10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission file number 001-13643

ONEOK, Inc.

(Exact name of registrant as specified in its charter)

Oklahoma	73-1520922
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 West Fifth Street, Tulsa, OK	74103
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (918) 588-7000

Securities registered pursuant to Section 12(b) of the Act:

Common stock, par value of $0.01	New York Stock Exchange
(Title of Each Class)	(Name of Each Exchange on which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

            Large accelerated filer x             Accelerated filer ¨             Non-accelerated filer ¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨  No  x.

Aggregate market value of registrant’s common stock held by non-affiliates based on the closing trade price on June 30, 2005, was $3,233.9 million.

On March 6, 2006, the Company had 117,243,278 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive proxy statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held May 18, 2006, are incorporated by reference in Part III.

ONEOK, Inc.

2005 ANNUAL REPORT ON FORM 10-K

		Page No.
Part I.
Item 1.	Business	3-13
Item 1A.	Risk Factors	13-16
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16-18
Item 3.	Legal Proceedings	18-20
Item 4.	Submission of Matters to a Vote of Security Holders	21
Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21-23
Item 6.	Selected Financial Data	23-24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	24-52
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52-55
Item 8.	Financial Statements and Supplementary Data	56-104
Item 9.	Changes in and Disagreements with Accountants On Accounting and Financial Disclosure	105
Item 9A.	Controls and Procedures	105-106
Item 9B.	Other Information	106
Part III.
Item 10.	Directors and Executive Officers of the Registrant	106
Item 11.	Executive Compensation	107
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	107
Item 13.	Certain Relationships and Related Transactions	107
Item 14.	Principal Accountant Fees and Services	107
Part IV.
Item 15.	Exhibits, Financial Statement Schedules	108-113
Signatures		114

As used in this Annual Report on Form 10-K, the terms “we,” “our” or “us” mean ONEOK, Inc., an Oklahoma corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.

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PART I.

ITEM 1. BUSINESS

DEFINITIONS

Following are definitions of abbreviations used in this Form 10-K:

Bbl	42 United States (U.S.) gallons, the basic unit for measuring crude oil, natural gas liquids and natural gas condensate
Bbl/d	42 United States (U.S.) gallons, the basic unit for measuring crude oil, natural gas liquids and natural gas condensate per day
MBbls	One thousand barrels
MBbls/d	One thousand barrels per day
MMBbls	One million barrels
Btu	British thermal unit, a measure of the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit
MMBtu	One million British thermal units
MMMBtu/d	One billion British thermal units per day
Mcf	One thousand cubic feet of gas
MMcf	One million cubic feet of gas
MMcf/d	One million cubic feet of gas per day
Bcf	One billion cubic feet of gas
Bcf/d	One billion cubic feet of gas per day

GENERAL

ONEOK, Inc., an Oklahoma corporation, was organized on May 16, 1997. On November 26, 1997, we acquired the natural gas business of Westar Energy, Inc. (Westar), formerly Western Resources, Inc., and merged with ONEOK, Inc., a Delaware corporation organized in 1933. We are the successor to a company founded in 1906 as Oklahoma Natural Gas Company.

We purchase, gather, process, transport, store and distribute natural gas. We extract, fractionate, store, transport, sell and market natural gas liquids (NGLs); and are engaged in natural gas, crude oil, NGLs and electricity marketing, retail natural gas marketing and trading activities. We are the largest natural gas distributor in Oklahoma and Kansas and the third largest natural gas distributor in Texas, providing service as a regulated public utility to wholesale and retail customers. Our largest distribution markets are Oklahoma City and Tulsa, Oklahoma; Kansas City, Wichita, and Topeka, Kansas; and Austin and El Paso, Texas. Our energy services operations provide services to customers in many states. We acquired Northern Plains Natural Gas Company and its wholly owned subsidiary Pan Border Gas Company (collectively, Northern Plains) in November 2004. As a result of this acquisition, we are the majority general partner of Northern Border Partners, one of the largest publicly-traded master limited partnerships. Northern Border Partners acquires, owns and manages pipelines and other midstream energy assets and is a leading transporter of natural gas imported from Canada into the United States.

In December 2005, we sold our natural gas gathering and processing assets located in Texas to a subsidiary of Eagle Rock Energy, Inc.

We completed the sale of our Production segment to TXOK Acquisition, Inc. in September 2005. The financial information related to the properties sold is reflected as a discontinued component in this Annual Report on Form 10-K. All periods presented have been restated to reflect the discontinued component.

In July 2005, we completed the acquisition of the natural gas liquids businesses owned by several affiliates and a subsidiary of Koch Industries, Inc. (Koch). This transaction included Koch Hydrocarbon, LP’s entire mid-continent natural gas liquids fractionation business; Koch Pipeline Company, LP’s natural gas liquids pipeline distribution systems; Chisholm Pipeline Holdings, Inc., which has a 50 percent ownership interest in Chisholm Pipeline Company; MBFF, LP, which owns an 80 percent interest in a 160,000 barrel per day fractionator at Mont Belvieu, Texas; and Koch Vesco Holdings, LLC, an entity that owns a 10.2 percent interest in Venice Energy Services Company, LLC (VESCO).

DESCRIPTION OF BUSINESS SEGMENTS

We report operations in the following reportable business segments:

• Gathering and Processing

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• Natural Gas Liquids

• Pipelines and Storage

• Energy Services

• Distribution

• Other

For financial and statistical information regarding our business units by segment, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. See Note M of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a discussion of changes in reportable business segments as well as sales to unaffiliated customers, operating income and total assets by business segment.

Gathering and Processing

Segment Description - Our Gathering and Processing segment is engaged in the gathering and processing of natural gas and fractionation of natural gas liquids (NGLs) primarily in Oklahoma and Kansas. Our operations include the gathering of natural gas production from crude oil and natural gas wells. Through gathering systems, these volumes are aggregated for removal of water vapor, solids and other contaminants and to extract NGLs in order to provide marketable natural gas, commonly referred to as residue gas. When the liquids are separated from the raw natural gas at the processing plants, the liquids are generally in the form of a mixed NGL stream. This stream can then be separated by a distillation process, referred to as fractionation, into marketable product components such as ethane, propane, iso-butane, normal butane and natural gasoline. The component products can then be stored, transported and marketed to a diverse customer base of end-users.

We generally gather and process gas under three types of contracts:

• Keep Whole - Under a keep whole processing contract, we extract NGLs and return to the producer volumes of merchantable natural gas containing the same amount of Btus as the raw natural gas that was delivered to us. We retain the NGLs as our fee for processing. Accordingly, we must purchase and return to the producer sufficient volumes of merchantable natural gas to replace the Btus that were removed as NGLs through the gathering and processing operation, commonly referred to as “shrink.” By using this contract type, the producer is kept whole on a Btu basis. This type of contract exposes us to the keep whole spread, or gross processing spread, which is the relative difference in the economic value between NGLs and natural gas on a Btu basis. We typically bear the full cost of the plant fuel consumed in processing under these contracts which usually include a fee-based gathering agreement. The main factors that affect our keep whole margins include:

• shrink,

• plant fuel consumed,

• transportation and fractionation costs incurred on the NGLs,

• gross processing spread, and

• the mid-continent natural gas price, crude oil price and the daily average Oil Price Information Service (OPIS) price for our NGL products sold.

• Percent of Proceeds (POP) - Under a POP contract, we retain a percentage of the NGLs and/or a percentage of the natural gas as payment for gathering, compressing and processing the producer’s raw natural gas. The producer may take its share of the NGLs and natural gas in kind or receive its share of proceeds from our sale of the commodities. We also have POP contracts that have an associated fee for providing services such as gathering, dehydration, compression and treating. The POP contract exposes us to both natural gas and NGL commodity price risk, but economically aligns us with the producer because we both benefit from higher commodity prices. There are a variety of factors that directly affect our POP margins, including:

• the percentages of products retained that represent our equity NGL, condensate and natural gas sales volumes,

• transportation and fractionation rates incurred on the NGLs, and

• the mid-continent natural gas price, crude oil price and the daily average OPIS price received for our equity products retained.

Additionally, we purchase natural gas at the wellhead under index-based purchase agreements that we use for operational purposes, such as fuel and shrink, with the excess being sold monthly at index-based prices.

• Fee - Under a fee contract, we are paid a fee for the services provided such as Btus gathered, compressed and/or processed. The wellhead volume and fees received for the services provided are the main components of the margin for this type of contract. The producer may take its NGLs and natural gas in kind or receive its proceeds from our sale of the commodities. This type of contract exposes us to minimal commodity price risk; however, there is still volumetric risk with this contract structure.

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Operating income from our Gathering and Processing segment was 49.5 percent, 26.2 percent and 13.1 percent of our consolidated operating income from continuing operations in 2005, 2004 and 2003, respectively. Our Gathering and Processing segment had no single external customer from which it received ten percent or more of consolidated revenues. Intersegment sales accounted for 84 percent, 81 percent and 76 percent of our Gathering and Processing segment’s revenues in 2005, 2004 and 2003, respectively.

Market Conditions and Seasonality - Contracts covering approximately 35 percent of the volumes associated with our keep whole contracts allow us to charge conditioning fees for processing, in the event the keep whole spread is negative. This helps mitigate the impact of an unfavorable keep whole spread by effectively converting the keep whole contract to a fee contract during periods of negative keep whole spreads. Our effort to add this conditioning language is a continuing strategy. We also continue our strategy of renegotiating any under-performing gas purchase, gathering and processing contracts.

Additionally, we have the ability to adjust plant operations to take advantage of market conditions. By changing the temperatures and pressures at which the natural gas is processed, we can produce more of the specific commodities that have the most favorable prices or price spread.

During the year, both crude oil and natural gas prices were volatile, with New York Mercantile Exchange (NYMEX) crude oil settlement prices ranging from $45.64 to $66.23 per Bbl and NYMEX natural gas settlement prices ranging from $6.12 to $13.91 per MMBtu.

We are affected by producer drilling activity, which is sensitive to geological success, as well as availability of capital, commodity prices and regulatory control. The mid-continent region is currently experiencing a significant upturn in crude oil and natural gas drilling activity. This resurgence in drilling activity has been driven by increased prices for natural gas and crude oil and by long-term projections of continued demand in the U.S. natural gas market. However, we are exposed to volume risk from a competitive and a production standpoint. We continue to see declines in certain fields that supply our gathering and processing operations, and the possibility exists that volumetric declines may surpass new gas development from future drilling.

Despite significant consolidation in the recent past, the U.S. midstream industry remains relatively fragmented, and we face competition from a variety of companies, including major integrated oil companies, major pipeline companies and their affiliated marketing companies, and national and local natural gas gatherers, processors and marketers. Competition exists for obtaining natural gas supplies for gathering and processing operations. The factors that typically affect our ability to compete are:

• producer drilling activity,

• petrochemical industry’s level of capacity utilization and its specific feedstock requirements,

• fees charged under the contract,

• pressures maintained on the gathering systems,

• location of our gathering systems relative to our competitors,

• location of our gathering systems relative to the drilling activity,

• efficiency and reliability of the operations, and

• delivery capabilities that exist in each system and plant location.

We have responded to these industry conditions by making capital investments to improve plant processing flexibility and reduce operating costs, selling assets in non-core operating areas and renegotiating unprofitable contracts. The principal goal of the contract renegotiation effort is to eliminate unprofitable contracts and improve margins, primarily when the keep whole spread is negative.

Some of our products, such as natural gas and propane used for heating, are subject to seasonality, resulting in more demand during the months of November through March. As a result, prices of these products are typically higher during that time period. We are also starting to see an increase in the demand for natural gas in the summer periods as more electric generation is dependent upon natural gas for fuel. Other products, such as ethane, are tied to the petrochemical industry, while iso-butane and natural gasoline are used by the refining industry as blending stocks. As a result, the prices of these products are affected by the economic conditions and demand associated with these various industries.

Government Regulation - The Federal Energy Regulatory Commission (FERC) has traditionally maintained that a processing plant is not a facility for transportation or sale for resale of natural gas in interstate commerce and, therefore, is not subject to jurisdiction under the Natural Gas Act (NGA). Although the FERC has made no specific declaration as to the jurisdictional status of our natural gas processing operations or facilities, our natural gas processing plants are primarily involved in removing NGLs and, therefore, we believe, are exempt from FERC jurisdiction. The NGA also exempts natural

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gas gathering facilities from the jurisdiction of the FERC. Interstate transmission facilities remain subject to FERC jurisdiction. The FERC has historically distinguished between these two types of facilities on a fact-specific basis. We believe our gathering facilities and operations meet the criteria used by the FERC to determine a non-jurisdictional gathering facility status. We can transport residue gas from our plants to interstate pipelines in accordance with Section 311(a) of the Natural Gas Policy Act (NGPA).

The states of Oklahoma and Kansas also have statutes regulating, in various degrees, the gathering of natural gas in those states. In each state, regulation is applied on a case-by-case basis if a complaint is filed against the gatherer with the appropriate state regulatory agency.

Natural Gas Liquids

Segment Description - Our Natural Gas Liquids segment gathers, stores, fractionates and treats raw NGLs produced from natural gas processing plants located in Oklahoma, Kansas and the Texas panhandle. This segment was formed in July 2005 primarily from our acquisition of the Koch assets. See Note B of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information. We connect the NGL production basins in Oklahoma, Kansas and the Texas panhandle with the key NGL market centers in Conway, Kansas and Mont Belvieu, Texas.

Most natural gas produced at the wellhead contains a mixture of NGL components such as ethane, propane, iso-butane, normal butane and natural gasoline. Natural gas processing plants remove the NGLs from the natural gas stream to realize the higher economic value of the NGLs and to meet natural gas pipeline quality specifications, which limit NGLs in the natural gas stream due to liquid and Btu content.

The NGLs that are separated from the natural gas stream at the natural gas processing plants remain in a mixed, raw form until they are gathered, primarily by pipeline, and delivered to our fractionators. A fractionator, by applying heat and pressure, separates each NGL component into marketable products, such as ethane/propane mix, propane, iso-butane, normal butane and natural gasoline (collectively, NGL products). These NGL products are then stored and/or distributed to petrochemical, heating and motor gasoline manufacturers.

Our Natural Gas Liquids segment focuses on increasing the market value of NGL products through the use of our natural gas liquids assets. We are engaged in three primary business activities downstream of our Gathering and Processing segment.

• Exchange Services - We provide gathering, fractionation, transportation, storage and treating of NGLs through term, fee-based exchange contracts. Under a typical fee-based exchange contract, we provide bundled services that include gathering and transporting raw NGLs to our fractionators, separating them into marketable products and redelivering the NGL products to our customers.

• Optimization and Marketing - We use our asset base, portfolio of contracts and market knowledge to capture location price spreads through transactions that optimize the flow of our NGL products between the major market centers in Conway, Kansas and Mont Belvieu, Texas. Optimization activities include redirecting NGL products to their highest value locations. In the mid-continent area, we purchase approximately two-thirds of our customers’ raw products on an index pricing basis, less an exchange fee. Although most of our storage is leased to third parties for a fee, we also own and lease storage in the mid-continent and gulf coast areas which provides opportunities to capture seasonal price variances.

• Isomerization - We own an isomerization unit in Conway, Kansas, with a capacity of 9 MBbls/d that converts normal butane to the more valuable iso-butane used by the refining industry to upgrade the octane of motor gasoline.

Operating income from our Natural Gas Liquids segment, which was formed in July 2005 primarily from our acquisition of the Koch assets, was 5.4 percent, 3.3 percent and 1.5 percent of our consolidated operating income from continuing operations in 2005, 2004 and 2003, respectively. Our Natural Gas Liquids segment had no single external customer from which it received ten percent or more of consolidated revenues.

Market Conditions and Seasonality - During the year, natural gas, crude oil and NGL product prices were volatile, with NYMEX crude oil settlement prices ranging from $45.64 to $66.23 per Bbl and the NYMEX natural gas settlement prices ranging from $6.12 to $13.91 per MMBtu.

Similar to our Gathering and Processing segment, our Natural Gas Liquids segment is also affected by producer drilling activity. The mid-continent region is currently experiencing a significant upturn in crude oil and natural gas drilling activity. This resurgence in drilling activity has been driven primarily by increased prices for natural gas and crude oil and by long-term projections of continued demand in the U.S. natural gas market. However, we continue to see production declines in

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certain fields that supply the gathering and processing facilities that feed our systems and the possibility exists that declines may surpass development from new drilling. The factors that typically affect our ability to compete for NGL supplies are:

• location of natural gas processing plants relative to our gathering pipelines,

• location of our gathering pipelines relative to our competitors,

• location of our fractionation facilities relative to our competitors,

• efficiency, reliability and costs of operations including fuel and power consumption,

• available fractionation, pipeline and storage capacity, and

• delivery capabilities to move NGL products to their highest value locations.

Our natural gas liquids gathering pipelines are affected by operational or market-driven changes in the output of the processing plants to which we are connected. Increases or decreases in gas processing plant output may affect the volume of NGLs shipped through the system as a result of the relative value of natural gas to NGL prices, primarily ethane to natural gas and then composite NGL price to natural gas.

The main factors that affect our margins are:

• transportation and fractionation volumes and associated fees,

• commodity and regional pricing differences, and

• fees charged for storage.

We have acquired assets that are strategically located near our existing assets, making capital investments to improve operational efficiencies and controlling costs. Some of our products, such as propane, which is used for heating, and iso-butane and natural gasoline, used in motor fuel, are subject to seasonality resulting in higher prices during periods of higher demand. Other products, such as ethane, are tied to the petrochemical industry and iso-butane and natural gasoline are used by the refining industry as blending stocks. As a result, the prices of these products are affected by the economic condition and demand associated with these industries.

Government Regulations - Tariff revenues for our proprietary pipelines in both Oklahoma and Kansas are not regulated by the FERC or the states’ respective corporation commissions.

Our fractionation facilities are operated under the regulatory framework and oversight of various governmental agencies. These primarily include the U.S. Environmental Protection Agency (EPA) and its state counterparts, as well as the Occupational Safety and Health Administration (OSHA). We have developed systems to identify, control, and manage compliance risks and obligations, including environmental, health and safety management systems.

Our gathering pipelines are operated under the guidance and oversight of various governmental agencies. Besides programs mandated by OSHA, EPA and various state environmental agencies, the U.S. Department of Transportation’s Office of Pipeline Safety (OPS) as well as the Oklahoma Corporation Commission (OCC), Kansas Corporation Commission (KCC) and the Texas Railroad Commission (RRC), have each established a regulatory framework focused on asset integrity, safety and environmental protection.

Pipelines and Storage

Segment Description - Our Pipelines and Storage segment, formerly Transportation and Storage, operates our intrastate natural gas transmission pipelines, natural gas storage, regulated natural gas liquids gathering and distribution pipelines, and non-processable natural gas gathering facilities. We also provide interstate natural gas transportation and storage service under Section 311(a) of the NGPA.

In Oklahoma, we have access to the major natural gas producing areas, allowing for natural gas and natural gas liquids to be moved throughout the state. We have access to the major natural gas producing area in south central Kansas. In Texas, we are connected to the major natural gas producing areas in the Texas panhandle and the Permian Basin, providing for natural gas to be moved to the Waha Hub, where other pipelines may be accessed for transportation east to the Houston Ship Channel market and west to the California market. Our natural gas liquids gathering connections provide for raw NGLs gathered in Oklahoma, Kansas and the Texas panhandle to be delivered to our fractionation facilities in these states and to our natural gas liquids distribution pipelines which allows access to the two main NGL market centers in Conway, Kansas and Mont Belvieu, Texas.

We own or reserve storage capacity in five underground natural gas storage facilities in Oklahoma, three underground natural gas storage facilities in Kansas and three underground natural gas storage facilities in Texas.

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Through our acquisition of the Koch natural gas liquids assets in July 2005, we operate approximately 2,500 miles of FERC regulated natural gas liquids gathering and distribution pipelines in Oklahoma, Kansas and Texas. Our natural gas liquids gathering pipelines deliver raw NGLs gathered from natural gas processing plants located in these states to fractionation facilities in Medford, Oklahoma, Hutchinson and Conway, Kansas, and Mont Belvieu, Texas. Our natural gas liquids distribution pipelines move products from Oklahoma and Kansas to the market centers of Conway, Kansas and Mont Belvieu, Texas.

The majority of our Pipelines and Storage segment’s revenues are derived from services provided to affiliates. Operating income from our Pipelines and Storage segment was 10.6 percent, 13.5 percent and 11.9 percent of our consolidated operating income from continuing operations in 2005, 2004 and 2003, respectively. Our Pipelines and Storage segment had no single external customer from which it received ten percent or more of consolidated revenues. Intersegment sales accounted for 69 percent, 61 percent and 57 percent of our Pipelines and Storage segment’s revenues in 2005, 2004 and 2003, respectively.

Market Conditions and Seasonality - Our natural gas assets primarily serve local distribution companies (LDCs), large industrial companies, municipalities, irrigation customers, power generation facilities and marketing companies. Our natural gas liquids gathering assets provide gathering services for shippers from processing plants in Oklahoma, Kansas and Texas to our fractionation facilities. Our natural gas liquids distribution pipelines provide shippers with access to the key natural gas liquids markets located in Conway, Kansas and Mont Belvieu, Texas. Our natural gas and natural gas liquids pipelines compete directly with other intrastate and interstate pipeline companies. Additionally, we compete directly with other storage facilities. Competition for natural gas transportation services continues to increase as the FERC and state regulatory bodies continue to encourage more competition in the natural gas markets. Factors that affect competition for both natural gas and NGL services are location, market access, natural gas and NGL prices, fees for services and quality of services provided. We believe that our pipelines and natural gas storage assets enable us to compete effectively.

Our business is affected by the economy, natural gas and NGL price volatility, and weather. The strength of the economy has a direct relationship on manufacturing and industrial companies and their resulting demand for natural gas and NGL products. Volatility in the natural gas market also impacts our customers’ decisions relating to injection and withdrawal of natural gas in storage. In addition, our natural gas liquids gathering pipelines are affected by operational or market driven changes in the output of the gas processing plants to which we are connected. Gas processing plant output may increase or decrease affecting the volume of NGLs shipped through the system as a result of the relative value of natural gas to NGL prices, primarily ethane to natural gas and composite NGL price to natural gas. In addition, volume delivered through the system may increase or decrease as a result of the relative NGL price between the mid-continent and gulf coast regions. Natural gas transportation throughput fluctuates due to rainfall that impacts irrigation demand, hot temperatures that affect power generation demand and cold temperatures that affect heating demand.

Government Regulation - Our natural gas transportation assets in Oklahoma, Kansas and Texas are regulated by the OCC, KCC and RRC, respectively. We have flexibility in establishing natural gas transportation rates with customers. However, there is a maximum rate that we can charge our customers in Oklahoma and Kansas. Our natural gas liquids gathering and distribution pipelines in Oklahoma, Kansas and Texas are interstate pipelines regulated by the FERC and the OPS. We transport raw NGLs and NGL products pursuant to filed tariffs.

Energy Services

Segment Description - Our Energy Services segment’s primary focus is to create value for our customers by delivering physical products and risk management services through our network of contracted gas supply, transportation and storage capacity. These services include meeting our customers’ baseload, swing and peaking natural gas commodity requirements on a year-round basis. To provide these bundled services, we lease storage and transportation capacity. Our total storage capacity under lease is 86 Bcf, with maximum withdrawal capability of 2.3 Bcf/d and maximum injection capability of 1.6 Bcf/d. Our current transportation capacity is 1.9 Bcf/d. The contracted storage and transportation capacity connects the major supply and demand centers throughout the United States and into Canada. With these contracted assets, our business strategies include identifying, developing and delivering specialized services and products for premium value to our customers, which are primarily LDCs, electric utilities, and commercial and industrial end users. Also, our storage and transportation capacity allows us opportunities to optimize these positions through our application of market knowledge and risk management skills.

We actively manage the commodity price and volatility risk assumed from providing energy risk management services to our customers by executing derivative instruments in accordance with the parameters established in our marketing and trading policy. The derivative instruments consist of over-the-counter financially settled transactions such as swaps, options and NYMEX futures.

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Our working capital requirements related to our inventory in storage were as high as $670.9 million during 2005, but had decreased to $505.0 million at December 31, 2005. In addition, our margin requirements with counterparties can result in increased working capital requirements. During 2005, our margin requirements ranged from $58.7 million to $312.4 million.

Operating income from our Energy Services segment was 20.7 percent, 31.4 percent and 45.5 percent of our consolidated operating income from continuing operations in 2005, 2004 and 2003, respectively. In 2004, our Energy Services segment had one customer, BP, PLC and affiliates, from which it received $664.4 million, or approximately 11 percent, of consolidated revenues. Our Energy Services segment had no single external customer from which it received ten percent or more of consolidated revenues in 2005 or 2003.

At the beginning of the third quarter of 2004, we completed a reorganization of our Energy Services segment and renewed our focus on our physical marketing and storage business. We separated the management and operations of our wholesale marketing, retail marketing and financial trading activities and began accounting separately for the different types of revenue earned from these activities. Prior to the third quarter of 2004, we managed our Energy Services segment on an integrated basis and presented all energy trading activity on a net basis in our Consolidated Statements of Income.

Market Conditions and Seasonality - In response to a very competitive marketing environment resulting from deregulation of the retail natural gas markets, our strategy is to concentrate our efforts on providing reliable service during peak demand periods and capture opportunities created by short-term pricing volatility through our leased storage and transportation assets. We focus on building and strengthening supplier and customer relationships to execute our strategy.

Due to seasonality of supply and demand balances, earnings may be higher during the winter months than the summer months. Our Energy Services segment’s margins are subject to fluctuations during the year primarily due to the impact certain seasonal factors have on sales volumes and the price of natural gas and crude oil. Natural gas sales volumes are typically higher in the winter heating months than in the summer months, reflecting increased demand due to greater heating requirements and, typically, higher natural gas prices that occur during the winter heating months.

Distribution

Segment Description - Our Distribution segment provides natural gas distribution services to over two million customers in Oklahoma, Kansas and Texas through Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. We serve residential, commercial, industrial and transportation customers in all three states. In addition, our distribution services in Oklahoma and Kansas serve wholesale customers and Texas serves public authority customers.

Our operating results are primarily affected by the number of customers, usage and the ability to establish delivery rates that provide an authorized rate of return on our investment and recovery of our cost of service. Natural gas costs are passed through to our customers based on the actual cost of gas purchased by the respective distribution companies. Substantial fluctuations in natural gas sales can occur from year to year without significantly impacting our gross margin, since the fluctuations in natural gas costs affect natural gas sales and cost of gas by an equivalent amount. Natural gas sales to residential and commercial customers are seasonal, as a substantial portion of natural gas is used principally for heating. Accordingly, the volume of natural gas sales is consistently higher during the heating season (November through March) than in other months of the year.

Operating income from the Distribution segment was 14.3 percent, 24.8 percent and 27.5 percent of the consolidated operating income from continuing operations in 2005, 2004 and 2003, respectively. The decline in our Distribution segment’s operating income as a percent of consolidated operating income is primarily due to the sale of our natural gas gathering and processing assets located in Texas, which resulted in a gain in our consolidated operating income. Our Distribution segment had no single external customer from which it received ten percent or more of consolidated revenues.

Natural Gas Supply - The majority of our distribution segment’s natural gas supply is provided under contracts from a number of suppliers. These contracts are awarded through a competitive bid process. The remainder of our distribution segment’s natural gas supply is purchased from a combination of direct wellhead production, natural gas processing plants, natural gas marketers and production companies.

There is an adequate supply of natural gas available to our utility systems, and we do not anticipate problems with securing additional natural gas supply as needed for our customers. However, if supply shortages occur, Oklahoma Natural Gas’ rate schedule “Order of Curtailment” and Kansas Gas Service’s rate order “Priority of Service” provide for first reducing or totally discontinuing gas service to large industrial users and then requesting that residential and commercial customers reduce their gas requirements to an amount essential for public health and safety. Texas Gas Service’s gas transportation contracts with

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interruption provisions require large volume users to purchase their natural gas with the understanding that they may be forced to shut down or switch to alternate sources of energy at times when the gas is needed for higher priority customers. In addition, during times of special supply problems, curtailments of deliveries to customers with firm contracts may be made in accordance with guidelines established by appropriate federal, state and local regulatory agencies.

Market Conditions and Seasonality - Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service distribute natural gas as public utilities to approximately 87 percent, 71 percent and 13 percent of the distribution markets for Oklahoma, Kansas and Texas, respectively. Natural gas sold to residential and commercial customers, which is used primarily for heating and cooking, accounts for approximately 76 and 22 percent of natural gas sales, respectively, in Oklahoma, 58 and 16 percent of natural gas sales, respectively, in Kansas, and 66 and 26 percent of natural gas sales, respectively, in Texas.

A franchise, although nonexclusive, is a utility’s right to use the municipal streets, alleys, and other public ways for a defined period of time in exchange for a fee. Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service hold franchises in 39, 279 and 82 municipalities, respectively. In management’s opinion, our franchises contain no unduly burdensome restrictions and are sufficient for the transaction of business in the manner in which it is now conducted.

Under our transportation tariffs, qualifying industrial and commercial customers are able to purchase natural gas from the supplier of their choice and have it transported for a fee by Oklahoma Natural Gas, Kansas Gas Service or Texas Gas Service. Because of increased competition for the transportation of natural gas to commercial and industrial customers, some of these customers may be lost to affiliated or unaffiliated transporters. If our Pipelines and Storage segment gained some of this business, it would result in a shift of some revenues from our Distribution segment to our Pipelines and Storage segment.

The natural gas industry is expected to remain highly competitive, resulting from initiatives being pursued by the industry and regulatory agencies that allow industrial and commercial customers increased options for energy supplies and service. We believe that we must maintain a competitive advantage in order to retain our customers and, accordingly, we focus on providing reliable, efficient service and reducing costs.

The Distribution segment is subject to competition from other pipelines for our existing industrial load. Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service compete for service to the large industrial and commercial customers and competition continues to lower rates. A portion of Oklahoma Natural Gas’ and Kansas Gas Service’s transportation services are at negotiated rates that are generally below the approved transportation tariff rates. Increased competition potentially could lower these rates. In the service area for Texas Gas Service, reduced rate transportation service is negotiated only when a competitive pipeline is in proximity to bypass Texas Gas Service or another energy option is available. Any negotiated transportation service contract is filed under a separate, confidential tariff at the RRC. Industrial and transportation sales volumes tend to remain relatively constant throughout the year.

Natural gas sales to residential and commercial customers are seasonal, as a substantial portion of natural gas is used principally for heating. Accordingly, the volume of natural gas sales is consistently higher during the heating season (November through March) than in other months of the year. Tariff rates for Oklahoma Natural Gas and Kansas Gas Service include a temperature normalization adjustment clause during the heating season, which mitigates the effect of fluctuations in weather. The recently authorized rate structure for Oklahoma Natural Gas includes billing options for all gas sales customers. Under this new rate structure, certain high volume customers will pay a higher monthly service charge and a lower per dekatherm delivery charge, while lower usage customers will pay a lower monthly service charge coupled with a higher per dekatherm delivery charge. Customers can elect to change billing options to ensure that they are billed under the alternative that best fits their individual usage, but they must remain on the selected option for a full year after the change is made. Additionally, with prior KCC approval, Kansas Gas Service has a natural gas hedging program in place to reduce volatility in the natural gas price paid by consumers. The costs of this program are borne by the Kansas Gas Service customers. Approximately 84 percent of Texas Gas Service’s revenues are protected from abnormal weather due to a higher customer charge or weather normalization adjustment clauses. Texas Gas Service’s weather normalization adjustment clause applies to 19 Texas towns and cities, including Austin and Galveston, to stabilize earnings and neutralize the impact of unusual weather on customers. A higher customer charge is included in the authorized rate design for the cities of El Paso and Port Arthur to protect customers from abnormal weather.

Government Regulation - Rates charged for natural gas services are established by the OCC for Oklahoma Natural Gas and by the KCC for Kansas Gas Service. Texas Gas Service is subject to regulatory oversight by the various municipalities that it serves, which have primary jurisdiction in their respective areas. Rates in areas adjacent to the various municipalities and appellate matters are subject to regulatory oversight by the RRC. Natural gas purchase costs are included in the Purchased Gas Adjustment (PGA) clause rate that is billed to customers. Our distribution companies do not make a profit on the cost of gas. Other changes in costs must be recovered through periodic rate adjustments approved by the OCC, KCC, RRC and various municipalities in Texas. See pages 42-43 for a detailed description of our various regulatory initiatives.

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Oklahoma Natural Gas has settled all known claims arising out of long-term gas supply contracts containing “take-or-pay” provisions that purport to require us to pay for volumes of natural gas contracted for but not taken. The OCC has authorized recovery of the accumulated settlement costs over a 20-year period expiring in 2014, or approximately $7.0 million annually, through a combination of a surcharge from customers, revenue from transportation under Section 311(a) of the NGPA and other intrastate transportation revenues. There are no significant potential claims or cases pending against us under “take-or-pay” contracts.

Other

Segment Description - The primary companies in our Other segment include ONEOK Leasing Company, ONEOK Parking Company, and Northern Plains, which owns a 1.65 percent general partner interest and a 1.08 percent limited partner interest in Northern Border Partners.

Through ONEOK Leasing Company and ONEOK Parking Company, we own a parking garage and lease an office building (ONEOK Plaza) in downtown Tulsa, Oklahoma, where our headquarters are located. ONEOK Leasing Company leases excess office space to others and operates our headquarters office building. ONEOK Parking Company owns and operates a parking garage adjacent to our headquarters.

Northern Plains was acquired in November 2004 and we account for our 2.73 percent interest in Northern Border Partners following the equity method. Effective January 1, 2006, we were required to consolidate Northern Border Partners in accordance with Emerging Issues Task Force (EITF) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF 04-5). See Impact of New Accounting Standards in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation for additional information.

Our Other segment had no single external customer from which it received ten percent or more of consolidated revenues.

ENVIRONMENTAL MATTERS

We own or retain legal responsibility for the environmental conditions at 12 former manufactured gas sites in Kansas. These sites contain potentially harmful materials that are subject to control or remediation under various environmental laws and regulations. A consent agreement with the Kansas Department of Health and Environment (KDHE) presently governs all work at these sites. The terms of the consent agreement allow us to investigate these sites and set remediation activities based upon the results of the investigations and risk analysis. We have commenced active remediation on eight sites, with regulatory closure achieved at two of these locations, and have begun assessments at the four remaining sites. The site situations are not similar, and we have no previous experience with similar remediation efforts. We have completed some analysis of the four remaining sites, but are unable to accurately estimate individual or aggregate costs that may be required to satisfy our remedial obligations.

Our preliminary review of similar cleanup efforts at former manufactured gas sites reveals that costs can range from $100,000 to $10 million per site. These estimates do not consider potential insurance recoveries, recoveries through rates or from unaffiliated parties, to which we may be entitled. At this time, we have not recorded any amounts for potential insurance recoveries or recoveries from unaffiliated parties, and we are not recovering any environmental amounts in rates. Total costs to remediate the two sites, which have achieved regulatory closure, was approximately $700,000. Total remedial costs for each of the remaining sites are expected to exceed $500,000 per site, but there is no assurance that costs to investigate and remediate the remaining sites will not be significantly higher. As more information related to the site investigations and remediation activities becomes available, and to the extent such amounts are expected to exceed our current estimates, additional expenses could be recorded. Such amounts could be material to our results of operations and cash flows depending on the remediation done and number of years over which the remediation is completed.

Our expenditures for environmental evaluation and remediation to date have not been significant in relation to the results of operations and there were no material effects upon earnings during 2005 related to compliance with environmental regulations.

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EMPLOYEES

We employed 4,558 people at February 28, 2006. At February 28, 2006, Kansas Gas Service employed 782 people who were subject to collective bargaining contracts, and we had no other union employees. The following table sets forth our contracts with unions at February 28, 2006.

Union	Employees	Contract Expires
United Steelworkers of America	422	June 30, 2009
International Union of Operating Engineers	14	June 30, 2009
Gas Workers Metal Trades of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada	9	June 30, 2009
International Brotherhood of Electrical Workers	337	June 30, 2006

Currently, we have no ongoing labor negotiations, and there are no other unions representing our employees.

EXECUTIVE OFFICERS

All executive officers are elected at the annual meeting of our Board of Directors and serve for a period of one year or until successors are duly elected. Our executive officers listed below include the officers who have been designated by our Board of Directors as our Section 16 executive officers.

Name and Position	Age		Business Experience in Past Five Years
David L. Kyle Chairman of the Board of Directors, President and Chief Executive Officer	53	2000 to present 1997 to 2000 1995 to present	Chairman of the Board of Directors, President and Chief Executive Officer President and Chief Operating Officer Member of the Board of Directors
Jim Kneale Executive Vice President- Finance and Administration and Chief Financial Officer	54	2004 to present 2001 to 2004 1999 to 2000	Executive Vice President - Finance and Administration and Chief Financial Officer Senior Vice President, Treasurer and Chief Financial Officer Vice President, Treasurer and Chief Financial Officer
John R. Barker Senior Vice President, General Counsel and Assistant Secretary	58	2004 to present 1994 to 2004	Senior Vice President, General Counsel and Assistant Secretary Stockholder, President and Director, Gable & Gotwals
Curtis L. Dinan Senior Vice President and Chief Accounting Officer	38	2004 to present 2004 to 2004 2002 to 2004 2000 to 2002	Senior Vice President and Chief Accounting Officer Vice President and Chief Accounting Officer Assurance and Business Advisory Partner, Grant Thornton, LLP Assurance and Business Advisory Partner, Arthur Andersen, LLP; Assurance and Business Advisory Senior Manager, Arthur Andersen, LLP
John A. Gaberino, Jr. Senior Vice President and Special Counsel to the Chairman of the Board	64	2004 to present 1998 to 2004 2001 to 2003	Senior Vice President and Special Counsel to the Chairman of the Board Senior Vice President and General Counsel Corporate Secretary
William R. Cordes Chief Executive Officer, Northern Border Partners, LP and President, Northern Plains Natural Gas Company	57	2000 to present 1993 to 2000	Chief Executive Officer - Northern Border Partners, LP/ President - Northern Plains Natural Gas Company President, Northern Natural Gas Company
Samuel Combs, III President - ONEOK Distribution Companies	48	2005 to present 2001 to 2005 1999 to 2001	President, ONEOK Distribution Companies President, Oklahoma Natural Gas Company Vice President - Western Region, Oklahoma Natural Gas Company
John W. Gibson President - ONEOK Energy Companies (a)	53	2005 to present 2000 to 2005 1995 to 2000	President, ONEOK Energy Companies President, Energy Executive Vice President, Koch Energy, Inc.; President, Koch Midstream Services; President, Koch Gateway Pipeline Company

(a) ONEOK Energy Companies include our Gathering and Processing, Natural Gas Liquids, Pipelines and Storage, and Energy Services segments.

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No family relationships exist between any of the executive officers, nor is there any arrangement or understanding between any executive officer and any other person pursuant to which the officer was selected.

AVAILABLE INFORMATION

You can access financial and other information at our website at www.oneok.com. We make available, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and reports of holdings of our securities filed by our officers and directors under Section 16 of the Securities Exchange Act of 1934 as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC. Copies of our Code of Business Conduct, Corporate Governance Guidelines, Director Independence Guidelines and Board of Directors committee charters, including the charters of our audit, executive, executive compensation and corporate governance committees, are also available on our website, and we will make available, free of charge, copies of these documents upon request.

ITEM 1A. RISK FACTORS

Our investors should consider the following risks that could affect us and our business. Although we have tried to discuss key factors, please be aware that other risks may prove to be important in the future. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. Investors should carefully consider the following discussion of risks and the other information included or incorporated by reference in this Annual Report on Form 10-K, including Forward-Looking Information, which is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Our nonregulated businesses are riskier than our regulated businesses.

Our nonregulated operations have a higher level of risk than our regulated operations, which include our utility and natural gas transportation businesses. We expect to continue investing in natural gas projects and other related projects, some or all of which may involve nonregulated businesses or assets. These projects could involve risks associated with operational factors, such as competition and dependence on certain suppliers and customers, and financial, economic and political factors, such as rapid and significant changes in prices of hydrocarbons and energy, the cost and availability of capital and counterparty risk, including the inability of a counterparty, customer or supplier to fulfill a contractual obligation.

Our businesses are subject to market and credit risks.

We are exposed to market and credit risks in all of our operations. To minimize the risk of commodity price fluctuations, we periodically enter into derivative transactions to hedge anticipated purchases and sales of natural gas, NGLs, crude oil, fuel requirements and firm transportation commitments. Interest rate swaps are also used to manage interest rate risk. However, financial derivative instrument contracts do not eliminate the risks. Specifically, such risks include commodity price changes, market supply shortages, interest rate changes and counterparty default. The impact of these variables could result in our inability to fulfill contractual obligations, significantly higher energy or fuel costs relative to corresponding sales contracts, or increased interest expense.

Increased competition could have a significant adverse financial impact on us.

The natural gas industry is expected to remain highly competitive, resulting from deregulation and other initiatives being pursued by the industry and regulatory agencies that allow customers increased options for energy supplies and service. The demand for natural gas is primarily a function of commodity prices, including prices for alternative energy sources, customer usage rates, weather, economic conditions and service costs. Our ability to compete also depends on a number of other factors, including competition from other pipelines for our existing load, the efficiency, quality and reliability of the services we provide, and competition for throughput for our gathering systems and processing plants.

In the future, we may face additional competition from new entrants to the energy industry as a result of the Energy Policy Act of 2005. This comprehensive legislation signed into law by President Bush in August 2005 will substantially affect the regulation of energy companies. Among the important changes to be implemented as a result of this act is the repeal of the Public Utility Holding Company Act of 1935 (PUHCA), which is effective in February 2006. PUHCA imposed a number of restrictions, including restrictions on the structure of companies involved in the retail distribution of natural gas. As a result of the repeal of PUHCA, new competitors may enter the industry.

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We cannot predict when we will be subject to other changes in legislation or regulation, nor can we predict the impact of these changes on our financial position, results of operations or cash flows. Although we believe our businesses are positioned to compete effectively in the energy market, there are no assurances that this will be true in the future.

We may not be able to successfully make additional strategic acquisitions or integrate businesses we acquire into our operations.

Our ability to successfully make strategic acquisitions and investments will depend on: (1) the extent to which acquisitions and investment opportunities become available; (2) our success in bidding for the opportunities that do become available; (3) regulatory approval, if required, of the acquisitions on favorable terms; and (4) our access to capital, including our ability to use our equity in acquisitions or investments, and the terms upon which we obtain capital. If we are unable to make strategic investments and acquisitions, we may be unable to grow. If we are unable to successfully integrate new businesses into our operations, we could experience increased costs and losses on our investments.

Any reduction in our credit ratings could materially and adversely affect our business, financial condition, liquidity and results of operations.

Our senior unsecured debt has been assigned a rating by Moody’s Investors Service, Inc. (Moody’s) of “Baa2” (Stable) and by Standard & Poor’s Ratings Group (S&P) of “BBB” (CreditWatch with negative implications). We will seek to maintain an investment grade rating through prudent capital management and financing structures. However, we cannot provide assurance that any of our current ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so warrant. Specifically, if S&P or Moody’s were to downgrade our long-term rating, particularly below investment grade, our borrowing costs would increase, which would adversely affect our financial results, and our potential pool of investors and funding sources could decrease. Further, if our short-term ratings were to fall below A-2 (capacity to meet its financial commitment on the obligation is satisfactory) or P-2 (strong ability to repay short-term debt obligations), the current ratings assigned by S&P and Moody’s, respectively, it could significantly limit our access to the commercial paper market. Any such downgrade of our long- or short-term ratings could increase our cost of capital and reduce the availability of capital and, thus, have a material adverse effect on our business, financial condition, liquidity and results of operations. Ratings from credit agencies are not recommendations to buy, sell or hold our securities. Each rating should be evaluated independently of any other rating.

We are subject to comprehensive energy regulation by governmental agencies and the recovery of our costs is dependent on regulatory action.

We are subject to comprehensive regulation by several federal, state and municipal utility regulatory agencies, which significantly influences our operating environment and our ability to recover our costs from utility customers. The utility regulatory authorities in Oklahoma, Kansas and Texas regulate many aspects of our utility operations, including customer service and the rates that we can charge customers. Federal, state and local agencies also have jurisdiction over many of our other activities, including regulation by the FERC of our storage and interstate pipeline assets. The profitability of our regulated operations is dependent on our ability to pass costs related to providing energy and other commodities through to our customers. The current regulatory environment applicable to our regulated businesses could impair our ability to recover costs historically absorbed by our customers.

On October 4, 2005, the OCC unanimously approved an annual rate increase of $57.5 million for Oklahoma Natural Gas. Kansas Gas Service began operating under a new rate schedule effective September 22, 2003. As part of the order issued by the KCC, Kansas Gas Service cannot file a new rate case before May 15, 2006.

On November 23, 2005, Texas Gas Service filed requests for rate increases in its Port Arthur and north Texas services areas for $2.4 million and $1.1 million, respectively. The municipalities have suspended the proposed rates for 90 days in order to conduct further review of the filings. Texas Gas Service also has an appeal pending in the court of appeals from the RRC’s 2004 order authorizing an annual revenue increase of approximately $0.9 million in the cities of Grove, Port Neches and Nederland, Texas.

We are unable to predict the impact that the future regulatory activities of these agencies will have on our operating results. Changes in regulations or the imposition of additional regulations could have an adverse impact on our business, financial condition and results of operations.

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We are subject to environmental regulations that could be difficult and costly to comply with.

We are subject to multiple environmental laws and regulations affecting many aspects of present and future operations, including air emissions, water quality, wastewater discharges, solid wastes and hazardous material and substance management. These laws and regulations generally require us to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with these laws, regulations, permits and licenses may expose us to fines, penalties and/or interruptions in our operations that could be material to the results of operations. If an accidental leak or spill of hazardous materials occurs from our lines or facilities in the process of transporting natural gas or NGLs or at any facility that we own, operate or otherwise use, we could be held jointly and severally liable for all resulting liabilities, including investigation and cleanup costs, which could materially affect our results of operations and cash flow. In addition, emission controls required under the Federal Clean Air Act and other similar federal and state laws could require unexpected capital expenditures at our facilities. We cannot provide assurance that existing environmental regulations will not be revised or that new regulations will not be adopted or become applicable to us. Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material adverse effect on our business, financial condition and results of operations.

We own or retain legal responsibility for the environmental conditions at 12 former manufactured gas sites in Kansas. These sites contain potentially harmful materials that are subject to control or remediation under various environmental laws and regulations. A consent agreement with the KDHE presently governs all remediation work at these sites. The terms of the consent agreement allow us to investigate these sites and set remediation activities based upon the results of the investigations and risk analysis. We have commenced active remediation on eight sites, with regulatory closure achieved at two of these locations, and have begun assessments at the four remaining sites. The site situations are not similar, and we have no previous experience with similar remediation efforts. We have completed some analysis of the four remaining sites, but are unable to accurately estimate individual or aggregate costs that may be required to satisfy our remedial obligations.

Our preliminary review of similar cleanup efforts at former manufactured gas sites reveals that costs can range from $100,000 to $10 million per site. These estimates do not consider potential insurance recoveries, recoveries through rates or from unaffiliated parties, to which we may be entitled. At this time, we have not recorded any amounts for potential insurance recoveries or recoveries from unaffiliated parties, and we are not recovering any environmental amounts in rates. Total costs to remediate the two sites, which have achieved regulatory closure, were approximately $700,000. Total remedial costs for each of the remaining sites are expected to exceed $500,000 per site, but there is no assurance that costs to investigate and remediate the remaining sites will not be significantly higher. As more information related to the site investigations and remediation activities becomes available, and to the extent such amounts are expected to exceed our current estimates, additional expenses could be recorded. Such amounts could be material to our results of operations and cash flows depending on the remediation done and number of years over which the remediation is completed.

Our expenditures for environmental evaluation and remediation to date have not been significant in relation to our results of operations and there were no material effects upon earnings during 2005 related to compliance with environmental regulations.

We are subject to risks that could limit our access to capital, thereby increasing our costs and adversely affecting our results of operations.

We have grown rapidly in the last several years as a result of acquisitions. Further acquisitions may require additional external capital. If we are not able to access capital at competitive rates, our strategy of enhancing the earnings potential of our existing assets, including through acquisitions of complementary assets or businesses, will be adversely affected. A number of factors could adversely affect our ability to access capital, including: (1) general economic conditions; (2) capital market conditions; (3) market prices for natural gas, NGLs and other hydrocarbons; (4) the overall health of the energy and related industries; (5) our ability to maintain our investment-grade credit ratings; and (6) our capital structure. Much of our business is capital intensive, and achievement of our long-term growth targets is dependent, at least in part, upon our ability to access capital at rates and on terms we determine to be attractive. If our ability to access capital becomes significantly constrained, our interest costs will likely increase and our financial condition and future results of operations could be significantly harmed.

Our business could be adversely affected by strikes or work stoppages by our unionized employees.

As of February 28, 2006, approximately 782 of our 4,558 employees were represented by labor unions under collective bargaining agreements. We are involved periodically in discussions with labor unions representing some of our employees to negotiate or renegotiate labor agreements. We cannot predict the results of these negotiations, including whether any failure

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to reach new agreements will have a negative effect on our business, financial condition and results of operations or whether we will be able to reach any agreement with the unions. Any failure to reach agreement on new labor contracts might result in a work stoppage. Any future work stoppage could, depending on the operations and the length of the work stoppage, have a material adverse effect on our business, financial condition and results of operations.

We do not fully hedge against price changes in commodities. This could result in decreased revenues and increased costs, thereby resulting in lower margins and adversely affecting our results of operations.

Our nonregulated businesses are exposed to market risk and the impact of market price fluctuations of natural gas, NGLs, crude oil and power prices. Market risk refers to the risk of loss in cash flows and future earnings arising from adverse changes in commodity energy prices. Our primary exposure arises from fixed price purchase or sale agreements that extend for periods of up to five years, natural gas in storage utilized by our Energy Services segment, NGLs in storage utilized by our Natural Gas Liquids segment and the difference between natural gas and NGL prices with respect to our keep whole processing agreements. To a lesser extent, we are exposed to the risk of changing prices or the cost of transportation resulting from purchasing natural gas or NGLs at one location and selling it at another (referred to as basis risk). To minimize the risk from market price fluctuations of natural gas, NGLs and crude oil, we use commodity derivative instruments such as futures contracts, swaps and options to manage market risk of existing or anticipated purchases and sales of natural gas, NGLs and crude oil. We adhere to policies and procedures that limit our exposure to market risk from open positions and that monitor our market risk exposure.

Our distribution segment uses storage to minimize the volatility of natural gas costs by placing natural gas in storage during the summer months for consumption in the winter months. In addition, various natural gas supply contracts allow us the option to convert index-based purchases to fixed prices. Also, we use derivative instruments to hedge the cost of anticipated natural gas purchases during the winter heating months to protect Kansas Gas Services’ customers from upward volatility in the market price of natural gas.

We could be subject to claims arising out of our ownership of a majority of the general partnership interest in Northern Border Partners, LP, a publicly traded limited partnership.

In November 2004, we acquired Northern Plains, which owns 82.5 percent of the general partnership interest and 500,000 limited partnership units, together representing a 2.73 percent ownership interest, in Northern Border Partners, a publicly traded limited partnership. As the holder of a majority of the general partnership interests in Northern Border Partners we have certain duties and responsibilities. Although we do not expect to incur any material liability relating to such duties or responsibilities, we cannot provide assurance that such claims will not arise or that any claims that do arise will not have an adverse effect on our business, financial condition or results of operation.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

DESCRIPTION OF PROPERTIES

Gathering and Processing

We own and operate, lease and operate, or own an interest in natural gas processing plants in Oklahoma and Kansas with active processing capacity of approximately 1.7 Bcf/d and NGL fractionation capacity of 89 MBbls/d. We own approximately 10,100 miles of gathering pipelines that supply our gas processing plants.

Our natural gas processing operations utilize two types of gas processing plants - field plants and straddle plants. Our processing plants extract NGLs and remove water vapor and other contaminants from the raw natural gas stream. Our field plants located in Oklahoma and Kansas, which represent 34 percent of our processing capacity, aggregate gathered volumes of unprocessed gas from multiple producing wells into quantities that can be processed. Our straddle plants, which represent about 66 percent of our processing capacity, are situated on mainline natural gas pipelines in Kansas and allow us to extract NGLs under contract from a natural gas stream.

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Natural Gas Liquids

We own and operate, or utilize through affiliated companies, approximately 4,600 miles of gathering and distribution pipelines with gathering capacity of 277 MBbls/d and distribution capacity of 360 MBbls/d. Our gathering pipelines, or those of our affiliates, are connected to approximately 90 percent of the natural gas processing plants located in the mid-continent producing areas.

We have approximately 380 MBbls/d of fractionation capacity through our ownership or interest in four different facilities. Our fractionation and storage facilities are centrally located and provide flexible redelivery of NGL products to the NGL market centers in Conway, Kansas and Mont Belvieu, Texas. We have the ability to satisfy our customer redelivery requests to these market centers, and through our own account we can also market our NGL products to the highest value locations. We own or lease approximately 20.4 MMBbls of storage capacity in the mid-continent and gulf coast regions.

Pipelines and Storage

We own approximately 5,600 miles of natural gas transmission and gathering pipelines and about 2,500 miles of natural gas liquids gathering and distribution pipelines all located in Oklahoma, Kansas and Texas. We have a peak natural gas transportation capacity of 2.9 Bcf/d and have natural gas compression and dehydration facilities located at various points throughout the pipeline system. We have a peak NGL transportation capacity of 355 MBbls/d with pump stations located at various points throughout the pipeline system.

In addition, we own or reserve capacity in five underground natural gas storage facilities in Oklahoma, three underground natural gas storage facilities in Kansas and three underground natural gas storage facilities in Texas. The storage facilities primarily consist of land and leasehold agreements with mineral and surface owners, wells and equipment, rights of way, and cushion gas. The active working storage capacity of these facilities is approximately 51.6 Bcf. Four of the Oklahoma storage facilities are located in close proximity to large market areas.

Our natural gas pipelines and storage facilities interconnect with 31 different intrastate and interstate companies at 109 interconnect points, connecting 37 processing plants and 139 producing fields. Our natural gas liquids gathering pipelines interconnect with 18 processing plants providing our customers with access to multiple markets and allowing product to be moved throughout the mid-continent and Texas panhandle areas. Our natural gas liquids distribution lines move product from fractionators in Oklahoma and Kansas to market centers in Conway, Kansas and Mont Belvieu, Texas.

Energy Services

In the third quarter of 2005, we made the decision to sell our Spring Creek power plant and exit the power generation business. These assets were held for sale at December 31, 2005, and, accordingly, this component of our business is accounted for as discontinued operations, in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (Statement 144). For additional information see discussion of discontinued operations on page 43.

Our total storage capacity under lease is 86 Bcf, with maximum withdrawal capability of 2.3Bcf/d and maximum injection capability of 1.6 Bcf/d. Our current transportation capacity is 1.9 Bcf/d. The contracted storage and transportation capacity connects the major supply and demand centers throughout the United States and into Canada. Our storage leases are spread across eighteen different facilities in seven states and one facility in Canada allowing us the flexibility to capture volatility in the energy markets.

Distribution

We own approximately 17,800 miles of pipeline and other distribution facilities in Oklahoma, approximately 12,400 miles of pipeline and other distribution facilities in Kansas and approximately 9,000 miles of pipeline and other distribution facilities in Texas. We own a number of warehouses, garages, meter and regulator houses, service buildings and other buildings throughout Oklahoma, Kansas and Texas. We also own or lease a fleet of trucks and maintain an inventory of spare parts, equipment and supplies.

Other

We own a parking garage and land, subject to a long-term ground lease. Located on this land is a seventeen-story office building with approximately 517,000 square feet of net rentable space. We also lease our office building under a lease term that expires in 2009 with six five-year renewal options. After the primary term or any renewal period, we can purchase the

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property at its fair market value. We occupy approximately 240,000 square feet for our own use and lease the remaining space to others.

ITEM 3. LEGAL PROCEEDINGS

United States ex rel. Jack J. Grynberg v. ONEOK, Inc., et al., No. CIV-97-1006-R, United States District Court for the Western District of Oklahoma, transferred, In re Natural Gas Royalties Qui Tam Litigation, MDL Docket No. 1293, United States District Court for the District of Wyoming. We, along with two of our subsidiaries, were served on June 21, 1999 as defendants in an action brought under the False Claims Act by Mr. Grynberg, ostensibly on behalf of the United States. Approximately 70 other substantially identical lawsuits were filed against other companies in the natural gas industry. The main claim against the defendants alleges that they intentionally provided false information to the government concerning the volume and heating content of natural gas produced from lands in which the Federal Government or Native Americans owned the royalty rights. Grynberg seeks to recover $5,000 to $10,000 for each violation of the False Claims Act as well as treble damages for any underpayment. The actions brought by Grynberg have been transferred to the United States District Court for the District of Wyoming for coordination of pretrial proceedings. That Court overruled the defendants’ initial motion to dismiss, but granted the motion of the United States to dismiss certain portions of the complaints. On June 4, 2004, we joined with the numerous other defendants in filing a motion to dismiss contending that Grynberg has not satisfied the unique jurisdictional prerequisites for maintaining an action under the False Claims Act. That motion to dismiss was heard by the Special Master on March 16 and 17, 2005. The Special Master issued his Report and Recommendation on May 16, 2005, recommending in part that all claims against the Company be dismissed. After extensive briefing, the District Court heard oral argument on December 9, 2005, on whether the Special Master’s recommendations should be accepted. The Court has taken the matter under advisement.

Will Price, et al. v. Gas Pipelines, et al. (f/k/a Quinque Operating Company, et al. v. Gas Pipelines, et al.), 26th Judicial District, District Court of Stevens County, Kansas, Civil Department, Case No. 99C30 (“Price I”). Plaintiffs brought suit on May 28, 1999, against us, five of our subsidiaries and one of our divisions, as well as approximately 225 other defendants. Additionally, in connection with the completion of our acquisition of the natural gas liquids (NGL) businesses owned by several Koch companies, on July 1, 2005, we acquired Koch Hydrocarbon, LP (renamed ONEOK Hydrocarbon, L.P.) which is also one of the defendants in this case. Plaintiffs sought class certification for its claims that the defendants had underpaid gas producers and royalty owners throughout the United States by intentionally understating both the volume and the heating content of purchased gas. After extensive briefing and a hearing, the Court refused to certify the class sought by plaintiffs. Plaintiffs then filed an amended petition limiting the purported class to gas producers and royalty owners in Kansas, Colorado and Wyoming and limiting the claim to undermeasurement of volumes. Oral argument on the plaintiffs’ motion to certify this suit as a class action was conducted on April 1, 2005. The Court has not yet ruled on the class certification issue.

Will Price and Stixon Petroleum, et al. v. Gas Pipelines, et al., 26th Judicial District, District Court of Stevens County, Kansas, Civil Department, Case No. 03C232 (“Price II”). This action was filed by the plaintiffs on May 12, 2003, after the Court had denied class status in Price I. Plaintiffs claim that 21 groups of defendants, including us and four of our subsidiaries, intentionally underpaid gas producers and royalty owners by understating the heating content of purchased gas in Kansas, Colorado and Wyoming. Additionally, in connection with the completion of our acquisition of the natural gas liquids (NGL) businesses owned by several Koch companies, on July 1, 2005, we acquired Koch Hydrocarbon, LP (renamed ONEOK Hydrocarbon, L.P.) which is also one of the defendants in this case. Price II has been consolidated with Price I for the determination of whether either or both cases may properly be certified as class actions. Oral argument on the plaintiffs’ motion to certify this suit as a class action was conducted on April 1, 2005. The Court has not yet ruled on the class certification issue.

In the Matter of the Natural Gas Explosion at Hutchinson, Kansas during January, 2001, Case No. 02-E-0155, before the Secretary of the Kansas Department of Health and Environment. On July 23, 2002, the Division of Environment of the Kansas Department of Health and Environment (KDHE) issued an administrative order that assessed a $180,000 civil penalty against our Kansas Gas Service division. The penalty was based upon allegations of violations of various KDHE regulations relating to our operation of hydrocarbon storage wells, monitoring requirements applicable to stored hydrocarbon products, and spill reporting in connection with the gas explosion at our Yaggy gas storage facility in Hutchinson, Kansas in January 2001. In addition, the order required us to monitor existing unplugged vent wells, drill additional observation, monitoring and vent wells as directed by the KDHE, perform cleanup activities relating to certain brine wells, and prepare a geoengineering plan with respect to the Yaggy gas field. On April 5, 2004, we entered into a Consent Order with the KDHE in which we paid a civil penalty in the amount of $180,000 and reimbursed the KDHE for its costs related to the investigation of the incident in the amount of approximately $79,000. Remediation required under the consent order is ongoing.

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Loyd Smith, et al v. Kansas Gas Service Company, Inc., ONEOK, Inc., Western Resources, Inc., Mid Continent Market Center, Inc., ONEOK Gas Storage, L.L.C., ONEOK Gas Storage Holdings, Inc., and ONEOK Gas Transportation, L.L.C., Case No. 01-C-0029, in the District Court of Reno County, Kansas, and Gilley et al. v. Kansas Gas Service Company, Western Resources, Inc., ONEOK, Inc., ONEOK Gas Storage, L.L.C., ONEOK Gas Storage Holdings, Inc., ONEOK Gas Transportation L.L.C. and Mid Continent Market Center, Inc., Case No. 01-C-0057, in the District Court of Reno County, Kansas. Two separate class action lawsuits were filed against us and several of our subsidiaries in early 2001 relating to certain gas explosions in Hutchinson, Kansas. The court certified two separate classes of claimants, which included all owners of residential real estate in Reno County, Kansas whose property had allegedly declined in value, and owners of businesses in Reno County whose income had allegedly suffered. Both cases were adjudicated in September 2004 and resulted in jury verdicts. In the class action relating to the residential claimants, the jury awarded $5 million in actual damages, which is covered by insurance. In the business owners’ class action, the jury rendered a defense verdict awarding no actual damages. The jury rejected claims for punitive damages in both cases. In a separate hearing on Plaintiffs’ attorney fees, the Judge awarded $2,047,406 in fees and $646,090.78 in expenses, which is also covered by insurance. We are reviewing our options for appeal of the residential claimants’ class action verdict and subsequent award of attorney fees. With the exception of a related lawsuit that was filed in Sedgwick County, Kansas, which is now on appeal (see Note K of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion on this matter), all other litigation regarding the gas explosions has been resolved. On April 11, 2005, the court denied plaintiffs’ motion for a new trial and denied a post trial motion filed by defendants. The business class plaintiffs and residential class plaintiffs have filed notices of appeal. We have filed a notice of appeal of the residential class verdict and the attorney fee award. The cases have been transferred to the Kansas Supreme Court for appeal.

Cornerstone Propane Partners, L.P., et al. v. E Prime, Inc., ONEOK Energy Marketing and Trading Company, L.P., ONEOK, Inc., and Calpine Energy services, L.P., United States District Court for the Southern District of New York, Case No. 04-CV-00758. We and our wholly owned subsidiary, ONEOK Energy Services, L.P. (formerly ONEOK Energy Marketing and Trading Company, L.P.) were named as two of the defendants in the above-captioned lawsuit filed February 2, 2004, in the United States District Court for the Southern District of New York brought on behalf of persons who bought and sold natural gas futures and options contracts on the New York Mercantile Exchange during the years 2000 through 2002. The Complaint seeks class certification, actual damages in unspecified amounts for alleged violations of the Commodities Exchange Act, recovery of costs of the suit, including attorney’s fees, and other appropriate relief. On August 17, 2004, this case was consolidated for all purposes with a related lawsuit, which names a number of other defendants in the energy industry. Plaintiffs in the related case assert allegations similar to those alleged against us in this case. On October 3, 2005, the Court granted plaintiffs’ motion for class certification without a hearing. On February 3, 2006, plaintiffs’ filed a motion for preliminary approval of the proposed settlement with certain defendants, including the ONEOK entities. The Court approved Plaintiffs motion on February 8, 2006.

Enron Corp. v. Silver Oak Capital, LLC and AG Capital Recovery Partners III, LP, Adversary Proceeding No. 03-93568, relating to Case No. 01-16034, in the United States Bankruptcy Court for the Southern District of New York. Enron Corp. filed a complaint on November 28, 2003, against Silver Oak Capital, LLC and AG Capital Recovery Partners III, LP (“AG”), instituting an adversary proceeding seeking to avoid as a fraudulent transfer, under Section 548 of the Bankruptcy Code, certain guaranties of obligations of Enron North America Corp. (“ENA”) that Enron Corp. issued to one of our subsidiaries, ONEOK Energy Services, L.P. (formerly ONEOK Energy Marketing and Trading Company, L.P.). At that time, AG was the owner of claims filed in the bankruptcies of Enron Corp. and ENA that ONEOK Energy Services, L.P. originally sold on a recourse basis to Bear Stearns & Co. Inc. in May 2002 (the “Claims”). The filing of that complaint triggered repurchase obligations that ONEOK Energy Services, L.P. honored in April 2004, and accordingly ONEOK Energy Services, L.P. purchased from AG $25 million of the Claims against Enron Corp. (the “Repurchased Claims”). ONEOK Energy Services, L.P. now owns and is enforcing the Repurchased Claims in the Enron bankruptcy case, and ONEOK Energy Services, L.P. is also defending the adversary proceeding. Additionally, Enron Corp. and ENA have filed separate objections to a portion of the Claims, alleging that the applicable proofs of claim, as filed by AG, were overstated. The filing of those objections may trigger obligations of ONEOK Energy Services, L.P. to repurchase additional portions of the Claims (the “Additional Contested Claims”), which ONEOK Energy Services, L.P. would then enforce in the same manner as the Repurchased Claims. If ONEOK Energy Services, L.P. did repurchase some or all of the Additional Contested Claims, it would then potentially be entitled to distributions under the confirmed Enron bankruptcy plan on account of those claims that would be less than the amount for which ONEOK Energy Services, L.P. might have to repurchase the Additional Contested Claims.

Samuel P. Leggett, et al. v. Duke Energy Corporation et al; Case No. 13847 in the Chancery Court of Tennessee for the Twenty-Fifth Judicial District at Somerville. This action was filed against us and our wholly owned subsidiary, ONEOK Energy Services Company (formerly ONEOK Energy Marketing and Trading Company, L.P.) and several other energy trading companies on January 28, 2005. The lawsuit seeks a class certification of residential and business classes in

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Tennessee for recovery of damages and injunctive relief based upon allegations of a purported conspiracy to manipulate the price of gas in Tennessee through the reporting of false prices to the publishers of natural gas price indexes and other misconduct. On March 7, 2005, the defendants removed this matter to federal court. On August 11, 2005, the Judicial Panel on Multidistrict Litigation transferred the case to the District of Nevada for inclusion in the multidistrict litigation styled “In Re Western States Wholesale Natural Gas Antitrust Litigation” (MDL-1566). The plaintiffs have filed a motion to remand the case to state court, and defendants have moved to dismiss the case. Both motions are currently pending in the MDL proceeding.

Learjet, Inc., et al. v. ONEOK, Inc., et al., originally filed in the District Court of Wyandotte County, Kansas (Case No. 05-CV-1500), removed to the United States District Court for the District of Kansas (Case No. 05-CV-2513-CM-JPO), conditionally transferred to MDL-1566 in the United States District Court for the District of Nevada. This class action was brought on November 4, 2005 on behalf of Kansas direct purchasers of natural gas against ONEOK, Inc., ONEOK Energy Services Company, L.P., Kansas Gas Marketing Company, and 20 other defendants. The plaintiffs allege, among other things, that during the period from January 1, 2000 through October 31, 2002, the defendants violated the Kansas Restraint of Trade Act by reporting false prices to publishers of natural gas price indexes that increased the price paid for natural gas purchased by the plaintiffs. The plaintiffs seek damages based upon the full consideration damage remedy of the Kansas Restraint of Trade Act, together with court costs and attorney fees. The case was removed from state district court to federal district court on December 7, 2005. The Judicial Panel for Multidistrict Litigation issued a conditional transfer order on January 23, 2006, conditionally transferring this case to MDL Docket No. 1566 pending in the United States District Court for the District of Nevada. The Plaintiffs filed a Motion to Vacate the Conditional Transfer Order with the Judicial Panel on Multidistrict Litigation on February 7, 2006.

Sinclair Oil Corporation v. ONEOK Energy Services Corporation, L.P., filed in the United States District Court for the District of Wyoming (Case No. 05-CV-254-D), conditionally transferred to MDL-1566 in the United States District Court for the District of Nevada (Case No. 05-CV-1396). On September 23, 2005, Sinclair Oil Corporation filed a complaint asserting several claims against ONEOK Energy Services Company, L.P. (“OESC”) on alleged misconduct for false reporting to publishers of natural gas price indexes. Sinclair was a gas purchaser from OESC and claims the false reporting affected the price it paid for gas. A motion to dismiss the case based on the defenses of the filed rate doctrine and federal preemption was filed on November 3, 2005. The Judicial Panel on Multidistrict Litigation entered a conditional transfer order on November 4, 2005, conditionally transferring this case to the Multidistrict Litigation Docket No. 1566 in the United States District Court for the District of Nevada. The Judicial Panel for Multidistrict Litigation entered into a final Order on February 15, 2006, transferring this case to MDL Docket No. 1566 pending in the United Sates District Court for the District of Nevada.

J.P. Morgan Trust Company v. ONEOK, Inc., et al, originally filed in the District Court of Wyandotte County (Case No. 05-CV-1232), removed to the United States District Court for the District of Kansas (Case No. 05-CV-1331), transferred to MDL-1566 in the United States District Court for the District of Nevada (Case No. 05-CV-1331). On October, 2005, an amended complaint was filed in this case naming ONEOK, Inc. and ONEOK Energy Marketing and Trading Company, L.P. (now named ONEOK Energy Services Company, L.P.) as defendants. The amended complaint asserts claims under the Kansas Restraint of Trade Act against 22 defendants. On October 13, 2005, the Judicial Panel on Multidistrict Litigation entered a conditional transfer order of this case to MDL Docket No. 1566 pending in the United States District Court for the District of Nevada. On March 2, 2006, the Court granted the Motion for Remand filed by the plaintiff. However, the Court has stayed this order pending a further review. The case had been transferred to the MDL 1566 proceeding and if the remand order stands, will be remanded back to the District Court of Wyandotte County, Kansas.

Richard Manson v. Northern Plains Natural Gas Company, LLC, et. al., Civil Action No. 1973-N, in the Court of Chancery of the State of Delaware in and for New Castle County. On March 2, 2006, a holder of limited partnership units of Northern Border Partners, L.P. (“Northern Border”) filed a class action and derivative complaint on behalf of a putative class of all holders of Northern Border limited partnership units against Northern Border, TransCanada Corporation, us and some of our affiliates, and the individual members of the Policy Committee of Northern Border. The plaintiff claims that the transactions we announced on February 15, 2006, including the sale of some of our assets to Northern Border, an increase of our general partner interest in Northern Border to 100 percent and the sale by Northern Border of 20 percent of its interest in Northern Border Pipeline Company to TC PipeLines, LP, will constitute a breach of Northern Border’s partnership agreement and a breach of defendants’ fiduciary duties. The plaintiff seeks to enjoin the transactions or to rescind them if the transactions are completed prior to entry of a final judgment in the case. The Plaintiff also seeks to recover damages on behalf of the class for the profits and any special benefits obtained by the defendants, as well as interest, costs, attorneys’ fees and expert fees.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION AND HOLDERS

Our common stock is listed on the New York Stock Exchange under the trading symbol OKE. The corporate name ONEOK is used in newspaper stock listings. The following table sets forth the high and low closing prices of our common stock for the periods indicated.

	Year Ended December 31, 2005				Year Ended December 31, 2004
	High		Low		High		Low
First Quarter	$	30.94	$	27.10	$	23.37	$	21.74
Second Quarter	$	32.65	$	28.68	$	22.93	$	19.80
Third Quarter	$	35.72	$	32.36	$	26.02	$	20.97
Fourth Quarter	$	34.68	$	26.63	$	28.90	$	25.66

There were 14,724 holders of record of our common stock at February 28, 2006.

DIVIDENDS

The following table sets forth the quarterly dividends paid on our common stock during the periods indicated.

	Years Ended December 31,
	2005			2004
First Quarter	$	0.25		$	0.19
Second Quarter	$	0.28		$	0.21
Third Quarter	$	0.28	(a)	$	0.23	(a)
Fourth Quarter	$	0.28	(a)	$	0.25	(a)

(a) - Declared in the previous quarter.

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EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information concerning our equity compensation plans as of December 31, 2005.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)			Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities in Column (a)) (c)
Equity compensation plans approved by security holders (1)	2,805,174	$	21.90		2,791,688	(4)
Equity compensation plans not approved by security holders (2)	264,510	$	22.73	(3)	507,219	(4)
Total	3,069,684	$	21.97		3,298,907

(1) Includes stock options, restricted stock awards, restricted stock incentive units and performance share awards granted under our Long-Term Incentive Plan. For a brief description of the material features of this plan, see Note P of the Notes to Consolidated Financial Statements. Column (c) also includes 1,297,310 and 966,887 shares available for future issuance under our Thrift Plan and Employee Stock Purchase Plan, respectively.

(2) Includes our Employee Non-Qualified Deferred Compensation Plan, Deferred Compensation Plan for Non-Employee Directors, and Stock Compensation Plan for Non-Employee Directors. For a brief description of the material features of these plans, see Note P of the Notes to Consolidated Financial Statements. Column (c) also includes 42,662 shares available for future issuance under the Employee Stock Award Program described below.

(3) Compensation deferred into our common stock under our Employee Non-Qualified Deferred Compensation Plan and Deferred Compensation Plan for Non-Employee Directors is distributed to participants at fair market value on the date of distribution. The price used for these plans to calculate the weighted-average exercise price in the table is $26.63, which represents the closing price of our common stock at December 30, 2005.

(4) Securities reserved for future issuance under our Deferred Compensation Plan for Non-Employee Directors are included in shares reserved for issuance under our Long-Term Incentive Plan, which is reflected in the table as an equity compensation plan approved by security holders.

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ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth information relating to our purchases of our common stock for the periods shown.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2005	11,447	(1)(2)	$	31.27	1,200,900	267,500
November 1-30, 2005	78	(1)(2)	$	27.57	267,500	7,500,000	(3)
December 1-31, 2005	6,704	(1)(2)	$	26.80	—	7,500,000
Total	18,229		$	29.61	1,468,400	7,500,000

(1) Includes shares withheld pursuant to attestation of ownership and deemed tendered to us in connection with the exercise of stock options under the ONEOK, Inc. Long-Term Incentive Plan, as follows :

11,412 shares for the period October 1-31, 2005

6,662 shares for the period December 1-31, 2005

(2) Includes shares repurchased directly from employees, pursuant to our Employee Stock Award Program, as follows:

35 shares for the period October 1-31, 2005

78 shares for the period November 1-30, 2005

42 shares for the period December 1-31, 2005

(3) Reflects additional shares authorized by our Board of Directors in November 2005.

EMPLOYEE STOCK AWARD PROGRAM

Under our Employee Stock Award Program, we issued, for no consideration, to all eligible employees (all full-time employees and employees on short-term disability) one share of our common stock when the closing price of our common stock on the New York Stock Exchange (NYSE) was for the first time at or above $26 per share, and we will issue, for no consideration, one additional share of our common stock to all eligible employees when the closing price on the NYSE is for the first time at or above each one dollar increment above $26 per share. In July 2005, our Board increased the total number of shares of our common stock available for issuance under this program from 50,000 to 100,000.

Through December 31, 2005, a total of 45,415 shares had been issued to employees under this program.

The issuance of shares under this program has not been registered under the Securities Act of 1933, as amended (1933 Act) in reliance upon SEC releases, including Release No. 6188, dated February 1, 1980, stating that there is no sale of the shares in the 1933 Act sense to employees under this type of program.

ITEM 6. SELECTED FINANCIAL DATA

Through February 5, 2003, we computed our earnings per share (EPS) in accordance with EITF Topic No. D-95 (Topic D-95), which was subsequently superceded by EITF Issue No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128”. See Note Q of the Notes to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

In February 2003, we purchased approximately 9 million shares of our Series A Convertible Preferred Stock (Series A) from Westar and exchanged the remaining 10.9 million shares of Series A for 21.8 million shares of Series D Convertible Preferred Stock (Series D) reflecting the two-for-one stock split in 2001. The Series D had a fixed annual cash dividend rate of 92.5 cents per share. As a result of this transaction, the EITF for participating securities no longer applied to our computation of EPS beginning in February 2003. In November 2003, the Series D was converted to common stock and sold to the public by Westar. Effective January 6, 2004, the Series D was retired. There are no shares of Series A currently outstanding.

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The following table sets forth our selected financial data for each of the periods indicated.

	Years Ended December 31,
	2005		2004		2003		2002		2001
	(Millions of dollars, except per share amounts)
Net margin from continuing operations	$	1,338.2	$	1,137.2	$	1,084.8	$	875.3	$	699.2
Operating income from continuing operations	$	799.0	$	443.7	$	427.9	$	346.1	$	194.2
Income from continuing operations	$	403.1	$	224.7	$	206.4	$	151.0	$	43.5
Total assets	$	10,013.5	$	7,199.2	$	6,211.9	$	5,809.6	$	5,853.3
Long-term debt	$	1,993.2	$	1,829.5	$	1,830.9	$	1,442.0	$	1,744.2
Basic earnings per share - continuing operations	$	4.01	$	2.21	$	2.28	$	1.26	$	0.36
Basic earnings per share - total	$	5.44	$	2.38	$	1.48	$	1.40	$	0.85
Diluted earnings per share - continuing operations	$	3.73	$	2.13	$	2.05	$	1.26	$	0.36
Diluted earnings per share - total	$	5.06	$	2.30	$	1.22	$	1.39	$	0.85
Dividends declared per common share	$	1.09	$	0.88	$	0.69	$	0.62	$	0.62

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

EXECUTIVE SUMMARY

The following discussion highlights some of our achievements and significant issues affecting us this past year. You should read the Financial and Operating Results section of Management’s Discussion and Analysis of Financial Condition and Results of Operation and the Financial Statements for a complete explanation of the following items.

Our diluted earnings per share of common stock from continuing operations increased to $3.73 in 2005 compared with $2.13 in 2004. During 2005, we increased our dividend to a current annual dividend of $1.12 per share of common stock. This follows four increases in our dividend during 2004.

In 2005, our income from continuing operations increased to $403.1 million from $224.7 million in 2004, a 79 percent increase. Operating income increased to $799.0 million in 2005 from $443.7 million in 2004, primarily due to the gain on sale of assets in our Gathering and Processing segment of $264.2 million.

Our Energy Services segment benefited from increases in natural gas prices and price volatility during 2005. Operating income for our Energy Services segment increased $26.5 million in 2005 compared with 2004, primarily due to an increase of $32.4 million in net margin. An increase of $41.9 million in net margin was due to the effect of improved natural gas basis differentials on transportation margins. A $22.6 million increase in net margin was due to the increase in wholesale physical marketing margins, which resulted from natural gas price volatility. These increases were partially offset by an $18.3 million decrease in storage margins from cash flow hedge ineffectiveness primarily related to natural gas basis movements attributable to anticipated storage withdrawals from the 2006/2007 heating season and an $18.4 million decrease resulting from less favorable price movements in 2005 related to our natural gas fixed price activities.

Favorable energy prices also had a significant impact on our Gathering and Processing segment’s results during 2005. Average prices for natural gas, NGLs and crude oil exceeded prices for the same period in 2004. The gross processing spread was also higher in 2005 and continued to exceed the previous five-year and three-year averages.

The acquisition of the natural gas liquids businesses owned by several affiliates and a subsidiary of Koch in July 2005, accounted for increases in both our Natural Gas Liquids segment and our Pipelines and Storage segment.

On February 14, 2006, we signed agreements to sell certain assets to Northern Border Partners for approximately $3 billion in cash and limited partner units and increase our general partnership interest in Northern Border Partners to 100 percent. We expect these transactions to be completed by April 1, 2006. These transactions will result in our Gathering and Processing segment, Natural Gas Liquids segment, and Pipelines and Storage segment being transferred to Northern Border Partners.

On October 4, 2005, the OCC issued a final order on our application for a rate increase by Oklahoma Natural Gas. The OCC unanimously approved an annual rate increase of $57.5 million. The Commission’s administrative law judge had previously

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recommended an increase in annual revenues of approximately $58.0 million in July 2005. Oklahoma Natural Gas implemented new rates, subject to refund, on July 28, 2005, based on the judge’s report.

SIGNIFICANT ACQUISITIONS AND DIVESTITURES

In February 2006, we signed agreements to sell certain assets to Northern Border Partners for approximately $3 billion in cash and limited partner units and increase our general partner interest in Northern Border Partners to 100 percent. We will purchase, through Northern Plains, from an affiliate of TransCanada Corporation (TransCanada) 17.5 percent of the general partner interest in Northern Border Partners for $40 million, less $10 million for expenses associated with the transfer of operating responsibility of the Northern Border Pipeline Company to TransCanada for a net payment of $30 million. After the transactions are completed, we will own approximately 37.0 million limited partner units and 100 percent of the Northern Border Partners’ general partner interest, increasing our total interest in Northern Border Partners to 45.7 percent.

With the purchase of 17.5 percent of the general partner interest in Northern Border Partners, we will also transfer our Gathering and Processing segment, Natural Gas Liquids segment, and Pipelines and Storage segment to Northern Border Partners in transactions valued at approximately $3 billion. We will receive approximately $1.35 billion in cash and approximately 36.5 million limited partner units from Northern Border Partners. The limited partner units and related general partner interest contribution were valued at approximately $1.65 billion at the time of the signing of the transaction. This sale, subject to adjustment, includes the natural gas liquids assets we purchased from Koch in July 2005 for $1.35 billion. We will not recognize a gain on the sale as the transfer of assets will be accounted for at the assets’ historical cost.

We plan to use the cash proceeds to reduce short-term debt, acquire other assets or repurchase our common stock. These transactions are subject to regulatory approvals and other conditions, including antitrust clearance from the Federal Trade Commission under the Hart-Scott-Rodino Act. We expect these transactions to be completed by April 1, 2006.

In December 2005, we sold our natural gas gathering and processing assets located in Texas to a subsidiary of Eagle Rock Energy, Inc. for approximately $527.2 million and recorded a pre-tax gain of $264.2 million, which is included in gain on sale of assets in our Gathering and Processing segment’s operating income. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold. We used the net cash proceeds from this sale to prepay our 7.75 percent $300.0 million long-term debt which was due in August 2006.

In October 2005, we entered into an agreement to sell our Spring Creek power plant to Westar for $53 million. The transaction requires FERC approval and is expected to be completed in 2006. The 300-megawatt gas-fired merchant power plant was built in 2001 to supply electrical power during peak periods using gas-powered turbine generators. The financial information related to the properties sold is reflected as a discontinued component in this Annual Report on Form 10-K. All periods presented have been restated to reflect the discontinued component.

In September 2005, we completed the sale of our Production segment to TXOK Acquisition, Inc. for $645 million, before adjustments and recognized a pre-tax gain on the sale of approximately $240.3 million. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold. The proceeds from the sale were used to reduce debt. The financial information related to the properties sold is reflected as a discontinued component in this Annual Report on Form 10-K. All periods presented have been restated to reflect the discontinued component.

In July 2005, we completed the acquisition of the natural gas liquids businesses owned by Koch for approximately $1.33 billion, net of working capital and cash received. This transaction included Koch Hydrocarbon, LP’s entire mid-continent natural gas liquids fractionation business; Koch Pipeline Company, LP’s natural gas liquids pipeline distribution systems; Chisholm Pipeline Holdings, Inc., which has a 50 percent ownership interest in Chisholm Pipeline Company; MBFF, LP, which owns an 80 percent interest in a 160,000 barrel per day fractionator at Mont Belvieu, Texas; and Koch Vesco Holdings, LLC, an entity that owns a 10.2 percent interest in VESCO. These assets are included in our consolidated financial statements beginning on July 1, 2005.

In November 2004, we acquired Northern Plains, which owns 82.5 percent of the general partner interest and 500,000 limited partnership units, together representing a 2.73 percent ownership interest, in Northern Border Partners, from CCE Holdings, LLC for $175 million. Income derived from this investment is included in other income in our Other segment.

In December 2003, we acquired approximately $240 million of natural gas and crude oil properties and related flow lines located in Texas. The results of operations for these assets were included in our consolidated financial statements from that date until the disposition of our Production segment in September 2005.

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In January 2003, we sold approximately 70 percent of the natural gas and crude oil producing properties of our Production segment for an adjusted cash price of $294 million. The properties sold were located in Oklahoma, Kansas and Texas. We recorded a pretax gain of approximately $61.2 million in 2003 related to this sale. The financial information related to the properties sold is reflected as a discontinued component in this Annual Report on Form 10-K.

In January 2003, we acquired the Texas natural gas distribution business and other assets from Southern Union Company. The results of operations for these assets have been included in our consolidated financial statements since that date. We paid approximately $436.6 million for these assets, including $16.6 million in working capital adjustments. The primary assets acquired were natural gas distribution operations that currently serve approximately 560,000 customers in cities located throughout Texas, including the major cities of El Paso and Austin, as well as the cities of Port Arthur, Galveston, Brownsville and others. Over 90 percent of the customers are residential. The other assets acquired include a 125-mile natural gas transmission system, as well as other energy-related domestic assets involved in natural gas marketing, retail sales of propane and distribution of propane. The purchase also included natural gas distribution investments in Mexico. The assets relating to the propane distribution operations were sold in May and July 2004, and the natural gas distribution investments in Mexico were sold in May 2004.

REGULATORY

Several regulatory initiatives positively impacted the earnings and future earnings potential for our Distribution segment. These are discussed beginning on page 42.

IMPACT OF NEW ACCOUNTING STANDARDS

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (Statement 123R). Statement 123R requires companies to expense the fair value of share-based payments. In addition, there are also changes related to the expense calculation for share-based payments. Effective January 1, 2006, we adopted Statement 123R, and we elected to use the prospective method. We are currently assessing the impact of adopting Statement 123R, but we do not believe it will have a material impact on our financial condition and results of operations, as we have been expensing share-based payments since our adoption of Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” on January 1, 2003.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47), that requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective for our year ended December 31, 2005. We completed our review of the applicability of FIN 47 to our operations and determined that its impact was immaterial to our consolidated financial statements.

In June 2005, the FASB ratified the consensus reached in EITF 04-5. EITF 04-5 presumes that a general partner controls a limited partnership and therefore should consolidate the partnership in the financial statements of the general partner. Effective January 1, 2006, we were required to consolidate Northern Border Partners’ operations in our consolidated financial statements and we elected to use the prospective method. If we had consolidated Northern Border Partners at December 31, 2005, our debt-to-equity ratio would have changed from 67 percent debt and 33 percent equity to 73 percent debt and 27 percent equity. This increase results from the consolidation of Northern Border Partners’ debt of $1.35 billion at December 31, 2005, while the majority of their equity is reported as minority interest liability. The debt covenant calculations in our credit agreements exclude the debt of Northern Border Partners, since it is a master limited partnership. The adoption of EITF 04-5 will not have an impact on our net income; however, reported revenues, costs and expenses will be higher to reflect the activities of Northern Border Partners.

In September 2005, the FASB ratified the consensus reached in EITF Issue No. 04-13, “Accounting for Purchases and Sales of Inventory with the Same Counterparty” (EITF 04-13). EITF 04-13 defines when a purchase and a sale of inventory with the same party that operates in the same line of business should be considered a single nonmonetary transaction. EITF 04-13 is effective for new arrangements that a company enters into in periods beginning after March 15, 2006. We do not expect the adoption of EITF 04-13 to impact our consolidated financial statements.

The FASB is currently reviewing the accounting for pension and postretirement medical benefits and expects to issue an exposure draft on phase one of this project during the first quarter of 2006. The final standard for the first phase of this project is expected to be issued in the third quarter of 2006 with implementation required for years ending after December 15, 2006. Based on the FASB’s discussion, we could be required to record a balance sheet liability equal to the difference between our benefit obligations and plan assets. If this requirement had been in place at December 31, 2005, we would have

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been required to record unrecognized losses of $124.8 million and $78.8 million for pension and postretirement benefits, respectively, on our consolidated balance sheet as accumulated other comprehensive income (loss).

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America and included in this Annual Report on Form 10-K. Certain amounts included in or affecting our financial statements and related disclosure must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. Therefore, the reported amounts of our assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates.

The following is a summary of our most critical accounting policies, which are defined as those policies most important to the portrayal of our financial condition and results of operations and requiring management’s most difficult, subjective, or complex judgment, particularly because of the need to make estimates concerning the impact of inherently uncertain matters. We have discussed the development of and selection of our critical accounting policies and estimates with the audit committee of our Board of Directors.

Derivatives and Risk Management Activities - We engage in wholesale energy marketing, retail marketing, trading, and risk management activities. We account for derivative instruments utilized in connection with these activities and services under the fair value basis of accounting in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133), as amended.

Under Statement 133, entities are required to record derivative instruments at fair value. The fair value of derivative instruments is determined by commodity exchange prices, over-the-counter quotes, volatility, time value, counterparty credit and the potential impact on market prices of liquidating positions in an orderly manner over a reasonable period of time under current market conditions. Refer to the table on page 53 for amounts in our portfolio at December 31, 2005, that were determined by prices actively quoted, prices provided by other external sources and prices derived from other sources. The majority of our portfolio’s fair values are based on actual market prices. Transactions are also executed in markets for which market prices may exist but the market may be relatively inactive, thereby resulting in limited price transparency that requires management’s subjectivity in estimating fair values.

Market value changes result in a change in the fair value of our derivative instruments. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. If the derivative instrument does not qualify or is not designated as part of a hedging relationship, we account for changes in fair value of the derivative in earnings as they occur. Commodity price volatility may have a significant impact on the gain or loss in any given period. For more information on fair value sensitivity and a discussion of the market risk of pricing changes, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk.

To minimize the risk of fluctuations in natural gas, NGLs and crude oil prices, we periodically enter into futures transactions and swaps in order to hedge anticipated purchases of natural gas and crude oil, fuel requirements and NGL inventories. Interest rate swaps are also used to manage interest rate risk. Under certain conditions, we designate these derivative instruments as a hedge of exposure to changes in fair values or cash flows. For hedges of exposure to changes in fair value, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. For hedges of exposure to changes in cash flow, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income and is subsequently reclassified into earnings when the forecasted transaction affects earnings. Any ineffectiveness of designated hedges is reported in earnings in the period the ineffectiveness occurs.

Many of our purchase and sale agreements that otherwise would be required to follow derivative accounting qualify as normal purchases and normal sales under Statement 133 and are therefore exempt from fair value accounting treatment.

Energy-related contracts that are not derivatives pursuant to Statement 133 are no longer carried at fair value but are accounted for on an accrual basis as executory contracts. Changes to the accounting for existing contracts as a result of the rescission of EITF Issue No. 98-10, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities” were reported as a cumulative effect of a change in accounting principle on January 1, 2003. This resulted in a cumulative effect loss, net of tax, of $141.8 million in 2003.

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Impairment of Goodwill and Long-Lived Assets - We assess our goodwill for impairment at least annually based on Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (Statement 142). An initial assessment is made by comparing the fair value of the operations with goodwill, as determined in accordance with Statement 142, to the book value of each reporting unit. If the fair value is less than the book value, an impairment is indicated, and we must perform a second test to measure the amount of the impairment. In the second test, we calculate the implied fair value of the goodwill by deducting the fair value of all tangible and intangible net assets of the operations with goodwill from the fair value determined in step one of the assessment. If the carrying value of the goodwill exceeds this calculated implied fair value of the goodwill, we will record an impairment charge. At December 31, 2005, we had the following amounts of goodwill recorded on our balance sheet.

	(Thousands of dollars)
Gathering and Processing	$	15,604
Natural Gas Liquids		173,945
Pipelines and Storage		22,036
Energy Services		10,255
Distribution		158,554
Total goodwill	$	380,394

We assess our long-lived assets for impairment based on Statement 144. A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may exceed its fair value. Fair values are based on the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the assets.

Examples of long-lived asset impairment indicators include:

• a significant decrease in the market price of a long-lived asset or asset group,

• a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition,

• a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator that would exclude allowable costs from the rate-making process,

• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group,

• a current-period operating cash flow loss, combined with a history of operating cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, and

• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

In the third quarter of 2005, we made the decision to sell our Spring Creek power plant, located in central Oklahoma, and exit the power generation business. In October 2005, we concluded that our Spring Creek power plant had been impaired and recorded an impairment expense of $52.2 million. This conclusion was based on our Statement 144 impairment analysis of the results of operations for this plant through September 30, 2005, and also the net sales proceeds from the anticipated sale of the plant. These assets were held for sale at December 31, 2005, and, accordingly, this component of our business is accounted for as discontinued operations in accordance with Statement 144.

Pension and Postretirement Employee Benefits - We have a defined benefit pension plan covering substantially all full-time employees and a postretirement employee benefits plan covering most employees. Nonbargaining unit employees hired after December 31, 2004, are not eligible for our defined benefit pension plan; however, they are covered by a profit sharing plan. Nonbargaining unit employees retiring between the ages of 50 and 55 who elect postretirement medical coverage, all nonbargaining unit employees hired on or after January 1, 1999, employees who are members of the International Brotherhood of Electrical Workers hired after June 30, 2003, and gas union employees hired after July 1, 2004, who elect postretirement medical coverage pay 100 percent of the retiree premium for participation in the plan. Additionally, any employees who came to us through various acquisitions may be further limited in their eligibility to participate or receive any contributions from us for postretirement medical benefits. Our actuarial consultant calculates the expense and liability related to these plans and uses statistical and other factors that attempt to anticipate future events. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases, age and employment periods. In determining the projected benefit obligations and costs, assumptions can change from period to period and result in material changes in the costs and liabilities we recognize. See Note J of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

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Assumed health care cost trend rates have a significant effect on the amounts reported for our health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects.

	One-Percentage Point Increase		One-Percentage Point Decrease
	(Thousands of dollars)
Effect on total of service and interest cost	$	3,106	$	(2,513	)
Effect on postretirement benefit obligation	$	17,982	$	(15,619	)

During 2005, we recorded net periodic benefit costs of $13.0 million related to our defined benefit pension plans and $27.4 million related to postretirement benefits. We estimate that in 2006, we will record net periodic benefit costs of $21.9 million related to our defined benefit pension plan and $25.9 million related to postretirement benefits. In determining our estimated expenses for 2006, our actuarial consultant assumed an 8.75 percent expected return on plan assets and a discount rate of 5.75 percent. A decrease in our expected return on plan assets to 8.50 percent would increase our 2006 estimated net periodic benefit costs by approximately $1.6 million for our defined benefit pension plan and would not have a significant impact on our postretirement benefit plan. A decrease in our assumed discount rate to 5.25 percent would increase our 2006 estimated net periodic benefit costs by approximately $4.9 million for our defined benefit pension plan and $1.6 million for our postretirement benefit plan. For 2006, we anticipate our total contributions to our defined benefit pension plan and postretirement benefit plan to be $1.7 million and $2.7 million, respectively, and our pay-as-you-go other postretirement benefit plan costs to be $14.0 million.

Contingencies - Our accounting for contingencies covers a variety of business activities including contingencies for legal exposures and environmental exposures. We accrue these contingencies when our assessments indicate that it is probable that a liability has been incurred or an asset will not be recovered and an amount can be reasonably estimated in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies.” We base our estimates on currently available facts and our estimates of the ultimate outcome or resolution. Actual results may differ from our estimates resulting in an impact, positive or negative, on earnings.

FINANCIAL AND OPERATING RESULTS

Consolidated Operations

The following table sets forth certain selected financial information for the periods indicated.

	Years Ended December 31,
Financial Results	2005			2004		2003
	(Thousands of dollars)
Operating revenues, excluding energy trading revenues	$	12,663,550		$	5,671,714	$	2,640,684
Energy trading revenues, net		12,680			113,814		229,782
Cost of sales and fuel		11,338,076			4,648,311		1,785,648
Net margin		1,338,154			1,137,217		1,084,818
Operating costs		619,995			535,512		512,268
Depreciation, depletion and amortization		183,394			158,053		144,695
Gain on sale of assets		264,207			—		—
Operating income	$	798,972		$	443,652	$	427,855
Other income	$	14,188		$	17,599	$	8,128
Other expense	$	19,883		$	12,056	$	5,198
Discontinued operations, net of taxes
Income (loss) from operations of discontinued components, net	$	(6,180	)	$	17,505	$	10,185
Gain on sale of discontinued component, net	$	149,577		$	—	$	39,739
Cumulative effect of changes in accounting principle, net of tax	$	—		$	—	$	(143,885	)

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Operating Results - Net margin increased for the year ended December 31, 2005, compared with the same period in 2004 primarily due to:

• the effect of increased natural gas basis differentials and natural gas price volatility in our Energy Services segment,

• the impact of favorable commodity pricing for natural gas and NGL products on our Gathering and Processing segment,

• the effect of the natural gas liquids assets acquired from Koch in our Natural Gas Liquids segment and our Pipelines and Storage segment, and

• the implementation of new rate schedules in Oklahoma for our Distribution segment.

For an explanation of energy trading revenues, net, see the discussion of our Energy Services segment beginning on page 37.

Consolidated operating costs for the year increased primarily because of costs related to the natural gas liquids assets acquired from Koch and increased employee benefit costs.

Depreciation, depletion and amortization increased for the year primarily due to the costs associated with the natural gas liquids assets acquired from Koch. Further increases resulted from additional plant, property and equipment in our Distribution segment and regulatory asset amortization resulting from the Kansas Gas Service rate case.

Operating income for 2005 includes the gain on sale of assets in our Gathering and Processing segment of $264.2 million. This gain was the result of the sale of certain natural gas gathering and processing assets located in Texas to a subsidiary of Eagle Rock Energy, Inc. in December 2005.

Net margin increased in 2004, compared with 2003, primarily due to:

• the impact of favorable commodity pricing for natural gas and NGL products on our Gathering and Processing segment, and

• the implementation of new rate schedules in Kansas and Oklahoma for our Distribution Segment.

These increases in net margin in 2004 compared with 2003 were partially offset by the impact of reduced volatility in natural gas prices and lower inter-regional basis spreads from marketing and seasonal gas sales from storage for our Energy Services segment.

Operating costs and depreciation, depletion and amortization increased in 2004, compared with 2003, primarily due to:

• increased employee benefit costs, and

• regulatory asset amortization resulting from the Oklahoma and Kansas rate cases.

The following table sets forth the components of other income for the periods indicated.

	Years Ended December 31,
	2005		2004		2003
	(Thousands of dollars)
Equity income	$	2,538	$	2,404	$	1,489
Gains on sale of assets		5,651		11,269		292
Interest income		2,686		1,282		2,944
Income from benefit plan investments		2,027		1,671		2,559
Other		1,286		973		844
Other Income	$	14,188	$	17,599	$	8,128

In November 2004, we acquired Northern Plains, which owns 82.5 percent of the general partnership interest and 500,000 limited partnership units, together representing a 2.73 percent ownership interest, in Northern Border Partners. Our equity income includes $10.1 million and $1.3 million in 2005 and 2004, respectively, from Northern Border Partners.

The decrease in other income for 2005 is primarily due to the impairment of $5.9 million, included in equity income, recognized in the fourth quarter of 2005 on our 50 percent investment in an Oklahoma gas plant which we do not operate. Also affecting 2005 other income is a $2.6 million impairment charge, included in equity income, related to one of our gas gathering partnerships that may terminate in early 2006.

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The following table sets forth the components of other expense for the periods indicated.

	Years Ended December 31,
	2005		2004		2003
	(Thousands of dollars)
Donations and civic contributions	$	12,236	$	2,078	$	5,973
Non-operating litigation expense and claims, net		4,690		7,033		(2,506	)
Loss on sale of property		818		683		6
Terminated acquisition expense		551		401		175
Other		1,588		1,861		1,550
Other Expense	$	19,883	$	12,056	$	5,198

Other expense increased in 2005, primarily due to our $10.0 million donation to the ONEOK Foundation, included in donations and civic contributions. More information regarding our results of operations is provided in the discussion of each segment’s results. The discontinued component is discussed in our Discontinued Operations and Energy Services segment sections and the cumulative effect of a change in accounting principle is discussed in our Energy Services segment section.

Key Performance Indicators - Key performance indicators reviewed by management include:

• earnings per share,

• return on invested capital, and

• shareholder appreciation.

For the year ended December 31, 2005, our basic and diluted earnings per share from continuing operations was $4.01 and $3.73, respectively, representing an 81 percent increase in basic earnings per share and a 75 percent increase in diluted earnings per share from continuing operations compared with 2004. Return on invested capital is 23.0 percent in 2005 compared with 14.3 percent in 2004.

To evaluate shareholder appreciation, we compare ourselves with a group of 20 peer companies. For the three years ended December 31, 2005, we ranked in the top 50th percentile in shareholder appreciation compared to our peers.

Gathering and Processing

Overview - Our Gathering and Processing segment is engaged in the gathering and processing of natural gas and fractionation of NGLs primarily in Oklahoma and Kansas. Our operations include the gathering of natural gas production from crude oil and natural gas wells. Through gathering systems, these volumes are aggregated for removal of water vapor, solids and other contaminants and to extract NGLs in order to provide marketable natural gas, commonly referred to as residue gas. When the liquids are separated from the raw natural gas at the processing plants, the liquids are generally in the form of a mixed NGL stream. This stream can then be separated by a distillation process, referred to as fractionation, into marketable product components such as ethane, propane, iso-butane, normal butane and natural gasoline. The component products can then be stored, transported and marketed to a diverse customer base of end-users.

Acquisition and Divestiture - The following acquisition and divestiture are described beginning on page 25.

• In December 2005, we sold our natural gas gathering and processing assets located in Texas. This sale included approximately 3,700 miles of pipe and six processing plants with a capacity of 0.2 Bcf/d. See page 25 for additional information. The impact of these assets on our Gathering and Processing segment’s operating income for the year ended December 31, 2005, was $42.0 million.

• In July 2005, we acquired Koch Vesco Holdings, LLC, an entity which owns a 10.2 percent interest in VESCO. VESCO owns a gas processing complex near Venice, Louisiana.

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Selected Financial and Operating Information - The following tables set forth certain selected financial and operating information for our Gathering and Processing segment for the periods indicated.

	Years Ended December 31,
Financial Results	2005			2004		2003
	(Thousands of dollars)
Natural gas liquids and condensate sales	$	671,865		$	575,537	$	449,294
Gas sales		877,049			669,956		640,499
Gathering, compression, dehydration and processing fees and other revenues		99,660			93,491		91,259
Cost of sales and fuel		1,361,308			1,071,954		982,753
Net margin		287,266			267,030		198,299
Operating costs		123,385			118,090		112,822
Depreciation, depletion and amortization		32,649			32,744		29,273
Gain on sale of assets		264,207			—		—
Operating income	$	395,439		$	116,196	$	56,204
Other income (expense), net	$	(7,373	)	$	486	$	(108	)
Cumulative effect of a change in accounting principle, net of tax	$	—		$	—	$	(1,375	)

	Years Ended December 31,
Operating Information	2005		2004		2003
Total gas gathered (MMMBtu/d)		1,077		1,099		1,171
Total gas processed (MMMBtu/d)		1,117		1,172		1,209
Natural gas liquids sales (MBbls/d)		49		51		49
Natural gas liquids produced (MBbls/d)		59		62		59
Gas sales (MMMBtu/d)		329		328		330
Capital expenditures (Thousands of dollars)	$	28,316	$	23,067	$	20,444
Average Conway OPIS composite NGL price ($/gal) (based on our NGL product mix)	$	0.89	$	0.72	$	0.59
Average NYMEX crude oil price ($/Bbl)	$	55.76	$	41.34	$	30.98
Average realized condensate price ($/Bbl)	$	52.69	$	38.17	$	28.68
Average natural gas price ($/MMBtu) (mid-continent region)	$	7.30	$	5.54	$	5.06
Gross processing spread ($/MMBtu)	$	2.77	$	2.47	$	1.36

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	Years Ended December 31,
	2005			2004
Keep whole:
NGL shrink (MMBtu/d)		61,558			80,700
Plant fuel (MMBtu/d)		8,734			9,670
Condensate shrink (MMBtu/d)		4,682			5,930
Condensate sales (Bbls/d)		961			1,217
Percentage of total net margin		13.5	%		19.0	%
Percentage of Proceeds:
Wellhead purchases (MMBtu/d)		184,294			219,800
NGL sales (Bbls/d)		6,634			6,975
Residue sales (MMBtu/d)		24,835			24,270
Condensate sales (Bbls/d)		1,644			1,705
Percentage of total net margin		61.6	%		55.0	%
Fee:
Wellhead volumes (MMBtu/d)		1,076,518			1,120,500
Average rate ($/MMBtu)	$	0.18		$	0.17
Percentage of total net margin		24.8	%		26.0	%

Operating Results - The financial and operating results set forth in the table above have been restated to reflect the transfer of the natural gas liquids marketing business that was previously included in our Gathering and Processing segment to our new Natural Gas Liquids segment.

The change in net margin for 2005, compared with 2004, is primarily due to:

• an increase of $18.8 million attributable to our keep whole contracts, net of hedging, due primarily to an increase in our gross processing spread,

• an increase of $8.0 million due to higher natural gas and NGL prices on our POP contracts, net of hedging, and

• a decrease of $6.5 million due to the sale of certain natural gas gathering and processing assets located in Texas in December 2005.

The gross processing spread for 2005, which is the relative difference in economic value between NGLs and natural gas on a Btu basis, was higher than the previous five-year average of $1.78. The gross processing spread in 2005 was $2.77 per MMBtu versus $2.47 per MMBtu in 2004. Improved contractual terms for gas gathering and processing, resulting from our continued efforts to renegotiate under-performing gas purchase, gas processing and gas gathering contracts, continue to positively impact net margin.

The increase in operating costs for 2005 is primarily due to an increase of $1.5 million in materials, supplies and utilities related to compressor utilization and maintenance, and a $1.1 million increase from the higher cost of chemicals. The remaining increase is associated with higher employee-related costs.

Operating income for 2005 includes a $264.2 million gain on the sale of our natural gas gathering and processing assets located in Texas to a subsidiary of Eagle Rock Energy, Inc. in December 2005. See Note B of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

The decrease in other income (expense) for 2005 is primarily due to an impairment of $5.9 million recognized in the fourth quarter of 2005 related to a 50 percent equity investment in an Oklahoma gas plant which we do not operate and a $1.3 million gain from our 2004 sale of propane distribution assets located in south Texas. The remaining decrease is due to an accrual of a $0.5 million insurance deductible associated with VESCO. The Venice, Louisiana plant suffered damage in August 2005 from Hurricane Katrina. Management expects that insurance payments from our carriers will cover the remaining costs associated with repairing the damage to the facility. The facility is expected to be back in partial service by March 31, 2006.

The increase in capital expenditures for 2005 is primarily related to well connects and additional compression expenditures.

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The increase in net margin in 2004, compared with 2003, is primarily due to:

• an increase of $16.8 million due to favorable commodity pricing for natural gas and NGL products on our POP contracts,

• an increase of $50.2 million attributable to our keep whole contracts due primarily to an increase in our gross processing spread, and

• an increase of $1.8 million due to higher NGL production and sales, partially offset by reduced natural gas sales.

The increase in operating costs in 2004, compared with 2003, is primarily attributable to approximately $3.6 million of charges associated with various contractual dispute settlements in 2004. Employee costs were also $2.7 million higher in 2004 compared with 2003.

Depreciation, depletion and amortization increased in 2004 compared with 2003 primarily due to shorter depreciation lives on certain capital expenditures, the acquisition of new properties and our normal capital expenditure program.

Risk Management - We use derivative instruments to minimize the risks associated with price volatility. In 2005 and 2004, we used a variety of instruments including physical forward sales, NYMEX natural gas futures, NYMEX crude oil futures, and over-the-counter natural gas and natural gas liquid swaps to hedge the cash flows for the purchases and sales of natural gas, sales of condensate and sales of NGLs produced by our operations. We used physical forward sales and derivative instruments to secure a certain price for natural gas, condensate and NGL products. The keep whole spread is hedged with a combination of derivative instruments for the purchase of natural gas and derivative instruments and physical forward sales for NGLs. The realized financial impact of the derivative transactions is included in our operating income in the period that the physical transaction occurs.

The following table sets forth the 2006 hedging information for our Gathering and Processing segment for the periods indicated.

	Three Months Ending March 31, 2006		Year Ending December 31, 2006
Product	Volumes Hedged	Average Price	Volumes Hedged	Average Price
Percent of Proceeds:
Condensate (a)	75 MBbls	$52.00-60.00/Bbl	300 MBbls	$52.00-60.00/Bbl
Natural gas (a)	0.5 Bcf	$6.15-11.00/MMBtu	1.9 Bcf	$6.15-11.00/MMBtu
Natural gas (b)	0.5 Bcf	$9.76/MMBtu	0.5 Bcf	$9.76/MMBtu

(a) - Hedged with NYMEX-based costless collars.

(b) - Hedged with NYMEX futures and basis swaps.

We continue to evaluate market conditions for the remainder of 2006 to take advantage of favorable pricing opportunities for our company-owned production associated with the POP contracts, as well as our keep whole quantities.

See Item 7A, Quantitative and Qualitative Disclosures About Market Risk and Note D of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Natural Gas Liquids

Overview - Our Natural Gas Liquids segment gathers, stores, fractionates and treats raw NGLs produced from gas processing plants located in Oklahoma, Kansas and the Texas panhandle. We connect the NGL production basins in Oklahoma, Kansas and the Texas panhandle with the key NGL market centers in Conway, Kansas and Mont Belvieu, Texas.

Most natural gas produced at the wellhead contains a mixture of NGL components such as ethane, propane, iso-butane, normal butane and natural gasoline. Natural gas processing plants remove the NGLs from the natural gas stream to realize the higher economic value of the NGLs and to meet natural gas pipeline quality specifications, which limit NGLs in the natural gas stream due to liquid and Btu content.

The NGLs that are separated from the natural gas stream at the natural gas processing plants remain in a mixed, raw form until they are gathered, primarily by pipeline, and delivered to our fractionators. A fractionator, by applying heat and pressure, separates each NGL component into marketable products, such as ethane/propane mix, propane, iso-butane, normal

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butane and natural gasoline (collectively, NGL products). These NGL products are then stored and/or distributed to petrochemical, heating and motor gasoline manufacturers.

Acquisition - The following acquisition is discussed beginning on page 25.

• In July 2005, we acquired natural gas liquids businesses from Koch.

Selected Financial and Operating Information - The following tables set forth certain selected financial and operating information for our Natural Gas Liquids segment for the periods indicated.

	Years Ended December 31,
Financial Results	2005		2004			2003
	(Thousands of dollars)
Natural gas liquids and condensate sales	$	2,361,488	$	1,243,347		$	1,018,622
Storage and fractionation revenues		98,887		13,151			4,995
Cost of sales		2,372,486		1,232,082			1,007,779
Net margin		87,889		24,416			15,838
Operating costs		33,460		9,462			9,281
Depreciation, depletion and amortization		11,060		119			59
Operating income	$	43,369	$	14,835		$	6,498
Other income (expense), net	$	231	$	(148	)	$	(86	)

	Years Ended December 31,
Operating Information	2005		2004		2003
Natural gas liquids gathered (MBbls/d) (a)		191		—		—
Natural gas liquids sales (MBbls/d)		207		109		112
Natural gas liquids fractionated (MBbls/d) (a)		292		—		—
Capital expenditures (Thousands of dollars)	$	12,220	$	9,264	$	154

(a) Data presented for 2005 represents the per day results of operations from July 1, 2005.

Operating Results - The results of operations for 2004 and 2003 set forth above are related to the natural gas liquids marketing business that was previously included in our Gathering and Processing segment. The increases for 2005 are primarily related to the natural gas liquids assets acquired in July 2005. The increases associated with the acquisition for 2005 include:

• an increase in net margin of $57.4 million,

• an increase in operating costs of $22.2 million, and

• an increase in depreciation, depletion and amortization of $10.3 million.

The remaining net margin increase for 2005 is primarily related to increased storage margins of $4.8 million from restructured storage contracts.

Increased storage regulatory compliance costs resulted in an additional $1.7 million in operating costs for 2005, compared with 2004.

The increase in net margins for the year ended December 31, 2004, compared with the same period in 2003, was primarily due to increased storage margins and higher NGL prices. Storage margins increased $10.2 million primarily from the addition of storage and pipeline assets located in Conway, Kansas.

Pipelines and Storage

Overview - Our Pipelines and Storage segment, formerly Transportation and Storage, operates our intrastate natural gas transmission pipelines, natural gas storage, regulated natural gas liquids gathering and distribution pipelines, and non-processable natural gas gathering facilities. We also provide interstate natural gas transportation and storage service under Section 311(a) of the NGPA.

In Oklahoma, we have access to the major natural gas producing areas, allowing for natural gas and natural gas liquids to be moved throughout the state. We have access to the major natural gas producing area in south central Kansas. In Texas, we

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are connected to the major natural gas producing areas in the Texas panhandle and the Permian Basin, providing for natural gas to be moved to the Waha Hub, where other pipelines may be accessed for transportation east to the Houston Ship Channel market and west to the California market. Our natural gas liquids gathering connections provide for raw NGLs gathered in Oklahoma, Kansas and the Texas panhandle to be delivered to our fractionation facilities in these states and to our natural gas liquids distribution pipelines which allows for access to the two main NGL market centers in Conway, Kansas and Mont Belvieu, Texas.

Acquisitions and Divestitures - The following acquisitions and divestitures are described beginning on page 25.

• In December 2005, we sold approximately ten miles of non-contiguous, natural gas gathering pipelines in Texas.

• In July 2005, we acquired the FERC regulated assets that were part of the acquisition from Koch.

• In January 2003, we acquired natural gas transmission assets as part of the purchase of our Texas assets.

Selected Financial and Operating Information - The following tables set forth certain selected financial and operating information for our Pipelines and Storage segment for the periods indicated.

	Years Ended December 31,
Financial Results	2005			2004		2003
	(Thousands of dollars)
Transportation and gathering revenues	$	151,490		$	101,950	$	102,812
Storage revenues		51,562			45,791		42,086
Gas sales and other revenues		22,598			19,694		16,401
Cost of sales and fuel		54,036			40,887		47,637
Net margin		171,614			126,548		113,662
Operating costs		63,326			49,414		46,186
Depreciation, depletion and amortization		23,702			17,349		16,694
Operating income	$	84,586		$	59,785	$	50,782
Other income (expense), net	$	(657	)	$	2,835	$	1,495
Cumulative effect of a change in accounting principle, net of tax	$	—		$	—	$	(645	)

	Years Ended December 31,
Operating Information	2005		2004		2003
Natural gas transported (MMcf)		486,635		432,844		449,261
Natural gas liquids transported (MBbls/d) (a)		187		—		—
Natural gas liquids gathered (MBbls/d) (a)		53		—		—
Capital expenditures (Thousands of dollars)	$	15,719	$	12,287	$	15,234
Average natural gas price ($/MMBtu) (mid-continent region)	$	7.30	$	5.54	$	5.06

(a) Data presented for 2005 represents the per day results of operations from July 1, 2005.

Operating Results - Net margin, which increased in 2005, compared with 2004, was affected by:

• an increase of $26.4 million related to revenues on natural gas liquids gathering and distribution pipelines acquired in July 2005,

• an increase of $20.5 million in natural gas transport revenues resulting from increased throughput due to favorable weather conditions for transportation, our improved fuel position and significantly higher commodity prices,

• an increase of $5.8 million related to increased storage revenues from renegotiated contracts, improved fuel position and higher commodity prices, and

• a decrease of $5.8 million related to lower net margins on equity natural gas inventory sales.

The increase in operating costs in 2005, compared with 2004, is due to:

• an increase of $11.5 million for natural gas liquids gathering and distribution pipelines acquired in July 2005,

• increased outside services costs of $1.7 million primarily driven by regulatory compliance requirements, and

• higher employee costs offset in part by lower litigation costs as compared with 2004.

The increase in depreciation, depletion and amortization of approximately $6.4 million for 2005 is primarily related to the newly-acquired natural gas liquids pipelines.

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The decrease in other income (expense), net, for 2005 is due in part to the gain on the sale of certain assets in 2004. Also impacting 2005 is a $2.6 million impairment charge related to one of our gas gathering partnerships that may terminate in early 2006, partially offset by a $0.9 million gain on sale of non-contiguous, natural gas gathering pipelines in Texas.

Net margin, which increased in 2004, compared with 2003, was affected by:

• an increase of $8.9 million related to the sale of operational gas inventory in December 2004,

• increased storage revenues of $2.4 million due to spot storage transactions resulting from the weather and favorable forward pricing in 2004,

• decreased cost of sales and fuel of $1.7 million primarily related to lower transportation volumes partially offset by increased fuel consumed and higher fuel prices, resulting from increased storage activity, and

• decreased volumes transported as a result of milder and wetter weather reducing irrigation, power generation and heating demands.

The increase in operating costs in 2004, compared with 2003, is due to:

• increased regulatory and pipeline integrity compliance costs of $2.9 million, and

• higher employee costs and legal costs for settled litigation.

In 2004, other income (expense), net includes the gain on the sale of the Texas assets of $6.9 million, which is partially offset by litigation costs.

Energy Services

Overview - Our Energy Services segment’s primary focus is to create value for our customers by delivering physical products and risk management services through our network of contracted gas supply, transportation and storage capacity. These services include meeting our customers’ baseload, swing and peaking natural gas commodity requirements on a year-round basis. To provide these bundled services, we lease storage and transportation capacity. Our total storage capacity under lease is 86 Bcf, with maximum withdrawal capability of 2.3 Bcf/d and maximum injection capability of 1.6 Bcf/d. Our current transportation capacity is 1.9 Bcf/d. The contracted storage and transportation capacity connects the major supply and demand centers throughout the United States and into Canada. With these contracted assets, our business strategies include identifying, developing and delivering specialized services and products for premium value to our customers, which are primarily LDCs, electric utilities, and commercial and industrial end users. Also, our storage and transportation capacity allows us opportunities to optimize these positions through our application of market knowledge and risk management skills.

Selected Financial and Operating Information - The following tables set forth certain selected financial and operating information for our Energy Services segment for the periods indicated. In the third quarter of 2005, we made the decision to sell our Spring Creek power plant, located in central Oklahoma, and exit the power generation business. In October 2005, we concluded that our Spring Creek power plant had been impaired and recorded an impairment expense of $52.2 million. These assets were held for sale at December 31, 2005, and, accordingly, this component of our business is accounted for as discontinued operations, in accordance with Statement 144. The discontinued operations are excluded from the financial and operating results below. For additional information, see discussion of discontinued operations on page 43.

	Years Ended December 31,
Financial Results	2005			2004			2003
	(Thousands of dollars)
Energy and power revenues	$	8,345,091		$	2,720,629		$	6,462
Energy trading revenues, net		12,680			113,814			229,782
Other revenues		980			849			961
Cost of sales and fuel		8,152,391			2,661,286			8,508
Net margin		206,360			174,006			228,697
Operating costs		38,598			33,261			32,226
Depreciation, depletion and amortization		2,071			1,554			1,612
Operating income	$	165,691		$	139,191		$	194,859
Other income (expense), net	$	(8,635	)	$	(6,920	)	$	(9,272	)
Cumulative effect of a change in accounting principle, net of tax	$	—		$	—		$	(141,982	)

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	Years Ended December 31,
Operating Information	2005		2004		2003
Natural gas marketed (Bcf)		1,191		1,073		1,012
Natural gas gross margin ($/Mcf)	$	0.14	$	0.14	$	0.17
Physically settled volumes (Bcf)		2,387		2,157		2,028
Capital expenditures (Thousands of dollars)	$	159	$	1,806	$	555

Operating Results - Net margins increased for 2005, compared with 2004, primarily due to:

• an increase of $41.9 million in transportation margins, net of economic hedges, due to improved natural gas basis differentials primarily in the fourth quarter of 2005 associated with certain capacity held in the Mid-Continent region,

• an increase of $22.6 million in wholesale physical marketing margins resulting from favorable natural gas price volatility primarily in the fourth quarter of 2005, and

• an increase of $6.8 million in power trading margins related to improved Electric Reliability Council of Texas (ERCOT) market heat-rates attributable to a 13.2 percent increase in cooling degree days compared to normal and a 10.0 percent increase in cooling days compared with the same period in 2004.

These increases in net margin were partially offset by:

• a net decrease of $18.3 million in storage margins from cash flow hedge ineffectiveness primarily related to natural gas basis movements attributable to anticipated storage withdrawals from the 2006/2007 heating season,

• a decrease of $18.4 million resulting from less favorable price movements in 2005 related to our natural gas fixed price activities, and

• a decrease of $2.2 million in retail activities related to reduced physical margins.

The increase in operating costs in 2005, compared with 2004, is primarily due to increased employee-related costs of $1.3 million and increased legal costs of $2.9 million.

Our natural gas in storage at December 31, 2005, was 62.1 Bcf compared with 70.6 Bcf at December 31, 2004. At December 31, 2005, our total natural gas storage capacity under lease was 86 Bcf compared with 84 Bcf at December 31, 2004.

Net margin was negatively affected in 2004, compared with 2003, primarily due to:

• a decrease of $43.7 million in margins from marketing and seasonal natural gas sales from storage resulting from lower inter-regional basis spreads early in 2004,

• a decrease of $35.9 million attributable to lower natural gas price volatility and the impact it had on our trading margins, and

• a decrease of $4.7 million resulting from weaker spark spreads in ERCOT.

These decreases in net margin were partially offset by:

• increased revenues of $9.5 million in reservation fees received for natural gas peaking services and

• increased revenues of $20.5 million related to the seasonal spread, which resulted in increased sales volumes as we recycled natural gas in storage during the fourth quarter of 2004.

Natural gas volumes marketed increased for 2005, compared with 2004, due to our expanded Canadian operations, additional long-term transportation contracts and opportunities to sell into supply-constrained markets. Natural gas volumes increased in 2004, compared with 2003, due to our Canadian operations and higher natural gas storage inventory levels at the beginning of 2004, which shifted purchased volumes from storage injections to regional sales.

The acquisition of natural gas storage capacity has become more competitive as a result of new entrants from the financial services sector, the increase in the spread between summer and winter natural gas prices, and natural gas price volatility. The increased demand for storage capacity has resulted in an increase in both the cost of leasing storage capacity and the required term of the lease. Longer terms for our storage capacity leases could result in significant increases in our contractual commitments.

At the beginning of the third quarter of 2004, we completed a reorganization of our Energy Services segment and renewed our focus on our physical marketing and storage business. We separated the management and operations of our wholesale marketing, retail marketing and trading activities and began accounting separately for the different types of revenue earned from these activities. Prior to the third quarter of 2004, we managed our Energy Services segment on an integrated basis and presented all energy trading activity on a net basis.

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Concurrent with this reorganization, we evaluated the accounting treatment related to the presentation of revenues from the different types of activities to determine which amounts should be reported on a gross or net basis under the guidance in EITF Issue No. 03-11, “Reporting Realized Gains and Losses on Derivative Instruments That Are Subject to FASB Statement No. 133 and Not “Held for Trading Purposes” as Defined in EITF Issue No. 02-3” (EITF 03-11). For derivative instruments considered held for trading purposes that result in physical delivery, the indicators in EITF Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities” were used to determine the proper treatment. These activities and all financially settled derivative contracts will continue to be reported on a net basis.

For derivative instruments that are not considered “held for trading purposes” and that result in physical delivery, the indicators in EITF 03-11 and EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (EITF 99-19) were used to determine the proper treatment. We began accounting for the realized revenues and purchase costs of these contracts that result in physical delivery on a gross basis beginning with the third quarter of 2004. We apply the indicators in EITF 99-19 to determine the appropriate accounting treatment for non-derivative contracts that result in physical delivery. Derivatives that qualify for the normal purchase or sale exception as defined in Statement 133 are also reported on a gross basis. Prior periods have not been adjusted for this change; therefore, comparisons to prior periods may not be meaningful. Reporting of these transactions on a gross basis did not impact operating income but resulted in an increase to revenues and cost of sales and fuel.

The following table shows the margins by activity, beginning with our reorganization on July 1, 2004.

	Year Ended December 31, 2005			Six Months Ended December 31, 2004
	(Thousands of dollars)
Marketing and storage, gross	$	350,227		$	126,989
Less: Storage and transportation costs		(174,838	)		(72,661	)
Marketing and storage, net		175,389			54,328
Retail marketing		17,526			8,628
Financial trading		13,445			23,221
Net margin	$	206,360		$	86,177

Marketing and storage activities primarily include physical marketing (purchase and sales) using our firm storage and transportation capacity, including cash flow and fair value hedges and other derivative instruments to manage our risk associated with these activities. The combination of owning supply, controlling strategic assets and risk management services allows us to provide commodity-diverse products and services to our customers such as peaking and load following services. Power activities are also included in the marketing and storage business. Retail marketing includes revenues from providing physical marketing and supply services to residential and small commercial and industrial customers. Financial trading revenues include activities that are generally executed using financially settled derivatives. These activities are normally short term in nature with a focus of capturing short-term price volatility.

Distribution

Overview - Our Distribution segment provides natural gas distribution services to over two million customers in Oklahoma, Kansas and Texas through Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service, respectively. We serve residential, commercial, industrial and transportation customers in all three states. In addition, our distribution services in Oklahoma and Kansas serve wholesale customers and Texas serves public authority customers.

In September 2005, Hurricane Rita caused significant damage to customers’ homes and businesses in the service area of Texas Gas Service located in south Jefferson County and Port Arthur, Texas. Texas Gas Service suffered damage to its Port Arthur service center, meters in south Jefferson County and Port Arthur, Texas, and incurred system natural gas loss. The financial impact will not be material due to insurance coverage that covers property damage, natural gas loss and business interruption.

Acquisition - The following acquisition is described beginning on page 25:

• In January 2003, we acquired our Texas natural gas distribution assets.

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Selected Financial Information - The following table sets forth certain selected financial and operating information for our Distribution segment for the periods indicated.

	Years Ended December 31,
Financial Results	2005			2004		2003
	(Thousands of dollars)
Gas sales	$	2,094,126		$	1,816,697	$	1,640,323
Transportation revenues		94,160			82,006		75,322
Cost of gas		1,628,507			1,367,186		1,213,811
Gross margin		559,779			531,517		501,834
Other revenues		27,921			25,799		24,415
Net margin		587,700			557,316		526,249
Operating costs		360,351			341,651		312,814
Depreciation, depletion and amortization		113,437			105,438		95,654
Operating income	$	113,912		$	110,227	$	117,781
Other income (expense), net	$	(1,081	)	$	1,375	$	(278	)

Operating Results - Net margin increased for 2005, compared with 2004, due to:

• an increase of $28.2 million resulting from the implementation of new rate schedules in Oklahoma,

• an increase of $2.3 million resulting from increased wholesale transactions in Kansas,

• an increase of $4.9 million due to the ad valorem tax recovery rider, which is offset in amortization expense, and

• an offsetting decrease of $5.2 million in customer sales volumes due to warmer weather.

Operating costs increased for 2005, compared with 2004, due to:

• an increase of $12.5 million in labor and employee benefit costs,

• an increase of $2.0 million in bad debt expense,

• an increase of $3.2 million due to equipment leasing costs, higher vehicle fuel costs, and an insurance deductible related to Hurricane Rita.

Depreciation, depletion and amortization increased for 2005 primarily due to:

• a $2.9 million charge related to the replacement of our field customer service system in Texas,

• a $3.5 million depreciation expense related to our investment in property, plant and equipment,

• a $4.9 million amortization of the ad valorem tax recovery rider in Kansas, and

• an offsetting decrease of $3.2 million in pension expense amortization in Oklahoma which expired in 2004.

Net margin increased in 2004, compared with 2003, primarily due to:

• the implementation of new rate schedules in Kansas and Oklahoma, which added $22.0 million and $14.5 million, respectively, and

• certain commercial and industrial customers in Oklahoma who converted to transportation rates as a result of lower volume thresholds to qualify for transportation rates, which increased transportation revenue by $1.5 million and decreased gross margin by an equivalent amount.

These increases in net margin were partially offset by:

• decreased revenues of $4.9 million due to the impact of reduced customer usage in Kansas and Oklahoma primarily attributable to the impact of warmer weather on customers not subject to weather normalization, and

• increased line loss expense of $2.4 million, net of rider recoveries, in Oklahoma.

Operating costs, which increased in 2004, compared with 2003, were impacted by:

• increased information technology costs of $7.6 million, primarily associated with our customer service system, and

• increased employee costs of $18.9 million.

Depreciation, depletion and amortization expense increased for 2004, compared with 2003, due to:

• amortization expense of $5.7 million related to the new rate schedules in Kansas and Oklahoma, and

• depreciation expense of $4.1 million related to our investment in property, plant and equipment.

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Selected Operating Data - The following tables set forth certain selected financial and operating information for our Distribution segment for the periods indicated.

	Years Ended December 31,
Operating Information	2005		2004		2003
Average number of customers		2,018,900		2,008,835		1,990,757
Customers per employee		689		664		652
Capital expenditures (Thousands of dollars)	$	143,765	$	142,515	$	153,405
	Years Ended December 31,
Volumes (MMcf)	2005		2004		2003
Gas sales
Residential		122,010		123,388		126,998
Commercial		39,294		41,984		45,054
Industrial		2,432		2,513		3,442
Wholesale		33,521		32,265		29,823
Public Authority		2,559		2,748		2,645
Total volumes sold		199,816		202,898		207,962
Transportation		252,180		239,914		231,425
Total volumes delivered		451,996		442,812		439,387
	Years Ended December 31,
Margin	2005		2004		2003
	(Thousands of dollars)
Gas sales
Residential	$	363,265	$	344,486	$	325,540
Commercial		89,828		92,793		89,581
Industrial		2,785		3,496		3,183
Wholesale		6,672		5,347		5,033
Public Authority		3,069		3,389		3,175
Gross margin on gas sales		465,619		449,511		426,512
Transportation		94,160		82,006		75,322
Gross margin	$	559,779	$	531,517	$	501,834

Residential, commercial and industrial volumes decreased in 2005, compared with 2004, and in 2004, compared with 2003, due to:

• warmer weather, which primarily affects residential and commercial customers, and

• commercial customers migrating to new transportation rates as a result of lower minimum transport thresholds in Oklahoma.

Wholesale sales represent contracted natural gas volumes that exceed the needs of our residential, commercial and industrial customer base and are available for sale to other parties. Wholesale volumes increased for 2005, as fewer volumes were required to meet the needs of residential, commercial and industrial customers, resulting in additional volume being available for sale to other parties.

Public authority natural gas volumes, which remained relatively flat in 2005 compared with the prior years, reflect volumes used by state agencies and school districts serviced by Texas Gas Service.

Transportation volumes increased for 2005 primarily due to commercial and industrial customers of Oklahoma Natural Gas migrating to new transportation rates as a result of lower minimum transport thresholds.

Transportation volumes increased in 2004, compared with 2003, primarily due to:

• the acquisitions of the distribution system at the United States Army’s Fort Bliss in El Paso, Texas, and a pipeline system that extends through the Rio Grande Valley region in Texas,

• the continued migration of commercial and industrial customers to new transportation rates as a result of lower minimum transport thresholds in Oklahoma, and

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• the marketing effort by Oklahoma Natural Gas to add small usage transport customers.

Capital Expenditures - Our capital expenditure program includes expenditures for extending service to new areas, modifying customer service lines, increasing system capabilities, general replacements and improvements. It is our practice to maintain and periodically upgrade facilities to assure safe, reliable and efficient operations. Our capital expenditure program included $38.6 million, $35.0 million and $33.5 million for new business development in 2005, 2004 and 2003, respectively.

Oklahoma Regulatory Initiatives - On October 4, 2005, the OCC issued a final order on our application for a rate increase by Oklahoma Natural Gas. The OCC unanimously approved an annual rate increase of $57.5 million. The Commission’s administrative law judge had recommended an increase in annual revenues of approximately $58.0 million in July 2005. Oklahoma Natural Gas implemented new rates, subject to refund, on July 28, 2005, based on the judge’s report. Oklahoma Natural Gas and the Attorney General both filed appeals from the administrative law judge’s recommendation. All parties ultimately reached a settlement of the appeals, which was approved by the OCC in its final order.

On January 30, 2004, the OCC issued an order allowing Oklahoma Natural Gas annual rate relief of $17.7 million in order to recover expenses related to its investment in service lines and cathodic protection, an increased level of uncollectible revenues, and a return on Oklahoma Natural Gas’ service lines and investment in natural gas in storage. The OCC’s order also approved a modified distribution main extension policy and authorized Oklahoma Natural Gas to defer homeland security costs. The order authorized the new rates to be in effect for a maximum of 18 months and categorized $10.7 million of the annual additional revenues as interim and subject to refund until a final determination at Oklahoma Natural Gas’ next general rate case. This interim relief expired on July 27, 2005, and was replaced by the rate increase of $57.5 million approved on October 4, 2005. As the final rate increase exceeded the interim revenues that were subject to refund, no refund obligation was incurred associated with this rate increase.

A Joint Stipulation approved by the OCC on May 16, 2002, settled a number of outstanding Oklahoma Natural Gas cases pending before the OCC. The major cases settled were the OCC’s inquiry into our gas cost procurement practices during the winter of 2000/2001, an application seeking relief from improper and excessive purchased gas costs, and enforcement action against Oklahoma Natural Gas, our subsidiaries and affiliated companies. In addition, all of the open inquiries related to the annual audits of Oklahoma Natural Gas’ fuel adjustment clause for 1996 to 2000 were closed as a result of this Stipulation.

The Stipulation had a $33.7 million value to Oklahoma Natural Gas customers that was realized over a three-year period. In July 2002, immediate cash savings were provided to all Oklahoma Natural Gas customers in the form of billing credits totaling approximately $9.1 million. Oklahoma Natural Gas replaced certain natural gas contracts, which reduced natural gas costs by approximately $13.8 million, due to avoided reservation fees between April 2003 and October 2005. Storage value of $2.0 million was generated on behalf of customers. As a part of the final rate order issued on October 4, 2005, Oklahoma Natural Gas was authorized to net $1.8 million in under-recovered revenues authorized for recovery under the OCC’s January 30, 2004 rate order against its final December 2005 billing credit obligation. In December 2005, a final billing credit of $6.9 million was made to customers.

Kansas Regulatory Initiatives - On September 17, 2003, the KCC issued an order approving $45 million in rate relief pursuant to the stipulated settlement agreement with Kansas Gas Service. The order settled the rate case filed by Kansas Gas Service in January 2003 and allowed Kansas Gas Service to begin operating under the new rate schedules effective September 22, 2003. After amortization of previously deferred costs, annual operating income increased by approximately $25.8 million.

On June 24, 2005, the KCC issued an order authorizing the inclusion of the natural gas cost component of uncollectible customer accounts in the Cost of Gas Rider. Kansas Gas Service began deferring the natural gas cost component of uncollectible accounts in July 2005 for subsequent recovery through the Cost of Gas Rider.

The KCC staff has made several rule recommendations to segregate public utility operations within diversified utility companies or holding company business structures. If adopted, the KCC staff recommendations could result in changes to our business practices.

Texas Regulatory Initiatives - On November 23, 2005, Texas Gas Service filed requests for rate increases in its Port Arthur and north Texas services areas for $2.4 million and $1.1 million, respectively. The municipalities have suspended the proposed rates for 90 days in order to conduct further review of the filings.

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On November 12, 2003, Texas Gas Service filed an appeal with the RRC based on the denial of proposed rate filing by the cities of Port Neches, Nederland and Groves, Texas. In July 2004, the RRC approved approximately $0.9 million in annual revenue relief. The interim rates were implemented in May 2003. On October 7, 2004, Texas Gas Service filed a petition in the District Court of Travis County, Texas seeking judicial review of certain of the ratemaking decisions contained in the RRC’s final order. On October 26, 2005, the district court upheld the RRC final order. On November 23, 2005, Texas Gas Service and the cities of Port Neches, Nederland and Groves, Texas appealed the decision of the District Court to the Third District Court of Appeals. A decision is expected on this appeal in 2006.

General - Certain costs to be recovered through the ratemaking process have been recorded as regulatory assets in accordance with Statement 71. Should recovery cease due to regulatory actions, certain of these assets may no longer meet the criteria of Statement 71 and, accordingly, a write-off of regulatory assets and stranded costs may be required.

Discontinued Operations

Overview - In September 2005, we completed the sale of our Production segment to TXOK Acquisition, Inc. for $645 million, before adjustments, and recognized a pre-tax gain on the sale of approximately $240.3 million. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold. The proceeds from the sale were used to reduce debt. Our Board of Directors had approved the potential sale in July 2005, which resulted in our Production segment being classified as held for sale beginning July 1, 2005. In accordance with Statement 144, we did not record any depreciation, depletion or amortization for our Production segment while it was classified as held for sale.

Additionally, in the third quarter of 2005, we made the decision to sell our Spring Creek power plant and exit the power generation business. We entered into an agreement to sell our Spring Creek power plant to Westar for $53 million. The transaction requires FERC approval and is expected to be completed in 2006. The 300-megawatt gas-fired merchant power plant was built in 2001 to supply electrical power during peak periods using gas-powered turbine generators. The proceeds from this sale will be used to purchase other assets, repurchase ONEOK shares or retire debt.

In January 2003, we sold approximately 70 percent of the natural gas and crude oil producing properties of our Production segment for an adjusted cash price of $294 million. The properties sold were in Oklahoma, Kansas and Texas. We recognized a pretax gain of approximately $61.2 million in 2003 related to this sale. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold.

These components of our business are accounted for as discontinued operations in accordance with Statement 144. Accordingly, amounts in our financial statements and related notes for all periods shown relating to our Production segment and our power generation business are reflected as discontinued operations. The sale of our Production segment and the pending sale of our power generation business are in line with our business strategy to sell assets when deemed less strategic or as other conditions warrant.

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Selected Financial Information - The amounts of revenue, costs and income taxes reported in discontinued operations are as follows.

	Years Ended December 31,
	2005			2004		2003
	(Thousands of dollars)
Operating revenues	$	135,213		$	202,552	$	136,271
Cost of sales and fuel		38,398			95,524		76,870
Net margin		96,815			107,028		59,401
Impairment expense		52,226			—		—
Operating costs		24,302			29,997		19,270
Depreciation, depletion and amortization		17,919			30,673		18,103
Operating income		2,368			46,358		22,028
Other income (expense), net		252			60		10
Interest expense		12,588			16,167		5,953
Income taxes		(3,788	)		12,746		5,900
Income (loss) from operations of discontinued components, net	$	(6,180	)	$	17,505	$	10,185
Gain on sale of discontinued components, net of tax of $90.7 million, $0 million and $21.5 million, respectively	$	149,577		$	—	$	39,739

LIQUIDITY AND CAPITAL RESOURCES

General - Part of our strategy is to grow through acquisitions that strengthen and complement our existing assets. We have relied primarily on operating cash flow, borrowings from commercial paper and credit agreements, and issuance of debt and equity in the capital markets for our liquidity and capital resource requirements. We expect to continue to use these sources for liquidity and capital resource needs on both a short- and long-term basis. We have no material guarantees of debt or other similar commitments to unaffiliated parties. During 2005 and 2004, our capital expenditures were financed through operating cash flows and short and long-term debt. Capital expenditures for 2005 were $250 million, compared with $264 million in 2004, exclusive of acquisitions.

Financing - Financing is provided through our commercial paper program and long-term debt. We also have a credit agreement, as discussed below, which is used as a back-up for the commercial paper program. Other options to obtain financing include, but are not limited to, issuance of equity, issuance of mandatory convertible debt securities, issuance of trust preferred securities by ONEOK Capital Trust I or ONEOK Capital Trust II, asset securitization and sale/leaseback of facilities.

The total amount of short-term borrowings authorized by our Board of Directors is $2.5 billion. At December 31, 2005, we had $641.5 million in commercial paper outstanding, $900.0 million drawn on our short-term bridge financing agreement, $178.7 million in letters of credit issued and approximately $7.9 million in cash and temporary investments. We also had $2.0 billion of long-term debt outstanding, including current maturities. As of December 31, 2005, we could have issued $1.5 billion of additional debt under the most restrictive provisions contained in our various borrowing agreements.

Both the five-year credit agreement, which matures in 2009, and short-term bridge financing agreement contain customary affirmative and negative covenants, including covenants relating to liens, investments, fundamental changes in our business, changes in the nature of our business, transactions with affiliates, the use of proceeds, a limit on our debt-to-capital ratio, a limit on investments in master limited partnerships and a covenant that prevents us from restricting our subsidiaries’ ability to pay dividends to ONEOK, Inc. In 2005, we amended the five-year credit and the short-term bridge financing agreements to change the definition of Consolidated Net Worth to eliminate the effect of gains and losses recorded in accumulated other comprehensive income (loss) as a result of certain commodity hedging agreements. At December 31, 2005, we were in compliance with all covenants.

Currently, we have $48.2 million available under one of our shelf registration statements on Form S-3, for the issuance and sale of shares of our common stock, debt securities, preferred stock, stock purchase contracts and stock purchase units.

Short-term Bridge Financing Agreement - In June 2005, we entered into a $1.0 billion short-term bridge financing agreement. The interest rate is based, at our election, on either (i) the higher of prime or one-half of one percent above the Federal Funds

44

Rate, which is the rate that banks charge each other for the overnight borrowing of funds, or (ii) the Eurodollar rate plus a set number of basis points based on our current long-term unsecured debt ratings by Moody’s and S&P.

On July 1, 2005, we borrowed $1.0 billion under the short-term bridge financing agreement to assist in financing the acquisition of assets from Koch. See Note B for additional information about this acquisition. We funded the remaining acquisition cost through our commercial paper program. We anticipate permanent financing of the acquisition to come from a combination of proceeds from the sale of assets, such as our Production segment and our Spring Creek power plant, proceeds from the February 2006 settlement of the purchase contracts that were part of our mandatory convertible equity units, and free cash flow. At December 31, 2005, we had lowered the balance of outstanding indebtedness under the bridge financing agreement to $900.0 million. The reduction in indebtedness under our short-term bridge financing agreement is a result of a required prepayment due to the sale of our Production segment. At our option, we paid $200.0 million on February 3, 2006. We paid an additional $403.0 million as a required prepayment on February 16, 2006, from the settlement of our equity units. The remaining balance of $297.0 million is required to be paid by March 31, 2006.

In November 2005, we amended the short-term bridge financing agreement to remove the requirement to prepay the loan with the net cash proceeds received from the disposition of the natural gas gathering and processing assets located in Texas, provided that we prepay our 7.75 percent $300.0 million long-term debt due in August 2006 in full, which we did in December 2005. See further discussion below under Long-term Debt.

Five-year Credit Agreement - In July 2005, we amended our 2004 $1.0 billion five-year credit agreement to increase the limit on our debt-to-capital ratio from 67.5 percent debt to 70.0 percent debt for the period from July 25, 2005, to February 28, 2006. Beginning on March 1, 2006, the limit on our debt will return to 67.5 percent of total capital.

In September 2005, we exercised the accordion feature of our 2004 $1.0 billion five-year credit agreement to increase the commitment amounts by $200 million to a total of $1.2 billion. The interest rate payable under this five-year credit agreement is a floating rate calculated in the same manner as the $1.0 billion short-term bridge financing agreement.

Uncommitted Line of Credit - We entered into a credit agreement with KBC Bank NV in April 2004. The agreement gives us access to an uncommitted line of credit for loans and letters of credit up to a maximum principal amount of $10 million. The rate charged on any outstanding amount is the higher of prime or one-half of one percent above the Federal Funds overnight rate, which is the rate that banks charge each other for the overnight borrowing of funds. This agreement remains in effect until canceled by KBC Bank NV or us. This agreement does not contain any covenants more restrictive than those in our $1.2 billion five-year credit agreement.

In December 2005, we amended our $10.0 million agreement with KBC Bank NV to increase the maximum principal amount available under the uncommitted line of credit to $15.0 million. The increased commitment was used to issue a $15.0 million standby letter of credit.

Long-term Debt - In November 2005, we elected to make an early redemption of our 7.75 percent $300.0 million long-term notes with a stated maturity of August 2006. The early redemption occurred in December 2005, for a total payment of $314.4 million. In addition to the principal payment, we were required to pay a make-whole call premium of $5.7 million and accrued interest of $8.7 million. We funded this early redemption with the proceeds from the sale of our natural gas gathering and processing assets located in Texas.

In June 2005, we issued $800 million of notes, comprised of $400 million in 10-year maturities with a coupon of 5.2 percent and $400 million in 30-year maturities with a coupon of 6.0 percent. Proceeds from this debt issuance were used to repay commercial paper borrowings and for general corporate purposes.

In March 2005, $335 million of our long-term debt matured. We funded payment of this debt with working capital and the issuance of commercial paper in the short-term market.

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The following table sets forth our capitalization structure for the periods indicated.

	Years Ended December 31,
	2005		2004
Long-term debt	53	%	54	%
Equity	47	%	46	%
Debt (including Notes payable)	67	%	61	%
Equity	33	%	39	%

Equity Units - Both S&P and Moody’s consider the equity units we issued in January 2003 to be part equity and part debt. For purposes of computing capitalization ratios, these rating agencies adjust the capitalization structure. S&P considers the equity units to be equal amounts of debt and equity for the first three years, with the effect being to increase shareholders’ equity by the same amount as long-term debt, which would result in a capitalization structure of 52 percent equity and 48 percent long-term debt at December 31, 2005. Moody’s considers 25 percent of the equity units to be long-term debt and 75 percent to be shareholders’ equity, which would result in a capitalization structure of 55 percent equity and 45 percent long-term debt at December 31, 2005.

We had 16.1 million equity units outstanding at December 31, 2005. Each unit consists of two components, an equity purchase contract and a note (see Notes G and I of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information). In November 2005, we remarketed the notes with a new coupon of 5.51 percent. The notes continue to have a stated maturity of February 2008. The cash received was put into a treasury portfolio pledged as collateral against the purchase contracts. This action had no effect on our liquidity. On February 16, 2006, we successfully settled 16.1 million equity units to approximately 19.5 million shares of our common stock. Of this amount, 8.3 million shares were issued from treasury stock and approximately 11.2 million shares were newly issued. Holders of the equity units received 1.2119 shares of our common stock for each equity unit they owned. The number of shares that we issued for each stock purchase contract was determined based on our average closing price over the 20-trading day period ending on the third trading day prior to February 16, 2006. With the settlement, we received $402.4 million in cash, which was used to pay down our short-term bridge financing agreement.

Northern Border Partners - On February 14, 2006, we signed agreements to sell certain assets to Northern Border Partners for approximately $3 billion in cash and limited partner units and increase our general partner interest in Northern Border Partners to 100 percent.

We will purchase, through Northern Plains, from an affiliate of TransCanada 17.5 percent of the general partner interest in Northern Border Partners for $40 million, less $10 million for expenses associated with the transfer of operating responsibility of Northern Border Pipeline Company to TransCanada for a net payment of $30 million. After the transactions are completed, we will own approximately 37.0 million limited partner units and 100 percent of the Northern Border Partners’ general partner interest, increasing our total interest in Northern Border Partners to 45.7 percent.

With the purchase of 17.5 percent of the general partner interest in Northern Border Partners, we will also transfer our Gathering and Processing segment, Natural Gas Liquids segment, and Pipelines and Storage segment, to Northern Border Partners in transactions valued at approximately $3 billion. We will receive approximately $1.35 billion in cash and approximately 36.5 million limited partner units from Northern Border Partners. The limited partner units and related general partner interest contribution were valued at approximately $1.65 billion at the time of the signing of the transaction. This sale, subject to adjustment, includes the natural gas liquids assets we purchased from Koch in July 2005 for $1.35 billion. We will not recognize a gain on the sale as the transfer of assets will be accounted for at the assets’ historical cost. We plan to use cash proceeds to reduce short-term debt, acquire other assets or repurchase our common stock.

The transfer of our Gathering and Processing segment, Pipelines and Storage segment, and Natural Gas Liquids segment will not affect our consolidated net income on our consolidated statements of income, total assets on our consolidated balance sheets or change in cash and cash equivalents on the consolidated statements of cash flows since under EITF 04-5 we were already required to consolidate Northern Border Partners effective January 1, 2006. See Impact of New Accounting Standards in Management’s Discussion and Analysis of Financial Condition and Results of Operation for additional discussion of EITF 04-5.

The limited partner units we will receive from Northern Border Partners will be a newly created Class B units with the same distribution rights as the outstanding common units, but will have limited voting rights and will be subordinated to the common units with respect to payment of minimum quarterly distributions. Distributions on the Class B units will be

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prorated from the date of issuance. Northern Border Partners is required to hold a special election for holders of common units within 12 months of issuing the Class B units to approve the conversion of the Class B units into common units and to approve certain amendments to the partnership agreement. The proposed amendments grant voting rights for common units held by the general partner if a vote is held to remove the general partner and require fair market value compensation for the general partner interest if the general partner is removed. If the common unit holders do not approve both the conversion and amendments within 12 months of the issuance of the Class B units, then the amount payable on such Class B units would increase to 115 percent of the distributions paid on the common units and the Class B distribution rights would continue to be subordinated in the manner described above unless and until the conversion described above has been approved. If the common unit holders vote to remove us or our affiliates as the general partner of Northern Border Partners at any time prior to the approval of the conversion and amendment described above, the amount payable on such Class B units would increase to 125 percent of the distributions payable with respect to the common units and the Class B unit distribution rights would continue to be subordinated in the manner described above unless and until the conversion described above has been approved.

These transactions are subject to regulatory approvals and other conditions, including antitrust clearance from the Federal Trade Commission under the Hart-Scott-Rodino Act. We expect these transactions will be completed by April 1, 2006.

Stock Buy Back Program - In January 2005, our Board of Directors authorized a stock buy back program to repurchase up to 7.5 million shares of our common stock currently issued and outstanding. Our Board of Directors extended this program in November 2005, and authorized us to repurchase an additional 7.5 million shares of our common stock currently issued and outstanding. Shares are repurchased from time to time in open market transactions or through privately negotiated transactions at our discretion, subject to market conditions and other factors. The program will terminate in November 2007, unless extended by our Board of Directors. During 2005, we repurchased approximately 7.5 million shares of our common stock pursuant to this program.

Credit Rating - Our credit ratings are currently a “Baa2” (Stable) by Moody’s and a “BBB” (CreditWatch with negative implications) by S&P. In October 2005, Moody’s downgraded us to “Baa2” from “Baa1,” S&P downgraded us to “BBB” from “BBB+” and both removed the negative watch. Subsequently, in February 2006, S&P placed our credit rating on negative watch. Our credit ratings may be affected by a material change in our financial ratios or a material adverse event affecting our business. The most common criteria for assessment of our credit ratings are the debt-to-capital ratio, business risk profile, pretax and after-tax interest coverage, and liquidity. If our credit ratings were downgraded, the interest rates on our commercial paper would increase, resulting in an increase in our cost to borrow funds, and we could potentially lose access to commercial paper borrowings. In the event that we are unable to borrow funds under our commercial paper program and there has not been a material adverse change in our business, we have access to a $1.2 billion five-year credit agreement, which expires September 16, 2009.

Our Energy Services segment relies upon the investment grade rating of our senior unsecured long-term debt to satisfy credit requirements with most of our counterparties. If our credit ratings were to decline below investment grade, our ability to participate in energy marketing and trading activities could be significantly limited. Without an investment grade rating, we may be required to fund margin requirements with our counterparties with cash, letters of credit or other negotiable instruments. At December 31, 2005, the amount we could have been required to fund for the few counterparties with which we have a Credit Support Annex within our International Swaps and Derivatives Association Agreements is approximately $89.3 million. A decline in our credit rating below investment grade may also significantly impact other business segments.

We have reviewed our commercial paper agreement, trust indentures, building leases, equipment leases, marketing, trading and risk contracts, and other various contracts which may be subject to rating triggers, and we do not have significant exposure. Rating triggers are defined as provisions that would create an automatic default or acceleration of indebtedness based on a change in our credit rating. Our five-year credit and short-term bridge financing agreements contain a provision that would cause the cost to borrow funds to increase based on the amount borrowed under these agreements if our credit rating is negatively adjusted. The agreements also contain a default provision based on a material adverse change. An adverse rating change is not defined as a default or material adverse change.

Commodity Prices - We are subject to commodity price volatility. Significant fluctuations in commodity price in either physical or financial energy contracts may impact our overall liquidity due to the impact the commodity price change has on items such as the cost of NGLs and gas held in storage, increased margin requirements, collectibility of certain energy-related receivables and working capital. We believe that our current commercial paper program and debt capacity are adequate to meet our liquidity requirements associated with commodity price volatility.

Pension and Postretirement Benefit Plans - We calculate benefit obligations based upon generally accepted actuarial methodologies using the projected benefit obligation (PBO) for pension plans and the accumulated postretirement benefit

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obligation for other postretirement plans. Pension costs and other postretirement obligations as of December 31 are determined using a September 30 measurement date. The benefit obligations are the actuarial present value of all benefits attributed to employee service rendered. The PBO is measured using the pension benefit formula and assumptions as to future compensation levels. A plan’s funded status is calculated as the difference between the benefit obligation and the fair value of plan assets. Our funding policy for the pension plans is to make annual contributions in accordance with regulations under the Internal Revenue Code and in accordance with generally accepted actuarial principles. Contributions made to the pension plan and postretirement benefit plan in 2005 were $1.5 million and $3.1 million, respectively. For 2006, we anticipate our total contributions to our defined benefit pension plan and postretirement benefit plan to be $1.7 million and $2.7 million, respectively, and our pay-as-you-go other postretirement benefit plan costs to be $14.0 million. We believe we have adequate resources to fund our obligations under our plans.

CASH FLOW ANALYSIS

Our Consolidated Statements of Cash Flows combines cash flows from discontinued operations with cash flows from continuing operations within each category. Discontinued operations accounted for approximately $77.2 million, $16.9 million and $(68.0) million in operating cash flows for the years ended December 31, 2005, 2004 and 2003, respectively. Discontinued operations accounted for approximately $(44.4), $(52.9) and $(18.7) million in investing cash flows for the years ended December 31, 2005, 2004 and 2003, respectively, and did not account for any financing cash flows. The absence of cash flows from our discontinued operations is not expected to have a significant impact on our future cash flows.

Operating Cash Flows - Operating cash flows decreased by $385.4 million for the year ended December 31, 2005, compared with the same period in 2004. The decrease in operating cash flows was primarily the result of a net increase in working capital of $301.3 million in 2004, compared with a net increase in working capital of $597.5 million in 2005. These increases primarily related to increases in accounts receivable and natural gas inventory, partially offset by increases in accounts payable.

Working capital changes had the opposite impact on 2004, compared with 2003, contributing to an increase in operating cash flows of $203.7 million.

The impact of higher commodity prices on accounts receivable, accounts payable and natural gas inventory negatively impacted operating cash flows for all periods. There is typically a lag between when payment is made for natural gas purchased for our distribution customers and when the customers are billed. This is due to the cycle billing process where distribution customers are billed throughout the month. Under level prices, this lag would have no impact on cash flows from year to year, but with increased prices, this lag resulted in a negative impact on cash flows.

Our Energy Services segment’s deposits, or margin requirements, increase or decrease from year to year based on the level of open positions on our contracts as well as commodity prices and price volatility. With the increase in commodity prices at December 31, 2005, we were required to meet additional margin requirements, which also negatively impacted operating cash flows.

Investing Cash Flows - Acquisitions in 2005 primarily represent the cash purchase of the Koch assets. The sale of our Production segment resulted in proceeds from the sale of discontinued component. The proceeds from sale of assets in 2005 primarily resulted from the sale of our natural gas gathering and processing assets located in Texas. Additionally, the sale of Cimarex Energy Company common stock, formerly Magnum Hunter Resources (MHR) common stock, is also included in proceeds from sale of assets. This common stock was acquired upon exercise of MHR stock purchase warrants in February 2005, resulting in our paying $22.7 million, which is included in changes in other investments, net.

Acquisitions in 2004 represent the cash purchase of Northern Plains. Increased capital expenditures in 2004 were primarily incurred by our discontinued Production segment. Proceeds from the sale of assets include the sales of certain natural gas transmission and gathering pipelines, compression assets, natural gas distribution systems and investments in 2004.

Acquisitions in 2003 primarily represent the cash purchase of our Texas distribution assets and the purchase of natural gas and crude oil properties and related flow lines. Proceeds from the sale of discontinued component represents the sale of natural gas and crude oil producing properties for a cash sales price of $294 million, including adjustments, of which $15 million was received in 2002.

Financing Cash Flows - During 2005, we borrowed $1.0 billion under the short-term bridge financing agreement to assist in financing the acquisition of natural gas liquids assets from Koch. We funded the remaining acquisition cost through our commercial paper program. We reduced our indebtedness under our short-term bridge financing agreement by $100.0 million as a result of a required prepayment due to the sale of our Production segment.

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During 2005, we paid $233.0 million to repurchase 7.5 million shares of our stock pursuant to a plan approved by our Board of Directors in 2005. This plan allows us to repurchase up to a total of 15 million shares of our common stock on or before November 17, 2007.

In December 2005, we made an early redemption of our 7.75 percent $300.0 million long-term notes with a stated maturity of August 2006. In addition to the principal payment, we were required to pay a make-whole call premium of $5.7 million and accrued interest of $8.7 million for a total payment of $314.4 million. We funded this early redemption with the proceeds from the sale of our natural gas gathering and processing assets located in Texas.

In June 2005, we issued $800 million of long-term notes and used a portion of the proceeds to repay commercial paper. The commercial paper had been issued to finance the Northern Border Partners acquisition, to repay $335 million of long-term debt that matured on March 1, 2005, and to meet operating needs. This increase was partially offset by $643 million in payments on notes payable and commercial paper, which represents the cash received from the sale of our Production segment, and payments made in the normal course of operations.

During the first quarter of 2005, we terminated $400 million of our interest rate swap agreements and paid a net amount of $19.4 million, which included $20.2 million for the present value of future payments at the time of termination, less $0.8 million for interest rate savings through the termination of the swaps. The $20.2 million payment has been recorded as a reduction in long-term debt and will be recognized in the income statement over the term of the debt instruments originally hedged. In the second quarter of 2005, we terminated $500 million of our treasury rate-lock agreements, which resulted in our paying $2.4 million. This amount, net of tax, has been recorded to accumulated other comprehensive loss and will be recognized in the income statement over the term of the related debt issuances.

During the first quarter of 2004, we repaid $600 million in notes payable using cash generated from operating activities and proceeds from our February 2004 equity offering. During the second half of 2004, we incurred $644 million of notes payable, which includes the acquisition of Northern Plains and funds used in the ordinary course of business.

We terminated $670 million of our interest rate swap agreements in the first quarter of 2004 to lock-in savings and generate a positive cash flow of $91.8 million, which included $8.9 million of interest savings previously recognized. These interest rate swaps were previously initiated as a strategy to hedge the fair value of fixed rate long-term debt. The proceeds received upon termination of the interest rate swaps, net of amounts previously recognized, will be recognized in the income statement over the term of the debt instruments originally hedged.

During the first quarter of 2004, we sold 6.9 million shares of our common stock to an underwriter at $21.93 per share, resulting in proceeds to us, before expenses, of $151.3 million.

During the first quarter of 2003, we issued a total of 16.1 million equity units at the public offering price of $25 per unit, resulting in aggregate net proceeds to us, after underwriting discounts and commissions, of $24.25 per share, or $390.4 million. Each equity unit consists of a stock purchase contract for the purchase of shares of our common stock and, initially, a senior note due February 16, 2008, issued pursuant to an Indenture with SunTrust Bank, as trustee. The equity units carry a total annual coupon rate of 8.5 percent (4.0 percent annual face amount of the senior notes plus 4.5 percent annual contract adjustment payments). The interest expense associated with the 4.0 percent senior notes will be recognized in the income statement on an accrual basis over the term of the senior notes. The present value of the contract adjustment payments was accrued as a liability with a charge to equity at the time of the transactions. Accordingly, there will be no impact on earnings in future periods as this liability is paid, except for the interest recognized as a result of discounting the liability to its present value at the time of the transaction. This interest expense will be approximately $3.5 million over three years. The present value of the contract adjustment payments is accounted for as equity and reduces paid in capital. The number of shares that we issued for each stock purchase contract issued as part of the equity units was determined based on our average closing price over the 20-trading day period ending on the third trading day prior to February 16, 2006.

Also, during the first quarter of 2003, we issued a total of 13.8 million shares of common stock at the public offering price of $17.19 per share, resulting in aggregate net proceeds to us, after underwriting discounts and commissions, of $16.524 per share, or $228 million.

In January 2003, we issued common stock and equity units, which were partially offset by the payment of notes payable and the repurchase of our Series A Convertible Preferred Stock from Westar in February 2003. In August 2003, we repurchased $50 million or approximately 2.6 million shares of our common stock from Westar.

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CONTRACTUAL OBLIGATIONS AND COMMERICAL COMMITMENTS

We lease various buildings, facilities and equipment, which are accounted for as operating leases. We lease vehicles which are accounted for as operating leases for financial purposes and capital leases for tax purposes.

The following table sets forth our contractual obligations to make future payments under our current debt agreements, operating lease agreements and fixed price contracts. For further discussion of the debt and operating lease agreements, see Notes I and K, respectively, of Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

	Payments Due by Period
Contractual Obligations	Total		2006		2007		2008		2009		2010		Thereafter
	(Thousands of dollars)
Long-term debt	$	1,993,202	$	6,546	$	6,563	$	408,882	$	107,596	$	6,285	$	1,457,330
Notes payable		1,541,500		1,541,500		—		—		—		—		—
Operating leases		247,218		59,982		43,853		41,482		38,464		26,813		36,624
Storage contracts		74,231		32,068		20,975		12,054		6,929		1,521		684
Firm transportation contracts		455,864		100,095		75,621		47,777		43,175		38,490		150,706
Purchase commitments, rights-of-way and other		14,230		3,471		2,114		1,975		1,787		1,746		3,137
Pension plan (a)		11,300		1,700		2,900		2,100		2,200		2,400		—
Other postretirement benefit plan (a)		86,529		16,711		17,052		17,289		17,534		17,943		—
Total contractual obligations	$	4,424,074	$	1,762,073	$	169,078	$	531,559	$	217,685	$	95,198	$	1,648,481

(a) - No payment amounts are provided for our pension and other postretirement benefit plans in the “Thereafter” column since there is no termination date for these plans.

Long-term debt as reported in the consolidated balance sheets includes unamortized debt discount and the mark-to-market effect of interest rate swaps. Purchase commitments exclude commodity purchase contracts. Our Distribution segment is a party to fixed price transportation contracts. However, the costs associated with these contracts are recovered through rates as allowed by the applicable regulatory agency and are excluded from the table above.

OTHER

Environmental - We are subject to multiple environmental laws and regulations affecting many aspects of present and future operations, including air emissions, water quality, wastewater discharges, solid wastes and hazardous material and substance management. These laws and regulations generally require us to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with these laws, regulations, permits and licenses may expose us to fines, penalties and/or interruptions in our operations that could be material to the results of operations. If an accidental leak or spill of hazardous materials occurs from our lines or facilities, in the process of transporting natural gas or NGLs, or at any facility that we own, operate or otherwise use, we could be held jointly and severally liable for all resulting liabilities, including investigation and clean up costs, which could materially affect our results of operations and cash flow. In addition, emission controls required under the Federal Clean Air Act and other similar federal and state laws could require unexpected capital expenditures at our facilities. We cannot assure that existing environmental regulations will not be revised or that new regulations will not be adopted or become applicable to us. Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material adverse effect on our business, financial condition and results of operations.

We own or retain legal responsibility for the environmental conditions at 12 former manufactured gas sites in Kansas. These sites contain potentially harmful materials that are subject to control or remediation under various environmental laws and regulations. A consent agreement with the KDHE presently governs all work at these sites. The terms of the consent agreement allow us to investigate these sites and set remediation activities based upon the results of the investigations and risk analysis. We have commenced active remediation on eight sites, with regulatory closure achieved at two of these locations, and have begun assessments at the four remaining sites. The site situations are not similar, and we have no previous experience with similar remediation efforts. We have completed some analysis of the four remaining sites, but are unable to accurately estimate individual or aggregate costs that may be required to satisfy our remedial obligations.

Our preliminary review of similar cleanup efforts at former manufactured gas sites reveals that costs can range from $100,000 to $10 million per site. These estimates do not consider potential

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insurance recoveries, recoveries through rates or from unaffiliated parties, to which we may be entitled. At this time, we have not recorded any amounts for potential insurance recoveries or recoveries from unaffiliated parties, and we are not recovering any environmental amounts in rates. Total costs to remediate the two sites, which have achieved regulatory closure, was approximately $700,000. Total remedial costs for each of the remaining sites are expected to exceed $500,000 per site, but there is no assurance that costs to investigate and remediate the remaining sites will not be significantly higher. As more information related to the site investigations and remediation activities becomes available, and to the extent such amounts are expected to exceed our current estimates, additional expenses could be recorded. Such amounts could be material to our results of operations and cash flows depending on the remediation done and number of years over which the remediation is completed.

Our expenditures for environmental evaluation and remediation to date have not been significant in relation to the results of operations and there were no material effects upon earnings during 2005 related to compliance with environmental regulations.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

Some of the statements contained and incorporated in this Annual Report on Form 10-K are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements relate to: anticipated financial performance; management’s plans and objectives for future operations; business prospects; outcome of regulatory and legal proceedings; market conditions and other matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. The following discussion is intended to identify important factors that could cause future outcomes to differ materially from those set forth in the forward-looking statements.

Forward-looking statements include the items identified in the preceding paragraph, the information concerning possible or assumed future results of our operations and other statements contained or incorporated in this Annual Report on Form 10-K identified by words such as “anticipate,” “estimate,” “expect,” “forecast,” “intend,” “believe,” “projection” or “goal.”

You should not place undue reliance on forward-looking statements. Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Those factors may affect our operations, markets, products, services and prices. In addition to any assumptions and other factors referred to specifically in connection with the forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following:

• risks associated with any reduction in our credit ratings;

• the effects of weather and other natural phenomena on energy sales and prices, production and processing volumes, availability of supplies and other aspects of our business;

• competition from other energy suppliers as well as alternative forms of energy;

• the capital intensive nature of our business;

• the profitability of assets or businesses acquired by us;

• risks of marketing, trading and hedging activities as a result of changes in energy prices or the financial condition of our counterparties;

• economic climate and growth in the geographic areas in which we do business;

• the uncertainty of estimates, including accruals and costs of environmental remediation;

• the timing and extent of changes in commodity prices for natural gas, NGLs, power and crude oil, including basis differentials for natural gas and NGLs;

• the effects of changes in governmental policies and regulatory actions, including changes with respect to income taxes, environmental compliance, pipeline integrity, authorized rates or recovery of gas costs and ERISA;

• the impact of recently issued and future accounting pronouncements and other changes in accounting policies;

• the possibility of future terrorist attacks or the possibility or occurrence of an outbreak of, or changes in, hostilities or changes in the political conditions in the Middle East and elsewhere;

• the risk of increased costs for insurance premiums, security or other items as a consequence of terrorist attacks;

• risks associated with casualty losses, including casualty losses at plant sites that could interrupt portions of our business;

• the impact of changes in interest rates, equity markets, inflation rates, economic recession and other external factors over which we have no control, including the effect on pension expense and funding resulting from changes in stock and bond market returns;

• risks associated with pending or possible acquisitions and dispositions, including our ability to finance or integrate any such acquisitions and any regulatory delay or conditions imposed by regulatory bodies in connection with any such acquisitions and dispositions;

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• the results of administrative proceedings and litigation involving the OCC, KCC, Texas regulatory authorities or any other local, state or federal regulatory body, including the FERC;

• our ability to access capital at competitive rates or on terms acceptable to us;

• the risk of a significant slowdown in growth or decline in the U.S. economy or the risk of delay in growth or recovery in the U.S. economy;

• risks associated with adequate supply to our gathering, processing, fractionation and pipeline facilities, including production declines which outpace new drilling;

• risks of fines in the event of accidents and/or accidental releases of natural gas or NGLs;

• risks inherent in the implementation of new software, such as our customer service system, and the impact on the timeliness of information for financial reporting;

• the risk that material weaknesses or significant deficiencies in our internal controls over financial reporting could emerge or that minor problems could become significant;

• the impact of the outcome of pending and future litigation;

• the possible loss of franchises or other adverse effects caused by the actions of municipalities;

• changes in law or increase in competition resulting from new federal energy legislation, including the repeal of the Public Utility Holding Company Act of 1935;

• risks of holding a majority of the general partnership interest in Northern Border Partners, LP, a publicly-traded limited partnership; and

• the other factors listed in the reports we have filed and may file with the Securities and Exchange Commission, which are incorporated by reference.

Other factors and assumptions not identified above were also involved in the making of the forward-looking statements. The failure of those assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. We have no obligation and make no undertaking to update publicly or revise any forward-looking information.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

COMMODITY PRICE RISK

Non-Regulated Businesses, Including Energy Services - We are exposed to market risk and the impact of market price fluctuations of natural gas, NGLs, crude oil and power prices. Market risk refers to the risk of loss in cash flows and future earnings arising from adverse changes in commodity energy prices. Our primary exposure arises from fixed price purchase or sale agreements that extend for periods of up to three years, natural gas in storage utilized by our Energy Services segment, NGLs in storage utilized by our Natural Gas Liquids segment, the difference in price between natural gas and NGL prices with respect to our keep whole processing agreements, and purchases of natural gas and crude oil. To a lesser extent, we are exposed to the risk of changing prices or the cost of intervening transportation resulting from purchasing natural gas and NGLs at one location and selling it at another (referred to as basis risk). To minimize the risk from market price fluctuations of natural gas, NGLs and crude oil, we use commodity derivative instruments such as futures contracts, swaps and options to manage market risk of existing or anticipated purchase and sale agreements, existing physical natural gas in storage, and basis risk. We adhere to policies and procedures that limit our exposure to market risk from open positions and that monitor our market risk exposure.

The following table sets forth the fair value component of the energy marketing and risk management assets and liabilities, excluding derivative instruments that have been declared as either fair value or cash flow hedges.

Fair Value Component of Energy Marketing and Risk Management Assets and Liabilities
(Thousands of dollars)
Net fair value of contracts outstanding at December 31, 2004	$	17,951
Contracts realized or otherwise settled during the period		18,326
Fair value of new contracts when entered into during the period		3,596
Other changes in fair value		(9,537	)
Net fair value of contracts outstanding at December 31, 2005	$	30,336

The net fair value of contracts outstanding includes the effect of settled energy contracts and current period changes resulting primarily from newly originated transactions and the impact of market movements on the fair value of energy marketing and risk management assets and liabilities. Fair value estimates consider the market in which the transactions are executed. The market in which exchange traded and over-the-counter transactions are executed is a factor in determining fair value. We

52

utilize third-party references for pricing points from NYMEX and third-party over-the-counter brokers to establish the commodity pricing and volatility curves. We believe the reported transactions from these sources are the most reflective of current market prices. Fair values are subject to change based on valuation factors. The estimate of fair value includes an adjustment for the liquidation of the position in an orderly manner over a reasonable period of time under current market conditions. The fair value estimate also considers the risk of nonperformance based on credit considerations of the counterparty.

The following table sets forth the maturity schedule of our energy trading contracts based on the heating season from April through March. This maturity schedule is consistent with our business strategy.

	Fair Value of Contracts at December 31, 2005
Fair Value (a)	Matures through March 2006			Matures through March 2009			Matures through March 2011			Total Fair Value
	(Thousands of dollars)
Prices actively quoted (b)	$	80,531		$	4,522		$	—		$	85,053
Prices provided by other external sources (c)		(43,316	)		11,289			(1,731	)		(33,758	)
Prices derived from quotes, other external sources and other assumptions (d)		(6,864	)		(17,046	)		2,951			(20,959	)
Total	$	30,351		$	(1,235	)	$	1,220		$	30,336

(a) Fair value is the mark-to-market component of forwards, futures, swaps and options, net of applicable reserves. These fair values are reflected as a component of assets and liabilities from energy marketing and risk management activities in our Consolidated Balance Sheets.

(b) Values are derived from the energy market price quotes from national commodity trading exchanges that primarily trade future and option commodity contracts.

(c) Values are obtained through energy commodity brokers or electronic trading platforms, whose primary service is to match willing buyers and sellers of energy commodities. Energy price information by location is readily available because of the large energy broker network.

(d) Values derived in this category utilize market price information from the other two categories, as well as other assumptions for liquidity and credit.

The following table sets forth our Energy Services segment’s financial and commodity risk from fixed-price transactions at December 31, 2005.

	Investment Grade Credit Quality (a)			Below Investment Grade Credit Quality
	(Thousands of dollars)
Gas and electric utilities	$	(27,873	)	$	(16,859	)
Financial institutions		(45,844	)		—
Oil and gas producers		14,719			12,209
Industrial and commercial		5,262			7,320
Other		(28,571	)		565
Net value of fixed-price transactions	$	(82,307	)	$	3,235

(a) Investment grade is primarily determined using publicly available credit ratings along with consideration of cash prepayments, cash managing, standby letters of credit and parent company guarantees. Included in Investment Grade are counterparties with a minimum S&P rating of BBB- or Moody’s rating of Baa3.

For further discussion of trading activities, see the Critical Accounting Policies and Estimates section of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation in this Annual Report on Form 10-K. Also, see Note D of the Notes to Consolidated Financial Statements in this Form 10-K.

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Regulated Businesses - Kansas Gas Service uses derivative instruments to hedge the cost of anticipated natural gas purchases during the winter heating months to protect Kansas Gas Service customers from upward volatility in the market price of natural gas. At December 31, 2005, Kansas Gas Service had derivative instruments in place to hedge the cost of natural gas purchases for 2.4 Bcf, which represents part of their gas purchase requirements for the 2005/2006 winter heating months. Gains or losses associated with the Kansas Gas Service hedges are included in and recoverable through the monthly PGA.

Value-at-Risk (VAR) Disclosure of Market Risk - We measure market risk in the energy marketing and risk management, trading and non-trading portfolios of our non-regulated businesses using a VAR methodology, which estimates the expected maximum loss of the portfolio over a specified time horizon within a given confidence interval. Our VAR calculations are based on the Monte Carlo approach. The quantification of market risk using VAR provides a consistent measure of risk across diverse energy markets and products with different risk factors in order to set overall risk tolerance, to determine risk targets and set position limits. The use of this methodology requires a number of key assumptions, including the selection of a confidence level and the holding period to liquidation. Inputs to the calculation include prices, volatilities, positions, instrument valuations and the variance-covariance matrix. Historical data is used to estimate our VAR with more weight given to recent data, which is considered a more relevant predictor of immediate future commodity market movements. We rely on VAR to determine the potential reduction in the portfolio values arising from changes in market conditions over a defined period. While management believes that the referenced assumptions and approximations are reasonable, no uniform industry methodology exists for estimating VAR. Different assumptions and approximations could produce materially different VAR estimates.

Our VAR exposure represents an estimate of potential losses that would be recognized for our non-regulated businesses’ energy marketing and risk management, non-trading and trading portfolios of derivative financial instruments, physical contracts and natural gas in storage due to adverse market movements. A one-day time horizon and a 95 percent confidence level were used in our VAR data. Actual future gains and losses will differ from those estimated by the VAR calculation based on actual fluctuations in commodity prices, operating exposures and timing thereof, and the changes in our derivative financial instruments, physical contracts and natural gas in storage. VAR information should be evaluated in light of these assumptions and the methodology’s other limitations.

The potential impact on our future earnings, as measured by the VAR, was $30.1 million and $9.6 million at December 31, 2005 and 2004, respectively. The following table details the average, high and low VAR calculations.

	Years Ended December 31,
Value-at-Risk	2005		2004
	(Millions of dollars)
Average	$	16.4	$	3.8
High	$	44.0	$	17.7
Low	$	6.2	$	0.6

The variations in the VAR data are reflective of market volatility and changes in the portfolios during the year. The 2005 increase in VAR, compared with 2004, is primarily due to the increase in natural gas prices in the third and fourth quarters of 2005, which mainly resulted from supply disruption caused by Hurricane Katrina and Hurricane Rita.

Risk Policy and Oversight - We control the scope of risk management, marketing and trading operations through a comprehensive set of policies and procedures involving senior levels of management. The audit committee of our Board of Directors has oversight responsibilities for our risk management limits and policies. Our risk oversight committee, comprised of corporate officers, oversees all activities related to commodity price, credit and interest rate risk management, and marketing and trading activities. The committee also proposes risk metrics including VAR and dollar loss limits. We have a corporate risk control organization led by our Senior Vice President of Financial Services and Treasurer and our Vice President of Audit and Risk Control, who are assigned responsibility for establishing and enforcing the policies, procedures and limits. Key risk control activities include credit review and approval, credit and performance risk measurement and monitoring, validation of transactions, portfolio valuation, VAR and other risk metrics.

To the extent open commodity positions exist, fluctuating commodity prices can impact our financial results and financial position either favorably or unfavorably. As a result, we cannot predict with precision the impact risk management decisions may have on the business, operating results or financial position.

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INTEREST RATE AND CURRENCY RISK

Interest Rate Risk - We are subject to the risk of interest rate fluctuation in the normal course of business. We manage interest rate risk through the use of fixed rate debt, floating rate debt and, at times, interest rate swaps. Fixed rate swaps are used to reduce our risk of increased interest costs during periods of rising interest rates. Floating rate swaps are used to convert the fixed rates of long-term borrowings into short-term variable rates. At December 31, 2005, the interest rate on 82.8 percent of our long-term debt was fixed after considering the impact of interest rate swaps.

During the first quarter of 2005, we terminated $400 million of our interest rate swap agreements and paid a net amount of $19.4 million, which included $20.2 million for the present value of future payments at the time of termination, less $0.8 million for interest rate savings through the termination of the swaps. During the first quarter of 2004, we terminated $670 million of our interest rate swap agreements and received $81.9 million. The net savings from the termination of these swaps is being recognized in interest expense over the terms of the debt instruments originally hedged. Net interest expense savings for 2005 for all terminated swaps was $7.7 million, and the remaining net savings for all terminated swaps will be recognized over the following periods:

2006	$	6.8 million
2007	$	6.6 million
2008	$	6.6 million
2009	$	5.6 million
2010	$	5.5 million
Thereafter	$	15.3 million

Currently, $340 million of fixed rate debt is swapped to floating. The floating rate debt is based on both the three- and six-month London InterBank Offered Rate (LIBOR). At December 31, 2005, we recorded a net liability of $7.3 million to recognize the interest rate swaps at fair value. Long-term debt was decreased by $7.3 million to recognize the change in the fair value of the related hedged liability. See Note I.

Total swap savings for 2005 were $10.7 million, compared with the savings of $27.6 million in 2004.

Prior to the issuance of the $800 million of notes in the second quarter of 2005, we entered into $500 million in treasury rate-lock agreements to hedge the changes in cash flows of our anticipated interest payments from changes in treasury rates prior to the issuance of the notes. Upon issuance of the notes in June 2005, the treasury rate-lock agreements terminated, which resulted in our paying $2.4 million. This amount, net of tax, has been recorded to accumulated other comprehensive loss and will be recognized in the income statement over the term of the related debt issuances.

At December 31, 2005, a 100 basis point move in the annual interest rate on all of our outstanding long-term debt would change our annual interest expense by $3.4 million before taxes. This 100 basis point change assumes a parallel shift in the yield curve. If interest rates changed significantly, we would take actions to manage our exposure to the change. Since a specific action and the possible effects are uncertain, no change has been assumed.

Currency Rate Risk - With our Energy Services segment’s expansion into Canada, we are subject to currency exposure related to our firm transportation and storage contracts. Our objective with respect to currency risk is to reduce the exposure due to exchange-rate fluctuations. We use physical forward transactions, which result in an actual two-way flow of currency on the settlement date since we exchange U.S. dollars for Canadian dollars with another party. We have not designated these transactions for hedge accounting treatment; therefore, the gains and losses associated with the change in fair value are recorded in net margin. At December 31, 2005 and 2004, our exposure to risk from currency translation was not material.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

ONEOK, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting (Item 9A(b)), that ONEOK, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ONEOK, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment:

The Company’s third party software system associated with accounting for derivative hedging instruments was inadequately designed to appropriately account for certain hedges of forecasted transactions and thus did not facilitate the recognition of hedging ineffectiveness in accordance with generally accepted accounting principles. The software system incorrectly reversed previously recognized hedging ineffectiveness when additional derivative instruments (basis swaps) were incorporated into the Company’s hedging strategy related to the forecasted transactions. As a result, misstatements were identified in the Company’s cost of sales and fuel account and accumulated other comprehensive income (loss).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of ONEOK, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005. The aforementioned material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2005 consolidated financial statements, and this report does not affect our report dated March 10, 2006 which expressed an unqualified opinion on those consolidated financial statements.

In our opinion, management’s assessment that ONEOK, Inc. did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria,

56

ONEOK, Inc. has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Company acquired Koch Industries, Inc.’s natural gas liquids business in July 2005 (herein after referred to as “the Natural Gas Liquids segment”), and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, internal control over financial reporting associated with the Natural Gas Liquids segment, which represents approximately 19 percent of total consolidated revenue in 2005 and approximately 16 percent of consolidated total assets included in the consolidated financial statements as of and for the year ended December 31, 2005. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of the Natural Gas Liquids segment.

KPMG LLP

Tulsa, Oklahoma

March 10, 2006

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

ONEOK, Inc.:

We have audited the accompanying consolidated balance sheets of ONEOK, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ONEOK, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

As discussed in Note A to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, the recognition and measurement principles of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, and the rescission of the provisions of Emerging Issues Task Force 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management Activities, effective January 1, 2003.

We also have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of ONEOK, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2006, expressed an unqualified opinion on management’s assessment of, and an adverse opinion on the effective operation of, internal control over financial reporting.

KPMG LLP

Tulsa, Oklahoma

March 10, 2006

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ONEOK, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2005			2004		2003
	(Thousands of dollars, except per share amounts)
Revenues
Operating revenues, excluding energy trading revenues	$	12,663,550		$	5,671,714	$	2,640,684
Energy trading revenues, net		12,680			113,814		229,782
Total Revenues		12,676,230			5,785,528		2,870,466
Cost of sales and fuel		11,338,076			4,648,311		1,785,648
Net Margin		1,338,154			1,137,217		1,084,818
Operating Expenses
Operations and maintenance		552,531			475,106		449,006
Depreciation, depletion and amortization		183,394			158,053		144,695
General taxes		67,464			60,406		63,262
Total Operating Expenses		803,389			693,565		656,963
Gain on Sale of Assets		264,207			—		—
Operating Income		798,972			443,652		427,855
Other income		14,188			17,599		8,128
Other expense		19,883			12,056		5,198
Interest expense		147,608			87,301		98,232
Income before Income Taxes		645,669			361,894		332,553
Income taxes		242,521			137,221		126,104
Income from Continuing Operations		403,148			224,673		206,449
Discontinued operations, net of taxes (Note C):
Income (loss) from operations of discontinued components, net of tax		(6,180	)		17,505		10,185
Gain on sale of discontinued component, net of tax		149,577			—		39,739
Cumulative effect of changes in accounting principles, net of tax (Note A and D)		—			—		(143,885	)
Net Income		546,545			242,178		112,488
Preferred stock dividends		—			—		24,211
Income Available for Common Stock	$	546,545		$	242,178	$	88,277
Earnings Per Share of Common Stock (Note Q)
Basic:
Earnings per share from continuing operations	$	4.01		$	2.21	$	2.28
Earnings (loss) per share from operations of discontinued components, net		(0.06	)		0.17		0.12
Earnings per share from gain on sale of discontinued component, net		1.49			—		0.36
Earnings per share from cumulative effect of changes in accounting principles		—			—		(1.28	)
Net Earnings Per Share, Basic	$	5.44		$	2.38	$	1.48
Diluted:
Earnings per share from continuing operations	$	3.73		$	2.13	$	2.05
Earnings (loss) per share from operations of discontinued components, net		(0.06	)		0.17		0.10
Earnings per share from gain on sale of discontinued component, net		1.39			—		0.35
Earnings per share from cumulative effect of changes in accounting principles		—			—		(1.28	)
Net Earnings Per Share, Diluted	$	5.06		$	2.30	$	1.22
Average Shares of Common Stock (Thousands)
Basic		100,536			101,965		80,569
Diluted		108,006			105,461		96,999
Dividends Declared Per Share of Common Stock	$	1.09		$	0.88	$	0.69

See accompanying Notes to Consolidated Financial Statements.

59

ONEOK, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	December 31, 2005		December 31, 2004
	(Thousands of dollars)
Assets
Current Assets
Cash and cash equivalents	$	7,915	$	9,458
Trade accounts and notes receivable, net		2,202,895		1,412,861
Gas and natural gas liquids in storage		911,393		593,028
Commodity exchanges		133,159		1,758
Energy marketing and risk management assets (Note D)		765,157		386,781
Other current assets		385,274		90,566
Total Current Assets		4,405,793		2,494,452
Property, Plant and Equipment
Property, plant and equipment		5,575,365		4,832,876
Accumulated depreciation, depletion and amortization		1,581,138		1,519,719
Net Property, Plant and Equipment		3,994,227		3,313,157
Deferred Charges and Other Assets
Goodwill and intangibles (Note E)		683,211		225,188
Energy marketing and risk management assets (Note D)		150,026		71,310
Investments and other		716,298		589,805
Total Deferred Charges and Other Assets		1,549,535		886,303
Assets of Discontinued Component		63,911		505,240
Total Assets	$	10,013,466	$	7,199,152

See accompanying Notes to Consolidated Financial Statements.

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ONEOK, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	December 31, 2005			December 31, 2004
	(Thousands of dollars)
Liabilities and Shareholders’ Equity
Current Liabilities
Current maturities of long-term debt	$	6,546		$	341,532
Notes payable		1,541,500			644,000
Accounts payable		1,756,307			1,161,984
Commodity exchanges		238,176			—
Energy marketing and risk management liabilities (Note D)		814,803			403,626
Other		438,009			337,653
Total Current Liabilities		4,795,341			2,888,795
Long-term Debt, excluding current maturities		2,024,070			1,543,202
Deferred Credits and Other Liabilities
Deferred income taxes		603,835			601,281
Energy marketing and risk management liabilities (Note D)		442,842			102,865
Other deferred credits		350,157			371,130
Total Deferred Credits and Other Liabilities		1,396,834			1,075,276
Liabilities of Discontinued Component		2,464			86,175
Total Liabilities		8,218,709			5,593,448
Commitments and Contingencies (Note K)
Shareholders’ Equity
Common stock, $0.01 par value:
authorized 300,000,000 shares; issued 107,973,436 shares and outstanding 97,654,697 shares at December 31, 2005; issued 107,143,722 shares and outstanding 104,106,285 shares at December 31, 2004		1,080			1,071
Paid in capital		1,044,283			1,017,603
Unearned compensation		(105	)		(1,413	)
Accumulated other comprehensive loss (Note F)		(56,991	)		(9,591	)
Retained earnings		1,085,845			649,240
Treasury stock, at cost: 10,318,739 shares at December 31, 2005 and 3,037,437 shares at December 31, 2004		(279,355	)		(51,206	)
Total Shareholders’ Equity		1,794,757			1,605,704
Total Liabilities and Shareholders’ Equity	$	10,013,466		$	7,199,152

See accompanying Notes to Consolidated Financial Statements.

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62

ONEOK, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2005			2004			2003 Revised
	(Thousands of Dollars)
Operating Activities
Net income	$	546,545		$	242,178		$	112,488
Depreciation, depletion and amortization		183,394			158,053			144,695
Impairment expense on discontinued operations		52,226			—			—
Cumulative effect of changes in accounting principles, net		—			—			143,885
Gain on sale of discontinued component, net		(149,577	)		—			(39,739	)
Gain on sale of assets		(269,040	)		(10,586	)		(286	)
Income from equity investments, net		9,705			(1,506	)		(307	)
Deferred income taxes		16,372			91,238			115,368
Stock based compensation expense		11,842			14,330			6,289
Allowance for doubtful accounts		16,329			13,309			14,073
Changes in assets and liabilities (net of acquisition and disposition effects):
Accounts and notes receivable		(733,367	)		(476,017	)		(156,792	)
Inventories		(320,632	)		(96,510	)		(428,227	)
Unrecovered purchased gas costs		(8,943	)		12,944			54,954
Commodity exchanges		106,775			—			—
Deposits		(118,214	)		10,030			(42,424	)
Regulatory assets		(6,357	)		(15,395	)		(4,586	)
Accounts payable and accrued liabilities		518,406			322,387			99,516
Energy marketing and risk management assets and liabilities		223,965			(22,033	)		27,651
Other assets and liabilities		(259,088	)		(36,718	)		(44,592	)
Cash Provided by (Used in) Operating Activities		(179,659	)		205,704			1,966
Investing Activities
Changes in other investments, net		(23,864	)		1,891			(2,366	)
Acquisitions		(1,327,907	)		(176,709	)		(690,302	)
Capital expenditures		(250,493	)		(264,110	)		(215,148	)
Proceeds from sale of discontinued component		519,279			—			280,669
Proceeds from sale of assets		556,434			21,241			3,084
Other investing activities		(6,862	)		(5,603	)		3,635
Cash Used in Investing Activities		(533,413	)		(423,290	)		(620,428	)
Financing Activities
Borrowing of notes payable, net		897,500			44,000			334,500
Issuance of debt, net of issuance costs		798,792			—			402,400
Termination of interest rate swaps		(22,565	)		82,915			—
Payment of debt		(636,288	)		(1,364	)		(16,148	)
Purchase of Series A Convertible Preferred Stock		—			—			(300,000	)
Purchase of common stock		(228,149	)		—			(50,000	)
Issuance of common stock		16,372			189,777			224,412
Issuance (purchase) of treasury stock, net		—			(823	)		12,616
Dividends paid		(110,157	)		(89,229	)		(71,242	)
Other financing activities		(3,976	)		(10,404	)		20,574
Cash Provided by Financing Activities		711,529			214,872			557,112
Change in Cash and Cash Equivalents		(1,543	)		(2,714	)		(61,350	)
Cash and Cash Equivalents at Beginning of Period		9,458			12,172			73,522
Cash and Cash Equivalents at End of Period	$	7,915		$	9,458		$	12,172

See accompanying Notes to Consolidated Financial Statements. See Note A for discussion of 2003 revision.

63

ONEOK, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

	Common Stock Issued	Preferred Stock Issued		Series A Convertible Preferred Stock			Series D Convertible Preferred Stock			Common Stock		Paid-in Capital
	(Shares)			(Thousands of dollars)
December 31, 2002	63,438,441	19,946,448		$	199		$	—		$	634	$	903,918
Net income	—	—			—			—			—		—
Other comprehensive loss	—	—			—			—			—		—
Total comprehensive income
Re-issuance of treasury stock		—			—			—			—		1,608
Common stock offering	13,800,000	—			—			—			138		227,893
Common stock issuance pursuant to various plans	—	—			—			—			—		6,029
Issuance costs of equity units	—	—			—			—			—		(9,728	)
Contract adjustment payment	—	—			—			—			—		(50,805	)
Repurchase of Series A
Convertible Preferred Stock	18,077,511	(9,038,755	)		(90	)		—			181		(91	)
Exchange of Series A
Convertible Preferred Stock	—	(10,907,693	)		(109	)		—			—		(308,466	)
Issuance of Series D
Convertible Preferred Stock	—	21,815,386			—			218			—		361,747
Repurchase of common stock	—	—			—			—			—		—
Exchange of Series D
Convertible Preferred Stock	—	(8,418,000	)		—			(84	)		—		(137,551	)
Conversion of Series D
Convertible Preferred Stock	2,551,835	(13,397,386	)		—			(134	)		26		(182,035	)
Issuance of restricted stock	—	—			—			—			—		107
Forfeiture of restricted stock	—	—			—			—			—		—
Registration Costs	—	—			—			—			—		(268	)
Stock-based employee compensation expense	326,887	—			—			—			3		3,512
Convertible preferred stock dividends	—	—			—			—			—		—
Common stock dividends - $0.69 per share	—	—			—			—			—		—
December 31, 2003	98,194,674	—		$	—		$	—		$	982	$	815,870

See accompanying Notes to Consolidated Financial Statements.

64

ONEOK, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Continued)

	Unearned Compensation			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total
	(Thousands of dollars)
December 31, 2002	$	(2,716	)	$	(5,546	)	$	507,836		$	(38,713	)	$	1,365,612
Net income		—			—			112,488			—			112,488
Other comprehensive loss		—			(12,080	)		—			—			(12,080	)
Total comprehensive income														100,408
Re-issuance of treasury stock		—			—			—			15,458			17,066
Common stock offering		—			—			—			—			228,031
Common stock issuance pursuant to various plans		—			—			—			—			6,029
Issuance costs of equity units		—			—			—			—			(9,728	)
Contract adjustment payment		—			—			—			—			(50,805	)
Repurchase of Series A
Convertible Preferred Stock		—			—			—			(300,000	)		(300,000	)
Exchange of Series A
Convertible Preferred Stock		—			—			—			—			(308,575	)
Issuance of Series D
Convertible Preferred Stock		—			—			(53,390	)		—			308,575
Repurchase of common stock		—			—			—			(50,000	)		(50,000	)
Exchange of Series D
Convertible Preferred Stock		—			—			—			137,635			—
Conversion of Series D
Convertible Preferred Stock		—			—			—			182,143			—
Issuance of restricted stock		(3,206	)		—			—			3,099			—
Forfeiture of restricted stock		5			—			—			(5	)		—
Registration Costs		—			—			—			—			(268	)
Stock-based employee compensation expense		2,774			—			—			—			6,289
Convertible preferred stock dividends		—			—			(18,753	)		—			(18,753	)
Common stock dividends - $0.69 per share		(279	)		—			(52,210	)		—			(52,489	)
December 31, 2003	$	(3,422	)	$	(17,626	)	$	495,971		$	(50,383	)	$	1,241,392

65

ONEOK, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

	Common Stock Issued	Preferred Stock Issued	Series A Convertible Preferred Stock		Series D Convertible Preferred Stock		Common Stock		Paid-in Capital
	(Shares)				(Thousands of dollars)
December 31, 2003	98,194,674	—	$	—	$	—	$	982	$	815,870
Net income	—	—		—		—		—		—
Other comprehensive income	—	—		—		—		—		—
Total comprehensive income
Receipts and forfeitures of restricted stock	—	—		—		—		—		—
Common stock offering	6,900,000	—		—		—		69		151,248
Common stock issuance pursuant to various plans	2,049,048	—		—		—		20		38,736
Offering costs	—	—		—		—		—		(296	)
Stock-based employee compensation expense	—	—		—		—		—		12,045
Common stock dividends - $0.88 per share	—	—		—		—		—		—
December 31, 2004	107,143,722	—		—		—		1,071		1,017,603
Net income	—	—		—		—		—		—
Other comprehensive loss	—	—		—		—		—		—
Total comprehensive income
Repurchase of common stock	—	—		—		—		—		—
Common stock issuance pursuant to various plans	829,714	—		—		—		9		16,363
Stock-based employee compensation expense	—	—		—		—		—		10,317
Common stock dividends - $1.09 per share	—	—		—		—		—		—
December 31, 2005	107,973,436	—	$	—	$	—	$	1,080	$	1,044,283

See accompanying Notes to Consolidated Financial Statements.

66

ONEOK, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Continued)

	Unearned Compensation			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total
	(Thousands of dollars)
December 31, 2003	$	(3,422	)	$	(17,626	)	$	495,971		$	(50,383	)	$	1,241,392
Net income		—			—			242,178			—			242,178
Other comprehensive income		—			8,035			—			—			8,035
Total comprehensive income														250,213
Receipts and forfeitures of restricted stock		44			—			—			(823	)		(779	)
Common stock offering		—			—			—			—			151,317
Common stock issuance pursuant to various plans		—			—			—			—			38,756
Offering costs		—			—			—			—			(296	)
Stock-based employee compensation expense		2,285			—			—			—			14,330
Common stock dividends - $0.88 per share		(320	)		—			(88,909	)		—			(89,229	)
December 31, 2004		(1,413	)		(9,591	)		649,240			(51,206	)	$	1,605,704
Net income		—			—			546,545			—			546,545
Other comprehensive loss		—			(47,400	)		—			—			(47,400	)
Total comprehensive income														499,145
Repurchase of common stock		—			—			—			(228,149	)		(228,149	)
Common stock issuance pursuant to various plans		—			—			—			—			16,372
Stock-based employee compensation expense		1,525			—			—			—			11,842
Common stock dividends - $1.09 per share		(217	)		—			(109,940	)		—			(110,157	)
December 31, 2005	$	(105	)	$	(56,991	)	$	1,085,845		$	(279,355	)	$	1,794,757

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF ACCOUNTING POLICIES

Nature of Operations - We purchase, gather, process, transport, store and distribute natural gas. We extract, fractionate, store, transport, sell and market natural gas liquids (NGLs); and are engaged in natural gas, crude oil, NGLs and electricity marketing, retail natural gas marketing and trading activities. We are the largest natural gas distributor in Oklahoma and Kansas and the third largest natural gas distributor in Texas, providing service as a regulated public utility to wholesale and retail customers. Our largest distribution markets are Oklahoma City and Tulsa, Oklahoma; Kansas City, Wichita, and Topeka, Kansas; and Austin and El Paso, Texas. Our energy services operations provide services to customers in many states. We acquired Northern Plains Natural Gas Company and its wholly owned subsidiary Pan Border Gas Company (collectively, Northern Plains) in November 2004. As a result of this acquisition, we are the majority general partner of Northern Border Partners, one of the largest publicly-traded master limited partnerships. Northern Border Partners acquires, owns and manages pipelines and other midstream energy assets and is a leading transporter of natural gas imported from Canada into the United States.

Critical Accounting Policies

The following is a summary of our most critical accounting policies, which are defined as those policies most important to the portrayal of our financial condition and results of operations and requiring management’s most difficult, subjective, or complex judgment, particularly because of the need to make estimates concerning the impact of inherently uncertain matters. We have discussed the development of and selection of our critical accounting policies and estimates with the audit committee of our Board of Directors.

Derivatives and Risk Management Activities - We engage in wholesale energy marketing, retail marketing, trading, and risk management activities. We account for derivative instruments utilized in connection with these activities and services under the fair value basis of accounting in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133), as amended. Many of our purchase and sale agreements that otherwise would be required to follow derivative accounting qualify as normal purchases and normal sales under Statement 133 and are therefore exempt from fair value accounting treatment.

Under Statement 133, entities are required to record derivative instruments at fair value. The fair value of derivative instruments is determined by commodity exchange prices, over-the-counter quotes, volatility, time value, counterparty credit and the potential impact on market prices of liquidating positions in an orderly manner over a reasonable period of time under current market conditions. The majority of our portfolio’s fair values are based on actual market prices. Market value changes result in a change in the fair value of our derivative instruments. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. If the derivative instrument does not qualify or is not designated as part of a hedging relationship, we account for changes in fair value of the derivative in earnings as they occur. Commodity price volatility may have a significant impact on the gain or loss in any given period.

To minimize the risk of fluctuations in natural gas, NGLs and crude oil prices, we periodically enter into futures transactions and swaps in order to hedge anticipated purchases of natural gas and crude oil, fuel requirements and NGL inventories. Interest rate swaps are also used to manage interest rate risk. Under certain conditions, we designate these derivative instruments as a hedge of exposure to changes in fair values or cash flows. For hedges of exposure to changes in fair value, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. For hedges of exposure to changes in cash flow, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income and is subsequently reclassified into earnings when the forecasted transaction affects earnings. Any ineffectiveness of designated hedges is reported in earnings in the period the ineffectiveness occurs.

In October 2002, the Emerging Issues Task Force (EITF) of the FASB rescinded EITF Issue No. 98-10, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities” (EITF 98-10). As a result, energy-related contracts that are not accounted for pursuant to Statement 133 are no longer carried at fair value, but rather will be accounted for on an accrual basis as executory contracts. As a result of the rescission of EITF 98-10, the Task Force also agreed that energy trading inventories carried under storage agreements should no longer be carried at fair value, but should be carried at the lower of cost or market. The rescission was effective for all fiscal periods beginning after December 31, 2002, and for all

68

existing energy trading contracts and inventory as of October 25, 2002. Additionally, the rescission applied immediately to contracts entered into on or after October 25, 2002. Changes to the accounting for existing contracts as a result of the rescission of EITF 98-10 were reported as a cumulative effect of a change in accounting principle on January 1, 2003. This resulted in a cumulative effect loss, net of tax, of $141.8 million in 2003. The impact of this change was non-cash.

See Note D for more discussion of derivatives and risk management activities.

Impairment of Goodwill and Long-Lived Assets - We assess our goodwill for impairment at least annually based on Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (Statement 142). An initial assessment is made by comparing the fair value of the operations with goodwill, as determined in accordance with Statement 142, to the book value of each reporting unit. If the fair value is less than the book value, an impairment is indicated, and we must perform a second test to measure the amount of the impairment. In the second test, we calculate the implied fair value of the goodwill by deducting the fair value of all tangible and intangible net assets of the operations with goodwill from the fair value determined in step one of the assessment. If the carrying value of the goodwill exceeds this calculated implied fair value of the goodwill, we will record an impairment charge. See Note E for more discussion of goodwill.

We assess our long-lived assets for impairment based on Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (Statement 144). A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may exceed its fair value. Fair values are based on the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the assets.

Examples of long-lived asset impairment indicators include:

• a significant decrease in the market price of a long-lived asset or asset group,

• a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition,

• a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator that would exclude allowable costs from the rate-making process,

• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group,

• a current-period operating cash flow loss, combined with a history of operating cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, and

• a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

In the third quarter of 2005, we made the decision to sell our Spring Creek power plant, located in central Oklahoma, and exit the power generation business. In October 2005, we concluded that our Spring Creek power plant had been impaired and recorded an impairment expense of $52.2 million. This conclusion was based on our Statement 144 impairment analysis of the results of operations for this plant through September 30, 2005, and also the net sales proceeds from the anticipated sale of the plant. These assets were held for sale at December 31, 2005, and, accordingly, this component of our business is accounted for as discontinued operations in accordance with Statement 144.

Pension and Postretirement Employee Benefits - We have a defined benefit pension plan covering substantially all full-time employees and a postretirement employee benefits plan covering most employees. Nonbargaining unit employees hired after December 31, 2004, are not eligible for our defined benefit pension plan; however, they are covered by a profit sharing plan. Our actuarial consultant calculates the expense and liability related to these plans and uses statistical and other factors that attempt to anticipate future events. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases, age and employment periods. In determining the projected benefit obligations and the costs, assumptions can change from period to period and result in material changes in the costs and liabilities we recognize. See Note J for more discussion of pension and postretirement employee benefits.

The FASB is currently reviewing the accounting for pension and postretirement medical benefits and expects to issue an exposure draft on phase one of this project during the first quarter of 2006. The final standard for the first phase of this project is expected to be issued in the third quarter of 2006 with implementation required for years ending after December 15, 2006. Based on the FASB’s discussion, we could be required to record a balance sheet liability equal to the difference between our benefit obligation and plan assets. If this requirement had been in place at December 31, 2005, we would have been required to record unrecognized losses of $124.8 million and $78.8 million for pension and postretirement benefits, respectively, on our consolidated balance sheet as accumulated other comprehensive income (loss).

69

Contingencies - Our accounting for contingencies covers a variety of business activities including contingencies for legal exposures and environmental exposures. We accrue these contingencies when our assessments indicate that it is probable that a liability has been incurred or an asset will not be recovered and an amount can be reasonably estimated in accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies.” We base our estimates on currently available facts and our estimates of the ultimate outcome or resolution. Actual results may differ from our estimates resulting in an impact, either positive or negative, on earnings. See Note K for more discussion of contingencies.

Significant Accounting Policies

Consolidation - The consolidated financial statements include the accounts of ONEOK, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in 20 percent to 50 percent-owned affiliates are accounted for on the equity method. Investments in less than 20 percent owned affiliates are accounted for on the cost method unless we have the ability to exercise significant influence over operating and financial policies of our investee, in which case we apply the equity method. Our investment in the general and limited partner interests in Northern Border Partners is accounted for by the equity method.

In June 2005, the FASB ratified the consensus reached in EITF Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF 04-5). EITF 04-5 presumes that a general partner controls a limited partnership and therefore should consolidate the partnership in the financial statements of the general partner. Effective January 1, 2006, we were required to consolidate Northern Border Partners’ operations in our consolidated financial statements and we elected to use the prospective method. If we had consolidated Northern Border Partners at December 31, 2005, our debt-to-equity ratio would have changed from 67 percent debt and 33 percent equity to 73 percent debt and 27 percent equity. This increase results from the consolidation of Northern Border Partners’ debt of $1.35 billion at December 31, 2005, while the majority of their equity is reported as minority interest liability. The debt covenant calculations in our credit agreements exclude the debt of Northern Border Partners since it is a master limited partnership. The adoption of EITF 04-5 will not have an impact on our net income; however, reported revenues, costs and expenses will be higher to reflect the activities of Northern Border Partners.

Cash and Cash Equivalents - Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have original maturities of three months or less.

Inventories - Materials and supplies are valued at average cost. Noncurrent natural gas in storage is classified as property and is valued at cost. Cost of current natural gas in storage for Oklahoma Natural Gas is determined under the last-in, first-out (LIFO) methodology. The estimated replacement cost of current natural gas in storage was $70.2 million and $37.3 million at December 31, 2005 and 2004, respectively, compared to its value under the LIFO method of $56.2 million and $38.9 million at December 31, 2005 and 2004, respectively. Current natural gas and NGLs in storage for all other companies are determined using the weighted average cost method.

In September 2005, the FASB ratified the consensus reached in EITF Issue No. 04-13, “Accounting for Purchases and Sales of Inventory with the Same Counterparty” (EITF 04-13). EITF 04-13 defines when a purchase and a sale of inventory with the same party that operates in the same line of business should be considered a single nonmonetary transaction. EITF 04-13 is effective for new arrangements that a company enters into in periods beginning after March 15, 2006. We do not expect the adoption of EITF 04-13 to impact our consolidated financial statements.

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Property - The following table sets forth property, by segment, for the periods presented.

	Years Ended December 31,
	2005		2004
	(Thousands of dollars)
Gathering and Processing	$	778,022	$	1,034,344
Natural Gas Liquids		497,836		32,268
Pipelines and Storage		1,136,821		705,115
Energy Services		7,690		7,531
Distribution		3,016,668		2,916,440
Other		138,328		137,178
Property, plant and equipment		5,575,365		4,832,876
Accumulated depreciation, depletion and amortization		1,581,138		1,519,719
Net property, plant and equipment	$	3,994,227	$	3,313,157

Regulated Property - Regulated properties are stated at cost, which includes an allowance for funds used during construction. The allowance for funds used during construction represents the capitalization of the estimated average cost of borrowed funds (5.9 percent in 2005 and 6.2 percent in 2004) used during the construction of major projects and is recorded as a credit to interest expense. Depreciation is calculated using the straight-line method based on rates prescribed for ratemaking purposes. The average depreciation rates for Oklahoma Natural Gas and ONEOK Gas Transportation property regulated by the Oklahoma Corporation Commission (OCC), Kansas Gas Service and Mid Continent Market Center property regulated by the Kansas Corporation Commission (KCC), Texas Gas Service and ONEOK WesTex Transmission property regulated by the Texas Railroad Commission (RRC) and various municipalities in Texas, and ONEOK NGL Pipeline property regulated by the Federal Energy Regulatory Commission (FERC) is set forth in the following table for the periods indicated.

	Years Ended December 31,
Regulated Property	2005		2004		2003
Oklahoma Natural Gas	2.8	%	2.9	%	2.8	%
Kansas Gas Service	3.3	%	3.2	%	3.3	%
Texas Gas Service	3.1	%	3.2	%	3.2	%
ONEOK Gas Transportation	2.1	%	2.1	%	2.1	%
Mid-Continent Market Center	3.6	%	3.6	%	3.5	%
ONEOK WesTex Transmission	2.2	%	2.2	%	2.1	%
ONEOK NGL Pipeline	2.7	%	(	a)	(	a)

(a) In July 2005, we acquired the natural gas liquids businesses from Koch.

Maintenance and repairs are charged directly to expense. Generally, the cost of property retired or sold, plus removal costs, less salvage, is charged to accumulated depreciation. Gains and losses from sales or transfers of operating units or systems are recognized in income.

The following table sets forth the remaining life and service years of our regulated properties.

	Remaining Life	Service Years
Distribution property	18-25	39-47
Transmission property	18-36	40-49
Other property	7-15	15-25

Other Property - Gas processing plants and all other properties are stated at cost. Gas processing and natural gas liquids fractionation plants are depreciated using various rates based on estimated lives of available natural gas reserves. All other property and equipment are depreciated using the straight-line method over its estimated useful life.

Environmental Expenditures - We accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations

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generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information becomes available or circumstances change. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

Revenue Recognition - We recognize revenue when services are rendered or product is delivered. Major industrial and commercial natural gas distribution customers are invoiced as of the end of each month. Certain natural gas distribution customers, primarily residential and some commercial are invoiced on a cyclical basis throughout the month, and we accrue unbilled revenues at the end of each month. Tariff rates for residential and commercial Oklahoma Natural Gas, Kansas Gas Service and some Texas Gas Service customers contain a temperature normalization clause that provides for billing adjustments from actual volumes to normalized volumes during the winter heating season. A flat monthly service fee is included in the authorized rate design for Texas Gas Service in El Paso and Port Arthur to protect customers from abnormal rate fluctuations due to weather.

Income Taxes - Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is deferred and amortized for operations regulated by the OCC, KCC, RRC and various municipalities in Texas. For all other operations the effect is recognized in income in the period that includes the enactment date. We continue to amortize previously deferred investment tax credits for ratemaking purposes over the period prescribed by the OCC, KCC, RRC and various municipalities in Texas.

Regulation - Our intrastate natural gas transmission pipelines and distribution operations are subject to the rate regulation and accounting requirements of the OCC, KCC, RRC and various municipalities in Texas. Other transportation activities are subject to regulation by the FERC. Oklahoma Natural Gas, Kansas Gas Service, Texas Gas Service and portions of our Pipelines and Storage segment follow the accounting and reporting guidance contained in Statement of Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation” (Statement 71). During the rate-making process, regulatory authorities may require us to defer recognition of certain costs to be recovered through rates over time as opposed to expensing such costs as incurred. This allows us to stabilize rates over time rather than passing such costs on to the customer for immediate recovery. Accordingly, actions of the regulatory authorities could have an affect on the amount recovered from rate payers. Any difference in the amount recoverable and the amount deferred would be recorded as income or expense at the time of the regulatory action. If all or a portion of the regulated operations becomes no longer subject to the provisions of Statement 71, a write-off of regulatory assets and stranded costs may be required.

At December 31, 2005, we had regulatory assets in the amount of $181.7 million, included in investments and other in our Consolidated Balance Sheets. Regulatory assets are being recovered through various rate cases with the exception of an immaterial amount, which we expect to eventually recover.

Asset Retirement Obligations - In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47), that requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective for our year ended December 31, 2005. We completed our review of the applicability of FIN 47 to our operations and determined that the impact was immaterial to our consolidated financial statements.

On January 1, 2003, we adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (Statement 143). Statement 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset. Statement 143 requires that we recognize the fair value of a liability for an asset retirement obligation in the period when it is incurred if a reasonable estimate of the fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for an amount other than the carrying amount of the liability, we will recognize a gain or loss on settlement.

All legal obligations for asset retirement obligations were identified and the fair value of these obligations was determined as of January 1, 2003. The obligations primarily relate to the 300-megawatt power plant and various processing plants, storage facilities and producing wells. As a result of the adoption of Statement 143, we recorded a long-term liability of approximately $16.3 million, an increase to property, plant and equipment, net of accumulated depreciation, of approximately $12.9 million, and a cumulative effect loss of approximately $2.1 million, net of tax, in the first quarter of 2003. The related depreciation and amortization expense is immaterial to our consolidated financial statements.

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In accordance with long-standing regulatory treatment, we collect through rates the estimated costs of removal on certain regulated properties through depreciation expense, with a corresponding credit to accumulated depreciation, depletion and amortization. These removal costs are non-legal obligations as defined by Statement 143. However, these non-legal asset removal obligations should be accounted for as a regulatory liability under Statement 71. Historically, the regulatory authorities which have jurisdiction over our regulated operations have not required us to track this amount; rather these costs are addressed prospectively as depreciation rates are set in each general rate order. We have made an estimate of our removal cost liability using current rates since the last general rate order in each of our jurisdictions. However, significant uncertainty exists regarding the ultimate determination of this liability pending, among other issues, clarification of regulatory intent. We continue to monitor the regulatory authorities and the liability may be adjusted as more information is obtained. We have reclassified the estimated non-legal asset removal obligation from accumulated deprecation, depletion and amortization to non-current liabilities in other deferred credits on our balance sheets as of December 31, 2005 and 2004. To the extent this estimated liability is adjusted, such amounts will be reclassified between accumulated depreciation, depletion and amortization and other deferred credits and thus will not have an impact on earnings.

Common Stock Options and Awards - In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (Statement 123R). Statement 123R requires companies to expense the fair value of share-based payments. In addition, there are also changes related to the expense calculation for share-based payments. Effective January 1, 2006, we adopted Statement 123R, and we elected to use the prospective method. We are currently assessing the impact of adopting Statement 123R, but we do not believe it will have a material impact on our financial condition and results of operations, as we have been expensing share-based payments since our adoption of Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” (Statement 148) on January 1, 2003.

On January 1, 2003, we adopted Statement 148, which was an amendment to Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (Statement 123). We elected to begin expensing the fair value of all stock option compensation granted on or after January 1, 2003 under the prospective method allowed by Statement 148. Prior to January 1, 2003, we accounted for our stock option compensation under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.

The following table sets forth the effect on net income and earnings per common share (EPS) as if we had applied the fair-value recognition provisions of Statement 123 to stock-based employee compensation in the periods presented.

	Years Ended December 31,
	2005		2004		2003
	(Thousands of dollars, except per share amounts)
Net income, as reported	$	546,545	$	242,178	$	112,488
Add: Stock option compensation included in net income, net of related tax effects		8,343		9,228		4,650
Deduct: Total stock option compensation expense determined under fair value based method for all awards, net of related tax effects		8,994		10,415		5,864
Pro forma net income	$	545,894	$	240,991	$	111,274
Earnings per share:
Basic - as reported	$	5.44	$	2.38	$	1.48
Basic - pro forma	$	5.43	$	2.36	$	1.46
Diluted - as reported	$	5.06	$	2.30	$	1.22
Diluted - pro forma	$	5.05	$	2.29	$	1.21

Earnings per Common Share - Basic EPS is calculated based on the daily weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated based on the daily weighted average number of shares of common stock outstanding during the period plus potentially dilutive components. The dilutive components are calculated based on the dilutive effect for each quarter. For any fiscal year period consisting of two or more quarters, the dilutive components for each quarter are averaged to arrive at the fiscal year-to-date dilutive component.

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Labor Force - We employed 4,559 people at December 31, 2005. Approximately 17 percent of the workforce, all of whom are employed by Kansas Gas Service, is covered by collective bargaining agreements, with 7 percent covered by agreements that expire in 2006 and 10 percent covered by agreements that expire in 2009.

Use of Estimates - Certain amounts included in or affecting our financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Items which may be estimated include, but are not limited to, the economic useful life of assets, fair value of assets and liabilities, obligations under employee benefit plans, provisions for uncollectible accounts receivable, unbilled revenues for natural gas delivered but for which meters have not been read, gas purchased expense for natural gas received but for which no invoice has been received, provision for income taxes including any deferred tax valuation allowances, the results of litigation and various other recorded or disclosed amounts. Accordingly, the reported amounts of our assets and liabilities, revenues and expenses, and related disclosures are necessarily affected by these estimates.

We evaluate these estimates on an ongoing basis using historical experience, consultation with experts and other methods we consider reasonable based on the particular circumstances. Nevertheless, actual results may differ significantly from the estimates. Any effects on our financial position or results of operations from revisions to these estimates are recorded in the period when the facts that give rise to the revision become known.

Reclassifications and Revisions - Certain amounts in prior period consolidated financial statements have been reclassified to conform to the 2005 presentation. These reclassifications did not impact previously reported net income or shareholders’ equity.

In 2005, we combined cash flows from discontinued operations with cash flows from continuing operations to present cash flows on a combined basis in our consolidated statements of cash flows. The consolidated statements of cash flows have been revised for 2003 to conform to the 2005 presentation and to reconcile from net income instead of income from continuing operations.

Prior periods have been adjusted to reflect the sale of our Production segment and the pending sale of our Spring Creek power plant as discontinued operations. See Note C for additional information.

B. ACQUISITIONS AND DIVESTITURES

In December 2005, we sold our natural gas gathering and processing assets located in Texas to a subsidiary of Eagle Rock Energy, Inc. for approximately $527.2 million and recorded a pre-tax gain of $264.2 million, which is included in gain on sale of assets in our operating income. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold.

In October 2005, we entered into an agreement to sell our Spring Creek power plant to Westar Energy, Inc. for $53 million. The transaction requires FERC approval and is expected to be completed in 2006. The 300-megawatt gas-fired merchant power plant was built in 2001 to supply electrical power during peak periods using gas-powered turbine generators. The financial information related to the properties sold is reflected as a discontinued component in our consolidated financial statements. All periods presented have been restated to reflect the discontinued component. See Note C for additional information.

In September 2005, we completed the sale of our Production segment to TXOK Acquisition, Inc. for $645 million, before adjustments and recognized a pre-tax gain on the sale of approximately $240.3 million. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold. The proceeds from the sale were used to reduce debt. The financial information related to the properties sold is reflected as a discontinued component in our consolidated financial statements. All periods presented have been restated to reflect the discontinued component. See Note C for additional information.

In July 2005, we completed the acquisition of the natural gas liquids businesses owned by several affiliates and a subsidiary of Koch Industries, Inc. (Koch) for approximately $1.33 billion, net of working capital and cash received. This transaction included Koch Hydrocarbon, LP’s entire mid-continent natural gas liquids fractionation business; Koch Pipeline Company, LP’s natural gas liquids pipeline distribution systems; Chisholm Pipeline Holdings, Inc., which has a 50 percent ownership interest in Chisholm Pipeline Company; MBFF, LP, which owns an 80 percent interest in a 160,000 barrel per day fractionator at Mont Belvieu, Texas; and Koch Vesco Holdings, LLC, an entity that owns a 10.2 percent interest in Venice

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Energy Services Company, LLC (VESCO). These assets are included in our consolidated financial statements beginning on July 1, 2005.

The unaudited pro forma information in the table below presents a summary of our consolidated results of operations as if the acquisition of the Koch natural gas liquids businesses had occurred at the beginning of the periods presented. The results do not necessarily reflect the results that would have been obtained if the acquisition had actually occurred on the dates indicated or results that may be expected in the future.

	Pro Forma Years Ended December 31,
	2005		2004
	(Thousand of Dollars, except per share amounts)
Revenues	$	12,782,367	$	5,978,946
Net income	$	550,997	$	256,569
Net earnings per share, basic	$	5.48	$	2.52
Net earnings per share, diluted	$	5.10	$	2.43

The acquisition increased our mid-continent operating focus through a downstream extension of our natural gas gathering and processing operation. The assets acquired provide commercial, operational and administrative synergies as these assets enhance our existing mid-stream operating areas. This acquisition creates new and expanded commercial opportunities and we anticipate volumes and margins of our existing business to increase. Our gathering and processing assets are the second largest producer of NGLs on the natural gas liquids pipeline, storage and fractionation system and all but two of our processing plants are connected to this system. Additionally, the acquisition improves our market access to the largest NGL hub, which is located in the gulf coast. As a result of our purchase price allocation, we assigned $1.2 billion to identifiable assets consisting of approximately $928.9 million to tangible assets based on the fair value of the net assets and approximately $306.7 million to identifiable intangible assets, primarily contracts acquired, that will be amortized on a straight-line basis over an aggregated weighted average period of 40 years. The excess of the purchase price over the fair value of identifiable assets acquired, net of liabilities assumed is $173.9 million, which is recorded as goodwill. This entire amount of goodwill is deductible for tax purposes.

The purchase price and related allocation are preliminary and may be revised as a result of adjustments made to the purchase price, additional information regarding liabilities assumed, including contingent liabilities, and revisions of preliminary estimates of fair values made at the date of purchase. The pro forma balance sheet as of the acquisition date is shown below.

	July 1, 2005
	(Thousands of dollars)
Assets
Current assets	$	106,634
Property, plant and equipment, net		879,943
Goodwill and intangibles		480,595
Investments and other		49,000
Total Assets	$	1,516,172
Liabilities
Accounts payable	$	172,941
Other current liabilities		15,665
Total Liabilities	$	188,606
Net Assets Acquired	$	1,327,566

In November 2004, we acquired Northern Plains, which owns 82.5 percent of the general partner interest and 500,000 limited partnership units, together representing a 2.73 percent ownership interest, in Northern Border Partners, from CCE Holdings, LLC for $175 million.

In 2004, we sold other assets including natural gas transmission and gathering pipelines, compression facilities, propane operations and a gas distribution system for approximately $20.4 million and recorded a pre-tax gain of $10.4 million.

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In December 2003, we acquired approximately $240 million of natural gas and crude oil properties and related flow lines located in Texas. The results of operations for these assets were included in our consolidated financial statements from that date until the disposition of our Production segment in September 2005.

We also acquired other assets during 2003, including NGL storage and pipeline facilities and a gas distribution system, totaling approximately $19.7 million.

In October 2003, we sold our Texas transmission assets for approximately $3.1 million. We recorded a charge against accumulated depreciation of approximately $7.8 million in accordance with Statement 71 and the regulatory accounting requirements of the FERC and RRC.

In January 2003, we sold approximately 70 percent of the natural gas and crude oil producing properties of our Production segment for a cash sales price of $294 million, including adjustments. See Note C for additional information.

In January 2003, we acquired the Texas natural gas distribution business and other assets from Southern Union Company. The results of operations for these assets have been included in our consolidated financial statements since that date. We paid approximately $436.6 million for these assets, including $16.6 million in working capital adjustments. The primary assets acquired were natural gas distribution operations that currently serve approximately 560,000 customers in cities located throughout Texas, including the major cities of El Paso and Austin, as well as the cities of Port Arthur, Galveston, Brownsville and others. Over 90 percent of the customers are residential. The other assets acquired include a 125-mile natural gas transmission system, as well as other energy related domestic assets involved in natural gas marketing, retail sales of propane and distribution of propane. The purchase also included natural gas distribution investments in Mexico. The assets relating to the propane distribution operations were sold in May and July 2004 and the natural gas distribution investments in Mexico were sold in May 2004.

C. DISCONTINUED OPERATIONS

In September 2005, we completed the sale of our Production segment to TXOK Acquisition, Inc. for $645 million, before adjustments, and recognized a pre-tax gain on the sale of approximately $240.3 million. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold. The proceeds from the sale were used to reduce debt. Our Board of Directors had approved the potential sale in July 2005, which resulted in our Production segment being classified as held for sale beginning July 1, 2005. In accordance with Statement 144, we did not record any depreciation, depletion or amortization for our Production segment while it was classified as held for sale.

Additionally, in the third quarter of 2005, we made the decision to sell our Spring Creek power plant and exit the power generation business. We entered into an agreement to sell our Spring Creek power plant to Westar Energy, Inc. for $53 million. The transaction requires FERC approval and is expected to be completed in 2006. The 300-megawatt gas-fired merchant power plant was built in 2001 to supply electrical power during peak periods using gas-powered turbine generators. The proceeds from this sale will be used to purchase other assets, repurchase ONEOK shares or retire debt.

In January 2003, we sold approximately 70 percent of the natural gas and crude oil producing properties of our Production segment for an adjusted cash price of $294 million. The properties sold were located in Oklahoma, Kansas and Texas. We recorded a pretax gain of approximately $61.2 million in 2003 related to this sale. The gain reflects the cash received less adjustments, selling expenses and the net book value of the assets sold.

These components of our business are accounted for as discontinued operations in accordance with Statement 144. Accordingly, amounts in our financial statements and related notes for all periods shown relating to our Production segment and our power generation business are reflected as discontinued operations.

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The amounts of revenue, costs and income taxes reported in discontinued operations are as follows.

	Years Ended December 31,
	2005			2004		2003
	(Thousands of dollars)
Operating revenues	$	135,213		$	202,552	$	136,271
Cost of sales and fuel		38,398			95,524		76,870
Net margin		96,815			107,028		59,401
Impairment expense		52,226			—		—
Operating costs		24,302			29,997		19,270
Depreciation, depletion and amortization		17,919			30,673		18,103
Operating income		2,368			46,358		22,028
Other income (expense), net		252			60		10
Interest expense		12,588			16,167		5,953
Income taxes		(3,788	)		12,746		5,900
Income (loss) from operations of discontinued components, net	$	(6,180	)	$	17,505	$	10,185
Gain on sale of discontinued components, net of tax of $90.7 million, $0 million and $21.5 million, respectively	$	149,577		$	—	$	39,739

The following table discloses the major classes of discontinued assets and liabilities included in our Consolidated Balance Sheets for the periods indicated.

	December 31, 2005		December 31, 2004
	(Thousands of dollars)
Assets
Trade accounts and notes receivable, net	$	—	$	19,564
Energy marketing and risk management assets		—		1,891
Property, plant and equipment, net		50,937		473,664
Deferred income taxes		9,151		—
Investments and other		3,823		10,121
Assets of Discontinued Component	$	63,911	$	505,240
Liabilities
Accounts payable	$	1,043	$	23,367
Energy marketing and risk management liabilities		—		6,007
Deferred income taxes		—		43,251
Other liabilities		1,421		13,550
Liabilities of Discontinued Component	$	2,464	$	86,175

D. ENERGY MARKETING AND RISK MANAGEMENT ACTIVITIES AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Risk Policy and Oversight - Market risks are monitored by a risk control group that operates independently from the operating segments that create or actively manage these risk exposures. The risk control group ensures compliance with our risk management policies.

We control the scope of risk management, marketing and trading operations through a comprehensive set of policies and procedures involving senior levels of management. The audit committee of our Board of Directors has oversight responsibilities for our risk management limits and policies. Our risk oversight committee, comprised of corporate officers, oversees all activities related to commodity price, credit and interest rate risk management, and marketing and trading activities. The committee also proposes risk metrics including value-at-risk (VAR) and dollar loss limits. We have a corporate risk control organization led by our Senior Vice President of Financial Services and Treasurer and our Vice President of Audit and Risk Control, who are assigned responsibility for establishing and enforcing the policies, procedures

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and limits. Key risk control activities include credit review and approval, credit and performance risk measurement and monitoring, validation of transactions, portfolio valuation, VAR and other risk metrics.

To the extent open commodity positions exist, fluctuating commodity prices can impact our financial results and financial position, either favorably or unfavorably. As a result, we cannot predict with precision the impact risk management decisions may have on our business, operating results or financial position.

Accounting Treatment - We account for derivative instruments and hedging activities in accordance with Statement 133. Under Statement 133, entities are required to record all derivative instruments at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. If the derivative instrument does not qualify or is not designated as part of a hedging relationship, we account for changes in fair value of the derivative instrument in earnings as they occur. We record these changes in fair value as operating revenues in our Consolidated Statements of Income. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposure to changes in fair values, cash flows or foreign currencies. For hedges of exposure to changes in fair value, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The difference between the change in fair value of the derivative instrument and the change in fair value of the hedged item represents hedge ineffectiveness. For hedges of exposure to changes in cash flow, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income and is subsequently reclassified into earnings when the forecasted transaction affects earnings.

As required by Statement 133, we formally document all relationships between hedging instruments and hedged items, as well as risk management objectives, strategies for undertaking various hedge transactions and methods for assessing and testing correlation and hedge ineffectiveness. We specifically identify the asset, liability, firm commitment or forecasted transaction that has been designated as the hedged item. We assess the effectiveness of hedging relationships, both at the inception of the hedge and on an ongoing basis.

In July 2003, the EITF reached a consensus on EITF Issue No. 03-11, “Reporting Realized Gains and Losses on Derivative Instruments That Are Subject to FASB Statement No. 133 and Not ‘Held for Trading Purposes’ as Defined in EITF Issue No. 02-3” (EITF 03-11). EITF 03-11 provides that the determination of whether realized gains and losses on physically settled derivative contracts not “held for trading purposes” should be reported in the income statement on a gross or net basis is a matter of judgment that depends on the relevant facts and circumstances. Consideration of the facts and circumstances should be made in the context of the various activities of the entity rather than based solely on the terms of the individual contracts.

At the beginning of the third quarter of 2004, we completed a reorganization of our Energy Services segment and renewed our focus on our physical marketing and storage business. We separated the management and operations of our wholesale marketing, retail marketing and trading activities and began accounting separately for the different types of revenue earned from these activities. Prior to the third quarter, we managed our Energy Services segment on an integrated basis and presented all energy trading activity on a net basis.

Concurrent with this reorganization, we evaluated the accounting treatment related to the presentation of revenues from the different types of activities to determine which amounts should be reported on a gross or net basis under the guidance in EITF 03-11. For derivative instruments considered held for trading purposes that result in physical delivery, the indicators in EITF Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities” were used to determine the proper treatment. These activities and all financially settled derivative contracts will continue to be reported on a net basis.

For derivative instruments that are not considered “held for trading purposes” and that result in physical delivery, the indicators in EITF 03-11 and EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (EITF 99-19) were used to determine the proper treatment. We began accounting for the realized revenues and purchase costs of these contracts that result in physical delivery on a gross basis beginning with the third quarter of 2004. We apply the indicators in EITF 99-19 to determine the appropriate accounting treatment for non-derivative contracts that result in physical delivery. Derivatives that qualify for the normal purchase or sale exception as defined in Statement 133 are also reported on a gross basis. No prior periods have been adjusted for this change; therefore, comparisons to prior periods may not be meaningful. Reporting of these transactions on a gross basis did not impact operating income but resulted in an increase to revenues and cost of sales and fuel.

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Energy Marketing and Risk Management Activities - Our operating results are affected by commodity price fluctuations. We routinely enter into derivative financial instruments to minimize the risk of commodity price fluctuations related to anticipated sales of natural gas and crude oil, purchase and sale commitments, fuel requirements, transportation and storage contracts, and natural gas and NGL inventories. We are also subject to the risk of interest rate fluctuations in the normal course of business. We manage interest rate risk through the use of fixed rate debt, floating rate debt and, at times, interest rate swaps.

Our Energy Services segment includes our wholesale and retail natural gas marketing and storage, retail and financial trading operations. Our Energy Services segment generally attempts to manage the commodity risk of our fixed-price physical purchase and sale commitments in terms of contract volumes and the timing of performance and delivery obligations through the use of derivative instruments. With respect to the net open positions that exist within our financial trading operations, fluctuating commodity market prices can impact our financial position and results of operations, either favorably or unfavorably. The net open positions are actively managed and the impact of the changing prices on our financial condition at a point in time is not necessarily indicative of the impact of price movements throughout the year.

Operating margins associated with our Gathering and Processing and Natural Gas Liquids segments’ natural gas gathering, processing and fractionation activities are sensitive to changes in natural gas, condensate and NGL prices, principally as a result of contractual terms under which natural gas is processed and products are sold. We use physical forward sales and derivative instruments to secure a certain price for natural gas, condensate and NGL products.

Fair Value Hedges - During the first quarter of 2005, we terminated $400 million of our interest rate swap agreements and paid a net amount of $19.4 million, which included $20.2 million for the present value of future payments at the time of termination, less $0.8 million for interest rate savings through the termination of the swaps. During the first quarter of 2004, we terminated $670 million of our interest rate swap agreements and received $81.9 million. The net savings from the termination of these swaps is being recognized in interest expense over the terms of the debt instruments originally hedged. Net interest expense savings for 2005 for all terminated swaps was $7.7 million, and the remaining net savings for all terminated swaps will be recognized over the following periods:

2006	$	6.8 million
2007	$	6.6 million
2008	$	6.6 million
2009	$	5.6 million
2010	$	5.5 million
Thereafter	$	15.3 million

Currently, $340 million of fixed rate debt is swapped to floating. The floating rate debt is based on both the three- and six-month London InterBank Offered Rate (LIBOR). Based on the actual performance through December 31, 2005, the weighted average interest rate on the $340 million of debt was reduced from 6.44 percent to 5.55 percent. At December 31, 2005, we recorded a net liability of $7.3 million to recognize the interest rate swaps at fair value. Long-term debt was decreased by $7.3 million to recognize the change in the fair value of the related hedged liability. See Note I.

Our Energy Services segment uses basis swaps to hedge the fair value of certain firm transportation commitments. Net gains or losses from the fair value hedges are recorded to cost of sales and fuel. The ineffectiveness related to these hedges was not material in 2005, 2004 or 2003.

Cash Flow Hedges - Our Energy Services segment uses futures and basis swaps to hedge the cash flows associated with our anticipated purchases and sales of natural gas and cost of fuel used in transportation of gas. Accumulated other comprehensive loss at December 31, 2005, includes net losses of approximately $66.9 million, net of tax, related to these hedges that will be realized within the next 41 months, of which $28.9 million in net gains will be recognized in the next 12 months. Our Gathering and Processing and Natural Gas Liquids segments periodically enter into derivative instruments to hedge the cash flows associated with their exposure to changes in the price of natural gas, crude oil and NGLs. Accumulated other comprehensive loss at December 31, 2005, includes gains of approximately $0.8 million, net of tax, for the gathering and processing hedges and losses of approximately $0.1 million, net of tax, for the natural gas liquids hedges, both of which will be realized in the income statement within the next 12 months. In accordance with Statement 133, the actual losses that are reclassified into earnings will be based on the mark-to-market prices at the future contract settlement dates, along with the realization of the gains or losses on the related physical volumes, which are not reflected in the amounts above.

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Net gains and losses related to the ineffective portion of our hedges are reclassified out of accumulated other comprehensive loss to operating revenues or cost of sales and fuel. Ineffectiveness related to these cash flow hedges was approximately $33.9 million, $12.3 million and $7.7 million in 2005, 2004 and 2003, respectively. Additionally, losses of approximately $4.6 million were recognized from accumulated other comprehensive loss in 2004, due to the discontinuance of cash flow hedge treatment on certain transactions since it was probable that the forecasted transactions would not occur. There were no losses in 2005 or 2003 due to the discontinuance of cash flow hedge treatment.

Fair Value - The following table represents the fair value of our energy marketing and risk management assets and liabilities for the periods indicated. The fair value is the carrying value for these instruments at December 31, 2005 and 2004.

	Years Ended December 31,
	2005				2004
	Assets		Liabilities		Assets		Liabilities
	(Thousands of dollars)
Gathering and processing - cash flow hedges	$	975	$	5,635	$	7,662	$	4,353
Natural gas liquids - cash flow hedges		—		192		—		—
Energy services - cash flow hedges		398,311		537,259		188,111		210,702
Energy services - fair value hedges		23,900		261,196		15,540		12,779
Distribution - natural gas swaps		8,122		—		—		1,015
Interest rate swaps - fair value hedges		—		7,271		4,160		21,758
Financial trading and non-trading instruments		483,875		446,092		242,618		255,884
Total fair value	$	915,183	$	1,257,645	$	458,091	$	506,491

Our regulated businesses use derivative instruments from time to time. Gains or losses associated with these derivative instruments are included in and recoverable through the monthly Purchased Gas Adjustment (PGA). At December 31, 2005, Kansas Gas Service had derivative instruments in place to hedge the cost of natural gas purchases for 2.4 Bcf, which represents part of their gas purchase requirements for the 2005/2006 winter heating months.

Based on quarterly measurements, the average fair values during 2005 for financial trading and non-trading assets and liabilities were approximately $484.2 million and $473.6 million, respectively. For 2004, the amounts were $292.7 million and $324.3 million, respectively.

Fair value estimates consider the market in which the transactions are executed. We utilize third party references for pricing points from New York Mercantile Exchange (NYMEX) and third-party over-the-counter brokers to establish commodity pricing and volatility curves. We believe the reported transactions from these sources are the most reflective of current market prices. Fair values are subject to change based on valuation factors. The estimate of fair value includes an adjustment for the liquidation of the position in an orderly manner over a reasonable period of time under current market conditions. The fair value estimate also considers the risk of nonperformance based on credit considerations of the counterparty.

Credit Risk - We maintain credit policies with regard to our counterparties that we believe significantly minimize overall credit risk. These policies include an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances and the use of standardized agreements which allow for netting of positive and negative exposures associated with a single counterparty.

Our counterparties consist primarily of financial institutions, major energy companies, local distribution companies (LDCs), electric utilities, and commercial and industrial end-users. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions. Based on our policies, exposures, credit and other reserves, we do not anticipate a material adverse effect on our financial position or results of operations as a result of counterparty nonperformance.

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Financial Instruments

The following table represents the carrying amounts and estimated fair values of our financial instruments, excluding energy marketing and risk management assets and liabilities, which are listed in the table above.

	December 31, 2005				December 31, 2004
	Book Value		Approximate Fair Value		Book Value		Approximate Fair Value
	(Thousands of dollars)
Assets
Cash and cash equivalents	$	7,915	$	7,915	$	9,458	$	9,458
Accounts and notes receivable	$	2,202,895	$	2,202,895	$	1,412,861	$	1,412,861
Liabilities
Notes payable	$	1,541,500	$	1,541,500	$	644,000	$	644,000
Accounts payable	$	1,756,307	$	1,756,307	$	1,161,984	$	1,161,984
Long-term debt	$	2,032,413	$	2,079,420	$	1,886,243	$	1,949,965

The fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, and notes payable, approximate book value due to their short-term nature. The estimated fair value of long-term debt has been determined using quoted market prices of the same or similar issues, discounted cash flows, and/or rates currently available to us for debt with similar terms and remaining maturities.

E. GOODWILL AND INTANGIBLES

In July 2005, we acquired the natural gas liquids businesses owned by Koch for approximately $1.33 billion, net of working capital and cash received. See Note B for additional information regarding this acquisition.

We performed our annual test of goodwill as of January 1, 2005, and there was no impairment indicated. The following table reflects the changes in the carrying amount of goodwill for the periods indicated.

	Balance December 31, 2003		Goodwill Adjustments			Balance December 31, 2004		Goodwill Acquired		Goodwill Adjustments			Balance December 31, 2005
	(Thousands of dollars)
Gathering and Processing	$	34,343	$	—		$	34,343	$	—	$	(18,739	)	$	15,604
Natural Gas Liquids		—		—			—		173,945		—			173,945
Pipelines and Storage		22,288		(252	)		22,036		—		—			22,036
Energy Services		10,255		—			10,255		—		—			10,255
Distribution		158,729		(175	)		158,554		—		—			158,554
Total Goodwill	$	225,615	$	(427	)	$	225,188	$	173,945	$	(18,739	)	$	380,394

The 2005 adjustment to goodwill resulted from the sale of our natural gas gathering and processing assets located in Texas by our Gathering and Processing segment in December 2005. The 2004 adjustments to goodwill resulted from the sale of the natural gas distribution system in Eagle Pass, Texas by our Distribution segment in December 2004 and from the sale of certain natural gas transmission and gathering pipelines and compression facilities by our Pipelines and Storage segment in March 2004.

Intangible assets primarily relate to contracts acquired through the acquisition of the natural gas liquids businesses from Koch and, based on the purchase price allocation, are being amortized over an aggregate weighted-average period of 40 years. The aggregate amortization expense for each of the next five years is estimated to be approximately $7.7 million. The following tables reflect the gross carrying amount and accumulated amortization of intangibles at December 31, 2005.

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	Intangibles, gross		Accumulated Amortization		Intangibles, net
	(Thousands of dollars)
Natural Gas Liquids	$	292,000	$	3,649	$	288,351
Pipelines and Storage		14,650		184		14,466
Total Intangibles	$	306,650	$	3,833	$	302,817
	Balance December 31, 2004		Amortization		Balance December 31, 2005
	(Thousands of dollars)
Natural Gas Liquids	$	—	$	3,649	$	3,649
Pipelines and Storage		—		184		184
Accumulated amortization	$	—	$	3,833	$	3,833

F. COMPREHENSIVE INCOME

The table below gives an overview of comprehensive income for the periods indicated. The assumption of derivative instruments in the table below relates to the derivative instruments transferred to the buyer of our Production segment.

	Years Ended December 31,
	2005						2004
	(Thousands of dollars)
Net income				$	546,545					$	242,178
Unrealized losses on derivative instruments	$	(17,013	)				$	(29,680	)
Unrealized holding losses arising during the period		(606	)					(227	)
Realized (gains) losses in net income		(35,069	)					45,420
Assumption of derivative instruments related to sale of discontinued component		(18,915	)					—
Minimum pension liability adjustment		(5,677	)					(2,400	)
Other comprehensive income (loss) before taxes		(77,280	)					13,113
Income tax (expense) benefit on other comprehensive income (loss)		29,880						(5,078	)
Other comprehensive income (loss)				$	(47,400	)				$	8,035
Comprehensive income				$	499,145					$	250,213

Accumulated other comprehensive loss at December 31, 2005 and 2004, primarily includes unrealized gains and losses on derivative instruments and minimum pension liability adjustments.

G. CAPITAL STOCK

Series A Convertible Preferred Stock - We issued Series A Convertible Preferred Stock (Series A), par value $0.01 per share, at the time of the November 1997 transaction with Westar Energy, Inc. (formerly Western Resources, Inc.). On February 5, 2003, we repurchased from Westar Industries, a wholly-owned subsidiary of Westar Energy (collectively “Westar”), approximately 9 million shares (approximately 18.1 million shares of common stock equivalents) of our Series A. We exchanged the remaining Series A shares for 21.8 million shares of our newly-created Series D Convertible Preferred Stock (Series D). See further discussion in the Westar section of this Note. There are no shares of Series A currently outstanding.

Series B Convertible Preferred Stock - There are no shares of Series B Convertible Preferred Stock currently outstanding.

Series C Preferred Stock - Series C Preferred Stock (Series C) is designed to protect our shareholders from coercive or unfair takeover tactics. Holders of Series C are entitled to receive, in preference to the holders of ONEOK, Inc. Common Stock, quarterly dividends in an amount per share equal to the greater of $0.50 or, subject to adjustment, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends. No Series C has been issued.

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Series D Convertible Preferred Stock - In February 2003, we exchanged the remaining shares of Series A for 21.8 million shares of Series D. During 2003, Westar sold all its equity in us, including all of the shares of our common stock and our Series D, which converted to common stock when sold. See further discussion in the Westar section of this Note. The Series D were retired after Westar’s sale.

Common Stock - At December 31, 2005, we had approximately 185 million shares of authorized and unreserved common stock available for issuance.

The Board of Directors has reserved 12.0 million shares of our common stock for the Direct Stock Purchase and Dividend Reinvestment Plan, of which 186,000 shares, 151,000 shares and 172,000 shares were issued in 2005, 2004 and 2003, respectively. We have reserved approximately 13.2 million shares for the Thrift Plan, less the number of shares issued to date under this plan.

In January 2005, our Board of Directors authorized a stock buy back program to repurchase up to 7.5 million shares of our common stock currently issued and outstanding. Our Board of Directors extended this program in November 2005, and authorized us to repurchase an additional 7.5 million shares of our common stock currently issued and outstanding. Shares are repurchased from time to time in open market transactions or through privately negotiated transactions at our discretion, subject to market conditions and other factors. The program will terminate in November 2007, unless extended by our Board of Directors. During 2005, we repurchased approximately 7.5 million shares of our common stock pursuant to this program.

Dividends - Quarterly dividends paid on our common stock for shareholders of record as of the close of business on January 31, 2005, May 2, 2005, July 29, 2005 and October 31, 2005, were $0.25 per share, $0.28 per share, $0.28 per share and $0.28 per share, respectively. Additionally, a quarterly dividend of $0.28 per share was declared in January 2006, payable in the first quarter.

2004 Common Stock Offering - During the first quarter of 2004, we sold 6.9 million shares of our common stock to an underwriter at $21.93 per share, resulting in proceeds to us, before expenses, of $151.3 million.

2003 Public Offerings - During the first quarter of 2003, we conducted public offerings of our common stock and equity units. In connection with these offerings, we issued a total of 13.8 million shares of our common stock at the public offering price of $17.19 per share, resulting in aggregate net proceeds to us, after underwriting discounts and commissions, of $16.524 per share, or $228 million. In addition, we issued a total of 16.1 million equity units at the public offering price of $25 per unit, resulting in aggregate net proceeds to us, after underwriting discounts and commissions, of $24.25 per equity unit, or $390.4 million. Each equity unit consisted of a stock purchase contract for the purchase of our common stock and, initially, a senior note described in Note I. On February 16, 2006, we successfully settled the 16.1 million equity units to 19.5 million shares of our common stock. Of this amount, 8.3 million shares were issued from treasury stock and approximately 11.2 million shares were newly issued. Holders of the equity units received 1.2119 shares of our common stock for each equity unit they owned. The number of shares that we issued for each stock purchase contract was determined based on our average closing price over the 20-trading day period ending on the third trading day prior to February 16, 2006. With the settlement, we received $402.4 million in cash, which was used to pay down our short-term bridge financing agreement.

Westar - On January 9, 2003, we entered into an agreement with Westar to repurchase a portion of the shares of our Series A held by Westar and to exchange Westar’s remaining shares of Series A for newly-created shares of our $0.925 Series D. The Series A were convertible into two shares of common stock for each share of Series A, reflecting our two-for-one stock split in 2001, and the Series D were convertible into one share of common stock for each share of Series D. Some of the differences between the Series D and the Series A were (a) the Series D had a fixed quarterly cash dividend of 23.125 cents per share, (b) the Series D was redeemable by us at any time after August 1, 2006, at a per share redemption price of $20, in the event that the per share closing price of our common stock exceeded, at any time prior to the date the notice of redemption was given, $25 for 30 consecutive trading days, (c) each share of Series D was convertible into one share of our common stock, and (d) with certain exceptions, Westar could not convert any shares of Series D held by it unless the annual per share dividend on our common stock for the previous year was greater than 92.5 cents and such conversion would not have subjected us to the Public Utility Holding Company Act of 1935.

In connection with that transaction, a new rights agreement, a new shareholder agreement and a new registration rights agreement between us and Westar became effective. The shareholder agreement restricted Westar from selling five percent or more of our outstanding Series D and common stock (assuming conversion of all shares of Series D to be transferred), in a bona fide public underwritten offering, to any one person or group. The agreement allowed Westar to sell up to five percent

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of our outstanding Series D and common stock (assuming conversion of all shares of Series D to be transferred) to any one person or group who did not own more than five percent of our outstanding common stock (assuming conversion of all shares of Series D to be transferred).

The KCC approved our agreement with Westar on January 17, 2003. On February 5, 2003, we consummated the agreement by purchasing $300 million of our Series A from Westar. We exchanged Westar’s remaining 10.9 million Series A for approximately 21.8 million shares of our newly-created Series D. Upon the cash redemption of the Series A, the shares were converted to approximately 18.1 million shares of common stock in accordance with the terms of the Series A and the prior shareholder agreement with Westar. Accordingly, the redemption is reflected as an increase to common treasury stock. The Series D exchanged for the Series A was recorded at fair value and the premium over the previous carrying value of the Series A is reflected as a decrease in retained earnings. We had registered for resale all of the shares of our common stock held by Westar, as well as all the shares of our Series D issued to Westar and all of the shares of our common stock that were issuable upon conversion of the Series D.

On August 5, 2003, Westar conducted a secondary offering to the public of 9.5 million shares of our common stock at a public offering price of $19.00 per share, which resulted in gross offering proceeds to Westar of approximately $180.5 million. An over-allotment option for an additional 718,000 shares provided Westar with approximately $13.6 million. We did not receive any proceeds from the offering. Since Westar received in excess of $150 million of total proceeds from the offering, we were allowed, under a new transaction agreement related to the offering, to repurchase $50 million, or approximately 2.6 million shares, of our common stock from Westar at the public offering price of $19.00 per share. Our repurchase of those shares occurred immediately following the closing of the Westar offering. Of the shares sold in the Westar public offering, approximately 8.4 million shares represented our common stock issued by conversion of our Series D owned by Westar. The remaining shares consisted of approximately 1.1 million shares of our common stock owned by Westar.

On November 21, 2003, Westar sold its remaining equity in us, which included all the shares of common stock Westar owned and all of our Series D, which converted to shares of common stock when sold.

H. LINES OF CREDIT AND SHORT-TERM NOTES PAYABLE

General - The total amount of short-term borrowings authorized by our Board of Directors is $2.5 billion. At December 31, 2005, commercial paper and short-term notes payable totaling $1.54 billion were outstanding, which included $900.0 million of bridge financing for the Koch assets acquisition. Commercial paper and short-term notes payable totaling $644.0 million were outstanding at December 31, 2004. The commercial paper and short-term notes payable carried average interest rates of 3.73 percent and 1.77 percent for 2005 and 2004, respectively. We had $178.7 million and $3.6 million in letters of credit outstanding at December 31, 2005 and 2004, respectively.

Both the five-year credit agreement, which matures in 2009, and short-term bridge financing agreement contain customary affirmative and negative covenants, including covenants relating to liens, investments, fundamental changes in our business, changes in the nature of our business, transactions with affiliates, the use of proceeds, a limit on our debt-to-capital ratio, a limit on investments in master limited partnerships and a covenant that prevents us from restricting our subsidiaries’ ability to pay dividends to ONEOK, Inc. In 2005, we amended the five-year credit and the short-term bridge financing agreements to change the definition of Consolidated Net Worth to eliminate the effect of gains and losses recorded in accumulated other comprehensive income (loss) as a result of certain commodity hedging agreements. At December 31, 2005, we were in compliance with all covenants.

Short-term Bridge Financing Agreement - In June 2005, we entered into a $1.0 billion short-term bridge financing agreement. The interest rate is based, at our election, on either (i) the higher of prime or one-half of one percent above the Federal Funds Rate, which is the rate that banks charge each other for the overnight borrowing of funds, or (ii) the Eurodollar rate plus a set number of basis points based on our current long-term unsecured debt ratings by Moody’s Investors Service (Moody’s) and Standard & Poor’s Ratings Group (S&P).

On July 1, 2005, we borrowed $1.0 billion under the short-term bridge financing agreement to assist in financing the acquisition of assets from Koch. See Note B for additional information about this acquisition. We funded the remaining acquisition cost through our commercial paper program. We anticipate permanent financing of the acquisition to come from a combination of proceeds from the sale of assets, such as our Production segment and our Spring Creek power plant, proceeds from the February 2006 settlement of the purchase contracts that were part of our mandatory convertible equity units, and free cash flow. At December 31, 2005, we had lowered the balance of outstanding indebtedness under the bridge

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financing agreement to $900.0 million. The reduction in indebtedness under our short-term bridge financing agreement is a result of a required prepayment due to the sale of our Production segment. At our option, we paid $200.0 million on February 3, 2006. We paid an additional $403.0 million as a required prepayment on February 16, 2006, from the settlement of our equity units. The remaining balance of $297.0 million is required to be paid by March 31, 2006.

In November 2005, we amended the $1.0 billion short-term bridge financing agreement to remove the requirement to prepay the loan from any net cash proceeds received from the disposition of the natural gas gathering and processing assets located in Texas, provided that we prepay our 7.75 percent $300.0 million notes due in August 2006 in full, which we did in December 2005. See Note I for additional information regarding this prepayment.

Five-year Credit Agreement - In July 2005, we amended our 2004 $1.0 billion five-year credit agreement to increase the limit on our debt-to-capital ratio from 67.5 percent debt to 70.0 percent debt for the period from July 25, 2005, to February 28, 2006. Beginning on March 1, 2006, the limit on our debt will return to 67.5 percent of total capital.

In September 2005, we exercised the accordion feature of our 2004 $1.0 billion five-year credit agreement to increase the commitment amounts by $200 million to a total of $1.2 billion. The interest rate payable under this five-year credit agreement is a floating rate calculated in the same manner as the $1.0 billion short-term bridge financing agreement.

Uncommitted Line of Credit - We entered into an agreement with KBC Bank NV in April 2004. The agreement gives us access to an uncommitted line of credit for loans and letters of credit up to a maximum principal amount of $10 million. The rate charged on any outstanding amount is the higher of prime or one-half of one percent above the Federal Funds overnight rate, which is the rate that banks charge each other for the overnight borrowing of funds. This agreement remains in effect until canceled by KBC Bank NV or us. This agreement does not contain any covenants more restrictive than those in our $1.2 billion five-year credit agreement.

In December 2005, we amended our $10.0 million agreement with KBC Bank NV to increase the maximum principal amount available under the uncommitted line of credit to $15.0 million. The increased commitment was used to issue a $15.0 million standby letter of credit.

I. LONG-TERM DEBT

In November 2005, we elected for the early redemption of our 7.75 percent $300.0 million long-term notes with a stated maturity of August 2006. The early redemption occurred in December 2005, for a total payment of $314.4 million. In addition to the principal payment, we were required to pay a make-whole call premium of $5.7 million and accrued interest of $8.7 million. We funded this early redemption with the proceeds from the sale of our natural gas gathering and processing assets located in Texas.

In June 2005, we issued $800 million of notes, comprised of $400 million in 10-year maturities with a coupon of 5.2 percent and $400 million in 30-year maturities with a coupon of 6.0 percent. Proceeds from this debt issuance were used to repay commercial paper borrowings and for general corporate purposes.

In March 2005, we had $335 million of long-term debt mature. We funded payment of this debt with working capital and the issuance of commercial paper in the short-term market.

In the first quarter of 2003, we issued long-term debt concurrent with our public equity offering. We issued a total of 16.1 million equity units at the public offering price of $25 per unit, for a total of $402.5 million. Each equity unit consists of a stock purchase contract for the purchase of shares of our common stock and, initially, a senior note due February 16, 2008, issued pursuant to our existing Indenture with SunTrust Bank, as trustee. The equity units carry a total annual coupon rate of 8.5 percent (4.0 percent annual face amount of the senior notes plus 4.5 percent annual contract adjustment payments). The interest expense associated with the 4.0 percent senior notes will be recognized in the income statement on an accrual basis over the term of the senior notes. The present value of the contract adjustment payments was accrued as a liability with a charge to equity at the time of the transactions. Accordingly, there will be no impact on earnings in future periods as this liability is paid, except for the interest recognized as a result of discounting the liability to its present value at the time of the transaction. This interest expense associated with the discounting will be approximately $3.5 million over three years. In November 2005, we remarketed the notes with a new rate of 5.51 percent. The notes continue to have a stated maturity of February 2008. The cash received was put into a treasury portfolio pledged as collateral against the purchase contracts. We received this cash on February 16, 2006, when we successfully settled our equity units. See further discussion in Note G.

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The following table sets forth our long-term debt for the periods indicated.

	December 31,
	2005			2004
	(Thousands of dollars)
Long-term notes payable
7.75% due 2005	$	—		$	335,000
7.75% due 2006		—			300,000
5.51%, 4.0% due 2008		402,303			402,500
LIBOR + 1.25% due 2009		2,332			2,694
6.0% due 2009		100,000			100,000
7.125% due 2011		400,000			400,000
7.25% due 2013		2,044			2,240
5.2% due 2015		400,000			—
6.4% due 2019		92,921			93,303
6.5% due 2028		92,246			92,395
6.875% due 2028		100,000			100,000
6.0% due 2035		400,000			—
8.0% due 2051		1,356			1,359
Total long-term notes payable		1,993,202			1,829,491
Change in fair value of hedged debt		39,211			56,752
Unamortized debt discount		(1,796	)		(1,509	)
Current maturities		(6,547	)		(341,532	)
Long-term debt	$	2,024,070		$	1,543,202

The aggregate maturities of long-term debt outstanding at December 31, 2005, are $6.5 million; $6.6 million; $408.9 million; $107.6 million; and $6.3 million for 2006 through 2010, respectively. Additionally, $185.1 million is callable at par at our option from now until maturity, which is 2019 for $92.9 million and 2028 for $92.2 million. All long-term debt is unsecured, with the exception of the $2.3 million note due in 2009. Certain debt agreements have negative covenants that relate to liens and sale/leaseback transactions.

J. EMPLOYEE BENEFIT PLANS

Retirement and Other Postretirement Benefit Plans

Retirement Plans - We have defined benefit and defined contribution retirement plans covering substantially all employees. Nonbargaining unit employees hired after December 31, 2004, are not eligible for our defined benefit pension plan; however, they are covered by a profit sharing plan. Certain officers and key employees are also eligible to participate in supplemental retirement plans. We generally fund pension costs at a level equal to the minimum amount required under the Employee Retirement Income Security Act of 1974.

We elected to delay recognition of the accumulated benefit obligation and amortize it over 20 years as a component of net periodic postretirement benefit cost. The accumulated benefit obligation for the defined benefit pension plan was $704.4 million and $681.3 million at December 31, 2005 and 2004, respectively.

Other Postretirement Benefit Plans - We sponsor welfare care plans that provide postretirement medical benefits and life insurance benefits to substantially all employees who retire under the retirement plans with at least five years of service. The postretirement medical plan is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. Nonbargaining unit employees retiring between the ages of 50 and 55 who elect postretirement medical coverage, all nonbargaining unit employees hired on or after January 1, 1999, employees who are members of the International Brotherhood of Electrical Workers hired after June 30, 2003, and gas union employees hired after July 1, 2004, who elect postretirement medical coverage, pay 100 percent of the retiree premium for participation in the plan. Additionally, any employees who came to us through various acquisitions may be further limited in their eligibility to participate or receive any contributions from us for postretirement medical benefits.

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In May 2004, the FASB issued FASB Staff Position No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (FSP FAS 106-2) as guidance on how employers should account for provisions of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Reform Act). We adopted FSP FAS 106-2 in the second quarter of 2004. FSP FAS 106-2 superseded FASB Staff Position No. FAS 106-1, ”Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which we adopted in the first quarter of 2004. After careful analysis of the administrative requirements associated with the adoption of the Medicare Reform Act, we chose to carve out and discontinue prescription benefits for non-bargaining unit retirees. Non-bargaining unit retirees may qualify for medical insurance premium reimbursements from us. These reimbursements will be applied toward Medicare Part D and B premiums paid by the retiree. We have developed a wrap-around plan to be applied to the Medicare Part D program for bargaining unit retirees.

Measurement - We use a September 30 measurement date for the majority of our plans. In 2004, our plans were remeasured as of November 30 due to the Northern Plains acquisition. This remeasurement affected our pension and postretirement benefit expense beginning March 1, 2005.

Obligations and Funded Status - The following tables set forth our pension and other postretirement benefit plans benefit obligations, fair value of plan assets and funded status at December 31, 2005 and 2004.

	Pension Benefits December 31,						Postretirement Benefits December 31,
	2005			2004			2005			2004
	(Thousands of dollars)
Change in Benefit Obligation
Benefit obligation, beginning of period	$	733,836		$	683,888		$	255,739		$	236,394
Service cost		19,764			15,834			7,058			5,954
Interest cost		43,030			41,916			14,270			13,587
Participant contributions		—			—			2,355			2,806
Plan amendments		1,478			2,890			(22,433	)		3,254
Liability gain due to Medicare Reform		—			—			—			(24,039	)
Actuarial loss		21,335			32,541			12,910			34,427
Acquisitions		296			—			—			—
Benefits paid		(42,301	)		(43,233	)		(16,686	)		(16,644	)
Benefit obligation, end of period	$	777,438		$	733,836		$	253,213		$	255,739
Change in Plan Assets
Fair value of assets, beginning of period	$	660,299		$	613,872		$	46,229		$	39,168
Actual return on assets		84,350			82,821			2,650			4,821
Employer contributions		1,513			6,839			2,231			2,590
Benefits paid		(42,301	)		(43,233	)		—			—
Reimbursement		—			—			—			(350	)
Fair value of assets, end of period	$	703,861		$	660,299		$	51,110		$	46,229
Funded status - under	$	(73,577	)	$	(73,537	)	$	(202,103	)	$	(209,510	)
Unrecognized net asset		—			—			23,089			28,398
Unrecognized prior service cost		11,788			11,753			(15,451	)		5,600
Unrecognized net loss		191,071			202,586			115,317			107,065
Activity subsequent to measurement date		—			—			5,232			4,131
Prepaid (accrued) cost	$	129,282		$	140,802		$	(73,916	)	$	(64,316	)

Prepaid (accrued) cost for pension benefits includes a prepaid benefit of $146.7 million and a liability of $17.4 million at December 31, 2005. At December 31, 2004, the components of prepaid (accrued) cost for pension benefits included a prepaid benefit of $154.7 million and a liability of $13.9 million.

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Components of Net Periodic Benefit Cost

The following tables set forth the components of net periodic benefit cost for our pension and other postretirement benefit plans for the periods indicated.

	Pension Benefits Years Ended December 31,
	2005			2004			2003
	(Thousands of dollars)
Components of Net Periodic Benefit Cost (Income)
Service cost	$	19,764		$	15,834		$	14,872
Interest cost		43,030			41,916			42,602
Expected return on assets		(59,706	)		(60,165	)		(64,264	)
Amortization of unrecognized net asset at adoption		—			(314	)		(467	)
Amortization of unrecognized prior service cost		1,443			765			613
Amortization of loss		8,502			2,878			2,235
Net periodic benefit cost (income)	$	13,033		$	914		$	(4,409	)
	Postretirement Benefits Years Ended December 31,
	2005			2004			2003
	(Thousands of dollars)
Components of Net Periodic Benefit Cost
Service cost	$	7,058		$	5,954		$	5,391
Interest cost		14,270			13,587			12,418
Expected return on assets		(4,343	)		(3,811	)		(3,154	)
Amortization of unrecognized net transition obligation at adoption		3,456			3,456			3,456
Amortization of unrecognized prior service cost (income)		471			190			(125	)
Amortization of loss		6,469			5,620			3,997
Net periodic benefit cost	$	27,381		$	24,996		$	21,983

Actuarial Assumptions - The following table sets forth the weighted-average assumptions used to determine benefit obligations at December 31, 2005 and 2004.

	Pension Benefits December 31,				Postretirement Benefits December 31,
	2005		2004		2005		2004
Discount rate	5.75	%	6.00	%	5.75	%	6.00	%
Compensation increase rate	4.00	%	4.00	%	4.50	%	4.50	%

The following table sets forth the weighted-average assumptions used to determine net periodic benefit costs at December 31, 2005 and 2004.

	Pension Benefits December 31,				Postretirement Benefits December 31,
	2005		2004		2005		2004
Discount rate	6.00	%	(	a)	6.00	%	(	a)
Expected long-term return on plan assets	8.75	%	8.75	%	8.75	%	8.75	%
Compensation increase rate	4.00	%	4.00	%	4.50	%	4.50	%

(a) - The discount rate was 6.25% for the first nine months and 6.75% for the remaining three months of 2004.

Our overall expected long-term rate of return on plan assets assumption is an equally weighted blend of historical return, building block and economic growth/yield to maturity projections that we determined based on discussions with our independent investment consultants.

Our discount rates are based on our bond model analysis, where the amount and timing of the projected benefit payments are matched with the cash payments from coupons and maturities of a hypothetical bond portfolio. We first determined the

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projected cash flows for the plan for each year in the future. We projected these values based on the most recent valuation. The longest maturity period for bonds considered in our model is 30 years. Since cash flows are expected to continue beyond this period of time, we discount all benefit cash flows over 30 years back to the 30th year at a rate that is consistent with the yields on long-term zero coupon bonds. The resulting present value is treated as an additional benefit cash flow for the 30th year and handled the same way as any other benefit cash flow within our bond matching process. Our model uses the universe of bonds available at the measurement date with a quality rating of AA or better as rated by Moody’s or S&P. Callable bonds are generally eliminated from the universe. A regression curve is generated for the expected yields from the remaining bonds. Any bonds with yields that fall outside a two standard deviation corridor are eliminated. Using the projected benefit cash flows and the bond universe defined above, our model considers all possible bond portfolios that produce matching cash flows and uses linear programming techniques to select the optimal portfolio with the highest possible yield. Our methodology is such that no single bond can comprise more than 15 percent of the total purchase. The model permits bond cash flows for a particular year to exceed the benefit cash flow for that year. The excess for a given year is used to meet the benefit cash flow in a future year and is reinvested at the one year forward rates.

Health Care Cost Trend Rates - The following table sets forth the assumed health care cost trend rates at December 31, 2005 and 2004.

	2005		2004
Health care cost trend rate assumed for next year	9	%	10	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5	%	5	%
Year that the rate reaches the ultimate trend rate	2009		2009

Assumed health care cost trend rates have a significant effect on the amounts reported for our health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects.

	One-Percentage Point Increase		One-Percentage Point Decrease
	(Thousands of dollars)
Effect on total of service and interest cost	$	3,106	$	(2,513	)
Effect on postretirement benefit obligation	$	17,982	$	(15,619	)

Plan Assets - The following table sets forth our pension and postretirement benefit plan weighted-average asset allocations at December 31, 2005 and 2004.

	Pension Benefits				Postretirement Benefits
Asset Category	Percentage of Plan Assets at December 31,				Percentage of Plan Assets at December 31,
	2005		2004		2005		2004
U.S. equities	57	%	57	%	65	%	68	%
International equities	13	%	11	%	13	%	12	%
Investment grade bonds	6	%	5	%	14	%	17	%
High yield bonds	9	%	9	%	0	%	0	%
Cash and cash equivalents	0	%	2	%	8	%	3	%
Insurance contracts	14	%	15	%	0	%	0	%
Other	1	%	1	%	0	%	0	%
Total	100	%	100	%	100	%	100	%

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Our investment strategy is to invest plan assets in accordance with sound investment practices that emphasize long-term investment fundamentals. The goal of this strategy is to maximize investment returns while managing risk in order to meet the plan’s current and projected financial obligations. The plan’s investments include a diverse blend of various U.S. and international equities, venture capital, investments in various classes of debt securities, and insurance contracts. The target allocation for the plan assets of our pension plan is as follows.

Corporate bonds / Insurance contracts	20	%
High yield corporate bonds	10	%
Large-cap value equities	16	%
Large-cap growth equities	16	%
Mid-cap equities	10	%
Small-cap equities	10	%
International equities	15	%
Alternative investments	2	%
Venture capital	1	%

As part of our risk management for the plans, minimums and maximums have been set for each of the asset classes listed above. All investment managers for the plan are subject to certain restrictions on the securities they purchase and, with the exception of indexing purposes, are prohibited from owning our stock.

Contributions - For 2005, $1.5 million and $3.1 million of contributions were made to our pension plan and other postretirement benefit plan, respectively. We presently anticipate our total 2006 contributions will be $1.7 million for the pension plan and $2.7 million for the other postretirement benefit plan. Additionally, we expect our pay-as-you-go payments for the other postretirement benefit plan to be $14.0 million.

Pension and Other Postretirement Benefit Payments - The pension benefits expected to be paid in 2006-2010 are $43.5 million, $44.6 million, $45.6 million, $47.2 million and $47.8 million, respectively. The aggregate benefits expected to be paid in the five years from 2011-2015 are $258.5 million.

The other postretirement benefits expected to be paid in 2006-2010 are $14.0 million, $14.5 million, $15.0 million, $15.4 million and $16.2 million, respectively. The aggregate benefits expected to be paid in the five years from 2011-2015 are $91.9 million.

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2005, and include estimated future employee service.

Regulatory Treatment - The OCC and KCC have approved the recovery of pension costs and other postretirement benefits costs through rates for Oklahoma Natural Gas and Kansas Gas Service, respectively. The costs recovered through rates are based on current funding requirements and the net periodic benefit cost for pension and postretirement costs. Differences, if any, between the expense and the amount recovered through rates are charged to earnings.

Other Employee Benefit Plans

Thrift Plan - We have a Thrift Plan covering substantially all employees. Employee contributions are discretionary. Subject to certain limits, we match employee contributions. The cost of the plan was $10.5 million, $10.4 million and $9.6 million in 2005, 2004 and 2003, respectively.

Profit Sharing Plan - We have a profit sharing plan for all nonbargaining unit employees hired after December 31, 2004. Nonbargaining unit employees who were employed prior to January 1, 2005, were given a one-time opportunity to make an irrevocable election to participate in the profit sharing plan and not accrue any additional benefits under our defined benefit pension plan after December 31, 2004. We plan to make a contribution to the profit sharing plan each quarter equal to one percent of each participant’s compensation during the quarter. Additional discretionary employer contributions may be made at the end of each year. Employee contributions are not allowed under the plan. The cost of the plan was $0.6 million in 2005.

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K. COMMITMENTS AND CONTINGENCIES

Leases - The initial lease term of our headquarters building, ONEOK Plaza, is for 25 years, expiring in 2009, with six five-year renewal options. At the end of the initial term or any renewal period, we can purchase the property at its fair market value. Annual rent expense for the lease will be approximately $6.8 million until 2009. Rent payments were $9.3 million in 2005, 2004 and 2003. Estimated future minimum rental payments for the lease are $9.3 million for each of the years ending December 31, 2006 through 2009.

We have the right to sublet excess office space in ONEOK Plaza. We received rental revenue of $2.8 million in 2005, 2004 and 2003. Estimated minimum future rental payments to be received under existing contracts for subleases are $3.0 million in 2006, $1.4 million in 2007, $1.3 million in 2008 and $0.8 million in 2009.

Other operating leases include a gas processing plant, office buildings, and equipment. Future minimum lease payments under non-cancelable operating leases as of December 31, 2005, are $50.7 million in 2006, $34.5 million in 2007, $32.2 million in 2008, $29.1 million in 2009 and $26.8 million in 2010. These amounts include the following minimum lease payments relating to the lease of a gas processing plant for which we have a liability as a result of uneconomic lease terms: $37.7 million in 2006, $24.2 million in 2007, $24.2 million in 2008, $24.0 million in 2009 and $24.2 million in 2010. Accordingly, the liability is amortized to rent expense in the amount of $13.0 million per year over the term of the lease. The amortization of the liability reduces rent expense; however, the cash outflow under the lease remains the same.

Environmental - We are subject to multiple environmental laws and regulations affecting many aspects of present and future operations, including air emissions, water quality, wastewater discharges, solid wastes and hazardous material and substance management. These laws and regulations generally require us to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals. Failure to comply with these laws, regulations, permits and licenses may expose us to fines, penalties and/or interruptions in our operations that could be material to the results of operations. If an accidental leak or spill of hazardous materials occurs from our lines or facilities, in the process of transporting natural gas or NGLs, or at any facility that we own, operate or otherwise use, we could be held jointly and severally liable for all resulting liabilities, including investigation and clean up costs, which could materially affect our results of operations and cash flows. In addition, emission controls required under the Federal Clean Air Act and other similar federal and state laws could require unexpected capital expenditures at our facilities. We cannot assure that existing environmental regulations will not be revised or that new regulations will not be adopted or become applicable to us. Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material adverse effect on our business, financial condition and results of operations.

We own or retain legal responsibility for the environmental conditions at 12 former manufactured gas sites in Kansas. These sites contain potentially harmful materials that are subject to control or remediation under various environmental laws and regulations. A consent agreement with the Kansas Department of Health and Environment (KDHE) presently governs all work at these sites. The terms of the consent agreement allow us to investigate these sites and set remediation activities based upon the results of the investigations and risk analysis. We have commenced active remediation on eight sites, with regulatory closure achieved at two of these locations, and have begun assessments at the remaining four sites. The site situations are not similar, and we have no previous experience with similar remediation efforts. We have completed some analysis of the remaining four sites, but are unable to accurately estimate individual or aggregate costs that may be required to satisfy our remedial obligations.

Our preliminary review of similar cleanup efforts at former manufactured gas sites reveals that costs can range from $100,000 to $10 million per site. These estimates do not consider potential insurance recoveries, recoveries through rates or from unaffiliated parties, to which we may be entitled. At this time, we have not recorded any amounts for potential insurance recoveries or recoveries from unaffiliated parties, and we are not recovering any environmental amounts in rates. Total costs to remediate the two sites, which have achieved regulatory closure, was approximately $700,000. Total remedial costs for each of the remaining sites are expected to exceed $500,000 per site, but there is no assurance that costs to investigate and remediate the remaining sites will not be significantly higher. As more information related to the site investigations and remediation activities becomes available, and to the extent such amounts are expected to exceed our current estimates, additional expenses could be recorded. Such amounts could be material to our results of operations and cash flows depending on the remediation done and number of years over which the remediation is completed.

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Our expenditures for environmental evaluation and remediation to date have not been significant in relation to the results of operations and there were no material effects upon earnings during 2005 related to compliance with environmental regulations.

Yaggy Facility - In January 2001, our Yaggy gas storage facility’s operating parameters were changed as mandated by the KDHE following natural gas explosions and eruptions of natural gas geysers in or near Hutchison, Kansas. In July 2002, the KDHE issued an administrative order that assessed a civil penalty against us, based on alleged violations of several KDHE regulations. On April 5, 2004, we entered into a Consent Order with the KDHE in which we paid a civil penalty in the amount of $180,000 and reimbursed the KDHE for its costs related to the investigation of the incident in the amount of approximately $79,000. In addition, the Consent Order requires us to conduct an environmental remediation and a geoengineering study. Based on information currently available to us, we do not believe there are any material adverse effects resulting from the Consent Order.

In February 2004, a jury awarded $1.7 million in actual damages to the plaintiffs in a lawsuit involving property damage alleged to relate to the natural gas explosions and eruptions. In April 2004, the judge in this case awarded punitive damages in the amount of $5.25 million. We have filed an appeal of the jury verdict and the punitive damage award. Based on information currently available to us, we believe our legal reserves and insurance coverage is adequate and that this matter will not have a material adverse effect on us.

The two class action lawsuits filed against us in connection with the natural gas explosions and eruptions of natural gas geysers that occurred at, and in the vicinity of, our Yaggy facility in January 2001, resulted in jury verdicts in September 2004. The jury awarded the plaintiffs in the residential class $5.0 million in actual damages, and the judge ordered the payment of $2.0 million in attorney fees and $0.6 million in expenses, all of which are covered by insurance. In the other class action relating to business claims, the jury awarded no damages. The jury rejected claims for punitive damages in both cases. On April 11, 2005, the court denied the plaintiffs’ motion for a new trial and denied a post-trial motion filed by defendants. We filed our notice of appeal of the residential class verdict and the attorney fee award. The cases have now been transferred to the Kansas Supreme Court for appeal. With the exception of appeals, all litigation regarding our Yaggy facility has been resolved.

Enron - We have repurchased a portion of the Enron Corp. guaranty claim that Enron Corp. and Enron North American Corp. (ENA) sought to avoid in the adversary proceeding. We are now providing the defense of the adversary proceeding for both the portion of the guaranty claim constituting the repurchased claim and also the portion of the guaranty claim previously sold. Based on information currently available to us, we do not expect the adversary proceeding to have a material adverse effect on us.

In addition to the adversary proceeding, Enron Corp. and ENA have filed a new objection to portions of the guaranty claim and to portions of the underlying claim against ENA, creating a new contested matter in the Enron Corp. and ENA bankruptcy cases which involve different legal and factual issues than those raised in the adversary proceeding. Enron Corp. and ENA allege in this matter that the guaranty claim and underlying claim against ENA are overstated. The filing of this matter may trigger additional obligations for us to repurchase some of the claims previously sold. Based on the information currently available to us, we do not expect this matter to have a material adverse effect on us.

Other - The OCC staff filed an application on February 1, 2001, to review the gas procurement practices of Oklahoma Natural Gas in acquiring its gas supply for the 2000/2001 heating season and to determine if these practices were consistent with least cost procurement practices and whether our procurement decisions resulted in fair, just and reasonable costs being borne by Oklahoma Natural Gas customers. In May 2002, we, along with the staff of the Public Utility Division and the Consumer Services Division of the OCC, the Oklahoma Attorney General, and other stipulating parties, entered into a joint settlement agreement resolving this gas cost issue and ongoing litigation related to a contract with Dynamic Energy Resources, Inc.

The settlement agreement had a $33.7 million value to Oklahoma Natural Gas customers that was realized over a three-year period. In July 2002, immediate cash savings were provided to all Oklahoma Natural Gas customers in the form of billing credits totaling approximately $9.1 million. Oklahoma Natural Gas replaced certain natural gas contracts, which reduced natural gas costs by approximately $13.8 million, due to avoided reservation fees between April 2003 and October 2005. Storage value of $2.0 million was generated on behalf of customers. As part of the final rate order issued on October 4, 2005, Oklahoma Natural Gas was authorized to net $1.8 million in under-recovered revenues authorized for recovery under the OCC’s January 30, 2004 rate order against its final December 2005 billing credit obligation. In December 2005, a final billing credit of $6.9 million was made to customers.

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We are a party to other litigation matters and claims, which are normal in the course of our operations. While the results of litigation and claims cannot be predicted with certainty, we believe the final outcome of such matters will not have a material adverse effect on our consolidated results of operations, financial position, or liquidity.

L. INCOME TAXES

The following table sets forth our provisions for income taxes for the periods indicated.

	Years Ended December 31,
	2005		2004		2003
	(Thousands of dollars)
Current income taxes
Federal	$	186,486	$	40,822	$	13,068
State		27,589		5,161		1,248
Total current income taxes from continuing operations		214,075		45,983		14,316
Deferred income taxes
Federal		24,780		80,669		112,242
State		3,666		10,569		(454	)
Total deferred income taxes from continuing operations		28,446		91,238		111,788
Total provision for income taxes before cumulative effect/discontinued operations		242,521		137,221		126,104
Total provision for income taxes for the cumulative effect of a change in accounting principle		—		—		(90,456	)
Discontinued operations		86,926		12,746		27,318
Total provision for income taxes	$	329,447	$	149,967	$	62,966

The following table is a reconciliation of our provision for income taxes for the periods indicated.

	Years Ended December 31,
	2005			2004			2003
	(Thousands of dollars)
Pretax income from continuing operations	$	645,669		$	361,894		$	332,553
Federal statutory income tax rate		35	%		35	%		35	%
Provision for federal income taxes		225,984			126,663			116,394
Amortization of distribution property investment tax credit		(568	)		(608	)		(522	)
State income taxes, net of federal tax benefit		20,316			10,224			13,283
Other, net		(3,211	)		942			(3,051	)
Income tax expense	$	242,521		$	137,221		$	126,104

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The following table sets forth the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities for the periods indicated.

	Years Ended December 31,
	2005			2004
	(Thousands of dollars)
Deferred tax assets
Employee benefits and other accrued liabilities	$	36,858		$	39,412
Purchased gas adjustment		12,438			22,884
Net operating loss carryforward		—			8,887
Other comprehensive income		36,172			4,784
Other		18,412			30,141
Total deferred tax assets		103,880			106,108
Valuation allowance for net operating loss carryforward expected to expire prior to utilization		—			3,426
Net deferred tax assets	$	103,880		$	102,682
Deferred tax liabilities
Excess of tax over book depreciation and depletion	$	653,416		$	669,825
Investment in joint ventures		11,423			8,934
Regulatory assets		27,990			30,786
Other		13,329			11,259
Total deferred tax liabilities		706,158			720,804
Net deferred tax liabilities before discontinued operations		602,278			618,122
Discontinued operations		(9,151	)		43,251
Net deferred tax liabilities	$	593,127		$	661,373

All federal and state net operating loss carryforwards had been utilized at December 31, 2005. At December 31, 2005, we had $4.3 million in deferred investment tax credits related to regulated operations recorded in other deferred credits, which will be amortized over the next 10 years. We had accrued income taxes of approximately $113.8 million and $0.5 million at December 31, 2005 and 2004, respectively.

M. SEGMENT INFORMATION

We have divided our operations into six reportable segments based on similarities in economic characteristics, products and services, types of customers, methods of distribution and regulatory environment. These segments are as follows: (1) our Gathering and Processing segment gathers and processes natural gas and fractionates raw NGLs; (2) our Natural Gas Liquids segment gathers, treats and fractionates raw NGLs and stores NGLs produced; (3) our Pipelines and Storage segment gathers, transports and stores natural gas for others and provides NGL gathering and distribution services; (4) our Energy Services segment markets natural gas and crude oil to wholesale and retail customers and markets electricity to wholesale customers; (5) our Distribution segment distributes natural gas to residential, commercial and industrial customers, and transports natural gas; and (6) our Other segment primarily consists of Northern Plains and the operating and leasing operations of our headquarters building and a related parking facility. Our Distribution segment is comprised of regulated public utilities and portions of our Pipelines and Storage segment are regulated.

The main customers for our Gathering and Processing segment are primarily major and independent oil and gas production companies. Our Natural Gas Liquids segment’s customers are primarily gathering and processing companies and petrochemical and refining companies. Companies serviced by our Pipelines and Storage segment include LDCs, power generators, natural gas marketing companies and petrochemical companies. Our Energy Services segment buys and sells natural gas and power to LDCs, municipalities, producers, large industrials, power generators, retail aggregators and other marketing companies, as well as residential and small commercial/industrial companies. Our Distribution segment provides natural gas to residential, commercial, industrial, wholesale, public authority and transportation customers.

With the acquisition of assets from Koch on July 1, 2005, we formed a new operating segment called Natural Gas Liquids. This segment consists of our existing natural gas liquids marketing business, which was previously part of our Gathering and Processing segment, and the assets acquired from Koch excluding those natural gas liquids gathering and pipeline

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distribution assets regulated by the FERC, which have been transferred to our Pipelines and Storage segment. VESCO, also acquired as part of the asset acquisition, was added to our Gathering and Processing segment. Segment results for our Gathering and Processing segment for all prior periods have been restated to reflect the transfer of our existing natural gas liquids marketing business to our Natural Gas Liquids segment. Our segment formerly named Transportation and Storage has been renamed Pipelines and Storage in order to better describe the activities of the segment.

In September 2005, we completed the sale of our Production segment. Additionally, in the third quarter of 2005, we made the decision to sell our Spring Creek power plant and exit the power generation business. These components of our business are accounted for as discontinued operations in accordance with Statement 144. Our Production segment is included in our Other segment in the tables below, while our power generation business is included in our Energy Services segment.

As discussed in Note D, at the beginning of the third quarter of 2004, we completed a reorganization of our Energy Services segment and separated the management and operations of our wholesale marketing, retail marketing and trading activities. We began accounting separately for the different types of revenue earned from these activities, with certain revenues accounted for on a gross rather than a net basis.

The accounting policies of the segments are described in Note A. Intersegment gross sales are recorded on the same basis as sales to unaffiliated customers. Corporate overhead costs relating to a reportable segment have been allocated for the purpose of calculating operating income. Our equity method investments do not represent operating segments.

In 2005 and 2003, we had no single external customer from which we received 10 percent or more of our consolidated gross revenues. In 2004, we had one customer, BP PLC (BP), from which we received $745.1 million, or approximately 13 percent of consolidated revenues. Our Energy Services segment received $664.4 million of the total 2004 revenues received from BP, or approximately 11 percent, of consolidated 2004 revenues.

The following tables set forth certain selected financial information for our six operating segments for the periods indicated.

Year Ended December 31, 2005	Gathering and Processing			Natural Gas Liquids		Pipelines and Storage			Energy Services			Distribution		Other and Eliminations			Total
	(Thousands of dollars)
Sales to unaffiliated customers	$	263,139		$	2,460,375	$	70,257		$	7,638,711		$	2,216,207	$	14,861		$	12,663,550
Energy trading revenues, net		—			—		—			12,680			—		—			12,680
Intersegment sales		1,385,435			—		155,393			707,360			—		(2,248,188	)		—
Total Revenues	$	1,648,574		$	2,460,375	$	225,650		$	8,358,751		$	2,216,207	$	(2,233,327	)	$	12,676,230
Net margin	$	287,266		$	87,889	$	171,614		$	206,360		$	587,700	$	(2,675	)	$	1,338,154
Operating costs		123,385			33,460		63,326			38,598			360,351		875			619,995
Depreciation, depletion and amortization		32,649			11,060		23,702			2,071			113,437		475			183,394
Gain on sale of assets		264,207			—		—			—			—		—			264,207
Operating income	$	395,439		$	43,369	$	84,586		$	165,691		$	113,912	$	(4,025	)	$	798,972
Income (loss) from operations of discontinued component	$	—		$	—	$	—		$	(34,675	)	$	—	$	28,495		$	(6,180	)
Income (loss) from equity investments	$	(6,083	)	$	—	$	(1,511	)	$	—		$	—	$	10,132		$	2,538
Total assets	$	1,663,660		$	1,617,938	$	1,018,345		$	3,030,392		$	2,824,523	$	(141,392	)	$	10,013,466
Capital expenditures	$	28,316		$	12,220	$	15,719		$	159		$	143,765	$	50,314		$	250,493

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Year Ended December 31, 2004	Gathering and Processing		Natural Gas Liquids		Pipelines and Storage		Energy Services			Distribution		Other and Eliminations			Total
	(Thousands of dollars)
Sales to unaffiliated customers	$	255,956	$	1,256,498	$	65,678	$	2,499,880		$	1,924,502	$	(330,800	)	$	5,671,714
Energy trading revenues, net		—		—		—		113,814			—		—			113,814
Intersegment sales (a)		1,083,028		—		101,757		221,598			—		(1,406,383	)		—
Total Revenues	$	1,338,984	$	1,256,498	$	167,435	$	2,835,292		$	1,924,502	$	(1,737,183	)	$	5,785,528
Net margin	$	267,030	$	24,416	$	126,548	$	174,006		$	557,316	$	(12,099	)	$	1,137,217
Operating costs		118,090		9,462		49,414		33,261			341,651		(16,366	)		535,512
Depreciation, depletion and amortization		32,744		119		17,349		1,554			105,438		849			158,053
Operating income	$	116,196	$	14,835	$	59,785	$	139,191		$	110,227	$	3,418		$	443,652
Income from operations of discontinued component	$	—	$	—	$	—	$	(3,183	)	$	—	$	20,688		$	17,505
Income from equity investments	$	—			$	1,122	$	—		$	—	$	1,279		$	2,401
Total assets	$	1,225,077	$	232,105	$	801,746	$	2,021,221		$	2,774,279	$	144,724		$	7,199,152
Capital expenditures	$	23,067	$	9,264	$	12,287	$	1,806		$	142,515	$	75,171		$	264,110

(a) - Intersegment sales for Energy Services were $327.3 million for the six months ended June 30, 2004. These are included in energy trading revenues, net above.

Year Ended December 31, 2003	Gathering and Processing			Natural Gas Liquids		Pipelines and Storage			Energy Services			Distribution		Other and Eliminations			Total
	(Thousands of dollars)
Sales to unaffiliated customers	$	287,452		$	1,023,617	$	68,724		$	7,423		$	1,740,060	$	(486,592	)	$	2,640,684
Energy trading revenues, net		—			—		—			229,782			—		—			229,782
Intersegment sales (a)		893,600			—		92,575			—			—		(986,175	)		—
Total Revenues	$	1,181,052		$	1,023,617	$	161,299		$	237,205		$	1,740,060	$	(1,472,767	)	$	2,870,466
Net margin	$	198,299		$	15,838	$	113,662		$	228,697		$	526,249	$	2,073		$	1,084,818
Operating costs		112,822			9,281		46,186			32,226			312,814		(1,061	)		512,268
Depreciation, depletion and amortization		29,273			59		16,694			1,612			95,654		1,403			144,695
Operating income	$	56,204		$	6,498	$	50,782		$	194,859		$	117,781	$	1,731		$	427,855
Income from operations of discontinued component	$	—		$	—	$	—		$	1,282		$	—	$	8,903		$	10,185
Cumulative effect of changes in accounting principles, net of tax	$	(1,375	)	$	—	$	(645	)	$	(141,982	)	$	—	$	117		$	(143,885	)
Income from equity investments	$	—				$	1,397		$	—		$	—	$	92		$	1,489
Total assets	$	1,218,358		$	182,001	$	867,743		$	1,610,957		$	2,682,531	$	(349,704	)	$	6,211,886
Capital expenditures	$	20,444		$	154	$	15,234		$	555		$	153,405	$	25,356		$	215,148

(a) - Intersegment sales for Energy Services were $487.3 million for the year ended December 31, 2003. These are included in energy trading revenues, net above.

N. QUARTERLY FINANCIAL DATA (UNAUDITED)

Total operating revenues are consistently greater during the heating season from November through March due to the large volume of natural gas sold to customers for heating. The following tables set forth the unaudited quarterly results of operations for the periods indicated.

The third quarter 2005 numbers in the following table have been restated due to a software system error we identified subsequent to the issuance of the September 30, 2005 Quarterly Report on Form 10-Q. This error impacted net margin, operating income, income from continuing operations, net income and earnings per share in the following table. No other prior periods were affected.

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Year Ended December 31, 2005	First Quarter		Second Quarter		Third Quarter Restated			Fourth Quarter
	(Thousands of dollars, except per share amounts)
Total Revenues	$	2,707,040	$	2,080,790	$	3,192,207		$	4,696,193
Net margin	$	370,397	$	229,977	$	329,319		$	408,461
Operating income	$	186,378	$	52,183	$	110,066		$	450,345
Income from continuing operations	$	101,778	$	17,074	$	44,614		$	239,682
Income (loss) from operation of discontinued components, net	$	5,886	$	7,778	$	(19,582	)	$	(262	)
Gain on sale of discontinued component, net	$	—	$	—	$	151,355		$	(1,778	)
Net Income	$	107,664	$	24,852	$	176,387		$	237,642
Earnings per share from continuing operations
Basic	$	0.98	$	0.17	$	0.45		$	2.46
Diluted	$	0.92	$	0.16	$	0.41		$	2.32

Year Ended December 31, 2004	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(Thousands of dollars, except per share amounts)
Total Revenues	$	982,476	$	594,811	$	1,664,415	$	2,543,826
Net margin	$	365,349	$	205,143	$	219,850	$	346,875
Operating income	$	183,627	$	42,242	$	48,433	$	169,350
Income from continuing operations	$	100,506	$	13,128	$	16,575	$	94,464
Income from operation of discontinued components, net	$	4,647	$	4,661	$	4,264	$	3,933
Net Income	$	105,153	$	17,789	$	20,839	$	98,397
Earnings per share from continuing operations
Basic	$	1.01	$	0.13	$	0.16	$	0.91
Diluted	$	0.99	$	0.13	$	0.15	$	0.86

O. SUPPLEMENTAL CASH FLOW INFORMATION

The following tables set forth supplemental information relative to our cash flow for the periods indicated.

	Years Ended December 31,
	2005		2004		2003
	(Thousands of dollars)
Cash paid during the year
Interest (including amounts capitalized)	$	219,918	$	37,526	$	115,939
Income taxes paid (received)	$	244,925	$	125,062	$	(16,302	)
Non-cash transactions
Cumulative effect of changes in accounting principles
Rescission of EITF 98-10 (price risk management assets and liabilities)	$	—	$	—	$	141,832
Adoption of Statement 143	$	—	$	—	$	2,053
Issuance of restricted stock, net	$	—	$	—	$	3,201
Treasury stock transferred to compensation plans	$	6,536	$	—	$	4,450

Cash paid (received) for interest includes swap terminations, treasury rate-lock terminations and ineffectiveness of $22.6 million and $(82.9) million for the years ended December 31, 2005 and 2004, respectively. There were no swap terminations, treasury rate-lock terminations or ineffectiveness for the year ended December 31, 2003.

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P. STOCK BASED COMPENSATION

Deferred Compensation Plans

Employee Non-Qualified Deferred Compensation Plan - The ONEOK, Inc. Employee Non-Qualified Deferred Compensation Plan (the Prior Deferred Comp Plan) provides select employees, as approved by the Board of Directors, with the option to defer portions of their compensation and provides non-qualified deferred compensation benefits which are not available due to limitations on employer and employee contributions to qualified defined contribution plans under the federal tax laws. Under the plan, participants have the option to defer a portion of their salary and/or bonus compensation to a short-term deferral account, which pays out a minimum of five years from commencement, or a long-term deferral account, which pays out at retirement or termination of the participant’s employment. Participants are immediately 100 percent vested. Short-term deferral accounts are credited with a deemed investment return based on the five-year treasury bond fund. Long-term deferral accounts are credited with a deemed investment return based on various investment options. At the distribution date, cash is distributed to participants based on the fair market value of the deemed investment of the participant account at that date.

On December 16, 2004, our Board of Directors approved certain amendments to our Prior Deferred Comp Plan, including amendments providing that the Prior Deferred Comp Plan would terminate and be frozen effective December 31, 2004, as to eligibility of any new participants and the deferral of any compensation by a participant under the Prior Deferred Comp Plan after that date. Participants in the Prior Deferred Comp Plan will be paid compensation they had deferred under the Prior Deferred Comp Plan on or before December 31, 2004, in accordance with the terms of the Prior Deferred Comp Plan.

Also, on December 16, 2004, our Board of Directors adopted the 2005 Employee Deferred Compensation Plan (the 2005 Deferred Comp Plan), which became effective January 1, 2005. The 2005 Deferred Comp Plan provides for deferral of compensation and payment of benefits in substantially the same manner as provided under the Prior Deferred Comp Plan. However, the 2005 Deferred Comp Plan contains certain different provisions intended to comply with the requirements of Section 409A of the Internal Revenue Code. Those provisions relate to participant elections to defer compensation, the timing of payments and distributions under the 2005 Deferred Comp Plan, prohibition of any foreign trust for the 2005 Deferred Comp Plan, new defined terms, and certain other conforming provisions and features.

Deferred Compensation Plan for Non-Employee Directors - The ONEOK, Inc. Deferred Compensation Plan for Non-Employee Directors provides our directors, who are not our employees, the option to defer all or a portion of their compensation for their service on our Board of Directors. Under the plan, directors may elect either a cash deferral option or a phantom stock option. Under the cash deferral option, directors may defer the receipt of all or a portion of their annual retainer and/or meeting fees, plus accrued interest. Under the phantom stock option, directors may defer all or a portion of their annual retainer and/or meeting fees and receive such fees on a deferred basis in the form of shares of common stock under our Long-Term Incentive Plan. Shares are distributed to non-employee directors at the fair market value of our common stock at the date of distribution.

Long-Term Incentive Plan

General - The ONEOK, Inc. Long-Term Incentive Plan (the LTIP) provides for the granting of stock-based compensation, including incentive stock options, non-statutory stock options, stock bonus awards, restricted stock awards, restricted stock unit awards and performance unit awards to key employees and the granting of stock awards to non-employee directors. We have reserved a total of approximately 7.8 million shares of common stock for issuance under the plan. The maximum number of shares for which options or other awards may be granted to any employee during any year is 300,000. The number of shares of stock to be paid and distributed to non-employee directors is determined by dividing the dollar amount of the director fees that are to be paid in common stock on any payment date by the fair market value of a share of common stock on that date. The LTIP is administered by the Executive Compensation Committee (the Committee). Stock options and awards could be granted until August 17, 2005.

Our Board of Directors and shareholders approved the ONEOK, Inc. Equity Compensation Plan, in February and May of 2005, respectively. This plan replaced the LTIP for new awards, but the LTIP will continue with respect to awards outstanding and the remaining shares reserved for issuance under the plan. See the Equity Compensation Plan section in this Note for additional information.

Options - Under the LTIP, stock options may be granted, which are not exercisable until a fixed future date or in installments. Prior to 2002, our stock option agreements provided for restored options to be granted. A restored option is

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granted in the event an optionee surrenders shares of common stock that the optionee already owns in full or partial payment of the option price of an option being exercised and/or surrenders shares of common stock to satisfy withholding tax obligations incident to the exercise of an option. A restored option is for the number of shares surrendered by the optionee and has an option price equal to the fair market value of the common stock on the date on which the exercise of an option resulted in the grant of the restored option.

Options issued to date become void upon voluntary termination of employment other than retirement. In the event of retirement or involuntary termination, the optionee may exercise the option within a period determined by the Committee and stated in the option. In the event of death, the option may be exercised by the personal representative of the optionee within a period to be determined by the Committee and stated in the option. A portion of the options issued to date can be exercised after one year from grant date and an option must be exercised no later than ten years after grant date. Restored options are exercisable at any time after six months following the grant date and expire on the expiration of the original grant.

Restricted Stock Awards - Under the LTIP, restricted stock awards may be granted to key employees with ownership of the common stock vesting over a period determined by the Committee and stated in the award. Those granted to date vest over a three-year period. Compensation expense is recognized on a straight-line basis over the period of the award. Shares awarded may not be sold during the vesting period. Dividends on restricted stock awards are reinvested in common stock.

Restricted Stock Incentive Units - Under the LTIP, restricted stock incentive units may be granted to key employees with ownership of the incentive unit vesting over a period determined by the Committee and stated in the award. Those granted in 2005 and 2004 vest over a three-year period, at which time the grantee is entitled to receive two-thirds of the grant in shares of our common stock and one-third of the grant in cash. No dividends are paid on the restricted stock incentive units. Compensation expense is recognized on a straight-line basis over the period of the award.

Performance Unit Awards - Under the LTIP, performance unit awards may be granted to key employees. The performance units vest at the expiration of a period determined by the Committee and stated in the award if certain performance criteria are met by us. Those granted to date vest at the expiration of a three-year period. Upon vesting, a holder of performance units is entitled to receive a number of shares of our common stock equal to a percentage (0 percent to 200 percent) of the performance units granted based on our total shareholder return over the vesting period, compared with the total shareholder return of a peer group of 20 other companies over the same period. Compensation expense is recognized on a straight-line basis over the period of the award with adjustments as needed based on our performance. Awards granted in 2005 and 2004 entitle the grantee to receive two-thirds of the grant in shares of our common stock and one-third of the grant in cash, while awards granted in 2003 were common stock only.

Equity Compensation Plan

General - The ONEOK, Inc. Equity Compensation Plan will replace the existing ONEOK, Inc. Long-Term Incentive Plan. The Equity Compensation Plan provides for the granting of stock-based compensation, including incentive stock options, non-statutory stock options, stock bonus awards, restricted stock awards, restricted stock unit awards, performance stock awards and performance unit awards to eligible employees and the granting of stock awards to non-employee directors. We have reserved a total of approximately 3.0 million shares of common stock for issuance under the plan. The maximum number of shares for which options or other awards may be granted to any employee during any year is 500,000. The number of shares of stock to be paid and distributed to non-employee directors is determined by dividing the dollar amount of the director fees that are to be paid in common stock on any payment date by the fair market value of a share of common stock on that date.

At December 31, 2005, there were no shares issued under this plan.

Stock Compensation Plan for Non-Employee Directors

General - The ONEOK, Inc. Stock Compensation Plan for Non-Employee Directors (the DSCP) provides for the granting of stock bonus awards, including performance unit awards, restricted stock awards, restricted stock unit awards and options. Under the DSCP, these awards may be granted by the Committee at any time on or before January 18, 2011. We have reserved a total of 700,000 shares of common stock for issuance under the DSCP. The maximum number of shares of common stock which can be issued to a participant under the DSCP during any year is 20,000.

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Options - Options may be exercisable in full at the time of grant or may become exercisable in one or more installments. The plan also provides for restored options consistent with the plan for employees. Options must be exercised no later than ten years after the date of grant of the option. In the event of retirement or termination, the optionee may exercise the option within a period determined by the Committee. In the event of death, the option may be exercised by the personal representative of the optionee over a period of time determined by the Committee.

Performance Unit Awards and Restricted Stock Awards - Under the DSCP, performance unit awards and restricted stock awards may be granted at the discretion of the Committee under terms set by the Committee. These awards may be settled in cash or unrestricted shares of common stock. No performance unit awards or restricted stock awards have been made to non-employee directors under the DSCP.

Stock Option Activity

The following table sets forth the stock option activity under the LTIP and DSCP for employees and non-employee directors for the periods indicated.

	Number of Shares		Weighted Average Exercise Price
Outstanding December 31, 2002	3,063,676		$	18.60
Granted	458,400		$	16.79
Exercised	(413,471	)	$	16.23
Expired	(25,062	)	$	20.45
Restored	134,146		$	21.33
Outstanding December 31, 2003	3,217,689		$	18.75
Exercised	(921,837	)	$	17.85
Expired	(58,048	)	$	19.14
Restored	384,980		$	23.80
Outstanding December 31, 2004	2,622,784		$	19.79
Exercised	(1,179,700	)	$	21.00
Expired	(31,536	)	$	17.14
Restored	540,867		$	32.06
Outstanding December 31, 2005	1,952,415		$	22.51
Options Exercisable
December 31, 2003	1,651,840		$	18.94
December 31, 2004	1,541,209		$	20.03
December 31, 2005	1,350,387		$	21.29

At December 31, 2005, we had 942,037 outstanding options with exercise prices ranging between $13.44 to $20.16 and a weighted average remaining life of 6.00 years. Of these options, 632,350 were exercisable at December 31, 2005, with a weighted average exercise price of $17.15.

We also had 773,718 options outstanding at December 31, 2005, with exercise prices ranging between $20.17 and $30.26 and a weighted average remaining life of 4.76 years. Of these options, 717,841 were exercisable at December 31, 2005, at a weighted average exercise price of $24.93.

Additionally, we had 236,660 outstanding options at December 31, 2005, with exercise prices ranging between $30.27 and $35.49 and a weighted average remaining life of 4.41 years. Of these options, 196 were exercisable at December 31, 2005, at a weighted average exercise price of $35.49.

Restricted Stock Awards Activity

The following table sets forth activity for the restricted stock awards under the LTIP. There were no restricted stock awards under the DSCP.

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	Number of Shares		Weighted Average Exercise Price
Outstanding December 31, 2002	259,854		$	17.74
Granted	189,900		$	16.88
Released to participants	(4,417	)	$	13.70
Forfeited	(2,686	)	$	19.15
Dividends	14,109		$	19.48
Outstanding December 31, 2003	456,760		$	17.47
Released to participants	(96,549	)	$	22.28
Forfeited	(2,597	)	$	17.26
Dividends	13,763		$	23.27
Outstanding December 31, 2004	371,377		$	16.43
Released to participants	(179,762	)	$	17.38
Forfeited	(5,074	)	$	16.88
Dividends	7,379		$	29.55
Outstanding December 31, 2005	193,920		$	16.05

Restricted Stock Incentive Unit Activity

The following table sets forth the activity for the restricted stock incentive units under the LTIP. There were no restricted stock units under the DSCP.

	Number of Shares		Weighted Average Exercise Price
Outstanding December 31, 2003	—		$	—
Granted	144,255		$	20.22
Outstanding December 31, 2004	144,255		$	20.22
Granted	114,979		$	25.19
Released to participants	(12,132	)	$	22.13
Forfeited	(8,166	)	$	22.42
Outstanding December 31, 2005	238,936		$	22.44

Performance Unit Activity

The following table sets forth the activity for the performance units under the LTIP. There were no performance unit awards under the DSCP.

	Number of Units		Weighted Average Exercise Price
Outstanding December 31, 2002	—		$	—
Granted	172,900		$	15.29
Outstanding December 31, 2003	172,900		$	15.29
Granted	191,811		$	20.20
Outstanding December 31, 2004	364,711		$	17.87
Granted	266,809		$	25.50
Released to participants	(31,133	)	$	20.45
Forfeited	(18,540	)	$	21.12
Outstanding December 31, 2005	581,847		$	21.13

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Employee Stock Purchase Plan

The ONEOK, Inc. Employee Stock Purchase Plan (the ESPP) currently has 3.8 million shares reserved for issuance. Subject to certain exclusions, all full-time employees are eligible to participate. Under the terms of the plan, employees can choose to have up to ten percent of their annual base pay withheld to purchase our common stock. The Committee may allow contributions to be made by other means, provided that in no event will contributions from all means exceed ten percent of the employee’s annual base pay. The purchase price of the stock is 85 percent of the lower of its grant date or exercise date market price. Approximately 63 percent, 54 percent and 58 percent of employees participated in the plan in 2005, 2004 and 2003, respectively. Under the plan, we sold 289,558 shares at $22.57 per share in 2005, 449,090 shares at $18.84 per share in 2004, and 296,125 shares at $16.23 per share in 2003.

Accounting Treatment

We adopted Statement 148 on January 1, 2003, and began expensing the fair value of all stock options granted on or after January 1, 2003. See Note A for disclosure of our pro forma net income and EPS information had we applied the provisions of Statement 123 to determine the compensation cost under these plans for stock options granted prior to January 1, 2003, for the periods presented. Effective January 1, 2006, we adopted Statement 123R. See Note A for additional information.

The fair market value of each option granted was estimated on the date of grant based on the Black-Scholes model using the following assumptions: volatility of 16.0 percent for 2005, 21.3 percent for 2004, and 30.3 percent for 2003; dividend yield of 3.8 percent for 2005, 3.9 percent for 2004, and 3.5 percent for 2003; and risk-free interest rate of 3.9 percent for 2005, 3.4 percent for 2004, and 4.0 percent for 2003.

The expected life ranged from one to ten years based upon experience to date and the make-up of the optionees. The fair value of options granted at fair market value under the Plan were $3.65, $3.53 and $4.67 for the years ended December 31, 2005, 2004 and 2003, respectively.

Q. EARNINGS PER SHARE INFORMATION

Through February 5, 2003, we computed our EPS in accordance with EITF Topic No. D-95 (Topic D-95), which was subsequently superseded by EITF Issue No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128”. The dilutive effect of our Series A was considered in the computation of basic EPS utilizing the “if-converted” method. Under the “if-converted” method, the dilutive effect of our Series A on EPS could not be less than the amount that would have resulted from the application of the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determined EPS for our common stock and our participating Series A according to dividends declared and participating rights in the undistributed earnings. Our Series A was a participating instrument with our common stock with respect to the payment of dividends. For the period from January 1, 2003 to February 5, 2003, the “two-class” method resulted in additional dilution. Accordingly, EPS for this period reflects this further dilution. As a result of our repurchase and exchange of our Series A in February 2003, we no longer applied the provisions of Topic D-95 to our EPS computations beginning in February 2003.

The following table sets forth the computation of basic and diluted EPS from continuing operations for the periods indicated.

	Year Ended December 31, 2005
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS from continuing operations
Income from continuing operations available for common stock	$	403,148	100,536	$	4.01
Diluted EPS from continuing operations
Effect of other dilutive securities:
Mandatory convertible units		—	6,366
Options and other dilutive securities		—	1,104
Income from continuing operations available for common stock and common stock equivalents	$	403,148	108,006	$	3.73

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	Year Ended December 31, 2004
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS from continuing operations
Income from continuing operations available for common stock	$	224,673	101,965	$	2.21
Diluted EPS from continuing operations
Effect of other dilutive securities:
Mandatory convertible units		—	2,723
Options and other dilutive securities		—	773
Income from continuing operations available for common stock and common stock equivalents	$	224,673	105,461	$	2.13

	Year Ended December 31, 2003
	Income		Shares	Per Share Amount
	(Thousands, except per share amounts)
Basic EPS from continuing operations
Income from continuing operations available for common stock under D-95	$	26,174	62,055
Series A Convertible Preferred Stock dividends		12,139	39,893
Income from continuing operations available for common stock and assumed conversion of Series A Convertible Preferred Stock		38,313	101,948	$	0.37
Further dilution from applying the “two-class” method				$	(0.08	)
Basic EPS from continuing operations under D-95				$	0.29
Income from continuing operations available for common stock not under D-95		156,064	78,585	$	1.99
Basic EPS from continuing operations				$	2.28
Diluted EPS from continuing operations
Income from continuing operations available for Series D
Convertible Preferred Stock dividends		194,377	80,569
Effect of other dilutive securities:
Options and other dilutive securities		—	911
Series D Convertible Preferred Stock dividends		12,072	15,519
Income from continuing operations	$	206,449	96,999	$	2.13
Further dilution from applying the “two-class” method				$	(0.08	)
Diluted EPS from continuing operations				$	2.05

There were 28,107, 17,734 and 151,448 option shares excluded from the calculation of diluted EPS for the years ended December 31, 2005, 2004 and 2003, respectively, since their inclusion would be antidilutive.

The repurchase and exchange of our Series A from Westar in February 2003 was recorded at fair value. In accordance with Topic No. D-42, “The Effect of the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock,” the premium, or the excess of the fair value of the consideration transferred to Westar over the carrying value of the Series A, was considered a preferred dividend. The premium recorded on the repurchase and exchange of the Series A was approximately $44.2 million and $53.4 million, respectively, for a total premium of $97.6 million. As a result of our adoption of Topic D-95, we recognized additional dilution of approximately $94.5 million through the application of the “two-class” method of computing EPS. This additional dilution offsets the total premium recorded, resulting in a net premium of $3.1 million, which is reflected as a dividend on the Series A in the EPS calculation above for the year ended December 31, 2003.

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R. RELATIONSHIPS WITH NORTHERN BORDER PARTNERS

In November 2004, we acquired Northern Plains, which owns 82.5 percent of the general partner interest and 500,000 limited partnership units, together representing a 2.73 percent ownership interest, in Northern Border Partners, from CCE Holdings, LLC for $175 million.

With our acquisition of Northern Plains in November 2004, we entered into a transition services agreement with Northern Border Partners. We provide certain administrative, operating and management services to Northern Border Partners and are reimbursed for these direct and indirect costs and expenses. In 2005, the aggregate amount we charged Northern Border Partners for services was approximately $52.6 million.

Our Energy Services segment became affiliated with Northern Border Pipeline in November 2004, in connection with our purchase of Northern Plains, and holds contracts for firm transportation on Northern Border Pipeline that represents approximately three percent of its design capacity. In 2005, our Energy Services segment paid Northern Border Pipeline $7.7 million related to these transportation contacts.

In 2005, Northern Border Partners paid us total cash distributions of $9.3 million, which included $5.7 million related to our incentive distribution rights.

S. SUBSEQUENT EVENT

On February 14, 2006, we signed agreements to sell certain assets to Northern Border Partners for approximately $3 billion in cash and limited partner units and increase our general partner interest in Northern Border Partners to 100 percent. We will purchase, through Northern Plains, from an affiliate of TransCanada Corporation (TransCanada) 17.5 percent of the general partner interest in Northern Border Partners for $40 million, less $10 million for expenses associated with the transfer of operating responsibility of Northern Border Pipeline Company to TransCanada for a net payment of $30 million. After the transactions are completed, we will own approximately 37.0 million limited partner units and 100 percent of the Northern Border Partners’ general partner interest, increasing our total interest in Northern Border Partners to 45.7 percent.

With the purchase of 17.5 percent of the general partner interest in Northern Border Partners, we will also transfer our Gathering and Processing segment, Natural Gas Liquids segment, and Pipelines and Storage segment to Northern Border Partners in transactions valued at approximately $3 billion. We will receive approximately $1.35 billion in cash and approximately 36.5 million limited partner units from Northern Border Partners. The limited partner units and related general partner interest contribution were valued at approximately $1.65 billion at the time of the signing of the transaction. This sale, subject to adjustment, includes the natural gas liquids assets we purchased from Koch in July 2005 for $1.35 billion. We will not recognize a gain on the sale as the transfer of assets will be accounted for at the assets’ historical cost. We plan to use the cash proceeds to reduce short-term debt, acquire other assets or repurchase our common stock.

The limited partner units we will receive from Northern Border Partners will be a newly created Class B unit with the same distribution rights as the outstanding common units, but will have limited voting rights and will be subordinated to the common units with respect to payment of minimum quarterly distributions. Distributions on the Class B units will be prorated from the date of issuance. Northern Border Partners is required to hold a special election for holders of common units within 12 months of issuing the Class B units to approve the conversion of the Class B units into common units and to approve certain amendments to the partnership agreement. The proposed amendments grant voting rights for common units held by the general partner if a vote is held to remove the general partner and require fair market value compensation for the general partner interest if the general partner is removed. If the common unit holders do not approve both the conversion and amendments within 12 months of the issuance of the Class B units, then the amount payable on such Class B units would increase to 115 percent of the distributions paid on the common units and the Class B distribution rights would continue to be subordinated in the manner described above unless and until the conversion described above has been approved. If the common unit holders vote to remove us or our affiliates as the general partner of Northern Border Partners at any time prior to the approval of the conversion and amendment described above, the amount payable on such Class B units would increase to 125 percent of the distributions payable with respect to the common units and the Class B unit distribution rights would continue to be subordinated in the manner described above unless and until the conversion described above has been approved.

These transactions are subject to regulatory approvals and other conditions, including antitrust clearance from the Federal Trade Commission under the Hart-Scott-Rodino Act. We expect these transactions will be completed by April 1, 2006.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that information required to be disclosed by us, including our consolidated entities, in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended (the “Act”) is recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Under the supervision and with the participation of senior management, including our Chairman and Chief Executive Officer (“Principal Executive Officer”) and our Chief Financial Officer (“Principal Financial Officer”), we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Act. Based on this evaluation, our Principal Executive Officer and our Principal Financial Officer concluded that due to the material weakness described below under the heading “Management’s Report on Internal Control Over Financial Reporting” (Item 9A(b)), our disclosure controls and procedures were not effective as of the end of the period covered by this annual report.

(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. In February 2006, we identified a software system error impacting our accounting for hedging instruments that led management to conclude that the following material weakness existed as of December 31, 2005.

Our third party software system associated with accounting for derivative hedging instruments was inadequately designed to appropriately account for certain hedges of forecasted transactions and thus did not facilitate the recognition of hedging ineffectiveness in accordance with generally accepted accounting principles. The software system incorrectly reversed previously recognized hedging ineffectiveness when additional derivative instruments (basis swaps) were incorporated into our hedging strategy related to the forecasted transactions. As a result, misstatements were identified in the Company’s cost of sales and fuel account and accumulated other comprehensive income (loss) and were corrected prior to the issuance of the 2005 consolidated financial statements.

Management has determined that the aforementioned deficiency constitutes a material weakness in our internal control over financial reporting as of December 31, 2005, based on our evaluation under the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Accordingly, management concluded that our internal control over financial reporting was not effective as of December 31, 2005.

We acquired Koch Industries Inc.’s natural gas liquids business in July 2005 (herein after referred to as “the Natural Gas Liquids segment”). Management excluded from our assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, internal control over financial reporting associated with our Natural Gas Liquids segment, which represents approximately 19 percent of our total revenue in 2005 and approximately 16 percent of our total assets included in our consolidated financial statements as of December 31, 2005.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein (Item 8).

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(c) Changes in Internal Controls Over Financial Reporting

We have not made any changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Act) during the fiscal year ended December 31, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for those controls described below.

In July 2005, we completed the acquisition of the Natural Gas Liquids segment as more fully described in Note B in the Notes to our Consolidated Financial Statements included in Part II of this report. As part of our ongoing integration activities, we are in the process of developing and incorporating controls and procedures related to these assets into our internal controls over financial reporting. Until such controls are more fully developed, we have implemented and are relying on compensating controls and have performed extensive reviews of our reported results. As with any acquisition, there are inherent risks in the timing, development and implementation of internal controls that could negatively impact us; however, we do not believe they will have a material impact on our financial statements.

Subsequent to December 31, 2005, we discovered the material weakness described above. We have developed additional controls to manually review and revalue the hedging ineffectiveness calculated by the affected software. We are also performing additional analytical reviews and reconciliations of reports generated by the affected software. Management believes that the additional controls will remediate the deficiency; however, such determination will not occur until the additional controls have been in place for a period of time sufficient to demonstrate that the controls are operating effectively. Additionally, we are working with the third party software vendor to correct the affected software. Until we are satisfied that the software is operating correctly, we will continue to rely on the additional manual controls described above.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Registrant

Information concerning our directors is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

Executive Officers of the Registrant

Information concerning our executive officers is included in Part I, Item 1. Business, of this Annual Report on Form 10-K.

Compliance with Section 16(a) of the Exchange Act

Information on compliance with Section 16(a) of the Exchange Act is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

Code of Ethics

Information concerning the code of ethics, or code of business conduct, is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

Nominating Committee Procedures

Information concerning the nominating committee procedures is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

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ITEM 11. EXECUTIVE COMPENSATION

Information on executive compensation is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners

Information concerning the ownership of certain beneficial owners is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

Security of Ownership of Management

Information on security ownership of directors and officers is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

Equity Compensation Plan Information

Information concerning our equity compensation plans is included in Part II, Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters of this Annual Report on Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information on certain relationships and related transactions is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning the principal accountant’s fees and services is set forth in our 2006 definitive Proxy Statement and is incorporated herein by this reference.

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PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Documents Filed as Part of this Report

(1) Exhibits

3	Certificate of Incorporation of WAI, Inc. (now ONEOK, Inc.) filed May 16, 1997 (incorporated by reference from Exhibit 3.1 to Amendment No. 3 to Registration Statement on Form S-4 filed August 6, 1997, Commission File No. 333-27467).
3.1	Certificate of Merger of ONEOK, Inc. (formerly WAI, Inc.) filed November 26, 1997 (incorporated by reference from Exhibit (1)(b) to Form 10-Q for the quarter ended May 31, 1998, filed June 26, 1998).
3.2	Amended Certificate of Incorporation of ONEOK, Inc. filed January 16, 1998 (incorporated by reference from Exhibit (1)(a) to Form 10-Q for the quarter ended May 31, 1998, filed June 26, 1998).
3.3	Amendment to Certificate of Incorporation of ONEOK, Inc. filed May 23, 2001 (incorporated by reference from Exhibit 4.6 to Registration Statement on Form S-3 filed July 19, 2001, as amended, Commission File No. 333-65392).
3.4	Bylaws of ONEOK, Inc. (incorporated by reference from Exhibit 3 to Form 10-Q for the quarter ended March 31, 2004, filed April 30, 2004).
4	Certificate of Designation for Convertible Preferred Stock of WAI, Inc. (now ONEOK, Inc.) filed November 26, 1997 (incorporated by reference from Exhibit 3.3 to Amendment No 3. to Registration Statement on Form S-4 filed August 6, 1997, Commission File No. 333-27467).
4.1	Certificate of Designation for Series C Participating Preferred Stock of ONEOK, Inc. filed November 26, 1997 (incorporated by reference from Exhibit No. 1 to Registration Statement on Form 8-A filed November 28, 1997).
4.2	Form of Common Stock Certificate (incorporated by reference from Exhibit 1 to Registration Statement on Form 8-A filed November 21, 1997).
4.3	Indenture, dated September 24, 1998, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 4.1 to Registration Statement on Form S-3 filed August 26, 1998, Commission File No. 333-62279).
4.4	Indenture dated December 28, 2001, between ONEOK, Inc. and SunTrust Bank (incorporated by reference from Exhibit 4.1 to Amendment No. 1 to Registration Statement on Form S-3 filed December 28, 2001, Commission File No. 333-65392).
4.5	First Supplemental Indenture dated September 24, 1998, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 5(a) to Form 8-K filed September 24, 1998).
4.6	Second Supplemental Indenture dated September 25, 1998, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 5(b) to Form 8-K filed September 24, 1998).
4.7	Third Supplemental Indenture dated February 8, 1999, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 4 to Form 8-K filed February 8, 1999).

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4.8	Fourth Supplemental Indenture dated February 17, 1999, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 4.5 to Registration Statement on Form S-3 filed April 15, 1999, Commission File No. 333-76375).
4.9	Fifth Supplemental Indenture dated August 17, 1999, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 4 to Form 8-K filed August 17, 1999).
4.10	Sixth Supplemental Indenture dated March 1, 2000, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 4.11 to the Registration Statement on Form S-4 filed March 13, 2000, Commission File No. 333-32254).
4.11	Seventh Supplemental Indenture dated April 24, 2000, between ONEOK, Inc. and Chase Bank of Texas (incorporated by reference from Exhibit 4 to Form 8-K filed April 26, 2000).
4.12	Eighth Supplemental Indenture dated April 6, 2001, between ONEOK, Inc. and The Chase Manhattan Bank (incorporated by reference from Exhibit 4.9 to Registration Statement on Form S-3 filed July 19, 2001, Commission File No. 333-65392).
4.13	First Supplemental Indenture, dated as of January 28, 2003, between ONEOK, Inc. and SunTrust Bank (incorporated by reference from Exhibit 4.22 to Registration Statement on Form 8-A/A filed January 31, 2003).
4.14	Second Supplemental Indenture, dated June 17, 2005, between ONEOK, Inc. and SunTrust Bank (incorporated by reference from Exhibit 4.1 to Form 8-K filed June 17, 2005).
4.15	Third Supplemental Indenture, dated June 17, 2005, between ONEOK, Inc. and SunTrust Bank (incorporated by reference from Exhibit 4.3 to Form 8-K filed June 17, 2005).
4.16	Form of Senior Note Due 2008 (included in Exhibit 4.13).
4.17	Form of 5.20% Notes Due 2015 (included in Exhibit 4.14).
4.18	Form of 6.00% Notes due 2035 (included in Exhibit 4.15).
4.19	Purchase Contract Agreement, dated January 28, 2003, between ONEOK, Inc. and SunTrust Bank, as Purchase Contract Agent (incorporated by reference from Exhibit 4.3 to Registration Statement on Form 8-A/A filed January 31, 2003).
4.20	Form of Corporate Unit (included in Exhibit 4.19).
4.21	Pledge Agreement, dated January 28, 2003, among ONEOK, Inc., SunTrust Bank, as Collateral Agent, Custodial Agent and Securities Intermediary, and SunTrust Bank, as Purchase Contract Agent (incorporated by reference from Exhibit 4.4 to Registration Statement on Form 8-A/A filed January 31, 2003).
4.22	Remarketing Agreement, dated January 28, 2003, among ONEOK, Inc., UBS Warburg LLC, Banc of America LLC and J.P. Morgan Securities Inc. and SunTrust Bank, as Purchase Contract Agent (incorporated by reference from Exhibit 4.5 to Registration Statement on Form 8-A/A filed January 31, 2003).
4.23	Remarketing Agreement Supplement (incorporated by reference from Exhibit 1.1 to Form 8-K filed November 16, 2005).

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4.24	Amended and Restated Rights Agreement dated as of February 5, 2003, between ONEOK, Inc. and UMB Bank, N.A., as Rights Agent (incorporated by reference from Exhibit 1 to Registration Statement on Form 8-A/A (Amendment No. 1) filed February 6, 2003).
10	ONEOK, Inc. Long-Term Incentive Plan (incorporated by reference from Exhibit 10(a) to Form 10-K for the fiscal year ended December 31, 2001, filed March 14, 2002).
10.1	ONEOK, Inc. Stock Compensation Plan for Non-Employee Directors (incorporated by reference from Exhibit 99 to Form S-8 filed January 25, 2001).
10.2	ONEOK, Inc. Supplemental Executive Retirement Plan terminated and frozen December 31, 2004 (incorporated by reference from Exhibit 10.1 to Form 8-K filed on December 20, 2004).
10.3	ONEOK, Inc. 2005 Supplemental Executive Retirement Plan dated January 1, 2005 (incorporated by reference from Exhibit 10.2 to Form 8-K filed on December 20, 2004).
10.4	Termination Agreements between ONEOK, Inc. and ONEOK, Inc. executives, as amended, dated January 1, 2003 (incorporated by reference from Exhibit 10.3 to Form 10-K for the fiscal year ended December 31, 2002, filed March 10, 2003).
10.5	Indemnification Agreement between ONEOK, Inc. and ONEOK, Inc. officers and directors, as amended, dated January 1, 2003 (incorporated by reference from Exhibit 10.4 to Form 10-K for the fiscal year ended December 31, 2002, filed March 10, 2003).
10.6	ONEOK, Inc. Annual Officer Incentive Plan (incorporated by reference from Exhibit 10(f) to Form 10-K for the fiscal year ended December 31, 2001, filed March 14, 2002).
10.7	ONEOK, Inc. Employee Nonqualified Deferred Compensation Plan, as amended December 16, 2004 (incorporated by reference from Exhibit 10.3 to Form 8-K filed December 20, 2004).
10.8	ONEOK, Inc. 2005 Nonqualified Deferred Compensation Plan dated January 1, 2005 (incorporated by reference from Exhibit 10.4 to Form 8-K filed December 20, 2004).
10.9	ONEOK, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended and restated November 19, 1998 (incorporated by reference from Exhibit 10.7 to Form 10-K for the fiscal year ended December 31, 2002, filed March 10, 2003).
10.10	Ground Lease between ONEOK Leasing Company and Southwestern Associates dated May 15, 1983 (incorporated by reference from Form 10-K dated August 31, 1983).
10.11	First Amendment to Ground Lease between ONEOK Leasing Company and Southwestern Associates dated October 1, 1984 (incorporated by reference from Form 10-K dated August 31, 1984).
10.12	Sublease between RMZ Corp. and ONEOK Leasing Company dated May 15, 1983 (incorporated by reference from Form 10-K dated August 31, 1984).
10.13	First Amendment to Sublease between RMZ Corp. and ONEOK Leasing Company dated October 1, 1984 (incorporated by reference from Form 10-K dated August 31, 1984).
10.14	ONEOK Leasing Company Lease Agreement with Oklahoma Natural Gas Company dated August 31, 1984 (incorporated by reference from Form 10-K dated August 31, 1985).

110

10.15	Second Amendment to Credit Agreement among ONEOK, Inc., as the Borrower, Bank of America, N.A., as Administrative Agent for the Lenders and as a Lender and L/C Issuer, and the Lenders, effective as of July 25, 2005 (incorporated by reference from Exhibit 10.5 to the Form 10-Q for the quarter ended June 30, 2005, filed August 3, 2005).
10.16	Third Amendment to Credit Agreement among ONEOK, Inc., Bank of America, N.A., as Administration Agent and as a lender and L/C issuer, and the Lenders, dated September 13, 2005 (incorporated by reference from Exhibit 10.2 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).
10.17	Fourth Amendment to Credit Agreement among ONEOK, Inc., Bank of America, N.A., dated September 1, 2005 (incorporated by reference from Exhibit 10.3 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).
10.18	$1,000,000,000 Credit Agreement dated as of June 27, 2005, among ONEOK, Inc., as the Borrower, Citibank, N.A, as the Administrative Agent and as a Lender, and the Lenders party thereto (incorporated by reference from Exhibit 10.1 to Form 8-K filed June 29, 2005).
10.19	First Amendment to Credit Agreement among ONEOK, Inc., Citibank, N.A., as Administrative Agent and as a Lender, and the Lenders party thereto, dated September 1, 2005 (incorporated by reference from Exhibit 10.1 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).
10.20	$10,000,000 Credit Agreement dated as of April 20, 2004 between ONEOK, Inc., as the Borrower, and KBC Bank, N.V (incorporated by reference from Exhibit 10.23 to the Form 10-K for the year ended December 31, 2004, filed March 8, 2005).
10.21	Purchase Agreement between CCE Holdings, LLC and ONEOK, Inc. dated as of September 16, 2004 (incorporated by reference from Exhibit 10.25 to the Form 10-K for the year ended December 13, 2004, filed March 8, 2005).
10.22	Purchase Agreement between Koch Hydrocarbon Management Company, LLC and ONEOK, Inc. dated May 9, 2005 (incorporated by reference from Exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 2005, filed August 3, 2005).
10.23	Asset Purchase Agreement between Koch Pipeline Company, L.P. and ONEOK, Inc. dated May 9, 2005 (incorporated by reference from Exhibit 10.2 to the Form 10-Q for the quarter ended June 30, 2005, filed August 3, 2005).
10.24	Limited Liability Company Membership Interest Purchase Agreement between Koch Holdings Enterprises, LLC and ONEOK, Inc. dated May 9, 2005 (incorporated by reference from Exhibit 10.3 to the Form 10-Q for the quarter ended June 30, 2005, filed August 3, 2005).
10.25	Limited Liability Company Membership Interest Purchase Agreement between Koch Hydrocarbon Management Company, LLC and ONEOK, Inc. dated May 9, 2005 (incorporated by reference from Exhibit 10.4 to the Form 10-Q for the quarter ended June 30, 2005, filed August 3, 2005).
10.26	Limited Liability Company Membership Interest Purchase Agreement between TXOK Acquisition, Inc. and ONEOK Energy Resources Company dated September 19, 2005 (incorporated by reference from Exhibit 10.4 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).

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10.27	Amendment No. 1 to Limited Liability Company Membership Interest Purchase Agreement between TXOK Acquisition, Inc., and ONEOK Energy Resources Company dated September 27, 2005 (incorporated by reference from Exhibit 10.6 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).
10.28	Stock Purchase Agreement between TXOK Acquisition, Inc. and ONEOK, Inc., dated September 19, 2005 (incorporated by reference from Exhibit 10.5 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).
10.29	Amendment No. 1 to Stock Purchase Agreement between TXOK Acquisition, Inc., and ONEOK, Inc., dated September 27, 2005 (incorporated by reference from Exhibit 10.7 to the Form 10-Q for the quarter ended September 30, 2005, filed November 4, 2005).
10.30	Purchase and Sale Agreement by and between TransCan Northwest Border Ltd. and Northern Plains Natural Gas Company, LLC, dated February 14, 2006.
10.31	Purchase and Sale Agreement by and between ONEOK, Inc. and Northern Border Partners, L.P., dated February 14, 2006.
10.32	Contribution Agreement by and among ONEOK. Inc., Northern Border Partners, L.P. and Northern Border Intermediate Limited Partnership, dated February 14, 2006.
10.33	Form of Services Agreement to be entered into among ONEOK, Inc. and its affiliates and Northern Border Partners, L.P. and Northern Border Intermediate Limited Partnership.
10.34	Form of Amendment No. 1 Amended and Restated Agreement of Limited Partnership of Northern Border Partners, L.P., to be entered into among Northern Plains Natural Gas Company, LLC, Pan Border Gas Company, LLC and Northwest Border Pipeline Company.
10.35	ONEOK, Inc. Profit Sharing Plan dated January 1, 2005 (incorporated by reference from Exhibit 99 to Registration Statement on Form S-8 filed December 30, 2004).
10.36	ONEOK, Inc. Employee Stock Purchase Plan, as amended and restated February 17, 2005 (incorporated by reference from Exhibit 10.2 to the Form 8-K filed February 23, 2005).
10.37	Form of Non-Statutory Stock Option Agreement (incorporated by reference from Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2004, filed November 3, 2004).
10.38	Form of Restricted Stock Award Agreement (incorporated by reference from Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2004, filed November 3, 2004).
10.39	Form of Performance Shares Award Agreement (incorporated by reference from Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2004, filed November 3, 2004).
10.40	Form of Restricted Stock Incentive Award Agreement (incorporated by reference from Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 2004, filed November 3, 2004).
10.41	Form of Performance Shares Award Agreement (incorporated by reference from Exhibit 10.5 to Form 10-Q for the quarter ended September 30, 2004, filed November 3, 2004).

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10.42	ONEOK, Inc. Equity Compensation Plan dated effective February 17, 2005 (incorporated by reference from Exhibit 10.1 to Form 8-K filed February 23, 2005).
10.43	Form of Restricted Unit Award Agreement.
10.44	Form of Performance Unit Award Agreement.
12	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001.
12.1	Computation of Ratio of Earnings to Fixed Charges for the years ended December 31, 2005, 2004, 2003, 2002 and 2001.
21	Required information concerning the registrant’s subsidiaries.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of David L. Kyle pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Jim Kneale pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of David L. Kyle pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished only pursuant to Rule 13a-14(b)).
32.2	Certification of Jim Kneale pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished only pursuant to Rule 13a-14(b)).

			Page No.
(2)	Financial Statements
	(a)	Report of Independent Registered Public Accounting Firm	58
	(b)	Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003	59
	(c)	Consolidated Balance Sheets as of December 31, 2005 and 2004	60-61
	(d)	Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	63
	(e)	Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003	64-67
	(f)	Notes to Consolidated Financial Statements	68-104
(3)	Financial Statement Schedules

All schedules have been omitted because of the absence of conditions under which they are required.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ONEOK, Inc.
		Registrant
Date: March 8, 2006	By:	/s/ Jim Kneale
		Jim Kneale
		Executive Vice President -
		Finance and Administration
		and Chief Financial Officer
		(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on this 8th day of March 2006.

/s/ David L. Kyle David L. Kyle Chairman of the Board of Directors, President, and Chief Executive Officer	/s/ Curtis L. Dinan Curtis L. Dinan Senior Vice President and Chief Accounting Officer
/s/ William M. Bell William M. Bell Director	/s/ Douglas A. Newsom Douglas A. Newsom Director
/s/ James C. Day James C. Day Director	/s/ Gary D. Parker Gary D. Parker Director
/s/ William L. Ford William L. Ford Director	/s/ Eduardo A. Rodriguez Eduardo A. Rodriguez Director
/s/ Bert H. Mackie Bert H. Mackie Director	/s/ Mollie B. Williford Mollie B. Williford Director
/s/ Pattye L. Moore Pattye L. Moore Director

114

EX-10.30

Exhibit 10.30

PURCHASE AND SALE AGREEMENT

by and between

TransCan Northwest Border Ltd.

and

Northern Plains Natural Gas Company, LLC

for the purchase and sale of

all of the shares of common stock of

Northwest Border Pipeline Company,

a Delaware corporation

Dated as of February 14, 2006

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of this 14th day of February, 2006, by and among TransCan Northwest Border Ltd., a Delaware corporation (the “Seller”), and Northern Plains Natural Gas Company, LLC, a Delaware limited liability company (the “Buyer”) (each a “Party” and, together, the “Parties”).

WHEREAS, the Seller owns 100% of the issued and outstanding Common Stock (as defined in Section 3.2) of Northwest Border Pipeline Company, a Delaware corporation (the “Company”);

WHEREAS, the Company owns a 0.175% general partner percentage interest (“Company’s NBP GP Interest”) in Northern Border Partners, L.P, a publicly traded master limited partnership formed under the laws of Delaware (“NBP”), and a 0.17677% general partner percentage interest (“Company’s NBILP GP Interest”) in Northern Border Intermediate Limited Partnership, a Delaware limited partnership (“NBILP”, and together with NBP, the “Partnerships” and the Company’s NBILP GP Interest together with the Company’s NBP GP Interest, the “Company’s GP Interests”);

WHEREAS, the remaining general partner percentage interests (the “Other GP Interests”) in each of NBP and NBILP are held by the Buyer and Pan Border Gas Company, LLC, a Delaware limited liability company and an affiliate of the Buyer;

WHEREAS, upon the terms and subject to the conditions set forth herein, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, all of the Common Stock;

WHEREAS, TransCanada PipeLines Limited, a Canadian corporation (“TCPL”), and TransCanada PipeLine USA Ltd., a Nevada corporation and wholly owned subsidiary of TCPL ( “Seller Parent”), concurrent with the execution of this Agreement, have executed and delivered a Seller Parent guarantee (the “Seller Parent Guarantee”) for the benefit of the Buyer which guarantees the performance by the Seller of the Seller’s obligations under this Agreement; and

WHEREAS, ONEOK, Inc., an Oklahoma corporation (“Buyer Parent”), concurrent with the execution of this Agreement, has executed and delivered a Buyer Parent guarantee (the “Buyer Parent Guarantee”) for the benefit of the Seller which guarantees the performance by the Buyer of the Buyer’s obligations under this Agreement.

NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the Parties hereto hereby agree as follows:

ARTICLE I

SALE AND PURCHASE

Section 1.1 Agreement to Sell and to Purchase. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined in Section 2.1 below), the Seller shall sell, assign, transfer, convey and deliver all of the Common Stock, free and clear of any liens, claims, charges, mortgages, security interests, agreements, obligations or other legal or equitable encumbrances of any kind (“Encumbrances”), other than those specified in (a) the Amended and Restated Agreement of Limited Partnership of NBP dated as of October 1, 1993, as amended (the “NBP Partnership Agreement”), or (b) the Amended and Restated Agreement of Limited Partnership of NBILP dated as of October 1, 1993, as amended (“NBILP Partnership Agreement”, and together with the NBP Partnership Agreement, the “Partnership Agreements”), to the Buyer, and the Buyer shall purchase and accept such Common Stock from the Seller in exchange for a cash payment of (i) $40 million (the “Base Purchase Price”), minus (ii) in recognition of costs and expenses to be incurred by the Buyer and in recognition of the Buyer entering into a transition services agreement with the Seller or the Seller’s affiliate (the terms and conditions of which are summarized on Exhibit A) each with respect to the assumption by the Seller or the Seller’s affiliate of the operatorship of Northern Border Pipeline Company, a Texas general partnership (“NBPC”) (the “Operatorship Transfer”), an amount equal to $10 million, plus (iii) the aggregate amount of all cash capital contributions or other cash payments made by the Company to NBP or NBILP from and after 11:59 p.m. on December 31, 2005 (the “Effective Time”), minus (iv) the aggregate amount of all distributions, dividends, or payments made by NBP or NBILP to the Company on or after the Effective Time that relate to cash received by the Company after the Effective Time to the extent the Company distributes such amount prior to the Closing Date (the “Adjusted Purchase Price”).

ARTICLE II

CLOSING

Section 2.1 Closing. The closing of the sale and purchase of Common Stock (the “Closing”) shall occur on a date (such date, the “Closing Date”) following the satisfaction or waiver of each of the conditions precedent specified in this Agreement hereof (any or all of which may be waived in writing by the respective parties whose performance is conditioned upon satisfaction of such conditions precedent). Subject to the satisfaction or waiver of each of the conditions precedent specified in this Agreement hereof pursuant to the previous sentence, the Closing shall occur immediately prior to the closing of a transaction pursuant to which affiliates of the Buyer are conveying certain of its subsidiaries to NBP (“Asset Transfer Transactions”) pursuant to one or more contribution agreements or purchase and sale agreements. Immediately following the Closing of the Asset Transfer Transactions, NBILP and TC PipeLines Intermediate Limited Partnership, an affiliate of the Seller, will close a transaction pursuant to which NBILP will sell a 20% general partnership interest in NBPC to TC PipeLines Intermediate Limited Partnership (“Northern Border Pipeline Interest Transaction”), which transaction requires the execution of binding documentation evidencing the

2

Operatorship Transfer. The Closing shall take place at the offices of Gable & Gotwals, 100 W. 5^th Street, Suite 1800, Tulsa, OK 74103, or at such other place as the Seller and the Buyer shall agree.

Section 2.2 Payments at Closing. Not less than three (3) business days prior to the Closing Date the Seller shall deliver to the Buyer a statement certified by the Seller certifying any adjustments that should be made to the Base Purchase Price necessary to determine the Adjusted Purchase Price. Subject to the parties agreeing to the Seller’s calculation of the Adjusted Purchase Price, at the Closing, the Buyer shall pay the Adjusted Purchase Price to the Seller by wire transfer of immediately available funds to an account designated by the Seller in writing not less than two (2) business days prior to the Closing Date.

Section 2.3 Deliveries by the Seller. At the Closing, the Seller shall deliver the following documents to the Buyer:

(a) certificates evidencing the Common Stock, duly endorsed in blank or with appropriate stock powers;

(b) resolutions of the Board of Directors of (i) the Seller authorizing the execution, delivery and performance of this Agreement and all other documents related hereto, and (ii) each of TCPL and the Seller Parent, authorizing the execution, delivery and performance of the Seller Parent Guarantee and for each of (i) and (ii) hereof, a certificate of the Secretary of the Seller, TCPL and the Seller Parent, as applicable, dated as of the date of the Closing, to the effect that such resolutions were duly adopted and are in full force and effect;

(c) certificates of (i) an officer of the Seller stating that the conditions specified in Sections 6.3(a) and (b) have been satisfied, and (ii) the Secretary of the Seller, TCPL and the Seller Parent (as applicable) certifying true and complete copies of the certificate of incorporation and bylaws of the Seller, TCPL and the Seller Parent (as applicable);

(d) resignations of each director and officer of the Company and each of the Company’s representatives on or to the Policy Committee of NBP and NBILP, the Management Committee of NBPC and any other committee of NBP, NBILP or any of their respective affiliates, including NBPC, for which the Company has representatives;

(e) the certificate of incorporation and bylaws of the Company, certified by the Secretary of the Company;

(f) a certificate of non-foreign status for the Seller satisfying the requirements of Treasury Regulation Sections 1.445-2(c) and 1.897(2)(h); and

(g) such other certificates or documents as may be reasonably requested by the Buyer pursuant to this Agreement.

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Section 2.4 Deliveries by the Buyer. At the Closing, the Buyer shall deliver the following documents to the Seller:

(a) resolutions of the Board of Directors of (i) the Buyer authorizing the execution, delivery and performance of this Agreement and all other documents related hereto, and (ii) Buyer Parent, authorizing the execution, delivery and performance of the Buyer Parent Guarantee and for each of (i) and (ii) hereof, a certificate of the Secretary of the Buyer and Buyer Parent, as applicable, dated as of the date of Closing, to the effect that such resolutions were duly adopted and are in full force and effect;

(b) certificates of (i) an officer of the Buyer stating that the conditions specified in Sections 6.2(a) and (b) have been satisfied or waived, and (ii) certificate of Secretary of the Buyer and the Buyer Parent (as applicable) certifying true and complete copies of the certificate of incorporation and bylaws of the Buyer and the Buyer Parent (as applicable); and

(c) such other certificates or documents as may be reasonably requested by the Seller pursuant to this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents and warrants to the Buyer that:

Section 3.1 Corporate Organization. The Seller and the Company are each a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. The Company has all requisite power and authority and all governmental licenses, authorizations, permits, consents and approvals to own its properties and assets and to conduct its business as now conducted. The Company is duly qualified to do business as a foreign entity and is in good standing in every jurisdiction where the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification necessary except for failures to be so qualified or in good standing as would not reasonably be expected to impair its ability to consummate the transactions contemplated by this Agreement.

Section 3.2 Capitalization; Title. The Company’s only authorized capital stock is 1,000 shares of common stock (the “Common Stock”), all of which is issued and outstanding and owned of record and beneficially by the Seller. All of the Common Stock has been duly authorized and validly issued and is fully paid and nonassessible, free and clear of any Encumbrances. There are no outstanding options, warrants, agreements, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire the Common Stock or any other equity security of the Company. Except for this Agreement, there are no voting trusts or other agreements or understandings to which the Seller or the Company is a party that restrict or otherwise relate to the voting, dividend rights or disposition of the Common Stock. There is no indebtedness of the Company having general voting rights issued and outstanding. The Company has no obligation to make any capital contributions to any Person, except as

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required under the Partnership Agreements. Except for this Agreement, there are no outstanding obligations of any person to repurchase, redeem or otherwise acquire outstanding Common Stock or any securities convertible into or exchangeable for any Common Stock. The Seller has good, valid and marketable title to the Common Stock and the sale and transfer of the Common Stock by the Seller to the Buyer hereunder will transfer good, valid and marketable title to the Common Stock to the Buyer free and clear of any Encumbrances.

Section 3.3 Equity Interests; No Subsidiaries; No Encumbrances. The Company is the record and beneficial owner of, and has good, valid and marketable title to, the Company’s GP Interests. Except for the Company’s GP Interests, the Company does not own, directly or indirectly, any shares of capital stock, voting rights or other equity interests or investments in any other Person. The Company’s NBP GP Interest and the Company’s NBILP GP Interest represent all of the Seller and its affiliates’ interest in NBP and NBILP, respectively. The Company does not have any rights to acquire by any means, directly or indirectly, any capital stock, voting rights, equity interests or investments in another Person. Except as set forth in the Partnership Agreements, the Company’s GP Interests and the capital accounts related thereto are, and will be at the Closing, owned by the Company free and clear of any Encumbrance. Except for the Partnership Agreements, the Seller and its affiliates have not entered into and are not a party to, or subject to any agreement with respect to, or relating to, the Company’s GP Interests.

Section 3.4 Validity of Agreement; Authorization. The Seller has the requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by the Board of Directors of the Seller and no other proceedings on the part of the Seller is necessary to authorize such execution, delivery and performance. This Agreement has been duly executed and delivered by the Seller and constitutes the Seller’s valid and binding obligation enforceable against the Seller in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar law affecting the enforcement of creditors’ rights generally.

Section 3.5 No Conflict or Violation. The execution, delivery and performance by the Seller of this Agreement does not and will not:

(a) violate or conflict with any provision of its certificate of incorporation or bylaws or any other organizational document of the Seller or the Company;

(b) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default or permit termination of or cause any obligation, penalty or premium to arise or accrue under any material contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Seller or the Company is a party or by which any of them is bound or to which any of their respective properties or assets is subject;

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(c) violate any applicable provision of any law, statute, rule, or regulation (“Applicable Law”) or judgment, order, writ, injunction, decree or award (“Order”) of any foreign, federal, tribal, state, provincial or local government, court, arbitrator, agency or commission or other governmental or regulatory body or authority (“Governmental Authority”) in a manner that would have a Material Adverse Effect (as defined in Section 6.2(d) below); or

(d) result in the creation or imposition of any Encumbrance upon any of the properties or assets of the Company.

Section 3.6 Consents and Approvals; Compliance with Laws. No permit, license, approval or authorization of, or filing, registration or qualification with, or notification to or waiver or consent from, any Governmental Authority or other Person (each a “Consent”) is required as a condition to the execution and delivery of this Agreement by the Seller or the performance of the Seller’s obligations hereunder other than those Consents that, if not obtained, would not have a Material Adverse Effect. The Company is, and at all times since August 16, 2002 has been, in material compliance with all Applicable Laws. Since August 16, 2002, the Company has not received any written notice from any Governmental Authority regarding any actual or possible material violation of or material failure to comply with any Applicable Laws. Other than the Consents held by the Company, no other Consents are required by the Company for the conduct of its business as now being conducted.

Section 3.7 Tax Matters.

(a) For purposes of this Agreement, “Tax Returns” shall mean returns, reports, exhibits, schedules, information statements and other documentation (including any additional or supporting material) filed or maintained, or required to be filed or maintained, in connection with the calculation, determination, assessment or collection of any Tax and shall include any amended returns required as a result of examination adjustments made by the Internal Revenue Service or other Tax authority. For purposes of this Agreement, “Tax” or “Taxes” shall mean any and all federal, state, local, foreign and other taxes, levies, fees, imposts and duties (including any interest, penalties or additions to the tax imposed in connection therewith or with respect thereto), including taxes imposed on, or measured by, income, franchise, profits or gross receipts, ad valorem, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes and customs duties and shall include any liability for Taxes under Treas. Reg. 1.1502-6 or any analogous provision of state, local or foreign law, as a transferee or operation of law, or by contract.

(b) Except as set forth on Schedule 3.7, (i) the Company has duly and timely filed (or joined in the filing of) when due all material Tax Returns required by applicable law to be filed by it; (ii) all such Tax Returns were true, correct and complete

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in all material respects as of the time of such filing; (iii) all Taxes relating to periods ending on or before the date hereof owed by the Company, Seller or the Seller Parent (whether or not shown on any Tax Return) at any time on or prior to the date hereof, if required to have been paid, have been paid (except for Taxes which are being contested in good faith in appropriate proceedings); (iv) there is no action, suit, proceeding, audit or claim now pending against, or with respect to, the Company or the Seller Parent in respect of any Tax or Tax assessment, nor is any written claim for additional Tax or assessment asserted by any Tax authority; (v) there is no power of attorney given by or binding upon the Company with respect to Taxes for any period for which the statute of limitations (including waivers or extensions) has not yet expired; (vi) the Company does not have any outstanding request for any extension of time within which to pay its Taxes or file its Tax Returns; (vii) there has been no waiver or extension of any applicable statute of limitations for the assessment or collection of any Taxes of the Company; (viii) the Seller and the Seller Parent are not “foreign persons” within the meaning of Section 1445 of the United States Internal Revenue Code of 1986, as amended (the “Code”); (ix) the Company is not a party to any agreement providing for the payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax matters; (x) the Company has withheld and paid all Taxes required to be withheld by it in connection with any amounts paid or owing to any employee, creditor, independent contractor or other third party; and (xi) the Company is and will be on the Closing Date a member of the selling consolidated group (within the meaning of Section 338(h)(10)(B) of the Code) of which Seller Parent is the common parent. To the knowledge of the Seller, the Company has never had any material items of taxable income, deduction or expense, other than any such items derived from its ownership of the Company’s GP Interests.

Section 3.8 Absence of Undisclosed Liabilities. The Company has no Indebtedness and has no other liabilities or obligations of any nature whatsoever, whether known or unknown, accrued, absolute, contingent or otherwise, or whether due or become due (“Liabilities”) other than (a) Liabilities resulting directly from the Company being a general partner in NBP or NBILP or being a former general partner in NBPC and (b) liens for current Taxes not yet due and payable and assessments not in default. The Seller is not aware of any Liabilities of the kind described in clause (a) above that would have a disproportionate impact on the Company as opposed to the holders of the Other GP Interests or the current or former general partners of NBPC. “Indebtedness” means all outstanding obligations for borrowed money, including (i) indebtedness evidenced by notes, bonds, debentures or other instruments (and including all outstanding principal, prepayment premiums, if any, and accrued interest, fees and expenses related thereto), (ii) any outstanding obligations under capital leases and purchase money obligations, (iii) any amounts owed with respect to drawn letters of credit and (iv) any outstanding guarantees of obligations of the type described in clauses (i) through (iii) above.

Section 3.9 No Litigation. There are no Legal Proceedings (as defined below) pending or, to the Seller’s knowledge, threatened against or involving the Company. “Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings (public or private), investigations or governmental proceedings before any Governmental Authority or arbitrator.

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Section 3.10 Employee Benefit Matters. The Company does not have any employees or any liabilities under any plan, program or other arrangement providing for compensation, severance, termination or retirement pay, performance awards, stock or stock related awards or other employee benefits, including, without limitation, each “employee benefit plan”, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. The Company is not a party to, or bound by, any collective bargaining agreement, contract or other understanding with a labor union. There are no unfair labor practice or labor arbitration proceedings pending or, threatened in writing against the Company.

Section 3.11 Contracts. Except for the Partnership Agreements and the tax allocation agreements described on Schedule 3.7, the Company has not entered into and is not a party to, or subject to any agreement.

Section 3.12 Bank Accounts. The Company does not have any bank accounts.

Section 3.13 No Brokers. The Seller has not employed the services of an investment broker, financial advisor, broker or finder in connection with this Agreement or the transactions contemplated hereby.

Section 3.14 Intercompany Matters. Except for (a) any intercompany matters between the Company on the one hand and NBP or NBILP on the other that relate solely to the Company being a general partner in one or both of those partnerships, and (b) as described in Schedule 3.14, there are no intercompany contracts or other arrangements between the Company on the one hand and the Seller and its affiliates (other than the Company) on the other, including any (i) outstanding loans made to the Company by NBP, NBILP, NBPC or their affiliates (each a “Related Party”), (ii) outstanding loans made by the Company to a Related Party, (iii) outstanding receivables of the Company that are received by the Company from a Related Party, (iv) outstanding payables of the Company that are payable to a Related Party, (v) services provided by any party above for or on behalf of the Company (including all costs and expenses charged to or on behalf of the Company in respect thereof) under arrangements existing after the Closing, (vi) services provided by the Company for any Related Party (including all costs and expenses charged by the Company in respect thereof) under arrangements existing after the Closing and (vii) other outstanding Liabilities or arrangements relating to the Company on the one hand and any Related Party on the other hand.

Section 3.15 Company’s Activities. During the period that the Seller and its affiliates have been the owners of the Company, except for the agreements set forth on Schedule 3.14, the Company is and has been engaged solely in the business of acting as general partner of each of NBP and NBILP and the Company has not had and does not have any assets or business operations that are not related to such activities. To the knowledge of the Seller, prior to date on which the Seller and its affiliates became the owners of the Company, the Company was engaged solely in the business of acting as general partner of each of NBP, NBILP and NBPC, and did not have any assets or business operations that were not related to such activities.

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Section 3.16 Reliance by Seller. In entering into this Agreement, in selling the Common Stock and in consummating the other transactions contemplated herein, the Seller has relied solely upon its own investigation and the express representations and warranties of the Buyer set forth in Article IV of this Agreement, and neither the Buyer nor its respective officers, directors, shareholders, employees, affiliates, agents or representatives has made any representation or warranty as to the Buyer or this Agreement, except as expressly set forth in this Agreement. Seller is not aware of any breach of, or any inaccuracy in, any of the representations and warranties made by it in this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to the Seller that:

Section 4.1 Corporate Organization. The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite power and authority to own its properties and assets and to conduct its business as now conducted, except for failures to have such qualification as would not impair its ability to consummate the transactions contemplated by this Agreement. The Buyer is duly qualified to do business as a foreign entity in every jurisdiction where the character of the properties owned or leased by the Buyer or the nature of the business conducted by the Buyer makes such qualifications necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to impair its ability to consummate the transactions contemplated by this Agreement.

Section 4.2 Validity of Agreement; Authorization. The Buyer has the requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement by the Buyer and the performance of the Buyer’s obligations hereunder have been duly authorized by the Board of Directors of the Buyer, and no other proceedings on the part of the Buyer are necessary to authorize the execution, delivery and performance. This Agreement has been duly executed and delivered by the Buyer and constitutes the valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally.

Section 4.3 No Conflict or Violation; No Defaults. The execution, delivery and performance by the Buyer of this Agreement does not and will not:

(a) violate or conflict with any provision of its certificate of incorporation, bylaws or other organizational document of the Buyer;

(b) violate, or result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contract, lease, loan agreement,

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mortgage, security agreement, trust indenture or other agreement or instrument to which the Buyer is a party or by which it is bound or to which any of its properties or assets is subject;

(c) violate any Applicable Law or Order of any Governmental Authority in a manner that would have a material adverse effect on the Buyer’s ability to consummate the transactions described herein; or

(d) result in the creation or imposition of any Encumbrance upon any of the properties or assets of the Buyer where such Encumbrance would impair the Buyer’s ability to perform its obligations under this Agreement.

Section 4.4 Consents and Approvals. No Consent is required as a condition to the execution and delivery of this Agreement by the Buyer or the performance of the Buyer’s obligations hereunder other than those Consents that, if not obtained, would have a material adverse effect on the Buyer’s ability to consummate the transactions described herein.

Section 4.5 No Brokers. Except for UBS Securities, LLC (the fees of which shall be paid solely by the Buyer), no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by the Buyer or any of its affiliates.

Section 4.6 Securities Act. The Buyer is acquiring the Common Stock for the Buyer’s own account and not with a view to a distribution thereof within the meaning of Section 2(11) of the Securities Act of 1933, as amended.

Section 4.7 Buyer’s Investigation. The Buyer is an informed and sophisticated purchaser of companies similar to the Company and, in connection with the transactions contemplated hereby, has sought the advice of experts who are experienced in the evaluation and purchase of companies similar to the Company. The Buyer has undertaken such investigation of the Company as it has deemed necessary to enable it to make an informed decision with respect to this Agreement and the transactions contemplated hereby. In entering into this Agreement, in purchasing the Common Stock and in consummating the other transactions contemplated herein, the Buyer has relied solely upon its own investigation and the express representations and warranties of Seller set forth in Article III of this Agreement, and neither the Seller nor its respective officers, directors, shareholders, employees, affiliates, agents or representatives has made any representation or warranty as to the Seller, the Company or this Agreement, except as expressly set forth in this Agreement. Buyer is not aware of any breach of, or any inaccuracy in, any of the representations and warranties made by it in this Agreement.

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ARTICLE V

COVENANTS

Section 5.1 Filings. Intentionally deleted.

Section 5.2 Other Actions. Each of the Buyer and the Seller, on its own behalf and on behalf of the Partnerships, shall use its commercially reasonable efforts to consummate the transactions contemplated herein and make effective as promptly as practicable, including (a) defending lawsuits or other proceedings challenging this Agreement or the consummation of any part of the transactions contemplated herein, (b) using commercially reasonable efforts to lift any injunction or order adversely affecting this Agreement or the consummation of the transactions contemplated herein, or (c) using commercially reasonable efforts to take any other action as may be required in connection with the consummation of the transactions to give effect to the transactions contemplated herein, including by promptly making all filings and notifications required to be made with any Governmental Authority, if any.

Section 5.3 Further Assurances. Following the Closing, the Seller shall execute and deliver such further instruments of assignment, transfer, conveyance, endorsement, direction or authorization and other documents as the Buyer may reasonably request in order to perfect title of the Buyer and its successors and assigns to the Common Stock or otherwise to effectuate the purposes of this Agreement.

Section 5.4 Tax Covenants.

(a) Seller Group. For purposes of this Section 5.4, the “Seller Group” means, with respect to Seller Parent, the affiliated group of entities filing a consolidated federal income Tax Return of which the Seller and the Company are members (with the Seller Parent being the common parent of the Seller Group).

(b) Preparation of Tax Returns and Payment of Taxes. The Seller covenants that it shall be responsible for (i) all Liability for federal, state or local income Taxes of the Company for all periods ending on or before the Closing Date; (ii) all Liability for other Taxes of the Company for Pre-Closing Periods (as defined below), (iii) all Liability of the Company for Taxes for the portion of any Straddle Period (as defined below) through the Closing Date as provided in Section 5.4(e); and (iv) all Liability for Pre-Closing Periods imposed upon the Company for Taxes of any other person or entity pursuant to Treas. Reg. Section 1.1502-6 or any other provision of state or local law.

(c) Consolidated, Combined or Unitary Returns. Seller Parent shall cause to be included in the consolidated federal income Tax Returns (and the state income Tax Returns of any state that permits consolidated combined, or unitary income Tax Returns, if any) of the Seller Group for all taxable periods ending on or before the Closing Date (“Pre-Closing Periods”) all tax items of the Company which are required to be included herein, shall cause such income Tax Returns to be timely filed with the appropriate taxing authorities, and shall timely pay (and be entitled to any refund) all Taxes due with respect to the periods covered by such income Tax Returns.

(d) Other Tax Filings. With respect to any federal, state or foreign income or franchise Tax Return covering a Pre-Closing Period that is required to be filed after the Closing Date with respect to the Company that is not described in Section 5.4(c), Seller Parent shall cause such Tax Return to be prepared, shall cause to be included in

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such Tax Return all tax items required to be included therein, shall cause such Tax Return to be timely filed and shall remit the amount shown as due on such Tax Return with the appropriate taxing authority. Not later than 30 days prior to the due date of each such Tax Return, Seller Parent shall furnish to Buyer a copy of such Tax Return. Seller Parent shall permit the Buyer to review and comment on each such Tax Return prior to filing and shall make such revisions to such Tax Returns as are reasonably and timely requested by the Buyer. With respect to any other Tax Returns covering a Pre-Closing Period that is required to be filed after the Closing Date with respect to the Company and that is not described in Section 5.4(c) or the preceding sentences of this Section 5.4(d), the Buyer shall cause such Tax Return to be prepared and shall cause to be included in such Tax Return all tax items required to be included therein. Not later than 30 days prior to the due date of each such Tax Return, the Buyer shall furnish to Seller Parent a copy of such Tax Return. The Buyer shall permit Seller Parent to review and comment on each such Tax Return prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by Seller Parent; provided Buyer shall not be required to make any revisions inconsistent with Section 5.4 (f). Not later than five days prior to the due date of any Tax Return covering a Pre-Closing Period (other than a Tax Return described in Section 5.4(c) and any income or franchise Tax Return covering a Pre-Closing Period described above), Seller Parent shall remit to the Buyer the amount shown as due on such Tax Return. The Buyer shall cause such Tax Return to be filed and shall remit the amount shown as due on the Tax Return with the appropriate taxing authority. Seller Parent shall be entitled to any refund of Taxes due with respect to any Pre-Closing Period, and the Buyer shall pay over to Seller Parent any such refund, net of any taxes or other costs incurred with respect to such refund, within 15 days after receipt thereof.

(e) Allocations. With respect to any Tax Return covering a taxable period beginning before the Closing Date and ending after the Closing Date (a “Straddle Period”) that is required to be filed after the Closing Date with respect to the Company, the Buyer shall cause such Tax Return to be prepared, shall cause to be included in such Tax Return all Tax items required to be included therein, shall furnish a copy of such Tax Return to Seller Parent not later than 30 days prior to the due date (taking into account extensions) of each such Tax Return, shall file timely such Tax Return with the appropriate taxing authority, and shall timely pay all Taxes due with respect to the period covered by such Tax Return. The Buyer shall permit Seller Parent to review and comment on each such Tax Return prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by Seller Parent; provided that Buyer shall not be required to make any revision that would be inconsistent with the Company’s past practices with respect to the item in question unless otherwise required by law. The Buyer shall determine (by an interim closing of the books as of the Closing Date except for ad valorem Tax which shall be pro rated on a daily basis) the Tax that would have been due with respect to the period covered by such Tax Return if such taxable period ended on and included the Closing Date. If (i) the amount of Tax so determined exceeds (ii) the amount of payments made in respect to such Tax as of the Closing Date, Seller Parent shall pay to the Buyer the amount of such excess not later than five days after receipt from the Buyer of evidence of the filing of such Tax Return; if the amount determined in clause (ii) exceeds the amount determined in clause (i), the Buyer shall pay to Seller Parent the amount of such excess not later than five days after the filing of such

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Tax Return. Any Tax refunds that are received by the Buyer or the Company that relate to Tax periods or portions thereof ending on or before the Closing Date shall be for the account of Seller Parent, and the Buyer shall pay over to Seller Parent any such refund, or appropriate portion thereof, net of any taxes or costs resulting from the receipt of such refund, within 15 days after receipt thereof.

(f) Miscellaneous. Any Tax Return related to the Company to be prepared pursuant to the provisions of this Section 5.4 shall be prepared in a manner consistent with practices followed in prior years with respect to similar Tax Returns of the Company, except as otherwise required by law. The Buyer shall not file an amended Tax Return related to the Company for any period ending on or prior to the Closing Date without the consent of Seller Parent, which shall not be unreasonably withheld, conditioned or delayed.

(g) Tax Indemnity. From and after the Closing Date, Seller Parent shall protect, defend, indemnify and hold harmless the Buyer and the Company from any and all Taxes (including any obligation to contribute to the payment of any Taxes determined on a consolidated, combined, or unitary basis with respect to a group of corporations that includes or included the Company) which are (i) imposed on Seller Parent or any member (other than the Company) of the consolidated, unitary or combined group which includes or included the Company for any period that ends on or before the Closing Date, that the Buyer or the Company pays, otherwise satisfies in whole or in part, or results in Encumbrances on any of the Buyer’s or the Company’s assets; or (ii) imposed on the Company in respect of its income, business, property or operations or for which it may otherwise be liable (A) for any taxable period of the Company or portion thereof ending prior to the Closing Date as provided in this Section 5.4 (including without limitation Taxes for which Seller Parent is responsible pursuant to Sections 5.4(b)-(e)), (B) resulting by reason of the several Liability of the Company pursuant to Treas. Reg. Section 1.1502-6 or any analogous state, local or foreign law or regulation or by reason of its having been a member of any consolidated, combined or unitary group on or prior to the Closing Date, (C) resulting from its ceasing to be a member of the Seller Group, (D) resulting from the making of the Section 338(h)(10) Elections (as defined below in Section 5.4(k)) if made pursuant to Section 5.4(k), (E) resulting from the breach of Seller Parent’s covenants set forth in this Section 5.4 and/or breach of the representations and warranties set forth in Section 3.7 or (F) relating to any reorganization of the Company done on or prior to the Closing Date. Seller shall have no Liability under this Section 5.4(g) to the extent that such Liability would not have been incurred but for (y) conduct of the Buyer or its affiliates that conflict with this Agreement or (z) failures by the Buyer or its affiliates to make filings or take other actions required to be taken by the Buyer or its affiliates under this Agreement (in each case, including the Company as an affiliate of the Buyer from and after the Closing Date and, in each case, other than matters resulting from or arising out of actions taken or failed to be taken at the direction of Seller). Indemnification for Taxes pursuant to this section, shall also include any reasonable professional fees, accounting fees and other out of pocket costs incurred by Buyer and the Company relating to the Tax liability for which indemnification is provided or in enforcing this indemnity.

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(h) Access to Information. Seller Parent and each member of the Seller Group shall grant to the Buyer (or its designees) access at all reasonable times to all of the information, books, and records relating to the Company within the possession of Seller or any member of the Seller Group (including work papers and correspondence with taxing authorities), and shall afford the Buyer (or its designees) the right (at the Buyer’s expense) to take extracts therefrom and to make copies thereof, to the extent, reasonably necessary to permit the Buyer (or its designees) to prepare Tax Returns and to conduct negotiations with taxing authorities. The Buyer shall grant or cause the Company to grant to Seller Parent (or its designees) access at all reasonable times to all of the information, books and records relating to the Company within the possession of the Buyer or the Company (including work papers and correspondence with taxing authorities), and shall afford Seller Parent (or its designees) the right (at Seller Parent’s expense) to take extracts therefrom and to make copies thereof, to the extent reasonably necessary to permit Seller Parent (or its designees) to prepare Tax Returns and to conduct negotiations with taxing authorities.

(i) Tax Sharing Agreements. Seller Parent shall as of the Closing Date ensure that no Tax allocation agreement or Tax sharing agreement with respect to the Company is in force or effect or results in any obligation of the Company on and after the Closing Date and that there shall be no Liability of the Company on and after the Closing Date under any such agreement.

(j) Assistance and Cooperation. After the Closing Date, in the case of any audit, examination, claim or other proceeding (“Proceeding”) with respect to Taxes of the Company for which Seller Parent is or may be liable or entitled to a refund pursuant to this Agreement in respect of tax periods ending on or before the Closing Date, the Buyer shall promptly inform Seller Parent of such Proceeding, and shall afford Seller Parent, at Seller Parent’s expense, the opportunity to control the conduct of such Proceedings and, if there is substantial authority therefore, initiate any claim for refund, file any amended return or take any other action which Seller Parent deems appropriate with respect to such Taxes; provided that Seller Parent (i) reaffirms in writing at the time that it takes control of the Proceeding that it is responsible for 100% of all Tax liability relating to such Proceeding, (ii) agrees to fund all outlays required to pursue such Proceeding and (iii) agrees to reimburse Buyer for all reasonable out of pocket costs incurred by Buyer in connection with such Proceedings. The Buyer shall execute or cause to be executed powers of attorney or other documents necessary to enable Seller Parent to control such Proceeding. Buyer shall be entitled to participate in any such Proceeding which Seller has elected to control and shall be kept fully and timely informed by Seller Parent of all developments and communications. Any Proceeding with respect to Taxes of the Company for a period which includes but does not end on the Closing Date shall be controlled by the Buyer. Notwithstanding any provision of this Section 5.4(j) to the contrary, Seller Parent shall not settle any Proceeding, initiate any claim for refund or file any amended Tax Return of the Company without the prior written consent of the Buyer, which consent shall not be unreasonably withheld, conditioned or delayed if, as a result of such Proceeding, claim for refund or amended Tax Return, the Taxes payable by the Buyer or the Company for a taxable period (or portion of a period) for which Seller Parent is not obligated to indemnify the Buyer or the

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Company pursuant to this Section 5.4 would be (or there is a material risk that such Taxes would be) increased. Notwithstanding any provision of this Section 5.4 to the contrary, the Buyer shall not settle any Proceeding, initiate any claim for refund or file any amended return with respect to the Company for a tax period ending on, before or including the Closing Date, without the prior written consent of Seller Parent, which consent shall not be unreasonably withheld, conditioned, or delayed if, as a result of such Proceeding, claim for refund or amended Tax Return, the Taxes for which Seller Parent is obligated to indemnify the Buyer or the company pursuant to this Section 5.4 would be (or there is a substantial risk that such Taxes would be ) increased, except as required to reflect any agreed audit adjustment. Seller Parent will allow the Company and its counsel to participate at its own expense in any Proceedings related to the consolidated federal income Tax Returns of the Seller Group to the extent such returns relate to the Company.

(k) Section 338(h)(10) Election.

(i) With respect to the Buyer’s acquisition of the Common Stock, the Buyer and the Seller acknowledge and agree that the Buyer intends to make an election under Code Section 338(h)(10) (such election and any available elections under any substantially similar state, local or foreign law that the Buyer specifies in its notice are collectively referred to as the “Section 338(h)(10) Election”), with respect to the Company. The Seller and the Buyer (1) will report the purchase by the Buyer of the Common Stock under this Agreement consistent with such Section 338(h)(10) Election, (2) shall take no position contrary thereto in any Tax Return, any proceeding before any taxing authority or otherwise and (3) shall cooperate with each other to take all other actions necessary and appropriate to effect and preserve a timely Section 338(h)(10) Election. The Buyer shall provide to the Seller within 150 days after the Closing Date Buyer’s proposed allocation of the purchase price for the deemed sale of assets resulting from the making of the Section 338(h)(10) Election, setting forth the estimate fair market values of the assets of the Company. On or before the date that is 180 days after the Closing Date, the Buyer and the Seller shall agree upon a final allocation of such purchase price (the “Final Allocation”).

(ii) The Buyer shall be responsible for the preparation and filing of all forms related to or required by such election (or any similar state, local or foreign election) (such forms being referred to as the “Election Forms”). The Buyer shall deliver the Election Forms to the Seller within 150 days of the Closing Date. The Seller shall provide to the Buyer any information required to complete such Election Forms and shall execute and deliver such Election Forms to the Buyer within 30 days of Seller’s receipt of such Election Forms. The Buyer shall be responsible for filing the Election Forms with the proper Taxing Authorities; provided, that the Seller shall be responsible for filing any Election Form that must be filed with its Tax Returns.

(iii) The Buyer and the Seller each agree that it shall not, and shall not permit any of its respective affiliates to, take any action to modify the Election

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Forms following the execution thereof, or to modify or revoke the Section 338(h)(10) Election, or any such election available under any similar state, local or foreign law if requested by the Buyer, following the filing of any of the Election Forms, without the prior written consent of the Buyer or the Seller, as the case may be.

(iv) Each of the Buyer and the Seller shall file, and shall cause each of its respective affiliates to file, all Tax Returns in a manner consistent with the information contained in the Election Forms as filed and the Final Allocation, unless otherwise required because of a change in Applicable Law relating to Taxes.

Section 5.5 Books and Records. Promptly after the Closing Date, the Seller shall deliver to the Buyer the corporate books and records of the Company and all other assets and properties of the Company; provided, however, that the Seller shall deliver the Company’s minute books, which have been updated to include any minutes or resolutions through and including the Closing Date, within ten days after the Closing Date.

Section 5.6 Partnership Contributions. From the date hereof until the Closing Date, the Seller shall ensure that the Company makes any payments and capital contributions as required under the Partnership Agreements to NBP and NBILP.

Section 5.7 Intercompany Accounts . All liabilities and obligations of the Company to the Seller or any of its affiliates (other than the Company) and all liabilities and obligations of the Seller or any of its affiliates (other than the Company) to the Company shall be paid or otherwise settled in accordance with this Section 5.7. At the Closing, all contracts, agreements or other arrangements between the Seller or any of its affiliates (other than the Company) on the one hand, and the Company, on the other hand, shall be terminated. Prior to the Closing (i) if the obligations and liabilities owed by the Company to the Seller or any of its affiliates exceed the obligations and liabilities owed by the Seller or any of its affiliates to the Company, then the Seller shall contribute, or cause to be contributed, to the Company such excess and (ii) if the obligations and liabilities owed by the Seller or any of its affiliates to the Company exceed the obligations and liabilities owed by the Company to the Seller or any of its affiliates, then the Company shall dividend or make a return of capital to the Seller such excess.

Section 5.8 Conduct of Business Pending Closing. The Seller hereby covenants and agrees with the Buyer that except as provided in this Agreement, or with the Buyer’s consent (which shall not be unreasonably withheld, conditioned or delayed) during the period from the date hereof to the Closing, the Seller shall use commercially reasonable efforts to cause the Company to:

(a) in all material respects conduct its operations according to its ordinary course of business consistent with past practice and in compliance with all Applicable Laws;

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(b) preserve, maintain and protect its assets, rights and properties and corporate existence; and

(c) pay when due or otherwise discharge all Taxes, assessments, government charges or Encumbrances imposed upon it or any of its properties or assets, or upon the income or profit therefrom.

Nothing in this Section 5.8 shall be deemed to require the Seller (or any of its affiliates) or the Company to make any payments or enter into or amend any contractual agreements, arrangements or understandings unless such payment or other action is in the ordinary course of business consistent with past practice.

Section 5.9 Restrictions on Certain Actions. Without limiting the generality of Section 5.8, and except as required by Applicable Law or as otherwise expressly provided in this Agreement, prior to the Closing, the Seller shall not permit the Company, without the prior written consent of the Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), to:

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

(b) (i) issue, sell, or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase, or otherwise) any shares of its capital stock of any class or any other securities or equity equivalents; or (ii) amend in any 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; (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 the Company;

(d) (i) create, incur, guarantee or assume any Indebtedness or otherwise become liable or responsible for the obligations of any other person or entity, except for obligations to or of NBPC, NBP or NBILP; (ii) make any loans, advances or capital contributions to, or investments in, any other person or entity; or (iii) mortgage or pledge any of its assets, tangible or intangible, or create or suffer to exist any Encumbrance thereupon;

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

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

(g) make any capital expenditure or expenditures (other than contributions that may be required to be made to NBP or NBILP);

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(h) pay, discharge, or satisfy any claims, liabilities or obligations (whether accrued, absolute, contingent, unliquidated or otherwise, and whether asserted or unasserted), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice;

(i) enter into any material natural gas or other futures or options trading agreement or any price swaps, hedges, futures or similar material instruments;

(j) make any payment or distribution under any Tax sharing or other similar arrangement;

(k) make any payment, dividend or other distribution to its shareholders;

(l) enter into, or permit to be entered into, any closing or other agreement or settlement with respect to Taxes affecting or relating to the Company, other than Taxes in respect of which the Company joins in a consolidated, unitary or other combined group and such group is not controlled by Seller Parent;

(m) pursuant to or within the meaning of the title 11 the United States Code, as amended, or any similar federal, state or foreign law for the relief of debtors, commence a voluntary case, consent to the entry of an order for relief in an involuntary case, consent to the appointment of a receiver, trustee, assignee, liquidator or similar official of it or for all or any portion of its property or assets, or make a general assignment for the benefit of creditors; or

(n) commit or otherwise agree to do any of the foregoing;

provided, however, that notwithstanding the foregoing, the Company shall be permitted to declare a dividend, return of capital or other distribution or repayment to the Seller or the Seller Parent in accordance with Section 5.7.

ARTICLE VI

CONDITIONS OF CLOSING

Section 6.1 Conditions Precedent to Obligations of Each Party. The respective obligations of the Parties to consummate the transactions contemplated by this Agreement are subject to the fulfillment or waiver by the applicable Party, on or prior to the Closing, of each of the following conditions:

(a) Legal Proceedings. No Order issued by any court of competent jurisdiction preventing the consummation of the transactions contemplated hereby shall be in effect, nor shall any Legal Proceeding by any Governmental Authority of competent jurisdiction having valid enforcement authority seeking such an Order be threatened or pending, nor shall there be any action taken, or any Applicable Law or Order enacted, entered or enforced that has not been subsequently overturned or otherwise made

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inapplicable to this Agreement, that makes the consummation of the transactions contemplated hereby illegal.

(b) Other Transactions. The satisfaction or waiver of all conditions to closing of the Northern Border Pipeline Interest Transaction (which closing requires the execution of binding documentation for the Operatorship Transfer) and the Asset Transfer Transactions, which closings shall occur on the Closing Date.

Section 6.2 Conditions Precedent to Obligations of Seller. The obligations of the Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment or waiver by the Seller, on or prior to the Closing, of each of the following conditions:

(a) Representations and Warranties True. All the representations and warranties of the Buyer contained in this Agreement, and in any agreement, instrument, or document delivered pursuant hereto or in connection herewith, shall be true and correct in all material respects on and as of the date of this Agreement and on and as of the Closing Date as if made again on and as of such date, provided, however, that (i) any such representation or warranty qualified by a reference to materiality or Material Adverse Effect shall be true and correct in all respects and (ii) any such representation or warranty that is made as of a specific date need only be true and correct in all respects or true and correct in all material respects, as the case may be, as of such specified date.

(b) Covenants and Agreements Performed. The Buyer shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by the Buyer on or prior to the Closing Date.

(c) Delivery of Documents. Each of the documents required to be executed and/or delivered by the Buyer to the Seller hereunder shall have been executed and/or delivered to the Seller.

Section 6.3 Conditions Precedent to Obligations of the Buyer. The obligations of the Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver by the Buyer, on or prior to the Closing, of each of the following conditions:

(a) Representations and Warranties True. All the representations and warranties of the Seller contained in this Agreement, and in any agreement, instrument, or document delivered pursuant hereto or in connection herewith on or prior to the Closing Date, shall be true and correct in all material respects on and as of the date of this Agreement and on and as of the Closing Date as if made again on and as of such date; provided, however, that (i) any such representation or warranty qualified by a reference to materiality or a Material Adverse Effect shall be true and correct in all respects and (ii) any such representation or warranty that is made as of a specific date need only be true and correct in all respects or true and correct in all material respects as the case may be, as of such specified date.

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(b) Covenants and Agreements Performed. The Seller shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by the Seller on or prior to the Closing Date.

(c) Delivery of Documents. Each of the documents required to be executed and/or delivered by the Seller to the Buyer hereunder shall have been executed and/or delivered to the Buyer.

(d) No Material Adverse Effect. No event, individually or in the aggregate, resulting in a Material Adverse Effect shall have occurred. “Material Adverse Effect” means any fact, event, change, development, circumstance or effect that individually or in the aggregate with other facts, events, changes, developments, circumstances or effects, is (a) materially adverse to the business, financial condition, properties or operations of the Company, or (b) prevents or materially impairs or materially delays the ability of the Seller to perform its obligations under this Agreement; provided, however, that Material Adverse Effect shall exclude any fact, event, change, development, circumstance or effect arising or resulting from any material changes in any laws, statutes, rules, regulations, ordinances, judgments, orders or decrees that adversely affect the U.S. natural gas pipeline industry and midstream industry generally and which is not specific to the Seller, its affiliates, the Company unless such fact, event, change, development, circumstance or effect has a disproportionate affect on Seller or the Company.

ARTICLE VII

TERMINATION

Section 7.1 Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing in the following manner:

(a) automatically in the event that (i) the agreement with respect to the Asset Transfer Transactions is terminated, (ii) the agreement with respect to the Northern Border Pipeline Interest Transaction is terminated or (iii) the Operatorship Transfer is abandoned;

(b) by mutual written consent of the Seller and the Buyer;

(c) by either the Seller or the Buyer, if any Governmental Authority with jurisdiction over such matters shall have issued an Order permanently restraining, enjoining, or otherwise prohibiting the sale of the Common Stock hereunder;

(d) by the Seller, if (i) the Buyer fails to comply with any of its covenants or agreements contained herein, or breaches its representations and warranties contained herein, and, if curable, does not cure such failure to comply or breach within 30 days after receipt by the Buyer from the Seller of written notice of such failure to comply

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or breach, and (ii) such failure to comply or breach would result in a failure to satisfy the conditions to Closing set forth in Section 6.2(a) or (b);

(e) by the Buyer, if (i) the Seller fail to comply with any of its covenants or agreements contained herein, or breaches its representations and warranties contained herein, and, if curable, does not cure such failure to comply or breach within 30 days after receipt by the Seller from the Buyer of written notice of such failure to comply or breach, and (ii) such failure to comply or breach would result in the failure to satisfy the conditions to Closing set forth in Section 6.3(a) or (b); or

(f) by either the Buyer or the Seller, upon written notice to the other, if the Closing shall not have occurred by the date and time specified in Section 10.1(f) of the purchase and sale agreement for the Northern Border Pipeline Interest Transaction dated on or about the date of this Agreement;

provided, however, that the rights to terminate under Section 7.1 shall not be available to a Party if it was the failure of such Party (or as applicable, such Party’s affiliate) to fulfill any obligation under this Agreement or under any agreement with respect to the Asset Transfer Transactions, the Northern Border Pipeline Interest Transaction or the Operatorship Transfer that was the cause of, or that resulted in the event or situation which gave rise to the right to terminate.

Section 7.2 Effect of Termination. If a Party terminates this Agreement under Section 7.1(c)-(f), then such Party shall promptly give written 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 further force or effect, except that the agreements contained in this Article 7 and Article 9 shall survive the termination hereof. Nothing contained in this Section 7.2 shall relieve any Party from Liability for damages actually incurred as a result of any breach of this Agreement.

ARTICLE VIII

INDEMNIFICATION

Section 8.1 Survival. The respective representations and warranties of the Parties hereto contained herein or in any certificates or other documents delivered pursuant to this Agreement shall survive until the second anniversary of the Closing Date; provided, however, that the representations and warranties set forth in Sections 3.2, 3.3, 3.4, 3.5(a), 3.13, 4.2, 4.3(a) and 4.5 shall survive indefinitely, and the representations and warranties set forth in Section 3.7 shall survive for a period equal to the applicable statute of limitations for each type of Tax and Tax year (including any extensions thereof).

Section 8.2 Indemnification Coverage.

(a) From and after the Closing and subject to the terms and conditions contained herein, the Seller agrees to indemnify, defend, save and hold the Buyer, the Company and each of their respective officers, directors, employees, agents and affiliates (other than the Seller and any of its affiliates) (collectively, the “Buyer Indemnified

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Parties”) harmless if any such Buyer Indemnified Party shall at any time or from time to time suffer any damage, judgment, fine, penalty, demand, settlement, Liability, loss, claim or cause of action, cost, expense (including reasonable attorneys’, consultants’ and experts’ fees but excluding any and all Taxes (which matters are covered under Section 5.4 (g)) (each, a “Loss”) arising out of:

(i) any breach or inaccuracy in any representation or warranty (other than Section 3.7) of the Seller contained in this Agreement or any certificates or other documents delivered pursuant to this Agreement (it being understood that, for purposes of this Section 8.2(a)(i) only, any “Material Adverse Effect” or similar materiality qualifier shall not be taken into account in determining whether there was a breach of inaccuracy in the representations and warranties contained in Sections 3.5(c) or 3.6); or

(ii) any failure by the Seller to perform or observe any term, provision, covenant or agreement by the Seller (other than Section 5.4) to be performed or observed under this Agreement.

(b) From and after the Closing and subject to the terms and conditions contained herein the Buyer shall indemnify and agree to defend, save and hold the Seller and its respective officers, directors, employees, agents and affiliates (collectively, the “Seller Indemnified Parties”) harmless if any such Seller Indemnified Party shall at any time or from time to time suffer any Loss arising out of:

(i) any breach or inaccuracy in any representation or warranty of the Buyer contained in this Agreement or any certificates or other documents delivered pursuant to this Agreement (it being understood that, for purposes of this Section 8.2(b)(i) only, any “Material Adverse Effect” or similar materiality qualifier shall not be taken into account in determining whether there was a breach of inaccuracy in the representations and warranties contained in Sections 4.3(c) or 4.4); or

(ii) any failure by the Buyer to perform or observe any term, provision, covenant or agreement (other than Section 5.4) on the part of the Buyer to be performed or observed by the Buyer under this Agreement.

(c) The foregoing indemnification obligations shall be subject to the following limitations:

(i) the amount of any Losses suffered by a Seller Indemnified Party or a Buyer Indemnified Party, as the case may be, shall be reduced by any third-party insurance which such party receives in respect of or as a result of such Losses. If any Losses for which indemnification is provided hereunder is subsequently reduced by any third-party insurance or other indemnification benefit or recovery, the amount of the reduction shall be remitted to the Indemnifying Party (as hereinafter defined);

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(ii) (A) the Seller’s aggregate Liability under Section 8.2(a)(i) shall neither (1) with respect to such Liabilities other than Liabilities relating to a breach of the representation set forth in Section 3.8 on account of facts or circumstances occurring after August 15, 2002 (collectively, “Recent Liabilities”), exceed $30 million, nor (2) exceed $50 million (it being understood that, for the avoidance of doubt, in no event shall the Seller’s aggregate Liability under Section 8.2(a)(i) exceed $50 million) and (B) the Buyer’s aggregate Liability under Section 8.2(b)(i) shall not exceed $30 million;

(iii) no indemnification for any Losses asserted against the Buyer or the Seller, as the case may be, under Section 8.2(a)(i)(other than with respect to Recent Liabilities) or Section 8.2(b)(i) shall be required unless and until the cumulative aggregate amount of such Losses exceeds $300,000 (the “Threshold”), at which point the Seller or the Buyer, as the case may be, shall be obligated to indemnify the Indemnified Party (as hereinafter defined) for the entire amount of such Losses, subject to the limitations in Section 8.2(c)(i), (ii) and (v)(it being understood that, for the avoidance of doubt, the Seller’s indemnification for Recent Liabilities shall not be subject to the Threshold);

(iv) no claim may be asserted nor may any action be commenced against a Party for breach or inaccuracy of any representation or breach of a warranty, unless written notice of such claim or action is received by such Party describing in reasonable detail the facts and circumstances known at such time with respect to the subject matter of such claim or action on or prior to the date on which the representation or warranty on which such claim or action is based ceases to survive as set forth in Section 8.1 (it being agreed and understood that if a claim for a breach of a representation or warranty is timely made, the claim shall survive until the date on which such claim is finally liquidated or otherwise resolved); and

(v) an Indemnified Party shall not be entitled under this Agreement to multiple recovery for the same Losses.

Section 8.3 Procedures. Any Seller Indemnified Party or the Buyer Indemnified Party, as the case may be (an “Indemnified Party”), shall notify the Seller or the Buyer, as the case may be (an “Indemnifying Party”), promptly in the event that (a) any claim, demand or proceeding is asserted or instituted by any person or entity other than the Parties to this Agreement or their affiliates that could give rise to Losses for which an Indemnifying Party could be liable to an Indemnified Party under this Agreement or (b) any Indemnified Party under this Agreement shall have a claim to be indemnified by any Indemnifying Party under this Agreement which does not involve a third party claim, demand or proceeding. Such notice shall identify with reasonable specificity the nature of such claim, demand or proceeding and the amount or estimated amount thereof, if known (such amount or estimated amount shall not be conclusive of the final amount, if any, of such claim, demand or proceeding). Subject to Section 8.2(c)(iv), the failure to so notify or provide information to the Indemnifying Party shall not relieve the Indemnifying Party of any Liability that it may have to any Indemnified

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Party, except to the extent that the Indemnifying Party demonstrates that it has been materially prejudiced by the Indemnified Party’s failure to give such notice, in which case the Indemnifying Party shall be relieved from its obligations hereunder to the extent of such material prejudice. The Indemnifying Party shall have the right, at its option, to defend, contest or otherwise protect the Indemnified Party against any such claim or action by counsel of the Indemnifying Party’s choice at its sole cost and expense (which right shall include the right to settle or compromise such kind of action); provided, however, that, if the Indemnifying Party assumes such defense, it shall not make any settlement or compromise without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed) unless the sole relief provided is monetary damages that are paid in full by the Indemnifying Party. If the Indemnifying Party assumes the defense, the Indemnified Party shall have the right, but not the obligation, to participate at its own expense in the defense thereof by counsel of the Indemnified Party’s choice and shall in any event use its reasonable best efforts to cooperate with and assist the Indemnifying Party. If the Indemnifying Party elects not to assume the defense or fails timely to defend, contest or otherwise protect against such suit, action, investigation, claim or proceeding, the Indemnified Party shall have the right to do so, including, the right to make any compromise or settlement thereof, and the Indemnified Party shall be entitled to recover the entire cost thereof from the Indemnifying Party, including, reasonable attorneys’ fees, disbursements and amounts paid as the result of such suit, action, investigation, claim or proceeding, so long as the Indemnifying Party is obligated to indemnify the Indemnified Party for such matter pursuant to the terms of this Agreement.

Section 8.4 Remedy. Absent fraud, the sole remedy of a Party in connection with the transactions contemplated by this Agreement, shall, in each case, be as set forth in Section 5.4(g) and this Article VIII.

ARTICLE IX

MISCELLANEOUS PROVISIONS

Section 9.1 Publicity. No Party shall, nor shall it permit its affiliates to, issue or cause the publication of any press release or other announcement with respect to this Agreement or the transactions contemplated hereby without the consent of the other Party hereto, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, in the event any such press release or announcement is required by any law or stock exchange rule to be made by the Party proposing to issue the same, such Party shall use its reasonable best efforts to consult in good faith with the other Party prior to the issuance of any such press release or announcement.

Section 9.2 Successors and Assigns; No Third-Party Beneficiaries. This Agreement shall inure to the benefit of, and be binding upon, the Parties hereto and their respective successors and assigns; provided, however, that no party shall assign or delegate any of the obligations created under this Agreement without the prior written consent of the other parties; provided, further, that the Buyer may assign its rights hereunder to any direct or indirect wholly owned subsidiary of the Buyer Parent, in which

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case the Buyer Parent shall guarantee the performance of such assignee hereunder with the same effect as if such assignee were an original party hereunder in lieu of the Buyer. Except for the Seller Indemnified Parties and the Buyer Indemnified Parties who shall be express third party beneficiaries solely for the purpose of enforcing their respective rights under Article VIII hereof, nothing in this Agreement shall confer upon any person or entity not a party to this Agreement, or the legal representatives of such person or entity, any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement.

Section 9.3 Fees and Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other fees, costs and expenses of a party hereto incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs or expenses.

Section 9.4 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made if delivered personally or sent by overnight courier or sent by facsimile or attached in “portable document format” to an electronic mail (with evidence of confirmation of receipt) to the Parties at the following addresses:

If to the Buyer, to:

Northern Plains Natural Gas Company, LLC

100 W. 5^th Street, Suite 1800

Tulsa, OK 74103-4217

Attention: John R. Barker

Facsimile: 918-588-7971

with a copy to:

Gable & Gotwals

100 W. 5^th Street, Suite 1100

Tulsa, OK 74103-4217

Attention: Stephen W. Lake

Facsimile: 918-595-4990

If to the Seller, to:

c/o TransCanada PipeLines Limited

TransCanada PipeLines Tower

450 First Street, S.W.

Calgary, Alberta T2P5H1

Fax: (403) 920-2410

Attention: Executive Vice-President and General Counsel

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with a copy to:

Mayer, Brown, Rowe & Maw LLP

71 South Wacker Drive

Chicago, Illinois 60606

Fax: (312) 701-7711

Attention: Marc F. Sperber

                 William R. Kucera

or to such other persons or at such other addresses as shall be furnished by either party by like notice to the other, and such notice or communication shall be deemed to have been given or made as of the date so delivered or mailed. No change in any of such addresses shall be effective insofar as notices under this Section 9.4 are concerned unless such changed address is located in the United States of America and notice of such change shall have been given to such other party hereto as provided in this Section 9.4.

Section 9.5 Interpretation. Unless otherwise indicated to the contrary in this Agreement by the context or use thereof:

(a) the words “herein,” “hereto,” “hereof” and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof;

(b) words importing the masculine gender shall also include the feminine and neutral genders, and vice versa;

(c) words importing the singular shall also include the plural, and vice versa;

(d) reference to any Person includes such Person’s heirs, executors, personal representatives, administrators, successors and assigns; provided, however, that nothing contained in this clause (d) is intended to authorize any assignment or transfer not otherwise expressly permitted by this Agreement;

(e) reference to a Person, means any individual, partnership, corporation, limited liability company, trust or other entity. Reference to a Person in a particular capacity or capacities excludes such Person in any other capacity;

(f) reference to an 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 herein, 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;

(g) reference to any contract means such contract as amended, supplemented or modified from time to time in accordance with the terms thereof;

26

(h) all references to Exhibits shall be deemed to be references to the Exhibits attached hereto which are made a part hereof and incorporated herein by reference;

(i) accounting terms used but not defined herein shall be construed in accordance with GAAP, and whenever the character or amount of any asset, liability or item of income or expense is required to be determined, or any consolidation or accounting computation is required to be made, such determination or computation shall be made in accordance with GAAP; “GAAP” means United States generally accepted accounting principles and practices as in effect from time to time and applied consistently throughout the periods involved; and

(j) whenever the words “include,” “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation.”

Section 9.6 Entire Agreement. This Agreement, together with the Schedules hereto, and together with the Confidentiality Agreement dated July 26, 2005 between Buyer Parent and Seller Parent, represents the entire agreement and understanding of the Parties with reference to the transactions set forth herein and no representations or warranties have been made in connection with this Agreement other than those expressly set forth herein or in the Schedules, certificates and other documents delivered in accordance herewith. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the Parties relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement.

Section 9.7 Waivers and Amendments. The Seller or the Buyer may by written notice to the other, waive any provision of this Agreement or in any document delivered pursuant to this Agreement by the other party intended for its benefit. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach, whether or not similar, unless such waiver specifically states that it is to be construed as a continuing waiver. This Agreement may be amended, modified or supplemented only by a written instrument executed by the Parties hereto.

Section 9.8 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the Parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

Section 9.9 Titles and Headings. The Article and Section headings and any table of contents contained in this Agreement are solely for convenience of

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reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof.

Section 9.10 Signatures and Counterparts. Facsimile or electronic mail transmission in “portable document format” of any signed original document and/or retransmission of any signed facsimile transmission or electronic transmission in “portable document format” shall be the same as delivery of an original. At the request of the Buyer or the Seller, the Parties will confirm facsimile or such electronic transmission by signing a duplicate original document. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

Section 9.11 Enforcement of the Agreement. The Parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereto, this being in addition to any other remedy to which they are entitled at law or in equity. In no event shall any party hereto be entitled to any punitive, incidental, indirect, special or consequential damages (“Special Damages”) resulting from or arising out of this Agreement or the transactions contemplated hereby; provided that Special Damages asserted by any Party unrelated to the Parties hereto may become the subject of indemnification pursuant to Article VIII.

Section 9.12 Governing Law. This Agreement shall be governed by and construed in accordance with the internal and substantive laws of Delaware and without regard to any conflicts of laws concepts which would apply the substantive law of some other jurisdiction.

Section 9.13 Consent to Jurisdiction; Exclusive Forum; Waiver of Jury Trial. With respect to any suit, action or proceeding initiated by a party to this Agreement arising out of, under or in connection with this Agreement or the transactions contemplated hereby, each of the Seller and the Buyer hereby submit to the exclusive jurisdiction of any state or federal court sitting in Wilmington, Delaware and irrevocably waive, to the fullest extent permitted by law, any objection that they may now have or hereafter obtain to the laying of venue in any such court in any such suit, action or proceeding and agree not to bring any action, suit or proceeding in any other court, and agree to waive their right to a jury trial in any such proceeding.

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

TRANSCAN NORTHWEST BORDER LTD.
By:	/s/ Donald R. Marchand
	Name:	Donald R. Marchand
	Title:	Vice-President and Treasurer
By:	/s/ Rhondda E.S. Grant
	Name:	Rhondda E.S. Grant
	Title:	Secretary
NORTHERN PLAINS NATURAL GAS COMPANY, LLC
By:	/s/ David L. Kyle
	Name:	David L. Kyle
	Title:	Chairman and Chief Executive Officer

SECTION NUMBER REFERENCES FOR DEFINED TERMS

Adjusted Purchase Price	1.1
Agreement	Preamble
Applicable Law	3.5(c)
Asset Transfer Transactions	2.1
Base Purchase Price	1.1
Buyer	Preamble
Buyer Indemnified Parties	8.2(a)
Buyer Parent	Recitals
Buyer Parent Guarantee	Recitals
Closing	2.1
Closing Date	2.1
Code	3.7(b)
Common Stock	3.2
Company	Recitals
Company’s GP Interests	Recitals
Company’s NBILP GP Interest	Recitals
Company’s NBP GP Interest	Recitals
Consent	3.6
Effective Time	1.1
Election Forms	5.4(k)(ii)
Encumbrances	1.1
Final Allocation	5.4(k)(i)
GAAP	9.5(i)
Governmental Authority	3.5(c)
Indebtedness	3.8
Indemnified Party	8.3
Indemnifying Party	8.3
Legal Proceeding	3.9
Liabilities	3.8
Loss	8.2(a)
Material Adverse Effect	6.3(d)
NBILP	Recitals
NBILP Partnership Agreement	1.1
NBP	Recitals
NBPC	1.1
NBP Partnership Agreement	1.1
Northern Border Pipeline Interest Transaction	2.1
Operatorship Transfer	1.1
Order	3.5(c)
Other GP Interests	Recitals
Party	Preamble
Parties	Preamble
Partnerships	Recitals
Partnership Agreements	1.1
Pre-Closing Periods	5.4(c)
Proceeding	5.4(j)
Recent Liabilities	8.2(c)(ii)
Related Party	3.14
Section 338(h)(10) Election	5.4(k)(i)
Seller	Preamble
Seller Indemnified Parties	8.2(b)
Seller Group	5.4(a)
Seller Parent	Recitals
Seller Parent Guarantee	Recitals
Special Damages	9.11
Straddle Period	5.4(e)
Tax	3.7(a)
Taxes	3.7(a)
Tax Returns	3.7(a)
TCPL	Recitals

Schedule 3.7

Tax Matters

Exception to subsection 3.7(b)(ix):

1. Federal Tax Allocation Agreement among TransCanada PipeLine USA Ltd. and all of its 100% wholly owned subsidiaries through which Northwest Border Pipeline Company is a party effective January 1, 2005.

2. Federal Tax Sharing Agreement among TransCan Northern Ltd. and all of its 100% wholly owned subsidiaries through which Northwest Border Pipeline Company is a party effective January 1, 2004.

Schedule 3.14

Intercompany Matters

1. Federal Tax Allocation Agreement among TransCanada PipeLine USA Ltd. and all of its 100% wholly owned subsidiaries through which Northwest Border Pipeline Company is a party effective January 1, 2005.

2. Federal Tax Sharing Agreement among TransCan Northern Ltd. and all of its 100% wholly owned subsidiaries through which Northwest Border Pipeline Company is a party effective January 1, 2004.

EX-10.31

Exhibit 10.31

PURCHASE AND SALE AGREEMENT

by and between

ONEOK, INC.

and

NORTHERN BORDER PARTNERS, L.P.

February 14, 2006

TABLE OF CONTENTS

SECTION 1. PURCHASE AND SALE		1
1.1	Interests	1
1.2	Consideration and Payment	1
1.3	The Closing	1
1.4	Working Capital Adjustment	2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ONEOK		4
2.1	Organization and Authority of ONEOK	4
2.2	Organization, Authority and Qualification of the Entities	5
2.3	Capital of Companies; Beneficial Ownership	5
2.4	Subsidiaries	6
2.5	Financial Statements	6
2.6	Taxes	7
2.7	Absence of Certain Changes	8
2.8	Ordinary Course	9
2.9	Intellectual Property	9
2.10	Contracts	10
2.11	Compliance	11
2.12	Litigation	11
2.13	Insurance	11
2.14	Related Transactions	12
2.15	Employee Benefit Matters	12
2.16	Environmental Matters	13
2.17	Regulatory Matters	13
2.18	Operating Assets	14
2.19	Brokers’ Fees	15
2.20	Books and Records	15
2.21	Indebtedness	15
2.22	Disclaimer	15
SECTION 3. REPRESENTATIONS AND WARRANTIES OF NORTHERN BORDER		16
3.1	Organization and Authority of Northern Border	16
3.2	Litigation	17
3.3	Securities Act	17
3.4	Brokers’ Fees	18
3.5	Opinion of Financial Adviser	18
3.6	Disclaimer	18
SECTION 4. COVENANTS OF ONEOK		19
4.1	Conduct of the Entities	19
4.2	Cash Management	21
SECTION 5. COVENANTS OF NORTHERN BORDER		21
5.1	Northern Border’s Efforts Regarding Financing Arrangements.	21
5.2	Books and Records	21
SECTION 6. COVENANTS OF ONEOK AND NORTHERN BORDER		22
6.1	Access to Information	22
6.2	Commercially Reasonable Efforts	23

6.3	Regulatory and Other Authorizations; Notices and Consents	23
6.4	Public Announcements	24
6.5	Notices of Certain Events	24
6.6	Entity Guarantees	24
6.7	Intercompany Accounts	25
6.8	Shared Contracts and Drop-Down Contracts	25
6.9	ONEOK Marks	26
6.10	Indebtedness for Borrowed Money	26
6.11	Conversion Transactions	26
6.12	Interim Financial Statements	27
6.13	Cooperation Regarding Audits	27
6.14	Insurance Matters	27
SECTION 7. CONDITIONS TO CLOSING		27
7.1	Conditions to the Obligations of ONEOK	27
7.2	Conditions to the Obligations of Northern Border	29
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED		31
8.1	Termination	31
8.2	Effect of Termination	31
SECTION 9. INDEMNIFICATION		32
9.1	Survival of Representations and Warranties, Etc.	32
9.2	Indemnification	32
9.3	Threshold; Cap	33
9.4	Exclusive Remedy; Sole Recourse	34
9.5	No Contribution	35
9.6	Setoff	35
9.7	Third Party Claims	35
SECTION 10. TAX MATTERS		36
10.1	Retention of Records	36
10.2	Cooperation	36
10.3	Transfer Taxes	37
10.4	Tax Returns	37
10.5	Allocation of Taxes	38
10.6	Tax Indemnity	39
10.7	Contests	41
10.8	Amended Tax Returns	41
10.9	Miscellaneous	42
10.10	Allocation of the Purchase Price	42
SECTION 11. MISCELLANEOUS		43
11.1	Fees and Expenses	43
11.2	Governing Law	43
11.3	Notices	43
11.4	Entire Agreement	44
11.5	Assignability; Binding Effect	44
11.6	Captions and Gender	45
11.7	Execution in Counterparts	45
11.8	Amendments	45

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11.9	Publicity and Disclosures	45
11.10	Severability	45
11.11	Waiver of Jury Trial	45
11.12	Arbitration	45
11.13	Time of the Essence	46
11.14	Remedies Cumulative; Specific Performance	46
11.15	Further Assurances	46
11.16	Third Party Beneficiaries	46
11.17	Audit Committee Authority	46
11.18	Certain Definitions	47
11.19	Other Defined Terms	54

Exhibit A — Companies/Company Subsidiaries

Exhibit B — Intentionally Omitted

Exhibit C — ONEOK Guaranty Agreement

Exhibit D — Target Working Capital

Exhibit E — Services Agreement

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PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into as of February 14, 2006 by and between ONEOK, Inc., an Oklahoma corporation (“ONEOK”), and Northern Border Partners, L.P., a Delaware limited partnership (“Northern Border”) (each a “Party” and together, the “Parties”). Capitalized terms used but not defined shall have the meaning given in Section 11.18.

W I T N E S S E T H

WHEREAS, ONEOK owns all of the issued and outstanding Equity Interests (the “Shares”) of each of the Persons listed on Exhibit A hereto under the heading “Companies,” (the “Companies”, and each, individually, a “Company”);

WHEREAS, the Companies and their Subsidiaries, all of which are listed on Exhibit A under the heading “Company Subsidiaries”, own and operate natural gas gathering, processing, fractionating, transportation, storage, pipelines and natural gas liquids assets located in Kansas, Oklahoma, Texas and Louisiana (the “Business”); and

WHEREAS, ONEOK wishes to sell the Shares to Northern Border and Northern Border wishes to purchase the Shares, upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and mutual agreements and covenants herein contained, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

SECTION 1. PURCHASE AND SALE

1.1 Interests. At the Closing, ONEOK shall deliver or cause to be delivered to Northern Border good and sufficient instruments of transfer transferring all of the Shares to Northern Border. Such instruments of transfer shall effectively vest in Northern Border good and marketable title to all of the Shares free and clear of all Liens other than transfer restrictions imposed by applicable securities laws.

1.2 Consideration and Payment. As consideration for the Shares, Northern Border will, at Closing, pay to ONEOK $1,350,000,000 (the “Purchase Price”) by wire transfer of immediately available funds to an account designated by ONEOK in writing not less than two (2) business days prior to the Closing Date.

1.3 The Closing.

(a) Subject to the provisions of Section 8, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Gable & Gotwals, 100 W. 5^th Street, Tulsa, OK 74103, commencing at 10:00 a.m. local time on the first business day of the calendar month immediately following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby

(other than conditions with respect to actions the Parties shall take at the Closing itself, including without limitation, conditions in Section 7.1(h) and 7.2(h) herein) or such other date as Northern Border and ONEOK may mutually determine (the “Closing Date”).

(b) At the Closing, ONEOK will deliver the following documents and deliverables to Northern Border:

(i) Good and sufficient instruments of transfer transferring all of the Shares to Northern Border free and clear of all Liens other than transfer restrictions imposed by applicable securities laws;

(ii) An executed copy of a Services Agreement substantially in the form attached hereto as Exhibit E (the “Services Agreement”);

(iii) A certificate certifying that the transactions contemplated hereby are exempt from withholding under Code Section 1445 executed in accordance with the requirements of the Treasury regulations promulgated thereunder;

(iv) Resignations of the officers, directors and managers identified prior to Closing by Northern Border;

(v) An executed copy of a Guaranty substantially in the form attached hereto as Exhibit C (the “ONEOK Guaranty Agreement”);

(vi) A written opinion from legal counsel to ONEOK addressed to Northern Border substantially in the form attached hereto as Schedule 1.3(b)(vi); and

(vii) Such other certificates, instruments of conveyance, and documents as may be reasonably requested by Northern Border prior to the Closing Date to carry out the intent and purposes of this Agreement.

(c) At the Closing, Northern Border will deliver the following documents and deliverables to ONEOK:

(i) An executed copy of the Services Agreement;

(ii) A written opinion from legal counsel to Northern Border addressed to ONEOK substantially in the form attached hereto as Schedule 1.3(c)(ii); and

(iii) Such other certificates, instruments, and documents as may be reasonably requested by ONEOK prior to the Closing Date to carry out the intent and purposes of this Agreement.

1.4 Working Capital Adjustment.

(a) As soon as practicable, but in no event later than 60 days following the Closing, ONEOK shall prepare and deliver to Northern Border a calculation (the “Closing Working Capital Statement”) of the Net Working Capital of the Entities, on a consolidated basis,

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as of the close of business on the last day of the month immediately preceding the Closing Date (the “Closing Working Capital”). The Closing Working Capital Statement shall be prepared in accordance with the principles set forth in the definition of Net Working Capital.

(b) ONEOK shall deliver a copy of the Closing Working Capital Statement to Northern Border promptly after it has been prepared. After receipt of the Closing Working Capital Statement, Northern Border shall have 30 days to review the Closing Working Capital Statement, together with the work papers used in the preparation thereof. ONEOK shall (i) provide Northern Border and its Representatives reasonable access during normal business hours to all relevant personnel, work papers, trial balances and other financial information to the extent necessary or useful to complete their review of the Closing Working Capital Statement, and (ii) cooperate with Northern Border’s and its Representatives’ reasonable requests with respect to the review of the Closing Working Capital Statement, including by providing on a timely basis all information necessary or useful in reviewing the Closing Working Capital Statement. Unless Northern Border delivers written notice to ONEOK on or prior to the 30th day after Northern Border’s receipt of the Closing Working Capital Statement specifying in reasonable detail the amount, nature and basis of all disputed items, Northern Border shall be deemed to have accepted and agreed to the calculation of the Closing Working Capital. If Northern Border (or one of its Representatives) notifies ONEOK of an objection to the calculation of the Closing Working Capital, ONEOK and Northern Border shall, within 20 days (or such longer period as the Parties may agree in writing) following such notice (the “Resolution Period”), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive (other than as a result of manifest error or fraud).

(c) If, at the conclusion of the Resolution Period, there are any amounts remaining in dispute, then such amounts remaining in dispute shall be submitted to a nationally recognized public accounting firm agreed by Northern Border and ONEOK (the “Neutral Auditors”). Northern Border and ONEOK shall execute, if requested by the Neutral Auditors, a reasonable engagement letter, including customary indemnities. The Neutral Auditors shall act as an arbitrator to determine, based solely on the provisions of this Section 1.4(c) and the presentations by ONEOK and Northern Border, and not by independent review, only those issues still in dispute. The Neutral Auditors’ determination shall be made within 30 days of the dispute being submitted for their determination, shall be set forth in a written statement delivered to ONEOK and Northern Border and shall be final, non-appealable and binding on the Parties hereto, absent manifest error or fraud. A judgment of a court of competent jurisdiction may be entered upon the Neutral Auditors’ determination. The Neutral Auditors shall have exclusive jurisdiction over, and resort to the Neutral Auditors as provided in this Section 1.4(c) shall be the only recourse and remedy of the Parties against one another with respect to, any disputes arising out of or relating to the adjustments pursuant to this Section 1.4(c). The fees, costs and expenses of the Neutral Auditors shall be borne by Northern Border, on the one hand, and by ONEOK, on the other, based upon the percentage which the portion of the contested amount not awarded to each Party bears to the amount actually contested by such Party. For example, if Northern Border claims that the Closing Working Capital is $1,000 less than the amount determined by ONEOK, and ONEOK contests only $500 of the amount claimed by Northern Border, and if the Neutral Auditors ultimately resolve the dispute by awarding Northern Border $300 of the $500 contested, then the costs and expenses of the Neutral Auditors will be allocated 60% (i.e., 300 ÷ 500) to ONEOK and 40% (i.e., 200 ÷ 500) to Northern Border. The term “Final Closing

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Working Capital” shall mean the definitive Closing Working Capital agreed to (or deemed to be agreed to) by Northern Border and ONEOK in accordance with Section 1.4(b) hereof or resulting from the determinations made by the Neutral Auditors in accordance with this Section 1.4(c) (in addition to those items theretofore agreed to by ONEOK and Northern Border).

(d) In the event the Final Closing Working Capital

(i) exceeds the Target Working Capital, Northern Border shall pay the excess in cash to ONEOK; or

(ii) is less than the Target Working Capital, ONEOK shall pay the difference in cash to Northern Border (the payments contemplated by this Section 1.4(d) are referred to as the “Net Working Capital Adjustment”).

All payments made pursuant to this Section 1.4 shall be made by wire transfer of immediately available funds within five (5) days of the determination of the Final Closing Working Capital to an account designated in writing by the applicable Party.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF ONEOK

Except as set forth in the disclosure schedules delivered by ONEOK (the “ONEOK Disclosure Schedules”) to Northern Border on the date hereof (it being agreed that any matter disclosed in a particular Schedule of the Disclosure Schedules delivered by ONEOK shall be deemed to have been disclosed with respect to any other Sections of this Agreement to the extent that the relevance of such matter to such other Section is readily apparent from the information disclosed), ONEOK represents and warrants to Northern Border that the statements contained in this Section 2 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing, except in each case to the extent that such statements are expressly made only as of a specified date, in which case ONEOK represents and warrants that such statements are true, correct and complete as of such specified date.

2.1 Organization and Authority of ONEOK.

(a) ONEOK is a corporation duly incorporated, validly existing and in good standing under the laws of Oklahoma.

(b) ONEOK has all requisite right, authority and power to enter into this Agreement and each Related Agreement to be executed and delivered by ONEOK and to carry out the transactions contemplated hereby and thereby.

(c) The execution, delivery and performance by ONEOK of this Agreement and each Related Agreement have been duly authorized by all necessary action of ONEOK and no other action on the part of ONEOK is required in connection therewith.

(d) This Agreement and each Related Agreement to be executed and delivered by ONEOK constitutes, or when executed and delivered will constitute, valid and binding obligations of ONEOK enforceable in accordance with their respective terms, except as such

4

enforceability may be limited by bankruptcy, insolvency or other similar laws from time to time in effect which affect the enforcement of creditors’ rights generally.

(e) The execution, delivery and performance by ONEOK of this Agreement and each Related Agreement to be executed and delivered by ONEOK, with or without the giving of notice or the passage of time, or both:

(i) do not and will not conflict with or violate any provision of the organizational documents of ONEOK or any Entity;

(ii) do not and will not conflict with or violate any Legal Requirements applicable to ONEOK or any of the Entities, or, except as set forth in Schedule 2.1(e)(ii) and any filings required to be made under the HSR Act, require ONEOK or any Entity to obtain any approval, consent or waiver of, or make any filing with, any Governmental Authority that has not been obtained or made;

(iii) do not and will not require the consent, approval or waiver of any Person (other than any Governmental Authority), except as set forth in Schedule 2.1(e)(iii), or except for any such consents, approvals or waivers as have been obtained or the failure of which to be obtained would not, individually or in the aggregate, have a Material Adverse Effect; and

(iv) does not and will not breach any Material Contract or result in or permit the termination of any such Material Contract.

2.2 Organization, Authority and Qualification of the Entities. Each Company and each Subsidiary thereof (each, a “Company Subsidiary” and, together with the Companies, each an “Entity” and, collectively, the “Entities”) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, as set forth on Exhibit A, and has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it is currently conducted. Each Entity is duly licensed or qualified to do business and is in good standing (to the extent applicable) in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, have a Material Adverse Effect. All material actions taken by the Entities have been duly authorized, and no Entity has taken any action that in any material respect conflicts with, constitutes a material default under or results in a material violation of the organizational documents of such Entities. True and correct copies of the organizational documents of each Entity, each as in effect on the date hereof, have previously been made available to Northern Border.

2.3 Capital of Companies; Beneficial Ownership.

(a) All of the issued and outstanding shares of capital stock of each of the Companies that is a corporation are validly issued, fully paid and nonassessable and are owned beneficially and of record, directly or indirectly, by ONEOK, and all of the limited liability company interests in each of the Companies that is a limited liability company are validly issued, fully paid and nonassessable and are owned beneficially and of record, directly or indirectly, by ONEOK, in each case free and clear of all Liens.

5

(b) There are no outstanding options, warrants, rights, commitments, preemptive rights or agreements of any kind for the issuance or sale of, or outstanding securities convertible into, any additional shares of capital stock of any class or limited liability company interests, as the case may be, of any Company which would entitle the holders thereof to an interest in or rights in respect of that Company, and there are no agreements of any kind that may obligate ONEOK or any of its Affiliates (including the Companies) to sell, issue, purchase, redeem or otherwise transfer any Shares to any Person. There are no voting agreements, proxies or other similar agreements or understandings with respect to the Shares.

2.4 Subsidiaries.

(a) Exhibit A lists, for each Company Subsidiary, its name, type of entity, jurisdiction of its incorporation, formation or organization and the percentage Equity Interest owned by a Company. Except as set forth in Schedule 2.4(a), the Companies own, directly or indirectly, all of the issued and outstanding Equity Interests of each Company Subsidiary, free and clear of all Liens other than transfer restrictions imposed by applicable securities laws, and the owner beneficially and of record of each Company Subsidiary is either a Company or a Company Subsidiary, as applicable, and all Equity Interests of each Company Subsidiary are validly issued, fully paid and nonassessable. There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the Equity Interests of the Company Subsidiaries or that may obligate the Company Subsidiaries to issue or sell any Equity Interests of any Company Subsidiary, and there are no agreements of any kind that may obligate any Company to sell, issue, purchase, redeem or otherwise transfer any Equity Interests in any Company Subsidiary to any Person. There are no voting agreements, proxies or other similar agreements or understandings with respect to the Equity Interests of the Company Subsidiaries.

(b) Other than the Company Subsidiaries, no Entity owns any Equity Interest in any Person except as set forth in Schedule 2.4(b). The Entities own, directly or indirectly, 50% of the outstanding Equity Interests in Chisholm Pipeline Company, free and clear of all Liens, other than transfer restrictions imposed by applicable securities laws.

2.5 Financial Statements.

(a) ONEOK has delivered to Northern Border true, correct and complete copies of a consolidated unaudited balance sheet of the Entities (the “Balance Sheet”) as of December 31, 2005 (the “Balance Sheet Date”) and an unaudited statement of income of the Acquired Entities for the 12 months then ended (together, the “Financial Statements”) copies of which are attached hereto as Schedule 2.5(a). The long-term Indebtedness listed in the Financial Statements under the caption “Long-term Debt, excluding current maturities” is all owed to ONEOK or its Affiliates.

(b) Except (i) to the extent set forth in or reserved against in the Balance Sheet or as identified in Schedule 2.5(b) hereto, (ii) for current liabilities (determined in accordance with GAAP) incurred in the ordinary course of business consistent with past practices since the Balance Sheet Date, and (iii) for immaterial Liabilities, none of the Entities has any Liabilities of

6

the type that would be required to be disclosed on a balance sheet of that Entity (or the notes thereto) prepared in accordance with GAAP.

(c) The Financial Statements have been prepared in accordance with GAAP (except as disclosed herein) during the periods covered thereby, are complete and correct in all material respects, and present fairly in all material respects the financial condition of the applicable Entities at the dates of said statements and the results of their operations for the periods covered thereby, except for normal year or period end adjustments and the absence of footnotes.

2.6 Taxes.

(a) The Entities have (giving effect to extensions) (x) duly and timely filed (or there has been filed on their behalf) with the appropriate Governmental Authority all income and other material Tax Returns required to be filed by them, and all such Tax Returns are true, correct and complete in all material respects and (y) timely paid or accrued on the their books, or there has been paid on their behalf, all material Taxes due and payable.

(b) The Entities have complied in all material respects with all applicable Tax Laws relating to the payment and withholding of Taxes.

(c) There are no Liens that arose in connection with Taxes upon the assets or properties of the Entities except for Liens described in clause (a) of the definition of “Permitted Liens.”

(d) The Entities have not requested (nor has any request been made by any Person on behalf of any of the Entities) in writing any extension of time within which to file any Tax Return in respect of any taxable year which has not since been filed, and no outstanding written waivers or comparable written consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns has been given by or on behalf of the Entities.

(e) To the Knowledge of ONEOK, no U.S. federal, state, local or foreign audits, reviews or other administrative proceedings or court proceedings (“Audits”) are ongoing or have been initiated with regard to any Taxes or Tax Returns of the Entities, and the Entities have not received any written notice of any such Audits.

(f) None of the Entities has agreed or is required to make any adjustment by reason of a change in accounting method that would affect any taxable year ending after the Closing Date, and no Tax Authority has proposed any such adjustment or change in accounting method that would affect any taxable year ending after the Closing Date. None of the Entities have an application pending with any Tax Authority requesting permission for any change in accounting method that relates to their business or operations and that would affect any taxable year ending after the Closing Date.

(g) Each of the Entities is classified as a partnership or a disregarded entity for U.S. federal income tax purposes, except for those Entities listed in Schedule 2.6.

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(h) No written claim has been made, and to the Knowledge of ONEOK there has been no oral or threatened claim, by any Tax Authority in a jurisdiction where an Entity does not file a Tax Return that it is or may be subject to Tax in that jurisdiction.

(i) None of the Entities is a party to any Tax allocation or sharing agreement or has any liability for the Taxes of another Person under Treasury Regulations Section 1.1502-6 or similar law, as a transferee, successor, by contract or otherwise.

(j) ONEOK is a United States person within the meaning of the Code.

(k) The unpaid Taxes of the Companies (A) did not, as of the Balance Sheet Date, exceed the reserves established on the Financial Statements, and (B) do not exceed the reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Entities in filing their Tax Returns.

(l) None of the assets or properties of the Entities (A) secures any debt the interest on which is tax-exempt under Code Section 103(a), (B) is “tax-exempt use property” within the meaning of Code Section 168(h), (C) is “tax exempt bond financed property” within the meaning of Code Section 168(g)(5), (D) is “limited use property” within the meaning of Revenue Procedure 76-30 or (E) will be treated as owned by another Person pursuant to the provisions of Code Section 168(f)(8).

(m) The transactions contemplated herein are not subject to tax withholding pursuant to the provisions of Section 3406 or Subchapter A of Chapter 3 of the Code or any other Legal Requirement.

2.7 Absence of Certain Changes. As of the date hereof, except as identified on Schedule 2.7, since the Balance Sheet Date there has not been:

(a) any change in the financial condition, properties, assets, Liabilities, business or operations of the Entities that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) any contingent Liability incurred by any of the Entities as guarantor or otherwise with respect to the obligations of others (other than any other Entity) in excess of $500,000, or any cancellation of any material debt or claim owing to any Entity, or waiver of any right that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(c) other than Permitted Liens, any Lien placed on any of the material properties of the Entities, that remain in existence on the date hereof and that will remain in existence on the Closing Date;

(d) any material obligation or Liability of any nature incurred by any of the Entities, whether accrued, absolute, contingent or otherwise, asserted or unasserted, known or unknown, other than obligations and Liabilities incurred in the ordinary course of business consistent with past practice and in accordance with the terms of this Agreement;

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(e) any purchase, sale or other disposition, or any agreement or other arrangement for the purchase, sale or other disposition, of any of the material properties or assets of any Entity other than in the ordinary course of business consistent with past practice and in accordance with the terms of this Agreement;

(f) any material change in accounting principles, methods or practices used by any Entity;

(g) any loss, damage, destruction or other casualty to any Entity’s property, plants, equipment or inventories (whether or not covered by insurance) that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(h) any material change in the compensation levels of any Entity’s senior executives, any material changes in the manner in which other employees are generally compensated or any provision of additional or supplemental benefits for its employees generally, except, in each case, normal periodic increases or promotions effected in the ordinary course of business consistent with past practice;

(i) any material commitment, guarantee, contractual obligation, capital expenditure or transaction entered into by any Entity, other than in the ordinary course of business consistent with past practice, or any borrowing or other incurrence, assumption or guarantee of Indebtedness by any Entity other than short term Indebtedness owed to ONEOK or its Affiliates; or

(j) any agreement or understanding whether in writing or otherwise, for any Entity to take any of the actions specified in paragraphs (a) through (i) above.

For purposes of this Section 2.7, materiality, as to any matter, shall be determined with respect to all the Entities, taken as a whole.

2.8 Ordinary Course. Since the Balance Sheet Date, the Entities have conducted their respective businesses in the ordinary course of business consistent with past practices.

2.9 Intellectual Property. Each Entity owns or has the right to use all Intellectual Property Assets necessary for or used in the conduct of its business as currently conducted (“Entity Intellectual Property Assets”), and all such Entity Intellectual Property Assets owned by any Entity are free and clear of all Liens (other than Permitted Liens). Neither the execution or delivery of this Agreement, nor the consummation of the transactions contemplated hereby will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare, a breach or termination of, or cancellation or reduction in rights of any Entity under any Contract providing for the license of any Entity Intellectual Property Assets to such Entity, except for any such terminations, cancellations or reductions that, individually or in the aggregate, would not have a Material Adverse Effect. No Entity is infringing or otherwise violating in any material respect the Intellectual Property Assets of any other Person.

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2.10 Contracts.

(a) As of the date hereof, Schedule 2.10(a) contains a true and complete listing of the following Contracts to which any Entity is a party (collectively, the “Material Contracts”):

(i) except for any intercompany Indebtedness that will be cancelled prior to Closing, each Contract for Indebtedness or the borrowing of money, or securing Indebtedness or the borrowing of money, by any Entity involving an obligation in excess of $500,000;

(ii) each natural gas transportation, storage, gathering or processing Contract that individually involves revenues of the Entities in excess of $500,000 for the year to date period ended on the Balance Sheet Date;

(iii) each executory Contract for the purchase of any fixed asset or service for a price in excess of $500,000, whether or not such purchase is in the ordinary course of business;

(iv) each Contract involving a remaining commitment by the Entities to pay capital expenditures in excess of $500,000;

(v) each Contract for lease of personal property or real property involving aggregate payments in excess of $500,000 in any calendar year;

(vi) each employment Contract and each Contract providing retention, severance or project bonus payments, in each case that have not been paid in full as of the date of this Agreement;

(vii) each Contract with any union, trade organization or bargaining unit representative;

(viii) each material acquisition, divestiture or merger agreement;

(ix) each joint venture or partnership agreement;

(x) except for Contracts otherwise described in this Section 2.10, each Contract between ONEOK or any of its Affiliates (other than the Entities) or any officer, director or manager of any Entity, on the one hand, and any Entity on the other hand, involving payments by or to Entities in excess of $500,000 in any calendar year;

(xi) each Contract that provides for a limit on the ability of an Entity or its Affiliates to compete in any line of business or with any Person or in any geographic area during any period of time after the Closing;

(xii) each Shared Contract involving payments by or to Entities in excess of $500,000 in any calendar year;

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(xiii) each Drop-Down Contract involving payments by or to Entities in excess of $500,000 in any calendar year; and

(xiv) each Contract not otherwise listed above involving aggregate payments (contingent or otherwise), by or to the Entities in excess of $500,000 in any future calendar year that cannot be terminated by the Entities upon 60 days or less notice without penalty.

(b) True and complete copies of all Material Contracts have been made available to Northern Border.

(c) Except as would not, individually or in the aggregate, have a Material Adverse Effect, (i) each Material Contract is in full force and effect and represents the legal, valid and binding obligation of the Entity that is a party thereto and, to the Knowledge of ONEOK, represents the legal, valid and binding obligation of the other parties thereto, and (ii) the Entities are not and, to the Knowledge of ONEOK, no other party is in material breach of any Material Contract, and neither ONEOK nor any Entity has received any written or, to the Knowledge of ONEOK, oral notice of termination or breach of any Material Contract. For purposes of this Section 2.10(c) only, “Material Contracts” shall also include all Contracts of the types described in Section 2.10(a) above entered into by any Entity between the date hereof through and including the Closing Date.

2.11 Compliance. Each Entity is, and at all times since January 1, 2001 has been, in material compliance with all applicable Legal Requirements, except for such instances of non-compliance that, individually or in the aggregate would not have a Material Adverse Effect. Since January 1, 2001, none of ONEOK or any Entity has received any written notice from any Governmental Authority regarding any actual or possible material violation of or material failure by any Entity to comply with any Legal Requirement that has resulted, or would reasonably be expected to result, in any material fine, penalty or Liability. Each Entity holds all Permits necessary for it to own and operate its assets and for the conduct of the Business as now being conducted, other than any Permits, the failure of which to hold would not, individually or in the aggregate, have a Material Adverse Effect and there is no suspension or cancellation of any such Permits pending or, to the Knowledge of ONEOK, threatened.

2.12 Litigation. Except as disclosed in Schedule 2.12, there are no Legal Proceedings pending or, to the Knowledge of ONEOK, threatened (a) that (i) seeks more than $1,000,000 in damages for which any Entity could be liable, (ii) seeks injunctive relief against any Entity, its assets or its activities or (iii) is, or seeks to be certified as, a class or similar representative action and involves any Entity or the material assets of any Entity, or (b) that challenges or otherwise seeks to prevent, enjoin, alter or delay the consummation of the transactions contemplated hereby. No Entity (nor any of the material assets of any Entity) is subject to any outstanding Governmental Order.

2.13 Insurance. Schedule 2.13 identifies all insurance policies maintained by, at the expense of or for the benefit of any Entity and identifies any material unresolved claims made thereunder. ONEOK has previously made available to Northern Border accurate and complete copies of the insurance policies identified on Schedule 2.13. Each of such insurance

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policies is in full force and effect, and the Entities have paid all premiums due thereunder. Since January 1, 2005, no Entity has received any written notice or other communication regarding any actual or possible (a) cancellation or invalidation of any insurance policy, (b) refusal of any coverage or rejection of any material claim under any insurance policy, or (c) material adjustment in the amount of the premiums payable with respect to any insurance policy.

2.14 Related Transactions. Except as set forth on Schedule 2.14, and other than through ownership of the Shares, no Related Party (a) has any direct or indirect ownership interest in any material asset used in or otherwise relating to the Business; (b) is indebted to any Entity in an amount exceeding $500,000; (c) has any direct or indirect financial interest in any Material Contract; and (d) has any claim against any Entity in excess of $500,000 (other than rights to receive compensation for services performed as an employee of the Entity or its Subsidiaries). Each of the following shall be deemed to be a “Related Party”: (i) ONEOK and its Affiliates (other than the Entities); (ii) each individual who is an officer or director of ONEOK, its Affiliates or any Entity; (iii) each member of the immediate family of each of the individuals referred to in clause “(ii)” above; and (iv) any trust or other entity (other than ONEOK or any Entity, Northern Border and any Subsidiary of Northern Border) in which any one of the individuals referred to in clauses “(ii)” and “(iii)” above holds (or in which more than one of such individuals collectively hold), beneficially or otherwise, a controlling voting, proprietary or equity interest.

2.15 Employee Benefit Matters. Except as set forth on Schedule 2.15:

(a) All of the employees engaged in running and operating the Business are employees of ONEOK or its Affiliates (other than the Entities). None of the Entities have any employees or any Liabilities under any current or former Employee Benefit Plan.

(b) No Entity has any Liabilities in respect of Employee Benefit Plans or employment matters relating to current or former employees of such Entity or any current or former ERISA Affiliate of such Entity.

(c) Neither ONEOK or any of its Affiliates (including the Entities) is a party to, or bound by, any collective bargaining agreement, Contract or other understanding with a labor union with respect to any employees who perform services in connection with the businesses of the Entities, and, to the Knowledge of ONEOK, there are not any union organizing efforts underway with respect to any such employees. There are no unfair labor practice or labor arbitration proceedings pending or, to the Knowledge of ONEOK, threatened against any Entity.

(d) Each Entity is in compliance, in all material respects, with all applicable Legal Requirements respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, and no Entity has or would reasonably be expected to have any Liability arising out of any failure of ONEOK or its Affiliates (other than the Entities) to comply with any such Legal Requirements.

(e) None of the Entities is obligated to make any payments, or is party to any agreement that could obligate it to make any payments, that would not be deductible under Code

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section 162(m) or 280G of the Code, or would be considered a payment under a nonqualified deferred compensation plan, as contemplated in Code section 409A.

2.16 Environmental Matters. Notwithstanding any other provision in this Agreement, this Section 2.16 contains the exclusive representations of ONEOK concerning Environmental Matters. Except as set forth on Schedule 2.16:

(a) Each Entity is, and at all times since January 1, 2001 has been, in material compliance with all applicable Environmental Laws;

(b) There have been no releases of Hazardous Materials from, at, on or under any property now owned or leased (or formerly owned or leased) by any Entity which are required by applicable Environmental Laws to be remediated (or would, upon discovery, be required to be remediated) by any Entity, except for any releases that have been fully remediated or that would not, individually or in the aggregate, have a Material Adverse Effect;

(c) Neither ONEOK nor any Entity has received any written request for information or written notification that it is a potentially responsible party under CERCLA or any similar state Legal Requirement with respect to any on-site or off-site location for which liability is currently being asserted against them with respect to the activities or operations of the Entities and no Entity has sent or contributed waste to any facility that is subject to a potential claim under CERCLA or any similar state Legal Requirement;

(d) There are no material writs, injunctions, decrees, notices of violation, Governmental Orders or judgments outstanding, or any Legal Proceedings pending or, to ONEOK’s Knowledge, threatened, involving any Entity relating to (i) its compliance with any Environmental Law or (ii) the release, discharge, spill, treatment, storage or disposal of Hazardous Materials into the environment at any location that could reasonably be expected to result in any Entity incurring any material Liability under Environmental Law;

(e) Each Entity has obtained, currently maintains and is in material compliance with all Environmental Permits, and all such Environmental Permits are in effect and no Legal Proceeding is pending with respect to any such Environmental Permit;

(f) Except as otherwise disclosed in the Balance Sheet, no material expenditures, capital improvements or changes in operation are, or, to the Knowledge of ONEOK, will be, necessary to achieve or maintain compliance with any Environmental Permit or Environmental Law, or will be necessary as a condition or result of the renewal, amendment or necessary modification of any Environmental Permit; and

(g) ONEOK has provided or made available to Northern Border all information relevant to the environmental compliance and condition of the Entities and all of their respective Business Facilities, and the estimated or reasonably anticipated remediation costs related thereto.

2.17 Regulatory Matters. No Entity is a “public utility company,” “holding company” or “subsidiary” or “affiliate” of a holding company as such terms are defined in the Public Utility Holding Company Act of 1935 (the “1935 Act”). Each Entity that is a “Natural

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Gas Company” as that term is defined in Section 2 of the Natural Gas Act (“NGA”) is in compliance, in all material respects, with all provisions of the NGA and all rules and regulations promulgated by FERC pursuant thereto. Each such Natural Gas Company is in compliance, in all material respects, with all orders issued by FERC that pertain to material terms and conditions and material rates charged for services. No approval of (a) the SEC under the 1935 Act or (b) FERC under the NGA or the Federal Power Act is required in connection with the execution of this Agreement by ONEOK or the transactions contemplated hereby with respect to ONEOK or the Entities. The Form No. 2 Annual Reports filed by each Natural Gas Company with FERC for the years ended December 31, 2004 and December 31, 2003 were true, correct and complete, in all material respects, as of the dates thereof and since December 31, 2004 no Natural Gas Company has become subject to any proceeding under Section 5 of the NGA or any general rate case proceeding commenced under Section 4 of the NGA by reason of a filing made with the FERC after December 31, 2004. Except as set forth on Schedule 2.17, no approvals of state Governmental Authorities are required in connection with the execution of this Agreement by ONEOK or the transactions contemplated hereby with respect to ONEOK or the Entities.

2.18 Operating Assets.

(a) Except as identified to the contrary in Schedule 2.18(a), (i) except for the Drop-Down Contracts and the Shared Contracts and except as would not reasonably be expected to have a Material Adverse Effect, the Entities own or have the right to use the pipelines, storage facilities, gas processing facilities, fractionators, plants, equipment and related facilities and assets (“Operating Assets”) necessary to enable them to conduct their business in the manner currently being conducted and the Entities own or have the right to use the Operating Assets that are reflected as being owned or leased by such Entities on the Financial Statements; (ii) the Operating Assets are free and clear of Liens other than Permitted Liens; (iii) each Entity has good and indefeasible title to the real property it owns in fee, free and clear of all Liens other than Permitted Liens; and (iv) each Entity has title to its rights-of-way and easements (A) free and clear of all Liens and claims of those claiming by, through or under ONEOK or its Affiliates (other than the Entities), other than Permitted Liens; and (B) sufficient to allow such Entity to conduct its business in substantially the same manner as such business is currently being conducted; and (v) the Entities collectively own all of the rights, title and interest in and to any and all of the properties, rights, claims, contracts, permits and other assets acquired by ONEOK and its Affiliates, either directly by asset purchase or indirectly by purchase of equity interests, pursuant to the terms of (A) that certain Limited Liability Company Membership Interest and Stock Purchase Agreement by and between Koch Hydrocarbon Management Company, LLC and ONEOK, Inc. dated May 9, 2005 (relating to the purchase and sale of a 100% membership interest in NGL/LP, LLC and all of the outstanding capital stock of Koch Underground Storage Company), (B) that certain Asset Purchase Agreement by and between Koch Pipeline Company, L.P. and ONEOK dated May 9, 2005 (relating to the purchase and sale of Mid-Continent NGL Assets), (C) that certain Limited Liability Company Membership Interest Purchase Agreement by and between Koch Holdings Enterprises, LLC and ONEOK dated May 9, 2005 (relating to the purchase and sale of a 100% membership interest in MB1/LP, LLC), and (D) that certain Limited Liability Company Membership Interest Purchase Agreement by and between Koch Hydrocarbon Management Company, LLC and ONEOK dated May 9, 2005 (relating to the purchase and sale of a 100% membership interest in Koch Vesco Holdings, LLC), other than any

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such properties, rights, claims, contracts, permits and other assets as have been disposed of in the ordinary course of business.

(b) Except as identified to the contrary in Schedule 2.18(b), the Operating Assets are in good operating condition and repair, ordinary wear and tear excepted, are free of material defects and are suitable for the use for which such assets are currently used.

2.19 Brokers’ Fees. Except for UBS Investment Bank (the fees of which shall be paid solely by ONEOK), no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by ONEOK or any of its Affiliates.

2.20 Books and Records. The respective books of account, minute books, stock or other equity record books and other records of each Entity, all of which have been made available to Northern Border, are complete and correct.

2.21 Indebtedness. No Entity has any Indebtedness to any Person other than Indebtedness owed to the other Entities or to ONEOK or its other Affiliates.

2.22 Disclaimer.

(a) Except as and to the extent expressly set forth in Section 2, (i) ONEOK makes no representations or warranties, express or implied, and (ii) ONEOK expressly disclaims all Liability and responsibility for any representation, warranty, statement or information made or communicated (orally or in writing) to Northern Border or any of its Subsidiaries, employees, agents, consultants or representatives (including, without limitation, any opinion, information, projection or advice that may have been provided to Northern Border by any officer, director, employee, agent, consultant, representative or advisor of ONEOK or any of its Affiliates).

(b) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN SECTION 2, ONEOK EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS TO (I) TITLE TO ANY OF THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM OR REPORT RELATING TO THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, (III) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, (IV) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, OR (V) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO NORTHERN BORDER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A

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PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT, EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN SECTION 2, NORTHERN BORDER SHALL BE DEEMED TO BE OBTAINING PIPELINES, STORAGE FACILITIES, PLANTS, EQUIPMENT AND RELATED FACILITIES AND OTHER ASSETS IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT NORTHERN BORDER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS IT DEEMS APPROPRIATE.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF NORTHERN BORDER

Except as set forth in the disclosure schedules (the “Northern Border Disclosure Schedules”) delivered by Northern Border to ONEOK on the date hereof (it being agreed that any matter disclosed in a particular Schedule of the Northern Border Disclosure Schedules shall be deemed to have been disclosed with respect to any other Sections of this Agreement to the extent that the relevance of such matter to such other Section is readily apparent from the information disclosed), Northern Border represents and warrants to ONEOK that the statements contained in this Section 3 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing, except in each case to the extent that such statements are expressly made only as of a specified date, in which case Northern Border represents and warrants that such statements are true, correct and complete as of such specified date.

3.1 Organization and Authority of Northern Border.

(a) Northern Border is a limited partnership duly organized, validly existing and in good standing under the laws of Delaware.

(b) Northern Border has all requisite right, authority and power to enter into this Agreement and each Related Agreement to be executed and delivered by Northern Border and to carry out the transactions contemplated hereby.

(c) The Partnership Policy Committee and the Audit Committee of Northern Border have each approved the execution, delivery and performance of this Agreement and each of the other Northern Border Transaction Agreements, and the Audit Committee has determined that the Northern Border Transaction is fair and reasonable to Northern Border. Except as contemplated by this Agreement, the execution, delivery and performance by Northern Border of this Agreement and each of the other Northern Border Transaction Agreements have been duly authorized by all necessary action of Northern Border and no other action on the part of Northern Border is required in connection therewith.

(d) This Agreement and each Related Agreement (including, without limitation, the Amendment) executed and delivered by Northern Border constitutes, or when executed and delivered will constitute, valid and binding obligations of Northern Border enforceable in accordance with their respective terms, except as such enforceability may be

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limited by bankruptcy, insolvency or other similar laws from time to time in effect which affect the enforcement of creditors’ rights generally.

(e) The execution, delivery and performance by Northern Border of this Agreement and each Related Agreement (including, without limitation, the Amendment) executed and delivered by Northern Border, with or without the giving of notice or the passage of time, or both:

(i) do not and will not conflict with or violate any provision of the organizational documents of Northern Border;

(ii) do not and will not conflict with or violate any Legal Requirements applicable to Northern Border or, except as set forth in Schedule 3.1(e)(ii) and any filings required to be made under the HSR Act, require Northern Border to obtain any approval, consent or waiver of, or make any filing with, any Governmental Authority that has not been obtained or made, except for such violations or failures to obtain such approval, consent or waiver would not, individually or in the aggregate, have a material adverse effect on the ability of Northern Border to perform its obligations hereunder and consummate the transactions contemplated hereby on the Closing Date;

(iii) except as set forth on Schedule 3.1(e)(iii), do not and will not require the consent, approval or waiver of any Person (other than any Governmental Authority), except for any such consents, approvals or waivers as have been obtained or the failure of which to be obtained would not, individually or in the aggregate, have a material adverse effect on the ability of Northern Border to perform its obligations hereunder and consummate the transactions contemplated hereby on the Closing Date;

(iv) does not and will not breach any contract material to the business or operations of Northern Border or result in or permit the termination of any such contract; and

(v) do not require the consent or approval of the holders of common units representing limited partnership interests in Northern Border (“Common Units”).

(f) The Northern Border Partnership Agreement is in full force and effect and is binding on all the partners thereto. After the Closing, the Amendment will be effective to amend the Northern Border Partnership Agreement in accordance with the provisions and terms of the Amendment.

3.2 Litigation. Except as set forth on Schedule 3.2, there are no Legal Proceedings pending or, to the Knowledge of Northern Border, threatened that challenges or otherwise seeks to prevent, enjoin, alter or delay the consummation of the transactions contemplated hereby.

3.3 Securities Act. Northern Border is acquiring the Shares solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or state securities laws. Northern Border acknowledges that the Shares are not registered under the Securities Act or any applicable state securities law, and that such Shares may not be transferred or sold except pursuant to the

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registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and pursuant to state securities laws and regulations as applicable.

3.4 Brokers’ Fees. Except for the fees payable to the financial advisor referenced in Section 3.5 herein (the fees of which shall be paid solely by Northern Border), no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by Northern Border or any of its Affiliates.

3.5 Opinion of Financial Adviser. Lehman Brothers Inc. has provided the Audit Committee of Northern Border (with a copy to the Partnership Policy Committee of Northern Border) with its opinion that, as of the date hereof and based upon and subject to the matters set forth therein, the net consideration involved in the Northern Border Transaction is fair to Northern Border from a financial point of view.

3.6 Disclaimer.

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

(b) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN SECTION 3, NORTHERN BORDER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS TO (I) TITLE TO ANY OF THE PROPERTIES OR OTHER ASSETS OF NORTHERN BORDER OR ANY OF ITS SUBSIDIARIES, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM OR REPORT RELATING TO THE PROPERTIES OR OTHER ASSETS OF NORTHERN BORDER OR ANY OF ITS SUBSIDIARIES, (III) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE PROPERTIES OR OTHER ASSETS OF NORTHERN BORDER OR ANY OF ITS SUBSIDIARIES, (IV) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE PROPERTIES OR OTHER ASSETS OF NORTHERN BORDER OR ANY OF ITS SUBSIDIARIES, OR (V) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO ONEOK OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT.

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SECTION 4. COVENANTS OF ONEOK

4.1 Conduct of the Entities. Except as set forth on Schedule 4.1, during the period from the date of this Agreement until the Closing (the “Pre-Closing Period”), ONEOK agrees that, except as otherwise contemplated by this Agreement, the ONEOK Disclosure Schedules, or as Northern Border shall otherwise consent in writing (such consent not to be unreasonably withheld, delayed or conditioned):

(a) Ordinary Course. ONEOK shall cause the Entities to, (i) conduct their Business in the ordinary course consistent with past practice and (ii) use commercially reasonable efforts to (A) preserve intact their current business organization, (B) preserve the relationships of the Entities with customers, suppliers, landlords, creditors, employees and other Persons having business dealings with the Entities, (C) preserve and maintain in force all of the insurance policies of the Entities and each of the Permits of the Entities, (D) maintain and repair all property material to the operation of the Business in a manner consistent with past practice, (E) make the capital expenditures identified in the budget previously provided to Northern Border and (F) make payments to all employees, vendors and other trade creditors in a timely manner consistent with past practice.

(b) Governing Documents. ONEOK shall cause each Entity not to amend or waive any rights under the organizational documents of such Entity, other than amendments or waivers necessary to execute, deliver and perform the transactions contemplated by this Agreement including, without limitation, pursuant to Section 6.12.

(c) Issuance of Securities. ONEOK shall cause each Entity not to issue, transfer, sell or dispose of, or authorize or agree to the issuance, transfer, sale or disposition of (whether through the issuance or granting of options, rights, warrants, or otherwise), any Equity Interests of any Entity or any options, rights, warrants or other securities convertible into or exchangeable or exercisable for any Equity Interests of any Entity or amend any of the terms of any securities or agreements relating to such Equity Interests outstanding on the date hereof.

(d) Reclassifications. ONEOK shall cause each Entity not to split, combine or reclassify any Equity Interests of any Entity, or redeem, purchase or otherwise acquire or offer to acquire any such Equity Interests of any Entity.

(e) No Acquisitions. ONEOK shall cause each Entity not to form any Subsidiary or acquire or agree to acquire, by merging or consolidating with, or by purchasing an equity interest in or any of the assets of, any Person; provided, however, that, subject to Section 4.1(h), the foregoing shall not restrict ONEOK or any Entity from purchasing assets in the ordinary course of operating the Entities.

(f) No Dispositions. ONEOK shall cause each Entity not to transfer, sell, lease, license, encumber or otherwise dispose of or agree to transfer, sell, lease, license, encumber or otherwise dispose of, any of their respective assets other than (i) in the ordinary course of business consistent with past practice, (ii) pursuant to existing contractual obligations, (iii) the imposition of Permitted Liens and (iv) the transfer of assets among the Entities.

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(g) Material Contracts. ONEOK shall cause each Entity not to enter into, or permit any of the material assets owned or used by Entity to become bound by or modify, amend or prematurely terminate, or waive any material right or remedy under:

(i) any Contract containing covenants limiting the freedom of any of the Entities, Northern Border or any of its Subsidiaries or their assignees or successors to compete in any line of business or with any Person or in any geographic area during any period of time following the Closing;

(ii) any Contract for the borrowing of money or related to Indebtedness of any Entity in excess of $500,000;

(iii) any Contract with any officer, employee, director of any Entity or ONEOK or any of their respective Affiliates;

(iv) any Contract with any union, trade organization or bargaining unit representative; or

(v) any acquisition, divestiture, merger, joint venture or partnership agreement that is material to the Business.

(h) Capital Expenditures. ONEOK shall cause each Entity not to make, authorize or enter into commitments to make capital expenditures in an amount that, when added to all other capital expenditures made during the Pre-Closing Period on behalf of any Entity, exceeds $500,000, other than any capital expenditures contemplated by the budget previously provided to Northern Border.

(i) Indebtedness. ONEOK shall cause each Entity not to (i) lend money to any Person (except that any Entity may make routine advances to employees in the ordinary course of business) or (ii) incur, assume, guarantee or otherwise become liable in respect of any Indebtedness.

(j) Accounting. ONEOK shall cause each Entity not to change any of its methods of accounting or accounting practices in any material respect except as may be required by any Legal Requirement or GAAP.

(k) Tax Elections. ONEOK shall cause each Entity not to make any Tax election, other than (A) any Tax election made consistent with prior practice of the Entity, (B) a Tax election that would not adversely affect Northern Border or any Entity for any taxable period or portion thereof beginning after the Closing Date or (C) a Tax election to effect a Conversion Transaction as contemplated by Section 6.11.

(l) Proceedings. ONEOK shall cause each Entity not to settle any material Legal Proceeding if, as a result of the settlement, the Entity would be liable after the Closing for settlement payments in excess of $5,000,000 or subject to any injunctive or similar equitable relief or otherwise be subject to any ongoing obligations following the payment of any settlement amounts.

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(m) Regulatory Actions. ONEOK shall cause each Entity not to, other than routine compliance filings, make any filings or submit any documents or information to FERC or any other Governmental Authority, other than routine compliance filings, without prior consultation with Northern Border.

(n) Agreements to Take Action. ONEOK shall cause each Entity not to agree or commit to take any of the actions described in clauses “(b)” through “(m)” above.

4.2 Cash Management. Nothing contained in this Agreement shall prevent or limit the ability of any Entity to distribute, dividend or otherwise transfer any cash to ONEOK, any other Entity or any other Affiliate of ONEOK during the Pre-Closing Period.

SECTION 5. COVENANTS OF NORTHERN BORDER

5.1 Northern Border’s Efforts Regarding Financing Arrangements.

(a) Northern Border shall use commercially reasonable efforts to obtain commitments from sources of financing (the “Financing Commitments”), before the Closing, in amounts, when added to available unrestricted funds are sufficient to enable Northern Border to satisfy its obligations under Section 1.2 of this Agreement.

(b) Northern Border will promptly notify ONEOK if any of the institutions party to a Financing Commitment withdraws, terminates or makes a material change in the amount or terms of such Financing Commitment that could reasonably be expected to adversely affect the ability of Northern Border to satisfy its obligations under Section 1.2 of this Agreement. In addition, upon ONEOK’s reasonable request, Northern Border will advise ONEOK with respect to the status, proposed closing date, and material terms of the Financing Commitments.

(c) Northern Border will, and will cause its Affiliates to, use commercially reasonable efforts to (i) maintain the effectiveness of the Financing Commitments in accordance with their terms or obtain alternative financing if necessary to satisfy its obligations under Section 1.2 of this Agreement, (ii) enter into definitive documentation with respect to the Financing Commitments, or any alternative financing necessary satisfy its obligations under Section 1.2 of this Agreement, (iii) satisfy all funding conditions to the Financing Commitments or any alternative financing set forth in the definitive documentation with respect to the financing contemplated by the Financing Commitments, or alternative financing necessary to satisfy its obligations under Section 1.2 of this Agreement, (iv) consummate the financing contemplated by the Financing Commitments, (v) procure the execution and delivery of the Northern Border Credit Agreement Amendments and (vi) procure the execution and delivery of the waiver to the Viking Indenture described in Section 7.2(m).

5.2 Books and Records.

(a) No later than ten (10) days after Closing, ONEOK will make available to Northern Border or its designee, at ONEOK’s sole cost and expense, originals of all files, records, information and data (in all formats) owned by or primarily relating to the Entities that are in the possession or control of ONEOK or its Affiliates (together with all ONEOK’s and its

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Affiliate’s contractual rights to request other such files, records, information and data from any third party).

(b) For a period of five (5) years from the Closing Date:

(i) Northern Border shall not dispose of or destroy any of the material books and records relating to the Business for periods prior to the Closing (the “Books and Records”) without first offering to turn over possession thereof to ONEOK by written notice from Northern Border to ONEOK at least 60 days prior to the proposed date of such disposition or destruction. Within 30 days after receipt of such notice from Northern Border, ONEOK may notify Northern Border that it wishes to receive such Books and Records, and Northern Border shall deliver such Books and Records (to the extent such Books and Records are not subject to an attorney-client or similar privilege or other confidentiality obligation) to a designated Representative of ONEOK upon receipt by Northern Border of a written agreement in form and substance reasonably satisfactory to Northern Border in which ONEOK agrees to maintain the confidentiality of such Books and Records. If ONEOK does not notify Northern Border within 30 days of receipt of such notice, Northern Border may dispose of or destroy the Books and Records.

(ii) Northern Border shall, on reasonable notice and at reasonable times at Northern Border’s principal place of business or at any location where any Books and Records are stored, allow ONEOK and its agents reasonable access to all Books and Records that are not subject to attorney-client or similar privilege or other confidentiality obligation, to the extent such access is requested for any legitimate purpose related to ONEOK’s prior ownership of the Entities and provided that Northern Border has received a written agreement in form and substance reasonably satisfactory to Northern Border in which ONEOK agrees to maintain the confidentiality of such Books and Records. ONEOK shall have the right, at its own expense, to make copies of any such Books and Records; provided, however, that any such access or copying shall be had or done in such a manner so as not to unduly interfere with the normal conduct of the Business.

(iii) Northern Border shall make available to ONEOK upon reasonable notice to ONEOK and at reasonable times and upon written request Northern Border’s personnel to assist ONEOK in locating and obtaining any Books and Records.

SECTION 6. COVENANTS OF ONEOK AND NORTHERN BORDER

The parties hereto agree that:

6.1 Access to Information. During the Pre-Closing Period, ONEOK will, and will cause each Entity to, (i) give Northern Border and its Representatives reasonable access during normal business hours and on reasonable notice to the officers, personnel, properties, Tax Returns, books, records and work papers of and relating to any Entity, (ii) furnish to Northern Border and its Representatives such financial and operating data and copies of such Tax Returns, books, records, work papers and other documents and information with respect to any Entity, as such Persons may reasonably request, and (iii) instruct their respective Representatives to cooperate with Northern Border in its investigation of the Entities. The Parties agree that any

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information provided, or caused to be provided, by the Entities pursuant to this Section 6.1 shall be kept confidential and not disclosed to any third party, except to the extent required by any Legal Requirement. ONEOK shall cooperate to ensure that the provision of access hereunder to Northern Border and its authorized Representatives shall comply in all respects with the Federal Energy Regulatory Commission’s (“FERC”) Standards of Conduct for Transmission Providers set forth in 18 C.F.R. Part 37, et al.

6.2 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement and applicable Legal Requirements, each of the Parties hereto shall act in good faith and use its commercially 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 consummate and make effective the transactions contemplated hereby as soon as practicable, including such actions or things as the other Party may reasonably request in order to cause any of the conditions to such other Party’s obligation to consummate the transactions contemplated by this Agreement to be fully satisfied.

6.3 Regulatory and Other Authorizations; Notices and Consents.

(a) Each of ONEOK and Northern Border shall use commercially reasonable efforts to obtain promptly all authorizations, consents, orders and approvals of all Governmental Authorities (including by making, or causing to be made, all appropriate filings of notifications or reports) necessary for its execution and delivery of, and the performance of its obligations pursuant to, and the consummation of the transactions contemplated by, this Agreement (such authorizations, consents, orders and approvals, “Governmental Approvals”). ONEOK and Northern Border shall, and ONEOK shall cause the Entities to, cooperate in promptly seeking to obtain the Governmental Approvals.

(b) Neither ONEOK nor Northern Border shall intentionally take any action that would be reasonably expected to delay, impair or impede the receipt of any Governmental Approvals. ONEOK and Northern Border agree to make, or to cause to be made, all appropriate filings of notifications and reports required to obtain the Governmental Approvals promptly after the date of this Agreement and to supply promptly any additional information and documentary material that may be requested by Governmental Authorities responsible therefor. As defined further below, the parties shall cooperate in making any such filings. ONEOK and Northern Border agree to use their commercially reasonable efforts to avoid or eliminate each and every impediment under any Legal Requirement that may be asserted by any Governmental Authority in connection with the Governmental Approvals so as to enable the Parties to expeditiously close the transactions contemplated by this Agreement. ONEOK and Northern Border agree to use commercially reasonable efforts to vacate or lift any order relating to the Governmental Approvals that would have the effect of making any of the transactions contemplated by this Agreement illegal or otherwise prohibiting their consummation. Notwithstanding any other terms or provisions of this Agreement, in no event shall Northern Border or its Subsidiaries be deemed to have any obligation to dispose of any assets or properties (including any assets or properties of the Entities) or to enter into any agreement with any Person in order to obtain early termination or expiration of the waiting period under the HSR Act or to obtain any other Governmental Approvals.

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(c) Each Party shall promptly notify the other party of any communication it or any of its Affiliates receives from any Governmental Authority relating to the matters that are the subject of this Agreement, including any filing, investigation or inquiry, and, subject to applicable Law, permit the other Party to review in advance any proposed communication by such Party to, or filing by such party with, any Governmental Authority. No Party shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry unless it consults with the other Party in advance and, to the extent permitted by such Governmental Authority, affords the other Party the reasonable opportunity to attend and participate. Each Party will coordinate and cooperate fully with the other Party in exchanging such information and providing such assistance as such other Party may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods under the HSR Act or in connection with any other Governmental Approvals. Each Party will provide the other Party with copies of all correspondence, filings or communications between it or any of its Representatives, on the one hand, and any Governmental Authority, on the other hand, with respect to this Agreement and the transactions contemplated by this Agreement, including with respect to the Party hereto making a filing, providing copies of all such documents to the non-filing Party and its Representatives prior to filing (except that neither Party hereto shall be under an obligation of any kind to provide the other Party with documents, material or other information relating to such Party’s valuation of the Business).

(d) Northern Border and ONEOK shall (and shall each cause their respective Affiliates to) use commercially reasonable efforts to obtain all consents, authorizations, waivers and approvals of third parties that any of Northern Border, ONEOK or their respective Affiliates (including the Entities) are required to obtain in order to consummate the transactions contemplated hereby.

6.4 Public Announcements. During the Pre-Closing Period, ONEOK and Northern Border shall consult with each other before issuing any press release or making any public statement with respect to the transactions contemplated hereby and, except as may be required by applicable Legal Requirements or stock exchange rules and regulations, shall not issue any such press release or make any such public statement unless the text of such statement shall first have been agreed to by the parties.

6.5 Notices of Certain Events. Each Party hereto shall promptly notify the other Party hereto (i) following the receipt of any notice of any Legal Proceeding commenced or, to the Knowledge of ONEOK, or the Knowledge of Northern Border, as applicable, threatened against it that relates to or seeks to prohibit the consummation of the transactions contemplated hereby, (ii) upon its discovery that any of its representations or warranties in this Agreement contain any inaccuracies or that such Party has breached or otherwise failed to perform its obligations, covenants and agreements contained herein or (iii) upon its discovery of any development that is reasonably likely to result in a failure of a condition to the Closing.

6.6 Entity Guarantees.

(a) Northern Border and ONEOK shall use commercially reasonable efforts to obtain from the respective beneficiary, in form and substance reasonably satisfactory to ONEOK,

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on or before the Closing, valid and binding written releases of ONEOK and its Affiliates (other than the Entities), as applicable, from any liability or obligation, whether arising before, on or after the Closing Date, under any Entity Guarantees in effect as of the Closing. If any Entity Guarantee has not been released as of the Closing Date, then Northern Border shall continue to use commercially reasonable efforts after the Closing to cause each such unreleased Entity Guarantee to be released promptly. Schedule 6.6(a) to the ONEOK Disclosure Schedules contains a true, correct and complete list of all of the Entity Guarantees.

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

(c) Northern Border shall indemnify and hold harmless ONEOK and its Affiliates from and after the Closing Date for any and all Damages arising out of or relating to any Entity Guarantees.

6.7 Intercompany Accounts. Except for amounts related to normal operational sales and cost of sales and fuel, prior to Closing ONEOK will settle all Intercompany Accounts and intercompany arrangements between any Entity, on the one hand, and ONEOK and its Affiliates (other than an Entity), on the other hand, and the Entities will not have any Liability whatsoever with respect to such settled intercompany arrangements and Intercompany Accounts. ONEOK shall be solely liable for any contractual or other Liabilities, express or implied, arising out of the termination, cancellation and elimination of any of the foregoing.

6.8 Shared Contracts and Drop-Down Contracts.

(a) Schedule 6.8(a) contains a true and complete listing of all Shared Contracts and Drop-Down Contracts. Commencing on the date hereof, (i) Northern Border and ONEOK shall use commercially reasonable efforts to cause the Shared Contracts to be replaced with separate Contracts that provide that each Entity receive only such rights and obligations under a replacement Contract substantially and materially similar to those contract rights and obligations utilized by it in the conduct of its business immediately prior to the date hereof and (ii) Northern Border and ONEOK shall use commercially reasonable efforts to cause the Drop-Down Contracts to be assigned to one or more Entities, as applicable, or, if any such Drop-Down Contracts are not assignable or if ONEOK is not able to obtain any consent required to so assign such Drop-Down Contracts, use commercially reasonable efforts to cause such Drop-Down Contracts to be replaced with separate Contracts that provide that the Entity receives the rights and obligations under a replacement Contract as are substantially and materially similar to those contract rights and obligations of ONEOK under such Drop-Down Contracts immediately prior to the date hereof. The administrative costs and expenses arising from the separation, replacement or assignment of a Shared Contract or Drop-Down Contract (excluding any costs incurred under the payment terms under any such Contract or any replacement Contract) shall be borne by ONEOK.

(b) If the Parties are not able to effect the separation and replacement of a Shared Contract or to effect the assignment or replacement of a Drop-Down Contract prior to the

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Closing, then, from the Closing until such Contract is separated and replaced (in the case of a Shared Contract), assigned or replaced (in the case of a Drop-Down Contract) or expires by its terms, to the extent permissible under any Legal Requirement and under the terms of such Contract, ONEOK shall, and Northern Border shall cause each Entity to, (i) assume and perform the liabilities and obligations under such Contract relating to its respective business (and shall promptly reimburse the other Party for any expenses relating thereto incurred by the other Party or its Affiliates), (ii) hold in trust for the benefit of the other Party, and shall promptly forward to the other Party, any monies or other benefits received pursuant to such Shared Contract relating to the business of the other Party (or its Affiliates) and (iii) endeavor to institute alternative arrangements intended to put the Parties in substantially the same economic position as if such Contract were separated and replaced (in the case of a Shared Contract) or assigned or replaced (in the case of a Drop-Down Contract).

6.9 ONEOK Marks. Northern Border shall obtain no right, title, interest, license or any other right whatsoever to use the word “ONEOK” or any Trademarks containing or comprising the foregoing, or any Trademark confusingly similar thereto or dilutive thereof (collectively, the “ONEOK Marks”). Notwithstanding the preceding sentence, effective upon the Closing Date, ONEOK, on behalf of itself and its Affiliates hereby grants to the Entities and Northern Border a nonexclusive, nontransferable, royalty-free license, without right to sublicense, to use, solely in the Entities’ businesses as they are presently conducted, any and all of the ONEOK Marks solely to the extent appearing on existing advertising materials and property of the Companies (such as signage, vehicles, and equipment) for a period of 6 months from the Closing Date (“License Period”); provided, however, that with respect to pipeline and gas storage signage the License Period shall be deemed to be a period of 12 months from the Closing Date. Northern Border and the Entities may use such existing inventory, advertising materials and property during the License Period, but shall not create new inventory, advertising materials or property using the ONEOK Marks. Northern Border and the Entities shall promptly replace or remove all ONEOK Marks on inventory, advertising materials and other assets, provided that all such use shall cease no later than the end of the License Period. As promptly as practicable and no later than 60 days after the Closing Date, Northern Border shall change the name of any Entity that contains a reference to “ONEOK” to a name that does not contain such reference. The Parties agree, because damages would be an inadequate remedy, that a Party seeking to enforce this Section 6.9 shall be entitled to seek specific performance and injunctive relief as remedies for any breach thereof in addition to other remedies available at law or in equity.

6.10 Indebtedness for Borrowed Money. Immediately prior to the Closing, (i) ONEOK shall repay or otherwise settle any Indebtedness due to the Entities from ONEOK or its Affiliates (other than the Entities) and (ii) ONEOK shall cause the repayment or settlement any Indebtedness due from the Entities to ONEOK or its Affiliates (other than the Entities), in each case, including interest and other amounts accrued thereon or due in respect thereof, other than any Indebtedness fully reflected in the Closing Working Capital.

6.11 Conversion Transactions. ONEOK shall, prior to the Closing Date, subject to having obtained any and all necessary approvals and consents from Governmental Authorities, (a) cause each of the Converting Companies to convert from corporations into an Eligible Person under the laws of the jurisdiction in which each is organized on the date of this Agreement (the

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“Conversion Transactions”) (and use its best efforts, after consulting with Northern Border, to form such Eligible Person as instructed by Northern Border) and (b) cause each of the Companies and Company Subsidiaries that is not on the date hereof treated as a partnership or an entity disregarded from its owner for United States federal income tax purposes to be so treated on or before the Closing Date and (c) cause each such Company and Company Subsidiary described in (a) or (b) above to be continuously treated as a partnership or a disregarded entity from its owner for United States federal income tax purposes from the date it becomes so treated through the Closing Date.

6.12 Interim Financial Statements. From time to time after the date hereof, ONEOK will deliver to Northern Border copies of the monthly and quarterly financial statements (which shall include a balance sheet and a statement of income) for the Entities for all periods after the Balance Sheet Date through and including the Closing Date (collectively, the “Interim Financial Statements”). The Interim Financial Statements will be prepared on the same basis as the Financial Statements and will present fairly in all material respects the financial position, results of operations and cash flows of the Entities as of such dates and for the periods then ended (subject to normal year-end audit adjustments consistent with prior periods).

6.13 Cooperation Regarding Audits. ONEOK acknowledges and understands that Northern Border may be required to obtain certain information relating to the Entities including, but not limited to, audited or unaudited financial statements of the Entities, and disclose such information in registration statements and other documents filed with the Securities and Exchange Commission under the federal securities laws or in disclosure documents given to investors in certain securities offerings, including in connection with the third-party financing required to satisfy Northern Border’s obligations under Section 1.2 of this Agreement. At Northern Border’s cost, ONEOK agrees to use commercially reasonable efforts to cooperate, and shall cause its Affiliates, accountants, counsel and other agents and representatives to cooperate, with Northern Border in connection therewith with respect to the Entities for periods prior to the Closing, including the execution and delivery of any customary audit representation letters, consents or comfort letters and representation letters for such periods presented to ONEOK by Northern Border and its auditors for execution in connection therewith.

SECTION 7. CONDITIONS TO CLOSING

7.1 Conditions to the Obligations of ONEOK. The obligation of ONEOK to consummate this Agreement and the transactions contemplated hereby is subject to the fulfillment, prior to or at the Closing, of the following conditions precedent unless waived by ONEOK in its sole discretion:

(a) Accuracy of Representations and Warranties. All representations and warranties made by Northern Border herein and in any Related Agreement shall be true and correct when made and on and as of the Closing, except for representations and warranties that are made as of a specific date or time, which shall be true and correct only as of such specific date or time, except for such failures of such representations and warranties to be true and correct (without giving effect to any limitation or qualification as to Northern Border Material Adverse Effect or “materiality” (including the word “material”) set forth therein) as would not, individually or in the aggregate, have a material adverse effect on the ability of Northern Border

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to perform its obligations hereunder and consummate the transactions contemplated hereby on the Closing Date.

(b) Compliance with Covenants. Northern Border shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement and any Related Agreements to be performed or complied with by it prior to or on the Closing.

(c) No Material Change. Since the date hereof, there shall not have occurred any event, development or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a Northern Border Material Adverse Effect.

(d) Certificate from Officers. Northern Border shall have delivered to ONEOK a certificate of Northern Border’s Chief Financial and Accounting Officer dated as of the Closing to the effect that the statements set forth in paragraphs (a), (b) and (c) above in this Section 7.1 are true and correct.

(e) No Injunction. At the time of Closing there shall be no effective injunction, writ or preliminary restraining order or any Governmental Order of any nature issued by a Governmental Authority of competent jurisdiction to the effect that the transactions contemplated by this Agreement may not be consummated as herein provided, and no proceeding or lawsuit shall have been commenced by any Governmental Authority or other Person for the purpose of obtaining any such injunction, writ or preliminary restraining order.

(f) Hart-Scott-Rodino. All required filings under the HSR Act shall have been completed and all applicable time limitations under such Act shall have expired without a request for further information by the relevant Governmental Authorities under such Act, or in the event of such a request for further information, the expiration of all applicable time limitations under the Act shall have occurred without the objection of such federal authorities.

(g) Governmental Approvals. The consent of (i) Kansas Corporation Commission for transfer of Certificates of Convenience and Necessity and transfer of tariffs related to Mid-Continent Marketing Center (“KCC Consent”) and (ii) Oklahoma Corporation Commission for the sale of ONEOK Gas Transportation, L.L.C. (“OCC Consent”), shall have been obtained.

(h) Other Transactions. The transactions contemplated by the Contribution Agreement by and among ONEOK, Northern Border and NBILP, dated concurrently with this Agreement (the “Contribution Agreement”), the Purchase and Sale Agreement between TransCan Northwest Border Ltd and Northern Plains Natural Gas Company, LLC (the “GP Purchase Agreement“) and the Partnership Interest Purchase and Sale Agreement by and between NBILP and TC PipeLines Intermediate Limited Partnership, dated February 14, 2006 (the “TransCanada Agreement” and, together with the Contribution Agreement and the GP Purchase Agreement, the “Other Transaction Agreements”), shall have been consummated on the Closing Date (the transactions contemplated by the GP Purchase Agreement shall be consummated immediately prior to the Closing and ONEOK or its Affiliates shall, immediately following such consummation, own 100% of the general partnership interests in Northern

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Border, the transactions contemplated by the Contribution Agreement shall be consummated simultaneously with the Closing and the transactions contemplated by the TransCanada Agreement shall be consummated immediately following the Closing).

(i) Amendment to Credit Facility. An amendment to each of (A) the Credit Agreement dated as of September 17, 2004 by and among ONEOK, Bank of America, N.A., and the financial institutions therein named as Lenders, as amended, and (B) the Credit Agreement dated June 27, 2005 among ONEOK, Inc., as Borrower, Citibank, N.A., as Administrative Agent, and the Lenders party thereto, as amended, shall have been executed and delivered by the parties thereto in form and substance reasonably satisfactory to ONEOK that permits ONEOK to enter into and perform its obligations under this Agreement.

(j) Delivery of Deliverables. Each of the deliveries set forth in Section 1.3(c) shall have been made.

7.2 Conditions to the Obligations of Northern Border. Northern Border’s obligation to consummate this Agreement and the transactions contemplated hereby is subject to the fulfillment, prior to or at the Closing, of the following conditions precedent unless waived by Northern Border in writing in its sole discretion:

(a) Accuracy of Representations and Warranties. All representations and warranties made by ONEOK herein and in any Related Agreement shall be true and correct when made and on and as of the Closing, except for representations and warranties that are made as of a specific date or time, which shall be true and correct only as of such specific date or time; except for such failures of such representations and warranties to be true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or “Material Adverse Effect” set forth therein) as would not, individually or in the aggregate, have a Material Adverse Effect.

(b) Compliance with Covenants. ONEOK shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement and any Related Agreements to be performed or complied with by it prior to or on the Closing.

(c) No Material Change. Since the date hereof, there shall not have occurred any event, development or circumstance with respect to ONEOK or the Entities that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of ONEOK to perform its obligations hereunder and consummate the transactions contemplated hereby on the Closing Date.

(d) Certificate from Officers. ONEOK shall have delivered to Northern Border a certificate of ONEOK’s Chief Financial Officer dated as of the Closing to the effect that the statements set forth in paragraphs (a), (b) and (c) above in this Section 7.2 are true and correct.

(e) No Injunction. At the time of Closing there shall be no effective injunction, writ or preliminary restraining order or any Governmental Order of any nature issued by a Governmental Authority of competent jurisdiction to the effect that the transactions

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contemplated by this Agreement may not be consummated as herein provided, and no proceeding or lawsuit shall have been commenced by any Governmental Authority or other Person for the purpose of obtaining any such injunction, writ or preliminary restraining order.

(f) Hart-Scott-Rodino. All required filings under the HSR Act shall have been completed and all applicable time limitations under such Act shall have expired without a request for further information by the relevant Governmental Authorities under such Act, or in the event of such a request for further information, the expiration of all applicable time limitations under the Act shall have occurred without the objection of such federal authorities.

(g) Governmental Approvals. The KCC Consent and the OCC Consent shall have been obtained.

(h) Other Transactions. The transactions contemplated by the Other Transaction Agreements shall have been consummated on the Closing Date (the transactions contemplated by the GP Purchase Agreement shall be consummated immediately prior to the Closing and ONEOK or its Affiliates shall, immediately following such consummation, own 100% of the general partner interests in Northern Border, the transactions contemplated by the Contribution Agreement shall be consummated simultaneously with the Closing and the transactions contemplated by the TransCanada Agreement shall be consummated immediately following the Closing).

(i) Conversion Transactions. The Conversion Transactions shall have been completed in form and substance satisfactory to Northern Border.

(j) Funding. Northern Border shall have received the proceeds of the financing contemplated by the Financing Commitments on substantially the same terms and subject to the conditions set forth therein.

(k) Amendment of Certain Debt Agreements. Amendments to (i) that certain Revolving Credit Agreement, dated as of May 16, 2005, by and among Northern Border, the lenders named therein and Citibank, N.A., and (ii) that certain Revolving Credit Agreement, dated as of May 16, 2005, by and among Northern Border Pipeline Company, the lenders named therein, and Citibank N.A., (the “Northern Border Credit Agreements”) that permit Northern Border to enter into and consummate the transactions contemplated by the Northern Border Transaction Agreements without violating the terms of, or causing a default under, either such credit agreement, in the form attached hereto as Exhibit F (the “Northern Border Credit Agreement Amendments”), shall have been executed and delivered by the parties thereto.

(l) Delivery of Deliverables. Each of the deliveries set forth in Section 1.3(b) shall have been made

(m) Waiver Under Viking Indenture. A waiver by the holders of a majority of the principal amount of the notes outstanding under the Amended and Restated Indenture Agreement dated as of November 30, 2004 the (“Viking Indenture”) between Viking Gas Transmission Company and Wells Fargo Bank, National Association, as Trustee as are reasonably necessary to permit Northern Border to enter into and consummate the transaction

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contemplated by the Northern Border Transaction Agreements without violating the terms thereof or causing a default thereunder shall have been obtained.

SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED

8.1 Termination.

(a) This Agreement may be terminated on or prior to the Closing Date only as follows:

(i) by mutual written consent of the Parties to this Agreement;

(ii) at the election of either ONEOK or Northern Border, if the Closing shall not have occurred on or prior to June 30, 2006; provided that no Party shall be entitled to terminate this Agreement pursuant to this Section 8.1(a)(ii) if such Party’s failure to fulfill any obligation under this Agreement has been the primary cause of the failure of the Closing to occur on or before such date; and provided further that upon the occurrence of a request for additional information being received from a Governmental Authority pursuant to the HSR Act, such date shall be extended to September 30, 2006;

(iii) by either ONEOK or Northern Border, if a Governmental Authority shall have issued an order, decree or ruling permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree or ruling shall have become final and nonappealable, provided that the terminating Party has satisfied its obligations under Section 6 in response to actions or requests of such Governmental Authority;

(iv) by ONEOK, if ONEOK is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant, or agreement of Northern Border contained in this Agreement such that any of the conditions set forth in Section 7.1 would not be satisfied at or prior to the Closing, and, if such breach is of a character that it is capable of being cured, such breach has not been cured by Northern Border within 15 days after written notice thereof from ONEOK; or

(v) by Northern Border, if Northern Border is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant, or agreement of ONEOK contained in this Agreement such that any of the conditions set forth in Section 7.2 would not be satisfied at or prior to the Closing, and, if such breach is of a character that it is capable of being cured, such breach has not been cured by ONEOK within 15 days after written notice thereof from Northern Border.

(b) The termination of this Agreement shall be effectuated by the delivery of a written notice of such termination from the party terminating this Agreement to the other party.

8.2 Effect of Termination. All obligations of the parties hereunder shall cease upon any termination pursuant to Section 8.1; provided, however, that (i) the provisions of this Section 8, Section 6.1 (solely with respect to confidentiality obligations) and Section 11 hereof shall survive any termination of this Agreement, and (ii) nothing herein shall relieve any party

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from any Liability for any intentional breach (including any “efficient breach”) of this Agreement or a failure to comply with any of its covenants, conditions or agreements contained herein.

SECTION 9. INDEMNIFICATION

9.1 Survival of Representations and Warranties, Etc.

The representations and warranties of ONEOK and Northern Border contained in this Agreement shall survive the Closing and expire on the second anniversary of the Closing Date; provided, however, that (i) the representations and warranties of ONEOK in Sections 2.1 (Organization and Authority of ONEOK), 2.2 (Organization, Authority and Qualification of the Entities), 2.3 (Capital of Companies; Beneficial Ownership) and 2.4 (Subsidiaries) shall survive indefinitely, (ii) the representations and warranties of ONEOK in Section 2.16 (Environmental Matters) shall survive the Closing and expire on the fourth anniversary of the Closing Date, (iii) the representations and warranties of ONEOK in Section 2.6 (Taxes) shall survive the Closing and expire on the 60^th day following the expiration of the applicable statute of limitations relating thereto and (iv) the representations and warranties of Northern Border in Section 3.1 (Organization and Authority of Northern Border) shall survive indefinitely. No Northern Border Indemnitee shall be entitled to indemnification for a breach of a representation or warranty under this Section 9 unless it shall have given ONEOK written notice that it seeks indemnification (which notice may be, in the case of third-party Claims, notice under Section 9.7) on or before the expiration of such representation or warranty. No ONEOK Indemnitee shall be entitled to indemnification for a breach of a representation or warranty under this Section 9 unless it shall have given the Northern Border written notice that it seeks indemnification (which notice may be, in the case of third-party Claims, notice under Section 9.7) on or before the expiration of such representation or warranty. Each notice delivered under the preceding two sentences shall include a good faith estimate of the amount claimed and a detailed description of the circumstances surrounding the Damages in respect of which indemnification is claimed. The terms of this Agreement that by their nature are intended to survive the Closing shall survive the Closing indefinitely (or for their respective terms, if any).

9.2 Indemnification.

(a) From and after the Closing, ONEOK shall hold harmless and indemnify the Northern Border Indemnitees from and against, and shall compensate and reimburse each of the Northern Border Indemnitees for, (i) any Damages which are directly or indirectly suffered or incurred by any of the Northern Border Indemnitees or to which any of the Northern Border Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party Claim) as a result of, caused by or arising out of (including any allegations by a third party): (A) other than in connection with Section 2.16 of this Agreement (which is covered under Section 9.2(a)(ii) below), any inaccuracy in or breach of any representation or warranty of ONEOK set forth in this Agreement (without giving effect to any limitation or qualification as to “materiality” (including the word “material” or “Material Adverse Effect”) contained or incorporated directly or indirectly in such representation or warranty; or (B) any breach of any covenant or obligation of ONEOK under this Agreement; or (ii) any Damages with respect to any inaccuracy in or breach of any representation or warranty of ONEOK set forth in Section

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2.16 of this Agreement (without giving effect to any limitation or qualification as to “materiality” (including the word “material” or “Material Adverse Effect”) or the “Knowledge of ONEOK” contained or incorporated directly or indirectly in such representation or warranty), in each case in this subsection (ii) except for Damages that arise out of matters discovered by or on behalf of Northern Border or its Subsidiaries as a result of a Phase II, Phase III or similar environmental subsurface investigation undertaken voluntarily after Closing by or on behalf of Northern Border or any of its Subsidiaries, including the Entities, and except for remediation costs and expenses for matters which are not required to be remediated under applicable law.

(b) From and after the Closing, Northern Border shall hold harmless and indemnify the ONEOK Indemnitees from and against, and shall compensate and reimburse each of the ONEOK Indemnitees for, any Damages which are directly or indirectly suffered or incurred by any of the ONEOK Indemnitees or to which any of the ONEOK Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party Claim) as a result of, caused by or arising out of: (i) any inaccuracy in or breach of any representation or warranty of Northern Border set forth in this Agreement (without giving effect to any limitation or qualification as to “materiality” (including the word “material” or “Northern Border Material Adverse Effect”) contained or incorporated directly or indirectly in such representation or warranty); or (ii) any breach of any covenant or obligation of Northern Border under this Agreement; provided, however, that no ONEOK Indemnitee shall have any claim or recourse against Northern Border, and Northern Border shall have no obligation to indemnify any ONEOK Indemnitee under the terms of this Agreement, with respect to any breach by Northern Border of any representation or warranty of Northern Border set forth in this Agreement if to the Knowledge of ONEOK, Northern Border is in breach of any representation or warranty on the date hereof. For purposes of this Section 9.2(b) only, the term “Knowledge of ONEOK” shall include the actual knowledge of David Kyle.

(c) To the extent that ONEOK or its Affiliates (other than the Entities) has the right to seek indemnification from third parties for the benefit of the Entities or their assets, and the Entities are not entitled to seek such indemnification on their own accord, ONEOK, upon Northern Border’s written request, shall assign such indemnification rights to Northern Border or, if such rights cannot be assigned, assert (at Northern Border’s cost) a claim relating to such matter against such third party on behalf of the applicable Entities, and provide to Northern Border all benefits of such indemnification as, when and if provided by such third party. Notwithstanding the foregoing, neither ONEOK nor its Affiliates shall be obligated to make any additional payments or to take any action that would cause them to incur or be subject to any additional liabilities or costs with respect to any actions taken under this Section 9.2(c).

9.3 Threshold; Cap.

(a) ONEOK shall not be required to make any indemnification payment in respect of any claim or series of substantially related claims made pursuant to Section 9.2(a) of this Agreement, or pursuant to Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of the Contribution Agreement, unless the amount of any Damages that have been directly or indirectly suffered or incurred by any one or more of the Northern Border Indemnitees or to which any one or more of the Northern Border Indemnitees has or have otherwise become subject with respect to such claim (or such substantially related claims) exceeds $100,000 (the “Minimum Claim

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Amount”). In addition, ONEOK shall not be required to make any indemnification payment pursuant to Section 9.2(a) of this Agreement, or pursuant to Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of the Contribution Agreement, until such time as the total amount of all individual claims exceeding the Minimum Claim Amount (such total amount, the “Aggregate Northern Border Damages”) exceeds $45,000,000 in the aggregate (the “Indemnity Threshold”). If the total amount of such Aggregate Northern Border Damages exceeds the Indemnity Threshold, then, subject to Section 9.3(b), the Northern Border Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for all Aggregate Northern Border Damages in excess of the Indemnity Threshold. Northern Border shall not be required to make any indemnification payment in respect of any claim (or series of substantially related claims) made pursuant to Section 9.2(b) of this Agreement or pursuant to Section 9.2(b) of the Contribution Agreement unless the amount of any Damages that have been directly or indirectly suffered or incurred by any one or more of the ONEOK Indemnitees or to which any one or more of the ONEOK Indemnitees has or have otherwise become subject with respect to such claim (or such substantially related claims) exceeds the Minimum Claim Amount. In addition, Northern Border shall not be required to make any indemnification payment pursuant to Section 9.2(b) of this Agreement or pursuant to Section 9.2(b) of the Contribution Agreement until such time as the total amount of all individual claims exceeding the Minimum Claim Amount (such total amount, the “Aggregate ONEOK Damages”) exceeds the Indemnity Threshold. If the total amount of such Aggregate ONEOK Damages exceeds the Indemnity Threshold, then, subject to Section 9.3(b), the Northern Border Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for all Aggregate ONEOK Damages in excess of the Indemnity Threshold.

(b) The maximum liability of ONEOK under Section 9.2(a) of this Agreement and under Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of the of the Contribution Agreement, taken in the aggregate, shall be $360,000,000 (the “ONEOK Indemnity Cap”). The maximum liability of Northern Border under Section 9.2(b) of this Agreement and of both NBP and NBILP under Section 9.2(b) of the Contribution Agreement, taken in the aggregate, shall be $198,000,000 (the “Northern Border Indemnity Cap”).

(c) The limitations set forth in Section 9.3(a) and Section 9.3(b) shall not apply to any of the matters described in Sections 1.4 (Working Capital Adjustment), 2.1 (Organization and Authority of ONEOK), 2.2 (Organization, Authority and Qualification of the Entities), 2.3 (Capital of Companies; Beneficial Ownership), 2.4 (Subsidiaries) and 3.1 (Organization and Authority of Northern Border).

9.4 Exclusive Remedy; Sole Recourse. With the exception of claims based upon fraud or intentional misrepresentation, from and after the Closing, the indemnification provisions set forth in this Section 9 and the Tax indemnification provisions set forth in Section 10.6 shall be the sole and exclusive remedy of both the Northern Border Indemnitees and the ONEOK Indemnitees for Damages under this Agreement (it being understood that nothing in this Section 9.4 or elsewhere in this Agreement shall affect the Parties’ rights to specific performance or other equitable remedies with respect to the covenants referred to in this Agreement to be performed after the Closing).

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9.5 No Contribution. ONEOK shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against any Entity in connection with any indemnification obligation or any other Liability to which it may become subject under or in connection with this Agreement.

9.6 Setoff. Notwithstanding anything herein to the contrary, Damages shall be calculated net of any insurance or indemnification proceeds and Tax Benefits actually received by an Indemnitee or its Affiliates in connection with the facts giving rise to the right of indemnification (net of any fees, costs or expenses incurred in enforcing such Indemnitee’s rights to recover such insurance proceeds).

9.7 Third Party Claims.

(a) Upon receipt by any Person seeking to be indemnified pursuant to Section 9.2 (the “Indemnitee”) of notice of any third-party claim, (each a “Claim”) against it which has or is expected to give rise to a claim for Damages, the Indemnitee shall give prompt written notice thereof to the Person from which it seeks to be indemnified (the “Indemnitor”), indicating the nature of such Claim and the basis therefor; provided, however, that any delay or failure by the Indemnitee to give notice to the Indemnitor shall relieve the Indemnitor of its obligations hereunder only to the extent, if at all, that it is materially prejudiced by reason of such delay or failure.

(b) The Indemnitor shall have 30 days (or such shorter period as may be required by applicable Legal Requirements) after receipt of the Indemnitee’s notice to elect, at its option, to assume the defense of, at its own expense and by its own counsel, any such Claim. If the Indemnitor desires to undertake to defend any such Claim, it shall promptly notify the Indemnitee of its intention to do so. Notwithstanding an election by the Indemnitor to assume the defense of such Claim, (i) the Indemnitee shall have the right to employ separate counsel and to participate in the defense of such Claim, and the Indemnitor shall bear the reasonable fees, costs and expenses of such separate counsel if (A) the Indemnitee shall have determined in good faith that an actual or potential conflict of interest makes representation by the same counsel or the counsel selected by the Indemnitor inappropriate, (B) the Indemnitee shall have determined in good faith that the Damages in respect of such Claim may exceed the remaining balance of the applicable Indemnity Cap, or (C) the Indemnitor shall have authorized the Indemnitee to employ separate counsel at the Indemnitor’s expense, and (ii) the Indemnitee shall have the right at any time after the Indemnitor assumes the defense of such Claim to assume the defense of such Claim if (y) the Indemnitor subsequently determines that it does not believe the Claim is one for which the Indemnitee is entitled to indemnification, compensation or reimbursement under this Section 9.7 and requests that the Indemnitee assume the defense of such Claim (in which case the Indemnitee may, but shall not be obligated to, retain the legal counsel previously retained by the Indemnitor to assist in the defense of such Claim) or (z) any Damages in respect of such Claim are reasonably likely to exceed the remaining balance of the applicable Indemnity Cap available to such Indemnitee (in which case the Indemnitor shall bear the reasonable fees, costs and expenses of Indemnitee’s counsel, subject to the applicable Indemnity Cap, as applicable). The Indemnitee and Indemnitor and their counsel shall cooperate fully in the compromise or defense of any Claim subject to this Section 9.7 and keep one another informed of all developments relating to any such Claims, and provide copies of all relevant correspondence and

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documentation relating thereto. If an Indemnitor receiving a notice of Claim does not elect to defend such Claim within the time period referred to above, the Indemnitee shall have the right, in addition to any other right or remedy it may have hereunder, at the Indemnitor’s expense, subject to the Indemnity Cap, as applicable, to defend such Claim. The Indemnitee’s defense of, or participation in the defense of, any such Claim shall not in any way diminish or lessen the obligations of the Indemnitor under this Section 9.7. In no event may an Indemnitor or an Indemnitee settle or compromise any Claim without the consent of the other (which consent will not be unreasonably withheld, conditioned or delayed); provided, however, that an Indemnitor may settle or compromise a claim without the consent of the Indemnitee so long as (i) the relief consists solely of money damages in an amount greater than the Indemnity Threshold and less than the remaining balance of the applicable Indemnity Cap with respect to the Indemnitor and includes a provision whereby the plaintiff or claimant in the matter releases the Indemnitor and the Indemnitee from all liability with respect thereto, and (ii) such Indemnitor acknowledges the Indemnitee is entitled to indemnification, compensation and reimbursement under this Section 9.7). If remediation is required in connection with any Claims for which the Northern Border Indemnitees are entitled to indemnification under Section 9.2(a)(ii) above, ONEOK shall have the right to conduct, control and direct such remediation; provided, however, that any remediation activities undertaken by ONEOK shall be conducted (i) in compliance with all applicable Legal Requirements and any health and safety plan or other reasonable plans or guidelines imposed by Northern Border on Persons entering its properties, and (ii) in a manner that minimizes any short or long-term interference with Northern Border’s operations. ONEOK shall consult with Northern Border in its determination of the appropriate remediation standard to which remediation will be performed, and any institutional controls that ONEOK intends to employ to meet such remediation standard.

SECTION 10. TAX MATTERS

10.1 Retention of Records. Each of Northern Border and ONEOK shall retain, and Northern Border shall cause each of the Entities to retain, all Tax Records in its possession for all open Tax Periods ending on or before or including the Closing Date, until 6 months following the expiration of the statute of limitations (and any extensions thereof) of the respective Tax Periods. “Tax Records” means any Tax Return, Tax Return workpapers, documentation relating to any Audit, and any other books of account or records (whether on paper, computer disk or any other medium) required or advisable to be maintained under the applicable Tax law or under any record retention agreement with any Tax Authority.

10.2 Cooperation. Northern Border and ONEOK covenant and agree that subsequent to the Closing, upon reasonable notice and during normal business hours, they and their Affiliates will (i) give the other Party and its Representatives information, books and records (or copies thereof) relevant to the Entities, to the extent necessary to enable the other Party to prepare its Tax Returns (and any Tax Returns for which it has preparation or filing responsibility hereunder) or determine the amount of any refund, credit or other amount the amount of which the requesting Party may be entitled to receive pursuant to this Agreement, and (ii) provide the other Party and its Representatives with such information, books and records (or copies thereof) as may reasonably be requested in connection with any Tax Return, inquiry, election, Audit or other examination by any Tax Authority, or judicial or administrative proceedings relating to liability for Taxes. ONEOK and Northern Border also shall make

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available to each other, as reasonably requested, and at the expense of the requesting Party, knowledgeable employees or advisors of the Party or its Affiliates of which the request is made and personnel responsible for preparing and maintaining information, books, records and documents in connection with Tax filings, Audits, disputes or litigation. Notwithstanding the foregoing or any other provision in this Agreement, neither Northern Border nor the Entities (or any Affiliates of either) shall have the right to receive or obtain any information relating to Taxes of ONEOK, any of its Affiliates, or any of its predecessors other than information relating solely to or otherwise affecting the calculation of Taxes of or attributable to the Entities or any of their subsidiaries. Northern Border and ONEOK each agree, upon request, to use their reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

10.3 Transfer Taxes. All transfer, documentary, recording, notarial, sales, use, registration, stamp and other similar taxes, fees and expenses (including, but not limited to, all applicable stock transfer, real estate transfer or gains Taxes and including any penalties, interest and additions to such tax) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by ONEOK. Northern Border and ONEOK shall cooperate in timely making and filing all Tax Returns as may be required to comply with the provisions of laws relating to such Transfer Taxes.

10.4 Tax Returns.

(a) ONEOK shall prepare (or cause to be prepared) and timely file all Tax Returns required to be filed with any Tax Authority with respect to the Entities for all Tax Periods ending on or before the Closing Date and shall pay all Taxes (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) due with respect to such Tax Returns. Northern Border shall timely pay all Taxes due with respect to such Tax Returns to the extent of any applicable accruals included within the calculation of Final Closing Working Capital. ONEOK shall provide Northern Border with drafts of such Tax Returns at least 10 days prior to the due date for filing such Tax Returns (taking into account extensions) for Northern Border’s review and comment; provided that in the case of a Tax Return which is a Consolidated Return, ONEOK shall only be required to provide the portions of such Consolidated Return relating solely to the income, gain, loss and deduction of the Entities. The final form of any such Tax Return required to be provided to Northern Border (and the portion of any such Consolidated Return relating solely to the Entities), pursuant to the preceding sentence, shall be subject to Northern Border’s prior written consent, which shall not be unreasonably withheld; provided that Northern Border shall not withhold consent to the filing of any such Tax Return if such Tax Return (or in the case of a Consolidated Return the portion thereof relating to the Entities) is prepared in a manner consistent with Section 10.4(c) of this Agreement and the treatment of any items that are not covered by past practice would not have an adverse effect on the Taxes of the Entities for any period beginning on or after the Closing Date or the portion of any Straddle Period (as defined below) that is Northern Border’s responsibility. In the case of any Tax Return required to be filed by ONEOK pursuant to this Section 10.4(a) after the Closing Date, Northern Border shall arrange for the signing of such Tax Returns or shall provide ONEOK with such powers or attorney or other authorization, in each case as may be necessary to effect such filings in accordance with applicable Tax Law.

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(b) Northern Border shall prepare (or cause to be prepared) and timely file all Tax Returns for all Tax Periods ending after the Closing Date, including all Tax Returns for periods which include but do not end on the Closing Date (“Straddle Periods”) (the “Northern Border Returns”). If ONEOK is responsible under Section 10.5 of this Agreement for any Taxes due with respect to a Northern Border Return, Northern Border shall provide ONEOK with a substantially final draft of each such Tax Return at least 10 days prior to the due date for filing such Tax Returns (taking into account extensions) for ONEOK’s review and comment and the final form for any such Northern Border Returns shall be subject to ONEOK’s prior written consent, which shall not be unreasonably withheld; provided however, that ONEOK shall not withhold consent if such Tax Return is prepared in a manner consistent with Section 10.4(c) of this Agreement and the treatment of any items that are not covered by past practice would not have a material adverse effect on the Tax liabilities of ONEOK or the Entities for any Pre-Closing Period. Northern Border shall timely pay all Taxes due with respect to such Returns and ONEOK shall promptly reimburse Northern Border for any such Taxes which are its responsibility pursuant to Section 10.5 of this Agreement.

(c) Except as otherwise agreed by the parties, any Tax Return that includes any of the Entities’ assets or activities for any Pre-Closing Period shall be prepared in accordance with ONEOK’s past Tax accounting practices used with respect to the Tax Returns in question (unless the party responsible for preparing the Tax Return determines that the past practices are no longer permissible under the Code or other applicable Tax law), and to the extent any items are not covered by past practices (or in the event such past practices are no longer permissible under the Code or other applicable Tax law), in accordance with reasonable Tax accounting practices selected by the party responsible for preparing the Tax Return. In the case of any Tax Return for an Entity for any Straddle Period, any income, gain, loss and deduction shall be allocated based on a closing of the books method or such other method as may be agreed upon in writing by the parties.

(d) As part of the Services Agreement between ONEOK and Northern Border, ONEOK shall provide certain Tax Return filing assistance and other Tax assistance relating to the Taxes of the Entities in respect of periods ending after the Closing Date.

10.5 Allocation of Taxes.

(a) Allocation of Straddle Period Taxes. Northern Border and ONEOK shall, to the extent permitted by applicable Tax Law and except as otherwise provided herein, elect with the relevant Tax Authority to close the Tax Period of the Entities as of and including the Closing Date. Subject to the preceding sentence, in the case of Taxes attributable to the Entities that are payable with respect to any Straddle Period the portion of any such Taxes that are allocable to the portion of the Straddle Period ending on the Closing Date shall: (1) in the case of Taxes that are either (A) based upon or related to income or receipts or (B) imposed in connection with any sale, transfer or assignment of property (real or personal, tangible or intangible) be deemed equal to the amount that would be payable if the Tax year ended on and included the Closing Date and (2) in the case of Taxes (other than those described in clause (i)) imposed on a period basis with respect to the business or assets of the Entities or otherwise measured by the level of any item, be deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such

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Taxes for the immediately preceding Tax Period) multiplied by a fraction the numerator of which is the number of calendar days in the portion of the Straddle Period ending on and including the Closing Date and the denominator of which is the number of calendar days in the entire Straddle Period (the “Part-Year Fraction”). For purposes of clause (1) of the preceding sentence, any exemption, deduction, credit or other item that is calculated on an annual basis shall be allocated to the portion of the Straddle Period ending on the Closing Date on a pro rata basis determined by multiplying the total amount of such item allocated to the Straddle Period times the Part-Year Fraction. In the case of any Tax based upon or measured by capital (including net worth or long-term debt) or intangibles, any amount thereof required to be allocated under this Section 10.5(a) shall be computed by reference to the level of such items on the Closing Date. ONEOK shall be responsible for and shall pay any Taxes (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) allocable to the portion of the Straddle Period ending on the Closing Date and Northern Border shall be responsible for and shall pay any Taxes allocable to the portion of the Straddle Period after the Closing Date.

(b) Post-Closing Tax Periods. From and after the Closing Date, for the portion of any Straddle Period that begins on the day after the Closing Date and any other Tax Period beginning after the Closing Date, without duplication of any amount otherwise payable by Northern Border pursuant to this Agreement, Northern Border shall be responsible and pay, or cause the Entities to pay, to the appropriate Tax Authority any other Taxes due with respect to the Entities for any such period.

(c) Ad Valorem Taxes. Notwithstanding the foregoing, all ad valorem taxes (other than production, severance and similar Taxes measured by the quantity of or the value of production) related to the 2006 ad valorem tax year shall be pro-rated based on the number of days during the 2006 ad valorem tax year falling before and falling on or after the Closing Date. ONEOK will pay to Northern Border at Closing an amount equal to the portion of the 2006 ad valorem taxes allocated to it pursuant to this paragraph (to the extent such allocated amounts exceed any applicable accruals therefor included within the calculation of Final Closing Working Capital). ONEOK shall not be liable for any ad valorem taxes for the period following the Closing. Northern Border assumes full responsibility for filing all ad valorem renditions and tax returns in all applicable tax jurisdictions due after the Closing Date. ONEOK will, upon request from Northern Border, provide reasonably requested historical documentation of prior year filings related to ad valorem taxes to help facilitate Northern Border’s correct filing of ad valorem renditions and tax returns. ONEOK assumes full responsibility for filing all ad valorem taxes through the Closing Date.

10.6 Tax Indemnity.

(a) ONEOK’s Indemnity for Taxes for Pre-Closing Date Periods. Notwithstanding any of the provisions of Section 9, from and after the Closing Date, without duplication of any amount otherwise payable by ONEOK pursuant to this Agreement, ONEOK shall indemnify Northern Border and its respective Affiliates against:

(i) all Taxes (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) imposed or payable by the Entities with

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respect to Tax Periods ending on or before the Closing Date and the portion of any Straddle Periods ending on the Closing Date (each such period a “Pre-Closing Taxable Period”);

(ii) all Taxes that are imposed or payable by the Entities that are attributable to (A) any termination of the Entities under Code Section 708 caused by the transactions contemplated herein, or (B) ONEOK or any member of an Affiliated, consolidated, combined or unitary Tax group of which the Entities are or were members prior to the Closing Date (other than any Taxes of the Entities) that is imposed under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) by reason of such Entities being included in any such Affiliated, consolidated, combined or unitary Tax group; and

(iii) any payments (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) owed by the Entities to any third party (other than a Governmental Authority) under a tax sharing or other contractual agreement with respect to Taxes of the Entity accruing on or before the Closing Date.

(b) Northern Border Indemnity for Taxes for Post-Closing Tax Periods. Notwithstanding any of the provisions of Section 9, from and after the Closing Date, without duplication of any amount otherwise payable by Northern Border pursuant to this Agreement, Northern Border shall indemnify ONEOK and its respective Affiliates against all Taxes imposed on or payable by Northern Border or the Entities relating to any Tax Period or portion thereof that begins after the Closing Date, including the portion of the Straddle Period beginning immediately after the Closing Date and including any Taxes accruing after the Closing Date.

(c) Payments. Payment by the indemnitor of any amount due under this Section 10.6 shall be made within 10 days following written notice by the indemnitee that payment of such amounts to the appropriate Tax Authority is due, such written notice to reasonably demonstrate that the indemnitee is entitled to such payment under the terms of this Agreement.

(d) Tax Refunds. If Northern Border or any of its Affiliates (including, for this purpose, the Entities after the Closing Date) receives a refund of Taxes of the Entities with respect to a Pre-Closing Taxable Period (including any interest thereon), or in lieu thereof a credit against Taxes, Northern Border shall pay (or cause the Entities to pay) to ONEOK the amount of such Tax refund or credit (net of any costs or expenses incurred by Northern Border or the Entities in obtaining the Tax refund or credit). Such payment shall be made promptly following the receipt of such Tax refund or credit by Northern Border or any of its Affiliates. In addition, if the payments made (or deemed made) by or on behalf of the Entities with respect to the Pre-Closing Taxable Period portion of the Straddle Period exceed the Taxes due with respect to such portion of the Straddle Period, Northern Border shall cause the Entities to pay to ONEOK such excess within 10 days following the filing of the relevant Tax Return with respect to such Straddle Period. ONEOK shall have the sole right, at its expense, to pursue any Tax refunds with respect to Tax periods ending on or before the Closing Date.

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10.7 Contests.

(a) Notices. After the Closing Date, Northern Border and ONEOK each shall notify the other in writing within 5 business days of receipt of any notice of the commencement of any Tax audit or administrative or judicial proceeding relating to the Taxes of any of the Entities (“Tax Controversy”) in respect to Pre-Closing Taxable Periods or the Straddle Periods, the outcome of which may affect the Tax liabilities or indemnification obligations under this Agreement of the other party (“Tax Indemnitor”). Such notice shall include copies of any notice or other document received from any Tax Authority in respect of such audit or other proceeding. If either Northern Border or ONEOK fail to give the other party prompt notice as required under this Agreement, then (i) if the failure of a party to give such notice precludes the Tax Indemnitor from contesting an asserted Tax liability in any administrative or judicial forums, then the Tax Indemnitor shall not have any obligation to indemnify under this Agreement for any loss or damage arising out of such asserted Tax liability, and (ii) if the Tax Indemnitor is not so precluded from contesting an asserted Tax liability, but such failure to give prompt notice results in a detriment to the Tax Indemnitor, then any amount which the Tax Indemnitor is otherwise required to pay pursuant to this Agreement with respect to such liability shall be reduced by the amount of such detriment.

(b) Control of Contests. ONEOK shall control the defense and settlement of any Tax Controversy involving any asserted liability for Taxes imposed with respect to the Entities relating to Tax Periods that end on or before the Closing Date for which ONEOK is responsible pursuant to this Section 10. Northern Border shall control the defense and settlement of any Tax Controversy involving any asserted liability for Taxes imposed with respect to the Entities relating to Tax Periods that end after the Closing Date.

(c) Procedures. If the resolution of any Tax Controversy would be grounds for indemnification under this Agreement (including, for this purpose, as a result of altering the Tax Period in which items of income, gain, loss, deduction or credit are reported) by the party not in control of the conduct of such Tax Controversy (the “Non-Controlling Party”) or otherwise adversely affect the Tax liability of the Non-Controlling Party, (i) the party in control of such Tax Controversy (the “Controlling Party”) shall keep the Non-Controlling Party fully informed of any proceedings, events, and developments relating to or in connection with such Tax Controversy; (ii) the Non-Controlling Party shall be entitled to receive copies of all correspondence and documents relating to such Tax Controversy; (iii) the Controlling Party shall consult with the Non-Controlling Party and shall not enter into any settlement with respect to any such Tax Controversy without the Non-Controlling Party’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed; and (iv) at its own cost and expense, the Non-Controlling Party shall have the right to participate (but not control) the defense of such Tax Controversy; provided however, that clauses (i) through (iv) shall apply only in respect of the portion of such Tax Controversy, correspondence and documents that relate solely to the Entities.

10.8 Amended Tax Returns. ONEOK shall not, without the prior written consent of Northern Border (which consent shall not be unreasonably withheld, conditioned or delayed), file any amended Tax Return or claim for Tax refund filed or required to be filed hereunder to be filed by ONEOK to the extent such filing, if accepted, could be reasonably expected to have an adverse effect on the Tax liability of Northern Border, its Affiliates or any Entity or any of the

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Entities for any Tax Period after the Closing; provided that no such consent shall be required for any amended return or claim for Tax refund resulting from an audit adjustment.

10.9 Miscellaneous.

(a) Character of Payments. Any payment made by ONEOK, Northern Border, or any of their respective Subsidiaries (including the Entities) under this Section 10 shall constitute an adjustment to the Purchase Price for all tax purposes.

(b) Interest on Payments. To the extent any payment obligation under this Section 10 or Article 9 is not made on a timely basis (as determined by the relevant provision of this Section 10 or the relevant provision of Article 9), the amount due and payable shall bear interest at a floating annual rate equal to the annual prime lending rate of The Chase Manhattan Bank in effect, from time to time, from the last date such payment would be timely under the relevant provision of this Section 10 or Article 9, as applicable, to the date of the payment of such amount.

(c) Survival of Tax Claims. Notwithstanding any other provision of this Agreement to the contrary, any obligations of the parties pursuant to this Section 10 shall be unconditional and absolute and shall survive until the expiration of 6 months after the applicable statute of limitations (taking into account any applicable extensions or tollings thereof) relating to the Taxes at issue.

10.10 Allocation of the Purchase Price.

(a) Within one hundred twenty (120) days following the Closing Date, ONEOK will prepare, or cause to be prepared, and delivered to Northern Border a statement of the fair market value of the interests in each of the Entities acquired pursuant to this Agreement, with the aggregate of the Entity fair market values equaling the fair market value of the consideration provided in Section 1.2 of this Agreement. In addition, in the case of any Entities which are taxable as disregarded entities federal income tax, the statement shall also include a statement of the fair market value of the assets of each of such Entities (such statement, together with the Entity fair market schedule, the “FMV Schedules”). The FMV Schedules as so prepared by ONEOK shall be deemed accepted by Northern Border, unless Northern Border shall send ONEOK a written objection thereto within thirty (30) days following the Northern Border’s receipt thereof. In the event that Northern Border delivers a timely written objection as aforesaid and Northern Border and ONEOK are unable to resolve such objection within twenty (20) business days after Northern Border is notified of ONEOK’s objection, the matters in dispute shall be submitted for final and binding determination to the Neutral Auditors. The FMV Schedules as proposed by ONEOK, shall be adjusted to reflect the resolution of any timely objections made thereto by Northern Border in accordance with this Section 10.9 and the determinations of the Neutral Auditors, which determinations will be binding absent manifest error or fraud. Northern Border and ONEOK shall each pay their own expenses of preparing and analyzing the schedules and resolving objections thereto; provided that the cost of any appraisals required to prepare the FMV Schedule shall be borne 50 percent by Northern Border and 50 percent by ONEOK. The fees and expenses of the Neutral Auditors used to resolve objections to the schedules will be borne equally by Northern Border and ONEOK.

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(b) Each party agrees that it shall not take any position that varies from or is inconsistent with such valuation in any filing made by such party with the IRS or any other taxing authority, except to the extent an adjustment is required by the IRS or any other taxing authority.

SECTION 11. MISCELLANEOUS

11.1 Fees and Expenses. Each of the parties will bear its own expenses in connection with the negotiation and the consummation of the transactions contemplated by this Agreement.

11.2 Governing Law. This Agreement shall be construed under and governed by the internal laws of the State of Delaware without regard to its conflict of laws provisions.

11.3 Notices. All notices and other communications between the Parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person or by overnight delivery service, (ii) 3 days after posting in the United States mail having been sent registered or certified mail return receipt requested, or (iii) upon receipt when delivered by facsimile transmission, in each case, to the addresses set forth below (or to such other address or addresses as the Parties may designate from time to time in writing):

TO ONEOK:

ONEOK, Inc.

100 W. 5^th Street, Suite 1800

Tulsa, OK 74103

Attention: President

Facsimile: (918) 588-7961

with copies to (which shall not constitute notice):

ONEOK, Inc.

100 W. 5^th Street, Suite 1800

Tulsa, OK 74103

Attention: General Counsel

Facsimile: (918) 588-7971

and to:

Gable & Gotwals

100 W. 5^th Street, Suite 1100

Tulsa, OK 74103-4217

Attention: Stephen W. Lake

Facsimile: (918) 595-4990

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TO NORTHERN BORDER:

Northern Border Partners, L.P.

13710 FNB Parkway

Omaha, NE 68154-5200

Attention: Chief Executive Officer

Facsimile: (402) 490-7482

with copies to (which shall not constitute notice):

Northern Border Partners, L.P.

13710 FNB Parkway

Omaha, NE 68154-5200

Attention: Janet Place

Facsimile: (402) 492-7480

Locke Liddell & Sapp LLP

600 Travis, 3400 JPMorgan Chase Tower

Houston, TX 77002

Attention: Michael T. Peters

Facsimile: (713) 223-3717

and with a copy to (prior to the Closing):

Baker Botts L.L.P.

910 Louisiana

Houston, Texas 77002-4995

Attention: R. Joel Swanson

Facsimile: (713) 229-1522

Any notice given hereunder may be given on behalf of any party by his counsel or other authorized representatives.

11.4 Entire Agreement. This Agreement together with the Related Agreements, including the Schedules and Exhibits referred to herein and therein and the other writings specifically identified herein and therein (including the Confidentiality Agreement) or contemplated hereby, is complete, reflects the entire agreement of the Parties with respect to its subject matter, and supersedes all previous written or oral negotiations, commitments and writings. No promises, representations, understandings, warranties and agreements have been made by any of the Parties hereto except as referred to herein or therein or in such Schedules and Exhibits or in such other writings and all inducements to the making of this Agreement relied upon by either Party hereto have been expressed herein or in such Schedules or Exhibits or in such other writings.

11.5 Assignability; Binding Effect. This Agreement may not be assigned by ONEOK or Northern Border without the prior written consent of the other parties to this Agreement. This Agreement shall be binding upon and enforceable by, and shall inure to the benefit of, the Parties hereto and their respective successors and permitted assigns.

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11.6 Captions and Gender. The captions in this Agreement are for convenience only and shall not affect the construction or interpretation of any term or provision hereof. The use in this Agreement of the masculine pronoun in reference to a Party hereto shall be deemed to include the feminine or neuter, as the context may require.

11.7 Execution in Counterparts. For the convenience of the Parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

11.8 Amendments. This Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by both Northern Border and ONEOK, or in the case of a waiver, the Party waiving compliance.

11.9 Publicity and Disclosures. No press releases or public disclosure, either written or oral, of the transactions contemplated by this Agreement shall be made by a Party to this Agreement without the written consent of ONEOK and Northern Border.

11.10 Severability. The Parties agree that, in the event that any provision of this Agreement or the application of any such provision to any Party is held by a court of competent jurisdiction to be contrary to law, the provision in question shall be construed so as to be lawful and the remaining provisions of this Agreement shall remain in full force and effect.

11.11 Waiver of Jury Trial. Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any Legal Proceeding directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement.

11.12 Arbitration. All disputes arising out of or in connection with this Agreement and the transactions contemplated hereby and thereby, which cannot be resolved through the procedures described herein or therein shall be finally resolved solely and exclusively by means of arbitration under the then-current rules for non-administered arbitration of the International Institute for Conflict Prevention and Resolution (“CPR Rules”) to be conducted in English in the City of Tulsa. The arbitration shall be conducted by a panel of three (3) arbitrators appointed by agreement of the Parties, or failing such agreement, under the CPR Rules, provided that any arbitrator selected shall be a retired federal judge of a court within the jurisdiction of the United States. The arbitration will proceed in accordance with the CPR Rules. The decision of the arbitrators shall be final, conclusive, and binding upon the Parties, and a judgment upon the award may be obtained and entered in any federal or state court of competent jurisdiction. The Parties agree that any arbitration shall be kept confidential and any element of such arbitration (including but not limited to any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the arbitral tribunal, the Parties, their counsel and any persons necessary to conduct the arbitration, except as may be required in recognition and enforcement proceedings, if any, or in order to satisfy disclosure obligations imposed by any applicable law. The Parties agree to cooperate in providing each other with all discovery, including but not limited to the exchange of documents and depositions of Parties and non-Parties, reasonably related to the issues in the arbitration. If

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the Parties are unable to agree on any matter relating to such discovery, any such difference shall be determined by the arbitrators. The award of the arbitrators shall be final and binding upon the Parties, and shall not be subject to any appeal or review. The Parties agree that such award may be recognized and enforced in any court of competent jurisdiction. The Parties also agree to submit to the non-exclusive personal jurisdiction of the federal and state courts sitting in Oklahoma, for the limited purpose of enforcing this arbitration agreement (including, where appropriate, issuing injunctive relief) or any award resulting from arbitration pursuant to this Section 11.12. The Parties agree that except in the case of fraud the arbitration proceeding described in this Section 11.12 is the sole and exclusive manner in which the Parties may resolve disputes arising out of or in connection with this Agreement. The arbitrators have the discretion to grant the prevailing Party in any arbitration attorneys’ fees and costs and make the non-prevailing Party responsible for all expenses of the arbitration.

11.13 Time of the Essence. Time is of the essence with respect to the performance of the obligations set forth in this Agreement.

11.14 Remedies Cumulative; Specific Performance. The rights and remedies of the Parties hereto shall be cumulative and not alternative. The Parties hereto agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement for the benefit of any other Party to this Agreement, such other Party shall be entitled (in addition to any other remedy that may be available to it and without the requirement of the posting of a bond) to (a) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision and (b) an injunction restraining such breach or threatened breach.

11.15 Further Assurances. From and after the date of this Agreement, upon the request of either Party, the other Party shall execute and deliver such instruments, documents or other writings as may be reasonably necessary to carry out and effectuate fully the intent and purposes of this Agreement.

11.16 Third Party Beneficiaries. Nothing herein expressed or implied is intended to or shall be construed to confer upon or give any Person, other than the Parties hereto and their respective successors, permitted assigns and Affiliates (including, without limitation, the Northern Border Indemnitees and the ONEOK Indemnitees), any rights or remedies under or by reason of this Agreement.

11.17 Audit Committee Authority. At or prior to the Closing, (a) any action, notice, consent, approval or waiver that is required to be taken or given or may be taken or given by Northern Border pursuant to Section 1.4 (Working Capital Adjustment), Section 4.1 (Conduct of the Entities), Section 6.4 (Public Announcements), Section 7.2 (Conditions to the Obligations of Northern Border), and Section 8.1 (Termination), and (b) any amendment of this Agreement or of any other Northern Border Transaction Agreement shall be made, taken or given by Northern Border, as the case may be, only with the concurrence, or at the direction, of the Audit Committee of Northern Border.

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11.18 Certain Definitions. (a) For purposes of this Agreement, the term:

“Acquired Entities” means, collectively, the Entities and the “Entities” as defined in the Contribution Agreement.

“Affiliates” means, with respect to the Person to which it refers, a Person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such subject Person. Notwithstanding the other provisions of this definition and except as otherwise expressly provided in this Agreement, ONEOK’s Affiliates shall be deemed to exclude Northern Border and its Subsidiaries and Northern Border’s Affiliates shall be deemed to exclude ONEOK and its Subsidiaries (including the Entities).

“Business Facility” includes any pipeline or pipeline easement or right-of-way, compressor station, hub, delivery point, receipt point, interconnection, gas storage facility, gas processing facility, fractionator, storage field, well or other real or personal property that any Entity or any of its respective organizational predecessors currently owns, leases, manages or operates in any manner or formerly owned, leased, managed or operated in any manner, including, without limitation, the Operating Assets.

“CERCLA” shall have the meaning ascribed to it in the definition of Environmental Laws.

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

“Contract” means any written or oral note, instrument, bond, mortgage, indenture, lease, sublease, contract, subcontract, warranty, agreement, obligation, understanding, commitment or legally binding commitment or undertaking of any nature.

“Consolidated Return” means a consolidated United States Income Tax Return (within the meaning of Section 1501 of the Code and the Treasury Regulations promulgated pursuant to Section 1502 of the Code) and any other combined, joint, consolidated or unitary Tax Return required to be filed with any Tax Authority that includes both (i) any Entity and (ii) ONEOK or any subsidiary of ONEOK that is not an Entity.

“Converting Companies” means each of Chisholm Pipeline Holdings, Inc., ONEOK Transmission Company and ONEOK Underground Storage Company.

“Copyrights” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Damages” means any loss, damage, injury, decline in value, lost opportunity, liability (INCLUDING STRICT LIABILITY), claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees), charge, cost or expense of any nature (including costs and expenses of litigation, administrative proceedings and investigations), whether arising in tort, contract or otherwise, but excluding any punitive damages except to the extent such punitive damages are awarded against any Indemnitees in a third-party Claim; provided, however, notwithstanding any other provision of this Agreement to the contrary, to avoid double counting as to any matter, “Damages” shall not include any Liability to the extent

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that such Liability (or a reserve therefor (to the extent of such reserve)) is fully reflected as a current liability in the calculation of Final Closing Working Capital.

“Drop-Down Contracts” means all Contracts (other than Shared Contracts, intercompany loan or credit agreements that shall be terminated prior to or at the Closing, confidentiality agreements, benefit plans and employment or secondment agreements), to which an Entity is not a party and to which ONEOK or any Affiliate of ONEOK (other than an Entity) is a party and which solely benefits one or more of the Entities.

“Eligible Person” means a Person treated as a “domestic eligible entity” under section 301.7701-3(a) of the Treasury regulations promulgated under the Code.

“Employee Benefit Plan” means (i) each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, including any multiemployer plan (as defined in Section 3(40) of ERISA), (ii) each plan that would be an employee benefit plan if it was subject to ERISA, such as plans for directors, (iii) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock or other stock plan (whether qualified or nonqualified), and (iv) each bonus, deferred compensation or incentive compensation plan; provided, however, that such term shall not include (a) routine employment policies and procedures developed and applied in the ordinary course of business and consistent with past practice, including wage, vacation, holiday, and sick or other leave policies, (b) workers compensation insurance, and (c) directors and officers liability insurance.

“Environmental Laws” means, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. §§ 9601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., and the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq., and all rules and regulations promulgated pursuant to any of the above statutes, and any federal, state, local, municipal, foreign or other law, statute, constitution, common law, resolution, ordinance, code, edict, decree, order, rule, regulation, permit condition, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority, in each case relating to Environmental Matters.

“Environmental Matters” means any matters arising out of or relating to health and safety, or pollution or protection of the environment or workplace, including, without limitation, the ambient and indoor air, surface and ground waters, land and soils, buildings, and indoor workplaces, and any of the foregoing relating to the use, generation, transport, treatment, storage, or disposal of any Hazardous Materials.

“Environmental Permit” means all Permits required to comply with any applicable Environmental Law.

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“Entity Guarantees” means all guaranties, letters of credit, bonds, sureties and other credit support or assurances provided by ONEOK or its Affiliates (other than the Entities) in support of any obligations of the Entities.

“Equity Interests” means the capital stock, limited liability company membership interest, partnership interest or similar ownership interests of any Person.

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

“ERISA Affiliate” means, with respect to any Person, any other Person that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first Person, or that is a member of the same “controlled group” as the first Person pursuant to Section 4001(a)(14) of ERISA.

“GAAP” means United States generally accepted accounting principles and practices as in effect from time to time and applied consistently throughout the periods involved.

“Governmental Authority” means any foreign or domestic federal, state, local, municipal, or other government or governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); or any body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, or regulatory or power of any nature, in each case having jurisdiction over ONEOK, the Entities, the Business or Northern Border.

“Governmental Order” means any order, ruling, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Hazardous Material” means any substance, material or waste that is regulated by any Environmental Law as hazardous, toxic, a pollutant, contaminant, solid waste or words of similar import, including, without limitation, petroleum, petroleum derivatives and by-products, asbestos, urea formaldehyde and polychlorinated biphenyls.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indebtedness” means all outstanding obligations for borrowed money, including (i) indebtedness evidenced by notes, bonds, debentures or other instruments (and including all outstanding principal, prepayment premiums, if any, and accrued interest, fees and expenses related thereto), (ii) any outstanding obligations under capital leases and purchase money obligations, (iii) any amounts owed with respect to drawn letters of credit and (iv) any outstanding guarantees of obligations of the type described in clauses (i) through (iii) above (and, for the avoidance of doubt, excludes accounts payable).

“Indemnity Cap” means the ONEOK Indemnity Cap or the Northern Border Indemnity Cap, as applicable.

“Intellectual Property Assets” means: (A) patents, patent applications, inventions, discoveries, and invention disclosures (whether or not patented) (collectively, “Patents”); (B)

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trade names, trade dress, logos, slogans, internet domain names, registered and unregistered trademarks and service marks and related registrations, applications for registration and renewals therefor (collectively, “Trademarks”); (C) copyrights in both published and unpublished works and all copyright registrations, applications and renewals therefor, and all derivatives, translations, adaptations and combinations of the above (collectively, “Copyrights”); (D) know-how, trade secrets, confidential or proprietary information, data, processes and strategies, (collectively, “Trade Secrets”); (E) other intellectual property rights and/or proprietary rights relating to any of the foregoing; (F) Software; and (G) goodwill, licenses, permits, consents, approvals, and claims of infringement against third parties.

“Intercompany Accounts” shall mean all balances related to receivables, payables or other accounts between ONEOK and its Subsidiaries (other than the Entities) on the one hand, and the Entities, on the other hand (but excluding all Indebtedness).

“IRS” means the Internal Revenue Service.

“Knowledge of Northern Border” or similar words or phrases means the actual knowledge of Bill Cordes, Chris Skoog, Jerry Peters, Mike Nelson, Pierce Norton and Fred Rimington.

“Knowledge of ONEOK” or similar words or phrases means the actual knowledge of John Gibson, Pierce Norton, Sam McVay, Pete Walker, Terry Spencer, Steve Guy, Jim Haught and Curtis Dinan.

“Legal Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigate or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or Governmental Authority or any arbitrator or arbitration panel.

“Legal Requirement” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, order, judgment or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority, including, without limitation, Tax Laws.

“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including, without limitation, those arising under any Legal Requirement and those arising under any contract, agreement, arrangement, commitment or undertaking.

“Lien” means any claim, restriction on voting, transfer or pledge, hypothecation, option, right of first refusal, easement, preemptive right, community property interest, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, security interest or other restriction of any kind, whether imposed by Legal Requirement, agreement, understanding or otherwise.

“Material Adverse Effect” means with respect to the Entities any event, change or effect that individually or in the aggregate has or would reasonably be expected to have a material

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adverse effect upon the condition (financial or otherwise), business, assets, liabilities, or results of operations of the Entities, taken as a whole; excluding any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which the Entities operate; (ii) national or international political conditions, including terrorism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP which are not specific to the Entities; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental Authority generally affecting one or more industries in which the Entities operate; (vi) the public announcement, pendency or completion of the transactions contemplated by this Agreement; or (vii) seasonal reductions in revenues and/or earnings of the entities in the ordinary course of business. References in this Agreement to dollar amount thresholds shall not be deemed to be a measure of a Material Adverse Effect or materiality.

“Net Working Capital” means, at any date, the difference between the consolidated current assets of the Entities and the consolidated current liabilities of the Entities, in each case determined in accordance with GAAP applied consistently in the manner applied in the Financial Statements, except as otherwise provided in the calculation of Target Working Capital as set forth in Exhibit D, and except as otherwise provided in Schedule 1.4, (but for the purposes of preparing the Closing Working Capital Statement only, without regard to any income Tax assets or liabilities).

“Northern Border Indemnitees” means Northern Border, Northern Border’s Affiliates (including, without limitation, the Entities) and their respective Representatives.

“Northern Border Material Adverse Effect” means with respect to Northern Border any event, change or effect that individually or in the aggregate has or would reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), business, assets, liabilities, or results of operations of Northern Border, taken as a whole; excluding any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which Northern Border operates; (ii) national or international political conditions, including terrorism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP which are not specific to Northern Border; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental Authority generally affecting one or more industries in which Northern Border operates; (vi) the public announcement, pendency or completion of the transactions contemplated by this Agreement or (vii) seasonal reductions in revenues and/or earnings of Northern Border in the ordinary course of business. References in this Agreement to dollar amount thresholds shall not be deemed to be a measure of a Northern Border Material Adverse Effect or materiality.

“Northern Border Transaction” means the transactions provided for under the terms of the Northern Border Transaction Agreements when viewed on a collective basis.

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“Northern Border Transaction Agreements” means this Agreement, the Contribution Agreement, the TransCanada Agreement, the Amendment and each agreement, instrument, certificate or similar document executed and delivered by Northern Border pursuant to the terms of this Agreement, the Contribution Agreement, the TransCanada Agreement and the Amendment.

“ONEOK Indemnitees” means ONEOK, ONEOK’s Affiliates and their respective Representatives.

“Patents” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Permit” means any license, franchise, permit, consent, permission, concession, order, approval, authorization, qualification or registration from, of or with a Governmental Authority.

“Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure Legal Proceeding shall have been commenced: (a) Liens for Taxes, assessments and governmental charges or levies arising in the ordinary course of business and not yet delinquent or Liens that are solely financial in nature and are accounted for as current liabilities in the determination of the Net Working Capital Adjustment; (b) Liens imposed by any applicable Legal Requirement, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established to the extent they exceed $500,000; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business consistent with past practice; (e) all matters of record, including, without limitation, survey exceptions, reciprocal easement agreements and other encumbrances on title to real property, and all special exceptions included in title insurance policies or title opinions issued to any Entity, in each case that could not result in future denial of possession and do not unreasonably interfere with the use of the properties in the Business; (f) all applicable zoning, entitlement, conservation restrictions and other land use and environmental regulations that do not unreasonably interfere with the use of the properties in the Business; (g) all exceptions, restrictions, easements, charges, rights-of-way and other Liens set forth in any Permits or other state, local or municipal franchise applicable to any Entity or any of their respective properties that do not unreasonably interfere with the use of the properties in the Business; (h) any encumbrances, restrictions, defects in title or other similar Liens that could not result in future denial of possession and do not unreasonably interfere with the use of the properties in the Business; (i) the rights of licensors and licensees under licenses executed in the ordinary course of business that do not unreasonably interfere with the use of the properties in the Business; and (j) Liens created by Northern Border or its successors and assigns.

“Person” means any individual, partnership, corporation, limited liability company, trust, other entity or Governmental Authority.

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“Related Agreements” means any agreement, instrument, certificate or similar document executed and delivered pursuant to this Agreement (including, without limitation, the Other Transaction Agreements and the Amendment).

“Representative” means with respect to a Person, such Person’s officers, directors, managers, partners, employees, agents, attorneys, accountants, advisors and representatives. With respect to Northern Border, “Representative” shall include the Chairman of its Audit Committee.

“Securities Act” means the Securities and Exchange Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“SEC” means the Securities and Exchange Commission.

“Shared Contract” means any Contract (other than Drop-Down Contracts, Intercompany Accounts, confidentiality agreements, Employee Benefit Plans, and employment or secondment agreements), to which an Entity is not a party and to which ONEOK or any Affiliate of ONEOK (other than an Entity) is a party and which directly benefits both (i) an Entity, and (ii) ONEOK or any Affiliate of ONEOK (other than an Entity).

“Software” means any and all of the following, other than “shrink wrap” licenses, that are primarily used by any of the Entities: (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (iv) documentation, including user manuals and other training documentation, related to any of the foregoing.

“Subsidiary” means with respect to any Person, the corporations, partnerships, limited liability companies, joint ventures, associations and other entities controlled by such Person directly or indirectly through one or more intermediaries.

“Target Working Capital” means the amount shown as the Target Working Capital on Exhibit D.

“Tax” or “Taxes” means all taxes, charges, levies, fees, or other assessments imposed by any federal, state, local or foreign Tax Authority, including, but not limited to, any income, gross income, gross receipts, profits, capital stock, franchise, business, withholding payroll, social security, workers’ compensation, unemployment, disability, property, ad valorem, stamp, excise, occupation, service, sales, use, license, lease, transfer, import, export, value added, goods and services, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

“Tax Authority” means, with respect to any Tax, the Governmental Authority that imposes such Tax and the agency (if any) charged with the collection or administration of such Tax for such entity.

53

“Tax Benefits” means any refund of Taxes, reduction in liability for Taxes, or credit against Taxes.

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

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

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes or any other similar report, statement, declaration, or document required to be filed under applicable Tax Law, including any attachments, exhibits or other materials submitted with any of the foregoing and including any amendments or supplements to any of the foregoing.

“Trademarks” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Trade Secrets” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Transfer Taxes” means all sales, use, transfer, stock transfer, real property transfer, documentary, gains, stamp recording and similar Taxes and fees (including any penalties, interest or additions) incurred in connection with the transactions contemplated by this Agreement.

11.19 Other Defined Terms. For the purpose of this Agreement, the following terms shall have the meanings given in the indicated Sections of this Agreement:

INDEX

Term	Section
1935 Act	2.17
Aggregate Northern Border Damages	9.3(a)
Aggregate ONEOK Damages	9.3(a)
Agreement	Preamble
Audits	2.6(e)
Balance Sheet	2.5(a)
Balance Sheet Date	2.5(a)

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Books and Records	5.2(b)(i)
Business	Recitals
Claim	9.7(a)
Closing	1.3(a)
Closing Date	1.3(a)
Closing Working Capital	1.4(a)
Closing Working Capital Statement	1.4(a)
Common Units	3.1(e)(v)
Companies	Recitals
Company	Recitals
Company Subsidiary	2.2
Contribution Agreement	7.1(h)
Controlling Party	10.7(c)
Conversion Transactions	6.11
CPR Rules	11.12
Entities	2.2
Entity	2.2
Entity Intellectual Property Assets	2.9
FERC	6.1
Final Closing Working Capital	1.4(c)
Financial Statements	2.5(a)
FMV Schedules	10.10(a)
Governmental Approvals	6.3(a)
GP Purchase Agreement	7.1(h)
Indemnitee	9.7(a)

55

Indemnitor	9.7(a)
Indemnity Threshold	9.3(a)
Interim Financial Statements	6.12
KCC Consent	7.1(g)
License Period	6.9
Material Contracts	2.10(a)
Minimum Claim Amount	9.3(a)
Net Working Capital Adjustment	1.4(d)(ii)
Neutral Auditors	1.4(c)
NGA	2.17
Non-Controlling Party	10.7(c)
Northern Border	Preamble
Northern Border Credit Agreement Amendments	7.2(k)
Northern Border Credit Agreements	7.2(k)
Northern Border Disclosure Schedules	3
Northern Border Indemnity Cap	9.3(b)
Northern Border Returns	10.4(b)
OCC Consent	7.1(g)
ONEOK	Preamble
ONEOK Disclosure Schedules	2
ONEOK Guaranty Agreement	1.3(b)(ii)
ONEOK Indemnity Cap	9.3(b)
ONEOK Marks	6.9
Operating Assets	2.18(a)
Other Transaction Agreements	7.1(h)

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Parties	Preamble
Party	Preamble
Part-Year Fraction	10.5(a)
Pre-Closing Period	4.1
Pre-Closing Taxable Period	10.6(a)(i)
Purchase Price	1.2
Related Party	2.14
Resolution Period	1.4(b)
Services Agreement	1.3(b)(ii)
Shares	Recitals
Straddle Periods	10.4(b)
Tax Controversy	10.7(a)
Tax Indemnitor	10.7(a)
Tax Records	10.1
TransCanada Agreement	7.1(h)
Viking Indenture	7.2(m)

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the date set forth above by their duly authorized representatives.

ONEOK, INC.
By:	/s/ David L. Kyle
Name:	David L. Kyle
Title:	Chairman of the Board, President and Chief Executive Officer
NORTHERN BORDER PARTNERS, L.P.
By:	/s/ William R. Cordes
Name:	William R. Cordes
Title:	Chief Executive Officer

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Schedule 1.3(b)(vi)

Form of Opinions to be Delivered by Counsel

for ONEOK

Unless otherwise defined herein, all capitalized terms defined in the Purchase and Sale Agreement shall have the same meanings when used herein.

1. ONEOK is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma.

2. ONEOK has all requisite corporate right, authority and power to execute, deliver and perform its obligations under the Purchase and Sale Agreement and each Related Agreement.

3. The execution, delivery and performance by ONEOK of the Purchase and Sale Agreement and each Related Agreement have been duly authorized by all necessary corporate action of ONEOK, and no other corporate action on the part of ONEOK is required in connection therewith.

4. ONEOK has duly executed and delivered the Purchase and Sale Agreement and each Related Agreement.

5. The Purchase and Sale Agreement and each Related Agreement executed and delivered by ONEOK pursuant to the Purchase and Sale Agreement constitutes valid and binding obligations of ONEOK enforceable against ONEOK in accordance with their respective terms.

6. The execution, delivery and performance by ONEOK of the Purchase and Sale Agreement and each Related Agreement executed and delivered by ONEOK, with or without the giving of notice or the passage of time, or both, (i) do not and will not conflict with or violate any provision of the certificate of incorporation or bylaws of ONEOK, (ii) do not and will not conflict with or violate any law, or regulation of any Governmental Authority, of the United States of America or the laws of the State of Oklahoma applicable to ONEOK, and (iii) do not and will not require under the federal laws of the United States of America or the laws of the State of Oklahoma, any filing or registration by ONEOK with, or approval or consent to ONEOK of, any Governmental Authority of the United States of America or the State of Oklahoma that has not been made or obtained, except for such violations or failures to obtain such approval, consent or waiver that would not, individually or in the aggregate, have a material adverse effect on the ability of ONEOK to perform its obligations under the Purchase and Sale Agreement and each Related Agreement and consummate the transactions contemplated thereby on the Closing Date.

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Schedule 1.3(c)(ii)

Form of Opinions to be Delivered by Counsel

for Northern Border

Unless otherwise defined herein, all capitalized terms defined in the Purchase and Sale Agreement shall have the same meanings when used herein.

1. The NBP Partnerships are limited partnerships duly organized, validly existing and in good standing under the laws of the State of Delaware.

2. The NBP Partnerships have all requisite partnership right, authority and power to execute, deliver and perform their obligations under the Purchase and Sale Agreement and each Related Agreement.

3. The execution, delivery and performance by the NBP Partnerships of the Purchase and Sale Agreement and each Related Agreement have been duly authorized by all necessary partnership action of the NBP Partnerships, and no other partnership action on the part of the NBP Partnerships is required in connection therewith.

4. The NBP Partnerships have duly executed and delivered the Purchase and Sale Agreement and each Related Agreement.

5. The Purchase and Sale Agreement and each Related Agreement executed and delivered by the NBP Partnerships pursuant to the Purchase and Sale Agreement constitutes valid and binding obligations of the NBP Partnerships enforceable against the NBP Partnerships in accordance with their respective terms.

6. The execution, delivery and performance by the NBP Partnerships of the Purchase and Sale Agreement and each Related Agreement executed and delivered by Northern Border, with or without the giving of notice or the passage of time, or both, (i) do not and will not conflict with or violate any provision of the organizational documents of the NBP Partnerships, (ii) do not and will not conflict with or violate any law, or regulation of any Governmental Authority, of the United States of America or the laws of the State of Delaware applicable to the NBP Partnerships, (iii) do not and will not require under the federal laws of the United States of America or the laws of the State of Delaware, any filing or registration by the NBP Partnerships with, or approval or consent to the NBP Partnerships of, any Governmental Authority of the United States of America or the State of Delaware that has not been made or obtained, except for such violations or failures to obtain such approval, consent or waiver that would not, individually or in the aggregate, have a material adverse effect on the ability of the NBP Partnerships to perform their obligations under the Purchase and Sale Agreement and each Related Agreement and consummate the transactions contemplated thereby on the Closing Date, and (iv) do not require the consent or approval of the holders of Common Units.

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EX-10.32

Exhibit 10.32

CONTRIBUTION AGREEMENT

by and among

ONEOK, INC.

NORTHERN BORDER PARTNERS, L.P.

and

NORTHERN BORDER INTERMEDIATE LIMITED PARTNERSHIP

February 14, 2006

TABLE OF CONTENTS

SECTION 1. CONTRIBUTION		1
1.1	Contribution to Northern Border	1
1.2	Issuance of the Units	2
1.3	The Closing	2
1.4	GP Contribution and Dropdown To NBILP	3
1.5	Working Capital Adjustment	3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ONEOK		5
2.1	Organization and Authority of ONEOK	5
2.2	Organization, Authority and Qualification of the Entities	6
2.3	Capital of Companies; Beneficial Ownership	6
2.4	Subsidiaries	7
2.5	Financial Statements	7
2.6	Taxes	8
2.7	Absence of Certain Changes	9
2.8	Ordinary Course	10
2.9	Intellectual Property	10
2.10	Contracts	11
2.11	Compliance	12
2.12	Litigation	12
2.13	Insurance	12
2.14	Related Transactions	13
2.15	Employee Benefit Matters	13
2.16	Environmental Matters	14
2.17	Securities Act	14
2.18	Regulatory Matters	15
2.19	Operating Assets	15
2.20	Brokers’ Fees	16
2.21	Books and Records	16
2.22	Indebtedness	16
2.23	Disclaimer	16
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE NBP PARTNERSHIPS		17
3.1	Organization and Authority of the NBP Partnerships	17
3.2	Capitalization	18
3.3	Litigation	19
3.4	Compliance	19
3.5	Employee Matters	19
3.6	Environmental Matters	20
3.7	Absence of Certain Changes	21
3.8	Securities Act	21
3.9	SEC Filings	21
3.10	Brokers’ Fees	22
3.11	Opinion of Financial Adviser	22

3.12	Registration Rights	22
3.13	Disclaimer	22
SECTION 4. COVENANTS OF ONEOK		23
4.1	Conduct of the Entities	23
4.2	Cash Management	25
SECTION 5. COVENANTS OF THE NBP PARTNERSHIPS		25
5.1	Books and Records	25
5.2	Approval of Issuance of Common Units Upon Conversion Units	26
SECTION 6. COVENANTS OF ONEOK AND THE NBP PARTNERSHIPS		26
6.1	Access to Information	26
6.2	Commercially Reasonable Efforts	27
6.3	Regulatory and Other Authorizations; Notices and Consents	27
6.4	Public Announcements	28
6.5	Notices of Certain Events	29
6.6	Entity Guarantees	29
6.7	Intercompany Accounts	29
6.8	Shared Contracts and Drop-Down Contracts	29
6.9	ONEOK Marks	30
6.10	Indebtedness for Borrowed Money	31
6.11	Conversion Transactions	31
6.12	Interim Financial Statements	31
6.13	Cooperation Regarding Audits	31
6.14	Insurance Matters	32
SECTION 7. CONDITIONS TO CLOSING		32
7.1	Conditions to the Obligations of ONEOK	32
7.2	Conditions to the Obligations of the NBP Partnerships	34
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED		36
8.1	Termination	36
8.2	Effect of Termination	37
SECTION 9. INDEMNIFICATION		37
9.1	Survival of Representations and Warranties, Etc	37
9.2	Indemnification	37
9.3	Threshold; Cap	39
9.4	Exclusive Remedy; Sole Recourse	40
9.5	No Contribution	40
9.6	Setoff	40
9.7	Third Party Claims	40
SECTION 10. TAX MATTERS		41
10.1	Retention of Records	41
10.2	Cooperation	41

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10.3	Transfer Taxes	42
10.4	Tax Returns	42
10.5	Allocation of Taxes	43
10.6	Tax Indemnity	45
10.7	Contests	46
10.8	Amended Tax Returns	47
10.9	Miscellaneous	47
10.10	Allocation of Value among the Contributed Entities; Book Ups	47
SECTION 11. MISCELLANEOUS		48
11.1	Fees and Expenses	48
11.2	Governing Law	48
11.3	Notices	48
11.4	Entire Agreement	50
11.5	Assignability; Binding Effect	50
11.6	Captions and Gender	50
11.7	Execution in Counterparts	50
11.8	Amendments	50
11.9	Publicity and Disclosures	50
11.10	Severability	51
11.11	Waiver of Jury Trial	51
11.12	Arbitration	51
11.13	Time of the Essence	51
11.14	Remedies Cumulative; Specific Performance	51
11.15	Further Assurances	52
11.16	Third Party Beneficiaries	52
11.17	Audit Committee Authority	52
11.18	Certain Definitions	52
11.19	Other Defined Terms	60

Exhibit A – Companies/Company Subsidiaries

Exhibit B – Form of Amendment

Exhibit C – ONEOK Guaranty Agreement

Exhibit D – Target Working Capital

Exhibit E – Services Agreement

iii

CONTRIBUTION AGREEMENT

This CONTRIBUTION AGREEMENT (this “Agreement”) is entered into as of February 14, 2006 by and among ONEOK, Inc., an Oklahoma corporation (“ONEOK”), Northern Border Partners, L.P., a Delaware limited partnership (“Northern Border”), and Northern Border Intermediate Limited Partnership (“NBILP”, and together with Northern Border, the “NBP Partnerships”) (each a “Party” and together, the “Parties”). Capitalized terms used but not defined shall have the meaning given in Section 11.18.

W I T N E S S E T H

WHEREAS, ONEOK owns all of the issued and outstanding Equity Interests (the “Shares”) of each of the Persons listed on Exhibit A hereto under the heading “Companies” (the “Companies”, and each, individually, a “Company”);

WHEREAS, the Companies and their Subsidiaries, all of which are listed on Exhibit A under the heading “Company Subsidiaries”, own and operate natural gas gathering, processing, fractionating, transportation, storage, pipelines and natural gas liquids assets located in Kansas, Oklahoma and Texas (the “Business”); and

WHEREAS, ONEOK wishes to contribute the Shares to the NBP Partnerships and the NBP Partnerships wish to accept the contribution of the Shares, upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and mutual agreements and covenants herein contained, and intending to be legally bound hereby, the Parties hereto hereby agree as follows:

SECTION 1. CONTRIBUTION

1.1 Contribution to Northern Border. Immediately before Closing, ONEOK shall deliver or cause to be delivered to Northern Plains Natural Gas Company, LLC (“Northern Plains”) and Pan Border Gas Company, LLC (“Pan Border”, and collectively, the “Contributing NBP General Partners”), good and sufficient instruments of transfer transferring the NBP GP Shares and the NBILP GP Shares to the Contributing NBP General Partners. At the Closing, ONEOK and the Contributing NBP General Partners shall deliver or cause to be delivered to Northern Border good and sufficient instruments of transfer transferring the NBP Shares and the NBP GP Shares, respectively, to Northern Border. Such instruments of transfer shall effectively vest in Northern Border good and marketable title to the NBP Shares and the NBP GP Shares free and clear of all Liens other than transfer restrictions imposed by applicable securities laws. The contribution of the NBP GP Shares by the Contributing NBP General Partners will be made in order to comply with the NBP General Partners’ obligations to maintain general partner capital accounts in accordance with Section 4.2 of the Northern Border Partnership Agreement and NBP acknowledges that the contribution of the NBP GP Shares by the Contributing NBP general Partners is sufficient to maintain the aggregate general partner capital accounts in NBP required by Section 4.2 of the Northern Border Partnership Agreement.

1.2 Issuance of the Units. As consideration for the NBP Shares, Northern Border will, at Closing, issue to ONEOK 36,494,126 units representing limited partnership interests in Northern Border with the rights and preferences contained in the form of amendment (the “Amendment”) to the Amended and Restated Agreement of Limited Partnership of Northern Border, dated as of October 1, 1993 (the “Northern Border Partnership Agreement”), attached hereto as Exhibit B (the “Units”), which Units shall be convertible, as set forth in the Amendment, into common units representing limited partnership interests in Northern Border (“Common Units;” and the Common Units into which the Units are convertible, the “Conversion Units”).

1.3 The Closing.

(a) Subject to the provisions of Section 8, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Gable & Gotwals, 100 W. 5^th Street, Tulsa, OK 74103, commencing at 10:00 a.m. local time on the first business day of the calendar month immediately following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the Parties shall take at the Closing itself, including without limitation, conditions in Section 7.1(h) and 7.2(h) herein) or such other date as Northern Border and ONEOK may mutually determine (the “Closing Date”).

(b) At the Closing, ONEOK will deliver the following documents and deliverables to Northern Border:

(i) Good and sufficient instruments of transfer transferring all of the Shares to Northern Border free and clear of all Liens other than transfer restrictions imposed by applicable securities laws;

(ii) An executed copy of a Services Agreement substantially in the form attached hereto as Exhibit E (the “Services Agreement”);

(iii) A certificate certifying that the transactions contemplated hereby are exempt from withholding under Code Section 1445 executed in accordance with the requirements of the Treasury regulations promulgated thereunder;

(iv) Resignations of the officers, directors and managers identified prior to Closing by Northern Border;

(v) An executed copy of a Guaranty substantially in the form attached hereto as Exhibit C (the “ONEOK Guaranty Agreement”);

(vi) An executed copy of a Payment, Performance, Indemnity and Support Agreement substantially in the form attached hereto as Schedule 1.3(b)(vi);

(vii) A written opinion from legal counsel to ONEOK addressed to Northern Border substantially in the form attached hereto as Schedule 1.3(b)(vii); and

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(viii) Such other certificates, instruments of conveyance, and documents as may be reasonably requested by Northern Border prior to the Closing Date to carry out the intent and purposes of this Agreement.

(c) At the Closing, Northern Border will deliver the following documents and deliverables to ONEOK:

(i) Certificates (or appropriate evidence of a book entry transfer to the account designated by ONEOK) representing the Units;

(ii) An executed copy of the Services Agreement;

(iii) An Agreement and Guaranty with respect to each of the equipment leases relating to ONEOK Bushton Processing, Inc., in a form reasonably acceptable to ONEOK and Northern Border, and such other agreements, certificates and assurances necessary in connection with the transfer of ONEOK Bushton Processing, Inc. to Northern Border;

(iv) An executed copy of a Payment, Performance, Indemnity and Support Agreement substantially in the form attached hereto as Schedule 1.3(b)(vi);

(v) A written opinion from legal counsel to Northern Border addressed to ONEOK substantially in the form attached hereto as Schedule 1.3(c)(v); and

(vi) Such other certificates, instruments, and documents as may be reasonably requested by ONEOK prior to the Closing Date to carry out the intent and purposes of this Agreement.

1.4 GP Contribution and Dropdown To NBILP. At the Closing and immediately following the contribution set forth in Section 1.1, (i) Northern Border shall deliver to NBILP good and sufficient instruments of transfer transferring the NBP Shares and the NBP GP Shares to NBILP, and (ii) ONEOK shall cause the Contributing NBP General Partners to deliver to NBILP good and sufficient instruments of transfer transferring the NBILP GP Shares to NBILP. Such instruments of transfer shall effectively vest in NBILP good and marketable title to the Shares free and clear of all Liens other than transfer restrictions imposed by applicable securities laws. The contribution of the NBILP GP Shares by the Contributing NBP General Partners will be made in order to comply with the NBP General Partners’ obligations to maintain general partner capital accounts in accordance with Section 4.2 of the Amended and Restated Agreement of Limited Partnership of NBILP, dated as of October 1, 1993 (the “NBILP Partnership Agreement”) and NBILP acknowledges that the contribution of the NBILP GP Shares by the Contributing NBP General Partners is sufficient to maintain the aggregate general partner capital accounts in NBILP required by Section 4.2 of the NBILP Partnership Agreement.

1.5 Working Capital Adjustment.

(a) As soon as practicable, but in no event later than 60 days following the Closing, ONEOK shall prepare and deliver to Northern Border a calculation (the “Closing Working Capital Statement”) of the Net Working Capital of the Entities, on a consolidated basis,

3

as of the close of business on the last day of the month immediately preceding the Closing Date (the “Closing Working Capital”). The Closing Working Capital Statement shall be prepared in accordance with the principles set forth in the definition of Net Working Capital.

(b) ONEOK shall deliver a copy of the Closing Working Capital Statement to Northern Border promptly after it has been prepared. After receipt of the Closing Working Capital Statement, Northern Border shall have 30 days to review the Closing Working Capital Statement, together with the work papers used in the preparation thereof. ONEOK shall (i) provide Northern Border and its Representatives reasonable access during normal business hours to all relevant personnel, work papers, trial balances and other financial information to the extent necessary or useful to complete their review of the Closing Working Capital Statement, and (ii) cooperate with Northern Border’s and its Representatives’ reasonable requests with respect to the review of the Closing Working Capital Statement, including by providing on a timely basis all information necessary or useful in reviewing the Closing Working Capital Statement. Unless Northern Border delivers written notice to ONEOK on or prior to the 30th day after Northern Border’s receipt of the Closing Working Capital Statement specifying in reasonable detail the amount, nature and basis of all disputed items, Northern Border shall be deemed to have accepted and agreed to the calculation of the Closing Working Capital. If Northern Border (or one of its Representatives) notifies ONEOK of an objection to the calculation of the Closing Working Capital, ONEOK and Northern Border shall, within 20 days (or such longer period as the Parties may agree in writing) following such notice (the “Resolution Period”), attempt to resolve their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive (other than as a result of manifest error or fraud).

(c) If, at the conclusion of the Resolution Period, there are any amounts remaining in dispute, then such amounts remaining in dispute shall be submitted to a nationally recognized public accounting firm agreed by Northern Border and ONEOK (the “Neutral Auditors”). Northern Border and ONEOK shall execute, if requested by the Neutral Auditors, a reasonable engagement letter, including customary indemnities. The Neutral Auditors shall act as an arbitrator to determine, based solely on the provisions of this Section 1.5(c) and the presentations by ONEOK and Northern Border, and not by independent review, only those issues still in dispute. The Neutral Auditors’ determination shall be made within 30 days of the dispute being submitted for their determination, shall be set forth in a written statement delivered to ONEOK and Northern Border and shall be final, non-appealable and binding on the Parties hereto, absent manifest error or fraud. A judgment of a court of competent jurisdiction may be entered upon the Neutral Auditors’ determination. The Neutral Auditors shall have exclusive jurisdiction over, and resort to the Neutral Auditors as provided in this Section 1.5(c) shall be the only recourse and remedy of the Parties against one another with respect to, any disputes arising out of or relating to the adjustments pursuant to this Section 1.5(c). The fees, costs and expenses of the Neutral Auditors shall be borne by Northern Border, on the one hand, and by ONEOK, on the other, based upon the percentage which the portion of the contested amount not awarded to each Party bears to the amount actually contested by such Party. For example, if Northern Border claims that the Closing Working Capital is $1,000 less than the amount determined by ONEOK, and ONEOK contests only $500 of the amount claimed by Northern Border, and if the Neutral Auditors ultimately resolve the dispute by awarding Northern Border $300 of the $500 contested, then the costs and expenses of the Neutral Auditors will be allocated 60% (i.e., 300 ÷ 500) to ONEOK and 40% (i.e., 200 ÷ 500) to Northern Border. The term “Final Closing

4

Working Capital” shall mean the definitive Closing Working Capital agreed to (or deemed to be agreed to) by Northern Border and ONEOK in accordance with Section 1.5(b) hereof or resulting from the determinations made by the Neutral Auditors in accordance with this Section 1.5(c) (in addition to those items theretofore agreed to by ONEOK and Northern Border).

(d) In the event the Final Closing Working Capital

(i) exceeds the Target Working Capital, Northern Border shall pay the excess in cash to ONEOK; or

(ii) is less than the Target Working Capital, ONEOK shall pay the difference in cash to Northern Border (the payments contemplated by this Section 1.5(d) are referred to as the “Net Working Capital Adjustment”).

All payments made pursuant to this Section 1.5 shall be made by wire transfer of immediately available funds within five (5) days of the determination of the Final Closing Working Capital to an account designated in writing by the applicable Party.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF ONEOK

Except as set forth in the disclosure schedules delivered by ONEOK (the “ONEOK Disclosure Schedules”) to Northern Border on the date hereof (it being agreed that any matter disclosed in a particular Schedule of the Disclosure Schedules delivered by ONEOK shall be deemed to have been disclosed with respect to any other Sections of this Agreement to the extent that the relevance of such matter to such other Section is readily apparent from the information disclosed), ONEOK represents and warrants to Northern Border that the statements contained in this Section 2 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing, except in each case to the extent that such statements are expressly made only as of a specified date, in which case ONEOK represents and warrants that such statements are true, correct and complete as of such specified date.

2.1 Organization and Authority of ONEOK.

(a) ONEOK is a corporation duly incorporated, validly existing and in good standing under the laws of Oklahoma.

(b) ONEOK has all requisite right, authority and power to enter into this Agreement and each Related Agreement to be executed and delivered by ONEOK and to carry out the transactions contemplated hereby and thereby.

(c) The execution, delivery and performance by ONEOK of this Agreement and each Related Agreement have been duly authorized by all necessary action of ONEOK and no other action on the part of ONEOK is required in connection therewith.

(d) This Agreement and each Related Agreement to be executed and delivered by ONEOK constitutes, or when executed and delivered will constitute, valid and binding obligations of ONEOK enforceable in accordance with their respective terms, except as such

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enforceability may be limited by bankruptcy, insolvency or other similar laws from time to time in effect which affect the enforcement of creditors’ rights generally.

(e) The execution, delivery and performance by ONEOK of this Agreement and each Related Agreement to be executed and delivered by ONEOK, with or without the giving of notice or the passage of time, or both:

(i) do not and will not conflict with or violate any provision of the organizational documents of ONEOK or any Entity;

(ii) do not and will not conflict with or violate any Legal Requirements applicable to ONEOK or any of the Entities, or, except as set forth in Schedule 2.1(e)(ii) and any filings required to be made under the HSR Act, require ONEOK or any Entity to obtain any approval, consent or waiver of, or make any filing with, any Governmental Authority that has not been obtained or made;

(iii) do not and will not require the consent, approval or waiver of any Person (other than any Governmental Authority), except as set forth in Schedule 2.1(e)(iii), or except for any such consents, approvals or waivers as have been obtained or the failure of which to be obtained would not, individually or in the aggregate, have a Material Adverse Effect; and

(iv) does not and will not breach any Material Contract or result in or permit the termination of any such Material Contract.

2.2 Organization, Authority and Qualification of the Entities. Each Company and each Subsidiary thereof (each, a “Company Subsidiary” and, together with the Companies, each an “Entity” and, collectively, the “Entities”) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, as set forth on Exhibit A, and has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it is currently conducted. Each Entity is duly licensed or qualified to do business and is in good standing (to the extent applicable) in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, have a Material Adverse Effect. All material actions taken by the Entities have been duly authorized, and no Entity has taken any action that in any material respect conflicts with, constitutes a material default under or results in a material violation of the organizational documents of such Entities. True and correct copies of the organizational documents of each Entity, each as in effect on the date hereof, have previously been made available to Northern Border.

2.3 Capital of Companies; Beneficial Ownership.

(a) All of the issued and outstanding shares of capital stock of each of the Companies that is a corporation are validly issued, fully paid and nonassessable and are owned beneficially and of record, directly or indirectly, by ONEOK, and all of the limited liability company interests in each of the Companies that is a limited liability company are validly issued, fully paid and nonassessable and are owned beneficially and of record, directly or indirectly, by ONEOK, in each case free and clear of all Liens.

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(b) There are no outstanding options, warrants, rights, commitments, preemptive rights or agreements of any kind for the issuance or sale of, or outstanding securities convertible into, any additional shares of capital stock of any class or limited liability company interests, as the case may be, of any Company which would entitle the holders thereof to an interest in or rights in respect of that Company, and there are no agreements of any kind that may obligate ONEOK or any of its Affiliates (including the Companies) to sell, issue, purchase, redeem or otherwise transfer any Shares to any Person. There are no voting agreements, proxies or other similar agreements or understandings with respect to the Shares.

2.4 Subsidiaries.

(a) Exhibit A lists, for each Company Subsidiary, its name, type of entity, jurisdiction of its incorporation, formation or organization and the percentage Equity Interest owned by a Company. Except as set forth in Schedule 2.4(a), the Companies own, directly or indirectly, all of the issued and outstanding Equity Interests of each Company Subsidiary, free and clear of all Liens other than transfer restrictions imposed by applicable securities laws, and the owner beneficially and of record of each Company Subsidiary is either a Company or a Company Subsidiary, as applicable, and all Equity Interests of each Company Subsidiary are validly issued, fully paid and nonassessable. There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the Equity Interests of the Company Subsidiaries or that may obligate the Company Subsidiaries to issue or sell any Equity Interests of any Company Subsidiary, and there are no agreements of any kind that may obligate any Company to sell, issue, purchase, redeem or otherwise transfer any Equity Interests in any Company Subsidiary to any Person. There are no voting agreements, proxies or other similar agreements or understandings with respect to the Equity Interests of the Company Subsidiaries.

(b) Other than the Company Subsidiaries, no Entity owns any Equity Interest in any Person except as set forth in Schedule 2.4(b). The Entities own, directly or indirectly, 50% of the outstanding Equity Interests in Fox Plant, L.L.C. and 10.1765% of the Equity Interests in Venice Energy Services Company, L.L.C., in each case free and clear of all Liens, other than transfer restrictions imposed by applicable securities laws.

2.5 Financial Statements.

(a) ONEOK has delivered to Northern Border true, correct and complete copies of a consolidated unaudited balance sheet of the Entities (the “Balance Sheet”) as of December 31, 2005 (the “Balance Sheet Date”) and an unaudited statement of income of the Acquired Entities for the 12 months then ended (together, the “Financial Statements”) copies of which are attached hereto as Schedule 2.5(a). The long-term Indebtedness listed in the Financial Statements under the caption “Long-term Debt, excluding current maturities” is all owed to ONEOK or its Affiliates.

(b) Except (i) to the extent set forth in or reserved against in the Balance Sheet or as identified in Schedule 2.5(b) hereto, (ii) for current liabilities (determined in accordance with GAAP) incurred in the ordinary course of business consistent with past practices since the Balance Sheet Date, and (iii) for immaterial Liabilities, none of the Entities has any Liabilities of

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the type that would be required to be disclosed on a balance sheet of that Entity (or the notes thereto) prepared in accordance with GAAP.

(c) The Financial Statements have been prepared in accordance with GAAP (except as disclosed herein) during the periods covered thereby, are complete and correct in all material respects, and present fairly in all material respects the financial condition of the applicable Entities at the dates of said statements and the results of their operations for the periods covered thereby, except for normal year or period end adjustments and the absence of footnotes.

2.6 Taxes.

(a) The Entities have (giving effect to extensions) (x) duly and timely filed (or there has been filed on their behalf) with the appropriate Governmental Authority all income and other material Tax Returns required to be filed by them, and all such Tax Returns are true, correct and complete in all material respects and (y) timely paid or accrued on the their books, or there has been paid on their behalf, all material Taxes due and payable.

(b) The Entities have complied in all material respects with all applicable Tax Laws relating to the payment and withholding of Taxes.

(c) There are no Liens that arose in connection with Taxes upon the assets or properties of the Entities except for Liens described in clause (a) of the definition of “Permitted Liens”.

(d) The Entities have not requested (nor has any request been made by any Person on behalf of any of the Entities) in writing any extension of time within which to file any Tax Return in respect of any taxable year which has not since been filed, and no outstanding written waivers or comparable written consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns has been given by or on behalf of the Entities.

(e) To the Knowledge of ONEOK, no U.S. federal, state, local or foreign audits, reviews or other administrative proceedings or court proceedings (“Audits”) are ongoing or have been initiated with regard to any Taxes or Tax Returns of the Entities, and the Entities have not received any written notice of any such Audits.

(f) None of the Entities has agreed or is required to make any adjustment by reason of a change in accounting method that would affect any taxable year ending after the Closing Date, and no Tax Authority has proposed any such adjustment or change in accounting method that would affect any taxable year ending after the Closing Date. None of the Entities have an application pending with any Tax Authority requesting permission for any change in accounting method that relates to their business or operations and that would affect any taxable year ending after the Closing Date.

(g) Each of the Entities is classified as a partnership or a disregarded entity for U.S. federal income tax purposes, except for those Entities listed in Schedule 2.6.

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(h) No written claim has been made, and to the Knowledge of ONEOK there has been no oral or threatened claim, by any Tax Authority in a jurisdiction where an Entity does not file a Tax Return that it is or may be subject to Tax in that jurisdiction.

(i) None of the Entities is a party to any Tax allocation or sharing agreement or has any liability for the Taxes of another Person under Treasury Regulations Section 1.1502-6 or similar law, as a transferee, successor, by contract or otherwise.

(j) ONEOK is a United States person within the meaning of the Code.

(k) The unpaid Taxes of the Companies (A) did not, as of the Balance Sheet Date, exceed the reserves established on the Financial Statements, and (B) do not exceed the reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Entities in filing their Tax Returns.

(l) None of the assets or properties of the Entities (A) secures any debt the interest on which is tax-exempt under Code Section 103(a), (B) is “tax-exempt use property” within the meaning of Code Section 168(h), (C) is “tax exempt bond financed property” within the meaning of Code Section 168(g)(5), (D) is “limited use property” within the meaning of Revenue Procedure 76-30 or (E) will be treated as owned by another Person pursuant to the provisions of Code Section 168(f)(8).

(m) The transactions contemplated herein are not subject to tax withholding pursuant to the provisions of Section 3406 or Subchapter A of Chapter 3 of the Code or any other Legal Requirement.

2.7 Absence of Certain Changes. As of the date hereof, except as identified on Schedule 2.7, since the Balance Sheet Date there has not been:

(a) any change in the financial condition, properties, assets, Liabilities, business or operations of the Entities that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) any contingent Liability incurred by any of the Entities as guarantor or otherwise with respect to the obligations of others (other than any other Entity) in excess of $500,000, or any cancellation of any material debt or claim owing to any Entity, or waiver of any right that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(c) other than Permitted Liens, any Lien placed on any of the material properties of the Entities, that remain in existence on the date hereof and that will remain in existence on the Closing Date;

(d) any material obligation or Liability of any nature incurred by any of the Entities, whether accrued, absolute, contingent or otherwise, asserted or unasserted, known or unknown, other than obligations and Liabilities incurred in the ordinary course of business consistent with past practice and in accordance with the terms of this Agreement;

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(e) any purchase, sale or other disposition, or any agreement or other arrangement for the purchase, sale or other disposition, of any of the material properties or assets of any Entity other than in the ordinary course of business consistent with past practice and in accordance with the terms of this Agreement;

(f) any material change in accounting principles, methods or practices used by any Entity;

(g) any loss, damage, destruction or other casualty to any Entity’s property, plants, equipment or inventories (whether or not covered by insurance) that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(h) any material change in the compensation levels of any Entity’s senior executives, any material changes in the manner in which other employees are generally compensated or any provision of additional or supplemental benefits for its employees generally, except, in each case, normal periodic increases or promotions effected in the ordinary course of business consistent with past practice;

(i) any material commitment, guarantee, contractual obligation, capital expenditure or transaction entered into by any Entity, other than in the ordinary course of business consistent with past practice, or any borrowing or other incurrence, assumption or guarantee of Indebtedness by any Entity other than short term Indebtedness owed to ONEOK or its Affiliates; or

(j) any agreement or understanding whether in writing or otherwise, for any Entity to take any of the actions specified in paragraphs (a) through (i) above.

For purposes of this Section 2.7, materiality, as to any matter, shall be determined with respect to all the Entities, taken as a whole.

2.8 Ordinary Course. Since the Balance Sheet Date, the Entities have conducted their respective businesses in the ordinary course of business consistent with past practices.

2.9 Intellectual Property. Each Entity owns or has the right to use all Intellectual Property Assets necessary for or used in the conduct of its business as currently conducted (“Entity Intellectual Property Assets”), and all such Entity Intellectual Property Assets owned by any Entity are free and clear of all Liens (other than Permitted Liens). Neither the execution or delivery of this Agreement, nor the consummation of the transactions contemplated hereby will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare, a breach or termination of, or cancellation or reduction in rights of any Entity under any Contract providing for the license of any Entity Intellectual Property Assets to such Entity, except for any such terminations, cancellations or reductions that, individually or in the aggregate, would not have a Material Adverse Effect. No Entity is infringing or otherwise violating in any material respect the Intellectual Property Assets of any other Person.

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2.10 Contracts.

(a) As of the date hereof, Schedule 2.10(a) contains a true and complete listing of the following Contracts to which any Entity is a party (collectively, the “Material Contracts”):

(i) except for any intercompany Indebtedness that will be cancelled prior to Closing, each Contract for Indebtedness or the borrowing of money, or securing Indebtedness or the borrowing of money, by any Entity involving an obligation in excess of $500,000;

(ii) each natural gas transportation, storage, gathering or processing Contract that individually involves revenues of the Entities in excess of $500,000 for the year to date period ended on the Balance Sheet Date;

(iii) each executory Contract for the purchase of any fixed asset or service for a price in excess of $500,000, whether or not such purchase is in the ordinary course of business;

(iv) each Contract involving a remaining commitment by the Entities to pay capital expenditures in excess of $500,000;

(v) each Contract for lease of personal property or real property involving aggregate payments in excess of $500,000 in any calendar year;

(vi) each employment Contract and each Contract providing retention, severance or project bonus payments, in each case that have not been paid in full as of the date of this Agreement;

(vii) each Contract with any union, trade organization or bargaining unit representative;

(viii) each material acquisition, divestiture or merger agreement;

(ix) each joint venture or partnership agreement;

(x) except for Contracts otherwise described in this Section 2.10, each Contract between ONEOK or any of its Affiliates (other than the Entities) or any officer, director or manager of any Entity, on the one hand, and any Entity on the other hand, involving payments by or to Entities in excess of $500,000 in any calendar year;

(xi) each Contract that provides for a limit on the ability of an Entity or its Affiliates to compete in any line of business or with any Person or in any geographic area during any period of time after the Closing;

(xii) each Shared Contract involving payments by or to Entities in excess of $500,000 in any calendar year;

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(xiii) each Drop-Down Contract involving payments by or to Entities in excess of $500,000 in any calendar year; and

(xiv) each Contract not otherwise listed above involving aggregate payments (contingent or otherwise), by or to the Entities in excess of $500,000 in any future calendar year that cannot be terminated by the Entities upon 60 days or less notice without penalty.

(b) True and complete copies of all Material Contracts have been made available to Northern Border.

(c) Except as would not, individually or in the aggregate, have a Material Adverse Effect, (i) each Material Contract is in full force and effect and represents the legal, valid and binding obligation of the Entity that is a party thereto and, to the Knowledge of ONEOK, represents the legal, valid and binding obligation of the other parties thereto, and (ii) the Entities are not and, to the Knowledge of ONEOK, no other party is in material breach of any Material Contract, and neither ONEOK nor any Entity has received any written or, to the Knowledge of ONEOK, oral notice of termination or breach of any Material Contract. For purposes of this Section 2.10(c) only, “Material Contracts” shall also include all Contracts of the types described in Section 2.10(a) above entered into by any Entity between the date hereof through and including the Closing Date.

2.11 Compliance. Each Entity is, and at all times since January 1, 2001 has been, in material compliance with all applicable Legal Requirements, except for such instances of non-compliance that, individually or in the aggregate would not have a Material Adverse Effect. Since January 1, 2001, none of ONEOK or any Entity has received any written notice from any Governmental Authority regarding any actual or possible material violation of or material failure by any Entity to comply with any Legal Requirement that has resulted, or would reasonably be expected to result, in any material fine, penalty or Liability. Each Entity holds all Permits necessary for it to own and operate its assets and for the conduct of the Business as now being conducted, other than any Permits, the failure of which to hold would not, individually or in the aggregate, have a Material Adverse Effect and there is no suspension or cancellation of any such Permits pending or, to the Knowledge of ONEOK, threatened.

2.12 Litigation. Except as disclosed in Schedule 2.12, there are no Legal Proceedings pending or, to the Knowledge of ONEOK, threatened (a) that (i) seeks more than $1,000,000 in damages for which any Entity could be liable, (ii) seeks injunctive relief against any Entity, its assets or its activities or (iii) is, or seeks to be certified as, a class or similar representative action and involves any Entity or the material assets of any Entity, or (b) that challenges or otherwise seeks to prevent, enjoin, alter or delay the consummation of the transactions contemplated hereby. No Entity (nor any of the material assets of any Entity) is subject to any outstanding Governmental Order.

2.13 Insurance. Schedule 2.13 identifies all insurance policies maintained by, at the expense of or for the benefit of any Entity and identifies any material unresolved claims made thereunder. ONEOK has previously made available to Northern Border accurate and complete copies of the insurance policies identified on Schedule 2.13. Each of such insurance

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policies is in full force and effect, and the Entities have paid all premiums due thereunder. Since January 1, 2005, no Entity has received any written notice or other communication regarding any actual or possible (a) cancellation or invalidation of any insurance policy, (b) refusal of any coverage or rejection of any material claim under any insurance policy, or (c) material adjustment in the amount of the premiums payable with respect to any insurance policy.

2.14 Related Transactions. Except as set forth on Schedule 2.14, and other than through ownership of the Shares, no Related Party (a) has any direct or indirect ownership interest in any material asset used in or otherwise relating to the Business; (b) is indebted to any Entity in an amount exceeding $500,000; (c) has any direct or indirect financial interest in any Material Contract; and (d) has any claim against any Entity in excess of $500,000 (other than rights to receive compensation for services performed as an employee of the Entity or its Subsidiaries). Each of the following shall be deemed to be a “Related Party”: (i) ONEOK and its Affiliates (other than the Entities); (ii) each individual who is an officer or director of ONEOK, its Affiliates or any Entity; (iii) each member of the immediate family of each of the individuals referred to in clause “(ii)” above; and (iv) any trust or other entity (other than ONEOK or any Entity, Northern Border and any Subsidiary of Northern Border) in which any one of the individuals referred to in clauses “(ii)” and “(iii)” above holds (or in which more than one of such individuals collectively hold), beneficially or otherwise, a controlling voting, proprietary or equity interest.

2.15 Employee Benefit Matters. Except as set forth on Schedule 2.15:

(a) All of the employees engaged in running and operating the Business are employees of ONEOK or its Affiliates (other than the Entities). None of the Entities have any employees or any Liabilities under any current or former Employee Benefit Plan.

(b) No Entity has any Liabilities in respect of Employee Benefit Plans or employment matters relating to current or former employees of such Entity or any current or former ERISA Affiliate of such Entity.

(c) Neither ONEOK or any of its Affiliates (including the Entities) is a party to, or bound by, any collective bargaining agreement, Contract or other understanding with a labor union with respect to any employees who perform services in connection with the businesses of the Entities, and, to the Knowledge of ONEOK, there are not any union organizing efforts underway with respect to any such employees. There are no unfair labor practice or labor arbitration proceedings pending or, to the Knowledge of ONEOK, threatened against any Entity.

(d) Each Entity is in compliance, in all material respects, with all applicable Legal Requirements respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, and no Entity has or would reasonably be expected to have any Liability arising out of any failure of ONEOK or its Affiliates (other than the Entities) to comply with any such Legal Requirements.

(e) None of the Entities is obligated to make any payments, or is party to any agreement that could obligate it to make any payments, that would not be deductible under Code

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section 162(m) or 280G of the Code, or would be considered a payment under a nonqualified deferred compensation plan, as contemplated in Code section 409A.

2.16 Environmental Matters. Notwithstanding any other provision in this Agreement, this Section 2.16 contains the exclusive representations of ONEOK concerning Environmental Matters. Except as set forth on Schedule 2.16:

(a) Each Entity is, and at all times since January 1, 2001 has been, in material compliance with all applicable Environmental Laws;

(b) There have been no releases of Hazardous Materials from, at, on or under any property now owned or leased (or formerly owned or leased) by any Entity which are required by applicable Environmental Laws to be remediated (or would, upon discovery, be required to be remediated) by any Entity, except for any releases that have been fully remediated or that would not, individually or in the aggregate, have a Material Adverse Effect;

(c) Neither ONEOK nor any Entity has received any written request for information or written notification that it is a potentially responsible party under CERCLA or any similar state Legal Requirement with respect to any on-site or off-site location for which liability is currently being asserted against them with respect to the activities or operations of the Entities and no Entity has sent or contributed waste to any facility that is subject to a potential claim under CERCLA or any similar state Legal Requirement;

(d) There are no material writs, injunctions, decrees, notices of violation, Governmental Orders or judgments outstanding, or any Legal Proceedings pending or, to ONEOK’s Knowledge, threatened, involving any Entity relating to (i) its compliance with any Environmental Law or (ii) the release, discharge, spill, treatment, storage or disposal of Hazardous Materials into the environment at any location that could reasonably be expected to result in any Entity incurring any material Liability under Environmental Law;

(e) Each Entity has obtained, currently maintains and is in material compliance with all Environmental Permits, and all such Environmental Permits are in effect and no Legal Proceeding is pending with respect to any such Environmental Permit;

(f) Except as otherwise disclosed in the Balance Sheet, no material expenditures, capital improvements or changes in operation are, or, to the Knowledge of ONEOK, will be, necessary to achieve or maintain compliance with any Environmental Permit or Environmental Law, or will be necessary as a condition or result of the renewal, amendment or necessary modification of any Environmental Permit; and

(g) ONEOK has provided or made available to Northern Border all information relevant to the environmental compliance and condition of the Entities and all of their respective Business Facilities, and the estimated or reasonably anticipated remediation costs related thereto.

2.17 Securities Act. ONEOK is acquiring the Units solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or state securities laws. ONEOK acknowledges that the Units

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are not registered under the Securities Act or any applicable state securities law, and that such Units may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and pursuant to state securities laws and regulations as applicable. ONEOK acknowledges that each certificate representing the Units shall bear a legend in substantially the following form:

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS (“ACTS”). THE UNITS HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE UNITS UNDER THE ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP THAT SUCH REGISTRATION IS NOT REQUIRED.

2.18 Regulatory Matters. No Entity is a “public utility company,” “holding company” or “subsidiary” or “affiliate” of a holding company as such terms are defined in the Public Utility Holding Company Act of 1935 (the “1935 Act”). Each Entity that is a “Natural Gas Company” as that term is defined in Section 2 of the Natural Gas Act (“NGA”) is in compliance, in all material respects, with all provisions of the NGA and all rules and regulations promulgated by FERC pursuant thereto. Each such Natural Gas Company is in compliance, in all material respects, with all orders issued by FERC that pertain to material terms and conditions and material rates charged for services. No approval of (a) the SEC under the 1935 Act or (b) FERC under the NGA or the Federal Power Act is required in connection with the execution of this Agreement by ONEOK or the transactions contemplated hereby with respect to ONEOK or the Entities. The Form No. 2 Annual Reports filed by each Natural Gas Company with FERC for the years ended December 31, 2004 and December 31, 2003 were true, correct and complete, in all material respects, as of the dates thereof and since December 31, 2004 no Natural Gas Company has become subject to any proceeding under Section 5 of the NGA or any general rate case proceeding commenced under Section 4 of the NGA by reason of a filing made with the FERC after December 31, 2004. Except as set forth on Schedule 2.18, no approvals of state Governmental Authorities are required in connection with the execution of this Agreement by ONEOK or the transactions contemplated hereby with respect to ONEOK or the Entities.

2.19 Operating Assets.

(a) Except as identified to the contrary in Schedule 2.19(a), (i) except for the Drop-Down Contracts and the Shared Contracts and except as would not reasonably be expected to have a Material Adverse Effect, the Entities own or have the right to use the pipelines, storage facilities, gas processing facilities, fractionators, plants, equipment and related facilities and assets (“Operating Assets”) necessary to enable them to conduct their business in the manner currently being conducted and the Entities own or have the right to use the Operating Assets that are reflected as being owned or leased by such Entities on the Financial Statements; (ii) the Operating Assets are free and clear of Liens other than Permitted Liens; (iii) each Entity has good and indefeasible title to the real property it owns in fee, free and clear of all Liens other than Permitted Liens; and (iv) each Entity has title to its rights-of-way and easements (A) free and clear of all Liens and claims of those claiming by, through or under ONEOK or its Affiliates

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(other than the Entities), other than Permitted Liens; and (B) sufficient to allow such Entity to conduct its business in substantially the same manner as such business is currently being conducted.

(b) Except as identified to the contrary in Schedule 2.19(b), the Operating Assets are in good operating condition and repair, ordinary wear and tear excepted, are free of material defects and are suitable for the use for which such assets are currently used.

2.20 Brokers’ Fees. Except for UBS Investment Bank (the fees of which shall be paid solely by ONEOK), no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by ONEOK or any of its Affiliates.

2.21 Books and Records. The respective books of account, minute books, stock or other equity record books and other records of each Entity, all of which have been made available to Northern Border, are complete and correct.

2.22 Indebtedness. No Entity has any Indebtedness to any Person other than Indebtedness owed to the other Entities or to ONEOK or its other Affiliates.

2.23 Disclaimer.

(a) Except as and to the extent expressly set forth in Section 2, (i) ONEOK makes no representations or warranties, express or implied, and (ii) ONEOK expressly disclaims all Liability and responsibility for any representation, warranty, statement or information made or communicated (orally or in writing) to Northern Border or any of its Subsidiaries, employees, agents, consultants or representatives (including, without limitation, any opinion, information, projection or advice that may have been provided to Northern Border by any officer, director, employee, agent, consultant, representative or advisor of ONEOK or any of its Affiliates).

(b) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN SECTION 2, ONEOK EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS TO (I) TITLE TO ANY OF THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM OR REPORT RELATING TO THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, (III) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, (IV) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE PROPERTIES OR OTHER ASSETS OF ANY OF THE ENTITIES, OR (V) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO NORTHERN BORDER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR

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WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT, EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN SECTION 2, NORTHERN BORDER SHALL BE DEEMED TO BE OBTAINING PIPELINES, STORAGE FACILITIES, PLANTS, EQUIPMENT AND RELATED FACILITIES AND OTHER ASSETS IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT NORTHERN BORDER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS IT DEEMS APPROPRIATE.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE NBP PARTNERSHIPS

Except as set forth in the disclosure schedules (the “NBP Partnerships Disclosure Schedules”) delivered by the NBP Partnerships to ONEOK on the date hereof (it being agreed that any matter disclosed in a particular Schedule of the NBP Partnerships Disclosure Schedules shall be deemed to have been disclosed with respect to any other Sections of this Agreement to the extent that the relevance of such matter to such other Section is readily apparent from the information disclosed), the NBP Partnerships represent and warrant to ONEOK that the statements contained in this Section 3 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing, except in each case to the extent that such statements are expressly made only as of a specified date, in which case the NBP Partnerships represent and warrant that such statements are true, correct and complete as of such specified date.

3.1 Organization and Authority of the NBP Partnerships.

(a) The NBP Partnerships are limited partnerships duly organized, validly existing and in good standing under the laws of Delaware.

(b) The NBP Partnerships have all requisite right, authority and power to enter into this Agreement and each Related Agreement to be executed and delivered by Northern Border and to carry out the transactions contemplated hereby.

(c) The Partnership Policy Committee and the Audit Committee of Northern Border have each approved the execution, delivery and performance of this Agreement and each of the other Northern Border Transaction Agreements, and the Audit Committee has determined that the Northern Border Transaction is fair and reasonable to Northern Border. Except as contemplated by this Agreement, the execution, delivery and performance by the NBP Partnerships of this Agreement and each of the other Northern Border Transaction Agreements have been duly authorized by all necessary action of the NBP Partnerships and no other action on the part of the NBP Partnerships is required in connection therewith.

(d) This Agreement and each Related Agreement (including, without limitation, the Amendment) executed and delivered by the NBP Partnerships constitutes, or when executed and delivered will constitute, valid and binding obligations of the NBP Partnerships

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enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency or other similar laws from time to time in effect which affect the enforcement of creditors’ rights generally.

(e) The execution, delivery and performance by the NBP Partnerships of this Agreement and each Related Agreement (including, without limitation, the Amendment) executed and delivered by the NBP Partnerships, with or without the giving of notice or the passage of time, or both, and the issuance of the Units or the Conversion Units, as applicable:

(i) do not and will not conflict with or violate any provision of the organizational documents of the NBP Partnerships;

(ii) do not and will not conflict with or violate any Legal Requirements applicable to the NBP Partnerships or, except as set forth in Schedule 3.1(e)(ii) and any filings required to be made under the HSR Act, require the NBP Partnerships to obtain any approval, consent or waiver of, or make any filing with, any Governmental Authority that has not been obtained or made, except for such violations or failures to obtain such approval, consent or waiver would not, individually or in the aggregate, have a material adverse effect on the ability of the NBP Partnerships to perform its obligations hereunder and consummate the transactions contemplated hereby on the Closing Date;

(iii) except as set forth on Schedule 3.1(e)(iii), do not and will not require the consent, approval or waiver of any Person (other than any Governmental Authority), except for the approval of the issuance of the Conversion Units by the holders of the Common Units and except for any such consents, approvals or waivers as have been obtained or the failure of which to be obtained would not, individually or in the aggregate, have a material adverse effect on the ability of the NBP Partnerships to perform their obligations hereunder and consummate the transactions contemplated hereby on the Closing Date;

(iv) does not and will not breach any contract material to the business or operations of the NBP Partnerships or result in or permit the termination of any such contract; and

(v) except for issuance of the Conversion Units, do not require the consent or approval of the holders of Common Units.

(f) The Northern Border Partnership Agreement and the NBILP Partnership Agreement are in full force and effect and are binding on all the partners thereto. After the Closing, the Amendment will be effective to amend the Northern Border Partnership Agreement in accordance with the provisions and terms of the Amendment.

3.2 Capitalization.

(a) As of the date hereof, Northern Border has 46,397,214 Common Units issued and outstanding and the partnership interests in Northern Border are as described in the Northern Border Partnership Agreement. Except as set forth on Schedule 3.2(a), there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the partnership interests of Northern Border or obliging

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Northern Border to issue or sell any partnership interests of Northern Border. NBILP has a 1.0101% general partner interest issued and outstanding. All of the limited partner interests in NBILP are held by Northern Border. Except as set forth on Schedule 3.2(a), there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the partnership interests in NBILP or obligating NBILP to issue or sell any partnership interests of NBILP.

(b) All of the Units and Conversion Units issuable to ONEOK pursuant to this Agreement, when issued, will at time of such issuance or conversion, as applicable, be duly authorized, validly issued, fully paid, and nonassessable and free of preemptive rights, with no personal liability attaching to ownership thereof, except as such non-assessability and absence of personal liability may be affected by section 18-607 of the Delaware Revised Limited Partnership Act. At the Closing, Northern Border will deliver to ONEOK good and valid title to the Units, and, upon conversion, to the Conversion Units, in each case, free and clear of any Liens, other than those imposed by section 18-607 of the Delaware Revised Limited Partnership Act, applicable securities laws or the Northern Border Partnership Agreement.

3.3 Litigation. Except as disclosed in Schedule 3.3, there are no Legal Proceedings pending or, to the Knowledge of the NBP Partnerships, threatened (a) that (i) seeks more than $1,000,000 in damages for which the NBP Partnerships or any of their Subsidiaries could be liable, (ii) seeks injunctive relief against the NBP Partnerships or any of their Subsidiaries or any of their respective assets or activities or (iii) is, or seeks to be certified as, a class or similar representative action involving the NBP Partnerships or any of their Subsidiaries or any of their respective assets, or (b) that challenges or otherwise seeks to prevent, enjoin, alter or delay the consummation of the transactions contemplated hereby. Neither of the NBP Partnerships nor any of their Subsidiaries (nor any of their material assets) is subject to any outstanding Governmental Order.

3.4 Compliance. Except as set forth on Schedule 3.4, the NBP Partnerships and their Subsidiaries are, and at all times since January 1, 2001 have been, in material compliance with all applicable Legal Requirements, except for such instances of non-compliance that, individually or in the aggregate would not have a Northern Border Material Adverse Effect. Except as set forth on Schedule 3.4, since January 1, 2001, neither of the NBP Partnerships nor any of their Subsidiaries have received any written notice from any Governmental Authority regarding any actual or possible material violation of or material failure to comply with any Legal Requirement that has resulted, or would reasonably be expected to result, in any material fine, penalty or Liability. Except as set forth on Schedule 3.4, the NBP Partnerships and their Subsidiaries hold all Permits necessary for the conduct of their business as now being conducted, other than any Permits the failure of which to hold would not, individually or in the aggregate, have a Northern Border Material Adverse Effect, and there is no suspension or cancellation of any such Permits pending or, to the Knowledge of the NBP Partnerships, threatened.

3.5 Employee Matters. Except for the Black Mesa Companies:

(a) Neither of the NBP Partnerships nor any of their Subsidiaries has at any time maintained, sponsored or been obligated to contribute to any Employee Benefit Plan.

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(b) There are no liabilities owed by the NBP Partnerships or any of their Subsidiaries in respect of current or former employees or employment related matters, other than to employees or former employees of ONEOK or its Affiliates who provide services primarily to one or more of the Entities.

(c) Neither of the NBP Partnerships nor any of their Subsidiaries is a party to, or bound by, any collective bargaining agreement, Contract or other understanding with a labor union. There are no unfair labor practice or labor arbitration proceedings pending or, to the Knowledge of the NBP Partnerships, threatened in writing against the NBP Partnerships or any of their Subsidiaries.

3.6 Environmental Matters. Notwithstanding any other provision in this Agreement, this Section 3.6 contains the exclusive representations of the NBP Partnerships concerning Environmental Matters. Except as set forth on Schedule 3.6:

(a) The NBP Partnerships and their Subsidiaries are, and at all times since January 1, 2005 have been, in material compliance, with all applicable Environmental Laws;

(b) There have been no releases of Hazardous Materials at, on or under any property now owned or leased (or formerly owned or leased) by the NBP Partnerships or any of their Subsidiaries which are required by applicable Environmental Laws to be remediated by the NBP Partnerships or any of their Subsidiaries, except for any releases that have been fully remediated or that would not, individually or in the aggregate, have a Northern Border Material Adverse Effect;

(c) Neither of the NBP Partnerships nor any of their Subsidiaries has received any written request for information or written notification that it is a potentially responsible party under CERCLA or any similar state Legal Requirement with respect to any on-site or off-site location for which liability is currently being asserted against them with respect to the activities or operations of the NBP Partnerships and their Subsidiaries and neither of the NBP Partnerships nor any of their Subsidiaries has sent or contributed waste to any facility that is subject to a potential claim under CERCLA or any similar state Legal Requirement;

(d) There are no material writs, injunctions, decrees, notices of violation, Governmental Orders or judgments outstanding, or any Legal Proceedings pending or, to the Knowledge of the NBP Partnerships, threatened, involving the NBP Partnerships or any of their Subsidiaries relating to (i) its compliance with any Environmental Law or (ii) the release, discharge, spill, treatment, storage or disposal of Hazardous Materials into the environment at any location that could reasonably be expected to result in the NBP Partnerships or any of their Subsidiaries incurring any material Liability under Environmental Law;

(e) The NBP Partnerships and each of their Subsidiaries has obtained, currently maintains and is in material compliance with all Environmental Permits, and all such Environmental Permits are in effect and no Legal Proceeding is pending with respect to any such Environmental Permit; and

(f) Except to the extent set forth in or reserved against in the consolidated financial statements of Northern Border contained in the Northern Border SEC Documents, no

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material expenditures, capital improvements or changes in operation are, or, to the Knowledge of the NBP Partnerships, will be, necessary to achieve or maintain compliance with any Environmental Permit or Environmental Law, or will be necessary as a condition or result of the renewal, amendment or necessary modification of any Environmental Permit.

3.7 Absence of Certain Changes. As of the date hereof, since September 30, 2005 (a) there has not been any Northern Border Material Adverse Effect and (b) the business of Northern Border and its consolidated Subsidiaries has been conducted in all material respects only in the ordinary course consistent with past practice.

3.8 Securities Act. The NBP Partnerships are acquiring the Shares solely for the purpose of investment and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or state securities laws. The NBP Partnerships acknowledge that the Shares are not registered under the Securities Act or any applicable state securities law, and that such Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and pursuant to state securities laws and regulations as applicable.

3.9 SEC Filings.

(a) The NBP Partnerships have made available to ONEOK true and complete copies of all SEC Documents filed by Northern Border with the SEC since January 1, 2004 (the “Northern Border SEC Documents”), which are all of the documents (other than preliminary material) that Northern Border was required to file with the SEC since such date. As of their respective dates, the Northern Border SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations promulgated thereunder. None of the Northern Border SEC Documents, including, without limitation, any exhibits, financial statements or schedules included therein, at the time filed contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including the related notes and schedules) of Northern Border included in the Northern Border SEC Documents comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by the rules of the SEC) and fairly present in accordance with the applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal, recurring adjustments, none of which will be material), the consolidated financial position of Northern Border and its consolidated Subsidiaries as of their respective dates and the consolidated results of operations and the consolidated cash flows of Northern Border and its consolidated Subsidiaries for the periods presented therein.

(b) Except (i) to the extent set forth in or reserved against in the consolidated financial statements of Northern Border contained in the Northern Border SEC Documents, (ii) for current liabilities (determined in accordance with GAAP) incurred in the ordinary course of business consistent with past practices since the date of the most recent consolidated financial statements of Northern Border contained in the Northern Border SEC Documents and (iii) except

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for immaterial Liabilities, Northern Border has no Liabilities of the type that would be required to be disclosed on a balance sheet of Northern Border (or the notes thereto) prepared in accordance with GAAP.

3.10 Brokers’ Fees. Except for the fees payable to the financial advisor referenced in Section 3.11 herein (the fees of which shall be paid solely by Northern Border), no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by Northern Border or any of its Affiliates.

3.11 Opinion of Financial Adviser. Lehman Brothers Inc. has provided the Audit Committee of Northern Border (with a copy to the Partnership Policy Committee of Northern Border) with its opinion that, as of the date hereof and based upon and subject to the matters set forth therein, the net consideration involved in the Northern Border Transaction is fair to Northern Border from a financial point of view.

3.12 Registration Rights. The Units and the Conversion Units, when issued, will be Partnership Securities (as such term is used in the Northern Border Partnership Agreement) and ONEOK will be entitled to exercise all of the registration rights provided for in Section 6.14 of the Northern Border Partnership Agreement with respect to the Units and the Conversion Units.

3.13 Disclaimer.

(a) Except as and to the extent expressly set forth in Section 3, (i) the NBP Partnerships make no representations or warranties, express or implied, and (ii) the NBP Partnerships expressly disclaim all Liability and responsibility for any representation, warranty, statement or information made or communicated (orally or in writing) to ONEOK or any of its Affiliates, employees, agents, consultants or representatives (including, without limitation, any opinion, information, projection or advice that may have been provided to ONEOK by any officer, director, employee, agent, consultant, representative or advisor of the NBP Partnerships or any of their Subsidiaries).

(b) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN SECTION 3, THE NBP PARTNERSHIPS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AS TO (I) TITLE TO ANY OF THE PROPERTIES OR OTHER ASSETS OF THE NBP PARTNERSHIPS OR ANY OF THEIR SUBSIDIARIES, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM OR REPORT RELATING TO THE PROPERTIES OR OTHER ASSETS OF THE NBP PARTNERSHIPS OR ANY OF THEIR SUBSIDIARIES, (III) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE PROPERTIES OR OTHER ASSETS OF THE NBP PARTNERSHIPS OR ANY OF THEIR SUBSIDIARIES, (IV) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE PROPERTIES OR OTHER ASSETS OF THE NBP PARTNERSHIPS OR ANY OF THEIR SUBSIDIARIES, OR (V) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE

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AVAILABLE OR COMMUNICATED TO ONEOK OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT.

SECTION 4. COVENANTS OF ONEOK

4.1 Conduct of the Entities. Except as set forth on Schedule 4.1, during the period from the date of this Agreement until the Closing (the “Pre-Closing Period”), ONEOK agrees that, except as otherwise contemplated by this Agreement, the ONEOK Disclosure Schedules, or as Northern Border shall otherwise consent in writing (such consent not to be unreasonably withheld, delayed or conditioned):

(a) Ordinary Course. ONEOK shall cause the Entities to, (i) conduct their Business in the ordinary course consistent with past practice and (ii) use commercially reasonable efforts to (A) preserve intact their current business organization, (B) preserve the relationships of the Entities with customers, suppliers, landlords, creditors, employees and other Persons having business dealings with the Entities, (C) preserve and maintain in force all of the insurance policies of the Entities and each of the Permits of the Entities, (D) maintain and repair all property material to the operation of the Business in a manner consistent with past practice, (E) make the capital expenditures identified in the budget previously provided to Northern Border and (F) make payments to all employees, vendors and other trade creditors in a timely manner consistent with past practice.

(b) Governing Documents. ONEOK shall cause each Entity not to amend or waive any rights under the organizational documents of such Entity, other than amendments or waivers necessary to execute, deliver and perform the transactions contemplated by this Agreement including, without limitation, pursuant to Section 6.12.

(c) Issuance of Securities. ONEOK shall cause each Entity not to issue, transfer, sell or dispose of, or authorize or agree to the issuance, transfer, sale or disposition of (whether through the issuance or granting of options, rights, warrants, or otherwise), any Equity Interests of any Entity or any options, rights, warrants or other securities convertible into or exchangeable or exercisable for any Equity Interests of any Entity or amend any of the terms of any securities or agreements relating to such Equity Interests outstanding on the date hereof.

(d) Reclassifications. ONEOK shall cause each Entity not to split, combine or reclassify any Equity Interests of any Entity, or redeem, purchase or otherwise acquire or offer to acquire any such Equity Interests of any Entity.

(e) No Acquisitions. ONEOK shall cause each Entity not to form any Subsidiary or acquire or agree to acquire, by merging or consolidating with, or by purchasing an equity interest in or any of the assets of, any Person; provided, however, that, subject to Section

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4.1(h), the foregoing shall not restrict ONEOK or any Entity from purchasing assets in the ordinary course of operating the Entities.

(f) No Dispositions. ONEOK shall cause each Entity not to transfer, sell, lease, license, encumber or otherwise dispose of or agree to transfer, sell, lease, license, encumber or otherwise dispose of, any of their respective assets other than (i) in the ordinary course of business consistent with past practice, (ii) pursuant to existing contractual obligations, (iii) the imposition of Permitted Liens and (iv) the transfer of assets among the Entities.

(g) Material Contracts. ONEOK shall cause each Entity not to enter into, or permit any of the material assets owned or used by Entity to become bound by or modify, amend or prematurely terminate, or waive any material right or remedy under:

(i) any Contract containing covenants limiting the freedom of any of the Entities, Northern Border or any of its Subsidiaries or their assignees or successors to compete in any line of business or with any Person or in any geographic area during any period of time following the Closing;

(ii) any Contract for the borrowing of money or related to Indebtedness of any Entity in excess of $500,000;

(iii) any Contract with any officer, employee, director of any Entity or ONEOK or any of their respective Affiliates;

(iv) any Contract with any union, trade organization or bargaining unit representative; or

(v) any acquisition, divestiture, merger, joint venture or partnership agreement that is material to the Business.

(h) Capital Expenditures. ONEOK shall cause each Entity not to make, authorize or enter into commitments to make capital expenditures in an amount that, when added to all other capital expenditures made during the Pre-Closing Period on behalf of any Entity, exceeds $500,000, other than any capital expenditures contemplated by the budget previously provided to Northern Border.

(i) Indebtedness. ONEOK shall cause each Entity not to (i) lend money to any Person (except that any Entity may make routine advances to employees in the ordinary course of business) or (ii) incur, assume, guarantee or otherwise become liable in respect of any Indebtedness.

(j) Accounting. ONEOK shall cause each Entity not to change any of its methods of accounting or accounting practices in any material respect except as may be required by any Legal Requirement or GAAP.

(k) Tax Elections. ONEOK shall cause each Entity not to make any Tax election, other than (A) any Tax election made consistent with prior practice of the Entity, (B) a Tax election that would not adversely affect Northern Border or any Entity for any taxable

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period or portion thereof beginning after the Closing Date or (C) a Tax election to effect a Conversion Transaction as contemplated by Section 6.11.

(l) Proceedings. ONEOK shall cause each Entity not to settle any material Legal Proceeding if, as a result of the settlement, the Entity would be liable after the Closing for settlement payments in excess of $5,000,000 or subject to any injunctive or similar equitable relief or otherwise be subject to any ongoing obligations following the payment of any settlement amounts.

(m) Regulatory Actions. ONEOK shall cause each Entity not to, other than routine compliance filings, make any filings or submit any documents or information to FERC or any other Governmental Authority, other than routine compliance filings, without prior consultation with Northern Border.

(n) Agreements to Take Action. ONEOK shall cause each Entity not to agree or commit to take any of the actions described in clauses “(b)” through “(m)” above.

4.2 Cash Management. Nothing contained in this Agreement shall prevent or limit the ability of any Entity to distribute, dividend or otherwise transfer any cash to ONEOK, any other Entity or any other Affiliate of ONEOK during the Pre-Closing Period.

SECTION 5. COVENANTS OF THE NBP PARTNERSHIPS

5.1 Books and Records.

(a) No later than ten (10) days after Closing, ONEOK will make available to the NBP Partnerships or their designee, at ONEOK’s sole cost and expense, originals of all files, records, information and data (in all formats) owned by or primarily relating to the Entities that are in the possession or control of ONEOK or its Affiliates (together with all ONEOK’s and its Affiliate’s contractual rights to request other such files, records, information and data from any third party).

(b) For a period of five (5) years from the Closing Date:

(i) The NBP Partnerships shall not dispose of or destroy any of the material books and records relating to the Business for periods prior to the Closing (the “Books and Records”) without first offering to turn over possession thereof to ONEOK by written notice from the NBP Partnerships to ONEOK at least 60 days prior to the proposed date of such disposition or destruction. Within 30 days after receipt of such notice from the NBP Partnerships, ONEOK may notify the NBP Partnerships that it wishes to receive such Books and Records, and the NBP Partnerships shall deliver such Books and Records (to the extent such Books and Records are not subject to an attorney-client or similar privilege or other confidentiality obligation) to a designated Representative of ONEOK upon receipt by the NBP Partnerships of a written agreement in form and substance reasonably satisfactory to the NBP Partnerships in which ONEOK agrees to maintain the confidentiality of such Books and Records. If ONEOK does not notify the NBP Partnerships within 30 days of receipt of such notice, the NBP Partnerships may dispose of or destroy the Books and Records.

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(ii) The NBP Partnerships shall, on reasonable notice and at reasonable times at Northern Border’s principal place of business or at any location where any Books and Records are stored, allow ONEOK and its agents reasonable access to all Books and Records that are not subject to attorney-client or similar privilege or other confidentiality obligation, to the extent such access is requested for any legitimate purpose related to ONEOK’s prior ownership of the Entities and provided that the NBP Partnerships have received a written agreement in form and substance reasonably satisfactory to the NBP Partnerships in which ONEOK agrees to maintain the confidentiality of such Books and Records. ONEOK shall have the right, at its own expense, to make copies of any such Books and Records; provided, however, that any such access or copying shall be had or done in such a manner so as not to unduly interfere with the normal conduct of the Business.

(iii) The NBP Partnerships shall make available to ONEOK upon reasonable notice to ONEOK and at reasonable times and upon written request the personnel of the NBP Partnerships to assist ONEOK in locating and obtaining any Books and Records.

5.2 Approval of Issuance of Common Units Upon Conversion Units. Northern Border shall, as soon as reasonably practicable following the Closing (but in any event prior to the one year anniversary of the Closing Date), (i) take action to call and hold a meeting of holders of the Common Units for the purposes of approving the issuance of the Conversion Units to ONEOK upon the conversion of the Units by ONEOK and approving the amendment to the Northern Border Partnership Agreement in the manner contemplated by the Parties in the Amendment, (ii) actively solicit proxies in favor of the proposals described in subsection 5.2(i) above, and (iii) take such other actions as may be reasonably necessary and appropriate in order to obtain all requisite approvals for the resolutions described above in this Section 5.2.

SECTION 6. COVENANTS OF ONEOK AND THE NBP PARTNERSHIPS

The parties hereto agree that:

6.1 Access to Information. During the Pre-Closing Period

(a) ONEOK will, and will cause each Entity to, (i) give the NBP Partnerships and their Representatives reasonable access during normal business hours and on reasonable notice to the officers, personnel, properties, Tax Returns, books, records and work papers of and relating to any Entity, (ii) furnish to the NBP Partnerships and their Representatives such financial and operating data and copies of such Tax Returns, books, records, work papers and other documents and information with respect to any Entity, as such Persons may reasonably request, and (iii) instruct their respective Representatives to cooperate with the NBP Partnerships in their investigation of the Entities. The Parties agree that any information provided, or caused to be provided, by the Entities pursuant to this Section 6.1(a) shall be kept confidential and not disclosed to any third party, except to the extent required by any Legal Requirement. ONEOK shall cooperate to ensure that the provision of access hereunder to the NBP Partnerships and their authorized Representatives shall comply in all respects with the Federal Energy Regulatory Commission’s (“FERC”) Standards of Conduct for Transmission Providers set forth in 18 C.F.R. Part 37, et al.

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(b) The NBP Partnerships will (i) give ONEOK and its Representatives reasonable access during normal business hours and on reasonable notice to the officers, personnel, properties, Tax Returns, books, records and work papers of and relating to the NBP Partnerships and their Subsidiaries, (ii) furnish to ONEOK and its Representatives such financial and operating data and copies of such Tax Returns, books, records, work papers and other documents and information with respect to Northern Border and its Subsidiaries, as such Persons may reasonably request, and (iii) instruct its Representatives to cooperate with ONEOK in its investigation of the NBP Partnerships and their Subsidiaries. The Parties agree that any information provided, or caused to be provided, by the NBP Partnerships and their Subsidiaries pursuant to this Section 6.1(b) shall be kept confidential and not disclosed to any third party, except to the extent required by any Legal Requirement. The NBP Partnerships shall cooperate to ensure that the provision of access hereunder to ONEOK and its authorized Representatives shall comply in all respects with the FERC Standards of Conduct for Transmission Providers set forth in 18 C.F.R. Part 37, et al.

6.2 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement and applicable Legal Requirements, each of the Parties hereto shall act in good faith and use its commercially 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 consummate and make effective the transactions contemplated hereby as soon as practicable, including such actions or things as the other Parties may reasonably request in order to cause any of the conditions to such other Party’s or Parties’ obligation to consummate the transactions contemplated by this Agreement to be fully satisfied.

6.3 Regulatory and Other Authorizations; Notices and Consents.

(a) Each of the Parties shall use commercially reasonable efforts to obtain promptly all authorizations, consents, orders and approvals of all Governmental Authorities (including by making, or causing to be made, all appropriate filings of notifications or reports) necessary for its execution and delivery of, and the performance of its obligations pursuant to, and the consummation of the transactions contemplated by, this Agreement (such authorizations, consents, orders and approvals, “Governmental Approvals”). ONEOK and the NBP Partnerships shall, and ONEOK shall cause the Entities to, cooperate in promptly seeking to obtain the Governmental Approvals.

(b) Neither ONEOK nor the NBP Partnerships shall intentionally take any action that would be reasonably expected to delay, impair or impede the receipt of any Governmental Approvals. ONEOK and the NBP Partnerships agree to make, or to cause to be made, all appropriate filings of notifications and reports required to obtain the Governmental Approvals promptly after the date of this Agreement and to supply promptly any additional information and documentary material that may be requested by Governmental Authorities responsible therefor. As defined further below, the parties shall cooperate in making any such filings. ONEOK and the NBP Partnerships agree to use their commercially reasonable efforts to avoid or eliminate each and every impediment under any Legal Requirement that may be asserted by any Governmental Authority in connection with the Governmental Approvals so as to enable the Parties to expeditiously close the transactions contemplated by this Agreement. ONEOK and the NBP Partnerships agree to use commercially reasonable efforts to vacate or lift

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any order relating to the Governmental Approvals that would have the effect of making any of the transactions contemplated by this Agreement illegal or otherwise prohibiting their consummation. Notwithstanding any other terms or provisions of this Agreement, in no event shall the NBP Partnerships or their Subsidiaries be deemed to have any obligation to dispose of any assets or properties (including any assets or properties of the Entities) or to enter into any agreement with any Person in order to obtain early termination or expiration of the waiting period under the HSR Act or to obtain any other Governmental Approvals.

(c) Each Party shall promptly notify the other parties of any communication it or any of its Affiliates receives from any Governmental Authority relating to the matters that are the subject of this Agreement, including any filing, investigation or inquiry, and, subject to applicable Law, permit the other Parties to review in advance any proposed communication by such Party to, or filing by such party with, any Governmental Authority. No Party shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation or other inquiry unless it consults with the other Parties in advance and, to the extent permitted by such Governmental Authority, affords the other Parties the reasonable opportunity to attend and participate. Each Party will coordinate and cooperate fully with the other Parties in exchanging such information and providing such assistance as such other Parties may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods under the HSR Act or in connection with any other Governmental Approvals. Each Party will provide the other Parties with copies of all correspondence, filings or communications between such Party or any of its Representatives, on the one hand, and any Governmental Authority, on the other hand, with respect to this Agreement and the transactions contemplated by this Agreement, including with respect to the Party hereto making a filing, providing copies of all such documents to the non-filing Parties and their Representatives prior to filing (except that no Party hereto shall be under an obligation of any kind to provide the other Parties with documents, material or other information relating to such Party’s valuation of the Business).

(d) The NBP Partnerships and ONEOK shall (and shall each cause their respective Affiliates to) use commercially reasonable efforts to obtain all consents, authorizations, waivers and approvals of third parties that any of the Parties or their respective Affiliates (including the Entities) are required to obtain in order to consummate the transactions contemplated hereby.

(e) Northern Border shall use commercially reasonable efforts to list the Common Units to be issued to ONEOK pursuant to this Agreement on the New York Stock Exchange, prior to the Closing Date or immediately upon conversion of the Units into Conversion Units, subject to official notice of issuance.

(f) The Parties agree to cooperate and assist in the filing of proxy solicitation materials relating to matters contemplated hereby requiring a vote of the holders of the outstanding Common Units of Northern Border, as promptly as practicable after the date hereof.

6.4 Public Announcements. During the Pre-Closing Period, the Parties shall consult with each other before issuing any press release or making any public statement with respect to the transactions contemplated hereby and, except as may be required by applicable

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Legal Requirements or stock exchange rules and regulations, shall not issue any such press release or make any such public statement unless the text of such statement shall first have been agreed to by the parties.

6.5 Notices of Certain Events. Each Party hereto shall promptly notify the other Parties hereto (i) following the receipt of any notice of any Legal Proceeding commenced or, to the Knowledge of ONEOK, or the Knowledge of the NBP Partnerships, as applicable, threatened against it that relates to or seeks to prohibit the consummation of the transactions contemplated hereby, (ii) upon its discovery that any of its representations or warranties in this Agreement contain any inaccuracies or that such Party has breached or otherwise failed to perform its obligations, covenants and agreements contained herein or (iii) upon its discovery of any development that is reasonably likely to result in a failure of a condition to the Closing.

6.6 Entity Guarantees.

(a) The NBP Partnerships and ONEOK shall use commercially reasonable efforts to obtain from the respective beneficiary, in form and substance reasonably satisfactory to ONEOK, on or before the Closing, valid and binding written releases of ONEOK and its Affiliates (other than the Entities), as applicable, from any liability or obligation, whether arising before, on or after the Closing Date, under any Entity Guarantees in effect as of the Closing. If any Entity Guarantee has not been released as of the Closing Date, then the NBP Partnerships shall continue to use commercially reasonable efforts after the Closing to cause each such unreleased Entity Guarantee to be released promptly. Schedule 6.6 to the ONEOK Disclosure Schedules contains a true, correct and complete list of all of the Entity Guarantees.

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

(c) The NBP Partnerships shall indemnify and hold harmless ONEOK and its Affiliates from and after the Closing Date for any and all Damages arising out of or relating to any Entity Guarantees.

6.7 Intercompany Accounts. Except for amounts related to normal operational sales and cost of sales and fuel, prior to Closing ONEOK will settle all Intercompany Accounts and intercompany arrangements between any Entity, on the one hand, and ONEOK and its Affiliates (other than an Entity), on the other hand, and the Entities will not have any Liability whatsoever with respect to such settled intercompany arrangements and Intercompany Accounts. ONEOK shall be solely liable for any contractual or other Liabilities, express or implied, arising out of the termination, cancellation and elimination of any of the foregoing.

6.8 Shared Contracts and Drop-Down Contracts.

(a) Schedule 6.8(a) contains a true and complete listing of all Shared Contracts and Drop-Down Contracts. Commencing on the date hereof, (i) Northern Border and ONEOK shall use commercially reasonable efforts to cause the Shared Contracts to be replaced with separate Contracts that provide that each Entity receive only such rights and obligations

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under a replacement Contract substantially and materially similar to those contract rights and obligations utilized by it in the conduct of its business immediately prior to the date hereof and (ii) Northern Border and ONEOK shall use commercially reasonable efforts to cause the Drop-Down Contracts to be assigned to one or more Entities, as applicable, or, if any such Drop-Down Contracts are not assignable or if ONEOK is not able to obtain any consent required to so assign such Drop-Down Contracts, use commercially reasonable efforts to cause such Drop-Down Contracts to be replaced with separate Contracts that provide that the Entity receives the rights and obligations under a replacement Contract as are substantially and materially similar to those contract rights and obligations of ONEOK under such Drop-Down Contracts immediately prior to the date hereof. The administrative costs and expenses arising from the separation, replacement or assignment of a Shared Contract or Drop-Down Contract (excluding any costs incurred under the payment terms under any such Contract or any replacement Contract) shall be borne by ONEOK.

(b) If the Parties are not able to effect the separation and replacement of a Shared Contract or to effect the assignment or replacement of a Drop-Down Contract prior to the Closing, then, from the Closing until such Contract is separated and replaced (in the case of a Shared Contract), assigned or replaced (in the case of a Drop-Down Contract) or expires by its terms, to the extent permissible under any Legal Requirement and under the terms of such Contract, ONEOK shall, and Northern Border shall cause each Entity to, (i) assume and perform the liabilities and obligations under such Contract relating to its respective business (and shall promptly reimburse the other Party for any expenses relating thereto incurred by the other Party or its Affiliates), (ii) hold in trust for the benefit of the other Party, and shall promptly forward to the other Party, any monies or other benefits received pursuant to such Shared Contract relating to the business of the other Party (or its Affiliates) and (iii) endeavor to institute alternative arrangements intended to put the Parties in substantially the same economic position as if such Contract were separated and replaced (in the case of a Shared Contract) or assigned or replaced (in the case of a Drop-Down Contract).

6.9 ONEOK Marks. Northern Border shall obtain no right, title, interest, license or any other right whatsoever to use the word “ONEOK” or any Trademarks containing or comprising the foregoing, or any Trademark confusingly similar thereto or dilutive thereof (collectively, the “ONEOK Marks”). Notwithstanding the preceding sentence, effective upon the Closing Date, ONEOK, on behalf of itself and its Affiliates hereby grants to the Entities and Northern Border a nonexclusive, nontransferable, royalty-free license, without right to sublicense, to use, solely in the Entities’ businesses as they are presently conducted, any and all of the ONEOK Marks solely to the extent appearing on existing advertising materials and property of the Companies (such as signage, vehicles, and equipment) for a period of 6 months from the Closing Date (“License Period”); provided, however, that with respect to pipeline and gas storage signage the License Period shall be deemed to be a period of 12 months from the Closing Date. Northern Border and the Entities may use such existing inventory, advertising materials and property during the License Period, but shall not create new inventory, advertising materials or property using the ONEOK Marks. Northern Border and the Entities shall promptly replace or remove all ONEOK Marks on inventory, advertising materials and other assets, provided that all such use shall cease no later than the end of the License Period. As promptly as practicable and no later than 60 days after the Closing Date, Northern Border shall change the name of any Entity that contains a reference to “ONEOK”, to a name that does not contain such

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reference. The Parties agree, because damages would be an inadequate remedy, that a Party seeking to enforce this Section 6.9 shall be entitled to seek specific performance and injunctive relief as remedies for any breach thereof in addition to other remedies available at law or in equity.

6.10 Indebtedness for Borrowed Money. Immediately prior to the Closing, (i) ONEOK shall repay or otherwise settle any Indebtedness due to the Entities from ONEOK or its Affiliates (other than the Entities) and (ii) ONEOK shall cause the repayment or settlement of any Indebtedness due from the Entities to ONEOK or its Affiliates (other than the Entities), in each case, including interest and other amounts accrued thereon or due in respect thereof, other than any Indebtedness fully reflected in the Closing Working Capital.

6.11 Conversion Transactions. ONEOK shall, prior to the Closing Date, subject to having obtained any and all necessary approvals and consents from Governmental Authorities, (a) cause each of the Converting Companies to convert from corporations into an Eligible Person under the laws of the jurisdiction in which each is organized on the date of this Agreement (the “Conversion Transactions”) (and use its best efforts, after consulting with Northern Border, to form such Eligible Person as instructed by Northern Border) and (b) cause each of the Companies and Company Subsidiaries that is not on the date hereof treated as a partnership or an entity disregarded from its owner for United States federal income tax purposes to be so treated on or before the Closing Date and (c) cause each such Company and Company Subsidiary described in subsections 6.11(a) or (b) above to be continuously treated as a partnership or a disregarded entity from its owner for United States federal income tax purposes from the date it becomes so treated through the Closing Date.

6.12 Interim Financial Statements. From time to time after the date hereof, ONEOK will deliver to Northern Border copies of the monthly and quarterly financial statements (which shall include a balance sheet and a statement of income) for the Entities for all periods after the Balance Sheet Date through and including the Closing Date (collectively, the “Interim Financial Statements”). The Interim Financial Statements will be prepared on the same basis as the Financial Statements and will present fairly in all material respects the financial position, results of operations and cash flows of the Entities as of such dates and for the periods then ended (subject to normal year-end audit adjustments consistent with prior periods).

6.13 Cooperation Regarding Audits. ONEOK acknowledges and understands that Northern Border may be required to obtain certain information relating to the Entities including, but not limited to, audited or unaudited financial statements of the Entities, and disclose such information in registration statements and other documents filed with the Securities and Exchange Commission under the federal securities laws or in disclosure documents given to investors in certain securities offerings, including in connection with the third-party financing required to satisfy Northern Border’s obligations under Section 1.2 of the Northern Border Purchase Agreement. At Northern Border’s cost, ONEOK agrees to use commercially reasonable efforts to cooperate, and shall cause its Affiliates, accountants, counsel and other agents and representatives to cooperate, with Northern Border in connection therewith with respect to the Entities for periods prior to the Closing, including the execution and delivery of any customary audit representation letters, consents or comfort letters and representation letters

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for such periods presented to ONEOK by Northern Border and its auditors for execution in connection therewith.

6.14 Insurance Matters. The Parties acknowledge that the facilities owned by Venice Energy Services Co., L.L.C. (“VESCO”) were damaged by Hurricane Katrina in 2005 and that ONEOK VESCO Holdings, L.L.C. (“VESCO Holdings”), a wholly-owned subsidiary of ONEOK, holds 10.1765% of the outstanding equity interests in VESCO. The Parties further acknowledge that VESCO Holdings has contributed approximately $2,500,000 to VESCO as the pro rata amount that VESCO’s partnership committee required the partners in VESCO to contribute for the repair costs for such facilities. In addition to such prior contribution, ONEOK shall pay or reimburse Northern Border for its pro rata share of any additional amounts the VESCO partnership committee requires the partners in VESCO to contribute to VESCO with respect to such hurricane damage occurring in 2005. As a result, the Parties acknowledge and agree that ONEOK shall receive and retain all proceeds of any casualty loss insurance that may relate to such facilities for the period prior to the Closing. With respect to any “business interruption” or similar insurance coverage that may relate to the interest of ONEOK or its Affiliates in VESCO, ONEOK or its Affiliates (other than the Entities) shall retain or be paid that portion of any such insurance proceeds that may be paid covering the period prior to Closing, and the Entities shall retain or be paid that portion of any such insurance proceeds covering the period on or after Closing. To the extent either Party receives any insurance proceeds that are payable to the other Party as set forth in this Section 6.14, then such proceeds shall be promptly paid to such other Party.

SECTION 7. CONDITIONS TO CLOSING

7.1 Conditions to the Obligations of ONEOK. The obligation of ONEOK to consummate this Agreement and the transactions contemplated hereby is subject to the fulfillment, prior to or at the Closing, of the following conditions precedent unless waived by ONEOK in its sole discretion:

(a) Accuracy of Representations and Warranties.

(i) All representations and warranties made by the NBP Partnerships (other than those set forth in Section 3.9 (SEC Filings)) herein and in any Related Agreement shall be true and correct when made and on and as of the Closing, except for representations and warranties that are made as of a specific date or time, which shall be true and correct only as of such specific date or time, except for such failures of such representations and warranties to be true and correct (without giving effect to any limitation or qualification as to Northern Border Material Adverse Effect or “materiality” (including the word “material”) set forth therein) as would not, individually or in the aggregate, have a material adverse effect on the ability of the NBP Partnerships to perform their obligations hereunder and consummate the transactions contemplated hereby on the Closing Date;

(ii) The representations and warranties made by Northern Border in Section 3.9 (SEC Filings) shall be true and correct in all material respects when made and on and as of the Closing, with the same force and effect as if made on and as of the Closing, except for

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representations and warranties that are made as of a specific date or time, which shall be true and correct in all material respects only as of such specific date or time.

(b) Compliance with Covenants. The NBP Partnerships shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement and any Related Agreements to be performed or complied with by it prior to or on the Closing.

(c) No Material Change. Since the date hereof, there shall not have occurred any event, development or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a Northern Border Material Adverse Effect.

(d) Certificate from Officers. The NBP Partnerships shall have delivered to ONEOK a certificate of Northern Border’s Chief Financial and Accounting Officer dated as of the Closing to the effect that the statements set forth in paragraphs (a), (b) and (c) above in this Section 7.1 are true and correct.

(e) No Injunction. At the time of Closing there shall be no effective injunction, writ or preliminary restraining order or any Governmental Order of any nature issued by a Governmental Authority of competent jurisdiction to the effect that the transactions contemplated by this Agreement may not be consummated as herein provided, and no proceeding or lawsuit shall have been commenced by any Governmental Authority or other Person for the purpose of obtaining any such injunction, writ or preliminary restraining order.

(f) Hart-Scott-Rodino. All required filings under the HSR Act shall have been completed and all applicable time limitations under such Act shall have expired without a request for further information by the relevant Governmental Authorities under such Act, or in the event of such a request for further information, the expiration of all applicable time limitations under the Act shall have occurred without the objection of such federal authorities.

(g) Governmental Approvals. The consent of (i) Kansas Corporation Commission for transfer of Certificates of Convenience and Necessity and transfer of tariffs related to Mid-Continent Marketing Center (“KCC Consent”) and (ii) Oklahoma Corporation Commission for the sale of ONEOK Gas Transportation, L.L.C. (“OCC Consent”), shall have been obtained.

(h) Other Transactions. The transactions contemplated by the Purchase and Sale Agreement by and between ONEOK, Northern Border and NBILP, dated concurrently with this Agreement (the “Northern Border Purchase Agreement”), the Purchase and Sale Agreement between TransCan Northwest Border Ltd and Northern Plains Natural Gas Company, LLC (the “GP Purchase Agreement”) and the Partnership Interest Purchase and Sale Agreement by and between NBILP and TC PipeLines Intermediate Limited Partnership, dated February __, 2006 (the “TransCanada Agreement” and, together with the Northern Border Purchase Agreement and the GP Purchase Agreement, the “Other Transaction Agreements”), shall have been consummated on the Closing Date (the transactions contemplated by the GP Purchase Agreement shall be consummated immediately prior to the Closing and ONEOK or its Affiliates shall, immediately following such consummation, own 100% of the general partnership interests

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in Northern Border, the transactions contemplated by the Northern Border Purchase Agreement shall be consummated simultaneously with the Closing and the transactions contemplated by the TransCanada Agreement shall be consummated immediately following the Closing).

(i) Amendment to Credit Facility. An amendment to each of (A) the Credit Agreement dated as of September 17, 2004 by and among ONEOK, Bank of America, N.A., and the financial institutions therein named as Lenders, as amended, and (B) the Credit Agreement dated June 27, 2005 among ONEOK, Inc., as Borrower, Citibank, N.A., as Administrative Agent, and the Lenders party thereto, as amended, shall have been executed and delivered by the parties thereto in form and substance reasonably satisfactory to ONEOK that permits ONEOK to enter into and perform its obligations under this Agreement.

(j) Delivery of Deliverables. Each of the deliveries set forth in Section 1.3(c) shall have been made.

(k) Bushton Consents. Written consents and agreements from the trustees, owner participants, noteholders and other parties as may reasonably be necessary in connection with the transfer of ONEOK Bushton Processing, Inc. (“OBPI”) to Northern Border, and in connection with the conversion of OBPI to a limited liability company, shall have been obtained.

7.2 Conditions to the Obligations of the NBP Partnerships. The obligation of the NBP Partnerships to consummate this Agreement and the transactions contemplated hereby is subject to the fulfillment, prior to or at the Closing, of the following conditions precedent unless waived by the NBP Partnerships in writing in their sole discretion:

(a) Accuracy of Representations and Warranties. All representations and warranties made by ONEOK herein and in any Related Agreement shall be true and correct when made and on and as of the Closing, except for representations and warranties that are made as of a specific date or time, which shall be true and correct only as of such specific date or time except for such failures of such representations and warranties to be true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or “Material Adverse Effect” set forth therein) as would not, individually or in the aggregate, have a Material Adverse Effect.

(b) Compliance with Covenants. ONEOK shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants, contained in this Agreement and any Related Agreements to be performed or complied with by it prior to or on the Closing.

(c) No Material Change. Since the date hereof, there shall not have occurred any event, development or circumstance with respect to ONEOK or the Entities that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of ONEOK to perform its obligations hereunder and consummate the transactions contemplated hereby on the Closing Date.

(d) Certificate from Officers. ONEOK shall have delivered to Northern Border a certificate of ONEOK’s Chief Financial Officer dated as of the Closing to the effect that

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the statements set forth in paragraphs (a), (b) and (c) above in this Section 7.2 are true and correct.

(e) No Injunction. At the time of Closing there shall be no effective injunction, writ or preliminary restraining order or any Governmental Order of any nature issued by a Governmental Authority of competent jurisdiction to the effect that the transactions contemplated by this Agreement may not be consummated as herein provided, and no proceeding or lawsuit shall have been commenced by any Governmental Authority or other Person for the purpose of obtaining any such injunction, writ or preliminary restraining order.

(f) Hart-Scott-Rodino. All required filings under the HSR Act shall have been completed and all applicable time limitations under such Act shall have expired without a request for further information by the relevant Governmental Authorities under such Act, or in the event of such a request for further information, the expiration of all applicable time limitations under the Act shall have occurred without the objection of such federal authorities.

(g) Governmental Approvals. The KCC Consent and the OCC Consent shall have been obtained.

(h) Other Transactions. The transactions contemplated by the Other Transaction Agreements shall have been consummated on the Closing Date (the transactions contemplated by the GP Purchase Agreement shall be consummated immediately prior to the Closing and ONEOK or its Affiliates shall, immediately following such consummation, own 100% of the general partner interests in Northern Border, the transactions contemplated by the Northern Border Purchase Agreement shall be consummated simultaneously with the Closing and the transactions contemplated by the TransCanada Agreement shall be consummated immediately following the Closing).

(i) Conversion Transactions. The Conversion Transactions shall have been completed in form and substance satisfactory to Northern Border.

(j) Amendment of Certain Debt Agreements. Amendments to (i) that certain Revolving Credit Agreement, dated as of May 16, 2005, by and among Northern Border, the lenders named therein and Citibank, N.A., and (ii) that certain Revolving Credit Agreement, dated as of May 16, 2005, by and among Northern Border Pipeline Company, the lenders named therein, and Citibank N.A., (the “Northern Border Credit Agreements”) as are reasonably necessary to permit Northern Border to enter into and consummate the transactions contemplated by the Northern Border Transaction Agreements without violating the terms of, or causing a default under, either such credit agreement (the “Northern Border Credit Agreement Amendments”), shall have been executed and delivered by the parties thereto.

(k) Delivery of Deliverables. Each of the deliveries set forth in Section 1.3(b) shall have been made.

(l) Waiver Under Viking Indenture. A waiver by the holders of a majority of the principal amount of the notes outstanding under the Amended and Restated Indenture Agreement dated as of November 30, 2004 (the “Viking Indenture”) between Viking Gas Transmission Company and Wells Fargo Bank, National Association, as Trustee as are

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reasonably necessary to permit Northern Border to enter into and consummate the transactions contemplated by the Northern Border Transaction Agreements without violation of the terms thereof or causing default thereunder shall have been obtained.

(m) Bushton Consents. Written consents and agreements from the trustees, owner participants, noteholders and other parties as may reasonably be necessary in connection with the transfer of OBPI to Northern Border, and in connection with the conversion of OBPI to a limited liability company, shall have been obtained.

SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED

8.1 Termination.

(a) This Agreement may be terminated on or prior to the Closing Date only as follows:

(i) by mutual written consent of the Parties to this Agreement;

(ii) at the election of any Party, if the Closing shall not have occurred on or prior to June 30, 2006; provided that no Party shall be entitled to terminate this Agreement pursuant to this Section 8.1(a)(ii) if such Party’s failure to fulfill any obligation under this Agreement has been the primary cause of the failure of the Closing to occur on or before such date; and provided further that upon the occurrence of a request for additional information being received from a Governmental Authority pursuant to the HSR Act such date shall be extended to September 30, 2006;

(iii) by any Party, if a Governmental Authority shall have issued an order, decree or ruling permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree or ruling shall have become final and nonappealable, provided that the terminating Party has satisfied its obligations under Section 6 in response to actions or requests of such Governmental Authority;

(iv) by ONEOK, if ONEOK is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty, covenant, or agreement of the NBP Partnerships contained in this Agreement such that any of the conditions set forth in Section 7.1 would not be satisfied at or prior to the Closing, and, if such breach is of a character that it is capable of being cured, such breach has not been cured by the NBP Partnerships within 15 days after written notice thereof from ONEOK; or

(v) by the NBP Partnerships, if the NBP Partnerships are not in material breach of their obligations under this Agreement and there has been a breach of any representation, warranty, covenant, or agreement of ONEOK contained in this Agreement such that any of the conditions set forth in Section 7.2 would not be satisfied at or prior to the Closing, and, if such breach is of a character that it is capable of being cured, such breach has not been cured by ONEOK within 15 days after written notice thereof from the NBP Partnerships.

(b) The termination of this Agreement shall be effectuated by the delivery of a written notice of such termination from the party terminating this Agreement to the other party.

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8.2 Effect of Termination. All obligations of the parties hereunder shall cease upon any termination pursuant to Section 8.1; provided, however, that (i) the provisions of this Section 8, Section 6.1 (solely with respect to confidentiality obligations) and Section 11 hereof shall survive any termination of this Agreement, and (ii) nothing herein shall relieve any party from any Liability for any intentional breach (including any “efficient breach”) of this Agreement or a failure to comply with any of its covenants, conditions or agreements contained herein.

SECTION 9. INDEMNIFICATION

9.1 Survival of Representations and Warranties, Etc. The representations and warranties of ONEOK and the NBP Partnerships contained in this Agreement shall survive the Closing and expire on the second anniversary of the Closing Date; provided, however, that (i) the representations and warranties of ONEOK in Sections 2.1 (Organization and Authority of ONEOK), 2.2 (Organization, Authority and Qualification of the Entities), 2.3 (Capital of Companies; Beneficial Ownership) and 2.4 (Subsidiaries) shall survive indefinitely, (ii) the representations and warranties of ONEOK in Section 2.16 (Environmental Matters) shall survive the Closing and expire on the fourth anniversary of the Closing Date, (iii) the representations and warranties of ONEOK in Section 2.6 (Taxes) shall survive the Closing and expire on the 60^th day following the expiration of the applicable statute of limitations relating thereto and (iv) the representations and warranties of the NBP Partnerships in Sections 3.1 (Organization and Authority of the NBP Partnerships) and 3.2 (Capitalization) shall survive indefinitely. No Northern Border Indemnitee shall be entitled to indemnification for a breach of a representation or warranty under this Section 9 unless it shall have given ONEOK written notice that it seeks indemnification (which notice may be, in the case of third-party Claims, notice under Section 9.7) on or before the expiration of such representation or warranty. No ONEOK Indemnitee shall be entitled to indemnification for a breach of a representation or warranty under this Section 9 unless it shall have given the NBP Partnerships written notice that it seeks indemnification (which notice may be, in the case of third-party Claims, notice under Section 9.7) on or before the expiration of such representation or warranty. Each notice delivered under the preceding two sentences shall include a good faith estimate of the amount claimed and a detailed description of the circumstances surrounding the Damages in respect of which indemnification is claimed. The terms of this Agreement that by their nature are intended to survive the Closing shall survive the Closing indefinitely (or for their respective terms, if any).

9.2 Indemnification.

(a) From and after the Closing, ONEOK shall hold harmless and indemnify the Northern Border Indemnitees from and against, and shall compensate and reimburse each of the Northern Border Indemnitees for, (i) any Damages which are directly or indirectly suffered or incurred by any of the Northern Border Indemnitees or to which any of the Northern Border Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party Claim) as a result of, caused by or arising out of (including any allegations by a third party): (A) other than in connection with Section 2.16 of this Agreement (which is covered under Section 9.2(a)(ii) below), any inaccuracy in or breach of any representation or warranty of ONEOK set forth in this Agreement (without giving effect to any limitation or qualification as to “materiality” (including the word “material” or “Material Adverse Effect”) contained or

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incorporated directly or indirectly in such representation or warranty); (B) any breach of any covenant or obligation of ONEOK under this Agreement; (C) the litigation matters commonly known as “Woody’s/Décor” and “Smith”, each of which is described in greater detail on Schedule 9.2(a) hereto; or (ii) any Damages with respect to any inaccuracy in or breach of any representation or warranty of ONEOK set forth in Section 2.16 of this Agreement (without giving effect to any limitation or qualification as to “materiality” (including the word “material” or “Material Adverse Effect”) or the “Knowledge of ONEOK” contained or incorporated directly or indirectly in such representation or warranty), in each case in this subsection (ii) except for Damages that arise out of matters discovered by or on behalf of the NBP Partnerships or their Subsidiaries as a result of a Phase II, Phase III or similar environmental subsurface investigation undertaken voluntarily after Closing by or on behalf of the NBP Partnerships or any of their Subsidiaries, including the Entities, and except for remediation costs and expenses for matters that are not required to be remediated under applicable law.

(b) From and after the Closing, the NBP Partnerships shall hold harmless and indemnify the ONEOK Indemnitees from and against, and shall compensate and reimburse each of the ONEOK Indemnitees for, any Damages which are directly or indirectly suffered or incurred by any of the ONEOK Indemnitees or to which any of the ONEOK Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party Claim) as a result of, caused by or arising out of: (i) any inaccuracy in or breach of any representation or warranty of the NBP Partnerships set forth in this Agreement (without giving effect to any limitation or qualification as to “materiality” (including the word “material” or “Northern Border Material Adverse Effect”) contained or incorporated directly or indirectly in such representation or warranty); or (ii) any breach of any covenant or obligation of Northern Border under this Agreement; provided, however, that no ONEOK Indemnitee shall have any claim or recourse against the NBP Partnerships, and the NBP Partnerships shall have no obligation to indemnify any ONEOK Indemnitee under the terms of this Agreement, with respect to any breach by the NBP Partnerships of any representation or warranty of the NBP Partnerships set forth in this Agreement if to the Knowledge of ONEOK, the NBP Partnerships are in breach of any representation or warranty on the date hereof. For purposes of this Section 9.2(b) only, the term “Knowledge of ONEOK” shall include the actual knowledge of David Kyle.

(c) To the extent that ONEOK or its Affiliates (other than the Entities) has the right to seek indemnification from third parties for the benefit of the Entities or their assets, and the Entities are not entitled to seek such indemnification on their own accord, ONEOK, upon Northern Border’s written request, shall assign such indemnification rights to Northern Border or, if such rights cannot be assigned, assert (at Northern Border’s cost) a claim relating to such matter against such third party on behalf of the applicable Entities, and provide to Northern Border all benefits of such indemnification as, when and if provided by such third party. Notwithstanding the foregoing, neither ONEOK nor its Affiliates shall be obligated to make any additional payments or to take any action that would cause them to incur or be subject to any additional liabilities or costs with respect to any actions taken under this Section 9.2(c).

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9.3 Threshold; Cap.

(a) ONEOK shall not be required to make any indemnification payment in respect of any claim or series of substantially related claims made pursuant to Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of this Agreement, or pursuant to Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of the Northern Border Purchase Agreement, unless the amount of any Damages that have been directly or indirectly suffered or incurred by any one or more of the Northern Border Indemnitees or to which any one or more of the Northern Border Indemnitees has or have otherwise become subject with respect to such claim (or such substantially related claims) exceeds $100,000 (the “Minimum Claim Amount”). In addition, ONEOK shall not be required to make any indemnification payment pursuant to Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of this Agreement, or pursuant to Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of the Northern Border Purchase Agreement, until such time as the total amount of all individual claims exceeding the Minimum Claim Amount (such total amount, the “Aggregate Northern Border Damages”) exceeds $45,000,000 in the aggregate (the “Indemnity Threshold”). If the total amount of such Aggregate Northern Border Damages exceeds the Indemnity Threshold, then, subject to Section 9.3(b), the Northern Border Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for all Aggregate Northern Border Damages in excess of the Indemnity Threshold. The NBP Partnerships shall not be required to make any indemnification payment in respect of any claim (or series of substantially related claims) made pursuant to Section 9.2(b) of this Agreement or pursuant to Section 9.2(b) of the Northern Border Purchase Agreement unless the amount of any Damages that have been directly or indirectly suffered or incurred by any one or more of the ONEOK Indemnitees or to which any one or more of the ONEOK Indemnitees has or have otherwise become subject with respect to such claim (or such substantially related claims) exceeds the Minimum Claim Amount. In addition, the NBP Partnerships shall not be required to make any indemnification payment pursuant to Section 9.2(b) of this Agreement or pursuant to Section 9.2(b) of the Northern Border Purchase Agreement until such time as the total amount of all individual claims exceeding the Minimum Claim Amount (such total amount, the “Aggregate ONEOK Damages”) exceeds the Indemnity Threshold. If the total amount of such Aggregate ONEOK Damages exceeds the Indemnity Threshold, then, subject to Section 9.3(b), the Northern Border Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for all Aggregate ONEOK Damages in excess of the Indemnity Threshold.

(b) The maximum liability of ONEOK under Section 9.2(a)(i)(A) or (B) and Section 9.2(a)(ii) of this Agreement and under Section 9.2(a)(i)(A) or (B) or Section 9.2(a)(ii) of the Northern Border Purchase Agreement, taken in the aggregate, shall be $360,000,000 (the “ONEOK Indemnity Cap”). The maximum liability of the NBP Partnerships under Section 9.2(b) of this Agreement and under Section 9.2(b) of the Northern Border Purchase Agreement, taken in the aggregate, shall be $198,000,000 (the “Northern Border Indemnity Cap”).

(c) The limitations set forth in Section 9.3(a) and Section 9.3(b) shall not apply to any of the matters described in Sections 1.5 (Working Capital Adjustment), 2.1 (Organization and Authority of ONEOK), 2.2 (Organization, Authority and Qualification of the Entities), 2.3 (Capital of Companies; Beneficial Ownership), 2.4 (Subsidiaries), 3.1 (Organization and Authority of Northern Border) and 3.2 (Capitalization).

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9.4 Exclusive Remedy; Sole Recourse. With the exception of claims based upon fraud or intentional misrepresentation, from and after the Closing, the indemnification provisions set forth in this Section 9 and the Tax indemnification provisions set forth in Section 10.6 shall be the sole and exclusive remedy of both the Northern Border Indemnitees and the ONEOK Indemnitees for Damages under this Agreement (it being understood that nothing in this Section 9.4 or elsewhere in this Agreement shall affect the Parties’ rights to specific performance or other equitable remedies with respect to the covenants referred to in this Agreement to be performed after the Closing).

9.5 No Contribution. ONEOK shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against any Entity in connection with any indemnification obligation or any other Liability to which it may become subject under or in connection with this Agreement.

9.6 Setoff. Notwithstanding anything herein to the contrary, Damages shall be calculated net of any insurance or indemnification proceeds and Tax Benefits actually received by an Indemnitee or its Affiliates in connection with the facts giving rise to the right of indemnification (net of any fees, costs or expenses incurred in enforcing such Indemnitee’s rights to recover such insurance proceeds).

9.7 Third Party Claims.

(a) Upon receipt by any Person seeking to be indemnified pursuant to Section 9.2 (the “Indemnitee”) of notice of any third-party claim, (each a “Claim”) against it which has or is expected to give rise to a claim for Damages, the Indemnitee shall give prompt written notice thereof to the Person from which it seeks to be indemnified (the “Indemnitor”), indicating the nature of such Claim and the basis therefor; provided, however, that any delay or failure by the Indemnitee to give notice to the Indemnitor shall relieve the Indemnitor of its obligations hereunder only to the extent, if at all, that it is materially prejudiced by reason of such delay or failure.

(b) The Indemnitor shall have 30 days (or such shorter period as may be required by applicable Legal Requirements) after receipt of the Indemnitee’s notice to elect, at its option, to assume the defense of, at its own expense and by its own counsel, any such Claim. If the Indemnitor desires to undertake to defend any such Claim, it shall promptly notify the Indemnitee of its intention to do so. Notwithstanding an election by the Indemnitor to assume the defense of such Claim, (i) the Indemnitee shall have the right to employ separate counsel and to participate in the defense of such Claim, and the Indemnitor shall bear the reasonable fees, costs and expenses of such separate counsel if (A) the Indemnitee shall have determined in good faith that an actual or potential conflict of interest makes representation by the same counsel or the counsel selected by the Indemnitor inappropriate, (B) the Indemnitee shall have determined in good faith that the Damages in respect of such Claim may exceed the remaining balance of the applicable Indemnity Cap, or (C) the Indemnitor shall have authorized the Indemnitee to employ separate counsel at the Indemnitor’s expense, and (ii) the Indemnitee shall have the right at any time after the Indemnitor assumes the defense of such Claim to assume the defense of such Claim if (y) the Indemnitor subsequently determines that it does not believe the Claim is one for which the Indemnitee is entitled to indemnification, compensation or reimbursement under this

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Section 9.7 and requests that the Indemnitee assume the defense of such Claim (in which case the Indemnitee may, but shall not be obligated to, retain the legal counsel previously retained by the Indemnitor to assist in the defense of such Claim) or (z) any Damages in respect of such Claim are reasonably likely to exceed the remaining balance of the applicable Indemnity Cap available to such Indemnitee (in which case the Indemnitor shall bear the reasonable fees, costs and expenses of Indemnitee’s counsel, subject to the applicable Indemnity Cap, as applicable). The Indemnitee and Indemnitor and their counsel shall cooperate fully in the compromise or defense of any Claim subject to this Section 9.7 and keep one another informed of all developments relating to any such Claims, and provide copies of all relevant correspondence and documentation relating thereto. If an Indemnitor receiving a notice of Claim does not elect to defend such Claim within the time period referred to above, the Indemnitee shall have the right, in addition to any other right or remedy it may have hereunder, at the Indemnitor’s expense, subject to the Indemnity Cap, as applicable, to defend such Claim. The Indemnitee’s defense of, or participation in the defense of, any such Claim shall not in any way diminish or lessen the obligations of the Indemnitor under this Section 9.7. In no event may an Indemnitor or an Indemnitee settle or compromise any Claim without the consent of the other (which consent will not be unreasonably withheld, conditioned or delayed); provided, however, that an Indemnitor may settle or compromise a claim without the consent of the Indemnitee so long as (i) the relief consists solely of money damages in an amount greater than the Indemnity Threshold and less than the remaining balance of the applicable Indemnity Cap with respect to the Indemnitor and includes a provision whereby the plaintiff or claimant in the matter releases the Indemnitor and the Indemnitee from all liability with respect thereto, and (ii) such Indemnitor acknowledges the Indemnitee is entitled to indemnification, compensation and reimbursement under this Section 9.7). If remediation is required in connection with any Claims for which the Northern Border Indemnitees are entitled to indemnification under Section 9.2(a)(ii) above, ONEOK shall have the right to conduct, control and direct such remediation; provided, however, that any remediation activities undertaken by ONEOK shall be conducted (i) in compliance with all applicable Legal Requirements and any health and safety plan or other reasonable plans or guidelines imposed by the NBP Partnerships on Persons entering its properties, and (ii) in a manner that minimizes any short or long-term interference with the operations of the NBP Partnerships. ONEOK shall consult with the NBP Partnerships in its determination of the appropriate remediation standard to which remediation will be performed, and any institutional controls that ONEOK intends to employ to meet such remediation standard.

SECTION 10. TAX MATTERS

10.1 Retention of Records. Each of Northern Border and ONEOK shall retain, and Northern Border shall cause each of the Entities to retain, all Tax Records in its possession for all open Tax Periods ending on or before or including the Closing Date, until 6 months following the expiration of the statute of limitations (and any extensions thereof) of the respective Tax Periods. “Tax Records” means any Tax Return, Tax Return workpapers, documentation relating to any Audit, and any other books of account or records (whether on paper, computer disk or any other medium) required or advisable to be maintained under the applicable Tax law or under any record retention agreement with any Tax Authority.

10.2 Cooperation. Northern Border and ONEOK covenant and agree that subsequent to the Closing, upon reasonable notice and during normal business hours, they and

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their Affiliates will (i) give the other Party and its Representatives information, books and records (or copies thereof) relevant to the Entities, to the extent necessary to enable the other Party to prepare its Tax Returns (and any Tax Returns for which it has preparation or filing responsibility hereunder) or determine the amount of any refund, credit or other amount the amount of which the requesting Party may be entitled to receive pursuant to this Agreement, and (ii) provide the other Party and its Representatives with such information, books and records (or copies thereof) as may reasonably be requested in connection with any Tax Return, inquiry, election, Audit or other examination by any Tax Authority, or judicial or administrative proceedings relating to liability for Taxes. ONEOK and Northern Border also shall make available to each other, as reasonably requested, and at the expense of the requesting Party, knowledgeable employees or advisors of the Party or its Affiliates of which the request is made and personnel responsible for preparing and maintaining information, books, records and documents in connection with Tax filings, Audits, disputes or litigation. Notwithstanding the foregoing or any other provision in this Agreement, neither Northern Border nor the Entities (or any Affiliates of either) shall have the right to receive or obtain any information relating to Taxes of ONEOK, any of its Affiliates, or any of its predecessors other than information relating solely to or otherwise affecting the calculation of Taxes of or attributable to the Entities or any of their subsidiaries. Northern Border and ONEOK each agree, upon request, to use their reasonable efforts to obtain any certificate or other document from any Tax Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated by this Agreement.

10.3 Transfer Taxes. All transfer, documentary, recording, notarial, sales, use, registration, stamp and other similar taxes, fees and expenses (including, but not limited to, all applicable stock transfer, real estate transfer or gains Taxes and including any penalties, interest and additions to such tax) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by ONEOK. Northern Border and ONEOK shall cooperate in timely making and filing all Tax Returns as may be required to comply with the provisions of laws relating to such Transfer Taxes.

10.4 Tax Returns.

(a) ONEOK shall prepare (or cause to be prepared) and timely file all Tax Returns required to be filed with any Tax Authority with respect to the Entities for all Tax Periods ending on or before the Closing Date and shall pay all Taxes (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) due with respect to such Tax Returns. Northern Border shall timely pay all Taxes due with respect to such Tax Returns to the extent of any applicable accruals included within the calculation of Final Closing Working Capital. ONEOK shall provide Northern Border with drafts of such Tax Returns at least 10 days prior to the due date for filing such Tax Returns (taking into account extensions) for Northern Border’s review and comment; provided that in the case of a Tax Return which is a Consolidated Return, ONEOK shall only be required to provide the portions of such Consolidated Return relating solely to the income, gain, loss and deduction of the Entities. The final form of any such Tax Return required to be provided to Northern Border (and the portion of any such Consolidated Return relating solely to the Entities), pursuant to the preceding sentence, shall be subject to Northern Border’s prior written consent, which shall not be unreasonably withheld; provided that Northern Border shall not withhold consent to the filing of any such Tax

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Return if such Tax Return (or in the case of a Consolidated Return the portion thereof relating to the Entities) is prepared in a manner consistent with Section 10.4(c) of this Agreement and the treatment of any items that are not covered by past practice would not have an adverse effect on the Taxes of the Entities for any period beginning on or after the Closing Date or the portion of any Straddle Period (as defined below) that is Northern Border’s responsibility. In the case of any Tax Return required to be filed by ONEOK pursuant to this Section 10.4(a) after the Closing Date, Northern Border shall arrange for the signing of such Tax Returns or shall provide ONEOK with such powers or attorney or other authorization, in each case as may be necessary to effect such filings in accordance with applicable Tax Law.

(b) Northern Border shall prepare (or cause to be prepared) and timely file all Tax Returns for all Tax Periods ending after the Closing Date, including all Tax Returns for periods which include but do not end on the Closing Date (“Straddle Periods”) (the “Northern Border Returns”). If ONEOK is responsible under Section 10.5 of this Agreement for any Taxes due with respect to a Northern Border Return, Northern Border shall provide ONEOK with a substantially final draft of each such Tax Return at least 10 days prior to the due date for filing such Tax Returns (taking into account extensions) for ONEOK’s review and comment and the final form for any such Northern Border Returns shall be subject to ONEOK’s prior written consent, which shall not be unreasonably withheld; provided however, that ONEOK shall not withhold consent if such Tax Return is prepared in a manner consistent with Section 10.4(c) of this Agreement and the treatment of any items that are not covered by past practice would not have a material adverse effect on the Tax liabilities of ONEOK or the Entities for any Pre-Closing Period. Northern Border shall timely pay all Taxes due with respect to such Returns and ONEOK shall promptly reimburse Northern Border for any such Taxes which are its responsibility pursuant to Section 10.5 of this Agreement.

(c) Except as otherwise agreed by the parties, any Tax Return that includes any of the Entities’ assets or activities for any Pre-Closing Period shall be prepared in accordance with ONEOK’s past Tax accounting practices used with respect to the Tax Returns in question (unless the party responsible for preparing the Tax Return determines that the past practices are no longer permissible under the Code or other applicable Tax law), and to the extent any items are not covered by past practices (or in the event such past practices are no longer permissible under the Code or other applicable Tax law), in accordance with reasonable Tax accounting practices selected by the party responsible for preparing the Tax Return. In the case of any Tax Return for an Entity for any Straddle Period, any income, gain, loss and deduction shall be allocated based on a closing of the books method or such other method as may be agreed upon in writing by the parties.

(d) As part of the Services Agreement between ONEOK and Northern Border, ONEOK shall provide certain Tax Return filing assistance and other Tax assistance relating to the Taxes of the Entities in respect of periods ending after the Closing Date.

10.5 Allocation of Taxes.

(a) Allocation of Straddle Period Taxes. Northern Border and ONEOK shall, to the extent permitted by applicable Tax Law and except as otherwise provided herein, elect with the relevant Tax Authority to close the Tax Period of the Entities as of and including the

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Closing Date. Subject to the preceding sentence, in the case of Taxes attributable to the Entities that are payable with respect to any Straddle Period the portion of any such Taxes that are allocable to the portion of the Straddle Period ending on the Closing Date shall: (1) in the case of Taxes that are either (A) based upon or related to income or receipts or (B) imposed in connection with any sale, transfer or assignment of property (real or personal, tangible or intangible) be deemed equal to the amount that would be payable if the Tax year ended on and included the Closing Date and (2) in the case of Taxes (other than those described in clause (i)) imposed on a period basis with respect to the business or assets of the Entities or otherwise measured by the level of any item, be deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding Tax Period) multiplied by a fraction the numerator of which is the number of calendar days in the portion of the Straddle Period ending on and including the Closing Date and the denominator of which is the number of calendar days in the entire Straddle Period (the “Part-Year Fraction”). For purposes of clause (1) of the preceding sentence, any exemption, deduction, credit or other item that is calculated on an annual basis shall be allocated to the portion of the Straddle Period ending on the Closing Date on a pro rata basis determined by multiplying the total amount of such item allocated to the Straddle Period times the Part-Year Fraction. In the case of any Tax based upon or measured by capital (including net worth or long-term debt) or intangibles, any amount thereof required to be allocated under this Section 10.5(a) shall be computed by reference to the level of such items on the Closing Date. ONEOK shall be responsible for and shall pay any Taxes (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) allocable to the portion of the Straddle Period ending on the Closing Date and Northern Border shall be responsible for and shall pay any Taxes allocable to the portion of the Straddle Period after the Closing Date.

(b) Post-Closing Tax Periods. From and after the Closing Date, for the portion of any Straddle Period that begins on the day after the Closing Date and any other Tax Period beginning after the Closing Date, without duplication of any amount otherwise payable by Northern Border pursuant to this Agreement, Northern Border shall be responsible and pay, or cause the Entities to pay, to the appropriate Tax Authority any other Taxes due with respect to the Entities for any such period.

(c) Ad Valorem Taxes. Notwithstanding the foregoing, all ad valorem taxes (other than production, severance and similar Taxes measured by the quantity of or the value of production) related to the 2006 ad valorem tax year shall be pro-rated based on the number of days during the 2006 ad valorem tax year falling before and falling on or after the Closing Date. ONEOK will pay to Northern Border at Closing an amount equal to the portion of the 2006 ad valorem taxes allocated to it pursuant to this paragraph (to the extent such allocated amounts exceed any applicable accruals therefor included within the calculation of Final Closing Working Capital). ONEOK shall not be liable for any ad valorem taxes for the period following the Closing. Northern Border assumes full responsibility for filing all ad valorem renditions and tax returns in all applicable tax jurisdictions due after the Closing Date. ONEOK will, upon request from Northern Border, provide reasonably requested historical documentation of prior year filings related to ad valorem taxes to help facilitate Northern Border’s correct filing of ad valorem renditions and tax returns. ONEOK assumes full responsibility for filing all ad valorem taxes through the Closing Date.

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10.6 Tax Indemnity.

(a) ONEOK’s Indemnity for Taxes for Pre-Closing Date Periods. Notwithstanding any of the provisions of Section 9, from and after the Closing Date, without duplication of any amount otherwise payable by ONEOK pursuant to this Agreement, ONEOK shall indemnify Northern Border and its respective Affiliates against:

(i) all Taxes (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) imposed or payable by the Entities with respect to Tax Periods ending on or before the Closing Date and the portion of any Straddle Periods ending on the Closing Date (each such period a “Pre-Closing Taxable Period”);

(ii) all Taxes that are imposed or payable by the Entities that are attributable to (A) any termination of the Entities under Code Section 708 caused by the transactions contemplated herein, or (B) ONEOK or any member of an Affiliated, consolidated, combined or unitary Tax group of which the Entities are or were members prior to the Closing Date (other than any Taxes of the Entities) that is imposed under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) by reason of such Entities being included in any such Affiliated, consolidated, combined or unitary Tax group; and

(iii) any payments (in excess of any applicable accruals therefor included within the calculation of Final Closing Working Capital) owed by the Entities to any third party (other than a Governmental Authority) under a tax sharing or other contractual agreement with respect to Taxes of the Entity accruing on or before the Closing Date.

(b) Northern Border Indemnity for Taxes for Post-Closing Tax Periods. Notwithstanding any of the provisions of Section 9, from and after the Closing Date, without duplication of any amount otherwise payable by Northern Border pursuant to this Agreement, Northern Border shall indemnify ONEOK and its respective Affiliates against all Taxes imposed on or payable by Northern Border or the Entities relating to any Tax Period or portion thereof that begins after the Closing Date, including the portion of the Straddle Period beginning immediately after the Closing Date and including any Taxes accruing after the Closing Date.

(c) Payments. Payment by the indemnitor of any amount due under this Section 10.6 shall be made within 10 days following written notice by the indemnitee that payment of such amounts to the appropriate Tax Authority is due, such written notice to reasonably demonstrate that the indemnitee is entitled to such payment under the terms of this Agreement.

(d) Tax Refunds. If Northern Border or any of its Affiliates (including, for this purpose, the Entities after the Closing Date) receives a refund of Taxes of the Entities with respect to a Pre-Closing Taxable Period (including any interest thereon), or in lieu thereof a credit against Taxes, Northern Border shall pay (or cause the Entities to pay) to ONEOK the amount of such Tax refund or credit (net of any costs or expenses incurred by Northern Border or the Entities in obtaining the Tax refund or credit). Such payment shall be made promptly following the receipt of such Tax refund or credit by Northern Border or any of its Affiliates. In addition, if the payments made (or deemed made) by or on behalf of the Entities with respect to

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the Pre-Closing Taxable Period portion of the Straddle Period exceed the Taxes due with respect to such portion of the Straddle Period, Northern Border shall cause the Entities to pay to ONEOK such excess within 10 days following the filing of the relevant Tax Return with respect to such Straddle Period. ONEOK shall have the sole right, at its expense, to pursue any Tax refunds with respect to Tax periods ending on or before the Closing Date.

10.7 Contests.

(a) Notices. After the Closing Date, Northern Border and ONEOK each shall notify the other in writing within 5 business days of receipt of any notice of the commencement of any Tax audit or administrative or judicial proceeding relating to the Taxes of any of the Entities (“Tax Controversy”) in respect to Pre-Closing Taxable Periods or the Straddle Periods, the outcome of which may affect the Tax liabilities or indemnification obligations under this Agreement of the other party (“Tax Indemnitor”). Such notice shall include copies of any notice or other document received from any Tax Authority in respect of such audit or other proceeding. If either Northern Border or ONEOK fail to give the other party prompt notice as required under this Agreement, then (i) if the failure of a party to give such notice precludes the Tax Indemnitor from contesting an asserted Tax liability in any administrative or judicial forums, then the Tax Indemnitor shall not have any obligation to indemnify under this Agreement for any loss or damage arising out of such asserted Tax liability, and (ii) if the Tax Indemnitor is not so precluded from contesting an asserted Tax liability, but such failure to give prompt notice results in a detriment to the Tax Indemnitor, then any amount which the Tax Indemnitor is otherwise required to pay pursuant to this Agreement with respect to such liability shall be reduced by the amount of such detriment.

(b) Control of Contests. ONEOK shall control the defense and settlement of any Tax Controversy involving any asserted liability for Taxes imposed with respect to the Entities relating to Tax Periods that end on or before the Closing Date for which ONEOK is responsible pursuant to this Section 10. Northern Border shall control the defense and settlement of any Tax Controversy involving any asserted liability for Taxes imposed with respect to the Entities relating to Tax Periods that end after the Closing Date.

(c) Procedures. If the resolution of any Tax Controversy would be grounds for indemnification under this Agreement (including, for this purpose, as a result of altering the Tax Period in which items of income, gain, loss, deduction or credit are reported) by the party not in control of the conduct of such Tax Controversy (the “Non-Controlling Party”) or otherwise adversely affect the Tax liability of the Non-Controlling Party, (i) the party in control of such Tax Controversy (the “Controlling Party”) shall keep the Non-Controlling Party fully informed of any proceedings, events, and developments relating to or in connection with such Tax Controversy; (ii) the Non-Controlling Party shall be entitled to receive copies of all correspondence and documents relating to such Tax Controversy; (iii) the Controlling Party shall consult with the Non-Controlling Party and shall not enter into any settlement with respect to any such Tax Controversy without the Non-Controlling Party’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed; and (iv) at its own cost and expense, the Non-Controlling Party shall have the right to participate (but not control) the defense of such Tax Controversy; provided however, that clauses (i) through (iv) shall apply only in respect of

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the portion of such Tax Controversy, correspondence and documents that relate solely to the Entities.

10.8 Amended Tax Returns. ONEOK shall not, without the prior written consent of Northern Border (which consent shall not be unreasonably withheld, conditioned or delayed), file any amended Tax Return or claim for Tax refund filed or required to be filed hereunder to be filed by ONEOK to the extent such filing, if accepted, could be reasonably expected to have an adverse effect on the Tax liability of Northern Border, its Affiliates or any Entity or any of the Entities for any Tax Period after the Closing; provided that no such consent shall be required for any amended return or claim for Tax refund resulting from an audit adjustment.

10.9 Miscellaneous.

(a) Character of Payments. Any payment made by ONEOK, Northern Border, or any of their respective Subsidiaries (including the Entities) under this Section 10 shall constitute an adjustment to the consideration contributed for the Units for all tax purposes.

(b) Interest on Payments. To the extent any payment obligation under this Section 10 or Article 9 is not made on a timely basis (as determined by the relevant provision of this Section 10 or the relevant provision of Article 9), the amount due and payable shall bear interest at a floating annual rate equal to the annual prime lending rate of The Chase Manhattan Bank in effect, from time to time, from the last date such payment would be timely under the relevant provision of this Section 10 or Article 9, as applicable, to the date of the payment of such amount.

(c) Survival of Tax Claims. Notwithstanding any other provision of this Agreement to the contrary, any obligations of the parties pursuant to this Section 10 shall be unconditional and absolute and shall survive until the expiration of 6 months after the applicable statute of limitations (taking into account any applicable extensions or tollings thereof) relating to the Taxes at issue.

(d) Treatment of Contribution. The Parties intend that the contribution of the Shares and the receipt of the Units pursuant to this Agreement shall be tax free transactions governed by Section 721 of the Code. Each party agrees that it shall not take any position that is inconsistent with the foregoing in any filing made by such party with the IRS or any other taxing authority.

10.10 Allocation of Value among the Contributed Entities; Book Ups.

(a) Within one hundred twenty (120) days following the Closing Date, ONEOK will prepare, or cause to be prepared, and delivered to Northern Border a statement of the fair market value of the interests in each of the Entities acquired pursuant to this Agreement, with the aggregate of the Entity fair market values equaling the fair market value of the consideration provided in Section 1.2 of this Agreement. In addition, in the case of any Entities which are taxable as disregarded entities federal income tax, the statement shall also include a statement of the fair market value of the assets of each of such Entities (such statement, together with the Entity fair market schedule, the “FMV Schedules”). The FMV Schedules as so prepared by ONEOK shall be deemed accepted by Northern Border, unless Northern Border shall send

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ONEOK a written objection thereto within thirty (30) days following the Northern Border’s receipt thereof. In the event that Northern Border delivers a timely written objection as aforesaid and Northern Border and ONEOK are unable to resolve such objection within twenty (20) business days after Northern Border is notified of ONEOK’s objection, the matters in dispute shall be submitted for final and binding determination to the Neutral Auditors. The FMV Schedules as proposed by ONEOK, shall be adjusted to reflect the resolution of any timely objections made thereto by Northern Border in accordance with this Section 10.9 and the determinations of the Neutral Auditors, which determinations will be binding absent manifest error or fraud. Northern Border and ONEOK shall each pay their own expenses of preparing and analyzing the schedules and resolving objections thereto; provided that the cost of any appraisals required to prepare the FMV Schedule shall be borne 50 percent by Northern Border and 50 percent by ONEOK. The fees and expenses of the Neutral Auditors used to resolve objections to the schedules will be borne equally by Northern Border and ONEOK.

(b) ONEOK and Northern Border shall use the FMV Schedules as determined under this Section 10.9 to calculate built in gain or loss with respect to interests in the contributed Entities for purposes of Section 704(c) of the Code and the Treasury Regulations thereunder. Each party agrees that it shall not take any position that varies from or is inconsistent with such valuation in any filing made by such party with the IRS or any other taxing authority, except to the extent an adjustment is required by the IRS or any other taxing authority.

(c) In connection with the contribution hereunder and the contribution of the Shares by Northern Border to NBILP, Northern Border and NBILP shall adjust the carrying value of their assets to their respective fair market values in accordance with the provisions of Treasury Regulation 1.704-1(b)(2)(iv)(f). Such adjustments shall be supported by one or more appraisals reasonably satisfactory to ONEOK, a copy of which appraisals shall be provided to ONEOK. In the event of any dispute with respect to the values as so determined the matters in dispute shall be submitted for final and binding determination to the Neutral Auditors. Northern Border, NBILP and ONEOK shall each pay their own expenses of preparing and analyzing the schedules and resolving objections thereto; provided that the cost of the appraisals shall be borne solely by Northern Border and NBILP. The fees and expenses of the Neutral Auditors used to resolve objections to the schedules will be borne equally by Northern Border and ONEOK.

SECTION 11. MISCELLANEOUS

11.1 Fees and Expenses. Each of the parties will bear its own expenses in connection with the negotiation and the consummation of the transactions contemplated by this Agreement.

11.2 Governing Law. This Agreement shall be construed under and governed by the internal laws of the State of Delaware without regard to its conflict of laws provisions.

11.3 Notices. All notices and other communications between the Parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person or by overnight delivery service, (ii) 3 days after posting in the United States mail having been sent registered or certified mail return receipt requested, or (iii) upon receipt when delivered by

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facsimile transmission, in each case, to the addresses set forth below (or to such other address or addresses as the Parties may designate from time to time in writing):

TO ONEOK:

ONEOK, Inc.

100 W. 5^th Street, Suite 1800

Tulsa, OK 74103

Attention: President

Facsimile: (918) 588-7961

with copies to (which shall not constitute notice):

ONEOK, Inc.

100 W. 5^th Street, Suite 1800

Tulsa, OK 74103

Attention: General Counsel

Facsimile: (918) 588-7971

and to:

Gable & Gotwals

100 W. 5^th Street, Suite 1100

Tulsa, OK 74103-4217

Attention: Stephen W. Lake

Facsimile: (918) 595-4990

TO THE NORTHERN BORDER PARTNERSHIPS:

Northern Border Partners, L.P.

13710 FNB Parkway

Omaha, NE 68154-5200

Attention: Chief Executive Officer

Facsimile: (402) 490-7482

with copies to (which shall not constitute notice):

Northern Border Partners, L.P.

13710 FNB Parkway

Omaha, NE 68154-5200

Attention: Janet Place

Facsimile: (402) 492-7480

Locke Liddell & Sapp LLP

600 Travis, 3400 JPMorgan Chase Tower

Houston, TX 77002

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Attention: Michael T. Peters

Facsimile: (713) 223-3717

and with a copy to (prior to the Closing):

Baker Botts L.L.P.

910 Louisiana

Houston, Texas 77002-4995

Attention: R. Joel Swanson

Facsimile: (713) 229-1522

Any notice given hereunder may be given on behalf of any party by his counsel or other authorized representatives.

11.4 Entire Agreement. This Agreement together with the Related Agreements, including the Schedules and Exhibits referred to herein and therein and the other writings specifically identified herein and therein (including the Confidentiality Agreement) or contemplated hereby, is complete, reflects the entire agreement of the Parties with respect to its subject matter, and supersedes all previous written or oral negotiations, commitments and writings. No promises, representations, understandings, warranties and agreements have been made by any of the Parties hereto except as referred to herein or therein or in such Schedules and Exhibits or in such other writings and all inducements to the making of this Agreement relied upon by any of the Parties hereto have been expressed herein or in such Schedules or Exhibits or in such other writings.

11.5 Assignability; Binding Effect. This Agreement may not be assigned by any Party without the prior written consent of the other parties to this Agreement. This Agreement shall be binding upon and enforceable by, and shall inure to the benefit of, the Parties hereto and their respective successors and permitted assigns.

11.6 Captions and Gender. The captions in this Agreement are for convenience only and shall not affect the construction or interpretation of any term or provision hereof. The use in this Agreement of the masculine pronoun in reference to a Party hereto shall be deemed to include the feminine or neuter, as the context may require.

11.7 Execution in Counterparts. For the convenience of the Parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

11.8 Amendments. This Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by Northern Border, NBILP and ONEOK, or in the case of a waiver, the Party waiving compliance.

11.9 Publicity and Disclosures. No press releases or public disclosure, either written or oral, of the transactions contemplated by this Agreement shall be made by a Party to this Agreement without the written consent of ONEOK, Northern Border and NBILP.

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11.10 Severability. The Parties agree that, in the event that any provision of this Agreement or the application of any such provision to any Party is held by a court of competent jurisdiction to be contrary to law, the provision in question shall be construed so as to be lawful and the remaining provisions of this Agreement shall remain in full force and effect.

11.11 Waiver of Jury Trial. Each of the parties hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury with respect to any Legal Proceeding directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement.

11.12 Arbitration. All disputes arising out of or in connection with this Agreement and the transactions contemplated hereby and thereby, which cannot be resolved through the procedures described herein or therein shall be finally resolved solely and exclusively by means of arbitration under the then-current rules for non-administered arbitration of the International Institute for Conflict Prevention and Resolution (“CPR Rules”) to be conducted in English in the City of Tulsa. The arbitration shall be conducted by a panel of three (3) arbitrators appointed by agreement of the Parties, or failing such agreement, under the CPR Rules, provided that any arbitrator selected shall be a retired federal judge of a court within the jurisdiction of the United States. The arbitration will proceed in accordance with the CPR Rules. The decision of the arbitrators shall be final, conclusive, and binding upon the Parties, and a judgment upon the award may be obtained and entered in any federal or state court of competent jurisdiction. The Parties agree that any arbitration shall be kept confidential and any element of such arbitration (including but not limited to any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the arbitral tribunal, the Parties, their counsel and any persons necessary to conduct the arbitration, except as may be required in recognition and enforcement proceedings, if any, or in order to satisfy disclosure obligations imposed by any applicable law. The Parties agree to cooperate in providing each other with all discovery, including but not limited to the exchange of documents and depositions of Parties and non-Parties, reasonably related to the issues in the arbitration. If the Parties are unable to agree on any matter relating to such discovery, any such difference shall be determined by the arbitrators. The award of the arbitrators shall be final and binding upon the Parties, and shall not be subject to any appeal or review. The Parties agree that such award may be recognized and enforced in any court of competent jurisdiction. The Parties also agree to submit to the non-exclusive personal jurisdiction of the federal and state courts sitting in Oklahoma, for the limited purpose of enforcing this arbitration agreement (including, where appropriate, issuing injunctive relief) or any award resulting from arbitration pursuant to this Section 11.12. The Parties agree that except in the case of fraud the arbitration proceeding described in this Section 11.12 is the sole and exclusive manner in which the Parties may resolve disputes arising out of or in connection with this Agreement. The arbitrators have the discretion to grant the prevailing Party in any arbitration attorneys’ fees and costs and make the non-prevailing Party responsible for all expenses of the arbitration.

11.13 Time of the Essence. Time is of the essence with respect to the performance of the obligations set forth in this Agreement.

11.14 Remedies Cumulative; Specific Performance. The rights and remedies of the Parties hereto shall be cumulative and not alternative. The Parties hereto agree that, in the

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event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement for the benefit of any other Party to this Agreement, such other Party shall be entitled (in addition to any other remedy that may be available to it and without the requirement of the posting of a bond) to (a) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision and (b) an injunction restraining such breach or threatened breach.

11.15 Further Assurances. From and after the date of this Agreement, upon the request of any Party, the other Parties shall execute and deliver such instruments, documents or other writings as may be reasonably necessary to carry out and effectuate fully the intent and purposes of this Agreement.

11.16 Third Party Beneficiaries. Nothing herein expressed or implied is intended to or shall be construed to confer upon or give any Person, other than the Parties hereto and their respective successors, permitted assigns and Affiliates (including, without limitation, the Northern Border Indemnitees and the ONEOK Indemnitees), any rights or remedies under or by reason of this Agreement.

11.17 Audit Committee Authority. At or prior to the Closing, (a) any action, notice, consent, approval or waiver that is required to be taken or given or may be taken or given by Northern Border pursuant to Section 1.5 (Working Capital Adjustment), Section 4.1 (Conduct of the Entities), Section 6.4 (Public Announcements), Section 7.2 (Conditions to the Obligations of the NBP Partnerships), and Section 8.1 (Termination), and (b) any amendment of this Agreement or of any other Northern Border Transaction Agreement shall be made, taken or given by Northern Border, as the case may be, only with the concurrence, or at the direction, of the Audit Committee of Northern Border.

11.18 Certain Definitions. For purposes of this Agreement, the term:

“Acquired Entities” means, collectively, the Entities and the “Entities” as defined in the Northern Border Purchase Agreement.

“Affiliates” means, with respect to the Person to which it refers, a Person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such subject Person. Notwithstanding the other provisions of this definition and except as otherwise expressly provided in this Agreement, ONEOK’s Affiliates shall be deemed to exclude Northern Border and its Subsidiaries and Northern Border’s Affiliates shall be deemed to exclude ONEOK and its Subsidiaries (including the Entities).

“Black Mesa Companies” means Black Mesa Pipeline Operations, L.L.C., Black Mesa Holdings, Inc. and Black Mesa Pipeline, Inc.

“Business Facility” includes any pipeline or pipeline easement or right-of-way, compressor station, hub, delivery point, receipt point, interconnection, gas storage facility, gas processing facility, fractionator, storage field, well or other real or personal property that any Entity or any of its respective organizational predecessors currently owns, leases, manages or operates in any manner or formerly owned, leased, managed or operated in any manner, including, without limitation, the Operating Assets.

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“CERCLA” shall have the meaning ascribed to it in the definition of Environmental Laws.

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

“Contract” means any written or oral note, instrument, bond, mortgage, indenture, lease, sublease, contract, subcontract, warranty, agreement, obligation, understanding, commitment or legally binding commitment or undertaking of any nature.

“Consolidated Return” means a consolidated United States Income Tax Return (within the meaning of Section 1501 of the Code and the Treasury Regulations promulgated pursuant to Section 1502 of the Code) and any other combined, joint, consolidated or unitary Tax Return required to be filed with any Tax Authority that includes both (i) any Entity and (ii) ONEOK or any subsidiary of ONEOK that is not an Entity.

“Contribution Companies” means each of the Companies, other than the Intermediate Contribution Companies.

“Converting Companies” means each of ONEOK Bushton Processing, Inc., ONEOK Sayre Storage Company, OkTex Pipeline Company, ONEOK Field Services Company and Mid Continent Market Center, Inc.

“Copyrights” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Damages” means any loss, damage, injury, decline in value, lost opportunity, liability (INCLUDING STRICT LIABILITY), claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees), charge, cost or expense of any nature (including costs and expenses of litigation, administrative proceedings and investigations), whether arising in tort, contract or otherwise, but excluding any punitive damages except to the extent such punitive damages are awarded against any Indemnitees in a third-party Claim; provided, however, notwithstanding any other provision of this Agreement to the contrary, to avoid double counting as to any matter, “Damages” shall not include any Liability to the extent that such Liability (or a reserve therefor (to the extent of such reserve)) is fully reflected as a current liability in the calculation of Final Closing Working Capital.

“Drop-Down Contracts” means all Contracts (other than Shared Contracts, intercompany loan or credit agreements that shall be terminated prior to or at the Closing, confidentiality agreements, benefit plans and employment or secondment agreements), to which an Entity is not a party and to which ONEOK or any Affiliate of ONEOK (other than an Entity) is a party and which solely benefits one or more of the Entities.

“Eligible Person” means a Person treated as a “domestic eligible entity” under section 301.7701-3(a) of the Treasury regulations promulgated under the Code.

“Employee Benefit Plan” means (i) each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, including any multiemployer plan (as defined in Section 3(40) of ERISA), (ii) each plan that would be an employee benefit plan if it was subject to ERISA, such

53

as plans for directors, (iii) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock or other stock plan (whether qualified or nonqualified), and (iv) each bonus, deferred compensation or incentive compensation plan; provided, however, that such term shall not include (a) routine employment policies and procedures developed and applied in the ordinary course of business and consistent with past practice, including wage, vacation, holiday, and sick or other leave policies, (b) workers compensation insurance, and (c) directors and officers liability insurance.

“Environmental Laws” means, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. §§ 9601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., and the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq., and all rules and regulations promulgated pursuant to any of the above statutes, and any federal, state, local, municipal, foreign or other law, statute, constitution, common law, resolution, ordinance, code, edict, decree, order, rule, regulation, permit condition, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority, in each case relating to Environmental Matters.

“Environmental Matters” means any matters arising out of or relating to health and safety, or pollution or protection of the environment or workplace, including, without limitation, the ambient and indoor air, surface and ground waters, land and soils, buildings, and indoor workplaces, and any of the foregoing relating to the use, generation, transport, treatment, storage, or disposal of any Hazardous Materials.

“Environmental Permit” means all Permits required to comply with any applicable Environmental Law.

“Entity Guarantees” means all guaranties, letters of credit, bonds, sureties and other credit support or assurances provided by ONEOK or its Affiliates (other than the Entities) in support of any obligations of the Entities.

“Equity Interests” means the capital stock, limited liability company membership interest, partnership interest or similar ownership interests of any Person.

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

“ERISA Affiliate” means, with respect to any Person, any other Person that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first Person, or that is a member of the same “controlled group” as the first Person pursuant to Section 4001(a)(14) of ERISA.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

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“GAAP” means United States generally accepted accounting principles and practices as in effect from time to time and applied consistently throughout the periods involved.

“Governmental Authority” means any foreign or domestic federal, state, local, municipal, or other government or governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); or any body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, or regulatory or power of any nature, in each case having jurisdiction over ONEOK, the Entities, the Business or Northern Border.

“Governmental Order” means any order, ruling, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Hazardous Material” means any substance, material or waste that is regulated by any Environmental Law as hazardous, toxic, a pollutant, contaminant, solid waste or words of similar import, including, without limitation, petroleum, petroleum derivatives and by-products, asbestos, urea formaldehyde and polychlorinated biphenyls.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indebtedness” means all outstanding obligations for borrowed money, including (i) indebtedness evidenced by notes, bonds, debentures or other instruments (and including all outstanding principal, prepayment premiums, if any, and accrued interest, fees and expenses related thereto), (ii) any outstanding obligations under capital leases and purchase money obligations, (iii) any amounts owed with respect to drawn letters of credit and (iv) any outstanding guarantees of obligations of the type described in clauses (i) through (iii) above (and, for the avoidance of doubt, excludes accounts payable).

“Indemnity Cap” means the ONEOK Indemnity Cap or the Northern Border Indemnity Cap, as applicable.

“Intellectual Property Assets” means: (A) patents, patent applications, inventions, discoveries, and invention disclosures (whether or not patented) (collectively, “Patents”); (B) trade names, trade dress, logos, slogans, internet domain names, registered and unregistered trademarks and service marks and related registrations, applications for registration and renewals therefor (collectively, “Trademarks”); (C) copyrights in both published and unpublished works and all copyright registrations, applications and renewals therefor, and all derivatives, translations, adaptations and combinations of the above (collectively, “Copyrights”); (D) know-how, trade secrets, confidential or proprietary information, data, processes and strategies, (collectively, “Trade Secrets”); (E) other intellectual property rights and/or proprietary rights relating to any of the foregoing; (F) Software; and (G) goodwill, licenses, permits, consents, approvals, and claims of infringement against third parties.

“Intercompany Accounts” shall mean all balances related to receivables, payables or other accounts between ONEOK and its Subsidiaries (other than the Entities) on the one hand, and the Entities, on the other hand (but excluding all Indebtedness).

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“IRS” means the Internal Revenue Service.

“Intermediate Contribution Companies” means each of ONEOK Sayre Storage Company, OkTex Pipeline Company and ONEOK Gas Gathering, L.L.C.

“Knowledge of the NBP Partnerships” or similar words or phrases means the actual knowledge of Bill Cordes, Chris Skoog, Jerry Peters, Mike Nelson, Pierce Norton and Fred Rimington.

“Knowledge of ONEOK” or similar words or phrases means the actual knowledge of John Gibson, Pierce Norton, Sam McVay, Pete Walker, Terry Spencer, Steve Guy, Jim Haught and Curtis Dinan.

“Legal Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigate or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or Governmental Authority or any arbitrator or arbitration panel.

“Legal Requirement” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, order, judgment or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority, including, without limitation, Tax Laws.

“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including, without limitation, those arising under any Legal Requirement and those arising under any contract, agreement, arrangement, commitment or undertaking.

“Lien” means any claim, restriction on voting, transfer or pledge, hypothecation, option, right of first refusal, easement, preemptive right, community property interest, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, security interest or other restriction of any kind, whether imposed by Legal Requirement, agreement, understanding or otherwise.

“Material Adverse Effect” means with respect to the Entities any event, change or effect that individually or in the aggregate has or would reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), business, assets, liabilities, or results of operations of the Entities, taken as a whole; excluding any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which the Entities operate; (ii) national or international political conditions, including terrorism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP which are not specific to the Entities; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental Authority generally affecting one or more industries in which the Entities operate; (vi) the public announcement, pendency or completion of the transactions contemplated by this Agreement; or (vii) seasonal reductions in revenues and/or

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earnings of the entities in the ordinary course of business. References in this Agreement to dollar amount thresholds shall not be deemed to be a measure of a Material Adverse Effect or materiality.

“NBILP GP Shares” means all of the outstanding Equity Interests in the Intermediate Contribution Companies.

“NBP General Partners” means Northern Plains, Pan Border and Northwest Border.

“NBP GP Shares” means an undivided 1% interest in the Shares of the Contribution Companies.

“NBP Shares” means an undivided 99% interest in the Shares of the Contribution Companies.

“Net Working Capital” means, at any date, the difference between the consolidated current assets of the Entities and the consolidated current liabilities of the Entities, in each case determined in accordance with GAAP applied consistently in the manner applied in the Financial Statements, except as otherwise provided in the calculation of Target Working Capital as set forth in Exhibit D, and except as otherwise provided in Schedule 1.5, (but for the purposes of preparing the Closing Working Capital Statement only, without regard to any income Tax assets or liabilities).

“Northern Border Indemnitees” means the NBP Partnerships and their respective Affiliates (including, without limitation, the Entities) and their respective Representatives.

“Northern Border Material Adverse Effect” means with respect to the NBP Partnerships any event, change or effect that individually or in the aggregate has or would reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), business, assets, liabilities, or results of operations of the NBP Partnerships, taken as a whole; excluding any adverse change, event or effect arising from: (i) conditions generally affecting the United States economy or generally affecting one or more industries in which the NBP Partnerships operate; (ii) national or international political conditions, including terrorism or the engagement by the United States in hostilities or acts of war; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP which are not specific to Northern Border; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental Authority generally affecting one or more industries in which the NBP Partnerships operate; (vi) the public announcement, pendency or completion of the transactions contemplated by this Agreement or (vii) seasonal reductions in revenues and/or earnings of Northern Border in the ordinary course of business. References in this Agreement to dollar amount thresholds shall not be deemed to be a measure of a Northern Border Material Adverse Effect or materiality.

“Northern Border Transaction” means the transactions provided for under the terms of the Northern Border Transaction Agreements when viewed on a collective basis.

“Northern Border Transaction Agreements” means this Agreement, the Northern Border Purchase Agreement, the TransCanada Agreement, the Amendment and each agreement,

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instrument, certificate or similar document executed and delivered by Northern Border pursuant to the terms of this Agreement, the Northern Border Purchase Agreement, the TransCanada Agreement and the Amendment.

“Northwest Border” means Northwest Border Pipeline Company.

“ONEOK Indemnitees” means ONEOK, ONEOK’s Affiliates and their respective Representatives.

“Patents” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Permit” means any license, franchise, permit, consent, permission, concession, order, approval, authorization, qualification or registration from, of or with a Governmental Authority.

“Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure Legal Proceeding shall have been commenced: (a) Liens for Taxes, assessments and governmental charges or levies arising in the ordinary course of business and not yet delinquent or Liens that are solely financial in nature and are accounted for as current liabilities in the determination of the Net Working Capital Adjustment; (b) Liens imposed by any applicable Legal Requirement, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established to the extent they exceed $500,000; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business consistent with past practice; (e) all matters of record, including, without limitation, survey exceptions, reciprocal easement agreements and other encumbrances on title to real property, and all special exceptions included in title insurance policies or title opinions issued to any Entity, in each case that could not result in future denial of possession and do not unreasonably interfere with the use of the properties in the Business; (f) all applicable zoning, entitlement, conservation restrictions and other land use and environmental regulations that do not unreasonably interfere with the use of the properties in the Business; (g) all exceptions, restrictions, easements, charges, rights-of-way and other Liens set forth in any Permits or other state, local or municipal franchise applicable to any Entity or any of their respective properties that do not unreasonably interfere with the use of the properties in the Business; (h) any encumbrances, restrictions, defects in title or other similar Liens that could not result in future denial of possession and do not unreasonably interfere with the use of the properties in the Business; (i) the rights of licensors and licensees under licenses executed in the ordinary course of business that do not unreasonably interfere with the use of the properties in the Business; and (j) Liens created by Northern Border or its successors and assigns.

“Person” means any individual, partnership, corporation, limited liability company, trust, other entity or Governmental Authority.

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“Related Agreements” means any agreement, instrument, certificate or similar document executed and delivered pursuant to this Agreement (including, without limitation, the Other Transaction Agreements and the Amendment).

“Representative” means with respect to a Person, such Person’s officers, directors, managers, partners, employees, agents, attorneys, accountants, advisors and representatives. With respect to Northern Border, “Representative” shall include the Chairman of its Audit Committee.

“Securities Act” means the Securities and Exchange Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“SEC” means the Securities and Exchange Commission.

“SEC Documents” means all reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated therein) filed by the applicable Party with the SEC under the Securities Act or the Exchange Act.

“Shared Contract” means any Contract (other than Drop-Down Contracts, Intercompany Accounts, confidentiality agreements, Employee Benefit Plans, and employment or secondment agreements), to which an Entity is not a party and to which ONEOK or any Affiliate of ONEOK (other than an Entity) is a party and which directly benefits both (i) an Entity, and (ii) ONEOK or any Affiliate of ONEOK (other than an Entity).

“Software” means any and all of the following, other than “shrink wrap” licenses, that are primarily used by any of the Entities: (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (iv) documentation, including user manuals and other training documentation, related to any of the foregoing.

“Subsidiary” means with respect to any Person, the corporations, partnerships, limited liability companies, joint ventures, associations and other entities controlled by such Person directly or indirectly through one or more intermediaries.

“Target Working Capital” means the amount shown as the Target Working Capital on Exhibit D.

“Tax” or “Taxes” means all taxes, charges, levies, fees, or other assessments imposed by any federal, state, local or foreign Tax Authority, including, but not limited to, any income, gross income, gross receipts, profits, capital stock, franchise, business, withholding payroll, social security, workers’ compensation, unemployment, disability, property, ad valorem, stamp, excise, occupation, service, sales, use, license, lease, transfer, import, export, value added, goods and services, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

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“Tax Authority” means, with respect to any Tax, the Governmental Authority that imposes such Tax and the agency (if any) charged with the collection or administration of such Tax for such entity.

“Tax Benefits” means any refund of Taxes, reduction in liability for Taxes, or credit against Taxes.

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

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

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes or any other similar report, statement, declaration, or document required to be filed under applicable Tax Law, including any attachments, exhibits or other materials submitted with any of the foregoing and including any amendments or supplements to any of the foregoing.

“Trademarks” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Trade Secrets” shall have the meaning ascribed to it in the definition of Intellectual Property Assets.

“Transfer Taxes” means all sales, use, transfer, stock transfer, real property transfer, documentary, gains, stamp recording and similar Taxes and fees (including any penalties, interest or additions) incurred in connection with the transactions contemplated by this Agreement.

11.19 Other Defined Terms. For the purpose of this Agreement, the following terms shall have the meanings given in the indicated Sections of this Agreement:

INDEX

Term	Section
1935 Act	2.18
Aggregate Northern Border Damages	9.3(a)
Aggregate ONEOK Damages	9.3(a)
Agreement	Preamble
Amendment	1.2
Audits	2.6(e)
Balance Sheet	2.5(a)
Balance Sheet Date	2.5(a)
Books and Records	5.2(b)(i)
Business	Recitals
Claim	9.7(a)
Closing	1.3(a)

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Closing Date	1.3(a)
Closing Working Capital	1.5(a)
Closing Working Capital Statement	1.5(a)
Common Units	1.2
Companies	Recitals
Company	Recitals
Company Subsidiary	2.2
Contributing NBP General Partners	1.1
Controlling Party	10.7(c)
Conversion Transactions	6.11
Conversion Units	1.2
CPR Rules	11.12
Entities	2.2
Entity	2.2
Entity Intellectual Property Assets	2.9
FERC	6.1(a)
Final Closing Working Capital	1.5(c)
Financial Statements	2.5(a)
FMV Schedules	10.10(a)
Governmental Approvals	6.3(a)
GP Purchase Agreement	7.1(h)
Indemnitee	9.7(a)
Indemnitor	9.7(a)
Indemnity Threshold	9.3(a)
Interim Financial Statements	6.12
KCC Consent	7.1(g)
License Period	6.9
Material Contracts	2.10(a)
Minimum Claim Amount	9.3(a)
NBILP	Preamble
NBILP Partnership Agreement	1.4
NBP Partnerships	Preamble
NBP Partnerships Disclosure Schedules	3
Net Working Capital Adjustment	1.5(d)(ii)
Neutral Auditors	1.5(c)
NGA	2.18
Non-Controlling Party	10.7(c)
Northern Border	Preamble
Northern Border Credit Agreement Amendments	7.2(j)
Northern Border Credit Agreements	7.2(j)
Northern Border Indemnity Cap	9.3(b)
Northern Border Partnership Agreement	1.2
Northern Border Purchase Agreement	7.1(h)
Northern Border Returns	10.4(b)
Northern Border SEC Documents	3.9(a)
Northern Plains	1.1

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OBPI	7.1(k)
OCC Consent	7.1(g)
ONEOK	Preamble
ONEOK Disclosure Schedules	2
ONEOK Guaranty Agreement	1.3(b)(ii)
ONEOK Indemnity Cap	9.3(b)
ONEOK Marks	6.9
Operating Assets	2.19(a)
Other Transaction Agreements	7.1(h)
Pan Border	1.1
Parties	Preamble
Party	Preamble
Part-Year Fraction	10.5(a)
Pre-Closing Period	4.1
Pre-Closing Taxable Period	10.6(a)
Related Party	2.14
Resolution Period	1.5(b)
Services Agreement	1.3(b)(ii)
Shares	Recitals
Straddle Periods	10.4(b)
Tax Controversy	10.7(a)
Tax Indemnitor	10.7(a)
Tax Records	10.1
TransCanada Agreement	7.1(h)
Units	1.2
Viking Indenture	7.2(l)

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the date set forth above by their duly authorized representatives.

ONEOK, INC.
By:	/s/ David L. Kyle
Name:	David L. Kyle
Title:	Chairman of the Board, President and Chief Executive Officer

NORTHERN BORDER PARTNERS, L.P.
By:	/s/ William R. Cordes
Name:	William R. Cordes
Title:	Chief Executive Officer

NORTHERN BORDER INTERMEDIATE LIMITED PARTNERSHIP
By:	/s/ William R. Cordes
Name:	William R. Cordes
Title:	Chief Executive Officer

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Schedule 1.3(b)(vii)

Form of Opinions to be Delivered by Counsel

for ONEOK

Unless otherwise defined herein, all capitalized terms defined in the Contribution Agreement shall have the same meanings when used herein.

1. ONEOK is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma.

2. ONEOK has all requisite corporate right, authority and power to execute, deliver and perform its obligations under the Contribution Agreement and each Related Agreement.

3. The execution, delivery and performance by ONEOK of the Contribution Agreement and each Related Agreement have been duly authorized by all necessary corporate action of ONEOK, and no other corporate action on the part of ONEOK is required in connection therewith.

4. ONEOK has duly executed and delivered the Contribution Agreement and each Related Agreement.

5. The Contribution Agreement and each Related Agreement executed and delivered by ONEOK pursuant to the Contribution Agreement constitutes valid and binding obligations of ONEOK enforceable against ONEOK in accordance with their respective terms.

6. The execution, delivery and performance by ONEOK of the Contribution Agreement and each Related Agreement executed and delivered by ONEOK, with or without the giving of notice or the passage of time, or both, (i) do not and will not conflict with or violate any provision of the certificate of incorporation or bylaws of ONEOK, (ii) do not and will not conflict with or violate any law, or regulation of any Governmental Authority, of the United States of America or the laws of the State of Oklahoma applicable to ONEOK, and (iii) do not and will not require under the federal laws of the United States of America or the laws of the State of Oklahoma, any filing or registration by ONEOK with, or approval or consent to ONEOK of, any Governmental Authority of the United States of America or the State of Delaware that has not been made or obtained, except for such violations or failures to obtain such approval, consent or waiver that would not, individually or in the aggregate, have a material adverse effect on the ability of ONEOK to perform its obligations under the Contribution Agreement and each Related Agreement and consummate the transactions contemplated thereby on the Closing Date.

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Schedule 1.3(c)(v)

Form of Opinions to be Delivered by Counsel

for the NBP Partnerships

Unless otherwise defined herein, all capitalized terms defined in the Contribution Agreement shall have the same meanings when used herein.

1. The NBP Partnerships are limited partnerships duly organized, validly existing and in good standing under the laws of the State of Delaware.

2. The NBP Partnerships have all requisite partnership right, authority and power to execute, deliver and perform their obligations under the Contribution Agreement and each Related Agreement.

3. The execution, delivery and performance by the NBP Partnerships of the Contribution Agreement and each Related Agreement have been duly authorized by all necessary partnership action of the NBP Partnerships, and no other partnership action on the part of the NBP Partnerships is required in connection therewith.

4. The NBP Partnerships have duly executed and delivered the Contribution Agreement and each Related Agreement.

5. The Contribution Agreement and each Related Agreement executed and delivered by the NBP Partnerships pursuant to the Contribution Agreement constitutes valid and binding obligations of the NBP Partnerships enforceable against the NBP Partnerships in accordance with their respective terms.

6. The execution, delivery and performance by the NBP Partnerships of the Contribution Agreement and each Related Agreement executed and delivered by Northern Border, with or without the giving of notice or the passage of time, or both, and the issuance of the Units or the Conversion Units, as applicable, (i) do not and will not conflict with or violate any provision of the organizational documents of the NBP Partnerships, (ii) do not and will not conflict with or violate any law, or regulation of any Governmental Authority, of the United States of America or the laws of the State of Delaware applicable to the NBP Partnerships, (iii) do not and will not require under the federal laws of the United States of America or the laws of the State of Delaware, any filing or registration by the NBP Partnerships with, or approval or consent to the NBP Partnerships of, any Governmental Authority of the United States of America or the State of Delaware that has not been made or obtained, except for such violations or failures to obtain such approval, consent or waiver that would not, individually or in the aggregate, have a material adverse effect on the ability of the NBP Partnerships to perform their obligations under the Contribution Agreement and each Related Agreement and consummate the transactions contemplated thereby on the Closing Date, and (iv) do not require the consent or approval of the holders of Common Units.

7. Assuming that ONEOK acquires “control” (within the meaning of subsections (a) and (b) of Section 8-106 of the Uniform Commercial Code of the State of Delaware) [of the certificate or certificates representing the Units delivered to ONEOK at Closing] without notice of any adverse claim (within the meaning of Section 8-105 of the Uniform Commercial Code of the State of Delaware), upon delivery of the certificate or certificates representing the Units to ONEOK, ONEOK will acquire its rights to the Units, free of adverse claims.

Assuming that ONEOK acquires “control” (within the meaning of subsections (a) and (b) of Section 8-106 of the Uniform Commercial Code of the State of Delaware) [of the certificate or certificates representing the Conversion Units delivered to ONEOK upon conversion of the Units in accordance with the terms of the Northern Border Partnership Agreement] without notice of any adverse claim (within the meaning of Section 8-105 of the Uniform Commercial Code of the State of Delaware), upon conversion of the Units in accordance with the terms of the Northern Border Partnership Agreement and delivery of the certificate or certificates representing the Conversion Units to ONEOK registered in the name of ONEOK, ONEOK will acquire its rights to the Conversion Units, free of adverse claim.

EX-10.33

Exhibit 10.33

SERVICES AGREEMENT

This Services Agreement (“Agreement”) is made and entered into as of the [    ]^th day of [            ], 2006 (the “Effective Date”) by and among ONEOK, Inc., an Oklahoma corporation (“ONEOK”), Northern Plains Natural Gas Company, LLC, a Delaware limited liability company (“Northern Plains”), NBP Services, LLC, a Delaware limited liability company (“NBP Services”), Northern Border Partners, L.P., a Delaware limited partnership (the “MLP”), and Northern Border Intermediate Limited Partnership (the “ILP”), a Delaware limited partnership. Each party is referred to herein individually as a “Party,” and collectively as the “Parties.” Capitalized terms used herein and not otherwise defined shall have the meanings given to them in Section 10.1.

W I T N E S S E T H:

WHEREAS, the MLP and ILP previously contracted for NBP Services to provide certain services to the MLP and the ILP in connection with the day-to-day business and affairs of the MLP and ILP pursuant to the Administrative Services Agreement;

WHEREAS, the Parties desire for the Administrative Services Agreement to be terminated, superseded and replaced by this Agreement and to have the services previously provided under that Administrative Services Agreement be provided under this Agreement;

WHEREAS, Northern Plains, pursuant to certain Operating Agreements, is the operator of certain interstate natural gas pipelines in which the MLP and the ILP have an ownership interest;

WHEREAS, the Operating Agreements each provide that Northern Plains may delegate or cause one or more of its affiliates to fulfill its obligations under the Operating Agreements;

WHEREAS, certain affiliates of ONEOK own all of the outstanding general partner interests of each of the MLP and ILP and own a substantial percentage of the outstanding equity interests in the MLP;

WHEREAS, the Parties have determined that the operations of ONEOK and its affiliates and the Northern Border Companies can operate more efficiently and cost effectively if certain common services are combined and shared;

WHEREAS, certain ONEOK Affiliates and Northern Border Companies are regulated by various governmental entities that require a fair and reasonable method of allocation for costs incurred for such common services; and

WHEREAS, ONEOK (an affiliate of NBP Services and Northern Plains) desires to provide or cause the provision of certain services to the Northern Border Companies, and the Northern Border Companies desire to receive these services, in accordance with the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the premises and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are

hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

SERVICES TO BE PROVIDED

1.1 Services. On the terms and conditions set forth in this Agreement, ONEOK will provide or cause to be provided to the Northern Border Companies at least the type and amount of services that it provides or causes to be provided to ONEOK Affiliates, including but not limited to, executive officers, legal services, human resources and employee benefits, information technology, insurance and risk management, purchasing, inventory control, gas supply services, marketing, pipeline control, right of way management, general operations and maintenance, measurement, engineering, accounting, contract administration, SEC reporting, day-to-day supervisory and administrative services, planning support, budgeting support, technical, treasury services, tax and internal audit services, external audit services and other services required to be provided pursuant to the partnership agreements of the MLP and ILP, as amended from time to time, and various other services routinely and customarily provided to the ONEOK Affiliates (the “Services”). Each Northern Border Company or permitted successor or assign that receives Services shall be referred to as a “Purchaser” and collectively as the “Purchasers”. ONEOK and the ONEOK Affiliates that provide Services under this Agreement, including Northern Plains and NBP Services, shall be collectively referred to as the “Provider.”

1.2 Operating Agreement Services. The Parties acknowledge and agree that Northern Plains will continue to perform its obligations under each of the Operating Agreements. To the extent Northern Plains requests Services from ONEOK under this Agreement in order to perform those obligations, ONEOK shall provide such Services, and Northern Plains shall pay for such Services, under the terms and conditions set forth in this Agreement. To the extent Northern Plains receives Services under this Agreement, it will be deemed a “Purchaser” with respect to such Services.

1.3 Additional Services. Any additional services requested by any Purchaser will be provided on the basis agreed upon by the Parties in writing. Unless the context otherwise requires, the term “Services” in this Agreement shall include any such additional services agreed upon in writing by the Parties.

1.4 Costs. The costs for the Services provided under this Agreement will be allocated and billed monthly to the Purchasers in a manner consistent with the method of allocation of such costs among other ONEOK Affiliates and consistent with applicable law, including the requirements of the Federal Energy Regulatory Commission (“FERC”). Direct costs will be allocated to the Purchasers having activities that give rise to such costs to the extent that such direct basis can reasonably be determined and allocated. The remaining unallocated direct costs and all indirect costs will then be allocated on the basis of a three-factor formula (the “Distrigas Method”), consistent with methods approved by the FERC. The Distrigas Method provides for the allocation of common costs based on the average of the percentage of “gross plant and investment”, “operating income” and “labor expense,” as such terms are defined in FERC regulations of each company involved in the calculation. The Provider will determine an average of those three factors for each Purchaser and for ONEOK and each ONEOK Affiliate

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that is involved in the calculation. That average will be the allocation ratio for each such entity (the “Distrigas Allocation Ratio”). The Distrigas Allocation Ratio for each such entity will then be applied to the total amount of common costs to determine the amount of common costs that will be allocated to each such entity. The Distrigas Allocation Ratio will be recalculated annually, or as required due to acquisitions, divestitures or other similar types of transactions or regulatory requirements. For the avoidance of doubt, the costs allocated through the Distrigas Method are based on actual costs recognized under U.S. generally accepted accounting principles and do not include a mark-up or other element of profit. The Provider is not entitled to and will not receive any other fee or other compensation for the performance of the Services other than as set forth in this Section 1.4.

ARTICLE II

SERVICE STANDARD

2.1 Standard of Care; Limited Warranty.

(a) The Provider represents that it will discharge its duties hereunder in good faith and with reasonable diligence and on a basis consistent with the standards of service provided to ONEOK Affiliates. EXCEPT AS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE, THE PROVIDER MAKES NO (AND HEREBY DISCLAIMS AND NEGATES ANY AND ALL) WARRANTIES OR REPRESENTATIONS WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES. IN NO EVENT SHALL THE PROVIDER BE LIABLE TO THE NORTHERN BORDER COMPANIES OR ANY OTHER PERSON FOR ANY INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES RESULTING FROM ANY ERROR IN THE PERFORMANCE OF THE SERVICES, REGARDLESS OF WHETHER THE PROVIDER OR OTHERS MAY BE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT; PROVIDED HOWEVER, THAT THE PROVIDER SHALL BE LIABLE FOR ANY DAMAGES ARISING OUT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE PRECEDING IS THE ONLY WARRANTY CONCERNING THE SERVICES AND ANY RESULTS, WORK PRODUCT OR PRODUCTS RELATED THERETO, AND IS MADE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND REPRESENTATIONS EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR NONINFRINGEMENT. THE PARTIES UNDERSTAND, ACKNOWLEDGE AND AGREE THAT THE LEVEL OF COMPENSATION THE PARTIES HAVE AGREED TO ACCEPT IS PREDICATED ON THIS LIMITATION OF LIABILITY AND DISCLAIMER OF WARRANTIES.

(b) The Parties shall agree and communicate regarding (i) any changes to the Services or (ii) service level expectations related to the Services. The Provider shall not make any changes to the Services or the manner in which they are provided without advance notice to the Purchaser.

2.2 Consequences of Breach or Non-Performance. The Purchasers shall promptly notify the Provider of any failure by the Provider to perform one or more of the Services in

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accordance with the terms of this Agreement. In the event that the Provider does not cure such non-performance within thirty (30) business days of the receipt of such notice, the Purchasers may terminate such Service(s) by delivering notice to the Provider.

2.3 Relationship of Parties. The Parties hereby acknowledge and agree that, in providing the Services and otherwise in connection with this Agreement, the Provider is an independent contractor and is not, and shall not be deemed to be, an agent, employee or legal representative of the Purchasers or otherwise as having power or authority to bind the Purchasers, unless specifically delegated to do so in order to facilitate the Services.

ARTICLE III

TERM AND TERMINATION

3.1 Term. This Agreement shall become effective as of the Effective Date and shall remain in effect until terminated as herein provided or until Services are no longer being provided (the “Term”).

3.2 Termination of this Agreement. Except as set forth in Section 2.2 of this Agreement, a Party may not terminate this Agreement during the Term except under the following circumstances:

(a) The Parties may terminate this Agreement by the execution of a written agreement signed by authorized representatives of all Parties, in which event the termination shall be effective on the date specified in such agreement.

(b) If a transaction is consummated which would cause the Provider or its Affiliates (other than the Northern Border Companies and their subsidiaries) to cease to be a general partner of the MLP or the ILP, then ONEOK or the MLP, as the case may be, shall have the right to terminate this Agreement upon the execution and delivery of a mutually agreeable transition services agreement between the Parties.

3.3 Termination of the Administrative Services Agreement. Effective as of the execution and delivery of this Agreement, the Administrative Services Agreement is hereby terminated, superseded and replaced by this Agreement; provided, however, that all amounts due or to become due under that Administrative Services Agreement shall be paid in full and the Administrative Services Agreement shall continue in effect with respect thereto until all such amounts are paid in full.

ARTICLE IV

BILLING AND PAYMENT

4.1 Invoices. The Provider will send one monthly invoice to the ILP covering all of the Services provided under this Agreement. The monthly invoice will be sent following completion of the Provider’s normal monthly financial reporting process, including completion of the Distrigas Method calculation. The ILP shall pay each invoice by wire transfer or other means of immediate payment within fifteen (15) days of the invoice date without setoff or deduction of any kind, except as provided in Section 4.2. Any late payment by the ILP shall incur a late fee of ten percent (10%) per annum, calculated from the due date until the date of

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payment. In the event that any invoice is based on estimated costs, the Provider shall make adjustments by increasing or decreasing the costs in the invoice subsequent to the determination of the actual costs.

4.2 Disputed Amounts. In the event that a dispute arises as to the amount of any statement or invoice or any portions thereof submitted pursuant to this Article IV, the Parties will resolve the dispute in accordance with this Section 4.2 and Section 4.3 below. Pending resolution of the dispute, the ILP may withhold payment of the amounts on an invoice or statement to the extent such amounts are disputed in good faith, but shall pay all charges on such invoice or statement that are not so disputed. If the ILP disputes any amount on an invoice or statement it shall promptly notify the Provider in writing of such disputed amounts and the reasons each such charge is disputed. The Provider shall provide the ILP with sufficient records relating to the disputed charge to enable the Parties to resolve the dispute. In the event the determination is made that the ILP should have paid the disputed amount, the ILP shall pay the disputed amount, with interest on the disputed amount at a rate of ten percent (10%) per annum, calculated from and after the original due date of such invoice until the date of payment. If the ILP paid the disputed amount, but such disputed amount is ultimately determined not to have been payable, then the Provider shall refund to the ILP the disputed amount, with interest on the disputed amount at a rate of ten percent (10%) per annum, calculated from and after the date the Provider received the payment to the date of the refund. Payment by the ILP of a disputed amount shall not be deemed a waiver of the right of the ILP to recoup any contested portion of any bill or statement.

4.3 Dispute Resolution. In the event of a dispute under this Agreement, the Parties shall, during the fifteen (15) days after notice of such a dispute, use their commercially reasonable efforts to reach agreement on the disputed items or amounts. If the Parties are unable to reach agreement within such period, they shall promptly thereafter cause a nationally recognized accounting firm agreeable to the Parties (the “Accounting Referee”) to review this Agreement and the disputed items or amounts. The Accounting Referee shall deliver to the Parties as promptly as practicable (but in any event no later than thirty (30) days from the date of engagement of the Accounting Referee), a report setting forth the Accounting Referee’s determination of the appropriate resolution of the dispute. Such determination shall be final and binding upon the Parties. The cost of such review and report shall be borne equally by each Party involved in the dispute.

4.4 Audit. The Northern Border Companies and their designated representatives, after fifteen (15) days notice in writing to the Provider, shall have the right during normal business hours to audit, at their own expense, all books and records of the Provider related to the Services. Such audits shall not be commenced more often than twice each calendar year. The Northern Border Companies shall have two (2) years after the close of a calendar year in which to make an audit of the Provider’s records for such calendar year. Absent fraud or intentional concealment or misrepresentation by the Provider or its employees, the Provider shall neither be required nor permitted to adjust any item unless a claim therefore is presented or adjustment is initiated within two (2) years after the close of the calendar year in which the statement therefore is rendered, and in the absence of such timely claims or adjustments, the bills and statements rendered shall be conclusively established as correct. The Provider shall use reasonable

5

commercial efforts to obtain similar audit rights from contractors, consultants and suppliers engaged to perform any of the Services on behalf of the Provider.

ARTICLE V

LIMITATION OF LIABILITY AND INDEMNITIES

5.1 Purchaser’s Limitation of Liability. Each of the Northern Border Companies agrees, with respect to the Services provided to such entity hereunder, to indemnify, defend and hold harmless the Provider and its Affiliates (provided that Northern Plains shall not be entitled to indemnity for any costs, expenses or liabilities incurred by it as a general partner of the MLP or the ILP), and their respective employees, officers, directors, representatives and agents harmless from and against all claims, losses, costs, damages and expenses (including, without limitation, attorneys’ fees and expenses), penalties and liabilities (collectively, “Liabilities”) arising out of the acts (or failure to act) by any such persons or entities in connection with the performance by such persons or entities of such Services, REGARDLESS OF WHETHER THE PROVIDER, OR SUCH OTHER PERSONS OR ENTITIES MAY BE WHOLLY, CONCURRENTLY, PARTIALLY OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT IN CONNECTION THEREWITH; PROVIDED, HOWEVER, THAT NEITHER THE PROVIDER NOR ANY OF SUCH OTHER PERSONS AND ENTITIES SHALL BE INDEMNIFIED FOR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PROVIDER OR SUCH OTHER PERSONS OR ENTITIES.

5.2 Provider’s Indemnification. The Provider shall indemnify, defend and hold the Northern Border Companies and their general partners and their respective employees, directors, policy committee members, officers, representatives and agents harmless from and against all Liabilities arising out of the performance of this Agreement and resulting from the gross negligence or willful misconduct of the Provider or its Affiliates.

5.3 Defense of Claims. It is understood and agreed that in the event that any Party is made a defendant in any suit, action or proceeding for which it is entitled to be indemnified pursuant to this Agreement, and the applicable indemnifying party fails or refuses to timely assume the defense thereof, after having been notified by the indemnified party to do so, that the indemnified party may compromise and settle or defend any such claim, and the applicable indemnifying party shall be bound and obligated to reimburse said indemnified party for the amount expended by the indemnified party in settling and compromising any such claim, or for the amount expended by the indemnified party in paying any judgment rendered therein, together with all reasonable attorneys’ fees and costs incurred by the indemnified party for defense or settlement of such claim. Any judgment rendered against the indemnified party or amount expended by the indemnified party in compromising or settling such claim, together with all reasonable attorneys’ fees and costs, shall be conclusive as determining the amount for which the applicable indemnifying party is liable to reimburse the indemnified party hereunder.

ARTICLE VI

CONFIDENTIALITY AND OWNERSHIP OF RECORDS

6.1 Confidentiality. The Parties acknowledge that in the course of this Agreement they may have access to and be in possession of Confidential Information (as described

6

immediately below) of the other Party. Each Party shall protect the other Parties’ Confidential Information in the same manner as it protects its own confidential information of like kind, which in no event shall be less than reasonable care. Each Party’s access to the Confidential Information of the other Parties shall be restricted to those of such Party’s personnel who have a need to know in order to perform under this Agreement. The provisions of this Section shall survive any termination or expiration of this Agreement and shall not be limited by any limitation of liability contained herein. The term “Confidential Information” shall mean information regarded by that Party as proprietary or confidential, including, but not limited to, information relating to its business affairs, financial information and prospects; future projects or purchases; proprietary products, materials or methodologies; data; customer lists; system or network configurations; passwords and access rights; and any other information marked as confidential or, in the case of information verbally disclosed, verbally designated as confidential.

6.2 Ownership of Records. The Northern Border Companies shall own the data, records, information, etc. provided, generated, or otherwise related to the Services and the business of the Northern Border Companies (“Northern Border Company Records”), regardless of who prepares or generates such Northern Border Company Records. The Provider shall maintain on behalf of the Northern Border Companies all Northern Border Company Records and shall not destroy or delete any Northern Border Company Records without the prior written consent of the Northern Border Companies. Additionally, should this Agreement be terminated, then the Provider shall deliver or cause to be delivered all Northern Border Company Records to the Northern Border Companies; provided, however, that ONEOK shall be entitled to retain copies of any such Records.

ARTICLE VII

FORCE MAJEURE

7.1 Force Majeure. Subject to the standards set forth in Article II, if, by reason of force majeure (as defined in Section 7.2 below), a Party is rendered unable, wholly or in part, to carry out its obligations under this Agreement, and if the non-performing Party declaring force majeure gives notice and reasonable particulars of such force majeure to the Party to whom the performance is due within a reasonable time after the occurrence of the cause relied on, upon giving such notice, so far as and to the extent that it is affected by such force majeure, the non-performing Party declaring force majeure shall not be liable solely on account of such inability to perform during the continuance of any inability so caused; provided, however, the non-performing Party shall use commercially reasonable efforts to recommence performance of the affected Services as promptly as possible; provided, further, however, that an event of force majeure shall not excuse payment for Services provided hereunder.

7.2 Definition of Force Majeure. The term “force majeure” as employed in this Agreement shall mean acts of God; strikes, lockouts or industrial disputes or disturbances; civil disturbances; arrests and restraints from rulers of people; interruptions by government, administrative agency or court orders, other than as a result of a failure to comply with laws; present and future valid orders, decisions or rulings of any governmental or administrative entity having proper jurisdiction; acts of a public enemy; wars; acts of terrorism; riots; blockades; insurrections; inability to secure materials by reason of allocations promulgated by authorized governmental agencies; epidemics; landslides; lightning; earthquakes; fire; storm; floods;

7

washouts; whether of the kind herein enumerated or otherwise, not reasonably within the control of the Party claiming force majeure and not caused, in whole or in part, by the acts or omissions of the Party so affected by force majeure.

ARTICLE VIII

NOTICES AND REPORTS

8.1 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed duly given (i) when delivered personally or by prepaid overnight courier, with a record of receipt, (ii) the fourth day after mailing, if mailed by certified mail, return receipt requested, or (iii) the day of transmission, if sent by facsimile or telecopy during regular business hours, or the day after transmission if sent after regular business hours (with a copy promptly sent by prepaid overnight courier with record of receipt or by certified mail, return receipt requested), to the Parties at the following addresses or telecopy numbers (or to such other address or telecopy number as a Party may have specified by notice given to the other Party pursuant to this provision):

If to the Provider(s), to:

ONEOK, Inc.

100 West 5^th Street

Tulsa, OK 74103

Attn: General Counsel

Facsimile: (918) 588-7971

If to Northern Border Companies:

Northern Border Partners, L.P.

13710 FNB Parkway

Omaha, NE 68154-5200

Attention: General Counsel

Facsimile: (402) 492-7480

ARTICLE IX

MISCELLANEOUS

9.1 Applicable Law. THIS AGREEMENT, THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT, AND ANY CLAIM OR CONTROVERSY DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL IN ALL RESPECTS BE GOVERNED BY AND INTERPRETED, CONSTRUED, AND DETERMINED IN ACCORDANCE WITH, THE APPLICABLE PROVISIONS OF THE BANKRUPTCY CODE AND THE INTERNAL LAWS OF THE STATE OF OKLAHOMA (WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION).

8

9.2 Waiver. The performance of or compliance with a Party’s obligation hereunder may be waived, but only in writing signed by an authorized representative of the other relevant Party. No waiver or failure of enforcement by any Party of any default by any other Party in the performance of any provision, condition or requirement herein shall be deemed to be a waiver of, or in any manner a release of the defaulting Party from, performance of any other provision, condition or requirement herein, nor deemed to be a waiver of, or in any manner a release of the defaulting Party from, future performance of the same provision, condition or requirement; nor shall any delay or omission of any non-defaulting Party to exercise any right hereunder in any manner impair the exercise of any such right or any like right accruing to it thereafter.

9.3 Modification. This Agreement may not be modified, varied or amended except by an instrument in writing signed by the Parties.

9.4 Headings. The headings to each of the various Articles and Sections in this Agreement are included for convenience and reference only and shall have no effect on, or be deemed as part of the text of, this Agreement.

9.5 Third Parties. Except as provided in Article V hereof, this Agreement is not intended to confer upon any Person not a Party hereto any rights or remedies hereunder, and no Person other than the Parties hereto is entitled to rely on or enforce any representation, warranty or covenant contained herein.

9.6 Survival; Limitations Period. Notwithstanding any other provisions in this Agreement, all indemnities, limitations of liability, and payment obligations set forth in this Agreement, and the provisions set forth in Section 4.2 and Articles V, VI, VII, VIII, IX, X and XI, shall survive the termination of this Agreement or the expiration of the Term, in whole or in part. NO PARTY MAY ASSERT ANY CAUSE OF ACTION AGAINST ANY OTHER PARTY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT MORE THAN ONE (1) YEAR AFTER TERMINATION OF THIS AGREEMENT.

9.7 Binding Effect Assignment.

(a) Subject to Section 9.7(b) below, no Party hereto may assign this Agreement, in whole or in part, except with the prior written approval of each other Party. This Agreement shall inure to the benefit of, and shall be binding upon, the Parties and their respective permitted successors and assigns.

(b) The Provider may assign the performance by it of any Service to an Affiliate (other than the Northern Border Companies and their subsidiaries) or any subsidiary or any successor in interest to any such Affiliate or subsidiary. In addition, the Provider may subcontract or outsource the performance of any Service to a third party.

9.8 Entire Agreement. This Agreement, including any exhibits, attachments and schedules hereto, constitutes the entire agreement between the Parties concerning the subject matter hereof, and supersedes any prior understandings or written or oral agreements relative to such subject matter. However, this Agreement in no way changes or amends the terms of the Operating Agreements or the Administrative Services Agreement or the obligations of NBP

9

Services and Northern Plains to any of the Northern Border Companies under any of those agreements.

9.9 Waiver of Jury Trial. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT THEY MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN ANY LEGAL PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

9.10 No Strict Construction. The Parties to this Agreement have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises with respect to this Agreement, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring a Party by virtue of the authorship of any of the provisions of this Agreement.

9.11 Severability. If any provision of this Agreement is invalid or unenforceable, the balance of this Agreement shall remain in effect.

9.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

9.13 Acknowledgement of Applicability of Section 365(n) of the Bankruptcy Code. The Parties hereby acknowledge that this Agreement is an executory contract granting rights in intellectual property to the Northern Border Companies as described in the U. S. Bankruptcy Code, Title 11 Section 365(n)(1)(B), and, as such, the Northern Border Companies may retain their rights under this Agreement in the event that the Provider or its Affiliates or its trustee, as applicable, rejects such executory contract or this Agreement pursuant to, and in accordance with, Section 365(n) of Title 11. Furthermore, the Parties acknowledge and agree that the execution of this Agreement shall not impair any of the Provider’s rights under title 11 of the United States Code.

ARTICLE X

INTERPRETATION; DEFINITIONS

10.1 Definitions. Capitalized terms used herein and not otherwise defined shall have the following meanings:

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“Administrative Services Agreement” means the agreement between NBP Services, LLC, Northern Border Partners, L.P. and Northern Border Intermediate Limited Partnership effective as of October 1, 1993, as amended.

“Affiliate” means any person or entity that is Controlled By a person. For purposes of this Agreement, a Provider shall not constitute an Affiliate of any Purchaser.

“Control” or “Controlled By” means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by written contract or otherwise).

“Northern Border Companies” (each, individually, a Northern Border Company) means (i) the MLP, (ii) the ILP, (iii) any direct or indirect subsidiary of the MLP, and (iv) any other entity that directly, or through one or more intermediaries, is controlled by the MLP, and (v) any entity in which the MLP or ILP has a direct or indirect ownership interest and NBP Services or Northern Plains is contractually obligated to provide administrative and/or operational services.

“ONEOK Affiliates” means any direct or indirect subsidiary of ONEOK or any entity controlled by ONEOK, but shall exclude any of the Northern Border Companies.

“Operating Agreements” include (i) the Northern Border Pipeline Project Operating Agreement between Northern Plains Natural Gas Company and Northern Border Pipeline Company dated February 28, 1980; (ii) the Midwestern Gas Transmission Company Operating Agreement between Northern Plains Natural Gas Company and Midwestern Gas Transmission Company dated May 1, 2001; (iii) the Viking Gas Transmission Company Operating Agreement between Northern Plains Natural Gas Company and Viking Gas Transmission Company dated January 17, 2003, and (iv) the Operating Agreement between Northern Plains Natural Gas Company and Guardian Pipeline, L.L.C. dated April 5, 2004. Additionally, this definition shall include any other operating agreement subsequently entered into by Northern Plains for the purpose of providing similar services to other natural gas transmission companies or similar services to other entities in the energy industry.

10.2 Construction and Interpretation. All references herein to agreements and other contractual instruments shall be deemed to include all exhibits, attachments and appendices attached thereto and all amendments and other modifications to such agreements and instruments. Words used herein in the singular, where the context so permits, shall also apply to words when used in the plural and visa versa. The term “including” when used in this Agreement will be by way of example and not considered in any way to be a limitation, and means “including, without limitation”.

ARTICLE XI

LICENSE GRANT

11.1 License. Subject to the terms and conditions of this Agreement, and subject to the right of ONEOK and the ONEOK Affiliates to do so, ONEOK and the ONEOK Affiliates (collectively, for purposes of this Article XI, “Licensor”) hereby grant and agree to grant to each Northern Border Company (each, for purposes of this Article XI, a “Licensee”), under all of Licensor’s intellectual property rights in and to the software programs, object code and source

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code, and documentation related to the Services and licensed patents related thereto (“Licensed Programs”), a fully paid-up, irrevocable and perpetual (during the term of this Agreement), worldwide, non-exclusive, transferable, sublicensable, assignable license to: (i) copy, modify and use the Licensed Programs and documentation; (ii) use, make, have made, distribute, and sell any and all products and services of Licensee, its Affiliates, and its sublicensees (if any) and (iii) engage in the business as conducted by Licensee, its Affiliates, and sublicensees (if any). The foregoing license shall include the right for any third party service company or independent contractor retained by any Licensee or an Affiliate of any Licensee (“Contractor”) to install, copy, modify and/or use the Licensed Programs on behalf of such Licensee and its Affiliates. The grant of the foregoing licenses with respect to any particular Licensed Program and related documentation or patents shall be limited to those Licensed Programs utilized by the Provider to provide the Services to the Purchasers and shall not include any Licensed Programs subject to agreements that would be breached by the grant in this paragraph.

11.2 Existing Rights. Except as expressly provided herein, Licensor shall retain all of its right, title and interest, including, without limitation, all intellectual property rights, in and to the Licensed Programs, including any and all copies in whatever form. Licensee acknowledges that all materials provided by Licensor to Licensee under this provision, including, but not limited to the Licensed Programs, class libraries, scripts, algorithms, designs, flow-charts, procedures, processes, systems, methodologies, and information shall remain the sole and exclusive property of Licensor.

11.3 Hardware and Software Platform. Licensee acknowledges that Licensee’s operation of the Licensed Programs may require, among other things, Licensee’s obtaining rights to use third party hardware and licensed copies of third party software, and Licensee shall be responsible for obtaining such rights to use third party hardware and software. Licensor assumes no responsibility or liability under this license grant or otherwise for obtaining or providing any such third party hardware or software or for providing any labor support. Licensor shall provide reasonable assistance in converting Licensee’s data files for use with the Licensed Programs.

(Signature Page Follows)

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first above written.

ONEOK, Inc.,

an Oklahoma corporation

By:

Name:

Title:

NORTHERN PLAINS NATURAL GAS COMPANY, LLC,

a Delaware limited liability company

By:

Name:

Title:

NBP SERVICES, LLC,

a Delaware limited liability company

By:

Name:

Title:

NORTHERN BORDER PARTNERS, L.P.

a Delaware limited partnership

By:

Name:

Title:

NORTHERN BORDER INTERMEDIATE LIMITED PARTNERSHIP,

a Delaware limited partnership

By:

Name:

Title:

Exhibit A

Description of Additional Services

EX-10.34

Exhibit 10.34

AMENDMENT NO. 1 TO AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP OF

NORTHERN BORDER PARTNERS, L.P.

This Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Northern Border Partners, L.P. (this “Amendment”), dated as of February [    ], 2006, is entered into and effectuated by Northern Plains Natural Gas Company, LLC, a Delaware limited liability company (“Northern Plains”), Northwest Border Pipeline Company, a Delaware corporation (“Northwest Border”), and Pan Border Gas Company, LLC, a Delaware limited liability company (“Pan Border” and, together with Northern Plains and Northwest Border, the “General Partners”), as the General Partners, pursuant to authority granted in Section 4.2 and Section 15.1 of the Amended and Restated Agreement of Limited Partnership of Northern Border Partners, L.P., dated as of October 1, 1993 (the “Partnership Agreement”). Capitalized terms used but not defined herein are used as defined in the Partnership Agreement.

RECITALS:

WHEREAS, Section 4.2(a) of the Partnership Agreement provides that the Partnership Policy Committee, without the approval of any Limited Partners, may issue additional Partnership Securities, or classes or series thereof, for any Partnership purpose, at any time or from time to time, and may issue such Partnership Securities for such consideration and on such terms and conditions as shall be established by the Partnership Policy Committee in its sole discretion;

WHEREAS, Section 4.2(b) of the Partnership Agreement provides that the Partnership Securities authorized to be issued by the Partnership pursuant to Section 4.2(a) may be issued in one more classes, or one or more series of any such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties (which may be senior to existing classes and series of Partnership Securities (except as provided in Section 4.2(c)) as shall be fixed by the Partnership Policy Committee;

WHEREAS, Section 15.1(f) of the Partnership Agreement provides that the Partnership Policy Committee, without the approval of any Limited Partner or Assignee (subject to the terms of Section 4.2 of the Partnership Agreement), may amend any provision of the Partnership Agreement necessary or appropriate in connection with the authorization for issuance of any class or series of Partnership Securities pursuant to Section 4.2 of the Partnership Agreement;

WHEREAS, the Partnership has entered into a definitive agreement, dated as of February 14, 2006, between the Partnership and ONEOK, Inc., an Oklahoma corporation (“ONEOK”) (the “Contribution Agreement”);

WHEREAS, as part consideration for the contribution of the Shares to the Partnership, the Contribution Agreement obligates the Partnership to issue limited partner interests to be designated as Class B Units having the terms set forth in this Agreement;

WHEREAS, the Partnership Policy Committee, in consultation with the Audit Committee, has determined that the issuance of the Class B Units provided for in this Amendment is permitted by Section 4.2 of the Partnership Agreement; and

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WHEREAS, Section 15.1(d)(i) of the Partnership Agreement provides that the Partnership Policy Committee, without the approval of any Limited Partner or Assignee, may amend any provision of the Partnership Agreement to reflect a change that the Partnership Policy Committee determines, in its sole discretion, does not adversely affect the Limited Partners in any material respect;

NOW, THEREFORE, it is hereby agreed as follows:

A. Amendment. The Partnership Agreement is hereby amended as follows:

1) Section 1.1 is hereby amended to add the following definitions:

“Class B Subordination Period” means the period commencing upon issuance of the Class B Units and ending on the earlier of (a) the Conversion Approval Date or (b) the Conversion Approval Termination Date.

“Class B Unit” means a Unit representing a fractional part of the Partnership Interests of all Limited Partners and Assignees and having the rights and obligations specified with respect to Class B Units in this Agreement. Except as otherwise provided in this Agreement, the term “Class B Unit” does not refer to a Common Unit prior to the conversion of the Class B Unit into a Common Unit pursuant to the terms hereof.

“Class B Unit Arrearage” means, with respect to any Class B Unit, and as to any calendar quarter within the Class B Subordination Period, the excess, if any, of (a) the Minimum Quarterly Distribution with respect to such Class B Unit (including any applicable increased amounts distributable with respect to the Minimum Quarterly Distribution following the Class B Distribution Increase Date, the Section 4.11(b) Distribution Increase Date or the GP Removal Date) over (b) the sum of all Available Cash distributed with respect to such Class B Unit in respect of such quarter pursuant to Section 4.10(b)(ii)(A) (and Section 4.10(b)(ii)(A)(1) following the Class B Distribution Increase Date and/or GP Removal Date, as applicable).

“Cumulative Class B Unit Arrearage” means, with respect to any Class B Unit, and as of the end of any calendar quarter (or on the expiration of the Class B Subordination Period), the excess, if any, of (a) the sum resulting from adding together the Class B Unit Arrearage as to such Class B Unit for each of the quarters within the Class B Subordination Period over (b) the sum resulting from adding together (i) any distributions theretofore made pursuant to Section 4.10(b)(ii)(B) (and Section 4.10(b)(ii)(A)(2) following the Class B Distribution Increase Date and/or GP

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Removal Date, as applicable) with respect to such Class B Unit (including any distributions to be made in respect of the last of such quarters) and (ii) any Cumulative Common Unit Arrearage then existing upon conversion of a Class B Unit into a Common Unit pursuant to the terms hereof or the occurrence of a Termination Capital Transaction.

2) Section 1.1 is hereby amended to:

a) add the following sentence to the end of the definition of “Common Unit”:

“Except as otherwise provided in this Agreement, the term “Common Unit” does not refer to a Class B Unit prior to the conversion of the Class B Unit into a Common Unit pursuant to the terms hereof.”

b) add the phrase “or within the Class B Subordination Period” after the phrase “and as to any calendar quarter within the Subordination Period” in the definition of “Common Unit Arrearage.”

c) add the phrase “or within the Class B Subordination Period” after the phrase “for each of the quarters within the Subordination Period ending on or before the last day of such quarter” in clause (a) of the definition of “Cumulative Common Unit Arrearage.”

d) add the following proviso to the end of the definition of “Outstanding”:

“; provided, further, that, except as provided in Sections 4.11(a), 4.11(b), 4.12(a) and 4.12(b), none of the Class B Units shall be deemed to be Outstanding for purposes of determining if any Class B Units are entitled to distributions of Available Cash unless such Class B Units shall have been reflected on the Partnership’s books and records as outstanding during such calendar quarter and on the Record Date for the determination of any distribution of Available Cash;”

e) add the phrase “or if not offered to the public, the price per Unit at which such class or series of Unit was initially issued, in each case” after the phrase “for sale by the Underwriters in respect of such offering,” in the definition of “Unrecovered Initial Unit Price.”

3) Article IV is hereby amended to add new Sections 4.10 – 4.13 creating a new class of Units as follows:

Section 4.10 Establishment of Class B Units.

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a) General. The Partnership Policy Committee hereby designates and creates a class of Units to be designed as “Class B Units” and consisting of a total of 36,494,126 Class B Units, and fixes the designations, preferences and relative, participating, optional or other special rights, power and duties of holders of the Class B Units as set forth in this Section 4.10.

b) Rights Associated with Class B Units. During the period commencing upon issuance of the Class B Units and ending upon the conversion of the Class B Units as set forth in Section 4.10(f) hereof, unless amended pursuant to Section 4.11 or Section 4.12 hereof:

i) subject to the provisions of Section 5.1(d)(iii)(A), and unless clauses (ii), (iii), or (iv) below require a different allocation pursuant to Section 5.1(c)(i) or otherwise, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent as such items would be so allocated if such Class B Units were Common Units that were then Outstanding;

ii) Notwithstanding anything to the contrary in Section 5.4, with respect to distributions made in accordance with Section 5.4 for calendar quarters ending on or prior to the expiration of the Class B Subordination Period, the Class B Units shall be deemed Units, but not Common Units, for such purposes and, in addition, the holders of Class B Units shall have the right to share in Partnership quarterly cash distributions in accordance with Section 5.4 hereof (such distribution to be prorated for the quarter in which the Class B Units are issued), provided that following any distribution pursuant to Section 5.4(c) and prior to any distribution pursuant to Section 5.4(d), Available Cash shall be distributed as follows:

(A) 99% to the holders of Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Minimum Quarterly Distribution; and

(B) then, 99% to the holders of Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B

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Unit Outstanding as of the last day of such quarter an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter.

iii) The holders of Class B Units shall have the right to share in Partnership quarterly cash distributions for quarters ending after the expiration of the Class B Subordination Period in accordance with Section 5.4 hereof as if such holders of Class B Units held Common Units and, in addition, notwithstanding anything to the contrary set forth in Section 5.4, if a Cumulative Class B Unit Arrearage exists on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(d), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed in accordance with Section 4.10(b)(ii)(B) hereof to each holder of record of the applicable Class B Units as of the expiration of the Class B Subordination Period. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A).

iv) Notwithstanding anything to the contrary in Section 5.1(c)(i), during the Class B Subordination Period the Class B Units shall be treated as Common Units then Outstanding for purposes of Section 5.1(c)(i), and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 99% to the holders of the Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit.

c) Voting Rights. Unless amended pursuant to Section 4.11 or Section 4.12 hereof, (i) during the Class B Subordination Period, the Class B Units are non-voting (and solely for all purposes of calculating votes and determining the presence of a quorum under this Agreement, none of the Class B Units shall be deemed Outstanding), except that the Class B Units shall be entitled to vote

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as a separate class on any matter that adversely affects the rights or preferences of the Class B Units in relation to other classes of Partnership Interests or as required by law. The approval of a majority of the Class B Units shall be required to approve any matter for which the holders of the Class B Units are entitled to vote as a separate class, and (ii) upon expiration of the Class B Subordination Period, the Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, with respect to the Conversion Approval or Amendment Approval, none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to the number of votes equal to the number of Common Units into which a Class B Unit is convertible at the time of the record date for the vote or written consent on the matter.

d) Certificates. The Class B Units will be evidenced by certificates in such form as the Partnership Policy Committee may approve and, subject to the satisfaction of any applicable legal and regulatory requirements, may be assigned or transferred in a manner identical to the assignment and transfer of other Units. The Certificates will include the restrictive legend set forth in Section 2.17 of the Contribution Agreement.

e) Registrar and Transfer Agent. Northern Plains will act as registrar and transfer agent of the Class B Units.

f) Conversion. Except as provided in this Section 4.10(f), the Class B Units are not convertible into Common Units.

i) Optional Conversion. The Partnership shall, as promptly as practicable following the issuance of any Class B Units, take such actions as may be necessary or appropriate to submit to a vote or consent of its securityholders the approval of a change in the terms of the Class B Units to provide that each Class B Unit shall be convertible from time to time, at the option of the holders thereof, into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units that occurs prior to the conversion of the Class B Units), effective upon approval of the issuance of additional Common Units in accordance with the following sentence (the “Conversion Approval”). The vote or consent required for such approval will be the requisite vote required under the rules or staff interpretations of the National Securities Exchange on which the Common Units are listed or admitted for trading for the listing or addition to

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trading of the Common Units that would be issued upon such conversion, excluding those Units held by ONEOK and its affiliates. Upon receipt of the required vote or consent (the date of such approval, the “Conversion Approval Date”), the terms of the Class B Units will be changed, automatically and without further action, so that each Class B Unit may be converted, at the option of the holder thereof, into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units that occurs prior to the conversion of the Class B Units).

ii) Automatic Conversion. The Partnership shall, as promptly as practicable following the issuance of any Class B Units, take such actions as may be necessary or appropriate to submit to a vote or consent of holders of at least 66 ²/3% of the Outstanding Units (excluding those Units held by ONEOK and its Affiliates) and otherwise as required by Section 15.2 of the Partnership Agreement, the amendments to the Partnership Agreement described on Annex A (the approval of such amendment, the “Amendment Approval,” and the date of obtaining the Amendment Approval, the “Amendment Approval Date”). Subject to Section 4.12, each Class B Unit shall automatically convert into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units that occurs prior to the conversion of the Class B Units) upon receipt of:

(A) Conversion Approval as set forth above in paragraph (i); and

(B) Amendment Approval as set forth above in this paragraph (ii);

and immediately thereafter, none of the Class B Units shall be outstanding.

iii) Quarterly Cash Distributions. Each Common Unit into which a Class B Unit has been converted as provided in this Section 4.10(f) shall have the right to share in any Partnership quarterly cash distributions made in respect of a Common Unit in accordance with Section 5.4 hereof (including, without limitation and not withstanding anything to the contrary contained in the Partnership Agreement, the right to any distributions of amounts in

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respect of Cumulative Common Unit Arrearages in respect of a Common Unit).

Section 4.11 Amendment of Terms of Class B Units if SecurityHolder Approval is Not Obtained.

a) If:

i) the Conversion Approval has not been obtained by the date that is 12 months following the Closing (as defined under the Contribution Agreement); and

ii) the Amendment Approval has not been obtained by the date that is 12 months following the Closing;

then, unless the provisions of Section 4.12 shall already be in effect, effective as of the next succeeding day (the “Class B Distribution Increase Date”) until amended by the provisions of Section 4.12, Sections 4.10(b) and 4.10(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

“b) Rights Associated with Class B Units. Prior to the conversion of all of the Class B Units pursuant to Section 4.10(f) above:

i) subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units;

ii) (A) notwithstanding anything to the contrary in Section 5.4, the Class B Units shall be deemed Units, but not Common Units, for purposes of Section 5.4 and the Class B Units shall have the right to share in Partnership quarterly cash distributions in accordance with Section 5.4 hereof based on 115% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit (such additional 15% pro rated for the quarter in which the Class B Distribution Increase Date occurs), provided, however, that following any distribution pursuant to Section 5.4(c) and prior to any distribution pursuant to Section 5.4(d), Available Cash shall be distributed as follows:

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(1) 99% to the holders of Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to 115% of the Minimum Quarterly Distribution; and

(2) then, 99% to the holders of Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter.

(B) notwithstanding anything to the contrary contained in Section 5.4, if a Cumulative Class B Unit Arrearage exists on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(d), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 99% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

iii) the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 115% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 99% to

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the holders of the Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.3, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

c) Voting Rights. The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, with respect to the Conversion Approval or Amendment Approval, none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to the number of votes equal to the number of Common Units into which a Class B Unit is convertible at the time of the record date for the vote or written consent on the matter.”

b) If:

i) the Conversion Approval has been obtained by the date that is 12 months following the Closing (as defined under the Contribution Agreement); and

ii) the Amendment Approval has not been obtained by the date that is 12 months following the Closing;

then, unless the provisions of Section 4.12 shall already be in effect, effective as of the next succeeding day (the “Section 4.11(b) Distribution Increase Date”) until amended by the provisions of Section 4.12, Sections 4.10(b) and 4.10(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

“b) Rights Associated with Class B Units. Prior to the conversion of all of the Class B Units pursuant to Section 4.10(f) above:

i) subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all items of Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units;

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ii) (A) the Class B Units shall have the right to share in Partnership quarterly cash distributions based on 115% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit (such additional 15% pro rated for the quarter in which the Class B Distribution Increase Date occurs), and the right of holders of Class B Units to receive distributions shall have the same order of priority relative to distributions on the Common Units; and

(B) notwithstanding anything to the contrary contained in Section 5.4, if a Cumulative Class B Unit Arrearage existed on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(d), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 99% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

iii) the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 115% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 115% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 99% to the holders of the Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until each such holder of a Class B Unit

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has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.3, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

c) Voting Rights. The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, with respect to the Conversion Approval or Amendment Approval, none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote. Each Class B Unit will be entitled to the number of votes equal to the number of Common Units into which a Class B Unit is convertible.”

c) If a Class B Distribution Increase Date or Section 4.11(b) Distribution Increase Date has occurred and the Partnership’s securityholders thereafter either (1) obtain the Conversion Approval and the Amendment Approval, or (2) any of the Class B Units are converted into Common Units pursuant to Section 4.10(f)(i), then, unless the provisions of Section 4.12 shall already be in effect, (i) with respect to the matters described in sub-clause (1) above, as of the later of the Conversion Approval Date and the Amendment Approval Date, all Class B Units shall automatically, and without further action of the holder(s) thereof, be converted into Common Units in accordance with Section 4.10(f)(ii), and (ii) with respect to matters described in sub-clauses (1) and (2) above for the quarter in which such conversion occurs, concurrently with the distribution made in accordance with Article V of the Partnership Agreement of Available Cash, with respect to the quarter in which the conversion of the Class B Units is effected, a distribution shall be paid to each holder of record of the applicable Class B Units as of the effective date of such conversion, with the amount of such distribution for each such Class B Unit to be equal to the product of (a) 15% of the amount to be distributed in respect of such quarter to each Common Unit times (it being agreed that each such Common Unit issued upon conversion shall be entitled to the full distribution payable to the holder of a Common Unit) and (b) a fraction, of which (A) the numerator is the number of days in such quarter up to but excluding the date of such conversion, and (B) the denominator is the total number of days in such quarter (the foregoing amount being referred to as an “Excess Payment”). For the taxable year in which an Excess Payment is made, each holder of a Class B Unit shall be allocated items of gross income with respect to such taxable year in an amount equal to the Excess Payment distributed to it as provided in Section 5.1(d)(iii)(A).

Section 4.12 Amendment of Terms of Class B Units Upon Removal of the General Partner.

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a) If prior to the conversion of all Class B Units, a resolution of the Limited Partners holding the requisite majority of Outstanding Units is passed approving the removal of any Affiliate of ONEOK as the general partner of the Partnership (a “GP Removal Event”) and the Conversion Approval has not been obtained, then notwithstanding Section 4.11, automatically and without further action and, effective as of the next succeeding day (the “GP Removal Date”), Section 4.10(f)(ii) shall be deemed to be deleted in its entirety, automatically and without further action, and Sections 4.10(b) and 4.10(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

“b) Rights Associated with Class B Units. Prior to the conversion of the Class B Units as set forth in Section 4.10(f) hereof:

i) subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all of items Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent as such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units; and

ii) (A) notwithstanding anything to the contrary in Section 5.4, the Class B Units shall be deemed Units, but not Common Units, for purposes of Section 5.4 and the Class B Units shall have the right to share in Partnership quarterly cash distributions in accordance with Section 5.4 hereof based on 125% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit (such additional 25% pro rated for the quarter in which the GP Removal Date occurs), provided, however, that following any distribution pursuant to Section 5.4(c) and prior to any distribution pursuant to Section 5.4(d), Available Cash shall be distributed as follows:

(1) 99% to the holders of Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to 125% of the Minimum Quarterly Distribution; and

(2) then, 99% to the holders of Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been

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distributed in respect of each Class B Unit Outstanding as of the last day of such quarter an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter.

(B) notwithstanding anything to the contrary in Section 5.4, if a Cumulative Class B Unit Arrearage exists on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(d), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 99% to the holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

iii) the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 125% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 99% to the holders of the Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.3, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

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c) Voting Rights. The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, (i) for the purposes of the definition of “Outstanding” such Class B Units shall be deemed to be “Units,” but not “Common Units,” for all purposes thereof and (ii) with respect to the Conversion Approval (if not already obtained), none of the Class B Units shall be deemed Outstanding as of the record date for such vote or be entitled to vote . Each Class B Unit will be entitled to one vote on each matter with respect to which such Class B Unit is entitled to be voted.”

b) If, the Conversion Approval has been obtained and a GP Removal Event occurs, then notwithstanding Section 4.11, automatically and without further action and, effective as of the GP Removal Date, Section 4.10(f)(ii) shall be deemed to be deleted in its entirety, automatically and without further action, and Sections 4.10(b) and 4.10(c) hereof will be deemed to be amended in their entirety, automatically and without further action, as follows:

“b) Rights Associated with Class B Units. Prior to the conversion of the Class B Units as set forth in Section 4.10(f) hereof:

i) subject to the provisions of Section 5.1(d)(iii)(A) and paragraphs (ii) and (iii) below, all of items Partnership income, gain, loss, deduction and credit shall be allocated to the Class B Units to the same extent as such items would be allocated if such Class B Units were Common Units then Outstanding, and the allocations to Class B Units shall have the same order of priority relative to allocations on the Common Units; and

ii) (A) the Class B Units shall have the right to share in Partnership quarterly cash distributions based on 125% of the amount of any Partnership distribution that would be made to each Common Unit so that the amount of any Partnership distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit (such additional 25% pro rated for the quarter in which the GP Removal Date occurs), and the right of holders of Class B Units to receive distributions shall have the same order of priority relative to distributions on the Common Units; and,

(B) notwithstanding anything to the contrary in Section 5.4, if a Cumulative Class B Unit Arrearage existed on the date of the expiration of the Class B Subordination Period, prior to any distribution pursuant to Section 5.4(d), irrespective of whether any such Class B Units are then Outstanding, Available Cash shall be distributed 99% to the

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holders of record of the applicable Class B Units as of the expiration of the Class B Subordination Period and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until there has been distributed in respect of each Class B Unit an amount equal to the Cumulative Class B Unit Arrearage, if any, existing with respect to such quarter. This distribution shall not be deemed a distribution on a Common Unit, but the satisfaction of prior entitlements of the holders of Class B Units as of the expiration of the Class B Subordination Period. For the taxable year in which such distribution is made, if not previously allocated, each Person receiving such cash distribution shall be allocated items of gross income in an amount equal to such distribution as provided in Section 5.1(d)(iii)(A); and

iii) the Class B Units shall have rights upon dissolution and liquidation of the Partnership, including the right to share in any liquidating distributions, that are based on 125% of the liquidating distributions that would be made to the Common Units so that the amount of any liquidating distribution to each Class B Unit will equal 125% of the amount of such distribution to each Common Unit, and, in addition, following any allocation made pursuant to Section 5.1(c)(i)(B) and before an allocation is made pursuant to Section 5.1(c)(i)(C), any remaining Net Termination Gain shall be allocated 99% to the holders of the Class B Units and 1% to the General Partners, in accordance with their relative General Partner Percentage Interests, until each such holder of a Class B Unit has been allocated Net Termination Gain equal to any then existing Cumulative Class B Unit Arrearage with respect to such Class B Unit, and accordingly, notwithstanding anything to the contrary in this Agreement, prior to any distribution under Section 14.3, the Capital Account of each Partner shall be adjusted to give effect to the foregoing liquidation rights.

c) Voting Rights. The Class B Units will have such voting rights pursuant to the Partnership Agreement as such Class B Units would have if they were Common Units that were then Outstanding except that, for the purposes of the definition of “Outstanding” such Class B Units shall be deemed to be “Units”, but not “Common Units” for all purposes thereof. Each Class B Unit will be entitled to one vote on each matter with respect to which such Class B Unit is entitled to be voted.”

c) If a GP Removal Event has occurred and any of the Class B Units are converted into Common Units pursuant to Section 4.10(f)(i), then, for the quarter in which such conversion occurs, concurrently with the distribution made in

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accordance with Article V of the Partnership Agreement of Available Cash, with respect to the quarter in which the conversion of the Class B Units is effected, a distribution shall be paid to each holder of record of the applicable Class B Units as of the effective date of such conversion, with the amount of such distribution for each such Class B Unit to be equal to the product of (a) 25% of the amount to be distributed in respect of such quarter to each Common Unit times (it being agreed that each such Common Unit issued upon conversion shall be entitled to the full dividend payable to the holder of a Common Unit) (b) a fraction, of which (i) the numerator is the number of days in such quarter up to but excluding the date of such conversion, and (ii) the denominator is the total number of days in such quarter (the foregoing amount being referred to as an “Excess Payment”). For the taxable year in which an Excess Payment is made, each holder of a Class B Unit shall be allocated items of gross income with respect to such taxable year in an amount equal to the Excess Payment distributed to it as provided in Section 5.1(d)(iii)(A).

Section 4.13 Change of New York Stock Exchange Rules or Interpretations. If at any time (i) the rules of the National Securities Exchange on which the Common Units are listed or admitted to trading or the staff interpretations of such rules are changed, or (ii) facts and circumstances arise so that the Conversion Approval is no longer required as a condition to the listing of the Common Units that would be issued upon any conversion of any Class B Units into Common Units as provided in Section 4.10(f)(i) hereof as determined by the Partnership Policy Committee (the date that the Partnership Policy Committee makes such determination, the “Conversion Approval Termination Date”) and the Amendment Approval has been obtained, then, unless the provisions of Section 4.12 shall already be in effect, the terms of such Class B Units will be changed so that each such Class B Unit is converted (without further action or any vote of any securityholders of the Partnership) into one Common Unit (subject to appropriate adjustment in the event of any split-up, combination or similar event affecting the Common Units).

B. Agreement in Effect. Except as hereby amended, the Partnership Agreement shall remain in full force and effect.

C. Applicable Law. This Amendment shall be construed in accordance with and governed by the laws of the State of Delaware.

D. Invalidity of Provisions. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be effected thereby.

E. Counterparts. This Amendment may be executed in counterparts, all of which together shall constitute an agreement binding on all parties thereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.

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General Partners:

Northern Plains Natural Gas Company, LLC

Name:

Title:

Northwest Border Pipeline Company

Name:

Title:

Pan Border Gas Company, LLC

Name:

Title:

Limited Partners:

All Limited Partners now and hereafter admitted as limited partner of the Partnership, pursuant to Powers of Attorney now and hereafter executed in favor of, and granted and delivered to, the Members of the Partnership Policy Committee.

Chairman of the Partnership Policy Committee, as attorney-in-fact for all Limited Partners pursuant to the Powers of Attorney granted in Section 1.4

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ANNEX A

1. The following definitions shall be deleted in their entirety from Article II:

“Gross General Partner Percentage Interest”; and

“Hypothetical Equity Value”.

2. Section 13.2 shall be amended to read in its entirety as follows:

“Section 13.2 Removal of the General Partner.

The General Partner may be removed if such removal is approved by the Unitholders holding at least 66 ²/3% of the Outstanding Units (including for purposes of such determination Units held by the General Partner and its Affiliates) voting as a single class. Any such action by such holders for removal of the General Partner must also provide for the election of a successor General Partner by the Unitholders holding a majority of the outstanding Common Units voting as a class (including for purposes of such determination Units held by the General Partner and its Affiliates). Such removal shall be effective immediately following the admission of a successor General Partner. The removal of the General Partner shall also automatically constitute the removal of the General Partner as general partner or managing member, to the extent applicable, of the Intermediate Partnership and any other Group Members of which the General Partner is a general partner or managing member. If a Person is elected as a successor General Partner in accordance with the terms of this Section 13.2, such Person shall, upon admission pursuant to Article XII, automatically become a successor general partner or managing member, to the extent applicable, of the Intermediate Partnership and any other Group Members of which the General Partner is a general partner of a managing member. The right of the holders of Outstanding Units to remove the General Partner shall not exist or be exercised unless the Partnership has received an opinion opining as to the matters covered by a Withdrawal Opinion of Counsel. Any successor General Partner elected in accordance with the terms of this Section 13.2 shall be subject to the provisions of Section 12.3.”

3. The second paragraph of Section 13.3(a) shall be amended to read in its entirety as follows:

“For purposes of this Section 13.3(a), the fair market value of the Departing Partner’s Combined Interest shall be determined by agreement between the Departing Partner and its successor or, failing agreement within 30 days after the effective date of such Departing Partner’s departure, by an independent investment banking firm or other independent expert selected by the Departing Partner and its successor, which, in turn, may rely on other experts, and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing Partner shall designate an independent investment banking firm or other independent expert, the Departing Partner’s successor shall designate an independent investment banking firm or other independent expert, which third independent investment

banking firm or other independent expert shall determine the fair market value of the Combined Interest of the Departing Partner. In making its determination, such third independent investment banking firm or other independent expert may consider the then current trading price of Units on any National Securities Exchange on which Units are then listed or admitted to trading, the value of the Partnership’s assets, the rights and obligations of the Departing Partner and other factors it may deem relevant.”

4. Section 13.3(b) shall be amended to read in its entirety as follows:

(b) If the Combined Interest of a Departing Partner is not acquired by one or more of the remaining General Partners pursuant to Section 11.7(b) or by a successor in the manner set forth in Section 13.3(a), the Departing Partner shall become a Limited Partner and the Combined Interest shall be converted into Common Units based on the fair market value of such Combined Interest as calculated pursuant to Section 13.3(a) and the Current Market Price of the Common Units as of the effective date of the departure of such Departing Partner. Any successor General Partner shall indemnify the Departing Partner as to all debts and liabilities of the Partnership arising on or after the date on which the Departing Partner becomes a Limited Partner. For purposes of this Agreement, conversion of a General Partner’s Partnership Interest as a general partner in the Partnership to Common Units will be characterized as if such General Partner contributed its Partnership Interest to the Partnership in exchange for the newly-issued Common Units.

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EX-10.43

Exhibit 10.43

RESTRICTED UNIT AWARD AGREEMENT

This instrument is issued as of the 19^th day of January, 2006, by ONEOK, Inc., an Oklahoma corporation, (hereinafter referred to as “Corporation”), to «Officer_Name» (hereinafter referred to as “Grantee”), an employee of the Corporation or a division or subsidiary thereof, pursuant to the terms of the ONEOK, Inc. Equity Compensation Plan, effective February 17, 2005, (hereinafter referred to as the “Plan”).

1. Restricted Unit Award. This instrument and that certain Notice of Restricted Unit Award and Agreement, dated January 19, 2006, a copy of which is attached hereto and incorporated herein by reference (the “Notice of Restricted Unit Award and Agreement”) constitute evidence of the issuance and grant of a Restricted Unit Award to the Grantee by the Corporation under the Plan of «No_of_Restricted_Units» Restricted Units that shall entitle the Grantee to receive shares of the Corporation’s Common Stock (hereinafter referred to as “Common Stock”) all subject to the terms, provisions, and conditions of this instrument (including, without limitation, the restrictions stated in paragraph 5, below) and of the Plan, which are incorporated herein by reference (hereinafter referred to as “Award”). This instrument, when executed by the Grantee, together with the Notice of Restricted Unit Award and Agreement constitute an agreement between the Corporation and the Grantee. Notwithstanding the foregoing, should there be any inconsistency between the provisions of this instrument and the terms of the Award stated in the resolutions and records of the Board of Directors of the Corporation, or the Plan, the provisions of such resolutions and records and of the Plan shall control. The grant of Restricted Units to the Grantee shall be effective in the manner and to the extent provided in this instrument and the Plan as to all or any part of the shares of Common Stock subject to the grant from time to time during the period stated herein.

2. Plan. The Award is issued pursuant to the Plan, as approved by the Shareholders of the Corporation, which provides that a specific aggregate number of shares of Common Stock of the Corporation may be issued or transferred pursuant to Stock Incentives under the Plan. The Plan specifies the authority of the Corporation, its Board of Directors, and a committee of the Board of Directors to select employees to be granted Stock Incentives. The Executive Compensation Committee of the Board of Directors (hereinafter referred to as the “Committee”) is authorized to administer the Plan with respect to the Award and the grant of the Award made to the Grantee pursuant to the Plan. Except where expressly stated or clearly indicated otherwise by the terms of this instrument, all terms, words and phrases used herein shall have the same meaning and effect as stated in the Plan. The Grantee has been provided a complete copy of the Plan with this instrument.

3. Grantee’s Agreement Concerning Award and Employment. In consideration of the Corporation’s granting the Award of Restricted Units as incentive compensation to Grantee pursuant to this instrument, the Grantee by acceptance thereof, and signing this instrument evidencing its terms, agrees to such terms and to continue to contribute and perform service in the employ of the Corporation or a division or subsidiary thereof at the direction, will and pleasure of the Corporation and the Board of Directors. Provided, however, neither the foregoing agreement of the Grantee in this paragraph 3, nor any other provision in the Plan shall confer on the Grantee any right to continue in the employ of the Corporation (or a division or

subsidiary thereof), or interfere in any way with the right of the Corporation (or such division or subsidiary) to terminate the Grantee’s employment at any time.

4. Registration of Stock; Grantee’s Representation With Respect To Acquiring for Investment. It is intended by the Corporation that the Plan and shares of Common Stock covered by the Award issued and granted to the Grantee referred to in paragraph 1, above, are to be registered under the Securities Act of 1933, as amended, prior to the date of the grant; provided, that in the event such registration is for any reason not made effective for such shares, the Grantee agrees, for the Grantee, and for the Grantee’s heirs and legal representatives by inheritance or bequest, that all shares acquired pursuant to the grant will be acquired for investment and not with a view to, or for sale or tender in connection with the distribution of any part thereof, including any transfer or distribution of such shares by the Grantee pursuant to the grant and this instrument or as otherwise allowed by the Plan.

5. Restrictions; Restricted Period; Transfer of Common Stock to Grantee. The issue and grant of the Award to the Grantee stated in paragraph 1, above, are subject to the following terms and conditions:

(a) The ownership and transfer of the Restricted Units granted to the Grantee shall be restricted during the period beginning January 19, 2006, the date of the grant thereof (hereinafter referred to as “Grant Date”) and ending on January 19, 2009, (which period is hereinafter referred to as “Restricted Period”), as herein provided.

(b) The Restricted Units, or any Common Stock or cash to be paid or transferred to Grantee pursuant to the Award may not be sold, assigned, transferred, pledged, encumbered or otherwise disposed of by Grantee or any other person except as provided in this instrument and the Plan until the expiration of the Restricted Period.

(c) The Grantee shall earn and become vested and entitled to the Restricted Units granted by this Award under paragraph 1, above, at the expiration of the Restricted Period. Upon expiration of the Restricted Period, the Grantee shall be entitled to receive, and the Corporation shall issue to Grantee one (1) share of Common Stock for each Restricted Unit that becomes earned by and vested in the Grantee pursuant to the Award.

(d) The Grantee shall become vested in the Restricted Units granted to the Grantee hereunder and Common Stock paid and transferred pursuant to the Award free and clear of all restrictions imposed by the Award if the Grantee’s employment by the Corporation (or a division or Subsidiary thereof) does not terminate during the Restricted Period; provided, that the Grantee shall become partially vested in the Restricted Units and Common Stock payable pursuant to the Award and the restrictions imposed by the Award shall partially cease to apply in certain events to the extent described in paragraph 6(d), below.

(e) If the Grantee’s employment with the Corporation (or a division or Subsidiary thereof) terminates prior to the end of the Restricted Period by reason of (i) the Grantee’s voluntary termination of the Grantee’s employment with the Corporation (or a division or Subsidiary), or (ii) the involuntary Termination for Cause by the Corporation of the Grantee’s employment with the Corporation (or a division or Subsidiary), the Grantee shall forfeit all the

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Grantee’s right, title or interest in the Restricted Units, and to any Common Stock payable pursuant to the Award; and the Grantee shall forfeit such right, title and interest in the Restricted Units, and to any Common Stock payable pursuant to the Award regardless of the reason for such termination of employment. Any such termination of employment of the Grantee described in the preceding sentence shall not be deemed to occur by reason of transfer of employment of the Grantee by or between the Corporation and any division or Subsidiary of the Corporation.

(f) The Grantee shall not be entitled to vote any shares of Common Stock that may be issued to the Grantee pursuant to the Award prior to the end of the Restricted Period and actual issuance of such Common Stock to the Grantee pursuant to the Award.

(g) No dividends with respect to shares of Common Stock that may be issued to the Grantee under the Award shall accrue or become payable to the Grantee prior to the end of the Restricted Period and issuance of such Common Stock to Grantee pursuant to the Award.

6. Transferability of Restricted Units, Cash or Common Stock; Termination of Employment.

(a) Except as provided in subparagraph (b) of this paragraph 6, below, this instrument, the Grantee’s rights and obligations hereunder, and the Restricted Units granted hereunder shall not be transferable by the Grantee otherwise than by will or the laws of descent and distribution which apply to the Grantee’s estate.

(b) Notwithstanding the foregoing, the Grantee may transfer any part or all of the Grantee’s rights in the Restricted Units to members of the Grantee’s immediate family, or to one or more trusts for the benefit of such immediate family members, or partnerships in which such immediate family members are the only partners if the Grantee does not receive any consideration for the transfer. In the event of any such transfer, Restricted Units shall continue to be subject to the same terms and conditions otherwise applicable hereunder and under the Plan immediately prior to its transfer, except that such rights shall not be further transferable by the transferee inter vivos, except for transfer back to the original Grantee. For any such transfer to be effective, the Grantee must provide prior written notice thereof to the Committee, unless otherwise authorized and approved by the Committee, in its sole discretion; and the Grantee shall furnish to the Committee such information as it may request with respect to the transferee and the terms and conditions of any such transfer. For purposes of transfer of this grant under this subparagraph (b), “immediate family” shall mean the Grantee’s spouse, children and grandchildren.

(c) Notwithstanding anything to the contrary expressed or implied herein (including without limitation, the restrictions stated in paragraph 5, above, applicable to the Restricted Units), all rights and interest of the Grantee in the Restricted Units shall become invalid and wholly terminated and forfeited upon (i) the Grantee’s voluntary termination of the Grantee’s employment with the Corporation (or a division or Subsidiary), or (ii) the involuntary Termination for Cause by the Corporation of the Grantee’s employment with the Corporation (or a division or Subsidiary).

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(d) Notwithstanding the foregoing provisions, in the event of termination of the Grantee’s employment with the Corporation (or a division or Subsidiary) during the Restricted Period by reason of (i) the involuntary termination of the Grantee’s employment with the Corporation (or a division or Subsidiary) other than a Termination for Cause (ii) the retirement of the Grantee, (iii) the Total Disability of the Grantee, or (iv) the Grantee’s death while still employed by the Corporation (or a division or Subsidiary), then partial vesting shall be allowed as provided in this paragraph 6(d) and the Grantee shall become vested in and receive, in the event of any such involuntary termination of employment other than a Termination for Cause, retirement or Total Disability, and the legatees, or personal representatives or heirs of the Grantee shall be vested in and entitled to receive, in the event of the Grantee’s death, the percentage of the Restricted Units which is determined by dividing the number of full months which have elapsed under the Restricted Period at the time of such termination of employment by the number of full months in the Restricted Period.

(e) The Grantee may designate a Beneficiary to receive any rights of the Grantee which may become vested in the event of the death of the Grantee under procedures and in the form established by the Committee; and in the absence of such designation of a beneficiary, any such rights shall be deemed to be transferred to the estate of the Grantee.

(f) For purposes of the Award to the Grantee and this instrument, an involuntary “Termination for Cause” of the Grantee’s employment with and by the Corporation (or a division or Subsidiary) shall mean that the Corporation (or a division or Subsidiary) has terminated such employment by reason of (i) the Grantee’s conviction in a court of law of a felony, or any crime or offense involving misuse or misappropriation of money or property, (ii) the Grantee’s violation of any covenant, agreement or obligation not to disclose confidential information regarding the business of the Corporation (or a division or Subsidiary), (iii) any violation by the Grantee of any covenant not to compete with the Corporation (or a division or Subsidiary), (iv) any act of dishonesty by the Grantee which adversely effects the business of the Corporation (or a division or Subsidiary), (v) any willful or intentional act of the Grantee which adversely affects the business of, or reflects unfavorably on the reputation of the Corporation (or a division or Subsidiary); (vi) the Grantee’s use of alcohol or drugs which interferes with the Grantee’s performance of duties as an employee of the Corporation (or a division or Subsidiary), or (vii) the Grantee’s failure or refusal to perform the specific directives of the Corporation’s Board of Directors, or its officers which directives are consistent with the scope and nature of the Grantee’s duties and responsibilities with the existence and occurrence of all of such causes to be determined by the Corporation, in its sole discretion; provided, that nothing contained in the foregoing provisions of this paragraph shall be deemed to interfere in any way with the right of the Corporation (or a division or Subsidiary), which is hereby acknowledged, to terminate the Grantee’s employment at any time without cause.

(g) For purposes of this instrument and the Award, “Total Disability” shall mean that the Grantee is permanently and totally disabled and unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, and has established such disability to the extent and in the manner and form as may be required under the provisions of Section 22(e) of

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the Internal Revenue Code of 1986, as amended (or corresponding section of any future federal tax code), and regulations thereunder.

7. Administration of Restricted Unit Award. The grant of the Award shall be subject to such other rules and requirements as the Committee, in its sole discretion, may determine to be appropriate with respect to administration thereof and the restrictions made applicable to the Grantee and the Restricted Units during the Restricted Period. This instrument and the rights and obligations of the parties involved, shall be subject to interpretation and construction by the Committee to the same extent and with the same effect as the Committee actions under pertinent provisions of the Plan. The Grantee shall take all actions and execute and deliver all documents as may from time to time be requested by the Committee in connection with such restrictions and in furtherance hereof. The Grantee agrees to pay to the Corporation any applicable federal, state, or local income, employment, social security, medicare, or other withholding tax obligation arising in connection with the grant of the Award to the Grantee; and the Corporation shall have the right, without the Grantee’s prior approval or direction, to satisfy such withholding tax by withholding all or any part of the Common Stock that would otherwise be transferred and delivered to the Grantee, with any shares of Common Stock so withheld to be valued at the Fair Market Value (as defined in the Plan) on the date of such withholding. The Grantee, with the consent of the Corporation, may satisfy such withholding tax by delivery and transfer to the Corporation of shares of Common Stock previously owned by the Grantee, with any shares so delivered and transferred to be valued at the Fair Market Value on the date of such delivery.

8. Adjustment Provisions. It is understood that, prior to the expiration of the Restricted Period, certain changes in capitalization of the Corporation may occur. It is, therefore, understood and agreed with respect to changes in capitalization that:

(a) If a stock dividend is declared on the Common Stock of the Corporation, there shall be added to the number of Restricted Units described in paragraph 1 of this instrument, the number of Restricted Units which the Grantee would have been entitled to if the Grantee had been the fully vested and unrestricted owner of the number of Restricted Units then held under the Award granted, but not theretofore received without restriction; provided, however, that the additional Restricted Units shall be subject to all terms and provisions of this instrument (including, without limitation, the restrictions stated in paragraph 5, above), and in making such adjustments, no fractional Restricted Units shall be awarded, and the Grantee shall be entitled to receive only the number of full Restricted Units to which the Grantee may be entitled by reason of such adjustment at the adjusted grant price per share.

(b) In the event of an increase in the outstanding shares of Common Stock of the Corporation, effectuated for the purpose of acquiring properties or securities of another corporation or business enterprise, there shall be no increase in the number of shares of Restricted Units which are the subject matter of the Award evidenced by this instrument as a result of such acquisition.

(c) In the event of an increase or decrease in the number of outstanding shares of Common Stock of the Corporation through recapitalization, reclassification, stock split-ups, consolidation of shares, changes in par value and the like, an appropriate adjustment shall be made in the number of Restricted Units described in paragraph 1 of this instrument, by

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increasing or decreasing the number of Restricted Units, as may be required to enable the Grantee to acquire the same proportionate stockholdings as the grant of the Award would originally have provided. Provided, however, that any additional Restricted Units shall be subject to all terms and provisions of this instrument (including, without limitation, the restrictions stated in paragraph 5, above), and that in making such adjustments, no fractional Restricted Units shall be awarded, and the Grantee shall be entitled to receive only the number of full Restricted Units to which the Grantee may be entitled by reason of such adjustment.

(d) Notwithstanding any provision to the contrary stated herein, to the extent Restricted Units are still restricted and not vested in Grantee at the time of a Change in Control with respect to the Corporation, then pursuant to the provisions of the Plan, they shall become fully vested and completely unrestricted and free and clear of any restrictions stated herein at that time; provided, that if such Change in Control occurs less than six (6) months after the date of the grant of Restricted Units to the Grantee, then Restricted Units shall become fully vested and completely unrestricted and free and clear of any restrictions stated herein at the time of such Change in Control only if the Grantee agrees in writing, if requested by the Corporation in writing, to remain in the employ of the Corporation or a division or subsidiary of the Corporation at least through the date which is six (6) months after the date the grant was made with substantially the same title, duties, authority, reporting relationships, and compensation as on the day immediately preceding the Change in Control. The provisions of this subparagraph (d) shall be applied in addition to, and shall not reduce, modify, or change any other obligation or right of the Grantee otherwise provided for in paragraph 3, above, concerning the Grantee’s continued employment with the Corporation or the termination thereof. If the Restricted Units become subject to this subparagraph (d), they shall become fully vested in the Grantee and nonforfeitable. Such Restricted Units are subject to the provisions of the Plan authorizing the Corporation, or a committee of its Board of Directors, to provide in advance or at the time of a Change in Control for cash to be paid in settlement of the Restricted Units, all subject to such terms and conditions as the Corporation or the Committee, in its sole discretion, may determine and impose. For purposes of this subparagraph (d), the term “Change in Control” shall have the same meaning as provided in the definition of that term stated in the Plan, including any amendments thereof which may be made from time to time in the future pursuant to the provisions of the Plan, with any amended definition of such term to apply to all events thereafter coming within the amended meaning.

9. Stock Reserved. The Corporation shall at all times during the term of the Award reserve and keep available such number of shares of its Common Stock as will be sufficient to satisfy the Award issued and granted to Grantee and the terms stated in this instrument, and shall pay all original issue taxes, if any, on the transfer of the Common Stock to the Grantee and all other fees and expenses necessarily incurred by the Corporation in connection therewith.

10. Rights of Shareholder. Except as otherwise provided in this instrument, the Grantee shall have no rights as a shareholder of the Corporation in respect of the Restricted Units or Common Stock for which the Award is granted; and the Grantee shall not be considered or treated as a record owner of shares of Common Stock with respect to the Restricted Units until the Common Stock is issued to Grantee and no longer subject to any of the restrictions imposed under the Award indicated in this instrument, and Common Stock is actually issued and transferred to Grantee.

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11. Entire Agreement. This instrument contains the entire terms of the Award, and may not be changed orally or other than by a written instrument issued and approved by the Corporation pursuant to the Plan. This instrument supersedes any agreements or understandings that may have previously existed, and there are no other agreements or understandings, relating to its subject matter.

12. Successors and Assigns. The Award evidenced by this instrument shall inure to the benefit of and be binding upon the heirs, legatees, legal representatives, successors, and assigns of the parties hereto.

The Grantee hereby acknowledges receipt of this instrument, the Notice of Restricted Unit Award Agreement and a copy of the Plan, and accepts the Award under the terms and conditions stated in this instrument, subject to all terms and provisions of the Plan, by signing this instrument in duplicate originals, as of the date first stated above.

Date	«Officer_Name»
	Grantee

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EX-10.44

Exhibit 10.44

PERFORMANCE UNIT AWARD AGREEMENT

This instrument is issued as of the 19th day of January, 2006, by ONEOK, Inc., an Oklahoma corporation, (hereinafter referred to as “Corporation”), to «Officer_Name» (hereinafter referred to as “Grantee”), an employee of the Corporation or a division or subsidiary thereof, pursuant to the terms of the ONEOK, Inc. Equity Compensation Plan, effective February 17, 2005, (hereinafter referred to as the “Plan”).

1. Performance Unit Award. This instrument and that certain Notice of Performance Unit Award and Agreement, dated January 19, 2006, a copy of which is attached hereto and incorporated herein by reference (the “Notice of Performance Unit Award and Agreement”), constitute evidence of the issuance and grant of a Performance Unit Award (hereinafter referred to as “Award”) of «No_of_Perf_Units» Performance Units to the Grantee by the Corporation that shall entitle the Grantee to receive shares of the Corporation’s Common Stock (hereinafter also referred to as “Common Stock”) or cash, all pursuant and subject to the terms, provisions, and conditions of this instrument (including, without limitation, the conditions, restrictions and limitations stated in paragraph 5, below) and the terms and provisions of the Plan, which are incorporated herein by reference. This instrument, when executed by the Grantee, together with the Notice of Performance Unit Award and Agreement constitute an agreement between the Corporation and the Grantee. Notwithstanding the foregoing, should there be any inconsistency between the provisions of this instrument and the terms and provisions of the Award stated in the resolutions and records of the Board of Directors of the Corporation providing for the Award or provisions of the Plan, the provisions of such resolutions and records and of the Plan shall control. The grant of such Performance Units to the Grantee shall be effective in the manner and to the extent provided in this instrument and the Plan as to all or any part of the shares of Common Stock subject to the grant from time to time during the period stated herein.

2. Plan. The Award is made to the Grantee pursuant to the terms and provisions of the Plan, as approved by the Shareholders of the Corporation, which Plan provides that a specific aggregate number of shares of Common Stock of the Corporation may be issued or transferred pursuant to Stock Incentives under the Plan. The Plan specifies the authority of the Corporation, its Board of Directors, and a committee of the Board of Directors to select employees to be granted Stock Incentives under the Plan. The Executive Compensation Committee of the Board of Directors (hereinafter referred to as the “Committee”) is authorized to administer the Plan with respect to this instrument and the grant of the Award made to the Grantee pursuant to the Plan. Except where expressly stated or clearly indicated otherwise by the terms of this instrument, all terms, words and phrases used herein shall have the same meaning and effect as stated in the Plan. The Grantee has been provided a complete copy of the Plan with this instrument.

3. Grantee’s Agreement Concerning Award and Employment. In consideration of the Corporation’s granting of the Award of Performance Units and entitlement to shares of Common Stock, as incentive compensation to Grantee pursuant to this instrument, the Grantee, by acceptance thereof, and signing this instrument evidencing its terms, agrees to such terms and to continue to contribute and perform service in the employ of the Corporation or a division or subsidiary thereof at the direction, will and pleasure of the Corporation and the Board of

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Directors. Provided, however, neither the foregoing agreement of the Grantee in this paragraph 3, nor any other provision in this instrument shall confer on the Grantee any right to continue in the employ of the Corporation (or a division or Subsidiary thereof), or interfere in any way with the right of the Corporation (or such division or Subsidiary) to terminate the Grantee’s employment at any time.

4. Registration of Stock; Grantee’s Representation With Respect To Acquiring for Investment. It is intended by the Corporation that the Plan and the shares of Common Stock covered by the Award issued and granted to the Grantee referred to in paragraph 1, above, are to be registered under the Securities Act of 1933, as amended, prior to the date of the grant; provided, that in the event such registration is for any reason not made effective for such shares, the Grantee agrees, for the Grantee, and for the Grantee’s permissible assignees, heirs and legal representatives by inheritance or bequest, that all shares acquired pursuant to the grant will be acquired for investment and not with a view to, or for sale or tender in connection with the distribution of any part thereof, including any transfer or distribution of such shares by the Grantee pursuant to the grant and this instrument or as otherwise allowed by the Plan.

5. Terms and Conditions of Award; Transfer of Stock to Grantee. The issue and grant of the Award of Performance Units to the Grantee stated in paragraph 1, above, shall be subject to the following terms and conditions:

(a) The right to ownership and transfer of the Performance Units granted to the Grantee shall be subject to the Award during the period beginning January 19, 2006, the date of the grant thereof (hereinafter referred to as “Grant Date”) and ending on January 19, 2009, (which period is hereinafter referred to as “Performance Period”), as herein provided.

(b) The Grantee shall earn and become entitled to receive a percentage of the number of Performance Units granted under paragraph 1, above, at the expiration of the Performance Period as provided for in Table A and Table B, attached hereto, based upon the Corporation’s ranking for Total Stockholder Return in the ONEOK Peer Group listed in Table C attached hereto, all as determined by the Committee, in its sole discretion.

(c) Upon expiration of the Performance Period, the Grantee shall be entitled to receive one (1) share of Common Stock for each Performance Unit that becomes earned by and vested in the Grantee pursuant to the Award; provided, no fractional shares shall be issued and any fractional shall be paid to the Grantee in cash.

(d) The Grantee shall not be entitled to vote any shares of Common Stock of the Corporation, or otherwise have any right or interest as a Common Stock shareholder by reason of the Performance Unit Award granted under the Award during the Performance Period, and prior to the actual transfer of Common Stock to the Grantee pursuant to the Award.

(e) No dividends or any similar amounts shall be payable or paid with respect to Performance Units, Common Stock earned under the Award, or the Award during or for the Performance Period.

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(f) The Grantee shall have no right to receive cash or acquire shares of Common Stock of the Corporation under the Award other than the cash and Common Stock attributable to the Performance Units earned by the Grantee to the extent provided for herein.

(g) The Common Stock or cash to which the Grantee becomes entitled shall be paid and transferred to the Grantee only upon the determination of the Performance Units earned by the Grantee at the expiration of the Performance Period. The payment and transfer of such Common Stock or cash to the Grantee shall be made as soon as reasonably practicable after the expiration of the Performance Period, as determined and directed by the Committee, in its sole discretion.

(h) The Performance Units or any Common Stock or cash to be paid or transferred to Grantee pursuant to the Award may not be sold, assigned, transferred, pledged, encumbered or otherwise disposed of by Grantee or any other person except as provided in the Award and the Plan until the expiration of the Performance Period and payment and transfer of Common Stock or cash pursuant to the Agreement and Plan.

(i) The Grantee shall become entitled to receive Performance Units earned, and shall become owner of the shares of Common Stock or cash paid and transferred to the Grantee pursuant to the Award free and clear of all terms, conditions and restrictions imposed by the Award if the Grantee’s employment by the Corporation does not terminate during the Performance Period; provided, that the Grantee shall become entitled to a prorated amount of Performance Units and the terms and conditions imposed by the Award shall partially cease to apply in certain events to the extent described in paragraph 6(d), below.

(j) If the Grantee’s employment with the Corporation (or a division or Subsidiary thereof) terminates prior to the end of the Performance Period other than by reason of retirement, Total Disability or death, the Grantee shall forfeit all of the Grantee’s right, title or interest in the Performance Units; and the Grantee shall forfeit such right, title and interest in the Performance Units regardless of the reason for such termination of employment. Any such termination of employment of the Grantee described in the preceding sentence shall not be deemed to occur by reason of transfer of employment of the Grantee by or between the Corporation and any division or Subsidiary of the Corporation. Upon a forfeiture the Performance Units forfeited shall be cancelled for all purposes.

6. Transferability of Performance Units; Termination of Employment.

(a) Except as provided in subparagraph (b) of this paragraph 6, below, the Award, the Grantee’s rights and obligations hereunder and the Performance Units granted hereunder shall not be transferable by the Grantee otherwise than by will or the laws of descent and distribution which apply to the Grantee’s estate.

(b) Notwithstanding the foregoing, the Grantee may transfer any part or all of the Grantee’s rights in and to the Performance Units to members of the Grantee’s immediate family, or to one or more trusts for the benefit of such immediate family members, or partnerships in which such immediate family members are the only partners if the Grantee does

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not receive any consideration for the transfer. In the event of any such transfer, Performance Units shall continue to be subject to the same terms and conditions otherwise applicable hereunder and under the Plan immediately prior to its transfer, except that this stock shall not be further transferable by the transferee inter vivos, except for transfer back to the original Grantee. For any such transfer to be effective, the Grantee must provide prior written notice thereof to the Committee, unless otherwise authorized and approved by the Committee, in its sole discretion; and the Grantee shall furnish to the Committee such information as it may request with respect to the transferee and the terms and conditions of any such transfer. For purposes of transfer of this grant under this subparagraph (b), “immediate family” shall mean the Grantee’s spouse, children and grandchildren.

(c) Notwithstanding anything to the contrary expressed or implied herein (including without limitation, the restrictions stated in paragraph 5, above, applicable to the Performance Units), all rights and interest of the Grantee in the Performance Units shall become invalid and wholly terminated and forfeited upon the termination of the Grantee’s employment with the Corporation (or a division or Subsidiary), during the Performance Period other than a termination by reason of retirement, Total Disability or death of the Grantee.

(d) Notwithstanding the foregoing provisions, in the event of termination of the Grantee’s employment with the Corporation (or a division or Subsidiary) during the Performance Period by reason of (i) the retirement of the Grantee, (ii) the Total Disability of the Grantee, or (iii) the Grantee’s death while still employed by the Corporation (or a division or Subsidiary), then an adjusted and prorated entitlement to Performance Units shall be allowed as provided in this paragraph 6(d). The Grantee shall become vested in and entitled receive, in the event of any such retirement or Total Disability, and the legatees, or personal representatives or heirs of the Grantee shall be vested in and entitled to receive, in the event of the Grantee’s death, a prorated award of Performance Units earned in the Performance Period following such retirement, Total Disability or death. The award shall be a prorated amount of Performance Units equal to the total of Performance Units earned under the Award at the end of the Performance Period for the Grantee, multiplied by a fraction of which the numerator shall be the number of full months which have elapsed under the Performance Period at the time of such termination of employment by reason of retirement, Total Disability or death, and the denominator of which shall be the total number of months in the Performance Period. The Grantee, or personal representatives or heirs of the Grantee, as the case may be, shall become entitled to receive such prorated award at the expiration of the Performance Period and following application of the performance criteria as provided in the Award and determined by the Committee.

(e) The Grantee may designate a Beneficiary to receive any rights of the Grantee which may become vested in the event of the death of the Grantee under procedures and in the form established by the Committee; and in the absence of such designation of a Beneficiary, any such rights shall be deemed to be transferred to the estate of the Grantee.

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(f) For purposes of the Award and this instrument, “Total Disability” shall mean that the Grantee is permanently and totally disabled and unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, and has established such disability to the extent and in the manner and form as may be required under the provisions of Section 22(e) of the Internal Revenue Code of 1986, as amended (or corresponding section of any future federal tax code), and regulations thereunder.

7. Administration of Performance Unit Award. The grant of the Award shall be subject to such other rules and requirements as the Committee, in its sole discretion, may determine to be appropriate with respect to administration thereof and the terms and conditions made applicable to the Grantee and the Performance Units during the Performance Period. The Award, this instrument, and the rights and obligations of the parties thereto shall be subject to interpretation and construction by the Committee to the same extent and with the same effect as the Committee actions under pertinent provisions of the Plan. The Grantee shall take all actions and execute and deliver all documents as may from time to time be requested by the Committee in connection with such restrictions and in furtherance hereof. The Grantee agrees to pay to the Corporation any applicable federal, state, or local income, employment, social security, medicare, or other withholding tax obligation arising in connection with the grant of the Award to the Grantee; and the Corporation shall have the right, without the Grantee’s prior approval or direction, to satisfy such withholding tax by withholding all or any part of the shares of Common Stock or cash that would otherwise be paid and transferred to the Grantee, with any shares of Common Stock so withheld to be valued at the Fair Market Value (as defined in the Plan) on the date of such withholding. The Grantee, with the consent of the Corporation, may satisfy such withholding tax by delivery and transfer to the Corporation of shares of Common Stock previously owned by the Grantee, with any shares so delivered and transferred to be valued at the Fair Market Value on the date of such delivery.

8. Adjustment Provisions. It is understood that, prior to the expiration of the Performance Period certain changes in capitalization of the Corporation may occur. It is, therefore, understood and agreed with respect to changes in capitalization that:

(a) If a stock dividend is declared on the Common Stock of the Corporation, there shall be added to the number of Performance Units provided for under the Award and stated in paragraph 1 of this instrument, the number of Performance Units equal to the number of Performance Units which would have been granted to the Grantee had the Grantee been the fully vested and unrestricted owner of the number of Performance Units then provided for under the Award granted, but not theretofore received without restriction; provided, however, that the additional Performance Units shall be subject to all terms and provisions of this instrument (including, without limitation, the terms and conditions stated in paragraph 5, above), and in making such adjustments, no fractional units, shares, or scrip certificates in lieu thereof, shall be granted or issuable by the Corporation, and the Grantee shall be entitled to only the number of full Performance Units to which the Grantee may be entitled by reason of such adjustment at the adjusted grant.

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(b) In the event of an increase in the outstanding shares of Common Stock of the Corporation, effectuated for the purpose of acquiring properties or securities of another corporation or business enterprise, there shall be no increase in the number of Performance Units which are the subject matter of the Award under this instrument as a result of such acquisition.

(c) In the event of an increase or decrease in the number of outstanding shares of Common Stock of the Corporation through recapitalization, reclassification, stock split-ups, consolidation of shares, changes in par value and the like, an appropriate adjustment shall be made in the number of Performance Units provided for under the Award and stated in Section 1 of this instrument, by increasing or decreasing the number of Performance Units, as may be required to enable the Grantee to acquire the same proportionate stockholdings as the grant of the Award would originally have provided. Provided, however, that any additional Performance Units shall be subject to all terms and provisions of this instrument (including, without limitation, the restrictions stated in paragraph 5, above), and that in making such adjustments, no fractional Performance Units shall be awarded, and the Grantee shall be entitled to receive only the number of full Performance Units to which the Grantee may be entitled by reason of such adjustment.

(d) Notwithstanding any provision to the contrary stated herein, to the extent Performance Units are still not vested in Grantee at the time of a Change in Control with respect to the Corporation, then pursuant to the provisions of the Plan, they shall become fully vested and completely free and clear of any conditions or restrictions stated herein at that time; provided, that if such Change in Control occurs less than six (6) months after the date of the grant of the Award hereunder to the Grantee, then Performance Units shall become fully vested and completely free and clear of any conditions or restrictions stated herein at the time of such Change in Control only if the Grantee agrees in writing, if requested by the Corporation in writing, to remain in the employ of the Corporation or a division or subsidiary of the Corporation at least through the date which is six (6) months after the date the grant was made with substantially the same title, duties, authority, reporting relationships, and compensation as on the day immediately preceding the Change in Control. The provisions of this subparagraph (d) shall be applied in addition to, and shall not reduce, modify, or change any other obligation or right of the Grantee otherwise provided for in paragraph 3, above, concerning the Grantee’s continued employment with the Corporation or the termination thereof. If the Performance Units become subject to this subparagraph (d), they shall become fully vested in the Grantee and nonforfeitable. The Performance Units are subject to the provisions of the Plan authorizing the Corporation, or a committee of its Board of Directors, to provide in advance or at the time of a Change in Control for cash to be paid in actual settlement of the shares of Common Stock for earned Performance Units, all subject to such terms and conditions as the Corporation or the Committee, in its sole discretion, may determine and impose. For purposes of this subparagraph (d), the term “Change in Control” shall have the same meaning as provided in the definition of that term stated in the Plan, including any amendments thereof which may be made from time to time in the future pursuant to the provisions of the Plan, with any amended definition of such term to apply to all events thereafter coming within the amended meaning.

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9. Stock Reserved. The Corporation shall at all times during the term of the Award reserve and keep available such number of shares of its Common Stock as will be sufficient to satisfy the Award issued and granted to Grantee and the requirements thereof as evidenced by this instrument, and shall pay all original issue taxes, if any, on the transfer of Common Stock to the Grantee, and all other fees and expenses necessarily incurred by the Corporation in connection therewith.

10. Rights of Shareholder. Except as otherwise provided in the Award and this instrument, the Grantee shall have no rights as a shareholder of the Corporation in respect of the Performance Units or Common Stock for which the Award is granted; and the Grantee shall not be considered or treated as a record owner of shares with respect to the Common Stock until the Performance Units are fully vested and no longer subject to any of the conditions, performance requirements, or restrictions imposed under the Award, and Common Stock is actually issued and transferred to the Grantee.

11. Entire Agreement. This instrument contains the entire terms of the Award, and may not be changed orally or other than by a written instrument issued and approved by the Corporation pursuant to the Plan. This instrument supersedes any agreements or understandings that may previously have existed, and there are no other agreements or understandings, relating to its subject matter.

12. Successors and Assigns. The Award shall inure to the benefit of and be binding upon the heirs, legatees, legal representatives, successors, and assigns of the parties thereto.

The Grantee hereby acknowledges receipt of this instrument, the Notice of Performance Unit Award and a copy of the Plan, and accepts the Award under the terms and conditions stated in this instrument, subject to all terms and provisions of the Plan, by signing this instrument in duplicate originals, as of the date first above written.

Date	«Officer_Name»
	Grantee

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Table A

Performance Units Criteria

2006-2009 Performance Period

Total Stockholder Return (TSR):vs. ONEOK Peer Group

ONEOK TSR Ranking vs. ONEOK Peer Group	Percentage of Performance Units Earned
90th percentile and above	200%
75th – 89th percentile	150%
50th – 74th percentile	100%
30th – 49th percentile	50%
29th percentile and below	0%

Table B

Illustration of Hypothetical 2006-2009 Performance Period

Performance Unit Award Calculation

Illustration assumes 1,000 Performance Units Granted in January 2006

Total Stockholder Return (TSR) vs. ONEOK Peer Group

Hypothetical 2006-2009 ONEOK TSR Ranking = 40^th percentile

A 40^th percentile TSR ranking earns 50% (from Table A)

of PUs granted (i.e., 1,000 units) – 500 units earned

Total Performance Units Earned    

TR             500 Performance Units

500 performance units earned out of 1,000 units granted = 50.0% “earn-out” [50% (500 shares) paid and distributed in the form of Common Stock as provided in section 5.c.]

Table C

ONEOK PEER GROUP – 2006

Company Name	Sym
AGL Resources Inc.	ATG
ATMOS Energy	ATO
CenterPoint Energy	CNP
Enbridge	ENB
KeySpan Energy Inc (Brooklyn Union)	KSE
Kinder Morgan	KMI
MDU Resources	MDU
National Fuel Gas Company	NFG
New Jersey Resources	NJR
NICOR Inc.	GAS
NiSource	NI
ONEOK, Inc.	OKE
Peoples Energy Corporation	PGL
Piedmont Natural Gas Company	PNY
SEMPRA (Pacific Enterprises & ENOVA)	SRE
Southern Union	SUG
Southwest Gas Corporation	SWX
UGI Corporation	UGI
Vectren	VVC
Washington Gas Light Company	WGL
Wisconsin Energy Corp	WEC

EX-12

EXHIBIT 12

ONEOK, Inc.

Computation of Ratio of Earnings to Combined Fixed Charges

and Preferred Stock Dividend Requirements

	Years Ended December 31,
(Unaudited)	2005		2004		2003		2002		2001
	(Thousands of dollars)
Fixed Charges, as defined
Interest on long-term debt	$	116,642	$	78,349	$	87,382	$	78,414	$	99,530
Other interest		27,031		5,239		5,873		10,523		27,454
Amortization of debt discount and expense		3,935		3,713		4,977		7,949		3,475
Interest on lease agreements		20,781		21,638		21,323		22,831		21,564
Total Fixed Charges		168,389		108,939		119,555		119,717		152,023
Preferred dividend requirements		—		—		37,536		60,820		59,839
Total fixed charges and preferred dividend requirements	$	168,389	$	108,939	$	157,091	$	180,537	$	211,862
Earnings before income taxes and income from equity investees	$	655,374	$	360,388	$	332,246	$	242,446	$	51,877
Total fixed charges		168,389		108,939		119,555		119,717		152,023
Earnings available for combined fixed charges and preferred stock dividend requirements	$	823,763	$	469,327	$	451,801	$	362,163	$	203,900
Ratio of Earnings to combined fixed charges and preferred stock dividend requirements		4.89 x		4.31 x		2.88 x		2.01 x		0.96 x

For purposes of computing the ratio of earnings to combined fixed charges and preferred stock dividend requirements, “earnings” consists of income before cumulative effect of a change in accounting principle plus fixed charges and income taxes, less undistributed income for equity investees. “Fixed charges” consists of interest charges, the amortization of debt discounts and issue costs and the representative interest portion of operating leases. “Preferred dividend requirements” consists of the pre-tax preferred dividend requirement.

EX-12.1

EXHIBIT 12.1

ONEOK, Inc.

Computation of Ratio of Earnings to Fixed Charges

	Years Ended December 31,
(Unaudited)	2005		2004		2003		2002		2001
	(Thousands of dollars)
Fixed Charges, as defined
Interest on long-term debt	$	116,642	$	78,349	$	87,382	$	78,414	$	99,530
Other interest		27,031		5,239		5,873		10,523		27,454
Amortization of debt discount and expense		3,935		3,713		4,977		7,949		3,475
Interest on lease agreements		20,781		21,638		21,323		22,831		21,564
Total Fixed Charges		168,389		108,939		119,555		119,717		152,023
Earnings before income taxes and undistributed income from equity investees		655,374		360,388		332,246		242,446		51,877
Earnings available for fixed charges	$	823,763	$	469,327	$	451,801	$	362,163	$	203,900
Ratio of earnings to fixed charges		4.89 x		4.31 x		3.78 x		3.03 x		1.34 x

For purposes of computing the ratio of earnings to fixed charges, “earnings” consists of income before cumulative effect of a change in accounting principle plus fixed charges and income taxes, less undistributed income for equity investees. “Fixed charges” consists of interest charges, the amortization of debt discounts and issue costs and the representative interest portion of operating leases.

EX-21

Exhibit 21

Subsidiary	State of Incorporation or Organization
Chisholm Pipeline Company (50%)	Delaware
Chisholm Pipeline Holdings, Inc.	Delaware
Fox Plant, L.L.C. (50%)	Delaware
Kansas Gas Marketing Company	Kansas
Mercado Gas Services Inc.	Delaware
Mid Continent Market Center, Inc.	Kansas
Northern Plains Natural Gas Company, LLC1	Delaware
NBP Services, LLC	Delaware
Northern Border Pipeline Corporation	Delaware
Oasis Acquisition Corporation	California
Oklahoma Natural Energy Services Company	Oklahoma
OkTex Pipeline Company	Delaware
ONEOK Bushton Processing, Inc.	Delaware
ONEOK Energy Marketing Company	Oklahoma
ONEOK Energy Services Canada, Ltd.	Canada
ONEOK Energy Services Company, II	Delaware
ONEOK Energy Services Company, L.P.	Texas
ONEOK Energy Services Holdings, L.L.C.	Oklahoma
ONEOK Field Services Company	Oklahoma
ONEOK Field Services Holdings, L.L.C.	Oklahoma
ONEOK Gas Gathering, L.L.C.	Oklahoma
ONEOK Gas Storage Holdings, L.L.C.	Delaware
ONEOK Gas Storage, L.L.C.	Oklahoma
ONEOK Gas Transportation, L.L.C.	Oklahoma
ONEOK Hydrocarbon, L.L.C.	Delaware
ONEOK Hydrocarbon, L.P.	Delaware
ONEOK Hydrocarbon GP, L.L.C.	Delaware
ONEOK Hydrocarbon Holdings, L.L.C.	Delaware
ONEOK Hydrocarbon Southwest, L.L.C.	Delaware
ONEOK Kansas Company	Kansas
ONEOK Kansas Properties, L.L.C.	Kansas
ONEOK Leasing Company	Delaware
ONEOK MB I, L.P.2	Delaware
ONEOK Midstream Gas Supply, L.L.C.	Oklahoma
ONEOK NGL Pipeline, L.P.	Delaware
ONEOK Palo Duro Pipeline Company, Inc.	Delaware
ONEOK Parking Company, L.L.C.	Delaware
ONEOK Pipeline, Inc.	Oklahoma

¹ Northern Plains Natural Gas Company, LLC owns a 1.067% limited partner interest and a .5% general partner interest in Northern Border Partners, L.P. The direct and indirect subsidiaries of Northern Border Partners, L.P. are not listed here.

² ONEOK MB I, L.P. owns 80% of the Mont Belvieu I Fractionation Facility.

Updated March 7, 2006

ONEOK Propane Company	Delaware
ONEOK Sayre Storage Company	Delaware
ONEOK Services Company	Oklahoma
ONEOK Texas Gas Storage, L.P.	Texas
ONEOK Texas Resources, Inc.	Delaware
ONEOK Transmission Company	Delaware
ONEOK Underground Storage Company	Kansas
ONEOK VESCO Holdings, L.L.C.3	Delaware
ONEOK WesTex Transmission, L.P.	Delaware
Pan Border Gas Company, LLC4	Delaware
Potato Hills Gas Gathering System (joint venture) (51%)	Oklahoma
Sycamore Gas System (general partnership) (48.445%)	Oklahoma
TGS Rio, L.L.C.	Delaware

In addition to the interests of the Company in the Subsidiaries set forth above, the Company also directly or indirectly holds various undivided interests in facilities relating to the oil and gas business and holds minority interests in various other entities and ventures.

³ ONEOK VESCO Holdings, L.L.C. owns a 10.1765% interest in Venice Energy Services Company, L.L.C., a Delaware limited liability company.

⁴ Pan Border Gas Company, LLC owns a .3250% general partner interest in Northern Border Partners, L.P. The direct and indirect subsidiaries of Northern Border Partners, L.P. are not listed here.

– 2 –

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

ONEOK, Inc.

We consent to the incorporation by reference in Registration Statements Nos. 333-75768, 333-54274, 333-41263, 333-41265, 333-41267, 333-41269, 333-42094, 333-95039, 333-81043, 333-121769, 333-130070 and 333-130067 on Form S-8 and Nos. 333-54586, 333-44915, 333-57433, 333-65059, 333-82717, 333-65392, and 333-102105 on Form S-3 of ONEOK, Inc. of our report dated March 10, 2006, with respect to the consolidated balance sheets of ONEOK, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of ONEOK, Inc. Our report refers to a change in accounting for asset retirement obligations, stock-based compensation, and contracts involved in energy trading and risk management activities in 2003.

Our report dated March 10, 2006, on the effectiveness of internal control over financial reporting as of December 31, 2005, expresses our opinion that ONEOK, Inc. did not maintain effective internal control over financial reporting as of December 31, 2005 because of the effect of a material weakness on the achievement of the objectives of the control criteria and contains an explanatory paragraph that states that the Company’s information system associated with accounting for derivative hedging instruments was inadequately designed to appropriately account for certain hedges of forecasted transactions and thus did not facilitate the recognition of hedging ineffectiveness in accordance with generally accepted accounting principles.

Additionally, our report on management assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2005, contains an explanatory paragraph that states that ONEOK, Inc. excluded the Company’s Natural Gas Liquids segment from its assessment of the effectiveness of the Company’s internal control over financial reporting. Our audit of internal control over financial reporting of ONEOK, Inc. also excluded an evaluation of the internal control over financial reporting of the Company’s Natural Gas Liquids segment.

	/s/ KPMG LLP
March 10, 2006
Tulsa, Oklahoma

EX-31.1

Exhibit 31.1

Certification

I, David L. Kyle, certify that:

I have reviewed this annual report on Form 10-K of ONEOK, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2006

/s/ David L. Kyle

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Jim Kneale, certify that:

I have reviewed this annual report on Form 10-K of ONEOK, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 10, 2006

/s/ Jim Kneale

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ONEOK, Inc. (the “Company”) for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David L. Kyle, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David L. Kyle

David L. Kyle

Chief Executive Officer

March 10, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ONEOK, Inc. and will be retained by ONEOK, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of ONEOK, Inc. (the “Company”) for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jim Kneale, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jim Kneale

Jim Kneale

Chief Financial Officer

March 10, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to ONEOK, Inc. and will be retained by ONEOK, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.