<PAGE>   1

                                                                   EXHIBIT 10.14


                      LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                     POSEIDON OIL PIPELINE COMPANY, L.L.C.

                     (A DELAWARE LIMITED LIABILITY COMPANY)

                        (DATED AS OF FEBRUARY 14, 1996)
<PAGE>   2
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                        <C>
ARTICLE I. DEFINITIONS ...................................................... 1
     1.01      Specific Definitions ......................................... 1
     1.02      Other Terms ................................................. 11
     1.03      Construction ................................................ 11

ARTICLE II. ORGANIZATION ................................................... 12
     2.01      Formation ................................................... 12
     2.02      Name ........................................................ 12
     2.03      Principal Office in the United States; Other Offices ........ 12
     2.04      Purpose ..................................................... 12
     2.05      Foreign Qualification ....................................... 12
     2.06      Term ........................................................ 12
     2.07      Mergers and Exchanges ....................................... 12
     2.08      Business Opportunities--No Implied Duty or Obligation ....... 12

ARTICLE III. MEMBERSHIP INTERESTS AND TRANSFERS ............................ 13
     3.01      Initial Members ............................................. 13
     3.02      Number of Members ........................................... 13
     3.03      Membership Interest ......................................... 13
     3.04      Representation and Warranties ............................... 13
     3.05      Restrictions on the Transfer of a Membership Interest ....... 14
     3.06      Transfer .................................................... 15
     3.07      Documentation; Validity of Transfer ......................... 17
     3.08      [Intentionally Deleted.]  ................................... 18
     3.09      Possible Additional Restrictions on Transfer ................ 18
     3.10      Additional Membership Interests ............................. 18
     3.11      Interests in a Member ....................................... 18
     3.12      Information ................................................. 18
     3.13      Liability to Third Parties .................................. 19
     3.14      Withdrawal .................................................. 19
     3.15      Lack of Member Authority .................................... 20
     3.16      Security Interest of Members ................................ 20

ARTICLE IV. CAPITAL CONTRIBUTIONS .......................................... 20
     4.01      Initial Capital Contributions ............................... 20
     4.02      Subsequent Contributions .................................... 21
     4.03      Failure to Contribute ....................................... 21
     4.04      Return of Contributions ..................................... 23
     4.05      Advances by Members ......................................... 24
     4.06      Capital Accounts ............................................ 24
     4.07      Capitalization of Loans ..................................... 26
</TABLE>

                                       i

<PAGE>   3


<TABLE>
<S>                                                                  <C>
ARTICLE V. ALLOCATIONS AND DISTRIBUTIONS ............................ 27
     5.01    Allocations for Capital Account Purposes ............... 27
     5.02    Allocations for Tax Purposes ........................... 29
     5.03    Requirement of Distributions ........................... 30
     5.04    Pro Rata Distributions ................................. 30
     5.05    Reserves ............................................... 31
     5.06    Distribution Restrictions .............................. 31

ARTICLE VI. MANAGEMENT OF THE COMPANY ............................... 31
     6.01    Management by the Members and Delegation of Authority .. 31
     6.02    Committees ............................................. 31
     6.03    Authority of Members and Committees .................... 32
     6.04    Officers ............................................... 34
     6.05    Duties of Officers ..................................... 35
     6.06    No Duty to Consult ..................................... 35
     6.07    Reimbursement  ......................................... 36
     6.08    Members and Affiliates Dealing With the Company ........ 36
     6.09    Insurance .............................................. 36

ARTICLE VII. MEETINGS ............................................... 36
     7.01    Meetings ............................................... 36
     7.02    Special Actions ........................................ 38
     7.03    Voting List ............................................ 38
     7.04    Proxies ................................................ 39
     7.05    Votes .................................................. 39
     7.06    Conduct of Meetings .................................... 39
     7.07    Action by Written Consent .............................. 39
     7.08    Records ................................................ 40

ARTICLE VIII. INDEMNIFICATION ....................................... 40
     8.01    Right to Indemnification ............................... 40
     8.02    Indemnification of Officers, Employees and Agents ...... 41
     8.03    Advance Payment ........................................ 41
     8.04    Appearance as a Witness ................................ 41
     8.05    Nonexclusivity of Rights ............................... 42
     8.06    Insurance .............................................. 42
     8.07    Member Notification .................................... 42
     8.08    Savings Clause ......................................... 42
     8.09    Scope of Indemnity ..................................... 42

ARTICLE IX. TAXES ................................................... 42
     9.01    Tax Returns ............................................ 42
     9.02    Tax Elections .......................................... 43
     9.03    Tax Matters Member ..................................... 43
</TABLE>



                                       ii
<PAGE>   4

<TABLE>
<S>                                                                            <C>
ARTICLE X. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS ......................... 43
     10.01   Maintenance of Books ............................................. 43
     10.02   Financial Statements ............................................. 44
     10.03   Tax Statements ................................................... 44
     10.04   Accounts ......................................................... 44

ARTICLE XI. BANKRUPTCY OF A MEMBER ............................................ 45
     11.01    Bankrupt Members ................................................ 45

ARTICLE XII. DISSOLUTION, LIQUIDATION, AND TERMINATION ........................ 45
     12.01    Dissolution ..................................................... 45
     12.02    Liquidation and Termination ..................................... 46
     12.03    Provision for Contingent Claims ................................. 48
     12.04    Deficit Capital Accounts ........................................ 48

ARTICLE XIII. AMENDMENT OF THE AGREEMENT ...................................... 49
     13.01    Amendments to be Adopted by the Company ......................... 49
     13.02    Amendment Procedures ............................................ 49

ARTICLE XIV. CERTIFICATED MEMBERSHIP INTERESTS ................................ 50
     14.01    Entitlement to Certificates ..................................... 50
     14.02    Multiple Classes of Interest .................................... 50
     14.03    Signatures ...................................................... 50
     14.04    Issuance and Payment ............................................ 50
     14.05    Restrictive Legend .............................................. 51
     14.06    Lost, Stolen or Destroyed Certificates .......................... 51
     14.07    Transfer of Membership Interest ................................. 51
     14.08    Registered Holders .............................................. 52

ARTICLE XV. OTHER MEMBER AGREEMENTS AND OBLIGATIONS ........................... 52
     15.01    Participation in Extensions and Expansions ...................... 52

ARTICLE XVI. GENERAL PROVISIONS ............................................... 53
     16.01    Offset .......................................................... 53
     16.02    Entire Agreement; Supersedure ................................... 53
     16.03    Waivers ......................................................... 53
     16.04    Binding Effect .................................................. 54
     16.05    Member and Committee Deadlocks; Negotiations, Mediation and
              Arbitration ..................................................... 54
     16.06    Governing Law; Severability ..................................... 56
     16.07    Further Assurances .............................................. 57
     16.08    Waiver of Certain Rights ........................................ 57
     16.09    Notice to Members of Provisions of this Agreement ............... 57
     16.10    Counterparts .................................................... 57
</TABLE>


                                      iii
<PAGE>   5

<TABLE>
<S>                                                                   <C>
16.11    Attendance via Communications Equipment ..................... 57
16.12    Reports to Members .......................................... 57
16.13    Checks, Notes and Contracts ................................. 58
16.14    Seal ........................................................ 58
16.15    Books and Records ........................................... 58
16.16    Surety Bonds ................................................ 58
16.17    Audit Rights of Members ..................................... 58
16.18    No Third Party Beneficiaries ................................ 58
16.19    Notices ..................................................... 59
</TABLE>


                                       iv
<PAGE>   6
                      LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                     POSEIDON OIL PIPELINE COMPANY, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)

         This Limited Liability Company Agreement of Poseidon Oil Pipeline
Company, L.L.C., dated as of February 14, 1996, is (a) adopted by the Members
(as defined below) and (b) executed and agreed to, for good and valuable
consideration, by the Members.

                                   ARTICLE I.
                                  DEFINITIONS

         1.01     SPECIFIC DEFINITIONS. As used in this Agreement, the
following terms have the following meanings:

                  "AAA" has the meaning given that term in Section 16.05(b)
         herein.

                  "Act" means the Delaware Limited Liability Company Act and
         any successor statute, as amended from time to time.

                  "Additional Capital Contribution" has the meaning given to
         that term in Section 4.05 herein.

                  "Adjusted Capital Account" means the Capital Account
         maintained for each Member as of the end of each taxable year of the
         Company, (a) increased by any amounts that such Member is obligated to
         restore under the standards set by Treasury Regulation section
         1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore pursuant to
         the penultimate sentences of Treasury Regulation sections
         1.704-2(g)(1) and 1.704-2(i)(5)), and (b) decreased by (i) the amount
         of all losses and deductions that, as of the end of such taxable year,
         are reasonably expected to be allocated to such Member in subsequent
         years under sections 704(e)(2) and 706(d) of the Code and Treasury
         Regulation section 1.751-1(b)(2)(ii), and (ii) the amount of all
         distributions that, as of the end of such taxable year, are reasonably
         expected to be made to such Member in subsequent years in accordance
         with the terms of this Agreement or otherwise to the extent they
         exceed offsetting increases to such Member's Capital Account that are
         reasonably expected to occur during (or prior to) the year in which
         such distributions are reasonably expected to be made (other than
         increases as a result of a minimum chargeback pursuant to Section
         5.01(d) or 5.01(e)). The foregoing definition of Adjusted Capital
         Account is intended to comply with the provisions of Treasury
         Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted
         consistently therewith.

                  "Adjusted Property" means any property, the Carrying Value of
         which has been adjusted pursuant to Section 4.06(d). Once an Adjusted
         Property is deemed distributed

                                       1
<PAGE>   7
         by, and recontributed to, the Company for federal income tax purposes
         upon a termination thereof pursuant to section 708 of the Code, such
         property shall thereafter constitute a Contributed Property until the
         Carrying Value of such property is further adjusted pursuant to Section
         4.06(d).

                  "Advancing Members" has the meaning given to that term in
         Section 4.05 herein.

                  "Affiliate" means, with respect to any relevant Person, any
         other Person that directly or indirectly controls, is controlled by,
         or is under common control with, such relevant Person in question. As
         used herein, the term "control" (including its derivatives and similar
         terms) means owning, directly or indirectly, more than 50% of the
         interest in any such relevant Person if such interest has, directly or
         indirectly, the power to direct or cause the direction of the
         management and policies of such relevant Person.

                  "Agreed Value" of any Contributed Property means the fair
         market value of such property or other consideration at the time of
         contribution as determined by the Company using such reasonable method
         of valuation as it may adopt. The Company shall, in its sole
         discretion, use such method as it deems reasonable and appropriate to
         allocate the aggregate Agreed Value of Contributed Properties in a
         single or integrated transaction among such properties on a basis
         proportional to their fair market value. In the event of a breach of
         a representation or warranty by a Member contained in a contribution
         agreement pertaining to a Contributed Property, the Agreed Value of
         such Contributed Property (and such Member's Capital Account) shall be
         reduced by (i) the diminution in value of the Contributed Property
         associated with such breach less (ii) the amount of any indemnity
         payments actually paid to the Company by such Member with respect to
         such breach.

                  "Agreement" means this Limited Liability Company Agreement
         (including any schedules, exhibits or attachments hereto) as amended,
         supplemented or modified from time to time.

                  "Available Cash" means unrestricted cash and cash equivalents
         of the Company less reasonable reserves, including, without
         limitation, those necessary for working capital and obligations or
         other contingencies of the Company. Available Cash shall not include
         any Initial Capital Contributions except to the extent that all of the
         Members agree that the applicable portion of any such Initial Capital
         Contribution is no longer needed to finance the construction of the
         Poseidon Pipeline or the operations of the Company.

                  "Bankrupt Member" means (except to the extent a Majority
         Interest consents otherwise) any Member:

                           (a) that (i) makes a general assignment for the
                  benefit of creditors; (ii) files a voluntary bankruptcy
                  petition; (iii) becomes the subject of an order


                                       2
<PAGE>   8
                  for relief or is declared insolvent in any federal or state
                  bankruptcy or insolvency proceeding; (iv) files a petition or
                  answer seeking for the Member a reorganization, arrangement,
                  composition, readjustment, liquidation, dissolution, or
                  similar relief under any law; (v) files an answer or other
                  pleading admitting or failing to contest the material
                  allegations of a petition filed against the Member in a
                  proceeding of the type described in subclauses (i) through
                  (iv) of this clause (a); or (vi) seeks, consents, or
                  acquiesces to the appointment of a trustee, receiver, or
                  liquidator of the Member or of all or any substantial part of
                  the Member's properties; or

                           (b) against which a proceeding seeking
                  reorganization, arrangement, composition, readjustment,
                  liquidation, dissolution, or similar relief under any law has
                  been commenced and 90 days have expired without dismissal
                  thereof or with respect to which, without the Member's
                  consent or acquiescence, a trustee, receiver, or liquidator of
                  the Member or of all or any substantial part of the Member's
                  properties has been appointed and 60 days have expired without
                  such appointments having been vacated or stayed, or 60 days
                  have expired after the date of expiration of a stay, if the
                  appointment has not previously been vacated.

                  In addition, Poseidon, and any of its Transferees or
         Substituted Members, shall be deemed to be a Bankrupt Member if any of
         the foregoing events occur with respect to the Guarantor.

                  "Book-Tax Disparity" means with respect to any item of
         Contributed Property or Adjusted Property, as of the date of any
         determination, the difference between the Carrying Value of such
         Contributed Property or Adjusted Property and the adjusted basis
         thereof for federal income tax purposes as of such date. A Member's
         share of the Company's Book-Tax Disparities in all of its Contributed
         Property and Adjusted Property will be reflected by the difference
         between such Member's Capital Account balance as maintained pursuant to
         Section 4.06 and the hypothetical balance of such Member's Capital
         Account computed as if it had been maintained strictly in accordance
         with federal income tax accounting principles. The determination of
         Book-Tax disparity and a Member's share thereof shall be determined
         consistently with Section 1.704-3(c) of the Treasury Regulations.

                  "Business Day" means Monday through Friday of each week,
         except that a legal holiday recognized as such by the government of the
         United States or the State of New York shall not be regarded as a
         Business Day.

                  "Business Development Committee" has the meaning given that
         term in Section 6.02.



                                       3

<PAGE>   9




                  "Capital Account" means the capital account maintained for
         each Member pursuant to Section 4.06 herein.

                  "Capital Contribution" means any contribution by a Member to
         the capital of the Company, as contemplated by Section 4.06(a).

                  "Carrying Value" means (a) with respect to Contributed
         Property, the Agreed Value of such property reduced (but not below
         zero) by all depreciation, amortization and cost recovery deductions
         relating to such property charged to the Members' Capital Accounts, and
         (b) with respect to any other Company property, the adjusted basis of
         such property for federal income tax purposes, all as of the time of
         determination. The Carrying Value of any property shall be adjusted
         from time to time in accordance with Sections 4.06(d)(i) and
         4.06(d)(ii) and to reflect changes, additions or other adjustments to
         the Carrying Value for dispositions and acquisitions of Company
         properties, as deemed appropriate by the Company.

                  "Certificate" has the meaning given that term in Section 2.01.

                  "Code" means the Internal Revenue Code of 1986 and any
         successor statute, as amended from time to time.

                  "Company" means Poseidon Oil Pipeline Company, L.L.C., a
         Delaware limited liability company.

                  "Company Minimum Gain" means the amount determined pursuant
         to Treasury Regulation Section 1.704-2(d).

                  "Contributed Property" means each property or other asset, in
         such form as may be permitted by the Act, but excluding cash or cash
         equivalents, contributed to the Company (or deemed contributed to the
         Company on termination and reconstitution thereof pursuant to section
         708 of the Code). Once the Carrying Value of a Contributed Property is
         adjusted pursuant to Section 4.06(d), such property shall no longer
         constitute a Contributed Property for purposes of Section 5.02, but
         shall be deemed an Adjusted Property for such purposes.

                  "Costs" has the meaning given that term in Section
         4.03(a)(ii)(3).

                  "Declining Member" has the meaning given to that term in
         Section 4.05 herein.

                  "Default" means, in respect of any Member, upon the occurrence
         and during the continuation of any of the following events:

                           (a) the failure to remedy within five (5) Business
                  Days of receipt of written notice thereof from the Company or
                  any Member, the failure of a


                                       4

<PAGE>   10




                  Member to make any Initial Capital Contribution to the Company
                  as required pursuant to Section 4.01, on the date on which
                  such Initial Capital Contribution is due;

                           (b) the occurrence of any event that causes such
                  Member to become a Bankrupt Member; or

                           (c) the failure to remedy within ten (10) Business
                  Days of receipt of written notice thereof, the default in
                  performance of or failure to comply with any other material
                  agreements, obligations or undertakings of such Member (or, in
                  the case of Poseidon, or any of its Transferees or Substituted
                  Members, the Guarantor) contained in the Transaction
                  Documents.

                  "Default Interest Rate" means a rate per annum, compounded
         daily, equal to the lesser of (a) 4% plus a varying rate per annum that
         is equal to the interest rate publicly quoted or announced by Chase
         Manhattan Bank (New York, New York office), from time to time as its
         prime commercial or similar reference interest rate, with adjustments
         in that varying rate to be made on the same date as any change in that
         rate, and (b) the maximum rate permitted by applicable law.

                  "Delinquent Member" has the meaning given that term in Section
         4.03(a).

                  "Economic Risk of Loss" has the meaning set forth in Treasury
         Regulation section 1.752-2(a).

                  "Eligible Citizen" means a Person qualified to hold leases,
         rights-of-way, permits, licenses or other similar agreements or
         documents issued by or entered into with the United States government,
         and whose status as a Member or Transferee does not or would not
         subject the Company to a substantial risk of cancellation or forfeiture
         of any such lease, right-of-way, permit, license or other similar
         agreement or document issued by or entered into with the United States
         government. As of the date hereof, "Eligible Citizen" means (a) a
         citizen of the United States, (b) an association (including a
         partnership, joint tenancy in common) organized or existing under the
         Laws of the United States or any state or territory thereof, all of the
         members of which are citizens of the United States or (c) a corporation
         organized under the Laws of the United States or of any state or
         territory thereof, of which corporation, to the best of its knowledge,
         not more than five percent of the voting stock, or of all the stock, is
         owned or controlled by citizens of countries that deny to United States
         citizens privileges to own stock in corporations holding oil and gas
         leases similar to the privileges of non-United States citizens to own
         stock in corporations holding an interest in oil and gas leases on
         federal lands.

                  "Foreclosure Transfer" means any Transfer resulting from any
         judicial or non-judicial foreclosure by the holder of a Security
         Interest or Transfer from the holder of a Security Interest in
         connection with a workout or similar arrangement.



                                       5

<PAGE>   11

                  "GAAP" has the meaning given that term in Section 3.06(b)
         herein.

                  "General Interest Rate" means a rate per annum, compounded
         daily, equal to the lesser of (a) a varying rate per annum that is
         equal to the interest rate publicly quoted by Chase Manhattan Bank (New
         York, New York office), a national banking association, from time to
         time as its prime commercial or similar reference interest rate, with
         adjustments in that varying rate to be made on the same date as any
         change in that rate, plus one percent and (b) the maximum rate
         permitted by applicable law.

                  "Guarantor" means Leviathan Gas Pipeline Partners, L.P., a
         Delaware limited partnership.

                  "Initial Capital Contribution" shall have the meaning given
         that term in Section 4.01 herein.

                  "Lateral Opportunity" has the meaning given that term in
         Section 15.01.

                  "Lateral Opportunity Notice" has the meaning given that term
         in Section 15.01.

                  "Laws" means the laws, rules, regulations, decrees and orders
         of the United States of America and all other governmental authorities
         having jurisdiction, whether such Laws now exist or hereafter come into
         effect.

                  "Lending Member" has the meaning given that term in Section
         4.03(a)(ii).

                  "Liquidator" has the meaning given to that term in Section
         12.02.

                  "Majority Interest" means one or more Members having among
         them more than 50% of the Membership Interests of all Members.

                  "Management Committee" has the meaning given that term in
         Section 6.02.

                  "Member" means any Person executing this Agreement as of even
         date herewith as a Member or any Person hereafter admitted to the
         Company as an additional Member or Substituted Member as provided in
         this Agreement, but does not include any Person who has ceased to be a
         Member in the Company.

                  "Membership Interest" means the ownership interest (on a
         percentage basis) of a Member in the Company, including, without
         limitation, rights to distributions (liquidating or otherwise),
         allocations, information, and to consent or approve, which ownership
         interest is more particularly described and identified in Article III
         and Exhibit A.



                                       6

<PAGE>   12




                  "Minimum Gain Attributable to Member Nonrecourse Debt" means
         that amount determined in accordance with the principles of Treasury
         Regulation section 1.704-2(i)(3).

                  "Net Agreed Value" means (a) in the case of any Contributed
         Property, the fair market value of such property reduced by any
         liabilities either assumed by the Company upon such contribution or to
         which such property is subject when contributed, and (b) in the case of
         any property distributed to a Member or Transferee by the Company, the
         Company's Carrying Value of such property at the time such property is
         distributed, reduced by any indebtedness either assumed by such Member
         or Transferee upon such distribution or to which such property is
         subject at the time of distribution as determined under section 752 of
         the Code.

                  "Net Income" means, for any taxable period, the excess, if
         any, of the Company's items of income and gain for such taxable period
         over the Company's items of loss and deduction for such taxable period.
         The items included in the calculation of Net Income shall be determined
         in accordance with Section 4.06(b) and shall not include any items
         specifically allocated under Sections 5.01(d) through 5.01(i). For
         purposes of Sections 5.01(a) and (b), in determining whether Net Income
         has been allocated to any Member for any previous taxable period, any
         Unrealized Gain or Unrealized Loss allocated pursuant to Section
         4.06(d) shall be treated as an item of gain or loss in computing Net
         Income.

                  "Net Loss" means, for any taxable period, the excess, if any,
         of the Company's items of loss and deduction for such taxable period
         over the Company's items of income and gain for such taxable period.
         The items included in the calculation of Net Loss shall be determined
         in accordance with Section 4.06(b) and shall not include any items
         specifically allocated under Sections 5.01(d) through 5.01(i). For
         purposes of Sections 5.01(a) and (b), in determining whether Net Loss
         has been allocated to any Member for any previous taxable period, any
         Unrealized Gain or Unrealized Loss allocated pursuant to Section
         4.06(d) shall be treated as an item of gain or loss in computing Net
         Loss.

                  "Nonrecourse Built-In Gain" means with respect to any
         Contributed Properties or Adjusted Properties that are subject to a
         mortgage or negative pledge securing a nonrecourse liability, the
         amount of any taxable gain that would be allocated to the Members
         pursuant to Section 5.02(b)(i)(A), 5.02(b)(ii)(A) or 5.02(b)(iii) if
         such properties were disposed of in a taxable transaction in full
         satisfaction of such liabilities and for no other consideration.

                  "Nonrecourse Debt" has the meaning set forth in Treasury
         Regulation section 1.704-2(b)(4).

                  "Nonrecourse Deductions" means any and all items of loss,
         deduction, or expenditure (described in section 705(a)(2)(B) of the
         Code) that, in accordance with the


                                       7

<PAGE>   13




         principles of Treasury Regulation section 1.704-2(b)(i), are
         attributable to a Nonrecourse Liability.

                  "Nonrecourse Liability" has the meaning assigned to such term
         in Treasury Regulation section 1.704-2(b)(3).

                  "Non-Selling Members" has the meaning given that term in
         Section 3.06(e) herein.

                  "Offer Notice" has the meaning given that term in Section
         3.06(e) herein.

                  "Oil Contract" means any contract, agreement or other
         obligation of the Company to buy, sell, transport, gather or otherwise
         handle oil or liquid condensate or to construct, maintain or operate
         any pipelines or facilities in connection therewith.

                  "Obligation" has the meaning given that term in Section
         4.03(a)(ii)(2).

                  "Onshore Segment" means either (i) the assets subject to that
         certain Purchase and Sale Agreement dated as of June 12, 1995, between
         Texaco Pipeline Inc. ("TPL") and Texas Eastern Transmission
         Corporation, as amended from time to time, if the Members decide to
         consummate the acquisition of such assets, or (ii) the assets described
         in the agreement referred to in clause (b)(vii) of the definition of
         "Transaction Documents," if the Members decide not to consummate the
         acquisition of the assets referred to in clause (i) above and to
         proceed under such agreement.

                  "Operating Committee" has the meaning given that term in
         Section 6.02(a).

                  "Option Period" has the meaning given that term in Section
         3.06(e) herein.

                  "Person" means any individual or entity, including, without
         limitation, any corporation, limited liability company, partnership
         (general or limited), joint venture, association, joint stock company,
         trust, unincorporated organization or government (including any board,
         agency, political subdivision or other body thereof).

                  "Phase I Line" means the pipeline and facilities to be
         installed pursuant to that certain (i) Construction Agreement of even
         date herewith between the Company and Poseidon and (ii) Offshore
         Pipeline Installation Agreement dated August 17, 1995 between Poseidon
         and J. Ray McDermott, Inc., which pipeline and facilities are more
         particularly described on "Exhibit B. "

                  "Phase II Line" means the pipeline and facilities to be
         installed pursuant to that certain (i) Construction Agreement of even
         date herewith between the Company and Texaco and (ii) offshore pipeline
         installation agreement entered into with an independent




                                       8

<PAGE>   14



         contractor in connection with such Construction Agreement, which
         pipeline and facilities are more particularly described on Exhibit B.

                  "Poseidon" means Poseidon Pipeline Company, L.L.C.

                  "Poseidon Pipeline" means that certain oil pipeline to be
         constructed and owned by Company and operated by Company or its
         designee and located offshore Louisiana, Outer Continental Shelf,
         comprised of (i) the Phase I Line, (ii) the Phase II Line, (iii) the
         Onshore Segment, (iv) any laterals constructed by Company pursuant to
         Section 15.01 or purchased by the Company, (v) any other facilities
         constructed by Company and (vi) the equipment, facilities and fixtures
         located on or connected to such pipelines and facilities described in
         (i) through (iv) above and owned by Company, but excluding any
         equipment, facilities or fixtures owned (wholly or partially) by any
         Person other than Company.

                  "Proceeding" has the meaning given that term in Section 8.01.

                  "Recapture Income" means any gain recognized by the Company
         (computed without regard to any adjustment required by section 734 or
         743 of the Code) upon the disposition of any property or asset of the
         Company, which gain is characterized as ordinary income because it
         represents the recapture of deductions previously taken with respect to
         such property or asset.

                  "Record Date" means the date established by the Company for
         determining (a) the identity of Members (or Transferees, if applicable)
         entitled to notice of, or to vote at any meeting of Members or entitled
         to vote by ballot or give approval of Company action in writing without
         a meeting or entitled to exercise rights in respect of any lawful
         action of Members, or (b) the identity of Record Holders entitled to
         receive any report or distribution.

                  "Record Holder" means the Person in whose name a Membership
         Interest is registered on the books of the Company as of the opening of
         business on a particular Business Day.

                  "Rejected Lateral Opportunity" has the meaning given that
         term in Section 15.01.

                  "Required Interest" means the applicable percentage of
         Membership Interests of all Members required to authorize or approve a
         relevant act of the Company, including, without limitation, a Majority
         Interest, a Super-Majority Interest or all Membership Interests, as
         applicable.

                  "Residual Gain" or "Residual Loss" means any item of gain or
         loss, as the case may be, of the Company recognized for federal income
         tax purposes resulting from a sale,



                                       9

<PAGE>   15




         exchange or other disposition of a Contributed Property or Adjusted
         Property, to the extent such item of gain or loss is not allocated
         pursuant to Section 5.02(b)(i)(A) or 5.02(b)(ii)(A), to eliminate
         Book-Tax Disparities.

                  "Security Interest" means any security interest, lien,
         mortgage, encumbrance, hypothecation, pledge, or other obligation,
         whether created by operation of law or otherwise, created by any Person
         in any of its property or rights.

                  "Selling Member" has the meaning given that term in Section
         3.06(e) herein.

                  "Service" means the Internal Revenue Service.

                  "Substituted Member" means a Person who is admitted as a
         Member to the Company pursuant to Section 3.05 in place of and with all
         the rights of a Member and who is shown as a Member on the books and
         records of the Company.

                  "Super-Majority Interest" means one or more Members having
         among them at least 66 2/3% of the Membership Interests of all Members.

                  "Tax Matters Member" has the meaning given that term in
         Section 9.03.

                  "Texaco" means Texaco Trading and Transportation Inc.

                  "Transaction Documents" means (a) this Agreement, (b) each of
         the following documents of even date herewith: (i) the Operation and
         Management Agreement between the Company and Texaco; (ii) the
         Construction Agreement between Poseidon and the Company; (iii) the
         Construction Agreement between the Company and Texaco; (iv) the
         Contribution Agreement between Poseidon and certain of its Affiliates
         and the Company; (v) the Contribution Agreement between Texaco and one
         of its Affiliates and the Company; (vi) the Letter Agreement among the
         Company, Manta Ray Gathering Systems, Inc., Poseidon and Texaco; (vii)
         the Letter Agreement among the Company, Poseidon, Texaco and Texaco
         Pipeline Inc.; (viii) the Agreement between Poseidon and Texaco
         regarding the letter of credit issued in favor of the Company and (ix)
         the Guaranty made by Leviathan Gas Pipeline Partners, L.P. and (c) the
         Platform Limited Right of Use Agreement and the Lease Agreement, each
         between the Company and Louisiana Offshore Gathering Systems, L.L.C.,
         and each as described in the Letter Agreement described in subsection
         (b)(vii), above.

                  "Transferee" means a Person who receives all or part of a
         Member's Membership Interest through a Transfer but who has not become
         a Substituted Member.

                  "Transferor" means a Member, Substituted Member or a
         predecessor Transferor who Transfers a Membership Interest.


                                       10

<PAGE>   16


                  "Transfer" or "Transferred" means, other than granting a
         Security Interest and making a Transfer in connection with any such
         Security Interest, (i) a voluntary or involuntary sale, assignment,
         transfer, conveyance, exchange, bequest, devise, gift or any other
         alienation (in each case, with or without consideration) of any rights,
         interest or obligations with respect to all or any portion of any
         Membership Interest including, without limitation, a Foreclosure
         Transfer, or (ii) (A) the sale of all or substantially all of a
         Member's assets, (B) a merger or consolidation involving a Member or
         (C) a transfer, directly or indirectly, in one or more transactions, of
         a majority of the equity interests in a Member to a Person that is not
         an Affiliate of such Member prior to such transfer; provided, however,
         that a transfer, directly or indirectly, of the equity ownership
         (including, without limitation, a merger, consolidation, share exchange
         or similar transaction) or of all or substantially all of the assets of
         the Guarantor or Texaco shall not be considered a Transfer
         hereunder.

                  "Treasury Regulation" shall have the meaning set forth in
         Section 3.09.

                  "Unrealized Gain" attributable to any item of Company property
         means, as of any date of determination, the excess, if any, of (a) the
         fair market value of such property as of such date over (b) the
         Carrying Value of such property as of such date (prior to any
         adjustment to be made pursuant to Section 4.06(d) as of such date). In
         determining such Unrealized Gain, the aggregate cash amount and fair
         market value of a Company asset (including cash or cash equivalents)
         shall be determined by the Company using such reasonable method of
         valuation as it may adopt.

                  "Unrealized Loss" attributable to any item of Company property
         means, as of any date of determination, the excess, if any, of (a) the
         Carrying Value of such property as of such date (prior to any
         adjustment to be made pursuant to Section 4.06(d) as of such date) over
         (b) the fair market value of such property as of such date. In
         determining such Unrealized Loss, the aggregate cash amount and fair
         market value of a Company asset (including cash or cash equivalents)
         shall be determined by the Company using such reasonable method of
         valuation as it may adopt.

                  "Withdrawing Member" shall have the meaning given that term in
         Section 12.02(d) herein.

         1.02 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meaning indicated throughout this Agreement.

         1.03 CONSTRUCTION. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter. All
references to Articles and Sections refer to articles and sections of this
Agreement, and all references to Exhibits are to exhibits attached hereto, each
of which is incorporated herein for all purposes.



                                       11

<PAGE>   17




                                   ARTICLE II.
                                  ORGANIZATION

         2.01 FORMATION. The Company has been organized as a Delaware limited
liability Company by the filing of a Certificate of Formation (the
"Certificate") with the Secretary of State of the State of Delaware pursuant to
the Act.

         2.02 NAME. The name of the Company is Poseidon Oil Pipeline Company,
L.L.C. and all Company business must be conducted in that name or such other
names that comply with applicable law as the Company may select from time to
time.

         2.03 PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES. The
principal office of the Company in the United States shall be at 1670 Broadway,
Denver, Colorado 80202, or at such other place as the Company may designate from
time to time, which need not be in the State of Delaware. The Company may have
such other offices as the Members may designate from time to time.

         2.04 PURPOSE. The sole and exclusive purpose of the Company is to
design, construct, own and operate the Poseidon Pipeline, including entering
into Oil Contracts related to the operation thereof.

         2.05 FOREIGN QUALIFICATION. Prior to the Company's conducting business
in any jurisdiction other than Delaware, the Company shall comply, to the extent
procedures are available and those matters are reasonably within the control of
the Company, with all requirements necessary to qualify the Company as a foreign
limited liability company, and, if necessary, keep the Company in good standing,
in that jurisdiction.

         2.06 TERM. Subject to earlier termination pursuant to other provisions
of this Agreement (including those contained in Article V), the term of the
Company shall be from the date of this Agreement through and including December
31, 2046.

         2.07 MERGERS AND EXCHANGES. Except as otherwise provided in this
Agreement or by applicable Laws, the Company may be a party to any (i) merger,
(ii) consolidation, (iii) exchange or acquisition or (iv) any other type of
reorganization.

         2.08 BUSINESS OPPORTUNITIES--NO IMPLIED DUTY OR OBLIGATION. The Members
and their respective Affiliates may engage, directly or indirectly, without the
consent of the other Members or the Company, in other business opportunities,
transactions, ventures or other arrangements of any nature or description,
independently or with others, including without limitation, business of a nature
which may be competitive with or the same as or similar to the business of the
Company, regardless of the geographic location of such business, and without any
duty or obligation to account to the other Members or the Company in connection
therewith.



                                       12

<PAGE>   18




                                  ARTICLE III.
                       MEMBERSHIP INTERESTS AND TRANSFERS

         3.01 INITIAL MEMBERS. The initial Members of the Company are the
Persons executing this Agreement as of the date hereof in such capacity, each of
which is admitted to the Company as a Member effective contemporaneously with
the execution by such Person of this Agreement.

         3.02 NUMBER OF MEMBERS. The number of Members of the Company shall
never be fewer than two.

         3.03 MEMBERSHIP INTERESTS. The Members agree that each Member's
ownership in the Company shall be that which is set forth in Exhibit A, as
amended from time to time in accordance with the terms of this Agreement.

         3.04 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents and
warrants to the Company and each other Member that (a) it is duly formed,
validly existing and (if applicable) in good standing under the Laws of the
state of its formation, and if required by Laws is duly qualified to do business
and (if applicable) in good standing in the jurisdiction of its principal place
of business (if not formed therein); (b) that Member has full corporate, limited
liability company, partnership, trust, or other applicable power and authority
to execute and agree to this Agreement and to perform its obligations hereunder
and all necessary actions by the board of directors, shareholders, managers,
members, partners, trustees, beneficiaries, or other Persons necessary for the
due authorization, execution, delivery, and performance of this Agreement by
that Member have been duly taken; (c) that Member has duly executed and
delivered this Agreement and it is enforceable against such Member in accordance
with its terms, subject to bankruptcy, moratorium, insolvency and other Laws
generally affecting creditors' rights and general principles of equity (whether
applied in a proceeding in a court of Laws or equity); (d) that Member's
authorization, execution, delivery, and performance of this Agreement does not
conflict with any other material agreement or arrangement to which that Member
is a party or by which it is bound; (e) that member is an Eligible Citizen and
will remain an Eligible Citizen for so long as such Member remains a Member of
the Company; and (f) it (i) has been furnished with or given adequate access to
such information about the Company and the Membership Interest as the Member has
requested, (ii) has made its own independent inquiry and investigation into, and
based thereon has formed an independent judgment concerning, the Company and
that Member's Membership Interest therein, (iii) has adequate means of providing
for its current needs and possible individual contingencies and is able to bear
the economic risks of this investment and has a sufficient net worth to sustain
a loss of its entire investment in the Company in the event such loss should
occur, (iv) has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment in the
Company, (v) is an "accredited investor" within the meaning of "accredited
investor" under Regulation D of the Securities Act of 1933, as amended, and (vi)
understands and agrees that its Membership Interest shall not be sold, pledged,
hypothecated or otherwise transferred except in accordance


                                       13


<PAGE>   19




with the terms of this Agreement and pursuant to an applicable exemption from
registration under the Securities Act of 1933 and other applicable securities
Laws.

         3.05 RESTRICTIONS ON THE TRANSFER OF A MEMBERSHIP INTEREST. A Member
may Transfer all or part of a Membership Interest only in accordance with
applicable Laws and the provisions of this Agreement, including the following
provisions of this Section. Any purported Transfer in breach of the terms of
this Agreement shall be null and void ab initio, and the Company shall not
recognize any such prohibited Transfer.

         (a) A Membership Interest shall not be Transferred except pursuant to
an applicable exemption from registration under the Securities Act of 1933 and
other applicable securities Laws;

         (b) Except as otherwise provided in this Agreement or by applicable
Laws, a Transfer of a Membership Interest shall be effective only to give the
Transferee the right to receive the share of allocations and distributions to
which the Transferor would otherwise be entitled, and no Transferee of a
Membership Interest shall have the right to become a Substituted Member;

         (c) Unless and until a Transferee is admitted as a Substituted Member,
(i) the Transferee shall have no right to exercise any of the powers, rights and
privileges of a Member hereunder other than to receive its share of allocations
and distributions pursuant to Section 3.05(b), and (ii) the Member who has
Transferred all or any part of its Membership Interest to such Transferee shall
cease to be a Member with respect to such Membership Interest upon Transfer of
such Membership Interest and thereafter shall have no further powers, rights and
privileges as a Member hereunder with respect to such Membership Interest (to
the extent so Transferred), but shall, unless otherwise relieved of such
obligations, remain liable for all obligations and duties as a Member with
respect to such Membership Interest;

         (d) Subject to compliance with the terms and conditions of Section
3.06, a Transferee may become a Substituted Member if the Transferee agrees in
writing to be bound by all the terms and conditions, as then in effect, of this
Agreement;

         (e) At the time all of the provisions of Sections 3.05, 3.06 and 3.07
are complied with, (i) a Substituted Member shall have all of the powers,
rights, privileges, duties, obligations and liabilities of a Member, as provided
in this Agreement and by applicable Laws to the extent of the Membership
Interest so Transferred and (ii) the Member who Transferred the Membership
Interest shall be relieved of all of the obligations and liabilities with
respect to such Membership Interest; provided that such Member shall remain
fully liable for all liabilities and obligations relating to such Membership
Interest that accrued prior to such Transfer;

         (f) The Company may, in its reasonable discretion, charge a Member a
reasonable fee to cover the additional administrative expenses incurred in
connection with or as a consequence of any Transfer of all or part of such
Member's Membership Interest;


                                       14


<PAGE>   20




         (g) In the absence of the substitution (as provided herein) of a Member
for a transferring Member, any payment to the transferring Member shall acquit
the Company and the Members of all liability to any other Persons who may be
interested in such payment by reason of a Transfer by such Member;

         (h) Notwithstanding any term or condition contained in Sections 3.05,
3.06 and 3.07, any Person shall have the right to grant a Security Interest in
any rights or obligations such Person may have arising from or related to this
Agreement, the Company or any interest therein and make a Transfer in connection
with any such Security Interest; provided that such Security Interest is not
created in violation of Sections 3.05(a) and (i) of this Agreement and any other
provisions contained in this Agreement and the Company is promptly notified in
writing of such Security Interest; and

         (i) Each Member or Transferee agrees not to Transfer all or any part
of its Membership Interest (or take or omit any action, filing, election, or
other action which could result in a deemed Transfer) if such Transfer (either
considered alone or in the aggregate with prior Transfers by the same Member or
any other Members or Transferees) would result in the termination of the Company
for federal income tax purposes. Such an attempted Transfer is void ab initio.

         Notwithstanding any contrary provision contained in this Agreement, no
Person shall Transfer to any other Person such Person's rights or obligations
arising from or related to this Agreement, the Company or any interest therein
if such Transfer (A) would result in violation of the Act or any local, state or
federal (including agencies thereof) rule, statute or Laws (including, without
limitation, those promulgated by the Minerals Management Service), (B) would
alter the non-jurisdictional status of the Company with respect to the
jurisdiction of the Federal Energy Regulatory Commission or any successor
thereto or (C) have a material adverse effect on the assets or operations of the
Company. Any such attempted Transfers are void ab initio.

         3.06 TRANSFER RESTRICTIONS.

         (a) Neither the Company nor any of the Members shall be bound or
otherwise affected by any Transfer of Membership Interest of which such Person
has not received notice.

         (b) Any Member's Membership Interest may be Transferred to any Person
that is directly or indirectly controlled (through the ownership of voting
interests) by such Member (or, in the case of Poseidon, directly or indirectly
owned or controlled (through the ownership of voting interests) by the
Guarantor) so long as the Transferee or Substituted Member has a net worth
calculated in accordance with General Accepted Accounting Principles ("GAAP") of
not less than the lesser of (i) $150 million or (ii) the greater of (A) the net
worth of Transferor on the date of this Agreement or (B) the net worth of
Transferor immediately prior to the date of the Transfer. If the Transferor's
Membership Interest is subject to a guaranty, the guaranty shall apply to the
Transferee and its Membership Interest.



                                       15
<PAGE>   21


     (c) Subject to the right of first refusal set forth in Section 3.06(e), a
Member may Transfer all or any portion of its Membership Interest to any Person
that has a net worth calculated in accordance with GAAP of not less than $150
million immediately prior to the Transfer; provided that such net worth
requirement shall not apply in the case of a Foreclosure Transfer. Prior to a
Transfer under this Section 3.06(c), the Transfer must be approved in writing by
all non-transferring Members. Such approval will not be unreasonably delayed or
withheld.

     (d) Except with respect to a Foreclosure Transfer, a Member in Default
shall not Transfer its Membership Interest.

     (e) Except with respect to a Foreclosure Transfer or Transfers according to
the terms of Section 3.06(b), any Member who desires to Transfer all or any
portion of its Membership Interest ("Selling Member") to a ready, willing and
able Person shall first offer to sell such Membership Interest to the other
Members (the "Non-Selling Members") as a group. Such offer shall be made by an
irrevocable written offer (the "Offer Notice") to sell all of the Membership
Interest which the Selling Member desires to Transfer and shall contain a
complete description of the transaction in which the Selling Member proposes to
Transfer the Membership Interest, including, without limitation, the name of the
ready, willing and able Person and the consideration specified. The Non-Selling
Members shall have forty-five (45) days (the "Option Period") after actual
receipt of the Offer Notice within which to advise the Selling Member whether or
not they will purchase all of such Membership Interest upon the terms and
conditions contained in the Offer Notice. If, within the Option Period, one or
more Non-Selling Members elect to purchase such Membership Interest, then such
Non-Selling Member or Members shall close such transaction in accordance with
Section 3.06(f) no later than the later to occur of (i) the closing date set
forth in the Notice Offer or (ii) sixty (60) days after the last day of the
Option Period. If any Non-Selling Member does not elect to purchase its
proportionate share of the Membership Interest being sold, the remaining
Non-Selling Members shall have the right to purchase the remaining Membership
Interest based on the relation of their Membership Interest to the Membership
Interest of all Non-Selling Members desiring to purchase a portion of such
Membership Interest. The right herein created in favor of the Non-Selling
Members as a group is an option to purchase all, or none, of the Membership
Interest offered for sale by the Selling Member. If the Non-Selling Members as a
group decline to purchase all of the Membership Interest of the Selling Member
in accordance with this Section, the Selling Member may Transfer such Membership
Interest to the Person named in the Offer Notice delivered to the Non-Selling
Members upon the terms described in such Offer Notice. If such Transfer does not
occur in accordance with the terms of such Offer Notice, the Selling Member
shall again be subject to the provisions of this Section. Upon consummation of
any such Transfer (whether to a Member or any other Person), such Person and its
Membership Interest shall automatically become a party to and be bound by this
Agreement and shall thereafter have all of the rights and obligations of a
Member hereunder. Notwithstanding the foregoing, all Transfers pursuant to this
Section must also comply with and be governed by this Agreement, including any
restrictions on Transfers therein and on any Transferee becoming a Substituted
Member.

                                       16


<PAGE>   22


     (f) At the closing of the Transfer of a Membership Interest pursuant to
this Agreement, the transferee shall deliver to the Transferor (A) the full
consideration agreed upon and (B) a release of all personal liability of the
Transferor as a guarantor of any indebtedness for borrowed money of the Company
to any Person or, if a release reasonably cannot be obtained, an agreement
which, by its terms and substance, fully indemnifies the Transferor for such
liability. Any Membership Interest Transfer or similar taxes involved in such
sale shall be paid by the Transferor, and the Transferor shall provide the
transferee with such evidence of the Transferor's authority to Transfer
hereunder and such tax lien waivers and similar instruments as the transferee
may reasonably request.

     (g) If any governmental consent or approval is required with respect to any
Transfer, the transferee shall have a reasonable amount of time (not to exceed
sixty (60) days from the date upon which such Transfer would have been otherwise
consummated in accordance with the terms of this Agreement) to obtain such
consent or approval. All Members shall use reasonable, good faith efforts to
cooperate with the transferee attempting to obtain, and to assist in timely
obtaining, such consent or approval; provided that no Member shall be required
to incur any out-of-pocket costs in connection with such cooperation and
assistance. After the expiration of such waiting period, such transferee shall
forfeit its rights to acquire the Membership Interest with respect to such
specific transaction; provided, however, that such forfeiture shall not limit or
otherwise affect the forfeiting transferee's rights with respect to any
subsequent proposed Transfer.

     3.07 DOCUMENTATION; VALIDITY OF TRANSFER. The Company may not recognize for
any purpose any purported Transfer of all or any part of a Membership Interest
unless and until the applicable provisions of Sections 3.05 and 3.06 have been
satisfied and the Company has received, on behalf of the Company, a document in
a form acceptable to the Company executed by both the Member effecting the
Transfer (or if the Transfer is on account of the death, incapacity, or
liquidation of the Member, its representative) and the transferee. Such document
shall (i) include the notice address of any Person to be admitted to the Company
as a Substituted Member and such Person's agreement to be bound by this
Agreement with respect to the Membership Interest or part thereof being
obtained, (ii) set forth the Membership Interest after the Transfer of the
Member effecting the Transfer and the Person to which the Membership Interest or
part thereof is Transferred (which together must total the Membership Interest
of the Member effecting the Transfer before the Transfer), (iii) contain a
representation and warranty that the Transfer was made in accordance with all
applicable Laws (including state and federal securities Laws) and the terms and
conditions of this Agreement, and (iv) if the Person to which the Membership
Interest or part thereof is Transferred is to be admitted to the Company as a
Substituted Member, its representation and warranty that the representations and
warranties in Section 3.04 are true and correct with respect to such Person.
Each Transfer and, if applicable, admission complying with the provisions of
this Section 3.07 and Sections 3.05 and 3.06 is effective against the Company as
of the first business day of the calendar month immediately succeeding the month
in which (y) the Company receives the document required by this Section 3.07
reflecting such Transfer, and (z) the other requirements of Sections 3.05 and
3.06 have been met.

                                       17



<PAGE>   23


     3.08 [Intentionally Deleted.]

     3.09 POSSIBLE ADDITIONAL RESTRICTIONS ON TRANSFER. Notwithstanding anything
to the contrary contained in this Agreement, in the event of (i) the enactment
(or imminent enactment) of any legislation, (ii) the publication of any
temporary or final regulation by the Treasury Department ("Treasury
Regulation"), (iii) any ruling by the Service or (iv) any judicial decision that
in any such case, in the opinion of counsel, would result in the taxation of the
Company for federal income tax purposes as a corporation or would otherwise
subject the Company to being taxed as an entity for federal income tax purposes,
this Agreement shall be deemed to impose such restrictions on the Transfer of a
Membership Interest as may be required, in the opinion of counsel to the
Company, to prevent the Company from being taxed as a corporation or otherwise
being taxed as an entity for federal income tax purposes, and the Members
thereafter shall amend this Agreement as necessary or appropriate to impose such
restrictions.

     3.10 ADDITIONAL MEMBERSHIP INTERESTS. Additional Persons may be admitted to
the Company as Members, and Membership Interests may be created and issued to
those Persons and to existing Members upon a unanimous vote by the Members and
subject to the terms and conditions of this Agreement. Such admission must
comply with any additional terms and conditions the Members may in their sole
discretion determine at the time of admission. A document, in a form acceptable
to the Company, shall specify the terms of admission or issuance and shall
include, among other things, the Membership Interest applicable thereto. Any
such admission of a new Member also must comply with the provisions of Section
3.05(d). The provisions of this Section 3.10 shall not apply to Transfers of
Membership Interests.

     3.11 INTERESTS IN A MEMBER.

     (a) A Member that is not a natural person may not cause or permit an
interest, direct or indirect, in itself to be Transferred such that, after the
Transfer, the Company would be considered to have terminated within the meaning
of section 708 of the Code.

     (b) On any breach of the provisions of Section 3.11 (a), the Company shall
have (i) the right to consent to such Transfer, or (ii) the option to buy, and,
on exercise of that option, the breaching Member shall sell, the breaching
Member's Membership Interest, all in accordance with Section 11.01, as if the
breaching Member were a Bankrupt Member.

     3.12 INFORMATION.

     (a) In addition to the other rights specifically set forth in this
Agreement, each Member is entitled to all information to which that Member is
entitled to have access pursuant to the Act under the circumstances and subject
to the conditions therein stated.

     (b) The Members acknowledge that, from time to time, they may receive
information from or regarding the Company or any other Member or its Affiliates
in the nature of trade secrets or secret or proprietary information or
information that is otherwise confidential,

                                       18



<PAGE>   24



the release of which may be damaging to the Company or the Member or its
Affiliates, as applicable, or Persons with which they do business. Each Member
shall hold in strict confidence any information it receives regarding the
Company and may not disclose such information to any Person other than another
Member, except for disclosures (i) to comply with any law, rule, regulation or
order, (ii) to Affiliates, advisers or representatives of the Member or Persons
to which that Member's Membership Interest may be Transferred as permitted by
this Agreement, but only if the recipients of such information have agreed to be
bound by the provisions of this Section 3.12(b), and (iii) of information that a
Member also has received from a source independent of the Company and that such
Member reasonably believes such source obtained such information without breach
of any obligation of confidentiality, (iv) of information obtained prior to the
formation of the Company, (v) to lenders, accountants and other representatives
of the disclosing Member with a need to know such information, provided that the
disclosing Member shall be responsible for such representatives' use and
disclosure of any such information, or (vi) of public information. The Members
acknowledge that a breach of the provisions of this Section 3.12(b) may cause
irreparable injury to the Company or another Member for which monetary damages
are inadequate, difficult to compute, or both. Accordingly, the Members agree
that the provisions of this Section 3.12(b) may be enforced by injunctive action
or specific performance.

     (c) The Members acknowledge that, from time to time, the Company may need
information from any or all of such Members for various reasons, including,
without limitation, for complying with various federal and state regulations.
Each Member shall provide to the Company all information reasonably requested by
the Company within a reasonable amount of time from the date such Member
receives such request; provided, however, that no Member shall be obligated to
provide such information to the Company to the extent such disclosure (i) would
result in the breach or violation of any contractual obligation (if a waiver of
such restriction cannot reasonably be obtained) or Law or (ii) involves secret,
confidential or proprietary information.

     3.13 LIABILITY TO THIRD PARTIES. Except as required by the Act, no Member
shall be liable to any Person (including any third party or to another Member)
(i) as the result of any act or omission of another Member or (ii) for Company
losses, liabilities or obligations (except as otherwise expressly agreed to in
writing by such Member).

     3.14 WITHDRAWAL. Each Member hereby covenants and agrees that it will not
withdraw from the Company as a Member without prior written consent from Members
holding at least a majority of the Membership Interest remaining after excluding
the Membership Interest of the withdrawing Member. A Member which attempts to
withdraw without such written consent shall (i) lose the right to exercise any
of the powers, rights and privileges of a Member would otherwise be entitled and
(ii) remain liable for all obligations and duties as a Member with respect to
such Membership Interest, unless otherwise relieved of such obligations by
unanimous written agreement of all of the other Members.


                                       19


<PAGE>   25


     3.15 LACK OF MEMBER AUTHORITY. No Member has the authority or power to act
for or on behalf of the Company, do any act that would be binding on the
Company, or incur any expenditures on behalf of the Company, unless authorized
to do so in writing by the Company.

     3.16 SECURITY INTEREST OF MEMBERS. Each Member grants to each other Member,
as security, equally and ratably, a Security Interest in such granting Member's
Membership Interest and the proceeds thereof, all under the Uniform Commercial
Code of the State of Texas. The Security Interest secures the performance of all
of the material obligations (including any costs or other expenses incurred in
enforcing same) of such granting Member pursuant to this Agreement. Upon such
granting Member's failure to perform any such obligation, the other Members
shall be entitled to all the rights and remedies of a secured party under the
Uniform Commercial Code of the State of Texas with respect to the Security
Interest granted in this Section; provided, however, that the Security Interest
granted in this Section is subordinate to any indebtedness (including principal
thereof and interest thereon) for borrowed money (including, without limitation,
guarantees thereof) evidenced by a note, credit agreement, indenture or similar
agreement. Each Member shall execute and deliver to the other Members all
financing statements and other instruments that such Members may request to
effectuate and carry out the preceding provisions of this Section. At the option
of any Member, this Agreement or a carbon, photographic, or other copy hereof
may serve as a financing statement. Each Member has the right, in addition to
the other rights and remedies granted to it pursuant to this Agreement or
available to it at law or in equity, to take any action (including, without
limitation, court proceedings and exercising the rights of a secured party under
the Uniform Commercial Code of the State of Texas) that the such Member may deem
appropriate to obtain performance by any other Member of such other Member's
obligations secured by this Section. For purposes of perfecting the Security
Interests granted in or permitted by this Agreement, the Membership Interest
shall be deemed to be a "security" governed by Chapter 8 of the Texas Uniform
Commercial Code and as such term is therein defined in sections 8.102(a)(15) and
8.103(c).

                                   ARTICLE IV.
                              CAPITAL CONTRIBUTIONS

     4.01 INITIAL CAPITAL CONTRIBUTIONS. Each Member shall make the following
Capital Contributions (the "Initial Capital Contributions"):

     (a)  Contributions of non-cash assets set forth in Exhibit A to be made
          contemporaneous with the execution of this Agreement;

     (b)  Contributions of cash by Texaco in an amount as set forth in Exhibit A
          to be made contemporaneous with the execution of this Agreement; and

     (c)  Proportionate contributions of cash by each Member in an amount
          necessary to (i) complete the construction of the Phase I Line and the
          Phase II Line of the Poseidon Pipeline and (ii) fund the purchase
          price or the construction costs


                                       20


<PAGE>   26


          of, as applicable, the Onshore Segment, in each case to be made as
          necessary to allow the Company to timely pay such obligations as they
          become due. Such contributions are currently projected to be needed on
          the dates and in the amounts set forth in Exhibit A, however, if any
          Member determines from time to time in good faith that any such
          Capital Contributions or additional Capital Contributions may be
          necessary and in the best interest of the Company to complete the
          construction or purchase price, as applicable, of the Phase I Line,
          the Phase II Line and the Onshore Segment of the Poseidon Pipeline and
          place same into operational service based on amounts the Company
          expects to be obligated to pay within such time frame, then the Member
          making such determination shall send written notice to the other
          Members specifying (i) the aggregate amount of the Capital
          Contributions reasonably and in good faith deemed necessary by such
          Member and each Member's allocable share thereof and (ii) the date by
          which such additional Capital Contributions shall be made to the
          Company by the Members (which date shall not be less than ten (10)
          Business Days from the date on which the notice is sent). Each Member
          shall thereafter contribute cash to the Company in an amount equal to
          such Member's allocable share of the amount of the Capital
          Contribution on or before the date specified in such notice. All
          Initial Capital Contributions consisting of cash shall be held in an
          account until such time as such funds are used to fund the
          construction costs or purchase price, as applicable, of the Phase I
          Line, the Phase II Line and the Onshore Segment of the Poseidon
          Pipeline except to the extent that all of the Members agree that the
          applicable portion of any such Initial Capital Contribution is no
          longer needed to finance such construction costs or the operations of
          the Company.

     4.02 SUBSEQUENT CONTRIBUTIONS. Unless unanimously agreed to in writing by
the Members, no Member shall be required to make any Capital Contributions other
than the Initial Capital Contributions as contemplated by Section 4.01.

     4.03 FAILURE TO CONTRIBUTE.

     (a) If a Member does not contribute by the time required all or any portion
of a Capital Contribution such Member ("Delinquent Member") is required to make
as provided in this Agreement, the Company (by vote of at least a majority of
the Membership Interest remaining after excluding the Membership Interest of
the Delinquent Member) may exercise, on written notice to such Delinquent
Members, one or more of the following remedies:

          (i) taking such action (including, without limitation, court
     proceedings) as the Company may deem appropriate to obtain payment by the
     Delinquent Member of the portion of the Delinquent Member's Capital
     Contribution that is in default, along with the costs and expenses
     associated with the collection of such Delinquent Member's Capital
     Contribution;

                                       21


<PAGE>   27


          (ii) permitting the other Members in proportion to their Membership
     Interest or in such other percentages as they may agree (the "Lending
     Member," whether one or more), to advance the portion of the Delinquent
     Member's Capital Contribution that is in default, with the following
     results:

               (1) the sum advanced constitutes a loan from the Lending Member
          to the Delinquent Member and a Capital Contribution of that sum to the
          Company by the Delinquent Member pursuant to the applicable provisions
          of this Agreement,

               (2) the principal balance of the loan and all accrued unpaid
          interest thereon (collectively, the "Obligation") is due and payable
          in whole on the tenth Business Day after the day written demand
          requesting payment of the Obligation is made by the Lending Member to
          the Delinquent Member,

               (3) the amount lent bears interest at the Default Interest Rate
          from the date on which the advance is deemed made until the date that
          the loan, together with all interest accrued thereon and all costs and
          expenses associated therewith ("Costs"), is repaid to the Lending
          Member,

               (4) all distributions from the Company that otherwise would be
          made to the Delinquent Member (whether before or after dissolution of
          the Company) instead shall be paid to the Lending Member until the
          Obligation and any Costs have been paid in full to the Lending Member
          (with payments being applied first to accrued and unpaid interest,
          second to Costs, and finally to principal),

               (5) the payment of the Obligation and Costs is secured by a
          Security Interest in the Delinquent Member's Membership Interest, as
          more fully set forth in Section 4.03(b), and

               (6) the Lending Member has the right, in addition to the other
          rights and remedies granted to it pursuant to this Agreement or
          available to it at law or in equity, to take any action (including,
          without limitation, court proceedings and exercising the rights of a
          secured party under the Uniform Commercial Code of the State of Texas)
          that the Lending Member may deem appropriate to obtain payment from
          the Delinquent Member of the Obligation and all Costs; or

          (iii) exercising any other rights and remedies available at law or in
     equity; or

          (iv) the other Members (by affirmative vote of at least a majority of
     the Membership Interests held by such other Members) may elect to make any
     such unpaid Capital Contributions to the Company and adjust the Membership
     Interest for each Member to equal the percentage obtained by dividing (A)
     the Capital Account of such


                                       22


<PAGE>   28


     Member (including any Capital Contribution made by such Member under this
     Section) by (B) the aggregate Capital Accounts of all Members (including
     all Capital Contributions made under this Section). Upon the adjustment of
     the Membership Interests in the manner set forth in the preceding
     sentence, Exhibit A shall be deemed to be amended to reflect such adjusted
     Membership Interests.

     (b) Each Member grants to the Company and to each Lending Member with
respect to any Obligation and Costs owed to such Lending Member by that Member
as Delinquent Member pursuant to Section 4.03(a)(ii), as security, equally and
ratably, a Security Interest its Membership Interest and the proceeds thereof,
all under the Uniform Commercial Code of the State of Texas. The Security
Interest secures the payment of all Capital Contributions such Member has agreed
to make and the payment of any Obligation and Costs owed to a Lending Member by
such Member as a Delinquent Member pursuant to Section 4.03(a)(ii). On any
default in the payment of a Capital Contribution or in the payment of any
Obligation or Costs, the Company or the Lending Member, as applicable, is
entitled to all the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Texas with respect to the Security Interest
granted in this Section 4.03(b). Each Member shall execute and deliver to the
Company and the Lending Member, as applicable, all financing statements and
other instruments that the Company or the Lending Member, as applicable, may
request to effectuate and carry out the preceding provisions of this Section
4.03(b). At the option of the Company or Lending Member, as applicable, this
Agreement or a carbon, photographic, or other copy hereof may serve as a
financing statement.

     (c) In addition to the remedies set forth above in this Section 4.03, if
any Member is in Default with respect to the payment of any Initial Capital
Contribution, then the other Members (by affirmative vote of at least a majority
of the Membership Interests held by such other Members) may expel the Member in
Default from the Company and such other Members may purchase (in such
percentages as may be determined by such other Members), or cause the Company to
purchase, the Membership Interest of the Member in Default, as of the expulsion
date, at a price equal to the greater of $1.00 or the balance in the Capital
Account of the Member in Default as shown by the Company's books immediately
prior to the purchase less (A) all costs incurred or reasonably anticipated to
be incurred by the Company and the other Members to remedy the Default and (B)
all damages to the Company or the other Members resulting from such Default by
giving written notice specifying the expulsion date and purchase. It is the
intent of the parties to this Agreement that upon such expulsion and purchase,
the Company shall continue to exist and operate without interruption,
dissolution or termination, and without impairing or reducing in any way its
rights and obligations to third parties.

     4.04 RETURN OF CONTRIBUTIONS. A Member is not entitled (i) to the return of
any part of any Capital Contributions other than any preferential or
disproportionate distributions to the extent such distributions are expressly
provided for in this Agreement (including those set forth in Sections 5.04 and
12.02(c)(iii) or (ii) to be paid interest in respect of either its Capital
Account or its Capital Contributions. Except as provided in Section 4.03(a)(ii),
an unrepaid Capital Contribution is not a liability of the Company or of any
Member. A Member is not

                                       23



<PAGE>   29


required to contribute or to lend any cash or property to the Company to enable
the Company to return any other Member's Capital Contributions.

     4.05 ADVANCES BY MEMBERS. If any Member makes a determination in good faith
and it is reasonably necessary and in the best interest of the Company for the
continued viable operation of the Company because failure to obtain additional
funds would cause an imminent material default of a commercial loan or of a
material contract related to the construction and/or operation of the Poseidon
Pipeline, any Member may propose that the Members make additional Capital
Contributions to the Company by giving notice in writing to the other Members.
Each Member shall notify the Company within five (5) Business Days of the date
such notice is given as to whether such Member elects or declines to make any
additional Capital Contribution requested by a Member pursuant to this Section
4.05 (an "Additional Capital Contribution"). If any Member (a "Declining
Member") declines to make an Additional Capital Contribution or fails to give
timely notice to the Company in accordance with this Section 4.05, the Members
agreeing to make such Additional Capital Contributions (the "Advancing Members")
may elect one of the following:

          (i) The Advancing Members may advance the unpaid portion of the
     Additional Capital Contribution to the Company on behalf of the Declining
     Member with the results as described in Section 4.03(a)(ii); or

          (ii) The Advancing Members may advance the aggregate amount of the
     requested Additional Capital Contribution to or on behalf of the Company.
     An advance described in this Section 4.05(ii) constitutes a loan from the
     Advancing Member to the Company and shall bear interest at the Default
     Interest Rate and be repayable prior to any distributions to the Members.

     4.06 CAPITAL ACCOUNTS. A separate capital account ("Capital Account") shall
be established and maintained for each Member in accordance with the rules of
Treasury Regulation section 1.704-1(b)(2)(iv) and the following terms and
conditions:

     (a) Each Member's Capital Account shall be (i) increased by (A) the amount
of cash or cash equivalents contributed by that Member to the Company as capital
(B) the Net Agreed Value of property contributed by that Member to the Company
as capital, (C) the amount of any loans transferred by such Member to its
Capital Account pursuant to Section 4.07 (contributions contemplated by
subparagraphs (A), (B) and (C) shall be referred to as "Capital Contributions"),
and (D) allocations to that Member of Company income and gain (or items
thereof), including, without limitation, income and gain exempt from tax and
income and gain described in Treasury Regulation section 1.704-1(b)(2)(iv)(g),
but excluding income and gain described in Treasury Regulation section
1.704-1(b)(4)(i); and (ii) shall be decreased by (A) the amount of cash or cash
equivalents distributed to that Member by the Company, (B) the Net Agreed Value
of property distributed to that Member by the Company, and (C) allocations of
Company losses and deductions (or items thereof), including losses and
deductions described in

                                       24


<PAGE>   30


Treasury Regulation section 1.704-1(b)(2)(iv)(g) (but excluding losses or
deductions described in Treasury Regulation section 1.704-1(b)(4)(i) or (iii)),

     (b) For purposes of computing the amount of any item of income, gain,
loss or deduction to be reflected in the Members' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of depreciation, cost
recovery or amortization used for that purpose), provided that:

          (i) All fees and other expenses incurred by the Company to promote the
     sale of (or to sell) any interest that can neither be deducted nor
     amortized under section 709 of the Code, if any, shall, for purposes of
     Capital Account maintenance, be treated as an item of deduction at the time
     such fees and other expenses are incurred and shall be allocated among the
     Members pursuant to Sections 5.01 and 5.02.

          (ii) Except as otherwise provided in Treasury Regulation section
     1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
     and deduction shall be made without regard to any election under section
     754 of the Code which may be made by the Company and, as to those items
     described in section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
     regard to the fact that such items are not includable in gross income or
     are neither currently deductible nor capitalized for federal income tax
     purposes.

          (iii) Any income, gain or loss attributable to the taxable disposition
     of any Company property shall be determined as if the adjusted basis of
     such property as of such date of disposition were equal in amount to the
     Company's Carrying Value with respect to such property as of such date.

          (iv) In accordance with the requirements of section 704(b) of the
     Code, any deductions for depreciation, cost recovery or amortization
     attributable to any Contributed Property shall be determined as if the
     adjusted basis of such property on the date it was acquired by the Company
     was equal to the Agreed Value of such property on the date it was acquired
     by the Company. Upon an adjustment pursuant to Section 4.06(d) to the
     Carrying Value of any Company property subject to depreciation, cost
     recovery or amortization, any further deductions for such depreciation,
     cost recovery or amortization attributable to such property shall be
     determined (A) as if the adjusted basis of such property were equal to the
     Carrying Value of such property immediately following such adjustment and
     (B) using a rate of depreciation, cost recovery or amortization derived
     from the same method and useful life (or, if applicable, the remaining
     useful life) as is applied for federal income tax purposes; provided,
     however, that if the asset has a zero adjusted basis for federal income tax
     purposes, depreciation, cost recovery or amortization deductions shall be
     determined using any reasonable method that the Company may adopt.

                                       25

<PAGE>   31


     (c) A transferee shall succeed to the Capital Account of the Transferor
relating to the Membership Interest so Transferred; provided, however, that if
the Transfer causes a termination of the Company under section 708(b)(1)(B) of
the Code, the Company's properties shall be deemed to have been distributed in
liquidation of the Company to the Members (including any transferee of a
Membership Interest that is a party to the Transfer causing such termination)
pursuant to Section 12.02 and recontributed by such Members in reconstitution of
the Company. Any such deemed distribution shall be treated as an actual
distribution for purposes of this Section 4.06. In such event the Carrying
Values of the Company properties shall be adjusted immediately prior to such
deemed distribution pursuant to Section 4.06(d)(ii) and such Carrying Values
shall then constitute the fair market values of such properties upon such deemed
contribution to the reconstituted Company for the purposes of determining the
Agreed Value and otherwise. The Capital Accounts of such reconstituted Company
shall be maintained in accordance with the principles of this Section 4.06.

     (d)(i) Consistent with the provisions of Treasury Regulation section
1.704-1(b)(2)(iv)(f), on an issuance of additional Membership Interests for cash
or Contributed Property, the Capital Accounts of all Members and the Carrying
Value of each Company property immediately prior to such issuance shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as if such Unrealized Gain or Unrealized
Loss had been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Members at such time
pursuant to Section 5.01.

          (ii) In accordance with Treasury Regulation section
1.704-1(b)(2)(iv)(f), immediately prior to any distribution to a Member of any
Company property (other than a distribution of cash or cash equivalents that are
not in redemption or retirement of a Membership Interest), the Capital Accounts
of all Members and the Carrying Value of each Company property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value (which shall be
determined by the Company using any valuation method it deems reasonable under
the circumstances), and had been allocated to the Members at such time, pursuant
to Section 5.01.

     4.07 CAPITALIZATION OF LOANS. Initially, a loan by any Member to another
Member or the Company as contemplated by Section 4.03(a)(ii) or 4.05 shall not
be considered a Capital Contribution and shall not increase the Capital Account
balance of the Advancing Member. Notwithstanding the foregoing, in the event the
principal and interest of any such loan has not been repaid within one (1) year
from the date of the loan, the Advancing Member, at any time thereafter by
giving written notice to the Company, may elect to have the unpaid principal and
interest balance of such loan transferred to and increase such Member's Capital
Account Upon such transfer, the loan shall be treated as a Capital Contribution
and the Membership Interest for each Member shall be adjusted to equal the
percentage obtained by dividing (A) the Capital Account of such Member
(including any Capital Contribution made on behalf of another Member)


                                       26


<PAGE>   32

by (B) the aggregate Capital Accounts of all Members (including all Capital
Contributions made on behalf of other Members).

                                   ARTICLE V.
                          ALLOCATIONS AND DISTRIBUTIONS

     5.01 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of maintaining
the Capital Accounts and in determining the rights of the Members among
themselves, the Company's items of income, gain, loss and deduction (computed in
accordance with Section 4.06(b)) shall be allocated among the Members in each
taxable year (or portion thereof) as provided herein below.

     (a) Net Income. All items of income, gain, loss and deduction taken into
account in computing Net Income for such taxable period shall be allocated to
each of the Members in accordance with its respective Membership Interests.

     (b) Net Losses. All items of income, gain, loss and deduction taken into
account in computing Net Losses for such taxable period shall be allocated to
each Member in accordance with its respective Membership Interests; provided,
however, that Net Losses shall not be allocated pursuant to this Section 5.01(b)
to the extent that such allocation would cause a Member to have a deficit
balance in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account).

     (c) Nonrecourse Liabilities. For purposes of Treasury Regulation section
1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of the Company in
excess of the sum of (A) the amount of Company Minimum Gain and (B) the total
amount of Nonrecourse Built-in Gain shall be allocated among the Members in
accordance with their respective Membership Interests.

     (d) Company Minimum Gain Chargeback. Notwithstanding the other provisions
of this Section 5.01, except as provided in Treasury Regulation section
1.704-2(f)(2) through (5), if there is a net decrease in Company Minimum Gain
during any Company taxable period, each Member shall be allocated items of
Company income and gain for such period (and, if necessary, subsequent periods)
in the manner and amounts provided in Treasury Regulation sections 1.704-2(f)(6)
and (g)(2) and section 1.704-2(j)(2)(i), or any successor provisions. For
purposes of this Section 5.01 (d), each Member's Adjusted Capital Account
balance shall be determined, and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other allocations
pursuant to this Section 5.01 with respect to such taxable period (other than an
allocation pursuant to Section 5.01(h) or (i)).

     (e) Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt.
Notwithstanding the other provisions of this Section 5.01 (other than Section
5.01(d), except as provided in Treasury Regulation section 1.704-2(i)(4)), if
there is a net decrease in Minimum

                                       27


<PAGE>   33


Gain Attributable to Member Nonrecourse Debt during any Company taxable period,
any Member with a share of Minimum Gain Attributable to Member Nonrecourse Debt
at the beginning of such taxable period shall be allocated items of Company
income and gain for such period (and, if necessary, subsequent periods) in the
manner and amounts provided in Treasury Regulation sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this Section
5.01, each Member's Adjusted Capital Account balance shall be determined and the
allocation of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 5.01, other than
Sections 5.01(d), (h) and (i), with respect to such taxable period.

     (f) Qualified Income Offset. In the event any Member unexpectedly receives
adjustments, allocations or distributions described in Treasury Regulation
section 1.704-1(b)(2)(ii)(d)(4) through (6) (or any successor provisions), items
of Company income and gain shall be specifically allocated to such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations promulgated under section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such adjustments,
allocations or distributions as quickly as possible unless such deficit balance
is otherwise eliminated pursuant to Section 5.01(d) or 5.01(e).

     (g) Gross Income Allocations. In the event any Member has a deficit balance
in its Adjusted Capital Account at the end of any Company taxable period which
is in excess of the sum of (i) the amount such Member is obligated to restore
pursuant to any provision of this Agreement and (ii) the amount such Member is
deemed obligated to restore pursuant to the penultimate sentences of Treasury
Regulations sections 1.704-2(g)(1) and 1.704-2(i)(5), such Member shall be
specifically allocated items of Company gross income and gain in the amount of
such excess as quickly as possible; provided that an allocation pursuant to this
Section 5.01(g) shall be made only if and to the extent that such Member would
have a deficit balance in its Adjusted Capital Account after all other
allocations provided in this Section 5.01 have been tentatively made as if this
Section 5.01(g) was not in the Agreement.

     (h) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Members in accordance with their respective Membership
Interests. If the Company determines in its good faith discretion that the
Company's Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Treasury Regulations promulgated
under section 704(b) of the Code, the Company is authorized, upon notice to the
Members, to revise the prescribed ratio to the numerically closest ratio which
does satisfy such requirements.

     (i) Member Nonrecourse Deductions. Member Nonrecourse Deductions for any
taxable period shall be allocated 100% to the Member that bears the Economic
Risk of Loss for such Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulation section
1.704-2(i) (or any successor provision). If more than one Member bears the
Economic Risk of Loss with respect to a Member Nonrecourse Debt,

                                       28


<PAGE>   34


such Member Nonrecourse Deductions attributable thereto shall be allocated
between or among such Members ratably in proportion to their respective shares
of such Economic Risk of Loss.

     5.02 ALLOCATIONS FOR TAX PURPOSES.

     (a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction which is recognized by the Company
for federal income tax purposes shall be allocated among the Members in the same
manner as its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to Section 5.01 hereof.

     (b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Members as follows:

          (i) (A) In the case of a Contributed Property, such items attributable
     thereto shall be allocated among the Members in the manner provided under
     section 704(c) of the Code and section 1.704-3(b) of the Treasury
     Regulations (i.e. the "traditional method") that takes into account the
     variation between the Agreed Value of such property and its adjusted basis
     at the time of contribution; and (B) except as otherwise provided in
     Section 5.02(b)(iii), any item of Residual Gain or Residual Loss
     attributable to a Contributed Property shall be allocated among the Members
     in the same manner as its correlative item of "book" gain or loss is
     allocated pursuant to Section 5.01.

          (ii) (A) In the case of an Adjusted Property, such items shall (1)
     first, be allocated among the Members in a manner consistent with the
     principles of section 704(c) of the Code and section 1.704-3(b) of the
     Treasury Regulations (i.e. the "traditional method") to take into account
     the Unrealized Gain or Unrealized Loss attributable to such property and
     the allocations thereof pursuant to Section 4.06(d)(i) or (ii), and (2)
     second, in the event such property was originally a Contributed Property,
     be allocated among the Members in a manner consistent with Section
     5.02(b)(i); and (B) except as otherwise provided in Section 5.02(b)(iii),
     any item of Residual Gain or Residual Loss attributable to an Adjusted
     Property shall be allocated among the Members in the same manner as its
     correlative item of "book" gain or loss is allocated pursuant to Section
     5.01.

          (iii) Any items of income, gain, loss or deduction otherwise allocable
     under Section 5.02(b)(i)(B) or 5.02(b)(ii)(B) shall be subject to
     allocation by the Company in a manner designed to eliminate, to the maximum
     extent possible, Book-Tax Disparities in a Contributed Property or Adjusted
     Property otherwise resulting from the application of the "ceiling"
     limitation (under section 704(c) of the Code or section 704(c) principles)
     to the allocations provided under Sections 5.02(b)(i)(A) and
     5.02(b)(ii)(A).

                                       29


<PAGE>   35


     (c) For the proper administration of the Company, the Company shall (i)
adopt such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
curative allocations for federal income tax purposes of income (including,
without limitation, gross income) or deductions pursuant to section 1.704 3(c)
of the Treasury Regulations to eliminate the impact of the "ceiling" limitation
(under section 704(c) of the Code as Section 704 principles) to the allocations
provided in Section 5.02(b); and (iii) amend the provisions of this Agreement as
appropriate to reflect the proposal or promulgation of Treasury Regulations
under section 704(b) or section 704(c) of the Code. The Company may adopt such
conventions, make such allocations and make such amendments to this Agreement as
provided in this Section 5.02(c) only if such conventions, allocations or
amendments are consistent with the principles of section 704 of the Code.

     (d) The Company may determine to depreciate the portion of an adjustment
under section 743(b) of the Code attributable to unrealized appreciation in any
Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a
predetermined rate derived from the depreciation method and useful life applied
to the Company's common basis of such property, despite the inconsistency of
such with Proposed Treasury Regulation section 1.168-2(n) and Treasury
Regulation section 1.167(c)-l(a)(6), or any successor provisions. If the Company
determines that such reporting position cannot reasonably be taken, the Company
may adopt any reasonable depreciation convention that would not have a material
adverse effect on the Members.

     (e) Any gain allocated to the Members upon the sale or other taxable
disposition of any Company asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 5.02
be characterized as Recapture Income in the same proportions and the same extent
as such Members (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.

     (f) All items of income, gain, loss, deduction and credit recognized by the
Company for federal income tax purposes and allocated to the Members in
accordance with the provisions hereof shall be determined without regard to any
election under section 754 of the Code which may be made by the Company;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by sections 734 and 743 of the Code.

     5.03 REQUIREMENT OF DISTRIBUTIONS. Subject to the provisions of Sections
5.06 and 7.02, and after the establishment of any reserve set aside pursuant to
Section 5.05, the Company shall distribute (within 30 days following the end of
each calendar month) such amount of Available Cash as determined by the Members,
to the Members who were Record Holders as of the Record Date in accordance with
their respective Membership Interest.

     5.04 PRO RATA DISTRIBUTIONS. Except for preferential or disproportionate
distributions to the extent expressly provided for in this Agreement (including
those set forth in Section 12.02),

                                       30


<PAGE>   36


any distributions on the Membership Interest of the Company paid in cash,
property, or equity ownership of the Company shall be allocated pro rata
according to Membership Interest.

     5.05 RESERVES. Before payment of any Distributions, there may be set aside
out of any funds of the Company available for distributions such sum or sums as
the Company from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, for repairing or maintaining any
property of the Company, or for such other purpose as the Company shall
determine to be in the best interest of the Company; and the Company may modify
or abolish any such reserve in the manner in which it was created.

     5.06 DISTRIBUTION RESTRICTIONS. Unless unanimously agreed to in writing by
the Members, the Company shall not distribute (i) any of the Initial Capital
Contributions until the completion of the construction of the Phase I Line and
the Phase II Line of the Poseidon Pipeline, except to the extent that all of the
Members agree that the applicable portion of such Initial Capital Contributions
is no longer needed to finance such construction or the operations of the
Company, or (ii) any amounts that would cause the Company to materially breach,
or would create a material default under, any debt agreements or instruments to
which the Company is a party.

                                   ARTICLE VI.
                            MANAGEMENT OF THE COMPANY

     6.01 MANAGEMENT BY THE MEMBERS AND DELEGATION OF AUTHORITY. The Members
hereby unanimously agree that the business and affairs of the Company shall be
managed by or under the authority of the Members in accordance with the Act,
which Members may act through their directors, officers, employees,
representatives, agents and designees. Except for situations in which the
approval of the Members is required by this Agreement or by nonwaivable
provisions of applicable law, the Members shall have broad discretion to
authorize any committee constituted pursuant to Section 6.02 or any officer or
other agent to act on behalf of the Company.

     6.02 COMMITTEES.

     (a) For organizational purposes, the Members may form one or more
committees of the Members, including, without limitation, (i) a "Management
Committee" responsible for the planning and oversight of the policies and
strategies of the Company and any other actions not expressly delegated to
another committee, body, officer or other representative of the Company, (ii) a
"Business Development Committee" responsible for the planning and oversight of
specific business development projects as stated in Section 6.02(b), and (iii)
an "Operating Committee" responsible for the oversight and control of the
physical operations and maintenance of the Poseidon Pipeline, and (iv) such
other committees as the Members or the Management Committee may desire from time
to time. Each Member shall appoint one (or more) of its duly authorized agents
to act for the Member of any committee of the Members. One such agent of

                                       31


<PAGE>   37


each Member shall be given the authority by such Member to vote on behalf of the
Member on any issue within the committee's responsibility.

     (b) The Business Development Committee shall meet at least annually and at
such other regular or special meetings at times and locations reasonably
acceptable to its participating representatives. At each annual meeting, the
representatives of the Business Development Committee shall set the general
terms and conditions pursuant to which the Company would be willing to enter
into Oil Contracts during the immediately succeeding calendar year, which
general terms and conditions shall include, without limitation, minimum and
maximum purchase and resale differentials and other applicable rates applicable
to such calendar year, and shall continue to be effective until replaced by new
terms approved by the Business Development Committee. Any representative of the
Business Development Committee may request such committee to review the maximum
and minimum purchase and resale differentials and other applicable rates
applicable to the current calendar year if such representative has information
or data evidencing that market conditions have changed materially since such
rates were set or that such rates are materially inappropriate.

     (c) Under the oversight of the Business Development Committee, the
representatives of the Members jointly shall conduct the business development
activities of the Company, including, without limitation, identifying and
negotiating with potential customers. Each Member shall use all reasonable
efforts to ensure that its representatives cooperate with and keep informed the
representatives of the other Members with respect to any business development
activities conducted by such representative. Each such representative may
independently approach any potential customer or other Person and discuss such
potential arrangements; provided, however, that no such representative may
submit any formal proposal to a potential customer without consulting with
representatives of the other Members. The Business Development Committee shall
have the authority to reconsider the business development procedures and
arrangements on an annual calendar year basis beginning with the calendar year
commencing on January 1, 1998. The Company shall reimburse each Member
(including its officers, agents and other representatives) for reasonable costs
associated with business development services performed pursuant to this
Agreement.

     6.03 AUTHORITY OF MEMBERS AND COMMITTEES. (a) With respect to conflicts or
disagreements between and among any committees, the Management Committee shall
have ultimate decision making authority. The Members and the committees shall
act through the Company's officers, employees, representatives, agents and
designees. No Member shall have individual authority to bind the Company unless
such is expressly conferred upon them pursuant to this Agreement or by action of
the Members or a duly authorized committee, body, officer or other
representative. All action shall be taken subsequent to resolutions approved by
the Members in accordance with Article VII of this Agreement.

     (b) Unless otherwise expressly delegated in writing or provided by this
Agreement, the Members hereby reserve to the Members as a group the authority to
authorize and approve the following:

                                       32


<PAGE>   38


          (i) acquiring and disposing of, and utilizing for Company purposes,
     any material asset of the Company;

          (ii) borrowing money;

          (iii) determining the reserve applicable to distributions of Company
     cash and other property as provided in Section 5.03;

          (iv) authorizing transactions not in the ordinary course of business;

          (v) permitting the Company to merge, consolidate, participate in a
     share exchange or other statutory reorganization with, or sell all or
     substantially all of the assets of the Company to, any Person;

          (vi) permitting the Company to dissolve and liquidate;

          (vii) approving any operating and capital expenditures budgets for the
     Company;

          (viii) permitting a Member to withdraw from the Company;

          (ix) entering into contracts, agreements and other undertakings
     binding the Company to pay more than $500,000 in any year or $1,000,000 in
     the aggregate pursuant to any such individual contract, agreement or
     undertaking that may be necessary, appropriate, or advisable in furtherance
     of the purposes of the Company;

          (x) entering into Oil Contracts with a term of one year or more; and

          (xi) authorizing the Company to enter into a transaction involving a
     Lateral Opportunity in accordance with Article XI.

     With respect to each such matter described in (i) - (xi) above, exercise of
such authority shall occur only by the affirmative vote of the applicable
Membership Interest as required by the Agreement, including the Majority
Interest voting requirements set forth in Section 7.01(a), the Super-Majority
Interest voting requirements set forth in Section 7.02 and the unanimous
Membership Interest voting requirements otherwise set forth in this Agreement,
as applicable.

     (c) Member approval of or agreement to any matter specified in Section
6.03(b)(i), (ii), (iv), (v), (vi) or (viii) may be withheld by any Member for
any reason whatsoever. Approval of or agreement to any other matter will not be
withheld by any Member (whether acting directly through such Member or any
committee) without a reasonable basis.

                                       33


<PAGE>   39

     6.04 OFFICERS.

     (a) The Members or the Management Committee may designate one or more
Persons to one or more officer positions of the Company. Such officers may
include, without limitation, Chief Executive Officer, Chief Financial Officer,
President, Vice President, Treasurer, Assistant Treasurer, Secretary and
Assistant Secretary. No officer need be a resident of the State of Delaware. The
Members or the Management Committee may assign titles to particular officers.
Each officer shall hold office until his successor shall be duly designated and
shall qualify to hold such office, or until his death or until he shall resign
or shall have been removed in the manner hereinafter provided. Any number of
offices may be held by the same Person. The salaries or other compensation, if
any, of the officers and agents of the Company may be fixed from time to time by
the Members. Notwithstanding any other provisions of this Agreement, the
authority of any officers or agents of the Company shall be restricted to the
carrying on of the day-to-day affairs of the Company and any such authority
shall be subject to the supervisory control of the Members. Only Members or
their duly authorized agents shall have the authority to make policy decisions
for the Company. Unless the Members or the Management Committee decide
otherwise, the assignment of such title shall constitute the delegation to such
officer of the authority and duties set forth below and those that are normally
associated with that office:

          (i) Chief Executive Officer. The Chief Executive Officer shall
     generally and actively manage the business of the Company and shall see
     that all orders and resolutions of the Members and its Committees are
     carried into effect. The Chief Executive Officer shall only report to the
     Management Committee.

          (ii) President. Unless otherwise specified by the Members or the
     Management Committee, the President shall be the chief operating officer of
     the Company and have general executive powers to manage the operations of
     the Company, and such other powers and duties as this Agreement, the
     Members or the Management Committee may from time to time prescribe. In the
     absence of the Chief Executive Officer or in the event of his inability or
     refusal to act, the President shall perform the duties and exercise the
     powers of the Chief Executive Officer.

          (iii) Chief Financial Officer. The Chief Financial Officer shall be
     the principal financial officer of the Company and shall have such powers
     and perform such duties as this Agreement, the Members or the Management
     Committee may from time to time prescribe.

          (iv) Vice Presidents. In the absence of the President, or in the event
     of his inability or refusal to act, the Vice President (or in the event
     there be more than one Vice President, the Vice Presidents in the order
     designated by the Members or the Management Committee, or in the absence of
     any such designation, then in the order of their election or appointment)
     shall perform the duties of the President, and when so

                                       34

<PAGE>   40


     acting, shall have all the powers of and be subject to all the restrictions
     upon the President.

          (v) Secretary. The Secretary shall keep the minutes of the meetings of
     the Company and of the Management Committee, and shall exercise general
     supervision over the files of the Company. The Secretary shall give notice
     of meetings and shall perform other duties commonly incident to such
     office.

          (vi) Assistant Secretary. At the request of the Secretary or in the
     Secretary's absence or inability to act, the Assistant Secretary shall
     perform part or all of the Secretary's duties.

          (vii) Treasurer. The Treasurer shall have general supervision of the
     funds, securities, notes, drafts, acceptances, and other commercial paper
     and evidences of indebtedness of the Company and he shall determine that
     funds belonging to the Company are kept on deposit in such banking
     institutions as the Members or the Management Committee may from time to
     time direct. The Treasurer shall determine that accurate accounting records
     are kept, and the Treasurer shall render reports of the same and of the
     financial condition of the Company to the Members or the Management
     Committee at any time upon request. The Treasurer shall perform other
     duties commonly incident to such office, including, but not limited to, the
     execution of tax returns.

          (viii) Assistant Treasurer. At the request of the Treasurer or in the
     Treasurer's absence or inability to act, the Assistant Treasurer shall
     perform part or all of the Treasurer's duties.

     (b) Any officer may resign as such at any time. Such resignation shall be
made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Company. The acceptance of
a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such, either with or
without cause, by the Members; provided, however, that such removal shall be
without prejudice to the contract rights, if any, of the officer so removed.
Designation of an officer shall not of itself create contract rights. Any
vacancy occurring in any office of the Company may be filled by the applicable
Committee or the Members.

     6.05 DUTIES OF OFFICERS. Each officer shall devote such time, effort, and
skill to the Company's business affairs as he deems necessary and proper for the
Company's welfare and success. The Members expressly recognize that the officers
have substantial other business relationships and activities with Persons other
than the Company.

     6.06 NO DUTY TO CONSULT. Except as otherwise provided herein or by
applicable law, neither the Company nor its duly appointed agents, designees or
representatives or the officers of the Company shall have a duty or obligation
to consult with or seek the advice of the Members on any matter relating to the
day-to-day business affairs of the Company duly delegated to such


                                       35

<PAGE>   41
Persons; provided, however, that such Persons shall not be restricted from
consulting with or the seeking the advice of the Members.

     6.07 REIMBURSEMENT. All expenses incurred with respect to the organization,
operation and management of the Company shall be borne by the Company.

     6.08 MEMBERS AND AFFILIATES DEALING WITH THE COMPANY. Subject to obtaining
any consent expressly required hereunder, the Company may appoint, employ,
contract, or otherwise deal with any Person, including Affiliates of the
Members, individuals with whom the Members are otherwise related, and with
business entities which have a financial interest in a Member or in which a
Member has a financial interest, for transacting Company business, including any
acts or services for the Company as the members of any committee, officer or
other representative with the proper authority may approve.

     6.09 INSURANCE. The Members and the Company agree to maintain for the
benefit of the Company and the Members and at the their sole expense the
insurance coverage described on "Exhibit C" hereto and such other insurance as
may be required by Law and any commercial lender. Promptly upon request of the
Company or any Member, the Company and each Member agree to provide an insurance
certificate evidencing the coverage required by this Section. If a Member does
not maintain insurance or provide an insurance certificate as required by this
Agreement ("Delinquent Insurance Member"), then the other Members (the "Insuring
Members") may acquire or maintain insurance to satisfy the Delinquent Insurance
Member's obligation. The cost for the Insuring Members to acquire or maintain
insurance to satisfy the obligations of the Delinquent Insurance Member shall be
reimbursed by the payment by the Company of such amounts to the Insuring Members
out of any distributions payable to the Delinquent Insurance Member, and any
such Delinquent Insurance Member hereby directs the Company to make such
payments on its behalf. Each such person shall be named as an additional insured
on the policies carried by the other person. The costs of the insurance required
to be carried by the Company pursuant to this Section 6.09 shall automatically
be included in the applicable operating budget for the Company without the
necessity of approval by the Members.

                                   ARTICLE VII
                                    MEETINGS

     7.01 MEETINGS OF MEMBERS AND COMMITTEES.

     (a) A quorum shall be present at a meeting of Members or any committee of
the Company if the holders of at least 37.5% of all of the Membership Interests
of the Company are represented at the meeting in person or by proxy. At a
meeting of the Members at which a quorum is present with respect to any matter
(except for any matter requiring the affirmative vote of (i) a Super-Majority
Interest or all of the Membership Interest as required by this Agreement or (ii)
a Required Interest greater than a Majority Interest as required by this
Agreement or the Act), the affirmative vote of the Majority Interest shall be
the act of the Members.


                                       36

<PAGE>   42


     (b) All meetings of the Members or any committee of the Company shall be
held at the principal place of business of the Company or at such other place
within or without the State of Delaware as shall be specified or fixed in the
notices or waivers of notice thereof; provided that any or all Members or their
representatives may participate in any such meeting by means of conference
telephone or similar communications equipment pursuant to Section 16.10.

     (c) Notwithstanding the other provisions of this Agreement, the holders of
at least a Majority Interest of the Company shall have the power to adjourn such
meeting from time to time, without any notice other than an announcement at the
meeting of the time and place of the resumption of the adjourned meeting. The
time and place of such adjournment shall be determined by a vote of the holders
of at least a Majority Interest of the Company. Upon the resumption of such
adjourned meeting, any business may be transacted that might have been
transacted at the meeting as originally called.

     (d) Unless otherwise expressly provided in a written notice issued by the
Members, an annual meeting of the Members for the transaction of such business
as may properly come before such meeting shall be held at the principal office
of the Company at 10:00 a.m. on the first Tuesday which is a Business Day in the
month of April. Regularly scheduled, periodic meetings of the Members or any
committee of the Company may be held without notice to the Members or Member
representatives at such times and places as shall from time to time be
determined by resolution of the Members or such Member representatives and
communicated to all Members or their representatives. Each Member, or its
representatives in the case of committee meetings, shall use reasonable efforts
to inform the other Members or committee representatives of any business matters
that it intends to raise at any regular meeting of the Members or any committee
of the Company within a reasonable time prior to such meeting, provided that the
business matters to be acted upon at any such a meeting shall not be limited to
the matters disclosed by a Member or its representative(s) prior to such
meeting.

     (e) Special meetings of the Members or any committee of the Company, for
any purpose or purposes, unless otherwise prescribed by law, shall be called by
(i) President or Secretary (if any) (ii) Member representative(s) at the request
in writing by the President, (iii) Members holding at least twenty percent (20%)
or more of the Membership Interests of the Company or (iv) at least two Members.
Such request of the President, Secretary or Member representative(s) shall state
the purpose or purposes of the proposed meeting.

     (f) Except as provided otherwise by the Agreement or applicable law,
written or printed notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which such meeting is
called, shall be delivered not less than ten nor more than 60 (including
Saturdays, Sundays and holidays) days before the date of the proposed meeting,
either personally, by certified mail (return receipt requested) or by telecopy
(with a copy delivered via United States mail), by or at the direction of the
Person calling the meeting, to each Member or Member representative, as the case
may be, entitled to vote thereat. If mailed, any such notice shall be deemed to
be delivered when deposited in the United States


                                       37

<PAGE>   43


mail, addressed to the Member, or Member representative, at its address provided
for in Section 16.19, with postage thereon prepaid.

     (g) The date on which notice of a meeting of the Members or any committee
of the Company is mailed shall be the Record Date for the determination of the
Members or Member representatives entitled to notice of or to vote at such
meeting, including any adjournment thereof, or the Members or Member
representatives entitled to receive such distribution.

     7.02 SPECIAL ACTIONS. The approval of the holders of a Super-Majority
Interest of the Members shall be required to authorize and approve the
following:

          (i)    acquiring and disposing of, and utilizing for Company purposes,
     any material asset of the Company;

          (ii)   borrowing money;

          (iii)  determining the reserve applicable to distributions of Company
     cash and other property as provided in Section 5.03;

          (iv)   authorizing transactions not in the ordinary course of
     business;

          (v)    permitting the Company to merge, consolidate, participate in a
     share exchange or other statutory reorganization with, or sell all or
     substantially all of the assets of the Company to, any Person;

          (vi)   permitting the Company to dissolve and liquidate;

          (vii)  approving any operating and capital expenditures budgets for
     the Company;

          (viii) entering into contracts, agreements and other undertakings
     binding the Company to pay more than $500,000 in any year or $1,000,000 in
     the aggregate pursuant to any such individual contract, agreement or
     undertaking that may be necessary, appropriate, or advisable in furtherance
     of the purposes of the Company;

          (ix)   authorizing the Company to enter into a transaction involving a
     Lateral Opportunity in accordance with Article XV; and

          (x)    entering into Oil Contracts with a term of one year or more.

     7.03 VOTING LIST. The officer of the Company who is responsible for the
maintenance of the Company's records shall make, at least ten days before each
meeting of Members or the Management Committee, a complete list of the Members
or their representatives, as the case may


                                       38

<PAGE>   44

be, entitled to vote thereat or any adjournment thereof, arranged in
alphabetical order, with the address of and the Membership Interest held or
represented by each, which list, for a period of ten days prior to such meeting,
shall be kept on file at the registered office or principal place of business
of the Company and shall be subject to inspection by any Member or Member
representative at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Member or Member representative during the whole time
of the meeting. The original Company records shall be prima facie evidence as to
who are the Members or their representatives entitled to examine such list or
transfer records or to vote at any meeting of Members or the Management
Committee. Failure to comply with the requirements of this Section 7.03 shall
not affect the validity of any action taken at the meeting.

     7.04 PROXIES. A Member or Member representative may vote either in person
or by proxy executed in writing by the Member or Member representative. A
telegram, telex, cablegram or similar transmission by the Member or Member
representative or a photographic, photostatic, facsimile or similar reproduction
of writing executed by the Member or Member representative shall be treated as
an execution in writing for purposes of this Section 7.04. Proxies for use at
any meeting of the Members or committee of the Company or in connection with the
taking of any action by written consent shall be filed with the Company before
or at the time of the meeting or execution of the written consent, as the case
may be. All proxies shall be received and taken charge of and all ballots shall
be received and canvassed by an inspector or inspectors appointed by the
President or a Vice President of the Company who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes.

     7.05 VOTES. Each Member or Member representative shall be entitled to one
vote (or a fraction thereof) per percent (or fraction thereof) of Membership
Interest held by such Member, as reflected in the transfer records of the
Company.

     7.06 CONDUCT OF MEETINGS. All meetings of the Members or committees of the
Company shall be presided over by the chairman of the meeting, who shall be
designated by the Chief Executive Officer, President, Vice President or other
appropriate officer of the Company. The chairman of any meeting of Members or
committee of the Company shall determine the order of business and the procedure
at the meeting, including regulation of the manner of voting and the conduct of
discussion.

     7.07 ACTION BY WRITTEN CONSENT.

     (a) Except as otherwise provided by law, any action required or permitted
to be taken at any meeting of Members or committee of the Company may be taken
without a meeting, without prior notice, and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holder or holders or representatives of not less than the minimum of Membership
Interests that would be necessary to take such action at a meeting at which the
holders of all Membership Interests entitled to vote on the action were present
and


                                       39

<PAGE>   45

voted. To the extent required by law, every written consent shall bear the date
of signature of each Member or Member representative who signs the consent. To
the extent required by law, no written consent shall be effective to take the
action that is the subject to such consent unless, within 60 days after the date
of the earliest dated consent delivered to the Company in the manner required by
this Section 7.07, a consent or consents signed by the holder or holders of not
less than the minimum Membership Interests that would be necessary to take the
action that is the subject of the consent are delivered to the Company by
delivery to its registered office or its principal place of business. Delivery
shall be by hand or certified or registered mail (return receipt requested) to
the Company's principal place of business and shall be addressed to the
Secretary of the Company. A telegram, telex, cablegram or similar transmission
by a Member or Member representative, or a photographic, photostatic, facsimile
or similar reproduction of a writing signed by a Member or Member
representative, shall be regarded as signed by the Member or Member
representative for purposes of this Section 7.07. Prompt written notice of the
taking of any action by the Members or committees of the Company without a
meeting by less than unanimous written consent shall be given to those Members
or Member representatives who did not consent in writing to the action.

     (b) The Record Date for determining Members or their representatives
entitled to consent to an action in writing without a meeting shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company. Delivery shall be by hand or
by certified or registered mail (return receipt requested) to the Company's
principal place of business and shall be addressed to the Secretary of the
Company.

     7.08 RECORDS. An officer of the Company or a designated Member
representative shall be responsible for maintaining the records of the Company,
including keeping minutes at the meetings of the Members or committees of the
Company and the filing of consents in the records of the Company.

                                  ARTICLE VIII.
                                 INDEMNIFICATION

     8.01 RIGHT TO INDEMNIFICATION. Subject to the limitations and conditions
as provided herein or by applicable law, each Person who was or is made a party
or is threatened to be made a party to or is involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "Proceeding"), or
any appeal in such a Proceeding or any inquiry or investigation that could lead
to such a Proceeding, by reason of the fact that he or she, or a Person of whom
he or she is the legal representative, is or was a Member of the Company, a
member of a committee of the Company or an officer of the Company, or while such
a Person is or was serving at the request of the Company as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
of another foreign or domestic general partnership, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, shall be indemnified by the Company to the extent such Proceeding or
other above-described process relates to any


                                       40

<PAGE>   46

such above-described relationships with, status with respect to, or
representation of any such Person to the fullest extent permitted by the Act, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide
prior to such amendment) against judgments, penalties (including excise and
similar taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, attorneys' fees) actually incurred by such
Person in connection with such Proceeding, and indemnification under this
Article VIII shall continue as to a Person who has ceased to serve in the
capacity which initially entitled such Person to indemnity hereunder for any and
all liabilities and damages related to and arising from such Person's activities
while acting in such capacity; provided, however, that no Person shall be
entitled to indemnification under this Section 8.01 in the event the Proceeding
involves acts or omissions of such Person which constitute an intentional breach
of this Agreement or gross negligence or willful misconduct on the part of such
Person. The rights granted pursuant to this Article VIII shall be deemed
contract rights, and no amendment, modification or repeal of this Article VIII
shall have the effect of limiting or denying any such rights with respect to
actions taken or Proceedings arising prior to any such amendment, modification
or repeal. It is expressly acknowledged that the indemnification provided in
this Article VIII could involve indemnification for negligence or under theories
of strict liability.

     8.02 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS. The Company may
indemnify, and advance expenses to, Persons who are not or were not a Member,
including officers, employees or agents of the Company, and those Persons who
are or were serving at the request of the Company as a manager, director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic general partnership, corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in such a capacity or arising out of his status as such a Person to the same
extent that it may indemnify and advance expenses to a Member under this Article
VIII.

     8.03 ADVANCE PAYMENT. The right to indemnification conferred in this
Article VIII shall include a limited right to be paid or reimbursed by the
Company for any and all reasonable expenses as they are incurred by a Person
entitled to be indemnified under Sections 8.01 and 8.02 who was, or is
threatened, to be made a named defendant or respondent in a Proceeding in
advance of the final disposition of the Proceeding and without any determination
as to such Person's ultimate entitlement to indemnification; provided, however,
that the payment of such expenses incurred by any such Person in advance of
final disposition of a Proceeding shall be made only upon delivery to the
Company of a written affirmation by such Person of his good faith belief that he
has met the requirements necessary for indemnification under this Article VIII
and a written undertaking, by or on behalf of such Person, to repay all amounts
so advanced if it shall ultimately be determined that such indemnified Person is
not entitled to be indemnified under this Article VIII or otherwise.

     8.04 APPEARANCE AS A WITNESS. Notwithstanding any other provision of this
Article VIII, the Company may pay or reimburse expenses incurred by any Person
entitled to be


                                       41

<PAGE>   47

indemnified pursuant to this Article VIII in connection with such Person's
appearance as a witness or other participation in a Proceeding at a time when he
is not a named defendant or respondent in the Proceeding.

     8.05 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this Article VIII shall not
be exclusive of any other right which a Person indemnified pursuant to Sections
8.01 and 8.02 may have or hereafter acquire under any law (common or statutory),
this Agreement, or any other agreement, vote of Members or otherwise.

     8.06 INSURANCE. The Company may purchase and maintain indemnification
insurance, at its expense, to protect itself and any Person from any expenses,
liabilities, or losses that may be indemnified under this Article VIII.

     8.07 MEMBER NOTIFICATION. Any indemnification of or advance of expenses to
any Person entitled to be indemnified under this Article VIII shall be reported
in writing to the Members with or before the notice or waiver of notice of the
next Members' meeting or with or before the next submission to Members of a
consent to action without a meeting and, in any case, within the 12-month period
immediately following the date the indemnification or advance was made.

     8.08 SAVINGS CLAUSE. If this Article VIII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless any Person entitled to be
indemnified pursuant to this Article VIII as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative to the full extent permitted by any applicable
portion of this Article VIII that shall not have been invalidated and to the
fullest extent permitted by applicable law.

     8.09 SCOPE OF INDEMNITY. For the purposes of this Article VIII, references
to the "Company" include all constituent entities, whether corporations or
otherwise, absorbed in a consolidation or merger as well as the resulting or
surviving entity. Thus, any Person entitled to be indemnified or receive
advances under this Article VIII shall stand in the same position under the
provisions of this Article VIII with respect to the resulting or surviving
entity as he would have if such merger, consolidation, or other reorganization
never occurred.

                                   ARTICLE IX.
                                      TAXES

     9.01. TAX RETURNS. The Company shall cause to be prepared and filed all
necessary federal and state income tax returns for the Company, including making
the elections described in Section 9.02. Upon written request by the Company,
each Member shall furnish to the


                                       42

<PAGE>   48

Company all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed.

     9.02 TAX ELECTIONS. The Company shall make the following elections on the
appropriate tax returns:

     (a) to adopt the accrual method of accounting;

     (b) an election pursuant to section 754 of the Code;

     (c) to elect to amortize the organizational expenses of the Company and the
start-up expenditures of the Company under section 195 of the Code ratably over
a period of 60 months as permitted by section 709(b) of the Code; and

     (d) any other election that the Company may deem appropriate and in the
best interests of the Company or Members, as the case may be.

Neither the Company nor any Member may make an election for the Company to be
excluded from the application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable state law, and no
provision of this Agreement shall be construed to sanction or approve such an
election.

     9.03 TAX MATTERS MEMBER. The Company shall select one of the Members as
the "Tax Matters Member" of the Company pursuant to section 6231(a)(7) of the
Code. The Tax Matters Member shall take such action as may be necessary to cause
each Member to become a "notice partner" within the meaning of section 6223 of
the Code and shall inform each Member of all significant matters that may come
to its attention in its capacity as Tax Matters Member by giving notice thereof
on or before the fifth Business Day after becoming aware thereof and, within
that time, shall forward to each other Member copies of all significant written
communications it may receive in that capacity. The Tax Matters Member may not
take any action contemplated by sections 6222 through 6232 of the Code without
the consent of a Majority Interest, but this sentence does not authorize the Tax
Matters Member to take any action left to the determination of an individual
Member under sections 6222 through 6232 of the Code. The initial Tax Matters
Member shall be the Member so indicated on Exhibit A.

                                   ARTICLE X.
                   BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

     10.01 MAINTENANCE OF BOOKS. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members. The books of
account for the Company shall be maintained on an accrual basis in accordance
with the terms of this Agreement and generally accepted accounting principles,
except that the Capital Accounts of the Members



                                       43

<PAGE>   49

shall be maintained in accordance with Section 4.06. The accounting year of the
Company shall be determined by the Company.

     10.02 FINANCIAL STATEMENTS. On or before the last day of each calendar
month during the term of the Company, the Company shall cause each Member to be
furnished with a balance sheet, an income statement and a statement of cash
flows for, or as of the end of, the calendar month immediately preceding such
calendar month. On or before the last day of each April during the existence of
the Company, the Company shall cause each Member to be furnished with audited
financial statements, including, a balance sheet, an income statement, a
statement of cash flows, and a statement of changes in each Member's Capital
Account for, or as of the end of, the immediately preceding calendar year.
Annual financial statements must be prepared in accordance with generally
accepted accounting principles consistently applied (except as therein noted).
The Company also may cause to be prepared or delivered such other reports as it
may deem, in its sole judgment, appropriate. The Company shall bear the costs
of all such reports and financial statements.

     10.03 TAX STATEMENTS. On or before the last day of June during the
existence of the Company, the Company shall cause each Member to be furnished
with all information reasonably necessary or appropriate to file their
appropriate tax reports, including a schedule of Company book-tax differences
for, or as of the end of, the immediately preceding tax year.

     10.04 ACCOUNTS. The officers of the Company shall establish and maintain
one or more separate bank and investment accounts and arrangements for Company
funds in the Company's name with financial institutions and firms that officers
of the Company may determine. The Company may not commingle the Company's funds
with the funds of any other Person. All such accounts shall be and remain the
property of the Company and all funds shall be received, held and disbursed for
the purposes specified in this Agreement. The officers of the Company may invest
the Company funds only in (i) readily marketable securities issued by the United
States or any agency or instrumentality thereof and backed by the full faith and
credit of the United States maturing within three months or less from the date
of acquisition, (ii) readily marketable securities issued by any state or
municipality within the United States of America or any political subdivision,
agency or instrumentality thereof, maturing within three months or less from the
date of acquisition and rated "A" or better by any recognized rating agency,
(iii) readily marketable commercial paper rated "Prime-1" by Moody's or "A-1" by
Standard and Poor's (or comparably rated by such organizations or any successors
thereto if the rating system is changed or there are such successors) and
maturing in not more than three months after the date of acquisition or (iv)
certificates of deposit or time deposits issued by any incorporated bank
organized and doing business under the Laws of the United States of America
which is rated at least "A" or "A2" by Standard and Poors or Moody's, which is
not in excess of federally insured amounts, and which matures within three
months or less from the date of acquisition.


                                       44

<PAGE>   50

                                   ARTICLE XI.
                            BANKRUPTCY OF A MEMBER

     11.01 BANKRUPT MEMBERS. Subject to Section 12.01(c), if any Member becomes
a Bankrupt Member, the Company or, if the Company does not exercise the relevant
option, the remaining Members which desire to participate, shall have the
option, exercisable by notice from the Company or the Members, as the case may
be, to the Bankrupt Member (or its representative) at any time prior to the
180th day after receipt of notice of the occurrence of the event causing it to
become a Bankrupt Member, to buy, and, on the exercise of this option, the
Bankrupt Member or its representative shall sell, its Membership Interest. The
purchase price shall be an amount equal to the fair market value thereof
determined by agreement by the Bankrupt Member (or its representative) and the
purchasing Person; however, if those Persons do not agree on the fair market
value on or before the 30th day following the exercise of the option, either
such Person, by written notice to the other, may require the determination of
fair market value to be made by an independent appraiser specified in such
notice. If the Person receiving that notice objects on or before the tenth day
following receipt to the independent appraiser designated in that notice, and
those Persons otherwise fail to agree on an independent appraiser, either such
Person may petition the United States District Judge for the Southern District
of Texas then senior in active service to designate an independent appraiser,
whose determination of the independent appraiser, however designated, is final
and binding on all parties. The Bankrupt Member and the purchasing Person each
shall pay one-half of the costs of the appraisal and court costs in appointing
an appraiser (if any). The purchasing Person shall pay the fair market value as
so determined in cash on closing. The payment to be made to the Bankrupt Member
or its representative pursuant to this Section 11.01 is in complete liquidation
and satisfaction of all the rights and interest of the Bankrupt Member and its
representative (and of all Persons claiming by, through, or under the Bankrupt
Member and its representative) in and in respect of the Company, including,
without limitation, any Membership Interest, any rights in specific Company
property, and any rights against the Company and its officers, agents, and
representatives and (insofar as the affairs of the Company are concerned)
against the Members.

                                  ARTICLE XII.
                    DISSOLUTION, LIQUIDATION, AND TERMINATION

     12.01 DISSOLUTION. Subject to the provisions of Section 12.02, the Company
shall dissolve and its affairs shall be wound up on the first to occur of the
following:

     (a) the consent of holders of at least a Super-Majority Interest of the
Membership Interests pursuant to Section 7.02(vi);

     (b) the expiration of the period fixed for the duration of the Company as
set forth in this Agreement;


                                       45

<PAGE>   51

     (c) entry of a decree of judicial dissolution of the Company under section
18-802 of the Act; and

     (d) the bankruptcy or dissolution of a Member or other event described in
section 18-801 of the Act (other than a Transfer of Membership Interest in
accordance with the terms of this Agreement).

     12.02 LIQUIDATION AND TERMINATION. Subject to Section 12.02(d), upon
dissolution of the Company, a representative of the Company selected by a
Majority Interest (not including any member in Default at the time of
dissolution) shall act as a liquidator or may appoint one or more Members as
liquidator ("Liquidator"). The Liquidator shall proceed diligently to wind up
the affairs of the Company and make final distributions as provided herein and
in the Act. The costs of liquidation shall be borne as a Company expense. Until
final distribution, the Liquidator shall continue to operate the Company
properties for a reasonable period of time to allow for the sale of all or a
part of the assets thereof with all of the power and authority of the Members.
The steps to be accomplished by the Liquidator are as follows:

     (a) as promptly as possible after dissolution and again after final
liquidation, the Liquidator shall cause a proper accounting to be made of the
Company's assets, liabilities, and operations through the last day of the
calendar month in which the dissolution occurs or the final liquidation is
completed, as applicable;

     (b) the Liquidator shall cause any notices required by law to be mailed to
each known creditor of and claimant against the Company in the manner described
by such law;

     (c) subject to the terms and conditions of this Agreement and the Act
(especially section 18-803), the Liquidator shall distribute the assets of the
Company in the following order:

          (i) the Liquidator shall pay, satisfy or discharge from Company funds
     all of the debts, liabilities and obligations of the Company, including
     without limitation all expenses incurred in liquidation (but excluding any
     advances or Capital Contributions described in Section 4.05) or otherwise
     make adequate provision for payment and discharge thereof (including,
     without limitation, the establishment of a cash escrow fund for contingent
     liabilities in such amount and for such term as the Liquidator may
     reasonably determine);

          (ii) the Liquidator shall pay, satisfy or discharge from Company funds
     all of the advances and loans (but not Capital Contributions) made to the
     Company by Members, as described in Section 4.05; and

          (iii) all remaining assets of the Company shall be distributed to the
     Members as follows:



                                       46

<PAGE>   52

               (A) the Liquidator may sell any or all Company property,
          including to one or more of the Members (other than any Member in
          Default at the time of dissolution), and any resulting gain or loss
          from each sale shall be computed and allocated to the Capital Accounts
          of the Members on a pro rata basis in accordance with each of their
          respective Membership Interests;

               (B) with respect to all Company property that has not been sold,
          the fair market value of that property (as determined by the
          Liquidator using any method of valuation as it, using its best
          judgment, deems reasonable) shall be determined and the Capital
          Accounts of the Members shall be adjusted to reflect the manner in
          which the unrealized income, gain, loss, and deduction inherent in
          property that has not been reflected in the Capital Accounts
          previously would be allocated among the Members if there were a
          taxable disposition of that property for the fair market value of that
          property on the date of distribution; and

               (C) Company property shall be distributed among the Members
          ratably in proportion to each Member's Capital Account balances, as
          determined after taking into account all Capital Account adjustments
          for the taxable year of the Company during which the liquidation of
          the Company occurs (other than those made by reason of this clause
          (C); and in each case, those distributions shall be made by the end of
          the taxable year of the Company during which the liquidation of the
          Company occurs (or, if later, 90 days after the date of the
          liquidation).

All distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses, and liabilities shall be allocated to the distributee pursuant
to this Section 12.02. The distribution of cash and/or property to a Member in
accordance with the provisions of this Section 12.02 constitutes a complete
return to the Member of its Capital Contributions and a complete distribution to
the Member of its Membership Interest and all the Company's property. To the
extent that a Member returns funds to the Company, it has no claim against any
other Member for those funds.

     (d) Upon dissolution of the Company upon an event occurring to a Member
described in Section 12.01(d) (the "Withdrawing Member"), then within thirty
(30) days after the Company delivers notice of such event to the Members, at
least 50% of such other Members (by Membership Interest and excluding the
Membership Interest of the transferring or bankrupt Member) may elect to
reconstitute the Company and continue its business on the same terms and
conditions set forth in this Agreement by forming a new company on terms
identical to those set forth in this Agreement and, as necessary, admitting an
additional Member chosen by such other Members. Such other Members shall be
deemed to have voted for and consented to such reconstitution unless a written
statement objecting to the reconstitution shall have been received by the
Company within thirty (30) days after notice of dissolution was made to such
Member.


                                       47


<PAGE>   53

Upon any such election to reconstitute by at least 50% of such other Members (by
Membership Interest), all Members, Withdrawing Members, and successors shall be
bound thereby and shall be deemed to have approved thereof. Unless such an
election to reconstitute is made within the applicable time period as set forth
above, the Company shall conduct only activities necessary to wind up its
affairs. If such an election is so made, then:

          (i) the reconstituted Company shall continue until the end of the term
     set forth in Section 2.06 unless earlier dissolved in accordance with this
     Article XII;

          (ii) the interest of the Withdrawing Member shall be treated
     thenceforth as the interest of a Transferee that has not been admitted as a
     Substitute Member hereunder; and

          (iii) all necessary steps shall be taken to cancel this Agreement and
     to enter into and, as necessary, to file new organizational documents;
     provided that the right to reconstitute and to continue the business of the
     Company shall not exist and may not be exercised unless the Company has
     received an opinion of counsel that the Company would not become taxable as
     a corporation or otherwise be taxed as an entity for federal income tax
     purposes upon the exercise of such right to continue.

     12.03 PROVISION FOR CONTINGENT CLAIMS.

     (a) The Liquidator shall make a reasonable provision to pay all claims and
obligations, including all contingent, conditional or unmatured claims and
obligations, actually known to the Company but for which the identity of the
claimant is unknown; and

     (b) If there are insufficient assets to both pay the creditors pursuant to
Section 12.02(c)(i) and to establish the provision contemplated by Section
12.03(a), the claims shall be paid as provided for in accordance to their
priority, and, among claims of equal priority, ratably to the extent of assets
therefor.

     12.04 DEFICIT CAPITAL ACCOUNTS. Notwithstanding anything to the contrary
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that the deficit, if any, in the Capital Account of
any Member results from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or distributions of
money pursuant to this Agreement to all Members ratably in proportion to their
respective Membership Interest, upon dissolution of the Company such deficit
shall not be an asset of the Company and such Members shall not be obligated to
contribute any amounts to the Company to bring the balance of such Member's
capital account to zero.


                                       48
<PAGE>   54

                                  ARTICLE XIII.
                           AMENDMENT OF THE AGREEMENT

          13.01 AMENDMENTS TO BE ADOPTED BY THE COMPANY. Each Member agrees that
the appropriate officer of the Company, in accordance with and subject to the
limitations contained in Article VII, may amend the Company's certificate of
formation, and execute, swear to, acknowledge, deliver, file and record whatever
documents may be required to reflect:

         (a) a change in the name of the Company, the location of the principal
place of business of the Company or the registered agent or office of the
Company;

         (b) admission or substitution of Members effected in accordance with
this Agreement;

         (c) a change that the appropriate officer of the Company believes is
reasonable and necessary or appropriate to qualify or continue the qualification
of the Company as a limited liability company under the Laws of any state or
that is necessary or advisable in the opinion of the Company to ensure that the
Company will not be taxable as a corporation or otherwise taxed as an entity for
federal income tax purposes;

          (d) a change (i) that the appropriate officer of the Company believes
does not adversely affect the Members in any material respect, or (ii) that is
necessary or appropriate for the Company to satisfy any requirements,
conditions, guidelines or interpretations contained in any opinion,
interpretative release, directive, order, ruling or regulation of any federal or
state agency or judicial authority (including, without limitation, the Act);

         (e) an amendment that is necessary, in the opinion of counsel, to
prevent the Company or its officers from in any manner being subjected to the
provisions of the Investment Company Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;

         (f) subject to the terms of Section 3.09, an amendment that the Company
determines in its sole discretion to be necessary or appropriate in connection
with the authorization for issuance of any Membership Interest pursuant to
Section 3.09; and

         (g) any amendment expressly permitted in this Agreement to be made by
the Company.

         13.02 AMENDMENT PROCEDURES. Except as provided in Section 13.01, all
amendments to this Agreement shall be made in accordance with the following
requirements. Amendments to this Agreement may be proposed by any Member. Each
such proposal shall contain the text of the proposed amendment. If an amendment
is proposed, the Company shall seek the written approval of the holders of the
requisite percentage of Membership Interests or call a meeting of

                                       49

<PAGE>   55




the Members to consider and vote on such proposed amendment. A proposed
amendment shall be effective upon its approval by the holders of all of the
Membership Interests, unless a different percentage is required under this
Agreement. Any amendment that would materially and adversely affect the rights
of any type or class of Membership Interests in relation to other types or
classes of Membership Interests requires the approval of the holders of at least
a majority of the Membership Interests of such class or type of Membership
Interest. The Company shall notify all Record Holders upon final adoption of
any proposed amendment.

                                  ARTICLE XIV.
                        CERTIFICATED MEMBERSHIP INTERESTS

         14.01 ENTITLEMENT TO CERTIFICATES. Every owner of a Membership Interest
in the Company, unless and to the extent the Company elects otherwise, shall be
entitled to have a certificate, in such form as is approved by the Company and
conforms with applicable law, certifying the Membership Interest owned by it.

         14.02 MULTIPLE CLASSES OF INTEREST. If the Company shall be authorized
to issue more than one class of Membership Interest or more than one series of
any Membership Interest, a statement of the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
membership interest or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall, unless the Members shall
by resolution provide that such class or series of Membership Interest shall be
uncertificated, be set forth in full or summarized on the face or back of the
certificate which the Company shall issue to represent such class or series of
Membership Interest; provided that, to the extent allowed by law, in lieu of
such statement, the face or back of such certificate may state that the Company
will furnish a copy of such statement without charge to each requesting Member.

         14.03 SIGNATURES. Each certificate representing a Membership Interest
in the Company shall be signed by or in the name of the Company by (1) any of
the President or Vice President of the Company; and (2) any of the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company. The
signature of the officers of the Company may be facsimiles. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to hold such office before such certificate is issued, it may
be issued by the Company with the same effect as if he held such office on this
date of issue.

         14.04 ISSUANCE AND PAYMENT. Subject to the provisions of the Act and
this Agreement, Membership Interests may be issued for such consideration and to
such persons as the Company may determine from time to time. Membership
Interests may not be issued until the full amount of the consideration has been
paid, unless upon the face or back of each certificate issued to represent any
partly paid Membership Interest there shall have been set forth the total amount
of the consideration to be paid therefor and the amount paid thereon up to and
including the time said certificate is issued.

                                       50

<PAGE>   56




         14.05 RESTRICTIVE LEGEND. In the absence of a more restrictive legend,
all certificates which evidence Membership Interests shall be stamped or typed
in a conspicuous place with the following legend:

         THE INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE LIMITED
         LIABILITY AGREEMENT OF THE COMPANY DATED AS OF FEBRUARY 14,1996, WHICH
         RESTRICTS ANY SALE, ASSIGNMENT, TRANSFER, CONVEYANCE, ENCUMBRANCE,
         PLEDGE OR OTHER TRANSFER OR ALIENATION (WITH OR WITHOUT CONSIDERATION)
         OF SUCH INTEREST. THE COMPANY WILL FURNISH TO THE RECORD HOLDER OF THIS
         CERTIFICATE, WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE COMPANY AT ITS
         PRINCIPAL PLACE OF BUSINESS, A COPY OF SUCH LIMITED LIABILITY
         AGREEMENT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
         ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
         STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD,
         ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, OR OTHERWISE
         TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF
         COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
         REQUIRED FOR SUCH TRANSFER.

Such legend shall also be placed on all Certificates which are hereafter issued
to any Member.

         14.06 LOST, STOLEN OR DESTROYED CERTIFICATES. The Company may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Company alleged to have been lost, stolen
or destroyed upon the making of an affidavit of that fact by the Person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Company may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Company a bond in such sum as it may direct as indemnity against any
claim that may be made against the Company with respect to the certificate
alleged to have been lost, stolen or destroyed.

         14.07 TRANSFER OF MEMBERSHIP INTEREST. Upon surrender to the Company or
its transfer agent, if any, of a certificate representing Membership Interests
duly endorsed or accompanied by proper evidence of succession, assignation or
authority to transfer in accordance with this Agreement and of the payment of
all taxes applicable to the transfer of said Membership Interest, the Company
shall be obligated to issue a new certificate to the Person entitled thereto,
cancel the old certificate and record the transaction upon its books, provided,
however, that the Company shall not be so obligated unless such transfer was
made in compliance with the provisions of this Agreement and any applicable
state and federal securities Laws.

                                       51


<PAGE>   57

         14.08 REGISTERED HOLDERS. The Company shall be entitled to recognize
the exclusive right of a Person registered on its books as the owner of the
indicated Membership Interest and shall not be bound to recognize any equitable
or other claim to or interest in such Membership Interest on the part of any
Person other than such registered owner, whether or not it shall have express or
other notice thereof, except as otherwise provided by Law.

                                   ARTICLE XV.
                     OTHER MEMBER AGREEMENTS AND OBLIGATIONS

         15.01 PARTICIPATION IN EXTENSIONS AND EXPANSIONS. (a) Except as
otherwise provided in Section 15.01(b), each Member agrees that neither it nor
its Affiliates will, directly or indirectly, enter into any agreement to
construct or otherwise consummate transactions involving construction of any
pipeline laterals or extensions or related facilities (a "Lateral Opportunity")
to connect any oil or liquid condensate to the Poseidon Pipeline until
such Lateral Opportunity has been rejected or otherwise forfeited by the Company
and the Members, as applicable, pursuant to this Article; provided, however,
that this Article shall not apply to any exploration and production Affiliate
that intends to construct a pipeline lateral for the purpose of transporting
crude oil produced in whole or in part by such Affiliate. Any Member may propose
that the Company undertake a Lateral Opportunity by delivering written notice (a
"Lateral Opportunity Notice") to the Company and each of the other Members,
which Lateral Opportunity Notice would include the proposed terms and conditions
of such transactions and reasonably sufficient operational and financial
information and other details to allow such Members to make a reasonably
informed decision with respect to such Lateral Opportunity. If Members holding
at least a Super-Majority Interest do not agree and deliver notice thereof in
writing within thirty (30) days after the Company receives the Lateral
Opportunity Notice that the Company should undertake such project on the terms
and conditions set forth in the applicable Lateral Opportunity Notice, any
Member (including its Affiliates) voting in favor of such project shall have the
right to pursue such project (a "Rejected Lateral Opportunity") on the terms and
conditions set forth in the applicable Lateral Opportunity Notice and own any
assets related thereto in the proportion that such Member's Membership Interest
is to the Membership Interest of all Members electing to participate in the
Rejected Lateral Opportunity by giving written notice of such intent to the
Company within fifty (50) days after the Company receives the relevant Lateral
Opportunity Notice. In such event, the Members (or their Affiliates) desiring
to pursue such Rejected Lateral Opportunity shall be free for a period of sixty
(60) days after such fifty (50) day period to enter into definitive agreements,
if any, or otherwise consummate the transactions contemplated by the applicable
Lateral Opportunity Notice on the same terms and conditions set forth in the
applicable Lateral Opportunity Notice without further obligation to any Members
or the Company; provided that following such sixty (60) day period such Members
or their Affiliates may not enter into definitive agreements, if any, or
otherwise consummate the transactions with respect to a Rejected Lateral
Opportunity without again offering the same to the Company in accordance with
this Article. No Members shall have any obligation or duty to the Company or
the other Members with respect to any Rejected Lateral Opportunity to the
extent it is covered by definitive agreements entered into, or otherwise
consummated, by such Members or their Affiliates after

                                       52

<PAGE>   58




compliance with this Section 15.01 or with respect to any modification,
renewal or extension of the terms of such definitive agreements with respect to
any such Rejected Lateral Opportunity. The construction, operation, maintenance
and ownership of each such Rejected Lateral Opportunity project shall not be
governed or affected by this Agreement, but shall be governed by the contractual
and other arrangements established by the Members participating in such project.

         (b) Notwithstanding anything contained in this Agreement to the
contrary, Poseidon and any of its Affiliates shall have the right, at its sole
cost, expense and risk, to construct pipeline laterals or extensions or related
facilities to connect the Poseidon Pipeline to oil or liquid condensate produced
from Blocks 254, 297, 298 and 342 in the Green Canyon area, and Blocks 871, 914,
915, 916, 958, 959, 1002 and 1003 in the Ewing Bank Area Gulf of Mexico. Such
right shall be absolute and unconditional and shall be free and clear of any
obligation to offer the Company or any Member the right to participate therein.

         (c) Notwithstanding anything contained in this Agreement to the
contrary, Texaco and any of its Affiliates shall have the right, at its sole
cost, expense and risk, to construct pipeline laterals or extensions or related
facilities to connect the Poseidon Pipeline to oil or liquid condensate produced
from Blocks 331, 375, 419, 415, 416, 459, 460, 504, 505, 506, 507, 548, 549,
550, 551, 593, 594, 508, 509, 510, 552, 553 and 554 in the Green Canyon area,
Gulf of Mexico. Such right shall be absolute and unconditional and shall be free
and clear of any obligation to offer the Company or any Member the right to
participate therein.

         15.02 PROJECT FINANCINGS. Each Member shall be responsible for
arranging the financing of its share of Capital Contributions and advances or
loans to or other investments in the Company; provided, however, that the
Members agree to use commercially reasonable, good faith efforts to review and
pursue any project financing arrangement for the Company to the extent the terms
and conditions of such project financing are in the best interest of each of
the Members.

                                  ARTICLE XVI.
                               GENERAL PROVISIONS

         16.01 OFFSET. Whenever the Company is to pay any sum to any Member, any
amounts that a Member owes the Company may be deducted from that sum before
payment.

         16.02 ENTIRE AGREEMENT; SUPERSEDURE. This Agreement constitutes the
entire agreement and supersedes all prior (oral or written) or oral
contemporaneously proposals or agreements, all previous negotiations and all
other communications or understandings between the Parties with respect to the
subject matter hereof.

         16.03 WAIVERS. Neither action taken (including, without limitation, any
investigation by or on behalf of any Party) nor inaction pursuant to this
Agreement, shall be deemed to

                                       53

<PAGE>   59

constitute a waiver of compliance with any representation, warranty, covenant or
agreement contained herein by the Party not committing such action or inaction.
A waiver by any Party of a particular right, including, without limitation,
breach of any provision of this Agreement, shall not operate or be construed as
a subsequent waiver of that same right or a waiver of any other right.

         16.04 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Members and their respective heirs, legal representatives,
successors and assigns.

         16.05 MEMBER AND COMMITTEE DEADLOCKS; NEGOTIATIONS, MEDIATION AND
ARBITRATION.

               (a) Member and Committee Deadlocks. If any matter or proposal
(other than those matters specified in Section 6.03(b)(i), (ii), (iv), (v), (vi)
or (viii)) requiring the vote of less than all of the Membership Interest for
approval thereof is brought before the Members or the Management Committee and
(i) does not receive at least the Required Interest voting for such matter or
proposal or (ii) does not receive at least the Required Interest voting against
(not including abstentions or other non-votes) such matter or proposal, then any
Member by written notice to the other Members given within ten (10) days after
the initial vote on such matter or proposal, may call a meeting of the Members
or the Management Committee to reconsider such matter or proposal, such meeting
to be held when, where and as reasonably specified in said notice, but not less
than ten (10) days nor more than twenty-five (25) days after the date of such
vote. If such meeting is called and held as herein provided and the matter or
proposal at such meeting again and (i) does not receive at least the Required
Interest voting for such matter or proposal or (ii) does not receive at least
the Required Interest voting against (not including abstentions or other
non-votes) such matter or proposal, then any Member may within ten (10) days
thereafter submit the matter to arbitration in accordance with Section 16.05(b)
- h. If no Member calls such a meeting within the first ten (10) day period
herein provided for or if arbitration is not requested within the ten (10) day
period after the second meeting, no Member shall thereafter have any right to
request arbitration regarding such matter or proposal. Member approval or
disapproval of the matters specified in Section 6.03(b)(i), (ii), (iv), (v),
(vi) or (viii) shall not be subject to arbitration under this Agreement.

               (b) Initiation of Proceedings. Any Member wishing to submit a
matter or proposal to arbitration as permitted by Section 16-05(a) shall do so
by giving written notice of arbitration to the other Members and the Company.
The Member initiating arbitration shall also simultaneously file duplicate
copies of its notice of arbitration with any regional office of the American
Arbitration Association ("AAA"), together with the appropriate fee as provided
in the AAA's administrative fee schedule. The initiating Member shall state in
its notice of arbitration the regional office of AAA it has selected and
thereafter all communications with the AAA regarding the arbitration
proceedings shall be directed to such office unless the AAA directs otherwise.
The notice of arbitration shall contain a brief description of the nature of the
dispute to be arbitrated and the remedy or resolution sought by the Member
initiating arbitration. Such notice may also contain a request that the dispute
be arbitrated by a panel of three arbitrators.

                                       54



<PAGE>   60




If no such request is contained in the notice, it shall be presumed that the
Member seeking arbitration desires the dispute to be determined by a single
arbitrator.

               (c) Responses. Each of the other Members shall, within twenty
(20) days from the date of mailing of the notice of arbitration, file with each
of the other Members, the Company and the AAA a response in which it states
its view regarding the dispute to be arbitrated and the remedy or resolution it
desires. Such response may also include a request that the dispute be determined
by a panel of three arbitrators. If any of the Members indicate, in accordance
with Section 16.05(b) or this Section 16.05(c), their desire to have the dispute
determined by a panel of three arbitrators, it shall be so determined.
Otherwise, the dispute shall be determined by a single arbitrator.

               (d) Selection of Arbitrators. As soon as practicable after the
expiration of the twenty (20) day period beginning upon the date of mailing of
the initiating Member's notice of arbitration, the AAA shall compile a list of
available arbitrators competent and qualified to determine the dispute as
described in the notice of arbitration and the responses thereto. If the Members
have elected, in accordance with Section 16.05(c), to have the dispute
determined by a panel of three arbitrators, the list shall be composed of eight
names and if the Members have elected to have the dispute determined by a
single arbitrator, the list shall be composed of six names. The AAA shall also,
at the same time, by lot, rank the Members in order, and shall thereupon
forthwith transmit the list simultaneously to the Members and inform them of the
order in which it has ranked them. Unless the Members shall beforehand agree to
a different time or place, or both, they shall meet at the principal office of
the Company at 10:00 a.m. local time on the Business Day after the date of
mailing the AAA's list of arbitrators and notice of ranking. At such time, they
shall each, one by one, in accordance with the ranking determined by the AAA,
strike a name from the list submitted by the AAA. The three or the one
remaining, as the case may be, when such process of striking has been completed,
shall be the arbitrators or arbitrator to arbitrate and determine the dispute.
If any of the arbitrators so selected declines or for any reason fails to serve,
the AAA shall forthwith furnish the Members a second list of additional
available arbitrators competent and qualified to determine the dispute, such
list to contain five names plus the names of as many individuals as there are
vacancies to fill because of the failure to serve of previously selected
arbitrators. The Members shall thereupon again, in accordance with the ranking
determined by the AAA, one by one, in turn, strike names from the list. The
individuals or individual whose names or name remain on the list upon the
completion of such striking shall, together with any arbitrators previously
chosen in the case of a dispute to be determined by a panel of three
arbitrators, be the arbitrators to arbitrate and determine the dispute. This
procedure shall be repeated until one or three arbitrators, as the case may be,
who are willing and able to serve have been selected. If any of the Members at
any point fails to participate in the procedure hereinabove established to
select arbitrators, the AAA shall forthwith eliminate one name from the list of
arbitrators for each Member not so participating.

                                       55

<PAGE>   61




               (e) Location. Unless otherwise agreed by the Members, the
arbitration proceedings shall be held in Houston, Texas at such location
selected by the arbitrator or panel of arbitrators.

               (f) Rules. Except as set forth in this Section 16.05, all
arbitration proceedings under this Section 16.05 shall be conducted in
accordance with the Commercial Arbitration Rules of the AAA, as then amended and
in effect; and such rules shall be interpreted and applied and questions
regarding the arbitration process not resolved under such rules shall be
determined in accordance with the Uniform Arbitration Act, as enacted in the
State of Delaware; provided, however, that the arbitrator or panel of
arbitrators shall resolve such dispute within sixty (60) days from the day a
member submitted its notice or arbitration to the other Members, the Company and
the AAA. In any such arbitration proceeding, the arbitrator shall determine
whether there is a reasonable basis for the withholding of agreement or approval
by one or more Members or committee members from the standpoint of the best
interests of the Company, in light of the purposes of the Company expressed
herein. A reasonable basis for withholding agreement or approval shall be found
if a reasonable business person would withhold agreement or approval under the
circumstances based soley upon what such reasonable business person believes is
in the best interest of the Company. In the event the arbitration proceeding
results in a decision that a Member's or committee member's agreement is being
or has been withheld without a reasonable basis, such Member's or committee
member's agreement will be deemed to have been given. During pendency of any
arbitration proceeding, the business of the Company shall continue to be
conducted in accordance with the most recently approved budgets until such time
as the arbitration is completed, agreement among the Members or any committee is
achieved, or the Company is dissolved in accordance with the provisions hereof.

               (g) Limitation on Arbitration. Except with respect to the matters
specified in Section 16.05(a) or 4.03(c), no Member shall have the right to
demand arbitration with respect to any dispute, difference or question arising
between any of the Members themselves or any Member and the Company as to the
meaning or interpretation of any provision of this Agreement or as to the
performance by any Member or the Company of its obligation hereunder, whether
before or after the termination of this Agreement, or as to any matter
whatsoever.

               (h) Effect of Award. The Arbitrator's decision with respect to
any matter referred to arbitration pursuant to the provisions of this Section
16.05 shall be final and binding upon the Company and the Members, as if the
Members had voted in favor of such resolution, and each Member and the Company
shall use its best efforts to take all such steps as may be within its power to
ensure that the matter determined by arbitration is carried out as if it had
received the approval of the Members of the Management Committee. The Members
agree that judgment on the arbitration award may be entered by any court of
competent jurisdiction.

         16.06 GOVERNING LAW: SEVERABILITY. (a) THIS AGREEMENT HAS BEEN EXECUTED
AND DELIVERED AND SHALL BE CONSTRUED, INTERPRETED AND GOVERNED PURSUANT TO AND
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY
CONFLICT OF LAWS PRINCIPLES

                                       56

<PAGE>   62




WHICH, IF APPLIED, MIGHT PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.

         (b) In the event of a direct conflict between the provisions of this
Agreement and any mandatory provision of the Act or applicable law, the
applicable provision of the Act or other applicable law, as the case may be,
shall control. If any provision of this Agreement, or the application thereof to
any Person or circumstance, is held invalid or unenforceable to any extent, the
remainder of this Agreement and the application of that provision to other
Persons or circumstances shall not be affected thereby and that provision shall
be enforced to the greatest extent permitted by the Act or other applicable
law, as the case may be.

         16.07 FURTHER ASSURANCES. Subject to the terms and conditions set
forth in this Agreement, each of the Parties agrees to use all reasonable
efforts to take, or to cause to be taken, all actions, and to do, or to cause to
be done, all things necessary, proper or advisable under applicable Laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case, at any time after the execution of this Agreement, any
further action is necessary or desirable to carry out its purposes, the proper
officers or directors of the Parties shall take or cause to be taken all such
necessary action.

         16.08 WAIVER OF CERTAIN RIGHTS. Except as otherwise expressly provided
herein, each Member irrevocably waives any right it may have to maintain any
action for dissolution of the Company or for partition of the property of the
Company.

         16.09 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By executing
this Agreement, each Member acknowledges that it has actual notice of all of
the provisions of this Agreement. Each Member hereby agrees that this Agreement
constitute adequate notice of all such provisions.

         16.10 COUNTERPARTS. This Agreement may be executed in multiple of
counterparts, each of which, when executed, shall be deemed an original, and all
of which shall constitute but one and the same instrument.

         16.11 ATTENDANCE VIA COMMUNICATIONS EQUIPMENT. Unless otherwise
restricted by law or this Agreement, the Members or committees may hold a
meeting by means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can effectively
communicate with each other. Such participation in a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.

         16.12 REPORTS TO MEMBERS. The officers of the Company shall present at
each annual meeting of Members, and at any special meeting of Members, a
statement of the business and condition of the Company.

                                       57

<PAGE>   63

         16.13 CHECKS, NOTES AND CONTRACTS. Checks and other orders for the
payment of money shall be signed by such person or persons as the Company shall
from time to time by resolution determine. Contracts and other instruments or
documents may be signed in the name of the Company by any other officer
authorized to sign such contract, instrument or document by the Company, and
such authority may be general or confined to specific instances. Checks and
other orders for the payment of money made payable to the Company may be
endorsed for deposit to the credit of the Company, with a depositary authorized
by resolution of the Company, by the Chief Financial Officer or Treasurer or
such other persons as the Company may from time to time by resolution determine.

         16.14 SEAL. The seal of the Company shall be in such form as shall from
time to time be adopted by the Company. The seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.

         16.15 BOOKS AND RECORDS. The officers of the Company shall keep correct
and complete books and records of account and minutes of the proceedings of its
Members shall keep at its registered office or principal place of business, or
at the office of its transfer agent or registrar, a record of the Members,
giving the names and addresses of all Members and the number and class of the
shares held by each.

         16.16 SURETY BONDS. Such officers and agents of the Company (if any) as
the Company may direct, from time to time, shall be bonded for the faithful
performance of their duties and for the restoration to the Company, in case of
their death, resignation, retirement, disqualification or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in
their possession or under their control belonging to the Company, in such
amounts and by such surety companies as the Company may determine. The premiums
on such bonds shall be paid by the Company and the bonds so furnished shall be
in the custody of the Secretary.

         16.17 AUDIT RIGHTS OF MEMBERS. Each Member shall have the right to
inspect and audit the books and records of the Company to the extent necessary
to determine the accuracy of the financial statements delivered to the Members
pursuant to Section 10.02 of the Agreement. The audit rights with respect to any
calendar year or any portion of such year shall terminate on and as of the last
day of the second calendar year immediately following the issuance of the
audited financial statements covering such calendar year. A Member may exercise
its audit rights hereunder by giving at least 30 days written notice to the
Company of the desire to perform such audit, which notice shall include the
estimated timing and other particulars related to such audit. The audit shall be
conducted at the sole cost of the Member requesting same and during normal
business hours of the Company. The audit shall not unreasonably interfere with
the operation for the Company.

         16.18 NO THIRD PARTY BENEFICIARIES. Except to the extent a third party
is expressly given rights herein, any agreement herein contained, expressed or
implied, shall be only for the benefit of the Parties and their respective legal
representatives, successors, and assigns, and such

                                       58

<PAGE>   64

agreements or assumption shall not inure to the benefit of any other Person
whomsoever, it being the intention of the parties hereto that no Person shall be
deemed a third party beneficiary of this Agreement except to the extent a third
party is expressly given rights herein.

         16.19 NOTICES. Except as otherwise expressly provided in this Agreement
to the contrary (including in the definition of the term Default), any notice
required or permitted to be given under this Agreement shall be in writing
(including telex, facsimile, telecopier or similar writing) and sent to the
address of the Party set forth below, or to such other more recent address of
which the sending Party actually has received written notice:

          (a)         if to the Company, to:

                      Poseidon Oil Pipeline Company, L.L.C.
                      Attn: President
                      1670 Broadway
                      Denver, Colorado 80202
                      Telephone           303/861-4475
                      Telecopy            303/860-3135

          (b)         if to the Members, to:

                      (1)        Poseidon Pipeline Company, L.L.C.
                                 Attn: Chief Operating Officer
                                 7200 Texas Commerce Tower
                                 600 Travis Street
                                 Houston, Texas 77002
                                 Telephone: (713) 224-7400
                                 Telecopy: (713) 547-5151

                      (2)        Texaco Trading and Transportation Inc.
                                 Attn: Senior Vice President - Southern Region
                                 4900 Fournace Place             P.O. Box 5080
                                 Bellaire, Texas 77401-2325      Bellaire, Texas
                                 Telephone 713/432-3800          77402-5080
                                 Telecopy 713/432-3592

Each such notice, demand or other communication shall be effective, if given by
registered or certified mail, return receipt requested, as of the third day
after the date indicated on the mailing certificate, or if given by any other
means, when delivered at the address specified in this Section.

                                       59

<PAGE>   65




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

                                        MEMBERS:

                                        POSEIDON PIPELINE COMPANY, L.L.C.

                                        By: /s/ JAMES H. LYTAL
                                           ------------------------------------
                                        Printed Name: James H. Lytal
                                                      -------------------------
                                        Title: President
                                               --------------------------------

                                        TEXACO TRADING AND TRANSPORTATION INC.

                                        By: /S/ ARTHUR NICOLETTI
                                           ------------------------------------
                                           A.A. Nicoletti, President

EXHIBITS:

Exhibit A      -     Ownership Information
Exhibit B      -     Description of Phase I Line and Phase II Line
Exhibit C      -     Insurance







                                       60
<PAGE>   66

                             FIRST AMENDMENT TO THE
                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                      POSEIDON OIL PIPELINE COMPANY, L.L.C.
                     (A DELAWARE LIMITED LIABILITY COMPANY)

         THIS FIRST AMENDMENT dated as of July 1, 1996 (this "Amendment"), to
the Limited Liability Company Agreement (the "LLC Agreement") of Poseidon Oil
Pipeline Company, L.L.C. dated as of February 14, 1996, is entered into by the
Members (as defined below).

                              W I T N E S S E T H:

         WHEREAS, on February 14, 1996, TEXACO TRADING AND TRANSPORTATION INC.,
a Delaware corporation ("Texaco"), and POSEIDON PIPELINE COMPANY, L.L.C., a
Delaware limited liability company ("Poseidon"), formed the Delaware limited
liability company known as Poseidon Oil Pipeline Company, L.L.C. (the
"Company"), pursuant to its Certificate of Formation and the LLC Agreement; and

         WHEREAS, in connection with that certain Acknowledgment and Consent
Agreement dated as of even date herewith by and among the Company, Poseidon,
Texaco, Marathon Oil Company ("Marathon"), Texaco Pipeline Inc. ("TPLI"),
Marathon Pipeline Company ("MPLC") and Block 873 Pipeline Company ("Pipeline
Owner"), and certain other agreements, (i) Pipeline Owner contributed certain
assets to Company in exchange for a newly issued Membership Interest (defined
herein); (ii) Pipeline Owner distributed such Membership Interest to its owners,
TPLI and Marathon; and (iii) TPLI and MPLC transferred such Membership Interests
to Texaco and Marathon, respectively;

         WHEREAS, Poseidon, Texaco and Marathon are the current members of the
Company;

         WHEREAS, Poseidon, Texaco and Marathon (collectively, the "Members,"
and each a "Member") have agreed to amend the LLC Agreement.

         NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Members hereby stipulate and agree as follows:

         1. Definitions. Unless otherwise defined herein, terms defined in this
Amendment have the meanings specified herein, and capitalized terms not defined
herein, but defined in the LLC Agreement, are used herein as therein defined.



<PAGE>   67

         2. Amendments. The LLC Agreement shall be amended as of the date hereof
as follows:

                  (a) Section 1.01. Section 1.01 of the LLC Agreement is amended
         by adding the following definition in proper alphabetical order:

                           "Marathon" means Marathon Oil Company.

                  (b) Section 1.01. Section 1.01 of the LLC Agreement is further
         amended by deleting the definitions of the terms "Bankrupt Member,"
         "Default," "Majority Interest" and "Super-Majority Interest" in their
         entirety and replacing such terms with the following definitions, each
         in proper alphabetical order:

                           "Bankrupt Member" means any Member:

                           (a) that (i) makes a general assignment for the
                  benefit of creditors; (ii) files a voluntary bankruptcy
                  petition; (iii) becomes the subject of an order for relief or
                  is declared insolvent in any federal or state bankruptcy or
                  insolvency proceeding; (iv) files a petition or answer seeking
                  for the Member a reorganization, arrangement, composition,
                  readjustment, liquidation, dissolution, or similar relief
                  under any law; (v) files an answer or other pleading admitting
                  or failing to contest the material allegations of a petition
                  filed against the Member in a proceeding of the type described
                  in subclauses (i) through (iv) of this clause (a); or (vi)
                  seeks, consents, or acquiesces to the appointment of a
                  trustee, receiver, or liquidator of the Member or of all or
                  any substantial part of the Member's properties; or

                           (b) against which a proceeding seeking
                  reorganization, arrangement, composition, readjustment,
                  liquidation, dissolution, or similar relief under any law has
                  been commenced and 90 days have expired without dismissal
                  thereof or with respect to which, without the Member's consent
                  or acquiescence, a trustee, receiver, or liquidator of the
                  Member or of all or any substantial part of the Member's
                  properties has been appointed and 60 days have expired without
                  such appointments having been vacated or stayed, or 60 days
                  have expired after the date of expiration of a stay, if the
                  appointment has not previously been vacated.

                  In addition, Poseidon, and any of its Transferees or
                  Substituted Members, shall be deemed to be a Bankrupt Member
                  if any of the foregoing events occur with respect to the
                  Guarantor.

                           "Default" means, in respect of any Member, upon the
                  occurrence and during the continuation of any of the following
                  events:

                           (a) the failure to remedy within five (5) Business
                  Days of receipt of written notice thereof from the Company or
                  any Member, the failure of a Member to



                                       2
<PAGE>   68

                  make any Initial Capital Contribution to the Company as
                  required pursuant to Section 4.01, on the date on which such
                  Initial Capital Contribution is due;

                           (b) the occurrence of any event that causes such
                  Member to become a Bankrupt Member (except to the extent a
                  Majority Interest consents otherwise); or

                           (c) the failure to remedy within ten (10) Business
                  Days of receipt of written notice thereof, the default in
                  performance of or failure to comply with any other material
                  agreements, obligations or undertakings of such Member (or, in
                  the case of Poseidon, or any of its Transferees or Substituted
                  Members, the Guarantor) contained in the Transaction
                  Documents.

                           "Majority Interest" means two or more Members having
                  among them more than 50% of the Membership Interests of all
                  Members; provided, however that if at any time a single Member
                  shall own more than 50% of the Membership Interest of all
                  Members, then "Majority Interest" shall mean an amount which
                  is 1% greater than the Membership Interest held by such
                  Member.

                           "Super-Majority Interest" means one or more Members
                  having among them greater than 72% of the Membership Interests
                  of all Members.

                  (c) Section 1.03. Section 1.03 of the LLC Agreement shall be
         amended by adding the following sentence at the end of Section 1.03:

                           "Whenever the context requires, the singular shall
                  include the plural, and the plural, shall include the
                  singular."

                  (d) Section 5.06. Section 5.06 of the LLC Agreement is amended
         by deleting Section 5.06 in its entirety and replacing it with the
         following:

                           "5.06 Distribution Restrictions. Unless unanimously
                  agreed to in writing by the Members, and subject to the
                  provisions of Section 4.03, the Company shall not distribute
                  (i) any of the Initial Capital Contributions until the
                  completion of the construction of the Phase I Line, the Phase
                  II Line and the Onshore Segment of the Poseidon Pipeline,
                  except to the extent that all of the Members agree that the
                  applicable portion of such Initial Capital Contributions is no
                  longer needed to finance such construction or the operations
                  of the Company, or (ii) any amounts that would cause the
                  Company to materially breach, or would create a material
                  default under, any debt agreements or instruments to which the
                  Company is a party."

                  (e) Section 6.02. Subsection 6.02(c) of the LLC Agreement is
         amended by deleting Subsection 6.02(c) in its entirety and replacing it
         with the following:



                                       3
<PAGE>   69

                           "(c) Under the oversight of the Business Development
                  Committee, the representatives of the Members jointly shall
                  conduct the business development activities of the Company,
                  including, without limitation, identifying and negotiating
                  with potential customers. Each Member shall use all reasonable
                  efforts to ensure that its representatives cooperate with and
                  keep informed the representatives of the other Members with
                  respect to any business development activities conducted by
                  such representative on behalf of the Company. Each such
                  representative may independently approach any potential
                  customer or other Person and discuss such potential
                  arrangements; provided, however, that no such representative
                  may submit any formal proposal to a potential customer without
                  consulting with representatives of the other Members. The
                  Business Development Committee shall have the authority to
                  reconsider the business development procedures and
                  arrangements on an annual calendar year basis beginning with
                  the calendar year commencing on January 1, 1998. The Company
                  shall reimburse each Member (including its officers, agents
                  and other representatives) for reasonable costs associated
                  with business development services performed pursuant to this
                  Agreement.

                           (d) At least one year prior to any Day on which the
                  Company has a right to terminate any agreement with respect to
                  the operation and management of the Poseidon Pipeline, the
                  Operating Committee shall meet to consider the exercise of
                  such termination right. If the representatives of a Majority
                  Interest of the Members state at such meeting the desire of
                  such Members to bid, or to seek bids, with respect to such
                  operation and management activities, then the Operating
                  Committee shall establish procedures to govern such bidding
                  process and shall conduct such bidding process prior to the
                  time that the Company's right to terminate such agreement must
                  be exercised."

                  (f) Section 6.03. Section 6.03 of the LLC Agreement is amended
         by deleting Section 6.03 in its entirety and replacing it with the
         following:

                           "6.03 AUTHORITY OF MEMBERS AND COMMITTEES. (a) With
                  respect to conflicts or disagreements between and among any
                  committees, the Management Committee shall have ultimate
                  decision making authority. The Members and the committees
                  shall act through the Company's officers, employees,
                  representatives, agents and designees. No Member shall have
                  individual authority to bind the Company unless such is
                  expressly conferred upon them pursuant to this Agreement or by
                  action of the Members or a duly authorized committee, body,
                  officer or other representative. All action shall be taken
                  subsequent to resolutions approved by the Members in
                  accordance with Article VII of this Agreement.

                                    (b) Unless otherwise expressly delegated in
                           writing or provided by this Agreement, the Members
                           hereby reserve to the Members as a group the
                           authority to authorize and approve the following:



                                       4
<PAGE>   70

                                             (i) utilizing for other than
                                    Company purposes, acquiring, or disposing of
                                    any material asset of the Company;

                                             (ii) borrowing money;

                                             (iii) determining the reserve
                                    applicable to distributions of Company cash
                                    and other property as provided in Sections
                                    5.03, 5.05 and 5.06;

                                             (iv) authorizing transactions not
                                    in the ordinary course of business;

                                             (v) permitting the Company to
                                    merge, consolidate, participate in a share
                                    exchange or other statutory reorganization
                                    with, or sell all or substantially all of
                                    the assets of the Company to, any Person;

                                             (vi) permitting the Company to
                                    dissolve and liquidate;

                                             (vii) approving any operating and
                                    capital expenditures budgets for the
                                    Company;

                                             (viii) permitting a Member to
                                    withdraw from the Company;

                                             (ix) entering into contracts,
                                    agreements and other undertakings binding
                                    the Company to pay more than $500,000 in any
                                    year or $1,000,000 in the aggregate pursuant
                                    to any such individual contract, agreement
                                    or undertaking that may be necessary,
                                    appropriate, or advisable in furtherance of
                                    the purposes of the Company;

                                             (x) entering into Oil Contracts
                                    with a term of one year or more;

                                             (xi) authorizing the Company to
                                    enter into a transaction involving a Lateral
                                    Opportunity in accordance with Article XV;
                                    and

                                            (xii) entering into any transaction,
                                    including, without limitation, any purchase,
                                    sale, lease or exchange of property or the
                                    rendering of any service, with any Member or
                                    any Affiliate of any Member unless such
                                    transaction is upon fair and reasonable
                                    terms no less favorable to the Company than
                                    it would obtain in a comparable



                                       5
<PAGE>   71

                                    arm's length transaction with a Person which
                                    is not a Member or an Affiliate of a Member.

                                    With respect to each such matter described
                           in (i) - (xii) above, exercise of such authority
                           shall occur only by the affirmative vote of the
                           applicable Required Interest as required by the
                           Agreement, including the Majority Interest voting
                           requirements set forth in Section 7.01(a), the
                           Super-Majority Interest voting requirements set forth
                           in Section 7.02 and the unanimous Membership Interest
                           voting requirements otherwise set forth in this
                           Agreement, as applicable.

                                    (c) Member approval of or agreement to any
                           matter specified in Section 6.03(b)(ix) or (x), shall
                           be granted or withheld based only upon such Member's
                           good faith belief that such approval or agreement, or
                           the withholding of such approval or agreement, is in
                           the best interests of the Company.

                                    (d) Member approval of or agreement to any
                           matter specified in Section 6.03(b)(i), (v), (vi) or
                           (viii) or any borrowing which includes an interest
                           rate in excess of the prime interest rate charged by
                           Texas Commerce Bank, Houston, Texas office plus two
                           percent (2%), may be withheld by any Member for any
                           reason whatsoever.

                                    (e) Approval of or agreement to any other
                           matter will not be withheld by any Member (whether
                           acting directly through such Member or any committee)
                           without a reasonable basis."

                  (g) Section 7.01. Subsection 7.01(a) of the LLC Agreement is
         amended by deleting Subsection 7.01(a) in its entirety and replacing it
         with the following:

                           "(a) A quorum shall be present at a meeting of
                  Members or any committee of the Company if the holders of at
                  least 28.0% of all of the Membership Interests of the Company
                  are represented at the meeting in person or by proxy. At a
                  meeting of the Members at which a quorum is present with
                  respect to any matter (except for any matter requiring the
                  affirmative vote of (i) a Super-Majority Interest or all of
                  the Membership Interest as required by this Agreement or (ii)
                  a Required Interest greater than a Majority Interest as
                  required by this Agreement or the Act), the affirmative vote
                  of the Majority Interest shall be the act of the Members."

                  (h) Section 7.02. Section 7.02 of the LLC Agreement is amended
         by deleting Section 7.02 in its entirety and replacing it with the
         following:

                           "7.02 SPECIAL ACTIONS. The approval of the holders of
                  a Super-Majority Interest of the Members shall be required to
                  authorize and approve the following:



                                       6
<PAGE>   72

                                             (i) utilizing other than for
                                    Company purposes, acquiring, or disposing of
                                    any asset of the Company having a then
                                    existing fair market value or GAAP net book
                                    value (after deducting accumulated
                                    depreciation, depletion, amortization and
                                    impairment) of more than $5,000,000;

                                             (ii) borrowing money other than (x)
                                    pursuant to that certain Credit Agreement
                                    dated as of April 24, 1996, as amended,
                                    supplemented, restated or otherwise modified
                                    from time to time, among the Company, Texas
                                    Commerce Bank National Association, as the
                                    administrative agent and a lender, and the
                                    other lenders as a party thereto, (y)
                                    pursuant to any other credit agreement,
                                    indenture or similar agreement which has
                                    been authorized by a Super-Majority Interest
                                    (pursuant to this Section), and (z) in
                                    addition to the borrowing permitted pursuant
                                    to (x) and (y) above, an additional amount
                                    of money not to exceed $10,000,000.

                                             (iii) except with respect to
                                    reserves consistent with the historical
                                    practices of the Company, determining the
                                    reserve applicable to distributions of
                                    Company cash and other property as provided
                                    in Sections 5.03, 5.05 and 5.06;

                                             (iv) authorizing material
                                    transactions the nature of which are not in
                                    the ordinary course for the businesses in
                                    which the Company operates;

                                             (v) permitting the Company to
                                    merge, consolidate, participate in a share
                                    exchange or other statutory reorganization
                                    with, or sell all or substantially all of
                                    the assets of the Company to, any Person;

                                             (vi) permitting the Company to
                                    dissolve and liquidate; and

                                             (vii) entering into any
                                    transaction, including, without limitation,
                                    any purchase, sale, lease or exchange of
                                    property or the rendering of any service,
                                    with any Member or any Affiliate of any
                                    Member unless such transaction is upon fair
                                    and reasonable terms no less favorable to
                                    the Company than it would obtain in a
                                    comparable arm's length transaction with a
                                    Person which is not a Member or an Affiliate
                                    of a Member."



                                       7
<PAGE>   73

                  (i) Section 7.07. Subsection 7.07(a) of the LLC Agreement is
         amended by deleting Subsection 7.07(a) in its entirety and replacing it
         with the following:

                           "(a) Except as otherwise provided by law, any action
                  required or permitted to be taken at any meeting of Members or
                  committee of the Company may be taken without a meeting, and
                  without a vote, if a consent or consents in writing, setting
                  forth the action so taken, shall be signed by the holder or
                  holders or representatives of not less than the minimum of
                  Membership Interests that would be necessary to take such
                  action at a meeting at which the holders of all Membership
                  Interests entitled to vote on the action were present and
                  voted; provided, however, that no such written consent shall
                  be effective unless each Member has been provided with at
                  least 3 Business Days prior written notice of such consent to
                  be sought or has waived the requirement of such notice. To the
                  extent required by law, every written consent shall bear the
                  date of signature of each Member or Member representative who
                  signs the consent. To the extent required by law, no written
                  consent shall be effective to take the action that is the
                  subject to such consent unless, within 60 days after the date
                  of the earliest dated consent delivered to the Company in the
                  manner required by this Section 7.07, a consent or consents
                  signed by the holder or holders of not less than the minimum
                  Membership Interests that would be necessary to take the
                  action that is the subject of the consent are delivered to the
                  Company by delivery to its registered office or its principal
                  place of business. Delivery shall be by hand or certified or
                  registered mail (return receipt requested) to the Company's
                  principal place of business and shall be addressed to the
                  Secretary of the Company. A telegram, telex, cablegram or
                  similar transmission by a Member or Member representative, or
                  a photographic, photostatic, facsimile or similar reproduction
                  of a writing signed by a Member or Member representative,
                  shall be regarded as signed by the Member or Member
                  representative for purposes of this Section 7.07. In addition
                  to the prior written notice described above, prompt written
                  notice of the taking of any action by the Members or
                  committees of the Company without a meeting by less than
                  unanimous written consent shall be given to those Members or
                  Member representatives who did not consent in writing to the
                  action."

                  (j) Section 11.01. Section 11.01 of the LLC Agreement is
         amended by deleting Section 11.01 in its entirety and replacing it with
         the following:

                           "11.01. BANKRUPT MEMBERS. Subject to Section
                  12.01(c), if any Member becomes a Bankrupt Member (except to
                  the extent a Majority Interest consents otherwise), the
                  Company or, if the Company does not exercise the relevant
                  option, the remaining Members which desire to participate,
                  shall have the option, exercisable by notice from the Company
                  or the Members, as the case may be, to the Bankrupt Member (or
                  its representative) at any time prior to the 180th day after
                  receipt of notice of the occurrence of the event causing it to
                  become a Bankrupt Member, to buy, and, on the exercise of this
                  option, the Bankrupt Member or its representative shall sell,
                  its Membership Interest. The purchase price shall be an



                                       8
<PAGE>   74

                  amount equal to the fair market value thereof determined by
                  agreement by the Bankrupt Member (or its representative) and
                  the purchasing Person; however, if those Persons do not agree
                  on the fair market value on or before the 30th day following
                  the exercise of the option, either such Person, by written
                  notice to the other, may require the determination of fair
                  market value to be made by an independent appraiser specified
                  in such notice. If the Person receiving that notice objects on
                  or before the tenth day following receipt to the independent
                  appraiser designated in that notice, and those Persons
                  otherwise fail to agree on an independent appraiser, either
                  such Person may petition the United States District Judge for
                  the Southern District of Texas then senior in active service
                  to designate an independent appraiser, whose determination of
                  the independent appraiser, however designated, is final and
                  binding on all parties. The Bankrupt Member and the purchasing
                  Person each shall pay one-half of the costs of the appraisal
                  and court costs in appointing an appraiser (if any). The
                  purchasing Person shall pay the fair market value as so
                  determined in cash on closing. The payment to be made to the
                  Bankrupt Member or its representative pursuant to this Section
                  11.01 is in complete liquidation and satisfaction of all the
                  rights and interest of the Bankrupt Member and its
                  representative (and of all Persons claiming by, through, or
                  under the Bankrupt Member and its representative) in and in
                  respect of the Company, including, without limitation, any
                  Membership Interest, any rights in specific Company property,
                  and any rights against the Company and its officers, agents,
                  and representatives and (insofar as the affairs of the Company
                  are concerned) against the Members."

                  (k) Section 14.05. Section 14.05 of the LLC Agreement is
         amended by deleting Section 14.05 in its entirety and replacing it with
         the following:

                           "14.05 Restrictive Legend. In the absence of a more
                  restrictive legend, all certificates which evidence Membership
                  Interests shall be stamped or typed in a conspicuous place
                  with the following legend:

                           THE INTEREST REPRESENTED BY THIS CERTIFICATE IS
                           SUBJECT TO THE LIMITED LIABILITY AGREEMENT OF THE
                           COMPANY DATED AS OF FEBRUARY 14, 1996, AS IT EXISTS
                           FROM TIME TO TIME, WHICH RESTRICTS ANY SALE,
                           ASSIGNMENT, TRANSFER, CONVEYANCE, ENCUMBRANCE, PLEDGE
                           OR OTHER TRANSFER OR ALIENATION (WITH OR WITHOUT
                           CONSIDERATION) OF SUCH INTEREST. THE COMPANY WILL
                           FURNISH TO THE RECORD HOLDER OF THIS CERTIFICATE,
                           WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE COMPANY
                           AT ITS PRINCIPAL PLACE OF BUSINESS, A COPY OF SUCH
                           LIMITED LIABILITY AGREEMENT. THE SECURITIES
                           REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
                           FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
                           SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
                           LAWS OF ANY STATE.



                                       9
<PAGE>   75

                           WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE
                           SOLD, ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED,
                           HYPOTHECATED, OR OTHERWISE TRANSFERRED, EXCEPT UPON
                           DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
                           SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
                           NOT REQUIRED FOR SUCH TRANSFER.

                  Such legend shall also be placed on all Certificates which are
                  hereafter issued to any Member."

                  (l) Section 15.01. Subsection 15.01(a) of the LLC Agreement is
         amended by deleting Subsection 15.01(a) in its entirety and replacing
         it with the following:

                           "(a) Except as otherwise provided in Section 15.01(b)
                  and (c), each Member agrees that neither it nor its Affiliates
                  will, directly or indirectly, enter into any agreement to
                  construct or otherwise consummate transactions involving
                  construction of any pipeline laterals or extensions or related
                  facilities (a "Lateral Opportunity") to connect any oil or
                  liquid condensate to the Poseidon Pipeline until such Lateral
                  Opportunity has been rejected or otherwise forfeited by the
                  Company and the Members, as applicable, pursuant to this
                  Article. Notwithstanding the foregoing, this Article shall not
                  prevent any exploration and production Affiliate of a Member
                  (or, as to a Member that conducts its own exploration and
                  production, the exploration and production division of such
                  Member) from constructing a pipeline lateral solely for the
                  purpose of transporting crude oil produced in whole or in part
                  from a lease in which such Affiliate or division owns an
                  interest; provided that such interest in the crude oil to be
                  transported by such lateral was acquired by the relevant
                  Affiliate or division primarily for a purpose other than the
                  avoidance of the provisions of this Section. Any Member may
                  propose that the Company undertake a Lateral Opportunity by
                  delivering written notice (a "Lateral Opportunity Notice") to
                  the Company and each of the other Members, which Lateral
                  Opportunity Notice would include the proposed terms and
                  conditions of such transactions and reasonably sufficient
                  operational and financial information and other details to
                  allow such Members to make a reasonably informed decision with
                  respect to such Lateral Opportunity. If Members holding at
                  least a Majority Interest do not agree and deliver notice
                  thereof in writing within thirty (30) days after the Company
                  receives the Lateral Opportunity Notice that the Company
                  should undertake such project on the terms and conditions set
                  forth in the applicable Lateral Opportunity Notice, any Member
                  (including its Affiliates) voting in favor of such project
                  shall have the right to pursue such project (a "Rejected
                  Lateral Opportunity") on the terms and conditions set forth in
                  the applicable Lateral Opportunity Notice and own any assets
                  related thereto in the proportion that such Member's
                  Membership Interest is to the Membership Interest of all
                  Members electing to participate in the Rejected Lateral
                  Opportunity by giving written notice of such intent to the
                  Company within fifty (50) days after the Company receives the
                  relevant Lateral Opportunity Notice. In such



                                       10
<PAGE>   76

                  event, the Members (or their Affiliates) desiring to pursue
                  such Rejected Lateral Opportunity shall be free for a period
                  of sixty (60) days after such fifty (50) day period to enter
                  into definitive agreements, if any, or otherwise consummate
                  the transactions contemplated by the applicable Lateral
                  Opportunity Notice on the same terms and conditions set forth
                  in the applicable Lateral Opportunity Notice without further
                  obligation to any Members or the Company; provided that
                  following such sixty (60) day period such Members or their
                  Affiliates may not enter into definitive agreements, if any,
                  or otherwise consummate the transactions with respect to a
                  Rejected Lateral Opportunity without again offering the same
                  to the Company in accordance with this Article. No Member
                  shall have any obligation or duty to the Company or the other
                  Members with respect to any Rejected Lateral Opportunity to
                  the extent it is covered by definitive agreements entered
                  into, or otherwise consummated, by such Members or their
                  Affiliates after compliance with this Section 15.01 or with
                  respect to any modification, renewal or extension of the terms
                  of such definitive agreements with respect to any such
                  Rejected Lateral Opportunity. Except as set forth in this
                  Section, the construction, operation, maintenance and
                  ownership of each such Rejected Lateral Opportunity project
                  shall not be governed or affected by this Agreement, but shall
                  be governed by the contractual and other arrangements
                  established by the Members participating in such project. Any
                  Member which delivers a Lateral Opportunity Notice or elects
                  to participate in a Rejected Lateral Opportunity shall deliver
                  a certificate executed by an executive or similar officer of
                  such Member to each other Member certifying that: (i) such
                  Lateral Opportunity or Rejected Lateral Opportunity is not,
                  directly or indirectly, related in any way to any past,
                  current or future-contemplated transaction involving the
                  certifying Member not described in the Lateral Opportunity
                  Notice and (ii) taken as a whole and, in light of the
                  circumstances in which the same were made, the Lateral
                  Opportunity Notice does not and will not, to the best
                  knowledge of the certifying Member, as of the date when made,
                  contain any untrue statement of a material fact or omit to
                  state a material fact (other than omissions that pertain to
                  matters of a general economic nature, matters generally known
                  to each Member, or matters of public knowledge that generally
                  affect any of the industry segments included in the business
                  of the Company) necessary in order to make the statements
                  contained therein not misleading, and all financial
                  projections contained in any Lateral Opportunity Notice have
                  been prepared in good faith based upon assumptions believed by
                  the Member to be reasonable. Any breach of a representation or
                  warranty contained in such certificate shall be deemed to be a
                  breach of a representation or warranty contained in this
                  Agreement."

                  (m) Section 16.05. Subsection 16.05(a) of the LLC Agreement is
         amended by deleting Subsection 16.05(a) in its entirety and replacing
         it with the following:

                           "(a) Member and Committee Deadlocks. Member approval
                  or disapproval of the matters specified in Section 6.03(b)(i),
                  (v), (vi) or (viii), or of any borrowing which includes an
                  interest rate in excess of the prime interest rate



                                       11
<PAGE>   77

                  charged by Texas Commerce Bank, Houston, Texas office plus two
                  percent (2%), shall not be subject to arbitration under this
                  Agreement. If any matter or proposal (other than those matters
                  specified in Section 6.03(b)(i), (v), (vi) or (viii) or any
                  borrowing which includes an interest rate in excess of the
                  prime interest rate charged by Texas Commerce Bank, Houston,
                  Texas office plus two percent (2%)) requiring the vote of less
                  than all of the Membership Interest for approval thereof is
                  brought before the Members or the Management Committee and
                  receives neither (x) at least the Required Interest voting for
                  such matter or proposal nor (y) at least the Required Interest
                  voting against (not including abstentions or other non-votes)
                  such matter or proposal, then any Member, by written notice to
                  the other Members given within ten (10) days after the initial
                  vote on such matter or proposal, may call a meeting of the
                  Members or the Management Committee to reconsider such matter
                  or proposal, such meeting to be held when, where and as
                  reasonably specified in said notice, but not less than ten
                  (10) days nor more than twenty-five (25) days after the date
                  of such vote. If such meeting is called and held as herein
                  provided and the matter or proposal at such meeting again and
                  (x) does not receive at least the Required Interest voting for
                  such matter or proposal or (y) does not receive at least the
                  Required Interest voting against (not including abstentions or
                  other non-votes) such matter or proposal, then any Member may
                  within ten (10) days thereafter submit the matter to
                  arbitration in accordance with Section 16.05(b) - (h). If no
                  Member calls such a meeting within the first ten (10) day
                  period herein provided for or if arbitration is not requested
                  within the ten (10) day period after the second meeting, no
                  Member shall thereafter have any right to request arbitration
                  regarding such matter or proposal.

                  (n) Section 16.05. Subsection 16.05(b) of the LLC Agreement is
         amended by deleting Subsection 16.05(b) in its entirety and replacing
         it with the following:

                           "(b) Initiation of Proceedings, Costs. Any Member
                  wishing to submit a matter or proposal to arbitration as
                  permitted by Section 16.05(a) shall do so by giving written
                  notice of arbitration to the other Members and the Company.
                  The Member initiating arbitration shall also simultaneously
                  file duplicate copies of its notice of arbitration with any
                  regional office of the American Arbitration Association
                  ("AAA"), together with the appropriate fee as provided in the
                  AAA's administrative fee schedule. The initiating Member shall
                  state in its notice of arbitration the regional office of AAA
                  it has selected and thereafter all communications with the AAA
                  regarding the arbitration proceedings shall be directed to
                  such office unless the AAA directs otherwise. The notice of
                  arbitration shall contain a brief description of the nature of
                  the dispute to be arbitrated and the remedy or resolution
                  sought by the Member initiating arbitration. Such notice may
                  also contain a request that the dispute be arbitrated by a
                  panel of three arbitrators. If no such request is contained in
                  the notice, it shall be presumed that the Member seeking
                  arbitration desires the dispute to be determined by a single
                  arbitrator. Each Member shall bear its own costs incurred



                                       12
<PAGE>   78

                  in connection with preparing responses and proposals for
                  arbitration and retaining separate counsel to represent such
                  Member. The Company shall pay the fees of the arbitrators and
                  any other costs related to the arbitration."

                  (o) Exhibit A2. The LLC Agreement is amended by adding Exhibit
         A2 attached hereto which sets forth the initial capital contributions
         to be made by Marathon and additional initial capital contributions to
         be made by Texaco in connection with the admission of Marathon as a
         Member.

                  (p) Exhibit C. Exhibit C to the LLC Agreement is amended by
         deleting Exhibit C in its entirety and replacing it with Exhibit C
         attached hereto.

         3. Representations and Warranties. Each Member hereby represents and
warrants to each other Member that, after giving effect to the amendments
provided for herein, the representations and warranties contained in the LLC
Agreement will be true and correct in all material respects as if made on and as
of the date hereof (unless such representations or warranties are stated to
refer to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date) and that no Default or Event of Default will have occurred and be
continuing.

         4. No Other Waivers or Amendments. Except as expressly waived or
amended hereby, the LLC Agreement shall remain in full force and effect in
accordance with its terms, without any waiver, amendment or modification of any
provision thereof.

         5. Counterparts. This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.



                                       13
<PAGE>   79

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.


                                       POSEIDON PIPELINE COMPANY, L.L.C.


                                       By: /s/ JAMES H. LYTAL
                                          --------------------------------------
                                       Name:   James H. Lytal
                                            ------------------------------------
                                       Title:  President
                                             -----------------------------------


                                       TEXACO TRADING AND TRANSPORTATION INC.


                                       By: /s/ TERRY F. HUDGENS
                                          --------------------------------------
                                       Name:   Terry F. Hudgens
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------


                                       MARATHON OIL COMPANY


                                       By: /s/ KEVIN M. HENNING
                                          --------------------------------------
                                       Name:   Kevin M. Henning
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------


Exhibit A2: Ownership Information
Exhibit C: Insurance



<PAGE>   80

                                    EXHIBIT A2
                              OWNERSHIP INFORMATION

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
          NAME AND INITIAL CAPITAL             ADDITIONAL INITIAL     MEMBERSHIP
         CONTRIBUTION OF EACH MEMBER                 CAPITAL           INTEREST
                                                  CONTRIBUTIONS
--------------------------------------------------------------------------------
<S>                                            <C>                   <C>
1)   Poseidon Pipeline Company, L.L.C.                                   36.0%
--------------------------------------------------------------------------------
2)   Texaco Trading and Transportation Inc.(3)          (1)              36.0%
--------------------------------------------------------------------------------
3)   Marathon Oil Company                               (2)              28.0%
--------------------------------------------------------------------------------
</TABLE>


(1)      Texaco shall make additional Initial Capital Contributions by causing
         Block 873 Pipeline Company to contribute the Block 873 Pipeline to the
         Company at an agreed value, net to the interest of Texaco and its
         Affiliates, of $10.0 million.

(2)      Marathon shall make Initial Capital Contributions equal to:

         (a)      Contribution of $5.2 million via wire transfer of immediately
                  available federal funds on the date of execution of this
                  Agreement.

         (b)      Causing Block 873 Pipeline Company to contribute the Block 873
                  Pipeline to the Company at an agreed value, net to the
                  interest of Marathon and its Affiliates, of $20.0 million.

(3)      Initial Tax Matters Member.



                                      A2-1
<PAGE>   81

                                    EXHIBIT C
                                    INSURANCE

         Coverage                   Limit of Liability            Deductible(1)
         --------                   ------------------            -------------

I.    EACH MEMBER WILL CARRY FOR ITS OWN BENEFIT AND THE BENEFIT OF THE COMPANY
      ITS PROPORTIONATE SHARE EQUAL TO ITS MEMBERSHIP INTEREST OF EACH OF THE
      FOLLOWING:

<TABLE>
      <S>                                         <C>                               <C>
      A.  Property:(2)

          1.  Pipelines                           $20,000,000                       $250,000
          2.  Line Pack                           $2,000,000                        $250,000
          3.  Equipment                           $2,000,000.                       $250,000.
          4.  Cargo                               $4,000,000 a.o.a.o                $25,000 a.o.a.o

      B.  Excess Liability including              $200,000,000 a.o.a.o. and in      Excess of Primary
          pollution Liability                     the aggregate annually as         Insurance as below
                                                  respects Products Liability
</TABLE>

II.   TO BE CARRIED BY THE COMPANY:

<TABLE>
      <S>                                         <C>                               <C>
      A.   Liabilities:

          1.   General Liability to include        $1,000,000 a.o.a.o. and in       $50,000
               Marine Liability, Pollution         the aggregate annually as
               Liability, Contractual Liability    respects Products Liability
               and Action-Over Indemnity,
               Non-Owned Watercraft
          2.   W.C./EL/Maritime Employees          Per Statute/$1,000,000            N/A
               Liability
          3.   Automobile Liability                $2,000,000 a.o.a.o.               N/A
          4.   Non-Owned Aviation Liability        $10,000,000 a.o.a.o.              N/A
</TABLE>



--------
(1) Texaco shall have the right to self-insure for an amount equal to the
retention under Texaco's corporate insurance program, subject to a limit of $10
million. Marathon shall have the right to self-insure for an amount equal to the
retention under Marathon's corporate insurance program, subject to a limit of
$15,000,000 for environmental loss and $50,000,000 for other types of coverage.

(2) All deductible amounts in Section I are stated in total deductible amounts,
to be apportioned among the Members pro rata in accordance with their Membership
Interests.



                                      C-1
<PAGE>   82

III.  IF OPERATIONS INVOLVED OWNED OR BAREBOAT CHARTERED WATERCRAFT THESE
      COVERAGES WILL BE CARRIED BY THE COMPANY:

<TABLE>
      <S>                             <C>                              <C>
      A.   Hull/Machinery,            $10,000,000 a.o.a.o.             $10,000
           including Collision
           Liability to hull value.

      B.   Protection & Indemnity,    $1,000,000 a.o.a.o.              $25,000
           including crew coverage
           and Excess Collision
           Liability
</TABLE>


                                      C-2