Document:

Exhibit 10.3

 

EXECUTION VERSION

 

 

 

PURCHASE AND SALE AGREEMENT

(Javelina)

 

 

By and Between

 

 

Valero Energy Corporation

Valero
Javelina, L.P. 

(Seller)

 

and

 

MarkWest Energy Partners, L.P.

(Buyer)

 

 

Covering the Acquisition of

 

The following Equity Interests in

 

(Acquired Company Equity Interests)

 

20% of Javelina Company

20% of Javelina Pipeline Company

 

(the Acquired
Companies)

 

 

September 16, 2005

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  THE TRANSACTION

  	
   

  
	
   

  	
  (a)

  	
  Sale
  of Acquired Company Equity Interests

  	
   

  
	
   

  	
  (b)

  	
  Consideration

  	
   

  
	
   

  	
  (c)

  	
  The
  Closing

  	
   

  
	
   

  	
  (d)

  	
  Deliveries
  at the Closing

  	
   

  
	
   

  	
  (e)

  	
  Interim
  Closing Statement and Post-Closing Adjustment

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND WARRANTIES CONCERNING
  THE TRANSACTION

  	
   

  
	
   

  	
  (a)

  	
  Representations
  and Warranties of the Seller

  	
   

  
	
   

  	
  (b)

  	
  Representations and Warranties of the Buyer

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES CONCERNING
  THE ACQUIRED COMPANY EQUITY INTERESTS, ACQUIRED COMPANIES AND ACQUIRED
  COMPANY ASSETS

  	
   

  
	
   

  	
  (a)

  	
  Organization, Qualification, and Company Power

  	
   

  
	
   

  	
  (b)

  	
  Capitalization

  	
   

  
	
   

  	
  (c)

  	
  Authorization of Transaction. Noncontravention

  	
   

  
	
   

  	
  (d)

  	
  Changes

  	
   

  
	
   

  	
  (e)

  	
  Legal
  Compliance; Permits

  	
   

  
	
   

  	
  (f)

  	
  Tax
  Matters

  	
   

  
	
   

  	
  (g)

  	
  Contracts
  and Commitments

  	
   

  
	
   

  	
  (h)

  	
  Litigation

  	
   

  
	
   

  	
  (i)

  	
  Environmental
  Matters

  	
   

  
	
   

  	
  (j)

  	
  Title
  to the Acquired Company Assets

  	
   

  
	
   

  	
  (k)

  	
  Potential
  Preferential Purchase Rights

  	
   

  
	
   

  	
  (l)

  	
  Financial
  Information

  	
   

  
	
   

  	
  (m)

  	
  Employee
  Matters

  	
   

  
	
   

  	
  (n)

  	
  Regulatory
  Matters

  	
   

  
	
   

  	
  (o)

  	
  No
  Unrecorded Obligations

  	
   

  
	
   

  	
  (p)

  	
  Intellectual
  Property

  	
   

  
	
   

  	
  (q)

  	
  Sufficiency
  of the Acquired Company Assets

  	
   

  
	
   

  	
  (r)

  	
  Bank
  Accounts

  	
   

  
	
   

  	
  (s)

  	
  Bonds;
  Guarantees

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  PRE-CLOSING COVENANTS

  	
   

  
	
   

  	
  (a)

  	
  General

  	
   

  
	
   

  	
  (b)

  	
  Notices,
  Consents and Audited Financial Statements

  	
   

  
	
   

  	
  (c)

  	
  Operation
  of Business

  	
   

  
	
   

  	
  (d)

  	
  Affirmative Covenants

  	
   

  

 

i

 

	
   

  	
  (e)

  	
  Damage or Condemnation

  	
   

  
	
   

  	
  (f)

  	
  Access

  	
   

  
	
   

  	
  (g)

  	
  HSR Act

  	
   

  
	
   

  	
  (h)

  	
  Intercompany Transactions

  	
   

  
	
   

  	
  (i)

  	
  Notices and Effect of Supplements to Schedules

  	
   

  
	
   

  	
  (j)

  	
  Reorganization Transactions

  	
   

  
	
   

  	
  (k)

  	
  Surety Bonds; Guarantees

  	
   

  
	
   

  	
  (l)

  	
  No Shop

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  POST-CLOSING COVENANTS

  	
   

  
	
   

  	
  (a)

  	
  General

  	
   

  
	
   

  	
  (b)

  	
  Litigation Support

  	
   

  
	
   

  	
  (c)

  	
  Delivery and Retention of Records

  	
   

  
	
   

  	
  (d)

  	
  Pipeline Markers and Valero Marks

  	
   

  
	
   

  	
  (e)

  	
  Payments

  	
   

  
	
   

  	
  (f)

  	
  Accounts Receivable

  	
   

  
	
   

  	
  (g)

  	
  Post-Closing Environmental Filings

  	
   

  
	
   

  	
  (h)

  	
  Mutual Mistake

  	
   

  
	
   

  	
  (i)

  	
  Real Property Matters

  	
   

  
	
   

  	
  (j)

  	
  Operatorship and ROFR Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CONDITIONS TO OBLIGATION TO CLOSE

  	
   

  
	
   

  	
  (a)

  	
  Conditions to Obligation of the Buyer

  	
   

  
	
   

  	
  (b)

  	
  Conditions to Obligation of the Seller

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  OBLIGATIONS, SURVIVAL AND INDEMNIFICATION

  	
   

  
	
   

  	
  (a)

  	
  Survival of Representations, Warranties and
  Covenants

  	
   

  
	
   

  	
  (b)

  	
  Indemnification Provisions for Benefit of
  the Buyer

  	
   

  
	
   

  	
  (c)

  	
  Indemnification Provisions for Benefit of
  the Seller

  	
   

  
	
   

  	
  (d)

  	
  Matters Involving Third Parties

  	
   

  
	
   

  	
  (e)

  	
  Determination of Amount of Adverse
  Consequences

  	
   

  
	
   

  	
  (f)

  	
  Tax Treatment of Indemnity Payments

  	
   

  
	
   

  	
  (g)

  	
  Exclusive Remedy

  	
   

  
	
   

  	
  (h)

  	
  Disclaimer of Representations and
  Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  TAX MATTERS

  	
   

  
	
   

  	
  (a)

  	
  Allocations

  	
   

  
	
   

  	
  (b)

  	
  Post-Closing Tax Returns

  	
   

  
	
   

  	
  (c)

  	
  Pre-Closing Tax Returns

  	
   

  
	
   

  	
  (d)

  	
  Straddle Periods

  	
   

  
	
   

  	
  (e)

  	
  Straddle Returns

  	
   

  
	
   

  	
  (f)

  	
  Claims for Refund

  	
   

  
	
   

  	
  (g)

  	
  Indemnification

  	
   

  
	
   

  	
  (h)

  	
  Cooperation on Tax Matters

  	
   

  
	
   

  	
  (i)

  	
  Certain Taxes

  	
   

  
	
   

  	
  (j)

  	
  Confidentiality

  	
   

  
	
   

  	
  (k)

  	
  Audits

  	
   

  

 

ii

 

	
   

  	
  (l)

  	
  Control of Proceedings

  	
   

  
	
   

  	
  (m)

  	
  Powers of Attorney

  	
   

  
	
   

  	
  (n)

  	
  Remittance of Refunds

  	
   

  
	
   

  	
  (o)

  	
  Closing Tax Certificate

  	
   

  
	
   

  	
  (p)

  	
  Settlements

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  TERMINATION

  	
   

  
	
   

  	
  (a)

  	
  Termination of Agreement

  	
   

  
	
   

  	
  (b)

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
  (a)

  	
  Confidentiality

  	
   

  
	
   

  	
  (b)

  	
  Public Announcements

  	
   

  
	
   

  	
  (c)

  	
  Insurance

  	
   

  
	
   

  	
  (d)

  	
  No Third Party Beneficiaries

  	
   

  
	
   

  	
  (e)

  	
  Succession and Assignment

  	
   

  
	
   

  	
  (f)

  	
  Counterparts

  	
   

  
	
   

  	
  (g)

  	
  Headings

  	
   

  
	
   

  	
  (h)

  	
  Notices

  	
   

  
	
   

  	
  (i)

  	
  Governing Law

  	
   

  
	
   

  	
  (j)

  	
  Amendments and Waivers

  	
   

  
	
   

  	
  (k)

  	
  Severability

  	
   

  
	
   

  	
  (l)

  	
  Transaction Expenses

  	
   

  
	
   

  	
  (m)

  	
  Construction

  	
   

  
	
   

  	
  (n)

  	
  Exhibits and Schedules

  	
   

  
	
   

  	
  (o)

  	
  Entire Agreement

  	
   

  

 

iii

 

EXHIBITS AND SCHEDULES

 

	
  Exhibit
  A

  	
  Facilities

  
	
  Exhibit
  B 

  	
  Form of Acquired
  Company Equity Interests Assignment

  
	
  Exhibit
  C

  	
  INTENTIONALLY OMITTED

  
	
  Exhibit
  D-1

  	
  Form of Certification
  of Non-Foreign Status (Valero Corporation)

  
	
  Exhibit
  D-2

  	
  Form of Certification
  of Non-Foreign Status (Valero Javelina, L.P.)

  
	
  Exhibit
  E

  	
  Form of Javelina
  Indemnity Agreement

  
	
  Exhibit
  F-1

  	
  Form of Gas Processing
  Agreement (West Refinery)

  
	
  Exhibit
  F-2

  	
  Form of Gas Processing
  Agreement (East Refinery)

  
	
  Exhibit
  F-3

  	
  Form of Agreement for
  Sale and Purchase of Hydrogen

  

 

	
  Schedule
  1(a)

  	
  Seller’s
  Knowledge Individuals

  
	
  Schedule
  1(b)

  	
  Product
  Inventory Value Amount and Pricing Schedule Example

  
	
  Schedule
  1(c)

  	
  Working
  Capital Schedule Example 

  
	
  Schedule
  2(e)

  	
  Interim
  Closing Statement Example 

  
	
  Schedule
  3(a)(ii)

  	
  Consents (Seller Parties)

  
	
  Schedule
  3(a)(iii)

  	
  Noncontravention (Seller Parties)

  
	
  Schedule
  3(b)(ii)

  	
  Consents
  (Buyer)

  
	
  Schedule
  3(b)(iii)

  	
  Noncontravention
  (Buyer)

  
	
  Schedule
  4(c)

  	
  Noncontravention
  (Acquired Companies)

  
	
  Schedule
  4(d)

  	
  Changes

  
	
  Schedule
  4(f)

  	
  Tax
  Matters

  
	
  Schedule
  4(g)(i)

  	
  Acquired
  Company Contracts

  
	
  Schedule
  4(g)(ii)

  	
  Material
  Contract Defaults

  
	
  Schedule
  4(h)

  	
  Litigation

  
	
  Schedule
  4(i)

  	
  Environmental
  Matters

  
	
  Schedule
  4(j)

  	
  Exceptions
  to Title to the Acquired Company Assets

  
	
  Schedule
  4(k)

  	
  Potential
  Preferential Purchase Rights

  
	
  Schedule
  4(l)(i)

  	
  Audited
  Financial Information

  
	
  Schedule
  4(l)(ii)

  	
  Unaudited
  Financial Information

  
	
  Schedule
  4(p)

  	
  Intellectual
  Property

  
	
  Schedule
  4(r)

  	
  Bank
  Accounts

  
	
  Schedule
  4(s)

  	
  Bonds;
  Guarantees

  
	
  Schedule
  5(c)

  	
  Operation
  of Business

  
	
  Schedule
  5(c)(ix)

  	
  Capital
  Expenditures

  
	
  Schedule
  5(f)(ii)

  	
  Site
  Access Insurance

  
	
  Schedule
  5(h)(i)

  	
  Affiliate
  Contracts to be Terminated

  
	
  Schedule
  5(k)

  	
  Surety
  Bonds

  

 

iv

 

PURCHASE AND SALE AGREEMENT

(JAVELINA)

 

THIS PURCHASE
AND SALE AGREEMENT, dated as of September 16, 2005,
is by and among Valero Javelina, L.P., a Delaware limited partnership (the “Valero Javelina”), Valero Energy
Corporation, a Delaware corporation and indirect parent of Valero Javelina (“Valero”
and together with Valero Javelina, individually and collectively,  the “Seller”), and MarkWest Energy Partners, L.P., a Delaware limited partnership (the “Buyer”).

 

INTRODUCTION

 

1.             The
Acquired Companies (defined below) own certain rights, title and interests in and
to certain natural gas processing plants, fractionation plants, pipelines and
related facilities and other assets.

 

2.             Valero
Javelina owns equity interests in the Acquired Companies.

 

3.             Subject
to the terms and conditions set forth in this agreement, Valero Javelina will
sell to the Buyer, and the Buyer will purchase and acquire from Valero
Javelina, such equity interests in the Acquired Companies, and the Buyer will
pay to Valero Javelina the consideration described in this agreement.

 

In
consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein
contained, the Parties hereto agree as follows:

 

AGREEMENT

 

1.             Definitions.

 

“Access Right” has the meaning set
forth in Section 5(f)(ii)(A).

 

“Acquired Companies”
means Javelina Pipeline and Javelina Plant.

 

“Acquired Company Assets” means all rights, title and
interests of each Acquired Company in and to its assets and properties,
including its interest in the Facilities.

 

“Acquired Company Contract” means a written contract,
lease or other agreement existing on the date of this Agreement or entered into
after the date of this Agreement in accordance with Section 5(c),
in each case to which an Acquired Company is a party that will be binding on
such Acquired Company or any of the Acquired Company Assets.

 

“Acquired Company Equity Interests”
means the Javelina Plant Interest and the Javelina Pipeline Interest.

 

“Acquired Company Equity Interests Assignment” means the
Assignment of Equity Interests substantially in the form of Exhibit B,
pursuant to which Valero Javelina will convey to the Buyer (or its permitted
designee) all of the Acquired Company Equity Interests and the

 

1

 

Buyer (or its
permitted designee) will agree to be admitted as a partner of the Acquired
Companies and agree to be bound by the Organizational Documents of the Acquired
Companies.

 

“Adverse Consequences” means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys’ fees and expenses, but excluding (except to the extent paid to an
unrelated third party pursuant to a Third Party Claim) punitive, exemplary,
special or consequential damages.

 

“Affiliate” means, with respect to a specified Person,
any Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such specified
Person; provided,
however,
that the Acquired Companies shall be deemed (i) not to be Affiliates of the
Seller and (ii) to be Affiliates of the Buyer on and after the Closing.  For purposes of this definition, “control”
(and its derivatives) means the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
Equity Interests, by contract or otherwise.

 

“Agreement” means this Purchase and Sale Agreement
(including any exhibits, schedules, annexes, or other attachments hereto) as
amended, restated, supplemented or otherwise modified
from time to time.

 

“Buyer” has the meaning set forth in the Preface.

 

“Buyer Diligence Representatives”
means, collectively, the agents, consultants, contractors, employees or other
representatives of or retained by the Buyer that assist or will assist the
Buyer in conducting or performing the Diligence Activities and any employee,
agent, contractor or subcontractor thereof.

 

“Buyer Indemnitees” means, collectively, the Buyer and
its Affiliates and each of their respective officers (or natural persons
performing similar functions), directors (or natural persons performing similar
functions), employees, agents and representatives to the extent acting in such
capacity.

 

“Buyer Party” means each of (i) the Buyer and (ii) each Affiliate
of the Buyer that is a party to a Transaction Agreement.

 

“Capital Expenditures” means, without
duplication, amounts capitalized in accordance with GAAP by any Acquired
Company (as prorated based on the Javelina Percentage Interest).

 

“Closing” has the meaning set forth in Section 2(c).

 

“Closing Date” has the meaning set forth in Section 2(c).

 

“Closing Statement” has the meaning
set forth in Section 2(e)(i).

 

“Code” means the Internal Revenue Code of 1986, as
amended, or any successor Law.

 

2

 

“Commercial Agreements” means,
collectively, (i) Gas Processing Agreement by and between Javelina Plant and
Valero Refining-Texas L.P. West Refinery in the form of Exhibit F-1,
(ii) Gas Processing Agreement by and between Javelina Plant and Valero
Refining-Texas L.P. East Refinery in the form of Exhibit F-2, and (iii)
Agreement for Sale and Purchase of Hydrogen by and between Javelina Plant and
Valero Refining-Texas L.P. in the form of Exhibit F-3, in each case (x)
including any annexes, exhibits, schedules and other attachments thereto and
(y) as amended, restated, supplemented or otherwise modified through the date
of this Agreement.

 

“Commitment” means (a) options, warrants, convertible
securities, exchangeable securities, subscription rights, call rights,
conversion rights, exchange rights or other contracts that could require a
Person to issue any of its Equity Interests or to sell any Equity Interest it
owns in another Person; (b) any other securities convertible into, exchangeable
or exercisable for, or representing the right to subscribe for any Equity
Interest of a Person or owned by a Person; (c) statutory pre-emptive rights or
pre-emptive rights granted under a Person’s Organizational Documents; and (d)
stock appreciation rights, phantom stock, profit participation, or other
similar rights with respect to a Person.

 

“Diligence Activities” has the
meaning set forth in Section 5(f)(ii)(A).

 

“Effective Time” means 12:01 a.m. on
the Closing Date.

 

“Electronic Data”
means all electronic documents, data and other computer based communications
and information stored on any electronic, digital, or other storage or back up
media and retained in the Ordinary Course of Business by any Acquired Company
or any Affiliate of any such Person, including, without limitation, operating,
accounting, financial, environmental, measurement (including SCADA), regulatory
data and the information and data contained in the electronic data room.

 

“Encumbrance” means any Lien, encumbrance, option, right
of first refusal, Commitment, voting right, easement, servitude, transfer
restriction or title defect.

 

“Environmental Laws” means all applicable federal, state
and local laws, statutes, regulations and ordinances in effect as of the date
of this Agreement relating to the protection of the public health, welfare and
the environment, including those laws relating to the storage, handling and use
of Hazardous Substances and those relating to the generation, processing,
fractionation, treatment, storage, transportation, disposal or other management
thereof, as to each, as amended.  The
term “Environmental Laws” does not include operating practices or standards
that may be employed or adopted by other industry participants or recommended
by a Governmental Authority.

 

“Environmental Permits” has the meaning set forth in Section 4(i).

 

“Equity Interest” means (a) with respect to a
corporation, any and all shares of capital stock, (b) with respect to a
partnership, limited liability company, trust or
similar Person, any and all units, interests or other partnership, limited
liability company, trust or similar interests, and (c) any other direct equity
ownership or participation in a Person.

 

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

 

3

 

“Facilities” means the rights, title and interests of
each Acquired Company in and to the facilities commonly known as the Javelina
Plant and the Javelina Pipeline, each of which are more particularly described
on Exhibit A.

 

“FCC Regulations”
means those Laws promulgated by the Federal
Communications Commission.

 

“FTC” means the Federal Trade Commission.

 

“Fundamental Representations” means those representations
and warranties contained in Sections 3(a)(i)
(Seller Organization and Good Standing), 3(a)(ii)
(Seller Authorization of Transaction), 3(a)(iv) (Seller Brokers), 3(b)(i) (Buyer Organization and Good Standing), 3(b)(ii) (Buyer Authorization of Transaction), 3(b)(iv)
(Buyer Brokers), 4(a) (Acquired Company Organization, Qualification and
Company Power), 4(b) (Acquired Company Capitalization), 4(f) (Acquired
Company Tax Matters), and 4(m) (Employee Matters).

 

“GAAP” means accounting principles generally accepted in
the United States consistently applied.

 

“Governmental Authority” means the United States or any
agency thereof and any state, county, city or other political subdivision,
agency, court or instrumentality.

 

“Hazardous Substances” means any pollutants,
contaminants, toxics or hazardous or extremely hazardous substances, materials,
wastes, constituents, compounds or chemicals that are regulated by, or may form
the basis of liability under, any Environmental Laws.

 

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

 

“Indemnified Party” has the meaning set forth in Section 8(d).

 

“Indemnifying Party” has the meaning set forth in Section 8(d).

 

“Intellectual Property” means all intellectual property rights used by the
Acquired Companies that arise from or in respect of the following:
(i) patents and applications therefor, including continuations,
divisionals, continuations-in-part, or reissues of patent applications and
patents issuing thereon, (ii) trademarks, service marks, trade names,
service names, brand names, trade dress rights, logos, Internet domain names
and corporate names, and all applications, registrations and renewals thereof,
(iii) copyrights and registrations and applications therefor, works of authorship
and mask work rights, (iv) Software and (v) Technology; provided, however, that
Intellectual Property does not include Software of a general nature that is
licensed by any of the partners of the Acquired Companies or their respective
Affiliates and not unique to the Acquired Companies, such as accounting, tax
and similar Software.

 

“Interim Closing Statement” has the
meaning set forth in Section 2(e)(i).

 

“Interim Agreement” means the Interim Agreement effective as of
September 1, 2005 by and between Javelina Plant and Valero Refining-Texas, L.P.

 

4

 

“Javelina Assignment” means the Assignment and
Assumption Agreement (Javelina Company) substantially in the form of Exhibit A
to the ROFR Waiver Agreement pursuant to which certain Rights of Way will be
transferred into Javelina Plant.

 

 “Javelina Indemnity Agreement” means
the Indemnity and Release Agreement substantially in the form of Exhibit E,
in which each of the Seller, on the one hand,  and the Acquired Companies, on the
other hand, release and indemnify each other with respect to certain potential
claims.

 

“Javelina Holding Company”
means Javelina Holding Company, L.P., a Delaware limited partnership.

 

 “Javelina Operating Agreements”
means, collectively, (i) the Construction and Operating Agreement for the
Javelina Plant – Nueces County, Texas dated November 4, 1988 by and between
Javelina Holding Company (as successor-in-interest to El Paso Field Operations
Company and Coastal Javelina, Inc.) and Javelina Plant, and (ii) the System
Operating Agreement dated as of September 30, 1990 by and between Javelina
Holding Company (as successor-in-interest to El Paso Field Operations Company
and Coastal Javelina, Inc.) and Javelina Plant, each, in the case of (i) or
(ii) (including any exhibits, schedules, annexes or other attachments thereto),
as amended, restated, supplemented or otherwise modified from time to time.

 

 “Javelina Percentage Interest” means,
with respect to Javelina Pipeline or Javelina Plant, 20%.

 

“Javelina Pipeline”
means Javelina Pipeline Company, a Texas general partnership, created pursuant
to that certain Javelina Pipeline Company Partnership Agreement dated as of
September 30, 1990 by and among Javelina Holding Company (as successor-in-interest
to El Paso Field Operations Company and Coastal Javelina, Inc.), Javelina
Holding (as successor-in-interest to K-M Javelina, Inc.) and Valero Javelina
(as successor-in-interest to Valero Javelina Company) (including any exhibits,
schedules, annexes or other attachments thereto), as amended, restated,
supplemented or otherwise modified from time to time.

 

“Javelina Pipeline Interest”
means a 20% general partner interest in Javelina Pipeline.

 

“Javelina Plant”
means Javelina Company, a Texas general partnership, created pursuant to that
certain Javelina Company Partnership Agreement dated as of November 4, 1988 by
and among Javelina Holding Company (as successor-in-interest to El Paso Field
Operations Company and Coastal Javelina, Inc.), Javelina Holding (as
successor-in-interest to K-M Javelina, Inc.) and Valero Javelina (as
successor-in-interest to Valero Refining Off-Gas Processing) (including any
exhibits, schedules, annexes or other attachments thereto), as amended and
restated by that certain Amended and Restated Javelina Company Partnership
Agreement dated as of September 30, 1990 by and among Javelina Holding Company
(as successor-in-interest to El Paso Field Operations Company and Coastal
Javelina, Inc.), Javelina Holding (as successor-in-interest to K-M Javelina,
Inc.) and Valero Javelina (as successor-in-interest to Valero Javelina Company)
(including any exhibits, schedules, annexes or other attachments thereto), as
further amended, restated, supplemented or otherwise modified from time to time.

 

5

 

“Javelina Plant Interest”
means a 20% general partner interest in Javelina Plant.

 

“Law” or “Laws” means any
statute, code, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any applicable Governmental Authority.

 

“Legal Right” means, to the extent arising from, related
to or in any way related to the Acquired Companies (including the assets and
operations associated with each), the legal
authority and right (without risk of liability, criminal, civil or otherwise),
such that the contemplated conduct would not constitute a violation,
termination or breach of, or require any payment under, or permit any
termination under, any contract or agreement; arrangement; applicable Law;
fiduciary, quasi-fiduciary or similar duty; or any other obligation.

 

“Lien” means any deed of trust,
mortgage, pledge, lien, or other security interest.

 

“Material Adverse Effect” means any change, effect, event
or occurrence with respect to Seller’s proportional interest in the financial
condition, properties, assets or operations of the Acquired Companies that is
material and adverse to Seller’s proportional interest in the Acquired
Companies, taken as a whole, provided that in determining whether a
Material Adverse Effect has occurred, the following shall not be
considered:  changes, effects, events and
occurrences relating to (i) the natural gas pipeline, treating and processing
industry generally (including the price of natural gas and the costs associated
with the drilling and/or production of natural gas), (ii) any general market,
economic, financial or political conditions, or outbreak or hostilities or war,
in the United States, or (iii) the transactions contemplated by this Agreement;
provided, however, that to be excluded
under subsection (ii) above, such condition may not disproportionately affect,
as compared to others in such industry, any of the Acquired Companies, or their
respective businesses, assets, properties, results of operation or condition
(financial or otherwise).

 

“Material Contracts” has the meaning
set forth in Section 4(g).

 

“New Contract” means any Acquired
Company Contract for which the Buyer’s consent is required pursuant to Section
5(c).

 

“Notice and Consent Requirements”
means giving any notices to, making any filings with, and obtaining, any
authorizations, consents, waivers, releases, approvals (including as required
under the HSR Act), licenses or other rights of Governmental Authorities and
other Persons either Party is required to obtain (1) in connection with the
matters referred to in this Agreement, including matters described in Sections 3(a)(ii), 3(a)(iii), 3(b)(ii),
3(b)(iii),  4(c), 4(i) and 4(k),
the corresponding Schedules, and the Reorganization Transactions, or (2)
under each of the Technology Licenses, in the case of (1) and (2) so as to
permit the Closing to occur as soon as reasonably practicable, and thereafter
with respect to the Seller’s post-Closing Notice and Consent Requirements
obligations under Section 5(b)(i).

 

“Obligations” means duties, liabilities and obligations,
whether vested, absolute or contingent, known or unknown, asserted or
unasserted, accrued or unaccrued, liquidated or unliquidated, due or to become
due, and whether contractual, statutory or otherwise.

 

6

 

“Ordinary Course of Business” means the ordinary course
of business consistent with the applicable Person’s past custom and practice.

 

“Organizational Documents” means the articles of
incorporation, certificate of incorporation, charter, bylaws, articles or
certificate of formation, regulations, operating agreement, certificate of
limited partnership, partnership agreement, and all other similar documents,
instruments or certificates executed, adopted, or filed in connection with the
creation, formation, or organization of a Person, including any exhibits,
schedules, annexes or other attachments thereto, each as amended, restated,
supplemented or otherwise modified from time to time.

 

“Other Purchase Agreements” means,
collectively, (i) the Purchase and Sale Agreement dated as of even date
herewith by and between the Buyer and Kerr-McGee Corporation (and certain of
its Affiliates) and (ii) the Purchase and Sale
Agreement dated as of even date herewith by and between the Buyer and El Paso
Corporation, whereby the Buyer, directly or indirectly, has agreed to acquire
all of the Equity Interests in the Acquired Companies (other than the Acquired
Company Equity Interests).

 

“Parties”
means, collectively, the Buyer, Valero Javelina and Valero.

 

“Party” means, individually, the
Buyer, Valero Javelina or Valero.

 

“Permits” means any
approvals, authorizations, consents, licenses, permits or certificates issued
by a Governmental Authority.

 

“Permitted Encumbrances” means any Encumbrance relating
to any of the following: (i) any Taxes not yet delinquent or, if
delinquent, that are being contested in good faith in the Ordinary Course of
Business; (ii) any obligations or duties reserved to or vested in any
municipality or other Governmental Authority to regulate any Acquired Company
Assets in any manner, including any applicable Laws; (iii) any inchoate,
mechanic’s, materialmen’s, and similar liens arising or incurred in the
Ordinary Course of Business; (iv) any inchoate liens or other Encumbrances
created pursuant to any operating, construction, operation and maintenance,
co-owners, cotenancy, lease or other operating agreements for which amounts are
not due; (v) the Organizational Documents of any Acquired Company; (vi) any
purchase money liens and liens securing rental payments under capital lease
arrangements; (vii) all matters of public record and
(viii) any easements, rights-of-way, restrictions and other similar
arrangements incurred in the Ordinary Course of Business which, in the
aggregate, are not substantial in amount, character or extent and which do not
in any case materially interfere with the ordinary conduct of the business of
any of the Acquired Companies, taken as a whole.

 

“Person” means an individual or entity, including any
partnership, corporation, association, joint stock company, trust, joint
venture, limited liability company, unincorporated organization, or
Governmental Authority (or any department, agency or political subdivision
thereof).

 

“Post-Closing Tax Period” means any Tax period beginning
on or after the Effective Time.

 

7

 

“Post-Closing Tax Return” means any Tax Return that is
required to be filed for any of the Acquired Companies, the Seller or any of
its Affiliates with respect to a Post-Closing Tax Period.

 

“Pre-Closing Tax Period” means any Tax periods or
portions thereof ending before the Effective Time.

 

“Pre-Closing Tax Return” means any Tax Return that is required
to be filed for any Acquired Companies, the Seller or any of its Affiliates
with respect to a Pre-Closing Tax Period.

 

“Prime Rate” means the prime rate reported in The Wall Street
Journal at the time such rate must be determined under the
terms of this Agreement.

 

“Product Inventory” means,
collectively, the Javelina Percentage Interest of the quantity of natural gas,
natural gas liquids and other products that are owned by the Acquired Companies
as of the Effective Time, whether held in storage facilities, pipelines,
fractionators or other facilities, including imbalances; but excluding line fill, tank bottoms, and cushion, pad and
retainage products.

 

“Product Inventory Value Amount” means
the Product Inventory quantity segregated as between all liquids and all gas,
with each to be valued as set forth on Part I of Schedule 1(b).  An example of the schedule of Product
Inventory valuation using pricing and quantity information as of March 31, 2005
is set forth on Part II of Schedule 1(b).

 

“Project Manager” shall have the
meaning ascribed to such term in the partnership agreements of the Acquired
Companies.

 

“Purchase Price” means Seventy-One Million Dollars
($71,000,000.00) plus (i) the amount, if any, by which the total of the
Purchase Price Increases exceeds the total of the Purchase Price Decreases, or
minus (ii) the amount, if any, by which the total of the Purchase Price
Decreases exceeds the total of the Purchase Price Increases.

 

“Purchase Price Decreases” means, without duplication,
(i) the Javelina Percentage Interest of the amount, if any, of negative Working
Capital of each Acquired Company as of the Effective Time, (ii) to the extent
the Product Inventory Value Amount is negative, the Product Inventory Value
Amount, (iii) any reduction of the Purchase Price pursuant to Section 5(e)
(Damage or Condemnation), and (iv) the Javelina Percentage Interest of
long-term Unrecorded Obligations and indebtedness for borrowed money of the
Acquired Companies, excluding any such items otherwise specifically allocated
in this Agreement.

 

“Purchase Price Increases” means, without duplication,
(i) the Javelina Percentage Interest of the amount, if any, of positive Working
Capital of each Acquired Company as of the Effective Time, (ii) to the extent
the Product Inventory Value Amount is positive, the Product Inventory Value
Amount and (iii) the Reimbursable Capital Expenditures.

 

“Records” has the meaning set forth in Section 6(c).

 

8

 

“Reimbursable Capital Expenditures”
means the aggregate amount of Capital Expenditures paid or payable by the
Seller or its Affiliates or the Acquired Companies (as prorated based on the
Javelina Percentage Interest) that have been consented to in writing by the
Buyer (in its sole discretion).

 

“Reorganization Transactions” means
the transactions contemplated by the Transaction Agreements and the Interim
Agreement.

 

 “Rights of Way”
means any and all rights-of-way, easements, permits, licenses, franchises or
other rights of ingress and egress associated with, arising out of, or related
to the ownership or operation of the Acquired Company Assets.

 

“ROFR Waiver Agreement”
means the ROFR Waiver and Side Agreement as of even date herewith among the
partners of the Acquired Companies and certain of their respective Affiliates
(including any exhibits, schedules, annexes or other attachments thereto), as
amended, restated or otherwise modified from time to time, which agreement
addresses, among other things, certain possible preferential purchase rights
relating to the Javelina Pipeline Interest and the Javelina Plant Interest, as
well as operatorship of, and access to, the Acquired Companies.

 

“SEC” means the Securities and
Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as
amended from time to time.

 

“Seller” has the meaning set forth in the Preface.

 

“Seller Indemnitees” means, collectively, the Seller and
its Affiliates and each of its officers (or Persons performing similar
functions), directors (or Persons performing similar functions), employees,
agents, and representatives.

 

“Seller’s Knowledge” means the actual conscious awareness
of each individual listed on Schedule 1(a)
with respect to a particular fact or other matter at the time of determination
(i.e. at signing or Closing, or both) without investigation or inquiry.

 

“Seller Party” means each of (i) the Seller and (ii) each
Affiliate of the Seller that is a party to any Transaction Agreement.

 

“Software” means any and all of the following that are used by the Acquired
Companies: (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, (ii) databases and compilations, including any and all
data and collections of data, whether machine readable or otherwise,
(iii) descriptions, flow-charts and other work product used to design,
plan, organize and develop any of the foregoing, screens, user interfaces,
report formats, firmware, development tools, templates, menus, buttons and
icons, and (iv) documentation including user manuals and other training
documentation related to any of the foregoing.

 

“Straddle Period” means a Tax period or Tax year
commencing before and ending after the Effective Time.

 

9

 

“Straddle Return” means a Tax Return for a Straddle
Period.

 

“Tax” or “Taxes” means any
federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), custom duties,
capital stock, franchise, profits, withholding, social security (or similar
excises), unemployment, disability, ad valorem, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax, levy tax or similar tax-based fee or
imposition of any kind whatsoever, whether imposed on any Acquired Company or
Acquired Company Assets by any Governmental Authority, pursuant to Treasury
Regulation Section 1.1502-6 or any analogous provision of Law, as a transferee,
successor or custodian, or by contract or otherwise, together with any
interest, penalty or addition thereto, whether disputed or not.

 

“Tax Records” means all Tax Returns and Tax-related work
papers relating to any Acquired Company or Acquired Company Asset.

 

“Tax Return” means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

 

“Technology” means, collectively, all designs, formulae, algorithms, procedures,
methods, techniques, ideas, know-how, research and development, technical data,
programs, subroutines, tools, materials, specifications, processes, inventions
(whether patentable and whether or not reduced to practice), apparatus,
creations, improvements, works of authorship and other similar materials that
are used by the Acquired Companies.

 

“Technology Licenses” means any and
all intellectual property licenses and other similar arrangements (including,
without limitation, computer software, telephone and radio licenses, and
scientific processes) relating to any of the Acquired Company Assets.

 

“Third Party Claim” has the meaning set forth in Section 8(d).

 

“Transaction Agreements” means this Agreement, the
Acquired Company Equity Interests Assignments, the Commercial Agreements, the
Javelina Indemnity Agreement, the ROFR Waiver Agreement and the Javelina
Assignment.

 

“Unrecorded Obligations” means, with
respect to a Person, all liabilities incurred and payable by such Person that
relate to any deferred payment(s) on account of the provision of goods or
services to such Person and that would be required to be recorded in accordance
with GAAP in such Person’s financial statements as a liability.

 

“Valero” has the meaning set forth in the Preface.

 

“Valero Marks” means all trademarks, service marks, and
trade names owned by Seller, Valero and their respective Affiliates.

 

“Valero Javelina” has the meaning set forth in the
Preface.

 

10

 

“Working Capital” means current assets minus current
liabilities as of the Effective Time as determined in accordance with GAAP; provided, however, that
the term “Working Capital” shall not include (without duplication) the value of
any (i) Product Inventory, (ii) current assets or liabilities relating to
Taxes, (iii) current assets or liabilities relating to purchase accounting
reserves, (iv) current liabilities or current assets otherwise included in
Working Capital and for which this Agreement allocates the ultimate economic
costs or benefits to the Seller or the Buyer (e.g., specified Straddle Period
Taxes) and (v) any accounts receivable with a Person that has any account
receivable balance 90 or more days past due. 
Schedule 1(c) is the
schedule of Working Capital for the Acquired Companies as of March 31,
2005.

 

2.             The Transaction.

 

(a)           Sale of Acquired Company Equity Interests.  Subject to the terms and conditions of this
Agreement, Valero Javelina agrees to, and Valero agrees to cause Valero
Javelina to, sell to the Buyer the Acquired Company Equity Interests, and the
Buyer agrees to purchase the Acquired Company Equity Interests.

 

(b)           Consideration.  In consideration for the assignment of the
Acquired Company Equity Interests, the Buyer agrees to pay Valero Javelina the
Purchase Price set forth in the Closing Statement in cash by wire transfer of
immediately available federal funds.

 

(c)           The
Closing.  The closing of the
transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of the Seller or its counsel, commencing at
10:00 a.m., local time, on the earlier to occur of (i) the first day of the
calendar month after which all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions each Party shall take at the Closing itself) are and have
been for a period of at least three (3) business days satisfied or waived or
(ii) such other date as the Parties may mutually determine (the “Closing Date”); provided that,
if such date is not a business day, the Parties will close into escrow on the
preceding business day with the Closing to be effective for all purposes on the
first day of the month.

 

(d)           Deliveries at the Closing.  At the Closing,

 

(i)            the
Seller shall deliver to the Buyer the certificate referred to in Section 9(o);

 

(ii)           the Seller will, and will cause
each applicable Seller Party and, to the extent it has the Legal Right, each
Acquired Company, to execute and deliver each Transaction Agreement (other than
any Transaction Agreement that is executed before the Closing) to which such
Seller Party is a party;

 

(iii)          the Buyer will, and will cause
the applicable Buyer Party to, execute and deliver each Transaction Agreement
to which such Buyer Party is a party;

 

(iv)          the Seller shall deliver to the
Buyer the Interim Closing Statement;

 

(v)           the Seller shall deliver, or cause
to be delivered, to the Buyer evidence of the resignation or removal of any
officers, directors, Representatives (as defined in the

 

11

 

partnership
agreements of the Acquired Companies) or managers of the Acquired Companies, if
any, that the Seller has the Legal Right to so remove or to cause to so resign,
in each case that the Buyer has not identified to the Seller within a
reasonable period of time before Closing as a Person that will be continuing
with such Acquired Company in that capacity after the Closing;

 

(vi)          the Seller shall deliver to the
Buyer an officer’s certificate verifying that the conditions of the Buyer set
forth in Section 7(a)(i) have been satisfied;

 

(vii)         the Buyer shall deliver to the
Seller an officer’s certificate verifying that the conditions of the Seller set
forth in Section 7(b)(i) have been
satisfied; and

 

(viii)        at any time on or before the
Closing, the Seller shall deliver to the Buyer such applicable Organizational
Documents, resolutions and certificates of good standing of Seller, in such
form as is reasonably acceptable to the Buyer.

 

(e)           Interim Closing Statement and Post-Closing
Adjustment.

 

(i)            At least five (5) business days
prior to the Closing Date, the Seller shall cause to be prepared and delivered
to the Buyer a statement (the “Interim Closing Statement”)
setting forth the Seller’s good faith estimate of the Purchase Price, including
a schedule of the estimated Product Inventory valuation, Working Capital,
Purchase Price Increases and Purchase Price Decreases, in each case of the
Acquired Companies, and any other reasonable detail.  As soon as practicable, but in any event no
later than one hundred twenty (120) days following the Closing Date, the Buyer
shall cause to be prepared and delivered to the Seller (i) a good faith
statement, including reasonable detail, of the actual Purchase Price (such
statement, as it may be adjusted pursuant to Section 2(e)(ii), the “Closing Statement”), including a
schedule of Product Inventory valuation, Working Capital, Purchase Price
Increases and Purchase Price Decreases, in each case of the Acquired Companies,
and any other reasonable detail.  In
connection with the preparation of the Closing Statement, the Seller shall
measure the Product Inventory quantities in its control as of the Effective
Time, and the Buyer’s representatives shall be given reasonable advance notice
of, and shall be permitted to attend and observe, such measurement and to have
reasonable access to documentation of Product Inventory positions prepared by
the Seller and other Persons (to the extent the Seller has the Legal Right or
other legal authority and right to access such Person’s documentation).  In the event that all actual Product
Inventory quantities are not known prior to Closing, the Seller shall make a
good faith estimate of the Product Inventory quantities and the related Product
Inventory Value Amount, which information shall be attached to the Interim
Closing Statement. 
By way of example, Schedule 2(e) is a hypothetical Interim Closing
Statement that assumes the Closing occurred on March 31, 2005.

 

(ii)           Upon receipt of the Closing
Statement, the Seller and the Seller’s independent accountants shall be
permitted during the succeeding sixty (60)-day
period to examine the work papers used or generated in connection with the
preparation of the Closing Statement and such other documents as the Seller may
reasonably request in connection with its review of the Closing Statement,
including the income statements for the Acquired Companies.  Within sixty (60) days of receipt of the
Closing Statement, the Seller shall deliver to the Buyer a written statement
describing in reasonable detail its objections (if any) to any amounts or items
set forth on the Closing Statement. Additionally, if the Buyer receives a
timely objection to the

 

12

 

proposed Closing Statement pursuant to
the comparable provision of the Other Purchase Agreements, the Buyer shall
provide notice to the Seller of objection notice and, if then elected by the
Seller, the Seller shall be deemed to have timely made the same objection to
the Closing Statement made under the Other Purchase Agreements.   If the Buyer does not receive, within sixty
(60) days of the Seller’s receipt of the Closing Statement, the Seller’s
written statement describing in reasonable detail the Seller’s objections (and
the Seller is not deemed to have timely objected pursuant to the preceding
sentence), the Closing Statement shall become final and binding.  If the Seller raises written objections
within the 60-day period (or the Seller is deemed to have timely objected
pursuant to the preceding sentence), the Parties shall negotiate in good faith
to resolve any such objections.  If the
Parties are unable to resolve any disputed item, other than matters involving
the application or interpretation of the Law or other provisions of this
Agreement, within thirty (30) days after the Buyer’s receipt of the Seller’s
written objections, any such disputed items shall be submitted to a nationally
recognized independent accounting firm mutually agreeable to the Parties who
shall be instructed to resolve such disputed item in accordance with GAAP
within thirty (30) days.  The resolution
of such disputes (as limited in the preceding sentence) shall be set forth in
writing and shall be conclusive, binding and non-appealable upon the Parties
and the Closing Statement shall become final and binding upon the date of such
resolution.  The fees and expenses of
such accounting firm shall be paid one-half by the Buyer and one-half by the
Seller.  The Parties agree that any
disputed item related to the application or interpretation of the Law or other
provisions of this Agreement shall not be resolved by the designated accounting
firm.

 

(iii)          If the Purchase Price as set
forth on the Closing Statement exceeds the estimated Purchase Price as set
forth on the Interim Closing Statement, the Buyer shall pay the Seller, without
offset or deduction, in cash the amount of such excess. If the estimated
Purchase Price as set forth on the Interim Closing Statement exceeds the
Purchase Price as set forth on the Closing Statement, the Seller shall pay to
the Buyer, without offset or deduction, in cash the amount of such excess.
After giving effect to the foregoing adjustments, any amount to be paid by the
Buyer to the Seller, or to be paid by the Seller to the Buyer, as the case may
be, shall be paid in the manner and with interest as provided in Section 2(e)(iv) at a mutually convenient
time and place within five (5) business days after the later of acceptance of
the Closing Statement or the resolution of the Seller’s objections thereto
pursuant to Section 2(e)(ii)).

 

(iv)          Any
payments pursuant to this Section 2(e)
shall be made by causing such payments to be credited in immediately available
funds to such account or accounts of the Buyer or the Seller, as the case may
be, as may be designated by the Buyer or the Seller, as the case may be.  The amount of the payment to be made pursuant
to this Section 2(e) shall bear
interest from and including the Closing Date to, but excluding, the date of
payment at a rate per annum equal to the Prime Rate plus two (2) percent (not
to exceed the maximum rate permitted by applicable Law).  Such interest shall be payable at the same
time as the payment to which it relates and shall be calculated on the basis of
a year of three hundred sixty five (365) days and the actual number of days for
which due.

 

(v)           Except as set forth in Section 2(e)(ii), each
Party shall bear its own expenses incurred in connection with the preparation
and review of the Closing Statement.

 

13

 

3.             Representations and Warranties
Concerning the Transaction.

 

(a)           Representations and Warranties of the
Seller.  The Seller hereby represents
and warrants to the Buyer as follows:

 

(i)            Organization and Good
Standing.  Each Seller Party is a limited liability
company, limited partnership or corporation duly organized, validly existing, and
in good standing under the Laws of the State of its respective
organization.  Each Seller Party is duly
qualified or authorized to do business and is in good standing under the Laws
of each state in which the conduct of its business or the ownership of its
assets or properties requires such qualification or authorization, except where
the lack of such qualification would not have an adverse effect in any material
respect on the ability of any such Seller Party to consummate the transactions
contemplated hereby.  Each such Seller
Party has full power and authority to carry on the businesses in which it is
engaged (as such businesses are presently conducted) and to own, lease and use
the properties and assets owned, leased and used by it, except where the lack
of such power and authority would not have an adverse effect in any material
respect on the ability of any such Seller Party to consummate the transactions
contemplated hereby.

 

(ii)           Authorization of
Transaction.  Each Seller Party has full power and authority
(including full entity power and authority) to execute and deliver each
Transaction Agreement to which such Seller Party is a party and to perform its
obligations thereunder.  The execution
and delivery of each of the Transaction Agreements to which any Seller Party is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all required entity action on the part of each such Seller
Party.  This Agreement has been, and each
of the other Transaction Agreements to which any Seller Party is a party will
be at or prior to the Closing, duly and validly executed and delivered by such
Seller Party, and each Transaction Agreement to which any Seller Party is a
party constitutes the valid and legally binding obligation of such Seller
Party, enforceable against such Seller Party in accordance with its terms and
conditions, subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors’ rights
generally, and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).  Except as contemplated by Section 5(g) and as set forth on Schedule 3(a)(ii), no Seller Party need give
any notice to, make any filing with, or obtain any waiver, Permit, order,
authorization, consent, or approval of any Governmental Authority or any other
Person in order to consummate the transactions contemplated by this Agreement
or any other Transaction Agreement to which such Seller Party is a party,
except for the prior approval of the FTC and except for such notices, filings,
authorizations, consents or approvals as would not have an adverse effect in
any material respect on the ability of any Seller Party to consummate the transactions
contemplated hereby.

 

(iii)          Noncontravention.  Except for prior approval of the FTC, if
applicable, or as contemplated by Section 5(g)
and for filings specified in Schedule 3(a)(ii)
or as set forth in Schedule 3(a)(iii),
neither the execution and delivery of any Transaction Agreement to which any
Seller Party (other than the Acquired Companies) is a party, the compliance by
any such Seller Party with any of the provisions thereof, nor the consummation
of any of the transactions contemplated thereby, shall result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination or cancellation under, any provision

 

14

 

of (A) any Law to
which any such Seller Party is subject or any provision of its Organizational
Documents, or (B) any agreement or permit to which any such Seller Party is a
party or by which it is bound or to which any of its assets or properties are
subject, or (C) any order of any Governmental Authority applicable to any such
Seller Party or by which any of the properties or assets of such Seller Party
are bound, except for any such violation, default or right of termination or
cancellation as would not have an adverse effect in any material respect on the
ability of any Seller Party to consummate the transactions contemplated hereby.

 

(iv)          Brokers’ Fees.  No Seller Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Buyer
or any Acquired Company could become liable or obligated.

 

(b)           Representations and Warranties of the
Buyer.  The Buyer hereby represents
and warrants to the Seller as follows:

 

(i)            Organization of the Buyer.  Each Buyer Party is a limited
partnership duly organized, validly existing, and in good standing under
the Laws of the State of Delaware.  Each
Buyer Party is duly qualified or authorized to do business and is in good
standing under the Laws of each state which requires such qualification, except
where the lack of such qualification would not have an adverse effect in any
material respect on the ability of any such Buyer Party to consummate the
transactions contemplated hereby.  Each
Buyer Party has full power and authority to carry on the businesses in which it
is engaged (as such businesses are presently conducted) and to own, lease and
use the properties and assets owned, leased and used by it, except where the
lack of such power and authority would not have an adverse effect in any
material respect on the ability of any such Buyer Party to consummate the
transactions contemplated hereby.

 

(ii)           Authorization of
Transaction.  Each Buyer Party has full power and authority
(including full entity power and authority) to execute and deliver each
Transaction Agreement to which such Buyer Party is a party and to perform its
obligations thereunder.  The execution
and delivery of each of the Transaction Agreements to which any Buyer Party is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all required entity action on the part of each such Buyer
Party.  This Agreement has been, and each
of the other Transaction Agreements to which any Buyer Party is a party will be
at or prior to the Closing, duly and validly executed and delivered by such
Buyer Party, and each Transaction Agreement to which any Buyer Party is a party
constitutes the valid and legally binding obligation of such Buyer Party, enforceable
against such Buyer Party in accordance with its terms and conditions, subject,
however, to the effects of bankruptcy, insolvency, reorganization, moratorium
or similar Laws affecting creditors’ rights generally, and to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law). 
Except as contemplated by Section 5(g)
and as set forth on Schedule 3(b)(ii),
no Buyer Party need give any notice to, make any filing with, or obtain any waiver,
Permit, order, authorization, consent, or approval of any Governmental
Authority or any other Person in order to consummate the transactions
contemplated by this Agreement or any other Transaction Agreement to which such
Buyer Party is a party, except for the prior approval of the FTC and except for
such notices, filings, authorizations, consents or approvals as would not have
an

 

15

 

adverse effect in any material respect
on the ability of any Buyer Party to consummate the transactions contemplated
hereby.

 

(iii)          Noncontravention.  Except for the prior approval of the FTC or
as contemplated by Section 5(g) and
for filings specified in Schedule 3(b)(ii)
or as set forth in Schedule 3(b)(iii),
neither the execution and delivery of any Transaction Agreement to which any
Buyer Party is a party, the compliance by any such Buyer Party with any of the
provisions thereof, nor the consummation of any of the transactions
contemplated thereby, shall result in any violation or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination
or cancellation under, any provision of (A) any Law to which such Buyer Party
is subject or any provision of its Organizational Documents, or (B) any
agreement or permit to which any such Buyer Party is a party or by which it is
bound or to which any of its assets or properties are subject, or (C) any order
of any Governmental Authority applicable to any such Buyer Party or by which
any of the properties or assets of such Buyer Party are bound, except for any
such violation, default or right of termination or cancellation as would not
have an adverse effect in any material respect on the ability of any Buyer
Party to consummate the transactions contemplated hereby.

 

(iv)          Brokers’ Fees.  No Buyer Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Seller
could become liable or obligated.

 

(v)           Investment.  The Buyer is not acquiring the Acquired
Company Equity Interests with a view to or for sale in connection with any
distribution thereof or any other security related thereto within the meaning
of the Securities Act.  The Buyer is
familiar with investments of the nature of the Acquired Company Equity
Interests, understands that this investment involves substantial risks, has
substantial knowledge and experience in financial and business matters such
that it is capable of evaluating, and has evaluated, the merits and risks
inherent in purchasing the Acquired Company Equity Interests, and is able to
bear such risks.  The Buyer has had the
opportunity to visit with the Seller and its applicable Affiliates and meet
with their representative officers and other representatives to discuss the
business, assets, liabilities, financial condition, and operations of the
Acquired Companies, has received (to the Buyer’s knowledge) all materials,
documents and other information in the possession of the Seller and its
Affiliates that the Buyer deems necessary or advisable to evaluate the Acquired
Companies, and has made its own independent examination, investigation,
analysis and evaluation of the Acquired Companies, including its own estimate of
the value of the Acquired Companies.

 

(vi)          Availability of Funds.  The Buyer has, or will have as of the Closing
Date, sufficient funds with which to pay the Purchase Price and consummate the
transactions contemplated by this Agreement. 
The ability of the Buyer to consummate the transactions contemplated by
this Agreement is not subject to any condition or contingency with respect to
financing.

 

4.             Representations and Warranties
Concerning the Acquired Company Equity Interests, Acquired Companies and Acquired
Company Assets.  The Seller
represents and warrants to the Buyer as follows; provided, however, that, except with respect to Section 4(b),
any

 

16

 

representation
or warranty given in this Section 4 shall be deemed to be made to the
Seller’s Knowledge:

 

(a)           Organization,
Qualification, and Company Power. 
Each Acquired Company is a general partnership duly organized and
validly existing under the laws of the State of Texas.  Each Acquired Company has full power and
authority to carry on the businesses in which it is engaged (as such businesses
are presently conducted) and to own, lease and use the properties and assets
owned, leased and used by it in the State of Texas.  The Seller has provided the Buyer with
complete copies (including all amendments, restatements and other
modifications) of the Organizational Documents of each Acquired Company as in
effect on the date of this Agreement.

 

(b)           Capitalization.  

 

(i)            On the Closing Date, Valero
Javelina will own (beneficially and of record) the Javelina Plant Interest and
the Javelina Pipeline Interest.

 

(ii)           The Acquired Company Equity
Interests have been duly authorized, and are validly issued and fully
paid.  Except to the extent created under
the Securities Act, state securities Laws and partnership Laws of the Acquired
Companies’ state of formation, and as created by the Organizational Documents
of the Acquired Companies, (x) the Acquired Company Equity Interests are each
held as set forth above, free and clear of any Encumbrances and (y) there are
no Commitments with respect to any Equity Interest (1) constituting the
Javelina Plant Interest or (2) constituting the Javelina Pipeline
Interest.  Except as provided in the
Organizational Documents of any Acquired Company, no Seller Party is party to
any voting trusts, proxies, or other agreements or understandings with respect
to the voting, redemption, sale, transfer or other disposition of any Equity
Interest of any of the Acquired Companies.

 

(iii)          No Equity
Interests.  None of the Acquired Companies own, directly
or indirectly (and the Acquired Company Assets do not include), any Equity
Interest in any other Person.

 

(iv)          The
Acquired Company Equity Interest Assignment will transfer to the Buyer good and
indefeasible title to the Acquired Company Equity Interests, free and clear of
any and all Encumbrances.

 

(c)           Authorization
of Transaction.  Noncontravention.

 

Except as contemplated by Section 5(g)
and as set forth on Schedule 4(c),
neither of the Acquired Companies need give any notice to, make any filing
with, or obtain any waiver, Permit, order, authorization, consent, or approval
of any Governmental Authority or any other Person in order to consummate the
transactions contemplated by this Agreement or any other Transaction Agreement
to which any Acquired Company is a party, except for the prior approval of the
FTC and except for such notices, filings, authorizations, consents or approvals
as would not have an adverse effect in any material respect on the ability of
any Seller Party to consummate the transactions contemplated hereby. Except for
the approval of the FTC, if applicable, or as contemplated by Section 5(g) or as set forth in Schedule 4(c), neither the execution and
delivery of any Transaction Agreement, the compliance with any of the
provisions

 

17

 

thereof,
nor the consummation of any of the transactions contemplated thereby, shall
result in the imposition of any Encumbrance (except any created by any
Transaction Document) on any of the Acquired Company Equity Interests or any of
the Acquired Company Assets, result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination or cancellation under, any provision of:  (i) any material Law to which any of the
Acquired Companies or any of the Acquired Company Assets is subject or any
provision of the Organizational Documents of any of the Acquired Companies, or
(ii) any material agreement (excluding Rights of Way) or permit to which any of the Acquired Companies, any of the Acquired
Company Equity Interests or any of the Acquired Company Assets is subject, or
(iii) any order of any Governmental Authority applicable to any Acquired
Company, any of the Acquired Company Equity Interests or any of the Acquired
Company Assets.

 

(d)           Changes. 
Except (i) as set forth in Schedules 4(d), 4(l)(i) and 4(l)(ii),
(ii) with respect to the Reorganization Transactions and (iii) as otherwise
permitted by this Agreement, from May 31, 2005 to the date of this Agreement:

 

(i)            the Acquired Company Assets, taken
as a whole, have been operated and maintained in the Ordinary Course of
Business;

 

(ii)           the Acquired Companies, taken as a
whole, have conducted their respective businesses only in the Ordinary Course
of Business;

 

(iii)          there has been no purchase, sale,
exchange or lease of any property, plant or equipment of any Acquired Company,
other than those not exceeding net proceeds of one million dollars ($1,000,000)
in the aggregate;

 

(iv)          there has not been any change,
event or loss affecting any Acquired Company that has resulted, or would
reasonably be expected to result, in a Material Adverse Effect; and

 

(v)           there has been no contract,
commitment or agreement to do any of the foregoing, except as expressly
permitted by this Agreement.

 

(e)           Legal Compliance; Permits.  Currently and since December 31, 2002, each
Acquired Company has complied and is in compliance with all applicable Laws of
all Governmental Authorities.  Neither
Seller nor any Acquired Company has received any written notice of or has been
charged with the violation of any material Laws applicable to the Acquired
Company Assets.  The Acquired Companies
currently have all material Permits that are necessary to operate the Acquired
Company Assets and the operations related thereto in the Ordinary Course of
Business, all such Permits are in full force and effect, and no Acquired
Company is in material default or violation (and no event has occurred which,
with notice or the lapse of time or both, would constitute a material default
or violation) of any term, condition or provision of any such Permits.  Notwithstanding the previous sentences, the
Seller makes no representations or warranties in this Section 4(e)
with respect to Taxes or Environmental Laws, for which the sole representations
and warranties of the Seller are set forth in Sections 4(f) and 4(i),
respectively.

 

18

 

(f)            Tax Matters. 
Except as set forth in Schedule 4(f):

 

(i)            The Acquired Companies have
timely filed all Tax Returns with respect to the Acquired Companies and the
Acquired Company Assets that they were required to file and such Tax Returns
are accurate in all material respects.  All
Taxes (whether or not shown on any Tax Return) required to be paid by any of
the Acquired Companies or with respect to the Acquired Company Assets have been
paid.

 

(ii)           The Acquired Companies have duly
complied with all withholding Tax and Tax deposit requirements;

 

(iii)          None of the Acquired Companies
are under investigation, audit or examination by any Governmental Authority,
and there are no claims or proceedings now pending or threatened against the
Acquired Companies with respect to any Tax or any matters under discussion with
any Governmental Authority relating to any Tax;

 

(iv)          There
are no liens on any of the Acquired Company Assets related with any failure (or
alleged failure) to pay any Tax;

 

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

 

(vi)          All material Acquired Company
Assets have been included on the property tax rolls of the Tax jurisdictions in
which the property is located and there is no omitted property in such
jurisdictions; and

 

(vii)         None of the Acquired Companies
have elected to be taxed or are subject to being taxed as a corporation for
federal income tax purposes.

 

(g)           Contracts and Commitments.  Included in Schedule 4(g)(i)
is a description of each Acquired Company Contract (excluding Rights of Way)
existing on the date of this Agreement that fits into the categories described
in (i) – (xii) below (such Acquired Company Contracts are, collectively, the “Material Contracts”):

 

(i)            (A) any that resulted in
aggregate payments by an Acquired Company of more than two million five hundred
thousand ($2,500,000) dollars during the twelve months ending December 31, 2004 (in each
case, based solely on the terms thereof and without regard to any expected
increase in volumes or revenues), or (B) are reasonably expected (regardless of
the term) to result in aggregate payments by an Acquired Company of $2,500,000
or more in either calendar years 2005 or 2006;

 

(ii)           (A) any that resulted in
aggregate revenues to an Acquired Company of more than:  (1) two million five hundred thousand ($2,500,000)
dollars during the twelve months ending December 31, 2004 (in each
case, based solely on the terms thereof and without regard to any expected
increase in volumes or revenues), or (B) are reasonably expected (regardless of
the term) to result in aggregate revenues by an Acquired Company of $2,500,000
or more in either calendar years 2005 or 2006;

 

19

 

(iii)          any hydrocarbon purchase and
sale, transportation, processing or similar agreement of an Acquired Company
that is not terminable on one hundred eighty (180) days or less notice or that
has a remaining term of more than one hundred eighty (180) days;

 

(iv)          any that is an indenture, mortgage,
loan, credit or sale-leaseback or similar financial agreement or any other
agreement representing indebtedness for borrowed monies where an Acquired
Company is a borrower or a guarantor;

 

(v)           any that constitutes a lease
under which an Acquired Company is the lessor or the lessee of real or personal
property, which lease (A) cannot be terminated by such Acquired Company without
penalty upon one hundred eighty (180) days or less notice and (B) involves an
annual base rental of more than five hundred thousand ($500,000)
dollars;

 

(vi)          any with respect to any swap,
forward, future or derivative transaction or option or similar agreement,
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial
or pricing indices or measures of economic, financial or pricing risk or value
or any similar transaction;

 

(vii)         any entered into on or after
December 31, 2004
for the sale of any of the assets of any Acquired Company (other than Product
Inventory sold in the Ordinary Course of Business), for consideration in excess
of five million dollars ($5,000,000);

 

(viii)        each agreement that limits or
purports to limit the ability of an Acquired Company to compete in any line of
business or with any Person or in any geographic area or during any period of
time that will not expire upon consummation of the transactions contemplated by
this Agreement and that is not cancelable without penalty or further payment
and without more than 30 days’ notice; and

 

(ix)           any under which an Acquired Company provides a guaranty or
an indemnity with respect to any obligation of any Person other than an
Acquired Company.

 

Except as
set forth on Schedule 4(g)(ii) and except for any such matters that
would not be material,there exists no breach or default under any Material
Contract or New Contract by any Acquired Company or by any other Person that is
a party to such contract.  Except as set
forth on Schedule 4(g)(ii) and except for any
matter that would not be material, no event has occurred that with notice or
lapse of time or both would reasonably be expected to constitute a default
under any Material Contract or New Contract by any Acquired Company or, by any
other Person who is a party to such contract. 
No Acquired Company has received any written notice of any material
default under any Material Contract or New Contract, and no Acquired Company
has received from any other party to any Material Contract or New Contract any
written notice of such party’s intent to terminate any such Material
Contract.  The Seller has furnished or
made available to the Buyer a true and correct copy of each Material Contract
and New Contract, and each written amendment thereto.  Each Material Contract and New Contract is in
full force and effect and is valid, in each case according to its terms.

 

(h)           Litigation. 
Schedule 4(h) sets forth each instance
in which any of the Acquired Companies or any of the Acquired Company Assets
(A) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (B) is the subject of any judicial, administrative or

 

20

 

arbitral action, suit, or hearing pending
before any Governmental Authority or (C) threatened material claim, demand, or
notice of violation or liability from any Person or any investigation or
similar proceeding by any Governmental Authority.

 

(i)            Environmental Matters.  (i) Except as set forth in Schedule 4(i):  (a) since December 31, 2002, the Acquired
Companies and their respective businesses, operations, and properties have been
and are in material compliance with all Environmental Laws and all permits,
registrations, licenses, approvals, exemptions, variances, and other
authorizations required of the Acquired Companies under material Environmental
Laws (the “Environmental Permits”);
(b) since December 31, 2003, the Acquired Companies have obtained or filed for
all material Environmental Permits for their respective businesses, operations,
and properties as they currently exist and all such Environmental Permits are
currently in full force and effect; (c) the Acquired Companies and their
respective businesses, operations, and properties are not subject to any
pending or material threatened claims, actions, suits, investigations,
inquiries or proceedings under Environmental Laws; (d) there have been no
material releases or threatened releases of Hazardous Substances on, under or
from the properties of the Acquired Companies; and (e) the Acquired Companies
have not received any written notice asserting an alleged liability or
obligation under any Environmental Laws against the Acquired Companies with
respect to the actual or alleged Hazardous Substance contamination of any
property offsite of the properties of the Acquired Companies.  The Seller has made available to the Buyer
complete copies of each report, study, assessment or similar document
(including any drafts that were prepared by consultants and presented but not
finalized) prepared with respect to any property or asset (owned now) of any
Acquired Company.  Except for those made
available, no other such reports have been prepared for any Acquired Company or
any of their properties during the last four years.

 

The Seller does not make any representation or warranty
regarding any compliance or failure to comply with, or any actual or contingent
liability under, any Environmental Law, except as expressly set forth in this Section 4(i).

 

(j)            Title to the Acquired Company Assets.  Each Acquired Company has good and marketable
title to all of its respective Acquired Company Assets, in each case free and
clear of all Encumbrances, except (w) for Permitted Encumbrances, (x) for
Encumbrances disclosed on Schedule 4(j), (y) with respect to claims that
are not by, through or under such Acquired Company, the Seller or any Seller
Affiliate, and (z) with respect to Rights of Way.  Each Acquired Company has good and marketable
title to all of its respective Acquired Company Assets constituting Rights of
Way, in each case, free and clear of all Encumbrances, except (1) for Permitted
Encumbrances, (2) for Encumbrances disclosed on Schedule 4(j),
and (3) with respect to claims that are not by, through or under such Acquired
Company, the Seller or any Seller Affiliate.

 

(k)           Potential Preferential Purchase Rights.  Except as set forth on Schedule 4(k),
there are no preferential purchase rights, rights of first refusal, options or
other rights held by any Person not a party to this Agreement to purchase or
acquire any or all of the Acquired Company Equity Interests, or any of the
assets or properties of the Acquired Companies, in whole or in part, that would
be triggered or otherwise affected as a result of the transactions contemplated
by this Agreement.

 

21

 

(l)            Financial Information.

 

(i)            Schedule 4(l)(i) sets forth (w) the audited
balance sheets as of December 31, 2004 and 2003 and related statements of
operations, cash flows and partners’ capital for the years ended December 31,
2004 and 2003 of Javelina Plant, (x) the audited balance sheets as of December
31, 2003 and 2002 and related statements of operations, cash flows and partners’
capital for the years ended December 31, 2003 and 2002 of Javelina Plant, (y)
the audited balance sheets as of December 31, 2004 and 2003 and related
statements of operations, cash flows and partners’ capital for the years ended
December 31, 2004 and 2003 of Javelina Pipeline and (z) the audited balance
sheets and related statements of operations, cash flows and partners’ capital
of Javelina Pipeline as of December 31, 2003 and 2002 and for the years then
ended. 
Each set of the audited financial statements contained in Schedule
4(l)(i) was prepared in accordance with GAAP and fairly presents, in all
material respects, the financial position and results of operation, cash flows
and partners’ capital associated with the ownership and operation of such
Persons referenced therein as of the dates and for the periods indicated.

 

(ii)           Schedule 4(l)(ii) sets forth (x) the unaudited
balance sheet and related statements of operations and cash flows of Javelina
Plant as of May 31, 2005 and for the five months then ended and (y) the
unaudited balance sheet and related statements of operations and cash flows of
Javelina Pipeline as of May 31, 2005 and for the five months then ended.  Each set of unaudited financial information
contained in Schedule 4(l)(ii) (1) was extracted from the corporate
financial records of the Acquired Companies, which records are maintained on
the same basis on which the Project Manager maintains its corporate financial
records for similarly sized and situated Persons, (2) was generally maintained
and prepared in accordance with GAAP concepts (except as set forth therein and
except for the absence of footnotes, year-end adjustments, periodic accrual
adjustments, transactions and entries typically eliminated in consolidation,
the allocation of overhead and the effects of the Reorganization Transactions),
(3) reasonably presents, in all material respects, the financial information
depicted therein as of the dates and for the periods indicated and (4) contains
the primary information used by the management of the Seller and its Affiliates
to evaluate the financial performance of the Acquired Companies.

 

(m)          Employee Matters.  None of the Acquired Companies has any
employees.  No Acquired Company has ever
been a party to any labor or collective bargaining agreement.  No Acquired Company has at any time
maintained, contributed to or been an adopting employer of any “employee
benefit plan” (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended), or any other plan, program or policy
of deferred compensation, fringe benefits or other compensatory arrangements
(written or unwritten) for any employees. 
No Acquired Company is liable for any contributions, withdrawal
liability, premiums or other obligations under ERISA pertaining to any employee
benefit plan of the Seller or any of its Affiliates.

 

(n)           Regulatory Matters.  No Seller Party or Acquired Company is
subject to regulation as (i) a “holding company,” a “subsidiary company” of a “holding
company,” an “affiliate” of a “holding company,” or a “public utility,” as each
such term is defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment

 

22

 

Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder; or (iii) a “natural gas company,”
as defined in the Natural Gas Act of 1938, as amended.

 

(o)           No Unrecorded Obligations.  Except for Unrecorded Obligations:  (i) disclosed, reflected or reserved against
on the face of the balance sheet for the five months ended May 31, 2005 that
are included in the financial information contained in Schedule 4(l)(ii);
(ii) incurred in the Ordinary Course of Business after May 31, 2005; (iii)
arising from the execution, delivery or performance of this Agreement or any
other agreement contemplated hereby; or (iv) disclosed on any Schedule to this
Agreement, neither of the Acquired Companies has any material Unrecorded
Obligations.

 

(p)           Intellectual Property.  Schedule 4(p) sets forth all
Intellectual Property used by any Acquired Company in the conduct of its
business.  Except as set forth on Schedule 4(p),
the Acquired Companies own or have valid licenses to use all such Intellectual
Property.  Except as set forth on Schedule 4(p),
no Intellectual Property used by any of the Acquired Companies is the subject
of any challenge received by any of the Acquired Companies in writing, and no
such challenge has been threatened.

 

(q)           Sufficiency of the Acquired Company Assets.  Except as otherwise set forth in this
Agreement (including the Reorganization Transactions) or the Other Purchase
Agreements, the Acquired Company Assets constitute all of the assets (excluding
Rights of Way), taken as a whole, that generated the financial results
reflected in the financial information contained in Schedules 4(l)(i) and 4(l)(ii) and attributable to the twelve
months ending December 31, 2004 and the five months ending May 31, 2005.

 

(r)            Bank Accounts.  Schedule 4(r) contains a list, as of
the date of this Agreement, of each bank account of each Javelina Partnership.

 

(s)           Bonds; Guarantees.  Except as listed on Schedule 4(s),
there are no bonds, guarantees or other forms of credit support or similar
arrangements provided by the Seller or its Affiliates) for the benefit of the
Acquired Companies.

 

5.             Pre-Closing Covenants.  The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing:

 

(a)           General. 
The Buyer shall use its commercially reasonable efforts to satisfy the
Seller’s conditions to closing in Section 7(b).  The
Seller shall use its commercially reasonable efforts to satisfy the Buyer’s
conditions to closing in Section 7(a).

 

(b)           Notices, Consents and Audited Financial
Statements.

 

(i)            The Seller shall use
commercially reasonable efforts to obtain the satisfaction of all Notice and
Consent Requirements (other than with respect to those set forth on Schedules
3(b)(ii) or 3(b)(iii) or required under the
HSR Act or FCC Regulations) on or prior to the Closing Date.  Each Party agrees that the ROFR Waiver
Agreement, when duly executed and delivered by the parties thereto, shall constitute
procurement of the Notice and Consent Requirements with respect to those
matters set forth on Schedule 4(k). 
The Buyer shall use commercially reasonable efforts to obtain all Notice
and Consent Requirements with respect to

 

23

 

those set forth on Schedules 3(b)(ii)
and 3(b)(iii) (other than with respect to those required under the HSR
Act or FCC Regulations).  Each Party
agrees to use commercially reasonable efforts to cooperate with and assist the other
Party in satisfying the Notice and Consent Requirements for which the other
Party is responsible.  The Seller’s
obligations under the immediately preceding sentence shall survive for 90 days
after the Closing.  Each Party hereby
acknowledges and agrees that the failure to obtain the satisfaction of any
Notice and Consent Requirement, except for those under the HSR Act, shall not
delay or otherwise prohibit the occurrence of the Closing or the consummation
of the transactions contemplated by this Agreement.  The Seller shall pay all Adverse Consequences
arising from or attributable to the failure to obtain the satisfaction of any
Notice and Consent Requirements required under FCC Regulations, and the Buyer
shall pay for all other Adverse Consequences arising from or attributable to
the failure to obtain the satisfaction of any other Notice and Consent
Requirements.

 

(ii)           In addition to the audited
financial statements provided in Schedule 4(l)(i), the Seller will
provide unaudited financial statements relating to the Acquired Companies as of
and for the period ending in 2005 through June 30, 2005.  The Seller will: (A) cause the Acquired
Companies’ auditors to review such unaudited financial statements, (B) direct
such auditors to provide the Buyer’s auditors access to the auditors’ work
papers, and (C) use commercially reasonable efforts to provide other financial
information reasonably requested by the Buyer. 
The Buyer shall pay and/or reimburse the Seller for all reasonable costs
incurred in connection with the preparation of financial information referenced
in this Section 5(b)(ii), if the Closing occurs
or if the Closing does not occur for any reason other than the default under
this Agreement by the Seller.

 

(c)           Operation of Business.  From the date of this Agreement to the
Closing Date, the Seller shall not, without the consent of the Buyer (which
consent shall not be unreasonably withheld or delayed), except as expressly
contemplated by this Agreement, including Section 5(j),
or as contemplated by Schedule 5(c), cause or (to the extent any Seller
Party or its Affiliate has the Legal Right) permit any of the Acquired
Companies to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business or, with respect to the assets and operations of the Acquired
Companies (to the extent any Seller Party or any of its Affiliates has the
Legal Right), engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business.  Without limiting the generality of the
foregoing, without the consent of the Buyer (which consent shall not be
unreasonably withheld or delayed), except as expressly contemplated by this
Agreement, including Section 5(j) or as contemplated by Schedule 5(c),
or contemplated by the Other Purchase Agreements (including the exhibits and
schedules attached thereto), to the extent the Seller has the Legal Right, the
Seller shall cause the Acquired Companies not to do or agree to do any of the
following from the date of this Agreement to the Closing Date:

 

(i)            issue, sell, pledge, dispose of,
transfer, grant, encumber, or authorize the issuance, sale, pledge,
disposition, transfer or grant of its Equity Interests or any Commitments with
respect to its Equity Interests, or grant (other than the terms currently
provided in the Organizational Documents of any Acquired Company), any
Encumbrance upon its Equity Interests;

 

24

 

(ii)                                  cause or allow any Acquired
Company Asset to become subject to a Lien, except for Permitted Encumbrances;

 

(iii)                               execute, amend or terminate
(other than the expiration thereof in accordance with its terms) any material
Acquired Company Contract, except to the extent that any such amendment occurs
in the Ordinary Course of Business and does not materially affect such
contract, or enter into any agreement that, if in effect on the date of this
Agreement, would have constituted a Material Contract;

 

(iv)                              (A) acquire (including by
merger, consolidation or acquisition, in whole or in part, of Equity Interests
or assets) any corporation, partnership, limited liability company or other
Person or any division thereof or any material amount of assets on behalf of
the Acquired Companies; (B) enter into any material joint venture, partnership
or similar arrangement; (C) incur any Obligations for borrowed money or any
guarantee of indebtedness of any Person or make any loans or advances, except
for intercompany borrowing in the Ordinary Course of Business among the
Acquired Companies and/or the Seller and its Affiliates; or (D) sell, lease or
otherwise dispose of any of its material property or assets other than sales of
goods or services in the Ordinary Course of Business;

 

(v)                                 declare, set aside, make or pay
any dividend or other distribution (other than cash) in respect of the Equity
Interests in the Acquired Companies, or repurchase, redeem or otherwise acquire
any outstanding units of membership interest, stock, partnership interests or
other ownership interests in any of the Acquired Companies;

 

(vi)                              effect any liquidation (complete
or partial), dissolution, restructuring (other than as contemplated in Section
5(j)), recapitalization, reclassification or like change in the
capitalization of any of the Acquired Companies;

 

(vii)                           amend in any material respect
the Organizational Documents of any Acquired Company;

 

(viii)                        cancel or compromise any
material debt or claim of any of the Acquired Companies, or settle or agree to
settle any action to which any of the Acquired Companies is a party where the
terms of such settlement or agreement adversely impact the Acquired Companies
or the operation of their assets or business after such settlement or
agreement;

 

(ix)                                enter into any commitment for
capital expenditures of any of the Acquired Companies in excess of $2,000,000
for all commitments in the aggregate that will not be paid before Closing,
except for reasonable capital expenditures made in connection with any emergency
or force majeure events affecting any of the Acquired Companies;

 

(x)                                   enter into any labor or
collective bargaining agreement or, through negotiations or otherwise, make any
commitment or incur any liability to any labor organizations; and

 

(xi)                                change any tax elections or,
except to the extent done in the Ordinary Course of Business, change any
accounting principles or practices used by the
Acquired

 

25

 

Companies except
as:  (1) required by Law or GAAP, and (2)
with prior written notice to the Buyer;

 

(xii)                             allow any material Permits held
by any of the Acquired Companies to terminate or lapse; or

 

provided, that notwithstanding any
provision of this Section 5(c), each
Acquired Company shall be entitled to make or incur capital expenditures in
accordance with the terms of the Organizational Documents relating
to the Acquired Companies and the
capital expenditures budget set forth on Schedule 5(c)(ix).

 

(d)                                 Affirmative Covenants.  Except as expressly contemplated by this
Agreement, including Section 5(j) or as contemplated by Schedule 5(c),
or contemplated by the Other Purchase Agreements (including the exhibits and
schedules attached thereto) to the extent the Seller has the Legal Right, the
Seller shall cause the Acquired Companies to do the following from the date of
this Agreement to the Closing Date:

 

(i)                                     use its commercially reasonable
efforts to (1) preserve in all material respects the Acquired Companies’
present business, operations, organization and goodwill and (2) preserve its
present relationships with customers and suppliers;

 

(ii)                                  maintain and repair in the
Ordinary Course of Business the operating assets of the Acquired Companies,
normal wear and tear excepted; and

 

(iii)                               provide the Buyer with copies of
any amendments of Organizational Documents of any Acquired Company that are not
otherwise prohibited by Section 5(c)(vii).

 

(e)                                  Damage or Condemnation.  If, before Closing, any part of the Acquired
Company Assets are damaged or destroyed, or are condemned, or if proceedings
are filed for condemnation or under the right of eminent domain that results in
damage, destruction  or condemnation of
property with the Javelina Percentage Interest of a fair market value (as
determined by the Parties), in the aggregate of (i) 10% or less of the Purchase Price, the Purchase Price shall be
reduced by  the Javelina Percentage
Interest of such amount, the Parties shall be obligated to proceed with the
Closing, and the Seller shall retain, or to the extent received by any Acquired
Company or the Buyer following the Closing, the Buyer or such Acquired Company
shall pay to the Seller, all property casualty insurance proceeds payable to
the Seller or its Affiliates relating to such damage, destruction or condemnation,
and (ii) more than 10% of the Purchase Price, the Buyer shall not be obligated
to consummate the Closing, provided that, in lieu of electing not to close, the
Buyer may elect: (x) to offer to extend the date for Closing to allow the
Seller the opportunity (in the Seller’s sole discretion) to repair or replace,
or to cause the repair or replacement of, any such damaged or destroyed assets;
or (y) accept the Acquired Company Equity Interests, notwithstanding any such
destruction, taking, or pending or threatened taking (without reduction of the
Purchase Price therefor), in which case the Seller shall pay to the Buyer all
property casualty insurance proceeds actually received by the Seller or any of
its Affiliates that are not required to be paid by any of them as a
reimbursement to any property casualty insurance providers of the Seller and
its Affiliates by reason of the destruction, or taking of such assets, to the
extent such sums are not committed, used or applied by the Seller

 

26

 

or any of its Affiliates or the Acquired
Companies prior to the Closing Date to repair, restore or replace such damaged
or taken assets, and shall assign and transfer to the Buyer, or subrogate the
Buyer to, all of the right, title and interest of the Seller and its Affiliates
in and to any such unpaid awards or other payments arising out of the
destruction, taking, or pending or threatened taking that are actually received
by the Seller or any of its Affiliates and that are not required to be paid by
any of them as a reimbursement to any property casualty insurance providers of
the Seller and its Affiliates and the Acquired Companies.  If any such payments payable to the Buyer
under this Section 5(e) are not assignable, the Seller will collect such payments at the Buyer’s expense
and remit all such amounts, less any related expenses, to the Buyer as such are
collected.  Prior to the Closing, to the
extent it has the Legal Right, the Seller shall not compromise, settle or
adjust any amounts payable to the Buyer under clause (y) above, without first
obtaining the written consent of the Buyer, which consent shall not be
unreasonably withheld or delayed.  The
Buyer’s election under this Section 5(e) shall expire twenty (20) days after the
earlier to occur of the date this Agreement terminates or the date on which the Buyer receives
written notice from the Seller describing in reasonable detail the nature and
amount becomes aware of such damage, destruction or proposed condemnation.

 

(f)                                    Access.

 

(i)                                     Books and Records.  To the extent they have the Legal Right, the
Seller shall permit, and shall cause its Affiliates to permit, representatives
of the Buyer to have full access at all reasonable times and upon reasonable
notice, and in a manner so as not to interfere with the normal business
operations of the Seller and its Affiliates and the Acquired Companies, to all
personnel, books, records (including Tax Records), contracts, and documents of
or pertaining to any of the Acquired Companies. 
All investigations and due diligence conducted by the Buyer or any of
its representatives shall be conducted at the Buyer’s sole cost, risk and
expense.  To the extent they have the
Legal Right, the Seller shall, and shall cause the Acquired Companies and their
respective officers, employees, consultants, agents, accountants, attorneys and
other representatives to, use commercially reasonable efforts to cooperate with
the Buyer and the Buyer’s representatives in connection with such investigation
and examination.

 

(ii)                                  Site
Access.

 

(A)              Subject
to the terms and conditions of this Agreement, the Seller (to the extent it has
the Legal Right) hereby grants to the Buyer and the Buyer Diligence
Representatives the right to enter upon the Acquired Company Assets for the
purpose of making, and hereby grants to the Buyer and the Buyer Diligence
Representatives, the right to make, a reasonable examination and inspection of
the Acquired Company Assets, together with any activities incidental thereto
(the “Access Right”); provided, however, that
the Access Right and any environmental examination conducted in connection
therewith shall not permit the Buyer to conduct any invasive procedures (collectively, such examination,
inspection and incidental activities, as so qualified, are the “Diligence Activities”).  Neither the Buyer nor any Buyer Diligence
Representative shall engage in any activities on the Acquired Company Assets
other than the Diligence Activities.

 

(B)                The
Buyer shall provide the Seller reasonable written notice of the date and time
on which the Diligence Activities are expected to be conducted.

 

27

 

(C)                During
all periods that the Buyer and/or the Buyer Diligence Representatives are on
the Acquired Company Assets to conduct the Diligence Activities, and for a
one-year period thereafter, the Buyer and the Buyer Diligence Representatives
shall maintain policies of insurance, at its sole cost and expense and with
insurers reasonably satisfactory to the Seller as provided in Schedule 5(f)(ii).  Coverage under all insurance required to be
carried by the Buyer hereunder shall (w) be primary insurance,
(x) list the Seller as a “loss payee” or “additional insured” (as
applicable), (y) waive subrogation against the Seller and (z) provide
for thirty (30) days prior notice to the Seller in the event of cancellation or
modification of the policy or reduction in coverage.  The Buyer and the Buyer Diligence
Representatives shall provide evidence of such insurance to the Seller prior to
exercising their Access Rights.

 

(D)               The
Diligence Activities shall occur at reasonable times, in a manner so as not to
unreasonably interfere with the normal business operations of the Seller, its
Affiliates, any of the Acquired Companies or any other Person.  The Seller shall have the right to accompany
the Buyer and/or the Buyer Diligence Representatives whenever they are on site
on the Acquired Company Assets.   Buyer
and/or the Buyer Diligence Representatives shall coordinate any inspection or
assessment so as to minimize any inconvenience to or interruption of the
conduct of business of the Acquired Companies and their Affiliates.  The Buyer and/or the Buyer Diligence
Representatives shall abide by any relevant Person’s safety rules, regulations
and operating policies while conducting any Activities.

 

(E)                 Except
insofar as reasonably necessary to carry out the Diligence Activities, all
vehicles brought by the Buyer and the Buyer Diligence Representatives onto the
Acquired Company Assets will be restricted to existing roadways, if any, on the
Acquired Company Assets.

 

(F)                 All
Diligence Activities conducted or performed by the Buyer and the Buyer
Diligence Representatives on the Acquired Company Assets shall be conducted and
performed in material compliance with all applicable Laws, including
Environmental Laws.

 

(G)                The
Diligence Activities shall be conducted at the Buyer’s sole cost, risk and
expense.  Upon completion of the
Diligence Activities, the Buyer shall at its sole cost and expense and without
any cost or expense to the Seller or its Affiliates or the Acquired Companies,
(w) repair all damage done to the Acquired Company Assets in connection
with the performance of the Diligence Activities by the Buyer and the Buyer
Diligence Representatives, (x) restore the Acquired Company Assets to the
approximately same or better condition than they were prior to commencement of
the Diligence Activities, (y) remove all equipment, tools or other
property brought onto the Acquired Company Assets by the Buyer and the Buyer
Diligence Representatives in connection with the Diligence Activities and (z)
return all documents and copies of documents pertaining to the Acquired Company
Assets.

 

(H)               The
Access Right shall remain in full force and effect until the earlier to occur
of (w) the date on which the Buyer notifies the Seller in writing that the
Buyer or any Buyer Diligence Representative is not continuing to perform with
reasonable diligence any Diligence Activities on the Acquired Company Assets,
(x) the date on which the Buyer materially breaches or violates any of the
covenants or agreements contained in this Section 5(f)(ii);

 

28

 

provided that such Access Rights will resume
when the Buyer provides reasonable assurance that such breach or violation will
not occur again and any continuing breach or violation is cured, (y) the date
this Agreement is terminated pursuant to Section 10 or (z) the Closing
Date.

 

(g)                                 HSR Act. 
The Parties shall prepare, as soon as is practicable, but in any event
within ten (10) business days following
the execution of this Agreement, all necessary filings in connection with the
transactions contemplated by this Agreement that may be required under the HSR
Act.  The Parties shall submit such
filings to the appropriate Governmental Authority as soon as practicable after
the execution hereof for filings under the HSR Act.  The Parties shall request early termination
of the waiting period under the HSR Act for the HSR Act filing, shall promptly
make any appropriate or necessary subsequent or supplemental filings and shall
cooperate in the preparation of such filings as is reasonably necessary and
appropriate.  The Parties shall use their
respective commercially reasonable efforts to resolve such objections, if any,
as may be asserted with respect to the transactions contemplated hereby under
any antitrust or trade regulatory laws of any Governmental Authority.  The Buyer and the Seller agree to take all
actions that may be required by the FTC in order to consummate the transactions
contemplated hereby as soon as reasonably practicable, except agreeing to sell,
hold separate or otherwise dispose of any business or assets so required to be
sold, held separate or disposed of by the FTC. 
The Buyer shall pay 100% of all filing fees in connection with all
filings under the HSR Act.

 

(h)                                 Intercompany Transactions.  Those
agreements listed on Schedule 5(h)(i) shall be terminated as of the
Closing, in such manner as the Seller or its applicable Affiliates shall
specify, without imposing liabilities or expenses upon the Buyer, and none of
the parties to such agreements shall have any further liability or obligation
in respect of any such transaction or arrangement.  The Seller shall have the right to settle any
and all intercompany balances at any time (and from time to time) up to and at
the Closing in any manner as it so chooses, including payment, offset,
capitalization or otherwise; provided that, such settlements shall be
appropriately reflected in the calculation of Working Capital.

 

(i)                                     Notices and Effect of Supplements to Schedules.  Each Party will, promptly upon becoming aware
of any fact, matter, circumstance or event, which fact, matter, circumstance or
event arose either (x) on or prior to the date hereof or (y) after the date
hereof but prior to the Closing, in any case, (i) causing or that reasonably
could cause either Party to be in breach or violation of any of its
representations, warranties, covenants or agreements under this Agreement, give
notice to such other Party with respect to such fact, matter, circumstance or
event, or (ii) requiring supplementation or amendment of the schedules provided
by the Parties attached hereto, supplement or amend such schedules to this
Agreement to reflect any fact, matter, circumstance or event, which, if
existing, occurring or known on the date of this Agreement, would have been
required to be set forth or described in such schedules which were or have been
rendered inaccurate thereby.  Each Party
will notify the other Party promptly after the discovery by such Party that any
representation or warranty of the other Party contained in this Agreement is,
becomes or will be untrue in any material respect on or before the Closing
Date.  No such supplement or amendment
will amend or modify this Agreement or the Schedules in any way for any
purpose.

 

29

 

(j)                                     Reorganization Transactions.  Except with respect to the ROFR Waiver
Agreement to be entered into concurrent with execution hereof, the Seller
shall, or shall cause its applicable Affiliates and, to the extent it has the
Legal Right, each of the Acquired Companies to, perform each of the
Reorganization Transactions concurrent with the Closing.

 

(k)                                  Surety
Bonds; Guarantees.  The Buyer agrees
to replace on or before the Closing Date each of the surety bonds or guarantees
issued by the Seller or any of its Affiliates with respect to the Acquired
Companies that are listed on Schedule 5(k).

 

(l)                                     No Shop. 
The Seller shall not, and shall cause (to the extent it has the Legal
Right) its Affiliates and its and their directors, officers and similar agents
not to, (i) solicit, initiate or encourage the submission of any proposal or
offer from any Person relating to the acquisition of any of the Acquired
Company Equity Interests or any substantial portion of the Acquired Company
Assets (including any acquisition structured as a merger, consolidation or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing.  The Seller
will use commercially reasonable efforts to cause its financial advisors and
other representatives not to do any of the foregoing.

 

6.                                       Post-Closing Covenants.  The Parties agree as follows:

 

(a)                                  General.  In
case at any time after the Closing any further action is necessary to carry out
the purposes of this Agreement, each Party shall take such further action
(including the execution and delivery of such further instruments and
documents) as the other Party reasonably may request, all at the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 8).

 

(b)                                 Litigation Support.  In the event and for so long as either Party
actively is pursuing, contesting or defending against any third party action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this Agreement or
(ii) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on or
before the Closing Date relating to the Acquired Companies, the other Party
shall cooperate with the pursuing, contesting or defending Party and its
counsel in such pursuit, defense or contest, make available its personnel, and
provide such testimony and access to its books and records (other than books
and records which are subject to privilege or to confidentiality restrictions)
as shall be necessary in connection with such pursuit, defense or contest, all
at the sole cost and expense of the pursuing, contesting or defending Party
(unless the pursuing, contesting or defending Party is entitled to
indemnification therefor under Section 8).

 

(c)                                  Delivery and Retention of Records.  Within forty-five (45) days after the Closing
Date, the Seller shall (to the extent the Seller or its Affiliate have the
Legal Right) deliver or cause to be delivered to the Buyer, copies of Tax
Records which are relevant to Post-Closing Tax Periods and all other files,
books, records, information and data relating to the Acquired Companies,
including the Electronic Data and a CD containing all the information and data
contained in the electronic data room (other than Tax Records) that are in the
possession or

 

30

 

control of the Seller or any of its
Affiliates (the “Records”).  The Buyer agrees to (i) hold the Records and
not to destroy or dispose of any thereof for a period of five (5) years from
the Closing Date or such longer time as may be required by Law, provided
that, if it desires to destroy or dispose of such Records during such period,
it shall first offer in writing at least sixty (60) days before such
destruction or disposition to surrender them to the Seller and if the Seller
does not accept such offer within thirty (30) days after receipt of such offer,
the Buyer may take such action and (ii) following the Closing Date to afford
the Seller, its accountants, and counsel, during normal business hours, upon
reasonable request, full access to the Records and to the Buyer’s employees to
the extent that such access may be requested for any legitimate purpose at no
cost to the Seller (other than for reasonable out-of-pocket expenses); provided
that such access shall not be construed to require the disclosure of Records that
would cause the waiver of any attorney-client, work product, or like privilege
or cause the breach of any confidentiality agreement; provided,
further that in the event of any litigation nothing herein shall limit either
Party’s rights of discovery under applicable Law.  All post-Closing access to the Records and to
the Buyer’s employees will be subject to confidentiality obligations under Section
11(a).

 

(d)                                 Pipeline Markers and Valero Marks.  The Buyer acknowledges and agrees
that it obtains no right, title, interest, license or any other right
whatsoever to use the Valero Marks and that the Seller and its Affiliates do
not have any Obligation to the Buyer with respect to the establishment,
registration or maintenance, whether prior to, on or after the Closing, of any
of the Valero Marks, including any rights, title, interest or license to use
any Valero Marks.  The Buyer will not do
any business or offer any goods or services under the Valero Marks.  The Buyer will not send, or cause to be sent,
any correspondence or other materials to any Person on any stationery that
contains any Valero Marks or otherwise operate any Acquired Company in any
manner which would or might confuse any Person into believing that the Buyer
has any right, title, interest, or license to use the Valero Marks.  Within one hundred eighty (180) days after
the Closing Date, the Buyer shall remove the Valero Marks from the pipeline and
facility markers, decals, logos and other signage on the real and personal
property of each Acquired Company referring to the Seller or any of its
Affiliates.  As promptly as practicable
after the Closing, the Buyer shall post the Buyer’s emergency contact telephone
numbers in place of any of the Seller’s or its Affiliates’ emergency contact
telephone numbers.

 

(e)                                  Payments. 
The Seller will promptly, after receipt thereof, pay to the Buyer or the
appropriate Acquired Company, any amounts received by the Seller and its
Affiliates after Closing that relate to the business or operations of any
Acquired Company (whether before or after the Effective Time).  The Buyer will promptly, after receipt
thereof, pay, or cause the Acquired Companies to pay, to the Seller the
Javelina Percentage Interest of any amounts received by the Buyer and its
Affiliates and the Acquired Companies after Closing that should have been paid
to the Seller or its Affiliates.

 

(f)                                    Accounts Receivable.  To the extent any Acquired Company receives
cash payments with respect to its accounts receivable that were excluded from
Working Capital, the Buyer shall, or shall cause the applicable Acquired
Company to, promptly remit the Javelina Percentage Interest of such payments to
the Seller.  Towards this end, the Seller
shall have the right for two (2) years after the Closing Date to inspect and
examine the Records of the applicable Acquired Companies to determine
compliance by the Buyer with the provisions of this Section 6(f).

 

31

 

(g)                                 Post-Closing Environmental Filings.  The Buyer shall prepare (or cause to be
prepared) and file (or cause to be filed) any environmental reports, filings or
certifications to any Governmental Authority (including such filings involving
periods that straddle the Effective Time) with respect to the Acquired Company
Assets or the Acquired Companies.  The
Seller shall cooperate fully (to the extent it has the Legal Right) as and to
the extent reasonably requested by the Buyer, in connection with such reports,
filings, or certifications to be made by the Buyer.

 

(h)                                 Mutual Mistake.  If the Parties determine that the Seller and
its Affiliates did not transfer to one of the Acquired Companies any material
asset that the Parties mutually agree they both intended to be included as an
Acquired Company Asset, the Parties will cooperate to effect such transfer as
promptly as practical.

 

(i)                                     Real Property Matters.  Except as represented and warranted under
Section 4(j), with respect to any and all real property interests owned by any
Acquired Company on the Effective Time, the Buyer shall, and shall cause its
applicable Affiliates to (i) waive any and all rights of substitution and
subrogation in and to any covenants and warranties (whether arising under title
documents, contracts, laws or otherwise) providing title claims against the
Seller and any of its Affiliates that is a predecessor in title of any Acquired
Company and (ii) release, forgive and otherwise discharge and otherwise not
pursue any claim, right or other cause of action in favor of it or its
Affiliates against the Seller or any of its Affiliates to the extent same
relates to title to any such real property interests.

 

(j)                                     Operatorship and ROFR Matters.  The Buyer and the Seller acknowledge that (i)
Javelina Holding Company is the Project Manager of the Acquired Companies
pursuant to the partnership agreements of the Acquired Companies and the
Javelina Operating Agreements, and (ii) as of even date herewith, the partners
of the Acquired Companies executed and delivered the ROFR Waiver Agreement,
which provides (among other things) that Javelina Holding Company will remain
the Project Manager after the Closing pursuant to the terms of the Javelina
Operating Agreements and that those partners waive certain preferential
purchase rights provisions, which may or may not apply to the transactions
contemplated by this Agreement.

 

7.                                       Conditions to Obligation to Close.  All proceedings to be taken and all documents
to be exchanged and delivered by all parties at the Closing shall be deemed to
have been taken and executed simultaneously unless otherwise provided in this
Agreement, and no proceedings shall be deemed taken nor any documents executed
or delivered until all have been taken, executed, and delivered.

 

(a)                                  Conditions to Obligation of the Buyer.  The obligation of the Buyer to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:

 

(i)                                     (A) the representations and
warranties of the Seller contained in Sections 3(a)
and 4 shall be true and correct (without
giving effect to any qualification as to materiality or any supplements or
amendments to the Schedules made pursuant to Section 5(i)) as of
the date of this Agreement and at Closing (except for those that refer to a
specific date, which must be true and correct (without giving effect to any
qualification as to materiality or any supplements to the

 

32

 

Schedules made pursuant to Section 5(i))
as of such date, except where all inaccuracies of such representations and
warranties would (or could reasonably be expected to) result in Adverse
Consequences constituting (in the aggregate) less than a Material Adverse
Effect, and (B) the Seller shall have performed in all material respects with
all of its covenants and agreements hereunder;

 

(ii)                                  there must not be any
injunction, judgment, order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this Agreement or any
suit or action pending by a Governmental Authority to enjoin the consummation
of any of the transactions, contemplated by this Agreement;

 

(iii)                               any required waiting period
under the HSR Act shall have expired or early termination shall have been
granted with respect to such period;

 

(iv)                              if there has been damage,
destruction or condemnation of the type described in the first sentence of Section 5(e), the Buyer’s election to close must
have been exercised and, in the case of Section 5(e)(ii)(x),
agreed to by the Seller;

 

(v)                                 the Seller shall have delivered,
or caused to be delivered, to the Buyer the unaudited financial statements of
the Acquired Companies reviewed by the auditors of the Acquired Companies for
the period ending June 30, 2005, and if Closing is after October 31, 2005, the
unaudited financial statements of the Acquired Companies reviewed by the
auditors of the Acquired Companies for the calendar quarter ending September
30, 2005, all in conformance with the requirements set forth in Section 5(b)(ii);

 

(vi)                              the Seller shall have delivered,
or caused to be delivered, to the Buyer each Transaction Agreement to which any
Seller Party is a party and, to the extent the Seller has the Legal Right, any
Acquired Company is a party;

 

(vii)                           the Seller shall have delivered,
or caused to be delivered, to the Buyer evidence of the resignation or removal
of any officers of the Acquired Companies that the Seller has the Legal Right
to so remove or to cause to so resign, in each case that the Buyer has not
identified to the Seller within a reasonable period of time before Closing as
an officer that will be continuing with the applicable Acquired Company in that
capacity after the Closing;

 

(viii)                        each of the Commercial
Agreements shall have been executed and delivered by each of the parties
thereto; and

 

(ix)                                with respect to each Other
Purchase Agreement, the Closing (as defined in such Other Purchase Agreement)
under such Other Purchase Agreement shall have occurred simultaneously with the
Closing.

 

The Buyer may waive any
condition specified in this Section 7(a) if
it executes a writing so stating at or before the Closing.

 

(b)                                 Conditions to Obligation of the
Seller.  The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:

 

33

 

(i)                                     (A) the representations and
warranties of the Buyer contained in Section 3(b)
shall be true and correct (without giving effect to any qualification as to
materiality or any supplements or amendments to the Schedules made
pursuant to Section 5(i)) as of the date of this Agreement and at
Closing (except for those that refer to a specific date, which must be true and
correct (without giving effect to any qualification as to materiality or any
supplements to the Schedules made pursuant to Section 5(i)) as of
such date), except where all inaccuracies of such representations and
warranties would (or could reasonably be expected to) not adversely affect the
ability of the Buyer to consummate the transactions contemplated by this
Agreement, and (B) the Buyer shall have performed in all material respects with
all of its covenants and agreements hereunder;

 

(ii)                                  there must not be any
injunction, judgment, order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this Agreement or any
suit or action pending by a Governmental Authority to enjoin the consummation
of any of the transactions, contemplated by this Agreement;

 

(iii)                               any required waiting period
under the HSR Act shall have expired or early termination shall have been
granted with respect to such period;

 

(iv)                              if there has been damage,
destruction or condemnation of the type described in the first sentence of Section 5(e), the Buyer’s election to close must
have been exercised and, in the case of Section 5(e)(ii)(x),
agreed to by the Seller;

 

(v)                                 taken together, the effect of
all inaccuracies of representations and warranties of the Seller as described
in Section 7(a)(i)(A) is less than three million dollars ($3,000,000);

 

(vi)                              the Buyer shall have delivered
to the Seller the estimated Purchase Price set forth in the Interim Closing
Statement in cash by wire transfer of immediately available federal funds;

 

(vii)                           each of the Commercial
Agreements shall have been executed and delivered by each of the parties
thereto;

 

(viii)                        with respect to each Other
Purchase Agreement, the Closing (as defined in such Other Purchase Agreement)
under such Other Purchase Agreement shall have occurred simultaneously with the
Closing; and

 

(ix)                                the Buyer shall have delivered,
or caused to be delivered, to the Seller each Transaction Agreement to which
any Buyer Party is a party.

 

The Seller may waive any
condition specified in this Section 7(b) if
it executes a writing so stating at or before the Closing.

 

8.                                       Obligations, Survival and
Indemnification.

 

(a)                                  Survival of Representations, Warranties
and Covenants.  (i) All of the
representations contained in Sections 3(a)
and 4 (other than the Fundamental
Representations)

 

34

 

shall survive the Closing until April 1,
2007; and (ii) the Fundamental Representations shall survive the Closing until
ninety (90) days after the expiration of the applicable statute of
limitations.  The covenants and
obligations contained in Sections 2 and 6 and all other covenants and obligations
contained in this Agreement shall survive the Closing indefinitely.

 

(b)                                 Indemnification Provisions for
Benefit of the Buyer.

 

(i)                                     Representations and
Warranties - General.  In the event: (x)
the Seller breaches (without giving effect to any qualification as to
materiality (including Material Adverse Effect)) any of its representations or
warranties contained herein (other than those contained in Section 4(b)
(Capitalization) and Section 4(f) (Tax Matters)); and (y) the Buyer
makes a written claim for indemnification against the Seller pursuant to Section 11(h) within the applicable survival
period specified in Section 8(a), then
the Seller agrees to RELEASE, INDEMNIFY AND
HOLD HARMLESS the Buyer Indemnitees from and against the entirety of
any Adverse Consequences that are individually in excess of twenty-five
thousand dollars ($25,000) and that are suffered by the Buyer Indemnitees by
reason of each such breach; provided, that the Seller shall not have
any obligation to indemnify the Buyer Indemnitees from and against (A) the
entirety of any such Adverse Consequences by reason of such breaches until the
Buyer Indemnitees, in the aggregate, have suffered Adverse Consequences by
reason of all such breaches in excess of an initial aggregate deductible amount
equal to 1.0% of the Purchase Price, (B) after which point, 50% of any such
further Adverse Consequences by reason of such breaches until the Buyer
Indemnitees, in the aggregate (above such amounts described in (A) above), have
suffered Adverse Consequences by reason of all such breaches in excess of a
second deductible aggregate amount equal to 1.0% of the Purchase Price (after
which point the Seller shall be obligated only to indemnify the Buyer
Indemnitees from and against any further such Adverse Consequences), or (C) to
the extent all Adverse Consequences the Buyer Indemnitees, in the aggregate,
have suffered by reason of all such breaches exceeds an aggregate ceiling
amount equal to Fourteen Million Two Hundred Thousand ($14,200,000.00) (after
which point the Seller shall have no obligation to indemnify the Buyer
Indemnitees from and against any further such Adverse Consequences).

 

(ii)                                  Representations and
Warranties - Special.  In the event: (x) the Seller breaches
(without giving effect to any qualification as to materiality (including
Material Adverse Effect)) any of its representations or warranties contained in
Sections 4(b) or 4(f); and (y) the Buyer makes a written
claim for indemnification against the Seller pursuant to Section
11(h) within the applicable survival period specified in Section 8(a), then the Seller agrees to RELEASE, INDEMNIFY AND HOLD HARMLESS the
Buyer Indemnitees from and against the entirety of any Adverse Consequences
that are suffered by the Buyer Indemnitees by reason of each such breach.

 

(iii)                               Covenants and Obligations.  In the event: 
(x) the Seller breaches any of its covenants or obligations in Sections 2 or 6
or any other covenants or obligations of the Seller in this Agreement is
breached; and (y) the Buyer makes a written claim for indemnification
against the Seller pursuant to Section 11(h)
within the applicable survival period specified in Section 8(a),
then the Seller agrees to RELEASE, INDEMNIFY
AND HOLD HARMLESS the Buyer Indemnitees from and against the
entirety of any Adverse Consequences that, except

 

35

 

with respect to the
covenants provided in Section 9 (in which case there are no thresholds),
are individually in excess of twenty-five thousand dollars ($25,000) and that
are suffered by the Buyer Indemnitees by reason of such breaches.

 

(iv)                              ERISA.  The Seller shall RELEASE, INDEMNIFY AND HOLD HARMLESS the Buyer Indemnitees
from and against the entirety of any Adverse Consequences that are suffered by
the Buyer Indemnitees by reason of any of the Buyer Indemnitees having been
aggregated with the Seller or any Affiliate of the Seller under Section 414(o) of
the Code, or having been under “common control” with the Seller or such
Affiliate within the meaning of Section 4001(a)(14) of ERISA.

 

(v)                                 Taxes.  The Seller shall RELEASE, INDEMNIFY AND HOLD HARMLESS the Buyer Indemnitees
from and against the entirety of the Javelina Percentage Interest of any
Adverse Consequences that are suffered by the Buyer Indemnitees with respect to
Taxes, if any, imposed on any of the Acquired Companies by reason of Treasury
Regulation Section 1.1502-6 (a) (or any similar provision of the state or
local Law) by reason of being a member of an Affiliated Group that includes the
regarded parent of the Seller at or before the Effective Time.

 

(vi)                              Retained Indebtedness
Obligations.  The Seller shall
RELEASE, INDEMNIFY AND HOLD HARMLESS the
Buyer Indemnitees from and against the entirety of the Javelina Percentage
Interest of any Adverse Consequences that are suffered by the Buyer Indemnitees
with respect to any indebtedness for borrowed money of any Acquired Company
represented by a credit agreement, note, indenture or similar lending
instrument to the extent such amount is not included in the Working Capital
calculation.

 

(vii)                           Retained Seller Obligations.  The Seller shall RELEASE, INDEMNIFY AND HOLD HARMLESS the Buyer Indemnitees from
and against the entirety of any: (A) Adverse Consequences that are suffered by
the Buyer Indemnitees to the extent resulting from any claims by any third
party relating to any asset or property owned by the Seller or its Affiliates
prior to Closing that has never been owned or operated by, or the subject of
any contract or other agreement with or for the benefit of, any Acquired
Company; and (B) the Javelina Percentage Interest of any Adverse Consequences
resulting from violations of Environmental Laws to the extent relating to any
real property interest owned as of the Effective Time by any Acquired Company
to the extent such real property interest is not generally associated with the
Facilities described on Exhibit A.

 

(viii)                        Divested Acquired Company Assets.  The Seller shall RELEASE, INDEMNIFY AND HOLD HARMLESS the Buyer Indemnitees
from and against the entirety of the Javelina Percentage Interest of any
Adverse Consequences that are suffered by the Buyer Indemnitees to the extent
relating to any business (including any plant or other substantial tangible
asset) that both was owned and divested or otherwise disposed of by either of
the Acquired Companies at any time prior to the Closing Date.

 

(ix)                                Seller and Affiliate Claims.  The Seller shall RELEASE, INDEMNIFY AND HOLD HARMLESS the Buyer Indemnitees
from and against the entirety of any Adverse Consequences that are suffered by
the Buyer Indemnitees for claims by the Seller and its

 

36

 

Affiliates against the Acquired Companies and
attributable to the period prior to the Closing, except for claims arising out
of this Agreement or any Transaction Agreement, claims with respect to any
Acquired Company Contract or intercompany arrangements that will not be terminated
as of the Closing in accordance with Section 5(h), and claims of the
type for which the Buyer is providing indemnity pursuant to Section 8(c).

 

(x)                                   Limitations.
Notwithstanding any representation, warranty, covenant or other agreement
contained in this Agreement, including the rights of indemnification provided
in this Section 8, the Seller shall not have any obligation to release,
indemnify and hold harmless any Buyer Indemnitee with respect to any Adverse
Consequence (A) associated with, attributable to or resulting from any
environmental condition or circumstance (including the non-compliance with any
Environmental Law and the presence of any Hazardous Substance) except to
the extent the relevant condition or circumstance constitutes a breach of the
representation and warranty set forth in Section 4(i) or is subject to
indemnity in accordance with Sections 8(b)(vii)-(ix) or (B) to the
extent relating to the Acquired Companies or the assets, properties,
obligations, activities and other matters relating to the Acquired Companies,
that portion of such Adverse Consequence in excess of the product derived by
multiplying the Javelina Percentage Interest by the amount of such Adverse
Consequence.  By way of clarification,
the Parties acknowledge and agree (1) that the Buyer has entered into a
separate purchase agreement with each partner of the Acquired Companies
covering such partner’s interest in such Acquired Companies, and (2) each such
purchase agreement is separate and independent from the others and is not
intended to increase the Seller’s exposure for Adverse Consequences, if
any.  For example, if it should happen
that one of the Acquired Companies has an Unrecorded Obligation of $100 that
would constitute a breach of the representation and warranty contained in Section
4(l), the Seller’s maximum aggregate exposure with respect thereto (subject
to any deductibles, caps or other limitations) would be determined by
multiplying $100 by the Javelina Percentage Interest.

 

(c)                                  Indemnification Provisions for
Benefit of the Seller.

 

(i)                                     Representation, Warranties and
Covenants.  In the event: (x) the Buyer breaches any of
its representations, warranties, covenants or other obligations contained
herein; and (y) the Seller makes a written claim for indemnification against
the Buyer pursuant to Section 11(h) within
the applicable survival period specified in Section 8(a),
then the Buyer agrees to RELEASE, INDEMNIFY
AND HOLD HARMLESS the Seller Indemnitees from and against the
entirety of any Adverse Consequences that are individually in excess of
twenty-five thousand dollars ($25,000) and suffered by the Seller Indemnitees
by reason of such breaches.

 

(ii)                                  General.  Except to the extent the Seller is obligated
to indemnify the Buyer pursuant to Section 8(b),
the Buyer agrees to RELEASE, INDEMNIFY AND
HOLD HARMLESS the Seller Indemnitees from and against the entirety
of any Adverse Consequences relating in any way to the Acquired Companies,
Acquired Company Equity Interests, the Acquired Company Assets or the ownership,
operation or Obligations of any of them, in each such case, whether or not
arising during, related to or otherwise attributable to the period prior to, on
or after the Closing Date including, without limitation, any Adverse
Consequences incurred or suffered by such Seller Indemnities resulting or
arising from Seller serving as a general partner of Acquired Companies.  Except as otherwise expressly provided for in
this

 

37

 

Agreement, the Buyer’s
Obligations under this Section 8(c)(ii) include and cover matters
whether or not they are set forth in the Schedules to this Agreement,
including such Obligations relating to litigation to which the Seller or any of
its Affiliates is a party.

 

(iii)                               Acquired Company Claims.  The Buyer shall RELEASE, INDEMNIFY AND HOLD HARMLESS the Seller Indemnitees from and
against the entirety of any Adverse Consequences that are suffered by the
Seller Indemnitees for claims by the Acquired Companies against the Seller and
its Affiliates attributable to the period prior to the Closing, except for
claims arising out of this Agreement or any Transaction Agreement, and claims
with respect to any intercompany arrangements that will not be terminated as of
the Closing in accordance with Section 5(h).

 

(iv)                              Site Access.  The Buyer agrees to RELEASE,
INDEMNIFY AND HOLD HARMLESS the Seller Indemnitees from and against
the entirety of any Adverse Consequences that are suffered by the Seller
Indemnitees arising out of, resulting from or relating to any field visit or
other due diligence activities relating to any performance of the Diligence
Activities to the extent caused by acts or omissions of any Buyer Party or
Buyer Diligence Representative, even if such Adverse Consequences arise out of or
result from, solely or in part, the sole, active, passive, concurrent or
comparative negligence, strict liability or other fault or violation of Law of
or by the Seller Indemnitees, except Adverse Consequences to the extent
resulting from the gross negligence or willful misconduct of the Seller
Indemnitees.

 

(d)                                 Matters Involving Third Parties.

 

(i)                                     If any third party shall notify
either Party (the “Indemnified Party”) with
respect to any matter (a “Third Party Claim”)
that is reasonably expected to give rise to a claim for indemnification against
the other Party (the “Indemnifying Party”)
under this Section 8, then the Indemnified
Party shall promptly (and in any event within five (5) business days after
receiving notice of the Third Party Claim) notify the Indemnifying Party
thereof in writing.  Failure to notify
the Indemnifying Party shall not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party, except to the extent the
defense of such claim is materially prejudiced by the Indemnified Party’s
failure to give such notice, including having the effect of tolling or
suspending the statute of limitations applicable to such claim.

 

(ii)                                  The Indemnifying Party shall
have the right to assume and thereafter conduct the defense of the Third Party
Claim with counsel of its choice reasonably satisfactory to the Indemnified
Party and the Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however,
that the Indemnifying Party shall not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim which provides
for or results in any payment by or Obligation of the Indemnified Party of or
for any damages or other amount, any Encumbrance on any property of the
Indemnified Party, any finding of responsibility or liability on the part of
the Indemnified Party or any sanction or injunction of, restriction upon the
conduct of any business by, or other equitable relief upon the Indemnified
Party without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).

 

38

 

(iii)                               Unless and until the
Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 8(d)(ii), the Indemnified Party may
defend against the Third Party Claim in any manner it reasonably may deem
appropriate.

 

(iv)                              In no event shall the
Indemnified Party consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party which consent shall not be withheld
unreasonably.

 

(e)                                  Determination of Amount of Adverse
Consequences.  The Adverse
Consequences giving rise to any indemnification obligation hereunder shall be
limited to the actual loss suffered by the Indemnified Party (i.e.
reduced by any insurance proceeds or other payment or recoupment received,
realized or retained by the Indemnified Party as a result of the events giving
rise to the claim for indemnification net of any expenses related to the
receipt of such proceeds, payment or recoupment, including retrospective
premium adjustments, if any), but not any reduction in Taxes of the Indemnified
Party (or the affiliated group of which it is a member) occasioned by such loss
or damage.  The amount of the actual loss
and the amount of the indemnity payment shall be computed by taking into
account the timing of the loss or payment, as applicable, using a Prime Rate
plus two percent interest or discount rate, as appropriate (not to exceed the
maximum rate permitted by applicable Law). 
Upon the request of the Indemnifying Party, the Indemnified Party shall
provide the Indemnifying Party with information sufficient to allow the
Indemnifying Party to calculate the amount of the indemnity payment in
accordance with this Section 8(e).  An Indemnified Party shall take all
reasonable steps to mitigate damages in respect of any claim for which it is
seeking indemnification and shall use commercially reasonable efforts to avoid
any costs or expenses associated with such claim and, if such costs and
expenses cannot be avoided, to minimize the amount thereof.  Nothing in this Section 8 is intended
to allow an indemnified Person to receive duplicative payments in connection
with a Party’s Obligations to release, indemnify and hold harmless.  Without in any way limiting the generality of
the preceding sentence, although an indemnified Person may seek recovery for an
Adverse Consequence under any Section under which such Adverse Consequence may
be recoverable, to the extent an indemnified Person has been paid for an
Adverse Consequence under one Section of this Agreement, that Person
shall not be permitted to seek payment for that Adverse Consequence under
another Section of this Agreement, even though that Adverse Consequence
is of a type which would be covered by each such Section.

 

(f)                                    Tax Treatment of Indemnity Payments.  All indemnification payments made under this
Agreement, including any payment made under Section 9,
shall be made in cash and treated as purchase price adjustments for Tax
purposes.

 

(g)                                 Exclusive Remedy.  The indemnities provided for in this Section 8 shall be the sole and exclusive remedy
of the Indemnified Party against the Indemnifying Party by contract, statute or
otherwise, at law or equity, for any claim, cause of action or other matter
arising from any breach by the Buyer or the Seller, as applicable, of any of
its representations, warranties, covenants or other agreements under this
Agreement or the transactions contemplated hereby. Each Party acknowledges that
the payment of money, as limited by the terms of this Agreement, shall be
adequate compensation for breach of any representation, warranty, covenant or
agreement contained herein or for any other claim arising in connection with or
with respect to the transactions contemplated by this Agreement.  As the payment of money shall be adequate

 

39

 

compensation, each Party hereby waives any
right to rescind this Agreement or any of the transactions contemplated hereby.

 

(h)                                 Disclaimer of Representations and
Warranties.  The Buyer acknowledges
that (i) it has had and pursuant to this Agreement shall have before Closing
access to the Acquired Companies and the Acquired Company Assets and the
officers or other representatives of the Seller and (ii) in making the decision
to enter into this Agreement and consummate the transactions contemplated
hereby, the Buyer has relied solely on the basis of its own independent
investigation, including environmental and other inspections, and upon the
express representations, warranties, covenants, and agreements set forth in
this Agreement, and the Seller expressly disclaims all liability and
responsibility for any representation, warranty, statement or communication
made or communicated (orally or in writing) to the Buyer or any of its
Affiliates, employees, agents, consultants or representatives other than as
expressly set forth in this Agreement or any Transaction Agreement (including,
without limitation, any opinion, information, projection or advice that may
have been provided to the Buyer by any officer, director, employee, agent,
consultant, representative or advisor of the Seller or any of its
Affiliates).  Toward this end, except as
expressly set forth in this Agreement, no Seller Indemnitee shall have
liability to the Buyer or any other Person resulting from the distribution to
the Buyer, or the Buyer’s use of, any such information relating to any Seller
Indemnitee, or prepared by or on behalf of any Seller Indemnitee, and supplied
to the Buyer before the date of this Agreement, or any information, documents
or materials made available to the Buyer in any data rooms, any presentation or
in any other form relating to the business of the Acquired Companies in
connection with the transactions contemplated hereby.  Accordingly, the Buyer acknowledges that,
except as expressly set forth in this Agreement, the Seller has not made, and
THE SELLER MAKES NO AND DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES, WHETHER
EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, REGARDING
(i) TITLE TO ANY OF THE ACQUIRED COMPANY ASSETS (INCLUDING ANY RIGHTS OF WAY)
(WHETHER RELATING TO DEFECTIVE TITLE OR GAPS IN TITLE), (ii) THE QUALITY,
CONDITION, OR OPERABILITY OF ANY REAL OR PERSONAL PROPERTY, EQUIPMENT, OR
FIXTURES, INCLUDING FREEDOM FROM LATENT OR PATENT VICES OR DEFECTS, (iii) THEIR
MERCHANTABILITY, (iv) THEIR FITNESS FOR ANY PARTICULAR PURPOSE, (v) THEIR
CONFORMITY TO MODELS, SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, (vi) THE
CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING
CONSULTANTS, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION
RELATING TO ANY ACQUIRED COMPANY ASSETS, (vii) THE QUANTITY, QUALITY,
PRODUCTION OR RECOVERABILITY OF HYDROCARBONS, (viii) ANY ESTIMATES OF THE VALUE
OF THE ACQUIRED COMPANY EQUITY INTERESTS OR RELATED ACQUIRED COMPANY ASSETS OR
FUTURE REVENUES GENERATED THEREFROM, (ix) THE MAINTENANCE, REPAIR, CONDITION,
QUALITY SUITABILITY, DESIGN OR MARKETABILITY OF THE ACQUIRED COMPANY ASSETS,
(x) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS,
BROCHURES, CHARTS OR STATEMENTS PREPARED BY ANY PERSON WITH RESPECT TO THE
ACQUIRED COMPANY EQUITY INTERESTS OR ACQUIRED COMPANY ASSETS, (xi) ANY OTHER
MATERIALS OR INFORMATION MADE AVAILABLE TO THE BUYER OR ITS AFFILIATES, OR ITS
OR THEIR EMPLOYEES,

 

40

 

AGENTS, CONSULTANTS, REPRESENTATIVES OR
ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR
ANY DISCUSSION OR PRESENTATION RELATED THERETO, (xii) ANY EXPRESS OR IMPLIED
WARRANTY OF FREEDOM FROM INTELLECTUAL PROPERTY INFRINGEMENT, (xiii) ANY RIGHTS
OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION
OR RETURN OF THE PURCHASE PRICE, (xiv) ANY MATTER OR CIRCUMSTANCE RELATING TO
ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION
OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER
ENVIRONMENTAL CONDITION OF THE ACQUIRED COMPANY ASSETS, AND, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, ALL OF THE ACQUIRED COMPANY ASSETS ARE
DELIVERED IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS, WHERE
IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR
UNDISCOVERABLE), INCLUDING FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION.  THE INCLUSION BY ANY SELLER PARTY OF ANY OF
THE REPRESENTATIONS, WARRANTIES AND COVENANTS CONTAINED IN THIS AGREEMENT DOES
NOT CONSTITUTE AN ADMISSION OR ACKNOWLEDGEMENT, EXPRESSED OR IMPLIED, OF FAULT,
RESPONSIBILITY OR LIABILITY OF ANY KIND BY ANY SELLER PARTY UNDER ANY LAW
(INCLUDING ANY ENVIRONMENTAL LAW) FOR ACTS, OMISSIONS, OBLIGATIONS OR EVENTS
INVOLVING THE PRESENCE, IF ANY, OF ANY POLLUTANTS, CONTAMINANTS, TOXIN OR
HAZARDOUS OR EXTREMELY HAZARDOUS SUBSTANCES, MATERIALS, WASTES, CONSTITUENTS,
COMPOUNDS OR CHEMICALS THAT ARE REGULATED BY, OR MAY FORM THE BASIS OF
LIABILITY UNDER, ANY ENVIRONMENTAL LAWS ON OR ADJACENT TO THE ACQUIRED COMPANY
ASSETS.  The Parties agree that, to the
extent required by Law to be effective, the disclosures contained in this Section 8(h) are “conspicuous” for purposes of
any such Laws.

 

41

 

9.                                       Tax Matters.

 

(a)                                  Allocations. 
For purposes of allocating the Javelina Percentage Interest of items of
income, loss, deduction, and credit of the Acquired Companies between Seller
and the Buyer for the calendar year in which the Closing occurs, the Acquired
Companies’ taxable year in which the Closing occurs shall be treated as two
separate taxable years, the first of which shall be the period commencing on
January 1 of the calendar year in which the Closing occurs and ending
immediately prior to the Effective Time (the “Interim Period”) and the second
of which shall be the period commencing at the Effective Time and ending on
December 31 of the calendar year in which the Closing occurs.  Seller shall be allocated, in accordance with
the Organizational Documents of the Acquired Companies in effect at the
Effective Time, the Javelina Percentage Interest of all items of income, loss,
deduction, and credit of the Acquired Companies for the Interim Period and
Buyer shall be allocated the Javelina Percentage of all remaining items of
income, loss, deduction, and credit of the Acquired Companies for such calendar
year.  More precisely, with respect to
the sale of the Acquired Companies Equity Interests, the Seller and the Buyer
elect, and after the Closing the Buyer shall cause the Acquired Companies and
their respective partners to elect, “the closing of the books” method pursuant
to the Regulations of Section 706 of the Code.

 

(b)                                 Post-Closing Tax Returns.  The Buyer shall prepare or cause to be
prepared and file or cause to be filed any Post-Closing Tax Returns with
respect to the Acquired Company Assets or the Acquired Companies.  The Buyer shall pay (or cause to be paid) any
Taxes due with respect to such Tax Returns.

 

(c)                                  Pre-Closing Tax Returns.  The Seller shall, if applicable, prepare or
cause to be prepared and file or cause to be filed all Pre-Closing Tax Returns
to the extent it has the Legal Right, with respect to the Acquired Companies or
the Acquired Company Assets thereof.  The
Seller shall pay or cause to be paid the Javelina Percentage Interest of any
Taxes due with respect to those Tax Returns described in Section 9(c).

 

(d)                                 Straddle Periods.  The Buyer shall be responsible for Taxes of
the Acquired Company Assets and the Acquired Companies related to the portion
of any Straddle Period occurring on or after the Effective Time.  The Seller shall be responsible for Taxes of
the Acquired Company Assets and the Acquired Companies (solely to the extent of
the Javelina Percentage Interest of such Taxes) relating to the portion of any
Straddle Period occurring before and on the Effective Time.  With respect to any such Straddle Period, to the extent permitted
by applicable Law, the Seller or the Buyer shall elect to treat the close of
the day ending immediately prior to the Effective Time as the last day of the
Tax period.  If applicable Law shall not
permit such date to be the last day of a period, then (i) real or personal
property Taxes with respect to the Acquired Company Assets and the Acquired
Companies shall be allocated based on the number of days in the partial period
before and after such date, (ii) in the case of all other Taxes based on or in
respect of income, the Tax computed on the basis of the taxable income or loss
attributable to the Acquired Company Assets and the Acquired Companies for each
partial period as determined from their books and records, and (iii) in the
case of all other Taxes, on the basis of the actual activities or attributes of
the Acquired Company Assets and the Acquired Companies for each partial period
as determined from their books and records.

 

42

 

(e)                                  Straddle Returns.  The Buyer shall prepare any such Straddle Returns. The Buyer shall deliver,
at least forty-five (45) days prior to the due date for filing such Straddle
Return (including any extension) to the Seller a statement setting forth the
amount of Tax that the Seller owes, if applicable, including the allocation of
taxable income or loss (Schedule K-1) and Taxes under Section
9(d), and copies of such Straddle Return.  The Seller shall have the right to review
such Straddle Returns and the allocation of taxable income and liability for
Taxes and to suggest to the Buyer any reasonable changes to such Straddle
Returns no later than fifteen (15) days prior to the date for the filing of
such Straddle Returns.  The Seller and
the Buyer agree to consult and to attempt to resolve in good faith any issue
arising as a result of the review of such Straddle Returns and allocation of
taxable income and liability for Taxes and mutually to consent to the filing as
promptly as possible of such Straddle Returns. 
Not later than five (5) days before the due date for the payment of
Taxes with respect to such Straddle Returns, if applicable, the Seller shall
pay or cause to be paid to the Buyer an amount equal to the Taxes as agreed to
by the Buyer and the Seller as being owed by the Seller.  If the Buyer and the Seller cannot agree on
the amount of Taxes owed by the Seller with respect to a Straddle Return, the
Seller shall pay or cause to be paid to the Buyer the amount of Taxes
reasonably determined by the Seller to be owed by the Seller.  Within ten (10) days after such payment, the
Seller and the Buyer shall refer the matter to an independent nationally
recognized accounting firm agreed to by the Buyer and the Seller to arbitrate
the dispute. The Seller and the Buyer shall equally share the fees and expenses
of such accounting firm and its determination as to the amount owing by the
Seller with respect to a Straddle Return shall be binding on the Seller and the
Buyer.  Within five (5) days after the
determination by such accounting firm, if necessary, the appropriate Party shall
pay the other Party any amount which is determined by such accounting firm to
be owed.  The Seller shall be entitled to
reduce its obligation to pay Taxes with respect to a Straddle Return by the
amount of any estimated Taxes paid with respect to such Taxes on or before the
Effective Time.

 

(f)                                    Claims for Refund.  The Buyer shall not, and, to the extent the
Buyer has the Legal Right, shall cause the Acquired Companies and any of their
Affiliates not to, file any claim for refund of Taxes with respect to the
Acquired Company Assets and the Acquired Companies for whole or partial taxable
periods on or before the Effective Time.

 

(g)                                 Indemnification.  The Buyer agrees to indemnify the Seller
against all Taxes of or with respect to the Acquired Company Assets and the
Acquired Companies for any Post-Closing Tax Period and the portion of any
Straddle Period occurring after the Effective Time.  The Seller agrees to indemnify the Buyer
against all Taxes of or with respect to the Acquired Company Assets and the Acquired
Companies (solely to the extent of the Javelina Percentage Interest of such
Taxes) for any Pre-Closing Tax
Period and the portion of any Straddle Period occurring on or before the
Effective Time (including any Tax liability associated with any matter listed
on Schedules 4(f) and  4(h)).

 

(h)                                 Cooperation on Tax Matters.

 

(i)                                     The Buyer and the Seller shall
cooperate fully, as and to the extent reasonably requested by the other Party,
in connection with the filing of Tax Returns pursuant to this Section 9(h) and any audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.  The Buyer and the Seller
shall (A) retain all books and records in their

 

43

 

possession with respect to Tax matters pertinent to
each Acquired Company relating to any whole or partial taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by the Buyer or the Seller, any extensions
thereof) of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority, and (B) give the
other Party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other Party so requests, the
Buyer or the Seller, as the case may be, shall allow the other Party to take
possession of such books and records.

 

(ii)                                  The Buyer and the Seller further
agree, upon request, to use commercially reasonable efforts to obtain any
certificate or other document from any Governmental Authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including with respect to the transactions contemplated hereby).

 

(iii)                               The Buyer and the Seller agree,
upon request, to provide the other Parties with all information that such other
Parties may be required to report pursuant to Sections 751 and 6050K of the
Code and all Treasury Department Regulations promulgated thereunder.

 

(i)                                     Certain Taxes.  The Seller shall file all necessary Tax
Returns and other documentation with respect to all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees, pay the
related Tax, and, if required by applicable Law, the Buyer shall, and shall
cause its Affiliates to, join in the execution of any such Tax Returns and
other documentation.  Notwithstanding
anything set forth in this Agreement to the contrary, the Buyer shall pay to
the Seller, on or before the date such payments are due from the Seller to a
Governmental Authority, any transfer, documentary, sales, use, stamp,
registration and other Taxes and fees incurred in connection with this
Agreement and the transactions contemplated hereby.

 

(j)                                     Confidentiality.  Any information shared in connection with
Taxes shall be kept confidential, except as may otherwise be necessary in
connection with the filing of Tax Returns or reports, refund claims, tax
audits, tax claims and tax litigation, or as required by Law.

 

(k)                                  Audits.  The
Seller or the Buyer, as applicable, shall provide prompt written notice to the
other Parties of any pending or threatened tax audit, assessment or proceeding
that it becomes aware of related to the Acquired Company Assets or the Acquired
Companies for whole or partial periods for which it is indemnified by the other
Party hereunder.  Such notice shall
contain factual information (to the extent known) describing the asserted tax
liability in reasonable detail and shall be accompanied by copies of any notice
or other document received from or with any tax authority in respect of any
such matters.  If an Indemnified Party
has knowledge of an asserted tax liability with respect to a matter for which
it is to be indemnified hereunder and such Party fails to give the Indemnifying
Party prompt notice of such asserted tax liability, then (I) if the
Indemnifying Party is precluded by the failure to give prompt notice from
contesting the asserted tax liability in any forum, the Indemnifying Party
shall have no obligation to indemnify the Indemnified Party for any Taxes
arising out of such asserted tax liability, and (II) if the Indemnifying Party
is not so precluded from contesting, but such failure to give prompt notice
results in a detriment to the Indemnifying Party, then any amount which the
Indemnifying Party is otherwise required to pay the Indemnified Party pursuant
to this Section 9(k) shall be

 

44

 

reduced by the amount of such detriment, provided,
the Indemnified Party shall nevertheless be entitled to full indemnification
hereunder to the extent, and only to the extent, that such Party can establish
that the Indemnifying Party was not prejudiced by such failure.  This Section 9(k)
shall control the procedure for Tax indemnification matters to the extent it is
inconsistent with any other provision of this Agreement.

 

(l)                                     Control of Proceedings.  The Party responsible for the Tax under this
Agreement shall control audits and disputes related to such Taxes (including
action taken to pay, compromise or settle such Taxes).  The Seller and the Buyer shall jointly
control, in good faith with each other, audits and disputes relating to
Straddle Periods.  Reasonable
out-of-pocket expenses with respect to such contests shall be borne by the
Seller and the Buyer in proportion to their responsibility for such Taxes as
set forth in this Agreement.  Except as
otherwise provided by this Agreement, the noncontrolling Party shall be
afforded a reasonable opportunity to participate in such proceedings at its own
expense.

 

(m)                               Powers of Attorney.  To the extent the Buyer has the Legal Right,
the Buyer, the Acquired Companies and their respective Affiliates shall provide
the Seller and its Affiliates with such powers of attorney or other authorizing
documentation as are reasonably necessary to empower them to execute and file
returns they are responsible for hereunder, file refund and equivalent claims
for Taxes they are responsible for, and contest, settle, and resolve any audits
and disputes that they have control over under Section
9(l) (including any refund claims which turn into audits or
disputes).

 

(n)                                 Remittance of Refunds.  If the Buyer or any Affiliate of the Buyer
receives a refund of any Taxes that the Seller is responsible for hereunder, or
if the Seller or any Affiliate of the Seller receives a refund of any Taxes
that the Buyer is responsible for hereunder, the Party receiving such refund
shall, within thirty (30) days after receipt of such refund, remit it to the
Party who has responsibility for such Taxes hereunder.  For the purpose of this Section 9(n), the term “refund” shall include a
reduction in Tax and the use of an overpayment as a credit or other Tax offset,
and receipt of a refund shall occur upon the filing of a Tax Return or an
adjustment thereto using such reduction, overpayment or offset or upon the
receipt of cash.

 

(o)                                 Closing Tax Certificate.  At the Closing, the Seller shall deliver to
the Buyer a certificate, in the form of Exhibits D-1,
signed under penalties of perjury (i) stating it is not a foreign corporation,
foreign partnership, foreign trust or foreign estate, (ii) providing its U.S.
Employer Identification Number, and (iii) providing its address, all pursuant
to Section 1445 of the Code.

 

(p)                                 Settlements. 
Notwithstanding anything to the contrary contained in this Agreement,
the Seller shall not be entitled to settle or concede, either administratively
or after the commencement of litigation, any proceeding related to Taxes in a
manner that could increase the amount of Taxes of the Buyer or any of the
Acquired Companies for any Post-Closing Tax Periods, unless (i) the Buyer
consents to such settlement or concession or (ii) the Seller agrees to
indemnify the Buyer for any such increase in the amount of Taxes of the Buyer
or any of the Acquired Companies for Post-Closing Tax Periods.

 

45

 

10.                                 Termination.

 

(a)                                  Termination of Agreement.  The Parties may terminate this Agreement, as
provided below:

 

(i)                                     the Parties may terminate this
Agreement by mutual written consent at any time before the Closing;

 

(ii)                                  (A) by the Seller, on one hand,
or the Buyer on the other, in writing, without liability to the other Parties
on account of such termination (provided the terminating Party is not in
default or breach of any of representations, warranties, covenants and
agreements contained in this Agreement), if the Closing shall not have occurred
on or before 5:00 p.m. Houston, Texas time on December 1, 2005;

 

(iii)                               the Buyer may terminate this
Agreement by giving written notice to the Seller at any time before Closing in
the event the Seller has materially breached any representation or warranty set
forth in Section 3(a) or Section 4 or any covenant contained in this
Agreement, the Buyer has notified the Seller of the breach, the breach is not
curable, or, if curable, has continued without cure for a period of twenty-five
(25) days after the written notice of breach and such breach would result in a
failure to satisfy a condition to the Buyer’s obligation to consummate the
transactions contemplated hereby; provided, that the right to terminate this
Agreement pursuant to this Section 10(a)(iii)
shall not be available to the Buyer if, at such time, the Buyer is in breach of
any representation or warranty set forth in Section 3(b)
or any covenant contained in this Agreement and such breach would result in a
failure to satisfy a condition to the Seller’s obligation to consummate the
transactions contemplated hereby;

 

(iv)                              the Seller may terminate this
Agreement by giving written notice to the Buyer at any time before the Closing
in the event the Buyer has materially breached any representation or warranties
set forth in Section 3(b) or any covenant
contained in this Agreement, the Seller has notified the Buyer of the breach,
the breach is not curable, or, if curable, has continued without cure for a
period of twenty-five (25) days after the written notice of breach and such
breach would result in a failure to satisfy a condition to the Seller’s
obligation to consummate the transactions contemplated hereby; provided that
the right to terminate this Agreement pursuant to this Section
10(a)(iv) shall not be available to the Seller if, at such time, the
Seller is in breach of any representation or warranties set forth in Section 3(a) or Section 4
or any covenant contained in this Agreement and such breach would result in a
failure to satisfy a condition to the Buyer’s obligation to consummate the
transactions contemplated hereby;

 

(v)                                 the
Parties may terminate this Agreement if any Governmental Authority shall have
issued an order, decree or ruling or shall have taken any other action
permanently enjoining, restraining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action shall have
become final and nonappealable; provided that the Party seeking to terminate
this Agreement pursuant to this Section 10(a)(v) shall have complied
with Section 5(a), Section 5(b) and Section 5(g), it being
agreed that the Parties shall promptly appeal any adverse determination that is
not nonappealable (and pursue such appeal with reasonable diligence); and

 

46

 

(vi)                              either Party may terminate this
Agreement by giving written notice to the other Party at any time before
Closing if, prior to the time of such notice, any of the Other Purchase
Agreements had been duly terminated pursuant to the provisions of such Other
Purchase Agreement.

 

(b)                                 Effect of Termination.  Except for the obligations under Sections
5(f)(ii)(C), 5(f)(ii)(G), 8, 10 and 11, if
either Party terminates this Agreement pursuant to Section 10(a), all
rights and obligations of the Parties hereunder shall terminate without any
liability of either Party to the other Party (except for any liability of
either such Party then in breach); provided, that
the provisions contained in Sections 5(f)(ii)(C), 5(f)(ii)(G) and
8(c)(iv) shall survive termination.

 

11.                                 Miscellaneous.

 

(a)                                  Confidentiality.  If the Closing occurs, the Buyer shall not be
limited by the terms thereof with respect to information, assets and operations
of the Acquired Companies.  The Seller
shall, and shall cause its Affiliates to, not make disclosure of any
confidential or proprietary information relating to any Acquired Company to any
Person other than (i) to its owners, directors, officers, employees,
consultants or other representatives to whom such disclosure is necessary or
convenient for the completion of the transactions contemplated by this
Agreement; (ii) as required to convey title to any of the Acquired Company
Assets; (iii) as required by Law or any securities exchange or market rule;
(iv) as may be requested or required by any Governmental Authority (provided
that the Seller first notifies the Buyer and gives the Buyer the opportunity to
contest such request or requirement), or (v) except with prior notice of such
request for disclosure to, and consent of, the Buyer (which consent may be
withheld in the Buyer’s sole discretion).

 

(b)                                 Public Announcements.  Neither Party shall issue any press release
or make any public announcement or otherwise publicly disseminate information
relating to the subject matter of this Agreement before or after the Closing
without the prior written approval of the other Party (which approval will not
be withheld or delayed unreasonably); provided that
either Party may make any public disclosure it believes in good faith is
required by applicable Law or any listing or trading agreement concerning its
publicly traded securities (in which case the disclosing Party will advise the
other Party before making the disclosure and will provide the other Party, to
the extent practicable, with a reasonable opportunity to comment on such
proposed disclosures).

 

(c)                                  Insurance. 
To the extent the Seller has the Legal Right, (i) the Seller shall cause
any of its insurance policies covering the Acquired Company Assets (except
those stand-alone insurance policies that are in the name of any of the
Javelina Partnerships and that are obtained solely to cover the assets,
facilities and/or operations of the Javelina Partnerships (collectively, such
policies are the “Javelina
Insurance Policies”)) to
remain in full force and effect or to be renewed and maintained in full force
and effect through (but not after) the Closing Date; (ii) the Seller shall not
take any action to release any insurer with respect to any claim made under any
such insurance policy before the Closing Date; provided,
however, that the Seller may release any
such insurer (A) that is an Affiliate of the Seller or (B) if such claim may be
filed under a Javelina Insurance Policy; and (iii) the Seller will file all
insured claims (both before and after Closing) that may be filed under any such
insurance policy for any Adverse 

 

47

 

Consequences occurring before Closing and
will thereafter coordinate with the Buyer to resolve all such claims after
Closing; provided, however,
that (x) the Seller will not be required to file such claims to the extent (A)
the insurer of such claims is an Affiliate of the Seller or (B) that such
claims may be filed under a Javelina Insurance Policy and (y) neither the
Seller nor any of its Affiliates shall be obligated or otherwise liable for any
deductible, self insured retention amount or reimbursable amount payable by any
of them with respect to any such claim. 
The Buyer acknowledges and agrees that, following the Closing, any
insurance policies maintained by the Seller and its Affiliates and the Javelina
Partnerships shall be terminated or modified to exclude coverage of all or any
portion of the assets, facilities and/or operations of the Acquired Companies
(except for the Javelina Insurance Policies), and, as a result, the Buyer shall
be obligated at or before Closing to obtain at its sole cost and expense
replacement insurance, including insurance required by any Person to be maintained
for or by the Acquired Companies.  The
Buyer further acknowledges and agrees that the Buyer may need to provide to
certain Governmental Authorities and other Persons evidence of such replacement
or substitute insurance coverage for the continued operations or businesses of
the Acquired Companies.

 

(d)                                 No Third Party Beneficiaries.  Except for the indemnification provisions,
this Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns.

 

(e)                                  Succession and Assignment.  This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns.  None
of the Parties may assign, alienate, delegate or otherwise transfer all or any
portion of its rights, interests or obligations under this Agreement without
the prior written approval of the other Party (which approval may not be
unreasonably withheld); provided, however, without the prior approval of the Seller, the Buyer
and its permitted successors and assigns may transfer any or all of its rights
or interests under this Agreement to a wholly owned subsidiary of the Buyer for
so long as such Person remains a wholly owned subsidiary of the Buyer, including
designating one or more such Persons to be the assignee of some or any portion
of the Acquired Company Equity Interests; and  provided  further that no
transfer shall result in the release of the requesting Party from any of its
obligations under this Agreement, and such Party shall remain a primary obligor
(as opposed to a surety) thereof.

 

(f)                                    Counterparts. 
This Agreement may be executed in counterparts, each of which shall be
deemed an original but which together shall constitute one and the same instrument.

 

(g)                                 Headings. 
The Section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.

 

(h)                                 Notices. 
All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given two business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:

 

48

 

	
  If to the Seller:

  	
  Valero
  Energy Corporation

  
	
   

  	
  Valero
  Javelina, L.P.

  
	
   

  	
  c/o Valero Energy Corporation

  
	
   

  	
  Attn:
  Christopher Quinn,

  
	
   

  	
  Vice President-Corporate Development

  
	
   

  	
  One Valero
  Way

  
	
   

  	
  San Antonio,
  Texas 78249

  
	
   

  	
  Facsimile:(210)
  345-2270

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  With a copy
  to:

  	
  Cox Smith
  Matthews Incorporated

  
	
   

  	
  112 E. Pecan
  Street, Suite 1800

  
	
   

  	
  San Antonio,
  Texas 78205

  
	
   

  	
  Attention:
  Steven A. Elder

  
	
   

  	
  Facsimile:   (210)
  226-8395

  
	
   

  	
   

  
	
   

  	
   

  
	
  If to the Buyer:

  	
  MarkWest
  Energy Partners, L.P.

  
	
   

  	
  Attn:
  General Counsel

  
	
   

  	
  155
  Inverness Drive West, Suite 200

  
	
   

  	
  Tel No.:
  (303) 290-8700

  
	
   

  	
  Fax No.:
  (303) 290-8769

  
			

 

Either Party may send any
notice, request, demand, claim, or other communication hereunder to the
intended recipient at the addresses set forth above using any other means other
than electronic mail (including personal delivery, expedited courier, messenger
service, telecopy or ordinary mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient; provided, if notice is sent
by telecopy and such telecopy is received during non business hours of the
addressee, then such notice shall be deemed received on the next business day
of the addressee.  Either Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice
in the manner herein set forth.

 

(i)                                     Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF
THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION
OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.  VENUE FOR ANY ACTION ARISING UNDER THIS
AGREEMENT SHALL LIE EXCLUSIVELY IN ANY STATE OR FEDERAL COURT IN TEXAS.

 

(j)                                     Amendments and Waivers.  No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller.  No waiver by
either Party of any default, misrepresentation, or breach of warranty or
covenant

 

49

 

hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.  All waivers must be in writing.

 

(k)                                  Severability. 
Any term or provision of this Agreement that is invalid or unenforceable
in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.

 

(l)                                     Transaction Expenses.  Except to the extent otherwise provided for
in this Agreement, each of the Buyer, on the one hand, and the Seller, on the
other hand, shall bear its and its Affiliates own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.  Except
to the extent otherwise provided for in this Agreement, for the avoidance of
doubt, it is agreed that the Seller will bear the Javelina Percentage Interest
of any and all expenses of the Acquired Companies, in each case in connection
with this Agreement and the transactions contemplated hereby.

 

(m)                               Construction. 
The Parties have participated jointly in the negotiation and drafting of
this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring either Party by virtue of the
authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local,
or foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.  The word “including” shall mean including
without limitation. All personal pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, shall include all other genders;
the singular shall include the plural, and vice versa.  All references herein to Exhibits, Schedules,
Articles, Sections or subdivisions thereof shall refer to the corresponding Exhibits,
Schedules, Article, Section or subdivision thereof of this Agreement
unless specific reference is made to such exhibits, articles, sections or
subdivisions of another document or instrument. The terms “herein,” “hereby,” “hereunder,”
“hereof,” “hereinafter,” and other equivalent words refer to this Agreement in
its entirety and not solely to the particular portion of the Agreement in which
such word is used.

 

(n)                                 Exhibits
and Schedules.

 

(i)                                     The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.  Any fact or item which is
disclosed in any part of the Transaction Agreements (including any schedule,
exhibit or other attachment thereto) will be deemed to have been disclosed for
all purposes of this Agreement (if reasonably apparent that such disclosure
relates to another portion of the Agreement),
notwithstanding the omission of a reference or cross-reference
thereto.

 

(ii)                                  Matters reflected in the Exhibits
and Schedules are not necessarily limited to matters required by the
Agreement to be reflected therein.  Such
additional matters are set forth for informational purposes and do not
necessarily include other matters of a similar nature.  In no event shall the listing of such matters
therein be deemed or interpreted to broaden or

 

50

 

otherwise amplify
the applicable Party’s representations, warranties, covenants or agreements
contained in this Agreement.  The fact
that any item of information is contained in the Exhibits and Schedules
shall not (i) be construed as an admission of liability under any Law, (ii)
mean that such information is required by this Agreement to be disclosed in the
Exhibits and Schedules, (iii) mean that such information is
material or (iv) be used as a basis for interpreting the term “material” or “Material
Adverse Effect” or any similar qualification in this Agreement.

 

(iii)                               If there is any conflict or
other inconsistency between this Agreement and the Exhibits and Schedules,
the terms of this Agreement shall prevail. 
For the avoidance of doubt, the Buyer hereby acknowledges and agrees
that (A) nothing contained in any of the Exhibits and Schedules
shall constitute a representation, warranty or other assurance (x) as to the
quality, condition or capability of any of the facilities, components or other
assets contained therein or (y) as to the ownership interest of the Seller or
any other Person as to any such asset and (B) with respect to such matters, the
terms of this Agreement shall govern, meaning that the Buyer is exclusively
relying on its own due diligence and independent investigation, as contemplated
by Section 3(b)(v) and the representations, warranties and covenants
contained in this Agreement.  Except as
set forth in this Agreement, the Seller hereby disclaims any and all
representations, warranties or other assurances with respect to any and all
such assets, as contemplated by Sections 8(b)(x) and 8(h).

 

(o)                                 Entire Agreement.  THIS AGREEMENT (INCLUDING THE DOCUMENTS
REFERRED TO HEREIN) CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND
SUPERSEDES ANY PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG
THE PARTIES, WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY WAY TO THE
SUBJECT MATTER HEREOF.

 

[Signature Pages follow]

 

51

 

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

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  VALERO JAVELINA, L.P.

  
	
   

  	
  BY: Valero
  Javelina, Inc., as general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  PRINTED NAME:

  	
   

  
	
   

  	
   

  	
  TITLE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VALERO ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  
	
   

  	
  PRINTED NAME:

  	
   

  
	
   

  	
  TITLE:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  MARKWEST ENERGY PARTNERS, L.P.

  
	
   

  	
  BY:

  	
  MarkWest
  Energy GP, L.L.C.,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  PRINTED NAME:

  	
   

  
	
   

  	
   

  	
  TITLE:

  	
   

  
													

 

 

Javelina Purchase and Sale Agreement Signature PagePrepared and filed by St Ives Financial

 	CAPITAL Z FINANCIAL SERVICES FUND II, L.P.

      CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II,
      L.P.

           c/o Capital Z
      Partners, Ltd. 

           54 Thompson Street

           New York, NY
    10012	September 20, 2005
	 	 
	RER REINSURANCE HOLDINGS, L.P.

           c/o RER Reinsurance
      Holdings, L.P. 

           777 Main Street

           Suite 2250

           Fort Worth, TX
    76102	 
	 	 
	RESERVOIR CAPITAL PARTNERS, L.P.

      RESERVOIR CAPITAL MASTER FUND, L.P.

         c/o Reservoir Capital
    Management L.L.C.

         650 Madison Avenue

         26th Floor

         New York, NY 10022	 
	 	 
	Robert Stavis

           c/o Bessemer
      Venture Partners

           1865 Palmer Avenue

           Suite 104

           Larchmont, NY
    10538	 
	 	 

 Dear Gentlemen:

          Reference
    is made to the Description of Stock (the “Description of Stock”)
    for the Series A Convertible Voting Preferred Shares, Series B Convertible
    Voting
    Preferred Shares, Series C Convertible Voting Preferred Shares, (the foregoing
    Series of Preferred Shares are hereinafter collectively referred to as the
    “Preferred Shares”), Class A Convertible Voting Common Shares,
    Class B Convertible Voting Common Shares and Class C Convertible Voting Common
    Shares, (the foregoing Classes of Convertible Voting Common Shares are hereinafter
    collectively referred to as the “Convertible Common Shares”), of
    PXRE Group Ltd. (the ”Company”).  Capitalized terms
used herein and not otherwise defined shall have the meaning assigned to such
terms in the Description of Stock.  

	 	 WHEREAS:

	 	 	 
	 	(1)	
 The Company wishes to raise additional capital by the issue and sale of further stock of the Company, including, without limitation, Convertible Common Shares;

	 	 	 
	 	(2)	
 Pursuant to paragraph 6(g) of the Description of Stock, the Company is required to and has reserved and kept available for issuance out of the authorised but un-issued Common Shares, such number of Common Shares issuable by the Company on the conversion of all the currently issued and outstanding Preferred Shares and Convertible Common Shares respectively. 

 

          NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the Company and the holders of Preferred Shares and Convertible Common Shares do hereby agree and consent as follows:

1.      Consent to Use of  Convertible Common Shares. Subject only to compliance with paragraph 6(g) of the Description of Stock, the Board of Directors of the Company may in its discretion, at any time, and from time to time, issue or cause to be issued all or any part of the authorized but un-issued Convertible Common Shares of the Company for consideration of such character and value as the Board shall in its absolute discretion from time to time determine. 

2.   Miscellaneous.  This agreement (a) shall be governed by and construed in accordance with the laws of Bermuda, without regard to principles of conflicts of laws and, in connection therewith, each party hereto consents to the exclusive jurisdiction of the Supreme Court of Bermuda over any dispute arising from this letter agreement; (b) shall not be assigned or delegated by any party hereto without the consent of the other parties hereto and shall be binding upon the parties' respective successors and permitted assigns; (c) may be executed in counterparts and delivered by facsimile transmission; and (d) constitutes the entire agreement among the parties hereto relating to the subject matter hereof and supersedes all prior agreements or
understandings among the parties hereto relating to such subject matter.

IN WITNESS WHEREOF, the Company and the holders of Preferred Shares and Convertible Common Shares have caused this agreement and consent to be executed by their duly authorized representatives.

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	 	PXRE GROUP LTD. 
	 	 	 
	 	By:	/s/ Jeffrey
      L. Radke

      Name: Jeffrey L. Radke

  Title: President and Chief Executive Officer
	 	 	 
	 	CAPITAL Z FINANCIAL SERVICES FUND
    II, L.P. 
	 	 	 
	 	By:

    By:	Capital Z Partners, L.P.,
  its general partner
Capital Z Partners, Ltd. its
  sole general partner 

  
By: /s/ Bradley Cooper

  Name: Bradley Cooper

  Title:
	 	 	 
	 	CAPITAL Z FINANCIAL SERVICES PRIVATE
    FUND II, L.P. 
	 	 	 
	 	By:

  By:

  By:  	Capital Z Partners, L.P.,
  its general partner
Capital Z Partners, Ltd. its
  sole general partner 
/s/ Bradley Cooper
Name: Bradley Cooper

  Title:
	 	 	 
	 	RESERVOIR CAPITAL PARTNERS, L.P. 
	 	 	 
	 	By:

  By:

  By:    	Reservoir Capital Group,
      L.L.C., its sole general partner
Reservoir
      Capital Management, its managing member
/s/ Melissa Parish
Name: Melisa Parish

      Title:
	 	 	 
	 	RESERVOIR CAPITAL MASTER FUND,
    L.P. 
	 	 	 
	 	By:

  By:

  By:    	Reservoir Capital Group,
  L.L.C., its sole general partner
Reservoir Capital
  Management, its managing member
/s/ Melissa Parish
Name: Melissa Parish

  Title:

	 	 	 
	 	RER REINSURANCE
        HOLDINGS, L.P.
	 	 	 
		By:	/s/ Richard Rainwater

      Name: Richard Rainwater

      Title: General Partner
	 	 	 
	 	/s/ Robert Stavis
	 	 

    Robert Stavis

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