Document:

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                                                                    EXHIBIT 10.N

                                                               Execution Version

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                       PURCHASE, SALE AND MERGER AGREEMENT
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                                 By and Between

                         EL PASO TENNESSEE PIPELINE CO.
                                    (Seller)

                                       and

                          EL PASO ENERGY PARTNERS, L.P.
                                     (Buyer)

                     ======================================

                           Covering the Acquisition of

                         ALL OF THE EQUITY INTERESTS IN
                       (Acquired Company Equity Interests)

                      EL PASO TEXAS FIELD SERVICES, L.L.C.
                         EL PASO ENERGY INTRASTATE, L.P.
                EL PASO OFFSHORE GATHERING & TRANSMISSION, L.L.C.
                            EPGT TEXAS PIPELINE, L.P.
                           EL PASO HUB SERVICES L.L.C.
                    EL PASO ENERGY WARWINK I COMPANY, L.L.C.
                  EL PASO ENERGY WARWINK II COMPANY, L.L.C. and
                     WARWINK GATHERING AND TREATING COMPANY
                              (Acquired Companies)

                     ======================================

                                  April 1, 2002

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                                TABLE OF CONTENTS
<Table>
<Caption>
                                                                                                                PAGE
                                                                                                                ----

<S>      <C>                                                                                                     <C>
1.       Definitions..............................................................................................2

2.       The Transactions........................................................................................12
         (a)   Sale of Assigned Equity Interests.................................................................12
         (b)   The Merger........................................................................................12
         (c)   Consideration.....................................................................................12
         (d)   The Closing.......................................................................................13
         (e)   Deliveries at the Closing.........................................................................13
         (f)   Proposed Closing Statement and Post-Closing Adjustment............................................13

3.       Representations and Warranties Concerning the Transaction...............................................15
         (a)   Representations and Warranties of the Seller......................................................15
         (b)   Representations and Warranties of the Buyer.......................................................16

4.       Representations and Warranties Concerning the Acquired Company Equity Interests, Acquired
         Companies and Relevant Assets...........................................................................18
         (a)   Organization, Qualification, and Company Power....................................................18
         (b)   Noncontravention..................................................................................18
         (c)   Title to and Condition of Assets..................................................................18
         (d)   Material Change...................................................................................21
         (e)   Legal Compliance..................................................................................22
         (f)   Tax Matters.......................................................................................22
         (g)   Contracts and Commitments.........................................................................22
         (h)   Litigation........................................................................................22
         (i)   Environmental Matters.............................................................................23
         (j)   Preferential Purchase Rights......................................................................24
         (k)   Financial Statements..............................................................................25
         (l)   Employee Matters..................................................................................25
         (m)   Prohibited Events.................................................................................25
         (n)   Regulatory Matters................................................................................25
         (o)   Intercompany Transactions.........................................................................25
         (p)   Disclaimer of Representations and Warranties Concerning Personal Property, Equipment, and
               Fixtures..........................................................................................26

5.       Pre-Closing Covenants...................................................................................26
         (a)   General...........................................................................................26
         (b)   Notices and Consents..............................................................................26
         (c)   Operation of Business.............................................................................26
         (d)   Intercompany Transactions.........................................................................28
         (e)   Full Access.......................................................................................28
         (f)   Liens and Encumbrances............................................................................28

</Table>

                                       i

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<Table>
<S>      <C>                                                                                                     <C>
         (g)   Prince Pre-Closing Matters........................................................................28

6.       Post-Closing Covenants..................................................................................28
         (a)   General...........................................................................................28
         (b)   Litigation Support................................................................................29
         (c)   Surety Bonds; Guarantees..........................................................................29
         (d)   Delivery and Retention of Records.................................................................29
         (e)   Pipeline Integrity Program........................................................................29
         (f)   Channel Insurance Proceeds........................................................................30
         (g)   Operatorship of Cotenancy Assets..................................................................30
         (h)   Assignment of Rights..............................................................................30

7.       Conditions to Obligation to Close.......................................................................30
         (a)   Conditions to Obligation of the Buyer.............................................................30
         (b)   Conditions to Obligation of the Seller............................................................31

8.       Remedies for Breaches of this Agreement.................................................................32
         (a)   Survival of Representations and Warranties........................................................32
         (b)   Indemnification Provisions for Benefit of the Buyer...............................................33
         (c)   Indemnification Provisions for Benefit of the Seller..............................................35
         (d)   Matters Involving Third Parties...................................................................36
         (e)   Determination of Amount of Adverse Consequences...................................................37
         (f)   Tax Treatment of Indemnity Payments...............................................................37

9.       Tax Matters.............................................................................................37
         (a)   Post-Closing Tax Returns..........................................................................37
         (b)   Pre-Closing Tax Returns...........................................................................37
         (c)   Straddle Periods..................................................................................37
         (d)   Straddle Returns..................................................................................38
         (e)   Claims for Refund.................................................................................38
         (f)   Indemnification...................................................................................38
         (g)   Cooperation on Tax Matters........................................................................39
         (h)   Certain Taxes.....................................................................................39
         (i)   Confidentiality...................................................................................39
         (j)   Audits............................................................................................39
         (k)   Control of Proceedings............................................................................40
         (l)   Powers of Attorney................................................................................40
         (m)   Remittance of Refunds.............................................................................40
         (n)   Purchase Price Allocation.........................................................................40
         (o)   Closing Tax Certificate...........................................................................40
         (p)   Like Kind Exchanges...............................................................................41

10.      Termination.............................................................................................41
         (a)   Termination of Agreement..........................................................................41
         (b)   Effect of Termination.............................................................................42

11.      Miscellaneous...........................................................................................42
</Table>

                                       ii
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<Table>
<S>      <C>                                                                                                     <C>
         (a)   Public Announcements..............................................................................42
         (b)   Insurance.........................................................................................42
         (c)   No Third Party Beneficiaries......................................................................42
         (d)   Succession and Assignment.........................................................................42
         (e)   Counterparts......................................................................................43
         (f)   Headings..........................................................................................43
         (g)   Notices...........................................................................................43
         (h)   Governing Law.....................................................................................44
         (i)   Amendments and Waivers............................................................................44
         (j)   Severability......................................................................................44
         (k)   Transaction Expenses..............................................................................44
         (l)   Construction......................................................................................44
         (m)   Incorporation of Exhibits and Schedules...........................................................45
         (n)   Entire Agreement..................................................................................45
</Table>

                                          EXHIBITS AND SCHEDULES

Exhibit A:        Principal Cotenancy Assets
Exhibit B:        Principal Acquired Company Assets
Exhibit C:        Disposed Assets
Exhibit D:        Form of Assigned Equity Interests Assignment
Exhibit E:        Form of Merger Agreement
Exhibit F:        Form of Parent Guaranty
Exhibit G:        Form of Exchange Agreement
Exhibit H:        Form of Prince PSA
Exhibit I:        [Intentionally omitted]
Exhibit J:        Form of Prince Side Letter
Exhibit K:        Form of Certification of Non-Foreign Status

Schedule 1(a):             Subject Insurance Policies
Schedule 1(b):             Permitted Encumbrances
Schedule 1(c):             Reorganization Transactions
Schedule 3(a)(ii):         Consents (Seller)
Schedule 3(a)(iii):        Noncontravention (Seller)
Schedule 3(b)(ii):         Consents (Buyer)
Schedule 3(b)(iii):        Noncontravention (Buyer)
Schedule 4(b):             Noncontravention (Acquired Companies)
Schedule 4(c)(i):          Encumbrances
Schedule 4(c)(ii):         Condition of Acquired Company Assets
Schedule 4(c)(v):          Encumbrances for Borrowed Money
Schedule 4(c)(vi):         Ownership and Operation of the Cotenancy Assets
Schedule 4(d):             Material Changes
Schedule 4(f):             Tax Matters

                                      iii
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Schedule 4(g)(i):          Acquired Company Contracts
Schedule 4(g)(ii):         Rights of Way
Schedule 4(h):             Litigation
Schedule 4(i):             Environmental Matters
Schedule 4(i)(ii):         Environmental Permits
Schedule 4(j):             Preferential Purchase Rights
Schedule 4(k):             Financial Statements
Schedule 4(k)(ii):         Obligations of the Acquired Companies
Schedule 4(n):             Regulatory Matters
Schedule 4(o):             Intercompany Transactions
Schedule 5(c):             Operation of Business
Schedule 5(c)(v):          Capital Expenditures Budget
Schedule 6(c):             Surety Bonds

                                       iv
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                       PURCHASE, SALE AND MERGER AGREEMENT

         THIS PURCHASE, SALE AND MERGER AGREEMENT (this "Agreement") dated as of
April 1, 2002 is by and between El Paso Tennessee Pipeline Co., a Delaware
corporation (the "Seller"), and El Paso Energy Partners, L.P., a Delaware
limited partnership (the "Buyer"). The Seller and the Buyer are sometimes
referred to collectively herein as the "Parties" and individually as a "Party."

                                    RECITALS

         WHEREAS, the Seller owns all of the issued and outstanding membership
interest (the El Paso Texas Interest") in El Paso Texas Field Services L.L.C., a
Delaware limited liability company ("El Paso Texas"), which owns, among other
things, (i) the natural gas gathering and treating system generally known as the
Waha Gathering and Treating System and (ii) the natural gas gathering system
generally known as the Carlsbad Gathering System;

         WHEREAS, El Paso Texas owns all of the issued and outstanding limited
partnership interest (the "El Paso Intrastate LP Interest") in El Paso Energy
Intrastate, L.P., a Delaware limited partnership ("El Paso Intrastate"), which
owns, among other assets, a 50% undivided interest in the natural gas gathering
system and related facilities and assets generally known as the Channel Pipeline
System;

         WHEREAS, El Paso Texas owns all of the issued and outstanding
membership interest (the "El Paso Offshore Interest") in El Paso Offshore
Gathering & Transmission, L.L.C., a Delaware limited liability company ("El Paso
Offshore"), which owns, among other assets, (i) the natural gas gathering system
generally known as the TPC Offshore System and (ii) the facilities generally
known as the Oyster Lake and MILSP Condensate Separation and Stabilization
facilities;

         WHEREAS, El Paso Texas owns a 1.93% limited partnership interest (the
"EPGT 2% LP Interest") in EPGT Texas Pipeline, L.P., a Delaware limited
partnership ("EPGT"), which owns, among other assets, (i) the natural gas
lateral pipelines generally known as the TGP Laterals, (ii) the natural gas
gathering and transmission system generally known as the GTT Transmission
System, (iii) the leased natural gas storage facility generally known as the
Wilson Storage facility, (iv) a 80% undivided interest in the East Texas 36"
pipeline, (v) a 50% undivided interest in the West Texas 30" Pipeline, (vi) a
50% undivided interest in the North Texas 36" Pipeline, (vii) the natural gas
gathering system generally known as the McMullen County gathering system, (viii)
the natural gas gathering system generally known as the Hidalgo County Gathering
System, (ix) a 22% undivided interest in the Bethel-Howard pipeline; and (x) a
75% undivided interest in the Longhorn pipeline;

         WHEREAS, El Paso Texas owns all of the issued and outstanding
membership interest (collectively, the "Warwink Interests") in each of El Paso
Energy Warwink I Company, L.L.C., a Delaware limited liability company ("Warwink
I"), and El Paso Energy Warwink Company II, L.L.C., a Delaware limited liability
company ("Warwink II"), which collectively own 100% of the outstanding joint
venture interest (collectively, the "Warwink Gathering Interest") in

                                       1
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Warwink Gathering and Treating Company, a Texas joint venture ("Warwink
Gathering and Treating"), which owns, among other assets, the natural gas
gathering system generally known as the Warwink Gathering System;

         WHEREAS, the Seller owns, directly or indirectly, all of the issued and
outstanding equity interests in (i) El Paso Field Services Management, Inc., a
Delaware corporation ("EPFS Management"), which owns (a) a 1% general partner
interest (the "El Paso Intrastate GP Interest") in El Paso Intrastate and (b) a
1% general partner interest (the "EPGT GP Interest") in EPGT, and (ii) El Paso
Transmission, L.L.C., a Delaware limited liability company ("El Paso
Transmission"), which owns (a) a 97.07% limited partner interest (the "EPGT 97%
LP Interest" and, collectively with the EPGT 2% LP Interest, the "EPGT LP
Interest") in EPGT and (b) all of the issued and outstanding membership interest
(the "El Paso Hub Services Interest") in El Paso Hub Services, L.L.C., a
Delaware limited liability company ("El Paso Hub Services"), which owns certain
contract rights and certain parcels of real property;

         WHEREAS, the Buyer, directly or indirectly, owns all of the issued and
outstanding membership interest in Argo, L.L.C., a Delaware limited liability
company ("Argo"), which owns or shall own at Closing (i) the offshore platform
generally known as the Prince TLP and related rights and facilities associated
therewith and (ii) a 9.2% overriding royalty interest in the Prince Field
located offshore Texas in the Gulf of Mexico; and

         WHEREAS, this Agreement contemplates a series of transactions in which
(i) (a) the Seller shall sell, or cause to be sold, through the sale of equity
interests to the Buyer, the Assigned Equity Interests (defined herein), (b) the
Seller shall cause El Paso Texas to be merged into and with a subsidiary of the
Buyer, and (c) as a result of (a) and (b), the Buyer shall acquire indirect
ownership of the Acquired Company Assets (defined herein), and (ii) the Buyer
shall pay consideration of $625 million for such sales, consisting of $435
million in cash and $190 million represented by the assignment of Argo's assets
to an affiliate of the Seller.

                                    AGREEMENT

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

1.       Definitions.

         "Acquired Companies" means El Paso Texas, El Paso Intrastate, El Paso
Offshore, EPGT, El Paso Hub Services, Warwink I, Warwink II, Warwink Gathering
and Treating and MIAGS.

         "Acquired Company Assets" means, excluding the Disposed Assets, the El
Paso Texas Assets, the El Paso Intrastate Assets, the El Paso Offshore Assets,
the EPGT Assets, the El Paso Hub Services Assets, the Warwink Assets and the
MIAGS Assets.

         "Acquired Company Contracts" has the meaning set forth in Section 4(g).

                                       2
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         "Acquired Company Equity Interests" means the El Paso Texas Interest,
the El Paso Intrastate LP Interest, the El Paso Intrastate GP Interest, the El
Paso Offshore Interest, the EPGT LP Interest, the EPGT GP Interest, the Warwink
Interests, the Warwink Gathering Interest, the El Paso Hub Services Interest and
the MIAGS Interest, all of which are being acquired by the Buyer pursuant to
this Agreement through either (i) the Assigned Equity Interests Assignment or
(ii) the Merger.

         "Administrative Agent" means JPMorgan Chase Bank, in its capacity as
administrative agent under the credit agreement to be entered into among a
subsidiary of the Buyer, the Administrative Agent and the lenders party thereto.

         "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 attorneys' fees and expenses, but excluding
punitive (except as provided in Section 8), exemplary, special or consequential
damages.

         "Adverse Contribution Agreement Event" has the meaning given such term
in the Contribution Agreement.

         "Adverse Event" means any Adverse PSA Event and any Adverse
Contribution Agreement Event.

         "Adverse PSA Event" means any breach of any representation or warranty
(without giving effect to any supplement to the Schedules, any qualification as
to materiality, Material Adverse Effect, knowledge, awareness or concepts of
similar import, or any qualification or limitation as to monetary amount or
value) of the Seller contained in this Agreement (other than a representation or
warranty contained in Section 4(c)(iii) or 4(f)).

         "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act; provided, however, that (i) with
respect to the Buyer, the term "Affiliate" shall exclude each member of the El
Paso Group, (ii) with respect to the Seller, the term "Affiliate" shall exclude
each member of the Buyer Group and (iii) the Acquired Companies shall be deemed
to be Affiliates (x) prior to the Closing, of the Seller and (y) on and after
the Closing, of the Buyer.

         "Agreement" has the meaning set forth in the preface.

         "Argo" has the meaning set forth in the Recitals.

         "Assigned Equity Interests" means the El Paso Intrastate GP Interest,
the EPGT GP Interest, the El Paso Hub Services Interest and the EPGT 97%LP
Interest.

         "Assigned Equity Interests Assignment" means the assignment in the form
of Exhibit D.

                                       3
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         "Basis" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.

         "Best Efforts" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it could reasonably be expected to have an adverse effect on such
Person and would require an expense of such Person in excess of $1,000,000.

         "Buyer" has the meaning set forth in the preface.

         "Buyer Group" means (i) the General Partner, (ii) the Buyer, (iii) each
Affiliate of the Buyer in which the Buyer owns (directly or indirectly) an
Equity Interest and (iv) each natural person that is an Affiliate of any Person
described in (i) - (iii) above solely because of such natural person's position
as an officer (or natural person performing similar functions), director (or
natural person performing similar functions) or other representative of any
Person described in (i) - (iii) above, but only to the extent that such natural
person is acting in such capacity.

         "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, (ii) Argo I, (iii) each
Affiliate of the Buyer in which the Buyer owns (directly or indirectly) an
Equity Interest and which is a party to any Transaction Agreement and (iv)
immediately after the Closing, each of the Acquired Companies.

         "CERCLA" has the meaning set forth in Section 4(i).

         "Certificate of Merger" means a certificate of merger in the form
attached to the Merger Agreement.

         "Channel" means the cotenancy created and evidenced by A/S Pipeline
Ownership Agreement between Channel Industries Gas Company and Houston Pipe Line
Company dated January 1, 1997 (as amended, restated, supplemented and otherwise
modified from time to time).

         "Channel Rupture" means the rupture of the Channel pipeline on December
4, 2000.

         "Closing" has the meaning set forth in Section 2(d).

         "Closing Date" has the meaning set forth in Section 2(d).

         "Closing Statement" has the meaning set forth in Section 2(f)(i).

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

                                       4
<PAGE>

         "Combined Value" means the sum of (i) the Purchase Price plus (ii) the
Issue Price, as such term is defined in the Contribution Agreement plus (iii)
$119 million.

         "Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription 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.

         "Contribution Agreement" means the Contribution Agreement dated the
date of this Agreement between EPFS Holding and the Buyer.

         "Cotenancy Assets" means 100% of all of the assets listed on Exhibit A,
and any organizational, ownership or operational documents related thereto.

         "Cotenancy Interests" means the Acquired Companies' interests in the
Cotenancy Assets.

         "Delaware LLC Act" means the Delaware Limited Liability Company Act as
in effect on the date of this Agreement and as amended, restated or replaced
from time to time thereafter.

         "Delaware LP Act" means the Delaware Revised Uniform Limited
Partnership Act as in effect on the date of this Agreement and as amended,
restated or replaced from time to time thereafter.

         "Disposed Assets" means all of the assets listed on Exhibit C.

         "Disposed Obligations" means all Obligations, regardless of when such
Obligations actually arise or arose, (i) associated with, arising out of, or
related to the ownership or operation of the Disposed Assets or (ii) other than
those Obligations explicitly set forth on Schedule 4(k)(ii), existing on the
Closing Date and not directly related to the Acquired Company Assets.

         "El Paso Corporation" means El Paso Corporation, a Delaware
corporation.

         "El Paso Group" means, other than members of the Buyer Group, (i) each
Affiliate of El Paso Corporation in which El Paso Corporation owns (directly or
indirectly) an Equity Interest and (ii) each natural person that is an Affiliate
of any Person described in (i) above solely because of such natural person's
position as an officer (or natural person performing similar functions),
director (or natural person performing similar functions) or other
representative of any Person described in (i) above, but only to the extent that
such natural person is acting in such capacity.

         "El Paso Hub Services" has the meaning set forth in the Recitals.

                                       5
<PAGE>
         "El Paso Hub Services Assets" means all assets of El Paso Hub Services,
including any applicable Cotenancy Interests.

         "El Paso Hub Services Interest" has the meaning set forth in the
Recitals.

         "El Paso Intrastate" has the meaning set forth in the Recitals.

         "El Paso Intrastate Assets" means all assets of El Paso Intrastate,
including any applicable Cotenancy Interests.

         "El Paso Intrastate GP Interest" has the meaning set forth in the
Recitals.

         "El Paso Intrastate LP Interest" has the meaning set forth in the
Recitals.

         "El Paso Offshore" has the meaning set forth in the Recitals.

         "El Paso Offshore Assets" means all assets of El Paso Offshore,
including any applicable Cotenancy Interests.

         "El Paso Offshore Interest" has the meaning set forth in the Recitals.

         "El Paso Production" means El Paso Production GOM, Inc., a Delaware
corporation.

         "El Paso Texas" has the meaning set forth in the Recitals.

         "El Paso Texas Assets" means all assets of El Paso Texas, including any
applicable Cotenancy Interests.

         "El Paso Texas Interest" has the meaning set forth in the Recitals.

         "El Paso Transmission" has the meaning set forth in the Recitals.

         "Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest, purchase or preferential right, right of first refusal,
option or other defect in title.

         "Environmental Law" and "Environmental Laws" have the meanings set
forth in Section 4(i).

         "EPFS Holding" means El Paso Field Services Holding Company, a Delaware
corporation.

         "EPFS Management" has the meaning set forth in the Recitals.

         "EPGT" has the meaning set forth in the Recitals.

         "EPGT 2% LP Interest" has the meaning set forth in the Recitals.

         "EPGT 97% LP Interest" has the meaning set forth in the Recitals.

                                       6
<PAGE>

         "EPGT Assets" means all assets of EPGT, including any applicable
Cotenancy Interests.

         "EPGT GP Interest" has the meaning set forth in the Recitals.

         "EPGT LP Interest" has the meaning set forth in the Recitals.

         "Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (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 any Commitments with respect thereto, and (c)
any other direct equity ownership or participation in a Person.

         "Exchange Agreement" has the meaning set forth in Section 9(p).

         "Financial Statement Assets" means the Acquired Company Assets and the
Indian Basin Cotenancy Interest (as such term is defined in the Contribution
Agreement).

         "Financial Statement Entities" means the Acquired Companies, El Paso
Indian Basin L.P., a Delaware limited partnership, and El Paso Indian Basin GP
Holding L.L.C., a Delaware limited liability company.

         "Financial Statements" has the meaning set forth in Section 4(k).

         "FTC" has the meaning set forth in Section 3(a)(ii).

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

         "General Partner" means El Paso Energy Partners Company, a Delaware
corporation and the general partner of the Buyer.

         "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 all materials, substances, chemicals, gas
and wastes which are regulated under any Environmental Law or which may form the
basis for liability under any Environmental Law.

         "Indebtedness" means, with respect to any Person, to the extent not
classified as a current liability, on a consolidated basis, all Obligations of
the Person to other Persons for (a) borrowed money, (b) any capital lease
Obligation, (c) any Obligation (whether fixed or contingent) to reimburse any
bank or other Person in respect of amounts paid or payable under a standby
letter of credit, (d) any guarantee with respect to indebtedness (of the kind
otherwise described in this definition) of any Person and (e) any liability,
indebtedness or other Obligation of the Person.

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

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

                                       7
<PAGE>
         "Knowledge": an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is consciously aware of such
fact or other matter at the time of determination. A Person other than a natural
person shall be deemed to have "Knowledge" of a particular fact or other matter
if (i) any natural person who is serving as a director, executive officer,
partner, member, executor, or trustee of such Person (or in any similar
capacity) or (ii) any employee (or any natural person serving in a similar
capacity) who is charged with the ultimate responsibility for a particular area
of such Person's operations (e.g., the manager of the environmental section with
respect to knowledge of environmental matters), at the time of determination
had, Knowledge of such fact or other matter.

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

         "Legal Right" means the legal authority and right (without risk of
liability, criminal, civil or otherwise), such that the contemplated conduct
would not, to the extent arising from, related to or in any way connected with
any Acquired Company or Cotenancy Asset (including under any Organizational
Documents thereof or any contract, agreement or arrangement related thereto)
constitute a violation, termination or breach of, or require any payment under,
or cause or permit any termination under, any contract or agreement;
arrangement; applicable Law; fiduciary, quasi-fiduciary or similar duty; or any
other obligation of or by any Acquired Company or Cotenancy Asset.

         "Material Adverse Effect" means any change or effect relating to the
Acquired Company Equity Interests, the Acquired Company Assets or the
businesses, operations (financial or otherwise) and properties of the Acquired
Companies or the Acquired Company Assets taken as a whole, that, individually or
in the aggregate with other changes or effects, materially and adversely effects
the value of the Acquired Company Equity Interests, provided that in determining
whether a Material Adverse Effect has occurred, changes or effects 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) United States or global economic
conditions or financial markets in general, or (iii) the transactions
contemplated by this Agreement, shall not be considered.

         "Merger" means the merger of El Paso Texas with and into a subsidiary
of the Buyer as contemplated hereby.

         "Merger Agreement" means a merger agreement in the form of Exhibit E.

         "MIAGS" means Matagorda Island Area Gathering System, a Texas joint
venture.

         "MIAGS Assets" means all of the assets of MIAGS.

         "MIAGS Interest" means a 84% joint venture interest in MIAGS.

         "Non-Operated Cotenancies" means those Cotenancy Assets for which
Schedule 4(c)(vi) indicates that the Seller or its Affiliate is not the
operator.

                                       8
<PAGE>

         "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.

         "Operated Cotenancies" means those Cotenancy Assets other than the
Non-Operated Cotenancies.

         "Ordinary Course of Business" means the ordinary course of business
consistent with the applicable Person's past custom and practice (including with
respect to quantity and frequency).

         "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 amendments thereto.

         "Parent Guaranty" means the performance guaranty in the form of Exhibit
F.

         "Party" and "Parties" have the meanings set forth in the preface.

         "Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the Ordinary Course of Business, provided that
adequate reserve accounts have been established in accordance with GAAP; (ii)
inchoate, mechanic's, materialmen's, and similar liens; (iii) any inchoate liens
or other Encumbrances created pursuant to (1) any operating, farmout,
construction, operation and maintenance, co-owners, cotenancy, lease or similar
agreements listed on Schedule 1(b) for which amounts are not due or (2) the
Organizational Documents of any of the Acquired Companies or Cotenancy Assets
for which amounts are not due; and (iv) easements, rights-of-way, restrictions
and other similar encumbrances incurred in the Ordinary Course of Business
which, in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto as it is
currently being used or materially interfere with the ordinary conduct of the
business.

         "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).

         "Pipeline Integrity Costs" means all expenses, fees, liabilities and
other costs arising from, connected with or otherwise relating to implementing
and completing the Pipeline Integrity Program to the extent relating to any
pipelines constituting part of the Acquired Company Assets (other than the
leased Old Ocean Pipeline) or the Operated Cotenancies, including costs
associated with direct assessment of pipelines, in-line inspections, pressure
tests, increased inspections and remediation of defects, as well as the
allocable portion of salaries, overhead and any charged management fee (but does
not include routine operating and maintenance costs).

                                       9
<PAGE>

         "Pipeline Integrity Program" means the pipeline integrity management
plan filed by El Paso Corporation with the Texas Railroad Commission, as in
effect and on record as of the date hereof, and as revised from time to time to
the extent that the Buyer and El Paso Corporation mutually consent to the
revisions (which consent shall not be unreasonably withheld or delayed).

         "Post-Closing Tax Period" means any Tax period beginning after the
Closing Date.

         "Post-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Acquired Companies with respect to a Post-Closing Tax
Period.

         "Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.

         "Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any Acquired Company with respect to a Pre-Closing Tax Period.

         "Preferential Rights" has the meaning set forth in Section 4(j).

         "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.

         "Prince PSA" means the purchase and sale agreement in the form of
Exhibit H.

         "Prince Side Letter" means an agreement in the form of Exhibit J.

         "Proposed Closing Statement" has the meaning set forth in Section
2(f)(i).

         "Purchase Price" means $625 million 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 Adjustment Date" means immediately after the close of
business on March 31, 2002.

         "Purchase Price Decreases" means, without duplication, the following:
(i) 100% of the amount, if any, of negative Working Capital of the Acquired
Companies as of the Purchase Price Adjustment Date, as determined and calculated
in accordance with GAAP, and (ii) 100% of the amount, if any, of all of the
consolidated Indebtedness (other than Indebtedness otherwise included in Working
Capital and the $24 million Indebtedness associated with the mercury meter
reserve) of the Acquired Companies as of the Purchase Price Adjustment Date.

         "Purchase Price Increases" means, without duplication, 100% of the
amount, if any, of positive Working Capital of the Acquired Companies as of the
Purchase Price Adjustment Date, as determined and calculated in accordance with
GAAP.

         "Records" has the meaning set forth in Section 6(d).

                                       10
<PAGE>

         "Relevant Assets" means the Acquired Company Assets, the Disposed
Assets and the Cotenancy Assets.

         "Reorganization Transactions" means the transactions described on
Schedule 1(c).

         "Rights of Way" has the meaning set forth in Section 4(g).

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

         "Securities Exchange Act" means the Securities Exchange Act of 1934, 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 their respective officers (or Persons performing similar functions),
directors (or Persons performing similar functions), employees, agents, and
representatives.

         "Seller Party" means each of (i) the Seller, (ii) El Paso Corporation,
EPFS Management, EPFS Holding, El Paso Transmission, (iii) each Affiliate of the
Seller in which the Seller owns (directly or indirectly) an Equity Interest and
which is a party to any Transaction Agreement and (iv) up to and through the
Closing, each of the Acquired Companies.

         "Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.

         "Straddle Return" means a Tax Return for a Straddle Period.

         "Subject Insurance Policies" means those material policies of
insurance, the current policies of which are listed on Schedule 1(a), which the
Seller or any of its Affiliates maintain covering any Acquired Company Assets,
any Acquired Company or any Cotenancy Asset with respect to its assets and
operations.

         "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 of any kind whatsoever,
including 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.

         "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.

                                       11
<PAGE>

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

         "Transaction Agreements" means this Agreement, the Merger Agreement,
the Assigned Equity Interests Assignment, the Prince PSA, the Parent Guaranty,
the Contribution Agreement, the Exchange Agreement (if applicable) and all other
agreements, documents, certificates or instruments executed and delivered in
connection with the transactions contemplated herein.

         "Warwink Gathering and Treating" has the meaning set forth in the
Recitals.

         "Warwink Gathering Interest" has the meaning set forth in the Recitals.

         "Warwink I" has the meaning set forth in the Recitals.

         "Warwink II" has the meaning set forth in the Recitals.

         "Warwink Interests" has the meaning set forth in the Recitals.

         "Warwink Assets" means all assets of Warwink I, Warwink II and Warwink
Gathering and Treating, including any applicable Cotenancy Interests.

         "Working Capital" means current assets less current liabilities.

      2. The Transactions.

         (a) Sale of Assigned Equity Interests. Subject to the terms and
conditions of this Agreement, the Seller agrees to cause EPFS Management and El
Paso Transmission to sell to the Buyer (or its designee), and the Buyer agrees
to purchase (or cause its designee to purchase) from the Seller, the Assigned
Equity Interests, free and clear of any Encumbrances.

         (b) The Merger. Subject to the terms and conditions of this Agreement,
the Parties agree to cause El Paso Texas to merge with and into a subsidiary of
the Buyer in accordance with the Delaware LLC Act. Following the Merger, the
separate limited liability company existence of El Paso Texas shall cease and
the applicable subsidiary of the Buyer shall continue as the surviving company
and shall succeed to and assume all the rights and obligations of El Paso Texas
in accordance with the Delaware LLC Act. The Merger shall have the effects set
forth in Section 28-109 of the Delaware LLC Act and, if applicable, the Delaware
LP Act.

         (c) Consideration. In consideration for the assignment of the Assigned
Company Equity Interests and the Merger (which together shall vest in the Buyer
record or beneficial ownership of 100% of the Acquired Company Equity Interests
and the Acquired Company Assets (other than the MIAGS Assets, in which the Buyer
would acquire beneficial ownership of 83%), including the Cotenancy Interests),
the Buyer agrees to pay the Purchase Price to the Seller as follows:

                  (i) Payment of $190 million of the Purchase Price in the form
         of property by causing the execution and delivery by Argo of the Prince
         PSA and the assignment of all of Argo's assets contemplated thereby;
         and

                                       12
<PAGE>

                  (ii) Payment of the remainder of the Purchase Price in cash by
         wire transfer of immediately available funds. All payments with respect
         to the cash portion of the Purchase Price shall be made to the Seller,
         and the Seller shall be responsible for allocating and distributing
         such payments among any applicable Seller Parties.

         (d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Seller,
commencing at 10:00 a.m., local time, on the last business day of the month in
which the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby has occurred (other
than conditions with respect to actions each Party shall take at the Closing
itself) or such other date as the Parties may mutually determine (the "Closing
Date").

         (e) Deliveries at the Closing. At the Closing, (i) the Seller shall
deliver to the Buyer the various certificates, instruments, and documents
referred to in Sections 7(a) and 9(o); (ii) the Buyer shall deliver to the
Seller the various certificates, instruments, and documents referred to in
Section 7(b); (iii) the Seller shall cause EPFS Management and El Paso
Transmission to execute and deliver the Assigned Equity Interests Assignment;
(iv) the Seller shall cause El Paso Corporation to execute and deliver to the
Buyer the Parent Guaranty; (v) the Buyer shall execute and deliver to the
Seller, and the Seller shall cause El Paso Production to execute and deliver to
the Buyer, the Prince PSA; (vi) the Buyer shall, and the Seller shall cause El
Paso Production to, execute and deliver the Prince Side Letter; (vii) the Buyer
shall deliver to the Seller the estimated Purchase Price as set forth on the
Proposed Closing Statement; (viii) the Seller shall cause El Paso Texas, and the
Buyer shall cause one of its subsidiaries, to execute and deliver the Merger
Agreement; (ix) the Parties shall execute and cause the Certificate of Merger to
be filed with the Delaware Secretary of State; and (x) the Parties shall execute
and/or deliver, or cause to be executed and/or delivered, each other Transaction
Agreement (including the Exchange Agreement, if applicable).

         (f) Proposed Closing Statement and Post-Closing Adjustment.

                  (i) On or prior to the Closing Date, the Seller shall cause to
         be prepared and delivered to the Buyer a statement (the "Proposed
         Closing Statement"), as prepared and determined in accordance with GAAP
         to the extent applicable, setting forth the Seller's good faith
         estimate, including reasonable detail, of the Purchase Price. As soon
         as practicable, but in any event no later than 60 days following the
         Closing Date, the Seller shall cause to be prepared and delivered to
         the Buyer a statement, including reasonable detail, of the actual
         Purchase Price (such statement, as it may be adjusted pursuant to
         Section 2(f)(ii), the "Closing Statement").

                  (ii) Upon receipt of the Closing Statement, the Buyer and the
         Buyer's independent accountants shall be permitted during the
         succeeding 30-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 Buyer may reasonably request in connection with
         its review of the Closing Statement. Within 30 days of

                                       13
<PAGE>

         receipt of the Closing Statement, the Buyer shall deliver to the Seller
         a written statement describing in reasonable detail its objections (if
         any) to any amounts or items set forth on the Closing Statement. If the
         Buyer does not raise objections within such period, then, the Closing
         Statement shall become final and binding upon all Parties at the end of
         such period. If the Buyer raises objections, the Parties shall
         negotiate in good faith to resolve any such objections. If the Parties
         are unable to resolve any disputed item within 60 days after the
         Buyer's receipt of the Closing Statement, any such disputed item shall
         be submitted to a nationally recognized independent accounting firm
         mutually agreeable to the Parties who shall be instructed to resolve
         such disputed item within 30 days. The resolution of disputes by the
         accounting firm so selected 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.

                  (iii) If the Purchase Price as set forth on the Closing
         Statement exceeds the estimated Purchase Price as set forth on the
         Proposed Closing Statement, the Buyer shall pay the Seller the amount
         of such excess. If the estimated Purchase Price as set forth on the
         Proposed Closing Statement exceeds the Purchase Price as set forth on
         the Closing Statement, the Seller shall pay to the Buyer (or its
         designee) 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(f)(iv) at a mutually convenient time and place within five business
         days after the later of acceptance of the Closing Statement or the
         resolution of the Buyer's objections thereto pursuant to Section
         2(f)(ii).

                  (iv) Any payments pursuant to this Section 2(f) 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. If payment is being made after the fifth business day referred to
         in Section 2(f)(iii), the amount of the payment to be made pursuant to
         this Section 2(f) shall bear interest from and including such fifth
         business day to, but excluding, the date of payment at a rate per annum
         equal to the Prime Rate plus two percent. 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 365 days and the actual number
         of days for which due.

                  (v) The Buyer shall cooperate in the preparation of the
         Closing Statement, including providing customary certifications to the
         Seller, and, if requested, to the Seller's independent accountants or
         the accounting firm selected by mutual agreement of the Parties
         pursuant to Section 2(f)(ii).

                                       14
<PAGE>

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

      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 (provided, however, that any
representation or warranty given in this Section 3(a) with respect to the
Non-Operated Cotenancies shall be deemed to be made to the Seller's Knowledge):

                  (i) Organization and Good Standing. The Seller is an entity
         duly organized, validly existing, and in good standing under the Laws
         of the state of Delaware. The Seller is in good standing under the Laws
         of the state of Texas and each other jurisdiction which requires such
         qualification, except where the lack of such qualification would not
         have a Material Adverse Effect.

                  (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. 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 set forth on Schedule 3(a)(ii), no Seller Party need give any
         notice to, make any filing with, or obtain any 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 Federal Trade Commission ("FTC"),
         if applicable.

                  (iii) Noncontravention. Except for prior approval of the FTC
         (if applicable) and 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, nor the consummation of any of the transactions
         contemplated thereby, shall (A) violate any statute, regulation, rule,
         injunction, judgment, order, decree, ruling, charge, or other
         restriction of any Governmental Authority to which any Seller Party is
         subject or any provision of its Organizational Documents or (B)
         conflict with, result in a breach of, constitute a default under,
         result in the acceleration of, create in any Person the right to
         accelerate, terminate, modify, or cancel, or require any notice under
         any agreement, contract, lease, license, instrument, or other
         arrangement to which any Seller Party is a party or by which it is
         bound or to which any of its assets or any of the Relevant Assets are
         subject, except for such violations, defaults, breaches, or other
         occurrences that do not, individually or in

                                       15
<PAGE>

         the aggregate, have a material adverse effect on the ability of the
         Seller or any other Seller Party to consummate the transactions
         contemplated by such Transaction Agreement.

                  (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 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
         liability company, limited partnership or corporation duly organized,
         validly existing, and in good standing under the Laws of the state of
         Delaware. Each Buyer Party is in good standing under the Laws of the
         state of Texas and each other jurisdiction which requires such
         qualification, except where the lack of such qualification would not
         have a Material Adverse Effect.

                  (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 it is a party
         and to perform its obligations thereunder. Each Transaction Agreement
         to which such 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 set forth on
         Schedule 3(b)(ii), no Buyer Party needs to give any notice to, make any
         filing with, or obtain any 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, except for the prior approval of the FTC, if applicable.

                  (iii) Noncontravention. Except for the prior approval of the
         FTC (if applicable) and 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, nor the
         consummation of any of the transactions contemplated thereby, shall (A)
         violate any statute, regulation, rule, injunction, judgment, order,
         decree, ruling, charge, or other restriction of any Governmental
         Authority to which such Buyer Party is subject or any provision of its
         Organizational Documents or (B) conflict with, result in a breach of,
         constitute a default under, result in the acceleration of, create in
         any Person the right to accelerate, terminate, modify, or cancel, or
         require any notice, approval or consent under any agreement, contract,
         lease, license, instrument, or other arrangement to

                                       16
<PAGE>

         which any Buyer Party is a party or by which it is bound or to which
         any of its assets is subject, except for such violations, defaults,
         breaches, or other occurrences that do not, individually or in the
         aggregate, have a material adverse effect on the ability of any Buyer
         Party to consummate the transactions contemplated by such Transaction
         Agreement.

                  (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 or the Acquired Company Assets 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 and the Acquired Company Assets, understands
         that this investment involves substantial risks, has adequately
         investigated the Acquired Company Equity Interests and the Acquired
         Company Assets, and 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 the Acquired Company Assets, and
         is able to bear the economic risks of such investment. 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 and the Acquired
         Company Assets, has received all materials, documents and other
         information that the Buyer deems necessary or advisable to evaluate the
         Acquired Company Equity Interests and the Acquired Company Assets, and
         has made its own independent examination, investigation, analysis and
         evaluation of the Acquired Companies and the Acquired Company Assets,
         including its own estimate of the value of the Acquired Company Equity
         Interests and the Acquired Company Assets. The Buyer has undertaken
         such due diligence (including a review of the assets, properties,
         liabilities, books, records and contracts of the Acquired Companies and
         the Acquired Company Assets) as the Buyer deems adequate.

                  (vi) Taxes. To the knowledge of each Buyer Party, the Buyer
         has (i) duly filed all material Tax Returns required to be filed by or
         with respect to the Buyer or its assets or operations with the Internal
         Revenue Service or other applicable taxing authority, (ii) paid, or
         adequately reserved against, all Taxes due or claimed due by a taxing
         authority from or with respect to the Buyer or its assets or operations
         and (iii) made all material deposits required with respect to Taxes. To
         the knowledge of each Buyer Party, there has been no material issue
         raised or material adjustment proposed (and none is pending) by the
         Internal Revenue Service or any other taxing authority in connection
         with any Tax Returns relating to the assets or operations of the Buyer,
         and no waiver or extension of any statute

                                       17
<PAGE>

         of limitations as to any federal, state, local or foreign tax matter
         relating to the assets or operations of the Buyer has been given by or
         requested from Buyer with respect to any Tax year.

      4. Representations and Warranties Concerning the Acquired Company
Equity Interests, Acquired Companies and Relevant Assets. The Seller hereby
represents and warrants to the Buyer as follows (provided, however, that any
representation or warranty given in this Section 4 with respect to the
Non-Operated Cotenancies shall be deemed to be made to the Seller's Knowledge):

         (a) Organization, Qualification, and Company Power. Each of the
Acquired Companies and the Seller Parties (x) is a limited liability company,
partnership (limited or general), joint venture or corporation duly organized,
validly existing, and (except with respect to Warwink Gathering and Treating and
MIAGS) in good standing under the Laws of the state of Delaware; (y) is (except
with respect to Warwink Gathering and Treating and MIAGS) in good standing under
the Laws of the state of Texas and each other jurisdiction which requires
qualification, except where the lack of such qualification would not have a
Material Adverse Effect; and (z) has full power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it.

         (b) Noncontravention. Except for the need to obtain prior approval of
the FTC or as set forth in Schedule 4(b), neither the execution and delivery of
any Transaction Agreement to which any Seller Party is a party, nor the
consummation of any of the transactions contemplated thereby, shall (i) violate
any statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any Governmental Authority to which any Acquired
Company or any of the Acquired Company Assets is subject or any provision of the
Organizational Documents of any Seller Party or any Acquired Company or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, require any notice or trigger any rights to payment or other
compensation, or result in the imposition of any Encumbrance on any of the
Acquired Company Equity Interests or the Acquired Company Assets under, any
agreement, contract, lease, license, instrument, or other arrangement to which
any Acquired Company or any of the Acquired Company Assets is subject, except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, right to payment or other
compensation, or Encumbrance would not have a Material Adverse Effect, or would
not materially adversely affect the ability of any Seller Party to consummate
the transactions contemplated by such Transaction Agreement.

         (c) Title to and Condition of Assets.

                  (i) The Acquired Companies have good, marketable and
         indefeasible title to all of the Acquired Company Assets in each case
         free and clear of all Encumbrances, except for (a) Permitted
         Encumbrances and (b) Encumbrances disclosed in Schedule 4(c)(i). The
         principal assets in which any Acquired Company owns less than 100%
         (other than assets in which Warwink I and Warwink II each own 50% due
         to their ownership of the Warwink Gathering

                                       18
<PAGE>

         Interest) are described on Exhibit A. The principal assets constituting
         the Acquired Company Assets are described on Exhibit B. The operations
         of the Acquired Company Assets are the only operations reflected in the
         Financial Statements.

                  (ii) To the Seller's Knowledge, except as disclosed in
         Schedule 4(c)(ii), the Relevant Assets are in good operating condition
         and repair (normal wear and tear excepted), are free from defects
         (patent and latent), are suitable for the purposes for which they are
         currently used and are not in need of maintenance or repairs except for
         ordinary routine maintenance and repairs; provided, however, that a
         defect in a pipeline constituting part of the Acquired Company Assets
         or the Operated Cotenancies discovered after Closing through, and
         remediated under, the Pipeline Integrity Program shall not be a breach
         of this Section 4(c)(ii).

                  (iii) Capitalization of the Acquired Companies.

                           (A) The capitalization of the Acquired Companies is
                  as follows:

                                    (1) The El Paso Texas Interest constitutes
                           all of the Equity Interests of El Paso Texas. The
                           Seller owns (beneficially and of record) 100% of the
                           El Paso Texas Interest.

                                    (2) The El Paso Intrastate GP Interest and
                           the El Paso Intrastate LP Interest constitute all of
                           the Equity Interests of El Paso Intrastate. El Paso
                           Texas owns (beneficially and of record) 100% of the
                           El Paso Intrastate LP Interest. EPFS Management owns
                           (beneficially and of record) 100% of the El Paso
                           Intrastate GP Interest.

                                    (3) The El Paso Offshore Interest
                           constitutes all of the Equity Interests of El Paso
                           Offshore. El Paso Texas owns (beneficially and of
                           record) the El Paso Offshore Interest.

                                    (4) The EPGT GP Interest and the EPGT LP
                           Interest constitute all of the Equity Interests of
                           EPGT. El Paso Texas owns (beneficially and of record)
                           the EPGT 2%LP Interest, and El Paso Transmission owns
                           (beneficially and of record) the EPGT 97%LP Interest,
                           which collectively constitute the entire EPGT LP
                           interest. EPFS Management owns (beneficially and of
                           record) 100% of the EPGT GP Interest.

                                    (5) The Warwink Interests constitute all of
                           the Equity Interests of Warwink I and Warwink II. El
                           Paso Texas owns (beneficially and of record) 100% of
                           the Warwink Interests. Warwink I owns (beneficially
                           and of record) a 1% joint venture

                                       19
<PAGE>

                           interest in Warwink Gathering and Treating and
                           Warwink II owns (beneficially and of record) a 99%
                           joint venture interest in Warwink Gathering and
                           Treating, which collectively are all of the Equity
                           Interests in Warwink Gathering and Treating.

                                    (6) The El Paso Hub Services Interest
                           constitutes all of the Equity Interests of El Paso
                           Hub Services. El Paso Transmission owns (beneficially
                           and of record) 100% of the El Paso Hub Services
                           Interest.

                                    (7) EPGT owns the MIAGS Interest, which
                           constitutes 83% of the Equity Interests in MIAGS.

                           (B) The Seller beneficially owns directly or
                  indirectly 100% of the Seller Parties other than El Paso
                  Corporation and El Paso Production. The Seller beneficially
                  owns directly or indirectly 100% of the Acquired Company
                  Equity Interests, which includes 100% of the Equity Interests
                  in the Acquired Companies other than MIAGS. All of the
                  Acquired Company Equity Interests are uncertificated. The
                  Acquired Company Equity Interests constitute 100% of the
                  issued and outstanding Equity Interests of the Acquired
                  Companies other than MIAGS and have been duly authorized, and
                  are validly issued and fully paid and (except (i) with respect
                  to general partnership and joint venture interests and (ii) as
                  set forth in Sections 17-303(a) and 17-607 of the Delaware LP
                  Act with respect to limited partnership interests)
                  non-assessable. Except to the extent created under the
                  Securities Act, state securities Laws, limited liability
                  company Laws, limited partnership Laws, partnership and joint
                  venture Laws and general corporation Laws of the Acquired
                  Companies' jurisdiction of formation, and as created by the
                  Acquired Companies' Organizational Documents, (x) the Acquired
                  Company Equity Interests are held as set forth above, free and
                  clear of any Encumbrances and (y) there are no Commitments
                  with respect to any Equity Interest of any Acquired Company.
                  No Seller Party is party to any voting trusts, proxies, or
                  other agreements or understandings with respect to voting any
                  Equity Interest of any Acquired Company other than the
                  Organizational Documents of MIAGS.

                           (C) After the consummation of the transactions
                  contemplated in this Agreement, the Buyer shall own, directly
                  or indirectly, 100% of the Acquired Company Equity Interests,
                  which includes 100% of the Equity Interests in the Acquired
                  Companies and 100% of the Acquired Company Assets (other than
                  the MIAGS Assets, in which the Buyer will acquire beneficial
                  ownership of 83%).

                  (iv) Acquired Company Ownership. No Acquired Company owns an
         Equity Interest in any Person, except as set forth in Section
         4(c)(iii). There are no

                                       20
<PAGE>

         Commitments with respect to an Equity Interest in any Acquired Company.
         The Acquired Companies own no other assets other than the Acquired
         Company Assets, and have no operations or Obligations other than those
         directly related to the Acquired Company Assets or explicitly set forth
         on Schedule 4(k)(ii).

                  (v) Encumbrances for Borrowed Money. Except as set forth on
         Schedule 4(c)(v), there are no borrowings, loan agreements, promissory
         notes, pledges, mortgages, guaranties, liens and similar liabilities
         (direct and indirect), or Encumbrances which are secured by or
         constitute an Encumbrance on the Relevant Assets.

                  (vi) Ownership and Operation of the Cotenancy Assets.

                           (A) The Acquired Companies' ownership interests in
                  the Cotenancy Assets are set forth on Schedule 4(c)(vi).

                           (B) The Seller or one of its Affiliates is the
                  operator with respect to all of the Cotenancy Assets indicated
                  on Schedule 4(c)(vi). The transactions contemplated by this
                  Agreement shall result in the Buyer (or its designee) becoming
                  the operator of all of the Cotenancy Assets, other than the
                  Non-Operated Cotenancies, as of the Closing Date.

                           (C) Except to the extent created under the Securities
                  Act, state securities Laws, limited liability company Laws and
                  general corporation Laws of the Acquired Companies'
                  jurisdiction of formation, and as created by the Acquired
                  Companies' Organizational Documents, (x) the Cotenancy
                  Interests are held as set forth above, free and clear of any
                  Encumbrances and (y) there are no Commitments with respect to
                  any Cotenancy Interests. No Seller Party is party to any
                  voting trusts, proxies, or other agreements or understandings
                  with respect to voting any Cotenancy Interest

              (d) Material Change. Except for the Reorganization Transactions
and as set forth in Schedule 4(d), since December 31, 2001:

                  (i) there has not been any Material Adverse Effect;

                  (ii) the Relevant Assets have been operated and maintained in
         the Ordinary Course of Business;

                  (iii) to the Seller's Knowledge, there has not been any
         material damage, destruction or loss to any material portion of the
         Relevant Assets, whether or not covered by insurance;

                  (iv) there has been no purchase, sale or lease of any material
         asset included in the Relevant Assets;

                                       21
<PAGE>

                  (v) there has been no actual, pending, or to the Seller's
         Knowledge, threatened change affecting any of the Relevant Assets with
         any customers, licensors, suppliers, distributors or sales
         representatives of any Seller Party, except for changes that do not
         have a Material Adverse Effect;

                  (vi) there has been no (x) amendment or modification in any
         material respect to any Acquired Company Contract or any other contract
         or agreement material to the Relevant Assets, or (y) termination of any
         Acquired Company Contract or any other contract or agreement material
         to the Relevant Assets before the expiration of the term thereof other
         than to the extent any such material contract or agreement terminated
         pursuant to its terms in the Ordinary Course of Business; and

                  (vii) there is no contract, commitment or agreement to do any
         of the foregoing, except as expressly permitted hereby.

         (e) Legal Compliance. Each Seller Party, with respect to the Relevant
Assets and the Acquired Companies, has complied with all applicable Laws of all
Governmental Authorities, except where the failure to comply would not have a
Material Adverse Effect. 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.

         (f) Tax Matters. Except as set forth in Schedule 4(f) or as would not
have a Material Adverse Effect, the Seller, its Affiliates and the Acquired
Companies have filed all Tax Returns with respect to the Relevant Assets that
they were required to file and such Tax Returns are accurate in all material
respects. All Taxes shown as due by any Acquired Company or with respect to the
Relevant Assets on any such Tax Returns have been paid.

         (g) Contracts and Commitments. Schedule 4(g)(i) contains a list of all
the material contracts, agreements, licenses, permits and other documents and
instruments to which any Acquired Company is a party or otherwise constituting
part of the Acquired Company Assets (the "Acquired Company Contracts"), and each
such Acquired Company Contract is in full force and effect, except where the
failure to be in full force and effect would not have a Material Adverse Effect.
Schedule 4(g)(ii) contains a list of all rights-of-way constituting part of the
Acquired Company Assets (the "Rights of Way"). The Acquired Company Contracts,
together with the Rights of Way, constitute all of the contracts, agreements,
rights of way, licenses, permits, and other documents and instruments necessary
for the operation and business of the Relevant Assets consistent with applicable
Laws and prior operation. The Seller Parties have performed all material
obligations required to be performed by them to date under the Acquired Company
Contracts and the Rights of Way, and are not in default under any material
obligation of any such contract or right-of-way, except when such default would
not have a Material Adverse Effect. To the Seller's Knowledge, no other party to
any Acquired Company Contract is in default thereunder.

         (h) Litigation.

                                       22
<PAGE>

                  (i) Schedule 4(h) sets forth each instance in which any
         Acquired Company or any of the Relevant Assets (A) is subject to any
         outstanding injunction, judgment, order, decree, ruling, or charge or
         (B) is the subject of any action, suit, proceeding, hearing, or
         investigation of, in, or before any court or quasi-judicial or
         administrative agency of any federal, state, local, or foreign
         jurisdiction, or is the subject of any pending or, to the Seller's
         Knowledge, threatened claim, demand, or notice of violation or
         liability from any Person, except where any of the foregoing would not
         have a Material Adverse Effect.

                  (ii) No Seller Party has Knowledge of any Basis for any
         present or future injunction, judgment, order, decree, ruling, or
         charge or action, suit, proceeding, hearing, or investigation of, in,
         or before any court or quasi-judicial or administrative agency of any
         federal, state, local, or foreign jurisdiction, against any of them
         giving rise to any Obligation to which any Acquired Company would be
         subject.

         (i) Environmental Matters. Except as set forth in Schedule 4(i):

                  (i) The Seller, with respect to the Relevant Assets, has been
         in compliance with all applicable local, state, and federal laws,
         rules, regulations, and orders regulating or otherwise pertaining to
         (a) the use, generation, migration, storage, removal, treatment,
         remedy, discharge, release, transportation, disposal, or cleanup of
         pollutants, contamination, hazardous wastes, hazardous substances,
         hazardous materials, toxic substances or toxic pollutants, (b) surface
         waters, ground waters, ambient air and any other environmental medium
         on or off any Lease or (c) the environment or health and safety-related
         matters; including the following as from time to time amended and all
         others whether similar or dissimilar: the Comprehensive Environmental
         Response, Compensation, and Liability Act of 1980, as amended by the
         Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), the
         Resource Conservation and Recovery Act of 1976, as amended by the Used
         Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of
         1980, and the Hazardous and Solid Waste Amendments of 1984, the
         Hazardous Materials Transportation Act, as amended, the Toxic Substance
         Control Act, as amended, the Clean Air Act, as amended, the Clean Water
         Act, as amended, and all regulations promulgated pursuant thereto
         (collectively, the "Environmental Laws" and individually an
         "Environmental Law"), except for such instances of noncompliance that
         individually or in the aggregate do not have a Material Adverse Effect.

                  (ii) The Seller has obtained all permits, licenses,
         franchises, authorities, consents, registrations, orders, certificates,
         waivers, exceptions, variances and approvals, and have made all
         filings, paid all fees, and maintained all material information,
         documentation, and records, as necessary under applicable Environmental
         Laws for operating the Relevant Assets and the Disposed Assets as they
         are presently operated, and all such permits, licenses, franchises,
         authorities, consents, approvals, and filings remain in full force and

                                       23
<PAGE>

         effect, except for such matters that individually or in the aggregate
         do not have a Material Adverse Effect. Schedule 4(i)(ii) sets forth a
         complete list of all permits, licenses, franchises, authorities,
         consents, and approvals, as necessary under applicable Environmental
         Laws for operating the Relevant Assets and the Acquired Companies'
         businesses as they are presently operated (except with respect to the
         Disposed Assets), each of which is held in the name of the appropriate
         Seller Party as indicated on such schedule.

                  (iii) Except as would not have a Material Adverse Effect, (x)
         there are no pending or threatened claims, demands, actions,
         administrative proceedings or lawsuits against the Seller with respect
         to the Relevant Assets and the Seller has not received notice of any of
         the foregoing and (y) no Acquired Company, and none of the Relevant
         Assets, is subject to any outstanding injunction, judgment, order,
         decree or ruling under any Environmental Laws.

                  (iv) The Seller has not received any written notice that the
         Seller, with respect to the Relevant Assets, is or may be a potentially
         responsible party under CERCLA or any analogous state law in connection
         with any site actually or allegedly containing or used for the
         treatment, storage or disposal of Hazardous Substances.

                  (v) All Hazardous Substances or solid wastes generated,
         transported, handled, stored, treated or disposed by, in connection
         with or as a result of the operation or possession of the Seller or the
         conduct of the Seller, have been transported only by carriers
         maintaining valid authorizations under applicable Environmental Laws
         and treated, stored, disposed of or otherwise handled only at
         facilities maintaining valid authorizations under applicable
         Environmental Laws and such carriers and facilities have been and are
         operating in compliance with such authorizations and are not the
         subject of any existing, pending or threatened action, investigation or
         inquiry by any Governmental Authority or other Person in connection
         with any of the Environmental Laws.

The Seller makes no 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). For
purposes of this Section 4(i), each reference to the Seller or Seller Parties
shall be deemed to include the Seller Parties and their Affiliates.

         (j) Preferential Purchase Rights. Except as set forth on Schedule 4(j),
there are no preferential purchase rights, options or other rights held by any
Person not a party to this Agreement to purchase or acquire any or all of the
Equity Interest in any Acquired Company, or any of the Relevant Assets (other
than the Disposed Assets), in whole or in part, that would be triggered or
otherwise affected as a result of the transactions contemplated by this
Agreement ("Preferential Rights").

                                       24
<PAGE>

         (k) Financial Statements.

                  (i) Schedule 4(k) sets forth (A) an unaudited combined and
         consolidated balance sheet covering the ownership of the Financial
         Statement Entities and the Financial Statement Assets as of December
         31, 2001 and (B) unaudited combined and consolidated income statements
         covering the ownership and operations of the Financial Statement
         Entities and the Financial Statement Assets for the twelve month
         periods ended December 31, 2000 and December 31, 2001, including, for
         both (A) and (B), as pro forma adjustments the disposition of the
         Disposed Assets on December 31, 1999 (collectively, the "Financial
         Statements").

                  (ii) (A) The Financial Statements were prepared in accordance
         with GAAP (except as expressly set forth therein, except for the
         absence of footnotes (other than to the extent footnotes are included
         in Schedule 4(k)), and fairly present, in all material respects, the
         financial position and income associated with the ownership and
         operation of the Financial Statement Entities and Financial Statement
         Assets as of the dates and for the periods indicated; (B) the Financial
         Statements do not omit to state any liability required to be stated
         therein in accordance with GAAP (except as expressly set forth therein,
         except for the absence of footnotes (other than to the extent footnotes
         are included in Schedule 4(k)), and except for normal year-end
         adjustments); and (C) except as set forth on Schedule 4(k)(ii), none of
         the Financial Statement Entities has any Obligations other than those
         reflected in the Financial Statements.

         (l) Employee Matters. No Acquired Company has any employees.

         (m) Prohibited Events. Except for the Reorganization Transactions and
settlement of litigation proceedings, none of the matters described in Section
5(c) have occurred since June 30, 2001.

         (n) Regulatory Matters. No Seller Party or Acquired Company is (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 Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder. Except as set forth on Schedule
4(n), none of the Relevant Assets are subject to regulation by the Federal
Energy Regulatory Commission or rate regulation or comprehensive
nondiscriminatory access regulation under any federal laws or the laws of any
state or other local jurisdiction.

         (o) Intercompany Transactions. Each outstanding receivable, payable and
other intercompany transaction and arrangement between the Seller or any of its
Affiliates, on the one hand, and any Acquired Company, on the other hand,
(including hydrocarbon imbalances existing on the date of this Agreement)
existing on the Closing Date is listed on Schedule 4(o).

                                       25
<PAGE>

         (p) Disclaimer of Representations and Warranties Concerning Personal
Property, Equipment, and Fixtures. The Buyer acknowledges that (i) it has had
and pursuant to this Agreement shall have before Closing access to the Acquired
Companies and the Relevant Assets and the officers and employees 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 and upon the express representations,
warranties, covenants, and agreements set forth in this Agreement and the other
Transaction Agreements. 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) THE
QUALITY, CONDITION, OR OPERABILITY OF ANY PERSONAL PROPERTY, EQUIPMENT, OR
FIXTURES, (ii) THEIR MERCHANTABILITY, (iii) THEIR FITNESS FOR ANY PARTICULAR
PURPOSE, (iv) THEIR CONFORMITY TO MODELS, SAMPLES OF MATERIALS OR MANUFACTURER
DESIGN, OR (v) AS TO WHETHER ANY RELEVANT ASSETS ARE YEAR 2000 COMPLIANT, AND
ALL PERSONAL PROPERTY AND EQUIPMENT IS DELIVERED "AS IS, WHERE IS" IN THE
CONDITION IN WHICH THE SAME EXISTS.

      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 Best Efforts to take all action
and to do all things necessary, proper, or advisable in order to consummate and
make effective the transactions contemplated by this Agreement, including the
Seller's conditions to closing in Section 7(b). The Seller shall use its Best
Efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement, including the Buyer's conditions to closing in Section 7(a).

         (b) Notices and Consents. Each of the Parties shall give any notices
to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the matters referred to in
Sections 3(a)(ii), 3(a)(iii), 3(b)(ii), and 3(b)(iii) including the
corresponding Schedules, so as to permit the Closing to occur not later than
9:00 a.m. (Houston time) on April 1, 2002. Without limiting the generality of
the foregoing, the Parties agree to work in good faith with the FTC in order to
consummate the transactions contemplated hereby as soon as reasonably
practicable, but in no event later than 9:00 a.m. (Houston time) on April 1,
2002; provided, that, notwithstanding anything to the contrary contained herein,
this sentence shall not obligate the Buyer to divest or hold separate any assets
or enter into any agreement not contemplated by this Agreement or modify this
Agreement.

         (c) Operation of Business. 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 or as contemplated by Schedule 5(c),
cause or (to the extent any Seller Party or its Affiliate has the Legal Right)
permit any Acquired Company or Cotenancy Asset to engage in any practice, take
any action, or enter into any transaction outside the Ordinary

                                       26
<PAGE>

Course of Business or, with respect to the Relevant Assets, 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 or Schedule 5(c),
the Seller shall not, and shall not cause or (to the extent any Seller Party has
the Legal Right) permit any Acquired Company or Cotenancy Asset to, do any of
the following:

                  (i) issue, sell, pledge, dispose of, grant, encumber, or
         authorize the issuance, sale, pledge, disposition, or grant of any
         Equity Interest of any Acquired Company or any Commitments with respect
         to any Equity Interest of any Acquired Company;

                  (ii) cause or allow any part of the Acquired Company Equity
         Interests or the Relevant Assets to become subject to an Encumbrance,
         except for Permitted Encumbrances and other Encumbrances identified in
         Section 4(c);

                  (iii) amend in any material respect any Acquired Company
         Contract material to the Relevant Assets or any Acquired Company or
         Cotenancy Asset (including any Acquired Company's or Cotenancy Asset's
         Organizational Documents) or terminate any such material contract or
         agreement before the expiration of the term thereof other than to the
         extent any such material contract or agreement expires in accordance
         with its terms in the Ordinary Course of Business;

                  (iv) except as required by Law, make, change or revoke any Tax
         election relevant to any Acquired Company or Relevant Asset;

                  (v) (A) acquire (including by merger, consolidation or
         acquisition of Equity Interest or assets) any corporation, partnership,
         limited liability company or other business organization or any
         division thereof or any material amount of assets; (B) incur any
         Indebtedness for borrowed money or issue any debt securities or assume,
         guarantee, endorse, or otherwise as an accommodation become responsible
         for, the obligations of any Person, or make any loans or advances
         except for intercompany borrowing among the Acquired Companies in the
         Ordinary Course of Business; (C) except for the Disposed Assets, sell,
         lease or otherwise dispose of any property or assets, other than sales
         of goods or services in the Ordinary Course of Business; or (D) enter
         into or amend a contract, agreement, commitment, or arrangement with
         respect to any matter set forth in this Section 5(c)(v) or (except for
         contracts with aggregate Obligations of the applicable Acquired Company
         not in excess of $10,000) otherwise not in the Ordinary Course of
         Business; provided that notwithstanding any provision of this
         Agreement, if the Buyer expressly consents in writing (x) each Acquired
         Company shall be entitled to dividend and/or distribute to its Equity
         Interest holders, at any time, and from time to time, such cash
         generated by such company's business to which such Equity Interest
         holder would otherwise be entitled (other than cash arising from
         borrowings by such company or sales of

                                       27
<PAGE>

         assets by such company outside of the Ordinary Course of Business) so
         long as such dividends and/or distributions are reflected as a Purchase
         Price Decrease, where appropriate, and (y) each Acquired Company may
         make or incur capital expenditures in accordance with the terms of its
         Organizational Documents and the capital expenditures budget set forth
         on Schedule 5(c)(v); and provided further that, to the extent Channel
         or El Paso Intrastate receives any insurance proceeds from the Channel
         Rupture, El Paso Intrastate may distribute its share of such proceeds
         to the owners of the El Paso Intrastate LP Interest and the El Paso
         Intrastate GP Interest in accordance with its Organizational Documents;

                  (vi) change any Acquired Company's accounting practices in any
         material respect with the exception of any changes in accounting
         methodologies that have already been agreed upon by its Equity Interest
         holders, consistent with its Organizational Documents; or

                  (vii) initiate or settle any litigation, complaint, rate
         filing or administrative proceeding.

         (d) Intercompany Transactions. All outstanding receivables, payables
and other intercompany transactions and arrangements between the Seller or any
of its Affiliates, on the one hand, and any Acquired Company, on the other hand,
shall remain in full force and effect through and after the Closing.

         (e) Full Access. To the extent it has 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 in a manner so as not to
interfere with the normal business operations of the Seller and its Affiliates,
to all premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to any Acquired Company or any of the
Relevant Assets.

         (f) Liens and Encumbrances. Prior to the Closing, the Seller shall
obtain releases of all liens and other Encumbrances disclosed in Schedule
4(c)(i), without any post-Closing liability or expense to any Acquired Company
or Acquired Company Asset or any Buyer Party, and shall provide proof of such
releases to the Buyer at the Closing.

         (g) Prince Pre-Closing Matters. The Buyer shall ensure that, until the
closing of the transactions contemplated by the Prince PSA, El Paso Production
and its Affiliates shall have the access and other rights to the books, records
and assets of Argo provided in Section 5 of the Prince PSA.

      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 of the Parties
shall take such further action (including the execution and delivery of such
further instruments and documents) as the

                                       28
<PAGE>

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 any Party
actively is contesting or defending against any 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 involving any Acquired Company or the Relevant Assets, the
other Party shall cooperate with the contesting or defending Party and its
counsel in the 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 the defense or contest, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8).

         (c) Surety Bonds; Guarantees. The Buyer agrees to be substituted as the
surety or guarantor of any surety bonds or guarantees issued by the Seller or
any of its Affiliates in connection with the Acquired Companies or the Relevant
Assets, including the surety bonds and guarantees listed on Schedule 6(c). The
Buyer and the Seller shall cooperate to effect all such substitutions and the
Buyer shall indemnify and hold the Seller harmless from and against any Adverse
Consequences arising from the failure of the Buyer to be so substituted. The
Buyer shall use commercially reasonable efforts to obtain a release of the
Seller from any surety or guaranty obligations with respect to the Acquired
Companies or the Relevant Assets.

         (d) Delivery and Retention of Records. On or promptly after the Closing
Date, the Seller shall 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 or the
Relevant Assets (other than Tax Records) that are in the possession or control
of the Seller (the "Records"). The Buyer agrees to (i) hold the Records and not
to destroy or dispose of any thereof for a period of ten 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 60 days before such destruction or disposition to surrender
them to the Seller and if the Seller does not accept such offer within 20 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, at any time, 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; provided, further that in
the event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law.

         (e) Pipeline Integrity Program. Through December 31, 2006, the Seller
shall cause its applicable Affiliates to continue to diligently and in good
faith implement and complete as soon as reasonably practicable the Pipeline
Integrity Program to the extent relating to any

                                       29
<PAGE>

pipelines constituting part of the Acquired Company Assets (other than the
leased Old Ocean Pipeline) and the Operated Cotenancies in accordance with such
program, all applicable Laws, El Paso Corporation's policies and procedures and
prudent industry practices.

         (f) Channel Insurance Proceeds. To the extent Channel or El Paso
Intrastate receives any insurance proceeds from the Channel Rupture, the Buyer
shall cause El Paso Intrastate to pay to El Paso Field Services, L.P., an
Affiliate of the Seller, El Paso Intrastate's share of such insurance proceeds.

         (g) Operatorship of Operated Cotenancies. The Seller Parties shall take
any further action that may be required for the Buyer (or its designee) to
become the operator of the Operated Cotenancies.

         (h) Assignment of Rights. The Seller will assign and will cause its
Affiliates to assign, upon the Buyer's request, any and all rights (including
claims) of the Seller or its Affiliates relating to any of the Acquired Company
Assets or the Cotenancy Assets under any agreement (including that certain Stock
Purchase Agreement dated as of January 27, 2000 between PG&E National Energy
Group, Inc. and El Paso Field Services Company) pursuant to which the Seller or
any of its Affiliates purchased or otherwise acquired any of the Acquired
Company Assets or the Cotenancy Assets.

      7. Conditions to Obligation to Close.

         (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) the representations and warranties of the Seller contained
         in Sections 3(a) and 4 must be true and correct in all material
         respects (without giving effect to any supplement to the Schedules, any
         qualification as to materiality, Material Adverse Effect, Knowledge,
         awareness or concepts of similar import, or any qualification or
         limitation as to monetary amount or value, except with respect to (A)
         the Non-Operated Cotenancies, (B) the representations and warranties in
         Section 4(c)(ii) and (C) the representations and warranties in Section
         4(d)(iii) with respect to latent defects, for which in each such case
         qualifications as to Knowledge shall be given effect) as of the date of
         this Agreement and at Closing (except for those which refer to a
         specific date, which must be true and correct as of such date);

                  (ii) the Seller must have performed and complied in all
         material respects with its covenants hereunder through the Closing
         (without giving effect to any supplement to the Schedules, any
         qualification as to materiality, Material Adverse Effect, Knowledge,
         awareness or concepts of similar import, or any qualification or
         limitation as to monetary amount or value);

                                       30
<PAGE>

                  (iii) 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;

                  (iv) the Seller must have obtained all material Governmental
         Authority and third party consents, including any material consents
         specified in Sections 3(a)(ii), 3(a)(iii), and 4(b) and including the
         corresponding Schedules;

                  (v) the Seller must have delivered to the Buyer a certificate
         to the effect that each of the conditions specified in Sections
         7(a)(i)-(iv) is satisfied in all respects;

                  (vi) the FTC must have approved the transactions contemplated
         hereunder;

                  (vii) the Closing Date shall be no earlier than March 28,
         2002;

                  (viii) The Buyer shall have received financing for the
         transactions contemplated herein satisfactory to the Buyer;

                  (ix) the Board of Directors of the General Partner shall have
         received a fairness opinion acceptable to such Board (in its sole
         discretion) from UBS Warburg LLC or any other financial advisor
         acceptable to such Board (in its sole discretion) with respect to the
         transactions contemplated herein;

                  (x) the transactions contemplated herein shall have been
         approved by at least a majority of the members of each of (1) of the
         Board of Directors of the General Partner, (2) the independent members
         of the Board of Directors of the General Partner and (3) the Special
         Committee of the Board of Directors of the General Partner responsible
         for reviewing such transactions;

                  (xi) EPFS Holding and the Buyer must have executed and
         delivered the Contribution Agreement and the closing of the
         transactions contemplated therein must have occurred; and

                  (xii) The Buyer and El Paso Production must have executed and
         delivered the Prince PSA and the closing of the transactions
         contemplated therein must have occurred.

   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:

                                       31
<PAGE>

                  (i) the representations and warranties of the Buyer contained
         in Section 3(b) must be true and correct in all material respects
         (without giving effect to any supplement to the Schedules, any
         qualification as to materiality, Material Adverse Effect, Knowledge,
         awareness or concepts of similar import, or any qualification or
         limitation as to monetary amount or value) as of the date of this
         Agreement and at Closing (except for those which refer to a specific
         date, which must be true and correct as of such date);

                  (ii) the Buyer must have performed and complied in all
         material respects with each of its covenants hereunder through the
         Closing (without giving effect to any supplement to the Schedules, any
         qualification as to materiality, Material Adverse Effect, Knowledge,
         awareness or concepts of similar import, or any qualification or
         limitation as to monetary amount or value);

                  (iii) 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;

                  (iv) the Seller must have obtained all material Governmental
         Authority and third party consents, including material consents
         specified in Sections 3(a)(ii), 3(a)(iii), and 4(b) and including the
         corresponding Schedules;

                  (v) the Buyer must have delivered to the Seller a certificate
         to the effect that each of the conditions specified in Sections
         7(b)(i)-(iv) is satisfied in all respects;

                  (vi) the FTC must have approved the transactions contemplated
         hereunder;

                  (vii) EPFS Holding and the Buyer must have executed and
         delivered the Contribution Agreement and the closing of the
         transactions contemplated therein must have occurred; and

                  (viii) The Buyer and El Paso Production must have executed and
         delivered the Prince PSA and the closing of the transactions
         contemplated therein must have occurred.

    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. Remedies for Breaches of this Agreement.

         (a) Survival of Representations and Warranties. (i) All of the
representations and warranties of the Seller contained in Sections 3(a) and 4
(other than Sections 4(c)(iii), 4(f) and 4(h)(ii)) shall survive the Closing
hereunder for a period of three years after the Closing

                                       32
<PAGE>

Date; (ii) the representations and warranties of the Seller contained in Section
4(c)(iii) shall survive the Closing forever; (iii) the representations and
warranties of the Seller contained in Section 4(f) shall survive the Closing
with respect to any given claim that would constitute a breach of such
representation or warranty until 90 days after the expiration of the statute of
limitations applicable to the underlying Tax matter giving rise to that claim,
and (iv) the representations and warranties of the Seller contained in Section
4(h)(ii) shall survive the Closing for a period of one year after the Closing
Date. The representations and warranties of the Buyer contained in Section 3(b)
shall survive the Closing for a period of three years after the Closing Date.
The covenants and obligations contained in Sections 2 and 6 and all other
covenants and obligations contained in this Agreement (other than Section
8(b)(iv)) shall survive the Closing forever. The covenants and obligations
contained in Section 8(b)(iv) shall survive the Closing for a period of three
years after the Closing Date.

         (b) Indemnification Provisions for Benefit of the Buyer.

                  (i) In the event: (x) the Seller breaches any of its
         representations or warranties (without giving effect to any supplement
         to the Schedules, any qualification as to materiality, Material Adverse
         Effect, Knowledge, awareness or concepts of similar import, or any
         qualification or limitation as to monetary amount or value, except with
         respect to (A) the Non-Operated Cotenancies, (B) the representations
         and warranties in Section 4(c)(ii) and (C) the representations and
         warranties in Section 4(d)(iii) with respect to latent defects, for
         which in each such case qualifications as to Knowledge shall be given
         effect) contained herein (other than a representation or warranty
         contained in Section 4(c)(iii) or 4(f)); (y) there is an applicable
         survival period pursuant to Section 8(a); and (z) the Buyer makes a
         written claim for indemnification against the Seller pursuant to
         Section 11(g) within such survival period, then the Seller agrees to
         release and indemnify the Buyer Indemnitees from and against any
         Adverse Consequences by reason of all Adverse Events suffered by the
         Buyer Indemnitees; provided, that the Seller shall not have any
         obligation to indemnify the Buyer Indemnitees from and against any such
         Adverse Consequences by reason of all Adverse Events (A) until the
         Buyer Indemnitees, in the aggregate, have suffered Adverse Consequences
         by reason of all Adverse Events in excess of an aggregate deductible
         amount equal to 1% of the Combined Value (after which point the Seller
         shall be obligated only to indemnify the Buyer Indemnitees from and
         against further such Adverse Consequences) or thereafter (B) to the
         extent the Adverse Consequences the Buyer Indemnitees, in the
         aggregate, have suffered by reason of all Adverse Events exceeds an
         aggregate ceiling amount equal to 50% of the Combined Value (after
         which point the Seller shall have no obligation to indemnify the Buyer
         Indemnitees from and against further such Adverse Consequences);
         provided, however, that the deductible amount with respect to breaches
         of Section 4(c)(i) shall be $750,000.

                  (ii) In the event: (x) the Seller breaches any of its
         covenants or obligations in Sections 2 or 6 or any
         other covenants or obligations in this Agreement or any representation
         or warranty contained in Section 4(c)(iii) or 4(f)

                                       33
<PAGE>

         (in each case above without giving effect to any supplement to the
         Schedules, any qualification as to materiality, Material Adverse
         Effect, Knowledge, awareness or concepts of similar import, or any
         qualification or limitation as to monetary amount or value); (y) there
         is an applicable survival period pursuant to Section 8(a); and (z) the
         Buyer makes a written claim for indemnification against the Seller
         pursuant to Section 11(g) within such survival period, then the Seller
         agrees to release and indemnify the Buyer Indemnitees from and against
         the entirety of any Adverse Consequences suffered by the Buyer
         Indemnitees.

                  (iii) The Seller shall release, indemnify and hold harmless
         the Buyer Indemnitees against any and all Adverse Consequences
         resulting by reason of (a) joint and several liability with the Seller
         arising by reason of having been required to be aggregated with the
         Seller under Section 414(o) of the Code, or having been under "common
         control" with the Seller, within the meaning of Section 4001(a)(14) of
         ERISA.

                  (iv) In the event: (x) there is an applicable survival period
         pursuant to Section 8(a) and (y) the Buyer makes a written claim for
         indemnification against the Seller pursuant to Section 11(g) within
         such survival period, except to the extent the Buyer is obligated to
         release and indemnify the Seller under Section 8(c)(ii)(1), then the
         Seller agrees to release and indemnify the Buyer Indemnitees from and
         against the entirety of any Adverse Consequences suffered by the Buyer
         Indemnitees with respect to, any environmental condition, claim or loss
         with respect to any Acquired Company or any of the Relevant Assets
         arising as a result of events occurring on or prior to the Purchase
         Price Adjustment Date, including the matters disclosed in Schedule
         4(i).

                  (v) [Intentionally omitted.]

                  (vi) With respect to each calendar year through December 31,
         2006, the Seller shall release, indemnify and hold harmless the Buyer
         Indemnitees against any and all Pipeline Integrity Costs incurred
         (whether paid or payable) with respect to the Acquired Company Assets
         and the Operated Cotenancies to the extent such Pipeline Integrity
         Costs in such year exceed $5,000,000 (which amount shall be prorated to
         $3,750,000 for the period from April 1, 2002 to December 31, 2002).

                  (vii) The Seller shall release, indemnify and hold harmless
         the Buyer Indemnitees against any and all Adverse Consequences with
         respect to the Disposed Obligations and the ownership or operation of
         any Disposed Assets or Disposed Obligations (whether prior to or after
         Closing), including any Tax attributable thereto.

                  (viii) The Seller shall release, indemnify and hold harmless
         the Buyer Indemnitees against any and all Adverse Consequences suffered
         by the Buyer Indemnitees with respect to, any outstanding injunction,
         judgment, order, decree,

                                       34
<PAGE>

         ruling, or charge, or any pending or threatened action, suit,
         proceeding, hearing, or investigation of, in, or before any court or
         quasi-judicial or administrative agency of any federal, state, local,
         or foreign jurisdiction, relating to any Acquired Company or any of the
         Relevant Assets on the Closing Date, including the matters listed on
         Schedule 4(h).

                  (ix) The Seller shall release, indemnify and hold harmless the
         Buyer Indemnitees against any and all Adverse Consequences arising as a
         result of any of the Reorganization Transactions.

                  (x) Notwithstanding anything to the contrary contained in
         Sections 8(b)(i), (iii), (iv) and (v), the Seller shall not have any
         obligation to indemnify any Buyer Indemnified Party to the extent that
         the payment thereof would cause the Seller's aggregate indemnity
         payments under all of Sections 8(b)(i), (iii), (iv) and (v) (but
         excluding Sections 8(b)(ii), (vi), (vii), (viii) and (ix)) to exceed
         100% of the Combined Value.

                  (xi) To the extent any Buyer Indemnitee becomes liable to, and
         is ordered to and does pay to any third party, punitive, exemplary,
         special or consequential damages caused by a breach by the Seller of
         any representation, warranty or covenant contained in this Agreement,
         then such punitive, exemplary, special or consequential damages shall
         be deemed actual damages to such Buyer Indemnitee and included within
         the definition of Adverse Consequences for purposes of this Section 8.

                  (xii) Except for the rights of indemnification provided in
         this Section 8, the Buyer hereby waives any claim or cause of action
         pursuant to common or statutory law or otherwise against the Seller
         arising from any breach by the Seller of any of its representations,
         warranties or covenants under this Agreement or the transactions
         contemplated hereby.

        (c) Indemnification Provisions for Benefit of the Seller.

                  (i) In the event: (x) the Buyer breaches any of its
         representations, warranties or covenants contained herein (without
         giving effect to any supplement to the Schedules, any qualification as
         to materiality, Material Adverse Effect, Knowledge, awareness or
         concepts of similar import, or any qualification or limitation as to
         monetary amount or value); (y) there is an applicable survival period
         pursuant to Section 8(a); and (z) the Seller makes a written claim for
         indemnification against the Buyer pursuant to Section 11(g) within such
         survival period, then the Buyer agrees to release and indemnify the
         Seller Indemnitees from and against the entirety of any Adverse
         Consequences suffered by such Seller Indemnitees.

                  (ii) The Buyer agrees to release and indemnify the Seller
         Indemnitees from and against the entirety of any Adverse Consequences
         relating to any of (1)

                                       35
<PAGE>

         any environmental condition, claim or loss with respect to any Acquired
         Company or any of the Relevant Assets arising from or related to
         mercury contamination emanating from mercury meters used in connection
         therewith or (2) the ownership and operation of each Acquired Company
         and each Relevant Asset (including those arising during, related to or
         otherwise attributable to the period commencing with the Purchase Price
         Adjustment Date).

                  (iii) To the extent any Seller Indemnitee becomes liable to,
         and is ordered to and does pay to any third party, punitive, exemplary,
         special or consequential damages caused by a breach by the Buyer of any
         representation, warranty or covenant contained in this Agreement, then
         such punitive, exemplary, special or consequential damages shall be
         deemed actual damages to such Seller Indemnitee and included within the
         definition of Adverse Consequences for purposes of this Section 8.

                  (iv) Except for the rights of indemnification provided in this
         Section 8, the Seller hereby waives any claim or cause of action
         pursuant to common or statutory law or otherwise against the Buyer
         arising from any breach by the Buyer of any of its representations,
         warranties or covenants under this Agreement or the transactions
         contemplated hereby.

        (d) Matters Involving Third Parties.

                  (i) If any third party shall notify any Party (the
         "Indemnified Party") with respect to any matter (a "Third Party Claim")
         that may give rise to a claim for indemnification against any other
         Party (the "Indemnifying Party") under this Section 8, then the
         Indemnified Party shall promptly (and in any event within five business
         days after receiving notice of the Third Party Claim) notify the
         Indemnifying Party thereof in writing.

                  (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; 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 without the prior written consent of the Indemnified Party
         (not to be withheld unreasonably) unless the judgment or proposed
         settlement involves only the payment of money damages and does not
         impose an injunction or other equitable relief upon the Indemnified
         Party.

                  (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

                                       36
<PAGE>

         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 2% interest or discount rate, as appropriate. 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 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.

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

      9. Tax Matters.

         (a) 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 Relevant Assets or the Acquired Companies. The Buyer shall pay (or cause
to be paid) any Taxes due with respect to such Tax Returns.

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

         (c) Straddle Periods. The Buyer shall be responsible for Taxes of the
Relevant Assets (other than the Disposed Assets) and the Acquired Companies
related to the portion of any Straddle Period occurring after the Closing Date.
The Seller shall be responsible for Taxes of the Relevant Assets and the
Acquired Companies relating to the portion of any Straddle Period occurring
before and on the Closing Date. With respect to any Straddle Period, to the
extent permitted by applicable Law, the Seller or the Buyer shall elect to treat
the Closing Date as the last day of the Tax period. If applicable Law shall not
permit the Closing Date to be the last day of a period, then (i) real or
personal property Taxes with respect to the Relevant Assets and the Acquired
Companies shall be allocated based on the number of days in the partial period
before and after the Closing Date, (ii) in the case of all other Taxes based on
or in respect

                                       37
<PAGE>

of income, the Tax computed on the basis of the taxable income or
loss attributable to the Relevant 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
Relevant Assets and the Acquired Companies for each partial period as determined
from their books and records.

         (d) Straddle Returns. The Buyer shall prepare any Straddle Returns. The
Buyer shall deliver, at least 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, including the allocation of
taxable income and Taxes under Section 9(c), 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 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 5 days before the due date for
the payment of Taxes with respect to such Straddle Returns, 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 10 days after such payment, the Seller and the Buyer shall refer the
matter to an independent "Big-Five" 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 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 Closing Date.

         (e) Claims for Refund. The Buyer shall not, and shall cause the
Acquired Companies and any of their Affiliates not to, file any claim for refund
of Taxes with respect to the Relevant Assets and the Acquired Companies for
whole or partial taxable periods on or before the Closing Date.

         (f) Indemnification. The Buyer agrees to indemnify the Seller against
all Taxes of or with respect to the Relevant Assets and the Acquired Companies
for any Post-Closing Tax Period and the portion of any Straddle Period occurring
after the Closing Date. The Seller agrees to indemnify the Buyer against all
Taxes of or with respect to the Relevant Assets and the Acquired Companies for
any Pre-Closing Tax Period and the portion of any Straddle Period occurring on
or before the Closing Date, and the Buyer Parties against all Taxes of or with
respect to the Disposed Assets, and all Taxes arising directly as a result of
the Reorganization Transactions.

                                       38
<PAGE>

         (g) 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(g) 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.

                  (ii) The Buyer and the Seller further agree, upon request, to
         use their Best 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 Section 6043 of the Code and all
         Treasury Department Regulations promulgated thereunder.

         (h) 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 Taxes and fees, 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, any transfer,
documentary, sales, use, stamp, registration and other Taxes and fees incurred
in connection with this Agreement and the transactions contemplated hereby (but
not with respect to the Reorganization Transactions).

         (i) 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.

         (j) 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 Relevant
Assets or the Acquired Companies for whole or partial periods for which it is
indemnified by any 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

                                       39
<PAGE>

party is otherwise required to pay the indemnified party pursuant to this
Section 9(j) shall be 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(j) shall control the procedure for Tax indemnification matters to the extent
it is inconsistent with any other provision of this Agreement.

         (k) 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.

         (l) Powers of Attorney. 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(k) (including any refund claims which turn into audits or
disputes).

         (m) 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 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(m),
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.

         (n) Purchase Price Allocation. The Seller and the Buyer agree that the
actual Purchase Price allocable to the Assigned Equity Interests, El Paso Texas
Interest and Acquired Company Assets shall be allocated to the Acquired Company
Assets for all purposes (including Tax and financial accounting purposes) as
jointly agreed between the Buyer and the Seller within ninety (90) days after
the Closing Date. The Buyer, the Seller and their applicable Affiliates shall
file all Tax Returns (including amended Tax Returns and claims for refund) and
information reports in a manner consistent with such allocation.

         (o) Closing Tax Certificate. At the Closing, the Seller shall deliver
to the Buyer a certificate, in the form of Exhibit K, 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.

                                       40
<PAGE>

         (p) Like Kind Exchanges. Each of the Buyer and Seller shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with enabling the transactions contemplated herein to qualify in
whole or in part as a "like-kind exchange" pursuant to Section 1031 of the Code.
Each of the Buyer and Seller agree to indemnify the other Party against any and
all costs and expenses incurred with respect to furnishing such cooperation.
Each Party may assign all or a portion of its rights under this Agreement to a
"qualified intermediary" to facilitate a like-kind exchange. The agreement
between the applicable Party and the qualified intermediary ("EXCHANGE
AGREEMENT") shall be set forth as Exhibit G.

     10. Termination.

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

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

                  (ii) the Buyer may terminate this Agreement by giving written
         notice to the Seller at any time before Closing (A) in the event the
         Seller has breached any representation, warranty or covenant contained
         in this Agreement in any material respect, the Buyer has notified the
         Seller of the breach, the breach has continued without cure for a
         period of 10 days after the 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; (B) if the Closing
         shall not have occurred on or before 9:00 a.m. (Houston time) on April
         1, 2002 (unless the failure results primarily from the Buyer itself
         breaching any representation, warranty or covenant contained in this
         Agreement); or (C) if the transactions contemplated hereby do not
         receive all required approvals of the FTC;

                  (iii) the Seller may terminate this Agreement by giving
         written notice to the Buyer at any time before the Closing (A) in the
         event the Buyer has breached any representation, warranty or covenant
         contained in this Agreement in any material respect, the Seller has
         notified the Buyer of the breach, the breach has continued without cure
         for a period of 10 days after the 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; (B) if
         the Closing shall not have occurred on or before 9:00 a.m. (Houston
         time) on April 1, 2002 (unless the failure results primarily from the
         Seller breaching any representation, warranty or covenant contained in
         this Agreement); or (C) if the transactions contemplated hereby do not
         receive all required approvals of the FTC;

                  (iv) the Buyer or the Seller may terminate this Agreement if
         any court of competent jurisdiction or any governmental, administrative
         or regulatory authority, agency or body shall have issued an order,
         decree or ruling or shall have taken any other action permanently
         enjoining, restraining or otherwise prohibiting

                                       41
<PAGE>

         the transactions contemplated hereby and such order, decree, ruling or
         other action shall have become final and nonappealable; and

                  (v) the Buyer or the Seller may terminate this Agreement if
         the Contribution Agreement is terminated for any reason.

         (b) Effect of Termination. Except for the obligations under Sections 8,
10 and 11, if any Party terminates this Agreement pursuant to Section 10(a), all
rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for any liability of any Party
then in breach).

     11. Miscellaneous.

         (a) Public Announcements. Any Party is permitted to issue a press
release or make a public announcement concerning this Agreement without the
other Parties' consents, in which case the disclosing Party shall provide an
advance copy of the proposed public disclosure to the non-disclosing Parties and
permit the non-disclosing Parties the opportunity to reasonably comment on such
proposed disclosure. The Parties agree to cooperate in good faith to issue
separate and simultaneous press releases within twenty-four (24) hours following
the execution of this Agreement by all Parties.

         (b) Insurance. The Buyer acknowledges and agrees that, following the
Closing, any Subject Insurance Policies shall be terminated or modified to
exclude coverage of all or any portion of the Relevant Assets or Acquired
Companies by the Seller or any of its Affiliates, 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 third party to be
maintained for or by the Relevant Assets or the Acquired Companies. The Buyer
further acknowledges and agrees that the Buyer may need to provide to certain
Governmental Authorities and third parties evidence of such replacement or
substitute insurance coverage for the continued operations or businesses of the
Relevant Assets or the Acquired Companies. If any claims are made or losses
occur prior to the Closing Date that relate solely to the Relevant Assets or the
business activities of the Acquired Companies and such claims, or the claims
associated with such losses, properly may be made against the policies retained
by the Seller or its Affiliates after the Closing, then the Seller shall use its
Best Efforts so that the Buyer can file, notice, and otherwise continue to
pursue these claims pursuant to the terms of such policies; provided, however,
nothing in this Agreement shall require the Seller to maintain or to refrain
from asserting claims against or exhausting any retained policies.

         (c) 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, except that the Administrative Agent is a third-party beneficiary of
Section 11(d), and such Section may not be amended or modified without the
Administrative Agent's written consent.

         (d) 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

                                       42
<PAGE>

assigns. Prior to the Closing the Buyer may not assign this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the Seller; provided, however, without the prior written approval of
the Seller, the Buyer and its permitted successors and assigns may assign any or
all of its rights, interests or obligations under this Agreement (i) to an
Affiliate of the Buyer, including designating one or more Affiliates of the
Buyer to be the assignee of some or any portion of the Acquired Company Assets,
(ii) in connection with granting a lien, pledge, mortgage or other security
interest pursuant to a bona fide lending transaction, or (iii) pursuant to the
foreclosure or settlement of any assignment made pursuant to (ii) above;
provided the Buyer is not released from any of its obligations or liabilities
hereunder. Each Party may assign either this Agreement or any of its rights,
interests or obligations hereunder, without the prior written approval of the
other Party, to a qualified intermediary in connection with any transaction
described in Section 9(p); provided, however, that no such assignment shall
relieve any Party from any of its obligations or liabilities under this
Agreement. The Seller acknowledges that the Buyer has granted to the
Administrative Agent a lien on and security interest in all of its right, title
and interest in and to this Agreement.

         (e) 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.

         (f) 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.

         (g) 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:

   If to the Seller:          El Paso Tennessee Pipeline Co.
                              Attn: President
                              El Paso Building
                              1001 Louisiana
                              Houston, Texas 77002

   If to the Buyer:           El Paso Energy Partners, L.P.
                              Attn: President
                              4 Greenway Plaza
                              Houston, Texas 77046
                              (713) 420-2131

Any 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 (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been

                                       43
<PAGE>

duly given unless and until it actually is received by the intended recipient.
Any 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.

         (h) 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 HARRIS
COUNTY, TEXAS.

         (i) 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 any Party of any default, misrepresentation,
or breach of warranty or covenant 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.

         (j) 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.

         (k) Transaction Expenses. Each of the Buyer and the Seller shall bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.

         (l) 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 any 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. Each certificate delivered pursuant to this Agreement shall
be deemed a part hereof, and any representation, warranty or covenant herein
referenced or affirmed in such certificate shall be treated as a representation,
warranty or

                                       44
<PAGE>

covenant given in the correlated Section hereof on the date of such certificate.
Additionally, any representation, warranty or covenant made in any such
certificate shall be deemed to be made herein.

         (m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.

         (n) Entire Agreement. THIS AGREEMENT (INCLUDING THE DOCUMENTS REFERRED
TO HEREIN) CONSTITUTES THE ENTIRE AGREEMENT AMONG 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.

                                      *****

                                       45
<PAGE>

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

                             EL PASO ENERGY PARTNERS, L.P.

                             By: /s/ Keith B. Forman
                                 -------------------
                                 Vice President and Chief Financial Officer

                             EL PASO TENNESSEE PIPELINE CO.

                             By: /s/ H. Brent Austin
                                 -------------------
                                 Executive Vice President and Chief Financial
                                 Officer<PAGE>
                                                                    EXHIBIT 10.O

                                                               Execution Version

            ========================================================

                             CONTRIBUTION AGREEMENT

            ========================================================

                                 By and Between

                     EL PASO FIELD SERVICES HOLDING COMPANY
                                  (Contributor)

                                       and

                          EL PASO ENERGY PARTNERS, L.P.
                                    (Issuer)

                       ==================================

                          Covering the Contribution of

                         ALL OF THE EQUITY INTERESTS IN

                         EL PASO INDIAN BASIN L.P., and
                     EL PASO INDIAN BASIN GP HOLDING L.L.C.
                              (Acquired Companies)

                       ==================================

                                  April 1, 2002

<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                                PAGE
                                                                                                                ----

<S>      <C>   <C>                                                                                              <C>
1.       Definitions..............................................................................................1

2.       The Transactions.........................................................................................9
         (a)   Contribution.......................................................................................9
         (b)   The Closing........................................................................................9
         (c)   Deliveries at the Closing..........................................................................9
         (d)   Proposed Closing Statement and Post-Closing Adjustment.............................................9

3.       Representations and Warranties Concerning the Transaction...............................................11
         (a)   Representations and Warranties of the Contributor.................................................11
         (b)   Representations and Warranties of the Issuer......................................................12

4.       Representations and Warranties Concerning the Acquired Company Equity
         Interests, Acquired Companies and Relevant Assets.......................................................14
         (a)   Organization, Qualification, and Company Power....................................................14
         (b)   Noncontravention..................................................................................15
         (c)   Title to and Condition of Assets..................................................................15
         (d)   Material Change...................................................................................17
         (e)   Legal Compliance..................................................................................18
         (f)   Tax Matters.......................................................................................18
         (g)   Contracts and Commitments.........................................................................18
         (h)   Litigation........................................................................................18
         (i)   Environmental Matters.............................................................................19
         (j)   Preferential Purchase Rights......................................................................20
         (k)   [Intentionally omitted]...........................................................................20
         (l)   Employee Matters..................................................................................20
         (m)   Prohibited Events.................................................................................20
         (n)   Regulatory Matters................................................................................20
         (o)   Intercompany Transactions.........................................................................20
         (p)   Disclaimer of Representations and Warranties Concerning Personal Property,
               Equipment, and Fixtures...........................................................................21

5.       Pre-Closing Covenants...................................................................................21
         (a)   General...........................................................................................21
         (b)   Notices and Consents..............................................................................21
         (c)   Operation of Business.............................................................................21
         (d)   Intercompany Transactions.........................................................................23
         (e)   Full Access.......................................................................................23
         (f)   Liens and Encumbrances............................................................................23

6.       Post-Closing Covenants..................................................................................23
</Table>

                                       i
<PAGE>

<Table>
<S>      <C>   <C>                                                                                              <C>
         (a)   General...........................................................................................23
         (b)   Litigation Support................................................................................23
         (c)   Surety Bonds; Guarantees..........................................................................24
         (d)   Delivery and Retention of Records.................................................................24
         (e)   Assignment of Rights..............................................................................24

7.       Conditions to Obligation to Close.......................................................................25
         (a)   Conditions to Obligation of the Issuer............................................................25
         (b)   Conditions to Obligation of the Contributor.......................................................26

8.       Remedies for Breaches of this Agreement.................................................................27
         (a)   Survival of Representations and Warranties........................................................27
         (b)   Indemnification Provisions for Benefit of the Issuer..............................................27
         (c)   Indemnification Provisions for Benefit of the Contributor.........................................30
         (d)   Matters Involving Third Parties...................................................................30
         (e)   Determination of Amount of Adverse Consequences...................................................31
         (f)   Tax Treatment of Indemnity Payments...............................................................31

9.       Tax Matters.............................................................................................31
         (a)   Post-Closing Tax Returns..........................................................................31
         (b)   Pre-Closing Tax Returns...........................................................................32
         (c)   Straddle Periods..................................................................................32
         (d)   Straddle Returns..................................................................................32
         (e)   Claims for Refund.................................................................................33
         (f)   Indemnification...................................................................................33
         (g)   Cooperation on Tax Matters........................................................................33
         (h)   Certain Taxes.....................................................................................33
         (i)   Confidentiality...................................................................................33
         (j)   Audits............................................................................................34
         (k)   Control of Proceedings............................................................................34
         (l)   Powers of Attorney................................................................................34
         (m)   Remittance of Refunds.............................................................................34
         (n)   [Intentionally omitted]...........................................................................35
         (o)   Closing Tax Certificate...........................................................................35

10.      Termination.............................................................................................35
         (a)   Termination of Agreement..........................................................................35
         (b)   Effect of Termination.............................................................................36

11.      Miscellaneous...........................................................................................36
         (a)   Public Announcements..............................................................................36
         (b)   Insurance.........................................................................................36
         (c)   No Third Party Beneficiaries......................................................................36
         (d)   Succession and Assignment.........................................................................36
         (e)   Counterparts......................................................................................37
         (f)   Headings..........................................................................................37
         (g)   Notices...........................................................................................37
</Table>

                                       ii

<PAGE>

<Table>
<S>      <C>   <C>                                                                                              <C>
         (h)   Governing Law and Venue...........................................................................38
         (i)   Amendments and Waivers............................................................................38
         (j)   Severability......................................................................................38
         (k)   Transaction Expenses..............................................................................38
         (l)   Construction......................................................................................38
         (m)   Incorporation of Exhibits and Schedules...........................................................39
         (n)   Entire Agreement..................................................................................39
</Table>

                             EXHIBITS AND SCHEDULES

Exhibit A:        Indian Basin
Exhibit B:        Subject Indebtedness
Exhibit C:        Form of Assigned Equity Interests Contribution and Assignment
Exhibit D:        Form of Parent Guaranty
Exhibit E:        Form of Certification of Non-Foreign Status

Schedule 1(a):          Subject Insurance Policies
Schedule 1(b):          Permitted Encumbrances
Schedule 1(c):          Reorganization Transactions
Schedule 3(a)(ii):      Consents (Contributor)
Schedule 3(a)(iii):     Noncontravention (Contributor)
Schedule 3(b)(ii):      Consents (Issuer)
Schedule 3(b)(iii):     Noncontravention (Issuer)
Schedule 4(b):          Noncontravention (Acquired Companies)
Schedule 4(c)(i):       Encumbrances
Schedule 4(c)(ii):      Condition of Relevant Assets
Schedule 4(c)(v):       Encumbrances for Borrowed Money
Schedule 4(d):          Material Changes
Schedule 4(f):          Tax Matters
Schedule 4(g)(i):       Acquired Company Contracts
Schedule 4(g)(ii):      Rights of Way
Schedule 4(h):          Litigation
Schedule 4(i):          Environmental Matters
Schedule 4(i)(ii):      Environmental Permits
Schedule 4(j):          Preferential Purchase Rights
Schedule 4(n):          Regulatory Matters
Schedule 4(o):          Intercompany Transactions
Schedule 5(c):          Operation of Business
Schedule 5(c)(v):       Capital Expenditures Budget
Schedule 6(c):          Surety Bonds

                                       iii
<PAGE>

                             CONTRIBUTION AGREEMENT

         THIS CONTRIBUTION AGREEMENT (this "Agreement") dated as of April 1,
2002 is by and between El Paso Field Services Holding Company, a Delaware
corporation (the "Contributor"), and El Paso Energy Partners, L.P., a Delaware
limited partnership (the "Issuer"). The Contributor and the Issuer are sometimes
referred to collectively herein as the "Parties" and individually as a "Party."

                                    RECITALS

         WHEREAS, the Contributor owns directly (i) a 99% limited partner
interest (the "El Paso Indian Basin LP Interest") in El Paso Indian Basin L.P.,
a Delaware limited partnership ("El Paso Indian Basin"), which owns a 42.38653%
undivided interest (the "Indian Basin Cotenancy Interest") in the Indian Basin
Gas Plant and related assets and facilities ("Indian Basin") located in Eddy
County, New Mexico, as evidenced by the Agreement for Construction and Operation
of Indian Basin Gas Plant, Eddy County, New Mexico dated March 30, 1965 (as
amended, restated, supplemented and otherwise modified from time to time) and
(ii) all of the issued and outstanding membership interest (the "Holding LLC
Interest" and, together with the El Paso Indian Basin LP Interest, the "Assigned
Equity Interests") in El Paso Indian Basin GP Holding L.L.C., a Delaware limited
liability company ("Holding LLC" and, together with El Paso Indian Basin, the
"Acquired Companies"), which owns a 1% general partner interest (the "El Paso
Indian Basin GP Interest" and, together with the Assigned Equity Interests, the
"Acquired Company Equity Interests") in El Paso Indian Basin; and

         WHEREAS, the Contributor desires to contribute the Assigned Equity
Interests to the Issuer in exchange for the issuance by the Issuer of common
units representing limited partner interests in the Issuer ("Common Units") to
the Contributor.

                                    AGREEMENT

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

         1. Definitions.

         "Acquired Companies " has the meaning set forth in the Recitals.

         "Acquired Company Assets" means the Indian Basin Cotenancy Interest and
the El Paso Indian Basin GP Interest.

         "Acquired Company Contracts" has the meaning set forth in Section 4(g).

         "Acquired Company Equity Interests" has the meaning set forth in the
Recitals.

                                       1
<PAGE>

         "Administrative Agent" means JPMorgan Chase Bank, in its capacity as
administrative agent under the credit agreement to be entered into among a
subsidiary of the Issuer, the Administrative Agent and the lenders party
thereto.

         "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 attorneys' fees and expenses, but excluding
punitive (except as provided in Section 8), exemplary, special or consequential
damages.

         "Adverse Contribution Agreement Event" means any breach of any
representation or warranty (without giving effect to any supplement to the
Schedules, any qualification as to materiality, Material Adverse Effect,
knowledge, awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value) of the Contributor contained in this
Agreement (other than a representation or warranty contained in Section 4(c)(i)
or 4(c)(iii).

         "Adverse Event" means any Adverse PSA Event and any Adverse
Contribution Agreement Event.

         "Adverse PSA Event" has the meaning given such term in the Purchase and
Sale Agreement.

         "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act; provided, however, that (i) with
respect to the Issuer, the term "Affiliate" shall exclude each member of the El
Paso Group, (ii) with respect to the Contributor, the term "Affiliate" shall
exclude each member of the Issuer Group, and (iii) the Acquired Companies shall
be deemed to be Affiliates (x) prior to the Closing, of the Contributor and (y)
on and after the Closing, of the Issuer.

         "Agreement" has the meaning set forth in the preface.

         "Assigned Equity Interests" has the meaning set forth in the Recitals.

         "Assigned Equity Interests Assignment" means the contribution and
assignment agreement in the form of Exhibit C.

         "Basis" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.

         "Best Efforts" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it could reasonably be expected to have an adverse effect on such
Person and would require an expense of such Person in excess of $1,000,000.

         "CERCLA" is defined in Section 4(i).

                                       2
<PAGE>

         "Closing" has the meaning set forth in Section 2(b).

         "Closing Date" has the meaning set forth in Section 2(b).

         "Closing Statement" has the meaning set forth in Section 2(d).

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

         "Combined Value" means the sum of (i) the Issue Price plus (ii) the
purchase price paid by the buyer under the Purchase and Sale Agreement plus
(iii) $119 million.

         "Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription 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.

         "Common Units" has the meaning set forth in the Recitals.

         "Contributor" has the meaning set forth in the preface.

         "Contributor Indemnitees" means, collectively, the Contributor and its
Affiliates and each of their respective officers (or Persons performing similar
functions), directors (or Persons performing similar functions), employees,
agents, and representatives.

         "Contributor Party" means each of (i) the Contributor, (ii) El Paso
Corporation, (iii) each Affiliate of the Contributor in which the Contributor
owns (directly or indirectly) an Equity Interest and which is a party to any
Transaction Agreement and (iv) up to and through the Closing, each of the
Acquired Companies.

         "Delaware LP Act" means the Delaware Revised Uniform Limited
Partnership Act as in effect on the date of this Agreement and as amended,
restated or replaced from time to time thereafter.

         "Disposed Obligations" means all Obligations of the Acquired Companies,
regardless of when such Obligations actually arise or arose, other than the
Subject Indebtedness, existing on the Closing Date and not directly related to
the Acquired Company Assets.

         "El Paso Corporation" means El Paso Corporation, a Delaware
corporation.

         "El Paso Group" means, other than members of the Issuer Group, (i) each
Affiliate of El Paso Corporation in which El Paso Corporation owns (directly or
indirectly) an Equity Interest and (ii) each natural person that is an Affiliate
of any Person described in (i) above solely because of such natural person's
position as an officer (or natural person performing similar

                                       3
<PAGE>

functions), director (or natural person performing similar functions) or other
representative of any Person described in (i) above, but only to the extent that
such natural person is acting in such capacity.

         "El Paso Indian Basin" has the meaning set forth in the Recitals.

         "El Paso Indian Basin GP Interest" has the meaning set forth in the
Recitals.

         "El Paso Indian Basin LP Interest" has the meaning set forth in the
Recitals.

         "Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest, purchase or preferential right, right of first refusal,
option, or other defect in title.

         "Environmental Law" and "Environmental Laws" have the meanings set
forth in Section 4(i).

         "Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (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 any Commitments with respect thereto, and (c)
any other direct equity ownership or participation in a Person.

         "FTC" has the meaning set forth in Section 3(a)(ii).

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

         "General Partner" means El Paso Energy Partners Company, a Delaware
corporation and the general partner of the Issuer.

         "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 all materials, substances, chemicals, gas
and wastes which are regulated under any Environmental Law or which may form the
basis for liability under any Environmental Law.

         "Holding LLC" has the meaning set forth in the Recitals.

         "Holding LLC Interest" has the meaning set forth in the Recitals.

         "Indebtedness" means, with respect to any Person, to the extent not
classified as a current liability, on a consolidated basis, all Obligations of
the Person to other Persons for (a) borrowed money, (b) any capital lease
Obligation, (c) any Obligation (whether fixed or contingent) to reimburse any
bank or other Person in respect of amounts paid or payable under a standby
letter of credit, (d) any guarantee with respect to indebtedness (of the kind
otherwise described in this definition) of any Person and (e) any liability,
indebtedness or other Obligation of the Person.

                                       4
<PAGE>

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

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

         "Indian Basin" has the meaning set forth in the Recitals.

         "Indian Basin Cotenancy Interest" has the meaning set forth in the
Recitals.

         "Issue Price" means $6,000,000 plus (i) the amount, if any, by which
the total of the Issue Price Increases exceeds the total of the Issue Price
Decreases, or minus (ii) the amount, if any, by which the total of the Issue
Price Decreases exceeds the total of the Issue Price Increases.

         "Issue Price Adjustment Date" means immediately after the close of
business on March 31, 2002.

         "Issue Price Decreases" means, without duplication, the following: (i)
100% of the amount, if any, of negative Working Capital of the Acquired
Companies as of the Issue Price Adjustment Date, as determined and calculated in
accordance with GAAP; (ii) 100% of the amount, if any, of all of the
consolidated Indebtedness (other than (a) Subject Indebtedness and (b)
Indebtedness otherwise included in Working Capital) of the Acquired Companies as
of the Issue Price Adjustment Date; and (iii) 100% of the amount, if any, of all
dividends and/or distributions made by any Acquired Company (other than
dividends and/or distributions made by El Paso Indian Basin to Holding LLC), if
any, between the Issue Price Adjustment Date and the Closing Date.

         "Issue Price Increases" means, without duplication, 100% of the amount,
if any, of positive Working Capital of the Acquired Companies as of the Issue
Price Adjustment Date, as determined and calculated in accordance with GAAP.

         "Issuer" has the meaning set forth in the preface.

         "Issuer Group" means (i) the General Partner, (ii) the Issuer, (iii)
each Affiliate of the Issuer in which the Issuer owns (directly or indirectly)
an Equity Interest and (iv) each natural person that is an Affiliate of any
Person described in (i) -- (iii) above solely because of such natural person's
position as an officer (or person performing similar functions), director (or
person performing similar functions) or other representative of any Person
described in (i) -- (iii) above, but only to the extent that such natural person
is acting in such capacity.

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

         "Issuer Party" means each of (i) the Issuer, (ii) each Affiliate of the
Issuer in which the Issuer owns (directly or indirectly) an Equity Interest and
which is a party to any Transaction Agreement, and (iii) immediately after the
Closing, each of the Acquired Companies.

                                       5
<PAGE>

         "Knowledge": an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is consciously aware of such
fact or other matter at the time of determination. A Person other than a natural
person shall be deemed to have "Knowledge" of a particular fact or other matter
if (i) any natural person who is serving as a director, executive officer,
partner, member, executor, or trustee of such Person (or in any similar
capacity) or (ii) any employee (or any natural person serving in a similar
capacity) who is charged with the ultimate responsibility for a particular area
of such Person's operations (e.g., the manager of the environmental section with
respect to knowledge of environmental matters), at the time of determination
had, Knowledge of such fact or other matter.

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

         "Legal Right" means the legal authority and right (without risk of
liability, criminal, civil or otherwise), such that the contemplated conduct
would not, to the extent arising from, related to or in any way connected with
any Acquired Company or Indian Basin (including under any Organizational
Documents thereof or any contract, agreement or arrangement related thereto)
constitute a violation, termination or breach of, or require any payment under
or cause or permit any termination under, any contract or agreement;
arrangement; applicable Law; fiduciary, quasi-fiduciary or similar duty; or any
other obligation of or by any Acquired Company or Indian Basin.

         "Market Price" means the average of the closing sales prices of the
Common Units as reported on the New York Stock Exchange for the ten trading days
ending two business days before the Closing Date or, in the case of an
indemnification payment by the Issuer hereunder, the date the Issuer is notified
by the Contributor of such indemnification obligation.

         "Material Adverse Effect" means any change or effect relating to the
Acquired Company Equity Interests, the Acquired Company Assets or the
businesses, operations (financial or otherwise) and properties of the Acquired
Companies or the Acquired Company Assets taken as a whole, that, individually or
in the aggregate with other changes or effects, materially and adversely effects
the value of the Acquired Company Equity Interests, provided that in determining
whether a Material Adverse Effect has occurred, changes or effects 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) United States or global economic
conditions or financial markets in general, or (iii) the transactions
contemplated by this Agreement, shall not be considered.

         "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.

         "Ordinary Course of Business" means the ordinary course of business
consistent with the applicable Person's past custom and practice (including with
respect to quantity and frequency).

                                       6
<PAGE>

         "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 amendments thereto.

         "Parent Guaranty" means the performance guaranty in the form of
Exhibit D.

         "Party" and "Parties" have the meanings set forth in the preface.

         "Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the Ordinary Course of Business, provided that
adequate reserve accounts have been established in accordance with GAAP; (ii)
inchoate, mechanic's, materialmen's, and similar liens; (iii) any inchoate liens
or other Encumbrances created pursuant to (1) any operating, farmout,
construction, operation and maintenance, co-owners, cotenancy, lease or similar
agreements listed on Schedule 1(b) for which amounts are not due or (2) the
Organizational Documents of any of the Acquired Companies or Indian Basin for
which amounts are not due; and (iv) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the Ordinary Course of Business which, in
the aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto as it is
currently being used or materially interfere with the ordinary conduct of the
business.

         "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 after the
Closing Date.

         "Post-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Acquired Companies with respect to a Post-Closing Tax
Period.

         "Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.

         "Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any Acquired Company with respect to a Pre-Closing Tax Period.

         "Preferential Rights" has the meaning set forth in Section 4(j).

         "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.

         "Proposed Closing Statement" has the meaning set forth in Section 2(d).

                                       7
<PAGE>

         "Purchase and Sale Agreement" means the Purchase, Sale and Merger
Agreement dated the date of this Agreement between El Paso Tennessee Pipeline
Co. and El Paso Energy Partners, L.P.

         "Records" has the meaning set forth in Section 6(d).

         "Relevant Assets" means the Acquired Company Assets and Indian Basin.

         "Reorganization Transactions" means the transactions described on
Schedule 1(c).

         "Rights of Way" has the meaning set forth in Section 4(g).

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

         "Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.

         "Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.

         "Straddle Return" means a Tax Return for a Straddle Period.

         "Subject Indebtedness" means the Obligations described on Exhibit B.

         "Subject Insurance Policies" means those material policies of
insurance, the current policies of which are listed on Schedule 1(a), which the
Contributor or any of its Affiliates maintain covering any Acquired Company
Assets, any Acquired Company or Indian Basin with respect to its assets and
operations.

         "Subject Units" means that number of Common Units to be issued to the
Contributor (or its designee) pursuant to the terms and conditions of this
Agreement, which number shall be determined by dividing (i) the Issue Price by
(ii) the Market Price.

         "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 of any kind whatsoever,
including 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.

         "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.

                                       8
<PAGE>

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

         "Transaction Agreements" means this Agreement, the Assigned Equity
Interests Assignment, the Parent Guaranty, the Purchase and Sale Agreement and
all other agreements, documents, certificates or instruments executed and
delivered in connection with the transactions contemplated herein.

         "Working Capital" means current assets less current liabilities.

         2. The Transactions.

                  (a) Contribution. Subject to the terms and conditions of this
Agreement, the Contributor agrees to contribute the Assigned Equity Interests to
the Issuer, and the Issuer agrees to issue the Subject Units to the Contributor
or its designee.

                  (b) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of the
Contributor, commencing at 10:00 a.m., local time, on the last business day of
the month in which the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
has occurred (other than conditions with respect to actions each Party shall
take at the Closing itself) or such other date as the Parties may mutually
determine (the "Closing Date").

                  (c) Deliveries at the Closing. At the Closing, (i) the
Contributor shall deliver to the Issuer the various certificates, instruments,
and documents referred to in Sections 7(a) and 9(o); (ii) the Issuer shall
deliver to the Contributor the various certificates, instruments, and documents
referred to in Section 7(b); (iii) the Contributor shall execute and deliver the
Assigned Equity Interests Assignment; (iv) the Contributor shall cause El Paso
Corporation to execute and deliver to the Issuer the Parent Guaranty; and (v)
the Parties shall execute and/or deliver, or cause to be executed and/or
delivered, each other Transaction Agreement. The Issuer shall deliver to the
Contributor, either on the Closing Date or as soon as practicable thereafter,
the Subject Units,

                  (d) Proposed Closing Statement and Post-Closing Adjustment

                           (i) At least three business days prior to the Closing
                  Date, the Contributor shall cause to be prepared and delivered
                  to the Issuer a statement (the "Proposed Closing Statement"),
                  as prepared and determined in accordance with GAAP to the
                  extent applicable, setting forth the Contributor's good faith
                  estimate, including reasonable detail, of the Issue Price. As
                  soon as practicable, but in any event no later than 60 days
                  following the Closing Date, the Contributor shall cause to be
                  prepared and delivered to the Issuer a statement, including
                  reasonable detail, of the actual Issue Price (such statement,
                  as it may be adjusted pursuant to Section 2(d)(ii), the
                  "Closing Statement").

                           (ii) Upon receipt of the Closing Statement, the
                  Issuer and the Issuer's independent accountants shall be
                  permitted during the succeeding 30-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 Issuer may reasonably

                                       9
<PAGE>

                  request in connection with its review of the Closing
                  Statement. Within 30 days of receipt of the Closing Statement,
                  the Issuer shall deliver to the Contributor a written
                  statement describing in reasonable detail its objections (if
                  any) to any amounts or items set forth on the Closing
                  Statement. If the Issuer does not raise objections within such
                  period, then, the Closing Statement shall become final and
                  binding upon all Parties at the end of such period. If the
                  Issuer raises objections, the Parties shall negotiate in good
                  faith to resolve any such objections. If the Parties are
                  unable to resolve any disputed item within 60 days after the
                  Issuer's receipt of the Closing Statement, any such disputed
                  item shall be submitted to a nationally recognized independent
                  accounting firm mutually agreeable to the Parties who shall be
                  instructed to resolve such disputed item within 30 days. The
                  resolution of disputes by the accounting firm so selected
                  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 Issuer and one-half by the
                  Contributor.

                           (iii) If the Issue Price as set forth on the Closing
                  Statement exceeds the estimated Issue Price as set forth on
                  the Proposed Closing Statement, the Issuer shall pay the
                  Contributor the amount of such excess in Common Units based on
                  the Market Price on the date of Closing. If the estimated
                  Issue Price as set forth on the Proposed Closing Statement
                  exceeds the Issue Price as set forth on the Closing Statement,
                  the Contributor shall pay to the Issuer (or its designee) the
                  amount of such excess in cash. After giving effect to the
                  foregoing adjustments, any amount to be paid by the Issuer to
                  the Contributor, or to be paid by the Contributor to the
                  Issuer, as the case may be, shall be paid in the manner and
                  with interest as provided in Section 2(d)(iv) at a mutually
                  convenient time and place within five business days after the
                  later of acceptance of the Closing Statement or the resolution
                  of the Issuer's objections thereto pursuant to Section
                  2(d)(ii).

                           (iv) Any cash payments pursuant to this Section 2(d)
                  shall be made by causing such payments to be credited in
                  immediately available funds to such account of the Issuer as
                  may be designated by the Issuer. If any cash payment is being
                  made after the fifth business day referred to in Section
                  2(d)(iii), the amount of the payment to be made pursuant to
                  this Section 2(d) shall bear interest from and including such
                  fifth business day to, but excluding, the date of payment at a
                  rate per annum equal to the Prime Rate plus two percent. 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 365 days and the actual number of days for which due.

                           (v) The Issuer shall cooperate in the preparation of
                  the Closing Statement, including providing customary
                  certifications to the Contributor, and, if requested, to the
                  Contributor's independent accountants or the accounting firm
                  selected by mutual agreement of the Parties pursuant to
                  Section 2(d)(ii).

                                       10
<PAGE>

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

         3. Representations and Warranties Concerning the Transaction.

                  (a) Representations and Warranties of the Contributor. The
Contributor hereby represents and warrants to the Issuer as follows (provided,
however, that any representation or warranty given in this Section 3(a) with
respect to Indian Basin shall be deemed to be made to the Seller's Knowledge):

                           (i) Organization and Good Standing. The Contributor
                  is an entity duly organized, validly existing, and in good
                  standing under the Laws of the state of Delaware. The
                  Contributor is in good standing under the Laws of the state of
                  Texas and each other jurisdiction which requires such
                  qualification, except where the lack of such qualification
                  would not have a Material Adverse Effect.

                           (ii) Authorization of Transaction. Each Contributor
                  Party has full power and authority (including full entity
                  power and authority) to execute and deliver each Transaction
                  Agreement to which such Contributor Party is a party and to
                  perform its obligations thereunder. Each Transaction Agreement
                  to which any Contributor Party is a party constitutes the
                  valid and legally binding obligation of such Contributor
                  Party, enforceable against such Contributor 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 set forth on Schedule 3(a)(ii),
                  no Contributor Party need give any notice to, make any filing
                  with, or obtain any 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 Document to which such Contributor Party
                  is a party, except for the prior approval of the Federal Trade
                  Commission ("FTC"), if applicable.

                           (iii) Noncontravention. Except for prior approval of
                  the FTC (if applicable) and 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, nor the
                  consummation of any of the transactions contemplated thereby,
                  shall (A) violate any statute, regulation, rule, injunction,
                  judgment, order, decree, ruling, charge, or other restriction
                  of any Governmental Authority to which any Contributor Party
                  is subject or any provision of its Organizational Documents or
                  (B) conflict with, result in a breach of, constitute a default
                  under, result in the acceleration of, create in any Person the
                  right to accelerate, terminate, modify, or cancel, or require
                  any notice under any agreement, contract, lease, license,
                  instrument, or other arrangement to which any Contributor
                  Party is a party or by which it is bound or to which any of
                  its assets or any of the Relevant Assets is subject, except
                  for such

                                       11
<PAGE>

                  violations, defaults, breaches, or other occurrences that do
                  not, individually or in the aggregate, have a material adverse
                  effect on the ability of the Contributor or any other
                  Contributor Party to consummate the transactions contemplated
                  by such Transaction Agreement.

                           (iv) Brokers' Fees. No Contributor 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 Issuer could
                  become liable or obligated.

                           (v) Investment. The Contributor is not acquiring the
                  Subject Units 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 Contributor is
                  familiar with investments of the nature of the Subject Units,
                  understands that this investment involves substantial risks,
                  has adequately investigated the Subject Units, and 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
                  Subject Units, and is able to bear the economic risks of such
                  investment. The Contributor has had the opportunity to visit
                  with the Issuer and meet with its representative officers and
                  other representatives to discuss the Issuer's business,
                  assets, liabilities, financial condition, and operations, has
                  received all materials, documents and other information that
                  the Contributor deems necessary or advisable to evaluate the
                  Subject Units, and has made its own independent examination,
                  investigation, analysis and evaluation of the Issuer,
                  including its own estimate of the value of the Subject Units.
                  The Contributor has undertaken such due diligence (including a
                  review of the Issuer's assets, properties, liabilities, books,
                  records and contracts) as the Contributor deems adequate.

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

                           (i) Organization of the Issuer. Each Issuer 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 Delaware. Each Issuer
                  Party is in good standing under the Laws of the state of Texas
                  and each other jurisdiction which requires such qualification,
                  except where the lack of such qualification would not have a
                  Material Adverse Effect.

                           (ii) Authorization of Transaction. Each Issuer Party
                  has full power and authority (including full entity power and
                  authority) to execute and deliver each Transaction Agreement
                  to which it is a party and to perform its obligations
                  thereunder. Each Transaction Agreement to which such Issuer
                  Party is a party constitutes the valid and legally binding
                  obligation of such Issuer Party, enforceable against such
                  Issuer Party in accordance with its terms and conditions,
                  subject, however, to the effects of bankruptcy, insolvency,
                  reorganization,

                                       12
<PAGE>

                  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 set forth on Schedule 3(b)(ii),
                  no Issuer Party needs to give any notice to, make any filing
                  with, or obtain any 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 Document, except for the prior approval
                  of the FTC, if applicable.

                           (iii) Noncontravention. Except for the prior approval
                  of the FTC (if applicable) and 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 Issuer Party is a party, nor the consummation of any of
                  the transactions contemplated thereby, shall (A) violate any
                  statute, regulation, rule, injunction, judgment, order,
                  decree, ruling, charge, or other restriction of any
                  Governmental Authority to which such Issuer Party is subject
                  or any provision of its Organizational Documents or (B)
                  conflict with, result in a breach of, constitute a default
                  under, result in the acceleration of, create in any Person the
                  right to accelerate, terminate, modify, or cancel, or require
                  any notice, approval or consent under any agreement, contract,
                  lease, license, instrument, or other arrangement to which any
                  Issuer Party is a party or by which it is bound or to which
                  any of its assets is subject, except for such violations,
                  defaults, breaches, or other occurrences that do not,
                  individually or in the aggregate, have a material adverse
                  effect on the ability of any Issuer Party to consummate the
                  transactions contemplated by such Transaction Agreement.

                           (iv) Brokers' Fees. No Issuer 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 Contributor could become
                  liable or obligated.

                           (v) Investment. The Issuer is not acquiring the
                  Acquired Company Equity Interests or the Acquired Company
                  Assets 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 Issuer is
                  familiar with investments of the nature of the Acquired
                  Company Equity Interests and the Acquired Company Assets,
                  understands that this investment involves substantial risks,
                  has adequately investigated the Acquired Company Equity
                  Interests and the Acquired Company Assets, and 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 the Acquired Company Assets, and is able
                  to bear the economic risks of such investment. The Issuer has
                  had the opportunity to visit with the Contributor 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 and the Acquired Company Assets, has

                                       13
<PAGE>

                  received all materials, documents and other information that
                  the Issuer deems necessary or advisable to evaluate the
                  Acquired Company Equity Interests and the Acquired Company
                  Assets, 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 Company Equity Interests and the Acquired Company
                  Assets. The Issuer has undertaken such due diligence
                  (including a review of the assets, properties, liabilities,
                  books, records and contracts of the Acquired Companies and the
                  Acquired Company Assets) as the Issuer deems adequate.

                           (vi) Subject Units. The issuance of the Subject Units
                  by the Issuer has been duly authorized and approved by all
                  requisite partnership action, and such Subject Units shall,
                  when issued in consideration for the contribution by the
                  Contributor of the Assigned Equity Interests pursuant to this
                  Agreement, be validly issued, fully paid and (except as set
                  forth in Sections 17-303(a) and 17-607 of the Delaware LP Act)
                  non-assessable.

                           (vii) Taxes. To the knowledge of each Issuer Party,
                  the Issuer has (i) duly filed all material Tax Returns
                  required to be filed by or with respect to the Issuer or its
                  assets or operations with the Internal Revenue Service or
                  other applicable taxing authority, (ii) paid, or adequately
                  reserved against, all Taxes due or claimed due by a taxing
                  authority from or with respect to the Issuer or its assets or
                  operations and (iii) made all material deposits required with
                  respect to Taxes. To the knowledge of each Issuer Party, there
                  has been no material issue raised or material adjustment
                  proposed (and none is pending) by the Internal Revenue Service
                  or any other taxing authority in connection with any Tax
                  Returns relating to the assets or operations of the Issuer,
                  and no waiver or extension of any statute of limitations as to
                  any federal, state, local or foreign tax matter relating to
                  the assets or operations of the Issuer has been given by or
                  requested from the Issuer with respect to any Tax year.

         4. Representations and Warranties Concerning the Acquired Company
Equity Interests, Acquired Companies and Relevant Assets. The Contributor hereby
represents and warrants to the Issuer as follows (provided, however, that any
representation or warranty given in this Section 4 with respect to Indian Basin
shall be deemed to be made to the Seller's Knowledge):

                  (a) Organization, Qualification, and Company Power. (x) Each
of the Acquired Companies and the Contributor Parties is a limited liability
company, partnership (limited or general) or corporation duly organized, validly
existing, and in good standing under the Laws of the state of Delaware; (y) is
in good standing under the Laws of the state of Texas and each other
jurisdiction which requires qualification, except where the lack of such
qualification would not have a Material Adverse Effect; and (z) has full power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it.

                                       14
<PAGE>

                  (b) Noncontravention. Except for the need to obtain prior
approval of the FTC or as set forth in Schedule 4(b), neither the execution and
delivery of any Transaction Agreement to which any Contributor Party is a party,
nor the consummation of any of the transactions contemplated thereby, shall (i)
violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Authority to which any
Acquired Company or any of the Acquired Company Assets is subject or any
provision of the Organizational Documents of any Contributor Party or any
Acquired Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, require any notice or trigger any
rights to payment or other compensation, or result in the imposition of any
Encumbrance on any of the Acquired Company Equity Interests or the Acquired
Company Assets under, any agreement, contract, lease, license, instrument, or
other arrangement to which any Acquired Company or any of the Acquired Company
Assets is subject, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
right to payment or other compensation, or Encumbrance would not have a Material
Adverse Effect, or would not materially adversely affect the ability of any
Contributor Party to consummate the transactions contemplated by such
Transaction Agreement.

                  (c) Title to and Condition of Assets.

                           (i) The Acquired Companies have good, marketable and
                  indefeasible title to all of the Acquired Company Assets in
                  each case free and clear of all Encumbrances, except for (a)
                  Permitted Encumbrances and (b) Encumbrances disclosed in
                  Schedule 4(c)(i). The principal assets constituting Indian
                  Basin are described on Exhibit A. The operations of the
                  Acquired Company Assets are the only operations of the
                  Acquired Companies.

                           (ii) To the Contributor's Knowledge, except as
                  disclosed in Schedule 4(c)(ii), the Relevant Assets are in
                  good operating condition and repair (normal wear and tear
                  excepted), are free from defects (patent and latent), are
                  suitable for the purposes for which they are currently used
                  and are not in need of maintenance or repairs except for
                  ordinary routine maintenance and repairs.

                           (iii) Capitalization of the Acquired Companies. The
                  capitalization of the Acquired Companies is as follows:

                                    (A) The Holding LLC Interest constitutes all
                           of the Equity Interests of Holding LLC. The
                           Contributor owns (beneficially and of record) 100% of
                           the Holding LLC Interest.

                                    (B) The El Paso Indian Basin GP Interest and
                           the El Paso Indian Basin LP Interest constitute all
                           of the Equity Interests of El Paso Indian Basin. The
                           Contributor owns (beneficially and of record) 100% of
                           the El Paso Indian Basin LP Interest. Holding LLC
                           owns (beneficially and of record) 100% of the El Paso
                           Indian Basin GP Interest.

                                       15
<PAGE>

                                    (C) The Contributor beneficially owns
                           directly or indirectly 100% of the Contributor
                           Parties other than El Paso Corporation. The
                           Contributor beneficially owns directly or indirectly
                           100% of the Acquired Company Equity Interests, which
                           includes 100% of the Equity Interests in the Acquired
                           Companies. All of the Acquired Company Equity
                           Interests are uncertificated. The Acquired Company
                           Equity Interests constitute 100% of the issued and
                           outstanding Equity Interests of the Acquired
                           Companies and have been duly authorized, and are
                           validly issued and fully paid and (except (i) with
                           respect to general partnership interests and (ii) as
                           set forth in Sections 17-303(a) and 17-607 of the
                           Delaware LP Act with respect to limited partnership
                           interests) non-assessable. Except to the extent
                           created under the Securities Act, state securities
                           Laws, limited liability company Laws, limited
                           partnership Laws and general corporation Laws of the
                           Acquired Companies' jurisdiction of formation, and as
                           created by the Acquired Companies' Organizational
                           Documents, (x) the Acquired Company Equity Interests
                           are held as set forth above, free and clear of any
                           Encumbrances and (y) there are no Commitments with
                           respect to any Equity Interest of any Acquired
                           Company. No Contributor Party is party to any voting
                           trusts, proxies, or other agreements or
                           understandings with respect to voting any Equity
                           Interest of any Acquired Company.

                                    (D) After the consummation of the
                           transactions contemplated in this Agreement, the
                           Issuer shall own, directly or indirectly, 100% of the
                           Acquired Company Equity Interests, which includes
                           100% of the Equity Interests in the Acquired
                           Companies and 100% of the Acquired Company Assets.

                           (iv) Acquired Company Ownership. No Acquired Company
                  owns an Equity Interest in any Person, except as set forth in
                  Section 4(c)(iii). There are no Commitments with respect to an
                  Equity Interest in any Acquired Company. The Acquired
                  Companies own no other assets other than the Acquired Company
                  Assets, and have no operations or Obligations other than the
                  Subject Indebtedness and those directly related to the
                  Acquired Company Assets.

                           (v) Encumbrances for Borrowed Money. Except as set
                  forth on Schedule 4(c)(v), there are no borrowings, loan
                  agreements, promissory notes, pledges, mortgages, guaranties,
                  liens and similar liabilities (direct or indirect), or
                  Encumbrances which are secured by or constitute an Encumbrance
                  on the Relevant Assets.

                           (vi) Ownership and Operation of Indian Basin.

                                    (A) The Acquired Companies' ownership
                           interest in Indian Basin is the Indian Basin
                           Cotenancy Interest.

                                       16
<PAGE>

                                    (B) [Intentionally omitted.]

                                    (C) Except to the extent created under the
                           Securities Act, state securities Laws, limited
                           liability company Laws and general corporation Laws
                           of the Acquired Companies' jurisdiction of formation,
                           and as created by the Acquired Companies'
                           Organizational Documents, (x) the Indian Basin
                           Cotenancy Interest is held as set forth above, free
                           and clear of any Encumbrances and (y) there are no
                           Commitments with respect to the Indian Basin
                           Cotenancy Interest. No Contributor Party is party to
                           any voting trusts, proxies, or other agreements or
                           understandings with respect to voting the Indian
                           Basin Cotenancy Interest.

                  (d) Material Change. Except for the Reorganization
Transactions and as set forth in Schedule 4(d), since December 31, 2001:

                           (i) there has not been any Material Adverse Effect;

                           (ii) the Relevant Assets have been operated and
                  maintained in the Ordinary Course of Business;

                           (iii) to the Contributor's Knowledge, there has not
                  been any material damage, destruction or loss to any material
                  portion of the Relevant Assets, whether or not covered by
                  insurance;

                           (iv) there has been no purchase, sale or lease of any
                  material asset included in the Relevant Assets;

                           (v) there has been no actual, pending, or to the
                  Contributor's Knowledge, threatened change affecting the
                  Relevant Assets with any customers, licensors, suppliers,
                  distributors or sales representatives of any Contributor
                  Party, except for changes that do not have a Material Adverse
                  Effect;

                           (vi) there has been no (x) amendment or modification
                  in any material respect to any Acquired Company Contract or
                  any other contract or agreement material to the Relevant
                  Assets, or (y) termination of any Acquired Company Contract or
                  any other contract or agreement material to the Relevant
                  Assets before the expiration of the term thereof other than to
                  the extent any such material contract or agreement terminated
                  pursuant to its terms in the Ordinary Course of Business; and

                           (vii) there is no contract, commitment or agreement
                  to do any of the foregoing, except as expressly permitted
                  hereby.

                                       17
<PAGE>

                  (e) Legal Compliance. Each Contributor Party, with respect to
the Relevant Assets and the Acquired Companies, has complied with all applicable
Laws of all Governmental Authorities, except where the failure to comply would
not have a Material Adverse Effect. The Contributor 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 Contributor are set forth
in Sections 4(f) and 4(i), respectively.

                  (f) Tax Matters. Except as set forth in Schedule 4(f) or as
would not have a Material Adverse Effect, the Contributor, its Affiliates and
the Acquired Companies have filed all Tax Returns with respect to the Relevant
Assets that they were required to file and such Tax Returns are accurate in all
material respects. All Taxes shown as due by any Acquired Company or with
respect to the Relevant Assets on any such Tax Returns have been paid.

                  (g) Contracts and Commitments. Schedule 4(g)(i) contains a
list of all the contracts, agreements, licenses, permits and other documents and
instruments to which any Acquired Company is a party or otherwise constituting
part of the Acquired Company Assets (the "Acquired Company Contracts"), and each
such Acquired Company Contract is in full force and effect, except where the
failure to be in full force and effect would not have a Material Adverse Effect.
Schedule 4(g)(ii) contains a list of all rights-of-way constituting part of the
Acquired Company Assets (the "Rights of Way"). The Acquired Company Contracts,
together with the Rights of Way, constitute all of the contracts, agreements,
rights of way, licenses, permits, and other documents and instruments necessary
for the operation and business of the Relevant Assets consistent with applicable
Laws and prior operation. The Contributor Parties have performed all material
obligations required to be performed by them to date under the Acquired Company
Contracts and the Rights of Way, and are not in default under any material
obligation of any such contract or right-of-way, except when such default would
not have a Material Adverse Effect. To the Contributor's Knowledge, no other
party to any Acquired Company Contract is in default thereunder.

                  (h) Litigation.

                           (i) Schedule 4(h) sets forth each instance in which
                  any Acquired Company or any of the Relevant Assets (A) is
                  subject to any outstanding injunction, judgment, order,
                  decree, ruling, or charge or (B) is the subject of any action,
                  suit, proceeding, hearing, or investigation of, in, or before
                  any court or quasi-judicial or administrative agency of any
                  federal, state, local, or foreign jurisdiction, or is the
                  subject of any pending or, to the Contributor's Knowledge,
                  threatened claim, demand, or notice of violation or liability
                  from any Person, except where any of the foregoing would not
                  have a Material Adverse Effect.

                           (ii) No Contributor Party has Knowledge of any Basis
                  for any present or future injunction, judgment, order, decree,
                  ruling, or charge or action, suit, proceeding, hearing, or
                  investigation of, in, or before any court or quasi-judicial or
                  administrative agency of any federal, state, local, or foreign
                  jurisdiction, against any of them giving rise to any
                  Obligation to which any Acquired Company would be subject.

                                       18
<PAGE>

                  (i) Environmental Matters. Except as set forth in
Schedule 4(i):

                           (i) The Contributor, with respect to the Relevant
                  Assets, has been in compliance with all applicable local,
                  state, and federal laws, rules, regulations, and orders
                  regulating or otherwise pertaining to (a) the use, generation,
                  migration, storage, removal, treatment, remedy, discharge,
                  release, transportation, disposal, or cleanup of pollutants,
                  contamination, hazardous wastes, hazardous substances,
                  hazardous materials, toxic substances or toxic pollutants, (b)
                  surface waters, ground waters, ambient air and any other
                  environmental medium on or off any Lease or (c) the
                  environment or health and safety-related matters; including
                  the following as from time to time amended and all others
                  whether similar or dissimilar: the Comprehensive Environmental
                  Response, Compensation, and Liability Act of 1980, as amended
                  by the Superfund Amendments and Reauthorization Act of 1986
                  ("CERCLA"), the Resource Conservation and Recovery Act of
                  1976, as amended by the Used Oil Recycling Act of 1980, the
                  Solid Waste Disposal Act Amendments of 1980, and the Hazardous
                  and Solid Waste Amendments of 1984, the Hazardous Materials
                  Transportation Act, as amended, the Toxic Substance Control
                  Act, as amended, the Clean Air Act, as amended, the Clean
                  Water Act, as amended, and all regulations promulgated
                  pursuant thereto (collectively, the "Environmental Laws" and
                  individually an "Environmental Law"), except for such
                  instances of noncompliance that individually or in the
                  aggregate do not have a Material Adverse Effect.

                           (ii) The Contributor has obtained all permits,
                  licenses, franchises, authorities, consents, registrations,
                  orders, certificates, waivers, exceptions, variances and
                  approvals, and have made all filings, paid all fees, and
                  maintained all material information, documentation, and
                  records, as necessary under applicable Environmental Laws for
                  operating the Relevant Assets and their business as they are
                  presently operated, and all such permits, licenses,
                  franchises, authorities, consents, approvals, and filings
                  remain in full force and effect, except for such matters that
                  individually or in the aggregate do not have a Material
                  Adverse Effect. Schedule 4(i)(ii) sets forth a complete list
                  of all permits, licenses, franchises, authorities, consents,
                  and approvals, as necessary under applicable Environmental
                  Laws for operating the Relevant Assets and the Acquired
                  Companies' businesses as they are presently operated, each of
                  which is held in the name of the appropriate Contributor Party
                  as indicated on such schedule.

                           (iii) Except as would not have a Material Adverse
                  Effect, (x) there are no pending or threatened claims,
                  demands, actions, administrative proceedings or lawsuits
                  against the Contributor with respect to the Relevant Assets
                  and the Contributor has not received notice of any of the
                  foregoing and (y) no Acquired Company, and none of the
                  Relevant Assets, is subject to any outstanding injunction,
                  judgment, order, decree or ruling under any Environmental
                  Laws.

                           (iv) The Contributor has not received any written
                  notice that the Contributor, with respect to the Relevant
                  Assets, is or may be a potentially

                                       19
<PAGE>

                  responsible party under CERCLA or any analogous state law in
                  connection with any site actually or allegedly containing or
                  used for the treatment, storage or disposal of Hazardous
                  Substances.

                           (v) All Hazardous Substances or solid wastes
                  generated, transported, handled, stored, treated or disposed
                  by, in connection with or as a result of the operation or
                  possession of the Contributor or the conduct of the
                  Contributor, have been transported only by carriers
                  maintaining valid authorizations under applicable
                  Environmental Laws and treated, stored, disposed of or
                  otherwise handled only at facilities maintaining valid
                  authorizations under applicable Environmental Laws and such
                  carriers and facilities have been and are operating in
                  compliance with such authorizations and are not the subject of
                  any existing, pending or threatened action, investigation or
                  inquiry by any Governmental Authority or other Person in
                  connection with any of the Environmental Laws.

The Contributor makes no 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). For
purposes of this Section 4(i), each reference to the Contributor or Contributor
Parties shall be deemed to include the Contributor Parties and their Affiliates.

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

                  (k) [Intentionally omitted].

                  (l) Employee Matters. No Acquired Company has any employees.

                  (m) Prohibited Events. Except for the Reorganization
Transactions, none of the matters described in Section 5(c) have occurred since
June 30, 2001.

                  (n) Regulatory Matters. No Contributor Party or Acquired
Company is (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 Company Act of 1940,
as amended, and the rules and regulations promulgated thereunder. Except as set
forth on Schedule 4(n), none of the Relevant Assets are subject to regulation by
the Federal Energy Regulatory Commission or rate regulation or comprehensive
nondiscriminatory access regulation under any federal laws or the laws of any
state or other local jurisdiction.

                  (o) Intercompany Transactions. Each outstanding receivable,
payable and other intercompany transaction and arrangement between the
Contributor or any of its Affiliates,

                                       20
<PAGE>

on the one hand, and any Acquired Company, on the other hand, (including
hydrocarbon imbalances existing on the date of this Agreement) is listed on
Schedule 4(o).

                  (p) Disclaimer of Representations and Warranties Concerning
Personal Property, Equipment, and Fixtures. The Issuer acknowledges that (a) it
has had and pursuant to this Agreement shall have before Closing access to the
Acquired Companies and the Relevant Assets and the officers and employees of the
Contributor and (b) in making the decision to enter into this Agreement and
consummate the transactions contemplated hereby, the Issuer has relied solely on
the basis of its own independent investigation and upon the express
representations, warranties, covenants, and agreements set forth in this
Agreement and the other Transaction Agreements. Accordingly, the Issuer
acknowledges that, except as expressly set forth in this Agreement, the
Contributor has not made, and THE CONTRIBUTOR MAKES NO AND DISCLAIMS ANY,
REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON
LAW, STATUTE, OR OTHERWISE, REGARDING (i) THE QUALITY, CONDITION, OR OPERABILITY
OF ANY PERSONAL PROPERTY, EQUIPMENT, OR FIXTURES, (ii) THEIR MERCHANTABILITY,
(iii) THEIR FITNESS FOR ANY PARTICULAR PURPOSE, (iv) THEIR CONFORMITY TO MODELS,
SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, OR (v) AS TO WHETHER ANY RELEVANT
ASSETS ARE YEAR 2000 COMPLIANT, AND ALL PERSONAL PROPERTY AND EQUIPMENT IS
DELIVERED "AS IS, WHERE IS" IN THE CONDITION IN WHICH THE SAME EXISTS.

         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 Issuer shall use its Best Efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including the Contributor's conditions to closing in Section 7(b). The
Contributor shall use its Best Efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement, including the Issuer's conditions
to closing in Section 7(a).

                  (b) Notices and Consents. Each of the Parties shall give any
notices to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the matters referred to in
Sections 3(a)(ii), 3(a)(iii), 3(b)(ii) and 3(b)(iii) including the corresponding
Schedules, so as to permit the Closing to occur not later than 9:00 a.m.
(Houston time) on April 1, 2002. Without limiting the generality of the
foregoing, the Parties agree to work in good faith with the FTC in order to
consummate the transactions contemplated hereby as soon as reasonably
practicable, but in no event later than 9:00 a.m. (Houston time) on April 1,
2002; provided, that, notwithstanding anything to the contrary contained herein,
this sentence shall not obligate the Issuer to divest or hold separate any
assets or enter into any agreement not contemplated by this Agreement or modify
this Agreement.

                  (c) Operation of Business. The Contributor shall not, without
the consent of the Issuer (which consent shall not be unreasonably withheld or
delayed), except as expressly

                                       21
<PAGE>

contemplated by this Agreement or as contemplated by Schedule 5(c), cause or (to
the extent any Contributor Party or its Affiliate has the Legal Right) permit
any Acquired Company or Indian Basin to engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business or, with
respect to the Relevant Assets, 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 Issuer
(which consent shall not be unreasonably withheld or delayed), except as
expressly contemplated by this Agreement or Schedule 5(c), the Contributor shall
not, and shall not cause or (to the extent any Contributor Party has the Legal
Right) permit any Acquired Company or Indian Basin to, do any of the following:

                           (i) issue, sell, pledge, dispose of, grant, encumber,
                  or authorize the issuance, sale, pledge, disposition, or grant
                  of any Equity Interest of any Acquired Company or any
                  Commitments with respect to any Equity Interest of any
                  Acquired Company;

                           (ii) cause or allow any part of the Acquired Company
                  Equity Interests or the Relevant Assets to become subject to
                  an Encumbrance, except for Permitted Encumbrances and other
                  Encumbrances identified in Section 4(d);

                           (iii) amend in any material respect any Acquired
                  Company Contract material to the Relevant Assets, any Acquired
                  Company or Indian Basin (including Indian Basin's or any
                  Acquired Company's Organizational Documents) or terminate any
                  such material contract or agreement before the expiration of
                  the term thereof other than to the extent any such material
                  contract or agreement expires in accordance with its terms in
                  the Ordinary Course of Business;

                           (iv) except as required by Law, make, change or
                  revoke any Tax election relevant to any Acquired Company or
                  Relevant Asset;

                           (v) (A) acquire (including by merger, consolidation
                  or acquisition of Equity Interest or assets) any corporation,
                  partnership, limited liability company or other business
                  organization or any division thereof or any material amount of
                  assets; (B) incur any Indebtedness for borrowed money or issue
                  any debt securities or assume, guarantee, endorse, or
                  otherwise as an accommodation become responsible for, the
                  obligations of any Person, or make any loans or advances
                  except for intercompany borrowing among the Acquired Companies
                  in the Ordinary Course of Business; (C) sell, lease or
                  otherwise dispose of any property or assets, other than sales
                  of goods or services in the Ordinary Course of Business; or
                  (D) enter into or amend a contract, agreement, commitment, or
                  arrangement with respect to any matter set forth in this
                  Section 5(c)(v) or (except for contracts with aggregate
                  Obligations of the applicable Acquired Company not in excess
                  of $10,000) otherwise not in the Ordinary Course of Business;
                  provided that notwithstanding any provision of this Agreement,
                  if the Issuer expressly consents in writing (x) each Acquired
                  Company shall be entitled to dividend and/or distribute to its
                  Equity Interest holders, at any time, and from time to time,
                  such

                                       22
<PAGE>

                  cash generated by such company's business to which such Equity
                  Interest holder would otherwise be entitled (other than cash
                  arising from borrowings by such company or sales of assets by
                  such company outside of the Ordinary Course of Business) so
                  long as such dividends and/or distributions are reflected as a
                  Issue Price Decrease, where appropriate, and (y) each Acquired
                  Company may make or incur capital expenditures in accordance
                  with the terms of its Organizational Documents and the capital
                  expenditures budget set forth on Schedule 5(c)(v);

                           (vi) change any Acquired Company's accounting
                  practices in any material respect with the exception of any
                  changes in accounting methodologies that have already been
                  agreed upon by its Equity Interest holders, consistent with
                  its Organizational Documents; or

                           (vii) initiate or settle any litigation, complaint,
                  rate filing or administrative proceeding.

                  (d) Intercompany Transactions. All outstanding receivables,
payables and other intercompany transactions and arrangements between the
Contributor or any of its Affiliates, on the one hand, and any Acquired Company,
on the other hand, shall remain in full force and effect through and after the
Closing.

                  (e) Full Access. To the extent it has the Legal Right, the
Contributor shall permit, and shall cause its Affiliates to permit,
representatives of the Issuer to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Contributor and its Affiliates, to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
any Acquired Company or any of the Relevant Assets.

                  (f) Liens and Encumbrances. Prior to the Closing, the
Contributor shall obtain releases of all liens and other Encumbrances disclosed
in Schedule 4(c)(i), without any post-Closing liability or expense to any
Acquired Company or Acquired Company Asset or any Issuer Party, and shall
provide proof of such releases to the Issuer at the Closing.

         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 of the
Parties 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 any
Party actively is contesting or defending against any 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

                                       23
<PAGE>

involving any Acquired Company or the Relevant Assets, the other Party shall
cooperate with the contesting or defending Party and its counsel in the 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 the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8).

                  (c) Surety Bonds; Guarantees. The Issuer agrees to be
substituted as the surety or guarantor of any surety bonds or guarantees issued
by the Contributor or any of its Affiliates in connection with the Acquired
Companies or the Relevant Assets, including the surety bonds and guarantees
listed on Schedule 6(c). The Issuer and the Contributor shall cooperate to
effect all such substitutions and the Issuer shall indemnify and hold the
Contributor harmless from and against any Adverse Consequences arising from the
failure of the Issuer to be so substituted. The Issuer shall use commercially
reasonable efforts to obtain a release of the Contributor from any surety or
guaranty obligations with respect to the Acquired Companies or the Relevant
Assets.

                  (d) Delivery and Retention of Records. On or promptly after
the Closing Date, the Contributor shall deliver or cause to be delivered to the
Issuer, 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 or the Relevant Assets (other than Tax Records) that are in the
possession or control of the Contributor (the "Records"). The Issuer agrees to
(i) hold the Records and not to destroy or dispose of any thereof for a period
of ten 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 60 days before such
destruction or disposition to surrender them to the Contributor and if the
Contributor does not accept such offer within 20 days after receipt of such
offer, the Issuer may take such action and (ii) following the Closing Date to
afford the Contributor, its accountants, and counsel, during normal business
hours, upon reasonable request, at any time, full access to the Records and to
the Issuer's employees to the extent that such access may be requested for any
legitimate purpose at no cost to the Contributor (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; provided, further that in the
event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law.

                  (e) Assignment of Rights. The Contributor will assign and will
cause its Affiliates to assign, upon the Issuer's request, any and all rights
(including claims) of the Contributor or its Affiliates relating to any of the
Relevant Assets under any agreement (including that certain Stock Purchase
Agreement dated as of January 27, 2000 between PG&E National Energy Group, Inc.
and El Paso Field Services Company) pursuant to which the Contributor or any of
its Affiliates purchased or otherwise acquired any of the Relevant Assets.

                                       24
<PAGE>

         7. Conditions to Obligation to Close.

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

                           (i) the representations and warranties of the
                  Contributor contained in Sections 3(a) and 4 must be true and
                  correct in all material respects (without giving effect to any
                  supplement to the Schedules, any qualification as to
                  materiality, Material Adverse Effect, Knowledge, awareness or
                  concepts of similar import, or any qualification or limitation
                  as to monetary amount or value, (except with respect to (A)
                  Indian Basin, (B) the representations and warranties in
                  Section 4(c)(ii) and (C) the representations and warranties in
                  Section 4(d)(iii) with respect to latent defects, for which in
                  each such case qualifications as to Knowledge shall be given
                  effect) as of the date of this Agreement and at Closing
                  (except for those which refer to a specific date, which must
                  be true and correct as of such date);

                           (ii) the Contributor must have performed and complied
                  in all material respects with its covenants hereunder through
                  the Closing (without giving effect to any supplement to the
                  Schedules, any qualification as to materiality, Material
                  Adverse Effect, Knowledge, awareness or concepts of similar
                  import, or any qualification or limitation as to monetary
                  amount or value);

                           (iii) 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;

                           (iv) the Contributor must have obtained all material
                  Governmental Authority and third party consents, including any
                  material consents, specified in Sections 3(a)(ii), 3(a)(iii),
                  and 4(b), and including the corresponding Schedules;

                           (v) the Contributor must have delivered to the Issuer
                  a certificate to the effect that each of the conditions
                  specified in Sections 7(a)(i)-(iv) is satisfied in all
                  respects;

                           (vi) the FTC must have approved the transactions
                  contemplated hereunder;

                           (vii) the Closing Date shall be no earlier than March
                  28, 2002;

                           (viii) The Issuer shall have received financing for
                  the transactions contemplated herein satisfactory to the
                  Issuer;

                                       25
<PAGE>

                           (ix) the Board of Directors of the General Partner
                  shall have received a fairness opinion acceptable to such
                  Board (in its sole discretion) from UBS Warburg LLC or any
                  other financial advisor acceptable to such Board (in its sole
                  discretion) with respect to the transactions contemplated
                  herein;

                           (x) the transactions contemplated herein shall have
                  been approved by at least a majority of the members of each of
                  (1) of the Board of Directors of the General Partner, (2) the
                  independent members of the Board of Directors of the General
                  Partner and (3) the Special Committee of the Board of
                  Directors of the General Partner responsible for reviewing
                  such transactions; and

                           (xi) the Contributor must have executed and delivered
                  to the Issuer the Purchase and Sale Agreement, and the closing
                  of the transactions contemplated therein must have occurred.

         The Issuer 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 Contributor. The
obligation of the Contributor to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:

                           (i) the representations and warranties of the Issuer
                  contained in Section 3(b) must be true and correct in all
                  material respects (without giving effect to any supplement to
                  the Schedules, any qualification as to materiality, Material
                  Adverse Effect, Knowledge, awareness or concepts of similar
                  import, or any qualification or limitation as to monetary
                  amount or value) as of the date of this Agreement and at
                  Closing (except for those which refer to a specific date,
                  which must be true and correct as of such date);

                           (ii) the Issuer must have performed and complied in
                  all material respects with each of its covenants hereunder
                  through the Closing (without giving effect to any supplement
                  to the Schedules, any qualification as to materiality,
                  Material Adverse Effect, Knowledge, awareness or concepts of
                  similar import, or any qualification or limitation as to
                  monetary amount or value);

                           (iii) 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;

                           (iv) the Contributor must have obtained all material
                  Governmental Authority and third party consents, including
                  material consents, specified in Sections 3(a)(ii), 3(a)(iii),
                  and 4(b), and including the corresponding Schedules;

                                       26
<PAGE>

                           (v) the Issuer must have delivered to the Contributor
                  a certificate to the effect that each of the conditions
                  specified in Sections 7(b)(i)-(iv) is satisfied in all
                  respects;

                           (vi) the FTC must have approved the transactions
                  contemplated hereunder; and

                           (vii) the Issuer must have executed and delivered to
                  the Contributor the Purchase and Sale Agreement, and the
                  closing of the transactions contemplated therein must have
                  occurred.

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

         8. Remedies for Breaches of this Agreement.

                  (a) Survival of Representations and Warranties. (i) All of the
representations and warranties of the Contributor contained in Sections 3(a) and
4 (other than Sections 4(c)(iii), 4(f) and 4(h)(ii)) shall survive the Closing
hereunder for a period of three years after the Closing Date; (ii) the
representations and warranties of the Contributor contained in Section 4(c)(iii)
shall survive the Closing forever; (iii) the representations and warranties of
the Contributor contained in Section 4(f) shall survive the Closing with respect
to any given claim that would constitute a breach of such representation or
warranty until 90 days after the expiration of the statute of limitations
applicable to the underlying Tax matter giving rise to that claim, and (iv) the
representations and warranties of the Contributor contained in Section 4(h)(ii)
shall survive the Closing for a period of one year after the Closing Date. The
representations and warranties of the Issuer contained in Section 3(b) shall
survive the Closing for a period of three years after the Closing Date. The
covenants and obligations contained in Sections 2 and 6 and all other covenants
and obligations contained in this Agreement (other than Section 8(b)(iv)) shall
survive the Closing forever. The covenants and obligations contained in Section
8(b)(iv) shall survive the Closing for a period of three years after the Closing
Date.

                  (b) Indemnification Provisions for Benefit of the Issuer.

                           (i) In the event: (x) the Contributor breaches any of
                  its representations or warranties (without giving effect to
                  any supplement to the Schedules, any qualification as to
                  materiality, Material Adverse Effect, Knowledge, awareness or
                  concepts of similar import, or any qualification or limitation
                  as to monetary amount or value, except with respect to (A)
                  Indian Basin, (B) the representations and warranties in
                  Section 4(c)(ii) and (C) the representations and warranties in
                  Section 4(d)(iii) with respect to latent defects, for which in
                  each such case qualifications as to Knowledge shall be given
                  effect) contained herein (other than a representation or
                  warranty contained in Section 4(c)(iii) or 4(f)); (y) there is
                  an applicable survival period pursuant to Section 8(a); and
                  (z) the Issuer makes a written claim for indemnification
                  against the Contributor pursuant to Section 11(g) within such
                  survival period, then the Contributor agrees to release and
                  indemnify the Issuer Indemnitees from and against any Adverse
                  Consequences by reason of all Adverse Events suffered by the
                  Issuer Indemnitees; provided, that the Contributor shall not
                  have any obligation to release and

                                       27
<PAGE>

                  indemnify the Issuer Indemnitees from and against any such
                  Adverse Consequences by reason of all Adverse Events (A) until
                  the Issuer Indemnitees, in the aggregate, have suffered
                  Adverse Consequences by reason of all Adverse Events in excess
                  of an aggregate deductible amount equal to 1% of the Combined
                  Value (after which point the Contributor shall be obligated
                  only to release and indemnify the Issuer Indemnitees from and
                  against further such Adverse Consequences) or thereafter (B)
                  to the extent the Adverse Consequences the Issuer Indemnitees,
                  in the aggregate, have suffered by reason of all Adverse
                  Events exceeds an aggregate ceiling amount equal to 50% of the
                  Combined Value (after which point the Contributor shall have
                  no obligation to release and indemnify the Issuer Indemnitees
                  from and against further such Adverse Consequences); provided,
                  however, that the deductible amount with respect to breaches
                  of Section 4(c)(i) shall be $750,000.

                           (ii) In the event: (x) the Contributor breaches any
                  of its covenants or obligations in Sections 2 or 6 or any
                  other covenants or obligations in this Agreement or any
                  representation or warranty contained in Section 4(c)(iii)or
                  4(f) (in each case above without giving effect to any
                  supplement to the Schedules, any qualification as to
                  materiality, Material Adverse Effect, Knowledge, awareness or
                  concepts of similar import, or any qualification or limitation
                  as to monetary amount or value); (y) there is an applicable
                  survival period pursuant to Section 8(a); and (z) the Issuer
                  makes a written claim for indemnification against the
                  Contributor pursuant to Section 11(g) within such survival
                  period, then the Contributor agrees to release and indemnify
                  the Issuer Indemnitees from and against the entirety of any
                  Adverse Consequences suffered by the Issuer Indemnitees.

                           (iii) The Contributor shall release, indemnify and
                  hold harmless the Issuer Indemnitees against any and all
                  Adverse Consequences resulting by reason of (a) joint and
                  several liability with the Contributor arising by reason of
                  having been required to be aggregated with the Contributor
                  under Section 414(o) of the Code, or having been under "common
                  control" with the Contributor, within the meaning of Section
                  4001(a)(14) of ERISA.

                           (iv) In the event: (x) there is an applicable
                  survival period pursuant to Section 8(a); and (y) the Issuer
                  makes a written claim for indemnification against the
                  Contributor pursuant to Section 11(g) within such survival
                  period, except to the extent the Issuer is obligated to
                  release and indemnify the Contributor under Section
                  8(c)(ii)(1), then the Contributor agrees to release and
                  indemnify the Issuer Indemnitees from and against the entirety
                  of any Adverse Consequences suffered by the Issuer Indemnitees
                  with respect to, any environmental condition, claim or loss
                  with respect to any Acquired Company or any of the Relevant
                  Assets arising

                                       28
<PAGE>

                  as a result of events occurring on or prior to the Issue Price
                  Adjustment Date, including the matters disclosed in Schedule
                  4(i).

                           (v) [Intentionally omitted.]

                           (vi) [Intentionally omitted.]

                           (vii) The Contributor shall release, indemnify and
                  hold harmless the Issuer Indemnitees against any and all
                  Adverse Consequences with respect to any Disposed Obligations,
                  including any Tax attributable thereto.

                           (viii) The Contributor shall release, indemnify and
                  hold harmless the Issuer Indemnitees against any and all
                  Adverse Consequences suffered by the Issuer Indemnitees with
                  respect to, any outstanding injunction, judgment, order,
                  decree, ruling, or charge, or any pending or threatened
                  action, suit, proceeding, hearing, or investigation of, in, or
                  before any court or quasi-judicial or administrative agency of
                  any federal, state, local, or foreign jurisdiction, relating
                  to any Acquired Company or any of the Relevant Assets on the
                  Closing Date, including the matters listed on Schedule 4(h).

                           (ix) The Contributor shall release, indemnify and
                  hold harmless the Issuer Indemnitees against any and all
                  Adverse Consequences arising as a result of the Reorganization
                  Transactions.

                           (x) Notwithstanding anything to the contrary
                  contained in Sections 8(b)(i) and (iii), the Seller shall not
                  have any obligation to indemnify any Buyer Indemnified Party
                  to the extent that the payment thereof would cause the
                  Seller's aggregate indemnity payments under all of Sections
                  8(b)(i) and (iii) (but excluding Sections 8(b)(ii), (iv),
                  (vii), (viii) and (ix)) to exceed 100% of the Combined Value.

                           (xi) To the extent any Issuer Indemnitee becomes
                  liable to, and is ordered to and does pay to any third party,
                  punitive, exemplary, special or consequential damages caused
                  by a breach by the Contributor of any representation, warranty
                  or covenant contained in this Agreement, then such punitive,
                  exemplary, special or consequential damages shall be deemed
                  actual damages to such Issuer Indemnitee and included within
                  the definition of Adverse Consequences for purposes of this
                  Section 8.

                           (xii) Except for the rights of indemnification
                  provided in this Section 8, the Issuer hereby waives any claim
                  or cause of action pursuant to common or statutory law or
                  otherwise against the Contributor arising from any breach by
                  the Contributor of any of its representations, warranties or
                  covenants under this Agreement or the transactions
                  contemplated hereby.

                                       29
<PAGE>

                  (c) Indemnification Provisions for Benefit of the Contributor.

                           (i) In the event: (x) the Issuer breaches any of its
                  representations, warranties or covenants contained herein
                  (without giving effect to any supplement to the Schedules, any
                  qualification as to materiality, Material Adverse Effect,
                  Knowledge, awareness or concepts of similar import, or any
                  qualification or limitation as to monetary amount or value);
                  (y) there is an applicable survival period pursuant to Section
                  8(a); and (z) the Contributor makes a written claim for
                  indemnification against the Issuer pursuant to Section 11(g)
                  within such survival period, then the Issuer agrees to release
                  and indemnify the Contributor Indemnitees from and against the
                  entirety of any Adverse Consequences suffered by such
                  Contributor Indemnitees.

                           (ii) The Issuer agrees to release and indemnify the
                  Contributor Indemnitees from and against the entirety of any
                  Adverse Consequences relating to any of (1) any environmental
                  condition, claim or loss with respect to any Acquired Company
                  or any of the Relevant Assets arising from or related to
                  mercury contamination emanating from mercury meters used in
                  connection therewith or (2) the ownership and operation of
                  each Acquired Company and each Relevant Asset (including those
                  arising during, related to or otherwise attributable to the
                  period commencing with the Issue Price Adjustment Date).

                           (iii) To the extent any Contributor Indemnitee
                  becomes liable to, and is ordered to and does pay to any third
                  party, punitive, exemplary, special or consequential damages
                  caused by a breach by the Issuer of any representation,
                  warranty or covenant contained in this Agreement, then such
                  punitive, exemplary, special or consequential damages shall be
                  deemed actual damages to such Contributor Indemnitee and
                  included within the definition of Adverse Consequences for
                  purposes of this Section 8.

                           (iv) Except for the rights of indemnification
                  provided in this Section 8, the Contributor hereby waives any
                  claim or cause of action pursuant to common or statutory law
                  or otherwise against the Issuer arising from any breach by the
                  Issuer of any of its representations, warranties or covenants
                  under this Agreement or the transactions contemplated hereby.

         (d) Matters Involving Third Parties.

                           (i) If any third party shall notify any Party (the
                  "Indemnified Party") with respect to any matter (a "Third
                  Party Claim") that may give rise to a claim for
                  indemnification against any other Party (the "Indemnifying
                  Party") under this Section 8, then the Indemnified Party shall
                  promptly (and in any event within five business days after
                  receiving notice of the Third Party Claim) notify the
                  Indemnifying Party thereof in writing.

                           (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; provided, however, that the

                                       30
<PAGE>

                  Indemnifying Party shall not 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
                  Indemnified Party (not to be withheld unreasonably) unless the
                  judgment or proposed settlement involves only the payment of
                  money damages and does not impose an injunction or other
                  equitable relief upon the Indemnified Party.

                           (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 2% interest or discount rate, as
appropriate. 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 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.

                  (f) Tax Treatment of Indemnity Payments. All indemnification
payments made under this Agreement, including any payment made under Section 9,
shall be treated as purchase price adjustments for Tax purposes. In addition,
all indemnification payments made to the Contributor under this Agreement shall
be satisfied by the issuance of a number of Common Units determined using the
Market Price on the date the Issuer is notified by the Contributor of such
indemnification obligation.

         9. Tax Matters.

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

                                       31
<PAGE>

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

                  (c) Straddle Periods. The Issuer shall be responsible for
Taxes of the Acquired Companies related to the portion of any Straddle Period
occurring after the Closing Date. The Contributor shall be responsible for Taxes
of the Relevant Assets and the Acquired Companies relating to the portion of any
Straddle Period occurring before and on the Closing Date. With respect to any
Straddle Period, to the extent permitted by applicable Law, the Contributor or
the Issuer shall elect to treat the Closing Date as the last day of the Tax
period. If applicable Law shall not permit the Closing Date to be the last day
of a period, then (i) real or personal property Taxes with respect to the
Relevant Assets and the Acquired Companies shall be allocated based on the
number of days in the partial period before and after the Closing 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 Relevant 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 Relevant Assets and the Acquired
Companies for each partial period as determined from their books and records.

                  (d) Straddle Returns. The Issuer shall prepare any Straddle
Returns. The Issuer shall deliver, at least 45 days prior to the due date for
filing such Straddle Return (including any extension) to the Contributor a
statement setting forth the amount of Tax that the Contributor owes, including
the allocation of taxable income and Taxes under Section 9(c), and copies of
such Straddle Return. The Contributor shall have the right to review such
Straddle Returns and the allocation of taxable income and liability for Taxes
and to suggest to the Issuer any reasonable changes to such Straddle Returns no
later than 15 days prior to the date for the filing of such Straddle Returns.
The Contributor and the Issuer 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 5
days before the due date for the payment of Taxes with respect to such Straddle
Returns, the Contributor shall pay or cause to be paid to the Issuer an amount
equal to the Taxes as agreed to by the Issuer and the Contributor as being owed
by the Contributor. If the Issuer and the Contributor cannot agree on the amount
of Taxes owed by the Contributor with respect to a Straddle Return, the
Contributor shall pay or cause to be paid to the Issuer the amount of Taxes
reasonably determined by the Contributor to be owed by the Contributor. Within
10 days after such payment, the Contributor and the Issuer shall refer the
matter to an independent "Big-Five" accounting firm agreed to by the Issuer and
the Contributor to arbitrate the dispute. The Contributor and the Issuer shall
equally share the fees and expenses of such accounting firm and its
determination as to the amount owing by the Contributor with respect to a
Straddle Return shall be binding on the Contributor and the Issuer. Within five
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 Contributor 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 Closing Date.

                                       32
<PAGE>

                  (e) Claims for Refund. The Issuer shall not, and shall cause
the Acquired Companies and any of their Affiliates not to, file any claim for
refund of taxes with respect to the Relevant Assets and the Acquired Companies
for whole or partial taxable periods on or before the Closing Date.

                  (f) Indemnification. The Issuer agrees to indemnify the
Contributor against all Taxes of or with respect to the Relevant Assets and the
Acquired Companies for any Post-Closing Tax Period and the portion of any
Straddle Period occurring after the Closing Date. The Contributor agrees to
indemnify the Issuer against all Taxes of or with respect to the Relevant Assets
and the Acquired Companies for any Pre-Closing Tax Period and the portion of any
Straddle Period occurring on or before the Closing Date, and all Taxes arising
directly as a result of the Reorganization Transactions.

                  (g) Cooperation on Tax Matters.

                           (i) The Issuer and the Contributor 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(g) 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.

                           (ii) The Issuer and the Contributor further agree,
                  upon request, to use their Best 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 Issuer and the Contributor agree, upon
                  request, to provide the other Parties with all information
                  that such other Parties may be required to report pursuant to
                  Section 6043 of the Code and all Treasury Department
                  Regulations promulgated thereunder.

                  (h) Certain Taxes. The Contributor shall file all necessary
Tax Returns and other documentation with respect to all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the Issuer 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 Issuer shall pay to
the Contributor, on or before the date such payments are due from the
Contributor, any transfer, documentary, sales, use, stamp, registration and
other Taxes and fees incurred in connection with this Agreement and the
transactions contemplated hereby.

                  (i) 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.

                                       33
<PAGE>

                  (j) Audits. The Contributor or the Issuer, 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 Relevant Assets or the Acquired Companies for whole or partial periods
for which it is indemnified by any 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(j) shall be 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(j) shall control the procedure for Tax indemnification matters to
the extent it is inconsistent with any other provision of this Agreement.

                  (k) 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
Contributor and the Issuer 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 Contributor and the
Issuer 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.

                  (l) Powers of Attorney. The Issuer, the Acquired Companies and
their respective Affiliates shall provide the Contributor 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(k) (including any refund claims which
turn into audits or disputes).

                  (m) Remittance of Refunds. If the Issuer or any Affiliate of
the Issuer receives a refund of any Taxes that the Contributor is responsible
for hereunder, or if the Contributor or any Affiliate of the Contributor
receives a refund of any Taxes that the Issuer is responsible for hereunder, the
party receiving such refund shall, within 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(m), 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 return or an adjustment thereto using
such reduction, overpayment or offset or upon the receipt of cash.

                                       34
<PAGE>

                  (n) [Intentionally omitted].

                  (o) Closing Tax Certificate. At the Closing, the Contributor
shall deliver to the Issuer a certificate in the form of Exhibit E 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.

         10. Termination.

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

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

                           (ii) the Issuer may terminate this Agreement by
                  giving written notice to the Contributor at any time before
                  Closing (A) in the event the Contributor has breached any
                  representation, warranty or covenant contained in this
                  Agreement in any material respect, the Issuer has notified the
                  Contributor of the breach, the breach has continued without
                  cure for a period of 10 days after the notice of breach and
                  such breach would result in a failure to satisfy a condition
                  to the Issuer's obligation to consummate the transactions
                  contemplated hereby; (B) if the Closing shall not have
                  occurred on or before 9:00 a.m. (Houston time) on April 1,
                  2002 (unless the failure results primarily from the Issuer
                  itself breaching any representation, warranty or covenant
                  contained in this Agreement); or (C) if the transactions
                  contemplated hereby do not receive all required approvals of
                  the FTC;

                           (iii) the Contributor may terminate this Agreement by
                  giving written notice to the Issuer at any time before the
                  Closing (A) in the event the Issuer has breached any
                  representation, warranty or covenant contained in this
                  Agreement in any material respect, the Contributor has
                  notified the Issuer of the breach, the breach has continued
                  without cure for a period of 10 days after the notice of
                  breach and such breach would result in a failure to satisfy a
                  condition to the Contributor's obligation to consummate the
                  transactions contemplated hereby; (B) if the Closing shall not
                  have occurred on or before 9:00 a.m. (Houston time) on April
                  1, 2002 (unless the failure results primarily from the
                  Contributor breaching any representation, warranty or covenant
                  contained in this Agreement); or (C) if the transactions
                  contemplated hereby do not receive all required approvals of
                  the FTC;

                           (iv) the Issuer or the Contributor may terminate this
                  Agreement if any court of competent jurisdiction or any
                  governmental, administrative or regulatory authority, agency
                  or body shall have issued an order, decree or ruling or shall
                  have taken any other action permanently enjoining, restraining
                  or otherwise prohibiting

                                       35
<PAGE>

                  the transactions contemplated hereby and such order, decree,
                  ruling or other action shall have become final and
                  nonappealable; and

                           (v) the Issuer or the Contributor may terminate this
                  Agreement if the Purchase and Sale Agreement is terminated for
                  any reason.

                  (b) Effect of Termination. Except for the obligations under
Sections 8, 10 and 11, if any Party terminates this Agreement pursuant to
Section 10(a), all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach).

         11. Miscellaneous.

                  (a) Public Announcements. Any Party is permitted to issue a
press release or make a public announcement concerning this Agreement without
the other Parties' consents, in which case the disclosing Party shall provide an
advance copy of the proposed public disclosure to the non-disclosing Parties and
permit the non-disclosing Parties the opportunity to reasonably comment on such
proposed disclosure. The Parties agree to cooperate in good faith to issue
separate and simultaneous press releases within twenty-four (24) hours following
the execution of this Agreement by all Parties.

                  (b) Insurance. The Issuer acknowledges and agrees that,
following the Closing, any Subject Insurance Policies shall be terminated or
modified to exclude coverage of all or any portion of the Relevant Assets or
Acquired Companies by the Contributor or any of its Affiliates, and, as a
result, the Issuer shall be obligated at or before Closing to obtain at its sole
cost and expense replacement insurance, including insurance required by any
third party to be maintained for or by the Relevant Assets or the Acquired
Companies. The Issuer further acknowledges and agrees that the Issuer may need
to provide to certain Governmental Authorities and third parties evidence of
such replacement or substitute insurance coverage for the continued operations
or businesses of the Relevant Assets or the Acquired Companies. If any claims
are made or losses occur prior to the Closing Date that relate solely to the
Relevant Assets or the business activities of the Acquired Companies and such
claims, or the claims associated with such losses, properly may be made against
the policies retained by the Contributor or its Affiliates after the Closing,
then the Contributor shall use its Best Efforts so that the Issuer can file,
notice, and otherwise continue to pursue these claims pursuant to the terms of
such policies; provided, however, nothing in this Agreement shall require the
Contributor to maintain or to refrain from asserting claims against or
exhausting any retained policies.

                  (c) 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, except that the Administrative Agent is a third-party
beneficiary of Section 11(d), and such Section may not be amended or modified
without the Administrative Agent's written consent.

                  (d) 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

                                       36
<PAGE>

assigns. Prior to the Closing the Issuer may not assign this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the Contributor; provided, however, without the prior written
approval of the Contributor, the Issuer and its permitted successors and assigns
may assign any or all of its rights, interests or obligations under this
Agreement (i) to an Affiliate of the Issuer, including designating one or more
Affiliates of the Issuer to be the assignee of some or any portion of the
Acquired Company Assets, (ii) in connection with granting a lien, pledge,
mortgage or other security interest pursuant to a bona fide lending transaction,
or (iii) pursuant to the foreclosure or settlement of any assignment made
pursuant to (ii) above; provided the Contributor is not released from any of its
obligations or liabilities hereunder. The Contributor acknowledges that the
Issuer has granted, and its Affiliate assignee(s) may grant, to the
Administrative Agent a lien on and security interest in all of its right, title
and interest in and to this Agreement.

                  (e) 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.

                  (f) 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.

                  (g) 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:

         If to the Contributor:     El Paso Field Services Holding Company
                                    Attn: President
                                    El Paso Building
                                    1001 Louisiana
                                    Houston, Texas 77002

         If to the Issuer:          El Paso Energy Partners, L.P.
                                    Attn: President
                                    4 Greenway Plaza
                                    Houston, Texas 77046
                                    (713) 420-2131

Any 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 (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic 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. Any 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.

                                       37
<PAGE>

                  (h) Governing Law and Venue. 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 HARRIS COUNTY, TEXAS.

                  (i) 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 Issuer and the Contributor. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant 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.

                  (j) 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.

                  (k) Transaction Expenses. Each of the Issuer and the
Contributor shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.

                  (l) 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 any 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. Each certificate delivered pursuant to this Agreement shall
be deemed a part hereof, and any representation, warranty or covenant herein
referenced or affirmed in such certificate shall be treated as a representation,
warranty or covenant given in the correlated Section hereof on the date of such
certificate. Additionally, any representation, warranty or covenant made in any
such certificate shall be deemed to be made herein.

                                       38
<PAGE>

                  (m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.

                  (n) Entire Agreement. THIS AGREEMENT (INCLUDING THE DOCUMENTS
REFERRED TO HEREIN) CONSTITUTES THE ENTIRE AGREEMENT AMONG 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.

                                      *****

                                       39
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date in the preamble.

                                 EL PASO ENERGY PARTNERS, L.P.

                                 By:      /s/ Keith Forman
                                     ------------------------------------------
                                     Vice President and Chief Financial Officer

                                 EL PASO FIELD SERVICES HOLDING COMPANY

                                 By:      /s/ D. Mark Leland
                                     ------------------------------------------
                                     Senior Vice President

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