Document:

Unassociated Document

    
       

      CONTRIBUTION
        AGREEMENT

      

      between

      

      DCP
        LP Holdings, LP

      

      and

      

      DCP
        Midstream Partners, LP

      

      October
        9, 2006

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

      

        
          	
                  ARTICLE
                    I CERTAIN DEFINITIONS

                	
                  1

                
	
                   

                	
                   

                	
                   

                
	
                  1.1

                	
                  CERTAIN
                    DEFINED TERMS

                	
                  1

                
	
                  1.2

                	
                  OTHER
                    DEFINITIONAL PROVISIONS

                	
                  13

                
	
                  1.3

                	
                  HEADINGS.

                	
                  13

                
	
                  1.4

                	
                  OTHER
                    TERMS

                	
                  13

                
	
                   

                	
                   

                
	
                  ARTICLE
                    II CONTRIBUTION OF THE SUBJECT INTEREST, ISSUANCE OF THE UNITS
                    AND
                    CONSIDERATION

                	
                  13

                
	
                   

                	
                   

                
	
                  2.1

                	
                  THE
                    TRANSACTION.

                	
                  13

                
	
                  2.2

                	
                  CONSIDERATION

                	
                  14

                
	
                   

                	
                   

                
	
                  ARTICLE
                    III ADJUSTMENTS, PRORATIONS AND SETTLEMENT

                	
                  14

                
	
                   

                	
                   

                
	
                  3.1

                	
                  ADJUSTMENTS.

                	
                  14

                
	
                  3.2

                	
                  PRORATIONS
                    AND ADJUSTMENTS.

                	
                  14

                
	
                  3.3

                	
                  PRELIMINARY
                    SETTLEMENT STATEMENT

                	
                  15

                
	
                  3.4

                	
                  FINAL
                    SETTLEMENT STATEMENT

                	
                  15

                
	
                  3.5

                	
                  DISPUTE
                    PROCEDURES

                	
                  15

                
	
                  3.6

                	
                  PAYMENTS

                	
                  15

                
	
                  3.7

                	
                  ACCESS
                    TO BOOKS AND RECORDS

                	
                  16

                
	
                  3.8

                	
                  EXCLUDED
                    ASSETS

                	
                  16

                
	
                   

                	
                   

                
	
                  ARTICLE
                    IV REPRESENTATIONS AND WARRANTIES OF HOLDINGS

                	
                  16

                
	
                   

                	
                   

                
	
                  4.1

                	
                  ORGANIZATION,
                    GOOD STANDING, AND AUTHORITY.

                	
                  16

                
	
                  4.2

                	
                  ENFORCEABILITY.

                	
                  17

                
	
                  4.3

                	
                  NO
                    CONFLICTS.

                	
                  17

                
	
                  4.4

                	
                  CONSENTS,
                    APPROVALS, AUTHORIZATIONS AND GOVERNMENTAL
                    REGULATIONS.

                	
                  17

                
	
                  4.5

                	
                  TAXES

                	
                  18

                
	
                  4.6

                	
                  LITIGATION;
                    COMPLIANCE WITH LAWS

                	
                  19

                
	
                  4.7

                	
                  CONTRACTS

                	
                  19

                
	
                  4.8

                	
                  TITLE
                    TO ASSETS; INTELLECTUAL PROPERTY

                	
                  20

                
	
                  4.9

                	
                  PREFERENTIAL
                    RIGHTS TO PURCHASE.

                	
                  21

                
	
                  4.10

                	
                  BROKER'S
                    OR FINDER'S FEES

                	
                  21

                
	
                  4.11

                	
                  COMPLIANCE
                    WITH PROPERTY INSTRUMENTS

                	
                  21

                
	
                  4.12

                	
                  ENVIRONMENTAL
                    MATTERS

                	
                  21

                
	
                  4.13

                	
                  EMPLOYEE
                    MATTERS

                	
                  22

                
	
                  4.14

                	
                  BENEFIT
                    PLAN LIABILITIES

                	
                  22

                
	
                  4.15

                	
                  NO
                    FOREIGN PERSON

                	
                  22

                
	
                  4.16

                	
                  CAPITALIZATION
                    OF GSRLLC.

                	
                  22

                
	
                  4.17

                	
                  SUBSIDIARIES
                    AND OTHER EQUITY INTERESTS

                	
                  22

                
	
                  4.18

                	
                  BANK
                    ACCOUNTS

                	
                  22

                
	
                  4.19

                	
                  NO
                    PREPAYMENTS MADE OR REFUNDS OWED.

                	
                  22

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        

          
            	
                    4.20

                  	
                    INVESTMENT
                      INTENT

                  	
                    23

                  
	
                    4.21

                  	
                    NO
                      OTHER REPRESENTATIONS OR WARRANTIES; SCHEDULES

                  	
                    23

                  
	
                     

                  	
                     

                  
	
                    ARTICLE
                      V REPRESENTATIONS AND WARRANTIES OF DCP

                  	
                    23

                  
	
                     

                  	
                     

                  
	
                    5.1

                  	
                    ORGANIZATION,
                      GOOD STANDING, AND AUTHORIZATION

                  	
                    23

                  
	
                    5.2

                  	
                    ENFORCEABILITY

                  	
                    23

                  
	
                    5.3

                  	
                    NO
                      CONFLICTS

                  	
                    24

                  
	
                    5.4

                  	
                    CONSENTS,
                      APPROVALS, AUTHORIZATIONS AND GOVERNMENTAL
                      REGULATIONS

                  	
                    24

                  
	
                    5.5

                  	
                    LITIGATION

                  	
                    24

                  
	
                    5.6

                  	
                    INDEPENDENT
                      INVESTIGATION

                  	
                    24

                  
	
                    5.7

                  	
                    BROKER'S
                      OR FINDER'S FEES

                  	
                    25

                  
	
                    5.8

                  	
                    INVESTMENT
                      INTENT

                  	
                    25

                  
	
                    5.9

                  	
                    AVAILABLE
                      FUNDS

                  	
                    26

                  
	
                     

                  	
                     

                  
	
                    ARTICLE
                      VI COVENANTS AND ACCESS

                  	
                    26

                  
	
                     

                  	
                     

                  
	
                    6.1

                  	
                    CONDUCT
                      OF BUSINESS.

                  	
                    26

                  
	
                    6.2

                  	
                    CASUALTY
                      LOSS.

                  	
                    27

                  
	
                    6.3

                  	
                    ACCESS,
                      INFORMATION AND ACCESS INDEMNITY.

                  	
                    28

                  
	
                    6.4

                  	
                    REGULATORY
                      FILINGS; HART-SCOTT-RODINO FILING.

                  	
                    29

                  
	
                    6.5

                  	
                    LIMITATION
                      ON CASUALTY LOSSES AND OTHER MATTERS

                  	
                    29

                  
	
                    6.6

                  	
                    SUPPLEMENTS
                      TO EXHIBITS AND SCHEDULES

                  	
                    30

                  
	
                    6.7

                  	
                    PRESERVATION
                      OF RECORDS

                  	
                    30

                  
	
                    6.8

                  	
                    MEASUREMENT
                      AND VALUATION OF EXCESS INVENTORY

                  	
                    30

                  
	
                    6.9

                  	
                    CAPITAL
                      PROJECTS

                  	
                    31

                  
	
                    6.10

                  	
                    NEW
                      DEBT

                  	
                    31

                  
	
                    6.11

                  	
                    CREDITS
                      AND RECEIPTS.

                  	
                    31

                  
	
                    6.12

                  	
                    TAX
                      COVENANTS.

                  	
                    31

                  
	
                    6.13

                  	
                    FINANCIAL
                      STATEMENTS AND FINANCIAL RECORDS

                  	
                    34

                  
	
                    6.14

                  	
                    INSURANCE

                  	
                    35

                  
	
                     

                  	
                     

                  
	
                    ARTICLE
                      VII CONDITIONS TO CLOSING

                  	
                    35

                  
	
                     

                  	
                     

                  
	
                    7.1

                  	
                    HOLDINGS'
                      AND DEFS' CONDITIONS

                  	
                    35

                  
	
                    7.2

                  	
                    DCP'S
                      CONDITIONS

                  	
                    36

                  
	
                     

                  	
                     

                  
	
                    ARTICLE
                      VIII CLOSING

                  	
                    37

                  
	
                     

                  	
                     

                  
	
                    8.1

                  	
                    TIME
                      AND PLACE OF CLOSING

                  	
                    37

                  
	
                    8.2

                  	
                    DELIVERIES
                      AT CLOSING

                  	
                    37

                  
	
                     

                  	
                     

                  
	
                    ARTICLE
                      IX TERMINATION

                  	
                    38

                  
	
                     

                  	
                     

                  
	
                    9.1

                  	
                    TERMINATION
                      AT OR PRIOR TO CLOSING.

                  	
                    38

                  
	
                    9.2

                  	
                    EFFECT
                      OF TERMINATION

                  	
                    38

                  

          

        

         

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

         

        
          
            
              	
                      ARTICLE
                        X INDEMNIFICATION

                    	
                      38

                    
	
                       

                    	
                       

                    
	
                      10.1

                    	
                      INDEMNIFICATION
                        BY DCP

                    	
                      38

                    
	
                      10.2

                    	
                      INDEMNIFICATION
                        BY HOLDINGS.

                    	
                      39

                    
	
                      10.3

                    	
                      DEDUCTIBLES,
                        CAPS, SURVIVAL AND CERTAIN LIMITATIONS.

                    	
                      39

                    
	
                      10.4

                    	
                      NOTICE
                        OF ASSERTED LIABILITY; OPPORTUNITY TO DEFEND.

                    	
                      41

                    
	
                      10.5

                    	
                      MATERIALITY
                        CONDITIONS

                    	
                      43

                    
	
                      10.6

                    	
                      EXCLUSIVE
                        REMEDY.

                    	
                      43

                    
	
                      10.7

                    	
                      NEGLIGENCE
                        AND STRICT LIABILITY WAIVER

                    	
                      43

                    
	
                      10.8

                    	
                      LIMITATION
                        ON DAMAGES

                    	
                      43

                    
	
                      10.9

                    	
                      BOLD
                        AND/OR CAPITALIZED LETTERS

                    	
                      44

                    
	
                       

                    	
                       

                    
	
                      ARTICLE
                        XI MISCELLANEOUS PROVISIONS

                    	
                      44

                    
	
                       

                    	
                       

                    
	
                      11.1

                    	
                      EXPENSES

                    	
                      44

                    
	
                      11.2

                    	
                      FURTHER
                        ASSURANCES

                    	
                      44

                    
	
                      11.3

                    	
                      APPORTIONMENT
                        OF PROPERTY TAXES; TRANSFER TAXES; AND RECORDING
                        FEES.

                    	
                      44

                    
	
                      11.4

                    	
                      ASSIGNMENT

                    	
                      44

                    
	
                      11.5

                    	
                      ENTIRE
                        AGREEMENT, AMENDMENTS AND WAIVER

                    	
                      45

                    
	
                      11.6

                    	
                      SEVERABILITY

                    	
                      45

                    
	
                      11.7

                    	
                      COUNTERPARTS

                    	
                      45

                    
	
                      11.8

                    	
                      GOVERNING
                        LAW, DISPUTE RESOLUTION AND ARBITRATION.

                    	
                      45

                    
	
                      11.9

                    	
                      NOTICES
                        AND ADDRESSES

                    	
                      48

                    
	
                      11.10

                    	
                      PRESS
                        RELEASES

                    	
                      49

                    
	
                      11.11

                    	
                      OFFSET.

                    	
                      49

                    
	
                      11.12

                    	
                      NO
                        PARTNERSHIP; THIRD PARTY BENEFICIARIES

                    	
                      49

                    
	
                      11.13

                    	
                      NEGOTIATED
                        TRANSACTION

                    	
                      49

                    

            

          

        

      

      

        
          
             

          

          
            iii

            
              

            

          

          
            
            

          

        

      

       

      EXHIBITS

      

        
          	
                  A

                	
                  Map
                    of Terminals

                
	
                  B

                	
                  Form
                    of Amended Limited Partnership Agreement

                
	
                  C

                	
                  Form
                    of ISDA Master Agreement

                
	
                  D

                	
                  Form
                    of Omnibus Agreement Amendment

                
	
                  E

                	
                  Form
                    of Subject Interests Assignment Agreement

                
	
                  F

                	
                  Form
                    of Certificate for Class C Units

                
	
                  G

                	
                  Form
                    of Canada Business Agreement

                

        

      

      
      

       

      SCHEDULES

      

        
          	
                  1.1(a)

                	
                  Personal
                    Property

                
	
                  1.1(b)

                	
                  Real
                    Property Interests

                
	
                  1.1(c)

                	
                  Permits

                
	
                  1.1(d)

                	
                  Contracts
                    

                
	
                  1.1(e)

                	
                  Post
                    Closing Consents 

                
	
                  1.1(f)

                	
                  Retained
                    Liabilities

                
	
                  1.1(g)

                	
                  Excluded
                    Assets

                
	
                  1.1(h)

                	
                  HOLDINGS'
                    Knowledge

                
	
                  1.1(i)

                	
                  List
                    of Terminals and Field Offices

                
	
                  4.4

                	
                  HOLDINGS
                    Consents, Approvals and Authorizations

                
	
                  4.5

                	
                  Taxes

                
	
                  4.6

                	
                  Litigation

                
	
                  4.9

                	
                  Preferential
                    Rights

                
	
                  4.11

                	
                  Real
                    Property Matters

                
	
                  4.12

                	
                  Environmental
                    Matters

                
	
                  4.18

                	
                  Bank
                    Accounts

                
	
                  4.19

                	
                  Prepayments,
                    Refunds

                
	
                  5.4

                	
                  DCP
                    Consents, Approvals and Authorizations

                
	
                  6.8

                	
                  Measurement
                    and Valuation of Excess Inventory

                
	
                  6.9

                	
                  Capital
                    Projects

                
	
                  6.10

                	
                  New
                    Debt

                
	
                  10.2(d)

                	
                  Certain
                    Indemnified Matters

                

        

      

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

    

     

    CONTRIBUTION
      AGREEMENT

     

    This
      Contribution Agreement ("Agreement")
      is
      dated as of October 9, 2006 and is between DCP LP Holdings, LP, a Delaware
      limited partnership ("HOLDINGS")
      and
      DCP Midstream Partners, LP, a Delaware limited partnership ("DCP").
      HOLDINGS and DCP are sometimes referred to collectively herein as the
      "Parties"
      and
      individually as a "Party".

    

    RECITALS

     

    A. HOLDINGS
      owns all of the outstanding limited liability company member interests of Duke
      Energy Guadalupe Pipeline, LLC, a Delaware limited liability company
      ("DEGP").

    

    B. DEGP
      owns
      all of the outstanding limited liability company member interests of Gas Supply
      Resources LLC, a Texas limited liability company ("GSRLLC").

    

    C. GSRLLC
      owns
      (a) all of the limited
      liability company
      member
      interests of GSRI Transportation LLC, a Texas limited
      liability company ("GSRI")
      and
      (b) 50% of the limited liability company member interests of Pine
      Tree
      Propane limited
      liability company, a Maine limited liability company ("Pine
      Tree").

    

    D. R
      H
      Foster LLC,
      a Maine
      limited liability company operates and owns the remaining 50% of the limited
      liability company member interests of Pine
      Tree.

    

    E. Prior
      to
      Closing, DEGP will distribute, convey and assign all of the outstanding limited
      liability company member interests of GSRLLC to HOLDINGS.

    

    F. HOLDINGS
      and DCP desire that HOLDINGS contribute to DCP all of the limited
      liability company member
      interest
      of GSRLLC (the "Subject
      Interests")
      in
      accordance with this Agreement. 

    

    FOR
      GOOD AND VALUABLE CONSIDERATION,
      the
      receipt and sufficiency of which are hereby acknowledged, DCP and HOLDINGS
      agree
      as follows:

     

    ARTICLE
      I

     

    CERTAIN
      DEFINITIONS 

     

    1.1 Certain
      Defined Terms.
      Capitalized terms used herein and not defined elsewhere in this Agreement shall
      have the meanings given such terms as is set forth below.

     

    "Affiliate"
      means,
      when used with respect to a specified Person, any other Person directly or
      indirectly controlling or controlled by or under direct or indirect common
      control with the specified Person as of the time or for the time periods during
      which such determination is made. By way of example, the LLCs shall be deemed
      Affiliates of HOLDINGS during the time period prior to the Effective Time and
      shall be deemed Affiliates of DCP for time periods subsequent to the Effective
      Time. For purposes of this definition "control", when used with respect to
      any
      specified Person, means the power to direct the management and policies of
      the
      Person, directly or indirectly, whether through the ownership of voting
      securities, by contract or otherwise; and the terms "controlling" and
      "controlled" have the meanings correlative to the foregoing. Notwithstanding
      the
      foregoing, the term "Affiliate" when applied to (a) DCP shall not include Duke
      Energy Corporation, a Delaware corporation, or ConocoPhillips, a Delaware
      corporation, or any entities owned, directly or indirectly, by Duke Energy
      Corporation or ConocoPhillips, other than entities owned, directly or
      indirectly, by DCP and DCP Midstream GP and (b) HOLDINGS shall not include
      DCP
      or any entities owned, directly or indirectly, by DCP.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    "Allocation
      Statement"
      shall
      have the meaning given such term in Section
      6.12(f).
      

     

    "Amended
      Limited Partnership Agreement"
      shall
      mean DCP's Second Amended and Restated Agreement of Limited Partnership to
      be
      dated on or before the Effective Time in substantially the form of Exhibit
      B.

     

    "Annual
      Financial Statements"
      shall
      have the meaning given such term in Section
      6.13.

     

    "Arbitral
      Dispute"
      means
      any dispute, claim, counterclaim, demand, cause of action, controversy and
      other
      matters in question arising out of or relating to this Agreement or the alleged
      breach hereof, or in any way relating to the subject matter of this Agreement
      or
      the relationship between the Parties created by this Agreement, regardless
      of
      whether (a) allegedly extra-contractual in nature, (b) sounding in contract,
      tort, or otherwise, (c) provided for by applicable Law or otherwise, or (d)
      seeking damages or any other relief, whether at Law, in equity, or
      otherwise.

     

    "Arbitration
      Rules"
      shall
      have the meaning given such term in Section
      11.8(d).

     

    "Assets"
      shall
      mean all of the assets and properties of the respective LLC, including the
      respective LLC's interests in the following, except for the Excluded Assets.
      Each Schedule referenced in this definition includes a separate subpart for
      each
      of the three LLCs.

     

    (a) Personal
      Property.
      All
      tangible personal property of every kind and nature that relate to the
      ownership, operation, use or maintenance of the Assets, including field
      equipment, office equipment, fixtures, trailers, railcars, tools, instruments,
      spare parts, machinery, computer equipment, telecommunications equipment,
      furniture, supplies and materials that are located at the Terminals or Field
      Offices, including those items of personal property more particularly described
      in Schedule
      1.1(a)
      and all
      hydrocarbon inventory at the Terminals or in transit to or from the Terminals
      (collectively the "Personal
      Property");

     

    (b) Real
      Property.
      All fee
      property, rights-of-way, easements, surface use agreements, licenses and leases
      that relate to the ownership, operation, use or maintenance of the other Assets,
      including those described in Schedule
      1.1(b)
      (collectively, the "Real
      Property Interests"),
      and
      all fixtures, buildings and improvements located on or under such Real Property
      Interests;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c) Permits.
      All
      assignable permits, licenses, certificates, orders, approvals, authorizations,
      grants, consents, concessions, warrants, franchises and similar rights and
      privileges which are necessary for, or are used or held for use primarily for
      or
      in connection with, the ownership, use, operation or maintenance of the Assets
      (collectively, the "Permits"),
      including those Permits more particularly described in Schedule
      1.1(c);

     

    (d) Contract
      Rights.
      All
      contracts that relate to the ownership, operation, use or maintenance of the
      Assets, including all propane purchase and sales agreements, storage agreements,
      and transportation agreements, equipment leases, rental contracts, and service
      agreements, including those contracts or agreements described in Schedule
      1.1(d)
      (collectively, the "Contracts");

     

    (e) Intellectual
      Property.
      All
      technical information, shop rights, designs, plans, manuals, specifications
      and
      other proprietary and nonproprietary technology and data used in connection
      with
      the ownership, operation, use or maintenance of the Assets (collectively, the
      "Intellectual
      Property");

     

    (f) Terminals
      and Field Offices.
      The
      Terminals and Field Offices;

     

    (g) Books
      and Records.
      All
      contract, land, title, engineering, environmental, operating, accounting,
      business, marketing, and other data, files, documents, instruments, notes,
      correspondence, papers, ledgers, journals, reports, abstracts, surveys, maps,
      books, records and studies which relate primarily to the Assets or which are
      used or held for use primarily in connection with, the ownership, operation,
      use
      or maintenance of the Assets; provided,
      however,
      such
      material shall not include (i) any proprietary data that is not primarily used
      in connection with the continued ownership, use or operation of the Assets,
      (ii)
      any information subject to Third Person confidentiality agreements for which
      a
      consent or waiver cannot be secured by HOLDINGS after reasonable efforts, (iii)
      any information which, if disclosed, would violate an attorney-client privilege
      or would constitute a waiver of rights as to attorney work product or
      attorney-client privileged communications, or (iv) any information relating
      primarily to the Retained Liabilities or any obligations for which HOLDINGS
      is
      required to indemnify the DCP Indemnitees pursuant to Section
      10.2
      (collectively, the "Records");
      provided,
      however,
      that
      DCP shall have the right to copy any of the information specified in
clause
      (iv);
      and

     

    (h) Incidental
      Rights.
      All of
      the following insofar as the same are attributable or relate primarily to any
      of
      the Assets described in clauses
      (a)
      through
(g):
      (i) all purchase orders, invoices, storage or warehouse receipts, bills of
      lading, certificates of title and documents, (ii) all keys, lock
      combinations, computer access codes and other devices or information necessary
      to gain entry to and/or take possession of such Assets, (iii) all rights in
      any confidentiality or nonuse agreements relating to the Assets, and
      (iv) the benefit of and right to enforce all covenants, warranties,
      guarantees and suretyship agreements running in favor of the LLCs relating
      primarily to the Assets and all security provided primarily for payment or
      performance thereof.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    "Assumed
      Obligations"
      shall
      mean, except for the Retained Liabilities, all rights, liabilities, duties,
      obligations, risk of loss, Claims, Losses and any related responsibility for
      the
      ownership, operation or use of the LLCs, the Assets and the business related
      thereto and any condition of or on the Assets attributable to any period of
      time, whether before, on or after the Effective Time.

     

    "Benefit
      Plan"
      shall
      mean any of the following: (a) any employee welfare benefit plan or
      employee pension benefit plan as defined in sections 3(1) and 3(2) of ERISA,
      and
      (b) any other material employee benefit agreement or arrangement, including
      a deferred compensation plan, incentive plan, bonus plan or arrangement, stock
      option plan, stock purchase plan, stock award plan, golden parachute agreement,
      severance plan, dependent care plan, cafeteria plan, employee assistance
      program, scholarship program, employment contract, retention incentive
      agreement, non-competition agreement, consulting agreement, vacation policy,
      and
      other similar plan, agreement and arrangement.

     

    "Business
      Day"
      shall
      mean any day, other than Saturday and Sunday, on which federally-insured
      commercial banks in Denver, Colorado are generally open for business and capable
      of sending and receiving wire transfers.

     

    "Canada
      Business Agreement"
      shall
      mean a Canada Business Agreement between HOLDINGS and GSRLLC in the form of
      the
      attached Exhibit
      G.

     

    "Capital
      Projects"
      shall
      have the meaning given such term in Section
      6.9.

     

    "Cash
      Consideration"
      shall
      have the meaning given such term in Section
      2.2.

     

    "Casualty
      Loss"
      shall
      mean, with respect to all or any portion of the Assets, any destruction by
      fire,
      storm or other casualty, or any condemnation or taking or threatened
      condemnation or taking, of all or any portion of the Assets. 

     

    "Cash
      Consideration"
      shall
      have the meaning given such term in Section
      2.2.

     

    "Certificate
      of Class C Units"
      shall
      mean the certificate(s) representing HOLDINGS’ additional interest in DCP in the
      form of the attached Exhibit
      E.

     

    "Claim"
      shall
      mean any demand, demand letter, claim or notice by a Third Person of
      noncompliance or violation or Proceeding.

     

    "Claim
      Notice"
      shall
      have the meaning given such term in Section
      10.3(c).

     

    "Closing"
      shall
      have the meaning given such term in Section
      8.1.

     

    "Closing
      Date"
      shall
      have the meaning given such term in Section
      8.1.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    "Code"
      shall
      mean the U.S. Internal Revenue Code of 1986, as amended.

     

    "Commercially
      Reasonable Efforts"
      shall
      mean efforts which are reasonably within the contemplation of the Parties on
      the
      date hereof, which are designed to enable a Party, directly or indirectly,
      to
      satisfy a condition to, or otherwise assist in the consummation of, the
      transactions contemplated by this Agreement and which do not require the
      performing Party to expend any funds or assume liabilities other than
      expenditures and liabilities which are reasonable in nature and amount in the
      context of the transactions contemplated by this Agreement.

     

    "Contracts"
      shall
      have the meaning given such term in the definition of Assets.

     

    "Consideration"
      shall
      mean the Unit Consideration and Cash Consideration.

     

    "DCP"
      shall
      mean DCP Midstream Partners, LP, a Delaware limited partnership and its
      permitted successors and assigns.

     

    "DCP
      Indemnitees"
      shall
      have the meaning given such term in Section
      10.2.

     

    "DCP's
      Knowledge"
      or the
      "Knowledge
      of DCP"
      or any
      similar term, shall mean the actual knowledge of any officer of DCP having
      a
      title of vice president or higher.

     

    "DCP
      Midstream GP"
      shall
      mean DCP Midstream GP, LP, a Delaware limited partnership.

     

    "DCP
      Required Consents"
      shall
      have the meaning given such term in Section
      5.4.

     

    "Defensible
      Title"
      shall
      mean, as to the Assets, such title to the Assets that vests the applicable
      LLC
      with indefeasible title in and to the Assets free and clear of Liens
      other
      than Permitted Encumbrances.

     

    "DEFS"
      shall
      mean Duke Energy Field Services, LLC, a Delaware limited liability
      company.

     

    "DENGL"
      shall
      mean Duke Energy NGL Services, LP, a Delaware limited partnership.

     

    "DOJ"
      shall
      mean the Department of Justice of the United States.

     

    "Effective
      Time"
      shall
      mean 7:00 A.M. on the calendar day following the Closing Date; provided,
      however, that if Closing occurs after November 1, 2006, but on or before
      November 14, 2006, "Effective
      Time"
      shall
      mean 7:00 A.M. on November 1, 2006.

     

    "Environmental
      Law"
      shall
      mean any and all Laws, statutes, ordinances, rules, regulations, or orders
      of
      any Governmental Authority in existence at the Effective Time pertaining to
      the
      protection of the environment or natural resources or to Hazardous Materials
      in
      any and all jurisdictions in which the party in question owns property or
      conducts business or in which the Assets are located, including the Clean Air
      Act, the Comprehensive Environmental Response, Compensation, and Liability
      Act
      of 1980 ("CERCLA"),
      the
      Federal Water Pollution Control Act, the Occupational Safety and Health Act
      of
      1970 (to the extent relating to environmental matters), the Resource
      Conservation and Recovery Act of 1976 ("RCRA"),
      the
      Safe Drinking Water Act, the Toxic Substances Control Act, the Hazardous &
Solid Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization
      Act of 1986, the Hazardous Materials Transportation Act, the Oil Pollution
      Act
      of 1990, any state or local Laws implementing or substantially equivalent to
      the
      foregoing federal Laws, and any state or local Laws pertaining to the handling
      of oil and gas exploration, production, gathering, and processing wastes or
      the
      use, maintenance, and closure of pits and impoundments.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    "Environmental
      Matter"
      shall
      have the meaning given such term in Section
      4.4(b).

     

    "ERISA"
      shall
      mean the Employee Retirement Income Security Act of 1974, as
      amended.

     

    "Excess
      Inventory"
      shall
      mean all propane included in the Assets above the necessary minimum operating
      inventory, which shall be measured in accordance with Section
      6.8.

     

    "Excluded
      Assets"
      shall
      mean all of the following:

     

    (a) All
      deposits, cash, checks, funds, claims for refund and accounts receivable to
      the
      extent related to the business of the LLCs prior to the Effective
      Time;

     

    (b) any
      deposits or pre-paid items attributable to the operation of the
      Assets;

     

    (c) the
      Excess Inventory;

     

    (d) Claims
      for refund of or loss carry forwards with respect to (i) Taxes attributable
      to
      the business of the LLCs for any period prior to the Effective Time or (ii)
      any
      Taxes attributable to any of the Excluded Assets;

     

    (e) All
      work
      product of HOLDINGS' or its Affiliates' attorneys, records relating to the
      negotiation and consummation of the transactions contemplated hereby and
      documents that are subject to a valid attorney-client privilege;

     

    (f) All
      real
      property, personal property, contracts, intellectual property, Permits, office
      computers or other equipment (or any leases or licenses of the foregoing ),
      if
      any, that are listed on Schedule
      1.1(g);

     

    (g) All
      vehicles, and all leases for vehicles that relate to the ownership, operation,
      use or maintenance of the Assets, except the leasehold interest in tractors
      and
      trailers under the lease agreements described in Schedule
      1.1(d);

     

    (h) All
      computer software that relates to the ownership, operation, use or maintenance
      of the Assets that requires a consent to transfer;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (i) All
      rights and obligations under swaps, futures or other similar derivative-based
      transactions that relate to the ownership, operation, use or maintenance of
      the
      Assets, except those that are specifically described in Schedule
      1.1(d);
      

     

    (j) all
      Canadian propane supply and inventory/storage contracts (i.e., the only Canadian
      assets that will be included within the Assets are rail car
      leases);

     

    (k) All
      office equipment and accessories (including computers) that relate to the
      ownership, operation, use or maintenance of the Assets, other than that located
      at the Terminals and the Field Offices; and

     

    (l) Subject
      to Sections
      6.2
      and
6.14,
      all
      rights to claim coverage or benefits under HOLDINGS' or its Affiliates'
      insurance policies or coverage,
      including self-insurance and insurance which HOLDINGS has obtained through
      a
      captive insurance carrier.

     

    "Exhibits"
      shall
      mean any and/or all of the exhibits attached to and made a part of this
      Agreement.

     

    "Field
      Offices"
      shall
      mean GSRLLC’s offices (or leasehold interest in offices) described in
Schedule
      1.1(i).

     

    "Final
      Settlement Statement"
      shall
      have the meaning given such term in Section
      3.4.

     

    "FTC"
      shall
      mean the Federal Trade Commission of the United States of America.

     

    "GAAP"
      means
      generally accepted accounting principles in the United States as of the date
      hereof, consistently applied.

     

    "Governmental
      Authorities"
      shall
      mean (a) the United States of America or any state or political subdivision
      thereof within the United States of America and (b) any court or any
      governmental or administrative department, commission, board, bureau or agency
      of the United States of America or of any state or political subdivision thereof
      within the United States of America.

     

    "Hazardous
      Materials"
      shall
      mean: (a) any chemicals, materials or substances defined or included in the
      definition of "hazardous substances," "hazardous materials," "toxic substances,"
      "solid wastes," "pollutants," "contaminants," or words of similar import, under
      any Environmental Law, (b) any petroleum, petroleum products (including,
      without limitation, crude oil or any faction thereof), natural gas liquids,
      natural gas condensate, or oil and gas exploration or production waste,
      radioactive materials (other than naturally occurring radioactive materials),
      friable asbestos, mercury, lead based paints and polychlorinated biphenyls,
      (c) any other chemical, material or substance, exposure to which is
      prohibited, limited or regulated by any Governmental Authority; or (d) any
      regulated constituents or substances in concentrations or levels that exceed
      numeric or risk-based standards established pursuant to Environmental Laws.
      

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    "HOLDINGS"
      shall
      mean DCP LP Holdings, LP, a Delaware limited partnership.

     

    "HOLDINGS'
      Indemnitees"
      shall
      have the meaning given such term in Section
      10.1.

     

    "HOLDINGS'
      Knowledge"
      or the
      "Knowledge
      of HOLDINGS"
      or any
      similar term, shall mean the actual knowledge of (i) any officer of HOLDINGS
      having a title of Vice President or higher, and (ii) the individuals listed
      on
Schedule
      1.1(h).

     

    "HOLDINGS'
      Property Tax"
      shall
      have the meaning given such term in Section 11.3(a).

     

    "HOLDINGS'
      Required Consents"
      shall
      have meaning given such term in Section 4.4(a).

     

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

     

    "Imbalance"
      shall
      mean all hydrocarbon imbalances between an LLC and a Third Person relating
      to or
      arising out of the operation of the Assets that exist at the Effective
      Time.

     

    "Imbalance
      Payable"
      shall
      mean an account payable for an Imbalance owed by an LLC to a Third
      Person.

     

    "Imbalance
      Receivable"
      shall
      mean an account receivable for an Imbalance owed by a Third Person to an
      LLC.

     

    "Indemnified
      Party"
      or
      "Indemnitee"
      shall
      have the meaning given such term in Section 10.4(a).

     

    "Indemnifying
      Party"
      or
      "Indemnitor"
      shall
      have the meaning given such term in Section
      10.4(a).

     

    "Independent
      Accountants"
      shall
      mean PriceWaterhouseCoopers.

     

    "Insurance"
      shall
      have the meaning give such term in Section
      6.14.

     

    "Interest
      Rate"
      shall
      mean a per annum rate of interest equal to the lesser of (a) the prime rate
      of interest by Bank of America plus one percent (1%), which rate shall change
      when and as such prime rate changes, or (b) the maximum non-usurious rate
      of interest permitted to be charged under applicable Law.

     

    "ISDA
      Agreement"
      shall
      mean an ISDA Master Agreement between DENGL and GSRLLC in the form of the
      attached Exhibit
      C.

     

    "Laws"
      shall
      mean all applicable statutes, laws (including common law), regulations, rules,
      rulings, ordinances, orders, restrictions, requirements, writs, judgments,
      injunctions, decrees and other official acts of or by any Governmental
      Authority.

     

    "Lien"
      shall
      mean any lien, mortgage, pledge, claim, charge, security interest or other
      encumbrance, option or defect on title.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    "Limited
      Partnership Agreement"
      shall
      mean the First Amended and Restated Agreement of Limited Partnership of DCP
      dated as of December 7, 2005.

     

    "LLCs"
      shall
      mean GSRLLC, GSRI and Pine Tree.

     

    "Loss"
      or
      "Losses"
      shall
      mean any and all damages, demands, payments, obligations, penalties,
      assessments, disbursements, claims, costs, liabilities, losses, causes of
      action, and expenses, including interest, awards, judgments, settlements, fines,
      fees, costs of defense and reasonable attorneys' fees, costs of accountants,
      expert witnesses and other professional advisors and costs of investigation
      and
      preparation of any kind or nature whatsoever.

     

    "Material
      Adverse Effect"
      shall
      mean a single event, occurrence or fact, or series of events, occurrences or
      facts, that, alone or together with all other events, occurrences or facts
      (a)
      would have an adverse change in or effect on the LLCs or the Assets (including
      the cost to remedy, replace or obtain same) taken as a whole, in excess of
      $3,400,000 or (b) would result in the prohibition or material delay in the
      consummation of the transactions contemplated by this Agreement, excluding
      (in
      each case) matters that are generally industry-wide developments or changes
      or
      effects resulting from changes in Law or general economic, regulatory or
      political conditions. 

     

    "Materiality
      Condition"
      shall
      have the meaning given such term in Section
      10.5.

     

    "Notice
      Period"
      shall
      have the meaning given such term in Section
      10.4(c).

     

    "Omnibus
      Agreement Amendment"
      shall
      mean the Second Amendment to Omnibus Agreement among DEFS, DCP, DCP Midstream
      GP, DCP Midstream GP, LLC and DCP Midstream Operating, LP, in the form of the
      attached Exhibit
      D.
      

     

    "Ordinary
      Course of Business"
      shall
      mean the ordinary course of business consistent with past
      practices.

     

    "Permits"
      shall
      have the meaning given such term in the definition of Assets.

     

    "Permitted
      Encumbrances"
      shall
      mean the following:

     

    (a) the
      terms, conditions, restrictions, exceptions, reservations, limitations, and
      other matters contained in any document creating the Real Property Interests,
      or
      in any Permit or Contract;

     

    (b) Liens
      for
      property Taxes and assessments that are not yet due and payable (or that are
      being contested in good faith by appropriate Proceedings for which HOLDINGS
      will
      retain liability);

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (c) mechanic's,
      materialmen's, repairmen's and other statutory Liens arising in the ordinary
      course and securing obligations incurred prior to the Effective Time and (i)
      for
      which HOLDINGS or a Third Person is, and will after the Effective Time be,
      responsible for payment, or (ii) that are not delinquent and that will be paid
      and discharged in the ordinary course of business by HOLDINGS or a Third Person
      or, if delinquent, that are being contested in good faith with any action to
      foreclose on or attach any Assets on account thereof properly stayed and for
      which HOLDINGS, its Affiliates or a Third Person will retain
      liability;

     

    (d) utility
      easements, restrictive covenants, defects and irregularities in title,
      encumbrances, exceptions and other matters that are of record that, singularly
      or in the aggregate, will not materially interfere with the ownership, use
      or
      operation of the Assets to which they pertain;

     

    (e) required
      Third Person consents to assignment, preferential purchase rights and other
      similar agreements with respect to which consents or waivers are obtained from
      the appropriate Person for the transaction contemplated hereby prior to Closing
      or, as to which the appropriate time for asserting such rights has expired
      as of
      the Closing without an exercise of such rights; 

     

    (f) any
      Post-Closing Consent; 

     

    (g) Liens
      created by DCP or its successors or assigns; and

     

    (h) The
      Liens
      listed on Schedule
      1.1(a).

     

    "Person"
      shall
      mean any natural person, corporation, company, partnership (general or limited),
      limited liability company, trust, joint venture, joint stock company,
      unincorporated organization, or other entity or association.

     

    "Personal
      Property"
      shall
      have the meaning given such term in the definition of Assets.

     

    "Post-Closing
      Consents"
      shall
      mean consents or approvals from, or filings with Governmental Authorities or
      consents from railroads customarily obtained following the closing of a
      transaction similar to the transaction contemplated hereby, including those
      listed on Schedule 1.1(e).
      

     

    "Pre-Closing
      Tax Period"
      shall
      mean, with respect to the LLCs, any taxable period (including the portion of
      any
      Straddle Period) ending on or prior to the Closing Date.

     

    "Preliminary
      Settlement Statement"
      shall
      have the meaning given such term in Section 3.3.

     

    "Proceeding"
      shall
      mean any action, suit, claim, investigation, review or other judicial or
      administrative proceeding, at Law or in equity, before or by any Governmental
      Authority or arbitration or other dispute resolution proceeding.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    "Qualified
      Claims"
      shall
      have the meaning given such term in Section
      10.3(b)(iv).

     

    "Real
      Property Interests"
      shall
      have the meaning given such term in the definition of Assets.

     

    "Records"
      shall
      have the meaning given such term in the definition of Assets.

     

    "Recoupments"
      shall
      have meaning given such term in Section
      6.9.

     

    "Retained
      Liabilities"
      shall
      mean Losses with respect to:

     

    (i) except
      for sales, transfer, use or similar Taxes that are due or should hereafter
      become due (including penalty and interest thereon) by reason of the transaction
      contemplated by this Agreement and property Taxes, all Taxes with respect to
      the
      LLCs or the Assets to the extent related to periods prior to and including
      the
      Closing Date;

     

    (ii) property
      Taxes on the Assets related to periods prior to January 1, 2006;

     

    (iii) disposal
      of Hazardous Substances generated at the Terminals at offsite locations between
      April 30, 2001 and the Closing Date;

     

    (iv) the
      Excluded Assets and Taxes related thereto; and

     

    (v) those
      matters, if any, described on Schedule
      1.1(f).
      

     

    "Schedules"
      shall
      mean any and/or all of the schedules attached to and made a part of this
      Agreement.

     

    "SEC"
      shall
      mean the U.S. Securities and Exchange Commission.

     

    "SEC
      Financial Statements"
      shall
      have the meaning specified in Section
      6.13.

     

    "Securities
      Act"
      shall
      mean the Securities Act of 1933, as amended.

     

    "Settlement
      Notice"
      shall
      have the meaning given such term in Section
      3.5.

     

    "Straddle
      Period"
      shall
      mean any taxable period that begins before and ends after the Closing
      Date.

     

    "Straddle
      Tax Return"
      shall
      mean any Tax Return that covers a taxable period that begins before and ends
      after the Closing Date.

     

    "Stub
      Period Financial Statements"
      shall
      have the meaning given such term in Section 6.13.

     

    "Subject
      Interests"
      shall
      mean 100% of the limited liability company membership interests of
      GSRLLC.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    "Subject
      Interests Assignment Agreement"
      shall
      mean the Assignment Agreement in substantially the form of Exhibit
      E
      covering
      the conveyance of the Subject Interests by HOLDINGS to DCP.

     

    "Subject
      Time"
      shall
      mean the current local time then in effect (a) with respect to the Closing,
      in
      Denver, Colorado and (b) with respect to Personal Property or Real Property
      Interests, where such property is located.

     

    "Tank
      Damage"
      shall
      have the meaning given such term in Section
      6.9.

     

    "Tax"
      or
      "Taxes"
      shall
      mean any Governmental Authority income tax, ad valorem tax, excise tax, sales
      tax, use tax, franchise tax, real or personal property tax, transfer tax, gross
      receipts tax or other tax, assessment, duty, fee, levy or other governmental
      charge, together with and including, any and all interest, fines, penalties,
      assessments, and additions to Tax resulting from, relating to, or incurred
      in
      connection with any of those or any contest or dispute thereof.

     

    "Tax
      Authority"
      shall
      mean any Authority having jurisdiction over the payment or reporting of any
      Tax.

     

    "Tax
      Benefits"
      means
      the amount by which the Tax liability of the Indemnified Party or any of its
      Affiliates for a taxable period is actually reduced (including, without
      limitation, by deduction, reduction in income upon a sale, disposition or other
      similar transaction as a result of increased tax basis, receipt of a refund
      of
      Taxes or use of a credit of Taxes) plus any related interest (net of Taxes
      payable thereon) received from the relevant Tax Authority, as a result of the
      incurrence, accrual or payment of any Loss or Tax with respect to which the
      indemnification payment is being made.

     

    "Tax
      Claim"
      shall
      mean the written notice of the assertion or commencement of any claim,
      assessment, deficiency, audit, review, examination or other proposed change
      or
      adjustment by any Tax Authority or any judicial or administrative proceeding
      relating to a Pre-Closing Tax Period of the Company.

     

    "Tax
      Proceeding"
      shall
      have the meaning given such term in Section
      6.12(g).

     

    "Tax
      Return"
      shall
      mean any report, statement, form, return or other document or information
      required to be supplied to a taxing authority in connection with
      Taxes.

     

    "Terminals"
      shall
      mean those propane terminal facilities described in Schedule
      1.1(i)
      and
      identified on the Terminal Map.

     

    "Terminal
      Map"
      shall
      mean the map describing the Terminals attached to this Agreement as Exhibit
      A.

     

    "Third
      Person"
      shall
      mean (i) any Person other than a Party or its Affiliates, and (ii) any
      Governmental Authority. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    "Third
      Person Awards"
      shall
      mean any actual recoveries from Third Persons by the Indemnified Party
      (including, without limitation, from insurance and third-party indemnification)
      in connection with the claim for which such party is also potentially
      liable.

     

    "Third
      Person Claim"
      shall
      have the meaning given such term in Section
      10.4(c).

     

    "Transaction
      Documents"
      shall
      mean the ISDA Agreement, the Amended Limited Partnership Agreement, the Canada
      Business Agreement, the Omnibus Agreement Amendment, the Subject Interests
      Assignment Agreement, a Certificate representing the Unit Consideration, and
      any
      other document related to the sale, transfer, assignment or conveyance of the
      Subject Interests to be delivered at Closing. 

     

    "Treasury
      Regulations"
      shall
      mean regulations promulgated under the Code.

     

    "Unit
      Consideration"
      shall
      have the meaning given such term in Section
      2.2.

     

    "Units"
      shall
      mean one of that certain class of limited partnership interests of DCP with
      those special rights and obligations specified in the Amended Limited
      Partnership Agreement as being appurtenant to a "Class C
      Unit".

     

    1.2 Other
      Definitional Provisions.
      As used
      in this Agreement, unless expressly stated otherwise or the context requires
      otherwise, (a) all references to an "Article," "Section," or "subsection" shall
      be to an Article, Section, or subsection of this Agreement, (b) the words "this
      Agreement," "hereof," "hereunder," "herein," "hereby," or words of similar
      import shall refer to this Agreement as a whole and not to a particular Article,
      Section, subsection, clause or other subdivision hereof, (c) the words used
      herein shall include the masculine, feminine and neuter gender, and the singular
      and the plural, (d) the word "including" means "including, without
      limitation"
      and (e)
      the word "day" or "days" means a calendar day or days, unless otherwise denoted
      as a Business Day.

     

    1.3 Headings.
      The
      headings of the Articles and Sections of this Agreement and of the Schedules
      and
      Exhibits are included for convenience only and shall not be deemed to constitute
      part of this Agreement or to affect the construction or interpretation hereof
      or
      thereof.

     

    1.4 Other
      Terms.
      Other
      terms may be defined elsewhere in the text of this Agreement and shall have
      the
      meaning indicated throughout this Agreement.

     

    ARTICLE
      II

     

    CONTRIBUTION
      OF THE SUBJECT INTEREST, ISSUANCE OF THE UNITS AND
      CONSIDERATION

     

    2.1 The
      Transaction.
      At the
      Closing, but effective for all purposes as of the Effective Time, HOLDINGS
      shall
      contribute to DCP the Subject Interests in exchange for the issuance of the
      Consideration to HOLDINGS by DCP.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    2.2 Consideration.
      In
      consideration for the contribution of the Subject Interests, DCP shall
      (i) issue and deliver to HOLDINGS at the Closing one or more certificates
      duly registered in the name of HOLDINGS and representing 200,312 Units (the
      "Unit
      Consideration")
      and
      (ii) distribute $57,057,000.00 in cash to HOLDINGS (the "Cash
      Consideration").

     

    ARTICLE
      III

     

    ADJUSTMENTS,
      PRORATIONS AND SETTLEMENT

     

    3.1  Adjustments.

     

    (a) The
      value
      of the Cash Consideration shall be subject to cash adjustments pursuant to
      this
Article
      III.

     

    (b) For
      the
      avoidance of doubt, cash adjustments pursuant to this Article
      III
      shall
      not result in any adjustment to the Unit Consideration. Each payment of an
      adjustment to the Cash Consideration shall be made at Closing if the adjustment
      is determined by such date, or otherwise, in the Final Settlement
      Statement.

     

    (c) The
      Parties shall use all Commercially Reasonable Efforts to agree upon the
      adjustments set forth in this Article
      III,
      and to
      resolve any differences with respect thereto. Except as provided herein, no
      adjustments shall be made after delivery of the Final Settlement
      Statement.

     

    3.2 Prorations
      and Adjustments.

     

    (a) The
      amount payable to HOLDINGS will be reduced by the amount of any unpaid general
      property Tax assessed against or pertaining to the Assets for periods before
      the
      Effective Time with respect to any taxable period that includes the Effective
      Time, prorated in accordance with Section
      11.3(a).
      

     

    (b) The
      amount payable to HOLDINGS will be increased by the value of Excess Inventory
      under Section 6.8,
      prepaid
      items and any other Excluded Assets that DCP agrees to acquire at Closing (in
      which event, such Excluded Assets shall be transferred to the respective LLC).
      

     

    (c) The
      amount payable to HOLDINGS will be reduced by the amount of any utility charges
      or other items of expense attributable to the operation of the Assets prior
      to
      the Effective Time paid by GSRLLC. Such amounts shall be prorated as of the
      Effective Time. 

     

    (d) Subject
      to Sections
      3.2(e)
      and
6.9,
      the
      amount payable to HOLDINGS will be reduced by the amount of any trade accounts
      payable (including Imbalance Payables) of the LLCs that exist as of the
      Effective Time. 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (e) Notwithstanding
      anything to the contrary, including Sections
      3.2(d)
      and
10.2(b),
      the
      amount payable to HOLDINGS will be increased by the amount of DCP's
      reimbursement obligation in respect of the Capital Projects in accordance with
      Section
      6.9.
      

     

    (f) If
      Closing occurs after November 1, 2006 but on or before November 14, 2006, the
      amount payable to HOLDINGS will be increased by an amount equal to the Interest
      Rate times X divided by 365 times the number of days from and including November
      1, 2006 through but excluding the Closing Date; where X equals what the value
      of
      the Cash Consideration plus the Unit Consideration, as adjusted by Section
      3.2(a)
      through
(e),
      would
      have been if Closing had occurred on November 1, 2006.

     

    3.3 Preliminary
      Settlement Statement.
      Not
      later
      than five (5) business days before the Closing Date, and after consultation
      with
      DCP, HOLDINGS shall deliver to DCP a written statement (the "Preliminary
      Settlement Statement")
      setting forth the Cash Consideration and the description and amount of each
      item
      determined in good faith by HOLDINGS that are described in Section 3.2,
      with
      HOLDINGS' calculation of such items in reasonable detail, based on information
      then available to HOLDINGS. The
      Preliminary Settlement Statement shall also set forth wire transfer instructions
      for the Closing payments. 
      Payment
      of the Cash Consideration at the Closing shall be based on the Preliminary
      Settlement Statement.

     

    3.4 Final
      Settlement Statement.
      No later
      than ninety (90) days after the Closing Date and after consultation with DCP,
      HOLDINGS shall deliver to DCP a revised settlement statement showing in
      reasonable detail its calculation of the items described in Section
      3.2
      along
      with other adjustments or payments contemplated in this Agreement (said revised
      statement and the calculation thereof shall be referred to as the "Final
      Settlement Statement").

     

    3.5 Dispute
      Procedures.
      The
      Final Settlement Statement shall become final and binding on the Parties on
      the
      45th
      day
      following the date the Final Settlement Statement is received by DCP, unless
      prior to such date DCP delivers written notice to HOLDINGS of its disagreement
      with the Final Settlement Statement (a "Settlement
      Notice").
      Any
      Settlement Notice shall set forth DCP's proposed changes to the Final Settlement
      Statement, including an explanation in reasonable detail of the basis on which
      DCP proposes such changes. If DCP has timely delivered a Settlement Notice,
      DCP
      and HOLDINGS shall use good faith efforts to reach written agreement on the
      disputed items. If the disputed items have not been resolved by DCP and HOLDINGS
      by the 30th
      day
      following HOLDINGS' receipt of a Settlement Notice, any remaining disputed
      items
      shall be submitted to the Independent Accountants for resolution within ten
      (10)
      Business Days after the end of the foregoing 30-day period. The fees and
      expenses of the Independent Accountants shall be borne fifty percent (50%)
      by
      HOLDINGS and fifty percent (50%) by DCP. The Independent Accountants'
      determination of the disputed items shall be final and binding upon the Parties,
      and the Parties hereby waive any and all rights to dispute such resolution
      in
      any manner, including in court, before an arbiter or appeal.

     

    3.6 Payments.
      If the
      final amount as set forth in the Final Settlement Statement exceeds the
      estimated amount as set forth in the Preliminary Settlement Statement, then
      DCP
      shall pay to HOLDINGS the amount of such excess, with interest at the Interest
      Rate (calculated from the Closing Date). If the final calculated amount as
      set
      forth in the Final Settlement Statement is less than the estimated calculated
      amount as set forth in the Preliminary Settlement Statement, then HOLDINGS
      shall
      pay to DCP the amount of such excess, with interest at the Interest Rate. Any
      payment shall be made within three (3) Business Days of the date the Final
      Settlement Statement becomes final pursuant to Section
      3.5. 

     

    
      
        
        

      

      
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    3.7  Access
      to Books and Records.
      The
      Parties shall grant to each other full access to the Books and Records and
      its
      relevant personnel to allow each of them to make evaluations under this
Article
      III.

     

    3.8 Excluded
      Assets.
      Prior
      to the Closing, the Excluded Assets will be distributed by the LLCs to
      DEGP. 

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES OF HOLDINGS

     

    HOLDINGS
      represents and warrants to DCP as follows:

     

    4.1 Organization,
      Good Standing, and Authority.

     

    (a) HOLDINGS
      is a limited partnership duly formed, validly existing and in good standing
      under the Laws of the State of Delaware. The execution and delivery of this
      Agreement and the other Transaction Documents to which HOLDINGS is a party
      and
      the consummation by HOLDINGS of the transactions contemplated herein and therein
      have been duly and validly authorized by all necessary limited partnership
      action by HOLDINGS. This Agreement has been duly executed and delivered by
      HOLDINGS. HOLDINGS
      has all requisite limited partnership power and authority to enter into and
      perform this Agreement and the other Transaction Documents to which it is a
      party, to perform its obligations hereunder and thereunder and to carry out
      the
      transactions contemplated herein and therein.

     

    (b) DEGP
      is a
      limited liability company duly formed, validly existing and in good standing
      under the Laws of the State of Delaware. The execution and delivery of this
      Agreement and the other Transaction Documents to which DEGP is a party and
      the
      consummation by DEGP of the transactions contemplated herein and therein have
      been duly and validly authorized by all necessary limited partnership action
      by
      DEGP. HOLDINGS has all requisite limited liability company power and authority
      to enter into and perform the Transaction Documents to which it is a party,
      to
      perform its obligations thereunder and to carry out the transactions
      contemplated herein and therein.

     

    (c) GSRLLC
      is
      a limited liability company duly formed, validly existing and in good standing
      under the Laws of the State of Texas and has all requisite limited liability
      company power and authority to own or otherwise hold and operate its Assets.
      GSRLLC is duly licensed or qualified and in good standing as a foreign limited
      liability company authorized to do business in each additional State in which
      it
      owns assets. 

     

    
      
        
        

      

      
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    (d) GSRI
      is a
      limited liability company duly formed, validly existing and in good standing
      under the Laws of the State of Texas and has all requisite limited liability
      company power and authority to own or otherwise hold and operate its Assets.
      GSRI is duly licensed or qualified and in good standing as a foreign limited
      liability company authorized to do business in each additional State in which
      it
      owns assets. 

     

    (e) To
      HOLDINGS' Knowledge, Pine Tree is a limited liability company duly formed,
      validly existing and in good standing under the Laws of the State of Maine
      and
      has all requisite limited liability company power and authority to own or
      otherwise hold and operate its Assets. To HOLDINGS' Knowledge, Pine Tree is
      duly
      licensed or qualified and in good standing as a foreign limited liability
      company authorized to do business in each additional State in which it owns
      assets. 

     

    4.2 Enforceability.
      This
      Agreement constitutes and, upon execution of and delivery by HOLDINGS, DENGL
      and
      DEFS of the other Transaction Documents to which they are a party, such
      Transaction Documents will constitute, valid and binding obligations of
      HOLDINGS, DENGL and DEFS, as applicable, enforceable against such Parties in
      accordance with their terms, subject to applicable bankruptcy, insolvency,
      reorganization, moratorium and other similar Laws affecting creditor's rights
      generally and general principles of equity.

     

    4.3 No
      Conflicts.
      The
      execution, delivery and performance by HOLDINGS of this Agreement, and the
      execution, delivery and performance by HOLDINGS, DEGP, DENGL and DEFS of the
      other Transaction Documents to which they are party and the consummation of
      the
      transactions contemplated hereby or thereby, will not:

     

    (a) Provided
      all of HOLDINGS' Required Consents and Post Closing Consents have been obtained,
      conflict with, constitute a breach, violation or termination of, give rise
      to
      any right of termination, cancellation or acceleration of or result in the
      loss
      of any right or benefit under, any agreements to which HOLDINGS, DENGL, DEFS,
      DEGP, GSRI or GSRLLC (and to HOLDINGS' Knowledge, Pine Tree) is a party or
      by
      which any of them, the Subject Interests or the Assets are bound;

     

    (b) Conflict
      with or violate the limited liability company agreements of DEGP or the LLCs,
      or
      the limited partnership agreement of HOLDINGS; and

     

    (c) Provided
      that all of HOLDINGS' Required Consents and Post Closing Consents have been
      obtained, violate any Law applicable to HOLDINGS, DENGL, DEFS, GSRLLC, GSRI
      or
      the Assets (and to HOLDINGS' Knowledge, Pine Tree).

     

    4.4 Consents,
      Approvals, Authorizations and Governmental Regulations.

     

    (a) Except
      (i) for Post-Closing Consents, (ii) as set forth in Schedule
      4.4
      and
      (iii) as may be required under the HSR Act (the items described in clauses
      (ii)
      and
(iii)
      being
      collectively referred to as the "HOLDINGS'
      Required Consents";
      no
      order, consent, waiver, permission, authorization or approval of, or exemption
      by, or the giving of notice to or the registration or filing with any
      Governmental Authority or Third Person, is necessary for HOLDINGS to execute,
      deliver and perform this Agreement or for HOLDINGS, DEGP, DEFS or DENGL to
      execute, deliver and perform the other Transaction Documents to which it is
      a
      party.

     

    
      
        
        

      

      
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    (b) Except
      as
      set forth in Schedule
      4.4,
      (i),
      all material permits, licenses, certificates, orders, approvals, authorizations,
      grants, consents, concessions, warrants, franchises and similar rights and
      privileges, of all Governmental Authorities required or necessary for GSRLLC
      and
      GSRI (and to HOLDINGS' Knowledge, Pine Tree) to own and operate its Assets
      in
      the places and in the manner currently owned or operated, have been obtained,
      and are in full force and effect, (ii) HOLDINGS and its Affiliates have received
      no written notification concerning, and there are no violations that are in
      existence with respect to the Permits and (iii) no Proceeding is pending or
      threatened with respect to the revocation or limitation of any of the Permits.
      Notwithstanding anything herein to the contrary, the provisions of this
Section
      4.4(b)
      shall
      not relate to or cover any matter relating to or arising out of any
      Environmental Laws (an "Environmental
      Matter"),
      which
      shall be governed by Section
      4.12.

     

    4.5 Taxes.
      Except
      as set forth in Schedule
      4.5:

     

    (a) GSRLLC
      and GSRI have not and will not (and, with respect to Pine Tree, GSRLLC has
      not
      and will not consent to Pine Tree to) on or prior to the Closing Date, file
      an
      election under Treasury Regulation §301.7701-3 to be classified as a corporation
      for U.S. federal income tax purposes. Since December 7, 2005 until Closing,
      GSRLLC and GSRI have been and will be business entities that will be disregarded
      for federal Tax purposes under Treasury Regulation §§301.7701-2 and - 3. To
      HOLDINGS' Knowledge, during the entirety of the period from the date of its
      formation until Closing, Pine Tree has been and will be a partnership for
      federal tax purposes;

     

    (b) Except
      with respect to ad valorem Taxes for the year in which Closing occurs, all
      Taxes
      due and owing or claimed to be due and owing (whether such claim is asserted
      before or after the Effective Time) from or against HOLDINGS, DEGP, GSRLLC,
      GSRI
      or Pine Tree relating to the Assets, or the operation thereof, prior to the
      Effective Time have been or will be timely paid in full by HOLDINGS or its
      Affiliates;

     

    (c) All
      withholding Tax and Tax deposit requirements imposed on HOLDINGS, DEGP, GSRLLC,
      GSRI or Pine Tree and applicable to the Assets, or the operation thereof, for
      any and all periods or portions thereof ending prior to the Effective Time
      have
      been or will be timely satisfied in full by HOLDINGS or its
      Affiliates;

     

    (d) All
      Tax
      Returns that are required to be timely filed for, by, on behalf of or with
      respect to GSRLLC or GSRI (and to HOLDINGS' Knowledge, Pine Tree), before the
      Effective Time have been or will be filed with the appropriate Governmental
      Authority; all Taxes shown to be due and payable on such Tax Returns have been
      or will be paid in full by HOLDINGS or its Affiliates; 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (e) None
      of
      DEGP or the LLCs are under audit or examination by any Governmental Authority.
      There are no Claims now pending or, to the Knowledge of HOLDINGS, threatened
      against DEGP or the LLCs with respect to any Tax or any matters under discussion
      with any Governmental Authority relating to any Tax. There are no claims for
      any
      additional Tax asserted by any Governmental Authority against DEGP or the LLCs,
      in each case, relating to its Assets or the operation thereof; 

     

    (f) None
      of
      DEGP, GSRLLC or GSRI (and to HOLDINGS' Knowledge, Pine Tree) (i) have agreed
      to
      make, nor is required to make, any adjustment under Section 481 of the Code
      or
      any comparable provision of state, local or foreign Law by reason of a change
      in
      accounting method or otherwise, and (ii) is a party to or bound by (or will
      become a party to or bound by) any Tax sharing, Tax indemnity, or Tax allocation
      agreement; and

     

    (g) Pine
      Tree
      has made, or will make, an election under Section 754 of the Code.

     

    4.6 Litigation;
      Compliance with Laws.

     

    (a) There
      is
      no injunction, restraining order or Proceeding pending against HOLDINGS, DENGL,
      DEFS, DEGP or the LLCs that restrains or prohibits the consummation of the
      transactions contemplated by this Agreement.

     

    (b) Except
      for the litigation and Claims identified on Schedule
      4.6,
      there
      is no written Claim, investigation or examination pending, or to the Knowledge
      of HOLDINGS, threatened, against or affecting the Assets or the Subject
      Interests before or by any Governmental Authority or any Third
      Person.

     

    (c) To
      HOLDINGS' Knowledge, the Assets have been owned and operated in compliance
      with
      applicable Laws, except for any non-compliance which has been timely brought
      into compliance therewith. Notwithstanding anything herein to the contrary,
      the
      provisions of this Section
      4.6(c)
      shall
      not relate to or cover any Environmental Matters, which shall be governed by
      Section
      4.12.

     

    4.7 Contracts.
      All of
      the Contracts that are material are listed on Schedule
      1.1(d).
      GSRLLC,
      GSRI and, to HOLDINGS' Knowledge, Pine Tree are not in default and there is
      no
      event or circumstance that with notice, or lapse of time or both, would
      constitute an event of default by the applicable LLC under the terms of the
      Contracts. All of the Contracts are in full force and effect and to HOLDINGS'
      Knowledge, no counter-party to any of the Contracts is in default under the
      terms of such Contracts. Schedule
      1.1(d)
      lists
      each Contract that: 

     

    (a) expressly
      obligates an LLC to pay an amount of $500,000 or more and has not been fully
      performed as of the date hereof; 

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (b) expressly
      restricts the ability of an LLC to compete or otherwise to conduct its business
      in any manner or place; 

     

    (c) provides
      for the sale of products or the provision of services for amounts in excess
      of
      $500,000 (including outstanding offers or quotes which by acceptance would
      create such a Contract) and which have not been fully performed as of the date
      hereof; 

     

    (d) is
      a
      sales, agency, marketing or distribution agreement which is material to an
      LLC,
      taken as a whole; provides a right of first refusal or other restrictive right
      that limits the ability to transfer, sell or assign an interest in an asset
      or
      an equity interest in a Person;

     

    (e) is
      a
      master agreement, swap, derivative, option, future or similar type Contract
      or
      any open agreement or position thereunder;

     

    (f) is
      with
      any current or former employee, officer, director or consultant of any
      LLC;

     

    (g) is
      with
      HOLDINGS' or any Affiliate (other than an LLC); 

     

    (h) is
      with
      any labor union or association;

     

    (i) is
      a
      partnership or joint venture agreement with a Third Person in which one of
      the
      LLCs is a party or by which any of them are bound; 

     

    (j) is
      an
      agreement with a consideration in excess of $500,000 by one of the LLCs to
      purchase or sell any assets (other than inventory in the Ordinary Course of
      Business), businesses, capital stock or other debt or equity securities of
      any
      Person;

     

    (k) any
      agreements with a consideration in excess of $500,000 involving the merger,
      consolidation, purchase, sale, transfer or other disposition of interests in
      real property, capital stock or other debt or equity securities of any Person
      prior to Closing; or

     

    (l) is
      any
      other lease agreements with respect to any parcel of real property in which
      the
      Company or any of its Subsidiaries has a leasehold or similar
      interest. 

     

    4.8 Title
      to Assets; Intellectual Property.
      Except
      for the Permitted Encumbrances, to HOLDINGS' Knowledge, each LLC has Defensible
      Title to the Assets that it operates, free and clear of all Liens.

     

    (a) None
      of
      HOLDINGS, DEGP or the LLCs have received any written notice of infringement,
      misappropriation or conflict with respect to Intellectual Property from any
      Person with respect to the ownership, use or operation of the
      Assets.

     

    (b) To
      HOLDINGS' Knowledge, the ownership, use and operation of the Assets have not
      infringed, misappropriated or otherwise conflicted with any patents, patent
      applications, patent rights, trademarks, trademark applications, service marks,
      service mark applications, copyrights, trade names, unregistered copyrights,
      trade secrets of any other Person.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    4.9 Preferential
      Rights to Purchase.
      Except
      for Pine Tree and as listed in Schedule 4.9,
      there
      are no preferential or similar rights to purchase any portion of the LLCs or
      Assets that will be triggered by this Agreement or the transactions contemplated
      herein.

     

    4.10 Broker's
      or Finder's Fees.
      No
      investment banker, broker, finder or other Person is entitled to any brokerage
      or finder's fee or similar commission in respect thereof based in any way on
      agreements, arrangements or understandings made by or on behalf of HOLDINGS,
      or
      any of its Affiliates

     

    4.11 Compliance
      with Property Instruments.
      To
      HOLDINGS' Knowledge and except as set forth in Schedule
      4.11,
      (a) all
      of the instruments creating the Real Property Interests are presently valid,
      subsisting and in full force and effect; (b) there are no violations, defaults
      or breaches thereunder, or existing facts or circumstances which upon notice
      or
      the passage of time or both will constitute a violation, default or breach
      thereunder; and
      (c)
      the Assets are currently being operated and maintained in compliance with all
      terms and provisions of the instruments creating the Real Property Interests.
      None of HOLDINGS or its Affiliates have received or given any written notice
      of
      default or claimed default under any such instruments and is not participating
      in any negotiations regarding any material modifications thereof.

     

    4.12 Environmental
      Matters.
      Except
      as set forth in Schedule
      4.12:

     

    (a) To
      HOLDINGS' Knowledge, HOLDINGS and its Affiliates have not caused or allowed
      the
      generation, use, treatment, manufacture, storage, or disposal of Hazardous
      Materials at, on or from the Assets, except in accordance with all applicable
      Environmental Laws;

     

    (b) To
      HOLDINGS' Knowledge, there has been no Release of any Hazardous Materials at,
      on, from, or underlying any of the Assets except in accordance with all
      applicable Environmental Laws;

     

    (c) To
      HOLDINGS' Knowledge, the LLCs have secured all Permits required under
      Environmental Laws for the ownership, use and operation of the Assets and the
      LLCs are in compliance with such Permits;

     

    (d) HOLDINGS
      and its Affiliates have not received written inquiry or notice of any actual
      or
      threatened Claim related to or arising under any Environmental Law relating
      to
      the Assets;

     

    (e) GSRLLC,
      GSRI and to HOLDINGS' Knowledge, Pine Tree, are not currently operating or
      required to be operating any of the Assets under any compliance order, a decree
      or agreement, any consent decree or order, or corrective action decree or order
      issued by or entered into with any Governmental Authority under any
      Environmental Law or any Law regarding health or safety in the work
      place;

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (f) To
      HOLDINGS' Knowledge, the LLCs have owned, used and operated the Assets in
      compliance with Environmental Laws, except for any non-compliance which has
      been
      remediated and brought into compliance with Environmental Laws;

     

    (g) To
      HOLDINGS' Knowledge, none of the off-site locations where Hazardous Materials
      from any of the Assets have been stored, treated, recycled, disposed of or
      released has been designated as a facility that is subject to a claim under
      any
      Environmental Laws.

     

    4.13 Employee
      Matters.
      At no
      time prior to the Effective Time will GSRLLC or GSRI have had any
      employees. 

     

    4.14 Benefit
      Plan Liabilities.
      At no
      time prior to the Effective Time will GSRLLC or GSRI have maintained any Benefit
      Plans. At the Effective Time, GSRLLC and GSRI shall have no liability with
      respect to any Benefit Plans.

     

    4.15 No
      Foreign Person.
      HOLDINGS is not a "foreign person" as defined in Section 1445 of the Code and
      in
      any regulations promulgated thereunder. 

     

    4.16 Capitalization
      of GSRLLC.

     

    (a) The
      Subject Interests constitute all of the outstanding ownership interests in
      GSRLLC and are duly authorized, validly issued, fully paid and non-assessable,
      and were not issued in violation of any pre-emptive rights. DEGP has good and
      marketable title to the Subject Interests.

     

    (b) There
      are
      no existing rights, agreements or commitments of any character obligating
      GSRLLC, GSRI or to HOLDINGS' Knowledge, Pine Tree, to issue, transfer or sell
      any additional ownership rights or interests or any other securities (debt,
      equity or otherwise) convertible into or exchangeable for such ownership rights
      or interests.

     

    4.17 Subsidiaries
      and Other Equity Interests.
      GSRLLC
      does not have any subsidiaries or own, directly or indirectly, any equity
      interest in any other Person except as follows (a) 100% of the membership
      interests of GSRI and (b) 50% of the membership interests of Pine
      Tree.

     

    4.18 Bank
      Accounts.
      Except
      as set forth on Schedule
      4.18,
      neither
      GSRLLC nor GSRI have any accounts or safe-deposit boxes with banks, trust
      companies, savings and loan associations, or other financial
      institutions.

     

    4.19 No
      Prepayments Made or Refunds Owed.
      Except
      as set forth in Schedule
      4.19
      and
      except for any Imbalance Payables included in the Final Settlement Statement
      pursuant to Section
      3.2(f),
      none of
      the LLCs have received any prepayment, advance payment, deposits or similar
      payments, and has no refund obligation, with respect to any products purchased,
      sold, treated or
      processed through the Terminals, and neither HOLDINGS nor any of its Affiliates
      has received any compensation for services relating to the Terminals which
      would
      be subject to any refund or create any repayment obligation either by or to
      GSRLLC.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    4.20 Investment
      Intent.
      HOLDINGS is acquiring the Units for its own account, and not with a view to,
      or
      for sale in connection with, the distribution thereof in violation of state
      or
      federal Law. HOLDINGS acknowledges that the Units have not been registered
      under
      the Securities Act or the securities Laws of any state and neither HOLDINGS
      nor
      any of its Affiliates has any obligation or right to register the Units except
      as set forth in the Amended and Restated Partnership Agreement. Without such
      registration, the Units may not be sold, pledged, hypothecated or otherwise
      transferred unless it is determined that registration is not required. HOLDINGS,
      itself or through its officers, employees or agents, has sufficient knowledge
      and experience in financial and business matters to be capable of evaluating
      the
      merits and risks of an investment such as an investment in the Units, and
      HOLDINGS, either alone or through its officers, employees or agents, has
      evaluated the merits and risks of the investment in the Units.

     

    4.21 No
      Other Representations or Warranties; Schedules.
      HOLDINGS makes no other express or implied representation or warranty with
      respect to the LLCs or any of their respective Affiliates, the Assets or the
      transactions contemplated by this Agreement, and disclaims any other
      representations or warranties. The disclosure of any matter or item in any
      schedule to this Agreement shall not be deemed to constitute an acknowledgment
      that any such matter is required to be disclosed.

     

    ARTICLE
      V

     

    REPRESENTATIONS
      AND WARRANTIES OF DCP

     

    DCP
      hereby represents and warrants to HOLDINGS:

     

    5.1 Organization,
      Good Standing, and Authorization.
      DCP is
      a limited partnership duly formed, validly existing and in good standing under
      the Laws of the State of Delaware. DCP has all requisite limited partnership
      power and authority to enter into and perform this Agreement and the Transaction
      Documents to which it is a party, to perform its obligations hereunder and
      thereunder and to carry out the transactions contemplated herein and therein.
      The execution and delivery of this Agreement and the Transaction Documents
      to
      which it is a party and the consummation by DCP of the transactions contemplated
      herein have been duly and validly authorized by all necessary limited
      partnership action by DCP. This Agreement has been duly executed and delivered
      by DCP. 

     

    5.2 Enforceability.
      This
      Agreement constitutes, and upon execution and delivery of the Transaction
      Documents to which DCP is a party, such Transaction Documents will
      constitute, valid
      and
      binding obligations of DCP, enforceable against DCP in accordance with their
      terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
      and other similar Laws affecting creditor's rights generally and general
      principles of equity.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    5.3 No
      Conflicts.
      The
      execution, delivery and performance by DCP of this Agreement and the Transaction
      Documents and the consummation of the transactions contemplated hereby or
      thereby, will not:

     

    (a) Provided
      that any DCP Required Consents and Post Closing Consents have been obtained,
      conflict with, constitute a breach, violation or termination of, give rise
      to
      any right of termination, cancellation or acceleration of or result in the
      loss
      of any right or benefit under, any agreement to which DCP is a
      party;

     

    (b) Conflict
      with or violate the Limited Partnership Agreement (with respect to time periods
      prior to Closing), the Amended Limited Partnership Agreement (with respect
      to
      time periods at and after Closing) or result in the creation of a Lien on the
      Units; or

     

    (c) Provided
      that all of the DCP Required Consents and Post Closing Consents have been
      obtained, violate any Law applicable to DCP.

     

    5.4 Consents,
      Approvals, Authorizations and Governmental Regulations.
      Except
      (i) for Post-Closing Consents, (ii) as set forth in Schedule
      5.4
      and
      (iii) as may be required under the HSR Act (the items described in clauses
      (ii)
      and (iii) being collectively referred to as the "DCP Required
      Consents"),
      no
      order, consent, waiver, permission, authorization or approval of, or exemption
      by, or the giving of notice to or registration or filing with, any Governmental
      Authority or Third Person, is necessary for DCP to execute, deliver and perform
      this Agreement or the Transaction Documents to which it will be a
      party.

     

    5.5 Litigation.
      There
      is no injunction, restraining order or Proceeding pending against DCP that
      restrains or prohibits the consummation of the transactions contemplated by
      this
      Agreement.

     

    5.6 Independent
      Investigation.
      DCP is
      knowledgeable in the business of owning and operating propane facilities and
      has
      had access to the Assets, the representatives of HOLDINGS and its Affiliates,
      and to the records of HOLDINGS and its Affiliates with respect to the Assets.
      DCP
      ACKNOWLEDGES THAT THE ASSETS ARE IN THEIR "AS IS, WHERE IS" CONDITION AND STATE
      OF REPAIR, AND WITH ALL FAULTS AND DEFECTS, AND THAT, EXCEPT AS EXPRESSLY SET
      OUT IN THIS AGREEMENT, HOLDINGS HAS MADE NO REPRESENTATION OR WARRANTY OF ANY
      KIND OR NATURE, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO,
      WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, CONFORMITY TO SAMPLES,
      MERCHANTABILITY, AND/OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE
      EXPRESSLY DISCLAIMED BY HOLDINGS AND EXCEPT AS SET FORTH IN THIS AGREEMENT,
      WAIVED BY DCP. DCP FURTHER ACKNOWLEDGES THAT: (I) THE ASSETS HAVE BEEN USED
      FOR PROPANE OPERATIONS AND PHYSICAL CHANGES IN THE ASSETS AND IN THE LANDS
      BURDENED THEREBY MAY HAVE OCCURRED AS A RESULT OF SUCH USES; (II) THE ASSETS
      MAY
      INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, THE LOCATIONS OF WHICH MAY NOT
      BE
      KNOWN BY HOLDINGS OR READILY APPARENT BY A PHYSICAL INSPECTION OF THE ASSETS
      OR
      THE LANDS BURDENED THEREBY; (III) DCP SHALL HAVE INSPECTED PRIOR TO CLOSING,
      OR
      SHALL BE DEEMED TO HAVE WAIVED ITS RIGHTS TO INSPECT, THE ASSETS AND THE
      ASSOCIATED PREMISES, AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL
      CONDITION, AND THAT DCP SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS
      AGREEMENT, ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION AND
      STATE
      OF REPAIR, AND WITH ALL FAULTS AND DEFECTS, INCLUDING, BUT NOT LIMITED TO,
      THE
      PRESENCE OF MAN-MADE MATERIAL FIBERS AND THE PRESENCE, RELEASE OR DISPOSAL
      OF
      HAZARDOUS MATERIALS. EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, HOLDINGS
      MAKES NO REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED OR STATUTORY, AS TO
      (A) THE ACCURACY OR COMPLETENESS OF ANY DATA OR RECORDS DELIVERED TO DCP
      WITH RESPECT TO THE INTERESTS, INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION
      OF
      THE INTERESTS, PRICING ASSUMPTIONS, QUALITY OR QUANTITY OF THE INTERESTS,
      FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR (B) FUTURE VOLUMES OF
      HYDROCARBONS OR OTHER PRODUCTS TRANSPORTED, TREATED, STORED OR PROCESSED THROUGH
      OR AT THE ASSETS. With respect to any projection or forecast delivered by or
      on
      behalf of HOLDINGS or its Affiliates to DCP, DCP acknowledges that (i) there
      are
      uncertainties inherent in attempting to make such projections and forecasts,
      (ii) DCP is familiar with such uncertainties, (iii) DCP is taking full
      responsibility for making its own evaluation of the adequacy and accuracy of
      all
      such projections and forecasts furnished to DCP and (iv) DCP will not have
      a
      claim against HOLDINGS or any of its advisors or Affiliates with respect to
      such
      projections or forecasts.

     

    
      
        
        

      

      
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    5.7 Broker's
      or Finder's Fees.
      No
      investment banker, broker, finder or other Person is entitled to any brokerage
      or finder's fee or similar commission in respect thereof based in any way on
      agreements, arrangements or understandings made by or on behalf of DCP or any
      of
      its Affiliates which is, or following the Closing would be, an obligation of
      HOLDINGS or any of its Affiliates. 

     

    5.8 Investment
      Intent.
      DCP is
      acquiring the Subject Interests for its own account, and not with a view to,
      or
      for sale in connection with, the distribution thereof in violation of state
      or
      federal Law. DCP acknowledges that the Subject Interests have not been
      registered under the Securities Act or the securities Laws of any state and
      neither HOLDINGS nor any of its Affiliates has any obligation to register the
      Subject Interests. Without such registration, the Subject Interests may not
      be
      sold, pledged, hypothecated or otherwise transferred unless it is determined
      that registration is not required. DCP, itself or through its officers,
      employees or agents, has sufficient knowledge and experience in financial and
      business matters to be capable of evaluating the merits and risks of an
      investment such as an investment in the Subject Interests, and DCP, either
      alone
      or through its officers, employees or agents, has evaluated the merits and
      risks
      of the investment in the Subject Interests.

     

    
      
        
        

      

      
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    5.9 Available
      Funds.
      DCP
      will have at Closing, sufficient cash to enable it to make payment in
      immediately available funds of the cash portion of the Consideration when due
      and any other amounts to be paid by it hereunder. 

     

    ARTICLE
      VI

     

    COVENANTS
      AND ACCESS

     

    6.1 Conduct
      of Business. HOLDINGS
      covenants and agrees that from and after the execution of this Agreement and
      until the Closing:

     

    (a) Without
      the prior written consent of DCP, (i) HOLDINGS will not, and will not permit
      GSRLLC or GSRI (or with respect to Pine Tree, will not consent to Pine Tree)
      to,
      sell, transfer, assign, convey or otherwise dispose of any Assets other than
      (A) the transfer of the Excluded Assets; (B) the sale of inventory in the
      ordinary course of business or (C) the sale or other disposition of equipment
      or
      other Personal Property which is replaced with equipment or other Personal
      Property of comparable or better value and utility; (ii) except for the Capital
      Projects, modify in any respect the Terminals that will require a capital
      expenditure in excess of $25,000; (iii) make any adverse change in its sales,
      credit or collection terms and conditions relating to the Assets; (iv) do any
      act or omit to do any act which will cause a material breach in any Contract;
      or
      (v) unless disputed in good faith, fail to pay when due all amount owed under
      the Contracts; notwithstanding the foregoing, the Parties acknowledge that
      the
      Excess Inventory is an Excluded Asset and HOLDINGS may minimize the amount
      of
      Excess Inventory held by the LLCs prior to Closing; and that DCP will purchase
      the remaining Excess Inventory at Closing;

     

    (b) HOLDINGS
      will not allow GSRLLC or GSRI (or with respect to Pine Tree, will not consent
      to
      Pine Tree to) create or permit the creation of any Lien on any Asset other
      than
      Permitted Encumbrances; 

     

    (c) If
      HOLDINGS becomes aware of any event or development that it reasonably believes
      is likely to cause a material breach or default hereunder or to have a Material
      Adverse Effect, it will give prompt written notice to DCP; and

     

    (d) HOLDINGS
      agrees to cause GSRLLC and GSRI to (and with respect to Pine Tree, will not
      consent to Pine Tree to not):

     

    (i) maintain
      and operate the Assets in the ordinary course of business in accordance with
      the
      past operating and maintenance practices of the LLCs, including regular
      scheduled maintenance plans and capital expenditures, and pay or cause to be
      paid all costs and expenses in connection therewith when due; 

     

    (ii) carry
      on
      its business in respect of the Assets in substantially the same manner as it
      has
      heretofore; 

     

    
      
        
        

      

      
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    (iii) use
      reasonable efforts to preserve its business in respect of the Assets intact,
      to
      keep available the services of the employees involved in the conduct of such
      business and to preserve the goodwill of customers having business relations
      with HOLDINGS in respect of the Assets, in each case, in all material
      respects;

     

    (iv) not
      abandon any of the Assets or liquidate, dissolve, recapitalize or otherwise
      wind
      up its business;

     

    (v) comply
      in
      all material respects with all of the rules, regulations and orders of any
      Governmental Authority applicable to the Assets;

     

    (vi) timely
      file, properly and accurately make in all material respects all reports and
      filings required to be filed with the appropriate Governmental Authority;
      and

     

    (vii) pay
      all
      Taxes with respect to the Assets which come due and payable prior to the Closing
      Date;

     

    (viii) not
      make,
      amend or revoke any material election with respect to Taxes; 

     

    (ix) not
      amend
      its organizational documents;

     

    (x) not
      make
      any material change in any method of accounting or accounting principles,
      practices or policies, other than those required by GAAP; 

     

    (xi) not
      issue
      or sell any equity interests, notes, bonds or other securities or incur, assume
      or guarantee any indebtedness for borrowed money, or any option, warrant or
      right to acquire same;

     

    (xii) not
      (A)
      merge or consolidate with any Person; or (B) make any loan to any Person (other
      than extensions of credit to customers in the ordinary course of business and
      intercompany loans under DEFS' cash management system); and

     

    (xiii) maintain
      in full force and effect insurance policies covering the Assets.

     

    6.2 Casualty
      Loss.

     

    (a) HOLDINGS
      shall promptly notify DCP of any Casualty Loss of which HOLDINGS becomes aware
      prior to the Closing. If a Casualty Loss occurs that would reasonably be
      expected to have a Material Adverse Effect on the LLCs or the Assets, HOLDINGS
      shall have the right to extend the Closing Date for up to forty-five (45) days
      for the purpose of repairing or replacing the Assets destroyed or damaged by
      the
      Casualty Loss to the reasonable satisfaction of DCP. If HOLDINGS does not repair
      or replace the Assets destroyed or damaged by the Casualty Loss prior to the
      Closing to the reasonable satisfaction of DCP and the Parties are unable to
      agree on a value to compensate DCP for the Casualty Loss, DCP may terminate
      this
      Agreement upon fifteen (15) days written notice to HOLDINGS.

     

    
      
        
        

      

      
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    (b) If
      this
      Agreement is not terminated by DCP as provided in subsection (a), DCP's sole
      remedy with respect to any Casualty Loss in respect of Assets which are not
      repaired or replaced prior to the Closing to the reasonable satisfaction of
      DCP
      is at DCP's option to (i) accept a value estimated by HOLDINGS and agreed to
      by
      DCP to be equal to the cost to repair or replace the Assets affected by the
      Casualty Loss; provided
      that, if
      the Parties cannot agree, then the Closing shall occur and either Party may
      submit the determination of the costs of the Casualty Loss for resolution
      pursuant to Section
      11.8,
      in
      which case any insurance, condemnation or taking proceeds with respect to such
      Casualty Loss shall be the sole property of HOLDINGS, or (ii) accept the Assets
      with no value being paid by HOLDINGS, but with DCP being entitled to receive
      as
      DCP's sole property an assignment of all claims with respect to, and all rights
      in such Casualty Loss, including in and to all insurance, condemnation or
      taking, on account of such Casualty Loss.

     

    6.3 Access,
      Information and Access Indemnity. 

     

    (a) Prior
      to
      Closing, HOLDINGS will make available at HOLDINGS' offices to DCP and DCP's
      authorized representatives for examination as DCP may reasonably request, all
      Records; provided,
      however,
      such
      material shall not include (i) any proprietary data which relates to another
      business of HOLDINGS or its Affiliates and is not primarily used in connection
      with the continued ownership, use or operation of the Assets, (ii) any
      information subject to Third Person confidentiality agreements for which a
      consent or waiver cannot be secured by HOLDINGS or its Affiliates after
      reasonable efforts, or (iii) any information which, if disclosed, would violate
      an attorney-client privilege or would constitute a waiver of rights as to
      attorney work product or attorney-client privileged communications.

     

    (b) Subject
      to subsection (a) above, HOLDINGS shall permit DCP and DCP's authorized
      representatives to consult with employees of HOLDINGS and its Affiliates during
      the business hours of 8:00 a.m. to 5:00 p.m. (local time), Monday through Friday
      and to conduct, at DCP's sole risk and expense, inspections and inventories
      of
      the Assets and to examine all Records over which HOLDINGS and its Affiliates
      have control. HOLDINGS shall also coordinate, in advance, with DCP to allow
      site
      visits and inspections at the field sites on Saturdays unless operational
      conditions would reasonably prohibit such access. 

     

    (c) DCP
      SHALL
      PROTECT, DEFEND, INDEMNIFY AND HOLD THE HOLDINGS' INDEMNITEES HARMLESS FROM
      AND
      AGAINST ANY AND ALL CLAIMS AND LOSSES OCCURRING ON OR TO THE ASSETS CAUSED
      BY
      THE ACTS OR OMISSIONS OF DCP, DCP'S AFFILIATES OR ANY PERSON ACTING ON DCP'S
      OR
      ITS AFFILIATES' BEHALF IN CONNECTION WITH ANY DUE DILIGENCE CONDUCTED PURSUANT
      TO OR IN CONNECTION WITH THIS AGREEMENT PRIOR TO CLOSING, INCLUDING ANY SITE
      VISITS AND ENVIRONMENTAL SAMPLING; PROVIDED,
      HOWEVER,
      THE
      FOREGOING OBLIGATION OF DCP SHALL NOT APPLY WITH RESPECT TO ANY ENVIRONMENTAL
      DEFECTS EXISTING PRIOR TO THE CONDUCT OF SUCH DUE DILIGENCE WHICH ARE DISCOVERED
      DURING SUCH DUE DILIGENCE. DCP shall comply in all material respects with all
      rules, regulations, policies and instructions issued by HOLDINGS or any Third
      Person operator regarding DCP's actions prior to Closing while upon, entering
      or
      leaving any property included in the Assets, including any insurance
      requirements that HOLDINGS may impose on contractors authorized to perform
      work
      on any property owned or operated by HOLDINGS. 

     

    
      
        
        

      

      
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    6.4 Regulatory
      Filings; Hart-Scott-Rodino Filing.

     

    (a) DCP
      and
      HOLDINGS will take all commercially reasonable actions necessary or desirable,
      and proceed diligently and in good faith and use all commercially reasonable
      efforts, as promptly as practicable to obtain all consents, approvals or actions
      of, to make all filings with, and to give all notices to, Governmental
      Authorities required to accomplish the transactions contemplated by this
      Agreement;
      provided, however, that the cost to obtain Post-Closing Consents shall be borne
      by DCP.

     

    (b) The
      Parties shall make any filings required under the HSR Act on or prior to ten
      (10) days after the date of this Agreement and provide such information to
      the
      FTC as is required in connection with the HSR Act as soon as practicable after
      a
      request therefore.

     

    (c) Notwithstanding
      any provision herein to the contrary, each of the Parties will (i) use
      reasonable efforts to comply as expeditiously as possible with all lawful
      requests of Governmental Authorities for additional information and documents
      pursuant to the HSR Act, (ii) not (A) extend any waiting period under the HSR
      Act or (B) enter into any voluntary agreement with any Governmental Authority
      not to consummate the transactions contemplated by this Agreement, except with
      the prior consent of the other Party, and (iii) cooperate with each other and
      use reasonable efforts to obtain the requisite approval of the FTC and DOJ;
      provided, however, that the Parties are not obligated to accept any conditional
      approval or divest any of the Assets or any of theirs properties.

     

    (d) DCP
      will
      be responsible for paying the filing fees required with respect to any filing
      under the HSR Act. 

     

    6.5 Limitation
      on Casualty Losses and Other Matters.
      Notwithstanding any provision herein to the contrary, in the event that either
      HOLDINGS or DCP reasonably determines that the anticipated aggregate value
      of
      any Casualty Losses and a good faith estimate of HOLDINGS' liability with
      respect to breaches of representations and warranties of which either HOLDINGS
      or DCP has provided notice to the other prior to Closing, exceeds $4,000,000,
      then such Party shall provide written notice to the other of such determination
      together with the notifying Party's calculations of the estimated costs,
      payments, reductions and liabilities supporting such determination.
      Notwithstanding Section
      9.1(c),
      upon
      the other Party's receipt of such notice, the Party receiving the notice shall
      have the right to terminate this Agreement at any time prior to Closing upon
      ten
      (10) days written notice to the other Party. 

     

    
      
        
        

      

      
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    6.6 Supplements
      to Exhibits and Schedules.
      HOLDINGS may, from time to time, by written notice to DCP at any time prior
      to
      the Closing Date, supplement or amend the Exhibits and Schedules to correct
      any
      matter that would constitute a breach of any representation or warranty of
      HOLDINGS herein contained. DCP shall have a minimum of five (5) Business Days
      to
      review such supplement or amendment and the Closing shall be extended as
      required to allow DCP to do so; provided,
      however,
      that in
      the event that DCP reasonably determines that any individual new disclosure
      item
      set forth in any such supplement or amendment would increase the amount of
      the
      Assumed Obligations by more than $50,000, then DCP shall notify HOLDINGS of
      such
      determination together with DCP's calculations of such increase in the amount
      of
      the Assumed Obligations. Promptly upon HOLDINGS' receipt of such written notice,
      the Parties shall endeavor in good faith to agree to a value to be paid by
      HOLDINGS to DCP therefore or other mutually agreeable remedy to address the
      matters which are the subject of such supplement(s) and amendment(s) to the
      Exhibits and Schedules. If within fifteen (15) days of HOLDINGS' receipt of
      such
      written notice, the Parties have not agreed to a value to be paid by HOLDINGS
      to
      DCP therefore or another mutually agreeable remedy, DCP shall have the right
      to
      terminate this Agreement at any time during the five (5) Business Days following
      the expiration of such fifteen (15) day period by provision of written notice
      to
      HOLDINGS. Notwithstanding any other provision hereof, if the Closing occurs,
      any
      such supplement or amendment will be effective to cure and correct for all
      purposes any breach of any representation or warranty that would have existed
      if
      such supplement or amendment had not been made.

     

    6.7 Preservation
      of Records.
      For a
      period of seven (7) years after the Closing Date, the Party in possession of
      the
      originals of the Records will retain such Records at its sole cost and expense
      and will make such Records available to the other Party to the extent pertaining
      to such other Parties' obligations hereunder upon reasonable notice for
      inspection and/or copying, at the expense of the requesting Party, at the
      headquarters of the Party in possession (or at such other location in the United
      States as the Party in possession may designate in writing to the other Party)
      at reasonable times and during regular office hours. DCP
      agrees that HOLDINGS may retain a copy of the Records to the extent such Records
      pertain to their obligations hereunder.

     

    6.8 Measurement
      and Valuation of Excess Inventory.
      As of
      the Effective Time, representatives of HOLDINGS and DCP shall jointly calculate
      the quantity and value of Excess Inventory in accordance with Schedule
      6.8.
      With
      respect to Excess Inventory: (a) that is located in the Company’s storage,
      trailers and railcars, the Parties shall jointly measure inventory immediately
      prior to Closing, and (b) that is held in storage by a Third Person, the volume
      of Excess Inventory shall be determined based upon a statement of account from
      the Third Person as of the time immediately prior to Closing. 

     

    
      
        
        

      

      
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    6.9 Capital
      Projects.
      The
      LLCs are currently constructing or participating in the construction of those
      capital projects described on Schedule
      6.9
      (the
      "Capital
      Projects").
      HOLDINGS shall continue such construction of the Capital Projects until the
      Effective Time; provided however that at Closing, DCP shall reimburse HOLDINGS
      for the total amount expended on the Capital Projects prior to the Effective
      Time. Notwithstanding
      anything to the contrary, (a) unless accounted for under Section
      3.2(e),
      any
      other capital expenditures for new projects or maintenance capital (but
      excluding capital expenditures related to Casualty Losses) incurred between
      the
      date of this Agreement and Closing shall be at the sole cost and expense of
      DCP
      and (b) to the extent that DCP or GSRLLC incurs any out of pocket repair costs,
      increased supply costs, replacement costs, or other costs associated with the
      tank at the Midland terminal due to damage (the "Tank
      Damage")
      thereto in or about September 2006 (regardless of whether DCP or GSRLLC incurs
      same either directly or via reimbursement of Capital Projects), and if HOLDINGS
      (or its Affiliates) recoups any costs, expenses or damages ("Recoupments")
      with
      respect to the Tank Damage from a Third Person (including an insurer), then
      HOLDINGS shall reimburse DCP or GSRLLC their out of pocket costs related to
      the
      Tank Damage, but only to the extent that the Recoupments exceed the damages
      and
      costs incurred by HOLDINGS (and/or its Affiliates) in connection with the Tank
      Damage and any assertion and/or collection of claims related
      thereto.

     

    6.10 New
      Debt.
      DCP or
      its Affiliates will incur new indebtedness that will be used and subject to
      the
      restrictions and other matters as set forth in Schedule
      6.10. 

     

    6.11 Credits
      and Receipts.
      Subject
      to the terms hereof (including the indemnification provisions hereof), all
      monies, proceeds, receipts, credits and income attributable to the Assets (as
      determined in accordance with GAAP) (i) for all periods of time at and after
      the
      Effective Time, shall be the sole property and entitlement of the LLCs and
      DCP,
      and, to the extent received by HOLDINGS or one of its Affiliates, shall be
      promptly accounted for and transmitted to DCP and (ii) for all periods of time
      prior to the Effective Time, shall be the sole property and entitlement of
      HOLDINGS and, to the extent received by LLCs or DCP, shall be promptly accounted
      for and transmitted to HOLDINGS. Subject to the terms hereof (including the
      indemnification provisions hereof), after the Effective Time, regardless of
      when
      and by whom the actual invoice or demand for payment is received, DCP shall
      cause the LLCs to pay and be responsible for all accounts payable or overhead
      or
      administrative costs incurred in the ordinary course of business with respect
      to
      the Assets and attributable to any period of time whether before or after the
      Effective Time.
      Notwithstanding the foregoing, the LLCs and DCP shall be entitled to all monies,
      proceeds, receipts, credits and income attributable to that certain Propane
      Supply Agreement dated May 1, 2004 between Aux Sable Liquid Products LP and
      Gas
      Supply Resources, Inc. for the period of time between December 1, 2005 and
      March
      1, 2006 to the extent attributable to the Aux Sable volume disruption during
      said period of time regardless of when and by whom same is received; and, to
      the
      extent received by HOLDINGS or one of its Affiliates, shall be promptly
      accounted for and transmitted to DCP.

     

    
      
        
        

      

      
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      6.12 Tax
        Covenants. 

       

    

    (a) Preparation
      of Tax Returns.
      HOLDINGS shall prepare and file or cause to be prepared and filed all Tax
      Returns with the appropriate federal, state, local and foreign Tax Authorities
      relating to the LLCs for periods ending on or prior to the Closing Date, and
      shall pay all Taxes due with respect to such Tax Returns, to the extent not
      accrued in the Final Settlement Statement. DCP shall prepare and file, or cause
      to be prepared and filed, all other Straddle Tax Returns required to be filed
      by
      the LLCs and DCP shall cause the LLCs to pay the Taxes shown to be due thereon;
      provided,
      however,
      that
      HOLDINGS shall promptly reimburse DCP for the portion of such Tax that relates
      to a Pre-Closing Tax Period, to the extent not accrued in the Final Settlement
      Statement. 
      HOLDINGS
      shall furnish to DCP all information and records reasonably requested by DCP
      for
      use in preparation of any Straddle Tax Returns. DCP shall allow HOLDINGS to
      review, comment upon and reasonably approve without undue delay any Straddle
      Tax
      Return at any time during the twenty (20) day period immediately preceding
      the
      filing of such Tax Return. 

     

    (b) Close
      of Prior Periods.
      Except
      as otherwise provided in Section
      11.3,
      HOLDINGS
      and DCP shall, unless prohibited by Law, cause the LLCs to close all Tax periods
      on the Closing Date, with HOLDINGS bearing the sole obligation for filing the
      Tax Returns and paying all Taxes for such Tax periods. If applicable Law does
      not permit any of the LLCs to close a Tax period on the Closing Date, except
      as
      otherwise provided in this Section
      6.12(b),
      the
      amount of Taxes allocable to the portion of such period ending on the Closing
      Date shall be deemed equal to the amount that would be payable if the relevant
      taxable period ended on the Closing Date. Any allocation of income or deductions
      required to determine any income Taxes relating to such period shall be taken
      into account as though the relevant taxable period ended on the Closing Date
      and
      by means of a closing of the books and records of the LLCs on the Closing Date;
      provided
      that
      exemptions, allowances or deductions that are calculated on an annual basis
      (including, but not limited to, depreciation and amortization deductions) shall
      be allocated between the period ending on the Closing Date and the period after
      the Closing Date in proportion to the number of days in each such period. All
      Tax Returns filed by DCP, HOLDINGS, and the LLCs shall be prepared consistently
      with such allocation. Notwithstanding anything to the contrary herein, any
      franchise Tax paid or payable with respect to the LLCs shall be allocated to
      the
      taxable period during which the income, operations, assets or capital comprising
      the base of such Tax is measured, regardless of whether the right to do business
      for another taxable period is obtained by the payment of such franchise
      Tax. 

     

    (c) Refund
      or Credit.
      Any
      refund or credit (including any interest with respect thereto) of Taxes of
      the
      LLCs attributable to any taxable period (or portion thereof) ending on or before
      the Closing Date shall be the property of HOLDINGS to the extent not previously
      accrued in the Final Settlement Statement, and if Tax refund or credits in
      excess of that accrued in the Final Settlement Statement is received by DCP
      or
      the LLCs after the Closing Date, DCP shall promptly notify HOLDINGS of such
      refund or credit and pay over to HOLDINGS the amount of such refund or credit
      (net of any Tax liability imposed on DCP or the LLCs in connection with the
      receipt of such refund). 

     

    
      
        
        

      

      
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    (d) Post-Closing
      Assistance.
      HOLDINGS and DCP will each provide the other, and subsequent to the Closing,
      DCP
      will cause the LLCs to provide HOLDINGS with such assistance as may reasonably
      be requested in connection with the preparation of any Tax Return, any audit
      or
      other examination by any Tax Authority, or any judicial or administrative
      proceedings relating to liability for Taxes, and each will retain and provide
      the requesting party with any records or information that may be reasonably
      relevant to such return, audit or examination, proceedings or determination.
      The
      party requesting assistance will reimburse the other party for reasonable
      out-of-pocket expenses (other than salaries or wages of any employees of the
      parties) incurred in providing such assistance. Any information obtained
      pursuant to this Section 6.12(d)
      or
      pursuant to any other Section hereof providing for the sharing of information
      or
      the review of any Tax Return or other schedule relating to Taxes will be kept
      confidential by the Parties. 

     

    (e) Maintaining
      Records.
      DCP and
      HOLDINGS will maintain all Tax records, working papers and other supporting
      financial records and documents relating to the Tax Returns filed by the LLCs
      for all open years. Such Tax Returns will be delivered to and maintained by
      DCP
      for a period of seven years after the Closing, and DCP will make the same
      available to HOLDINGS or their agents at reasonable times for inspection and
      copying.

     

    (f) Allocation
      Statement.
      As
      promptly as practicable, but in no event later than sixty (60) days after the
      delivery of Final Settlement Statement, DCP shall prepare and deliver to
      HOLDINGS a statement (the "Allocation
      Statement")
      allocating the Consideration among the assets of the LLCs in accordance with
      Section 1060 of the Code and the Treasury Regulations promulgated thereunder.
      HOLDINGS shall have fifteen (15) days to review the Allocation Statement and
      shall notify DCP of any disputes with the allocation as set forth in the
      Allocation Statement. HOLDINGS and DCP shall negotiate in good faith to resolve
      any such dispute prior to the date that is sixty (60) days prior to the due
      date
      of the Tax Returns that reflect the allocation. If HOLDINGS and DCP cannot
      resolve the disputed allocation prior to such date, then HOLDINGS and DCP shall
      refer the dispute to the Independent Accountant to review and to determine
      the
      proper allocation (it being understood that in making such determination, the
      Independent Accountant shall be functioning as an expert and not as an
      arbitrator). The Independent Accountant shall deliver to HOLDINGS and DCP,
      as
      promptly as practicable (but in any case no later than thirty (30) days from
      the
      date of engagement of the Independent Accountant), a determination of the
      allocation, which determination will be binding on the parties hereto. The
      cost
      of such review and report shall be borne one-half by HOLDINGS and one-half
      by
      DCP. All Tax Returns filed by DCP, HOLDINGS, the LLCs and each of their
      Affiliates concerning the LLCs or the Assets shall be prepared consistently
      with
      the allocation determined under this Section
      6.12. 

     

    (g) Notice
      of Audit.
      If
      notice of any claim, audit, examination, or other proposed change or adjustment
      by any Taxing Authority, as well as any notice of assessment and any notice
      and
      demand for payment, concerning any Taxes for any taxable period (or portion
      thereof) ending on or before the Closing Date (a "Tax
      Proceeding")
      shall
      be received by DCP, DCP shall promptly inform HOLDINGS in writing of such Tax
      Proceeding. HOLDINGS shall have the right, at its expense to represent the
      interests of GSRLLC and GSRI (and, with respect to Pine Tree, DCP shall not
      object to HOLDINGS representing its interests) and control the prosecution,
      defense and settlement of any Tax Proceeding relating exclusively to taxable
      periods ending on or before the Closing Date. DCP shall represent, at its
      expense, the interests of the LLCs in any Tax Proceeding relating to any taxable
      period that begins on or before the Closing Date and ends after the Closing
      Date; provided,
      however,
      that
      (i) DCP shall allow HOLDINGS and its counsel to participate in any such Tax
      Proceeding at HOLDINGS' sole expense; (ii) DCP shall keep HOLDINGS fully and
      timely informed with respect to the commencement, status and nature of such
      Tax
      Proceeding; and (iii) if the results of any such Tax Proceeding involve an
      issue
      that is otherwise the subject of indemnification by HOLDINGS under this
      Agreement or for which a refund may be available to HOLDINGS, then DCP and
      HOLDINGS shall, subject to the indemnification procedures set forth in
Article
      X,
      jointly
      control the prosecution, defense and settlement of any such Tax Proceeding,
      each
      party shall cooperate with the other party at its own expense and there shall
      be
      no settlement or closing or other agreement with respect thereto without the
      consent of the other party, which consent shall not be unreasonably
      withheld.

     

    
      
        
        

      

      
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    (h) Carry
      Back of Losses.
      DCP
      agrees that, unless required by applicable Law, it shall not, and shall not
      cause or permit any of GSRLLC or GSRI (and, with respect to Pine Tree, shall
      not
      consent to Pine Tree) to, carry back to any taxable period ending on or prior
      to
      the Closing Date any net operating loss or other Tax attribute and further
      agrees that HOLDINGS have no obligation under this Agreement or otherwise to
      return or remit any refund or other Tax benefit attributable to a breach by
      DCP
      of the foregoing undertaking. 

     

    (i) Certain
      Elections.
      DCP
      shall not make any Tax elections that would affect HOLDINGS or any of its
      Affiliates (including the LLCs) for any taxable period (or portion thereof,
      determined under Section
      6.12(f))
      ending
      on or prior to the Closing Date.

     

    6.13 Financial
      Statements and Financial Records.
      From
      the date hereof through the Closing:

     

    (a) HOLDINGS
      shall use Commercially Reasonable Efforts to cooperate with DCP to prepare
      (i)
      balance sheets as of December 31, 2003, December 31, 2004 and December 31,
      2005
      with respect to the LLCs and related combined income statements and cash flow
      statements with respect to the LLCs for each such year (such statements,
      including the related notes and schedules thereto, are referred to herein as
      the
      "Annual
      Financial Statements")
      and
      (ii) a balance sheet as of the date of the last day of the calendar quarter
      immediately preceding the date of the Closing and the related combined income
      statements and cash flow statements for the interim period from January 1,
      2006
      through the date of such balance sheet and comparative income statements and
      cash flow statements for the comparable period in 2005 (the "Stub
      Period Financial Statements"),
      in
      each case in accordance with the requirements of Regulation S-X adopted by
      the
      SEC and, in the case of the Stub Period Financial Statements, on a basis
      consistent with the basis of presentation of the Annual Financial Statements
      (except to the extent of differences permitted by Regulation S-X with respect
      to
      financial statements for interim periods). The Annual Financial Statements
      and
      the Stub Period Financial Statements are collectively the "SEC
      Financial Statements."

     

    
      
        
        

      

      
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    (b) HOLDINGS
      shall consent to the inclusion or incorporation by reference of the SEC
      Financial Statements in any registration statement, report or other document
      of
      DCP or any of its Affiliates to be filed with the SEC in which DCP or such
      Affiliate reasonably determines that the SEC Financial Statements are required
      to be included or incorporated by reference to satisfy any rule or regulation
      of
      the SEC or to satisfy relevant disclosure obligations under the Securities
      Act
      of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
      HOLDINGS shall use Commercially Reasonable Efforts to cause its auditors to
      consent to the inclusion or incorporation by reference of its audit opinion
      with
      respect to the Annual Financial Statements in any such registration statement,
      report or other document and, in connection therewith, HOLDINGS shall execute
      and deliver to its auditors such representation letters, in form and substance
      customary for representation letters provided to external audit firms by
      management of the company whose financial statements are the subject of an
      audit, as may be reasonably requested by its auditors.

     

    6.14 Insurance.
      HOLDINGS shall continue to provide certain existing property and liability
      insurance coverage related to the Assets (the "Insurance")
      and
      administer any insured claims asserted by DCP. The Insurance is part of Duke
      Energy Field Services, LLC’s corporate insurance program. It is anticipated that
      the Insurance will be provided for up to one (1) year. However, either Party
      may
      terminate any or all of the Insurance upon 30 Days notice. HOLDINGS will invoice
      DCP for premiums related to the Insurance. DCP shall pay such invoices within
      30
      days after receipt. With respect to the Insurance, DCP shall be solely
      responsible for (a) deductibles, (b) self insured retentions, (c) out of pocket
      costs, (d) claims that are not insured or excluded from coverage, and (e)
      amounts in excess of policy limits. The foregoing costs shall be paid directly
      by DCP.

     

    ARTICLE
      VII

     

    CONDITIONS
      TO CLOSING

     

    7.1 HOLDINGS'
      and DEFS' Conditions.
      The
      obligation of HOLDINGS to close is subject to the satisfaction of the following
      conditions, any of which may be waived in HOLDINGS sole discretion:

     

    (a) The
      representations of DCP contained in Article
      V
      shall be
      true, in all material respects (or, in the case of representations or warranties
      that are already qualified by a materiality standard, shall be true in all
      respects) on and as of Closing.

     

    (b) DCP
      shall
      have performed in all material respects the obligations, covenants and
      agreements of DCP contained herein.

     

    
      
        
        

      

      
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    (c) There
      is
      no injunction, restraining order or Proceeding pending against HOLDINGS, DENGL,
      DEFS, DEGP or the LLCs that restrains or prohibits the consummation of the
      transactions contemplated by this Agreement.

     

    (d) All
      of
      HOLDINGS' Required Consents, DCP's Required Consents, consents or approvals
      under the HSR Act (or expiration of the waiting period) and consents under
      the
      Real Property Interests, Contracts and Permits shall have been
      obtained.

     

    (e) The
      Amended Limited Partnership Agreement shall have been executed and delivered
      by
      DCP Midstream GP, in its capacity as the general partner of DCP, and by
      HOLDINGS, in its capacity as the attorney-in-fact of the limited partners of
      DCP.

     

    (f) DCP
      shall
      have made all deliveries in accordance with Section
      8.2.

     

    7.2 DCP's
      Conditions.
      The
      obligation of DCP to close is subject to the satisfaction of the following
      conditions, any of which may be waived in its sole discretion:

     

    (a) The
      representations of HOLDINGS contained in Article
      IV
      shall be
      true, in all material respects (or in the case of representations or warranties
      that are already qualified by a materiality standard, shall be true in all
      respects) on and as of the Closing.

     

    (b) HOLDINGS
      shall have performed, in all material respects, the obligations, covenants
      and
      agreements of HOLDINGS contained herein.

     

    (c) There
      is
      no injunction, restraining order or Proceeding pending against HOLDINGS, DENGL,
      DEFS, DEGP or the LLCs that restrains or prohibits the consummation of the
      transactions contemplated by this Agreement.

     

    (d) All
      of
      HOLDINGS' Required Consents, DCP's Required Consents, consents or approvals
      under the HSR Act (or expiration of the waiting period) and consents under
      the
      Real Property Interests, Contracts and Permits shall have been obtained.

     

    (e) There
      shall have been no events or occurrences that could reasonably be expected
      to
      have a Material Adverse Effect.

     

    (f) HOLDINGS
      shall have delivered all documents in accordance with Section
      8.2.
      

     

    (g) HOLDINGS
      shall have delivered to DCP resignations of all officers and managers of GSRLLC
      and GSRI, unless otherwise requested by DCP.

     

    (h) The
      SEC
      Financial Statements and the content thereof shall be satisfactory to DCP in
      its
      sole discretion.

     

    
      
        
        

      

      
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    7.3 Exceptions.
      Notwithstanding the provisions of Sections
      7.1(a)
      and
(b)
      and
7.2(a)
      and
(b),
      no
      Party shall have the right to refuse to close the transaction contemplated
      hereby by reason of this Article
      VII unless
      (a) in the case of HOLDINGS, the sum of all representations of DCP contained
      in
Article
      V
      which
      are not true and all obligations, covenants and agreements which DCP has failed
      to perform, would reasonably be expected to have a Material Adverse Effect,
      and
      (b) in the case of DCP, the sum of all representations of HOLDINGS contained
      in
Article
      IV
      which
      are not true and all obligations, covenants and agreements which HOLDINGS has
      failed to perform, would reasonably be expected to have a Material Adverse
      Effect. 

     

    ARTICLE
      VIII

     

    CLOSING

     

    8.1 Time
      and Place of Closing.
      The
      consummation of the transactions contemplated by this Agreement (the
      "Closing")
      shall
      take place at 4:00 p.m. Subject Time in the offices of DEFS in Denver, Colorado,
      on October 31,
      2006
      (unless such date is otherwise extended by either HOLDINGS or DCP as permitted
      hereunder), or on the last day of the month following the receipt of the
      consents required by Sections
      7.1(d)
      and
7.2(d)
      (if
      later than the foregoing specified date of Closing), or such other time and
      place as the Parties agree to in writing (the "Closing
      Date"),
      and
      shall be effective as of the Effective Time. 

     

    8.2 Deliveries
      at Closing.
      At the
      Closing, 

     

    (a) HOLDINGS,
      as applicable, will execute and deliver or cause to be executed and delivered
      to
      DCP:

     

    (i) Each
      of
      the Transaction Documents to which HOLDINGS or Affiliates are a party;

     

    (ii) Certificates
      of a corporate officer or other authorized person dated the Closing Date,
      certifying on behalf of HOLDINGS that the conditions in Sections 7.2(a)
      and
(b)
      have
      been fulfilled.

     

    (b) DCP
      will
      execute and deliver or cause to be executed and delivered to
      HOLDINGS:

     

    (i) Each
      of
      the Transaction Documents to which DCP or DCP's Affiliates are a party;

     

    (ii) A
      certificate of a corporate officer or other authorized person dated the Closing
      Date certifying on behalf of DCP that the conditions in Sections 7.1(a)
      and
(b)
      have
      been fulfilled;

     

    (iii) A
      certificate, in the form of Certificate for Class C Units attached as
Exhibit
      F,
      for the
      number of Units determined in accordance with Section
      2.1;

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    (iv) A
      wire
      transfer to HOLDINGS of the amount due with respect to the Cash Consideration
      (as set forth in the Preliminary Settlement Statement). 

     

    ARTICLE
      IX

     

    TERMINATION

     

    9.1 Termination
      at or Prior to Closing.
      This
      Agreement may be terminated and the transactions contemplated hereby abandoned
      as follows:

     

    (a) HOLDINGS
      and DCP may elect to terminate this Agreement at any time prior to the Closing
      by mutual written consent thereof;

     

    (b) Either
      HOLDINGS or DCP by written notice to the other may terminate this Agreement
      if
      the Closing shall not have occurred on or before December 31, 2006; provided,
      however,
      that
      neither Party may terminate this Agreement if such Party is at such time in
      material breach of any provision of this Agreement;

     

    (c) HOLDINGS
      and DCP may each terminate this Agreement at any time on or prior to the Closing
      if either DCP, on the one hand, or HOLDINGS, on the other hand, shall have
      materially breached any representations, warranties or covenants thereof herein
      contained and the same is not cured within thirty (30) days after receipt of
      written notice thereof from the applicable non-breaching Party; provided,
      however,
      that
      neither Party may terminate this Agreement if such Party is at such time in
      material breach of any representations, warranties or covenants of such Party;
      and 

     

    (d) In
      addition to the foregoing, any Party may terminate this Agreement to the extent
      such termination is expressly authorized by another provision of this
      Agreement.

     

    9.2 Effect
      of Termination.
      In the
      event that Closing does not occur as a result of any Party exercising its right
      to terminate pursuant to Section
      9.1,
      then no
      Party shall have any further rights or obligations under this Agreement, except
      that (i) nothing herein shall relieve any Party from any liability for any
      willful breach of this Agreement, and (ii) the provisions of Section
      6.3(c)
      and
Article
      XI
      shall
      survive any termination of this Agreement.

     

    ARTICLE
      X

     

    INDEMNIFICATION

     

    10.1 Indemnification
      by DCP.
      Effective upon Closing, DCP shall defend, indemnify and hold harmless HOLDINGS
      and its Affiliates, and all of its and their directors, officers, employees,
      partners, members, contractors, agents, and representatives (collectively,
      the
      "HOLDINGS
      Indemnitees")
      from
      and against any and all Losses asserted against, resulting from, imposed upon
      or
      incurred by any of the HOLDINGS Indemnitees as a result of or arising out
      of:

     

    (a) the
      breach of any of the representations or warranties under Article
      V;

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    (b) the
      breach of any covenants or agreements of DCP contained in this
      Agreement;

     

    (c) to
      the
      extent that HOLDINGS is not required to indemnify any of the DCP Indemnitees
      pursuant to Section
      10.2,
      the
      Assumed Obligations; and

     

    (d) to
      the
      extent that HOLDINGS is not required to indemnify any of the DCP Indemnitees
      pursuant to Section
      10.2(d),
      all
      liabilities or obligations of any kind or nature resulting from or arising
      out
      of the ownership, use or operation of the Assets by the LLCs or the ownership
      of
      the Subject Interests by DCP, arising out of or relating to periods on and
      after
      the Effective Time.

     

    10.2 Indemnification
      by HOLDINGS.
      Effective upon Closing, HOLDINGS shall defend, indemnify and hold harmless
      DCP
      and its Affiliates (including GSRLLC), and all of its and their directors,
      officers, employees, partners, members, contractors, agents, and representatives
      (collectively, the "DCP
      Indemnitees")
      from
      and against any and all Losses asserted against, resulting from, imposed upon
      or
      incurred by any of the DCP Indemnitees as a result of or arising out
      of:

     

    (a) the
      breach of any of the representations or warranties under Article
      IV
      (other
      than Sections
      4.1,
      4.2,
      4.16
      and
4.17);
      

     

    (b) subject
      to Sections
      3.2(e)
      and
6.9,
      to the
      extent not accounted for in the Final Settlement Statement, Third Person Claims
      asserted within one (1) year after Closing to the extent related to underpayment
      of trade payables for periods prior to the Effective Time; 

     

    (c) claims
      by
      Governmental Authorities asserted within two (2) years after Closing to the
      extent related to fines and penalties for periods between April 30, 2001 and
      Closing;

     

    (d) any
      matters set forth on Schedule 10.2(d); 

     

    (e) the
      breach of any of the representations or warranties under Sections
      4.1,
      4.2,
      4.16
      and
4.17
      or the
      covenants or agreements of HOLDINGS contained in this Agreement;
      and

     

    (f) any
      Retained Liabilities.

     

    10.3 Deductibles,
      Caps, Survival and Certain Limitations. 

     

    (a) Subject
      to this Section
      10.3,
      all
      representations, warranties, covenants and indemnities made by the Parties in
      this Agreement or pursuant hereto shall survive the Closing as hereinafter
      provided, and shall not be merged into any instruments or agreements delivered
      at Closing.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    (b) With
      respect to the obligations of HOLDINGS:

     

    (i) under
      Sections
      10.2(a)
      or
(b),
      none of
      the DCP Indemnitees shall be entitled to assert any right to indemnification
      after one (1) year from the Closing;

     

    (ii) under
      Section
      10.2(c),
      none of
      the DCP Indemnitees shall be entitled to assert any right to indemnification
      after two (2) years from the Closing;

     

    (iii) under
      Section
      10.2(d),
      none of
      the DCP Indemnitees shall be entitled to assert any right to indemnification
      after three (3) years from the Closing;

     

    (iv) none
      of
      the DCP Indemnitees shall be entitled to assert any right to indemnification
      unless the individual claim or series of related claims which arise out of
      substantially the same facts and circumstances exceeds $50,000 ("Qualified
      Claims");
      

     

    (v) under
      Section
      10.2(a),
      none of
      the DCP Indemnitees shall be entitled to assert any right to indemnification
      unless Qualified Claims for which indemnity in only provided under Section
      10.2(a) in the aggregate exceed $680,000, and then only to the extent that
      all
      such claims exceed said amount; and 

     

    (vi) under
      Section
      10.2(a),
      none of
      the DCP Indemnitees shall be entitled to indemnification for any amount in
      excess of $6,800,000.
      

     

    (c) The
      claim
      for indemnity under this Agreement made by a Party Indemnitee shall be in
      writing, be delivered in good faith prior to the respective survival period
      under Sections
      10.3(b)
      (to the
      extent applicable), and specify in reasonable detail the specific nature of
      the
      claim for indemnification hereunder ("Claim
      Notice").
      Any
      such claim that is described in a timely (if applicable) delivered Claim Notice
      shall survive with respect to the specific matter described therein.

     

    (d) Notwithstanding
      anything contained herein to the contrary, in no event shall HOLDINGS be
      obligated under this Agreement to indemnify (or be otherwise liable hereunder
      in
      any way whatsoever to) any of the DCP Indemnitees with respect to a breach
      of
      any representation or warranty, if DCP had Knowledge thereof at Closing and
      failed to notify HOLDINGS of such breach prior to Closing. Unless HOLDINGS
      or a
      Third Person shall have made a claim or demand or it appears reasonably likely
      that such a claim or demand appears reasonably likely, DCP shall not take any
      voluntary action that is intended by DCP to cause a Third Person Claim to be
      initiated that would be subject to indemnification by HOLDINGS.

     

    (e) 
      All
      Losses indemnified hereunder shall be determined net of any (i) Third
      Person Awards, (ii) Tax Benefits; and (iii) amount which specifically
      pertains to such Loss and is reflected in the calculations of the amounts set
      forth on the Final Settlement Statement. 

     

    
      
        
        

      

      
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    10.4 Notice
      of Asserted Liability; Opportunity to Defend.

     

    (a) All
      claims for indemnification hereunder pertaining to Third Person Claims shall
      be
      asserted and handled pursuant to this Section
      10.4.
      Any
      person claiming indemnification hereunder is referred to herein as the
      "Indemnified
      Party"
      or
      "Indemnitee"
      and any
      person against whom such claims are asserted hereunder is referred to herein
      as
      the "Indemnifying
      Party"
      or
      "Indemnitor."

     

    (b) In
      the
      event that any Third Person Claim is asserted against or any Loss is sought
      to
      be collected by a Third Person from an Indemnified Party, the Indemnified Party
      shall with reasonable promptness provide to the Indemnifying Party a Claim
      Notice. The failure to give any such Claim Notice, shall not otherwise affect
      the rights of the Indemnified Party to indemnification hereunder unless the
      Indemnified Party has proceeded to contest, defend or settle such Claim or
      remedy such a Loss with respect to which it has failed to give a Claim Notice
      to
      the Indemnifying Party, but only to the extent the Indemnifying Party is
      prejudiced thereby. Additionally, to the extent the Indemnifying Party is
      prejudiced thereby, the failure to provide a Claim Notice to the Indemnifying
      Party shall relieve the Indemnifying Party from liability for such Claims and
      Losses that it may have to the Indemnified Party, but only to the extent the
      liability for such Claims or Losses is directly attributable to such failure
      to
      provide the Claim Notice. 

     

    (c) The
      Indemnifying Party shall have thirty (30) days from the personal delivery or
      receipt of the Claim Notice (the "Notice
      Period")
      to
      notify the Indemnified Party (i) whether or not it disputes the liability to
      the
      Indemnified Party hereunder with respect to the Claim or Loss, and in the event
      of a dispute, such dispute shall be resolved in the manner set forth in
Section
      11.8
      hereof,
      (ii) in the case where Losses are asserted against or sought to be collected
      from an Indemnifying Party by the Indemnified Party, whether or not the
      Indemnifying Party shall at its own sole cost and expense remedy such Losses
      or
      (iii) in the case where Claims are asserted against or sought to be collected
      from an Indemnified Party by a Third Person ("Third
      Person Claim"),
      whether or not the Indemnifying Party shall at its own sole cost and expense
      defend the Indemnified Party against such Third Person Claim; provided however,
      that any Indemnified Party is hereby authorized prior to and during the Notice
      Period to file any motion, answer or other pleading that it shall deem necessary
      or appropriate to protect its interests or those of the Indemnifying Party
      (and
      of which it shall have given notice and opportunity to comment to the
      Indemnifying Party) and not prejudicial to the Indemnifying Party. 

     

    (d) If
      the
      Indemnifying Party does not give notice to the Indemnified Party of its election
      to contest and defend any such Third Person Claim within the Notice Period,
      then
      the Indemnifying Party shall be bound by the result obtained with respect
      thereto by the Indemnified Party and shall be responsible for all costs incurred
      in connection therewith.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    (e) If
      the
      Indemnifying Party is obligated to defend and indemnify the Indemnified Party,
      and the Parties have a conflict of interest with respect to any such Third
      Person Claim, then the Indemnified Party may, in its sole discretion, separately
      and independently contest and defend such Third Person Claim, and the
      Indemnifying Party shall be bound by the result obtained with respect thereto
      by
      the Indemnified Party and shall be responsible for all costs incurred in
      connection therewith. 

     

    (f) In
      the
      event that the Indemnifying Party notifies the Indemnified Party within the
      Notice Period that it shall defend the Indemnified Party against a Third Person
      Claim, the Indemnifying Party shall have the right to defend all appropriate
      Proceedings, and with counsel of its own choosing (but reasonably satisfactory
      to the Indemnified Party) and such Proceedings shall be promptly settled
      (subject to obtaining a full and complete release of all Indemnified Parties)
      or
      prosecuted by it to a final conclusion. If the Indemnified Party desires to
      participate in, but not control, any such defense or settlement it may do so
      at
      its sole cost and expense. If the Indemnified Party joins in any such Third
      Person Claim, the Indemnifying Party shall have full authority to determine
      all
      action to be taken with respect thereto, as long as such action could not create
      a liability to any of the Indemnified Parties, in which case, such action would
      require the prior written consent of any Indemnified Party so
      affected.

     

    (g) If
      requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
      with the Indemnifying Party and its counsel in contesting any Third Person
      Claim
      and in making any counterclaim against the Third Person asserting the Third
      Person Claim, or any cross-complaint against any person as long as such
      cooperation, counterclaim or cross-complaint could not create a liability to
      any
      of the Indemnified Parties. 

     

    (h) At
      any
      time after the commencement of defense by Indemnifying Party under Section
      10.4(f)
      above of
      any Third Person Claim, the Indemnifying Party may request the Indemnified
      Party
      to agree in writing to the abandonment of such contest or to the payment or
      compromise by the Indemnifying Party of the asserted Third Person Claim, but
      only if the Indemnifying Party agrees in writing to be solely liable for such
      Third Person Claim; whereupon such action shall be taken unless the Indemnified
      Party determines that the contest should be continued and notifies the
      Indemnifying Party in writing within fifteen (15) days of such request from
      the
      Indemnifying Party. In the event that the Indemnified Party determines that
      the
      contest should be continued, the amount for which the Indemnifying Party would
      otherwise be liable hereunder shall not exceed the amount which the Indemnifying
      Party had agreed to pay to compromise such Third Person Claim; provided
      that,
      the other Person to the contested Third Person Claim had agreed in writing
      to
      accept such amount in payment or compromise of the Third Person Claim as of
      the
      time the Indemnifying Party made its request therefor to the Indemnified Party,
      and further provided
      that,
      under such proposed compromise, the Indemnified Party would be fully and
      completely released from any further liability or obligation with respect to
      the
      matters which are the subject of such contested Third Person Claim.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    10.5 Materiality
      Conditions.
      For
      purposes of determining whether an event described in this Article
      X
      has
      occurred for which indemnification under this Article
      X
      can be
      sought, any requirement in any representation, warranty, covenant or agreement
      by HOLDINGS or DCP, as applicable, contained in this Agreement that an event
      or
      fact be "material," "Material," meet a certain minimum dollar threshold or
      have
      a "Material Adverse Effect" or a material adverse effect (each a "Materiality
      Condition")
      in
      order for such event or fact to constitute a misrepresentation or breach of
      such
      representation, warranty, covenant or agreement under this Agreement, such
      Materiality Condition shall be disregarded and such representations, warranties,
      covenants or agreements shall be construed solely for purposes of this
Article
      X
      as if
      they did not contain such Materiality Conditions. Notwithstanding anything
      in
      this Section
      10.5,
      any
      claim for indemnification under this Article
      X
      will be
      subject to Section
      10.3. 

     

    10.6 Exclusive
      Remedy.
      AS
      BETWEEN THE DCP INDEMNITEES AND THE HOLDINGS INDEMNITEES, AFTER CLOSING (A)
      THE
      EXPRESS INDEMNIFICATION PROVISIONS SET FORTH IN THIS AGREEMENT, WILL BE THE
      SOLE
      AND EXCLUSIVE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES WITH RESPECT
      TO
      SAID AGREEMENT AND THE EVENTS GIVING RISE THERETO, AND THE TRANSACTIONS PROVIDED
      FOR THEREIN OR CONTEMPLATED THEREBY (OTHER THAN THE OTHER TRANSACTION DOCUMENTS)
      AND (B) NEITHER PARTY NOR ANY OF ITS RESPECTIVE SUCCESSORS OR ASSIGNS SHALL
      HAVE
      ANY RIGHTS AGAINST THE OTHER PARTY OR ITS AFFILIATES WITH RESPECT TO THE
      TRANSACTIONS PROVIDED FOR HEREIN OTHER THAN AS IS EXPRESSLY PROVIDED IN THIS
      AGREEMENT
      AND THE
      OTHER TRANSACTION DOCUMENTS.

     

    10.7 Negligence
      and Strict Liability Waiver.
      WITHOUT
      LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH
      IN
      THIS AGREEMENT, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION UNDER
      THIS AGREEMENT IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE
      LOSS OR CLAIM GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT
      OF
      THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OR VIOLATION
      OF ANY LAW OF OR BY SUCH INDEMNIFIED PARTY. 

     

    10.8 Limitation
      on Damages.
      NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL
      ANY OF HOLDINGS OR DCP BE LIABLE TO THE OTHER, OR TO THE OTHERS' INDEMNITEES,
      UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE, REMOTE, SPECULATIVE,
      CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES OR LOSS OF PROFITS; PROVIDED
      THAT,
      IF ANY
      OF THE HOLDINGS INDEMNITEES OR DCP INDEMNITEES IS HELD LIABLE TO A THIRD PERSON
      FOR ANY SUCH DAMAGES AND THE INDEMNITOR IS OBLIGATED TO INDEMNIFY SUCH HOLDINGS
      INDEMNITEES OR DCP INDEMNITEES FOR THE MATTER THAT GAVE RISE TO SUCH DAMAGES,
      THE INDEMNITOR SHALL BE LIABLE FOR, AND OBLIGATED TO REIMBURSE SUCH INDEMNITEES
      FOR SUCH DAMAGES.

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    10.9 Bold
      and/or Capitalized Letters.
      THE
      PARTIES AGREE THAT THE BOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT
      CONSTITUTE CONSPICUOUS
      LEGENDS.

     

    ARTICLE
      XI

     

    MISCELLANEOUS
      PROVISIONS

     

    11.1 Expenses.
      Unless
      otherwise specifically provided for herein, each Party will bear its own costs
      and expenses (including legal fees and expenses) incurred in connection with
      the
      negotiation of this Agreement and the transactions contemplated hereby;
provided
      that
      HOLDINGS will bear the cost of all Post-Closing Consents which must be obtained
      from any railroad.

     

    11.2 Further
      Assurances.
      From
      time to time, and without further consideration, each Party will execute and
      deliver to the other Party such documents and take such actions as the other
      Party may reasonably request in order to more effectively implement and carry
      into effect the transactions contemplated by this Agreement.

     

    11.3 Apportionment
      of Property Taxes; Transfer Taxes; and Recording Fees.

     

    (a) Prior
      to
      the Closing, HOLDINGS shall determine, in accordance with this Section
      11.3,
      the
      portion of general property Tax attributable to the period from January 1 (of
      the year in which Closing occurs) to the Effective Time (the "HOLDINGS'
      Property Tax").
      The
      HOLDINGS Property Tax shall be an amount equal to the product of (i) the amount
      of such general property Tax assessed or pertaining to the Assets for the entire
      taxable period that includes the Effective Time (or the amount of such general
      property Tax for the immediately preceding taxable period in the case of those
      Assets, if any, for which such general property Tax for the current period
      cannot be determined, subject to future adjustment as set forth herein), times
      (ii) a fraction, the numerator of which is the number of days from January
      1 (of
      the year in which Closing occurs) to the Effective Time and the denominator
      of
      which is the total number of days in the entire taxable period. 

     

    (b) The
      Parties believe that the contribution of the Subject Interests as provided
      for
      herein is exempt from or is otherwise not subject to any and all sales, use,
      transfer, or similar Taxes. If any such sales, transfer, use or similar Taxes
      are due or should hereafter become due (including penalty and interest thereon)
      by reason of this transaction, DCP shall timely pay and solely bear all such
      type of Taxes.

     

    11.4 Assignment.
      Neither
      Party may assign this Agreement or any of its rights or obligations arising
      hereunder without the prior written consent of the other Party;
      provided,
      however,
      DCP
      shall be permitted to assign this Agreement to an Affiliate prior to Closing,
      provided,
      that,
      notwithstanding such assignment, DCP shall continue to remain responsible for
      all obligations of DCP hereunder following such assignment.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    11.5 Entire
      Agreement, Amendments and Waiver.
      This
      Agreement, together with the Transaction Documents and all certificates,
      documents, instruments and writings that are delivered pursuant hereto and
      thereto contain the entire understanding of the Parties with respect to the
      transactions contemplated hereby and supersede all prior agreements,
      arrangements and understandings relating to the subject matter hereof. This
      Agreement may be amended, superseded or canceled only by a written instrument
      duly executed by the Parties specifically stating that it amends, supersedes
      or
      cancels this Agreement. Any of the terms of this Agreement and any condition
      to
      a Party's obligations hereunder may be waived only in writing by that Party
      specifically stating that it waives a term or condition hereof. No waiver by
      either Party of any one or more conditions or defaults by the other in
      performance of any of the provisions of this Agreement shall operate or be
      construed as a waiver of any future conditions or defaults, whether of a like
      or
      different character, nor shall the waiver constitute a continuing waiver unless
      otherwise expressly provided.

     

    11.6 Severability.
      Each
      portion of this Agreement is intended to be severable. If any term or provision
      hereof is illegal or invalid for any reason whatsoever, such illegality or
      invalidity shall not affect the validity of the remainder of this
      Agreement.

     

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

     

    11.8 Governing
      Law, Dispute Resolution and Arbitration.

     

    (a) Governing
      Law.
      This
      Agreement shall be governed by, enforced in accordance with, and interpreted
      under, the Laws of the State of Colorado, without reference to conflicts of
      Laws
      principles.

     

    (b) Negotiation.
      In the
      event of any Arbitral Dispute, the Parties shall promptly seek to resolve any
      such Arbitral Dispute by negotiations between senior executives of the Parties
      who have authority to settle the Arbitral Dispute. When a Party believes there
      is an Arbitral Dispute under this Agreement that Party will give the other
      Party
      written notice of the Arbitral Dispute. Within thirty (30) days after receipt
      of
      such notice, the receiving Party shall submit to the other a written response.
      Both the notice and response shall include (i) a statement of each Party's
      position and a summary of the evidence and arguments supporting such position,
      and (ii) the name, title, fax number, and telephone number of the executive
      or
      executives who will represent that Party. In the event the Arbitral Dispute
      involves a claim arising out of the actions of any Person not a signatory to
      this Agreement, the receiving Party shall have such additional time as
      necessary, not to exceed an additional thirty (30) days, to investigate the
      Arbitral Dispute before submitting a written response. The executives shall
      meet
      at a mutually acceptable time and place within fifteen (15) days after the
      date
      of the response and thereafter as often as they reasonably deem necessary to
      exchange relevant information and to attempt to resolve the Arbitral Dispute.
      If
      one of the executives intends to be accompanied at a meeting by an attorney,
      the
      other executive shall be given at least five (5) Business Days' notice of such
      intention and may also be accompanied by an attorney.

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    (c) Failure
      to Resolve.
      If the
      Arbitral Dispute has not been resolved within sixty (60) days after the date
      of
      the response given pursuant to Section
      11.8(b)
      above,
      or such additional time, if any, that the Parties mutually agree to in writing,
      or if the Party receiving such notice denies the applicability of the provisions
      of Section
      11.8(b)
      or
      otherwise refuses to participate under the provisions of Section
      11.8(b),
      either
      Party may initiate binding arbitration pursuant to the provisions of
Section
      11.8(d)
      below.

     

    (d) Arbitration.
      Any
      Arbitral Disputes not settled pursuant to the foregoing provisions shall be
      resolved through the use of binding arbitration in accordance with the
      Commercial Arbitration Rules of the American Arbitration Association
      ("Arbitration
      Rules"),
      as
      supplemented to the extent necessary to determine any procedural appeal
      questions by the Federal Arbitration Act (Title 9 of the United States Code)
      and
      in accordance with the following provisions: 

     

    (i) If
      there
      is any inconsistency between this Section
      12.8(d)
      and the
      Arbitration Rules or the Federal Arbitration Act, the terms of this Section
      12.8(d)
      will
      control the rights and obligations of the Parties.

     

    (ii) Arbitration
      shall be initiated by a Party serving written notice, via certified mail, on
      the
      other Party that the first Party elects to refer the Arbitral Dispute to binding
      arbitration, along with the name of the arbitrator appointed by the Party
      demanding arbitration and a statement of the matter in controversy. Within
      thirty (30) days after receipt of such demand for arbitration, the receiving
      Party shall name its arbitrator. If the receiving Party fails or refuses to
      name
      its arbitrator within such thirty (30) day period, the second arbitrator shall
      be appointed, upon request of the Party demanding arbitration, by the Chief
      U.S.
      District Court Judge for the District of Colorado, or such other person
      designated by such judge. The two arbitrators so selected shall within thirty
      (30) days after their designation select a third arbitrator; provided, however,
      that if the two arbitrators are not able to agree on a third arbitrator within
      such thirty (30) day period, either Party may request the Chief U.S. District
      Court Judge for the District of Colorado, or such other person designated by
      such judge to select the third arbitrator as soon as possible. In the event
      the
      Judge declines to appoint an arbitrator, appointment shall be made, upon
      application of either Party, pursuant to the Commercial Arbitration Rules of
      the
      American Arbitration Association. If any arbitrator refuses or fails to fulfill
      his or her duties hereunder, such arbitrator shall be replaced by the Party
      which selected such arbitrator (or if such arbitrator was selected by another
      Person, through the procedure which such arbitrator was selected) pursuant
      to
      the foregoing provisions.

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    (iii) The
      hearing will be conducted in Denver, Colorado, no later than sixty (60) days
      following the selection of the arbitrators or thirty (30) days after all
      prehearing discovery has been completed, whichever is later, at which the
      Parties shall present such evidence and witnesses as they may choose, with
      or
      without counsel. The Parties and the arbitrators should proceed diligently
      and
      in good faith in order that the award may be made as promptly as
      possible.

     

    (iv) Except
      as
      provided in the Federal Arbitration Act, the decision of the arbitrators will
      be
      binding on and non-appealable by the Parties. Any such decision may be filed
      in
      any court of competent jurisdiction and may be enforced by any Party as a final
      judgment in such court.

     

    (v) The
      arbitrators shall have no right or authority to grant or award exemplary,
      punitive, remote, speculative, consequential, special or incidental
      damages.

     

    (vi) The
      Federal Rules of Civil Procedure, as modified or supplemented by the local
      rules
      of civil procedure for the U.S. District Court of Colorado, shall apply in
      the
      arbitration. The Parties shall make their witnesses available in a timely manner
      for discovery pursuant to such rules. If a Party fails to comply with this
      discovery agreement within the time established by the arbitrators, after
      resolving any discovery disputes, the arbitrators may take such failure to
      comply into consideration in reaching their decision. All discovery disputes
      shall be resolved by the arbitrators pursuant to the procedures set forth in
      the
      Federal Rules of Civil Procedure.

     

    (vii) Adherence
      to formal rules of evidence shall not be required. The arbitrators shall
      consider any evidence and testimony that they determine to be
      relevant.

     

    (viii) The
      Parties hereby request that the arbitrators render their decision within thirty
      (30) days following conclusion of the hearing.

     

    (ix) The
      defenses of statute of limitations and laches shall be tolled from and after
      the
      date a Party gives the other Party written notice of an Arbitral Dispute as
      provided in Section
      11.8(b)
      above
      until such time as the Arbitral Dispute has been resolved pursuant to
Section
      11.8(b),
      or an
      arbitration award has been entered pursuant to this Section
      11.8(d).

     

    (e) Recovery
      of Costs and Attorneys' Fees.
      In the
      event arbitration arising out of this Agreement is initiated by either Party,
      the decision of the arbitrators may include the award of court costs, fees
      and
      expenses of such arbitration (including reasonable attorneys' fees).

     

    (f) Choice
      of Forum.
      If,
      despite the Parties' agreement to submit any Arbitral Disputes to binding
      arbitration, there are any court proceedings arising out of or relating to
      this
      Agreement or the transactions contemplated hereby, such proceedings shall be
      brought and tried in, and the Parties hereby consent to the jurisdiction of,
      the
      federal or state courts situated in the City and County of Denver, State of
      Colorado.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    (g) Jury
      Waivers.
      THE
      PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO DEMAND A TRIAL BY
      JURY.

     

    (h) Settlement
      Proceedings.
      All
      aspects of any settlement proceedings, including discovery, testimony and other
      evidence, negotiations and communications pursuant to this Section
      11.8,
      briefs
      and the award shall be held confidential by each Party and the arbitrators,
      and
      shall be treated as compromise and settlement negotiations for the purposes
      of
      the Federal and State Rules of Evidence.

     

    11.9 Notices
      and Addresses.
      Any
      notice, request, instruction, waiver or other communication to be given
      hereunder by either Party shall be in writing and shall be considered duly
      delivered if personally delivered, mailed by certified mail with the postage
      prepaid (return receipt requested), sent by messenger or overnight delivery
      service, or sent by facsimile to the addresses of the Parties as
      follows:

     

    DCP:

    

    DCP
      Midstream Partners, LP

    370
      -
      17th Street, Suite 2775

    Denver,
      Colorado 80202

    Telephone:
      (303) 633-2900

    Facsimile:
      (303) 633-2921

    Attn:
      President

    

    with
      a
      copy to:

    

    DCP
      Midstream Partners, LP

    370
      -
      17th Street, Suite 2775

    Denver,
      Colorado 80202

    Telephone:
      (303) 633-2900

    Facsimile:
      (303) 633-2921

    Attn:
      General Counsel

    

    HOLDINGS:

    

    Duke
      Energy Field Services, LP

    370
      -
      17th Street, Suite 2500

    Denver,
      Colorado 80202

    Telephone:
      (303) 595-3331

    Facsimile:
      (303) 605-2226

    Attn:
      President

    

    with
      a
      copy to:

    

    Duke
      Energy Field Services, LP

    370
      -
      17th Street, Suite 2500

    Denver,
      Colorado 80202

    Telephone:
      (303) 605-1630

    Facsimile:
      (303) 605-2226

    Attn:
      General Counsel

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

    

    or
      at
      such other address as either Party may designate by written notice to the other
      Party in the manner provided in this Section
      11.9.
      Notice
      by mail shall be deemed to have been given and received on the third
      (3rd)
      day
      after posting. Notice by messenger, overnight delivery service, facsimile
      transmission (with answer-back confirmation) or personal delivery shall be
      deemed given on the date of actual delivery.

     

    11.10 Press
      Releases.
      Except
      as may otherwise be required by securities Laws and public announcements or
      disclosures that are, in the reasonable opinion of the Party proposing to make
      the announcement or disclosure, legally required to be made, there shall be
      no
      press release or public communication concerning the transactions contemplated
      by this Agreement by either Party except with the prior written consent of
      the
      Party not originating such press release or communication, which consent shall
      not be unreasonably withheld or delayed. DCP and HOLDINGS will consult in
      advance on the necessity for, and the timing and content of, any communications
      to be made to the public and, subject to legal constraints, to the form and
      content of any application or report to be made to any Governmental Authority
      that relates to the transactions contemplated by this Agreement.

     

    11.11 Offset.
      Nothing
      contained herein or in any Transaction Document shall create a right of offset
      or setoff for any Party under this Agreement and each Party hereby waives and
      disclaims any such right of offset or setoff under all applicable Law (including
      common Law).

     

    11.12 No
      Partnership; Third Party Beneficiaries.
      Nothing
      in this Agreement shall be deemed to create a joint venture, partnership, tax
      partnership, or agency relationship between the Parties. Nothing in this
      Agreement shall provide any benefit to any Third Person or entitle any Third
      Person to any claim, cause of action, remedy or right of any kind, it being
      the
      intent of the Parties that this Agreement shall not be construed as a
      third-party beneficiary contract; provided, however, that the indemnification
      provisions of Article
      X
      shall
      inure to the benefit of the DCP Indemnitees and the HOLDINGS Indemnitees as
      provided therein. 

     

    11.13 Negotiated
      Transaction.
      The
      provisions of this Agreement were negotiated by the Parties, and this Agreement
      shall be deemed to have been drafted by both Parties. 

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

    THE
      PARTIES HAVE
      signed
      this Agreement by their duly authorized officials as of the date first set
      forth
      above.

     

    
      	 	 	 
	 	DCP LP HOLDINGS,
              LP
	 
 	 
 	 
 
	
            	By:  	/s/ Mark
              A.
              Borer 
	 	
              
Name:
              Mark A. Borer
	 	Title: Vice President

    

     

    
      	 	 	 
	 	
              DCP
                MIDSTREAM PARTNERS, LP

               

              By:
                DCP MIDSTREAM GP, LP, 

              Its
                General Partner

               

              By:
                DCP MIDSTREAM GP, LLC,

              Its
                General Partner

            
	 
 	 
 	 
 
	
            	By:  	/s/ Greg
              K.
              Smith
	 	
              
Name:
              Greg K. Smith
	 	Title:
              Vice President

      
        
          
          

        

        
          50Unassociated Document

    SUBSCRIPTION
      AGREEMENT

    

    

    This
      SUBSCRIPTION AGREEMENT (this “Agreement”)
      is
      made as of August 2, 2006 by and among InSite Vision Incorporated, a Delaware
      corporation (the “Company”),
      and
      each of the subscribers set forth on Schedule 1 hereto (each a “Subscriber”
and
      collectively, the “Subscribers”).

    

    W
      I T N E
      S S E T H:

    

    WHEREAS,
      Subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
      thereunder, the Company desires to issue and sell and each Subscriber, severally
      and not jointly, desires to purchase up to 5,500,000 shares (the “Shares”)
      of
      common stock of the Company, par value $0.01 per share (the “Common
      Stock”),
      subject to the terms and conditions as set forth below.

    

    NOW,
      THEREFORE, in consideration of the promis-es and the mutual representations
      and
      covenants hereinaf-ter set forth, the parties hereto do hereby agree as
      follows:

    

    I. PURCHASE
      OF SHARES OF COMMON STOCK AND WARRANTS 

    

    1.1 The
      Offering.
      (a)
      Subject to the terms and conditions set forth in this Agreement, at the Closing,
      the Company shall issue and sell to each Subscriber, and each Subscriber shall,
      severally and not jointly, purchase from the Company, such number of Shares
      as
      indicated below such Subscriber’s name on the signature page hereto, at a
      purchase price of $1.31 per share.

    

    (b) The
      Company will also grant each Subscriber a warrant, the form of which is attached
      hereto as Exhibit A (the “Warrants”),
      to
      purchase a number of shares of Common Stock equal to 20% of the Common Stock
      purchased by each such Subscriber; provided, however, that the maximum number
      of
      shares of Common Stock issuable upon the exercise of the Warrants shall not
      exceed 1,100,000 shares (subject to any stock splits, stock dividends or the
      like).

    

    1.2 Closing.
      The
      purchase and sale of the Common Stock hereunder shall take place at the offices
      of O’Melveny & Myers LLP, 2765 Sand Hill Road, Menlo Park, CA, 94025,
      at 10:00 a.m., on the date hereof, or at such other time and place as the
      Company and the Subscriber mutually agree upon orally or in writing (which
      time
      and place are designated as the “Closing”).
      Prior
      to the Closing, Subscriber must complete and return a duly executed, unaltered
      copy of this Agreement (including the completed Confidential Subscriber
      Questionnaire included in Article VIII hereof).

    

    1.3 Delivery
      of Certificates.
      Within
      five business days after the Closing, the Company shall deliver a facsimile
      copy
      of the Warrants and the certificates free and clear of all restrictive and
      other
      legends (except as expressly provided in Section 2.9 hereof), evidencing the
      number of shares of Common Stock indicated below such Subscriber’s name on its
      signature page hereto, registered in the name of such Subscriber or its
      custodian as indicated on the Subscriber’s signature page hereto; provided,
      however, that originals of the same are delivered to the Subscribers within
      ten
      business days after the Closing. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    II. REPRESENTATIONS,
      WARRANTIES AND COVENANTS OF SUBSCRIBER

    

    Each
      Subscriber hereby, for itself and no other Subscriber, represents, warrants
      and
      covenants to the Company as follows:

    

    2.1 The
      Subscrib-er recog-nizes and acknowledges that the purchase of the Common Stock
      and the Warrants involves a high degree of risk including, but not limited
      to,
      the following: (i) an invest-ment in the Company- is highly specula-tive, and
      only Subscribers who can afford the loss of their entire invest-ment should
      consid-er investing in the Company and the Common Stock and the Warrants; (ii)
      the Sub-scriber may not be able to liqui-date its invest-ment; (iii)
      trans-fer-ability of the Common Stock and the Warrants is ex-tremely limit-ed;
      (iv) in the event of a disposition of the Common Stock or the Warrants, the
      Sub-scriber could sustain the loss of its entire investment; and (v) the Company
      has not paid any dividends on its Common Stock since inception and does not
      anticipate the payment of dividends in the foreseeable future. 

    

    2.2 The
      Subscriber is an “accredited investor” as such term is defined in Rule 501 of
      Regula-tion D promulgated under the Securities Act of 1933, as amended (the
      “Securities
      Act”),
      as
      indicated by the Subscriber’s re-sponses to the questions contained in Article
      VIII here-of which responses are true and correct as of the date hereof, and
      that the Subscriber is able to bear the economic risk of an invest-ment in
      the
      Company for an indefinite period of time, has no need for liquidity, and can
      afford a complete loss of its investment in the Common Stock and the Warrants.
      After giving effect to the purchase of the Common Stock and the Warrants
      requested to be purchased by Subscriber hereunder, Subscriber represents and
      warrants that Subscriber neither individually nor as a member of a group (except
      as permitted by Rule 13d-5(b)(2) promulgated under the Securities Exchange
      Act
      of 1934, as amended (the “Exchange
      Act”)),
      shall own more than 19.9% of the Company’s outstanding Common Stock or voting
      power. Such Subscriber is not a registered broker-dealer under Section 15 of
      the
      Exchange Act.

     

    2.3 The
      Subscriber hereby acknowledges and represents that (i) the Subscriber is
      knowledgeable, sophisticated and has experience in making, and is qualified
      to
      make, decisions with respect to investments representing an investment decision
      like that involved in the purchase of the Common Stock and has prior investment
      experience, including in-vestment in -securities which are non-listed,
      unregistered and/or not traded on the NASDAQ Global or Capital Market or listed
      on the American Stock Exchange (“AMEX”); (ii) the Subscriber recog-nizes the
      highly specu-lative nature of this invest-ment, that an investment in the Common
      Stock and the Warrants involves a significant degree of risk, that the Company’s
      financial condition has been and continues to be weak and the Company’s auditors
      have included explanatory paragraphs in the Company’s audited financial
      statements for the fiscal years ended December 31, 2004 and 2005 indicating
      substantial doubt as to the Company’s ability to continue as a going concern;
      (iii) Subscriber acknowledges that it has read and understands the disclosure
      by
      the Company in its Quarterly Report on Form 10-Q for the three months ended
      March 31, 2006, filed with the Commission on May 17, 2006, that the Company
      estimated that its cash on hand to continue operations would only last through
      the middle of July 2006, and that the Company has informed the Subscribers
      that
      its current cash available for operations will last through the end July 2006;
      (iv) Subscriber recognizes that the market price of the Company’s common stock
      has been and continues to be extremely volatile and has in fact declined
      substantially in recent weeks, and Subscriber has carefully evaluated the risks
      of an investment in the Common Stock and the Warrants; and (v) the Sub-scriber
      is able to bear the economic risk of an investment in the Common Stock and
      the
      potential loss of its entire investment, which risk the Subscrib-er hereby
      as-sumes.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    2.4 The
      Subscriber hereby acknowledges that it has carefully reviewed this Agreement
      and
      the following documents filed by the Company with the Securities and Exchange
      Commission (the “SEC”
or
      the
“Commission”,
      and
      such documents, the “SEC
      Reports”):
      Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed
      with the SEC on March 31, 2006 (the “2005
      10-K”),
      the
      Quarterly Report for the three months ended March 31, 2006 (filed with the
      SEC
      on May 17, 2006) and the Current Reports on Form 8-K filed with the SEC on
      January 6, 2006, January 18, 2006, March 30, 2006, May 1, 2006 and May 11,
      2006
      as well as any future filings that the Company makes with the SEC under the
      Exchange Act prior to the Closing. The Subscriber further represents that the
      Subscriber has been fur-nished by the Company during the course of this
      transac-tion with all information regarding the Company which the Subscriber,
      its investment advisor, attorney and/or accountant has requested or de-sired
      to
      know or which is otherwise relevant to an investment decision, has been
      af-forded the oppor-tuni-ty to ask ques-tions of and receive answers from duly
      autho-rized offi-cers or other represen-tatives of the Company- concern-ing
      the
      terms and condi-tions of the sale of Common Stock and Warrants as contemplated
      by this Agreement, and has received any addi-tional infor-mation which the
      Subscriber or its advisors or agents has requested.

    

    2.5 (a) The
      Subscriber has relied solely upon the information provided by the Company in
      making the decision to invest in the Common Stock and the Warrants. The
      Subscriber is familiar with and understands the rights to which Subscriber
      is
      entitled to under this Agreement. In evaluating the suitability of an investment
      in the Company, the Subscriber has not relied upon any representation or other
      information (whether oral or written) from the Company, or any agent, employee
      or Affiliate (as defined below) of the Company other than as set forth in this
      Agreement or resulting from Subscriber’s own independent investigation.
      Subscriber understands and acknowledges that nothing in this Agreement or any
      other materials provided to Subscriber in connection with the purchase of the
      Common Stock and the Warrants constitutes investment, tax or legal advice.
      To
      the extent deemed necessary or advisable by Subscriber in his/her/its sole
      discretion, the Subscriber has retained, at his/her/its sole expense, and relied
      upon appropriate professional advice regarding the investment, tax and legal
      merits and consequences of this Agreement and its purchase of the Common Stock
      and the Warrants hereunder. “Affiliate” shall mean, with respect to any Person
      (as defined below), any other Person controlling, controlled by or under direct
      or indirect common control with such Person (for the purposes of this definition
      “control,” when used with respect to any specified Person, shall mean the power
      to direct the management and policies of such Person, directly or indirectly,
      whether through ownership of voting securities, by contract or otherwise; and
      the terms “controlling” and “controlled” shall have meanings correlative to the
      foregoing).

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (b) The
      Subscriber represents that no Common Stock, Warrants or other securities of
      the
      Company were offered or sold to it by means of any form of general solicitation
      or general advertising, and in connection therewith the Subscriber did not:
      (A)
      receive or review any advertisement, article, notice or other communication
      published in a newspaper or magazine or similar media or broadcast over
      television or radio whether closed circuit, or generally available; or (B)
      attend any seminar meeting or industry or conference whose attendees were
      invited by any general solicitation or general advertising.

    

    2.6 The
      Subscriber hereby acknowledges that the purchase and sale of the Common Stock
      and the Warrants is intend-ed to be exempt from the registra-tion requirements
      of Section 5 of the Securities Act pursu-ant to Regula-tion D. The Subscriber
      shall- not sell or other-wise trans-fer the Common Stock, the Warrants and
      the
      shares of Common Stock issuable upon the exercise of the Warrants (collectively,
      the “Securities”)
      unless
      such transfer is regis-tered under the Securities Act or unless an exemption
      from such registra-tion is available. The Subscriber understands that if
      required by the laws or regulations or any applicable jurisdiction, the offer
      and sale of the Securities contemplated hereby will be submitted to the
      appropriate authorities of such state(s) for registration or exemption therefrom
      and will be specifically subject to the receipt of such registration or
      exemption. 

    

    2.7 The
      Subscriber understands and acknowledges that the Securities have not been
      registered under the Securities Act in reliance upon a claimed exemption under
      the provisions of the Securities Act which depends, in part, upon the
      Subscriber’s investment intention and the truth and accuracy of, and
      Subscriber’s compliance with, the representations, warranties, acknowledgments
      and covenants of Subscriber set forth herein. In this connection, the Subscriber
      hereby represents that the representations, warranties, acknowledgments and
      covenants of Subscriber set forth herein are true and accurate, Subscriber
      will
      comply with the covenants set forth herein, and the Subscrib-er is purchasing
      the Securities for the Subscriber’s own ac-count for in-vest-ment purposes only
      and not with a view toward the resale or dis-tri-bu-tion to others and has
      no
      contract, undertaking, agreement or other arrangement, in existence or
      contemplated, to sell, pledge, assign or otherwise transfer the Securities
      to
      any other individual or corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or subdivision thereof) or other entity
      of any kind (each, a “Person”).
      The
      Subscriber also represents that it was not formed for the purpose of purchasing
      the Common Stock. The Subscriber has no current plans to effect a “change of
      control” of the Company, as such term is understood in Rule 13d of the Exchange
      Act.

    

    2.8 The
      Subscriber understands that the Securities will not be registered or available
      for sale in the public markets except as specifically provided herein, and
      Rule
      144 promul-gated under the Securities Act (“Rule
      144”)
      requires, among other conditions, a one-year holding period of the Company
      prior
      to the resale (in limited amounts) of secu-rities acquired in a non-public
      offering without having to satisfy the regis-tration requirements under the
      Securities Act. The Sub-scriber understands and hereby acknowl-edges that the
      Company is under no obli-ga-tion to register the Securities under the Securities
      Act or any state secu-ri-ties or “blue sky” laws or assist the Subscriber in
      obtaining an exemption from various registration requirements, other than as
      set
      forth in Article VI herein and shall comply with any sale or distribution
      requirements applicable to each such Subscriber under the Securities Act or
      any
      applicable state securities or “blue sky” laws.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    2.9 (a)
      The
      Subscriber consents to the placement of a legend on any certificate evidenc-ing
      the Securities substantially as set forth below, that such Securities have
      not
      been regis-tered under the Securities Act or any state securities or “blue sky”
laws and setting forth or referring to the restrictions on transfer-ability
      and
      sale thereof contained in this Agree-ment. The Sub-scriber is aware that the
      Company will make a notation in its appro-priate records and with its transfer
      agent with respect to the restrictions on the transfer-ability of the
      Securities. 

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
      STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
      RESALE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
      THE
      SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
      IN
      FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, THAT
      REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
      SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES
      ACT.

     

     

    (b)
       In
      connection with the re-sale of the shares of Common Stock sold pursuant to
      this
      Agreement (and the shares of Common Stock issuable upon the exercise of the
      Warrants) pursuant to an effective registration statement (as contemplated
      by
      Article VI hereof) where Subscriber is listed as a “selling stockholder”, upon
      receipt of legal opinion in a form reasonably acceptable to the Company as
      well
      as required supporting documentation (appropriate broker’s and Seller’s
      representation letter, etc.), the Company shall cause its transfer agent to
      promptly remove the legend set forth above, but only with respect to the number
      of shares actually being sold and any certificate issued for shares not sold
      pursuant to such effective registration statement shall contain the legend
      set
      forth above.

    

    2.10 The
      Subscriber agrees to supply the Company, as soon as practical but in no event
      later than five days after the Subscriber receives the request therefore from
      the Company, with such additional information concerning the Subscriber as
      the
      Company reasonably deems necessary or advisable.

    

    2.11 The
      Subscriber hereby represents and warrants (i) that the address of the Subscriber
      furnished by Subscriber on the signa-ture page hereof is the Subscriber’s
      principal busi-ness address (ii) the Subscriber has full right, power, authority
      and capacity (corporate, personal, statutory and other-wise) to execute,
      deliver, and perform this Agreement and to purchase the Securities and has
      taken
      all action necessary to authorize the execution, delivery and performance of
      this Agreement; and (iii) this Agreement constitutes the legal, valid and
      binding obligation of the Subscriber, enforce-able against the Subscriber in
      accordance with its terms, except as enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
      creditors’ and contracting parties’ rights generally and except as
      enforceability may be subject to limitations of public policy, general
      principals of equity (regardless of whether such enforceability is considered
      at
      law or equity).

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    2.12 If
      the
      Subscriber is a corporation, partnership, limited liability company, trust,
      employee benefit plan, individual retire-ment account, Keogh Plan, or other
      entity (a) it is authorized and qualified to become a Subscriber in the Company
      and the Person signing this Agreement on behalf of such entity has been duly
      authorized by such entity to do so and (b) it is duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization.

    

    2.13 The
      Subscriber acknowledges that if it is a Registered Representa-tive of a National
      Association of Securities Dealers, Inc. (“NASD”)
      member
      firm, it must give such firm the notice required by the NASD Rules of Fair
      Practice, receipt of which must be acknowl-edged in accordance with such
      rules.

    

    2.14 The
      Subscriber understands, acknowledges and agrees with the Company that, there
      can
      be no assurance that the Subscriber will be able to sell or dispose of the
      Securities. It is understood that in order not to jeopardize the Offering’s
      exempt status under Section 4(2) of the Securities Act and Regulation D, in
      addition to any other restrictions on transfer set forth herein, the Company
      may, at a minimum, require any transferee to fulfill the Subscriber suitability
      requirements thereunder and make the representations, warranties and covenants
      of Subscriber hereunder.

    

    2.15
       The
      Subscriber understands, acknowledges and agrees with the Company that, except
      as
      otherwise set forth herein, the Subscription hereunder is irrevocable by the
      Subscriber, that, except as required by law, the Subscriber is not entitled
      to
      cancel, terminate or revoke this Agreement or any agreements of the Subscriber
      hereunder and that this Agreement and such other agreements shall be binding
      upon and inure to the benefit of the parties and their heirs, executors,
      administrators, successors, legal representatives and permitted assigns.

    

    2.16 
      The
      Subscriber agrees that during the period from the date that Subscriber was
      first
      contacted with respect to the sale of the Securities contemplated by this
      Agreement (the “First
      Date”)
      through the effective date of the registration statement filed by the Company
      pursuant to Section 6.2 hereof, the Subscriber will not directly or indirectly,
      through related parties, affiliates or otherwise sell "short" or "short against
      the box" (as those terms are generally understood) any equity security of the
      Company or take any action with respect to any equity security of the Company
      which would violate the Securities Act or the rules and regulations promulgated
      thereunder and from the First Date through the Closing has not and will not
      take
      any action the intent or reasonably foreseeable effect of which is to reduce
      the
      trading price of the Common Stock. 

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    2.17 Each
      Subscriber represents and warrants that, except as otherwise disclosed on
      Schedule 2.17 hereto, from the First Date up through the execution of this
      Agreement, the Subscriber did not, directly or indirectly, execute and Short
      Sales (as defined below) or engage in any other trading in the Common Stock
      or
      any derivative security thereof. The term “Short Sales” means all “short sales”
as defined in Rule 200 of Regulation SHO promulgated under the Exchange Act.
      

    

    2.18 If
      the
      Subscriber is purchasing the Securities in a fiduciary capacity for another
      Person or entity, including without limitation a corporation, partnership,
      trust
      or any other entity, the Subscriber has been duly authorized and empowered
      to
      execute this Agreement and all other subscription documents, and such other
      Person or entity fulfills all the requirements for purchase of the shares as
      such requirements are set forth herein, concurs in the purchase of the
      Securities and agrees to be bound by the obligations, representations,
      warranties and covenants contained herein. Upon request of the Company, the
      Subscriber will provide true, complete and current copies of all relevant
      documents creating the Subscriber, authorizing its investment in the Company
      and/or evidencing the satisfaction of the foregoing.

    

    2.19 No
      authorization, approval, consent or license of any person is required to be
      obtained for the purchase of the Securities
      by
      the
      Subscriber, other than as have been obtained and are in full force and effect.
      The execution and delivery of this Agreement does not, and the consummation
      of
      the transactions contemplated hereby will not, result in any violation of or
      constitute a default under Subscriber’s charter, bylaws or other organizational
      documents, as applicable, or material agreement or other instrument to which
      the
      Subscriber is a party or by which the Subscriber or any of its properties are
      bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
      judgment, order, decree, statute, rule or regulation to which the Subscriber
      or
      any of its businesses or properties is subject.

    

    2.20 The
      representations, warranties and agreements of the Subscriber contained herein,
      in the Confidential Subscriber Questionnaire and in any other writing delivered
      in connection with the transactions contemplated hereby shall be true and
      correct in all respects on and as of the Closing as if made on and as of such
      date and shall survive the execution and delivery of this Agreement and the
      purchase of the Securities. Subscriber agrees to notify the Company as promptly
      as possible of any change in any of the foregoing information until such time
      as
      the Subscriber has sold all of its Securities.

    

    2.21 The
      Subscriber hereby covenants with the Company not to make any sale of the Common
      Stock under the Registration Statement without causing the prospectus delivery
      requirement under the Securities Act to be satisfied, and further agrees to
      comply with reasonable requests of the Company or its transfer agent to provide
      additional information and representations concerning such sale. 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    2.22 Subscriber
      acknowledges the following disclosure, which is set forth herein as required
      pursuant to Section 25102(a) of the California Corporate Securities Law of
      1968:

     

    “THE
      SALE
      OF THE COMMON STOCK THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
      WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
      ISSUANCE OF THE COMMON STOCK OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
      CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
      OF THE COMMON STOCK IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102,
      OR
      25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
      AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED,
      UNLESS THE SALE IS SO EXEMPT.”

    

    2.23 Neither
      the Subscriber nor any of its Affiliates are an adverse party to the Company
      in
      any lawsuit involving the Company.

    

    III. REPRESENTATIONS,
      WARRANTIES AND COVENANTS BY AND OF THE COMPANY

    

    The
      Company hereby represents and warrants to each Subscriber,
      except
      as
      set forth on a Schedule of Exceptions (the “Schedule
      of Exceptions”)
      furnished to Subscriber prior to execution hereof and attached hereto as Exhibit
      A, that as of the Closing: 

    

    3.1 Organization,
      Good Standing and Qualifica-tion; Subsidiaries.
      (a) The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the jurisdiction of its incorporation and has full
      corporate power and authority to conduct its business as currently conducted.
      The Company is not in violation of any of the provisions of its certificate
      of
      incorporation or bylaws, except to the extent that any such violation would
      not
      be reasonably likely to result in a Material Adverse Effect (as defined below).
      The Company is duly qualified as a foreign corporation to do business and is
      in
      good standing in every jurisdiction in which the property owned or leased by
      it
      or the nature of the business conducted by it makes such qualification
      necessary, except to the extent that the failure to be so qualified or in good
      standing would not reasonably be expected to have, individually or in the
      aggregate, (i) a material adverse effect on the legality, validity or
      enforceability of this Agreement, (ii) a material adverse effect on the
      Company’s ability to perform in any material respect on a timely basis its
      obligations under this Agreement; or (iii) a material adverse effect on the
      business, operations, condition (financial or otherwise), assets, or results
      of
      operations of the Company as a whole (any of (i), (ii) or (iii), a “Material
      Adverse Effect”).
      

     

    (b) The
      Company has no direct or indirect Subsidiaries (as defined below) other than
      those listed in the SEC Reports (as defined below). Except as disclosed in
      the
      SEC Reports and as disclosed on Schedule 3.1(b), the Company owns, directly
      or
      indirectly, all of the capital stock or comparable equity interests of each
      Subsidiary free and clear of any and all Liens (as defined below), and all
      the
      issued and outstanding shares of capital stock or comparable equity interests
      of
      each Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights. The term “Subsidiary”
means
      any “significant Subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
      promulgated by the Commission under the Exchange Act.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    3.2 Capitalization.
      

     

    (a)
      The
      authorized capital stock of the Company consists of 120,000,000 shares of common
      stock, of which 87,895,332 shares were issued and outstanding as of June 30,
      2006, and 5,000,000 shares of preferred stock, none of which are issued or
      outstanding. All of the securities issued by the Company have been issued in
      accordance with all applicable federal and state securities laws. Except as
      set
      forth on Schedule 3.2 hereof, there are no other options, warrants, calls,
      rights, commitments or agreements of any character to which the Company is
      a
      party or by which either the Company is bound or obligating the Company to
      issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
      sold, repurchased or redeemed, any shares of the capital stock of the Company
      or
      obligating the Company to grant, extend or enter into any such option, warrant,
      call, right, commitment or agreement. Except as set forth on Schedule 3.2
      hereof, there are no preemptive rights or rights of first refusal or similar
      rights which are binding on the Company permitting any Person to subscribe
      for
      or purchase from the Company shares of its capital stock pursuant to any
      provision of law, the Company’s Certificate of Incorporation as in effect on the
      date hereof (the “Certificate
      of Incorporation”)
      or the
      Company’s By-laws, as in effect on the date hereof (the “By-laws”)
      or by
      agreement or otherwise. Except as set forth on Schedule 3.2 hereof, there are
      no
      securities or instruments (including, without limitation, any warrants or
      convertible debentures) containing anti-dilution or similar provisions that
      will
      be triggered by the issuance of the Common Stock as described in this Agreement.
      

     

    (b)
       The
      Common Stock and Warrants to be issued at the Closing, and the Common Stock
      issuable upon exercise of the Warrants issued at the Closing have been duly
      authorized and, when issued, delivered and paid for in the manner set forth
      in
      this Agreement and the Warrants, will be duly authorized, validly issued, fully
      paid and non-assessable and free and clear of all Liens (as defined below)
      imposed by the Company other than restrictions on transfer provided for in
      this
      Agreement or by applicable law. For purposes hereof, “Liens”
shall
      mean and include security interests, mortgages, liens, pledges, charges,
      easements, reservations, restrictions, rights of way, servitudes, options,
      rights of first refusal, community property interests, equitable interests,
      restrictions of any kind and all other encumbrances, whether or not relating
      to
      the extension of credit or the borrowing of money.

     

    3.3 Authorization;
      Enforceability.
      The
      Company has all requisite corporate right, power and authority to enter into
      this Agreement and to consummate the transactions contemplated hereby. All
      corporate action on the part of the Company, its directors and stockholders
      necessary for the authorization, execution, delivery and performance of this
      Agreement by the Company, the authorization, sale, issuance and delivery of
      the
      Securities contemplated herein and the performance of the Company’s obligations
      hereunder has been taken (other than filings as may be required to be made
      with
      the Commission, the NASD and AMEX and with any state or foreign blue sky or
      securities regulatory authority, which filings will be made on or prior to
      the
      Closing or, for those filings which by their terms may be made post-Closing,
      such filings will be made post-Closing within the time period prescribed for
      such filings). This Agreement has been duly executed and delivered by the
      Company and constitutes a legal, valid and binding obligation of the Company,
      enforceable against the Company in accordance with its terms, except as
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting creditors’ and contracting
      parties’ rights generally and except as enforceability may be subject to
      limitations of public policy, general principals of equity (regardless of
      whether such enforceability is considered at law or equity) and except as the
      indemnification agreements of the Company in Section 6.7 hereof may be legally
      unenforceable. 

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    3.4 No
      Conflict; Governmental and Other Consents. 

    

    (a) The
      execution and delivery by the Company of this Agreement and the consumma-tion
      of
      the transactions contemplated hereby will not result in the violation of any
      law, statute, rule, regulation, order, writ, injunction, judgment or decree
      of
      any court or governmental authority to or by which the Company or any Subsidiary
      is bound, or of any provision of the Certificate of Incorporation or By-laws
      of
      the Company or any Subsidiary, and will not conflict with, or result in a breach
      or violation of, any of the terms or provisions of, or constitute (with due
      notice or lapse of time or both) a default under, any lease, loan agreement,
      mortgage, security agreement, trust indenture or other agreement or instrument
      to which the Company or any Subsidiary is a party or by which it is bound or
      to
      which any of its properties or assets is subject, nor result in the creation
      or
      imposition of any lien upon any of the properties or assets of the Company
      or
      any Subsidiary where such violation, breach, default or imposition is reasonably
      likely to result in a Material Adverse Effect.

    

    (b) Except
      as
      set forth on Schedule 3.4(b), no consent, approval, authorization or other
      order
      of any federal, state, local or other governmental authority or other
      third-party is required to be obtained by the Company or any Subsidiary in
      connection with the authorization, execution and delivery of this Agreement
      or
      with the authorization, issue and sale of the Securities, except such filings
      as
      may be required to be made with the Commission, the NASD and AMEX and with
      any
      state or foreign blue sky or securities regulatory authority, which filings
      will
      be made on or prior to the Closing or, for those filings which by their terms
      are to be made post-Closing, such filings will be made post-Closing within
      the
      time period prescribed for such filings.

    

    3.5 Litigation.
      Other
      than as disclosed in the SEC Reports, there is no pending or, to the actual
      knowledge of the Company, threatened legal or governmental proceedings to which
      the Company is a party which is reasonably expected to result in a Material
      Adverse Effect or which would or might reasonably be expected to materially
      adversely affect the Company’s ability to perform its obligations under this
      Agreement. Neither the Company, nor any director or officer thereof, is or
      has
      been the subject of any Action involving a claim of violation of or liability
      under federal or state securities laws or a claim of breach of fiduciary duty,
      except as disclosed in the SEC Reports. There has not been, and to the knowledge
      of the Company, there is not pending or contemplated, any official investigation
      by the Commission involving the Company or any current director or officer
      of
      the Company. The Company has not received any stop order or other order
      suspending the effectiveness of any registration statement filed by the Company
      under the Exchange Act or the Securities Act.

     

    
      
         

      

      
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    3.6 SEC
      Reports.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it under the Securities Act and the Exchange Act,
      including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the
      one-year period preceding the date hereof (or such shorter period as the Company
      was required by law to file such material) (the foregoing materials, including
      the exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “SEC Reports”) on a timely basis or has
      received a valid extension of such time of filing and has filed any such SEC
      Reports prior to the expiration of any such extension. Except to the extent
      of
      any subsequent correction filed prior to the date hereof (and a copy of which
      has been heretofore provided to the Purchasers), as of their respective dates,
      the SEC Reports complied in all material respects with the requirements of
      the
      Securities Act and the Exchange Act, as applicable, and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company included
      in the SEC Reports, as subsequently amended and restated (provided such
      amendments, if any, have been heretofore provided to the Subscribers), complied
      in all material respects with applicable accounting requirements and the rules
      and regulations of the Commission with respect thereto as in effect at the
      time
      of filing. Such financial statements have been prepared in accordance with
      United States generally accepted accounting principles applied on a consistent
      basis during the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company as of and for the dates thereof and the
      results of operations and cash flows for the periods then ended, subject, in
      the
      case of unaudited statements, to normal, immaterial, year-end audit
      adjustments.

    

    3.7 Investment
      Company.
      The
      Company is not, and will not after the consummation of the offering of the
      Securities contemplated by this Agreement be, an “investment company” or an
      Affiliate of an “investment company” within the meaning of such term under the
      Investment Company Act of 1940, as amended.

    

    3.8 Intellectual
      Property.
      Except
      as set forth in the SEC Reports, the Company owns or possesses adequate and,
      to
      its knowledge, enforceable rights to use all material patents, patent
      applications, trademarks, service marks, trade names, logos, corporate names,
      copyrights, trade secrets, processes, mask works, licenses, inventions,
      formulations, technology and know-how and other intangible property currently
      used in the conduct of its business (the "Proprietary
      Rights").
      Except as set forth in the SEC Reports, the Company has taken commercially
      reasonable measures to protect all of the Company’s Proprietary Rights. Except
      as set forth in the SEC Reports, the Company has not received any notice of,
      and
      there are not any facts known to the Company which indi-cate the existence
      of
      (i) any infringe-ment or mis-appro-pria-tion by any third party of any of the
      Proprietary Rights, which infringement or mis-appro-pria-tion would reasonably
      be expected to have a Material Adverse Effect, (ii) any claim by a third party
      contesting the validity of any of the Propriet-ary Right-s, other than claims
      that would not reasonably be expected to have a Material Adverse Effect or
      (iii)
      any infringement, misappropriation or violation by the Company or any Subsidiary
      or, to the Company’s knowledge, any of their employ-ees, of any Propriet-ary
      Rights of third parties that would be reasonably expected to have a Material
      Adverse Effect. Except as set forth in the SEC Reports, to the Company's
      knowledge, no infringe-ment, illicit copying, misappropriation or viola-tion
      of
      any intellectual property rights of any third party has occurred by the Company
      with respect to any products currently being sold by the Company or with respect
      to any products current-ly under develop-ment by the Company or with respect
      to
      the conduct of the business of the Company as currently conducted. Except as
      set
      forth in the SEC Reports, to the Company's knowledge, no infringe-ment, illicit
      copying, misappropriation or viola-tion of any intellectual property rights
      of
      any third party will occur by the Company as a result of the sale by the Company
      of any products current-ly under develop-ment by the Company should such
      products receive the applicable regulatory approval for commercial sale. Except
      as set forth in the SEC Reports, the Company is not aware that any of its
      employees are obligated under any contract (including licenses, cove-nants
      or
      commit-ments of any nature) or other agreement, or subject to any judg-ment,
      decree or order of any court or adminis-trative agency, that the Company
      believes would materially interfere with the use of the employee's best efforts
      to promote the interests of the Company or that would conflict with the
      busi-ness of the Company as currently conducted. To the Company's knowl-edge,
      neither the execution and delivery of this Agree-ment, nor the carry-ing on
      of
      the business of the Company by the employ-ees of the Company, nor the conduct
      of
      the business of the Company, as currently conducted, will conflict with or
      result in a breach of the terms, condi-tions or provisions of, or constitute
      a
      default under, any contract, covenant or instrument under which any such
      employee is now obli-gated.

     

    
      
         

      

      
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    3.9 Private
      Offering.
      Neither
      the Company nor any Person acting on the Company’s behalf has sold, offered to
      sell or solicited any offer to buy the Securities by means of any form of
      general solicitation or advertising. Neither the Company, any of its Affiliates
      nor any Person acting on the Company's behalf has, directly or indirectly,
      at
      any time within the past six months, made any offer or sale of any security
      or
      solicitation of any offer to buy any security under circumstances that would
      eliminate the availability of the exemption from registration under Regulation
      D
      under the Securities Act in connection with the offer and sale of the Securities
      as contemplated hereby. 

    

    3.10 Transactions
      With Officers and Directors.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company is presently a party to any transaction with the Company (other than
      for
      services as officers or directors), including any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing for
      rental of real or personal property to or from, or otherwise requiring payments
      to or from any officer or director, or to the knowledge of the Company, any
      entity in which any officer or director has a substantial interest or is an
      officer, director, trustee or partner, in each case in excess of $60,000 other
      than (i) for payment of salary or consulting fees for services rendered, (ii)
      reimbursement for expenses incurred on behalf of the Company and (iii) for
      other
      employee benefits, including stock option agreements under any stock option
      plan
      of the Company. 

     

    
      
         

      

      
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    3.11 Sarbanes-Oxley;
      Internal Accounting Controls.
      The
      Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are applicable to it as of the Closing Date except where the failure
      to
      comply would no be reasonably likely to result in a Material Adverse Effect.
      The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed (or
      caused to de designed) such disclosure controls and procedures to ensure that
      material information relating to the Company was made known to the certifying
      officers by others within those entities, during the period in which the
      Company’s most recently filed periodic report under the Exchange Act was
      prepared. The Company’s certifying officers have evaluated the effectiveness of
      the Company’s disclosure controls and procedures as of the end of the period
      covered by the Company’s most recently filed periodic report under the Exchange
      Act (the “Evaluation
      Date”).
      The
      Company disclosed in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the Company’s internal controls (as such term is defined in Item
      307(b) of Regulation S-K under the Exchange Act).

    

    3.12 Brokers,
      Etc.
      Neither
      the Company nor any of its officers has retained any broker, financial advisor
      or consultant, finder, placement agent, investment banker, bank or other Person
      with respect to the transactions contemplated by this Agreement other than
      RBC
      Capital Markets (“RBC”);
      provided, however, the Company is subject to the terms of that certain
      engagement letter, dated as of December 16, 2005, by and between the Company
      and
      Paramount BioCapital.

    

    3.13 Listing
      Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
      Act, and the Company has taken no action designed to, or which to its knowledge
      is likely to have the effect of, terminating the registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that
      the Commission is contemplating terminating such registration. Except as set
      forth on Schedule 3.13 hereof, the Company has not, in the 12 months preceding
      the date hereof, received notice from the AMEX to the effect that the Company
      is
      not in compliance with the listing or maintenance requirements of the AMEX.
      The
      issuance and sale of the shares of Common Stock under this Agreement does not
      contravene the rules and regulations of the AMEX, and no approval of the
      shareholders of the Company thereunder is required for the Company to issue
      and
      deliver to the Subscribes the shares of Common Stock sold under this
      Agreement.

    

    3.14 Representations
      Complete.
      None of
      the representations or warranties made by the Company in this Agreement (except
      as modified by the SEC Reports taken as a whole and the Schedule Exceptions)
      contains any untrue statement of a material fact, or omits to state any material
      fact necessary in order to make the statements contained herein or therein,
      in
      the light of the circumstances under which made, not misleading. No event or
      circumstance has occurred or information exists with respect to the Company
      or
      its business, properties, prospects, operations or financial conditions, which,
      under applicable law, rule or regulation, requires public disclosure or
      announcement by the Company but which has not been so publicly announced or
      disclosed.

     

    
      
         

      

      
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    3.15 Material
      Changes.
      Since
      March 31, 2006, except as disclosed in the SEC Reports and as set forth in
      Section 3.15 of the Disclosure Schedule, (i) there has been no event, occurrence
      or development that has had a Material Adverse Effect, (ii) the Company has
      not
      incurred any liabilities (contingent or otherwise) other than (A) trade payables
      and accrued expenses incurred in the ordinary course of business, (B)
      liabilities not required to be reflected in the Company’s financial statements
      pursuant to GAAP or required to be disclosed in filings made with the Commission
      and (C) expenses incurred in connection with the transactions contemplated
      hereunder, (iii) the Company has not altered its method of accounting, (iv)
      the
      Company has not declared or made any dividend or distribution of cash or other
      property to its stockholders or purchased, redeemed or made any agreements
      to
      purchase or redeem any shares of its capital stock (other than the repurchase
      at
      cost of shares of unvested or restricted stock as permitted under the Company’s
      stock option or stock purchase plan upon termination of employment or service)
      and (v) the Company has not issued any equity securities to any officer,
      director or Affiliate, except pursuant to existing Company stock purchase or
      stock option plans. 

    

    3.16 Form
      S-3 Eligibility.
      The
      Company is eligible to register the Common Stock for resale by the Subscribers
      using a registration statement on Form S-3 promulgated under the Securities
      Act.

    

    3.17 Reasonably
      Equivalent Value.
      The
      Board of Directors has determined (after internal review and discussions with
      its advisors) that the terms of the Shares offered hereunder represent the
      reasonably equivalent value with respect to the sale of the Shares. This
      Agreement and the transactions contemplated thereby were the result of arms'
      length negotiations among the Company and each of the Subscribers.

    

    3.18 Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, reasonably be
      likely to have a Material Adverse Effect, the Company has filed all necessary
      federal, state and foreign income and franchise tax returns and has paid or
      accrued all taxes shown as due thereon, and the Company has no knowledge of
      a
      material tax deficiency which has been asserted or threatened against the
      Company.

    

    3.19 Foreign
      Corrupt Practices.
      Neither
      the Company, nor to the knowledge of the Company, any agent or other person
      acting on behalf of the Company, has (i) directly or indirectly, used any funds
      for unlawful contributions, gifts, entertainment or other unlawful expenses
      related to foreign or domestic political activity, (ii) made any unlawful
      payment to foreign or domestic government officials or employees or to any
      foreign or domestic political parties or campaigns from corporate funds, (iii)
      failed to disclose fully any contribution made by the Company (or made by any
      person acting on its behalf of which the Company is aware) which is in violation
      of law or (iv) violated in any material respect any provision of the Foreign
      Corrupt Practices Act of 1977, as amended.

     

    
      
         

      

      
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    3.20 Certain
      Registration Matters.
      Assuming the accuracy of each of the Subscriber’s representations and
      warranties, the offer and sale of the Securities by the Company to the
      Subscribers under this Agreement is exempt from the registration requirements
      of
      the Securities Act. Except as described in Schedule 3.20, the Company has not
      granted or agreed to grant to any Person any rights (including “piggy back”
registration rights) to have any securities of the Company that are currently
      outstanding registered with the Commission or any other governmental authority
      that have not been satisfied.

    

    

    IV. TERMS
      OF SUBSCRIPTION; CONDITIONS TO OBLIGATIONS OF THE COMPANY

    

    4.1 The
      Company’s obligation to complete the sale and issuance of the Common Stock and
      the Warrants and deliver the Common Stock and the Warrants to the Subscriber
      at
      the Closing shall be subject to the following conditions, any one or more of
      which may be waived in writing by the Company: 

     

    (a)
      Receipt
      of Purchase Price.
      The
      Company shall have received the full amount of the purchase price for the Common
      Stock being purchased hereunder at the Closing the in United States dollars
      and
      in immediately available funds, by wire transfer to the account or accounts
      designated by the Company for such purposes as set forth on Schedule I hereto.
      

    

    (b) Representations
      and Warranties Correct; Covenants.
      The
      representations, warranties, and acknowledgements made by the Subscriber in
      this
      Agreement shall be true and correct when made and shall be true and correct
      on
      and as of the Closing, and all undertakings, agreements and covenants of the
      Subscriber required to be fulfilled prior to the Closing shall have been
      performed or complied with.

    

    (c) Questionnaire.
      Each
      Subscriber shall have completed, executed and delivered to the Company the
      Confidential Subscriber Questionnaire set forth in Article VIII of this
      Agreement, which Questionnaire shall be true and correct as of the Closing
      and
      shall be satisfactory to the Company in its sole discretion.

    

    (d) No
      Legal Order Pending.
      There
      shall not then be in effect any legal or other order enjoining or restraining
      the transactions contemplated by this Agreement.

    

    (e) No
      Law
      Prohibiting or Restricting Sale.
      The
      sale of the Common Stock and the Warrants shall not be prohibited or restricted
      by any applicable law, regulation or governmental order.

    

    V. CONDITIONS
      TO OBLIGATIONS OF THE SUBSCRIBER

    

    5.1 Subscriber’s
      obligations to purchase the Common Stock and the Warrants at the Closing is
      subject to the fulfillment on or prior to the Closing of the following
      conditions, any or all of which conditions may be waived in writing by each
      Subscriber to the extent permitted by law:

     

    
      
         

      

      
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    (a) Representations
      and Warranties Correct; Survival.
      The
      representations and warranties made by the Company in Article III hereof shall
      be true and correct in all material respects when made (except for such
      representations and warranties that are qualified by their terms by a reference
      to materiality, which representations and warranties as so qualified shall
      be
      true and correct in all respects and for any representation or warranty that
      speaks as of a specific date, which shall be true and correct in all material
      respects as of such date), and shall be true and correct in all material
      respects on the Closing with the same force and effect as if they had been
      made
      on and as of the Closing (except for any representation or warranty that speaks
      as of a specific date, which shall be true and correct in all material respects
      as of such date). The representations and warranties made by the Company in
      Article III hereof shall survive until the first anniversary of the
      Closing.

     

    (b) Covenants.
      All
      covenants, agreements and conditions contained in this Agreement to be performed
      by the Company on or prior to the Closing shall have been performed or complied
      with in all material respects.

    

    (c) No
      Legal Order Pending.
      There
      shall not then be in effect any legal or other order enjoining or restraining
      the transactions contemplated by this Agreement.

    

    (d) No
      Law
      Prohibiting or Restricting Sale.
      There
      shall not be in effect any law, rule or regulation prohibiting or restricting
      such sale or requiring any consent or approval of any person which shall not
      have been obtained to issue the Common Stock (except as otherwise provided
      in
      this Agreement).

    

    (e) Legal
      Opinion.
      Counsel
      for the Company, O’Melveny & Myers LLP shall have furnished to the
      Subscriber, an opinion, dated as of the date of the Closing, in the form
      previously provided to RBC, addressed to each of the Subscribers and
      RBC.

    

    (f) Filing
      of Listing Notice.
      The
      Company shall have filed the required notice with AMEX to sell the Securities
      pursuant to this Agreement. 

    

    VI. REGISTRATION
      RIGHTS

    

    6.1 As
      used
      in this Agreement, the following terms shall have the following
      meanings:

    

    (a) “Business
      Day”
shall
      mean a day Monday through Friday on which banks are generally open for business
      in New York, New York.

    

    (b) “Holder”
shall
      mean the Subscriber and any Person holding Registrable Securities or any person
      to whom the rights under Article VI have been transferred in accordance with
      Section 6.10 hereof.

     

    
      
         

      

      
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    (c) The
      term
“Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by such Registration Statement,
      and all other amendments and supplements to the Prospectus, including
      post-effective amendments, and all material incorporated by reference or deemed
      to be incorporated by reference in such Prospectus.

    

    (d) The
      terms
“register,”
      “registered”
and
      “registration”
refer
      to the registration effected by preparing and filing a registration statement
      in
      compliance with the Securities Act, and the declaration or ordering of the
      effectiveness of such registration statement.

    

    (e) “Registrable
      Securities”
shall
      mean the Common Stock sold pursuant to this Agreement and the shares of Common
      Stock issuable upon the exercise of the Warrants; provided,
      however,
      that
      such Common Stock shall only be treated as Registrable Securities if and only
      for so long as they (A) have not been disposed of pursuant to a registration
      statement declared effective by the Commission; (B) have not been sold in a
      transaction exempt from the registration and prospectus delivery requirements
      of
      the Securities Act so that all transfer restrictions and restrictive legends
      with respect thereto are removed upon the consummation of such sale; (C) are
      held by a Holder or a permitted transferee pursuant to Section 6.10; or (D)
      have not become eligible for sale pursuant to Rule 144(k) (or any successor
      thereto) under the Securities Act. 

    

    (f) “Registration
      Expenses”
shall
      mean all expenses incurred by the Company in complying with Section 6.2
      hereof, including, without limitation, all registration, qualification and
      filing fees, printing expenses, escrow fees, fees and expenses of counsel for
      the Company, blue sky fees and expenses and the expense of any special audits
      incident to or required by any such registration, and the reasonable fees and
      expenses of one legal counsel for all Holders in connection with the
      Registration Statement, not to exceed $3,000.

    

    (h) “Selling
      Expenses”
shall
      mean all underwriting discounts and selling commissions applicable to the sale
      of Registrable Securities and all fees and expenses of legal counsel and other
      advisors for any Holder, except for the fees and expenses of such legal counsel
      of the Holders as is set forth in the definition of “Registration Expenses”
above.

    

    6.2 Subject
      to the terms herein, the Company will, as soon as practicable following the
      Closing but not later than 60 days following the Closing (the “Filing
      Date”),
      (a)
      subject to receipt of necessary information from, and reasonable cooperation
      by,
      the Holder, file a registration statement with the SEC (the “Registration
      Statement”)
      on the
      appropriate form to allow the resale of the Registrable Securities, and use
      its
      reasonable best efforts, subject to receipt of necessary information from,
      and
      reasonable cooperation by, the Holder, to have such Registration Statement
      declared effective by the SEC prior to the date which is 90 days after the
      Filing Date; and (b) subject to Section 6.8 hereof, cause such Registration
      Statement to remain effective (the “Registration
      Period”)
      until
      the earlier of (i) such date as the holders of the Registrable Securities have
      completed the distribution described in the Registration Statement and (ii)
      at
      such time that such Registrable Securities have become eligible for sale
      pursuant to Rule 144(k) (or any successor thereto) under the Securities Act.
      Thereafter, the Company shall be entitled to withdraw the Registration Statement
      and the Holders shall have no further right to offer or sell any of the Common
      Stock pursuant to the Registration Statement. To the extent permissible, such
      Registration Statement also shall cover, to the extent allowable under the
      Securities Act and the rules promulgated thereunder (including Rule 416 under
      the Securities Act), such indeterminate number of additional shares of Common
      Stock resulting from stock splits, stock dividends or similar transactions
      with
      respect to the Registrable Securities.

     

    
      
         

      

      
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    6.3 Should
      (a) the Company fail to file the Registration Statement by the Filing Date
      for
      any reason, (b) the Registration Statement not be declared effective by the
      SEC
      within 90 days after the Filing Date for any reason, or (c) the Registration
      Statement be filed and declared effective, but the effectiveness of such
      Registration Statement be suspended for any reason for more than an aggregate
      of
      90 days (whether consecutive or non-consecutive) in the aggregate during any
      12-month period during the Registration Period (each a “Registration Default”),
      then the Company will issue each Subscriber (on a pro-rata basis), as liquidated
      damages and not as a penalty, a warrant, with the same terms and conditions,
      included exercise price, as the Warrants, to purchase a number of shares of
      Common Stock equal to 1% of the shares of Common Stock issued to Subscribers
      pursuant to this Agreement for each 30 day period during which a Registration
      Default continues beyond the aforementioned periods up to a maximum in
      liquidated damages of no more than 5% of such shares of Common Stock issued
      to
      Subscribers pursuant to this Agreement for all Registration Defaults in the
      aggregate, and no further liquidated or other damages will be owed pursuant
      to
      this provision or pursuant to this Agreement; provided, however, that for
      purposes of this Section 6.3, no day shall be counted for purposes of this
      Section 6.3 on which performance of the Company is prevented by reason of
      closure or other unavailability of the SEC or U.S. federal government due to
      weather, attack, war or other act of God. 

    

    6.4 All
      Registration Expenses incurred in connection with any registration,
      qualification, exemption or compliance pursuant to Section 6.2 shall be borne
      by
      the Company. All Selling Expenses relating to the sale of the Common Stock
      registered by or on behalf of the Holder shall be borne by such
      Holder.

    

    6.5 In
      the
      case of the registration, qualification, exemption or compliance effected by
      the
      Company pursuant to this Agreement, the Company shall, upon reasonable request,
      inform each Holder as to the status of such registration, qualification,
      exemption and compliance. At its expense the Company shall: 

    

    (a) Not
      less
      than four trading days prior to the filing of a Registration Statement or any
      related prospectus or any amendment or supplement thereto, the Company shall
      furnish to the Holders copies of the “Selling Stockholders” section of such
      document, the “Plan of Distribution” and any risk factor contained in such
      document that addresses the transactions contemplated by this Agreement or
      the
      Holders, as proposed to be filed which documents will be subject to the review
      of such Holders. The Company shall not file a Registration Statement or any
      such
      prospectus or any amendments or supplements thereto that does not contain the
      disclosure listing such Holder as a “Selling Stockholder” except to the extent
      that any Holder has failed to provide all required information to the Company
      within four trading days prior to such filing.

     

    
      
         

      

      
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    (b) subject
      to Section 6.8 hereof, use its best efforts to keep such registration, and
      any
      qualification, exemption or compliance under state or federal securities laws
      which the Company determines to obtain, continuously effective until the
      termination of the Registration Period; and 

    

    (c) advise
      the Holders as soon as practicable (and, in the case of the filing of any
      registration statement or post-effective amendment thereto under (i)(A) below,
      not less than three trading days prior to such filing) and (if requested by
      any
      such Person) confirm such notice in writing no later than one trading day
      following the day:

    

    (i) (A)
      when
      the Registration Statement or any amendment thereto has been filed with the
      Commission and when the Registration Statement or any post-effective amendment
      thereto has become effective when the Commission notifies the Company whether
      there will be a “review” of such Registration Statement and whenever the
      Commission comments in writing on such Registration Statement; and (B) with
      respect to each Registration Statement or any post-effective amendment, when
      the
      same has become effective;

    

    (ii) of
      any
      request by the Commission or any other federal or state governmental entity
      for
      amendments or supplements to the Registration Statement or the prospectus
      included therein or for additional information;

    

    (iii) of
      the
      issuance by the Commission of any stop order suspending the effectiveness of
      the
      Registration Statement or the initiation of any proceedings for such
      purpose;

    

    (iv) of
      the
      receipt by the Company of any notification with respect to the suspension of
      the
      qualification of the Registrable Securities included therein for sale in any
      jurisdiction or the initiation or threatening of any proceeding for such
      purpose; and

    

    (v) of
      the
      happening of any event that requires the making of any changes in the
      Registration Statement or the prospectus so that, as of such date, the
      statements therein are not misleading and do not omit to state a material fact
      required to be stated therein or necessary to make the statements therein (in
      the case of the prospectus, in the light of the circumstances under which they
      were made) not misleading;

    

    (d) make
      every reasonable effort to avoid the issuance of, or, if issued, obtain the
      withdrawal of any order suspending the effectiveness of any Registration
      Statement at the earliest possible time or any suspension of the qualification
      (or exemption from qualification) of any of the Registrable Securities for
      sale
      in any jurisdiction, at the earliest practicable moment;

     

    
      
         

      

      
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    (e) at
      each
      Holder’s written request, furnish to each Holder, without charge, at least one
      conformed copy of such Registration Statement and any post-effective amendment
      thereto, including any financial statements and schedules, and, if the Holder
      so
      requests in writing, all exhibits (including those incorporated by reference)
      in
      the form filed with the Commission;

    

    (f) during
      the Registration Period, deliver to each Holder, without charge, as many copies
      of the prospectus included in such Registration Statement and any amendment
      or
      supplement thereto as such Holder may reasonably request in writing in order
      to
      facilitate the public sale or other disposition of all or any of the Common
      Stock by Holder; and the Company consents to the use, consistent with the
      provisions hereof and applicable laws, rules or regulations, of the prospectus
      or any amendment or supplement thereto by each of the selling Holders of
      Registrable Securities in connection with the offering and sale of the
      Registrable Securities covered by the prospectus or any amendment or supplement
      thereto. In addition, upon the reasonable request of the Holder and subject
      in
      all cases to confidentiality protections reasonably acceptable to the Company,
      the Company will meet with a Holder or a representative thereof at the Company’s
      headquarters to discuss all information relevant for disclosure in the
      Registration Statement covering the Registrable Securities, and will otherwise
      cooperate with any Holder conducting an investigation for the purpose of
      reducing or eliminating such Holder’s exposure to liability under the Securities
      Act, including the reasonable production of information at the Company’s
      headquarters;

    

    (g) prior
      to
      any public offering of Registrable Securities pursuant to any registration
      statement, register or qualify or obtain an exemption for offer and sale under
      the securities or blue sky laws of such jurisdictions as any such Holders
      reasonably request in writing and do any and all other reasonable acts or things
      reasonably necessary or advisable to enable the offer and sale in such
      jurisdictions of the Registrable Securities covered by such Registration
      Statement, provided, however, that
      the
      Company shall not for any such purpose be required to (i) qualify to transact
      business as a foreign corporation in any jurisdiction where it is not so
      qualified; (ii) consent to general service of process in any such jurisdiction;
      (iii) subject itself to taxation in any such jurisdiction; (iv) provide any
      undertakings that cause material expense or burden to the Company; or (v) make
      any change to its organizational documents which the Board of Directors of
      the
      Company determines to be contrary to the best interests of the Company and
      its
      stockholders; 

    

    (h) subject
      to Section 6.8 hereof, upon the occurrence of any event contemplated by Section
      6.5(b)(v) above, the Company shall promptly prepare a post-effective amendment
      to the Registration Statement or a supplement to the related prospectus, or
      file
      any other required document so that, as thereafter promptly delivered to
      purchasers of the Registrable Securities included therein, the prospectus will
      not include any untrue statement of a material fact or omit to state any
      material fact necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading; and

     

    
      
         

      

      
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    (i) use
      its
      best efforts to comply with all applicable rules and regulations of the
      Commission, and use its reasonable best efforts to make generally available
      to
      the Holders (which may be satisfied upon filing via EDGAR) not later than 45
      days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after
      the
      end of its fiscal quarter in which the first anniversary date of the effective
      date of the Registration Statement occurs, an earnings statement satisfying
      the
      provisions of Section 11(a) of the Securities Act.

    

    Notwithstanding
      the foregoing, it shall be a condition precedent to the obligations of the
      Company to take any action pursuant to paragraphs (a) through (i) of this
      Section 6.5, that the Subscriber shall furnish to the Company such
      information regarding itself, the Common Stock to be sold by the Subscriber,
      and
      the intended method of disposition of such Securities as shall be required
      to
      effect the registration of the Common Stock, all of which information shall
      be
      furnished to the Company in writing specifically for use in the Registration
      Statement.

    

    6.6 The
      Holders shall have no right to take any action to restrain, enjoin or otherwise
      delay any registration pursuant to Section 6.2 hereof as a result of any
      controversy that may arise with respect to the interpretation or implementation
      of this Agreement. 

     

    6.7 (a) The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, agents, investment advisors,
      partners, members and employees of each of them, each Person who controls any
      such Holder (within the meaning of Section 15 of the Securities Act or Section
      20 of the Exchange Act) and the officers, directors, agents and employees of
      each such controlling Person, to the fullest extent permitted by applicable
      law,
      from and against any and all damages, as incurred, arising out of or relating
      to
      any untrue or alleged untrue statement of a material fact contained in any
      Registration Statement, any Prospectus or any form of prospectus or in any
      amendment or supplement thereto or in any preliminary prospectus, or arising
      out
      of or relating to any omission or alleged omission of a material fact required
      to be stated therein or necessary to make the statements therein (in the case
      of
      any Prospectus or form of prospectus or supplement thereto, in light of the
      circumstances under which they were made) not misleading, except to the extent,
      but only to the extent, that (1) such untrue statements or omissions are based
      solely upon information regarding such Holder furnished in writing to the
      Company by such Holder expressly for use therein, or to the extent that such
      information relates to such Holder or such Holder’s proposed method of
      distribution of Registrable Securities and was reviewed and expressly approved
      in writing by such Holder expressly for use in the Registration Statement,
      such
      Prospectus or such form of Prospectus or in any amendment or supplement thereto
      (it being understood that the Holder has approved Annex A hereto for this
      purpose) or (2) in the case of an occurrence of an event of the type specified
      in Section 6.5(c)(ii)-(v), the use by such Holder of an outdated or defective
      Prospectus after the Company has notified such Holder in writing that the
      Prospectus is outdated or defective and prior to the receipt by such Holder
      of
      the notice contemplated by Section 6.8(a) or an amended or supplemented
      Prospectus, but only if and to the extent that following the receipt of the
      notice contemplated by Section 6.8(a) or the amended or supplemented Prospectus
      the misstatement or omission giving rise to such Loss would have been corrected.
      The Company shall notify the Holders promptly of the institution, threat or
      assertion of any Action (as defined below) of which the Company is aware in
      connection with the transactions contemplated by this Agreement.

     

    
      
         

      

      
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    (b) Each
      Holder will severally, and not jointly, in proportion to the respective number
      of shares included by each such Holder, if Registrable Securities are included
      in the securities as to which such registration, qualification or compliance
      is
      being effected, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless the Company, and each of its officers, directors, agents,
      investment advisors, partners, members and employees to the fullest extent
      permitted by applicable law, from and against any and all Losses, as incurred,
      arising out of or relating to any untrue or alleged untrue statement of a
      material fact contained in any Registration Statement, any Prospectus or any
      form of prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any Prospectus or form of prospectus
      or
      supplement thereto, in light of the circumstances under which they were made)
      not misleading, but only to the extent, that (1) such untrue statements or
      omissions are based solely upon information regarding such Holder furnished
      in
      writing to the Company by such Holder expressly for use therein, or to the
      extent that such information relates to such Holder or such Holder’s proposed
      method of distribution of Registrable Securities and was reviewed and expressly
      approved in writing by such Holder expressly for use in the Registration
      Statement, such Prospectus or such form of Prospectus or in any amendment or
      supplement thereto (it being understood that the Holder has approved Annex
      A
      hereto for this purpose) or (2) in the case of an occurrence of an event of
      the
      type specified in Section 6.5(c)(ii)-(v), the use by such Holder of an outdated
      or defective Prospectus after the Company has notified such Holder in writing
      that the Prospectus is outdated or defective and prior to the receipt by such
      Holder of an Advice or an amended or supplemented Prospectus, but only if and
      to
      the extent that following the receipt of the Advice or the amended or
      supplemented Prospectus the misstatement or omission giving rise to such Loss
      would have been corrected. Notwithstanding anything in this Agreement to the
      contrary, the liability of the Holder pursuant to this Section 6 shall not
      exceed the dollar amount of the proceeds received by such Holder upon the sale
      of Registrable Securities giving rise to such liability. Each Holder shall
      notify the Company promptly of the institution, threat or assertion of any
      Action of which the Holder is aware in connection with the transactions
      contemplated by this Agreement.

     

    
      
         

      

      
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    (c) Each
      party entitled to indemnification under this Section 6.7 (the “Indemnified
      Party”)
      shall
      give notice to the party required to provide indemnification (the “Indemnifying
      Party”)
      promptly after such Indemnified Party has actual knowledge of any claim as
      to
      which indemnity may be sought, provided that the failure of any Indemnified
      Party to give notice as provided herein shall not relieve the Indemnifying
      Party
      of its obligations under this Agreement, unless such failure is materially
      prejudicial to the Indemnifying Party in defending such claim or litigation.
      Subject to provisions hereinafter stated, in case any such action is brought
      against any Indemnified Party and such Indemnified Party seeks or intends to
      seek indemnity from an Indemnifying Party, the Indemnifying Party will be
      entitled to participate in, and, to the extent that it may wish, jointly with
      all other indemnifying parties similarly notified, to assume the defense thereof
      with counsel reasonably satisfactory to such Indemnified Party; provided,
      however, if the defendants in any such action include both the Indemnified
      Party
      and the Indemnifying Party, and the Indemnifying Party and the Indemnified
      Party, based upon the advice of such Indemnified Party’s counsel, shall have
      reasonably concluded that there may be a conflict of interest between the
      positions of the Indemnifying Party and the Indemnified Party in conducting
      the
      defense of any such action or that there may be legal defenses available to
      it
      and/or other indemnified parties which are different from or additional to
      those
      available to the Indemnifying Party, the Indemnified Party or parties shall
      have
      the right to select separate counsel to assume such legal defenses and to
      otherwise participate in the defense of such action on behalf of such
      Indemnified Party or parties. Upon receipt of notice from the Indemnifying
      Party
      to such Indemnified Party of its election so to assume the defense of such
      action and approval by the Indemnified Party of counsel, the Indemnifying Party
      will not be liable to such Indemnified Party under this Section 6.7 for any
      legal or other expenses subsequently incurred by such Indemnified Party in
      connection with the defense thereof unless (i) the Indemnified Party shall
      have employed such counsel in connection with the assumption of legal defenses
      in accordance with the proviso to the preceding sentence (it being understood,
      however, that the Indemnifying Party shall not be liable for the expenses of
      more than one separate counsel, approved by such Indemnifying Party representing
      the Indemnified Parties who are parties to such action, or (ii) the
      Indemnifying Party shall not have employed counsel reasonably satisfactory
      to
      the Indemnified Party to represent the Indemnified Party within a reasonable
      time after notice of commencement of action, in each of which cases the
      reasonable fees and expenses of counsel shall be at the expense of the
      Indemnifying Party. In no event shall any Indemnifying Party be liable in
      respect of any amounts paid in settlement of any action unless the Indemnifying
      Party shall have approved the terms of such settlement; provided
      that such
      approval shall not be unreasonably withheld. 

    

    (d) If
      the
      indemnification provided for in this Section 6.7 is held by a court of competent
      jurisdiction to be unavailable to an Indemnified Party with respect to any
      loss,
      liability, claim, damage or expense referred to therein, then the Indemnifying
      Party, in lieu of indemnifying such Indemnified Party thereunder, shall
      contribute to the amount paid or payable by such Indemnified Party as a result
      of such loss, liability, claim, damage or expense in such proportion as is
      appropriate to reflect the relative fault of the Indemnifying Party on the
      one
      hand and of the Indemnified Party on the other in connection with the statements
      or omissions or inaccuracies in the representations and warranties in this
      Agreement which resulted in such loss, liability, claim, damage or expense
      as
      well as any other relevant equitable considerations. The relative fault of
      the
      Indemnifying Party and of the Indemnified Party shall be determined by reference
      to, among other things, whether the untrue or alleged untrue statement of a
      material fact or the omission to state a material fact or the inaccurate
      representation and/or warranty relates to information supplied by the
      Indemnifying Party or by the Indemnified Party and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      statement or omission. Notwithstanding the foregoing, in no event shall a Holder
      be liable for any such claims, losses, damages or liabilities pursuant to this
      paragraph 6.7(b) in excess of the net proceeds received by such Holder in the
      Offering, except in the event of fraud or intentional misrepresentation by
      such
      Holder.

     

    
      
         

      

      
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    6.8 (a) Notwithstanding
      any other provision of this Agreement, each Holder agrees that, upon receipt
      of
      any notice from the Company of the happening of any event requiring the
      preparation of a supplement or amendment to a prospectus relating to Registrable
      Securities or the filing of an appropriate report with the SEC pursuant to
      the
      Exchange Act, so that, as thereafter delivered to the Holders, such prospectus
      shall not contain an untrue statement of a material fact or omit to state any
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, each Holder will forthwith discontinue disposition
      of
      Registrable Securities pursuant to the registration statement contemplated
      by
      Section 6.2 until its receipt of copies of the supplemented or amended
      prospectus from the Company or confirmation of the filing of such report with
      the SEC by the Company, any such prospectus to be forwarded promptly to the
      Subscriber by the Company, and, if so directed by the Company, each Holder
      shall
      deliver to the Company all copies, other than permanent file copies then in
      such
      Holder’s possession, of the prospectus covering such Registrable Securities
      current at the time of receipt of such notice.

    

    (b) Notwithstanding
      any other provision of this Agreement, each Holder shall suspend, upon request
      of the Company, any disposition of Registrable Securities pursuant to the
      Registration Statement and prospectus contemplated by Section 6.2 during
      any periods not to exceed 90 days in the aggregate within any one 12-month
      period when the Company reasonably determines in good faith that offers and
      sales pursuant thereto should not be made by reason of the presence of material
      undisclosed circumstances or developments with respect to which the disclosure
      that would be required in such a prospectus is premature, would have an adverse
      effect on the Company or is otherwise inadvisable.

    

    (c) As
      a
      condition to the inclusion of its Registrable Securities, each Holder shall
      furnish to the Company such information regarding such Holder and the
      distribution proposed by such Holder as the Company may reasonably request
      in
      writing or as shall be required in connection with any registration,
      qualification or compliance referred to in this Article VI.

    

    (d) Each
      Holder hereby covenants with the Company not to make any sale of the Registrable
      Securities without effectively causing the prospectus delivery requirements
      under the Securities Act to be satisfied.

    

    (e) Each
      Holder acknowledges and agrees that the Registrable Securities sold pursuant
      to
      the Registration Statement described in this Section are not transferable on
      the
      books of the Company unless the stock certificate submitted to the transfer
      agent evidencing such Registrable Securities is accompanied by a certificate
      reasonably satisfactory to the Company to the effect that (i) the
      Registrable Securities have been sold in accordance with such Registration
      Statement and (ii) the requirement of delivering a current prospectus has
      been satisfied.

    

    (f) Each
      Holder agrees not to take any action with respect to any distribution deemed
      to
      be made pursuant to such registration statement which would constitute a
      violation of Regulation M under the Exchange Act or any other applicable rule,
      regulation or law.

    

    (g) At
      the
      end of the period during which the Company is obligated to keep the Registration
      Statement current and effective as described above, the Holders of Registrable
      Securities included in the Registration Statement shall discontinue sales of
      shares pursuant to such Registration Statement upon receipt of notice from
      the
      Company of its intention to remove from registration the shares covered by
      such
      Registration Statement which remain unsold, and such Holders shall notify the
      Company of the number of shares registered which remain unsold immediately
      upon
      receipt of such notice from the Company.

     

    
      
         

      

      
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    6.9 With
      a
      view to making available to the Holders the benefits of certain rules and
      regulations of the Commission which at any time permit the sale of the
      Registrable Securities to the public without registration, the Company shall
      use
      its reasonable best efforts to:

    

    (a) make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144 under the Securities Act, at all times;

    

    (b) file
      with
      the Commission in a timely manner all reports and other documents required
      of
      the Company under the Exchange Act; and 

    

    (c) so
      long
      as a Holder owns any unregistered Registrable Securities, furnish to such
      Holder, upon any reasonable written request, a written statement by the Company
      as to its compliance with Rule 144 under the Securities Act, and of the
      Exchange Act, a copy of the most recent annual or quarterly report of the
      Company, and such other reports and documents of the Company as such Holder
      may
      reasonably request in availing itself of any rule or regulation of the
      Commission allowing a Holder to sell any such securities without
      registration.

     

    6.10 The
      rights to cause the Company to register Registrable Securities granted to the
      Holders by the Company under Section 6.2 may be assigned in full by a
      Holder in connection with a transfer by such Holder of all of its Registrable
      Securities, but only if: (i) such transfer may otherwise be effected in
      accordance with applicable securities laws; (ii) such Holder gives prior
      written notice of the proposed transfer to the Company including the name and
      address of such transferee and a copy of the transfer documents and agreements;
      (iii) such transferee agrees in writing with the Company to be bound by and
      to
      comply with the terms and provisions of this Agreement; (iv) the transferee
      is
      an “accredited investor” as that term is defined in Rule 501 of Regulation D;
      and (v) such transfer is otherwise in compliance with this Agreement. Except
      as
      specifically permitted by this Section 6.10, the rights of a Holder with
      respect to Registrable Securities as set forth herein shall not be transferable
      to any other Person, the Company may impose stop transfer orders with respect
      to
      any such transfer or attempted transfer, and any such transfer or attempted
      transfer shall be null and void.

     

    6.11 The
      Company shall use best efforts to cause all Registrable Securities covered
      by a
      Registration Statement to be listed on each securities exchange, interdealer
      quotation system or other market on which similar securities issued by the
      Company are then listed.

     

    6.12 With
      the
      written consent of the Company and the Holders holding at least a majority
      of
      the Registrable Securities that are then outstanding, any provision of this
      Article VI may be waived (either generally or in a particular instance, either
      retroactively or prospectively and either for a specified period of time or
      indefinitely) or amended and shall be effective against all Holders. Upon the
      effectuation of each such waiver or amendment, the Company shall promptly give
      written notice thereof to the Holders, if any, who have not previously received
      notice thereof or consented thereto in writing.

     

    
      
         

      

      
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    6.13 If
      at any
      time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee benefit plans, then the Company
      shall send to each Holder written notice of such determination and, if within
      fifteen days after receipt of such notice, any such Holder shall so request
      in
      writing, the Company shall include in such registration statement all or any
      part of such Registrable Securities such holder requests to be registered,
      subject to customary underwriter cutbacks applicable to all holders of
      registration rights.

    

    VII. MISCELLANEOUS

    

    7.1 Any
      notice or other communication given hereunder shall be deemed sufficient if
      in
      writing and sent by facsimile, with confirmation, by registered or certified
      mail, return receipt requested, or delivered by hand against written receipt
      therefore or sent by nationally recognized overnight express courier postage
      prepaid, if to the Company: addressed to InSite Vision Incorporated, 965
      Atlantic Avenue, Alameda, California 94501, Attn: Chief Financial Officer,
      Fax:
      (510) 865-5700 and if to the Sub-scrib-er, at the Subscriber’s address or
      facsimile number indi-cated on the signa-ture page of this Agree-ment. Notices
      shall be deemed to have been given or delivered in the case of facsimile, upon
      receipt of confirmation of transmission by the sender, registered or certified
      mail, three days after so mailed, in the case of hand delivery, when so
      delivered against written receipt therefore, and in the case of overnight
      express courier, the day after mailing, except notices of change of address,
      which shall be deemed to have been given or delivered when
      received.

    

    7.2 Except
      as
      otherwise provided above, this Agreement shall not be changed, modified or
      amended except by a writing signed by the parties to be charged, and this
      Agreement may not be discharged except by per-formance in accordance with its
      terms or by a writing signed by the party to be charged.

    

    7.3 This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and to their respective heirs, legal representatives, successors and assigns.
      Neither the Company nor any Subscriber may assign any of their respective rights
      or obligations hereunder without the prior written consent of the other party.
      This Agreement sets forth the entire agreement and under-standing between the
      parties as to the subject matter hereof and merges and supersedes all prior
      dis-cussions, agreements and understandings of any and every nature among
      them.

     

    
      
         

      

      
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    7.4 Upon
      the
      execution and delivery of this Agreement by the Subscriber, this Agreement
      shall
      become a binding obliga-tion of the Subscriber with respect to the purchase
      of
      the Common Stock as herein provided; subject, however, to the right hereby
      reserved to the Company to enter into substantially similar agreements with
      other subscribers and to add and/or delete other Persons as subscribers.

    

    7.5 NOTWITHSTANDING
      THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO,
      THE
      PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
      CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
      WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL
      PROCEEDING IS NECESSARY, THE EXCLUSIVE FORUMS FOR RESOLVING DISPUTES ARISING
      OUT
      OF OR RELATING TO THIS AGREEMENT ARE EITHER THE SUPREME COURT OF THE STATE
      OF
      NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE
      AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY
      CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

    

    7.6 The
      holding of any provision of this Agreement to be invalid or unenforce-able
      by a
      court of competent juris-diction shall not affect any other provi-sion of this
      Agreement, which shall remain in full force and effect. If any provision of
      this
      Agreement shall be declared by a court of competent jurisdiction to be inval-id,
      illegal or incapable of being enforced in whole or in part, such provision
      shall
      be interpreted so as to remain enforceable to the maximum extent permissible
      consistent with applicable law and the remaining condi-tions and provisions
      or
      portions thereof shall neverthe-less remain in full force and effect and
      enforceable to the extent they are valid, legal and en-forceable, and no
      provisions shall be deemed dependent upon any other covenant or provision unless
      so expressed herein.

    

    7.7 It
      is
      agreed that a waiver by either party of a breach of any provision of this
      Agreement shall not operate, or be construed, as a waiver of any subsequent
      breach by that same party.

    

    7.8 The
      parties agree to execute and deliver all such further documents, agreements
      and
      instruments and take such other and further action as may be neces-sary or
      appropriate to carry out the purposes and intent of this Agreement.

    

    7.9 This
      Agreement may be executed in two or more counter-parts each of which shall
      be
      deemed an origi-nal, but all of which shall together constitute one and the
      same
      instrument.

    

    7.10 (a) The
      Subscriber agrees not to issue any public statement with respect to its
      investment or proposed investment in the Company or the terms of any agreement
      or covenant between them and the Company without the Company’s prior written
      consent, except such disclosures as may be required under applicable law or
      under any applicable order, rule or regulation.

     

    
      
         

      

      
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    (b) The
      Company agrees not to disclose the name, address or any other information about
      the Subscriber, except as required by law and to satisfy its obligations under
      Article VI.

    

    7.11 The
      Subscriber represents and warrants that it has not engaged, consented to nor
      authorized any broker, finder or intermediary to act on its behalf, directly
      or
      indirectly, as a broker, finder or intermediary in connection with the
      transactions contemplated by this Agreement. Subscriber hereby severally agrees
      to indemnify and hold harmless the Company from and against all fees,
      commissions or other payments owing to any such person or firm acting on behalf
      of such Subscriber hereunder.

    

    7.12 Each
      Subscriber acknowledges that RBC is acting as a placement agent for the shares
      of Common Stock being offered hereby and will be compensated by the Company
      for
      acting in such capacity. Each Subscriber further acknowledges that RBC has
      acted
      solely as agent of the Company in connection with the offering of the shares
      of
      Common Stock by the Company. Each Subscriber further acknowledges that the
      provisions of this Section 7.12 are for the benefit of and may be enforced
      by
      RBC.

     

    7.13 Nothing
      in this Agreement shall create or be deemed to create any rights in any person
      or entity not a party to this Agreement, except for the holders of Registrable
      Securities and RBC with respect to Section 7.12.

    

    7.14 The
      Company acknowledges and agrees that irreparable damage would occur in the
      event
      that any of the provisions of Article VI of this Agreement were not performed
      in
      accordance with its specific terms or were otherwise breached and that such
      damage would not be compensable in money damages and that it would be extremely
      difficult or impracticable to measure the resultant damages. Accordingly, except
      as otherwise specifically set forth herein, Subscriber shall be entitled to
      an
      injunction or injunctions with respect to the provisions of this Agreement
      and
      to enforce specifically the terms and provisions hereof, in addition to any
      other remedy to which it may be entitled at law or in equity, and the Company
      expressly waives any defense that a remedy in damages would be adequate and
      expressly waives any requirement in an action for specific performance for
      the
      posting of a bond by the Subscriber bringing such action.

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    VIII. CONFIDENTIAL
      SUBSCRIBER QUESTIONNAIRE

    

    The
      Subscriber represents and warrants that it comes within one cate-gory marked
      below, and that for any category marked it has truthfully set forth, where
      applicable, the factual basis or reason the Subscriber comes within that
      category. ALL INFORMATION IN RESPONSE TO THIS PARTS I-IV OF THIS QUESTIONNARE
      WILL BE KEPT STRICTLY CONFIDEN-TIAL except as otherwise required by law or
      as
      necessary for inclusion in the Registration Statement. The undersigned agrees
      to
      furnish any additional information which the Company deems neces-sary in order
      to verify the an-swers set forth below.

     

     

    
      	Category A __	 	The undersigned is an indi-vidual
              (not a part-ner-ship, corpora-tion, etc.) whose individual net worth,
              or
              joint net worth with his or her spouse, pres-ently ex-ceeds
              $1,000,000.
	 	 	 	 
	 	 	 	 
	 	 	 	Explanation. In calculating net worth
              you may
              include equity in personal property and real es-tate, including your
              principal residence, cash, short-term in-vestments, stock and securi-ties.
              Equity in personal prop-erty and real estate should be based on the
              fair
              market value of such property less debt se-cured by such
              prop-erty. 
	 	 	 	 
	Category B __ 	 	The undersigned is an individual
              (not a part-ner-ship, corporation, etc.) who had an income in ex-cess
              of
              $200,000 in each of the two most recent years, or joint in-come with
              his
              or her spouse in excess of $300,000 in each of those years (in each
              case
              in-clud-ing foreign income, tax exempt income and full amount of capital
              gains and losses but excluding any in-come of other family members
              and any
              unreal-ized capital appre-cia-tion) and has a reasonable expec-tation
              of
              reaching the same in-come level in the current year. 
	 	 	 	 
	Category C __ 	 	The undersigned is a director
              or
              executive officer of the Compa-ny which is issuing and sell-ing the
              Securities. 
	 	 	 	 
	Category D __	 	The undersigned is a bank;
              a
              savings and loan associa-tion; insurance company; registered invest-ment
              compa-ny; registered business development company; licensed small business
              invest-ment company (“SBIC”);
              or em-ploy-ee benefit plan within the mean-ing of Title 1 of ERISA
              and (a)
              the investment decision is made by a plan fiducia-ry which is either
              a
              bank, savings and loan associ-ation, insurance company or registered
              invest-ment advisor, or (b) the plan has total assets in excess of
              $5,000,000 or (c) is a self directed plan with invest-ment decisions
              made
              solely by persons that are accred-ited investors. (describe
              entity) 
	 	 	 
	 	 	 

    

     

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

     

    
      	Category E __ 	 	The undersigned is a private
              business development company as defined in section 202(a)(22) of the
              Investment Advi-sors Act of 1940. (describe entity) 
	 	 	 
	 	 	 
	 	 	 	 
	Category F __	 	The undersigned is either
              a
              corpora-tion, part-ner-ship, Massa-chu-setts busi-ness trust, or
              non-profit organi-zation within the meaning of Section 501(c)(3) of
              the
              Internal Revenue Code, in each case not formed for the specif-ic purpose
              of acquiring the Common Stock and with total assets in excess of
              $5,000-,000. (describe entity)
	 	 	 
	 	 	 
	 	 	 	 
	Category G __	 	The undersigned is a trust
              with
              total assets in excess of $5,000,-000, not formed for the spe-cific
              purpose of ac-quiring the Common Stock, where the purchase is di-rect-ed
              by a “sophisticated Subscriber-“ as defined in Regu-lation 506(b)(2-)(ii)
              under the Securities Act. 
	 	 	 	 
	Category H __	 	The undersigned is an entity
              (other
              than a trust) in which all of the equity owners are “accredited investors”
              within one or more of the above catego-ries. If relying upon this category
              alone, each equity owner must com-plete a sepa-rate copy of this
              Agre-ement. (describe entity)
	 	 	 
	 	 	 	 
	Category I __ 	 	The undersigned is not within
              any
              of the cate-go-ries above and is therefore not an accredited
              investor. 

    

     

    The
      undersigned agrees that the undersigned will notify the Company at any time
      on
      or prior to the Closing in the event that the representations and warranties
      in
      this Agreement shall cease to be true, accurate and complete.

    

    Part
      II
 SUITABILITY
      (please
      answer each question)

    

    (a)
      For
      an individual Subscriber, please describe your current employment, including
      the
      company by which you are employed and its principal business:

    ________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    

    

    

    

    (b)
      For
      an individual Subscriber, please describe any college or graduate degrees held
      by you:

    ________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________________

    (c)
      For
      all Subscribers, please state whether you have you participated in other
private
      placements
      before:

    

    YES_______   NO_______

    

    (d)
      If
      your answer to question (d) above was “YES”, please indicate frequency of such
      prior participation in private
      placements
      of:

     

     

    
      	 	 	
               Public
                Companies

            	 	
               Private
                Companies

            	 	
              Public
                or Private
Pharmaceutical
                Companies

            
	Frequently 	 	
               ________

            	 	
               ________

            	 	
               ________

            
	Occasionally 	 	
               ________

            	 	
               ________

            	 	
               ________

            
	Never 	 	
               ________

            	 	
               ________

            	 	
               ________

            

    

      

    (e)
      For
      trust, corporate, partnership and other institutional Subscribers, do you expect
      your current level of income to significantly decrease in the foreseeable
      future:

    

    YES_______   NO_______

    

    (f)
      For
      trust, corporate, partnership and other institutional Subscribers, do you expect
      your total assets to significantly decrease in the foreseeable future:

    

    YES_______   NO_______

    

    (g)
      For
      all Subscribers, do you have any other investments or contingent liabilities
      which you reasonably anticipate could cause you to need sudden cash requirements
      in excess of cash readily available to you: 

    

    YES_______   NO_______

    

    (h)
      For
      all Subscribers, are you familiar with the risk aspects and the non-liquidity
      of
      investments such as the securities for which you seek to subscribe?

    

    YES_______   NO_______

    

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    

    (i)
      For
      all Subscribers, do you understand that there is no guarantee of financial
      return on this investment, that an investment in the Securities is highly
      speculative and risky and that you run the risk of losing your entire
      investment?

    

    YES_______   NO_______

    

    (j)
      For
      all Subscribers, will you have sufficient readily available cash to fund your
      obligation to purchase Securities at the Closing pursuant to your subscription
      if and when the Closing occurs?

    

    YES_______   NO_______

    

    

    Part
      III  MANNER
      IN WHICH TITLE IS TO BE HELD.
      (circle
      one)

    

    (a) Individual
      Ownership

    (b) Community
      Property

    (c) Joint
      Tenant with Right of Survivorship
      (both par-ties must
      sign)

    (d) Partnership*

    (e) Tenants
      in Common

    (f) Company*

    (g) Trust*

    (h) Other

    

    *If
      Securities are being subscribed for by an entity, the attached Certif-icate
      of
      Signatory must also be completed.

     

    Part
      IV  NASD
      AFFILIATION.

    

    Are
      you
      affiliated or associated with an NASD member firm (please check
      one):

    

    Yes
      _________  No
      __________

    

    If
      Yes,
      please describe:

    _________________________________________________________

    _________________________________________________________

    _________________________________________________________

    

    *If
      Subscriber is a registered representative with an NASD member firm, have the
      following acknowledgment signed by the appropriate party:

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    

    The
      undersigned NASD member firm acknowledges receipt of the notice required by
      Article III, Sections 28(a) and (b) of the Rules of Fair Practice.

    

    _________________________________

    Name
      of
      NASD Member Firm

    

    By:
      ______________________________

    Authorized
      Officer

    

    Date:
      ____________________________

    

    

    Part
      V
REGISTRATION
      QUESTIONNAIRE

    

    The
      following questions in this Part V are specifically intended to provide
      information to the Company for the Company's use in the preparation of the
      Registration Statement contemplated by the Subscription Agreement and for
      specific inclusion in such Registration Statement. 

    

    PLEASE
      ANSWER EVERY QUESTION BELOW. If a question is inapplicable to you or your answer
      is in the negative, please so state by inserting “N/A.” If you are in doubt
      whether a particular question requires an affirmative response from you, please
      furnish full particulars so that those persons responsible for preparing the
      Registration Statement contemplated by the Subscription Agreement can determine
      whether any disclosure based on your answer is required. Information requested
      in this questionnaire is as of the date you complete the questionnaire, unless
      otherwise indicated. Your furnishing such information does not necessarily
      mean
      that such information will be disclosed, although it may be disclosed.
You
      are required to promptly provide the Company with any update to the information
      if such information changes after the date hereof.

    

    DEFINITIONS

    

    Your
      answers to this questionnaire should be made upon the basis of the following
      definitions of terms used in this questionnaire:

    

    The
      term
“beneficial
      owner”
of
      a
      security includes any person who, directly or indirectly, through any contract,
      arrangement, understanding, relationship or otherwise has or shares
      (1) voting
      power,
      which
      includes the power to vote, or direct the voting of, such security or
      (2) investment
      power,
      which
      includes the power to dispose or direct the disposition of such security. A
      person may be regarded as having voting power of a security which is owned
      (i)
      by his spouse or minor children or by any of his relatives or his spouse’s
      relatives who share the same home with him, (ii) a partnership of
      which he is a partner or (iii) a corporation of which he is a substantial
      stockholder. A person is also deemed to be the beneficial owner of shares which
      that person has the right to acquire within 60 days, including but not limited
      to any right to acquire through the exercise of an option, through conversion
      of
      a security, pursuant to the power to revoke a trust or pursuant to the automatic
      termination of a trust. Please also disclose any other rights which you have
      to
      acquire securities of the Company on or before August 6, 2006.

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    

    The
      term
“material,”
when
      used to qualify a requirement for the furnishings of information as to any
      subject, limits the information required to those matters about which the
      average prudent investor should reasonably be informed before buying or selling
      the securities of the Company. If you are in doubt as to the materiality of
      certain information, you should relate sufficient facts to enable the Company
      and its advisors to reach a conclusion as to its materiality.

    

    QUESTIONS

    

    QUESTION
      1:

    

    State
      your present position or positions with the Company (if any), including
      membership on any audit, personnel, compensation or similar committee or
      committees; any positions held by you during the previous three years; and
      any
      positions to which you have been elected or appointed but the duties of which
      you have not yet assumed. For each position, list the term or expected term
      of
      office.

    

    ANSWER:

    

    QUESTION
      2:

    

    Other
      than Securities that you will acquire in connection with the
      Offering,
      provide
      below information regarding the equity securities of the Company of which you
      are the “beneficial owner.” Please
      refer to the definition of “beneficial owner,” above.
      Under
      the column “Nature of Ownership,” please indicate amounts of securities for
      which you have (a) sole voting power, (b) shared voting power, (c) sole
      investment power, or (d) shared investment power. If your response covers any
      securities included because you have the right to acquire them on or before
      August 6, 2006, please separately indicate the amount of such securities. Also,
      if you hold more than 5% of the Company’s securities pursuant to a voting trust
      or similar agreement, please separately state the amount of such securities
      held
      or to be held pursuant to the trust or agreement, the duration of the agreement
      and the names and addresses of the voting trustees, outlining briefly their
      voting rights and other powers under the trust or agreement. 

     

    ANSWER
      (attach additional pages if necessary):

    
 

    
      	
               Number
                of
                Securities

            	
               Nature
                of Ownership

            	
               Title
                of
                Securities

            
	 	 	 

    

           

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    QUESTION
      3:

    

    If
      you
      plan to offer your shares of Common Stock through the selling efforts of brokers
      or dealers, describe the terms (and attach copies) of any agreement,
      arrangement, or understanding entered into with broker(s) or dealer(s),
      including volume limitations on sales, parties to the agreement and the
      conditions under which the agreement may be terminated. If known, identify
      the
      broker(s) or dealer(s), which will participate in the offering and state the
      amount to be offered through each.

    

    ANSWER:

    

    QUESTION
      4:

    

    Describe
      below any information known to you, and if none state “none,” pertaining to
      underwriting compensation and arrangements or any dealings between any
      underwriter or related person, member of the NASD or a person associated with
      a
      member of the NASD, and the Company or any controlling stockholder thereof
      since
      January 1, 2002.

     

    ANSWER:

    

    QUESTION
      5:

    

    State
      below whether you or any of your associates are a member of NASD, a controlling
      stockholder of a member, a person associated or affiliated with a member or
      an
      underwriter or related person with respect to the proposed offering. If you
      responded “yes,” describe such relationship:

    

    ANSWER:

    

    

    QUESTION
      6:

    

    Are
      you a
      broker-dealer?

    

    ANSWER:

    

    Yes
      ______ No______
      

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    QUESTION
      7:

    

    If
      you
      are not a broker-dealer, are you affiliated with a broker-dealer?

    

    ANSWER:

    

    Yes
      ______ No______

    

    QUESTION
      8:

    

    If
      you
      are affiliated with a broker-dealer, did you purchase the securities in the
      ordinary course of business?

    

    ANSWER:

    

    Yes
      ______ No______

    

    

    QUESTION
      9:

    

    If
      you
      are affiliated with a broker-dealer, did you have any agreements or
      understandings, directly or indirectly, with any person to distribute the
      securities at the time that you purchased the securities?

    

    ANSWER:

    

    Yes
      ______ No______

    

    

    Please
      note that the Commission takes the position that if you are a broker-dealer,
      you
      are to be identified in the Registration Statement as an underwriter. In the
      “Plan of Distribution,” the Registration Statement will provide substantially as
      follows:

    

    “The
      selling stockholders and any broker-dealers, agents or underwriters that
      participate with the selling stockholders in the distribution of the issued
      and
      outstanding shares of common stock or the shares of stock issuable upon exercise
      of warrants may be deemed to be "underwriters" within the meaning of the
      Securities Act, in which event any commissions received by these broker-dealers,
      agents or underwriters and any profits realized by the selling stockholders
      on
      the resales of the securities may be deemed to be underwriting commissions
      or
      discounts under the Securities Act. If the selling stockholders are deemed
      to be
      underwriters, the selling stockholders may be subject to certain statutory
      and
      regulatory liabilities, including liabilities imposed pursuant to Sections
      11,
      12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.”

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    

    QUESTION
      10:

     

    Are
      their
      specific individuals who have voting or investment control over the
      securities?

     

    ANSWER:

    

    Yes
      ______ No______

    

    If
      you
      answered “yes”, please list the names of such individuals: 

    ____________________________________________________________________________________________________

    
      ____________________________________________________________________________________________________

    

     

    

    The
      answers to the foregoing questions are true and correct to the best of the
      undersigned’s knowledge, information and belief. The undersigned agrees to
      promptly notify the Company in writing in care of Chief Financial Officer,
      InSite Vision Incorporated, 965 Atlantic Avenue, Alameda, California 94501
      of
      (a) any transfer by you of your Common Stock, (b) sales of common stock of
      the
      Company (giving the number of shares sold and the name of the broker-dealer
      used) and (c) any other changes in the answers to this questionnaire that should
      be made as a result of any material development occurring subsequent to the
      date
      hereof.

    

    Dated:
      August 1, 2006.

    

    

    

    ____________________________________

    Signature

    

    

    

    The
      undersigned is informed of the signifi-cance to the Company of the forego-ing
      representa-tions and answers contained in the Confidential Subscriber
      Questionnaire contained in this Article VIII and such answers have been provided
      under the assumption that the Company will rely on them.

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    [SIGNATURE
      PAGE TO FOLLOW]

    
 

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF, the parties have executed this Subscription Agreement as of
      the
      date first above written.  

    

    

    
      	 	 	INSITE VISION INCORPORATED 
	 	 	 
	 	 	By: _____________________ 
	 	 	Name:  S.
              Kumar Chandrasekaran, Ph. D. 
	 	 	Title: President
              and Chief Executive Officer 
	 	 	 
	 	 	[SUBSCRIBER] 
	 	 	 
	 	 	By: _____________________ 
	 	 	Name:___________________ 
	 	 	Title:____________________ 

    

     

     

     

    

    

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    

    CERTIFICATE
      OF SIGNATORY

    

    

    I,____________________________,
      am the____________________________ of ________________________________ (the
      “Entity”).

    

    I
      certify
      that I am empowered and duly autho-rized by the Entity to execute and carry
      out
      the terms of the Subscription Agreement and to purchase and hold the Common
      Stock, and certify further that the Subscription Agree-ment has been duly and
      validly executed on behalf of the Entity and consti-tutes a legal and binding
      obligation of the Entity.

    

    IN
      WITNESS WHEREOF, I have set my hand this 1st day of August, 2006.

    

     

    
      	 	 	 
	 	 	
               (Signature)

            
	 	 	 

    

     

     

    

    
      
         

      

      
        39

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