Document:

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                                                                    EXHIBIT 10.2

                                      ASSET
                           PURCHASE AND SALE AGREEMENT

                                     between

                             CONOCOPHILLIPS COMPANY

                                       and

                         DUKE ENERGY FIELD SERVICES, LP

                                 March 10, 2004

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                                TABLE OF CONTENTS

<TABLE>
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                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
1.   DEFINITIONS........................................................      1
2.   PURCHASE AND SALE..................................................     10
     (A)   PURCHASE AND SALE OF THE ASSETS..............................     10
     (B)   PAYMENT OF PURCHASE PRICE AT CLOSING.........................     10
     (C)   THE CLOSING..................................................     10
     (D)   DELIVERIES AT THE CLOSING....................................     10
     (E)   ALLOCATION OF PURCHASE PRICE.................................     11
3.   REPRESENTATIONS AND WARRANTIES OF SELLER...........................     11
     (A)   ORGANIZATION OF SELLER.......................................     11
     (B)   AUTHORIZATION OF TRANSACTION.................................     11
     (C)   NONCONTRAVENTION.............................................     12
     (D)   BROKERS' FEES................................................     12
     (E)   LEGAL COMPLIANCE.............................................     12
     (F)   ENVIRONMENTAL MATTERS........................................     13
     (G)   TAX MATTERS..................................................     13
     (H)   CONTRACTS....................................................     14
     (I)   LITIGATION...................................................     15
     (J)   EMPLOYEES....................................................     15
     (K)   EMPLOYEE BENEFIT PLANS.......................................     15
     (L)   EASEMENTS....................................................     15
     (M)   CONDUCT OF BUSINESS..........................................     16
     (N)   AFES AND CAPITAL PROJECTS....................................     16
     (O)   SPECIAL WARRANTY OF TITLE....................................     16
     (P)   NO CHANGE IN CONDITION.......................................     16
4.   REPRESENTATIONS AND WARRANTIES OF BUYER............................     16
     (A)   ORGANIZATION OF BUYER........................................     17
     (B)   AUTHORIZATION OF TRANSACTION.................................     17
     (C)   NONCONTRAVENTION.............................................     17
     (D)   BROKERS' FEES................................................     18
     (E)   FINANCIAL CAPABILITY.........................................     18
     (F)   INVESTMENT INTENT............................................     18
5.   PRE-CLOSING COVENANTS..............................................     18
     (A)   GENERAL......................................................     18
     (B)   NOTICES AND CONSENTS.........................................     18
     (C)   OPERATION OF BUSINESS........................................     20
     (D)   FULL ACCESS..................................................     21
     (E)   NOTICE OF DEVELOPMENTS.......................................     21
     (F)   ENVIRONMENTAL MATTERS........................................     21
     (G)   TITLE MATTERS................................................     24
     (H)   CAPITAL EXPENDITURES.........................................     24
     (I)   EXCLUSIVITY..................................................     24
</TABLE>

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<TABLE>
<S>                                                                         <C>
     (J)   CERTAIN EXISTING CONTRACTS...................................     25
     (K)   CASUALTY LOSS................................................     25
6.   CONDITIONS TO OBLIGATION TO CLOSE..................................     25
     (A)   CONDITIONS TO OBLIGATION OF BUYER............................     25
     (B)   CONDITIONS TO OBLIGATION OF SELLER...........................     26
7.   CERTAIN POST-CLOSING OBLIGATIONS...................................     27
     (A)   POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE...................     28
     (B)   SUSPENSE ACCOUNT FUNDS.......................................     29
     (C)   IMBALANCES...................................................     30
     (D)   COOPERATION..................................................     30
     (E)   TAXES........................................................     31
     (F)   ACCESS TO CONTRACTS..........................................     31
     (G)   CUSTOMARY POST-CLOSING CONSENTS..............................     31
     (H)   MISCELLANEOUS EXPENSES.......................................     31
     (I)   BUYER OBLIGATIONS FOR POST-CLOSING CONTRACTS MATTERS.........     32
8.   PURCHASE PRICE ADJUSTMENTS.........................................     33
9.   TERMINATION........................................................     33
     (A)   TERMINATION OF AGREEMENT.....................................     33
     (B)   EFFECT OF TERMINATION........................................     34
10.  ALLOCATION OF RESPONSIBILITIES AND INDEMNITIES.....................     35
     (A)   SELLER EXISTING CONTRACT INDEMNITY OBLIGATION................     35
     (B)   SELLER COVENANT INDEMNITY OBLIGATION.........................     35
     (C)   SELLER REPRESENTATION AND WARRANTY INDEMNITY OBLIGATION......     35
     (D)   BUYER COVENANT INDEMNITY OBLIGATION..........................     36
     (E)   BUYER REPRESENTATION AND WARRANTY INDEMNITY OBLIGATION.......     36
     (F)   BUYER GENERAL INDEMNITY OBLIGATION...........................     36
     (G)   NOTICE OF ASSERTED CLAIMS....................................     36
     (H)   DEFENSE AND PAYMENT OF ASSERTED CLAIMS.......................     37
11.  CLAIM LIMITATIONS..................................................     37
     (A)   EXPRESS NEGLIGENCE...........................................     37
     (B)   SELLER THRESHOLDS AND DEDUCTIBLES............................     37
     (C)   BUYER THRESHOLDS AND DEDUCTIBLES.............................     38
     (D)   EXCLUSIVE REMEDY.............................................     38
     (E)   NO WARRANTY AND DISCLAIMER...................................     38
     (F)   SELLER INDEMNITY LIMITATION..................................     39
     (G)   BUYER REVIEW.................................................     39
12.  EMPLOYEE MATTERS...................................................     40
     (A)   TRANSFER OF COVERED EMPLOYEES................................     40
     (B)   SELLER PLANS.................................................     40
     (C)   NEW ARRANGEMENTS FOR TRANSFERRED EMPLOYEES...................     40
     (D)   WELFARE BENEFITS.............................................     42
     (E)   401(K) PLAN..................................................     43
     (F)   WORKERS' COMPENSATION........................................     43
     (G)   NO RESTRICTIONS ON CHANGES...................................     43
</TABLE>

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<TABLE>
<S>                                                                         <C>
     (H)   CONFLICT.....................................................     43
13.  ARBITRATION........................................................     43
14.  MISCELLANEOUS......................................................     44
     (A)   NO THIRD PARTY BENEFICIARIES.................................     44
     (B)   ENTIRE AGREEMENT.............................................     44
     (C)   SUCCESSION...................................................     44
     (D)   COUNTERPARTS.................................................     44
     (E)   NOTICES......................................................     44
     (F)   GOVERNING LAW................................................     45
     (G)   AMENDMENTS AND WAIVERS.......................................     45
     (H)   SEVERABILITY.................................................     45
     (I)   EXPENSES.....................................................     46
     (J)   CONSTRUCTION.................................................     46
     (K)   INCORPORATION OF EXHIBITS AND SCHEDULES......................     47
     (L)   SALES TAXES..................................................     47
     (M)   WAIVER OF CERTAIN DAMAGES....................................     47
     (N)   PRESS RELEASES AND PUBLIC ANNOUNCEMENTS......................     47
     (O)   LIKE-KIND EXCHANGE...........................................     47
     (P)   ASSIGNMENT...................................................     48
</TABLE>

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           Exhibits and Schedules to Asset Purchase and Sale Agreement
        between ConocoPhillips Company and Duke Energy Field Services, LP
                              dated March 10, 2004

EXHIBIT A     --   Description of Facilities
EXHIBIT A-1   --   Fee Property and Other Real Property
EXHIBIT A-2   --   Easements
EXHIBIT A-3   --   Equipment
EXHIBIT B     --   Environmental Permits
EXHIBIT C     --   Excluded Assets
EXHIBIT D     --   Existing Contracts
EXHIBIT E     --   Intentionally Omitted
EXHIBIT F     --   Covered Employees
EXHIBIT G     --   Form of Conveyance, Assignment and Bill of Sale
EXHIBIT H     --   Matters Excluded From Required Consents
EXHIBIT I     --   Like-Kind Assignments
EXHIBIT J     --   Arbitration
EXHIBIT K     --   Certification of Non-Foreign Status for Entities
EXHIBIT L     --   Phase II Agreed Audit Sites
EXHIBIT M     --   Grama Ridge Map of Personal Property
EXHIBIT N     --   Intentionally Omitted
EXHIBIT O     --   Grama Ridge Transaction Confirmations
EXHIBIT P     --   Fractionation Contract
EXHIBIT Q     --   Grama Ridge Access Agreement

DISCLOSURE SCHEDULE -- Exceptions to Representations, Warranties and Covenants
SECTION 1(A)  --       SELLER'S KNOWLEDGE
SECTION 1(C)  --       CERTAIN ENVIRONMENTAL SITES
SECTION 2(E)  --       ALLOCATION OF PURCHASE PRICE
SECTION 3(C)  --       SELLER'S NONCONTRAVENTION
SECTION 3(E)  --       LEGAL COMPLIANCE
SECTION 3(F)  --       ENVIRONMENTAL MATTERS
SECTION 3(H)  --       CONTRACTS
SECTION 3(I)  --       LITIGATION
SECTION 3(N)  --       AFE'S AND CAPITAL PROJECTS
SECTION 4(C)  --       BUYER'S NONCONTRAVENTION
SECTION 7(B)  --       SUSPENSE ACCOUNT FUNDS

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<PAGE>

                                      ASSET
                           PURCHASE AND SALE AGREEMENT

      THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into
as of March 10, 2004, by and between CONOCOPHILLIPS COMPANY, a Delaware
corporation ("SELLER") and DUKE ENERGY FIELD SERVICES, LP, a Delaware limited
partnership ("BUYER"). BUYER and SELLER are referred to collectively herein as
the "Parties." Certain capitalized terms are used in the Recitals below in the
manner defined in Section 1 below.

                                    RECITALS:

      1.    SELLER is the direct or indirect owner of the Assets (as defined
            herein).

      2.    BUYER desires to purchase and SELLER desires to sell the Assets for
cash.

AGREEMENT:

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

1.    DEFINITIONS.

      "AFE" means an authorization for expenditure or similar authorization or
approval with respect to funding a particular project or matter.

      "Adjustment Time" means 12:01 a.m. (Central Time then in effect) on the
Closing Date.

      "Affiliate" means, when used with respect to a specified Person, any other
Person controlling, directly controlled by or under common control with the
specified Person. 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 whether through the ownership of voting securities or by
contract; and the term "controlled" has the meanings correlative to the
foregoing. Notwithstanding the foregoing, the term "Affiliate" (i) when applied
to BUYER, 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 Duke Energy
Field Services, LLC, a Delaware limited liability company and its subsidiaries
(but excluding Texas Eastern Products Pipeline Company, LLC, a Delaware limited
liability company, TEPPCO Partners L.P., a Delaware limited partnership, and any
Person owned, directly or indirectly, by Texas Eastern Products Pipeline
Company, LLC or TEPPCO Partners, L.P.) and (ii) when applied to SELLER, shall
not include Duke Energy Field Services, LLC, a Delaware limited liability
company or any entities owned, directly or indirectly, by Duke Energy Field
Services, LLC.

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

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      "Allocable Share" means, with respect to any matter relating to the
Facilities, 100% ownership interest in such Facilities; provided, however, with
regard to the Antelope Ridge Gas Processing Plant, Allocable Share shall mean
94.52474%.

      "Antitrust Authorities" has the meaning set forth in Section 5(b).

      "Applicable Law" means any law (statutory, common, or otherwise),
constitution, treaty, convention, ordinance, equitable principle, code, rule,
regulation, executive order, or other similar authority enacted, adopted,
promulgated, or applied by any Governmental Authority, each as amended and now
and hereinafter in effect.

      "Arbitrable Disputes" means any and all disputes, claims, counterclaims,
demands, causes of action and controversies arising out of or relating to this
Agreement (including 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.

      "Asserted Claim" has the meaning set forth in Section 10(g) below.

      "Asserted Environmental Defect" means an Environmental Condition asserted
by BUYER in accordance with Section 5(f) that, as of the time of notice thereof,
is not in compliance with the then existing Environmental Laws.

      "Assets" means all of the SELLER Interests.

      "Assignments" means one or more of a Conveyance, Assignment and Bill of
Sale substantially in the form of Exhibit G, pursuant to which SELLER (and, if
applicable, its Affiliates) will assign the SELLER Interests (in one or a series
of transactions) to BUYER, and BUYER will assume and agree to perform certain
obligations of SELLER (and, if applicable, its Affiliates) as provided in this
Agreement.

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

      "BUYER" has the meaning set forth in the preface above.

      "BUYER Group" means BUYER and all Affiliates of BUYER.

      "BUYER Indemnified Persons" means (i) BUYER and its Affiliates and (ii)
the directors, officers, employees, agents or other representatives of any such
Person described in clause (i).

      "Casualty Loss" shall mean, with respect to all or any portion of the
Facilities, 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 Facilities.

      "Catastrophic Event" means any catastrophe (natural or man-made) or other
similar circumstance, development, event, or occurrence, whereby one or more of
those facilities

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referenced at subsection (ii) of the definition of "Related Properties and
Rights" shall be, or shall reasonably be expected to be, for a period of at
least two months after such catastrophe, circumstance, development, event, or
occurrence, incapable of operating substantially similarly to the manner in
which they were operating immediately before such catastrophe, circumstance,
development, event, or occurrence.

      "Claim Notice" has the meaning set forth in Section 10(g) below.

      "Claims" means any and all claims, demands, suits, causes of action,
losses, damages, Liabilities, fines, penalties, and costs (including attorneys'
fees and costs of litigation), whether known or unknown, that are brought by or
owed to any third Person, including any applicable Governmental Authority.

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

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

      "Code" means the Internal Revenue Code of 1986, as amended.

      "Confidentiality Agreement" means that certain Confidentiality Agreement,
dated July 30, 2003 between BUYER and SELLER.

      "Costs" means, other than Claims, all costs and damages and other amounts
related to the relevant matter; provided, however, that notwithstanding the
foregoing, the term "Costs" shall include reasonable attorney's fees, court
costs, interest, fines, penalties, assessments, and levies.

      "Covered Employee" means an individual who is, immediately before the
Closing Date, an employee of SELLER Group principally employed in connection
with the Facilities and whose name is on Exhibit F.

      "Customary Post-Closing Consents" has the meaning set forth in Section
3(c) below.

      "Defensible Title" means, as to the Assets, such title to the Assets that
vests BUYER with indefeasible title in and to the Assets free and clear of all
Security Interests, other than Permitted Liens.

      "Disclosure Schedule" means the disclosure schedule prepared by SELLER
with respect to SELLER's disclosures to this Agreement and by BUYER with respect
to BUYER'S disclosures to this Agreement, together with any supplements or
amendments thereto, provided that (i) with respect to any supplements and
amendments made thereto by SELLER, such supplements and amendments shall,
without prior approval of BUYER, only relate to additional disclosures of
immaterial matters that arise in the Ordinary Course of Business attributable to
the time period from and after the date of this Agreement to the Closing Date
and (ii) with respect to any supplements and amendments made thereto by BUYER,
such supplements and amendments shall, without prior approval of SELLER, only
relate to additional disclosures of immaterial matters that arise in the
Ordinary Course of Business attributable to the time period from and after the
date of this Agreement to the Closing Date. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
(but not sub-paragraphs) contained in this Agreement.

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      "Easement" means an easement, right-of-way, or state or federal land use
permits or permissions.

      "Environmental Arbiter" has the meaning set forth in Section 5(f).

      "Environmental Audit" means the environmental audit of the Facilities to
be performed by BUYER that is to include a Phase I audit and, to the extent
provided in Section 5(f) below, a Phase II audit.

      "Environmental Condition" means any circumstance where there is an actual
or threatened failure to comply with the Environmental Standard.

      "Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and the Resource Conservation and
Recovery Act of 1976, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
permits, licenses, franchises, and charges thereunder) of Governmental
Authorities concerning pollution, waste management, or protection of the
environment, including laws relating to emissions, discharges, releases, or
threatened releases of Hazardous Substances, pollutants, contaminants, or
chemical, industrial, or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Substances, pollutants, contaminants, or chemical,
industrial, or toxic materials or wastes.

      "Environmental Notice" has the meaning set forth in Section 5(f)(iii)
below.

      "Environmental Permits" means all governmental (whether federal, state or
local) and regulatory permits, licenses, orders, authorizations, and related
instruments or rights used or held for use in connection with the ownership,
operation or use of the Assets issued under Environmental Laws.

      "Environmental Standard" means the minimum regulatory standard necessary
to achieve compliance with Environmental Laws.

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

      "ERISA Affiliate" means, with respect to any entity, trade, or business,
any other entity, trade, or business that is a member of a group described in
Code Sec. 414(b), (c), (m), or (o) or ERISA Sec. 4001(b) that includes the first
entity, trade, or business, or that is a member of the same "controlled group"
as the first entity, trade, or business pursuant to ERISA Sec. 4001(a)(14).

      "Excluded Assets" means those assets listed on Exhibit C, which assets
will not be transferred to BUYER pursuant to this Agreement.

      "Existing Contracts" means: (i) the contracts and other agreements listed
on Exhibit D; and (ii) any other written and fully-executed contracts entered
into in the Ordinary Course of Business in accordance with the terms of this
Agreement between the date of this Agreement and the Closing Time which
constitute a part of the SELLER Interests.

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      "Facilities" means, except for the Excluded Assets, the gas plants,
pipelines and Related Properties and Rights that are either specifically or
generally described in Exhibits A, A-1, A-2 and A-3, including, without
limitation, the map attached to Exhibit A.

      "Facilities Constitutive Documents" means the Construction and Operating
Agreement dated October 28, 1981 concerning the Antelope Ridge Gas Processing
Plant, as amended prior to the date hereof.

      "Fractionation Contract" means that Fractionation Contract between Duke
Energy NGL Services, LP and Gulf Coast Fractionators, a Texas general
partnership, attached hereto as Exhibit P.

      "Governmental Authority" means any federal, state, or local governmental
or quasi-governmental authority, body, department, agency, or court, including
any political subdivision thereof.

      "Grama Ridge" has the meaning set forth in Section 7(j) below.

      "Grama Ridge Access Agreement" means that Access Agreement attached hereto
as Exhibit Q.

      "Grama Ridge Transaction Confirmations" mean those transaction
confirmations attached hereto as Exhibit O.

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

      "Hazardous Substance" means (a) any substance, whether solid, liquid, or
gaseous, (i) that is listed, defined, or regulated as a "hazardous material,"
"hazardous waste," "solid waste," "hazardous substance," "toxic substance,"
"pollutant," or "contaminant," or otherwise classified as hazardous or toxic, in
or pursuant to any Environmental Law, (ii) that is or contains asbestos,
polychlorinated biphenyls, radon, urea formaldehyde foam insulation, explosives,
or radioactive materials, or (iii) that causes or threatens to cause
contamination or a hazard to the environment or to the health or safety of
persons on any properties or any adjacent property that may require action in
order to prevent or mitigate such contamination or hazard, or (b) any petroleum,
hydrocarbons, hydrocarbon products, natural gas liquids, crude oil or any
components, fractions, or derivatives thereof, oil or gas exploration or
production waste, natural gas, or synthetic gas, or any mixtures thereof.

      "Hazardous Substance Handling" means the offsite disposal, storage,
treatment, recycling, or handling of Hazardous Substances generated, stored,
treated, or disposed of or used on and removed from, any of the Facilities prior
to the Closing Date.

      "Imbalance Payable" means that quantity of natural gas or natural gas
liquids as is owed by SELLER with respect to the SELLER Interests under
agreements relating to the Facilities and attributable to time periods prior to
the Adjustment Time.

      "Imbalance Receivable" means that quantity of natural gas or natural gas
liquids as is owed SELLER with respect to the SELLER Interests under agreements
relating to the Facilities and attributable to time periods prior to the
Adjustment Time.

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      "includes" has the meaning set forth in Section 14(j) below.

      "Indemnified Party" has the meaning set forth in Section 10(g) below.

      "Indemnifying Party" has the meaning set forth in Section 10(g) below.

      "Independent Accountants" has the meaning set forth in Section 7(a) below.

      "Knowledge" means either actual knowledge, or knowledge that would result
from a reasonable internal investigation of the type described in the
immediately succeeding sentence, of (i) with respect to SELLER, current
employees of SELLER listed on Section 1(a) of the Disclosure Schedule and (ii)
with respect to BUYER, current employees of BUYER. The investigation
contemplated by this definition would involve making reasonable inquiries of
personnel employed by, and reviews of books and records owned by and in the
possession of, the Party (including its Affiliates) to which the Knowledge
relates, but would not involve an audit or any inquiry of any non-affiliated
Person, including other owners and/or prior operators of the Facilities or
Governmental Authorities.

      "Legal Right" means the legal authority and right, without risk of
criminal or civil Liability to Governmental Authorities, such that the
contemplated conduct would not constitute a violation of Applicable Laws.

      "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.

      "Material Adverse Effect" means any circumstances, developments, events,
or occurrences that has or could reasonably be expected to have an adverse
effect on the operation of any of the Facilities or the earnings or financial
condition with respect thereto that (insofar as attributable to the SELLER
Interests) individually or in the aggregate would exceed $500,000, in each case
excluding effects attributable to the general state of the energy industry,
including natural gas and natural gas liquid prices, or to general economic
conditions in the United States, including prevailing interest rates and stock
market levels.

      "Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).

      "New Arrangements" has the meaning set forth in Section 12(c) below.

      "Ordinary Course of Business" means the ordinary conduct of business
consistent with past custom and practice (including with respect to quantity and
frequency).

      "Parties" has the meaning set forth in the preface above.

      "Permitted Liens" means (a) liens for Taxes not yet due or that are being
contested in good faith by appropriate proceedings; (b) carrier's,
warehousemen's', mechanics', materialmen's, repairmen's, employees',
contractors', operators' or other similar liens or charges securing the payment
of expenses not yet due and payable that were incurred in the Ordinary Course of
Business of the Facilities for which BUYER or a third Person is responsible for
payment, that are not delinquent and that will be paid and discharged in the
ordinary course of business or, if delinquent, that are being contested in good
faith with any

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action to foreclose on or attach any Assets on account thereof properly stayed;
(c) deposits to secure performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds, or other obligations of
a like nature incurred in the Ordinary Course of Business of the Facilities; (d)
any obligations or duties to any Governmental Authority arising in the Ordinary
Course of Business with respect to any franchise, grant, license or permit
constituting a part of the Facilities, and all Applicable Laws, rules,
regulations and orders of any Governmental Authority; (e) Easements encumbering
all or any part of the Facilities that do not materially interfere with the
ownership or operation of the Facilities; (f) required third party consents to
assignments or similar agreements listed on Section 3(c) of the Disclosure
Schedule; (g) all rights to consent by, required notices to, or filings with
Governmental Authorities in connection with the sale or conveyance of the
Facilities or interests therein, including Customary Post-Closing Consents; and
(h) the Facilities' Constitutive Documents.

      "Person" means an individual or entity, including a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, a Governmental
Authority, or any other entity.

      "Phase I" means the phase of an environmental assessment that (a) is
consistent with ASTM standards for Phase I environmental site assessments (ASTM
E1527-97) and (b) involves a determination of the Facilities' compliance with
Environmental Laws with respect to matters other than soil and groundwater
contamination.

      "Phase II" means the phase of an environmental assessment of soil,
groundwater or other environmental media that is consistent with prudent
industry practices for Phase II environmental site assessments (ASTM E1903-97).

      "Phase II Audit Sites" has the meaning set forth in Section 5(f) below.

      "Purchase Price" means $75,350,000.00.

      "Qualified Intermediary " has the meaning set forth in Section 1.1031(k) -
1(g)(4)(v) of regulations promulgated by the United States Treasury Department
and codified in Part 1 of Title 26 of the Code of Federal Regulations.

      "Reasonable Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved expeditiously; provided, however, that an obligation to use
Reasonable Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would incur any unreasonable out-of-pocket
cost or expense in connection therewith.

      "Related Properties and Rights" means (i) all of the fee property and
leases described on Exhibit A-1 hereto, and Easements permits and licenses
described on Exhibit A-2 hereto, in each case, relating to, or used in
connection with the ownership or operation of, the Facilities; (ii) all of the
buildings, structures, stations, processing facilities, residue gas pipelines,
natural gas liquids pipelines, line pack, spare parts and hydrocarbons inventory
(to the extent stored or located at any of the Facilities as of the Closing
Date), machinery, vehicles, equipment (including the equipment described on
Exhibit A-3 hereto), compressors, tanks, pumps, pipe, engines, heaters, valves,
meters, liquid handling facilities, liquids, tools, fire equipment, parts,
supplies, equipment, computers, software assignable at no out-of-pocket cost to
SELLER (including data relating to TIPS files and supporting

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<PAGE>

schedules in electronic compatible format), tangible personal property, books
and records directly pertaining to the relevant Facility or located upon or
under the property described in subsection (i) above; and (iii) all Existing
Contracts.

      "Required Consents" has the meaning set forth in Section 5(b) below.

      "Remediation" means those activities required to bring each Asserted
Environmental Defect in compliance with the Environmental Standard in accordance
with: (a) with respect to those Assets located in the state of New Mexico: Title
19 New Mexico Administrative Code Chapter 15 (the "OCD Regulations") or (b) with
respect to those Assets located in the state of Texas, 16 Texas Administrative
Code Part 1, Chapter 3 (the "Texas Regulations"); provided, however, solely with
regard to BUYER's, SELLER's and the Environmental Arbiter's obligations as set
forth in Section 5(f)(iii), 5(f)(iv) and 5(f)(viii), respectively, if the OCD
Regulations or Texas Regulations, as applicable, do not provide for a standard
to which an Asserted Environmental Defect must be corrected, then "Remediation"
shall mean those activities required to bring such Asserted Environmental Defect
in compliance with the Environmental Standard for soil and groundwater.

      "Response Notice" has the meaning set forth in Section 5(f).

      "Retained Liabilities" means all Costs, Claims and Liabilities arising out
of or attributable to:

      (i)   Wages, benefits and equal opportunity employment obligations to or
            in respect of any current or former employees of SELLER or any of
            its ERISA Affiliates, including any such obligations arising under
            or in respect of any benefit plan;

      (ii)  Imbalance Payables and, to the extent not assumed by BUYER, Suspense
            Account Funds;

      (iii) Administrative, civil and criminal fines and penalties (A) assessed
            prior to the Closing Date or (B) to the extent attributable to
            periods prior to the Closing Date with respect to (1) Clean Air Act
            Title V operating permit for the Antelope Ridge facility, and (2)
            those matters set forth on Section 3(f) of the Disclosure Schedule
            and those sites on Section 1(c) of the Disclosure Schedule;

      (iv)  Except for ad valorem Taxes on the Facilities during the year that
            Closing occurs, Taxes of SELLER or any of its Affiliates in respect
            of periods prior to the Adjustment Time;

      (v)   Death, personal injury or property damages in respect of the
            Facilities or the business to which to Assets relate, to the extent
            related to periods of time prior to the Closing Date and, if
            property damages, to the extent such property damages were not
            caused by or the result or effect of any Environmental Condition;

      (vi)  Hazardous Substance Handling prior to the Closing Date; (vii)
            Excluded Assets;

      (viii) Those sites described in Sections 1(c) (Certain Environmental
            Sites) of the Disclosure Schedule, and 3(i) (Litigation) of the
            Disclosure Schedule;

      (ix)  Asserted Environmental Defects and those sites described on Section
            1(c) of the Disclosure Schedule and for those matters described on
            Section 3(f) of the Disclosure Schedule; provided, however, that if
            there is a Purchase

                                       8
<PAGE>

            Price reduction for any of the foregoing sites or matters, then only
            to the extent of third Person Claims related to such sites or
            matters;

      (x)   Preemptive rights, rights of first refusal or similar rights with
            respect to any of the Assets; and

      (xi)  Accounts payable incurred before the Closing Date except to the
            extent accounted for at Section 7(a)(i)(A).

      "Security Interest" means any mortgage, pledge, lien, other security
interest created by, through or under SELLER or any of its Affiliates.

      "SELLER" has the meaning set forth in the preface above.

      "SELLER Group" means ConocoPhillips Company, its parent and all Affiliates
of both.

      "SELLER Indemnified Persons" means (i) each member of the SELLER Group and
(ii) the directors, officers, employees, agents or other representatives of such
members.

      "SELLER Interests" means the Allocable Share of the Facilities.

      "SELLER Plans" means all employee benefit plans providing benefits to any
Covered Employees that are sponsored or maintained by SELLER Group or to which
SELLER Group contributes or is obligated to contribute on behalf of Covered
Employees, including any employee welfare benefit plan within the meaning of
ERISA Sec. 3(1), any employee pension benefit plan within the meaning of ERISA
Sec. 3(2), and any bonus, incentive, deferred compensation, stock purchase,
stock option, stock appreciation, severance, change of control, or fringe
benefit plan.

      "Settlement Date" has the meaning set forth in Section 7(a) below.

      "Settlement Notice" has the meaning set forth in Section 7(a) below.

      "Settlement Statement" has the meaning set forth in Section 7(a) below.

      "Suspense Account Funds" has the meaning set forth in Section 7(b) below.

      "Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, ad valorem, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.

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

      "Termination Amount" means the total of Costs, Claims and Liabilities
incurred or reasonably expected to be incurred by SELLER (and its Affiliates)
with respect to (i) breaches by SELLER identified prior to the Closing of its
representations, warranties, and

                                       9
<PAGE>

covenants in this Agreement (excluding any breaches intentionally committed by
SELLER in order to invoke the rights of SELLER set forth in Section 9(a)(iv)
below), (ii) the effect of a lack of a material consent from a third Person, and
(iii) Claims asserted with respect to the Facilities prior to the Closing Date.

      "Transaction Agreements" means this Agreement, the Assignments, Grama
Ridge Transaction Confirmations, Fractionation Contract, the Grama Ridge Access
Agreement, and the other agreements entered in connection herewith or therewith.

      "Transferred Employees" has the meaning set forth in Section 12(a) below.

      "Welfare Benefits" has the meaning set forth in Section 12(d) below.

2.    PURCHASE AND SALE.

      (A)   PURCHASE AND SALE OF THE ASSETS

      On and subject to the terms and conditions of this Agreement, BUYER agrees
      to purchase from SELLER, and SELLER agrees to (or cause its Affiliates to)
      sell, transfer and convey to BUYER (and/or to BUYER's designated
      Affiliate), all of the Assets at the Closing for the consideration
      specified below in this Section 2.

      (B)   PAYMENT OF PURCHASE PRICE AT CLOSING.

      BUYER agrees to pay to SELLER at the Closing the Purchase Price (as may be
      adjusted in accordance with Section 5(f)(vii)) by wire transfer or
      delivery of immediately available federal funds to the following account
      or any other account specified by SELLER to BUYER at least five days prior
      to Closing:

                 JP Morgan Chase, New York, NY
                 ABA #021000021
                 Account #9102001659
                 c/o ConocoPhillips Company

      (C)   THE CLOSING.

      The closing of the transactions contemplated by this Agreement (the
      "Closing") shall take place at the offices of ConocoPhillips in Houston,
      Texas, commencing at 9:00 a.m. local time on the first calendar day of the
      month that follows the satisfaction or waiver of all conditions to the
      obligations of the Parties to consummate the transactions contemplated
      hereby as set forth in Section 6 below (other than conditions with respect
      to actions the respective Parties will take at the Closing itself), or
      such other date as the Parties may mutually determine (the "Closing
      Date").

      (D)   DELIVERIES AT THE CLOSING.

      At the Closing, (i) SELLER will deliver to BUYER the certificate provided
      for in Section 6(a) below; (ii) BUYER will deliver to SELLER the
      certificate provided for in Section 6(b) below; (iii) SELLER will execute
      and deliver to BUYER (and/or BUYER's Affiliate designated by BUYER) an
      assignment of the Assets in the form

                                       10
<PAGE>

      attached hereto as Exhibit G; (iv) BUYER will deliver to SELLER the
      Purchase Price(as may be adjusted in accordance with Section 5(f)(vii));
      (v) each Party will execute and deliver (or cause to be executed and
      delivered, as applicable) to the other Party (or the other Party's
      Affiliate, as applicable) the other Transaction Agreements; and (vi)
      SELLER will execute and deliver to BUYER a Certification of Non-Foreign
      Status for Entities in the form attached hereto as Exhibit K.

      (E)   ALLOCATION OF PURCHASE PRICE.

      For the purpose of the requisite filings, if any, under Section 1060 of
      the Code, the Parties will allocate the Purchase Price as set forth on
      Section 2(e) of the Disclosure Schedule. The Parties agree to report the
      federal, state, local, or other Tax consequences of the transactions
      contemplated by this Agreement in a manner consistent with such allocation
      and will not take any position inconsistent therewith. The Parties agree
      that each will furnish the other a copy of Form 8594 as filed with the
      Internal Revenue Service within 30 days of the filing of such form. Solely
      for Tax purposes, the Purchase Price shall be allocated among the
      Facilities as set forth on Section 2(e) of the Disclosure Schedule.

3.    REPRESENTATIONS AND WARRANTIES OF SELLER.

SELLER represents and warrants to BUYER that the statements contained in this
Section 3 are true and correct as of the date of this Agreement and will be true
and correct as of the Closing Date, in each case, except: (i) that the
statements referring to a specific time will be true and correct as of the time
therein indicated, and (ii) as set forth in Section 3 of the Disclosure
Schedule.

      (A)   ORGANIZATION OF SELLER.

      Each member of the SELLER Group that is a party to a Transaction Agreement
      is an entity duly organized, validly existing, and in good standing under
      the laws of the jurisdiction of its organization, having all necessary
      power and authority to carry on its business as presently conducted and to
      own, lease, and operate all properties and assets now owned, leased, or
      operated by it, and, to the extent necessary, is duly qualified as a
      foreign entity and in good standing in the states where the Assets are
      located.

      (B)   AUTHORIZATION OF TRANSACTION.

      Each member of the SELLER Group that is a party to a Transaction Agreement
      has full power and authority (including full corporate power and
      authority) to execute and deliver such Transaction Agreement and to
      perform its obligations thereunder. Each Transaction Agreement to which a
      member of the SELLER Group is a party constitutes the valid and legally
      binding obligation of such Person, enforceable against such Person in
      accordance with its terms, subject to the effects of bankruptcy,
      insolvency, reorganization, moratorium, or other laws relating to or
      affecting the rights of creditors generally, and general principles of
      equity.

                                       11
<PAGE>

      (C)   NONCONTRAVENTION.

      Except as set forth in Section 3(c) of the Disclosure Schedule, neither
      the execution and the delivery of any Transaction Agreement, nor the
      consummation of the transactions contemplated thereby, will (i) violate
      any constitution, statute, regulation, rule, injunction, order, decree,
      ruling, charge, or other restriction of any Governmental Authority to
      which any member of the SELLER Group is subject, (ii) violate any
      provision of the charter, bylaws, or other organizational document of such
      Person or (iii) result in a breach of, constitute a default under, result
      in the acceleration of, create in any party the right to accelerate,
      terminate, modify, or cancel, or require any authorization, consent,
      waiver, or approval under any agreement, contract, lease, license,
      instrument, decree, judgment, or other arrangement to which such Person is
      a party or by which it is bound or to which any of its assets constituting
      a part of the SELLER Interests is subject (or result in the imposition of
      any Security Interest or encumbrance upon any such assets), except, with
      respect to subsections (i) and (iii) above, where such violations,
      breaches, defaults or other matters, including the failure to obtain such
      authorizations, consents, waivers or approvals, could not reasonably be
      expected to have a Material Adverse Effect. Except (1) pursuant to the
      Hart-Scott-Rodino Act, (2) as set forth on Section 3(c) of the Disclosure
      Schedule, (3) for those authorizations, consents, waivers or approvals of
      Governmental Authorities customarily obtained after the closing of similar
      transactions ("Customary Post-Closing Consents") and (4) where the failure
      to give such notices, make such filings or obtain such authorizations,
      consents, waivers or approvals could not reasonably be expected to have a
      Material Adverse Effect, no such Person needs to give any notice, make any
      filing with or obtain any authorization, consent, waiver, or approval of
      any Governmental Authority in order for the Parties to consummate the
      transactions contemplated by this Agreement.

      (D)   BROKERS' FEES.

      Other than to Morgan Stanley & Co. Incorporated, SELLER has no Liability
      or obligation to pay any fees or commissions to any broker, finder, or
      agent with respect to the transactions contemplated by this Agreement.

      (E)   LEGAL COMPLIANCE.

      With respect to all Applicable Laws other than Environmental Laws, the
      Facilities are in compliance with all such laws, other than non-compliance
      that could reasonably be expected not to have a Material Adverse Effect,
      and SELLER has not received any written notice from any Governmental
      Authority of any actual or potential non-compliance with the terms and
      conditions of any such laws with respect to any part of the Facilities, or
      any written notice of any civil, criminal, or administrative proceeding
      involving any part of the Facilities relating in any way to such laws.
      Section 3(e) of the Disclosure Schedule lists all permits and licenses
      held by SELLER that are required to operate the Facilities, and to the
      Knowledge of SELLER, there are no other permits or licenses required to
      operate the Facilities. With respect to Environmental Laws:

            (i)   other than as set forth on Section 3(e) of the Disclosure
      Schedule, to the Knowledge of SELLER, the Facilities are in compliance
      with all applicable

                                       12
<PAGE>

      Environmental Laws, other than non-compliance that could reasonably be
      expected not to have a Material Adverse Effect;

            (ii)  other than as set forth on Section 3(e) of the Disclosure
      Schedule, to the Knowledge of SELLER, there are no locations or premises
      that are a part of the Facilities where Hazardous Substances or other
      substances have entered on, under, or into the soil or into groundwater in
      violation of applicable Environmental Laws;

            (iii) for those Facilities operated by SELLER since August 1, 2003,
      SELLER has not received any written notice from any Governmental Authority
      of any actual or potential non-compliance with the terms and conditions of
      any Environmental Laws with respect to any portion of the Facilities; and

            (iv)  for those Facilities operated by SELLER since August 1, 2003,
      SELLER has not received any written notification of any civil, criminal,
      or administrative proceeding involving any portion of the Facilities
      relating in any way to applicable Environmental Laws.

      (F)   ENVIRONMENTAL MATTERS.

      To the Knowledge of SELLER, and except (1) as would not have a Material
      Adverse Effect or substantially delay the ability of SELLER to consummate
      the transactions contemplated hereby, or (2) as set forth in Section 3(f)
      of the Disclosure Schedule:

            (i)   SELLER has in force and effect all Environmental Permits
      necessary under Environmental Laws and all such Environmental Permits,
      which are annotated as to whether or not they are transferable or
      assignable, are listed on Exhibit B hereto;

            (ii)  There has been no environmental investigation, study, audit,
      test, review or other analysis conducted of which SELLER has Knowledge in
      relation to the Facilities (as currently or previously conducted) which
      has not been delivered to BUYER at least ten (10) days prior to the date
      hereof;

            (iii) There are no Facilities which are in violation of
      Environmental Laws; and

            (iv)  There are no Hazardous Substances on, under or emanating from
      (other than in the Ordinary Course of Business) any of the Facilities.

      (G)   TAX MATTERS.

      Excluding Taxes for which BUYER is responsible pursuant to Section 7(e) of
      this Agreement, all Taxes owed by any member of the SELLER Group or based
      upon, measured by, or arising by reason of the ownership of the Facilities
      that have become due and payable have been duly and timely paid, all
      applicable Tax Returns relating the Facilities have been duly and timely
      filed, and there is no claim pending or, to the Knowledge of SELLER,
      threatened by any applicable Governmental Authority in connection with any
      such Taxes, other than those being contested in good faith that are set
      forth in the Disclosure Schedule.

                                       13
<PAGE>

      (H)   CONTRACTS.

      Exhibit D lists (as of the date of this Agreement) the following contracts
      and other agreements to which any member of the SELLER Group is a party
      and that constitute any portion of the SELLER Interests:

            (i)   any agreement (or group of related agreements) (A) for the
      purchase or sale of gas, raw materials, commodities, supplies, products,
      or other personal property, (B) for the furnishing or receipt of services,
      or (C) that is a gas exchange agreement, gas gathering agreement, gas
      transportation agreement, transportation service agreement, tariff, or
      other agreement, the performance of which will extend over a period of
      more than one (1) year or involve consideration in excess of $100,000 over
      the term of such agreement;

            (ii)  any agreement creating or concerning a partnership, joint
      venture, or similar entity and any operating agreement, undivided
      ownership agreement, or similar agreement;

            (iii) any agreement (or group of related agreements) (A) under which
      it has created, incurred, assumed, or guaranteed any indebtedness for
      borrowed money, or any capitalized lease obligation, (B) involving
      consideration in excess of $250,000 or (C) under which it has imposed a
      Security Interest on any of its assets, tangible or intangible;

            (iv)  any agreement concerning noncompetition;

            (v)   any agreement to which the counterparty is any member of the
      SELLER Group;

            (vi)  any collective bargaining agreement or other union contract;

            (vii) any agreement for the employment of any individual on a
      full-time or part-time basis (A) providing annual compensation in excess
      of $100,000, (B) having a term in excess of one (1) year or (C) providing
      severance benefits;

            (viii) any agreement under which it has advanced or loaned any
      amount to any of its directors, officers, and employees outside the
      Ordinary Course of Business that would be binding upon the BUYER;

            (ix)  any preferential purchase right, right of first refusal, or
      similar right that would be applicable to or invoked by the consummation
      of the transactions contemplated by this Agreement;

            (x)   any lease, in either the capacity of lessee or lessor;

            (xi)  any futures, swaps or forward contracts or other derivative
      based instruments; and

            (xii) all other material contracts.

                                       14
<PAGE>

      SELLER has provided BUYER access to and the opportunity to review a
      correct and complete copy of each agreement listed in Exhibit D (as
      amended to the date of execution of this Agreement). Except as set forth
      in Section 3(h) of the Disclosure Schedule, with respect to each agreement
      listed in Exhibit D (and except as could not reasonably be expected to
      have a Material Adverse Effect with respect to all such agreements in the
      aggregate): (A) the agreement is in full force and effect (except where
      the agreement has expired by its own terms, other than as a result of a
      breach by any member of the SELLER Group); (B) the transactions
      contemplated herein will not cause the agreement to cease to be in full
      force and effect on identical terms following the consummation of the
      transactions contemplated hereby; (C) no party is in breach or default, no
      party has claimed there is a breach or default, and, to SELLER's
      Knowledge, no event has occurred that with notice or lapse of time would
      constitute a breach or default that would permit termination, modification
      or acceleration under the agreement; and (D) no party has repudiated in
      writing any provision of the agreement.

      (I)   LITIGATION.

      Section 3(i) of the Disclosure Schedule sets forth each instance (that
      relates to the Facilities) in which SELLER (i) is subject to any
      outstanding injunction, judgment, order, decree, ruling, arbitration or
      other award or charge or (ii) is a party or, to the Knowledge of SELLER,
      is threatened to be made a party to any action, suit, proceeding, hearing,
      or investigation of, in, or before any Governmental Authority or before
      any arbitrator.

      (J)   EMPLOYEES.

      Insofar as relating directly to the Facilities, (i) none of SELLER Group
      has experienced any material strikes, grievances, claims of unfair labor
      practices, or other collective bargaining disputes since January 1, 1999,
      (ii) SELLER has no Knowledge that any unfair labor practice has been
      committed at the Facilities since January 1, 1999, and (iii) SELLER has no
      Knowledge of any organizational effort presently being made or threatened
      by or on behalf of any labor union with respect to employees employed at
      the Facilities.

      (K)   EMPLOYEE BENEFIT PLANS.

            (i)   As of the date of this Agreement, the SELLER Group is neither
      contributing to, nor is it obligated to contribute to, any Multiemployer
      Plan providing benefits to any Covered Employees. None of SELLER or any of
      its respective ERISA Affiliates has incurred any withdrawal Liability
      under Part I of Subtitle E of Title IV of ERISA that has not been
      satisfied in full.

            (ii)  The consummation of the transactions contemplated by this
      Agreement will not constitute a "change in ownership or control" of SELLER
      within the meaning of Proposed Treasury Reg. Sec. 1.280G-1.

      (L)   EASEMENTS.

      To SELLER's Knowledge, no event has occurred that with notice or lapse of
      time would constitute a breach or default that would permit termination,
      modification, or

                                       15
<PAGE>

      acceleration, under any Easement constituting a portion of the SELLER
      Interests. Exhibit A-2 lists all of the Easements constituting SELLER
      Interests; those Easements that SELLER operates are free and clear of all
      Security Interests. EXCEPT AS SET FORTH IN THIS SECTION 3(L), SELLER DOES
      NOT OTHERWISE REPRESENT, AND SELLER SPECIFICALLY BY THIS DISCLAIMER DOES
      NOT WARRANT, TITLE TO ANY EASEMENT.

      (M)   CONDUCT OF BUSINESS.

      Except as contemplated by this Agreement and the other Transaction
      Agreements, at all times since August 1, 2003, each of SELLER and its
      Affiliates has conducted its business with respect to the Facilities in
      the Ordinary Course of Business.

      (N)   AFES AND CAPITAL PROJECTS.

      Section 3(n) of the Disclosure Schedule lists each AFE or uncompleted
      capital or operating project that has not been totally funded, as of the
      date of this Agreement, with respect to the Facilities, setting forth a
      general description of the circumstances involved, the approximate
      unfunded amount of such AFE or unfinished capital project attributable to
      the SELLER Interests, and the estimated timing for the payment of such
      amount.

      (O)   SPECIAL WARRANTY OF TITLE.

      Except (x) for Permitted Liens and (y) with respect to Easements as set
      forth at Section 3(l), the BUYER has good and marketable title (free and
      clear of all liens, encumbrances and Security Interests) to the SELLER
      Interests.

      (P)   NO CHANGE IN CONDITION.

      Since August 1, 2003, the equipment and other personal property or
      fixtures constituting a part of any Facility have been maintained in the
      Ordinary Course of Business and in substantially the same working order
      and condition as of such date, normal wear and tear excepted.

BUYER acknowledges that if Closing occurs the Assets are being sold to BUYER on
an "AS IS, WHERE IS" basis, without any warranties or representations, either
express or implied, of any nature whatsoever, except as represented and as
warranted above and in Section 10, subject to Section 11, below and as set forth
in the Assignments delivered at Closing. Without limiting the generality of the
foregoing, SELLER makes no representations or warranty with respect to: (a) any
projections, estimates or budgets delivered to or made available to BUYER of
future revenues, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof) of the
Assets or the future business viability and/or operations of the Assets; or (b)
any other information or documents made available to BUYER or BUYER Group and/or
its/their counsel, accountants or advisors with respect to the Assets.

4.    REPRESENTATIONS AND WARRANTIES OF BUYER.

BUYER represents and warrants to SELLER that the statements contained in this
Section 4 are true and correct as of the date of this Agreement and will be true
and correct as of the

                                       16
<PAGE>

Closing Date, in each case, except (i) as set forth in the Disclosure Schedule,
and (ii) that the statements referring to a specific time will be true and
correct as of the time indicated.

      (A)   ORGANIZATION OF BUYER.

      Each member of the BUYER Group that is a party to a Transaction Agreement
      is an entity duly organized, validly existing, and in good standing under
      the laws of the jurisdiction of its organization, having all necessary
      power and authority to carry on its business as presently conducted and to
      own, lease, and operate all properties and assets now owned, leased, or
      operated by it, and, to the extent necessary, is duly qualified as a
      foreign entity and in good standing in the states where the Assets are
      located.

      (B)   AUTHORIZATION OF TRANSACTION.

      Each member of the BUYER Group that is a party to a Transaction Agreement
      has full power and authority (including full corporate power and
      authority) to execute and deliver such Transaction Agreement and to
      perform its obligations thereunder. Each Transaction Agreement to which a
      member of the BUYER Group is a party constitutes the valid and legally
      binding obligation of such Person, enforceable against such Person in
      accordance with its terms, subject to the effects of bankruptcy,
      insolvency, reorganization, moratorium, or other laws relating to or
      affecting the rights of creditors generally, and general principles of
      equity.

      (C)   NONCONTRAVENTION.

      Except as set forth in Section 4(c) of the Disclosure Schedule, neither
      the execution and the delivery of any Transaction Agreement, nor the
      consummation of the transactions contemplated thereby, will (i) violate
      any constitution, statute, regulation, rule, injunction, order, decree,
      ruling, charge, or other restriction of any Governmental Authority to
      which any member of the BUYER Group is subject, (ii) violate any provision
      of the charter, bylaws, or other organizational document of such Person or
      (iii) result in a breach of, constitute a default under, result in the
      acceleration of, create in any party the right to accelerate, terminate,
      modify, or cancel, or require any authorization, consent, waiver, or
      approval under any agreement, contract, lease, license, instrument,
      decree, judgment, or other arrangement to which such Person is a party or
      by which it is bound or to which any of its assets are subject (or result
      in the imposition of any Security Interest or encumbrance upon any such
      assets), except, with respect to subsections (i) and (iii) above, where
      such violations, breaches, defaults or other matters, including the
      failure to obtain such authorizations, consents, waivers or approvals,
      could not reasonably be expected to have a Material Adverse Effect on the
      transactions contemplated hereby. Except (1) pursuant to the
      Hart-Scott-Rodino Act, (2) as set forth on Section 4(c) of the Disclosure
      Schedule, (3) Customary Post-Closing Consents and (4) where the failure to
      give such notices, make such filings or obtain such authorizations,
      consents, waivers or approvals could not reasonably be expected to have a
      Material Adverse Effect on the transactions contemplated hereby, no such
      Person needs to give any notice, make any filing with or obtain any
      authorization, consent, waiver, or approval of any Governmental Authority
      in order for the Parties to consummate the transactions contemplated by
      this Agreement.

                                       17
<PAGE>

      (D)   BROKERS' FEES.

      BUYER has no Liability or obligation to pay any fees or commissions to any
      broker, finder, or agent with respect to the transactions contemplated by
      this Agreement.

      (E)   FINANCIAL CAPABILITY.

      BUYER has and on the Closing Date will have the full financial capability
      and access to available funds necessary to consummate the transactions
      contemplated by this Agreement.

      (F)   INVESTMENT INTENT.

      BUYER is acquiring the Assets for its own account and not with a view to
      the distribution thereof within the meaning of Section 2(11) of the
      Securities Act of 1933, as amended.

5.    PRE-CLOSING COVENANTS.

The Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing:

      (A)   GENERAL.

      Each of the Parties will satisfy its obligations under Section 5(b)(iv)
      and will use its Reasonable Efforts to take all action and to do all
      things necessary, proper, or advisable in order to consummate and make
      effective the transactions contemplated by this Agreement (including
      satisfaction, but not waiver, of the Closing conditions set forth in
      Section 6 below).

      (B)   NOTICES AND CONSENTS.

            (i)   With regard to the following notices and consents:

            A.    SELLER will give or cause to be given any notices to all third
            Persons which are not a Governmental Authority, and SELLER will use
            its Reasonable Efforts (which, with respect to landowner consents,
            shall not exceed the cost to repurchase the same type of real
            property interest at the market rate generally prevailing in the
            area, and, further, the Parties agree that the reasonable market
            rate for easements and rights-of way shall be deemed to be not more
            than $50.00/rod) to obtain any third Person consents, approvals or
            authorizations, that must be given or obtained in order for the
            Parties to consummate the transaction contemplated by this Agreement
            (collectively, except for the Customary Post-Closing Consents, the
            "Required Consents") provided, however, and, for the avoidance of
            any doubt, the use of the phrase "Person" in this sentence shall
            exclude Antitrust Authorities. If SELLER is required to pay an
            amount in excess of $50.00/rod to obtain any landowner Required
            Consent prior to Closing, then the amount in excess of $50.00/rod
            shall be shared equally with each of BUYER and SELLER bearing 50% of
            such costs and the amount of BUYER's 50% of such costs shall be paid
            to SELLER pursuant to Section 7(a)(i)(C).

                                       18
<PAGE>

            Notwithstanding anything to the contrary in this Section 5(b)(i)(A),
            BUYER shall not be responsible for any costs incurred by SELLER, if
            any, to obtain a landowner Required Consent to the extent such costs
            are incurred to resolve preexisting dispute(s) between SELLER and
            the landowner (other than the consent itself); and

            B.    Each of the Parties will give any notices to, make any filings
            with, Governmental Authorities, and use their Reasonable Efforts to
            obtain any authorizations, consents, and approvals of those
            Governmental Authorities in connection with the matters referred to
            in Sections 3(c) and 4(c) above in order for such Party to perform
            its obligations under this Agreement.

            (ii)  Without limiting the generality of the foregoing, each of the
      Parties acknowledges and agrees that this Agreement and the consummation
      of the transactions contemplated by this Agreement are subject to and
      conditioned upon the following: (A) any applicable waiting period under
      the Hart-Scott-Rodino Act relating to the transactions contemplated by
      this Agreement shall have expired or been terminated; and (B) no provision
      of any applicable law or regulation, and no judgment, injunction, order or
      decree shall prohibit or enjoin the consummation of the transactions
      contemplated by this Agreement.

            (iii) The Parties further acknowledge and agree that each will use
      its Reasonable Efforts to, as promptly as is possible: (A) prepare and
      make all filings required of it with, and give all notices to, will file
      (to the extent not heretofore filed) any Notification and Report Forms and
      related material that it may be required to file with the Federal Trade
      Commission, the Antitrust Division of the United States Department of
      Justice or any other federal or state antitrust reviewing agency (whether
      acting together or independently, "Antitrust Authorities") or any other
      Person as is required of such Party in order to consummate the
      transactions contemplated hereby under the Hart-Scott-Rodino Act, and will
      use its Reasonable Efforts to obtain an early termination of the
      applicable waiting period, and will make any further filings pursuant
      thereto that may be necessary, proper, or advisable in connection
      therewith; (B) provide such other information and communications to such
      Antitrust Authorities as such Antitrust Authorities may reasonably request
      in connection therewith; and (C) provide reasonable cooperation to each
      other in connection with the performance of their obligations under this
      Section. The BUYER and the SELLER will provide prompt notification to each
      other when any such consent, approval, action, filing or notice referred
      to in Section 5(b)(ii)(A), above, is obtained, taken, made or given, as
      applicable, and will advise each other of any communications (and, unless
      precluded by law, provide copies of any such communications that are in
      writing) with any Antitrust Authority regarding any of the transactions
      contemplated by this Agreement; provided, however, that competitively
      sensitive information may be withheld. SELLER agrees to reimburse BUYER
      for those filing fees required by Antitrust Authorities for BUYER's
      application under the Hart-Scott-Rodino Act.

            (iv)  BUYER will undertake commercially reasonable efforts to obtain
      all consents, approvals or actions of the Antitrust Authorities and shall
      cooperate with SELLER and propose to the relevant Antitrust Authorities
      appropriate and reasonable remedies to alleviate potential concerns
      generated by the Agreement and the consummation of the transactions
      contemplated by this Agreement and

                                       19
<PAGE>

      shall commit itself to such remedies vis-a-vis the relevant Antitrust
      Authorities, with the aim of enabling the completion of the consummation
      of the transactions contemplated by this Agreement as soon as practicable;
      provided, however, that BUYER will not be required to take any action that
      would materially impact this transaction. Such remedies shall not, in any
      way, reduce BUYER's obligations to pay the full Purchase Price as required
      by this Agreement. Before proposing such remedies to the relevant
      Antitrust Authorities, the BUYER shall reveal to SELLER the remedies to be
      proposed. The Parties also agree that they will use all Reasonable Efforts
      in the defense of any lawsuits or other legal proceedings, whether
      judicial or administrative, challenging this Agreement and the
      consummation of the transactions contemplated by this Agreement, including
      seeking to have any stay, temporary restraining order, or other injunction
      entered by any court or other governmental entity vacated or reversed.

            (v)   BUYER shall be solely responsible for all filing fees
      associated with Easements, including railroad assignments, and for the
      cost of obtaining the Customary Post-Closing Consents.

      (C)   OPERATION OF BUSINESS.

      To the extent SELLER has the Legal Right and such action will not cause a
      breach by SELLER under the Facilities Constitutive Documents (after using
      its Reasonable Efforts to obtain any required consent of the other parties
      thereto with respect to such action), SELLER will do the following with
      respect to the Facilities:

            (A)   Continue to operate and maintain such Facilities in the
      Ordinary Course of Business, consistent with past practices (including
      pipeline line-fill and operating pressures);

            (B)   Continue in effect all present insurance coverage on such
      Facilities;

            (C)   Cooperate with BUYER to effect an orderly transition in the
      ownership of such Facilities; and

            (D)   Use its Reasonable Efforts to preserve, maintain, and protect
      such Facilities, and to protect and preserve the relationships with
      existing producers and suppliers associated with such Facilities.

      Furthermore, to the extent SELLER has the Legal Right and such action will
      not cause a breach by SELLER under the Facilities Constitutive Documents
      (after using its Reasonable Efforts to obtain any required consent of the
      other parties thereto with respect to such action), SELLER shall not, and
      SELLER shall not permit any Affiliate to do any of the following with
      respect to the Facilities, without the prior consent of BUYER (which
      consent shall not be unreasonably withheld or delayed):

            (1)   Enter into, terminate, or amend any material agreements;

            (2)   Grant or abandon any Easements that are a part of or
      materially affect such Facilities;

                                       20
<PAGE>

            (3)   Sell, assign, mortgage, pledge, or subject to any encumbrance
      or Security Interest (other than Permitted Liens) any of the SELLER
      Interests;

            (4)   Incur any obligation with respect to any capital expenditure
      unless the same is fully completed, pre-paid or approved by BUYER prior to
      Closing; and

            (5)   Commit to do any of the foregoing.

      (D)   FULL ACCESS.

      To the extent SELLER has the Legal Right and upon reasonable telephonic
      request by BUYER, SELLER will permit representatives of BUYER to have full
      access at all reasonable times, and in a manner so as not to interfere
      with the normal business operations of the premises, properties, personnel
      (including personnel knowledgeable about the financial, environmental, and
      operating condition of the Facilities), books, records (including Tax
      records), contracts, and documents of or pertaining to the SELLER
      Interests. This access shall include: (i) providing BUYER with access to
      those environmental analyses and reports which are, to the Knowledge of
      SELLER, in SELLER's possession; and (ii) access to those Assets for the
      purpose of inspecting the Environmental Condition of the Assets and
      conducting evaluations related to the Environmental Condition of the
      Assets, as set forth in Section 5(f), including, without limitation, the
      right to continuously run four (4) drilling rigs in connection with the
      Phase II activities; provided, however, SELLER shall have no obligation to
      provide BUYER with forecasts, budgets or drafts of any of the foregoing.
      BUYER shall maintain same in confidence in accordance with the terms of
      the Confidentiality Agreement. To the extent SELLER has the Legal Right
      and upon reasonable written request by BUYER, SELLER shall also assist
      BUYER in obtaining access to land owned or controlled by third Persons
      with respect to BUYER's inspection of the Facilities located thereon and
      its environmental review for same.

      (E)   NOTICE OF DEVELOPMENTS.

      Each Party will give prompt notice to the other Party of any development
      causing a breach of any of its own representations and warranties in
      Section 3 and Section 4 above. SELLER will give prompt notice to BUYER of
      the occurrence of any Material Adverse Effect or Catastrophic Event. No
      disclosure by any Party shall be deemed to amend or supplement the
      Disclosure Schedule or to prevent or cure any misrepresentation, breach of
      warranty, or breach of covenant.

      (F)   ENVIRONMENTAL MATTERS.

            (i)   SELLER has made disclosures to BUYER pursuant to Section 3(f),
                  at Section 3(f) of the Disclosure Schedule.

            (ii)  Exhibit L, Phase II Agreed Audit Sites, sets forth the list of
                  sites (the "Phase II Audit Sites") upon which the Parties have
                  agreed that BUYER shall be entitled to perform, at its sole
                  cost, risk and expense, Phase II of the Environmental Audit to
                  determine if there exists at the time of such Environmental
                  Audit an Environmental Condition at any of the sites listed on
                  Exhibit L. The Phase II of

                                       21
<PAGE>

                  the Environmental Audit shall be conducted during the period
                  ending forty (40) days after the date of this Agreement;
                  provided, however, that with respect to PCA Junction,
                  Rattlesnake Compressor Station and Northeast Carlsbad
                  Compressor Station, said forty-day period shall be extended by
                  the number of days that lapse from the date of this Agreement
                  until the date that the U.S. Bureau of Land Management grants
                  its archeological consent in connection with the Phase II. In
                  exchange for the permission to conduct the Environmental
                  Audit, BUYER shall fully protect, defend, indemnify and hold
                  each SELLER Indemnified Person harmless from and against any
                  and all Costs and Claims (whenever asserted) the Basis for
                  which relates to, arises out of or is connected with the
                  performance by BUYER or by any Person on BUYER's behalf of any
                  Environmental Audit; and, it is further provided, the
                  foregoing indemnity shall not apply to Costs or Claims
                  incurred by BUYER the Basis for which is an Environmental
                  Condition existing at the time of the Phase II Environmental
                  Audit as discovered in the Environmental Audit.

            (iii) Also within forty (40) days after the date of this Agreement,
                  BUYER shall notify SELLER, in writing (the "Environmental
                  Notice"), of any Environmental Condition that BUYER has
                  discovered in its Phase II Environmental Audit conducted
                  pursuant to Section 5(f)(ii) as to which BUYER takes exception
                  (an "Asserted Environmental Defect"). The Environmental Notice
                  shall include (A) a reasonably complete description of each
                  individual Environmental Condition as to which BUYER takes
                  exception (including supporting documentation) and (B) BUYER's
                  good faith estimate of the third Person costs (excluding Costs
                  associated with Retained Liabilities) to conduct Remediation.

            (iv)  Unless SELLER agrees with the matters set forth in the
                  Environmental Notice, within five (5) business days after
                  receipt of the Environmental Notice, SELLER shall deliver to
                  BUYER a written statement (the "Response Notice") that sets
                  forth (A) a reasonably complete description of each Asserted
                  Environmental Defect as to which SELLER takes exception
                  (including supporting documentation and rationale) and (B)
                  SELLER's good faith estimate of the third Person costs
                  (excluding Costs associated with Retained Liabilities) to
                  conduct Remediation.

            (v)   If a Response Notice was delivered, BUYER and SELLER shall
                  meet within five (5) business days following BUYER's receipt
                  of the Response Notice in an attempt to mutually agree on an
                  acceptable resolution addressing the Asserted Environmental
                  Defects which remain uncured.

            (vi)  BUYER shall be entitled to raise an Asserted Environmental
                  Defect at any Phase II Agreed Audit Site only to the extent
                  that BUYER's good faith estimate of the third Person costs
                  (excluding Costs associated with Retained Liabilities) to
                  conduct the

                                       22
<PAGE>

                  Remediation for such Phase II Agreed Audit Site exceeds
                  $100,000 in the aggregate; provided, however, that said
                  $100,000 deductible shall not apply with respect to the PCA
                  Junction Valve Site and APEX Compressor Station as identified
                  on Exhibit L.

            (vii) With respect to each Asserted Environmental Defect, the
                  Parties will attempt to reach agreement as to whether such an
                  Environmental Condition actually exists, the appropriate
                  method to remediate same and the Allocable Share of the third
                  Person costs (excluding Costs associated with Retained
                  Liabilities) to conduct Remediation. In the event the Parties
                  reach agreement with regard to the matters set forth in the
                  foregoing sentence, subject to the Retained Liabilities, BUYER
                  will assume all liability with respect to the costs of such
                  Asserted Environmental Defect and the Purchase Price shall be
                  reduced by the agreed costs.

            (viii) If the Parties cannot reach agreement with regard to the one
                  or more of the matters set forth in the first sentence of
                  Section 5(f)(vii) within five (5) business days from the date
                  determined by Section 5(f)(v), unless SELLER agrees to
                  remediate the matter in accordance with Section 5(f)(ix)
                  below, then the Closing shall occur and BUYER and SELLER shall
                  render such matters to TRC Companies, Inc. (the "Environmental
                  Arbiter") for determination. The contacts at TRC Companies,
                  Inc. are the following two individuals: Gil Fry @ 21
                  Technology Drive, Irvine, CA 92618; and, Chris Reel @ 7761
                  Shaffer Parkway, Ste 100, Littleton, CO 80127. The Parties
                  hereby request that the Environmental Arbiter makes its
                  determination within twenty (20) days. If the Environmental
                  Arbiter determines that an Environmental Condition actually
                  exists, (A) the Environmental Arbiter shall also determine the
                  Allocable Share of the third Person costs (excluding Costs
                  associated with Retained Liabilities) to conduct Remediation,
                  (B) such amount shall be paid by SELLER to BUYER within five
                  (5) days after the Environmental Arbiter makes its
                  determination, and (C) subject to the Retained Liabilities,
                  BUYER will assume all liability with respect to the costs to
                  perform the remediation of such Asserted Environmental Defect.
                  The Parties agree that they and the Environmental Arbiter
                  shall proceed to reach a determination of the matters
                  submitted to the Environmental Arbiter in accordance with
                  Sections 4 through 14, 16 through 18, 21 and 26 of Exhibit J,
                  wherein the word (A) "Arbitrator" is agreed to mean
                  Environmental Arbiter, (B) each Party will be both a
                  Respondent and Claimant, and (C) the word "arbitration" is
                  agreed to mean "determination." The matters determined
                  pursuant to this Section 5(f)(vii) shall not be Arbitrable
                  Disputes for any purpose other than the foregoing referenced
                  sections of Exhibit J, and shall not be subject to the
                  provisions of Section 13. The determination of the
                  Environmental Arbiter shall be in writing and shall be binding
                  upon the Parties. The Parties shall equally share the cost of
                  the Environmental Arbiter.

                                       23
<PAGE>

            (ix)  In lieu of the Parties submitting an Asserted Environmental
                  Defect to dispute resolution in accordance with Section 5(f)
                  (viii) above, SELLER shall have the right to elect to conduct
                  the Remediation for such Asserted Environmental Defect at
                  SELLER's sole cost, risk and expense. In the event, and to the
                  extent, that prior to Closing SELLER has agreed to conduct
                  such Remediation, (A) BUYER shall be entitled to participate
                  with SELLER in any discussions, negotiations and proceedings
                  with any Governmental Authorities in connection therewith, (B)
                  SELLER shall reimburse BUYER for actual third Person costs
                  incurred by BUYER outside of its normal operations and to the
                  extent necessary for SELLER to conduct Remediation and for the
                  reasonable cost of supervision and monitoring services
                  requested of BUYER by SELLER, (C) SELLER SHALL PROTECT,
                  DEFEND, INDEMNIFY AND HOLD THE BUYER INDEMNITIES HARMLESS FROM
                  AND AGAINST ANY AND ALL CLAIMS AND COSTS OCCURRING ON OR TO
                  THE ASSETS CAUSED BY THE ACTS OR OMISSIONS OF SELLER, SELLER'S
                  AFFILIATES OR ANY PERSON ACTING ON SELLER'S OR SELLER'S
                  AFFILIATES BEHALF IN CONNECTION WITH ANY REMEDIATION CONDUCTED
                  PURSUANT TO THIS AGREEMENT, and (D) SELLER shall comply fully
                  with all rules, regulations, policies and instructions issued
                  by BUYER or any third Person operator regarding SELLER actions
                  while upon, entering or leaving any property included in the
                  Assets, including any insurance requirements. Notwithstanding
                  the foregoing, BUYER shall not impose rules, regulations or
                  instructions that unreasonably impede or delay SELLER's
                  Remediation and BUYER shall give SELLER access to BUYER's
                  properties for such activities.

      (G)   TITLE MATTERS.

      Prior to Closing and at its sole cost, risk and expense, SELLER shall
      obtain a new easement, customary in the industry, that covers SELLER'S
      existing twelve-inch (12") gas pipeline to the extent that it is located
      in NE/NE, SE/NE, NE/SE, SE/SE Section 36, 16S, 35E and NW/SW Section 30,
      16S, 36E, Lea County, NM; such easement shall be added to Exhibit A-2.

      (H)   CAPITAL EXPENDITURES.

      Notwithstanding anything in this Agreement, SELLER (or its Affiliates, as
      applicable) shall be responsible for and pay any and all capital
      expenditures (including, without limitation, capital costs relating to any
      maintenance, repair or replacement of fixtures, equipment or other
      personal property) with respect to the Facilities that are commenced or
      contracted for prior to Closing unless the same has been approved by
      BUYER.

      (I)   EXCLUSIVITY.

      Prior to Closing, SELLER will not, directly or indirectly, participate in
      any discussions regarding, furnish any information with respect to, assist
      or participate in, or facilitate

                                       24
<PAGE>

      in any other manner any effort or attempt by any Person other than BUYER
      to acquire the SELLER Interests or any part thereof or any economic
      interest therein.

      (J)   CERTAIN EXISTING CONTRACTS.

      SELLER shall notify BUYER in writing regarding any agreement or contract
      that will constitute an Existing Contract pursuant to clause (ii) of the
      definition of Existing Contract.

      (K)   CASUALTY LOSS.

            (i)   SELLER shall promptly notify BUYER of any Casualty Loss of
      which SELLER becomes aware prior to the Closing. If a Casualty Loss occurs
      that results in destruction of or damage to Facilities in excess of 10% of
      the Purchase Price, then either SELLER or BUYER shall have the right to
      extend the Closing Date for up to 45 days for the purpose of repairing or
      replacing the Facilities destroyed or damaged by the Casualty Loss. If
      SELLER does not repair or replace the Facilities destroyed or damaged by
      the Casualty Loss prior to the Closing and the Parties are unable to agree
      on a reduction to the Purchase Price to compensate BUYER for the Casualty
      Loss, BUYER may terminate this Agreement upon fifteen (15) days written
      notice to SELLER.

            (ii)  If this Agreement is not terminated by BUYER as provided in
      subsection (i), BUYER's sole remedy with respect to any Casualty Loss in
      respect of Facilities which are not repaired or replaced prior to the
      Closing is to (A) reduce the Purchase Price by an amount estimated by
      SELLER and agreed to by BUYER to be equal to the repair or replacement
      cost of the Facilities 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 the arbitration provisions of this Agreement, in
      which case any insurance, condemnation or taking proceeds with respect to
      such Casualty Loss shall be the sole property of SELLER, or (B) accept the
      Facilities with no adjustment to the Purchase Price, but with BUYER being
      entitled to receive as BUYER's sole property all insurance, condemnation
      or taking proceeds, on account of such Casualty Loss.

6.    CONDITIONS TO OBLIGATION TO CLOSE.

      (A)   CONDITIONS TO OBLIGATION OF BUYER.

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

            (i)   The representations and warranties set forth in Section 3
      above shall be true and correct in all material respects at and as of the
      Closing Date;

            (ii)  SELLER shall have performed and complied with all of its
      covenants hereunder in all material respects through the Closing;

                                       25
<PAGE>

            (iii) SELLER shall have delivered to BUYER a certificate to the
      effect that each of the conditions specified above in Section 6(a)(i)-(ii)
      is satisfied in all respects;

            (iv)  no action, suit, or proceeding shall be pending or threatened
      before any Governmental Authority wherein an unfavorable injunction,
      judgment, order, decree, ruling, or charge would (A) prevent, restrain,
      prohibit or invalidate or seek damages in connection with the consummation
      of any of the transactions contemplated by this Agreement or (B) cause any
      of the transactions contemplated by this Agreement to be rescinded
      following consummation (and no such injunction, judgment, order, decree,
      ruling, or charge shall be in effect);

            (v)   all applicable waiting periods (and any extensions thereof)
      under the Hart-Scott-Rodino Act shall have expired or otherwise been
      terminated and SELLER and BUYER shall have received all other material
      authorizations, consents, and approvals of Governmental Authorities
      referred to in Section 3(c), except for Customary Post-Closing Consents,
      and Section 4(c) above;

            (vi)  all Persons holding preferential purchase rights, rights of
      first refusal, or similar rights referred to in Section 3(h) of the
      Disclosure Schedule with respect to any material part of the SELLER
      Interests shall have waived such rights in writing;

            (vii) Since the date of this Agreement, no Catastrophic Event shall
      have occurred;

            (viii) if SELLER shall have given any notice pursuant to Section
      9(a)(iv) below, either (A) BUYER shall have given its notice therein
      referred to or (B) the 15 day period therein referred to shall have ended
      (it being understood that, if this clause (B) is applicable, this
      Agreement shall terminate and no Closing hereunder shall occur); and

            (x)   SELLER (or its Affiliates, as applicable) shall have taken all
      actions required under Section 2(d) above.

            (xi)  All of the Required Consents shall have been obtained;
      provided, however, excluded from the foregoing are those consents,
      approvals or authorizations which are set forth on Exhibit H.

            (xii) There shall have been no event or occurrence that has had or
      could reasonably be expected to result in a negative impact to Facilities
      in excess of 10% of the Purchase Price.

      BUYER may, in its sole discretion, waive any condition specified in this
      Section 6(a) if it executes a writing so stating at or prior to the
      Closing.

      (B)   CONDITIONS TO OBLIGATION OF SELLER.

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

                                       26
<PAGE>

            (i)   The representations and warranties set forth in Section 4
      above shall be true and correct in all material respects at and as of the
      Closing Date;

            (ii)  BUYER shall have performed and complied with all of its
      covenants hereunder in all material respects through the Closing;

            (iii) BUYER shall have delivered to SELLER a certificate to the
      effect that each of the conditions specified above in Section 6(b)(i)-(ii)
      is satisfied in all respects;

            (iv)  All of the material third Person consents specified in Section
      5(b) above shall have been procured;

            (v)   no action, suit, or proceeding shall be pending or threatened
      before any Governmental Authority wherein an unfavorable injunction,
      judgment, order, decree, ruling, or charge would (A) prevent, restrain,
      prohibit or invalidate or seek damages in connection with the transactions
      contemplated by this Agreement or (B) cause any of the transactions
      contemplated by this Agreement to be rescinded following consummation (and
      no such injunction, judgment, order, decree, ruling, or charge shall be in
      effect);

            (vi)  all applicable waiting periods (and any extensions thereof)
      under the Hart-Scott-Rodino Act shall have expired or otherwise been
      terminated and SELLER and BUYER shall have received all other material
      authorizations, consents and approvals of Governmental Authorities
      referred to in Section 3(c) and Section 4(c) above;

            (vii) all Persons holding preferential purchase rights, rights of
      first refusal, or similar rights referred to in Section 3(h) of the
      Disclosure Schedule with respect to any part of the SELLER Interests shall
      have waived such rights in writing;

            (viii) if SELLER shall have given any notice pursuant to Section
      9(b)(iv) below, either (A) BUYER shall have given its notice therein
      referred to or (B) the 15 day period therein referred to shall have ended
      (it being understood that, if this sub-clause (B) is applicable, this
      Agreement shall terminate and no Closing hereunder shall occur);

            (ix)  Since the date of this Agreement, no Catastrophic Event shall
      have occurred; and

            (x)   BUYER (or its Affiliates, as applicable) shall have taken all
      actions required under Section 2(d) above.

      SELLER may, in its sole discretion, waive any condition specified in this
      Section 6(b) if it executes a writing so stating at or prior to the
      Closing.

7.    CERTAIN POST-CLOSING OBLIGATIONS.

Provided that the Closing occurs, the following shall be applicable:

                                       27
<PAGE>

      (A)   POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE.

            (i)   After Closing, the Purchase Price shall be increased without
      duplication by the following amounts:

                  (A)   the amount of all accounts or trade payables and all
                        direct operating expenses (other than Taxes) in
                        connection with the Assets related to time periods after
                        the Adjustment Time that are incurred and paid by SELLER
                        or any Affiliate;

                  (B)   all capital expenditures approved by BUYER which are
                        paid by SELLER on or after the execution date of this
                        Agreement;

                  (C)   one half of the amount incurred by Seller, if any, in
                        excess of $50.00/rod to resolve those Required Consents
                        as provided in Section 5(b)(i)(A); and

                  (D)   any further amounts mutually agreed upon in writing by
                        the Parties.

            (ii)  After Closing, the Purchase Price shall be decreased without
      duplication by the following amounts:

                  (A)   the amount of all income, revenues and proceeds in
                        connection with the Assets related to time periods after
                        the Adjustment Time that are collected by SELLER or any
                        Affiliate;

                  (B)   the amount of all accounts or trade payables and all
                        direct operating expenses (other than Taxes) in
                        connection with the Assets related to time periods prior
                        to the Adjustment Time that are paid by BUYER or any
                        Affiliate;

                  (C)   all proceeds received by SELLER in respect of any Assets
                        sold, leased or otherwise disposed of by SELLER on or
                        after the Adjustment Time;

                  (D)   any further amounts mutually agreed upon in writing by
                        the Parties;

                  (E)   the Allocable Share of all unpaid ad valorem or similar
                        Taxes on the Facilities for the year 2004, prorated to
                        the Adjustment Time, based on the amount of such Taxes
                        paid with respect to the year 2003 (with BUYER then to
                        cause all such Taxes for the year 2004 to be duly paid),
                        in accordance with Section 7(e);

                  (F)   any amounts agreed to by the Parties with respect to
                        Asserted Environmental Defects, and Casualty Losses, in
                        accordance with Sections 5(f) and (k);

                                       28
<PAGE>

                  (G)   any obligations with respect to Suspense Account Funds
                        in accordance with Section 7(b); and

                  (H)   the estimated or agreed upon amount of future costs for
                        any capital expenditures that are commenced prior to
                        Closing, which were not approved by BUYER.

            (iii) As soon as practicable, but not later than 60 days, after the
      Closing Date, SELLER shall prepare and deliver to BUYER a statement (the
      "Settlement Statement") setting forth in reasonable detail its calculation
      of each adjustment to the Purchase Price contemplated by Section 7(a)(i)
      and Section 7(a)(ii) along with any other amounts that are payable or are
      to be prorated hereunder as of the Adjustment Time. As may be reasonably
      requested by SELLER, BUYER shall promptly furnish all information that it
      or its Affiliates may have and that is useful to SELLER in the calculation
      or verification of the Settlement Statement. On or before the 30th day
      after receipt of the Settlement Statement, BUYER shall deliver to the
      SELLER a written report containing any changes that BUYER proposes to be
      made to the Settlement Statement. If SELLER does not deliver the
      Settlement Statement when required, BUYER may prepare and deliver it to
      SELLER, and in such case, SELLER shall have BUYER's objection rights under
      this Section .

            (iv)  The Settlement Statement shall become final and binding on
      SELLER and BUYER on the 31st day following the date the Settlement
      Statement is received by BUYER, unless prior to such date BUYER proposes
      any changes to the accounting set forth in the Settlement Statement (a
      "Settlement Notice").

            (v)   Any Settlement Notice shall set forth BUYER's proposed changes
      to the Settlement Statement, including an explanation in reasonable detail
      of the basis on which BUYER proposes such changes. If BUYER has timely
      delivered a Settlement Notice, BUYER and SELLER shall use good faith
      efforts to reach agreement on the disputed items. If the disputed items
      have not been resolved by BUYER and SELLER by the 30th day following
      SELLER `s receipt of a Settlement Notice, any remaining disputed items
      shall be submitted to Ernst & Young (the "Independent Accountants") for
      resolution within five (5) 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 SELLER and fifty percent (50%) by BUYER.
      The Independent Accountants' determination of the disputed items shall be
      final and binding upon BUYER and SELLER and the Parties hereby waive any
      and all rights to dispute such resolution in any manner, including in
      court, before an arbiter or appeal.

            (vi)  The date, upon which the Settlement Statement is agreed upon
      or is otherwise established hereunder, is hereinafter referred to as the
      "Settlement Date". Any payment shall be made within three (3) business
      days of the Settlement Date. Nothing contained in this Section 7(a) shall
      relieve any Party from any obligation to make any other payments required
      by this Agreement.

      (B)   SUSPENSE ACCOUNT FUNDS.

            (i)   Certain funds attributable to the Facilities are held in
      suspense that would otherwise be payable to operators or interest owners
      in wells connected

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<PAGE>

      to the Facilities or other owners delivering natural gas or natural gas
      liquids to the Facilities pending resolution of title disputes or
      execution of division orders or probate proceedings or similar reasons
      (the "Suspense Account Funds"). The amount payable by BUYER to SELLER as
      referenced in Section 7(a)(ii)(G) shall be reduced by the amount of
      Suspense Account Funds existing on the Closing Date and thereafter BUYER
      shall be responsible for the disbursement of the Suspense Account Funds.

            (ii)  To SELLER's Knowledge, Section 7(b) of the Disclosure Schedule
      sets out the actual liability in respect of the Suspense Account Funds as
      of the date set forth in such Section 7(b) of the Disclosure Schedule.
      SELLER shall make a good faith estimate of its liability in respect of the
      Suspense Account Funds as of the date five (5) days prior to the Closing
      Date, and shall update Section 7(b) of the Disclosure Schedule to reflect
      such estimate. BUYER and SELLER agree to cooperate and to make available
      to each other all information necessary to calculate and to confirm and
      verify the actual amount of the liability with respect to the Suspense
      Account Funds.

      (C)   IMBALANCES.

      The Imbalance Receivable shall be for the sole benefit of SELLER, and the
      Imbalance Payable shall be the sole obligation of SELLER.

      (D)   COOPERATION.

            (i)   The Parties shall cooperate with each other in all reasonable
      ways to effectuate the transition in ownership contemplated by this
      Agreement as efficiently, appropriately, and punctually as reasonably
      possible, including cooperating with obtaining required third Person
      consents and concerning the receipt of revenues and the payment of
      expenses. Without limiting the foregoing, the Parties agree (i) that if
      SELLER receives any revenues relating to the Facilities that are
      attributable to the period on and after the Adjustment Time, or if BUYER
      receives any revenues relating to the Facilities that are attributable to
      the period prior to the Adjustment Time, then such Party will pay such
      amount over to the other Party within 30 days of its receipt of such
      revenues, and (ii) that if a Party is notified (including receiving all
      reasonable details) of expenses incurred by the other Party for which such
      notified Party is responsible in accordance with this Agreement, the
      responsible Party shall pay such amount over to the other Party as
      promptly as reasonably possible and in any event within 30 days after
      receipt.

            (ii)  Notwithstanding Section 7(d)(i), above, and with regard to
      Serial Nos. 23549, 22328, 22300, 22308, 22309, 22310, 22311, and 22303 as
      shown on Exhibit A-2, under the heading Partial Assignments, SELLER shall
      use Reasonable Efforts to cause the State of New Mexico to change its
      records to reflect that SELLER is the record holder of those
      aforementioned easement.

            (iii) While SELLER intends to convey the Assets at the Closing, in
      the event it is determined after the Closing that: (A) any part of the
      Assets were not in fact conveyed to BUYER, and that the title to any part
      of the Assets is incorrectly in the name of SELLER, or (B) any asset not
      an Asset is conveyed to BUYER and that the title to such asset is
      incorrectly in the name of BUYER then each Party shall take

                                       30
<PAGE>

      all such action necessary to correctly convey such Assets to BUYER, or
      such assets to SELLER.

            (iv)  Solely for the purpose of complying with SELLER's obligations
      under Section 5(f)(ix), BUYER shall give SELLER and its designees access
      to the Assets in order that SELLER may conduct Remediation in accordance
      with Section 5(f)(ix).

      (E)   TAXES.

      Ad valorem and similar Taxes for the Facilities for the year 2004 shall be
      prorated between SELLER and BUYER as of the Adjustment Time, based on the
      amount of such Taxes paid with respect to the year 2003 (with no
      subsequent adjustment if the actual amount of such Taxes is different).
      SELLER shall be charged for such Taxes prior to such date pursuant to the
      adjustment provisions of Section 7(a). Notwithstanding anything in this
      Agreement to the contrary, no further adjustment shall be made for such
      general property Tax for the year 2004, BUYER hereby agreeing to assume
      the payment of all such 2004 general property Tax effective upon the
      Closing. SELLER shall pay general property Tax relating to the SELLER
      Interests for 2003 and prior years.

      (F)   ACCESS TO CONTRACTS.

      For seven years after the Closing Date, BUYER shall provide SELLER access
      (upon reasonable notice and at all reasonable times, and in a manner so as
      not to interfere with the normal business operations of BUYER) to and the
      right, at SELLER's sole cost, and expense, to copy all books, records,
      agreements and other documents relating to the SELLER Interests that were
      provided by SELLER to BUYER in connection with this Agreement and the
      transactions contemplated herein and that relate to the time period prior
      to the Closing Date.

      (G)   CUSTOMARY POST-CLOSING CONSENTS.

      SELLER shall use Reasonable Efforts after Closing to assist BUYER in
      obtaining Customary Post-Closing Consents; provided, however, the use of
      the phrase "Reasonable Efforts" in this sentence shall not require SELLER
      to take actions where it or any of the SELLER Group would incur any
      out-of-pocket cost or expense in connection therewith.

      (H)   MISCELLANEOUS EXPENSES.

      BUYER will be responsible for the cost of any recording or filing expenses
      incurred in connection with this Agreement and the transactions
      contemplated herein and the recording of the Assignments. Within 90 days
      after Closing, BUYER shall have (at no cost to SELLER) removed and/or
      replaced all SELLER's and SELLER'S Affiliates names and logos from all
      signs that constituted part of the SELLER Interests (including signs
      displaying a SELLER emergency contact telephone number). As promptly as
      practical after the Closing, BUYER shall post BUYER emergency contact
      telephone numbers in place of any SELLER emergency contact telephone
      number on such signs.

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<PAGE>

      (I)   BUYER OBLIGATIONS FOR POST-CLOSING CONTRACTS MATTERS.

      BUYER shall use its Reasonable Efforts to assure that any audit provision
      time period limitations contained in any contracts assigned under this
      Agreement are strictly enforced. In the event BUYER fails to use its
      Reasonable Efforts to enforce such provisions then BUYER shall,
      notwithstanding any other provision of the Agreement, fully protect,
      indemnify, and hold each SELLER Indemnified Person harmless from and
      against any and all Costs and Claims relating to, arising out of, or
      connected with BUYER's failure to enforce such audit provision time period
      limitations. The use of the phrase "Reasonable Efforts" in this paragraph
      shall not require BUYER to take actions where it or any of its Affiliates
      would incur any out-of-pocket cost or expense in connection therewith
      (unless SELLER agrees to reimburse BUYER for such costs and expenses).

      (J)   GRAMA RIDGE #1 SEGREGATION. With respect to the Grama Ridge #1
      Facility identified on Exhibit M ("Grama Ridge"):

            (i)   Grama Ridge shall be separated into two facilities as depicted
                  on Exhibit M. SELLER shall retain the portion of the facility
                  used in connection with the injection, storage and withdrawal
                  of natural gas. The remainder of the facility, as depicted on
                  Exhibit M, shall be included within the Facilities.

            (ii)  SELLER's current Emergency Shut Down (ESD) System covers a
                  single system common to all of Grama Ridge. The Parties will
                  determine before closing via Hazop study how best to either
                  separate or to share use of the common system in the future.

            (iii) SELLER's current electric power supply is common to all of
                  Grama Ridge. At its sole, cost, risk and expense, SELLER shall
                  segregate the electric supply system as necessary to complete
                  separation of the facility. SELLER and BUYER shall mutually
                  arrange for separate billings from electricity supplier for
                  their respective supplies.

            (iv)  At its sole, cost, risk and expense, SELLER shall (or shall
                  cause) pipe to be cut and re-laid as necessary to complete
                  separation of the facility.

            (v)   Condensate storage for hydrocarbon scrubber liquids from
                  various locations that SELLER is retaining and those conveyed
                  to BUYER hereunder is common to all of Grama Ridge. At BUYER's
                  option and at its sole cost, risk and expense, BUYER may
                  install a storage tank in the future as necessary to collect
                  natural gas liquids that are owned by BUYER. Unless and until
                  BUYER installs such storage tank, SELLER shall be entitled to
                  all natural gas liquids collected without obligation to BUYER.

            (vi)  At its sole, cost, risk and expense, BUYER shall (or shall
                  cause) a single methanol and waste lube oil tank to be
                  installed at the location identified on Exhibit M. Capacity,
                  design and specification of this tank shall be subject to
                  BUYER's prior written approval.

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<PAGE>

            (vii) BUYER shall design, purchase or relocate (or shall cause to be
                  relocated) custody transfer meters as needed at mutually
                  acceptable locations to assure measurement of FERC 311 volumes
                  delivered to SELLER for injection and underground storage and
                  for underground storage withdrawals (downstream of
                  dehydration) for redeliveries to BUYER into the FERC 311 line.
                  BUYER shall deliver the meters to SELLER and SELLER shall
                  install the meters at the agreed upon locations. SELLER shall
                  promptly reimburse BUYER 50% of the actual costs of said
                  design, purchase and/or relocation upon receipt of BUYER's
                  invoices. BUYER will be solely responsible for the operation,
                  maintenance and calibration of the meters.

            (viii) SELLER shall request the State of New Mexico to convert that
                  certain surface use right SELLER has on the date of this
                  Agreement with the State of New Mexico for the use of surface
                  rights at Grama Ridge into a document (termed by the State of
                  New Mexico as a Business Lease). If the State of New Mexico
                  does not issue a Business Lease to SELLER, the Parties will
                  implement another reasonable alternative to accomplish a
                  similar result.

            (ix)  From and after the Closing, each Party shall have access to
                  Grama Ridge in accordance with the Grama Ridge Access
                  Agreement. Further, and with regard to the Parties' facilities
                  shown on Exhibit M, SELLER shall partially assign the Business
                  Lease to BUYER thereby allocating an undivided right to the
                  use of approximately thirty percent (30%) of the surface at
                  the Grama Ridge site to BUYER.

            (x)   BUYER shall install and/or extend an access road on the south
                  side of Grama Ridge to allow access to the facilities acquired
                  by BUYER. The Parties shall cooperate in order that BUYER
                  shall have access, as necessary, to complete installation of
                  this road. The future extension to the road and BUYER's access
                  through the existing fence surrounding the site are generally
                  shown on Exhibit M, on the south side of the Grama Ridge
                  property.

8.    PURCHASE PRICE ADJUSTMENTS.

The Purchase Price payable at Closing shall be adjusted after Closing in
accordance with Section 7(a).

9.    TERMINATION.

      (A)   TERMINATION OF AGREEMENT.

      The Parties may terminate this Agreement as provided below:

            (i)   BUYER and SELLER may terminate this Agreement by mutual
      written consent at any time prior to the Closing;

                                       33
<PAGE>

            (ii)  BUYER may terminate this Agreement by giving notice to SELLER
      at any time prior to the Closing (A) in the event SELLER has breached any
      representation, warranty, or covenant contained in this Agreement in any
      material respect, BUYER has notified SELLER in writing of the breach, and
      the breach has continued without cure for a period of 15 days after the
      notice of breach; or (B) if the Closing shall not have occurred on or
      before June 1, 2004 by reason of the failure of any condition precedent
      under Section 6(a) above (unless the failure results primarily from BUYER
      breaching any representation, warranty, or covenant contained in this
      Agreement);

            (iii) SELLER may terminate this Agreement by giving notice to BUYER
      at any time prior to the Closing (A) in the event BUYER has breached any
      representation, warranty, or covenant contained in this Agreement in any
      material respect, SELLER has notified BUYER in writing of the breach, and
      the breach has continued without cure for a period of 15 days after the
      notice of breach or (B) if the Closing shall not have occurred on or
      before June 1, 2004 by reason of the failure of any condition precedent
      under Section 6(b) above (unless the failure results primarily from SELLER
      breaching any representation, warranty, or covenant contained in this
      Agreement);

            (iv)  If the Termination Amount exceeds, or could reasonably be
      expected to exceed, five percent (5%) of the Purchase Price, SELLER may
      terminate this Agreement by giving 15 days' prior notice to BUYER (which
      notice shall set forth in reasonable detail SELLER's calculation of each
      element of the Termination Amount and the Basis for SELLER's evaluation
      and calculation thereof), provided that BUYER shall have the right within
      such 15 days to notify SELLER in writing that BUYER is irrevocably
      obligating itself to be responsible for the claims and other obligations
      underlying such amounts and waiving its rights against SELLER (in the
      manner provided in the next sentence) to the extent the Termination Amount
      exceeds five percent (5%) of the Purchase Price. Such notice from BUYER
      shall be in a form reasonably acceptable to SELLER and shall specify the
      extent to which BUYER shall waive its rights to damages from SELLER
      (theretofore included in the Termination Amount) resulting from breaches
      by SELLER of its representations, warranties, and covenants in this
      Agreement, to not more than five percent (5%) of the Purchase Price. If
      BUYER provides such notice within such 15-day period, said notice from
      SELLER shall be of no further force and effect, and this Agreement shall
      not be terminated pursuant to this Section 9(a)(iv), and the obligations
      and waivers contained in such notice from BUYER shall be applicable and
      effective;

            (v)   Notwithstanding that Asserted Environmental Defects would be
      cured or remediated by SELLER pursuant to this Agreement, if the value of
      the Asserted Environmental Defects and Casualty Losses exceed ten percent
      (10%) of the Purchase Price, then BUYER or SELLER shall have the right to
      terminate this Agreement upon notice to SELLER; and

            (vi)  In the event of a Casualty Loss in accordance with Section
      5(k).

      (B)   EFFECT OF TERMINATION.

      If either Party terminates this Agreement pursuant to Section 9(a) above,
      all rights and obligations of the Parties hereunder (except under
      provisions of this Agreement

                                       34
<PAGE>

      that by their nature would continue after such termination) shall
      terminate without any Liability of either Party to the other Party (except
      for a Liability of a Party then in breach).

10.   ALLOCATION OF RESPONSIBILITIES AND INDEMNITIES.

Effective upon the Closing and subject to Section 11 below, the following shall
be applicable:

      (A)   SELLER EXISTING CONTRACT INDEMNITY OBLIGATION.

      SELLER releases each BUYER Indemnified Person from and shall fully
      protect, defend, indemnify, and hold each BUYER Indemnified Person
      harmless from and against the Allocable Share of any and all Claims
      (whenever asserted prior to the expiration of the notice periods set forth
      in the proviso to this subsection (a)) the Basis for which is attributable
      to the period prior to the Closing Date, relating to, arising out of, or
      connected with, any Existing Contract; provided that SELLER will have no
      obligation to protect, defend, indemnify, and hold any BUYER Indemnified
      Person harmless from and against any such Cost or Claim for which BUYER
      has not provided SELLER with notice of the Claim in accordance with this
      Agreement within two (2) years after the Closing Date.

      (B)   SELLER COVENANT INDEMNITY OBLIGATION.

      SELLER releases each BUYER Indemnified Person from and shall fully
      protect, defend, indemnify, and hold each BUYER Indemnified Person
      harmless from and against any and all Costs and Claims relating to,
      arising out of, or connected with (i) the Retained Liabilities and (ii)
      any breach or violation by SELLER of its covenants or agreements under
      this Agreement.

      (C)   SELLER REPRESENTATION AND WARRANTY INDEMNITY OBLIGATION.

      SELLER releases each BUYER Indemnified Person from and shall fully
      protect, defend, indemnify, and hold each BUYER Indemnified Person
      harmless from and against any and all Costs and Claims (whenever asserted
      prior to the expiration of the notice period set forth in the proviso to
      this subsection (c)) relating to, arising out of, or connected with, any
      breach or violation by SELLER of its representations and warranties
      contained in this Agreement; provided that SELLER will have no obligation
      to protect, defend, indemnify and hold any BUYER Indemnified Person
      harmless from and against any such Cost or Claim for which BUYER has not
      provided SELLER with notice of the Cost or Claim in accordance with this
      Agreement within two (2) years after the Closing Date. For purposes of
      this Section 10(c), in determining whether there has occurred a breach of
      a representation or warranty of SELLER contained in or made pursuant to
      this Agreement, as well as the amount of any Liability resulting
      therefrom, to the extent that (a) any Cost or Claim is less than the
      threshold set forth in Section 11(b), it shall be deemed that no breach
      has occurred with respect to the representation or warranty out of which
      such Cost or Claim arose and (b) the provisions of Section 3 are qualified
      by materiality or a Material Adverse Effect, such provisions shall be read
      and interpreted as if such qualification was not included therein.

                                       35
<PAGE>

      (D)   BUYER COVENANT INDEMNITY OBLIGATION.

      BUYER shall fully protect, defend, indemnify, and hold each SELLER
      Indemnified Person harmless from and against any and all Costs and Claims
      relating to, arising out of, or connected with, any breach or violation by
      BUYER of its covenants or agreements under this Agreement.

      (E)   BUYER REPRESENTATION AND WARRANTY INDEMNITY OBLIGATION.

      BUYER shall fully protect, defend, indemnify, and hold each SELLER
      Indemnified Person harmless from and against any and all Costs and Claims
      (whenever asserted prior to the expiration of the notice periods set forth
      in the provisos to this subsection (e)) relating to, arising out of, or
      connected with, any breach or violation by BUYER of its representations
      and warranties contained in this Agreement; provided that BUYER will have
      no obligation to protect, defend, indemnify and hold any SELLER
      Indemnified Person harmless from and against any such Cost or Claim for
      which SELLER has not provided BUYER with notice of the Cost or Claim in
      accordance with this Agreement within two (2) years after the Closing
      Date. For purposes of this Section 10(e), in determining whether there has
      occurred a breach of a representation or warranty of SELLER contained in
      or made pursuant to this Agreement, as well as the amount of any Liability
      resulting therefrom, to the extent that (a) any Cost or Claim is less than
      the threshold set forth in Section 11(c), it shall be deemed that no
      breach has occurred with respect to the representation or warranty out of
      which such Cost or Claim arose and (b) the provisions of Section 4 are
      qualified by materiality or a Material Adverse Effect, such provisions
      shall be read and interpreted as if such qualification was not included
      therein.

      (F)   BUYER GENERAL INDEMNITY OBLIGATION.

      Subject to the proviso at the end of this sentence, BUYER releases each
      SELLER Indemnified Person from and shall fully protect, defend, indemnify,
      and hold each SELLER Indemnified Person harmless from and against any and
      all Costs and Claims (whenever asserted) the Basis for which is
      attributable to any period of time whether prior to or after the Closing
      Date, relating to, arising out of, or connected with, the ownership or
      operation of the Assets or any part thereof or interest therein, provided,
      however, this release and indemnity shall not apply to or be effective up
      to the limits of SELLER's indemnifications of BUYER Indemnified Persons
      (other than with respect to any deductible amount applicable to such
      indemnity) as specifically set forth at Sections 10(a) and (c), above,
      unless and until, pursuant to the express terms of this Agreement, such
      indemnity has expired and is no longer in effect.

      (G)   NOTICE OF ASSERTED CLAIMS.

      If a Cost or Claim (either, an "Asserted Claim") is asserted against a
      Party for which the other Party may have an obligation of indemnity and
      defense under this Agreement, it is a condition precedent to such other
      Party's obligations of indemnity and defense under this Agreement that the
      Party seeking indemnification (the "Indemnified Party") give the party
      from which the Indemnified Party seeks indemnification (the "Indemnifying
      Party") reasonably prompt notice of the Asserted Claim setting forth the
      particulars associated with the Asserted Claim (including a

                                       36
<PAGE>

      copy of the Asserted Claim, if any) as then known by the Indemnified Party
      (the "Claim Notice").

      (H)   DEFENSE AND PAYMENT OF ASSERTED CLAIMS.

      Within 30 days after the Indemnifying Party receives a Claim Notice, the
      Indemnifying Party shall notify in writing the Indemnified Party whether
      or not the Indemnifying Party will assume responsibility for the Asserted
      Claim referenced in the Claim Notice. With respect to a Claim that is an
      Asserted Claim, if the Indemnifying Party refuses or otherwise fails to
      assume responsibility for the defense and payment of such Asserted Claim,
      the Indemnified Party may defend against, or enter into any settlement
      with respect to, such Asserted Claim as it deems appropriate without
      relieving the Indemnifying Party of any of the indemnification obligations
      with respect to such Asserted Claim. Failure of the Indemnifying Party to
      respond in writing to the Claim Notice within such 30-day period will be
      deemed a failure by the Indemnifying Party to assume responsibility for
      the defense and payment of the Asserted Claim. If the Indemnifying Party
      assumes responsibility for the defense and payment of a Claim that is an
      Asserted Claim, then (a) the Indemnifying Party shall defend the
      Indemnified Party against the Asserted Claim with counsel of the
      Indemnifying Party's choice reasonably acceptable to the Indemnified
      Party, provided that the Indemnified Party shall cooperate with the
      Indemnifying Party in all reasonable respects in such defense, (b) the
      Indemnifying Party shall pay any judgment entered or settlement with
      respect to such Asserted Claim, (c) the Indemnifying Party will not
      consent to the entry of any judgment or enter into any settlement with
      respect to the Asserted Claim that does not include a provision whereby
      the plaintiff or claimant in the matter releases the Indemnified Party
      from all Liability with respect to the Asserted Claim, and (d) the
      Indemnified Party will not consent to the entry of any judgment or enter
      into any settlement with respect to the Asserted Claim without the
      Indemnifying Party's prior consent, not to be unreasonably withheld or
      delayed. In all instances, the Indemnified Party may employ separate
      counsel and participate in the defense of an Asserted Claim; provided,
      however, the fees and expenses of counsel employed by the Indemnified
      Party will be borne solely by the Indemnified Party.

11.   CLAIM LIMITATIONS.

      (A)   EXPRESS NEGLIGENCE.

      The Parties indemnity and defense obligations herein shall apply
      regardless of cause or any negligent acts or omissions of any Indemnified
      Party in connection with the Basis for any Cost or Claim (including the
      sole negligence, concurrent negligence, or strict liability of such
      Indemnified Party).

      (B)   SELLER THRESHOLDS AND DEDUCTIBLES.

      SELLER shall have no obligation to protect, defend, indemnify, or hold
      harmless any BUYER Indemnified Person from or against any claim under
      Sections 10(a) or (c) above if the individual claim or series of related
      claims which arise out of substantially the same facts and circumstances
      involves an amount of less than $150,000; provided, that, the foregoing
      threshold and deductible shall not apply to Costs and Claims (i) with
      respect to obligations to make payments that are incurred

                                       37
<PAGE>

      during the period from and after December 1, 2003 until the Adjustment
      Time, based upon the failure to make payments when due and in a manner
      consistent with SELLER's practices during the two year period prior to the
      date hereof or (ii) based upon the failure to correctly calculate and pay
      amounts due under Contracts consistent with SELLER's practices during the
      two (2) year period prior to the date hereof, but only to the extent that
      SELLER received the economic benefit of an underpayment.

      (C)   BUYER THRESHOLDS AND DEDUCTIBLES.

      BUYER shall have no obligation to protect, defend, indemnify, or hold
      harmless any SELLER Indemnified Person from or against any Costs and/or
      Claims asserted on or after the Closing Date involving an amount of less
      than $150,000 under Sections 10(e) or (f) above.

      (D)   EXCLUSIVE REMEDY.

      Notwithstanding anything to the contrary in this Agreement, the
      indemnification provisions in Section 10, as modified by Section 11, shall
      be the exclusive remedy of BUYER and SELLER with respect to this Agreement
      and the transactions contemplated herein and SELLER and BUYER waive their
      rights to make any other claims, including those that may be available
      under any applicable securities laws. In furtherance of the foregoing, all
      other remedies available at law (including independent common-law or
      statutory rights or remedies a Party may have) or in equity, in tort,
      contract, or otherwise (now and in the future) are hereby waived, released
      and discharged by the Parties.

      (E)   NO WARRANTY AND DISCLAIMER.

      BUYER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
      SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES,
      AND BUYER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY,
      EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE
      ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
      MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO
      BUYER BY OR ON BEHALF OF SELLER. NOTWITHSTANDING ANYTHING TO THE CONTRARY
      IN THIS AGREEMENT, BUT IN NO WAY IN CONTRAVENTION OF SECTION 10, SELLER
      EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY WAIVES, AS TO PERSONAL
      PROPERTY, EQUIPMENT AND FIXTURES CONSTITUTING ANY PART OF THE SELLER
      INTERESTS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY
      IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY
      IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
      MATERIALS, (iv) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO
      CLAIM DIMINUTION OF CONSIDERATION, (v) ANY CLAIMS BY BUYER FOR DAMAGES
      BECAUSE OF ANY LATENT OR PATENT DEFECTS OR OTHER DEFECTS, WHETHER KNOWN OR
      UNKNOWN, AND (vi) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE
      LAW; IT BEING THE EXPRESS INTENTION OF BOTH BUYER AND SELLER THAT THE
      PERSONAL PROPERTY, EQUIPMENT

                                       38
<PAGE>

      AND FIXTURES INCLUDED WITHIN THE SELLER INTERESTS ARE HEREBY CONVEYED TO
      BUYER IN THEIR PRESENT CONDITION AND STATE OF REPAIR, "AS IS" AND "WHERE
      IS" WITH ALL FAULTS, AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH
      INSPECTIONS AS BUYER DEEMS APPROPRIATE. SELLER AND BUYER AGREE THAT, TO
      THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF
      CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS
      FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.

      (F)   SELLER INDEMNITY LIMITATION.

      Notwithstanding anything to the contrary herein expressed or implied:

            (i)   the maximum aggregate liability of SELLER to BUYER under
                  Sections 10(a) and (c) of this Agreement shall not exceed
                  twenty percent (20%) of the Purchase Price; and

            (ii)  SELLER's obligation to indemnify BUYER with respect to any
                  site listed in Section 1(c) of the Disclosure Schedule shall
                  terminate with respect to such of the sites at such time, if
                  any, that BUYER, its successors, assigns or any lessee,
                  assignee, purchaser or other Person present on such site at
                  BUYER's request or knowledge conducts a Phase II environmental
                  site assessment at such site; provided, however, that the
                  foregoing termination and waiver shall not apply if such Phase
                  II is (A) ordered by a Governmental Authority and was not the
                  result of a request by, or otherwise encouraged by BUYER or
                  its Affiliates, assignees or designees (excluding from any of
                  the foregoing notifications, if any, those required by law to
                  be made to a Governmental Authority), or (B) conducted by or
                  at the request of a record title owner of an interest in the
                  real estate at the site and was not the result of a request
                  by, or otherwise encouraged by BUYER or its Affiliates,
                  assignees or designees (excluding from any of the foregoing
                  notifications, if any, those required by law to be made to a
                  Governmental Authority or those required by an existing
                  contract or law to be made to the record title owner of an
                  interest in the real estate).

      (G)   BUYER REVIEW.

      BUYER acknowledges that it has such knowledge and experience in financial
      and business matters that it is capable of evaluating the merits and risks
      of its investment in the Assets contemplated by this Agreement, and is an
      "accredited investor," as defined by the Securities Act of 1933, as
      amended, and the rules promulgated thereunder, and is able to bear the
      economic risk of such investment for an indefinite period of time. BUYER
      acknowledges that it has had the opportunity to conduct due diligence, and
      will be permitted to conduct additional due diligence in accordance with
      Section 5, with respect to the SELLER Interests.

                                       39
<PAGE>

12.   EMPLOYEE MATTERS.

      (A)   TRANSFER OF COVERED EMPLOYEES.

      SELLER has provided BUYER with a complete list of the Covered Employees
      (determined as of the date of the list), which list shall include each
      such Covered Employee's name, job title, and work location. BUYER and
      SELLER shall schedule a joint meeting at a mutually agreeable time and
      place at least 30 days prior to the Closing Date between representatives
      of BUYER and the Covered Employees (determined as of the date of such
      meeting). SELLER shall make appropriate arrangements so that all Covered
      Employees are available for employment with the BUYER Group on the Closing
      Date. BUYER Group shall be under no obligation to offer employment to any
      Covered Employee. Nothing herein is intended to create any Claims or any
      rights on the part of any employee of SELLER, and no such employee shall
      be entitled to assert any Claims or rights hereunder. BUYER shall provide
      to SELLER at least five (5) work days prior to the Closing Date a list of
      the Covered Employees to whom BUYER Group will offer employment commencing
      as of the Closing Date. BUYER shall provide to SELLER on the Closing Date
      lists of Covered Employees who: (i) accepted BUYER's offer of employment;
      (ii) were offered and did not accept BUYER'S offer of employment, which
      shall include base salary; and (iii) were not offered employment. BUYER
      shall provide SELLER no more than three (3) days after the Closing Date a
      list of the Covered Employees who commenced employment with BUYER. Those
      Covered Employees who accept offers of employment with BUYER Group shall
      be referred to herein as "Transferred Employees."

      (B)   SELLER PLANS.

      SELLER shall remain solely responsible for all Liabilities with respect to
      the SELLER Plans, and BUYER Group shall not assume any SELLER Plan and
      shall have no obligations and shall assume no Liabilities with respect to
      the SELLER Plans. Without limiting the scope of the preceding sentence,
      SELLER shall retain all responsibility and Liabilities for all severance,
      benefits, compensation, and employment obligations for the Covered
      Employees (regardless of whether they become Transferred Employees) for
      the period prior to the Closing and associated with the termination of any
      Covered Employee's employment from SELLER Group, including any Claims
      relating to continuation of health coverage required pursuant to section
      4980B of the Code or part 6 of subtitle B of Title I of ERISA attributable
      to "qualifying events" and claims incurred by SELLER's employees or their
      covered dependents.

      (C)   NEW ARRANGEMENTS FOR TRANSFERRED EMPLOYEES.

      Effective as of the Closing Date, each of the Transferred Employees and
      his or her dependents shall be eligible for coverage under employee
      benefit plans, programs, practices, or arrangements as determined and
      provided in the sole discretion of BUYER Group (the "New Arrangements").

            (i)   BUYER acknowledges and agrees that, except as otherwise
      specifically provided in this Agreement, each of the Transferred Employees
      will be provided with employee pension or retirement benefit plans,
      employee welfare

                                       40
<PAGE>

      benefit plans, and other benefit and compensation plans, programs,
      policies, and practices that are offered by BUYER to its newly hired
      employees with similar backgrounds and experience. SELLER acknowledges
      that the employee benefit plans provided by BUYER may provide different
      benefits than are available under SELLER's employee benefit plans.

            (ii)  If the New Arrangements include a qualified defined benefit
      pension plan, each of the Transferred Employees shall be credited with
      service under such plan, for eligibility to become a participant and
      vesting purposes but not for any other purpose for which service is used
      under such plan, with the service credited to the Transferred Employee
      under the terms of the SELLER qualified defined benefit pension plan for
      such purposes as of the day immediately preceding the Closing Date.

            (iii) If the New Arrangements include a qualified defined
      contribution plan, each of the Transferred Employees considered shall be
      credited with service under such plan, for eligibility to become a
      participant and vesting purposes but not for any other purpose for which
      service is used under such plan, with the service credited to the
      Transferred Employee under the terms of the SELLER qualified defined
      contribution plan as of the day immediately preceding the Closing Date.

            (iv)  If the New Arrangements include a vacation pay plan or policy,
      each of the Transferred Employees shall be credited with service under
      such plan, for the purpose of determining eligibility to participate and
      to determine the amount of vacation they are entitled to receive annually
      beginning in 2005 but not for any other purpose for which service is used
      under such plan, with the service credited to the Transferred Employee
      under the terms of the SELLER vacation plan for such purposes as of the
      date immediately preceding the Closing Date; provided, however, that the
      New Arrangements shall not be required to take into account any unused
      vacation balances under the SELLER vacation plan. SELLER shall be
      responsible for all unused vacation balances and there shall be no such
      unused vacation balances transferred to BUYER. Transferred Employees will
      be granted up to 80 hours of vacation eligibility during 2004 by the BUYER
      to be taken no earlier than 30 days after Closing. Up to 40 hours of the
      80 hours of vacation granted in 2004 may be carried over into 2005,
      pursuant to the terms of the BUYER's vacation policy.

            (v)   If the New Arrangements include a service anniversary award
      program or policy, each of the Transferred Employees shall be credited
      with service under such plan, for eligibility to become a participant and
      for determining the level of their awards but not for any other purpose
      for which service is used under such plan, with the service credited to
      the Transferred Employee under the terms of the SELLER service award
      program for such purposes as of the day immediately preceding the Closing
      Date.

            (vi)  If the New Arrangements include a severance benefits plan,
      program or policy, each of the Transferred Employees shall be credited
      with service under such plan, for eligibility to become a participant and
      for determining the amount of their benefits but not for any other purpose
      for which service is used under such plan, with the service credited to
      the Transferred Employee under the terms of the

                                       41
<PAGE>

      SELLER severance benefit plan for such purposes as of the day immediately
      preceding the Closing Day.

            (vii) SELLER shall promptly provide BUYER with all necessary
      information to enable BUYER Group to provide service credit to each of the
      Transferred Employees in accordance with the provisions of this Section
      12(c) and Section 12(d).

      (D)   WELFARE BENEFITS.

      The BUYER Group shall waive or cause the plans sponsored or maintained by
      the BUYER Group to waive the application of all "prior existing
      conditions" provisions of all plans that apply to the Transferred
      Employees or their dependants only to the extent that those "prior
      existing conditions" were covered under both the SELLER Plans and the New
      Arrangements. In addition, BUYER Group shall apply towards any deductible
      requirements and out-of-pocket maximum limits under BUYER Group's medical
      and dental Welfare Benefits (as hereinafter defined) under the New
      Arrangements that are applicable for the plan year in which the Closing
      Date occurs, any amounts paid by any of the Transferred Employees toward
      such requirements and limits under any similar SELLER Group medical
      Welfare Benefits plans in which he or she participated during such plan
      year. SELLER shall cause the required information about deductibles and
      maximum out-of-pocket expenses incurred for the current calendar year and
      prior to Closing to be determined as reflected in the records of its third
      party claims administrators as of the end of the calendar month next
      following 30 days after Closing. With respect to the immediately preceding
      sentence, in accordance with the privacy provisions of the Health
      Insurance Portability and Accountability Act pursuant to 45 C.F.R. part
      160 and part 164, subparts A and E, SELLER shall instruct the third party
      administrators on behalf of the respective plans to transfer the
      information about deductible and maximum out-of-pocket expenses incurred
      for the current calendar year and prior to the Closing on each Transferred
      Employee and his or her covered dependents as reflected in the records of
      SELLER's third party administrators as of the end of the calendar month
      next following 30 days after Closing to the third party administrators of
      the BUYER Group's corresponding plans within fifteen (15) business days
      after the end of such calendar month. Claims of Transferred Employees and
      their eligible beneficiaries and dependents for medical, dental,
      prescription drug, vision care, life insurance and/or short-term
      disability benefits ("Welfare Benefits") (other than long-term disability
      benefits, which are addressed below) that are incurred before the Closing
      Date shall be the sole responsibility of SELLER and the SELLER Plans.
      Claims of Transferred Employees and their eligible beneficiaries and
      dependents for Welfare Benefits (other than long-term disability benefits,
      which are addressed below) that are incurred on or after the Closing Date
      shall be the sole responsibility of BUYER Group and the New Arrangements.
      For purposes of the preceding provisions of this Section 12(d), a
      medical/dental claim shall be considered incurred on the date when the
      medical/dental services are rendered or medical/dental supplies are
      provided, and not when the condition arose or when the course of treatment
      began; provided, however, that claims relating to a hospital confinement
      that begins before the Closing Date but continues on the Closing Date or
      thereafter shall be treated as incurred before the Closing Date. Claims of
      Transferred Employees and their eligible beneficiaries and dependents for
      long-term disability Welfare Benefits that arise out of occurrences prior
      to the Closing Date shall be the

                                       42
<PAGE>

      sole responsibility of SELLER and the SELLER Plans. Claims of Transferred
      Employees and their eligible beneficiaries and dependents for long-term
      disability Welfare Benefits that arise out of occurrences on or after the
      Closing Date shall be the sole responsibility of BUYER Group and the New
      Arrangements.

      (E)   401(K) PLAN.

      As soon as administratively feasible after the Closing Date, and subject
      to reasonable requirements, the Parties may enter into an agreement
      whereby BUYER shall cause the trustee of BUYER's 401(k) plan trust (to the
      extent permitted under BUYER' 401(k) plan) to accept direct rollovers from
      SELLER's 401(k) plan trust for each of the Transferred Employees electing
      the same with respect to a distribution of his or her vested account
      thereunder; provided, however, that BUYER shall have no obligation to
      cause BUYER's 401(k) plan trust to accept such rollovers if BUYER does not
      receive from SELLER proof which is satisfactory to BUYER that the SELLER's
      401(k) plan will be fully qualified under section 401(a) of the Code at
      the time of such rollovers. Participant promissory notes for any
      outstanding loans of Transferred Employees under SELLER's 401(k) plan may
      be rolled over to BUYER's 401(k) plan trust along with all or a portion of
      their account balance to meet the BUYER plan threshold for loan amount(s)
      not exceeding 50% of account balance.

      (F)   WORKERS' COMPENSATION.

      Claims by Transferred Employees for workers' compensation benefits arising
      out of occurrences prior to the Closing Date shall be the responsibility
      of SELLER. Claims by Transferred Employees for workers' compensation
      benefits arising out of occurrences on or after the Closing Date shall be
      the responsibility of BUYER.

      (G)   NO RESTRICTIONS ON CHANGES.

      Nothing herein shall be deemed or construed to (i) give rise to any
      rights, claims, benefits, or causes of action by any Transferred Employees
      or (ii) prevent, restrict, or limit BUYER Group following the Closing from
      terminating the employment of any Transferred Employees, modifying the
      terms of employment of any Transferred Employees, or modifying,
      terminating or replacing any of the New Arrangements as it may deem
      appropriate.

      (H)   CONFLICT.

      In the event of any conflict between this Section 12 and Section 10, the
      provisions of this Section 12 shall control and prevail.

13.   ARBITRATION.

Any Arbitrable Disputes between the Parties shall be handled in accordance with
Exhibit J.

                                       43
<PAGE>

14.   MISCELLANEOUS.

      (A)   NO THIRD PARTY BENEFICIARIES.

      Except with respect to BUYER Indemnified Persons and with respect to
      SELLER Indemnified Persons, this Agreement shall not confer any rights or
      remedies upon any Person other than the Parties and their respective
      successors and permitted assigns.

      (B)   ENTIRE AGREEMENT.

      Except for the Confidentiality Agreement, this Agreement constitutes the
      entire agreement between the Parties and supersedes any prior
      understandings, agreements, or representations by or between the Parties,
      written or oral, to the extent they related in any way to the subject
      matter hereof. To the extent not previously terminated, the Parties hereby
      terminate, and each Party hereby waives all rights and claims it may have
      against the other Party, under each such understandings, agreements, or
      representations (except for the Confidentiality Agreement and this
      Agreement) or other instrument. At Closing, the Confidentiality Agreement
      and any Site Access Agreement executed in connection therewith shall
      terminate.

      (C)   SUCCESSION.

      This Agreement shall be binding upon and inure to the benefit of the
      Parties named herein and their respective successors and permitted
      assigns.

      (D)   COUNTERPARTS.

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed an original but all of which together will constitute one
      and the same instrument.

      (E)   NOTICES.

      All notices, approvals, consents, requests, demands, claims, statements
      and other communications hereunder will be in writing. Any notice,
      request, demand, claim, or other communication hereunder shall be
      addressed to the intended recipient as set forth below:

      If to SELLER:        ConocoPhillips Company
                           600 North Dairy Ashford
                           Houston, Texas  77079
                           Attn: Mary Ann Pearce, Manager of Business
                           Development, Land & Gas Activities
                           Fax No.: (281) 293-2036

                                       44
<PAGE>

      If to BUYER:

                           Duke Energy Field Services, LP
                           370 - 17th Street, Suite 2500
                           Denver, Colorado 80202
                           Telephone: (303) 595-3331
                           Facsimile: (303) 605-2225
                           Attn:  President

      With a copy to:

                           Duke Energy Field Services, LP
                           370 - 17th Street, Suite 2500
                           Denver, Colorado 80202
                           Telephone: (303) 595-3331
                           Facsimile: (303) 605-2226
                           Attn: General Counsel

      Any Party may send any notice, request, demand, claim, or other
      communication hereunder to the intended recipient at the address set forth
      above using personal delivery, expedited courier, messenger service, fax
      or registered or certified mail, but no such notice, request, demand,
      claim, or other communication shall be deemed to have been duly given
      unless and until it actually is received by the intended recipient. Any
      Party may change the address to which notices, requests, demands, claims,
      and other communications hereunder are to be delivered by giving the other
      Party notice in the manner herein set forth.

      (F)   GOVERNING LAW.

      This Agreement shall be governed by and construed in accordance with the
      domestic laws of the State of Texas without giving effect to any choice or
      conflict of law provision that would cause the application of the laws of
      any jurisdiction other than the State of Texas.

      (G)   AMENDMENTS AND WAIVERS.

      No amendment of any provision of this Agreement shall be valid unless the
      same shall be in writing and signed by BUYER and SELLER. No waiver by any
      Party of any default, misrepresentation, or breach of warranty or covenant
      hereunder, whether intentional or not, shall be deemed to extend to any
      prior or subsequent default, misrepresentation, or breach of warranty or
      covenant hereunder or affect in any way any rights arising by virtue of
      any prior or subsequent such occurrence.

      (H)   SEVERABILITY.

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

                                       45
<PAGE>

      (I)   EXPENSES.

      Unless specifically provided otherwise in this Agreement, each of BUYER
      and SELLER will bear its own costs and expenses (including legal fees and
      expenses) incurred in connection with this Agreement and the transactions
      contemplated hereby. SELLER will pay all costs and expenses of all
      investment advisors and brokers that SELLER engaged with respect to the
      transactions contemplated herein.

      (J)   CONSTRUCTION.

      In interpreting and construing this Agreement, the following principles
      shall be followed:

            (i)   The Parties have participated jointly in the negotiation and
                  drafting of this Agreement. In the event an ambiguity or
                  question of intent or interpretation arises, this Agreement
                  shall be construed as if drafted jointly by the Parties and no
                  presumption or burden of proof shall arise favoring or
                  disfavoring any Party by virtue of the authorship of any of
                  the provisions of this Agreement. Any reference to any
                  federal, state, or local statute or law shall be deemed also
                  to refer to all amendments thereof and all rules and
                  regulations promulgated thereunder, unless the context
                  requires otherwise. Any approval, consent, or waiver by a
                  Party hereunder may be granted or withheld in its sole
                  discretion, unless otherwise expressly provided;

            (ii)  the terms "herein," "hereof," "hereby," and "hereunder," or
                  other similar terms, refer to this Agreement as a whole and
                  not only to the particular Article, Section or other
                  subdivision in which any such terms may be employed;

            (iii) references to Articles, Sections, and other subdivisions refer
                  to the Articles, Sections, and other subdivisions of this
                  Agreement;

            (iv)  all accounting terms not otherwise defined herein have the
                  meanings assigned to them in accordance with GAAP;

            (v)   no consideration shall be given to the captions of the
                  articles, Sections, subsections, or clauses, which are
                  inserted for convenience in locating the provisions of this
                  Agreement or the Disclosure Schedule and not as an aid in its
                  construction;

            (vi)  the word "includes" and its syntactical variants mean
                  "includes, but is not limited to" and corresponding
                  syntactical variant expressions;

            (vii) the plural shall be deemed to include the singular, and vice
                  versa;

            (viii) each exhibit, attachment, and schedule to this Agreement is a
                  part of this Agreement and is hereby incorporated by
                  reference;

            (ix)  "or" means "either or both";

            (x)   unless the context otherwise requires, a term has the meaning
                  assigned to it;

            (xi)  reference to "day" or "days" shall refer to calendar days
                  unless otherwise stated; and

            (xii) Other terms may be defined elsewhere in the text of this
                  Agreement and shall have the meaning indicated throughout this
                  Agreement.

                                       46
<PAGE>

      (K)   INCORPORATION OF EXHIBITS AND SCHEDULES.

      The Exhibits and Schedules identified in this Agreement are incorporated
      herein by reference and made a part hereof.

      (L)   SALES TAXES.

      While it is the intent and understanding of the Parties that no sales or
      use Taxes will be attributable to or incurred in connection with the
      transactions contemplated by this Agreement, any such sales or use Taxes
      shall be borne by BUYER.

      (M)   WAIVER OF CERTAIN DAMAGES.

      Each of the Parties expressly waives and agrees not to seek indirect,
      consequential, punitive or exemplary damages of any kind with respect to
      any dispute arising out of or relating to this Agreement or breach hereof;
      provided that this Section 14(m) will not diminish or affect in any way
      the right of any Party to recover such damages paid to a non-Affiliated
      third Person.

      (N)   PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.

      Neither Party shall, prior to or after the Closing, (i) issue any press
      release or make any public announcement relating to the subject matter of
      this Agreement, or (ii) disclose to any third Person the economic terms of
      the transactions contemplated by this Agreement, without in either case
      the prior approval of the other Party; provided, however, that either
      Party may make any public disclosure it believes in good faith is required
      by Applicable Law or any listing or trading agreement concerning its
      publicly-traded securities, in which case the disclosing Party will use
      its Reasonable Efforts to advise the other Party prior to making the
      disclosure.

      (O)   LIKE-KIND EXCHANGE.

      SELLER shall have the right at any time prior to Closing to assign all or
      a portion of its rights (but not its obligations) under this Agreement to
      a Qualified Intermediary in order to accomplish the transaction in a
      manner that will comply, either in whole or in part, with the requirements
      of a like-kind exchange pursuant to Section 1031 of the Code. Likewise,
      BUYER shall have the right at any time prior to Closing to assign all or a
      portion of its rights (but not its obligations) under this Agreement to a
      Qualified Intermediary for the same purpose. In the event either Party
      assigns its rights under this Agreement pursuant to this Section 14(o),
      such Party agrees to notify the other Party in writing of such assignment
      at or before Closing. If SELLER assigns its rights under this Agreement
      for this purpose, BUYER agrees to (i) consent to SELLER's assignment of
      its rights in this Agreement in the form of Exhibit I, and (ii) pay the
      Purchase Price into a qualified escrow or qualified trust account at
      Closing as directed in writing. If BUYER assigns its rights under this
      Agreement for this purpose, SELLER agrees to (i) consent to BUYER's
      assignment of its rights in this Agreement in the form of Exhibit I, (ii)
      accept the Purchase Price from the qualified escrow or qualified trust
      account at Closing, and (iii) at Closing, convey and assign directly to
      BUYER the Assets upon satisfaction of the other conditions to Closing and
      other terms and conditions hereof. The Parties acknowledge and agree that
      any assignment of this Agreement to a Qualified

                                       47
<PAGE>

      Intermediary shall not release either Party from any of their respective
      liabilities and obligations to each other under this Agreement and that
      neither Party represents to the other that any particular tax treatment
      will be given to either Party as a result thereof.

      (P)   ASSIGNMENT

      Except as otherwise explicitly provided in this Agreement, no Party may
      assign or transfer either this Agreement or any of its rights, interests,
      or obligations hereunder without the prior approval of the other Party and
      any attempted assignment, delegation or transfer in breach hereof shall be
      void ab initio.

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

CONOCOPHILLIPS COMPANY                          DUKE ENERGY FIELD SERVICES, LP

                                                By: /s/ Greg K. Smith
                                                    ----------------------------
By:  /s/ Sigmund L. Cornelius
     ----------------------------------
                                                Title: Vice President

Title: President - U.S. Lower 48, Latin
       America & Midstream

                                       48<PAGE>
                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT
                               PATRICK J. MAHAFFY
                                  FEBRUARY 2004

         THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made as of this 23rd day
of February 2004 by and between PHARMION CORPORATION, with principal offices at
2525 28th Street, Boulder, Colorado (the "COMPANY"), and PATRICK J. MAHAFFY of
845 5th Street, Boulder, Colorado ("EXECUTIVE," and together with the Company,
the "PARTIES").

         WHEREAS, the Executive is currently in the employ of the Company on the
terms and subject to the conditions as originally set forth between them;

         WHEREAS, the parties intend that this Employment Agreement shall
supersede and replace the original verbal or written agreements;

         NOW, THEREFORE, in consideration of the promises, mutual covenants, the
above recitals, and the agreements herein set forth, and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
Parties agree to the following terms and conditions of Executive's employment:

         1. EMPLOYMENT. The Company hereby agrees to employ Executive as Chief
Executive Officer, and Executive hereby accepts such employment upon the terms
and conditions set forth herein and agrees to perform duties as assigned by the
Company. Executive's employment as provided herein, shall be deemed to have
commenced, January 1, 2000 ("EFFECTIVE DATE"), and shall continue until
terminated pursuant to the provisions of Section 10 below ("TERMINATION").

         2. AT-WILL EMPLOYMENT. IT IS UNDERSTOOD AND AGREED BY THE COMPANY AND
EXECUTIVE THAT THIS AGREEMENT DOES NOT CONTAIN ANY PROMISE OR REPRESENTATION
CONCERNING THE DURATION OF EXECUTIVE'S EMPLOYMENT WITH THE COMPANY. EXECUTIVE
SPECIFICALLY ACKNOWLEDGES THAT HIS EMPLOYMENT WITH THE COMPANY IS AT-WILL AND
MAY BE ALTERED OR TERMINATED BY EITHER EXECUTIVE OR THE COMPANY AT ANY TIME,
WITH OR WITHOUT CAUSE AND/OR WITH OR WITHOUT NOTICE. EXECUTIVE ACKNOWLEDGES THAT
THE COMPANY'S ONLY OBLIGATIONS, IF ANY, UPON TERMINATION OF EXECUTIVE'S
EMPLOYMENT ARE SET FORTH IN SECTION 10 BELOW, WHICH SECTION DOES NOT ALTER THE
AT-WILL NATURE OF EXECUTIVE'S EMPLOYMENT. THE NATURE, TERMS OR CONDITIONS OF
EXECUTIVE'S EMPLOYMENT WITH THE COMPANY CANNOT BE CHANGED BY ANY ORAL
REPRESENTATION, CUSTOM, HABIT OR PRACTICE, OR ANY OTHER EXCEPT AS PROVIDED FOR
IN THE FINAL SENTENCE OF THIS SECTION 2. IN ADDITION, THAT THE RATE OF SALARY OR
OTHER COMPENSATION IS STATED IN UNITS OF YEARS OR MONTHS DOES NOT ALTER THE
AT-WILL NATURE OF THE EMPLOYMENT, AND DOES NOT MEAN AND SHOULD NOT BE
INTERPRETED TO MEAN THAT EXECUTIVE IS GUARANTEED EMPLOYMENT TO THE END OF ANY
PERIOD OF TIME OR FOR ANY PERIOD OF TIME. IN THE EVENT OF CONFLICT BETWEEN THIS
DISCLAIMER AND

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Patrick Mahaffy
February 2004
                                       1
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ANY OTHER STATEMENT, ORAL OR WRITTEN, PRESENT OR FUTURE, CONCERNING TERMS AND
CONDITIONS OF EMPLOYMENT, THE AT-WILL RELATIONSHIP CONFIRMED BY THIS DISCLAIMER
SHALL CONTROL. THIS AT-WILL STATUS CANNOT BE ALTERED EXCEPT IN WRITING SIGNED BY
EXECUTIVE AND THE COMPANY, WITH EXPLICIT APPROVAL OF THE BOARD OF DIRECTORS.

         3. DUTIES. Executive shall render exclusive, full-time services (except
if/as agreed to in advance by the Company Board of Directors) to the Company as
its Chief Executive Officer. He shall render such services diligently. Executive
shall perform services under this Agreement at the Boulder, Colorado office of
the Company, from such other locations as directed by the Company, and from
locations necessary to perform the duties of Chief Executive Officer under this
Agreement. Executive's responsibilities, title, working conditions, location,
duties and/or any other aspect of Executive's employment may be changed, added
to or eliminated during employment at the sole discretion of the Company. During
the Term of this Agreement, Executive shall devote his time, skill and attention
to the performance of his duties on behalf of the Company.

         4. POLICIES AND PROCEDURES. Executive agrees that he is subject to and
will comply with the policies and procedures of the Company, as such policies
and procedures may be modified, added to or eliminated from time to time at the
sole discretion of the Company, except to the extent any such policy or
procedure specifically conflicts with the express terms of this Agreement.
Executive further agrees and acknowledges that any written or oral policies and
procedures of the Company do not constitute contracts between the Company and
Executive.

         5. COMPENSATION.

                  (a) BASE SALARY. For services rendered under this Agreement,
the Company agrees to pay to Executive, and Executive agrees to accept a salary
of $350,000 per annum ("Base Salary"). Such Base Salary shall be payable in
installments in accordance with the Company's normal payroll practices and shall
be subject to such deductions or withholdings as the Company is required to make
pursuant to law, or by further agreement with Executive. Executive's Base Salary
will be reviewed annually by the Company's Board of Directors and may be
adjusted from time to time as the Board, in its sole discretion, deems
appropriate.

                  (b) BONUS. Executive will be eligible to participate in a
bonus plan pursuant to which he may be entitled to receive an annual bonus of
his Base Salary based upon the achievement by Executive and the Company of
certain milestones as determined solely in the discretion of the Company's Board
of Directors.

         6. RELOCATION EXPENSES. N/A

         7. OTHER BENEFITS. While employed by the Company as provided herein:

                  (a) EMPLOYEE BENEFITS. Executive shall be entitled to
participate in the Company's various employee benefit plans as such plans are
established pursuant to the terms and conditions of such plans. Currently, the
Company has adopted the following plans: Group health,

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Patrick Mahaffy
February 2004
                                       2
<PAGE>

vision and dental insurance plan; short and long term disability plan, life
insurance plan; and 401(k) plan. The Company reserves the right to alter, amend
and to terminate the benefits received by Executive from time to time at the
Company's discretion, and nothing in this Section shall require that the Company
adopt, amend, maintain or terminate any employee benefit plan.

                  (b) EXPENSE REIMBURSEMENT. Executive shall receive, against
presentation of proper receipts and vouchers, reimbursement for direct and
reasonable out-of-pocket expenses incurred in connection with the performance of
his duties hereunder, according to the policies of the Company.

                  (c) PAID VACATION TIME. Executive shall be entitled to 4 weeks
paid vacation time per year in accordance with the Company's vacation time
policy.

         8. PROPRIETARY AND OTHER OBLIGATIONS. Executive acknowledges that
signing and complying with the Confidential Information and Invention Assignment
Agreement ("Confidentiality Agreement") attached as Attachment A, is a condition
of his employment by the Company. Executive therefore agrees to sign and comply
with the Confidentiality Agreement and acknowledges that by beginning employment
with the Company, he will be deemed to have signed and agreed to all provisions
of the Confidentiality Agreement.

         9. TERMINATION. Executive's employment hereunder may be terminated
without any breach of this Agreement under the following circumstances (each, a
"Termination"):

                  (a) TERMINATION UPON EXECUTIVE'S DEATH. This Agreement shall
terminate upon the death of Executive.

                  (b) TERMINATION UPON EXECUTIVE'S DISABILITY. Subject to any
state or federal law or regulation governing employees with disabilities, the
Company may terminate this Agreement upon the Disability of Executive. For
purposes of this Agreement, "Disability" shall mean that Executive, due to
illness, accident, or other physical or mental incapacity, has been
substantially unable to perform the duties required of him under this Agreement,
either with or without reasonable assistance, for a continuous period of more
than three months.

                  (c) TERMINATION BY THE COMPANY FOR JUST CAUSE. The Company may
terminate Executive's employment under this Agreement for Just Cause. For
purposes of this Agreement, "Just Cause" for termination shall mean that the
Company, acting in good faith based upon the information then known to it,
determines that:

                           (i) Executive has committed or engaged in negligent
or willful conduct that is likely to be detrimental to the Company;

                           (ii) Executive has engaged in acts which constitute
theft, fraud, or other illegal or dishonest conduct which are considered to be
harmful to the Company as determined by the majority vote of its Board of
Directors;

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Patrick Mahaffy
February 2004
                                       3
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                           (iii) Executive has willfully disobeyed the
reasonable and lawful directives of the Company's Board of Directors;

                           (iv) Executive has refused or is unwilling to perform
his job duties;

                           (v) Executive has failed adequately to perform his
job duties (provided, however, that the Company shall provide Executive with
written notice of the deficiencies in his performance and Executive shall be
given 45 days to remedy such deficiencies);

                           (vi) Executive has demonstrated habitual absenteeism;

                           (vii) Executive is substantially dependent on alcohol
or any controlled substance or violates any general Company policy with regard
to alcohol or controlled substances;

                           (viii) Executive has engaged in acts which constitute
sexual or other forms of illegal harassment or discrimination;

                           (ix) Executive makes public remarks that disparage
the Company, its Board of Directors, officers, directors, advisors, executives,
affiliates or subsidiaries;

                           (x) Executive violates his fiduciary duty to the
Company, or his duty of loyalty to the Company; or

                           (xi) Executive breaches any term of this Agreement,
including the Confidentiality Agreement attached hereto as Attachment A.

         The Parties acknowledge that this definition of "Just Cause" in not
intended and does not apply to any aspect of the relationship between the
Company and any of its employees, including Executive, beyond determining
Executive's eligibility for severance pay pursuant to Section 10 below.

                  (d) TERMINATION BY THE COMPANY WITHOUT JUST CAUSE. The Company
may terminate Executive's employment without Just Cause upon 30 days' advance
written notice to Executive.

                  (e) TERMINATION BY EXECUTIVE FOR GOOD REASON. Upon written
notice to the Company, Executive may terminate his employment under this
Agreement for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:

                           (i) The Company becoming insolvent, as evidenced by
its inability to meet its obligations in the ordinary course of business;

                           (ii) A reduction in Executive's Base Salary of more
than 10% per year, without Executive's consent;

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Patrick Mahaffy
February 2004
                                       4
<PAGE>

                           (iii) Executive being required to relocate his
residence further than 45 miles from the Company's office located at 2525 28th
Street, Boulder, Colorado, without Executive's consent; or

                           (iv) A material reduction in the scope of Executive's
duties, or a material change in the content of Executive's duties.

         Executive must provide the Company with written notice of his decision
to terminate his employment for Good Reason pursuant to this Section 9(e) no
later than 90 days following the receipt of a notice from the company than an
act or event constituting Good Reason has occurred.

                  (f) TERMINATION BY EXECUTIVE FOR OTHER THAN GOOD REASON.
Executive may terminate his employment under this Agreement other than for Good
Reason upon 30 days' advance written notice to the Company.

         10. COMPENSATION AND OTHER BENEFITS UPON TERMINATION. Executive shall
be entitled to the following compensation and benefits upon Termination:

                  (a) TERMINATION AS A RESULT OF EXECUTIVE'S DEATH OR
DISABILITY. Upon Termination pursuant to Section 9(a) [termination as a result
of Executive's death], or Section 9(b) [termination as a result of Executive's
Disability], Executive shall be entitled to receive any Base Salary and prorated
bonus earned but unpaid as of the date of Termination, all accrued but unused
vacation benefits as of the date of Termination, and any business expenses that
were incurred but not reimbursed as of the date of Termination.

                  (b) TERMINATION BY THE COMPANY FOR JUST CAUSE; TERMINATION BY
EXECUTIVE FOR OTHER THAN GOOD REASON. Upon Termination pursuant Section 9(c)
[termination by The Company for Just Cause] or Section 9(f) [termination by
Executive for other than Good Reason], Executive shall be entitled to receive
any Base Salary earned but unpaid as of the date of Termination, all accrued but
unused vacation benefits as of the date of Termination, and any business
expenses that were incurred but not reimbursed as of the date of Termination.

                  (c) TERMINATION BY THE COMPANY WITHOUT JUST CAUSE, TERMINATION
BY EXECUTIVE FOR GOOD REASON. Upon Termination pursuant to Section 9(d)
[termination by the Company without Just Cause] or Section 9(e) [termination by
Executive for Good Reason], Executive shall be entitled to receive any Base
Salary earned but unpaid as of the date of Termination, all accrued but unused
vacation benefits as of the date of Termination, and any business expenses that
were incurred but not reimbursed as of the date of Termination. In addition,
upon the execution by Executive and delivery to the Company of a Request for
Severance Pay and Release of Claims in the form attached hereto as Attachment B
(the "RELEASE") releasing all claims that Executive may have against Company as
of the date Executive signs such Release, Executive shall be entitled to receive
severance pay ("SEVERANCE PAY") made either in a lump sum or in twenty-four
equal monthly installments, in the Company's sole discretion, equal to
twenty-four (24) months' of Executive's Base Salary (calculated at the same rate
of Base Salary most recently applicable to Executive immediately prior to the
date of

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Patrick Mahaffy
February 2004
                                       5
<PAGE>

termination), and 24 months COBRA benefit coverage for health, dental and vision
insurance (at a coverage level equal to or below coverage on the day before the
date of termination). The Severance Pay shall be subject to such deductions or
withholdings as the Company is required to make pursuant to law. Executive shall
not be entitled to receive any Severance Pay from the Company until the Release
has become effective pursuant to its terms.

                  (d) TERMINATION AFTER CHANGE IN CONTROL. Upon a Termination
pursuant to Section 9(d) [termination by the Company without Just Cause] or
Section 9(e) [termination by Executive for Good Reason] occurring on or within
twenty-four (24) months after a Change in Control (as defined below), (i) the
vesting and exercisability of all of Executive's stock options and other
equity-based awards will be accelerated in full so that all such stock options
will be immediately exercisable for fully vested stock and any other stock
awards will be fully vested as of the date of such Termination, and (ii)
Executive's stock options will remain exercisable until the first anniversary of
Executive's date of Termination. For purposes of this Agreement, "Change of
Control" shall mean (1) a sale of all or substantially all the assets of the
Company; (2) a merger into or consolidation of the Company with any other
corporation, except any such merger or consolidation involving the Company or a
subsidiary of the Company in which the holders of capital stock of the Company
immediately prior to such merger or consolidation continue to hold immediately
following such merger or consolidation at least 50% by voting power of the
capital stock of (a) the surviving or resulting corporation or (b) if the
surviving or resulting corporation is a wholly owned subsidiary of another
corporation immediately following such merger or consolidation, the parent
corporation of such surviving or resulting corporation, (3) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any parent or subsidiary
corporation of the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, or (4)
individuals who, on the date of execution of this Amended and Restated
Agreement, are members of the Company's Board of Directors (the "Incumbent
Board") cease for any reason to constitute at least a majority of the members of
the Board of Directors; provided, however, that if the appointment or election
(or nomination for election) of any new Board of Directors member was approved
or recommended by a majority vote of the members of the Incumbent Board then
still in office, such new member shall, for purposes of this Agreement, be
considered as a member of the Incumbent Board.

                  (e) PARACHUTE PAYMENT GROSS-UP. If any payment or benefit
Executive would receive from the Company or otherwise would constitute a
parachute payment that would subject Executive to an excise tax ("Excise Tax")
under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision), Executive shall be entitled to receive an
additional lump sum payment in cash (the "Tax Gross-Up"), subject to mandatory
tax withholding, which, when added to all payments and benefits allocable to
Executive that constitute parachute payments, provides Executive with the same
after-tax compensation that he would have received from such parachute payments
had none of such compensation constituted a parachute payment. The amount of any
such Tax Gross-Up to which Executive becomes entitled under this paragraph will
be determined pursuant to the following formula:

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Patrick Mahaffy
February 2004
                                       6
<PAGE>

                  X = Y divided by (1 - (A + B + C)), where

                  X is the total dollar amount of the Tax Gross-Up payable to
                  Executive;

                  Y is the total Excise Tax imposed on Executive;

                  A is the Excise Tax rate applicable to Executive's parachute
                  payments;

                  B is the highest combined marginal federal income and
                  applicable state income tax rate in effect for Executive,
                  after taking into account the deductibility of state income
                  taxes against federal income taxes to the extent allowable,
                  for the calendar year in which the Tax Gross-Up is paid; and

                  C is the applicable Hospital Insurance (Medicare) Tax Rate in
                  effect for Executive with respect to the Tax Gross-Up payment
                  for the calendar year in which the Tax Gross-Up is paid;

provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him with such
reimbursement.

Within ninety (90) days after a determination is made by the Internal Revenue
Service or Executive's tax advisor that an item of compensation or benefit
payable hereunder constitutes a parachute payment under Code Section 280G for
which Executive is liable for an Excise Tax, Executive shall identify the nature
of the payment to the Company and submit to the Company the calculation of the
Excise Tax attributable to that payment and the Tax Gross-Up to which Executive
is entitled with respect to such tax liability. The Company will pay such Tax
Gross-Up to Executive (net of all applicable withholding taxes, including any
taxes required to be withheld under Code Section 4999) within ten (10) business
days after Executive's submission of the calculation of such Excise Tax and the
resulting Tax Gross-Up, provided such calculations represent a reasonable
interpretation of the applicable law and regulations.

In the event that Executive's actual Excise Tax liability is determined by a
Final Determination to be greater than the Excise Tax liability previously taken
into account for purposes of the Tax Gross-Up paid to Executive pursuant to this
paragraph, then within ninety (90) days following the Final Determination,
Executive shall submit to the Company a new Excise Tax calculation based upon
the Final Determination. Within ten (10) business days after receipt of such
calculation, the Company shall pay Executive the additional Tax Gross-Up
attributable to such excess Excise Tax liability.

In the event that Executive's actual Excise Tax liability is determined by a
Final Determination to be less than the Excise Tax liability previously taken
into account for purposes of the Tax Gross-Up paid to Executive pursuant to this
paragraph, then Executive shall refund to the Company, promptly upon receipt,
any federal or state tax refund attributable to the Excise Tax overpayment.

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Patrick Mahaffy
February 2004
                                       7
<PAGE>

For purposes of this paragraph 10(e), a "Final Determination" means an audit
adjustment by the Internal Revenue Service that is either (i) agreed to by both
Executive (or his estate) and the Company (such agreement by the Company to be
not unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur (such
concurrence by the Company to be not unreasonably withheld) or with respect to
which the period within which an appeal may be filed has lapsed without a notice
of appeal being filed.

         11. RESTRICTIVE COVENANT; NON-COMPETE. Executive acknowledges and
agrees that the agreements and covenants contained in this Section 11 are (i)
reasonable and valid in geographical and temporal scope and in all other
respects, and (ii) essential to protect the value of the Company's business and
assets, and by his employment with the Company, Executive will obtain knowledge,
contacts, know-how, training and experience and there is a substantial
probability that such knowledge, know-how, contacts, training and experience
could be used to the substantial advantage of a competitor of the Company and to
the Company's substantial detriment. For purposes of this Section 11, references
to the Company shall be deemed to include its subsidiaries.

                  (a) NON-COMPETE. Executive covenants and agrees that during
Executive's employment with the Company (the "Employment Period") and for a
period extending to the first anniversary of Executive's Termination for any
reason or for no reason (the "Restricted Period"), with respect to any state or
foreign country in which the Company is engaged in business at the time of such
Termination, Executive shall not, directly or indirectly, individually or
jointly, own any interest in, operate, join, control or participate as a
partner, director, principal, officer, or agent of, enter into the employment
of, act as a consultant to, or perform any services for any entity which
competes to a material extent with the business activities in which the Company
is engaged at the time of such termination or in which business activities the
Company has documented plans to become engaged in and as to which Executive has
knowledge at the time of Termination, or any entity in which any such
relationship with Executive would result in the inevitable use or disclosure of
Confidential Information. Notwithstanding anything herein to the contrary, this
Section 11(a) shall not prevent Executive from acquiring as an investment
securities representing not more than one percent (1%) of the outstanding voting
securities of any publicly-held corporation.

                  (b) EXTENSION. If Executive violates the provisions of Section
11(a) above, Executive shall continue to be bound by the restrictions set forth
in Section 11(a) until a period of one year has expired without any violation of
such provisions.

                  (c) BLUE PENCIL. If any court of competent jurisdiction shall
at any time deem the duration or the geographic scope of any of the provisions
of this Section 11 unenforceable, the other provisions of this Section 11 shall
nevertheless stand and the duration and/or geographic scope set forth herein
shall be deemed to be the longest period and/or greatest size permissible by law
under the circumstances, and the parties hereto agree that such court shall
reduce the time period and/or geographic scope to permissible duration or size.

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Patrick Mahaffy
February 2004
                                       8
<PAGE>

         12. MISCELLANEOUS.

                  (a) TAXES. Executive acknowledges that the Company will
withhold all taxes required by law with respect to any and all compensation or
benefits provided by the Company pursuant to this Agreement. Executive
acknowledges that the Company has not made, nor herein makes, any representation
about the tax consequences of any consideration provided by the Company to
Executive pursuant to this Agreement, except as expressly provided herein.

                  (b) MODIFICATION/WAIVER. This Agreement may not be amended,
modified, superseded, canceled, renewed or expanded, or any terms or covenants
hereof waived, except by a writing executed by each of the parties hereto or, in
the case of a waiver, by the party waiving compliance. Failure of any party at
any time or times to require performance of any provision hereof shall in no
manner affect their or its right at a later time to enforce the same. No waiver
by a party of a breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of agreement contained in the
Agreement.

                  (c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of any successor or assignee of the business
of the Company. This Agreement shall not be assignable by the Executive.

                  (d) NOTICES. All notices given hereunder shall be given by
certified mail, addressed, or delivered by hand, to the other party at his or
its address as set forth herein, or at any other address hereafter furnished by
notice given in like manner. Executive promptly shall notify Company of any
change in Executive's address. Each notice shall be dated the date of its
mailing or delivery and shall be deemed given, delivered or completed on such
date.

                  (e) GOVERNING LAW; PERSONAL JURISDICTION AND VENUE. This
Agreement and all disputes relating to this Agreement shall be governed in all
respects by the laws of the State of Colorado. The Parties acknowledge that this
Agreement constitutes the minimum contacts to establish personal jurisdiction in
Colorado and agree to Colorado courts' exercise of personal jurisdiction. The
Parties further agree that if they are unable to reach an agreement concerning
the nature and terms of alternative dispute resolution, any disputes relating to
this Agreement shall be brought in the District Court of the 20th Judicial
District, Boulder, Colorado, and they hereby consent to the jurisdiction of such
Court.

                  (f) ENTIRE AGREEMENT. This Agreement together with Attachment
A and B hereto set forth the entire agreement and understanding of the parties
hereto with regard to the employment of Executive by the Company and supersedes
any and all prior agreements, arrangements and understandings, written or oral,
pertaining to the subject matter hereof. No representation, promise or
inducement relating to the subject matter hereof has been made to a party that
is not embodied in these Agreements, and no party shall be bound by or liable
for any alleged representation, promise or inducement not so set forth.

                            [Signature Page Follows]

Employment Agreement
Patrick Mahaffy
February 2004
                                       9
<PAGE>

          IN WITNESS WHEREOF, the Parties have each duly executed this
Employment Agreement as of the day and year first above written.

                                    PHARMION CORPORATION

                                    -----------------------------
                                    By:
                                    Its:

                                    EXECUTIVE

                                    -----------------------------
                                    PATRICK MAHAFFY

Employment Agreement
Patrick Mahaffy
February 2004
                                       10

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