PURCHASE AGREEMENT

PURCHASE AGREEMENT

dated as of

September __, 2005

among

MARTIN OPERATING PARTNERSHIP L.P. ,

PRISM GAS SYSTEMS I, L.P.,

and

NATURAL GAS PARTNERS V, L.P.
ROBERT E. DUNN
WILLIAM J. DIEHNELT
GENE A. ADAMS
PHILIP D. GETTIG
SHARON L. TAYLOR
SCOTT A. SOUTHARD

relating to the purchase and sale

of

100% of the Membership Interests

of

PRISM GAS SYSTEMS GP, L.L.C.

AND

100% of the Limited Partnership Interests

of

PRISM GAS SYSTEMS I, L.P.

TABLE OF CONTENTS

LIST OF EXHIBITS AND ANNEXES

Exhibit A – Escrow Agreement
Exhibit B – Release of NGP
Exhibit C – Release of Sellers
Exhibit D – Mutual Release with Manager, Director, or Officer
Exhibit E – Avail Consulting Engagement Letter
Annex A – Ownership of Interests

LIST OF SCHEDULES

PURCHASE AGREEMENT

     AGREEMENT dated as of September 6, 2005 among Prism Gas Systems I, L.P., a Texas limited partnership (the “ Partnership ”), for the limited purpose of making certain representations and warranties in Article 3, Martin Operating Partnership L.P., a Delaware limited partnership (“ Buyer ”), and Natural Gas Partners V, L.P., a Delaware limited partnership, Robert E. Dunn, William J. Diehnelt, Gene A. Adams, Philip D. Gettig, Sharon L. Taylor and Scott A. Southard (“ Sellers ”).

W I T N E S S E T H :

     WHEREAS, the Partnership provides directly and indirectly a variety of gathering and processing services to natural gas producers in Texas and is also engaged in the marketing of natural gas liquids and residue gas; and

     WHEREAS, Sellers are the record and beneficial owners of the Interests and desire to sell the Interests to Buyer, and Buyer desires to purchase the Interests from Sellers, upon the terms and subject to the conditions hereinafter set forth;

     The parties hereto agree as follows:

ARTICLE 1

     Section 1.01. Definitions .

     (a) The following terms, as used herein, have the following meanings:

     “ Administaff ” shall mean Administaff Companies II, L.P., a Delaware limited partnership.

     “ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided that neither the Partnership nor the Partnership Group nor any Subsidiary shall be considered an Affiliate of Sellers.

     “ Applicable Law ” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, executive order, injunction, judgment, decree, ruling, or other similar requirement enacted, adopted, promulgated, or applied by a Governmental Authority that is binding upon such Person.

     “ Bank Credit Agreement ” means the Credit Agreement, dated November 5, 2003, by and among the Partnership, the General Partner, and Fleet National Bank, as bank, Fleet National Bank, as administrative agent, and Fleet Securities, Inc., as arranger and book manager, as the same may be amended and supplemented.

     “ Base Purchase Price ” means the aggregate sum of $94.5 million.

     “ Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

     “ Business ” means the conduct of gathering, processing, fractionating, treating and stabilizing services to natural gas producers in Texas and Louisiana and the marketing of natural gas liquids and residue gas as currently conducted by the Partnership Group and the Joint Ventures.

     “ Claims ” means any action, suit, proceeding, hearing, investigation, litigation, charge, complaint, claim, Environmental Action, demand or threat.

     “ Closing Date ” means the date of the Closing, which date shall for all purposes be the effective date of the transactions contemplated hereunder.

     “ Code ” means the Internal Revenue Code of 1986, as amended.

     “ Damages ” means any and all assessments, losses, damages, liabilities, judgments, settlements, penalties, costs, and expenses (including reasonable attorneys’ fees and expenses), of any nature whatsoever, whether actual or consequential, including any Losses.

     “ Easements ” shall mean easements, licenses, rights-of-way or other similar interests relating to the Real Property.

     “ Employee Plans ” shall mean any bonus, deferred compensation, incentive compensation, stock purchase, stock option, employment, consulting, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefit, profit sharing, pension or retirement plan, program, agreement or arrangement, or any other benefit plan of any kind whatsoever that is provided to employees or former employees of the Partnership or their beneficiaries, and each other “employee benefit plan” as defined in Section 3(3) of ERISA, whether formal or informal, written or oral, and whether contributed to, or required to be contributed to, by the Partnership.

     “ Environmental Action ” means any administrative, regulatory or judicial action, suit, Claim, notice of non-compliance or violation, investigation, request for information, proceeding, consent order or consent agreement by any Person relating in any way to any Environmental Law or any demand or threat with respect to any of the foregoing.

     “ Environmental Laws ” means any and all Applicable Laws, including but not limited to the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. , in each case as in effect on the date hereof, related to the protection of the environment or human health, including workplace safety.

     “ Environmental Permits ” means all Permits, authorizations, consents, approvals and registrations issued under Environmental Laws.

     “ Equity Securities ” means (i) with respect to any corporation, all shares, interests, participations or other equivalents of capital stock of a corporation, however designated, and any warrants, options or other rights to purchase or acquire any such capital stock and any securities convertible into or exchangeable or exercisable for any such capital stock, (ii) with respect to any partnership, all partnership interests, participations or other equivalents of partnership interests of a partnership, however designated, and any warrants, options or other rights to purchase or acquire any such partnership interests and any securities convertible into or exchangeable or exercisable for any such partnership interests and (iii) with respect to any limited liability company, all units, interests, participations or other equivalents of membership interests of a limited liability company, however designated, and any warrants, options or other rights to purchase or acquire any such membership interests and any securities convertible into or exchangeable or exercisable for any such membership interests.

     “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder.

     “ ERISA Affiliate ” means any other entity which, together with the Partnership would be treated as a single employer under Section 414 of the Code.

     “ GAAP ” means generally accepted accounting principles in the United States applied on a consistent basis.

     “ General Partner ” means Prism Gas Systems GP, L.L.C., a Texas limited liability company.

     “ Governmental Authority ” means any federal, state or local governmental authority, department, court, agency or official, including any political subdivision thereof.

     “ Hazardous Substance ” means any solid, liquid, or gaseous, substance 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, including but not limited to, asbestos, polychlorinated biphenyls, radon, urea formaldehyde foam insulation, explosives, or radioactive materials, or 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.

     “ Hedging Transaction ” means any futures, hedge, swap, collar, put, call, floor, cap, option or other contract that is intended to benefit from, relate to or reduce or eliminate the risk of fluctuations in the price of commodities, including hydrocarbons, interest rates, currencies or securities.

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

     “ Indebtedness ” of any Person means any obligations of such Person (a) for borrowed money, (b) evidenced by notes, bonds, indentures or similar instruments, (c) for the deferred purchase price of goods and services (other than trade payables incurred in the ordinary course of business), (d) under capital leases, (e) any other indebtedness required to be classified as such under GAAP, and (f) in the nature of guarantees of the obligations described in clauses (a) through (e) above of any other Person.

     “ Intellectual Property Rights ” means any Software, trademark, service mark, trade name, mask work, invention, patent, trade secret, copyright, trade dress, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right.

     “ Interests ” means all of the outstanding membership interests of the General Partner and all of the outstanding limited partner interests of the Partnership, including any option, warrant or similar instrument permitting any Person to acquire any such membership or limited partner interests at any time.

     “ Investment ” means, with respect to any Person, any payment, loan, advance or contribution of any amount to any other Persons or any agreement or commitment to do any of the foregoing, and in any event will include (i) any direct or indirect purchase or other acquisition of any notes, obligations, instruments or Equity Securities and (ii) any capital contribution to any other Person.

      “Joint Venture” or “Joint Ventures” means Waskom Gas Processing Company, a Texas general partnership (“Waskom” ), Matagorda System ( “Matagorda” ) and Panther Interstate Pipeline Energy, L.L.C., a Texas limited liability company ( “Pipe” ).

     “ Knowledge of Buyer ”, “ Buyer’s Knowledge ” or any other similar knowledge qualification in this Agreement means to the actual knowledge, after reasonable inquiry, of Ruben S. Martin, Jeffery A. Ballew or Robert D. Bondurant.

     “ Knowledge of Sellers ”, “ Sellers’ Knowledge ” or any other similar knowledge qualification in this Agreement means to the actual knowledge, after reasonable inquiry, of Robert E. Dunn, William J. Diehnelt, Gene A. Adams, Philip D. Gettig, Sharon L. Taylor and Scott A. Southard.

     “ Liability ” means all Indebtedness, Claims, legal proceedings, obligations, duties, warranties or liabilities, including, without limitation, STRICT LIABILITY, of any nature (including any undisclosed, unfixed, unknown, unliquidated, unsecured, unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied, vicarious, joint, several or secondary liabilities), regardless of whether any such Indebtedness, Claims, legal proceedings, obligations, duties, warranties or liabilities would be required to be disclosed on a balance sheet prepared in accordance with GAAP or is known as of the Closing.

     “ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance, adverse claim, right of first refusal or purchase option in respect of such property or asset.

     “ Loss ” or “ Losses ” means any loss, damage, injury, harm, detriment, Liability, diminution in value, exposure, claim, demand, proceeding, settlement, judgment, award, punitive damage award, fine, penalty, fee, charge, cost or expense (including, without limitation, reasonable costs of attempting to avoid or in opposing the imposition thereof, interest, penalties, costs of preparation and investigation, and the reasonable fees, disbursements and expenses of attorneys, accountants and other professional advisors), as well as with respect to compliance with the requirements of environmental law, expenses of remediation and any other remedial, removal, response, abatement, cleanup, investigative, monitoring, or record keeping costs and expenses.

     “ Material Adverse Effect ” means any event which has a material adverse effect on the business, assets, financial condition or results of operations of the Business, the Partnership Group or the Joint Ventures, taken as a whole, except to the extent resulting from or arising in connection with (i) this Agreement or the transactions contemplated hereby, (ii) changes or conditions affecting the natural gas gathering, processing, aggregation or marketing industries generally (including, without limitation, changes in hydrocarbon pricing and the depletion of reserves), provided, however, that such changes or conditions do not have a disproportionate impact on the Business, the Partnership Group or the Joint Ventures when compared to other participants in such industries, taken as a whole, (iii) changes in economic, regulatory or political conditions generally, provided, however, that such changes or conditions do not have a disproportionate impact on the Business, the Partnership Group or the Joint Ventures when compared to other participants in the gas gathering, processing, aggregation or marketing industries, taken as a whole, (iv) any other matter set forth in the Schedules hereto, except to the extent of any adverse developments with respect to such matters that arise after the date hereof, or (v) any ordinary course decrease in inlet volumes into plants or gathering systems or any curtailment in transportation volumes.

     “ NGP ” means Natural Gas Partners V, L.P., a Delaware limited partnership.

     “ Partnership Group ” means the Partnership, the General Partner, and the Subsidiaries.

     “ Partnership Intellectual Property Rights ” means all Intellectual Property Rights owned by the Partnership Group.

     “ Permitted Liens ” means (i) Liens disclosed on Schedule 1.01, (ii) Liens for taxes, assessments and similar charges that are not yet due or are being contested in good faith, and in the case of those items which are being contested, that do not exceed $250,000 in the aggregate, (iii) mechanic’s, materialman’s, carrier’s, repairer’s and other similar Liens arising or incurred in the ordinary course of business or that are not yet due and payable or are being contested in good faith, and in the case of those items which are being contested, that do not exceed $250,000 in the aggregate, (iv) published zoning, municipal planning, building codes or other applicable laws, rules, regulations, permits or ordinances regulating the use, development or occupancy of real property, (v) recorded building and use restrictions and covenants, and (vi) recorded easements and rights-of-way that are necessary for utilities and other similar services on real property, which do not restrict the present use of such real property.

     “ Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

     “ Real Property ” means any real property which the Partnership Group and the Joint Ventures owns, leases, operates or subleases.

     “ Software ” means any computer software (including, without limitation, source code, object code, firmware, operating systems and specifications) owned or licensed by each of the Partnership Group and the Joint Ventures.

     “ Subsidiary ” or “ Subsidiaries ,” as appropriate, means any entity, or all of the entities, as appropriate, of which membership interests, securities or other ownership interests having the power to designate the managing member or ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by the Partnership or the General Partner and specifically include McLeod Gas Gathering and Processing Company, L.L.C., a Louisiana limited liability company ( “McLeod” ), Prism Gas

Systems, Inc., a Delaware corporation ( “Prism Gas” ), and Prism Gulf Coast Systems L.L.C., a Texas limited liability company ( “Prism Gulf Coast” ).

     “ Title Defect ” means (a) any title defect, Lien other than a Permitted Lien or any liens associated with the Bank Credit Agreement (which shall be released at Closing), that causes any member of the Partnership Group or any Joint Ventures to not have good and indefeasible title, free and clear of all Liens other than Permitted Liens, to any of the Real Property (including the buildings and improvements thereon), Permits or leases relating to Real Property, (b) the extent to which the Easements do not grant all rights reasonably necessary for the operation, maintenance, repair, and replacement of all the properties, facilities or assets of the Partnership Group or the Joint Ventures, or (c) any issues associated with access, encroachments, zoning or land-use restriction or other matters relating to the Real Property that would restrict the Buyer’s, the Partnership Group’s or the Joint Ventures’ ability to operate and conduct the Business as it is presently conducted or that would reduce the value of any of the Real Property; provided that “Title Defect” shall not include any matter that would otherwise be a Title Defect if (x) the related Title Defect Amount is individually $100,000 or less, (y) it has been cured by Sellers to the reasonable satisfaction of Buyer prior to the Closing Date or (z) it is not set forth in a Title Defect Notice.

     “ Title Defect Amount ” means the cost of curing a Title Defect, or if such Title Defect cannot be cured, any Damages resulting from the existence of such Title Defect. For purposes of calculating a Title Defect Amount, the parties shall value all assets affected by a Title Defect, including rights-of-way, surface leases and fee properties, at the lesser of fair market value or the cost to cure.

     “ Working Capital ” means the consolidated current assets less the consolidated current liabilities of the Partnership Group that are balance sheet items in accordance with GAAP, each as calculated in accordance with GAAP as of the Closing Date on a basis consistent with the Audited Financial Statements, including as current liabilities (a) any accrued and unpaid legal, accounting, banking or other advisory fees, costs and expenses incurred by the Partnership Group through the Closing Date in connection with this Agreement, and (b) any Tax payable accruals on the books of the Partnership Group as of the Closing Date, including the updated Tax payable accrual determined based on the Appraisal required under Section 7.15 and reflected on the June Financial Statements; provided, however, that Working Capital shall specifically exclude any assets associated with the Earnest Money and exclude any liabilities or obligations associated with the (i) Bank Credit Agreement and (ii) any Hedging Transactions.

     (b) Each of the following terms is defined in the Section set forth opposite such term:

Section 1.02. Other Definitional and Interpretative Provisions. Unless specified otherwise, in this Agreement the obligations of any party consisting of more than one person are joint and several. The words “hereof”, “herein”, “hereby” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

ARTICLE 2

Section 2.01. Purchase and Sale .

     (a) Upon the terms and subject to the conditions of this Agreement, Sellers agree to sell to Buyer, and Buyer agrees to purchase from Sellers, the Interests at the Closing.

     (b) The purchase price for the Interests is (i) the Base Purchase Price, (ii) plus an amount equal to the increase in net cash used in investment activity from the Latest Balance Sheet Date to the Closing Date, (iii) minus the aggregate amount of Agreed-Upon Title Defect Amounts to be taken into account as an adjustment pursuant to Section 2.05(f), (iv) plus (or minus, to the extent a negative number) an amount equal to Working Capital as of the Closing Date, (v) minus the aggregate amount of all outstanding obligations under or relating to the Bank Credit Agreement as of the Closing Date, and (vi) in the event Buyer elects not to obtain the Insurance Policy pursuant to Section 7.16(c), minus an amount equal to 32.5% of the premium that would have been paid under the Insurance Policy, but for Buyer’s election not to obtain the Insurance Policy (the “Purchase Price” ).

     (c) No later than three Business Days prior to the Closing Date, Sellers shall deliver to Buyer a statement setting forth the Partnership’s good faith estimate of (i) the Working Capital (the “ Estimated Working Capital ”) and (ii) the Purchase Price (the “ Estimated Purchase Price ”), and a reasonably detailed computation of such estimates, including an estimated consolidated balance sheet for the Partnership and Subsidiaries as of the Closing Date, supporting schedules and other relevant information, in each case prepared in accordance with GAAP on a basis consistent with the December 31, 2004 consolidated balance sheet included in the Audited Financial Statements. Buyer shall be entitled to conduct a timely review of such information and to provide good faith, reasonable objections to any such calculations not later than one Business Day prior to the Closing Date. Subject to resolution of any such good faith, reasonable objections, the Estimated Purchase Price shall be paid as provided in Section 2.02 and shall be subject to further adjustment post-Closing as provided in Section 2.04.

Section 2.02. Closing . The closing (the “ Closing ”) of the purchase and sale of the Interests hereunder shall take place at the offices of Thompson & Knight LLP, 1700 Pacific Avenue, Suite 3300, Dallas, Texas on the fifth Business Day after all of the conditions set forth in Article 9 are satisfied, but in no event any later than October 31, 2005 (which date shall be extended pursuant to Section 10.01(b)), or at such other time or place as Buyer and Sellers may agree. If the Closing Date shall occur on a day other than the normal month-end cutoff date for the ordinary

course preparation of Partnership Group financial information, the parties agree that all items of income and expense shall be prorated to reflect the relative number of days during the month that the Business is actually owned by Sellers and Buyer, except to the extent an item of expense adjusts the Purchase Price (including as reflected in Working Capital). At the Closing:

     (a) Buyer shall deliver to each Seller, in either cash or Common Units of Martin Midstream Partners L.P. (“ Common Units ”), its pro rata portion of the Estimated Purchase Price, in the dollar amounts to be specified in a written document (the “ Payment Schedule ”) delivered by Sellers to Buyer not later than ten Business Days prior to Closing. Cash payments shall be made in immediately available funds by wire transfer to an account of each such Seller with a bank designated by such Seller by notice to Buyer delivered not later than two Business Days prior to the Closing Date (or if not so designated, then by certified or official bank check payable in immediately available funds to the order of each such Seller in such amount). Payments in Common Units shall be made in the name of each such Seller or its nominee designated by such Seller by notice to Buyer delivered not later than two Business Days prior to the Closing. The Payment Schedule shall be prepared to reflect that Buyer is acquiring 100% of the fully diluted equity ownership interests in the General Partner and the Partnership after giving effect to either the pre-Closing Date cancellation or exercise, as the case may be, of any options, warrants or similar rights that any employee, consultant, entity or other third party may have to acquire any equity ownership interests in any member of the Partnership Group or the Joint Ventures, all of which the Sellers will cause to be cancelled or exercised, as the case may be, prior to the Closing Date. Sellers shall provide Buyer with evidence of any such cancellations or exercises not later than one Business Day prior to the Closing Date. Any Common Units delivered to a Seller hereunder shall be “restricted securities” within the meaning of federal and state securities laws and each applicable Seller acknowledges and agrees that such Common Units will not be freely tradable and may not be sold, pledged, gifted or otherwise transferred or disposed of unless any such transaction is registered or qualified under applicable federal and state securities laws or such transaction is exempt from such registration or qualification as evidenced by a written opinion of counsel addressed to Buyer, which counsel and opinion shall be acceptable to Buyer. Any such Common Units will bear a restrictive legend to the foregoing effects. Common Units deliverable hereunder shall be deemed to have a value equal to the average closing price of the Common Units on the NASDAQ over the ten trading days immediately preceding the date on which Buyer makes a public announcement of the transaction contemplated by this Agreement and the ten trading days immediately following the date of such public announcement, excluding in each case the closing price for Common Units on such public announcement date.

     (b) Buyer shall pay to the lender(s) under the Bank Credit Agreement an amount equal to the outstanding principal and interest owed by the Partnership under the Bank Credit Agreement as of the Closing Date in exchange for a full and complete release by such lender(s) of all Liens they may have on any of the Partnership Group’s assets and the cancellation of the Bank Credit Agreement.

     (c) The Partnership shall pay all accrued and unpaid legal, accounting, banking or other advisory fees, costs and expenses incurred by the Partnership Group in connection with this Agreement or any other services rendered by any such party through the Closing Date, but accrued and unpaid as of the Closing Date. Following such payments, Sellers agree that the Partnership Group shall owe no further fees for any legal, accounting, banking or advisory services rendered through the Closing Date, except to the extent such fees adjust the Purchase Price (including as reflected in Working Capital).

Section 2.03. Closing Date Balance Sheet .

     (a) As promptly as practicable, but no later than 45 days after the Closing Date, Buyer will cause to be prepared and delivered to Sellers an actual consolidated balance sheet of the Partnership and Subsidiaries as of the Closing Date (the “ Closing Date Balance Sheet ”) and a certificate based on such Closing Date Balance Sheet setting forth Buyer’s good faith calculation of the Working Capital. The Closing Date Balance Sheet shall (x) fairly present the consolidated financial position of the Partnership and Subsidiaries as of the Closing Date in accordance with GAAP applied on a basis consistent with those used in the preparation of the December 31, 2004 balance sheet included in the Audited Financial Statements, and (y) include line items substantially consistent with those in such December 31, 2004 balance sheet.

     (b) If Sellers disagree with Buyer’s calculation of the Working Capital delivered pursuant to Section 2.03(a), Sellers may, within 10 days after delivery of the documents referred to in Section 2.03(a), deliver a notice to

Buyer disagreeing with such calculation which specifies Sellers’ calculation of such amount and, in reasonable detail, Sellers’ grounds for such disagreement.

     (c) If a notice of disagreement shall be duly delivered pursuant to Section 2.03(b), Buyer and Sellers shall, during the 15 days following such delivery, use commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the amount of the Working Capital, which amount shall not be less than the amount thereof shown in Buyer’s calculation delivered pursuant to Section 2.03(a) nor more than the amount thereof shown in Sellers’ calculation delivered pursuant to Section 2.03(b). If, during such period, Buyer and Sellers are unable to reach such agreement, they shall promptly thereafter cause the audit group of a nationally recognized “Big 4” accounting firm that does not provide tax or audit services to Buyer, the Partnership Group, the Joint Ventures or any Seller (the “ Accounting Referee ”) promptly to review this Agreement and the disputed items or amounts for the purpose of calculating the Working Capital. Each party shall set forth in writing its estimate of the Working Capital referred to the Accounting Referee for resolution, and the Accounting Referee shall, as promptly as practicable, be required to select the position of either one party or the other with respect to the Working Capital and to communicate such selection to both parties. The costs of the Accounting Referee shall be borne entirely by the party which does not have its position selected by the Accounting Referee. The determination of the Accounting Referee shall be final, conclusive and binding on the parties and shall be enforceable in any court having jurisdiction.

     (d) Buyer and Sellers agree that they will, and cause their respective independent accountants to and the Partnership Group to, cooperate and assist in the preparation of the Closing Date Balance Sheet, the calculation of the Working Capital and, if applicable, the reviews referred to in this Section 2.03, including making available, to the extent necessary, books, records, work papers and personnel of the Partnership Group.

Section 2.04. Adjustment of the Purchase Price .

     (a) If the Estimated Working Capital exceeds the Final Working Capital (as defined below), Sellers shall pay to Buyer, as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 2.04(b), the amount of such excess. If the Final Working Capital exceeds the Estimated Working Capital, then Buyer shall pay to Sellers as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 2.04(b), the amount of such excess. The “ Final Working Capital ” means the Working Capital (i) as shown in Buyer’s calculation delivered pursuant to Section 2.03(a), if no notice of disagreement with respect thereto is duly delivered pursuant to Section 2.03(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed by Buyer and Sellers pursuant to Section 2.03, or (B) in the absence of such agreement, as determined by the Accounting Referee pursuant to Section 2.03(c); provided that in no event shall the Final Working Capital be less than Buyer’s calculation of the Working Capital delivered pursuant to Section 2.03(a) or more than Sellers’ calculation of the Working Capital delivered pursuant to Section 2.03(b).

     (b) Any payment pursuant to Section 2.04(a) shall be made within five days after the Final Working Capital has been determined (x) in the case of payments made by Buyer, by delivery by Buyer of immediately available funds, pro rata to each Seller in accordance with the percentages specified in the Payment Schedule and on a basis consistent with Section 2.02(a), and to the same bank designated by each such Seller for any cash Closing payments made pursuant to Section 2.02(a), or if no bank was specified, then by certified or official bank check payable in immediately available funds to the order of such Seller, or (y) in the case of payments made by Sellers, by delivery from Sellers (pro rata from each Seller in accordance with the percentages specified in the Payment Schedule and on a basis consistent with Section 2.02(a) (including utilizing the Common Unit value established thereunder)) in either immediately available funds or Common Units, and in the case of cash payments to an account previously designated by Buyer. Payments made pursuant to Section 2.04(a) shall bear cash interest at the rate of 6% per annum from the Closing Date to the date of payment.

Section 2.05. Title Defects .

     (a) (i) Buyer may seek to cause LandAmerica Commercial Services, Dallas, Texas (the “Title Company” ) to deliver to Buyer a commitment for a title insurance policy in favor of Buyer with respect to the Real Property leased by Waskom and comprising Waskom’s gas processing plant located in Waskom, Texas as more fully described, by a full and complete legal description, in Schedule 2.05(a)(1) hereto (the “Waskom Site” ), such

policy to be a standard form Texas title insurance policy in favor of Buyer insuring Waskom’s leasehold interest in the Waskom Site (the “Waskom Title Policy” ). Buyer shall be responsible for the payment of all costs and expenses associated with the issuance of the Waskom Title Policy and Sellers shall use their commercially reasonable efforts to deliver to the Title Company any affidavits, agreements or other documents or assurances reasonably necessary to cause the issuance of the Waskom Title Policy. Buyer agrees that it will not delay the Closing, if all other conditions to the occurrence of the Closing shall have then been satisfied in accordance with the provisions of this Agreement, due to the unavailability of such title commitment provided that the provisions of this sentence shall not restrict Buyer’s ability to object to Title Defects pursuant to Section 2.05(b) below.

          (i) Buyer may seek to cause a Texas registered and licensed professional surveyor identified by Buyer to deliver to Buyer a current survey with respect to the Waskom Site to meet the requirements of the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys jointly established by the American Land Title Association, the American Congress on Surveying and Mapping and the National Society of Professional Surveyors. Buyer agrees that it will not delay the Closing, if all other conditions to the occurrence of the Closing shall have then been satisfied in accordance with the provisions of this Agreement, due to the unavailability of such survey within the time frame specified above, provided that the provisions of this sentence shall not restrict Buyer’s ability to object to any Title Defects pursuant to Section 2.05(b) below.

     (b) As soon as reasonably practicable following the date of this Agreement, and in no event later than 15 Business Days prior to the Closing Date, Buyer shall deliver to Sellers written notices identifying each matter that it believes in good faith to be a Title Defect, together with a reasonable, good faith estimate of the associated Title Defect Amount for each such alleged Title Defect, and reasonable written documentation to support Buyer’s claims of each such Title Defect (the “ Title Defect Notice ”). In order for Sellers to review the alleged Title Defects listed in the Title Defect Notice, Buyer will provide to Sellers and their representatives copies of any documents used to determine the existence of a Title Defect and the estimated Title Defect Amount.

     (c) If Sellers disagree with the existence of a Title Defect or the associated Title Defect Amount, then Sellers shall notify Buyer of such disagreement in writing (a “ Notice of Disagreement ”) within 5 Business Days after their receipt of the applicable Title Defect Notice. Such Notice of Disagreement shall specify in reasonable detail Sellers’ grounds for such disagreement, the Title Defect Amount estimated by Sellers therefore, or both, as the case may be. To the extent Sellers do not contest a Title Defect or a Title Defect Amount in a Notice of Disagreement within 5 Business Days after receipt of the applicable Title Defect Notice, Sellers shall be deemed to have accepted the existence of such Title Defect or Title Defect Amount, which shall be final, binding and conclusive for all purposes hereunder.

     (d) If a Notice of Disagreement is timely provided by Sellers, Buyer and Sellers shall use commercially reasonable efforts for a period of 3 Business Days after delivery of such Notice of Disagreement (or such longer period as they may mutually agree) to resolve any disagreements with respect to the existence of any Title Defect or Title Defect Amount contested in the Notice of Disagreement. If, at the end of such period, they are unable to resolve such disagreements, then, upon the written request of either party, Sellers and Buyer agree that they will turn the dispute over to an independent, experienced real estate attorney who is practicing law with a regional law firm that is nationally recognized in the midstream oil and gas industry, that is mutually agreed upon by Sellers and Buyer (the “ Title Defect Arbitrator ”), to resolve any remaining disagreements.

     (e) The Title Defect Arbitrator shall determine as promptly as practicable (but in any event within 10 Business Days) following the date on which such dispute is referred to the Title Defect Arbitrator the existence of any alleged Title Defect or the disputed Title Defect Amount, as the case may require, identified in the Notice of Disagreement and not previously resolved by the parties. Each party shall set forth in writing its position regarding the existence of each alleged Title Defect and Title Defect Amount referred to the Title Defect Arbitrator for resolution, and the Title Defect Arbitrator shall be required to select the position of either one party or the other with respect to each such Title Defect or Title Defect Amount, as the case may require. The costs of the Title Defect Arbitrator shall be allocated by the Title Defect Arbitrator between the parties based upon the positions on the Title Defects asserted by the parties ultimately selected by the Title Defect Arbitrator. The determination of the Title Defect Arbitrator shall be final, conclusive and binding on the parties and shall be enforceable in any court having jurisdiction.

     (f) As used in this Agreement, an “ Agreed-Upon Title Defect ” shall mean any of (i) a Title Defect that is not contested under any Notice of Disagreement, (ii) a Title Defect that is mutually agreed upon or deemed agreed upon by Buyer and Sellers or (iii) a Title Defect recognized as such by determination of the Title Defect Arbitrator pursuant to Section 2.05(e) above. An “ Agreed-Upon Title Defect Amount ” shall mean any of (i) a Title Defect Amount that is not contested under any Notice of Disagreement, (ii) a Title Defect Amount that is mutually agreed upon or deemed agreed upon by Buyer and Sellers or (iii) a Title Defect Amount recognized in a determination of the Title Defect Arbitrator pursuant to Section 2.05(e) above.

     (g) At Closing, the Purchase Price shall be reduced by the amount of all Agreed-Upon Title Defect Amounts. In the event there is any dispute as to any Title Defect or Title Defect Amount which has not been resolved by the Title Defect Arbitrator prior to Closing, the Closing shall be delayed until the Title Defect Arbitrator has made a determination with respect to such Title Defect or Title Defect Amount. In addition, if the total of the aggregate Agreed-Upon Title Defect Amounts exceeds $5,000,000, then either Buyer or Sellers, respectively, may terminate this Agreement and the Earnest Money shall be paid by the Escrow Agent to Buyer.

Section 2.06. Allocation of Purchase Price. At least 15 days before the Closing, Buyer shall deliver to Sellers a statement (the “ Allocation Statement ”), allocating the Purchase Price (plus the liabilities of the Partnership Group to the extent properly taken into account under Section 1060 of the Code) among the assets of the Partnership Group in accordance with Section 1060 of the Code. If within 10 days after the delivery of the Allocation Statement Sellers notify Buyer in writing that Sellers object to the allocation set forth in the Allocation Statement, Buyer and Sellers shall use commercially reasonable efforts to resolve such dispute prior to Closing. In the event that Buyer and Sellers are unable to resolve such dispute prior to Closing, Buyer and Sellers shall jointly retain the tax group of a nationally recognized “Big 4” accounting firm that does not provide tax or audit services to Buyer, the Partnership Group, the Joint Ventures or any Seller (the “ Tax Allocation Referee ”) to resolve the disputed items. Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution. The costs, fees and expenses of the Tax Allocation Referee shall be borne equally by Buyer and Sellers. Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution. Sellers and Buyer agree to (i) be bound by the Allocation Statement and (ii) act in accordance with the Allocation Statement in the preparation, filing and audit of any Return (including filing Form 8594, if applicable, with its federal income Tax Return for the taxable year that includes the date of the Closing).

Section 2.07. Earnest Money. Contemporaneous with Buyer’s execution of this Agreement, Buyer shall post with Bank of New York Trust Company of Florida, N.A., as escrow agent (the “ Escrow Agent ”), an amount equal to $5,000,000 (the “ Earnest Money ”), pursuant to the terms of the Escrow Agreement attached hereto as Exhibit A (the “ Escrow Agreement ”). In the event the Closing occurs, the Earnest Money shall be paid by the Escrow Agent to the Sellers in accordance with Section 2.02(a) and credited against the amount to be paid by Buyer to Sellers pursuant to Section 2.02(a). If the Closing does not occur, the Earnest Money shall be paid by the Escrow Agent to the Partnership or paid by the Escrow Agent to Buyer in accordance with the remaining provisions of this Section 2.07. In the event Buyer breaches this Agreement by failing or refusing to close the transaction contemplated hereby on the Closing Date and each of the conditions contained in Sections 9.01 and 9.02 (other than the condition set forth in Section 9.02(f)) otherwise has been either fulfilled (or was capable of being fulfilled, absent Buyer’s breach, in the case of the condition in Section 9.01(c)), or waived, the Escrow Agent shall pay the Earnest Money to the Partnership as damages. In addition, in the event Buyer does not close solely on account of a failure of the condition in Section 9.02(f) to be satisfied, the Escrow Agent shall pay the Earnest Money to the Partnership as damages. In all other circumstances, including in the event where Buyer terminates this Agreement pursuant to Section 2.05(g), the Earnest Money shall be paid by the Escrow Agent to Buyer. The Earnest Money shall be invested by the Escrow Agent pursuant to the terms of the Escrow Agreement and any investment income thereon shall be payable to Buyer or as otherwise directed by Buyer.

Section 2.08. Additional Damage Payment. In the event Section 2.07 requires the Escrow Agent to pay the Earnest Money to the Partnership as damages, the Buyer shall also pay to the Partnership, as damages, such additional amount, if any, that represents the sum of (a) the excess of: (i) the increased tax liability of Partnership (i.e., the increase in the Tax accrual on the Partnership’s books and records) as a result of the Appraisal, over (ii) the Earnest Money amount and (b) any amount expended, or required to be expended, by the Partnership or Sellers to procure, or cancel procurement of: (x) the June Financial Statements or other financial statements discussed in Section 7.14, (y) the Appraisal, and (z) the Insurance Policy. It is expressly agreed and acknowledged by all parties that nothing

in this Section 2.08 or in Section 2.07 should be construed to limit the remedies of Sellers under Section 10.02, including the ability to recover any additional damages from Buyer in the event of Buyer’s breach of this Agreement, except in the event Buyer does not close solely on account of a failure of the condition in Section 9.02(f) to be satisfied, in which case the remedies provided in this Section 2.08 and in Section 2.07 shall be the exclusive remedies of the Partnership and Sellers.

ARTICLE 3

     Except as set forth in the Schedules hereto, (i) each Seller, severally only with respect to itself, with respect to the representations and warranties in Sections 3.02, 3.03, 3.04, 3.06 and 3.29, and (ii) the Partnership, with respect to the representations and warranties in Sections 3.01, 3.05 and 3.07 to 3.28 of this Article 3, represents and warrants to Buyer as of the date hereof that:

Section 3.01. Existence and Power . The Partnership as a limited partnership and the General Partner as a limited liability company, as well as the Subsidiaries and the Joint Ventures as either corporations, limited liability companies or partnerships, are duly organized, validly existing and in good standing under the laws of Texas and they and/or the Partnership Group have all powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted and to own, lease, and operate all properties and assets now owned, leased or operated by it, except for those licenses, authorizations, permits, consents and approvals the absence of which would not be material to the conduct of the Business. Each of the Partnership, the General Partner, the Subsidiaries and the Joint Ventures is duly qualified to do business as a foreign Person and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect.

Section 3.02. Sellers Authorization . The execution, delivery and performance by such Seller of this Agreement and the consummation of the transactions contemplated hereby are within such Seller’s powers and have been duly authorized by all necessary action on the part of such Seller. This Agreement constitutes a valid and binding agreement of such Seller.

Section 3.03. Governmental Authorization . The execution, delivery and performance by such Seller of this Agreement and the consummation of the transactions contemplated hereby require no action, notice, filing, authorization, consent, waiver or approval by or in respect of, a Governmental Authority other than (i) compliance with any applicable requirements of the HSR Act and (ii) any such action, notice, filing, authorization, consent, waiver or approval, as to which the failure to make or obtain would not have a Material Adverse Effect.

Section 3.04. Noncontravention . The execution, delivery and performance by such Seller of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate the certificate of incorporation, certificate of organization, limited partnership or limited liability company operating agreement of such Seller or the Partnership Group or the Joint Ventures, (ii) assuming compliance with the matters referred to in Section 3.03, violate any Applicable Law that is material to the business of such Seller or the Partnership Group or the Joint Ventures or their respective assets, (iii) except as disclosed in Schedule 3.04 or as to matters which would not reasonably be expected to be material to the Business, require any authorization, consent, waiver, or approval, or other action by any Person under, constitute a default under, or give rise to any right of termination, modification, cancellation or acceleration of any right or obligation of such Seller or the Partnership Group or the Joint Ventures or to a loss of any benefit to which such Seller or the Partnership Group or any Joint Venture is entitled under any provision of any agreement, contract, lease, license, instrument, decree, judgment or other arrangement binding upon such Seller or the Partnership Group or any Joint Venture, or (iv) result in the creation or imposition of any Lien on any asset of the Partnership Group or any Joint Venture, except for any Permitted Liens.

Section 3.05. Capitalization .

     (a) The Interests, all of which are held by the Sellers, together with the outstanding general partner interests of the Partnership, all of which are held by the General Partner, and the outstanding capital stock or membership interests of each of the Subsidiaries, all of which are held by the Partnership, directly or indirectly, constitute all of the outstanding capital stock, membership and partnership interests of the Partnership Group.

     (b) All outstanding capital stock, membership interests and partnership interests of the Partnership Group have been duly authorized and validly issued and are fully paid and non-assessable and issued free from any violation of, or subject to, any preemptive rights or rights of subscription. Except as set forth in Schedule 3.05(b), there are no outstanding (i) securities or interests of the Partnership Group (other than the Interests, as defined herein, the outstanding general partner interests of the Partnership held by the General Partner and the outstanding capital stock or membership interests of the Subsidiaries held by the Partnership, directly or indirectly), (ii) securities or interests of the Partnership Group convertible into or exchangeable for Interests or other securities of the Partnership Group, or (iii) options or other rights to acquire from the Partnership Group, or other obligations of the Partnership Group to issue, any equity interests, voting securities or securities convertible into or exchangeable for equity interests or voting securities of the Partnership Group (the items in clauses 3.05(b)(i),(ii) and (iii) being referred to collectively as the “ Partnership Securities ”). There are no outstanding obligations of the Partnership Group to repurchase, redeem or otherwise acquire any Partnership Securities.

     (c) Except as set forth in Schedule 3.05(c), no outstanding equity interests or capital stock, or interest or stock issuable upon exercise or exchange of any outstanding options, warrants, or rights, or other interests or stock issuable by any member of the Partnership Group, are subject to any preemptive rights, rights of first refusal, or other rights to purchase such interests or stock (whether in favor of any member of the Partnership Group or any other Person) pursuant to any agreement or commitment of any member of the Partnership Group, all of which shall have been waived in writing in connection with the transactions contemplated by this Agreement.

     Section 3.06. Ownership of Interests . On the Closing, (i) each Seller will be the record and beneficial owner of the Interests listed next to such Seller’s name on Annex A , free and clear of any Lien, (ii) each Seller will transfer and deliver to Buyer at the Closing good and valid title to such Interests free and clear of any Lien, and (iii) the Interests listed on Annex A will constitute 100% of the outstanding Equity Securities of the Partnership and the General Partner.

Section 3.07. Subsidiaries; Investments .

     (a) (i) Each Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and (ii) each Subsidiary has all powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, consents and approvals the absence of which would not be material to the Business. All Subsidiaries and their respective jurisdictions of organization are identified on Schedule 3.07.

     (b) All of the outstanding capital stock or membership interests of each Subsidiary are owned by the Partnership, directly or indirectly, free and clear of any Lien and have been duly authorized, validly issued and is fully paid and nonassessable.

     (c) Except as set forth on Schedule 3.07 with respect to the Joint Ventures and the Partnership’s ownership of the Subsidiaries, the Partnership Group does not own beneficially or of record, or have any ownership or similar interest in, any Equity Securities of any Person, and does not have an Investment of any kind in any Person. All of the Equity Securities listed on Schedule 3.07 have been duly authorized, are validly issued and are fully paid and nonassessable and owned by the Partnership free and clear of all Liens (other than Permitted Liens) or restrictions on transfer of any kind. None of the Equity Securities listed on Schedule 3.07 have been issued in violation of, or subject to, any preemptive rights or rights of subscription. The financial statements relating to any Person in which the Partnership Group holds Equity Securities as disclosed on Schedule 3.07 are not required pursuant to GAAP to be consolidated in the Financial Statements.

     (d) Except as set forth on Schedule 3.07, neither the Sellers, on account of their Interests, nor the Partnership Group, on account of their ownership interests in the Joint Ventures or otherwise, is under any obligation to make any loans, advances or capital contributions to, or become a borrower or guarantor or be otherwise liable with respect to any debts, liabilities or obligations of, any of the Joint Ventures nor is any such Joint Venture similarly obligated with respect to the Sellers or the Partnership Group.

Section 3.08. Financial Statements . The audited consolidated financial statements — including balance sheet, consolidated statement of income, shareholders’ equity, and cash flows — of Prism Gas, the predecessor-in-interest to

the Partnership, and its subsidiaries (which consist solely of the Subsidiaries) as of and for the years ended December 31, 2000, 2001, 2002, 2003, and 2004, attached hereto as Schedule 3.08(a) (the “Audited Financial Statements ”), present fairly the financial position of Prism Gas and its subsidiaries as of the dates indicated, and the results of operations for the indicated periods in conformity with GAAP, consistently applied (except as may be indicated in the notes thereto). In addition, the unaudited consolidated financial statements (the “Unaudited Financial Statements” , and together with the Audited Financial Statements, the “Financial Statements” ) — including balance sheet (the “ Latest Balance Sheet ”), statements of operations, cash flows, and partners’ capital — of the Partnership and Subsidiaries as of and for the period ended May 31, 2005 (the “Latest Balance Sheet Date”) , attached hereto as Schedule 3.08(b), present fairly the financial position of the Partnership and Subsidiaries as of the Latest Balance Sheet Date, and the results of operations for the period from January 1, 2005 to the Latest Balance Sheet Date in conformity with GAAP, consistently applied, except that the Unaudited Financial Statements, including the Latest Balance Sheet, are unaudited and are subject to normal recurring year-end adjustments and the absence of footnotes. The year-end adjustments for the Partnership Group’s annual financial statements for its 2002, 2003 and 2004 fiscal years are as specified in Schedule 3.08(c). The Financial Statements (i) are true, accurate, correct and complete and in accordance with the books and records of the Partnership Group, (ii) represent bona fide transactions effected in the ordinary course of business, and (iii) do not reflect any write-ups, write-downs or material adjustments that are not otherwise disclosed. Attached hereto as Schedule 3.08(d) for each Joint Venture are unaudited financial statements — including balance sheet, statement of income, and cash flows — as of and for the year ended December 31 of each of the years in which the Partnership Group owned an interest in such Joint Venture, and as of and for the five months ended May 31, 2005 (collectively, the “Joint Venture Financial Statements” ). The Joint Venture Financial Statements are unaudited and present fairly the respective financial position and results of operation for each of the Joint Ventures in accordance with GAAP, consistently applied, as of and for the periods presented, except that (i) the Joint Venture Financial Statements as of and for the five months ended May 31, 2005 and all Joint Venture Financial Statements of Matagorda and Pipe have not been prepared in conformity with GAAP, and (ii) in the case of such May 31, 2005 Joint Venture Financial Statements, such financial statements are subject to normal recurring year-end adjustments and the absence of footnotes. The year-end adjustments for the Joint Ventures’ annual financial statements attached as Schedule 3.08(d) for the fiscal years thereof are as specified in Schedule 3.08(e). The Joint Venture Financial Statements (i) are true, accurate, correct and complete and in accordance with the books and records of each Joint Venture, (ii) represent bona fide transactions effected in the ordinary course of business, and (iii) do not reflect any write-ups, write-downs or material adjustments that are not otherwise disclosed. Each member of the Partnership Group and each Joint Venture, except as otherwise detailed on Schedule 3.08(f), maintains a system of internal accounting controls required under GAAP that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, including policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of such entity, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with the authorization of management, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on financial statements. In addition, when delivered pursuant to Section 7.14(b), the June Financial Statements will present fairly the financial position of the Partnership and the Subsidiaries as of the dates indicated therein, including any required adjustment to the Tax payable accrual reflected on the Latest Balance Sheet as a result of the Appraisal pursuant to Section 7.15, and the results of operations for the periods presented therein in conformity with GAAP, consistently applied, except that such June Financial Statements are unaudited and are subject to normal recurring year-end adjustments and the absence of footnotes. When delivered, the June Financial Statements will (i) be true, accurate, correct and complete and in accordance with the books and records of the Partnership Group, (ii) represent bona fide transactions effected in the ordinary course of business, and (iii) not reflect any write-ups, write-downs or material adjustments that are not otherwise disclosed.

Section 3.09. Absence of Certain Changes . Except as disclosed in Schedule 3.09 or as expressly contemplated by this Agreement, since December 31, 2004, the business of the Partnership Group and the Joint Ventures has been conducted in the ordinary course consistent with past practices and since December 31, 2004 in the case of subsections (a) through (c) and (e) through (j), and since the latest Balance Sheet Date in the case of subsections (d) and (k), there has not been:

     (a) a Material Adverse Effect;

(b) any repurchase, redemption or other acquisition by the Partnership Group or the Joint Ventures of any outstanding Interests or other securities of the Partnership Group or the Joint Ventures;

(c) any amendment of any material term of any outstanding security of the Partnership Group or the Joint Ventures, or any issuance of additional equity securities or grant of any option, warrant or right to acquire any equity securities or issue any security convertible into or exchangeable for equity securities;

(d) any incurrence, creation, renewal, assumption or guarantee by the Partnership Group or the Joint Ventures of any (i) indebtedness for borrowed money, (ii) capitalized lease arrangement, (iii) hedging transactions, or (iv) operating lease arrangements, in any case other than in the ordinary course of business consistent with past practices and in all cases not in excess of $500,000 in the aggregate;

(e) any making of any loan, advance or capital contributions to, or investment in, any Person other than loans, advances or capital contributions to or investments made in the ordinary course of business consistent with past practices;

(f) any transaction or commitment made, including any capital expenditure or any contract or agreement entered into by the Partnership Group or the Joint Ventures relating to its assets or business, in either case, material to the Partnership Group or the Joint Ventures, taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement;

(g) any material change in any method of accounting or accounting practice by the Partnership Group or the Joint Ventures except for any such change required by reason of a concurrent change in GAAP;

(h) any (i) employment, deferred compensation, severance, retirement or other similar agreement entered into with any director, officer or employee of the Partnership Group or the Joint Ventures (or any amendment to any such existing agreement), (ii) grant of any severance or termination pay to any director, officer or employee of the Partnership Group or the Joint Ventures, or (iii) change in compensation or other benefits payable to any director, officer or employee of the Partnership Group or the Joint Ventures to any severance or retirement plans or policies thereof, in each case other than in the ordinary course of business consistent with past practices;

(i) any (i) change in accounting method, (ii) closing agreement (as defined in Section 7121 of the Code) or settlement of a material Tax liability entered into that affects the Partnership Group or the Joint Ventures, (iii) sale or other disposition of assets that is subject to the installment method or has been treated as an open transaction, (iv) change in a Tax election, or (v) amendment to a Return filed by the Partnership Group or the Joint Ventures;

(j) any transfer, assignment or encumbrance of any material asset of the Partnership Group or the Joint Ventures, other than the Permitted Liens; or

(k) any capital expenditure individually in excess of $50,000 and not to exceed $100,000 in the aggregate in the case of all capital expenditures, other than for capital expenditures related to projects set forth on Schedule 5.01(d).

Section 3.10. Intercompany Accounts . Schedule 3.10 contains a complete list of all intercompany balances and liabilities as of the Latest Balance Sheet Date between or among Sellers and their Affiliates, on the one hand, and the Partnership Group and the Joint Ventures, on the other hand. Since the Latest Balance Sheet Date, there has not been any accrual of liability by the Partnership Group or the Joint Ventures to Sellers or any of their Affiliates or other transaction between the Partnership Group or the Joint Ventures and Sellers and any of their Affiliates, except in the ordinary course of business of the Partnership Group or the Joint Ventures consistent with past practices or as provided in Schedule 3.10. Except as disclosed on Schedule 3.10, each of the liabilities and balances listed on Schedule 3.10 was incurred or engaged in on an arm’s length basis. All settlements of intercompany balances and liabilities between Sellers and their Affiliates, on the one hand, and the Partnership Group and the Joint Ventures, on the other hand, have been made, and all allocations of intercompany expenses have been applied, on arms-length

terms. All of the balances and liabilities listed on Schedule 3.10, or intercompany balances and liabilities incurred between the Latest Balance Sheet Date and the Closing Date as between the Sellers and their Affiliates, on the one hand, and the Partnership Group and the Joint Ventures, on the other hand, will be settled prior to the Closing.

Section 3.11. Material Contracts. Schedule 3.11 discloses any agreements, contracts, plans, leases, arrangements or commitments binding upon any member of the Partnership Group or the Joint Ventures that provide for payment, or delivery of assets or services, with obligations for payment of amounts in excess of $100,000 on an annual basis. Such disclosed items represent at least 80% of the annualized revenue stream of the Partnership Group. Schedule 3.11 also discloses (i) any agre