Midstream/Pipeline Acquisitions and Divestitures

1. Midstream/Pipeline Acquisitions andDivestitures Presented by: Bill Swanstrom Locke Liddell & Sapp LLP (713) 226-1143 bswanstrom@lockeliddell.com My thanks to Val Burguieres of Locke Liddell for her excellent work in compiling the information reflected in this report.

2. INTRODUCTION This study analyzes publicly available domestic midstream acquisition agreements, along with certain private agreements that Locke Liddell has been involved in, entered into since January 1, 2004. The transaction values ranged from approximately $50 million to $2.35 billion.

3. Table of Contents • “No Undisclosed Liabilities” Representation • “Full Disclosure” Representation • Material Adverse Change Condition • Material Adverse Change/Effect Carveouts • Knowledge Investigation Standards • Knowledge Groups • Time Limitation for Assertion of Claims • Baskets • Basket Carveouts • Caps • Indemnification as the Exclusive Remedy • Escrows

4. 1. Buyer-Favorable“No Undisclosed Liabilities” Representation “Except for Unrecorded Obligations: (i) disclosed, reflected or reserved against on the face of the balance sheet for five months ended May 31, 2005 that are included in the financial information contained in Schedule 4(1)(ii); (ii) incurred in the Ordinary Course of Business after May 31, 2005; (iii) arising from the execution, delivery or performance of this Agreement or any other agreement contemplated hereby; or (iv) disclosed on any Schedule to this Agreement, neither of the Acquired Companies has any material Unrecorded Obligations.” (MarkWest Energy Partners L.P. acquisition from Valero Energy Corporation)

5. Target-Favorable“No Undisclosed Liabilities” Representation “No Undisclosed Liabilities. Except as disclosed in Sellers’ Disclosure Schedules, no HPL Entity has any material liabilities that are required by GAAP to be reflected on the balance sheet of such HPL Entity except for…” (La Grange Acquisition, L.P. equity purchase from HPL Storage LP and AEP Energy Services Gas Holding Company II, L.L.C.)

6. No Representation 33% Includes a Representation 67% “No Undisclosed Liabilities” Representation

7. No Target Favorable Representation 34% 33% Buyer Favorable 33% “No Undisclosed Liabilities” Representation

8. 2. “Full Disclosure” Representation “Full Disclosure. No representation or warranty or other statement made by [Target or any Target shareholder] in this Agreement, the Disclosure Letter, any supplement to the Disclosure Letter, the certificates delivered pursuant to Section 2.7(a) or otherwise in connection with the Contemplated Transactions contains any untrue statement or omits to state a material fact necessary to make any of them in light of the circumstances in which it was made, not misleading.”* (ABA Model Asset Purchase Agreement) *Although this pro-Buyer representation is sometimes present, it was not included in any of the agreements reviewed for this presentation.

9. 3. Material Adverse Change Condition(MAC Condition) Example 1: “Since the date of this Agreement, there has not been any Target Material Adverse Change.” Example 2: Representation that there is an “Absence of Changes” PLUS A “Bring Down” formulation of “Accuracy of Representations” Condition

10. No MAC Condition 7% MAC Condition 93% MAC Condition

11. MAC Condition(Various Formulations – Quantified MAC) “Material Adverse Effect” means, (a) with respect to [Target] or the Shareholders, any breach of a representation or warranty hereunder or a covenant to be performed by [Target] or the Shareholders the effect of which is likely to cause [Target] (or the Surviving Company) to pay or become liable to pay more than Five Hundred Thousand ($500,000) Dollars to remedy any single such event, violation, breach, default or termination (as the case may be) or more than One Million ($1,000,000) Dollars in the aggregate for all such events, violations, breaches or defaults or terminations (as the case may be), and (b) with respect to Parent, any breach of a representation or warranty hereunder or a covenant to be performed by the Parent or Acquisition Subsidiary the effect of which is likely to cause the Parent (or the Surviving Company) to pay or become liable to pay more than Five Hundred Thousand ($500,000) Dollars to remedy any single such event, violation, breach, default or termination (as the case may be) or more than One Million ($1,000,000) Dollars in the aggregate for all such events, violations, breaches, or defaults or terminations (as the case may be).” (Starcraft Corp Acquisition of Wheel-to-Wheel Inc.*) *This is not a midstream acquisition but does demonstrate a quantified MAC condition

12. Buyer’s MAC Condition(Various Formulations – Quantified MACs)(All deals with stand-alone or backdoor MAC Condition) Other studies have indicated that in mergers and acquisitions generally, 8% of deals have a quantified MAC Condition. However, we found no midstream/pipeline acquisitions with quantified MAC Conditions.

13. MAC Condition(Various Formulations – Prospects) “Except as set forth in §4(g) of the Disclosure Schedule since April 30, 2005, (i) there has not been any Material Adverse Change in the business, financial condition, operations, results of operations, assets, liabilities, obligations or future prospects of the Company since April 30, 2005. (Copano Energy acquisition from Scissortail Energy, LLC)

14. 4. MAC/MAE Carveouts “Material Adverse Effect means (i) a material adverse effect on the business, assets, properties, results of operations or financial condition of the Companies and the Subsidiaries (taken as a whole) or (ii) a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement, other than with respect to (i) and (ii) an effect resulting from an Excluded Matter*.” (ONEOK, Inc, purchase of NGL/LP, LLC from Koch Hydrocarbon Management Company, LLC) * Excluded Matter defined on following slide

15. “Excluded Matter means any one or more of the following: (A) the effect of any change in the United States or foreign economies or securities or financial markets in general; (B) the effect of any change that generally affects any industry in which any of the Companies or the Subsidiaries operates; (C) the effect of any change arising in connection with any natural disasters, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any hostilities, acts of war, sabotage, or terrorism or military actions existing or underway as of the date hereof; (D) the effect of any action taken by Purchaser or its Affiliates with respect to the transactions contemplated hereby or with respect to any of the Companies or the Subsidiaries; (E) any matter of which Purchaser is aware on the date hereof; (F) the effect of any changes in applicable Laws or accounting rules; (G) the failure of any of the Companies or the Subsidiaries to meet any of its internal projections; (H) any effect resulting from the public announcement of this agreement, compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement; (I) the loss of any employee of any of the Companies or the Subsidiaries; or (J) matters that will be reflected in the determination of the Adjusted Purchase Price as of the Closing Date. (ONEOK, Inc, purchase of NGL/LP, LLC from Koch Hydrocarbon Management Company, LLC)

16. No MAC/MAE Carveouts 13% Includes MAC/MAE Carveouts 87% MAC/MAE Carveouts(All deferred closing deals)

17. No "General Economic Conditions" Carveout 0% ( Subset: "General Economic Conditions" Carveout) Disregards Disproportionate Effect 23% Includes "General Economic Conditions" Carveout 100% Does not Disregard Disproportionate Effect 77% MAC/MAE Carveouts – General Economic Conditions(All deals with MAC/MAE Carveout)

18. No "Industry Conditions" Carveout 31% (Subset: Industry Conditions Carveout) Does not Disregard Disproportionate Effect 22% Includes "Industry Conditions" Carveout Disregards 69% Disproportionate Effect 78% MAC/MAE Carveouts – Industry Conditions(All deferred closing deals regardless of existence of MAC Condition)

19. 5. Knowledge Investigation Standards“Actual Knowledge” “Knowledge of the Company” means actual knowledge without independent investigation of the individuals listed in §1(b) of the Disclosure Schedule.” (Copano Energy, LLC acquisition from Scissortail Energy, LLC)

20. Knowledge Investigation Standards“Constructive Knowledge” “Knowledge” as to Buyers means the actual knowledge, after reasonable inquiry, of those persons listed in Schedule 1.1(a) and as to Sellers means the actual knowledge, after reasonable inquiry, of those persons listed in Schedule 1.1(b).” (Southern Union asset purchase from SRGC)

21. Constructive Knowledge 44% Actual Knowledge 56% Knowledge Investigation Standards

22. 6. Whose Knowledge? “As to any Seller, “Knowledge” means the actual knowledge of any of the individuals listed in Sellers’ Disclosures Schedules as “Sellers’ Knowledge Group” or any other presently serving officer, member of the board of directors, or limited liability company manager of such Seller or the HPL Companies that such Seller directly or indirectly owned before the Closing Date, and the knowledge that such individual would have obtained as a result of the proper operation of reporting procedure concerning the business of Sellers or the HPL Entities that was not grossly negligent.” (La Grange Acquisition L.P. purchase from HPL Storage LP and AEP Energy Services Gas Holding Company II, L.L.C.)

23. Knowledge Groups(From agreements with Knowledge Investigation Standards) All of the midstream acquisition agreements, reviewed for this presentation, containing a knowledge qualifier also identified specific knowledge groups.

24. 7. Time Limitation for Assertion of Claims “The representations and warranties of the parties contained in this Agreement shall survive the Closing until nine (9) months after the Closing Date, except that the representations and warranties in Sectiosn 5.1, 5.2, 5.4, 5.19, 6.1, 6.2, 6.5 and 6.6 shall survive until the fifth annual anniversary of the Closing Date and the representations and warranties in Section 5.9 shall survive until the expiration of the applicable statute of limitations.” (ONEOK, Inc, acquisition from Koch Hydrocarbon Management Company, LLC)

25. 27% 60% 13% Survival/Time Limitation for Assertion of Claims* <12 mos. 12 mos. > 12 mos. * Time periods that apply to representations on a general basis; does not take into account longer periods that may be assigned to specific representations (see “Carveouts to Survival Limitations”)

26. 100% Fundamental Representations * 53% Taxes 47% Covenants 33% Environmental 27% Employee Matters 13% Indemnification 67% Broker's fees 7% Personal Injury/Property Loss 7% Gas Contract Corrections 7% Disposed Assets * Examples of Fundamental Representations include representations regarding due authorization, title, enforceability, no violation of the law and other matters Carveouts to Survival Limitations

27. 8. Baskets - Deductible “Seller shall have no liability arising out of or relating to Section 9.2(a) except if the aggregate Losses actually incurred by the Buyer Indemnified Parties thereunder exceed two percent of the Base Purchase Price (and then, subject to Section 9.4(c), only to the extent such aggregate Losses exceed such amount).” (TGT Pipeline, LLC equity purchase of GS Pipeline Company, LLC from Entergy-Koch, LP) “No reimbursement or payment for any Damages asserted against Sellers under Section 6.2.1(i) or 6.2.1(v) shall be required unless and until the cumulative aggregate amount of such Damages for all claims arising thereunder equals or exceeds the Sellers’ Threshold and then only to the extent that the cumulative aggregate amount of Damages, as finally determined, exceeds the Seller’s Threshold. The “Seller’s Threshold” shall be $10,000,000.” (La Grange Acquisition, L.P. equity purchase from HPL Storage LP and AEP Energy Services Gas Holding Company II, L.L.C.)

28. Baskets – First Dollar An Indemnifying Party shall not be liable for any claim for indemnification pursuant to Section 7.02(a) or 7.03(a), unless and until the aggregate amount of identifiable Losses that may be recovered from the Indemnifying Party equals or exceeds $12,000,000 (the “Aggregate Threshold”) in which case the Indemnifying Party shall be liable for all such Losses…. (Boston Scientific Corp acquisition of Advanced Bionics Corporation)* *Note that this is not a midstream/pipeline agreement. None of the agreements that we reviewed had a First Dollar Basket.

29. Baskets – Other Variations1. Minimum Size for Individual Claims2. Tiered Baskets “…the Seller agrees to release, indemnify and hold harmless the Buyer Indemnitees from and against the entirety of any Adverse Consequences that are individually in excess of twenty-five thousand dollars ($25,000) and that are suffered by the Buyer Indemnitees by reason of each such breach; provided, that the Seller shall not have any obligation to indemnify the Buyer Indemnitees from and against (A) the entirety of any such Adverse Consequence by reason of such breaches until the Buyer Indemnitees, in the aggregate, have suffered Adverse Consequences by reason of all Adverse Events in excess of an initial aggregate deductible amount equal to 1.0% of the Combined Purchase Price, (B) after which point, 50% of any such further Adverse Consequences by reason of such breaches until the Buyer Indemnitees, in the aggregate (above such amounts described in (A) above), have suffered Adverse Consequences by reason of all Adverse Events in excess of a second deductible aggregate amount equal to 1.0% of the Combined Purchase Price (after which point the Seller shall be obligated only to indemnify the Buyer Indemnitees from and against any further Adverse Consequences)…” (Crosstex Energy, L.P. acquisition from El Paso Corporation)

30. 20% 4% or More 20% 2% to < 4% 47% 1% to < 2% 0% 1/2% to < 1% 13% Less than 1/2 % Baskets: As a Percentage of Deal Value(Subset: Deals with Baskets)

31. 40% Taxes 27% Capitalization Fundamental 33% Representations 13% Broker's Fees 9. Basket Carveouts(Subset: deals with Baskets) * Examples of Fundamental Representations include representations regarding due authorization, title, enforceability, no violation of the law and other matters

32. 10. Caps “In no event shall the total indemnification to be paid by Sellers under this Article XI (other than the amounts paid pursuant to Section 11.1(b) with respect to post-Closing covenants, 11.1(c) and 11.1(e)) exceed U.S. $300,00,000.” (Targa Resources acquisition from Dynegy)

33. No Cap 7% Yes - Less Than Purchase Price 93% Caps

34. 7% No Cap 13% More than 25% 33% 20%-25% 7% 15%-19% 27% 10%-14% 13% Less than 10% Cap Amounts

35. 80% Taxes 36% Capitalization Buyer's 20% IndemnificationObligation Fundamental 13% Representations Cap Carveouts * Examples of Fundamental Representations include representations regarding due authorization, title, enforceability, no violation of the law and other matters

36. Silent 25% Exclusive Remedy 75% 11. Indemnification as the Exclusive Remedy

37. 17% Fraud 25% Equitable Remedies Breach of Representations and Warranties prior 8% to closing Indemnification as the Exclusive Remedy - Carveouts

38. Escrow 20% No Escrow 80% 12. Escrows