exv10w4



 







EXHIBIT 10.4




 

 






SALE, CONTRIBUTION AND EXCHANGE AGREEMENT




Covering the Sale and Contribution of




100% of the Partnership Interests in




Midstream Gas Services, L.P.




In Exchange for Cash and Partnership

Interests in Eagle Rock Pipeline, LP




Dated June 2, 2006




 

 






 









 





SALE, CONTRIBUTION AND EXCHANGE AGREEMENT




     THIS SALE, CONTRIBUTION AND EXCHANGE AGREEMENT (“Agreement”) is made and entered into this 2nd
day of June, 2006, by and among MGS GP, L.L.C., a Texas limited liability company (“MGS GP”);
ANTHONY R. MICHOG, in his individual capacity (“Michog”); DAVID E. HIETT, in his individual
capacity (“Hiett”); DAVID B. BRALEY, in his individual capacity (“Braley”); RICHARD W. WILKERSON in
his individual capacity (“Wilkerson”); TERRY D. GREGSON in his individual capacity (“Gregson”);
NATURAL GAS PARTNERS VII, L.P., a Delaware limited partnership (“NGP” along with Michog, Hiett,
Braley, Wilkerson and Gregson are collectively the “MGS LPs” or individually an “MGS LP”); EAGLE
ROCK ENERGY SERVICES, L.P., a Texas limited partnership (“Buyer”); and EAGLE ROCK PIPELINE, LP, a
Delaware limited partnership (“ER Pipeline”).



     WHEREAS, MGS GP and the MGS LPs own all of the issued and outstanding limited and general
partner interests, incentive interests, options and related rights (collectively, the “MGS Units”)
in MIDSTREAM GAS SERVICES, L.P., a Texas limited partnership (“MGS”) which owns and operates
certain assets consisting generally of a gas plant, gathering pipelines and compressor stations and
other related assets, located in Roberts County, Texas; and



     WHEREAS, pursuant to the terms of this Agreement, MGS GP desires to sell, convey and assign to
Buyer and Buyer desires to purchase, acquire and receive from MGS GP all of the general partner
interests in MGS; and



     WHEREAS, pursuant to the terms of this Agreement, NGP desires to contribute its limited
partner interests in MGS to ER Pipeline and ER Pipeline desires to accept from NGP such limited
partner interests in MGS; and



     WHEREAS, pursuant to the terms of this Agreement, Michog, Hiett and Braley desire to sell,
convey and assign a portion of their limited partner interests in MGS to Buyer and Buyer desires to
purchase, acquire and receive from Michog, Hiett and Braley such portion of limited partner
interests in MGS; and



     WHEREAS, pursuant to the terms of this Agreement, Michog, Hiett and Braley desire to
contribute the remaining portion of their limited partner interests in MGS to ER Pipeline and ER
Pipeline desires to accept from Michog, Hiett and Braley such remaining portion of limited partner
interests in MGS; and



     WHEREAS, pursuant to the terms of this Agreement, Wilkerson and Gregson desire to sell, assign
and convey their limited partner interests in MGS to Buyer and Buyer desires to purchase, acquire
and receive from Wilkerson and Gregson all of their limited partner interests in MGS; and



 









 





     WHEREAS, pursuant to the terms of this Agreement, Buyer and ER Pipeline desire to acquire and
receive such interests from MGS GP and the MGS LPs.



     NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained
herein, the parties to this Agreement hereby agree as follows:



 









 





ARTICLE I

DEFINITIONS; INTERPRETATION





	1.01	 	Definitions. Capitalized terms used herein and not defined elsewhere in this
Agreement shall have the meanings given such terms as is set forth below.





     “Advisory Services Agreement” means the Advisory Services, Reimbursement and Indemnification
Agreement, effective as of November 1, 2004, between MGS and NGP.



     “Affiliate” means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such Person. For purposes of the
definition of “Affiliate,” the term “control” (including the correlative terms “controlled by” and
“under common control with”), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, by contract, or otherwise. For purposes of this
Agreement, the term Affiliate, with respect to MGS, MGS GP, Buyer and ER Pipeline, shall not
include NGP.



     “Assets” shall mean all of the Facilities, Property Rights, Rights of Way, Pipeline and Other
Fixtures, Permits, Contracts, Leases, Other Assets, and Line Fill, but shall specifically exclude
the Excluded Assets.



     “Assumed Liabilities” shall have the meaning given it in Section 6.07.



     “Business Day” means any day, Monday through Friday, on which nationally chartered banks are
open for the transaction of business in Houston, Texas.



     “Casualty Loss” shall have the meaning given it in Section 6.01.



     “Chesapeake Agreement” means that certain Gas Processing Agreement dated July 10, 2005,
between MGS and Axio Production Company, an Affiliate of Chesapeake Energy Corporation.



     “Closing” shall have the meaning given it in Section 8.01.



     “Closing Amount” shall have the meaning given it in Section 6.04.



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



     “Confidentiality and Noncompete Agreements” means the Confidentiality and Noncompete
Agreements, dated as of November 1, 2004, between MGS and certain of MGS’ employees.



     “Contracts” means any and all contracts and agreements relating exclusively to or which are
reasonably necessary for conduct of the business of MGS in Roberts County, Texas, or the use of the
Assets, including contracts related to the purchase, processing, gathering and



 









 







transportation of gas; the sales, marketing and fractionation of natural gas liquids; and the sale
of condensate.



     “Contributor(s)” means NGP, Michog, Hiett and/or Braley.



     “Deferred Units” means the amount, if any, of additional Units in ER Pipeline to be delivered
to NGP as calculated using the Financial Model, but not to exceed the Maximum Deferred Units.



     “Effective Time” shall mean 11:59 p.m. central time on May 31, 2006.



     “Environmental Laws” means any and all Legal Requirements or Orders, rules, codes, policies,
directives, standards, licenses or permits of any Governmental Body relating to the environment,
specifically, including those relating to the exposure to, use, Release, emission, presence,
storage, treatment, generation, transportation, processing or handling of Hazardous Materials,
previously, presently, or hereafter in effect, including the Safe Drinking Water Act, 42 U.S.C. §
300f et seq.; the Federal Insecticide, Fungicide & Rodenticide Act, 7 U.S.C. § 136 et seq.; the
Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. §
2701 et seq.; the Clean Water Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”), and
the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq.; and all similar
statutes adopted by the State of Texas, as each may be amended from time to time.



     “ER Indemnitees” shall have the meaning given it in Section 9.01(a).



     “ER Partnership Agreement” means that certain Amended and Restated Agreement of Limited
Partnership dated March 27, 2006, as amended, among the general and limited partners of ER
Pipeline, governing the operation and affairs of ER Pipeline.



     “ER Pipeline” means Eagle Rock Pipeline, LP, a Delaware limited partnership.



     “ER Units” means limited partnership interests in ER Pipeline which, for purposes of this
Agreement, shall be valued at $18.02 per Unit.



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



     “Excluded Assets” shall have the meaning given it in Section 6.06.



     “Facilities” means the gas plant, gathering pipelines, compressor station, processing plant,
pad site and related facilities owned by MGS and located in Roberts County, Texas.



 









 





     “Financial Model” shall mean the formula described on Exhibit D hereto to be used by
the parties to determine the amount of Deferred Units, if any, to be paid to NGP in accordance with
Section 3.02(a).



     “Governmental Body” means any (a) nation, state, county, city, town, village, district,
territory, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or
other government; (c) governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); or (d) body exercising,
or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.



     “Hazardous Material” means at any time (i) any material, substance, waste, pollutant, or
contaminant regulated, designated or defined as hazardous, extremely or imminently hazardous,
dangerous or toxic under the following federal statutes and their state counterparts, as well as
those statutes’ implementing regulations: CERCLA, the Federal Insecticide, Fungicide and
Rodenticide Act, the Atomic Energy Act, the Hazardous Materials Transportation Act, and the Solid
Waste Disposal Act, each as amended; (ii) petroleum products including crude oil and any fractions
thereof; (iii) asbestos; (iv) natural gas, synthetic gas and any mixtures thereof; or (v) any
substance with respect to which a Governmental Body otherwise requires environmental investigation,
monitoring, reporting or remediation.



     “Indemnitee” shall have the meaning given it in Section 10.01



     “Indemnitor” shall have the meaning given it in Section 10.01.



     “Initial Units” means the aggregate amount of one million one hundred twenty five thousand
four hundred sixteen (1,125,416) ER Units, which, for purposes of this Agreement, has a deemed
value of Twenty Million Two Hundred Eighty Thousand and No/100 Dollars ($20,280,000).



     “Knowledge of Sellers and Contributors” means the actual knowledge of each Seller and
Contributor.



     “Leases” means all leases of real or personal property, including the lease of the real
property on which the Facilities operate.



     “Legal Requirement” means any Order, constitution, law, ordinance, regulation, statute, or
treaty issued by any federal, state, local, municipal, foreign, international, multinational, or
other administrative body, any principle of common law or governmental interpretation thereof.



     “Liabilities/Claims” shall have the meaning given it in Section 9.01(a).



     “Line Fill” means the quantity of natural gas owned by MGS.



 









 





     “Maximum Deferred Units” means an amount not to exceed 1,109,878 Units in ER Pipeline.



     “Order” means any award, decision, injunction, judgment, decree, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator.



     “Other Assets” means all vehicles, computers, software, communication equipment and other
assets utilized in the operation of the business of MGS in Roberts County, Texas.



     “Permits” means all environmental and other governmental permits, licenses, orders, franchises
and related instruments or rights relating to the ownership or operation of the Assets.



     “Permitted Encumbrances” shall mean:




	 	(i)	 	the terms, conditions, restrictions, obligations, exceptions, reservations,
limitations and other matters contained in: (A) any of the Rights of Way or documents
under which Sellers obtained any of the Property Rights or Rights of Way; (B) other
easements, leases, permits or other conveyancing documents which are of record in the
land records of the county where the affected Assets are located; and (C) the
Contracts;
	 
	 	(ii)	 	liens for property taxes and assessments that are not yet due and payable (or
if delinquent, that are being contested in good faith by MGS by appropriate
Proceedings);
	 
	 	(iii)	 	mechanic’s, materialmen’s, repairmen’s and other liens arising in the ordinary
course and securing obligations incurred prior to Closing and for which MGS is are
responsible for payment;
	 
	 	(iv)	 	any obligations or duties affecting the Assets as to any Governmental Body
under any Permit and all Legal Requirements, and any rights reserved to or vested in
any Governmental Body to control or regulate the Assets or the operation thereof in any
manner;
	 
	 	(v)	 	utility easements, restrictive covenants, and other matters that (A) are of
record or (B) do not and will not interfere materially with the ownership, use and
operation of the Assets; and
	 
	 	(vi)	 	preferential rights to purchase, required third-party consents to assignment
and other similar agreements which do not apply to this transaction or with respect to
which waivers or consents are obtained from the appropriate parties with respect to the
sale contemplated hereby or as to which the appropriate time for asserting such rights
has expired as of Closing without an exercise of such rights.





     “Person” means any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust,



 









 







unincorporated organization, business, syndicate, sole proprietorship, association, organization, labor union, or
other entity or Governmental Body.



     “Pipeline and Other Fixtures” shall mean those certain pipelines, and related valves, pumps,
compressors and other equipment, personal property and fixtures relating to the Facilities.



     “Proceeding” means any action, arbitration, audit, claim, inspection, notice, review, hearing,
investigation, litigation, or suit, injunction, judgment, order, decree or ruling (whether civil,
criminal, administrative, investigative, or informal), at law or in equity, commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.



     “Property Rights” shall mean any fee properties, surface leases, other rights to use of the
surface and related instruments, upon which the Facilities are located.



     “Release” or “Released” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, migrating or disposing (including the
abandoning or discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) of a substance into the environment.



     “Rights Agreement” means the Voting and Transfer Restriction Agreement, dated as of November
1, 2004, by and among MGS, MGS GP, NGP, and certain employees and investors.



     “Rights of Way” means all easements, rights-of-way, servitudes, permits and/or licenses
pertaining to the Facilities or the Pipeline and Other Fixtures.



     “Securities Act” means the Securities Act of 1933, as amended.



     “Seller Indemnitees” shall have the meaning given it in Section 9.01(b).



     “Seller(s)” means MGS GP, Michog, Hiett, Braley, Wilkerson and/or Gregson.



     “Tax” or “Taxes” means all income, profits, franchise, gross receipts, capital, sales, use,
withholding, value added, ad valorem, transfer, employment, social security, disability,
occupation, asset, property, severance, documentary, stamp, excise and other taxes, duties and
similar governmental charges or assessments imposed by or on behalf of any governmental authority
and any interest, fines, penalties or additions relating to any such tax, duty, charge or
assessment.



     “Tax Return” means any return, report, information statement, or similar statement required to
be filed with respect to any Taxes (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return and declaration of estimated
Tax.



 









 






	1.02	 	Interpretation. All references in this Agreement to Exhibits, Schedules, Articles,
Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions of or to this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections,
subsections or other subdivisions of this Agreement are for convenience only, do not
constitute any part of this Agreement, and shall be disregarded in construing the language
hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words
of similar import, refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The words “this Article,” “this Section” and “this
subsection,” and words of similar import, refer only to the Article, Section or subsection
hereof in which such words occur. The word “or” is not exclusive, and the word “including”
(in its various forms) means including without limitation.




 









 











ARTICLE II

SALE AND CONTRIBUTION OF MGS UNITS





	2.01	 	Purchase and Sale. Subject to the terms and conditions of this Agreement, Buyer
shall purchase from Sellers, and Sellers shall sell, transfer, assign and convey to Buyer, the
MGS Units set forth on Schedule 2.01. Such sale, transfer, assignment and conveyance
shall be performed pursuant to instruments generally in the form of the Assignment attached
hereto as Exhibit A.






	2.02	 	Contribution. Subject to the terms and conditions of this Agreement, Contributors
shall contribute and transfer to ER Pipeline, and ER Pipeline shall received and accept from
Contributors, in a transaction under Section 721 of the Code, the MGS Units set forth on
Schedule 2.02. Such contributions shall be performed pursuant to instruments
generally in the form of the Contribution Agreement attached hereto as Exhibit B.




 









 











ARTICLE III

PURCHASE PRICE





	3.01	 	Purchase Price. Subject to the terms and conditions of this Agreement, and in full
payment for the MGS Units being sold to Buyer pursuant to Section 2.01, Buyer shall pay or
cause to be paid to Sellers, as further detailed below, at Closing, by wire transfer as
described in Section 8.01(b), the aggregate sum of Four Million Seven Hundred Twenty Thousand
and no/100 Dollars ($4,720,000) as such sum may be adjusted pursuant to the provisions of this
Agreement, such sum to be payable to the respective Sellers as follows:






	 	(a)	 	As payment for the sale, assignment and conveyance by MGS GP of all of the
general partner interests in MGS, Buyer will pay to MGS GP, Two Hundred Fifty Thousand
and No/100 Dollars ($250,000.00);
	 
	 	(b)	 	As payment for the sale, assignment and conveyance by Michog of 10,743 MGS
Units, Buyer will pay to Michog, Six Hundred Ninety Thousand and No/100 Dollars
($690,000.00);
	 
	 	(c)	 	As payment for the sale, assignment and conveyance by Hiett of 10,743 MGS
Units, Buyer will pay to Hiett, Six Hundred Ninety Thousand and No/100 Dollars
($690,000.00);
	 
	 	(d)	 	As payment for the sale, assignment and conveyance by Braley of 10,743 MGS
Units, Buyer will pay to Braley, Six Hundred Ninety Thousand and No/100 Dollars
($690,000.00);
	 
	 	(e)	 	As payment for the sale, assignment and conveyance by Wilkerson of 10,435 MGS
Units, Buyer will pay to Wilkerson, One Million Two Hundred Thousand and No/100 Dollars
($1,200,000); and
	 
	 	(f)	 	As payment for the sale, assignment and conveyance by Gregson of 10,435 MGS
Units, Buyer will pay to Gregson, One Million Two Hundred Thousand and No/100 Dollars
($1,200,000).






	3.02	 	Exchange. Subject to the terms and conditions of this Agreement, and in exchange for
the MGS Units being contributed to ER Pipeline pursuant to Section 2.02, ER Pipeline shall
issue and deliver to Contributors, as further detailed below: (i) at Closing the Initial
Units, and (ii) within twenty (20) Business Days after the second anniversary of the Closing
date, the Deferred Units, if any.






	 	(a)	 	In exchange for the contribution by NGP of 495,000 MGS Units, ER Pipeline will
issue and deliver to NGP 610,433 ER Units and the Deferred Units, if any;
	 
	 	(b)	 	In exchange for the contribution by Michog of 42,971 MGS Units, ER Pipeline
will issue and deliver to Michog 171,661 ER Units;




 









 






	 	(c)	 	In exchange for the contribution by Hiett of 42,971 MGS Units, ER Pipeline will
issue and deliver to Hiett 171,661 ER Units; and
	 
	 	(d)	 	In exchange for the contribution by Braley of 42,971 MGS Units, ER Pipeline
will issue and deliver to Braley 171,661 ER Units.





 









 





ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS, 

CONTRIBUTORS AND MGS



4.01 Sellers and Contributors. Each Seller and Contributor, severally and not jointly,
with respect to himself or itself and not with respect to any other Seller or Contributor, hereby
represents and warrants to Buyer and ER Pipeline as follows:





(a) Title to MGS Units; Capitalization. Such Seller or Contributor is the lawful
owner, beneficially and of record of the MGS Units set forth on Schedule 2.01 and 2.02, as
applicable, free and clear of any liens, claims or encumbrances of any kind or nature. The
MGS Units set forth on Schedules 2.01 and 2.02, in the aggregate, constitute one hundred
percent (100%) of the general and limited partnership interests of MGS. Such MGS Units have
been duly authorized, are validly issued, fully paid and nonassessable, and were not issued
in violation of any preemptive or other similar rights. Except for the MGS Units, there are
no outstanding (i) voting or other partnership interests of MGS; (ii) securities of MGS
convertible into, or exchangeable or exercisable for, partnership interests of MGS; and
(iii) options, warrants, calls, rights, commitments or agreements to which MGS is a party or
by which it is bound, in any case obligating MGS to issue, deliver, sell, purchase, redeem
or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired,
partnership interests of MGS, or obligating MGS to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. Upon consummation of the
transactions contemplated hereby, Buyer and ER Pipeline will acquire good, valid and
indefeasible title to all the MGS Units of such Seller or Contributor, free and clear of any
liens, claims or encumbrances.




(b) Authorization of Transaction. Such Seller or Contributor has full power and
authority (including full partnership or limited liability company power and authority, to
the extent applicable) to execute and deliver this Agreement and to perform his or its
obligations hereunder. This Agreement constitutes the valid and legally binding obligation
of such Seller or Contributor, enforceable in accordance with its terms and conditions,
subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally, and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in equity or at
law). Such Seller or Contributor does not need to give any notice to, make any filing with
or obtain any authorization, consent or approval of, any Governmental Authority in order to
consummate the transactions contemplated by this Agreement. If such Seller or Contributor
is an individual, the MGS Units sold or contributed by such Seller or Contributor are not
subject to any spousal rights or similar restrictions or such Seller’s or Contributor’s
spouse has executed this Agreement, evidencing such spouse’s consent to the execution,
delivery and performance of this Agreement by such Seller or Contributor and such spouse, as
applicable.



 









 






(c) Noncontravention. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any Governmental Body to which such Seller or Contributor is subject or any
provision of its formation documents or instruments, if applicable, or (B) conflict with,
result in a breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any notice under
any agreement, Contract, lease, license, instrument or other arrangement to which such
Seller or Contributor is a party or by which he or it is bound or to which any of the Assets
is subject.




(d) Claims against MGS. Such Seller or Contributor has no outstanding claims for
reimbursement from or indemnity by MGS.




(e) Solvency.




	 	(i)	 	Such Seller or Contributor is not insolvent and will not be
rendered insolvent by any of transactions described hereunder. As used in this
section, “insolvent” means that the sum of the debts and other probable
liabilities of such Seller or Contributor exceed the present fair saleable
value of such Seller’s or Contributor’s assets.
	 
	 	(ii)	 	Immediately after giving effect to the consummation of the
transactions described hereunder: (i) such Seller or Contributor will be able
to pay its liabilities as they become due in the usual course of its business;
(ii) such Seller or Contributor will not have unreasonably small capital with
which to conduct its present or proposed business; (iii) such Seller or
Contributor will have assets (calculated at fair market value) that exceed its
liabilities; and (iv) taking into account all pending and threatened
litigation, final judgments against such Seller or Contributor in actions for
money damages are not reasonably anticipated to be rendered at a time when, or
in amounts such that, such Seller or Contributor will be unable to satisfy any
such judgments promptly in accordance with their terms (taking into account the
maximum probable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) as well as all other
obligations of such Seller or Contributor. The cash available to such Seller
or Contributor, after taking into account all other anticipated uses of the
cash, will be sufficient to pay all such debts and judgments promptly in
accordance with their terms.






(f) Securities Representation. Such Contributor receiving ER Units in exchange for
his or its MGS Units is acquiring such ER Units for his or its own account and not with a
view to, or for offer of resale in connection with, a distribution thereof, within the
meaning of the Securities Act. Such Contributor acknowledges that he or it is able to fend
for himself or itself, can bear the economic risk of his or its investment in the ER Units,
and has such knowledge and experience in financial and business matters that he or it is capable
of evaluating the merits and risks of an investment in the ER Units. In acquiring the ER



 









 







Units, such Contributor is not offering or selling, and will not offer or sell, for himself
or itself or ER Pipeline in connection with any distribution of the ER Units, and such
Contributor does not have a participation and will not participate in any such undertaking
or in any underwriting of such an undertaking except in compliance with applicable federal
and state securities laws. Further, such Contributor understands that such ER Units will not
have been registered pursuant to the Securities Act or any applicable state securities laws,
that the ER Units will be characterized as “restricted securities” under federal securities
laws, and that under such laws and applicable regulations the ER Units cannot be sold or
otherwise disposed of without registration under the Securities Act or an exemption
therefrom. In this connection, such Contributor represents that he or it is familiar with
Rule 144 promulgated under the Securities Act, as currently in effect, and understands the
resale limitations imposed thereby and by the Securities Act. Stop transfer instructions
may be issued to the transfer agent for securities of ER Pipeline (or a notation may be made
in the appropriate records of ER Pipeline) in connection with the ER Units issued hereunder.
It is agreed and understood by such Contributor that, should any certificate be issued
representing any of the ER Units, each such certificate shall conspicuously set forth on the
face or back thereof, in addition to any legends required by Legal Requirement or other
agreement, a legend in substantially the following form:




THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH UNITS MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS EAGLE ROCK PIPELINE, LP RECEIVES A
WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.


4.02 MGS. Each Seller and Contributor, jointly and severally, hereby represents and
warrants to Buyer and ER Pipeline as follows:





(a) Organization and Standing. MGS is a limited partnership duly organized and
validly existing under the laws of the State of Texas. MGS GP is the sole general partner
of MGS.




(b) Title to Assets; Condition; Operatorship. MGS owns good and defensible title to
all real property included in the Assets, and owns good and defensible title or (in the case
of leases and contractual rights) a valid and subsisting contractual right to its interest
in, all of the other assets included in the Assets, free and clear of all liens, pledges,
encumbrances, adverse claims, or preferential rights, except for Permitted Encumbrances.
Schedule 4.02(b) sets forth a full and complete description of all of the Assets.
The



 









 







tangible assets included in the Assets are in good operating condition and repair, ordinary
wear and tear excepted, and are suitable for the use for which such tangible assets are
currently used. The Assets include all assets or rights used by MGS in connection with the
business and operations conducted with the Assets and are all the rights, properties, and
equipment necessary to carry out the business and operations of MGS with respect to the
Assets as presently conducted. Except as otherwise set forth on Schedule 4.02(b),
MGS is the sole owner and operator of all of the Assets.




(c) Financial Statements. Schedule 4.02(c) sets forth (i) the unaudited
balance sheet of MGS at December 31, 2005 (the “Final Balance Sheet”), and related unaudited
statements of income and cash flows for the year ended on December 31, 2005; (ii) the
unaudited balance sheet of MGS at December 31, 2004, and related unaudited statements of
income and cash flows for the year ended December 31, 2004; and (iii) the unaudited balance
sheet of MGS at April 30, 2006, and the related unaudited income statement for the four (4)
month period ended April 30, 2006 (collectively, the “Financial Data”). The Financial Data
are derived from the books and records of MGS and were prepared in accordance with generally
accepted accounting principles, have been prepared consistent with the past practices of MGS
in reporting such Financial Data, and present fairly the financial condition of MGS in all
material respects. There is no liability, contingent or otherwise, of MGS that is not
adequately reflected or reserved against in the Financial Data, other than liabilities that
are either (A) liabilities incurred in the ordinary course of business and consistent with
past practices of MGS; or (B) liabilities under this Agreement. MGS has conducted its
business in the ordinary course of business and consistent with past practices of MGS.




(d) Material Change. Except as set forth in Schedule 4.02(d), since
December 31, 2005:




	 	(i)	 	there has not been any material adverse change with respect
to the condition of the Assets or the operations of the Assets;
	 
	 	(ii)	 	the Assets have been operated and maintained in the ordinary
course of business;
	 
	 	(iii)	 	there has been no actual, pending or, to the Knowledge of
Sellers or Contributors, whether in writing or verbally, threatened adverse
change affecting any of the Assets with any customers, licensors, suppliers,
distributors or sales representatives;
	 
	 	(iv)	 	there has not been any material damage, destruction or loss
to any material portion of the Assets, whether or not covered by insurance;
	 
	 	(v)	 	there has been no sale or lease of assets included in the
Assets;




 









 






	 	(vi)	 	there has been no Contract or commitment entered into outside
the ordinary course of business;
	 
	 	(vii)	 	there has been no Contract entered into which grants to a
Person a preferential right to purchase any MGS Units or any of the Assets;
	 
	 	(viii)	 	there has been no Contract or commitment for capital expenditures or the
acquisition or construction of fixed assets for which Buyer shall or may have
responsibility after the Closing; and
	 
	 	(ix)	 	there is no Contract, commitment or agreement to do any of
the foregoing, except as expressly permitted hereby.






(e) Legal Compliance. MGS, with respect to the Assets and the operation thereof,
has complied in all material respects with all Legal Requirements.




(f) Tax Matters. Except as set forth in Schedule 4.02(f):




	 	(i)	 	MGS has (and as of the Closing will have) filed all federal,
state, local and foreign Tax Returns due that it was required to file with any
taxing authority, all such Tax Returns are correct in all material respects,
and the Excluded Assets, and all Taxes owed by Sellers or Contributors (with
respect to the Assets) with respect to the information reflected on any such
Tax Return have been paid;
	 
	 	(ii)	 	MGS has not (and as of the Closing will not have) requested or
been granted any extensions with respect to any Tax Return.
	 
	 	(iii)	 	There is no material adjustment (due to a change in
accounting method or otherwise), dispute or claim concerning any Tax liability
of MGS either claimed or raised by any authority in writing;
	 
	 	(iv)	 	MGS has never made an effective election to be treated as an
association taxable as a corporation for federal tax purposes and
	 
	 	(v)	 	No waiver or extension of any statute of limitations as to
any federal, state, local or foreign Tax Matter that has been given by or
requested from MGS is currently effective.






(g) Contracts and Commitments. Schedule 4.02(g) includes a list of all
Contracts and commitments (including any contract, lease, agreement or commitment, written
or oral, providing for receipt or payment, contingent or otherwise, or which may not be
terminated without payment or penalty, or restricting the ability of the owner of the Assets
to engage in any line of business in any geographic area, or containing any indemnity
obligation, or relating to indebtedness or guarantee obligations) which are included in the
Assets, and each such Contract is in full force and effect. MGS has



 









 







performed all material obligations
required to be performed by it to date under the Contracts, has invoiced and collected all
amounts due to MGS under the Contracts, except for amounts not required to be paid as of the
date hereof and as of the Closing date, respectively, under the terms of the Contract, and
is not in default under any material obligation of any such Contracts. To the Knowledge of
Sellers and Contributors, no other party to any Contract is in default thereunder. The
construction of the Facilities is complete. The Facilities are currently operational and
have been designed as a 25MMSCF per day gas processing plant.




(h) Litigation. Neither MGS nor any of the Assets (i) is subject to any outstanding
Proceeding, or (ii) is the subject of any pending or, to the Knowledge of Sellers,
threatened, whether in writing or verbally, claim, demand or notice of violation or
liability from any Person.




(i) Environmental Matters. Except as set forth in Schedule 4.02(i),




	 	(i)	 	MGS is and has been in compliance in all material respects with
all applicable Environmental Laws.
	 
	 	(ii)	 	MGS has obtained all Permits, licenses, franchises,
authorities, consents and approvals, and has made all filings and maintained
all material information, documentation, and records, as necessary under
applicable Environmental Laws for operating the business conducted with the
Assets as it is presently conducted, and all such permits, licenses,
franchises, authorities, consents, approvals, and filings remain in full force
and effect.
	 
	 	(iii)	 	There are no pending or, to Sellers’ Knowledge, threatened,
whether in writing or verbally, claims, demands, actions, administrative
proceedings, lawsuits or investigations against MGS relating to Environmental
Laws, and MGS is not subject to any injunction, judgment, order, decree or
ruling under any Environmental Laws.
	 
	 	(iv)	 	None of the real property leased by MGS nor any off-site
location used for the treatment, storage or disposal of waste from any Asset,
is: (A) listed on the National Priorities List or any similar state list of
sites requiring remedial action; (B) to the Knowledge of Sellers and
Contributors, being considered for possible inclusion on the National
Priorities List or on any such similar state list; or (C) to the Knowledge of
Sellers and Contributors, the subject of any action or investigation that may
lead to claims under any Environmental Law.
	 
	 	(v)	 	No part of any of the real property leased by MGS is now being
used, or has been used by MGS or its Affiliates or, by any third party, as a
landfill, dump or other disposal area for Hazardous Substances.




 









 






	 	(vi)	 	Neither Sellers, Contributors nor MGS have received any notice
or other communication that it, with respect to the Assets, is or may be a
potentially responsible party or otherwise liable under any Environmental Law in
connection with any site actually or allegedly containing or used for the
treatment, storage or disposal of Hazardous Substances.






(j) Permits, Bonds, Regulatory Requirements. Schedule 4.02(j) lists all
Permits, surety bonds, performance bonds, guarantees, financial assurances required to be
provided by MGS, consents, approvals and authorizations of all Governmental Bodies necessary
for the conduct of the business and operations conducted by MGS. Each Permit is in full
force and effect, and MGS is in compliance in all material respects with all of its
obligations with respect to each Permit and no event has occurred that permits, or upon the
giving of notice or the lapse of time or otherwise would permit, revocation or termination
of any Permit.




(k) No “Take or Pay”. Except as expressly set forth in Schedule 4.02(k),
there are currently no arrangements under any of the Contracts by which MGS will be
obligated by virtue of a prepayment arrangement, a “take-or-pay” arrangement, a production
payment or any other arrangement, to sell, transport or deliver hydrocarbons at some future
time without then or thereafter being entitled to receive full payment therefor, or to make
payment at some future time for hydrocarbons or the transportation or the delivery of
hydrocarbons purchased or transported prior to the date of this Agreement.




(l) Pipeline Rights of Way. Except as expressly set forth in Schedule
4.02(l), neither Sellers, Contributors nor MGS have received written notice from any
third party of any deficiency in any Rights of Way with respect to the entire route of all
pipelines owned and used or held for use with respect to the Assets. Other than sales or
assignments to customers, Sellers have not sold or assigned any Rights of Way, in whole or
in part, or any undivided interest therein to any party whatsoever, except as expressly
disclosed in Schedule 4.02(l).




(m) Tariffs. Except as expressly set forth in Schedule 4.01(m), to the
extent that the operations with respect to the Assets are subject to a tariff approved by
the Texas Railroad Commission (“TRC”), those operations are in compliance with each such
tariff. Sellers have no Knowledge of any refund claim of any customers or any refund
obligation imposed under an order issued by the TRC and, except as expressly set forth in
Schedule 4.01(m), has no Knowledge of any facts or circumstance which would give
rise to any such refund claim or refund obligation. Except as expressly set forth in
Schedule 4.01(m), there are no customer complaints pending or, to the Knowledge of
Sellers or Contributors, whether in writing or verbally, threatened, before the TRC or any
other administrative or regulatory agency.




(n) Real Property.




	 	(i)	 	MGS does not own any real property. Schedule 4.02(n)
sets forth an accurate, correct and complete list of each parcel of real
property leased by




 









 






	 	 	 	MGS, including the street address, complete legal
description, and a list of all contracts and agreements, oral or written,
relating to or affecting such
real property or any interest therein, including any lease agreement
therefor. MGS has delivered to Buyer accurate, correct and complete copies
of all such contracts and agreements, which are all valid and binding and in
full force and effect.
	 
	 	(ii)	 	Neither the whole nor any portion of the real property listed
on Schedule 4.02(n) has been condemned, requisitioned, or otherwise
taken by any public authority, and no notice of any such action has been
received by MGS, or to the Knowledge of Sellers or Contributors, threatened,
whether in writing or verbally.
	 
	 	(iii)	 	MGS has delivered to Buyer accurate, correct and complete
copies of all existing surveys, appraisals, mechanical and structural reports,
engineering plans, architectural drawings, and soil studies and similar
reports, if any, with respect to the real property listed on Schedule
4.01(n) which is in its possession.
	 
	 	(iv)	 	With respect to any leased real property, MGS has been in
peaceable possession of the premises covered by the applicable real property
lease since the commencement of the original term of such lease.






(o) Patents, Copyright, Trademarks, Etc. The present conduct of business by MGS
does not conflict with, infringe upon or violate the patents, trademarks, servicemarks,
trade names, copyrights or trade secrets or other intangible assets of any other Person, and
MGS has not received any written notice of any infringement thereof.




(p) No Leases. Except as expressly set forth in Schedule 4.02(p), all the
equipment and real property (other than Rights of Way, easements, licenses and permits)
which is material to the operation of the business of MGS is owned by MGS and not leased or
rented.




(q) Illegal Payments. None of Sellers or MGS or any director, officer, employee, or
agent of such Seller or MGS has, directly or indirectly, paid or delivered any fee,
commission, or other sum of money or item of property however characterized to any broker,
finder, agent, government official, or other Person, in the United States or any other
country, in any manner related to the business or operations of MGS, which Sellers or MGS or
any such director, officer, employee, or agent knows or has reason to believe to have been
illegal under any Legal Requirement.




(r) Employees and ERISA.




	 	(i)	 	Schedule 4.02(r) contains a complete and accurate list
of the following information for each employee and/or independent contractor,
consultant 




 









 






	 	 	 	and agent of MGS: name; job title; date of hiring or engagement; and
current compensation.
	 
	 	(ii)	 	Except as set forth on Schedule 4.02(r), all employees
of MGS are “at-will” employees not under any form of employment agreement.
	 
	 	(iii)	 	During the past five years, neither MGS nor any of its
Affiliates has made or been required to make contributions to any
“multiemployer plan”, as defined in Section 3(37) of ERISA. MGS has paid and
discharged promptly when due all liabilities and obligations arising under
ERISA or the Code of a character which if unpaid or unperformed might result in
the imposition of a lien against any of the Assets. For purposes of this
Section 4.01(r) only, an “Affiliate” of any Person means any other Person
which, together with such Person, would be treated as a single employer under
Section 414 of the Code.
	 
	 	(iv)	 	As of the Closing date, all employees of MGS will have been
terminated or will have resigned and no such employee shall have any claim for
payroll, severance or other benefits, all of which will have been paid by MGS.






(s) Insurance. Schedule 4.02(s) contains a list of all insurance policies
carried by MGS with respect to its business or the Assets. All premiums due and payable with
respect to such policies have been timely paid. No notice of cancellation of, or indication
of an intention not to renew, any such policy has been received by MGS. During the past
three years, no application by MGS for insurance with respect to any of the Assets or
operations of the business of MGS has been denied for any reason. None of the insurances
maintained by MGS will terminate as a result of the transaction contemplated by this
Agreement, nor, to the Knowledge of Sellers or Contributors, will premiums under any such
policy increase solely as a result of the transaction contemplated by this Agreement.




(t) Books and Records. All the books and records of MGS, including all personnel
files, employee data, and other materials relating to employees of MGS, are substantially
complete and correct in all material respects, have been in all material respects maintained
in accordance with good business practice and all Legal Requirements. Such books and
records accurately and fairly reflect, in reasonable detail, all material transactions,
revenues, expenses, assets, and liabilities of MGS with respect to the Assets and the
business associated with the Assets.




(u) Disclosure. No representation or warranty or other statement made by MGS
hereunder or on any certificates delivered pursuant hereto or otherwise in connection with
the transactions described herein 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. There exists no fact that has specific application to MGS (other than general
economic or industry conditions) and that may materially adversely affect the Assets,
business, financial condition or results of operations of MGS that has not been set forth in
this Agreement or the schedules.




(v) Receivables. All receivables (including accounts and notes receivable, employee
advances, and accrued interest receivables) of MGS as reflected in the Financial Data or
arising since the date thereof are valid obligations of the respective makers thereof, have
arisen in the ordinary course of business for goods or services delivered or rendered, are
not subject to any valid defenses, counterclaims, or set offs, and have been collected or
are collectible in full at their recorded amounts in the ordinary course of business without
resort to litigation or other extraordinary collection efforts, net of all cash discounts
and doubtful accounts as reflected in the Financial Data (in the case of receivables so
reflected) or on the books of MGS (in the case of receivables arising since the date
thereof). The allowances for doubtful accounts reflected in the Financial Data and on the
books of MGS were determined in accordance with generally accepted accounting principles
consistently applied and were and are reasonable in light of historical data and other
relevant information.




(w) Inventory. All inventory reflected in the Financial Data or thereafter acquired
and not disposed of in the ordinary course of business is in good condition and is
merchantable, or suitable and usable for the intended purpose. None of such items is
obsolete, discontinued, returned, damaged, overage, or of below standard quality or
merchantability, except for items that have been written down to realizable market value or
for which adequate reserves have been provided in the Financial Data.




(x) Broker’s Commissions. Neither Sellers, Contributors nor MGS have, directly or
indirectly, entered into any agreement with any Person that would obligate Sellers,
Contributors or MGS to pay any commission, brokerage fee or “finder’s fee” in connection
with the transactions contemplated herein.




(y) Accounts; Powers of Attorney. Set forth on Schedule 4.02(y) are (i) the
name and address of each bank or other financial institution with which MGS has an account
or safe deposit box or vault, the account and safe deposit box and vault numbers thereof,
the purpose of each thereof, and the names of all persons authorized to draw thereon or to
have access thereto; (ii) the names of all Persons authorized to borrow funds on behalf of
MGS and the names and addresses of all entities from which they are authorized to borrow
funds; and (iii) the names of all Persons, if any, holding proxies, powers of attorney, or
other like instruments from MGS. No such proxies, powers of attorney, or other like
instruments are irrevocable.



 









 





ARTICLE V

REPRESENTATIONS AND WARRANTIES BY 

BUYER AND ER PIPELINE





	5.01	 	Buyer and ER Pipeline. Buyer and ER Pipeline, jointly and severally, hereby represent
and warrant to Sellers and Contributors that:






	 	(a)	 	Organization and Standing. Buyer is a limited partnership duly
organized and validly existing under the laws of the State of Texas. ER Pipeline is a
limited partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware.
	 
	 	(b)	 	Authorization. Buyer and ER Pipeline have the power and authority to
enter into and perform this Agreement and to carry out the transactions contemplated
herein.
	 
	 	(c)	 	Enforceability. This Agreement constitutes the valid and binding
obligation of Buyer and ER Pipeline, enforceable in accordance with its terms, except
as that enforceability may be (i) limited by an applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’
rights generally and (ii) subject to general principles of equity (regardless of
whether such enforceability is considered in a Proceeding in equity or at law).
	 
	 	(d)	 	Legal Proceedings. There are no pending Proceedings before any
Governmental Body as to which Buyer or ER Pipeline has been served process or received
notice which would hinder, impede, or prevent it from consummating the transactions
contemplated by this Agreement.
	 
	 	(e)	 	No Violations. This transaction will not (i) violate or conflict with
any provision of Buyer’s or ER Pipeline’s organizational documents; (ii) result in the
breach of any term or condition of, or terminate or constitute a default or cause the
acceleration of any obligation under, any agreement or instrument to which Buyer or ER
Pipeline is a party or is otherwise bound; or (iii) violate or conflict with any
applicable Legal Requirement or Order.
	 
	 	(f)	 	Securities Representation. Buyer and ER Pipeline are acquiring the MGS
Units for Buyer’s and ER Pipeline’s own account and not with a view to, or for offer of
resale in connection with, a distribution thereof, within the meaning of the Securities
Act.
	 
	 	(g)	 	Capitalization. There are 6,580,466 ER Units issued and outstanding in
the aggregate. All ER Units to be issued to Contributors hereunder have been duly
authorized and, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable. There are no preemptive or similar
rights that would be applicable to the issuance of such ER Units to




 









 






	 	 	 	Contributors hereunder. Upon consummation of the transactions contemplated hereby, Contributors
will acquire good, valid and indefeasible title to all of such ER Units, free and
clear of any liens, claims, encumbrances or restrictions, except under applicable
securities laws.
	 
	 	(h)	 	Financial Statements. Schedule 5.01(h) sets forth the
unaudited balance sheet of ER Pipeline as of March 31, 2006, and the related unaudited
statements of income and cash flows of ER Pipeline for the three-month period then
ended (the “ER Financial Data”). The ER Financial Data was prepared in accordance with
generally accepted accounting principles, have been prepared consistent with the past
practices of ER Pipeline and present fairly the financial condition and results of
operations of ER Pipeline at such date and for such periods in all material respects.
	 
	 	(i)	 	Legal Compliance. ER Pipeline has complied in all material respects
with all applicable Legal Requirements.
	 
	 	(j)	 	ER Partnership Agreement. The ER Partnership Agreement is in full
force and effect. To ER Pipeline’s Knowledge, no party is in breach or default
thereunder.
	 
	 	(k)	 	Disclosure. No representation or warranty or other statement made by
ER Pipeline hereunder or on any certificates delivered pursuant hereto or otherwise in
connection with the transactions described herein 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.





 









 





ARTICLE VI

COVENANTS





	6.01	 	Casualty Loss. Prior to Closing, if all or any portion of the Assets have been or
are destroyed by fire, flood, storm, or any other casualty, or shall be taken by condemnation
or under the right of eminent domain (all of which are herein called “Casualty Loss”),
Sellers, Contributors and MGS shall bear the risk of such Casualty Loss. Any insurance
proceeds, payments made under threat of condemnation, or condemnation awards, shall be the
sole property of MGS. The risk of Casualty Loss relating to the Assets shall pass to Buyer as
of Closing.
	 
	6.02	 	Conduct of Business Prior to Closing.






	 	(a)	 	Prior to Closing, Sellers and Contributors shall cause MGS to maintain the
Assets in the ordinary course of business, including timely completion of all
interconnects to producers using or intending to use the Facilities pursuant to any
existing Contract.
	 
	 	(b)	 	Without the consent of Buyer, and prior to Closing, Sellers and Contributors shall not
permit MGS to:






	 	(i)	 	waive, compromise, or settle any right or claim;
	 
	 	(ii)	 	make any distribution of any kind or character to its partners,
other than the Excluded Assets;
	 
	 	(iii)	 	incur obligations with respect to, or undertake any
transactions relating to, the Assets other than transactions (1) in the normal,
usual, and customary manner, (2) of a nature and in an amount consistent with
prior practice, and (3) in the ordinary course of business of owning and
operating the Assets;
	 
	 	(iv)	 	encumber, sell, or otherwise dispose of any of the Assets,
other than property which is replaced by equivalent property, or which is used,
consumed, or abandoned in the normal operations of Sellers’ business;
	 
	 	(v)	 	amend its certificate of limited partnership or Agreement of
Limited Partnership;
	 
	 	(vi)	 	liquidate, dissolve, recapitalize or otherwise wind up its
business;
	 
	 	(vii)	 	change its accounting methods, policies or practices, except
as required by generally accepted accounting principles;




 









 






	 	(viii)	 	sell, assign, transfer, lease or otherwise dispose of any material
non-current assets except in the ordinary course of business;
	 
	 	(ix)	 	make any capital expenditure in excess of $50,000, other than
reasonable capital expenditures in connection with any emergency or force
majeure events affecting MGS;
	 
	 	(x)	 	incur any indebtedness outside the ordinary course of business
consistent with past practices of MGS;
	 
	 	(xi)	 	merge or consolidate with, or purchase substantially all of the
assets or business of, or equity interests in, or make an investment in any
Person;
	 
	 	(xii)	 	issue or sell any equity interests, notes, bonds or other
securities of MGS, or any option, warrant or right to acquire same; or
	 
	 	(xiii)	 	agree, whether in writing or otherwise, to do any of the foregoing.






	6.03	 	Compliance with Conditions Precedent. Each party shall use its commercially
reasonable efforts to cause the conditions precedent to Closing set forth in Sections 8.02 and
8.03, applicable to such party, to be fulfilled and satisfied as soon as practicable but in
any event prior to Closing.






	6.04	 	Press Release. Buyer, Sellers and Contributors shall consult with each other with
regard to all publicity and other releases issued at or prior to Closing concerning this
Agreement and the transactions contemplated hereby and except as required by Legal
Requirements. Neither party shall issue any publicity or other release without the prior
written consent of the other party, except as required by law, regulation or stock exchange
rule.






	6.05	 	Non-solicitation. Sellers and Contributors agree that, for a period beginning on the
date this Agreement has been fully executed and ending upon the Closing or the termination
hereof, except as otherwise consented to in writing by Buyer, Sellers, Contributors and any
Affiliates or agents of Sellers and Contributors will immediately terminate all discussions
with any third parties relating to the sale of the Assets, excluding ordinary course of
business discussions, and shall not solicit any third parties, respond to any expressions of
interest or questions regarding the Assets, or enter into any new discussions with any party
other than Buyer with respect to any sale or other similar transaction involving the MGS Units
or the Assets or involving any extraordinary corporate event involving MGS.






	6.06	 	Excluded Assets. Prior to the Closing, Sellers and Contributors will cause MGS to
distribute or otherwise convey to one or more Sellers or Contributors or to one or more
Affiliates of Sellers or Contributors all of the assets as more particularly described on
Schedule 6.06 (the “Excluded Assets”).




 









 












	6.07	 	Assumption of Liabilities. Prior to the Closing, one or more Sellers or Contributors
or one or more Affiliates of a Seller or a Contributor will assume and/or discharge the
Liabilities of MGS described on Schedule 6.07 which will include any and all
liabilities, costs and expenses arising out of or related to the Excluded Assets
(collectively, the “Assumed Liabilities”).






	6.08	 	ER Partnership Agreement. At Closing, Buyer and ER Pipeline shall cause the ER
Partnership Agreement to be amended in accordance with Exhibit C to reflect
Contributors as limited partners in ER Pipeline.




 









 











ARTICLE VII

POST-CLOSING AGREEMENTS





	7.01	 	Files and Records. Within five (5) Business Days after Closing, Sellers and
Contributors shall deliver to Buyer all of the files, records and data relating to MGS or the
Assets in Sellers’ and Contributors’ possession. From time to time as reasonably requested
by Sellers and/or Contributors, Buyer shall make such files, records, and data which it takes
possession of available to Sellers and Contributors for inspection and copying during normal
business hours, together with such additional files, data, and records of Buyer as may be
reasonably requested by Sellers and/or Contributors in order to pursue any claims,
obligations, and disputes relating to the ownership of the MGS Units or the Assets.






	7.02	 	Further Assurances. Each party shall, from time to time at the reasonable request of
the other, and without further consideration, execute and deliver such other instruments of
transfer, conveyance, assignment, clarification, and termination, and take such other action
as the party making the request may reasonably require to effectuate the intentions of the
parties, including those required to transfer, convey and assign to, and vest in Buyer, and to
place Buyer in possession of the MGS Units, and to transfer, assign, or convey the Excluded
Assets to Sellers and/or Contributors and/or their Affiliates.






	7.03.	 	Non-competition. (a) Each of MGS GP, Michog, Hiett, Braley, Wilkerson and Gregson
acknowledges that in consideration of the payments and deliveries being made to them
hereunder, Buyer and ER Pipeline are acquiring MGS and the goodwill associated with the
Assets, including complete ownership and control thereof. Therefore, each of MGS GP, Michog,
Hiett, Braley, Wilkerson and Gregson agrees that, for a period commencing upon the Closing
date and ending upon the fourth anniversary thereof for Carson, Collingsworth, Donley, Gray,
Hemphill, Hutchinson, Lipscomb, Moore, Potter, Roberts, and Wheeler Counties in Texas, unless
otherwise extended pursuant to the terms of this Section 7.03, MGS GP, Michog, Hiett, Braley,
Wilkerson and Gregson will not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director, or in any
other individual or representative capacity, engage or participate in processing, treating or
gathering of natural gas (including casinghead gas) for third parties or entering into any
agreement to process or treat third party natural gas produced or gathered within such
territories other than as a result of his ownership of ER Units, if any. Each of MGS GP,
Michog, Hiett, Braley, Wilkerson and Gregson represents to Buyer and ER Pipeline that the
enforcement of the restriction contained in this Section 7.03(a) would not be unduly
burdensome to any of MGS GP, Michog, Hiett, Braley, Wilkerson and Gregson and that in order to
induce Buyer and ER Pipeline to enter into this Agreement, each of MGS GP, Michog, Hiett,
Braley, Wilkerson and Gregson further represents and acknowledges that each of MGS GP, Michog,
Hiett, Braley, Wilkerson and Gregson is willing and able to compete in other geographical
areas not prohibited by this Section 7.03(a).




 









 












	(b)	 	Each of MGS GP, Michog, Hiett, Braley, Wilkerson and Gregson agrees that a breach or
violation of this covenant not to compete shall entitle Buyer and/or ER Pipeline, as a matter
of right, to an injunction issued by any court of competent jurisdiction, restraining any
further or continued breach or violation of this covenant. Such right to an injunction shall
be cumulative and in addition to, and not in lieu of, any other remedies to which Buyer and/or
ER Pipeline may show itself justly entitled. Further, during any period in which any of MGS
GP, Michog, Hiett, Braley, Wilkerson or Gregson is in breach of this covenant not to compete,
the time period of this covenant shall be extended with respect to such Person for the amount
of time that such Person is in breach hereof.
	 
	(c)	 	The representations and covenants contained in this Section 7.03 on the part of MGS GP,
Michog, Hiett, Braley, Wilkerson and Gregson will be construed as ancillary to and independent
of any other provision of this Agreement, and the existence of any claim or cause of action of
MGS GP, Michog, Hiett, Braley, Wilkerson or Gregson against Buyer, ER Pipeline or any officer,
director, partner or shareholder of Buyer and/or ER Pipeline, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by Buyer of the
covenants of MGS GP, Michog, Hiett, Braley, Wilkerson and Gregson contained in this Section
7.03.
	 
	(d)	 	If any of MGS GP, Michog, Hiett, Braley, Wilkerson or Gregson violates any covenant contained
in this Section 7.03 and Buyer and/or ER Pipeline brings legal action for injunctive or other
relief, Buyer shall not, as a result of the time involved in obtaining the relief, be deprived
of the benefit of the full period of any such covenant.
	 
	(e)	 	The parties to this Agreement agree that the limitations contained in this Section 7.03 with
respect to time, geographical area, and scope of activity are reasonable. However, if any
court shall determine that the time, geographical area, or scope of activity of any
restriction contained in this Section 7.03 is unenforceable, it is the intention of the
parties that such restrictive covenant set forth herein shall not thereby be terminated but
shall be deemed amended to the extent required to render it valid and enforceable.
	 
	(f)	 	The covenants of MGS GP, Michog, Hiett, Braley, Wilkerson and Gregson contained in this
Section 7.03 may be assigned by Buyer and/or ER Pipeline to any person to whom MGS Units or
the Assets are transferred substantially as an entirety, it being the intention of the parties
hereto that such covenants shall inure to the benefit of any successor to the MGS Units or the
Assets, with the same force and effect as if such covenants had been made directly to such
successor or successors.
	 
	(g)	 	The representations and covenants of MGS GP, Michog, Hiett, Braley, Wilkerson and Gregson set
forth in this Section 7.03 are several and not joint, and in no event shall a breach by one or
more of such Persons affect or be deemed to be a breach by any other of such Persons.






	7.04	 	Continuation of MGS’ Existing Indemnification Obligations. From and after the
Closing, MGS or its successor shall indemnify and hold harmless Sellers and Contributors and




 









 






	 	 	each Person who has been at any time prior to the Closing, an officer, director or partner of MGS
(collectively, the “Indemnified Parties”) but only to the extent that such Indemnified Party
was entitled to indemnification from MGS immediately prior to the date hereof under
applicable law or the Agreement of Limited Partnership of MGS, or under contracts between
such Indemnified Party and MGS (including indemnification as provided to NGP under the
Advisory Services Agreement), regardless of whether such contracts are terminated on or
after the Closing. The procedures associated with such indemnification shall be the same as
those associated with the Indemnitees’ indemnification from MGS immediately prior to the
date hereof. The provisions of this Section 7.04 are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party and their respective heirs and
representatives.






	7.05  	Termination of Certain Agreements. At Closing, the Advisory Services Agreement and
the Rights Agreement shall be terminated and no party shall have further rights or obligations
thereunder, except for the continuation of indemnity rights as provided in Section 7.04. All
outstanding agreements between MGS and Sellers and Contributors, including the Confidentiality
and Noncompete Agreements, shall be terminated by MGS prior to Closing.






	7.06  	Tax Closing. Buyer and ER Pipeline shall cause the books and financial accounts of
MGS to be closed for tax purposes as of the Closing date. Sellers will cause to be prepared
and timely filed the final federal income Tax Return for MGS on IRS Form 1065 for the period
that ends at Closing.






 










 







ARTICLE VIII

CLOSING





	8.01	 	Time and Place. The Closing of the transaction contemplated by this Agreement shall
take place at the offices of Thompson & Knight LLP in Houston, Texas, at 9:00 a.m., central
time, on June 2, 2006 (the “Closing”). At Closing, the following events shall occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously with the others:






	 	(a)	 	Sellers’ Obligations at Closing. At Closing, Sellers shall deliver to
Buyer, unless waived by Buyer in writing, the following:






	 	(i)	 	A conveyance of all of Sellers’ right, title, and interest in
and to the MGS Units set forth on Schedule 2.01, substantially in the
form and content of the Assignment set forth in Exhibit A, executed by
each Seller and such other conveyance documents and instruments of transfer and
assignment necessary to convey such MGS Units to Buyer in the manner
contemplated by this Agreement;
	 
	 	(ii)	 	An Officer’s Certificate or other documentation reasonably
satisfactory to Buyer and ER Pipeline, evidencing that the person or persons
signing documents in connection with this transaction on behalf of MGS GP have
appropriate authorization to bind MGS GP;
	 
	 	(iii)	 	Evidence reasonably satisfactory to Buyer that all employees
of MGS have been terminated or have resigned;
	 
	 	(iv)	 	Such other instruments, documents, or certificates as necessary
to carry out its obligations under this Agreement as determined in Buyer’s sole
discretion.






	 	(b)	 	Contributors’ Obligations at Closing. At the Closing, Contributors
shall deliver to ER Pipeline, unless waived by ER Pipeline in writing, the following:






(i) A contribution of all of such Contributors’ right, title, and interest in and to
the MGS Units set forth on Schedule 2.02, substantially in the form and
content of the Contribution Agreement set forth in Exhibit B, executed by
each Contributor, and such other documents and instruments for the contribution of
such MGS Units to ER Pipeline in the manner contemplated by this Agreement;




(ii) An Officer’s Certificate or other documentation reasonably satisfactory to
Buyer and ER Pipeline, evidencing that the person or persons signing documents in
connection with this transaction on behalf of NGP have appropriate authorization to
bind NGP; and



 









 






(iii) Such other instruments, document, or certificates as necessary to carry out
such Contributor’s obligations under this Agreement.




	 	(c)	 	Buyer’s Obligations at Closing. At the Closing, Buyer shall deliver to
Sellers, unless waived by Sellers in writing, the following:






	 	(i)	 	Buyer shall deliver or cause to be delivered to Sellers, and
Sellers shall have received, the cash payment set forth in Article III, as
adjusted;
	 
	 	(ii)	 	An Officer’s Certificate or other documentation satisfactory to
Sellers and Contributors, evidencing that the person or persons signing
documents in connection with this transaction on behalf of Buyer has
appropriate authorization to bind the parties for whom they are signing; and
	 
	 	(iii)	 	Such other instruments, document, or certificates as necessary
to carry out its obligations under this Agreement.






	 	(d)	 	ER Pipeline’s Obligations at Closing. At the Closing, ER Pipeline
shall deliver to Contributors unless waived by Contributors in writing, the following:






	 	(i)	 	ER Pipeline shall cause to be issued in the name of each Seller
or Contributor the Initial Unit Payment set forth in n Article III;
	 
	 	(ii)	 	An Officer’s Certificate or other documentation reasonably
satisfactory to Sellers and contributors, evidencing that the person or persons
signing documents in connection with this transaction on behalf of ER Pipeline
has appropriate authorization to bind the parties for whom they are signing;
and
	 
	 	(iii)	 	Such other instruments, document, or certificates as necessary
to carry out its obligations under this Agreement.






	8.02	 	Conditions to Buyer’s and ER Pipeline’s Obligations. Each and every obligation of
Buyer and ER Pipeline to be performed at the Closing, is, at the option of Buyer and ER
Pipeline, subject to each of the conditions set forth below, which conditions may be waived by
Buyer and ER Pipeline:






	 	(a)	 	The representations and warranties made by Sellers and Contributors in this
Agreement shall be true and accurate in all material respects on and as of the Closing
with the same effect as though such representations and warranties had been given on
and as of the Closing, except to the extent such representations and warranties
specifically speak as of an earlier date, in which case they shall be true as of that
date. Sellers and Contributors shall also have performed or complied with, in all
material respects, all of their obligations under this Agreement which are to be
performed or complied with by them as of the Closing.




 









 












	 	(b)	 	There shall not be on the Closing (i) any Order by any Governmental Body, (ii)
any threat thereof by any Governmental Body, which is evidenced by a writing by the
threatening agency, or (iii) any lawsuit, which in all reasonable likelihood, might
prohibit or render illegal, Buyer’s or ER Pipeline’s consummation of the transactions
contemplated herein. All material consents and approvals, if any, of Persons,
including Governmental Bodies, whether required contractually or by applicable Legal
Requirement or otherwise necessary for execution, delivery, and performance of this
Agreement (except for consents and approvals of Governmental Bodies customarily
obtained after transfer of title) shall have been obtained and delivered before the
Closing date and shall not have been withdrawn or revoked.
	 
	 	(c)	 	All agreements, documents, and instruments contemplated under this Agreement to
be executed and delivered by Sellers and/or Contributors shall have been duly executed
by Sellers and/or Contributors, as applicable, and be ready for delivery concurrently
with the consummation of the transactions contemplated by this Agreement.
	 
	 	(d)	 	No material adverse change has occurred with respect to the condition of the
Assets or the operations of MGS or the Assets; provided, however, that an adverse
change in the market price of crude oil, natural gas, or natural gas liquids would not
constitute a material adverse change hereunder.






	8.03	 	Conditions to Sellers’ and Contributors’ Obligations. Each and every obligation of
Sellers and Contributors to be performed on the Closing is, at the option of Sellers and
Contributors, subject to each of the conditions set forth below, which conditions may be
waived by Sellers and Contributors:






	 	(a)	 	The representations and warranties made by Buyer and ER Pipeline in this
Agreement shall be true and accurate in all material respects on and as of the Closing
with the same effect as though such representations and warranties had been given on
and as of the Closing. Buyer and ER Pipeline shall also have performed or complied
with, in all material respects, all of its obligations under this Agreement which are
to be performed or complied with by them prior to or on the Closing.
	 
	 	(b)	 	All agreements, documents, and instruments contemplated under this Agreement to
be executed and delivered by Buyer and ER Pipeline shall have been duly executed by
Buyer and ER Pipeline and be ready for delivery concurrently with the consummation of
the transactions contemplated by this Agreement.
	 
	 	(c)	 	All material consents and approvals, if any, of Persons including Governmental
Bodies, whether required contractually or by applicable Legal Requirement or otherwise
necessary for execution, delivery, and performance of this Agreement




 









 






	 	 	 	(except for consents and approvals of Governmental Bodies customarily obtained after
transfer of title) shall have been obtained and delivered before the Closing date
and shall not have been withdrawn or revoked.
	 
	 	(d)	 	The ER Partnership Agreement shall have been amended in accordance with
Exhibit C.
	 
	 	(e)	 	There shall not be on the Closing (i) any Order by any Governmental Body, (ii)
any threat thereof by any Governmental Body, which is evidenced by a writing by the
threatening agency, or (iii) any lawsuit, which in all reasonable likelihood might
prohibit or render illegal Sellers or Contributors consummation of the transactions
contemplated herein.




 









 











ARTICLE IX

INDEMNITY





	9.01	 	Indemnity. (a) FROM AND AFTER THE CLOSING, SELLERS AND CONTRIBUTORS SHALL, JOINTLY
AND SEVERALLY, INDEMNIFY DEFEND, AND HOLD HARMLESS BUYER, ER PIPELINE, THEIR PARENT COMPANIES,
AFFILIATES AND SUBSIDIARIES, AND THEIR RESPECTIVE PARTNERS, MEMBERS, DIRECTORS, SHAREHOLDERS,
OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (COLLECTIVELY, “BUYER INDEMNITEES”), FROM AND
AGAINST ANY AND ALL LIABILITIES, CLAIMS, LOSSES, STRICT LIABILITY CLAIMS (INCLUDING THOSE
ARISING UNDER ENVIRONMENTAL LAWS), DEMANDS, LAWSUITS, JUDGMENTS, ORDERS, FINES, PENALTIES,
DAMAGES, PUNITIVE DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEYS’ AND CONSULTANTS’ FEES),
COSTS AND CAUSES OF ACTION ASSERTED BY ANY PERSON (COLLECTIVELY REFERRED TO HEREINAFTER AS
“LIABILITIES/CLAIMS”), ARISING FROM OR RELATING TO ANY BREACH OF THE REPRESENTATIONS AND
WARRANTIES MADE BY SELLERS, CONTRIBUTORS SET FORTH IN SECTION 4.01 AND/OR 4.02.
	 
	 	 	(b) SUBJECT ONLY TO SECTION 9.01(a), FROM AND AFTER THE CLOSING, BUYER AND ER PIPELINE
SHALL, JOINTLY AND SEVERALLY, SHALL INDEMNIFY, DEFEND, AND HOLD HARMLESS SELLERS,
CONTRIBUTORS AND THEIR PARENT COMPANIES, AFFILIATES AND SUBSIDIARIES, AND THEIR RESPECTIVE
PARTNERS, MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (COLLECTIVELY,
“SELLER INDEMNITEES”), FROM AND AGAINST ANY AND ALL LIABILITIES/CLAIMS ARISING FROM OR
RELATING TO ANY INACCURACY IN OR BREACH OF THE REPRESENTATIONS AND WARRANTIES MADE BY BUYER
AND ER PIPELINE SET FORTH IN SECTION 5.01.
	 
	 	 	(c) IN ADDITION TO THE OBLIGATIONS OF EACH OF THE SELLERS AND CONTRIBUTORS SET FORTH IN
SECTION 9.01(a) AND 9.01(d) BELOW, SELLERS AND CONTRIBUTORS SHALL, JOINTLY AND SEVERALLY,
INDEMNIFY DEFEND, AND HOLD HARMLESS MGS AND THE BUYER INDEMNITEES FROM AND AGAINST ANY AND
ALL LIABILITIES/CLAIMS ARISING FROM OR RELATED TO THE ASSUMED LIABILITIES. THE ASSUMED
LIABILITIES SHALL BE PAID OR DISCHARGED BY THE SELLERS AND CONTRIBUTORS.
	 
	 	 	(d) IN ADDITION TO THE OBLIGATIONS OF EACH OF THE SELLERS AND CONTRIBUTORS SET FORTH IN
SECTION 9.01(a) AND 9.01(c) ABOVE; SELLERS AND CONTRIBUTORS SHALL, JOINTLY AND SEVERALLY,




 









 






	 	 	INDEMNIFY DEFEND, AND HOLD HARMLESS MGS AND THE BUYER INDEMNITEES FROM AND AGAINST (I) THE
COSTS AND EXPENSES WHICH ARISE OR ARE RELATED TO PERIODS PRIOR TO THE EFFECTIVE TIME FOR THE
CONSTRUCTION OF THE FACILITIES; (II) AMOUNTS WHICH ARISE OR ARE RELATED TO PERIODS PRIOR TO
THE EFFECTIVE TIME DUE TO ANY SELLER OR CONTRIBUTOR, INCLUDING ANY ADMINISTRATION OR OTHER
FEES DUE TO NGP; (III) SEVERANCE, VACATION OR OTHER BENEFITS RELATING TO THE EMPLOYEES OF
MGS OR MGS GP WHICH ARISE OR ARE RELATED TO PERIODS PRIOR TO THE EFFECTIVE TIME; (IV) THE
COSTS AND EXPENSES DUE TO ANY CONTRACTOR PROVIDING SERVICES TO OR ON BEHALF OF MGS OR MGS GP
PRIOR TO THE CLOSING DATE; (V) THE COSTS AND EXPENSES CHARGED FOR LEGAL COUNSEL, ACCOUNTING
OR OTHER PROFESSIONAL SERVICES INCURRED FOR THE PREPARATION, NEGOTIATION AND DELIVERY OF
THIS AGREEMENT; AND (VI) ANY AD VALOREM OR SIMILAR PROPERTY TAXES FROM THE PERIOD JANUARY 1,
2006 THROUGH THE DATE OF CLOSING. THE OBLIGATIONS OF THE SELLERS AND CONTRIBUTORS UNDER
THIS SECTION 9.01(d) ARISE ONLY TO THE EXTENT THAT THE FOREGOING OBLIGATIONS ARE NOT OR
CANNOT BE SATISFIED BY MGS FROM CASH ON HAND AS OF THE CLOSING DATE AND REVENUE GENERATED BY
MGS PRIOR TO THE EFFECTIVE TIME.
	 
	9.02	 	Limits on Indemnity Obligations.
	 
	 	 	(a) No Person shall be entitled to seek indemnification pursuant to Section 9.01(a) and 9.01
(b) with respect to any Liabilities/Claims (with such Liabilities/Claims being determined
without giving effect or other regard to qualifications or other words of “material,”
“materially,” “material adverse effect,” or “Material Adverse Effect,” since the parties’
determinations as to relevance under this Article IX are as reflected in this Article IX),
unless such Person notifies the indemnifying party of such Liability Claim in writing within
the period set forth in Section 9.04.
	 
	 	 	(b) No indemnification shall be required to be made by any Party hereto pursuant to Section
9.01(a) or 9.01(b) with respect to any Liabilities/Claims arising out of or resulting from
the breach of the representations and warranties of a Party contained in this Agreement,
unless and until the aggregate amount of such asserted Liabilities/Claims incurred by a
Party (whether asserted, resulting, imposed, or incurred before, on, or after the Closing
Date) exceeds $250,000 (the “Threshold”), it being agreed and understood that, if such
amount is exceeded, the breaching Party shall be liable to the full extent of such
Liabilities/Claims, including those not in excess of the Threshold. The Threshold shall not
apply to the obligations of the Sellers and Contributors pursuant to Section 9.01(c) or
9.01(d).




 









 






	 	 	(c) The total amount of obligations with respect to any Liabilities/Claims pursuant to
Section 9.01(a) or 9.01(b)shall be limited to an aggregate maximum amount equal to
$2,500,000. The forgoing limitation shall not apply to the obligations of the Sellers and
Contributors pursuant to Section 9.01(c) or 9.01(d).
	 
	9.03	 	Exclusive Remedy. Notwithstanding any provision of this Agreement to the contrary,
the sole remedy of the parties hereto for any breach of any of the provisions of Article IV or
V shall be to exercise their rights under this Article IX, which shall be subject to the
procedures and limitations set forth in this Article IX, excluding, however, any cause of
action for fraud or specific performance.
	 
	9.04	 	Survival. All representations and warranties of the Parties contained in this
Agreement and all covenants contained in this Agreement that are to be performed prior to the
Closing shall survive the Closing until twelve (12) months after the Closing date, except that
the representations and warranties in Sections 4.01, 4.02(a), 4.02(b), 5.01(a) and 5.01(b)
shall survive until the third anniversary of the Closing date. No Party shall have any
liability for indemnification claims made under this Article XI with respect to any such
representation, warranty or covenant unless a claim notice is provided by the non-breaching
Party to the other Party prior to the expiration of the applicable survival period for such
representation, warranty or covenant. If a claim notice has been timely given in accordance
with this Agreement prior to the expiration of the applicable survival period for such
representation, warranty or covenant, then the applicable representation, warranty or covenant
shall survive as to such claim, until such claim has been finally resolved.




 









 











ARTICLE X

INDEMNIFICATION PROCEDURES





	10.01	 	Indemnification Procedures. Subject to the provisions set forth in Article IX, in
the event that any Proceedings shall be instituted or any claim or demand shall be asserted by
any Person in respect of which indemnification may be sought by any Person or Persons from any
party or parties under the provisions of this Agreement, the Person or Persons seeking
indemnification (collectively, the “Indemnitee”) shall cause written notice of the assertion
of any claim of which it has knowledge that is covered by the indemnity to be forwarded
promptly to the party or parties from which indemnification is sought (collectively, the
“Indemnitor”). The Indemnitor shall have the right, at its option and at its own expense, to
be represented by counsel of its choice; provided, however, the Indemnitor shall provide the
Indemnitee five (5) Business Days during which the Indemnitee may approve or disapprove of the
Indemnitor’s choice of counsel, such approval not to be unreasonably withheld. The Indemnitor
shall also have the right to participate in, or to take exclusive control of, the defense,
negotiation, and/or settlement of any Proceeding or demand which relates to any amounts
indemnifiable or potentially indemnifiable under this Agreement; provided, however, that the
Indemnitee may participate in any such Proceeding with counsel of its choice and at its own
expense, shall have a right to notice of any settlement, and the Indemnitor shall not execute
or otherwise agree to any settlement or consent decree which provides for other than monetary
payment without the Indemnitee’s prior written consent, which consent will not unreasonably be
withheld, conditioned or delayed. Notwithstanding the foregoing, the Indemnitee shall have
the right to pay or settle any such claim, provided that in such event it shall waive any
right to indemnity therefor by the Indemnitor. In the event that the Indemnitor elects not to
defend or settle such Proceeding or demand and the Indemnitee defends, settles, or otherwise
deals with any such Proceeding or demand, which settlement may be without the consent of the
Indemnitor, the Indemnitee will provide fifteen (15) days advance written notice of any
settlement to the Indemnitor and will act reasonably and in accordance with its good faith
business judgment. The parties hereto agree to reasonably cooperate fully with each other in
connection with the defense, negotiation, or settlement of any such Proceeding or demand.
After final judgment or award shall have been rendered by a Governmental Body and the
expiration of the time in which to appeal therefrom, or a settlement shall have been
consummated, or the Indemnitee and the Indemnitor shall have arrived at a mutually binding
agreement with respect to each separate matter indemnified by the Indemnitor, the Indemnitee
shall forward to the Indemnitor notice of any sums due and owing by the Indemnitor with
respect to such matter and the Indemnitor shall pay all of the sums so owing to the Indemnitee
by check within thirty (30) days after the date of such notice. In the event of any claim by
a third party against an Indemnitee, the Indemnitee will, at its own expense, use its
commercially reasonable efforts to make available to the Indemnitor those employees whose
assistance, testimony, or presence is necessary to assist the Indemnitor in evaluating and in
defending such claims; provided, however, that any such access shall be conducted in such a
manner as not to interfere




 









 












unreasonably with the operations of the business of the Indemnitee but failure to provide necessary witnesses or
access to information will excuse the Indemnitor’s performance.



 









 





ARTICLE XI

TAXES





	11.01	 	Tax Proceedings. In the event Buyer or any of its Affiliates receives notice of any
examination, adjustment, or other Proceeding relating to the liability for Taxes of or with
respect to MGS for any period prior to the Closing date, Buyer shall notify Sellers and
Contributors in writing within ten (10) days of receiving notice thereof (or such lesser time
if such notice given to Buyer requires action in less than ten (10) days). As to any such
Taxes for which Sellers and/or Contributors are or may be liable, Sellers and/or Contributors
shall, at Sellers’ and/or Contributors’ expense, control or settle the contest of such
examination, adjustment, or other Proceeding, and shall defend (upon Buyer’s request) and
indemnify Buyer against all losses in connection therewith. The parties shall cooperate with
each other and with their respective Affiliates in the negotiations and settlement of any
Proceeding described in this Section 11.01.
	 
	11.02	 	Taxes. The payments provided for hereunder exclude any sales tax or other Taxes
required to be paid in connection with the sale of the MGS Units. Buyer shall be responsible
for all applicable sales and use taxes, gross receipts, conveyance, transfer, and recording
fees, motor vehicle transfer and excise taxes and registration fees, and real estate transfer
taxes and documentary stamp taxes, if any, that may be imposed on any transfer pursuant to
this Agreement. Buyer shall defend (upon Sellers’ and/or Contributors’ request), indemnify and
hold Sellers and Contributors harmless for any and all sales, use, gross receipts and similar
taxes, penalties, and interest imposed on Sellers or Contributors based on the sale of the
Assets.
	 
	11.03	 	Other Taxes.






	 	(a)	 	All Taxes which have accrued prior to the Effective Time have been or will be
properly paid or withheld by MGS and all statements, returns, and documents pertinent
thereto have been or will be properly filed, and Sellers and Contributors shall
indemnify and hold harmless Eagle Rock Pipeline and Buyer for such Taxes.
	 
	 	(b)	 	Buyer shall defend (upon Sellers’ or Contributors’ request) and indemnify and
hold harmless Sellers and Contributors for, and shall be responsible for, paying or
withholding or causing to be paid or withheld all such Taxes which have accrued after
the Effective Time and for filing all statements, returns, and documents incident
thereto.




 









 











ARTICLE XII

MISCELLANEOUS PROVISIONS





	12.01	 	Commission. Each of the parties hereto represents and warrants that there are no
claims for brokerage commission or finders’ fees in connection with the transaction
contemplated by this Agreement, and Sellers, Contributors, Buyer and ER Pipeline will
respectively pay or discharge, and will defend and indemnify the other for, brokerage
commissions or finders’ fees incurred by reason of any action taken by such indemnifying
party.
	 
	12.02	 	Assignment. The terms, provisions and conditions of this Agreement shall extend to,
be binding upon and inure to the benefit of the parties hereto, their respective successors
and assigns. No party will make an assignment of its rights and/or obligations under this
Agreement without the prior written consent of the others, which such consent may be withheld
for any reason.
	 
	12.03	 	Entire Agreement; Amendments. This Agreement and the exhibits and schedules
attached hereto and incorporated by reference herein contain the entire understanding of the
parties with respect to its subject matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings relating to the transactions contemplated herein other
than those expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter. This Agreement may be
amended only by a written instrument duly executed by the parties. Any condition to a party’s
obligations hereunder may be waived in writing by such party. No waiver by any party of any
one or more defaults by the other in performance of any of the provisions of this Agreement
shall operate or be construed as a waiver of any future default or defaults, whether of a like
or different character.
	 
	12.04	 	Severability. Each portion of this Agreement is intended to be severable. If any
term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of this Agreement.
	 
	12.05	 	Actions. Sellers, Contributors, Buyer and ER Pipeline warrant and agree that each
shall use its commercially reasonable efforts to take or cause to be taken all such action as
may be necessary to consummate and make effective the transactions as set forth in this
Agreement and to assure that it will not be under any material corporate, legal or contractual
restriction that would prohibit or delay the timely consummation of such transactions.
	 
	12.06	 	Termination. Based solely upon the unanimous approval of the board or other
governing body of the Party electing to terminate, this Agreement may be terminated at any
time on or prior to the Closing:






	 	(a)	 	by mutual written consent of MGS, Buyer and ER Pipeline;




 









 






	 	(b)	 	by Sellers and Contributors on June 14, 2006, if the conditions set forth in
Section 8.03 have not been satisfied in all material respects or waived by Sellers and
Contributors in writing by such date; or
	 
	 	(c)	 	by Buyer and ER Pipeline on June 14, 2006, if the conditions set forth in
Section 8.02 have not been satisfied in all material respects or waived by Buyer and ER
Pipeline in writing by such date.






	12.07	 	Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
	 
	12.08	 	GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, ENFORCED IN ACCORDANCE WITH,
AND INTERPRETED UNDER, THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CONFLICTS OF LAW
PRINCIPLES.
	 
	12.09	 	Preparation of Agreement. This Agreement was prepared jointly by the parties hereto
and not by either to the exclusion of the other.
	 
	12.10	 	Further Assurance. After Closing, at Buyer’s or ER Pipeline’s request and without
further consideration, Sellers and Contributors shall execute and deliver or use reasonable
efforts to cause to be executed and delivered such other instruments of conveyance and
transfer and take such other actions as Buyer or ER Pipeline reasonably may request to more
effectively vest or put Buyer and ER Pipeline in possession of the MGS Units.
	 
	12.11	 	Confidentiality. Except as otherwise required by law, the Parties shall hold a
confidential the terms and conditions of this Agreement and the information provided in
association herewith.
	 
	12.12	 	No Partnership Created. It is not the purpose or intention of this Agreement to
create (and it shall not be construed as creating) a joint venture, partnership, or any type
of association, and the Parties are not authorized to act as agent or principal for each other
with respect to any matter related hereto.
	 
	12.13	 	No Third Party Beneficiary. Nothing in this Agreement entitles any parties other
than the parties hereto, their permitted successors or assigns and the Indemnitees, to any
claim, cause of action, remedy or right of any kind relating to the transactions contemplated
by this Agreement.
	 
	12.14	 	Notices and Addresses. Any notice, request or other communication required or
permitted hereunder shall be in writing and either delivered personally delivered by facsimile
transmission or by registered or certified mail (postage prepaid and return receipt requested)
and shall be deemed given when received (or, if mailed, five (5) Business Days after the date
of mailing) at the following addresses or facsimile transmission numbers (or at such other
address or facsimile




 









 












transmission number for a Party as shall be specified by like notice):



SELLERS, CONTRIBUTORS OR MGS:



C/O: MGS GP, LLC

7633 E. 63rd Place, Suite 245

Tulsa, Oklahoma 74133

Attention: Anthony R. Michog

Phone: (918) 250-0407

Fax: (918) 249-0413



With copies (which shall not constitute notice) to:



Conner & Winters, LLP

Attn: Robert A. Curry

4000 One Williams Center

Tulsa, Oklahoma 74172-0148

Phone: (918) 586-5725

Fax: (918) 586-8625



and



Natural Gas Partners

Attn: Christopher Ray

125 E. John Carpenter Fwy., Suite 600

Irving, Texas 75062

Fax: (972) 432-1441




BUYER OR ER PIPELINE:



C/O EAGLE ROCK ENERGY SERVICES, L.P.

14950 Heathrow Forest Parkway

Houston, Texas 77032

Attention: Alex A. Bucher

Phone: (832) 327-8000

Fax: (832) 327-8009



With copies (which shall not constitute notice) to:




 









 







Thompson & Knight LLP

Attn: Barry Davis

333 Clay street, Suite 3300

Houston, Texas 77002

Phone: (713) 951-58623

Fax: (713) 654-1871



or at such other address as either party may designate by written notice.




SIGNATURE PAGES TO FOLLOW




 









 








     IN WITNESS WHEREOF, the parties have hereto set their hands by their duly authorized officials
as of the date set forth above.



	 	 	 	 	 	 	 
	 	 	“BUYER”	 	 
	 
	 	 	 	 	 	 
	 	 	EAGLE ROCK ENERGY SERVICES, L.P.

By: Eagle Rock Energy G&P, LLC;

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Alex A. Bucher
 

	 	 
	 	 	Name: Alex A. Bucher	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	“ER PIPELINE”	 	 
	 
	 	 	 	 	 	 
	 	 	EAGLE ROCK PIPELINE, L.P.

By: Eagle Rock Pipeline GP, LLC;

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Alex A. Bucher	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Alex A. Bucher	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	“SELLERS AND CONTRIBUTORS”	 	 
	 
	 	 	 	 	 	 
	 	 	MGS GP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Anthony R. Michog	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Anthony R. Michog	 	 
	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	 	 	MICHOG	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Anthony R. Michog	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Anthony R. Michog, Individually	 	 
	 
	 	 	 	 	 	 
	 	 	HIETT	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David E. Hiett	 	 
	 

	 	 	 	 	 	 
	 	 	Name: David E. Hiett, Individually	 	 






 









 






	 	 	 	 	 	 	 
	 	 	BRALEY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David B. Braley	 	 
	 

	 	 	 	 	 	 
	 	 	Name: David B. Braley, Individually	 	 
	 
	 	 	 	 	 	 
	 	 	WILKERSON	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard W. Wilkerson	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Richard W. Wilkerson, Individually	 	 
	 
	 	 	 	 	 	 
	 	 	GREGSON	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Terry D. Gregson	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Terry D. Gregson, Individually	 	 






	 	 	 	 	 	 	 
	 	 	NGP	 	 
	 
	 	 	 	 	 	 
	 	 	NATURAL GAS PARTNERS VII, L.P.

By: G.F.W. Energy VII, L.P., General Partner

   By: GFW VII, L.L.C., General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/
Kenneth Hersh 
	 	 
	 

	 	Name:
	 	Kenneth Hersh 

	 	 
	 

	 	Title:
	 	Managing Partner 

	 	 
	 

	 	 	 	 	 	 





 









 





EXHIBIT A




FORM OF ASSIGNMENT OF MGS UNITS




     THIS ASSIGNMENT OF MGS UNITS (this “Assignment”) is made and entered into this ___
day of June, 2006, by and between                                         , a                                    
                         
(“Assignor"), and Eagle Rock Energy Services, LP, a Texas limited partnership
(“Assignee”).



     Section 1. Defined Terms. All capitalized terms not otherwise defined herein shall have
the respective meanings assigned to them in that certain Sale, Contribution and Exchange Agreement
(the “Agreement”) dated as of June 2, 2006, by and among Assignor, Assignee and the other
parties hereto.



     Section 2. Assignment. Assignor hereby sells, transfers, assigns, contributes and conveys
to Assignee [certain/all] of the MGS Units owned by Assignor, together with all of Assignor’s
corresponding rights, duties and obligations as a partner in MGS, to have and to hold such MGS
Units unto Assignee, its successors and assigns, forever. The MGS Units sold, transferred,
assigned, contributed and conveyed to Assignee hereby consist of                      units of [limited/
general] partner interest in MGS (the “Sold MGS Units”).



     Section 3. Acceptance. Assignee hereby accepts the Sold MGS Units and, in consideration
therefor, contemporaneously herewith has tendered to Assignor the consideration set forth in
Section 3.01 of the Agreement.



     Section 4. Substituted Partner. Assignor and Assignee agree that, effective upon the
assignment referred to above, Assignee shall become a [limited/ general] partner of MGS in place of
Assignor.



     Section 5. Agreement. The representations, warranties, covenants and agreements of
Assignee and Assignor with respect to the sale, transfer and assignment of the Sold MGS Units are
set forth in the Agreement, and this Assignment is being executed and delivered pursuant to, and is
expressly subject to, the terms and provisions of the Agreement.



     Section 6. Counterparts. This Assignment may be executed in multiple counterparts, each of
which shall be deemed an original and all of which shall constitute but one and the same
instrument. This Assignment may
be executed by facsimile transmission and such facsimile signatures shall be afforded the same
force and effect as original signatures for all purposes.



     Section 7. Governing Law. This Assignment shall be governed by and construed and enforced
in accordance with the internal laws of the State of Texas, without regard to the principles of
conflicts of laws thereof.



 









 





     Section 8. Further Assurances. Each party hereto will take all actions necessary and will
sign all documents which may be necessary or desirable to effectuate this Assignment.



REMAINDER OF PAGE INTENTIONALLY LEFT BLANK




 









 





     IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date set forth
above.



	 	 	 	 	 	 	 
	 	 	ASSIGNOR:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ASSIGNEE:	 	 
	 
	 	 	 	 	 	 
	 	 	EAGLE ROCK ENERGY SERVICES, L.P.

By: Eagle Rock Energy G&P, LLC

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





 









 





EXHIBIT B




FORM OF CONTRIBUTION AGREEMENT




     THIS CONTRIBUTION AGREEMENT (this “Agreement”) is made and entered into this ___day
of June, 2006, by and between                                         , a                                                             
(“Contributor”), and Eagle Rock Pipeline, LP, a Delaware limited partnership
(“Issuer”).



     Section 9. Defined Terms. All capitalized terms not otherwise defined herein shall have
the respective meanings assigned to them in that certain Sale, Contribution and Exchange Agreement
(the “SCEA”) dated as of June 2, 2006, by and among Contributor, Issuer and the other
parties thereto.



     Section 10. Contribution. Contributor hereby contributes and conveys to Issuer [certain/
all] MGS Units owned by Contributor, together with all of Contributor’s corresponding rights,
duties and obligations as a partner in MGS, to have and to hold such MGS Units unto Issuer, its
successors and assigns, forever. The MGS Units transferred, assigned, contributed and conveyed to
Issuer hereby consists of                      limited partner interests in MGS (the “Contributed
Units”).



     Section 11. Acceptance. Issuer hereby accepts the contribution of the MGS Units and, in
consideration therefor, contemporaneously herewith has issued in the name of Contributor the ER
Units set forth in Section 3.02 of the Agreement.



     Section 12. Substituted Partner. Contributor and Issuer agree that, effective upon the
contribution and issuance referred to above, Issuer shall become a limited partner of MGS in place
of Contributor and Contributor shall be admitted as a limited partner in Issuer.



     Section 13. Agreement. The representations, warranties, covenants and agreements of Issuer
and Contributor with respect to the contribution of the MGS Units are set forth in the SCEA, and
this Agreement is being executed and delivered pursuant to, and is expressly subject to, the terms
and provisions of the SCEA.



     Section 14. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an
original and all of which shall constitute but one and the same instrument. This Agreement may be
executed by facsimile transmission and such facsimile signatures shall be afforded the same force
and effect as original signatures for all purposes.



     Section 15. Governing Law. This Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of Texas, without regard to the principles of
conflicts of laws thereof.



 









 





     Section 16. Further Assurances. Each party hereto will take all actions necessary and will
sign all documents which may be necessary or desirable to effectuate this Agreement.



REMAINDER OF PAGE INTENTIONALLY LEFT BLANK





 









 








     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth
above.



	 	 	 	 	 	 	 
	 	 	CONTRIBUTOR:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ISSUER:	 	 
	 
	 	 	 	 	 	 
	 	 	EAGLE ROCK PIPELINE, L.P.

By: Eagle Rock Pipeline GP, LLC

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





 









 





EXHIBIT C




AMENDMENT NO. 1

TO

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

OF

EAGLE ROCK PIPELINE, L.P.




     This Amendment (this “Amendment”) to the Amended and Restated Agreement of Limited Partnership
of Eagle Rock Pipeline, L.P., a Delaware limited partnership (the “Partnership”), dated as of March
27, 2006 (the “Partnership Agreement”), is entered into effective as of June ___, 2006, by Eagle
Rock Pipeline GP, LLC, a Delaware limited liability company (the “General Partner”), as the general
partner of the Partnership, on behalf of itself and the Limited Partners of the Partnership.
Capitalized terms used but not defined herein are used as defined in the Partnership Agreement.



RECITALS




     WHEREAS, Section 3.3 of the Partnership Agreement provides that the General Partner, without
the approval of any Limited Partner except as otherwise provided in the Partnership Agreement, may,
for any Partnership purpose, at any time or from time to time, issue additional Partnership
Securities for such consideration and on such terms and conditions as shall be established by the
General Partner in its sole discretion; and



     WHEREAS, Section 3.3(e) of the Partnership Agreement provides that the General Partner,
without the approval of any Partner, may amend the Partnership Agreement in connection with the
issuance of any class or series of Partnership Securities pursuant to Section 3.3 of the
Partnership Agreement; and



     WHEREAS, the Partnership has entered into a Sale, Contribution and Exchange Agreement, dated
as of June 2, 2006, between the Partnership and all of the equity owners of Midstream Gas Services,
L.P., a Delaware limited partnership (the “Contribution Agreement”); and



     WHEREAS, the Contribution Agreement obligates the Partnership to issue limited partner
interests designated as Common Units having the terms set forth in the Partnership Agreement; and



     NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:



 









 





AMENDMENT




     Section 1. Issuance of Common Units.



     (a) The Partnership hereby issues an aggregate of 1,125,416 Common Units to the following
Persons and admits such Persons as Limited Partners of the Partnership:



	 	 	 	 	 
	Name	 	Number of Common Units
	Natural Gas Partners VII, L.P.
	 	 	610,433	 
	Anthony R. Michog
	 	 	171,661	 
	David B. Braley
	 	 	171,661	 
	David E. Hiett
	 	 	171,661	 






     (b) The Partnership agrees to issue additional Common Units, up to a maximum of 1,109,878
Common Units, to Natural Gas Partners VII, L.P. upon the terms and conditions specified in the
Contribution Agreement and, upon such issuance, Natural Gas Partners VII, L.P. will be admitted as
a Limited Partner with respect to such additional Common Units.



     Section 2. Ratification of Partnership Agreement. Except as expressly modified and amended
herein, all of the terms and conditions of the Partnership Agreement shall remain in full force and
effect.



     Section 3. Governing Law. This Amendment will be governed by and construed in accordance
with the laws of the State of Delaware.



     Section 4. Counterparts. This Amendment may be executed in counterparts, all of which
together shall constitute an agreement binding on all the parties hereto, notwithstanding that all
such parties are not signatories to the original or the same counterpart.



     IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.



	 	 	 	 	 	 	 
	 	 	GENERAL PARTNER:	 	 
	 
	 	 	 	 	 	 
	 	 	Eagle Rock Pipeline GP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Alex A. Bucher	 	 
	 

	 	 	 	 

Alex A. Bucher
	 	 
	 

	 	 	 	President	 	 






 









 






	 	 	 	 	 	 	 
	 	 	LIMITED PARTNERS:	 	 
	 
	 	 	 	 	 	 
	 	 	All Limited Partners now and hereafter admitted as
limited partners of the Partnership, pursuant to
Powers of Attorney now and hereafter executed in
favor of, and granted and delivered to, the General
Partner.	 	 
	 
	 	 	 	 	 	 
	 	 	By: Eagle Rock Pipeline GP, LLC, General Partner, as
attorney-in-fact for all Limited Partners pursuant to
the powers of Attorney granted pursuant to Section
2.10 of the Partnership Agreement.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Alex A. Bucher	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Alex A. Bucher	 	 
	 

	 	 	 	President	 	 






 









 





EXHIBIT D




FINANCIAL MODEL FOR DETERMINATION OF

DEFERRED UNIT PAYMENT



The Earn Out Payment in the following table has been calculated using a model which projects EBITDA
based on various volume and commodity price scenarios. Such EBITDA is then multiplied by 8.5, to
calculate a total value. The Earn Out Payment will be such total value minus the $25 million
initial acquisition price. The Earn Out Payment is shown on the following tables as a final
calculated dollar amount, which will then be paid as provided below.



Under the terms listed below and as discussed in 3.02 (a), NGP will earn Deferred Units as defined
in section 3.02 (a) under the following circumstances.



The Deferred Units will be earned if the Earn Out Value as defined below is greater than zero.



The number of Deferred Units granted is based on a calculation of the “Earn Out Value” as defined
below.



The “Earn Out Volume” is determined by taking the average daily volumes in MMcfd that were produced
by Latigo Petroleum, Inc., Dominion Exploration and Production Inc., and Chesapeake Energy
Corporation or their successors within the Earn Out Area, which is shown on the following Map 3.2
(a), and were gathered, treated or processed by Eagle Rock Energy Field Services, L.P. for the
calendar quarter ending December 31, 2007.



The “Oil and Gas Prices” used to determine the Earn Out Value will be obtained by multiplying (i)
each of the forward twelve-month NYMEX Crude Oil and Natural Gas prices as of December 31, 2007 by
(ii) 0.9.



The “Earn Out Value” is obtained by using the Oil and Gas Prices determined above to look up the
NYMEX Natural Gas and NYMEX Oil Price axes shown on the Table D for the box which represents the
nearest closest Earn Out Volume, then selecting the corresponding Earn Out Value.



Interpolation should be used to determine an Earn Out Payment that falls between the volume and/or
commodity price values on Table D



The number of Deferred Units payable to NGP is determined by dividing the Earn Out Value by $18.02,
which entitlement to units will be adjusted in the same manner as the Eagle Rock Pipeline, L.P.
partners’ units in connection with the restructuring into Eagle Rock Energy Partners, L.P., as if
NGP held such Deferred Units at the time of such restructuring and then NGP


 









 






will be entitled to receive the Deferred Units in the form of the corresponding number units of, and issued by, Eagle
Rock Energy Partners, L.P.




Table D



(Earn Out Payments below already reflect subtraction of the $25 million initial acquisition price
and the NYMEX Natural Gas and Crude Oil Prices below have already been multiplied by 90%)




(dollars in thousands, except per unit data)




10 MMcfd Average Wellhead Reserves Earnout Payment




NYMEX Oil

($/Bbl)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	NYMEX Natural Gas ($/Mmbtu)
	 
	 	$	4.50	 	 	$	6.50	 	 	$	10.50	 	 	$	12.00	 
	$45.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 
	$55.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 
	$65.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 
	$75.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 






15 MMcfd Average Wellhead Reserves Earnout Payment




NYMEX Oil

($/Bbl)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	NYMEX Natural Gas ($/Mmbtu)
	 
	 	$	4.50	 	 	$	6.50	 	 	$	10.50	 	 	$	12.00	 
	$45.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 
	$55.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 
	$65.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 
	$75.00
	 	$	0.0	 	 	$	0.0	 	 	$	0.0	 	 	$	273	 






20 MMcfd Average Wellhead Reserves Earnout Payment




NYMEX Oil

($/Bbl)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	NYMEX Natural Gas ($/Mmbtu)
	 
	 	$	4.50	 	 	$	6.50	 	 	$	10.50	 	 	$	12.00	 
	$45.00
	 	$	0	 	 	$	0	 	 	$	2,800	 	 	$	4,394	 
	$55.00
	 	$	0	 	 	$	53	 	 	$	4,304	 	 	$	5,898	 
	$65.00
	 	$	0	 	 	$	1,557	 	 	$	5,808	 	 	$	7,402	 
	$75.00
	 	$	936	 	 	$	3,061	 	 	$	7,312	 	 	$	8,906	 






 









 





25 MMcfd Average Wellhead Reserves Earnout Payment




NYMEX Oil

($/Bbl)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	NYMEX Natural Gas ($/Mmbtu)
	 
	 	$	4.50	 	 	$	6.50	 	 	$	10.50	 	 	$	12.00	 
	$45.00
	 	$	1,937	 	 	$	4,594	 	 	$	9,908	 	 	$	11,900	 
	$55.00
	 	$	3,817	 	 	$	6,474	 	 	$	11,788	 	 	$	13,780	 
	$65.00
	 	$	5,697	 	 	$	8,354	 	 	$	13,668	 	 	$	15,660	 
	$75.00
	 	$	7,577	 	 	$	10,234	 	 	$	15,548	 	 	$	17,540