**Exhibit 2.2****PARTNERSHIP INTERESTS CONTRIBUTION AGREEMENT****by and among****MONTIERRA MINERALS & PRODUCTION, L.P.****NGP MINERALS, L.L.C.****and****EAGLE ROCK ENERGY PARTNERS, L.P.****Dated as of March 31, 2007**
 

 
**TABLE OF CONTENTS**     ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION  2 1.1 Definitions  2 1.2 Rules of Construction  15      ARTICLE II ACQUISITION & CONTRIBUTION; CLOSING  16 2.1 Contribution of Interests  16 2.2 Issuance of Contributee Units at Closing  17 2.3 Computation of Agreed Value  17 2.4 Escrow Deposit  19 2.5 Determination of Final Agreed Value; Post-Closing Adjustments; and Post-Closing Remittance Obligations  19 2.6 Environmental Defect; Limitation on Environmental Adjustments  21 2.7 Tax Treatment of Adjustments to Agreed Value and Payments  23 2.8 The Closing  23      ARTICLE III REPRESENTATIONS AND WARRANTIES RELATING TO CONTRIBUTORS  23 3.1 Organization of Contributors  23 3.2 Authorization; Enforceability  23 3.3 No Conflict; Consents  23 3.4 Ownership of Interests; Capitalization  24 3.5 Litigation  25 3.6 Solvency  25 3.7 Securities Representations  25      ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES  27 4.1 Organization  27 4.2 No Conflict; Consents  27 4.3 Litigation  28 4.4 Financial Statements; Internal Controls; Undisclosed Liabilities  28 4.5 Taxes  28 4.6 Cost-Bearing Assets  29 4.7 No Undisclosed Liabilities  29 4.8 Absence of Certain Changes  30 4.9 Contracts  30 
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     4.10 Intellectual Property  31 4.11 Employee Benefit Plans  31 4.12 Compliance with Laws; Permits  36 4.13 Insurance  36 4.14 Labor Relations; Employment Matters  37 4.15 Defensible Title; Special Warranty on Montierra Assets  38 4.16 Brokers’ Fees  39 4.17 Preferential Rights  39 4.18 Production Balances  39 4.19 Insider Interests  40 4.20 Receivables  40 4.21 Bank Accounts and Powers of Attorney  40 4.22 Illegal Payments  41 4.23 Offerings of Securities  41 4.24 Unrecorded Co-Invest Conveyances  41 4.25 Books and Records  41 4.26 Unrecorded Partnership Conveyances  42      ARTICLE V REPRESENTATIONS AND WARRANTIES RELATING TO CONTRIBUTEE  43 5.1 Organization  43 5.2 Authorization; Enforceability  43 5.3 No Conflict; Consents  43 5.4 Litigation  44 5.5 Brokers’ Fees  44 5.6 Independent Investigation  44 5.7 SEC Filings  44 5.8 Taxes  45      ARTICLE VI COVENANTS  46 6.1 Conduct of Business  46 6.2 Access  47 6.3 Third Party Approvals  49 6.4 Books and Records  49 6.5 Permits  49 6.6 Acquisition Proposals  50 6.7 Financial Statements  50 
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     6.8 Representation Letters  50 6.9 Employee and Benefit Matters  50      ARTICLE VII TAX MATTERS  51 7.1 Character and Treatment of Transaction  51 7.2 Pre-Closing Restructuring  52 7.3 Post-Closing Tax Covenants  53 7.4 Responsibility for Filing Tax Returns and Paying Taxes  53 7.5 Responsibility for Tax Audits and Contests  54 7.6 Tax Refunds  55 7.7 Transfer Taxes  55 7.8 Disputes over Tax Provisions  55 7.9 Limitations on Indemnity  55      ARTICLE VIII CONDITIONS TO closing  56 8.1 Conditions to Obligations of Contributee  56 8.2 Conditions to the Obligations of Contributors  58      ARTICLE IX INDEMNIFICATION  59 9.1 Survival  59 9.2 Indemnification  60 9.3 Limitations on Liability  61 9.4 Procedures  62 9.5 Notice of Claim Dispute  64 9.6 Escrow Account  65 9.7 No Special, Consequential or Punitive Damages  66 9.8 Waiver of Other Representations  66 9.9 Exclusive Remedy and Release  68      ARTICLE X TERMINATION  68 10.1 Termination  68 10.2 Effect of Termination  69      ARTICLE XI MISCELLANEOUS  70 11.1 Notices  70 11.2 Assignment  70 11.3 Rights of Third Parties  71 
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     11.4 Expenses  71 11.5 Counterparts  71 11.6 Entire Agreement  71 11.7 Disclosure Schedules  71 11.8 Amendments  72 11.9 Publicity  72 11.10 Severability  72 11.11 Governing Law; Jurisdiction  72 **LIST OF EXHIBITS AND SCHEDULES**   Exhibit A:   Part I Hemus Properties Part II Additional Properties Part III Wells on Hemus and Additional Properties Part IV Partnership Lands Part V Partnership Wells Part VI Investments in Non-Affiliates Part VII Other Assets Part VIII Total Net Mineral Acres by State Exhibit B Registration Rights Agreement Schedule A Allocated Environmental Defect Values
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**PARTNERSHIP INTEREST CONTRIBUTION AGREEMENT**     THIS PARTNERSHIP INTEREST CONTRIBUTION AGREEMENT (this “***Agreement***”), dated as of March 31,2007, is entered into by and among (i) **MONTIERRA MINERALS & PRODUCTION, L.P.**, a Texas limitedpartnership (“***Montierra***”), (ii) **NGP MINERALS, LLC**, a Texas limited liability company (“***MONTGP***” ,whoalong with Montierra are individually herein, a “***Contributor***” and collectively, the"***Contributors***”), and (iii) **EAGLE ROCK ENERGY PARTNERS, L.P**., a Delaware limited partnership(“***Contributee***”).**RECITALS**     WHEREAS, Montierra owns 100% of the issued and outstanding capital stock of NGP Income CapitalCorp., a Texas corporation (“***ICC***”);     WHEREAS, the Contributors and ICC own 100% of the issued and outstanding general and limitedpartnership interests in **NGP 2004 Income, L.P.**, a Texas limited partnership (the “***Partnership***” whoalong with ICC are individually, a “***Company****”*and collectively, the ***“Companies***”);     WHEREAS, Montierra desires to transfer and assign, subject to the terms and conditions of thisAgreement, all of its rights, titles and interests in and to the ***Hemus Properties***(as hereinafterdefined) and the ***Additional Properties***(as hereinafter defined) to the Partnership, effective as ofJanuary 1, 2007;     WHEREAS, the Partnership currently owns the mineral rights and royalty interests moreparticularly described on Parts IV and VI of Exhibit A attached hereto (the “***PartnershipAssets***”);     WHEREAS, subject to the terms and conditions of this Agreement, Montierra desires to convertICC to a limited liability company and thereafter transfer all of the outstanding membershipinterests of ICC to the Partnership;     WHEREAS, subject to the terms and conditions of this Agreement, Montierra desires to cause ICCto distribute to Montierra its special limited partnership interest in the Partnership;     WHEREAS, subject to the terms and conditions of this Agreement, Montierra desires to cause thePartnership to assume the Qualified Indebtedness (as defined below);
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     WHEREAS, subject to the terms and conditions of this Agreement, Contributee desires to acquirefrom the Contributors all of the general and limited partnership interests in the Partnership(collectively, all of such partnership interests are referred to as the “***Interests***”), andContributors desire to contribute the Interests, subject to the Qualified Indebtedness (andContributee’s obligation to cause the Qualified Indebtedness to be satisfied in full), in exchangefor Contributee Units (as defined below); and     WHEREAS, the transfer of the Interests shall be treated as a contribution under Code Section721(a) as more specifically provided herein;     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein andother good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the Parties agree as follows:ARTICLE I**DEFINITIONS AND RULES OF CONSTRUCTION**          1.1 Definitions. As used herein, the following terms shall have the following meanings:     “***AAA***” has the meaning provided such term in Section 9.5.     ***“Accountants”***has the meaning provided such term in Section 7.8.     “***Acquisition Proposal***” has the meaning provided such term in Section 6.6.     *"****Action****”*means any action, appeal, petition, plea, charge, complaint, claim, suit, demand,litigation, arbitration, mediation, hearing, inquiry, investigation or similar event, occurrence orproceeding.     “***Additional Properties***” means all of the properties, rights, titles and interests acquired byMontierra in and pursuant to the documents listed in Part II of Exhibit A attached hereto.     “***Administaff Agreement***” has the meaning provided such term in Section 4.11(p).     “***Affiliate***” means, with respect to any Person, any other Person that, directly or indirectly,controls, is controlled by or is under common control with, such specified Person through one ormore intermediaries or otherwise. For the purposes of this definition, “control” means, where usedwith respect to any Person, the possession, directly or indirectly, of the power
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to direct or cause the direction of the management and policies of such Person, whetherthrough the ownership of voting securities, by contract or otherwise, and the terms “controlling”and “controlled” have correlative meanings.     “***Aggregate Basket Amount***” has the meaning provided such term in Section 9.3(b).     “***Agreed Value***” has the meaning provided such term in Section 2.3.     “***Agreement***” has the meaning provided such term in the preamble to this Agreement.     “***Allocated Environmental Defect Value***” means the dollar amount assigned to those Assetsdescribed in Schedule A attached hereto that may be subject to an Environmental Defect.     “***Allocation***” has the meaning provided such term in Section 7.1(b).     “***Arbitrator***” has the meaning provided such term in Section 9.5.     “***Arbitrator’s Decision***” has the meaning provided such term in Section 9.5.     “***Assets***” means, as of the Effective Time, all of the right, title, and interest of thePartnership and Montierra in and to the Montierra Assets and the Partnership Assets, including, butnot limited to (a) in and to all of the oil, gas, and other minerals in and under and that may beproduced from the lands described on Exhibit A attached hereto (the “***Lands***”), together witheach and every kind and character of right, title, claim, and interest that the Partnership has inand to the Lands and any lands pooled, unitized, communitized, or consolidated therewith, whethersuch oil, gas, and other minerals be producing or not, or subject to an existing oil and gas leaseor not, as of the Effective Time, including (i) all fee mineral interests, royalty interests,overriding royalty interests, and production payments, and other interests, similar or dissimilarto the foregoing; (ii) the production from any oil and gas wells located on the Lands, whetherproducing, not producing, shut-in, temporarily abandoned, or permanently abandoned (the “***Wells***”);(iii) any pools or units which include any Lands or Wells (the “***Units***”), and including all interestof the Partnership in production from any such Unit, whether such Unit production comes from Wellslocated on or off of the Lands; (b) under or derived from all Contracts by which the Lands, Units,and/or Wells are bound, or that relate to or are otherwise applicable to the Lands, Units, and/orWells, to the extent applicable to, useful for the ownership of, or benefiting in any manner, theLands, Units, and/or Wells or the production of oil and gas and/or other minerals and productsproduced in association therewith from the Lands, Units, and/or Wells, but excluding any Contractsto the extent transfer is restricted by third-party agreement or
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applicable law and the necessary consents to transfer are not obtained; and (c) to the oil,gas, condensate, and other gaseous or liquid hydrocarbons (or any combination thereof) producedfrom or attributable to the Lands, Units, and/or Wells.     “***Business Day***” means any day that is not a Saturday, Sunday or legal holiday in the States ofTexas and New York and that is not otherwise a federal holiday in the United States.     “***CERCLA***” means the Federal Comprehensive Environmental Response Compensation and LiabilityAct, 42 U.S.C. § 9601 et seq.     “***Claim Notice***” has the meaning provided such term in Section 9.4(a).     “***Claim Settlement Agreement***” has the meaning provided such term in Section 9.4(d).     “***Closing***” has the meaning provided such term in Section 2.8.     “***Closing Date***” has the meaning provided such term in Section 2.8.     “***COBRA***” has the meaning provided such term in Section 4.11(e).     “***Code***” means the Internal Revenue Code of 1986, as amended.     “***Co-Invest***” means, collectively or individually, NGP-VII Income Co-Investment Opportunities,L.P., a Delaware limited partnership, NGP 2004 Co-Investment Income, L.P., a Texas limitedpartnership, and NGP Co-Investment Income Capital Corp., a Texas corporation.     “***Common Units***” means a common unit of limited partnership of Contributee, which are listed onthe NASDAQ Global Market.     “***Company***” or “***Companies***” has the meaning provided such term in the preamble to this Agreement,but shall include Montierra, as and when applicable with respect to operation and ownership of theMontierra Assets as of the Effective Time but prior to the contribution to the Partnership pursuantto the terms of this Agreement.     “***Company Guaranties***” means those guaranties, letters of credit, bonds, sureties and otherforms of credit support or assurances provided by the Contributors in support of obligations of theCompanies.     “***Company Securities***” has the meaning provided such term in Section 3.4.
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     “***Consents***” has the meaning provided such term in sub-section (m) of the definition ofPermitted Liens.     “***Constituents of Concern***” any substance defined as a hazardous substance, hazardous waste,hazardous material, pollutant or contaminant by any Environmental Law, any petroleum hydrocarbon orfraction thereof, friable asbestos, or polychlorinated biphenyls, the handling, storage, treatmentor exposure of or to which is regulated under any Environmental Law.     “***Contract***” means any legally binding agreement, commitment, lease, license or contract, butexcluding Plans.     “***Contributee***” has the meaning provided such term in the preamble to this Agreement.     “***Contributee GP***” means Eagle Rock Energy G&P, LLC, a Delaware limited liability company in itscapacity as the general partner of Eagle Rock Energy GP, L.P., a Delaware limited partnership, thegeneral partner of Contributee.     “***Contributee Indemnified Parties***” has the meaning provided such term in Section9.2(a).     “***Contributee Units***” means the Common Units issued pursuant to Section 2.2 hereof.     “***Contributor Indemnified Parties***” has the meaning provided such term in Section9.2(b).     “***Contributors”***has the meaning provided such term in the preamble to this Agreement.     “***Cost-Bearing Asset***” means any Asset that requires Montierra or the Partnership to pay or beobligated to pay for any operating expenses (excluding severance and ad valorem Taxes) associatedwith the Wells or the production of hydrocarbons therefrom.     “***Data***” means all files, records, and documentation including computer tapes, disks, orinformation on other electronic media of the Contributors or the Partnership pertaining to theAssets, including, without limitation, lease files, land files, well files, division order files,accounting files, legal records (excluding attorney/client privilege documents other than titleopinions), production records, marketing records, gas and oil sales contract files, gas processingfiles, abstracts, title opinions, maps, land surveys, non-confidential logs, engineering data andreports, reserve studies and evaluations, and any geological and/or geophysical data which theContributors or the Partnership have the right to convey under any applicable licensingagreements.
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     **"*****Defensible Title*****”**means such title to the Assets which, subject to Permitted Liens, (a) inthe case of each of the Wells identified in Parts III and V of Exhibit A, entitlesMontierra and the Partnership, individually or collectively, to receive a net revenue interest inproduction of oil or gas not less than that described in Parts III and V of Exhibit Ahereto for each of such Wells, (b) in the case of Lands that are not producing oil or gas as of theEffective Time, results in Montierra and the Partnership collectively owning at least the totalnumber of “Net Mineral Acres” in each State as reflected in Part VIII of Exhibit A hereto,and in each of cases (a) and (b) above, being free and clear of all Encumbrances except forPermitted Liens. As used herein, “Net Mineral Acres” shall be computed separately for each tractof Land which is a part of the Assets, and shall be determined, for each such tract, by multiplying(a) the number of gross acres in such tract by (b) the undivided interest in oil and gas owned byeither Montierra or the Partnership in such tract.     “***Direct Claim***” has the meaning provided such term in Section 9.4(d).     “***Disclosure Schedules***” means the schedules attached hereto.     “***Dollars***” and “***$***” mean the lawful currency of the United States.     “***Effective Time***” means 12:01 a.m. Central Time, on January 1, 2007.     “***Employee***” means any individual treated by any of the Contributors or the Companies as anemployee, employed at common law by any of the Contributors or the Companies, or co-employed by anyof the Contributors or the Companies.     “***Employee Benefit Plan***” has the meaning provided such term in Section 4.11(a).     “***Employee Pension Benefit Plan***” has the meaning provided such term in Section 4.11(a).     “***Employee Welfare Benefit Plan***” has the meaning provided such term in Section 4.11(a).     “***Encumbrance***” means any material title defect, mortgage, assignment, pledge, hypothecation,security interest, title or retention agreement, levy, execution, seizure, attachment, garnishment,deemed trust, lien, easement, option, right or claim of others, or charge or encumbrance of anykind whatsoever.
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     “***Environmental Claims Date”***means April 16, 2007.     ***“Environmental Defect***” means any condition existing as of the date of this Agreement or theClosing on any Cost-Bearing Asset or the Brea Olinda Asset located in Orange County, California,that is in material violation of any Environmental Laws existing as of the date of this Agreementor as of the Closing; provided, that no Environmental Defect may be claimed pursuant to thisAgreement unless Montierra or the Partnership has liability under Environmental Laws for suchEnvironmental Defect.     “***Environmental Law***” means all applicable Laws of any Governmental Authority relating to theprotection of human health or the environment, including: (a) all requirements pertaining toliability for reporting, management, licensing, permitting, investigation, and remediation ofemissions, discharges, releases, or threatened releases of a Constituent of Concern; and (b) alllimitations, restrictions, conditions, standards, prohibitions, obligations, and timetablescontained therein or in any notice or demand letter to Contributors or the Companies issued,entered, promulgated or approved thereunder. The term “***Environmental Law***” includes, withoutlimitation, CERCLA, the Federal Water Pollution Control Act (which includes the Federal Clean WaterAct), the Federal Clean Air Act, the Federal Solid Waste Disposal Act (which includes the ResourceConservation and Recovery Act), the Federal Toxic Substances Control Act, and the FederalInsecticide, Fungicide and Rodenticide Act, each as amended as of the date hereof, any regulationspromulgated pursuant thereto, and any state or local counterparts.     “***ERISA***” means the Employee Retirement Income Security Act of 1974, as amended.     “***ERISA Affiliate***” has the meaning provided such term in Section 4.11(a).     “***Escrow Account***” means the account maintained by the Escrow Agent and initially funded withthe Escrow Deposit.     “***Escrow Agent***” means Wells Fargo Bank (Texas), N.A.     “***Escrow Deposit***” means 155,789 Contributee Units having a deemed value of $2,960,000 and shallbe delivered to the Escrow Account in accordance with Section 2.4.     “***Escrow Income***” has the meaning provided such term in Section 9.6(a).     “***Exchange Act***” means the Securities and Exchange Act of 1934, as amended.
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     “***Final Agreed Value***” has the meaning provided such term in Section 2.5(a).     “***Final Settlement Statement***” has the meaning provided such term in Section 2.5(a).     “***GAAP***” means generally accepted accounting principles of the United States, consistentlyapplied.     “***Governmental Authority***” means any federal, state, municipal, local or similar governmentalauthority, regulatory or administrative agency, court or arbitral body.     “***Hemus Properties***” means all of the properties, rights, titles and interests acquired byMontierra in and pursuant to the documents listed in Part I of Exhibit A attached hereto.     “***HIPAA***” has the meaning provided such term in Section 4.11(n).     “***ICC***” has the meaning provided such term in the preamble to this Agreement.     **“*****Imbalance*****”**means any gas or other hydrocarbon production, pipeline, transportation orprocessing imbalance existing as of the Effective Time with respect to any of the Cost BearingAssets, together with any related rights or obligations as to future cash and/or gas or productbalancing, as a result of Contributors having taken and sold for the account of the Partnershipcumulative production which is greater or less than the Partnership’s share in cumulativeproduction.     “***Indebtedness for Borrowed Money***” means all obligations to any Person for borrowed money,including (a) any obligation to reimburse any bank or other Person in respect of amounts paid orpayable under a standby letter of credit or (b) any guaranty with respect to indebtedness forborrowed money of another Person.     “***Indemnified Party***” has the meaning provided such term in Section 9.4(a).     “***Indemnifying Party***” has the meaning provided such term in Section 9.4(a).     “***Individual Basket Amount***” has the meaning provided such term in Section 9.3(b).     “***Intellectual Property***” means intellectual property rights, statutory or common Law,worldwide, including (a) trademarks, service marks, trade dress, slogans, logos and all goodwillassociated therewith, and any applications or registrations for any of the foregoing; (b)copyrights and any applications or registrations for any of the foregoing; and (c) patents, allconfidential know-how, trade secrets and similar proprietary rights in confidential inventions,
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discoveries, improvements, processes, techniques, devices, methods, patterns, formulae,specifications, and lists of suppliers, vendors, customers, and distributors.     “***Interests***” has the meaning provided such term in the recitals of this Agreement.     “***IRS***” means Internal Revenue Service of the United States.     “***Knowledge***” (a) as to Contributors or the Companies means the actual knowledge of thosePersons listed in Section 1.1 of the Disclosure Schedules. A Person has “actual knowledge”of those matters which the individual involved could reasonably be expected to have as a result ofundertaking an investigation of such a scope and extent as a reasonably prudent Person in a same orsimilar position or office would undertake concerning the particular subject matter.     “***Law***” means any applicable statute, writ, law, rule, regulation, ordinance, order, judgment,injunction, award, determination or decree of a Governmental Authority, in each case as in effecton and as interpreted on the date of this Agreement or on and as of the Closing Date, asapplicable, unless the context otherwise clearly requires a different date, in which case on and asof such date.     “***Lien(s)***” means any charges, pledges, options, mortgages, deeds of trust, hypothecations, orsecurity interests.     “***Losses***” has the meaning provided such term in Section 9.2(a).     “***Material Adverse Effect***” means, with respect to any Person, any circumstance, change oreffect that (a) is adverse to the business, operations (including results of operation), assets,prospects, liabilities or financial condition of such Person in an amount individually or in theaggregate, of $500,000 or more, or (b) that materially impedes the ability of such Person tocomplete the transactions contemplated herein, but shall exclude any circumstance, change or effectresulting or arising from: (i) any change in general economic conditions in the industries ormarkets in which the Companies operates; (ii) seasonal reductions in revenues and/or earnings ofthe Companies in the ordinary course of its business; (iii) any adverse change, event or effect onthe global energy industry as a whole, including those impacting energy prices or the value ofAssets; (iv) national or international political conditions, including any engagement inhostilities, whether or not pursuant to the declaration of a national emergency or war, or theoccurrence of any military or terrorist attack; (v) changes in Law, GAAP or the interpretationthereof; (vi) the entry into or announcement of this Agreement, actions contemplated by thisAgreement, or the
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consummation of the transactions contemplated hereby; or (vii) matters only to the extent suchmatters are reflected in the Preliminary Settlement Statement as of the Closing Date.     “***Material Contracts***” has the meaning provided such term in Section 4.9.     “***MONTGP***” has the meaning provided such term in the first paragraph to this Agreement.     “***Montierra***” has the meaning provided such term in the first paragraph to this Agreement.     “***Montierra Assets***” means all of the rights, titles, and interests of Montierra in and to theHemus Properties, the Additional Properties and the Other Assets, including, but not limited to (a)in and to all of the Lands, together with each and every kind and character of right, title, claimand interest that Montierra has in and to the Lands and any lands pooled, unitized, communitized orconsolidated therewith, whether such oil, gas and other minerals be producing or not, or subject toan existing oil and gas lease or not, as of the Effective Time, including (i) all fee mineralinterests, royalty interests, overriding royalty interests and production payments, and otherinterests, similar or dissimilar to the foregoing; (ii) the production from the Wells; (iii) theUnits, including all interest of Montierra in production from any such Unit, whether such Unitproduction comes from Wells located on or off of the Lands; (b) under or derived from all Contractsby which the Lands, Units and/or Wells are bound, or that relate to or are otherwise applicable tothe Lands, Units and/or Wells, to the extent applicable to, useful for the ownership of, orbenefiting in any manner, the Lands, Units and/or Wells or the production of oil and gas and/orother minerals and products produced in association therewith from the Lands, Units and/or Wells,including any and all Contracts and conveyances pursuant to which Montierra acquired its interestsin the Lands, Units and/or Wells, but excluding any Contracts to the extent transfer is restrictedby third-party agreement or applicable law and the necessary consents to transfer are not obtained;and (c) to the oil, gas, condensate and other gaseous or liquid hydrocarbons (or any combinationthereof) produced from or attributable to the Lands, Units and/or Wells.     “***Montierra Conveyances***” means the conveyance documents to be executed and delivered byMontierra to the Partnership that, when taken together, convey the Montierra Assets to thePartnership, effective as of January 1, 2007.     **“*****NASDAQ*****”**means The NASDAQ National Stock Market, Inc.
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     “***Notice of Claim Dispute***” has the meaning provided such term in Section 9.4(d).     **“*****Order*****”**means any order, judgment, injunction, edict, decree, ruling, pronouncement,determination, decision, opinion, sentence, subpoena, writ or award issued, made, entered orrendered by any court, administrative agency or other Governmental Authority or by any arbitrator.     “***Organizational Documents***” means any charter, certificate of incorporation, articles ofassociation, partnership agreements, limited liability company agreements, bylaws, operatingagreement or similar formation or governing documents and instruments.     “***Other Assets***” means all of the assets listed in Part VII of Exhibit A attachedhereto.     “***Parties***” means Contributors and Contributee.     “***Partnership***” has the meaning provided such term in the first paragraph of this Agreement, butshall include Montierra and ICC, as and when applicable with respect to operation and ownership ofthe Montierra Assets as of the Effective Time but prior to the contribution to the Partnershippursuant to the terms of this Agreement.     “***Partnership Assets***” has the meaning provided such term in the preamble of this Agreement.     “***Permits***” means authorizations, licenses, permits or certificates issued by GovernmentalAuthorities; *provided*, right-of-way agreements and similar approvals are not included in thedefinition of Permits.     “***Permitted Liens***” means:     (a) terms, conditions, restrictions, exceptions, reservations, limitations and other matterscontained in the contracts, agreements, instruments and other documents which pertain to, relate toor cover the Assets, or create or reserve to the Partnership its interest in the Assets, or towhich the interest of the Partnership therein is subject, provided that the same do not reduce theinterest in an Asset below that set forth in Parts III, V or VIII of Exhibit A for suchAsset;     (b) changes in the interest associated with the Assets or any of them, occurring after theEffective Time from any cause insofar as said changes are either reflected on the Exhibits attachedhereto, or are described in the Contracts pertaining to the Assets;
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     (c) any easements, rights-of-way, servitudes, permits and other rights in respect of surfaceoperations, pipelines or the like, and easements for pipelines, power lines, and other similarrights-of-way, and encroachments, on, over or in respect of any of the Lands that do notunreasonably or materially interfere with the operation of the Lands for the exploration andproduction of hydrocarbons or related operations;     (d) the terms and conditions of all production sales contracts, transportation agreements,pooling agreements, unitization agreements, operating agreements, processing agreements, and allother contracts, agreements, and instruments related to or utilized in connection with the Lands,or the production, storage, treatment, transportation, sale or disposal of oil, gas or otherhydrocarbons, minerals or substances therefrom that do not operate to reduce the interest in anAsset below that set forth in Parts III, V or VIII of Exhibit A for such Asset;     (e) defects or irregularities arising out of lack of corporate authorization, unlessContributee provides affirmative evidence that such corporate action was not authorized and resultsin another Person’s superior claim of title to the relevant Property;     (f) defects or irregularities that have been cured or remedied by the passage of time,including, without limitation, applicable statutes of limitation or statutes for prescription,unless the defect or irregularity is of such a nature that a reasonably prudent Person would notrely on the passage of time to cure or remedy such defect or irregularity;     (g) conventional rights of reassignment normally actuated by an intent to abandon or release alease and requiring notice to the holders of such rights,     (h) normal and customary Liens of co-owners under operating agreements, unitizationagreements, and pooling orders relating to the oil and gas properties, which obligations are notyet due and pursuant to which Contributors are not in default;     (i) all approvals required to be obtained from Governmental Authority that are owners ofinterests in the Land, Wells or Units (or who administer such interests on behalf of such owners)which are customarily obtained post-Closing;     (j) the Lien against the Interests and/or the Partnership’s interest in the Assets held byUnion Bank of California, N.A.;     (k) Liens for Taxes which are not yet delinquent, or a mechanic’s or materialmen’s Lien (orother similar Lien), or a Lien under an operating agreement or similar agreement, to the
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extent the same relates to expenses incurred which are not yet delinquent, or Liens which willbe released at or before Closing;     (l) Requirements applicable to the transaction contemplated hereby for consents to assignment(“***Consents***”) and preferential rights to purchase (“***Preferential Rights***”) if, in the case of aPreferential Right, a waiver of such Preferential Right has been obtained or an appropriate tenderof the applicable interest has been made to all parties holding such right and, with respect toeach such party, either (A) the period of time required for such party to exercise such right hasexpired without such party exercising such right, or (B) such right has been exercised and theaffected portion of the Assets has been excluded from the transactions contemplated hereby, or, inthe case of a Consent, the document describing such Consent states that such Consent cannot beunreasonably withheld (or words similar thereto); and     (m) any other liens, charges, encumbrances, contracts, agreements, instruments, obligations,defects, or irregularities of any kind whatsoever affecting the Assets that individually or in theaggregate are not such as would materially adversely affect the ownership, value, or use of theAssets.     “***Person***” means any individual, firm, corporation, partnership, limited liability company,incorporated or unincorporated association, joint venture, joint stock company, GovernmentalAuthority or other entity of any kind.     “***Post-Effective Time Tax Period***” means any Tax period (or a portion thereof) that is not aPre-Effective Time Tax Period.     “***Pre-Effective Time Tax Period***” means any Tax period (or a portion thereof) ending on orbefore the Effective Time.     “***Preferential Rights***” has the meaning provided such term in sub-section (m) of the definitionof “Permitted Liens.”     ***“Preliminary Settlement Statement”***has the meaning provided such term in Section 2.3.     **“*****Proceeding*****”**means any action, suit, litigation, arbitration, lawsuit, claim, proceeding(including any civil, criminal, administrative, investigative or appellate proceeding and anyinformal proceeding), prosecution, contests, hearing, inquiry, inquest, audit, examination,investigation, challenge, controversy or dispute commenced, brought, conducted or heard by orbefore, or otherwise involving, any Governmental Authority or any arbitrator.
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     “***Qualified Indebtedness***” means the funded bank debt owed by Montierra under the UBOC Facilityin an amount not to exceed $6,000,000, which shall be assumed by the Partnership prior to Closingpursuant to Section 7.2(c).     “***Reasonable Efforts***” means efforts in accordance with reasonable commercial practice andwithout the incurrence of material expense.     “***Regulations***” means the Treasury Regulations, including Temporary Regulations, promulgated bythe United States Treasury Department under the Code.     “***Representatives***” means a Person’s directors, officers, employees, agents or advisors(including, without limitation, attorneys, accountants, consultants, bankers, financial advisorsand any representatives of those advisors).     “***Restructuring***” has the meaning provided such term in Section 7.2.     **“*****SEC*****”**means the United States Securities and Exchange Commission.     **“*****SEC Reports*****”**has the meaning provided such term in Section 5.7.     “***Securities Act***” means the Securities Act of 1933, as amended.     “***Straddle Period***” has the meaning provided such term in Section 7.4(a).     “***Subsidiary***” means, with respect to any Person, (a) any corporation, of which a majority ofthe total voting power of shares of stock entitled (without regard to the occurrence of anycontingency) to vote generally in the election of directors thereof is at the time owned orcontrolled, directly or indirectly, by that Person or one or more of the other Subsidiaries of thatPerson or a combination thereof or (b) any limited liability company, partnership, association orother business entity, of which a majority of the partnership or other similar ownership intereststhereof is at the time owned or controlled, directly or indirectly, by that Person or one or moreSubsidiaries of that Person or a combination thereof. For purposes of this definition, a Person orPersons will be deemed to have a majority ownership interest in a limited liability company,partnership, association or other business entity if such Person or Persons will be allocated amajority of limited liability company, partnership, association or other business entity gains orlosses, or is or controls the managing member or general partner of such limited liability company,partnership, association or other business entity.     “***Tax***” *or*“***Taxes***” means all taxes, assessments, charges, duties, fees, levies, imposts or
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other similar charges imposed by a Governmental Authority, including all income, franchise,profits, margins, capital gains, capital stock, transfer, gross receipts, sales, use, transfer,service, occupation, ad valorem, real or personal property, excise, severance, windfall profits,customs, premium, stamp, license, payroll, employment, social security, unemployment, disability,environmental, alternative minimum, add-on, value-added, withholding and other taxes, assessments,charges, duties, fees, levies, imposts or other similar charges of any kind, and all estimatedtaxes, deficiency assessments, additions to tax, penalties and interest, whether disputed orotherwise.     “***Tax Returns***” means any report, return, election, document, estimated tax filing, declaration,claim for refund, extensions, information returns, or other filing with respect to any Taxesprovided to any Governmental Authority including any schedules or attachments thereto and anyamendment thereof.     “***Third Party Claim***” has the meaning provided such term in Section 9.4(a).     **“*****UBOC Facility*****”**means the credit facility governed by that certain Credit Agreement dated asof September 29, 2006 by and among Montierra, Union Bank of California, N.A., individually and asagent, and the lenders named therein and with separate guarantees from the Partnership and ICC.     “***United States***” means United States of America.     “***Unit Price”***means $19.00 for each Contributee Unit.     “***Unrecorded Co-Invest Conveyances***” means all unrecorded conveyances from (a) Montierra toCo-Invest of interests in the Lands and (b) the Partnership to Co-Invest of interests in the Lands.     “***Unrecorded Partnership Conveyances***” means all unrecorded conveyances from Montierra to thePartnership of interests in the Lands.          1.2 Rules of Construction.All article, section, schedule and exhibit references used in this Agreement are to articlesand sections of, and schedules and exhibits to, this Agreement unless otherwise specified. Theschedules and exhibits attached to this Agreement constitute a part of this Agreement and areincorporated herein for all purposes.     (a) If a term is defined as one part of speech (such as a noun), it shall have acorresponding meaning when used as another part of speech (such as a verb). Terms
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definedin the singular have the corresponding meanings in the plural, and vice versa. Unless thecontext of this Agreement clearly requires otherwise, words importing the masculine gendershall include the feminine and neutral genders and vice versa. The term “includes” or“including” shall mean “including without limitation.” The words “hereof,” “hereto,”“hereby,” “herein,” “hereunder” and words of similar import, when used in this Agreement,shall refer to this Agreement as a whole and not to any particular section or article inwhich such words appear.     (b) With respect to the Companies the term “*ordinary course of business*” will be deemedto refer to the ordinary conduct of the business in a manner consistent with the pastpractices and customs of the Companies.     (c) The Parties acknowledge that each Party and its attorney have reviewed thisAgreement and that any rule of construction to the effect that any ambiguities are to beresolved against the drafting Party, or any similar rule operating against the drafter of anagreement, shall not be applicable to the construction or interpretation of this Agreement.     (d) The captions in this Agreement are for convenience only and shall not be considereda part of or affect the construction or interpretation of any provision of this Agreement.     (e) All references to currency herein shall be to, and all payments required hereundershall be paid in, Dollars.     (f) All accounting terms used herein and not expressly defined herein shall have themeanings given to them under GAAP.ARTICLE II**ACQUISITION & CONTRIBUTION; CLOSING**          2.1 Contribution of Interests.At the Closing, upon the terms and subject to the conditions set forth in this Agreement,Contributors shall contribute, assign, transfer and convey to Contributee (or to an entity orentities wholly-owned, directly or indirectly, by Contributee which is or are disregarded forFederal income Tax purposes and to which Contributee shall, prior to Closing, have assigned inwriting its rights, but not its obligations, hereunder), and Contributee, or such assignee(s),shall acquire from Contributors, the Interests,
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free and clear of any Liens, except Liens relatedto the Qualified Indebtedness.          2.2 Issuance of Contributee Units at Closing.Subject to Section 2.4, in exchange for the contribution of the Interests, at theClosing, Contributee shall deliver to Contributors, pro rata in accordance with their respectivepercentage ownership of the Interests as reflected in Section 3.4 of the DisclosureSchedule, the number of Common Units equal to the quotient of (i) the Agreed Value (as computed inaccordance with Section 2.3), divided by (ii) the Unit Price (the “***Contributee Units***”).          2.3 Computation of Agreed Value. For purposes of this ARTICLE II and the remainder of this Agreement, “***Agreed Value***”shall mean $59,200,000, increased and decreased as applicable, by the following amounts which shallbe set forth on a settlement statement (the “***Preliminary Settlement Statement***”) prepared by theContributors and agreed to by the Contributee prior to the Closing.     (a) The Agreed Value shall be increased by an amount equal to the sum of the followingamounts:     (i) An amount equal to the costs and expenses that are (1) attributable to theAssets for the period after the Effective Time, whether paid before or after theEffective Time, and (2) paid by Contributors, including, without limitation, bondand insurance premiums paid by or on behalf of Contributors attributable to coveragefor obligations or benefits extending beyond the Effective Time up to and including,but not beyond, the Closing Date;     (ii) An amount equal to the proceeds received by Contributee for the sale ofoil, gas or other minerals produced from the Assets before the Effective Time instorage or in pipelines on the Effective Time (excluding such productionconstituting line-fill in pipelines and such production below the outlet flange onstorage tanks) net of all applicable taxes and royalties;     (iii) The amount of all prepaid ad valorem, property, and similar Taxesand assessments based upon or measured by ownership of the Assets andattributable to periods of time after the Effective Time;     (iv) Any amounts due to the Partnership, ICC or the Contributors as of theEffective Time with respect to any Imbalances existing at the Effective Time, suchamounts to be determined by multiplying the Imbalance volume by $4.00
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per MCF andthen reducing such amount by any severance, production and other similar Taxes to bepaid on such amount, and further reducing such amount by any penalties and othercharges on the Imbalance;     (v) An amount equal to actual general and administrative expenses incurred byContributors from the Effective Time to the Closing Date;     (vi) An amount equal to the aggregate value of the Eagle Rock quarterlydistribution, for the quarter ended March 31, 2007, that would have been paid toContributors as the holders of the Contributee Units on the record date (had theContributee Units been issued to Contributors prior to the record date), providedthat for purposes of calculating this adjustment, Contributee Units shall mean theContributee Units that would result if the Agreed Value was calculated taking intoaccount all adjustments under this Section 2.3 other than this Section2.3(a)(vi); and     (vii) Any other amount agreed upon by Contributee and Contributors.     (b) The Agreed Value shall be decreased by an amount equal to the sum of the followingamounts:     (i) The amount of all proceeds received by the Partnership, ICC or theContributors, net of all applicable Taxes actually paid, attributable to the Assetsfor periods of time after the Effective Time, excluding, however, proceedsattributable to production prior to the Effective Time;     (ii) Any amounts due from the Partnership, ICC or the Contributors to otherparties as of the Effective Time with respect to any Imbalances existing at theEffective Time, such amounts to be determined by multiplying the Imbalance volume by$4.00 per MCF and then reducing such amount by severance, production and othersimilar Taxes to be paid on such amount, and further reduced by any penalties andother charges on the Imbalance;     (iii) An amount equal to the sum of any costs and expenses paid by Contributeethat are attributable to the Assets for periods prior to the Effective Time;     (iv) An amount equal to all ad valorem, property, and similar Taxes
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andassessments based upon or measured by the ownership of the Assets that are unpaid asof the Closing Date and attributable to periods of time prior to the Effective Time,which amounts shall be computed based upon such Taxes and assessments for thecalendar year in which the Effective Time occurs; provided that if such Taxes havenot been actually assessed for such calendar year as of the Closing Date, suchamounts will be initially computed based on such Taxes and assessments for thepreceding Tax year, and will be subsequently adjusted based upon the actual Taxesfor the current calendar year once those amounts are assessed;     (v) An amount equal to the aggregate sum of all downward adjustments made forEnvironmental Defects pursuant to Section 2.6 below;     (vi) An amount equal to the Qualified Indebtedness assumed by the Partnershipfor which the Partnership and Contributee are obligated to satisfy in fullpost-Closing pursuant to Section 7.2(b); and     (vii) Any other amount agreed upon by Contributors and Contributee.          2.4 Escrow Deposit. The Contributee Units to be delivered at Closing pursuant to Section 2.2 shall bereduced by the Escrow Deposit, which shall be delivered to the Escrow Agent at the Closing and willbe available to satisfy any amounts owed by Contributors to Contributee, if any, under thisAgreement in accordance with an Escrow Agreement to be mutually agreed upon by the parties heretoprior to Closing with substantially the terms set forth in this Agreement; provided, however, thatContributors shall have the right to vote any Contributee Units. Cash distributions attributable toany Contributee Units which are held in the Escrow Account will become a part of the EscrowDeposit. Contributors shall be responsible for all Taxes with respect to any cash distributionsattributable to such Contributee Units, provided, however, if any Contributee Units are releasedfrom the Escrow Deposit as a result of any Loss suffered by Contributee as permitted underARTICLE IX hereof, Contributee shall reimburse Contributors, on an after-Tax basisanalogous to that described in Section 7.3, for any Taxes actually paid or incurred byContributors which are attributable to such released Contributee Units.          2.5 Determination of Final Agreed Value; Post-Closing Adjustments; and Post-ClosingRemittance Obligations     (a) Contributors shall, within one hundred twenty (120) days after the Closing
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Date,prepare and submit for Contributee’s review, in accordance with this Agreement and withgenerally accepted accounting principles consistently applied, a statement (the “***FinalSettlement Statement***”) setting forth each adjustment to the Agreed Value necessary todetermine the Final Settlement Statement and showing the calculation of such adjustments(the “***Final Agreed Value***”). The Parties shall undertake to agree on the Final SettlementStatement and the Final Agreed Value no later than one hundred fifty (150) days after theClosing Date with respect to all of the Assets. If the Final Agreed Value is more than theAgreed Value, Contributee shall pay such difference to Contributors (in accordance with thepercentage ownership of Interests specified in Section 3.4) in additionalContributee Units within five (5) Business Days after the Parties have agreed upon the FinalSettlement Statement, with no portion of said additional issuance of Contributee Units beingsubject to or becoming part of the Escrow Deposit. If the Final Agreed Value is less thanthe Agreed Value, Contributors shall, at Contributors’ sole election, either (i) pay theamount of such difference to Contributee by wire transfer in immediately available funds (byMontierra and MONTGP, respectively, in accordance with the percentage ownership of Interestsspecified in Section 3.4) or (ii) forfeit to Contributee that number of ContributeeUnits held in the Escrow Deposit equal to the quotient of (A) the amount of the differencebetween the Final Agreed Value and the Agreed Value, divided by (B) the Unit Price, withinfive (5) Business Days after the Parties have agreed upon the Final Settlement Statement.If Contributors and Contributee cannot agree upon the Final Settlement Statement, Deloitte &Touche, LLP, or such other nationally recognized accounting firm as may be accepted by bothContributee and Contributors, shall act as an arbitrator and decide all points ofdisagreement with respect to the Final Settlement Statement, whose decisions shall bebinding upon the parties. The costs and expenses of such accounting firm shall be bornefifty percent (50%) by Contributors and fifty percent (50%) by Contributee.     (b) After the Final Settlement Statement and the Final Agreed Value have been computedand agreed upon (or settled by Deloitte & Touche pursuant to Section 2.5(a)), then any additional amounts which are received by either Contributorsor Contributee (and the Partnership or ICC) on account of production with respect to theAssets after the Effective Time, or prior to the Effective Time, respectively, and whichwere not taken into account in calculation of the Final Settlement Statement and FinalAgreed Value, shall be remitted within fifteen (15) Business Days by Contributors, orContributee, respectively, to Contributee, or Contributors, respectively, and any suchremittance by Contributee to Contributors shall be paid in accordance with the percentage
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ownershipof Interests specified in Section 3.4.          2.6 Environmental Defect; Limitation on Environmental Adjustments     (a) Contributee may give Contributors written notice of Environmental Defects on orbefore 5:00 p.m. Central Time on the Environmental Claims Date. Such notice shall be inwriting and shall include: (i) a description of the Environmental Defect, the individualAsset it pertains to with all supporting documentation reasonably necessary to fullydescribe the basis for the Environmental Defect, (ii) the amount of the AllocatedEnvironmental Defect Value assigned to such Asset, (iii) the cost to remedy suchEnvironmental Defect and (iv) Contributee’s proposed remedy with respect to suchEnvironmental Defect, including the amount by which Contributee would propose to adjust theAgreed Value applicable to such Environmental Defect. All Environmental Defects withrespect to which Contributee fails to so give Contributors notice by the EnvironmentalClaims Date will be deemed waived for all purposes. Within thirty (30) days after theEnvironmental Claims Date, Contributors may attempt to cure or remove any EnvironmentalDefect asserted by Contributee. If an Environmental Defect is neither cured nor waived inwriting by Contributee within such thirty (30) day period, then Contributee and Contributorsshall attempt to agree on (i) the cost of remedying such Environmental Defect and (ii) thenumber of Contributee Units that will be subtracted from the amount set forth in Section2.2 as an adjustment to the Agreed Value to cover such cost amount. If Contributeeconsents, Contributors may retain the obligation of any Environmental Defect and elect tochallenge the validity of any such Environmental Defect or any portion thereof, andContributee shall extend reasonable cooperation to Contributors in such efforts at no riskor expense to Contributee. If the Parties are unable to agree upon such an Agreed Valueadjustment prior to Closing, then either (i) if Contributors and Contributee so agree,Contributors shall forever indemnify, defend, and hold harmless Contributee against alllosses, costs, expenses, and liabilities with respectto such Environmental Defect or (ii) subject to the option of Contributors set forthbelow, the amount of the adjustment shall (x) be exclusively and finally resolved byarbitration pursuant to this Section 2.6 and (y) not be a part of the adjustment ofthe Agreed Value at Closing but shall be a part of the determination of the Final AgreedValue.     (b) There shall be a single arbitrator, who shall be an environmental attorney with atleast ten (10) years experience in oil and gas environmental matters in the State in which aplurality of the affected Assets are located as selected by mutual agreement of Contributeeand Contributors within sixty (60) days after the Environmental Claims Date,
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or, absent suchagreement of Contributee and Contributors, selected by the Houston office of the AmericanArbitration Association (the “***Environmental Arbitrator***”). Unless otherwise agreed by theParties, the arbitration proceeding shall be held in Houston, Texas, and shall be conductedin accordance with the provisions of the TEXAS GENERAL ARBITRATION ACT, TEXAS CIVIL PRACTICEAND REMEDIES CODE, §§171.001, et seq., to the extent such rules do not conflict with theterms of this Section. The Environmental Arbitrator’s determination shall be made withintwenty (20) business days after submission of the matters in dispute and shall be final andbinding upon both parties, without right of appeal. In making his determination, theEnvironmental Arbitrator shall be bound by the rules set forth in this Section 2.6and may consider such other matters as in the opinion of the Environmental Arbitrator arenecessary or helpful to make a proper determination. Additionally, the EnvironmentalArbitrator may consult with and engage disinterested third parties to advise him. TheEnvironmental Arbitrator shall act as an expert for the limited purpose of determining thespecific adjustment and may not award damages, interest, or penalties to any Party withrespect to any matter. Contributors and Contributee shall each bear their own legal feesand other costs of presenting its case. Contributors and Contributee shall each bearone-half of the costs and expenses of the Environmental Arbitrator. In the event theEnvironmental Arbitrator determines (i) that a valid Environmental Defect exists, (ii) thereshould be a reduction in the amount of Agreed Value as a result of such Environmental Defectand (iii) the amount of such reduction, Contributors shall have the sole option to either(x) agree to such Agreed Value reduction as determined by the arbitrator or (y) exclude andretain the Asset affected by such Environmental Defect from the transaction contemplatedhereby, in which case the Agreed Value will be reduced by the Allocated Environmental DefectValue for such affected Asset.     (c) If the Agreed Value reduction with respect to a particular EnvironmentalDefect which would result from the above provided for procedure does not exceed$25,000.00, no adjustment shall be made for such Environmental Defect. If the Agreed Valuereduction which would result from the above provided for procedure, as applied to allEnvironmental Defects for which an adjustment is to be made does not exceed three percent(3%) of the Agreed Value, then no adjustment of the Agreed Value shall occur, and none ofthe Assets which would be excluded by such procedure shall be excluded. If the Agreed Valuereduction which would result from the above provided for procedure, net after application ofall Environmental Defects for which an adjustment is to be made, exceeds three percent (3%)of the Agreed Value, the Agreed Value shall be adjusted by
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the amount such reduction orincrease exceeds three percent (3%) of the Agreed Value.          2.7 Tax Treatment of Adjustments to Agreed Value and Payments. For Tax purposes, the parties agree to treat all payments made under Section 2.2,Section 2.5, and Section 2.6, or under any indemnity provisions contained in thisAgreement, or for breaches of representations, warranties, covenants or agreements, as adjustmentsto the consideration for the Interests.          2.8 The Closing.The closing of the transactions contemplated by this Agreement (the “***Closing***”) shall takeplace at the offices of Thompson & Knight LLP, 333 Clay Street, Suite 3300, Houston, Texas 77002,commencing on the earlier to occur of (i) April 30, 2007; (ii) the third (3rd) BusinessDay following the satisfaction or waiver of all conditions to the obligations of the Parties setforth in ARTICLE VIII; or (iii) such other date as permitted in this Agreement or asContributee and Contributors may mutually determine (the date on which the Closing occurs isreferred to herein as the “***Closing Date***”).ARTICLE III**REPRESENTATIONS AND WARRANTIES RELATING TO CONTRIBUTORS**     Except as set forth on the Disclosure Schedules delivered by Contributors to Contributee at orprior to the execution and delivery of this Agreement, each Contributor jointly and severallyrepresent and warrant to Contributee as follows:          3.1 Organization of Contributors. Each Contributor is duly organized, validly existing and in good standing under the Laws of thestate of Texas.          3.2 Authorization; Enforceability. Each Contributor has full capacity, power and authority (including full corporate or otherentity power and authority) to execute and deliver this Agreement and to perform its obligationshereunder. This Agreement has been duly and validly executed and delivered by each Contributor,and this Agreement constitutes a valid and binding obligation of such Contributor, enforceableagainst such Contributor in accordance with its terms, subject to applicable bankruptcy,insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’rights generally and subject, as to enforceability, to general principles of equity.          3.3 No Conflict; Consents. The execution and delivery of this Agreement by
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Contributors and the consummation of thetransactions contemplated hereby by Contributors do not and shall not:     (a) violate any Law applicable to Contributors or require any filing with, consent,approval or authorization of, or notice to, any Governmental Authority;     (b) violate any Organizational Document of either Contributor;     (c) except for Consents that are Permitted Liens or as set forth in Section3.3(c) of the Disclosure Schedule, require any filing with or permit, consent orapproval of, or the giving of any notice to, any Person; or     (d) except as set forth in Section 3.3(d) of the Disclosure Schedule, breach ortrigger any right to purchase by or payment to any Person under any contract or otheragreement to which either Contributor is a party or is bound; (i) result in the terminationof any contract, or (ii) result in the creation of any Lien upon any of the Interests,either upon the consummation of the transactions contemplated hereby or after notice orlapse in time.          3.4 Ownership of Interests; Capitalization. Each Contributor is the lawful owner, beneficially and of record of the Interests in therespective Companies set forth in Section 3.4 of the Disclosure Schedule, free and clear ofany Liens, claims or encumbrances of any kind or nature. The Interests of the Partnership set forth inSection 3.4 of the Disclosure Schedule constitute one hundred percent (100%) of the limitedand general partnership interests of the Partnership. The membership interests of ICC set forth inSection 3.4 of the Disclosure Schedule constitute one hundred percent (100%) of issued andoutstanding membership interests of ICC. The Interests are duly authorized, validly issued, fullypaid, nonassessable and are free and clear of any Lien or other limitation or restriction(including any restriction on the right to vote, sell or otherwise dispose of such Interests).There are no (i) outstanding partnership interests, equity interests or other securities of theCompanies other than the Interests, (ii) outstanding securities of the Companies convertible into,exchangeable or exercisable for membership interests, equity interests or other securities of suchentity, (iii) authorized or outstanding options, warrants or other rights to purchase or acquirefrom the Companies, or obligations of the Companies to issue, any equity interests or othersecurities, including securities convertible into or exchangeable for membership interests or othersecurities of such entity, or (iv) authorized or outstanding bonds, debentures, notes or otherindebtedness that entitles the holders to vote (or convertible or exercisable for or exchangeableinto securities that entitle the holders to vote) with holders of units or interests of theCompanies on any matter (the items in clauses (i), (ii), (iii) and (iv) being
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referred tocollectively as the “***Company Securities***”). There are no outstanding obligations of the Companiesto repurchase, redeem or otherwise acquire the Company Securities, except as set forth in theOrganizational Documents of the Companies. Except as set forth in Section 3.4 of theDisclosure Schedule, no Company (i) owns, directly or indirectly, any capital stock, equityinterests or other securities of any Person, or (ii) has any Subsidiaries. Upon consummation ofthe transactions contemplated hereby, Contributee will acquire good, valid and indefeasible titleto all the Interests of Contributors, free and clear of any Liens, claims or encumbrances.          3.5 Litigation. As of the date of this Agreement (a) there are no lawsuits or actions before any GovernmentalAuthority pending or, to the Knowledge of Contributors, threatened in writing against eitherContributor that would reasonably be expected to have a Material Adverse Effect on the ability ofsuch Contributor to perform its obligations under this Agreement, (b) there are no orders orunsatisfied judgments from any Governmental Authority binding upon either Contributor that wouldreasonably be expected to have a Material Adverse Effect on the ability of such Contributor toperform its obligations under this Agreement.          3.6 Solvency. Each Contributor is now, and will be at Closing, solvent and will not be rendered insolvent byany of transactions described hereunder.          3.7 Securities Representations. Each Contributor is acquiring the Contributee Units for its own account and not with a view to,or for offer of resale in connection with, a distribution thereof, within the meaning of theSecurities Act. In acquiring the Contributee Units, such Contributor is not offering or selling,and will not offer or sell, for itself in connection with any distribution of the ContributeeUnits, and such Contributor does not have a participation in and will not participate in any suchundertaking or in any underwriting of such an undertaking except in compliance with applicablefederal and state securities Laws. Each Contributor is an “accredited investor” as such term isdefined under Regulation D promulgated under the Securities Act. Additionally, each Contributoracknowledges that it is able to fend for itself, can bear the economic risk of its investment inthe Contributee Units, and has such knowledge and experience in financial and business matterssimilar to the transaction described herein such that it is capable of evaluating the merits andrisks of an investment in the Contributee Units. Further, each Contributor understands that suchContributee Units will not have been registered pursuant to the Securities Act or any applicablestate securities Laws, that the Contributee Units, when issued, will be characterized as“restricted securities” under federal securities Laws, and that under such Laws and applicableregulations the Contributee Units cannot be sold or otherwise disposed of without registrationunder the Securities Act or an exemption therefrom. Each Contributor represents that it isfamiliar with Rule 144 promulgated
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under the Securities Act, as currently in effect, andunderstands the resale limitations imposed thereby and by the Securities Act. Stop transferinstructions may be issued to the transfer agent for securities of the Contributee (or a notationmay be made in the appropriate records of the Contributee) in connection with the Contributee Unitsissued hereunder. It is agreed and understood by each Contributor that, should any certificate beissued representing any of the Contributee Units, each such certificate shall conspicuously setforth on the face or back thereof, in addition to any legends required by applicable Law or otheragreement, a legend in substantially the following form:THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTEREDPURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIESLAWS. SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS THEYARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE STATE SECURITIES LAWSOR UNLESS EAGLE ROCK ENERGY PARTNERS, L.P. RECEIVES A WRITTEN OPINIONOF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE CORPORATION, TOTHE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.Each Contributor represents and acknowledges that Contributee is issuing the Contributee Unitspursuant to an exemption from the registration requirements of the Securities Act based on therepresentations provided by such Contributor hereunder.
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ARTICLE IV**REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES**     Except as set forth on the Disclosure Schedules delivered by Contributors to Contributee at orprior to the execution and delivery of this Agreement, each Contributor, jointly and severally,represents and warrants to Contributee as follows:          4.1 Organization. Each Company duly organized, validly existing, and in good standing under the Laws of the Stateof Texas and has the requisite organizational power and authority (including full limited liabilitycompany, limited partnership or other entity power and authority) to own or lease its assets and toconduct its business as it is now being conducted. The Partnership is duly licensed or qualifiedin each jurisdiction in which the ownership or operation of the Assets or the character of itsactivities are such as to require it to be so licensed or qualified, except where the failure to beso licensed or qualified would not reasonably be expected to have a Material Adverse Effect on thePartnership. Contributors have made available to Contributee true copies of all existingOrganizational Documents of the Companies.          4.2 No Conflict; Consents. The execution and delivery of this Agreement by the Companies and the consummation of thetransactions contemplated hereby by the Companies do not and shall not:     (a) violate any Law applicable to the Companies or require any filing with, consent,approval or authorization of, or notice to, any Governmental Authority;     (b) violate any Organizational Document of the Companies;     (c) except as set forth in Section 4.2(c) of the Disclosure Schedule, requireany filing with or permit, consent or approval of, or the giving of any notice to, anyPerson; or     (d) except as set forth in Section 4.2(d) of the Disclosure Schedule, breachany Material Contract to which any Company is a party or by which any Company may be bound,(i) result in the termination of any such Material Contract, (ii) result in the creation ofany Lien under any Material Contract or (iii) constitute an event that, afternotice or lapse of time or both, would result in any such breach, termination orcreation of a Lien.
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          4.3 Litigation. No Company is (a) subject to any outstanding injunction, judgment, order, decree, ruling, orcharge or, (b) a party to any action, suit, proceeding, hearing, or investigation of, in, or beforeany court or quasi-judicial or administrative agency of any federal, state, local, or foreignjurisdiction. To the Knowledge of Contributors and the Companies, no such action, suit,proceeding, hearing or investigation has been threatened against any Company.          4.4 Financial Statements; Internal Controls; Undisclosed Liabilities.     (a) Section 4.4 of the Disclosure Schedules includes the following financialstatements (collectively the “***Financial Statements***”): (i) unaudited pro forma balancesheets, as of September 30, 2006 (3rd quarter 2006) and the statements ofearnings and statements of cash flow as of and for the nine month period ended as of suchdate, and the balance sheets, statements of earnings and cash flows to be delivered prior toClosing pursuant to Section 6.7 (the “***Unaudited Financial Statements***”). TheUnaudited Financial Statements have been prepared in accordance with GAAP applied on aconsistent basis throughout the periods covered thereby and present fairly the financialcondition of the Companies as of such dates and the results of operations of the Companiesfor such periods; provided, however, that the Unaudited Financial Statements are subject tonormal year-end adjustments and lack footnotes otherwise required by GAAP. The Companiesare not a party to any off-balance sheet arrangements that have or are reasonably likely tohave a current or future Material Adverse Effect on the Companies.     (b) To the Knowledge of Contributors and the Companies, no member of the management ofthe Companies or any other employee with a significant role in the internal control of theCompanies over financial reporting has committed any act of fraud having a material effecton the Unaudited Financial Statements.     (c) The Companies have not received or otherwise had or obtained Knowledge of anycomplaint, allegation, assertion or claim, whether written or oral, alleging fraud orsuspected fraud affecting the Companies.          4.5 Taxes. Except as set forth in Section 7.4(b) and in the Disclosure Schedules, (a) all TaxReturns required to be filed by the Companies have (and as of the Closing Date will have) beentimely filed (taking into account any extension of time to file granted or obtained) for allTaxable periods ending on or before the Effective Time and suchreturns are 
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correct in all materialrespects, except where any such failure to file would not have a Material Adverse Effect on theCompanies, (b) all Taxes due on such Tax Returns have been paid, will be timely paid prior to theClosing Date, or are adequately reserved against in the Unaudited Financial Statements or the FinalSettlement Statement, (c) there are no Liens on any of the Assets that arose in connection with anyfailure to pay any Tax (other than Permitted Liens), (d) there is no claim or adjustment withrespect to the Companies pending by any Governmental Authority in connection with any Tax for aperiod on or before the Effective Time, (e) no Tax Returns of the Companies are under audit orexamination by any Governmental Authority, (f) there are no agreements or waivers currently ineffect that provide for an extension of time with respect to the filing of any Tax Return of theCompanies (other than income Tax Returns) or the assessment or collection of any Tax, (g) to theKnowledge of the Companies, no claim has been made by any Governmental Authority in a jurisdictionwhere the Companies do not file a Tax Return that any Company is or may be subject to taxation inthat jurisdiction, (h) no Company is a party to any Tax allocation or sharing arrangement, (i) thePartnership has always been treated, and by the Closing Date ICC will be treated, as either apartnership or a disregarded entity for federal income tax purposes and neither such Company hasmade an election (nor will such election be made prior to the Closing Date) to be treated as anassociation taxable as a corporation for federal income tax purposes, (j) no Contributor is a“foreign person” within the meaning of Section 1445 of the Code and the Regulations thereunder, (k)each Company has complied with all applicable Laws relating to the payment and withholding ofTaxes, and has duly and timely withheld and paid over to the appropriate Governmental Authority allamounts required to be so withheld and paid under all applicable Laws, and (l) ninety percent (90%)or more of the income projected to be generated by the Assets during calendar year 2007 is expectedto be “qualifying income” within the meaning of Code Section 7704(d).          4.6 Cost-Bearing Assets. Section 4.6 of the Disclosure Schedule contains a complete list of all of theCost-Bearing Assets.          4.7 No Undisclosed Liabilities. The Companies do not have Indebtedness for Borrowed Money, or any obligation or liability of anykind (whether accrued, absolute, contingent or otherwise, and whether due or to become due) thatwould have been required to be reflected in, reserved against or otherwise described on theFinancial Statements or in the notes thereto in accordance with GAAP (although the UnauditedFinancial Statements are subject to normal year-end adjustments and lack footnotes otherwiserequired by GAAP), that (a) is not shown on the Financial Statements or the notes thereto or (b)was not incurred in the ordinary course of business.
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          4.8 Absence of Certain Changes. From September 30, 2006, until the date of this Agreement, (a) there has not been any MaterialAdverse Effect on the Companies; and (b) the business of the Companies has been conducted only inthe ordinary course.          4.9 Contracts.     (a) Section 4.9 of the Disclosure Schedule contains a true and complete listing of thefollowing Contracts in effect on the date of this Agreement and to which the Companies are aparty (each such Contract being a “***Material Contract***”) and together the (“***MaterialContracts***”):     (i) except for any intercompany indebtedness that will be cancelled prior toClosing, each Contract for Indebtedness for Borrowed Money**;**     (ii) each Contract involving a remaining commitment by any Company to undertakeany expenditures;     (iii) each Material Contract between the Companies or an Affiliate of theCompanies that will survive the Closing and that cannot be cancelled by theCompanies upon thirty (30) days or less notice without payment penalty;     (iv) each Contract pursuant to which the Partnership acquired the Assets or abusiness as a going concern;     (v) each Contract that provides for a limit on the ability of the Companies tocompete in any line of business or with any person or in any geographic area duringany period of time after Closing; and     (vi) except for Contracts of the nature described in clauses (i) through (vii)above, each contract involving aggregate payments by or to the Companies in excessof $50,000 in any future calendar year that cannot be terminated by the Companiesupon thirty (30) days or less notice without payment penalty.     (b) pursuant to Section 6.2, true and complete copies of all Material Contractswill be made available to Contributee.     (c) Each Material Contract (other than such Material Contracts with respect to whichall performance and payment obligations have been fully performed or otherwise discharged bythe Companies or a party thereto prior to the Closing) (i) is in full force
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and effect and(ii) represents the legal, valid and binding obligation of the Companies and, to theKnowledge of Contributors and the Companies, represents the legal, valid and bindingobligation of the other parties thereto, in each case enforceable in accordance with itsterms. No Company is in breach of any Material Contract, and has received any written or,to the Knowledge of Contributors and the Companies, oral notice of termination or breach ofany Material Contract.          4.10 Intellectual Property. The Companies own or have the right to use pursuant to license, sublicense, agreement orotherwise all items of Intellectual Property required in the operation of their business aspresently conducted, (b) no party has asserted in writing against any Company a claim that suchCompany is infringing on the Intellectual Property of such third party and (c) to the Knowledge ofContributors and the Companies, no third party is infringing on the Intellectual Property owned bythe any Company. Section 4.10 of the Disclosure Schedules sets forth a list of allsoftware licenses to which each Company is a party and all Intellectual Property used by theCompanies. All Data relating to, or in any way affecting, the Assets has been (or will have beenprior to Closing) made available to Contributee for inspection and/or copying, and all files to befurnished or made available to Contributee by Contributors or the Companies hereunder are thecomplete files and were maintained by Contributors and the Partnership in the course of itsownership of the Assets.          4.11 Employee Benefit Plans.     (a) The Employee Benefit Plans established, maintained, contributed to, orrequired to be contributed to by the Companies or any ERISA Affiliate of the Companies(other than Employee Benefit Plans sponsored by Administaff) are set forth on Schedule4.11(a). The Companies do not sponsor any Employee Benefit Plans. As used in thisAgreement, “***Employee Benefit Plan***” means any plan, program, policy, practice, agreement orother arrangement providing compensation or benefits in any form to any current or formeremployee, co-employee, independent contractor, officer or director of the Companies or anERISA Affiliate of the Companies or any beneficiary or dependent thereof, whether written orunwritten, formal or informal, including any “employee welfare benefit plan” within themeaning of Section 3(1) of ERISA (“***Employee Welfare Benefit Plan***”), any “employee pensionbenefit plan” within the meaning of Section 3(2) of ERISA (whether or not such plan issubject to ERISA) (“***Employee Pension Benefit Plan***”) and any other pension, profit sharing,bonus, incentive compensation, deferred compensation, vacation, sick pay, stock purchase,stock option, phantom equity, equity compensation, severance, employment, consulting,unemployment, hospitalization or
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other medical, life or other insurance, long or short-termdisability, change of control, fringe benefit or any other similar plan, program or policy.“***ERISA Affiliate***” means any entity which has ever been considered a single employer with aContributor or a Company, as applicable, under Section 4001(b) of ERISA or Section 414(b),(c), (m) or (o) of the Code.     (b) With respect to each Employee Benefit Plan (other than Employee Benefit Planssponsored by Administaff), the Contributors have provided Contributee with a true, correctand complete copy of: (i) each writing constituting a part of such Employee Benefit Plan(including, but not limited to, the plan document(s), adoption agreement, prototype orvolume submitter documents, trust agreement, annuity contract, third party administrativecontracts and insurance contracts) and all amendments thereto; (ii) the three most recentAnnual Reports (Form 5500 Series) including all applicable schedules, if required; (iii) thecurrent summary plan description and any material modifications thereto, if required to befurnished under ERISA, or any written summary provided to participants with respect to anyplan for which no summary plan description exists; (iv) the most recent determination letter(or if applicable, advisory or opinion letter) from the IRS, if any, or if an applicationfor a determination letter is pending, the application with all attachments; (v) all noticesreceived by the Contributors or the Companies or their respective ERISA Affiliates by theIRS, Department of Labor, Pension Benefit Guaranty Corporation or other governmental agencyrelating to such Employee Benefit Plan; and (vi) a written description of each oral EmployeeBenefit Plan.     (c) No Employee Benefit Plan is intended to be “qualified” within the meaning ofSection 401(a) of the Code.     (d) The Companies have (i) filed or caused to be filed all returns and reports on theEmployee Benefit Plans that are required to be filed by the Companies or any Affiliate ofthe Companies and (ii) paid or made adequate provision for all fees, interest, penalties,assessments or deficiencies that have become due pursuant to those returns or reports orpursuant to any assessment or adjustment that has been made relating to those returns orreports. All other fees, interest, penalties and assessments that are payable by or for theCompanies and their Affiliates relating to the Employee Benefits Plans have been timelyreported, fully paid and discharged. There are no unpaid fees, penalties, interest orassessments due from the Companies or, to the Knowledge of Contributors, from any otherperson or entity relative to any Employee Benefit Plan. The Companies and their respectiveAffiliates have collected or withheld all amounts that are required to
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be collected orwithheld by them to discharge their obligations with respect to the Employee Benefit Plans,and all of those amounts have been paid to the appropriate governmental authority or setaside in appropriate accounts for future payment when due.     (e) No Employee Welfare Benefit Plan sponsored or maintained by Contributors or aCompany is subject to Section 419A of the Code. All Employee Welfare Benefit Planssponsored or maintained by Contributors or a Company that are required to comply with thehealth care continuation coverage (“***COBRA***”) provisions of ERISA and the Code or similarstate Laws have complied with such requirements.     (f) All contributions required to be made to any Employee Benefit Plan (or to anyperson pursuant to the terms thereof) by the Contributors, the Companies or their respectiveERISA Affiliates have been timely made or the amount of such payment or contributionobligation has been reflected in the financial statements of the Contributors or theCompanies.     (g) The Companies and their Affiliates have complied, and are now in compliance withall provisions of ERISA, the Code and all Laws and regulations applicable to the EmployeeBenefit Plans. Neither the Companies, nor any of their respective Affiliates has engaged inany prohibited transaction, within the meaning of Section 4975 of the Code or Section 406 ofERISA, as a fiduciary or party in interest with respect to any Employee Benefit Plan whichcould reasonably be expected to result in any liability, and, to the Knowledge of theContributors, (i) no prohibited transaction hasoccurred with respect to any Employee Benefit Plan and (ii) no fiduciary has anyliability for breach of fiduciary duty or any other failure to act or comply in connectionwith the administration or investment of assets of any Employee Benefit Plan.     (h) Neither the Companies, nor any ERISA Affiliate of the Companies has, within the six(6) year period preceding the date of this Agreement and the Closing Date, sponsored,maintained, contributed to or been required to contribute to any employee benefit plansubject to Title IV of ERISA or Section 412 of the Code. No current or former EmployeeWelfare Benefit Plan sponsored or maintained by Contributors or a Company is a multipleemployer welfare arrangement as defined in Section 3(40) of ERISA. No current or formerEmployee Pension Benefit Plan is a multiemployer plan as defined in Section 3(37) of ERISA.     (i) The Contributors, the Companies and their respective Affiliates have not
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offered toprovide life, health or medical benefits or insurance coverage to any individual, or to thefamily members of any individual, for any period extending beyond the termination of theindividual’s employment, except to the extent required by the COBRA provisions in ERISA andthe Code or similar provisions of state Law.     (j) The consummation of the transactions contemplated by this Agreement will not,either alone or in connection with termination of employment or any other event, (i) entitleany current or former employee, co-employee, independent contractor, director or officer ofthe Contributors, the Companies, or their respective Affiliates to severance pay, any changein control payment or any other payment except as provided in this Agreement, (ii)accelerate the time of payment or vesting, change the form or method of payment or increasethe amount of compensation due, any such employee, co-employee, independent contractor,director or officer, (iii) entitle any such employee, co-employee, independent contractor,director or officer to any gross up or similar payment in respect of the excise taxdescribed in Section 4999 of the Code, or (iv) result in the disallowance of a deductionunder Section 280G of the Code or an excise tax under Section 4999 of the Code with respectto any such payment. Neither the Contributors, the Companies, nor any of their respectiveAffiliates has taken any action that would result in its incurring any obligation for anypayments or benefits described in subsections (i), (ii) or (iii) of this Section4.11(j) (without regard to whether the transactions contemplated by this Agreement areconsummated).     (k) As of the date of this Agreement, there are no suits, actions, proceedings,investigations, claims or orders pending or, to the Knowledge of the Contributors,threatened against the Contributors, the Companies, any of their respective Affiliates orany Employee Benefit Plan sponsored or maintained by the Companies, related to any suchEmployee Benefit Plan (other than claims in the ordinary course of business). As of thedate of this Agreement, no Employee Benefit Plan sponsored or maintained by the Companies issubject to any ongoing audit, investigation or other administrative proceeding of anygovernmental entity, and no such Employee Benefit Plan is the subject of any pendingapplication for administrative relief under any voluntary compliance program or closingagreement program of the IRS or the Department of Labor.     (l) Neither the Contributors, the Companies, nor any ERISA Affiliate has a formal plan,commitment or proposal, whether legally binding or not, nor has any of them made acommitment to employees, co-employees, officers, directors, consultants or independentcontractors to create any additional Employee Benefit Plan or modify,
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change or terminateany existing Employee Benefit Plan, and no such plan, commitment or proposal is underserious consideration. To the Knowledge of the Contributors, no events have occurred or areexpected to occur with respect to any Employee Benefit Plan that would cause a materialchange in the cost of providing the benefits under such plan or would cause a materialchange in the cost of providing for other liabilities of such plan.     (m) None of the assets of any Employee Pension Benefit Plan include “qualifyingemployer securities” or “qualifying employer real property” within the meaning of Section407(d) of ERISA.     (n) Each Employee Benefit Plan sponsored or maintained by a Company that is a “grouphealth plan,” as defined in Section 607(1) of ERISA, Section 5000(b)(1) of the Code or 45C.F.R. Section 160.103, has been operated at all times in compliance with the provisions ofHIPAA and any applicable, similar state Law. As used in this Agreement, “***HIPAA***” means theprovisions of ERISA and the Code enacted by the Health Insurance Portability andAccountability Act of 1996, including any regulations thereunder, and the regulationspromulgated by the United States Department of Health and Human Services as set forth in 45C.F.R. Parts 160, 162, and 164.     (o) Each Employee Pension Benefit Plan that is not qualified under Section 401(a) ofthe Code is exempt from Parts 2, 3 and 4 of Title I of ERISA as an unfunded plan that ismaintained primarily for the purpose of providing deferred compensation fora select group of management or highly compensated employees pursuant to Section201(2), 301(a)(3) and 401(a)(1) of ERISA and each such plan has been maintained in goodfaith compliance with Section 409A of the Code. No assets (including, but not limited to,any Asset) of the Contributors or the Companies are allocated to or held in a “rabbi trust”or similar vehicle with respect to any such plan.     (p) Montierra has entered into an agreement with Administaff (the “***AdministaffAgreement***”) under which Administaff and Montierra are co-employers of the individualsperforming services for Montierra. Montierra has provided Contributee with a true, correctand complete copy of the agreement with Administaff, including, without limitation, alladdenda, schedules, exhibits and other attachments thereto. Pursuant to the AdministaffAgreement, Administaff is responsible for, among other things, paying salaries and wages,complying with reporting and payment of federal and state payroll taxes, and providingbenefits to the individuals performing services for
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Montierra. Montierra has complied inall material respects with its responsibilities under the Administaff Agreement. Exceptwith respect to benefits provided pursuant to the Administaff Agreement to individualsperforming services for Montierra, Contributors and the ERISA Affiliates of Contributorshave not established, maintained, contributed to or been required to contribute to any“employee welfare benefit plan” within the meaning of Section 3(1) of ERISA. During thepast six years, neither Contributors nor any ERISA Affiliate of Contributors haveestablished, maintained, contributed to, or been required to contribute to any “employeepension benefit plan” within the meaning of Section 3(2) of ERISA. The Contributors andtheir ERISA Affiliates have paid and discharged promptly when due all liabilities andobligations arising under ERISA or the Code of a character which if unpaid or unperformedwould result in the imposition of a lien against the Assets.          4.12 Compliance with Laws; Permits.     (a) Each Company is in compliance with all applicable Laws.     (b) To the Knowledge of Contributors and the Companies, the Wells that are Cost BearingAssets have been and are currently operated in compliance with all Laws issued orpromulgated by all Governmental Authorities having jurisdiction with respect to the Assets.     (c) To the Knowledge of the Contributors and the Companies (i) each Company possessesall Permits necessary to own their respective assets and operate its respective business ascurrently conducted, and (ii) all such Permits are in full force and effect. There are nolawsuits or other proceedings pending or, to the Knowledge of Contributors and theCompanies, threatened in writing before any Governmental Authority that seek the revocation,cancellation, suspension, or adverse modification thereof. To the Knowledge of theContributors and the Companies, each Company has complied with all requirements and hastaken all actions necessary to obtain and maintain the applicable Permits in full force andeffect.          4.13 Insurance. Section 4.13 of the Disclosure Schedules contains a summary description of all materialpolicies of property, fire and casualty, product liability, workers’ compensation and otherinsurance held by or for the benefit of the Companies as of the date of this Agreement. Allpolicies are in effect, and the Company has not received any rejected claim notice, any notice ofcancellation. To the Knowledge of Contributors and the Companies, all
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policies are capable ofbeing renewed in substantially the same coverages and coverage amounts upon payment of a reasonablysimilar premium payment.          4.14 Labor Relations; Employment Matters.     (a) Section 4.14 of the Disclosure Schedules identifies all Employees by name;identity of the employer; position or job title; initial date of hire; seniority or servicecredit date if different from initial date of hire; status (whether active or on leaveabsence, and if on leave, the type of leave); compensation by type (base salary, commission,bonus, and the like); and accrued but unused vacation, sick or other paid leave and the rateat which such paid leave is accrued.     (b) (i) No Company is a party to, bound by, or negotiating any collective bargainingagreement or other labor union contract; (ii) there are no current or to the Knowledge ofthe Contributors and the Companies, threatened organizational campaigns, petitions or otherunionization activities with respect to the Employees and there have not been any suchactivities within the past three (3) years; (iii) there is no current, pending, or, to theKnowledge of the Contributors and the Companies, threatened strikes, disputes, slowdowns,work stoppages or other labor controversy involving any Company or theEmployees and there have not been any such activities within the past three (3) years;(iv) there are no unfair labor practice complaints or any union representation questions orcertification petitions involving any Company or any Employee pending before the NationalLabor Relations Board and there have been no such complaints, questions or petitions withinthe last three (3) years.     (c) (i) No Company is a party to any Contract or agreement of employment or to provideconsulting or personal services that cannot be terminated at will without notice by and atno expense to such Company; (ii) each Company has timely paid or made provision for paymentof, and has properly accrued for in the Unaudited Financial Statements, all accruedsalaries, wages, commissions, bonuses, severance pay, vacation, sick, and other paid leavewith respect to any current or former employee or on account of employment; (iii) noseverance payment, stay-on or incentive payment, change-in-control payment, vacation, sickor other paid leave payment, or similar payment or obligation will be owed by any Company toany director, officer, Employee or other persons upon consummation of, or as a result of,the transactions contemplated by this Agreement, nor will any such director, officer,Employee or other person be entitled to any such payments a result of the transactionscontemplated by this Agreement in the
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event of the subsequent termination of his or heremployment or relationship; (iv) no current or former employee or person claiming to be orhave been an employee has a right to be recalled, reinstated, or restored to employmentunder any agreement, law, or policy or practice of any Company; (v) no Company is a partyto, or otherwise bound by, any Order or settlement with respect to any current or formeremployee, the terms and conditions of employment, or the working conditions of any employee;(vi) no Company has or is required by applicable Law to have an affirmative action plan;(vii) each Company has complied with the Older Workers’ Benefit Protection Act with respectto any waivers of liability under the Age Discrimination in Employment Act obtained by it inthe last 300 days; and (viii) no Company has had a “plant closing” or “mass layoff” as thoseterms are defined in the Worker Adjustment and Retraining Notification Act (“***WARN***”) withinthe last four year (4) years.     (d) Each Company has complied, and is in compliance, with all Laws (including thecommon law) relating to employment and employment practices, terms and conditions ofemployment, labor relations, wages, hours of work and overtime, worker classification,employment-related immigration and authorization to work in the United States, occupationalsafety and health, and privacy of health information. Thereare no pending or, to the Knowledge of the Contributors and the Companies, threatenedProceedings of any kind and in any forum by or on behalf of any present or former employee,applicant, person claiming to be an employee, or any classes of the foregoing, alleging orconcerning a violation of, or compliance with, any Law (including the common law) relatingto employment and employment practices, terms and conditions of employment, labor relations,wages, hours of work and overtime, worker classification, employment-related immigration andauthorization to work in the United States, occupational safety and health, or privacy ofhealth information, and there have been no such Proceedings within the past three (3) years.There is no current or, to the Knowledge of the Contributors and the Companies, threatenedProceeding in any forum in which any current or former director, officer, Employee or agentof any Company is or may be entitled to indemnification. No Company has breached and is notin breach of any Contract for the employment of any individual on a full-time, part-time,consulting, or other basis.          4.15 Defensible Title; Special Warranty on Montierra Assets.     (a) Defensible Title. Montierra and the Partnership, individually orcollectively, have Defensible Title to the Assets.
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     (b) Special Warranty on Montierra Assets. Notwithstanding any terms andprovisions of this Agreement or the Montierra Conveyances to the contrary, and except asotherwise provided in this Section 4.15(b), Contributors make no warranty of titleof any kind and character, whether express, implied, statutory or otherwise, with respect tothe Montierra Assets, and the Montierra Conveyances shall be made without warranty of titleof any kind and character, whether express, implied, statutory or otherwise; provided,however, (a) that solely in this Agreement (and not in the Montierra Conveyances), Montierrahereby agrees to warrant and forever defend title unto the Partnership and its successorsand assigns, against the claims and demands of all Persons claiming, or to claim the same,or any part thereof, by, through, or under Montierra, but not otherwise, as to (i) anundivided 43.31066% interest in and to the Hemus Properties, (ii) the undivided percentageinterests in and to the Additional Properties as set forth in Section 4.15(b) of theDisclosure Schedule, (iii) any interest in the Hemus Properties or the Additional Propertiesthat was previously conveyed by Montierra to Co-Invest under the Unrecorded Co-InvestConveyances and which, as a result of an Unrecorded Co-Invest Conveyancebeing defective in whole or in part, is determined not to have been conveyed toCo-Invest and to still be owned by Montierra, and (iv) any interest in the Lands that waspreviously conveyed by Montierra to the Partnership under the Unrecorded PartnershipConveyances and which, as a result of an Unrecorded Partnership Conveyance being defectivein whole or in part, is determined not to have been conveyed to the Partnership and to stillbe owned by Montierra, and (b) the Montierra Conveyances shall include, to the extenttransferable and permitted by law, the benefit of and the right to enforce the covenants,representations and warranties, if any, that Montierra is entitled to enforce with respectto the Montierra Assets.          4.16 Brokers’ Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’fee or other commission in connection with the transactions contemplated by this Agreement basedupon arrangements made by any Company.          4.17 Preferential Rights. Except as set forth in Section 3.3(c) and Section 3.3(d), none of the Assets (orany portion thereof) is subject to any Preferential Rights, restrictions on assignment, or requiredthird-party consents to assignment, which may be applicable to the transactions contemplated bythis Agreement.          4.18 Production Balances. No party is entitled to “make-up” or otherwise receive deliveries of production attributable tothe Partnership’s interest in the Assets at any time after the Effective Time without paying atsuch time the full contract price therefor, and there are
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no Imbalances that allow any party to“make-up” production at any time after the Effective Time under any operating agreement, gasbalancing and storage agreement, gas transportation or exchange agreement, gas processing ordehydration agreement, or other similar agreements relating to the Assets has not sold or assignedany easement, in whole or in part, or any undivided interest therein to any party whatsoever.          4.19 Insider Interests. No member, manager, partner, director, shareholder, officer, employee, or Affiliate of anyCompany or any associate thereof is presently, directly or indirectly, a party to any transactionwith any Company, including, without limitation, any agreement, arrangement, or understanding,written or oral, providing for the employment of, furnishing of services by, rental of real orpersonal property from, or otherwise requiring payments to any such member, manager, partner,director, shareholder, officer, employee, Affiliate, or associate thereof.          4.20 Receivables.All receivables (including accounts and notes receivable, employee advances, and accruedinterest receivables) of the Companies as reflected on the Unaudited Financial Statements orarising since the date thereof are valid obligations of the respective makers thereof and havearisen in the ordinary course of business for goods or services delivered or rendered, are notsubject to any valid defenses, counterclaims, or set offs, and have been collected or arecollectible in full at their recorded amounts in the ordinary course of business without resort tolitigation or other extraordinary collection efforts, net of all cash discounts and doubtfulaccounts as reflected on the Unaudited Financial Statements (in the case of receivables soreflected) or on the books of the Companies (in the case of receivables arising since the datethereof). The allowances for doubtful accounts reflected on the Unaudited Financial Statements andon the books of the Companies were determined in accordance with generally accepted accountingprinciples and were and are reasonable in light of historical data and other relevant information.          4.21 Bank Accounts and Powers of Attorney. Section 4.21 of the Disclosure Schedules includes (i) the name and address of each bankor other financial institution with which the Companies has an account or safe deposit box orvault, the account and safe deposit box and vault numbers thereof, the purpose of each thereof, andthe names of all persons authorized to draw thereon or to have access thereto, (ii) the names ofall persons authorized to borrow funds on behalf of the Companies and the names and addresses ofall entities from which they are authorized to borrow funds, and (iii) the names of all persons, ifany, holding proxies, powers of attorney, or other like instruments from any Company. No suchproxies, powers of attorney, or other like instruments are irrevocable.
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          4.22 Illegal Payments. None of the Companies or any director, officer, employee, or agent of the Companies has,directly or indirectly, paid or delivered any fee, commission, or other sum of money or item ofproperty 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 ofthe Companies, which the Companies or any such director, officer, employee, oragent knows or has reason to believe to have been illegal under any applicable Law.          4.23 Offerings of Securities. All securities which have been offered or sold by any Company have been registered pursuant tothe Securities Act and applicable state securities Laws or were offered and sold pursuant to validexemptions therefrom. No registration statement, prospectus, private offering memorandum, or otherinformation furnished (whether in writing or orally) to any offeree or purchaser of suchsecurities, at the time such registration statement became effective (in the case of a registeredoffering) or at the time of delivery of such registration statement, prospectus, private offeringmemorandum, or other information, contained any untrue statement of a material fact or omitted tostate any material fact required to be stated therein or necessary in order to make the statementscontained therein, in light of the circumstances under which they were made, not misleading. NoCompany has any obligation to register any of its securities under the Securities Act.          4.24 Unrecorded Co-Invest Conveyances. Section 4.24 of the Disclosure Schedule contains a full and complete list of all of theUnrecorded Co-Invest Conveyances.          4.25 Books and Records. The books of account, minute books, membership interest transfer books and other records of theCompanies, all of which have been made available to the Contributee, are (i) complete and correct,(ii) accurately and fairly reflect in reasonable detail the transactions and dispositions of theassets of the issuer; and (iii) maintained in accordance with a system of internal accountingcontrols sufficient to provide reasonable assurances that (a) transactions are executed inaccordance with management’s general or specific authorization; (b) transactions are recorded asnecessary (I) to permit preparation of financial statements in conformity with generally acceptedaccounting principles and (II) to maintain accountability for assets; (c) access to assets ispermitted only in accordance with management’s general or specific authorization; and (d) therecorded accountability for assets is compared with the existing assets at reasonable intervals andappropriate action is taken with respect to any differences. The minute books of the Companiescontain accurate and complete records of all meetings held of and action taken by the members andmanagers of the Companies and no meeting of such members or of any such managers has been held forwhich minutes have
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not been prepared and are not contained in such minute books. At the Closing,all of those books and records will be in the possession of the Contributee.          4.26 Unrecorded Partnership Conveyances. Section 4.26 of the Disclosure Schedule contains a full and complete list of all of theUnrecorded Partnership Conveyances.
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ARTICLE V**REPRESENTATIONS AND WARRANTIES RELATING TO CONTRIBUTEE**     Contributee hereby represents and warrants to Contributors as follows:          5.1  Organization. Contributee is a limited partnership duly organized, validly existing and in good standing underthe Laws of the State of Delaware.          5.2 Authorization; Enforceability. Contributee has all requisite limited partnership power and authority to execute and deliverthis Agreement and to perform all obligations to be performed by it hereunder. The ConflictsCommittee of the Contributee GP has (i) determined that the transactions contemplated by thisAgreement and the terms and conditions hereof are fair and reasonable to Contributee; (ii) providedall necessary approvals to the Board of Directors of the Contributee GP as required by the Amendedand Restated Limited Partnership Agreement of Contributee dated October 27, 2006 and the ConflictsCommittee Charter of the Contributee GP; and (iii) recommended to the Board of Directors of theContributee GP that the transactions contemplated by this Agreement be approved and authorized.The execution and delivery of this Agreement and the consummation of the transactions contemplatedhereby have been duly and validly authorized and approved by Contributee and the Board of Directorsof the Contributee GP, and no other limited partnership proceeding on the part of Contributee orthe Contributee GP is necessary to authorize this Agreement. This Agreement has been duly andvalidly executed and delivered by Contributee, and this Agreement constitutes a valid and bindingobligation of Contributee, enforceable against Contributee in accordance with its terms, subject toapplicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similarLaws affecting creditors’ rights generally and subject, as to enforceability, to general principlesof equity.          5.3 No Conflict; Consents. The execution and delivery of this Agreement by Contributee and the consummation of thetransactions contemplated hereby by Contributee do not and shall not:     (a) violate any Law applicable to Contributee or require any filing with, consent,approval or authorization of, or, notice to, any Governmental Authority;     (b) violate any Organizational Document of Contributee; or
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     (c) require any filing with or permit, consent or approval of, or the giving of anynotice to, any Person.          5.4 Litigation. As of the date of this Agreement (a) there are no lawsuits or actions before any GovernmentalAuthority pending or threatened in writing against Contributee that would reasonably be expected tohave a Material Adverse Effect on the ability of Contributee to perform its obligations under thisAgreement and (b) there are no orders or unsatisfied judgments from any Governmental Authoritybinding upon Contributee that would reasonably be expected to have a Material Adverse Effect on theability of Contributee to perform its obligations under this Agreement.          5.5 Brokers’ Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’fee or other commission in connection with the transactions contemplated by this Agreement basedupon arrangements made by any Company.          5.6 Independent Investigation**.**Contributee and its representatives have undertaken an independent investigation andverification of the business, operations and financial condition of the Companies. Except for therepresentations and warranties made by Contributors in this Agreement or in any certificate orwritten statement furnished or to be furnished to Contributee pursuant to this Agreement or inconnection with the transactions contemplated hereby, the Contributee acknowledges that there areno representations or warranties, whether oral or written, express or implied, as to the condition(financial or otherwise), assets, liabilities, operations, business or prospects of each Company,as to the accuracy or completeness of information obtained by Contributee during its investigationof each Company, and in entering into and performing this Agreement, Contributee has relied andwill rely solely upon its independent investigation of, and judgment with respect to, each Company,its value and the Interests.          5.7 SEC Filings. Contributee has heretofore filed all forms, reports, registration statements, definitiveproxy statements, schedules and other materials with the SEC required to be filed pursuant to theExchange Act or other federal securities Laws since October of 2006 (the “***SEC Reports***”). As oftheir respective dates, or, if applicable, the dates such SEC Reports were amended prior to thedate hereof, the SEC Reports (including, without limitation, all financial statements includedtherein, exhibits and schedules thereto and documents incorporated by reference therein) compliedin all material respects with all applicable requirements (including but not limited to theSarbanes-Oxley Act to the extent then in effect and applicable) of the Securities Act or theExchange Act, as applicable, and other federal securities
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Laws as of the date thereof. The SECReports, when filed and as amended from time to time, did not contain any untrue statement of amaterial fact or omit to state any material fact required to be stated therein or necessary inorder to make the statements made therein, in light of the circumstances under which they weremade, not misleading; provided, however, that no representation is made as to the accuracy of anyfinancial projections or forward looking statements, or the completeness of any informationfurnished by Contributee to the SEC solely for purposes of complying with Regulation FD promulgatedby the SEC under the Exchange Act or other information that is treated by SEC regulations as notbeing “filed” for the purposes of the Exchange Act.          5.8 Taxes. Except as set forth in the Disclosure Schedules, (a) all Tax Returns required to be filedby the Contributee have (and as of the Closing Date will have) been timely filed (taking intoaccount any extension of time to file granted or obtained) for all Taxable periods and such returnsare correct in all material respects, except where any such failure to file would not have aMaterial Adverse Effect on the Contributee, (b) all Taxes due on such Tax Returns have been paid,will be timely paid prior to the Closing Date or are adequately reserved against in theContributee’s financial statements, (c) there are no Liens on any of the Assets of the Contributeethat arose in connection with any failure to pay any Tax (other than Permitted Liens), (d) there isno claim or adjustment with respect to Contributee pending by any Governmental Authority inconnection with any Tax of Contributee for a period on or before the Effective Time, (e) no TaxReturns of Contributee are under audit or examination by any Governmental Authority, (f) there areno agreements or waivers currently in effect that provide for an extension of time with respect tothe filing of any Tax Return of Contributee (other than income Tax Returns) or the assessment orcollection of any Tax, (g) to the Knowledge of the Contributee, no claim has been made by anyGovernmental Authority in a jurisdiction where the Contributee does not file a Tax Return that theContributee is or may be subject to taxation in that jurisdiction, (h) the Contributee has compliedwith all applicable Laws relating to the payment and withholding of Taxes, and has duly and timelywithheld and paid over to the appropriate GovernmentalAuthority all amounts required to be so withheld and paid under all applicable Laws, and (i)for each taxable year of the Contributee beginning with 2006, ninety percent (90%) or more of theContributee’s gross income has been or is reasonably expected to be “qualifying income” within themeaning of Code Section 7704(d).
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ARTICLE VI**COVENANTS**          6.1 Conduct of Business.     (a) From the date of this Agreement through the Closing, Contributors shall cause theCompanies to operate its business in the ordinary course and, without limiting thegenerality or effect of the foregoing, Contributors will use their Reasonable Efforts tocause each Company to preserve intact its business and its relationships with customers,suppliers, and others having business relationships with the Companies, in each case in allmaterial respects.     (b) Without limiting the generality or effect of Section 6.1(a), and except for theRestructuring, prior to the Closing, Contributors shall cause the Companies not to, andContributors and the Companies shall not take any action to permit any Company to:     (i) amend its Organizational Documents;     (ii) liquidate, dissolve, recapitalize or otherwise wind up its business;     (iii) except as required by Law or in the ordinary course of business, (A)grant or increase any bonus, salary, severance, termination or other compensation orbenefits or other enhancement to the terms or conditions of employment to any of itsEmployees, (B) make any change in its key management structure or (C) adopt, enterinto or amend in any material respect any Employee Benefit Plan;     (iv) change its accounting methods, policies or practices, except as requiredby applicable Law;     (v) sell, assign, transfer, lease or otherwise dispose of any materialnon-current assets except pursuant to the terms of a Material Contract or thisAgreement (including Section 7.2);     (vi) make any capital expenditure other than as permitted in Section2.5(a) hereof;     (vii) incur any indebtedness outside the ordinary course of business consistentwith past practices of any Company;
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     (viii) merge or consolidate with, or purchase substantially all of the assetsor business of, or equity interests in, or make an investment in any Person (otherthan extensions of credit to customers in the ordinary course of business or inaccordance with the terms of a Material Contract or this Agreement, includingSection 7.2);     (ix) issue or sell any equity interests, notes, bonds or other securities ofany Company (except for inter-company loans from or to any Contributor or itsAffiliates in the ordinary course of business), or any option, warrant or right toacquire same, other than in accordance with this Agreement (including Section7.2);     (x) amend any Tax Return or settle or compromise any federal, state, local orforeign Tax liability or enter into any agreement or preliminary settlement with anyGovernmental Authority concerning Taxes; make any Tax election except electionsconsistent with past practices and that are required to be made in connection withTax Returns filed for any Tax period ending on or prior to the Closing Date; filewith, or provide to, any Governmental Authority any waiver extending the statutoryperiod for assessment or reassessment of Taxes or any other waiver of restrictionson assessment or collection of any Taxes; or     (xi) agree, whether in writing or otherwise, to do any of the foregoing.6.2 Access. From the date hereof through the Closing, Contributors and the Companies shall afford toContributee and its authorized Representatives reasonable access, during normal business hours, andsuch hours outside of normal business hours as Contributee may reasonably request, and in suchmanner as not to unreasonably interfere with normal operation of the business, to the properties,books, contracts, records and appropriate officers and employees of the Companies,and shall furnish such authorized Representatives with all financial and operating data and otherinformation concerning the affairs of the Companies as Contributee and such Representatives mayreasonably request. Contributors shall have the right to have a Representative present at alltimes during any such inspections, interviews and examinations. Notwithstanding the foregoing,Contributee shall have no right of access to, and Contributors shall have no obligation to provideto Contributee, information relating to (i) bids received from others in connection with thetransactions contemplated by this Agreement (or similar transactions) and information and analyses(including financial analyses) relating to such bids; (ii) any information the disclosure of whichwould jeopardize any privilege available to the
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Companies or Contributors relating to suchinformation or would cause the Companies or Contributors to breach a confidentiality obligation; or(iii) any information the disclosure of which would result in a violation of Law. Contributee andContributors shall cooperate to ensure that the provision of access hereunder to Contributee andits authorized Representatives shall comply in all respects with the FERC’s Standards of Conductfor Transmission Providers set forth in 18 C.F.R. Part 37, et al. CONTRIBUTEE RECOGNIZES ANDAGREES THAT ALL MATERIALS MADE AVAILABLE TO IT IN CONNECTION WITH THE TRANSACTION CONTEMPLATEDHEREBY, WHETHER MADE AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT ASAN ACCOMMODATION, AND WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND AS TO THE ACCURACY ANDCOMPLETENESS OF SUCH MATERIALS, OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT. EXCEPT FORAND WITHOUT ANY LIMITATION WHATSOEVER ON THOSE REPRESENTATIONS AND WARRANTIES CONTAINED IN THISAGREEMENT OR IN ANY CERTIFICATE OR WRITTEN STATEMENT FURNISHED, OR TO BE FURNISHED TO CONTRIBUTEEPURSUANT TO THIS AGREEMENT OR IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, NO WARRANTYOF ANY KIND IS MADE BY CONTRIBUTORS AS TO THE INFORMATION SUPPLIED TO CONTRIBUTEE OR WITH RESPECTTO THE ASSETS AND INTERESTS TO WHICH THE INFORMATION RELATES, AND CONTRIBUTEE EXPRESSLY AGREES THATANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN INDEPENDENT REVIEW AND JUDGMENT.ALL SUCH INFORMATION OBTAINED BY CONTRIBUTEE OR CONTRIBUTEE’S AUTHORIZED REPRESENTATIVES SHALL BEMAINTAINED BY CONTRIBUTEE OR CONTRIBUTEE’S AUTHORIZED REPRESENTATIVES IN STRICT CONFIDENCE, ANDSHALL BE USED BY CONTRIBUTEE SOLELY IN CONNECTION WITH ITS EVALUATION OF THE ASSETS AND INTERESTS,AND SHALL NOT BE DISCLOSED TO ANY OTHER PARTY, PRIOR TO CLOSING, WITHOUTCONTRIBUTORS’ PRIOR WRITTEN CONSENT. SUCH ACCESS, EXAMINATION AND INSPECTION SHALL BE ATCONTRIBUTEE’S SOLE RISK, COST AND EXPENSE AND CONTRIBUTEE WAIVES AND RELEASES ALL CLAIMS AGAINSTCONTRIBUTORS AND CONTRIBUTOR INDEMNIFIED PARTIES ARISING IN ANY WAY THEREFROM OR IN ANY WAYCONNECTED. CONTRIBUTEE SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS CONTRIBUTORS AND CONTRIBUTORINDEMNIFIED PARTIES FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF ACTION LIABILITIES, DAMAGES,LOSSES, COSTS OR EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS FEES), OR LIENSOR ENCUMBRANCES FOR
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LABOR OR MATERIALS, ARISING OUT OF OR IN ANY WAY CONNECTED WITH SUCH MATTERS,EXCEPTING ANY SUCH MATTERS WHICH ARISE AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OFCONTRIBUTORS OR CONTRIBUTOR INDEMNIFIED PARTIES. THE FOREGOING RELEASE AND INDEMNIFICATION SHALLAPPLY WHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OREXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENTNEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFULMISCONDUCT) OF ANY INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY. THE PARTIES HERETO AGREE THAT THEFOREGOING COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.          6.3 Third Party Approvals.Contributee and Contributors shall (and shall each cause their respective Affiliates to) useReasonable Efforts to obtain all material consents and approvals of third parties that any ofContributee, the Companies, or their respective Affiliates are required to obtain in order toconsummate the transactions contemplated hereby.          6.4 Books and Records. From and after the Closing, Contributee shall preserve and keep a copy of all books and recordsrelating to the business or operations of the Companies on or before the Closing Date inContributee’s possession for a period of at least five (5) years after the Closing Date. Aftersuch five (5) year period, before Contributee shall dispose of any such books and records,Contributee shall give Contributors at least ninety (90) days’ prior notice to such effect, andContributors shall be given an opportunity, at their cost and expense, to remove and retain all orany part ofsuch books and records as Contributors may select. Contributee shall provide to Contributors, atno cost or expense to Contributors, full access to such books and records as remain inContributee’s possession and full access to the properties and employees of Contributee and theCompanies in connection with matters relating to the business or operations of the Companies on orbefore the Closing Date and any disputes relating to this Agreement.          6.5 Permits. The Companies shall provide all notices and otherwise take all actions required to transfer orreissue any Permits, including those required under Environmental Laws, as a result of or infurtherance of the transactions contemplated by this Agreement. The Companies shall cooperate withContributee to provide information necessary to apply for such Permits.
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          6.6 Acquisition Proposals. From and after the date of this Agreement until the earlier of the Closing or the termination ofthis Agreement, none of the Partnership, or any Affiliate thereof shall, directly or indirectly,(i) solicit, initiate, or knowingly encourage any Acquisition Proposal (defined below) or (ii)engage in discussions or negotiations with, or disclose any nonpublic information relating to theCompanies to, any Person that is considering making or has made an Acquisition Proposal. TheCompanies and their Affiliates shall immediately cease and cause to be terminated any existingactivities, discussions, or negotiations with any persons conducted heretofore with respect to anyAcquisition Proposal and shall promptly request each such Person who has heretofore entered into aconfidentiality agreement in connection with an Acquisition Proposal to return to Contributors andthe Companies all confidential information heretofore furnished to such person by or on behalf ofany of Contributors or the Companies. If any of Contributors, the Companies or any of theirrespective Affiliates shall hereafter receive any Acquisition Proposal, Contributors and theCompanies shall immediately communicate the terms of such proposal to Contributee. The term“***Acquisition Proposal***,” as used herein, means any offer or proposal for, or any indication ofinterest in, a merger, sale consolidation or other business combination involving the Companies orits assets or the acquisition of any equity interest in the Companies, other than the transactionscontemplated by this Agreement.          6.7 Financial Statements. Prior to Closing, Contributors shall provide to Contributee an unaudited balance sheet as of theperiod ending December 31, 2006, and statements of earnings and statements of cash flow as of andfor the twelve month period ended as of such date, of the Companies. Contributors shall usecommercially reasonable efforts to assist Contributee in preparing financial statements of theCompanies in such form and covering such periods as may be required by any applicable securitiesLaws to be filed with the SEC by Contributee as a result of the transactions contemplated by thisAgreement and the acquisition of the Companies by Contributee.          6.8 Representation Letters. Contributors shall use its commercially reasonable efforts to cause the independent publicaccountants of the Companies to provide any consent necessary to the filing of such financialstatements with the Securities and Exchange Commission and to provide such customary representationletters as are necessary in connection therewith.          6.9 Employee and Benefit Matters.     (a) All Employees will be hired by Contributee as of the Closing Date. Such
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Employeesshall be paid at least equal to the annual salary amounts set in Section 4.14 of theDisclosure Schedule. Contributee shall recognize, and shall cause all benefit planscovering employees of Contributee to recognize, prior service with Contributors and theCompanies as employment with Contributee for purposes of satisfying all waiting period,eligibility and vesting requirements in those plans. Contributee shall cause all Employeeswho are hired by Contributee on a full-time basis to be eligible immediately for benefits inContributee’s benefit plans. The Companies and Contributee will have no liability(contingent or otherwise) under or in connection with the Administaff Agreement.     (b) Upon Closing, Contributee will grant the Employees 168,421 Contributee Long TermIncentive Plan Units. The allocation among the Employees of the granted units, shall bedetermined by Joseph A. Mills, with the approval of the board of managers of Contributee GP.The units issued to the Employees shall have a three (3) year vesting period commencing atthe Closing Date (with no portion vested at the Closing); however, the Employees willreceive, on a current basis, quarterly cash distributions on both the vested and unvestedportions of the granted units. In addition, over time post-Closing, Contributee shall granta high percentage of the remaining unallocated Contributee Long Term Incentive Plan Units tothe Employees and other executives of Contributee.ARTICLE VII**TAX MATTERS**          7.1 Character and Treatment of Transaction.     (a) Contribution Transaction. Contributee and Contributors agree to the treatthe contribution of the Interests pursuant to Section 2.1 and Section 2.2 asa contribution by Contributors to the Contributee in exchange for Contributee Units pursuantto Code Section 721(a) and the Regulations promulgated thereunder, and the assumption of theQualified Indebtedness pursuant to Regulation 1.707-5(a)(1)**.**The entire QualifiedIndebtedness is intended, and the parties expect it, to qualify as a “qualified liability”under Regulation 1.707-5(a)(6).     (b) Valuations and Allocations. The parties shall agree to an allocation of theAgreed Value among the Assets prior to the Closing Date (the “***Allocation***”).     (c) Allocation Consistency. Contributors and Contributee shall report thetransactions contemplated hereby on all Tax Returns, including, but not limited to, for
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purposes of future allocations under Code Section 704(c), in a manner consistent with theAllocation. If, contrary to the intent of the parties hereto as expressed in thisSection 7.1(c), any Taxing authority makes or proposes an allocation different fromthe Allocation, Contributors and Contributee shall cooperate with each other in good faithto contest such Taxing authority’s allocation (or proposed allocation), provided, however,that, after consultation with the party (or parties) adversely affected by such allocation(or proposed allocation), the other party (or parties) hereto may file such protectiveclaims or Tax Returns as may be reasonably required to protect its (or their) interests.          7.2 Pre-Closing Restructuring.Prior to Closing, Contributors shall cause the following to occur (the “***Restructuring***”):     (a) Conversion of ICC; Transfer of Assets. Montierra shall cause ICC toconvert from a corporation to a limited liability company and will not elect to have suchlimited liability company taxed as an association taxable as a corporation. Montierra shalltransfer all of the Montierra Assets in accordance with Section 4.15(b) (other thanthe Assets already held by the Partnership) and the equity interests of ICC to thePartnership, in a manner and on a form reasonably acceptable to Montierra andContributee, together with all Data pertaining to the Montierra Assets and Contributee shallassume all liabilities associated with the Montierra Assets so conveyed.     (b) Distribution of Special Limited Partnership Interest. Montierra shallcause ICC to distribute to Montierra its special limited partnership interest in thePartnership.     (c) Assumption of Qualified Indebtedness. The Partnership shall assume fromMontierra all of Montierra’s obligations to satisfy the Qualified Indebtedness, andContributee hereby covenants to satisfy, or cause the Partnership to satisfy, in full theQualified Indebtedness immediately following Closing.     (d) Section 754 Election. Contributors shall make a protective election underCode Section 754 for each Interest contributed.     (e) Working Capital Distribution. Contributors shall cause the Companies todistribute to the Contributors all working capital, cash and other assets that are not partof the Assets.     (f) Entity Name Changes. The parties hereto shall take all action necessary tochange the entity names of the Partnership and ICC such that their entity names no longer
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reference or incorporate “NGP” or “Natural Gas Partners.”     (g) Neutral Tax Impact. All the foregoing actions and transfers shall beeffected in a manner which does not result in a negative Tax impact on the Contributee.          7.3 Post-Closing Tax Covenants.(a) Contributee covenants that until the earlier of (i) two (2) years following the ClosingDate or (ii) the date that all of the Contributee Units transferred pursuant to Section 2.2have been sold in a transaction resulting in a basis adjustment under Code Section 743 for thebenefit of the transferee, that Contributee and its Affiliates will not dispose of any Interests(or Assets owned by the Companies) acquired by Contributee pursuant to Section 2.1 if anysuch disposition or series of dispositions would accelerate any “built-in gain” (as defined inRegulation 1.704-3(a)(3)(ii)) in any such Asset with respect to the Contributee Units transferredto the Contributors pursuant to Section 2.2; provided, however, that Contributee may sellor dispose of any such Interests (or Assets owned by the Companies) provided Contributeeindemnifies the applicable Contributor for any such accelerated built-in gain allocable to suchContributor. Any such indemnification payment (Y) shall equal an amount obtained by dividingthe amount of Tax payable by the ultimate partners of the Contributors resulting from suchaccelerated built-in gain (X) by the fraction obtained by subtracting from 1 the percentage(expressed as a number) equal to the highest marginal Federal income tax rate applicable toindividuals for the year such built-in gain is recognized (for example, if the highest such taxrate is 35%, the number would be .35) (here Z). Thus, the amount of such indemnification payment(Y) may be derived by the following formula:Y = X/1– ZAny disputes regarding the amount of such indemnification payment shall be resolved as set forth inSection 7.8 below.          7.4 Responsibility for Filing Tax Returns and Paying Taxes.     (a) Contributors shall file all Tax Returns required to be filed on or before theClosing Date by or with respect to each Company for a Pre-Effective Time Tax Period. Inaddition, Contributors shall cause to be prepared and timely filed the final federal incomeTax Return for the Companies on IRS Form 1065 for the period that ends on the Closing Date.Contributors shall pay all Taxes owed with respect to the Pre-Effective Time Tax Period withrespect to each of the Companies to the extent such Taxes are not taken into account in thecalculation of the Final Settlement Statement. Except as provided in the following sentenceand Section 7.4(b), Contributee shall file all other Tax
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Returns required to befiled by or with respect to each of the Companies and shall pay all other Taxes owed withrespect to each of the Companies or any of their Assets. Liability for Taxes (other thanincome Taxes) for any Tax period that includes but does not end on the Effective Time (a“***Straddle Period***”) shall be apportioned between Contributee and Contributors as follows:(i) property and similar ad valorem Taxes or franchise Taxes based solely on capital shallbe apportioned on a ratable daily basis; and (ii) all other Taxes shall be apportioned basedon an interim closing of the books of each of the Companies as of the Effective Time. Forpurposes of this Section 7.4(a), any franchise Tax paid or payable with respect toany Company shall be allocated to the taxable period during which the income, operations,assets or capital comprising the base of such Tax is measured, regardless of whether theright to do business for another taxable period is obtained by the payment of such Tax.Contributee and Contributors shall each provide the other with all information reasonablynecessary to prepare a Tax Return.     (b) Notwithstanding Section 7.4(a), Contributors shall be responsible for allincome Taxes incurred by ICC between the Effective Time and the date of ICC’s conversion toa limited liability company and all Taxes incurred with respect to the conversion of ICC toa limited liability company. Contributors shall file a final federal income Tax return onForm 1120 for ICC and pay all Taxes due thereon except for any Taxes included on the FinalSettlement Statement which shall be the responsibility of Contributee. Such payment will bedeemed as a contribution to the capital of Contributee by the Contributors.          7.5 Responsibility for Tax Audits and Contests.Contributors shall control and bear the cost of any audit or contest with respect to aPre-Effective Time Tax Period or relating to ICC prior to its conversion to a limited liabilitycompany, and Contributee shall control and bear the cost of any other audit or contest; provided,however, that the Party with the greater potential Tax liability shall control and bear the cost ofany audit or contest with respect to a year during which a Straddle Period occurs; providedfurther, that the Party so in control of an audit or contest with respect to a Straddle Periodshall allow the other Party to participate at such other Party’s cost and expense. The Party incontrol of an audit or controversy shall keep the other Party informed of the status of the auditor controversy (including providing copies of correspondence and pleadings). Neither Contributeenor Contributors shall settle any audit or contest in a way that would adversely affect the otherParty without the other Party’s written consent, which the other Party shall not unreasonablywithhold. Contributee and Contributors shall each provide the other with all informationreasonably necessary to conduct an audit or contest with respect to Taxes.
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          7.6 Tax Refunds.Contributors shall be entitled to any refund of Taxes that were paid or incurred with respectto a Pre-Effective Time Tax Period or with respect to ICC prior to and including its conversion toa limited liability company. Contributee shall be entitled to any refund of Taxes that were paidor incurred with respect to a Post-Effective Time Tax Period. Refunds for a Straddle Period shallbe apportioned based on the Taxes that were paid by or on behalf of Contributee and Contributors.If a Party receives a refund to which the other Party is entitled, the Party receiving the refundshall pay it to the Party entitled to the refund within two (2) Business Days after receipt.          7.7 Transfer Taxes.Contributors and Contributee shall be jointly responsible for state or local transfer, sales,use, stamp, registration or other similar Taxes resulting from the transactions contemplated bythis Agreement including, but not limited to, the Restructuring.          7.8 Disputes over Tax Provisions.If the Parties cannot agree, after good faith consultation, on the calculation of any Taxesthat would result in a payment hereunder by one to the other or an adjustment of the Agreed Value,then each Party shall deliver simultaneously to BDO Seidman, LLP (or if such firm is unwilling orunable to serve, another nationally recognized accounting firm mutually agreed on by the Parties,the accounting firm ultimately chosen being referred to herein as the “***Accountants***”) such workpapers and other reports and information relating to the disputed matter(s) as the Accountants mayrequest and shall be afforded the opportunity to discuss the disputed matter(s) with theAccountants. The Accountants shall have thirty (30) days to carry out a review and prepare awritten statement of its determination regarding the disputed matter(s) (including a statementregarding the Accountants’ determination of the prevailing Party in any such disputed matter) whichdetermination shall be final and binding upon the Parties. Any fees and expenses of theAccountants incurred in resolving the disputed matter(s) shall be borne equally by the Parties.          7.9 Limitations on Indemnity.Except with regard to the indemnity provided by Section 7.3 above, this ARTICLEVII shall be expressly subject to the limits on indemnity set forth in ARTICLE IXhereof.
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ARTICLE VIII**CONDITIONS TO CLOSING**          8.1 Conditions to Obligations of Contributee. The obligation of Contributee to consummate the transactions contemplated by this Agreement issubject to the satisfaction of the following conditions, any one or more of which may be waived inwriting by Contributee:     (a) Representations, Warranties and Covenants of Contributors. (i) Each of therepresentations and warranties of Contributors made in this Agreement will be true andcorrect in all material respects as of the date of this Agreement and as of the Closing (asif made anew at and as of the Closing), except that, to the extent any such representationor warranty is qualified by materiality or Material Adverse Effect, such representation orwarranty shall be true and correct in all respects, (ii) Contributors shall have performedor complied in all material respects with all of the covenants and agreements required bythis Agreement to be performed or complied with by Contributors on or before the Closing,and ((iii) Contributors shall have delivered to Contributee a certificate, dated the ClosingDate, certifying that the conditions specified in this Section 8.1(a) have beenfulfilled;     (b) Third Party Consents; Governmental Approvals. All consents, approvals orwaivers, if any, disclosed on any schedule to this Agreement or otherwise required inconnection with the consummation of the transactions contemplated by this Agreement havebeen received. All of the consents, approvals, authorizations, exemptions and waivers fromGovernmental Authorities that will be required to enable Contributee to consummate thetransactions contemplated by this Agreement have been obtained;     (c) Co-Invest Agreement. Contributee shall have entered in to an AssetContribution Agreement with Co-Invest pursuant to which Contributee or its designee willacquire all right, title and interest acquired by Co-Invest under all of the UnrecordedCo-Invest Conveyances and other certain mineral interests and royalties all as moreparticularly described therein and the closing of such Asset Contribution Agreement willoccur immediately after the Closing of this Agreement;     (d) No Injunction, Etc. No provision of any applicable Law and no order willbe in effect that will prohibit or restrict the consummation of the Closing;
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     (e) No Proceedings. No proceeding challenging this Agreement or thetransactions contemplated hereby or seeking to prohibit, alter, prevent or materially delaythe Closing or seeking Losses from any Company incident to this Agreement or thetransactions contemplated hereby, will have been instituted by any Person before anyGovernmental Authority and be pending;     (f) Resignations of Officers and Directors. Contributee shall have receivedthe resignations (or evidence of removal) of each officer or director of each Companyeffective as of the Closing;     (g) No Material Adverse Change. Since the Effective Time, there shall not havebeen a material adverse effect in the business, assets, results of operations, condition(financial or otherwise), or prospects of the Companies taken as a whole;     (h) Preliminary Settlement Statement. Contributee shall have received thePreliminary Settlement Statement, subject to the terms of Section 2.3;     (i) Books and Records. Contributee shall have received all original books andrecords of the Companies and control of all of the assets of the Companies;     (j) Restructuring. The Restructuring pursuant to Section 7.2 shallhave been completed;     (k) Escrow Agreement. Contributors shall have executed and delivered theEscrow Agreement in the form mutually agreed upon by the parties hereto and substantially inaccordance with the terms described in Section 9.6;     (l) Registration Rights Agreement. Contributors shall have executed anddelivered the Registration Rights Agreement substantially in the form of Exhibit B;     (m) FIRPTA Withholding. MONTGP, as general partner of the Partnership, shalldeliver to Contributee on or before the Closing Date but not more than thirty (30) daysbefore the Closing Date, an affidavit to the effect that fifty percent (50%) or more of thevalue of the gross assets of the Partnership do not consist of U.S. real property interestsand/or ninety percent (90%) or more of the value of the gross assets of the Partnership donot consist of U.S. real property interests plus cash or cash equivalents within the meaningof Section 1445(e)(5) of the Code and Section 1.1445-11T(b) of theRegulations. If, on or before the Closing Date, Contributee shall not have receivedsuch
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affidavit, Contributee may withhold from the consideration payable at Closing to theContributors hereto such sums as are required to be withheld therefrom under Section 1445 ofthe Code and the Regulations thereunder; and     (n) Other Deliveries. Contributors shall have delivered such othercertificates, instruments of conveyance and documents as may be reasonably requested byContributee and agreed to by Contributors prior to the Closing Date to carry out the intentand purposes of this Agreement.          8.2 Conditions to the Obligations of Contributors.. The obligation of Contributors to consummate the transactions contemplated by this Agreement issubject to the satisfaction of the following conditions, any one or more of which may be waived inwriting by Contributors:     (a) Representations, Warranties and Covenants of Contributee. (i) Each of therepresentations and warranties of Contributee made in this Agreement will be true andcorrect in all material respects in all respects as of the date of this Agreement and as ofthe Closing (as if made anew at and as of the Closing), except that, to the extent any suchrepresentation or warranty is qualified by materiality or Material Adverse Effect, suchrepresentation or warranty shall be true and correct in all respects, (ii) Contributee shallhave performed or complied in all material respects with all of the covenants and agreementsrequired by this Agreement to be performed or complied with by Contributee on or before theClosing, and (iii) Contributee shall have delivered to Contributors a certificate, dated theClosing Date, certifying that the conditions specified in this Section 8.2(a) havebeen fulfilled;     (b) Third Party Consents; Governmental Approvals. All consents, approvals orwaivers, if any, disclosed on any schedule to this Agreement or otherwise required inconnection with the consummation of the transactions contemplated by this Agreement havebeen received. All of the consents, approvals, authorizations, exemptions and waivers fromGovernmental Authorities that will be required to enable Contributors to consummate thetransactions contemplated by this Agreement have been obtained;     (c) Co-Invest Agreement. Contributee shall have entered in to an AssetContribution Agreement with Co-Invest pursuant to which Contributee or its designee willacquire all right, title and interest acquired by Co-Invest under all of the UnrecordedCo-Invest Conveyances and certain mineral interests and royalties all as moreparticularly
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described therein and the closing of such Purchase and Sale Agreement willoccur immediately after the Closing of this Agreement;     (d) No Injunction, Etc. No provision of any applicable Law and no order willbe in effect that will prohibit or restrict the consummation of the Closing;     (e) No Proceedings. No proceeding challenging this Agreement or thetransactions contemplated hereby or seeking to prohibit, alter, prevent or materially delaythe Closing or seeking Losses from Contributee incident to this Agreement or thetransactions contemplated hereby, will have been instituted by any Person before anyGovernmental Authority and be pending;     (f) Restructuring. The Restructuring pursuant to Section 7.2 shallhave been completed;     (g) Registration Rights Agreement. Contributee shall have executed anddelivered the Registration Rights Agreement substantially in the form of Exhibit B;and     (h) Other Deliveries. Contributee shall have delivered such othercertificates, instruments and documents as may be reasonably requested by Contributors andagreed to by Contributee prior to the Closing Date to carry out the intent and purposes ofthis Agreement.ARTICLE IX**INDEMNIFICATION**          9.1 Survival. The representations and warranties in this Agreement and all covenants contained in thisAgreement shall survive the Closing until one (1) year after the Closing Date, except that (a) therepresentations and warranties in Section 3.1 (Organization of Contributors), Section3.2 (Authorization; Enforceability), Section 3.4 (Ownership of Interests), Section4.11 (Employee Benefit Plans), Section 4.14 (Labor Relations; Employment Matters),Section 4.15(b) (Special Warranty on Montierra Assets), Section 5.1 (Organizationof Contributee), and Section 5.2 (Authorization; Enforceability) shall surviveindefinitely, (b) the representations and warranties in Section 4.5 (Taxes), to the extentnot related to property, ad valorem or other state or local Taxes, and Section 5.8 (Taxes)shall survive until the expiration of the applicable statute oflimitations, (c) the representation and warranty in Section 4.17(a) (Defensible Title)shall survive for six (6) months after the Closing Date; and (d) certain covenants with a specifiedexpiration date shall continue in effect as provided therein.
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Notwithstanding the precedingsentence, any representation or warranty in respect of which indemnity may be sought under thisAgreement will survive the time at which it would otherwise terminate pursuant to the precedingsentence if written notice of the inaccuracy or breach thereof giving rise to such right ofindemnity has been given to the Party against whom such indemnification may be sought prior to suchtime; *provided*that such right of indemnity shall continue to survive and shall remain a basis forindemnification hereunder only until the related claim for indemnification is resolved or disposedof in accordance with the terms hereof.          9.2 Indemnification.     (a) From and after the Closing, Contributors will, jointly and severally, indemnify,defend and hold harmless Contributee and its officers, members, directors, employees andAffiliates (the “***Contributee Indemnified Parties***”) against any and all liabilities, damages,losses, costs and expenses (including reasonable attorneys’ and consultants’ fees andexpenses) (“***Losses***”) Contributee shall suffer (any Loss of the Partnership after the ClosingDate shall be deemed a Loss suffered by Contributee) as a result of, or arising out of, (i)any failure or breach of any representation or warranty made by Contributors pursuant toARTICLE III or ARTICLE IV under this Agreement to be true and correct as ofthe date hereof and as of the Closing (as if made anew at and as of the Closing); (ii) thebreach of any covenant or agreement made or to be performed by Contributors pursuant to thisAgreement; (iii) the ownership of the Companies, the ownership of the Assets or any otherassets, or the operation of the business of the Companies or the Contributors (including,but not limited to, the Assets or any other assets) prior to the Effective Time, butspecifically not including any liabilities or obligations under Contracts not accruing orarising from a breach or default by the Contributors prior to the Effective Time.Notwithstanding the foregoing, any claims arising under Section 9.2(a)(i) andSection 9.2(a)(iii) shall be recoverable exclusively against the Escrow Account,and, except for any claim pertaining to transfer Taxes under Section 7.7 or Taxesattributable to a Straddle Period under Section 7.4(a), shall be subject to suchother limitations as set forth in Section 9.3 below.     (b) From and after the Closing, Contributee will indemnify, defend and holdharmless Contributors and their officers, members, directors, employees and Affiliates(the “***Contributor Indemnified Parties***”) against any and all Losses incurred or suffered as aresult of, relating to or arising out of (i) any failure of any representation or warrantymade by Contributee in this Agreement to be true and correct as of the Closing (as if madeanew at and as of the Closing), (ii) the breach of any covenant or agreement made
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or to beperformed by Contributee pursuant to this Agreement, and (iii) the ownership of theCompanies, or the ownership or operation of Assets or the business of the Companies, afterthe Effective Time.     (c) THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE IX SHALL BE ENFORCEABLEREGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT)ALLEGES OR PROVES (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENTNEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE ORWILLFUL MISCONDUCT) OF ANY INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY. THE PARTIES HERETOAGREE THAT THE FOREGOING COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.          9.3 Limitations on Liability. Notwithstanding anything to the contrary in this Agreement, in the event a ContributeeIndemnified Party has a claim for indemnification under Section 9.2 hereof:     (a) Neither a Contributee Indemnified Party nor a Contributor Indemnified Party will beentitled to indemnity under Section 9.2(a)(i), Section 9.2(a)(iii) orSection 9.2(b)(i) of this Agreement with respect to claims for Losses until theamount for any individual claim for Losses exceeds Fifty Thousand Dollars ($50,000) (the“***Individual Basket Amount***”) and the aggregate amount for all claims for Losses that exceedthe Individual Basket Amount exceeds Five Hundred Thousand Dollars ($500,000) (the“***Aggregate Basket Amount***”), and thereafter, the Contributee Indemnified Parties shall beentitled to indemnity for the aggregate amount of all individual claims for Losses in excessof the Individual Basket Amount applicable to each of such individual claims.     (b) In the event a Contributee Indemnified Party is entitled to indemnity underSection 9.2(a)(i) (for breach of representations and warranties which survive one(1) year or less after the Closing Date) and Section 9.2(a)(iii), any such claim maybe satisfiedsolely and exclusively against the Escrow Deposit. Therefore, the maximum aggregateliability of Contributors under Section 9.2(a)(i) (for breach of representations andwarranties which survive one (1) year or less after the Closing Date) and Section9.2(a)(iii) of this Agreement shall not exceed the Escrow Deposit, and ContributeeIndemnified Parties shall have no further right to indemnity thereunder at such time as allcash or Contributee Units have been disbursed from the Escrow Account. Under no
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circumstanceshall a Contributee Indemnified Party be entitled to recover an indemnity claim arisingunder Section 9.2(a)(i) (for breach of representations and warranties which surviveone (year) or less after the Closing Date) and Section 9.2(a)(iii) of this Agreementdirectly against Contributors. In addition, in all circumstances, a Contributee IndemnifiedParty must first look to the Escrow Account with respect to an indemnity claim, includingthose arising under Section 9.2(a)(i) (for representations and warranties which survivelonger than one (1) year after the Closing Date) and Section 9.2(a)(ii) of thisAgreement.     (c) The amount of any Losses subject to indemnification under this ARTICLE IXshall be reduced or reimbursed, as the case may be, by any third party insurance proceeds,third party recoveries less the costs expended for such recoveries. Each Party shall, andshall cause their respective Indemnified Parties to, use Reasonable Efforts to collect anyamounts available under such insurance coverage and from such other third party alleged tohave responsibility. If a Contributee Indemnified Party receives an amount under insurancecoverage or from such third party with respect to Losses that were the subject ofindemnification under Section 9.2 at any time subsequent to indemnification providedthereunder, then such Contributee Indemnified Party shall promptly reimburse Contributors.          9.4 Procedures. Claims for indemnification under this Agreement shall be asserted and resolved as follows:     (a) If any Person who or which is entitled to seek indemnification under Section9.2 (an “***Indemnified Party***”) receives notice of the assertion or commencement of anyclaim asserted against an Indemnified Party by a third party (“***Third Party Claim***”) inrespect of any matter that is subject to indemnification under Section 9.2, theIndemnified Party shall promptly (i) notify the Party obligated to the Indemnified Partypursuant to Section 9.2 above, (the “***Indemnifying Party***”) of the Third Party Claimand (ii) transmit to the Indemnifying Party a written notice (“***Claim Notice***”) describing inreasonable detail the nature of the Third Party Claim, a copy of all papers served withrespect to such claim (if any), the Indemnified Party’s best estimate of the amount ofLosses attributable to the Third Party Claim and the basis of the Indemnified Party’srequest for indemnification under this Agreement. Failure to timely provide such ClaimNotice shall not affect the right of the Indemnified Party’s indemnification hereunder,except to the extent the Indemnifying Party is prejudiced by such delay or omission.
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     (b) The Indemnifying Party shall have the right to defend the Indemnified Party againstsuch Third Party Claim. If the Indemnifying Party notifies the Indemnified Party that theIndemnifying Party elects to assume the defense of the Third Party Claim (such election tobe without prejudice to the right of the Indemnified Party to dispute whether such claim isan identifiable Loss under this ARTICLE IX), then the Indemnifying Party shall havethe right to defend such Third Party Claim with counsel selected by the Indemnifying Party(who shall be reasonably satisfactory to the Indemnified Party), by all appropriateproceedings, to a final conclusion or settlement at the discretion of the Indemnifying Partyin accordance with this Section 9.4(b). The Indemnifying Party shall have fullcontrol of such defense and proceedings, including any compromise or settlement thereof;*provided*that the Indemnifying Party shall not enter into any settlement agreement withoutthe written consent of the Indemnified Party (which consent shall not be unreasonablywithheld, conditioned or delayed); *provided further*, that such consent shall not be requiredif (i) the settlement agreement contains a complete and unconditional general release by thethird party asserting the claim to all Indemnified Parties affected by the claim and (ii)the settlement agreement does not contain any sanction or restriction upon the conduct ofany business by the Indemnified Party or its Affiliates. If requested by the IndemnifyingParty, the Indemnified Party agrees, at the sole cost and expense of the Indemnifying Party,to cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claimwhich the Indemnifying Party elects to contest, including the making of any relatedcounterclaim against the Person asserting the Third Party Claim or any cross complaintagainst any Person. The Indemnified Party may participate in, but not control, any defenseor settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to thisSection 9.4(b), and the Indemnified Party shall bear its own costs and expenses withrespect to such participation.     (c) If the Indemnifying Party does not notify the Indemnified Party that theIndemnifying Party elects to defend the Indemnified Party pursuant to Section9.4(b), then the Indemnified Party shall have the right to defend, and be reimbursed for itsreasonable cost and expense (but only if the Indemnified Party is actually ultimatelydetermined to be entitled to indemnification hereunder) in regard to the Third Party Claimwith counsel selected by the Indemnified Party (who shall be reasonably satisfactory to theIndemnifying Party), by all appropriate proceedings, which proceedings shall be prosecuteddiligently by the Indemnified Party. In such circumstances, the Indemnified Party shalldefend any such Third Party Claim in good
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faith and have full control of such defense andproceedings; *provided*, *however*, that the Indemnified Party may not enter into any compromiseor settlement of such Third Party Claim if indemnification is to be sought hereunder,without the Indemnifying Party’s consent (which consent shall not be unreasonably withheld,conditioned or delayed). The Indemnifying Party may participate in, but not control, anydefense or settlement controlled by the Indemnified Party pursuant to this Section9.4(c), and the Indemnifying Party shall bear its own costs and expenses with respect tosuch participation.     (d) Any claim by an Indemnified Party on account of Losses that does not result from aThird Party Claim (a “***Direct Claim***”) will be asserted by giving the Indemnifying Partyreasonably prompt written notice thereof, but in any event not later than thirty (30) daysafter the Indemnified Party becomes aware of such Direct Claim. Such notice by theIndemnified Party will describe the Direct Claim in reasonable detail, will include copiesof all available material written evidence thereof and will indicate the estimated amount,if reasonably practicable, of damages that has been or may be sustained by the IndemnifiedParty. The Indemnifying Party will have a period of twenty (20) days within which to objector accept in writing such Direct Claim. Any such objection is called a “***Notice of ClaimDispute***.” If the Indemnifying Party does not so respond within such twenty (20) day period,the Indemnifying Party will be deemed to have rejected such claim, in which event theIndemnified Party will be free to pursue such remedies as may be available to theIndemnified Party on the terms and subject to the provisions of this Agreement. Copies ofeach Notice of Claim Dispute shall be sent to Contributee and the Escrow Agent. IfContributee and Contributors fail to resolve any objection contained in such Notice of ClaimDispute within twenty (20) days after the date the Notice of Claim Dispute is delivered toContributee, then, at the request of either Party, they shall meet in an attempt to resolvean objection described in such Notice of Claim Dispute and reach a written agreement withrespect to such objection (a “***Claim Settlement Agreement***”). If Contributors and Contributeeenter into a Claim Settlement Agreement, the objections contained in such Notice of ClaimDispute shall be deemed tobe as resolved therein. If they are unable to resolve the objection described in suchNotice of Claim Dispute within twenty (20) days after delivery to the recipient of suchNotice of Claim Dispute, then Contributors and Contributee shall submit the objectionscontained in such Notice of Claim Dispute to arbitration as described in Section9.5.          9.5 Notice of Claim Dispute.. Any objection contained in a Notice of Claim Dispute not resolved in a Claim SettlementAgreement shall be resolved by submission to
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arbitration as follows: Contributors and Contributeeshall select a single arbitrator from the American Arbitration Association (“***AAA***”) in Houston,Texas (an “***Arbitrator***”) (or, if they cannot agree upon a selection, Contributors and Contributeeshall each select an Arbitrator, and the two Arbitrators so selected shall choose a thirdArbitrator who has knowledge of the industry and business of the Companies and who shall act as theArbitrator to resolve the dispute). The Arbitrator shall resolve the objection contained in theNotice of Claim Dispute pursuant to the Commercial Arbitration Rules of the AAA as promptly aspossible and a decision by the Arbitrator as to the resolution of such objection (the “***Arbitrator’sDecision***”) shall be (absent an agreement of the parties regarding an error that is manifest)conclusive and binding upon the parties for purposes of this Agreement. The Arbitrator’s Decisionshall be (i) in writing and (ii) non-appealable and incontestable by Contributee and Contributorsand each of their respective Affiliates and successors and not subject to collateral attack for anyreason. The Arbitrator shall have the ability to allocate fees and costs payable to the AAA basedon the Arbitrator’s assessment of the relative responsibility of the parties. In the absence ofsuch an allocations, the fees and costs payable to the AAA shall be paid one-half by Contributeeand one-half from the Escrow Deposit. Contributee shall pay its own counsel fees and other costsincurred in connection with any such dispute, and counsel fees and other costs incurred byContributors in connection with any such dispute shall be paid from the Escrow Deposit.          9.6 Escrow Account. At the Closing, the Parties shall enter into a mutually satisfactory agreement with the EscrowAgent setting out the rights and obligations of the Parties and the Escrow Agent with respect tothe Escrow Account. Whether included in such agreement, the Parties agree that the followingprovisions of this Section 9.6 shall control with respect to the Escrow Account:     (a) The interest, proceeds and distributions earned each year on the Escrow Deposit isherein called the “***Escrow Income***.” The Parties agree to treat the EscrowIncome as income of Contributors for U.S. federal income tax purposes and shall not besubject to indemnification claims under ARTICLE IX. Escrow Income shall be payableby Contributee to the Escrow Agent, and shall be considered part of the Escrow Deposit andsubject to claims for indemnification under this ARTICLE IX.     (b) The Contributee Units and Escrow Income in the Escrow Account shall be transferredby the Escrow Agent as follows:     (i) to Contributee, pursuant to a Claim Settlement Agreement delivered to theEscrow Agent;
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     (ii) to Contributee, pursuant to joint written instructions from Contributorsand Contributee to the Escrow Agent relating to the resolution of a Third PartyClaim pursuant to Section 9.4;     (iii) to Contributee, pursuant to any other joint written instruction fromContributors and Contributee to the Escrow Agent;     (iv) to Contributee, pursuant to a decision by the Arbitrator regarding aDirect Claim sent to the Escrow Agent pursuant to Section 9.5;     (v) to Contributors, on the first anniversary of the Closing Date, in an amountequal to the remainder of the Escrow Deposit less any amounts related to an assertedbut pending or unpaid Direct Claim or Third Party Claim.     (c) Fees of the Escrow Agent shall be paid by Contributee.     (d) Contributors shall have the right to vote any Contributee Units which are held inthe Escrow Account.     (e) Payments by the Escrow Agent out of the Escrow Deposit shall be, at the election ofContributor, either the dollar amount of the claim in cash or the number of ContributeeUnits based upon the dollar amount of the claim to be paid pursuant to Section9.6(b) divided by the Unit Price (or a portion in cash, to the extent of available cashin the Escrow Deposit ,and a portion in Contributee Units, based on the foregoing formulas).          9.7 No Special, Consequential or Punitive Damages. NOTWITHSTANDING ANYTHING HEREIN CONTAINED TO THE CONTRARY, NONE OF THE PARTIES TO THISAGREEMENT SHALL HAVE ANY OBLIGATION WITH RESPECT TO THIS AGREEMENT, OR OTHERWISE IN CONNECTIONHEREWITH, FOR ANY SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES.          9.8 Waiver of Other Representations. EXCEPT FOR AND WITHOUT ANY LIMITATION WHATSOEVER ON THOSE REPRESENTATIONS AND WARRANTIESCONTAINED IN THIS AGREEMENT OR IN ANY CERTIFICATE OR WRITTEN STATEMENT FURNISHED, OR TO BEFURNISHED TO CONTRIBUTEE PURSUANT TO THIS AGREEMENT OR IN CONNECTION WITH THE TRANSACTIONSCONTEMPLATED HEREBY: (A) NONE OF CONTRIBUTORS, NOR ANY OF THEIR
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AFFILIATES OR REPRESENTATIVES, HASMADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR INEQUITY, IN RESPECT OF EACH COMPANY, ITS BUSINESS OR ANY OF ITS ASSETS, LIABILITIES OR OPERATIONS,INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, OR WITH RESPECT TOANY FINANCIAL PROJECTIONS OR FORECASTS RELATING TO EACH COMPANY, AND ANY SUCH OTHER REPRESENTATIONAND WARRANTIES ARE HEREBY DISCLAIMED; (B) CONTRIBUTEE SHALL HAVE INSPECTED, OR WAIVED (AND UPONCLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE ASSETS FOR ALL PURPOSES ANDSATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE,INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSALOF HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN-MADE FIBERS, OR NATURALLY OCCURRINGRADIOACTIVE MATERIALS (“NORM”); (C) CONTRIBUTEE IS RELYING SOLELY UPON ITS OWN INSPECTION OF THEASSETS, AND CONTRIBUTEE SHALL ACCEPT ALL OF THE SAME IN THEIR “AS IS,” “WHERE IS” CONDITION; AND(D) CONTRIBUTORS MAKE NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, ASTO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION ORMATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO CONTRIBUTEE IN CONNECTIONWITH THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO PRICING ASSUMPTIONS, OR QUALITY ORQUANTITY OF HYDROCARBON RESERVES (IFANY) ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO PRODUCEHYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY OTHER MATTERS CONTAINED IN ANYMATERIALS FURNISHED OR MADE AVAILABLE TO CONTRIBUTEE BY CONTRIBUTOR OR BY CONTRIBUTOR’S AGENTS ORREPRESENTATIVES (ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHERMATERIALS (WRITTEN OR ORAL) FURNISHED BY CONTRIBUTOR OR OTHERWISE MADE AVAILABLE OR DISCLOSED TOCONTRIBUTEE ARE PROVIDED TO CONTRIBUTEE AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANYLIABILITY OF OR AGAINST CONTRIBUTORS AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE ATCONTRIBUTEE’S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW).
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          9.9 Exclusive Remedy and Release. Except as otherwise provided herein, the indemnification and remedies set forth in thisARTICLE IX shall, from and after the Closing, constitute the sole and exclusive remedies ofthe Parties with respect to any breach of representation or warranty contained in this Agreement;*provided*that nothing in this Section 9.9 shall prevent either Party from seekinginjunctive or equitable relief in pursuit of its indemnification claims under this ARTICLEIX.ARTICLE X**TERMINATION**          10.1 Termination. At any time prior to the Closing, this Agreement may be terminated and the transactionscontemplated hereby abandoned:     (a) by the mutual consent of Contributee and Contributors as evidenced in writingsigned by each of Contributee and Contributors;     (b) by Contributee, if there has been a material breach by Contributors of anyrepresentation, warranty or covenant contained in this Agreement that has prevented thesatisfaction of any condition to the obligations of Contributee at the Closing and, if suchbreach is of a character that it is capable of being cured, such breach has not been curedby Contributors within thirty (30) days after written notice thereof from Contributee;     (c) by Contributors, if there has been a material breach by Contributee of anyrepresentation, warranty or covenant contained in this Agreement that has prevented thesatisfaction of any condition to the obligations of Contributors at the Closing and, if suchbreach is of a character that it is capable of being cured, such breach has not been curedby Contributee within thirty (30) days after written notice thereof from Contributors;     (d) by either Contributee or Contributors if any Governmental Authority havingcompetent jurisdiction has issued a final, non-appealable order, decree, ruling orinjunction (other than a temporary restraining order) or taken any other action permanentlyrestraining, enjoining or otherwise prohibiting the transactions contemplated by thisAgreement; or     (e) by either Contributee or Contributors, if the transactions contemplated hereby havenot been consummated by May 31, 2007, *provided*that neither Contributee
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nor Contributorswill be entitled to terminate this Agreement pursuant to this Section 10.1(e) ifsuch Person’s breach of this Agreement has prevented the consummation of the transactionscontemplated by this Agreement.          10.2 Effect of Termination. If this Agreement is terminated under Section 10.1, all further obligations of theParties under this Agreement will terminate without further liability or obligation of either Partyto the other Parties hereunder; *provided, however*, that no Party will be released from liabilityhereunder if this Agreement is terminated and the transactions abandoned by reason of (a) failureof such Party to have performed its material obligations under this Agreement or (b) any materialmisrepresentation made by such Party of any matter set forth in this Agreement. Nothing in thisSection 10.2 will relieve any Party to this Agreement of liability for breach of thisAgreement occurring prior to any termination, or for breach of any provision of this Agreement thatspecifically survives termination hereunder.
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ARTICLE XI**MISCELLANEOUS**          11.1 Notices. All notices and other communications between the Parties shall be in writing and shall be deemedto have been duly given when (i) delivered in person, (ii) five (5) days after posting in theUnited States mail having been sent registered or certified mail return receipt requested or (iii)delivered by telecopy and promptly confirmed by delivery in person or post as aforesaid in eachcase, with postage prepaid, addressed as follows:If to Contributee, to:Eagle Rock Energy Partners, L.P.