**Exhibit 10.8**

 

**EXECUTION COPY**

 

 

CONTRIBUTION, CONVEYANCE

AND ASSUMPTION AGREEMENT

 

Among

 

**HILAND PARTNERS, LP**,

**HILAND OPERATING, LLC****,**

HILAND GP, LLC,

HILAND LP, LLC,

CONTINENTAL GAS, INC.

**HILAND PARTNERS GP, LLC**,

**HILAND PARTNERS, LLC****,**

**CONTINENTAL GAS HOLDINGS, INC.**,

HILAND ENERGY PARTNERS, LLC,

HAROLD HAMM,

HAROLD HAMM HJ TRUST

HAROLD HAMM DST

EQUITY FINANCIAL SERVICES, INC

RANDY MOEDER,

And

KEN MAPLES

 

 

EFFECTIVE AS OF

FEBRUARY 15, 2005

 

 

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**CONTRIBUTION, CONVEYANCEAND ASSUMPTION AGREEMENT**

 

THIS CONTRIBUTION,CONVEYANCE AND ASSUMPTION AGREEMENT, dated as of February 15, 2005, isentered into by and among **HILAND PARTNERS, LP**, a Delaware limited partnership (“**MLP**”),**HILANDOPERATING, LLC****,**a Delaware limited liability company (“**OLLC**”), **HILAND GP, LLC**, a Delaware limitedliability company (“**Hiland GP LLC**”),**HILAND LP, LLC**, a Delaware limitedliability company (“**Hiland LP LLC**”),**CONTINENTAL GAS, INC.**, an Oklahomacorporation (“**Continental Inc**.”),******HILAND PARTNERS GP, LLC**, aDelaware limited liability company (“**GP**”), **HILAND PARTNERS, LLC****, an Oklahoma**limited liability company (“**Hiland LLC**”), **CONTINENTAL GAS HOLDINGS, INC.**,a Delaware corporation (“**New Continental**”), **HILANDENERGY PARTNERS, LLC**, aDelaware limited liability company (“**NewHiland LLC**”), **HAROLD HAMM**, anindividual residing in Enid, Oklahoma (“**Mr. Hamm**”), the **HAROLD HAMM HJ TRUST** (“**HJTrust**”), the **HAROLD HAMM DSTTRUST** (“**DST Trust**”),**EQUITY FINANCIAL SERVICES, INC.**,an Oklahoma corporation (“**Equity Financial**”),**RANDY MOEDER**, an individualresiding in Enid, Oklahoma (“**Mr. Moeder**”)and **KEN MAPLES**, an individualresiding in Enid, Oklahoma (“**Mr. Maples**”).  The parties to this agreement arecollectively referred to herein as the “**Parties**.”  Capitalized terms used herein shall have themeanings assigned to such terms in Section 1.1.

 

**RECITALS**

 

A.                                   ContinentalInc. and GP have formed MLP pursuant to the Delaware Revised Uniform LimitedPartnership Act (the “**Delaware Act**”), for the purpose of engaging in anybusiness activity that is approved by GP and that lawfully may be conducted bya limited partnership organized pursuant to the Delaware Act.

 

B.                                     Inorder to accomplish the objectives and purposes in the preceding recital, thefollowing actions have been taken prior to the date hereof:

 

 1.                                    ContinentalInc., HJ Trust, DST Trust and Equity Financial have formed GP, to whichContinental Inc. contributed $648.50 in exchange for 6,141 GP Class BUnits, representing a 64.85% economic non-voting member interest in GP, DSTTrust contributed $206.50 in exchange for 1,956 GP Class B Units,representing a 20.65% economic non-voting member interest in GP, HJ Trustcontributed $137.60 in exchange for 1,303 GP Class B Units, representing a13.76% economic non-voting member interest in GP and Equity Financialcontributed $7.40 in exchange for 70 GP Class B Units, representing a0.74% economic non-voting member interest in GP.

 

 2.                                    ContinentalInc. and GP have formed MLP, to which Continental Inc. contributed $980 inexchange for a 98% limited partner interest in MLP (the “**Continental MLP Interest**”), and GPcontributed $20 in exchange for a 2% general partner interest in MLP.

 

 3.                                    MLPhas formed OLLC, to which MLP contributed $1,000 in exchange for all of themember interests in OLLC.

 

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 4.                                    Mr. Hamm,DST Trust and HJ Trust formed New Continental, to which Mr. Hammcontributed $907 in exchange for 9,070 shares of common stock, par value$1.00 per share, of New Continental (“**NewContinental Common Stock**”), DST Trust contributed $55.80 inexchange for 558 shares of New Continental Common Stock and HJ Trustcontributed $37.20 in exchange for 372 shares of New Continental CommonStock.  The shares of New ContinentalCommon Stock that were so issued to Mr. Hamm, DST Trust and HJ Trust representall of the outstanding shares of New Continental Common Stock and are referredto herein as the “**New Continental Shares**.”

 

 5.                                    NewContinental has formed Hiland GP LLC, to which it contributed $1,000 inexchange for all of the member interests in Hiland GP LLC.

 

 6.                                    NewContinental has formed Hiland LP LLC, to which it contributed $1,000 inexchange for all of the member interests in Hiland LP LLC.

 

 7.                                    Hilandhas formed New Hiland LLC, to which it contributed $1,000 in exchange for allof the member interests in New Hiland LLC.

 

 8.                                    Mr. Hammhas formed HH GP Holding, LLC, a Delaware limited liability company (“**Holding LLC**”), to which he hascontributed $1,000 in exchange for all of the membership interest in HoldingLLC.

 

 9.                                    HilandLLC has conveyed all of its assets, other than its assets related to the BakkenGathering System to New Hiland LLC as a capital contribution pursuant to, andin accordance with, that certain Assignment, Conveyance and Bill of Salebetween Hiland LLC and New Hiland LLC (“**HilandConveyance and Bill of Sale**”) dated as of November 23, 2004and that certain Bill of Sale between Hiland LLC and New Hiland LLC dated as ofNovember 23, 2004 (collectively, the “**SpecificConveyances**”).

 

C.                                     Concurrentlywith the consummation of the transactions contemplated hereby, each of thefollowing matters shall occur:

 

 1.                                    NewHiland LLC will distribute $0.6 million in cash and all of its accountsreceivables to Hiland LLC.

 

 2.                                    HilandLLC will distribute all of its member interests in New Hiland LLC to DST Trust,HJ Trust and Equity Financial as follows: (i) DST Trust will receive a 58.8% member interest in New HilandLLC, (ii) HJ Trust will receive a 39.2% member interest in New Hiland LLCand (iii) Equity Financial will receive a 2.0% member interest in NewHiland LLC.

 

 3.                                    Mr. Hamm,DST Trust and HJ Trust will convey all of their shares of common stock, no parvalue, of Continental Inc. (“**ContinentalCommon Stock**”), representing all of the outstanding shares ofContinental Common Stock (the “**ContinentalShares**”) to New Continental as a capital contribution.

 

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 4.                                    NewContinental will contribute 0.001 of a share of Continental Common Stock toHiland GP LLC and will contribute 99.999 shares of Continental Common Stock toHiland LP LLC, in each case as a capital contribution.

 

 5.                                    ContinentalInc. will convert from a corporation to an Oklahoma limited partnership, under Section 1090.5of the Oklahoma General Corporation Act (the “**OGCA**”), named “Continental Gas Operating, LP” (“**Continental LP**”) and will designateHiland GP LLC as its general partner and Hiland LP LLC as its limited partner.

 

 6.                                    ContinentalLP will distribute (i) approximately $0.5 million of its cash and all ofits accounts receivable to New Continental (.001% and 99.999% on behalf ofHiland GP LLC and Hiland LP LLC, respectively) and (ii) 6,141 Class BUnits in GP to New Continental (on behalf of Hiland GP LLC (0.0614 Class BUnits) and Hiland LP LLC (6,140.9386 Class B Units)).

 

 7.                                    EquityFinancial, DST Trust and HJ Trust will convey 0.014%, 0.413% and 0.276% memberinterests in New Hiland LLC, respectively, to GP as a capital contribution andNew Continental will convey a 1.297% member interest in Hiland LP LLC to GP asa capital contribution.  Such memberinterests in New Hiland LLC and Hiland LP LLC have an aggregate value equal to2% of the equity value of the MLP after the closing of the transactionscontemplated by this Agreement and shall be referred to herein as the “**Interests**.”

 

 8.                                    GPwill issue 330 GP Class B Units representing a 3.3% economic non-votingmember interest in GP to Mr. Moeder, and 200 GP Class B Unitsrepresenting a 2.0% economic non-voting member interest in GP to Mr. Maples.

 

 9.                                    HoldingLLC will contribute $0.94 to GP in exchange for 940 GP Class A Units, Mr. Moederwill contribute $0.04 to GP in exchange for 40 GP Class A Units, and Mr. Mapleswill contribute $0.02 in exchange for 20 GP Class A Units.

 

 10.                              GPwill contribute the Interests to MLP in exchange for (a) a continuation ofits 2% general partner interest in MLP and (b) the issuance of the IDRs.

 

 11.                              TheDST Trust will contribute all of its remaining member interests in New HilandLLC to MLP in exchange for (a) 148,721 Common Units, representing a 2.14%interest in MLP, (b) 842,752 Sub Units representing a 12.15% interest inMLP and (c) the right to receive reimbursement of certain capitalizedexpenditures as contemplated herein.

 

 12.                              TheHJ Trust will contribute all of its remaining member interests in New HilandLLC to MLP in exchange for (a) 99,147 Common Units, representing a 1.43%interest in MLP, (b) 561,834 Sub Units, representing a 8.10% interest inMLP and (c) the right to receive reimbursement of certain capitalizedexpenditures as contemplated herein.

 

 13.                              EquityFinancial will contribute all of its remaining member interests in New HilandLLC to MLP in exchange for (a) 5,059 Common Units, representing a 0.07%interest in MLP, (b) 28,665 Sub Units, representing a 0.41% interest inMLP and (c) the right to receive reimbursement of certain capitalizedexpenditures as contemplated herein.

 

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 14.                              NewContinental will contribute all of its remaining member interests in Hiland LPLLC and all of its member interests in Hiland GP LLC to MLP in exchange for (a) 467,073Common Units, representing a 6.73% interest in MLP, (b) 2,646,749 SubUnits, representing a 38.14% interest in MLP and (c) the right to receivereimbursement of certain capitalized expenditures as contemplated herein.

 

 15.                              TheMLP will redeem and cancel the Continental MLP Interest in exchange for $980payable to Continental LP and the MLP shall distribute $20 to the GP.

 

 16.                              Thepublic, through the Underwriters, will contribute approximately$51.75 million in cash, less the Underwriters’ spread of$3.6225 million in exchange for 2,300,000 Common Units.

 

 17.                              MLPwill (a) pay transaction expenses associated with the transactionscontemplated by this Agreement in the amount of approximately $1.8 million(exclusive of the Underwriter’s spread), (b) contribute approximately$14.0 million to Continental LP (on behalf of Hiland GP LLC (.001%) and HilandLP LLC (99.999%)) for the retirement of indebtedness under its term loan (the “**Continental Debt**”), (c) contributeapproximately $8.9 million to New Hiland LLC for the retirement of indebtednessunder its term loan (the “**Hiland Debt**”)and (d) contribute cash to Continental LP and New Hiland LLC to replenishworking capital

 

 18.                              ContinentalLP and New Hiland LLC will retire the Continental Debt and the Hiland Debt.

 

 19.                              MLPwill convey all of its member interests in New Hiland LLC, Hiland GP LLC andHiland LP LLC to the OLLC as a capital contribution.

 

 20.                              TheMLP shall redeem from HJ Trust, DST Trust and New Continental 300,000 CommonUnits on a pro rata basis based on their relative respective ownership of Unitsimmediately following the transactions contemplated by paragraph 16 above(“**Pro Rata Basis**”) toreimburse them for capital expenditures.

 

 21.                              TheAgreement of Limited Partnership of MLP, the Limited Liability CompanyAgreement of OLLC and the Limited Liability Company Agreement of GP will beamended and restated to reflect the applicable matters set forth above and ascontained in this Agreement.

 

 22.                              Tothe extent required by this Agreement, MLP will (a) distribute cash to DSTTrust, HJ Trust and Equity Financial in reimbursement of certain capitalizedexpenditures and (b) distribute cash to New Continental in reimbursementof certain capitalized expenditures.

 

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NOW, THEREFORE, inconsideration of their mutual undertakings and agreements hereunder, theParties undertake and agree as follows:

 

**ARTICLE 1DEFINITIONS**

 

Section 1.1                                      Thefollowing capitalized terms shall have the meanings given below.

 

(a)                                  “**Acquisition**”means consummation of the transactions contemplated by the terms of thisAgreement.

 

(b)                                 “**Agreement**”means this Contribution, Conveyance and Assumption Agreement.

 

(c)                                  **“Bakken Gathering System”** means allright, title and interest of Hiland LLC in and to the properties, assets andrights relating to the natural gas and gathering system in eastern Montanadescribed in Schedule I to the Omnibus Agreement.

 

(d)                                 “**Common Unit**”has the meaning assigned to such term in the Partnership Agreement.

 

(e)                                  “**Effective Time**”shall mean 8:00 a.m. New York, New York time on February 15, 2005.

 

(f)                                    “**GP**”has the meaning assigned to such term in the opening paragraph of thisAgreement.

 

(g)                                 “**IDRs**”means “Incentive Distribution Rights” as such term is defined in thePartnership Agreement.

 

(h)                                 “**MLP**”has the meaning assigned to such term in the opening paragraph of thisAgreement.

 

(i)                                     **“Offering”** means the initial publicoffering by the MLP of Common Units.

 

(j)                                     “**Omnibus Agreement**” means thatcertain Omnibus Agreement of even date herewith, among Continental Resources, Inc.,Hiland LLC, Mr. Hamm, GP, New Continental and MLP.

 

(k)                                  “**PartnershipAgreement**” means the First Amended and Restated Agreement of LimitedPartnership of Hiland Partners, LP dated as of February 15, 2005.

 

(l)                                     **“Partnership Group”**has the meaningassigned to such term in the Omnibus Agreement.

 

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(m)                               **“Registration Statement”**means theregistration statement on Form S-1 (Registration No. 333-119908)filed by the MLP relating to the Offering.

 

(n)                                 “**Sub Unit**”means “Subordinated Unit” as such term is defined in the Partnership Agreement.

 

(o)                                 “**Underwriters**”means A.G. Edwards & Sons, Inc., Raymond James &Associates, Inc., and RBC Capital Markets Corporation.

 

**ARTICLE 2CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS**

 

Section 2.1                                      **Distribution of Cash by New Hiland LLC to HilandLLC**.  New Hiland LLChereby distributes, grants, bargains, conveys, assigns, transfers, sets overand delivers to Hiland LLC, its successors and assigns, for its and their useforever, $0.6 million of cash and all of its accounts receivables (“**Hiland Distributed Working Capital**”).

 

Section 2.2                                      **Distribution of New Hiland LLC**.  Hiland LLC hereby distributes, grants,bargains, conveys, assigns, transfers, sets over and delivers to DST Trust, HJTrust and Equity Financial, their successors and assigns, for their useforever, all right, title and interest in and to all of Hiland LLC’s 100%member interest in New Hiland LLC as follows: (a) DST Trust is hereby distributed a 58.8% member interest in NewHiland LLC, (b) HJ Trust is hereby distributed a 39.2% member interest inNew Hiland LLC and (c) Equity Financial is hereby distributed a 2.0%member interest in New Hiland LLC.  Eachof DST Trust, HJ Trust and Equity Financial hereby accepts such memberinterests in New Hiland LLC.

 

Section 2.3                                      **Contribution of Continental Common Stock to NewContinental**.  Each of Mr. Hamm,DST Trust and HJ Trust hereby grants, contributes, bargains, conveys, assigns,transfers, sets over and delivers to New Continental, its successors andassigns, for its and their own use forever, all right, title and interest inand to 907, 56 and 37 shares, respectively, of Continental Common Stock, as acapital contribution, representing in the aggregate all of the outstandingshares of Continental Common Stock in exchange for (a) the continuation ofMr. Hamm’s, DST Trust’s and HJ Trust’s ownership of 9,070, 558 and 372shares of New Continental Common Stock, respectively, and (b) other goodand valuable considerations, the sufficiency of which is hereby acknowledged,and New Continental hereby accepts such Continental Shares as a contribution tothe capital of New Continental.

 

Section 2.4                                      **Contribution of Continental Common Stock to HilandGP LLC**.  New Continentalhereby grants, contributes, bargains, conveys, assigns, transfers, sets overand delivers to Hiland GP LLC, its successors and assigns, for its and theirown use forever, all right, title and interest in and to 0.001 of a share ofContinental Common Stock, as a capital contribution, and Hiland GP LLC herebyaccepts such Continental Shares as a contribution to the capital of Hiland GPLLC.

 

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Section 2.5                                      **Contribution of Continental Common Stock to HilandLP LLC**.  New Continentalhereby grants, contributes, bargains, conveys, assigns, transfers, sets overand delivers to Hiland LP LLC, its successors and assigns, for its and theirown use forever, all right, title and interest in and to 99.999 shares ofContinental Common Stock, as a capital contribution, and Hiland LP LLC herebyaccepts such Continental Shares as a contribution to the capital of Hiland LP LLC.

 

Section 2.6                                      **Conversion of Continental Inc. to Continental LP**.  The Parties acknowledge that Continental Inc.has adopted a certificate of conversion in the form attached hereto as Exhibit Aand pursuant thereto, has converted to Continental LP, an Oklahoma limitedpartnership, having (a) Hiland GP LLC as the general partner owning a..001% general partner interest and (b) Hiland LP LLC as the limitedpartner owning a 99.999% limited partner interest.

 

Section 2.7                                      **Distribution of Working Capital Assets byContinental LP**. Continental LP hereby distributes, grants, bargains, conveys, assigns,transfers, sets over and delivers to New Continental, its successors andassigns, for its use forever, (a) $0.5 million of cash (0.001% and 99.999%on behalf of Hiland GP LLC ($5.00) and Hiland LP LLC ($499,995.00),respectively), and (b) all of its accounts receivable as of immediatelyprior to the Effective Time (on behalf of Hiland GP LLC (0.01%) and Hiland LPLLC (99.99%)) (collectively, the “**Continental DistributedWorking Capital**”); provided that if the Continental DistributedWorking Capital exceeds $9,971,214 the amount of accounts receivabledistributed pursuant to this Section 2.7 shall be reduced such that theContinental Distributed Working Capital distributed pursuant to this Section 2.7shall equal $9,971,214. New Continental hereby accepts such working capitalassets as a distribution.

 

Section 2.8                                      **Distribution of GP by Continental LP**.  Continental LP hereby distributes, grants,bargains, conveys, assigns, transfers, sets over and delivers to NewContinental, its successors and assigns, for its use forever, all right, titleand interest in and to all of its 6,141 Class B Units in GP (on behalf ofHiland GP LLC (.0614 Class B Units)) and Hiland LP LLC (6,140.9386 Class BUnits)). New Continental hereby accepts such member interests in GP as adistribution.

 

Section 2.9                                      **Contribution of Interests to GP**.  Each of Equity Financial, DST Trust and HJTrust hereby grants, contributes, bargains, conveys, assigns, transfers, setsover and delivers to GP, its successors and assigns, for its and their own useforever, all right, title and interest in and to a 0.014%, 0.413% and 0.276%,respectively, member interests in New Hiland LLC, as a capital contribution,and New Continental hereby grants, contributes, bargains, conveys, assigns,transfers, sets over and delivers to GP, its successors and assigns, for itsand their own use forever, all right, title and interest in and to a 1.297%member interest in Hiland LP LLC, as a capital contribution, in each case inexchange for (a) the continuation of Equity Financial’s, DST Trust’s, HJTrust’s and New Continental’s ownership of 70, 1,956, 1,303 and 6,141 GP Class BUnits and (b) other good and valuable consideration, the sufficiency ofwhich is hereby acknowledged, and GP hereby accepts such member interests inNew Hiland LLC and such member interest

 

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in Hiland LP LLC as contributions to thecapital of GP.  The Parties acknowledgethat the Interests have an aggregate value equal to 2% of the equity value ofthe MLP after the closing of the transactions contemplated by this Agreement.

 

Section 2.10                                **Issuance of GP Class B Units.**  GP hereby issues to Mr. Moeder and Mr. Maples,their successors and assigns, for their use forever, all right, title andinterest in and to 330 GP Class B Units and 200 GP Class B Units,respectively, representing a 3.3% and 2.0%, respectively, member interest inGP.

 

Section 2.11                                **Purchase of GP Class A Units**.  Holding LLC hereby contributes $0.94 to GP inexchange for 940 GP Class A Units, representing a 94% voting interest inGP.  Mr. Moeder hereby contributes$0.04 to GP in exchange for 40 GP Class A Units, representing a 4% votinginterest in GP, and Mr. Maples hereby contributes $0.02 to GP in exchangefor 20 GP Class A Units, representing a 2% voting interest in GP.

 

Section 2.12                                **Contribution ofthe Interests by GP to MLP**. GP hereby grants, contributes, bargains, conveys, assigns, transfers,sets over and delivers to MLP, its successors and assigns, for its and theirown use forever, all right, title and interest in and to the Interests, as acapital contribution, in exchange for (a) a continuation of its 2% generalpartner interest in MLP, (b) the issuance of the IDRs, and (c) othergood and valuable consideration, the sufficiency of which is herebyacknowledged, and MLP hereby accepts the Interests as a contribution to thecapital of MLP.

 

Section 2.13                                **Contribution ofan Interest in New Hiland LLC by DST Trust to MLP**.  DST Trust hereby grants, contributes,bargains, conveys, assigns, transfers, sets over and delivers to MLP, itssuccessors and assigns, for its and their own use forever, all right, title andinterest in and to all of its 58.387% member interest in New Hiland LLC, as acapital contribution, in exchange for (a) 148,721 Common Units,representing a 2.14% interest in MLP, (b) 842,752 Sub Units representing a12.15% interest in MLP, (c) the right to receive, if any, an amount incash equal to the product of 0.588 and the Hiland Excess Distribution Amount(as defined below) in reimbursement of certain capitalized expenditures and (d) othergood and valuable consideration, the sufficiency of which is herebyacknowledged, and MLP hereby accepts such membership interest in New Hiland LLCas a contribution to the capital of MLP. “**Hiland Excess Distribution Amount**”shall mean the amount by which $5,399,858 exceeds the amount of HilandDistributed Working Capital.

 

Section 2.14                                **Contribution ofan Interest in New Hiland LLC by the HJ Trust to MLP**.  HJ Trust hereby grants, contributes,bargains, conveys, assigns, transfers, sets over and delivers to MLP, itssuccessors and assigns, for its and their own use forever, all right, title andinterest in and to all of its 38.924% member interest in New Hiland LLC as acapital contribution, in exchange for (a) 99,147 Common Units,representing a 1.43% interest in the MLP, (b) 561,834 Sub Unitsrepresenting a 8.10% interest in the, (c) the right to receive, if any, anamount in cash equal to the product of 0.392 and the Hiland Excess DistributionAmount in reimbursement of certain capitalized expenditures and (d) othergood and valuable consideration, the sufficiency of which is

 

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hereby acknowledged, and MLP hereby acceptssuch membership interest in New Hiland LLC as a contribution to the capital ofMLP.

 

Section 2.15                                **Contribution ofan Interest in New Hiland LLC by Equity Financial to MLP**.  Equity Financial hereby grants, contributes,bargains, conveys, assigns, transfers, sets over and delivers to MLP, itssuccessors and assigns, for its and their own use forever, all right, title andinterest in and to all of its 1.986% member interest in New Hiland LLC, as a capitalcontribution, in exchange for (a) 5,059 Common Units, representing a 0.07%interest in MLP and (b) 28,665 Sub Units representing a 0.41% interest inMLP, (c) the right to receive, if any, an amount in cash equal to theproduct of 0.02 and the Hiland Excess Distribution Amount in reimbursement ofcertain capitalized expenditures and (d) other good and valuableconsideration, the sufficiency of which is hereby acknowledged, and MLP herebyaccepts such member interest in New Hiland LLC as a contribution to the capitalof MLP.

 

Section 2.16                                **Contribution ofInterests in Hiland GP LLC and Hiland LP LLC by New Continental to MLP**.  New Continental hereby grants, contributes,bargains, conveys, assigns, transfers, sets over and delivers to MLP, itssuccessors and assigns, for its and their own use forever, all right, title andinterest in and to all of its 100% member interest in Hiland GP LLC and all ofits 98.703% member interest in Hiland LP LLC in exchange for (a) 467,073Common Units, representing a 6.73% interest in MLP, (b) 2,646,749 SubUnits, representing a 38.14% interest in MLP, (c) the right to receive, ifany, the Continental Excess Distribution Amount in reimbursement of certaincapitalized expenditures and (d) other good and valuable consideration,the sufficiency of which is hereby acknowledged, and MLP hereby accepts suchmembership interests in Hiland GP LLC and Hiland LP LLC as a contribution tothe capital of MLP. The “**Continental ExcessDistribution Amount**” shall mean the amount by which $9,971,214exceeds the Continental Distributed Working Capital distributed by ContinentalLP pursuant to Section 2.7.

 

Section 2.17                                **Redemption of Initial MLP Interests; Distributionto GP**.  The MLP herebyredeems from Continental LP and retires the Continental MLP Interest inexchange for a payment in cash to Continental LP equal to $980.00.  The MLP hereby distributes $20.00 in cash tothe GP.

 

Section 2.18                                **Public CashContribution**.  The Partiesacknowledge a capital contribution by the public through the Underwriters toMLP of approximately $51.75 million in cash ($48.1275 million net to MLP afterthe underwriters’ spread of $3.6225 million) in exchange for 2,300,000Common Units.

 

Section 2.19                                **Payment ofTransaction Costs; Retirement of Hiland Debt and Continental Debt**.  The Parties acknowledge (a) payment byMLP, in connection with the Acquisition, of transaction expenses in the amountof approximately $1.8 million (exclusive of the Underwriter’s spread), (b) retirementby MLP of approximately $14.0 million of debt of Continental, (c) retirementby MLP of approximately $8.9 million of debt of Hiland and (d) contributionby MLP of cash to Continental LP and New Hiland LLC to replenish workingcapital.

 

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Section 2.20                                **Contribution ofNew Hiland LLC, Hiland GP LLC and Hiland LP LLC by MLP to OLLC**.  MLP hereby grants, contributes, bargains,conveys, assigns, transfers, sets over and delivers to OLLC, its successors andassigns, for its and their own use forever, all right, title and interest inand to all of its 100% member interests in New Hiland LLC, Hiland GP LLC andHiland LP LLC, as a capital contribution, in exchange for (a) acontinuation of its 100% membership interest in OLLC, and (b) other goodand valuable consideration, the sufficiency of which is hereby acknowledged,and OLLC hereby accepts such membership interests in New Hiland LLC, Hiland GPLLC and Hiland LP LLC as a contribution to the capital of OLLC.

 

Section 2.21                                **Redemption of Common Units**.  MLP hereby redeems 41,604 Common Units fromHJ Trust, 62,405 Common Units from DST Trust and 195,991 Common Units from NewContinental (collectively, the “**Redeemed Units**”)in exchange for payments of $870,563.70, $1,305,824.63 and $4,101,111.67,respectively, which are being made in reimbursement of certain capitalizedexpenditures.  Pursuant to suchredemption, each of HJ Trust, DST Trust and New Continental hereby grants,bargains, conveys, assigns, transfers sets over and delivers to MLP theirrespective Redeemed Units.

 

**ARTICLE 3**

**ADDITIONAL TRANSACTIONS**

 

Section 3.1                                      ***Distribution in Reimbursement of Capitalized Expenditures******.  Within 30 daysafter the date of this Agreement, MLP shall (a) distribute, grant,bargain, convey, assign, transfer, set over and deliver to New Continental, forits use forever an amount in cash equal to the Continental Excess DistributionAmount, if any, and (b) distribute, grant, bargain, convey, assign,transfer, set over and deliver to (i) DST Trust an amount in cash equal tothe product of 0.588 and the Hiland Excess Distribution Amount, if any,***tosatisfy the right to reimbursement of capitalized expenditures***, (ii) HJ Trust***an amount incash equal to the product of 0.392 and the Hiland Excess Distribution Amount,if any, to satisfy the right to reimbursement of capitalized expenditures and (iii) ***Equity Financial***an amount incash equal to the product of 0.02 and the Hiland Excess Distribution Amount, ifany, to satisfy the right to reimbursement of capitalized expenditures.

 

**ARTICLE 4TITLE MATTERS**

 

Section 4.1                                      **Encumbrances.**

 

(a)                                  Exceptto the extent provided in Article 2 or any other document executed inconnection with this Agreement or the Offering including, without limitation,the Omnibus Agreement, the contribution and conveyance (by operation of law orotherwise) of the various physical assets owned by Hiland LLC or ContinentalGas as reflected in this Agreement (collectively, the “**Assets**”) are made expressly subject toall matters of record (other than consensual liens) to the extent that suchmatters are valid and in force and effect with respect to

 

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the Assets or that a currentsurvey on the ground would show and all matters contained in the SpecificConveyances.

 

(b)                                 Tothe extent that certain jurisdictions in which the Assets are located mayrequire that documents be recorded in order to evidence the transfers of titlereflected in this Agreement, then the provisions set forth in Section 4.1(a) immediatelyabove shall also be applicable to the conveyances under such documents.

 

Section 4.2                                      **Disclaimer of Warranties; Subrogation; Waiver ofBulk Sales Laws.**

 

(a)                                  EXCEPTTO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED INCONNECTION WITH THIS AGREEMENT OR THE OFFERING INCLUDING, WITHOUT LIMITATIONTHE OMNIBUS AGREEMENT, THE PARTIES ACKNOWLEDGE AND AGREE THAT NONE OF THEPARTIES HAS MADE, DOES NOT MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES ANDDISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS ORGUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED ORSTATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (A) THE VALUE,NATURE, QUALITY OR CONDITION OF THE ASSETS INCLUDING, WITHOUT LIMITATION, THEWATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THE ASSETS GENERALLY,INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THEASSETS, (B) THE INCOME TO BE DERIVED FROM THE ASSETS, (C) THESUITABILITY OF THE ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BECONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THE ASSETS OR THEIROPERATION WITH ANY LAWS (INCLUDING WITHOUT LIMITATION ANY ZONING, ENVIRONMENTALPROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS ORREQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY,PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE ASSETS.  EXCEPT TO THE EXTENT PROVIDED IN ANY OTHERDOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THEOFFERING INCLUDING, WITHOUT LIMITATION, THE OMNIBUS AGREEMENT, THE PARTIESACKNOWLEDGE AND AGREE THAT EACH HAS HAD THE OPPORTUNITY TO INSPECT THERESPECTIVE ASSETS, AND EACH IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THERESPECTIVE ASSETS AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY ANYOF THE PARTIES.  EXCEPT TO THE EXTENTPROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THISAGREEMENT OR THE OFFERING INCLUDING, WITHOUT LIMITATION, THE OMNIBUS AGREEMENT,NONE OF THE PARTIES IS LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTENSTATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE ASSETS FURNISHEDBY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED ORDELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING INCLUDING, WITHOUTLIMITATION, THE OMNIBUS AGREEMENT, EACH OF THE PARTIES ACKNOWLEDGES THAT TO THE

 

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MAXIMUM EXTENT PERMITTED BY LAW, THECONTRIBUTION OF THE ASSETS AS PROVIDED FOR HEREIN IS MADE IN AN “AS IS”, “WHEREIS” CONDITION WITH ALL FAULTS, AND THE ASSETS ARE CONTRIBUTED AND CONVEYEDSUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION.  THIS SECTION SHALL SURVIVE SUCHCONTRIBUTION AND CONVEYANCE OR THE TERMINATION OF THIS AGREEMENT.  THE PROVISIONS OF THIS SECTION HAVE BEENNEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE ACOMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHEREXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS THAT MAY ARISEPURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SETFORTH IN THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED OR DELIVERED INCONNECTION WITH THIS AGREEMENT OR THE OFFERING, INCLUDING, WITHOUT LIMITATION,THE OMNIBUS AGREEMENT.

 

(b)                                 Thecontributions of the Assets made under this Agreement are made with full rightsof substitution and subrogation of the respective parties receiving suchcontributions, and all persons claiming by, through and under such parties, tothe extent assignable, in and to all covenants and warranties by thepredecessors-in-title of the parties contributing the Assets, and with fullsubrogation of all rights accruing under applicable statutes of limitation andall rights of action of warranty against all former owners of the Assets.

 

(c)                                  Eachof the Parties agrees that the disclaimers contained in this Section Section 4.2are “conspicuous” disclaimers.  Anycovenants implied by statute or law by the use of the words “grant,” “convey,” “bargain,”“sell,” “assign,” “transfer,” “deliver,” or “set over” or any of them or anyother words used in this Agreement or any exhibits hereto are hereby expresslydisclaimed, waived or negated.

 

Each of the Parties hereby waives compliance with any applicable bulksales law or any similar law in any applicable jurisdiction in respect of thetransactions contemplated by this Agreement.

 

**ARTICLE 5FURTHER ASSURANCES**

 

Section 5.1                                      **Further Assurances**.  From time to time after the Effective Time,and without any further consideration, the Parties agree to execute,acknowledge and deliver all such additional deeds, assignments, bills of sale,conveyances, instruments, notices, releases, acquittances and other documents,and will do all such other acts and things, all in accordance with applicablelaw, as may be necessary or appropriate (a) more fully to assure that theapplicable Parties own all of the properties, rights, titles, interests,estates, remedies, powers and privileges granted by this Agreement, or whichare intended to be so granted, or (b) more fully and effectively to vestin the applicable Parties and their respective successors and assignsbeneficial and record title to the interests contributed and assigned by thisAgreement or intended so to be and to more fully and effectively carry out thepurposes and intent of this Agreement.

 

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Section 5.2                                      **Other Assurances**.  From time to time after the Effective Time,and without any further consideration, each of the Parties shall execute,acknowledge and deliver all such additional instruments, notices and otherdocuments, and will do all such other acts and things, all in accordance withapplicable law, as may be necessary or appropriate to more fully and effectivelycarry out the purposes and intent of this Agreement.  Without limiting the generality of theforegoing, the Parties acknowledge that the parties have used their good faithefforts to attempt to identify all of the assets being contributed to the MLPor its subsidiaries as required in connection with the Offering.  However, due to the age of some of thoseassets and the difficulties in locating appropriate data with respect to someof the assets it is possible that assets intended to be contributed to the MLPor its subsidiaries were not identified and therefore are not included in theassets contributed to the MLP or its subsidiaries.  It is the express intent of the Parties thatthe MLP or its subsidiaries own all assets necessary to operate the assets thatare identified in this Agreement and in the Registration Statement.  To the extent any assets were not identifiedbut are necessary to the operation of assets that were identified, then theintent of the Parties is that all such unidentified assets are intended to beconveyed to the appropriate members of the Partnership Group.  To the extent such assets are identified at alater date, the Parties shall take the appropriate actions required in order toconvey all such assets to the appropriate members of the PartnershipGroup.  Likewise, to the extent thatassets are identified at a later date that were not intended by the parties tobe conveyed as reflected in the Registration Statement, the Parties shall takethe appropriate actions required in order to convey all such assets to theappropriate party.

 

**ARTICLE 6EFFECTIVE TIME**

 

Notwithstanding anythingcontained in this Agreement to the contrary, none of the provisions of Article 2or Article 3 of this Agreement shall be operative or have any effect untilthe Effective Time, at which time all the provisions of Article 2 and Article 3of this Agreement shall be effective and operative in accordance with Article 7,without further action by any party hereto.

 

**ARTICLE 7MISCELLANEOUS**

 

Section 7.1                                      **Order ofCompletion of Transactions**. The transactions provided for in Article 2 and Article 3 ofthis Agreement shall be completed immediately following the Effective Time inthe following order: first, the transactions provided for in Article 2shall be completed in the order set forth therein; and second, following thecompletion of the transactions as provided in Article 2, the transactions,if they occur, provided for in Article 3 shall be completed.

 

Section 7.2                                      **Costs**.  Except for the transaction costs set forth inSection 2.21, the OLLC shall pay all expenses, fees and costs, includingbut not limited to, all sales, use and similar taxes arising out of thecontributions, conveyances and deliveries to be made hereunder and shall payall documentary, filing, recording, transfer, deed, and conveyance taxes andfees required in connection therewith. In addition, the OLLC shall be responsible for all costs, liabilitiesand expenses (including court costs and reasonable attorneys’ fees) incurred in

 

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connection with the implementation of anyconveyance or delivery pursuant to Section 5.1 or Section 5.2.

 

Section 7.3                                      **Headings;References; Interpretation**. All Article and Section headings in this Agreement are forconvenience only and shall not be deemed to control or affect the meaning orconstruction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similarimport, when used in this Agreement, shall refer to this Agreement as a whole,including, without limitation, all Schedules and Exhibits attached hereto, andnot to any particular provision of this Agreement.  All references herein to Articles, Sections,Schedules and Exhibits shall, unless the context requires a differentconstruction, be deemed to be references to the Articles and Sections of thisAgreement and the Schedules and Exhibits attached hereto, and all suchSchedules and Exhibits attached hereto are hereby incorporated herein and madea part hereof for all purposes.  Allpersonal pronouns used in this Agreement, whether used in the masculine,feminine or neuter gender, shall include all other genders, and the singularshall include the plural and vice versa. The use herein of the word “including” following any general statement,term or matter shall not be construed to limit such statement, term or matterto the specific items or matters set forth immediately following such word orto similar items or matters, whether or not non-limiting language (such as “withoutlimitation”, “but not limited to”, or words of similar import) is used withreference thereto, but rather shall be deemed to refer to all other items ormatters that could reasonably fall within the broadest possible scope of suchgeneral statement, term or matter.

 

Section 7.4                                      **Successors andAssigns**.  The Agreementshall be binding upon and inure to the benefit of the Parties and theirrespective successors and assigns.

 

Section 7.5                                      **No Third PartyRights**.  The provisions ofthis Agreement are intended to bind the Parties as to each other and are notintended to and do not create rights in any other person or confer upon anyother person any benefits, rights or remedies and no person is or is intendedto be a third party beneficiary of any of the provisions of this Agreement.

 

Section 7.6                                      **Counterparts**.  This Agreement may be executed in any numberof counterparts, all of which together shall constitute one agreement bindingon the parties hereto.

 

Section 7.7                                      **Governing Law**.  This Agreement shall be governed by, andconstrued in accordance with, the laws of the State of Oklahoma applicable tocontracts made and to be performed wholly within such state without givingeffect to conflict of law principles thereof.

 

Section 7.8                                      **Severability**.  If any of the provisions of this Agreementare held by any court of competent jurisdiction to contravene, or to be invalidunder, the laws of any political body having jurisdiction over the subjectmatter hereof, such contravention or invalidity shall not invalidate the entireAgreement. Instead, this Agreement shall be construed as if it did not containthe particular provision or provisions held to be invalid and an equitableadjustment shall be made and necessary provision added so as to give effect tothe intention of the Parties as expressed in this Agreement at the time ofexecution of this Agreement.

 

Section 7.9                                      **Amendment orModification**.  ThisAgreement may be amended or modified from time to time only by the writtenagreement of all the Parties. Each such

 

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instrument shall be reduced to writing andshall be designated on its face as an Amendment to this Agreement.

 

Section 7.10                                **Integration**.  This Agreement and the instruments referencedherein supersede all previous understandings or agreements among the Parties,whether oral or written, with respect to their subject matter. This documentand such instruments contain the entire understanding of the Parties withrespect to the subject matter hereof and thereof. No understanding,representation, promise or agreement, whether oral or written, is intended tobe or shall be included in or form part of this Agreement unless it iscontained in a written amendment hereto executed by the parties hereto afterthe date of this Agreement.

 

Section 7.11                                **Deed; Bill of Sale; Assignment.** Tothe extent required and permitted by applicable law, this Agreement shall alsoconstitute a “deed,” “bill of sale” or “assignment” of the assets and interestsreferenced herein.

 

[THE REMAINDEROF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, this Agreement has beenduly executed by the parties hereto as of the date first above written.

 
|       | **HILAND PARTNERS, LP**                       |
|------------|-----------------------------------------------|
|       |                                          |
|       | By:                                           | Hiland Partners GP, LLC, its general  partner |
|       |                                          |
|       |                                          |
|       |  /s/ RANDY MOEDER                        |   |
|       | Name: Randy Moeder                            |
|       | Title: President and Chief Executive  Officer |
|       |                                          |
|       |                                          |
|       | **HILAND PARTNERS GP, LLC**                   |
|       |                                          |
|       |                                          |
|       |  /s/ RANDY MOEDER                        |   |
|       | Name: Randy Moeder                            |
|       | Title: President and Chief Executive  Officer |
|       |                                          |
| ** ** | ** **                                    |
|       | **HILAND OPERATING, LLC**                     |
|       | ** **                                    |
|       |                                          |
|       |  /s/ RANDY MOEDER                        |   |
|       | Name: Randy Moeder                            |
|       | Title: Chief Executive Officer                |
| ** ** | ** **                                    |
|       |                                          |
|       | **CONTINENTAL GAS, INC.**                     |
|       |                                          |
|       |                                          |
|       |  /s/ HAROLD HAMM                         |   |
|       | Name: Harold Hamm                             |
|       | Title: Chief Executive Officer                |
|       |                                          |
|       |                                          |
|       | **HILAND GP, LLC**                            |
|       |                                          |
|       |                                          |
|       |  /s/ RANDY MOEDER                        |   |
|       | Name: Randy Moeder                            |
|       | Title: President and Chief Executive  Officer |
|            |                                               |  |  |

 

 

*[Signature Page tothe Contribution Agreement]*

 

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|   | **HILAND LP, LLC**                            |
|--------|-----------------------------------------------|
|   |                                          |
|   |                                          |
|   |  /s/ RANDY MOEDER                        |   |
|   | Name: Randy Moeder                            |
|   | Title: President and Chief Executive  Officer |
|   |                                          |
|   |                                          |
|   | **CONTINENTAL GAS HOLDINGS, INC.**            |
|   |                                          |
|   |                                          |
|   |  /s/ RANDY MOEDER                        |   |
|   | Name: Randy Moeder                            |
|   | Title: President and Chief Executive  Officer |
|   |                                          |
|   |                                          |
|   | **HILAND ENERGY PARTNERS, LLC**               |
|   |                                          |
|   |                                          |
|   |  /s/ RANDY MOEDER                        |   |
|   | Name: Randy Moeder                            |
|   | Title: President and Chief Executive  Officer |
|   |                                          |
|   |                                          |
|   | **EQUITY FINANCIAL SERVICES, INC.**           |
|   |                                          |
|   |                                          |
|   |  /s/ RANDY MOEDER                        |   |
|   | Name: Randy Moeder                            |
|   | Title: President and Chief Executive  Officer |

 

 

*[Signature Page tothe Contribution Agreement]*

 

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|       | **HAROLD HAMM DST TRUST** |
|------------|---------------------------|
|       |                      |
|       |                      |
|       |  /s/ BERT MACKIE     |   |
|       | Name: Bert Mackie         |
|       | Title: Trustee            |
|       |                      |
|       |                      |
|       | **HAROLD HAMM HJ TRUST**  |
|       |                      |
|       |                      |
|       |  /s/ BERT MACKIE     |   |
|       | Name: Bert Mackie         |
| ** ** | Title: Trustee            |
|       |                      |
|       |                      |
|       |  /s/ HAROLD HAMM     |   |
| ** ** | **HAROLD HAMM**           |
|       |                      |
|       |                      |
|       |  /s/ RANDY MOEDER    |   |
| ** ** | **RANDY MOEDER**          |
|       |                      |
|       |                      |
|       |  /s/ KEN MAPLES      |   |
| ** ** | **KEN MAPLES**            |

 

 

*[Signature Page tothe Contribution Agreement]*

 

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