Exhibit 10.3
Execution Copy
CONTRIBUTION, CONVEYANCE
AND ASSUMPTION AGREEMENT
EAGLE ROCK ENERGY PARTNERS,
L.P.
EAGLE ROCK ENERGY G&P,
LLC
EAGLE ROCK ENERGY GP,
L.P.
EAGLE ROCK PIPELINE,
L.P.
EAGLE ROCK PIPELINE GP,
LLC
EAGLE ROCK HOLDINGS,
L.P.
EFFECTIVE AS OF
OCTOBER 27, 2006
CONTRIBUTION, CONVEYANCE
AND ASSUMPTION AGREEMENT
This
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT , dated as
of October 27, 2006, is entered into by and among EAGLE
ROCK ENERGY PARTNERS, L.P. , a Delaware limited partnership
(“ MLP ”), EAGLE ROCK ENERGY
G&P , LLC , a Delaware limited liability company
(“ G&P ”), EAGLE ROCK ENERGY GP,
L.P. , a Delaware limited partnership (“ GP
LP ”), EAGLE ROCK PIPELINE, L.P. , a Delaware
limited partnership (“ OLP ”), EAGLE
ROCK PIPELINE GP, LLC , a Delaware limited liability company
(“ OLP GP ”), and EAGLE ROCK HOLDINGS,
L.P. , a Texas limited partnership (“
Holdings ”). The parties to this agreement are
collectively referred to herein as the “
Parties .” Capitalized terms used herein shall
have the meanings assigned to such terms in
Section 1.1.
WHEREAS, GP LP and
Holdings have formed MLP, pursuant to the Delaware Revised Uniform
Limited Partnership Act (the “ Delaware LP Act
”), for the purpose of engaging in any business activity that
is approved by GP LP and that lawfully may be conducted by a
limited partnership organized pursuant to the Delaware LP
Act.
WHEREAS, in order
to accomplish the objectives and purposes in the preceding recital,
the following actions have been taken prior to the date
hereof:
1.
G&P and Holdings formed GP LP, under the terms of the Delaware
LP Act, to which G&P contributed $0.01 and Holdings contributed
$999.99 in exchange for a 0.001% general partner interest and
99.999% limited partner interest, respectively.
2.
GP LP and Holdings formed MLP, under the terms of the Delaware LP
Act, to which GP LP contributed $20.00 in exchange for a 2% general
partner interest and Holdings contributed $980.00 in exchange for a
98% limited partner interest (the “ Holdings Initial
MLP Interest ”).
3.
Each of G&P, OLP and OLP GP filed the necessary certificates
and documents, under the terms of the applicable laws of the State
of Texas and under the Delaware LP Act and the Delaware Limited
Liability Company Act (the “ Delaware LLC Act
”), pursuant to which each of G&P, OLP and OLP GP were
converted to entities organized under the State of
Delaware.
4.
Certain private investors (the “ March 2006
Private Investors ”) contributed $98.3 million to OLP
in exchange for 5,455,050 common units in OLP.
5.
Certain private investors, including Natural Gas Partners VII,
L.P., (the “ June 2006 Private Investors
”) conveyed their ownership interests in Midstream Gas
Services, L.P., a Delaware limited partnership (“
MGS ”), to OLP and Eagle Rock Energy Services,
L.P. (“ Services ”) in exchange for an
aggregate 1,125,416 common units in OLP and
$4.47 million
from Services,
and MGS GP, L.L.C. sold its 1% general partner interest in MGS to
Services in exchange for $0.25 million.
6.
Services distributed its 1% general partner interest in MGS to OLP
GP, and OLP GP was admitted as the general partner of
MGS.
7.
Eagle Rock Midstream Resources, L.P., a Texas limited partnership
(“ Midstream ”), was dissolved and its
member interest in G&P was distributed to OLP GP, and its 99%
limited partner interest in each of Eagle Rock Gas Gathering &
Processing, Ltd, a Texas limited partnership (“
Gathering ”) and Services was distributed to
OLP.
8.
G&P distributed its 1% general partner interest in each of
Gathering, Services, Eagle Rock Operating, L.P., a Texas limited
partnership (“ Operating ”), and Eagle
Rock Field Services, L.P., a Texas limited partnership (“
Field Services ”), to OLP GP, and OLP GP was
admitted as the general partner of each of Gathering, Services,
Operating and Field Services.
9.
OLP GP distributed its member interest in G&P to
Holdings.
10.
MLP formed Heathrow Energy, LLC (“ Heathrow
”) under the terms of the Delaware LLC Act.
11.
Each of OLP, Gathering, Services, Operating and Field Services
(through any intermediate entities) distributed their working
capital assets consisting of cash and accounts receivable (the
“ Working Capital Assets ”), estimated to
be approximately $35.0 million, to Holdings, the
March 2006 Private Investors and the June 2006 Private
Investors in proportion to their interests in the OLP.
12.
OLP paid Holdings $7,008,825 to satisfy its obligation to pay
distribution arrearages on the subordinated units and general
partner units in OLP owned by Holdings.
WHEREAS,
concurrently with the consummation of the transactions contemplated
hereby (the “ Closing ”), each of the
following matters shall occur:
1.
Holdings will contribute to GP LP a limited partner interest (the
“ Interest ”) in OLP with a value equal
to 2% of the equity value of MLP immediately after the Closing as a
capital contribution (of which 0.001% of such conveyance will be
made to GP LP on behalf of G&P).
2.
GP LP will convey the Interest to MLP in exchange for (a) a
continuation of its 2% general partner interest, (b) the
issuance to GP LP of the IDRs of MLP and (c) the right to
receive $3,556,375 to reimburse it for certain capital expenditures
(of which $95,302 is to pay distribution arrearages on the general
partner units in OLP owned by OLP GP).
3.
Holdings will convey all of its member interest in OLP GP to MLP in
exchange for (a) 413,830 Subordinated Units in MLP (representing a
1.0% interest), (b) 69,185 Common Units in MLP (representing a
0.2% interest) and (c) the right to receive $2,914,217
to
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reimburse
Holdings for certain capital expenditures (of which $78,094 is to
pay distribution arrearages on the subordinated units in OLP owned
by Holdings).
4.
Pursuant to the Merger Agreement, Holdings will convey all of its
remaining limited partner interest in OLP to MLP in exchange for
(a) 20,277,665 Subordinated Units in MLP (representing a 48.0%
interest), (b) 3,390,051 Common Units in MLP (representing a
8.0% interest) and (c) the right to receive $142,796,621 to
reimburse Holdings for certain capital expenditures (of which
$3,826,604 is to pay distribution arrearages on the subordinated
units in OLP owned by Holdings).
5.
Pursuant to the Merger Agreement, the March 2006 Private
Investors and the June 2006 Private Investors will convey all
of their remaining limited partner interest in OLP to MLP in
exchange for (a) 4,732,259 Common Units in MLP (representing a
11.2% interest) and (b) the right to receive $27,786,462 to
reimburse the March 2006 Private Investors and the
June 2006 Private Investors for certain capital
expenditures.
6.
Pursuant to the Merger Agreement, Heathrow will merge with and into
OLP, and OLP will be the surviving entity.
7.
The public, through the Underwriters, will contribute $237,500,000
in cash, less the Underwriters’ discount of $15,437,500, in
exchange for 12,500,000 Common Units in MLP (representing a 29.6%
interest).
8.
MLP will (a) pay transaction expenses associated with the
transactions contemplated by this Agreement in the amount of
approximately $3,000,000 (exclusive of the Underwriters’
discount), (b) distribute $3,556,375 to GP LP to reimburse GP LP
for certain capital expenditures, (c) distribute $145,710,838
to Holdings to reimburse Holdings for certain capital expenditures,
(d) distribute $27,786,462 to the March 2006 Private
Investors and the June 2006 Private Investors to reimburse
them for certain capital expenditures and (e) contribute
$35,000,000 to OLP to replenish working capital (of which 2% of
such contribution will be made to OLP on behalf of OLP
GP).
9.
Holdings will pay to Natural Gas Partners $6,000,000 as
consideration for the termination of an advisory services,
reimbursement and indemnification agreement between Holdings and
Natural Gas Partners.
10.
MLP will redeem from Holdings and retire the Holdings Initial MLP
Interest in exchange for a payment in cash to Holdings of
$980.00.
11.
If the Underwriters exercise their option to purchase up to an
additional 1,875,000 Common Units (the “ Option
”), MLP shall use proceeds of that exercise, net of the
applicable Underwriters’ discount, to redeem a number of
Common Units owned by Holdings, the March 2006 Private
Investors and the June 2006 Private Investors equal to the
number of Common Units sold pursuant to the exercise of the Option,
and to reimburse Holdings, the March 2006 Private Investors
and the June 2006 Private Investors for certain capital
expenditures.
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12.
The agreements of limited partnership and the limited liability
company agreements of the aforementioned entities will be amended
and restated to the extent necessary to reflect the applicable
matters set forth above and as contained in this
Agreement.
NOW, THEREFORE, in
consideration of their mutual undertakings and agreements
hereunder, the Parties undertake and agree as follows:
Section 1.1
The following capitalized terms shall have the meanings given
below.
(a)
“ Agreement ” means this Contribution,
Conveyance and Assumption Agreement.
(b)
“ Assets ” has the meaning assigned to
such term in Section 4.1 of this Agreement.
(c)
“ Common Unit ” has the meaning assigned
to such term in the Partnership Agreement.
(d)
“ Effective Time ” shall mean 8:00 a.m.
New York, New York time on the date of the consummation of the
Offering.
(e)
“ IDRs ” means “Incentive
Distribution Rights” as such term is defined in the
Partnership Agreement.
(f)
“ Merger Agreement ” means the Agreement
and Plan of Merger of even date herewith, among MLP, OLP and
Heathrow.
(g)
“ MLP ” has the meaning assigned to such
term in the opening paragraph of this Agreement.
(h)
“ Natural Gas Partners ” means Natural
Gas Partners VII, L.P. and Natural Gas Partners VIII, L.P.
collectively.
(i)
“ Offering ” means the initial public
offering by MLP of Common Units.
(j)
“ Omnibus Agreement ” means that certain
Omnibus Agreement of even date herewith, among MLP, G&P, GP LP
and Holdings.
(k)
“ Partnership Agreement ” means the First
Amended and Restated Agreement of Limited Partnership of Eagle Rock
Energy Partners, L.P. dated as of the Effective Date.
(l)
“ Partnership Group ” has the meaning
assigned to such term in the Omnibus Agreement.
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(m)
“ Registration Statement ” means the
registration statement on Form S-1 (Registration
No. 333-134750) filed by MLP relating to the
Offering.
(n)
“ Subordinated Unit ” has the meaning
assigned to such term in the Partnership Agreement.
(o)
“ Underwriters ” means UBS Securities
LLC, Lehman Brothers Inc., Goldman, Sachs & Co., A.G. Edwards
& Sons, Inc., Wachovia Capital Markets, LLC, Credit Suisse
Securities (USA) LLC, Raymond James & Associates, Inc. and
RBC Capital Markets Corporation.
(p)
“ Underwriting Agreement ” means the
underwriting agreement dated October 24, 2006 among MLP, GP
LP, G&P and Holdings and the Underwriters relating to the
Offering.
ARTICLE 2
CONTRIBUTIONS, ACKNOWLEDGMENTS AND
DISTRIBUTIONS
Section 2.1
Contribution by Holdings of the Interest to GP LP .
Holdings hereby grants, contributes, bargains, conveys, assigns,
transfers, sets over and delivers to GP LP, its successors and
assigns, for its and their own use forever, all right, title and
interest in and to the Interest, as a capital contribution, for
good and valuable consideration, the sufficiency of which is hereby
acknowledged, and GP LP hereby accepts the Interest as a
contribution to the capital of GP LP (of which 0.001% of such
conveyance is being made on behalf of G&P).
Section 2.2
Contribution by GP LP of the Interest to MLP . GP LP
hereby grants, contributes, bargains, conveys, assigns, transfers,
sets over and delivers to MLP, its successors and assigns, for its
and their own use forever, all right, title and interest in and to
the Interest, as a capital contribution, in exchange for (a) a
continuation of its 2% general partner interest in MLP,
(b) the issuance by MLP to GP LP of the IDRs, (c) the
right to receive $3,556,375 to reimburse it for certain capital
expenditures (of which $95,302 is to pay distribution arrearages on
the general partner units in OLP owned by OLP GP), and
(d) other good and valuable consideration, the sufficiency of
which is hereby acknowledged, and MLP hereby accepts the Interest
as a contribution to the capital of MLP.
Section 2.3
Contribution by Holdings of Member Interest in OLP GP to
MLP . Holdings hereby grants, contributes, bargains,
conveys, assigns, transfers, sets over and delivers to MLP, its
successors and assigns, for its and their own use forever, all
right, title and interest in and to its member interest in OLP GP
in exchange for (a) the issuance by MLP to Holdings of 413,830
Subordinated Units in MLP, representing 1.0% interest in MLP,
(b) the issuance by MLP to Holdings of 69,185 Common Units in
MLP, representing a 0.2% interest in MLP, (c) the right to
receive $2,914,217 to reimburse Holdings for certain capital
expenditures (of which $78,094 is to pay distribution arrearages on
the subordinated units in OLP owned by Holdings) and (d) other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, and MLP hereby accepts such member interest as a
contribution to the capital of MLP and agrees to be bound by the
terms of the Limited Lia
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