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EXHIBIT 2.1 CONTRIBUTION AGREEMENT

Contribution Agreement

EXHIBIT 2.1 CONTRIBUTION AGREEMENT | Document Parties: HILAND HOLDINGS GP, LP | HILAND PARTNERS GP HOLDINGS, LLC | HILAND PARTNERS GP, INC | CONTINENTAL GAS HOLDINGS, INC | HH GP HOLDING, LLC | HAROLD HAMM DST TRUST | HAROLD HAMM HJ TRUST | RANDY MOEDER,  | EQUITY FINANCIAL SERVICES, INC | KEN MAPLES You are currently viewing:
This Contribution Agreement involves

HILAND HOLDINGS GP, LP | HILAND PARTNERS GP HOLDINGS, LLC | HILAND PARTNERS GP, INC | CONTINENTAL GAS HOLDINGS, INC | HH GP HOLDING, LLC | HAROLD HAMM DST TRUST | HAROLD HAMM HJ TRUST | RANDY MOEDER, | EQUITY FINANCIAL SERVICES, INC | KEN MAPLES

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Title: EXHIBIT 2.1 CONTRIBUTION AGREEMENT
Governing Law: Delaware     Date: 5/26/2006

EXHIBIT 2.1 CONTRIBUTION AGREEMENT, Parties: hiland holdings gp  lp , hiland partners gp holdings  llc , hiland partners gp  inc , continental gas holdings  inc , hh gp holding  llc , harold hamm dst trust , harold hamm hj trust , randy moeder   , equity financial services  inc , ken maples
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Exhibit 2.1

CONTRIBUTION AGREEMENT

By and Among

HILAND HOLDINGS GP, LP,

HILAND PARTNERS GP HOLDINGS, LLC,

HILAND PARTNERS GP, INC.

CONTINENTAL GAS HOLDINGS, INC.,

HH GP HOLDING, LLC,

HAROLD HAMM DST TRUST,

HAROLD HAMM HJ TRUST,

RANDY MOEDER,

EQUITY FINANCIAL SERVICES, INC.

and

KEN MAPLES

Dated as of May 24, 2006



TABLE OF CONTENTS


ARTICLE I
DEFINITIONS


ARTICLE II
CONTRIBUTION TRANSACTIONS


Section 2.1


 


Contribution Transactions


 


5

Section 2.2

 

Issuance of New Certificates

 

6

Section 2.3

 

Certificate Legends

 

6

Section 2.4

 

Fractional Units

 

6

Section 2.5

 

Certain Adjustments

 

7

Section 2.6

 

Exercise of Underwriters Over-Allotment Option

 

7


ARTICLE III
CLOSING


Section 3.1


 


Time and Place


 


7

Section 3.2

 

Deliveries at Closing

 

7


ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE EXISTING INVESTORS


Section 4.1


 


Authority


 


7

Section 4.2

 

Organization and Qualification

 

8

Section 4.3

 

Good Title

 

8

Section 4.4

 

Investor Representations

 

8


ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HPGP


Section 5.1


 


Authority


 


8

Section 5.2

 

Organization and Qualification

 

8


ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF HOLDINGS GP


Section 6.1


 


Authority


 


9

Section 6.2

 

Organization and Qualification

 

9


ARTICLE VII
COVENANTS


Section 7.1


 


Ordinary Course of Business


 


9

Section 7.2

 

HSR and Other Regulatory Matters

 

9

Section 7.3

 

Commercially Reasonable Efforts

 

9

Section 7.4

 

HPGP Registration Statement

 

10

Section 7.5

 

Withdrawal as Members of the MLP GP

 

10

Section 7.6

 

Further Assurances

 

10


ARTICLE VIII
CONDITIONS


Section 8.1


 


Conditions to Obligations of Each Party


 


10

Section 8.2

 

Conditions to Obligations of HPGP and Holdings GP

 

11

Section 8.3

 

Conditions to Obligations of the Existing Investors

 

11

 

 

 

 

 

 

i



ARTICLE IX
TERMINATION


Section 9.1


 


Termination


 


11


ARTICLE X
MISCELLANEOUS


Section 10.1


 


Waiver and Amendment


 


11

Section 10.2

 

Survival of Representations and Warranties

 

12

Section 10.3

 

Assignment

 

12

Section 10.4

 

Notices

 

12

Section 10.5

 

Governing Law

 

13

Section 10.6

 

Severability

 

13

Section 10.7

 

Counterparts

 

13

Section 10.8

 

Headings

 

13

Section 10.9

 

Enforcement of the Agreement

 

13

Section 10.10

 

Entire Agreement; Third Party Beneficiaries

 

14

ii



CONTRIBUTION AGREEMENT

        This Contribution Agreement, dated as of May 24, 2006 (this " Contribution Agreement "), is by and among HH GP Holding, LLC, an Oklahoma limited liability company (" Holding LLC "), Randy Moeder, an individual residing in Enid, Oklahoma (" Mr. Moeder "), Equity Financial Services, Inc., an Oklahoma corporation (" Equity Financial "), Ken Maples, an individual residing in Enid, Oklahoma (" Mr. Maples "), the Harold Hamm DST Trust (the " DST Trust "), the Harold Hamm HJ Trust (the " HJ Trust "), Continental Gas Holdings, Inc., a Delaware corporation (" Continental Holdings "), Hiland Holdings GP, LP, a Delaware limited partnership (" HPGP "), Hiland Partners GP, Inc., a Delaware corporation (" Hiland Partners, Inc. ") and Hiland Partners GP Holdings, LLC, a Delaware limited liability company (" Holdings GP "). Holding LLC, Mr. Moeder, Equity Financial, Mr. Maples, the DST Trust, the HJ Trust and Continental Holdings are sometimes referred to herein collectively as the " Existing Investors ." Terms that are capitalized but not defined shall have the meanings assigned to such terms in Article I hereof.

W I T N E S S E T H:

        WHEREAS, Holding LLC currently owns a 94.0% Class A limited liability company interest in Hiland Partners GP, LLC, a Delaware limited liability company (the " MLP GP ");

        WHEREAS, Equity Financial currently owns a 0.7% Class B limited liability company interest in the MLP GP and 5,059 common units representing limited partner interests (" Hiland Common Units ") of Hiland Partners, LP (the " MLP ") and 28,665 subordinated units representing limited partner interests (" Sub Units ") in the MLP;

        WHEREAS, Mr. Moeder currently owns a 4.0% Class A limited liability company interest and a 3.3% Class B limited liability company interest, respectively, in the MLP GP and 49,757 Hiland Common Units;

        WHEREAS, Mr. Maples currently owns a 2.0% Class A limited liability company interest and a 2.0% Class B limited liability company interest, respectively, in the MLP GP, and 20,000 Hiland Common Units;

        WHEREAS, DST Trust currently owns a 19.56% Class B limited liability company interest in the MLP GP, 116,316 Hiland Common Units and 842,752 Sub Units;

        WHEREAS, HJ Trust currently owns a 13.03% Class B limited liability company interest in the MLP GP, 77,543 Hiland Common Units and 561,834 Sub Units;

        WHEREAS, Continental Holdings currently owns a 61.41% Class B limited liability company interest in the MLP GP, 271,082 Hiland Common Units and 2,646,749 Sub Units and all of the capital stock of Hiland Partners, Inc.;

        WHEREAS, Holding LLC, Continental Holdings, Equity Financial, Mr. Moeder, Mr. Maples, DST Trust, HJ Trust, Hiland Partners, Inc., Holdings GP and HPGP wish to enter into a series of transactions whereby:

        (i)    HPGP becomes the owner of a 99.999% limited liability company interest in MLP GP, and Hiland Partners, Inc. becomes the owner of a 0.001% limited liability company interest in MLP GP, where Hiland Partners, Inc. is a wholly-owned subsidiary of HPGP;

        (ii)   539,757 Hiland Common Units held by Continental Holdings, DST Trust, HJ Trust, Mr. Moeder, Equity Financial and Mr. Maples are contributed to HPGP; and

        (iii)  4,080,000 Sub Units held by Continental Holdings, DST Trust, HJ Trust and Equity Financial are contributed to HPGP; and

        WHEREAS, pursuant to such business combination and transfers:

        (i)    Continental Holdings will convey a 0.001% Class B limited liability company interest in MLP GP to Hiland Partners, Inc. as a capital contribution;


        (ii)   Holding LLC, Mr. Moeder and Mr. Maples will convey 94.0%, 4.0% and 2.0%, respectively, Class A limited liability company interests in the MLP GP to Holdings GP in exchange for 94.0%, 4.0% and 2.0% member interest in Holdings GP;

        (iii)  DST Trust will contribute its Class B limited liability company interests in the MLP GP and 116,316 Hiland Common Units and 842,752 Sub Units to HPGP in exchange for a right to receive a distribution and common units representing limited partner interests in HPGP (" HPGP Common Units ");

        (iv)  HJ Trust will contribute its Class B limited liability company interests in the MLP GP, 77,543 Hiland Common Units and 561,834 Sub Units to HPGP in exchange for a right to receive a distribution and HPGP Common Units;

        (v)   Equity Financial will contribute its Class B limited liability company interests in the MLP GP, 5,059 Hiland Common Units and 28,665 Sub Units to HPGP in exchange for a right to receive a distribution and HPGP Common Units;

        (vi)  Mr. Moeder will contribute his Class B limited liability company interests in the MLP GP and 49,757 Hiland Common Units to HPGP in exchange for a right to receive a distribution, HPGP Common Units and HPGP Class B Units (as defined herein);

        (vii) Mr. Maples will contribute his Class B limited liability company interest in the MLP GP and 20,000 Hiland Common Units to HPGP in exchange for a right to receive a distribution, HPGP Common Units and HPGP Class B Units;

        (viii) Continental Holdings will contribute its remaining Class B limited liability company interest in the MLP GP, its capital stock of Hiland Partners, Inc., 271,082 Hiland Common Units and 2,646,749 Sub Units to HPGP in exchange for a right to receive a distribution and HPGP Common Units; and

        (ix)  Holdings GP will contribute all of the Class A limited liability company interests in the MLP GP to HPGP in exchange for a capital account credit.

        NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, the parties hereto agree as follows:


ARTICLE I
DEFINITIONS

        The terms set forth below in this Article I shall have the meanings ascribed to them below or in the part of this Contribution Agreement referred to below:

        " Act " means the Securities Act of 1933, as amended.

        " Affiliate " shall have the meaning ascribed to such term in Rule 12b-2 of the general rules and regulations under the Securities Exchange Act of 1934, as in effect on the date of this Contribution Agreement.

        " Board " means the board of directors of Holdings GP.

        " Business Day " means any day other than a Saturday, a Sunday or any other day when banks are not open for business generally in the State of Delaware.

        " Closing " has the meaning set forth in Section 3.1.

        " Closing Date " has the meaning set forth in Section 3.1.

        " Commission " means the U.S. Securities and Exchange Commission.

2


 

        " Continental Holdings " has the meaning set forth in the introductory paragraph hereto.

        " Contribution Agreement " has the meaning set forth in the introductory paragraph hereto.

        " Contribution Percentage " in respect of a particular Existing Investor equals an amount expressed as a decimal (rounded up to four decimal places) obtained by dividing (1) the Contribution Value in respect of such Existing Investor by (2) the Total Existing Investors Value.

        " Contribution Value " in respect of a particular Existing Investor equals (1) the total number of Hiland Common Units and Hiland Subordinated Units being contributed by such Existing Investor pursuant to the terms of this Agreement multiplied by the Hiland Partners Unit Price plus (2) the Total General Partner Value multiplied by such Existing Investor's percentage ownership (expressed as a decimal rounded up to four decimal places) of the Class B limited liability company interest in the MLP GP.

        " Delaware LLC Act " means the Limited Liability Company Act of the State of Delaware, as amended and any successor to such act.

        " DST Trust " has the meaning set forth in the introductory paragraph hereto.

        " Effective Time " means immediately prior to the closing under the Underwriting Agreement.

        " Equity Financial " has the meaning set forth in the introductory paragraph hereto.

        " Existing Investors " has the meaning set forth in the introductory paragraph hereto..

        " Existing Investors Units Amount " means the total number of HPGP Units to be outstanding immediately after the HPGP Initial Public Offering excluding the HPGP Units to be issued to the public in the HPGP Initial Public Offering pursuant to, and as described in, the HPGP Registration Statement.

        " Governmental Authorities " means the federal, state, county, city and political subdivisions in which any property of HPGP, Holdings GP, Holding LLC, Continental Holdings, DST Trust, HJ Trust, Equity Financial, Mr. Moeder, Mr. Maples, the MLP GP and the MLP, respectively, is located or which exercises jurisdiction over any such property or entity, and any agency, department, commission, board, bureau or instrumentality of any of them which exercises jurisdiction over any such property or entity.

        " GP Interests " has the meaning set forth in Section 2.1(b).

        " Hiland Common Units " has the meaning set forth in the recitals.

        " Hiland Partners, Inc. " has the meaning set forth in the introductory paragraph hereto.

        " Hiland Partners Unit Price " means the average last sale price of the Hiland Common Units on the NASDAQ National Market for the three trading days immediately preceding the date of execution of the Underwriting Agreement.

        " HJ Trust " has the meaning set forth in the introductory paragraph hereto.

        " Holding LLC " has the meaning set forth in the introductory paragraph hereto.

        " Holdings GP " has the meaning set forth in the introductory paragraph hereto.

        " HPGP " has the meaning set forth in the introductory paragraph hereto.

        " HPGP Class B Units " means a series of units representing limited partner interests in HPGP that have identical terms as the HPGP Common Units except that such units shall be subject to the vesting provisions set forth in Annex A hereto.

        " HPGP Common Units " has the meaning set forth in the recitals.

3


 

        " HPGP Credit Facility " means the Credit Agreement dated May 1, 2006 by and between the MLP GP and MidFirst Bank.

        " HPGP Debt Amount " means the amounts outstanding at the Closing Date under the HPGP Credit Facility.

        " HPGP Initial Public Offering " means the initial public offering of HPGP Common Units contemplated by the HPGP Registration Statement.

        " HPGP Material Adverse Effect " means a material adverse effect on the combined business, operations, prospects, properties (including intangible properties), assets, operating results or condition (financial or otherwise), liabilities or reserves of HPGP, Holdings GP, the MLP GP, the MLP and its subsidiaries, taken as a whole; provided, however, that a general decline in the business or prospects of the midstream energy industry as a whole shall not be deemed to be a HPGP Material Adverse Effect.

        " HPGP Registration Statement " means the Registration Statement on Form S-1 relating to HPGP Common Units to be filed with the Commission by HPGP in accordance with Section 8.4, and any amendments thereto.

        " HPGP Units " means the HPGP Common Units and the HPGP Class B Units.

        " HSR Act " means the Hart-Scott-Rodino Antitrust Improvements of 1976, as amended.

        " Initial Public Offering Price " means the per unit initial public offering price of the HPGP Common Units sold in the HPGP Initial Public Offering, without deducting for estimated offering expenses, underwriting discounts and commissions.

        " Lien " means a lien, mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, easement, preference, priority, assessment, security interest, lease, sublease, charge, claim, adverse claim, levy, interest of other Persons or other encumbrance of any kind.

        " MLP " has the meaning set forth in the recitals hereto.

        " MLP GP " has the meaning set forth in the recitals hereto.

        " MLP GP LLC Agreement " means the Limited Liability Company Operating Agreement of MLP GP, dated as of February 15, 2005.

        " MLP Partnership Agreement " means the Amended and Restated Agreement of Limited Partnership of the MLP, dated as of February 15, 2005.

        " Mr. Maples " has the meaning set forth in the introductory paragraph hereto.

        " Mr. Moeder " has the meaning set forth in the introductory paragraph hereto.

        " Net Proceeds of the HPGP Initial Public Offering " means the aggregate proceeds of the HPGP Initial Public Offering after deducting underwriting discounts and commissions and offering expenses.

        " Permitted Liens " means Liens (including mechanics', workers', repairers', materialmens', warehousemens', landlord's and other similar Liens) arising in the ordinary course of business as would not individually or in the aggregate materially adversely affect the value of, or materially adversely interfere with the use of, the property subject to them.

        " Person " means an individual, corporation, partnership (limited or general), limited liability company, trust, joint stock company, Governmental Authority, unincorporated association or other legal entity.

        " Shoe " has the meaning set forth in Section 2.6.

        " Sub Units " has the meaning set forth in the recitals hereto.

4


 

        " Total Existing Investors Value " means the Existing Investor Units Amount multiplied by the Initial Public Offering Price.

        " Total General Partner Value " means the Total Existing Investors Value minus the Total Hiland Partners Unit Value.

        " Total Hiland Partners Unit Value " means the total number of Hiland Common Units and Hiland Subordinated Units being contributed by the Existing Investors pursuant to this Agreement multiplied by the Hiland Partners Unit Price.

        " Underwriters " has the meaning set forth in Section 2.6.

        " Underwriting Agreement " has the meaning set forth in Section 8.1(d).

        " Unvested Percentage " in respect of Mr. Moeder or Mr. Maples equals an amount expressed as a decimal (rounded to four decimal places) obtained by dividing (1) the Total General Partner Value multiplied by such Existing Investor's percentage ownership (expressed as a decimal rounded up to four decimal places) of the Class B limited liability company interests in the MLP GP that are unvested at the Closing by (2) the Contribution Value in respect of such Existing Investor.


ARTICLE II
CONTRIBUTION TRANSACTIONS

         Section 2.1      Contribution Transactions.     Immediately prior to the Effective Time:

        (a)   Continental Holdings will convey a 0.001% Class B limited liability company interest in the MLP GP to Hiland Partners, Inc. as a capital contribution.

        (b)   Each of Holding LLC, Mr. Moeder and Mr. Maples will contribute its respective 94.0%, 4.0% and 2.0% Class A limited liabilty company interest in the MLP GP to Holdings GP in exchange for a 94.0%, 4.0% and 2.0% interest in Holdings GP (collectively the " GP Interests "). The GP Interests will represent a non-economic interest in HPGP. The limited liability company agreement of Holdings GP shall provide that the GP Interests of each of Mr. Moeder and Mr. Maples shall be cancelled if their respective employment with Holdings GP or its Affiliates is terminated for any reason.

        (c)   Each Existing Investor will contribute all of the following securities held by such Existing Investor as of the date of this Contribution Agreement and described on Annex B hereto: (i) the Class B limited liability company interests in the MLP GP, (ii) the Hiland Common Units, (iii) the Sub Units, and (iv) all of the capital stock of Hiland Partners, Inc., as applicable, to HPGP in exchange for the right to receive at Closing a distribution from HPGP of an amount of cash calculated in accordance with Section 2.1(d) and an amount of HPGP Units calculated in accordance with Section 2.1(e).

        (d)   Each Existing Investor shall be entitled to receive pursuant to Section 2.1(c) an amount of cash equal to (i) (A) the Net Proceeds of the HPGP Initial Public Offering, minus (B) the HPGP Debt Amount, multiplied by (ii) such Existing Investor's Contribution Percentage.

5


 

        (e)   Each Existing Investor shall be entitled to receive pursuant to Section 2.1(c) a number of HPGP Units (which shall consist of HPGP Common Units and with respect to Mr. Moeder and Mr. Maples shall consist of HPGP Common Units and HPGP Class B Units) equal to (i) the Existing Investors Units Amount multiplied by (ii) the Contribution Percentage attributable to such Existing Investor. A portion of the HPGP Units to be issued to Mr. Moeder and Mr. Maples pursuant to the immediately preceding sentence shall be in the form of HPGP Class B Units with the remainder being HPGP Common Units. The number of HPGP Class B Units that each of Mr. Moeder and Mr. Maples will receive will equal the total number of HPGP Units to be issued to such Existing Investor pursuant to this Section 2.1(e) multiplied by the Unvested Percentage in respect of such Existing Investor. The HPGP Class B Units distributed to Mr. Moeder and Mr. Maples may not be sold, transferred, pledged or otherwise disposed of until such time as, and only to the extent that, such Class B Units vest in accordance with Annex A to this Contribution Agreement.

        (f)    Holdings GP will contribute all of the Class A limited liability company interests in the MLP GP to HPGP in exchange for a credit to its capital account.

         Section 2.2      Issuance of New Certificates.     At the Closing, HPGP shall issue to each of Continental Holdings, DST Trust, HJ Trust, Equity Financial, Mr. Moeder and Mr. Maples a certificate or certificates representing the number of HPGP Common Units and, where applicable, HPGP Class B Units, to be issued to such Person pursuant to Section 2.1. Each such certificate shall be registered in the name of the Person or Persons specified by the recipient thereof to HPGP in writing at least two Business Days prior to the Closing.

         Section 2.3      Certificate Legends.     (a) The certificates evidencing HPGP Common Units and HPGP Class B Units delivered pursuant to Section 2.2 shall bear a legend substantially in the form set forth below and containing such other information as HPGP may deem necessary or appropriate:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR PURSUANT TO AN EXEMPTION THEREFROM WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS LIMITED PARTNERSHIP, IS AVAILABLE.

        (b)   The certificates evidencing HPGP Class B Units delivered pursuant to Section 2.2 shall also bear a legend substantially in the form set forth below:

THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CONTRIBUTION AGREEMENT BY AND AMONG HILAND HOLDINGS GP, LP, HILAND PARTNERS GP HOLDINGS, LLC, CONTINENTAL GAS HOLDINGS, INC., HH GP HOLDING, LLC, HAROLD HAMM DST TRUST, HAROLD HAMM HJ TRUST, HILAND PARTNERS GP, INC., RANDY MOEDER, EQUITY FINANCIAL SERVICES, INC. AND KEN MAPLES DATED MAY 24, 2006, AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE PROVISIONS THEREOF.

         Section 2.4      Fractional Units.     No fractional units of HPGP Common Units, HPGP Class B Units or scrip shall be issued as a result of the transactions contemplated by Section 2.1. Instead of any fractional units of HPGP Common Units or HPGP Class B Units, which would otherwise be issuable as a result of the such transactions, HPGP shall pay a cash adjustment in respect of such fractional interest in a per unit amount equal to the initial public offering price of HPGP Common Units.

6


         Section 2.5      Certain Adjustments.     Holdings GP may determine the aggregate number of HPGP Common Units and, as applicable, HPGP Class B Units, to be is


 
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