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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

EAGLE ROCK ENERGY PARTNERS, L.P.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 

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LOGO


SPECIAL MEETING RELATED TO A STRATEGIC TRANSACTION—YOUR VOTE IS VERY IMPORTANT



Dear Eagle Rock Energy Partners, L.P. Common Unitholder:

         On December 23, 2013, Eagle Rock Energy Partners, L.P., a Delaware limited partnership ("Eagle Rock"), Regency Energy Partners LP, a Delaware limited partnership ("Regency") and Regal Midstream LLC, a Delaware limited liability company and wholly owned subsidiary of Regency ("Regal"), entered into a contribution agreement (as such agreement may be amended from time to time, the "Contribution Agreement"). Pursuant to the Contribution Agreement, Eagle Rock will contribute to Regal the Eagle Rock subsidiaries that, at the closing of the Contribution (after giving effect to certain pre-closing transfers, assignments and novations) will constitute Eagle Rock's midstream business (the "Contribution"). The consideration for the Contribution includes (1) $720,000,000 payable to Eagle Rock, as adjusted in accordance with the Contribution Agreement, consisting of $520,000,000 in cash and 8,245,859 common units representing limited partner interests of Regency, (2) the assumption by Regency of up to $550,000,000 face value of senior unsecured notes of Eagle Rock (the "Eagle Rock Notes") validly tendered by holders of the Eagle Rock Notes pursuant to Regency's offer to exchange, subject to the terms and conditions of the Contribution Agreement and the debt assumption agreement by and between Eagle Rock and Regency, and cancelled and exchanged into an equivalent amount of Regency senior unsecured notes with the same tenor, coupon and call structure and a comparable covenant package as the Eagle Rock Notes (the "Exchange Offer") and (3) if less than all of the Eagle Rock Notes are tendered in the Exchange Offer, the payment by Regency to Eagle Rock of a dollar amount equal to 110% of the difference between $550,000,000 and the face value of Eagle Rock Notes so tendered. The cash portion of the consideration is subject to adjustment for working capital and breaches of representations and warranties, if any.

         You are cordially invited to a special meeting of Eagle Rock unitholders (the "special meeting") to be held at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002, on April 29, 2014 at 9:00 a.m., Houston, Texas time. The special meeting is being held for you to consider and vote on a proposal to approve the Contribution Agreement and the Contribution and an advisory, non-binding proposal to approve the related compensation payments that may be paid or become payable to one of Eagle Rock's named executive officers in connection with the Contribution (which we refer to as the "advisory say-on-contribution-pay proposal"). Whether or not you plan to attend the special meeting, please complete and submit the enclosed proxy card as soon as possible or transmit your voting instructions by using the telephone or internet procedures described on your proxy card.

         Completion of the transactions described above is conditioned on, among other things, the affirmative vote or consent of the holders of a majority of the outstanding Eagle Rock common units as of the record date for the special meeting in favor of the approval of the Contribution Agreement and the Contribution. Therefore, the failure of any Eagle Rock unitholder to vote will have the same effect as a vote by such unitholder "AGAINST" the proposal to approve the Contribution Agreement and the Contribution. Accordingly, your vote is very important.

         The board of directors of Eagle Rock Energy G&P, LLC, the general partner of Eagle Rock Energy GP, L.P., the general partner of Eagle Rock, recommends that you vote "FOR" the proposal to approve the Contribution Agreement and the Contribution and "FOR" the advisory say-on-contribution-pay proposal.

         The attached proxy statement gives you detailed information about the special meeting and the Contribution. We urge you to read carefully the entire proxy statement, including all of its annexes.

         Thank you in advance for your continued support and your consideration of this matter.

    Sincerely,

 

 


GRAPHIC

Joseph A. Mills
Chairman of the Board of Directors and Chief
Executive Officer of Eagle Rock Energy G&P, LLC

         Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Contribution Agreement, passed upon the merits or fairness of the transactions contemplated thereby or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

         This proxy statement is dated March 18, 2014 and is first being mailed to Eagle Rock common unitholders on or about March 21, 2014.


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TABLE OF CONTENTS

NOTICE OF SPECIAL MEETING OF COMMON UNITHOLDERS

    iii  

QUESTIONS AND ANSWERS

    1  

Questions and Answers About the Contribution Agreement and the Contribution

    1  

Questions and Answers About the Special Meeting and Voting

    3  

SUMMARY

    9  

The Special Meeting

    9  

The Parties

    10  

The Contribution

    11  

Selected Consolidated Historical Financial Data of Eagle Rock Energy Partners,  L.P. 

    23  

Summary Historical Financial Data of the Midstream Assets of Eagle Rock Energy Partners, L.P. 

    25  

Summary Selected Unaudited Pro Forma Condensed Combined Financial Information

    26  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

    27  

THE SPECIAL MEETING

    28  

PROPOSALS FOR THE SPECIAL MEETING

    32  

PROPOSAL 1: THE CONTRIBUTION AGREEMENT

    32  

PROPOSAL 2: ADVISORY SAY-ON-CONTRIBUTION-PAY

    32  

EAGLE ROCK UNITHOLDER PROPOSALS

    34  

THE PARTIES

    35  

THE CONTRIBUTION

    36  

Structure of the Contribution

    36  

Consideration for the Contribution

    36  

Background of the Contribution

    36  

Recommendation of the Eagle Rock Board and Reasons for the Contribution

    59  

Opinions of Eagle Rock's Financial Advisors Regarding the Contribution

    64  

Financial Projections Provided to the Advisors

    84  

Regulatory Clearances Required for the Contribution

    85  

No Appraisal Rights

    87  

Interests of Officers of Eagle Rock in the Contribution

    87  

Litigation Relating to the Contribution

    92  

ACCOUNTING TREATMENT

    93  

THE CONTRIBUTION AGREEMENT

    94  

The Contribution

    94  

Closing

    94  

Conditions to Consummation of the Contribution

    95  

Eagle Rock Unitholder Meeting

    98  

Non-Solicitation of Alternative Proposals

    98  

Change in Eagle Rock Board Recommendation

    99  

Consideration for the Contribution

    100  

Exchange Offer

    101  

Termination of the Contribution Agreement

    101  

Termination Fees

    101  

Conduct of Business Pending the Consummation of the Contribution

    102  

Amendment and Waiver

    104  

Remedies; Specific Performance

    104  

Representations and Warranties

    105  

Indemnification

    106  

Registration Rights Agreement

    107  

Voting and Support Agreement

    107  

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NOTICE OF SPECIAL MEETING OF COMMON UNITHOLDERS
To Be Held on April 29, 2014

To the common unitholders of Eagle Rock Energy Partners, L.P.:

        A special meeting of common unitholders of Eagle Rock Energy Partners, L.P. ("Eagle Rock") will be held at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002, on April 29, at 9:00 a.m., Houston, Texas time. The purpose of the special meeting is:

    To consider and vote on a proposal to approve the Contribution Agreement dated as of December 23, 2013, by and among Eagle Rock, Regency Energy Partners LP ("Regency") and Regal Midstream LLC, a wholly owned subsidiary of Regency ("Regal" and together with Regency, the "Regency Parties") (as it may be amended from time to time, the "Contribution Agreement"), a copy of which agreement is attached as Annex A to the proxy statement accompanying this notice, and the contribution by Eagle Rock of its midstream business and the other transactions contemplated thereby (collectively, the "Contribution"); and

    To consider and vote on an advisory, non-binding proposal to approve the related compensation payments that may be paid or become payable to one of Eagle Rock's named executive officers in connection with the Contribution (herein referred to as the "advisory say-on-contribution-pay proposal").

        Eagle Rock will transact no other business at the special meeting except such business as may properly be brought before the special meeting and any adjournment or postponement of the special meeting. At this time, Eagle Rock knows of no other matters that will be presented for the consideration of its common unitholders at the special meeting.

        Approval of the Contribution Agreement and the Contribution by the affirmative vote or consent of the holders of a majority of the outstanding Eagle Rock common units as of the record date for the special meeting is a condition to the parties' consummation of the Contribution. Abstentions will have the same effect as votes "AGAINST" the proposal to approve the Contribution Agreement and the Contribution and the advisory say-on-contribution-pay proposal. Failures to vote and broker-non votes (if any) will have the same effect as votes "AGAINST" the proposal to approve the Contribution Agreement and the Contribution but will have no effect on the advisory say-on-contribution-pay proposal.

        In connection with the execution of the Contribution Agreement, on December 23, 2013, Natural Gas Partners VIII, L.P. ("NGP VIII") and certain of its affiliates (collectively, the "NGP Parties") entered into a voting and support agreement with Regency (the "Voting and Support Agreement"). Pursuant to the terms of the Voting and Support Agreement, the NGP Parties agreed to vote all of their Eagle Rock common units beneficially owned, representing approximately 32.2% of the Eagle Rock common units as of December 23, 2013, in favor of the approval of the Contribution Agreement and the Contribution. For additional information regarding the Voting and Support Agreement, please read "The Contribution Agreement—Voting and Support Agreement" beginning on page 107. Eagle Rock granted the NGP Parties an irrevocable limited waiver (the "Limited Waiver") of certain provisions of the existing voting agreement between Eagle Rock and NGP VIII dated May 3, 2011 (the "Existing NGP Voting Agreement") solely to the extent necessary to allow each of the NGP Parties to enter into and comply with its obligations under the Voting and Support Agreement until such time as the Voting and Support Agreement is amended, modified or terminated. For additional information regarding the Limited Waiver, please read "The Contribution Agreement—Limited Waiver" beginning on page 107.

        Only Eagle Rock common unitholders of record as of the close of business on March 6, 2014 are entitled to notice of and to vote at the special meeting and any adjournment or postponement thereof.

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A list of Eagle Rock common unitholders entitled to vote at the special meeting will be available for inspection at Eagle Rock's offices in Houston, Texas, for any purpose relevant to the special meeting during normal business hours for a period of ten days before the special meeting and at the special meeting.

        YOUR VOTE IS VERY IMPORTANT.    Whether or not you plan to attend the special meeting, please submit your proxy with voting instructions as soon as possible. If you hold common units in your name as a unitholder of record, please complete, sign, date and return the accompanying proxy card in the enclosed self-addressed stamped envelope, use the toll-free telephone number shown on the proxy card or use the internet website shown on the proxy card. If you hold your common units through a bank or broker, please use the voting instructions you have received from your bank or broker. Submitting your proxy will not prevent you from attending the special meeting and voting in person. Please note, however, that if you hold your common units through a bank or broker, and you wish to vote in person at the special meeting, you must obtain from your bank or broker a proxy issued in your name. If you own your Eagle Rock common units in your own name, you may revoke your proxy at any time before it is voted at the special meeting by: (1) sending a written notice of revocation to Eagle Rock Energy G&P, LLC, Attention: Secretary, 1415 Louisiana Street, Suite 2700, Houston, Texas, 77002, timely received before the special meeting; (2) submitting a new proxy with a later date either signed and returned by mail or transmitted using the telephone or Internet voting procedures, timely received before the special meeting; or (3) attending the special meeting and voting in person if you are a holder of record or if you hold a proxy in your favor executed by a holder of record.

        The enclosed proxy statement provides a detailed description of the Contribution Agreement and the Contribution. We urge you to read this proxy statement, including the documents incorporated by reference and the annexes, carefully in its entirety. If you have any questions concerning the Contribution Agreement, the Contribution or this proxy statement, would like additional copies, or need help voting your Eagle Rock common units, please contact Morrow & Co., LLC, toll-free at (800) 449-0910.

        By Order of the Board of Directors (the "Eagle Rock Board") of Eagle Rock Energy G&P, LLC, the general partner of Eagle Rock Energy GP, L.P., the general partner of Eagle Rock.


 

 


GRAPHIC

Charles C. Boettcher
Senior Vice President, General Counsel and
Secretary of Eagle Rock Energy G&P, LLC

Houston, TX

 

 

March 18, 2014

 

 

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QUESTIONS AND ANSWERS

        In the following questions and answers below, we highlight selected information from this proxy statement but have not included all of the information that may be important to you regarding the Contribution. To better understand the Contribution, and for a complete description of the legal terms of the agreements relating to the Contribution, you should carefully read this proxy statement in its entirety, including the annexes, as well as the documents we have incorporated by reference in this proxy statement, including the Contribution Agreement, Voting and Support Agreement, Limited Waiver and the form of Registration Rights Agreement attached as an exhibit to the Contribution Agreement. Please read "Where You Can Find More Information" beginning on page 116.

Questions
and Answers About the Contribution Agreement and the Contribution 

Q:
Why is the Eagle Rock Board proposing the Contribution Agreement and the Contribution?

A:
Eagle Rock entered into the Contribution Agreement based on the determination and recommendation of the Eagle Rock Board that the Contribution Agreement and the Contribution are in the best interests of the Eagle Rock unitholders. In making the aforementioned determination and recommendation, the Eagle Rock Board, with the assistance of its legal and financial advisors, considered a number of factors which included, but were not limited to: (1) the "special approval" and unanimous recommendation of the Eagle Rock Conflicts Committee; (2) the aggregate value of the consideration received by Eagle Rock for the Contribution; (3) the significant debt reduction and additional liquidity that is expected to result from the Contribution; (4) the belief that its improved liquidity position and cost structure will enable Eagle Rock to grow its remaining upstream asset base and distributable cash flow through upstream acquisitions and drilling activities; (5) the perceived difficulty in growing Eagle Rock's midstream business given its small scale and high cost of capital relative to many of its midstream peers; and (6) the desire to provide greater clarity to the capital markets and to Eagle Rock's analysts and investors as a pure-play master limited partnership ("MLP") focused on a single line of business. For additional information regarding the evaluations made by the Eagle Rock Board and the Eagle Rock Conflicts Committee in connection with determining that the Contribution Agreement and the Contribution are in the best interests of the Eagle Rock unitholders, please read "The Contribution—Background of the Contribution" and "The Contribution—Recommendation of the Eagle Rock Board and Reasons for the Contribution" beginning on page 59.

Q:
What adjustments may be made to the consideration payable to Eagle Rock for the Contribution?

A:
The consideration payable to Eagle Rock for the Contribution may be reduced by a maximum amount of $132.5 million to the extent that breaches by Eagle Rock, if any, of certain representations and warranties made by Eagle Rock in the Contribution Agreement cause Regency to have actually incurred losses as of a date no later than five business days before the closing of the Contribution (as though the closing of the Contribution were to occur on such date). Regency's claims for any such losses are subject to an aggregate deductible of $13.25 million and each such claim must be valued in excess of $1 million in order for any such claim to be made. Moreover, the consideration payable to Eagle Rock for the Contribution is also subject to a customary working capital adjustment, upward to the extent that the working capital of the midstream business as of the closing of the Contribution exceeds $15 million or downward to the extent that working capital of the midstream business as of the closing of the Contribution is more negative than negative $15 million. For additional information regarding such terms and provisions, please read "The Contribution Agreement—Consideration for the Contribution" beginning on page 100.

 

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Q:
Do you expect the Contribution to be taxable to Eagle Rock unitholders?

A:
The Contribution is expected to be taxable, in part, to Eagle Rock unitholders. A portion of any taxable gain to Eagle Rock unitholders may be subject to recapture and taxed as ordinary income, and the remainder will generally be capital gain. Eagle Rock anticipates that a substantial portion of the gain is likely to be treated as ordinary income. However, Eagle Rock also anticipates that most of its unitholders are subject to the passive loss limitations and have suspended passive losses with respect to their investment in Eagle Rock from prior tax years that would be available to offset all or a portion of any income and gain allocated to the unitholders as a result of the Contribution. The amount of ordinary income and capital gain allocated to each unitholder and availability of any passive loss carryforwards will depend on that unitholder's particular situation. For additional information regarding the tax treatment of the Contribution and for estimates of the amount of ordinary income and capital gain to be recognized by Eagle Rock unitholders on the Contribution, please read "Material Federal Income Tax Consequences of the Contribution" beginning on page 109.

Q:
Does the Contribution constitute a sale of "substantially all" of Eagle Rock's assets under Eagle Rock's partnership agreement or the indenture governing the Eagle Rock Notes (the "Existing Indenture")?

A:
Eagle Rock does not believe that the Contribution constitutes a sale of "substantially all" of Eagle Rock's assets under its partnership agreement (as amended, the "Partnership Agreement") or the Existing Indenture. Following consummation of the Contribution, Eagle Rock will remain a publicly-traded MLP with significant upstream operations that have generated and are expected to continue to generate significant revenues and Adjusted EBITDA. However, Eagle Rock is seeking at this special meeting the vote of unitholders that would be required if the Contribution were determined to constitute a sale of "substantially all" of Eagle Rock's assets. Approval of the Contribution Agreement and the Contribution is a condition to closing under the Contribution Agreement and Eagle Rock does not currently intend to waive this condition. Moreover, Eagle Rock believes that the Exchange Offer (as defined and described below) effectively provides the holders of Eagle Rock Notes with treatment that is substantially similar to the treatment that would be afforded to them under the merger covenant in the Existing Indenture if the Contribution were determined to constitute a sale of "substantially all" of Eagle Rock's assets.

Q:
What is the Exchange Offer and what is its impact on the consideration payable to Eagle Rock for the Contribution?

A:
Pursuant to the Contribution Agreement, Regency has agreed to assume up to $550,000,000 face value of the Eagle Rock Notes validly tendered by holders of the Eagle Rock Notes pursuant to Regency's offer to exchange, subject to the terms and conditions of the Contribution Agreement and a debt assumption agreement by and between Eagle Rock and Regency (the "Debt Assumption Agreement"), and cancelled and exchanged into an equivalent amount of Regency senior unsecured notes with the same tenor, coupon and call structure and a comparable covenant package as the Eagle Rock Notes (the "Exchange Offer"). The results of the Exchange Offer will impact the form and total amount of consideration payable by Regency to Eagle Rock upon closing of the Contribution. Pursuant to the Contribution Agreement, if all Eagle Rock Notes are tendered for exchange in the Exchange Offer, the value of the total consideration payable to Eagle Rock upon closing of the Contribution will be $1.27 billion (prior to any purchase price adjustments). In this scenario, Eagle Rock's annual interest expense will be reduced by the approximately $46.1 million of interest expense associated with the Eagle Rock Notes in addition to interest savings resulting from the use of net cash proceeds to pay down borrowings under Eagle Rock's credit facility. Pursuant to the Contribution Agreement, if less than all the Eagle

 

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    Rock Notes are tendered for exchange in the Exchange Offer, Regency has agreed to pay Eagle Rock a dollar amount equal to 110% of the difference between $550,000,000 and the face value of Eagle Rock Notes so tendered. As such, if no Eagle Rock Notes are tendered for exchange in the Exchange Offer, the value of the total consideration payable to Eagle Rock upon closing of the Contribution Agreement will be approximately $1.325 billion (prior to any purchase price adjustments). In this scenario, the Eagle Rock Notes would remain outstanding, and Eagle Rock anticipates it would repay all outstanding borrowings under its credit facility and have excess cash to pursue acquisitions. Eagle Rock's annual interest expense would initially be higher under this scenario than if all of the Eagle Rock Notes were exchanged, by the $46.1 million of interest expenses, as only slightly affected by the added interest savings associated with the greater reduction in borrowings under Eagle Rock's credit facility.

Q:
Is the outcome of the Exchange Offer a condition to the Contribution?

A:
No. While Regency is obligated under the Contribution Agreement to conduct the Exchange Offer following written request from Eagle Rock and to accept for exchange all Eagle Rock Notes validly tendered for exchange, there is no minimum exchange condition for either the Exchange Offer or the Contribution.

Q:
What is the impact of the Exchange Offer on the Existing Indenture?

A:
In conjunction with the Exchange Offer, Regency is soliciting consents from the holders of the Eagle Rock Notes to proposed amendments to the Existing Indenture that, if consented to by holders of a majority of the outstanding Eagle Rock Notes, will eliminate substantially all restrictive covenants and certain events of default applicable to the Eagle Rock Notes. If greater than 50% of the Eagle Rock Notes are tendered for exchange in the Exchange Offer, the consent solicitation will be successful and substantially all restrictive covenants will be eliminated from the Existing Indenture, including but not limited to the covenants restricting Eagle Rock from making certain asset sales and requiring Eagle Rock to conduct an offer to repurchase Eagle Rock Notes upon a change of control of Eagle Rock. If less than 50% of the Eagle Rock Notes are tendered for exchange in the Exchange Offer, Eagle Rock will remain obligated to comply with all covenants in the Existing Indenture, including the covenants restricting Eagle Rock from making certain asset sales, restricting Eagle Rock in its use of the proceeds from certain asset sales and requiring Eagle Rock to conduct an offer to repurchase Eagle Rock Notes upon a change of control of Eagle Rock.


Questions and Answers About the Special Meeting and Voting

Q:
Where and when is the special meeting?

A:
We will hold a special meeting of common unitholders on April 29, 2014 at 9:00 a.m., Houston, Texas time, at our offices located at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002.

Q:
What is the purpose of the special meeting?

A:
At the special meeting, our unitholders will consider and act upon the matters outlined in the notice of the meeting, namely:

a proposal to approve the Contribution Agreement and the Contribution; and

an advisory, non-binding proposal regarding the compensation that may be paid or become payable to one of Eagle Rock's named executive officers in connection with the Contribution (which proposal we refer to as the "advisory say-on-contribution-pay proposal").

 

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Q:
When is the Contribution expected to be consummated?

A:
Eagle Rock currently expects to complete the Contribution during the first half of 2014, subject to receipt of unitholder approval of the Contribution Agreement and the Contribution and subject to the satisfaction or waiver of the other conditions to the transactions contemplated by the Contribution Agreement.

Q:
How does the Eagle Rock Board recommend unitholders vote on the proposals?

A:
The Eagle Rock Board recommends that you vote as follows:

FOR the approval of the Contribution Agreement and the Contribution; and

FOR the approval of the advisory say-on-contribution-pay proposal.

Q:
Who is entitled to vote at the special meeting?

A:
All of our common unitholders of record at the close of business on March 6, 2014, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting.

Q:
What Eagle Rock unitholder approvals are required to approve the Contribution Agreement and the Contribution?

A:
It is a condition to the parties' obligations to consummate the Contribution that the Contribution Agreement and the Contribution be approved by the affirmative vote or consent of the holders of a majority of our outstanding common units as of the record date for the special meeting ("Unitholder Approval"). Eagle Rock does not currently intend to waive this condition to closing, although Eagle Rock does not believe that Unitholder Approval is required for the Contribution under the Partnership Agreement or Delaware law.

Q:
What Eagle Rock unitholder approvals are required to approve the advisory say-on-contribution-pay proposal?

A:
The advisory say-on-contribution-pay proposal will require advisory (non-binding) approval by holders of a majority of the common units as of the record date of the special meeting that are present or represented by proxy at the special meeting and entitled to vote on the proposal.

Q:
What will happen if the advisory say-on-contribution-pay proposal is not approved?

A:
Approval of the compensation that may be paid or become payable to one of Eagle Rock's named executive officers that is based on or otherwise related to the Contribution is not a condition to the completion of the Contribution. The vote is advisory only and will not be binding on Eagle Rock. This compensation arises from contractual obligations of Eagle Rock or from contractual obligations specified in the Eagle Rock equity compensation plans and, even though Eagle Rock values the input of unitholders as to whether such compensation is appropriate, Eagle Rock would nevertheless be required contractually to make, and would make, such payments even if the compensation is not approved by the unitholders in the advisory vote. Therefore, if the Unitholder Approval is achieved and the Contribution is completed, this compensation would be payable in accordance with Eagle Rock's existing contractual obligations to such named executive officer or as specified in the Contribution Agreement, whether or not this proposal on compensation is approved by the unitholders, if other conditions applicable to such compensation have been satisfied.

 

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Q:
Am I entitled to appraisal rights?

A:
Eagle Rock common unitholders do not have appraisal rights under the Partnership Agreement, the Contribution Agreement or Delaware or other applicable law.

Q:
Who may attend the special meeting?

A:
Unitholders of record as of the close of business on March 6, 2014, or their duly appointed proxies, may attend the special meeting. "Street name" holders (those whose units are held through a broker, bank or other nominee) who wish to vote at the special meeting, should bring a proxy form from the record holder (your broker, bank or other nominee) of the common units authorizing you to vote at the special meeting and should also bring a copy of an account statement reflecting their ownership of common units as of the record date.

Q:
What constitutes a "quorum"?

A:
The holders of a majority of the outstanding Eagle Rock common units on the record date, represented in person or by proxy, will constitute a quorum at the special meeting for the proposal to approve the Contribution Agreement and the Contribution and for the proposal to approve advisory say-on-contribution-pay proposal. There must be a quorum at the special meeting to approve the proposal to approve the Contribution Agreement and the Contribution and to approve the advisory say-on-contribution-pay proposal. Proxies received but marked as abstentions and broker non-votes (if any) will be included in the number of common units considered to be present at the special meeting for the purpose of determining the presence of a quorum. For more information on broker non-votes, please read "—What is a broker non-vote and what is the effect of a broker non-vote?"

Q:
Who is soliciting my vote?

A:
The Eagle Rock Board is soliciting your proxy, and Eagle Rock will bear the cost of soliciting proxies. Morrow & Co., LLC has been retained to assist with the solicitation of proxies. Morrow & Co., LLC will be paid approximately $5,500 and will be reimbursed for its reasonable out-of-pocket expenses for these and other advisory services in connection with the special meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials also may be distributed through brokerage firms, custodians, nominees, fiduciaries and other like parties to the beneficial owners of common units, in which case such parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies also may be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by Morrow & Co., LLC or by certain of Eagle Rock's directors, officers, and employees, without additional compensation.

Q:
Does the special meeting take the place of Eagle Rock's annual meeting of its limited partners?

A:
No. Eagle Rock currently expects to hold its annual meeting of its limited partners within a reasonable period of time after the consummation of the Contribution.

Q:
What do I need to do now?

A:
After you have carefully read this proxy statement, please respond by completing, signing and dating your proxy card or voting instructions and returning it in the enclosed postage-paid envelope or by submitting your proxy or voting instruction by telephone or through the internet as soon as possible so that your common units will be represented and voted at the special meeting.

If your common units are held in "street name," please refer to your proxy card or voting instructions or the information forwarded by your broker or other nominee to see which options

 

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    are available to you. The internet and telephone proxy submission procedures are designed to authenticate our unitholders and to allow you to confirm that your instructions have been properly recorded.

    The method you use to submit a proxy or voting instructions will not limit your right to vote in person at the special meeting if you later decide to attend the special meeting. However, if your common units are held in the name of a broker or other nominee, you must obtain a legal proxy, executed in your favor from the holder of record, to be able to vote in person at the special meeting.

Q:
If my Eagle Rock common units are held in "street name" by my broker or other nominee, will my broker or other nominee vote my units for me?

A:
No. Your broker will not be able to vote your common units without instructions from you. Please follow the procedure your broker provides to vote your common units.

Q:
If I am planning on attending the special meeting in person, should I still submit a proxy?

A:
Yes. Even if you plan to attend the special meeting, we prefer that you submit a proxy or voting instructions in advance. Eagle Rock common units owned by you will not be voted if you do not submit a proxy or voting instructions and your plans to attend change. Your failure to submit a proxy or voting instructions or attend and vote (with a proper legal proxy from your broker or other nominee if you hold in "street name" as discussed above) would have the same effect as a vote "AGAINST" the proposal to approve the Contribution Agreement and the Contribution and the common units that you own will not be counted for the purposes of a quorum for either proposal. As such, we urge you to submit your proxy or voting instructions today.

Q:
What do I do if I want to change my vote after I have delivered my proxy card?

A:
You may change your vote at any time before your common units are voted at the special meeting. You can do this in any of the three following ways:

sending a written notice of revocation to Eagle Rock Energy G&P, LLC, Attention: Secretary, 1415 Louisiana Street, Suite 2700, Houston, Texas, 77002, timely received before the special meeting;

submitting a new proxy with a later date either signed and returned by mail or transmitted using the telephone or Internet voting procedures, timely received before the special meeting; or

attending the special meeting and voting in person if you are a holder of record or if you hold a proxy in your favor executed by a holder of record.

    If your common units are held through a broker, bank or other nominee, you should follow the instructions of your broker, bank or other nominee regarding the revocation of proxies. If your broker, bank or other nominee allows you to submit a proxy or voting instructions by telephone or the Internet, you may be able to change your vote by submitting a proxy or voting instructions again by telephone or the Internet.

    If you have questions about how to vote or revoke your proxy, you should contact our proxy solicitor, Morrow & Co., LLC toll-free at (800) 449-0910.

Q:
What should I do if I receive more than one set of voting materials for the special meeting?

A:
You may receive more than one set of voting materials for the special meeting and the materials may include multiple proxy cards or voting instruction cards. For example, you will receive a separate voting instruction card for each brokerage account in which you hold units. If you are a

 

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    holder of record registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive according to the instructions on it.

Q:
Can I submit my proxy by telephone or the internet?

A:
Yes. In addition to mailing your proxy, you may submit it telephonically or on the internet. Voting instructions for using the telephone or internet procedures are described on your proxy card.

Q:
Where can I find the voting results of the special meeting?

A:
Eagle Rock intends to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the United States Securities and Exchange Commission (the "SEC") following the special meeting. All reports Eagle Rock files with the SEC are publicly-available when filed.

Q:
What if I abstain from voting on any proposal?

A:
In connection with the special meeting, abstentions will be considered in determining the presence of a quorum. Further, an abstention will be the equivalent of a vote "AGAINST" the proposal to approve the Contribution Agreement and the Contribution and the advisory say-on-contribution-pay proposal. An abstention occurs when a unitholder abstains from voting (either in person or by proxy) on one or more of the proposals.

Q:
What is a broker non-vote and what is the effect of a broker non-vote?

A:
When a broker, bank or other nominee does not have discretion to vote on a particular matter, the beneficial owner does not give timely instructions on how the broker, bank or other nominee should vote the beneficial owner's common units, and the broker, bank or other nominee indicates it does not have authority to vote such common units on its proxy, a "broker non-vote" occurs. Because the only proposals for consideration at the Eagle Rock special meeting are non-discretionary proposals, it is not expected that there will be any broker non-votes at the Eagle Rock special meeting. However, if there are any broker non-votes, they will be counted for the purpose of determining the presence of a quorum. Broker non-votes (if any) will have the same effect as a vote "AGAINST" the proposal to approve the Contribution Agreement and the Contribution but will not have any effect on the advisory say-on-contribution-pay proposal.

Q:
How do I obtain additional information about Eagle Rock?

A:
Eagle Rock will provide copies of this proxy statement and its Annual Report on Form 10-K for the year ended December 31, 2013, without charge to any unitholder who makes a written request to our Secretary at Eagle Rock Energy G&P, LLC, 1415 Louisiana Street, Suite 2700, Houston, Texas 77002. Eagle Rock's Annual Report on Form 10-K for the year ended December 31, 2013 and other SEC filings also may be accessed at www.sec.gov or on the Investor Relations section of Eagle Rock's website at www.eaglerockenergy.com. Eagle Rock's website address is provided as an inactive textual reference only. The information provided on or accessible through our website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to our website provided in this proxy statement.

Q:
Who can I contact with questions about the special meeting or the Contribution?

A:
If you have any questions about the Contribution Agreement, the Contribution and the other matters contemplated by this proxy statement or how to submit your proxy or voting instruction

 

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    card, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instruction card, you should contact our proxy solicitor at:

Morrow & Co., LLC
470 West Avenue—3rd Floor
Stamford, CT 06902
Banks and Brokerage Firms, please call (203) 658-9400
Unitholders, please call toll-free (800) 449-0910

 

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SUMMARY

        This summary highlights selected information from this proxy statement. It does not contain all of the information that may be important to you. To understand the Contribution Agreement and the Contribution fully and for a complete description of the terms of the Contribution and related matters, you should read carefully this proxy statement, the documents incorporated by reference and the full text of the annexes to this proxy statement. Please read "Where You Can Find More Information" beginning on page 116.


The Special Meeting

Time, Date and Place

        The special meeting will be held on April 29, 2014 at 9:00 a.m., Houston, Texas time, at Eagle Rock's offices located at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002.

Purpose

        Our unitholders are being asked to consider and vote on:

    the proposal to approve the Contribution Agreement and the Contribution; and

    the advisory say-on-contribution-pay proposal.

        The persons named in the accompanying proxy card will have discretionary authority to vote on other business, if any, that properly comes before the special meeting and any adjournment or postponement thereof. As of the date of this proxy statement, we do not know of any other matter to be raised at the special meeting.

Unitholders Entitled to Vote

        Holders of our common units as of the close of business on March 6, 2014, the record date for the special meeting, will be entitled to vote at the special meeting. Each holder of record of our common units at the close of business on the record date is entitled to one vote for each common unit then held on each matter submitted to a vote of unitholders at the special meeting. As of the close of business on the record date of March 6, 2014, there were 159,390,793 common units of Eagle Rock outstanding.

Required Unitholder Votes

        It is a condition to the parties' obligations to consummate the Contribution that the Contribution Agreement and the Contribution are approved by the affirmative vote or consent of the holders of a majority of our outstanding common units as of the record date for the special meeting. Eagle Rock does not currently intend to waive this condition to closing, although Eagle Rock does not believe that Unitholder Approval is required for the Contribution under the Partnership Agreement or Delaware law. The advisory say-on-contribution-pay proposal will require advisory (non-binding) approval by the holders of a majority of the common units as of the record date for the special meeting that are present or represented by proxy at the special meeting and entitled to vote on the proposal.

 

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The Parties

Eagle Rock

        Eagle Rock is a Delaware MLP currently engaged in two businesses: (1) midstream, which includes (a) gathering, compressing, treating, processing and transporting natural gas; (b) fractionating and transporting natural gas liquids ("NGLs"); (c) crude oil and condensate logistics and marketing; and (d) natural gas marketing and trading; and (2) upstream, which includes exploiting, developing, and producing hydrocarbons in oil and natural gas properties.

        We conduct, evaluate and report on our midstream business within three segments—the Texas Panhandle Segment, the East Texas and Other Midstream Segment and the Marketing and Trading Segment. Our Texas Panhandle Segment consists of gathering and processing assets in the Texas Panhandle. Our East Texas and Other Midstream Segment consists of gathering and processing assets in East Texas/Northern Louisiana, South Texas, Southern Louisiana, the Gulf of Mexico and Galveston Bay. Our Marketing and Trading Segment consists of crude oil and condensate logistics and marketing in the Texas Panhandle and Alabama and natural gas marketing and trading.

        We conduct, evaluate and report on our Upstream Business as one segment, which includes operated and non-operated wells located in the Mid-Continent (which includes areas in Oklahoma, Arkansas, and the Texas Panhandle); Permian (which includes areas in West Texas); East Texas/South Texas/Mississippi; and Southern Alabama (which also includes two treating facilities and one natural gas processing plant and related gathering systems).

        Our final reporting segment is our Corporate and Other Segment, which is where we account for our risk management activity (excluding any risk management activity associated with our natural gas marketing and trading activities), intersegment eliminations and our general and administrative expenses.

        The principal executive offices of Eagle Rock are located at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002. The telephone number is (281) 408-1200.

Regency

        Regency is a publicly-traded Delaware limited partnership formed in 2005 engaged in the gathering and processing, compression, treating and transportation of natural gas and the transportation, fractionation and storage of NGLs. Regency provides midstream services in some of the most prolific natural gas producing regions in the United States, including the Eagle Ford, Haynesville, Barnett, Fayetteville, Marcellus, Utica, Bone Spring, Avalon and Granite Wash Shales. Regency's assets are primarily located in Texas, Louisiana, Arkansas, Pennsylvania, California, Mississippi, Alabama, New Mexico and the mid-continent region of the United States, which includes Kansas, Colorado and Oklahoma. Regency divides its operations into five business segments: (1) gathering and processing, (2) natural gas transportation, (3) NGL Services, (4) contract services and (5) corporate.

        The principal executive offices of Regency are located at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201.

Regal Midstream LLC

        Regal is a wholly owned subsidiary of Regency which was created by Regency to receive the contribution of the Contributed Interests (as defined below in "—The Contribution—Structure of the Contribution" on page 11).

Relationships Between the Parties

        Eagle Rock, Regency and PVR Partners, LP ("PVR") are parties to certain commercial agreements, including certain marketing and transportation agreements with respect to Eagle Rock's upstream business and certain gathering and takeaway agreements related to Eagle Rock's midstream business.

 

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The Contribution

Structure of the Contribution

        Upon satisfaction or waiver of the conditions set forth in the Contribution Agreement, Eagle Rock will contribute to Regal (1) 100% of the equity interests in (a) Eagle Rock Marketing, LLC, a Delaware limited liability company, (b) Eagle Rock Pipeline GP, LLC, a Delaware limited liability company, and (c) Eagle Rock Gas Services, LLC, a Delaware limited liability company and (2) 100% of the limited partner interests in (a) Eagle Rock Pipeline, L.P., a Delaware limited partnership and (b) EROC Midstream Energy, L.P., a Delaware limited partnership (the interests described in clauses (1) and (2) collectively, the "Contributed Interests" and, together with their direct and indirect subsidiaries, collectively, the "Midstream Entities"). The Contributed Interests, upon the closing of the Contribution and after giving effect to certain pre-closing transfers, assignments and novations (1) from Eagle Rock and certain of the Midstream Entities, on the one hand, to certain of the Midstream Entities, on the other hand and (2) from certain of the Midstream Entities, on the one hand, to Eagle Rock, on the other hand (collectively, the "Pre-Closing Transfers"), will represent the assets and operations that collectively comprise the midstream business of Eagle Rock.

Consideration for the Contribution

        The consideration for the Contribution will include (1) $720,000,000 payable to Eagle Rock, as adjusted in accordance with the Contribution Agreement, consisting of $520,000,000 in cash and 8,245,859 common units representing limited partner interests of Regency (the "equity consideration"), (2) the assumption by Regency of up to $550,000,000 face value of senior unsecured notes of Eagle Rock (the "Eagle Rock Notes") validly tendered by holders of the Eagle Rock Notes pursuant to the Exchange Offer and the Debt Assumption Agreement, and cancelled and exchanged into an equivalent amount of Regency senior unsecured notes with the same tenor, coupon and call structure and a comparable covenant package as the Eagle Rock Notes and (3) if less than all of the Eagle Rock Notes are tendered in the Exchange Offer, the payment by Regency to Eagle Rock of a dollar amount equal to 110% of the difference between $550,000,000 and the face value of Eagle Rock Notes so tendered. Depending on the amount of Eagle Rock Notes that are exchanged for like-kind Regency senior unsecured notes, the value of the total consideration to Eagle Rock in the Contribution will be between $1.27 billion and $1.325 billion (prior to any purchase price adjustments described in the next paragraph).

        The cash consideration payable to Eagle Rock may be reduced by the amounts of certain losses that would have actually incurred as of a date no later than five business days before the closing date of the Contribution (as though the closing were to occur on such date) resulting from the breach of certain of the representations and warranties (each a "Pre-Closing Breach") made by the Eagle Rock in the Contribution Agreement. The amount of any such losses agreed to by the parties at closing would reduce the consideration payable to Eagle Rock at closing. In addition, the alleged value of any losses alleged by Regency but not agreed to by Eagle Rock at closing would be deducted from the closing proceeds and placed into escrow subject to resolution pursuant to binding arbitration after the closing. Such losses would be subject to the following limitations: (1) each claim must be valued in excess of $1,000,000 in order for such claim to be made, (2) the aggregate value of all eligible claims must exceed $13,250,000, at which point only those amounts in excess of $13,250,000 will reduce the consideration paid to Eagle Rock and (3) the aggregate amount of all reductions in consideration resulting from Pre-Closing Breaches may not exceed $132,500,000.

        The consideration payable to Eagle Rock is also subject to a customary working capital adjustment, upward to the extent that the working capital of the midstream business as of the closing of the Contribution exceeds $15 million or downward to the extent that working capital of the midstream business as of the closing of the Contribution is more negative than negative $15 million.

 

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Voting and Support Agreement

        In connection with the execution of the Contribution Agreement, on December 23, 2013, the NGP Parties entered into the Voting and Support Agreement. Pursuant to the terms of the Voting and Support Agreement, the NGP Parties agreed to vote all of their Eagle Rock common units beneficially owned, representing approximately 32.2% of the Eagle Rock common units as of December 23, 2013, in favor of the approval of the Contribution Agreement and the Contribution.

Limited Waiver

        In connection with the execution of the Contribution Agreement, upon the Eagle Rock Conflicts Committee granting "special approval" and making a recommendation to the Eagle Rock Board, the Eagle Rock Board authorized Eagle Rock to grant, and Eagle Rock granted, the NGP Parties the Limited Waiver solely to the extent necessary to allow each of the NGP Parties to enter into and comply with its obligations under the Voting and Support Agreement until such time as the Voting and Support Agreement is amended, modified or terminated.

Recommendation of the Eagle Rock Board Regarding the Contribution

        After considering various factors, including the "special approval" and unanimous recommendation of the Eagle Rock Conflicts Committee, the Eagle Rock Board unanimously:

    determined that the Contribution and related transactions are in the best interests of Eagle Rock and its unitholders; and

    approved the Contribution Agreement and the Contribution.

        Therefore, the Eagle Rock Board recommends that the Eagle Rock unitholders vote to approve the Contribution Agreement and the Contribution. In the course of reaching its decision to approve the Contribution Agreement and the Contribution, the Eagle Rock Board considered a number of factors in its deliberations. For additional information regarding these factors, please read "The Contribution—Recommendation of the Eagle Rock Board and Reasons for the Contribution" beginning on page 59.

Opinions of Eagle Rock's Financial Advisors Regarding the Contribution

    Opinion of Evercore—Financial Advisor to the Eagle Rock Board

        In connection with the Contribution, on December 23, 2013, Eagle Rock's financial advisor, Evercore Group, L.L.C. (herein referred to as "Evercore"), delivered to the Eagle Rock Board its oral opinion, subsequently confirmed by delivery of a written opinion dated December 23, 2013, that, as of such date and based upon and subject to assumptions made, matters considered and limitations on the scope of review undertaken by Evercore as set forth in its opinion, the consideration to be received by Eagle Rock in connection with the Contribution is fair, from a financial point of view, to Eagle Rock.

        The full text of the written opinion of Evercore, dated December 23, 2013, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement. Evercore's opinion was addressed to, and provided for the information and benefit of, the Eagle Rock Board, in connection with its evaluation of the Contribution and addresses only the fairness to Eagle Rock, from a financial point of view, of the consideration to be received by Eagle Rock in connection with the Contribution. Evercore's opinion should not be construed as creating any fiduciary duty on Evercore's part to Eagle Rock, did not address any other aspect of the Contribution and was not intended to be, and did not constitute a recommendation to the Eagle Rock Board, any holder of Eagle Rock common units or any other persons in respect of the Contribution. Evercore's opinion did not address the relative merits of the Contribution as compared to other business or financial strategies that might be available to Eagle Rock, nor did it address the underlying business

 

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decision of Eagle Rock to engage in the Contribution. Evercore expressed no opinion as to the price at which the Eagle Rock common units or the Regency common units will trade at any time.

    Opinion of Citi—Financial Advisor to Eagle Rock

        In connection with the Contribution, Eagle Rock's financial advisor, Citigroup Global Markets Inc. (herein referred to as "Citi"), delivered a written opinion dated December 23, 2013 to the Eagle Rock Board as to the fairness, from a financial point of view and as of the date of the opinion, to Eagle Rock of the aggregate consideration to be received by Eagle Rock in the proposed Contribution.

        The full text of Citi's written opinion, dated December 23, 2013, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex C to this proxy statement and is incorporated by reference. Citi's financial advisory services and opinion were provided for the information of the Eagle Rock Board (in its capacity as such acting on behalf of Eagle Rock) in connection with its evaluation of the aggregate consideration provided for in the Contribution from a financial point of view to Eagle Rock and did not address any other aspects or implications of the Contribution. Citi was not requested to consider, and its opinion did not address, the underlying business decision of Eagle Rock to effect the Contribution, the relative merits of the Contribution as compared to any alternative business strategies or transactions that might exist for Eagle Rock or the effect of any other transaction in which Eagle Rock might engage or consider. Under the terms of its engagement, Citi has acted as an independent contractor, not as an agent or fiduciary. Citi's opinion is not intended to be and does not constitute a recommendation as to how any unitholder should vote or act on any matters relating to the Contribution, or otherwise.

Regulatory Clearances Required for the Contribution

        The Contribution is subject to the requirements of the Hart-Scott-Rodino Act of 1976 (the "HSR Act"), which prevents Eagle Rock and Regency from completing the Contribution until required information and materials are furnished to the Antitrust Division of the United States Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") and the HSR Act waiting period is terminated or expires. On January 16, 2014, Eagle Rock and Regency filed the requisite notification and report forms under the HSR Act with the DOJ and the FTC. On February 27, 2014, the FTC issued a request for additional information and documentary materials ("Second Request") in connection with the proposed Contribution. A Second Request extends the waiting period under the HSR Act, during which the parties may not close the transaction until 30 days after each party certifies substantial compliance with the Second Request (or the waiting period is otherwise terminated by the FTC). Eagle Rock and Regency are working cooperatively with the FTC staff to respond to the Second Request in a timely manner. For additional information, please read "The Contribution—Regulatory Clearances Required for the Contribution" beginning on page 85.

No Appraisal Rights

        Eagle Rock common unitholders do not have appraisal rights under the Partnership Agreement, the Contribution Agreement or Delaware or other applicable law.

Interests of Certain Officers of Eagle Rock in the Contribution

        Certain of Eagle Rock's officers have financial interests in the Contribution that are different from, or in addition to, the interests of Eagle Rock unitholders generally. The individuals with such financial interests are the Eagle Rock officers that primarily serve the midstream business: Messrs. Roger Fox, James Kincaid, Jeffrey Langemeier, Danny Schedule, Harold Gullung, Thomas Henderson and Todd Johnson (the "Midstream Officers"). The members of the Eagle Rock Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Contribution Agreement and the Contribution, and in recommending to Eagle Rock's unitholders that the Contribution Agreement be approved.

 

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        These interests include the following:

    Certain of Eagle Rock's officers are participants in the Eagle Rock Energy Partners Long-Term Incentive Plan, (the "Eagle Rock LTIP"). Prior to the Contribution, the Midstream Officers entered into letter agreements that will result in the full vesting acceleration of any unvested restricted units held by such executive officers upon certain qualifying terminations of employment in connection with or following the Contribution. In addition, pursuant to the Contribution Agreement, if any Midstream Officers are hired by Regency and become transferred employees, Regency will assume the obligations that would otherwise have been Eagle Rock's obligations under the letter agreements described in the preceding sentence and the unvested restricted unit awards held by such officers will be replaced with comparable awards under Regency's long-term incentive plan.

    Pursuant to certain change of control agreements with Eagle Rock Energy G&P LLC, the Midstream Officers are entitled to severance payments and benefits in the event of certain qualifying terminations of employment in connection with or following the Contribution. In addition, if any of the Midstream Officers is hired by Regency and becomes a transferred employee under the Contribution Agreement, Regency will assume the obligations that would otherwise have been payable under such change of control agreements with Eagle Rock Energy G&P LLC.

    Prior to the effective time, pursuant to the Contribution Agreement, Regency and its affiliates may initiate negotiations of agreements, arrangements and understandings with certain Midstream Officers regarding compensation and benefits and may enter into definitive agreements regarding employment with, or the right to participate in the equity of, Regency or its affiliates, in each case on a going-forward basis following completion of the Contribution.

Litigation Relating to the Contribution

        On March 3, 2014, a purported Eagle Rock unitholder ("Plaintiff") filed a class action lawsuit, on behalf of all Eagle Rock unitholders other than Defendants (as defined below) and their affiliates, against Eagle Rock, the members of the Eagle Rock Board, Regency, and Regal (collectively, "Defendants"). The lawsuit is styled Roberta Feinstein v. Eagle Rock, et al., Civ. No. 4:14-cv-00521, in the United States District Court for the Southern District of Texas, Houston Division (the "Lawsuit").

        Plaintiff alleges a variety of causes of action challenging the Contribution, including that (a) the members of the Eagle Rock Board have allegedly breached fiduciary duties in connection with the Contribution, (b) Eagle Rock, Regency, and Regal have allegedly aided and abetted in these alleged breaches of fiduciary duties, (c) Eagle Rock and the members of the Eagle Rock Board have allegedly violated Section 14(a) of the Exchange Act, and (d) the members of the Eagle Rock Board have allegedly violated Section 20(a) of the Exchange Act. Specifically, Plaintiff alleges that (a) the Contribution provides Eagle Rock with inadequate consideration for its midstream assets, (b) Eagle Rock and the Eagle Rock Board agreed to contractual terms that will allegedly dissuade other potential acquirers from seeking to purchase the midstream assets, and (c) Eagle Rock and the Eagle Rock Board failed to disclose allegedly material information concerning (i) the analysis of Eagle Rock's financial advisors, (ii) alleged potential conflicts of the advisors and members of the Eagle Rock Board, and (iii) the background of the transaction.

        Based on these allegations, Plaintiff seeks to enjoin Eagle Rock from proceeding with or consummating the Contribution. To the extent that the Contribution is consummated before injunctive relief is granted, Plaintiff seeks to have the Contribution rescinded. Plaintiff also seeks monetary damages and attorneys' fees.

        The Lawsuit is in early stages of litigation. Defendants have yet to answer, move to dismiss or otherwise respond to the Lawsuit. Eagle Rock cannot predict the outcome of the Lawsuit or any others that might be filed subsequent to the date of the filing of this proxy statement; nor can Eagle Rock

 

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predict the amount of time and expense that will be required to resolve the Lawsuit. All Defendants intend to vigorously defend against the Lawsuit.

Material U.S. Federal Income Taxes of the Contribution to U.S. Holders

        Tax matters associated with the Contribution are complex. The tax consequences to an Eagle Rock unitholder will depend on such unitholder's own personal tax situation. Eagle Rock unitholders are urged to consult their tax advisors for a full understanding of the U.S. federal, state, local and foreign tax consequences of the Contribution.

        For U.S. federal income tax purposes, the Contribution is, in part, a nontaxable contribution by Eagle Rock to Regency of a portion of the midstream assets of Eagle Rock's midstream business and, in part, a taxable "disguised sale" by Eagle Rock to Regency of the remaining portion of the midstream assets of Eagle Rock's midstream business. Eagle Rock unitholders will be allocated a share of Eagle Rock's gain resulting from the Contribution. The amount of taxable gain recognized by Eagle Rock will depend on several factors. A portion of any such gain, determined by the amount of depreciation previously deducted by the unitholders with respect to the midstream assets of Eagle Rock's midstream business, may be subject to recapture and taxed as ordinary income, and the remainder will generally be capital gain. Eagle Rock anticipates that a substantial portion of the gain is likely to be treated as ordinary income. Any such ordinary income or gain represents the portion of the built-in gain inherent in the unitholders' units that is attributable to the midstream business. As a result, any income and gain recognized from the Contribution by a unitholder will provide such unitholder an increase in the basis of its units, which will reduce the amount of income and gain that would otherwise have been recognized by that unitholder on a sale of such units. Moreover, Eagle Rock anticipates that most unitholders are subject to the passive loss limitations and have suspended passive losses with respect to their investment in Eagle Rock from prior tax years that would be available to offset all or a portion of any income and gain allocated to the unitholders as a result of the Contribution. Each unitholder's share of such recapture income and capital gain depends on such unitholder's particular situation, including the prices and times at which such unitholder purchased its common units and the ability of such unitholder to use suspended passive losses.

        For information regarding the tax consequences of the Contribution and Eagle Rock's estimates of such ordinary income and gain, please read "Material Federal Income Tax Consequences of the Contribution" on page 109.

Termination of the Contribution Agreement

        The Contribution Agreement contains provisions granting both the Regency Parties, on the one hand, and Eagle Rock, on the other hand, the right to terminate the Contribution Agreement under the following circumstances: (1) by mutual written consent of Eagle Rock and the Regency Parties, (2) if there shall be in effect a final nonappealable order of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated thereby; provided, such right to terminate the Contribution Agreement will not be available to Eagle Rock, on the one hand, or Regency, on the other hand, if such order was primarily due to the failure of Eagle Rock, on the one hand, or the Regency Parties, on the other hand, to perform any of its obligations under the Contribution Agreement, (3) if the closing of the Contribution does not occur on or before July 31, 2014 (the "Outside Date") or (4) the Contribution Agreement and the Contribution fail to receive Unitholder Approval.

        The Contribution Agreement also contains provisions granting Eagle Rock the right to terminate the Contribution Agreement and the Contribution if (1) either of the Regency Parties has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Contribution Agreement, or any of such party's representations or warranties has become untrue, and such breach, failure or untruth would result in a failure of a closing condition to be satisfied and has not been cured, if capable of being cured, within 30 days of notice of such breach, failure or untruth

 

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from either of the Regency Parties or (2) in order to enter into a definitive agreement in response to a superior proposal in accordance with the provisions of the Contribution Agreement described below in "—Non-Solicitation of Alternative Proposals" and "—Change in Eagle Rock Board Recommendation."

        The Contribution Agreement also contains provisions granting the Regency Parties the right to terminate the Contribution Agreement if (1) Eagle Rock has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Contribution Agreement, or any of such party's representations or warranties has become untrue, and such breach, failure or untruth would result in a failure of a closing condition to be satisfied and has not been cured, if capable of being cured, within 30 days of notice of such breach, failure or untruth from Eagle Rock, (2) the Eagle Rock Board withdraws, modifies or qualifies in any manner adverse to Regency its recommendation of the Contribution to the Eagle Rock unitholders or publicly approves or recommends, or publicly proposes to approve or recommend, any alternative proposal (a "Change in Recommendation") or (3) Regency has not received the Carve-Out Financial Statements (defined below) by January 21, 2014 (in fact, Eagle Rock delivered the Carve-Out Financial Statements to Regency on January 20, 2014).

Termination Fees

        Eagle Rock will be required to pay Regency $42,168,750 as a termination fee if:

    (1) an alternative proposal for 50% or more of the assets of the midstream business or to which 50% or more of Eagle Rock's revenues or earnings with respect to the midstream business are attributable shall have been publicly proposed or publicly disclosed prior to, and not withdrawn at the time of, the date of the special meeting (or, if the special meeting has not occurred yet, prior to either party exercising its right to terminate the Contribution Agreement due to the fact that the closing of the Contribution has not occurred on or before the Outside Date); (2) Eagle Rock or Regency has exercised their respective rights to terminate the Contribution Agreement due to the fact that the closing of the Contribution has not occurred on or before the Outside Date or if the special meeting has concluded and the Contribution Agreement and the Contribution fail to receive Unitholder Approval and (3) Eagle Rock enters into a definitive agreement with respect to, or consummates, such alternative proposal within nine months after the date the Contribution Agreement is terminated;

    Regency exercises its right to terminate the Contribution Agreement due to a Change in Recommendation (as defined below); or

    Eagle Rock exercises its right to terminate the Contribution Agreement in order to enter into a definitive agreement relating to a superior proposal (as defined below) in accordance with the provisions of the Contribution Agreement.

Conditions to Consummation of the Contribution

        Eagle Rock and the Regency Parties may choose not to complete the Contribution unless each of the following conditions is satisfied or waived, if waiver is permitted by applicable law:

    the Contribution Agreement and the Contribution will have received Unitholder Approval;

    no order or injunction (whether preliminary or permanent) issued by a court of competent jurisdiction or other governmental authority restraining or prohibiting in any material respect the consummation of the transactions contemplated by the Contribution Agreement or contemplated by the other transaction documents (brought by a third party) will be in effect;

    all applicable waiting periods under the HSR Act will have expired or been terminated; and

    no law will have been promulgated or enacted by any governmental authority, which would prevent or make illegal in any material respect the consummation of the transactions contemplated by the Contribution Agreement or by the other transaction documents.

 

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        The obligation of the Regency Parties to effect the Contribution and to consummate the transactions contemplated by the Contribution Agreement is subject to the satisfaction or waiver of the following additional conditions:

    the representations and warranties of Eagle Rock set forth in the Contribution Agreement are true and correct at and as of date of the Contribution Agreement and at and as of the closing date of the Contribution Agreement, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "Midstream Material Adverse Effect" (as defined below) set forth in any individual such representation or warranty) would not have a Midstream Material Adverse Effect (as defined below);

    since the date of the Contribution Agreement, there has not occurred any Midstream Material Adverse Effect;

    Eagle Rock will have caused the Midstream Entities and their assets to be fully released and discharged from all obligations in respect of the Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of June 22, 2011, among Eagle Rock, as borrower, Wells Fargo Bank, National Association, as administrative agent and swingline lender, and Bank of America, N.A. and The Royal Bank of Scotland plc, as co-syndication agents, and the lenders party thereto, as amended;

    Eagle Rock will have performed and complied in all material respects with all covenants, obligations and agreements required in the Contribution Agreement to be performed or complied with by it on or prior to the closing date of the Contribution Agreement;

    Eagle Rock will have provided evidence of the removal of all persons with signatory authority over any bank or depository accounts in the name of certain Midstream Entities;

    effective as of the closing date of the Contribution Agreement, the individuals from the board of managers, board of directors or similar governing body of each of the Midstream Entities will have resigned and Eagle Rock will have provided such resignations to Regency;

    Regency will have received audited historical financial statements for the midstream business for the fiscal years ended December 31, 2011 and 2012 and for the nine month period ended September 30, 2013 and unaudited historical financial statements for the midstream business for the nine month period ended September 30, 2012 (collectively, the "Carve-out Financial Statements"), which in fact Eagle Rock delivered to Regency on January 20, 2014;

    Regency will have executed and delivered a transition services agreement in a form having the terms attached as an exhibit to the Contribution Agreement;

    Regency will have received certain customary closing deliverables from Eagle Rock, including the assignment to Regency of the Contributed Interests; and

    Eagle Rock will have executed and delivered an escrow agreement in substantially the form attached as an exhibit to the Contribution Agreement.

        The obligation of Eagle Rock to effect the Contribution is subject to the satisfaction or waiver of the following additional conditions:

    the representations and warranties of the Regency Parties set forth in the Contribution Agreement will be true and correct in all material respects (without giving effect to any limitations as to "materiality" or "Acquirer Material Adverse Effect" (as defined below) set forth in any individual representation or warranty) at and as of the closing date of the Contribution Agreement, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date);

 

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    since the date of the Contribution Agreement, there will not have occurred an Acquirer Material Adverse Effect;

    the Regency Parties will have performed and complied in all material respects with each of the covenants, obligations and agreements required in the Contribution Agreement to be performed or complied with by such Regency Party on or prior to the closing date of the Contribution Agreement;

    Regency will have delivered, or caused to be delivered, to Eagle Rock evidence of the wire transfer of the closing cash consideration;

    all conditions to the consummation of the Exchange Offer will have been satisfied and not waived (other than with the prior written consent of the parties), and the Exchange Offer may be consummated in accordance with applicable law immediately after (1) the assumption by Regency from Eagle Rock of the Eagle Rock Notes validly tendered for exchange pursuant to the Exchange Offer and not withdrawn as of the closing and accepted by Regency for exchange pursuant to the Debt Assumption Agreement and (2) the Contribution by Eagle Rock to Regal of the Contributed Interests;

    the Regency common units compromising the equity consideration will have been approved for listing on the New York Stock Exchange (the "NYSE"), subject to official notice of issuance;

    Regency will have executed and delivered a registration rights agreement (as described in "The Contribution Agreement—Registration Rights Agreement") and will have executed and delivered a certificate duly executed by an executive officer of Regency confirming that as of the date of the certificate Regency is prepared to file and will file the registration statement contemplated by the registration rights agreement on the first business day following the closing;

    Regency will have executed and delivered a transition services agreement in a form having the terms attached as an exhibit to the Contribution Agreement;

    Regency will have executed and delivered an escrow agreement in substantially the form attached as an exhibit to the Contribution Agreement; or

    Eagle Rock will have received certain customary closing deliverables, including delivery of the cash consideration and a certificate of Regency's transfer agent certifying as to the book-entry of the 8,254,859 Regency common units for Eagle Rock's account.

        For purposes of the Contribution Agreement, the term "Midstream Material Adverse Effect" means any change, event, fact, development, condition, matter or circumstance that, individually or in the aggregate with all other changes, events, facts, developments, conditions, matters or circumstances, is or is reasonably likely to have a material adverse effect on the business, financial condition, liabilities, or results of operations of the Midstream Entities, taken as a whole. However, none of the following changes, events, facts, developments, conditions, matters or circumstances (either alone or in combination) will be taken into account for purposes of determining whether or not a material adverse effect with respect to the Midstream Entities has occurred:

    changes in the general economic, financial, credit or securities markets, including prevailing interest rates or currency rates, or regulatory or political conditions;

    changes in the economic conditions prevalent in (1) the natural gas gathering, compressing, treating, processing and transportation industry generally; (2) the natural gas liquids fractionating and transportation industry generally; (3) the crude oil and condensate logistics and marketing industry generally and (4) the natural gas marketing and trading industry generally (including in each case changes in law affecting such industries);

    changes, effects, events or occurrences generally affecting the prices of oil, gas, natural gas, natural gas liquids, condensate or other commodities;

 

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    the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including acts of terrorism;

    any hurricane, tornado, flood, earthquake or other natural disaster;

    the identity of, or actions or omissions of Regency, or its affiliates, or any action taken pursuant to or in accordance with the Contribution Agreement or at the request of or with the consent of Regency;

    any change resulting from the announcement of the Contribution Agreement and the transactions contemplated thereby, including any disruption of customers or supplier relationships or loss of any employees or independent contractors of any Midstream Entity;

    the announcement or disclosure of Eagle Rock's intention to review the possibility of selling itself or the midstream business;

    any change in accounting requirements or principles imposed upon Eagle Rock, its subsidiaries or their respective businesses or any change in applicable laws, or the interpretation thereof;

    actions taken by Regency or any of its affiliates;

    any changes, effects, events, facts, developments, conditions, matters or circumstances that have formed all or a portion of any breach of certain of the representations and warranties made by Eagle Rock in the Contribution Agreement any or certain losses resulting therefrom for which the purchase price has been adjusted pursuant to the terms of the Contribution Agreement or for which funds have been placed into the escrow account in accordance with the Contribution Agreement; and

    any failure by the midstream business to meet any estimates, expectations, projections, forecasts, guidance or revenue or earnings predictions for any period ending prior to, on or after the date of the Contribution Agreement.

        The changes, events, facts, developments, conditions, matters or circumstances referred to in the first, second, third, fourth, fifth and ninth bullets above will be considered for purposes of determining whether there has been a Midstream Material Adverse Effect if such changes, events, facts, developments, conditions, matters or circumstances materially or disproportionately affect the Midstream Entities as compared to other participants of similar size in the industries in which the Midstream Entities operate (it being understood and agreed that the facts and circumstances giving rise to such failure that are not otherwise excluded from the definition of Midstream Material Adverse Effect with respect to the Midstream Entities may be taken into account in determining whether there has been a Midstream Material Adverse Effect).

        For purposes of the Contribution Agreement, the term "Acquirer Material Adverse Effect" means any change, event, fact, development, condition, matter or circumstance that, individually or in the aggregate with one or more other events, changes, facts, development, conditions or circumstances, is or is reasonably likely to materially impair or delay the ability of Regency to perform any of its obligations or to consummate any of the transactions under the transaction documents or otherwise materially threaten or materially impede or delay the consummation or performance of the transactions or obligations under the transaction documents.

Non-Solicitation of Alternative Proposals

        The Contribution Agreement contains detailed provisions prohibiting Eagle Rock from seeking an alternative proposal (as defined below) from a third person. Under these "non-solicitation" provisions, Eagle Rock agreed to, and has agreed to use commercially reasonable efforts to cause its representatives to, immediately cease and cause to be terminated any discussions or negotiations with any person with respect to an alternative proposal, and request the return or destruction of all confidential information previously provided to such parties by or on behalf of Eagle Rock or its

 

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subsidiaries. In addition, Eagle Rock has agreed not to, and has agreed to use commercially reasonable efforts to cause its respective representatives not to, directly or indirectly:

    initiate or solicit any inquiries or the making or submission of any alternative proposal; or

    participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, any alternative proposal.

        Notwithstanding these restrictions, the Contribution Agreement provides that if at any time prior to Eagle Rock's unitholders voting in favor of approving the Contribution Agreement and the Contribution, (1) Eagle Rock has received a written alternative proposal that the Eagle Rock Board believes is bona fide and (2) the Eagle Rock Board, after consultation with its financial advisors and its outside legal counsel, determines in good faith that such alternative proposal constitutes or could reasonably be expected to lead to or result in a superior proposal, then Eagle Rock may (a) furnish information, including confidential information, with respect to Eagle Rock and its subsidiaries (including the Midstream Entities) to the person making such alternative proposal and (b) participate in discussions or negotiations regarding such alternative proposal. However, Eagle Rock will (x) not, and will use commercially reasonable efforts to cause its representatives not to, disclose any non-public information to such person unless Eagle Rock has, or first enters into, a confidentiality agreement with such person with confidentiality provisions that are not materially less restrictive to such person than the provisions of the confidentiality agreement between Eagle Rock and Regency are to Regency (including, without limitation, the inclusion of "standstill" provisions or similar restrictions) and (y) provide to Regency any non-public information about the Midstream Entities that was not previously provided or available to Regency prior to or substantially concurrently with providing or making available such non-public information to such other person.

        Eagle Rock also agreed that it will promptly (and in any event within 72 hours after receipt) advise Regency in writing of any alternative proposal (and any changes thereto) and the material terms and conditions of any such alternative proposal but need not provide the identity of the person making any such alternative proposal. Eagle Rock has agreed to keep Regency reasonably informed of material developments with respect to any such alternative proposal.

        For purposes of the Contribution Agreement, the term "alternative proposal" means any proposal or offer from any person or "group" (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than Regency and its subsidiaries, relating to any direct or indirect acquisition (whether in a single transaction or a series of related transactions), outside of the ordinary course of business, of assets of the Midstream Entities equal to 20% or more of the consolidated assets of the midstream business or to which 20% or more of Eagle Rock's revenues or earnings with respect to the midstream business on a consolidated basis are attributable, other than the transactions contemplated by the Contribution Agreement.

        For purposes of the Contribution Agreement, a "superior proposal" means a bona fide written offer, obtained after the date of the Contribution Agreement and not in breach of the non-solicitation provisions of the Contribution Agreement (other than an immaterial breach), to acquire, directly or indirectly, more than 50% of the outstanding equity securities of Eagle Rock or more than 50% of the combined assets of Eagle Rock, made by a third party, which is on terms and conditions which the Eagle Rock Board determines in good faith to be more favorable to the Eagle Rock unitholders than the transactions contemplated by the Contribution Agreement, taking into account at the time of determination any changes to the terms of the Contribution Agreement that as of that time had been committed to by Regency in writing and the ability of the person making such proposal to consummate the transactions contemplated by such proposal (based upon, among other things, the availability of financing and the expectation of obtaining required approvals).

 

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Change in Eagle Rock Board Recommendation

        The Contribution Agreement provides that the Eagle Rock Board will not, except as described below, (1) (a) withdraw, modify or qualify in any manner adverse to Regency the recommendation of the Eagle Rock Board that Eagle Rock's unitholders approve the Contribution Agreement and the Contribution or (b) publicly approve or recommend, or publicly propose to approve or recommend, any alternative proposal (a "Change in Recommendation"); or (2) approve, adopt or recommend, or publicly propose to approve, adopt or recommend, or allow Eagle Rock or any of its subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement, or other similar contract or any tender or exchange offer providing for, with respect to, or in connection with, any alternative proposal.

        Notwithstanding the above, if Eagle Rock receives (1) a written alternative proposal or (2) another proposal or offer that, in either case, the Eagle Rock Board believes is bona fide and the Eagle Rock Board, after consultation with its financial advisors and its outside legal counsel, concludes that such alternative proposal constitutes a superior proposal, then the Eagle Rock Board may at any time prior to Eagle Rock's unitholders voting in favor of approving the Contribution Agreement and the Contribution, terminate the Contribution Agreement and pay a termination fee (as described in "The Contribution Agreement—Termination of the Contribution Agreement" and "The Contribution Agreement—Termination Fees") and/or effect a Change in Recommendation. However, the Eagle Rock Board may not take such action pursuant to the foregoing unless:

    Eagle Rock has provided prior written notice to Regency specifying in reasonable detail the reasons for such action (including a description of the material terms of such superior proposal and delivering to Regency a copy of the proposed definitive agreement providing for such superior proposal), in the form to be entered into and any other relevant proposed transaction agreements, at least three calendar days in advance of taking any action with respect to a Change in Recommendation, unless at the time such notice is otherwise required to be given there are less than three calendar days prior to the Eagle Rock unitholder meeting, in which case Eagle Rock will provide as much notice as is reasonably practicable (the period inclusive of all such days, the "Notice Period"); and

    during the Notice Period, Eagle Rock has negotiated, and has used commercially reasonable efforts to cause its financial advisors and outside legal counsel to negotiate, with Regency in good faith (to the extent Regency desires to negotiate) to make such adjustments in the terms and conditions of the Contribution Agreement so that such superior proposal ceases to constitute (in the judgment of the Eagle Rock Board) a superior proposal.

        Notwithstanding anything to the contrary in the Contribution Agreement, other than in connection with an alternative proposal, the Eagle Rock Board is permitted, at any time prior to Eagle Rock's unitholders voting in favor of approving the Contribution Agreement and the Contribution, to make a Change in Recommendation (as defined below) if, prior to taking such action, both (1) the Eagle Rock Board determines in good faith, in consultation with its outside legal counsel, that failure to take such action would be inconsistent with its duties under applicable law and (2) Eagle Rock has given 48 hours advance notice to Regency that Eagle Rock intends to take such action.

        If the Eagle Rock Board effects a Change in Recommendation, Eagle Rock is not required to call, hold or convene the special meeting to which this proxy statement relates.

Remedies; Specific Performance

        In the event of a valid termination of the Contribution Agreement, then each of the parties will be relieved of its duties and obligations arising under the Contribution Agreement after the date of such

 

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termination and such termination will be without liability to the Regency Parties or Eagle Rock, except (1) with respect to Eagle Rock, if it is required to pay the termination fee to Regency or (2) with respect to Eagle Rock, if it is required to indemnify the Regency Parties and its affiliates against certain losses. For more information regarding termination fees or indemnification, please read "The Contribution Agreement—Termination Fees" and "The Contribution Agreement—Indemnification." In addition, in the event of a valid termination of the Contribution Agreement, the Regency Parties and Eagle Rock will not be relieved of any liability for the failure to comply with any covenants or agreements contained in the Contribution Agreement or any knowing or intentional breach by the Regency Parties of the representation with respect to the required consents and approvals of governmental authorities or any other person, except that (1) in the event that Eagle Rock pays the termination fee to Regency, Eagle Rock will have no further liability to Regency and (2) in the event that Regency terminates the Contribution Agreement because it has not received the Carve-Out Financial Statements on or prior to January 21, 2014, then Eagle Rock will have no liability for any failure to comply with any covenants or agreements contained therein or for any breaches of any representations or warranties of Eagle Rock contained in the Contribution Agreement.

        The parties acknowledged and agreed in the Contribution Agreement that a breach of the Contribution Agreement would cause irreparable damage to the Regency Parties and Eagle Rock and that the Regency Parties and Eagle Rock would not have an adequate remedy at law for such breach. The parties agreed that the obligations of the parties would be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. The parties agreed that such remedies would, however, be cumulative and not exclusive and would be in addition to any other remedies which any party might have under the Contribution Agreement or otherwise. Each of the parties agreed not to oppose the granting of an injunction, specific performance and other equitable relief as provided in the Contribution Agreement on the basis that (1) either party has an adequate remedy at law or (2) an award of specific performance is not an appropriate remedy for any reason at law or equity. Each party further agreed that no party would be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining equitable relief, and each party irrevocably waived any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.

 

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Selected Consolidated Historical Financial Data of Eagle Rock Energy Partners, L.P.

        The following table shows selected historical financial data from our audited consolidated financial statements for the five fiscal years from January 1, 2009 to December 31, 2013. The historical financial data for the years ended December 31, 2011, 2012 and 2013 and the historical balance sheet data as of December 31, 2012 and 2013 have been derived from our audited consolidated historical financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which is incorporated into this proxy statement by reference. The historical financial data for the years ended December 31, 2009 and 2010 and the historical balance sheet data as of December 31, 2009, 2010 and 2011 has been derived from our audited consolidated historical financial statements not included or incorporated by reference herein.

        The following financial data should be read in conjunction with our consolidated historical financial statements and the accompanying notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2013.

        Our results of operations for the periods presented below may not be comparable either from period to period or going forward. For a description of the significant transactions affecting the comparability of our results of operations, please read "Item 6. Selected Financial Data" in our Annual Report on Form 10-K for the year ended December 31, 2013, which is incorporated by reference in this proxy statement.

 

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  Year Ended December 31,  
 
  2009   2010   2011   2012   2013  
 
  ($ in thousands, except per unit amounts)
 

Statement of Operations Data:

                               

Sales to external customers

  $ 679,220   $ 741,095   $ 1,027,398   $ 926,065   $ 1,213,812  

Commodity risk management gains (losses)

    (106,290 )   (8,786 )   32,510     57,894     (18,533 )
                       

Total revenues

    572,930     732,309     1,059,908     983,959     1,195,279  

Cost of natural gas, NGLs and condensate

    470,099     468,304     633,184     532,719     790,618  

Operating and maintenance expense

    71,496     76,415     93,048     119,828     135,205  

Taxes other than income

    10,709     12,226     19,148     19,432     20,270  

General and administrative expense

    45,819     45,775     57,891     69,994     81,214  

Other operating (income) expense

    (3,552 )       (2,893 )        

Impairment expense

    21,788     6,666     16,288     177,003     214,286  

Depreciation, depletion and amortization

    108,530     106,398     131,611     161,045     167,170  
                       

Operating (loss) income

    (151,959 )   16,525     111,631     (96,062 )   (213,484 )

Interest expense, net

    27,751     42,171     41,023     56,205     69,866  

Other expense (income)

    136     (450 )   184     38     (257 )
                       

(Loss) income from continuing operations before income taxes

    (179,846 )   (25,196 )   70,424     (152,305 )   (283,093 )

Income tax (benefit) provision

    989     (2,585 )   (2,432 )   (1,703 )   (5,114 )
                       

(Loss) income from continuing operations

    (180,835 )   (22,611 )   72,856     (150,602 )   (277,979 )

Discontinued operations, net of tax

    9,577     17,262     276          
                       

Net (loss) income

  $ (171,258 ) $ (5,349 ) $ 73,132   $ (150,602 ) $ (277,979 )
                       
                       

(Loss) income from continuing operations per common unit—diluted

  $ (2.38 ) $ (0.26 ) $ 0.61   $ (1.13 ) $ (1.82 )
                       
                       

Balance Sheet Data (at period end):

                               

Property, plant and equipment, net

  $ 1,124,695   $ 1,137,239   $ 1,763,674   $ 1,968,206   $ 1,828,768  

Total assets

    1,534,818     1,349,397     2,045,688     2,294,216     2,127,550  

Long-term debt

    754,383     530,000     779,453     1,153,103     1,252,062  

Net equity

    530,398     579,113     1,007,347     868,374     573,879  

Cash Flow Data:

   
 
   
 
   
 
   
 
   
 
 

Net cash flows provided by (used in):

                               

Operating activities

  $ 77,228   $ 94,128   $ 117,800   $ 145,501   $ 177,376  

Investing activities

    (37,284 )   73,545     (373,936 )   (528,670 )   (247,048 )

Financing activities

    (73,260 )   (175,446 )   251,970     382,317     69,723  

Discontinued operations

    18,132     9,090     994          

 

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Summary Historical Financial Data of the Midstream Assets of Eagle Rock Energy Partners, L.P.

        The following selected statement of operations and cash flow data for the years ended December 31, 2013, 2012 and 2011 and selected balance sheet data as of December 31, 2013 and 2012 have been derived from the audited combined financial statements of the Midstream Assets of Eagle Rock Energy, which are included as Annex D to this proxy statement.

        You should read this summary financial data together with the financial statements that are included as Annex D to this proxy statement and their accompanying notes.

 
  Year Ended December 31,  
 
  2011   2012   2013  
 
  ($ in thousands)
 

Statement of Operations Data:

                   

Sales to external customers

  $ 865,804   $ 766,069   $ 1,051,727  

Commodity risk management gains (losses)

    (4,759 )   29,784     (14,596 )
               

Total revenues

    861,045     795,853     1,037,131  

Cost of natural gas, NGLs and condensate

    674,566     577,119     829,661  

Operating and maintenance expense

    60,827     78,559     93,779  

Taxes other than income

    3,712     4,089     7,342  

General and administrative expense

    31,471     40,383     51,227  

Other operating (income) expense

    (2,893 )        

Impairment expense

    4,560     131,714      

Depreciation, depletion and amortization

    64,702     70,534     77,726  
               

Operating (loss) income

    24,100     (106,545 )   (22,604 )

Interest expense, net

    30,710     45,612     58,814  

Other expense (income)

    35     (11 )   (287 )
               

(Loss) income from continuing operations before income taxes

    (6,645 )   (152,146 )   (81,131 )

Income tax (benefit) provision

    1,422     (110 )   77  
               

(Loss) income from continuing operations

    (8,067 )   (152,036 )   (81,208 )

Discontinued operations, net of tax

    (180 )        
               

Net (loss) income

  $ (8,247 ) $ (152,036 ) $ (81,208 )
               
               

Balance Sheet Data (at period end):

                   

Property, plant and equipment, net

        $ 985,422   $ 1,004,317  

Total assets

          1,246,146     1,263,959  

Long-term debt

          867,459     905,404  

Net equity

          243,579     192,399  

Cash Flow Data:

   
 
   
 
   
 
 

Net cash flows provided by (used in):

                   

Operating activities

  $ 31,071   $ 37,716   $ 40,863  

Investing activities

    (76,672 )   (376,161 )   (97,180 )

Financing activities

    45,063     338,445     56,317  

Discontinued operations

    538          

 

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Summary Selected Unaudited Pro Forma Condensed Combined Financial Information

        The following table presents selected unaudited pro forma combined financial information including Eagle Rock's consolidated balance sheet and statements of income, after giving effect to the Contribution to Regency as described under "The Contribution." The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2013 and the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2013 should be read in conjunction with: (1) the December 31, 2013 audited historical financial statements of Eagle Rock, including the related notes, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which is incorporated into this proxy statement by reference; and (2) the audited combined financial statements of the midstream assets of Eagle Rock, which comprise the combined balance sheets as of December 31, 2013 and December 31, 2012, and the related combined statements of operations, members' equity, and cash flows for each of the years in the two year period ended December 31, 2013, and the related notes to the combined financial statements, which is included as Annex D to this proxy statement. Please read "Where You Can Find More Information" beginning on page 116.

        The following selected unaudited pro forma condensed consolidated balance sheet as of December 31, 2013 is presented to illustrate the estimated effects of the Contribution, as if the Contribution had occurred on December 31, 2013. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2013 is presented to illustrate the estimated effects of Contribution as if the Contribution had occurred on January 1, 2013.

        The unaudited pro forma condensed financial statements are based on certain assumptions made by Eagle Rock based on its experience and perception of historical trends, current conditions, expected future developments and other factors Eagle Rock believes are appropriate under the circumstances, many of which are beyond the control of Eagle Rock, and are intended for informational purposes only and are not necessarily indicative of the financial position or results of operations that would have occurred if the Contribution had been consummated on the dates indicated or of the financial position or results of operations of Eagle Rock in the future. Actual results may differ materially from the estimates and assumptions used, and the following unaudited pro forma condensed financial statements do not purport to project the future financial position or operating results of Eagle Rock following the consummation of the Contribution. The pro forma adjustments and assumptions are described in Note 3 in the accompanying notes to the unaudited pro forma condensed consolidated financial statements, which are included in Annex E to the proxy statement.

        The information presented below should be read in conjunction with the pro forma condensed consolidated financial statements of Eagle Rock, including the related notes, that are included as Annex E to this proxy statement. Please read "Where You Can Find More Information" beginning on page 116.

 
  Year Ended
December 31, 2013
 
 
  ($ in thousands, except
per unit amounts)

 

Pro Forma Statement of Operations Data:

       

Revenues

  $ 197,372  

Net loss from continuing operations

  $ (202,718 )

Net loss from continuing operations per unit—Basic and diluted

  $ (1.33 )

Pro Forma Balance Sheet Data (at period end):

   
 
 

Total assets

  $ 1,067,606  

Long-term debt

  $ 201,800  

Net equity

  $ 718,933  

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        This proxy statement, including information included or incorporated by reference in this proxy statement, contains certain forward-looking statements with respect to our financial condition, results of operations, plans, objectives, intentions, future performance and business and other statements that are not historical facts, as well as certain information relating to the Contribution, including, without limitation:

    statements relating to the benefits of the Contribution;

    the financial projections described under "The Contribution—Financial Projections Provided to the Advisors" and statements relating to the financial results of Eagle Rock following the Contribution or in the event that the Contribution is not consummated; and

    statements preceded by, followed by or that include the words "believes," "anticipates," "plans," "predicts," "expects," "envisions," "hopes," "estimates," "intends," "will," "continue," "may," "potential," "should," "confident," "could" or similar expressions.

        Forward-looking statements involve certain risks and uncertainties. These statements are based on certain assumptions made by Eagle Rock based on its experience and perception of historical trends, current conditions, expected future developments and other factors Eagle Rock believes are appropriate under the circumstances, many of which are beyond the control of the Eagle Rock. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the factors discussed under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2013, as well as the following factors:

    the risks that the Contribution may not be consummated or the benefits contemplated therefrom may not be realized;

    the ability to obtain requisite regulatory and unitholder approval and the satisfaction of the other conditions to the consummation of the Contribution; and

    the potential impact of the announcement or consummation of the Contribution on relationships, including with employees, suppliers, customers, competitors and credit rating agencies.

        Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports we have filed with the SEC. Please read "Where You Can Find More Information."

        Forward-looking statements speak only as of the date of this proxy statement or the date of any document incorporated by reference in this proxy statement. All subsequent written and oral forward-looking statements concerning the Contribution or other matters addressed in this proxy statement and attributable to Eagle Rock or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.

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THE SPECIAL MEETING

Date, Time and Place

        We will hold a special meeting of our common unitholders on April 29, 2014 at 9:00 a.m., Houston, Texas time, at our offices located at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002.


Purpose

        At the special meeting, our common unitholders will be asked to consider and vote on:

    the proposal to approve the Contribution Agreement and the Contribution; and

    the advisory say-on-contribution-pay proposal.

        The persons named in the accompanying proxy card will have discretionary authority to vote on other business, if any, that properly comes before the special meeting and any adjournment or postponement of the special meeting. As of the date of this proxy statement, we do not know of any other matter to be raised at the special meeting.


Record Date and Quorum Requirement

        The Eagle Rock Board has fixed March 6, 2014 as the record date. Only holders of record of our common units as of the close of business on the record date will be entitled to receive notice of, and to vote at, the special meeting. Each holder of record of our common units at the close of business on the record date is entitled to one vote for each common unit then held on each matter submitted to a vote of unitholders at the special meeting. As of the close of business on the record date of March 6, 2014, there were 159,390,793 common units of Eagle Rock outstanding.

        If you are a record or beneficial holder on the record date and vote by proxy, by voting instructions or in person at the special meeting, you will be counted for purposes of determining whether there is a quorum at the special meeting. Abstentions and broker non-votes (if any) will be counted for the purpose of determining whether there is a quorum for the transaction of business at the special meeting. A broker non-vote occurs when a bank, broker or other nominee holding units for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Because the only proposals for consideration at the Eagle Rock special meeting are non-discretionary proposals, it is not expected that there will be any broker non-votes at the Eagle Rock special meeting.


Voting by Proxy

        Holders of record can ensure that their units are voted at the special meeting by completing, signing, dating and mailing the enclosed proxy card in the enclosed postage-prepaid envelope. Submitting instructions by this method will not affect your right to attend the special meeting and vote. If you hold your common units through a broker, bank or other nominee, you should follow the separate voting instructions, if any, provided by the broker, bank or other nominee with this proxy statement.


Voting Via Telephone or the Internet

        Voting via telephone or the Internet is fast, convenient and your vote is immediately confirmed and tabulated. If you choose to vote by telephone or the Internet, instructions to do so are set forth on the enclosed proxy card or voting instruction card. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a personal identification number, which appears on the proxy card. These procedures, which comply with Delaware law, allow unitholders to appoint a proxy to

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vote their units and to confirm that their instructions have been properly recorded. If you vote by telephone or the Internet, you do not have to mail in your proxy card or voting instruction card, but your vote must be received by 11:59 p.m., Houston time, on April 28, 2014.

        If you own your Eagle Rock common units in your own name, you can vote via the Internet in accordance with the instructions provided on the enclosed proxy card. If your common units are held by a bank, broker or other nominee, please follow the instructions provided with your proxy materials to determine if Internet or telephone voting is available. If your bank or broker does make Internet or telephone voting available, please follow the instructions provided on the voting form supplied by your bank or broker.


Revoking Your Proxy

        If you own your Eagle Rock common units in your own name, you may revoke your proxy at any time before it is voted at the special meeting by:

    sending a written notice of revocation to Eagle Rock Energy G&P, LLC, Attention: Secretary, 1415 Louisiana Street, Suite 2700, Houston, Texas, 77002, timely received before the special meeting;

    submitting a new proxy with a later date either signed and returned by mail or transmitted using the telephone or Internet voting procedures, timely received before the special meeting; or

    attending the special meeting and voting in person if you are a holder of record or if you hold a proxy in your favor executed by a holder of record.

        If your common units are held through a broker, bank or other nominee, you should follow the instructions of your broker, bank or other nominee regarding the revocation of proxies. If your broker, bank or other nominee allows you to submit a proxy by telephone or the Internet, you may be able to change your vote by submitting a proxy again by telephone or the Internet.

        If you have questions about how to vote or revoke your proxy, you should contact our proxy solicitor, Morrow & Co., LLC toll-free at (800) 449-0910.


Who to Call for Assistance

        If you need assistance, including help in changing or revoking your proxy, please contact Morrow & Co., LLC, which is acting as a proxy solicitation agent and information agent in connection with the Contribution as follows:

    Morrow & Co., LLC
    470 West Avenue—3rd Floor
    Stamford, CT 06902
    Banks and Brokerage Firms, please call (203) 658-9400
    Unitholders, please call toll-free (800) 449-0910


Voting at the Special Meeting

        Submitting a proxy now will not limit your right to vote at the special meeting if you decide to attend in person. If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your common units are held in "street name," which means your common units are held of record by a broker, bank or other nominee, and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy from the record holder of the units authorizing you to vote at the special meeting. Please contact your broker, bank or other nominee for specific instructions.

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Vote Required at the Special Meeting; How Units are Voted

        Under the terms of the Contribution Agreement, the proposal to approve the Contribution Agreement and the Contribution must be approved by the affirmative vote or consent of the holders of a majority of our outstanding common units as of the record date of the special meeting. The advisory say-on-contribution-pay proposal will require advisory (non-binding) approval by the holders of a majority of the common units as of the record date for the special meeting that are present or represented by proxy at the special meeting and entitled to vote on the proposal.

        Subject to revocation, all units represented by each properly executed proxy will be voted in accordance with the instructions indicated on the proxy. If you return a signed proxy card but do not provide voting instructions (other than in the case of broker non-votes (if any)), the persons named as proxies on the proxy card will vote "FOR" the proposal to approve the Contribution Agreement and the Contribution, and in such manner as the persons named on the proxy card in their discretion determine with respect to such other business as may properly come before the special meeting.

        Abstentions will have the same effect as a vote "AGAINST" the proposal to approve the Contribution Agreement and the Contribution and the advisory say-on-contribution-pay proposal. Failures to vote and broker non-votes (if any) will have the same effect as a vote "AGAINST" the proposal to approve the Contribution Agreement and the Contribution but will not have any effect on the advisory say-on-contribution-pay proposal. If the special meeting is adjourned for any reason, at any subsequent reconvening of the special meeting, all proxies will be voted in the same manner as such proxies would have been voted at the original convening of the meeting (except for any proxies that have been revoked or withdrawn).

        The proxy card confers discretionary authority on the persons named on the proxy card to vote the units represented by the proxy card on any other matter that is properly presented for action at the special meeting. As of the date of this proxy statement, we do not know of any other matter to be raised at the special meeting.

        As of March 6, 2014, the directors and executive officers of Eagle Rock Energy G&P LLC beneficially owned, in the aggregate, Eagle Rock common units representing approximately 1.8% of our outstanding common units. We believe that the directors and executive officers of Eagle Rock Energy G&P LLC intend to vote all of their Eagle Rock common units "FOR" the proposal to approve the Contribution Agreement and the Contribution and "FOR" the advisory say-on-contribution-pay proposal.


Proxy Solicitation

        This proxy statement is being furnished in connection with the solicitation of proxies by the Eagle Rock Board. Eagle Rock will bear the costs of soliciting proxies. These costs include the preparation, assembly and mailing of this proxy statement, the notice of the special meeting of unitholders and the enclosed proxy card or voting instruction card, as well as the cost of forwarding these materials to the beneficial owners of our common units. The directors, officers and regular employees of Eagle Rock and Eagle Rock Energy G&P LLC may, without compensation other than their regular compensation, solicit proxies by telephone, e-mail, the Internet, facsimile or personal conversation, as well as by mail. We have retained Morrow & Co., LLC, a proxy solicitation firm, to assist with the solicitation of proxies for the special meeting for a fee estimated not to exceed $5,500 plus expenses. We may also reimburse brokerage firms, custodians, nominees, fiduciaries and others for expenses incurred in forwarding proxy material to the beneficial owners of our common units.

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Adjournment

        Pursuant to the Partnership Agreement, our general partner may authorize its designated chairman of any special meeting to adjourn the meeting. Consequently, our general partner may adjourn the special meeting (including a further adjournment of an adjourned meeting) to a date within 45 days of the special meeting without further notice other than by an announcement made at the special meeting (or such adjourned meeting) and without setting a new record date. If proxies representing the required unitholder approvals have not been received at the time of the special meeting (or such adjourned meeting), our general partner may choose to adjourn the meeting so that we may solicit additional proxies in favor of the proposal to approve the Contribution Agreement and the Contribution or the advisory say-on-contribution-pay proposal. The general partner may also choose to adjourn the meeting for any other reason if deemed necessary or advisable.

        Pursuant to the terms of the Contribution Agreement, and unless the Eagle Rock Board makes a Change in Recommendation, Eagle Rock must hold the special meeting as soon as reasonably practicable following clearance of this proxy statement by the SEC. However, this obligation does not obligate Eagle Rock, nor limit the ability of Eagle Rock, to postpone or adjourn the special meeting (1) to solicit additional proxies for the purposes of obtaining Unitholder Approval, (2) for the absence of quorum, (3) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure that Eagle Rock has determined, after consultation with outside legal counsel, is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the Eagle Rock unitholders prior to the special meeting or (4) if Eagle Rock has delivered any notice contemplated by the provisions of the Contribution Agreement related to alternative proposals. For additional information, please read "The Contribution Agreement—Eagle Rock Unitholder Meeting."


Other Matters

Other Matters for Action at the Special Meeting

        As of the date of this proxy statement, the Eagle Rock Board knows of no matters that will be presented for consideration at the special meeting other than as described in this proxy statement.

Householding

        We have adopted a procedure approved by the SEC called "householding." Under this procedure, unitholders of record who have the same address and last name will receive only one copy of our proxy statement that are delivered until such time as one or more of these unitholders notifies us that they want to receive separate copies. This procedure reduces our printing costs and postage fees. Unitholders who participate in householding will continue to have access to and may utilize separate proxy voting instructions.

        If you receive a single set of proxy materials as a result of householding and you would like to receive a separate copy of our proxy statement, please submit a request to our Secretary at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002 or by telephone at (281) 408-1375, and we will promptly send you what you have requested. You can also contact our Secretary at the address and phone number above if you receive multiple copies of our proxy materials and you would prefer to receive a single copy in the future, or if you would like to opt out of householding for future mailings. Beneficial owners can request information about householding from their banks, brokers, or other holders of record.

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PROPOSALS FOR THE SPECIAL MEETING

PROPOSAL 1: THE CONTRIBUTION AGREEMENT

        As discussed elsewhere in this proxy statement, Eagle Rock's unitholders will consider and vote on a proposal to approve the Contribution Agreement and the Contribution. You should carefully read this proxy statement in its entirety for more detailed information concerning the Contribution Agreement and the Contribution. In particular, you should read the Contribution Agreement in its entirety, which is enclosed as Annex A to this proxy statement. In addition, please read "The Contribution" and "The Contribution Agreement."

        The Eagle Rock Board unanimously recommends that unitholders vote "FOR" the proposal to approve the Contribution Agreement and the Contribution.

        If you return a properly executed proxy card, but do not indicate instructions on your proxy card, your common units represented by such proxy card will be voted "FOR" the proposal to approve the Contribution Agreement and the Contribution.


PROPOSAL 2: ADVISORY SAY-ON-CONTRIBUTION-PAY

        Eagle Rock is providing its unitholders with the opportunity to cast an advisory (non-binding) vote to approve the related compensation payments that may be paid or become payable by Eagle Rock to Roger Fox, one of Eagle Rock's named executive officers in connection with the Contribution, as required by Section 14A of the Exchange Act, which was enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This proposal, which is referred to in this proxy statement as the advisory say-on-contribution-pay proposal, gives Eagle Rock unitholders the opportunity to vote on an advisory (non-binding) basis on the related compensation payments that may be paid or become payable by Eagle Rock to such named executive officer in connection with the Contribution. The related compensation that such named executive officer may be entitled to receive from Eagle Rock in connection with the Contribution is summarized in the table under "The Contribution—Interests of Officers of Eagle Rock in the Contribution—Quantification of Potential Payments to Eagle Rock's Named Executive Officers in Connection with the Contribution." That summary includes all compensation and benefits that may be paid or become payable by Eagle Rock to such named executive officer in connection with the Contribution. For the avoidance of doubt, as described above, the only named executive officer that may be paid compensation and benefits in connection with the Contribution is Mr. Fox.

        The Eagle Rock Board encourages you to review carefully the related compensation information disclosed in this proxy statement.

        The Eagle Rock Board unanimously recommends that the unitholders approve the following resolution:

        "RESOLVED, that the unitholders of Eagle Rock approve, on an advisory (non-binding) basis, the compensation that will or may become payable by Eagle Rock to one of its named executive officers in connection with the Contribution, as disclosed pursuant to Item 402(t) of Regulation S-K in the table in the section of the proxy statement titled "The Contribution—Interests of Officers of Eagle Rock in the Contribution—Quantification of Potential Payments to Eagle Rock's Named Executive Officers in Connection with the Contribution" and the related narrative disclosures."

        THE ADVISORY SAY-ON-CONTRIBUTION-PAY PROPOSAL IS A VOTE SEPARATE AND APART FROM THE VOTE ON THE APPROVAL OF THE CONTRIBUTION AGREEMENT AND THE CONTRIBUTION. ACCORDINGLY, YOU MAY VOTE TO APPROVE THE CONTRIBUTION AGREEMENT AND THE CONTRIBUTION AND VOTE NOT TO APPROVE THE ADVISORY SAY-ON-CONTRIBUTION-PAY PROPOSAL AND VICE VERSA. Because the vote on the say-on-

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contribution-pay proposal is advisory only, it will not be binding on either Eagle Rock or Regency. Accordingly, if the Contribution Agreement and the Contribution are approved and the Contribution is completed, the compensation payments that are contractually required to be paid by Eagle Rock to one of its named executive officers will or may be paid, subject only to the conditions applicable thereto, regardless of the outcome of the advisory (non-binding) vote of Eagle Rock unitholders.

        The affirmative vote of a majority of the votes cast affirmatively or negatively with respect to the advisory say-on-contribution-pay proposal by holders of the Eagle Rock common units, voting together as a single class, will be required to approve the advisory say-on-contribution-pay proposal. Accordingly, a broker non-vote (if any) or failure to vote will have no effect on the advisory say-on-contribution-pay proposal.

        The Eagle Rock Board unanimously recommends that you vote "FOR" the proposal to approve the related compensation payments that may be paid or become payable by Eagle Rock to one of its named executive officers in connection with the Contribution.

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EAGLE ROCK UNITHOLDER PROPOSALS

        Ownership of Eagle Rock common units does not entitle Eagle Rock common unitholders to make proposals at the Eagle Rock special meeting. Under the Partnership Agreement, only its general partner can make a proposal at the special meeting.

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THE PARTIES

Eagle Rock

        Eagle Rock is a Delaware MLP currently engaged in two businesses: (1) midstream, which includes (a) gathering, compressing, treating, processing and transporting natural gas; (b) fractionating and transporting natural gas liquids (NGLs); (c) crude oil and condensate logistics and marketing; and (d) natural gas marketing and trading; and (2) upstream, which includes exploiting, developing, and producing hydrocarbons in oil and natural gas properties.

        We conduct, evaluate and report on our midstream business within three segments—the Texas Panhandle Segment, the East Texas and Other Midstream Segment and the Marketing and Trading Segment. Our Texas Panhandle Segment consists of gathering and processing assets in the Texas Panhandle. Our East Texas and Other Midstream Segment consists of gathering and processing assets in East Texas/Northern Louisiana, South Texas, Southern Louisiana, the Gulf of Mexico and Galveston Bay. Our Marketing and Trading Segment consists of crude oil and condensate logistics and marketing in the Texas Panhandle and Alabama and natural gas marketing and trading.

        We conduct, evaluate and report on our Upstream Business as one segment, which includes operated and non-operated wells located in the Mid-Continent (which includes areas in Oklahoma, Arkansas, and the Texas Panhandle); Permian (which includes areas in West Texas); East Texas / South Texas / Mississippi; and Southern Alabama (which also includes two treating facilities and one natural gas processing plant and related gathering systems).

        Our final reporting segment is our Corporate and Other Segment, which is where we account for our risk management activity (excluding any risk management activity associated with our natural gas marketing and trading activities), intersegment eliminations and our general and administrative expenses.

        The principal executive offices of Eagle Rock are located at 1415 Louisiana Street, Suite 2700, Houston, Texas 77002.


Regency

        Regency is a publicly-traded Delaware limited partnership formed in 2005 engaged in the gathering and processing, compression, treating and transportation of natural gas and the transportation, fractionation and storage of NGLs. Regency provides midstream services in some of the most prolific natural gas producing regions in the United States, including the Eagle Ford, Haynesville, Barnett, Fayetteville, Marcellus, Utica, Bone Spring, Avalon and Granite Wash Shales. Regency's assets are primarily located in Texas, Louisiana, Arkansas, Pennsylvania, California, Mississippi, Alabama, New Mexico and the mid-continent region of the United States, which includes Kansas, Colorado and Oklahoma. Regency divides its operations into five business segments: (1) gathering and processing, (2) natural gas transportation, (3) NGL Services, (4) contract services and (5) corporate.


Regal

        Regal is a wholly owned subsidiary of Regency which was created by Regency to receive the contribution of the Contributed Interests.


Relationships Between the Parties

        Eagle Rock, Regency and PVR are parties to certain commercial agreements, including certain marketing and transportation agreements with respect to Eagle Rock's upstream business and certain gathering and takeaway agreements related to Eagle Rock's midstream business.

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THE CONTRIBUTION

Structure of the Contribution

        Upon satisfaction or waiver of the conditions set forth in the Contribution Agreement, Eagle Rock will contribute to Regal the Contributed Interests. The Contributed Interests, upon the closing of the Contribution and after giving effect the Pre-Closing Transfers, will represent the assets and operations that collectively comprise the midstream business of Eagle Rock.


Consideration for the Contribution

        The consideration for the Contribution includes (1) $720,000,000 payable to Eagle Rock, as adjusted in accordance with the Contribution Agreement, consisting of $520,000,000 in cash and the equity consideration, (2) the assumption by Regency of up to $550,000,000 face value of the Eagle Rock Notes validly tendered by holders of the Eagle Rock Notes pursuant to the Exchange Offer and cancelled and exchanged for Regency senior unsecured notes and (3) if less than all of the Eagle Rock Notes are tendered in the Exchange Offer, the payment by Regency to Eagle Rock of a dollar amount equal to 110% of the difference between $550,000,000 and the face value of Eagle Rock Notes so validly tendered and cancelled. For additional information regarding the Exchange Offer, please read "—Exchange Offer."

        In addition, the cash consideration payable to Eagle Rock may be reduced by the amounts of certain losses that would have actually incurred as of a date no later than five business days before the closing date of the Contribution Agreement (as though the closing were to occur on such date) by Regency resulting from the breach of certain of the representations and warranties (each a "Pre-Closing Breach") made by the Eagle Rock in the Contribution Agreement. The amount of any such losses agreed to by the parties at closing would reduce the consideration payable to Eagle Rock at closing. In addition, the alleged value of any losses alleged by Regency but not agreed to by Eagle Rock at closing would be deducted from the closing proceeds and placed into escrow subject to resolution pursuant to binding arbitration after the closing. Such losses would be subject to the following limitations: (1) each claim must be valued in excess of $1,000,000 in order for such claim to be made, (2) the aggregate value of all eligible claims must exceed $13,250,000, at which point only those amounts in excess of $13,250,000 will reduce the consideration paid to Eagle Rock and (3) the aggregate amount of all reductions in consideration resulting from Pre-Closing Breaches may not exceed $132,500,000.

        The consideration payable to Eagle Rock is also subject to a customary working capital adjustment upward to the extent that the working capital of the midstream business as of the closing of the Contribution exceeds $15 million or downward to the extent that working capital of the midstream business as of the closing of the Contribution is more negative than negative $15 million.


Background of the Contribution

        The Eagle Rock Board has periodically evaluated and considered a variety of financial and strategic opportunities as part of its strategy to enhance unitholder value.

        For example, in 2010, Eagle Rock completed a series of transactions (which we refer to herein as the "2010 Recapitalization"), which simplified Eagle Rock's capital structure and provided Eagle Rock with additional liquidity. The 2010 Recapitalization included (1) the contribution to Eagle Rock, and resulting cancellation, of Eagle Rock's incentive distribution rights and 20,691,495 subordinated units held by Eagle Rock's general partner and Eagle Rock Holdings, L.P. (herein referred to as "Eagle Rock Holdings"), which occurred on May 24, 2010; (2) the sale of all of Eagle Rock's fee mineral and royalty interests, as well as its equity interest in Ivory Working Interests, L.P., to Black Stone Minerals Company, L.P. for total consideration of $174.5 million, which sale was completed on May 24, 2010; (3) a rights offering, which was launched on June 1, 2010 and expired on June 30, 2010, and for which

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Eagle Rock received gross proceeds of $53.9 million and issued 21,557,164 common units and 21,557,164 warrants; and (4) an option, which was exercised on July 30, 2010 by the issuance to Eagle Rock Holdings of 1,000,000 newly-issued common units, to capture the value of the controlling interest in Eagle Rock through (a) acquiring Eagle Rock's general partner entities from Eagle Rock Holdings and immediately thereafter eliminating the 844,551 outstanding general partner units owned by Eagle Rock Holdings and (b) reconstituting the Eagle Rock Board to allow Eagle Rock's common unitholders not affiliated with NGP VIII to elect the majority (i.e., five of nine) of the members of the Eagle Rock Board and to allow the NGP Parties to appoint three of nine of the members of the Eagle Rock Board. Upon the exercise of the option to capture the value of the controlling interest in Eagle Rock, the NGP Parties lost control of Eagle Rock and Eagle Rock was no longer controlled by nor benefiting from a relationship with a sponsor that was incentivized, through a general partner interest with incentive distribution rights, to sell assets to Eagle Rock.

        The Eagle Rock Board has consistently held periodic meetings dedicated to strategic issues, and those strategic sessions often included a discussion of strategic alternatives. Following the 2010 Recapitalization, Eagle Rock became increasingly aware of, and receptive to, strategic alternatives including a potential separation of its midstream and upstream business units. However, Eagle Rock believed at that time that both businesses were of a size and scale that enabled them to benefit from continuing operation together inside of Eagle Rock. Therefore, Eagle Rock determined to continue operating the businesses together, and with its improved liquidity position, Eagle Rock determined to grow both businesses through organic growth and acquisitions.

        In the midstream business, Eagle Rock determined to grow around its existing midstream asset base, including through organic growth projects and strategic complementary acquisitions. As such, Eagle Rock consummated a strategic bolt-on acquisition from Centerpoint Energy on October 19, 2010. Later, Eagle Rock announced the expansion of its high efficiency cryogenic Phoenix processing plant (previously known as the Arrington Plant) and the construction of its Woodall and Wheeler processing facilities, each located in the Granite Wash play of the Texas Panhandle region.

        In the upstream business, Eagle Rock focused on growing through strategic acquisitions and through drilling opportunities identified in the strategic acquisitions. Eagle Rock acquired from NGP VIII and certain individuals on May 3, 2011 all of the equity interests outstanding in CC Energy II, L.L.C., a portfolio company of NGP VIII with upstream assets in the Mid-Continent region, for aggregate consideration of $564 million (which is referred to herein as the "Crow Creek Acquisition"). The majority of consideration came from the issuance of Eagle Rock common units to NGP VIII and certain individuals. To avoid causing NGP VIII to regain control of Eagle Rock, Eagle Rock and NGP VIII entered into the Existing NGP Voting Agreement with respect to the common units issued to NGP VIII as part of the Crow Creek Acquisition. Among other things, the Existing NGP Voting Agreement preserved public unitholder voting influence by restricting NGP VIII to its then-current voting percentage despite its increased equity position.

        In March 2011, representatives of Eagle Rock met with representatives of an energy-focused private equity firm ("Company A"). Discussions focused on the possible sale of Eagle Rock's midstream business or a separation of the two businesses. Discussions continued infrequently throughout the summer and fall of 2011 but ultimately no action was taken due to valuation, structure and timing issues. The discussions between Eagle Rock and Company A ceased by January 2012.

        In September 2011, the Eagle Rock senior management team and the Eagle Rock Board held a two-day series of strategy meetings at which the Eagle Rock senior management team discussed the recent positive momentum generated by the Crow Creek Acquisition and announced organic growth projects in the midstream business, including the Phoenix expansion and Woodall plant construction discussed above. Management also presented its views to the Eagle Rock Board regarding Eagle Rock's future growth prospects, noting that increasing the scale of the midstream business would be difficult given Eagle Rock's high relative cost of capital, Eagle Rock's relative size and the increasingly

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competitive environment for midstream assets, and further noting that a monetization of the midstream business (through an initial public offering, spin-off or outright sale) could result in a valuation uplift to the partnership.

        In February 2012, representatives of Eagle Rock met with representatives of a publicly-traded midstream MLP ("Company B") and its upstream-oriented private equity sponsor to discuss a possible strategic transaction or combination. Company B proposed combining Eagle Rock into Company B and concurrently spinning out Eagle Rock's upstream business into a separately traded upstream MLP. Underlying the transaction was the expectation that Company B's private equity sponsor could provide dropdowns of upstream assets from its array of upstream-oriented portfolio companies into the newly formed upstream MLP. Discussions were terminated in March 2012 due to valuation, the preliminary evaluation of the potential dropdown upstream assets held by the private equity sponsor, tax and governance issues.

        Continuing Eagle Rock's midstream strategy of organic growth and strategic acquisitions, beginning in March 2012, Eagle Rock aggressively pursued a package of midstream assets in the Panhandle region that were being marketed by BP America Production Company ("BP America"). Eagle Rock viewed this package as strategic and complementary to its existing midstream assets and operations in the Texas Panhandle region. In August 2012, Eagle Rock signed a definitive agreement with BP America to acquire these midstream assets for aggregate consideration of $231 million. The acquisition closed in October of 2012.

        In September 2012, Eagle Rock senior management and the Eagle Rock Board again held a two-day strategic session to assess Eagle Rock's competitive position and to consider ways to potentially unlock unitholder value. At this meeting, senior management and the Eagle Rock Board explored various strategic options to enhance unitholder value, including options involving the separation of the midstream and upstream businesses through a spin-off, initial public offering, or sale of one of the two businesses. The Eagle Rock Board encouraged the senior management team to continue to explore these options, but emphasized that senior management's near-term focus should remain on the successful integration of the midstream assets acquired from BP America.

        Following the September 2012 strategic session, Eagle Rock's senior management requested that Citi, an investment banking firm with which Eagle Rock has had a long-standing relationship, preliminarily review the potential for an initial public offering of Eagle Rock's midstream business. Citi's preliminary view was that an initial public offering of Eagle Rock's midstream business as an MLP was achievable and might create higher unitholder value versus Eagle Rock's existing business model, but at the time, such potential was uncertain given, among other things, the relatively small scale, limited visible growth opportunities and relatively high degree of commodity exposure for Eagle Rock's standalone midstream business. Eagle Rock's senior management informed the Eagle Rock Board of Citi's preliminary view at the Eagle Rock Board's regularly-scheduled October 2012 board meeting. While the Eagle Rock Board also continued to consider a midstream business initial public offering throughout the process, concerns about overall value creation, separating the debt between the two businesses and execution and market risk caused the Eagle Rock Board to not take action.

        In November 2012, Eagle Rock entered into discussion with a large privately held, private equity-sponsored exploration and production company ("Company C") concerning Company C's potential sale of MLP-appropriate upstream assets to Eagle Rock in exchange for cash and Eagle Rock equity. Under the contemplated structure, Company C would establish a meaningful equity position and board representation in Eagle Rock through the initial sale and would establish a long-term relationship with Eagle Rock through a drop-down strategy. Periodically thereafter, Company C would sell, or "drop-down," additional upstream assets to Eagle Rock, enhancing the value of Eagle Rock and Company C's initial equity stake in Eagle Rock. Representatives of Eagle Rock and Company C management met several times in December 2012 and January 2013 to discuss structure and board representation. Management presented a possible structure to the Eagle Rock Board at its regularly-

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scheduled quarterly meeting in February 2013. At this board meeting, senior management was authorized to continue discussions with Company C and its private equity sponsor and a member of the Eagle Rock Board participated with Eagle Rock senior management in face-to-face meetings with Company C in February 2013. During February 2013, Eagle Rock and Company C did not reach an agreement on corporate governance structure, relative valuation and transaction structure. Discussions between Eagle Rock and Company C were terminated in February 2013.

        On December 28, 2012, Eagle Rock amended its existing senior secured credit facility to (1) increase total commitments from $675 million to $820 million; (2) allow for a temporary step-up in the Total Leverage Ratio (as defined in the Credit Agreement) from 4.50x to 4.75x through the third quarter of 2013; (3) institute a new Senior Secured Leverage Ratio (as defined in the Credit Agreement) of 2.85x through the third quarter of 2013; and (4) increase the dollar amount of permitted other "Investments" (as defined in the Credit Agreement).

        Eagle Rock increased its distributions on common units for the fourth quarter of 2010 and throughout 2011. However, beginning in the first quarter of 2012, natural gas prices experienced a substantial and extended decline. As a result, Eagle Rock held its distributions on common units flat throughout 2012.

        In January 2013, representatives of Eagle Rock and a large public exploration and production company, which we refer to as "Company D", met to discuss potential strategic alternatives. Members of Eagle Rock senior management presented an outline of a structure to Company D whereby Company D would sell or contribute its midstream assets to Eagle Rock in exchange for Eagle Rock equity and representation on, or control of, the Eagle Rock Board. Discussions between Eagle Rock and Company D terminated in February 2013 based on Company D's lack of interest due to Eagle Rock's general partner not having incentive distribution rights and minimal geographical overlap with Company D's midstream operations, after which Company D announced its intention to form its own midstream MLP.

        In early February 2013, the Eagle Rock Board discussed the increased consolidation in the MLP space and the potential for Eagle Rock to position itself to either be an acquirer or the subject of an acquisition. In particular, the Eagle Rock Board took note of the public announcement of the acquisition by Kinder Morgan Energy Partners, L.P. of Copano Energy, L.L.C., a publicly-traded midstream company, for an attractive premium over Copano Energy, L.L.C.'s market price.

        In February 2013, representatives of Eagle Rock informally met with representatives of an upstream MLP ("Company E") to discuss a possible strategic transaction. The discussion was preliminary, and the parties did not engage in any further substantive discussions until November 2013, as discussed in more detail below.

        Between March 2013 and July 2013, Eagle Rock marketed its South Central Oklahoma Oil Province ("SCOOP") upstream oil and gas assets to approximately 100 potential counterparties. While Eagle Rock received numerous indications of interest, none of them met the value expectations of Eagle Rock and the Eagle Rock Board.

        The continuation of depressed natural gas prices and then the subsequent substantial decline in NGL prices beginning in late 2012, coupled with increased debt levels used to fund the above described acquisitions and organic growth projects and lower than expected upstream and midstream volumes caused Eagle Rock's distributable cash flow to drop substantially below its distribution rate in the first two quarters of 2013 and caused Eagle Rock's leverage ratio (total indebtedness to Adjusted EBITDA) to increase. Eagle Rock did not reduce its distribution at this time in part due to its expectation of meaningful volume increases in both its midstream and upstream businesses as soon as the second half of 2013 and a return to higher natural gas and natural gas liquids pricing.

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        In March 2013, Eagle Rock sold approximately 10.4 million common units in an underwritten offering. Net proceeds from the offering were approximately $92.5 million and were used to repay a portion of the outstanding borrowings under Eagle Rock's credit facility.

        At the regularly-scheduled, quarterly board meeting on April 23, 2013, senior management again presented to the Eagle Rock Board regarding long-term strategic alternatives, including highlighting to the Eagle Rock Board the recent acquisition by Atlas Energy Partners, L.P. of TEAK Midstream LLC. Given Eagle Rock's recent quarterly results and challenges and the recent strong valuations for quality midstream and upstream assets and the view that the midstream space could be entering a period of consolidation as evidenced by the acquisition by Kinder Morgan Energy Partners, L.P. of Copano Energy, L.L.C., the announced merger between Inergy, L.P. and Crestwood Midstream Partners LP, and the acquisition by Atlas Pipeline Partners, L.P. of TEAK Midstream LLC, the Eagle Rock Board directed senior management to advance the Eagle Rock Board's consideration of strategic alternatives by conducting preliminary discussions with a few financial advisory firms in anticipation of potentially engaging one or more to provide financial advisory services to Eagle Rock in connection with the Eagle Rock Board's review of, and potential consideration of one or more, strategic alternatives, including without limitation, maintaining the status quo, a sale of the full partnership, sales of the upstream or midstream business segments and an initial public offering of the midstream business segment. The Eagle Rock Board believed that long-term, while Eagle Rock had visible growth opportunities in both the midstream and upstream space, there was exposure to the combined risks of interest rates, commodity prices, debt levels and liquidity constraints.

        In May 2013, Eagle Rock engaged Vinson & Elkins L.L.P. ("Vinson & Elkins"), Eagle Rock's outside corporate counsel, to represent Eagle Rock in its consideration of strategic alternatives. In early to mid-May 2013, Eagle Rock contacted three investment banking firms, including Citi and Evercore, regarding their potential role as a financial advisor to Eagle Rock in connection with Eagle Rock's exploration of strategic alternatives and entered into separate confidentiality agreements with each investment banking firm.

        On May 14, 2013, Joseph A. Mills, Eagle Rock's Chairman and Chief Executive Officer, and Charles C. Boettcher, Eagle Rock's Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, met with the independent members of the Eagle Rock Board at which meeting Mr. Boettcher discussed, among other things, the Eagle Rock Board's duties, potential conflicts of interest and the impact of the Existing NGP Voting Agreement on any potential strategic alternative that would require a unitholder vote. The members of the Eagle Rock Board in attendance further discussed the potential engagement of a financial advisor.

        On May 16, 2013, the Eagle Rock Board met each of the three investment banking firms regarding its potential engagement to provide financial advisory services to Eagle Rock in connection with Eagle Rock's exploration of potential strategic alternatives. Eagle Rock subsequently retained Evercore and Citi to serve as Eagle Rock's financial advisors.

        On June 11, 2013, Eagle Rock senior management met with representatives from Evercore, Citi and Vinson & Elkins to provide additional background on Eagle Rock's financial situation and outlook, its goals in the strategic alternatives review, and thoughts concerning potential strategic counterparties. Throughout the balance of June, Eagle Rock senior management worked with Evercore, Citi and Vinson & Elkins to review various potential strategic alternatives. Specifically, Eagle Rock senior management reviewed with Evercore and Citi business and financial information regarding Eagle Rock, its operations and growth prospects, including financial projections for Eagle Rock's midstream and upstream businesses both individually and on a consolidated basis. Eagle Rock senior management and the financial advisors also reviewed various potential financial and strategic alternatives available to Eagle Rock (including maintaining the status quo, acquisitions, divestitures of the partnership or its business units, a separation of the two businesses via public offering or spin-off transaction, and a transaction with a new controlling sponsor) and the potential financial impact of such alternatives

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relative to the status quo. Evercore and Citi also considered with Eagle Rock senior management the parameters of a potential third-party solicitation process if authorized by the Eagle Rock Board, including the potential counterparties that might have an interest in all or part of Eagle Rock, including all of those mentioned previously herein (and such review included consideration of such counterparties' potential financial ability and likelihood to consummate a transaction with Eagle Rock which included input from Eagle Rock senior management on its conversations to date with certain potential counterparties), a preliminary timetable for contacting third parties to determine their level of interest in a transaction with Eagle Rock and proposed draft discussion materials to be used in initial meetings with such potential counterparties. Vinson & Elkins also reviewed due diligence information regarding Eagle Rock and its operations, assisted senior management in considering the various legal implications for the strategic alternatives being considered and prepared a form of confidentiality agreement to be signed by any potential counterparties as part of the potential third-party solicitation effort.

        On June 12, 2013, representatives of Eagle Rock and representatives of a publicly-traded midstream MLP ("Company F") met at Eagle Rock's main offices to discuss their respective businesses. This meeting was initiated by Company F and was not a result of Eagle Rock's strategic review process. However, Evercore and Citi were aware of the meeting and informed of the outcome. These discussions were general in nature and did not involve any discussion of a strategic transaction.

        On June 25, 2013, the Eagle Rock Board held a telephonic meeting attended by members of Eagle Rock senior management and representatives of Evercore and Citi. Evercore and Citi discussed with the Eagle Rock Board the current market environment and Eagle Rock's potential strategic alternatives. Evercore and Citi noted that based on then-current commodity prices and senior management's assumptions regarding the relationship between NGL and crude oil prices, a decision to maintain the status quo would likely result in three to five years of flat distributions with growth limited by Eagle Rock's high leverage. Evercore and Citi also noted that, while there may be upside potential to the extent NGL prices significantly recovered, there was also downside potential for Eagle Rock resulting from commodity price exposure and operational risks such as those Eagle Rock had experienced in the first and second quarters of 2013.

        Evercore and Citi also discussed whether a sufficient premium could be realized in a sale or merger of the entire partnership given Eagle Rock's then-current unit price and noted that there may be a limited number of counterparties interested in, and financially capable of timely executing an acquisition of, the entire partnership. The financial advisors further discussed with the Eagle Rock Board the potential sale of either the midstream segment or the upstream segment, indicating that although the sale of the midstream business was potentially more actionable, the sale of either business segment was actionable, with the potential value uplift impact of such alternatives somewhat dependent on a reinvestment of the net proceeds remaining after reducing leverage and potential tax consequences. Evercore and Citi also expressed their view that an initial public offering of the midstream segment as a separate MLP was still achievable and may potentially create value for unitholders above a standalone scenario, but was likely not as compelling as a third-party transaction and was subject to market and execution risks. Eagle Rock senior management also discussed with the Eagle Rock Board each of the alternatives. After discussion, the Eagle Rock Board decided to proceed with a third-party solicitation process while continuing to evaluate standalone alternatives, including a midstream business initial public offering, if a value enhancing third-party transaction were not achievable. Evercore and Citi then outlined for the Eagle Rock Board a proposed third-party solicitation process and a list of the most likely potential counterparties in such process. Jeffrey P. Wood, Eagle Rock's Senior Vice President, Chief Financial Officer and Treasurer, also discussed with the Eagle Rock Board the need for an amendment to Eagle Rock's credit facility to increase the leverage ratios in the near term based on Eagle Rock's lower quarterly results from the first half of 2013 and the projections of liquidity and leverage ratios projected for the second half of 2013 and 2014. The Eagle Rock Board authorized senior management to negotiate and execute such an amendment.

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        Throughout the third-party solicitation process and subsequent negotiation and final execution of the Contribution Agreement, senior management was in regular contact with members of the Eagle Rock Board both to apprise its members of the status of the process (including later negotiation status) and to receive its members' advice and instructions on actions to be taken (including later negotiation positions).

        Following the identification of the potential counterparties, Mr. Boettcher circulated to the Eagle Rock Board and senior management questionnaires seeking to identify any relevant relationships between the Eagle Rock Board members and Eagle Rock senior management, on the one hand, and the various potential counterparties on the other hand (the "D&O Questionnaires"). Each member of the Eagle Rock Board and senior management completed such D&O Questionnaires and the Eagle Rock Board was kept informed of relevant relationships between senior management, board members and potential counterparties.

        On June 27, 2013, in accordance with the Eagle Rock Board's directives, Evercore and Citi began contacting 13 potential counterparties. Each such counterparty was provided with a draft of Eagle Rock's form of confidentiality agreement. Throughout July and into mid-August, Eagle Rock and Vinson & Elkins negotiated, and Eagle Rock entered into, confidentiality agreements with all 13 potential counterparties. Management, with the assistance of Eagle Rock's legal and financial advisors, also prepared a summary confidential information memorandum about Eagle Rock for counterparties that executed a confidentiality agreement with Eagle Rock. Eagle Rock determined not to contact Company C given its high degree of financial leverage and the belief that it was more interested in disposing of assets rather than acquiring assets, or Company D given its then-publicly disclosed intention to take public its midstream business.

        Throughout July and the beginning of August of 2013, Evercore and Citi, on behalf of Eagle Rock, engaged in a series of discussions with the various potentially interested counterparties.

        On July 23, 2013, the Eagle Rock Board held a meeting at Eagle Rock's main offices. As part of that meeting, representatives of Evercore and Citi provided the Eagle Rock Board with an update on Eagle Rock's strategic review process, including potential counterparties contacted, the feedback that each party had provided, as well as which parties may be added to the process based on updated information. Also discussed were Eagle Rock's updated financial projections provided to potential counterparties and the reasons for the adjustments. Evercore and Citi then discussed with the Eagle Rock Board various scenarios for Eagle Rock, including maintaining the status quo, separating the midstream assets through an initial public offering, selling the entire partnership or selling only one segment. Each financial advisor also described (subject to confidentiality obligations) to the Eagle Rock Board the general nature of its investment banking services to potential counterparties over the past two years. Also at the July 23, 2013 meeting, the Eagle Rock Board agreed to maintain the distribution on its common units given its expectation of meaningful volume increases in both the midstream and upstream businesses as early as the second half of 2013.

        In addition, on July 23, 2013, Eagle Rock entered into an amendment regarding its credit facility to allow for a temporary increase in its Total Leverage Ratio (as defined in the credit facility) covenant to 5.50x for the second quarter of 2013, declining to 4.50x by the fourth quarter of 2014 and its Senior Secured Leverage Ratio (as defined in the credit facility) covenants to 3.15x for the second quarter of 2013, declining to 2.95x by the third quarter of 2014 and thereafter terminating.

        On August 7, 2013, the standing Conflicts Committee of the Eagle Rock Board, herein referred to as the "Conflicts Committee" or the "Eagle Rock Conflicts Committee," consisting of three independent directors, held a telephonic meeting with Mr. Mills, Mr. Boettcher and a representative of Richards, Layton & Finger, PA, Eagle Rock's Delaware law firm. The parties discussed how Eagle Rock would manage the strategic third-party solicitation process if any counterparty affiliated with NGP

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VIII were to submit an actionable proposal, including the procedures for interaction with members of the Eagle Rock Board who were affiliated with NGP VIII.

        Between August 14, 2013 and August 19, 2013, Eagle Rock received five indications of interest. Additionally, seven other potential counterparties, including Company E, indicated that they were not interested in a potential transaction. Company A, which decided not to submit a written indication of interest, orally communicated to Evercore its preliminary views on valuation of both the midstream segment and the upstream segment (Company A communicated to Evercore shortly after the August 20, 2013 board meeting described below that it was unwilling to transact at these valuation levels). None of the indications of interest received were for an entire partnership transaction. The indications of interest on the upstream business did not reach valuation levels satisfactory to the Eagle Rock Board. With respect to the midstream segment, the highest indication was from Regency at $1.3 billion.

        On August 20, 2013, the Eagle Rock Board held a meeting at Evercore's offices. Also in attendance were members of senior management and representatives of Evercore, Citi and Vinson & Elkins. Mr. Mills provided an initial summary to the Eagle Rock Board of the indications of interest Eagle Rock had received in its third-party solicitation process as of the meeting. Evercore then summarized for the Eagle Rock Board the third parties that the advisors had met with on behalf of Eagle Rock. Evercore described in detail the bidding process, noting that the potential counterparties believed they were given sufficient time, materials, and attention to be able to evaluate the potential transactions. Evercore presented each indication of interest in detail, indicating that the highest bid for the midstream assets thus far was from Regency and updated the Eagle Rock Board on Regency's recent acquisition history. Evercore then discussed the indications of interest relating to Eagle Rock's upstream business, noting that the potential counterparties were thus far unable to justify the valuation that Eagle Rock expected. Evercore informed the Eagle Rock Board that there had been no full partnership proposals (other than the oral value range of each business segment provided by Company A as discussed above), and summarized which potential counterparties had been approached with respect to a full partnership sale. In response to questions from the Eagle Rock Board, Evercore indicated that it did not believe there were additional parties that would be interested in making a bona fide bid, or that would be able to provide a full valuation for the partnership's assets. Evercore then discussed which potential counterparties had declined to submit indications of interest, and discussed why each such party had not submitted a proposal. Evercore then reviewed potential strategic alternatives available to Eagle Rock, including matching midstream and upstream bidders, and the potential full partnership values that could be generated in that scenario. Evercore reviewed, given the midstream indications of interest, the upstream valuations that would be necessary to obtain a premium to Eagle Rock's then-current unit price. Evercore then discussed which potential counterparties had not been contacted as part of the process and provided the reasons why each such party had not been brought into the process, noting that, for each such party, the determinations were made based on knowledge of the party's asset bases, financial conditions and strategies and goals. Mr. Boettcher and Vinson & Elkins also advised the Eagle Rock Board of relevant relationships between members of the Eagle Rock Board or senior management and potential counterparties, as disclosed in the completed D&O Questionnaires. In particular, Mr. Boettcher noted for the Eagle Rock Board that certain members of the Eagle Rock Board owned equity interests in Regency, Energy Transfer Equity, L.P., a publicly-traded MLP and an affiliate of Regency that owns Regency's general partner, 100% of Regency's incentive distribution rights and a certain number of Regency's common units, and Energy Transfer Partners, L.P., a publicly-traded MLP and an affiliate of Regency that owns a certain number of Regency's common units (herein referred to as the "Potential Regency Ownership Conflicts").

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        Evercore presented to the Eagle Rock Board potential unit valuations corresponding with the potential strategic alternatives reviewed, including maintaining the status quo, a midstream business initial public offering, the sale of the entire partnership, sale of the midstream segment or a sale of the upstream segment. Evercore presented to the Eagle Rock Board the assumptions underlying the unitholder valuation estimations and questions were asked by the Eagle Rock Board, and answered by Evercore in that regard. The Eagle Rock Board also asked questions regarding the tax implications of the various strategic alternatives, some of which were subsequently answered by senior management. Evercore then focused on the potential unit valuations associated with the sale of the midstream segment only with upstream remaining a viable on-going entity. Senior management then provided the Eagle Rock Board with its financial projections, including higher forecasted upstream maintenance capital expenditures, and continued challenges arising from the natural gas liquids and condensate pricing environment. Mr. Boettcher and Vinson & Elkins next presented the Eagle Rock Board with an update with respect to the Eagle Rock Notes, including advising as to the options the partnership had with respect to the Existing Indenture. After extensive deliberation, the Eagle Rock Board unanimously authorized Mr. Mills and other members of senior management to engage in discussions with Regency based on a potential sale of the midstream business and authorized Evercore and Citi to contact three additional potential counterparties for the acquisition of the upstream business and two additional potential counterparties for the midstream business that had been identified as potentially interested in, and financially capable of, consummating such transactions. The Eagle Rock Board further instructed senior management and the financial advisors to continue to request increased value in the indicative proposals from potential counterparties that had submitted indications of interest for the upstream business.

        Following the board meeting, Evercore contacted Regency and advised Regency management that Eagle Rock was interested in further discussions with Regency and would provide Regency with increased access to due diligence material. Evercore advised Regency that Eagle Rock was exploring the idea of pairing Regency with an upstream buyer to preserve the option of a simultaneous or near-simultaneous sale of the entire partnership and expected Regency to submit a final indication of interest by the end of September, including a full mark-up of a definitive agreement. Evercore also contacted other potential counterparties which had submitted indications of interest to advise them that Eagle Rock was willing to allow them to conduct due diligence, but Eagle Rock would require an increased offer price to consider their proposal in the next stage of the process. In addition, as directed by the Eagle Rock Board, Evercore and Citi contacted the five additional potential counterparties (two midstream and three upstream potential counterparties), and Eagle Rock later entered into confidentiality agreements with four of the five additional potential counterparties, bringing the total number of potential counterparties contacted on behalf of Eagle Rock since June 2013 to 18 and the total number of confidentiality agreements entered into by Eagle Rock to 17. The D&O Questionnaires were updated and recirculated to determine any relevant relationships between the four additional potential counterparties and members of the Eagle Rock Board or Eagle Rock senior management. Eagle Rock internal counsel examined the completed D&O Questionnaires and Mr. Boettcher informed the Eagle Rock Board of relevant relationships between senior management, board members and potential counterparties. From August 21 through September 17, senior management gave detailed presentations on the midstream segment or upstream segment, as appropriate, to Regency and various other interested counterparties, including some which had submitted indications prior to the board meeting and some which were contacted initially after the board meeting. Eagle Rock provided Regency and other potential counterparties with access to due diligence information via a virtual data room. Vinson & Elkins and senior management put together form definitive agreements that would provide for separate and contemporaneous sales of the midstream and upstream businesses. Eagle Rock provided Regency with a draft of the midstream definitive agreement on September 19, 2013. Mr. Mills conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Regency.

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        On September 12, 2013, Company F submitted an indication of interest for the midstream business in an amount that was close to, but still below, Regency's initial indication of interest, and Company F indicated that it would work diligently and attempt to provide a more definitive proposal on an expedited timeframe. Eagle Rock provided Company F with access to due diligence information via a virtual data room and made a management presentation to executives of Company F. Mr. Mills conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Company F.

        On September 26, 2013, members of senior management and Vinson & Elkins had a telephone conference with three non-executive members of the Eagle Rock Board. Mr. Boettcher, with assistance from Vinson & Elkins, discussed legal and process points with the board members, including the necessity for a unitholder vote and the treatment of the Eagle Rock Notes in a circumstance in which only the midstream business was sold.

        On September 27, 2013, Regency submitted a more definitive proposal to acquire the midstream business for $1.3 billion, consisting of $250 million in Regency common units and $1.05 billion in cash. The Regency proposal assumed that the midstream business would be free of debt and have zero working capital as of closing. Regency also provided a markup of the draft form of definitive agreement, which added or modified provisions related to (1) the post-closing indemnification, (2) Eagle Rock's cooperation with Regency in connection with its financing for the transaction, (3) antitrust provisions, (4) the scope of the representations and warranties, (5) conditions to closing, (6) an unspecified reverse termination fee if Regency failed to perform its covenants or breached its representations and warranties, (7) a termination fee of 5.0% of the purchase price from Eagle Rock in certain instances, plus in certain cases reimbursement of expenses, (8) the interim operating covenants with which Eagle Rock would have to comply between signing and closing, (9) the ability of Eagle Rock to specifically enforce Regency's covenants and agreements and (10) the release of present and former directors and officers of Eagle Rock at closing. Moreover, Regency rejected the requirement that Regency deposit 10% of the purchase price with Eagle Rock at signing. Mr. Mills conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Regency.

        On October 1, 2013, the Eagle Rock Board held a meeting at Evercore's offices. Also in attendance were members of senior management, and representatives of Evercore, Citi and Vinson & Elkins. Management summarized the Regency proposal for the Eagle Rock Board. Evercore then outlined for the Eagle Rock Board financial aspects of Regency's proposal and related financial analyses. Evercore further provided the Eagle Rock Board with information about Regency and the advisors' views on Regency's ability to increase its proposed purchase price. Mr. Boettcher and a representative from Vinson & Elkins then summarized for the Eagle Rock Board the key open points between Eagle Rock and Regency with respect to the definitive agreement, including the points outlined in the preceding paragraph. Following an executive session, Evercore advised the Eagle Rock Board that Company F was unable to submit an offer that equaled the indicative offer price for the midstream assets. Evercore further advised that additional potential upstream counterparties had elected not to make proposals on the upstream assets. Mr. Boettcher and the advisors also discussed the potential impact on the structure of the proposed Regency transaction and on the outstanding Eagle Rock Notes if there were not a contemporaneous acquisition of the upstream business. After deliberation, the Eagle Rock Board authorized senior management and the advisors to continue to engage Regency with respect to a possible transaction involving Eagle Rock's midstream assets in advance of receiving final bids from other bidders on the upstream and midstream segments. At this meeting, the Eagle Rock Board was specifically reminded of the Potential Regency Ownership Conflicts by certain members of the Eagle Rock Board. Mr. Boettcher reported that Eagle Rock was gathering additional information about the potential financial impact of the proposed transaction to unitholders of Regency, Energy Transfer Equity, L.P. and Energy Transfer Partners, L.P.

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        On October 4, 2013, at the direction of Eagle Rock, representatives of Evercore discussed certain key open points with members of Regency management. At this meeting, in response to Eagle Rock's requests on a number of key open points, Regency orally agreed to modify its original proposal dated September 27, 2013 by, among other things (1) dropping its proposal for a reverse termination fee, (2) requiring that Eagle Rock prepare and deliver the Carve-out Financial Statements, (3) agreeing to forego certain closing conditions, (4) reducing its proposed termination fee from 5.0% to between 3.5% and 4.0%, (5) agreeing conceptually to the release and indemnification of present and former Eagle Rock directors and officers at the closing and (6) agreeing to the ability of each party to specifically enforce the other party's covenants and agreements. Senior management conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Regency.

        On October 7, 2013, the Eagle Rock Board held a meeting at Evercore's offices. Also in attendance were members of senior management, and representatives of Evercore, Citi and Vinson & Elkins. Evercore summarized for the Eagle Rock Board the strategic third-party solicitation process and each potential counterparty's response to its respective meeting with senior management. Evercore described in detail each indication of interest and the final bid received. Evercore then summarized for the Eagle Rock Board the changes made by Regency to its previous proposal in response to Eagle Rock's negotiation points. Mr. Mills then provided the Eagle Rock Board with updated projections, which included lower commodity pricing assumptions than those reflected in the projections sent to potential counterparties at the beginning of the strategic review process. Mr. Mills explained that a reduction in NGL and condensate prices affected the partnership's midstream and upstream businesses negatively. Management and the Eagle Rock Board extensively discussed the commodity prices underlying the projections. Evercore then provided the Eagle Rock Board with an updated financial overview of the strategic alternatives available to Eagle Rock using the updated projections. The Eagle Rock Board then engaged in an extended discussion regarding the possible effects of a sale of only the midstream business and the implications of such a sale on an upstream-focused Eagle Rock. The Eagle Rock Board also discussed with senior management and the advisors the potential tax and other impacts of the proposed sale. Evercore and Citi were then dismissed from the meeting and the Eagle Rock Board held an executive session in which the potential risks and advantages of the strategic alternatives were discussed with senior management and Vinson & Elkins. In particular, the Eagle Rock Board discussed what the potential tax consequences would be to the common unitholders and how the Eagle Rock Notes would be treated if only the midstream business were sold. Following extensive discussion, the Eagle Rock Board instructed senior management to revisit the transaction structure with Regency to mitigate potential negative effects of a sale of only the midstream business. The Eagle Rock Board provided instruction to senior management on how to approach Regency, including asking Regency to revisit whether it might be interested in acquiring the entire partnership. Further, the Eagle Rock Board instructed senior management to revisit the expected common unit distribution for the third quarter of 2013 and provide the Eagle Rock Board with senior management's quarterly distribution recommendation at the October 24, 2013 meeting of the Eagle Rock Board.

        Following the meeting, Evercore contacted Regency and asked Regency management to consider a full partnership transaction. Regency management stated that it was only interested in the midstream business. In light of that, Evercore requested that Regency work with Eagle Rock to mitigate potential negative effects of a sale of only the midstream business, including potential tax impact to unitholders and complexities in dealing with the Eagle Rock Notes. Given the comparable size of the midstream and upstream businesses, Eagle Rock senior management and its advisors had numerous discussions on the treatment of the outstanding Eagle Rock Notes under the Existing Indenture. Eagle Rock determined that the contribution of the midstream business was not a sale of "all or substantially all" of Eagle Rock's assets because the remaining upstream business was a viable standalone business, with significant net revenues and Adjusted EBITDA comparable to that of the midstream business on both a historical and projected basis.

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        On October 10, 2013, Regency and PVR announced that Regency and PVR had entered into a definitive merger agreement pursuant to which Regency would acquire PVR. Following the announcement, Regency confirmed its continued interest in pursuing a transaction with Eagle Rock.

        Senior management, with the input of the members of the Eagle Rock Board, also continued to determine whether a full partnership solution might be available. On October 15, 2013, Eagle Rock instructed Citi to contact Company E to gauge whether it had renewed interest in acquiring the entire partnership. As requested, Citi contacted representatives of Company E later that day.

        As a result of the discussions between Eagle Rock and Regency following the October 7, 2013 Eagle Rock Board meeting, on October 17, 2013, Regency proposed two potential transaction structures with respect to Eagle Rock's midstream business. One proposal modified the original proposal to acquire the entire midstream business, offering aggregate consideration of $1.24 billion, consisting of (1) the assumption of $550 million of Eagle Rock Notes, (2) $200 million in Regency common units, valued at market prices, and (3) $490 million in cash. In the other proposal, Regency would acquire the portion of Eagle Rock's midstream business comprising the Texas Panhandle, Eagle Rock Marketing, LLC and Eagle Rock Gas Services, LLC midstream assets for $1.0 billion total consideration, consisting of $850 million in cash and $150 million in Regency common units, valued at market prices.

        Over the next several days, Eagle Rock's senior management discussed Regency's revised proposals and Eagle Rock's proposed responses with representatives of Evercore, Citi and Vinson & Elkins. Senior management held a series of conference calls with Eagle Rock Board members to discuss and formulate a counterproposal.

        On October 21, 2013, Mr. Mills outlined Eagle Rock's response in a conversation with Michael Bradley, Regency's Chief Executive Officer. Mr. Mills indicated that Eagle Rock proposed an overall consideration of $1.356 billion and that while Eagle Rock would agree to retain the Eagle Rock Notes, Eagle Rock expected Regency to work with Eagle Rock on potential strategies regarding the Eagle Rock Notes, such as a mutually agreed-upon exchange offer to exchange all or a portion of the Eagle Rock Notes into Regency notes, with appropriate adjustments to overall consideration as a result. In addition, among other things, Eagle Rock (1) agreed to accept $200 million in Regency common units, valued at a discount to the market price, (2) agreed to forego the signing deposit, (3) proposed a working capital target of negative $25 million, (4) proposed a termination fee of 3.0% of the purchase price, inclusive of expenses and (5) limited the scope of Eagle Rock's post-closing indemnification, including by narrowing the scope of representations and warranties subject to post-closing indemnification. Mr. Mills also indicated that Eagle Rock was willing to work with Regency on the proposed interim operating covenants but noted that Eagle Rock needed the latitude to run the business.

        Following this conversation, on behalf of Eagle Rock, a representative of Vinson & Elkins delivered a revised markup of the definitive agreement to representatives of Regency and Andrews Kurth LLP, counsel to Regency ("Andrews Kurth").

        On October 22, 2013, Company E indicated to Citi that it might be interested in proposing a full partnership transaction at a value of up to $6.00 per outstanding Eagle Rock common unit once it concluded its analysis of Eagle Rock based on public information. In addition, Company E indicated that it would need to conduct additional due diligence on Eagle Rock. Citi informed Eagle Rock's senior management of its conversation with Company E.

        On October 23, 2013, Regency contacted Evercore to request clarification concerning certain elements of Eagle Rock's proposal and to request certain documents related to employee benefit plans.

        On October 23, 2013, the Compensation Committee of the Eagle Rock Board held a meeting at Eagle Rock's main offices. Also present at the meeting were Mr. Mills, Mr. Wood, Mr. Boettcher and a

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representative of Pearl Meyer & Partners, which serves as compensation consultant to the Compensation Committee. As part of this meeting, Mr. Mills noted for the Compensation Committee that a sale of the midstream business would have an impact on approximately 70% of the partnership's work force. Mr. Mills expressed concerns over necessary retention of midstream employees following announcement of a transaction and prior to consummation. Mr. Mills discussed with the Compensation Committee ideas concerning retention, including the adoption of a severance program. Management and the Compensation Committee also discussed the impact of a midstream-only sale on the vesting of LTIP awards for midstream employees. The Compensation Committee agreed to take the discussion under advisement pending further negotiations with Regency or other potential counterparties.

        On October 24, 2013, the Eagle Rock Board held a regularly-scheduled meeting to review third quarter 2013 results. At this meeting, Evercore and Citi provided an overview of Regency's proposal and the potential financial impact on Eagle Rock of the proposed transaction. Members of the Eagle Rock Board asked questions about the impact to the proposed midstream transaction of Regency's recently announced merger with PVR, which were answered by senior management and Evercore. Senior management and Citi also updated the Eagle Rock Board regarding Citi's discussions with Company E, but cautioned that Company E's possible proposal was based on limited information and would require additional due diligence. The Eagle Rock Board instructed senior management and the advisors to continue to explore a full partnership transaction with Company E in order to determine if Company E could reach an actionable valuation.

        Also at the October 24 meeting, Mr. Wood reviewed the financial results for the third quarter of 2013 and the preliminary 2014 capital and operating budget for the Eagle Rock Board's consideration. Senior management recommended lowering the quarterly distribution per common and eligible restricted unit from the current $0.22 to $0.15 based on the financial results for the quarter and senior management's expectation of future results given its outlook for volumes, commodity prices and leverage levels and the associated risks to Eagle Rock. The Eagle Rock Board requested that senior management conduct additional analysis, including additional commodity price sensitivities with respect to Eagle Rock's ability to pay its current distribution and remain in compliance with its credit facility financial covenants. The Eagle Rock Board requested that senior management present its additional analysis by October 28, 2013 so that a decision could be made regarding the distribution level. Also at this meeting, Mr. Boettcher and Vinson & Elkins discussed with the Eagle Rock Board the anticipated request by Regency and other potential counterparties that Eagle Rock waive the Existing NGP Voting Agreement to enable the NGP Parties to enter into an agreement to vote all of their Eagle Rock common units in favor of a transaction with Regency or such other counterparty. Mr. Boettcher and Vinson & Elkins noted that certain members of the Eagle Rock Board were affiliated with the NGP Parties and may have conflicting interests in connection with any waiver of the Existing NGP Voting Agreement and any voting agreement in favor of the respective transaction (herein referred to as the "Potential NGP Conflicts" and, together with the Potential Regency Ownership Conflicts, the "Potential Conflicts"). Also at this meeting of the Eagle Rock Board, Mr. Boettcher reminded the Eagle Rock Board of the Potential Regency Ownership Conflicts of certain members of the Eagle Rock Board. Mr. Boettcher and Vinson & Elkins described the potential accretion that Energy Transfer Equity, L.P. and Energy Transfer Partners, L.P. unitholders might benefit from as a result of a sale of the midstream business to Regency, based on an analysis performed by Evercore, as well as the impact on the distributions from such equity in such entities held by members of the Eagle Rock Board. After an extensive discussion, including a discussion of the role of the Conflicts Committee, the Eagle Rock Board determined to revisit these matters at a later meeting after further analysis by Mr. Boettcher and Vinson & Elkins.

        On October 25, 2013, Regency contacted Evercore to advise that it was unwilling to transact at an overall consideration of $1.356 billion as proposed by Eagle Rock. On October 26, 2013, Eagle Rock provided Regency with an amended proposal pursuant to which Regency would pay $1.275 billion and

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assume all of the Eagle Rock Notes through a mutually agreeable exchange offer of Regency senior notes with the same tenor, same coupon and same call structure as the Eagle Rock Notes. All other aspects of Eagle Rock's October 21 proposal to Regency remained in effect.

        The Eagle Rock Board and senior management held a telephonic meeting on October 28, 2013 to review the results of senior management's additional analysis regarding Eagle Rock's distribution level. After review and discussion of the presented material, the Eagle Rock Board voted to reduce Eagle Rock's per-unit quarterly distribution level from $0.22 to $0.15 to better reflect Eagle Rock's distributable cash flow, improve coverage and move toward reducing leverage levels.

        Also on October 28, 2013, Barclays Capital Inc. ("Barclays"), Regency's financial advisor, contacted Evercore to discuss Eagle Rock's October 21 proposal as amended on October 26. Barclays advised Evercore that Regency was unwilling to issue Regency common units in the transaction at a discount to market price but was willing to entertain a collar around the $0 working capital requirement.

        On October 29, 2013, Mr. Mills and Mr. Bradley had a telephone call. Mr. Bradley indicated that while he was unwilling to transact at $1.356 billion, he remained willing to transact at $1.3 billion if Eagle Rock retained the Eagle Rock Notes. Mr. Bradley requested certain third quarter financial data to allow Regency to formalize its position. Mr. Mills reiterated his proposal to sell the midstream segment for $1.356 billion and retain the Eagle Rock Notes or sell the midstream segment for $1.275 billion with Regency to conduct an exchange offer for the Eagle Rock Notes on the same coupon, tenor and terms as the existing Eagle Rock Notes. Eagle Rock provided to Regency certain third quarter financial data later that day. Senior management conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Regency.

        On October 31, 2013, Company E contacted Citi to advise that it was continuing to consider a potential full partnership transaction with Eagle Rock. Citi informed Company E that time was of the essence and Company E committed to respond soon. Citi updated Eagle Rock's senior management and senior management advised the Eagle Rock Board of these discussions.

        On November 1, 2013, Mr. Mills and Mr. Bradley had a telephone call to discuss the status of the negotiations. Mr. Bradley indicated that Regency was strongly interested in pursuing a transaction, but was focused on its proxy statement for its proposed transaction with PVR. Mr. Mills and Mr. Bradley acknowledged that there remained a valuation gap between the parties, and Mr. Bradley advised Mr. Mills that he would provide a counterproposal the following week. Mr. Mills advised Mr. Bradley that time was of the essence and that other potential counterparties had shown renewed interest in Eagle Rock.

        Later that day, on behalf of Regency, a representative of Andrews Kurth delivered a revised markup of the definitive agreement to representatives of Eagle Rock and Vinson & Elkins. The markup included a request that certain Eagle Rock unitholders enter into a voting agreement. Regency's markup also indicated that all of Eagle Rock's representations and warranties (not just the "fundamental" representations") would survive closing for a period of 18 months, suggesting for the first time that Eagle Rock would have post-closing liability for breach of non-"fundamental" representations. In addition, the markup, among other things (1) rejected and left open for consideration the overall consideration of $1.356 billion, the working capital target and the size of the termination fee, (2) reinserted certain closing conditions, (3) added a covenant requiring Eagle Rock to hold the Regency common units received as consideration for a to-be-determined period and (4) expanded the scope of the representations and warranties and the scope of post-closing indemnification liability. According to Regency, certain of these changes were based on Regency's understanding that Eagle Rock would potentially retain the upstream business and continue as an upstream-only business following the proposed midstream business sale rather than a simultaneous sale of both the upstream and the midstream businesses.

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        Over the next several days, Eagle Rock's senior management discussed Regency's revised proposals and proposed responses with representatives of Evercore, Citi and Vinson & Elkins, as well as with members of the Eagle Rock Board. In particular, Eagle Rock and its advisors discussed potential alternatives with respect to the Eagle Rock Notes. On November 7, 2013, Mr. Mills provided to Mr. Bradley in writing a list of outstanding open issues.

        On November 8, 2013, Mr. Mills and Mr. Bradley had a telephone call to discuss the open issues between the parties. Mr. Bradley advised Mr. Mills that while he was still evaluating the aggregate consideration, he would not agree to a working capital target of negative $25 million, but was willing to entertain a working capital collar of between negative $15 million and positive $15 million, within which no purchase price adjustment would be made. Mr. Mills and Mr. Bradley discussed the parties' options with respect to the Eagle Rock Notes and agreed that an all-hands call should occur that afternoon regarding the treatment of the Eagle Rock Notes.

        Also on November 8, 2013, a representative of Company E contacted Citi and indicated that it was willing to consider an acquisition of Eagle Rock in its entirety for up to $6.00 per common unit, subject to due diligence. Later that afternoon, representatives of Eagle Rock, Regency, Evercore, Citi, Vinson & Elkins, Andrews Kurth and Barclays participated on a conference call to discuss potential alternatives with respect to the Eagle Rock Notes, including a potential exchange offer.

        On November 9, 2013, Evercore had a call with representatives of Company E regarding the structure of a potential acquisition of Eagle Rock, as well as next steps between the parties, including scheduling a management presentation for Company E. Subsequently, Evercore conveyed this information to Eagle Rock senior management and senior management discussed with members of the Eagle Rock Board, who encouraged senior management to schedule the requested management presentation with Company E and determine whether Company E was genuinely interested in an actionable full partnership transaction. Senior management provided a management presentation to Company E during the week of November 11, 2013.

        On November 10, 2013, following discussions with Eagle Rock's senior management and Vinson & Elkins, a representative of Vinson & Elkins delivered to Regency and Andrews Kurth a revised draft of the definitive agreement and an initial draft of the disclosure schedules.

        On November 11, 2013, the Eagle Rock Conflicts Committee held a telephonic meeting with representatives of Potter Anderson & Corroon LLP ("Potter Anderson") to discuss the possible invocation and role of the Eagle Rock Conflicts Committee with respect to a possible transaction with either Company E or Regency, including whether the Conflicts Committee would be charged with reviewing any requests by Company E and/or Regency with regard to a waiver of the Existing NGP Voting Agreement. The Eagle Rock Conflicts Committee also determined to engage Potter Anderson as the Conflicts Committee's independent legal counsel.

        On November 12, 2013, Mr. Bradley contacted Mr. Mills to advise that Regency was willing to pay up to $1.325 billion for the midstream business assuming no Eagle Rock Notes were exchanged for like-kind Regency notes. Mr. Bradley further advised that if all Eagle Rock Notes were exchanged for like-kind Regency notes, the purchase price would be $1.27 billion.

        Also on November 12, 2013, Mr. Boettcher and representatives of Vinson & Elkins met with internal legal counsel of Regency and representatives of Andrews Kurth at the Houston offices of Vinson & Elkins to discuss open issues with respect to the definitive agreement circulated by Vinson & Elkins on November 10, 2013. Among other things, the parties discussed various alternatives with respect to the treatment of the Eagle Rock Notes, Regency's timing requirements with respect to Eagle Rock's carve-out midstream financial statements, the balance sheet date, antitrust matters, the proposed voting agreement and the working capital target. With respect to its proposal that Eagle Rock's non-fundamental representations and warranties survive the closing, Regency clarified its intent that

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such indemnification be subject to certain limitations that would be forthcoming from Andrews Kurth. Eagle Rock resisted the concept of post-closing indemnification for breaches of non-fundamental representations, noting its view that the proposed purchase price offered by Regency was not reflective of post-closing protection for breach of non-fundamental representations since Regency's original bid for the midstream business was made assuming no such protection. Regency agreed to forego the requirement that Eagle Rock hold the Regency common units for a specified period after closing, and, with respect to the termination fee, as a compromise, Eagle Rock proposed increasing the termination fee to 3.25% of purchase price, inclusive of expenses.

        On November 15, 2013, Mr. Mills and Mr. Bradley held a telephone call to discuss the open issues between the parties. Mr. Mills proposed a framework whereby the aggregate consideration would be $1.325 billion coupled with an exchange offer of like-kind Regency notes for the outstanding Eagle Rock Notes. In the event that all of the Eagle Rock Notes were exchanged for Regency notes, the purchase price would be reduced to $1.285 billion. Mr. Wood and Thomas Long, Regency's Chief Financial Officer, likewise discussed the Eagle Rock proposal later that morning. Regency rejected the framework proposed by Eagle Rock and reiterated its position that it would purchase the midstream business for $1.325 billion with no exchange of Eagle Rock Notes or for $1.270 billion if all of the Eagle Rock Notes were exchanged.

        Also on November 15, 2013, representatives of Company E contacted Citi to express Company E's continued interest in discussions with Eagle Rock. Company E advised that it was continuing to evaluate potential structures and the proposed consideration for an entire partnership transaction.

        On November 15, 2013, a representative of Andrews Kurth circulated to Vinson & Elkins certain proposed revisions to the draft definitive agreement, including the proposed limitations on the post-closing indemnity for breaches of Eagle Rock's non-fundamental representations.

        Representatives of Eagle Rock and Regency continued to discuss alternatives with respect to the Eagle Rock Notes and Regency's request for carve-out audited financial statements for the midstream business. The parties reached an agreement to begin the audit of financial statements for the midstream business, subject to agreement with respect to partial reimbursement of Eagle Rock's expenses by Regency. On November 27, 2013, Eagle Rock and Regency executed a letter with respect to Eagle Rock's commitment to begin the audit process and associated expense reimbursement issues. Regency and Eagle Rock each agreed to bear one-half of the associated audit expenses. Senior management conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Regency.

        On November 19, 2013, Eagle Rock circulated to Regency and Andrews Kurth a list of selected open issues to be resolved among the parties. The issues list presented Eagle Rock's and Regency's then-current positions with respect to each issue, including with respect to consideration and treatment of the Eagle Rock Notes, including treatment of accrued interest on the Eagle Rock Notes, post-closing indemnification, closing conditions, the working capital target, the balance sheet date, the voting agreement, antitrust matters, the termination fee and delivery of carve-out financial statements.

        Also on November 19, 2013, Company E contacted Evercore to seek more information for a potential proposal related to consideration and transaction structure pursuant to which Company E would acquire Eagle Rock in a merger transaction. On November 20, 2013, Eagle Rock senior management, together with Evercore and Citi, participated in a call with representatives of Company E to address Company E's outstanding questions. Senior management conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Company E.

        On November 21, 2013, a representative of Andrews Kurth circulated to Eagle Rock and Vinson & Elkins a revised draft of the selected issues list, indicating in each case Regency's proposed position.

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Among other things, Regency proposed (1) a maximum purchase price of $1.325 billion, to be reduced by $55 million if all Eagle Rock Notes were tendered in the exchange offer, or a pro rata portion of such amount if less than all of the Eagle Rock Notes are tendered, (2) that there be no adjustment for working capital if working capital was between negative $15 million and positive $15 million, (3) that the carve-out financial statements be provided by January 21, 2014, (4) that the termination fee be 3.5%, inclusive of expenses and (5), with respect to Eagle Rock's liability for breaches of its non-fundamental representations, that the non-fundamental representations survive 12 months after closing and that liability for breach be subject to a $500,000 minimum claim amount, a $6.5 million deductible (approximately 0.5% of the proposed consideration) and a $260 million overall cap (approximately 20% of the proposed consideration).

        Also on November 21, 2013, Eagle Rock senior management hosted a conference call with members of the Eagle Rock Board to update the Eagle Rock Board regarding the status of the negotiations with Regency and Company E.

        On November 22, 2013, Eagle Rock received a verbal indication of interest for a merger transaction with Company E. Company E proposed a unit-for-unit exchange of units of Company E for units of Eagle Rock at an exchange ratio that implied an offer at the then-current trading price of Eagle Rock. Mr. Mills conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Company E.

        On November 23, 2013, Mr. Mills and Mr. Bradley had a conference call to further discuss the open points between the parties. Mr. Bradley reiterated that if all of the Eagle Rock Notes were exchanged for like-kind Regency notes, the aggregate consideration would decline to $1.27 billion. Mr. Mills and Mr. Bradley also discussed the working capital adjustment thresholds, the size of the termination fee, the covenant concerning antitrust clearance and which representations of Eagle Rock would survive closing.

        On November 25, 2013, the Eagle Rock Conflicts Committee held a telephonic meeting with representatives of Potter Anderson to discuss the status of negotiations with Regency and with Company E, and to further discuss the anticipated role of the Eagle Rock Conflicts Committee in connection with either potential transaction, including a possible waiver of the Existing NGP Voting Agreement. The Eagle Rock Conflicts Committee also discussed the Potential Conflicts.

        On November 26, 2013, the Eagle Rock Board held a meeting to discuss the status of negotiations with Regency and with Company E. At the request of Eagle Rock senior management, also present at the meeting were representatives of Evercore, Citi and Vinson & Elkins. Evercore reviewed with the Eagle Rock Board the financial aspects of the proposal from Company E and the proposed transaction with Regency. The representative of Evercore also reviewed a revised set of financial projections for Eagle Rock and provided a bridge to the financial projections previously discussed with the Eagle Rock Board on October 24, 2013. The Eagle Rock Board discussed the merits of each proposal, transaction risk, timing and logistics for completion of due diligence and strategy for negotiations with each potential counterparty. At the direction of the Eagle Rock Board, Mr. Mills instructed representatives of Evercore and Citi to negotiate an improved exchange ratio with Company E. The Eagle Rock Board also discussed the need to invoke the Eagle Rock Conflicts Committee to review the requests in both the Company E and Regency proposals with regard to a waiver of the Existing NGP Voting Agreement in connection with the proposed voting agreements with NGP VIII and, on account of the Potential Regency Ownership Conflicts, to consider whether the Regency proposal was in the best interests of Eagle Rock.

        Later that afternoon, in accordance with the Eagle Rock Board's directives, Evercore and Citi representatives contacted representatives of Company E and strongly encouraged Company E to enhance its proposed exchange ratio. Evercore and Citi suggested that Company E's general partner

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consider forgoing incentive distribution payments (the "IDR giveback") to allow the transaction to be more accretive to Eagle Rock and Company E's common unitholders.

        On November 27, 2013, Mr. Mills and Mr. Bradley discussed certain of the open issues between the parties. Mr. Mills informed Mr. Bradley that Eagle Rock would not accept having non-fundamental representations and warranties survive closing. Mr. Mills also reiterated his view that the termination fee should not exceed 3.25% of consideration. Mr. Bradley agreed to consider Mr. Mills' position. Mr. Mills and Mr. Bradley also discussed the limitations on Regency's obligations with respect to antitrust remedies. Mr. Mills conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Regency.

        On November 29, 2013, at Eagle Rock's request, representatives of Evercore and Citi discussed the proposed merger transaction and exchange ratio with representatives of Company E. Company E indicated that it was not willing to increase its proposed exchange ratio and rejected the proposal of an IDR giveback by its general partner. However, Company E confirmed its continued interest in a merger with Eagle Rock and ability to move quickly to consummate a transaction at its originally proposed exchange ratio.

        On the evening of November 29, 2013, Mr. Bradley delivered to Mr. Mills an updated proposal from Regency with respect to the list of outstanding issues that had been circulated between the parties and their respective legal counsel. Among other items, Mr. Bradley proposed that Eagle Rock's non-fundamental representations not survive closing, but only subject to the addition of a purchase price adjustment mechanism into the draft definitive agreement for any breaches of non-fundamental representations and warranties discovered by Regency prior to closing. In addition, Regency agreed to a 3.25% termination fee, inclusive of expenses, and to forego certain closing conditions, subject to Regency's diligence of the draft carve-out financial statements. He further indicated his understanding that the parties had agreed on the elements of consideration and that Eagle Rock had agreed to Regency's position on the working capital target. Mr. Bradley also made a new proposal with respect to antitrust matters, and with respect to delivery of carve-out financial statements, he noted that Regency would be entitled to terminate the transaction if the carve-out financial statements were not delivered prior to a hard delivery date.

        On November 30, 2013, the Eagle Rock Board held a special telephonic meeting to discuss the status of negotiations with Regency and with Company E. Mr. Mills reported Company E's unwillingness to increase the exchange ratio and the updated proposals from Regency. The Eagle Rock Board requested that Mr. Mills, with the assistance of Evercore and Citi, again seek an increase in the proposed exchange ratio. Later that day, in accordance with the Eagle Rock Board's request, representatives of Evercore and Citi contacted a representative of Company E and again requested that Company E increase its proposed exchange ratio. Again, Company E declined to do so and stated that its proposed price was firm.

        On December 1, 2013, Mr. Mills sent to Mr. Bradley a further updated issues list indicating Eagle Rock's proposed resolution of the outstanding issues. Among other issues, the Eagle Rock proposal did not accept Regency's proposal of a purchase price adjustment for breaches of non-fundamental representations discovered before the closing nor accept Regency's proposal with respect to antitrust matters.

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        On December 2, 2013, representatives of Eagle Rock and Regency held a call to discuss Regency's timing requirements regarding delivery of the audited financial statements for Eagle Rock's midstream business and to discuss further aspects of the Eagle Rock Notes exchange.

        On December 3, 2013, the Eagle Rock Board held a special telephonic meeting to discuss the status of negotiations with Regency and Company E. Mr. Mills provided the Eagle Rock Board with an update of the status of negotiations with Regency and outlined the key open issues. Mr. Mills then discussed the Company E proposal and the merits of engaging in further discussions with Company E concerning the proposed exchange ratio. The Eagle Rock Board discussed the comparative advantages and disadvantages of the two proposed transactions, the execution risks of each proposed transaction, as well as the future outlook for Eagle Rock's business. The Eagle Rock Board authorized senior management to engage in discussions with Company E based on Company E's proposed exchange ratio, while continuing to negotiate with Regency.

        On December 4, 2013, Eagle Rock's senior management contacted Company E and agreed to engage in negotiations with Company E with respect to a proposed merger transaction provided that Company E would set forth its proposal in writing. Later that day, representatives of Company E circulated to Eagle Rock a draft amendment to the existing confidentiality agreement between the parties to provide for the disclosure of confidential information of Company E to be provided to Eagle Rock.

        On December 5, 2013, Eagle Rock and Company E entered into the amended confidentiality agreement. Representatives of Eagle Rock, Company E and their respective advisors then began reviewing diligence materials and participating on conference calls with respect to due diligence matters.

        On December 6, 2013, Company E submitted a formal indication of interest to acquire the entire partnership at the previously communicated exchange ratio. Representatives of Eagle Rock and Company E held a call to discuss a preliminary timeline for the due diligence and negotiation of the merger agreement. That same day, a representative of Vinson & Elkins circulated a draft merger agreement to Company E's outside legal counsel. Mr. Mills conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Company E.

        On December 6, 2013, a representative of Vinson & Elkins also circulated to Regency and Andrews Kurth a revised draft of the definitive agreement, which reflected the positions set forth in the issues list circulated by Eagle Rock on December 1, 2013.

        On December 9, 2013, the Eagle Rock Board held a special telephonic meeting to discuss the status of negotiations with Regency and Company E. Also attending the meeting were representatives of Vinson & Elkins. Mr. Mills updated the Eagle Rock Board on the discussions with Company E and the status of discussions with Regency. Vinson & Elkins further updated the Eagle Rock Board on certain legal issues related to the Regency and Company E transactions. Mr. Boettcher and Vinson & Elkins also reported to the Eagle Rock Board their further analysis of the Potential Regency Ownership Conflicts and the impact of a potential transaction with Regency on the holders of equity interests in Regency, Energy Transfer Equity, L.P., and Energy Transfer Partners, L.P. The Eagle Rock Board confirmed that none of the members of the Eagle Rock Conflicts Committee were subject to Potential Conflicts, and that while one member of the Eagle Rock Conflicts Committee owned a small amount of common units of Energy Transfer Equity, L.P., the amount of such ownership was not material to that individual and would not impact that individual's ability to serve on the Conflicts Committee. Based on the Potential Conflicts, senior management recommended that the Eagle Rock Board invoke the Eagle Rock Conflicts Committee. After discussion, the Eagle Rock Board passed a resolution invoking the Eagle Rock Conflicts Committee. Because three board members were not present at the meeting, Mr. Boettcher subsequently circulated a written consent containing the resolutions invoking the Eagle Rock Conflicts Committee that had been adopted by the Eagle Rock

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Board at the meeting to ratify the action taken by the Eagle Rock Board at the meeting. This written consent was later executed by each member of the Eagle Rock Board.

        Late in the evening on December 9, 2013, a representative of Company E's legal counsel circulated to Eagle Rock and Vinson & Elkins a markup of the proposed merger agreement.

        From December 10, 2013 through December 16, 2013, representatives of Eagle Rock, Company E and their respective legal counsel met at the offices of Company E's legal counsel in New York City to negotiate the merger agreement and complete due diligence. Senior management conferred with various members of the Eagle Rock Board by phone regarding the ongoing discussions between Eagle Rock and Company E.

        On December 11, 2013, Mr. Mills, Mr. Bradley and Mr. Long met for breakfast in New York City. They discussed the remaining outstanding issues, including the antitrust divestiture threshold and the proposed pre-closing purchase price adjustment for breach of non-fundamental representations and warranties. Mr. Mills indicated that any pre-closing purchase price adjustments for breach of non-fundamental representations and warranties must have a higher deductible threshold and a smaller cap on the total adjustment. Mr. Mills proposed a de minimis amount of $1.0 million before any adjustment could be considered, a $13.25 million minimum deductible and a total cap of $132.5 million. Mr. Mills also proposed that Eagle Rock would have a unilateral right to terminate the transaction if the total amount of adjustments exceeded $50 million.

        On December 12, 2013, representatives of Vinson & Elkins and Andrews Kurth discussed certain of the outstanding issues, principally the impact to the consideration as a result of the exchange offer of Regency debt for the Eagle Rock Notes.

        Also on December 12, 2013, the Eagle Rock Conflicts Committee held a telephonic meeting with representatives of Potter Anderson to discuss the status of negotiations with Regency and with Company E. The Conflicts Committee and Potter Anderson discussed the Conflict Committee's mandate with respect to the two potential transactions, discussed the Potential Conflicts and reviewed the proposed voting and support agreement received from Company E. The Conflicts Committee and representatives of Potter Anderson also discussed the form and substance of a proposed waiver of the Existing NGP Voting Agreement with respect to a potential transaction.

        On December 13, 2013, Mr. Mills received a telephone call from Mr. Bradley. Mr. Bradley indicated that as a result of an accelerated timeline with respect to Regency's SEC filings in connection with its acquisition of PVR, Regency needed to be in a position to execute the definitive agreement with Eagle Rock by Friday, December 20, or the following Monday, December 23, at the latest. Mr. Bradley indicated that Andrews Kurth would circulate a revised draft of the definitive agreement to Vinson & Elkins by the close of business that day. Mr. Mills agreed that Eagle Rock could meet the timeline but urged Regency to accept Eagle Rock's latest proposed changes to the pre-closing purchase price adjustments.

        Also on December 13, 2013, the Eagle Rock Board held a special telephonic meeting to discuss the status of Eagle Rock's negotiations with Regency and Company E. At the request of Eagle Rock's senior management, representatives of Evercore and Vinson & Elkins were also in attendance. Mr. Mills reported on his meeting and phone call with Mr. Bradley. A representative of Vinson & Elkins then reviewed with the Eagle Rock Board the provisions (and current status of negotiations) of the proposed merger agreement with Company E. The representative of Vinson & Elkins also discussed the provisions of, and status of negotiations with respect to, the proposed voting agreement with the NGP Parties and the related limited waiver of the Existing NGP Voting Agreement with Eagle Rock. At the request of the Eagle Rock Board, the Eagle Rock Conflicts Committee provided a brief update to the full Eagle Rock Board regarding the Conflicts Committee's process to date, and the Conflicts Committee's preliminary view as to the proposed waiver of the Existing NGP Voting

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Agreement with respect to a potential transaction. Evercore then reviewed with the Eagle Rock Board the potential financial impact to a unitholder of the standalone case, the proposed merger transaction with Company E and the proposed Regency transaction.

        At the meeting, Mr. Mills also described a preliminary proposal from an investment banker with respect to a potential joint bid from two counterparties which previously participated in the strategic alternatives process ("Company G" and "Company H"). Mr. Mills described his discussions with the investment banker and the chief executive officer of Company G, but noted that he did not find the proposal compelling from a valuation standpoint and had concerns with the proposed transaction structure. The Evercore representative then outlined the potential transaction. The Evercore representative noted in addition to the issues that Mr. Mills pointed out regarding accretion and structure that the transaction did not take into account any tax impacts and involved a high degree of market risk with respect to the yield at which the resulting entities would trade. After a discussion among the directors, the Eagle Rock Board determined not to pursue the Company G/Company H proposal for all of the above reasons.

        On December 15, 2013, a representative of Andrews Kurth circulated to Eagle Rock and Vinson & Elkins a revised markup of the definitive agreement with Regency. The revised draft agreement reiterated Regency's proposed antitrust divestiture thresholds and inserted Regency's proposal that Eagle Rock provide for a purchase price reduction due to pre-closing discovery of breaches of non-fundamental representations and warranties, subject to a de minimis threshold of $1.0 million before any adjustment could be considered, a deductible of $13.25 million (approximately 1% of the consideration) and a cap of $132.5 million (approximately 10% of the consideration). Regency rejected Eagle Rock's proposed $50.0 million unilateral walk-right.

        On December 16, 2013, Company E indicated that it was no longer prepared to transact with Eagle Rock at the previously communicated exchange ratio. Company E advised that it might be willing to acquire the entire partnership at an exchange ratio lower than the previously communicated exchange ratio. Mr. Mills advised Company E that his view was that Company E had terminated discussions with Eagle Rock based on its refusal to proceed on the terms originally proposed and that he would recommend to the Eagle Rock Board that Eagle Rock terminate discussions with Company E.

        Also on December 16, 2013, Mr. Mills convened a special telephonic meeting of the Eagle Rock Board to report on the status of negotiations with Company E. The Eagle Rock Board concluded that Company E had constructively terminated discussions with Eagle Rock regarding a proposed combination of the companies and, at management's recommendation, the Eagle Rock Board instructed management to not proceed with additional discussions with Company E. The Eagle Rock Board also discussed the status of negotiations with Regency. Subsequently, senior management formally terminated negotiations with Company E.

        On December 17, 2013, Mr. Mills and Mr. Bradley had a telephone call to discuss the parameters of the parties' confirmatory due diligence process. From December 17, 2013 until December 22, 2013, representatives of Eagle Rock, Regency, and their respective advisors began reviewing diligence materials and participating on conference calls with respect to due diligence matters concerning the other party.

        On December 18, 2013, a representative of Vinson & Elkins circulated to Andrews Kurth a revised draft of the definitive agreement, which the parties had previously agreed to style as a contribution agreement. In this draft, Eagle Rock reiterated its proposal that Eagle Rock would have a unilateral termination right in the event Regency alleged greater than $50 million in losses pursuant to the purchase price adjustment. The revised contribution agreement also provided for further limitations on the types of losses that could be recovered under the purchase price adjustment. The revised contribution agreement set forth Eagle Rock's view that the proposed voting agreement with the NGP

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Parties must terminate if the Eagle Rock Board terminated the contribution transaction to enter into a superior proposal or if the Eagle Rock Board adversely changed its recommendation of the contribution transaction. Additionally, the revised contribution agreement deleted certain closing conditions and made other changes with respect to post-closing employee responsibilities and allocation of taxes.

        Later on December 18, 2013, the Eagle Rock Board held a special telephonic meeting to discuss the status of Eagle Rock's negotiations with Regency. At the request of Eagle Rock's senior management, representatives of Vinson & Elkins and Potter Anderson were also in attendance. Mr. Mills provided an update on the status of negotiations with Regency.

        Also on December 18, 2013, Regency and Eagle Rock entered into an addendum to the existing confidentiality agreement between the parties providing for disclosure of certain competitively sensitive information through "clean teams" comprising individuals not involved in commercial decision-making positions.

        On December 19, 2013, a representative of Andrews Kurth circulated to Vinson & Elkins a revised draft of the contribution agreement. In this draft, Regency proposed that Eagle Rock would be responsible for all accrued interest on the Eagle Rock Notes and rejected Eagle Rock's proposed unilateral termination right for alleged breaches in excess of $50 million and instead proposed a termination right for both parties if the alleged breaches exceeded $132.5 million.

        Also on December 19, 2013, the Eagle Rock Conflicts Committee held a telephonic meeting with representatives of Potter Anderson, a representative of Vinson & Elkins and Mr. Boettcher to discuss the status of the negotiations with Regency and certain open business issues. The Conflicts Committee was informed that the Eagle Rock Board would be requesting the Conflicts Committee to review and consider whether to approve and recommend the proposed transaction with Regency in addition to its evaluation of the proposed waiver to the Existing NGP Voting Agreement and the voting agreement with the NGP Parties. After the representatives of Vinson & Elkins and Mr. Boettcher left the meeting, the Conflicts Committee discussed the form and substance of the proposed voting agreement waiver and its preliminary view of the appropriateness of the proposed transaction with Regency and the related voting agreement waiver.

        Also on December 19, 2013, Eagle Rock's Compensation Committee held a special meeting. At the request of Eagle Rock's senior management, representatives of Vinson & Elkins and Potter Anderson were also present. At the meeting, Mr. Mills described the key elements of the change of control severance program senior management proposed to implement in connection with the proposed transaction with Regency, which was not materially different from the proposals previously discussed with the Compensation Committee. He noted that the Partnership would bear the severance costs of midstream employees not offered employment by Regency, midstream employees who receive offers but decline for "good reason," and additional redundant corporate and upstream staff eliminated in connection with the Regency transaction. Mr. Mills also discussed senior management's proposal with respect to 100% accelerated vesting of outstanding restricted units (including for midstream officers) under the LTIP plan and the long-term cash bonus plan for support and field employees in connection with the proposed Regency transaction. The compensation committee approved each of the foregoing proposals.

        On December 20, 2013, representatives of Eagle Rock, Regency, Vinson & Elkins and Andrews Kurth discussed the remaining outstanding issues on a conference call.

        On December 22, 2013, the Eagle Rock Board held a telephonic meeting to review the proposed contribution agreement. At the request of Eagle Rock's senior management, representatives of Vinson & Elkins, Potter Anderson, Evercore and Citi were also present. Mr. Mills updated the Eagle Rock Board on discussions and negotiations between the parties since the prior meeting of the Eagle

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Rock Board. Mr. Mills described his discussions with Messrs. Bradley and Long and their proposed resolution of certain open issues in the contribution agreement, including the payment of accrued but unpaid interest on the Eagle Rock Notes, the cap on the purchase price adjustment for pre-closing indemnification claims, indemnification for breaches by Regency of the no consent representation and how the parties would address severance obligations for transition employees. Representatives from Vinson & Elkins then described the terms of the draft contribution agreement and voting and support agreement. At the request of the Eagle Rock Board, representatives from Evercore reviewed and discussed Evercore's financial analyses of Eagle Rock and Regency and the proposed transaction. Evercore informed the Eagle Rock Board that, if requested by the Eagle Rock Board and assuming no material changes in the information that Evercore considered, Evercore would be in a position to provide an opinion to the Eagle Rock Board as to the fairness, from a financial point of view, to Eagle Rock of such aggregate consideration. At the request of the Eagle Rock Board, Citi reviewed its financial analysis of the aggregate consideration to be received by Eagle Rock in the Contribution and informed the Eagle Rock Board that, if requested by the Eagle Rock Board and assuming no material changes in the information that Citi considered, Citi would be in a position to provide an opinion to the Eagle Rock Board as to the fairness, from a financial point of view, to Eagle Rock of such aggregate consideration.

        The Eagle Rock Board then requested that the Eagle Rock Conflicts Committee (1) evaluate the proposed transaction, including the proposed voting agreement with the NGP Parties and the limited waiver of the Existing NGP Voting Agreement and the proposed contribution and (2) determine whether to provide its "special approval" of the foregoing transactions under the Partnership Agreement. The Eagle Rock Board next temporarily adjourned the meeting to allow the Eagle Rock Conflicts Committee to convene a meeting.

        The Eagle Rock Conflicts Committee then convened a separate meeting, together with representatives of Potter Anderson. The Eagle Rock Conflicts Committee discussed the status of negotiations and the anticipated timing of Board action, and considered certain open business issues described by senior management during the immediately preceding Eagle Rock Board meeting, including (1) whether the consent of PVR would be obtained, (2) whether the number of Regency units payable to Eagle Rock pursuant to the Contribution Agreement would be determined as of the date of signing or date of closing, (3) the nature of, and deductible and cap applicable to, any price adjustment based on a pre-closing breach by Eagle Rock of non-fundamental representations in the Contribution Agreement, and (4) whether Regency or Eagle Rock would be responsible for paying interest on the Eagle Rock Notes prior to closing. The Eagle Rock Conflicts Committee also considered the Potential Conflicts. After deliberation, the Eagle Rock Conflicts Committee unanimously determined that, subject to resolution, to the satisfaction of the Eagle Rock Board, of the foregoing open business issues, (a) the limited waiver and the voting and support agreement are in the best interest of Eagle Rock and its unitholders (other than NGP VIII and its affiliates), approved the limited waiver and the voting and support agreement, and recommended that the Eagle Rock Board approve the limited waiver and the voting and support agreement and authorize the execution and delivery of the limited waiver and (b) the contribution is in the best interest of Eagle Rock and its unitholders, approved the contribution, and recommended that the Eagle Rock Board approve the contribution and authorize the execution and delivery of the contribution agreement. In addition, the Eagle Rock Conflicts Committee unanimously determined that the foregoing approvals constituted "special approval" by the Eagle Rock Conflicts Committee for all purposes under the Partnership Agreement.

        The Eagle Rock Board then reconvened its meeting. The Conflicts Committee provided a report to the full Eagle Rock Board as to its determinations. The Eagle Rock Board then instructed senior management and the advisors to attempt to resolve the open issues with Regency. The Eagle Rock Board requested an update call at 11:00 p.m. Central Time that evening. This conference call was held with senior management and the advisors, but all of the issues with Regency had not been resolved.

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Therefore, the Eagle Rock Board adjourned and set a new meeting time of 5:00 a.m. Central Time the following morning.

        Later in the evening on December 22, 2013, a representative of Vinson & Elkins circulated to Andrews Kurth a revised draft of the contribution agreement. Later that night and into the early morning on December 23, 2013, representatives of Eagle Rock, Regency, Vinson & Elkins and Andrews Kurth discussed the remaining open issues.

        On the morning of December 23, 2013, the Eagle Rock Board held a telephonic meeting to review and discuss the negotiations with Regency and the contribution agreement. Mr. Mills updated the Eagle Rock Board on the successful negotiations on the open business issues and recommended to the Eagle Rock Board that Eagle Rock execute the contribution agreement and announce the transaction later that morning. Thereafter, at the request of the Eagle Rock Board, Evercore rendered its oral opinion to the Eagle Rock Board (which was subsequently confirmed in writing by delivery of Evercore's written opinion addressed to the Eagle Rock Board dated the same date) to the effect that, as of December 23, 2013 and based upon and subject to the assumptions, limitations, qualifications and other matters considered in the preparation of the opinion, the contribution consideration was fair, from a financial point of view, to Eagle Rock. Also at this meeting, Citi delivered to the Eagle Rock Board an oral opinion, confirmed by delivery of a written opinion dated December 23, 2013, to the effect that, as of such date and based on and subject to various assumptions, matters considered and limitations and qualifications described in such opinion, the aggregate consideration to be received by Eagle Rock in the Contribution was fair, from a financial point of view, to Eagle Rock. After discussion and deliberation, the Eagle Rock Board determined that the contribution agreement and the transactions contemplated thereby were advisable, fair to and in the best interests of Eagle Rock and its unitholders and authorized senior management to execute the contribution agreement and the limited waiver on behalf of Eagle Rock.

        Following the approval of the Eagle Rock Board, the senior management of Eagle Rock and Regency with their respective legal advisors finalized the last remaining open issues in accordance with instructions from their respective boards of directors, and the parties then entered into the Contribution Agreement in the morning on December 23, 2013.

        On December 23, 2013, each of Eagle Rock and Regency issued a press release announcing the execution of the Contribution Agreement and the proposed transactions.


Recommendation of the Eagle Rock Board and Reasons for the Contribution

        The Eagle Rock Board consists of nine directors: Joseph A. Mills, Christopher D. Ray, William J. Quinn, Philip B. Smith, William A. Smith, William K. White, Herbert C. Williamson, III, Peggy A. Heeg and David W. Hayes, with Mr. Mills serving as Chairman.

        The Eagle Rock Board determined that certain conflicts may exist between the interests of Eagle Rock Energy G&P LLC and its affiliates, on the one hand, and the interests of Eagle Rock and the unaffiliated holders of common units of Eagle Rock, on the other hand, in connection with the Contribution, the Contribution Agreement, the Limited Waiver and the Voting and Support Agreement due to the Potential Conflicts. Given the Potential Conflicts, the Eagle Rock Board authorized the Eagle Rock Conflicts Committee to review, evaluate and make recommendations to the Eagle Rock Board.

        The Eagle Rock Conflicts Committee is a standing committee and consists of three independent directors: Herbert C. Williamson, III, William A. Smith, and Peggy A. Heeg, with Mr. Williamson

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serving as the Chairman. In resolutions approved by the Eagle Rock Board on December 10, 2013, the Eagle Rock Conflicts Committee was authorized to:

            (1)   with respect to the Limited Waiver and the Voting and Support Agreement, (a) review and to evaluate the terms and conditions of such agreements; (b) determine whether or not such agreements were in the best interests of Eagle Rock and its unitholders (or any subset of the unitholders that the Eagle Rock Conflicts Committee determines to be appropriate); (c) determine whether or not to approve such agreements, with such approval constituting "Special Approval" pursuant to Section 7.9(a) of the Partnership Agreement; and (d) to determine whether or not to recommend that the Eagle Rock Board approve such Limited Waiver and Voting and Support Agreement; and

            (2)   at the request of the Eagle Rock Board, (a) review and to evaluate the terms and conditions of the Contribution, (b) determine whether or not the Contribution is in the best interests of Eagle Rock and its unitholders (or any subset of the unitholders that the Eagle Rock Conflicts Committee determines to be appropriate); (c) determine whether or not to approve the Contribution, with such approval constituting "Special Approval" pursuant to Section 7.9(a) of the Partnership Agreement; and (d) determine whether or not to recommend that the Eagle Rock Board approve the Contribution.

        In evaluating the Contribution, the Eagle Rock Conflicts Committee consulted with its outside legal counsel, Potter Anderson, and, in reaching its determination and recommendation, the Eagle Rock Conflicts Committee considered a number of factors. The Eagle Rock Conflicts Committee also consulted on numerous occasions with Potter Anderson regarding its obligations and the terms of the Contribution Agreement, the Limited Waiver and the Voting and Support Agreement.

        On December 22, 2013, the Eagle Rock Conflicts Committee unanimously:

            (1)(a)  determined that the Limited Waiver and the Voting and Support Agreement are in the best interest of Eagle Rock and its unitholders (other than NGP VIII and its affiliates), (b) approved the Limited Waiver and the Voting and Support Agreement, and (c) recommended that the Eagle Rock Board approve the Limited Waiver and the Voting and Support Agreement and authorize the execution and delivery of the Limited Waiver; and

            (2)(a)  determined that the Contribution is in the best interest of Eagle Rock and its unitholders, (b) approved the Contribution, and (c) recommended that the Eagle Rock Board approve the Contribution and authorize the execution and delivery of the Contribution Agreement.

        In addition, the Eagle Rock Conflicts Committee unanimously determined that the foregoing approvals constituted "Special Approval" by the Eagle Rock Conflicts Committee for all purposes under the Partnership Agreement, including Section 7.9(a) thereof.

        On December 23, 2013, the Eagle Rock Board met to consider the Contribution Agreement and related transactions. On the basis of the Eagle Rock Conflicts Committee's recommendation and "special approval" and the other factors described below, the Eagle Rock Board unanimously (1) determined that the Contribution Agreement and the Contribution are in the best interests of Eagle Rock and the Eagle Rock unitholders, (2) approved the Contribution Agreement and the Contribution and (3) recommended that the Eagle Rock unitholders vote to approve the Contribution Agreement and the Contribution.

        In evaluating the Contribution, the Eagle Rock Board consulted with Eagle Rock's senior management and its legal and financial advisors and, in reaching its determination and recommendation, the Eagle Rock Board considered a number of factors. The Eagle Rock Board also consulted with legal counsel regarding its obligations, legal due diligence matters and the terms of the Contribution Agreement, the Limited Waiver and the Voting and Support Agreement.

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        In determining that the Contribution Agreement and the Contribution are in the best interests of Eagle Rock and the Eagle Rock unitholders, approving the Contribution Agreement and the Contribution and recommending that the Eagle Rock unitholders vote for the approval of the Contribution Agreement and the Contribution, the Eagle Rock Board considered a number of factors, including the following material factors:

    the aggregate value of the consideration to be received by Eagle Rock for the Contribution, and the belief that the Contribution of the midstream business to Regency was an opportunity for Eagle Rock's unitholders to ultimately realize the maximum amount of inherent value believed to exist in its asset base, as compared to Eagle Rock continuing to operate both upstream and midstream businesses;

    its knowledge of Eagle Rock's businesses, operations, financial condition, earnings, contingent liabilities, and prospects, as well as the risks in achieving those prospects;

    the fact that Eagle Rock's debt levels put it at risk of violating certain of the financial covenants in its existing indebtedness, which could result in, among other consequences, suspension of Eagle Rock's distribution and a material reduction in unit price;

    the recognition that, in the absence of a significant transaction, Eagle Rock's negative free cash flow (after taking into consideration its planned capital spending and distributions to its unitholders) and its limited ability to raise additional equity capital, severely constrains its ability to achieve meaningful debt reduction;

    its expectation that proceeds from the Contribution will enable Eagle Rock to significantly reduce its leverage and improve its liquidity, either in the form of excess cash or availability under its revolving credit facility;

    its expectation that future growth of Eagle Rock's midstream business would be difficult given the partnership's small scale and high cost of capital relative to many of its midstream MLP competitors;

    that following the Contribution, Eagle Rock will be focused on a single business line as a pure-play upstream MLP, which the Eagle Rock Board expects will provide focus and greater clarity for Eagle Rock's investor base and analysts;

    its expectation that focusing on a single business line will result in an improved cost structure with substantial G&A savings;

    its belief that a greater number of potential actionable acquisition opportunities exist for MLP-appropriate upstream assets relative to such opportunities for midstream assets;

    its expectation that the increased liquidity resulting from the Contribution will enable Eagle Rock to focus on growing the upstream business through acquisitions of upstream assets and growing Eagle Rock's production base by continuing its drilling program, including by focusing on high-return opportunities in the Golden Trend field and SCOOP play;

    its expectation that following the Contribution and assuming all notes are exchanged in the Exchange Offer and depending on the successful execution of Eagle Rock's upstream business objectives, Eagle Rock would be in a better position to grow its current distribution rate, improve its distribution coverage level and ultimately grow its distribution level through accretive upstream acquisitions;

    that Eagle Rock will continue to have exposure to the midstream business and will be able to share in the benefit of the anticipated synergies expected to be realized by Regency through Eagle Rock's continuing ownership position in Regency;

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    that Regency currently pays regular quarterly cash distributions on its common units (which was $0.465 per common unit at the time the Eagle Rock Board made its determination) and that, after the Contribution is completed, Eagle Rock will be entitled to receive cash distributions paid by Regency on its common units;

    information and discussions with Eagle Rock's senior management and financial advisors, as well as discussions between representatives of Eagle Rock and representatives of Regency, regarding Regency's business, assets, financial condition, results of operations, business plan and prospects;

    the results of Eagle Rock's strategic alternatives review process;

    the financial analysis of Evercore presented to the Eagle Rock Board at the meeting held on December 22, 2013 and the oral opinion of that firm delivered to the Eagle Rock Board on that date, which was confirmed by delivery of a written opinion dated December 23, 2013, that, as of such date and based upon and subject to the limitations and assumptions set forth therein, the consideration offered to Eagle Rock pursuant to the Contribution Agreement was fair, from a financial point of view, to Eagle Rock, as more fully described below under "The Contribution—Opinions of Eagle Rock's Financial Advisors Regarding the Contribution." The full text of the written opinion of Evercore, dated December 23, 2013, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex B to this proxy statement;

    the opinion of Citi, dated December 23, 2013, and related financial presentation to the Eagle Rock Board as to the fairness, from a financial point of view and as of the date of the opinion, to Eagle Rock of the aggregate consideration to be received by Eagle Rock in the Contribution, as more fully described below under "The Contribution—Opinions of Eagle Rock's Financial Advisors Regarding the Contribution—Opinion of Citi—Financial Advisor to Eagle Rock." The full text of Citi's written opinion dated December 23, 2013, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex C to this proxy statement;

    that completion of the Contribution requires the affirmative vote or consent of holders of a majority of the outstanding Eagle Rock common units;

    its evaluation of the likely time period necessary to consummate the Contribution;

    the recommendation of the Contribution by Eagle Rock's senior management;

    the support of the Contribution by the NGP Parties, collectively Eagle Rock's largest unitholder, as evidenced by their execution of the Voting and Support Agreement;

    the unanimous approval and recommendation by the Eagle Rock Conflicts Committee, and the granting by the Eagle Rock Conflicts Committee of "Special Approval" under the Partnership Agreement, in each case with respect to the Contribution, the Contribution Agreement, the Limited Waiver and the Voting and Support Agreement;

    the ability of the Eagle Rock Board under the Contribution Agreement to receive, consider and negotiate certain unsolicited alternative proposals even after signing and announcement of the Contribution Agreement;

    the right and ability of the Eagle Rock Board to change its recommendation to Eagle Rock unitholders that they vote to approve the Contribution Agreement and the Contribution, subject to the terms and conditions set forth in the Contribution Agreement;

    the right and ability of the Eagle Rock Board to not call, hold or convene a meeting of the unitholders if the Eagle Rock Board changes its recommendation in accordance with the Contribution Agreement;

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    the terms of the Contribution Agreement, including the representations, obligations and rights of the parties under the Contribution Agreement, the conditions to each party's obligation to complete the Contribution, the circumstances in which each party is permitted to terminate the Contribution Agreement and the related termination fee payable by Eagle Rock in the event of termination of the Contribution Agreement under specified circumstances; and

    that the Voting and Support Agreement terminates upon the earliest to occur of (1) the date of the termination of the Contribution Agreement, (2) a change in recommendation by the Eagle Rock Board under the Contribution Agreement, (3) the consummation of the Contribution, (4) 5:00 p.m. Dallas time on July 31, 2014 and (5) the effective date of any waiver, amendment or other modification of the Contribution Agreement that materially reduces the consideration payable to Eagle Rock or is otherwise materially adverse to Eagle Rock's common unitholders.

        The Eagle Rock Board weighed the foregoing against a number of potentially negative factors, including:

    that following the Contribution, Eagle Rock's smaller scale and greater degree of commodity exposure as a pure-play upstream MLP could result in a higher cost of capital;

    that litigation could occur in connection with the Contribution or the Exchange Offer and that such litigation could lead to an injunction delaying or preventing the consummation of the Contribution or increase costs and result in a diversion of management focus;

    the risks and costs to Eagle Rock if the Contribution does not close, including the diversion of management and employee attention, potential employee attrition, the potential effects on business relationships and the advisor, accounting and other professional fees incurred;

    that there are restrictions on the conduct of Eagle Rock's business prior to the consummation of the Contribution, requiring Eagle Rock to conduct its business in all material respects only in the ordinary course, subject to specific limitations;

    that the Contribution might not be completed in a timely manner or at all due to a failure to receive necessary regulatory and other approvals, including under the HSR Act, or the failure to receive the approval of Eagle Rock's unitholders;

    that the consent solicitation in connection with the Exchange Offer is not successful, resulting in Eagle Rock continuing to be subject to certain existing covenants under its indenture, including the asset sales covenant, which would restrict Eagle Rock's use of the cash proceeds from the Contribution during the 360 days following the closing of the Contribution and require any excess proceeds following such 360-day period to be used to repurchase, pre-pay or redeem the existing Eagle Rock Notes on a pro rata basis;

    that if less than all Eagle Rock Notes are exchanged in the Exchange Offer, Eagle Rock will have greater interest expense and less free cash flow until it can grow its remaining upstream asset base further;

    that the purchase price could be reduced by (1) up to $132,500,000 as a result of certain losses actually incurred by Eagle Rock before the closing of the Contribution resulting from the breach of certain of the representations and warranties made by Eagle Rock in the Contribution Agreement and (2) the amount that working capital is more negative than negative $15 million;

    that because a portion of the consideration for the Contribution is a fixed number of Regency common units, (1) fluctuations in the market value of Regency common units during the pendency of the Contribution Agreement may affect the dollar value of the consideration received by Eagle Rock when the Contribution is completed, (2) following closing, cash flows of Eagle Rock will be partially dependent on the cash flows and distribution policies of Regency

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      and (3) the value of the Regency common units is subject to the same risks disclosed by Regency in its public filings, with respect to ownership and operation of its business; and

    that the consummation of the Contribution would result in the recognition of gain by certain unitholders for United States federal income tax purposes.

        The foregoing discussion of the information and factors considered by the Eagle Rock Board includes the material factors considered by Eagle Rock Board. In view of the variety of factors considered in connection with its evaluation of the Contribution, the Eagle Rock Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weight to different factors. The Eagle Rock Board approved and recommends the Contribution Agreement and the Contribution based upon the totality of the information presented to and considered by it.

        The Eagle Rock Board unanimously recommends that the Eagle Rock unitholders vote "FOR" the proposal to approve the Contribution Agreement and the Contribution at the Eagle Rock special meeting.


Opinions of Eagle Rock's Financial Advisors Regarding the Contribution

    Opinion of Evercore—Financial Advisor to the Eagle Rock Board

        On December 23, 2013, Evercore delivered its oral opinion to the Eagle Rock Board, which opinion was subsequently confirmed by delivery of a written opinion dated December 23, 2013, to the effect that, as of such date and based upon and subject to assumptions made, matters considered and limitations on the scope of review undertaken by Evercore as set forth in its opinion, the Contribution in exchange for (1) $720,000,000, consisting of cash and Regency common units, (2) the assumption by Regency of the Eagle Rock Notes validly tendered for exchange pursuant to the Exchange Offer and (3) if less than all of the Eagle Rock Notes are so tendered in the Exchange Offer, the payment by Regency to Eagle Rock of a dollar amount equal to 110% of the difference between $550,000,000 and the face value of the Eagle Rock Notes so tendered (collectively, for purposes of the analyses described below, the "Consideration") was fair, from a financial point of view, to Eagle Rock.

        The full text of the written opinion of Evercore, dated December 23, 2013, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement. You are urged to read Evercore's opinion carefully and in its entirety. Evercore's opinion was addressed to, and provided for the information and benefit of, the Eagle Rock Board (in its capacity as such), in connection with its evaluation of the Contribution and addresses only the fairness to Eagle Rock, from a financial point of view, of the Consideration to be received by Eagle Rock in connection with the Contribution. Evercore's opinion should not be construed as creating any fiduciary duty on Evercore's part to Eagle Rock, did not address any other aspect of the Contribution and was not intended to be, and did not constitute a recommendation to the Eagle Rock Board, any holder of Eagle Rock common units or any other persons in respect of the Contribution. Evercore's opinion did not address the relative merits of the Contribution as compared to other business or financial strategies that might be available to Eagle Rock, nor does it address the underlying business decision of Eagle Rock to engage in the Contribution. The summary of Evercore's opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex B.

        In connection with rendering its opinion, Evercore, among other things:

    reviewed certain publicly-available business and financial information relating to Eagle Rock and Regency that Evercore deemed to be relevant, including publicly-available research analyst estimates;

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    reviewed certain non-public projected financial and operating data relating to the Midstream Entities and Eagle Rock and Regency prepared and furnished to Evercore by senior management of Eagle Rock and Regency, respectively;

    discussed the past and current operations, financial projections and current financial condition of the Midstream Entities and Eagle Rock and Regency with senior management of Eagle Rock and Regency, respectively, including senior management's views of the risks and uncertainties of achieving such projections;

    reviewed certain historical transactions that Evercore deemed relevant;

    compared the financial and operating performance of Eagle Rock and Regency and certain of their market trading metrics with those of certain other publicly-traded entities that Evercore deemed relevant;

    reviewed the Contribution Agreement; and

    performed such other analyses and examinations and considered such other factors that Evercore deemed appropriate.

        For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of the accuracy and completeness of all of the information publicly-available, and all of the information supplied or otherwise made available to, discussed with or reviewed by Evercore, and Evercore assumed no liability therefor. With respect to the projected financial and operating data relating to the Midstream Entities, Eagle Rock and Regency, Evercore assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the respective senior managements of Eagle Rock and Regency as to the future financial performance of the Midstream Entities, Eagle Rock and Regency, as applicable, under the assumptions stated therein. Evercore expressed no view as to the projected financial and operating data or any judgments, estimates or assumptions on which they were based. Evercore relied, at the direction of the Eagle Rock Board, without independent verification, upon the assessments of the senior management of Eagle Rock as to the future financial and operating performance of Eagle Rock and Regency and Evercore assumed that the combined organization will realize the synergies and benefits that it expects to realize from the Contribution.

        For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Contribution Agreement (in the draft reviewed by Evercore) were true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the Contribution Agreement and that all conditions to the consummation of the Contribution would be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Contribution would be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on Eagle Rock or Regency or the consummation of the Contribution or materially reduce the benefits of the Contribution to Eagle Rock or Regency. Evercore assumed that the final versions of all documents reviewed by Evercore in draft form conform in all material respects to the drafts reviewed by Evercore.

        Evercore did not make nor assume any responsibility for making any independent valuation or appraisal of the assets or liabilities of the Midstream Entities, Eagle Rock or Regency, and Evercore was not furnished with any such appraisals, nor did Evercore evaluate the solvency or fair value of the Midstream Entities, Eagle Rock or Regency under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore's opinion was necessarily based upon information made available to it as of the date of its opinion and financial, economic, monetary, market, regulatory and other conditions and circumstances as they existed and as could be evaluated on the date of Evercore's

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opinion. It should be understood that subsequent developments may affect Evercore's opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.

        Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness of the Consideration, from a financial point of view, as of the date of Evercore's opinion, to Eagle Rock. Evercore did not express any view on, and its opinion did not address, the fairness of the Contribution to, or any Consideration received in connection therewith by, the holders of Eagle Rock common units or any other securities, or any creditors or other constituencies, of Eagle Rock, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Eagle Rock or any of the other parties to the Contribution Agreement, or any class of such persons, whether relative to the Consideration or otherwise. Evercore assumed that any modification to the structure of the Contribution would not vary in any respect material to its analysis. Evercore's opinion did not address the relative merits of the Contribution as compared to other business or financial strategies that might be available to Eagle Rock, nor did it address the underlying business decision of Eagle Rock to engage in the Contribution. Evercore's opinion did not constitute a recommendation to the Eagle Rock Board, any holder of Eagle Rock common units or to any other persons in respect of the Contribution. Evercore expressed no opinion as to the price at which Eagle Rock common units or the Regency common units will trade at any time. Evercore's opinion noted that Evercore is not a legal, regulatory, accounting or tax expert and Evercore assumed the accuracy and completeness of assessments by the senior management of Eagle Rock and their advisors with respect to legal, regulatory, accounting and tax matters.

        Except as described above, the Eagle Rock Board imposed no other restrictions or limitations on Evercore with respect to the investigations made or the procedures followed by Evercore in rendering its opinion. Evercore's opinion was only one of many factors considered by the Eagle Rock Board in its evaluation of the Contribution and should not be viewed as determinative of the views of the Eagle Rock Board with respect to the Contribution or the Consideration. Set forth below is a summary of the material financial analyses reviewed by Evercore on December 22, 2013 in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before December 22, 2013, and is not necessarily indicative of current market conditions.

Regency Analysis

        Evercore performed a series of analyses to derive an indicative valuation range for the equity consideration. In its analysis, Evercore assumed an aggregate value of $1,070 million of the Consideration consisting of cash and the retirement of the Eagle Rock Notes subject to the Exchange Offer. The equity consideration will consist of 8,245,859 Regency common units, representing $200,000,000 divided by the ten trading day volume-weighted average price ("VWAP") per Regency common unit prior to the date of the Contribution Agreement. Evercore derived an indicative valuation range for the equity consideration based in part on financial projections for Regency provided by management of Regency (the "Regency Projections"). Eagle Rock and Evercore determined that the information related to the Regency Projections which was provided to Evercore did not include any information which materially deviated from publicly-available business and financial information relating to Regency.

Discounted Cash Flow Analysis

        Evercore performed an indicative discounted cash flow analysis of Regency to derive an implied value range for the equity consideration based on the implied present value of (1) Regency's projected

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cash flows and (2) the projected standalone distributions to be received by the holders of Regency common units, utilizing the Regency Projections.

Discounted Cash Flow Analysis—Regency Projected Cash Flows

        With respect to projected cash flows, Evercore calculated the implied value range for the equity consideration by utilizing a range of discount rates with a mid-point equal to the Regency's weighted average cost of capital ("WACC"), as estimated by Evercore based on the capital asset pricing model ("CAPM"), Regency's projected unlevered free cash flows for the fiscal years 2014 through 2018 and terminal values as of December 31, 2018, based on a range of EBITDA exit multiples as well as perpetuity growth rates. Evercore assumed a range of discount rates of 7.0% to 8.0%, a range of EBITDA exit multiples of 9.0x to 11.0x and a range of perpetuity growth rates of 1.5% to 2.5%.

        The discounted cash flow analysis based on the implied present value of Regency's projected cash flows indicated ranges of the value of the equity consideration of $216.3 million to $371.4 million and aggregate Consideration of $1,286.3 million to $1,441.4 million, as compared to the ranges of the implied value of the equity consideration of $175.0 million to $225.0 million and aggregate Consideration of $1,245.0 million to $1,295.0 million.

Discounted Cash Flow Analysis—Distribution per Regency Common Unit

        With respect to projected distributions, Evercore calculated the implied per unit value range for the equity consideration by utilizing a range of discount rates with mid-points equal to Regency's equity cost of capital, as estimated by Evercore based on: (1) CAPM and (2) the sum of the current distribution yield and expected growth in distributions per Wall Street Research estimates for a selected group of publicly-traded natural gas gathering and processing MLPs that Evercore deemed comparable to Regency based on their demonstration of characteristics similar to those of Regency. Evercore noted that none of the selected publicly-traded MLPs is identical or directly comparable to Regency, Regency's projected distribution per Regency common unit for the fiscal years 2014 through 2018, and terminal values as of December 31, 2018, based on a range of terminal exit yields. Evercore applied terminal exit yields ranging from 6.50% to 8.75% based on the range of distribution yields for Regency common units for the 12-month period ended December 20, 2013 of 6.32% to 8.82% and equity discount rates of 9.0% to 10.0% (derived from CAPM) and 13.0% to 14.0% (derived based on the sum of the current distribution yield and projected growth in distributions for the selected publicly-traded MLPs).

        The discounted cash flow analysis based on the standalone distributions to be received by the holders of Regency common units indicated ranges of the value of the equity consideration of $182.7 million to $271.1 million and aggregate Consideration of $1,252.7 million to $1,341.1 million, as compared to the ranges of the implied value of the equity consideration of $175.0 million to $225.0 million and aggregate Consideration of $1,245.0 million to $1,295.0 million, respectively.

Precedent M&A Transaction Analysis

        Evercore reviewed and compared implied data for selected transactions which occurred since February 2010 involving target companies with natural gas gathering and processing assets that Evercore deemed to have certain characteristics that are similar to those of Regency, although Evercore noted that none of the selected transactions or the selected companies that participated in the selected transactions were directly comparable to the Contribution or to Regency. Multiples for the selected transactions were based on publicly-available information.

        Evercore reviewed the historical EBITDA multiples paid in the selected transactions and derived a range of relevant implied multiples of enterprise value ("EV") to EBITDA of 9.0x to 11.0x. The minimum, maximum, mean and median of the selected transactions were 5.7x, 28.4x, 11.2x and 9.5x.

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Evercore then applied this range of selected multiples to estimated 2014 and 2015 EBITDA for Regency in accordance with the Regency Projections, applied a discount rate of 7.5% to the resulting value, and subtracted the discounted value of the growth capital expenditures between January 1, 2014 and December 31, 2014 and between January 1, 2014 and December 31, 2015, respectively, at a 7.5% discount rate. This analysis indicated ranges of the value of the equity consideration of $86.9 million to $148.8 million and aggregate Consideration of $1,156.9 million to $1,218.8 million, as compared to the ranges of the implied value of the equity consideration of $175.0 million to $225.0 million and aggregate Consideration of $1,245.0 million to $1,295.0 million.

Peer Group Trading Analysis

        In order to assess how the public market values equity units of similar publicly-traded natural gas gathering and processing MLPs, Evercore reviewed and compared specific financial and operating data relating to Regency to that of a group of selected MLPs that Evercore deemed to have certain characteristics that are similar to those of Regency. Evercore noted, however, that none of the selected publicly-traded MLPs is identical or directly comparable to Regency.

        As part of its analysis, Evercore calculated and analyzed the ratios of EV to estimated 2014 and 2015 EBITDA for the selected publicly-traded MLPs and the projected growth in EBITDA for each selected MLP between 2014 and 2015. Evercore calculated all multiples based on closing unit prices as of December 20, 2013 for each respective MLP.

        The publicly-traded partnerships that Evercore deemed to have certain characteristics similar to those of Regency were the following:

    Access Midstream Partners, L.P.

    American Midstream Partners, LP

    Atlas Pipeline Partners, L.P.

    Crestwood Midstream Partners LP

    Crosstex Energy, L.P.

    DCP Midstream Partners, LP

    MarkWest Energy Partners, L.P.

    Marlin Midstream Partners, LP

    Midcoast Energy Partners, L.P.

    Southcross Energy Partners, L.P.

    Summit Midstream Partners, LP

    Tallgrass Energy Partners, LP

    Targa Resources Partners LP

    Western Gas Partners, LP

        The financial and operating data for the selected publicly-traded MLPs were based on publicly-available filings and financial projections provided by Wall Street equity research. Regency's projected financial metrics for 2014 and 2015 and related financial forecasts were provided by Regency's management. The minimum, maximum, mean and median multiples of EV to EBITDA for the selected publicly-traded MLPs were 9.1x, 15.6x, 12.5x and 12.9x, respectively for 2014 and 7.3x, 12.2x, 9.6x and 9.7x, respectively, for 2015. Based on the resulting range of multiples, Regency's projected growth in EBITDA between 2014 and 2015 and that of each of the selected MLPs and certain other

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considerations related to the specific characteristics of the comparable MLPs, Evercore deemed a range of 10.5x to 13.0x for 2014 and 9.0x to 10.5x for 2015 to be relevant.

        Evercore then applied the relevant range of selected multiples to the corresponding financial data of Regency. This analysis indicated ranges of the value of the equity consideration of $179.1 million to $251.4 million and aggregate Consideration of $1,249.1 million to $1,321.4 million, as compared to the ranges of the implied value of the equity consideration of $175.0 million to $225.0 million and aggregate Consideration of $1,245.0 million to $1,295.0 million.

Wall Street Research Price Targets

        Evercore analyzed Wall Street equity research analyst estimates of the potential future value (commonly referred to as price targets) of the Regency common units based on publicly-available equity research published on Regency. These targets reflect each analyst's estimate of the future public market trading price of the Regency common units and are not discounted to reflect present values. Evercore noted that the range of undiscounted equity analyst price targets of the Regency common units published from October 23, 2013 to December 11, 2013 ranged from $26.00 to $33.00 per Regency common unit.

        Evercore then discounted the relevant range of price targets at 9.0% to 10.0% based on CAPM and 13.0% to 14.0% based on the sum of the current distribution yield and projected growth in distributions for the selected publicly-traded MLPs. This analysis indicated ranges of the value of the equity consideration of $188.1 million to $249.7 million and aggregate Consideration of $1,258.1 million to $1,319.7 million, as compared to the ranges of the implied value of the equity consideration of $175.0 million to $225.0 million and aggregate Consideration of $1,245.0 million to $1,295.0 million, respectively. The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the Regency common units and these estimates are subject to uncertainties, including the future financial performance of Regency and future market conditions.

Analysis of the Midstream Entities

        Evercore performed a series of analyses to derive an indicative valuation range for the Midstream Entities and compared each one of the resulting implied value ranges to the implied value of the aggregate Consideration, as derived by Evercore based on (1) the value of the cash consideration to be received by Eagle Rock; (2) the value of the face amount of the Eagle Rock Notes to be exchanged and (3) a selected range of values of the equity consideration to be received as part of the Consideration, which selected range was determined by Evercore based on its knowledge of Regency and its analysis described above under "Regency Analysis". Evercore performed its analyses to derive an indicative valuation range for the Midstream Entities using financial projections of Eagle Rock provided by senior management of Eagle Rock and described in the section "—Financial Projections Provided to the Advisors" (the "Eagle Rock Projections"). Eagle Rock and Evercore determined that the information related to the Eagle Rock Projections which was provided to Evercore did not include any information which materially deviated from publicly-available business and financial information relating to Eagle Rock.

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Discounted Cash Flow Analysis

        Evercore performed an indicative discounted cash flow analysis of the Midstream Entities to derive an implied value range for the Midstream Entities based on the implied present value of the projected cash flows of the Midstream Entities utilizing the Eagle Rock Projections.

        With respect to projected cash flows of the Midstream Entities, Evercore calculated the implied value range of the Midstream Entities by utilizing a range of discount rates with a mid-point equal to the Midstream Entities' WACC, as estimated by Evercore based on CAPM, the Midstream Entities' projected unlevered free cash flows for the calendar years 2014 through 2018, and terminal values as of December 31, 2018, based on a range of EBITDA exit multiples as well as perpetuity growth rates. For its analysis, Evercore assumed a range of discount rates of 8.5% to 9.5%, a range of EBITDA multiples of 9.0x to 11.0x and a range of perpetuity growth rates of 1.50% to 2.50%.

        The discounted cash flow analysis based on the implied present value of the Midstream Entities' projected cash flows indicated a value of $897.1 million to $1,293.7 million, as compared to the implied value of the aggregate Consideration of $1,245.0 million to $1,295.0 million.

Precedent M&A Transaction Analysis

        Evercore reviewed and compared implied data for selected transactions which occurred since February 2010 involving target companies with assets that Evercore deemed to have certain characteristics that are similar to those of the Midstream Entities, although Evercore noted that none of the selected transactions or the selected companies that participated in the selected transactions were directly comparable to the Contribution or the Midstream Entities. Multiples for the selected transactions were based on publicly-available information.

Date
Announced
  Acquiror/Target (Seller)   Transaction
Value ($MM)
 

10/13

 

Crosstex Energy LP/Devon Energy Corporation

  $ 4,800.0  

10/13

 

Azure Midstream Holdings LLC/TGGT Holdings LLC (EXCO Resources Inc., BG Group plc)

    910.0  

10/13

 

Crestwood Midstream Partners LP/Arrow Midstream Holdings, LLC

    750.0  

08/13

 

ONEOK Partners, L.P./Sage Creek Processing Plant and Related Natural Gas and NGL Assets (Merit Energy Company)

    305.0  

08/13

 

Meritage Midstream Services II, LLC/Thunder Creek Gas Services, LLC (Devon Energy Corporation and PVR Partners, L.P.)

    NA  

07/13

 

EQT Midstream Partners, LP/Sunrise Pipeline, LLC (EQT Corporation)

    540.0  

06/13

 

Summit Midstream Partners, LP/Sherwood Gathering and Compression System (MarkWest Energy Partners, L.P.)

    210.0  

06/13

 

Summit Midstream Partners, LP/Bison Midstream, LLC (Summit Midstream Partners, LLC)

    250.0  

05/13

 

MarkWest Energy Partners, L.P./Granite Wash Gathering and Processing Assets (Chesapeake Energy Corporation)

    245.0  

05/13

 

SemGroup Corporation/Mid-America Gas Services, L.L.C. (Chesapeake Energy Corporation)

    300.0  

04/13

 

Atlas Pipeline Partners, L.P./TEAK Midstream, L.L.C. 

    1,000.0  

02/13

 

Regency Energy Partners LP/Southern Union Gathering Company, LLC (Southern Union Company)

    1,429.0  

02/13

 

Western Gas Partners, LP/33.75% Interest in Liberty and Rome Gas Gathering Systems (Anadarko Petroleum Corporation)

    490.0  

02/13

 

Western Gas Partners, LP/33.75% Interest in Larry's Creek, Seely and Warrensville Gas Gathering Systems (Chesapeake Energy Corporation)

    133.5  

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Date
Announced
  Acquiror/Target (Seller)   Transaction
Value ($MM)
 

02/13

 

DCP Midstream Partners LP/Additional 47.0% Interest in Eagle Ford Joint Venture and Additional Interest in the Goliad Plant (DCP Midstream LLC)

    856.0  

01/13

 

Summit Midstream Partners/Bear Tracker Energy, LLC

    513.0  

01/13

 

Crestwood Midstream Partners/65.0% Interest in Crestwood Marcellus Midstream LLC (Crestwood Holdings Partners LLC)

    258.0  

11/12

 

Targa Resources Partners LP/Saddle Butte Pipeline, LLC

    950.0  

11/12

 

Atlas Pipeline Partners, L.P./Cardinal Midstream L.L.C. 

    600.0  

08/12

 

Eagle Rock Energy Partners/Sunray and Hemphill processing plants and associated 2,500 mile gathering system (BP America Production Co.)

    227.5  

07/12

 

Crestwood Midstream Partners LP/West Johnson County Gathering and Processing Assets in the Barnett Shale (Devon Energy Corporation)

    90.0  

06/12

 

American Midstream Partners, LP/87.4% Interest in Chatom Processing and Fractionation Plant

    55.0  

06/12

 

CenterPoint Energy, Inc./50% Interest in Waskom Gas Processing and Other Gathering and Processing Assets (Martin Midstream Partners L.P.)

    275.0  

05/12

 

MarkWest Energy Partners, L.P./Keystone Midstream Services, LLC (Stonehenge Energy Resources, L.P., Rex Energy Corporation, Summit Discovery Resources II, LLC)

    512.0  

04/12

 

PennVirginia Resource Partners, L.P./Chief Gathering LLC

    1,252.5  

03/12

 

Williams Partners L.P./Caiman Eastern Midstream LLC

    2,500.0  

01/12

 

Western Gas Partners L.P./Red Desert Complex (Anadarko Petroleum Corporation)

    483.0  

12/11

 

Crestwood Midstream Partners LP/Antero Resources' Marcellus Shale Gathering Assets

    375.0  

10/11

 

Kinder Morgan Energy Partners, L.P./SouthTex Treaters

    155.0  

10/11

 

Crestwood Midstream Partners LP/Tristate Sabine, LLC (Energy Spectrum Capital and Zwolle Pipeline, LLC)

    73.0  

07/11

 

Western Gas Partners, LP/Bison Gas Treating Facility (Anadarko Petroleum Corporation)

    130.0  

06/11

 

Sable NGL LLC/Stanley Condensate Recovery Plant and Prairie Rose Pipeline Inc. (EOG Resources, Inc.)

    185.0  

05/11

 

Kinder Morgan Energy Partners, L.P./50% Interest in KinderHawk Field Services and 25% of Eagle Ford Midstream (Petrohawk Energy Corporation)

    920.0  

03/11

 

Anadarko Petroleum Corp/93% Interest in Wattenburg Processing Plant (BP plc)

    575.5  

02/11

 

Crestwood Midstream Partners/Gathering and Processing assets in the Fayetteville Shale and Granite Wash (Frontier Gas Services, LLC)

    338.0  

01/11

 

Western Gas Partners, LP/Fort Lupton Processing Plant and Related Gathering Systems in the DJ Basin (Encana Oil & Gas (USA)  Inc.)

    303.3  

12/10

 

Chesapeake Midstream Partners LP/Springridge Natural Gas Gathering System and Related Facilities in the Haynesville Shale

    500.0  

11/10

 

Williams Partners L.P./Marcellus Midstream Assets in Susquehanna County, Pennslyvania (Cabot Oil & Gas Corporation)

    150.0  

11/10

 

Chevron Corporation/49% Interest in Laurel Mountain Midstream in Marcellus (Atlas Pipeline Partners, LP)

    403.0  

11/10

 

ArcLight Capital Partners LLC/9.9% Equity Interest in Enogex (OGE Energy)

    183.0  

10/10

 

Williams Partners L.P./Gathering and Processing Assets in Colorado's Piceance Basin (Williams Companies, Inc.)

    782.0  

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Date
Announced
  Acquiror/Target (Seller)   Transaction
Value ($MM)
 

10/10

 

Cardinal Midstream, LLC/Gathering and Processing Assets in the Arkoma Woodford Shale in Eastern Oklahoma (Antero Resources,  LLC)

    268.0  

09/10

 

Targa Resources Partners LP/Venice Energy Services Company (Targa Resources, Inc.)

    167.5  

08/10

 

Targa Resources Partners LP/Versado Gas Processors, L.L.C. (Targa Resources, Inc.)

    230.0  

08/10

 

Regency Energy Partners, L.P./Zephyr Gas Services

    185.0  

08/10

 

Western Gas Partners, LP/Wattenberg Gathering System & Fort Lupton Processing Plant (Anadarko Petroleum Corporation)

    498.0  

07/10

 

Enbridge Energy Partners, L.P./Elk City Gathering and Processing System (Atlas Pipeline Partners, LP)

    686.1  

06/10

 

DCP Midstream, LLC/Liberty Gathering System and South Raywood Processing Plant (Ceritas Energy)

    79.0  

04/10

 

Regency Energy Partners LP/7% Interest in Haynesville Joint Venture Increasing its Total Interest to 49.99% (GE Energy Financial Services)

    92.1  

04/10

 

Kinder Morgan Energy Partners, L.P./50% interest in Haynesville Gathering & Treating Business (Petrohawk Energy)

    875.0  

04/10

 

Enterprise Products Partners, L.P./M2 Midstream LLC (Yorktown Partners)

    1,200.0  

03/10

 

Targa Resources Partners LP/Sand Hills, Coastal Straddles and Targa Gas Marketing (Targa Resources, Inc.)

    420.0  

02/10

 

Western Gas Partners, LP/Southwest Wyoming Gathering and Processing Assets (Anadarko Petroleum Corporation)

    254.4  

        Evercore reviewed the historical EBITDA multiples paid in the selected transactions and derived a range of relevant implied multiples of EV to EBITDA of 9.0x to 11.0x. The minimum, maximum, mean and median multiples of the selected transactions were 5.7x, 28.4x, 11.2x and 9.5x, respectively. Evercore applied the range of relevant implied EV to EBITDA multiples to estimated 2014 and 2015 EBITDA provided by Eagle Rock's senior management and described in the section "—Financial Projections Provided to the Advisors" for the Midstream Entities. Evercore then applied a discount rate of 9.0% to the resulting value and deducted the discounted 2014 growth capital expenditures and 2014 and 2015 growth capital expenditures using a discount rate of 9.0% from the discounted 2014 implied EV and 2015 implied EV, respectively. This analysis indicated implied EV ranges for the Midstream Entities of $891.7 to $1,208.0 as compared to the implied value of the aggregate Consideration of $1,245.0 million to $1,295.0 million.

Peer Group Trading Analysis

        In order to assess how the public market values equity units of similar publicly-traded natural gas gathering and processing MLPs, Evercore reviewed and compared specific financial and operating data relating to the Midstream Entities to that of a group of selected natural gas gathering and processing MLPs that Evercore deemed to have certain characteristics that are similar to those of the Midstream Entities. Evercore noted, however, that none of the selected publicly-traded MLPs is identical or directly comparable to the Midstream Entities as a whole.

        As part of its analysis, Evercore calculated and analyzed the ratios of EV to estimated 2014 and 2015 EBITDA for the selected natural gas gathering and processing MLPs and the projected growth in EBITDA for each selected MLP between 2014 and 2015. Evercore calculated all multiples based on closing unit prices as of December 20, 2013 for each respective natural gas gathering and processing MLP.

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        The natural gas gathering and processing MLPs that Evercore deemed to have certain characteristics similar to those of the Midstream Entities were the following:

    Access Midstream Partners, L.P.

    American Midstream Partners, LP

    Atlas Pipeline Partners, L.P.

    Crestwood Midstream Partners LP

    Crosstex Energy, L.P.

    DCP Midstream Partners, LP

    MarkWest Energy Partners, L.P.

    Marlin Midstream Partners, LP

    Midcoast Energy Partners, L.P.

    Regency Energy Partners LP

    Southcross Energy Partners, L.P.

    Summit Midstream Partners, LP

    Tallgrass Energy Partners, LP

    Targa Resources Partners LP

    Western Gas Partners, LP

        The financial and operating data for the selected publicly-traded MLPs were based on publicly-available filings and financial projections provided by Wall Street equity research. The Midstream Entities' projected financial metrics for 2014 and 2015 and related financial forecasts were provided by Eagle Rock's senior management. The minimum, maximum, mean and median multiples of EV to EBITDA for the selected natural gas gathering and processing MLPs were 9.1x, 15.6x, 12.5x and 12.9x, respectively, for 2014 and 7.3x, 12.2x, 9.7x and 9.8x, respectively, for 2015. Based on such multiples, the Midstream Entities' projected growth in EBITDA between 2014 and 2015 and certain other characteristics of the selected natural gas gathering and processing MLPs, Evercore deemed a range of 9.5x to 11.5x for 2014 and 8.5x to 10.0x for 2015 to be relevant.

        Evercore then applied the relevant range of selected multiples to the corresponding financial data of the Midstream Entities. This analysis indicated an implied EV range for the Midstream Entities of $1,088.4 million to $1,423.9 million as compared to the implied value of the aggregate Consideration of $1,245.0 million to $1,295.0 million.

Pro Forma Analysis

        Evercore performed a pro forma valuation analysis for the Contribution using the Eagle Rock Projections and Regency Projections.

Pro Forma Analysis of Eagle Rock

        The pro forma analysis of Eagle Rock utilized the Eagle Rock Projections.

        Evercore analyzed the pro forma impact of the Contribution on the 2014 through 2018 estimated distributable cash flow per Eagle Rock common unit and Net Debt/EBITDA ratio under scenarios in which 100% of outstanding Eagle Rock Notes are tendered for exchange in the Exchange Offer (the "100% Exchange Scenario") and in which 0% of outstanding Eagle Rock Notes are tendered for

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exchange in the Exchange Offer (the "0% Exchange Scenario"). Under both the 100% Exchange Scenario and the 0% Exchange Scenario, Evercore determined the distributable cash flow per Eagle Rock common unit and the Net Debt/EBITDA ratio assuming Eagle Rock senior management's assumed reinvestment of proceeds of the Contribution in upstream assets as well as assuming no proceeds of the Contribution are reinvested in upstream assets and a portion of such proceeds are used to repurchase Eagle Rock common units (the "No Reinvestment Case"). Evercore then compared the 2014 through 2018 estimated distributable cash flow per Eagle Rock common unit on a standalone basis to the 2014 through 2018 estimated distributable cash flow per Eagle Rock common unit on a pro forma basis, assuming (1) a 100% Exchange Scenario and Eagle Rock senior management assumptions for reinvestment of Contribution proceeds in upstream assets; (2) a 100% Exchange Scenario and no reinvestment of Contribution proceeds in upstream assets with $190.6 million of Contribution proceeds used to repurchase 31.8 million Eagle Rock common units in 2014; (3) a 0% Exchange Scenario and Eagle Rock senior management assumptions for reinvestment of Contribution proceeds in upstream assets and (4) a 0% Exchange Scenario and no reinvestment of Contribution proceeds in upstream assets with $294.5 million of Contribution proceeds used to repurchase 49.1 million Eagle Rock common units in 2014 and $47.9 million of Contribution proceeds used to repurchase 8.0 million Eagle Rock common units in 2015.

        Evercore's pro forma financial projections ("Pro Forma Eagle Rock Projections") utilized Eagle Rock Projections and incorporated the following additional assumptions:

    Transaction date of January 1, 2014;

    Eagle Rock utilizes cash proceeds from the Contribution to pay $20.0 million of transaction expenses, fund $11.5 million of accrued interest on the Eagle Rock Notes at closing, fund $10.0 million in swap cancellation expenses and repay outstanding borrowings on its revolving credit facility;

    Per Eagle Rock senior management, Eagle Rock utilizes up to $300.0 million of cash proceeds per year to invest in upstream assets on July 1, 2014 and July 1, 2015, each at 6.0x EBITDA, assuming annual maintenance capital expenditures equal to 25.0% of EBITDA;

    Per Eagle Rock senior management, Eagle Rock investment in upstream assets is further limited by a target leverage ratio of 3.0x Debt/EBITDA

    $3.0 million of general and administrative expense savings in each of 2014 through 2018;

    Debt requirements greater than 75.0% of pro forma revolver availability in 2016 through 2018 funded on a long-term basis at an 8.75% rate and a 1.5% gross spread;

    Initial distribution of $0.60 per Eagle Rock common unit;

    Eagle Rock does not reduce its initial distribution per Eagle Rock common unit and does not increase its distribution per Eagle Rock common unit until it reaches a target total distribution coverage ratio of 1.15x;

    Eagle Rock sells 50.0% of its Regency common units on January 1, 2015 and the remaining 50.0% on January 1, 2016 at an 8.0% all-in discount to the assumed then-current market price based on the projected then-current distribution and a Regency yield of 7.8% and uses the aggregate proceeds from both sales to reinvest in upstream assets on January 1, 2016 at 6.0x EBITDA, assuming annual maintenance capital expenditures equal to 25.0% of EBITDA; and

    Pro forma revolving credit facility availability of $781.8 million based on the estimated current borrowing base of Eagle Rock's upstream assets plus 60.0% of the additional acquired upstream assets' proved developed producing ("PDP") value, with PDP value for acquired upstream assets assumed to equal 90.0% of acquisition value.

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        Giving effect to the Contribution, Evercore's analysis indicated that the pro forma distributable cash flow per Eagle Rock common unit, utilizing the Pro Forma Eagle Rock Projections for the calendar years 2014, 2015, 2016, 2017 and 2018 and assuming reinvestment of Contribution proceeds in upstream assets, would be $0.72, $0.80, $0.90, $0.85 and $0.85, respectively, under the 100% Exchange Scenario, and $0.51, $0.64, $0.85, $0.88 and $0.89, respectively, under the 0% Exchange Scenario. Evercore's analysis also indicated that pro forma Net Debt/EBITDA, utilizing the Pro Forma Eagle Rock Projections for the calendar years 2014, 2015, 2016, 2017 and 2018, would be 3.05x, 2.84x, 3.02x, 3.03x and 3.00x, respectively, under the 100% Exchange Scenario, and 3.08x, 2.92x, 3.07x, 3.05x and 3.00x, respectively, under the 0% Exchange Scenario. In addition, relative to Eagle Rock's estimated distributable cash flow per Eagle Rock common unit, under the Pro Forma Eagle Rock Projections, the analysis indicated that the Contribution could be accretive in each of the years 2015 through 2018 under the 100% Exchange Scenario and accretive in each of the years 2016 through 2018 under the 0% Exchange Scenario.

        Giving effect to the Contribution, Evercore's analysis indicated that the pro forma distributable cash flow per Eagle Rock common unit, assuming no reinvestment in upstream assets for the calendar years 2014, 2015, 2016, 2017 and 2018, would be $0.71, $0.70, $0.65, $0.65 and $0.68, respectively, under the 100% Exchange Scenario, and $0.49, $0.58, $0.70, $0.70 and $0.72, respectively, under the 0% Exchange Scenario. Evercore's analysis also indicated that pro forma Net Debt/EBITDA, assuming no reinvestment in upstream assets for the calendar years 2014, 2015, 2016, 2017 and 2018, would be 2.68x, 2.83x, 3.01x, 3.04x and 3.00x, respectively, under the 100% Exchange Scenario, and 3.28x, 2.79x, 3.00x, 3.04x and 3.00x, respectively, under the 0% Exchange Scenario. In addition, relative to Eagle Rock's estimated distributable cash flow per Eagle Rock common unit, under the No Reinvestment Case, the analysis indicated that the Contribution could be accretive in each of 2015, 2017 and 2018 under the 100% Exchange Scenario and accretive in each of the years 2016 through 2018 under the 0% Exchange Scenario.

Pro Forma Analysis of Regency

        Evercore analyzed the pro forma impact of the Contribution on 2014 through 2018 estimated distributable cash flow per Regency common unit relative to the Regency Projections under the 100% Exchange Scenario and the 0% Exchange Scenario. Evercore then compared the 2014 through 2018 estimated distributable cash flow per Regency common unit on a standalone basis to the 2014 through 2018 estimated distributable cash flow per Regency common unit on a pro forma basis, in each case assuming a 100% Exchange Scenario and 0% Exchange Scenario and utilizing the Regency Projections.

        Giving effect to the Contribution, Evercore's analysis indicated that the pro forma distributable cash flow per Regency common unit for the calendar years 2014, 2015, 2016, 2017 and 2018 would be $2.03, $2.14, $2.36, $2.45 and $2.56, respectively, under the 100% Exchange Scenario, and $2.05, $2.14, $2.36, $2.44 and $2.56, respectively, under the 0% Exchange Scenario. In addition, relative to Regency's estimated distributable cash flow per Regency common unit, the pro forma analysis indicated that the Contribution could be accretive in each of the years 2014 through 2016 under both the 100% Exchange Scenario and the 0% Exchange Scenario and in 2017 under the 100% Exchange Scenario.

General

        The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Evercore. In connection with the review of the Contribution by the Eagle Rock Board, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore's opinion. In arriving at its fairness

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determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. In addition, Evercore may have considered various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should therefore not be taken to be Evercore's view of the value of Eagle Rock, the Midstream Entities or Regency. No entity used in the above analyses as a comparison is directly comparable to the Midstream Entities or Regency, and no precedent transaction used is directly comparable to the Contribution. Further, Evercore's analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, MLPs, MLP general partners or transactions used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Eagle Rock, the Midstream Entities and Regency.

        Evercore prepared these analyses for the purpose of providing an opinion to the Eagle Rock Board as to the fairness of the Consideration, from a financial point of view as of the date of Evercore's opinion, to Eagle Rock. These analyses do not purport to be appraisals or necessarily to reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore's analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates. The issuance of the opinion was approved by an opinion committee of Evercore.

        Eagle Rock has agreed to pay to Evercore an opinion fee of $1,500,000 which became payable upon delivery of Evercore's opinion to the Eagle Rock Board (regardless of the conclusion reached therein) and a success fee in an amount equal to 0.3825% of the total transaction value, as calculated in Evercore's engagement letter, which will be paid upon consummation of the Contribution. The opinion fee is fully creditable against any success fee payable upon the consummation of the Contribution. Eagle Rock did not pay Evercore a monthly retainer fee but has agreed to reimburse Evercore for its reasonable out-of-pocket third-party expenses incurred in connection with its engagement and has agreed to indemnify Evercore and its members, partners, officers, directors, advisors, representatives, employees, agents, affiliates or controlling persons, if any, against certain liabilities and expenses arising out of or in connection with Evercore's engagement.

        Evercore and its affiliates engage in a wide range of activities for their own accounts and the accounts of customers. In connection with these businesses or otherwise, Evercore and its affiliates and/or their respective employees, as well as investment funds in which any of them may have a financial interest, may at any time, directly or indirectly, hold long or short positions and may trade or otherwise effect transactions for their own accounts or the accounts of customers, in debt or equity securities, senior loans and/or derivative products relating to Eagle Rock, Regency and their respective affiliates, for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or instruments.

        In 2012 and 2013, Evercore provided financial advisory services to Regency and its affiliates with respect to matters unrelated to the Contribution. Evercore may provide financial or other services to Eagle Rock, Regency or any of their respective affiliates in the future and in connection with any such services Evercore may receive compensation.

        The Eagle Rock Board engaged Evercore to act as its financial advisor based on its qualifications, experience and reputation. Evercore is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses in connection with transactions and acquisitions,

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leveraged buyouts, competitive biddings, private placements and valuations for corporate and other purposes.

    Opinion of Citi—Financial Advisor to Eagle Rock

        Eagle Rock has retained Citi as its financial advisor in connection with the Contribution. In connection with this engagement, Eagle Rock requested that Citi evaluate the fairness, from a financial point of view, to Eagle Rock of the aggregate consideration to be received by Eagle Rock in the Contribution. On December 23, 2013, at a meeting of the Eagle Rock Board held to evaluate the Contribution, Citi delivered to the Eagle Rock Board an oral opinion, confirmed by delivery of a written opinion dated December 23, 2013, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations and qualifications described in its opinion, the aggregate consideration to be received by Eagle Rock in the Contribution was fair, from a financial point of view, to Eagle Rock.

        The full text of Citi's written opinion, dated December 23, 2013, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached as Annex C to this proxy statement and is incorporated herein by reference. The description of Citi's opinion set forth below is qualified in its entirety by reference to the full text of Citi's opinion. Citi's financial advisory services and opinion were provided for the information of the Eagle Rock Board (in its capacity as such acting on behalf of Eagle Rock) in connection with its evaluation of the aggregate consideration from a financial point of view to Eagle Rock and did not address any other aspects or implications of the Contribution or related transactions. Citi was not requested to consider, and its opinion did not address, the underlying business decision of Eagle Rock to effect the Contribution or related transactions, the relative merits of the Contribution or related transactions as compared to any alternative business strategies or opportunities that might exist for Eagle Rock or the effect of any other transaction in which Eagle Rock might engage or consider. Under the terms of its engagement, Citi has acted as an independent contractor, not as an agent or fiduciary. Citi's opinion is not intended to be and does not constitute a recommendation as to how any unitholder should vote or act on any matters relating to the Contribution, any related transaction or otherwise.

        In arriving at its opinion, Citi:

    reviewed an execution version, provided to Citi on December 23, 2013, of the Contribution Agreement;

    held discussions with certain senior officers, directors and other representatives and advisors of Eagle Rock concerning the midstream business and its operations and prospects and with certain senior officers and other representatives and advisors of Regency concerning the businesses, operations and prospects of Regency;

    reviewed certain publicly available business and financial information relating to the midstream business as well as certain other business and financial information, including financial forecasts and other information and data, provided to or discussed with Citi by the senior management of Eagle Rock;

    reviewed the financial terms of the Contribution as set forth in the Contribution Agreement in relation to, among other things, current and historical market prices and trading volumes of Eagle Rock common units and Regency common units, the financial condition and historical and projected cash flow and other operating data of the midstream business, and the capitalization of Eagle Rock;

    considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the Contribution;

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    analyzed certain financial, stock market and other publicly-available information relating to the businesses of other companies whose operations Citi considered relevant in evaluating those of the midstream business;

    evaluated certain potential pro forma financial effects of the Contribution on Eagle Rock utilizing financial forecasts and other information and data provided to or discussed with Citi by the senior managements of Eagle Rock and Regency; and

    conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion.

        In connection with Citi's engagement and at the direction of Eagle Rock, Citi was requested to approach, and Citi held discussions with, selected third parties to solicit indications of interest in the possible acquisition of all or a part of Eagle Rock. In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the managements of Eagle Rock and Regency that they were not aware of any relevant information that was omitted or that remained undisclosed to Citi. With respect to the financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Citi relating to the midstream business, and financial forecasts and other information and data relating to Regency utilized in Citi's review of the potential pro forma financial effects of the Contribution, Citi was advised by the managements of Eagle Rock and Regency, as the case may be, and assumed, with Eagle Rock's consent, that they were reasonably prepared on bases reflecting the best currently available estimates and judgments as to the oil and gas reserves and future financial performance of the midstream business, the potential pro forma financial effects of the Contribution, the potential strategic implications and financial and operational benefits anticipated by the management of Eagle Rock to result from the Contribution and the other matters covered thereby. Citi assumed, with Eagle Rock's consent, that the financial results (including with respect to certain planned acquisitions contemplated to be undertaken by Eagle Rock following consummation of the Contribution and the potential strategic implications and financial and operational benefits anticipated to result from the Contribution) reflected in such estimates, forecasts and other information and data will be realized in the amounts and at the times projected. Citi relied, at Eagle Rock's direction, upon the assessments of the management of Eagle Rock as to the potential impact on the midstream business of market trends and prospects of, and regulatory matters relating to, the oil, natural gas and natural gas liquids industry, including assumptions of the management of Eagle Rock as to future oil, natural gas and natural gas liquids commodity prices reflected in the financial forecasts and other information and data utilized in Citi's analyses, which prices are subject to significant volatility and which, if different than as assumed, could have a material impact on Citi's analyses or opinion. Citi assumed, with Eagle Rock's consent, that there would be no developments with respect to any such matters that would have an adverse effect on Eagle Rock (including the midstream business) or the Contribution (including the contemplated benefits of the Contribution) or that would otherwise be meaningful in any respect to Citi's analyses or opinions. Citi also assumed, with Eagle Rock's consent, that the value of the Eagle Rock Notes contemplated to be exchanged in connection with the Contribution in the Exchange Offer, would be equal to the face value thereof and that any adjustments to the aggregate consideration to be received by Eagle Rock in the Contribution would not in any respect be meaningful to Citi's analyses or opinion.

        Citi did not make or utilize an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Eagle Rock, Regency or any other entity and Citi did not make any physical inspection of the properties or assets of Eagle Rock, Regency or any other entity. Citi is not an expert in the evaluation of oil and gas reserves and expressed no view as to the reserve quantities, or the development or production (including, without limitation, as to the feasibility or timing thereof), of any oil and gas properties of Eagle Rock or any other entity. Citi assumed, with Eagle Rock's consent,

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that the Contribution and related transactions would be consummated in accordance with their respective terms and in compliance with all applicable laws and other requirements, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the Contribution and related transactions, no delay, limitation, restriction or condition, including any divestiture requirements, amendments or modifications, would be imposed that would have an adverse effect on Eagle Rock (including the midstream business), Regency, the Contribution (including the contemplated benefits thereof) or related transactions. Citi did not express any view or opinion as to the actual value of Regency common units when issued in the Contribution or the prices at which Regency common units or any other securities of Eagle Rock, Regency or any other entity would trade or otherwise be transferable at any time. Representatives of Eagle Rock advised Citi, and Citi further assumed, that the final terms of the Contribution Agreement would not vary materially from those set forth in the execution version Citi reviewed. Citi did not express any opinion with respect to accounting, tax, regulatory, legal or similar matters and it relied, with Eagle Rock's consent, upon the assessments of representatives of Eagle Rock as to such matters.

        Citi's opinion did not address any terms (other than the aggregate consideration to be received by Eagle Rock in the Contribution to the extent expressly specified in its opinion) or other aspects or implications of the Contribution or related transactions, including, without limitation, the form or structure of the Contribution or related transactions, the Exchange Offer or any voting agreement or other agreement, arrangement or understanding to be entered into in connection with or contemplated by the Contribution, any related transactions or otherwise. Citi expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the Contribution or related transactions, or any class of such persons, relative to the aggregate consideration or otherwise. Citi's opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date of its opinion. Citi expressed no opinion or view as to any potential effects of the volatility experienced by the credit, financial and stock markets on Eagle Rock, Regency or the Contribution (including the contemplated benefits thereof) or related transactions. The issuance of Citi's opinion was authorized by Citi's fairness opinion committee.

        The following is a summary of the material financial analyses presented to the Eagle Rock Board in connection with Citi's opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Citi's financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of such analyses. For purposes of the analyses described below, the term "aggregate consideration" refers to the total implied value of the consideration to be received by Eagle Rock in the Contribution of $1,270 million, calculated as (1) the $720,000,000 portion of the consideration payable in cash and in Regency common units and (2) $550,000,000 in a like-kind debt exchange for the Eagle Rock Notes in connection with the Exchange Offer (such aggregate consideration would be an amount of up to $1,325,000,000 if less than all such Eagle Rock Notes are exchanged).

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        Selected Public Companies Analysis.    Citi reviewed certain publicly-available financial and stock market information of the following seven selected companies which Citi in its professional judgment considered generally relevant for comparative purposes in evaluating Eagle Rock's midstream business as publicly-traded limited partnerships with assets or operations in the gathering and processing and transportation and storage sectors of the oil and gas industry, collectively referred to as the selected companies:

    Marlin Midstream Partners, LP

    Atlas Pipeline Partners, L.P.

    Summit Midstream Partners, LP

    Martin Midstream Partners L.P.

    Southcross Energy Partners, L.P.

    American Midstream Partners, LP

    Midcoast Energy Partners, L.P.

        Citi reviewed, among other things, enterprise values of the selected companies, calculated as equity values (including general partner interests) based on closing unit prices on December 20, 2013 plus total debt and non-controlling interests less cash, as a multiple of calendar year 2014 and calendar year 2015 estimated earnings before interest, taxes, depreciation and amortization, referred to as EBITDA. Citi also reviewed equity values of the selected companies, based on closing unit prices on December 20, 2013, as a multiple of calendar year 2014 and calendar year 2015 estimated distributable cash flow. The overall low to high calendar year 2014 and calendar year 2015 estimated EBITDA multiples observed for the selected companies were 9.4x to 12.6x (with a mean of 11.0x and median of 11.3x) and 6.7x to 9.8x (with a mean of 8.8x and median of 9.2x), respectively. The overall low to high calendar year 2014 and calendar year 2015 estimated distributable cash flow multiples observed for the selected companies were 8.5x to 14.5x (with a mean of 11.3x and median of 11.6x) and 9.2x to 12.8x (with a mean of 10.9x and median of 10.6x), respectively. Citi then applied a selected range of calendar year 2014 and calendar year 2015 estimated EBITDA multiples of 9.5x to 11.5x and 9.0x to 10.0x, respectively, and a selected range of calendar year 2014 and calendar year 2015 estimated distributable cash flow multiples of 9.0x to 12.0x and 9.0x to 12.0x, respectively, derived from the selected companies to corresponding data of the midstream business. Financial data of the selected companies were based on publicly-available research analysts' estimates, public filings and other publicly-available information. Financial data of the midstream business was based on internal financial forecasts and other estimates of the senior management of Eagle Rock. This analysis indicated the following approximate implied enterprise value reference range for the midstream business, as compared to the aggregate consideration:

Implied Enterprise Value
Reference Range
  Aggregate
Consideration
 
$1,125 - $1,325 million     $1,270 million
 

        Discounted Cash Flow Analysis.    Citi performed a discounted cash flow analysis of the midstream business by calculating the estimated net present value of the unlevered free cash flows that the midstream business was forecasted to generate during the calendar years ending December 31, 2014 through December 31, 2018. Citi calculated estimated terminal values for the midstream business by applying to the estimated EBITDA of the midstream business in calendar year 2018 a range of terminal value EBITDA multiples of 9.5x to 11.5x. The present values (as of December 31, 2013) of the cash flows and terminal values were then calculated using discount rates ranging from 9.3% to 10.7%. Financial data of the midstream business was based on internal financial forecasts and other estimates

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of the senior management of Eagle Rock. This analysis indicated the following approximate implied enterprise value reference range for the midstream business, as compared to the aggregate consideration:

Implied Enterprise Value
Reference Range
  Aggregate
Consideration
 
$1,021 - $1,247 million     $1,270 million
 

        Selected Precedent Transactions Analysis.    Using publicly-available information, Citi reviewed financial data relating to the following 23 selected transactions publicly announced from April 1, 2010 to October 21, 2013 which Citi in its professional judgment considered generally relevant for comparative purposes as transactions involving target companies with operations in the gathering and processing and transportation and storage sectors of the oil and gas industry, referred to as the selected transactions:

Announcement Date   Acquiror   Seller/Target
October 21, 2013  

Crosstex Energy,  Inc.

 

Devon Energy Corporation

October 10, 2013  

Crestwood Midstream Partners LP

 

Arrow Midstream Holdings LLC

April 16, 2013  

Atlas Pipeline Partners,  L.P.

 

TEAK Midstream, L.L.C.

March 15, 2013  

CenterPoint Energy,  Inc.

 

OGE/ArcLight Corp. / ArcLight Capital Partners, LLC

February 27, 2013  

Regency Energy Partners LP

 

Southern Union Gathering Co.

December 11, 2012  

Access Midstream Partners,  L.P.

 

Chesapeake Energy Corporation

December 3, 2012  

Atlas Pipeline Partners,  L.P.

 

Cardinal Midstream,  LLC

November 15, 2012  

Targa Resources Partners,  L.P.

 

Saddle Butte Pipeline,  LLC

August 20, 2012  

Tallgrass Energy Partners,  L.P.

 

Kinder Morgan Energy Partners,  L.P.

August 10, 2012  

Eagle Rock Energy Partners,  L.P.

 

BP America Production Company

May 21, 2012  

NGL Energy Partners,  L.P.

 

High Sierra Energy,  L.P.

May 7, 2012  

MarkWest Energy Partners,  L.P.

 

Keystone Midstream Services,  LLC

April 10, 2012  

Penn Virginia Resource Partners, L.P.

 

Chief E&D Holdings,  L.P.

March 19, 2012  

Williams Partners,  L.P.

 

Caiman Eastern Midstream,  LLC

February 27, 2012  

Crestwood Midstream Partners,  L.P.

 

Antero Resources Appalachian Corp.

December 12, 2011  

MarkWest Energy Partners,  L.P.

 

The Energy & Minerals Group

May 5, 2011  

Kinder Morgan Energy Partners,  L.P.

 

Petrohawk Energy Corp.

March 22, 2011  

Anadarko Petroleum Corp.

 

BP Plc

February 18, 2011  

Crestwood Midstream Partners,  L.P.

 

Frontier Gas Services,  LLC

January 18, 2011  

Western Gas Partners,  L.P.

 

Encana Oil & Gas,  Inc.

July 28, 2010  

Enbridge Energy Partners,  L.P.

 

Atlas Pipeline Partners,  L.P.

April 13, 2010  

Kinder Morgan Energy Partners,  L.P.

 

Petrohawk Energy Corp.

April 1, 2010  

Enterprise Products Partners,  L.P.

 

M2 Midstream,  LLC

        Citi reviewed, among other things, transaction values of the selected transactions, calculated as the purchase prices paid in such transactions, as a multiple of next 12 months estimated EBITDA. The overall low to high next 12 months estimated EBITDA multiples observed for the selected transactions were 8.2x to 41.7x. Citi then applied a selected range of next 12 months estimated EBITDA multiples of 9.0x to 11.5x derived from the selected transactions to the next 12 months (as of December 31, 2013) estimated EBITDA of the midstream business. Financial data of the selected transactions were based on publicly available research analysts' estimates, public filings and other publicly available information. Financial data of the midstream business was based on internal financial forecasts and other estimates of the senior management of Eagle Rock. This analysis indicated the following approximate implied

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enterprise value reference range for the midstream business, as compared to the aggregate consideration:

Implied Enterprise Value
Reference Range
  Aggregate
Consideration
 
$1,114 - $1,424 million     $1,270 million
 

        Other Information.    Citi also observed certain additional information that was not considered part of Citi's financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

    trading prices of Regency common units during the 52-week period ended December 20, 2013, which indicated such trading prices for Regency common units during such period of approximately $20.58 to $29.52 per unit;

    unit price targets for Regency as reflected in publicly-available Wall Street research analysts' reports, which indicated low to high unit price targets for Regency of $26.00 to $33.00 per unit;

    publicly-available financial and stock market information of Regency and the following eight selected companies in the gathering and processing and transportation and storage sectors of the oil and gas industry: (1) Access Midstream Partners, L.P., (2) Atlas Pipeline Partners, L.P., (3) Crestwood Midstream Partners LP, (4) DCP Midstream Partners, LP, (5) MarkWest Energy Partners, L.P., (6) Targa Resources Partners, L.P., (7) Western Gas Partners, L.P. and (8) Crosstex Energy, L.P., which reflected for these selected companies overall low to high calendar year 2014 and calendar year 2015 estimated EBITDA multiples of 11.3x to 22.0x (with a mean of 16.0x and median of 15.4x) and 9.8x to 19.1x (with a mean of 13.0x and median of 12.4x), respectively, and overall low to high calendar year 2014 and calendar year 2015 estimated distributable cash flow multiples of 12.3x to 19.8x (with a mean of 16.2x and median of 15.9x) and 12.1x to 18.3x (with a mean of 14.4x and median of 13.8x), respectively, as compared to Regency's calendar year 2014 and calendar year 2015 estimated EBITDA multiples of 11.3x and 9.8x, respectively, and calendar year 2014 and calendar year 2015 estimated distributable cash flow multiples of 11.4x and 10.6x, respectively; and

    potential pro forma financial effects of the Contribution on Eagle Rock's estimated cash distributions per unit in calendar year 2014 through calendar year 2018 based on internal financial forecasts and other estimates of the managements of Eagle Rock and Regency assuming a like-kind debt exchange for all outstanding Eagle Rock Notes in connection with the Exchange Offer and after giving effect, among other things, to potential synergies anticipated by the senior management of Eagle Rock to result from the Contribution and certain planned acquisitions contemplated to be undertaken by Eagle Rock following consummation of the Contribution, which indicated that the Contribution could be neutral to Eagle Rock's calendar year 2014 estimated cash distributions per unit and accretive to Eagle Rock's calendar year 2015 through calendar year 2018 estimated cash distributions per unit. The actual results achieved by the combined company may vary from forecasted results and the variations may be material.

    Miscellaneous

        In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described above. The summary of the analyses above is not a complete description of Citi's opinion or the analyses underlying, and factors considered in connection with, Citi's opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses undertaken by it and

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assessed as a whole, and Citi did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that the analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.

        In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Eagle Rock. No company, business or transaction reviewed is identical or directly comparable to the midstream business or the Contribution and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, business segments or transactions reviewed.

        The estimates contained in Citi's analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi's analyses are inherently subject to substantial uncertainty.

        Citi was not requested to, and it did not, recommend the specific consideration payable in the Contribution. The type and amount of consideration payable in the Contribution were determined through negotiations between Eagle Rock and Regency and the decision to enter into the Contribution Agreement was solely that of the Eagle Rock Board. Citi's opinion was only one of many factors considered by the Eagle Rock Board in its evaluation of the Contribution and should not be viewed as determinative of the views of the Eagle Rock Board or the management of Eagle Rock with respect to the Contribution or the aggregate consideration to be received by Eagle Rock in the Contribution.

        In connection with Citi's services as Eagle Rock's financial advisor, Eagle Rock has agreed to pay Citi an aggregate fee currently estimated to be approximately $2.0 million, of which $1.5 million was payable upon delivery of Citi's opinion and the balance of which is payable contingent upon completion of the Contribution. In addition, Eagle Rock has agreed to reimburse Citi for certain expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against liabilities, including liabilities under federal securities laws, arising from Citi's engagement.

        Citi and its affiliates in the past have provided, currently are providing and in the future may provide services to Eagle Rock, Regency and their respective affiliates unrelated to the Contribution, for which services Citi and its affiliates received and may receive compensation, including during the two-year period prior to the date of its opinion (1) having acted as bookrunner with respect to certain equity and debt offerings of Eagle Rock, (2) acting as a lender under an existing credit facility of Eagle Rock, (3) having acted as bookrunner or sole or joint bookrunner with respect to certain equity and debt offerings of Regency and its affiliates and (4) acting as a lender under certain credit facilities of Regency and its affiliates. In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of Eagle Rock, Regency and their respective affiliates for their own account or for the account of their customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with Eagle Rock, Regency and their respective affiliates.

        Eagle Rock selected Citi to act as its financial advisor in connection with the Contribution based on Citi's reputation, experience and familiarity with Eagle Rock and its business. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive

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bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.


Financial Projections Provided to the Advisors

Eagle Rock Projected Financial Information

        Eagle Rock does not, as a matter of course, generally publish its business plans and strategies or make external disclosures of its anticipated financial position or results of operations other than providing, from time to time, certain earnings guidance in its regular press releases and other investor materials. In connection with the evaluation of a possible transaction, Eagle Rock's management prepared certain nonpublic financial projections that were not intended for public disclosure, which projections are summarized below. These financial projections were prepared solely for purposes of evaluating a potential strategic transaction, and so were not prepared in the same manner as the financial guidance that Eagle Rock prepares for public disclosure.

        Eagle Rock unitholders are cautioned not to place undue reliance on the financial projections. The financial projections are not being included in this proxy statement for the purpose of influencing your decision whether to vote for the approval of the Contribution Agreement and the Contribution and should not be regarded as an indication that any of Eagle Rock, Regency or their respective affiliates, officers, employees, directors, partners, advisors or other representatives or any recipient of this information considered, or now considers, it to be necessarily predictive of actual future results, and the projected financial information should not be relied on as such. None of Eagle Rock, Regency or any of their respective affiliates, officers, employees, directors, partners, advisors or other representatives gives any assurance that actual results will not differ from the projected results, and no obligation is undertaken to update or otherwise revise or reconcile these internal financial projections to reflect circumstances existing, or changes in assumptions or outlook occurring, after the date the internal financial projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. Eagle Rock does not intend to update or otherwise revise the projected financial information. None of Eagle Rock, Regency or any of their respective affiliates, officers, employees, directors, partners, advisors or other representatives has made or makes any representation to any unitholder regarding Eagle Rock's ultimate performance compared to the information contained in these internal financial projections or that projected results will be achieved. Eagle Rock has made no representation to Regency in the Contribution Agreement or otherwise concerning the Eagle Rock Projections.

        The following table presents a summary of the Eagle Rock Projections. The unaudited prospective financial information set forth below does not include certain other financial projections provided to Regency and to the Eagle Rock Board prior to the time that the Eagle Rock Projections were provided to the Eagle Rock Board because such other financial projections (i) were based on information (including regarding commodity pricing and volumes) that was dated as of the time immediately prior to the execution of the Contribution Agreement, (ii) were not relied upon by the Eagle Rock Board or Eagle Rock's financial advisors in connection with the Contribution and (iii) are considered by Eagle Rock to not be material to Eagle Rock unitholders for the purpose of this proxy statement.

 
  2014E   2015E   2016E   2017E   2018E  

Midstream Adjusted EBITDA

  $ 123.8   $ 128.0   $ 134.0   $ 128.4   $ 130.7  

Midstream Unlevered Free Cash Flow

  $ 62.6   $ 68.5   $ 76.9   $ 71.3   $ 73.6  

        Projected Midstream Adjusted EBITDA, as prepared by Eagle Rock management and presented above, represents expected net operating income (revenues less cost of goods sold and operating expenses) plus depreciation, amortization and income taxes, if any, generated from the midstream assets plus the expected net midstream commodity derivative settlements, less expected general and

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administrative expenses allocated to the Midstream Business. Projected Midstream Unlevered Free Cash Flow represents Midstream Adjusted EBITDA less expected maintenance and growth capital expenditures. Midstream Adjusted EBITDA and Midstream Unlevered Free Cash Flow, as presented above, are non-GAAP financial measures. Eagle Rock provided this information to its financial advisors because Eagle Rock believed it could be useful in evaluating, on a prospective basis, Eagle Rock's potential operating performance and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Eagle Rock may not be comparable to similarly titled amounts used by other companies.

        The Eagle Rock Projections are subjective in many respects and thus subject to interpretation. While presented with numeric specificity, the Eagle Rock Projections reflect numerous estimates and assumptions made by Eagle Rock management with respect to industry performance and competition, general business, economic, market and financial conditions, commodity prices, demand for natural gas, natural gas liquids and oil, production growth, capacity utilization and additional matters specific to Eagle Rock's business, all of which are difficult to predict and many of which are beyond Eagle Rock's control. Other important factors that may cause actual results to be different from the Eagle Rock Projections include, but are not limited to, risks and uncertainties relating to Eagle Rock's business (including its ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, weather patterns, the regulatory environment, general business and economic conditions and other matters described under the section entitled "Cautionary Statement Concerning Forward-Looking Statements." As a result, there can be no assurance that the Eagle Rock Projections contained therein will be realized or that actual results will not be materially different than estimated in the Eagle Rock Projections, and it is likely that actual results will differ. The Eagle Rock Projections cover multiple years and, even to the extent such information may provide guidance as to management's view of possible future performance, such information by its nature becomes less predictive with each successive year. You are urged to review Eagle Rock's most recent SEC filings for a description of risk factors with respect to Eagle Rock's business. Please read "Cautionary Statement Concerning Forward-Looking Statements" and "Where You Can Find More Information."

        The Eagle Rock Projections were not prepared with a view toward complying with the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections or generally accepted accounting principles but, in the view of Eagle Rock's management, were prepared on a reasonable basis, and based on the assumptions underlying such Eagle Rock Projections, reflect the best currently available estimates and judgments of Eagle Rock's management. The Eagle Rock Projections were prepared by, and are the responsibility of Eagle Rock. Neither Eagle Rock's nor Regency's independent accountants, nor any other independent accountants, have compiled, examined or performed any procedures with respect to such projected financial information, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and they disclaim any association with, the Eagle Rock Projections. The reports of the independent registered public accounting firms incorporated by reference in this proxy statement relate to Eagle Rock's and Regency's historical financial information. Those reports do not extend to the Eagle Rock Projections and should not be read to do so.


Regulatory Clearances Required for the Contribution

        Eagle Rock, Regency and Regal have agreed to use their commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Contribution Agreement. These approvals include clearance under the HSR Act, the Sherman Act of 1890, as amended, the Clayton Act of 1914, as amended, and the Federal Trade Commission Act (together the "Antitrust Laws"), as well as approval from any government, or any authority, agency, regulatory body,

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listing agency or exchange, commission, court, official or other instrumentality of any government, of the United States of America, or any state, county, parish or city, or any other local or other political subdivision thereof (each, a "Governmental Authority"). On January 16, 2014, Eagle Rock and Regency filed the requisite notification and report forms under the HSR Act with the DOJ and the FTC. On February 27, 2014, the FTC issued the Second Request in connection with the proposed Contribution. A Second Request extends the waiting period under the HSR Act, during which the parties may not close the transaction until 30 days after each party certifies substantial compliance with the Second Request (or the waiting period is otherwise terminated by the FTC). Eagle Rock and Regency are working cooperatively with the FTC staff to respond to the Second Request in a timely manner.

        The terms of the Contribution Agreement require that each of Eagle Rock, Regency and Regal to supply as promptly as practicable any additional information requested by any Governmental Authority pursuant to the HSR Act or any other Antitrust Law and use commercially reasonable efforts to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act.

        Eagle Rock, Regency and Regal have agreed to use their commercially reasonable efforts to cooperate in all respects with each other in connection with any filing or submission with a Governmental Authority in connection with the transactions contemplated by the Contribution Agreement and in connection with any investigation or other inquiry by or before a Governmental Authority relating to the Contribution, including any proceeding initiated by a private person.

        Subject to the terms of the Contribution Agreement, Regency and Regal have agreed to take (including causing their subsidiaries to take) any and all steps and undertakings necessary to resolve any objections by Governmental Authorities asserted under Antitrust Laws with respect to the Contribution and related transactions, and to avoid or eliminate all impediments under Antitrust Laws that may be asserted by Governmental Authorities so as to enable to the Contribution to close as promptly as practicable and in any event no later than the July 31, 2014 (the "Outside Date"), including without limitation by means of:

    proposing, negotiating, committing to and effecting sales, divestitures or dispositions of businesses, assets, equity interests, product lines or properties of Regency, Regency's subsidiaries or the Midstream Entities or any equity interest in any joint venture held by Regency, Regency's subsidiaries or the Midstream Entities;

    creating, terminating or divesting relationships, ventures, contractual rights or obligations of Regency, Regency's subsidiaries or the Midstream Entities; and

    otherwise taking or committing to taking actions that would limit Regency's freedom of action, ownership or control with respect to, or its ability to retain or hold, directly or indirectly, any of the businesses, assets, equity interests, product lines or properties or any equity in any joint venture held by Regency, Regency's subsidiaries or the Midstream Entities;

in each case as may be required in order to obtain all approvals, consents, clearances, expirations or terminations of waiting periods, registrations, permits, authorizations and other confirmations required directly or indirectly under any Antitrust Law, or, in the alternative, to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any action or proceeding seeking to prohibit the Contribution or delay the closing of the Contribution beyond the Outside Date. However, Regency and Regal are not required to take any of the above actions to the extent such actions would require the divestiture of any assets of Regency, Regency's affiliates or related to Eagle Rock's midstream business that either individually or in the aggregate exceed $100,000,000.

        In addition, to assist Regency and Regal in complying with the foregoing obligations, Eagle Rock has agreed, and has agreed to cause the Midstream Entities to, enter into one or more agreements to

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be entered into prior to the closing of the Contribution requested by Regency with respect to any transaction to divest, hold separate or otherwise take any action limiting such entities' freedom of action, ownership or control with respect to, or their ability to retain or hold, directly or indirectly, any of the businesses, assets, equity interests, product lines or properties of such entities or any equity in any joint venture held by such entities (any such action, a "Divestiture Action"); provided, however, that:

    the consummation of the transactions provided for in any such agreement for a Divestiture Action (a "Divestiture Agreement") shall be conditioned upon the closing of the Contribution or the satisfaction of all of the conditions to the closing of the Contribution in a case where the closing would occur immediately following such Divestiture Action (and where Regency has irrevocably committed to effect the closing of the Contribution immediately following such Divestiture Action); and

    Regency and Regal must indemnify and hold harmless Eagle Rock and the Midstream Entities from all costs, expenses and liabilities incurred by Eagle Rock or the Midstream Entities arising from or relating to such Divestiture Agreement.

        Eagle Rock cannot assure you that all of the regulatory approvals will be obtained, and, if obtained, we cannot assure you as to the date of any approvals or the absence of any litigation challenging such approvals. Likewise, we cannot assure you that the Antitrust Division, the Federal Trade Commission or any state attorney general will not attempt to challenge the Contribution on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result.

        Eagle Rock, Regency and Regal are not aware of any material governmental approvals or actions that are required for completion of the Contribution other than those described above. Moreover, Eagle Rock cannot assure you, however, that other government agencies or private parties will not initiate actions to challenge the Contribution before or after it is completed. Any such challenge to the Contribution could result in a court order enjoining the Contribution or in restrictions or conditions that would have a material adverse effect on the midstream business following the Contribution if the Contribution is completed. It is presently contemplated that if any such additional governmental approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.


No Appraisal Rights

        Eagle Rock common unitholders do not have appraisal rights under the Partnership Agreement, the Contribution Agreement or Delaware or other applicable law.


Interests of Officers of Eagle Rock in the Contribution

        In considering the recommendation of the Eagle Rock Board that you vote to approve the Contribution Agreement and the Contribution, you should be aware that aside from their interests as unitholders of Eagle Rock, certain of Eagle Rock's officers, namely the Midstream Officers, have interests in the Contribution that are different from, or in addition to, those of other unitholders of Eagle Rock generally. The members of the Eagle Rock Board were aware of and considered these interests, among other matters, in evaluating and negotiating the Contribution Agreement and the Contribution, and in recommending to the unitholders of Eagle Rock that the Contribution Agreement be approved. Please read "The Contribution—Background of the Contribution" and "The Contribution—Recommendation of the Eagle Rock Board and Reasons for the Contribution." Eagle Rock's unitholders should take these interests into account in deciding whether to vote "FOR" the proposal to approve the Contribution Agreement and the Contribution. These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.

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    Treatment of Eagle Rock Restricted Unit Awards

        The Midstream Officers received letters (each, a "Letter Agreement") from Eagle Rock prior to the Contribution that will cause full accelerated vesting of any outstanding unvested restricted units granted under the Eagle Rock LTIP upon a Midstream Officer's termination without "Cause" or for "Good Reason" (each as defined in the Midstream Officer's restricted unit award agreement) following a "Change of Control" (as defined in the Midstream Officer's executive change of control agreement, which is described in more detail below). The Contribution qualifies as a Change of Control for purposes of the Letter Agreement.

        In addition, under the Contribution Agreement, any Midstream Officers that are hired by Regency and become transferred employees will have their unvested restricted unit awards replaced with a comparable award, as determined by Regency, under Regency's long-term incentive plan. It is not currently known which, if any, Midstream Officers will become transferred employees.

        As of the date of this filing, the Midstream Officers held the following numbers of outstanding Eagle Rock restricted units:

Name of Executive
  Number of
Outstanding
Unvested
Restricted
Units
 

Roger A. Fox

    152,000  

James L. Kincaid, Jr. 

    N/A  

Jeffrey D. Langemeier

    33,830  

Danny R. Schedule

    38,550  

Harold Gullung

    36,830  

Thomas W. Henderson, Jr. 

    30,040  

Todd A. Johnson

    28,485  

        For an estimate of the value that would be received by Mr. Fox, the only named executive officer of Eagle Rock who received a Letter Agreement, following accelerated vesting of his restricted unit award, please read "—Quantification of Potential Payments to Eagle Rock's Named Executive Officers in Connection with the Contribution."

    Potential Payments from Executive Change of Control Agreements

        Eagle Rock's executive officers are parties to executive change of control agreements with Eagle Rock Energy G&P LLC (each an "Executive COC Agreement"). Each Executive COC Agreement provides for severance payments and benefits upon a termination without "Cause" or resignation for "Good Reason" that occurs in connection with a "Change of Control" (each as defined below). However, the Executive COC Agreement for each Midstream Officer contains a unique definition of change of control, with an added trigger focused on a sale of the Midstream Entities. Because only the unique change of control definition within the Executive COC Agreements for the Midstream Officers (specifically, the added Midstream Entities sale trigger) will be triggered by the Contribution, the relevant portions of the Executive COC Agreements described below will focus on the potential severance and benefits that could become due in connection with a change of control for such Midstream Officers.

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        Under the Executive COC Agreements, if a change of control occurs and, within six months prior to or two years after the date of such change of control either (1) the executive officer's employment is terminated other than for Cause or (2) the executive officer terminates his employment for Good Reason (each of (1) and (2) constituting a "Qualifying Termination"), then each executive officer will receive the change of control severance payments and other benefits described below. The payments and benefits due to an executive upon a Qualifying Termination under the Executive COC Agreements are: (1) accrued but unpaid salary, earned but unpaid performance bonus for a completed fiscal year prior to the date of termination, reimbursement of eligible expenses incurred through the date of termination, and any employee benefits to which the executive may be entitled pursuant to the terms governing such benefits; (2) a pro-rata performance bonus for the calendar year of termination, payable in a lump sum within 60 days following the later of the change of control or the executive's date of termination; (3) a lump sum amount equal to 1.5 times (for Vice Presidents) or 2.5 times (for Senior Vice Presidents) the sum of the executive's base salary plus the officer's target performance bonus for the year in which the change of control occurs, payable within 60 days following the later of the change of control or the executive's date of termination; (4) continuation of medical and dental benefits for 18 months (for Vice Presidents) or 30 months (for Senior Vice Presidents) following the date of termination; and (5) reimbursement of the cost of outplacement services up to $30,000 incurred during the one year period beginning on the date of termination. Payment of these amounts is contingent upon an executive's execution and delivery and non-revocation of a general release of claims in Eagle Rock's favor.

        In the event the compensation committee of the Eagle Rock Board determines that Section 280G of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") applies to any compensation (including amounts payable under the Executive COC Agreements and the acceleration of vesting of equity awards) due to an executive officer in connection with a change of control and that such compensation, in the aggregate, if paid to the executive officer will more likely than not be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, that such compensation will either (1) be reduced so that the present value of the total compensation received by the executive officer is $1.00 less than the amount which would cause the officer to incur an excise tax under Section 4999, or (2) be paid to the executive officer in full, whichever produces the better net after tax position to the executive officer.

        For purposes of the Executive COC Agreements and restricted unit awards, the terms listed below are defined as follows:

            (1)   "Cause" means a determination made by 2/3 of the Eagle Rock Board that an individual (a) willfully and continually failed to substantially perform his duties, which continued for a period of 30 days after written notice thereof, or (b) willfully engaged in conduct that is demonstrably and materially injurious to Eagle Rock, in which case the individual shall be entitled to receive written notice of such conduct and shall have the opportunity to be heard by the Eagle Rock Board.

            (2)   "Change of Control" means (a) the acquisition by any person or group of 40% or more of either Eagle Rock's outstanding equity securities or the combined voting power of Eagle Rock's outstanding voting securities, subject to certain exceptions; (b) the acquisition by any person or group of 40% or more of the combined voting power of the then outstanding voting securities of Eagle Rock's general partner or Eagle Rock Energy G&P LLC, subject to certain exceptions; (c) Eagle Rock's limited partners approve a plan of complete liquidation; (d) a reorganization, merger or consolidation involving Eagle Rock or a sale of all or substantially all of Eagle Rock's assets, unless, following such event, ownership or effective control has not been sufficiently changed; (e) the current members of the Eagle Rock Board, and certain future members of the Eagle Rock Board who are appointed or elected other than through a contested election, cease for any reason to constitute at least a majority of the Eagle Rock Board; or (f) solely in the case of

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    the Midstream Officers, a sale of all or substantially all of the equity interests and/or assets of Eagle Rock's midstream business unit.

            (3)   "Good Reason" means (a) a substantial reduction in an individual's status, title, position or responsibilities or the assignment of duties or responsibilities inconsistent with an individual's status, title, position or responsibilities; (b) a reduction in an individual's annual base salary; (c) a change in the geographic location at which the individual must perform services to a location more than thirty-five (35) miles from the location at which the individual normally performs such services; (d) Eagle Rock's failure to continue in effect any material compensation or benefit plan in which the individual was participating or to provide the individual with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those previously provided for under each compensation or employee benefit plan, program and practice; (e) any material breach by Eagle Rock of any provision of the applicable agreement or of any provision of an individual's employment agreement, if any; or (f) any purported termination of an individual's employment for "cause" by Eagle Rock that does not otherwise comply with the terms of the applicable agreement or the individual's employment agreement, if any. In the case of the individual's allegation of "good reason," (A) the individual shall provide notice to the Eagle Rock Board of the event alleged to constitute "good reason" within 90 days of the occurrence of such event, and (B) Eagle Rock shall have the opportunity to remedy the alleged "good reason" event within 30 days from receipt of notice of such allegation.

        For an estimate of the value of the payments and benefits described above that would be payable under the Executive COC Agreements to each of Eagle Rock's named executive officers, please read "—Quantification of Potential Payments to Eagle Rock's Named Executive Officers in Connection with the Contribution."

    Indemnification

        The Partnership Agreement requires Eagle Rock, among other things, to indemnify the directors and officers of Eagle Rock Energy G&P LLC against certain liabilities that may arise by reason of their service as directors or officers.

        In addition, the Contribution Agreement provides that if the Contribution closes, Regency and its affiliates (including the Midstream Entities contributed to the Regency Parties in the Contribution) shall release, indemnify, defend and hold harmless any past or current officer, employee or director of Eagle Rock or any of its affiliates (including the Midstream Entities) from losses based upon, resulting from or arising out of actions taken or omissions made, prior to the closing of the Contribution, in respect of the business, affairs and governance and management of any Midstream Entity (except for any claim resulting from the willful misconduct or fraudulent act of such released person) and other certain matters named in the Contribution Agreement.

    New Arrangements with Regency

        Prior to the effective time, Regency and its affiliates may initiate negotiations of agreements, arrangements and understandings with certain Midstream Officers regarding compensation and benefits and may enter into definitive agreements regarding employment with, or the right to participate in the equity of, Regency or its affiliates, in each case on a going-forward basis following completion of the Contribution. However, as of the date of this filing, no such agreements exist.

    Quantification of Potential Payments to Eagle Rock's Named Executive Officers in Connection with the Contribution

        The information set forth below is required by Item 402(t) of Regulation S-K regarding compensation that is based on or otherwise relates to the Contribution which the current Eagle Rock

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named executive officers could receive in connection with the Contribution. Only information for Mr. Fox is included as he is the only named executive officer affected by the Contribution because (1) compared to the other named executive officers, only his Executive COC Agreement has the unique trigger focused on a sale of the midstream business, (2) he is the only named executive officer that entered into a Letter Agreement, and (3) he is the only named executive officer that could be hired by Regency and become a transferred employee. The amounts in the table below were calculated using the following assumptions: (1) the consummation of the Contribution occurred on                        , 2014, (2) the price per share of the Eagle Rock common units for purposes of calculating accelerated restricted unit awards is $6.05, which is the average closing market price of Eagle Rock's common units over the first five business days following the first public announcement of the Contribution, (3) although it has not yet been determined whether Mr. Fox will continue employment with Regency or if Mr. Fox will incur a Qualifying Termination, the employment of Mr. Fox is assumed to be terminated due to a Qualifying Termination on the date of the Contribution; and (4) with respect to amounts that could become payable under the Executive COC Agreement, Mr. Fox properly executed a general release agreement in favor of Eagle Rock Energy G&P LLC. Values shown below do not take into account any increase in compensation that may occur following the date of this proxy statement or following the Contribution. Some of the assumptions used in the table below are based upon information not currently available and, as a result, the actual amounts to be received by Mr. Fox below may differ from the amounts set forth below.

        For additional information regarding the terms of the payments described below, please read "The Contribution—Interests of Officers of Eagle Rock in the Contribution."

Name
  Cash
($)(1)
  Equity
($)(2)
  Perquisites/
Benefits
($)(3)
  Total
($)
 

Roger A. Fox

    1,563,125     919,600     95,576     2,578,301  

(1)
The amount in this column reflects the base salary and bonus that would become payable to Mr. Fox following a Qualifying Termination under his Executive COC Agreement. The severance and bonus payments are considered "double-trigger" payments as a Qualifying Termination following a Change of Control must occur prior to payment. The base salary portion of the severance amount under the Executive COC Agreement for Mr. Fox would equal $1,334,375 while the bonus portion of the severance amount under the Executive COC Agreement for Mr. Fox would equal $228,750.

(2)
The amount in this column reflects the result of the number of the unvested Eagle Rock restricted units that Mr. Fox held as of the date of this filing (152,000) multiplied by the average closing market price of Eagle Rock's common units over the first five business days following the first public announcement of the Contribution, which such unvested restricted units would be accelerated under the Letter Agreement. The amount in this column is considered a "double-trigger" payment as a termination without Cause or for Good Reason following a Change of Control under the Letter Agreement must occur prior to payment.

(3)
The amount in this column reflects the maximum aggregate amount of the continued medical benefits and the outplacements services Mr. Fox could receive upon a Qualifying Termination pursuant to his Executive COC Agreement. The amount of the cash payments that could become payable to Mr. Fox in connection with a Qualifying Termination for the coverage of medical benefits would be $65,576.18. The outplacement services have been calculated as if the maximum $30,000 of services would be provided, although it is possible that lower amounts would be provided if Mr. Fox were to take a job with a third party prior to reaching the maximum. The amount in this column is considered a "double-trigger" payment or benefit as a Qualifying Termination following a Change of Control must occur prior to the payment or benefit being provided.

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Litigation Relating to the Contribution

        On March 3, 2014, a purported Eagle Rock unitholder ("Plaintiff") filed a class action lawsuit, on behalf of all Eagle Rock unitholders other than Defendants (as defined below) and their affiliates, against Eagle Rock, the members of the Eagle Rock Board, Regency, and Regal (collectively, "Defendants"). The lawsuit is styled Roberta Feinstein v. Eagle Rock, et al., Civ. No. 4:14-cv-00521, in the United States District Court for the Southern District of Texas, Houston Division (the "Lawsuit").

        Plaintiff alleges a variety of causes of action challenging the Contribution, including that (a) the members of the Eagle Rock Board have allegedly breached fiduciary duties in connection with the Contribution, (b) Eagle Rock, Regency, and Regal have allegedly aided and abetted in these alleged breaches of fiduciary duties, (c) Eagle Rock and the members of the Eagle Rock Board have allegedly violated Section 14(a) of the Exchange Act, and (d) the members of the Eagle Rock Board have allegedly violated Section 20(a) of the Exchange Act. Specifically, Plaintiff alleges that (a) the Contribution provides Eagle Rock with inadequate consideration for its midstream assets, (b) Eagle Rock and the Eagle Rock Board agreed to contractual terms that will allegedly dissuade other potential acquirers from seeking to purchase the midstream assets, and (c) Eagle Rock and the Eagle Rock Board failed to disclose allegedly material information concerning (i) the analysis of Eagle Rock's financial advisors, (ii) alleged potential conflicts of the advisors and members of the Eagle Rock Board, and (iii) the background of the transaction.

        Based on these allegations, Plaintiff seeks to enjoin Eagle Rock from proceeding with or consummating the Contribution. To the extent that the Contribution is consummated before injunctive relief is granted, Plaintiff seeks to have the Contribution rescinded. Plaintiff also seeks monetary damages and attorneys' fees.

        The Lawsuit is in early stages of litigation. Defendants have yet to answer, move to dismiss or otherwise respond to the Lawsuit. Eagle Rock cannot predict the outcome of the Lawsuit or any others that might be filed subsequent to the date of the filing of this proxy statement; nor can Eagle Rock predict the amount of time and expense that will be required to resolve the Lawsuit. All Defendants intend to vigorously defend against the Lawsuit.

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ACCOUNTING TREATMENT

        Eagle Rock will account for the Contribution in accordance with accounting principles generally accepted in the United States and in accordance with the guidance within Financial Accounting Standard Board's Accounting Standards Codification Topic, 205-Presentation of Financial Statements, related to discontinued operations, and Topic 360-Property, Plant, and Equipment, related to assets held for sale, once the Contribution has been approved by the unitholders.

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THE CONTRIBUTION AGREEMENT

        The following describes the material provisions of the Contribution Agreement, which is attached as Annex A to this proxy statement and incorporated by reference herein. The description in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the Contribution Agreement, the Voting and Support Agreement, the Limited Waiver and the form of Registration Rights Agreement attached as an exhibit to the Contribution Agreement. This summary does not purport to be complete and may not contain all of the information about the Contribution Agreement, the Voting and Support Agreement, the Limited Waiver and the form of Registration Rights Agreement that is important to you. You should read carefully each of the Contribution Agreement, the Voting and Support Agreement, the Limited Waiver and the form of Registration Rights Agreement in its entirety before making any decisions regarding the Contribution as it is the legal document governing the Contribution.

        The Contribution Agreement, the Voting and Support Agreement, the Limited Waiver, the form of Registration Rights Agreement and this summary of their terms have been included to provide you with information regarding the terms of such agreement. Factual disclosures about Eagle Rock, Regency or any of their respective subsidiaries or affiliates contained in this proxy statement or their respective public reports filed with the SEC may supplement, update or modify the factual disclosures about Eagle Rock, Regency or their respective subsidiaries or affiliates contained in such agreements and described in this summary. The representations, warranties and covenants made in the Contribution Agreement by Eagle Rock, on the one hand, and the Regency Parties, on the other hand, were qualified and subject to important limitations agreed to by the Eagle Rock and the Regency Parties in connection with negotiating the terms of the Contribution Agreement. In particular, in your review of the representations and warranties contained in the Contribution Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of allocating risk between the parties to the Contribution Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to unitholders and reports and documents filed with the SEC and in some cases were qualified by confidential disclosures that were made by each party to the other, which disclosures are not reflected in the Contribution Agreement or otherwise publicly disclosed. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the Contribution Agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement. For the foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone or relied upon as characterizations of the actual state of facts or conditions of Eagle Rock, Regency or any of their respective subsidiaries or affiliates.


The Contribution

        Upon satisfaction or waiver of the conditions set forth in the Contribution Agreement, Eagle Rock will contribute to Regal the Contributed Interests. The Contributed Interests, upon the closing of the Contribution and after giving effect to the Pre-Closing Transfers, will represent the assets and operations that collectively comprise the midstream business of Eagle Rock.


Closing

        The closing of the Contribution will occur at 9:00 a.m. Houston time on the second business day after the satisfaction or waiver of the conditions to the Contribution provided in the Contribution Agreement (other than conditions that by their terms cannot be satisfied until the closing of the Contribution, but subject to the satisfaction or waiver of those conditions), or at such other date or time as the parties agree. For additional information regarding the conditions to the consummation of the Contribution, please read "—Conditions to Consummation of the Contribution."

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        Eagle Rock currently expects to complete the Contribution during the first half of 2014, subject to receipt of unitholder approval of the Contribution Agreement and the Contribution and to the satisfaction or waiver of the other conditions to the transactions contemplated by the Contribution Agreement described below.


Conditions to Consummation of the Contribution

        Eagle Rock and the Regency Parties may not complete the Contribution unless each of the following conditions is satisfied or waived, if waiver is permitted by applicable law:

    the Contribution Agreement and the Contribution will have been approved by the affirmative vote or consent of holders (as of the record date for the unitholder meeting) of a majority of the outstanding Eagle Rock common units;

    no order or injunction (whether preliminary or permanent) issued by a court of competent jurisdiction or other governmental authority restraining or prohibiting in any material respect the consummation of the transactions contemplated by the Contribution Agreement or contemplated by the other transaction documents (brought by a third party) will be in effect;

    all applicable waiting periods under the HSR Act will have expired or been terminated; and

    no law will have been promulgated or enacted by any governmental authority, which would prevent or make illegal in any material respect the consummation of the transactions contemplated by the Contribution Agreement or by the other transaction documents.

        The obligation of the Regency Parties to effect the Contribution and to consummate the transactions contemplated by the Contribution Agreement is subject to the satisfaction or waiver of the following additional conditions:

    the representations and warranties of Eagle Rock set forth in the Contribution Agreement are true and correct at and as of date of the Contribution Agreement and at and as of the closing date of the Contribution Agreement, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "Midstream Material Adverse Effect" (as defined below) set forth in any individual such representation or warranty) would not have a Midstream Material Adverse Effect;

    since the date of the Contribution Agreement, there has not occurred any Midstream Material Adverse Effect;

    Eagle Rock will have caused the Midstream Entities and their assets to be fully released and discharged from all obligations in respect of the Credit Agreement;

    Eagle Rock will have performed and complied in all material respects with all covenants, obligations and agreements required in the Contribution Agreement to be performed or complied with by it on or prior to the closing date of the Contribution Agreement;

    Eagle Rock will have provided evidence of the removal of all persons with signatory authority over any bank or depository accounts in the name of each of the Midstream Entities;

    effective as of the closing date of the Contribution Agreement, the individuals from the board of managers, board of directors or similar governing body of each of the Midstream Entities will have resigned and Eagle Rock will have provided such resignations to Regency;

    Regency will have received the Carve-out Financial Statements, which in fact Eagle Rock delivered to Regency on January 20, 2014;

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    Regency will have executed and delivered a transition services agreement in a form having the terms attached as an exhibit to the Contribution Agreement;

    Regency will have received certain closing deliverables from Eagle Rock; and

    Eagle Rock will have executed and delivered an escrow agreement in substantially the form attached as an exhibit to the Contribution Agreement.

        The obligation of Eagle Rock to effect the Contribution is subject to the satisfaction or waiver of the following additional conditions:

    the representations and warranties of the Regency Parties set forth in the Contribution Agreement will be true and correct in all material respects (without giving effect to any limitations as to "materiality" or "Acquirer Material Adverse Effect" (as defined below) set forth in any individual representation or warranty) at and as of the closing date of the Contribution Agreement, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date);

    since the date of the Contribution Agreement, there will not have occurred an Acquirer Material Adverse Effect;

    the Regency Parties will have performed and complied in all material respects with each of the covenants, obligations and agreements required in the Contribution Agreement to be performed or complied with by such Regency Party on or prior to the closing date of the Contribution Agreement;

    Regency will have delivered, or caused to be delivered, to Eagle Rock evidence of the wire transfer;

    all conditions to the consummation of the Exchange Offer will have been satisfied and not waived (other than with the prior written consent of the parties), and the Exchange Offer may be consummated in accordance with applicable law immediately after (1) the assumption by Regency from Eagle Rock of the Eagle Rock Notes validly tendered for exchange pursuant to the Exchange Offer and not withdrawn as of the closing and accepted by Regency for exchange pursuant to the Debt Assumption Agreement and (2) the Contribution by Eagle Rock to Regal of the Contributed Interests;

    the Regency common units compromising the equity consideration will have been approved for listing on the NYSE, subject to official notice of issuance;

    Regency will have executed and delivered a registration rights agreement (as described in "—Registration Rights Agreement") and will have executed and delivered a certificate duly executed by an executive officer of Regency confirming that as of the date of the certificate Regency is prepared to file and will file the registration statement contemplated by the registration rights agreement on the first business day following the closing;

    Regency will have executed and delivered a transition services agreement in a form having the terms attached as an exhibit to the Contribution Agreement;

    Regency will have executed and delivered an escrow agreement in substantially the form attached as an exhibit to the Contribution Agreement; and

    Eagle Rock will have received certain closing deliverables.

        For purposes of the Contribution Agreement, the term "Midstream Material Adverse Effect" means any change, event, fact, development, condition, matter or circumstance that, individually or in the aggregate with all other changes, events, facts, developments, conditions, matters or circumstances, is or is reasonably likely to have a material adverse effect on the business, financial condition,

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liabilities, or results of operations of the Midstream Entities, taken as a whole. However, none of the following changes, events, facts, developments, conditions, matters or circumstances (either alone or in combination) will be taken into account for purposes of determining whether or not a material adverse effect with respect to the Midstream Entities has occurred:

    changes in the general economic, financial, credit or securities markets, including prevailing interest rates or currency rates, or regulatory or political conditions;

    changes in the economic conditions prevalent in (1) the natural gas gathering, compressing, treating, processing and transportation industry generally; (2) the natural gas liquids fractionating and transportation industry generally; (3) the crude oil and condensate logistics and marketing industry generally and (4) the natural gas marketing and trading industry generally (including in each case changes in law affecting such industries);

    changes, effects, events or occurrences generally affecting the prices of oil, gas, natural gas, natural gas liquids, condensate or other commodities;

    the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including acts of terrorism;

    any hurricane, tornado, flood, earthquake or other natural disaster;

    the identity of, or actions or omissions of Regency, or its affiliates, or any action taken pursuant to or in accordance with the Contribution Agreement or at the request of or with the consent of Regency;

    any change resulting from the announcement of the Contribution Agreement and the transactions contemplated thereby, including any disruption of customers or supplier relationships or loss of any employees or independent contractors of any Midstream Entity;

    the announcement or disclosure of Eagle Rock's intention to review the possibility of selling itself or the midstream business;

    any change in accounting requirements or principles imposed upon Eagle Rock, its subsidiaries or their respective businesses or any change in applicable laws, or the interpretation thereof;

    actions taken by Regency or any of its affiliates;

    any changes, effects, events, facts, developments, conditions, matters or circumstances that have formed all or a portion of any breach of certain of the representations and warranties made by Eagle Rock in the Contribution Agreement any or certain losses resulting therefrom for which the purchase price has been adjusted pursuant to the terms of the Contribution Agreement or for which funds have been placed into the escrow account in accordance with the Contribution Agreement; or

    any failure by the midstream business to meet any estimates, expectations, projections, forecasts, guidance or revenue or earnings predictions for any period ending prior to, on or after the date of the Contribution Agreement.

        The changes, events, facts, developments, conditions, matters or circumstances referred to in the first, second, third, fourth, fifth and ninth bullets above will be considered for purposes of determining whether there has been a Midstream Material Adverse Effect if such changes, events, facts, developments, conditions, matters or circumstances materially or disproportionately affect the Midstream Entities as compared to other participants of similar size in the industries in which the Midstream Entities operate (it being understood and agreed that the facts and circumstances giving rise to such failure that are not otherwise excluded from the definition of Midstream Material Adverse

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Effect with respect to the Midstream Entities may be taken into account in determining whether there has been a Midstream Material Adverse Effect).

        For purposes of the Contribution Agreement, the term "Acquirer Material Adverse Effect" means any change, event, fact, development, condition, matter or circumstance that, individually or in the aggregate with one or more other events, changes, events, facts, development, conditions or circumstances, is or is reasonably likely to materially impair or delay the ability of Regency to perform any of its obligations or to consummate any of the transactions under the transaction documents or otherwise materially threaten or materially impede or delay the consummation or performance of the transactions or obligations under the transaction documents.


Eagle Rock Unitholder Meeting

        Eagle Rock has agreed, as soon as reasonably practicable following the date of the Contribution Agreement, to establish a record date for, and as soon as reasonably practicable following clearance of this proxy statement by the SEC, hold a meeting of Eagle Rock unitholders for the purpose of such unitholders voting on the approval of the Contribution Agreement and the Contribution in accordance with the terms and provisions of the Contribution Agreement. If the Eagle Rock Board no longer recommends approval of the Contribution Agreement and the Contribution, Eagle Rock will no longer be required to submit the Contribution Agreement and the Contribution to a unitholder vote. For additional information regarding such terms and provisions, please read "—Change in Eagle Rock Board Recommendation."


Non-Solicitation of Alternative Proposals

        The Contribution Agreement contains detailed provisions prohibiting Eagle Rock from seeking an alternative proposal from a third person. Under these "non-solicitation" provisions, Eagle Rock agreed to, and has agreed to use commercially reasonable efforts to cause its representatives to, immediately cease and cause to be terminated any discussions or negotiations with any person with respect to an alternative proposal, and request the return or destruction of all confidential information previously provided to such parties by or on behalf of Eagle Rock or its subsidiaries. In addition, Eagle Rock has agreed not to, and has agreed to use commercially reasonable efforts to cause its respective representatives not to, directly or indirectly:

    initiate or solicit any inquiries or the making or submission of any alternative proposal; or

    participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, any alternative proposal.

        Notwithstanding these restrictions, the Contribution Agreement provides that if at any time prior to Eagle Rock's unitholders voting in favor of approving the Contribution Agreement and the Contribution, (1) Eagle Rock has received a written alternative proposal that the Eagle Rock Board believes is bona fide and (2) the Eagle Rock Board, after consultation with its financial advisors and its outside legal counsel, determines in good faith that such alternative proposal constitutes or could reasonably be expected to lead to or result in a superior proposal, then Eagle Rock may (a) furnish information, including confidential information, with respect to Eagle Rock and its subsidiaries (including the Midstream Entities) to the person making such alternative proposal and (b) participate in discussions or negotiations regarding such alternative proposal. However, Eagle Rock will (x) not, and will use commercially reasonable efforts to cause its representatives not to, disclose any non-public information to such person unless Eagle Rock has, or first enters into, a confidentiality agreement with such person with confidentiality provisions that are not materially less restrictive to such person than the provisions of the confidentiality agreement between Eagle Rock and Regency are to Regency (including, without limitation, the inclusion of "standstill" provisions or similar restrictions) and (y) provide to Regency any non-public information about the Midstream Entities that was not

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previously provided or available to Regency prior to or substantially concurrently with providing or making available such non-public information to such other person.

        Eagle Rock also agreed that it will promptly (and in any event within 72 hours after receipt) advise Regency in writing of any alternative proposal (and any changes thereto) and the material terms and conditions of any such alternative proposal but need not provide the identity of the person making any such alternative proposal. Eagle Rock has agreed to keep Regency reasonably informed of material developments with respect to any such alternative proposal.

        For purposes of the Contribution Agreement, the term "alternative proposal" means any proposal or offer from any person or "group" (as defined in Section 13(d) of the Exchange Act), other than Regency and its subsidiaries, relating to any direct or indirect acquisition (whether in a single transaction or a series of related transactions), outside of the ordinary course of business, of assets of the Midstream Entities equal to 20% or more of the consolidated assets of the midstream business or to which 20% or more of Eagle Rock's revenues or earnings with respect to the midstream business on a consolidated basis are attributable, other than the transactions contemplated by the Contribution Agreement.

        For purposes of the Contribution Agreement, a "superior proposal" means a bona fide written offer, obtained after the date of the Contribution Agreement and not in breach of the non-solicitation provisions of the Contribution Agreement (other than an immaterial breach), to acquire, directly or indirectly, more than 50% of the outstanding equity securities of Eagle Rock or more than 50% of the combined assets of Eagle Rock, made by a third party, which is on terms and conditions which the Eagle Rock Board determines in good faith to be more favorable to the Eagle Rock unitholders than the transactions contemplated by the Contribution Agreement, taking into account at the time of determination any changes to the terms of the Contribution Agreement that as of that time had been committed to by Regency in writing and the ability of the person making such proposal to consummate the transactions contemplated by such proposal (based upon, among other things, the availability of financing and the expectation of obtaining required approvals).

        Notwithstanding anything to the contrary in the Contribution Agreement, other than in connection with an alternative proposal, the Eagle Rock Board is permitted, at any time prior to Eagle Rock's unitholders voting in favor of approving the Contribution Agreement and the Contribution, to make a Change in Recommendation if, prior to taking such action, both (1) the Eagle Rock Board determines in good faith, in consultation with its outside legal counsel, that failure to take such action would be inconsistent with its duties under applicable law and (2) Eagle Rock has given 48 hours advance notice to Regency that Eagle Rock intends to take such action.


Change in Eagle Rock Board Recommendation

        The Contribution Agreement provides that the Eagle Rock Board will not, except as described below, (1) (a) withdraw, modify or qualify in any manner adverse to Regency the recommendation of the Eagle Rock Board that Eagle Rock's unitholders approve the Contribution Agreement and the Contribution or (b) publicly approve or recommend, or publicly propose to approve or recommend, any alternative proposal (a "Change in Recommendation"); or (1) approve, adopt or recommend, or publicly propose to approve, adopt or recommend, or allow Eagle Rock or any of its subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement, or other similar contract or any tender or exchange offer providing for, with respect to, or in connection with, any alternative proposal.

        Notwithstanding the above, if Eagle Rock receives (1) a written alternative proposal or (2) another proposal or offer that, in either case, the Eagle Rock Board believes is bona fide and the Eagle Rock Board, after consultation with its financial advisors and its outside legal counsel, concludes that such

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alternative proposal constitutes a superior proposal, then the Eagle Rock Board may at any time prior to Eagle Rock's unitholders voting in favor of approving the Contribution Agreement and the Contribution, terminate the Contribution Agreement and pay a termination fee (as described in "—Termination of the Contribution Agreement" and "—Termination Fees") and/or effect a Change in Recommendation. However, the Eagle Rock Board may not take such action pursuant to the foregoing unless:

    Eagle Rock has provided prior written notice to Regency specifying in reasonable detail the reasons for such action (including a description of the material terms of such superior proposal and delivering to Regency a copy of the proposed definitive agreement providing for such superior proposal), in the form to be entered into and any other relevant proposed transaction agreements, at least three calendar days in advance of taking any action with respect to a Change in Recommendation, unless at the time such notice is otherwise required to be given there are less than three calendar days prior to the Eagle Rock unitholder meeting, in which case Eagle Rock will provide as much notice as is reasonably practicable (the period inclusive of all such days, the "Notice Period"); and

    during the Notice Period, Eagle Rock has negotiated, and has used commercially reasonable efforts to cause its financial advisors and outside legal counsel to negotiate, with Regency in good faith (to the extent Regency desires to negotiate) to make such adjustments in the terms and conditions of the Contribution Agreement so that such superior proposal ceases to constitute (in the judgment of the Eagle Rock Board) a superior proposal.


Consideration for the Contribution

        The consideration for the Contribution includes (1) $720,000,000 payable to Eagle Rock, as adjusted in accordance with the Contribution Agreement, consisting of $520,000,000 in cash and the equity consideration, (2) the assumption by Regency of up to $550,000,000 face value of the Eagle Rock Notes validly tendered by holders of the Eagle Rock Notes pursuant to the Exchange Offer and (3) if less than all of the Eagle Rock Notes are tendered in the Exchange Offer, the payment by Regency to Eagle Rock of a dollar amount equal to 110% of the difference between $550,000,000 and the face value of Eagle Rock Notes so validly tendered and cancelled and exchanged into Regency senior unsecured notes. For additional information regarding the Exchange Offer, please read "—Exchange Offer."

        In addition, the cash consideration payable to Eagle Rock may be reduced by the amounts of certain losses that would have actually incurred as of a date no later than five business days before the closing date of the Contribution Agreement (as though the closing were to occur on such date) by Regency resulting from the breach of certain of the representations and warranties (each a "Pre-Closing Breach") made by the Eagle Rock in the Contribution Agreement. The amount of any such losses agreed to by the parties at closing would reduce the consideration payable to Eagle Rock at closing. In addition, the alleged value of any losses alleged by Regency but not agreed to by Eagle Rock at closing would be deducted from the closing proceeds and placed into escrow subject to resolution pursuant to binding arbitration after the closing. Such losses would be subject to the following limitations: (1) each claim must be valued in excess of $1,000,000 in order for such claim to be made, (2) the aggregate value of all eligible claims must exceed $13,250,000, at which point only those amounts in excess of $13,250,000 will reduce the consideration paid to Eagle Rock and (3) the aggregate amount of all reductions in consideration resulting from Pre-Closing Breaches may not exceed $132,500,000.

        The consideration payable to Eagle Rock is also subject to a customary working capital adjustment if the working capital of the midstream business as of the closing exceeds $15 million or is more negative than negative $15 million.

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Exchange Offer

        In connection with the Contribution, Regency has agreed, subject to the terms and conditions of the Contribution Agreement, to conduct the Exchange Offer. For additional information regarding the impact of the Exchange Offer upon the consideration to be received by Eagle Rock in connection with the Contribution, please read "—Consideration for the Contribution."


Termination of the Contribution Agreement

        The Contribution Agreement contains provisions granting both the Regency Parties, on the one hand, and Eagle Rock, on the other hand, the right to terminate the Contribution Agreement under the following circumstances (1) by mutual written consent of Eagle Rock and the Regency Parties, (2) if there shall be in effect a final nonappealable order of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated thereby; provided, such right to terminate the Contribution Agreement will not be available to Eagle Rock, on the one hand, or Regency, on the other hand, if such order was primarily due to the failure of Eagle Rock, on the one hand, or the Regency Parties, on the other hand, to perform any of its obligations under the Contribution Agreement, (3) if the closing of the Contribution does not occur on or before the Outside Date or (4) the Contribution Agreement and the Contribution fail to receive Unitholder Approval.

        The Contribution Agreement also contains provisions granting Eagle Rock the right to terminate the Contribution Agreement and the Contribution if (1) either of the Regency Parties has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Contribution Agreement, or any of such party's representations or warranties has become untrue, and such breach, failure or untruth would result in a failure of a closing condition to be satisfied and has not been cured within 30 days of notice of such breach, failure or untruth from either of the Regency Parties or (2) in order to enter into a definitive agreement in response to a superior proposal in accordance with the provisions of the Contribution Agreement described above in "—Non-Solicitation of Alternative Proposals" and "—Change in Eagle Rock Board Recommendation."

        The Contribution Agreement also contains provisions granting the Regency Parties the right to terminate the Contribution Agreement if (1) Eagle Rock has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the Contribution Agreement, or any of such party's representations or warranties has become untrue, and such breach, failure or untruth would result in a failure of a closing condition to be satisfied and has not been cured within 30 days of notice of such breach, failure or untruth from Eagle Rock, (2) a Change in Recommendation has occurred or (3) Regency has not received the Carve-Out Financial Statements by January 21, 2014 (which in fact Eagle Rock provided to Regency on January 20, 2014).


Termination Fees

        Eagle Rock will be required to pay Regency $42,168,750 as a termination fee if:

    (1) an alternative proposal shall have been publicly proposed or publicly disclosed prior to, and not withdrawn at the time of, the date of the special meeting (or, if the special meeting has not occurred yet, prior to Eagle Rock exercising its right to terminate the Contribution Agreement due to the fact that the closing of the Contribution has not occurred on or before the Outside Date); (2) Eagle Rock or Regency has exercised their respective rights to terminate the Contribution Agreement due to the fact that the closing of the Contribution has not occurred on or before the Outside Date or if the special meeting has concluded and the Contribution Agreement and the Contribution fail to receive Unitholder Approval and (3) Eagle Rock enters into a definitive agreement with respect to, or consummates, such alternative proposal within nine months after the date the Contribution Agreement is terminated;

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    Regency exercises its right to terminate the Contribution Agreement due to a Change in Recommendation; or

    Eagle Rock exercises its right to terminate the Contribution Agreement in order to enter into a definitive agreement relating to a superior proposal in accordance with the provisions of the Contribution Agreement.


Conduct of Business Pending the Consummation of the Contribution

        Under the Contribution Agreement, Eagle Rock and the Regency Parties have undertaken certain covenants that place restrictions on them, and their respective subsidiaries, from the date of the Contribution Agreement until the closing date or the termination of the Contribution Agreement, unless the other party gives its prior written consent (which may not be unreasonably withheld, conditioned or delayed). These covenants are subject to certain exceptions set forth in the Contribution Agreement and the disclosure schedules exchanged between the parties in connection with the Contribution Agreement.

        Eagle Rock has agreed to, and has agreed to cause each Midstream Entity to:

    operate the Midstream Entities in all material respects in the ordinary course of business consistent with past practices and use its commercially reasonable efforts to preserve its present business operations and organization (including key employees) relating to the Midstream Entities;

    use its commercially reasonable efforts to preserve intact its current material relationships with third parties (including material customers and suppliers) having business dealings with any of the Midstream Entities;

    with respect to the Midstream Entities, maintain books, accounts and records in the usual, regular and ordinary manner, on a basis consistent with prior years;

    with respect to the Midstream Entities, maintain all material permits, approvals and registrations from and with governmental authorities applicable to the Midstream Entities as of the date of the Contribution Agreement;

    comply in all material respects with all applicable laws and orders to which the Midstream Entities are subject;

    not transfer, sell, pledge, encumber or dispose of the Contributed Interests or any equity interests of or, outside the ordinary course of business, any material assets of the Midstream Entities;

    not enter into any collective bargaining agreement or similar contract with (1) any labor union or representative relating to certain employees of Eagle Rock and its affiliates or (2) with respect to which any Midstream Entity could have any liability;

    except as required by applicable law, an existing Eagle Rock employee benefit plan or as specifically agreed to in writing between Regency and Eagle Rock as part of the transactions contemplated by the Contribution Agreement, (1) not enter into any new or amend any existing compensatory plan, agreement or arrangement for the benefit of certain employees of Eagle Rock and its affiliates or in which certain employees of Eagle Rock and its affiliates participate (including any Eagle Rock employee benefit plan) or with respect to which any Midstream Entity could have any material liability or (2) increase the salary, wages, bonuses or other compensation or benefits of certain employees of Eagle Rock and its affiliates by more than 10% as compared to the level as of the date of the Contribution Agreement;

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    not terminate the employment of certain employees of Eagle Rock and its affiliates other than for "cause";

    not, with respect to the Midstream Entities or the midstream business, make or change any election in respect of taxes, amend any tax return, adopt or change any accounting method in respect of taxes (other than changes required by law), or settle or compromise any tax liability, in each case, other than those adoptions, changes, elections, settlements, or compromises which would reasonably be expected to not materially increase the tax liability of the Midstream Entities or any direct or indirect owner of the Midstream Entities for any taxable period beginning after the closing date of the Contribution Agreement;

    not agree to take any affirmative action to, with respect to certain joint venture entities of Eagle Rock, cause such joint venture entities to make or change any election in respect of taxes, amend any tax return, adopt or change any accounting method in respect of taxes (other than changes required by law), or settle or compromise any tax liability, in each case, other than those adoptions, changes, elections, settlements, or compromises which would reasonably be expected to not materially increase the tax liability of the Midstream Entities or any direct or indirect owner of the Midstream Entities for any taxable period beginning after the closing date of the Contribution Agreement;

    use its commercially reasonable efforts to maintain the insurance policies in respect of the Midstream Entities consistent with past practice;

    except for any contract entered into, terminated or amended in the ordinary course of business or that individually would not reasonably be expected to have an adverse impact on the midstream business in excess of $5,000,000, (1) not enter into any contract that could constitute a material agreement under the terms of the Contribution Agreement, (2) not grant any waiver of any material term under, or give any material consent with respect to, any material agreement under the terms of the Contribution Agreement and (3) not modify, amend or terminate any material agreement under the terms of the Contribution Agreement;

    settle, release or compromise any pending or threatened adverse litigation for an amount that would reasonably be expected to be greater than $1,000,000, but in each case, only to the extent not covered by insurance or third-party indemnification; or

    not agree to take any of the foregoing prohibited actions.

        Regency has agreed to, and has agreed to cause its subsidiaries to:

    operate in all material respects in the ordinary course of business consistent with past practices and use its commercially reasonable efforts to preserve its present business operations and organization (including key employees);

    use its commercially reasonable efforts to preserve intact its current material relationships and all material contractual and other obligations with third parties (including material customers and suppliers) having business dealings with Regency or any of its subsidiaries;

    comply in all material respects with all applicable laws and orders to which Regency or its subsidiaries are subject;

    not take any action which would adversely affect, or impede or impair, the ability of the parties to the Contribution Agreement, or any of the actual or contemplated parties to any other transaction document, to consummate the transactions contemplated by the Contribution Agreement or the transaction documents;

    except as required by law, not take any action that would reasonably be expected to result in any of the conditions to the closing not being satisfied; or

    not agree to take any of the foregoing prohibited actions.

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Amendment and Waiver

        The parties may amend, modify or supplement the Contribution Agreement only by written agreement of the parties. However, certain provisions relating to the release of each past and current officer, director, partner, general partner, limited partner, managing director, member, stockholder, trustee, representative, employee, principal and agent of the general partner of Eagle Rock and each of the Midstream Entities (solely in their capacity as such, collectively, the "Released Parties") from any and all losses, claims, demands, rights, encumbrances, covenants or proceedings, of whatever kind or nature in law, equity or otherwise, whether known or unknown, and whether or not concealed or hidden, all of which any Midstream Entity now owns or holds or has at any time owned or held or may hereafter own or hold against any Released Party at any time, which arise out of actions taken or omissions made, prior to the closing date of the Contribution Agreement, in respect of the business, affairs and governance and management of any Midstream Entity may not be amended in a manner adverse to any such Released Party without the prior written consent of such Released Party.

        Except as otherwise provided in the Contribution Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition therein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.


Remedies; Specific Performance

        In the event of a valid termination of the Contribution Agreement, then each of the parties will be relieved of its duties and obligations arising under the Contribution Agreement after the date of such termination and such termination will be without liability to the Regency Parties or Eagle Rock, except (1) with respect to Eagle Rock, if it is required to pay the termination fee (described under "—Termination Fees") to Regency or (2) with respect to Eagle Rock, if it is required to indemnify the Regency Parties and its affiliates against certain losses (described under "—Indemnification"). In addition, in the event of a valid termination of the Contribution Agreement, the Regency Parties and Eagle Rock will not be relieved of any liability for the failure to comply with any covenants or agreements contained in the Contribution Agreement or any knowing or intentional breach by the Regency Parties of the representation with respect to the required consents and approvals of governmental authorities or any other person, except that (1) in the event that Eagle Rock pays the termination fee to Regency, Eagle Rock will have no further liability to Regency and (2) in the event that Regency terminates the Contribution Agreement because it has not received the Carve-Out Financial Statements by January 21, 2014 (in fact Eagle Rock provided the Carve-Out Financial Statements to Regency on January 20, 2014), then Eagle Rock will have no liability for any failure to comply with any covenants or agreements contained therein or for any breaches of any representations or warranties of Eagle Rock contained in the Contribution Agreement.

        The parties acknowledged and agreed in the Contribution Agreement that a breach of the Contribution Agreement would cause irreparable damage to the Regency Parties and Eagle Rock and that the Regency Parties and Eagle Rock would not have an adequate remedy at law for such breach. The parties agreed that the obligations of the parties would be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. The parties agreed that such remedies would, however, be cumulative and not exclusive and would be in addition to any other remedies which any party might have under the Contribution Agreement or otherwise. Each of the parties agreed not to oppose the granting of an injunction, specific performance and other equitable relief as provided in the Contribution Agreement on the basis that (x) either party has an adequate remedy at law or (y) an award of specific performance is not an appropriate remedy for any reason at law or equity. Each party further agreed that no party would be required to obtain, furnish or post any bond or similar

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instrument in connection with or as a condition to obtaining equitable relief, and each party irrevocably waived any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.


Representations and Warranties

        The Contribution Agreement contains representations and warranties made by Eagle Rock and the Regency Parties. These representations and warranties have been made solely for the benefit of the other parties to the Contribution Agreement and:

    may be intended not as statements of fact or of the condition of the parties to the Contribution Agreement or their respective subsidiaries, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

    have been qualified by disclosures that were made to the other party in connection with the negotiation of the Contribution Agreement, which disclosures and the related disclosure schedules may not be reflected in the Contribution Agreement;

    may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

    were made only as of the date of the Contribution Agreement or such other date or dates as may be specified in the Contribution Agreement and are subject to more recent developments which may not be publicly disclosed.

        Accordingly, the representations and warranties in the Contribution Agreement may not describe the actual state of affairs as of the date they were made or at any other time.

        The representations and warranties made by both Eagle Rock and the Regency Parties relate to, among other things:

    organization, formation, qualification and similar matters;

    limited liability company or partnership power and authority with respect to the execution and delivery of the Contribution Agreement, and the due and valid execution and delivery and enforceability of the Contribution Agreement;

    required consents and approvals of governmental authorities or any other person in connection with the transactions contemplated by the Contribution Agreement;

    absence of conflicts with, or violations of, organizational documents, other contracts, permits and applicable laws;

    documents filed with the SEC and financial statements included in those documents;

    absence of certain changes since September 30, 2013;

    compliance with applicable laws and permits;

    environmental matters;

    title to properties and rights of way;

    litigation;

    tax matters;

    intellectual property;

    books and records;

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    insurance; and

    financial advisors.

        In addition, the representations and warranties made by only Eagle Rock relate to, among other things:

    the ownership, due authorization and transfer of the Contributed Interests;

    absence of undisclosed liabilities;

    material contracts;

    employee benefits;

    information supplied in the Exchange Offer documents; and

    matters relating to the equity consideration.

        In addition, the representations and warranties made by only the Regency Parties relate to, among other things:

    capital structure;

    matters related to the acquisition of the Contributed Interests;

    the Exchange Offer documents; and

    funds available for the cash consideration payable to Eagle Rock on the closing date of the Contribution Agreement.


Indemnification

        Eagle Rock has agreed to indemnify the Regency Parties and their affiliates, and each of their respective officers and directors (the "Regency Indemnitees"), against all losses actually incurred by the Regency Indemnitees based upon, resulting from or arising out of: (1) the portion of Eagle Rock's business retained after the Contribution (including Eagle Rock's upstream business) and any assets and contracts transferred to Eagle Rock in connection with the Pre-Closing Transfers; (2) this proxy statement (except for losses based upon untrue or alleged untrue statements in or omissions or alleged omissions from the proxy statement in reliance upon or related to information furnished to Eagle Rock by Regency); (3) Eagle Rock's breach of its representations regarding (a) its existence and good standing, (b) the validity of and the Eagle Rock's authority to enter into the Contribution Agreement, (c) Eagle Rock's ownership, authorization and transfer of the Contributed Interests, (d) indebtedness of the Midstream Entities, (e) financial advisors, (f) Eagle Rock's breach after the closing of the Contribution of the confidentiality, non-compete or insurance provisions of the Contribution Agreement or (g) certain taxes of Eagle Rock; (4) Eagle Rock's breach after the closing of the Contribution of the covenants relating to public announcements, registration rights, confidentiality, employees and employee benefits, non-solicitation and non-competition, cooperation, insurance and other matters; (5) certain tax matters; and (6) matters relating to Eagle Rock's employee benefit plans and related matters.

        The Regency Parties have agreed to indemnify Eagle Rock and its affiliates and each of their respective officers, employees, directors and equity holders (the "Eagle Rock Indemnitees") against all losses actually incurred by the Eagle Rock Indemnitees based upon, resulting from or arising out of: (1) the midstream business, including any assets and contracts transferred to any Regency Party in connection with the Pre-Closing Transfers; (2) any untrue statement or omission from the proxy statement in reliance upon or related to information furnished to the Eagle Rock by a Regency Party; (3) Regency's breach of its representations regarding (a) its existence, (b) the validity of and Regency's

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authority to enter into the Contribution Agreement, (c) Regency's capitalization, (d) certain matters relating to Regency's acquisition of the Contributed Interests, (e) Regency's tax treatment as a partnership and Regal's tax treatment as a disregarded entity, (f) the absence of any consents required on behalf of Regency, or (g) financial advisors; (4) a Regency Party's breach after the closing of the Contribution of the covenants relating to registration rights, confidentiality, employees and employee benefits, use of name, retention of books and records, guarantees, cooperation, insurance, NYSE listing and other matters; (5) certain tax matters; and (6) Regency's use of the Carve-Out Financial Statements (except to the extent and only to the extent that such Carve-Out Financial Statements do not fairly present in all material respects the financial position of the midstream business as of the dates thereof and the results of operations and cash flows for the periods then-ended (subject, in the case of unaudited quarterly statements, to normal year-end adjustments).


Registration Rights Agreement

        In connection with the closing of the Contribution, Regency has agreed to enter into a registration rights agreement with Eagle Rock, substantially in the form attached as an exhibit to the Contribution Agreement, whereby Regency will grant Eagle Rock certain registration rights with respect to the Regency common units it will receive as equity consideration in connection with the closing of the Contribution.


Voting and Support Agreement

        In connection with the execution of the Contribution Agreement, on December 23, 2013, the NGP Parties entered into the Voting and Support Agreement. Pursuant to the terms of the Voting and Support Agreement, the NGP Parties agreed to vote all of their Eagle Rock common units beneficially owned, representing approximately 32.2% of the Eagle Rock common units as of December 23, 2013, in favor of the approval of the Contribution Agreement and the Contribution.

        Pursuant to its terms, the Voting and Support Agreement will terminate on the earliest to occur of (1) the date of the termination of the Contribution Agreement, (2) a Change in Recommendation, (3) the effectiveness of the closing of the Contribution, (4) 5:00 p.m. Dallas time on July 31, 2014 and (5) the effective date of any waiver, amendment or other modification of the Contribution Agreement that materially reduces the consideration payable to Eagle Rock or is otherwise materially adverse to Eagle Rock's common unitholders.


Limited Waiver

        In connection with the execution of the Contribution Agreement, upon the Eagle Rock Conflicts Committee granting "special approval" and making a recommendation to the Eagle Rock Board, the Eagle Rock Board authorized Eagle Rock to grant, and Eagle Rock granted, the NGP Parties the Limited Waiver solely to the extent necessary to allow each of the NGP Parties to enter into and comply with its obligations under the Voting and Support Agreement until such time as the Voting and Support Agreement is amended, modified or terminated.


Additional Agreements

        The Contribution Agreement also contains certain other material covenants and agreements, including covenants and agreements relating to:

    the preparation of this proxy statement by Eagle Rock;

    confidentiality and access by each party to certain information about the other party during the period prior to the closing date of the Contribution Agreement;

    public announcements;

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    undertaking commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things, necessary, proper or advisable to cause the conditions to the closing to be satisfied as promptly as reasonably practicable (and in any event no later than the Outside Date) and to consummate and make effective the Contribution;

    employees and employee benefits;

    causing the Regency common units to be issued in connection with the Contribution to be approved for listing on the NYSE;

    the release of the Released Parties from any and all losses, claims, demands, rights, encumbrances, covenants or proceedings, of whatever kind or nature in law, equity or otherwise, whether known or unknown, and whether or not concealed or hidden, all of which any Midstream Entity now owns or holds or has at any time owned or held or may hereafter own or hold against any Released Party at any time, which arise out of actions taken or omissions made, prior to the closing date of the Contribution Agreement, in respect of the business, affairs and governance and management of any Midstream Entity;

    the release of each of the obligations of Eagle Rock to guaranty any liability of any Midstream Entity; and

    the consummation of the Pre-Closing Transfers.

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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE CONTRIBUTION

General

        The following is a discussion of the material U.S. federal income tax consequences of the Contribution that may be relevant to current Eagle Rock public common unitholders. This discussion is based upon the current provisions of the Internal Revenue Code, existing final and proposed Treasury regulations promulgated under the Internal Revenue Code (the "Treasury Regulations"), administrative rulings and judicial decisions now in effect, all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. Eagle Rock has not sought a ruling from the Internal Revenue Service, which is referred to as the "IRS," with respect to any of the tax matters discussed below, and the IRS would not be precluded from taking positions contrary to those described herein. As a result, no assurance can be given that the IRS will agree with all of the tax characterizations and the tax consequences described below.

        This discussion does not purport to be a complete description of all U.S. federal income tax consequences of the Contribution to the unitholders of Eagle Rock. Moreover, this discussion focuses on unitholders of Eagle Rock who are individual citizens or residents of the United States and has only limited application to corporations, estates, trusts, nonresident aliens, other unitholders subject to specialized tax treatment, such as tax-exempt institutions, non-U.S. persons, individual retirement accounts (IRAs), real estate investment trusts (REITs), mutual funds (RICs), dealers in securities or currencies, traders in securities that elect to mark-to-market, unitholders who acquired Eagle Rock units from Eagle Rock in exchange for property other than cash (and those who acquired their units from such unitholders other than by purchase through a national securities exchange), affiliates of Eagle Rock's general partner, or persons who hold Eagle Rock common units as part of a hedge, straddle or conversion transaction. Also, this discussion assumes that Eagle Rock common units are held as capital assets (within the meaning of Section 1221 of the Internal Revenue Code) at the time of the Contribution. Furthermore, except as specifically provided, this discussion does not address the tax considerations arising under the U.S. federal estate or gift tax laws or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable treaty.

        Other than as described herein, no discussion is given with respect to any other tax matters arising from the Contribution. Moreover, the discussion herein assumes that the Contribution is consummated in the manner contemplated by, and in accordance with, the terms set forth in the Contribution Agreement and described in this proxy statement.

        Eagle Rock unitholders should consult with, and must rely on, their own tax advisors in analyzing the federal, state, local and foreign consequences particular to them of the Contribution in light of their own particular circumstances, including the possible effects of changes in federal or other tax laws.


Tax Treatment of the Contribution

        Pursuant to the Contribution Agreement, Regency has represented to us that it is properly classified as a partnership for U.S. federal income tax purposes and that Regal is disregarded as separate from Regency for U.S. federal income tax purposes, and as described in more detail under "The Contribution Agreement—Consideration for the Contribution", Eagle Rock will transfer the Contributed Interests to Regal in exchange for $520 million in cash and Regency common units, the assumption by Regency of up to $550 million in Eagle Rock Notes, and if less than $550 million in Eagle Rock Notes are assumed, an additional cash payment.

        No gain or loss generally will be recognized by a contributor, such as Eagle Rock, upon the contribution of property to a partnership, such as Regency, in exchange for an interest in the

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partnership. Likewise, gain generally will not be recognized upon a distribution by a partnership to a partner except to the extent that any money or marketable securities distributed exceeds the adjusted basis of such partner's interest in the partnership immediately before the distribution. Such gain will generally be capital gain. If a partnership assumes a liability of a partner, or takes contributed property subject to a liability, the portion of the liability allocated to other partners is treated as a cash distribution from the partnership to the contributing partner. Actual or deemed cash distributions will decrease the contributing partner's basis in his partnership interest, but not below zero.

        Notwithstanding the general nonrecognition rules described above, in a set of rules referred to as the "disguised sale rules," the Internal Revenue Code and Treasury Regulations treat related contributions of property to and distributions from a partnership (including the assumption of certain liabilities by the partnership) as though the contributing partner sold the property to the partnership. As a result, the transaction may result in taxable gain to the partner. If a partner transfers property to a partnership and the partnership transfers money or other consideration (including the assumption of certain liabilities by the partnership) to the partner within a two year period, the transfers are presumed to be related unless the facts and circumstances clearly establish otherwise.

        The disguised sale rules include a number of exceptions to the disguised sale treatment, including distributions in reimbursement of certain capital expenditures (the "CapEx Reimbursement Exception") and the assumption of certain qualified liabilities (the "Qualified Liabilities Exception"). Pursuant to the CapEx Reimbursement Exception, a distribution to a contributing partner will not be treated as part of a disguised sale to the extent the distribution reimburses the partner for, and does not exceed the amount of, capital expenditures that were incurred by the partner with respect to the contributed property during the two-year period preceding the transfer of the property to the partnership. The CapEx Reimbursement Exception is generally limited to 20 percent of the fair market value of the contributed property.

        Pursuant to the Qualified Liabilities Exception, if the partnership assumes a liability which is, or takes property subject to, a "qualified liability," the partnership will not be treated as transferring consideration to the partner for the contributed property as a result of the existence of the debt. However, if a transfer of property by a partner to the partnership is treated as part of a sale without regard to the partnership's assumption of or taking the property subject to the qualified liability, a portion of the qualified liability may nevertheless be treated as consideration as part of a sale. Among the liabilities that are treated as qualified liabilities are (1) liabilities incurred by the partner more than two years prior to the agreement to transfer the property to the partnership and encumbering the transferred property throughout that two-year period, and (2) liabilities allocable to capital expenditures with respect to the contributed property.

        Pursuant to the Contribution Agreement, Eagle Rock and Regency intend to treat the Contribution (1) in part, as a contribution consistent with the Internal Revenue Code of a portion of the assets owned by the Midstream Entities (the "Midstream Assets") to Regency in exchange for (a) Regency common units, (b) cash distribution as reimbursement of certain capital expenditures in accordance with the CapEx Reimbursement Exception and (c) the assumption of some portion of Eagle Rock Notes which are qualified liabilities (such portion of the Contribution being referred to as the "Contributed Portion") and, (2) in part, as a disguised sale under Internal Revenue Code Section 707(a)(2)(B) of the remaining portion of the Midstream Assets to Regency in exchange for the remaining cash and assumption of the remainder of Eagle Rock Notes (such portion of the Contribution being referred to as the "Sale Portion").

        Generally, the Contributed Portion should not result in the recognition of gain or loss to Eagle Rock except to the extent that Eagle Rock receives or is treated as receiving a cash distribution in excess of its basis in the Regency units it receives in exchange for the Contributed Portion. However, the Sale Portion will generally result in the recognition of gain to Eagle Rock. A portion of any such

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gain allocated to the existing common unitholders, determined by reference to the amount of depreciation previously allocated to the unitholders with respect to the Midstream Assets, may be subject to recapture and taxed as ordinary income, with the remainder generally being treated as capital gain. The exact amount of any such gain and ordinary income to be allocated to a common unitholder will depend on numerous factors, including the price paid by the unitholder for its Eagle Rock common units (and the basis adjustment to such unitholder's share of Eagle Rock common basis under Section 743(b) of the Internal Revenue Code) and the deductions previously allocated to such unitholder in respect of the Midstream Assets. Because a unitholder's share of Eagle Rock's trade or business losses and deductions are subject to passive loss limitations, unitholders subject to the passive loss rules may have suspended passive losses from prior periods that are available to offset any ordinary income or capital gain resulting from the Contribution. The amount of ordinary income and capital gain that Eagle Rock anticipates being allocable to the common unitholders as a result of the Contribution are reflected in Eagle Rock's projections described below under the heading "—Estimate of Taxable Income and Capital Gain Allocable to Common Unitholders."


Estimate of Taxable Income and Capital Gain Allocable to Common Unitholders

        Eagle Rock estimates that if the Contribution is carried out in accordance with the Contribution Agreement, it will result in an allocation of gain to most of the Eagle Rock common unitholders, as provided below. As a result of prior depreciation deductions allocated to the unitholders with respect to the midstream business, and rules regarding recapture of such tax deductions in excess of economic depreciation, Eagle Rock anticipates that a substantial portion of the gain is likely to be treated as ordinary income. Any such ordinary income or gain represents the portion of the built-in gain inherent in the unitholders' units that is attributable to the midstream business. As a result, any income and gain recognized from the Contribution by a unitholder will provide such unitholder an increase in the basis of its units, which will reduce the amount of income and gain that would otherwise have been recognized by that unitholder on a sale of such units. However, Eagle Rock also anticipates that many of the Eagle Rock common unitholders are subject to passive loss limitations and have suspended passive loss carryforwards that may offset some or all of the ordinary income or capital gain resulting from the Contribution.

        The amount of taxable income and capital gain allocated to an existing Eagle Rock common unitholder resulting from the Contribution will depend upon the unitholder's particular situation, including when the unitholder purchased its Eagle Rock common units (and the basis adjustment to such unitholder's share of Eagle Rock common units under Section 743(b) of the Internal Revenue Code) and the ability of the unitholder to utilize any suspended passive losses. While Eagle Rock anticipates that existing common unitholders have suspended passive losses, Eagle Rock does not track each unitholder's suspended passive losses. However, Eagle Rock believes that a unitholder subject to the passive loss rules would have suspended passive loss with respect to each Eagle Rock common unit of at least as much as the cumulative taxable loss (if any) allocated to such unitholder with respect to such unit. Depending on these factors, any particular unitholder may, or may not, be able to offset all or a portion of the additional taxable income or capital gain allocated to such unitholder.

        The estimates below are based upon numerous assumptions. For example, in making these estimates, Eagle Rock has assumed that (i) the Contribution is completed in accordance with the Contribution Agreement; (ii) all $550,000,000 of the Eagle Rock Notes are tendered to and assumed by Regency; and (iii) Eagle Rock is allocated a portion of Regency's nonrecourse liabilities equal to Eagle Rock's anticipated proportionate share of the Regency common units multiplied by the total anticipated liabilies of Regency as of the closing of the Contribution. If these assumptions or others prove not to be accurate, the income or gain estimated may be substantially more or less than anticipated. Moreover, the estimates below are applicable to common unitholders who purchased their units for cash in public offerings or in open market transactions via the Nasdaq exchange. The estimates below

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are not applicable to holders of common units who received their units in exchange for non-cash property contributions.

        In addition, these estimates are based on current tax law and tax reporting positions that Eagle Rock will adopt and with which the IRS could disagree. The IRS could take the position that less of the cash received by Eagle Rock satisfies the CapEx Reimbursement Exception in consideration of the Contributed Portion and should instead be considered to have been received as consideration for the Sale Portion. Likewise, the IRS could take the position that less of the Eagle Rock Notes are qualified liabilities assumed in consideration for the Contributed Portion and thus result in additional deemed cash distribution as consideration for the Sale Portion. Any such position the IRS takes on the Contribution that is different from the position taken by Eagle Rock, if ultimately found to be correct, would increase any gain recognized on the Sale Portion, which would affect the estimates. Accordingly, no assurance can be given that these estimates will prove to be correct.

        There may be exceptions to the projections described below for certain unitholders in special circumstances. For example, unitholders who acquired their units by exercising Eagle Rock rights or warrants may have more ordinary income or less cumulative taxable loss than purchasers of units on the open market for the same periods.

Date of Common Unit Purchase
  Ordinary Income and
Capital Gain per
Unit Resulting from
the Contribution
  Ordinary Income and Capital Gain per Unit Resulting from the Contribution In Excess of Cumulative Taxable Loss From Purchase Through December 31, 2013

Prior to December 2008

  $3.25 - $4.15   $0

December 2008 - December 2009

  $4.10 - $4.75   Less than $4.10

January 2010 - June 2010

  $3.50 - $3.85   $0

July 2010 - March 2011

  $2.95 - $4.00   Less than $.95

April 2011 - July 2012

  $2.35 - $4.20   Less than $2.60

August 2012 - Present

  $1.25 - $2.80   Less than $1.70

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth the beneficial ownership of our units as of March 6, 2014 held by (1) each person or group of persons who beneficially own 5% or more of our common units; (2) each director of the Eagle Rock Board; (3) each named executive officer of Eagle Rock during 2012 and 2013; and (4) all current directors and executive officers of Eagle Rock Energy G&P LLC as a group.

        Footnote 3 to the following table provides a brief explanation of what is meant by the term "beneficial ownership." The number of common units and the percentages of beneficial ownership are based on 159,390,793 common units outstanding as of March 6, 2014, and the number of units owned or acquirable within 60 days of March 6, 2014 by the named person assuming no other person acquires additional units, with the exception of the amounts reported in filings on Schedule 13D, which amounts are based on holdings as disclosed in such filings. The amounts presented may not add due to rounding.

Name of Beneficial Owner(1)(2)(3)
  Common Units
Beneficially Owned
  % of Common Units
Beneficially Owned

Kenneth A. Hersh(7)

  51,386,169   32.2%

Montierra Minerals & Production, L.P.(4)(5)(7)

    6,224,449     3.9%

Joseph A. Mills(6)

       952,850       *%

Jeffrey P. Wood(6)

       403,274       *%

Charles C. Boettcher(6)

       361,327       *%

Joseph E. Schimelpfening(6)

       347,540       *%

Steven G. Hendrickson(6)

       255,782       *%

Roger A. Fox(6)

       175,973       *%

Robert D. Hallett(6)

       137,425       *%

David W. Hayes

   

Peggy A. Heeg(6)

         39,074       *%

William J. Quinn

         17,000       *%

Christopher D. Ray

   

Philip B. Smith(6)

         68,016       *%

William A. Smith(6)

         59,528       *%

William K. White(6)

         65,655       *%

Herbert C. Williamson, III(6)

         39,074       *%

All directors and executive officers as a group (15 persons)

    2,922,518     1.8%

*
Represents less than 1% of the common units outstanding as of March 6, 2014.

(1)
Unless otherwise indicated, the address for all beneficial owners in this table is 1415 Louisiana Street, Suite 2700, Houston, Texas 77002.

(2)
All units are subject to the beneficial owner's sole voting and dispositive power unless otherwise indicated in the footnotes below.

(3)
"Beneficial ownership" is a term broadly defined by the SEC in Rule 13d-3 under the Exchange Act and includes more than the typical forms of unit ownership, that is, common units held in the person's name. The term also includes what is referred to as "indirect ownership" meaning ownership of units as to which a person has or shares investment or voting power, or a person who, through a trust or proxy, prevents the person from having beneficial ownership. For the purpose of this table, a person or group of persons is deemed to have "beneficial ownership" of any common units as of March 6, 2014, if that person or group has the right to acquire common units within 60 days after such date.

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(4)
See footnote (5) below for a description of NGP VII's ownership and control of this beneficial owner.

(5)
NGP VII, Joseph A. Mills, Steven G. Hendrickson and Joseph E. Schimelpfening, based on equity ownership and profits interests in Montierra Minerals & Production, L.P. ("Montierra") and Montierra Management LLC, have the right to receive distributions (based on equity units only, as no tier of incentive interests has achieved payout target) in the following percentages, respectively: 96.9%, 1.9%, 0.1% and 0.1%. NGP VII appoints three managers on the board of Montierra Management LLC ("Montierra Management"), which serves as the general partner of Montierra. NGP VII also owns a majority limited partner interest in Montierra Management, and thus may be deemed to beneficially own all of the reported securities of Montierra Management and Montierra.

(6)
The information provided in this footnote is as of the date of this proxy statement and the referenced vesting is subject to the terms and conditions of our Current LTIP and the applicable award agreement(s) covering the grant(s) of such restricted common units.


Joseph A. Mills beneficially owns 952,850 common units, 405,850 of which are unvested restricted common units. Of the 405,850 unvested common units, 219,150 common units will vest within one year, 118,700 additional common units will vest within two years and the remaining 68,000 common units will vest within three years.


Jeffrey P. Wood beneficially owns 403,274 common units, 160,850 of which are unvested restricted common units. Of the 160,850 unvested common units, 81,850 common units will vest within one year, 48,400 additional common units will vest within two years and the remaining 30,600 common units will vest within three years.


Charles C. Boettcher beneficially owns 361,327 common units, 125,650 of which are unvested restricted common units. Of the 125,650 unvested common units, 63,450 common units will vest within one year, 38,400 additional common units will vest within two years and the remaining 23,800 common units will vest within three years.


Joseph E. Schimelpfening beneficially owns 347,540 common units, 125,650 of which are unvested restricted common units. Of the 125,650 unvested common units, 63,450 common units will vest within one year, 38,400 additional common units will vest within two years and the remaining 23,800 common units will vest within three years.


Steven G. Hendrickson beneficially owns 255,782 common units, 122,300 of which are unvested restricted common units. Of the 122,300 unvested common units, 61,800 common units will vest within one year, 36,700 additional common units will vest within two years and the remaining 23,800 common units will vest within three years.


Roger A. Fox beneficially owns 175,973 common units, 152,000 of which are unvested restricted common units. Of the 152,000 unvested common units, 52,800 common units will vest within one year, 78,800 additional common units will vest within two years and the remaining 20,400 common units will vest within three years.


Robert D. Hallett beneficially owns 137,425 common units, 111,730 of which are unvested restricted common units. Of the 111,730 unvested common units, 50,110 common units will vest within one year, 41,220 additional common units will vest within two years and the remaining 20,400 common units will vest within three years.


Peggy A. Heeg beneficially owns 39,074 common units, 16,061 of which are unvested restricted common units. Of the 16,061 unvested common units, 7,448 will vest within one year, 5,685 will vest within two years and the remaining 2,928 common units will vest within three years.

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Philip B. Smith beneficially owns 68,016 common units, 16,061 of which are unvested restricted common units. Of the 16,061 unvested common units, 7,448 will vest within one year, 5,685 will vest within two years and the remaining 2,928 common units will vest within three years.


William A. Smith beneficially owns 59,528 common units, 16,061 of which are unvested restricted common units. Of the 16,061 unvested common units, 7,448 will vest within one year, 5,685 will vest within two years and the remaining 2,928 common units will vest within three years.


William K. White beneficially owns 65,655 common units, 16,061 of which are unvested restricted common units. Of the 16,061 unvested common units, 7,448 will vest within one year, 5,685 will vest within two years and the remaining 2,928 common units will vest within three years.


Herbert C. Williamson, III beneficially owns 39,074 common units, 16,061 of which are unvested restricted common units. Of the 16,061 unvested common units, 7,448 will vest within one year, 5,685 will vest within two years and the remaining 2,928 common units will vest within three years.

(7)
G.F.W. Energy VII, L.P., GFW VII, L.L.C., G.F.W. Energy VIII, L.P. and GFW VIII, L.L.C. may be deemed to beneficially own the units held by or attributable to Natural Gas Partners VII, L.P. ("NGP VII") and Natural Gas Partners VIII, L.P. ("NGP VIII") by virtue of GFW VII, L.L.C. being the general partner of G.F.W. Energy VII, L.P. (which is the general partner of NGP VII) and GFW VIII, L.L.C. being the general partner of G.F.W. Energy VIII, L.P. (which is the general partner of NGP VIII). Kenneth A. Hersh, who is an Authorized Member of each of GFW VII, L.L.C. and GFW VIII, L.L.C., may also be deemed to share the power to vote, or to direct the vote, and to dispose, or to direct the disposition, of those units. NGP VII owns a majority limited partner interest in Montierra. NGP VII controls Montierra Management LLC, the general partner of Montierra. NGP VII owns 100% of NGP Income Management L.L.C. ("NGP Income Management") and Eagle Rock Holdings NGP 7, LLC ("ERH NGP 7"), and ERH NGP 7 owns 100% of ERH NGP 7 SVP, LLC ("SVP 7"). NGP VII may be deemed to beneficially own all of the units of each of NGP Income Management and SPV 7 (collectively, the "NGP VII Subsidiary Units"). NGP VIII owns 100% of Eagle Rock Holdings NGP 8, LLC ("ERH NGP 8"), and ERH NGP 8 owns 100% of ERH NGP 8 SPV, LLC ("SPV 8"). NGP VIII may be deemed to beneficially own all of the units of SPV 8 (the "NGP VIII Subsidiary Units"). In addition to the amounts deemed beneficially owned, NGP VII also has direct beneficial ownership of 3,004,733 units, and NGP VIII also has direct beneficial ownership of 31,429,939 units, as reported on Schedule 13D/A dated and filed with the SEC as of December 30, 2013. Kenneth A. Hersh may be deemed to share dispositive power over the units held by NGP VII and NGP VIII; thus, he may also be deemed to be the beneficial owner of the NGP VII Subsidiary Units and the NGP VIII Subsidiary Units. Mr. Hersh disclaims beneficial ownership of our units except to the extent of his pecuniary interest therein.

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WHERE YOU CAN FIND MORE INFORMATION

        We file annual, quarterly and special reports, proxy statements and other information with the SEC. These reports, proxy statements and other information contain additional information about us. We will make these materials available for inspection and copying by any of our unitholders, or a representative of any unitholder who is so designated in writing, at its principal executive offices during regular business hours.

        We also make available on our website (www.eaglerockenergy.com) under "Investor Relations" the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports that we file. Unless explicitly stated otherwise herein, the information on our website is not incorporated by reference into this proxy statement.

        Eagle Rock unitholders may read and copy any reports, statements or other information that we file at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings with the SEC are also available to the public from commercial document retrieval services and at the website maintained by the SEC located at: www.sec.gov.

        The SEC allows us to "incorporate by reference" information into this proxy statement. This means that we may disclose important information by referring to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement. This proxy statement and the information that we file later with the SEC may update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the information in this proxy statement. In addition to such documents specifically incorporated by reference in this proxy statement, we incorporate by reference in this proxy statement each document that Eagle Rock files under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial filing of this proxy statement and before the special meeting, other than information furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K. We also incorporate by reference into this proxy statement the following documents filed by us with the SEC under the Exchange Act:

    Annual Report on Form 10-K for the year ended December 31, 2013; and

    Current Reports on Form 8-K and Form 8-K/A filed with the SEC on January 28, 2014, February 27, 2014 and February 28, 2014 (three filings).

        Eagle Rock will provide a copy of any document incorporated by reference in this proxy statement and any exhibit specifically incorporated by reference in those documents, without charge, by written or oral request directed to Eagle Rock at the following address and telephone number:

      Eagle Rock Energy Partners, L.P.
      1415 Louisiana Street, Suite 2700
      Houston, Texas 77002
      Attention: Investor Relations
      Telephone: (281) 408-1200

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        or to our proxy solicitation agent at:

      Morrow & Co., LLC
      470 West Avenue—3rd Floor
      Stamford, CT 06902
      Banks and Brokerage Firms, please call (203) 658-9400
      Unitholders, please call toll-free (800) 449-0910

        In addition, we incorporate by reference into this proxy statement each document that Regency files under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial filing of this proxy statement and before the special meeting, other than information furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K. We also incorporate by reference into this proxy statement the following documents filed by Regency with the SEC under the Exchange Act:

    Annual Report on Form 10-K for the year ended December 31, 2013; and

    Current Reports on Form 8-K and 8-K/A filed with the SEC on January 24, 2014, January 28, 2014, February 5, 2014 (two filings), February 10, 2014, February 20, 2014, February 21, 2014, March 3, 2014 and March 14, 2014.

        Regency will provide a copy of any document incorporated by reference in this proxy statement and any exhibit specifically incorporated by reference in those documents, without charge, by written or oral request directed to Eagle Rock at the following address and telephone number:

      Regency Energy Partners LP
      Investor Relations
      2001 Bryan Street, Suite 3700
      Dallas, Texas 75201
      (214) 750-1771

        The opinions of Evercore and Citi will be made available for inspection and copying at the principal executive offices of Eagle Rock during regular business hours by any interested unitholder of Eagle Rock or such unitholder's representative who has been so designated in writing.

        This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any offer or solicitation in that jurisdiction. The delivery of this proxy statement should not create an implication that there has been no change in our affairs since the date of this proxy statement or that the information herein is correct as of any later date regardless of the time of delivery of this proxy statement.

        The provisions of the Contribution Agreement are extensive and not easily summarized. You should carefully read the Contribution Agreement attached to this proxy statement because it is the legal document that governs the Contribution and related transactions. In addition, you should read "The Contribution Agreement."

        The Contribution Agreement contains representations and warranties by each of the parties to such agreement. These representations and warranties have been made solely for the benefit of the other parties to such agreement and:

    may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

    have been qualified by disclosures that were made to the other party in connection with the negotiation of the Contribution, which disclosures are not reflected in the associated agreement;

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    may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

    were made only as of the date of the agreements or such other date or dates as may be specified in the Contribution Agreement and are subject to more recent developments.

        Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

        You should rely only on the information contained or incorporated by reference in this proxy statement to vote your common units at the special meeting. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated March 18, 2014. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, or that the information contained in any document incorporated by reference is accurate as of any date other than the date of the document incorporated by reference. The mailing of the proxy statement shall not create any implication to the contrary.

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ANNEX A

Execution Version

CONTRIBUTION AGREEMENT

BY AND AMONG

EAGLE ROCK ENERGY PARTNERS, L.P.

AS CONTRIBUTOR

AND

REGENCY ENERGY PARTNERS LP

AS ACQUIRER

AND

REGAL MIDSTREAM LLC

AS ACQUIRER SUB

DECEMBER 23, 2013


Table of Contents


TABLE OF CONTENTS

 
  Page  

ARTICLE I DEFINITIONS

    A-2  

Section 1.1 Definitions

   
A-2
 

Section 1.2 Interpretations

    A-2  

ARTICLE II CONTRIBUTION; REGISTRATION RIGHTS

   
A-2
 

Section 2.1 Contribution

   
A-2
 

Section 2.2 Closing

    A-2  

Section 2.3 Contribution Consideration, Closing Adjustment and Closing Payments

    A-2  

Section 2.4 Final Adjustment Amount

    A-3  

Section 2.5 Registration Rights Agreement

    A-5  

ARTICLE III REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR

   
A-5
 

Section 3.1 Existence and Good Standing

   
A-5
 

Section 3.2 Validity of Agreement; Authorization

    A-6  

Section 3.3 Consents and Approvals

    A-6  

Section 3.4 No Breach

    A-6  

Section 3.5 Ownership, Due Authorization and Transfer of Subject Interests

    A-7  

Section 3.6 Absence of Undisclosed Liabilities

    A-7  

Section 3.7 Contributor Financial Statements

    A-8  

Section 3.8 Absence of Certain Changes or Events

    A-9  

Section 3.9 Compliance with Applicable Law; Permits

    A-10  

Section 3.10 Material Contracts

    A-10  

Section 3.11 Environmental Matters

    A-12  

Section 3.12 Title to Properties and Rights of Way

    A-12  

Section 3.13 Litigation

    A-13  

Section 3.14 Tax Matters

    A-13  

Section 3.15 Employee Benefits

    A-14  

Section 3.16 Intellectual Property

    A-16  

Section 3.17 Financial Advisors

    A-16  

Section 3.18 Books and Records

    A-16  

Section 3.19 Insurance

    A-17  

Section 3.20 Information Supplied

    A-17  

Section 3.21 Matters Relating to Equity Consideration

    A-17  

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIRER PARTIES

   
A-17
 

Section 4.1 Existence

   
A-17
 

Section 4.2 Validity of Agreement; Authorization; Valid Issuance

    A-17  

Section 4.3 Capitalization

    A-19  

Section 4.4 Consents and Approvals

    A-20  

Section 4.5 No Breach

    A-20  

Section 4.6 Matters Relating to Acquisition of the Subject Interests

    A-20  

Section 4.7 Acquirer Financial Statements

    A-20  

Section 4.8 Absence of Certain Changes or Events

    A-21  

Section 4.9 Compliance with Applicable Law; Permits

    A-21  

Section 4.10 Environmental Matters

    A-21  

Section 4.11 Title to Properties and Rights of Way

    A-22  

Section 4.12 Litigation

    A-22  

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  Page  

Section 4.13 Tax Matters

    A-23  

Section 4.14 Intellectual Property

    A-23  

Section 4.15 Books and Records

    A-23  

Section 4.16 Insurance

    A-23  

Section 4.17 Exchange Offer Documents

    A-23  

Section 4.18 Available Funds

    A-24  

Section 4.19 Financial Advisors

    A-24  

ARTICLE V COVENANTS

   
A-24
 

Section 5.1 Consummation of the Transaction

   
A-24
 

Section 5.2 Conduct Pending the Closing

    A-26  

Section 5.3 Preparation of the Proxy Statement; Unitholder Meeting

    A-28  

Section 5.4 Alternative Proposals; Change in Recommendation

    A-29  

Section 5.5 Access to Information

    A-31  

Section 5.6 Public Statements

    A-32  

Section 5.7 Confidentiality

    A-33  

Section 5.8 Employees and Employee Benefits

    A-33  

Section 5.9 Use of Name

    A-37  

Section 5.10 Retention of Books and Records

    A-37  

Section 5.11 Midstream Permits

    A-37  

Section 5.12 Guarantees

    A-38  

Section 5.13 Restrictive Covenants

    A-38  

Section 5.14 Cooperation in Litigation

    A-39  

Section 5.15 Assistance Obligations of Acquirer

    A-39  

Section 5.16 Further Assurances

    A-39  

Section 5.17 Insurance

    A-40  

Section 5.18 Exchange Offer

    A-40  

Section 5.19 Privileged Matters; Waiver of Conflicts

    A-42  

Section 5.20 Pre-Closing Transfers

    A-42  

Section 5.21 NYSE Listing

    A-43  

ARTICLE VI CLOSING

   
A-43
 

Section 6.1 Conditions Precedent to Obligations of the Parties

   
A-43
 

Section 6.2 Conditions Precedent to Obligations of the Acquirer Parties

    A-43  

Section 6.3 Conditions Precedent to Obligations of Contributor

    A-44  

Section 6.4 Contributor Deliveries

    A-45  

Section 6.5 Acquirer Parties Deliveries

    A-45  

ARTICLE VII TAX MATTERS

   
A-46
 

Section 7.1 Pre-Closing Taxes

   
A-46
 

Section 7.2 Post-Closing Taxes

    A-46  

Section 7.3 Transfer Taxes

    A-47  

Section 7.4 Tax Treatment and Contribution Consideration Allocation

    A-47  

Section 7.5 Cooperation on Tax Matters

    A-48  

Section 7.6 Amended Tax Returns and Settlements

    A-48  

Section 7.7 Tax Refunds

    A-48  

ARTICLE VIII TERMINATION

   
A-48
 

Section 8.1 Termination of Agreement

   
A-48
 

Section 8.2 Procedure Upon Termination

    A-49  

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  Page  

Section 8.3 Effect of Termination

    A-49  

Section 8.4 Fees and Expenses

    A-49  

ARTICLE IX INDEMNIFICATION

   
A-50
 

Section 9.1 Survival of Representations and Warranties and Covenants

   
A-50
 

Section 9.2 Indemnification

    A-50  

Section 9.3 Contributor Representation Breach Adjustment

    A-51  

Section 9.4 Recovery from Third Persons; Mitigation

    A-53  

Section 9.5 Indemnification Procedures

    A-54  

Section 9.6 Further Limitations on Indemnification

    A-55  

Section 9.7 Characterization of Payments

    A-56  

Section 9.8 Release

    A-56  

ARTICLE X MISCELLANEOUS

   
A-57
 

Section 10.1 Amendments and Modifications

   
A-57
 

Section 10.2 Waiver of Compliance; Consents

    A-57  

Section 10.3 Notices

    A-57  

Section 10.4 Assignment

    A-57  

Section 10.5 Expenses

    A-58  

Section 10.6 Specific Performance

    A-58  

Section 10.7 Entire Agreement

    A-58  

Section 10.8 Governing Law

    A-59  

Section 10.9 Waiver of Jury Trial

    A-59  

Section 10.10 Consent to Jurisdiction; Venue

    A-59  

Section 10.11 No Reliance

    A-59  

Section 10.12 Severability

    A-59  

Section 10.13 Disclosure Schedules

    A-60  

Section 10.14 Third Party Beneficiaries

    A-60  

Section 10.15 Facsimiles; Electronic Transmission; Counterparts

    A-60  

Section 10.16 Time of Essence

    A-60  

EXHIBITS AND SCHEDULES

Exhibit A   Definitions; Interpretations     A-62  
Exhibit B   Form of Assignment and Assumption Agreement     A-75  
Exhibit C   Form of Registration Rights Agreement     A-80  
Exhibit D   Form of Opinion of Counsel of Acquirer     A-96  
Exhibit E   Transition Services Term Sheet     A-97  
Exhibit F   Form of Escrow Agreement     A-98  
Exhibit G   Form of Debt Assumption Agreement     A-111  
Exhibit H   Terms of Exchange Notes     A-114  

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CONTRIBUTION AGREEMENT

        This CONTRIBUTION AGREEMENT (this "Agreement"), dated as of December 23, 2013, is entered into by and between Eagle Rock Energy Partners, L.P., a Delaware limited partnership ("Contributor") and Regency Energy Partners LP, a Delaware limited partnership ("Acquirer"), and Regal Midstream LLC, a Delaware limited liability company and a wholly owned Subsidiary of Acquirer ("Acquirer Sub" and, together with Acquirer, the "Acquirer Parties").


RECITALS

        WHEREAS, Contributor owns (a) 100% of the equity interests in (i) Eagle Rock Marketing, LLC, a Delaware limited liability company ("Marketing LLC"), (ii) Eagle Rock Pipeline GP, LLC, a Delaware limited liability company ("Pipeline LLC") and (iii) Eagle Rock Gas Services, LLC, a Delaware limited liability company ("ERGS") and (b) 100% of the limited partner interests in (i) Eagle Rock Pipeline, L.P., a Delaware limited partnership ("Pipeline LP") and (ii) EROC Midstream Energy, L.P. ("Midstream LP"), a Delaware limited partnership (the interests referred to in clauses (a) and (b) collectively, the "Subject Interests");

        WHEREAS, the entities set forth in clauses (a) and (b) in the recital above, together with their direct and indirect Subsidiaries (collectively, the "Midstream Entities") will, after giving effect to the Pre-Closing Transfers, hold the assets and conduct the operations that collectively comprise Contributor's midstream business, as generally described as of December 31, 2012 in Contributor's Annual Report on Form 10-K for the period ended December 31, 2012, which is a business engaging in gathering, compressing, treating, processing and transporting natural gas; fractionating and transporting natural gas liquids; crude oil and condensate logistics and marketing; and natural gas marketing and trading, but excluding certain intercompany agreements between Marketing LLC and Escambia Asset Co. LLC, which will be terminated as described on the Pre-Closing Transfer Schedule (the "Midstream Business");

        WHEREAS, Acquirer desires to acquire the Subject Interests from Contributor, and Contributor desires to contribute the Subject Interests to Acquirer Sub (the "Midstream Contribution"), subject to the Everest Notes Indebtedness, in each case upon the terms and subject to the conditions set forth in this Agreement;

        WHEREAS, upon completion of the Midstream Contribution, Contributor will continue to own Contributor's upstream business, as generally described as of December 31, 2012 in Contributor's Annual Report on Form 10-K for the period ended December 31, 2012, which is a business engaging in developing and producing interests in oil and natural gas properties (the "Upstream Business"), as well as Contributor's Employee Benefit Plans and the commodity and interest rate derivative contracts not included in the Pre-Closing Transfer (together with the Upstream Business, the "Retained Business");

        WHEREAS, concurrently with the execution and delivery of this Agreement, as a condition and inducement to the willingness of the Acquirer Parties to enter into this Agreement, (a) Contributor has waived that certain Voting Agreement, dated May 3, 2011 by and between Natural Gas Partners VIII, L.P. ("NGP") and Contributor (the "Voting Agreement") to allow NGP to vote all Subject Securities (as defined in the Voting Agreement) Beneficially Owned (as defined in the Voting Agreement) by it without restriction in favor of the transactions contemplated herein at the Unitholder Meeting and any adjournment thereof, and (b) NGP and certain of its Affiliates are entering into a Voting and Support Agreement (the "Support Agreement") with Acquirer pursuant to which, among other things, NGP and certain of its Affiliates have agreed to vote all of Contributor's equity securities beneficially owned by them in favor of the transactions contemplated herein;

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        WHEREAS, in connection with the parties' entry into this Agreement and upon the written request of the Contributor, as promptly as practicable after the date hereof, Acquirer will commence the Exchange Offer of Exchange Notes for Everest Notes;

        NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Acquirer Parties and Contributor hereby agree as follows:


ARTICLE I
DEFINITIONS

        Section 1.1    Definitions.     Unless otherwise provided to the contrary in this Agreement, capitalized terms in this Agreement have the meanings set forth in Section 1.01 of Exhibit A.

        Section 1.2    Interpretations.     Unless expressly provided to the contrary in this Agreement, this Agreement shall be interpreted in accordance with the provisions set forth in Section 1.02 of Exhibit A.


ARTICLE II
CONTRIBUTION; REGISTRATION RIGHTS

        Section 2.1    Contribution.     Upon the terms and subject to the conditions of this Agreement, at the Closing,

        (a)   Acquirer shall assume from the Everest Note Issuers the Everest Notes validly tendered for exchange pursuant to the Exchange Offer and not withdrawn as of the Closing and accepted by Acquirer for exchange pursuant to the Debt Assumption Agreement;

        (b)   Contributor will contribute to Acquirer Sub, and Acquirer Sub will acquire from Contributor, the Subject Interests; and

        (c)   Immediately following the consummation of the transactions specified in clauses (a) and (b) of this Section 2.1, the Exchange Offer shall be consummated and Acquirer shall accept for exchange and exchange Everest Notes validly tendered and not withdrawn in the Exchange Offer for Exchange Notes, with accrued but unpaid interest on the Everest Notes to be accrued by Contributor through the Closing Date and paid to the Acquirer, settled in cash by the Acquirer, and the Acquirer shall return, or cause to be returned, any tendered Everest Notes that were so accepted for exchange to Everest for cancellation.

        Section 2.2    Closing.     The closing of the transactions contemplated hereunder (the "Closing") shall take place at the offices of Vinson & Elkins L.L.P., 1001 Fannin Street, Suite 2500, Houston, Texas 77002, commencing at 9:00 a.m., local time, on the second Business Day following the satisfaction or written waiver of the closing conditions set forth in Section 6.1, Section 6.2 and Section 6.3 (other than conditions that by their terms cannot be satisfied until Closing, but subject to the satisfaction or valid waiver of such conditions at Closing), or at such other place and on such other date or time as the Parties may mutually agree (the date on which the Closing takes place, the "Closing Date"). The Closing shall be deemed to be effective between the Parties as of 12:01 a.m. (Central Time) on the Closing Date.

        Section 2.3    Contribution Consideration, Closing Adjustment and Closing Payments.     

        (a)   The aggregate consideration for the Subject Interests shall be (i) $720,000,000 (the "Base Closing Payment"), as adjusted in accordance with this Agreement, consisting of cash and common units representing limited partner interests of Acquirer ("Acquirer Common Units"), (ii) the assumption by Acquirer, pursuant to the Debt Assumption Agreement, and exchange of up to $550,000,000 face amount of Exchange Notes in accordance with Section 2.1(c) for up to $550,000,000 face amount of Everest Notes that immediately after the transactions specified in clauses (a) and (b) of Section 2.1 are

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validly tendered for exchange and not withdrawn as of the Closing and the retirement and cancellation of up to $550,000,000 face value of the Everest Notes Indebtedness (the "Debt Assumption"), and (iii) if less than $550,000,000 face amount of Everest Notes are so tendered for exchange and not withdrawn as of the Closing, payment of the Exchange Offer Adjustment in accordance with Section 2.3(c)(iv) (collectively, the "Contribution Consideration"). As a result of the effect of clause (iii) of the preceding sentence, if no Everest Notes are exchanged in the Exchange Offer, the Contribution Consideration shall be $1,325,000,000.

        (b)   No later than three Business Days before the Closing Date, Contributor shall deliver or cause to be delivered to Acquirer, an estimated balance sheet of the Midstream Business as of 11:59 p.m. (Central Time) on the date immediately prior to the Closing Date (except as otherwise contemplated by this Agreement), which estimated balance sheet shall give effect to the Pre-Closing Transfers even if it has not yet been effected, (the "Closing Balance Sheet"), which sets forth a calculation of Working Capital Surplus or Working Capital Deficiency as of such time and date ("Estimated Working Capital Surplus" or "Estimated Working Capital Deficiency," respectively). The Closing Balance Sheet shall be prepared by Contributor in accordance with this Agreement in a manner consistent with, and using the same principles, policies, methods and practices used in, the preparation of the Financial Statements, except that it shall give effect to the Pre-Closing Transfers.

        (c)   On the Closing Date, Acquirer shall pay to Contributor an amount equal to the Base Closing Payment adjusted as follows:

              (i)  increased by the amount of any Estimated Working Capital Surplus;

             (ii)  decreased by the amount of any Estimated Working Capital Deficiency;

            (iii)  decreased by the amount of any Closing Contributor Representation Breach Adjustment, if any; and

            (iv)  increased by the Exchange Offer Adjustment, if any (the Base Closing Payment, as so adjusted pursuant to clauses (i) through (iv) being the "Closing Contribution Consideration").

        (d)   The Closing Contribution Consideration shall be paid on the Closing Date as follows:

              (i)  Cash in an amount equal to the Closing Contribution Consideration minus $200,000,000 (the "Closing Cash Consideration"), payable by wire transfer of immediately available funds to such account as shall be designated by Contributor at least one Business Day prior to Closing; and

             (ii)  8,245,859 Acquirer Common Units (such Acquirer Common Units, together with any additional Acquirer Common Units issued to Contributor in accordance with Section 2.4(d), being the "Equity Consideration") issued to Contributor and recorded on the books and records of Acquirer's transfer agent, together with an executed certificate of Acquirer's transfer agent, in a form acceptable to Contributor, certifying as to the book entry issuance of the Acquirer Common Units comprising the Equity Consideration.

        (e)   On the Closing Date, Contributor shall deliver to the Escrow Agent for deposit into the Escrow Account an amount in cash or immediately available funds equal to any disputed claims of Contributor Representation Breaches in accordance with Section 9.3(d).

        Section 2.4    Final Adjustment Amount.     

        (a)   As promptly as practicable after the Closing Date (but in no event later than 75 days after the Closing Date), Acquirer shall prepare and deliver to Contributor a balance sheet of the Midstream Business as of 11:59 p.m. on the date immediately prior to the Closing Date, together with a written report of Grant Thornton LLP stating that such firm has examined such balance sheet and that such balance sheet has been prepared in accordance with this Agreement and in a manner consistent with, and using the same principles, policies and methods and practices used in, the preparation of the

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Financial Statements, except that it shall give effect to the Pre-Closing Transfer (the "Final Balance Sheet"), which shall set forth the components of Working Capital to enable Contributor and Acquirer to calculate the amount of Working Capital ("Closing Working Capital") and the amount of Working Capital Surplus or Working Capital Deficiency, in each case, as of such time and date ("Closing Working Capital Surplus" or "Closing Working Capital Deficiency", as the case may be). The Final Balance Sheet shall be prepared in accordance with this Agreement in a manner consistent with, and using the same principles, policies, methods and practices used in, the preparation of the Financial Statements, except that it shall give effect to the Pre-Closing Transfer. Following the delivery of the Final Balance Sheet to Contributor, Acquirer shall afford Contributor and its Representatives the opportunity to examine the Final Balance Sheet, and such supporting schedules, analyses, workpapers, including any audit workpapers, and other underlying records or documentation as are reasonably necessary and appropriate. Acquirer shall cooperate fully and promptly with Contributor and its Representatives in such examination, including providing answers to questions asked by Contributor and its Representatives, and Acquirer shall promptly make available to Contributor and its Representatives any records under the reasonable control of Acquirer that are requested by Contributor and its Representatives.

        (b)   If within 45 days following delivery of the Final Balance Sheet to Contributor, Contributor has not delivered to Acquirer written notice (the "Objection Notice") of its objections to the Final Balance Sheet, then Closing Working Capital and Closing Working Capital Surplus or Closing Working Capital Deficiency, as applicable, as set forth in or derived from such Final Balance Sheet shall be deemed final and conclusive and shall be "Final Working Capital" and "Final Working Capital Surplus" or "Final Working Capital Deficiency," respectively. If Contributor delivers the Objection Notice within such 45 day period, then Acquirer and Contributor shall endeavor in good faith to resolve the objections for a period not to exceed 15 days from the date of delivery of the Objection Notice and the "Final Working Capital" and "Final Working Capital Surplus" or "Final Working Capital Deficiency" shall be determined pursuant to Section 2.4(c) .

        (c)   If at the end of the 15 day period referenced in the last sentence of Section 2.4(b), there are any objections that remain in dispute, then the remaining objections in dispute shall be submitted for resolution to an accounting firm to be selected jointly by Contributor and Acquirer within the following five days or, if the Contributor and Acquirer are unable to mutually agree within such five day period, such accounting firm shall be Ernst & Young LLP (such jointly selected accounting firm or Ernst & Young LLP, the "Referee"). Acquirer and Contributor shall concurrently submit written statements to the Referee (with a copy to the other party) setting forth their respective positions regarding the calculation of Final Working Capital and Final Working Capital Surplus or Final Working Capital Deficiency (each such written statement a "Position Statement"). The Referee shall determine any unresolved items of Final Working Capital and Final Working Capital Surplus or Final Working Capital Deficiency as promptly as reasonably practicable after the objections that remain in dispute are submitted to it, but in any event within 30 days after the objections that remain in dispute are submitted to it. If any objections are submitted to the Referee for resolution, (i) each of Acquirer and Contributor shall furnish to the Referee such workpapers and other documents and info