THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF COPANO ENERGY, L.L.C.
TABLE OF CONTENTS
Page | ||||||
ARTICLE I | ||||||
DEFINITIONS | ||||||
Section 1.1 |
Definitions | 1 | ||||
Section 1.2 |
Construction | 17 | ||||
ARTICLE II | ||||||
ORGANIZATION | ||||||
Section 2.1 |
Formation | 17 | ||||
Section 2.2 |
Name | 18 | ||||
Section 2.3 |
Registered Office; Registered Agent; Principal Office; Other Offices | 18 | ||||
Section 2.4 |
Purposes and Business | 18 | ||||
Section 2.5 |
Powers | 19 | ||||
Section 2.6 |
Power of Attorney | 19 | ||||
Section 2.7 |
Term | 20 | ||||
Section 2.8 |
Title to Company Assets | 20 | ||||
ARTICLE III | ||||||
RIGHTS OF MEMBERS | ||||||
Section 3.1 |
Members | 20 | ||||
Section 3.2 |
Management of Business | 21 | ||||
Section 3.3 |
Outside Activities of the Members | 21 | ||||
Section 3.4 |
Rights of Members | 21 | ||||
ARTICLE IV | ||||||
CERTIFICATES; RECORD HOLDERS; | ||||||
ISSUANCE AND TRANSFER OF INTERESTS; | ||||||
REDEMPTION OF INTERESTS | ||||||
Section 4.1 |
Certificates | 22 | ||||
Section 4.2 |
Mutilated, Destroyed, Lost or Stolen Certificates | 23 | ||||
Section 4.3 |
Record Holders | 23 | ||||
Section 4.4 |
Transfer Generally | 24 | ||||
Section 4.5 |
Registration and Transfer of Member Interests | 24 | ||||
Section 4.6 |
Restrictions on Transfers | 25 | ||||
Section 4.7 |
Citizenship Certificates; Non-citizen Assignees | 25 | ||||
Section 4.8 |
Redemption of Interests of Non-citizen Assignees | 26 | ||||
ARTICLE V | ||||||
CAPITAL CONTRIBUTIONS AND | ||||||
ISSUANCE OF INTERESTS | ||||||
Section 5.1 |
Initial Offering Transactions | 27 | ||||
Section 5.2 |
Contributions by Initial Members | 28 | ||||
Section 5.3 |
Contributions by the Existing Investors | 29 | ||||
Section 5.4 |
Interest and Withdrawal | 29 | ||||
Section 5.5 |
Capital Accounts | 29 |
i
Page | ||||||
Section 5.6 |
Issuances of Additional Company Securities | 32 | ||||
Section 5.7 |
Reserved | 33 | ||||
Section 5.8 |
Reserved | 33 | ||||
Section 5.9 |
No Preemptive Rights | 33 | ||||
Section 5.10 |
Splits and Combinations | 33 | ||||
Section 5.11 |
Fully Paid and Non-Assessable Nature of Interests | 33 | ||||
ARTICLE VI | ||||||
ALLOCATIONS AND DISTRIBUTIONS | ||||||
Section 6.1 |
Allocations for Capital Account Purposes | 34 | ||||
Section 6.2 |
Allocations for Tax Purposes | 39 | ||||
Section 6.3 |
Requirement and Characterization of Distributions; Distributions to Record Holders | 41 | ||||
Section 6.4 |
Distributions of Available Cash from Operating Surplus | 42 | ||||
Section 6.5 |
Distributions of Available Cash from Capital Surplus | 42 | ||||
Section 6.6 |
Adjustment of Minimum Quarterly Distribution and Target Distribution Levels | 42 | ||||
Section 6.7 |
Entity Level Taxation | 42 | ||||
ARTICLE VII | ||||||
MANAGEMENT AND OPERATION OF BUSINESS | ||||||
Section 7.1 |
Board of Directors | 43 | ||||
Section 7.2 |
Certificate of Formation | 47 | ||||
Section 7.3 |
Restrictions on the Board of Directors’ Authority | 48 | ||||
Section 7.4 |
Officers | 48 | ||||
Section 7.5 |
Outside Activities | 50 | ||||
Section 7.6 |
Loans or Contributions from the Company or Group Members | 51 | ||||
Section 7.7 |
Indemnification | 51 | ||||
Section 7.8 |
Exculpation of Liability of Indemnitees | 55 | ||||
Section 7.9 |
Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties | 56 | ||||
Section 7.10 |
Duties of Officers and Directors | 56 | ||||
Section 7.11 |
Purchase or Sale of Company Securities | 57 | ||||
Section 7.12 |
Reliance by Third Parties | 57 | ||||
Section 7.13 |
Reimbursement of G&A by the Existing Investors | 57 | ||||
ARTICLE VIII | ||||||
BOOKS, RECORDS, ACCOUNTING AND REPORTS | ||||||
Section 8.1 |
Records and Accounting | 60 | ||||
Section 8.2 |
Fiscal Year | 61 | ||||
Section 8.3 |
Reports | 61 | ||||
ARTICLE IX | ||||||
TAX MATTERS | ||||||
Section 9.1 |
Tax Returns and Information | 61 | ||||
Section 9.2 |
Tax Elections | 61 | ||||
Section 9.3 |
Tax Controversies | 62 | ||||
Section 9.4 |
Withholding | 62 |
ii
Page | ||||||
ARTICLE X | ||||||
DISSOLUTION AND LIQUIDATION | ||||||
Section 10.1 |
Dissolution | 62 | ||||
Section 10.2 |
Liquidator | 62 | ||||
Section 10.3 |
Liquidation | 63 | ||||
Section 10.4 |
Cancellation of Certificate of Formation | 64 | ||||
Section 10.5 |
Return of Contributions | 64 | ||||
Section 10.6 |
Waiver of Partition | 64 | ||||
Section 10.7 |
Capital Account Restoration | 64 | ||||
ARTICLE XI | ||||||
AMENDMENT OF AGREEMENT; MEETINGS OF MEMBERS; RECORD DATE | ||||||
Section 11.1 |
Amendment of Limited Liability Company Agreement | 64 | ||||
Section 11.2 |
Amendment Requirements | 66 | ||||
Section 11.3 |
Unitholder Meetings | 67 | ||||
Section 11.4 |
Notice of Meetings of Members | 68 | ||||
Section 11.5 |
Record Date | 68 | ||||
Section 11.6 |
Adjournment | 69 | ||||
Section 11.7 |
Waiver of Notice; Approval of Meeting | 69 | ||||
Section 11.8 |
Quorum; Required Vote for Member Action; Cumulative Voting for Directors | 69 | ||||
Section 11.9 |
Conduct of a Meeting; Member Lists | 70 | ||||
Section 11.10 |
Action Without a Meeting | 70 | ||||
Section 11.11 |
Voting and Other Rights | 70 | ||||
Section 11.12 |
Proxies and Voting | 71 | ||||
Section 11.13 |
Notice of Member Business and Nominations | 72 | ||||
ARTICLE XII | ||||||
MERGER | ||||||
Section 12.1 |
Authority | 75 | ||||
Section 12.2 |
Procedure for Merger or Consolidation | 75 | ||||
Section 12.3 |
Approval by Members of Merger or Consolidation | 76 | ||||
Section 12.4 |
Certificate of Merger | 77 | ||||
Section 12.5 |
Effect of Merger | 77 | ||||
Section 12.6 |
Business Combination Limitations | 77 | ||||
ARTICLE XIII | ||||||
RIGHT TO ACQUIRE MEMBER INTERESTS | ||||||
Section 13.1 |
Right to Acquire Member Interests | 78 | ||||
ARTICLE XIV | ||||||
REGISTRATION RIGHTS | ||||||
Section 14.1 |
Registration Rights | 79 | ||||
Section 14.2 |
Registrable Securities | 80 | ||||
Section 14.3 |
Shelf Registration | 80 | ||||
Section 14.4 |
Underwritten Offerings | 81 | ||||
Section 14.5 |
Registration Procedures | 82 | ||||
Section 14.6 |
Cooperation by Existing Investors | 85 | ||||
Section 14.7 |
Restrictions on Public Sale by Existing Investors of Registrable Securities | 85 |
iii
Page | ||||||
Section 14.8 |
Expenses | 85 | ||||
Section 14.9 |
Indemnification | 86 | ||||
Section 14.10 |
Rule 144 Reporting | 88 | ||||
Section 14.11 |
Transfer or Assignment of Registration Rights | 88 | ||||
ARTICLE XV | ||||||
GENERAL PROVISIONS | ||||||
Section 15.1 |
Addresses and Notices | 89 | ||||
Section 15.2 |
Further Action | 90 | ||||
Section 15.3 |
Binding Effect | 90 | ||||
Section 15.4 |
Integration | 90 | ||||
Section 15.5 |
Creditors | 90 | ||||
Section 15.6 |
Waiver | 90 | ||||
Section 15.7 |
Counterparts | 90 | ||||
Section 15.8 |
Applicable Law | 90 | ||||
Section 15.9 |
Invalidity of Provisions | 90 | ||||
Section 15.10 |
Consent of Members | 90 |
iv
THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT OF COPANO ENERGY, L.L.C.
AGREEMENT OF COPANO ENERGY, L.L.C.
This THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF COPANO ENERGY, L.L.C.,
dated as of April 30, 2007 is entered into and effectuated by the Board of Directors of the
Company pursuant to authority granted to it in Section 11.1 of the Second Amended and Restated
Limited Liability Company Agreement of the Company dated November 15, 2004. In consideration of
the covenants, conditions and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the
contrary, applied to the terms used in this Agreement.
“Acquisition” means any transaction in which any Group Member acquires (through an asset
acquisition, merger, stock acquisition or other form of investment) control over all or a portion
of the assets, properties or business of another Person for the purpose of increasing the operating
capacity or revenue of the Company Group from the operating capacity or revenue of the Company
Group existing immediately prior to such transaction.
“Additional Book Basis” means the portion of any remaining Carrying Value of an Adjusted
Property that is attributable to positive adjustments made to such Carrying Value as a result of
Book-Up Events. For purposes of determining the extent that Carrying Value constitutes Additional
Book Basis:
(a) Any negative adjustment made to the Carrying Value of an Adjusted Property as a result of
either a Book-Down Event or a Book-Up Event shall first be deemed to offset or decrease that
portion of the Carrying Value of such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(b) If Carrying Value that constitutes Additional Book Basis is reduced as a result of a
Book-Down Event and the Carrying Value of other property is increased as a result of such Book-Down
Event, an allocable portion of any such increase in Carrying Value shall be treated as Additional
Book Basis; provided that the amount treated as Additional Book Basis as a result of such
Book-Down Event shall not exceed the amount by which the Aggregate Remaining Net Positive
Adjustments after such Book-Down Event exceed the remaining Additional Book Basis attributable to
all of the Company’s Adjusted Property after such Book-Down Event (determined without regard to the
application of this clause (ii) to such Book-Down Event).
“Additional Book Basis Derivative Items” means any Book Basis Derivative Items that are
computed with reference to Additional Book Basis. To the extent that the Additional Book Basis
attributable to all of the Company’s Adjusted Property as of the beginning of any taxable
period exceeds the Aggregate Remaining Net Positive Adjustments as of the beginning of such
period (the “Excess Additional Book Basis”), the Additional Book Basis Derivative Items for
1
such
period shall be reduced by the amount that bears the same ratio to the amount of Additional Book
Basis Derivative Items determined without regard to this sentence as the Excess Additional Book
Basis bears to the Additional Book Basis as of the beginning of such period.
“Additional G&A Cap” has the meaning assigned to such term in Section 7.13(b).
“Additional Member” means a Member admitted as a Member of the Company pursuant to Section 4.5
and who is shown as such on the books and records of the Company.
“Adjusted Capital Account” means the Capital Account maintained for each Member as of the end
of each fiscal year of the Company, (a) increased by any amounts that such Member is obligated to
restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed
obligated to restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of such fiscal year,
are reasonably expected to be allocated to such Member in subsequent years under Sections 704(e)(2)
and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of
all distributions that, as of the end of such fiscal year, are reasonably expected to be made to
such Member in subsequent years in accordance with the terms of this Agreement or otherwise to the
extent they exceed offsetting increases to such Member’s Capital Account that are reasonably
expected to occur during (or prior to) the year in which such distributions are reasonably expected
to be made (other than increases as a result of a minimum gain chargeback pursuant to Section
6.1(d)(i) or Section 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith. The “Adjusted Capital Account” of a Member in respect of a
Common Unit or any other Interest shall be the amount that such Adjusted Capital Account would be
if such Common Unit or other Interest were the only interest in the Company held by such Member
from and after the date on which such Common Unit or other Interest was first issued.
“Adjusted Operating Surplus” means, with respect to any period, Operating Surplus generated
with respect to such period (a) less (i) any net increase in Working Capital Borrowings with
respect to such period and (ii) any net decrease in cash reserves for Operating Expenditures with
respect to such period not relating to an Operating Expenditure made with respect to such period,
and (b) plus (i) any net decrease in Working Capital Borrowings with respect to such period and
(ii) any net increase in cash reserves for Operating Expenditures with respect to such period
required by any debt instrument for the repayment of principal, interest or premium. Adjusted
Operating Surplus does not include that portion of Operating Surplus included in clause (a)(i) and
(a)(ii) of the definition of Operating Surplus.
“Adjusted Property” means any property the Carrying Value of which has been adjusted pursuant
to Section 5.5(d)(i) or Section 5.5(d)(ii).
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with the
Person in question. As used herein, the term “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or otherwise.
2
“Aggregate Remaining Net Positive Adjustments” means, as of the end of any taxable period, the
sum of the Remaining Net Positive Adjustments of all Members.
“Agreed Allocation” means any allocation, other than a Required Allocation, of an item of
income, gain, loss or deduction pursuant to the provisions of Section 6.1, including, without
limitation, a Curative Allocation (if appropriate to the context in which the term “Agreed
Allocation” is used).
“Agreed Value” of any Contributed Property means the fair market value of such property or
other consideration at the time of contribution as determined by the Board of Directors. The Board
of Directors shall use such method as it determines to be appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Company in a single or integrated
transaction among each separate property on a basis proportional to the fair market value of each
Contributed Property.
“Agreement” means this Third Amended and Restated Limited Liability Company Agreement of
Copano Energy, L.L.C., as it may be amended, supplemented or restated from time to time.
“Allocated Percentage” means an amount expressed as a percentage equal to the proportion of
the fully diluted equity interest of each of the Existing Investors in the Company immediately
prior to the Closing Date as set forth on Exhibit B hereto.
“Anniversary” has the meaning assigned to such term in Section 11.13(b).
“Applicable Quarter” means a Quarter other than the first Quarter following the Closing Date.
“Associate” means, when used to indicate a relationship with any Person, (a) any corporation
or organization of which such Person is a director, officer or partner or is, directly or
indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any
trust or other estate in which such Person has at least a 20% beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of
such Person, or any relative of such spouse, who has the same principal residence as such Person.
“Available Cash” means, with respect to any Quarter ending prior to the Liquidation Date:
(a) the sum of (i) all cash and cash equivalents of the Company Group on hand at the end of
such Quarter, and (ii) all additional cash and cash equivalents of the Company Group on hand on the
date of determination of Available Cash with respect to such Quarter resulting from Working Capital
Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves established by the Board of Directors to (i) provide for
the proper conduct of the business of the Company Group (including reserves for
future capital expenditures and for anticipated future credit needs of the Company Group)
subsequent to such Quarter, (ii) comply with applicable law or any loan agreement, security
agreement, mortgage, debt instrument or other agreement or obligation to which any Group
3
Member is
a party or by which it is bound or its assets are subject or (iii) provide funds for distributions
under Section 6.4 or Section 6.5 in respect of any one or more of the next four Quarters;
provided, however, that the Board of Directors may not establish cash reserves
pursuant to (iii) above if the effect of such reserves would be that the Company is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus any Cumulative Common Unit
Arrearage on all Common Units, with respect to such Quarter; and, provided further,
that disbursements made by a Group Member or cash reserves established, increased or reduced after
the end of such Quarter but on or before the date of determination of Available Cash with respect
to such Quarter shall be deemed to have been made, established, increased or reduced, for purposes
of determining Available Cash, within such Quarter if the Board of Directors so determines.
Notwithstanding the foregoing, “Available Cash” with respect to the Quarter in which the
Liquidation Date occurs and any subsequent Quarter shall equal zero.
“Board of Directors” has the meaning assigned to such term in Section 7.1(a).
“Book Basis Derivative Items” means any item of income, deduction, gain or loss included in
the determination of Net Income or Net Loss that is computed with reference to the Carrying Value
of an Adjusted Property (e.g., depreciation, depletion, or gain or loss with respect to an Adjusted
Property).
“Book-Down Event” means an event that triggers a negative adjustment to the Capital Accounts
of the Members pursuant to Section 5.5(d).
“Book-Tax Disparity” means, with respect to any item of Contributed Property or Adjusted
Property, as of the date of any determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Member’s share of the Company’s Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference between such
Member’s Capital Account balance as maintained pursuant to Section 5.5 and the hypothetical balance
of such Member’s Capital Account computed as if it had been maintained strictly in accordance with
federal income tax accounting principles.
“Book-Up Event” means an event that triggers a positive adjustment to the Capital Accounts of
the Members pursuant to Section 5.5(d).
“Business Day” means Monday through Friday of each week, except that a legal holiday
recognized as such by the government of the United States of America or the State of Texas shall
not be regarded as a Business Day.
“Cap Period” means the period commencing on the first day of the first Applicable Quarter
following the Closing Date and ending on the last day of the third consecutive, non-overlapping
four-Quarter period following such first Applicable Quarter.
“Cap Period Extension” has the meaning assigned to such term in Section 7.13(c).
4
“Capital Account” means the capital account maintained for a Member pursuant to Section 5.5.
The “Capital Account” of a Member in respect of a Common Unit or any other Interest shall be the
amount that such Capital Account would be if such Common Unit or other Interest were the only
interest in the Company held by such Member from and after the date on which such Common Unit or
other Interest was first issued.
“Capital Contribution” means any cash, cash equivalents or the Net Agreed Value of Contributed
Property that a Member contributes to the Company pursuant to this Agreement.
“Capital Improvement” means any (a) addition or improvement to the capital assets owned by any
Group Member or (b) acquisition of existing, or the construction of new, capital assets, in each
case if such addition, improvement, acquisition or construction is made to increase the operating
capacity or revenue of the Company Group from the operating capacity or revenue of the Company
Group existing immediately prior to such addition, improvement, acquisition or construction.
“Capital Surplus” has the meaning assigned to such term in Section 6.3(a).
“Carrying Value” means (a) with respect to a Contributed Property, the Agreed Value of such
property reduced (but not below zero) by all depreciation, amortization and cost recovery
deductions charged to the Members’ Capital Accounts in respect of such Contributed Property, and
(b) with respect to any other Company property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value of any property shall
be adjusted from time to time in accordance with Section 5.5(d)(i) and Section 5.5(d)(ii) and to
reflect changes, additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Company properties, as deemed appropriate by the Board of Directors.
“Certificate” means a certificate (i) substantially in the form of Exhibit A to this
Agreement, (ii) issued in global form in accordance with the rules and regulations of the
Depositary or (iii) in such other form as may be adopted by the Board of Directors, issued by the
Company evidencing ownership of one or more Common Units or a certificate, in such form as may be
adopted by the Board of Directors, issued by the Company evidencing ownership of one or more other
Company Securities.
“Certificate of Formation” means the Certificate of Formation of the Company filed with the
Secretary of State of the State of Delaware as referenced in Section 7.2, as such Certificate of
Formation may be amended, supplemented or restated from time to time.
“Chairman of the Board” has the meaning assigned to such term in Section 7.1.
“Citizenship Certification” means a properly completed certificate in such form as may be
specified by the Board of Directors by which a Member certifies that he (and if he is a nominee
holding for the account of another Person, that to the best of his knowledge such other Person) is
an Eligible Citizen.
“Closing Date” means November 15, 2004.
5
“Closing Price” has the meaning assigned to such term in Section 13.1(a).
“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time.
Any reference herein to a specific section or sections of the Code shall be deemed to include a
reference to any corresponding provision of any successor law.
“Commenced Commercial Service” and “Commencement of Commercial Service” shall mean the date a
Capital Improvement is first put into service following completion of construction and testing.
“Commission” means the United States Securities and Exchange Commission.
“Common Unit” means a Company Security representing a fractional part of the Interests of all
Members, and having the rights and obligations specified with respect to Common Units in this
Agreement (including all Common Units issued upon conversion of subordinated units).
“Company” means Copano Energy, L.L.C., a Delaware limited liability company, and any
successors thereto.
“Company Group” means the Company and any Subsidiary of the Company, treated as a single
consolidated entity.
“Company Minimum Gain” means that amount determined in accordance with the principles of
Treasury Regulation Section 1.704-2(d).
“Company Security” means any class or series of equity interest in the Company (but excluding
any options, rights, warrants and appreciation rights relating to an equity interest in the
Company), including without limitation, Common Units, which are a separate class of Interests.
“Conflicts Committee” means a committee of the Board of Directors composed entirely of two or
more Independent Directors who are not (a) Officers or employees of the Company or any Subsidiary
of the Company or (b) holders of any ownership interest in the Company Group other than Common
Units.
“Contributed Property” means each property or other asset, in such form as may be permitted by
the Delaware Act, but excluding cash, contributed to the Company. Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.5(d), such property shall no longer
constitute a Contributed Property, but shall be deemed an Adjusted Property.
“Copano Partners” means Copano Partners, L.P., a Delaware limited partnership.
“CSFB Entities” means (i) CEH Holdco, Inc., a Delaware corporation, (ii) CEH Holdco II, Inc.,
a Delaware corporation, (iii) MBP III AIV, LP, a Delaware limited partnership, and (iv) MBP III
Onapoc Holdings LLC, a Delaware limited liability company.
“Curative Allocation” means any allocation of an item of income, gain, deduction, loss or
credit pursuant to the provisions of
Section 6.1(d)(x).
6
“Current Market Price” has the meaning assigned to such term in Section 13.1(a).
“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et
seq., as amended, supplemented or restated from time to time, and any successor to such statute.
“Depositary” means, with respect to any Units issued in global form, The Depository Trust
Company and its successors and permitted assigns.
“DGCL” means the General Corporation Law of the State of Delaware, 8 Del. C. Section 101, et
seq., as amended, supplemented or restated from time to time, and any successor to such statute.
“Director” means a member of the Board of Directors of the Company.
“EBITDA” means net income (loss) plus interest expense, provision for income taxes and
depreciation and amortization expense.
“Economic Risk of Loss” has the meaning set forth in Treasury Regulation Section 1.752-2(a).
“Effectiveness Period” has the meaning assigned to such term in Section 14.3(a).
“Eligible Citizen” means a Person qualified to own interests in real property in jurisdictions
in which any Group Member does business or proposes to do business from time to time, and whose
status as a Member does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.
“EnCap Entities” means (i) EnCap Energy Capital Fund III, L.P., a Texas limited partnership,
(ii) EnCap Energy Acquisition III-B, Inc., a Texas corporation, and (iii) BOCP Energy Partners,
L.P., a Texas limited partnership.
“Estimated Incremental Quarterly Tax Amount” has the meaning assigned to such term in Section
6.7.
“Excess G&A Obligation” means the amount by which G&A in any Applicable Quarter exceeds the
Total G&A Cap, subject to the limitations set forth herein.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Existing Investors” means (i) Copano Partners, (ii) the CSFB Entities, (iii) the EnCap
Entities, (iv) R. Xxxxx Xxxxxxxxx, an individual residing in Spring, Texas, and (v) Xxxxxxx X.
Xxxxxx, an individual residing in Houston, Texas.
“Final Adjudication” has the meaning assigned to such term in Section 7.7(e).
“G&A” means, in accordance with U.S. GAAP, all general and administrative expenses, less (i)
any general and administrative expenses incurred in connection with potential
7
Acquisitions and
Capital Improvements, of the Company and any wholly owned subsidiary of the Company and (ii) other
general and administrative expenses that would constitute adjustments to reconcile net income
(loss) to net cash provided by (used in) operating activities pursuant to U.S. GAAP (including,
without limitation, non-cash expenses with respect to equity-related compensation), limited in any
Quarter to the amounts set forth in the G&A Budget for such Quarter, which G&A Budget is subject to
adjustment as provided in Section 7.13(e).
“G&A Budget” has the meaning assigned to such term in Section 7.13(e).
“G&A Cap” means (a) $1,500,000 for each of the first through fourth Applicable Quarters
following the Closing Date, (b) $1,650,000 for each of the fifth through eighth Applicable Quarters
following the Closing Date and (c) $1,800,000 for each of the ninth through twelfth Applicable
Quarters following the Closing Date.
“Group” means a Person that with or through any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except
voting pursuant to a revocable proxy or consent given to such Person in response to a proxy or
consent solicitation made to 10 or more Persons) or disposing of any Company Securities with any
other Person that beneficially owns, or whose Affiliates or Associates beneficially own, directly
or indirectly, Company Securities.
“Group Member” means a member of the Company Group.
“Group Member Agreement” means the partnership agreement of any Group Member that is a limited
or general partnership, the limited liability company agreement of any Group Member, other than the
Company, that is a limited liability company, the certificate of incorporation and bylaws or
similar organizational documents of any Group Member that is a corporation, the joint venture
agreement or similar governing document of any Group Member that is a joint venture and the
governing or organizational or similar documents of any other Group Member that is a Person other
than a limited or general partnership, limited liability company, corporation or joint venture, as
such may be amended, supplemented or restated from time to time.
“Indemnitee” has the meaning assigned to such term in Section 7.7(a).
“Independent” with respect to a Director means a Director who meets the then current
independence standards required of directors who serve on an audit committee of a board of
directors established by the Commission and the National Securities Exchange on which the Common
Units are listed for trading.
“Initial Common Units” means the Common Units sold in the Initial Offering.
“Initial Members” means the holders of the Pre-Initial Offering Interests (with respect to the
Interests received by them pursuant to Section 5.1) and the Underwriters upon the issuance by the
Company of Common Units to the Underwriters as described in Section 5.2 in connection with the
Initial Offering.
8
“Initial Offering” means the initial offering and sale of Common Units to the public, as
described in the Registration Statement.
“Initial Unit Price” means (a) with respect to the Common Units and the subordinated units
(which subordinated units were subsequently converted into an equal number of Common Units in
accordance with the terms of the Second Amended and Restated Limited Liability Company Agreement of
the Company dated November 15, 2004), the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on the cover page of
the prospectus included as part of the Registration Statement and first issued at or after the time
the Registration Statement first became effective or (b) with respect to any other class or series
of Units, the price per Unit at which such class or series of Units is initially sold by the
Company, as determined by the Board of Directors, in each case adjusted as the Board of Directors
determines to be appropriate to give effect to any distribution, subdivision or combination of
Units.
“Interest” means the ownership interest of a Member in the Company, which may be evidenced by
Common Units or other Company Securities or a combination thereof or interest therein, and includes
any and all benefits to which such Member is entitled as provided in this Agreement, together with
all obligations of such Member to comply with the terms and provisions of this Agreement.
“Interim Capital Transactions” means the following transactions if they occur prior to the
Liquidation Date: (a) borrowings, refinancings or refundings of indebtedness (other than Working
Capital Borrowings and other than for items purchased on open account in the ordinary course of
business) by any Group Member and sales of debt securities of any Group Member; (b) sales of equity
interests of any Group Member (including the Common Units sold to the Underwriters pursuant to the
exercise of the Over-Allotment Option); and (c) sales or other voluntary or involuntary
dispositions of any assets of any Group Member other than (i) sales or other dispositions of
inventory, accounts receivable and other assets in the ordinary course of business and (ii) sales
or other dispositions of assets as part of normal retirements or replacements.
“Issue Price” means the price at which a Unit is purchased from the Company, after taking into
account any sales commission or underwriting discount charged to the Company.
“Liquidation Date” means the date on which an event giving rise to the dissolution of the
Company occurs.
“Liquidator” means one or more Persons selected by the Board of Directors to perform the
functions described in Section 10.2 as liquidating trustee of the Company within the meaning of the
Delaware Act.
“Losses” has the meaning assigned to such term in Section 14.9(a).
“Managing Underwriter” means, with respect to any Underwritten Offering, the book running lead
manager of such Underwritten Offering.
9
“Member” means, unless the context otherwise requires, each Initial Member, each Substituted
Member, and each Additional Member.
“Member Nonrecourse Debt” has the meaning set forth in Treasury Regulation Section
1.704-2(b)(4).
“Member Nonrecourse Debt Minimum Gain” has the meaning set forth in Treasury Regulation
Section 1.704-2(i)(2).
“Member Nonrecourse Deductions” means any and all items of loss, deduction or expenditure
(including, without limitation, any expenditure described in Section 705(a)(2)(B) of the Code)
that, in accordance with the principles of Treasury Regulation Section 1.704-2(i), are attributable
to a Member Nonrecourse Debt.
“Merger Agreement” has the meaning assigned to such term in Section 12.1.
“Minimum Quarterly Distribution” means $0.20 per Unit per Quarter, subject to adjustment in
accordance with Section 6.6.
“National Securities Exchange” means an exchange registered with the Commission under Section
6(a) of the Securities Exchange Act of 1934, as amended, supplemented or restated from time to
time, and any successor to such statute, or the Nasdaq Stock Market LLC or any successor thereto.
“Net Agreed Value” means, (a) in the case of any Contributed Property, the Agreed Value of
such property reduced by any liabilities either assumed by the Company upon such contribution or to
which such property is subject when contributed, and (b) in the case of any property distributed to
a Member by the Company, the Company’s Carrying Value of such property (as adjusted pursuant to
Section 5.5(d)(ii)) at the time such property is distributed, reduced by any indebtedness either
assumed by such Member upon such distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the Code.
“Net Income” means, for any taxable year, the excess, if any, of the Company’s items of income
and gain (other than those items taken into account in the computation of Net Termination Gain or
Net Termination Loss) for such taxable year over the Company’s items of loss and deduction (other
than those items taken into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year. The items included in the calculation of Net Income shall be
determined in accordance with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d); provided that the determination of the items that have been specially
allocated under Section 6.1(d) shall be made as if Section 6.1(d)(xi) were not in this Agreement.
“Net Loss” means, for any taxable year, the excess, if any, of the Company’s items of loss and
deduction (other than those items taken into account in the computation of Net Termination Gain or
Net Termination Loss) for such taxable year over the Company’s items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year. The items included in the calculation of Net Loss
10
shall be determined in accordance with Section 5.5(b) and shall not include any items
specially allocated under Section 6.1(d); provided that the determination of the items that
have been specially allocated under Section 6.1(d) shall be made as if Section 6.1(d)(xi) were not
in this Agreement.
“Net Positive Adjustments” means, with respect to any Member, the excess, if any, of the total
positive adjustments over the total negative adjustments made to the Capital Account of such Member
pursuant to Book-Up Events and Book-Down Events.
“Net Termination Gain” means, for any taxable year, the sum, if positive, of all items of
income, gain, loss or deduction recognized by the Company after the Liquidation Date. The items
included in the determination of Net Termination Gain shall be determined in accordance with
Section 5.5(b) and shall not include any items of income, gain or loss specially allocated under
Section 6.1(d).
“Net Termination Loss” means, for any taxable year, the sum, if negative, of all items of
income, gain, loss or deduction recognized by the Company after the Liquidation Date. The items
included in the determination of Net Termination Loss shall be determined in accordance with
Section 5.5(b) and shall not include any items of income, gain or loss specially allocated under
Section 6.1(d).
“Non-citizen Assignee” means a Person whom the Board of Directors has determined does not
constitute an Eligible Citizen and as to whose Interest the Board of Directors has become the
Substituted Member, pursuant to Section 4.7.
“Nonrecourse Built-in Gain” means with respect to any Contributed Properties or Adjusted
Properties that are subject to a mortgage or pledge securing a Nonrecourse Liability, the amount of
any taxable gain that would be allocated to the Members pursuant to Section 6.2(b)(i)(A), Section
6.2(b)(ii)(A) and Section 6.2(b)(iii) if such properties were disposed of in a taxable transaction
in full satisfaction of such liabilities and for no other consideration.
“Nonrecourse Deductions” means any and all items of loss, deduction or expenditure (including,
without limitation, any expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b), are attributable to a
Nonrecourse Liability.
“Nonrecourse Liability” has the meaning set forth in Treasury Regulation Section
1.752-1(a)(2).
“Notice of Election to Purchase” has the meaning assigned to such term in Section 13.1(b).
“Officer” has the meaning assigned to such term in Section 7.4(a).
“Operating Companies” means (i) Copano Field Services/Copano Bay, L.P., (ii) Copano Field
Services/South Texas, L.P., (iii) Copano Field Services/Agua Dulce, L.P., (iv) Copano Field
Services/Central Gulf Coast, L.P., (v) Copano Field Services/Xxxxxx, X.X., (vi) Copano Field
Services/Upper Gulf Coast, L.P., (vii) Copano Field Services/Live Oak, L.P.,
11
(viii) Copano Pipelines/South Texas, L.P., (ix) Copano Pipelines/Upper Gulf Coast, L.P., (x)
Copano Pipelines/Hebbronville, L.P., (xi) Copano Pipelines/Texas Gulf Coast, L.P., (xii) Copano
Energy Services/Upper Gulf Coast, L.P., (xiii) Copano Energy Services/Texas Gulf Coast, L.P., (xiv)
Copano NGL Services, L.P., (xv) Copano Processing, L.P., (xvi) any other operating Subsidiaries of
the Company and any successors thereto.
“Operating Expenditures” means all Company Group expenditures, including, but not limited to,
taxes, repayment of Working Capital Borrowings, debt service payments, and capital expenditures,
subject to the following:
(a) payments (including prepayments) of principal of and premium on indebtedness other than
Working Capital Borrowings shall not constitute Operating Expenditures; and
(b) Operating Expenditures shall not include (i) capital expenditures made for Acquisitions or
for Capital Improvements, (ii) payment of transaction expenses relating to Interim Capital
Transactions or (iii) distributions to Members. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other purposes, the Board of Directors,
with the concurrence of the Conflicts Committee, shall determine the allocation between the amounts
paid for each and, with respect to the part of such capital expenditures made for other purposes,
the period over which the capital expenditures made for other purposes will be deducted as an
Operating Expenditure in calculating Operating Surplus.
“Operating Surplus” means, with respect to any period ending prior to the Liquidation Date, on
a cumulative basis and without duplication,
(a) the sum of (i) $12.0 million, (ii) all cash and cash equivalents of the Company Group on
hand as of the close of business on the Closing Date, (iii) all cash receipts of the Company Group
for the period beginning on the Closing Date and ending on the last day of such period, excluding
cash receipts from Interim Capital Transactions (except to the extent specified in Section 6.5) and
(iv) all cash receipts of the Company Group after the end of such period but on or before the date
of determination of Operating Surplus with respect to such period resulting from Working Capital
Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning on the Closing Date and
ending on the last day of such period and (ii) the amount of cash reserves established by the
Company to provide funds for future Operating Expenditures; provided, however, that
disbursements made (including contributions to a Group Member or disbursements on behalf of a Group
Member) or cash reserves established, increased or reduced after the end of such period but on or
before the date of determination of Available Cash with respect to such period shall be deemed to
have been made, established, increased or reduced, for purposes of determining Operating Surplus,
within such period if the Company so determines.
Notwithstanding the foregoing, “Operating Surplus” with respect to the Quarter in which the
Liquidation Date occurs and any subsequent Quarter shall equal zero.
“Opinion of Counsel” means a written opinion of counsel (who may be regular counsel to the
Company or any of its Affiliates) acceptable to the Board of Directors.
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“Original Escrow Accounts” has the meaning assigned to such term in Section 5.1(b).
“Outstanding” means, with respect to Company Securities, all Company Securities that are
issued by the Company and reflected as outstanding on the Company’s books and records as of the
date of determination; provided, however, that no Company Securities held by the
Company (other than Company Securities representing Interests held by the Company on behalf of
Non-Citizen Assignees) or any other Group Member shall be considered Outstanding.
“Over-Allotment Option” means the over-allotment option granted to the Underwriters by the
Company pursuant to the Underwriting Agreement.
“Per Unit Capital Amount” means, as of any date of determination, the Capital Account, stated
on a per Unit basis, underlying any Unit held by a Person.
“Percentage Interest” means, as of any date of determination (a) as to any Unitholder holding
Units, the product obtained by multiplying (i) 100% less the percentage applicable to paragraph (b)
by (ii) the quotient obtained by dividing (A) the number of Units held by such Unitholder by (B)
the total number of all Outstanding Units, and (b) as to the holders of other Company Securities
issued by the Company in accordance with Section 5.6, the percentage established as a part of such
issuance.
“Person” means an individual or a corporation, limited liability company, partnership, joint
venture, trust, unincorporated organization or other enterprise (including an employee benefit
plan), association, government agency or political subdivision thereof or other entity.
“Preferred Investors” means the holders of the Preferred Units.
“Preferred Units” means the redeemable preferred membership interests of the Company
outstanding prior to the Initial Offering.
“Pre-Initial Offering Interests” means the membership interests in the Company (other than the
Preferred Units) and the Warrants outstanding prior to the Initial Offering.
“Prime Rate” means the prime rate of interest as quoted from time to time by the Wall Street
Journal or another source reasonably selected by the Company.
“Pro Rata” means (a) when modifying Units or any class thereof, apportioned equally among all
designated Units in accordance with their relative Percentage Interests, and (b) when modifying
Members, apportioned among all Members in accordance with their relative Percentage Interest.
“Purchase Date” means the date determined by the Board of Directors as the date for purchase
of all Outstanding Units of a certain class pursuant to Article XIII.
“Quarter” means, unless the context requires otherwise, a fiscal quarter, or, with respect to
the first fiscal quarter after the Closing Date, the portion of such fiscal quarter after the
Closing Date, of the Company.
13
“Recapture Income” means any gain recognized by the Company (computed without regard to any
adjustment required by Section 734 or Section 743 of the Code) upon the disposition of any property
or asset of the Company, which gain is characterized as ordinary income because it represents the
recapture of deductions previously taken with respect to such property or asset.
“Record Date” means the date established by the Company for determining (a) the identity of
the Record Holders entitled to notice of, or to vote at, any meeting of Members or entitled to
exercise rights in respect of any lawful action of Members or (b) the identity of Record Holders
entitled to receive any report or distribution or to participate in any offer.
“Record Holder” means the Person in whose name a Common Unit is registered on the books of the
Transfer Agent as of the opening of business on a particular Business Day, or with respect to other
Company Securities, the Person in whose name any such other Company Security is registered on the
books that the Company has caused to be kept as of the opening of business on such Business Day.
“Redeemable Interests” means any Interests for which a redemption notice has been given, and
has not been withdrawn, pursuant to Section 4.8.
“Registrable Security” means the Common Units until such time as such securities cease to be
Registrable Securities pursuant to Section 14.2 of this Agreement.
“Registration Expenses” has the meaning assigned to such term in Section 14.8.
“Registration Rights Group” has the meaning assigned to such term in Section 14.1
“Registration Statement” means the Registration Statement on Form S-1 (Registration No.
333-117825) as it has been or as it may be amended or supplemented from time to time, filed by the
Company with the Commission under the Securities Act to register the offering and sale of the
Common Units in the Initial Offering.
“Remaining Net Positive Adjustments” means as of the end of any taxable period, with respect
to the Unitholders holding Common Units, the excess of (i) the Net Positive Adjustments of the
Unitholders holding Common Units as of the end of such period over (ii) the sum of those Members’
Share of Additional Book Basis Derivative Items for each prior taxable period.
“Required Allocations” means (a) any limitation imposed on any allocation of Net Losses or Net
Termination Losses under Section 6.1(b) or 6.1(c)(ii) and (b) any allocation of an item of income,
gain, loss or deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or
6.1(d)(ix).
“Residual Gain” or “Residual Loss” means any item of gain or loss, as the case may be, of the
Company recognized for federal income tax purposes resulting from a sale, exchange or other
disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss
is not allocated pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
14
“Second Amended and Restated Limited Liability Company Agreement” means the Second Amended and
Restated Limited Liability Company Agreement of Copano Energy, L.L.C. dated as of November 15,
2004, as amended through the date of this Agreement.
“Securities Act” means the Securities Act of 1933, as amended, supplemented or restated from
time to time and any successor to such statute.
“Selling Expenses” has the meaning assigned to such term in Section 14.8.
“Share of Additional Book Basis Derivative Items” means in connection with any allocation of
Additional Book Basis Derivative Items for any taxable period, with respect to the Unitholders
holding Common Units, the amount that bears the same ratio to such Additional Book Basis Derivative
Items as the Unitholders’ Remaining Net Positive Adjustments as of the end of such period bears to
the Aggregate Remaining Net Positive Adjustments as of that time.
“Shelf Registration” has the meaning assigned to such term in Section 14.3(a).
“Shelf Registration Statement” has the meaning assigned to such term in Section 14.3(a).
“Solicitation Notice” has the meaning assigned to such term in Section 11.13(c).
“Special Approval” means approval by a majority of the members of the Conflicts Committee.
“Stakeholders’ Agreement” means the Stakeholders’ Agreement dated as of July 30, 2004, by and
among the Company and the Existing Investors.
“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of
the voting power of shares entitled (without regard to the occurrence of any contingency) to vote
in the election of directors or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such
Person or a combination thereof, (b) a partnership (whether general or limited) in which such
Person or a Subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if more than 50% of the partnership interests of such
partnership (considering all of the partnership interests of the partnership as a single class) is
owned, directly or indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a
combination thereof, directly or indirectly, at the date of determination, has (i) at least a
majority ownership interest or (ii) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
“Substituted Member” means a Person who is admitted as a Member of the Company pursuant to
Sections 4.5 or 4.7 in place of and with all rights of a Member and who is shown as a Member on the
books and records of the Company.
“Surviving Business Entity” has the meaning assigned to such term in Section 12.2(b).
15
“Tax Matters Partner” means the Tax Matters Partner as defined in the Code.
“Total G&A Cap” means the sum of the G&A Cap and, if applicable, the Additional G&A Cap.
“Trading Day” has the meaning assigned to such term in Section 13.1(a).
“Transfer” has the meaning assigned to such term in Section 4.4.
“Transfer Agent” means such bank, trust company or other Person (including the Company or one
of its Affiliates) as shall be appointed from time to time by the Company to act as registrar and
transfer agent for the Common Units; provided that if no Transfer Agent is specifically
designated for any other Company Securities, the Company shall act in such capacity.
“Transfer Escrow Account” has the meaning assigned to such term in Section 7.13(f).
“Underwriter” means each Person named as an underwriter in the Underwriting Agreement who
purchases Common Units pursuant thereto.
“Underwriting Agreement” means that certain Underwriting Agreement, dated November 8, 2004,
among the Underwriters, the Company and certain other parties, providing for the purchase of Common
Units by the Underwriters.
“Underwritten Offering” means an offering (including an offering pursuant to a Shelf
Registration Statement) in which Common Units are sold to an underwriter on a firm commitment basis
for reoffering to the public or an offering that is a “bought deal” with one or more investment
banks.
“Unit” means a Company Security that is designated as a “Unit” and shall include Common Units.
“Unit Majority” means at least a majority of the Outstanding Common Units.
“Unitholders” means the holders of Units.
“Unpaid MQD” has the meaning assigned to such term in Section 6.1(c)(i)(B).
“Unrealized Gain” attributable to any item of Company property means, as of any date of
determination, the excess, if any, of (a) the fair market value of such property as of such date
(as determined under Section 5.5(d)) over (b) the Carrying Value of such property as of such date
(prior to any adjustment to be made pursuant to Section 5.5(d) as of such date).
“Unrealized Loss” attributable to any item of Company property means, as of any date of
determination, the excess, if any, of (a) the Carrying Value of such property as of such date
(prior to any adjustment to be made pursuant to Section 5.5(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section 5.5(d)).
16
“Unrecovered Capital” means at any time, with respect to a Unit, the Initial Unit Price less
the sum of all distributions constituting Capital Surplus theretofore made in respect of an Initial
Common Unit and any distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Company theretofore made in respect of an
Initial Common Unit, adjusted as the Board of Directors determines to be appropriate to give effect
to any distribution, subdivision or combination of such Units.
“U.S. GAAP” means United States generally accepted accounting principles consistently applied.
“Warrants” means the warrants to acquire common membership interests in the Company
outstanding prior to the Initial Offering.
“Working Capital Borrowings” means borrowings used solely for working capital purposes or to
pay distributions to Members made pursuant to a credit facility or other arrangement to the extent
such borrowings are required to be reduced to a relatively small amount each year for an
economically meaningful period of time.
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include
the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and
verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to
Articles and Sections of this Agreement; and (c) the term “include” or “includes” means includes,
without limitation, and “including” means including, without limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation. The Members have previously formed the Company as a limited liability
company pursuant to the provisions of the Delaware Act and hereby amend and restate the Second
Amended and Restated Limited Liability Company Agreement in its entirety. This amendment and
restatement shall become effective on the date of this Agreement. Except as expressly provided to
the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and
obligations of the Members and the administration, dissolution and termination of the Company shall
be governed by the Delaware Act. All Interests shall constitute personal property of the owner
thereof for all purposes and a Member has no interest in specific Company property.
17
Section 2.2 Name. The name of the Company shall be Copano Energy, L.L.C. The Company’s business
may be conducted under any other name or names, as determined by the Board of Directors. The words
“Limited Liability Company,” “L.L.C.,” or similar words or letters shall be included in the
Company’s name where necessary for the purpose of complying with the laws of any jurisdiction that
so requires. The Board of Directors may change the name of the Company at any time and from time
to time and shall notify the Members of such change in the next regular communication to the
Members.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices. Unless and until
changed by the Board of Directors, the registered office of the Company in the State of Delaware
shall be located at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxx 00000, and the
registered agent for service of process on the Company in the State of Delaware at such registered
office shall be Wilmington Trust SP Services, Inc. The principal office of the Company shall be
located at 0000 Xxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 or such other place as the Board of
Directors may from time to time designate by notice to the Members. The Company may maintain
offices at such other place or places within or outside the State of Delaware as the Board of
Directors determines to be necessary or appropriate.
Section 2.4 Purposes and Business. The purpose and nature of the business to be conducted by the
Company shall be to (a) serve as a member, partner or stockholder, as the case may be, of (i)
Copano Pipelines Group, L.L.C., a Delaware limited liability company, (ii) Copano Houston Central,
L.L.C., a Delaware limited liability company, (iii) Copano/Xxxx-Xxxxx Pipeline GP, L.L.C., a
Delaware limited liability company (iv) CWDPL LP Holdings, L.L.C., a Delaware limited liability
company, (v) CPNO Services GP, L.L.C., a Delaware limited liability company, (vi) CPNO Services LP
Holdings, L.L.C., a Delaware limited liability company, (vii) Copano Energy Finance Corporation, a
Delaware corporation and (viii) Copano Energy/Rocky Mountains and Mid-Continent, L.L.C., a Delaware
limited liability company, and, in connection therewith, to exercise all the rights and powers
conferred upon the Company as a member, partner or stockholder, as the case may be, of such
entities, (b) engage directly in, or enter into or form any corporation, partnership, joint
venture, limited liability company or other arrangement to engage indirectly in, any business
activity that the Operating Companies are permitted to engage in or that their subsidiaries are
permitted to engage in by their organizational documents or agreements and, in connection
therewith, to exercise all of the rights and powers conferred upon the Company pursuant to the
agreements relating to such business activity, (c) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that is approved by the Board of Directors and that lawfully
may be conducted by a limited liability company organized pursuant to the Delaware Act and, in
connection therewith, to exercise all of the rights and powers conferred upon the Company pursuant
to the agreements relating to such business activity; and (d) do anything necessary or appropriate
to the foregoing, including the making of capital contributions or loans to a Group Member;
provided, however, that the Company shall not engage, directly or indirectly, in
any business activity that the Board of Directors determines would cause the Company to be treated
as an association taxable as a Corporation or otherwise taxable as an entity for federal income tax
purposes. The Board of Directors has no obligation or duty to the Company or the Members to
propose or approve, and may decline to propose or approve, the conduct by the Company of any
business.
18
Section 2.5 Powers. The Company shall be empowered to do any and all acts and things necessary and
appropriate for the furtherance and accomplishment of the purposes and business described in
Section 2.4 and for the protection and benefit of the Company.
Section 2.6 Power of Attorney. Each Member hereby constitutes and appoints each of the Chief
Executive Officer, the President and the Secretary and, if a Liquidator shall have been selected
pursuant to Section 10.2, the Liquidator (and any successor to the Liquidator by merger, transfer,
assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as
the case may be, with full power of substitution, as his true and lawful agent and
attorney-in-fact, with full power and authority in his name, place and xxxxx, to:
(a) execute, swear to, acknowledge, deliver, file and record in the appropriate public
offices (i) all certificates, documents and other instruments (including this Agreement and
the Certificate of Formation and all amendments or restatements hereof or thereof) that the
Chief Executive Officer, President or Secretary, or the Liquidator, determines to be
necessary or appropriate to form, qualify or continue the existence or qualification of the
Company as a limited liability company in the State of Delaware and in all other
jurisdictions in which the Company may conduct business or own property; (ii) all
certificates, documents and other instruments that the Chief Executive Officer, President or
Secretary, or the Liquidator, determines to be necessary or appropriate to reflect, in
accordance with its terms, any amendment, change, modification or restatement of this
Agreement; (iii) all certificates, documents and other instruments (including conveyances
and a certificate of cancellation) that the Board of Directors or the Liquidator determines
to be necessary or appropriate to reflect the dissolution and liquidation of the Company
pursuant to the terms of this Agreement; (iv) all certificates, documents and other
instruments relating to the admission, withdrawal, removal or substitution of any Member
pursuant to, or other events described in, Articles IV or X; (v) all certificates, documents
and other instruments relating to the determination of the rights, preferences and
privileges of any class or series of Company Securities issued pursuant to Section 5.6; and
(vi) all certificates, documents and other instruments (including agreements and a
certificate of merger) relating to a merger, consolidation or conversion of the Company
pursuant to Article XII; and
(b) execute, swear to, acknowledge, deliver, file and record all ballots, consents,
approvals, waivers, certificates, documents and other instruments that the Board of
Directors or the Liquidator determines to be necessary or appropriate to (i) make, evidence,
give, confirm or ratify any vote, consent, approval, agreement or other action that is made
or given by the Members hereunder or is consistent with the terms of this Agreement or (ii)
effectuate the terms or intent of this Agreement; provided, that when required by
Section 11.2 or any other provision of this Agreement that establishes a percentage of the
Members or of the Members of any class or series required to take any action, the Chief
Executive Officer, President or Secretary, or the Liquidator, may exercise the power of
attorney made in this Section 2.6(b) only after the necessary vote,
consent or approval of the Members or of the Members of such class or series, as
applicable.
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Nothing contained in this Section 2.6 shall be construed as authorizing the Chief Executive
Officer, President or Secretary, or the Liquidator, to amend this Agreement except in
accordance with Article XI or as may be otherwise expressly provided for in this Agreement.
(c) The foregoing power of attorney is hereby declared to be irrevocable and a power
coupled with an interest, and it shall survive and, to the maximum extent permitted by law,
not be affected by the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of any Member and the transfer of all or any portion of such
Member’s Interest and shall extend to such Member’s heirs, successors, assigns and personal
representatives. Each such Member hereby agrees to be bound by any representation made by
the Chief Executive Officer, President or Secretary, or the Liquidator, acting in good faith
pursuant to such power of attorney; and each such Member, to the maximum extent permitted by
law, hereby waives any and all defenses that may be available to contest, negate or
disaffirm the action of the Chief Executive Officer, President or Secretary, or the
Liquidator, taken in good faith under such power of attorney. Each Member shall execute and
deliver to the Chief Executive Officer, President or Secretary, or the Liquidator, within 15
days after receipt of the request therefor, such further designation, powers of attorney and
other instruments as any of such Officers or the Liquidator, determines to be necessary or
appropriate to effectuate this Agreement and the purposes of the Company.
Section 2.7 Term. The Company’s existence shall be perpetual, unless and until it is dissolved in
accordance with the provisions of Article X. The existence of the Company as a separate legal
entity shall continue until the cancellation of the Certificate of Formation as provided in the
Delaware Act.
Section 2.8 Title to Company Assets. Title to Company assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Company as an entity, and no
Member, Director or Officer, individually or collectively, shall have any ownership interest in
such Company assets or any portion thereof. Title to any or all of the Company assets may be held
in the name of the Company or one or more nominees, as the Board of Directors may determine. The
Company hereby declares and warrants that any Company assets for which record title is held in the
name of one or more of its Affiliates or one or more nominees shall be held by such Affiliates or
nominees for the use and benefit of the Company in accordance with the provisions of this
Agreement; provided, however, that the Board of Directors shall use reasonable
efforts to cause record title to such assets (other than those assets in respect of which the Board
of Directors determines that the expense and difficulty of conveyancing makes transfer of record
title to the Company impracticable) to be vested in the Company as soon as reasonably practicable.
All Company assets shall be recorded as the property of the Company in its books and records,
irrespective of the name in which record title to such Company assets is held.
ARTICLE III
RIGHTS OF MEMBERS
Section 3.1 Members.
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(a) A Person shall be admitted as a Member and shall become bound by the terms of this
Agreement if such Person purchases or otherwise lawfully acquires any Interest and becomes
the Record Holder of such Interests in accordance with the provisions of Article IV hereof.
A Person may become a Record Holder without the consent or approval of any of the Members.
A Person may not become a Member without acquiring an Interest. The rights and obligations
of a Person who is a Non-citizen Assignee shall be determined in accordance with Section 4.7
hereof.
(b) The name and mailing address of each Member shall be listed on the books and
records of the Company maintained for such purpose by the Company or the Transfer Agent.
The Secretary of the Company shall update the books and records of the Company from time to
time as necessary to reflect accurately the information therein (or shall cause the Transfer
Agent to do so, as applicable). A Member’s Interest shall be represented by a Certificate,
as provided in Section 4.1 hereof.
(c) As provided in Section 18-303 of the Delaware Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company. The Members shall have no liability
under this Agreement, or for any such debt, obligation or liability of the Company, in their
capacity as a Member, except as expressly provided in this Agreement or the Delaware Act.
(d) Members may not be expelled from or removed as Members of the Company. Members
shall not have any right to withdraw from the Company; provided, that when a
transferee of a Member’s Interest becomes a Record Holder of such Interest, such
transferring Member shall cease to be a Member with respect to the Interest so transferred.
Section 3.2 Management of Business. No Member, in its capacity as such, shall participate in the
operation or management of the Company’s business, transact any business in the Company’s name or
have the power to sign documents for or otherwise bind the Company by reason of being a Member.
Section 3.3 Outside Activities of the Members. Any Member shall be entitled to and may have
business interests and engage in business activities in addition to those relating to the Company,
including business interests and activities in direct competition with the Company Group. Neither
the Company nor any of the other Members shall have any rights by virtue of this Agreement in any
business ventures of any Member.
Section 3.4 Rights of Members.
(a) In addition to other rights provided by this Agreement or by applicable law, and
except as limited by Section 3.4(b), each Member shall have the right, for a purpose
reasonably related to such Member’s Interest as a Member in the Company, upon reasonable
written demand containing a concise statement of purposes and at such Member’s own expense:
21
(i) to obtain true and full information regarding the status of the business
and financial condition of the Company;
(ii) promptly after becoming available, to obtain a copy of the Company’s
federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last known
business, residence or mailing address of each Member;
(iv) to have furnished to him a copy of this Agreement and the Certificate of
Formation and all amendments thereto, together with copies of the executed copies of
all powers of attorney pursuant to which this Agreement, the Certificate of
Formation and all amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash and a
description and statement of the Net Agreed Value of any other Capital Contribution
by each Member and that each Member has agreed to contribute in the future, and the
date on which each became a Member; and
(vi) to obtain such other information regarding the affairs of the Company as
is just and reasonable.
(b) The Board of Directors may keep confidential from the Members, for such period of
time as the Board of Directors determines, (i) any information that the Board of Directors
determines to be in the nature of trade secrets or (ii) other information the disclosure of
which the Board of Directors determines (A) is not in the best interests of the Company
Group, (B) could damage the Company Group or (C) that any Group Member is required by law or
by agreement with any third party to keep confidential (other than agreements with
Affiliates of the Company the primary purpose of which is to circumvent the obligations set
forth in this Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS;
ISSUANCE AND TRANSFER OF INTERESTS;
REDEMPTION OF INTERESTS
Section 4.1 Certificates. Upon the Company’s issuance of Common Units to any Person, the Company shall issue one or more
Certificates in the name of such Person evidencing the number of such Units being so issued. In
addition, upon the request of any Person owning any other Company Securities other than Common
Units, the Company shall issue to such Person one or more certificates evidencing such other
Company Securities. Certificates shall be executed on behalf of the Company by the Chairman of the
Board, President or any Vice President and the Secretary or any Assistant Secretary. No Common
Unit Certificate shall be valid for any purpose until it has been countersigned by the Transfer
Agent; provided, however, that if the Board of Directors elects to issue Common
Units in global form, the Common Unit Certificates shall be valid upon receipt of a certificate
from the Transfer Agent certifying that the Common Units have been duly registered in accordance
with the directions of the Company. Any or all of the signatures required on the Certificate may
be by facsimile. If any Officer or
22
Transfer Agent who shall have signed or whose facsimile
signature shall have been placed upon any such Certificate shall have ceased to be such Officer or
Transfer Agent before such Certificate is issued by the Company, such Certificate may nevertheless
be issued by the Company with the same effect as if such Person were such Officer or Transfer Agent
at the date of issue. Certificates shall be consecutively numbered and shall be entered on the
books and records of the Company as they are issued and shall exhibit the holder’s name and number
of Units.
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates. If any mutilated Certificate is
surrendered to the Transfer Agent, the appropriate Officers on behalf of the Company shall execute,
and the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate
evidencing the same number and type of Company Securities as the Certificate so surrendered.
(a) The appropriate Officers on behalf of the Company shall execute and deliver, and
the Transfer Agent shall countersign a new Certificate in place of any Certificate
previously issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to the
Company, that a previously issued Certificate has been lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate before the Company has notice
that the Certificate has been acquired by a purchaser for value in good faith and
without notice of an adverse claim;
(iii) if requested by the Company, delivers to the Company a bond, in form and
substance satisfactory to the Company, with surety or sureties and with fixed or
open penalty as the Company may direct to indemnify the Company and the Transfer
Agent against any claim that may be made on account of the alleged loss, destruction
or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the Company.
If a Member fails to notify the Company within a reasonable time after he has notice of
the loss, destruction or theft of a Certificate, and a transfer of the Interests
represented by the Certificate is registered before the Company or the Transfer Agent
receives such notification, the Member shall be precluded from making any claim against the
Company or the Transfer Agent for such transfer or for a new Certificate.
(b) As a condition to the issuance of any new Certificate under this Section 4.2, the
Company may require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Transfer Agent) reasonably connected therewith.
Section 4.3 Record Holders. The Company shall be entitled to recognize the Record Holder as the
owner of an Interest and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such Interest on the part of any other Person, regardless
23
of whether the Company
shall have actual or other notice thereof, except as otherwise provided by law or any applicable
rule, regulation, guideline or requirement of any National Securities Exchange on which such
Interests are listed for trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting
as nominee, agent or in some other representative capacity for another Person in acquiring and/or
holding Interests, as between the Company on the one hand, and such other Persons on the other,
such representative Person shall be the Record Holder of such Interest.
Section 4.4 Transfer Generally. The term “transfer,” when used in this Agreement with respect to
an Interest, shall be deemed to refer to a transaction by which the holder of an Interest assigns
such Interest to another Person who is or becomes a Member, and includes a sale, assignment, gift,
exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of
any pledge, encumbrance, hypothecation or mortgage. No Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this Article IV. Any
transfer or purported transfer of an Interest not made in accordance with this Article IV shall be
null and void.
Section 4.5 Registration and Transfer of Member Interests.
(a) The Company shall keep or cause to be kept on behalf of the Company a register
that, subject to such reasonable regulations as it may prescribe and subject to the
provisions of Section 4.5(b), will provide for the registration and transfer of Interests.
The Transfer Agent is hereby appointed registrar and transfer agent for the purpose of
registering Common Units and transfers of such Common Units as herein provided. The Company
shall not recognize transfers of Certificates evidencing Interests unless such transfers are
effected in the manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Interests evidenced by a Certificate, and subject to the
provisions of Section 4.5(b), the appropriate Officers of the Company shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign and deliver,
in the name of the holder or the designated transferee or
transferees, as required pursuant to the Record Holder’s instructions, one or more new
Certificates evidencing the same aggregate number and type of Interests as was evidenced by
the Certificate so surrendered.
(b) Except as provided in Section 4.7, the Company shall not recognize any transfer of
Interests until the Certificates evidencing such Interests are surrendered for registration
of transfer. No charge shall be imposed by the Company for such transfer; provided,
that as a condition to the issuance of any new Certificate under this Section 4.5(b), the
Company may require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed with respect thereto.
(c) By acceptance of the transfer of any Interest in accordance with this Section 4.5
or the issuance of any Interest in accordance with Section 5.6, and except as provided in
Section 4.7, each acquiror or transferee of an Interest (including any nominee holder or an
agent or representative acquiring such Interests for the account of another Person) (i)
shall be admitted to the Company as a Member with respect to the Interests so
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acquired or
transferred to such Person when any such acquisition, transfer or admission is reflected in
the books and records of the Company, with or without execution of this Agreement, (ii)
shall be deemed to agree to be bound by the terms of, and shall be deemed to have executed,
this Agreement, (iii) shall become the Record Holder of the Interests so transferred, (iv)
represents that the transferee has the capacity, power and authority to enter into this
Agreement, (v) grants powers of attorney to the Officers of the Company and any Liquidator
of the Company and (vi) makes the consents and waivers contained in this Agreement. The
issuance or transfer of any Interests in accordance with this Agreement and the admission of
any new Member shall not constitute an amendment to this Agreement.
(d) Subject to (i) the foregoing provisions of this Section 4.5, (ii) Section 4.3,
(iii) Section 4.6, (iv) with respect to any series of Interests, the provisions of any
statement of designations establishing such series, (v) any contractual provision binding on
any Member and (vi) provisions of applicable law including the Securities Act, Interests
shall be freely transferable to any Person.
Section 4.6 Restrictions on Transfers.
(a) The Company may impose restrictions on the transfer of Interests if it receives an
Opinion of Counsel providing that such restrictions are necessary to avoid a significant
risk of any Group Member becoming taxable as a corporation or otherwise becoming taxable as
an entity for federal income tax purposes. The Board of Directors may impose such
restrictions by amending this Agreement in accordance with Article XI; provided,
however, that any amendment that would result in the delisting or suspension of
trading of any class of Interests on the principal National Securities Exchange on which
such class of Interests is then traded must be approved, prior to such amendment being
effected, by the holders of at least a majority of the Outstanding Interests of such
class. Notwithstanding Section 11.10, such approval may be obtained through a written
consent of such holders.
(b) Nothing contained in this Article IV, or elsewhere in this Agreement, shall
preclude the settlement of any transactions involving Interests entered into through the
facilities of any National Securities Exchange on which such Interests are listed for
trading.
Section 4.7 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or local law or
regulation that the Board of Directors determines would create a substantial risk of
cancellation or forfeiture of any property in which the Group Member has an interest based
on the nationality, citizenship or other related status of a Member, the Board of Directors
may request any Member to furnish to the Company, within 30 days after receipt of such
request, an executed Citizenship Certification or such other information concerning his
nationality, citizenship or other related status (or, if the Member is a nominee holding for
the account of another Person, the nationality, citizenship or other related status of such
Person) as the Company may request. If a Member fails to furnish
25
to the Company, within the
aforementioned 30-day period, such Citizenship Certification or other requested information
or if upon receipt of such Citizenship Certification or other requested information the
Board of Directors determines that a Member is not an Eligible Citizen, the Interests owned
by such Member shall be subject to redemption in accordance with the provisions of Section
4.8. In addition, the Board of Directors may require that the status of any such Member be
changed to that of a Non-citizen Assignee and, thereupon, the Company shall be substituted
for such Non-citizen Assignee as the Member in respect of the Non-Citizen Assignee’s
Interests.
(b) The Company shall, in exercising voting rights in respect of Interests held by the
Company on behalf of Non-citizen Assignees, distribute the votes in the same ratios or for
the same candidates for election as Directors as the votes of Members in respect of
Interests other than those of Non-citizen Assignees are cast, either for, against or
abstaining as to the matter or election.
(c) Upon dissolution of the Company, a Non-citizen Assignee shall have no right to
receive a distribution in kind pursuant to Section 10.3, but shall be entitled to the cash
equivalent thereof, and the Company shall provide cash in exchange for an assignment of the
Non-citizen Assignee’s share of any distribution in kind. Such payment and assignment shall
be treated for Company purposes as a purchase by the Company from the Non-citizen Assignee
of his Member Interest (representing his right to receive his share of such distribution in
kind).
(d) At any time after he can and does certify that he has become an Eligible Citizen, a
Non-citizen Assignee may, upon application to the Board of Directors, request that, with
respect to any Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.8, such Non-citizen Assignee be admitted as a Member, and upon approval of
the Board of Directors, such Non-citizen Assignee shall be admitted as a Member and shall no
longer constitute a Non-citizen Assignee and the Company shall cease to be deemed to be the
Member in respect of such Interests.
Section 4.8 Redemption of Interests of Non-citizen Assignees.
(a) If at any time a Member fails to furnish a Citizenship Certification or other
information requested within the 30-day period specified in Section 4.7(a), or, if upon
receipt of such Citizenship Certification or other information the Board of Directors
determines, with the advice of counsel, that a Member is not an Eligible Citizen, the
Company may, unless the Member establishes to the satisfaction of the Board of Directors
that such Member is an Eligible Citizen or has transferred his Interests to a Person who is
an Eligible Citizen and who furnishes a Citizenship Certification to the Board of Directors
prior to the date fixed for redemption as provided below, redeem the Interest of such Member
as follows:
(i) The Board of Directors shall, not later than the 30th day before
the date fixed for redemption, give notice of redemption to the Member, at his last
address designated on the records of the Company or the Transfer Agent, by
registered or certified mail, postage prepaid. The notice shall be deemed to have
26
been given when so mailed. The notice shall specify the Redeemable Interests, the
date fixed for redemption, the place of payment, that payment of the redemption
price will be made upon surrender of the Certificate evidencing the Redeemable
Interests and that on and after the date fixed for redemption no further allocations
or distributions to which the Member would otherwise be entitled in respect of the
Redeemable Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall be an amount
equal to the Current Market Price (the date of determination of which shall be the
date fixed for redemption) of Interests of the class to be so redeemed multiplied by
the number of Interests of each such class included among the Redeemable Interests.
The redemption price shall be paid, as determined by the Board of Directors, in cash
or by delivery of a promissory note of the Company in the principal amount of the
redemption price, bearing interest at the Prime Rate annually and payable in three
equal annual installments of principal together with accrued interest, commencing
one year after the redemption date.
(iii) Upon surrender by or on behalf of the Member, at the place specified in
the notice of redemption, of the Certificate evidencing the Redeemable Interests,
duly endorsed in blank or accompanied by an assignment duly executed in blank, the
Member or his duly authorized representative shall be entitled to receive the
payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer constitute
issued and Outstanding Member Interests.
(b) The provisions of this Section 4.8 shall also be applicable to Interests held by a
Member as nominee of a Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.8 shall prevent the recipient of a notice of redemption
from transferring his Interest before the redemption date if such transfer is otherwise
permitted under this Agreement. Upon receipt of notice of such a transfer, the Board of
Directors shall withdraw the notice of redemption, provided the transferee of such
Interest certifies to the satisfaction of the Board of Directors in a Citizenship
Certification that he is an Eligible Citizen. If the transferee fails to make such
certification, such redemption shall be effected from the transferee on the original
redemption date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND
ISSUANCE OF INTERESTS
Section 5.1 Initial Offering Transactions.
(a) Redemption or Exchange of the Pre-Initial Offering Interests. On the Closing Date
(i) all Preferred Units held by the Preferred Investors were redeemed and (ii) all
Pre-Initial Offering Interests in the Company were exchanged for Common Units and
subordinated units (which subordinated units were subsequently converted into an
27
equal
number of Common Units in accordance with the terms of the Second Amended and Restated
Limited Liability Company Agreement of the Company dated November 15, 2004) as set forth on
Exhibit C hereto.
(b) Original Escrow Accounts. Immediately prior to completion of the Initial Offering,
the Company distributed to the Existing Investors $4 million from the Company’s available
cash. The Existing Investors deposited such funds into escrow accounts (“Original Escrow
Accounts”) to be used solely for the purpose of satisfying their respective obligations
pursuant to Section 7.13 of this Agreement. Each of the Existing Investors and the Company
entered into escrow agreements with a mutually acceptable bank on terms reasonably
acceptable to both parties, which provided that (x) no funds would be released from the
Original Escrow Accounts prior to the end of the Cap Period except to satisfy such Existing
Investor’s Excess G&A Obligation and (y) the Existing Investors would be entitled to any
funds remaining in such Existing Investor’s Original Escrow Account following the expiration
of the Cap Period.
Section 5.2
Contributions by Initial Members. (a) On the Closing Date and pursuant to
the Underwriting Agreement, each Underwriter contributed to the Company cash in an amount
equal to the Issue Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at the Closing
Date. In exchange for such Capital Contributions by the Underwriters, the Company issued
Common Units to each Underwriter on whose behalf such Capital Contribution was made in
an amount equal to the quotient obtained by dividing (i) the cash contribution to the
Company by or on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(b) Upon the exercise of the Over-Allotment Option and pursuant to the Underwriting
Agreement, each Underwriter contributed to the Company cash in an amount equal to the Issue
Price per Initial Common Unit, multiplied by the number of Common Units specified in the
Underwriting Agreement to be purchased by such Underwriter at the Option Closing Date. In
exchange for such Capital Contributions by the Underwriters, the Company issued Common Units
to each Underwriter on whose behalf such Capital Contribution was made in an amount equal to
the quotient obtained by dividing (i) the cash contributions to the Company by or on behalf
of such Underwriter by (ii) the Issue Price per Initial Common Unit. Upon receipt by the
Company of the Capital Contributions from the Underwriters as provided in this Section
5.2(b), the Company used such cash to redeem from the CSFB Entities and the EnCap Entities,
on a pro rata basis, that number of Common Units held by them equal to the number of Common
Units issued to the Underwriters as provided in this Section 5.2(b).
(c) No Member Interests were issued or issuable as of or at the Closing Date other than
(i) the 5,000,000 Common Units issuable pursuant to Section 5.2(a) to the Underwriters, (ii)
the 750,000 Common Units issued upon exercise of the Over-Allotment Option and (iii) the
2,038,252 Common Units and 3,519,126 subordinated units (which subordinated units were
subsequently converted into an equal number of Common Units in accordance with the terms of
the Second Amended and Restated
28
Limited Liability Company Agreement of the Company dated
November 15, 2004) issuable to the holders of Pre-Initial Offering Interests pursuant to
Section 5.1(a).
Section 5.3
Contributions by the Existing Investors. On each date provided for reimbursement of
G&A to the Company pursuant to Section 7.13, the Existing Investors or their respective assignees
or transferees shall contribute severally, not jointly, an amount to the Company, as a Capital
Contribution, equal to their respective Allocated Percentage of the Excess G&A Obligation.
Notwithstanding the foregoing sentence and subject to the limitations set forth in Section 7.13,
such Capital Contribution shall only be made from (i) funds held in such Existing Investor’s
Original Escrow Account or Transfer Escrow Account or (ii) if there are no funds held in such
Existing Investor’s Original Escrow Account or Transfer Escrow Account, then to the extent of
distributions made with respect to such Quarter attributable to the Common Units and the
subordinated units (which subordinated units were subsequently converted into an equal number of
Common Units in accordance with the terms of the Second Amended and Restated Limited Liability
Company Agreement of the Company dated November 15, 2004) owned by such Existing Investor
immediately after the Initial Offering and as set forth on Exhibit C to this Agreement.
Section 5.4 Interest and Withdrawal. No interest shall be paid by the Company on Capital
Contributions. No Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or
upon termination of the Company may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this Agreement, no
Member shall have priority over any other Member either as to the return of Capital Contributions
or as to profits, losses or distributions.
Section 5.5 Capital Accounts.
(a) The Company shall maintain for each Member (or a beneficial owner of Interests held
by a nominee in any case in which the nominee has furnished the identity of such owner to
the Company in accordance with Section 6031(c) of the Code or any other method acceptable to
the Company) owning an Interest a separate Capital Account with respect to such Interest in
accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made to the
Company with respect to such Interest pursuant to this Agreement and (ii) all items of
Company income and gain (including, without limitation, income and gain exempt from tax)
computed in accordance with Section 5.5(b) and allocated with respect to such Interest
pursuant to Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such Interest
pursuant to this Agreement and (y) all items of Company deduction and loss computed in
accordance with Section 5.5(b) and allocated with respect to such Interest pursuant to
Section 6.1.
29
(b) For purposes of computing the amount of any item of income, gain, loss or deduction
which is to be allocated pursuant to Article VI and is to be reflected in the Members’
Capital Accounts, the determination, recognition and classification of any such item shall
be the same as its determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Company shall be treated as
owning directly its proportionate share (as determined by the Board of Directors
based upon the provisions of the applicable Group Member Agreement) of all property
owned by any other Group Member that is classified as a partnership for federal
income tax purposes.
(ii) All fees and other expenses incurred by the Company to promote the sale of
(or to sell) an Interest that can neither be deducted nor amortized under Section
709 of the Code, if any, shall, for purposes of Capital Account maintenance, be
treated as an item of deduction at the time such fees and other
expenses are incurred and shall be allocated among the Members pursuant to
Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the Code
which may be made by the Company and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items
are not includable in gross income or are neither currently deductible nor
capitalized for federal income tax purposes. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the
Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such adjustment
in the Capital Accounts shall be treated as an item of gain or loss.
(iv) Any income, gain or loss attributable to the taxable disposition of any
Company property shall be determined as if the adjusted basis of such property as of
such date of disposition were equal in amount to the Company’s Carrying Value with
respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code, any
deductions for depreciation, cost recovery or amortization attributable to any
Contributed Property shall be determined as if the adjusted basis of such property
on the date it was acquired by the Company were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying Value of any
Company property subject to depreciation, cost recovery or amortization, any further
deductions for such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property were
equal to the Carrying Value of such property
30
immediately following such adjustment
and (B) using a rate of depreciation, cost recovery or amortization derived from the
same method and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if
the asset has a zero adjusted basis for federal income tax purposes, depreciation,
cost recovery or amortization deductions shall be determined using any method that
the Board of Directors may adopt.
(vi) If the Company’s adjusted basis in a depreciable or cost recovery property
is reduced for federal income tax purposes pursuant to Section 48(q)(1) or 48(q)(3)
of the Code, the amount of such reduction shall, solely for purposes hereof, be
deemed to be an additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Members pursuant to
Section 6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the Members to
whom such deemed deduction was allocated.
(c) A transferee of an Interest shall succeed to a pro rata portion of the Capital
Account of the transferor relating to the Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an
issuance of additional Interests for cash or Contributed Property, the Capital Account of
all Members and the Carrying Value of each Company property immediately prior to such
issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Company property, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property immediately prior to such
issuance and had been allocated to the Members at such time pursuant to Section 6.1 in the
same manner as any item of gain or loss actually recognized during such period would have
been allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Company assets (including, without limitation, cash or
cash equivalents) immediately prior to the issuance of additional Interests shall be
determined by the Board of Directors using such method of valuation as it may adopt;
provided, however, that the Board of Directors, in arriving at such
valuation, must take fully into account the fair market value of the Interests of all
Members at such time. The Board of Directors shall allocate such aggregate value among the
assets of the Company (in such manner as it determines) to arrive at a fair market value for
individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Member of any Company
property (other than a distribution of cash that is not in redemption or retirement
of an Interest), the Capital Accounts of all Members and the Carrying Value of all
Company property shall be adjusted upward or downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Company property, as if such Unrealized Gain
or Unrealized Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and had been
allocated to the Members, at such time, pursuant to Section 6.1 in the same manner
as any
31
item of gain or loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Company assets (including, without limitation,
cash or cash equivalents) immediately prior to a distribution shall (A) in the case
of an actual distribution that is not made pursuant to Section 10.3 or in the case
of a deemed distribution, be determined and allocated in the same manner as that
provided in Section 5.5(d)(i) or (B) in the case of a liquidating distribution
pursuant to Section 10.3, be determined and allocated by the Liquidator using such
method of valuation as it may adopt.
Section 5.6 Issuances of Additional Company Securities.
(a) The Company may issue additional Company Securities, and options, rights, warrants
and appreciation rights relating to the Company Securities for any
Company purpose at any time and from time to time to such Persons for such
consideration and on such terms and conditions as the Board of Directors shall determine,
all without the approval of any Members.
(b) Each additional Company Security authorized to be issued by the Company pursuant to
Section 5.6(a) may be issued in one or more classes, or one or more series of any such
classes, with such designations, preferences, rights, powers and duties (which may be senior
to existing classes and series of Company Securities), as shall be fixed by the Board of
Directors, including (i) the right to share Company profits and losses or items thereof;
(ii) the right to share in Company distributions; (iii) the rights upon dissolution and
liquidation of the Company; (iv) whether, and the terms and conditions upon which, the
Company may redeem the Company Security; (v) whether such Company Security is issued with
the privilege of conversion or exchange and, if so, the terms and conditions of such
conversion or exchange; (vi) the terms and conditions upon which each Company Security will
be issued, evidenced by certificates and assigned or transferred; (vii) the method for
determining the Percentage Interest as to such Company Security; and (viii) the right, if
any, of each such Company Security to vote on Company matters, including matters relating to
the relative rights, preferences and privileges of such Company Security.
(c) The Board of Directors shall take all actions that it determines to be necessary or
appropriate in connection with (i) each issuance of Company Securities and options, rights,
warrants and appreciation rights relating to Company Securities pursuant to this Section
5.6, (ii) the admission of Additional Members and (iii) all additional issuances of Company
Securities. The Board of Directors shall determine the relative rights, powers and duties
of the holders of the Units or other Company Securities being so issued. The Board of
Directors shall do all things necessary to comply with the Delaware Act and is authorized
and directed to do all things that it determines to be necessary or appropriate in
connection with any future issuance of Company Securities pursuant to the terms of this
Agreement, including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any National Securities Exchange on which the
Units or other Company Securities are listed for trading.
32
Section 5.7
ReservedSection 5.8 Reserved Section 5.9 No Preemptive Rights. No Person shall have any
preemptive, preferential or other similar right with respect to the issuance of any Company
Security, whether unissued, held in the treasury or hereafter created.
Section 5.10 Splits and Combinations.
(a) Subject to Section 5.10(d), 6.6 and 6.7 (dealing with adjustments of distribution
levels), the Company may make a Pro Rata distribution of Company Securities to all Record
Holders or may effect a subdivision or combination of Company Securities so long as, after
any such event, each Member shall have the same Percentage Interest in the Company as before
such event, and any amounts calculated on a per Unit basis or stated as a number of Units
are proportionately adjusted retroactive to the date of formation of the Company.
(b) Whenever such a distribution, subdivision or combination of Company Securities is
declared, the Board of Directors shall select a Record Date as of which the distribution,
subdivision or combination shall be effective and shall send notice thereof at least 20 days
prior to such Record Date to each Record Holder as of a date not less than 10 days prior to
the date of such notice. The Board of Directors also may cause a firm of independent public
accountants selected by it to calculate the number of Company Securities to be held by each
Record Holder after giving effect to such distribution, subdivision or combination. The
Board of Directors shall be entitled to rely on any certificate provided by such firm as
conclusive evidence of the accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or combination, the Company
may issue Certificates to the Record Holders of Company Securities as of the applicable
Record Date representing the new number of Company Securities held by such Record Holders,
or the Board of Directors may adopt such other procedures that it determines to be necessary
or appropriate to reflect such changes. If any such combination results in a smaller total
number of Company Securities Outstanding, the Company shall require, as a condition to the
delivery to a Record Holder of such new Certificate, the surrender of any Certificate held
by such Record Holder immediately prior to such Record Date.
(d) The Company shall not issue fractional Units upon any distribution, subdivision or
combination of Units. If a distribution, subdivision or combination of Units would result
in the issuance of fractional Units but for the provisions of this Section 5.10(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded
to the next higher Unit).
Section 5.11 Fully Paid and Non-Assessable Nature of Interests. All Member Interests issued
pursuant to, and in accordance with the requirements of, this Article V shall be validly issued,
fully paid and non-assessable Interests in the Company, except as such non-assessability may be
affected by Sections 18-607 or 18-804 of the Delaware Act and except to the extent otherwise
provided in this Agreement.
33
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes. For purposes of maintaining the Capital Accounts and in determining the rights of the Members
among themselves, the Company’s items of income, gain, loss and deduction (computed in accordance
with Section 5.5(b)) shall be allocated among the Members in each taxable year (or portion thereof)
as provided herein below.
(a) Net Income. After giving effect to the special allocations set forth in Section
6.1(d) and any allocations to other Company Securities, Net Income for each taxable year and
all items of income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated to the Unitholders in accordance with their respective
Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set forth in Section
6.1(d) and any allocations to other Company Securities, Net Losses for each taxable period
and all items of income, gain, loss and deduction taken into account in computing Net Losses
for such taxable period shall be allocated to the Unitholders in accordance with their
respective Percentage Interests; provided that Net Losses shall not be allocated
pursuant to this Section 6.1(b) to the extent that such allocation would cause any
Unitholder to have a deficit balance in its Adjusted Capital Account at the end of such
taxable year (or increase any existing deficit balance in its Adjusted Capital Account).
(c) Net Termination Gains and Losses. After giving effect to the special allocations
set forth in Section 6.1(d) and any allocations to other Company Securities, all items of
income, gain, loss and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner as such Net
Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this
Section 6.1(c) shall be made after Capital Account balances have been adjusted by all other
allocations provided under this Section 6.1 and after all distributions of Available Cash
provided under Section 6.4 and 6.5 have been made; provided, however, that
solely for purposes of this Section 6.1(c), Capital Accounts shall not be adjusted for
distributions made pursuant to Section 10.3.
(i) If a Net Termination Gain is recognized (or deemed recognized pursuant to
Section 5.5(d)), such Net Termination Gain shall be allocated among the Members in
the following manner (and the Capital Accounts of the Members shall be increased by
the amount so allocated in each of the following subclauses, in the order listed,
before an allocation is made pursuant to the next succeeding subclause):
(A) First, to each Member having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to the total
deficit balances in the Capital Accounts of all Members, until each such
34
Member has been allocated Net Termination Gain equal to any such deficit
balance in its Capital Account;
(B) Second, to all Unitholders holding Common Units, Pro Rata, until
the Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) its Unrecovered Capital and (2)
the Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced (but not below zero) by any distribution
pursuant to Section 6.4 with respect to such Common Unit for such Quarter
(the amount determined pursuant to this clause (2) is hereinafter defined as
the “Unpaid MQD”); and
(C) Third, 100% to all Unitholders in accordance with their respective
Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to
Section 5.5(d)), such Net Termination Loss shall be allocated among the Members in
the following manner:
(A) First, to the Unitholders holding Common Units, Pro Rata, until the
Capital Account in respect of each Common Unit then Outstanding has been
reduced to zero; and
(B) Second, the balance, if any, 100% to all Unitholders in accordance
with their respective percentage Interests.
(d) Special Allocations. Notwithstanding any other provision of this Section 6.1, the
following special allocations shall be made for such taxable period:
(i) Company Minimum Gain Chargeback. Notwithstanding any other provision of
this Section 6.1, if there is a net decrease in Company Minimum Gain during any
Company taxable period, each Member shall be allocated items of Company income and
gain for such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 6.1(d),
each Member’s Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d) with respect to
such taxable period (other than an allocation pursuant to Section 6.1(d)(vi) and
6.1(d)(vii)). This Section 6.1(d)(i) is intended to comply with the Company Minimum
Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) Chargeback of Member Nonrecourse Debt Minimum Gain. Notwithstanding the
other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except as
provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net decrease in
Member Nonrecourse Debt Minimum Gain during any
35
Company taxable period, any Member
with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Company income and gain for such period
(and, if necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation
Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For
purposes of this Section 6.1(d), each Member’s Adjusted Capital Account balance
shall be determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to this
Section 6.1(d), other than Section 6.1(d)(i) and other than an allocation pursuant
to Section 6.1(d)(vi) and 6.1(d)(vii), with respect to such taxable period. This
Section 6.1(d)(ii) is intended to comply with the chargeback of items of income and
gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Priority Allocations. If the amount of cash or the Net Agreed Value of
any property distributed (except cash or property distributed pursuant to Section
10.3) to any Unitholder with respect to its Units for a taxable year is greater (on
a per Unit basis) than the amount of cash or the Net Agreed Value of property
distributed to the other Unitholders with respect to their Units (on a per Unit
basis), then each Unitholder receiving such greater cash or property distribution
shall be allocated gross income in an amount equal to the product of (A) the amount
by which the distribution (on a per Unit basis) to such Unitholder exceeds the
distribution (on a per Unit basis) to the Unitholders receiving the smallest
distribution and (B) the number of Units owned by the Unitholder receiving the
greater distribution.
(iv) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations promulgated under Section 704(b) of the
Code, the deficit balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless such deficit
balance is otherwise eliminated pursuant to Section 6.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Member has a deficit balance in
its Capital Account at the end of any Company taxable period in excess of the sum of
(A) the amount such Member is required to restore pursuant to the provisions of this
Agreement and (B) the amount such Member is deemed obligated to restore pursuant to
Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Member shall be
specially allocated items of Company gross income and gain in the amount of such
excess as quickly as possible; provided, that an allocation pursuant to this
Section 6.1(d)(v) shall be made only if and to the extent that such Member would
have a deficit balance in its Capital Account as adjusted after all other
allocations provided for in this Section 6.1 have been tentatively made as if this
Section 6.1(d)(v) were not in this Agreement.
36
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Members in accordance with their respective Percentage
Interests. If the Board of Directors determines that the Company’s
Nonrecourse Deductions should be allocated in a different ratio to satisfy the
safe harbor requirements of the Treasury Regulations promulgated under Section
704(b) of the Code, the Board of Directors is authorized, upon notice to the other
Members, to revise the prescribed ratio to the numerically closest ratio that does
satisfy such requirements.
(vii) Member Nonrecourse Deductions. Member Nonrecourse Deductions for any
taxable period shall be allocated 100% to the Member that bears the Economic Risk of
Loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Treasury Regulation Section
1.704-2(i). If more than one Member bears the Economic Risk of Loss with respect to
a Member Nonrecourse Debt, such Member Nonrecourse Deductions attributable thereto
shall be allocated between or among such Members in accordance with the ratios in
which they share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section
1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of the Company in
excess of the sum of (A) the amount of Company Minimum Gain and (B) the total amount
of Nonrecourse Built-in Gain shall be allocated among the Members in accordance with
their respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such basis), and such
item of gain or loss shall be specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Treasury Regulations.
(x) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1, other than
the Required Allocations, the Required Allocations shall be taken into
account in making the Agreed Allocations so that, to the extent possible,
the net amount of items of income, gain, loss and deduction allocated to
each Member pursuant to the Required Allocations and the Agreed Allocations,
together, shall be equal to the net amount of such items that would have
been allocated to each such Member under the Agreed Allocations had the
Required Allocations and the related Curative Allocation not otherwise been
provided in this Section 6.1.
37
Notwithstanding the preceding sentence,
Required Allocations relating to (1) Nonrecourse Deductions shall not be
taken into account except to the extent that there has been a decrease in
Company Minimum Gain and
(2) Member Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Member Nonrecourse
Debt Minimum Gain. Allocations pursuant to this Section 6.1(d)(x)(A) shall
only be made with respect to Required Allocations to the extent the Board of
Directors reasonably determines that such allocations will otherwise be
inconsistent with the economic agreement among the Members. Further,
allocations pursuant to this Section 6.1(d)(x)(A) shall be deferred with
respect to allocations pursuant to clauses (1) and (2) hereof to the extent
the Board of Directors determines that such allocations are likely to be
offset by subsequent Required Allocations.
(B) The Board of Directors shall, with respect to each taxable period,
(1) apply the provisions of Section 6.1(d)(x)(A) in whatever order is most
likely to minimize the economic distortions that might otherwise result from
the Required Allocations, and (2) divide all allocations pursuant to Section
6.1(d)(x)(A) among the Members in a manner that is likely to minimize such
economic distortions.
(xi) Corrective Allocations. In the event of any allocation of Additional Book
Basis Derivative Items or any Book-Down Event or any recognition of a Net
Termination Loss, the following rules shall apply:
(A) In the case of any negative adjustments to the Capital Accounts of
the Members resulting from a Book-Down Event or from the recognition of a
Net Termination Loss, such negative adjustment (1) shall first be allocated,
to the extent of the Aggregate Remaining Net Positive Adjustments, in such a
manner, as determined by the Board of Directors, that to the extent possible
the aggregate Capital Accounts of the Members will equal the amount that
would have been the Capital Account balance of the Members if no prior
Book-Up Events had occurred, and (2) any negative adjustment in excess of
the Aggregate Remaining Net Positive Adjustments shall be allocated pursuant
to Section 6.1(c) hereof.
(B) In making the allocations required under this Section 6.1(d)(xi),
the Board of Directors may apply whatever conventions or other methodology
it determines will satisfy the purpose of this Section 6.1(d)(xi).
(xii) Allocation of G&A. Any deduction or loss attributable to the Existing
Investors’ or their respective assignees’ or transferees’ obligation to reimburse
the Company for, or incurred by the Company and constituting, the Excess G&A
Obligation, which the Existing Investors have funded or agreed to fund pursuant to
Section 5.3, shall be allocated to each of the Existing Investors in an amount equal
to their Allocated Percentage of such Excess G&A Obligation.
38
Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes, each item of
income, gain, loss and deduction shall be allocated among the Members in the same manner as
its correlative item of “book” income, gain, loss or deduction is allocated pursuant to
Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed
Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and
cost recovery deductions shall be allocated for federal income tax purposes among the
Members as follows:
(i) (A) In the case of a Contributed Property, such items attributable thereto
shall be allocated among the Members in the manner provided under Section 704(c) of
the Code that takes into account the variation between the Agreed Value of such
property and its adjusted basis at the time of contribution; and (B) any item of
Residual Gain or Residual Loss attributable to a Contributed Property shall be
allocated among the Members in the same manner as its correlative item of “book”
gain or loss is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1) first, be
allocated among the Members in a manner consistent with the principles of Section
704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss
attributable to such property and the allocations thereof pursuant to Section
5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Members in a manner consistent with
Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Members in the
same manner as its correlative item of “book” gain or loss is allocated pursuant to
Section 6.1.
(iii) The Board of Directors shall apply the principles of Treasury Regulation
Section 1.704-3(d) to eliminate Book-Tax Disparities, except with respect to any
goodwill in the Company.
(c) For the proper administration of the Company and for the preservation of uniformity
of the Units (or any class or classes thereof), the Board of Directors shall (i) adopt such
conventions as it deems appropriate in determining the amount of depreciation, amortization
and cost recovery deductions; (ii) make special allocations for federal income tax purposes
of income (including, without limitation, gross income) or deductions; and (iii) amend the
provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to
preserve or achieve uniformity of the Units (or any class or classes thereof). The Board of
Directors may adopt such conventions, make such allocations and make such amendments to this
Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not have a
material adverse effect on the Members, the holders of any class or classes of Units
39
issued
and Outstanding or the Company, and if such allocations are consistent with the principles
of Section 704 of the Code.
(d) The Board of Directors may determine to depreciate or amortize the portion of an
adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any
Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a
predetermined rate derived from the depreciation or amortization method and useful life
applied to the Company’s common basis of such property, despite any inconsistency of such
approach with Treasury Regulation Section 1.167(c)-l(a)(6) or any successor regulations
thereto. If the Board of Directors determines that such reporting position cannot be taken,
the Board of Directors may adopt depreciation and amortization conventions under which all
purchasers acquiring Units in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a direct interest
in the Company’s property. If the Board of Directors chooses not to utilize such aggregate
method, the Board of Directors may use any other depreciation and amortization conventions
to preserve the uniformity of the intrinsic tax characteristics of any Member Interests, so
long as such conventions would not have a material adverse effect on the Members or the
Record Holders of any class or classes of Units.
(e) Any gain allocated to the Members upon the sale or other taxable disposition of any
Company asset shall, to the extent possible, after taking into account other required
allocations of gain pursuant to this Section 6.2, be characterized as Recapture Income in
the same proportions and to the same extent as such Members (or their predecessors in
interest) have been allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the Company for
federal income tax purposes and allocated to the Members in accordance with the provisions
hereof shall be determined without regard to any election under Section 754 of the Code that
may be made by the Company; provided, however, that such allocations, once
made, shall be adjusted (in the manner determined by the Board of Directors) to take into
account those adjustments permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Company income, gain, loss and deduction shall, for federal income tax
purposes, be determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Members as of the opening of the New York Stock Exchange on the first
Business Day of each month; provided, however, that gain or loss on a sale
or other disposition of any assets of the Company or any other extraordinary item of income
or loss realized and recognized other than in the ordinary course of business, as determined
by the Board of Directors, shall be allocated to the Members as of the opening of the New
York Stock Exchange on the first Business Day of the month in which such gain or loss is
recognized for federal income tax purposes. The Board of Directors may revise, alter or
otherwise modify such methods of allocation to the extent
permitted or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
40
(h) Allocations that would otherwise be made to a Member under the provisions of this
Article VI shall instead be made to the beneficial owner of Units held by a nominee in any
case in which the nominee has furnished the identity of such owner to the Company in
accordance with Section 6031(c) of the Code or any other method determined by the Board of
Directors.
Section 6.3 Requirement and Characterization of Distributions; Distributions to Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the Quarter ending
on December 31, 2004, an amount equal to 100% of Available Cash with respect to such Quarter
shall, subject to Section 18-607 of the Delaware Act, be distributed in accordance with this
Article VI by the Company to the Members as of the Record Date selected by the Board of
Directors. All amounts of Available Cash distributed by the Company on any date from any
source shall be deemed to be Operating Surplus until the sum of all amounts of Available
Cash theretofore distributed by the Company to the Members pursuant to Section 6.4 equals
the Operating Surplus from the Closing Date through the close of the immediately preceding
Quarter. Any remaining amounts of Available Cash distributed by the Company on such date
shall, except as otherwise provided in Section 6.5, be deemed to be “Capital Surplus.” All
distributions required to be made under this Agreement shall be made subject to Sections
18-607 and 18-804 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution and liquidation of
the Company, all receipts received during or after the Quarter in which the Liquidation Date
occurs, other than from borrowings described in (a)(ii) of the definition of Available Cash,
shall be applied and distributed solely in accordance with, and subject to the terms and
conditions of, Section 10.3(a).
(c) The Board of Directors may treat taxes paid by the Company on behalf of, or amounts
withheld with respect to, all or less than all of the Members, as a distribution of
Available Cash to such Members.
(d) Each distribution in respect of an Interest shall be paid by the Company, directly
or through the Transfer Agent or through any other Person or agent, only to the Record
Holder of such Interest as of the Record Date set for such distribution. Such payment shall
constitute full payment and satisfaction of the Company’s liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such payment by
reason of an assignment or otherwise.
41
Section 6.4
Distributions of Available Cash from Operating Surplus. Available Cash with respect to
any Quarter that is deemed to be Operating Surplus pursuant to the provisions of Section 6.3 or
6.5, subject to Section 18-607 of the Delaware Act and except as otherwise required by Section
5.6(b) in respect of other Company Securities issued pursuant thereto, shall be distributed 100% to
the Unitholders in accordance with their respective Percentage Interests.
Section 6.5 Distributions of Available Cash from Capital Surplus. Available Cash that is deemed to
be Capital Surplus pursuant to the provisions of Section 6.3(a) shall, subject to Section 18-607 of
the Delaware Act, be distributed, unless the provisions of Section 6.3 require otherwise, 100% to
the Unitholders in accordance with their respective Percentage Interests, until a hypothetical
holder of a Common Unit acquired on the Closing Date has received with respect to such Common Unit,
during the period since the Closing Date through such date, distributions of Available Cash that
are deemed to be Capital Surplus in an aggregate amount equal to the Initial Unit Price. Available
Cash that is deemed to be Capital Surplus shall then be distributed to all Unitholders holding
Common Units, Pro Rata, until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Cumulative Common Unit Arrearage. Thereafter, all Available
Cash shall be distributed as if it were Operating Surplus and shall be distributed in accordance
with Section 6.4.
Section 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels. (a) The Minimum Quarterly Distribution shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a distribution payable
in Units or otherwise) of Units or other Company Securities in accordance with Section 5.10.
In the event of a distribution of Available Cash that is deemed to be from Capital Surplus,
the then applicable Minimum Quarterly Distribution shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable Minimum
Quarterly Distribution by a fraction of which the numerator is the Unrecovered Capital of
the Common Units immediately after giving effect to such distribution and of which the
denominator is the Unrecovered Capital of the Common Units immediately prior to giving
effect to such distribution.
(b) The Minimum Quarterly Distribution shall also be subject to adjustment pursuant to
Section 6.7.
Section 6.7 Entity Level Taxation. If legislation is enacted or the interpretation of existing
language is modified by a governmental taxing authority so that a Group Member is treated as an
association taxable as a corporation or is otherwise subject to an entity-level tax for federal,
state or local income tax purposes, then the Board of Directors shall estimate for each Quarter the
Company Group’s aggregate liability (the “Estimated Incremental Quarterly Tax Amount”) for all such
income taxes that are payable by reason of any such new legislation or interpretation;
provided that any difference between such estimate and the actual tax liability for such
Quarter that is owed by
reason of any such new legislation or interpretation shall be taken into account in determining the
Estimated Incremental Quarterly Tax Amount with respect to each Quarter in which any such
difference can be determined. For each such Quarter, the Minimum Quarterly Distribution shall be
the product obtained by multiplying (a) the amounts therefor that are set out herein prior to the
application of this Section 6.7 times (b) the quotient obtained by dividing (i) Available
42
Cash with
respect to such Quarter by (ii) the sum of Available Cash with respect to such Quarter and the
Estimated Incremental Quarterly Tax Amount for such Quarter, as determined by the Board of
Directors. For purposes of the foregoing, Available Cash with respect to a Quarter will be deemed
reduced by the Estimated Incremental Quarterly Tax Amount for that Quarter.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Board of Directors.
(a) Except as otherwise expressly provided in this Agreement, the business and affairs
of the Company shall be managed by or under the direction of a Board of Directors (the
“Board of Directors”). As provided in Section 7.4, the Board of Directors shall have the
power and authority to appoint Officers of the Company. The Directors and Officers shall
constitute “managers” within the meaning of the Delaware Act. No Member, by virtue of its
status as such, shall have any management power over the business and affairs of the Company
or actual or apparent authority to enter into, execute or deliver contracts on behalf of, or
to otherwise bind, the Company. Except as otherwise specifically provided in this
Agreement, the authority and functions of the Board of Directors, on the one hand, and of
the Officers, on the other, shall be identical to the authority and functions of the board
of directors and officers, respectively, of a corporation organized under the DGCL. In
addition to the powers that now or hereafter can be granted to managers under the Delaware
Act and to all other powers granted under any other provision of this Agreement subject to
Section 7.3, the Board of Directors shall have full power and authority to do, and to direct
the Officers to do, all things and on such terms as it determines to be necessary or
appropriate to conduct the business of the Company, to exercise all powers set forth in
Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the
following:
(i) the making of any expenditures, the lending or borrowing of money, the
assumption or guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness, including indebtedness that
is convertible into Company Securities, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of periodic
or other reports to governmental or other agencies having jurisdiction over the
business or assets of the Company;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Company or the merger
or other combination of the Company with or into another Person (the matters
described in this clause (iii) being subject, however, to any prior approval that
may be required by Section 7.3);
(iv) the use of the assets of the Company (including cash on hand) for any
purpose consistent with the terms of this Agreement, including the financing
43
of the
conduct of the operations of the Company Group; subject to Section 7.6(a), the
lending of funds to other Persons (including other Group Members); the repayment of
obligations of the Company Group and the making of capital contributions to any
member of the Company Group;
(v) the negotiation, execution and performance of any contracts, conveyances or
other instruments (including instruments that limit the liability of the Company
under contractual arrangements to all or particular assets of the Company);
(vi) the distribution of Company cash;
(vii) the selection and dismissal of officers, employees, agents, outside
attorneys, accountants, consultants and contractors and the determination of their
compensation and other terms of employment or hiring, the creation and operation of
employee benefit plans, employee programs and employee practices;
(viii) the maintenance of insurance for the benefit of the Company Group and
the Members;
(ix) the formation of, or acquisition of an interest in, and the contribution
of property and the making of loans to, any limited or general partnerships, joint
ventures, corporations, limited liability companies or other relationships
(including the acquisition of interests in, and the contributions of property to,
any Group Member from time to time) subject to the restrictions set forth in Section
2.4;
(x) the control of any matters affecting the rights and obligations of the
Company, including the bringing and defending of actions at law or in equity and
otherwise engaging in the conduct of litigation, arbitration or remediation, and the
incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and contingencies to
the extent permitted by law;
(xii) the entering into of listing agreements with any National Securities
Exchange and the delisting of some or all of the Interests from, or requesting that
trading be suspended on, any such exchange (subject to any prior approval that may
be required under Section 4.6);
(xiii) unless restricted or prohibited by Section 5.6, the purchase, sale or
other acquisition or disposition of Company Securities, or the issuance of
additional options, rights, warrants and appreciation rights relating to Company
Securities;
(xiv) the undertaking of any action in connection with the Company’s
participation in any Group Member; and
44
(xv) the entering into of agreements with any of its Affiliates to render
services to a Group Member.
(b) The Board of Directors shall consist of not fewer than three nor more than 11
natural Persons. Each Director shall be elected as provided in Section 7.1(c) and shall
serve in such capacity until his successor has been duly elected and qualified or until such
Director dies, resigns or is removed. A Director may resign at any time upon written notice
to the Company. The Board of Directors may from time to time determine the number of
Directors then constituting the whole Board of Directors, but the Board of Directors shall
not decrease the number of Persons that constitute the whole Board of Directors if such
decrease would shorten the term of any Director.
(c) Directors shall be elected at each annual meeting of Members to serve for a term
expiring at the next annual meeting of Members. The nomination of Persons to serve as
Directors and the election of the Board of Directors shall be in accordance with Article XI
hereof.
(d) Subject to applicable law and the rights of the holders of any series of Interests,
vacancies existing on the Board of Directors (including a vacancy created by virtue of an
increase in the size of the Board of Directors) may be filled only by the affirmative vote
of a majority of the Directors then serving, even if less than a quorum. Any Director chosen
to fill a vacancy shall hold office until the next annual meeting of Members and until his
successor has been duly elected and qualified or until such Director’s earlier resignation
or removal. Subject to the rights of the holders of any series of Interests, any Director,
and the entire Board of Directors, may be removed from office at any time by the affirmative
vote of Members holding a majority of the Percentage Interest of all Members entitled to
vote; provided, however, that no Director may be removed (whether voting on
the removal of an individual Director or the removal of the entire Board of Directors)
without cause if the votes cast against such Director’s removal would be sufficient to elect
such Director if then cumulatively voted at an election of the entire Board of Directors.
(e) Directors need not be Members. The Board of Directors may, from time to time and
by the adoption of resolutions, establish qualifications for Directors.
(f) Unless otherwise required by the Delaware Act, other law or the provisions hereof,
(i) each member of the Board of Directors shall have one vote;
(ii) the presence at a meeting of the Board of Directors of a majority of the
members of the Board of Directors shall constitute a quorum at any such meeting for
the transaction of business; and
(iii) the act of a majority of the members of the Board of Directors present at
a meeting of the Board of Directors at which a quorum is present shall be deemed to
constitute the act of the Board of Directors.
45
(g) Regular meetings of the Board of Directors and any committee thereof shall be held
at such times and places as shall be designated from time to time by resolution of the Board
of Directors or such committee. Notice of such regular meetings shall not be required.
Special meetings of the Board of Directors or meetings of any committee thereof may be
called by the Chairman of the Board or on the written request of any three Directors or
committee members, as applicable, to the Secretary, in each case on at least twenty-four
hours personal, written, facsimile, electronic, telegraphic, cable or wireless notice to
each Director or committee member, which notice may be waived by any Director. Any such
notice, or waiver thereof, need not state the purpose of such meeting except as may
otherwise be required by law. Attendance of a Director at a meeting (including pursuant to
the last sentence of this Section 7.2(g)) shall constitute a waiver of notice of such
meeting, except where such Director attends the meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not lawfully called or
convened. Any action required or permitted to be taken at a meeting of the Board of
Directors, or any committee thereof, may be taken without a meeting, without prior notice
and without a vote if a consent or consents in writing, setting forth the action so taken,
are signed by all members of the Board of Directors or committee. Members of the Board of
Directors or any committee thereof may participate in and hold a meeting by means of
conference telephone, video conference or similar communications equipment by means of which
all Persons participating in the meeting can hear each other, and participation in such
meetings shall constitute presence in Person at the meeting.
(h) The Board of Directors may, by resolution of a majority of the full Board of
Directors, designate one or more committees, each committee to consist of one or more of the
Directors. The Board of Directors may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified Director at any meeting of such
committee. Any such committee, to the extent provided in the resolution of the Board of
Directors or in this Agreement, shall have and may exercise all powers and authority of the
Board of Directors in the management of the business and affairs of the Company; but no such
committee shall have the power or authority in reference to the following matters: approving
or adopting, or recommending to the Members, any action or matter expressly required by this
Agreement or the Delaware Act to be submitted to the Members for approval or adopting,
amending or repealing any provision of this Agreement. Unless specified by resolution of the
Board of Directors, any committee designated pursuant to this Section 7.2(h) shall choose
its own chairman, shall keep regular minutes of its proceedings and report the same to the
Board of Directors when requested, and, subject to Section 7.2(g), shall fix its own rules
or procedures and shall meet at such times and at such place or places as may be provided
by such rules. At every meeting of any such committee, the presence of a majority of
all the members thereof shall constitute a quorum and the affirmative vote of a majority of
the members present at a meeting of which a quorum is present shall be necessary for the
adoption by the committee of any resolution.
(i) The Board of Directors may elect one of its members as Chairman of the Board (the
“Chairman of the Board”). The Chairman of the Board, if any, and if present and acting,
shall preside at all meetings of the Board of Directors and of Members, unless
46
otherwise
directed by the Board of Directors. If the Board of Directors does not elect a Chairman or
if the Chairman is absent from the meeting, the Chief Executive Offer, if present and a
Director, or any other Director chosen by the Board of Directors, shall preside. In the
absence of a Secretary, the chairman of the meeting may appoint any Person to serve as
Secretary of the meeting.
(j) Unless otherwise restricted by law, the Board of Directors shall have the authority
to fix the compensation of the Directors. The Directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or paid a stated salary or paid other
compensation as Director. No such payment shall preclude any Director from serving the
Company in any other capacity and receiving compensation therefor. Members of special or
standing committees may also be paid their expenses, if any, of and allowed compensation for
attending committee meetings.
(k) Notwithstanding any other provision of this Agreement, any Group Member Agreement,
the Delaware Act or any applicable law, rule or regulation, each of the Members and each
other Person who may acquire an interest in Company Securities hereby (i) approves, ratifies
and confirms the execution, delivery and performance by the parties thereto of this
Agreement and the Group Member Agreement of each other Group Member, the Underwriting
Agreement and the other agreements described in or filed as exhibits to the Registration
Statement that are related to the transactions contemplated by the Registration Statement;
(ii) agrees that the Board of Directors (on its own or through any Officer of the Company)
is authorized to execute, deliver and perform the agreements referred to in clause (i) of
this sentence and the other agreements, acts, transactions and matters described in or
contemplated by the Registration Statement on behalf of the Company without any further act,
approval or vote of the Members or the other Persons who may acquire an interest in Company
Securities; and (iii) agrees that the execution, delivery or performance by the Company, any
Group Member or any Affiliate of any of them of this Agreement or any agreement authorized
or permitted under this Agreement shall not constitute a breach by the Board of Directors or
any Officer of any duty that the Board of Directors or any Officer may owe the Company or
the Members or any other Persons under this Agreement (or any other agreements) or of any
duty stated or implied by law or equity.
Section 7.2 Certificate of Formation. The Certificate of Formation has been filed with the
Secretary of State of the State of Delaware as required by the Delaware Act. The Board of
Directors shall use all reasonable efforts to cause
to be filed such other certificates or documents that it determines to be necessary or appropriate
for the formation, continuation, qualification and operation of a limited liability company in the
State of Delaware or any other state in which the Company may elect to do business or own property.
To the extent that the Board of Directors determines such action to be necessary or appropriate,
the Board of Directors shall direct the appropriate Officers of the Company to file amendments to
and restatements of the Certificate of Formation and do all things to maintain the Company as a
limited liability company under the laws of the State of Delaware or of any other state in which
the Company may elect to do business or own property. Subject to the terms of Section 3.4(a), the
Company
47
shall not be required, before or after filing, to deliver or mail a copy of the Certificate
of Formation, any qualification document or any amendment thereto to any Member.
Section 7.3 Restrictions on the Board of Directors’ Authority.
(a) Except as otherwise provided in this Agreement, the Board of Directors may not,
without written approval of the specific act by holders of all of the Outstanding Member
Interests or by other written instrument executed and delivered by holders of all of the
Outstanding Member Interests subsequent to the date of this Agreement, take any action in
contravention of this Agreement, including (i) committing any act that would make it
impossible to carry on the ordinary business of the Company; (ii) possessing Company
property, or assigning any rights in specific Company property, for other than a Company
purpose; (iii) admitting a Person as a Member; or (iv) amending this Agreement in any
manner.
(b) Except as provided in Articles X and XII, the Board of Directors may not sell,
exchange or otherwise dispose of all or substantially all of the assets of the Company
Group, taken as a whole, in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) without the approval of
holders of a Unit Majority; provided, however, that this provision shall not
preclude or limit the Board of Directors’ ability to mortgage, pledge, hypothecate or grant
a security interest in all or substantially all of the assets of the Company Group and shall
not apply to any forced sale of any or all of the assets of the Company Group pursuant to
the foreclosure of, or other realization upon, any such encumbrance.
Section 7.4 Officers.
(a) The Board of Directors shall have the power and authority to appoint such officers
with such titles, authority and duties as determined by the Board of Directors. Such
Persons so designated by the Board of Directors shall be referred to as “Officers.” Unless
provided otherwise by resolution of the Board of Directors, the Officers shall have the
titles, power, authority and duties described below in this Section 7.4.
(b) The Officers of the Company shall include a Chairman of the Board, a Chief
Executive Officer, a President, and a Secretary, and may also include a Vice
Chairman, Chief Operating Officer, Treasurer, one or more Vice Presidents (who may be
further classified by such descriptions as “executive,” “senior,” “assistant” or otherwise,
as the Board of Directors shall determine), one or more Assistant Secretaries and one or
more Assistant Treasurers. Officers shall be elected by the Board of Directors, which shall
consider that subject at its first meeting after every annual meeting of Members and as
necessary to fill vacancies. Each Officer shall hold office until his or her successor is
elected and qualified or until his or her earlier death, resignation or removal. Any number
of offices may be held by the same Person. The compensation of Officers elected by the
Board of Directors shall be fixed from time to time by the Board of Directors or by such
Officers as may be designated by resolution of the Board of Directors.
48
(c) Any Officer may resign at any time upon written notice to the Company. Any
Officer, agent or employee of the Company may be removed by the Board of Directors with or
without cause at any time. The Board of Directors may delegate the power of removal as to
Officers, agents and employees who have not been appointed by the Board of Directors. Such
removal shall be without prejudice to a Person’s contract rights, if any, but the
appointment of any Person as an Officer, agent or employee of the Company shall not of
itself create contract rights.
(d) The President shall be the Chief Executive Officer of the Company unless the Board
of Directors designates the Chairman of the Board as Chief Executive Officer. Subject to
the control of the Board of Directors and the executive committee (if any), the Chief
Executive Officer shall have general executive charge, management and control of the
properties, business and operations of the Company with all such powers as may be reasonably
incident to such responsibilities; he may employ and discharge employees and agents of the
Company except such as shall be appointed by the Board of Directors, and he may delegate
these powers; he may agree upon and execute all leases, contracts, evidences of indebtedness
and other obligations in the name of the Company, and shall have such other powers and
duties as designated in accordance with this Agreement and as from time to time may be
assigned to him by the Board of Directors.
(e) If elected, the Chairman of the Board shall preside at all meetings of the Members
and of the Board of Directors; and shall have such other powers and duties as designated in
this Agreement and as from time to time may be assigned to him by the Board of Directors.
(f) Unless the Board of Directors otherwise determines, the President shall have the
authority to agree upon and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Company; and, unless the Board of Directors otherwise
determines, shall, in the absence of the Chairman of the Board or if there be no Chairman of
the Board, preside at all meetings of the Members and (should he be a Director) of the Board
of Directors; and he shall have such other powers and duties as designated in accordance
with this Agreement and as from time to time may be assigned to him by the Board of
Directors.
(g) In the absence of the President, or in the event of his inability or refusal to
act, a Vice President designated by the Board of Directors shall perform the duties of the
President, and when so acting shall have all the powers of and be subject to all the
restrictions upon the President. In the absence of a designation by the Board of Directors
of a Vice President to perform the duties of the President, or in the event of his absence
or inability or refusal to act, the Vice President who is present and who is senior in terms
of uninterrupted time as a Vice President of the Company shall so act. The Vice President
shall perform such other duties and have such other powers as the Board of Directors may
from time to time prescribe. Unless otherwise provided by the Board of Directors, each Vice
President will have authority to act within his or her respective areas and to sign
contracts relating thereto.
49
(h) The Treasurer shall have responsibility for the custody and control of all the
funds and securities of the Company and shall have such other powers and duties as
designated in this Agreement and as from time to time may be assigned to the Treasurer by
the Board of Directors. The Treasurer shall perform all acts incident to the position of
Treasurer, subject to the control of the Chief Executive Officer and the Board of Directors.
Each Assistant Treasurer shall have the usual powers and duties pertaining to his office,
together with such other powers and duties as designated in this Agreement and as from time
to time may be assigned to him by the Chief Executive Officer or the Board of Directors.
The Assistant Treasurers shall exercise the powers of the Treasurer during that Officer’s
absence or inability or refusal to act. An Assistant Treasurer shall also perform such
other duties as the Treasurer or the Board of Directors may assign to him.
(i) The Secretary shall issue all authorized notices for, and shall keep minutes of,
all meetings of the Members and the Board of Directors. The Secretary shall have charge of
the corporate books and shall perform such other duties as the Board of Directors may from
time to time prescribe. In the absence or inability to act of the Secretary, any Assistant
Secretary may perform all the duties and exercise all the powers of the Secretary. The
performance of any such duty shall, in respect of any other Person dealing with the Company,
be conclusive evidence of his power to act. An Assistant Secretary shall also perform such
other duties as the Secretary or the Board of Directors may assign to him.
(j) The Board of Directors may from time to time delegate the powers or duties of any
Officer to any other Officers or agents, notwithstanding any provision hereof.
(k) Unless otherwise directed by the Board of Directors, the Chief Executive Officer,
the President or any Officer of the Company authorized by the Chief Executive Officer shall
have power to vote and otherwise act on behalf of the Company, in person or by proxy, at any
meeting of Members of or with respect to any action of equity holders of any other entity in
which the Company may hold securities and otherwise to exercise any and all rights and
powers which the Company may possess by reason of its ownership of securities in such other
entities.
Section 7.5 Outside Activities. (a) It shall be deemed not to be a breach of any duty (including
any fiduciary duty) or any other obligation of any type whatsoever of any Director for Affiliates
of such Director to engage in outside business interests and activities in preference to or to the
exclusion of the Company or in direct competition with the Company; provided such Affiliate does
not engage in such business or activity as a result of or using confidential information provided
by or on behalf of the Company to such Director and (b) Directors shall have no obligation
hereunder or as a result of any duty expressed or implied by law to present business opportunities
to the Company that may become available to Affiliates of such Director. None of any Group Member,
any Member or any other Person shall have any rights by virtue of a Director’s duties as a
Director, this Agreement or any Group Member Agreement in any business ventures of any Director.
50
Section 7.6 Loans or Contributions from the Company or Group Members.
(a) The Company may lend or contribute to any Group Member, and any Group Member may
borrow from the Company, funds on terms and conditions determined by the Board of Directors.
(b) No borrowing by any Group Member or the approval thereof by the Board of Directors
shall be deemed to constitute a breach of any duty (including any fiduciary duty), expressed
or implied, of the Board of Directors to the Company or the Members by reason of the fact
that the purpose or effect of such borrowing is directly or indirectly to enable
distributions to the Members.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law as it currently exists and to such greater
extent as applicable law hereafter may permit, but subject to the limitations expressly
provided in this Agreement, the Company shall indemnify any Person who was or is a party or
is threatened to be made a party to, or otherwise requires representation of counsel in
connection with, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in the right of
the Company) by reason of the fact that such Person is or was a Director or Officer of the
Company, or, while serving as a Director or Officer of the Company, is or was serving as a
Tax Matters Partner or, at the request of the Company, as a director, officer, tax matters
partner, employee, partner, managers, fiduciary or trustee of any Group Member or any other
Person (each an “Indemnitee”) or by reason of any action alleged to have been taken or
omitted in such capacity, against losses, expenses (including attorneys’ fees), judgments,
fines, damages, penalties, interest, liabilities and amounts paid in settlement actually and
reasonably incurred by the Person in connection with such action, suit or proceeding if the
Person acted in good faith and in a manner the Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable
cause to believe that such Person’s conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith and in a manner which the Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the Person’s conduct was unlawful.
(b) To the fullest extent permitted by law, but subject to the limitations expressly
provided in this Agreement, the Company shall indemnify any Person who was or is a party or
is threatened to be made a party to, or otherwise requires representation of counsel in
connection with, any threatened, pending or completed action, suit or proceeding, by or in
the right of the Company to procure a judgment in its favor by reason of the fact that such
Person was serving as an Indemnitee, or by reason of any action alleged to have been taken
or omitted in such capacity, against losses, expenses (including attorneys’ fees),
judgments, fines, damages, penalties, interest, liabilities and amounts paid in settlement
actually and reasonably incurred by the Person in connection
51
with such action, suit or
proceeding if the Person acted in good faith and in a manner the Person reasonably believed
to be in or not opposed to the best interests of the Company and except that no
indemnification shall be made in respect of any claim, issue or matter as to which such
Person shall have been adjudged to be liable to the Company unless and only to the extent
that the Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such Person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other court shall
deem proper.
(c) To the extent an Indemnitee has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 7.7(a) or Section 7.7(b),
or in the defense of any claim, issue or matter therein, such Person shall be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by such Person
in connection therewith.
(d) Any indemnification under Section 7.7(a) or Section 7.7(b) (unless ordered by a
court) shall be made by the Company only as authorized in the specific case upon a
determination that indemnification of the Indemnitee is proper in the circumstances because
the Person has met the applicable standard of conduct set forth in such section. Such
determination shall be made, with respect to a Person who is a Director or Officer at the
time of such determination, (i) by a majority vote of the Directors who are not parties to
such action, suit or proceeding, even though less than a quorum, (ii) by a committee of such
Directors designated by majority vote of such Directors, even though less than a quorum,
(iii) if there are no such Directors, or if such Directors so direct, by independent legal
counsel in an Opinion of Counsel, or (iv) by the Members.
(e) Expenses (including attorneys’ fees) incurred by an Indemnitee in defending any
action, suit or proceeding referred to in Section 7.7(a) or Section 7.7(b) shall be paid by
the Company in advance of the final disposition of such action, suit or
proceeding and in advance of any determination that such Indemnitee is not entitled to
be indemnified, upon receipt of an undertaking by or on behalf of such Indemnitee to repay
such amount if it shall ultimately be determined by final judicial decision from which there
is no further right to appeal (a “Final Adjudication”) that such Person is not entitled to
be indemnified by the Company as authorized in this Section 7.7.
(f) The indemnification, advancement of expenses and other provisions of this Section
7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under
any agreement, pursuant to any vote of the holders of Outstanding Interests, as a matter of
law or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to
actions in any other capacity (including any capacity under the Underwriting Agreement), and
shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure
to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.
52
(g) The Company may purchase and maintain insurance, on behalf of its Directors and
Officers, and such other Persons as the Board of Directors shall determine, against any
liability that may be asserted against or expense that may be incurred by such Person in
connection with the Company’s activities or such Person’s activities on behalf of the
Company, regardless of whether the Company would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
(h) For purposes of the definition of Indemnitee in Section 7.7(a), the Company shall
be deemed to have requested a Person to serve as fiduciary of an employee benefit plan
whenever the performance by such Person of his duties to the Company also imposes duties on,
or otherwise involves services by, such Person to the plan or participants or beneficiaries
of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute “fines” within the meaning of Section 7.7(a);
and action taken or omitted by such Person with respect to any employee benefit plan in the
performance of such Person’s duties for a purpose reasonably believed by him to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be for a
purpose that is in, or not opposed to, the best interests of the Company.
(i) Any indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Company, it being agreed that the Members shall not be personally liable for
such indemnification and shall have no obligation to contribute or loan any monies or
property to the Company to enable it to effectuate such indemnification.
(j) An Indemnitee shall not be denied indemnification in whole or in part under this
Section 7.7 because the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted by the terms of this
Agreement.
(k) If a claim under Section 7.7 of this Agreement is not paid in full by the Company
within 60 days after a written claim has been received by the Company, except in the case of
a claim for an advancement of expenses, in which case the applicable
period shall be 20 days, the Indemnitee may at any time thereafter bring suit against
the Company to recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the Indemnitee shall be entitled to be paid also
the reasonable expenses of prosecuting or defending such suit. In (i) any suit brought by
the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by
the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that,
and (ii) in any suit brought by the Company to recover an advancement of expenses pursuant
to the terms of an undertaking, the Company shall be entitled to recover such expenses upon
a Final Adjudication that, the Indemnitee has not met any applicable standard for
indemnification set forth in this Agreement. Neither the failure of the Company (including
its Directors who are not parties to such action, a committee of such Directors, independent
legal counsel, or its Members) to have made a determination prior to the commencement of
such suit that indemnification of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct
53
set forth in this Agreement, nor an
actual determination by the Company (including its Directors who are not parties to such
action, a committee of such Directors, independent legal counsel, or its Members) that the
Indemnitee has not met the applicable standard of conduct shall create a presumption that
the Indemnitee has not met the applicable standard of conduct, or, in the case of such a
suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the
Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Company to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified or
to such advancement of expenses, under this Section 7.7 or otherwise shall be on the
Company.
(l) The Company may indemnify any Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (whether or not an action by or in the
right of the Company) by reason of the fact that the Person is or was an employee (other
than an Officer) or agent of the Company, or, while serving as an employee (other than an
Officer) or agent of the Company is or was serving at the request of the Company as a
director, officer, employee, partner, fiduciary, trustee or agent of another Group Member or
another Person to the extent (i) permitted by the laws of the State of Delaware as from time
to time in effect, and (ii) authorized by the Board of Directors. The Company may, to the
extent permitted by Delaware law and authorized by the Board of Directors, pay expenses
(including attorneys’ fees) reasonably incurred by an such employee or agent in defending
any civil, criminal, administrative or investigative action, suit or proceeding in advance
of the final disposition of such action, suit or proceeding, upon such terms and conditions
as the Board of Directors determine. The provisions of this Section 7.7(l) shall not
constitute a contract right for any such employee or agent.
(m) The indemnification, advancement of expenses and other provisions of this Section
7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the benefit of any other
Persons.
(n) Except to the extent otherwise provided in Section 7.7(l), the right to be
indemnified and to receive advancement of expenses in this Section 7.7 shall be a contract
right. No amendment, modification or repeal of this Section 7.7 or any provision hereof
shall in any manner terminate, reduce or impair the right of any past, present or future
Indemnitee to be indemnified by the Company, nor the obligations of the Company to indemnify
any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in
effect immediately prior to such amendment, modification or repeal with respect to claims
arising from or relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
(o) The Board of Directors, acting alone and without the approval of any Member, in the
event of any amendment to Section 145 of the DGCL or the amendment or addition of any other
provision of the DGCL relating to indemnification by Delaware
54
corporations of Persons of the
type referenced in this Section 7.7, may amend this Agreement to, entirely or in part,
reflect such amendment or addition in the indemnification provisions of this Agreement.
Section 7.8 Exculpation of Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement, no Director
shall be liable to the Company or the Members for monetary damages for breach of fiduciary
duty as a Director, except
(i) for a breach of the Director’s duty of loyalty to the Company or the
Members;
(i) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
(ii) for any transaction from which the Director derived an improper personal
benefit.
If the DGCL is amended after the date of this Agreement to authorize Delaware corporations
to further eliminate or limit the personal liability of directors of Delaware corporations
beyond that permitted under Section 102(b)(7) of the DGCL, then the liability of a Director
to the Company or the Members, in addition to the personal liability limitation provided
herein, shall be further limited to the fullest extent permitted under the DGCL as so
amended.
(b) Subject to its obligations and duties as Board of Directors set forth in this
Article VII, the Board of Directors may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either directly or by or
through its agents, and the Board of Directors shall not be responsible for any misconduct
or negligence on the part of any such agent appointed by the Board of Directors in good
faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties (including
fiduciary duties) and liabilities relating thereto to the Company or to the Members, the
Directors and any other Indemnitee acting in connection with the Company’s business or
affairs shall not be liable to the Company or to any Member for its good faith reliance on
the provisions of this Agreement. The provisions of this Agreement, to the extent that they
restrict or eliminate or otherwise modify the duties (including fiduciary duties) and
liabilities of an Indemnitee otherwise existing at law or in equity, are agreed by the
Members to replace such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the liability
of any Indemnitee under this Section 7.8 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to matters occurring,
in whole or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
55
Section 7.9 Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties.
(a) Unless otherwise expressly provided in this Agreement or any Group Member
Agreement, whenever a potential conflict of interest exists or arises between one or more
Directors or their respective Affiliates, on the one hand, and the Company or any Group
Member, on the other, any resolution or course of action by the Board of Directors or its
Affiliates in respect of such conflict of interest shall be permitted and deemed approved by
all Members, and shall not constitute a breach of this Agreement, of any Group Member
Agreement, of any agreement contemplated herein or therein, or of any duty stated or implied
by law or equity, including any fiduciary duty, if the resolution or course of action in
respect of such conflict of interest is (i) approved by Special Approval, (ii) approved by
the vote of a majority of the Outstanding Units held by disinterested parties, (iii) on
terms no less favorable to the Company than those generally being provided to or available
from unrelated third parties or (iv) fair and reasonable to the Company, taking into account
the totality of the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Company). The Board of Directors
shall be authorized but not required in connection with its resolution of such conflict of
interest to seek Special Approval of such resolution, and the Board of Directors may also
adopt a resolution or course of action that has not received Special Approval. If Special
Approval is not sought and the Board of Directors determines that the resolution or course
of action taken with respect to a conflict of interest is on terms no less favorable to the
Company than those generally being provided to or available from unrelated third parties or
that the resolution or course of action taken with respect to a conflict of interest is fair
and reasonable to the Company, then such resolution or course of action shall be permitted
and deemed approved by all the Members, and shall not constitute a breach of this Agreement,
of any Group Member Agreement, of any agreement contemplated herein or therein, or of any
duty stated or implied by law or equity, including any fiduciary duty. In connection with
any such approval by the Board of Directors, it shall be presumed that, in making its
decision, the Board of Directors acted in good faith, and in any proceeding brought by any
Member or by or on behalf of such Member or any other Member or the Company challenging such
approval, the Person bringing or prosecuting such proceeding shall have the burden of
overcoming such presumption. Notwithstanding anything to the contrary in this Agreement,
the existence of the conflicts of interest described in the Registration Statement are
hereby approved by all Members.
(b) The Members hereby authorize the Board of Directors, on behalf of the Company as a
partner or member of a Group Member, to approve of actions by the Board of Directors or
managing member of such Group Member similar to those actions permitted to be taken by the
Board of Directors pursuant to this Section 7.9.
Section 7.10 Duties of Officers and Directors.
(a) Except as otherwise expressly provided in Section 7.5, 7.6, 7.7, 7.8 and 7.9 or
elsewhere in this Agreement, the duties and obligations owed to the Company and to the
Members by the Officers and Directors, shall be the same as the respective duties
56
and
obligations owed to a corporation organized under DGCL by its officers and directors,
respectively.
(b) A Director shall, in the performance of his duties, be fully protected in relying
in good faith upon the records of the Company and on such information, opinions, reports or
statements presented to the Company by any of the Company’s Officers or employees, or
committees of the Board of Directors, or by any other Person as to matters the Director
reasonably believes are within such other Person’s professional or expert competence and who
has been selected with reasonable care by or on behalf of the Company.
(c) The Board of Directors shall have the right, in respect of any of its powers or
obligations hereunder, to act through a duly appointed attorney or attorneys-in-fact or the
duly authorized Officers of the Company.
Section 7.11 Purchase or Sale of Company Securities. The Board of Directors may cause the Company
to purchase or otherwise acquire Company Securities.
Section 7.12 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the
Company shall be entitled to assume that the Board of Directors and any Officer authorized by the
Board of Directors to act on behalf of and in the name of the Company has full power and authority
to encumber, sell or otherwise use in any manner any and all assets of the Company
and to enter into any authorized contracts on behalf of the Company, and such Person shall be
entitled to deal with the Board of Directors or any Officer as if it were the Company’s sole party
in interest, both legally and beneficially. Each Member hereby waives any and all defenses or
other remedies that may be available against such Person to contest, negate or disaffirm any action
of the Board of Directors or any Officer in connection with any such dealing. In no event shall
any Person dealing with the Board of Directors or any Officer or its representatives be obligated
to ascertain that the terms of this Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the Board of Directors or any Officer or its
representatives. Each and every certificate, document or other instrument executed on behalf of
the Company by the Board of Directors or any Officer or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the
time of the execution and delivery of such certificate, document or instrument, this Agreement was
in full force and effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the Company and (c) such
certificate, document or instrument was duly executed and delivered in accordance with the terms
and provisions of this Agreement and is binding upon the Company.
Section 7.13 Reimbursement of G&A by the Existing Investors. For purposes of this
Section 7.13, the Common Units shall be deemed to include only: (i) the Common Units
exchanged pursuant to Section 5.1(a)(ii) of this Agreement; and (ii) the Common Units
received upon conversion of the subordinated units exchanged pursuant to Section 5.1(a)(ii)
of this Agreement. References in this Section 7.13 to “transfers” of Common
57
Units or
“transferred” Common Units shall include any prior transfer of subordinated units, all of
which have converted into Common Units.
(a) Subject to the limitations set forth in Sections 7.13(c) and (d), during the Cap
Period or any Cap Period Extension, if the G&A for a Quarter exceeds the Total G&A Cap in
respect of such Quarter, the Existing Investors shall reimburse the Company quarterly, on a
pro rata basis based on their respective Allocated Percentages, for the Excess G&A
Obligation.
(b) If during the Cap Period, the Company’s EBITDA for any Quarter exceeds $5,400,000,
the G&A Cap shall be increased for such Quarter by 10% of the amount in excess of $5,400,000
(the “Additional G&A Cap”).
(c) The Cap Period may be extended for any number of additional Quarters upon the
affirmative vote of at least 95% of the Common Units held by the Existing Investors, or
their permitted transferees (if any such transferees have assumed the Excess G&A Obligation
pursuant to Section 7.13(f)(ii)), voting together as a single class (a “Cap Period
Extension”). The Existing Investors and their permitted transferees shall agree on the
amount of the G&A Cap during any such Cap Period Extension. An Existing Investor shall have
no obligations under this Section 7.13(c) for Excess G&A Obligations during any Cap Period
Extension to the extent that such Existing Investor did not own Common Units immediately
prior to the Cap Period Extension.
(d) The Company shall notify the Existing Investors of the amount of any Excess G&A
Obligations within 40 days following the end of any Quarter. The Existing Investors shall
initially satisfy their respective Excess G&A Obligations from: (1) with respect to Common
Units held by such Existing Investor, the Original Escrow Accounts, without any limitation
in respect of distributions to the Existing Investors on the Common Units owned by such
Existing Investors pursuant to Article VI to the extent of the initial distribution to such
Existing Investor described under Section 5.1(b) and thereafter limited as set forth below
in (d)(i) of this subsection, and (2) with respect to Common Units Transferred by such
Existing Investor, any Transfer Escrow Accounts, but only to the extent of the cash
distributions that such Existing Investor would have received in respect of the applicable
Quarter if such transferred Common Units were then owned by such Existing Investor. If at
any time there are insufficient funds held in an Existing Investor’s:
(i) Original Escrow Account, then such Existing Investor shall be obligated to
pay its Allocated Percentage of the Excess G&A Obligation for any Quarter not
covered by the Original Escrow Account, but only to the extent of the cash
distributions made to such Existing Investors with respect to such Quarter on the
Common Units actually owned by such Existing Investor pursuant to Article VI; and
(ii) Transfer Escrow Account, then such Existing Investor shall be obligated to
pay its Allocated Percentage of the Excess G&A Obligation on any transferred Common
Units for any Quarter not covered by the Transfer Escrow
58
Account, but only to the
extent of the cash distributions that such Existing Investor would have received on
the transferred Common Units with respect to such Quarter if such transferred Common
Units were then owned by such Existing Investor.
Except as provided in this Section 7.13(d) and Section 7.13(f): (A) with respect to Common
Units held by such Existing Investor and subject to the limitations set forth in (d)(i)
above, to the extent there are insufficient funds held in an Existing Investor’s Original
Escrow Account, then the Company shall deposit any distributions required to cover such
Existing Investor’s Excess G&A Obligation in such Existing Investor’s Original Escrow
Account on the applicable distribution date; and (B) with respect to Common Units
Transferred by such Existing Investor and subject to the limitations set forth in (d)(ii)
above, to the extent there are insufficient funds held in an Existing Investor’s Transfer
Escrow Account (x) then the Company shall deposit any distributions on the Common Units
then-held by such Existing Investor required to cover such Existing Investor’s Excess G&A
Obligation in such Existing Investor’s Transfer Escrow Account on the applicable
distribution date or (y) if any such distributions on such Existing Investor’s Common Units
are insufficient to cover such Existing Investor’s Excess G&A Obligation in respect of the
transferred Common Units, then, within 5 days, such Existing Investor shall deposit
immediately available funds in such Existing Investors Transfer Escrow Account sufficient to
cover such Existing Investor’s Excess G&A Obligation in respect of the transferred Common
Units.
(e) During the Cap Period, the annual G&A budget (the “G&A Budget”) of the Company will
require approval of a majority of the Board of Directors in accordance with Section 7.1(f)
and at least 30 days prior to the beginning of the fiscal year, which approval shall not be
unreasonably withheld. If the G&A Budget is not approved by the Board of Directors, then
the G&A Budget for the prior year will apply. Any change in the G&A Budget that exceeds 10%
of the G&A Budget for the prior year shall require the unanimous approval of any members of
the Board of Directors affiliated with Copano Partners, the CSFB Entities or the EnCap
Entities, which approval shall not be unreasonably withheld. Any adjustments to an approved
G&A Budget that exceed 5% of the approved amount for any particular item in the G&A Budget,
or any collective adjustments to an approved G&A Budget that exceed 10% of the total
approved G&A Budget, shall require the unanimous approval of any members of the Board of
Directors affiliated with Copano Partners, the EnCap Entities or the CSFB Entities, which
approval shall not be unreasonably withheld.
(f) No Existing Investor shall Transfer any portion of its Common Units during the Cap
Period, unless prior to such Transfer: (i) such transferor deposits an amount into an
escrow account (the “Transfer Escrow Account”) for the benefit of the Company equal to 200%
of such transferor’s estimated remaining Excess G&A Obligation (based upon the highest G&A
subject to the G&A Cap incurred during the previous four Quarters and the applicable
quarterly G&A Cap for the Quarter in which such Common Units are Transferred and for each
subsequent Quarter prior to expiration of the G&A Cap) multiplied by the percentage of such
transferor’s Common Units Transferred, less the amount of funds then remaining in the
transferor’s Original Escrow
59
Account; provided that, if at any time funds remaining
in such Transfer Escrow Account and the transferor’s Original Escrow Account are
insufficient to fund such transferor’s Excess G&A Obligation for any Quarter with respect to
the Common Units Transferred, then such transferor shall remain liable to the Company for
its portion of the Excess G&A Obligation; provided further, however,
that in no event shall any Existing Investor be liable for any Excess G&A Obligation in
respect of any transferred Common Units in excess of any cash distributions that such
transferring Existing Investor would have received in respect of the applicable Quarter on
its transferred Units had such Transfer not occurred; or (ii) such transferring Existing
Investor causes the transferee to assume that portion of the transferor’s remaining Excess
G&A Obligation pursuant to this Agreement equal to such remaining Excess G&A Obligation
multiplied by the percentage of such transferor’s Common Units Transferred. With respect to
clause (i) above, such transferring Existing Investor and the Company shall enter into an
escrow agreement with a mutually acceptable bank on terms reasonably acceptable to both
parties; provided, however, any escrow agreement (x) shall detail, by
Quarter, the amount of funds escrowed to satisfy the transferring Existing Investor’s
remaining Excess G&A Obligation for such Quarter and shall provide that any funds escrowed
for a specific Quarter and not required to satisfy the transferor’s Excess G&A Obligation
for that Quarter shall be released from escrow within 60 days following the end of such
Quarter and (y) shall provide that no funds will otherwise be released from escrow prior to
the end of the Cap Period except to satisfy the transferring Existing Investor’s Excess G&A
Obligation. With respect to clause (ii) above, such transferring Existing Investor and
transferee shall provide notice to the Company of such assumption of the transferring
Existing Investor’s remaining Excess G&A Obligation within 14 Business Days of such
Transfer. No subsequent transferee of such Common Units shall Transfer any portion of such
transferred Common Units during the Cap Period unless such Transfer is made in accordance
with this Section 7.13(f). With respect to any one Existing Investor, the Original Escrow
Account and the Transfer Escrow Accounts may be maintained in one escrow account, and the
Company will account for the amounts deemed to be in the Original Escrow Account and the
amounts deemed to be in the Transfer Escrow Accounts.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting. The Board of Directors shall keep or cause to be kept at the
principal office of the Company appropriate books and records with respect to the Company’s
business, including all books and records necessary to provide to the Members any information
required to be provided pursuant to this Agreement. Any books and records maintained by or on
behalf of the Company in the regular course of its business, including the record of the Record
Holders of Units or other Company Securities, books of account and records of Company proceedings,
may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape,
photographs, micrographics or any other information storage device; provided, that the
books and records so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Company shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.
60
Section 8.2 Fiscal Year. The fiscal year of the Company shall be a fiscal year ending December 31.
Section 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after the close of each
fiscal year of the Company, the Board of Directors shall cause to be mailed or made
available to each Record Holder of a Unit as of a date selected by the Board of Directors,
an annual report containing financial statements of the Company for such fiscal year of the
Company, presented in accordance with U.S. GAAP, including a balance sheet and statements of
operations, equity and cash flows, such statements to be audited by a firm of independent
public accountants selected by the Board of Directors.
(b) As soon as practicable, but in no event later than 90 days after the close of each
Quarter except the last Quarter of each fiscal year, the Board of Directors shall cause to
be mailed or made available to each Record Holder of a Unit, as of a date selected by the
Board of Directors, a report containing unaudited financial statements of the Company and
such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are listed
for trading, or as the Board of Directors determines to be necessary or appropriate.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information. The Company shall timely file all returns of the Company
that are required for federal, state and local income tax purposes on the basis of the accrual
method and a taxable year ending on December 31. The tax information reasonably required by Record
Holders for federal and state income tax reporting purposes with respect to a taxable year shall be
furnished to them within 90 days of the close of the calendar year in which the Company’s taxable
year ends. The classification, realization and recognition of income, gain, losses and deductions
and other items shall be on the accrual method of accounting for federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Company shall make the election under Section 754 of the Code in accordance
with applicable regulations thereunder, subject to the reservation of the right to seek to
revoke any such election upon the Board of Directors’ determination that such revocation is
in the best interests of the Members. Notwithstanding any other provision herein contained,
for the purposes of computing the adjustments under Section 743(b) of the Code, the Board of
Directors shall be authorized (but not required) to adopt a convention whereby the price
paid by a transferee of a Member Interest will be deemed to be the lowest quoted closing
price of the Member Interests on any National Securities Exchange on which such Member
Interests are traded during the calendar month in which such transfer is deemed to occur
pursuant to Section 6.2(g) without regard to the actual price paid by such transferee.
61
(b) The Company shall elect to deduct expenses incurred in organizing the Company
ratably over a sixty-month period as provided in Section 709 of the Code.
(c) Except as otherwise provided herein, the Board of Directors shall determine whether
the Company should make any other elections permitted by the Code.
Section 9.3 Tax Controversies. Subject to the provisions hereof, the Board of Directors shall
designate one Member as the Tax Matters Partner (as defined in the Code). The Tax Matters Partner
is authorized and required to represent the Company (at the Company’s expense) in connection with
all examinations of the Company’s affairs by tax authorities, including resulting administrative
and judicial proceedings, and to expend Company funds for professional services and costs
associated therewith. Each Member agrees to cooperate with the Tax Matters Partner and to do or
refrain from doing any or all things reasonably required by the Tax Matters Partner to conduct such
proceedings.
Section 9.4 Withholding. Notwithstanding any other provision of this Agreement, the Board of
Directors is authorized to take any action that may be required to cause the Company and other
Group Members to comply with any withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445
and 1446 of the Code. To the extent that the Company is required or elects to withhold and pay
over to any taxing authority any amount resulting from the allocation or distribution of income to
any Member (including, without limitation, by reason of Section 1446 of the Code), the Board of
Directors may treat the amount withheld as a distribution of cash pursuant to Section 6.3 in the
amount of such withholding from such Member.
ARTICLE X
DISSOLUTION AND LIQUIDATION
Section 10.1 Dissolution. The Company shall not be dissolved by the admission of Substituted
Members or Additional Members. The Company shall dissolve, and its affairs shall be wound up,
upon:
(a) an election to dissolve the Company by the Board of Directors that is approved by
the holders of a Unit Majority;
(b) the sale, exchange or other disposition of all or substantially all of the assets
and properties of the Company and the Company’s Subsidiaries; or
(c) the entry of a decree of judicial dissolution of the Company pursuant to the
provisions of the Delaware Act.
Section 10.2 Liquidator. Upon dissolution of the Company, the Board of Directors shall select one
or more Persons to act as Liquidator. The Liquidator (if other than the Board of Directors) shall
be entitled to receive such compensation for its services as may be approved by holders of at least
a majority of the Outstanding Common Units voting as a single class. The Liquidator (if other than
the Board of Directors) shall agree not to resign at any time without 15 days’ prior notice and may
be removed at any time, with or without cause, by notice of removal approved by holders of at least
a majority of the Outstanding Common Units voting as a single
62
class. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to
all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be
approved by holders of at least a majority of the Outstanding Common Units voting as a single
class. The right to approve a successor or substitute Liquidator in the manner provided herein
shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner
herein provided. Except as expressly provided in this Article X, the Liquidator approved in the
manner provided herein shall have and may exercise, without further authorization or consent of any
of the parties hereto, all of the powers conferred upon the Board of Directors under the terms of
this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set
forth in Section 7.3(b)) necessary or appropriate to carry out the duties and functions of the
Liquidator hereunder for and during the period of time required to complete the winding up and
liquidation of the Company as provided for herein.
Section 10.3 Liquidation. The Liquidator shall proceed to dispose of the assets of the Company,
discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as
determined by the Liquidator, subject to Section 18-804 of the Delaware Act and the following:
(a) The assets may be disposed of by public or private sale or by distribution in kind
to one or more Members on such terms as the Liquidator and such Member or Members may agree.
If any property is distributed in kind, the Member receiving the property shall be deemed
for purposes of Section 10.3(c) to have received cash equal to its fair market value; and
contemporaneously therewith, appropriate cash distributions must be made to the other
Members. The Liquidator may defer liquidation or distribution of the Company’s assets for a
reasonable time if it determines that an immediate sale or distribution of all or some of
the Company’s assets would be impractical or would cause undue loss to the Members. The
Liquidator may distribute the Company’s assets, in whole or in part, in kind if it
determines that a sale would be impractical or would cause undue loss to the Members.
(b) Liabilities of the Company include amounts owed to the Liquidator as compensation
for serving in such capacity (subject to the terms of Section 10.2) and amounts to Members
otherwise than in respect of their distribution rights under Article VI. With respect to
any liability that is contingent, conditional or unmatured or is otherwise not yet due and
payable, the Liquidator shall either settle such claim for such amount as it thinks
appropriate or establish a reserve of cash or other assets to provide for its payment. When
paid, any unused portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) All property and all cash in excess of that required to discharge liabilities as
provided in Section 10.3(b) shall be distributed to the Members in accordance with, and to
the extent of, the positive balances in their respective Capital Accounts, as determined
after taking into account all Capital Account adjustments (other than those made by reason
of distributions pursuant to this Section 10.3(c)) for the taxable year of the Company
during which the liquidation of the Company occurs (with such date of occurrence being
determined pursuant to Treasury Regulation
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Section 1.704-1(b)(2)(ii)(g)), and such
distribution shall be made by the end of such taxable year (or, if later, within 90 days
after said date of such occurrence).
Section 10.4 Cancellation of Certificate of Formation. Upon the completion of the distribution of
Company cash and property as provided in Section 10.3 in connection with the liquidation of the
Company, the Company shall be terminated and the Certificate of Formation and all qualifications of
the Company as a foreign limited liability
company in jurisdictions other than the State of Delaware shall be canceled and such other actions
as may be necessary to terminate the Company shall be taken.
Section 10.5 Return of Contributions. None of any member of the Board of Directors or any Officer
of the Company will be personally liable for, or have any obligation to contribute or loan any
monies or property to the Company to enable it to effectuate, the return of the Capital
Contributions of the Members or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Company assets.
Section 10.6 Waiver of Partition. To the maximum extent permitted by law, each Member hereby
waives any right to partition of the Company property.
Section 10.7 Capital Account Restoration. No Member shall have any obligation to restore any
negative balance in its Capital Account upon liquidation of the Company.
ARTICLE XI
AMENDMENT OF AGREEMENT; MEETINGS OF MEMBERS; RECORD DATE
Section 11.1 Amendment of Limited Liability Company Agreement.
(a) General Amendments. Except as provided in Section 11.1(b) and Section 11.1(c), the
Board of Directors may amend any of the terms of this Agreement but only in compliance with
the terms, conditions and procedures set forth in this Section 11.1(a). If the Board of
Directors desires to amend any provision of this Agreement other than pursuant to Section
11.1(c), then it shall first adopt a resolution setting forth the amendment proposed,
declaring its advisability, and either calling a special meeting of the Members entitled to
vote in respect thereof for the consideration of such amendment or directing that the
amendment proposed be considered at the next annual meeting of the Members. Amendments to
this Agreement may be proposed only by or with the consent of the Board of Directors. Such
special or annual meeting shall be called and held upon notice in accordance with Section
11.2 and Section 11.3 of this Agreement. The notice shall set forth such amendment in full
or a brief summary of the changes to be effected thereby, as the Board of Directors shall
deem advisable. At the meeting, a vote of Members entitled to vote thereon shall be taken
for and against the proposed amendment. A proposed amendment shall be effective upon its
approval by a Unit Majority, unless a greater percentage is required under this Agreement or
by Delaware law.
(b) Super-Majority Amendments. Notwithstanding Section 11.1(a) but subject to Section
11.1(c), the affirmative vote of the holders of at least 75% of all Outstanding Units,
voting together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal subsection (d) of Section 7.1, subsection (e) of
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Section 11.2, subsection (d) of Section 11.3, subsections (b), (c) or (d) of Section 11.8,
Section 11.10 or Section 11.13. Notwithstanding Section 11.1(a), no amendment to Section
7.13 shall be adopted that would increase the obligation of the Existing Investors or their
permitted transferees without the consent of such Existing Investor or transferee, as
applicable.
(c) Amendments to be Adopted Solely by the Board of Directors. Notwithstanding Section
11.1(a) and Section 11.1(b), the Board of Directors, without the approval of any Member, may
amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and
record whatever documents may be required in connection therewith, to reflect:
(i) a change in the name of the Company, the location of the principal place of
business of the Company, the registered agent of the Company or the registered
office of the Company;
(ii) admission, substitution, withdrawal or removal of Members in accordance
with this Agreement;
(iii) a change that the Board of Directors determines to be necessary or
appropriate to qualify or continue the qualification of the Company as a limited
liability company under the laws of any state or to ensure that the Group Members
will not be treated as associations taxable as corporations or otherwise taxed as
entities for federal income tax purposes;
(iv) a change that the Board of Directors determines (A) does not adversely
affect the Members (including any particular class of Interests as compared to other
classes of Interests) in any material respect, (B) to be necessary or appropriate to
(1) satisfy any requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or judicial
authority or contained in any federal or state statute (including the Delaware Act)
or (2) facilitate the trading of the Units (including the division of any class or
classes of Outstanding Units into different classes to facilitate uniformity of tax
consequences within such classes of Units) or comply with any rule, regulation,
guideline or requirement of any National Securities Exchange on which the Units are
or will be listed for trading, compliance with any of which the Board of Directors
deems to be in the best interests of the Company and the Members, (C) to be
necessary or appropriate in connection with action taken by the Board of Directors
pursuant to Section 5.10 or (D) is required to effect the intent expressed in the
Registration Statement or the intent of the provisions of this Agreement or is
otherwise contemplated by this Agreement;
(v) a change in the fiscal year or taxable year of the Company and any other
changes that the Board of Directors determines to be necessary or appropriate as a
result of a change in the
fiscal year or taxable year of the Company including, if
the Board of Directors shall so determine, a change in the
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definition of “Quarter” and the dates on which distributions are to be made by
the Company;
(vi) an amendment that is necessary, in the Opinion of Counsel, to prevent the
Company or its Directors, Officers, trustees or agents from in any manner being
subjected to the provisions of the Investment Company Act of 1940, as amended, the
Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted
under the Employee Retirement Income Security Act of 1974, as amended, regardless of
whether such are substantially similar to plan asset regulations currently applied
or proposed by the United States Department of Labor;
(vii) an amendment that the Board of Directors determines to be necessary or
appropriate in connection with the authorization of issuance of any class or series
of Company Securities pursuant to Section 5.6;
(viii) any amendment expressly permitted in this Agreement to be made by the
Board of Directors acting alone;
(ix) an amendment effected, necessitated or contemplated by a Merger Agreement
approved in accordance with Section 12.3;
(x) an amendment that the Board of Directors determines to be necessary or
appropriate to reflect and account for the formation by the Company of, or
investment by the Company in, any corporation, partnership, joint venture, limited
liability company or other entity, in connection with the conduct by the Company of
activities permitted by the terms of Section 2.4;
(xi)a merger or conveyance pursuant to Section 12.3(d); or
(xii)any other amendments substantially similar to the foregoing.
Section 11.2 Amendment Requirements.
(a) Notwithstanding the provisions of Section 11.1, no provision of this Agreement that
establishes a percentage of Outstanding Units required to take any action shall be amended,
altered, changed, repealed or rescinded in any respect that would have the effect of
reducing such voting percentage unless such amendment is approved by the affirmative vote of
holders of Outstanding Units whose aggregate Outstanding Units constitute not less than the
voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Section 11.1, no amendment to this Agreement may
(i) enlarge the obligations of any Member without its consent, unless such shall be deemed
to have occurred as a result of an amendment approved pursuant to Section 11.2(c), (ii)
change Section 10.1(a), or (iii) change the term of the Company or, except as set forth in
Section 10.1(a), give any Person the right to dissolve the Company.
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(c) Except as provided in Section 12.3, and without limitation of the Board of
Directors’ authority to adopt amendments to this Agreement without the approval of any
Members as contemplated in Section 11.1, any amendment that would have a material adverse
effect on the rights or preferences of any class of Interests in relation to other classes
of Interests must be approved by the holders of not less than a majority of the Outstanding
Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for amendments
pursuant to Section 11.1 and except as otherwise provided by Section 12.3(b), no amendments
shall become effective without the approval of the holders of at least 90% of the
Outstanding Units voting as a single class unless the Company obtains an Opinion of Counsel
to the effect that such amendment will not affect the limited liability of any Member under
applicable law.
(e) Except as provided in Section 11.1, this Section 11.2 shall only be amended with
the approval of the holders of at least 75% of the Outstanding Units voting together as a
single class.
Section 11.3 Unitholder Meetings.
(a) All acts of Members to be taken hereunder shall be taken in the manner provided in
this Article XI. An annual meeting of the Members for the election of Directors and for the
transaction of such other business as may properly come before the meeting shall be held at
such time and place as the Board of Directors shall specify, which date shall be within 13
months of the last annual meeting of Members. If authorized by the Board of Directors, and
subject to such guidelines and procedures as the Board of Directors may adopt, Members and
proxyholders not physically present at a meeting of Members, may by means of remote
communication participate in such meeting, and be deemed present in person and vote at such
meeting provided that the Company shall implement reasonable measures to verify that each
Person deemed present and permitted to vote at the meeting by means of remote communication
is a Member or proxyholder, to provide such Members or proxyholders a reasonable opportunity
to participate in the meeting and to record the votes or other action made by such Members
or proxyholders.
(b) A failure to hold the annual meeting of the Members at the designated time or to
elect a sufficient number of Directors to conduct the business of the Company shall not
affect otherwise valid acts of the Company or work a forfeiture or dissolution of the
Company. If the annual meeting for election of Directors is not held on the date designated
therefor, the Directors shall cause the meeting to be held as soon as is convenient. If
there is a failure to hold the annual meeting for a period of 30 days after the date
designated for the annual meeting, or if no date has been designated, for a period of 13
months after the latest to occur of the date of this Agreement or its last annual meeting,
the Delaware Court of Chancery may summarily order a meeting to be held upon the application
of any Member or Director. The Outstanding Units present at such
meeting, either in person or by proxy, and entitled to vote thereat, shall constitute a
quorum for the purpose of such meeting, notwithstanding any provision of this
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Agreement to
the contrary. The Delaware Court of Chancery may issue such orders as may be appropriate,
including orders designating the time and place of such meeting, the record date for
determination of Unitholders entitled to vote, and the form of notice of such meeting.
(c) All elections of Directors will be by written ballots; if authorized by the Board
of Directors, such requirement of a written ballot shall be satisfied by a ballot submitted
by electronic transmission, provided that any such electronic transmission must
either set forth or be submitted with information from which it can be determined that the
electronic transmission was authorized by the Member or proxyholder.
(d) Special meetings of the Members may be called only by a majority of the Board of
Directors. No Members or group of Members, acting in its or their capacity as Members,
shall have the right to call a special meeting of the Members.
Section 11.4 Notice of Meetings of Members.
(a) Notice, stating the place, day and hour of any annual or special meeting of the
Members, as determined by the Board of Directors, and (i) in the case of a special meeting
of the Members, the purpose or purposes for which the meeting is called, as determined by
the Board of Directors or (ii) in the case of an annual meeting, those matters that the
Board of Directors, at the time of giving the notice, intends to present for action by the
Members, shall be delivered by the Company not less than 10 calendar days nor more than 60
calendar days before the date of the meeting, in a manner and otherwise in accordance with
Section 15.1 to each Record Holder who is entitled to vote at such meeting. Such further
notice shall be given as may be required by Delaware law. The notice of any meeting of the
Members at which directors are to be elected shall include the name of any nominee or
nominees who, at the time of the notice, the Board of Directors intends to present for
election. Only such business shall be conducted at a special meeting of Members as shall
have been brought before the meeting pursuant to the Company’s notice of meeting. Any
previously scheduled meeting of the Members may be postponed, and any special meeting of the
Members may be canceled, by resolution of the Board of Directors upon public notice given
prior to the date previously scheduled for such meeting of the Members.
(b) The Board of Directors shall designate the place of meeting for any annual meeting
or for any special meeting of the Members. If no designation is made, the place of meeting
shall be the principal office of the Company.
Section 11.5 Record Date. For purposes of determining the Members entitled to notice of or to vote
at a meeting of the Members, the Board of Directors may set a Record Date, which shall not be less
than 10 nor more than 60 days before the date of the meeting (unless such requirement conflicts
with any
rule, regulation, guideline or requirement of any National Securities Exchange on which
the Units
are listed for trading, in which case the rule, regulation, guideline or requirement of such
exchange shall govern). If no Record Date is fixed by the Board of Directors, the Record Date for
determining Members entitled to notice of or to vote at a meeting of Members shall be at the close
of business on the day next preceding the day on which
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notice is given. A determination of Members
of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new Record
Date for the adjourned meeting.
Section 11.6 Adjournment. When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the time and place
thereof are announced at the meeting at which the adjournment is taken, unless such adjournment
shall be for more than 30 days. At the adjourned meeting, the Company may transact any business
which might have been transacted at the original meeting. If the adjournment is for more than 30
days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given in accordance with this Article XI.
Section 11.7 Waiver of Notice; Approval of Meeting. Whenever notice to the Members is required to
be given under this Agreement, a written waiver, signed by the Person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a
Person at any such meeting of the Members shall constitute a waiver of notice of such meeting,
except when the Person attends a meeting for the express purpose of objecting at the beginning of
the meeting, to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any regular or special
meeting of the Members need be specified in any written waiver of notice unless so required by
resolution of the Board of Directors. All waivers and approvals shall be filed with the Company
records or made part of the minutes of the meeting.
Section 11.8 Quorum; Required Vote for Member Action; Cumulative Voting for Directors.
(a) At any meeting of the Members, the holders of a majority of the Outstanding Units
of the class or classes for which a meeting has been called represented in person or by
proxy shall constitute a quorum of such class or classes unless any such action by the
Members requires approval by holders of a greater percentage of Outstanding Units, in which
case the quorum shall be such greater percentage. The submission of matters to Members for
approval and the election of Directors shall occur only at a meeting of the Members duly
called and held in accordance with this Agreement at which a quorum is present;
provided, however, that the Members present at a duly called or held meeting
at which a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Members to leave
less than a quorum, if any action taken (other than adjournment) is approved by the
required percentage of Interests specified in this Agreement. In the absence of a quorum
any meeting of Members may be adjourned from time to time by the chairman of the meeting to
another place or time.
(b) Each Outstanding Common Unit shall be entitled to one vote per Unit and, except as
otherwise expressly provided in this Agreement, shall vote together as a single class on all
matters submitted to Members for approval and in the election of Directors.
(c) All matters (other than the election of Directors) submitted to Members for
approval shall be determined by a majority of the votes cast affirmatively or
69
negatively by
Members holding Outstanding Units unless a greater percentage is required with respect to
such matter under the provisions of this Agreement in which case the approval of Members
holding Outstanding Units that in the aggregate represent at least such greater percentage
shall be required.
(d) At all elections of Directors, each holder of an Outstanding Unit entitled to vote
in such election shall be entitled to as many votes as shall equal the number of votes which
(absent the provision as to cumulative voting in this Section 11.8(d)) such holder would be
entitled to cast for the election of Directors with respect to such holder’s Outstanding
Units multiplied by the number of Directors to be elected by such holder at such election,
and such holder may cast all of such votes for a single candidate for Director or may
distribute them among the number of candidates to be voted for, or any for two or more of
them, as such holder may see fit. Directors will be elected by a plurality of the votes
cast for a particular position.
Section 11.9 Conduct of a Meeting; Member Lists.
(a) The Board of Directors shall have full power and authority concerning the manner of
conducting any meeting of the Members, including the determination of Persons entitled to
vote, the existence of a quorum, the satisfaction of the requirements of this Article XI,
the conduct of voting, the validity and effect of any proxies and the determination of any
controversies, votes or challenges arising in connection with or during the meeting or
voting. The Board of Directors shall designate a Person to serve as chairman of any meeting
and shall further designate a Person to take the minutes of any meeting. All minutes shall
be kept with the records of the Company maintained by the Board of Directors. The Board of
Directors may make such other regulations consistent with applicable law and this Agreement
as it may deem advisable concerning the conduct of any meeting of the Members, including
regulations in regard to the appointment of proxies, the appointment and duties of
inspectors of votes, the submission and examination of proxies and other evidence of the
right to vote.
(b) A complete list of Members entitled to vote at any meeting of Members, arranged in
alphabetical order for each class of Interests and showing the address of each such Member
and the number of Outstanding Units registered in the name of such
Member, shall be open to the examination of any Member, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days before the
meeting, at the principal place of business of the Company. The Member list shall also be
produced and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any Member who is present.
Section 11.10 Action Without a Meeting. No action permitted or required to be taken at a meeting
of Members may be taken by written consent or by any other means or manner than a meeting of
Members called and conducted in accordance with this Agreement.
Section 11.11 Voting and Other Rights.
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(a) Only those Record Holders of Outstanding Units on the Record Date set pursuant to
Section 11.5 shall be entitled to notice of, and to vote at, a meeting of Members or to act
with respect to matters as to which the holders of the Outstanding Units have the right to
vote or to act. All references in this Agreement to votes of, or other acts that may be
taken by, the Outstanding Units shall be deemed to be references to the votes or acts of the
Record Holders of such Outstanding Units.
(b) With respect to Outstanding Units that are held for a Person’s account by another
Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent
of any of the foregoing), in whose name such Outstanding Units are registered, such other
Person shall, in exercising the voting rights in respect of such Outstanding Units on any
matter, and unless the arrangement between such Persons provides otherwise, vote such
Outstanding Units in favor of, and at the direction of, the Person who is the beneficial
owner, and the Company shall be entitled to assume it is so acting without further inquiry.
The provisions of this Section 11.11(b) (as well as all other provisions of this Agreement)
are subject to the provisions of Section 4.3.
Section 11.12 Proxies and Voting.
(a) At any meeting of the Members, every holder of an Outstanding Unit entitled to vote
may vote in person or by proxy authorized by an instrument in writing or by a transmission
permitted by law filed in accordance with the procedure established for the meeting. Any
copy, facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the entire original writing or
transmission.
(b) The Company may, and to the extent required by law, shall, in advance of any
meeting of Members, appoint one or more inspectors to act at the meeting and make a written
report thereof. The Company may designate one or more alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a meeting of
Members, the Person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or her
ability. Every vote taken by ballots shall be counted by a duly appointed inspector or
inspectors.
(c) With respect to the use of proxies at any meeting of Members, the Company shall be
governed by paragraphs (b), (c), (d) and (e) of Section 212 of the DGCL and other applicable
provisions of the DGCL, as though the Company were a Delaware corporation.
(d) With respect to any contested matter relating to any election, appointment, removal
or resignation of any Director, the Company shall be governed by Section 225 of
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the DGCL and
any other applicable provision of the DGCL, as though the Company were a Delaware
corporation.
Section 11.13 Notice of Member Business and Nominations.
(a) Subject to Section 7.1(d) of this Agreement, nominations of Persons for election to
the Board of Directors of the Company and the proposal of business to be considered by the
Members may be made at an annual meeting of Members (i) pursuant to the Company’s notice of
meeting delivered pursuant to Section 11.4 of this Agreement, (ii) by or at the direction of
the Board of Directors, (iii) for nominations to the Board of Directors only, by any holder
of Outstanding Units who is entitled to vote at the meeting, who complied with the notice
procedures set forth in paragraph (b) or (d) of this Section 11.13 and who was a Record
Holder of a sufficient number of Outstanding Units as of the Record Date for such meeting to
elect one or more members to the Board of Directors assuming that such holder cast all of
the votes it is entitled to cast in such election pursuant to Section 11.8(d) in favor of a
single candidate and such candidate received no other votes from any other holder of
Outstanding Units (or, in the case where such holder holds a sufficient number of
Outstanding Units to elect more than one Director, such holder votes its Units as
efficiently as possible for such candidates and such candidates receive no further votes
from holders of Outstanding Units), or (iv) by any holder of Outstanding Units who is
entitled to vote at the meeting, who complied with the notice procedures set forth in
paragraphs (c) or (d) of this Section 11.13 and who is a Record Holder of Outstanding Units
at the time such notice is delivered to the Secretary of the Company.
(b) For nominations to be properly brought before an annual meeting by a Unitholder
pursuant to Section 11.13(a)(iii), the Unitholder must have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
Unitholder’s notice shall be delivered to the Secretary at the principal executive offices
of the Company not less than 90 or more than 120 days prior to the first anniversary (the
“Anniversary”) of the date on which the Company first mailed its proxy materials for the
preceding year’s annual meeting of Members; provided, however, that if the
date of the annual meeting is advanced more than 30 days prior to or delayed by more than
thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the
Unitholder to be timely must be so delivered not later than the close of business on the
later of (x) the ninetieth day prior to such annual meeting or (y) the tenth day following
the day on which public announcement of the date of such meeting is first made. Such
Unitholder’s notice shall set forth: (A) as to each Person whom the Unitholder proposes to
nominate for election or reelection as a Director all information relating to such Person
that is required to be disclosed in solicitations of proxies for election of Directors, or
is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act,
including such Person’s written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected and (B) as to the Unitholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made the name
and address of such Unitholder, as they appear on the Company’s books, and of such
beneficial owner, the class and number of Units of the Company which are owned beneficially
and of record by such Unitholder and such beneficial owner. Such
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holder shall be entitled
to nominate as many candidates for election to the Board of Directors as would be elected
assuming such holder cast the precise number of votes necessary to elect each candidate and
no more votes were cast by such holder or any other holder for such candidates.
(c) For nominations or other business to be properly brought before an annual meeting
by a Unitholder pursuant to Section 11.13(a)(iv), (i) the Unitholder must have given timely
notice thereof in writing to the Secretary of the Company, (ii) such business must be a
proper matter for Member action under this Agreement and the Delaware Act, (iii) if the
Unitholder, or the beneficial owner on whose behalf any such proposal or nomination is made,
has provided the Company with a Solicitation Notice, such Unitholder or beneficial owner
must, in the case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the Company’s Outstanding Units required under this
Agreement or Delaware law to carry any such proposal, or, in the case of a nomination or
nominations, have delivered a proxy statement and form of proxy to holders of a percentage
of the Company’s Outstanding Units reasonably believed by such Unitholder or beneficial
holder to be sufficient to elect the nominee or nominees proposed to be nominated by such
Unitholder, and must, in either case, have included in such materials the Solicitation
Notice and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant
to this Section 11.13, the Unitholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have required the
delivery of such a Solicitation Notice. To be timely, a Unitholder’s notice shall be
delivered to the Secretary at the principal executive offices of the Company not less than
90 or more than 120 days prior to the first Anniversary; provided, however,
that in the event that the date of the annual meeting is advanced more than thirty (30) days
prior to or delayed by more than thirty (30) days after the anniversary of the preceding
year’s annual meeting, notice
by the Unitholder to be timely must be so delivered not later than the close of
business on the later of (x) the ninetieth day prior to such annual meeting or (y) the tenth
day following the day on which public announcement of the date of such meeting is first
made. Such Unitholder’s notice shall set forth: (A) as to each Person whom the Unitholder
proposes to nominate for election or reelection as a Director all information relating to
such Person that is required to be disclosed in solicitations of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act, including such Person’s written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected; (B) as to any other business that the
Unitholder proposes to bring before the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such Unitholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (C) as to the Unitholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is made the
name and address of such Unitholder, as they appear on the Company’s books, and of such
beneficial owner, the class and number of Units of the Company which are owned beneficially
and of record by such Unitholder and such beneficial owner, and whether either such
Unitholder or beneficial owner intends to deliver a proxy statement and form of proxy to
holders of, in the case of a proposal, at least the percentage of the Company’s Outstanding
Units required under this Agreement
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or Delaware law to carry the proposal or, in the case of
a nomination or nominations, a sufficient number of holders of the Company’s Outstanding
Units to elect such nominee or nominees (an affirmative statement of such intent, a
“Solicitation Notice”).
(d) Notwithstanding anything in the second sentence of Section 11.13(b) or the second
sentence of Section 11.13(c) to the contrary, if the number of Directors to be elected to
the Board of Directors is increased and there is no public announcement naming all of the
nominees for Director or specifying the size of the increased Board of Directors made by the
Company at least 90 days prior to the Anniversary, then a Unitholder’s notice required by
this Section 11.13 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Company not later than the close of business on the tenth
day following the day on which such public announcement is first made by the Company.
(e) Only such business shall be conducted at a special meeting of Members as shall have
been brought before the meeting pursuant to the Company’s notice of meeting pursuant to
Section 11.4 of this Agreement. Subject to Section 7.1(d) of this Agreement, nominations of
Persons for election to the Board of Directors may be made at a special meeting of Members
at which Directors are to be elected pursuant to the Company’s notice of meeting (i) by or
at the direction of the Board of Directors, (ii) by any holder of Outstanding Units who is
entitled to vote at the meeting, who complied with the notice procedures set forth in
paragraph (b) or (d) of this Section 11.13 and who was a Record Holder of a sufficient
number of Outstanding Units as of the Record Date for such meeting to elect one or more
members to the Board of Directors assuming that such holder cast all of the votes it is
entitled to cast in such election pursuant to Section 11.8(d) in favor of a single candidate
and such candidate received no other votes from any other
holder of Outstanding Units (or, in the case where such holder holds a sufficient
number of Outstanding Units to elect more than one Director, such holder votes its shares as
efficiently as possible for such candidates and such candidates receive no further votes
from holders of Outstanding Units), or (iii) by any holder of Outstanding Units who is
entitled to vote at the meeting, who complies with the notice procedures set forth in this
Section 11.13 and who is a Record Holder of Outstanding Units at the time such notice is
delivered to the Secretary of the Company. Nominations by Unitholders of Persons for
election to the Board of Directors may be made at such a special meeting of Members if the
Unitholder’s notice as required by Section 11.13(b) or Section 11.13(c) shall be delivered
to the Secretary of the Company not earlier than the ninetieth day prior to such special
meeting and not later than the close of business on the later of the seventieth day prior to
such special meeting or the tenth day following the day on which public announcement is
first made of the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. Holders of Outstanding Units making nominations
pursuant to Section 11.13(d)(ii) shall be entitled to nominate the number of candidates for
election at such special meeting as provided in Section 11.13(b) for an annual meeting.
(f) Except to the extent otherwise provided in Section 7.1(d) with respect to
vacancies, only Persons who are nominated in accordance with the procedures set forth in
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this Section 11.13 shall be eligible to serve as Directors and only such business shall be
conducted at a meeting of Members as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 11.13. Except as otherwise
provided herein or required by law, the chairman of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Section 11.13 and, if
any proposed nomination or business is not in compliance with this Section 11.13, to declare
that such defective proposal or nomination shall be disregarded.
(g) Notwithstanding the foregoing provisions of this Section 11.13, a Member shall also
comply with all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 11.13. Nothing in this
Section 11.13 shall be deemed to affect any rights of Members to request inclusion of
proposals in the Company’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE XII
MERGER
MERGER
Section 12.1 Authority. The Company may merge or consolidate with one or more limited liability
companies or “other business entities” as defined in Section 18-209 of the Delaware Act, formed
under the laws of the State of Delaware or any other state of the United States of America,
pursuant to a written agreement of merger or consolidation (“Merger Agreement”) in accordance with
this Article XII.
Section 12.2 Procedure for Merger or Consolidation. Merger or consolidation of the Company pursuant to this Article XII requires the prior approval
of the Board of Directors. If the Board of Directors shall determine to consent to the merger or
consolidation, the Board of Directors shall approve the Merger Agreement, which shall set forth:
(a) the names and jurisdictions of formation or organization of each of the business
entities proposing to merge or consolidate;
(b) the name and jurisdiction of formation or organization of the business entity that
is to survive the proposed merger or consolidation (the “Surviving Business Entity”);
(c) the terms and conditions of the proposed merger or consolidation;
(d) the manner and basis of exchanging or converting the rights or securities of, or
interests in, each constituent business entity for, or into, cash, property, rights, or
securities of or interests in, the Surviving Business Entity; and if any rights or
securities of, or interests in, any constituent business entity are not to be exchanged or
converted solely for, or into, cash, property, rights, or securities of or interests in, the
Surviving Business Entity, the cash, property, rights, or securities of or interests in, any
limited liability company or other business entity which the holders of such rights,
securities or interests are to receive;
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(e) a statement of any changes in the constituent documents or the adoption of new
constituent documents (the certificate of formation or limited liability company agreement,
articles or certificate of incorporation, articles of trust, declaration of trust,
certificate or agreement of limited partnership or other similar charter or governing
document) of the Surviving Business Entity to be effected by such merger or consolidation;
(f) the effective time of the merger, which may be the date of the filing of the
certificate of merger pursuant to Section 12.4 or a later date specified in or determinable
in accordance with the Merger Agreement (provided, that if the effective time of the
merger is to be later than the date of the filing of the certificate of merger, the
effective time shall be fixed no later than the time of the filing of the certificate of
merger and stated therein); and
(g) such other provisions with respect to the proposed merger or consolidation that the
Board of Directors determines to be necessary or appropriate.
Section 12.3 Approval by Members of Merger or Consolidation.
(a) Except as provided in Section 12.3(d), the Board of Directors, upon its approval of
the Merger Agreement, shall direct that the Merger Agreement be submitted to a vote of
Members, whether at an annual meeting or a special meeting, in either case in
accordance with the requirements of Article XI. A copy or a summary of the Merger
Agreement shall be included in or enclosed with the notice of meeting.
(b) Except as provided in Section 12.3(d), the Merger Agreement shall be approved upon
receiving the affirmative vote or consent of the holders of a Unit Majority unless the
Merger Agreement contains any provision that, if contained in an amendment to this
Agreement, the provisions of this Agreement or the Delaware Act would require for its
approval the vote or consent of a greater percentage of the Outstanding Units or of any
class of Members, in which case such greater percentage vote or consent shall be required
for approval of the Merger Agreement.
(c) Except as provided in Section 12.3(d), after such approval by vote or consent of
the Members, and at any time prior to the filing of the certificate of merger pursuant to
Section 12.4, the merger or consolidation may be abandoned pursuant to provisions therefor,
if any, set forth in the Merger Agreement.
(d) Notwithstanding anything else contained in this Article XII or in this Agreement,
the Board of Directors is permitted without Member approval, to convert the Company or any
Group Member into a new limited liability entity, to merge the Company or any Group Member
into, or convey all of the Company’s assets to, another limited liability entity which shall
be newly formed and shall have no assets, liabilities or operations at the time of such
conversion, merger or conveyance other than those it receives from the Company or other
Group Member if (i) the Board of Directors has received an Opinion of Counsel that the
conversion, merger or conveyance, as the case may be, would not result in the loss of the
limited liability of any Member or any Group
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Member or cause the Company or any Group Member
to be treated as an association taxable as a corporation or otherwise to be taxed as an
entity for federal income tax purposes (to the extent not previously treated as such), (ii)
the sole purpose of such conversion, merger or conveyance is to effect a mere change in the
legal form of the Company into another limited liability entity and (iii) the governing
instruments of the new entity provide the Members and the Board of Directors with the same
rights and obligations as are herein contained.
(e) Members are not entitled to dissenters’ rights of appraisal in the event of a
merger or consolidation pursuant to Section 12.1, a sale of all or substantially all of the
assets of the Company or the Company’s Subsidiaries, or any other transaction or event.
Section 12.4 Certificate of Merger. Upon the required approval by the Board of Directors and the
Unitholders of a Merger Agreement, a certificate of merger shall be executed and filed with the
Secretary of State of the State of Delaware in conformity with the requirements of the Delaware
Act.
Section 12.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business entities
that has merged or consolidated, and all property, real, personal and mixed, and all
debts due to any of those business entities shall be vested in the Surviving
Business Entity and after the merger or consolidation shall be the property of the
Surviving Business Entity and all other things and causes of action belonging to
each of those business entities, shall be vested in the Surviving Business Entity to
the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any of those
constituent business entities shall not revert and is not in any way impaired
because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests in
property of any of those constituent business entities shall be preserved
unimpaired; and
(iv) all debts, liabilities and duties of those constituent business entities
shall attach to the Surviving Business Entity and may be enforced against it to the
same extent as if the debts, liabilities and duties had been incurred or contracted
by it.
(b) A merger or consolidation effected pursuant to this Article XII shall not be deemed
to result in a transfer or assignment of assets or liabilities from one entity to another.
Section 12.6 Business Combination Limitations. Notwithstanding any other provision of this
Agreement, with respect to any “Business Combination” (as such term is defined in
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Section 203 of
the DGCL), the provisions of Section 203 of the DGCL shall be applied with respect to the Company
as though the Company were a Delaware corporation.
ARTICLE XIII
RIGHT TO ACQUIRE MEMBER INTERESTS
Section 13.1 Right to Acquire Member Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time any Person
holds more than 90% of the total Member Interests of any class then Outstanding, such Person
shall then have the right, which right it may assign and transfer in whole or in part to the
Company or any of its Affiliates, exercisable at its option, to purchase all, but not less
than all, of such Member Interests of such class then Outstanding held by other holders, at
the greater of (x) the Current Market Price as of the date three days prior to the date that
the notice described in Section 13.1(b) is mailed and (y) the highest price
paid by such Person or any of its Affiliates for any such Interest of such class
purchased during the 90-day period preceding the date that the notice described in Section
13.1(b) is mailed. As used in this Agreement, (i) “Current Market Price” as of any date of
any class of Interests listed or admitted to trading on any National Securities Exchange
means the average of the daily Closing Prices (as hereinafter defined) per Interest of such
class for the 20 consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) “Closing Price” for any day means the average of the high bid and low asked
prices on such day, regular way, or in the case no such sale takes place on such day, the
average of the closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system for securities listed or
admitted for trading on the principal national securities exchange on which the units of
that class are listed or admitted to trading, or if the units of that class are not listed
or admitted for trading on any national securities exchange, the last quoted price on that
day, or if no quoted price exists, the average of the high bid low asked price on that day
in the over-the-counter market, as reported by the Nasdaq Stock Market LLC or such other
system then in use, or, if on any such day such Interests of such class are not quoted by
any such organization of that type, the average of the closing bid and asked prices on such
day as furnished by a professional market maker making a market in such Interests of such
class selected by the Board of Directors, or if on any such day no market maker is making a
market in such Interests of such class, the fair value of such Interests on such day as
determined by the Board of Directors; and (iii) “Trading Day” means a day on which the
principal National Securities Exchange on which such Interests of any class are listed or
admitted to trading is open for the transaction of business or, if Interests of a class are
not listed or admitted to trading on any National Securities Exchange, a day on which
banking institutions in New York City generally are open.
(b) If any Person elects to exercise the right to purchase Interests granted pursuant
to Section 13.1(a), the Board of Directors shall deliver to the Transfer Agent notice of
such election to purchase (the “Notice of Election to Purchase”) and shall cause the
Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders
of Interests of such class (as of a Record Date selected by the Board of Directors) at least
10, but not more than 60, days prior to the Purchase Date. Such Notice of Election
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to
Purchase shall also be published for a period of at least three consecutive days in at least
two daily newspapers of general circulation printed in the English language and published in
the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the
Purchase Date and the price (determined in accordance with Section 13.1(a)) at which
Interests will be purchased and state that such Person elects to purchase such Interests,
upon surrender of Certificates representing such Interests in exchange for payment, at such
office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be
required by any National Securities Exchange on which such Interests are listed or admitted
to trading. Any such Notice of Election to Purchase mailed to a Record Holder of Interests
at his address as reflected in the records of the Transfer Agent shall be conclusively
presumed to have been given regardless of whether the owner receives such notice. On or
prior to the Purchase Date, the Person exercising the right to purchase hereunder shall
deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase
price of all of such Interests to be purchased in accordance with this Section 13.1. If the
Notice of Election to Purchase shall have been
duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior
to the Purchase Date the deposit described in the preceding sentence has been made for the
benefit of the holders of Interests subject to purchase as provided herein, then from and
after the Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Interests (including any rights
pursuant to Articles IV, V, VI, and X) shall thereupon cease, except the right to receive
the purchase price (determined in accordance with Section 13.1(a)) for Interests therefor,
without interest, upon surrender to the Transfer Agent of the Certificates representing such
Interests, and such Interests shall thereupon be deemed to be transferred to the Person
exercising the right to purchase hereunder on the record books of the Transfer Agent and the
Company, and such Person shall be deemed to be the owner of all such Interests from and
after the Purchase Date and shall have all rights as the owner of such Interests (including
all rights as owner of such Interests pursuant to Articles IV, V, VI and X).
(c) At any time from and after the Purchase Date, a holder of an Outstanding Interest
subject to purchase as provided in this Section 13.1 may surrender his Certificate
evidencing such Interest to the Transfer Agent in exchange for payment of the amount
described in Section 13.1(a), therefor, without interest thereon.
(d) Upon the exercise by any Person of the right to purchase Interests granted pursuant
to Section 13.1(a), no Member shall be entitled to dissenters’ rights of appraisal.
ARTICLE XIV
REGISTRATION RIGHTS
Section 14.1 Registration Rights. For purposes of this Article XIV, the “Existing Investors” shall
include Copano Partners, the CSFB Entities and the EnCap Entities, and each is individually
referred to in this Article XIV as a “Registration Rights Group.” Following the Initial Offering
and subject to the terms and limitations set forth in this Article XIV, each Registration Rights
Group shall be entitled to one demand registration right; provided, however, that
no demand registration request shall be made prior to the expiration of the 180-day “lock-
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up”
period following completion of the Initial Offering.
Section 14.2 Registrable Securities. Any Registrable Security will cease to be a Registrable
Security when (a) a registration statement covering such Registrable Security has been declared
effective by the Commission and such Registrable Security has been sold or disposed of pursuant to
such effective registration statement; (b) such Registrable Security has been disposed of pursuant
to any section of Rule 144 (or any similar provision then in force under the Securities Act); or
(c) such Registrable Security is held by the Company or one of its subsidiaries.
Section 14.3 Shelf Registration.
(a) Shelf Registration. Within 60 days following receipt of a written request
for the benefit of all the Registrable Securities held by a Registration Rights Group, the
Company shall prepare and file a registration statement under the Securities Act to permit
the public resale of the Registrable Securities pursuant to such registration statement,
including a registration statement permitting the public resale of the Registrable
Securities from time to time pursuant to Rule 415 of the Securities Act (the “Shelf
Registration Statement”). Such written request shall describe the plan of distribution for
such Registrable Securities, which plan may include, without limitation, sales through the
facilities of the principal trading market on which securities of the same class as the
Registrable Securities are then traded, sales pursuant to an Underwritten Offering, or both.
The Company shall use its commercially reasonable efforts to cause the Shelf Registration
Statement to become effective no later than 120 days after the date of filing such Shelf
Registration Statement (the “Shelf Registration”). A Shelf Registration Statement filed
pursuant to this Section 14.3(a) shall be on such appropriate registration form of the
Commission as shall be selected by the Company; provided, however, that if a
prospectus supplement will be used in connection with the marketing of an Underwritten
Offering from the Shelf Registration Statement and the Managing Underwriter at any time
notifies the Company in writing that, in the sole judgment of such Managing Underwriter,
inclusion of detailed information to be used in such prospectus supplement is of material
importance to the success of the Underwritten Offering of such Registrable Securities, the
Company shall use its commercially reasonable efforts to include such information in the
prospectus. The Company will cause the Shelf Registration Statement filed pursuant to this
Section 14.3(a) to be continuously effective under the Securities Act until all Registrable
Securities covered by the Shelf Registration Statement have been distributed in the manner
set forth and as contemplated in the Shelf Registration Statement or there are no longer any
Registrable Securities outstanding (the “Effectiveness Period”). The Shelf Registration
Statement when declared effective by the Commission (including the documents incorporated
therein by reference) will comply as to form in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and will not contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(b) Delay Rights. Notwithstanding anything to the contrary contained herein,
the Company: (i) may delay its obligation to file any Shelf Registration Statement if
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(1)
within 30 days of receipt of a written request from any Registration Rights Group, the
Company notifies the requesting Registration Rights Group of the Company’s intention of
effecting a public offering within 60 days, provided, that prior to the receipt of
such request, the Company has taken affirmative steps in contemplation of such public
offering, (2) the Company is pursuing an acquisition, merger, reorganization, disposition or
other similar transaction and the Company determines in good faith that the Company’s
ability to pursue or consummate such a transaction would be materially adversely affected by
any required disclosure of such transaction in the Shelf Registration Statement, or (3) the
Company has experienced some other material non-public event the disclosure of which at such
time is not required by law or, in the good faith judgment of the Company, would materially
adversely affect the Company, then, in each case, the Company may defer filing the Shelf
Registration Statement for up to 60 days; provided,
however, that the Company shall not exercise its right to delay filing the
Shelf Registration Statement more than once in any 12 month period (excluding any delays in
filing a registration statement or post-effective amendment pursuant to Section 14.11
hereof); (ii) may, upon written notice to any Registration Rights Group whose Registrable
Securities are included in the Shelf Registration Statement, suspend such Registration
Rights Group’s use of any prospectus which is a part of the Shelf Registration Statement (in
which event the Registration Rights Group shall discontinue sales of the Registrable
Securities pursuant to the Shelf Registration Statement) for up to 60 days if (1) the
Company is pursuing an acquisition, merger, reorganization, disposition or other similar
transaction and the Company determines in good faith that the Company’s ability to pursue or
consummate such a transaction would be materially adversely affected by any required
disclosure of such transaction in the Shelf Registration Statement or (2) the Company has
experienced some other material non-public event the disclosure of which at such time is not
required by law or, in the good faith judgment of the Company, would materially adversely
affect the Company; provided, however, that the Company shall not exercise
its right to suspend any Registration Rights Group’s use of any prospectus more than twice
in any 12-month period. Upon disclosure of such information or the termination of the
condition described in this Section 14.3(b), the Company shall provide prompt notice to the
Registration Rights Group whose Registrable Securities are included in the Shelf
Registration Statement, and shall promptly terminate any suspension of sales it has put into
effect and shall take such other actions to permit registered sales of Registrable
Securities as contemplated in this Agreement.
Section 14.4 Underwritten Offerings.
(a) Shelf Registration. If an Existing Investor elects to dispose of
Registrable Securities in an Underwritten Offering, the Company shall enter into an
underwriting agreement in customary form with the Managing Underwriter or Underwriters,
which shall include, among other provisions, indemnities to the effect and to the extent
provided in Section 14.9, and shall take all such other reasonable actions as are requested
by the Managing Underwriter in order to expedite or facilitate the registration and
disposition of the Registered Securities.
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(b) General Procedures. In connection with any Underwritten Offering pursuant
to a Shelf Registration Statement filed at the request of a Registration Rights Group
pursuant to Section 14.3 hereof, such Registration Rights Group, with the consent of the
Company, shall be entitled to select the Managing Underwriter or Underwriters. The consent
of the Company to the selection of the Managing Underwriter or Underwriters shall not be
unreasonably withheld. In all other cases, the Company shall select the Managing
Underwriter or Underwriters. In connection with an Underwritten Offering pursuant to
Section 14.3 hereof, each Existing Investor and the Company shall be obligated to enter into
an underwriting agreement which contains such representations, covenants, indemnities and
other rights and obligations as are customary in underwriting agreements for firm commitment
offerings of securities. No Existing Investor may
participate in such Underwritten Offering unless such Existing Investor agrees to sell
its Registrable Securities on the basis provided in such underwriting agreement and
completes and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. Each Existing
Investor may, at its option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit of such
underwriters also be made to and for such Existing Investor’s benefit and that any or all of
the conditions precedent to the obligations of such underwriters under such underwriting
agreement also be conditions precedent to its obligations. If any Existing Investor
disapproves of the terms of an underwriting, such Existing Investor may elect to withdraw
therefrom by notice to the Company and the Managing Underwriter; provided,
however, that such withdrawal must be made on or before the pricing of any such
Underwritten Offering. No such withdrawal or abandonment shall affect the Company’s
obligation to pay Registration Expenses.
Section 14.5 Registration Procedures. In connection with its obligations contained in Section 14.3
hereof, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission such amendments and supplements to the Shelf
Registration Statement and the prospectus used in connection therewith as may be necessary
to keep the Shelf Registration Statement effective and as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all securities
covered by the Shelf Registration Statement;
(b) furnish to each Existing Investor (i) as far in advance as reasonably practicable
before filing the Shelf Registration Statement or any other registration statement
contemplated by this Agreement or any supplement or amendment thereto, upon request, copies
of reasonably complete drafts of all such documents proposed to be filed (including exhibits
and each document incorporated by reference therein to the extent then required by the rules
and regulations of the Commission), and provide each such Existing Investor the opportunity
to object to any information pertaining to such Existing Investor and its plan of
distribution that is contained therein and make the corrections reasonably requested by such
Existing Investor with respect to such information prior to filing the Shelf Registration
Statement or such other registration statement or supplement or amendment thereto, and (ii)
such number of copies of the Shelf Registration Statement or such other registration
statement and the prospectus
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included therein and any supplements and amendments thereto as
such Persons may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such Shelf Registration Statement or
other registration statement;
(c) if applicable, use its commercially reasonable efforts to register or qualify the
Registrable Securities covered by the Shelf Registration Statement or any other registration
statement contemplated by this Agreement under the securities or blue sky laws of such
jurisdictions as the Existing Investors or, in the case of an Underwritten
Offering, the Managing Underwriter, shall reasonably request, provided that the
Company will not be required to qualify generally to transact business in any jurisdiction
where it is not then required to so qualify or to take any action which would subject it to
general service of process in any such jurisdiction where it is not then so subject;
(d) promptly notify each Existing Investor and each underwriter, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act, of (i) the
filing of the Shelf Registration Statement or any other registration statement contemplated
by this Agreement or any prospectus or prospectus supplement to be used in connection
therewith, or any amendment or supplement thereto, and, with respect to such Shelf
Registration Statement or any other registration statement or any post-effective amendment
thereto, when the same has become effective; and (ii) any written comments from the
Commission with respect to any filing referred to in clause (i) and any written request by
the Commission for amendments or supplements to the Shelf Registration Statement or any
other registration statement or any prospectus or prospectus supplement thereto;
(e) immediately notify each Existing Investor and each underwriter, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act, of (i) the
happening of any event as a result of which the prospectus or prospectus supplement
contained in the Shelf Registration Statement or any other registration statement
contemplated by this Agreement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances then
existing; (ii) the issuance or threat of issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or any other registration
statement contemplated by this Agreement, or the initiation of any proceedings for that
purpose; or (iii) the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the applicable
securities or blue sky laws of any jurisdiction. Following the provision of such notice,
the Company agrees to as promptly as practicable amend or supplement the prospectus or
prospectus supplement or take other appropriate action so that the prospectus or prospectus
supplement does not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and to take such other action as
is necessary to remove a stop order, suspension, threat thereof or proceedings related
thereto;
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(f) furnish to each Existing Investor copies of any and all transmittal letters or
other correspondence with the Commission or any other governmental agency or self-regulatory
body or other body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering of Registrable Securities;
(g) in the case of an Underwritten Offering, furnish upon request, (i) an opinion of
counsel for the Company, dated the effective date of the applicable registration statement
or the date of any amendment or supplement thereto, and a letter of like kind dated the date
of the closing under the underwriting agreement, and (ii) a “cold comfort”
letter, dated the effective date of the applicable registration statement or the date
of any amendment or supplement thereto and a letter of like kind dated the date of the
closing under the underwriting agreement, in each case, signed by the independent public
accountants who have certified the Company’s financial statements included or incorporated
by reference into the applicable registration statement, and each of the opinion and the
“cold comfort” letter shall be in customary form and covering substantially the same matters
with respect to such registration statement (and the prospectus and any prospectus
supplement included therein) as are customarily covered in opinions of issuer’s counsel and
in accountants’ letters delivered to the underwriters in Underwritten Offerings of
securities, and such other matters as such underwriters may reasonably request;
(h) otherwise use its commercially reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make available to the Existing Investors, as
soon as reasonably practicable, an earnings statement covering the period of at least 12
months, but not more than 18 months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;
(i) make available to the appropriate representatives of the Managing Underwriter and
Existing Investors access to such information and the Company personnel as is reasonable and
customary to enable such parties to establish a due diligence defense under the Securities
Act; provided that the Company need not disclose any information to any such
representative unless and until such representative has entered into a confidentiality
agreement with the Company;
(j) cause all such Registrable Securities registered pursuant to this Agreement to be
listed on each securities exchange or nationally recognized quotation system on which
similar securities issued by the Company are then listed;
(k) use its commercially reasonable efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the Existing
Investors to consummate the disposition of such Registrable Securities;
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(l) provide a transfer agent and registrar for all Registrable Securities covered by
such registration statement not later than the effective date of such registration
statement; and
(m) enter into customary agreements and take such other actions as are reasonably
requested by the Existing Investors or the underwriters, if any, in order to expedite or
facilitate the disposition of such Registrable Securities.
Each Existing Investor, upon receipt of notice from the Company of the happening of any event
of the kind described in subsection (e) of this Section 14.5, shall forthwith discontinue
disposition of the Registrable Securities until such Existing Investor’s receipt of the copies of
the
supplemented or amended prospectus contemplated by subsection (e) of this Section 14.5 or
until it is advised in writing by the Company that the use of the prospectus may be resumed, and
has received copies of any additional or supplemental filings incorporated by reference in the
prospectus, and, if so directed by the Company, such Existing Investor will, or will request the
Managing Underwriter or Underwriters, if any, to deliver to the Company (at the Company’s expense)
all copies in their possession or control, other than permanent file copies then in such Existing
Investor’s possession, of the prospectus covering such Registrable Securities current at the time
of receipt of such notice.
Section 14.6 Cooperation by Existing Investors. The Company shall have no obligation to include in
the Shelf Registration Statement Units of an Existing Investor who has failed to timely furnish
such information which, in the opinion of counsel to the Company, is reasonably required in order
for the registration statement or prospectus supplement, as applicable, to comply with the
Securities Act.
Section 14.7 Restrictions on Public Sale by Existing Investors of Registrable Securities. Each
Existing Investor that is a holder of Registrable Securities that are included in a registration
statement agrees not to effect any public sale or distribution of the Registrable Securities, other
than in an Underwritten Offering, during the 90 calendar day period beginning on the date of a
prospectus supplement filed with the Commission with respect to the pricing of such Underwritten
Offering, provided that the duration of the foregoing restrictions shall be no longer than
the duration of the shortest restriction generally imposed by the underwriters on the officers or
directors or any other unitholder of the Company on whom a restriction is imposed.
Section 14.8 Expenses. The Company will pay all Registration Expenses in connection with the Shelf
Registration Statement filed pursuant to Section 14.3(a) of this Agreement, whether or not the
Shelf Registration Statement becomes effective or any sale is made pursuant to the Shelf
Registration Statement. Each Existing Investor shall pay all Selling Expenses in connection with
any sale of its Registrable Securities hereunder. “Registration Expenses” means all expenses
incident to the Company’s performance under or compliance with this Agreement to effect the
registration of Registrable Securities in a Shelf Registration, and the disposition of such
securities, including, without limitation, all registration, filing, securities exchange listing
and Nasdaq National Market fees, all registration, filing, qualification and other fees and
expenses of complying with securities or blue sky laws, fees of the National Association
85
of
Securities Dealers, Inc., transfer taxes and fees of transfer agents and registrars, all word
processing, duplicating and printing expenses, and the fees and disbursements of counsel and
independent public accountants for the Company, including the expenses of any special audits or
“cold comfort” letters required by or incident to such performance and compliance. Except as
otherwise provided in Section 14.9 hereof, the Company shall not be responsible for legal fees
incurred by Existing Investors in connection with the exercise of such Existing Investors’ rights
hereunder. The Company shall
not be responsible for any “Selling Expenses,” which means all underwriting fees, discounts and
selling commissions allocable to the sale of the Registrable Securities.
Section 14.9 Indemnification.
(a) By the Company. In the event of a registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless each Existing Investor thereunder, its directors and officers, and each
underwriter, pursuant to the applicable underwriting agreement with such underwriter, of
Registrable Securities thereunder and each Person, if any, who controls such Existing
Investor or underwriter within the meaning of the Securities Act and the Exchange Act,
against any losses, claims, damages, expenses or liabilities (including reasonable
attorneys’ fees and expenses) (collectively, “Losses”), joint or several, to which such
Existing Investor or underwriter or controlling Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact contained in the
Shelf Registration Statement or any other registration statement contemplated by this
Agreement, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus, in light of the circumstances under
which they were made) not misleading, and will reimburse each such Existing Investor, its
directors and officers, each such underwriter and each such controlling Person for any legal
or other expenses reasonably incurred by them in connection with investigating or defending
any such Loss or actions or proceedings; provided, however, that the Company
will not be liable in any such case if and to the extent that any such Loss arises out of or
is based upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by such Existing Investor, such
underwriter or such controlling Person in writing specifically for use in the Shelf
Registration Statement or such other registration statement, or prospectus supplement, as
applicable. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Existing Investor or any such director, officer
or controlling Person, and shall survive the transfer of such securities by such Existing
Investor.
(b) By Each Existing Investor. Each Existing Investor agrees severally and not
jointly to indemnify and hold harmless the Company, its directors and officers, each
Person, if any, who controls the Company within the meaning of the Securities Act or of the
Exchange Act, and each other Existing Investor, its directors, officers, and controlling
86
Persons within the meaning of the Securities Act or of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to the selling Existing Investors, but only with
respect to information regarding such Existing Investor furnished in writing by or on behalf
of such Existing Investor expressly for inclusion in the Shelf Registration Statement or
prospectus supplement relating to the Registrable Securities, or any
amendment or supplement thereto; provided, however, that the liability
of each Existing Investor shall not be greater in amount than the dollar amount of the
proceeds (net of any Selling Expenses) received by such Existing Investor from the sale of
the Registrable Securities giving rise to such indemnification.
(c) Notice. Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the indemnifying
party in writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party other than under
this Section 14.9. In any action brought against any indemnified party, it shall notify the
indemnifying party of the commencement thereof. The indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified party under
this Section 14.9 for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; provided, however, that, (i) if the
indemnifying party has failed to assume the defense and employ counsel or (ii) if the
defendants in any such action include both the indemnified party and the indemnifying party
and counsel to the indemnified party shall have concluded that there may be reasonable
defenses available to the indemnified party that are different from or additional to those
available to the indemnifying party, or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, then the indemnified
party shall have the right to select a separate counsel and to assume such legal defense and
otherwise to participate in the defense of such action, with the reasonable expenses and
fees of such separate counsel and other reasonable expenses related to such participation to
be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of
this Agreement, no indemnified party shall settle any action brought against it with respect
to which it is entitled to indemnification hereunder without the consent of the indemnifying
party, unless the settlement thereof imposes no liability or obligation on, and includes a
complete and unconditional release from all liability of, the indemnifying party.
(d) Contribution. If the indemnification provided for in this Section 14.9 is
held by a court or government agency of competent jurisdiction to be unavailable to the
Company or any Existing Investor or is insufficient to hold them harmless in respect of any
Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a result of such
Losses as between the Company on the one hand and such Existing Investor on the other, in
such proportion as is appropriate to reflect the relative fault of the Company
87
on the one
hand and of such Existing Investor on the other in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant equitable
considerations; provided, however, that in no event shall such Existing
Investor be required to contribute an aggregate amount in excess of the dollar amount of
proceeds (net of Selling Expenses) received by such Existing Investor from the sale of
Registrable
Securities giving rise to such indemnification. The relative fault of the Company on
the one hand and each Existing Investor on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact has been made by, or relates to,
information supplied by such party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant to this
paragraph were to be determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the first
sentence of this paragraph. The amount paid by an indemnified party as a result of the
Losses referred to in the first sentence of this paragraph shall be deemed to include any
legal and other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any Loss which is the subject of this paragraph. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who is not guilty of such fraudulent
misrepresentation.
(e) Other Indemnification. The provisions of this Section 14.9 shall be in
addition to any other rights to indemnification or contribution which an indemnified party
may have pursuant to law, equity, contract or otherwise.
Section 14.10 Rule 144 Reporting. With a view to making available the benefits of certain rules
and regulations of the Commission that may permit the sale of the Registrable Securities to the
public without registration, the Company agrees to use its commercially reasonable efforts to:
(a) Make and keep public information regarding the Company available, as those terms
are understood and defined in Rule 144 of the Securities Act, at all times from and after
the date hereof;
(b) File with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act at all times from and
after the date hereof; and
(c) So long as an Existing Investor owns any Registrable Securities, furnish to such
Existing Investor forthwith upon request a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as such Existing
Investor may reasonably request in availing itself of any rule or regulation of the
Commission allowing such Existing Investor to sell any such securities without registration.
88
Section 14.11 Transfer or Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities granted to the Existing Investors by the Company pursuant to
Section 14.3 may be Transferred by the Existing Investors to one or more transferee(s) of such
Registrable Securities, provided that (a) each such transferee holds Registrable Securities
representing at least 25% (after giving effect to such Transfer) of the
Registrable Securities held by the Registration Rights Group following any redemption of Common
Units contemplated by Section 5.2(b) hereof, (b) the Company is given written notice prior to any
said Transfer, stating the name and address of each such transferee and identifying the securities
with respect to which such registration rights are being Transferred, and (c) each such transferee
assumes in writing responsibility for its portion of the obligations of the Existing Investors
under this Agreement. Any such rights transferred in accordance with this Section 14.11 shall
include the rights granted to the Existing Investors pursuant to Section 6.04 of the Stakeholders’
Agreement and shall include all other rights granted to an Existing Investor or a Registration
Rights Group hereunder. In no event shall the Company be required to file a post-effective
amendment to a Shelf Registration Statement or a new Shelf Registration Statement for the benefit
of such transferee(s) unless such transferring Existing Investor notifies the Company in writing
that it will pay all of the additional Registration Expenses incurred by the Company in connection
with filing a post-effective amendment to a Shelf Registration Statement or a new Shelf
Registration Statement for the benefit of such transferee(s); provided, however,
that the Company shall be entitled to delay any such filing as provided in Section 14.3(b) hereof.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices. Any notice, demand, request, report or proxy materials
required or permitted to be given or made to a Member under this Agreement shall be in writing and
shall be deemed given or made when delivered in person or when sent by first class United States
mail or by other means of written communication to the Member at the address described below. Any
notice, payment or report to be given or made to a Member hereunder shall be deemed conclusively to
have been given or made, and the obligation to give such notice or report or to make such payment
shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or
report to the Record Holder of such Company Securities at his address as shown on the records of
the Transfer Agent or as otherwise shown on the records of the Company, regardless of any claim of
any Person who may have an interest in such Company Securities by reason of any assignment or
otherwise. An affidavit or certificate of making of any notice, payment or report in accordance
with the provisions of this Section 15.1 executed by the Company, the Transfer Agent or the mailing
organization shall be prima facie evidence of the giving or making of such notice, payment or
report. If any notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the Company is returned
by the United States Postal Service marked to indicate that the United States Postal Service is
unable to deliver it, such notice, payment or report and any subsequent notices, payments and
reports shall be deemed to have been duly given or made without further mailing (until such time as
such Record Holder or another Person notifies the Transfer Agent or the Company of a change in his
address) if they are available for the Member at the principal office of the Company for a period
of one year from the date of the giving or making of such notice, payment or report to the other
Members. Any notice to the Company shall be deemed given if received by the Secretary at the
principal office of the Company designated pursuant to Section 2.3. The Board of Directors and the
Officers may rely
89
and shall be protected in relying on any notice or other document from a Member
or other Person if believed by it to be genuine.
Section 15.2 Further Action. The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or appropriate to achieve
the purposes of this Agreement.
Section 15.3 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal representatives and
permitted assigns.
Section 15.4 Integration. This Agreement and Section 6.04 of the Stakeholders’ Agreement
constitute the entire agreement among the parties hereto pertaining to the subject matter hereof
and supersede all prior agreements and understandings pertaining thereto.
Section 15.5 Creditors. None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Company.
Section 15.6 Waiver. No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy
consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant,
duty, agreement or condition.
Section 15.7 Counterparts. This Agreement may be executed in counterparts, all of which together
shall constitute an agreement binding on all the parties hereto, notwithstanding that all such
parties are not signatories to the original or the same counterpart. Each party shall become bound
by this Agreement immediately upon affixing its signature hereto or, in the case of a Person
acquiring a Unit, upon accepting the certificate evidencing such Unit.
Section 15.8 Applicable Law. This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of conflicts of law.
Section 15.9 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.
Section 15.10 Consent of Members. Each Member hereby expressly consents and agrees that, whenever in this Agreement it is
specified that an action may be taken upon the affirmative vote or consent of less than all of the
Members, such action may be so taken upon the concurrence of less than all of the Members and each
Member shall be bound by the results of such action.
Remainder of page intentionally left blank.
90
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
COPANO ENERGY, L.L.C. | ||||||
By: | /s/ Xxxx X. Xxxxx, Xx. | |||||
Name: Xxxx X. Xxxxx, Xx. | ||||||
Title: Chairman of the Board and Chief Executive Officer | ||||||
MEMBERS: | ||||||
All Members now and hereafter admitted as Members of the Company, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to, the Board of Directors. |
Signature Page to Third Amended and Restated
Limited Liability Company Agreement
Limited Liability Company Agreement
EXHIBIT A
to the Third Amended and
Restated Agreement of Limited Liability Company of
Copano Energy, L.L.C.
to the Third Amended and
Restated Agreement of Limited Liability Company of
Copano Energy, L.L.C.
No. [ ] [ ] Common Units
In accordance with Section 4.1 of the Third Amended and Restated Limited Liability Company
Agreement of Copano Energy, L.L.C., as amended, supplemented or restated from time to time (the
“Company Agreement”), Copano Energy , L.L.C., a Delaware limited liability company (the “Company”),
hereby certifies that [ ] (the “Holder”) is the registered owner of
Common Units representing Interests in the Company (the “Common Units”) transferable on the books
of the Company, in person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed. The rights, preferences and limitations of the Common Units are set forth in,
and this Certificate and the Common Units represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Company Agreement. Copies of the Company Agreement
are on file at, and will be furnished without charge on delivery of written request to the Company
at, the principal office of the Company located at 0000 Xxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000. Capitalized terms used herein but not defined shall have the meanings given them in the
Company Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and
agreed to become, a Member and to have agreed to comply with and be bound by and to have executed
the Company Agreement, (ii) represented and warranted that the Holder has all right, power and
authority and, if an individual, the capacity necessary to enter into the Company Agreement, (iii)
granted the powers of attorney provided for in the Company Agreement and (iv) made the waivers and
given the consents and approvals contained in the Company Agreement.
This Certificate shall not be valid for any purpose unless it has been countersigned and
registered by the Transfer Agent and Registrar.
Dated: | Copano Energy, L.L.C. | |||||||||
Countersigned and Registered by: | By: | |||||||||
By: | ||||||||||
as Transfer Agent and Registrar | ||||||||||
Name: | ||||||||||
By:
|
By: | |||||||||
Authorized Signature | Secretary |
A-1
Reverse of Certificate
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Certificate,
shall be construed as follows according to applicable laws or regulations:
TEN COM– | as tenants in common | UNIF GIFT/TRANSFERS MIN ACT | ||||||
TEN ENT –
|
as tenants by the entireties | Custodian | ||||||
(Cust) | (Minor) | |||||||
JT TEN – | as joint tenants with right of survivorship and not as tenants in common | under Uniform
Gifts/Transfers to CD Minors Act (State) |
Additional abbreviations, though not in the above list, may also be used.
A-2
ASSIGNMENT OF COMMON UNITS
in
COPANO ENERGY, L.L.C.
in
COPANO ENERGY, L.L.C.
FOR VALUE RECEIVED, hereby assigns, conveys, sells and transfers unto
(Please print or typewrite name and address of Assignee) |
(Please insert Social Security or other identifying number of Assignee) |
Common Units representing Member Interests evidenced by this
Certificate, subject to the Company Agreement, and does hereby irrevocably constitute and appoint
as its attorney-in-fact with full power of substitution to transfer the
same on the books of Copano Energy, L.L.C.
Date:
|
NOTE: | The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change. | ||||
SIGNATURE(S) MUST BE
GUARANTEED BY A MEMBER FIRM OF
THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. OR BY
A COMMERCIAL BANK OR TRUST
COMPANY SIGNATURE(S)
GUARANTEED
|
||||||
No transfer of the Common Units evidenced hereby will be registered on the books of the
Company, unless the Certificate evidencing the Common Units to be transferred is surrendered for
registration of transfer.
B-3
EXHIBIT B
to the Third Amended and
Restated Agreement of Limited Liability Company of
Copano Energy, L.L.C.
to the Third Amended and
Restated Agreement of Limited Liability Company of
Copano Energy, L.L.C.
Existing Investor | Allocated Percentage | |||
MBP III AIV, LP |
19.77 | % | ||
MBP III Onapoc Holdings LLC |
13.64 | % | ||
Total CSFB Entities |
33.41 | % | ||
EnCap Energy Capital Fund III, L.P. |
16.70 | % | ||
EnCap Energy Acquisition III – B, Inc. |
12.63 | % | ||
BOCP Energy Partners, L.P. |
4.08 | % | ||
Total EnCap Entities |
33.41 | % | ||
Copano Partners, L.P. |
29.41 | % | ||
R. Xxxxx Xxxxxxxxx |
2.49 | % | ||
Xxxxxxx X. Xxxxxx |
1.28 | % | ||
Total |
100 | % | ||
C-1
EXHIBIT C
to the Third Amended and
Restated Agreement of Limited Liability Company of
Copano Energy, L.L.C.
to the Third Amended and
Restated Agreement of Limited Liability Company of
Copano Energy, L.L.C.
Common Units and | ||||
Subordinated Units Received | ||||
Existing
Investor |
Pre-Initial Offering Interests | in Exchange | ||
MBP III AIV, L.P.
|
1,109,682 Warrants | 358,388 Common Units 618,772 Subordinated Units |
||
MBP III Onapoc Holdings LLC
|
765,318 Warrants | 247,172 Common Units 426,752 Subordinated Units |
||
Total CSFB Entities
|
1,875,000 Warrants | 605,560 Common Units 1,045,524 Subordinated Units |
||
EnCap Energy Capital Fund III, L.P.
|
937,037 Warrants | 302,631 Common Units 522,504 Subordinated Units |
||
EnCap Energy Acquisition III–B, Inc.
|
708,683 Warrants | 228,880 Common Units 395,171 Subordinated Units |
||
BOCP Energy Partners, L.P.
|
229,280 Warrants | 74,049 Common Units 127,849 Subordinated Units |
||
Total EnCap Entities
|
1,875,000 Warrants | 605,560 Common Units 1,045,524 Subordinated Units |
||
Copano Partners, L.P.
|
1,030,000 Common Units 620,000 Junior Units |
763,221 Common Units 1,317,733 Subordinated Units |
||
R. Xxxxx Xxxxxxxxx
|
100,000 Common
Special Units 40,000 Junior Special Units |
42,330 Common Units 73,084 Subordinated Units |
||
Xxxxxxx X. Xxxxxx
|
54,000 Common Special
Units 18,000 Junior Special Units |
21,581 Common Units 37,261 Subordinated Units |
C-1