AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF COPANO ENERGY, L.L.C.
Exhibit 3.1
AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
COPANO ENERGY, L.L.C.
LIMITED LIABILITY COMPANY AGREEMENT OF
COPANO ENERGY, L.L.C.
THIS AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
COPANO ENERGY, L.L.C. (this “Amendment”), dated as of October 19, 2007, is entered into
and effectuated by the Board of Directors (the “Board”) of Copano Energy, L.L.C. (the
“Company”), pursuant to authority granted to it in Sections 5.6 and 11.1(c) of the Third
Amended and Restated Limited Liability Company Agreement of Copano Energy, L.L.C., dated as of
April 30, 2007, as amended by that certain Amendment No. 1 dated as of May 1, 2007 (as so amended,
the “Limited Liability Company Agreement”). Capitalized terms used but not defined herein
are used as defined in the Limited Liability Company Agreement.
WHEREAS, Section 5.6(a) of the Limited Liability Company Agreement provides that the Company
may issue additional Company Securities for any Company purpose at any time and from time to time
for such consideration and on such terms and conditions as the Board shall determine, all without
the approval of any Members;
WHEREAS, Section 5.6(b) of the Limited Liability Company Agreement provides that the Company
Securities 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;
WHEREAS, Section 11.1(c)(vii) of the Limited Liability Company Agreement provides that the
Board, without the approval of any Member, may amend any provision of the Limited Liability Company
Agreement that the Board 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 of
the Limited Liability Company Agreement; and
WHEREAS, the Board deems it in the best interest of the Company to effect this Amendment to
provide for (i) the creation of a new class of Units to be designated as Class D Units and to fix
the preferences and the relative participating, optional and other special rights, powers and
duties pertaining to the Class D Units, including without limitation the conversion of the Class D
Units into Common Units in accordance with the terms described herein, and (ii) such other matters
as are provided herein.
NOW, THEREFORE, it is hereby agreed as follows:
A. Amendment. The Limited Liability Company Agreement is hereby amended as follows:
1. Section 1.1 is hereby amended to add the following definitions:
“Class D Units” means a Company Security representing a
fractional part of the Interests of all Members, and having the
rights and obligations specified with respect to the Class D Units
in this Agreement. The term “Class D Unit” does not refer to a
converted Class D Unit after its conversion into a Common Unit
pursuant to the terms hereof.
“Purchase Agreement” means that certain Purchase Agreement
dated August 31, 2007 by and among Cantera Resources Holdings LLC,
Copano Energy/Rocky Mountains, L.L.C. and the Company.
“Purchase Agreement Closing Date” means October 19, 2007.
“Seller” has the meaning assigned to such term in the Purchase
Agreement.
2. Section 1.1 is hereby amended by amending and restating the following definitions:
“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, Class C Unit,
Class D Unit or any other Interest shall be the amount that such
Adjusted Capital Account would be if such Common Unit, Class C Unit,
Class D 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, Class C Unit, Class D Unit or other Interest was first issued.
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“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, Class C Unit, Class D Unit or any other
Interest shall be the amount that such Capital Account would be if
such Common Unit, Class C Unit, Class D 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, Class C Unit, Class D Unit or
other Interest was first issued.
“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, Class C Units and Class
D Units, which are separate classes of Interests.
“Interest” means the ownership interest of a Member in the
Company, which may be evidenced by Common Units, Class C Units,
Class D 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.
“Remaining Net Positive Adjustments” means as of the end of any
taxable period, with respect to the Unitholders holding Common
Units, Class C Units or Class D Units, the excess of (i) the Net
Positive Adjustments of the Unitholders holding Common Units, Class
C Units or Class D 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.
“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, Class C Units or Class D 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.
“Unit” means a Company Security that is designated as a “Unit”
and shall include Common Units, Class C Units and Class D Units.
“Unit Majority” means, (i) during the period in which any Class
C Units are Outstanding, at least a majority of the
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Outstanding
Common Units and the Outstanding Class C Units
voting together as a single class, (ii) during the period in
which any Class D Units are Outstanding, at least a majority of the
Outstanding Common Units and the Outstanding Class D Units voting
together as a single class, and (iii) in all other cases, at least a
majority of the Outstanding Common Units.
3. Section 1.1 is hereby amended by amending and restating the final sentence to the
definition of “Common Unit:”
“The term “Common Unit” does not refer to a Class C Unit or a
Class D Unit prior to its conversion into a Common Unit pursuant to
the terms hereof.”
4. Section 1.1 is hereby amended by adding the following final proviso to the definition of
“Outstanding”:
“provided, further, that for purposes of the
foregoing, the Class C Units and the Class D Units shall be deemed
to be of the same class of Company Securities as the Common Units.”
5. Section 4.1 is hereby amended and restated as follows:
Section 4.1 Certificates. Upon the Company’s issuance of Common
Units, Class C Units or Class D 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, Class C Units or Class D 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 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
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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.
6. The following is added as a new Section 5.5(c)(iii):
(iii) Immediately prior to the transfer of a Class D Unit or of
a Class D Unit that has converted into a Common Unit pursuant to
Section 5.13(e) by a holder thereof (other than a transfer to an
Affiliate unless the Board of Directors elects to have this
subparagraph 5.5(c)(iii) apply), the Capital Account maintained for
such Person with respect to its Class D Units or converted Class D
Units will (a) first, be allocated to the Class D Units or converted
Class D Units to be transferred in an amount equal to the product of
(x) the number of such Class D Units or converted Class D Units to
be transferred and (y) the Per Unit Capital Amount for a Common
Unit, and (b) second, any remaining balance in such Capital Account
will be retained by the transferor, regardless of whether it has
retained any Class D Units or converted Class D Units. Promptly,
following any such allocation, the transferor’s Capital Account, if
any, maintained with respect to the retained Class D Units or
converted Class D Units, if any, will have a balance equal to the
amount allocated under clause (b) hereinabove, and the transferee’s
Capital Account established with respect to the transferred Class D
Units or converted Class D Units will have a balance equal to the
amount allocated under clause (a) hereinabove.
7. Section 5.10(a) is hereby amended and restated as follows:
(a) Subject to Section 5.10(d), Section 6.6 and Section 6.7
(dealing with adjustments of distribution levels), the Company may
make a Pro Rata distribution of Company Securities to all Record
Holders of Company Securities 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 (including the number of Common Units
into which Class C Units and Class D Units may convert and the
number of Class C Units and Class D Units issued on the Purchase
Agreement Closing Date) are proportionately adjusted retroactive to
the date of formation of the Company.
8. Article V is hereby amended to add a new Section 5.13 creating a new series of Units as
follows:
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Section 5.13 Establishment of Class D Units.
(a) General. The Board of Directors hereby designates and
creates a series of Units to be designated as “Class D Units” and
consisting of a total of 3,245,817 Class D Units, and fixes the
designations, preferences and relative, participating, optional or
other special rights, powers and duties of holders of the Class D
Units as set forth in this Section 5.13.
(b) Allocations. Subject to the provisions of Section
6.1(d)(iii), all allocations of items of Company income, gain, loss,
deduction and credit under Section 6.1(a) and Section 6.1(b) shall
be allocated to the Class D Units on a basis that is pro rata with
the Initial Common Units, so that the amount thereof allocated to
each Common Unit will equal the amount thereof allocated to each
Class D Unit;
(c) Distributions of Available Cash from Operating Surplus and
Distributions of Available Cash from Capital Surplus.
Notwithstanding anything to the contrary in Section 6.4 or Section
6.5, no Class D Unit shall have the right to share in any
distributions made to the Unitholders pursuant to Section 6.4 or
Section 6.5;
(d) Capital Accounts. The initial Capital Account balance of
each Class D Unit shall equal $34.66.
(e) Conversion of Class D Units to Common Units. Except as
provided in this Section 5.13(e), the Class D Units are not
convertible into Common Units. The Class D Units will be converted
into Common Units in accordance with this Section 5.13(e) without
the vote or consent of the Unitholders. With respect to the
aggregate number of Class D Units issued on the Purchase Agreement
Closing Date, the Class D Units will automatically convert to Common
Units on a one-for-one basis, as adjusted pursuant to Section
5.10(a), on the earlier of:
(i) the Company’s quarterly distribution of Available
Cash to the holders of Common Units pursuant to Section 6.4
and Section 6.5 with respect to the Quarter ended December
31, 2009, and
(ii) the Company’s distribution of Available Cash,
commencing with the distribution with respect to the fourth
Quarter of 2007, to the holders of Common Units pursuant to
Section 6.4 and 6.5 in an aggregate amount equal to $6.00
per Outstanding Common Unit.
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(f) Surrender of Certificates. Upon conversion of the Class D
Units into Common Units in accordance with Section 5.13(e), each
holder of converted Class D Units shall promptly surrender the Class
D Unit Certificates therefor, duly endorsed, at the office of the
Company. As soon as practicable thereafter, the Company shall issue
and deliver at such office to such holder of converted Class D Units
one or more Common Unit Certificates, registered in the name of such
holder, for the number of Common Units to which such holder shall be
entitled as provided in Section 5.13(e). Such conversion shall be
deemed to have been made as of the date of the conversion specified
in Section 5.13(e), and the Person entitled to receive the Common
Units issuable upon such conversion shall be treated for all
purposes as the record holder of such Common Units on said date.
(g) Voting Rights. The Class D Units shall be entitled to vote
together as a single class with the Common Units on any matter for
which the holders of Common Units are entitled to vote. Each Class
D Unit will be entitled to the number of votes equal to the number
of Common Units into which a Class D Unit is convertible at the time
of the Record Date for the vote or written consent on the matter for
which the Class D Units are entitled to vote together as a single
class with the Common Units. The Class D Units shall have no voting
rights except as set forth in this Section 5.13(g) or Section
11.2(c).
(h) Certificates. The Class D Units will be evidenced by
certificates in such form as the Board of Directors may approve and,
subject to the satisfaction of all applicable legal and regulatory
requirements, may be assigned or transferred in a manner identical
to the assignment and transfer of other Units. The certificates
will initially include a restrictive legend to the effect that the
Class D Units have not been registered under the Securities Act or
any state securities laws.
(i) Registrar and Transfer Agent. The Company will act as the
registrar and transfer agent of the Class D Units.
9. Section 6.1(c)(i)(B) is hereby amended and restated as follows:
(B) Second, to all Unitholders holding Common Units, Class C
Units or Class D Units, Pro Rata, until the Capital Account in
respect of each Common Unit, Class C Unit and Class D Unit then
Outstanding is equal to the sum of (1) its Unrecovered Capital and
(2) the Minimum Quarterly Distribution, if otherwise entitled, for
the Quarter during which the Liquidation Date occurs, reduced (but
not below zero) by any distribution pursuant to Section 6.4
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with respect to such Common Unit for such Quarter (the amount
determined pursuant to this clause (2) is hereinafter defined as the
“Unpaid MQD”);
10. Section 6.1(c)(ii)(A) is hereby amended and restated as follows:
(A) First, to the Unitholders holding Common Units, Class C
Units or Class D Units, Pro Rata, until the Capital Account in
respect of each Common Unit, Class C Unit and Class D Unit then
Outstanding has been reduced to zero; and
11. Section 6.1(d)(xiii) of the Limited Liability Company Agreement
is hereby amended to restate Section 6.1(d)(xiii) in its entirety to
read as follows:
(xiii) Economic Uniformity.
(A) Class C Units. At the election of the Board of Directors
with respect to any taxable period, all or a portion of the
remaining items of Company gross income or gain for such taxable
period, after taking into account allocations pursuant to Section
6.1(d)(iii), shall be allocated 100% to each Member holding Class C
Units in the proportion of the number of Class C Units held by such
Member to the total number of Class C Units then Outstanding, until
each such Member has been allocated an amount of gross income or
gain that increases the Capital Account maintained with respect to
such Class C Units to an amount equal to the product of (A) the
number of Class C Units held by such Member and (B) the Per Unit
Capital Amount for an Initial Common Unit Outstanding as of the time
of such event. The purpose of this allocation is to establish
uniformity between the Capital Accounts underlying Class C Units and
the Capital Accounts underlying Common Units immediately prior to
the conversion of such Class C Units into Common Units.
(B) Class D Units. At the election of the Board of Directors
with respect to any taxable period, all or a portion of the
remaining items of Company gross income or gain for such taxable
period, after taking into account allocations pursuant to Section
6.1(d)(iii), shall be allocated 100% to each Member holding Class D
Units in the proportion of the number of Class D Units held by such
Member to the total number of Class D Units then Outstanding, until
each such Member has been allocated an amount of gross income or
gain that increases the Capital Account maintained with respect to
such Class D Units to an amount equal to the product of (A) the
number of Class D Units held by such Member and (B) the Per Unit
Capital Amount for an Initial
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Common Unit Outstanding as of the time of such event. The
purpose of this allocation is to establish uniformity between the
Capital Accounts underlying Class C Units and the Capital Accounts
underlying Common Units immediately prior to the conversion of such
Class D Units into Common Units.
12. Section 6.4 is hereby amended by adding the following final proviso:
“; provided, however, that no distributions
shall be made pursuant to this Section 6.4 in respect of any Class C
Unit or Class D Unit.”
13. Section 6.5 is herby amended by adding the following final sentence:
“Notwithstanding anything to the contrary in this Agreement, no
distributions shall be made pursuant to this Section 6.5 in respect
of any Class C Unit or Class D Unit.”
14. Section 6.8 is hereby amended and restated as follows:
Section 6.8 Special Provision Relating to Holdings of Class C Units
and Class D Units.
(a) Except with respect to the right to vote on or approve
matters pursuant to Section 5.12(g) and Section 5.13(g), as
applicable, and the right to participate in allocations of income,
gain, loss and deduction and certain distributions made with respect
to Common Units, the holder of a Class C Unit or a Class D Unit
shall have all of the rights and obligations of a Unitholder holding
Common Units hereunder; provided, however, that
immediately upon the conversion of any Class C Units into Common
Units pursuant to Section 5.12(e) or any Class D Units into Common
Units pursuant to Section 5.13(e), as applicable, the Unitholder
holding a Class C Unit or a Class D Unit, as applicable, that is to
be converted shall possess all of the rights and obligations of a
Unitholder holding Common Units hereunder, including the right to
vote as a Common Unitholder and the right to participate in
allocations of income, gain, loss and deduction and distributions
made with respect to Common Units; provided,
however, that such converted Class C Units shall remain
subject to the provisions of Section 5.5(c)(ii), Section
6.1(d)(xiii)(A) and Section 6.8(b), and such converted Class D Units
shall remain subject to the provisions of Section 5.5(c)(iii),
Section 6.1(d)(xiii)(B) and Section 6.8(b).
(b) The Unitholder holding a Class C Unit or a Class D Unit
that has converted into a Common Unit pursuant to Section 5.12(e) or
Section 5.13(e), respectively, shall not be issued a Common Unit
Certificate pursuant to Section 4.1 and shall not be
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permitted to transfer its converted Class C Units or its
converted Class D Units, as applicable, to a Person that is not an
Affiliate of the holder until such time as the Board of Directors
determines, based on advice of counsel, that a converted Class C
Unit or a converted Class D Unit, as applicable, should have, as a
substantive matter, like intrinsic economic and federal income tax
characteristics, in all material respects, to the intrinsic economic
and federal income tax characteristics of an Initial Common Unit.
In connection with the condition imposed by this Section 6.8(b), the
Board of Directors may take whatever steps are required to provide
economic uniformity to the converted Class C Units or the converted
Class D Units, as applicable, in preparation for a transfer of such
converted Class C Units or converted Class D Units, as applicable,
including the application of Section 5.5(c)(ii) and Section
6.1(d)(xiii)(A) in the case of converted Class C Units and the
application of Section 5.5(c)(iii) and Section 6.1(d)(xiii)(B) in
the case of converted Class D Units; provided,
however, that no such steps may be taken that would have a
material adverse effect on the Unitholders holding Common Units
represented by Common Unit Certificates. The Board of Directors
shall act in good faith to make the determinations set forth in this
Section 6.8(b) as soon as practicable.
15. Section 11.8(b) is herby amended by adding the following final sentence:
“The Class D Units shall be entitled to vote together as a single
class with the Common Units on any matter for which the holders of
Common Units are entitled to vote.”
B. Agreement in Effect. Except as hereby amended, the Limited Liability Company Agreement
shall remain in full force and effect.
C. Applicable Law. This Amendment shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to principles of conflicts of laws.
D. Invalidity of Provisions. If any provisions of this Amendment are or become invalid,
illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.
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IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.
| COPANO ENERGY, L.L.C. |
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| By: | /s/ Xxxx X. Xxxxx, Xx. | |||
| Xxxx X. Xxxxx, Xx. | ||||
| Chairman of the Board and Chief Executive Officer | ||||
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