COMMON UNIT PURCHASE AGREEMENT

 

COMMON UNIT PURCHASE AGREEMENT

 

COMMON UNIT PURCHASE AGREEMENT, dated as of December 29, 2005 (this “ Agreement ”), by and among COPANO ENERGY, L.L.C., a Delaware limited liability company (“ Copano ”), and ZLP Fund, L.P., Structured Finance Americas, LLC and Royal Bank of Canada (each referred to herein as a “ Purchaser ” and collectively, the “ Purchasers ”).

 

WHEREAS, Copano desires to sell an aggregate of 1,418,440 of Common Units and the Purchasers desire to purchase an aggregate of 1,418,440 of Common Units from Copano in accordance with the provisions of this Agreement; and

 

WHEREAS, Copano has agreed to provide the Purchasers with certain registration rights with respect to the Purchased Common Units acquired pursuant to this Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Copano and each Purchaser, severally and not jointly, hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01           Definitions .  As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

 

“ Action ” against a Person means any lawsuit, action, proceeding, investigation or complaint before any Governmental Authority, mediator or arbitrator.

 

“ Affiliate ” means, with respect to a specified Person, any other Person, whether now in existence or hereafter created, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by,” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

“ Agreement ” has the meaning set forth in the introductory paragraph.

 

“ Basic Documents ” means, collectively, this Agreement, the Registration Rights Agreement and any and all other agreements or instruments executed and delivered by the Parties on even date herewith, or any amendments, supplements, continuations or modifications thereto.

 

“ Business Day ” means any day other than a Saturday, Sunday, or a legal holiday for commercial banks in Houston, Texas.

 

“ Closing ” shall have the meaning specified in Section 2.02.

 

 

“ Closing Date ” shall have the meaning specified in Section 2.02.

 

“ Commission ” means the United States Securities and Exchange Commission.

 

“ Common Unit Purchase Price ” means $35.25 per Purchased Common Unit.

 

“ Common Units ” means the Common Units of Copano representing limited liability company interests.

 

“ Copano ” has the meaning set forth in the introductory paragraph.

 

“ Copano Material Adverse Effect ” means any material and adverse effect on (i) the assets, liabilities, financial condition, business, operations, or affairs of Copano and its Subsidiaries, taken as a whole, measured against those assets, liabilities, financial condition, business, operations, or affairs reflected in the Copano SEC Documents, (ii) the ability of Copano and its Subsidiaries, taken as a whole, to carry out their business as of the date of this Agreement or to meet their obligations under the Basic Documents on a timely basis, or (iii) the ability of Copano to consummate the transactions under any Basic Document.  Notwithstanding the foregoing, a “Copano Material Adverse Effect” shall not include any effect resulting or arising from: (a) any change in general economic conditions in the industries or markets in which Copano or its Subsidiaries operate;  (b) seasonal reductions in revenues and/or earnings of Copano and its Subsidiaries in the ordinary course of their respective businesses; (c) national or international political, diplomatic or military conditions, including any engagement in hostilities, whether or not pursuant to a declaration of war, or the occurrence of any military or terrorist attack; or (d) changes in GAAP or other accounting principles.

 

“ Copano Related Parties ” shall have the meaning specified in Section 6.02.

 

“ Copano SEC Documents ” shall have the meaning specified in Section 3.03.

 

“ Copano SEC Reports ” means Copano’s Annual Report on Form 10-K for the year ended December 31, 2004 and Copano’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2005, June 30, 2005 and September 30, 2005.

 

“ Delaware LLC Act ” shall have the meaning specified in Section 3.02(a).

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

“ GAAP ” means generally accepted accounting principles in the United States of America in effect from time to time.

 

“ Governmental Authority ” shall include the country, state, county, city and political subdivisions in which any Person or such Person’s Property is located or which exercises valid jurisdiction over any such Person or such Person’s Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authorities that exercise valid jurisdiction over any such Person or such Person’s Property. Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental Authority

 

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having jurisdiction over, where applicable, Copano, its Subsidiaries or any of their Property or any of the Purchasers.

 

“ Indemnified Party ” shall have the meaning specified in Section 6.03.

 

“ Indemnifying Party ” shall have the meaning specified in Section 6.03.

 

“ Law ” means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law, rule or regulation.

 

“ Lien ” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes.  For the purpose of this Agreement, a Person shall be deemed to be the owner of any Property that it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

 

“ Limited Liability Company Agreement ” shall have the meaning specified in Section 2.01.

 

“ Lock-Up Date ” means 90 days from the Closing Date.

 

“ LTIP ” shall have the meaning specified in Section 3.02(b).

 

“ Parties ” means Copano and the Purchasers party to this Agreement, collectively.

 

“ Person ” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

 

“ Property ” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

“ Purchased Common Units ” means the Common Units to be issued and sold to the Purchasers pursuant to this Agreement.

 

“ Purchaser ” and “ Purchasers ” each has the meaning set forth in the introductory paragraph.

 

“ Purchaser Material Adverse Effect ” means any material and adverse effect on (i) the ability of a Purchaser to meet its obligations under the Basic Documents on a timely basis or (ii) the ability of a Purchaser to consummate the transactions under any Basic Document.

 

“ Purchaser Related Parties ” shall have the meaning specified in Section 6.01.

 

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“ Registration Rights Agreement ” means the Registration Rights Agreement, in the form attached to this Agreement as Exhibit B , to be entered into at the Closing, between Copano and the Purchasers.

 

“ Representatives ” of any Person means the affiliates, control persons, officers, directors, employees, agents and other representatives of such Person.

 

“ Securities Act ” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

“ Subsidiary ” means, as to any Person, any corporation or other entity of which at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation or other entity (irrespective of whether or not at the time any equity interest of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries.

 

Section 1.02           Accounting Procedures and Interpretation .  Unless otherwise specified in this Agreement, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters under this Agreement shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Purchasers under this Agreement shall be prepared, in accordance with GAAP applied on a consistent basis during the periods involved (except, in the case of unaudited statements, as permitted by Form 10-Q promulgated by the Commission) and in compliance as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto.

 

ARTICLE II
SALE AND PURCHASE

 

Section 2.01           Sale and Purchase of Common Units .  Subject to the terms and conditions of this Agreement, at the Closing (as defined in Section 2.02 below) Copano hereby agrees to sell to each Purchaser, and each Purchaser hereby agrees, severally and not jointly, to purchase from Copano, the number of Common Units set forth opposite such Purchaser’s name on Schedule 2.01, and each Purchaser agrees to pay Copano the Common Unit Purchase Price for each such Purchased Common Unit; provided , however , that, if the number of Purchased Common Units to be purchased by Structured Finance Americas, LLC, at Closing would represent more than 9.3% of the issued and outstanding number of Common Units as of immediately after the Closing then, and only upon Structured Finance Americas, LLC’s request, the number of Common Units to be purchased by Structured Finance Americas, LLC and its respective aggregate Common Unit Purchase Price in respect thereof, shall be reduced pro rata (based on the number of Common Units Structured Finance Americas, LLC would otherwise be required to purchase) by the minimum amount necessary such that Structured Finance Americas, LLC’s Purchased Common Units would not represent more than 9.3% of the issued and outstanding number of Common Units as of immediately after the Closing.  The Purchased Common Units shall have those rights, preferences, privileges and restrictions governing the

 

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Common Units as set forth in the Second Amended and Restated Limited Liability Company Agreement of Copano, dated as of November 15, 2004, as amended (the “ Limited Liability Company Agreement ”).  A true and correct copy of the Limited Liability Company Agreement together with Amendment No. 1 and Amendment No. 2 thereto have been filed by Copano with the Commission as Exhibits 3.3, 3.4 and 3.5 to Copano’s registration statement on Form S-3 (File No. 333-130315) filed on December 14, 2005.

 

Section 2.02           Closing .  The execution and delivery of the Basic Documents and execution and delivery of all other instruments, agreements, and other documents required by this Agreement (the “ Closing ”) shall take place on December 29, 2005 (the “ Closing Date ”.  Delivery of certificates representing the Purchased Common Units and payment by each Purchaser of the Common Unit Purchase Price therefor shall take place on (i) December 30, 2005 with respect to the Common Units to be purchased by Royal Bank of Canada and Structured Finance Americas, LLC and (ii) January 3, 2006 with respect to the Common Units to be purchased by ZLP Fund, L.P., in each case at the offices of Vinson & Elkins L.L.P., 1001 Fannin Street, Suite 2300, Houston, Texas 77002.  Each of the closing deliveries required by Section 2.03 and Section 2.04 below other than the delivery of certificates representing the Purchased Common Units and the payment by each Purchaser of the Common Unit Purchase Price therefor shall be deemed satisfied by delivery of such items on December 29, 2005.

 

Section 2.03           Copano Closing Deliveries . At the Closing, subject to the terms and conditions of this Agreement, Copano will deliver, or cause to be delivered, to each Purchaser:

 

(a)           The Purchased Common Units by delivering certificates (bearing the legend set forth in Section 4.08) evidencing such Purchased Common Units at the Closing, all free and clear of any Liens, encumbrances or interests of any other party;

 

(b)           An opinion addressed to the Purchasers from legal counsel to Copano, dated the Closing Date, in the form similar in substance to the form of opinion attached to this Agreement as Exhibit A ; and

 

(c)           The Registration Rights Agreement in the form attached to this Agreement as Exhibit B , which shall have been executed by Copano.

 

Section 2.04           Purchaser Closing Deliveries .  At the Closing, subject to the terms and conditions of this Agreement, each Purchaser will deliver, or cause to be delivered, to Copano:

 

(a)           Payment to Copano of the aggregate Common Unit Purchase Price for each Purchased Common Unit purchased by such Purchaser by wire transfer(s) of immediately available funds to an account designated by Copano; and

 

(b)           The Registration Rights Agreement in substantially the form attached to this Agreement as Exhibit B , which shall have been duly executed by such Purchaser.

 

Section 2.05           Independent Nature of Purchasers’ Obligations and Rights .

 

The obligations of each Purchaser under any Basic Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for

 

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the performance of the obligations of any other Purchaser under any Basic Document.  The failure or waiver of performance under any Basic Document by any Purchaser does not excuse performance by any other Purchaser.  Nothing contained herein or in any other Basic Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Basic Document.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Basic Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COPANO

 

Copano represents and warrants to the Purchasers as follows:

 

Section 3.01           Corporate Existence .  Copano: (i) is a limited liability company duly organized, legally existing and in good standing under the laws of the State of Delaware; (ii) has all requisite limited liability company power, and has all material governmental licenses, authorizations, consents and approvals, necessary to own its assets and carry on its business as its business is now being conducted as described in the Copano SEC Reports, except where the failure to obtain such licenses, authorizations, consents and approvals would not reasonably be expected to have a Copano Material Adverse Effect; and (iii) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualifications necessary, except where failure so to qualify would not reasonably be expected to have a Copano Material Adverse Effect.

 

Section 3.02           Capitalization and Valid Issuance of Purchased Common Units .

 

(a)           As of the date of this Agreement, the issued and outstanding membership interests of Copano consist of 13,391,288 Common Units and 3,519,126 Subordinated Units.  All of the outstanding Common Units and Subordinated Units have been duly authorized and validly issued in accordance with applicable Law and the Limited Liability Company Agreement and are fully paid (to the extent required under the Limited Liability Company Agreement) and nonassessable (except as such nonassessability may be affected by Section 18-607 of the Delaware Limited Liability Company Act (the “ Delaware LLC Act ”).

 

(b)           Other than Copano’s Long-Term Incentive Plan (the “ LTIP ”), Copano has no equity compensation plans that contemplate the issuance of Common Units (or securities convertible into or exchangeable for Common Units).  No indebtedness having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which Copano’s unitholders may vote is issued or outstanding.  Except as set forth in the first sentence of this Section 3.02(b) , as contemplated by this Agreement, or as are contained in the Limited Liability Company Agreement, there are no outstanding or authorized (i) options, warrants, preemptive rights, subscriptions, calls, or other rights, convertible securities, agreements, claims or commitments of any

 

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character obligating Copano or any of its Subsidiaries to issue, transfer or sell any limited liability company interests or other equity interest in, Copano or any of its Subsidiaries or securities convertible into or exchangeable for such limited liability company interests or equity interests, (ii) obligations of Copano or any of its Subsidiaries to repurchase, redeem or otherwise acquire any limited liability company interests or equity interests of Copano or any of its Subsidiaries or any such securities or agreements listed in clause (i) of this sentence or (iii) voting trusts or similar agreements to which Copano or any of its Subsidiaries is a party with respect to the voting of the equity interests of Copano or any of its Subsidiaries.

 

(c)           (i) All of the issued and outstanding equity interests of each of Copano’s Subsidiaries (other than Webb/Duval Gatherers and Southern Dome, LLC) are owned, directly or indirectly, by Copano free and clear of any Liens (except for such restrictions as may exist under applicable Law and except for such Liens as may be imposed under Copano’s or Copano’s Subsidiaries’ credit facilities filed as exhibits to the Copano SEC Documents), and all such ownership interests have been duly authorized, validly issued and are fully paid (to the extent required in the organizational documents of Copano’s Subsidiaries, as applicable) and non-assessable (except as nonassessability may be affected by Section 6.07 of the Texas Revised Uniform Limited Partnership Act, Section 18-607 of the Delaware Limited Liability Company Act, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act or the organizational documents of Copano’s Subsidiaries, as applicable) and free of preemptive rights, with no personal liability attaching to the ownership thereof, and (ii) except as disclosed in the Copano SEC Documents and pursuant to the Amended and Restated Operating Agreement of Southern Dome, LLC dated August 1, 2005, neither Copano nor any of its Subsidiaries own any shares of capital stock or other securities of, or interest in, any other Person, or are obligated to make any capital contribution to or other investment in any other Person.

 

(d)           The Purchased Common Units and the membership interests represented thereby, have been duly authorized by Copano pursuant to the Limited Liability Company Agreement and, when issued and delivered to the Purchasers against payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid (to the extent required by applicable Law and the Limited Liability Company Agreement) and nonassessable (except as such nonassessability may be affected by Section 18-607 of the Delaware LLC Act) with no personal liability attaching to the ownership thereof, and will be free of any and all Liens and restrictions on transfer, other than restrictions on transfer under the Limited Liability Company Agreement and under applicable state and federal securities laws and other than such Liens as are created by the Purchasers.

 

(e)           Copano’s currently outstanding Common Units are quoted on The Nasdaq National Market.  The Purchased Common Units will be issued in compliance with all applicable rules of The Nasdaq National Market.  Copano has filed a supplemental listing application with The Nasdaq National Market to list the Purchased Common Units.

 

Section 3.03           Copano SEC Documents .  Copano has timely filed with the Commission all forms, registration statements, reports, schedules and statements required to be filed by it under the Exchange Act or the Securities Act (all such documents filed on or prior to the date of

 

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this Agreement, collectively, the “ Copano SEC Documents ”).  The Copano SEC Documents, including, without limitation, any audited or unaudited financial statements and any notes thereto or schedules included therein, at the time filed (in the case of registration statements, solely on the dates of effectiveness) (except to the extent corrected by a subsequently filed Copano SEC Document filed prior to the date of this Agreement) (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) complied in all materia