DIRECTOR DESIGNATION AGREEMENT

---

 

 

 

 

This DIRECTOR DESIGNATION AGREEMENT, dated as of July 21, 2010 (this “Agreement”), is entered into by and between COPANO ENERGY, L.L.C., a Delaware limited liability company (“Copano”), and TPG Copenhagen, L.P., a Delaware limited partnership (the “Purchaser”).

 

 

WHEREAS, pursuant to the Purchase Agreement, Copano is agreeing to issue and sell Series A Preferred Units to the Purchaser;

 

WHEREAS, the Purchaser is the “Purchaser” under the Purchase Agreement;

 

WHEREAS, to induce the Purchaser to enter into the Purchase Agreement and the transactions contemplated thereby, Copano is required to deliver this Agreement, duly executed by Copano, to the Purchaser contemporaneously with the Closing of the transaction contemplated by the Purchase Agreement;

 

WHEREAS, the Purchaser’s investment in Copano pursuant to the Purchase Agreement is reasonably expected to benefit Copano; and

 

WHEREAS, Copano believes it to be in the best interests of Copano, and the Purchaser believes it to be in the best interests of the Purchaser, to have certain agreements in respect of the Purchaser’s right to designate a member of the board of directors of Copano (the “Board”) pursuant to the terms of 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 by each party hereto, the parties hereby agree as follows:

 

 

Section 1.                      Definitions.

 

Capitalized terms used in this Agreement and not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.  As used in this Agreement, the following terms have the meanings indicated:

 

“Agreement” shall have the meaning specified in the introductory paragraph of this Agreement.

 

“Board” shall have the meaning specified in the Recitals to this Agreement.

 

“Copano” shall have the meaning specified in the introductory paragraph of this Agreement.

 

“Designated Director” shall have the meaning specified in Section 2(a) of this Agreement.

 

“Purchase Agreement” means the Series A Convertible Preferred Unit Purchase Agreement, dated as of July 21, 2010, by and between Copano and the Purchaser.

 

“Purchaser” shall have the meaning specified in the introductory paragraph of this Agreement.

 

 “Resignation Event” means (i) that the Designated Director, as determined by the Board in good faith following compliance with the procedures set forth below in this definition when applicable, (A) ceases to be an employee of the Purchaser or any of its Affiliates; (B) is prohibited or disqualified from serving as a director of Copano under any rule or regulation of the Commission, NASDAQ or by applicable Law; (C) has engaged in acts or omissions constituting a breach of the Designated Director’s duty of loyalty to Copano or its members; (D) has engaged in acts or omissions which involve intentional misconduct or an intentional violation of Law; (E) has engaged in any transaction involving Copano from which the Desig nated Director derived an improper personal benefit or (ii) a Termination Event.  Prior to making a determination that any Resignation Event described in clause (i)(B) through (E) above has occurred, the Board shall provide the Designated Director with proper notice of a meeting of the Board to discuss and, if applicable, to dispute the proposed determination.  At such duly called and held Board meeting, the Board shall provide the Designated Director with a reasonable opportunity to be heard and to present information relevant to the Board’s proposed determination.  The Board may make a determination that a Resignation Event has occurred only following its consideration in good faith of such information presented by the Designated Director.

 

“Termination Event” means the earliest to occur of (i) the Purchaser and its Affiliates holding, in the aggregate, a number of Series A Preferred Units, together with any Common Units and Class B Units issued upon conversion of Series A Preferred Units, totaling less than fifty percent (50%) of the number of Purchased Units; and (ii) such time after the third anniversary of the date hereof as the sum of (A) the number of Common Units collectively held by the Purchaser and its Affiliates and (B) the number of Common Units issuable upon conversion of the Series A Preferred Units and Class B Units that are then collectively held by the Purchaser and its Affiliates represents less than five percent (5%) of the Common Units then outstandi ng.

 

Section 2.                      Director Designation Rights.

 

(a)      On or prior to the date hereof, the Board shall adopt resolutions that (i) increase the number of natural persons that constitute the whole Board by one (1) person and (ii) fill the vacancy created by virtue of such increase in the size of the Board with an individual designated by the Purchaser (the “Designated Director”), pursuant to Section 7.1(d) of the Copano LLC Agreement; provided, however, that the Designated Director shall, in the reasonable judgment of Copano, (A) have the requisite skill and experience to serve as a director of a publicl y traded company, (B) not be prohibited or disqualified from serving as a director of Copano pursuant to any rule or regulation of the Commission, NASDAQ or by applicable Law

 

and (C) otherwise be reasonably acceptable to Copano.  The Purchaser and the Designated Director agree to timely provide Copano with accurate and complete information relating to the Purchaser and the Designated Director that may be required to be disclosed by Copano under the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.  In addition, at Copano’s request, the Purchaser shall cause the Designated Director to complete and execute Copano’s Standard Director and Officer Questionnaire prior to being admitted to the Board or standing for reelection at an annual meeting of Unitholders or at such other time as may be requested by Copano.

 

(b)      Until a Termination Event, and subject to the conditions of Section 2(a) of this Agreement, Copano shall nominate the Designated Director for re-election to the Board at each annual meeting of Unitholders.  The Designated Director will hold office until his or her term expires and such Designated Director’s successor has been duly elected and qualified or until such Designated Director’s earlier death, resignation or removal.

 

(c)      Prior to a Termination Event:

 

(i)      in connection with each annual meeting of Unitholders, and subject to the conditions of Section 2(a) of this Agreement, Copano will take all actions necessary or advisable to cause the Board to unanimously recommend that Unitholders vote “FOR” the election of the Designated Director;

 

(ii)      any Designated Director may be removed pursuant to Section 7.1(d) of the Copano LLC Agreement, and any vacancy created by such removal shall be filled by the Board with an individual designated by the Purchaser who, subject to the conditions of Section 2(a) of this Agreement, shall become the Designated Director; and

 

(iii)                 upon written notice from Copano to the Purchaser that a Resignation Event has occurred, which notice shall set forth in reasonable detail the facts and circumstances constituting the Resignation Event, the Purchaser will cause the Designated Director then serving as a member of the Board to resign as a member of the Board within two (2) Business Days of such written notice, and any vacancy created by such resignation shall be filled by the Board with an individual designated by the Purchaser who, subject to the conditions of Section 2(a) of this Agreement, shall become the Designated Director.

 

(d)      Any action by the Purchaser to designate or replace the Designated Director shall be evidenced in writing furnished to Copano and shall be signed by or on behalf of the Purchaser.

 

(e)      Prior to designating a Designated Director, the Purchaser shall enter into a written agreement with the Designated Director whereby such Designated Director agrees to resign as a member of the Board upon a Resignation Event.  The Purchaser acknowledges and agrees that such an agreement is in the best interest of Copano and the Purchaser, and that Copano shall be a third party beneficiary of the terms and conditions of such an agreement, and Copano shall have the right to enforce such an agreement to the same extent as the parties thereto.

 

(f)      Copano shall not take any action that would lessen, restrict, prevent or otherwise have an adverse effect upon the foregoing rights of the Purchaser to Board representation; provided, however, that Copano shall not be prohibited from taking such action that the Board determines (i) may be necessary to (A) comply with any rule or regulation of the Commission or NASDAQ or (B) comply with applicable Law or (ii) is required to achieve compliance with the provisions of the Copano LLC Agreement.

 

Section 3.                      Termination of Director Designation Rights.  Upon the occurrence of a Termination Event, the Purchaser’s right to designate, and Copano’s obligation to nominate, the Designated Director shall automatically terminate, and the Purchaser shall cause the Designated Director then serving as a member of the Board, promptly upon (and in any event within two (2) Business Days following) receipt of a written request from Copano, to resign as a member of the Board.

 

Section 4.                      Director Indemnification.  At all times while the Designated Director is serving as a member of the Board, and following any such Designated Director’s death, resignation, removal or other cessation as a director in such former Designated Director’s capacity as a former director, each Designated Director shall be entitled to all rights to indemnification and exculpation as are then made available to any other member of the Board.  All such rights of indemnification shall specify that, as between Copano, on the one hand, and the Purchaser and its Affiliates (other than Copano), on the other hand, Copano shall, in all events, be the full indemnitor of first resort and shall not be entitled to any contribution, indemnification or other payment by or from any of the Purchaser or its Affiliates (other than Copano).

 

Section 5.                      Miscellaneous.

 

(a)      Unit Measurements.  Notwithstanding anything herein to the contrary, all measurements and references in this Agreement related to Common Unit, Series A Preferred Unit or Conversion Common Unit amounts shall be, in each instance, appropriately adjusted for unit splits, unit combinations, unit distributions and the like.

 

(b)      Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings other than those set forth or referred to herein with respect to the rights granted by Copano or any of its Affiliates or the Purchaser or any of its Affiliates set forth herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof.

 

(c)      Notices.  All notices and demands provided for in this Agreement shall be in writing and shall be given as provided in Section 9.07 of the Purchase Agreement.

 

(d)      Interpretation.  Section references in this Agreement are references to the corresponding Section to this Agreement, unless otherwise specified.  All references to instruments, documents, Contracts and agreements are references to such instruments, documents, Contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified.  The word “including” shall mean

 

“including but not limited to” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.  Any reference in this Agreement to $ shall mean U.S. dollars.  Whenever any determination, consent or approval is to be made or given by a party, such action shall be in such party’s sole discretion, unless otherwise specified in this Agreement.  If any provision in this Agreement is held to be illegal, invalid, not binding or unenforceable, (i) such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid, not binding or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions shall remain i n full force and effect and (ii) the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.  Any words imparting the singular number only shall include the plural and vice versa.  The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words a ppear unless the context otherwise requires.  The division of this Agreement into Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.

 

(e)      Governing Law; Submission to Jurisdiction.  This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be construed in accordance with and governed by the Laws of the State of Delaware without regard to principles of conflicts of Laws.  Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of De laware, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Delaware over any such action.  Each of the parties hereby irrevocably waives, to the fullest extent permitted by applicable Law, any objection that it may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.

 

(f)      Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OF THE PARTIES TO THIS

 

AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

(g)      No Waiver; Modifications in Writing.

 

(i)      Delay.  No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

 

(ii)      Specific Waiver.  Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of this Agreement shall be effective unless signed by each of the parties hereto affected by such amendment, waiver, consent, modification or termination.  Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement and any consent to any departure by a party from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Agreement, no notice to or de mand on a party in any case shall entitle such party to any other or further notice or demand in similar or other circumstances.  Any investigation by or on behalf of any party shall not be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.

 

(h)      Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.

 

(i)      Binding Effect; Assignment.  This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but will not be assignable or delegable by any party hereto without the prior written consent of each of the other parties; provided, however, that any of the rights and obligations of the Purchaser hereunder may be transferred or assigned in whole or in part by the Purchaser to any Affiliate of the Purchaser; provided, further, that such rights and obligations shall terminate and cease to be so transferred or assigned upon any Affiliate to which such rights and obligations are transferred or assigned no longer being an Affiliate of the Purchaser.

 

(j)      Independent Counsel.  Each of the parties acknowledges that it has been represented by independent counsel of its choice throughout all negotiations that have preceded the execution of this Agreement and that it has executed the same with consent and upon the advice of said independent counsel. Each party and its counsel cooperated in the drafting and

 

preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto will be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Accordingly, any rule of Law or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it is of no application and is hereby expressly waived.

 

(k)      Specific Enforcement.  Each of the parties acknowledges and agrees that monetary damages would not adequately compensate an injured party for the breach of this Agreement by any party, that this Agreement shall be specifically enforceable and that any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order without a requirement of posting bond.  Further, each party hereto waives any claim or defense that there is an adequate remedy at law for such breach or threatened breach.

 

(l)      Further Assurances.  Each of the parties hereto shall, from time to time and without further consideration, execute such further instruments and take such other actions as any other party hereto shall reasonably request in order to fulfill its obligations under this Agreement to effectuate the purposes of this Agreement.

 

 

[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

 

COPANO ENERGY, L.L.C.,
By:	/s/Carl A. Luna
Name:	Carl A. Luna
Title:	Senior Vice President and
	Chief Financial Officer

TPG COPENHAGEN, L.P.
By:	TPG Advisors VI, Inc., its General Partner
By:	/s/ Ronald Cami
Name:	Ronald Cami
Title:	Vice President