AMENDMENT
TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
QUEST CHEROKEE, LLC
This Amendment to the Amended and Restated Limited Liability Company
Agreement of Quest Cherokee, LLC (this "Amendment"), dated as of February 11,
2005 (the "Effective Date"), is by and among the Members of Quest Cherokee, LLC,
a Delaware limited liability company (the "Company").
WHEREAS, reference is herein made to that certain Amended and Restated
Limited Liability Company Agreement of Quest Cherokee, LLC, dated as of December
22, 2003 (as amended prior to the Effective Date, the "LLC Agreement"), by and
among the Members of the Company; and
WHEREAS, all capitalized terms used but not otherwise defined herein shall
have the meanings attributed to them in the LLC Agreement; and
WHEREAS, the Members wish to amend the LLC Agreement as set forth in this
Amendment; and
WHEREAS, pursuant to Section 10.9 of the LLC Agreement, the LLC Agreement
may be amended only by a written instrument approved by a Member Vote; and
pursuant to Section 1.1 of the LLC Agreement, the term, "Member Vote" is defined
to mean "the approval by those Class A Members who, in the aggregate, have a
Class A Unit Sharing Ratio in excess of 50%, together with the approval of those
Class B Members who, in the aggregate, have a Class B Unit Sharing Ratio in
excess of 50%"; and
WHEREAS, as of the Effective Date: (i) Cherokee Energy Partners LLC is the
sole Class A Member of the Company (and owns and holds 10,000 Class A Units);
and (ii) the following constitute all of the Class B Members of the Company: (A)
Quest Energy Service, Inc. (which owns and holds 196 Class B Units); (B) STP
Cherokee, Inc. (which owns and holds 3,726 Class B Units); (C) Ponderosa Gas
Pipeline Company, Inc. (which owns and holds 335 Class B Units); (D) Quest Oil &
Gas, Corporation (which owns and holds 4,790 Class B Units); (E) Producers
Service, Incorporated (which owns and holds 71 Class B Units), and (F) ▇-▇ Gas
Gathering, L.L.C. (which owns and holds 882 Class B Units); and
WHEREAS, this Amendment shall be effective to amend the LLC Agreement, and
shall be binding on all of the Members, upon the execution and delivery hereof
by Cherokee Energy Partners LLC (the sole Class A Member), together with those
Class B Members who, in the aggregate, have a Class B Unit Sharing Ratio in
excess of 50%.
Exhibit 3 - Page 1
NOW, THEREFORE, in accordance with the terms of the LLC Agreement and for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Members hereby agree as follows:
1. Section 1.1.
(a) Definition of Class A Member IRR. The definition of "Class A
Member IRR" in Section 1.1 of the LLC Agreement is hereby amended and
restated in its entirely to read as follows:
"Class A Member IRR" means, as of any date of
distribution, the per annum discount rate at which
the sum of the following cash flows is equal to
zero (assuming discounting on the basis of a year
of 365 days and actual days elapsed): (i) the
aggregate amount of capital contributed, and loans
made, by the Class A Member and its Affiliates
(including all Subordinated Notes issued pursuant
to the Subordinated Note Agreement, as amended,
and all amounts made available to pay fees and
expenses to the Class A Member or its Affiliates)
directly to the Company (each of which amounts
will be deemed to be negative for purposes of this
calculation) and (ii) (A) the aggregate amount of
equity distributions, and payments made in respect
of loans, by the Company directly to the Class A
Member or its Affiliates minus (B) any
distributions made pursuant to Section 5.4(c).
The equity distributions and payments in (ii)(A)
above exclude the aggregate fees and reimbursed
expenses paid by the Company, directly or
indirectly, to the Class A Member or its
Affiliates. The "Class A Member IRR" will be
calculated using the "XIRR" function in Microsoft
Excel 2000 or an equivalent function in another
software package.
(b) Definition of Early Liquidation Event. The definition of
"Early Liquidation Event" in Section 1.1 of the LLC Agreement is
hereby amended and restated in its entirely to read as follows:
"Early Liquidation Event" means a Dissolution
Event that occurs on or before three years after
the Second Closing (as defined in the Subordinated
Note Agreement) or the acceleration of the Loans
(as defined in the Subordinated Notes) or exercise
of other remedies by the Senior Lenders (as
defined in the Subordinated Notes) under the
Superior Loan Documents (as defined in the
Subordinated Notes)."
(c) Definition of Make Whole Payment. The definition
of "Make Whole Payment" in Section 1.1 of the LLC Agreement
is hereby amended by replacing the word "150%" with "140%".
2. Section 5.4(a) (iii). Section 5.4(a)(iii) of the LLC
Agreement is hereby amended and restated in its entirety to read
as follows:
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"(iii) Then, an amount up to 10 percent of the Net
Cash Flow shall be distributed (A) 0% to the Class A
Members in proportion to their respective Class A Unit
Sharing Ratios, and (B) 100 percent to the Class B
Members in proportion to their respective Class B Unit
Sharing Ratios; "
3. Section 5.4(b)(iv). Section 5.4(b)(iv) of the LLC Agreement is hereby
amended and restated in its entirety to read as follows:
"(iv)thereafter, Net Cash Flow will be distributed
(A) 35 percent to the Class A Members in
proportion to their Class A Unit Sharing Ratios,
and (B) 65 percent to the Class B Members in
proportion to their respective Class B Unit
Sharing Ratios."
4. Ratification. Except as amended by this Amendment, all of the terms and
provisions of the LLC Agreement (including, without limitation, all exhibits
thereto) are hereby ratified and affirmed in all respects and are incorporated
herein by reference.
5. Counterparts. This Amendment may be executed in one or more counterparts
(including faxed or electronic counterparts), all of which shall be considered
one and the same agreement, and shall become effective, as described above, when
one or more counterparts hereof have been signed and delivered by the minimum
number of Members necessary to amend the LLC Agreement.
Page 3
IN WITNESS WHEREOF, the undersigned Members have executed this Amendment on
the respective dates set forth below their signatures, but effective for all
purposes as of the Effective Date.
CLASS A UNIT
CLASS A MEMBERS: CLASS A UNITS: SHARING RATIOS:
--------------- ------------- --------------
CHEROKEE ENERGY PARTNERS LLC 10,000 Class A Units 100%
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Title: President
--------------------
Execution Date: 02/11/05
-----------
CLASS B UNIT
CLASS B MEMBERS: CLASS B UNITS: SHARING RATIOS:
--------------- ------------- --------------
QUEST ENERGY SERVICE, INC. 196 Class B Units 1.96%
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
Execution Date: 02/11/05
---------------
CLASS B UNIT
CLASS B UNITS: SHARING RATIOS:
------------- --------------
STP CHEROKEE, INC. 3,276 Class B Units 37.26%
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
Execution Date: 02/11/05
---------------
PONDEROSA GAS PIPELINE COMPANY, INC. 335 Class B Units 3.35%
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
Execution Date: 02/11/05
---------------
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QUEST OIL & GAS CORPORATION 4,790 Class B Units 47.9%
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
Execution Date: 02/11/05
---------------
PRODUCERS SERVICE, INCORPORATED 71 Class B Units 0.71%
By: ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
Execution Date: 02/11/05
---------------
▇-▇ GAS GATHERING, L.L.C. 882 Class B Units 8.82%
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
Execution Date: 02/11/05
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