AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF QUEST MIDSTREAM PARTNERS, L.P.
Exhibit 10.3
AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
QUEST MIDSTREAM PARTNERS, L.P.
This Amendment No. 1 (this “Amendment No. 1”) to the Second Amended and Restated
Agreement of Limited Partnership of Quest Midstream Partners, L.P. is hereby adopted effective as
of January 1, 2007, by Quest Midstream GP, LLC, a Delaware limited liability company (the
“General Partner”), as general partner of Quest Midstream Partners, L.P., a Delaware
limited partnership (the “Partnership”). Capitalized terms used but not defined herein are
used as defined in the Second Amended and Restated Agreement of Limited Partnership, dated as of
November 1, 2007 (the “Partnership Agreement”).
WHEREAS, the General Partner and the Limited Partners of the Partnership entered into the
Partnership Agreement; and
WHEREAS, acting pursuant to the power and authority granted to it under Section 13.1(d) of the
Partnership Agreement, the General Partner has determined that the following amendment to the
Partnership Agreement does not require the approval of any Limited Partner.
NOW THEREFORE, the General Partner does hereby amend the Partnership Agreement as follows:
Section 1. Amendment.
(a) Section 1.1 is hereby amended to add or amend and restate the following definitions:
(i) “Disposed of Adjusted Property” has the meaning assigned to such term in
Section 6.1(d)(xii)(B).
(ii) “Net Termination Gain” means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership (a)
after the Liquidation Date (other than items taken into account in the computation
of Required Sale Gain) or (b) upon the sale, exchange or other disposition of all
or substantially all of the assets of the Partnership Group, taken as a whole, in a
single transaction or a series of related transactions (excluding any disposition
to a member of the Partnership Group). 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).
(iii) “Net Termination Loss” means, for any taxable year, the sum, if
negative, of all items of income, gain, loss or deduction recognized
by the
- 2 -
Partnership (a) after the Liquidation Date (other than items taken into
account in the computation of Required Sale Gain) or (b) upon the sale, exchange or
other disposition of all or substantially all of the assets of the Partnership
Group, taken as a whole, in a single transaction or a series of related
transactions (excluding any disposition to a member of the Partnership Group). 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).
(b) Section 5.5(d) is hereby amended and restated in its entirety as follows:
(i) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an
issuance of additional Partnership Interests for cash or Contributed Property, the
issuance of Partnership Interests as consideration for the provision of services or
the conversion of the General Partner’s Combined Interest to Common Units pursuant
to Section 11.3(b), the Capital Accounts of all Partners and the Carrying
Value of each Partnership property immediately prior to such issuance shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized on an actual sale of each such property for an amount
equal to its fair market value immediately prior to such issuance and had been
allocated to the Partners at such time pursuant to Section 6.1(c) in the
same manner as any item of gain or loss actually recognized following an event
giving rise to the dissolution of the Partnership would have been allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and
fair market value of all Partnership assets (including cash or cash equivalents)
immediately prior to the issuance of additional Partnership Interests shall be
determined by the General Partner using such method of valuation as it may adopt;
provided, however, that the General Partner, in arriving at such valuation, must
take fully into account the fair market value of the Partnership Interests of all
Partners at such time. The General Partner shall allocate such aggregate value
among the assets of the Partnership (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 Partner of any
Partnership property (other than a distribution of cash that is not in redemption
or retirement of a Partnership Interest), the Capital Accounts of all Partners and
the Carrying Value of all Partnership property shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership
property, as if such Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property immediately prior to such distribution for an
amount equal to its fair market value, and had been allocated to the Partners, at
such time, pursuant to Section 6.1(c) in the same manner as any item of
gain or loss actually recognized following an event giving rise to the
dissolution of the Partnership would have been allocated. In determining such
Unrealized Gain or Unrealized Loss the aggregate cash amount
- 3 -
and fair market value
of all Partnership assets (including 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 12.4 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 12.4, be determined and allocated by the Liquidator using such
method of valuation as it may adopt.
(c) Section 6.1(d)(xii) is hereby amended and restated in its entirety as follows:
Corrective and Other 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) Except as provided in Section 6.1(d)(xii)(B), in the case
of any allocation of Additional Book Basis Derivative Items (other than an
allocation of Unrealized Gain or Unrealized Loss under Section
5.5(d) hereof) with respect to any Partnership property, the General
Partner shall allocate such Additional Book Basis Derivative Items (1) to
(aa) the holders of Incentive Distribution Rights and (bb) the General
Partner in the same manner that the Unrealized Gain or Unrealized Loss
attributable to such property is allocated pursuant to Section
5.5(d)(i) or Section 5.5(d)(ii) and (2) to all Unitholders, Pro
Rata, to the extent that the Unrealized Gain or Unrealized Loss
attributable to such property is allocated to any Unitholders pursuant to
Section 5.5(d)(i) or Section 5.5(d)(ii).
(B) In the case of any allocation of Additional Book Basis Derivative
Items (other than an allocation of Unrealized Gain or Unrealized Loss under
Section 5.5(d) hereof or an allocation of Net Termination Gain or
Net Termination Loss pursuant to Section 6.1(c) hereof) as a result
of a sale or other taxable disposition of any Partnership asset that is an
Adjusted Property (“Disposed of Adjusted Property”), the General Partner
shall allocate (1) additional items of income and gain (aa) away from the
holders of Incentive Distribution Rights and the General Partner and (bb)
to the Unitholders, or (2) additional items of deduction and loss (aa) away
from the Unitholders and (bb) to the holders of Incentive Distribution
Rights and the General Partner, to the extent that the Additional Book
Basis Derivative Items allocated to the Unitholders exceed their Share of
Additional Book Basis Derivative Items with respect to such Disposed of
Adjusted Property. For this purpose, the Unitholders shall be treated as
being allocated Additional Book Basis Derivative Items to the extent that
such Additional Book Basis Derivative Items have reduced the amount of
income that would otherwise have been allocated to the
Unitholders under this Agreement (e.g., Additional Book Basis
Derivative Items taken into account in computing cost of goods sold would
reduce the amount of book income otherwise available for
- 4 -
allocation among
the Partners). Any allocation made pursuant to this Section
6.1(d)(xii)(B) shall be made after all of the other Agreed Allocations
have been made as if this Section 6.1(d)(xii) were not in this
Agreement and, to the extent necessary, shall require the reallocation of
items that have been allocated pursuant to such other Agreed Allocations.
(C) In the case of any negative adjustments to the Capital Accounts of
the Partners 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 General Partner, that
to the extent possible the aggregate Capital Accounts of the Partners will
equal the amount that would have been the Capital Account balance of the
Partners 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.
(D) In making the allocations required under this Section
6.1(d)(xii), the General Partner may apply whatever conventions or
other methodology it determines will satisfy the purpose of this
Section 6.1(d)(xii).
Section 2. General Authority. The appropriate officers of the General Partner are
hereby authorized to make such further clarifying and conforming changes they deem necessary or
appropriate, and to interpret the Partnership Agreement, to give effect to the intent and purpose
of this Amendment No. 1.
Section 3. Ratification of Partnership Agreement. Except as expressly modified and
amended herein, all of the terms and conditions of the Partnership Agreement shall remain in full
force and effect.
Section 4. Governing Law. This Amendment No. 1 will be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the General Partner has executed this Amendment No. 1 as of the date first
set forth above.
GENERAL PARTNER: | ||||||
QUEST MIDSTREAM GP, LLC | ||||||
By: | /s/ Xxxxx X. Xxxx | |||||
Name: | Xxxxx X. Xxxx | |||||
Title: | Chief Executive Officer |
- 5 -