AMENDMENT NO. 2 TO SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CROSSTEX ENERGY, L.P.
Exhibit 3.1
AMENDMENT NO. 2 TO
SIXTH AMENDED AND RESTATED
OF
CROSSTEX ENERGY, L.P.
This AMENDMENT NO. 2 TO SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
CROSSTEX ENERGY, L.P. (this “Amendment No. 2”), is hereby adopted effective as of January 1, 2007
by Crosstex Energy GP, LLC, a Delaware limited liability company, the general partner of Crosstex
Energy GP, L.P., a Delaware limited partnership (the “General Partner”), as general partner of
Crosstex Energy, L.P., a Delaware limited partnership (the “Partnership”). Capitalized terms used
but not defined herein are used as defined in the Sixth Amended and Restated Agreement of Limited
Partnership of Crosstex Energy, L.P., dated as of March 23, 2007, as amended by Amendment No. 1 to
the Sixth Amended and Restated Agreement of Limited Partnership, dated December 20, 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) “Additional Book Basis” means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to such
Carrying Value as a result of Book-Up Events. For purposes of determining the extent
that Carrying Value constitutes Additional Book Basis:
(a) Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event shall
first be deemed to offset or decrease that portion of the Carrying Value of
such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(b) If Carrying Value that constitutes Additional Book Basis is reduced as a
result of a Book-Down Event and the Carrying Value of other property is
increased as a result of such Book-Down Event, an allocable portion of any
such increase in Carrying Value shall be treated as Additional Book Basis;
provided, that the amount treated as Additional Book Basis pursuant hereto
as a result of such Book-Down Event shall not exceed the amount by which the
Aggregate Remaining Net Positive Adjustments after such Book-Down Event
exceeds the remaining Additional Book Basis attributable to all of the
Partnership’s Adjusted Property after such Book-Down Event (determined
without regard to the application of this clause (b) to such Book-Down
Event).
(ii) “Additional Book Basis Derivative Items” means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent that
the Additional Book Basis attributable to all of the Partnership’s Adjusted Property
as of the beginning of any taxable period exceeds the Aggregate Remaining Net
Positive Adjustments as of the beginning of such period (the “Excess Additional Book
Basis”), the Additional Book Basis Derivative Items for such period shall be reduced
by the amount that bears the same ratio to the amount of Additional Book Basis
Derivative Items determined without regard to this sentence as the Excess Additional
Book Basis bears to the Additional Book Basis as of the beginning of such period.
(iii) “Adjusted Property” means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
(iv) “Aggregate Remaining Net Positive Adjustments” means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
(v) “Book Basis Derivative Items” means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed with
reference to the Carrying Value of an Adjusted Property (e.g., depreciation,
depletion, or gain or loss with respect to an Adjusted Property).
(vi) “Disposed of Adjusted Property” has the meaning assigned to such term in
Section 6.1(d)(xi)(B).
(vii) “Net Positive Adjustments” means, with respect to any Partner, the
excess, if any, of the total positive adjustments over the total negative
adjustments made to the Capital Account of such Partner pursuant to Book-Up Events
and Book-Down Events.
(viii) “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 or (b) upon the sale, exchange or other
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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).
(ix) “Net Termination Loss” means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership (a)
after the Liquidation Date 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).
(x) “Remaining Net Positive Adjustments” means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units, Subordinated
Units, Senior Subordinated Series C Units or Senior Subordinated Series D Units, the
excess of (a) the Net Positive Adjustments of the Unitholders holding Common Units,
Subordinated Units, Senior Subordinated Series C Units or Senior Subordinated Series
D Units as of the end of such period over (b) the sum of those Partners’ Share of
Additional Book Basis Derivative Items for each prior taxable period, (ii) with
respect to the General Partner (as holder of the General Partner Interest), the
excess of (a) the Net Positive Adjustments of the General Partner as of the end of
such period over (b) the sum of the General Partner’s Share of Additional Book Basis
Derivative Items with respect to the General Partner Interest for each prior taxable
period, and (iii) with respect to the holders of Incentive Distribution Rights, the
excess of (a) the Net Positive Adjustments of the holders of Incentive Distribution
Rights as of the end of such period over (b) the sum of the Share of Additional Book
Basis Derivative Items of the holders of the Incentive Distribution Rights for each
prior taxable period.
(xi) “Share of Additional Book Basis Derivative Items” means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period, (i)
with respect to the Unitholders holding Common Units, Subordinated Units, Senior
Subordinated Series C Units or Senior Subordinated Series 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, (ii) with
respect to the General Partner (as holder of the General Partner Interests), the
amount that bears the same ratio to such Additional Book Basis Derivative Items as
the General Partner’s Remaining Net Positive Adjustments as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustment as of that time, and
(iii) with respect to the Partners holding Incentive Distribution Rights, the amount
that bears the same
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ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Partners holding the Incentive Distribution Rights as of
the end of such period bears to the Aggregate Remaining Net Positive Adjustments as
of that time.
(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 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
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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)(xi) 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)(xi)(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
allocation among the Partners). Any allocation made pursuant to this Section
6.1(d)(xi)(B) shall be made after all of the other Agreed Allocations have
been made as if this Section 6.1(d)(xi) were not in this
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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. 2.
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. 2 will be governed by and construed in
accordance with the laws of the State of Delaware.
[Signature Page Follows]
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IN WITNESS WHEREOF, the General Partner has executed this Amendment No. 2 to be effective as
of the date first set forth above.
| GENERAL PARTNER: | ||||||
| Crosstex Energy GP, L.P. | ||||||
| By: | Crosstex Energy GP, LLC | |||||
| its general partner | ||||||
| By: Name: |
/s/ Xxxxxxx X. Xxxxx
|
|||||
| Title: | Executive Vice President and | |||||
| Chief Financial Officer | ||||||
Signature Page to Amendment No. 2
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