Energy Transfer 2012 Annual Report Download - page 70

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Distributions of Available Cash from Operating Surplus
The terms of our partnership agreement require that we make cash distributions with respect to each calendar quarter within 45
days following the end of each calendar quarter. We are required to make distributions of Available Cash from operating surplus
for any quarter in the following manner:
• First, 100% to all Common Unitholders, Class E Unitholders, Class F Unitholders and the general partner, in accordance
with their percentage interests, until each Common Unit has received $0.25 per unit for such quarter (the “minimum quarterly
distribution”);
• Second, 100% to all Common Unitholders, Class E Unitholders, Class F Unitholders and the general partner, in accordance
with their respective percentage interests, until each Common Unit has received $0.275 per unit for such quarter (the “first
target distribution”);
• Third, (i) to the general partner in accordance with its percentage interest, (ii) 13% to the holders of the IDRs, pro rata, and
(iii) to all Common Unitholders, Class E Unitholders and Class F Unitholders, pro rata, a percentage equal to 100% less the
percentages applicable to the general partner and holders of the IDRs, until each Common Unit has received $0.3175 per unit
for such quarter (the “second target distribution”);
• Fourth, (i) to the general partner in accordance with its percentage interest, (ii) 23% to the holders of the IDRs, pro rata, and
(iii) to all Common Unitholders, Class E Unitholders and Class F Unitholders, pro rata, a percentage equal to 100% less the
percentages applicable to the general partner and holders of the IDRs, until each Common Unit has received $0.4125 per unit
for such quarter (the “third target distribution”); and
• Fifth, thereafter, (i) to the general partner in accordance with its percentage interest, (ii) 48% to the holder of the IDRs, pro
rata, and (iii) to all Common Unitholders, Class E Unitholders and Class F Unitholders, pro rata, a percentage equal to 100%
less the percentages applicable to the general partner and holders of the IDRs.
The allocation of distributions among the Common, Class E and Class F Unitholders and the General Partner is based on their
respective interests as of the record date for such distributions.
Notwithstanding the foregoing, the distributions on each Class E unit may not exceed $1.41 per year and distributions on each
Class F unit may not exceed $3.75 per year. In addition, the distributions to the holders of the incentive distribution rights will not
exceed the amount the holders of the incentive distributions rights would otherwise receive if the available cash for distribution
were reduced to the extent it constitutes amounts previously distributed with respect to the Class F units.
Distributions of Available Cash from Capital Surplus
We will make distributions of available cash from capital surplus, if any, in the following manner:
• First, to all of our Unitholders and to our General Partner, in accordance with their percentage interests, until we distribute
for each Common Unit, an amount of available cash from capital surplus equal to our initial public offering price; and
• Thereafter, we will make all distributions of Available Cash from capital surplus as if they were from operating surplus.
Our Partnership Agreement treats a distribution of capital surplus as the repayment of the initial unit price from the initial public
offering, which is a return of capital. The initial public offering price per Common Unit less any distributions of capital surplus
per unit is referred to as the “unrecovered capital.”
If we combine our units into fewer units or subdivide our units into a greater number of units, we will proportionately adjust our
minimum quarterly distribution; our target cash distribution levels; and our unrecovered capital. For example, if a two-for-one
split of our Common Units should occur, our unrecovered capital would be reduced to 50% of the initial level. We will not make
any adjustment by reason of our issuance of additional units for cash or property.
In addition, if legislation is enacted or if existing law is modified or interpreted in a manner that causes us to become taxable as
a corporation or otherwise subject to additional taxation as an entity for federal, state or local income tax purposes, under the terms
of the Partnership Agreement, we can reduce our minimum quarterly distribution and the target cash distribution levels by
multiplying the same by one minus the sum of the highest marginal federal corporate income tax rate that could apply and any
increase in the effective overall state and local income tax rates.
The total amount of distributions declared is reflected in Note 7 to our consolidated financial statements. All distributions were
made from Available Cash from our operating surplus.
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