Energy Transfer 2015 Annual Report Download - page 71

Table of Contents
•Second, 100% to all Common Unitholders, Class E Unitholders, Class G 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 G 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 G 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 G 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, Class G and Class H 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 G 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 G units.
The incentive distributions described above do not reflect the impact of IDR subsidies previously agreed to by ETE in connection with previous transactions,
as described below under “IDR Subsidies.”
Distributions of Available Cash from Capital Surplus
We are required to make distributions of Available Cash from capital surplus initially to the Class H Unitholders in a manner similar to the distributions of
Available Cash from operating surplus, as described above. We will make distributions of any remaining Available Cash from capital surplus 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 8 to our consolidated financial statements. All distributions were made from Available Cash
from our operating surplus.
IDR Subsidies and Other Distribution Adjustments
As described above, our partnership agreement requires certain incentive distributions to the holders of the IDRs.
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