Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Amendment No. 10 to Third Amended and Restated Agreement of Limited Partnership
At the Effective Time, Energy Transfer issued 41,464,187 Series I Preferred Units to holders of Crestwood preferred units who elected to convert their Crestwood preferred units into Series I Preferred Units in connection with the closing of the Merger. The Series I Preferred Units represent limited partner interests in Energy Transfer which rank, as to distributions on such securities and distributions upon liquidation, on parity with Energy Transfer’s existing preferred units. The Series I Preferred Units, among other things, entitle the holders to participate in Energy Transfer partnership distributions and to exercise certain rights and privileges. In connection with the issuance of the Series I Preferred Units, the General Partner, as the general partner of Energy Transfer and on behalf of the limited partners of Energy Transfer, executed Amendment No. 10 (the “LPA Amendment”) to the Third Amended and Restated Agreement of Limited Partnership of Energy Transfer, dated as of February 8, 2006 (the “Third Amended and Restated Partnership Agreement”).
The Series I Preferred Units are entitled to a cumulative distribution (the “Preferred Distribution”) of $0.2111 per quarter in respect of each Series I Preferred Unit, subject to certain adjustments (as may be adjusted, the “Preferred Distribution Amount”). Each Preferred Distribution will be paid in cash at the Preferred Distribution Amount unless, subject to certain exceptions, (i) there is no distribution being paid on parity securities and junior securities and (ii) Energy Transfer’s Available Cash (as defined in the Fourth Amended and Restated Partnership Agreement, as defined below), excluding any deductions to provide funds for distributions of Available Cash to the holders of ET common units (“ET common unitholders”) in respect of any one or more of the next four quarters, is insufficient to pay the Preferred Distribution. If Energy Transfer fails to pay the Preferred Distribution in full in cash, then until such time as all accrued and unpaid Preferred Distributions are paid in full in cash, Energy Transfer will not be permitted to declare or make (a) any distributions in respect of any junior securities (including the common units) and (b) subject to certain exceptions, any distributions in respect of any parity securities. The Series I Preferred Units will be entitled to receive (and share pro rata with ET common unitholders in) any portion of any quarterly cash distribution made in the normal course to ET common unitholders that is in excess of the “Specified Distribution Amount.” The “Specified Distribution Amount” means an amount that is the greater of (i) the amount of the highest previously paid quarterly cash distribution after the date of the merger and (ii) the amount equal to 115% of the quarterly cash distribution for the immediately preceding quarter.
Holders of Series I Preferred Units may elect (i) to convert all or any portion of their Series I Preferred Units, in an aggregate amount equaling or exceeding the Minimum Conversion Amount (as defined in the LPA Amendment), into ET common units, at the then applicable Conversion Ratio (as defined in the LPA Amendment, initially 2.07 ET common units for ten Series I Preferred Units), subject to the payment of any accrued but unpaid distributions to the date of such conversion and (ii) in the event of Energy Transfer’s voluntary liquidation, dissolution or winding up, to convert all or any portion of such Series I Preferred Units into ET common units, at the then applicable Conversion Ratio, subject to payment of any accrued but unpaid distributions to the date of conversion. At any time, subject to certain liquidity requirements set forth in the LPA Amendment, if the volume-weighted average trading price of the ET common units on the national securities exchange on which the ET common units are then listed (the “VWAP Price”) for 20 trading days over the 30-trading day period ending on the close of trading on the day immediately preceding the date notice is given by Energy Transfer of election of its conversion right is greater than the quotient of (i) $13.691 divided by (ii) the then applicable Conversion Ratio (or approximately $66.14 based on the initial Conversion Ratio), the General Partner, in its sole discretion, may convert all or a portion of the outstanding Series I Preferred Units into ET common units, at the then applicable Conversion Ratio, subject to the payment of any accrued but unpaid distributions to the date of conversion. Also, subject to certain liquidity requirements set forth in the LPA Amendment, if the VWAP Price of the ET common units for 20 trading days over the 30-trading day period ending on the close of trading on the day immediately preceding the date notice is given by Energy Transfer of the exercise of its conversion right is greater than the quotient of (i) $9.1273 divided by (ii) the then applicable Conversion Ratio (or approximately $44.09 based on the initial Conversion
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Ratio), the General Partner, in its sole discretion, may convert all, but not less than all, of the outstanding Series I Preferred Units into a number of ET common units equal to the Adjusted Conversion Amount (as defined in the LPA Amendment).
The Series I Preferred Units are entitled to vote as a separate class under the following circumstances: (i) the affirmative vote of holders of at least two-thirds of the outstanding Series I Preferred Units, voting as a separate class, is required to adopt any amendment to the Fourth Amended and Restated Partnership Agreement that the General Partner determines would have a material and adverse effect on the rights of the Series I Preferred Units, and (ii) the affirmative vote of holders of at least two thirds of the outstanding Series I Preferred Units, voting together as a class with other parity securities, is required to (1) create or issue any Parity Securities if cumulative distributions on the Series I Preferred Units are in arrears or (2) create or issue any Senior Securities (as defined in the Fourth Amended and Restated Partnership Agreement).