As filed with the Securities and Exchange Commission on March 20, 2015
Registration No. 333-202319
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT
NO. 2
TO
FORM S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ENERGY
TRANSFER PARTNERS, L.P.
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
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4922 |
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73-1493906 |
(State or other jurisdiction of
Incorporation or Organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
3738 Oak Lawn Avenue
Dallas, Texas 75219
(214) 981-0700
(Address,
including zip code, and telephone number, including area code, of registrants principal executive offices)
Thomas P.
Mason
Senior Vice President, General Counsel and Secretary
Energy Transfer Partners, L.P.
3738 Oak Lawn Avenue
Dallas, Texas 75219
(214) 981-0700
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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William N. Finnegan IV
Ryan J. Maierson Debbie
P. Yee Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
(713) 546-5400 |
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Todd Carpenter
Senior Vice President and General Counsel Regency GP LLC
2001 Bryan Street, Suite 3700
Dallas, Texas 75201
(214) 750-1771 |
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Neel Lemon
Andrew J. Ericksen
Baker Botts L.L.P. 2001
Ross Avenue Dallas, Texas 75201
(214) 953-6500 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration
statement and the satisfaction or waiver of all other conditions to the closing of the merger described herein.
If the securities being registered on
this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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x |
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Accelerated filer |
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Non-accelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this document is not complete and may be changed. Energy Transfer
Partners, L.P. may not issue the securities described herein until the registration statement filed with the Securities and Exchange Commission is effective. This document is not an offer to sell these securities and is not soliciting an offer to
buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED MARCH 20, 2015
MERGER PROPOSALYOUR VOTE IS VERY IMPORTANT
March 24, 2015
Dear Unitholders:
On January 25, 2015, Energy Transfer Partners, L.P. (ETP) and Regency Energy Partners LP (Regency) entered into a
merger agreement, as amended on February 18, 2015 (as so amended, the merger agreement), pursuant to which Regency will merge with Rendezvous I LLC, a wholly owned subsidiary of ETP, with Regency continuing as the surviving entity
and becoming a wholly owned subsidiary of ETP (the merger). Concurrently with the merger, ETE GP Acquirer LLC (ETE Acquirer), the indirect owner of Regency GP LP, the general partner of Regency (Regency GP), will
merge with Rendezvous II LLC, a wholly owned subsidiary of ETP, with ETE Acquirer continuing as the surviving entity and becoming a wholly owned subsidiary of ETP (the GP merger and, together with the merger, the mergers).
The board of directors (the Regency Board) of Regency GP LLC, the general partner of Regency GP, approved and agreed to
submit the merger to a vote of Regency unitholders following the recommendation of the conflicts committee of the Regency Board (the Regency Conflicts Committee). The Regency Board and the Regency Conflicts Committee have determined that
the merger agreement and the merger are fair and reasonable and in the best interests of Regency and its unaffiliated unitholders, and have approved the merger agreement and the merger.
Under the terms of the merger agreement, holders of Regency common units will receive, for each Regency common unit held, 0.4066 common units
of ETP (ETP common units) and an additional number of ETP common units determined by dividing $0.32 by the lesser of (i) the volume weighted average price of ETP common units on the New York Stock Exchange (the NYSE) for
the five trading days ending on the third trading day immediately preceding the effective time of the merger and (ii) the closing price of the ETP common units on the NYSE on the third trading day immediately preceding the effective time of the
merger, rounded to the nearest ten thousandth of a unit. Further, each Class F common unit of Regency (the Class F units) will be deemed to convert automatically into Regency common units on a one-for-one basis immediately prior to the
effective time of the merger and holders thereof will receive the same merger consideration as the holders of Regency common units. Holders of Regencys Series A Cumulative Convertible Preferred Units (the Series A units) will
receive an equal number of ETP preferred units with the same preferences, privileges, powers, duties and obligations that such Regency Series A units had immediately prior to the closing of the merger.
The consideration to be received by holders of Regency common units and Class F units is valued at $26.89 per unit based on the closing
price of ETP common units as of January 23, 2015, the last trading day before the public announcement of the merger, representing a 13.2% premium to the closing price of Regencys common units of $23.75 on January 23, 2015, and a
15.3% premium to the volume weighted average closing price of Regencys common units for the three trading days ended January 23, 2015.
Immediately following completion of the merger, it is expected that Regency unitholders will
own approximately 35% of the outstanding common units of ETP, based on the number of common units of ETP outstanding, on a fully diluted basis, as of March 20, 2015. The common units of ETP and Regency are traded on the New York Stock
Exchange under the symbols ETP and RGP, respectively.
Regency is holding a special meeting of its
unitholders in Regencys offices at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, on April 28, 2015 at 11:00 a.m., local time, to obtain the vote of its unitholders to adopt the merger agreement and the transactions
contemplated thereby. Your vote is very important regardless of the number of units in Regency you own. The merger cannot be completed unless the holders of at least a majority of the outstanding Regency common units, Class F units and Series
A units, voting together as a single class, vote for the adoption of the merger agreement and transactions contemplated thereby at the special meeting. The Regency Conflicts Committee and the Regency Board recommend that Regency unitholders vote
FOR the adoption of the merger agreement and the transactions contemplated thereby and FOR the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the
merger agreement at the time of the special meeting, and the Regency Board recommends that Regency unitholders vote FOR the advisory compensation proposal. Whether or not you expect to attend the special meeting in person, we urge
you to submit your proxy as promptly as possible through one of the delivery methods described in the accompanying proxy statement/prospectus. Pursuant to the merger agreement, Energy Transfer Equity, L.P. (ETE), which indirectly owns
all of the incentive distribution rights and general partner interests in each of ETP and Regency, and ETP have agreed to vote all of the limited partner interests in Regency owned beneficially or of record by ETE, ETP or their respective
subsidiaries in favor of approval of the merger and the approval of any actions required in furtherance thereof.
In addition, we urge
you to read carefully the accompanying proxy statement/prospectus (and the documents incorporated by reference into the accompanying proxy statement/prospectus), which includes important information about the merger agreement, the proposed mergers
and the special meeting. Please pay particular attention to the section titled Risk Factors beginning on page 31 of the accompanying proxy statement/prospectus.
On behalf of the Regency Board, we thank you for your continued support.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be
issued under the accompanying proxy statement/prospectus or determined that the accompanying proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
The accompanying proxy statement/prospectus is dated March 24, 2015 and is first being mailed to the unitholders of Regency on or about
March 25, 2015.
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Sincerely, |
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/s/ Michael J. Bradley |
Michael J. Bradley
President and Chief Executive Officer of Regency GP LLC on behalf of Regency Energy Partners LP |
2001 Bryan Street, Suite 3700
Dallas, Texas 75201
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD ON APRIL 28, 2015
To the
Unitholders of Regency Energy Partners LP:
Notice is hereby given that a special meeting of unitholders of Regency Energy Partners LP
(Regency), will be held in Regencys offices at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, on April 28, 2015 at 11:00 a.m., local time, solely for the following purposes:
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Merger proposal: To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of January 25, 2015, as amended by Amendment No. 1 thereto (the amendment), dated as
of February 18, 2015 (as so amended and as may be further amended from time to time, the merger agreement), by and among Energy Transfer Partners, L.P. (ETP), Energy Transfer Partners GP, L.P., the general partner of ETP
(ETP GP), Rendezvous I LLC, Rendezvous II LLC, Regency, Regency GP LP, the general partner of Regency (Regency GP), ETE GP Acquirer LLC (ETE Acquirer) and, solely for purposes of certain provisions therein, Energy
Transfer Equity, L.P. (ETE), a composite copy of which, incorporating the amendment into the text of the initial agreement, is attached as Annex A to the proxy statement/prospectus accompanying this notice, and the transactions
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Adjournment proposal: To consider and vote on a proposal to approve the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger
agreement at the time of the special meeting; and |
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Advisory compensation proposal: To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the payments that will or may be paid by Regency to its named executive officers in connection
with the merger. |
These items of business, including the merger agreement and the proposed merger, are described in
detail in the accompanying proxy statement/prospectus. The board of directors of Regency GP LLC, the general partner of Regency GP, and the conflicts committee of the board of directors of Regency GP LLC have determined that the merger agreement
and the transactions contemplated thereby, including the merger, are fair and reasonable and in the best interests of Regency and its unaffiliated unitholders and recommend that Regency unitholders vote FOR the proposal to adopt the
merger agreement and the transactions contemplated thereby and FOR the adjournment of the special meeting, if necessary to solicit additional proxies in favor of such adoption, and the board of directors of Regency GP LLC recommends that
Regency unitholders vote FOR the advisory compensation proposal.
Only unitholders of record as of the close of
business on March 24, 2015 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. A list of unitholders entitled to vote at the special meeting will be available in our
offices located at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201 during regular business hours for a period of ten days before the special meeting, and at the place of the special meeting during the meeting. Pursuant to the merger agreement,
ETE and ETP have agreed to vote all of the limited partner interests in Regency owned beneficially or of record by ETE, ETP or their respective subsidiaries in favor of approval of the merger and the approval of any actions required in furtherance
thereof, which includes the merger proposal and, if necessary, the adjournment proposal. As of March 24, 2015, ETE, ETP and their respective subsidiaries collectively held 88,529,775 Regency
common units and 6,274,483 Class F units, representing approximately 22.58% of the Regency units entitled to vote at the special meeting.
Adoption of the merger agreement and the transactions contemplated thereby by the Regency unitholders is a condition to the
consummation of the merger and requires the affirmative vote of holders of at least a majority of the outstanding Regency common units, Class F units and Series A Cumulative Convertible Preferred Units, voting together as a single class. Therefore,
your vote is very important. Your failure to vote your units will have the same effect as a vote AGAINST the adoption of the merger agreement and the transactions contemplated thereby.
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By order of the board of directors, |
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/s/ Todd Carpenter |
Todd Carpenter Senior Vice President and
General Counsel |
Dallas, Texas
March 24, 2015
YOUR VOTE IS IMPORTANT!
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE
(1) BY TELEPHONE, (2) VIA THE INTERNET OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE PREPAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the special
meeting. If your units are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction card furnished to you by such record holder.
We urge you to read the accompanying proxy statement/prospectus, including all documents incorporated by reference into the accompanying proxy
statement/prospectus, and its annexes carefully and in their entirety. If you have any questions concerning the merger, the adjournment vote, the advisory (non-binding) vote on the payments that will or may be paid by Regency to its named executive
officers in connection with the merger, the special meeting or the accompanying proxy statement/prospectus or would like additional copies of the accompanying proxy statement/prospectus or need help voting your Regency units, please contact
Regencys proxy solicitor:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New
York 10016
Toll-free: (800) 322-2885
Collect: (212) 929-5500
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates by reference important business and financial information about ETP and Regency from other
documents filed with the Securities and Exchange Commission (the SEC), that are not included in or delivered with this proxy statement/prospectus. See Where You Can Find More Information.
Documents incorporated by reference are available to you without charge upon written or oral request. You can obtain any of these documents by
requesting them in writing or by telephone from the appropriate party at the following addresses and telephone numbers.
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Energy Transfer Partners L.P.
Investor Relations 3738
Oak Lawn Avenue Dallas, Texas 75219
(214) 981-0795 |
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Regency Energy Partners LP Investor
Relations 2001 Bryan Street, Suite 3700 Dallas, Texas
75201 (214) 750-1771 |
To receive timely delivery of the requested documents in advance of the special meeting, you should make
your request no later than April 20, 2015.
ABOUT THIS DOCUMENT
This document, which forms part of a registration statement on Form S-4 filed with the SEC by ETP (File No. 333-202319), constitutes
a prospectus of ETP under Section 5 of the Securities Act of 1933, as amended (the Securities Act), with respect to the ETP common units to be issued pursuant to the merger agreement. This document also constitutes a notice of
meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), with respect to the special meeting of Regency unitholders, at which Regency unitholders will be asked to
consider and vote on, among other matters, a proposal to adopt the merger agreement and the transactions contemplated thereby.
You
should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference
into, this proxy statement/prospectus. This proxy statement/prospectus is dated March 24, 2015. The information contained in this proxy statement/prospectus is accurate only as of that date or, in the case of information in a document
incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither the mailing of this proxy statement/prospectus to Regency unitholders nor the issuance by ETP of its common
units pursuant to the merger agreement will create any implication to the contrary.
This proxy statement/prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
The information concerning ETP contained in this proxy statement/prospectus or incorporated by reference has been provided by ETP, and
the information concerning Regency contained in this proxy statement/prospectus or incorporated by reference has been provided by Regency.
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS
Set forth below are questions that you, as a unitholder of Regency, may have regarding the merger, the adjournment proposal, the advisory
compensation proposal and the special meeting, and brief answers to those questions. You are urged to read carefully this proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus in their entirety, including
the composite merger agreement, which incorporates the text of the amendment into the text of the initial agreement and is attached as Annex A to this proxy statement/prospectus, and the documents incorporated by reference into this proxy
statement/prospectus, because this section may not provide all of the information that is important to you with respect to the merger and the special meeting. You may obtain a list of the documents incorporated by reference into this proxy
statement/prospectus in the section titled Where You Can Find More Information.
Q: Why am I receiving this proxy
statement/prospectus?
A: ETP and Regency have agreed to a merger, pursuant to which Regency will merge with Rendezvous I LLC, a
wholly owned subsidiary of ETP (Merger Sub A). Regency will continue its existence as the surviving entity and become a wholly owned subsidiary of ETP, but will cease to be a publicly traded limited partnership. In order to complete the
merger, Regency unitholders must vote to adopt the merger agreement. Regency is holding a special meeting of its unitholders to obtain such unitholder approval. Regency unitholders will also be asked to approve, on an advisory (non-binding) basis,
the payments that will or may be paid by Regency to its named executive officers in connection with the merger.
In the merger, ETP will
issue ETP common units as part of the consideration to be paid to holders of Regency common units and Regency Class F common units (Class F units). This document is being delivered to you as both a proxy statement of Regency and a
prospectus of ETP in connection with the merger. It is the proxy statement by which the board of directors (the Regency Board) of Regency GP LLC, the general partner of Regency GP, is soliciting proxies from you to vote on the adoption
of the merger agreement and the transactions contemplated thereby at the special meeting or at any adjournment or postponement of the special meeting. It is also the prospectus by which ETP will issue ETP common units to you in the merger.
Q: What will happen in the merger?
A: In the merger, Regency will merge with Merger Sub A. Regency will be the surviving limited partnership in the merger and become a wholly
owned subsidiary of ETP, but Regency will cease to be a publicly traded limited partnership.
Q: What will I receive in the merger?
A: If the merger is completed, each of your Regency common units will be cancelled and converted automatically into the right to
receive (i) 0.4066 (the exchange ratio) ETP common units (the unit consideration) and (ii) an additional number of ETP common units equal to the quotient of $0.32 divided by the lesser of (x) the volume
weighted average price of ETP common units on the New York Stock Exchange (the NYSE) for the five trading days ending on the third trading day immediately preceding the effective time of the merger and (y) the closing price of ETP
common units on the NYSE on the third day immediately preceding the effective time of the merger, rounded to the nearest ten thousandth of a unit (the additional unit consideration and, together with the unit consideration, the
merger consideration). Each of your Regency Class F units will be deemed to have converted automatically into Regency common units on a one-for-one basis and such common units will be converted automatically into the right to receive the
merger consideration. Regency unitholders will not receive any fractional ETP common units in the merger. Instead, each holder of Regency common units or Class F units that are converted pursuant to the merger agreement who otherwise would have
received a fraction of an ETP common unit will instead be entitled to receive a whole ETP common unit. Based on the closing price of ETP common units on the NYSE on January 23, 2015, the last trading day
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prior to the public announcement of the merger, the merger consideration represented approximately $26.89 in value for each Regency common unit and Class F unit. Based on the closing price of
$56.26 for ETP common units on the NYSE on March 20, 2015, the most recent practicable trading day prior to the date of this proxy statement/prospectus, the merger consideration represented approximately $23.20 in value for each
Regency common unit and Class F unit. The market price of ETP common units will fluctuate prior to the merger, and the market price of ETP common units when received by Regency unitholders after the merger is completed could be greater or less than
the current market price of ETP common units. See Risk Factors.
Q: What will happen to my Regency phantom units, unit
options and cash units in the merger?
A: If the merger is completed, each outstanding phantom unit of Regency (a Regency
phantom unit) (except for Regency phantom units granted before December 16, 2011 and for Regency phantom units held by the chief executive officer and the non-employee directors of Regency, which will vest and convert, subject to
applicable tax withholding, into the right to receive the merger consideration) will be converted into the right to receive an award of phantom units relating to ETP common units on the same terms and conditions as were applicable to the Regency
phantom units, except that the number of ETP common units covered by the award will be equal to the number of Regency common units covered by the corresponding award of Regency phantom units multiplied by the sum of (i) the exchange ratio and
(ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole unit. Each outstanding option to purchase Regency common units (a Regency unit option) that is in-the-money
will be deemed to be exercised on a net-issuance (i.e., cashless) basis and each net issued Regency common unit deemed to have been issued will be converted into the right to receive the merger consideration, subject to reduction for withholding
taxes. Each Regency unit option that is out-of-the-money will be cancelled and terminated for no consideration. In addition, each outstanding award of cash units (Regency cash units) issued under the Regency Energy Partners
LP Long-Term Incentive Cash Restricted Unit Plan representing the right to a cash payment based on the value of Regency common units will be converted into the right to receive an award of restricted cash units relating to ETP common units on
generally the same terms and conditions as were applicable to the award of Regency cash units, except that the number of notional ETP common units relating to the award will be equal to the number of notional Regency common units relating to the
corresponding award of Regency cash units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole unit.
Q: What will happen to Regency Series A units in the merger?
A: If the merger is completed, each outstanding Series A Cumulative Convertible Preferred Unit of Regency (a Series A unit) will
be cancelled and converted automatically into the right to receive a new preferred unit of ETP (an ETP preferred unit), with the same preferences, privileges, powers, duties and obligations that the Regency Series A units had immediately
prior to the closing of the merger.
Q: What happens if the merger is not completed?
A: If the merger agreement is not adopted by Regency unitholders or if the merger is not completed for any other reason, you will not receive
any form of consideration for your Regency units in connection with the merger. Instead, Regency will remain an independent publicly traded limited partnership and its common units will continue to be listed and traded on the NYSE. If the merger
agreement is terminated under specified circumstances, including if Regency unitholder approval is not obtained, Regency will be required to pay all of the reasonably documented out-of-pocket expenses incurred by ETP and its affiliates in connection
with the merger agreement and the transactions contemplated thereby, up to a maximum amount of $20 million. In addition, if the merger agreement is terminated in specified circumstances, including due to an adverse recommendation change having
occurred, Regency may be required to pay ETP a termination fee of $450 million, less any expenses previously paid by Regency to ETP. Following payment of the termination fee, Regency will not be obligated to pay any additional expenses incurred
by ETP or its affiliates. Please read
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Proposal 1: The Merger AgreementExpenses and Termination Fee beginning on page 92 of this proxy statement/prospectus.
Q: Will I continue to receive future distributions?
A: Before completion of the merger, Regency expects to continue to pay its regular quarterly cash distribution on its common units, which
currently is $0.5025 per Regency common unit. However, ETP and Regency will coordinate the timing of distribution declarations leading up to the merger so that, in any quarter, a holder of Regency units will either receive distributions in respect
of its Regency common units or Series A units or distributions in respect of the ETP common units or ETP preferred units, as applicable, that such holder will receive in the merger (but will not receive distributions in respect of both in any
quarter). Receipt of the regular quarterly distribution will not reduce the merger consideration you receive. After completion of the merger, you will be entitled only to distributions on any ETP common units you receive in the merger and hold
through the applicable distribution record date. While ETP provides no assurances as to the level or payment of any future distributions on its common units, and ETP determines the amount of its distributions each quarter, for the quarter ended
December 31, 2014, ETP paid a cash distribution of $0.995 per ETP common unit on February 13, 2015 to holders of record as of the close of business on February 6, 2015.
Q: What am I being asked to vote on?
A: Regencys unitholders are being asked to vote on the following proposals:
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Merger proposal: To adopt the merger agreement as amended by the amendment thereto, a composite copy of which, incorporating the amendment into the text of the initial agreement, is attached as Annex A to
this proxy statement/prospectus, and the transactions contemplated thereby; |
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Adjournment proposal: To approve the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the
special meeting; and |
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Advisory compensation proposal: To approve, on an advisory (non-binding) basis, the payments that will or may be paid by Regency to its named executive officers in connection with the merger.
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The approval of the merger proposal by Regency unitholders is a condition to the obligations of ETP and Regency to complete
the merger. Neither the adjournment proposal nor the advisory compensation proposal is a condition to the obligations of ETP or Regency to complete the merger.
Q: Does the Regency Board recommend that Regency unitholders adopt the merger agreement and the transactions contemplated thereby?
A: Yes. The Regency Board and the conflicts committee of the Regency Board (the Regency Conflicts Committee) have approved the
merger agreement and the transactions contemplated thereby, including the merger, and determined that these transactions are fair and reasonable and in the best interests of Regency and its unaffiliated unitholders. Therefore, the Regency Board and
Regency Conflicts Committee recommend that you vote FOR the proposal to adopt the merger agreement and the transactions contemplated thereby at the special meeting. See The MergerRecommendation of the Regency Conflicts
Committee, the Regency Board and Their Reasons for the Merger beginning on page 60 of this proxy statement/prospectus. In considering the recommendation of the Regency Board and the Regency Conflicts Committee with respect to the merger
agreement and the transactions contemplated thereby, including the merger, you should be aware that directors and executive officers of Regency are parties to agreements or participants in other arrangements that give them interests in the merger
that may be different from, or in addition to, your interests as a unitholder of Regency. You should consider these interests in voting on this proposal. These different interests are described under The MergerInterests of Directors and
Executive Officers of Regency in the Merger beginning on page 76 of this proxy statement/prospectus.
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Q: What are the related compensation payments to Regency named executive officers and why am I
being asked to vote on them?
A: The SEC has adopted rules that require Regency to seek an advisory (non-binding) vote on the
compensation payments related to the merger. The related compensation payments are certain compensation payments that are tied to or based on the merger and that will or may be paid by Regency to its named executive officers in connection with the
merger. This proposal is referred to as the advisory compensation proposal.
Q: Does the Regency Board recommend that unitholders
approve the advisory compensation proposal?
A: Yes. The Regency Board unanimously recommends that you vote FOR the
advisory compensation proposal. See Proposal 3: Advisory Vote on Related Compensation beginning on page 161 of this proxy statement/prospectus.
Q: What happens if the advisory compensation proposal is not approved?
A: Approval of the advisory compensation proposal is not a condition to completion of the merger. The vote is an advisory vote and is not
binding. If the merger is completed, Regency will pay the related compensation to its named executive officers in connection with the merger even if Regency unitholders fail to approve the advisory compensation proposal.
Q: What unitholder vote is required for the approval of each proposal?
A: The following are the vote requirements for the Regency proposals:
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Merger proposal. The affirmative vote or consent of holders of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class. Accordingly,
abstentions and unvoted units will have the same effect as votes AGAINST the proposal. |
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Adjournment proposal. If a quorum is present at the meeting, the affirmative vote of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a
single class; provided that, if a quorum is not present at the meeting, the affirmative vote of holders of a majority of the outstanding Regency common units, Class F units, and Series A units entitled to vote at such meeting represented
either in person or by proxy, voting together as a single class, will be required to approve the proposal. Accordingly, abstentions and unvoted units will have the same effect as votes AGAINST the proposal. |
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Advisory compensation proposal. The affirmative vote of at least a majority of the Regency common units, Class F units and Series A units, voting together as a single class. Accordingly, abstentions and
unvoted units will have the same effect as votes AGAINST the proposal. |
Pursuant to the merger agreement,
ETE, which directly and indirectly owns all of the incentive distribution rights and general partner interests in ETP and Regency, and ETP have agreed to vote all of the limited partner interests in Regency owned beneficially or of record by ETE,
ETP or their respective subsidiaries in favor of approval of the merger and the approval of any actions required in furtherance thereof, which includes the Regency merger proposal and, if necessary, the Regency adjournment proposal. As of
March 24, 2015, ETE, ETP and their respective subsidiaries collectively held 88,529,775 Regency common units and 6,274,483 Class F units, representing approximately 22.58% of the Regency units entitled to vote at the special meeting.
Q: What constitutes a quorum for the special meeting?
A: At least a majority of the outstanding Regency common units, Class F units and Series A units, considered together as a single class, must
be represented in person or by proxy at the special meeting in order to constitute a quorum.
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Q: When is this proxy statement/prospectus being mailed?
A: This proxy statement/prospectus and the proxy card are first being sent to Regency unitholders on or about March 25, 2015.
Q: Who is entitled to vote at the special meeting?
A: Holders of outstanding Regency common units, Class F units and Series A units outstanding as of the close of business on March 24,
2015, the record date, are entitled to one vote per unit at the special meeting.
As of the record date, there were approximately
411,707,950 Regency common units outstanding, 6,274,483 Class F units outstanding and 1,912,569 Series A units outstanding, all of which are entitled to vote at the special meeting.
Q: When and where is the special meeting?
A: The special meeting will be held in Regencys offices at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, on April 28,
2015, at 11:00 a.m., local time.
Q: How do I vote my units at the special meeting?
A: There are four ways you may cast your vote. You may vote:
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In Person. If you are a unitholder of record, you may vote in person at the special meeting. Units held by a broker, bank or other nominee may be voted in person by you only if you obtain a legal proxy from the
record holder (which is your broker, bank or other nominee) giving you the right to vote the units; |
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Via the Internet. You may vote electronically via the Internet by accessing the Internet address provided on each proxy card (if you are a unitholder of record) or vote instruction card (if your units are held by
a broker, bank or other nominee); |
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By Telephone. You may vote by using the toll-free telephone number listed on the enclosed proxy card (if you are a unitholder of record) or vote instruction card (if your units are held by a broker, bank or other
nominee); or |
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By Mail. You may vote by filling out, signing and dating the enclosed proxy card (if you are a unitholder of record) or vote instruction card (if your units are held by a broker, bank or other nominee) and
returning it by mail in the prepaid envelope provided. |
Even if you plan to attend the special meeting in person, you are
encouraged to submit your proxy as described above so that your vote will be counted if you later decide not to attend the special meeting.
If your units are held by a broker, bank or other nominee, also known as holding units in street name, you should receive
instructions from the broker, bank or other nominee that you must follow in order to have your units voted. Please review such instructions to determine whether you will be able to vote via Internet or by telephone. The deadline for voting units by
telephone or electronically through the Internet is 11:59 p.m. Eastern Time, April 27, 2015 (the telephone/internet deadline).
Q: If my units are held in street name by my broker, will my broker automatically vote my units for me?
A: No. If your units are held in an account at a broker or through another nominee, you must instruct the broker or other nominee on how to
vote your units by following the instructions that the broker or other nominee provides to you with these materials. Most brokers offer the ability for unitholders to submit voting instructions by mail by completing a voting instruction card, by
telephone and via the Internet.
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If you do not provide voting instructions to your broker, your units will not be voted on any
proposal on which your broker does not have discretionary authority to vote. This is referred to in this proxy statement/prospectus and in general as a broker non-vote. In these cases, the broker can register your units as being present at the
special meeting for purposes of determining a quorum, but will not be able to vote on those matters for which specific authorization is required. Under the current rules of the NYSE, brokers do not have discretionary authority to vote on any of the
proposals, including the merger proposal. A broker non-vote will have the same effect as a vote AGAINST the merger proposal, the adjournment proposal and the advisory compensation proposal.
Q: How will my Regency units be represented at the special meeting?
A: If you submit your proxy by telephone, the Internet website or by signing and returning your proxy card, the officers named in your proxy
card will vote your units in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how you would like to vote your units, your proxy will be voted as the Regency Board
recommends, which is:
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Merger proposal: FOR the adoption of the merger agreement and the transactions contemplated thereby; |
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Adjournment proposal: FOR the approval of the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time
of the special meeting; and |
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Advisory compensation proposal: FOR the approval, on an advisory (non-binding) basis, of the payments that will or may be paid by Regency to its named executive officers in connection with the merger.
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Q: Who may attend the special meeting?
A: Regency unitholders (or their authorized representatives) and Regencys invited guests may attend the special meeting. All attendees
at the special meeting should be prepared to present government-issued photo identification (such as a drivers license or passport) for admittance.
Q: Is my vote important?
A: Yes, your vote is very important. If you do not submit a proxy or vote in person at the special meeting, it will be more difficult for
Regency to obtain the necessary quorum to hold the special meeting. In addition, an abstention or your failure to submit a proxy or to vote in person will have the same effect as a vote AGAINST the adoption of the merger agreement and
the transactions contemplated thereby. If you hold your units through a broker or other nominee, your broker or other nominee will not be able to cast a vote on such adoption without instructions from you. The Regency Board recommends that Regency
unitholders vote FOR the Regency merger proposal.
Q: Can I revoke my proxy or change my voting instructions?
A: Yes. If you are a unitholder of record, you may revoke or change your vote at any time before the telephone/internet deadline or before the
polls close at the special meeting by:
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sending a written notice, no later than the telephone/internet deadline, to Regency Energy Partners LP at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, Attention: Corporate Secretary, that bears a date later than
the date of the proxy and is received prior to the special meeting and states that you revoke your proxy; |
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submitting a valid, later-dated proxy by mail, telephone or Internet that is received prior to the special meeting; or |
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attending the special meeting and voting by ballot in person (your attendance at the special meeting will not, by itself, revoke any proxy that you have previously given). |
If you hold your Regency units through a broker or other nominee, you must follow the directions you receive from your broker or other nominee
in order to revoke your proxy or change your voting instructions.
Q: What happens if I sell my units after the record date but before
the special meeting?
A: The record date for the special meeting is earlier than the date of the special meeting and earlier than the
date that the merger is expected to be completed. If you sell or otherwise transfer your Regency units after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting. However, you will not
have the right to receive the merger consideration to be received by Regencys unitholders in the merger. In order to receive the merger consideration, you must hold your Regency units through completion of the merger.
Q: What does it mean if I receive more than one proxy card or vote instruction card?
A: Your receipt of more than one proxy card or vote instruction card may mean that you have multiple accounts with Regencys transfer
agent or with a brokerage firm, bank or other nominee. If voting by mail, please sign and return all proxy cards or vote instruction cards to ensure that all of your units are voted. Each proxy card or vote instruction card represents a distinct
number of units and it is the only means by which those particular units may be voted by proxy.
Q: Am I entitled to appraisal rights
if I vote against the adoption of the merger agreement?
A: No. Appraisal rights are not available in connection with the merger under
the Delaware Revised Uniform Limited Partnership Act (the Delaware LP Act) or under the Regency partnership agreement.
Q:
Is completion of the merger subject to any conditions?
A: Yes. In addition to the adoption of the merger agreement by Regency
unitholders, completion of the merger requires the receipt of the necessary governmental clearances and the satisfaction or, to the extent permitted by applicable law, waiver of the other conditions specified in the merger agreement.
Q: When do you expect to complete the merger?
A: ETP and Regency are working towards completing the merger promptly. ETP and Regency currently expect to complete the merger shortly
following the conclusion of the meeting, subject to receipt of Regency unitholder approval, regulatory approvals and clearances and other usual and customary closing conditions. However, no assurance can be given as to when, or if, the merger will
occur.
Q: What are the expected U.S. federal income tax consequences to a Regency unitholder as a result of the transactions
contemplated by the merger agreement?
A: It is anticipated that no gain or loss will be recognized by a Regency unitholder solely as
a result of the merger, other than (i) such unitholders distributive share of any gain recognized by Regency as a result of the merger (which, as described below, is expected to be zero) or (ii) to the extent any net decrease in such
unitholders share of partnership liabilities pursuant to Section 752 of the Internal Revenue Code of 1986, as amended (the Code), exceeds such unitholders adjusted tax basis in its Regency units at the closing of the
merger. Please read Risk FactorsRisk Factors Relating to the Merger and Material U.S. Federal Income Tax Consequences of the MergerTax Consequences of the Merger to Regency Unitholders.
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Q: Under what circumstances could the merger result in a Regency unitholder recognizing
taxable income or gain?
A: For U.S. federal income tax purposes, Regency will be deemed to contribute all of its assets to ETP in
exchange for ETP units and the assumption of Regencys liabilities, followed by a liquidation of Regency in which ETP units are distributed to Regency unitholders. In addition, as a result of the merger, Regency unitholders who receive ETP
units will become limited partners of ETP for U.S. federal income tax purposes and will be allocated a share of ETPs nonrecourse liabilities. Each Regency unitholder will be treated as receiving a deemed cash distribution equal to the excess,
if any, of such unitholders share of nonrecourse liabilities of Regency immediately before the merger over such unitholders share of nonrecourse liabilities of ETP immediately following the merger. If the amount of any deemed cash
distribution received by a Regency unitholder exceeds such unitholders basis in his Regency units, such unitholder will recognize gain in an amount equal to such excess. While there can be no assurance, ETP and Regency expect that most Regency
unitholders will not recognize gain in this manner. The amount and effect of any gain that may be recognized by Regency unitholders will depend on the Regency unitholders particular situation, including the ability of the Regency unitholder to
utilize any suspended passive losses. For additional information, please read Material U.S. Federal Income Tax Consequences of the MergerTax Consequences of the Merger to Regency, Material U.S. Federal Income Tax Consequences
of the MergerTax Consequences of the Merger to Regency Unitholders and Risk Factors Relating to the Merger.
Q:
What are the expected U.S. federal income tax consequences for a Regency unitholder of the ownership of ETP common units after the merger is completed?
A: Each Regency unitholder who becomes an ETP common unitholder as a result of the merger will, as is the case for existing ETP common
unitholders, be allocated such unitholders distributive share of ETPs income, gains, losses, deductions and credits. In addition to U.S. federal income taxes, such a holder will be subject to other taxes, including state and local income
taxes, unincorporated business taxes, and estate, inheritance or intangibles taxes that may be imposed by the various jurisdictions in which ETP conducts business or owns property or in which the unitholder is resident. Please read Material
U.S. Federal Income Tax Consequences of ETP Common Unit Ownership.
Q: Assuming the merger closes before December 31, 2015,
how many Schedules K-1 will I receive if I am a Regency unitholder?
A: You will receive two Schedules K-1, one from Regency, which
will describe your share of Regencys income, gain, loss and deduction for the portion of the tax year that you held Regency units prior to the effective time of the merger, and one from ETP, which will describe your share of ETPs income,
gain, loss and deduction for the portion of the tax year you held ETP common units following the effective time of the merger.
Q: What
do I need to do now?
A: Carefully read and consider the information contained in and incorporated by reference into this proxy
statement/prospectus, including its annexes. Then, please vote your Regency units in accordance with the instructions described above.
If
you hold units through a broker or other nominee, please instruct your broker or nominee to vote your units by following the instructions that the broker or nominee provides to you with these materials.
Q: Should I send in my unit certificates now?
A: No. Regency unitholders should not send in their unit certificates at this time. After completion of the merger, ETPs exchange agent
will send you a letter of transmittal and instructions for exchanging your Regency
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common units and Class F units for the merger consideration and your Series A units for ETP preferred units. Unless you specifically request to receive ETP unit certificates, the ETP common units
and ETP preferred units you receive in the merger will be issued in book-entry form.
Q: Whom should I call with questions?
A: Regency unitholders should call MacKenzie Partners, Inc., Regencys proxy solicitor, with any questions about the merger or the
special meeting, or to obtain additional copies of this proxy statement/prospectus, proxy cards or voting instruction forms.
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SUMMARY
This summary highlights selected information from this proxy statement/prospectus. You are urged to read carefully the entire proxy
statement/prospectus and the other documents referred to in this proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the merger agreement, the
merger and the other matters being considered at the special meeting. See Where You Can Find More Information. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more
detail.
The Parties (See page 41)
Energy Transfer Partners, L.P., is a Delaware limited partnership with common units traded on the NYSE under the symbol ETP. ETP is
engaged in the transportation and storage of natural gas, natural gas liquids (NGLs) and crude oil and the retail marketing of gasoline and middle distillates through its wholly owned operating subsidiaries. Energy Transfer Partners GP,
L.P., a Delaware limited partnership, is ETPs general partner, and Rendezvous I LLC and Rendezvous II LLC are wholly owned subsidiaries of ETP.
Regency Energy Partners LP, is a Delaware limited partnership with common units traded on the NYSE under the symbol RGP. Regency
is a growth-oriented limited partnership engaged in the gathering and processing, compression, treating and transportation of natural gas; the transportation, fractionation and storage of NGLs; the gathering, transportation and terminaling of oil
(crude and/or condensate, a lighter oil) received from producers; natural gas marketing and trading; and the management of coal and natural resource properties in the United States. Regency GP LP, a Delaware limited partnership, is Regencys
general partner. ETE GP Acquirer LLC, a Delaware limited liability company, is the sole member of Regency GP LLC and the indirect owner of Regency GP.
Energy Transfer Equity, L.P. is a Delaware limited partnership with common units traded on the NYSE under the symbol ETE. ETE
directly and indirectly owns all of the incentive distribution rights and general partner interests in ETP and Regency. ETE is a party to the merger agreement solely for purposes of certain provisions therein.
The Merger (See page 49)
Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, the merger agreement provides for the merger
of Regency with Merger Sub A. Regency will survive the merger and become a wholly owned subsidiary of ETP.
The GP Merger
(See page 49)
Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, and concurrently with
the merger, ETE Acquirer will merge with Rendezvous II LLC (Merger Sub B). ETE Acquirer will survive the GP merger and become a wholly owned subsidiary of ETP (the GP merger and, together with the merger, the
mergers).
Merger Consideration (See page 89)
Common Units. The merger agreement provides that, at the effective time, each Regency common unit issued and outstanding or
deemed issued and outstanding as of immediately prior to the effective time (excluding Regency common units that are owned immediately prior to the effective time by Regency or its subsidiaries, which will be cancelled and cease to exist) will be
converted into the right to receive (i) 0.4066 ETP common units and (ii) an additional number of ETP common units equal to the quotient of $0.32 divided by the
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lesser of (x) the volume weighted average price of ETP common units as reported on the NYSE for the five trading days ending on the third trading day immediately
preceding the effective time of the merger and (y) the closing price of ETP common units on the NYSE on the third day immediately preceding the effective time of the merger, rounded to the nearest ten thousandth of a unit.
Class F Units. Each Class F unit issued and outstanding as of immediately prior to the effective time will be deemed to have
been converted into an equal number of Regency common units, which will be converted into the right to receive the merger consideration.
Series A Units. Each Series A unit issued and outstanding as of immediately prior to the effective time will be converted into
the right to receive an ETP preferred unit. The ETP preferred units will contain the same preferences, privileges, powers, duties and obligations that the Regency Series A units had immediately prior to the closing of the merger.
Treatment of General Partner Interest and Incentive Distribution Rights (See page 90)
As a result of the merger, the general partner interest in Regency outstanding immediately prior to the effective time will be converted into a
non-economic general partner interest and Regency GP will continue as the sole general partner of Regency. In addition, the incentive distribution rights in Regency outstanding immediately prior to the effective time will be cancelled. ETP and
Regency have agreed that, upon consummation of the mergers, the percentage interest represented by the ETP general partner interest will be increased to equal the sum of (i) the percentage interest of the ETP general partner interest
immediately prior to the effective time, as adjusted to give effect to the issuance of ETP common units in the merger, and (ii) the percentage interest in ETP that would be represented by the Regency general partner interest immediately prior
to the effective time, as adjusted to give effect to the issuance of ETP common units in the merger. In connection with the mergers, ETP GP will receive the right to any capital account in Regency associated with the Regency general partner interest
and incentive distribution rights immediately prior to the merger.
Treatment of Equity Awards (See page 89)
Phantom Units. At the effective time, each outstanding Regency phantom unit (except for Regency phantom units granted before
December 16, 2011 and for Regency phantom units held by the chief executive officer and the non-employee directors of Regency, which will vest and convert, subject to applicable tax withholding, into the right to receive the merger
consideration), will be converted into the right to receive an award of phantom units relating to ETP common units on the same terms and conditions as were applicable to the Regency phantom units, except that the number of ETP common units covered
by the award will be equal to the number of Regency common units covered by the corresponding award of Regency phantom units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional
unit consideration, rounded up to the nearest whole unit.
Unit Options. Each outstanding Regency unit option
that is in-the-money will at the effective time be deemed to be exercised on a net-issuance (i.e., cashless) basis and each net issued Regency common unit deemed to have been issued will be converted into the right to receive the merger
consideration, subject to reduction for withholding taxes. Each Regency unit option that is out-of-the-money will be cancelled and terminated for no consideration.
Cash Units. Each outstanding award of Regency cash units issued under the Regency Energy Partners LP Long-Term Incentive Cash
Restricted Unit Plan will at the effective time be converted into the right to receive an award of restricted cash units relating to ETP common units on generally the same terms and conditions as were applicable to the award of Regency cash units,
except that the number of notional ETP common units relating to the award will be equal to the number of notional Regency common units relating to the corresponding award of
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Regency cash units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest
whole unit.
The Special Meeting; Units Entitled to Vote; Required Vote (See page 44)
Meeting. The special meeting will be held in Regencys offices at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, on
April 28, 2015, at 11:00, local time. At the special meeting, Regency unitholders will be asked to vote on the following proposals:
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Merger proposal: To adopt the merger agreement as amended by the amendment thereto, a composite copy of which, incorporating the amendment into the text of the initial agreement, is attached as Annex A to
this proxy statement/prospectus, and the transactions contemplated thereby; |
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Adjournment proposal: To approve the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the
special meeting; and |
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Advisory compensation proposal: To approve, on an advisory (non-binding) basis, the payments that will or may be paid by Regency to its named executive officers in connection with the merger.
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Record Date. Only Regency unitholders of record at the close of business on March 24, 2015 will be
entitled to receive notice of and to vote at the special meeting. As of the close of business on the record date of March 24, 2015, there were approximately 411,707,950 Regency common units, 6,274,483 Class F units and 1,912,569 Series A units
outstanding and entitled to vote at the meeting. Each holder of Regency common units, Class F units and Series A units is entitled to one vote for each unit owned as of the record date.
Required Vote. To adopt the merger agreement and the transactions contemplated thereby, holders of at least a
majority of the outstanding Regency common units, Class F units and Series A units, together as a single class, must vote in favor of such adoption. Regency cannot complete the merger unless its unitholders adopt the merger agreement and the
transactions contemplated thereby. Because approval is based on the affirmative vote of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, a Regency
unitholders failure to vote, an abstention from voting or the failure of a Regency unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee
will have the same effect as a vote AGAINST adoption of the merger agreement.
To approve the adjournment of the
special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special meeting and if a quorum is present at the meeting, holders of at least a majority of the
outstanding Regency common units, Class F units and Series A units, voting together as a single class, must vote in favor of the proposal; provided that, if a quorum is not present at the meeting, the affirmative vote of holders of a majority of the
outstanding Regency common units, Class F units and Series A units entitled to vote at such meeting represented either in person or by proxy, voting together as a single class, is required to approve the proposal. Because approval of this proposal
is based on the affirmative vote of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, if a quorum is present at the special meeting, a Regency unitholders failure
to vote, an abstention from voting or the failure of a Regency unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect
as a vote AGAINST approval of this proposal.
To approve, on an advisory (non-binding) basis, the payments that will or may be
paid by Regency to its named executive officers in connection with the merger, holders of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, must vote in favor of the
proposal. Because approval of this proposal is based on the affirmative vote of at least a majority of the
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outstanding Regency common units, Class F units and Series A units, voting together as a single class, a Regency unitholders failure to vote, an abstention from voting or the failure of a
Regency unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect as a vote AGAINST approval of this proposal.
Unit Ownership of and Voting by Regencys Directors, Executive Officers and Affiliates. As of March 24, 2015,
Regencys directors and executive officers and their affiliates (including ETE, ETP and their respective subsidiaries) beneficially owned and had the right to vote 88,529,775 Regency common units and 6,274,483 Class F units at the special
meeting, which represent 22.58% of the Regency units entitled to vote at the special meeting. It is expected that Regencys directors and executive officers will vote their units FOR the adoption of the merger agreement and the
transactions contemplated thereby, although none of them has entered into any agreement requiring them to do so. Additionally, under the terms of the merger agreement, ETE and ETP have agreed to vote all of the Regency common units and Class F units
owned beneficially or of record by ETE, ETP or their respective subsidiaries in favor of the merger.
Recommendation of
the Regency Conflicts Committee, the Regency Board and Their Reasons for the Merger (See page 60)
The Regency Board and the
Regency Conflicts Committee recommend that Regency unitholders vote FOR the adoption of the merger agreement and the transactions contemplated thereby.
In the course of reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement, the Regency
Board considered a number of factors in its deliberations. For a more complete discussion of these factors, see The MergerRecommendation of the Regency Conflicts Committee, the Regency Board and Their Reasons for the Merger.
Opinion of the Financial Advisor to the Regency Conflicts Committee (See page 64)
On January 25, 2015, J.P. Morgan Securities LLC (J.P. Morgan) rendered its oral opinion to the Regency Conflicts Committee and
the Regency Board, which opinion was subsequently confirmed in writing, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to the holders of Regency common
units, other than ETE, ETP and their respective affiliates, in the merger was fair, from a financial point of view, to such unitholders.
The full text of the written opinion of J.P. Morgan dated January 25, 2015, which sets forth the assumptions made, matters considered
and limits on the review undertaken, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. Regency unitholders are urged to read the opinion in its entirety. J.P. Morgans written opinion is
addressed to the Regency Conflicts Committee and the Regency Board, is directed only to the merger consideration to be paid to holders of Regency common units (other than ETE, ETP and their respective affiliates) and does not constitute a
recommendation to any Regency unitholder as to how such Regency unitholder should vote with respect to the transactions contemplated by the merger agreement. The summary of the opinion of J.P. Morgan set forth in this proxy statement/prospectus is
qualified in its entirety by reference to the full text of such opinion included as Annex B.
ETP Unitholder Approval is
Not Required (See page 79)
ETP unitholders are not required to adopt the merger agreement or approve the merger or the issuance of ETP
common units in connection with the merger.
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Directors and Executive Officers of ETP After the Merger (See page 80)
ETP GP has direct responsibility for conducting ETPs business and for managing its operations. Because ETP GP is a limited
partnership, its general partner, Energy Transfer Partners, L.L.C. (ETP GP LLC), is ultimately responsible for the business and operations of ETP. Thus, the board of directors and officers of ETP GP LLC make decisions on ETPs
behalf. ETP expects that the directors and executive officers of ETP GP LLC immediately prior to the merger will continue as the directors and executive officers of ETP GP LLC after the merger, except that Thomas E. Long, Executive Vice President
and Chief Financial Officer of Regency, is expected to become the Chief Financial Officer of ETP GP LLC and Martin Salinas, ETP GP LLCs current Chief Financial Officer, will not be retained by ETP.
Ownership of ETP After the Merger (See page 80)
ETP will issue approximately 172 million ETP common units to former Regency unitholders pursuant to the merger. Based on the number of ETP
common units outstanding as of the date of this proxy statement/prospectus, immediately following the completion of the merger, ETP expects to have approximately million common units outstanding. Regency unitholders are therefore expected to hold
approximately 35% of the aggregate number of ETP common units outstanding immediately after the merger and approximately 25% of ETPs total units of all classes. Holders of ETP common units are not entitled to elect the directors of the board
of directors (the ETP Board) of Energy Transfer Partners, L.L.C., the general partner of ETP GP, and have only limited voting rights on matters affecting ETPs business.
Interests of Directors and Executive Officers of Regency in the Merger (See page 76)
Regencys directors and executive officers have financial interests in the merger that are different from, or in addition to, the
interests of Regency unitholders generally. The members of the Regency Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to Regencys
unitholders that the merger agreement be adopted.
These interests include:
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Certain members of the Regency Board are members of the ETE board of directors and are executives of ETE. |
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Certain executive officers of Regency have been offered roles at ETE and ETP following the completion of the merger. |
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The directors and officers of Regency are entitled to continued indemnification and insurance coverage under the merger agreement. |
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The Regency phantom units held by the chief executive officer and non-employee directors of Regency, as well as the Regency phantom units granted before December 16, 2011 held by other officers of Regency, will
vest and convert, subject to applicable tax withholding, into the right to receive the merger consideration, and the Regency phantom units granted after December 16, 2011 held by other executive officers of Regency will be converted into the
right to receive an award of phantom units relating to ETP common units on the same terms and conditions as were applicable to the Regency phantom units, except that the number of ETP common units covered by the award will be equal to the number of
Regency common units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole unit. |
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Interests of ETE and ETP in the Merger (See page 79)
ETE holds a controlling ownership interest in each of ETP and Regency. ETE controls ETP through ETEs ownership of ETP GP, which owns 100%
of the general partner interest and incentive distribution rights in ETP, and through ETEs ownership of all of the Class H units and Class I units of ETP. ETE controls Regency through ETEs ownership of ETE Acquirer and Regency GP LLC,
which own Regency GP. Regency GP owns 100% of the general partner interest and incentive distribution rights in Regency. ETE also owns, directly and through a wholly owned subsidiary, approximately 14.0% of the limited partner interest in Regency
and ETP, through a wholly owned subsidiary, owns an additional 7.6% limited partner interest in Regency and all of the Regency Class F units.
Under the terms of the merger agreement, ETE and ETP have agreed to vote all of the Regency common units and Class F units owned beneficially
or of record by ETE, ETP or their respective subsidiaries in favor of the merger.
Risk Factors Relating to the Merger and
Ownership of ETP Common Units (See page 31)
Regency unitholders should consider carefully all the risk factors together with all of
the other information included or incorporated by reference in this proxy statement/prospectus before deciding how to vote. Risks relating to the merger and ownership of ETP common units are described in the section titled Risk Factors.
Some of these risks include, but are not limited to, those described below:
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Because the market price of ETP common units will fluctuate prior to the consummation of the merger, Regency unitholders cannot be sure of the market value of the ETP common units they will receive as unit consideration
relative to the value of Regency common units and Class F units they exchange, or of the number of ETP common units they will receive as additional unit consideration. |
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ETP and Regency may be unable to obtain the regulatory clearances required to complete the merger or, in order to do so, ETP and Regency may be required to comply with material restrictions or satisfy material
conditions. |
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The merger agreement contains provisions that limit Regencys ability to pursue alternatives to the merger, which could discourage a potential competing acquirer of Regency from making a favorable alternative
transaction proposal and, in specified circumstances, including if unitholder approval is not obtained or if the merger agreement is terminated due to an adverse recommendation change having occurred, could require Regency to reimburse up to $20.0
million of ETPs out-of-pocket expenses and pay a termination fee to ETP of $450 million, less any previous expense reimbursements by Regency. Following payment of the termination fee, Regency will not be obligated to pay any additional
expenses by ETP or its affiliates. |
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Directors and officers of Regency have certain interests that are different from those of Regency unitholders generally. |
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Regency unitholders will have a reduced ownership in the combined organization after the merger and will exercise less influence over management. |
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ETP common units to be received by Regency unitholders as a result of the merger have different rights from Regency common units. |
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No ruling has been requested with respect to the U.S. federal income tax consequences of the merger. |
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The intended U.S. federal income tax consequences of the merger are dependent upon ETP and Regency being treated as partnerships for U.S. federal income tax purposes. |
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Regency common unitholders could recognize taxable income or gain for U.S. federal income tax purposes as a result of the merger. |
15
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ETP GP and Regency GP are owned by ETE. This may result in conflicts of interest. |
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ETP common unitholders have limited voting rights and are not entitled to elect ETP GP or the directors of the ETP Board. |
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ETPs tax treatment depends on its status as a partnership for federal income tax purposes, as well as its not being subject to a material amount of entity-level taxation by individual states or local entities. If
the IRS treats ETP as a corporation or ETP becomes subject to a material amount of entity-level taxation for state or local tax purposes, it would substantially reduce the amount of cash available for payment for distributions on ETPs common
units. |
Material U.S. Federal Income Tax Consequences of the Merger (See page 108)
Tax matters associated with the merger are complicated. The U.S. federal income tax consequences of the merger to a Regency unitholder will
depend, in part, on such unitholders own personal tax situation. The tax discussions contained herein focus on the U.S. federal income tax consequences generally applicable to individuals who are residents or citizens of the United States that
hold their Regency units as capital assets, and these discussions have only limited application to other unitholders, including those subject to special tax treatment. Regency unitholders are urged to consult their tax advisors for a full
understanding of the U.S. federal, state, local and foreign tax consequences of the merger that will be applicable to them.
In connection
with the merger, Regency expects to receive an opinion from Baker Botts L.L.P. to the effect that (i) Regency will not recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership
liabilities pursuant to Section 752 of the Code); (ii) holders of Regency common units will not recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to
Section 752 of the Code); provided that such opinion will not extend to any holder who acquired Regency common units from Regency in exchange for property other than cash; and (iii) at least 90% of the gross income of Regency for the most
recent four complete calendar quarters ending before the closing date for which the necessary financial information is available is from sources treated as qualifying income within the meaning of Section 7704(d) of the Code.
In connection with the merger, ETP expects to receive an opinion from Latham & Watkins LLP to the effect that (i) neither ETP
nor ETP GP will recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); (ii) no gain or loss will be recognized by holders of
ETP common units as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); and (iii) at least 90% of the combined gross income of each of ETP and Regency for
the most recent four complete calendar quarters ending before the closing date for which the necessary financial information is available is from sources treated as qualifying income within the meaning of Section 7704(d) of the
Code.
Opinions of counsel, however, are subject to certain limitations and are not binding on the Internal Revenue Service
(IRS) and no assurance can be given that the IRS would not successfully assert a contrary position regarding the merger and the opinions of counsel. In addition, such opinions will be based upon certain factual assumptions and
representations made by the officers of ETP, ETP GP, Regency and Regency GP and any of their respective affiliates. Please read Material U.S. Federal Income Tax Consequences of the Merger for a more complete discussion of the U.S.
federal income tax consequences of the merger.
Accounting Treatment of the Merger (See page 79)
ETP and Regency are under the common control of ETE. Therefore, in accordance with accounting principles generally accepted in the United
States, ETP will account for the merger as a reorganization of entities
16
under common control and will use the historical cost basis method of accounting. Under this method of accounting, ETP will retrospectively adjust its financial statements to reflect the
consolidation of Regency beginning May 26, 2010 (the date ETE acquired Regency GP).
Listing of ETP Common Units;
Delisting and Deregistration of Regency Common Units (See page 80)
ETP common units are currently listed on the NYSE under the ticker
symbol ETP. It is a condition to closing that the ETP common units to be issued in the merger to Regency unitholders be approved for listing on the NYSE, subject to official notice of issuance.
Regency common units are currently listed on the NYSE under the ticker symbol RGP. If the merger is completed, Regency common
units will cease to be listed on the NYSE and will be deregistered under the Exchange Act.
No Appraisal Rights (See page
79)
Appraisal rights are not available in connection with the merger under the Delaware LP Act or under the Regency partnership
agreement.
Conditions to Consummation of the Mergers (See page 83)
ETP and Regency currently expect to complete the merger shortly following the conclusion of the meeting, subject to receipt of required Regency
unitholder and regulatory approvals and clearances and to the satisfaction or waiver of the other conditions to the transactions contemplated by the merger agreement described below.
As more fully described in this proxy statement/prospectus, each partys obligation to complete the transactions contemplated by the
merger agreement depends on a number of customary closing conditions being satisfied or, where legally permissible, waived, including the following:
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the merger agreement and the transactions contemplated thereby must have been approved by the affirmative vote or consent of the holders of at least a majority of the outstanding Regency common units, Class F units and
Series A units as of the record date, voting together as a single class; |
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the waiting period applicable to the merger, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), must have been terminated or expired; |
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no law, injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any governmental authority will be in effect enjoining, restraining, preventing or prohibiting the consummation of the
transactions contemplated by the merger agreement or making the consummation of such transactions illegal; |
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the registration statement of which this proxy statement/prospectus forms a part must have been declared effective by the SEC and must not be subject to any stop order or proceedings initiated or threatened by the SEC;
and |
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the ETP common units to be issued in the merger must have been approved for listing on the NYSE, subject to official notice of issuance. |
The obligation of ETP to effect the merger is subject to the satisfaction or waiver of the following additional conditions:
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the representations and warranties of Regency in the merger agreement being true and correct both when made and at and as of the date of the closing
of the merger, subject to certain standards, including |
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materiality and material adverse effect qualifications, as described under Proposal 1: The Merger AgreementConditions to Consummation of the Merger; |
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Regency and Regency GP having performed, in all material respects, all obligations required to be performed by them under the merger agreement; |
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the receipt of an officers certificate executed by an executive officer of Regency certifying that the two preceding conditions have been satisfied; and |
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ETP having received from Latham & Watkins LLP, tax counsel to ETP, a written opinion regarding certain U.S. federal income tax matters, as described under Proposal 1: The Merger AgreementConditions
to Consummation of the Merger. |
The obligation of Regency to effect the merger is subject to the satisfaction or
waiver of the following additional conditions:
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the representations and warranties of ETP in the merger agreement being true and correct both when made and at and as of the date of the closing of the merger, subject to certain standards, including materiality and
material adverse effect qualifications, as described under Proposal 1: The Merger AgreementConditions to Consummation of the Merger; |
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ETP, ETP GP, Merger Sub A, and Merger Sub B having performed, in all material respects, all obligations required to be performed by them under the merger agreement; |
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the receipt of an officers certificate executed by an executive officer of ETP certifying that the two preceding conditions have been satisfied; |
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Regency having received from Baker Botts L.L.P., tax counsel to Regency, a written opinion regarding certain U.S. federal income tax matters, as described under Proposal 1: The Merger AgreementConditions to
Consummation of the Merger; and |
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ETP GP having executed and delivered to Regency an amendment to the ETP partnership agreement (the ETP partnership agreement amendment), as described under Proposal 1: The Merger
AgreementConditions to Consummation of the Merger |
Amendment of ETP Partnership Agreement (See
page 97)
In conjunction with the merger, ETP GP will enter into the ETP partnership agreement amendment, providing for (i) the
reduction by ETE, as the holder of ETPs incentive distribution rights, of (x) $20 million in quarterly distributions in respect of such rights for four consecutive quarters commencing with the first quarter for which the related record
date occurs on or following the closing and (y) $15 million in quarterly distributions in respect of such rights for 16 consecutive quarters thereafter, (ii) the creation and issuance of the ETP preferred units and (iii) a change in
the definition of Operating Surplus in the ETP partnership agreement to provide that such term will include an amount equal to the operating surplus of Regency. See The MergerETP Partnership Agreement Amendment.
Regulatory Approvals and Clearances Required for the Merger (See page 79)
Consummation of the merger is subject to the expiration or termination of the applicable waiting period under the HSR Act, if any. On
February 11, 2015, ETP and Regency filed Notification and Report Forms with the Antitrust Division of the Department of Justice (the Antitrust Division) and the Federal Trade Commission (the FTC). On February 24,
2015, the FTC granted early termination of the waiting period under the HSR Act. See The MergerRegulatory Approvals and Clearances Required for the Merger.
18
No Solicitation by Regency of Alternative Proposals (See page 86)
Under the merger agreement, Regency has agreed that it will not, and will cause its subsidiaries and use reasonable best efforts to cause its
and its subsidiaries directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives not to, directly or indirectly:
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solicit, initiate, knowingly facilitate, knowingly encourage (including by way of furnishing confidential information) or knowingly induce or take any other action intended to lead to any inquiries or any proposals that
constitute the submission of an alternative proposal; |
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grant approval to any person to acquire 20% or more of any partnership securities issued by Regency without such person being subject to the limitations in Regencys partnership agreement that prevents certain
persons or groups that beneficially own 20% or more of any outstanding partnership securities of any class then outstanding from voting any partnership securities of such party on any matter; or |
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except as permitted by the merger agreement, enter into any confidentiality agreement, merger agreement, letter of intent, agreement in principle, unit purchase agreement, asset purchase agreement or unit exchange
agreement, option agreement or other similar agreement relating to an alternative proposal. |
In addition, the merger
agreement requires Regency and its subsidiaries to (i) cease and cause to be terminated any discussions or negotiations with any persons conducted prior to the execution of the merger agreement regarding an alternative proposal,
(ii) request the return or destruction of all confidential information previously provided to any such persons and (iii) immediately prohibit any access by any persons (other than the other party and its representatives) to any physical or
electronic data room relating to a possible alternative proposal.
Notwithstanding these restrictions, the merger agreement provides that,
under specified circumstances at any time prior to Regency unitholders voting in favor of adopting the merger agreement, Regency may furnish information, including confidential information, with respect to it and its subsidiaries to, and participate
in discussions or negotiations with, any third party that makes a written alternative proposal that the Regency Board (upon the recommendation of the Regency Conflicts Committee) believes is bona fide so long as (after consultation with its
financial advisors and outside legal counsel) the Regency Board determines in good faith that (i) such alternative proposal constitutes or could reasonably be expected to lead to or result in a superior proposal, (ii) failure to furnish
such information or participate in such discussions would be inconsistent with the Regency Boards duties under the Regency partnership agreement and (iii) such alternative proposal did not result from a material breach of the no solicitation
provisions in the merger agreement.
Regency has also agreed in the merger agreement that it (i) will promptly, and in any event
within 24 hours after receipt, notify ETP of any alternative proposal or any request for information or inquiry with regard to any alternative proposal and the identity of the person making any such alternative proposal, request or inquiry
(including providing ETP with copies of any written materials received from or on behalf of such person relating to such proposal, offer, request or inquiry) and (ii) will provide ETP the terms, conditions and nature of any such alternative
proposal, request or inquiry. In addition, Regency agrees to keep ETP reasonably informed of all material developments affecting the status and terms of any such alternative proposals, offers, inquiries or requests (and promptly provide ETP with
copies of any written materials received by it or that it has delivered to any third party making an alternative proposal that relate to such proposals, offers, requests or inquiries) and of the status of any such discussions or negotiations.
19
Change in Regency Board Recommendation (See page 87)
The merger agreement provides that Regency will not, and will cause its subsidiaries and use reasonable best efforts to cause its
representatives not to, directly or indirectly, withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to ETP, the recommendation of the Regency Board that Regencys unitholders adopt the merger
agreement or publicly recommend the approval or adoption of, or publicly approve or adopt, or propose to publicly recommend, approve or adopt, any alternative proposal. In addition, subject to certain limitations, if Regency receives an alternative
proposal it will, within five business days of receipt of a written request from ETP, publicly reconfirm the recommendation of the Regency Board that Regencys unitholders adopt the merger agreement and Regency may not unreasonably withhold,
delay (beyond the five business day period) or condition such public reconfirmation.
Regencys taking or failing to take, as
applicable, any of the actions described above is referred to as an adverse recommendation change.
Subject to the
satisfaction of specified conditions in the merger agreement described under Proposal 1: The Merger AgreementChange in Regency Board Recommendation, the Regency Board may, at any time prior to the adoption of the merger agreement
by Regency unitholders, effect an adverse recommendation change in response to either (i) any alternative proposal constituting a superior proposal or (ii) a changed circumstance that was not known to or reasonably foreseeable by the
Regency Board prior to the date of the merger agreement, in each case if the Regency Board, upon the recommendation of the Regency Conflicts Committee and after consultation with its outside legal counsel and financial advisors, determines in good
faith that the failure to take such action would be inconsistent with its duties under the Regency partnership agreement or applicable law.
Termination of the Merger Agreement (See page 91)
ETP or Regency may terminate the merger agreement at any time prior to the
effective time:
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by mutual written consent; |
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by either ETP or Regency: |
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if the merger has not occurred on or before December 31, 2015 (the outside date); provided, that the right to terminate is not available to a party if the inability to satisfy such condition was
due to the failure of such party to perform any of its obligations under the merger agreement or if the other party has filed and is pursuing an action seeking specific performance pursuant to the terms of the agreement; |
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if any governmental authority has issued a final and nonappealable law, injunction, judgment or ruling that enjoins or otherwise prohibits the consummation of the transactions contemplated by the merger agreement or
makes the transactions contemplated by the merger agreement illegal; provided, however, that the right to terminate is not available to a party if such final law, injunction, judgment or rule was due to the failure of such party to
perform any of its obligations under the agreement; or |
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if the unitholders of Regency do not adopt the merger agreement at the special meeting or any adjournment or postponement of such meeting; |
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if an adverse recommendation change by the Regency Board shall have occurred; |
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if prior to the adoption of the merger agreement by Regency unitholders, Regency is in willful breach of its obligations to (i) duly call, give
notice of and hold a special meeting of Regency unitholders for the purpose of obtaining unitholder approval of the merger agreement, use its |
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reasonable best efforts to solicit proxies from unitholder in favor of such adoption and, through the Regency Board, recommend the adoption of the merger agreement to Regency unitholders or
(ii) comply with the requirements described under Proposal 1: The Merger AgreementNo Solicitation by Regency of Alternative Proposals, in each case, subject to certain exceptions discussed in Proposal 1: The Merger
AgreementTermination of the Merger Agreement; or |
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if there is a breach by Regency of any of its representations, warranties, covenants or agreements in the merger agreement such that certain closing conditions would not be satisfied, or if capable of being cured, such
breach has not been cured within 30 days following delivery of written notice of such breach by Regency, subject to certain exceptions discussed in Proposal 1: The Merger AgreementTermination of the Merger Agreement;
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if there is a breach by ETP of any of its representations, warranties, covenants or agreements in the merger agreement such that certain closing conditions would not be satisfied, or if capable of being cured, such
breach has not been cured within 30 days following delivery of written notice of such breach by ETP, subject to certain exceptions discussed in Proposal 1: The Merger AgreementTermination of the Merger Agreement; or
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prior to the adoption of the merger agreement by Regencys unitholders, in order to enter into (concurrently with such termination) any agreement, understanding or arrangement providing for a superior proposal in
accordance with the requirements described under Proposal 1: The Merger AgreementNo Solicitation by Regency of Alternative Proposals, including payment of the termination fee. |
Expenses (See page 93)
Generally, all fees and expenses incurred in connection with the transactions contemplated by the merger agreement will be the obligation of
the respective party incurring such fees and expenses.
In addition, following a termination of the merger agreement in specified
circumstances, including if Regency unitholder approval is not obtained, Regency will be required to pay all of the reasonably documented out-of-pocket expenses incurred by ETP and its affiliates in connection with the merger agreement and the
transactions contemplated thereby, up to a maximum amount of $20.0 million. Following payment of the termination fee, Regency will not be obligated to pay any additional expenses incurred by ETP or its affiliates.
Termination Fee (See page 92)
Following termination of the merger agreement under specified circumstances, including due to an adverse recommendation change having occurred,
Regency will be required to pay ETP a termination fee of $450 million, less any expenses previously reimbursed by Regency pursuant to the merger agreement. Following payment of the termination fee, Regency will not be obligated to pay any additional
expenses incurred by ETP or its affiliates.
Comparison of Rights of ETP Unitholders and Regency Unitholders (See page 134)
Regency unitholders will own ETP common units following the completion of the merger, and their rights associated with those ETP
common units will be governed by the ETP partnership agreement, which differs in a number of respects from the Regency partnership agreement, and the Delaware LP Act.
21
Litigation Relating to the Merger (See page 81)
Following the public announcement of the merger, nine putative unitholder class action and/or derivative action lawsuits were filed against
Regency GP, the members of the Regency Board, ETP, ETP GP, ETE and, in the non-derivative actions, Regency. Six of the nine actions were filed in the United States District Court for the Northern District of Texas, and the other three actions were
filed one in each of the 162nd, 134th and 192nd Judicial District Courts of Dallas County,
Texas. Among other remedies, the plaintiffs seek to enjoin the transactions contemplated by the merger agreement. For more information, please read The MergerLitigation Relating to the Merger.
Corporate Structure Prior to and Following the Mergers
The following represents the simplified corporate structure of ETE, ETP and Regency prior to the mergers:
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The following represents the simplified corporate structure of ETE, ETP and Regency
following the completion of the mergers:
23
Selected Historical Consolidated Financial Data of ETP
The following table shows ETPs selected audited historical consolidated financial data as of and for each of the years ended
December 31, 2014, 2013, 2012, 2011 and 2010 and are derived from ETPs consolidated financial statements.
You should read the
following historical financial data in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the related notes thereto set forth in
ETPs Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this proxy statement/prospectus. See Where You Can Find More Information.
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Historical |
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(Dollars in millions, except per unit data) |
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Year Ended December 31, |
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2014 |
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2013 |
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2012 |
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2011 |
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2010 |
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Statement of Operations Data: |
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Total revenues |
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$ |
51,158 |
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$ |
46,339 |
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$ |
15,702 |
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$ |
6,799 |
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$ |
5,843 |
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Operating income |
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2,475 |
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1,541 |
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|
1,394 |
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|
|
1,247 |
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|
|
1,065 |
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Income from continuing operations |
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1,489 |
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735 |
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1,757 |
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700 |
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623 |
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Basic net income (loss) per limited partner unit |
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1.77 |
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(0.18 |
) |
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4.43 |
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1.10 |
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1.20 |
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Diluted net income (loss) per limited partner unit |
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1.77 |
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(0.18 |
) |
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4.42 |
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1.10 |
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1.19 |
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Cash distributions per unit |
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3.8600 |
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3.6125 |
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3.5750 |
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3.5750 |
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3.5750 |
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Balance Sheet Data (at period end): |
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Total assets |
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48,221 |
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43,702 |
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|
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43,230 |
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|
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15,519 |
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|
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12,150 |
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Long-term debt, less current maturities |
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18,332 |
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16,451 |
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|
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15,442 |
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|
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7,388 |
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|
|
6,405 |
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Total equity |
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18,264 |
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|
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16,288 |
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|
|
17,332 |
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|
|
6,350 |
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|
|
4,743 |
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Other Financial Data: |
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Capital expenditures: |
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|
|
|
|
|
|
|
|
|
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|
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Maintenance (accrual basis) |
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|
343 |
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|
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343 |
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313 |
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|
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134 |
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99 |
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Growth (accrual basis) |
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4,135 |
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|
|
2,112 |
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|
|
2,736 |
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|
|
1,350 |
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|
|
1,276 |
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Cash paid for acquisitions |
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|
1,562 |
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|
|
1,737 |
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|
|
1,364 |
|
|
|
1,972 |
|
|
|
178 |
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Selected Historical Consolidated Financial Data of Regency
The following summary historical consolidated balance sheet data as of December 31, 2014, 2013, 2012, 2011 and 2010 and the summary
historical consolidated statement of operations for the years ended December 31, 2014, 2013, 2012 and 2011 and for the period from January 1, 2010 to May 25, 2010 and the period from May 26, 2010 to December 31, 2010, are
derived from Regencys audited historical consolidated financial statements. On April 30, 2013, Regency acquired Southern Union Gathering Company, LLC (SUGS). Regency accounted for the acquisition in a manner similar to the
pooling of interest method of accounting as it was a transaction between commonly controlled entities. Under this method of accounting, Regency reflected historical balance sheet data for Regency and SUGS instead of reflecting the fair market value
of SUGS assets and liabilities from the date of acquisition forward. Regency retrospectively adjusted its financial statements to include the balances and operations of SUGS from March 26, 2012 (the date upon which common control began). The
SUGS acquisition does not impact historical earnings per unit as pre-acquisition earnings were allocated to predecessor equity. As a result of this accounting treatment, the balances and operations of SUGS are included in the financial data of both
ETP and Regency for the period from March 26, 2012 to April 30, 2013.
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You should read the following historical consolidated financial data in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the related notes thereto set forth in Regencys Annual Report on Form 10-K for the year ended
December 31, 2014, which is incorporated by reference into this proxy statement/prospectus. See Where You Can Find More Information.
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Successor |
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Predecessor |
|
|
|
Year Ended December 31, |
|
|
Period from May 26, 2010 to December 31, 2010 |
|
|
Period from January 1, 2010 to May 25, 2010 |
|
(Dollars in millions, except per unit data) |
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
|
|
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
4,951 |
|
|
$ |
2,521 |
|
|
$ |
2,000 |
|
|
$ |
1,434 |
|
|
$ |
716 |
|
|
$ |
505 |
|
Total operating costs and expenses |
|
|
4,968 |
|
|
|
2,466 |
|
|
|
1,970 |
|
|
|
1,394 |
|
|
|
702 |
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(17 |
) |
|
|
55 |
|
|
|
30 |
|
|
|
40 |
|
|
|
14 |
|
|
|
20 |
|
Other income and deductions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated affiliates |
|
|
195 |
|
|
|
135 |
|
|
|
105 |
|
|
|
120 |
|
|
|
54 |
|
|
|
16 |
|
Interest expense, net |
|
|
(304 |
) |
|
|
(164 |
) |
|
|
(122 |
) |
|
|
(103 |
) |
|
|
(48 |
) |
|
|
(35 |
) |
Loss on debt refinancing, net |
|
|
(25 |
) |
|
|
(7 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
(2 |
) |
Other income and deductions, net |
|
|
12 |
|
|
|
7 |
|
|
|
29 |
|
|
|
17 |
|
|
|
(8 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
|
(139 |
) |
|
|
26 |
|
|
|
34 |
|
|
|
74 |
|
|
|
(4 |
) |
|
|
(5 |
) |
Income tax expense (benefit) |
|
|
3 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(142 |
) |
|
|
27 |
|
|
|
34 |
|
|
|
74 |
|
|
|
(5 |
) |
|
|
(5 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from operations of east Texas assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(142 |
) |
|
|
27 |
|
|
|
34 |
|
|
|
74 |
|
|
|
(6 |
) |
|
|
(5 |
) |
Net income (loss) attributable to noncontrolling interest |
|
|
(15 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Regency Energy Partners LP |
|
$ |
(157 |
) |
|
$ |
19 |
|
|
$ |
32 |
|
|
$ |
72 |
|
|
$ |
(6 |
) |
|
$ |
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) from continuing operations per common and subordinated unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) from continuing operations per common and subordinated unit |
|
$ |
(0.57 |
) |
|
$ |
0.17 |
|
|
$ |
0.16 |
|
|
$ |
0.39 |
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
Diluted income (loss) from continuing operations per common and subordinated units |
|
$ |
(0.57 |
) |
|
$ |
0.17 |
|
|
$ |
0.13 |
|
|
$ |
0.32 |
|
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
Distributions per common and subordinated unit |
|
|
1.975 |
|
|
|
1.87 |
|
|
|
1.84 |
|
|
|
1.81 |
|
|
|
0.89 |
|
|
|
0.89 |
|
Basic and diluted income (loss) from discontinued operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(0.01 |
) |
|
$ |
|
|
Basic net income (loss) per unit |
|
$ |
(0.57 |
) |
|
$ |
0.17 |
|
|
$ |
0.16 |
|
|
$ |
0.39 |
|
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
Diluted net income (loss) per common and subordinated unit |
|
$ |
(0.57 |
) |
|
|
0.17 |
|
|
|
0.13 |
|
|
|
0.32 |
|
|
|
(0.10 |
) |
|
|
(0.10 |
) |
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
|
December 31, 2012 |
|
|
December 31, 2011 |
|
(Dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
9,217 |
|
|
$ |
4,418 |
|
|
$ |
3,686 |
|
|
$ |
1,886 |
|
Total assets |
|
|
17,103 |
|
|
|
8,782 |
|
|
|
8,123 |
|
|
|
5,568 |
|
Long-term debt (long-term portion only) |
|
|
6,641 |
|
|
|
3,310 |
|
|
|
2,157 |
|
|
|
1,687 |
|
Series A Preferred Units |
|
|
33 |
|
|
|
32 |
|
|
|
73 |
|
|
|
71 |
|
Partners capital and noncontrolling interest |
|
|
9,585 |
|
|
|
4,916 |
|
|
|
5,340 |
|
|
|
3,531 |
|
Selected Unaudited Pro Forma Financial Information
The following selected unaudited pro forma condensed consolidated balance sheet data as of December 31, 2014 reflects the merger as if it
occurred on December 31, 2014. The unaudited pro forma condensed consolidated statement of continuing operations data for the years ended December 31, 2014, 2013 and 2012 reflect the merger as if it occurred on January 1, 2012.
The following selected unaudited pro forma combined financial information has been prepared for illustrative purposes only and is not
necessarily indicative of what the combined organizations condensed financial position or results of operations actually would have been had the merger been completed as of the dates indicated. In addition, the unaudited pro forma combined
financial information does not purport to project the future financial position or operating results of the combined organization. Future results may vary significantly from the results reflected because of various factors. The following selected
unaudited pro forma combined financial information should be read in conjunction with the section entitled Energy Transfer Partners, L.P. Unaudited Pro Forma Financial Information and related notes included in this proxy
statement/prospectus.
Unaudited Pro Forma Condensed Consolidated Balance Sheet Data as of December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
ETP Pro Forma for Merger |
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
48,221 |
|
|
$ |
17,103 |
|
|
$ |
(2,650 |
) |
|
$ |
62,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
$ |
6,040 |
|
|
$ |
756 |
|
|
$ |
(112 |
) |
|
$ |
6,684 |
|
Total long-term debt, less current maturities |
|
|
18,332 |
|
|
|
6,641 |
|
|
|
|
|
|
|
24,973 |
|
Total equity |
|
|
18,264 |
|
|
|
9,585 |
|
|
|
(2,538 |
) |
|
|
25,311 |
|
Total liabilities and equity |
|
$ |
48,221 |
|
|
$ |
17,103 |
|
|
$ |
(2,650 |
) |
|
$ |
62,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Unaudited Pro Forma Condensed Consolidated Statement of Continuing Operations for the Year Ended
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions except per unit data) |
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
ETP Pro Forma for Regency Merger |
|
Revenues |
|
$ |
51,158 |
|
|
$ |
4,951 |
|
|
$ |
(524 |
) |
|
$ |
55,585 |
|
Income from Continuing Operations |
|
$ |
1,489 |
|
|
$ |
(142 |
) |
|
$ |
(114 |
) |
|
$ |
1,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners Allocation of Income from Continuing Operations |
|
$ |
525 |
|
|
$ |
(199 |
) |
|
$ |
9 |
|
|
$ |
335 |
|
Income from Continuing Operations per Common Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.58 |
|
|
$ |
(0.57 |
) |
|
|
|
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
1.58 |
|
|
$ |
(0.57 |
) |
|
|
|
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed Consolidated Statement of Continuing Operations for the Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions except per unit data) |
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
ETP Pro Forma for Regency Merger |
|
Revenues |
|
$ |
46,339 |
|
|
$ |
2,521 |
|
|
$ |
(514 |
) |
|
$ |
48,346 |
|
Income from Continuing Operations |
|
$ |
735 |
|
|
$ |
27 |
|
|
$ |
(54 |
) |
|
$ |
708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners Allocation of Income from Continuing Operations |
|
$ |
(78 |
) |
|
$ |
34 |
|
|
$ |
(18 |
) |
|
$ |
(62 |
) |
Income (Loss) from Continuing Operations per Common Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.23 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(0.23 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Condensed Consolidated Statement of Continuing Operations for the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions except per unit data) |
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
ETP Pro Forma for Regency Merger |
|
Revenues |
|
$ |
15,702 |
|
|
$ |
2,000 |
|
|
$ |
(708 |
) |
|
$ |
16,994 |
|
Income from Continuing Operations |
|
$ |
1,757 |
|
|
$ |
34 |
|
|
$ |
(36 |
) |
|
$ |
1,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners Allocation of Income from Continuing Operations |
|
$ |
1,224 |
|
|
$ |
27 |
|
|
$ |
(6 |
) |
|
$ |
1,245 |
|
Income from Continuing Operations per Common Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
4.93 |
|
|
$ |
0.16 |
|
|
|
|
|
|
$ |
3.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
4.91 |
|
|
$ |
0.13 |
|
|
|
|
|
|
$ |
3.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Unaudited Comparative Per Unit Information
The table below sets forth historical and unaudited pro forma combined per unit information of ETP and Regency.
Historical Per Unit Information of ETP and Regency
The historical per unit information of ETP and Regency set forth in the table below is derived from the audited consolidated financial
statements as of and for the years ended December 31, 2014 and 2013 for each of ETP and Regency.
Pro Forma Combined Per Unit Information of
ETP
The unaudited pro forma combined per unit information of ETP set forth in the table below gives effect to the merger under the
purchase method of accounting, as if the merger had been effective on January 1, 2012, in the case of income from continuing operations per unit and cash distributions data, and December 31, 2014, in the case of book value per unit data, and,
in each case, assuming that a number of ETP common units equal to 0.4066 plus the number of ETP common units that would represent the additional unit consideration if the merger had been effective on such date have been issued in exchange for each
outstanding Regency common unit and Class F unit, after giving effect to the settlement of outstanding Regency phantom units, Regency unit options and Regency cash units in accordance with the merger agreement. The unaudited pro forma combined per
unit information of ETP is derived from the audited consolidated financial statements as of and for the years ended December 31, 2014 and 2013 for each of ETP and Regency.
Equivalent Pro Forma Combined Per Unit Information of Regency
The unaudited Regency equivalent pro forma per unit amounts set forth in the table below are calculated by multiplying the unaudited pro forma
combined per unit amounts of ETP by the sum of the exchange ratio of 0.4066 and the number of ETP common units that would represent the additional unit consideration if the merger had been effective on January 1, 2012 or December 31, 2014, as
applicable.
General
You
should read the information set forth below in conjunction with the selected historical financial information of ETP and Regency included elsewhere in this proxy statement/prospectus and the historical financial statements and related notes of ETP
and Regency that are incorporated into this proxy statement/prospectus by reference. See Selected Historical Consolidated Financial Data of ETP, Selected Historical Consolidated Financial Data of Regency and
Where You Can Find More Information.
The accounting for an acquisition of a business is based on the authoritative guidance
for business combinations. Purchase accounting requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the date the merger is completed. The allocation of the purchase price is
dependent upon certain valuations of Regencys assets and liabilities and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments
reflect the assets and liabilities of Regency at their preliminary estimated fair values. Differences between these preliminary estimates and the final purchase accounting will occur, and these differences could have a material impact on the
unaudited pro forma combined per unit information set forth in the following table.
28
The unaudited pro forma per unit information of ETP does not purport to represent the actual
results of operations that ETP would have achieved or distributions that would have been declared had the companies been combined during these periods or to project the future results of operations that ETP may achieve or the distributions it may
pay after the merger.
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended December 31, 2014 |
|
|
As of and for the Year Ended December 31, 2013 |
|
|
|
(in millions, except per unit data) |
|
HistoricalETP |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1,489 |
|
|
$ |
735 |
|
Distribution per common unit declared for the period |
|
$ |
3.8600 |
|
|
$ |
3.6125 |
|
Book value per limited partner unit |
|
$ |
29.49 |
|
|
$ |
28.08 |
|
|
|
|
|
|
As of and for the Year Ended December 31, 2014 |
|
|
As of and for the Year Ended December 31, 2013 |
|
|
|
(in millions, except per unit data) |
|
HistoricalRegency |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
(142 |
) |
|
$ |
27 |
|
Distribution per common unit declared for the period |
|
$ |
1.975 |
|
|
$ |
1.87 |
|
Book value per limited partner unit |
|
$ |
20.81 |
|
|
$ |
18.38 |
|
|
|
|
|
|
As of and for the Year Ended December 31, 2014 |
|
|
As of and for the Year Ended December 31, 2013 |
|
|
|
(in millions, except per unit data) |
|
Pro Forma Combined |
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1,233 |
|
|
$ |
708 |
|
Book value per limited partner unit |
|
$ |
34.83 |
|
|
$ |
29.26 |
|
Comparative Unit Prices and Distributions
ETP common units are currently listed on the NYSE under the ticker symbol ETP. Regency common units are currently listed on the
NYSE under the ticker symbol RGP. The table below sets forth, for the calendar quarters indicated, the high and low sale prices per ETP common unit on the NYSE and per Regency common unit on the NYSE. The table also shows the amount of
cash distributions declared on ETP common units and Regency common units, respectively, for the calendar quarters indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Common Units |
|
|
Regency Common Units |
|
|
|
High |
|
|
Low |
|
|
Cash Distributions |
|
|
High |
|
|
Low |
|
|
Cash Distributions |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter (through March 20, 2015) |
|
$ |
66.58 |
|
|
$ |
53.25 |
|
|
|
|
|
|
$ |
27.27 |
|
|
$ |
20.45 |
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter |
|
$ |
69.66 |
|
|
$ |
53.12 |
|
|
$ |
0.99500 |
|
|
$ |
32.86 |
|
|
$ |
22.07 |
|
|
$ |
0.5025 |
|
Third quarter |
|
|
64.13 |
|
|
|
54.64 |
|
|
|
0.97500 |
|
|
|
33.57 |
|
|
|
29.54 |
|
|
|
0.5025 |
|
Second quarter |
|
|
58.20 |
|
|
|
53.62 |
|
|
|
0.95500 |
|
|
|
32.22 |
|
|
|
25.67 |
|
|
|
0.4900 |
|
First quarter |
|
|
57.00 |
|
|
|
52.49 |
|
|
|
0.93500 |
|
|
|
27.91 |
|
|
|
25.29 |
|
|
|
0.4800 |
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter |
|
|
57.31 |
|
|
|
50.60 |
|
|
|
0.92000 |
|
|
|
29.52 |
|
|
|
23.86 |
|
|
|
0.4750 |
|
Third quarter |
|
|
54.85 |
|
|
|
49.40 |
|
|
|
0.90500 |
|
|
|
29.35 |
|
|
|
25.57 |
|
|
|
0.4700 |
|
Second quarter |
|
|
53.00 |
|
|
|
45.16 |
|
|
|
0.89375 |
|
|
|
27.15 |
|
|
|
23.70 |
|
|
|
0.4650 |
|
First quarter |
|
|
50.71 |
|
|
|
43.67 |
|
|
|
0.89375 |
|
|
|
25.66 |
|
|
|
22.03 |
|
|
|
0.4600 |
|
29
The following table presents per unit closing prices of ETP common units and Regency
common units on (i) January 23, 2015, the last trading day before the public announcement of the merger, and (ii) on March 20, 2015, the most recent practicable trading day before the date of this proxy statement/prospectus. This
table also presents the equivalent market value per Regency common unit on such dates. The equivalent market value per Regency common unit has been determined by multiplying the closing prices of ETP common units on those dates by the sum of the
exchange ratio and the number of ETP common units representing the additional unit consideration if the merger had been effective on such date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Common Units |
|
|
Regency Common Units |
|
|
Equivalent Market Value per Regency Common Unit |
|
January 23, 2015 |
|
$ |
65.34 |
|
|
$ |
23.75 |
|
|
$ |
26.85 |
|
March 20, 2015 |
|
$ |
56.26 |
|
|
$ |
23.14 |
|
|
$ |
23.20 |
|
Although the exchange ratio is fixed, the market prices of ETP common units and Regency common units will
fluctuate prior to the consummation of the merger and the market value of the unit consideration portion of the merger consideration ultimately received by Regency unitholders will depend on the closing price of ETP common units on the day the
merger is consummated. Likewise, the number of ETP common units that will ultimately be received by unitholders as the additional unit consideration will depend on either (i) the volume weighted average price of ETP common units on the NYSE for
the five trading days ending on the third trading day immediately preceding the effective time of the merger or (ii) the closing price of ETP common units on the NYSE on the third day immediately preceding the effective time of the merger,
whichever is lower. Thus, Regency unitholders will not know the exact market value of the merger consideration or the total number of ETP common units they will receive until the closing of the merger.
30
RISK FACTORS
In addition to the other information included and incorporated by reference into this proxy statement/prospectus, including the matters
addressed in the section titled Cautionary Statement Regarding Forward-Looking Statements, you should carefully consider the following risks before deciding whether to vote for the adoption of the merger agreement. In addition, you
should read and carefully consider the risks associated with each of ETP and Regency and their respective businesses. These risks can be found in ETPs and Regencys respective Annual Reports on Form 10-K for the year ended
December 31, 2014, which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For further information regarding the documents incorporated into this proxy statement/prospectus by reference, please see the
section titled Where You Can Find More Information. Realization of any of the risks described below, any of the events described under Cautionary Statement Regarding Forward-Looking Statements or any of the risks or events
described in the documents incorporated by reference could have a material adverse effect on ETPs, Regencys or the combined organizations businesses, financial condition, cash flows and results of operations and could result in a
decline in the trading prices of their respective common units.
Risk Factors Relating to the Merger
Because the market price of ETP common units will fluctuate prior to the consummation of the merger, Regency unitholders cannot be sure
of the market value of the ETP common units they will receive as unit consideration relative to the value of Regency common units or Class F units they exchange, or of the number of ETP common units they will receive as additional unit
consideration.
The market value of the unit consideration that Regency unitholders will receive in the merger will depend on the
trading price of ETPs common units at the closing of the merger. The exchange ratio that determines the number of ETP common units that Regency unitholders will receive as unit consideration in the merger is fixed. This means that there is no
mechanism contained in the merger agreement that would adjust the number of ETP common units that Regency unitholders will receive as the unit consideration based on any decreases in the trading price of ETP common units. Unit price changes may
result from a variety of factors (many of which are beyond ETPs or Regencys control), including:
|
|
|
changes in ETPs business, operations and prospects; |
|
|
|
changes in market assessments of ETPs business, operations and prospects; |
|
|
|
interest rates, general market, industry and economic conditions and other factors generally affecting the price of ETP common units; and |
|
|
|
federal, state and local legislation, governmental regulation and legal developments in the businesses in which ETP operates. |
Because the merger will be completed after the special meeting, at the time of the meeting, you will not know the exact market value of the
ETP common units that the Regency unitholders will receive upon completion of the merger. If ETPs common unit price at the closing of the merger is less than ETPs common unit price on the date that the merger agreement was signed, then
the market value of the unit consideration received by Regency unitholders will be less than contemplated at the time the merger agreement was signed.
Similarly, because the number of ETP common units Regency unitholders will receive as the additional unit consideration depends on the price
of ETP common units over the days leading up to the closing of the merger, Regency unitholders cannot be sure of the total number of ETP common units they will receive for the Regency common units or Class F units they exchange.
31
ETP and Regency may be unable to obtain the regulatory clearances required to complete the
merger or, in order to do so, ETP and Regency may be required to comply with material restrictions or satisfy material conditions.
The merger is subject to review by the Antitrust Division and the FTC under the HSR Act, and potentially by state regulatory authorities. The
closing of the merger is subject to the condition that there is no law, injunction, judgment or ruling by a governmental authority in effect enjoining, restraining, preventing or prohibiting the merger contemplated by the merger agreement. ETP and
Regency can provide no assurance that all required regulatory clearances will be obtained. If a governmental authority asserts objections to the merger, ETP or Regency may be required to divest some assets in order to obtain antitrust clearance.
There can be no assurance as to the cost, scope or impact of the actions that may be required to obtain antitrust or other regulatory approval. If ETP or Regency takes such actions, it could be detrimental to it or to the combined organization
following the consummation of the merger. Furthermore, these actions could have the effect of delaying or preventing completion of the proposed merger or imposing additional costs on or limiting the revenues or cash available for distribution of the
combined organization following the consummation of the merger. See Proposal 1: The Merger AgreementRegulatory Matters.
Although the parties received early termination of the statutory waiting period under the HSR Act on February 24, 2015, the Antitrust
Division or the FTC could take action under the antitrust laws to prevent or rescind the merger, require the divestiture of assets or seek other remedies. Additionally, state attorneys general could seek to block or challenge the merger as they deem
necessary or desirable in the public interest at any time, including after completion of the transaction. In addition, in some circumstances, a third party could initiate a private action under antitrust laws challenging or seeking to enjoin the
merger, before or after it is completed. ETP may not prevail and may incur significant costs in defending or settling any action under the antitrust laws.
The fairness opinion rendered to the Regency Conflicts Committee and the Regency Board by J.P. Morgan was based on J.P. Morgans
financial analysis and considered factors such as market and other conditions then in effect, and financial forecasts and other information made available to J.P. Morgan, as of the date of the opinion. As a result, the opinion does not reflect
changes in events or circumstances after the date of such opinion, including the amendment to the merger agreement. The Regency Conflicts Committee has not obtained, and does not expect to obtain, an updated fairness opinion from J.P. Morgan
reflecting changes in circumstances that may have occurred since the signing of the merger agreement.
The fairness opinion
rendered to the Regency Conflicts Committee and the Regency Board by J.P. Morgan was provided in connection with, and at the time of, the evaluation of the merger and the merger agreement by the Regency Conflicts Committee and the Regency Board. The
opinion was based on the financial analyses performed, which considered market and other conditions then in effect, and financial forecasts and other information made available to J.P. Morgan, as of the date of the opinion, which may have changed,
or may change, after the date of the opinion. The Regency Conflicts Committee and the Regency Board have not obtained an updated opinion as of the date of the amendment to the merger agreement or as of the date of this proxy statement/prospectus
from J.P. Morgan and do not expect to obtain an updated opinion prior to completion of the merger. Changes in the operations and prospects of ETP or Regency, general market and economic conditions and other factors that may be beyond the control of
ETP and Regency, and on which the fairness opinion was based, may have altered the value of ETP or Regency or the prices of ETP common units or Regency common units since the date of such opinion, or may alter such values and prices by the time the
merger is completed. The opinion does not speak as of any date other than the date of the opinion. For a description of the opinion that J.P. Morgan rendered to the Regency Conflicts Committee and the Regency Board, please refer to The
MergerOpinion of the Financial Advisor to the Regency Conflicts Committee.
32
Regency is subject to provisions that limit its ability to pursue alternatives to the
merger, which could discourage a potential competing acquirer of Regency from making a favorable alternative transaction proposal and, in specified circumstances under the merger agreement, would require Regency to reimburse up to $20.0 million of
ETPs out-of-pocket expenses and pay a termination fee to ETP of $450 million less any previous expense reimbursements.
Under
the merger agreement, Regency is restricted from entering into alternative transactions. Unless and until the merger agreement is terminated, subject to specified exceptions (which are discussed in more detail in Proposal 1: The Merger
AgreementNo Solicitation by Regency of Alternative Proposals), Regency is restricted from soliciting, initiating, knowingly facilitating, knowingly encouraging or knowingly inducing or negotiating, any inquiry, proposal or offer for a
competing acquisition proposal with any person. In addition, Regency may not grant approval to any person to acquire 20% or more of any class of its outstanding units without such person losing the ability to vote on any matter under the Regency
partnership agreement. Under the merger agreement, in the event of a potential change by the Regency Board of its recommendation with respect to the proposed merger in light of a superior proposal, Regency must provide ETP with five days
notice to allow ETP to propose an adjustment to the terms and conditions of the merger agreement. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of Regency from considering or
proposing that acquisition, even if such third party were prepared to pay consideration with a higher per unit market value than the merger consideration, or might result in a potential competing acquirer of Regency proposing to pay a lower price
than it would otherwise have proposed to pay because of the added expense of the termination fee that may become payable in specified circumstances.
If the merger agreement is terminated under specified circumstances, including if the Regency unitholder approval is not obtained, then
Regency will be required to pay all of the reasonably documented out-of-pocket expenses incurred by ETP and its affiliates in connection with the merger agreement and the transactions contemplated thereby, up to a maximum amount of $20.0 million. In
addition, if the merger agreement is terminated in specified circumstances, including due to an adverse recommendation change having occurred, Regency will be required to pay ETP a termination fee of $450 million, less any expenses previously paid
by Regency. Following payment of the termination fee, Regency will not be obligated to pay any additional expenses incurred by ETP or its affiliates. Please read Proposal 1: The Merger AgreementExpenses and Termination
Fee. If such a termination fee is payable, the payment of this fee could have material and adverse consequences to the financial condition and operations of Regency. For a discussion of the restrictions on soliciting or entering into a
takeover proposal or alternative transaction and the ability of the Regency Board to change its recommendation, see Proposal 1: The Merger AgreementNo Solicitation by Regency of Alternative Proposals and Change in
Regency Board Recommendation.
Directors and executive officers of Regency have certain interests that are different from
those of Regency unitholders generally.
Directors and executive officers of Regency are parties to agreements or participants in
other arrangements that give them interests in the merger that may be different from, or be in addition to, your interests as a unitholder of Regency. You should consider these interests in voting on the merger. These different interests are
described under The MergerInterests of Directors and Executive Officers of Regency in the Merger.
ETP or Regency
may have difficulty attracting, motivating and retaining executives and other employees in light of the merger.
Uncertainty about
the effect of the merger on ETP or Regency employees may have an adverse effect on the combined organization. This uncertainty may impair these companies ability to attract, retain and motivate personnel until the merger is completed. Employee
retention may be particularly challenging during the pendency of the merger, as employees may feel uncertain about their future roles with the combined organization. In addition, Regency may have to provide additional compensation in order to retain
employees. If employees of Regency depart because of issues relating to the uncertainty and difficulty of integration or a desire
33
not to become employees of the combined organization, the combined organizations ability to realize the anticipated benefits of the merger could be reduced.
ETP and Regency are subject to business uncertainties and contractual restrictions while the proposed merger is pending, which could
adversely affect each partys business and operations.
In connection with the pending merger, it is possible that some
customers, suppliers and other persons with whom ETP or Regency have business relationships may delay or defer certain business decisions or, might decide to seek to terminate, change or renegotiate their relationship with ETP or Regency as a result
of the merger, which could negatively affect ETPs and Regencys respective revenues, earnings and cash available for distribution, as well as the market price of ETP common units and Regency common units, regardless of whether the merger
is completed.
Under the terms of the merger agreement, each of ETP and Regency is subject to certain restrictions on the conduct of its
business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies. Such limitations could negatively affect each partys businesses and operations prior to the completion of the
merger. Furthermore, the process of planning to integrate two businesses and organizations for the post-merger period can divert management attention and resources and could ultimately have an adverse effect on each party. For a discussion of these
restrictions, see Proposal 1: The Merger AgreementConduct of Business Pending the Consummation of the Merger.
ETP
and Regency will incur substantial transaction-related costs in connection with the merger.
ETP and Regency expect to incur a
number of non-recurring transaction-related costs associated with completing the merger, combining the operations of the two organizations and achieving desired synergies. These fees and costs will be substantial. Non-recurring transaction costs
include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees and printing costs. Additional unanticipated costs may be incurred in the integration of the businesses of ETP and Regency. There can be no assurance
that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, will offset the incremental transaction-related costs over time. Thus, any net benefit may not be
achieved in the near term, the long term or at all.
Failure to successfully combine the businesses of ETP and Regency in the
expected time frame may adversely affect the future results of the combined organization, and, consequently, the value of the ETP common units that Regency unitholders receive as part of the merger consideration.
The success of the proposed merger will depend, in part, on the ability of ETP to realize the anticipated benefits and synergies from combining
the businesses of ETP and Regency. To realize these anticipated benefits, the businesses must be successfully combined. If the combined organization is not able to achieve these objectives, or is not able to achieve these objectives on a timely
basis, the anticipated benefits of the merger may not be realized fully or at all. In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the merger. These integration
difficulties could result in declines in the market value of ETPs common units and, consequently, result in declines in the market value of the ETP common units that Regency unitholders receive as part of the merger consideration.
The merger is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all. Failure to
complete the merger, or significant delays in completing the merger, could negatively affect the trading prices of ETP common units and Regency common units and the future business and financial results of ETP and Regency.
The completion of the merger is subject to a number of conditions. The completion of the merger is not assured and is subject to risks,
including the risk that approval of the merger by Regency unitholders or by governmental agencies is not obtained or that other closing conditions are not satisfied. If the merger is not
34
completed, or if there are significant delays in completing the merger, the trading prices of ETP common units and Regency common units and the respective future business and financial results of
ETP and Regency could be negatively affected, and each of them will be subject to several risks, including the following:
|
|
|
the parties may be liable for damages to one another under the terms and conditions of the merger agreement; |
|
|
|
negative reactions from the financial markets, including declines in the price of ETP common units or Regency common units due to the fact that current prices may reflect a market assumption that the merger will be
completed; |
|
|
|
having to pay certain significant costs relating to the merger, including, in certain circumstances, the reimbursement by Regency of up to $20.0 million of ETPs expenses and a termination fee of $450 million
less any previous expense reimbursements by Regency, as described in Proposal 1: The Merger AgreementExpenses and Termination Fee; and |
|
|
|
the attention of management of ETP and Regency will have been diverted to the merger rather than each organizations own operations and pursuit of other opportunities that could have been beneficial to that
organization. |
If the merger is approved by Regency unitholders, the date that Regency unitholders will receive the
merger consideration is uncertain.
As described in this proxy statement/prospectus, completing the proposed merger is subject to
several conditions, not all of which are controllable or waiveable by ETP or Regency. Accordingly, if the proposed merger is approved by Regency unitholders, the date that Regency unitholders will receive the merger consideration depends on the
completion date of the merger, which is uncertain.
Regencys financial estimates are based on various assumptions that may not
prove to be correct.
The financial estimates set forth in the forecast included under The MergerUnaudited Financial
Projections of Regency are based on assumptions of, and information available to, Regency at the time they were prepared and provided to the Regency Board and the Regency Conflict Committee and its financial advisors. Regency does not know
whether such assumptions will prove correct. Any or all of such estimates may turn out to be wrong. Such estimates can be adversely affected by inaccurate assumptions or by known or unknown risks and uncertainties, many of which are beyond
Regencys control. Many factors mentioned in this proxy statement/prospectus, including the risks outlined in this Risk Factors section and the events or circumstances described under Cautionary Statement Regarding
Forward-Looking Statements, will be important in determining Regencys future results. As a result of these contingencies, actual future results may vary materially from Regencys estimates. In view of these uncertainties, the
inclusion of Regencys financial estimates in this proxy statement/prospectus is not and should not be viewed as a representation that the forecast results will be achieved.
Regencys financial estimates were not prepared with a view toward public disclosure, and such financial estimates were not prepared with
a view toward compliance with published guidelines of any regulatory or professional body. Further, any forward-looking statement speaks only as of the date on which it is made, and Regency undertakes no obligation, other than as required by
applicable law, to update its financial estimates herein to reflect events or circumstances after the date those financial estimates were prepared or to reflect the occurrence of anticipated or unanticipated events or circumstances.
The financial estimates included in this proxy statement/prospectus have been prepared by, and are the responsibility of, Regency. Moreover,
neither Regencys independent accountants, Grant Thornton LLP, nor any other independent accountants, have compiled, examined or performed any procedures with respect to Regencys prospective financial information contained herein, nor
have they expressed any opinion or any other form of assurance on such information or its achievability, and, accordingly, Grant Thornton LLP assumes no
35
responsibility for, and disclaims any association with, Regencys prospective financial information. The reports of Grant Thornton LLP incorporated by reference herein relate exclusively to
the historical financial information of the entities named in those reports and do not cover any other information in this proxy statement/prospectus and should not be read to do so. See The MergerUnaudited Financial Projections of
Regency for more information.
The number of outstanding ETP common units will increase as a result of the merger, which could
make it more difficult for ETP to pay the current level of quarterly distributions.
As of March 24, 2015, there were more
than 327 million ETP common units outstanding. ETP will issue approximately 172 million common units in connection with the merger. Accordingly, the aggregate dollar amount required to pay the current per unit quarterly distribution on all ETP
common units will increase, which could increase the likelihood that ETP will not have sufficient funds to pay the current level of quarterly distributions to all ETP unitholders. Using a $0.995 per ETP common unit distribution (the amount ETP paid
with respect to the fourth fiscal quarter of 2014 on February 13, 2015 to holders of record as of February 6, 2015), the aggregate cash distribution paid to ETP unitholders totaled approximately $529.1 million (net of $59.0 million of
distributions that were reinvested), including a distribution of $145.3 million to ETP GP in respect of its general partner interest and ownership of incentive distribution rights. The combined pro forma ETP distribution with respect to the fourth
fiscal quarter of 2014, had the merger been completed prior to such distribution, would have resulted in $0.979 per unit being distributed on approximately 529 million ETP common units, or a total of approximately $777 million including a
distribution of $249 million to ETP GP in respect of its general partner interest and incentive distribution rights. As a result, ETP would have been required to distribute an additional $16 million in order to maintain the distribution level of
$0.995 per ETP common unit payable with respect to the fourth fiscal quarter of 2014.
Regency unitholders will have a reduced
ownership after the merger and will exercise less influence over management.
When the merger occurs, each Regency unitholder that
receives ETP common units will become a unitholder of ETP with a percentage ownership of the combined organization that is much smaller than such unitholders percentage ownership of Regency. In addition, ETP unitholders have only limited
voting rights on matters affecting ETPs business and, therefore, limited ability to influence managements decisions regarding ETPs business. Because of this, Regency unitholders will have less influence on the management and
policies of ETP than they have now on the management and policies of Regency.
ETP common units to be received by Regency
unitholders as a result of the merger have different rights from Regency common units.
Following completion of the merger, Regency
unitholders will no longer hold Regency common units, but will instead be unitholders of ETP. There are important differences between the rights of Regency unitholders and the rights of ETP unitholders. See Comparison of Rights of ETP
Unitholders and Regency Unitholders for a discussion of the different rights associated with ETP common units and Regency common units.
No ruling has been obtained with respect to the U.S. federal income tax consequences of the merger.
No ruling has been or will be requested from the IRS with respect to the U.S. federal income tax consequences of the merger. Instead, ETP and
Regency are relying on the opinions of their respective counsel as to the U.S. federal income tax consequences of the merger, and such counsels conclusions may not be sustained if challenged by the IRS. Please read Material U.S. Federal
Income Tax Consequences of the Merger.
36
The expected U.S. federal income tax consequences of the merger are dependent upon ETP and
Regency being treated as partnerships for U.S. federal income tax purposes.
The treatment of the merger as nontaxable to ETP and
Regency unitholders is dependent upon ETP and Regency each being treated as a partnership for U.S. federal income tax purposes. If ETP or Regency were treated as a corporation for U.S. federal income tax purposes, the consequences of the merger
would be materially different and the merger would likely be a fully taxable transaction to a Regency unitholder.
Regency
unitholders could recognize taxable income or gain for U.S. federal income tax purposes as a result of the merger.
For U.S.
federal income tax purposes, Regency will be deemed to contribute all of its assets to ETP in exchange for ETP units and the assumption of Regencys liabilities followed by a liquidation of Regency in which ETP units are distributed to Regency
unitholders. In addition, as a result of the merger, Regency unitholders who receive ETP units will become limited partners of ETP for U.S. federal income tax purposes and will be allocated a share of ETPs nonrecourse liabilities. Each Regency
unitholder will be treated as receiving a deemed cash distribution equal to the excess, if any, of such unitholders share of nonrecourse liabilities of Regency immediately before the merger over such unitholders share of nonrecourse
liabilities of ETP immediately following the merger. If the amount of any deemed cash distribution received by a Regency unitholder exceeds such unitholders basis in his Regency units, such unitholder will recognize gain in an amount equal to
such excess. While there can be no assurance, ETP and Regency expect that most Regency unitholders will not recognize gain in this manner. The amount and effect of any gain that may be recognized by Regency unitholders will depend on the Regency
unitholders particular situation, including the ability of the Regency unitholder to utilize any suspended passive losses. For additional information, please read Material U.S. Federal Income Tax Consequences of the MergerTax
Consequences of the Merger to Regency and Material U.S. Federal Income Tax Consequences of the MergerTax Consequences of the Merger to Regency Unitholders.
A Regency unitholders holding period for ETP common units received in the merger may be shorter than such holders holding
period in the surrendered Regency common units.
As a result of the merger, Regency will be deemed to contribute its assets to ETP
in exchange for ETP units, followed by a liquidation of Regency in which ETP units are distributed to Regency unitholders. A Regency unitholders holding period in the ETP units received in the merger will not be determined by reference to its
holding period in the surrendered Regency units. Instead, a Regency unitholders holding period in the ETP units received in the merger that are attributable to Regencys capital assets or assets used in its business as defined in
Section 1231 of the Code will include Regencys holding period in those assets. The holding period for ETP units received by a Regency unitholder attributable to other assets of Regency, such as inventory and receivables will begin on the
day following the merger.
Lawsuits have been filed against Regency, Regency GP, the members of the Regency Board, ETP, ETP GP and
ETE challenging the merger, and any injunctive relief or adverse judgment, including for monetary damages, could prevent the merger from occurring or could have a material adverse effect on Regency, ETP or the combined company following the merger.
Regency, Regency GP, the members of the Regency Board, ETP, ETP GP and ETE are named defendants in purported class actions and
derivative petitions brought by purported Regency unitholders in Dallas County, Texas, generally alleging claims of breach of duties under Regencys partnership agreement, breach of the implied covenant of good faith and fair dealing in
connection with the merger, and aiding and abetting arising out of the defendants pursuit of the merger by way of an allegedly conflicted and unfair process. Similar lawsuits have been filed in the United States District Court for the Northern
District of Texas. The plaintiffs in these lawsuits seek to enjoin the defendants from proceeding with or consummating the merger and, to the extent that the merger is implemented before relief is granted, plaintiffs seek to have the merger
rescinded. Plaintiffs also
37
seek money damages and attorneys fees. One of the conditions to the completion of the merger is that no order, decree, or injunction of any court or agency of competent jurisdiction shall
be in effect, and no law shall have been enacted or adopted, that enjoins, prohibits, or makes illegal consummation of any of the transactions contemplated by the merger agreement. A preliminary injunction could delay or jeopardize the completion of
the merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the merger. An adverse judgment for rescission or for monetary damages could have a material adverse effect on Regency, ETP or the
combined company following the merger.
Risk Factors Relating to the Ownership of ETP Common Units
In addition to the risks described above, ETP is, and will continue to be, subject to the risks described in ETPs Annual Report on Form
10-K for the fiscal year ended December 31, 2014 as updated by any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy
statement/prospectus. See Where You Can Find More Information for the location of information incorporated by reference in this proxy statement/prospectus.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents incorporated herein by reference contain forward-looking statements. These forward-looking
statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as anticipate, believe, intend, plan, projection,
forecast, strategy, position, continue, estimate, expect, may, or the negative of those terms or other variations of them or comparable terminology. Forward-looking
statements are also found under The MergerUnaudited Financial Projections of Regency. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results, the ability to generate
sales, income or cash flow, to realize cost savings or other benefits associated with the merger, to service debt or to make distributions are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine actual results are
beyond the ability of ETP or Regency to control or predict. Specific factors which could cause actual results to differ from those in the forward-looking statements include:
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the ability to complete the merger; |
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the ability to obtain requisite regulatory and unitholder approval and the satisfaction of the other conditions to the consummation of the merger; |
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the potential impact of the announcement or consummation of the merger on relationships, including with employees, suppliers, customers, competitors and credit rating agencies; |
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ETPs ability to successfully integrate Regencys operations and employees and to realize synergies and cost savings; |
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any distribution increases by ETP or Regency; |
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the amount of natural gas, crude oil and refined products transported in the pipelines and gathering systems of ETP or Regency; |
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volatility in the price of oil, natural gas, NGLs and coal; |
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ETPs and Regencys access to capital to fund organic growth projects and acquisitions, including significant acquisitions and their ability to obtain debt or equity financing on satisfactory terms;
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declines in the credit markets and the availability of credit for producers connected to ETPs and Regencys respective pipelines, Regencys gathering and processing facilities, and for customers of
ETPs and Regencys contract services business; |
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the level of creditworthiness of, and performance by, the customers and counter parties of ETP and Regency; |
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the use of derivative financial instruments to hedge commodity and interest rate risks; |
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the amount of collateral required to be posted from time to time in transactions; |
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changes in commodity prices and the projected demand for and supply of natural gas, NGLs and coal, interest rates and demand for the services of ETP and Regency; |
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any impairment write-downs of ETPs or Regencys assets; |
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changes in governmental regulation or enforcement practices with respect to the midstream sector of the natural gas industry and the coal industry, especially with respect to environmental, health and safety matters,
including with respect to emissions levels applicable to coal-burning power generators and permissible levels of mining runoff; |
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the occurrence of unusual weather and other natural phenomena or operating conditions including force majeure events; |
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environmental risks affecting the production, gathering and processing of natural gas or the mining of coal reserves; |
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industry changes including the impact of consolidations and changes in competition among natural gas midstream companies and among producers in the coal industry generally; |
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the ability of ETP and Regency to acquire natural gas midstream assets and new sources of natural gas supply and connections to third-party pipelines on satisfactory terms; |
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the ability of ETP and Regency to retain existing or acquire new natural gas midstream customers and coal lessees; |
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regulation of transportation rates on ETPs and Regencys natural gas and NGL pipelines; |
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the ability to obtain indemnification related to cleanup liabilities and to clean up any released hazardous materials on satisfactory terms; |
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the ability to obtain required approvals for construction or modernization of ETPs or Regencys facilities and the timing of production from such facilities; |
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uncertainties relating to the effects of regulatory guidance on permitting under the Clean Water Act and the outcome of current and future litigation regarding mine permitting; |
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risks and uncertainties relating to general domestic and international economic (including inflation, interest rates and financial and credit markets) and political conditions; |
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the effect of accounting pronouncements issued periodically by accounting standard setting boards; and |
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unfavorable results of litigation and the fruition of contingencies referred to in the notes to the financial statements contained in the reports incorporated by reference into this proxy statement/prospectus.
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Unless expressly stated otherwise, forward-looking statements are based on the expectations and beliefs of the respective
managements of ETP and Regency, based on information currently available, concerning future events affecting ETP and Regency. Although ETP and Regency believe that these forward-looking statements are based on reasonable assumptions, they are
subject to uncertainties and factors related to ETPs and Regencys operations and business environments, all of which are difficult to predict and many of which are beyond ETPs and Regencys control. Any or all of the
forward-looking statements in this proxy statement/prospectus may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. The foregoing list of factors should not be construed to be
exhaustive. Many factors mentioned in this proxy statement/prospectus, including the risks outlined under the caption Risk Factors contained in ETPs and Regencys Exchange Act reports incorporated herein by reference, will be
important in determining future results, and actual future results may vary materially. There is no assurance that the actions, events or results of the forward-looking statements will occur, or, if any of them do, when they will occur or what
effect they will have on ETPs and Regencys results of operations, financial condition, cash flows or distributions. In view of these uncertainties, ETP and Regency caution that investors should not place undue reliance on any
forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, ETP and Regency undertake no obligation to update or revise any forward-looking statement to reflect
events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
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THE PARTIES
Energy Transfer Partners, L.P.
ETP, a
Delaware limited partnership, is one of the largest publicly traded master limited partnerships in the United States in terms of equity market capitalization. ETP common units trade on the NYSE under the symbol ETP. ETP is managed by its
general partner, ETP GP, and ETP GP is managed by its general partner, ETP GP LLC, which is owned by ETE, another publicly traded master limited partnership. ETP GP LLC is ultimately responsible for the business and operations of ETP GP and conducts
ETPs business and operations, and the board of directors and officers of ETP GP LLC make decisions on ETPs behalf.
The
activities in which ETP is engaged, all of which are in the United States, are as follows:
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Natural gas operations, including the following: |
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natural gas midstream and intrastate transportation and storage through La Grange Acquisition, L.P.; and |
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interstate natural gas transportation and storage through Energy Transfer Interstate Holdings, LLC (ET Interstate) and Panhandle Eastern Pipe Line Company, LP (Panhandle). ET Interstate is the
parent company of Transwestern Pipeline Company, LLC, ETC Fayetteville Express Pipeline, LLC, ETC Tiger Pipeline, LLC, CrossCountry Energy, LLC and Rover Pipeline LLC. Panhandle is the parent company of Trunkline Gas Company, LLC and Sea Robin
Pipeline Company, LLC; |
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Liquids operations, including NGL transportation, storage and fractionation services primarily through Lone Star NGL LLC (Lone Star); and |
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Product and crude oil operations, including the following: |
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product and crude oil transportation through Sunoco Logistics Partners L.P.; and |
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retail marketing of gasoline and middle distillates through Sunoco, Inc., Susser Holdings Corporation and Sunoco LP. |
The address of ETPs and ETP GPs principal executive offices is 3738 Oak Lawn Avenue, Dallas, Texas 75219, and the telephone
number at this address is (214) 981-0700.
Regency Energy Partners LP
Regency Energy Partners LP is a Delaware limited partnership with common units traded on the NYSE under the symbol RGP. Regency is
a growth-oriented limited partnership engaged in the gathering and processing, compression, treating and transportation of natural gas; the transportation, fractionation and storage of NGLs; the gathering, transportation and terminaling of oil
(crude and/or condensate, a lighter oil) received from producers; the gathering and disposing of salt water; natural gas and NGL marketing and trading; and the management of coal and natural resource properties in the United States.
Regency focuses on providing midstream services in some of the most prolific natural gas producing regions in the United States, including the
Eagle Ford, Haynesville, Barnett, Fayetteville, Marcellus, Utica, Bone Spring, Avalon and Granite Wash shales. Regencys assets are primarily located in Texas, Louisiana, Arkansas, West Virginia, Pennsylvania, Ohio Mississippi, Alabama, New
Mexico and the mid-continent region of the United States, which includes Kansas, Colorado and Oklahoma.
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Regency divides its operations into six business segments:
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Gathering and Processing. Regency provides wellhead-to-market services to producers of natural gas, which include transporting raw natural gas from the wellhead through gathering systems, processing
raw natural gas to separate NGLs from the raw natural gas and selling or delivering pipeline-quality natural gas and NGLs to various markets and pipeline systems, the gathering of oil (crude and/or condensate, a lighter oil) received from producers,
the gathering and disposing of salt water, and natural gas and NGL marketing and trading. This segment also includes: |
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Regencys 60% membership interest in Edwards Lime Gathering LLC, which operates natural gas gathering, oil pipeline and oil stabilization facilities in south Texas; |
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Regencys 33.33% membership interest in Ranch Westex JV LLC, which process natural gas delivered from NGL-rich shale formations in west Texas; |
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Regencys 51% membership interest in Aqua PVR Water Services, LLC, which transports and supplies fresh water to natural gas producers in the Marcellus shale in Pennsylvania; |
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Regencys 75% membership interest in Ohio River System LLC, which will operate a natural gas gathering system in the Utica shale in Ohio; |
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Regencys 50% membership interest in Mi Vida JV LLC, which will own and operate a cryogenic processing plant and related facilities in west Texas; and |
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Regencys 50% limited partner interest in Sweeny Gathering LP, which operates a natural gas gathering system in east Texas. |
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Natural Gas Transportation. Regency owns a 49.99% general partner interest in RIGS Haynesville Partnership Co., which owns the Regency Intrastate Gas System, a 450-mile intrastate pipeline that delivers natural
gas from northwest Louisiana to downstream pipelines and markets, and a 50% membership interest in Midcontinent Express Pipeline LLC, which owns a 500-mile interstate natural gas pipeline stretching from southeast Oklahoma through northeast Texas,
northern Louisiana and central Mississippi to an interconnect with the Transcontinental Gas Pipe Line system in Butler, Alabama. This segment also includes Gulf States Transmission LLC, which owns a 10-mile interstate pipeline that extends from
Harrison County, Texas to Caddo Parish, Louisiana. |
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NGL Services. Regency owns a 30% membership interest in Lone Star, an entity owning a diverse set of midstream energy assets including NGL pipelines, storage, fractionation and processing facilities located in
Texas, New Mexico, Mississippi and Louisiana. |
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Contract Services. Regency owns and operates a fleet of compressors used to provide turn-key natural gas compression services for customer specific systems. Regency also owns and operates a fleet of equipment
used to provide treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration and BTU management. |
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Natural Resources. Regency is involved in the management and leasing of coal properties and the related collection of royalties. Regency also earns revenues from other land management activities, such as selling
standing timber, leasing coal-related infrastructure facilities and collecting oil and gas royalties. This segment also includes Regencys 50% interest in Coal Handling Solutions LLC, Kingsport Handling LLC, and Kingsport Services LLC, now
known as Materials Handling Solutions LLC, which own and operate end-user coal handling facilities. Regency purchased the remaining interests in these companies effective December 31, 2014. |
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Corporate. The corporate segment comprises Regencys corporate assets. |
Regency GP
is the general partner of Regency, and Regency GP has direct responsibility for conducting Regencys business and for managing its operations. Because Regency GP is a limited partnership, its general partner, Regency GP LLC, is ultimately
responsible for the business and operations of Regency GP and conducts its business and operations.
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The address of Regencys and Regency GPs principal executive offices is 2001 Bryan
Street, Suite 3700, Dallas, Texas 75201, and the telephone number at this address is (214) 750-1771.
Energy Transfer Equity, L.P.
Energy Transfer Equity, L.P. is a Delaware limited partnership, publicly traded on the NYSE under the symbol ETE. ETE directly and
indirectly owns equity interests in ETP and Regency.
The address of ETEs principal executive offices is 3738 Oak Lawn Avenue,
Dallas, Texas 75219, and the telephone number at this address is (214) 981-0700.
ETE GP Acquirer LLC
ETE GP Acquirer LLC is a Delaware limited liability company and a direct, wholly owned subsidiary of ETE. ETE Acquirer indirectly owns all of
the outstanding partnership interests in Regency GP.
The address of ETE Acquirers principal executive offices is 3738 Oak Lawn
Avenue, Dallas, Texas 75219, and the telephone number at this address is (214) 981-0700.
Rendezvous I LLC and Rendezvous II LLC
Each of Rendezvous I LLC (Merger Sub A) and Rendezvous II LLC (Merger Sub B) is a Delaware limited liability company
and a wholly owned subsidiary of ETP. Merger Sub A and Merger Sub B were formed on February 18, 2015 solely for the purpose of consummating the merger and the GP merger, as applicable, and have no operating assets. Neither Merger Sub A nor
Merger Sub B has carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
The address of Merger Sub As and Merger Sub Bs principal executive offices is 3738 Oak Lawn Avenue, Dallas, Texas 75219, and the
telephone number at this address is (214) 981-0700.
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THE SPECIAL MEETING
Regency is providing this proxy statement/prospectus to its unitholders in connection with the solicitation of proxies to be voted at the
special meeting of unitholders that Regency has called for, among other things, the purpose of holding a vote upon a proposal to adopt the merger agreement and the transactions contemplated thereby and at any adjournment or postponement thereof.
This proxy statement/prospectus constitutes a proxy statement of Regency in connection with the special meeting of Regency unitholders and a prospectus for ETP in connection with the issuance by ETP of its common units in connection with the merger.
This proxy statement/prospectus is first being mailed to Regencys unitholders on or about March 25, 2015, and provides Regency unitholders with the information they need to know to be able to vote or instruct their vote to be cast at the
special meeting of Regency unitholders.
Date, Time and Place
The special meeting will be held in Regencys offices at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, on April 28, 2015, at 11:00
a.m., local time.
Purpose
At the
special meeting, Regency unitholders will be asked to vote solely on the following proposals:
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Merger proposal: To adopt the merger agreement and the transactions contemplated thereby; |
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Adjournment proposal: To approve the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the
special meeting; and |
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Advisory compensation proposal: To approve, on an advisory (non-binding) basis, the payments that will or may be paid by Regency to its named executive officers in connection with the merger.
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Recommendation of the Regency Board
The Regency Board recommends that unitholders of Regency vote:
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Merger proposal: FOR the adoption of the merger agreement and the transactions contemplated thereby; |
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Adjournment proposal: FOR the approval of the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger
agreement at the time of the special meeting; and |
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Advisory compensation proposal: FOR the approval on an advisory (non-binding) basis, of the payments that will or may be paid by Regency to its named executive officers in connection
with the merger. |
The Regency Board and the Regency Conflicts Committee have (i) determined that the merger
agreement and the merger are fair and reasonable and in the best interests of Regency and its unaffiliated unitholders, and (ii) approved the merger and the merger agreement, and the Regency Board has resolved to recommend adoption of the
merger agreement and the transactions contemplated thereby to the Regency unitholders. See The MergerRecommendation of the Regency Conflicts Committee, the Regency Board and Their Reasons for the Merger.
In considering the recommendation of the Regency Board with respect to the merger agreement and the transactions contemplated thereby, you
should be aware that some of Regencys directors and executive officers may have interests that are different from, or in addition to, the interests of Regency unitholders more generally. See The MergerInterests of Directors and
Executive Officers of Regency in the Merger.
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Record Date; Outstanding Units; Units Entitled to Vote
The record date for the special meeting is March 24, 2015. Only Regency unitholders of record at the close of business on the record date will
be entitled to receive notice of and to vote at the special meeting or any adjournment or postponement of the meeting.
As of the
close of business on the record date of March 24, 2015, there were approximately 411,707,950 Regency common units, 6,274,483 Class F units and 1,912,569 Series A units outstanding and entitled to vote at the meeting. Each Regency common unit, Class
F units and Series A unit is entitled to one vote.
If at any time any person or group (other than Regency GP and its affiliates,
including ETP and ETE) beneficially owns 20% or more of any class of Regency units, such person or group loses voting rights on all of its units and such units will not be considered outstanding. This loss of voting rights does not apply
to (i) any person or group who acquired 20% or more of any class of Regency units from Regency GP or its affiliates, (ii) any person or group who directly or indirectly acquired 20% or more of any class of Regency units from that person or
group described in clause (i) provided Regency GP notified such transferee that such loss of voting rights did not apply, or (iii) any person or group who acquired 20% or more of any class of units issued by Regency with the prior approval
of the Regency Board.
A complete list of Regency unitholders entitled to vote at the special meeting will be available for inspection at
the principal place of business of Regency during regular business hours for a period of no less than ten days before the special meeting and at the place of the special meeting during the meeting.
Quorum
A quorum of unitholders
represented in person or by proxy at the special meeting is required to vote on adoption of the merger agreement at the special meeting, but not to vote on approval of any adjournment of the meeting. At least a majority of the outstanding Regency
common units, Class F units and Series A units, voting together as a single class, must be represented in person or by proxy at the meeting in order to constitute a quorum. Any abstentions and broker non-votes will be counted in determining whether
a quorum is present at the special meeting.
Required Vote
To adopt the merger agreement and the transactions contemplated thereby, holders of at least a majority of the outstanding Regency common
units, Class F units and Series A units, together as a single class, must vote in favor of adoption of the merger agreement and the transactions contemplated thereby. Because approval is based on the affirmative vote of at least a majority of the
outstanding Regency common units, Class F units and Series A units, voting together as a single class, a Regency unitholders failure to submit a proxy card or to vote in person at the special meeting or an abstention from voting, or the
failure of a Regency unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee, will have the same effect as a vote AGAINST the adoption
of the merger agreement and the transactions contemplated thereby.
To approve the adjournment of the special meeting, if necessary to
solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special meeting and if a quorum is present at the meeting, holders of at least a majority of the outstanding Regency common units, Class F
units and Series A units, voting together as a single class, must vote in favor of the proposal; provided that, if a quorum is not present at the meeting, the affirmative vote of holders of a majority of the outstanding Regency common units,
Class F units and Series A units entitled to vote at such meeting represented either in person or by proxy, voting together as a single class, is required to approve the proposal. Because approval of this proposal is based on the affirmative vote of
at least a majority of the outstanding Regency common units, Class F units and Series A
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units, voting together as a single class, if a quorum is present at the special meeting, a Regency unitholders failure to vote, an abstention from voting or the failure of a Regency
unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect as a vote AGAINST approval of this proposal.
To approve, on an advisory (non-binding) basis, the payments that will or may be paid by Regency to its named executive officers in connection
with the merger, holders of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, must vote in favor of the proposal. Because approval of this proposal is based on the
affirmative vote of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, a Regency unitholders failure to vote, an abstention from voting or the failure of a Regency
unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect as a vote AGAINST approval of this proposal.
Unit Ownership of and Voting by Regencys Directors, Executive Officers and Affiliates
As of March 24, 2015, Regencys directors and executive officers and their affiliates (including ETE, ETP and their respective
subsidiaries) beneficially owned and had the right to vote 88,529,775 Regency common units and 6,274,483 Class F units at the special meeting, which represent approximately 23% of the Regency units entitled to vote at the special meeting. It is
expected that Regencys directors and executive officers will vote their units FOR the adoption of the merger agreement and the transactions contemplated thereby, although none of them has entered into any agreement requiring them
to do so. Under the terms of the merger agreement, ETE and ETP have agreed to vote all of the Regency common units and Class F units owned beneficially or of record by ETE, ETP or their respective subsidiaries in favor of the merger.
Voting of Units by Holders of Record
If
you are entitled to vote at the special meeting and hold your units in your own name, you can submit a proxy or vote in person by completing a ballot at the special meeting. However, Regency encourages you to submit a proxy before the special
meeting even if you plan to attend the special meeting in order to ensure that your units are voted. A proxy is a legal designation of another person to vote your Regency units on your behalf. If you hold units in your own name, you may submit a
proxy for your units by:
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calling the toll-free number specified on the enclosed proxy card and follow the instructions when prompted; |
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accessing the Internet website specified on the enclosed proxy card and follow the instructions provided to you; or |
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filling out, signing and dating the enclosed proxy card and mailing it in the prepaid envelope included with these proxy materials. |
When a unitholder submits a proxy by telephone or through the Internet, his or her proxy is recorded immediately. Regency encourages its
unitholders to submit their proxies using these methods whenever possible. If you submit a proxy by telephone or the Internet website, please do not return your proxy card by mail.
All units represented by each properly executed and valid proxy received before the special meeting will be voted in accordance with the
instructions given on the proxy. If a Regency unitholder executes a proxy card without giving instructions, the Regency units represented by that proxy card will be voted as the Regency Board recommends, which is:
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Merger proposal: FOR the adoption of the merger agreement and the transactions contemplated thereby; |
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Adjournment proposal: FOR the approval of the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at
the time of the special meeting; and |
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Advisory compensation proposal: FOR the approval, on an advisory (non-binding) basis, of the payments that will or may be paid by Regency to its named executive officers in connection with the
merger. |
Your vote is important. Accordingly, please submit your proxy by telephone, through the Internet or by mail,
whether or not you plan to attend the meeting in person. Proxies must be received by 11:59 p.m., Eastern Time, on April 27, 2015.
Voting of Units
Held in Street Name
If your units are held in an account at a broker or through another nominee, you must instruct the broker or other
nominee on how to vote your units by following the instructions that the broker or other nominee provides to you with these proxy materials. Most brokers offer the ability for unitholders to submit voting instructions by mail by completing a voting
instruction card, by telephone and via the Internet.
If you do not provide voting instructions to your broker, your units will not be
voted on any proposal on which your broker does not have discretionary authority to vote. This is referred to in this proxy statement/prospectus and in general as a broker non-vote. In these cases, the broker or other nominee can register your units
as being present at the special meeting for purposes of determining a quorum, but will not be able to vote your units on those matters for which specific authorization is required. Under the current rules of the NYSE, brokers do not have
discretionary authority to vote on any of the proposals, including the Regency merger proposal. A broker non-vote of a Regency common unit will have the same effect as a vote AGAINST the Regency merger proposal, the Regency adjournment
proposal and the Regency advisory compensation proposal.
If you hold units through a broker or other nominee and wish to vote your units
in person at the special meeting, you must obtain a proxy from your broker or other nominee and present it to the inspector of election with your ballot when you vote at the special meeting.
Revocability of Proxies; Changing Your Vote
You may revoke your proxy and/or change your vote at any time before your proxy is voted at the special meeting. If you are a unitholder of
record, you can do this by:
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sending a written notice, no later than the telephone/internet deadline, to Regency Energy Partners LP at 2001 Bryan Street, Suite 3700, Dallas, Texas 75201, Attention: Corporate Secretary, that bears a date later than
the date of the proxy and is received prior to the special meeting and states that you revoke your proxy; |
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submitting a valid, later-dated proxy by mail, telephone or Internet that is received prior to the special meeting; or |
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attending the special meeting and voting by ballot in person (your attendance at the special meeting will not, by itself, revoke any proxy that you have previously given). |
If you hold your Regency units through a broker or other nominee, you must follow the directions you receive from your broker or other nominee
in order to revoke your proxy or change your voting instructions.
Solicitation of Proxies
This proxy statement/prospectus is furnished in connection with the solicitation of proxies by the Regency Board to be voted at the special
meeting. Regency will bear all costs and expenses in connection with the
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solicitation of proxies. Regency has engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies for the meeting and Regency estimates it will pay MacKenzie Partners, Inc. a fee of
approximately $50,000 for these services. Regency has also agreed to reimburse MacKenzie Partners, Inc. for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify MacKenzie Partners,
Inc. against certain losses, costs and expenses. In addition, Regency may reimburse brokerage firms and other persons representing beneficial owners of Regency common units for their reasonable expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of Regencys directors, officers and employees by telephone, electronic mail, letter, facsimile or in person, but no additional compensation will be paid to them.
Unitholders should not send unit certificates with their proxies.
A letter of transmittal and instructions for the surrender of Regency common unit certificates will be mailed to Regency unitholders shortly
after the completion of the merger.
No Other Business
Under the Regency partnership agreement, the business to be conducted at the special meeting will be limited to the purposes stated in the
notice to Regency unitholders provided with this proxy statement/prospectus.
Adjournments
Adjournments may be made for the purpose of, among other things, soliciting additional proxies. If a quorum exists, an adjournment may be made
from time to time with approval of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class. If a quorum does not exist, an adjournment may be made from time to time
with the approval of at least a majority of the votes present in person or by proxy at the time of the vote. Regency is not required to notify unitholders of any adjournment of 45 days or less if the time and place of the adjourned meeting are
announced at the meeting at which the adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At any adjourned meeting, Regency may transact any business that it might have transacted at the original
meeting, provided that a quorum is present at such adjourned meeting. Proxies submitted by Regency unitholders for use at the special meeting will be used at any adjournment or postponement of the meeting. References to the special meeting in this
proxy statement/prospectus are to such special meeting as adjourned or postponed.
Assistance
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact MacKenzie Partners, Inc.
toll-free at (800) 322-2885 (banks and brokers call collect at (212) 929-5500).
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THE MERGER
This section of the proxy statement/prospectus describes the material aspects of the proposed merger. This section may not contain all of
the information that is important to you. You should carefully read this entire proxy statement/prospectus and the documents incorporated herein by reference, including the full text of the merger agreement and the amendment thereto, for a more
complete understanding of the merger. A copy of the composite merger agreement, which incorporates the amendment into the text of the initial agreement, is attached as Annex A hereto. In addition, important business and financial information about
each of ETP and Regency is included in or incorporated into this proxy statement/prospectus by reference. See Where You Can Find More Information.
Effect of the Merger and the GP Merger
Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, the merger agreement provides for (i) the
merger of Regency with Merger Sub A and (ii) the merger of ETE Acquirer with Merger Sub B. Regency, which is sometimes referred to following the merger as the surviving entity, and ETE Acquirer, which is sometimes referred to following the GP
merger as the GP merger surviving entity, will survive the mergers, and the separate limited liability company existence of Merger Sub A and Merger Sub B will cease. As a result of the mergers, ETP will become the sole limited partner of Regency and
Regency GP will remain the sole general partner of Regency. Further, ETP, will become the sole member of ETE Acquirer and, as a result, will own, directly or indirectly, all of the outstanding membership and partnership interests, as applicable, in
Regency GP LLC and Regency GP. After the completion of the mergers, the certificate of limited partnership of Regency in effect immediately prior to the effective time will be the certificate of limited partnership of the surviving entity, until
amended in accordance with its terms and applicable law, and the Regency partnership agreement in effect immediately prior to the effective time will be the agreement of limited partnership of the surviving entity, until amended in accordance with
its terms and applicable law. After the completion of the GP merger, the certificate of formation and the limited liability company agreement of ETE Acquirer in effect immediately prior to the effective time of the GP merger will be the certificate
of formation and the limited liability company agreement of the GP merger surviving entity (except to the extent the limited liability company agreement is amended by the merger agreement to reflect the admission of ETP as the sole member of ETE
Acquirer), in each case, until amended in accordance with its terms and applicable law.
The merger agreement provides that, at the
effective time, each Regency common unit issued and outstanding or deemed issued and outstanding as of immediately prior to the effective time will be converted into the right to receive (i) 0.4066 ETP common units and (ii) an additional
number of ETP common units equal to the quotient of $0.32 divided by the lesser of (x) the volume weighted average price of ETP common units on the NYSE for the five trading days ending on the third trading day immediately preceding the
effective time of the merger and (y) the closing price of ETP common units on the NYSE on the third day immediately preceding the effective time of the merger, rounded to the nearest ten thousandth of a unit. Each Class F unit issued and
outstanding as of immediately prior to the effective time will be deemed to have been converted automatically into a Regency common unit, and such common unit will be converted automatically into the right to receive the merger consideration. Each
Series A unit issued and outstanding as of immediately prior to the effective time will be converted into the right to receive an ETP preferred unit having the same preferences, privileges, powers, duties and obligations that the Regency Series A
units had immediately prior to the closing of the merger. Any Regency securities that are owned by Regency or any of its subsidiaries immediately prior to the effective time will be cancelled without any conversion or payment of consideration in
respect thereof. ETPs common units had a value of $65.24 per unit, based on the closing price of ETP common units on the NYSE, as of January 23, 2015, the last date prior to the public announcement of the merger, and a value of $56.26 per
unit, based on the closing price of ETP common units on March 20, 2015, the most recent practicable trading day prior to the date of this proxy statement/prospectus.
Because the exchange ratio was fixed at the time the merger agreement was executed and because the market value of ETP common units and
Regency common units will fluctuate prior to the consummation of the
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merger, Regency unitholders cannot be sure of the value of the unit consideration they will receive relative to the value of Regency common units or Class F units that they are exchanging.
For example, decreases in the market value of ETP common units will negatively affect the value of the unit consideration that Regency unitholders receive, and increases in the market value of Regency common units may mean that the merger
consideration that such unitholders receive will be worth less than the market value of the Regency common units that they are exchanging. Additionally, because the number of ETP common units Regency unitholders will receive as the additional unit
consideration depends on the price of ETP common units over the days leading up to the closing of the merger, Regency unitholders cannot be sure of the total number of ETP common units they will receive for the Regency common units or Class F
units they exchange. See Risk FactorsRisk Factors Relating to the MergerBecause the market price of ETP common units will fluctuate prior to the consummation of the merger, Regency unitholders cannot be sure of the market value of
the ETP common units they receive as unit consideration relative to the value of the Regency common units they exchange, or of the number of ETP common units they will receive as additional unit consideration.
ETP will not issue any fractional units in the merger. Instead, each holder of Regency common units or Class F units that are converted
pursuant to the merger agreement who otherwise would have received a fraction of an ETP common unit will instead be entitled to receive a whole ETP common unit.
Each award of Regency phantom units (except for Regency phantom units granted before December 16, 2011 and for Regency phantom units held
by the chief executive officer and the non-employee directors of Regency, which will vest and convert, subject to applicable tax withholding, into the right to receive the merger consideration) that is outstanding immediately prior to the effective
time, automatically and without any action on the part of the holder of such Regency phantom unit, will at the effective time be converted into the right to receive an award of phantom units relating to ETP common units on the same terms and
conditions as were applicable to the award of Regency phantom units, except that the number of ETP common units covered by the award will be the number of Regency phantom units covered by the award multiplied by the sum of (i) the exchange
ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole unit.
Each outstanding Regency unit option that was granted under a Regency equity incentive plan and that has a per unit exercise price greater
than the closing price of a Regency unit on the NYSE on the last trading day prior to closing of the merger (in-the-money unit options) will be deemed to have been exercised on a net-issuance (i.e., cashless) basis immediately prior to
the effective time and each net issued Regency common unit deemed to have been issued will be converted into the right to receive the merger consideration on the same terms as issued and outstanding Regency common units, subject to reduction for
withholding taxes. No fractional ETP common units will be paid to holders of Regency unit options. Any other award of an option to purchase Regency common units representing the right to a cash payment based on the value of Regency units will be
canceled at the effective time of the merger for no consideration.
Each outstanding award of Regency cash units will, automatically and
without any action on the part of the holder of such cash unit, be converted into the right to receive an award of cash units relating to ETP common units on the same terms and conditions as were applicable to the award of Regency cash units, except
that the number of notional units that upon vesting entitles the holder to receive an amount of cash equal to the fair market value of an ETP common unit will be equal to the number of notional Regency common units related to the corresponding award
of Regency cash units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole unit. Prior to the effective time, the general
partner of Regency GP will adopt an amendment to the Regency Energy Partners LP Long-Term Incentive Cash Restricted Unit Plan to permit the treatment of Regency cash units in the merger described above.
As a result of the merger, the general partner interest in Regency outstanding immediately prior to the effective time will be converted into
a non-economic general partner interest and Regency GP will continue as the sole general partner of Regency. In addition, the incentive distribution rights in Regency outstanding
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immediately prior to the effective time will be cancelled. ETP and Regency have agreed that, upon consummation of the mergers, the percentage interest represented by the ETP general partner
interest will be increased to equal the sum of (i) the percentage interest of the ETP general partner interest immediately prior to the effective time, as adjusted to give effect to the issuance of ETP common units in the merger, and
(ii) the percentage interest in ETP that would be represented by the Regency general partner interest immediately prior to the effective time, as adjusted to give effect to the issuance of ETP common units in the merger. In connection with the
mergers, ETP GP will receive the right to any capital account in Regency associated with the Regency general partner interest and incentive distribution rights immediately prior to the merger. See the section entitled Proposal 1: The Merger
Agreement for further information.
Background of the Merger
The senior management and boards of directors of each of ETP and Regency regularly review operational and strategic opportunities to maximize
value for investors of ETP and Regency, respectively. In connection with these reviews, the management and boards of directors of ETP and Regency from time to time evaluate potential transactions that would further their respective strategic
objectives.
ETE controls both of ETP and Regency through its indirect ownership of the general partner interests in each company. In
addition, ETE owns, directly and through its wholly owned subsidiaries, all of the incentive distribution rights in ETP and all of the ETP Class H units and ETP Class I units. ETE also owns, directly and through its wholly owned subsidiaries, all of
the incentive distribution rights in Regency and 57.2 million Regency common units, representing an approximate 14.0% limited partner interest in Regency. ETP owns, through its subsidiary, 31.4 million Regency common units, representing an
approximate 7.6% limited partner interest in Regency, and all of the Regency Class F units.
As part of ETPs and Regencys
strategy to maximize value for investors, both ETP and Regency have from time to time evaluated transactions with each other. For example, in 2011, ETP and Regency formed a joint venture, Lone Star, to acquire the NGL storage, fractionation and
transportation business of Louis Dreyfus Highbridge Energy LLC. ETP and Regency continue to jointly own Lone Star, with ETP having a 70% ownership interest and Regency having a 30% ownership interest. In addition, in April 2013, Southern Union
Company, a former subsidiary of ETP, contributed to Regency all of the outstanding membership interests in Southern Union Gathering Company, LLC and its subsidiaries, which owned a 5,600-mile gathering system and approximately 500 million cubic feet
per day of natural gas and NGL processing and treating facilities in West Texas and New Mexico.
On January 13, 2015, ETP contacted a
representative of Latham & Watkins LLP (Latham) regarding the potential engagement of Latham as legal advisor to the ETP Board.
On January 16, 2015, the ETP Board and the ETE board of directors (the ETE Board) held a joint meeting to discuss ETP
managements analysis related to a potential merger with Regency. At this meeting, after reviewing and discussing the merits of the proposed transaction based on the deal terms recommended by ETP management, the ETP Board approved making a
proposal to Regency on those terms, which included an exchange ratio of 0.4044 ETP common units per Regency common unit and a one-time cash make-whole payment of approximately $137 million (to be divided among Regency unitholders pro rata to offset
the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for one year following the closing of the merger), based on an assumed incentive distribution subsidy from ETE in the amount of $60.0
million per year for each of the five years following the closing of the merger. The ETP Board determined that the proposal would be subject to approval of the conflicts committee of the ETP Board (the ETP Conflicts Committee).
On January 16, 2015, Michael J. Bradley, President and Chief Executive Officer of Regency GP LLC, the general partner of Regency GP, and
Thomas E. Long, Executive Vice President and Chief Financial Officer of Regency GP LLC, met with Kelcy L. Warren, Chief Executive Officer of ETP GP LLC and Chairman of the ETP
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Board, and Jamie Welch, Group Chief Financial Officer of LE GP, LLC, the general partner of ETE, and a member of the ETP Board, for initial discussions on a proposed transaction. At that meeting,
ETP formally proposed an offer to Regency, whereby Regency unitholders would receive 0.4044 ETP common units per Regency common unit, representing a 12.5% premium to Regencys unit price based on the previous days closing price, and a
one-time, cash make-whole payment of approximately $137 million (to be divided among Regency unitholders pro rata to offset the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for one year
following the closing of the merger). Combined with the unit consideration, ETPs offer implied a price of $24.59 per Regency common unit and represented a 14.2% premium to Regencys closing unit price on January 15, 2015. In addition, ETP
proposed that it would assume Regencys outstanding senior notes and refinance Regencys outstanding revolver borrowings. Messrs. Warren and Welch indicated that ETPs proposal also assumed an incentive distribution subsidy from ETE
in the amount of $60.0 million per year for each of the five years following the closing of the merger. The parties discussed that, under the proposed structure, the transaction would be subject to the approval of the Regency Board, the ETP Board
and the unitholders of each of Regency and ETP, as well as customary regulatory approvals.
On January 16, 2015, the Regency Board held a
telephonic meeting, at which Messrs. Bradley and Long, along with a representative from Baker Botts L.L.P. (Baker Botts), legal counsel to Regency, and Todd Carpenter, Senior Vice President and General Counsel of Regency GP LLC, informed
the Regency Board of ETPs offer. At the meeting, senior management of Regency noted that, in light of the recent commodity price volatility and changes in the capital markets, a transaction with ETP could provide Regencys operations with
the needed scale, diversification and investment grade balance sheet to pursue its growth projects. The Regency Board determined that the proposal would be subject to approval of the Regency Conflicts Committee and that it would be appropriate to
delegate authority to the Regency Conflicts Committee to review the proposed transaction. The formal resolutions delegating authority to the Regency Conflicts Committee (consistent with the deliberations of the Regency Board on January 16, 2015)
were adopted by the Regency Board on January 22, 2015. On January 16, 2015, the Regency Board also appointed Richard Brannon to the Regency Board and, on January 20, 2015, the Regency Board appointed Mr. Brannon to the Regency Conflicts
Committee.
Following the Regency Board meeting, on January 16, 2015, Mr. Long contacted a representative of J.P. Morgan about potentially
serving as financial advisor to the Regency Conflicts Committee.
On January 16, 2015, Latham emailed an initial draft of the merger
agreement to Baker Botts and Regency. The draft merger agreement provided for an exchange ratio of 0.4044 ETP common units per Regency common unit, a cash make-whole payment of approximately $137 million (to be divided among Regency unitholders pro
rata to offset the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for one year following the closing of the merger) and certain deal protection provisions, including a 4.25% breakup fee in
the event the merger agreement was terminated under certain circumstances. The draft merger agreement also specified the proposed incentive distribution subsidy amounts as described above. After distribution of the draft merger agreement,
representatives of Latham and Baker Botts had a telephonic discussion regarding certain structural aspects of the merger and the draft merger agreement.
On January 16, 2015, Regency contacted a representative of Akin Gump Strauss Hauer & Feld LLP (Akin Gump), the Regency
Conflicts Committees legal counsel on prior matters, to discuss their potential engagement by the Regency Conflicts Committee regarding the proposed merger.
On January 18, 2015, Mr. Carpenter held a call with representatives of Baker Botts to discuss issues identified in the initial draft of the
merger agreement and related issues regarding the proposed transaction, including structuring, regulatory and business issues.
On January
19, 2015, Messrs. Bradley, Long and Carpenter held a call with Mr. Brannon and James W. Bryant, members of the Regency Board, along with representatives of each of Baker Botts and Akin Gump, to discuss general issues and strategy with regard to the
proposed transaction. In a separate session, representatives of Baker Botts and representatives of Akin Gump met again to discuss issues identified in the initial draft of the
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merger agreement and related matters. Later on January 19, 2015, representatives of Akin Gump held a call with representatives of Latham to discuss the status and timing of the proposed
transaction.
From January 19 through January 20, 2015, Latham reviewed with David K. Skidmore, Chairman of the ETP Conflicts Committee,
and other representatives of ETP draft resolutions of the ETP Board delegating authority to the ETP Conflicts Committee to review and evaluate any potential conflicts of interest arising in connection with the proposed transaction and to determine
whether to approve the proposed transaction and to recommend approval of the proposed transaction to the ETP Board.
On January 20, 2015,
the ETP Board authorized the ETP Conflicts Committee, consisting of Mr. Skidmore and Michael K. Grimm, to review and evaluate any potential conflicts of interest arising in connection with the proposed transaction and to determine whether to approve
the proposed transaction, and to recommend approval of the proposed transaction to the ETP Board.
On January 20, 2015, representatives of
Latham and Baker Botts met in person with Thomas P. Mason, Senior Vice President and General Counsel of ETP GP LLC, and Messrs. Bradley, Long and Carpenter to discuss Regency managements comments to the initial draft merger agreement. The key
issues discussed at the meeting were Regency managements proposals to (i) narrow the restrictions on Regencys ability to engage in certain business activities after the execution of the merger agreement, (ii) restrict the ability of ETE
to engage in certain business activities after the execution of the merger agreement, (iii) require the vote of a majority of the unaffiliated Regency unitholders to approve the merger, (iv) require ETP to agree to certain non-solicitation covenants
similar to those applicable to Regency in the initial draft merger agreement and (v) require that ETP and ETE vote all of their units in Regency and ETP in favor of the merger.
On January 20, 2015, the Regency Conflicts Committee, consisting of Messrs. Brannon and Bryant, had a call with representatives of Akin Gump
to confirm their engagement by the Regency Conflicts Committee and to discuss (i) the independence of the members of the Regency Conflicts Committee, (ii) the duties and responsibilities of the Regency Conflicts Committee, (iii) the potential
engagement of a financial advisor and (iv) the proposed transaction. Later on January 20, 2015, the Regency Conflicts Committee had another call with representatives of Akin Gump and with representatives of a potential financial advisor, J.P.
Morgan, to discuss J.P. Morgans experience, qualifications and prior relationships with Regency, ETP and their respective affiliates, including fees paid to J.P. Morgan by such parties and whether any investments had been made by members of
the J.P. Morgan team in the parties involved in the proposed transaction. Following this call, the Regency Conflicts Committee had a separate call with representatives of Akin Gump to discuss the potential engagement of J.P. Morgan as financial
advisor to the Regency Conflicts Committee. The Regency Conflicts Committee determined to engage J.P. Morgan, subject to successful negotiation of an engagement letter.
On January 20, 2015, Messrs. Welch and Mason made a presentation to Messrs. Bradley, Long and Carpenter, the Regency Conflicts Committee, the
ETP Conflicts Committee, representatives from Barclays Capital Inc. (Barclays) (which was being considered by the ETP Conflicts Committee for retention as its financial advisor), J.P. Morgan, Latham, Baker Botts and Akin Gump regarding
ETPs business and operations, including a review of ETPs intrastate transportation and storage; interstate transportation and storage; midstream; liquids transportation and services; logistics; retail marketing; and other assets, as well
as ETPs future expected growth projects. They also reviewed the two-year financial projections for the business detailed in ETPs financial forecast provided to Regency and J.P. Morgan. Mr. Welch later provided Regency and J.P. Morgan
with electronic copies of the presentation and financial forecast. Following the presentation and extensive questions and answers, the parties agreed that representatives of ETP would discuss the forecast and address follow-up questions in a
subsequent meeting. Following Messrs. Welch and Masons presentation, Messrs. Bradley, Long and Carpenter, the Regency Conflicts Committee, Baker Botts and Akin Gump held a separate meeting to discuss strategy, timing and the status of the
proposed transaction.
On January 21, 2015, the ETP Conflicts Committee engaged Richards, Layton & Finger, P.A. (RLF) as
its legal counsel.
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On January 21, 2015, ETP provided J.P. Morgan with detailed financial information regarding ETP.
On January 21, 2015, the ETP Conflicts Committee held a telephonic meeting with ETP management and a separate telephonic meeting with RLF
to discuss the proposed transaction and the potential engagement by the ETP Conflicts Committee of Barclays as its financial advisor.
On
January 21, 2015, the Regency Conflicts Committee held a series of meetings with Akin Gump to discuss the terms in the initial draft merger agreement. Also on January 21, 2015, Baker Botts distributed a legal due diligence request and a revised
draft of the merger agreement to ETP and Latham. Also on January 21, 2015, Messrs. Bradley, Long and Carpenter, the Regency Conflicts Committee, the ETP Conflicts Committee, Mr. Mason, Baker Botts, Latham, Akin Gump, Barclays and J.P.
Morgan held a meeting to discuss legal and business due diligence matters related to Regencys business. Messrs. Bradley, Long and Carpenter made a presentation regarding Regencys business, including a review of its assets, as well as
Regencys future expected growth projects. Following the presentation and extensive questions and answers, the parties agreed that Regency would discuss the Regency financial forecast and address follow-up questions in a subsequent meeting.
Later on January 21, 2015, Regency provided J.P. Morgan and Barclays with detailed financial information regarding Regency, including electronic copies of its presentation and financial forecast. Messrs. Bradley, Long and Carpenter reviewed the
two-year financial projections for the business detailed in Regencys financial forecast previously provided to ETP, J.P. Morgan and Barclays with J.P. Morgan and Barclays. Representatives of Baker Botts and Akin Gump were present at the
meeting.
From January 21 to January 25, 2015, ETP provided written and telephonic responses to the Regency due diligence request.
Early on January 22, 2015, the ETP Conflicts Committee held a telephonic meeting with members of ETP management, RLF and Latham to discuss the
proposed transaction and the potential engagement of Barclays as the ETP Conflicts Committees financial advisor. Later that day, the ETP Conflicts Committee determined to engage Barclays as its financial advisor with respect to the proposed
transaction.
On January 22, 2015, Latham emailed a written due diligence request to Regency and Baker Botts. From January 22 to January
25, 2015, Regency provided written and telephonic responses to the ETP due diligence request.
On January 22, 2015, the ETP Conflicts
Committee held a telephonic meeting with Barclays and RLF to discuss the financial analysis being performed by Barclays with respect to the proposed transaction. At that meeting, RLF also provided the ETP Conflicts Committee with an overview of the
terms of the merger agreement and a summary of legal issues to be considered by the ETP Conflicts Committee.
On January 22, 2015, RLF
provided Latham with preliminary comments to the draft merger agreement that had been distributed by Baker Botts.
On January 22, 2015,
Latham emailed a revised draft of the merger agreement to Baker Botts, Akin Gump and Regency and then had a meeting with such parties to discuss various legal due diligence issues regarding the proposed transaction. Throughout the day on January 22,
2015, Regency, the Regency Conflicts Committee, Baker Botts and Akin Gump held multiple meetings to discuss Lathams most recent draft of the merger agreement.
On January 22, 2015, the Regency Board adopted resolutions specifying the delegation of authority to the Regency Conflicts Committee. The
Regency Conflicts Committee then executed engagement letters with J.P. Morgan and Morris, Nichols, Arsht & Tunnell LLP (Morris Nichols) to act as the Regency Conflicts Committees financial and outside Delaware legal
advisors, respectively. Representatives of J.P. Morgan then met with the Regency Conflicts Committee and representatives of Akin Gump to present their preliminary financial analyses with respect to Regency and ETP. The Regency Conflicts Committee
then discussed with its
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advisors possible responses to the ETP offer. The Regency Conflicts Committee then met with Mr. Mason to convey Regencys counterproposal on certain financial terms of the proposed
transaction. In particular, Regency proposed a 0.425 exchange ratio, a cash payment equal to the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for a period of two years following the
closing (as adjusted for the exchange ratio), a 3.0% breakup fee and a condition to the closing that a majority of the unaffiliated unitholders of Regency vote to approve the transaction.
On January 23, 2015, Baker Botts emailed a revised draft of the merger agreement to Latham, RLF, ETP and Akin Gump.
On January 23, 2015, a telephonic meeting was held among the ETP Conflicts Committee, RLF, Barclays and members of ETP management at which ETP
management summarized for the ETP Conflicts Committee, and provided its views on, the proposal from Regency. ETP management recommended to the ETP Conflicts Committee that ETP respond to Regencys proposal by either proposing (i)(A) an exchange
ratio of 0.4044 ETP common units for each Regency common unit, (B) a cash make-whole payment to cover the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for one year following the closing,
(C) a 4% breakup fee, and (D) that the proposed transaction be subject to approval by a simple majority vote of Regencys outstanding units, or (ii)(A) an exchange ratio of 0.3999 ETP common units for each Regency common unit, (B) a cash
make-whole payment to cover the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for two years following the closing, (C) a 4% breakup fee, and (D) that the proposed transaction be subject to
approval by a simple majority vote of Regencys outstanding units.
On January 23, 2015, the ETP Conflicts Committee held an
additional telephonic meeting with Barclays and RLF to discuss possible responses to Regencys proposal. At that meeting, the Barclays representatives discussed with the ETP Conflicts Committee its analysis of the terms of Regencys
proposal and the effect of the proposal on ETP, Regency and ETE. Following that meeting, the ETP Conflicts Committee, ETP management, Barclays and RLF held a telephonic meeting to discuss how to respond to Regencys proposal. At that meeting,
the ETP Conflicts Committee informed ETP management that the incentive distribution subsidy from ETE should be increased by an amount sufficient to keep the common unitholders of ETP other than ETE and its affiliates (the unaffiliated ETP
unitholders) from suffering dilution as a result of the proposed transaction during the first year after closing of the proposed transaction. On the basis that ETE would be willing to provide such an incentive distribution subsidy, the ETP
Conflicts Committee authorized ETP management to provide the Regency Conflicts Committee with the option to choose either of the two proposals recommended by ETP management earlier in the day.
On January 23, 2015, ETP management, with the approval of the ETP Conflicts Committee, conveyed the two options discussed above as a
counterproposal to Regency. Following ETPs counterproposal, Latham distributed a revised draft of the merger agreement to all parties, and the parties then held multiple meetings throughout the day and evening of January 23, 2015 to negotiate
pricing and other business structuring issues.
On January 23, 2015, the ETP Conflicts Committee held two additional telephonic meetings
with RLF, one of which was also attended by Barclays, to discuss the proposed transaction. Among the items presented to the ETP Conflicts Committee and discussed were Barclays preliminary financial analysis of the proposed transaction and the
effect of such proposal on ETP, Regency and ETE, the status of the merger agreement being negotiated in connection with the proposed transaction and the duties and obligations of the ETP Conflicts Committee in connection with the proposed
transaction.
On January 23, 2015, the Regency Conflicts Committee reviewed the terms of ETPs counterproposal, considered the advice
of its legal and financial advisors, and determined not to accept either option specified by ETP in its counterproposal. The Regency Conflicts Committee determined to present a new proposal, consisting
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of an exchange ratio of 0.4088 plus a cash make-whole payment to cover the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for one year
following the closing. The Regency Conflicts Committee then met with Mr. Mason to present this proposal and explained that the aggregate merger consideration would need to be comprised of an exchange ratio and a cash payment that would result in a
total 15.0% premium to Regency unitholders. Following Regencys proposal, the representatives of ETP met with Latham to discuss the details of Regencys proposal.
After trading on the NYSE closed on January 23, 2015, a telephonic meeting was held among the ETP Conflicts Committee, members of ETP
management, RLF, Latham and Barclays to discuss the Regency proposal. At that meeting, ETP management reported to the ETP Conflicts Committee that ETE was willing to increase the incentive distribution subsidy from ETE from $60.0 million to $80.0
million for the first year following the closing of the merger but the subsidy would remain at $60.0 million for each of the four years thereafter, and that the increase for the first year following the closing would be expected to keep the
unaffiliated ETP unitholders from suffering dilution as a result of the proposed transaction during the first year after closing. On the basis that ETE would be willing to provide such an incentive distribution subsidy, and after considering the
three-day and five-day volume weighted average price (VWAP) of Regency common units and the closing price of ETP common units on January 23, 2015, the ETP Conflicts Committee instructed ETP management to respond to Regencys
proposal by proposing an exchange ratio of 0.4066 ETP common units for each Regency common unit, a cash make-whole payment to cover the expected difference between ETPs quarterly distributions and Regencys quarterly distributions for one
year following the closing, a 4% breakup fee and approval to be based on a simple majority vote of the outstanding Regency units. This proposal had an implied offer value of $26.88 per Regency common unit, representing a 13.2% premium to the closing
price of Regency common units on January 23, 2015, a 15.3% premium to the three-day VWAP of Regency common units as of January 23, 2015 and a 17.2% premium to the five-day VWAP of Regency common units as of January 23, 2015.
On January 23, 2015, the ETE Board held a meeting at which ETE management provided an update on the status of the negotiations between ETP and
Regency and presented the financial analysis prepared by ETE management related to the financial impact of the proposed merger on ETE based on the terms then being considered by ETP and Regency, as well as the proposed incentive distribution
subsidy. At this meeting, the ETE Board determined that Matt Ramsey and Rick Turner, two independent directors of ETE, would spearhead the review of the financial impact of the proposed transaction, including the proposed incentive distribution
subsidy, on ETE. Following the meeting, the ETE Board engaged Potter Anderson & Corroon, LLP to provide legal advice to the ETE Board with respect to the proposed transaction.
On January 23, 2015, ETP management called Regency management and proposed an exchange ratio of 0.4066 and a cash payment of $0.31 per Regency
unit. Regency management conveyed that proposal to the Regency Conflicts Committee.
Later on January 23, 2015, the Regency Conflicts
Committee met and discussed such counterproposal as a rejection to its 15% premium with a 0.4088 ETP unit exchange ratio, but accepted the proposal in principle, subject to additional financial analysis to determine whether the proposed exchange
ratio and the cash payment would provide, in the aggregate, a 15.0% premium to Regencys VWAP for several trading days as compared to the closing price of ETP common units on January 23, 2015.
On January 24, 2015, Barclays, J.P. Morgan, Mr. Long and Mr. Welch had multiple discussions regarding the specific financial analysis related
to the calculation of the five-day VWAP for Regency common units, as well as the cash amount necessary to achieve the 15.0% premium that the Regency Conflicts Committee had requested in order to approve the proposed transaction. Following these
discussions, it was determined that an exchange ratio of 0.4066 and a cash payment of $0.32 per Regency unit would achieve the desired 15.0% premium for Regency common units. The combination of the 0.4066 exchange ratio and $0.32 cash payment had an
implied offer value of $26.89 per Regency common unit, representing a 13.2% premium to the closing price of Regency common units on January 23, 2015, a 15.3% premium to the three-day VWAP of Regency common units as of January 23, 2015 and
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a 17.2% premium to the five-day VWAP of Regency common units as of January 23, 2015. Following such discussions, on January 24, 2015, the Regency Conflicts Committee met and reviewed
such information and the merger agreement.
On January 24, 2015, Baker Botts emailed a revised draft of the merger agreement to Latham,
RLF and ETP, which included the 0.4066 exchange ratio, a cash make-whole payment equal to $0.32 per Regency unit and an incentive distribution subsidy from ETE to ETP of $80.0 million for the first year following the closing of the merger and $60.0
million for each of the four years thereafter.
On January 24, 2015, the ETP Conflicts Committee held a telephonic meeting with ETP
management, Barclays, RLF and Latham at which ETP management reported to the ETP Conflicts Committee regarding the negotiations with Regency and the proposed cash payment to Regency unitholders of $0.32 per Regency unit.
On January 24, 2015, the ETP Conflicts Committee held a telephonic meeting with Barclays and RLF to consider the proposed transaction. At the
meeting, (i) Barclays presented the ETP Conflicts Committee with its financial analysis of the terms agreed to in the proposed transaction, (ii) RLF summarized the terms of the merger agreement, and (iii) the ETP Conflicts Committee discussed
factors that supported approving the proposed transaction and factors that did not support approving the proposed transaction. Following such discussion, the ETP Conflicts Committee unanimously (i) determined in good faith that the proposed
transaction, including the merger agreement and the transactions contemplated thereby, on substantially the terms set forth in the merger agreement, including the incentive distribution subsidy from ETE, are advisable, fair and reasonable to, and in
the best interests of ETP and the unaffiliated ETP unitholders, (ii) approved the proposed transaction (including the merger agreement) upon substantially the terms and conditions set forth in the merger agreement (taking into account the incentive
distribution subsidy from ETE), and (iii) recommended that the ETP Board approve the merger agreement (including the consummation of the transactions contemplated thereby) and the proposed transaction, submit the merger agreement to the limited
partners of ETP for approval and cause ETP to enter into the merger agreement and consummate the proposed transaction upon substantially the terms and conditions set forth in the merger agreement (subject to obtaining the requisite approval of
limited partners of ETP).
On January 24, 2015, at an ETP Board meeting duly called and held, the ETP Conflicts Committee advised the ETP
Board that it had approved the merger agreement and recommended that the ETP Board approve the merger agreement and submit the merger agreement to ETPs limited partners for approval. Following this recommendation, the ETP Board determined that
it is in the best interests of ETP GP and its partners and ETP and its partners, and declared it advisable, for ETP GP and ETP to enter into the merger agreement, and the ETP Board approved and adopted the merger agreement and the transactions
contemplated thereby, including the merger.
On January 25, 2015, the Regency Conflicts Committee met with J.P. Morgan and Akin Gump. At
the meeting J.P. Morgan presented and discussed its financial analyses with respect to the proposed transaction. Following the presentation, at the request of the Regency Conflicts Committee, J.P. Morgan rendered its oral opinion to the Regency
Conflicts Committee (which was subsequently confirmed in writing by delivery of J.P. Morgans written opinion addressed to the Regency Conflicts Committee and the Regency Board as of the same date) as to the fairness, from a financial
point of view, of the consideration to be paid to Regencys common unitholders, other than ETE, ETP and their respective affiliates, in the proposed transaction. Following discussion of the terms and conditions of the merger agreement and the
fairness opinion with its advisors, the Regency Conflicts Committee then determined in good faith that the merger was fair and reasonable and in the best interest of Regency and the Regency unaffiliated unitholders. The Regency Conflicts Committee
unanimously approved and determined to recommend the merger and the merger agreement. The Regency Board then convened a duly called and held telephonic meeting, during which, at the request of the Regency Conflicts Committee, J.P. Morgan rendered
its oral opinion (which was subsequently confirmed in writing) described above to the Regency Board. Representatives of Baker Botts also participated in the Regency Board meeting. Pursuant to the Regency Conflicts Committees recommendation,
the Regency Board then approved the merger and the merger agreement on the same terms (with John W. McReynolds and Mr. Ramsey abstaining).
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On January 25, 2015, the parties finalized and executed the merger agreement.
On January 26, 2015, prior to the opening of trading on the NYSE, the parties issued a press release announcing the transaction.
From February 2, 2015 to February 9, 2015, ETP management and Latham discussed a possible change in the structure of the merger from a direct
merger of Regency into ETP to a reverse triangular merger in which Regency would merge with a newly formed, wholly owned subsidiary of ETP, with Regency surviving the merger as a wholly owned subsidiary of ETP. The parties discussed how this
possible change in structure would provide greater deal certainty for Regency and ETP and other benefits of the change.
On February 9,
2015, Latham and RLF discussed ETPs proposal to change the structure of the merger. The parties also discussed ETPs primary rationale for the change in merger structure, as well as the consequences of the change, including the
elimination of an ETP unitholder vote with respect to the transaction.
On February 10, 2015, the ETP Conflicts Committee held a
telephonic meeting with RLF. At the meeting, RLF described the proposal to change the structure of the merger, and the ETP Conflicts Committee and RLF discussed possible advantages and disadvantages with respect to the change in structure from the
perspective of ETP and the unaffiliated ETP unitholders. Also at that meeting, RLF described to the ETP Conflicts Committee the provisions of the merger agreement that required the ETP Board to refer any proposed amendment to the merger agreement to
the ETP Conflicts Committee and provide it with not less than two business days to make a recommendation with respect thereto. The ETP Conflicts Committee instructed RLF (i) to ensure that the ETP Board would make such a referral before the ETP
Conflicts Committee is asked to consider an amendment, and (ii) to ask ETP management to provide the ETP Conflicts Committee with a presentation that includes the benefits of the change in structure to ETP and the unaffiliated ETP unitholders, as
well as the potential issues related to such change. Following the meeting, between February 10, 2015 and February 18, 2015, ETP management, Latham and RLF conferred multiple times to discuss the benefits and issues associated with the change
in structure to ETP and the unaffiliated ETP unitholders and to develop the requested presentation.
On February 10, 2015, Latham emailed
an initial draft of the amended and restated merger agreement reflecting the change in the merger structure to RLF, Baker Botts, Akin Gump and Regency.
On February 14, 2015, Baker Botts emailed a revised draft of the amended and restated merger agreement to ETP, Latham and Akin Gump.
On February 16, 2015, Latham emailed a draft of an amendment to the merger agreement (the merger agreement amendment) to ETP,
Latham and RLF, which reflected the changes included in the amended and restated merger agreement draft delivered by Baker Botts on February 14, 2015. In addition, the merger agreement amendment included a change in the merger consideration such
that holders of Regency common units would receive, in lieu of the cash consideration, $0.32 in additional ETP common units based on the VWAP of the ETP common units for the five trading days ending on the third trading day immediately preceding the
effective time of the merger.
On February 17, 2015, the ETP Board and the ETE Board held a joint meeting to discuss the proposed merger
agreement amendment, pursuant to which the structure of the merger would be changed as described above (and, as a result, the ETP unitholder vote would be eliminated) and the cash component of the merger consideration would be changed as described
above. At the meeting, the ETP Board authorized the ETP Conflicts Committee to review and evaluate any potential conflicts of interest arising in connection with the proposed merger agreement amendment and to determine whether or not to approve, and
to recommend that the ETP Board approve, the proposed merger agreement amendment.
On February 17, 2015, Baker Botts emailed a revised
draft of the merger agreement amendment to ETP, Latham, Akin Gump and RLF.
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On February 18, 2015, the Regency Conflicts Committee held a telephonic meeting with Akin Gump
and J.P. Morgan to discuss the merger agreement amendment. While the Regency Conflicts Committee understood that it was under no obligation to renegotiate or agree to an amendment, it was willing to consider the merger agreement amendment if it
would be in the best interests of Regency and its unaffiliated unitholders. After discussion, the Regency Conflicts Committee determined that the change in the structure was positive for the Regency unitholders because the elimination of the
requirement for ETP to obtain unitholder approval removed the risk of a negative ETP unitholder vote, thereby providing additional deal certainty for the Regency unitholders. The Regency Conflicts Committee also discussed the effects of agreeing to
change the form of the cash make-whole consideration (which represented approximately 1.5% of the total consideration) to additional ETP common units. The Regency Conflicts Committee discussed the benefits to the Regency unitholders of receiving
additional ETP common units instead of being required to take cash at the closing, which would allow this portion of the merger consideration to be tax-deferred to the Regency unitholders. The Regency Conflicts Committee and its advisors discussed
alternative methodologies for calculating the number of units to be issued for the make-whole payment. The Regency Conflicts Committee noted that any Regency unitholder who wanted the $0.32 cash at closing would be required to sell the incremental
ETP common units received, incur a brokerage commission in connection with that sale, and pay tax on any difference between the amount received and that unitholders basis in the units sold. As a result, the Regency Conflicts Committee
determined to ask ETP to increase the value of the make-whole payment equal to two years of incremental Regency distributions. The Regency Conflicts Committee also discussed with Regency management its concern that the new merger structure may
impact ETPs ability to improve the credit rating with respect to Regencys outstanding senior notes to investment grade status because Regency would be a subsidiary of ETP post-merger instead of merged into ETP. The Regency Conflicts
Committee communicated its response and concerns to representatives of ETP, who indicated the two-year make-whole payment would probably be rejected. The Regency Conflicts Committee requested that the value of the ETP additional common units be
increased to at least $0.33 per Regency common unit.
On February 18, 2015, Latham emailed a revised draft of the merger agreement
amendment to RLF, Baker Botts, Akin Gump and Regency.
On February 18, 2015, ETP management conveyed to the Regency Conflicts Committee
that it was not willing to agree to the Regency Conflicts Committees proposed increases to the value of the make-whole payment but that it was willing to change the method by which the additional units would be calculated to a method based on
the lesser of (i) the closing price of ETP common units on the third business day prior to closing or (ii) the five-day VWAP three business days prior to closing in order to provide greater value to Regencys unitholders. Management of ETP also
confirmed that their proposed plan to achieve an investment grade rating for Regencys senior notes in this new structure would be for ETP to guarantee Regencys senior notes, as ETP management had previously discussed with the rating
agencies prior to execution of the merger agreement. Later that day, Latham emailed a revised draft of the merger agreement amendment to RLF, Baker Botts, Akin Gump and Regency, which incorporated the formula described above for calculating the
additional ETP common unit consideration.
On the evening of February 18, 2015, at a meeting of the Regency Conflicts Committee duly
called and held, at which representatives of Akin Gump participated, the Regency Conflicts Committee determined in good faith that the merger agreement amendment was fair and reasonable and in the best interest of Regency and the unaffiliated
Regency unitholders. The Regency Conflicts Committee unanimously approved and determined to recommend that the Regency Board approve the merger agreement amendment. Later on February 18, 2015, at a telephonic Regency Board meeting duly called
and held, at which representatives of Baker Botts participated, the Regency Conflicts Committee advised the Regency Board that the committee had approved the merger agreement amendment and recommended that the Regency Board approve the merger
agreement amendment. Upon deliberation following the Regency Conflicts Committees recommendation, the Regency Board then approved the merger agreement amendment (with Messrs. McReynolds and Ramsey abstaining).
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On the evening of February 18, 2015, the ETP Conflicts Committee held a telephonic meeting with
Barclays and RLF to consider the merger agreement amendment. At the meeting, (i) RLF presented the ETP Conflicts Committee with a document prepared by RLF, Latham and ETP management summarizing the potential benefits and disadvantages of the change
in structure to ETP and the unaffiliated ETP unitholders and the ETP Conflicts Committee considered those benefits and disadvantages and others it viewed as relevant, (ii) Barclays representatives discussed with the ETP Conflicts Committee its
analysis relating to the financial impact of the merger agreement amendment, and (iii) RLF summarized the terms of the merger agreement amendment. Following such discussion, the ETP Conflicts Committee unanimously (i) determined in good faith that
the merger agreement amendment and the transactions contemplated thereby, on the terms set forth in the merger agreement and the merger agreement amendment, are advisable, fair and reasonable to, and in the best interests of ETP and the unaffiliated
ETP unitholders, (ii) approved the merger agreement amendment upon the terms and conditions set forth in the merger agreement and the merger agreement amendment, and (iii) recommended that the ETP Board approve the merger agreement amendment and
cause ETP to enter into the merger agreement amendment.
On the evening of February 18, 2015, at an ETP Board meeting duly called and
held, at which representatives of Latham participated, the ETP Conflicts Committee advised the ETP Board that it had approved the merger agreement amendment and recommended that the ETP Board approve the merger agreement amendment. Following this
recommendation, the ETP Board (i) determined that it is in the best interests of ETP GP and its partners and ETP and its partners, and declared it advisable, for ETP GP and ETP to enter into the merger agreement amendment, and (ii) approved and
adopted the merger agreement amendment and the transactions contemplated thereby.
Following the Regency and ETP Board meetings, on
February 18, 2015, the parties finalized and executed the merger agreement amendment.
Recommendation of the Regency
Conflicts Committee, the Regency Board and Their Reasons for the Merger
The Regency Conflicts Committee consists of two independent
directors: Richard D. Brannon (Chairman) and James W. Bryant. The Regency Board authorized the Regency Conflicts Committee to (i) review, evaluate and negotiate with ETP the terms and conditions of the merger, together with the form, terms and
provisions of the merger agreement, on behalf of Regency, (ii) make a recommendation to the Regency Board whether to approve the merger and (iii) determine whether to give or withhold the Regency Conflicts Committees approval of the
merger.
The Regency Conflicts Committee retained Akin Gump as its outside legal counsel, Morris Nichols as its outside Delaware legal
counsel and J.P. Morgan as its financial advisor. The Regency Conflicts Committee oversaw the performance of financial and legal due diligence by its advisors, conducted an extensive review and evaluation of ETPs proposal and maintaining the
status quo, and conducted extensive negotiations with ETP and its representatives with respect to the merger agreement and other related agreements. Regency retained Baker Botts as its outside legal counsel.
The Regency Conflicts Committee, by unanimous vote at a meeting held on January 25, 2015, (i) determined that the merger is fair and
reasonable and in the best interests of Regency and Regencys common unitholders, other than ETE, ETP and their respective affiliates (the unaffiliated Regency unitholders), (ii) approved the merger and the execution and
delivery of the merger agreement, which approval constituted Special Approval as defined in the Regency partnership agreement, (iii) recommended approval of the merger agreement by the limited partners of Regency and
(iv) recommended that the Regency Board approve the merger, authorize the entry into the merger agreement, submit the merger agreement to a vote of limited partners of Regency and recommend approval of the merger agreement by the limited
partners of Regency. The Regency Conflicts Committee, by unanimous vote at a meeting held on February 18, 2015, (i) determined that the amendment to the merger agreement is fair and reasonable and in the best interests of Regency and the
unaffiliated Regency unitholders, (ii) approved the amendment to the merger agreement and the execution and delivery thereof, which approval constituted Special Approval as defined in the Regency partnership
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agreement, (iii) recommended approval of the amendment to the merger agreement by the limited partners of Regency and (iv) recommended that the Regency Board authorize the entry into
the amendment to the merger agreement.
Based on the Regency Conflicts Committees recommendation, the Regency Board (with Messrs.
McReynolds and Ramsey abstaining), at a meeting held on January 25, 2015, (i) determined that the merger is in the best interests of Regency and the unaffiliated Regency unitholders, (ii) approved the merger, the merger agreement and
the execution, delivery and performance of the merger agreement and (iii) directed that the merger agreement be submitted to a vote of limited partners of Regency. Further, based on the Regency Conflicts Committees recommendation, the
Regency Board (with Messrs. McReynolds and Ramsey abstaining), at a meeting held on February 18, 2015, (i) determined that the amendment to the merger agreement is in the best interests of Regency and the unaffiliated Regency unitholders
and (ii) approved the amendment to the merger agreement and the execution, delivery and performance thereof.
The Regency Conflicts
Committee and the Regency Board viewed the following factors as being generally positive or favorable in coming to their determinations and recommendation with respect to the merger:
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The merger agreement provides for Regency unitholders to receive 0.4066 ETP common units plus the additional unit consideration for each Regency common unit and a reduction of ETEs incentive distribution rights by
an aggregate of $320 million over five years ($80 million in the first year and $60 million per year for the following four years), which they believed constituted an improvement over ETPs initial proposal of 0.4044 ETP common units and
approximately $137 million in a keep-whole cash payment to be divided pro rata amongst the Regency common unitholders and a reduction of ETEs incentive distribution rights by an aggregate $300 million over five years ($60 million
in each year). |
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The merger consideration, with an implied value of $26.89 per Regency common unit based upon the closing price of ETP common units on January 23, 2015, represents a: |
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13.2% premium to the closing price of Regency common units of $23.75 on January 23, 2015; |
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15.3% premium to the volume weighted average price of Regency common units for the last three trading days ending January 23, 2015; and |
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17.2% premium to the volume weighted average price of Regency common units for the last five trading days ending January 23, 2015. |
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The Regency Conflicts Committee retained financial and legal advisors with knowledge and experience with respect to public merger and acquisition transactions, MLPs, Regencys and ETPs industry generally, and
Regency and ETP particularly, as well as substantial experience advising MLPs and other companies with respect to transactions similar to the merger. |
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J.P. Morgan prepared financial analyses with respect to Regency and ETP, including a public companies analysis and a dividend discount model analysis, and rendered its opinion to the Regency Conflicts Committee and the
Regency Board to the effect that, as of January 25, 2015, and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to unaffiliated Regency unitholders was fair, from a financial
point of view, to such unitholders. |
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The merger provides Regency unitholders equity ownership in an entity with a diversified platform of assets and substantially lower cost of capital, which is expected to provide greater ability to pursue accretive
capital projects and acquisitions that would provide for higher distribution growth. |
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On a pro forma basis after giving effect to the merger, ETP will be the second largest midstream MLP in the United States, with an expected enterprise value of approximately $87 billion, which, among other things,
consolidates midstream assets across multiple basins, builds a major presence in the Marcellus and Utica basins with an increased presence in the Permian and Eagle Ford basins, creates an increased upside to ETPs intrastate gas system, creates
significant synergies, provides an extensive geographic asset base and the financial capacity to make additional accretive capital investments. |
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The Regency equity exchange ratio, which represents a substantial portion of the consideration payable to Regency unitholders, is fixed and therefore the value of the consideration payable to Regency common unitholders
will increase in the event that the market price of ETP common units increases prior to the closing of the merger. |
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The merger is expected to create operating efficiencies and cost savings in administrative and interest costs as well as other combined benefits. |
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The resulting combined entity is expected to have a strong balance sheet and maintain an investment grade rating. The resulting combined entitys balance sheet and lower cost of capital will allow Regencys
unitholders to benefit from the investment grade rating of the combined entity and reduce the cost of the funding of Regencys approximately $2 billion budgeted capital program in a lower commodity price environment. |
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The merger consideration generally will not be taxable for U.S. federal income tax purposes to Regencys common unitholders. |
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The terms of the merger agreement, principally: |
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the provisions allowing the Regency Conflicts Committee and the Regency Board to withdraw or change their recommendation of the merger agreement in the event of a superior proposal or intervening events if any of them
makes a good faith determination that the failure to change its recommendation would be inconsistent with its duties under Regencys partnership agreement or applicable law; |
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the provisions allowing Regency to participate in negotiations with a third party in response to an unsolicited alternative proposal, which may, in certain circumstances, result in a superior proposal;
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the fact that the provisions do not provide for a vote of ETP unitholders to approve the merger; |
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the provisions requiring ETE and ETP to vote their Regency units in favor of the merger; |
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the operating covenants for ETP providing protection to Regency unitholders by restricting ETPs ability to take certain actions prior to the closing of the merger that could reduce the value of ETP common units
received by Regency unitholders in the merger; |
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the limited conditions and exceptions to the material adverse effect closing condition and other closing conditions; and |
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the consummation of the merger is not conditioned on financing. |
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The Regency Conflicts Committee believed that potential alternative transactions with third parties were not achievable due to ETEs control of Regencys general partner. In addition, the Regency Conflicts
Committee considered maintaining the status quo and the impact on Regencys business plan in light of the fundamental change in the commodity price environment and changes in the capital markets. |
The Regency Conflicts Committee and the Regency Board considered the following factors to be generally negative or unfavorable in making their
determinations and recommendation with respect to the merger:
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The Regency unitholders will receive ETP common units that, at least through 2016, are expected to pay a lower distribution as compared to the expected distribution on Regency common units during that period.
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The Regency Conflicts Committee was not authorized to, and did not, conduct an auction process or other solicitation of interest from third parties for the acquisition of Regency. Because ETE, an affiliate of ETP,
controls Regencys general partner, it was unrealistic to expect or pursue an unsolicited third party acquisition proposal or offer for the assets or control of Regency, and it was unlikely that the Regency Conflicts Committee could conduct a
meaningful auction for the acquisition of the assets or control of Regency. |
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Although the merger is subject to approval by a majority of the outstanding Regency units entitled to vote at the special meeting, the vote includes Regency units held by ETP, ETE and their affiliates, and there is no
requirement of a separate approval by the unaffiliated Regency unitholders. |
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The exchange ratio, which represents a substantial portion of the consideration to Regency unitholders, is fixed and therefore the value of the consideration payable to Regency common unitholders will decrease in the
event that the market price of ETP common units decreases relative to any change in the market price of Regency common units prior to the closing of the merger. |
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There is risk that the potential benefits sought in the merger might not be fully realized. |
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The merger may not be completed in a timely manner, or at all, which could result in significant costs and disruption to Regencys normal business. |
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Certain terms of the merger agreement, principally: |
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the provisions limiting the ability of Regency to solicit, or to consider unsolicited, offers from third parties for Regency; |
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the provisions requiring Regency to hold a unitholder meeting as soon as practicable to approve the merger, even in the event the Regency Conflicts Committee or Regency Board changes its recommendation with respect to
such approval; |
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the break-up fee payable by Regency in connection with termination of the merger agreement as a result of a superior proposal for Regency; |
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the Regency Conflicts Committee did not have ultimate authority to determine whether to proceed with the merger and the Regency Board reserved the right to move forward with the merger in the absence of approval by the
Regency Conflicts Committee; |
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Regency common unitholders are not entitled to dissenter or appraisal rights under the merger agreement, Regencys partnership agreement or Delaware law; and |
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Regency common unitholders will be foregoing the potential benefits, if any, that could be realized by remaining as unitholders of Regency as a standalone entity. |
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Litigation may occur in connection with the merger and such litigation may increase costs and result in a diversion of management focus. |
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Some of the directors and officers of Regency have interests in the merger that are different from, or in addition to, the interests of Regencys unitholders generally. Please read The MergerInterests
of Directors and Executive Officers of Regency in the Merger. |
The foregoing discussion is not intended to be
exhaustive, but is intended to address the material information and principal factors considered by the Regency Conflicts Committee and the Regency Board in considering the merger. In view of the number and variety of factors and the amount of
information considered, the Regency Conflicts Committee and the Regency Board did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its
determination. In addition, the Regency Conflicts Committee and the Regency Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its
ultimate determination, and individual members of the Regency Conflicts Committee and the Regency Board may have given different weights to different factors. The Regency Conflicts Committee and the Regency Board made their recommendations based on
the totality of information presented to, and the investigation conducted by, the Regency Conflicts Committee and the Regency Board. It should be noted that certain statements and other information presented in this section are forward-looking in
nature and, therefore, should be read in light of the factors discussed under the heading Cautionary Statement Regarding Forward-Looking Statements.
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The Regency Conflicts Committee and the Regency Board each recommend that Regency unitholders
vote FOR the approval of the merger agreement and FOR the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to approve the merger agreement at the time of the
special meeting, and the Regency Board recommends that Regency unitholders vote FOR the advisory compensation proposal.
Opinion of the Financial Advisor to the Regency Conflicts Committee
Pursuant to an engagement letter dated January 22, 2015,
Regency retained J.P. Morgan as the financial advisor to the Regency Conflicts Committee in connection with the merger.
At meetings of
the Regency Conflicts Committee and the Regency Board on January 25, 2015, J.P. Morgan rendered its oral opinion to the Regency Conflicts Committee and the Regency Board, which opinion was subsequently confirmed in writing, that, as of such
date and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration to be paid to holders of Regency common units, other than ETE, ETP and their respective affiliates, in the merger was fair, from a
financial point of view, to such unitholders. The issuance of J.P. Morgans opinion was approved by a fairness committee of J.P. Morgan. No limitations were imposed by the Regency Board or the Regency Conflicts Committee upon J.P. Morgan with
respect to the investigations made or procedures followed by it in rendering its opinions.
The full text of the written opinion of
J.P. Morgan dated January 25, 2015, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. Regency
unitholders are urged to read the opinion in its entirety. J.P. Morgans written opinion is addressed to the Regency Conflicts Committee and the Regency Board, is directed only to the merger consideration to be paid to holders of Regency common
units (other than ETE, ETP and their respective affiliates) and does not constitute a recommendation to any Regency unitholder as to how such Regency unitholder should vote with respect to the transactions contemplated by the merger agreement. The
summary of the opinion of J.P. Morgan set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, J.P. Morgan, among other things:
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reviewed a draft of the merger agreement dated January 25, 2015; |
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reviewed certain publicly available business and financial information concerning Regency and ETP and the industries in which they operate; |
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compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;
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compared the financial and operating performance of Regency and ETP with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market
prices of the Regency common units and the ETP common units and certain publicly traded securities of such other companies; |
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reviewed certain internal financial analyses and forecasts prepared by the management of Regency relating to its business and by the management of ETP relating to its business, as well as the estimated amount and timing
of the cost savings and related expenses and synergies expected to result from the merger (referred to in this section as the estimated synergies); |
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reviewed certain financial forecasts relating to the business of Regency based on certain publicly available financial forecasts and adjustments thereto reviewed by the management of Regency, which forecasts were
approved by Regencys management as reasonable for use in J.P. Morgans analysis; |
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reviewed certain financial forecasts relating to the business of ETP based on certain publicly available financial forecasts and adjustments thereto reviewed by the management of ETP, which forecasts were approved by
Regencys management as reasonable for use in J.P. Morgans analysis; and |
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performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion. |
J.P. Morgan also held discussions with the Regency Conflicts Committee and certain members of the management of Regency and ETP with respect
to certain aspects of the merger, and the past and current business operations of Regency and ETP, the financial condition and future prospects and operations of Regency and ETP, the effects of the merger on the financial condition and future
prospects of Regency and ETP, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its
opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Regency and ETP or otherwise reviewed by or for J.P. Morgan, and J.P.
Morgan did not independently verify, nor did J.P. Morgan assume any responsibility or liability for independently verifying, any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or
appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Regency or ETP under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to it
or derived therefrom, including the estimated synergies referred to above, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected
future results of operations and financial condition of Regency and ETP to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the estimated synergies) or the assumptions on which they
were based. J.P. Morgan also assumed that the merger and the other transactions contemplated by the merger agreement will have the tax consequences described in discussions with, and materials furnished to J.P. Morgan by, representatives of Regency,
and will be consummated as described in the merger agreement, and that the definitive merger agreement would not differ in any material respect from the draft thereof furnished to J.P. Morgan. As of the date on which J.P. Morgan delivered its
opinion, the merger agreement contemplated the payment of $0.32 in cash (referred to in this section as the cash consideration) in lieu of the additional unit consideration. J.P. Morgan also assumed that the representations and
warranties made by Regency and ETP in the merger agreement were and will be true and correct in all respects material to J.P. Morgans analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors
to Regency with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on Regency or ETP
or on the contemplated benefits of the merger.
The projections furnished to J.P. Morgan for Regency for the years ending
December 31, 2015 and 2016 were prepared by the management of Regency. Regencys management does not normally prepare projections beyond two years. Accordingly, the projections furnished to J.P. Morgan for Regency for the years ending
December 31, 2017, 2018 and 2019 (together with the 2015 and 2016 projections, referred to in this section as the Regency projections) were based on selected equity research reports and adjustments thereto reviewed by the management
of Regency and approved by the management of Regency as reasonable for use in J.P. Morgans analysis. The projections furnished to J.P. Morgan for ETP for the years ending December 31, 2015 and 2016 were prepared by the management of ETP.
ETP management does not normally prepare projections beyond two years. Accordingly, the projections furnished to J.P. Morgan for ETP for the years ending December 31, 2017, 2018 and 2019 (together with the 2015 and 2016 projections, referred to
in this section as the ETP projections) were based on selected equity research reports and adjustments thereto reviewed by the management of ETP and approved by the management of Regency as reasonable for use in J.P. Morgans
analysis. Neither Regency nor ETP publicly discloses internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgans analysis of the merger, and such projections were not prepared with a view toward public
65
disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors
related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.
J.P. Morgans opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available
to J.P. Morgan as of, the date of such opinion. Subsequent developments may affect J.P. Morgans opinion, and J.P. Morgan does not have any obligation to update, revise or reaffirm such opinion. J.P. Morgan did not update, revise or reaffirm
its opinion in connection with the amendment to the merger agreement dated as of February 18, 2015. J.P. Morgans opinion is limited to the fairness, from a financial point of view, of the merger consideration to be paid to holders of Regency
common units (other than ETE, ETP and their respective affiliates) and J.P. Morgan has expressed no opinion as to the fairness of any consideration paid in connection with the merger to ETE, ETP, their respective affiliates, the holders of any other
class of securities, creditors or other constituencies of Regency or as to the underlying decision by Regency to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any
officers, directors, or employees of any party to the merger, or any class of such persons relative to the consideration to be paid to the holders of the Regency common units in the merger or with respect to the fairness of any such compensation.
J.P. Morgan expressed no opinion as to the price at which the Regency common units or the ETP common units will trade at any future time.
J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or
any part of Regency or any alternative transaction.
The terms of the merger agreement, including the consideration payable to the holders
of Regency common units, were determined through arms length negotiations between the Regency Conflicts Committee and ETP, and the decision to enter into the merger agreement was solely that of the Regency Conflicts Committee, the Regency
Board and the ETP Board. J.P. Morgans opinion and financial analyses were only one of the many factors considered by the Regency Conflicts Committee and the Regency Board in their evaluation of the merger and should not be viewed as
determinative of the views of the Regency Conflicts Committee or the Regency Board or management with respect to the merger or the consideration payable in the merger.
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methods in reaching its opinion.
The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinion.
Public
Companies Analysis
Using publicly available information, J.P. Morgan compared selected financial data of Regency and ETP
with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to Regencys or ETPs.
For Regency, the companies selected by J.P. Morgan, which are referred to below as the Gathering and Processing MLP Peers, were as follows:
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Targa Resources Partners LP |
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MarkWest Energy Partners, L.P. |
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EnLink Midstream Partners, LP |
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DCP Midstream Partners, LP |
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Enable Midstream Partners, LP |
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Crestwood Midstream Partners LP |
66
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Midcoast Energy Partners, L.P. |
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Southcross Energy Partners, L.P. |
For ETP, the companies selected by J.P. Morgan, which are
referred to below as the Diversified MLP Peers, were as follows:
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Enterprise Products Partners L.P. |
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Plains All American Pipeline, L.P. |
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Spectra Energy Partners, LP |
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Enbridge Energy Partners, L.P. |
These companies were selected, among other reasons, because they are
publicly traded master limited partnerships with operations and businesses that, for the purposes of J.P. Morgans analysis, may be considered similar to those of Regency and ETP based on the nature of their assets and operations. However, none
of the companies selected is identical or directly comparable to Regency or ETP, and certain of these companies may have characteristics that are materially different from those of Regency and ETP. The analyses necessarily involve complex
considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than would affect Regency or ETP.
For each company listed above, J.P. Morgan calculated and compared various financial multiples and ratios based on publicly available
information as of January 23, 2015. For each of the following analyses performed by J.P. Morgan, estimated financial data for the selected companies were based on (except as otherwise noted) the Regency projections and the ETP projections (in
the case of Regency and ETP, respectively) and information obtained from FactSet Research Systems and selected equity research reports (in the case of the other selected companies). The information J.P. Morgan calculated for each of the selected
companies included:
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Multiple of firm value (calculated based on fully diluted limited partner unit (LP) equity value using the treasury stock method plus an estimated value of the general partner interest, plus debt, minority
interest and preferred equity, less cash and cash equivalents) to estimated EBITDA (calculated as earnings before interest, taxes, depreciation and amortization) for the years ending December 31, 2015 and 2016; |
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Multiple of price (using the unit price as of January 23, 2015) to estimated distributable cash flow (DCF) per common unit for the years ending December 31, 2015 and 2016; and |
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The current (based on the latest announced quarterly distribution) and estimated calendar year 2015 and 2016 distribution yields, calculated as the current or estimated distribution per LP unit divided by the common
unit price as of January 23, 2015. |
67
Results of the analysis for Regency and ETP, respectively, are as follows:
Regency
Gathering and Processing MLP
Peers
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Firm value / estimated EBITDA |
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Price / DCF per common unit |
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Distribution yield |
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2015E |
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2016E |
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2015E |
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2016E |
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Current |
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2015E |
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2016E |
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Mean |
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12.3x |
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10.0x |
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11.0x |
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|
10.0x |
|
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|
8.3 |
% |
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9.0 |
% |
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|
9.7 |
% |
Median |
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11.9x |
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10.6x |
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11.6x |
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10.8x |
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7.2 |
% |
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7.8 |
% |
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8.5 |
% |
J.P. Morgan also calculated the same financial multiples and ratios for Regency, both at the implied offer
price in the merger and at the market price as of January 23, 2015, based on both the Regency projections and selected equity research reports (referred to as street estimates in the below table).
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Firm value / estimated EBITDA |
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Price / DCF per Regency common unit |
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Distribution yield |
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2015E |
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2016E |
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2015E |
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2016E |
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Current |
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|
2015E |
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2016E |
|
Regency (based on street estimates) |
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12.5x |
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11.0x |
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11.1x |
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|
10.4x |
|
|
|
8.5 |
% |
|
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8.9 |
% |
|
|
9.4 |
% |
Regency (based on Regency projections) |
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12.3x |
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10.9x |
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11.9x |
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11.3x |
|
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|
8.5 |
% |
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8.5 |
% |
|
|
8.7 |
% |
Regency (based on street estimates at implied offer price) |
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13.4x |
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11.8x |
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12.6x |
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11.7x |
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|
7.5 |
% |
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7.8 |
% |
|
|
8.3 |
% |
Regency (based on Regency projections at implied offer price) |
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13.2x |
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11.7x |
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13.5x |
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12.8x |
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7.5 |
% |
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7.5 |
% |
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7.7 |
% |
J.P. Morgan did not rely solely on the quantitative results of the selected public company analysis, but also
made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Regency and the selected companies that could affect the public trading values of each in order to provide a context in
which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, asset profiles and capital structures between Regency and the companies included in the selected
public company analysis. While all of the selected companies referred to above were used in deriving the mean and median multiples, J.P. Morgan considered Targa Resources Partners LP, DCP Midstream Partners, LP, Enable Midstream Partners, LP and
Crestwood Midstream Partners LP to be the companies that were the most similar to Regency, and relied on the multiples calculated for those companies in the relative valuation analysis described below. Based on the results of this analysis, J.P.
Morgan selected multiple reference ranges for Regency of 11.0x14.5x and 9.5x11.5x for firm value to estimated 2015 and 2016 EBITDA, respectively; ranges of 9.0x13.0x and 9.0x11.0x for price per common unit to estimated 2015
and 2016 DCF per common unit, respectively; and ranges of 10.0%7.5%, 10.0%8.0%, and 11.0%8.5% for current and estimated 2015 and 2016 distribution yields, respectively.
After applying such ranges to the appropriate metrics for Regency based on the Regency projections, the analysis indicated the following
implied equity value per Regency common unit ranges (resulting per unit values were in all cases rounded to the nearest $0.25 per unit):
Regency Implied Equity Value Per Regency Common Unit Range
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Firm value / estimated EBITDA |
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Price / DCF per Regency common unit |
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Distribution yield |
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|
2015E |
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2016E |
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2015E |
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2016E |
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Current |
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|
2015E |
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|
2016E |
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Low |
|
$ |
19.25 |
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$ |
18.50 |
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$ |
18.00 |
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$ |
18.75 |
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$ |
20.00 |
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$ |
20.00 |
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$ |
18.75 |
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High |
|
$ |
31.25 |
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|
$ |
26.25 |
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$ |
25.75 |
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$ |
23.00 |
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$ |
26.75 |
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$ |
25.00 |
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$ |
24.25 |
|
68
The ranges of implied equity values per Regency common unit were compared to the Regency common
unit closing price of $23.75 on January 23, 2015 and the implied consideration per Regency common unit of $26.89 based on the exchange ratio, cash consideration and the ETP common unit closing price of $65.34 on January 23, 2015.
ETP
Diversified MLP Peers
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|
Firm value / estimated EBITDA |
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Price / DCF per common unit |
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|
Distribution yield |
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|
2015E |
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2016E |
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|
2015E |
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2016E |
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|
Current |
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|
2015E |
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2016E |
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Mean |
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|
15.0x |
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13.2x |
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16.0x |
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|
15.1x |
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|
5.6 |
% |
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|
5.8 |
% |
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|
6.2 |
% |
Median |
|
|
15.1x |
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|
12.9x |
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|
16.0x |
|
|
|
14.9x |
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|
5.5 |
% |
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|
5.7 |
% |
|
|
6.1 |
% |
J.P. Morgan also calculated the same financial multiples for ETP based on both the ETP projections and street
estimates.
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|
Firm value / estimated EBITDA |
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Price / DCF per ETP common unit |
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|
Distribution yield |
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|
2015E |
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|
2016E |
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|
2015E |
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|
2016E |
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|
Current |
|
|
2015E |
|
|
2016E |
|
ETP (based on street estimates) |
|
|
15.1x |
|
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|
14.9x |
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|
14.5x |
|
|
|
14.4x |
|
|
|
6.0 |
% |
|
|
6.4 |
% |
|
|
6.6 |
% |
ETP (based on ETP projections) |
|
|
14.5x |
|
|
|
13.4x |
|
|
|
15.0x |
|
|
|
14.4x |
|
|
|
6.1 |
% |
|
|
6.4 |
% |
|
|
6.7 |
% |
J.P. Morgan did not rely solely on the quantitative results of the selected public company analysis, but also
made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of ETP and the selected companies that could affect the public trading values of each in order to provide a context in
which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, asset profiles and capital structures between ETP and the companies included in the selected public
company analysis. While all of the selected companies referred to above were used in deriving the mean and median multiples, J.P. Morgan considered Enterprise Products Partners L.P. and Williams Partners L.P. to be the companies that were the most
similar to ETP, and relied on the multiples calculated for those companies in the relative valuation analysis described below. Based on the results of this analysis, J.P. Morgan selected multiple reference ranges for ETP of 13.0x16.0x and
11.5x13.5x for firm value to estimated 2015 and 2016 EBITDA, respectively; ranges of 13.0x16.0x and 12.0x15.5x for price per common unit to estimated 2015, and 2016 DCF per common unit, respectively; and ranges of 7.0%5.5%,
7.25%5.75%, and 7.75%6.25% for current and estimated 2015 and 2016 distribution yields, respectively.
After applying such
ranges to the appropriate metrics for ETP based on the ETP projections, the analysis indicated the following implied equity value per ETP common unit ranges (resulting per unit values were in all cases rounded to the nearest $0.25 per unit):
ETP Implied Equity Value Per ETP Common Unit Range
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|
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|
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|
|
Firm value / estimated EBITDA |
|
|
Price / DCF per ETP common unit |
|
|
Distribution yield |
|
|
|
2015E |
|
|
2016E |
|
|
2015E |
|
|
2016E |
|
|
Current |
|
|
2015E |
|
|
2016E |
|
Low |
|
$ |
49.25 |
|
|
$ |
43.25 |
|
|
$ |
56.75 |
|
|
$ |
54.25 |
|
|
$ |
56.75 |
|
|
$ |
57.75 |
|
|
$ |
56.75 |
|
High |
|
$ |
81.50 |
|
|
$ |
66.50 |
|
|
$ |
70.00 |
|
|
$ |
70.25 |
|
|
$ |
72.25 |
|
|
$ |
72.75 |
|
|
$ |
70.50 |
|
69
The ranges of implied equity values per ETP common unit were compared to ETP common unit closing
price of $65.34 on January 23, 2015.
Dividend Discount Model Analysis
J.P. Morgan conducted a dividend discount model analysis for the purpose of determining the fully diluted equity value per unit for the Regency
common units and the ETP common units. A dividend discount model analysis is a method of evaluating the equity value of a company using estimates of the future distributions to unitholders generated by the company and taking into consideration the
time value of money with respect to those future distributions by calculating their present value. Present value refers to the current value of future distributions to unitholders paid by the company, and is obtained by
discounting those future distributions back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, capitalized returns and other appropriate factors.
The projected distribution stream per Regency common unit for the years 2015 through 2019 was based on the Regency projections, and was
discounted to present value using a range of discount rates from 8.0% to 11.0%, which was chosen by J.P. Morgan based upon an analysis of the cost of equity of Regency. J.P. Morgan also calculated a range of terminal values for Regency at the end of
the five-year period ending 2019 by applying a perpetual distribution growth rate ranging from 0% to 2.0% to the projected distribution stream in 2019 to calculate a range of terminal period distributions, then applying a distribution yield range of
7.5% to 10.0% to those terminal period distributions. Terminal value refers to the capitalized value of all distributions to common unitholders expected to be paid by Regency for periods beyond the Regency projections. The range of
terminal values was then discounted to present value using a range of discount rates from 8.0% to 11.0%. The dividend discount model analysis indicated a range of implied equity values of between $22.25 and $30.50 per Regency common unit (rounded to
the nearest $0.25). The range of implied equity value per Regency common unit was compared to the Regency common unit closing price of $23.75 on January 23, 2015 and the implied consideration per Regency common unit of $26.89 based on the
exchange ratio, cash consideration and the ETP common unit closing price of $65.34 on January 23, 2015.
The projected distribution
stream per ETP common unit for the years 2015 through 2019 was based on the ETP projections, and was discounted to present value using a range of discount rates from 8.0% to 10.0%, which was chosen by J.P. Morgan based upon an analysis of the cost
of equity of ETP. J.P. Morgan also calculated a range of terminal values for ETP at the end of the five-year period ending 2019 by applying a perpetual distribution growth rate ranging from 0% to 2.0% to the projected distribution stream in 2019 to
calculate a range of terminal period distributions, then applying a distribution yield range of 5.5% to 7.0% to those terminal period distributions. The range of terminal values was then discounted to present value using a range of discount rates
from 8.0% to 10.0%. The dividend discount model analysis indicated a range of implied equity values of between $62.50 and $82.00 per ETP common unit (rounded to the nearest $0.25). The range of implied equity value per unit was compared to
ETPs common unit closing price of $65.34 on January 23, 2015.
70
Relative Valuation Analysis
Based upon the implied equity values for Regency and ETP calculated in its public companies analysis and the implied equity values for Regency
and ETP calculated in its dividend discount model analysis described above, J.P. Morgan calculated an implied range of exchange ratios. For each comparison, J.P. Morgan compared the highest equity value for Regency to the lowest equity value for ETP
to derive the highest implied exchange ratio for Regency common unitholders implied by each set of reference ranges. J.P. Morgan also compared the lowest equity value for Regency to the highest equity value for ETP to derive the lowest implied
exchange ratio for Regency common unitholders implied by each set of reference ranges. The implied ranges of the exchange ratio resulting from this analysis were:
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|
|
|
Implied Exchange Ratio |
|
|
|
Low |
|
|
High |
|
Public Companies Analysis |
|
|
|
|
|
|
|
|
Firm value to 2015E EBITDA |
|
|
0.2362x |
|
|
|
0.6345x |
|
Firm value to 2016E EBITDA |
|
|
0.2782x |
|
|
|
0.6069x |
|
Price to 2015E DCF per common unit |
|
|
0.2571x |
|
|
|
0.4537x |
|
Price to 2016E DCF per common unit |
|
|
0.2669x |
|
|
|
0.4240x |
|
Current distribution yield |
|
|
0.2768x |
|
|
|
0.4714x |
|
2015E distribution yield |
|
|
0.2749x |
|
|
|
0.4329x |
|
2016E distribution yield |
|
|
0.2660x |
|
|
|
0.4273x |
|
Dividend Discount Model Analysis |
|
|
0.2713x |
|
|
|
0.4880x |
|
The implied ranges of the exchange ratio for Regency common unitholders were compared to the exchange ratio
(including cash consideration) for the merger of 0.4115x.
Other Information
J.P. Morgan also reviewed for informational purposes, among other things, the following:
|
|
|
historical trading prices during the 52-week period ended January 23, 2015, of Regency common units and ETP common units of $20.50 to $33.50 per unit and $52.75 to $69.75 per unit, respectively; |
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|
|
(1) the implied historical exchange ratios during the two-year period ended January 23, 2015 calculated by dividing the daily closing price per Regency common unit by that of an ETP common unit for each trading day
during that period and (2) the average of those daily implied historical exchange ratios for the one-week, ten-day, one-month, three-month, six-month, one-year and two-year periods ending January 23, 2015, resulting in the following
average implied exchange ratios for the periods indicated: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-week |
|
10-day |
|
|
1-month |
|
|
3-month |
|
|
6-month |
|
|
1-year |
|
|
2-year |
|
|
|
|
|
|
|
|
|
Average |
|
0.3626x |
|
|
0.3628x |
|
|
|
0.3640x |
|
|
|
0.4109x |
|
|
|
0.4724x |
|
|
|
0.4898x |
|
|
|
0.5009x |
|
|
|
|
Wall Street equity analysts price targets for the Regency common units and ETP common units of approximately $23.00 to $34.00 and $65.00 to $80.00, respectively, yielding an implied exchange ratio of 0.2875x to
0.5231x; |
|
|
|
the potential pro forma financial effects of the merger, taking into account, among other things, the estimated synergies, on (1) Regencys
estimated DCF per Regency common unit and distributions per Regency common unit, both with and without the cash consideration payable to the holders of the Regency common units in the merger, during the years ending December 31, 2015 and 2016;
(2) ETPs estimated DCF per ETP common unit and distributions per ETP common unit during the years ending December 31, 2015 and 2016; and (3) ETEs estimated DCF per unit and distributions per unit during
|
71
|
the years ending December 31, 2015 and 2016. Based on the exchange ratio in the merger, this analysis indicated that, on a pro forma basis, the merger could be dilutive to Regencys
estimated DCF per Regency common unit and distributions per Regency common unit during the years ending December 31, 2015 and 2016 when not adjusting for the cash payment in connection with the merger; accretive to Regencys estimated DCF
per Regency common unit and distributions per Regency common unit during the year ending December 31, 2015 and dilutive during the year ending December 31, 2016 when adjusting for the cash payment in connection with the merger; accretive
to ETPs estimated DCF per ETP common unit and neutral to distributions per ETP common unit during the year ending December 31, 2015 and accretive to both ETPs estimated DCF per ETP common unit and distributions per ETP common unit
during the year ending December 31, 2016; and accretive to ETEs estimated DCF to the general partner during the years ending December 31, 2015 and 2016; and |
|
|
|
multiples of firm value to estimated EBITDA and equity value to estimated DCF per common unit (in each case calculated based on equity research estimates for the fiscal year following the year of announcement) paid in
selected pending and/or completed precedent transactions which, when applying a selected range of such multiples to Regencys estimated EBITDA and DCF per Regency common unit for the year ending December 31, 2016 (based on the Regency
projections), indicated implied per unit equity reference ranges of approximately $22.75 to $36.25 and $23.75 to $29.75, respectively. |
Miscellaneous
The foregoing
summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as
a whole, could create an incomplete view of the processes underlying the analyses and its opinion. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an
opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its
opinion. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P.
Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgans analyses are not and do not purport to be appraisals or otherwise
reflective of the prices at which businesses actually could be bought or sold. None of the selected companies reviewed as described in the above summary is identical to Regency or ETP. However, the companies selected were chosen because they are
publicly traded companies with operations and businesses that, for purposes of J.P. Morgans analysis, may be considered similar to those of Regency and ETP. The analyses necessarily involve complex considerations and judgments concerning
differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Regency and ETP and the transactions compared to the merger.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and
other purposes. J.P. Morgan was selected to advise the Regency Conflicts Committee with respect to the merger on the basis of such experience and its familiarity with Regency.
For services rendered in connection with the merger, Regency has agreed to pay J.P. Morgan a fee of $6,750,000, $1,000,000 of which was
payable upon delivery by J.P. Morgan of its opinion and the remainder of
72
which will become payable only if the merger is consummated. In addition, Regency has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the
fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities, including liabilities arising under federal securities laws.
During the two years preceding the date of its opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships
with Regency and ETP, for which it and such affiliates have received customary compensation. Such services for Regency and its subsidiaries during such period have included acting as joint lead arranger of a credit facility for Regency Gas Services
LP in November 2014, acting as joint bookrunner on a bond offering by Regency in April 2013, acting as a joint bookrunner on a bond offering by Regency in February 2014, and acting as financial advisor to Regency in connection with its acquisition
of Southern Union Gas Services, Ltd. in April 2013. J.P. Morgan and its affiliates have received approximately $6 million of fees from Regency during the two years preceding the delivery of J.P. Morgans opinion in connection with
commercial or investment banking relationships with Regency (other than services rendered in connection with the merger). Such services for ETP and its affiliates during such period have included acting as bookrunner on a bond offering by ETP in
September 2013, acting as a bookrunner on a bond offering by ETPs subsidiary Sunoco Logistics Partners L.P. (Sunoco Logistics) in January 2013, and acting as a joint bookrunner on an equity offering for Sunoco Logistics in
September 2014. J.P. Morgan and its affiliates have received approximately $13 million of fees from ETP during the two years preceding the delivery of J.P. Morgans opinion in connection with commercial or investment banking relationships with
ETP. In addition, during such two year period, J.P. Morgan has provided Treasury and Securities services to Regency, and has provided Treasury and Securities services and Asset and Wealth Management services to ETP. In the ordinary course of their
businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of Regency or ETP for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such
securities.
Unaudited Financial Projections of Regency
Regency does not as a matter of course make public projections as to earnings or other results. However, the management of Regency has prepared
prospective financial information to assist the Regency Board and the Regency Conflicts Committee in evaluating Regencys operations and prospects, and for use in connection with discussions with third parties regarding possible combination
transactions. The accompanying summary prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants
with respect to prospective financial information, but, in the view of Regencys management was, based on certain growth assumptions, prepared on a reasonable basis, reflected the best currently available estimates and judgments, and presented,
to the best of Regencys managements knowledge and belief, the expected course of action and the expected future financial performance of Regency. However, this information is not fact. None of the unaudited financial projections reflect
any impact of the transactions.
Neither ETPs nor Regencys independent auditors, nor any other independent accountants, have
compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no
responsibility for the prospective financial information. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to the historical financial information of ETP and
Regency, respectively. Such reports do not extend to the unaudited financial projections and should not be read to do so.
73
The following table sets forth projected financial information for Regency for the fiscal years
ended December 31, 2015 and 2016.
|
|
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|
|
|
Year Ending December 31, |
|
|
|
2015E |
|
|
2016E |
|
|
|
(dollars in millions, except per unit amounts) |
|
EBITDA |
|
$ |
1,419 |
|
|
$ |
1,611 |
|
Distributable cash flow |
|
$ |
936 |
|
|
$ |
1,122 |
|
Distributable cash flow per LP unit |
|
$ |
1.99 |
|
|
$ |
2.09 |
|
Distribution per LP unit |
|
$ |
2.01 |
|
|
$ |
2.07 |
|
Reasons of the ETP Conflicts Committee and the ETP Board for the Merger
In connection with the merger, the ETP Board established the ETP Conflicts Committee, consisting of two independent directors to
(i) review and evaluate any potential conflicts arising in connection with the merger and (ii) determine whether or not to approve, and recommend that the ETP Board approve, the merger. The ETP Conflicts Committee conducted an extensive
review and evaluation of the proposed transaction.
The ETP Conflicts Committee retained RLF as its outside legal counsel and Barclays as
its financial advisor. ETP retained Latham as its outside legal counsel.
The ETP Conflicts Committee, by unanimous vote at a meeting held
on January 24, 2015, (i) determined that the merger, including the merger agreement and the transactions contemplated thereby, on the terms and conditions set forth in the merger agreement, including the reduction in ETEs incentive
distribution rights, are advisable, fair and reasonable to, and in the best interests of, ETP and the holders of ETP common units other than ETE and its affiliates (the ETP unaffiliated unitholders), (ii) approved the merger
(including the merger agreement) upon the terms and conditions set forth in the merger agreement (taking into account the reduction in ETEs incentive distribution rights) and (iii) recommended that the ETP Board approve the merger
agreement (including the consummation of the transactions contemplated thereby) and the merger and cause ETP to enter into the merger agreement and consummate the merger upon the terms and conditions set forth in the merger agreement. Additionally,
the ETP Conflicts Committee, by unanimous vote at a meeting held on February 18, 2015, (i) determined that the amendment to the merger agreement and the transactions contemplated thereby, on the terms and conditions set forth in the merger
agreement and the amendment to the merger agreement, are advisable, fair and reasonable to, and in the best interests of, ETP and the ETP unaffiliated unitholders, (ii) approved the amendment to the merger agreement upon the terms and
conditions set forth in the merger agreement and the amendment to the merger agreement and (iii) recommended that the ETP Board approve the amendment to the merger agreement (including the consummation of the transactions contemplated thereby)
and cause ETP to enter into such amendment and consummate the transactions contemplated thereby upon the terms and conditions set forth in the merger agreement and the amendment to the merger agreement.
Based, in part, on the ETP Conflicts Committees recommendation, the ETP Board, at a meeting held on January 24, 2015,
(i) determined that it is in the best interests of ETP GP and its partners and ETP and its partners, and declared it advisable, for ETP GP and ETP to enter into the merger agreement and (ii) approved and adopted the merger agreement and
the transactions contemplated thereby, including the merger. Further, based, in part, on the ETP Conflicts Committees recommendation, the ETP Board, at a meeting held on February 18, 2015, (i) determined that it is in the best
interests of ETP GP and its partners and ETP and its partners, and declared it advisable, for ETP GP and ETP to enter into the amendment to the merger agreement and (ii) approved and adopted the amendment to the merger agreement and the
transactions contemplated thereby.
74
The reasons for the ETP Conflicts Committee and the ETP Board approving the merger agreement, the
amendment thereto and the mergers at this time include:
|
|
|
The opportunity for ETP to benefit from any future earnings and growth of Regency after the Regency common units cease to be publicly traded. |
|
|
|
The structure of the merger, which does not require ETP unitholder approval, enhances deal certainty. |
|
|
|
The value created in the merger for the unitholders of the combined company by creating a larger company that will be well diversified both geographically, with operations in substantially all major producing areas in
the United States (including an increased presence in the Marcellus and Utica Shales), and across business lines. |
|
|
|
The favorable timing of the merger for ETP in light of the overall current market conditions and the outlook for the midstream services industry as they relate to ETPs competitive position, financial condition,
future distributions and growth prospects. |
|
|
|
The improved overall economics and capital deployment for ETPs midstream business (including with respect to the Permian Basin) as a result of the merger. |
|
|
|
The simplified organizational structure recognized by 100% ownership of Lone Star as a result of the merger, including with respect to the management of Lone Star. |
|
|
|
Regencys attractive backlog of fee-based organic growth projects (with minimum volume commitments) that are expected to enhance ETPs cash flow growth. |
|
|
|
The opportunity for ETP and Regency to achieve synergies in the form of cost savings and other efficiencies related to the simplification of their organizational structure, including reduced SEC filing requirements and
other costs of Regency as a public company. |
|
|
|
The $320 million of aggregate distributions over a five-year period that ETE agreed to forego with respect to its incentive distribution rights in ETP. |
|
|
|
The fact that, following the merger, it is anticipated that, during the first year following the merger the distributions to be received by ETP common unitholders will be approximately the same as the distributions that
would have been received by ETP if the merger were not completed and, during the second year following the merger, the distributions to be received by ETP common unitholders will be higher than the distributions that they would have received from
ETP if the merger were not completed. |
|
|
|
The potential to refinance Regency indebtedness at a lower cost of capital. |
|
|
|
The elimination of risks arising from potential conflicts between ETP and Regency as a result of common ownership of ETP GP and Regency GP . |
|
|
|
The relatively low execution risk in integrating businesses due to existing shared services. |
The foregoing discussion is not intended to be exhaustive, but is intended to address the material information and many of the principal
factors considered by the ETP Conflicts Committee and the ETP Board in considering the merger. In view of the number and variety of factors and the amount of information considered, the ETP Conflicts Committee and the ETP Board did not find it
practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the ETP Conflicts Committee and the ETP Board did not undertake
to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the ETP Conflicts Committee and the ETP Board may
have given different weights to different factors. The ETP Conflicts Committee and the ETP Board made their recommendations based on the totality of information presented to, and the investigation conducted by, the ETP Conflicts Committee and the
ETP Board. It should be noted that certain statements and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading Cautionary Statement
Regarding Forward-Looking Statements.
75
Interests of Directors and Executive Officers of Regency in the Merger
In considering the recommendation of the Regency Board that you vote to adopt the merger agreement, you should be aware that aside from their
interests as unitholders of Regency, Regencys directors and executive officers have interests in the merger that are different from, or in addition to, those of other unitholders of Regency generally. The members of the Regency Board were
aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the unitholders of Regency that the merger agreement be adopted. See Background of
the Merger and Recommendation of the Regency Conflicts Committee, the Regency Board and Their Reasons for the Merger. Regencys unitholders should take these interests into account in deciding whether to vote
FOR the adoption of the merger agreement. These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.
Treatment of Regency Equity-Based Awards
Under the merger agreement, outstanding equity-based awards held by Regencys directors and executive officers immediately prior to the
effective time will be treated as described below. For an estimate of the amounts that would be payable to Regencys named executive officers on settlement of their unvested equity-based awards, see Golden Parachute
Compensation below.
Regency Phantom Units.
Immediately prior to the effective time, (i) Regency phantom units held by Mr. Bradley and the non-employee directors of Regency,
Messrs. Bryant, Gray, Ramsey and Brannon and (ii) Regency phantom units held by Messrs. Long and Holotik and granted prior to December 16, 2011 will vest and convert, subject to applicable tax withholding, into the right to receive the
merger consideration. Under the merger agreement, each other Regency phantom unit that is outstanding as of immediately prior to the Effective Time will cease to relate to or represent a right to receive Regency common units and will be converted,
at the effective time, into the right to receive an award of phantom units relating to ETP common units on the same terms and conditions as were applicable to the corresponding award of Regency phantom units, except that the number of ETP common
units covered by the award will be equal to the number of Regency common units covered by the corresponding award of Regency phantom units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing
the additional unit consideration, rounded up to the nearest whole unit.
As of March 9, 2015, the Regency executive officers held the
following numbers of outstanding Regency phantom units:
|
|
|
|
|
Name of Executive Officer |
|
Number of Outstanding Regency Phantom Units |
|
Michael J. Bradley |
|
|
248,771 |
(1) |
Thomas E. Long |
|
|
101,133 |
(2) |
Jim Holotik |
|
|
81,733 |
(3) |
Richard Rehm |
|
|
36,856 |
|
Todd Carpenter |
|
|
17,000 |
|
(1) |
All of Mr. Bradleys Regency phantom units will vest immediately prior to the effective time of the merger. |
(2) |
Includes 7,700 Regency phantom units granted prior to December 16, 2011 that will vest immediately prior to the effective time of the merger |
(3) |
Includes 4,700 Regency phantom units granted prior to December 16, 2011 that will vest immediately prior to the effective time of the merger. |
76
As of March 9, 2015, the Regency directors who are not employees of Regency or its affiliates
held the following numbers of outstanding Regency phantom units, all of which will vest immediately prior to the effective time of the merger.
|
|
|
|
|
Name of Director |
|
Number of Outstanding Regency Phantom Units |
|
Richard D. Brannon |
|
|
2,500 |
|
James W. Bryant |
|
|
12,957 |
|
Rodney L. Gray |
|
|
12,957 |
|
Matthew S. Ramsey |
|
|
6,637 |
|
Indemnification and Insurance
The Regency partnership agreement requires Regency, among other things, to indemnify the directors and executive officers of Regency GP LLC,
the general partner of Regency GP, against certain liabilities that may arise by reason of their service as directors or officers.
In
addition, the merger agreement provides that, for a period of six years from the effective time, ETP, the surviving entity and the GP merger surviving entity shall indemnify, defend and hold harmless each officer or director of Regency or any of its
subsidiaries and also with respect to any such person, in their capacity as a director, officer, employee, member, trustee or fiduciary of another corporation, foundation, partnership, joint venture, trust, pension or other employee benefit plan or
enterprise (whether or not such other entity or enterprise is affiliated with Regency) serving at the request of or on behalf of Regency or any of its subsidiaries and together with such persons heirs, executors or administrators against any
cost or expenses (including attorneys fees), judgments, fines, losses, claims, damages or liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative, investigative or otherwise and whether or not such claim, action, suit, proceeding or investigation results in a formal civil or criminal litigation or regulatory action.
In addition, pursuant to the terms of the merger agreement, Regencys directors and executive officers will be entitled to certain
ongoing indemnification and coverage under directors and officers liability insurance policies from the surviving entity. Such indemnification and insurance coverage is further described in the section entitled The Merger
AgreementIndemnification; Directors and Officers Insurance.
Conversion of Class F Units
ETP indirectly owns all of the outstanding Class F units. ETE, which owns the general partner of ETP also owns Regencys general partner
and has ability to appoint all of Regencys directors. In connection with the merger, all of the Class F units issued and outstanding as of immediately prior to the effective time will be deemed to have been converted into an equal number of
Regency common units, which will be converted into the right to receive the merger consideration.
New Arrangements with ETP
Following the completion of the merger, Mr. Bradley will become an officer of ETE and Mr. Long will be appointed as chief financial
officer of ETP. In addition, prior to the effective time, ETE, ETP and their affiliates may initiate negotiations of agreements, arrangements and understandings with Messrs. Bradley and Long, as well as other Regency executive officers, regarding
compensation and benefits and may enter into definitive agreements regarding employment with, or the right to participate in the equity of, ETE, ETP or their affiliates, in each case on a going-forward basis following completion of the merger.
However, as of the date of this filing, no such agreements with respect to any Regency executive officer exist.
77
Golden Parachute Compensation
Regencys named executive officers do not have any employment agreements that call for payments of termination or severance benefits or
that provide for any payments in the event of a change in control. Regencys long-term incentive plans provide for immediate vesting of all unvested awards in the event of a change in control, as defined in each of our long-term incentive
plans. For purposes of the Regency GP LLC Long-Term Incentive Plan (the 2006 Plan), the merger will constitute a change in control and unvested awards granted under the 2006 Plan will vest and convert into the right to receive the merger
consideration. The Regency Energy Partners LP 2011 Long-Term Incentive Plan (the 2011 Plan) contains a different definition of change in control than the 2006 Plan and no such change of control will occur in connection with the merger
for purposes of the 2011 Plan. For a discussion of the treatment of Regency equity-based awards held by Regencys named executive officers see Treatment of Regency Equity-Based Awards above.
In addition, Regencys affiliates adopted the Energy Transfer Partners GP, L.P. Severance Plan and Summary Plan Description effective as
of June 12, 2013 (the Severance Plan), and Regencys employees, including its named executive officers, are covered by this Severance Plan. The Severance Plan provides for payment of certain severance benefits in the event of
Qualifying Termination (as that term is defined in the Severance Plan). In general the Severance Plan provides payment of two weeks of annual base salary for each year or partial year of employment service with the Partnership up to a maximum of 52
weeks or one year of annual base salary (with a minimum of four weeks of annual base salary) and up to three months of continued group health insurance coverage. The Severance Plan also provides that Regency may determine to pay benefits in addition
to those provided under the Severance Plan based on special circumstances, which additional benefits will be unique and non-precedent setting. The Severance Plan is available to all salaried employees on a nondiscriminatory basis. The merger is not
currently expected to result in a Qualifying Termination for any of Regencys named executive officers; therefore, no amounts would be payable to the named executive officers under the Severance Plan.
The information set forth below is required by Item 402(t) of Regulation S-K regarding compensation that is based on or otherwise relates
to the merger which the current Regency named executive officers could receive in connection with this merger. The amounts in the table below were calculated using the following assumptions: (i) the consummation of the merger occurred on
February 25, 2015, and (ii) the price per share of the Regency common units for purposes of calculating accelerated equity awards is $25.08, which is the average closing market price of Regencys common units over the
first five business days following the first public announcement of the merger. Values shown below do not take into account any increase in compensation that may occur following the date of this proxy statement/prospectus or following the merger.
Some of the assumptions used in the table below are based upon information not currently available and, as a result, the actual amounts to be received by any of the individuals below may differ from the amounts set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Cash (1) |
|
|
Equity (2) |
|
|
Perquisites/ Benefits (3) |
|
|
Total |
|
Michael J. Bradley |
|
$ |
120,820 |
|
|
$ |
6,239,177 |
|
|
$ |
3,597 |
|
|
$ |
6,363,594 |
|
Thomas E. Long |
|
|
63,660 |
|
|
|
193,166 |
|
|
|
4,119 |
|
|
|
260,945 |
|
Jim Holotik |
|
|
119,780 |
|
|
|
117,876 |
|
|
|
2,877 |
|
|
|
240,533 |
|
Richard Rehm |
|
|
56,110 |
|
|
|
|
|
|
|
5,106 |
|
|
|
61,216 |
|
Todd Carpenter |
|
|
80,776 |
|
|
|
|
|
|
|
4,119 |
|
|
|
84,895 |
|
(1) |
Amounts in this column would only be paid upon a Qualifying Termination. |
(2) |
Amounts in this column reflect the value of the Regency phantom units that will vest upon the completion of the merger. Except with respect to Mr. Bradley, these include only those Regency phantom units granted
under the 2006 Plan. See Treatment of Regency Equity-Based AwardsRegency Phantom Units above. |
(3) |
Amounts in this column represent COBRA payments by Regency, assuming the executive is enrolled in Regencys health plans following a Qualifying Termination. |
78
Interests of ETE and ETP in the Merger
ETE holds a controlling ownership interest in each of ETP and Regency. ETE controls ETP through ETEs ownership of ETP GP, which owns 100%
of the general partner interest and incentive distribution rights in ETP, and through ETEs ownership of all of the Class H units and Class I units of ETP. ETE controls Regency through ETEs ownership of ETE Acquirer and Regency GP LLC,
which own Regency GP. Regency GP owns 100% of the general partner interest and incentive distribution rights in Regency. ETE also owns, directly and through a wholly owned subsidiary, approximately 14.0% of the limited partner interest in Regency
and ETP, through a wholly owned subsidiary, owns an additional 7.6% limited partner interest in Regency and all of the Regency Class F units.
ETE and ETP have agreed that, until the effective time or termination of the merger agreement, they will vote their respective limited partner
interests in Regency in favor of approval of the merger and the approval of any actions required in furtherance thereof.
No
Appraisal Rights
Appraisal rights are not available in connection with the merger under the Delaware LP Act or under the Regency
partnership agreement.
No ETP Unitholder Approval
ETP unitholders are not required to approve the merger agreement or the merger or the issuance of common units in connection with the merger.
Accounting Treatment of the Merger
ETP and Regency are under the common control of ETE. Therefore, in accordance with accounting principles generally accepted in the United
States, ETP will account for the merger as a reorganization of entities under common control and will use the historical cost basis method of accounting. Under this method of accounting, ETP will retrospectively adjust its financial statements to
reflect the consolidation of Regency beginning May 26, 2010 (the date ETE acquired Regency GP).
ETP Partnership
Agreement Amendment
In conjunction with the merger, ETP GP will enter into the ETP partnership agreement amendment, providing for
(i) the reduction by ETE, as the holder of ETPs incentive distribution rights, of (x) $20 million in quarterly distributions in respect of such rights for four consecutive quarters commencing with the first quarter for which the
related record date occurs on or following the closing and (y) $15 million in quarterly distributions in respect of such rights for 16 consecutive quarters thereafter, (ii) the creation and issuance of the ETP preferred units and
(iii) a change in the definition of Operating Surplus in the ETP partnership agreement to provide that such term will include an amount equal to the operating surplus of Regency.
Regulatory Approvals and Clearances Required for the Merger
The following is a summary of the material regulatory requirements for completion of the transactions contemplated by the merger agreement.
There can be no guarantee if and when any of the consents or approvals required for the transactions contemplated by the merger agreement will be obtained or as to the conditions that such consents and approvals may contain.
Under the HSR Act, and related rules, certain transactions, including the merger, may not be completed until notifications have been given and
information furnished to the Antitrust Division and the FTC and all statutory waiting period requirements have been satisfied. On February 11, 2015, ETP and Regency filed Notification and Report Forms (HSR Forms) with the Antitrust
Division and the FTC. On February 24, 2015, the FTC granted early termination of the waiting period under the HSR Act.
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At any time before or after the effective time, the Antitrust Division or the FTC could take
action under the antitrust laws, including seeking to prevent the merger, to rescind the merger or to conditionally approve the merger upon the divestiture of assets of ETP or Regency or subject to other remedies. In addition, U.S. state attorneys
general could take action under the antitrust laws as they deem necessary or desirable in the public interest including without limitation seeking to enjoin the completion of the merger or permitting completion subject to regulatory concessions or
conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it
would not be successful.
ETP and Regency have agreed to (including to cause their respective subsidiaries to) use their reasonable best
efforts to resolve any objections that a governmental authority may assert under antitrust laws with respect to the transactions contemplated by the merger agreement, including the merger, and to avoid or eliminate each and every impediment under
any antitrust law that may be asserted by any governmental authority with respect to the merger, in each case, so as to enable the closing of the merger to occur as promptly as practicable and in any event no later than the outside date, and
including agreeing to dispose or hold separate certain assets or agreeing to a non-compete or other restriction. Notwithstanding the foregoing, Regency has agreed not to commit to any disposal, hold separate of other restriction related to it or its
subsidiaries businesses, operations or assets without ETPs prior written consent.
Directors and Executive Officers of
ETP After the Merger
ETP GP has direct responsibility for conducting ETPs business and for managing its operations. Because ETP
GP is a limited partnership, its general partner, ETP GP LLC, is ultimately responsible for the business and operations of ETP. Thus, the ETP Board and officers of ETP GP LLC make decisions on ETPs behalf. ETP expects that the directors and
executive officers of ETP GP LLC immediately prior to the merger will continue as the directors and executive officers of ETP GP LLC after the merger, except that Thomas E. Long, Executive Vice President and Chief Financial Officer of Regency, is
expected to become the Chief Financial Officer of ETP GP LLC and Martin Salinas, ETP GP LLCs current Chief Financial Officer, will not be retained by ETP.
Listing of ETP Common Units
It is a condition to closing that the ETP common units to be issued in the merger to Regency unitholders be approved for listing on the NYSE,
subject to official notice of issuance.
Delisting and Deregistration of Regency Common Units
If the merger is completed, Regency common units will cease to be listed on the NYSE and will be deregistered under the Exchange Act.
Ownership of ETP After the Merger
ETP will issue approximately 172 million ETP common units to former Regency unitholders pursuant to the merger. Further, the number of ETP
common units outstanding will increase after the date of this proxy statement/prospectus if ETP sells additional common units to the public. Based on the number of ETP common units outstanding as of the date of this proxy statement/prospectus,
immediately following the completion of the merger, ETP expects to have approximately 500 million common units outstanding. Regency unitholders are therefore expected to hold approximately 35% of the aggregate number of ETP common units outstanding
immediately after the merger and approximately 25% of ETPs total units of all classes. Holders of ETP common units (similarly to holders of Regency common units) are not entitled to elect ETPs general partner or the directors of the ETP
Board and have only limited voting rights on matters affecting ETPs business. Please read Comparison of Rights of ETP Unitholders and Regency Unitholders for additional information.
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Restrictions on Sales of ETP Common Units Received in the Merger
Regency common units issued in the merger will not be subject to any restrictions on transfer arising under the Securities Act or the Exchange
Act, except for ETP common units issued to any Regency unitholder who may be deemed to be an affiliate of ETP after the completion of the merger. This proxy statement/prospectus does not cover resales of ETP common units received by any
person upon the completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.
Litigation Relating to the Merger
Following the public announcement of the merger, nine putative unitholder class action and/or derivative action lawsuits were filed against
Regency GP, the members of the Regency Board, ETP, ETP GP, ETE and, in the non-derivative actions, Regency, asserting claims relating to the proposed merger.
On February 3, 2015, William Engel and Enno Seago, purported Regency unitholders, filed a class action petition on behalf of
Regencys common unitholders and a derivative suit on behalf of the Regency in the 162nd Judicial District Court of Dallas County, Texas (the Engel Lawsuit). The lawsuit names as defendants Regency GP, the members of the Regency
Board, ETP, ETP GP, ETE and, as a nominal party, Regency. The Engel Lawsuit alleges that (i) Regency GPs directors breached duties to Regency and Regencys unitholders by employing a conflicted and unfair process and failing to
maximize the merger consideration; (2) Regency GPs directors breached the implied covenant of good faith and fair dealing by engaging in a flawed merger process; and (3) the non-director defendants aided and abetted in these claimed
breaches. The plaintiffs seek an injunction preventing the defendants from closing the transactions contemplated by the merger agreement or an order rescinding the transactions if they have already been completed. The plaintiffs also seek money
damages and court costs, including attorneys fees.
On February 9, 2015, Stuart Yeager, a purported Regency unitholder, filed a
class action petition on behalf of Regencys common unitholders and a derivative suit on behalf of Regency in the 134th Judicial District Court of Dallas County, Texas and, on February 10, 2015, Lucien Coggia a purported Regency
unitholder, filed a class action petition on behalf of Regencys common unitholders and a derivative suit on behalf of Regency in the 192nd Judicial District Court of Dallas County, Texas. The allegations, claims, and relief sought in these
suits are nearly identical to those in the Engel Lawsuit.
On February 3, 2015, Linda Blankman, a purported Regency unitholder, filed
a class action complaint on behalf of Regencys common unitholders in the United States District Court for the Northern District of Texas (the Blankman Lawsuit). The allegations and claims in the Blankman Lawsuit are similar to
those in the Engel Lawsuit. However, the Blankman Lawsuit does not allege any derivative claims and includes Regency as a defendant rather than a nominal party. The lawsuit also omits one of the Regency Boards directors, Richard Brannon, who
was named in the Engel Lawsuit. The Blankman Lawsuit alleges that Regency GPs directors breached their fiduciary duties to the unitholders by failing to maximize the value of Regency, failing to properly value Regency, and ignoring conflicts
of interest. The plaintiff also asserts a claim against the non-director defendants for aiding and abetting the directors alleged breach of fiduciary duty. The Blankman Lawsuit seeks the same relief that the plaintiffs seek in the Engel
Lawsuit.
Since the filing of the complaint in the Blankman Lawsuit, five additional complaints have been filed by purported Regency
unitholders in the United States District Court for the Northern District of Texas, including by (i) Edwin Bazini ( February 6, 2015), (ii) Mark Hinnau (February 11, 2015), (iii) Stephen Weaver (February 11, 2015),
(iv) Adrian Dieckman (February 11, 2015) and (v) Irwin Berlin (February 13, 2015). The allegations, claims and relief sought in these lawsuits are similar to those in the Blankman Lawsuit.
Each of the lawsuits described above is at a preliminary stage. None of Regency, ETP, ETE or their respective affiliates can predict the
outcome of these or any other lawsuits that might be filed, nor can they predict the amount of time and expense that will be required to resolve the lawsuits. Regency and the other defendants named in the lawsuits intend to defend vigorously against
these and any other actions.
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PROPOSAL 1: THE MERGER AGREEMENT
The following describes the material provisions of the merger agreement and the amendment thereto, a composite copy of which, incorporating
the amendment into the text of the initial agreement, is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein. The description in this section and elsewhere in this proxy statement/prospectus is qualified in
its entirety by reference to the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. ETP and Regency encourage you to read carefully the
merger agreement in its entirety before making any decisions regarding the mergers as it is the legal document governing the mergers.
The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger
agreement. Factual disclosures about ETP, Regency or any of their respective subsidiaries or affiliates contained in this proxy statement/prospectus or their respective public reports filed with the SEC may supplement, update or modify the factual
disclosures about ETP, Regency or their respective subsidiaries or affiliates contained in the merger agreement and described in this summary. The representations, warranties and covenants made in the merger agreement by ETP, Regency and ETE
Acquirer were qualified and subject to important limitations agreed to by ETP, Regency and ETE Acquirer in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained
in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of allocating risk between the parties to the merger agreement, rather than
establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to unitholders and reports and documents filed with the SEC and in some cases
were qualified by confidential disclosures that were made by each party to the other, which disclosures are not reflected in the merger agreement or otherwise publicly disclosed. Moreover, information concerning the subject matter of the
representations and warranties may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement/prospectus. For the
foregoing reasons, the representations, warranties and covenants or any descriptions of those provisions should not be read alone.
The Mergers
Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, the merger agreement
provides for the merger of Regency with Merger Sub A. Regency, which is sometimes referred to following the merger as the surviving entity, will survive the merger, and the separate limited liability company existence of Merger Sub A will cease.
After the completion of the merger, the certificate of limited partnership of Regency in effect immediately prior to the effective time will be the certificate of limited partnership of the surviving entity, until amended in accordance with its
terms and applicable law, and the Regency partnership agreement in effect immediately prior to the effective time will be the agreement of limited partnership of the surviving entity, until amended in accordance with its terms and applicable law.
The merger agreement also provides, subject to the terms and conditions of the merger agreement and in accordance with Delaware law, for
the merger of ETE Acquirer with Merger Sub B. ETE Acquirer, which is sometimes referred to following the GP merger as the GP merger surviving entity, will survive the GP merger, and the separate limited liability company existence of Merger Sub B
will cease. After the completion of the GP merger, the certificate of formation and the limited liability company agreement of ETE Acquirer in effect immediately prior to the effective time will be the certificate of formation and the limited
liability company agreement of the GP merger surviving entity (except to the extent the limited liability company agreement is amended by the merger agreement to reflect the admission of ETP as the sole member of ETE Acquirer), in each case, until
amended in accordance with its terms and applicable law.
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Effective Time; Closing
The effective time of the merger will be at such time that Regency files with the Secretary of State of the State of Delaware a certificate of
merger, executed in accordance with the relevant provisions of the Delaware LP Act and the Delaware Limited Liability Company Act (the Delaware LLC Act), or at such other date or time as is agreed to by ETP and Regency and specified in
the certificate of merger. The effective time of the GP merger will be at such time that ETE Acquirer files with the Secretary of State of the State of Delaware a certificate of merger, executed in accordance with the relevant provisions of the
Delaware LP Act and the Delaware LLC Act, or such other date or time as is agreed to by ETP and ETE Acquirer and specified in the certificate of merger.
Unless the parties agree otherwise, the closing of the mergers will occur at 9:00 a.m., local time, on the second business day after the
satisfaction or waiver of the conditions to the merger provided in the merger agreement (other than conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of those conditions), or
at such other date or time as ETP and Regency agree. For further discussion of the conditions to the merger, see Conditions to Consummation of the Mergers.
ETP and Regency currently expect to complete the mergers shortly following the conclusion of the meeting, subject to receipt of required
unitholder and regulatory approvals and to the satisfaction or waiver of the other conditions to the transactions contemplated by the merger agreement described below.
Conditions to Consummation of the Mergers
ETP and Regency may not complete the mergers unless each of the following conditions is satisfied or waived, if waiver is permitted by
applicable law:
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the merger agreement and the transactions contemplated thereby must have been adopted by the affirmative vote or consent of the holders of at least a majority of the outstanding Regency common units, Class F units and
Series A units, voting together as a single class; |
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the waiting period applicable to the merger under the HSR Act, if any, must have been terminated or expired; |
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no law, injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any governmental authority will be in effect enjoining, restraining, preventing or prohibiting the consummation of
transactions contemplated by the merger agreement or making the consummation of such transactions illegal; |
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the registration statement of which this proxy statement/prospectus forms a part must have been declared effective by the SEC and must not be subject to any stop order or proceedings initiated or threatened by the SEC;
and |
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the ETP common units to be issued in the merger must have been approved for listing on the NYSE, subject to official notice of issuance. |
The obligations of ETP, ETP GP, Merger Sub A and Merger Sub B to effect the merger are subject to the satisfaction or waiver of the following
additional conditions:
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the representations and warranties of Regency in the merger agreement being true and correct both when made and at and as of the date of the closing
of the merger, except to the extent expressly made as of an earlier date, in which case as of such date, except where the failure of such representations and warranties to not be so true and correct (without giving effect to any limitation as to
material adverse effect or materiality contained in any individual representation or warranty), does not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Regency (apart from certain
identified representations and warranties (i) that there will not have been a |
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material adverse effect on Regency from December 31, 2013 through the closing date, with respect to the authority to execute the merger agreement and consummate the transactions contemplated
thereby and that the adoption of the merger agreement by the affirmative vote or consent of the holders of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, is the only
approval of the holders of any equity interests in Regency that is required for approval of the transactions contemplated by the merger agreement, which in each case must be true and correct in all respects, and (ii) with respect to
Regencys capitalization, which must be true and correct in all respects other than immaterial misstatements and omissions); |
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Regency, Regency GP and ETE Acquirer having performed, in all material respects, all obligations required to be performed by them under the merger agreement; |
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the receipt of an officers certificate executed by an executive officer of Regency certifying that the two preceding conditions have been satisfied; and |
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ETP having received from Latham & Watkins LLP, tax counsel to ETP, a written opinion dated as of the date of the closing of the merger to the effect that for U.S. federal income tax purposes (i) neither
ETP nor ETP GP will recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); (ii) no gain or loss will be recognized by holders
of ETP common units as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); and (iii) at least 90% of the combined gross income of each of ETP and Regency
for the most recent four complete calendar quarters ending before the closing date for which the necessary financial information is available is from sources treated as qualifying income within the meaning of Section 7704(d) of the
Code. |
The obligations of Regency to effect the merger are subject to the satisfaction or waiver of the following additional
conditions:
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the representations and warranties of ETP in the merger agreement being true and correct both when made and at and as of the date of the closing of the merger, except to the extent expressly made as of an earlier date,
in which case as of such date, except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to material adverse effect or materiality contained in any individual representation
or warranty), does not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on ETP (apart from certain identified representations and warranties (i) providing that there will not have
been a material adverse effect on ETP from December 31, 2013 through the closing date and with respect to the authority to execute the merger agreement and consummate the transactions, which must be true and correct in all respects, and
(ii) with respect to ETPs capitalization, which must be true and correct in all respects other than immaterial misstatements and omissions); |
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ETP, ETP GP, Merger Sub A and Merger Sub B having performed, in all material respects, all obligations required to be performed by them under the merger agreement; |
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the receipt of an officers certificate executed by an executive officer of ETP certifying that the two preceding conditions have been satisfied; |
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Regency having received from Baker Botts L.L.P., tax counsel to Regency, a written opinion dated as of the date of the closing of the merger to the
effect that for U.S. federal income tax purposes, (i) Regency will not recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code);
(ii) holders of Regency common units will not recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); provided that such
opinion will not extend to any holder who acquired Regency common units from Regency in exchange for property other than cash; and (iii) at least 90% of the gross income of |
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Regency for the most recent four complete calendar quarters ending before the closing date for which the necessary financial information is available is from sources treated as qualifying
income within the meaning of Section 7704(d) of the Code; and |
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ETP GP having executed and delivered to Regency the ETP partnership agreement amendment, dated effective as of the effective time of the merger. |
For purposes of the merger agreement, the term material adverse effect means, when used with respect to a party to the merger
agreement, any change, effect, event or occurrence that, individually or in the aggregate, (x) has had or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of such party
or its subsidiaries, taken as a whole, or (y) prevents or materially impedes, interferes with or hinders the consummation of the transactions contemplated by the merger agreement, including the merger, on or before the outside date;
provided, however, that any adverse changes, effects, events or occurrences resulting from or due to any of the following will be disregarded in determining whether there has been a material adverse effect: (i) changes, effects, events
or occurrences generally affecting the United States or global economy, the financial, credit, debt, securities or other capital markets or political, legislative or regulatory conditions or changes in the industries in which such party operates;
(ii) the announcement or pendency of the merger agreement or the transactions contemplated thereby or the performance of the merger agreement (including, for the avoidance of doubt, performance of the parties reasonable best efforts
obligations under the merger agreement in connection with obtaining regulatory approval); (iii) any change in the market price or trading volume of the limited partnership interests, shares of common stock or other equity securities of such
party (it being understood and agreed that the foregoing will not preclude any other party to the merger agreement from asserting that any facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the
definition of material adverse effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a material adverse effect); (iv) acts of war or terrorism (or the
escalation of the foregoing) or natural disasters or other force majeure events; (v) changes in any laws or regulations applicable to such party or applicable accounting regulations or principles or the interpretation thereof; (vi) any
legal proceedings commenced by or involving any current or former member, partner or stockholder of such party (on their own or on behalf of such party) arising out of or related to the merger agreement or the transactions contemplated thereby;
(vii) changes, effects, events or occurrences generally affecting the prices of oil, natural gas, natural gas liquids or coal or other commodities; (viii) any failure of a party to meet any internal or external projections, forecasts or
estimates of revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the foregoing will not preclude any other party to the merger agreement from asserting that any facts or occurrences giving
rise to or contributing to such failure that are not otherwise excluded from the definition of material adverse effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be
expected to be, a material adverse effect); and (ix) the taking of any action required by the merger agreement; provided, however, that changes, effects, events or occurrences referred to in clauses (i), (iv), (v) and
(vii) above will be considered for purposes of determining whether there has been or would reasonably be expected to be a material adverse effect if and to the extent such state of affairs, changes, effects, events or occurrences has had or
would reasonably be expected to have a disproportionate adverse effect on such party and its subsidiaries, taken as a whole, as compared to other companies of similar size operating in the industries in which such party and its subsidiaries operate.
Regency Unitholder Approval
Regency has agreed to hold a special meeting of its unitholders as soon as is practicable after the date of the merger agreement for the
purpose of such unitholders voting on the adoption of the merger agreement and the transactions contemplated thereby. The merger agreement requires Regency to submit the merger agreement to a unitholder vote (i) even if the Regency Board no
longer recommends adoption of the merger agreement and (ii) irrespective of the commencement, public proposal, public disclosure or communication to Regency of any alternative proposal (as described below). In addition, unless the Regency Board
has effected an adverse recommendation change in accordance with the merger agreement as described in Change in Regency Board
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Recommendation, Regency has agreed to use reasonable best efforts to solicit from its unitholders proxies in favor of the merger and to take all other action necessary or advisable to
secure the adoption by its unitholders of the merger agreement and the transactions contemplated thereby. The Regency Board has approved the merger agreement and the transactions contemplated thereby and authorized that the merger agreement be
submitted to the unitholders of Regency for their consideration.
For purposes of the merger agreement, the term alternative
proposal means any inquiry, proposal or offer from any person or group (as defined in Section 13(d) of the Exchange Act), other than ETP, its subsidiaries and their respective affiliates, relating to any (i) direct or
indirect acquisition (whether in a single transaction or a series of related transactions), outside of the ordinary course of business, of assets of Regency and its subsidiaries equal to 15% or more of Regencys consolidated assets or to which
15% or more of Regencys revenues or earnings on a consolidated basis are attributable, (ii) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of beneficial ownership (within the meaning
of Section 13 under the Exchange Act) of 15% or more of any class of equity securities of Regency, (iii) tender offer or exchange offer that if consummated would result in any person or group (as defined in Section 13(d)
of the Exchange Act) beneficially owning 15% or more of any class of equity securities of Regency or (iv) merger, consolidation, unit exchange, share exchange, business combination, recapitalization, liquidation, dissolution or similar
transaction involving Regency which is structured to permit any person or group (as defined in Section 13(d) of the Exchange Act) to acquire beneficial ownership of at least 15% of such partys consolidated assets or equity
interests; in each case, other than the transactions contemplated by the merger agreement.
No Solicitation by Regency of
Alternative Proposals
The merger agreement contains detailed provisions prohibiting Regency from seeking an alternative proposal to
the merger. Under these no solicitation provisions, Regency has agreed that it will not, and will cause its subsidiaries and use reasonable best efforts to cause its and its subsidiaries directors, officers, employees, investment
bankers, financial advisors, attorneys, accountants, agents and other representatives not to, directly or indirectly:
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solicit, initiate, knowingly facilitate, knowingly encourage (including by way of furnishing confidential information) or knowingly induce or take any other action intended to lead to any inquiries or any proposals that
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grant approval to any person to acquire 20% or more of any partnership securities issued by Regency without such person being subject to the limitations in the Regency partnership agreement that prevents certain persons
or groups that beneficially own 20% or more of any outstanding partnership securities of any class then outstanding from voting any partnership securities of Regency on any matter; or |
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except as permitted by the merger agreement, enter into any confidentiality agreement, merger agreement, letter of intent, agreement in principle, unit purchase agreement, asset purchase agreement or unit exchange
agreement, option agreement or other similar agreement relating to an alternative proposal. |
In addition, the merger
agreement requires Regency and its subsidiaries to (i) cease and cause to be terminated any discussions or negotiations with any persons conducted prior to the execution of the merger agreement regarding an alternative proposal,
(ii) request the return or destruction of all confidential information previously provided to any such persons and (iii) immediately prohibit any access by any persons (other than ETP and its representatives) to any physical or electronic
data room relating to a possible alternative proposal.
Notwithstanding these restrictions, the merger agreement provides that, under
specified circumstances at any time prior to Regency unitholders voting in favor of adopting the merger agreement, Regency may furnish information, including confidential information, with respect to it and its subsidiaries to, and participate in
discussions or negotiations with, any third party that makes a written alternative proposal that the Regency Board (upon the recommendation of the Regency Conflicts Committee) believes is bona fide so long as (after
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consultation with its financial advisors and outside legal counsel) the Regency Board (upon the recommendation of the Regency Conflicts Committee) determines in good faith that (i) such
alternative proposal constitutes or could reasonably be expected to lead to or result in a superior proposal, (ii) failure to furnish such information or participate in such discussions would be inconsistent with the Regency Boards duties
under the Regency partnership agreement and (iii) such alternative proposal did not result from a material breach of the no solicitation provisions in the merger agreement.
Regency has also agreed in the merger agreement that it (i) will promptly, and in any event within 24 hours after receipt, notify ETP of
any alternative proposal or any request for information or inquiry with regard to any alternative proposal and the identity of the person making any such alternative proposal, request or inquiry (including providing ETP with copies of any written
materials received from or on behalf of such person relating to such proposal, offer, request or inquiry) and (ii) will provide ETP with the terms, conditions and nature of any such alternative proposal, request or inquiry. In addition, Regency
agrees to keep ETP reasonably informed of all material developments affecting the status and terms of any such alternative proposals, offers, inquiries or requests (and promptly provide ETP with copies of any written materials received by it or that
it has delivered to any third party making an alternative proposal that relate to such proposals, offers, requests or inquiries) and of the status of any such discussions or negotiations.
The merger agreement permits Regency or the Regency Board to issue a stop, look and listen communication pursuant to Rule 14d-9(f)
or comply with Rule 14d-9 and Rule 14e-2 under the Exchange Act if the Regency Board determines in good faith (after consultation with outside legal counsel) that the failure to take such action would be reasonably likely to constitute a violation
of applicable law.
For purposes of the merger agreement, a superior proposal means a bona fide unsolicited written offer, obtained
after the date of the merger agreement and not in breach of Regencys no solicitation obligations described above (other than an immaterial breach) to acquire, directly or indirectly, 80% or more of the outstanding equity securities of Regency
or 80% or more of the assets of Regency and its subsidiaries on a consolidated basis, made by a third party, which is on terms and conditions that the Regency Board determines in its good faith to be (i) reasonably capable of being consummated
in accordance with its terms, taking into account legal, regulatory, financial, financing and timing aspects of the proposal, and (ii) if consummated, more favorable to Regencys unitholders (in their capacity as unitholders) from a
financial point of view than the transactions contemplated by the merger agreement, taking into account at the time of such determination any changes to the terms of the merger agreement that as of that time had been committed to by ETP in writing.
Change in Regency Board Recommendation
The merger agreement provides that Regency will not, and will cause its subsidiaries and use reasonable best efforts to cause its
representatives not to, directly or indirectly, withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to ETP, the recommendation of the Regency Board that its unitholders adopt the merger agreement or
publicly recommend the approval or adoption of, or publicly approve or adopt, or propose to publicly recommend, approve or adopt, any alternative proposal. In addition, if Regency receives an alternative proposal it will, within five business days
of receipt of a written request from ETP, publicly reconfirm the recommendation of the Regency Board that its unitholders adopt the merger agreement and Regency may not unreasonably withhold, delay (beyond the five business day period) or condition
such public reconfirmation; provided, that ETP is not permitted to make such request on more than one occasion in respect of each alternative proposal and each material modification to an alternative proposal, if any.
Regencys taking or failing to take, as applicable, any of the actions described above is referred to as an adverse recommendation
change.
Notwithstanding the terms described above or any other term of the merger agreement to the contrary, subject to the
conditions described below, the Regency Board and the Regency Conflicts Committee may, at any time prior to the adoption of the merger agreement by the Regency unitholders, effect an adverse
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recommendation change in response to either (i) an alternative proposal or (ii) changed circumstance (as defined below), in each case if the Regency Board, upon the recommendation of
the Regency Conflicts Committee and after consultation with its outside legal counsel and financial advisors, determines in good faith that the failure to take such action would be inconsistent with its duties under the Regency partnership agreement
or applicable law, and the following conditions have been met:
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if the Regency Board intends to effect such adverse recommendation change in response to an alternative proposal: |
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such alternative proposal is bona fide, in writing and has not been withdrawn or abandoned; |
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the Regency Board (upon the recommendation of the Regency Conflicts Committee) has determined, after consultation with its outside legal counsel and financial advisors, that such alternative proposal constitutes a
superior proposal as described below; |
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Regency has provided prior written notice to ETP of the intention of the Regency Board to effect an adverse recommendation change, and such notice has specified the identity of the person making such alternative
proposal, the material terms and conditions of such alternative proposal, and complete copies of any written proposal or offers (including proposed agreements) received by Regency in connection with such alternative proposal; |
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during the period that commences on the date of delivery of the above-described notice and ends on the date that is the fifth calendar day following the date of such delivery, Regency must have (1) negotiated with
ETP in good faith to make such adjustments to the terms and conditions of the merger agreement as would permit the Regency Board not to effect an adverse recommendation change and (2) kept ETP reasonably informed with respect to the status and
changes in the material terms and conditions of such alternative proposal or other change in circumstances related thereto; provided, that any material revisions to such alternative proposal (including any change in the purchase price) will
require delivery of a subsequent notice and a subsequent notice period, except that such subsequent notice period will expire upon the later of (x) the end of the initial notice period and (y) the date that is the third calendar day
following the date of the delivery of such subsequent notice; and |
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the Regency Board must have considered all revisions to the terms of the merger agreement irrevocably offered in writing by ETP and, at the end of the notice period, must have determined in good faith that (i) such
alternative proposal continues to constitute a superior proposal and (ii) failure to effect an adverse recommendation change would be inconsistent with its duties under the Regency partnership agreement or applicable law, in each case even if
such revisions were to be given effect; or |
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if the Regency Board intends to effect such adverse recommendation change in response to a changed circumstance: |
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Regency has provided prior written notice to the other party of the intention of the Regency Board to effect an adverse recommendation change, and such notice has specified the details of such changed circumstance and
the reasons for the adverse recommendation change; |
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during the period that commences on the date of delivery of the above-described notice and ends on the date that is the fifth calendar day following the date of such delivery, Regency must have (i) negotiated with
the other party in good faith to make such adjustments to the terms and conditions of the merger agreement as would permit the Regency Board not to effect an adverse recommendation change and (ii) kept ETP reasonably informed of any change in
circumstances related thereto; and |
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the Regency Board must have considered all revisions to the terms of the merger agreement irrevocably offered in writing by ETP and, at the end of the notice period, must have determined in good faith (upon the
recommendation of the Regency Conflicts Committee) that the failure to effect an adverse recommendation change would be inconsistent with its duties under the Regency partnership agreement or applicable law even if such revisions were to be given
effect. |
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As used in the merger agreement, a changed circumstance means a material event, circumstance,
change or development, in each case that arises or occurs after the date of the merger agreement and was not, prior to such date, known to or reasonably foreseeable by the Regency Board; provided, however, that in no event will the receipt,
existence or terms of an alternative proposal or any matter relating thereto or consequence thereof constitute a changed circumstance.
Merger Consideration
The merger agreement provides that, at the effective time, each Regency common unit issued and outstanding or
deemed issued and outstanding as of immediately prior to the effective time will be converted into the right to receive (i) 0.4066 ETP common units and (ii) an additional number of ETP common units equal to the quotient of $0.32 divided by
the lesser of (x) the volume weighted average price of ETP common units as reported on the NYSE for the five trading days ending on the third trading day immediately preceding the effective time of the merger and (y) the closing price of
ETP common units on the NYSE on the third trading day immediately preceding the effective time of the merger, rounded to the nearest ten thousandth of a unit. Each Class F unit issued and outstanding as of immediately prior to the effective time
will be converted automatically into Regency common units on a one-for-one basis and such common units will be converted automatically into the right to receive the merger consideration. Each Series A unit issued and outstanding as of immediately
prior to the effective time will be converted into the right to receive an ETP preferred unit having the same preferences, privileges, powers, duties and obligations that the Series A units had immediately prior to the closing of the merger. Any
Regency securities that are owned by Regency or any of its subsidiaries immediately prior to the effective time will be cancelled without any conversion or payment of consideration in respect thereof.
ETP will not issue any fractional units in the merger. Instead, each holder of Regency common units or Class F units that are converted
pursuant to the merger agreement who otherwise would have received a fraction of a Regency common unit will be entitled to receive a whole ETP common unit.
Treatment of Equity Awards
Under the merger agreement, equity-based awards held by Regencys directors and executive officers as of the effective time will be
treated at the effective time as follows:
Phantom Units. Each award of Regency phantom units (except for Regency phantom units
granted before December 16, 2011 and for Regency phantom units held by the chief executive officer and the non-employee directors of Regency, which will vest and convert, subject to applicable tax withholding, into the right to receive the
merger consideration) that is outstanding immediately prior to the effective time, automatically and without any action on the part of the holder of such Regency phantom unit, will at the effective time be converted into the right to receive an
award of phantom units relating to ETP common units on the same terms and conditions as were applicable to the award of Regency phantom units, except that the number of ETP common units covered by the award will be equal to the number of Regency
common units covered by the corresponding award of Regency phantom units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole
unit.
Unit Options. Each outstanding Regency unit option that was granted under a Regency equity incentive plan and that has a per
unit exercise price greater than the closing price of a Regency unit on the NYSE on the last trading day prior to closing of the merger (in-the-money unit options) will be deemed to have been exercised on a net-issuance (i.e., cashless)
basis immediately prior to the effective time and each net issued Regency common unit deemed to have been issued will be converted into the right to receive the merger consideration on the same terms as issued and outstanding Regency common units,
subject to reduction for withholding taxes. No fractional ETP common units will be paid to holders of Regency unit options. Any other award of an option to purchase Regency common units will be canceled and terminated at the effective time of the
merger for no consideration.
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Cash Units. Each outstanding award of Regency cash units will, automatically and without
any action on the part of the holder of such cash unit, be converted into the right to receive an award of restricted cash units relating to ETP common units on the same terms and conditions as were applicable to the award of Regency cash units,
except that the number of notional ETP common units that upon vesting entitles the holder to receive an amount of cash equal to the fair market value of an ETP common unit will be equal to the number of notional Regency common units related to the
corresponding award of Regency cash units multiplied by the sum of (i) the exchange ratio and (ii) the partial ETP common unit representing the additional unit consideration, rounded up to the nearest whole unit. Prior to the effective
time, the general partner of Regency GP will adopt an amendment to the Regency Energy Partners LP Long-Term Incentive Cash Restricted Unit Plan to permit the treatment of Regency cash units in the merger described above.
Regency Equity Plans. As of the effective time, ETP will assume the obligations of Regency under the Regency equity plans and will
assume such plans for the purposes of employing such plans to make grants of equity-based awards of ETP common units following the closing of the merger.
Treatment of General Partner Interest and Incentive Distribution Rights
As a result of the merger, the general partner interest in Regency outstanding immediately prior to the effective time will be converted into a
non-economic general partner interest and Regency GP will continue as the sole general partner of Regency. In addition, the incentive distribution rights in Regency outstanding immediately prior to the effective time will be cancelled. ETP and
Regency have agreed that, upon consummation of the mergers, the percentage interest represented by the ETP general partner interest will be increased to equal the sum of (i) the percentage interest of the ETP general partner interest
immediately prior to the effective time, as adjusted to give effect to the issuance of ETP common units in the merger, and (ii) the percentage interest in ETP that would be represented by the Regency general partner interest immediately prior
to the effective time, as adjusted to give effect to the issuance of ETP common units in the merger. In connection with the mergers, ETP GP will receive the right to any capital account in Regency associated with the Regency general partner
interest and incentive distribution rights immediately prior to the merger.
Adjustments to Prevent Dilution
Prior to the effective time, each of the unit consideration, the additional unit consideration and the consideration to be paid to holders of
Series A units will be appropriately adjusted to reflect fully the effect of any unit dividend, subdivision, reclassification, recapitalization, split, split-up, unit distribution, combination, exchange of units or similar transaction with respect
to Regency common units, Class F units or Series A units or ETP common units to provide the holders of Regency common units, Class F units and Series A units the same economic effect as contemplated by the merger agreement prior to such event.
Withholding
ETP and the exchange agent will be entitled to deduct and withhold from the consideration otherwise payable to a holder of Regency common
units, Class F units, Series A units, Regency phantom units, Regency unit options and Regency cash units such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or under any provision of
applicable U.S. federal, state, local or foreign tax law. To the extent that deduction and withholding is required, such deduction and withholding will be taken in ETP common units. To the extent withheld, such withheld ETP common units will be
treated as having been paid to the former holder of Regency common units, Class F units, Series A units, Regency phantom units, Regency unit options and Regency cash units, as applicable, in respect of whom such withholding was made.
Distributions
No distributions with respect to ETP common units or ETP preferred units issued in the merger will be paid to the holder of any unsurrendered
certificates until such certificates are surrendered. Following such surrender,
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there will be paid, without interest, to the record holder of ETP common units or ETP preferred units issued in exchange therefor (i) at the time of such surrender, all distributions payable
in respect of any such ETP common units or ETP preferred units, as applicable, with a record date after the effective time and a payment date on or prior to the date of such surrender and not previously paid and (ii) at the appropriate payment
date, the distributions payable with respect to such ETP common units and ETP preferred units with a record date after the effective time but with a payment date subsequent to such surrender. For purposes of distributions in respect of ETP common
units and ETP preferred units, all ETP common units and ETP preferred units to be issued pursuant to the merger will be entitled to distributions as if issued and outstanding as of the effective time.
Regulatory Matters
See The MergerRegulatory Approvals and Clearances Required for the Merger for a description of the material regulatory
requirements for the completion of the merger.
ETP and Regency have agreed to (including to cause their respective subsidiaries to) use
their reasonable best efforts to resolve any objections that a governmental authority or any other person may assert under antitrust laws with respect to the merger, and to avoid or eliminate each and every impediment under any antitrust law that
may be asserted by any governmental authority with respect to the merger, in each case, so as to enable the closing of the mergers to occur as promptly as practicable and in any event no later than the outside date. Notwithstanding the foregoing,
Regency has agreed not to commit to any disposal, hold separate of other restriction related to it or its subsidiaries businesses, operations or assets without ETPs prior written consent.
Termination of the Merger Agreement
ETP or Regency may terminate the merger agreement at any time prior to the effective time, whether before or after the Regency unitholders have
approved the merger agreement, by mutual written consent.
In addition, either ETP or Regency may terminate the merger agreement at any
time prior to the effective time by written notice to the other party:
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if the merger has not occurred on or before the outside date; provided, that the right to terminate the merger agreement if the merger has not occurred on or before the outside date will not be available to a party
(i) if the inability to satisfy the conditions to closing was due to the failure of such party to perform any of its obligations under the merger agreement or (ii) if the other party has filed (and is then pursuing) an action seeking
specific performance to enforce the obligations under the merger agreement; |
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if any governmental authority has issued a final and nonappealable law, injunction, judgment or ruling that enjoins or otherwise prohibits the consummation of the transactions contemplated by the merger agreement or
makes the transactions contemplated by the merger agreement illegal; provided, however, that the right to terminate for this reason will not be available if the prohibition was due to the failure of the terminating party to perform any
of its obligations under the merger agreement; or |
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if the Regency unitholders do not adopt the merger agreement at the special meeting of Regency unitholders called for such purpose or any adjournment or postponement of such meeting. |
In addition, ETP may terminate the merger agreement:
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if an adverse recommendation change shall have occurred; |
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if prior to the adoption of the merger agreement by Regencys unitholders, Regency is in willful breach of its obligations to (i) duly call,
give notice of and hold a special meeting of Regencys unitholders for the purpose of obtaining unitholder approval of the merger agreement, use its reasonable best efforts to solicit proxies from unitholders in favor of such adoption and,
through the Regency Board, recommend the adoption of the merger agreement to Regencys unitholders or (ii) comply with the requirements |
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applicable to the other party described under No Solicitation by Regency of Alternative Proposals; other than in the case where (A) such willful breach is a result of an
isolated action by a Regency representative (other than a director or officer of Regency) and not caused by, or within the knowledge of, Regency and (B) Regency takes appropriate actions to remedy such willful breach upon discovery thereof;
provided, that the right to terminate the merger agreement for this reason will not be available to ETP if it is then in material breach of any of its representations, warranties, covenants or agreements under the merger agreement; or
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if there is a breach by Regency of any of its representations, warranties, covenants or agreements in the merger agreement such that certain closing conditions would not be satisfied, or if capable of being cured, such
breach has not been cured within 30 days following delivery of written notice of such breach by ETP; provided that ETP will not have the right to terminate the merger agreement for this reason if ETP is then in material breach of any of its
representations, warranties, covenants or agreements contained in the merger agreement. |
In addition, Regency may terminate
the merger agreement:
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if there is a breach by ETP of any of its representations, warranties, covenants or agreements in the merger agreement such that certain closing conditions would not be satisfied, or if capable of being cured, such
breach has not been cured within 30 days following delivery of written notice of such breach by Regency; provided that Regency will not have the right to terminate the merger agreement for this reason if Regency is then in material breach of
any of its representations, warranties, covenants or agreements contained in the merger agreement; or |
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prior to the adoption of the merger agreement by Regency unitholders, in order to enter into (concurrently with such termination) any agreement, understanding or arrangement providing for a superior proposal in
accordance with Regencys obligation to comply with the requirements described under No Solicitation by Regency of Alternative Proposals, provided that Regency must concurrently with such termination pay to ETP the
termination fee. |
In some cases, termination of the merger agreement will require Regency to reimburse up to $20.0 million
of ETPs expenses and pay a termination fee to ETP (less any expenses previously reimbursed), as described below under Termination Fee and Expenses. Following payment of the termination fee, Regency will not
be obligated to pay any additional expenses incurred by ETP or its affiliates.
Termination Fee
The merger agreement provides that Regency is required to pay a termination fee to ETP of $450.0 million, less any expenses of ETP previously
reimbursed by Regency, as described below under Expenses, to ETP:
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if (i) an alternative proposal was publicly proposed or publicly disclosed prior to, and not withdrawn at the time of, the date of the special meeting of Regency unitholders called for the purpose of adopting the
merger agreement (or, if the special meeting of Regency unitholders did not occur, prior to the date on which the merger agreement was terminated as a result of the failure to consummate the merger prior to the outside date), (ii) the merger
agreement is terminated by either party (A) as a result of the failure to consummate the merger prior to the outside date or (B) because the merger agreement was not adopted at the special meeting of Regency unitholders called for such
purpose and (iii) Regency enters into a definitive agreement with respect to, or consummates, any alternative proposal during the 12-month period following the date on which the merger agreement is terminated (whether or not such alternative
proposal is the same alternative proposal referred to in clause (i)); provided, that for purposes of the payment of the termination fee described above, the term alternative proposal has the meaning provided under
Regency Unitholder Approval, except that the references to 15% or more will be deemed to be references to 50% or more; |
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if ETP terminates the merger agreement due to: |
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an adverse recommendation change having occurred; or |
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Regency being, prior to the adoption of the merger agreement by Regency unitholders, in willful breach of its obligations to (i) duly call, give notice of and hold a special meeting of its unitholders for the
purpose of obtaining unitholder approval of the merger agreement, use its reasonable best efforts to solicit proxies from unitholders in favor of such adoption and, through the Regency Board, recommend the adoption of the merger agreement to Regency
unitholders or (ii) comply with the requirements described under No Solicitation by Regency of Alternative Proposals; other than in the case where (A) such willful breach is a result of an isolated action by a
representative of Regency (other than a Regency director or officer) and not caused by, or within the knowledge of, Regency and (B) Regency takes appropriate actions to remedy such willful breach upon discovery thereof; or |
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if Regency terminates the merger agreement: |
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because the merger agreement was not adopted by Regency unitholders at a special meeting of Regency unitholders called for such purpose in a case where an adverse recommendation change has occurred; or
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prior to the receipt of the Regency unitholder approval, in order to enter into (concurrently with such termination) any agreement, understanding or arrangement providing for a superior proposal. |
Expenses
Generally, all fees and expenses incurred in connection with the transactions contemplated by the merger agreement will be the obligation of
the party incurring such fees and expenses.
In addition, Regency is required to pay the expenses of ETP in the event that the merger
agreement is terminated:
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by Regency or ETP because the merger agreement was not adopted by Regency unitholders at a special meeting of Regency unitholders (or if Regency terminates the merger agreement pursuant to another termination right at a
time when the agreement was terminable for this reason); or |
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by ETP because there is a breach by Regency of any of its representations, warranties, covenants or agreements in the merger agreement such that certain closing conditions would not be satisfied, or if capable of being
cured, such breach has not been cured within 30 days following delivery of written notice of such breach by ETP. |
In such case, Regency
promptly, but in no event later than three business days after receipt of an invoice therefor from ETP, will be required to pay ETPs designee all of the reasonably documented out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, financing sources, hedging counterparties, experts and consultants) incurred by ETP and its affiliates in connection with the merger agreement and the transactions contemplated thereby, up to a maximum amount of
$20.0 million. In no event will Regency be required to make any such payment if, at the time of such termination, the merger agreement was terminable by it because there is a breach by ETP of any of its representations, warranties, covenants or
agreements in the merger agreement such that certain closing conditions would not be satisfied, or if capable of being cured, such breach has not been cured within 30 days following delivery of written notice of such breach. Following payment of the
termination fee, Regency will not be obligated to pay any additional expenses incurred by ETP or its affiliates.
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Conduct of Business Pending the Consummation of the Merger
Under the merger agreement, each of ETP and Regency has undertaken certain covenants that place restrictions on it and its respective
subsidiaries from the date of the merger agreement until the earlier of the termination of the merger agreement in accordance with its terms and the effective time, unless the other party gives its prior written consent (which, in certain instances,
cannot be unreasonably withheld, conditioned or delayed). In general, each party has agreed to (i) cause its respective business to be conducted in the ordinary course of business consistent with past practice, (ii) use commercially
reasonable efforts to preserve intact its respective business organization, (iii) use commercially reasonable efforts to keep in full force and effect all material permits and insurance policies maintained by it, its subsidiaries and its joint
ventures (other than, in the case of ETP, Sunoco Partners LLC, Sunoco GP LLC and their respective subsidiaries), other than changes to such policies made in the ordinary course of business and (iv) use commercially reasonable efforts to comply
in all material respects with all applicable laws and the requirements of its respective material contracts.
Subject to certain
exceptions set forth in the merger agreement and the disclosure schedules delivered by Regency to ETP in connection with the merger agreement, unless ETP consents in writing (which consent cannot be unreasonably withheld, conditioned or delayed),
Regency will not, and will not permit any of its subsidiaries or joint ventures to, among other things, undertake the following actions:
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sell, transfer, lease, farmout or otherwise dispose of any properties or assets that (i) do not generate cash on a recurring basis and have a fair market value in excess of $25 million in the aggregate (except
(A) pursuant to certain contracts listed in the disclosure schedules, (B) dispositions of obsolete or worthless equipment that is replaced with comparable or better equipment, (C) transactions in the ordinary course of business
consistent with past practice or (D) sales or transfers to Regency or its subsidiaries) and (ii) generate cash on a recurring basis (including securities of Regencys subsidiaries); |
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make any capital expenditures (which includes, among others, any investments by contribution to capital) in excess of $100 million in the aggregate other than certain capital expenditures set forth on the disclosure
schedules or as may be reasonably required to conduct emergency operations or repairs of any well, pipeline or other facility; |
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directly or indirectly acquire (i) any entity, division, business or equity interest of any third party or, (ii) except in the ordinary course of business consistent with past practice, any assets that, in the
aggregate, have a purchase price in excess of $50 million; |
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make any loans or advances to any person other than (i) travel, relocation expenses and similar expenses or advances to employees in the ordinary course of business consistent with past practice, (ii) loans
and advances to Regency or its subsidiaries and (iii) trade credit granted in the ordinary course of business consistent with past practice; |
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(i) except for in connection with certain contracts relating to indebtedness or commodity derivative instruments entered into in compliance with Regencys risk management policy and (other than in the case of
non-competition agreements) as in the ordinary course of business consistent with past practice, enter into material contracts or terminate or amend in any material respect any material Regency contract or (ii) (A) waive any material
rights under any material Regency contract, (B) enter into or extend the term or scope of any material Regency contract that materially restricts Regency or any of its subsidiaries from engaging in any line of business or in any geographic
area, (C) enter into any material Regency contract that would be breached by, or require the consent of any third party in order to continue in full force following, consummation of the transactions contemplated by the merger agreement or
(D) release any person from, or modify or waive any provision of, any standstill or confidentiality agreement related to a sale of Regency or any of its material subsidiaries; |
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except in the ordinary course of business as required by the terms, as of the date of the merger agreement, of any Regency benefit plan,
(i) increase the compensation of any executive officer, (ii) pay any bonus or incentive compensation, (iii) grant any new equity or non-equity based compensation |
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award, (iv) enter into, establish, amend or terminate any Regency benefit plan or any other agreement or arrangement which would be a Regency benefit plan if it were in effect on the date of
the merger agreement, (v) except as provided in the disclosure schedules, accelerate the vesting or payment of any compensation or benefits under any Regency benefit plan or (vi) fund any Regency benefit plan or trust relating thereto;
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adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization (other than transactions between wholly owned subsidiaries of
Regency); or |
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except as provided under any agreement entered into prior to the date of the merger agreement, pay, discharge, settle or satisfy any suit, action, claims or proceeding, in excess of $5 million individually or $10
million in the aggregate. |
Regency has further agreed that, subject to certain exceptions in the merger agreement and the
disclosure schedules delivered by Regency to ETP in connection with the merger agreement Regency will not, and will not permit any of its subsidiaries or joint ventures to, among other things, undertake the following actions without the consent of
ETP (which consent may be withheld in ETPs sole discretion):
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issue, sell, grant, dispose of, accelerate the vesting of or modify, any ownership or other limited partnership interests in Regency, voting securities or equity interests, or any securities convertible into or
exchangeable for ownership or other interests in Regency, voting securities or equity interests, except that Regency may grant new awards of phantom units under the Regency equity plans in the ordinary course of business consistent with past
practice, and may issue Regency common units (x) upon the settlement of phantom units or exercise of unit options, in each case, which are outstanding as of the date of the merger agreement and in accordance with the terms thereof,
(y) upon the conversion of the Class F units or Series A units to Regency common units in accordance with the Regency partnership agreement or (z) as part of the issuance and sale from time to time of up to $500 million aggregate
amount of Regency common units pursuant to Regencys prospectus supplement (and accompanying base prospectus) filed with the SEC on December 24, 2014; |
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redeem, purchase or otherwise acquire any ownership or other limited partnership interests in, voting securities or equity interests, except in connection with the settlement of tax withholding with respect to phantom
units or unit options, in each case which are outstanding as of the date of the merger agreement and in accordance with the terms of such awards; |
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declare, set aside for payment or pay any distribution on any Regency common units, Class F units, Series A units or other partnership interests, or otherwise make any payments to Regency unitholders in their capacity
as such, other than (i) distributions by a subsidiary to its parent, (ii) Regencys regular quarterly distribution up to $0.5025 per Regency common unit and (iii) Regency s regular quarterly distribution with respect to the
Series A units in accordance with the Regency partnership agreement; |
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split, combine, subdivide or reclassify any Regency common units, Class F units, Series A units or other partnership interests; |
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incur, refinance or assume any indebtedness for borrowed money or guarantee any such indebtedness for borrowed money or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt
securities of Regency or any of its subsidiaries or joint ventures, except that Regency may: |
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borrow under Regencys existing credit facility (and to the extent such credit facility is increased); |
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in addition to borrowings under the preceding bullet, borrow additional amounts up to $50 million; and |
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borrow from or repay a subsidiary, and Regencys subsidiaries may borrow from or repay Regency; |
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prepay or repurchase any long-term indebtedness for borrowed money or debt securities of Regency or any of its subsidiaries, other than revolving indebtedness, borrowings from Regency to a subsidiary and repayments or
repurchases required pursuant to the terms of such indebtedness or debt securities; |
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(i) change its fiscal year or method of tax accounting, (ii) make, change or revoke any material tax election, (iii) settle or compromise any material liability for taxes or (iv) file any material amended
tax return; |
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make any changes in financial accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by a change in GAAP or applicable law; or |
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amend Regencys certificate of limited partnership or the Regency partnership agreement. |
Subject to certain exceptions set forth in the merger agreement and the disclosure schedules delivered by ETP to Regency in connection with
the merger agreement, unless Regency consents in writing (which consent cannot be unreasonably withheld, conditioned or delayed), ETP has agreed to certain restrictions limiting the ability of it and its subsidiaries (other than Sunoco Partners LLC,
Sunoco GP LLC and their respective subsidiaries) to, among other things:
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issue, sell, grant, dispose of, accelerate the vesting of or modify any limited partnership interests in ETP, voting securities or equity interests, or any securities convertible into or exchangeable for limited
partnership interests in ETP, other than (i) in connection with the vesting or settlement of any equity or equity-based award that is outstanding on the date of the merger agreement or thereafter granted in accordance with their terms,
(ii) issuances of up to $1 billion in connection with a transaction involving the acquisition of assets or equity interests, (iii) issuances exceeding $1 billion in connection with a transaction involving the acquisition of assets or
equity interests as to which the ETP Board has received an opinion from a nationally recognized investment banking firm to the effect that such transaction is fair, from a financial point of view, to the ETP unitholders (any transaction described in
clauses (i) and (ii), a parent acquisition transaction or (iv) the issuance and sale of up to $1.5 billion of ETP common units pursuant to pursuant to ETPs prospectus supplement (and accompanying base prospectus) filed with the SEC
on November 20, 2014; |
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redeem, purchase or otherwise acquire any of ETPs outstanding limited partnership interests, voting securities or equity interests, other than tax withholding with respect to, equity or equity-based awards
outstanding on the date of the merger agreement or thereafter granted in accordance with their terms; |
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declare, set aside for payment or pay any distribution on any ETP common units, or otherwise make any payments to ETPs unitholders in their capacity as such other than (i) distributions by a direct or
indirect subsidiary to its parent, (ii) ETPs regular quarterly distribution and associated distributions to ETP GP or (iii) distributions in connection with a parent acquisition transaction; |
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split, combine, subdivide or reclassify any ETP common units; |
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amend ETPs certificate of limited partnership or the ETP partnership agreement (other than amendments in connection with a parent acquisition transaction or approved by ETP GP or ETPs unitholders as required
under the ETP partnership agreement); or |
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adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization (other than transactions between wholly owned subsidiaries of ETP). |
Indemnification; Directors and Officers Insurance
The merger agreement provides that, from and after the effective time, ETP, the surviving entity and the GP merger surviving entity will, to
the fullest extent permitted by law, indemnify, defend and hold harmless, and provide advance and reimbursement of reasonable expenses to, all past and present directors and officers of Regency, Regency GP, ETE Acquirer or any of their respective
subsidiaries, to the fullest extent that Regency, Regency GP, ETE Acquirer or any of their respective subsidiaries would be permitted to indemnify such indemnified persons.
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In addition, from and after the effective time and as provided by the merger agreement, ETP and
ETP GP will (i) honor the provisions regarding the elimination of liability of directors, indemnification of officers, directors and employees and advancement of expenses contained in Regencys charter documents and comparable governing
instruments of Regency GP, ETE Acquirer and any of their respective subsidiaries immediately prior to the effective time and ensure that the organizational documents of the surviving entity and the GP merger surviving entity will, for a period of
six years following the effective time, contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation than are presently set forth in such governing instruments and (ii) maintain in effect for six
years from the effective time of the merger the current directors and officers liability insurance policies or Regency, Regency GP and/or ETE Acquirer covering acts or omissions occurring at or prior to the effective time with respect to
such indemnified persons, so long as the surviving entity and the GP merger surviving entity are not required to expend more than an amount per year equal to 300% of current annual premiums paid by Regency, Regency GP and ETE Acquirer for such
insurance. Regency, Regency GP or ETE Acquirer may, in its sole discretion prior to the effective time, purchase a tail policy with respect to acts or omissions occurring or alleged to have occurred prior to the effective time that were
committed or alleged to have been committed by any past and present directors, officers and employees of Regency, Regency GP, ETE Acquirer or any of their respective subsidiaries in their capacity as such, so long as the cost of such policy does not
exceed six times an amount equal to 300% of the current annual premiums paid by Regency, Regency GP or ETE Acquirer for directors and officers liability insurance policies and, if such a tail policy is purchased, ETP and ETP
GP will have no further obligations with respect to maintaining directors and officers liability insurance.
Financing Matters
The merger agreement provides that Regency will, at ETPs request, (i) call for prepayment or redemption, or prepay or redeem,
(ii) attempt to renegotiate the terms of, (iii) commence an offer to purchase and/or consent solicitation or (iv) satisfy and discharge or defease any then-existing indebtedness for borrowed money of Regency; provided that
Regency will not be obligated to take any such action (nor will Regency be required to incur any cost or liability in respect thereof) prior to the effective time of the merger.
Amendment of ETP Partnership Agreement
The merger agreement provides that ETP GP will amend the ETP partnership agreement, for no additional consideration or undertaking by Regency
or by the unitholders of Regency, prior to and effective as of the effective time, to provide for, among other things, (i) the reduction by ETE, as the holder of ETPs incentive distribution rights, of (x) $20 million in quarterly
distributions in respect of such rights for four consecutive quarters commencing with the first quarter for which the related record date occurs on or following the closing and (y) $15 million in quarterly distributions in respect of such
rights for 16 consecutive quarters thereafter, (ii) the creation and issuance of the ETP preferred units and (iii) a change in the definition of Operating Surplus in the ETP partnership agreement to provide that such term will
include an amount equal to the operating surplus of Regency.
Amendment and Waiver
At any time prior to the effective time, whether before or after adoption of the merger agreement by Regency unitholders, the parties may, by
written agreement and by action taken or authorized by the ETP Board and the Regency Board, amend the merger agreement; provided, however, that the ETP Board and the Regency Board may not take or authorize any such action unless it has
first referred such action to the ETP Conflicts Committee and the Regency Conflicts Committee, as applicable, for its consideration, and permitted the ETP Conflicts Committee and the Regency Conflicts Committee, as applicable, not less than two
business days to make a recommendation to the ETP Board and the Regency Board, as applicable, with respect thereto (for the avoidance of doubt, the ETP Board and the Regency Board will in no way be obligated to follow the recommendation of the ETP
Conflicts Committee and the Regency Conflicts Committee, as applicable, and the
97
ETP Board and the Regency Board, as applicable, will be permitted to take action following the expiration of such two business day period). Following approval of the merger and the other
transactions contemplated by the merger agreement by Regency unitholders, no amendment or change to the provisions of the merger agreement will be made which by law would require further approval by Regency unitholders, without such approval.
Unless otherwise expressly set forth in the merger agreement, whenever a determination, decision, approval or consent of ETP or the ETP
Board or of Regency or the Regency Board is required pursuant to the merger agreement, such determination, decision, approval or consent must be authorized by the ETP Board and the Regency Board, as applicable; provided, however, that
the ETP Board and the Regency Board, as applicable, may not take or authorize any such action unless it has first referred such action to the ETP Conflicts Committee and the Regency Conflicts Committee, as applicable, for its consideration, and
permitted the ETP Conflicts Committee and the Regency Conflicts Committee, as applicable, not less than two business days to make a recommendation to the ETP Board and the Regency Board, as applicable, with respect thereto (for the avoidance of
doubt, the ETP Board and the Regency Board, as applicable, will in no way be obligated to follow the recommendation of the ETP Conflicts Committee or the Regency Conflicts Committee, as applicable, and the ETP Board and the Regency Board, as
applicable, will be permitted to take action following the expiration of such two business day period).
At any time prior to the
effective time, any party to the merger agreement may, to the extent legally allowed:
|
|
|
waive any inaccuracies in the representations and warranties of any other party contained in the merger agreement; |
|
|
|
extend the time for the performance of any of the obligations or acts of any other party provided for in the merger agreement; or |
|
|
|
waive compliance by any other party with any of the agreements or conditions contained in the merger agreement, as permitted under the merger agreement. |
Remedies; Specific Performance
The merger agreement provides that, in the event Regency pays the termination fee (described under Termination Fee) to ETP
when required, Regency will have no further liability to ETP or ETP GP. Notwithstanding any termination of the merger agreement, the merger agreement provides that nothing in the agreement (other than payment of the termination fee) will relieve any
party from any liability for any failure to consummate the transactions when required pursuant to the merger agreement or any party from liability for fraud or a willful breach of any covenant or agreement contained in the merger agreement. The
merger agreement also provides that the parties are entitled to obtain an injunction to prevent breaches of the merger agreement and to specifically enforce the merger agreement. In the event that ETP receives the termination fee, ETP may not seek
any award of specific performance under the merger agreement.
Representations and Warranties
The merger agreement contains representations and warranties made by ETP, Regency and ETE Acquirer. These representations and warranties have
been made solely for the benefit of the other parties to the merger agreement and:
|
|
|
may be intended not as statements of fact or of the condition of the parties to the merger agreement or their respective subsidiaries, but rather as a way of allocating the risk to one of the parties if those statements
prove to be inaccurate; |
|
|
|
have been qualified by disclosures that were made to the other party in connection with the negotiation of the merger agreement, which disclosures may not be reflected in the merger agreement; |
98
|
|
|
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
|
|
|
were made only as of the date of the merger agreement or such other date or dates as may be specified in the merger agreement and are subject to more recent developments. |
The representations and warranties made by both ETP, Regency and ETE Acquirer relate to, among other things:
|
|
|
organization, formation, standing, power and similar matters; |
|
|
|
approval and authorization of the merger agreement and the transactions contemplated by the merger agreement and any conflicts created by such transactions; |
|
|
|
required consents and approvals of governmental authorities in connection with the transactions contemplated by the merger agreement; |
|
|
|
absence of certain changes or events from December 31, 2013 through the date of the merger agreement and from the date of the merger agreement through the closing date; |
|
|
|
brokers and other advisors; and |
|
|
|
absence of additional representations and warranties. |
Additional representations and
warranties made only by ETP and Regency relate to, among other things:
|
|
|
documents filed with the SEC, financial statements included in those documents and regulatory reports filed with governmental authorities; |
|
|
|
absence of undisclosed liabilities since December 31, 2013; |
|
|
|
compliance with applicable laws and permits; |
|
|
|
information supplied in connection with this proxy statement/prospectus; |
|
|
|
contracts of each party; |
|
|
|
opinion of financial advisor; and |
|
|
|
state takeover statutes. |
Additional representations and warranties made only by Regency
relate to, among other things:
99
Distributions
The merger agreement provides that, from the date of the merger agreement until the effective time, each of ETP and Regency will coordinate
with the other regarding the declaration of any distributions in respect of ETP common units, Class F units, Series A units, ETP common units and ETP preferred units. The merger agreement also provides that holders of Regency common units, Class F
units and Series A units will receive, for any quarter, either: (i) only distributions in respect of Regency common units, Class F units or Series A units or (ii) only distributions in respect of ETP common units or ETP preferred units, as
applicable, that they receive in exchange therefor in the merger.
ETEs and ETPs Obligation to Vote Regency
Units
Under the terms of the merger agreement, ETE and ETP have agreed to vote all of the Regency common units and Class F
units owned beneficially or of record by ETE, ETP or their respective subsidiaries in favor of the merger. As of March 24, 2015, ETE, ETP and their respective subsidiaries collectively held 88,529,775 Regency common units and 6,274,483
Class F units, representing approximately 22.58% of the Regency units entitled to vote on the merger.
In addition, ETE has
consented to, and has agreed to cause any of its subsidiaries that own Class H units to consent to, the issuance of ETP preferred units to the holders of Series A units as contemplated by the merger agreement.
Additional Agreements
The merger agreement also contains covenants relating to cooperation in the preparation of this proxy statement/prospectus and additional
agreements relating to, among other things, access to information, notice of specified matters and public announcements. The merger agreement also obligates ETP to have ETP common units to be issued in connection with the merger approved for listing
on the NYSE, subject to official notice of issuance, prior to the date of the consummation of the merger.
100
ENERGY TRANSFER PARTNERS, L.P.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information of ETP reflects the pro forma impacts of ETPs proposed merger with
Regency.
The unaudited pro forma condensed consolidated balance sheet gives effect to the merger as if it had occurred on December 31,
2014; the unaudited pro forma condensed consolidated statements of operations assume that the merger was consummated on January 1, 2012. The unaudited pro forma condensed balance sheet and condensed consolidated statements of operations should
be read in conjunction with (i) ETPs Annual Report on Form 10-K for the year ended December 31, 2014, and (ii) Regencys Annual Report on Form 10-K for the year ended December 31, 2014.
The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and are not necessarily indicative of
the financial results that would have occurred if the merger had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations in the future. The pro forma adjustments, as described
in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of the date of this document.
Under the terms of the merger agreement, holders of Regency common units and Class F units will receive 0.4066 ETP common units plus a number
of additional ETP common units equal to $0.32 divided by the lesser of (i) the volume weighted average price of ETP common units for the five trading days ending on the third trading day immediately preceding the effective time of the merger
and (ii) the closing price of ETP common units on the third trading day immediately preceding the effective time of the merger.
In
addition, ETE, which owns the general partner and 100% of the incentive distribution rights of both Regency and ETP, has agreed to reduce the incentive distributions it receives from ETP by a total of $320 million over a five year period. The
reduction in distributions will be $80 million in the first year following the closing of the merger and $60 million per year for the following four years. The merger is expected to close in the second quarter of 2015.
ETP and Regency are under common control of ETE; therefore, ETP expects to account for the merger at historical cost as a reorganization of
entities under common control. Accordingly, ETPs consolidated financial statements will be retrospectively adjusted to reflect consolidation of Regency beginning May 26, 2010 (the date ETE acquired Regency GP).
101
Energy Transfer Partners, L.P. And Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 2014
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
|
|
|
ETP Pro Forma for Regency Merger |
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
639 |
|
|
$ |
24 |
|
|
$ |
|
|
|
|
|
|
|
$ |
663 |
|
Accounts receivable, net |
|
|
2,879 |
|
|
|
483 |
|
|
|
|
|
|
|
|
|
|
|
3,362 |
|
Accounts receivable from related companies |
|
|
210 |
|
|
|
45 |
|
|
|
(116 |
) |
|
|
a |
|
|
|
139 |
|
Inventories |
|
|
1,389 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
1,456 |
|
Exchanges receivable |
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
Price risk management assets |
|
|
7 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
82 |
|
Other current assets |
|
|
271 |
|
|
|
9 |
|
|
|
17 |
|
|
|
a |
|
|
|
297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
5,439 |
|
|
|
703 |
|
|
|
(99 |
) |
|
|
|
|
|
|
6,043 |
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT, net |
|
|
29,743 |
|
|
|
9,217 |
|
|
|
(53 |
) |
|
|
a |
|
|
|
38,907 |
|
ADVANCES TO AND INVESTMENTS IN AFFILIATES |
|
|
3,840 |
|
|
|
2,418 |
|
|
|
(1,162 |
) |
|
|
b |
|
|
|
3,760 |
|
|
|
|
|
|
|
|
|
|
|
|
(1,336 |
) |
|
|
c |
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
6,419 |
|
|
|
1,223 |
|
|
|
|
|
|
|
|
|
|
|
7,642 |
|
INTANGIBLE ASSETS, net |
|
|
2,087 |
|
|
|
3,439 |
|
|
|
|
|
|
|
|
|
|
|
5,526 |
|
OTHER NON-CURRENT ASSETS, net |
|
|
693 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
48,221 |
|
|
$ |
17,103 |
|
|
$ |
(2,650 |
) |
|
|
|
|
|
$ |
62,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,992 |
|
|
$ |
544 |
|
|
$ |
|
|
|
|
|
|
|
$ |
3,536 |
|
Accounts payable to related companies |
|
|
62 |
|
|
|
64 |
|
|
|
(105 |
) |
|
|
a |
|
|
|
21 |
|
Exchanges payable |
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183 |
|
Price risk management liabilities |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
Accrued and other current liabilities |
|
|
1,774 |
|
|
|
148 |
|
|
|
(7 |
) |
|
|
a |
|
|
|
1,915 |
|
Current maturities of long-term debt |
|
|
1,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
6,040 |
|
|
|
756 |
|
|
|
(112 |
) |
|
|
|
|
|
|
6,684 |
|
|
|
|
|
|
|
LONG-TERM DEBT, less current maturities |
|
|
18,332 |
|
|
|
6,641 |
|
|
|
|
|
|
|
|
|
|
|
24,973 |
|
DEFERRED INCOME TAXES |
|
|
4,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,226 |
|
NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES |
|
|
138 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
154 |
|
OTHER NON-CURRENT LIABILITIES |
|
|
1,206 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
1,278 |
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERIES A PREFERRED UNITS |
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
33 |
|
REDEEMABLE NONCONTROLLING INTERESTS |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partner |
|
|
184 |
|
|
|
781 |
|
|
|
|
|
|
|
|
|
|
|
965 |
|
Limited partners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common unitholders |
|
|
10,430 |
|
|
|
8,531 |
|
|
|
(1,183 |
) |
|
|
c |
|
|
|
17,738 |
|
|
|
|
|
|
|
|
|
|
|
|
(40 |
) |
|
|
a |
|
|
|
|
|
Class F Units |
|
|
|
|
|
|
153 |
|
|
|
(153 |
) |
|
|
c |
|
|
|
|
|
Class H Units |
|
|
1,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,512 |
|
Accumulated other comprehensive income (loss) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total partners' capital |
|
|
12,070 |
|
|
|
9,465 |
|
|
|
(1,376 |
) |
|
|
|
|
|
|
20,159 |
|
Noncontrolling interest |
|
|
6,194 |
|
|
|
120 |
|
|
|
(1,162 |
) |
|
|
b |
|
|
|
5,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
18,264 |
|
|
|
9,585 |
|
|
|
(2,538 |
) |
|
|
|
|
|
|
25,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
48,221 |
|
|
$ |
17,103 |
|
|
$ |
(2,650 |
) |
|
|
|
|
|
$ |
62,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
102
Energy Transfer Partners, L.P. And Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement Of Continuing Operations
For the Year Ended December 31, 2014
(in millions except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
|
|
|
ETP Pro Forma for Regency Merger |
|
|
|
|
REVENUES |
|
$ |
51,158 |
|
|
$ |
4,951 |
|
|
$ |
(524 |
) |
|
|
a |
|
|
$ |
55,585 |
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
|
45,540 |
|
|
|
3,452 |
|
|
|
(508 |
) |
|
|
a |
|
|
|
48,484 |
|
|
|
|
|
Operating expenses |
|
|
1,636 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
2,084 |
|
|
|
|
|
Depreciation and amortization |
|
|
1,130 |
|
|
|
541 |
|
|
|
|
|
|
|
|
|
|
|
1,671 |
|
|
|
|
|
Selling, general and administrative |
|
|
377 |
|
|
|
158 |
|
|
|
|
|
|
|
|
|
|
|
535 |
|
|
|
|
|
Gain on asset sales, net |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
Impairment charges and other |
|
|
|
|
|
|
370 |
|
|
|
|
|
|
|
|
|
|
|
370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
48,683 |
|
|
|
4,968 |
|
|
|
(508 |
) |
|
|
|
|
|
|
53,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
2,475 |
|
|
|
(17 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
2,442 |
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of interest capitalized |
|
|
(860 |
) |
|
|
(304 |
) |
|
|
|
|
|
|
|
|
|
|
(1,164 |
) |
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
234 |
|
|
|
195 |
|
|
|
(98 |
) |
|
|
b |
|
|
|
331 |
|
|
|
|
|
Gain on sale of AmeriGas common units |
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177 |
|
|
|
|
|
Losses on interest rate derivatives |
|
|
(157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(157 |
) |
|
|
|
|
Other, net |
|
|
(25 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE |
|
|
1,844 |
|
|
|
(139 |
) |
|
|
(114 |
) |
|
|
|
|
|
|
1,591 |
|
|
|
|
|
Income tax expense from continuing operations |
|
|
355 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS |
|
$ |
1,489 |
|
|
$ |
(142 |
) |
|
$ |
(114 |
) |
|
|
|
|
|
$ |
1,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLOCATION OF INCOME FROM CONTINUING OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner |
|
$ |
517 |
|
|
$ |
31 |
|
|
$ |
|
|
|
|
|
|
|
$ |
548 |
|
|
|
|
|
Limited Partners |
|
|
525 |
|
|
|
(199 |
) |
|
|
9 |
|
|
|
d |
|
|
|
335 |
|
|
|
|
|
Other Securities |
|
|
230 |
|
|
|
11 |
|
|
|
(7 |
) |
|
|
d |
|
|
|
234 |
|
|
|
|
|
Noncontrolling Interests |
|
|
217 |
|
|
|
15 |
|
|
|
(116 |
) |
|
|
b |
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,489 |
|
|
$ |
(142 |
) |
|
$ |
(114 |
) |
|
|
|
|
|
$ |
1,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.58 |
|
|
$ |
(0.57 |
) |
|
|
|
|
|
|
|
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
1.58 |
|
|
$ |
(0.57 |
) |
|
|
|
|
|
|
|
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE LIMITED PARTNER UNITS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
331.5 |
|
|
|
348.1 |
|
|
|
|
|
|
|
|
|
|
|
464.0 |
|
|
|
e |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
332.8 |
|
|
|
348.1 |
|
|
|
|
|
|
|
|
|
|
|
465.3 |
|
|
|
e |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
103
Energy Transfer Partners, L.P. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Continuing Operations
For the Year Ended December 31, 2013
(in millions except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
|
|
|
ETP Pro Forma for Regency Merger |
|
|
|
|
Revenues |
|
$ |
46,339 |
|
|
$ |
2,521 |
|
|
$ |
(246 |
) |
|
|
a |
|
|
$ |
48,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(268 |
) |
|
|
f |
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
|
41,204 |
|
|
|
1,793 |
|
|
|
(228 |
) |
|
|
a |
|
|
|
42,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(223 |
) |
|
|
f |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
1,388 |
|
|
|
296 |
|
|
|
(39 |
) |
|
|
f |
|
|
|
1,645 |
|
|
|
|
|
Depreciation and amortization |
|
|
1,032 |
|
|
|
287 |
|
|
|
(21 |
) |
|
|
f |
|
|
|
1,298 |
|
|
|
|
|
Selling, general and administrative |
|
|
485 |
|
|
|
88 |
|
|
|
(19 |
) |
|
|
f |
|
|
|
554 |
|
|
|
|
|
Loss on asset sales, net |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
Impairment charges and other |
|
|
689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
44,798 |
|
|
|
2,466 |
|
|
|
(530 |
) |
|
|
|
|
|
|
46,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
1,541 |
|
|
|
55 |
|
|
|
16 |
|
|
|
|
|
|
|
1,612 |
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of interest capitalized |
|
|
(849 |
) |
|
|
(164 |
) |
|
|
|
|
|
|
|
|
|
|
(1,013 |
) |
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
172 |
|
|
|
135 |
|
|
|
(64 |
) |
|
|
b |
|
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
c |
|
|
|
|
|
|
|
|
|
Gain on sale of AmeriGas common units |
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
|
|
Gains on interest rate derivatives |
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
|
|
Non-operating environmental remediation |
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(168 |
) |
|
|
|
|
Other, net |
|
|
5 |
|
|
|
|
|
|
|
2 |
|
|
|
f |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Income Tax Expense |
|
|
832 |
|
|
|
26 |
|
|
|
(54 |
) |
|
|
|
|
|
|
804 |
|
|
|
|
|
Income tax expense from continuing operations |
|
|
97 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
$ |
735 |
|
|
$ |
27 |
|
|
$ |
(54 |
) |
|
|
|
|
|
$ |
708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of Income from Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner |
|
$ |
507 |
|
|
$ |
11 |
|
|
$ |
|
|
|
|
|
|
|
$ |
518 |
|
|
|
|
|
Limited Partners |
|
|
(78 |
) |
|
|
34 |
|
|
|
(18 |
) |
|
|
d |
|
|
|
(62 |
) |
|
|
|
|
Other Securities |
|
|
10 |
|
|
|
10 |
|
|
|
(8 |
) |
|
|
d |
|
|
|
12 |
|
|
|
|
|
Noncontrolling Interests |
|
|
296 |
|
|
|
(28 |
) |
|
|
(64 |
) |
|
|
b |
|
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
f |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
735 |
|
|
$ |
27 |
|
|
$ |
(54 |
) |
|
|
|
|
|
$ |
708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations per Common Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.23 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(0.23 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Limited Partner Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
343.4 |
|
|
|
196.2 |
|
|
|
|
|
|
|
|
|
|
|
418.1 |
|
|
|
e |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
343.4 |
|
|
|
198.7 |
|
|
|
|
|
|
|
|
|
|
|
419.1 |
|
|
|
e |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
104
Energy Transfer Partners, L.P. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Continuing Operations
For the Year Ended December 31, 2012
(in millions except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETP Historical |
|
|
Regency Historical |
|
|
Pro Forma Adjustments |
|
|
|
|
|
ETP Pro Forma for Regency Merger |
|
|
|
|
Revenues |
|
$ |
15,702 |
|
|
$ |
2,000 |
|
|
$ |
(47 |
) |
|
|
a |
|
|
$ |
16,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(661 |
) |
|
|
f |
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
|
12,266 |
|
|
|
1,387 |
|
|
|
(38 |
) |
|
|
a |
|
|
|
13,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(516 |
) |
|
|
f |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
951 |
|
|
|
228 |
|
|
|
(1 |
) |
|
|
a |
|
|
|
1,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62 |
) |
|
|
f |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
656 |
|
|
|
252 |
|
|
|
(51 |
) |
|
|
f |
|
|
|
857 |
|
|
|
|
|
Selling, general and administrative |
|
|
435 |
|
|
|
100 |
|
|
|
(2 |
) |
|
|
a |
|
|
|
496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
f |
|
|
|
|
|
|
|
|
|
Loss on asset sales, net |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
14,308 |
|
|
|
1,970 |
|
|
|
(707 |
) |
|
|
|
|
|
|
15,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
1,394 |
|
|
|
30 |
|
|
|
(1 |
) |
|
|
|
|
|
|
1,423 |
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of interest capitalized |
|
|
(665 |
) |
|
|
(122 |
) |
|
|
|
|
|
|
|
|
|
|
(787 |
) |
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
142 |
|
|
|
105 |
|
|
|
(44 |
) |
|
|
b |
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
f |
|
|
|
|
|
|
|
|
|
Gain on deconsolidation of Propane Business |
|
|
1,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,057 |
|
|
|
|
|
Loss on extinguishment of debt |
|
|
(115 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
(123 |
) |
|
|
|
|
Losses on interest rate derivatives |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
Other, net |
|
|
11 |
|
|
|
29 |
|
|
|
1 |
|
|
|
f |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Income Tax Expense |
|
|
1,820 |
|
|
|
34 |
|
|
|
(35 |
) |
|
|
|
|
|
|
1,819 |
|
|
|
|
|
Income tax expense from continuing operations |
|
|
63 |
|
|
|
|
|
|
|
1 |
|
|
|
f |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations |
|
$ |
1,757 |
|
|
$ |
34 |
|
|
$ |
(36 |
) |
|
|
|
|
|
$ |
1,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of Income from Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner |
|
$ |
462 |
|
|
$ |
9 |
|
|
$ |
|
|
|
|
|
|
|
$ |
471 |
|
|
|
|
|
Limited Partners |
|
|
1,224 |
|
|
|
27 |
|
|
|
(6 |
) |
|
|
d |
|
|
|
1,245 |
|
|
|
|
|
Other Securities |
|
|
9 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
Noncontrolling Interests |
|
|
62 |
|
|
|
(12 |
) |
|
|
(44 |
) |
|
|
b |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
f |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,757 |
|
|
$ |
34 |
|
|
$ |
(36 |
) |
|
|
|
|
|
$ |
1,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations per Common Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
4.93 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
$ |
3.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
4.91 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
$ |
3.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Limited Partner Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
248.3 |
|
|
|
167.5 |
|
|
|
|
|
|
|
|
|
|
|
317.3 |
|
|
|
e |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
249.0 |
|
|
|
172.4 |
|
|
|
|
|
|
|
|
|
|
|
320.0 |
|
|
|
e |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
105
Energy Transfer Partners, L.P.
Notes to Unaudited Pro Forma Financial Information
The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and are not necessarily indicative of
the financial results that would have occurred if the merger had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations in the future. The pro forma adjustments, as described
in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of the date of this document.
Pro Forma Adjustments
Following is a
description of the pro forma adjustments made to the combined historical financial statements of ETP and Regency:
|
a. |
Pro forma adjustments to eliminate related party balances and transactions between ETP and Regency, including commercial transactions, as well as fees for services provided under an operating and service agreement
between ETP and Regency. These adjustments also include the elimination of profit recognized by a subsidiary of ETP from sales of equipment to Regency, including elimination of the cumulative amount of ETPs profit related to such equipment
sales included in Regencys property, plant and equipment, net, as of December 31, 2014. |
|
b. |
Pro forma adjustments to eliminate Regencys investment in Lone Star NGL LLC (Lone Star), a consolidated subsidiary of ETP. ETP owns a 70% interest in Lone Star, and Regency owns a 30% interest in Lone
Star. Regencys interest in Lone Star is reflected as a noncontrolling interest in ETPs historical consolidated financial statements and is reflected as an equity method investment in Regencys historical consolidated financial
statements. |
|
c. |
Pro forma adjustment to eliminate limited partner interests in Regency held by a subsidiary of ETP. ETP indirectly owns 31.4 million Regency common units and all of the outstanding Regency Class F units; these
interests were acquired in the SUGS Contribution (described below) on April 30, 2013. These limited partner interests are expected to convert to limited partner interests in ETP upon the closing of the merger, and the related amounts will
subsequently be eliminated from ETPs consolidated financial statements. |
|
d. |
Pro forma adjustments to limited partners income from continuing operations reflect the elimination of intercompany earnings between ETP and Regency. In addition, for the years ended December 31, 2014 and
2013, $7 million and $4 million, respectively, of income attributable to Regencys Class F units was reclassified from other securities to limited partners based on the assumed conversion of Regencys Class F units
to common units. |
|
e. |
Pro forma weighted average limited partner units outstanding reflects (i) the assumed conversion of Regencys common and Class F units to ETP common units, based on the weighted average of Regencys
common and Class F units outstanding during the respective periods multiplied by the conversion rate of 0.4066 and (ii) the assumed issuance of approximately 1.1 million additional ETP common units on January 1, 2012 based on the portion
of the additional unit consideration described above. In addition, for the years ended December 31, 2014 and 2013, the pro forma weighted average also reflects the elimination of Regency common units held by a subsidiary of ETP (see additional
information in note (c) above). |
|
f. |
Pro forma adjustments to eliminate the results of operation of Southern Union Gas Services (SUGS) for the period from March 26, 2012
through April 30, 2013, as such results are included in the historical consolidated financial statements of both ETP and Regency. ETP contributed SUGS to Regency on April 30, 2013 (the SUGS Contribution). The SUGS Contribution
was a reorganization of entities under common control; accordingly, Regency retrospectively adjusted its historical |
106
|
consolidated financial statements to reflect the consolidation of SUGS beginning March 26, 2012 (the date that common control of SUGS began). ETPs historical consolidated financial
statements continued to reflect SUGS results of operations for March 26, 2012 through April 30, 2013. As a result, SUGS results of operations are included in the historical consolidated financial statements of both ETP and
Regency for the period from March 26, 2012 through April 30, 2013. |
107
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of the material U.S. federal income tax consequences of the merger that may be relevant to Regency common
unitholders and ETP common unitholders. Unless otherwise noted, the legal conclusions set forth in the discussion relating to the consequences of the merger to Regency and its common unitholders are the opinion of Baker Botts L.L.P., counsel to
Regency, as to the material U.S. federal income tax consequences relating to those matters. Unless otherwise noted, the legal conclusions set forth in the discussion relating to the consequences of the merger to ETP and its common unitholders are
the opinion of Latham & Watkins LLP, counsel to ETP, as to the material U.S. federal income tax consequences relating to those matters. This discussion is based upon current provisions of the Code, existing and proposed Treasury regulations
promulgated under the Code (the Treasury Regulations) and current administrative rulings and court decisions, all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause the tax
consequences to vary substantially from the consequences described below.
This discussion does not purport to be a complete discussion of
all U.S. federal income tax consequences of the merger. Moreover, the discussion focuses on Regency common unitholders and ETP common unitholders who are individual citizens or residents of the United States (for U.S. federal income tax purposes)
and has only limited application to corporations, estates, trusts, nonresident aliens or other unitholders subject to specialized tax treatment, such as tax-exempt institutions, employee benefit plans, foreign persons, financial institutions,
insurance companies, real estate investment trusts (REITs), individual retirement accounts (IRAs), mutual funds, traders in securities that elect mark-to-market, persons who hold Regency common units or ETP common units as part of a hedge, straddle
or conversion transaction, persons who acquired Regency common units or ETP common units by gift, or directors and employees of Regency that received (or are deemed to receive) Regency common units as compensation or through the exercise (or deemed
exercise) of options, unit appreciation rights, phantom units or restricted units granted under a Regency equity incentive plan. Also, the discussion assumes that the Regency common units and ETP common units are held as capital assets at the time
of the merger (generally, property held for investment).
Neither ETP nor Regency has sought a ruling from the IRS with respect to any of
the tax consequences discussed below, and the IRS would not be precluded from taking positions contrary to those described herein. As a result, no assurance can be given that the IRS will agree with all of the tax characterizations and the tax
consequences described below. Some tax aspects of the merger are not certain, and no assurance can be given that the below-described opinions and/or the statements contained herein with respect to tax matters would be sustained by a court if
contested by the IRS. Furthermore, the tax treatment of the merger may be significantly modified by future legislative or administrative changes or court decisions. Any modifications may or may not be retroactively applied.
Accordingly, ETP and Regency strongly urge each ETP unitholder and Regency unitholder to consult with, and depend upon, such
unitholders own tax advisor in analyzing the U.S. federal, state, local and foreign tax consequences particular to the unitholder of the merger.
Tax Opinions Required as a Condition to Closing
No ruling has been or will be requested from the IRS with respect to the tax consequences of the merger. Instead, ETP and Regency will rely on
the opinions of their respective counsel regarding the tax consequences of the merger.
It is a condition of ETPs obligation to
complete the merger that ETP receive an opinion of its counsel, Latham & Watkins LLP, to the effect that for U.S. federal income tax purposes:
|
|
|
Neither ETP nor ETP GP will recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code);
|
108
|
|
|
no gain or loss will be recognized by holders of ETP common units as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); and
|
|
|
|
at least 90% of the combined gross income of each of ETP and Regency for the most recent four complete calendar quarters ending before the closing date for which the necessary financial information is available is from
sources treated as qualifying income within the meaning of Section 7704(d) of the Code. |
It is a condition
of Regencys obligation to complete the merger that Regency receive an opinion of its counsel, Baker Botts L.L.P., to the effect that for U.S. federal income tax purposes:
|
|
|
Regency will not recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); |
|
|
|
holders of Regency common units will not recognize any income or gain as a result of the merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); and
|
|
|
|
at least 90% of the gross income of Regency for the most recent four complete calendar quarters ending before the closing date for which the necessary financial information is available is from sources treated as
qualifying income within the meaning of Section 7704(d) of the Code. |
The opinion of Baker Botts L.L.P.
will not extend to any Regency common unitholder who acquired common units from Regency in exchange for property other than cash.
The
opinions of counsel will assume that the merger will be consummated in the manner contemplated by, and in accordance with, the terms set forth in the merger agreement and described in this proxy statement/prospectus. In addition, the tax opinions
delivered to ETP and Regency at closing will be based upon certain factual assumptions and representations made by the officers of ETP, ETP GP, Regency and Regency GP and any of their respective affiliates. If either ETP or Regency waives the
receipt of the requisite tax opinion as a condition to closing and the changes to the tax consequences would be material, then this proxy statement/prospectus will be amended and recirculated and unitholder approval will be resolicited. Unlike a
ruling, an opinion of counsel represents only that counsels best legal judgment and does not bind the IRS or the courts. Accordingly, no assurance can be given that the above-described opinions will be sustained by a court if contested by the
IRS.
Assumptions Related to the U.S. Federal Income Tax Treatment of the Merger
The discussion below assumes that ETP will be classified as a partnership for U.S. federal income tax purposes at the time of the merger.
Please read the discussion of the opinion of Latham & Watkins LLP that ETP is classified as a partnership for U.S. federal income tax purposes under Material U.S. Federal Income Tax Consequences of ETP Common Unit
OwnershipPartnership Status below. The discussion below also assumes that Regency will be classified as a partnership for U.S. federal income tax purposes at the time of the merger. Please read the discussion of the opinion of Baker
Botts L.L.P. that Regency is classified as a partnership for U.S. federal income tax purposes under Material U.S. Federal Income Tax Consequences of the MergerU.S. Federal Income Tax Treatment of the Merger. Following the merger, a
Regency common unitholder that receives ETP common units will be treated as a partner in ETP regardless of the U.S. federal income tax classification of Regency.
Additionally, the discussion below assumes that all of the liabilities of Regency that are deemed assumed by ETP in the merger qualify for an
exception to the disguised sale rules. ETP and Regency believe that such liabilities qualify for one or more of the exceptions to the disguised sale rules and intend to take the position that neither ETP nor Regency will
recognize any income or gain as a result of the disguised sale rules.
109
U.S. Federal Income Tax Treatment of the Merger
Upon the terms and subject to the conditions set forth in the merger agreement, Regency will merge with Merger Sub A and become a wholly owned
subsidiary of ETP, and all Regency units will be converted into the right to receive ETP units. For U.S. federal income tax purposes, the merger will be a merger of ETP and Regency within the meaning of Treasury Regulations promulgated
under Section 708 of the Code, with ETP being treated as the continuing partnership and Regency being treated as the terminated partnership.
As a result, the following is deemed to occur for U.S. federal income tax purposes: (1) Regency will be deemed to contribute its assets
to ETP in exchange for (i) the issuance to Regency of ETP units and (ii) the assumption of Regencys liabilities and (2) Regency will be deemed to liquidate, distributing ETP units to the Regency unitholders in exchange for such
Regency units (the Assets-Over Form).
The remainder of this discussion, except as otherwise noted, assumes that the merger
and the transactions contemplated thereby will be treated for U.S. federal income tax purposes in the manner described above. For the purposes of this discussion under U.S. Federal Income Tax Treatment of the Merger with respect to
Regency and its unitholders and based upon the factual representations made by Regency and Regency GP, Baker Botts L.L.P. is of the opinion that Regency will be treated as a partnership for federal income tax purposes immediately preceding the
merger. The representations made by Regency and Regency GP upon which Baker Botts L.L.P. has relied in rendering its opinion include, without limitation: (1) neither Regency nor its operating company has elected or will elect to be treated, or
is otherwise treated, as a corporation for federal income tax purposes and (2) for each taxable year, more than 90% of Regencys gross income has been and will be income of a character that Baker Botts L.L.P. has opined is qualifying
income within the meaning of Section 7704(d) of the Code.
Tax Consequences of the Merger to Regency
Under the Assets-Over Form, Regency will be deemed to contribute all of its assets to ETP in exchange for ETP units and the assumption of
Regencys liabilities. In general, the deemed contribution of assets from Regency to ETP in exchange for ETP units will not result in the recognition of gain or loss by Regency. Under Section 707 of the Code and the Treasury Regulations
thereunder, a transfer of property by a partner to a partnership, coupled with a related transfer of money or other consideration (other than a partnership interest) by the partnership to such partner (including the partnerships assumption of,
or taking of property subject to, certain liabilities), may be characterized, in part, as a disguised sale of property, rather than as a non-taxable contribution of the property to the partnership. If the merger were characterized, in
part, as a disguised sale of property by Regency, such disguised sale could result in substantial additional amounts of taxable gain being allocated to the Regency unitholders. ETP and Regency believe that all of the liabilities of
Regency that are deemed assumed by ETP in the merger qualify for one or more exceptions to the disguised sale rules and intend to take the position that neither ETP nor Regency will recognize any income or gain as a result of the
disguised sale rules.
Tax Consequences of the Merger to Regency Unitholders
Under the Assets-Over Form, Regency unitholders will be deemed to receive distributions in liquidation of Regency consisting of ETP units. In
general, the receipt of ETP units will not result in the recognition of taxable gain or loss to a Regency unitholder. Any receipt of cash by a Regency unitholder (including, as discussed below, a deemed distribution of cash resulting from a net
reduction in the amount of nonrecourse liabilities allocated to a Regency unitholder) will result in the recognition of taxable gain if such receipt exceeds the adjusted tax basis in the Regency units surrendered in the merger. The receipt of ETP
units may trigger taxable gain under the disguised sale rules of section 707(a)(2)(B) of the Code for a Regency unitholder that contributed property in exchange for Regency units.
As a partner in Regency, a Regency unitholder is entitled to include the nonrecourse liabilities of Regency attributable to its Regency units
in the tax basis of its Regency units. As a partner in ETP after the merger, a
110
Regency unitholder will be entitled to include the nonrecourse liabilities of ETP attributable to the ETP units received in the merger in the tax basis of such units received. The nonrecourse
liabilities of ETP will include the nonrecourse liabilities of Regency after the merger. The amount of nonrecourse liabilities attributable to a Regency unit or a ETP unit is determined under complex regulations under Section 752 of the Code.
If the nonrecourse liabilities attributable to the ETP units received by a Regency unitholder in the merger exceed the nonrecourse
liabilities attributable to the Regency units surrendered by the Regency unitholder in the merger, the Regency unitholders tax basis in the ETP units received will be correspondingly higher than the unitholders tax basis in the Regency
units surrendered. If the nonrecourse liabilities attributable to the ETP units received by a Regency unitholder in the merger are less than the nonrecourse liabilities attributable to the Regency units surrendered by the Regency unitholder in the
merger, the Regency unitholders tax basis in the ETP units received will be correspondingly lower than the unitholders tax basis in the Regency units surrendered. Please read Material U.S. Federal Income Tax Consequences of the
MergerTax Basis and Holding Period of the ETP Units Received below.
Any reduction in liabilities described in the preceding
paragraph will be treated as a deemed cash distribution to the Regency unitholder. If the amount of any such deemed distribution of cash to the Regency unitholder exceeds such Regency unitholders tax basis in the Regency units surrendered,
such Regency unitholder will recognize taxable gain in an amount equal to such excess. While there can be no assurance, ETP and Regency expect that most Regency unitholders will not recognize gain in this manner. However, the application of the
rules governing the allocation of nonrecourse liabilities in the context of the merger is complex and subject to uncertainty. There can be no assurance that a Regency unitholder will not recognize gain as a result of the distributions deemed
received by such Regency unitholder as a result of a net decrease in the amount of nonrecourse liabilities allocable to such Regency unitholder as a result of the merger. The amount and effect of any gain that may be recognized by an affected
Regency unitholder will depend on the affected Regency unitholders particular situation, including the ability of the affected Regency unitholder to utilize any suspended passive losses. Depending on these factors, any particular affected
Regency unitholder may, or may not, be able to offset all or a portion of any gain recognized. Each Regency unitholder should consult such unitholders own tax advisor in analyzing whether the merger causes such unitholder to recognize deemed
distributions in excess of the tax basis of Regency units surrendered in the merger.
Tax Basis and Holding Period of the ETP Units Received
A Regency unitholders initial tax basis in its Regency units consisted of the amount the Regency unitholder paid for the Regency units
plus the Regency unitholders share of Regencys nonrecourse liabilities. That basis has been and will be increased by the Regency unitholders share of income and by any increases in the Regency unitholders share of nonrecourse
liabilities. That basis has been and will be decreased, but not below zero, by distributions, by the Regency unitholders share of losses, by any decreases in the Regency unitholders share of nonrecourse liabilities and by the Regency
unitholders share of expenditures that are not deductible in computing taxable income and are not required to be capitalized.
A
Regency unitholders initial aggregate tax basis in the ETP units the Regency unitholder will receive in the merger will be equal to the Regency unitholders adjusted tax basis in the Regency units exchanged therefor, decreased by any
basis attributable to the Regency unitholders share of Regencys nonrecourse liabilities and increased by the Regency unitholders share of ETPs nonrecourse liabilities immediately after the merger. In addition, a Regency
unitholders tax basis in the ETP units received will be increased by the amount of any income or gain recognized by the Regency unitholder pursuant to the transactions contemplated by the merger.
As a result of the Assets-Over Form, a Regency unitholders holding period in the ETP units received in the merger will not be determined
by reference to its holding period in the Regency units exchanged therefor. Instead, a Regency unitholders holding period in the ETP units received in the merger that are attributable to Regencys capital assets or assets used in its
business as defined in Section 1231 of the Code will include
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Regencys holding period in those assets. The holding period for ETP units received by a Regency unitholder attributable to other assets of Regency, such as inventory and receivables, will
begin on the day following the merger.
Effect of Termination of Regencys Tax Year at Closing of Merger
Regency uses the year ending December 31 as its taxable year and the accrual method of accounting for U.S. federal income tax purposes. As
a result of the merger, Regencys taxable year will end as of the effective date of the merger, and Regency will be required to file a final U.S. federal income tax return for the taxable year ending upon the effective date of the merger. Each
Regency unitholder will receive a Schedule K-1 from Regency for the taxable year ending upon the effective date of the merger and will be required to include in income its share of income, gain, loss and deduction for this period. In addition, a
Regency unitholder who has a taxable year ending on a date other than December 31 and after the date the merger is effected must include its share of income, gain, loss and deduction in income for its taxable year, with the result that the
Regency unitholder will be required to include in income for its taxable year its share of more than one year of income, gain, loss and deduction from Regency.
Tax Consequences of the Merger to ETP and Its Unitholders
Neither ETP nor its common unitholders will recognize any income or gain, or loss, for federal income tax purposes as a result of the merger
other than any gain recognized as a result of decreases in partnership liabilities pursuant to Section 752 of the Code. Each ETP common unitholders share of ETPs nonrecourse liabilities will be recalculated following the merger. Any
resulting increase or decrease in a ETP common unitholders nonrecourse liabilities will result in a corresponding increase or decrease in such unitholders adjusted tax basis in its ETP common units. A reduction in a common
unitholders share of nonrecourse liabilities would, if such reduction exceeds the unitholders tax basis in his or her ETP common units, under certain circumstances, result in the recognition of taxable gain by a ETP common unitholder.
While there can be no assurance, ETP does not expect any ETP common unitholders to recognize gain in this manner.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
OF ETP COMMON UNIT OWNERSHIP
This section is a summary of the material federal income tax consequences that may be relevant to individual citizens or residents of the U.S.
owning ETP common units received in the merger and, unless otherwise noted in the following discussion, is the opinion of Latham & Watkins LLP insofar as it relates to legal conclusions with respect to matters of federal income tax law.
This section is based upon current provisions of the Code, existing and proposed Treasury Regulations and current administrative rulings and court decisions, all of which are subject to change. Changes in these authorities may cause the tax
consequences to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to ETP include its operating subsidiaries.
The following discussion does not comment on all federal income tax matters affecting ETP or its unitholders and does not describe the
application of the alternative minimum tax that may be applicable to certain unitholders. Moreover, the discussion focuses on unitholders who are individual citizens or residents of the United States and has only limited application to corporations,
estates, entities treated as partnerships for U.S. federal income tax purposes, trusts, nonresident aliens, U.S. expatriates and former citizens or long-term residents of the United States or other unitholders subject to specialized tax treatment,
such as banks, insurance companies and other financial institutions, tax-exempt institutions, foreign persons (including, without limitation, controlled foreign corporations, passive foreign investment companies and non-U.S. persons eligible for the
benefits of an applicable income tax treaty with the United States), IRAs, real estate investment trusts (REITs) or mutual funds, dealers in securities or currencies, traders in securities, U.S. persons whose functional currency is not
the U.S. dollar, persons holding their units as part of a straddle, hedge, conversion transaction or other risk reduction transaction, and persons deemed to sell their units under the constructive sale provisions
of the Code. In addition, the discussion only comments, to a limited extent, on state, local, and foreign tax consequences. Accordingly, ETP encourages each prospective unitholder to consult his own tax advisor in analyzing the state, local and
foreign tax consequences particular to him of the ownership or disposition of common units and potential changes in applicable laws.
No
ruling has been or will be requested from the IRS regarding any matter affecting ETP following the merger or the consequences of owning ETP common units received in the merger. Instead, ETP will rely on opinions of Latham & Watkins LLP.
Unlike a ruling, an opinion of counsel represents only that counsels best legal judgment and does not bind the IRS or the courts. Accordingly, the opinions and statements made herein may not be sustained by a court if contested by the IRS. Any
contest of this sort with the IRS may materially and adversely impact the market for the common units and the prices at which the common units trade. In addition, the costs of any contest with the IRS, principally legal, accounting and related fees,
will be borne indirectly by ETPs unitholders and ETP GP because the costs will reduce the cash available for distribution. Furthermore, the tax treatment of ETP, or of an investment in ETP, may be significantly modified by future legislative
or administrative changes or court decisions. Any modifications may or may not be retroactively applied.
All statements as to matters of
federal income tax law and legal conclusions with respect thereto, but not as to factual matters, contained in this section, unless otherwise noted, are the opinion of Latham & Watkins LLP and are based on the accuracy of the
representations made by ETP.
For the reasons described below, Latham & Watkins LLP has not rendered an opinion with respect to
the following specific federal income tax issues: (i) the treatment of a unitholder whose common units are loaned to a short seller to cover a short sale of common units (please read Tax Consequences of Common Unit
OwnershipTreatment of Short Sales); (ii) whether ETPs monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations (please read Disposition of Common
UnitsAllocations Between Transferors and Transferees); (iii) whether ETPs method for taking into account Section 743 adjustments is sustainable in certain cases (please read Tax Consequences of Common Unit
OwnershipSection 754 Election); and (iv) whether a Regency common unitholder will be able to utilize
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suspended passive losses related to its Regency common units to offset income from ETP (please read Tax Consequences of Common Unit OwnershipLimitations on Deductibility of
Losses and Uniformity of Common Units).
Partnership Status
A partnership is not a taxable entity and incurs no federal income tax liability. Instead, each partner of a partnership is required to take
into account his share of items of income, gain, loss and deduction of the partnership in computing his federal income tax liability, regardless of whether cash distributions are made to him by the partnership. Distributions by a partnership to a
partner are generally not taxable to the partnership or the partner, unless the amount of cash distributed to him is in excess of the partners adjusted basis in his partnership interest.
Section 7704 of the Code provides that publicly traded partnerships will, as a general rule, be taxed as corporations. However, an
exception, referred to as the Qualifying Income Exception, exists with respect to publicly traded partnerships of which 90% or more of the gross income for every taxable year consists of qualifying income. Qualifying income
includes income and gains derived from the exploration, development, mining or production, refining, transportation, storage, processing and marketing of any mineral or natural resource, including coal, timber, crude oil, natural gas and products
thereof. Other types of qualifying income include interest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of income that
otherwise constitutes qualifying income. ETP estimates that less than 5% of its current gross income is not qualifying income; however, this estimate could change from time to time. Based upon and subject to this estimate, the factual
representations made by ETP and ETP GP, and a review of the applicable legal authorities, Latham & Watkins LLP is of the opinion that at least 90% of ETPs current gross income constitutes qualifying income. The portion of ETPs
income that is qualifying income may change from time to time.
No ruling has been or will be sought from the IRS, and the IRS has made no
determination, as to ETPs status or the status of its operating subsidiaries for federal income tax purposes or whether ETPs operations generate qualifying income under Section 7704 of the Code. Instead, ETP will rely on
the opinion of Latham & Watkins LLP on such matters. It is the opinion of Latham & Watkins LLP that, based upon the Code, Treasury Regulations, published revenue rulings and court decisions and the representations described below
that:
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ETP will be classified as a partnership for federal income tax purposes; and |
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Each of ETPs operating subsidiaries will, except as otherwise provided, be disregarded as an entity separate from ETP or will be treated as a partnership for federal income tax purposes. |
In rendering its opinion, Latham & Watkins L.L.P. has relied on factual representations made by ETP and ETP GP. The representations
upon which Latham & Watkins L.L.P. has relied include:
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With the exception of Citrus, LLC and any partnerships or limited liability companies owned directly or indirectly by ETP subsidiaries that are treated as corporations for U.S. federal income tax purposes, neither ETP
nor any of its partnership or limited liability company subsidiaries has elected or will elect to be treated as a corporation for federal income tax purposes; |
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for each taxable year, more than 90% of ETPs gross income has been and will be income that Latham & Watkins LLP has opined or will opine is qualifying income within the meaning of
Section 7704(d) of the Code; and |
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each commodity hedging transaction that ETP treats as resulting in qualifying income has been and will be appropriately identified as a hedging transaction pursuant to applicable Treasury Regulations, and has been and
will be associated with oil, gas or products thereof that are held or to be held by ETP in activities that Latham & Watkins LLP has opined or will opine result in qualifying income. |
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ETP believes that these representations have been true in the past and expect that these
representations will continue to be true in the future.
If ETP fails to meet the Qualifying Income Exception, other than a failure that
is determined by the IRS to be inadvertent and that is cured within a reasonable time after discovery, in which case the IRS may also require ETP to make adjustments with respect to its unitholders or pay other amounts, ETP will be treated as if it
had transferred all of its assets, subject to liabilities, to a newly formed corporation, on the first day of the year in which ETP fails to meet the Qualifying Income Exception, in return for stock in that corporation, and then distributed that
stock to the unitholders in liquidation of their interests in ETP. This deemed contribution and liquidation should be tax-free to unitholders and ETP so long as, at that time, ETP does not have liabilities in excess of the tax basis of its assets.
Thereafter, ETP would be treated as a corporation for federal income tax purposes.
If ETP were treated as an association taxable as a
corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, its items of income, gain, loss and deduction would be reflected only on its tax return rather than being passed through to its
unitholders, and its net income would be taxed to ETP at corporate rates. In addition, any distribution made to a unitholder would be treated as either taxable dividend income, to the extent of ETPs current or accumulated earnings and profits,
or, in the absence of earnings and profits, a nontaxable return of capital, to the extent of the unitholders tax basis in his common units, or taxable capital gain, after the unitholders tax basis in his common units is reduced to zero.
Accordingly, taxation as a corporation would result in a material reduction in a unitholders cash flow and after-tax return and thus would likely result in a substantial reduction of the value of the common units.
The discussion below is based on Latham & Watkins LLPs opinion that ETP will be classified as a partnership for federal
income tax purposes.
Limited Partner Status
Unitholders who have become limited partners of ETP will be treated as partners of ETP for federal income tax purposes. Also, unitholders whose
common units are held in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their common units, will be treated as partners of ETP for federal income tax
purposes.
A beneficial owner of common units whose units have been transferred to a short seller to complete a short sale would appear to
lose his status as a partner with respect to those units for federal income tax purposes. Please read Tax Consequences of Common Unit Ownership Treatment of Short Sales.
Income, gains, losses or deductions would not appear to be reportable by a unitholder who is not a partner for federal income tax purposes,
and any cash distributions received by a unitholder who is not a partner for federal income tax purposes would therefore appear to be fully taxable as ordinary income. These holders are urged to consult their own tax advisors with respect to their
tax consequences of holding common units in ETP. The references to unitholders in the discussion that follows are to persons who are treated as partners in ETP for federal income tax purposes.
Tax Consequences of Common Unit Ownership
Flow-Through of Taxable Income. Subject to the discussion below under Entity Level Collections, ETP will not pay any
federal income tax. Instead, each unitholder will be required to report on his income tax return his share of ETPs income, gains, losses and deductions without regard to whether ETP makes cash distributions to him. Consequently, ETP may
allocate income to a unitholder even if he has not received a cash distribution. Each unitholder will be required to include in income his allocable share of ETPs income, gains, losses and deductions for ETPs taxable year ending with or
within his taxable year. ETPs taxable year ends on December 31.
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Treatment of Distributions. Distributions by ETP to a unitholder generally will not be
taxable to the unitholder for federal income tax purposes, except to the extent the amount of any such cash distribution exceeds his tax basis in his common units immediately before the distribution. ETPs cash distributions in excess of a
unitholders tax basis generally will be considered to be gain from the sale or exchange of the common units, taxable in accordance with the rules described under Disposition of Common Units below. Any reduction in a
unitholders share of ETPs liabilities for which no partner, including ETP GP, bears the economic risk of loss, known as nonrecourse liabilities, will be treated as a distribution by ETP of cash to that unitholder. To the
extent ETPs distributions cause a unitholders at risk amount to be less than zero at the end of any taxable year, he must recapture any losses deducted in previous years. Please read Limitations on Deductibility
of Losses.
A decrease in a unitholders percentage interest in ETP because of ETPs issuance of additional units will
decrease his share of ETPs nonrecourse liabilities, and thus will result in a corresponding deemed distribution of cash. This deemed distribution may constitute a non-pro rata distribution. A non-pro rata distribution of money or property may
result in ordinary income to a unitholder, regardless of his tax basis in his common units, if the distribution reduces the unitholders share of ETPs unrealized receivables, including depreciation recapture, depletion
recapture and/or substantially appreciated inventory items, each as defined in Section 751 of the Code, and collectively, Section 751 Assets. To that extent, the unitholder will be treated as having been distributed his
proportionate share of the Section 751 Assets and then having exchanged those assets with ETP in return for the non-pro rata portion of the actual distribution made to him. This latter deemed exchange will generally result in the
unitholders realization of ordinary income, which will equal the excess of (i) the non-pro rata portion of that distribution over (ii) the unitholders tax basis (generally zero) for the share of Section 751 Assets deemed
relinquished in the exchange.
Basis of Common Units. Please read Material U.S. Federal Income Tax Consequences of the
MergerTax Basis and Holding Period of the ETP Units Received for a discussion of how to determine the initial tax basis of ETP units received in the merger. That basis will be increased by his share of ETPs income and by any
increases in his share of ETPs nonrecourse liabilities. That basis will be decreased, but not below zero, by distributions from ETP, by the unitholders share of ETPs losses, by any decreases in his share of ETPs nonrecourse
liabilities and by his share of ETPs expenditures that are not deductible in computing taxable income and are not required to be capitalized. A unitholder will have no share of ETPs debt that is recourse to ETP GP to the extent of ETP
GPs net value as defined in regulations under Section 752 of the Code, but will have a share, generally based on his share of profits, of ETPs nonrecourse liabilities. Please read Disposition of Common
UnitsRecognition of Gain or Loss.
Limitations on Deductibility of Losses. The deduction by a unitholder of his share
of ETPs losses will be limited to the tax basis in his units and, in the case of an individual unitholder, estate, trust or corporate unitholder (if more than 50% of the value of the corporate unitholders stock is owned directly or
indirectly by or for five or fewer individuals or some tax-exempt organizations) to the amount for which the unitholder is considered to be at risk with respect to ETPs activities, if that is less than his tax basis. A common
unitholder subject to these limitations must recapture losses deducted in previous years to the extent that distributions cause his at-risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured
as a result of these limitations will carry forward and will be allowable as a deduction to the extent that his at-risk amount is subsequently increased, provided such losses do not exceed such common unitholders tax basis in his common units.
Upon the taxable disposition of a common unit, any gain recognized by a unitholder can be offset by losses that were previously suspended by the at-risk limitation but may not be offset by losses suspended by the basis limitation. Any loss
previously suspended by the at-risk limitation in excess of the gain recognized upon the taxable disposition of all of a unitholders common units would no longer be utilizable.
In general, a unitholder will be at risk to the extent of the tax basis of his units, excluding any portion of that basis attributable to his
share of ETPs nonrecourse liabilities, reduced by (i) any portion of that basis
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representing amounts otherwise protected against loss because of a guarantee, stop loss agreement or other similar arrangement and (ii) any amount of money he borrows to acquire or hold his
units, if the lender of those borrowed funds owns an interest in ETP, is related to the unitholder or can look only to the units for repayment. A unitholders at-risk amount will increase or decrease as the tax basis of the unitholders
units increases or decreases, other than tax basis increases or decreases attributable to increases or decreases in his share of ETPs nonrecourse liabilities.
In addition to the basis and at-risk limitations on the deductibility of losses, the passive loss limitations generally provide that
individuals, estates, trusts and some closely-held corporations and personal service corporations can deduct losses from passive activities, which are generally trade or business activities in which the taxpayer does not materially participate, only
to the extent of the taxpayers income from those passive activities. The passive loss limitations are applied separately with respect to each publicly traded partnership. Consequently, any passive losses ETP generates will be available to
offset only ETPs passive income generated in the future and will not be available to offset income from other passive activities or investments, including ETPs investments or a unitholders investments in other publicly traded
partnerships, or a unitholders salary or active business income. Passive losses that are not deductible because they exceed a unitholders share of income ETP generates may be deducted in full when he disposes of his entire investment in
ETP in a fully taxable transaction with an unrelated party. The passive loss limitations are applied after other applicable limitations on deductions, including the at-risk rules and the basis limitation.
A unitholders share of ETPs net income may be offset by any of such unitholders suspended passive losses from ETP, but it
may not be offset by any other current or carryover losses from other passive activities, including those attributable to other publicly traded partnerships.
There is no guidance as to whether suspended passive activity losses of Regency units will be available to offset passive activity income that
is allocated from ETP after the merger to a former Regency unitholder. The IRS may contend that since ETP is not the same partnership as Regency, the passive loss limitation rules would not allow a former Regency unitholder to utilize such losses
until such time as all of the former Regency unitholders ETP units are sold. An ETP unitholder may take the position, however, that ETP should be deemed a continuation of Regency for this purpose such that any suspended ETP losses would be
available to offset ETP taxable income allocated to such unitholder. Because of the lack of guidance with respect to this issue, Latham & Watkins LLP is unable to opine as to whether suspended passive activity losses arising from Regency
activities will be available to offset ETP taxable income allocated to a former Regency unitholder following the merger. If a unitholder has losses with respect to Regency units, it is urged to consult its own tax advisor.
Limitations on Interest Deductions. The deductibility of a non-corporate taxpayers investment interest expense is
generally limited to the amount of that taxpayers net investment income. Investment interest expense includes:
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interest on indebtedness properly allocable to property held for investment; |
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ETPs interest expense attributed to portfolio income; and |
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the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income. |
The computation of a unitholders investment interest expense will take into account interest on any margin account borrowing or other
loan incurred to purchase or carry a common unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest,
directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment or qualified dividend income. The IRS has indicated that the net passive income earned
by a publicly traded partnership will be treated as investment income to its unitholders for purposes of the investment interest deduction limitation. In addition, the unitholders share of ETPs portfolio income will be treated as
investment income.
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Entity-Level Collections. If ETP or ETP GP are required or elect under applicable law to
pay any federal, state, local or foreign income tax on behalf of any unitholder, ETP GP or any former unitholder, ETP is authorized to pay those taxes from ETPs funds. That payment, if made, will be treated as a distribution of cash to the
unitholder on whose behalf the payment was made. If the payment is made on behalf of a person whose identity cannot be determined, ETP is authorized to treat the payment as a distribution to all current unitholders. ETP is authorized to amend its
partnership agreement in the manner necessary to maintain uniformity of intrinsic tax characteristics of units and to adjust later distributions, so that after giving effect to these distributions, the priority and characterization of distributions
otherwise applicable under ETPs partnership agreement is maintained as nearly as is practicable. Payments by ETP as described above could give rise to an overpayment of tax on behalf of an individual unitholder, in which event the unitholder
would be required to file a claim in order to obtain a credit or refund.
Allocation of Income, Gain, Loss and Deduction. In
general, if ETP has a net profit, its items of income, gain, loss and deduction will be allocated amongst its unitholders and ETP GP in accordance with their percentage interests in ETP. At any time that incentive distributions are made to ETP GP,
gross income will be allocated to the recipients to the extent of such distributions. If ETP has a net loss, its items of income, gain, loss and deduction will be allocated first among its unitholders in accordance with their percentage interests in
ETP to the extent of their positive capital accounts, and thereafter to ETP GP.
Specified items of ETPs income, gain, loss and
deduction will be allocated under Section 704(c) of the Code to account for any difference between the tax basis and fair market value of any property contributed to ETP that exists at the time of such contribution, referred to in this
discussion as Contributed Property. The effect of these allocations, referred to as Section 704(c) Allocations, to a unitholder purchasing common units from ETP in an offering will be essentially the same as if the tax bases
of ETPs assets were equal to their fair market value at the time of such offering. Former Regency unitholders that receive ETP units in the merger will receive the Section 704(c) Allocations that otherwise would have been allocated to
Regency pursuant to Section 704(c) of the Code had Regency simply contributed its assets to ETP in exchange for units. Under these rules for example, following the merger in the event that ETP divests itself of certain assets formerly owned by
Regency (including through a distribution of such assets), all or a portion of any gain recognized as a result of a divestiture of such assets may be required to be allocated to the former Regency unitholders. In addition, a former Regency
unitholder may also be required to recognize its share of Regencys remaining built-in gain upon certain distributions by ETP to that unitholder of other ETP property (other than money) within seven years following the merger. No
special distributions will be made to the former Regency unitholders with respect to any tax liability from such transactions.
In the
event ETP issues additional common units or engages in certain other transactions in the future, ETP will make Reverse Section 704(c) Allocations, similar to the Section 704(c) Allocations described above, to ETP GP and all
common unitholders immediately prior to such issuance or other transactions to account for the difference between the book basis for purposes of maintaining capital accounts and the fair market value of all property held by ETP at the
time of such issuance or future transaction. In addition, items of recapture income will be allocated to the extent possible to the unitholder who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to
minimize the recognition of ordinary income by some unitholders. Finally, although ETP does not expect that its operations will result in the creation of negative capital accounts, if negative capital accounts nevertheless result, items of
ETPs income and gain will be allocated in an amount and manner sufficient to eliminate the negative balance as quickly as possible.
An allocation of items of ETPs income, gain, loss or deduction, other than an allocation required by the Code to eliminate the
difference between a partners book capital account, credited with the fair market value of Contributed Property, and tax capital account, credited with the tax basis of Contributed Property, referred to in this
discussion as the Book-Tax Disparity, will generally be given effect for federal income tax purposes in determining a partners share of an item of income, gain, loss or deduction only if the allocation has
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substantial economic effect. In any other case, a partners share of an item will be determined on the basis of his interest in ETP, which will be determined by taking into
account all the facts and circumstances, including:
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his relative contributions to ETP; |
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the interests of all the partners in profits and losses; |
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the interest of all the partners in cash flow; and |
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the rights of all partners to distributions of capital upon liquidation. |
Latham &
Watkins LLP is of the opinion that, with the exception of the issues described in Section 754 Election, Uniformity of Units and Disposition of Common UnitsAllocations Between Transferors and
Transferees, allocations under ETPs partnership agreement will be given effect for federal income tax purposes in determining a partners share of an item of income, gain, loss or deduction.
Treatment of Short Sales. A unitholder whose units are loaned to a short seller to cover a short sale of units may be
considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition. As a result, during this
period:
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any of ETPs income, gain, deduction or loss with respect to those common units would not be reportable by the unitholder; |
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any cash distributions received by the unitholder as to those units would be fully taxable; and |
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while not entirely free from doubt, all of these distributions would appear to be ordinary income. |
Because there is no direct or indirect controlling authority on the issue relating to partnership interests, Latham & Watkins LLP has
not rendered an opinion regarding the tax treatment of a unitholder whose common units are loaned to a short seller to cover a short sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain
recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing and loaning their units. The IRS
previously has announced that it is studying issues relating to the tax treatment of short sales of partnership interests. Please also read Disposition of Common UnitsRecognition of Gain or Loss.
Tax Rates. Currently, the highest marginal U.S. federal income tax rate applicable to ordinary income of individuals is 39.6% and the
highest marginal U.S. federal income tax rate applicable to long-term capital gains (generally, capital gains on certain assets held for more than twelve months) of individuals is 20%. Such rates are subject to change by new legislation at any time.
In addition, a 3.8% Medicare tax, or NIIT, on certain net investment income earned by individuals, estates and trusts currently applies.
For these purposes, net investment income generally includes a unitholders allocable share of ETPs income and gain realized by a unitholder from a sale of units. In the case of an individual, the tax will be imposed on the lesser of
(i) the unitholders net investment income and (ii) the amount by which the unitholders modified adjusted gross income exceeds $250,000 (if the unitholder is married and filing jointly or a surviving spouse), $125,000 (if the
unitholder is married and filing separately) or $200,000 (in any other case). In the case of an estate or trust, the tax will be imposed on the lesser of (i) undistributed net investment income and (ii) the excess adjusted gross income
over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins. The U.S. Department of the Treasury and the IRS have issued guidance in the form of proposed and final Treasury Regulations regarding the NIIT.
Prospective unitholders are urged to consult with their tax advisors as to the impact of the NIIT on an investment in ETPs common units.
Section 754 Election. ETP has made the election permitted by Section 754 of the Code. That election is irrevocable without
the consent of the IRS, unless there is a constructive termination of the partnership. Please
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read Disposition of Common UnitsConstructive Termination. The election generally permits ETP to adjust a common unit purchasers tax basis in its assets, which is
referred to as the inside basis, under Section 743(b) of the Code to reflect his purchase price. The Section 743(b) adjustment does not apply to a person who purchases common units directly from ETP, and it belongs only to the purchaser
and not to other unitholders. For purposes of this discussion, a unitholders inside basis in ETPs assets will be considered to have two components: (i) his share of ETPs tax basis in its assets, which is referred to as the
common basis, and (ii) his Section 743(b) adjustment to that basis.
ETP has adopted the remedial allocation method as to all of
its properties. Where the remedial allocation method is adopted, the Treasury Regulations under Section 743 of the Code require a portion of the Section 743(b) adjustment that is attributable to recovery property subject to depreciation
under Section 168 of the Code whose book basis is in excess of its tax basis to be depreciated over the remaining cost recovery period for the propertys unamortized Book-Tax Disparity. Under Treasury Regulation
Section 1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property subject to depreciation under Section 167 of the Code, rather than cost recovery deductions under Section 168, is generally required to be depreciated
using either the straight-line method or the 150% declining-balance method. Under ETPs partnership agreement, ETP GP is authorized to take a position to preserve the uniformity of units even if that position is not consistent with these and
any other Treasury Regulations. Please read Uniformity of Common Units.
ETP depreciates the portion of a
Section 743(b) adjustment attributable to unrealized appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the propertys unamortized Book-Tax Disparity, or treat that portion as non-amortizable to the extent attributable to property which is not amortizable. This method is consistent with the methods
employed by other publicly traded partnerships but is arguably inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of ETPs assets. To the extent this
Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, ETP will apply the rules described in the Treasury Regulations and legislative history. If ETP determines that this position
cannot reasonably be taken, ETP may take a depreciation or amortization position under which all purchasers acquiring common units in the same month would receive depreciation or amortization, whether attributable to common basis or a
Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in ETPs assets. This kind of aggregate approach may result in lower annual depreciation or amortization deductions than would
otherwise be allowable to some unitholders. Please read Uniformity of Common Units. A unitholders tax basis for his common units is reduced by his share of ETPs deductions (whether or not such deductions were claimed on
an individuals income tax return) so that any position ETP takes that understates deductions will overstate the unitholders basis in his common units, which may cause the unitholder to understate gain or overstate loss on any sale of
such units. Please read Disposition of Common UnitsRecognition of Gain or Loss. Latham & Watkins LLP is unable to opine as to whether ETPs method for taking into account Section 743 adjustments is
sustainable for property subject to depreciation under Section 167 of the Code or if ETP uses an aggregate approach as described above, as there is no direct or indirect controlling authority addressing the validity of these positions. The IRS
may challenge ETPs position with respect to depreciating or amortizing the Section 743(b) adjustment ETP takes to preserve the uniformity of the units. If such a challenge were sustained, the gain from the sale of units might be increased
without the benefit of additional deductions. Please read Uniformity of Common Units.
A Section 754 election is
advantageous if the transferees tax basis in his common units is higher than the units share of the aggregate tax basis of ETPs assets immediately prior to the transfer. Conversely, a Section 754 election is disadvantageous if
the transferees tax basis in his common units is lower than those units share of the aggregate tax basis of ETPs assets immediately prior to the transfer. Thus, the fair market value of the units may be affected either favorably or
unfavorably by the election. A basis adjustment is required regardless of whether a Section 754 election is made in the case of a transfer of an interest in ETP if ETP has a
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substantial built-in loss immediately after the transfer, or if ETP distributes property and has a substantial basis reduction. Generally a built-in loss or a basis reduction is substantial if it
exceeds $250,000.
The calculations involved in the Section 754 election are complex and will be made on the basis of assumptions as
to the value of ETPs assets and other matters. For example, the allocation of the Section 743(b) adjustment among ETPs assets must be made in accordance with the Code. The IRS could seek to reallocate some or all of any
Section 743(b) adjustment allocated by ETP to its tangible assets to goodwill instead. Goodwill, as an intangible asset, is generally non-amortizable or amortizable over a longer period of time or under a less accelerated method than ETPs
tangible assets. ETP cannot assure you that the determinations it makes will not be successfully challenged by the IRS and that the deductions resulting from them will not be reduced or disallowed altogether. Should the IRS require a different basis
adjustment to be made, and should, in ETPs opinion, the expense of compliance exceed the benefit of the election, ETP may seek permission from the IRS to revoke its Section 754 election. If permission is granted, a subsequent purchaser of
common units may be allocated more income than he would have been allocated had the election not been revoked.
Tax Treatment of Operations
Accounting Method and Taxable Year. ETP uses the year ending December 31 as its taxable year and the accrual method of accounting
for federal income tax purposes. Each unitholder will be required to include in income his share of ETPs income, gain, loss and deduction for ETPs taxable year ending within or with his taxable year. In addition, a unitholder who has a
taxable year ending on a date other than December 31 and who disposes of all of his units following the close of ETPs taxable year but before the close of his taxable year must include his share of ETPs income, gain, loss and
deduction in income for his taxable year, with the result that he will be required to include in his income for his taxable year his share of more than twelve months of ETPs income, gain, loss and deduction. Please read
Disposition of Common UnitsAllocations Between Transferors and Transferees.
Tax Basis, Depreciation and Amortization.
The tax basis of ETPs assets will be used for purposes of computing depreciation and cost recovery deductions and, ultimately, gain or loss on the disposition of these assets. The federal income tax burden associated with the difference
between the fair market value of ETPs assets and their tax basis immediately prior to an offering of new units will be borne by ETPs unitholders holding interests in ETP prior to such offering. Please read Tax Consequences of
Common Unit OwnershipAllocation of Income, Gain, Loss and Deduction.
To the extent allowable, ETP may elect to use the
depreciation and cost recovery methods, including bonus depreciation to the extent available, that will result in the largest deductions being taken in the early years after assets subject to these allowances are placed in service. Please read
Uniformity of Units. Property ETP subsequently acquires or constructs may be depreciated using accelerated methods permitted by the Code.
If ETP disposes of depreciable or depletable property by sale, foreclosure or otherwise, all or a portion of any gain, determined by reference
to the amount of depreciation and depletion previously deducted and the nature of the property, may be subject to the recapture rules and taxed as ordinary income rather than capital gain. Similarly, a unitholder who has taken cost recovery or
depreciation deductions with respect to property ETP owns will likely be required to recapture some or all of those deductions as ordinary income upon a sale of his interest in ETP. Please read Tax Consequences of Common Unit
OwnershipAllocation of Income, Gain, Loss and Deduction and Disposition of Common Units Recognition of Gain or Loss.
The costs ETP incurs in selling its units (called syndication expenses) must be capitalized and cannot be deducted currently,
ratably or upon its termination. There are uncertainties regarding the classification of costs as organization expenses, which may be amortized by ETP, and as syndication expenses, which may not be amortized by ETP. The underwriting discounts and
commissions ETP incurs will be treated as syndication expenses.
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Coal Income. Section 631 of the Code provides special rules by which gains or losses
on the sale of coal may be treated, in whole or in part, as gains or losses from the sale of property used in a trade or business under Section 1231 of the Code. Specifically, if the owner of coal held for more than one year disposes of that
coal under a contract by virtue of which the owner retains an economic interest in the coal under Section 631(c) of the Code, the gain or loss realized will be treated under Section 1231 of the Code as gain or loss from property used in a
trade or business. Section 1231 gains and losses may be treated as capital gains and losses. Please read Sales of Coal Reserves or Timberland. In computing such gain or loss, the amount realized is reduced by the adjusted
depletion basis in the coal, determined as described in Coal Depletion.
For purposes of Section 631(c), the coal
generally is deemed to be disposed of on the day on which the coal is mined. Further, Treasury Regulations promulgated under Section 631 provide that advance royalty payments may also be treated as proceeds from sales of coal to which
Section 631 applies and, therefore, such payment may be treated as capital gain under Section 1231. However, if the right to mine the related coal expires or terminates under the contract that provides for the payment of advance royalty
payments or such right is abandoned before the coal has been mined, ETP may, pursuant to the Treasury regulations, file an amended return that reflects the payments attributable to unmined coal as ordinary income and not as received from the sale of
coal under Section 631.
ETPs royalties from coal leases generally will be treated as proceeds from sales of coal to which
Section 631 applies. Accordingly, the difference between the royalties paid to ETP by the lessees and the adjusted depletion basis in the extracted coal generally will be treated as gain from the sale of property used in a trade or business,
which may be treated as capital gain under Section 1231. Please read Sales of Coal Reserves or Timberland. ETPs royalties that do not qualify under Section 631(c) generally will be taxable as ordinary income in the
year of sale.
Coal Depletion. In general, ETP is entitled to depletion deductions with respect to coal mined from the underlying
mineral property. Subject to the limitations on the deductibility of losses discussed above, ETP generally is entitled to the greater of cost depletion limited to the basis of the property or percentage depletion. The percentage depletion rate for
coal is 10%. If Section 631(c) applies to the disposition of the coal, however, ETP is not eligible for percentage depletion. Please read Coal Income.
Depletion deductions ETP claims generally will reduce the tax basis of the underlying mineral property. Depletion deductions can, however,
exceed the total tax basis of the mineral property. The excess of ETPs percentage depletion deductions over the adjusted tax basis of the property at the end of the taxable year is subject to tax preference treatment in computing the
alternative minimum tax, the consequences of which are not addressed herein. In addition, a corporate unitholders allocable share of the amount allowable as a percentage depletion deduction for any property will be reduced by 20% of the
excess, if any, of that partners allocable share of the amount of the percentage depletion deductions for the taxable year over the adjusted tax basis of the mineral property as of the close of the taxable year.
Oil and Natural Gas Depletion. Subject to the limitations on deductibility of losses discussed above (please read Tax
Consequences of Unit OwnershipLimitations on Deductibility of Losses), unitholders may be entitled to depletion deductions with respect to ETPs oil and natural gas royalty interests. The deduction is equal to the greater of cost
depletion limited to the basis of the property or (if otherwise allowable) percentage depletion.
Percentage depletion is generally
available with respect to unitholders who qualify under the independent producer exemption contained in Section 613A(c) of the Code. For this purpose, an independent producer is a person not directly or indirectly involved in the retail sale of
oil, natural gas or derivative products or the operation of a major refinery. Percentage depletion is calculated as an amount generally equal to 15% of the unitholders gross income from the oil and gas property for the taxable year. A
unitholder generally may deduct percentage depletion only to the extent the unitholders average daily production of domestic crude oil, or the natural gas equivalent, does not exceed 1,000 barrels. A limitation equal to the lower of 65% of
taxable income or 100% of taxable income from the property further limits the deduction for the taxable year.
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All or a portion of any gain recognized by a unitholder as a result of either the disposition by
ETP of some or all of its oil and natural gas interests or the disposition by the unitholder of some or all of his units may be taxed as ordinary income to the extent of recapture of oil and gas depletion.
Although the Code requires each unitholder to compute his own depletion allowance and maintain records of his share of the adjusted tax basis
of the underlying property for depletion and other purposes, ETP intends to furnish each of its unitholders with information relating to this computation for federal income tax purposes. Each unitholder, however, remains responsible for calculating
his own depletion allowance and maintaining records of his share of the adjusted tax basis of the underlying property for depletion and other purposes.
Timber Income. Section 631 of the Code provides special rules by which gains or losses on the sale of timber may be treated, in
whole or in part, as gains or losses from the sale of property used in a trade or business under Section 1231 of the Code. Specifically, if the owner of timber (including a holder of a contract right to cut timber) held for more than one year
disposes of that timber under any contract by virtue of which the owner retains an economic interest in the timber under Section 631(b) of the Code, the gain or loss realized will be treated under Section 1231 of the Code as gain or loss
from property used in a trade or business. Section 1231 gains and losses may be treated as capital gains and losses. Please read Sales of Coal Reserves or Timberland. In computing such gain or loss, the amount realized is
reduced by the adjusted basis in the timber, determined as described in Timber Depletion. For purposes of Section 631(b), the timber generally is deemed to be disposed of on the day on which the timber is cut (which is
generally deemed to be the date when, in the ordinary course of business, the quantity of the timber cut is first definitely determined).
Proceeds ETP receives from standing timber sales generally will be treated as sales of timber to which Section 631 applies. Accordingly,
the difference between those proceeds and the adjusted basis in the timber sold generally will be treated as gain from the sale of property used in a trade or business, which may be treated as capital gain under Section 1231. Please read
Sales of Coal Reserves and Timberland. Gains from sale of timber by ETP that do not qualify under Section 631 generally will be taxable as ordinary income in the year of sale.
Timber Depletion. Timber is subject to cost depletion and is not subject to accelerated cost recovery, depreciation or percentage
depletion. Timber depletion is determined with respect to each separate timber account (containing timber located in a timber block) and is equal to the product obtained by multiplying the units of timber cut by a fraction, the numerator
of which is the aggregate adjusted basis of all timber included in such account and the denominator of which is the total number of timber units in such timber account. The depletion allowance so calculated for the timber cut in a particular period
represents the adjusted tax basis of such cut timber for purposes of determining gain or loss on its disposition. The tax basis of the remaining timber in each timber account is reduced by the depletion allowance for cut timber from such account.
Sales of Coal Reserves or Timberland. If any coal reserves or timberland are sold or otherwise disposed of in a taxable
transaction, ETP will recognize gain or loss measured by the difference between the amount realized (including the amount of any indebtedness assumed by the purchaser upon such disposition or to which such property is subject) and the adjusted tax
basis of the property sold. Generally, the character of any gain or loss recognized upon that disposition will depend upon whether ETPs coal reserves or the particular tract of timberland sold are held by it:
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for sale to customers in the ordinary course of business (i.e., ETP is a dealer with respect to that property); |
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for use in a trade or business within the meaning of Section 1231 of the Code; or |
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as a capital asset within the meaning of Section 1221 of the Code. |
In determining dealer
status with respect to coal reserves, timberland and other types of real estate, the courts have identified a number of factors for distinguishing between a particular property held for sale in the
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ordinary course of business and one held for investment. Any determination must be based on all the facts and circumstances surrounding the particular property and sale in question.
ETP intends to hold its coal reserves and timberland for the purposes of generating cash flow from coal royalties and periodic harvesting and
sale of timber and achieving long-term capital appreciation. Although ETP may consider strategic sales of coal reserves and timberland consistent with achieving long-term capital appreciation, ETP does not anticipate frequent sales, nor significant
marketing, improvement or subdivision activity in connection with any strategic sales. Thus, ETP GP does not believe that ETP will be viewed as a dealer. In light of the factual nature of this question, however, there is no assurance that ETPs
purposes for holding its properties will not change and that its future activities will not cause it to be a dealer in coal reserves or timberland.
If ETP is not a dealer with respect to its coal reserves or its timberland and ETP has held the disposed property for more than a one-year
period primarily for use in its trade or business, the character of any gain or loss realized from a disposition of the property will be determined under Section 1231 of the Code. If ETP has not held the property for more than one year at the
time of the sale, gain or loss from the sale will be taxable as ordinary income.
A unitholders distributive share of any
Section 1231 gain or loss generated by ETP will be aggregated with any other gains and losses realized by that unitholder from the disposition of property used in the trade or business, as defined in Section 1231(b) of the Code, and from
the involuntary conversion of such properties and of capital assets held in connection with a trade or business or a transaction entered into for profit for the requisite holding period. If a net gain results, all such gains and losses will be
long-term capital gains and losses; if a net loss results, all such gains and losses will be ordinary income and losses. Net Section 1231 gains will be treated as ordinary income to the extent of prior net Section 1231 losses of the
taxpayer or predecessor taxpayer for the five most recent prior taxable years to the extent such losses have not previously been offset against Section 1231 gains. Losses are deemed recaptured in the chronological order in which they arose.
If ETP is not a dealer with respect to its coal reserves or a particular tract of timberland, and that property is not used in a trade or
business, the property will be a capital asset within the meaning of Section 1221 of the Code. Gain or loss recognized from the disposition of that property will be taxable as capital gain or loss, and the character of such capital
gain or loss as long-term or short-term will be based upon ETPs holding period in such property at the time of its sale. The requisite holding period for long-term capital gain is more than one year.
Upon a disposition of coal reserves or timberland, a portion of the gain, if any, equal to the lesser of (i) the depletion deductions
that reduced the tax basis of the disposed mineral property plus deductible development and mining exploration expenses, or (ii) the amount of gain recognized on the disposition, will be treated as ordinary income to us.
Valuation and Tax Basis of ETPs Properties. The federal income tax consequences of the ownership and disposition of common units
will depend in part on ETPs estimates of the relative fair market values, and the initial tax bases, of its assets. Although ETP may from time to time consult with professional appraisers regarding valuation matters, ETP will make many of the
relative fair market value estimates itself. These estimates and determinations of basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value or determination of basis are later found to be
incorrect, the character and amount of items of income, gain, loss or deductions previously reported by unitholders might change, and unitholders might be required to adjust their tax liability for prior years and incur interest and penalties with
respect to those adjustments.
Disposition of Common Units
Recognition of Gain or Loss. Gain or loss will be recognized on a sale of common units equal to the difference between the amount
realized and the unitholders tax basis for the units sold. A unitholders amount
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realized will be measured by the sum of the cash or the fair market value of other property received by him plus his share of ETPs nonrecourse liabilities. Because the amount realized
includes a unitholders share of ETPs nonrecourse liabilities, the gain recognized on the sale of units could result in a tax liability in excess of any cash received from the sale.
Prior distributions from ETP that in the aggregate were in excess of cumulative net taxable income for a common unit and, therefore, decreased
a unitholders tax basis in that common unit will, in effect, become taxable income to the extent the common unit is sold at a price greater than the unitholders tax basis in that common unit, even if the price received is less than his
original cost.
Except as noted below, gain or loss recognized by a unitholder, other than a dealer in units, on the sale or
exchange of a unit will generally be taxable as capital gain or loss. Capital gain recognized by an individual on the sale of common units held for more than twelve months will generally be taxed at the U.S. federal income tax rate applicable to
long-term capital gains. However, a portion of this gain or loss, which will likely be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise
to depreciation recapture, depletion recapture or other unrealized receivables or to inventory items ETP owns. The term unrealized receivables includes potential recapture items, including depreciation and
depletion recapture. Ordinary income attributable to unrealized receivables and inventory items may exceed net taxable gain realized upon the sale of a common unit and may be recognized even if there is a net taxable loss realized on the sale of a
unit. Thus, a unitholder may recognize both ordinary income and a capital loss upon a sale of units. Capital losses may offset capital gains and no more than $3,000 of ordinary income, in the case of individuals, and may only be used to offset
capital gains in the case of corporations. Both ordinary income and capital gain recognized on a sale of units may be subject to the NIIT in certain circumstances. Please read Tax Consequences of Common Unit OwnershipTax
Rates.
The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those
interests and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of that tax basis must be allocated to the interests sold using an equitable
apportionment method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partners tax basis in his entire interest in the partnership as the value of the interest
sold bears to the value of the partners entire interest in the partnership. Treasury Regulations under Section 1223 of the Code allow a selling unitholder who can identify common units transferred with an ascertainable holding period to
elect to use the actual holding period of the common units transferred. Thus, according to the ruling discussed above, a unitholder will be unable to select high or low basis common units to sell as would be the case with corporate stock, but,
according to the Treasury Regulations, may designate specific common units sold for purposes of determining the holding period of common units transferred. A unitholder electing to use the actual holding period of common units transferred must
consistently use that identification method for all subsequent sales or exchanges of common units. A unitholder considering the purchase of additional common units or a sale of common units purchased in separate transactions is urged to consult his
tax advisor as to the possible consequences of this ruling and application of the Treasury Regulations.
Specific provisions of the Code
affect the taxation of some financial products and securities, including partnership interests, by treating a taxpayer as having sold an appreciated partnership interest, one in which gain would be recognized if it were sold, assigned or
terminated at its fair market value, if the taxpayer or related persons enter(s) into:
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an offsetting notional principal contract; or |
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a futures or forward contract; |
in each case, with respect to the partnership interest or substantially
identical property.
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Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional
principal contract or a futures or forward contract with respect to the partnership interest, the taxpayer will be treated as having sold that position if the taxpayer or a related person then acquires the partnership interest or substantially
identical property. The Secretary of the Treasury is also authorized to issue regulations that treat a taxpayer that enters into transactions or positions that have substantially the same effect as the preceding transactions as having constructively
sold the financial position.
Allocations Between Transferors and Transferees. In general, ETPs taxable income and losses
will be determined annually, will be prorated on a monthly basis and will be subsequently apportioned among the unitholders in proportion to the number of units owned by each of them as of the opening of the applicable exchange on the first business
day of the month, which is referred to as the Allocation Date. However, gain or loss realized on a sale or other disposition of ETPs assets other than in the ordinary course of business will be allocated among the unitholders on
the Allocation Date in the month in which that gain or loss is recognized. As a result, a unitholder transferring units may be allocated income, gain, loss and deduction realized after the date of transfer.
Although simplifying conventions are contemplated by the Code and most publicly traded partnerships use similar simplifying conventions, the
use of this method may not be permitted under existing Treasury Regulations as there is no direct or indirect controlling authority on this issue. The U.S. Department of the Treasury and the IRS have issued proposed Treasury Regulations that provide
a safe harbor pursuant to which a publicly traded partnership may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, although such tax items must be prorated on a daily basis. Existing
publicly traded partnerships are entitled to rely on these proposed Treasury Regulations; however, they are not binding on the IRS and are subject to change until final Treasury Regulations are issued. Accordingly, Latham & Watkins LLP is
unable to opine on the validity of this method of allocating income and deductions between transferor and transferee unitholders because the issue has not been finally resolved by the IRS or the courts. If this method is not allowed under the
Treasury Regulations or only applies to transfers of less than all of the unitholders interest, ETPs taxable income or losses might be reallocated among the unitholders. ETP is authorized to revise its method of allocation between
transferor and transferee unitholders, as well as unitholders whose interests vary during a taxable year, to conform to a method permitted under future Treasury Regulations.
A unitholder who owns units at any time during a quarter and who disposes of them prior to the record date set for a cash distribution for
that quarter will be allocated items of ETPs income, gain, loss and deductions attributable to that quarter but will not be entitled to receive that cash distribution.
Notification Requirements. A unitholder who sells any of his common units generally is required to notify ETP in writing of that sale
within 30 days after the sale (or, if earlier, January 15 of the year following the sale). A purchaser of units who purchases units from another unitholder is also generally required to notify ETP in writing of that purchase within 30 days
after the purchase. Upon receiving such notifications, ETP is required to notify the IRS of that transaction and to furnish specified information to the transferor and transferee. Failure to notify ETP of a purchase may, in some cases, lead to the
imposition of penalties. However, these reporting requirements do not apply to a sale by an individual who is a citizen of the United States and who effects the sale or exchange through a broker who will satisfy such requirements.
Constructive Termination. ETP will be considered to have technically terminated for federal income tax purposes if there is a sale or
exchange of 50 percent or more of the total interests in its capital and profits within a twelve-month period. For purposes of determining whether the 50 percent threshold has been met, multiple sales of the same unit will be counted only once.
While ETP would continue its existence as a Delaware limited partnership, ETPs technical termination would, among other things, result in the closing of its taxable year for all unitholders, which would result in ETP filing two tax returns
(and our unitholders could receive two Schedules K-1 if relief was not available, as described below) for one fiscal year. ETPs termination could also result in a significant deferral of depreciation deductions allowable in computing its
taxable income. In the case
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of a unitholder reporting on a taxable year other than a calendar year, the closing of ETPs taxable year may also result in more than twelve months of ETPs taxable income or loss
being includable in his taxable income for the year of termination. ETPs termination currently would not affect its classification as a partnership for federal income tax purposes, but instead, it would be treated as a new partnership for
federal income tax purposes. If treated as a new partnership, ETP must make new tax elections, including a new election under Section 754 of the Code, and could be subject to penalties if it is unable to determine that a technical termination
occurred. The IRS has announced a relief procedure whereby if a publicly traded partnership that has technically terminated requests and the IRS grants special relief, among other things, the partnership may be permitted to provide only a single
Schedule K-1 to unitholders for the tax years in which the termination occurs.
Uniformity of Common Units
Because ETP cannot match transferors and transferees of common units, ETP must maintain uniformity of the economic and tax characteristics of
the common units to a purchaser of these units. In the absence of uniformity, ETP may be unable to completely comply with a number of federal income tax requirements, both statutory and regulatory. A lack of uniformity can result from a literal
application of Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity could have a negative impact on the value of the common units. Please read Tax Consequences of Common Unit OwnershipSection 754 Election.
ETP takes into account the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of
Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the propertys unamortized Book-Tax
Disparity, or treating that portion as non-amortizable to the extent attributable to property the common basis of which is not amortizable, consistent with the Treasury Regulations under Section 743 of the Code, even though that position may be
inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of ETPs assets. Please read Tax Consequences of Common Unit OwnershipSection 754
Election. To the extent that the Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, ETP will apply the rules described in the Treasury Regulations and legislative history.
If ETP determines that this position cannot reasonably be taken, ETP may adopt a depreciation and amortization position under which all purchasers acquiring common units in the same month would receive depreciation and amortization deductions,
whether attributable to a common basis or Section 743(b) adjustment, based upon the same applicable methods and lives as if they had purchased a direct interest in ETPs property. If this position is adopted, it may result in lower annual
depreciation and amortization deductions than would otherwise be allowable to some unitholders and risk the loss of depreciation and amortization deductions not taken in the year that these deductions are otherwise allowable. This position will not
be adopted if ETP determines that the loss of depreciation and amortization deductions will have a material adverse effect on the unitholders. If ETP chooses not to utilize this aggregate method, ETP may use any other reasonable depreciation and
amortization method to preserve the uniformity of the intrinsic tax characteristics of any units that would not have a material adverse effect on the unitholders. In either case, and as stated above under Tax Consequences of Common Unit
OwnershipSection 754 Election, Latham & Watkins LLP has not rendered an opinion with respect to these methods. Moreover, the IRS may challenge any method of depreciating the Section 743(b) adjustment described in this
paragraph. If this challenge were sustained, the uniformity of common units might be affected, and the gain from the sale of units might be increased without the benefit of additional deductions. Please read Disposition of Common
UnitsRecognition of Gain or Loss.
Tax-Exempt Organizations and Other Investors
Ownership of common units by employee benefit plans, other tax-exempt organizations, non-resident aliens, foreign corporations and other
non-U.S. persons raises issues unique to those investors and, as described below to a limited extent, may have substantially adverse tax consequences to them. If you are a tax-exempt entity or a non-U.S. person, you should consult your tax advisor
before investing in ETPs common units.
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Employee benefit plans and most other organizations exempt from federal income tax, including
individual retirement accounts and other retirement plans, are subject to federal income tax on unrelated business taxable income. Virtually all of ETPs income allocated to a unitholder that is a tax-exempt organization will be unrelated
business taxable income and will be taxable to it.
Non-resident aliens and foreign corporations, trusts or estates that own common units
will be considered to be engaged in business in the United States because of the ownership of units. As a consequence, they will be required to file federal tax returns to report their share of ETPs income, gain, loss or deduction and pay
federal income tax at regular rates on their share of ETPs net income or gain.
Moreover, under rules applicable to publicly traded
partnerships, ETPs quarterly distribution to foreign unitholders will be subject to withholding, at the highest applicable effective tax rate. Each foreign unitholder must obtain a taxpayer identification number from the IRS and submit that
number to ETPs transfer agent on a Form W-8BEN, W-8BEN-E or applicable substitute form in order to obtain credit for these withholding taxes. A change in applicable law may require ETP to change these procedures.
In addition, because a foreign corporation that owns common units will be treated as engaged in a U.S. trade or business, that corporation may
be subject to the U.S. branch profits tax at a rate of 30%, in addition to regular federal income tax, on its share of ETPs earnings and profits, as adjusted for changes in the foreign corporations U.S. net equity, that is
effectively connected with the conduct of a U.S. trade or business. That tax may be reduced or eliminated by an income tax treaty between the United States and the country in which the foreign corporate unitholder is a qualified
resident. In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Code.
A foreign unitholder who sells or otherwise disposes of a common unit will be subject to federal income tax on gain realized from the sale or
disposition of that unit to the extent the gain is effectively connected with a U.S. trade or business of the foreign unitholder. Under a ruling published by the IRS interpreting the scope of effectively connected income, a foreign
unitholder would be considered to be engaged in a trade or business in the United States by virtue of the U.S. activities of the partnership, and part or all of that unitholders gain would be effectively connected with that unitholders
indirect U.S. trade or business. Moreover, under the Foreign Investment in Real Property Tax Act, a foreign common unitholder generally will be subject to federal income tax upon the sale or disposition of a common unit if (i) he owned
(directly or constructively applying certain attribution rules) more than 5% of ETPs common units at any time during the five-year period ending on the date of such disposition and (ii) 50% or more of the fair market value of all of
ETPs assets consisted of U.S. real property interests at any time during the shorter of the period during which such unitholder held the common units or the 5-year period ending on the date of disposition. Currently, more than 50% of
ETPs assets consist of U.S. real property interests and ETP does not expect that to change in the foreseeable future. Therefore, foreign unitholders may be subject to federal income tax on gain from the sale or disposition of their units.
Recent changes in law may affect certain foreign unitholders. Please read Administrative MattersAdditional Withholding Requirements.
Administrative Matters
Information
Returns and Audit Procedures. ETP intends to furnish to each unitholder, within 90 days after the close of each calendar year, specific tax information, including a Schedule K-1, which describes his share of ETPs income, gain, loss and
deduction for ETPs preceding taxable year. In preparing this information, which will not be reviewed by counsel, ETP will take various accounting and reporting positions, some of which have been mentioned earlier, to determine each
unitholders share of income, gain, loss and deduction. ETP cannot assure you that those positions will yield a result that conforms to the requirements of the Code, Treasury Regulations or administrative interpretations of the IRS. Neither ETP
nor Latham & Watkins LLP can assure prospective unitholders that the IRS will not successfully contend in court that those positions are impermissible. Any challenge by the IRS could negatively affect the value of the common units.
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The IRS may audit ETPs federal income tax information returns. Adjustments resulting from
an IRS audit may require each unitholder to adjust a prior years tax liability, and possibly may result in an audit of his return. Any audit of a unitholders return could result in adjustments not related to ETPs returns as well as
those related to ETPs returns.
Partnerships generally are treated as separate entities for purposes of federal tax audits, judicial
review of administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and deduction are determined in a partnership proceeding rather than in separate proceedings with the
partners. The Code requires that one partner be designated as the Tax Matters Partner for these purposes. ETPs partnership agreement names ETP GP as ETPs Tax Matters Partner.
The Tax Matters Partner has made and will make some elections on ETPs behalf and on behalf of unitholders. In addition, the Tax Matters
Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in ETPs returns. The Tax Matters Partner may bind a unitholder with less than a 1% profits interest in ETP to a settlement with the
IRS unless a statement is timely filed with the IRS in accordance with applicable Treasury Regulations, either (i) to deny that authority to the Tax Matters Partner or (ii) to become a member of a notice group (generally, a group of
unitholders with a 5% or more profits interest in ETP that has requested treatment as a notice partner). The Tax Matters Partner may seek judicial review, by which all the unitholders are bound, of a final partnership administrative adjustment and,
if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of unitholders having in the aggregate at least a 5% interest in profits. However,
only one action for judicial review will go forward, and each unitholder with an interest in the outcome may participate.
A unitholder
must file a statement with the IRS identifying the treatment of any item on his federal income tax return that is not consistent with the treatment of the item on ETPs return. Intentional or negligent disregard of this consistency requirement
may subject a unitholder to substantial penalties.
Additional Withholding Requirements. Withholding taxes may apply to certain
types of payments made to foreign financial institutions (as specially defined in the Code) and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on interest, dividends and other fixed or determinable
annual or periodical gains, profits and income from sources within the United States (FDAP Income), or gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources
within the United States (Gross Proceeds) paid to a foreign financial institution or to a non-financial foreign entity (as specially defined in the Code), unless (i) the foreign financial institution undertakes certain
diligence and reporting, (ii) the non-financial foreign entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner or (iii) the foreign financial
institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (i) above, it must enter
into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts, and withhold 30% on
payments to noncompliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these requirements may be
subject to different rules.
These rules generally will apply to payments of FDAP Income and will apply to payments of relevant Gross
Proceeds made on or after January 1, 2017. Thus, to the extent ETP has FDAP Income or has Gross Proceeds after this date that is not treated as effectively connected with a U.S. trade or business (please read Tax-Exempt
Organizations and Other Investors), unitholders who are foreign financial institutions or certain other non-US entities may be subject to withholding on distributions they receive from ETP, or their distributive share of ETPs income,
pursuant to the rules described above.
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Prospective investors should consult their own tax advisors regarding the potential application
of these withholding provisions to their investment in ETPs common units.
Nominee Reporting. Persons who hold an interest in
ETP as a nominee for another person are required to furnish to ETP:
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the name, address and taxpayer identification number of the beneficial owner and the nominee; |
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whether the beneficial owner is: |
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a person that is not a U.S. person; |
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a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or |
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the amount and description of units held, acquired or transferred for the beneficial owner; and |
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specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from dispositions.
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Brokers and financial institutions are required to furnish additional information, including whether they are U.S. persons
and specific information on units they acquire, hold or transfer for their own account. A penalty per failure, which is generally capped at a maximum penalty per calendar year and the amount of which is adjusted for inflation each year, is imposed
by the Code for failure to report that information to ETP. The nominee is required to supply the beneficial owner of the units with the information furnished to ETP.
Accuracy-Related Penalties. An additional tax equal to 20% of the amount of any portion of an underpayment of tax that is attributable
to one or more specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation misstatements, is imposed by the Code. No penalty will be imposed, however, for any
portion of an underpayment if it is shown that there was a reasonable cause for that portion and that the taxpayer acted in good faith regarding that portion.
For individuals, a substantial understatement of income tax in any taxable year exists if the amount of the understatement exceeds the greater
of 10% of the tax required to be shown on the return for the taxable year or $5,000 ($10,000 for most corporations). The amount of any understatement subject to penalty generally is reduced if any portion is attributable to a position adopted on the
return:
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for which there is, or was, substantial authority; or |
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as to which there is a reasonable basis and the pertinent facts of that position are disclosed on the return. |
If any item of income, gain, loss or deduction included in the distributive shares of unitholders might result in that kind of an
understatement of income tax for which no substantial authority exists, ETP must disclose the pertinent facts on ETPs return. In addition, ETP will make a reasonable effort to furnish sufficient information for
unitholders to make adequate disclosure on their returns and to take other actions as may be appropriate to permit unitholders to avoid liability for this penalty. More stringent rules apply to tax shelters, which ETP does not believe
includes ETP, or any of its investments, plans or arrangements.
A substantial valuation misstatement exists if (i) the value of any
property, or the adjusted basis of any property, claimed on a tax return is 150% or more of the amount determined to be the correct amount of the valuation or adjusted basis, (ii) the price for any property or services (or for the use of
property) claimed on any such return with respect to any transaction between persons described in Section 482 of the Code is 200% or more (or 50% or less) of the amount determined under Section 482 to be the correct amount of such price,
or
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(iii) the net Code Section 482 transfer price adjustment for the taxable year exceeds the lesser of $5 million or 10% of the taxpayers gross receipts. No penalty is imposed unless
the portion of the underpayment attributable to a substantial valuation misstatement exceeds $5,000 ($10,000 for most corporations). If the valuation claimed on a return is 200% or more than the correct valuation or certain other thresholds are met,
the penalty imposed increases to 40%. ETP does not anticipate making any valuation misstatements.
In addition, the 20% accuracy-related
penalty also applies to any portion of an underpayment of tax that is attributable to transactions lacking economic substance. To the extent that such transactions are not disclosed, the penalty imposed is increased to 40%. Additionally, there is no
reasonable cause defense to the imposition of this penalty to such transactions.
Reportable Transactions
If ETP were to engage in a reportable transaction, it (and possibly you and others) would be required to make a detailed disclosure
of the transaction to the IRS. A transaction may be a reportable transaction based upon any of several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a listed transaction or
that it produces certain kinds of losses for partnerships, individuals, S corporations and trusts in excess of $2 million in any single year, or $4 million in a combination of six successive tax years (beginning with the tax year the
transactions are entered into). ETPs participation in a reportable transaction could increase the likelihood that ETPs federal income tax information return (and possibly your tax return) would be audited by the IRS. Please read
Administrative MattersInformation Returns and Audit Procedures.
Moreover, if ETP were to participate in a
reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, you may be subject to the following additional consequences:
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accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at Administrative MattersAccuracy-Related Penalties;
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for those persons otherwise entitled to deduct interest on federal tax deficiencies, non-deductibility of interest on any resulting tax liability; and |
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in the case of a listed transaction, an extended statute of limitations. |
ETP does not expect
to engage in any reportable transactions.
Legislative Developments
The present federal income tax treatment of publicly traded partnerships, including ETP, or an investment in ETPs common units may be
modified by administrative, legislative or judicial interpretation at any time. For example, from time to time, members of Congress and the President propose and consider substantive changes to the existing federal income tax laws that affect
publicly traded partnerships, including the elimination of partnership tax treatment for publicly traded partnerships. Any modification to the federal income tax laws and interpretations thereof may or may not be retroactively applied and could make
it more difficult or impossible to meet the exception for ETP to be treated as a partnership for federal income tax purposes. Please read Partnership Status. ETP is unable to predict whether any such changes will ultimately be
enacted. However, it is possible that a change in law could affect ETP, and any such changes could negatively impact the value of an investment in its common units.
State, Local, Foreign and Other Tax Considerations
In addition to federal income taxes, you likely will be subject to other taxes, such as state, local and foreign income taxes, unincorporated
business taxes, and estate, inheritance or intangible taxes that may be imposed by
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the various jurisdictions in which ETP does business or owns property or in which you are a resident. Although an analysis of those various taxes is not presented here, each prospective
unitholder should consider their potential impact on his investment in ETP. ETP currently owns property and does business in a number of states. Many of these states impose a personal income tax on individuals; certain of these states also impose an
income tax on corporations and other entities. ETP may also own property or do business in other jurisdictions in the future. Although you may not be required to file a return and pay taxes in some jurisdictions because your income from that
jurisdiction falls below the filing and payment requirement, you will be required to file income tax returns and to pay income taxes in many of these jurisdictions in which ETP does business or owns property and may be subject to penalties for
failure to comply with those requirements. In some jurisdictions, tax losses may not produce a tax benefit in the year incurred and may not be available to offset income in subsequent taxable years. Some of the jurisdictions may require ETP, or ETP
may elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of the jurisdiction. Withholding, the amount of which may be greater or less than a particular unitholders income tax liability
to the jurisdiction, generally does not relieve a nonresident unitholder from the obligation to file an income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes of determining the amounts distributed by ETP.
Please read Tax Consequences of Common Unit OwnershipEntity-Level Collections. Based on current law and ETPs estimate of ETPs future operations, ETP GP anticipates that any amounts required to be withheld will not
be material.
It is the responsibility of each unitholder to investigate the legal and tax consequences, under the laws of pertinent states, localities
and foreign jurisdictions, of his investment in ETP. Accordingly, each prospective unitholder is urged to consult, and depend upon, his tax counsel or other advisor with regard to those matters. Further, it is the responsibility of each unitholder
to file all state, local and foreign, as well as federal, tax returns that may be required of him. Latham & Watkins LLP has not rendered an opinion on the state, local, alternative minimum or foreign tax consequences of an investment in
ETP.
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DESCRIPTION OF ETP COMMON UNITS
ETP common units represent limited partner interests in ETP. ETP common units entitle the holders to participate in partnership distributions
and to exercise the rights and privileges available to limited partners under the ETP partnership agreement.
Where Common
Units Are Traded
ETPs outstanding common units are listed on the NYSE under the symbol ETP. The common units
received by Regency unitholders in the merger will also be listed on the NYSE.
Quarterly Distributions
The ETP partnership agreement requires that ETP distribute 100% of its Available Cash (as defined in the ETP partnership agreement)
to its partners within 45 days following the end of each quarter. Available Cash consists generally of all of ETPs cash on hand less the amount of cash reserves that are necessary or appropriate in the reasonable discretion of ETP GP to
provide for the proper conduct of the business, comply with applicable law or any debt agreement and provide funds for distributions to unitholders and ETP GP in respect of any one or more of the next four quarters plus all cash on hand on the date
of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. Please see Comparison of Rights of ETP Unitholders and Regency UnitholdersDistributions of Available
Cash for a further discussion of ETPs quarterly distributions.
Transfer Agent and Registrar
ETPs transfer agent and registrar for the common units is American Stock Transfer & Trust Company.
Summary of Partnership Agreement
A summary of the important provisions of the ETP partnership agreement is included in the reports filed with the SEC, particularly ETPs
Form S-3 filed on October 3, 2014, and under the caption Comparison of the Rights of ETP Unitholders and Regency Unitholders in this proxy statement/prospectus.
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COMPARISON OF RIGHTS OF ETP UNITHOLDERS AND REGENCY UNITHOLDERS
The rights of ETP unitholders are currently governed by ETPs Second Amended and Restated Agreement of Limited Partnership, as
amended, and the Delaware LP Act. The rights of Regencys unitholders are currently governed by Regencys Amended and Restated Agreement of Limited Partnership, as amended, (the Regency partnership agreement), and the Delaware
LP Act. If the merger is completed, the rights of Regency unitholders will be governed by the ETP partnership agreement and the Delaware LP Act.
There are many differences between the rights of ETP unitholders and the rights of Regency unitholders. Some of these, such as distribution
and voting rights, are significant. The following description summarizes the material differences that may affect the rights of ETP common unitholders and Regency common unitholders but does not purport to be a complete statement of all those
differences, or a complete description of the specific provisions referred to in this summary. The identification of specific differences is not intended to indicate that other equally significant or more significant differences do not exist.
Regency unitholders should read carefully the relevant provisions of the ETP partnership agreement and the Regency partnership agreement. Copies of the documents referred to in this summary may be obtained as described under Where You Can Find
More Information.
Purpose
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Regency |
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Regencys stated purpose is to engage in any business activities that are approved by its general partner. Regencys general partner, however, may not cause Regency to engage in any business activities that it determines
would cause Regency to be treated as a corporation for federal income tax purposes. |
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ETPs stated purpose is to serve as the limited partner of Heritage ETC, L.P. a Delaware limited partnership, and any successors thereto (the Operating Partnership), to engage in any business activities that the
Operating Partnership is permitted to engage in and to engage in any business activities that are approved by its general partner. |
Outstanding Units
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Regency |
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As of March 24, 2015, Regency had outstanding (a) approximately 411,707,950 common units, (b) 6,274,483 Class F units and
(c) 1,912,569 Series A units. The Class F units will convert automatically on a
one-for-one basis into common units on the first business day after the record date for distributions in respect of the quarter ending March 31, 2015.
The Series A units are convertible by the holders at any time into a number of Regency common units at the then-applicable conversion price set forth in the
Regency partnership agreement. As of December 31, 2014, the Series A units were convertible into an aggregate 2,064,805 common units. |
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As of March 24, 2015, ETP had outstanding (a) approximately 327,004,350 common units, (b) 8,853,832 Class E units, (c) 90,706,000
Class G units, (d) 81,001,069 Class H units and (e) 100 Class I units. The Class E
units, Class G units, Class H units and Class I units are not convertible into ETP common units and do not have any other redemption or conversion rights. |
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Issuance of Additional Securities
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Regency |
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The Regency partnership agreement authorizes Regency to issue an unlimited number of additional partnership securities for the consideration
and on the terms and conditions determined by the general partner without the approval of the unitholders.
It is possible that Regency will fund acquisitions through the issuance of additional common units or other partnership securities. Holders of any additional
common units it issues will be entitled to share equally with the then-existing holders of common units in distributions of available cash. In addition, the issuance of additional common units or other partnership securities may dilute the value of
the interests of the then-existing holders of common units in Regencys net assets.
In accordance with Delaware law and the provisions of the Regency partnership agreement, Regency may also issue additional partnership securities that, as
determined by the general partner, may have special voting rights to which the common units are not entitled. The Regency partnership agreement restricts Regencys ability to issue any securities senior to or on parity with the Series A units
with respect to distributions on such securities and distributions upon liquidation, except that Regency may issue parity securities up to an amount equal to 10% (at face value) of the lowest market capitalization of the common units as measured
over the trailing 30 day period prior to issuance. However, the Regency partnership agreement does not prohibit the issuance of equity securities that may effectively rank senior to the common units. |
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The ETP partnership agreement authorizes ETP to issue an unlimited number of additional limited partner interests and other equity securities
for the consideration and on the terms and conditions established by the general partner in its sole discretion without the approval of any limited partners. Any such additional partnership securities may be senior to the common units.
It is possible that ETP will fund acquisitions through the issuance of additional common
units or other equity securities. Holders of any additional common units issued by ETP will be entitled to share equally with the then-existing holders of common units in distributions of available cash. In addition, the issuance of additional
partnership interests may dilute the value of the interests of the then-existing holders of common units in ETPs net assets.
In accordance with Delaware law and the provisions of the ETP partnership agreement, ETP may also issue additional partnership securities that, in the sole
discretion of the general partner, have special voting rights to which the common units are not entitled.
The ETP partnership agreement restricts ETPs ability to issue any securities with distribution rights prior to liquidation that are senior to or on a
parity with either of the Class H units or Class I units or that have allocation rights that are senior to or on a parity with the allocations with respect to Net Termination Gains (as defined in the ETP partnership agreement) applicable to the
Class H units. ETE has consented to, and has agreed to cause any of its subsidiaries that own Class H units to consent to, the issuance of ETP preferred units to the holders of Regency Series A units as contemplated by the merger agreement. However,
the ETP partnership agreement does not prohibit the issuance of equity securities that may effectively rank senior to the common units. |
Distributions of Available Cash
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General. Within 45 days after the end of each quarter, Regency will distribute all available cash to unitholders of record on the applicable record date. |
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General. Within 45 days after the end of each quarter, ETP will distribute all available cash to its partners as of the applicable record date. |
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Regency |
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The Class F units will neither pay nor accrue distributions prior to their conversion into common units. The Series A units receive the distribution preference described below. References to unitholders made in the
context of the recipients of cash distributions refer to common unitholders. |
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Definition of Available Cash. Available cash is defined in the Regency partnership agreement and generally means, for each fiscal quarter, all cash on hand at the end of the quarter, |
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Definition of Available Cash. Available cash is defined in the ETP partnership agreement and generally means, for any calendar quarter, all cash on hand at the end of such quarter: |
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less the amount of cash reserves established by its general partner
to: provide for
the proper conduct of Regencys business;
comply with applicable law, any of Regencys debt instruments or other agreements;
and provide
funds for distribution to unitholders and to its general partner for any one or more of the next four quarters;
plus all cash on hand on the date of determination of available cash for the quarter
resulting from working capital borrowings made after the end of the quarter. Working
capital borrowings are generally borrowings that will be made under Regencys credit facilities and in all cases are used solely for working capital purposes or to pay distributions to partners.
Regency will treat all available cash distributed as coming from operating surplus until
the sum of all available cash distributed since it began operations equals the operating surplus as of the most recent date of determination of available cash. Regency will treat any amount distributed in excess of operating surplus, regardless of
its source, as capital surplus. Regency does not anticipate that it will make any distributions from capital surplus. |
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less the amount of cash reserves that the general partner in good
faith determines is necessary or appropriate to:
provide for the proper conduct of ETPs business;
comply with
applicable law, any of ETPs debt instruments or other agreements; or
provide funds for distributions to unitholders and the general partner for any one or
more of the next four quarters;
plus all cash on hand immediately prior to the date of the distribution of available
cash for the quarter. ETP will treat all available cash distributed as coming from
operating surplus until the sum of all available cash distributed equals operating surplus since the IPO date through the close of the immediately preceding quarter. ETP will treat any amounts distributed in excess of operating surplus as capital
surplus. |
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Definition of Operating Surplus. Operating surplus for any period generally means:
Regencys cash
balance on the closing date of its initial public offering; plus
$20.0 million (as described below); plus
all of its cash
receipts since the closing of its initial public offering, excluding cash from (1) |
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Definition of Operating Surplus. Operating surplus for any period generally means the sum of:
$10.0 million (as
described below) plus all cash and cash equivalents of ETP on hand as of the close of business on the closing date of its initial public offering; plus
all its cash receipts for the period beginning on the closing date of its initial public
offering and |
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Regency |
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borrowings that are not working capital borrowings, (2) sales of equity and debt securities and (3) sales or other
dispositions of assets outside the ordinary course of business; plus
working capital borrowings made after the end of a quarter but before the date of
determination of operating surplus for the quarter; less
operating expenses; less
the amount of cash
reserves established by its general partner for future operating expenditures.
Operating surplus includes a provision that will enable Regency, if it chooses, to distribute as operating surplus up to $20.0 million of cash it receives from
non-operating sources, such as asset sales, issuances of securities and long-term borrowings, that would otherwise be distributed as capital surplus. |
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ending with the last day of such period, other than cash receipts from interim capital transactions; plus
all cash receipts
of ETP after the end of such period but on or before the date of determination of operating surplus with respect to such period resulting from borrowings for working capital purposes, less the sum of
operating
expenditures; plus
the amount of cash reserves established by its general partner to provide funds for
future operating expenditures, provided, however, that disbursements made or cash reserves established, increased or reduced after the end of such period but on or before the date of determination of available cash with respect to such period
shall be deemed to have been made, established, increased or reduced for purposes of determining operating surplus, within such period if the general partner so determines.
Operating surplus includes a provision that will enable ETP, if it chooses, to distribute as operating surplus up to $10.0 million of cash it receives from
non-operating sources, such as asset sales, issuances of securities and long-term borrowings, that would otherwise be distributed as capital surplus. Following the merger, the ETP partnership agreement will be amended to change the definition of
Operating Surplus such that the term will include an amount equal to the operating surplus of Regency. |
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Definition of Capital Surplus. Capital surplus will generally be generated only by:
borrowings other
than working capital borrowings;
sales of debt and equity securities; and
sales or other
disposition of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or non-current assets sold as part of normal retirements or replacements of assets. |
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Definition of Capital Surplus. Capital surplus will generally be generated only by:
borrowings other
than working capital borrowings;
sales of debt and equity securities; and
sales or other
dispositions of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or as part of normal retirements or replacements of
assets. |
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Distributions of Available Cash from Operating Surplus
Regency will make distributions of available cash from operating surplus in the following manner:
first, to the
holders of the Series A units to the extent of the distribution preference on the Series A units, as described below;
second, 100% to all unitholders and the general partner, in accordance with their
respective percentage interests, until Regency distributes for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and
thereafter, in the manner described in Incentive Distribution Rights
below. Series A Distribution Preference. The Series A units will receive
distributions at a rate of $0.445 per Series A unit, payable quarterly on the same date as the distribution payment date for the common units. The record date for the determination of holders entitled to receive distributions of the Series A units
will be the same as the record date for determination of common unit holders entitled to receive quarterly distributions.
Distributions on the Series A units were accrued for the first two quarters following their issuance, resulting in an increase in the number of common units
issuable upon conversion of the Series A units. If on any distribution payment date occurring with respect to a quarter ending after December 31, 2009, Regency (x) fails to pay distributions on the Series A units, (y) reduces the distributions
on the common units to zero and (z) is prohibited by its material financing agreements from paying cash distributions, then until the distributions that were to be paid on the Series A units on such distribution payment date are paid in cash, such
distributions shall automatically accrue and accumulate. If Regency fails to pay cash distributions in full for two quarters (whether or not consecutive) from and including the quarter ended on March 31, 2010, then to the extent that Regency
fails to pay cash distributions on the Series A units thereafter, all future distributions on the Series A units that are accrued rather than being paid in cash by Regency will consist of the following: (i) $0.35375 per Series A units per quarter,
(ii) $0.09125 per Series A units per quarter (the Common Unit Distribution Amount), payable solely in common units, and (iii) $0.09125 per Series A units per quarter (the |
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Distributions of Available Cash from Operating Surplus
Subject to the distributions to be made to Class H unitholders and Class I unitholders as described below, ETP is required to make distributions of any
remaining available cash from operating surplus for any quarter in the following manner:
first, 100% to all common unitholders, Class E unitholders, Class G unitholders and the
general partner, in accordance with their percentage interests, until each common unit has received $0.25 per unit for such quarter, also known as the minimum quarterly distribution;
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, also known as the first target
distribution;
thereafter, in the manner described in Incentive Distribution Rights
below. Distributions to Class E Unitholders. Distributions to Class E
unitholders will be made as follows:
For each taxable year, no portion of any partnership cash distribution attributable to
(i) any distribution or dividend received by ETP from ETP Holdco Corporation (Holdco) or the proceeds of any sale of the capital stock of Holdco or (ii) any interest payments received by ETP with respect to indebtedness of ETP or its
subsidiaries (referred to as Holdco Distributions) will be distributed to the Class E units.
The Class E units shall be entitled to receive the Class E percentage (11.1%) of the portion of any partnership distributions (other than Holdco Distributions)
to be made to the unitholders and the remaining portion of the available cash to be distributed will be made to the unitholders (other than the holders of Class E units) in proportion to their relative percentage interests; provided, that the
aggregate partnership distributions made to each Class E unit in respect of each fiscal year will not exceed $1.41. |
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PIK Distribution Additional Amount), payable solely in common units. The total number of common units payable in connection with
the Common Unit Distribution Amount or the PIK Distribution Additional Amount cannot exceed 1,600,000 in any period of 20 consecutive fiscal quarters.
For as long as the Series A units are outstanding (or until Regency receives an investment grade rating from either Moodys Investor Service, Inc. or
Standard & Poors Ratings Services on its 9.375% Senior Notes due 2016), upon its breach of certain covenants (a Covenant Default) contained in the indenture governing such notes, the holders of the Series A units will be
entitled to an increase of $0.1825 per quarterly distribution, payable solely in common units (the Covenant Default Additional Amount).
All accumulated and unpaid distributions will accrue interest (i) at a rate of 2.432% per quarter, or (ii) if Regency has failed to pay all PIK Distribution
Additional Amounts or Covenant Default Additional Amounts or any Covenant Default has occurred and is continuing, at a rate of 3.429% per quarter while such failure to pay or such Covenant Default continues.
Additionally, the holders of the Series A units are entitled to a make-whole
distribution and allocation equal to 60% of the tax cost of the rate differential between ordinary income and long term capital gains with respect to any gross income allocation resulting from a forced conversion of the Series A units, grossed
up for the additional tax due with respect to such make-whole allocation. |
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Distributions to Class G Unitholders. Distributions to Class G unitholders will be made as follows:
For each taxable
year, no portion of any partnership cash distribution attributable to (i) any distribution or dividend received by ETP from Holdco or the proceeds of any sale of the capital stock of Holdco or (ii) any Holdco Distributions will be distributed to the
Class G units.
For each quarter following the quarter in which distributions are first made to the
Class G units, aggregate quarterly distributions, if any, to the holders of the incentive distribution rights will not exceed the amount the holders of the incentive distribution rights would otherwise receive if available cash were reduced by the
lesser of (A) the amount distributed to the Class G units and (B) the aggregate Holdco Distributions received by ETP, in the immediately prior quarter.
The Class G units will be entitled to receive the Class G percentage (35%) of the portion of any partnership cash distributions (other than Holdco
Distributions) to be made to the unitholders and the remaining portion of the available cash to be distributed will be made to the unitholders (other than the holders of Class G units) in proportion to their relative percentage interests;
provided, that the aggregate partnership distributions made to each Class G unit for each taxable year will not exceed $3.75.
Distributions to Class H unitholders. Distributions to Class H unitholders will be made as follows:
The holders of
Class H units will be entitled to receive distributions of available cash only to the extent provided below and will have no percentage interests with respect to their Class H units nor be entitled to receive distributions of cash from operating
surplus or capital surplus other than as set forth below.
For each quarter, prior to any distribution of available cash to any class of ETP units,
Class H units will be entitled to receive distributions of available cash in an amount equal to 90.05% of all distributions to ETP by Sunoco Partners LLC with respect to the incentive distribution rights and general partner interest in Sunoco
Logistics, |
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calculated on a cumulative basis beginning with the quarter ending March 31, 2015. |
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Distributions from Capital Surplus
How Distributions from Capital Surplus Will Be Made. Regency will make distributions of available cash from capital surplus, if any, in the following
manner: first,
100% to all unitholders and its general partner, in accordance with their respective percentage interests, until Regency distributes for each outstanding common unit issued in its initial public offering an amount of available cash from capital
surplus equal to the initial public offering price; and
thereafter, Regency will make all distributions of available cash from capital surplus
as if they were from operating surplus. Effect of a Distribution from Capital
Surplus. The Regency 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 less any
distributions of capital surplus per unit is referred to as the unrecovered initial unit price. Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same
proportion as the corresponding reduction in the unrecovered initial unit price. Because distributions of capital surplus will reduce the minimum quarterly distribution, after any of these distributions are made, it may be easier for the general
partner to receive incentive distributions. Any distribution of capital surplus before the unrecovered initial unit price is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.
Once Regency distributes capital surplus on a unit in an amount equal to the initial unit
price, it will reduce the minimum quarterly distribution and the target distribution levels to zero and it will make all future distributions from operating surplus, with 50% being paid to the holders of units, and 50% to the general
partner. |
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Distributions to Class I unitholders. Distributions to Class H unitholders will be made as follows:
The holders of
Class I units will be entitled to receive distributions of available cash only to the extent provided below and will have no percentage interests with respect to their Class I units nor be entitled to receive distributions of cash from operating
surplus or capital surplus other than as set forth below.
Prior to any distribution of available cash to any class of ETP units other than the
Class H units, Class I units will also be entitled to cash distributions in the aggregate amount of $55 million in 2015 and $30 million in 2016, subject to adjustment, commencing with the quarter ended March 31, 2015 and ending with the quarter
ending December 31, 2019. Distributions from Capital Surplus.
How Distributions from Capital Surplus Will Be Made. ETP is required to make
distributions of available cash from capital surplus initially to the Class H unitholders and Class I unitholders in a manner similar to the distributions of available cash from operating surplus, as described above. ETP will make distributions of
any remaining available cash form capital surplus in the following manner:
first, to all unitholders and its general partner, in accordance with their respective
percentage interests, until ETP distributes for each outstanding common unit, an amount of available cash from capital surplus equal to our initial public offering price; and
thereafter, ETP will make all distributions of available cash from capital surplus as if
they were from operating surplus. Effect of a Distribution from Capital
Surplus. The ETP partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from ETPs initial public offering, which is a |
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Incentive Distribution Rights
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Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from
operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Regencys general partner currently holds the incentive distribution rights, but may transfer these rights separately from its
general partner interest, subject to restrictions in the Regency partnership agreement. For purposes of this section Incentive Distribution Rights, the term unitholders does not include holders of Class F units, which are not
entitled to participate in distributions, and holders of Series A units. If for any
quarter:
Regency has distributed available cash from operating surplus to the common unitholders
in an amount equal to the minimum quarterly distribution;
Regency has distributed available cash from operating surplus on outstanding common
units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution; and
Regency has distributed available cash from operating surplus to the holders of the
Series A units to the extent of the distribution preference on the Series A units;
then, Regency will distribute any additional available cash from operating surplus for that quarter among the unitholders and its general partner in the
following manner:
first, 100% to all unitholders and the general partner, in accordance with their
respective percentage interests, until each unitholder receives a total of $0.4025 per unit for that quarter (the first target distribution);
second, 87% to all unitholders and the general partner, in accordance with their
respective percentage interests, and 13% to the holders of incentive distribution rights, pro rata, until each unitholder receives a total of $0.4375 per unit for that quarter (the second target distribution);
third, 77% to all
unitholders and the general partner, in accordance with their respective |
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return of capital. The initial public offering price per common unit less any distributions of capital surplus per unit is referred to as
unrecovered capital. Incentive distribution rights represent the right to receive an
increasing percentage of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution has been paid. ETPs general partner currently holds the incentive distribution rights. Distributions of
additional available cash from operating surplus (other than as described above) will be distributed in the following manner: If for any quarter:
first, (i) to the general partner in accordance with its percentage interest, (ii) 13%
to the holders of the incentive distribution rights, 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 incentive distribution rights, until each common unit has received $0.3175 per unit for such quarter, also known as the second target distribution;
second, (i) to the general partner in accordance with its percentage interest, (ii) 23%
to the holders of the incentive distribution rights, 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 incentive distribution rights, until each common unit has received $0.4125 per unit for such quarter, also known as the third target distribution; and
thereafter, (i) to the general partner in accordance with its percentage interest, (ii)
48% to the holder of the incentive distribution rights, 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 incentive distribution rights. 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 |
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percentage interests, and 23% to the holders of incentive distribution rights, pro rata, until each unitholder receives a
total of $0.5250 per unit for that quarter (the third target distribution); and
thereafter, 52% to all unitholders and the general partner, in accordance with their
respective percentage interests, and 48% to the holders of incentive distribution rights, pro rata.
Through the quarter ending March 31, 2015, the general partner agreed to forego distributions with respect to its incentive distribution rights with
respect to the 31,372,419 common units issued in connection with Regencys acquisition of SUGS. |
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exceed the amount holders of the incentive distribution 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 incentive distribution subsidies previously agreed to by ETE in connection with
previous transactions. |
Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels
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In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if
Regency combines its units into fewer units or subdivides its units into a greater number of units, it will proportionately adjust:
the minimum quarterly distribution;
the target
distribution levels; and
the unrecovered initial unit price.
For example, if a two-for-one split of the common units should occur, the minimum
quarterly distribution, the target distribution levels and the unrecovered initial unit price would each be reduced to 50% of its initial level. Regency will not make any adjustment by reason of the issuance of additional units for cash or
property. In addition, if legislation is enacted or if existing law is modified or
interpreted by a governmental taxing authority so that Regency becomes taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, Regency will reduce the minimum quarterly distribution and
the target distribution levels for each quarter by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter and the denominator of which is the sum of available cash for that quarter plus its
general partners estimate of Regencys aggregate liability for the quarter for such income taxes payable by reason of such legislation or interpretation. To the extent that the actual tax liability |
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If ETP combines its units into fewer units or subdivides its units into a greater number of units, it will proportionately adjust:
the minimum
quarterly distribution;
the target distribution levels; and
the unrecovered
initial unit price. For example, if a two-for-one split of the common units should
occur, the minimum quarterly distribution, the target distribution and the unrecovered capital would be reduced to 50% of its initial level. ETP 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 ETP to become taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, under the terms of the ETP partnership agreement, ETP can reduce its 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. |
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differs from the estimated tax liability for any quarter, the difference will be accounted for in subsequent quarters. |
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Distributions of Cash upon Liquidation
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If Regency dissolves in accordance with the Regency partnership agreement, it will sell or otherwise dispose of its assets in a process called liquidation. Upon dissolution, subject to Section 17-804 of the Delaware LP Act, the
holders of the Series A units will be entitled to receive any accrued and unpaid distributions in respect of the Series A units, if any, and will have the status of, and will be entitled to all remedies available to, a creditor of Regency, and will
have priority over any entitlement of any other unitholders with respect to any distributions by Regency. Regency will distribute any remaining proceeds to the unitholders and its general partner in accordance with their capital account balances, as
adjusted to reflect any gain or loss upon the sale or other disposition of its assets in liquidation. |
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If ETP dissolves in accordance with the ETP partnership agreement, it will sell or otherwise dispose of its assets in a process called a liquidation. It will first apply the proceeds of liquidation to the payment of its creditors
and the creation of a reserve for contingent liabilities. ETP will distribute any remaining proceeds to the unitholders, in accordance with the positive balance in their respective capital accounts. |
Merger, Sale or Other Disposition of Assets
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A merger or consolidation of Regency requires the prior consent of the general partner. The general partner, however, will have no duty or
obligation to consent to any merger or consolidation and may decline to do so free of any fiduciary duty or obligation whatsoever to Regency or the limited partners, including any duty to act in good faith or in the best interest of Regency or the
limited partners. The Regency partnership agreement generally prohibits the general
partner, without the prior approval of the holders of a unit majority, from causing Regency, among other things, to sell, exchange or otherwise dispose of all or substantially all of Regencys assets in a single transaction or a series of
related transactions, including by way of merger, consolidation or other combination, or approving on Regencys behalf the sale, exchange or other disposition of all or substantially all of the assets of its subsidiaries. Further, if any such
sale, merger, consolidation or other combination would adversely affect any of the rights, preferences and |
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A merger or consolidation of ETP requires the prior consent of the general partner. It is up to the general partners discretion to
consent to any merger or consolidation. The ETP partnership agreement generally
prohibits the general partner, without the prior approval of the holders of a unit majority, from causing ETP to sell, exchange or otherwise dispose of all or substantially all of its assets in a single transaction or a series of related
transactions, including by way of merger, consolidation or other combination, or approving on ETPs behalf the sale, exchange or other disposition of all or substantially all of its assets or the assets of its subsidiaries. The general partner
may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of ETPs assets without such approval. The general partner may also sell all or substantially all of ETPs assets under a foreclosure or other
realization upon the encumbrances above without such approval. |
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privileges of the Series A units or the Class F units in any respect, the affirmative vote of 75% of the Series A units or the Class F units,
respectively, voting separately as a class is required. The general partner may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of Regencys assets without such approval. The general partner may
also sell all or substantially all of Regencys assets under a foreclosure or other realization upon those encumbrances without such approval. Finally, the general partner may consummate any merger without the prior approval of unitholders if
Regency is the surviving entity in the transaction, the transaction would not result in a material amendment to the Regency partnership agreement, and each of Regencys units will be an identical unit of Regency following the transaction.
If the conditions specified in the Regency partnership agreement are satisfied, the
general partner may convert Regency or any of its subsidiaries into a new limited liability entity or merge Regency or any of its subsidiaries into, or convey all of its assets to, a newly formed entity if the sole purpose of that merger or
conveyance is to effect a mere change in Regencys legal form into another limited liability entity.
Unitholders are not entitled to dissenters rights of appraisal under the Regency partnership agreement or applicable Delaware law in the event of a
conversion, merger or consolidation, a sale of substantially all of Regencys assets or any other transaction or event. |
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If the conditions specified in the ETP partnership agreement are satisfied, the general partner may merge ETP or any of its subsidiaries
into, or convey some or all of their assets to, a newly formed entity if the sole purpose of that merger or conveyance is to effect a mere change in ETPs legal form into another limited liability entity.
Unitholders are not entitled to dissenters rights of appraisal under the ETP
partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of ETPs assets or any other transaction or event. |
Election of General Partner and Directors of the General Partner
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Unitholders are not entitled to elect the general partner or its directors.
Unitholders are not entitled to remove directors. |
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Unitholders are not entitled to elect the general partner or its directors.
Unitholders are not entitled to remove directors. |
Meetings; Voting
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Except as described below regarding a person or group owning 20% or more of any class of units then outstanding, unitholders or transferees who are record holders of units on the record date will be entitled to notice of, and to
vote at, meetings of the limited partners and to act upon matters for which approvals |
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Except as described below regarding a person or group owning 20% or more of any class of units then outstanding, unitholders or assignees who are record holders of units on the record date will be entitled to notice of, and to vote
at, meetings of the limited partners and to act upon matters for which approvals |
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may be solicited. In the case of common units held by the general partner on behalf of non-citizen assignees, the general partner will
distribute the votes on those common units in the same ratios as the votes of limited partners on other units are cast.
Any action that is required or permitted to be taken by the unitholders may be taken either at a meeting of the unitholders or without a meeting if consents in
writing describing the action so taken are signed by holders of the number of units necessary to authorize or take that action at a meeting. Meetings of the unitholders may be called by the general partner or by unitholders owning at least 20% of
the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding units of the class or classes for which a meeting has been called
represented in person or by proxy will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater percentage.
Each record holder of a unit has a vote according to his percentage interest in the
partnership; however, the holders of the Series A units and Class F units have special voting rights, and additional limited partner interests having special voting rights could be issued. Please read Issuance of Additional
Securities. The affirmative vote of 75% of the Series A units or Class F units, respectively, voting separately as a class with one vote per Series A unit or Class F unit, is necessary on any matter (including a merger, consolidation or
business combination) that would adversely affect any of the rights, preferences and privileges of the Series A units or Class F units, including without limitation, the following matters:
any reduction in
the distribution rate on the Series A units, change in the form of payment of distributions on the Series A units, deferral of the date from which distributions on the Series A units will accrue and accumulate, cancellation of accrued, accumulated
and unpaid distributions on the Series A units, change in the relative seniority rights of the holders of the Series A units as to the payment of distributions in relation to the holders of any other units, or amendment to Section 5.14 or Section
5.15 of the Regency partnership |
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may be solicited. Common units that are owned by an assignee who is a record holder, but who has not yet been admitted as a limited partner,
will be voted by the general partner at the written direction of the record holder. Absent direction of this kind, the common units will not be voted, except that, in the case of common units held by the general partner on behalf of non-citizen
assignees, the general partner will distribute the votes on those common units in the same ratios as the votes of limited partners on other units are cast.
If authorized by the general partner, any action that is required or permitted to be taken by the unitholders may be taken either at a meeting of the
unitholders or without a meeting if consents in writing describing the action so taken are signed by holders of the number of units as would be necessary to authorize or take that action at a meeting. Meetings of the unitholders may be called by the
general partner or by unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding units of the
class or classes for which a meeting has been called represented in person or by proxy shall constitute a quorum unless an action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum shall be
the greater percentage. Each record holder of a unit has a vote according to his
percentage interest in the partnership, although additional limited partner interests having special voting rights could be issued. Please read Issuance of Additional Securities. However, if at any time any person or group, other
than the general partner and its affiliates owns, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, the person or group will lose voting rights on all of its units and the units may not be voted on any
matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes.
Except as required by Delaware law, the Class E, Class G, Class H and Class I units are
not entitled to vote on any matters related to ETP other than any amendment to the ETP partnership agreement that |
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agreement (which set forth the terms of the Series A units and the Class F units, respectively), except that the general
partner may amend Section 5.14 or Section 5.15 so long as the amendment does not adversely affect the holders of Series A units or the Class F units, respectively;
any reduction in the liquidation value or change in the form of payment upon liquidation
of the Series A units, or any change in the relative seniority of the liquidation preferences of the holders of the Series A units to the rights upon liquidation of the holders of any other units;
any matter that
would accelerate the terms of Regencys options to redeem or convert the Series A units; and
any authorization, creation or issuance of any securities that would be senior to or on
parity with the Series A units with respect to distributions on such securities and distributions upon liquidation, except that Regency may issue parity securities up to an amount equal to 10% (at face value) of the lowest market capitalization of
the common units as measured over the trailing 30-day period prior to issuance. If at
any time any person or group, other than the general partner and its affiliates, a direct or subsequently approved transferee of the general partner or its affiliates or a person who acquired the units with the prior approval of the general partner,
acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose voting rights on all of its units and the units may not be voted on any matter and will not be considered to be
outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes. Common units held in nominee or street name account will be voted by the broker or other
nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.
Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of common units under the Regency partnership
agreement will be delivered to the record holder by Regency or by the transfer agent. |
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would adversely affect the Class E, Class G, Class H and Class I units, respectively, in any material respect.
Common units held in nominee or street name account will be voted by the broker or other
nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.
Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of common units under the ETP partnership
agreement will be delivered to the record holder by ETP or by the transfer agent. |
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Advance Notice Requirements for Nominations and Other Proposals
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Not applicable. |
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Not applicable. |
Withdrawal or Removal of the General Partner
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Except as described below, Regency GP has agreed not to withdraw voluntarily as the general partner prior to December 31, 2015 without
obtaining the approval of the holders of at least a majority of the outstanding common units, excluding common units held by the general partner and its affiliates, and furnishing an opinion of counsel regarding limited liability and tax matters. On
or after December 31, 2015, the general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days written notice, and that withdrawal will not constitute a violation of the Regency
partnership agreement. Notwithstanding the information above, the general partner may withdraw without unitholder approval upon 90 days notice to the limited partners if at least 50% of the outstanding common units are held or controlled by
one person and its affiliates other than the general partner and its affiliates. In addition, the Regency partnership agreement permits the general partner in some instances to sell or otherwise transfer all of its general partner interest in
Regency without the approval of the unitholders. Please read Transfer of General Partner Interest and Transfer of Incentive Distribution Rights.
Upon withdrawal of the general partner under any circumstances, other than as a result of
a transfer by the general partner of all or a part of its general partner interest in us, the holders of a unit majority may select a successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of
counsel regarding limited liability and tax matters cannot be obtained, the partnership will be dissolved, wound up and liquidated, unless within a specified period after that withdrawal, the holders of a unit majority agree in writing to continue
Regencys business and to appoint a successor general partner. Please read Termination and Dissolution.
The general partner may not be removed unless that removal is approved by the vote of the holders of not less than 66 2/3% of the outstanding units, voting
together as a single class, including units held by the general partner and its affiliates, and Regency receives |
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ETP GP may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days written notice, and that
withdrawal will not constitute a violation of the ETP partnership agreement. Upon the
withdrawal of the general partner under any circumstances, other than as a result of a transfer by the general partner of all or a part of its general partner interest, the holders of a majority of the outstanding units may select a successor to
that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability and tax matters cannot be obtained, the partnership will be dissolved, wound up and liquidated, unless within 90
days after that withdrawal, the holders of a majority of the outstanding units agree in writing to continue ETPs business and to appoint a successor general partner. See Termination and Dissolution.
The general partner may not be removed unless that removal is approved by the vote of the
holders of not less than 66 2/3% of the outstanding units, including units held by the general partner and its affiliates, and ETP receives an opinion of counsel regarding limited liability and tax matters, and, in certain circumstances, the
approval of a successor general partner by the vote of the holders of a majority of the outstanding common units (including common units held by the general partner and its affiliates. The ownership of more than 33 1/3% of the outstanding units by
the general partner and its affiliates would give them the practical ability to prevent the general partners removal.
The ETP partnership agreement also provides that if the general partner is removed as the general partner under circumstances where cause does not exist or the
general partner withdraws and such withdrawal does not violate the ETP partnership agreement, if a successor general partner is elected, the general partner has an option to require its successor to purchase its partnership interest as the general
partner |
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an opinion of counsel regarding limited liability and tax matters. Any removal of the general partner is also subject to the approval of a
successor general partner by the vote of the holders of a majority of the outstanding common units, voting as separate classes. The ownership of more than 33 1/3% of the outstanding units by the general partner and its affiliates would give them the
practical ability to prevent the general partners removal. The Regency
partnership agreement also provides that if the general partner is removed as the general partner under circumstances where cause does not exist and units held by the general partner and its affiliates are not voted in favor of that removal, the
general partner will have the right to convert its general partner interest and its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at that
time. In the event of removal of a general partner under circumstances where cause
exists or withdrawal of a general partner where that withdrawal violates the Regency partnership agreement, a successor general partner will have the option to purchase the general partner interest and incentive distribution rights of the departing
general partner for a cash payment equal to the fair market value of those interests. Under all other circumstances where a general partner withdraws or is removed by the limited partners, the departing general partner will have the option to
require the successor general partner to purchase the general partner interest of the departing general partner and its incentive distribution rights for fair market value. In each case, this fair market value will be determined by agreement between
the departing general partner and the successor general partner. If no agreement is reached, an independent investment banking firm or other independent expert selected by the departing general partner and the successor general partner will
determine the fair market value. Or, if the departing general partner and the successor general partner cannot agree upon an expert, then an expert chosen by agreement of the experts selected by each of them will determine the fair market value.
If the option described above is not exercised by either the departing general partner or
the successor general partner, the departing general partners general partner interest and its incentive distribution rights will automatically convert into common units equal to the |
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in ETP and ETPs subsidiaries, and its incentive distribution rights in an amount in cash equal to the fair market value of those
interests. In the event of removal of a general partner under circumstances where
cause exists or withdrawal of a general partner where that withdrawal violates the ETP partnership agreement, a successor general partner will have the option to purchase the general partner interest in ETP and ETPs subsidiaries and incentive
distribution rights of the general partner for a cash payment equal to the fair market value of those interests.
If the options described above are not exercised, the general partner will become a limited partner and the general partners interest will be converted
into common units. The successor will contribute to ETP cash in an amount equal to the product of the percentage interest of the general partner in ETP and the net agreed value of the ETPs
assets. |
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fair market value of those interests as determined by an investment banking firm or other independent expert selected in the manner described
in the preceding paragraph. In addition, Regency will be required to reimburse the
departing general partner for all amounts due the departing general partner, including, without limitation, all employee-related liabilities, including severance liabilities, incurred for the termination of any employees employed by the departing
general partner or its affiliates for Regencys benefit. |
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Transfer of General Partner Interests
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Except for transfer by the general partner of all, but not less than all, of its general partner interest to:
an affiliate of the
general partner (other than an individual); or
another entity as part of the merger or consolidation of the general partner with or
into another entity or the transfer by the general partner of all or substantially all of its assets to another entity,
the general partner may not transfer all or any part of its general partner interest in the partnership to another person prior to December 31, 2015
without the approval of the holders of at least a majority of the outstanding common units, excluding common units held by the general partner and its affiliates. As a condition of this transfer, the transferee must assume, among other things, the
rights and duties of the general partner, agree to be bound by the provisions of the Regency partnership agreement and furnish an opinion of counsel regarding limited liability and tax matters. |
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The general partner may not transfer all or any part of its general partner interest unless:
the transferee
agrees to assume the rights and duties of the general partner under the ETP partnership agreement;
ETP receives an opinion of counsel that such transfer would not result in the loss of
limited liability of any limited partner, or cause ETP to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes; and
such transferee
also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership interest of the general partner. |
Transfer of Incentive Distribution Rights
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The general partner or its affiliates or a subsequent holder may transfer its incentive distribution rights to an affiliate of the holder (other than an individual) or another entity as part of the merger or consolidation of such
holder with or into another entity, the sale of all of the ownership interest of the holder or the sale of all or substantially all of its assets to, that entity without the prior approval of the unitholders. Prior to December 31, |
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A holder of incentive distribution rights may transfer any or all of the incentive distribution rights held by such holder without the consent of unitholders to one or more of its affiliates or one or more persons in connection with
the merger or consolidation of such holder with and into another person or the transfer by such holder of all or substantially all of its assets to another person. Any other transfer of
incentive |
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2015, other transfers of incentive distribution rights will require the affirmative vote of holders of a majority of the outstanding common units, excluding common units held by the general partner and its affiliates. On or after
December 31, 2015, the incentive distribution rights will be freely transferable. |
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distribution rights requires the prior approval of holders of at least a unit majority. |
Limited Preemptive Right
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Upon issuance of additional partnership securities, the general partner will be entitled, but not required, to make additional capital
contributions to the extent necessary to maintain its percentage interest in Regency. The general partners percentage interest in Regency will be reduced if Regency issues additional units in the future and the general partner does not
contribute a proportionate amount of capital to Regency to maintain its percentage interest. Moreover, the general partner will have the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common
units or other partnership securities whenever, and on the same terms that, Regency issues those securities to persons other than the general partner and its affiliates, to the extent necessary to maintain the percentage interest of the general
partner and its affiliates, including such interest represented by common units, that existed immediately prior to each issuance. The holders of common units will not have preemptive rights to acquire additional common units or other partnership
securities. For so long as the Series A units remain outstanding, the holders of the
Series A units will have a preemptive right to purchase any securities junior to or on parity with the Series A units with respect to distributions on such securities and distributions upon liquidation (other than common units) issued by Regency to
the extent necessary to maintain their proportionate beneficial ownership of common units (on an as-converted basis) immediately before such issuance. |
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Upon issuance of additional partnership securities, the general partner will be entitled, but not required, to make additional capital contributions to the extent necessary to maintain its percentage interest in ETP. The general
partners percentage interest in ETP will be reduced if ETP issues additional units in the future and the general partner does not contribute a proportionate amount of capital to ETP to maintain its percentage interest. Moreover, the general
partner will have the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase partnership securities from ETP whenever, and on the same terms that, ETP issues partnership securities to persons other
than the general partner and its affiliates, to the extent necessary to maintain the percentage interests of the general partner and its affiliates equal to that which existed immediately prior to the issuance of such partnership securities. The
holders of common units will not have preemptive rights to acquire additional common units or other partnership securities. |
Limited Call Right
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If at any time the general partner and its affiliates own more than 80% of the then-issued and outstanding limited partner interests of any class, the general partner will have the right, which it may assign in whole or in part to
any of its affiliates or to Regency, to acquire all, |
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If at any time persons other than the general partner and its affiliates do not own more than 20% of the total limited partner interests of any class, the general partner will have the right, which it may assign to any of its
affiliates or to ETP, to acquire all, but not |
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but not less than all, of the remaining partnership securities of the class held by unaffiliated persons as of a record date to be selected by the general partner, on at least 10 but not more than 60 days notice. The purchase
price in the event of such a purchase is the greater of (a) the highest cash price paid by either of the general partner or any of its affiliates for any partnership securities of the class purchased within the 90 days preceding the date on
which the general partner first mails notice of its election to purchase those limited partner interests, and (2) the current market price as of the date three days before the date the notice is mailed. |
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less than all, of those common units at a price no less than their then-current market price. |
Amendment of Partnership Agreement
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General. Amendments to the Regency partnership agreement may be proposed only by or with the consent of the general partner. The
general partner, however, will have no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation whatsoever to Regency or the limited partners, including any duty to act in good faith or in the
best interests of Regency or the limited partners. In order to adopt a proposed amendment, other than the amendments discussed below, the general partner is required to seek written approval of the holders of the number of units required to approve
the amendment or to call a meeting of the limited partners to consider and vote upon the proposed amendment. Except as described below, an amendment must be approved by a unit majority.
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General. Amendments to the ETP partnership agreement may be proposed only by or with the consent of the general partner. Certain amendments require the approval of a majority of the outstanding common units, including common
units owned by the general partner and its affiliates. Any amendment that materially and adversely affects the rights or preferences of any class of partnership interest in relation to other classes requires the approval of at least a majority of
the partnership class so affected. Except as described below, an amendment must be approved by a majority of the outstanding units. |
Prohibited Amendments. Without the consent of the holders of at least 90% of the outstanding units voting together as a single class
(including units owned by the general partner and its affiliates) or such other limited partner approval as is specified below, the Regency partnership agreement may not be amended to:
enlarge the
obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or
enlarge the obligations of, restrict in any way any action by or rights of, or reduce in
any way the amounts distributable, reimbursable or otherwise payable by Regency to the general partner or any of its affiliates without the consent of the general partner, which consent may be given or withheld at its option. |
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Prohibited Amendments. Without the consent of the holders of at least 90% of the outstanding units, the ETP partnership agreement may
not be amended to:
enlarge the obligations of any limited partner without its consent, unless approved by
at least a majority of the type or class of limited partner interests so affected; or
enlarge the obligations of, restrict in any way any action by or rights of, or reduce in
any way the amounts distributable, reimbursable or otherwise payable by ETP to the general partner or any of its affiliates without the consent of the general partner, which may be given or withheld at its
option. |
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No Unitholder Approval. The general partner may generally make amendments to the Regency partnership agreement without the approval of
any limited partner or assignee to reflect:
a change in Regencys name, the location of its principal place of business, the
registered agent or registered office;
the admission, substitution, withdrawal or removal of partners in accordance with the
Regency partnership agreement;
a change that the general partner determines to be necessary or appropriate to qualify
or continue the qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither the partnership nor the operating company nor any of its subsidiaries
will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes;
an amendment that is necessary, in the opinion of Regencys counsel, to prevent the
partnership or the general partner or its directors, officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or plan asset regulations
adopted under the Employee Retirement Income Security Act of 1974, whether or not substantially similar to plan asset regulations currently applied or proposed;
an amendment that the general partner determines to be necessary or appropriate for the
authorization of additional partnership securities or rights to acquire partnership securities;
any amendment expressly permitted in the Regency partnership agreement to be made by the
general partner acting alone;
an amendment effected, necessitated or contemplated by a merger agreement that has been
approved under the terms of the Regency partnership agreement;
any amendment that the general partner determines to be necessary or appropriate for the
formation by the partnership of, or its investment in, any corporation, partnership or other entity, as otherwise permitted by the Regency partnership agreement; |
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No Unitholder Approval. The general partner may generally make amendments to the ETP partnership agreement without the approval of any
limited partner or assignee to reflect:
a change in ETPs name, the location of its principal place of business, the
registered agent or registered office;
the admission, substitution, withdrawal or removal of partners in accordance with the
ETP partnership agreement;
a change that, in the sole discretion of ETPs general partner, is necessary or
advisable for the partnership to qualify or to continue its qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that the partnership and operating
partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes
a change that, in the discretion of the general partner, (i) does not adversely affect
the unitholders in any material respect, (ii) is necessary or advisable to (A) satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority
or contained in any federal or state statute (including the Delaware LP Act) or (B) facilitate the trading of the common units (including the division of any class or classes of outstanding common units into different classes to facilitate
uniformity of tax consequences within such classes of units) or comply with any rule, regulation, guideline or requirement of any national securities exchange on which the common units are or will be listed for trading, compliance with any of which
the general partner determines in its discretion to be in the best interests of the partnership and the unitholders, (iii) is necessary or advisable in connection with action taken by the general partner, or (iv) is required to effect the intent
expressed in the registration statement or the intent of the provisions of the ETP partnership agreement or is otherwise contemplated by the ETP partnership agreement;
a change in ETPs fiscal year or taxable year and related
changes; |
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an amendment that is necessary to require the limited partners to
provide a statement, certification or other proof to Regency regarding whether such limited partner is subject to U.S. federal income taxation on the income generated by the partnership;
a change in
Regencys fiscal year or taxable year and related changes;
mergers with or conveyances to another limited liability entity that is newly formed and
has no assets, liabilities or operations at the time of the merger or conveyance other than those it receives by way of the merger or conveyance; or
any other amendments substantially similar to any of the matters described in the
clauses above. In addition, the general partner may make amendments to the Regency
partnership agreement without the approval of any limited partner or transferee (subject to the voting rights of the Series A units and the Class F units discussed below) in connection with a merger or consolidation approved in connection with the
Regency partnership agreement, or if the general partner determines that those amendments:
do not adversely affect the limited partners (or any particular class of limited
partners) in any material respect;
are necessary or appropriate to satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;
are necessary or appropriate to facilitate the trading of limited partner interests or
to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;
are necessary or appropriate for any action taken by the general partner relating to
splits or combinations of units under the provisions of the Regency partnership agreement; or
are required to effect the intent expressed in the registration statement relating to
Regencys initial public offering or the intent of the provisions of the Regency partnership agreement or are otherwise contemplated by the Regency partnership agreement. |
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an amendment that is necessary, in the opinion of ETPs counsel, to prevent the
partnership or ETPs general partner or its directors, officers, agents or trustees, from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, or
plan asset regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States
Department of Labor;
an amendment that, in the discretion of the general partner, is necessary or advisable
in connection with the authorization of issuance of any class or series of partnership securities;
any amendment expressly permitted in the ETP partnership agreement to be made by
ETPs general partner acting alone;
an amendment effected, necessitated or contemplated by a merger agreement approved in
accordance with the terms of the ETP partnership agreement;
an amendment that, in the discretion of the general partner, is necessary or advisable
to reflect, account for and deal with appropriately the formation by the partnership of, or investment by the partnership in, any corporation, partnership, joint venture, limited liability company or other entity other than the operating
partnership, in connection with the conduct by the partnership of activities permitted by the terms of the ETP partnership agreement; any other amendments substantially similar to any of the matters described in the clauses above.
a merger or
conveyance pursuant to the terms of the ETP partnership agreement; or
any other amendments substantially similar to the
foregoing. |
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Opinion of Counsel and Unitholder Approval. The general partner will not be required to obtain an opinion of counsel that an amendment
will not result in a loss of limited liability to the limited partners or result in the partnership being treated as an entity for federal income tax purposes in connection with any of the amendments described under No Unitholder
Approval. No other amendments to the Regency partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units voting as a single class unless Regency first obtains an opinion of counsel to
the effect that the amendment will not affect the limited liability under applicable law of any of the limited partners.
In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or preferences of any type or class of outstanding
units in relation to other classes of units will require the approval of at least a majority of the type or class of units so affected. Any amendment that reduces the voting percentage required to take any action is required to be approved by the
affirmative vote of limited partners whose aggregate outstanding units constitute not less than the voting requirement sought to be reduced. The affirmative vote of 75% of the Series A units or the Class F units, as applicable, voting separately as
a class with one vote per Series A unit or Class F unit, is necessary on any matter (including a merger, consolidation or business combination) that would adversely affect any of the rights, preferences and privileges of the Series A units or the
Class F units in any respect. Please read Meetings; Voting. |
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Opinion of Counsel and Unitholder Approval. The general partner will not be required to obtain an opinion of counsel that an amendment
will not result in a loss of limited liability to the limited partners or result in the partnership being treated as an entity for federal income tax purposes if one of the amendments described above under No Unitholder Approval
should occur. No other amendments to the ETP partnership agreement will become effective without the approval of holders of at least 90% of the units unless ETP obtains an opinion of counsel to the effect that the amendment will not affect the
limited liability under applicable law of any limited partner in the partnership. Any
amendment to ETPs partnership agreement that adversely affects the rights, preferences and privileges of ETPs Class E units, Class G units, Class H units or Class I units requires the approval of a majority of ETPs outstanding
Class E units, Class G units, Class H units or Class I units, as applicable, in each case voting separately as a class with each Class E unit, Class G unit, Class H unit, or Class I unit as applicable entitled to one vote. Any
amendment that reduces the voting percentage required to take any action is required to be approved by the affirmative vote of limited partners constituting not less than the voting requirement sought to be reduced. |
Indemnification
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Regency |
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ETP |
Under the Regency partnership agreement, in most circumstances, Regency will indemnify the following persons, to the fullest extent permitted
by law, from and against all losses, claims, damages or similar events:
the general partner;
any departing
general partner;
any person who is or was an affiliate of a general partner or any departing general
partner; any
person who is or was a director, officer, member, partner, fiduciary or trustee of any entity set forth in the preceding three bullet points; |
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Under the ETP partnership agreement, in most circumstances, ETP will indemnify the following persons, to the fullest extent permitted by law,
from and against all losses, claims, damages or similar events:
the general partner;
any departing
general partner;
any person who is or was an affiliate of a general partner or any departing general
partner; any
person who is or was a director, officer, employee, agent or trustee of any entity set forth |
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any person who is or was serving as director, officer, member,
partner, fiduciary or trustee of another person at the request of the general partner or any departing general partner; and
any person designated by the general partner.
Any indemnification under these provisions will only be out of Regencys assets.
Unless it otherwise agrees, the general partner will not be personally liable for, or have any obligation to contribute or loan funds or assets to Regency to enable Regency to effectuate, indemnification. Regency may purchase insurance against
liabilities asserted against and expenses incurred by persons for its activities, regardless of whether it would have the power to indemnify the person against liabilities under the Regency partnership agreement. |
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in the preceding three bullet points, as well as the Operating Partnership or any other subsidiary; and
any person who is
or was serving as director, officer, member, partner, fiduciary or trustee of another person at the request of the general partner or any departing general partner.
Any indemnification under these provisions will only be out of ETPs assets. Unless it otherwise agrees, the general partner will not be personally liable
for, or have any obligation to contribute or loan funds or assets to ETP to enable ETP to effectuate, indemnification. ETP may purchase insurance against liabilities asserted against and expenses incurred by persons for its activities, regardless of
whether it would have the power to indemnify the person against liabilities under the ETP partnership agreement. |
Conflicts of Interest
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Regency |
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ETP |
The Regency partnership agreement contains provisions that modify and limit the general partners fiduciary duties to the unitholders.
The Regency partnership agreement also restricts the remedies available to unitholders for actions taken that, without those limitations, might constitute breaches of fiduciary duty.
The general partner will not be in breach of its obligations under the Regency
partnership agreement or its duties to Regency or unitholders if the resolution of the conflict is:
approved by the conflicts committee of the board of directors, although the general
partner is not obligated to seek such approval;
approved by the vote of a majority of the outstanding common units, excluding any common
units owned by the general partner or any of its affiliates;
on terms no less favorable to Regency than those generally being provided to or
available from unrelated third parties; or
fair and reasonable to Regency, taking into account the totality of the relationships
among the parties involved, including other transactions that may be particularly favorable or advantageous to Regency. |
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The ETP partnership agreement contains provisions that waive or consent to conduct by the general partner and its affiliates and which would
reduce the general partners fiduciary duties to the unitholders. The ETP partnership agreement also restricts the remedies available to unitholders for actions taken by the general partner that might, without those limitations, constitute
breaches of fiduciary duty. The ETP partnership agreement generally provides that
transactions in which the general partner has a conflict of interests, are permitted and will not result in a breach of its obligations under the ETP partnership agreement or its duties to ETP or its unitholders if the resolution of the conflict
is: approved by
a majority of the members of the conflicts committee of the board of directors (as long as the material facts known to the general partner or any of its affiliates regarding any proposed transaction were disclosed to the conflicts committee at the
time it gave its approval);
is on terms no less favorable to ETP than those generally being provided to or available
from unrelated third parties; or |
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The general partner may, but is not required to, seek the approval of such resolution from the conflicts committee. If the general partner
does not seek approval from the conflicts committee and the board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the third and fourth
bullet points above, then it will be presumed that, in making its decision, the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such
proceeding will have the burden of overcoming such presumption. Unless the resolution
of a conflict is specifically provided for in the Regency partnership agreement, the general partner or the conflicts committee may consider any factors it determines in good faith to consider when resolving a conflict. When the Regency partnership
agreement provides that someone act in good faith, it requires that person to believe he is acting in the best interests of the partnership. |
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is fair to ETP, taking into account the totality of the relationships
between the parties involved (including other transactions that may be particularly favorable or advantageous to ETP).
The general partner may, but is not required to, seek the approval of such resolution from the conflicts committee. |
Change of Management Provisions
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Regency |
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ETP |
The Regency partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove the general partner or otherwise change Regencys management. If any person or group
other than the general partner and its affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or group that
acquires the units from the general partner or its affiliates and any transferees of that person or group approved by the general partner or to any person or group who acquires the units with the prior approval of the general partner. |
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The ETP partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove the general partner or otherwise change ETPs management. If any person or group other than
the general partner and its affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. |
Termination and Dissolution
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ETP |
Regency will continue as a limited partnership until terminated under the Regency partnership agreement. Regency will dissolve upon:
the election of the
general partner to dissolve the partnership, if approved by the holders of units representing a unit majority; |
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ETP will continue as a limited partnership until terminated under the ETP partnership agreement. ETP will dissolve upon:
the expiration of
its term on September 30, 2085; |
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there being no limited partners, unless the partnership continued
without dissolution in accordance with applicable Delaware law;
the entry of a decree of judicial dissolution of the partnership; or
the withdrawal or
removal of the general partner or any other event that results in its ceasing to be the general partner other than by reason of a transfer of its general partner interest in accordance with the Regency partnership agreement or withdrawal or removal
following approval and admission of a successor. Upon a dissolution under the last
clause above, the holders of a unit majority may also elect, within specific time limitations, to reconstitute the partnership and continue its business on the same terms and conditions described in the Regency partnership agreement by forming a new
limited partnership on terms identical to those in the Regency partnership agreement and having as general partner an entity approved by the holders of units representing a unit majority, subject to Regencys receipt of an opinion of counsel to
the effect that:
the action would not result in the loss of limited liability of any limited partner;
and neither the
partnership, the reconstituted limited partnership, Regencys operating company nor any of its other subsidiaries, would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes
upon the exercise of that right to continue. |
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an event of withdrawal of the general partner;
the entry of a
decree of judicial dissolution of the partnership; or
the sale, exchange or other disposition of all or substantially all of the assets and
properties of the partnership and its subsidiaries. Upon a dissolution under an event
of withdrawal caused by the voluntary withdrawal or removal of the general partner and the failure of the partners to select a successor or upon the dissolution of the partnership upon an event constituting withdrawal, the holders of a unit majority
may also elect, within specific time limitations, to reconstitute the partnership and continue its business on the same terms and conditions described in the ETP partnership agreement by forming a new limited partnership on terms identical to those
in the existing ETP partnership agreement and having as general partner an entity approved by a unit majority, subject to ETPs receipt of an opinion of counsel to the effect that:
the action would
not result in the loss of limited liability of any limited partner; and
neither the partnership, the reconstituted limited partnership, nor its Operating
Partnership would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue. |
Liquidation
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ETP |
Upon its dissolution, unless Regency is reconstituted and continued as a new limited partnership, the liquidator authorized to wind up Regencys affairs will, acting with all of the powers of the general partner that are
necessary or appropriate to liquidate Regencys assets and apply the proceeds of the liquidation as provided in Distributions of Cash upon Liquidation. The liquidator may defer liquidation or distribution of Regencys
assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to the partners. |
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Upon dissolution of the partnership, unless it is reconstituted and continued as a new limited partnership, the liquidator authorized to wind up ETPs affairs will, acting with all of the powers of the general partner that the
liquidator deems necessary or desirable in its good faith judgment, liquidate ETPs assets and apply the proceeds of the liquidation as provided in Distributions of Cash upon Liquidation. Under some circumstances, the
liquidator may defer liquidation or distribution of ETPs assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to the partners. |
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Non-Citizen Assignees; Redemption
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Regency |
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If Regency is or becomes subject to federal, state or local laws or regulations that, in the reasonable determination of the general partner, create a substantial risk of cancellation or forfeiture of any property that it has an
interest in because of the nationality, citizenship or other related status of any limited partner, Regency may redeem the units held by the limited partner at their current market price. In order to avoid any cancellation or forfeiture, the general
partner may require each limited partner to furnish information about his nationality, citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within 30 days after a
request for the information or the general partner determines after receipt of the information that the limited partner is not an eligible citizen, the limited partner may be treated as a non-citizen assignee. A non-citizen assignee, is entitled to
an interest equivalent to that of a limited partner for the right to share in allocations and distributions from Regency, including liquidating distributions. A non-citizen assignee does not have the right to direct the voting of his units and may
not receive distributions in kind upon a liquidation of the partnership. |
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If ETP is or becomes subject to federal, state or local laws or regulations that, in the reasonable determination of the general partner, create a substantial risk of cancellation or forfeiture of any property that it has an
interest in because of the nationality, citizenship or other related status of any limited partner or assignee, ETP may redeem the units held by the limited partner at their current market price. In order to avoid any cancellation or forfeiture, the
general partner may require each limited partner to furnish information about his nationality, citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within 30 days
after a request for the information or the general partner determines after receipt of the information that the limited partner is not an eligible citizen, the limited partner may be treated as a non-citizen assignee. A non-citizen assignee, is
entitled to an interest equivalent to that of a limited partner for the right to share in allocations and distributions from ETP, including liquidating distributions. A non-citizen assignee does not have the right to direct the voting of his units
and may not receive distributions in kind upon a liquidation of the partnership. |
Transfer of Common Units; Status as Unitholder or Assignee
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Regency |
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ETP |
By transfer of common units in accordance with the Regency partnership agreement, each transferee of common units will be admitted as a
limited partner with respect to the common units transferred when such transfer and admission is reflected in Regencys books and records. The general partner will cause any transfers to be recorded on Regencys books and records no less
frequently than quarterly. Each transferee:
represents that the transferee has the capacity, power and authority to become bound by
the Regency partnership agreement;
automatically agrees to be bound by the terms and conditions of, and is deemed to have
executed, the Regency partnership agreement; and
gives the consents and approvals contained in the Regency partnership agreement.
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Each purchaser of ETP common units must execute a transfer application. By executing and delivering a transfer application, the purchaser of
common units:
becomes the record holder of the common units and is an assignee until admitted into the
partnership as a substituted limited partner;
automatically requests admission as a substituted limited partner in the
partnership;
agrees to be bound by the terms and conditions of, and executes, the ETP partnership
agreement;
represents that he has the capacity, power and authority to enter into the ETP
partnership agreement;
grants powers of attorney to the general partner of the partnership as specified in the
ETP partnership agreement; and |
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Regency |
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ETP |
A transferee will become a substituted limited partner of the partnership for the transferred common units automatically upon the recording
of the transfer on Regencys books and records. The general partner will cause any transfers to be recorded on Regencys books and records no less frequently than quarterly.
Regency may, at its discretion, treat the nominee holder of a common unit as the absolute
owner. In that case, the beneficial owners rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common units are securities and are transferable according to the laws governing
transfers of securities. In addition to other rights acquired upon transfer, a transferor of common units gives a transferee of common units the right to become a substituted limited partner in the partnership for the transferred common units.
Until a common unit has been transferred on its books, Regency and the transfer agent may
treat the record holder of the common unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations |
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makes the consents and waivers contained in the ETP partnership agreement.
An assignee will become a substituted limited partner of the partnership for the
transferred common units upon the consent of the general partner and the recording of the name of the assignee on ETPs books and records. The general partner may withhold its consent in its sole discretion.
Transfer applications may be completed, executed and delivered by a purchasers
broker, agent or nominee. ETP is entitled to treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holders rights are limited solely to those that it has against the nominee holder as a result of any
agreement between the beneficial owner and the nominee holder. Common units are
securities and are transferable according to the laws governing transfer of securities. In addition to other rights acquired, the purchaser has the right to request admission as a substituted limited partner in the partnership for the purchased
common units. A purchaser of common units who does not execute and deliver a transfer application obtains only:
the right to assign the common unit to a purchaser or transferee; and
the right to
transfer the right to seek admission as a substituted limited partner in the partnership for the purchased common units.
Thus, a purchaser of common units who does not execute and deliver a transfer application:
will not receive
cash distributions or federal income tax allocations, unless the common units are held in a nominee or street name account and the nominee or broker has executed and delivered a transfer application; and
may not receive
some federal income tax information or reports furnished to record holders of common units.
Until a common unit has been transferred on its books, ETP and the transfer agent, notwithstanding any notice to the contrary, may treat the record holder of
the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations. |
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PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING
Regency unitholders are being asked to approve a proposal that will give the Regency Board authority to adjourn the special meeting, if
necessary, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special meeting. If this proposal is approved, the special meeting could be adjourned to any date. If the special meeting is
adjourned, Regency unitholders who have already submitted their proxies will be able to revoke them at any time prior to their use. If you return a proxy and do not indicate how you wish to vote on any proposal, or if you indicate that you wish to
vote in favor of the adoption of the merger agreement but do not indicate a choice on the adjournment proposal, your units will be voted in favor of the adjournment proposal. But if you indicate that you wish to vote against the adoption of the
merger agreement, your units will only be voted in favor of the adjournment proposal if you indicate that you wish to vote in favor of that proposal. If a quorum is present at the meeting, holders of at least a majority of the outstanding Regency
common units, Class F units and Series A units, voting together as a single class, must vote in favor of the proposal; provided that, if a quorum is not present at the meeting, the affirmative vote of holders of a majority of the outstanding Regency
common units, Class F units and Series A units entitled to vote at such meeting represented either in person or by proxy, voting together as a single class, will be required to approve the proposal. Because approval of this proposal is based on the
affirmative vote of at least a majority of the outstanding Regency common units, Class F units and Series A units, voting together as a single class, a Regency unitholders failure to vote, an abstention from voting or the failure of a Regency
unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect as a vote AGAINST approval of this proposal.
The Regency Board unanimously recommends that you vote FOR the adjournment of the special meeting, if necessary to solicit
additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special meeting.
160
PROPOSAL 3: ADVISORY VOTE ON RELATED COMPENSATION
Regency is providing its unitholders with the opportunity to cast an advisory (non-binding) vote to approve the payments that will or may be
made by Regency to its named executive officers in connection with the merger, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The payments that Regencys named executive officers will or may be entitled to
receive in connection with the merger are summarized in the table under The MergerInterests of Directors and Executive Officers of Regency in the MergerGolden Parachute Compensation and the related narrative disclosures.
The Regency Board encourages you to review carefully the related compensation information disclosed in this proxy statement/prospectus.
The Regency Board unanimously recommends that the unitholders of Regency approve the following resolution:
RESOLVED, that the unitholders of Regency approve, on an advisory (non-binding) basis, the compensation that will or may become payable
to its named executive officers in connection with the merger, as disclosed pursuant to Item 402(t) of Regulation S-K in the table in the section of the proxy statement entitled The MergerInterests of Directors and Executive
Officers of Regency in the MergerGolden Parachute Compensation and the related narrative disclosures.
The vote on the
advisory compensation proposal is a vote separate and apart from the vote on the adoption of the merger agreement. Accordingly, Regency unitholders may vote to approve the adoption of the merger agreement and vote not to approve the advisory
compensation proposal and vice versa. Because the vote on the advisory compensation proposal is advisory only, it will not be binding on either Regency or ETP. Accordingly, if the merger agreement is adopted and the merger is completed, the
compensation payments that are contractually required to be paid by Regency or the surviving partnership to Regencys named executive officers will or may be paid, subject only to the conditions applicable thereto, regardless of the outcome of
the advisory (non-binding) vote of Regency unitholders.
The affirmative vote of holders of at least a majority of the outstanding Regency
common units, Class F common units and Series A preferred units, voting together as a single class, will be required to approve the advisory compensation proposal. Accordingly, a Regency unitholders failure to vote, an abstention from voting
or the failure of a Regency unitholder who holds his or her units in street name through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect as a vote AGAINST
approval of this proposal.
The Regency Board unanimously recommends that you vote FOR the payments that will or may be
paid by Regency to its named executive officers in connection with the merger.
161
LEGAL MATTERS
The validity of the ETP common units to be issued in connection with the merger and being offered hereby, certain tax matters relating to
those common units and certain U.S. federal income tax consequences of the merger will be passed upon for ETP by Latham & Watkins LLP, Houston, Texas. Certain U.S. federal income tax consequences of the merger will be passed upon for
Regency by Baker Botts L.L.P., Dallas, Texas.
EXPERTS
ETP
The consolidated financial
statements of Energy Transfer Partners, L.P. and subsidiaries as of December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014, and managements assessment of the effectiveness of internal control
over financial reporting as of December 31, 2014, incorporated by reference in this proxy statement/prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance upon the reports of Grant Thornton
LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
The report of
Ernst & Young LLP, independent registered public accountants, appearing in Energy Transfer Partners, L.P.s Annual Report on Form 10-K for the year ended December 31, 2014 and incorporated by reference in this proxy
statement/prospectus with respect to the consolidated statements of comprehensive income, equity, and cash flows for the period from October 5, 2012 to December 31, 2012 (successor), the period from January 1, 2012 to October 2012
(predecessor) of Sunoco Logistics Partners L.P., has been so incorporated by reference in reliance upon the authority of said firm as experts in accounting and auditing.
The reports of Ernst & Young LLP, independent registered public accountants, appearing in Energy Transfer Partners, L.P.s Annual
Report on Form 10-K for the year ended December 31, 2014 and incorporated by reference in this proxy statement/prospectus with respect to the consolidated financial statements of Sunoco LP and Susser Holdings Corporation as of December 31, 2014 and
for the period from September 1, 2014 through December 31, 2014 have been incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
Regency
The consolidated financial
statements of Regency Energy Partners LP and subsidiaries as of December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014, and managements assessment of the effectiveness of internal control
over financial reporting as of December 31, 2014, incorporated by reference in this proxy statement/prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance upon the reports of Grant Thornton
LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
The consolidated
financial statements of RIGS Haynesville Partnership Co. and subsidiaries as of December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014, incorporated by reference in this proxy statement/prospectus
and elsewhere in the registration statement have been so incorporated by reference in reliance upon the report of Grant Thornton LLP, independent certified public accountants, upon the authority of said firm as experts in accounting and auditing.
The financial statements of Midcontinent Express Pipeline LLC as of December 31, 2014 and 2013 and for each of the three years in
the period ended December 31, 2014, included in Exhibit 99.3, of Regency Energy Partners LPs Annual Report on Form 10-K for the year ended December 31, 2014, have been so incorporated in this Proxy Statement/Prospectus in reliance on the
report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
162
The consolidated financial statements of Lone Star NGL LLC and subsidiaries as of
December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014, incorporated by reference in this proxy statement/prospectus and elsewhere in the registration statement have been so incorporated by
reference in reliance upon the report of Grant Thornton LLP, independent certified public accountants, upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of Eagle Rock Energy Partners, L.P.s midstream business as of December 31, 2013 and 2012 and for
each of the years in the three year period ended December 31, 2013 have been incorporated by reference herein in reliance upon the report of KPMG LLP, an independent registered public accounting firm, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
ETP has filed with the SEC a registration statement under the Securities Act of which this proxy statement/prospectus forms a part,
which registers the ETP common units to be issued to Regency unitholders in connection with the merger. The registration statement, including the exhibits and schedules attached to the registration statement, contains additional relevant information
about ETP and its common units. The rules and regulations of the SEC allow ETP and Regency to omit certain information that is included in the registration statement from this proxy statement/prospectus.
ETP and Regency file annual, quarterly and special reports and other information with the SEC. The SEC allows ETP and Regency to
incorporate by reference into this proxy statement/prospectus the information they file with the SEC, which means that they can disclose important information to you by referring you to those documents. This proxy statement/prospectus
contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by reference to the actual
documents. The information incorporated by reference is an important part of this proxy statement/prospectus, and information that ETP or Regency files later with the SEC will automatically update and supersede this information as well as the
information included in this proxy statement/prospectus. Some documents or information, such as that called for by Items 2.02 and 7.01 of Form 8-K, or the exhibits related thereto under Item 9.01 of Form 8-K, are deemed furnished and not filed
in accordance with SEC rules. None of those documents and none of that information is incorporated by reference into this proxy statement/prospectus. ETP and Regency incorporate by reference the documents listed below and any future filings they
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of the initial registration statement (of which this proxy statement/prospectus forms a part) and prior to the effectiveness of the
registration statement, as well as between the date of this proxy statement/prospectus and the date on which the special meeting of Regencys unitholders is held:
ETPs Filings (SEC File No. 001-11727)
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Annual Report on Form 10-K for the year ended December 31, 2014, filed on March 2, 2015; |
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Current Reports on Form 8-K filed on January 26, 2015 (three filings), January 30, 2015, February 2, 2015, February 5, 2015, February 17, 2015, February 19, 2015 (two filings),
February 25, 2015, March 2, 2015, March 10, 2015, March 11, 2015, March 12, 2015 and March 13, 2015; and |
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the description of the ETP common units contained in the Registration Statement filed on Form 8-A filed on May 16, 1996, and including any other amendments or reports filed for the purpose of updating such
description. |
163
ETP will provide a copy of any document incorporated by reference in this proxy
statement/prospectus and any exhibit specifically incorporated by reference in the documents it incorporates by reference, without charge, by written or oral request directed to ETP at the following address and telephone number:
Energy Transfer Partners, L.P.
Investor Relations
3738 Oak Lawn
Avenue
Dallas, Texas 75219
(214) 981-0795
Regencys Filings
(SEC File No. 001-35262)
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Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015; |
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Current Reports on Form 8-K filed on January 8, 2015, January 23, 2015, January 26, 2015 (three filings), January 30, 2015, February 19, 2015, February 25, 2015 and March 9, 2015; and
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the description of the Regency common units contained in the Registration Statement filed on Form 8-A filed on August 1, 2011, and including any other amendments or
reports filed for the purpose of updating such description. |
Regency will provide a copy of any document incorporated by
reference in this proxy statement/prospectus and any exhibit specifically incorporated by reference in the documents it incorporates by reference, without charge, by written or oral request directed to Regency at the following address and telephone
number:
Regency Energy Partners LP
Investor Relations
2001 Bryan
Street, Suite 3700 Dallas, Texas 75201
(214) 750-1771
ETP and Regency also make available free of charge on their internet websites at www.energytransfer.com and www.regencygasservices.com,
respectively, the reports and other information filed by ETP and Regency with the SEC, as soon as reasonably practicable after such material is electronically filed or furnished to the SEC. Neither ETPs nor Regencys websites, nor the
information contained on their websites, is part of this proxy statement/prospectus or the documents incorporated by reference.
The SEC
maintains an Internet website that contains reports, proxy and information statements and other material that are filed through the SECs Electronic Data Gathering, Analysis and Retrieval (EDGAR) System. This system can be accessed at
www.sec.gov. You can find information that ETP and Regency file with the SEC by reference to their names or to their SEC file numbers. You also may read and copy any document ETP or Regency files with the SEC at the SECs public reference room
located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room and its copy charges. ETPs and Regencys SEC filings are also available to the
public through the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
The information concerning ETP contained in this
proxy statement/prospectus or incorporated by reference has been provided by ETP, and the information concerning Regency contained in this proxy statement/prospectus or incorporated by reference has been provided by Regency.
In order to receive timely delivery of requested documents in advance of the special meeting your request should be received no later than
April 20, 2015. If you request any documents, ETP or Regency will mail them to you by first class mail, or another equally prompt means, within one business day after receipt of your request.
164
Neither ETP nor Regency has authorized anyone to give any information or make any representation
about the merger, ETP or Regency that is different from, or in addition to, that contained in this proxy statement/prospectus or in any of the materials that have been incorporated by reference. Therefore, if any one distributes this type of
information, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or the solicitation of proxies is
unlawful, or you are a person to whom it is unlawful to direct these types or activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this proxy statement/prospectus speaks only as
of its date, or in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies.
165
ANNEX A
Composite Agreement and Plan of Merger
Agreement and Plan of Merger, dated as of January 25, 2015, as amended as of February 18, 2015, by and among Energy Transfer Partners,
L.P., Energy Transfer Partners GP, L.P., Rendezvous I LLC, Rendezvous II LLC, Regency Energy Partners LP, Regency GP LP, ETE GP Acquirer LLC and, solely for purposes of certain provisions therein, Energy Transfer Equity, L.P. (composite copy
incorporating the Agreement and Plan of Merger, dated as of January 25, 2015 and Amendment No. 1 to Agreement and Plan of Merger, dated as of February 18, 2015).
Each reference in the Agreement and Plan of Merger to this Agreement, hereof, hereunder or words of like
import referring to the Agreement and Plan of Merger shall mean and be a reference to the Agreement and Plan of Merger as amended by Amendment No. 1 to Agreement and Plan of Merger. All references in the Agreement and Plan of Merger to
the date hereof or the date of this Agreement shall refer to January 25, 2015.
AGREEMENT AND PLAN OF MERGER
among
ENERGY TRANSFER
PARTNERS, L.P.,
ENERGY TRANSFER PARTNERS GP, L.P.,
RENDEZVOUS I LLC,
RENDEZVOUS II LLC,
REGENCY ENERGY PARTNERS LP,
REGENCY GP LP,
ETE GP
ACQUIRER LLC
and,
solely for purposes of Section 5.17 and Article VIII,
ENERGY TRANSFER EQUITY, L.P.
Dated as of January 25, 2015
As amended on February 18, 2015
TABLE OF CONTENTS
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Page |
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ARTICLE I. THE MERGERS |
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A-2 |
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Section 1.1 |
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The Mergers |
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A-2 |
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Section 1.2 |
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Closing |
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A-2 |
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Section 1.3 |
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Effective Time |
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A-2 |
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Section 1.4 |
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Effects of the Mergers |
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A-2 |
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Section 1.5 |
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Organizational Documents of the Surviving Entity |
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A-2 |
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ARTICLE II. EFFECT ON UNITS |
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A-3 |
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Section 2.1 |
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Effect of Merger |
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A-3 |
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Section 2.2 |
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Exchange of Certificates |
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A-4 |
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Section 2.3 |
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Treatment of Phantom Units, Unit Options, Cash Units and Equity Plans |
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A-7 |
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Section 2.4 |
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Adjustments |
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A-8 |
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Section 2.5 |
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No Dissenters Rights |
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A-8 |
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Section 2.6 |
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Effect of the GP Merger |
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A-8 |
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Section 2.7 |
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Parent GP Interest. |
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A-9 |
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF MLP |
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A-9 |
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Section 3.1 |
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Organization, Standing and Power |
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A-9 |
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Section 3.2 |
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Capitalization |
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A-10 |
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Section 3.3 |
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Authority; Noncontravention; Voting Requirements |
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A-11 |
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Section 3.4 |
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Governmental Approvals |
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A-12 |
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Section 3.5 |
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MLP SEC Documents; Undisclosed Liabilities |
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A-12 |
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Section 3.6 |
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Absence of Certain Changes or Events |
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A-13 |
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Section 3.7 |
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Legal Proceedings |
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A-13 |
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Section 3.8 |
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Compliance with Laws; Permits |
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A-14 |
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Section 3.9 |
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Information Supplied |
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A-14 |
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Section 3.10 |
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Tax Matters |
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A-15 |
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Section 3.11 |
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Employee Benefits |
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A-15 |
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Section 3.12 |
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Labor Matters |
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A-16 |
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Section 3.13 |
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Environmental Matters |
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A-17 |
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Section 3.14 |
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Contracts |
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A-17 |
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Section 3.15 |
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Property |
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A-18 |
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Section 3.16 |
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Intellectual Property |
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A-19 |
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Section 3.17 |
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Insurance |
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A-19 |
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Section 3.18 |
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Opinion of Financial Advisor |
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A-19 |
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Section 3.19 |
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Brokers and Other Advisors |
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A-20 |
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Section 3.20 |
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State Takeover Statutes |
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A-20 |
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Section 3.21 |
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Regulatory Matters |
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A-20 |
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Section 3.22 |
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No Other Representations or Warranties |
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A-20 |
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ARTICLE IIIA. REPRESENTATIONS AND WARRANTIES OF ETE ACQUIRER |
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A-20 |
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Section 3A.1 |
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Organization, Standing and Power |
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A-20 |
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Section 3A.2 |
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Limited Liability Company Interests; ETE Acquirer Business |
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A-21 |
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Section 3A.3 |
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Authority; Non-Contravention |
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A-21 |
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Section 3A.4 |
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Governmental Approvals |
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A-22 |
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Section 3A.5 |
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Absence of Certain Changes or Events |
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A-22 |
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Section 3A.6 |
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Brokers and Other Advisors |
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A-22 |
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Section 3A.7 |
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No Other Representations or Warranties |
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A-22 |
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A-i
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT |
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A-22 |
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Section 4.1 |
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Organization, Standing and Power |
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A-23 |
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Section 4.2 |
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Capitalization |
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A-23 |
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Section 4.3 |
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Authority; Noncontravention; Voting Requirements |
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A-24 |
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Section 4.4 |
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Governmental Approvals |
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A-25 |
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Section 4.5 |
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Parent SEC Documents; Undisclosed Liabilities |
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A-26 |
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Section 4.6 |
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Absence of Certain Changes or Events |
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A-27 |
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Section 4.7 |
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Legal Proceedings |
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A-27 |
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Section 4.8 |
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Compliance with Laws; Permits |
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A-27 |
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Section 4.9 |
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Information Supplied |
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A-28 |
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Section 4.10 |
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Tax Matters |
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A-28 |
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Section 4.11 |
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Environmental Matters |
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A-29 |
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Section 4.12 |
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Contracts |
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A-29 |
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Section 4.13 |
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Property |
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A-30 |
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Section 4.14 |
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Opinion of Financial Advisor |
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A-30 |
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Section 4.15 |
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Brokers and Other Advisors |
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A-30 |
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Section 4.16 |
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State Takeover Statutes |
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A-30 |
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Section 4.17 |
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Financing |
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A-30 |
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Section 4.18 |
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No Other Representations or Warranties |
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A-31 |
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ARTICLE V. ADDITIONAL COVENANTS AND AGREEMENTS |
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A-31 |
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Section 5.1 |
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Preparation of the Registration Statement and Proxy Statement; MLP Unitholders Meeting |
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A-31 |
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Section 5.2 |
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Conduct of Business. |
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A-32 |
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Section 5.3 |
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No Solicitation by MLP; Etc. |
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A-36 |
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Section 5.4 |
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[Removed and Reserved] |
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A-39 |
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Section 5.5 |
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Reasonable Best Efforts |
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A-39 |
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Section 5.6 |
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Public Announcements |
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A-40 |
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Section 5.7 |
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Access to Information; Confidentiality |
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A-40 |
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Section 5.8 |
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Notification of Certain Matters |
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A-41 |
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Section 5.9 |
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Indemnification and Insurance |
|
|
A-42 |
|
Section 5.10 |
|
Securityholder Litigation |
|
|
A-43 |
|
Section 5.11 |
|
Financing Matters |
|
|
A-43 |
|
Section 5.12 |
|
Fees and Expenses |
|
|
A-44 |
|
Section 5.13 |
|
Section 16 Matters |
|
|
A-44 |
|
Section 5.14 |
|
Listing |
|
|
A-44 |
|
Section 5.15 |
|
Distributions |
|
|
A-44 |
|
Section 5.16 |
|
Conflicts Committees |
|
|
A-44 |
|
Section 5.17 |
|
Voting and Consent |
|
|
A-45 |
|
|
|
ARTICLE VI. CONDITIONS PRECEDENT |
|
|
A-45 |
|
|
|
|
Section 6.1 |
|
Conditions to Each Partys Obligation to Effect the Merger and GP Merger |
|
|
A-45 |
|
Section 6.2 |
|
Conditions to Obligations of the Parent Entities to Effect the Merger and the GP Merger |
|
|
A-46 |
|
Section 6.3 |
|
Conditions to Obligation of MLP to Effect the Merger and the GP Merger |
|
|
A-46 |
|
Section 6.4 |
|
Frustration of Closing Conditions |
|
|
A-47 |
|
|
|
ARTICLE VII. TERMINATION |
|
|
A-47 |
|
|
|
|
Section 7.1 |
|
Termination |
|
|
A-47 |
|
Section 7.2 |
|
Effect of Termination |
|
|
A-49 |
|
Section 7.3 |
|
Fees and Expenses |
|
|
A-49 |
|
A-ii
|
|
|
|
|
|
|
|
|
ARTICLE VIII. MISCELLANEOUS |
|
|
A-50 |
|
|
|
|
Section 8.1 |
|
No Survival, Etc. |
|
|
A-50 |
|
Section 8.2 |
|
Amendment or Supplement |
|
|
A-50 |
|
Section 8.3 |
|
Extension of Time, Waiver, Etc. |
|
|
A-51 |
|
Section 8.4 |
|
Assignment |
|
|
A-51 |
|
Section 8.5 |
|
Counterparts |
|
|
A-51 |
|
Section 8.6 |
|
Entire Agreement; No Third-Party Beneficiaries |
|
|
A-51 |
|
Section 8.7 |
|
Governing Law; Jurisdiction; Waiver of Jury Trial |
|
|
A-51 |
|
Section 8.8 |
|
Specific Enforcement |
|
|
A-52 |
|
Section 8.9 |
|
Notices |
|
|
A-52 |
|
Section 8.10 |
|
Severability |
|
|
A-54 |
|
Section 8.11 |
|
Interpretation |
|
|
A-54 |
|
Section 8.12 |
|
Non-Recourse |
|
|
A-54 |
|
Section 8.13 |
|
Definitions |
|
|
A-55 |
|
A-iii
INDEX OF DEFINED TERMS
|
|
|
Defined Term |
|
Where Defined |
Additional Unit Consideration |
|
Section 8.13 |
Affiliate |
|
Section 8.13 |
Agreement |
|
Preamble |
Antitrust Laws |
|
Section 8.13 |
Balance Sheet Date |
|
Section 3.5(d) |
Book-Entry Units |
|
Section 2.1(e) |
business day |
|
Section 8.13 |
Cash Unit |
|
Section 8.13 |
Certificate |
|
Section 2.1(e) |
Certificate of GP Merger |
|
Section 1.3(b) |
Certificate of Merger |
|
Section 1.3(a) |
Class F Unit |
|
Section 8.13 |
Class F Unitholders |
|
Section 8.13 |
Clayton Act |
|
Section 8.13 |
Closing |
|
Section 1.2 |
Closing Date |
|
Section 1.2 |
Code |
|
Section 2.2(j) |
Commodity Derivative Instrument |
|
Section 3.14(a)(viii) |
Common Unit |
|
Section 8.13 |
Common Unitholders |
|
Section 8.13 |
Contract |
|
Section 3.3(b) |
Converted Parent Cash Unit Award |
|
Section 2.3(c) |
Converted Parent Phantom Unit Award |
|
Section 2.3(a) |
DLLCA |
|
Section 8.13 |
DRULPA |
|
Section 8.13 |
Effective Time |
|
Section 1.3(a) |
Environmental Law |
|
Section 8.13 |
Environmental Permit |
|
Section 8.13 |
ERISA |
|
Section 3.11(a) |
ERISA Affiliate |
|
Section 8.13 |
ETE |
|
Preamble |
ETE Acquirer |
|
Section 8.13 |
ETE Acquirer Material Adverse Effect |
|
Section 3A.1(a) |
ETE Acquirer Charter Documents |
|
Section 8.13 |
ETE Credit Documents |
|
Section 8.13 |
Exchange Act |
|
Section 3.4 |
Exchange Agent |
|
Section 2.2(a) |
Exchange and Repurchase Agreement |
|
Section 4.2(a) |
Exchange Fund |
|
Section 2.2(b) |
Exchange Ratio |
|
Section 2.1(a)(i)(i) |
Existing Credit Facility |
|
Section 5.2(a)(ii) |
Federal Trade Commission Act |
|
Section 8.13 |
GAAP |
|
Section 8.13 |
Governmental Authority |
|
Section 8.13 |
GP Merger |
|
Section 1.1(b) |
GP Merger Effective Time |
|
Section 1.3(b) |
GP Surviving Entity |
|
Section 1.1(b) |
Hazardous Substance |
|
Section 8.13 |
HSR Act |
|
Section 8.13 |
A-iv
|
|
|
ICA |
|
Section 3.21(b) |
Indemnified Person |
|
Section 5.9(a) |
Knowledge |
|
Section 8.13 |
Law |
|
Section 3.8(a) |
Laws |
|
Section 3.8(a) |
Liens |
|
Section 3.1(c) |
Material Adverse Effect |
|
Section 8.13 |
Maximum Amount |
|
Section 5.9(c) |
Merger |
|
Section 1.1(a) |
Merger Sub A |
|
Section 8.13 |
Merger Sub B |
|
Section 8.13 |
Merger Consideration |
|
Section 2.1(a)(i) |
MLP |
|
Preamble |
MLP Acquisition Agreement |
|
Section 5.3(a) |
MLP Adverse Recommendation Change |
|
Section 5.3(a) |
MLP Alternative Proposal |
|
Section 8.13 |
MLP Benefit Plans |
|
Section 3.11(a) |
MLP Board Recommendation |
|
Section 5.1(b) |
MLP Changed Circumstance |
|
Section 8.13 |
MLP Charter Documents |
|
Section 3.1(d) |
MLP Conflicts Committee |
|
Recitals |
MLP Disclosure Schedule |
|
Article III |
MLP Entities |
|
Preamble |
MLP Equity Plans |
|
Section 8.13 |
MLP Fairness Opinion |
|
Section 3.18 |
MLP Financial Advisor |
|
Section 3.18 |
MLP General Partner Interest |
|
Section 8.13 |
MLP GP |
|
Preamble |
MLP GP Charter Documents |
|
Section 8.13 |
MLP GP Common Unit Equivalent |
|
Section 8.13 |
MLP GP Parent Unit Equivalent |
|
Section 8.13 |
MLP GP Percentage Interest |
|
Section 8.13 |
MLP Incentive Distribution Right |
|
Section 8.13 |
MLP Intellectual Property |
|
Section 3.16 |
MLP Joint Ventures |
|
Section 8.13 |
MLP Limited Partner |
|
Section 8.13 |
MLP Limited Partner Interest |
|
Section 8.13 |
MLP Managing GP |
|
Recitals |
MLP Managing GP Board |
|
Recitals |
MLP Managing GP Charter Documents |
|
Section 8.13 |
MLP Material Adverse Effect |
|
Section 3.1(a) |
MLP Material Contract |
|
Section 3.14(a) |
MLP Partnership Agreement |
|
Section 8.13 |
MLP Partnership Interest |
|
Section 8.13 |
MLP Percentage Interest |
|
Section 8.13 |
MLP Permits |
|
Section 3.8(b) |
MLP Recommendation Change Notice |
|
Section 5.3(d)(ii)(A) |
MLP Recommendation Change Notice Period |
|
Section 5.3(d)(ii)(B) |
MLP SEC Documents |
|
Section 3.5(a) |
MLP Security |
|
Section 8.13 |
MLP Special Approval |
|
Section 8.13 |
A-v
|
|
|
MLP Subsidiary Documents |
|
Section 3.1(d) |
MLP Superior Proposal |
|
Section 8.13 |
MLP Superior Proposal Notice |
|
Section 5.3(d)(i)(C) |
MLP Superior Proposal Notice Period |
|
Section 5.3(d)(i)(D) |
MLP Termination Fee |
|
Section 7.3(a) |
MLP Unaffiliated Unitholders |
|
Section 8.13 |
MLP Unitholder |
|
Section 8.13 |
MLP Unitholder Approval |
|
Section 3.3(c) |
MLP Unitholders Meeting |
|
Section 5.1(b) |
Multiemployer Plan |
|
Section 8.13 |
NGA |
|
Section 3.21(a) |
NGPA |
|
Section 3.21(a) |
Non-Competition Agreement |
|
Section 3.14(a)(vi) |
NYSE |
|
Section 8.13 |
Option Consideration |
|
Section 2.3(b) |
Outside Date |
|
Section 7.1(b)(i) |
Parent |
|
Preamble |
Parent Acquisition Transaction |
|
Section 5.2(b)(i) |
Parent Charter Documents |
|
Section 4.1(d) |
Parent Class E Units |
|
Section 4.2(a) |
Parent Class G Units |
|
Section 4.2(a) |
Parent Class H Units |
|
Section 4.2(a) |
Parent Confidentiality Agreement |
|
Section 5.7(a) |
Parent Conflicts Committee |
|
Recitals |
Parent Disclosure Schedule |
|
Article IV |
Parent Entities |
|
Preamble |
Parent Equity Plans |
|
Section 4.2(a) |
Parent Expenses |
|
Section 7.3(g) |
Parent Fairness Opinion |
|
Section 4.14 |
Parent Financial Advisor |
|
Section 4.14 |
Parent GP |
|
Preamble |
Parent GP Charter Documents |
|
Section 8.13 |
Parent GP Interest |
|
Section 4.2(a) |
Parent Incentive Distribution Right |
|
Section 8.13 |
Parent Joint Ventures |
|
Section 8.13 |
Parent Limited Partner |
|
Section 8.13 |
Parent Limited Partner Interest |
|
Section 8.13 |
Parent Managing GP |
|
Recitals |
Parent Managing GP Board |
|
Recitals |
Parent Managing GP Charter Documents |
|
Section 8.13 |
Parent Material Adverse Effect |
|
Section 4.1(a) |
Parent Material Contracts |
|
Section 4.12(a) |
Parent Partnership Agreement |
|
Section 8.13 |
Parent Partnership Agreement Amendment |
|
Recitals |
Parent Partnership Interest |
|
Section 8.13 |
Parent Percentage Interest |
|
Section 8.13 |
Parent Permits |
|
Section 4.8(b) |
Parent Preferred Unit |
|
Section 2.1(a)(iv) |
Parent SEC Documents |
|
Section 4.5(a) |
Parent Subsidiary Documents |
|
Section 4.1(d) |
Parent Unaffiliated Unitholders |
|
Section 8.13 |
Parent Unit |
|
Section 8.13 |
A-vi
|
|
|
Parent Unitholders |
|
Section 8.13 |
Parent Unit Majority |
|
Section 8.13 |
Permit |
|
Section 8.13 |
Person |
|
Section 8.13 |
Phantom Unit |
|
Section 8.13 |
Proceeding |
|
Section 5.9(a) |
Proxy Statement |
|
Section 3.4 |
Registration Statement |
|
Section 3.9 |
Representatives |
|
Section 5.3(a) |
Restraints |
|
Section 6.1(d) |
Revocable Interests |
|
Section 3.15(b) |
rights-of-way |
|
Section 3.15(b) |
Risk Management Policy |
|
Section 8.13 |
Sarbanes-Oxley Act |
|
Section 3.5(a) |
SEC |
|
Section 8.13 |
Securities Act |
|
Section 3.1(c) |
Series A Unit |
|
Section 8.13 |
Series A Unit Consideration |
|
Section 2.1(a)(iv) |
Series A Unitholders |
|
Section 8.13 |
Sherman Act |
|
Section 8.13 |
Subsidiary |
|
Section 8.13 |
SUN Entities |
|
Section 8.13 |
SXL Entities |
|
Section 8.13 |
Tax |
|
Section 8.13 |
Tax Return |
|
Section 8.13 |
Taxes |
|
Section 8.13 |
Unit Consideration |
|
Section 2.1(a) |
Unit Majority |
|
Section 8.13 |
Unit Option |
|
Section 8.13 |
unit proceeds |
|
Section 2.2(h) |
WARN Act |
|
Section 3.12(b) |
Willful Breach |
|
Section 8.13 |
A-vii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of January 25, 2015 (this Agreement), as amended on February 18,
2015, is by and among Regency Energy Partners LP, a Delaware limited partnership (MLP), Regency GP LP, a Delaware limited partnership and the general partner of MLP (MLP GP and, together with MLP, the
MLP Entities), ETE GP Acquirer LLC, a Delaware limited liability company, Energy Transfer Partners, L.P., a Delaware limited partnership (Parent), Energy Transfer Partners GP, L.P., a Delaware limited
partnership and the general partner of Parent (Parent GP and, together with Parent, the Parent Entities), Rendezvous I LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of
Parent, Rendezvous II LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of Parent, and, solely for purposes of Section 5.17 and Article VIII, Energy Transfer Equity, L.P., a Delaware limited
partnership (ETE).
W I T N E S S E T H:
WHEREAS, the Conflicts Committee (MLP Conflicts Committee) of the Board of Directors (the MLP Managing GP
Board) of Regency GP LLC, a Delaware limited liability company and the general partner of MLP GP (the MLP Managing GP), by unanimous vote, in good faith (a) determined that this Agreement and the transactions
contemplated hereby are in the best interest of MLP and the MLP Unaffiliated Unitholders (as defined herein), (b) approved this Agreement and the transactions contemplated hereby, including the Merger (as defined herein) (the foregoing
constituting MLP Special Approval (as defined herein)), and (c) resolved to approve, and to recommend to the MLP Managing GP Board the approval of, this Agreement and the consummation of the transactions contemplated hereby, including the
Merger;
WHEREAS, upon the receipt of such approval and recommendation of the MLP Conflicts Committee, at a meeting duly called and held,
the MLP Managing GP Board (a) approved this Agreement and the transactions contemplated hereby, including the Merger and the GP Merger, (b) directed that this Agreement be submitted to a vote of the Limited Partners (as defined herein) and
the limited partners of MLP GP, and (c) resolved to recommend adoption of this Agreement by the Limited Partners;
WHEREAS, the
Conflicts Committee (the Parent Conflicts Committee) of the Board of Directors (the Parent Managing GP Board) of Energy Transfer Partners, L.L.C., a Delaware limited liability company and the general partner of
Parent GP (Parent Managing GP), by unanimous vote, in good faith (a) determined that this Agreement and the transactions contemplated hereby are in the best interest of Parent and the Parent Unaffiliated Unitholders,
(b) approved this Agreement and the transactions contemplated hereby, including the Merger (the foregoing constituting Parent Special Approval (as defined herein)), and (c) resolved to approve, and to recommend to the Parent Managing GP
Board the approval of, this Agreement and the consummation of the transactions contemplated hereby, including the Merger;
WHEREAS, upon
the receipt of such approval and recommendation of the Parent Conflicts Committee, at a meeting duly called and held, the Parent Managing GP Board (a) approved this Agreement and the transactions contemplated hereby, including the Merger and
the GP Merger, (b) directed that this Agreement be submitted to a vote of the Parent Limited Partners and the limited partners of Parent GP, and (c) resolved to recommend adoption of this Agreement by the Parent Limited Partners; and
WHEREAS, as a condition to the MLP Entities and Parents willingness to enter into this Agreement, subject to the terms and
conditions set forth herein, ETE has agreed to cause Parent GP to execute and deliver an amendment to the Parent Partnership Agreement (the Parent Partnership Agreement Amendment), immediately prior to the Effective Time,
providing for, among other things, (i) the reduction by the holders of the Parent Incentive Distribution Rights of (x) $20 million in quarterly distributions in respect of such rights for four consecutive quarters commencing with the first
quarter for which the related record date occurs on or following the Closing and (y) $15 million in quarterly distributions in respect of such rights for the 16 consecutive quarters immediately thereafter, (ii) the creation and issuance of
the Parent Preferred Units and (iii) a change in the definition of Operating Surplus to provide that such term shall include an amount equal to the operating surplus of MLP immediately prior to the Effective Time.
A-1
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained in this Agreement, and intending to be legally bound, the parties agree as follows:
ARTICLE I.
THE MERGERS
Section 1.1
The Mergers.
(a) Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DRULPA and
the DLLCA, at the Effective Time, MLP shall be merged with Merger Sub A (the Merger), the separate limited liability company existence of Merger Sub A will cease, and MLP will continue its existence as a limited partnership under
Delaware law as the surviving entity in the Merger and a wholly owned Subsidiary of Parent (the Surviving Entity).
(b)
Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DLLCA, at the GP Merger Effective Time, ETE Acquirer shall be merged with Merger Sub B (the GP Merger), the separate limited
liability company existence of Merger Sub B will cease, and ETE Acquirer will continue its existence as a limited liability company under Delaware law as the surviving entity in the GP Merger and a wholly owned Subsidiary of Parent (the GP
Merger Surviving Entity).
Section 1.2 Closing. Subject to the provisions of Article VI, the closing of the Merger
and the GP Merger (the Closing) shall take place at the offices of Latham & Watkins LLP, 811 Main Street, Houston, Texas 77002 at 9:00 A.M., local time, on the second business day after the satisfaction or waiver of the
conditions set forth in Article VI (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or at such other place, date and time as MLP and Parent shall
agree. The date on which the Closing actually occurs is referred to as the Closing Date.
Section 1.3 Effective
Time.
(a) Subject to the provisions of this Agreement, at the Closing, MLP will cause a certificate of merger, executed in accordance
with the relevant provisions of the DRULPA and the DLLCA (the Certificate of Merger) to be duly filed with the Secretary of State of the State of Delaware. The Merger will become effective at such time as the Certificate of Merger
has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by MLP and Parent in writing and specified in the Certificate of Merger (the effective time of the Merger being hereinafter
referred to as the Effective Time).
(b) Subject to the provisions of this Agreement, at the Closing, ETE Acquirer will
cause a certificate of merger, executed in accordance with the relevant provisions of the DLLCA (the Certificate of GP Merger) to be duly filed with the Secretary of State of the State of Delaware. The GP Merger will become
effective at such time as the Certificate of GP Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by ETE Acquirer and Parent in writing and specified in the Certificate of
GP Merger (the effective time of the GP Merger being hereinafter referred to as the GP Merger Effective Time). The parties hereto shall take all actions such that the GP Merger Effective Time shall be the same date and time as the
Effective Time.
Section 1.4 Effects of the Mergers. The Merger and the GP Merger shall have the effects set forth herein and in
the applicable provisions of the DRULPA and the DLLCA.
Section 1.5 Organizational Documents of the Surviving Entity.
(a) At the Effective Time, the certificate of limited partnership of MLP as in effect immediately prior to the Effective Time shall remain
unchanged and shall be the certificate of limited partnership of the Surviving Entity
A-2
from and after the Effective Time, and thereafter may be amended as provided therein or by Law, in each case consistent with the obligations set forth in Section 5.9.
(b) At the Effective Time, the MLP Partnership Agreement as in effect immediately prior to the Effective Time shall remain unchanged and shall
be the agreement of limited partnership of the Surviving Entity from and after the Effective Time, and thereafter may be amended as provided therein or by Law, in each case consistent with the obligations set forth in Section 5.9.
ARTICLE II.
EFFECT ON
UNITS
Section 2.1 Effect of Merger. At the Effective Time, by virtue of the Merger and without any action on the part of MLP
GP, MLP, Parent GP, Parent, Merger Sub A or the holder of any securities of MLP or Merger Sub A:
(a) (i) Conversion of Common
Units. Subject to Section 2.1(c), Section 2.2(h) and Section 2.4, each Common Unit issued and outstanding or deemed issued and outstanding in accordance with Section 2.3 as of immediately prior to
the Effective Time shall be converted into the right to receive (x) the Additional Unit Consideration and (y) 0.4066 (the Exchange Ratio) Parent Units (the Unit Consideration and, together with the Additional
Unit Consideration, the Merger Consideration).
(ii) Conversion of MLP General Partner
Interest. The MLP General Partner Interest outstanding immediately prior to the Effective Time shall be converted into a non-economic general partner interest in MLP, and MLP GP shall continue as the sole general partner of MLP and the sole
record and beneficial owner of the general partner interests in the MLP.
(iii) Conversion of Class F Units. Subject
to Section 2.1(c), Section 2.2(h) and Section 2.4, the Class F Units issued and outstanding as of immediately prior to the Effective Time shall be deemed to have been converted into an equal number of Common Units
and such Common Units shall be converted into the right to receive the Merger Consideration pursuant to Section 2.1(a).
(iv) Conversion of Series A Units. Subject to Section 2.1(c), Section 2.2(h) and
Section 2.4, each Series A Unit issued and outstanding as of immediately prior to the Effective Time shall be converted into the right to receive a Series A preferred unit representing a limited partner interest in Parent (a
Parent Preferred Unit), a new class of units in Parent containing provisions substantially equivalent to the provisions set forth in Section 5.14 of the MLP Partnership Agreement without abridgement including, the same
powers, preferences, rights to distributions, rights to accumulation and compounding upon failure to pay distributions, and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon, that
the Series A Units have immediately prior to the Closing (the Series A Unit Consideration).
(b) Cancellation of MLP
Incentive Distribution Rights. The MLP Incentive Distribution Rights outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be canceled and retired and shall cease to exist. In connection with such
cancellation, Parent GP shall receive a right to any capital account in MLP associated with the MLP Incentive Distribution Rights immediately prior to the Merger.
(c) Cancellation of MLP-Owned Units. Any MLP Securities that are owned immediately prior to the Effective Time by MLP or any Subsidiary
of MLP shall be automatically canceled and shall cease to exist and no consideration shall be delivered in exchange for such canceled MLP Securities.
(d) Conversion of Merger Sub A Limited Liability Company Interests. At the Effective Time, by virtue of the Merger and without any
action on the part of Parent or Merger Sub A, the limited liability company interests
A-3
in Merger Sub A issued and outstanding immediately prior to the Effective Time shall be converted into a 100% limited partner interest in MLP (as the Surviving Entity) and Parent shall be
admitted as a limited partner of MLP. At the Effective Time, the books and records of MLP shall be revised to reflect the admission of Parent as an MLP Limited Partner and the simultaneous withdrawal of all other MLP Limited Partners.
(e) Certificates. As of the Effective Time, all Common Units and Class F Units converted into the Merger Consideration and all Series A
Units converted into the Series A Unit Consideration, as applicable, pursuant to this Article II shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (or evidence of units in
book-entry form (Book-Entry Units)) that immediately prior to the Effective Time represented any such Common Units, Class F Units or Series A Units (a Certificate) shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration or Series A Unit Consideration, as applicable, and any distributions to which such holder is entitled pursuant to Section 2.2(g), in each case to be issued in consideration
therefor upon surrender of such Certificate in accordance with Section 2.2(c), without interest, and the right to be admitted as a Parent Limited Partner. Parent GP hereby consents to the admission (as a Parent Limited Partner) of each
MLP Unitholder who is issued Parent Units or Parent Preferred Units in accordance with this Article II, upon the proper surrender of the Certificate representing Common Units, Class F Units or Series A Units, as applicable. Upon such surrender of
the Certificate (or upon a waiver of the requirement to surrender a Certificate granted by Parent GP in its sole discretion) and the recording of the name of such Person as a limited partner of Parent on the books and records of Parent, such Person
shall be deemed to have made a capital contribution to Parent and shall automatically and effective as of the Effective Time be admitted as a Parent Limited Partner and be bound by the Parent Partnership Agreement as such. By its surrender of a
Certificate, or by its acceptance of Parent Units or Parent Preferred Units, as applicable, a MLP Unitholder confirms its agreement to be bound by all of the terms and conditions of the Parent Partnership Agreement.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall appoint an exchange agent reasonably acceptable to MLP (the
Exchange Agent) for the purpose of exchanging Certificates and Book-Entry Units for the Merger Consideration and Series A Unit Consideration, as applicable. As soon as reasonably practicable after the Effective Time, but in no
event more than three business days following the Effective Time, Parent will send, or will cause the Exchange Agent to send, to each holder of record of Common Units, Class F Units and Series A Units as of the Effective Time (and, to the extent
commercially practicable, to make available for collection by hand, during customary business hours commencing immediately after the Effective Time, if so elected by such holder of record), whose Common Units, Class F Units and Series A Units, as
applicable, were converted into the right to receive the Merger Consideration or Series A Unit Consideration, as applicable, a letter of transmittal (which shall specify that the delivery shall be effected, and risk of loss and title shall pass,
only upon proper delivery of the Certificates and Book-Entry Units (or effective affidavits of loss in lieu thereof) to the Exchange Agent) in such forms as MLP and Parent may reasonably agree, including, as applicable, instructions for use in
effecting the surrender of Certificates and Book-Entry Units (or effective affidavits of loss in lieu thereof) to the Exchange Agent in exchange for the Merger Consideration or Series A Unit Consideration, as applicable.
(b) Deposit. At or prior to the Closing, Parent shall cause to be deposited with the Exchange Agent, in trust for the benefit of the
holders of Common Units, Class F Units, Series A Units and Unit Options, an amount of (x) Parent Units (which shall be in non-certificated book-entry form) and (y) Parent Preferred Units (which shall be in non-certificated book-entry
form), issuable upon due surrender of the Certificates, Book-Entry Units or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) pursuant to the provisions of this Article II. Following the Effective Time, Parent
agrees to make available to the Exchange Agent, from time to time as needed, cash in U.S. dollars sufficient to pay any distributions pursuant to Section 2.2(g), any Parent Units sufficient to pay any Merger Consideration and any Parent
Preferred Units sufficient to pay any Series A Unit Consideration, in each case, that may be payable from time to time following the Effective Time. All cash or book-entry units representing Parent Units and Parent Preferred Units deposited with the
Exchange Agent or
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representing Parent Units to be delivered pursuant to Section 2.2(h) shall be referred to in this Agreement as the Exchange Fund. The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration and Series A Unit Consideration contemplated to be issued or paid pursuant to this Article II out of the Exchange Fund. The Exchange Fund shall not be used for any other purpose. The
Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent; provided, that (i) no such investment or losses thereon shall affect the Merger Consideration payable to holders of Common Units, Class F Units,
Series A Units or Unit Options entitled to receive such consideration and Parent shall promptly cause to be provided additional funds to the Exchange Agent for the benefit of holders of Common Units, Class F Units, Series A Units or Unit Options
entitled to receive such consideration in the amount of any such losses; and (ii) such investments shall be in short-term obligations of the United States of America with maturities of no more than 30 days.
(c) Exchange. Each holder of Common Units, Class F Units and Series A Units that have been converted into the right to receive the
Merger Consideration or Series A Unit Consideration, as applicable, upon surrender to the Exchange Agent of a properly completed letter of transmittal, duly executed and completed in accordance with the instructions thereto, a Certificate (or
effective affidavits of loss in lieu thereof), Book-Entry Unit or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) and such other documents as may reasonably be required by the Exchange Agent, will be entitled to
receive in exchange therefor (i) in the case of a Common Unitholder or Class F Unitholder, (x) the number of Parent Units representing, in the aggregate, the whole number of Parent Units that such holder has the right to receive in
accordance with the provisions of this Article II and/or (y) a check denominated in U.S. dollars in the amount of cash that such holder has the right to receive pursuant to this Article II, and (ii) in the case of a Series A
Unitholder, the number of Parent Preferred Units representing, in the aggregate, the whole number of Parent Preferred Units that such holder has the right to receive in accordance with the provisions of this Article II. The Merger
Consideration and Series A Unit Consideration shall be paid as promptly as practicable by mail after receipt by the Exchange Agent of the Certificate (or effective affidavits of loss in lieu thereof), Book-Entry Units or other evidence of Unit
Options and letter of transmittal in accordance with the foregoing. No interest shall be paid or accrued on any Merger Consideration, Series A Unit Consideration or on any unpaid distributions payable to holders of Certificates. Until so
surrendered, each such Certificate shall, after the Effective Time, represent for all purposes only the right to receive such Merger Consideration or Series A Unit Consideration, as applicable. The Merger Consideration and Series A Unit
Consideration paid upon surrender of Certificates, Book-Entry Units or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) shall be deemed to have been paid in full satisfaction of all rights pertaining to the Common
Units, Class F Units, Series A Units, Book-Entry Units or other evidence of Unit Options (or effective affidavits of loss in lieu thereof), as the case may be, formerly represented by such Certificates, Book-Entry Units or other evidence of Unit
Options (or effective affidavits of loss in lieu thereof).
(d) Other Payees. If any cash payment is to be made to a Person other
than the Person in whose name the applicable surrendered Certificate or Book-Entry Unit, or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) is registered, it shall be a condition of such payment that the Person
requesting such payment shall pay any transfer or other similar Taxes required by reason of the making of such cash payment to a Person other than the registered holder of the surrendered Certificate, Book-Entry Unit or other evidence of Unit
Options (or effective affidavits of loss in lieu thereof) or shall establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable. If any portion of the Merger Consideration or Series A Unit Consideration is to be
registered in the name of a Person other than the Person in whose name the applicable surrendered Certificate, Book-Entry Unit or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) is registered, it shall be a condition
to the registration thereof that the surrendered Certificate shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such delivery of the Merger Consideration or Series A Unit Consideration, as
applicable, shall pay to the Exchange Agent any transfer or other similar Taxes required as a result of such registration in the name of a Person other than the registered holder of such Certificate, Book-Entry Unit or other evidence of Unit Options
(or effective affidavits of loss in lieu thereof) or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.
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(e) No Further Transfers. From and after the Effective Time, there shall be no further
registration on the books of MLP of transfers of Common Units, Class F Units or Series A Units. From and after the Effective Time, the holders of Certificates, Book-Entry Units or other evidence of Unit Options (or effective affidavits of loss in
lieu thereof) representing Common Units, Class F Units or Series A Units outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Common Units, Class F Units or Series A Units, as applicable, except as
otherwise provided in this Agreement or by applicable Law. If, after the Effective Time, Certificates, Book-Entry Units or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) are presented to the Exchange Agent or
Parent, they shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Article II.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund that remains unclaimed by the Common Unitholders, Class F
Unitholders, Series A Unitholders or holders of Unit Options 12 months after the Effective Time shall be returned to Parent, upon demand, and any such holder who has not exchanged such holders Common Units, Class F Units, Unit Options or
Series A Units for the Merger Consideration or Series A Unit Consideration, as applicable, in accordance with this Section 2.2 prior to that time shall thereafter look only to Parent for delivery of the Merger Consideration or Series A
Unit Consideration, as applicable, in respect of such holders Common Units, Class F Units, Unit Options or Series A Units. Notwithstanding the foregoing, Parent, Merger Sub A and MLP shall not be liable to any Common Unitholder, Class F
Unitholder, Series A Unitholder or holders of Unit Options for any Merger Consideration or Series A Unit Consideration, as applicable, duly delivered to a public official pursuant to applicable abandoned property Laws. Any Merger Consideration or
Series A Unit Consideration remaining unclaimed by Common Unitholders, Class F Unitholders, Series A Unitholders or holders of Unit Options immediately prior to such time as such amounts would otherwise escheat to, or become property of, any
Governmental Authority shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.
(g) Distributions. No distributions with respect to Parent Units or Parent Preferred Units issued in the Merger shall be paid to the
holder of any unsurrendered Certificates, Book-Entry Units or other evidence of Unit Options (or effective affidavits of loss in lieu thereof) until such Certificates, Book-Entry Units or other evidence of Unit Options (or effective affidavits of
loss in lieu thereof) are surrendered as provided in this Section 2.2. Following such surrender, subject to the effect of escheat, Tax or other applicable Law, there shall be paid, without interest, to the record holder of the Parent
Units or Parent Preferred Units, if any, issued in exchange therefor (i) at the time of such surrender, all distributions payable in respect of any such Parent Units or Parent Preferred Units with a record date after the Effective Time and a
payment date on or prior to the date of such surrender and not previously paid and (ii) at the appropriate payment date, the distributions payable with respect to such Parent Units or Parent Preferred Units with a record date after the
Effective Time but with a payment date subsequent to such surrender. For purposes of distributions in respect of Parent Units or Parent Preferred Units, all Parent Units or Parent Preferred Units to be issued pursuant to the Merger shall be entitled
to distributions pursuant to the immediately preceding sentence as if issued and outstanding as of the Effective Time.
(h) No
Fractional Units. No certificates or scrip representing fractional Parent Units or Parent Preferred Units shall be issued upon the surrender for exchange of Certificates, Book-Entry Units or other evidence of Unit Options (or effective
affidavits of loss in lieu thereof). Notwithstanding any other provision of this Agreement, all fractional Parent Units that a holder of Common Units, Class F Units or Unit Options converted pursuant to the Merger would otherwise be entitled to
receive as Unit Consideration and Additional Unit Consideration in the Merger (after taking into account all Certificates (or effective affidavits of loss in lieu thereof), Book-Entry Units or other evidence of Unit Options (or effective affidavits
of loss in lieu thereof)) will be aggregated and then, if a fractional Parent Unit results from that aggregation, be rounded up to the nearest whole Parent Unit.
(i) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as
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indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration or Series A Unit Consideration to be paid in respect of the Common Units, Class F Units or Series A Units, as applicable, represented by such Certificate as contemplated by this Article II.
(j) Withholding Taxes. Parent and the Exchange Agent shall deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to a Common Unitholder, Class F Unitholder or Series A Unitholder such amounts as are required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the
Code), and the rules and regulations promulgated thereunder, or under any provision of applicable state, local or foreign Tax Law (and to the extent deduction and withholding is required, such deduction and withholding shall be
taken in Parent Units). To the extent amounts are so withheld and paid over to the appropriate Tax authority, such withheld amounts shall be treated for the purposes of this Agreement as having been paid to the former holder of the Common Units,
Class F Units, Series A Units and Unit Options, as applicable, in respect of whom such withholding was made. If withholding is taken in Parent Units, Parent and the Exchange Agent shall be treated as having sold such consideration for an amount of
cash equal to the fair market value of such consideration at the time of such deemed sale and paid such cash proceeds to the appropriate Tax authority.
(k) Tax Characterization of Merger. MLP and Parent each acknowledges and agrees that for federal income Tax purposes the transactions
consummated pursuant to this Agreement will be treated as an assets-over partnership merger transaction under Treasury Regulations Sections 1.708-1(c)(1) and 1.708-1(c)(3)(i), whereby MLP will be the terminating partnership and Parent
will be the resulting partnership. As a result, the transactions consummated pursuant to this Agreement shall be treated for U.S. federal income Tax purposes as a contribution of all of the assets of MLP to Parent in exchange for the Merger
Consideration, the Series A Unit Consideration and the assumption of liabilities. Each of MLP and Parent agrees to prepare and file all U.S. federal income Tax Returns in accordance with the foregoing and shall not take any position inconsistent
therewith on any such Tax Return, or in the course of any audit, litigation or other proceeding with respect to U.S. federal income Taxes, except as otherwise required by applicable Laws following a final determination by a court of competent
jurisdiction or other final administrative decision by an applicable Governmental Authority.
Section 2.3 Treatment of Phantom Units,
Unit Options, Cash Units and Equity Plans. As soon as reasonably practicable following the date of this Agreement, and in any event prior to the Effective Time, the MLP Managing GP Board (or, if appropriate, any committee administering any MLP
Equity Plans) will adopt resolutions, and MLP will take all other actions as may be necessary or required in accordance with applicable Law and each MLP Equity Plan (including, the award agreements in respect of awards granted thereunder) to give
effect to this Section 2.3 to provide that:
(a) Treatment of Phantom Units. Except as otherwise expressly provided in
the terms of a particular award or as provided in Section 5.2(a)(viii)(E) of the MLP Disclosure Schedule, each award of Phantom Units that is outstanding immediately prior to the Effective Time shall, as of the Effective Time,
automatically and without any action on the part of the holder thereof, cease to relate to or represent a right to receive Common Units and shall be converted, at the Effective Time, into the right to receive an award of phantom units relating to
Parent Units (a Converted Parent Phantom Unit Award) on the same terms and conditions as were applicable to the corresponding award of Phantom Units, except that the number of Parent Units covered by each such Converted Parent
Phantom Unit Award shall be equal to the number of Common Units subject to the corresponding award of Phantom Units multiplied by the sum (rounded up to the nearest whole unit) of (i) the Exchange Ratio, plus (ii) the partial Parent Unit
representing the Additional Unit Consideration.
(b) Treatment of Unit Options. Each Unit Option that is outstanding and
in-the-money on the Closing Date (i.e., having a per unit exercise price greater than the closing price of a Common Unit on the NYSE on the last trading day prior to the Closing Date) immediately prior to the Effective Time (whether or
not vested) shall be deemed to have been exercised on a net-issuance (i.e., cashless) basis immediately prior to the Effective Time
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and each net issued Common Unit deemed to have been issued will be converted into the right to receive the Merger Consideration pursuant to Section 2.1(a)(i) on the terms generally
applicable to issued and outstanding Common Units, except as provided in this Section 2.3(b) (such consideration the Option Consideration). Unless a recipient of Option Consideration shall have remitted to Parent GP or
its applicable Affiliate the amount required to be withheld with respect to the payment of the Option Consideration under the Code or any provision of state, local or foreign tax Law, the Option Consideration to be received by such holder shall be
reduced by a number of Parent Units equal to (i) the amount required to be deducted and withheld, divided by (ii) the closing price of one Parent Unit on the NYSE on the last trading day prior to the Closing Date. Each outstanding Unit
Option that is not in-the-money as of the Closing Date shall be mandatorily surrendered to the MLP and canceled and terminated at the Effective Time for no consideration. In the event that the deemed exercise described in this
Section 2.3(b) would result in the holder of the Unit Option being deemed to hold a fractional Common Unit, that holder shall not receive such fractional unit.
(c) Treatment of Cash Units. Each award of Cash Units that is outstanding immediately prior to the Effective Time shall, as of the
Effective Time, automatically and without any action on the part of the holder thereof, cease to relate to or represent a right to receive an amount of cash based on the fair market value of the Common Units and shall be converted, at the Effective
Time, into the right to receive an award of restricted cash units relating to Parent Units (a Converted Parent Cash Unit Award) on the same terms and conditions as were applicable to the corresponding award of Cash Units, except
that the number of notional units that upon vesting entitles the holder to receive an amount of cash equal to the fair market value of a Parent Unit shall be equal to the number of notional Common Units related to the corresponding award of Cash
Units multiplied by the sum (rounded up to the nearest whole unit) of (i) the Exchange Ratio, plus (ii) the partial Parent Unit representing the Additional Unit Consideration.
(d) Assumption of MLP Equity Plans. As of the Effective Time, Parent shall assume the obligations of MLP under the MLP Equity Plans and
shall assume such plans for purposes of employing such plans to make grants of equity based awards on Parent Units following the Closing.
Section 2.4 Adjustments. Notwithstanding any provision of this Article II to the contrary (but without in any way limiting the
covenants in Section 5.2), if between the date of this Agreement and the Effective Time the number of outstanding Common Units, Class F Units, Series A Units or Parent Units shall have been changed into a different number of units or a
different class by reason of the occurrence or record date of any unit dividend, subdivision, reclassification, recapitalization, split, split-up, unit distribution, combination, exchange of units or similar transaction, each of the Additional Unit
Consideration, the Exchange Ratio and the Series A Unit Consideration shall be appropriately adjusted to reflect fully the effect of such unit dividend, subdivision, reclassification, recapitalization, split, split-up, unit distribution,
combination, exchange of units or similar transaction and to provide the holders of Common Units, Class F Units and Series A Units the same economic effect as contemplated by this Agreement prior to such event.
Section 2.5 No Dissenters Rights. No dissenters or appraisal rights shall be available with respect to the Merger, the GP
Merger or the other transactions contemplated hereby.
Section 2.6 Effect of the GP Merger. At the GP Merger Effective Time, by
virtue of the GP Merger and without any action on the part of ETE Acquirer, Merger Sub B or their respective members: (i) the limited liability company interests in ETE Acquirer issued and outstanding immediately prior to the GP Merger
Effective Time shall be automatically canceled and shall cease to exist and no consideration shall be delivered in exchange for such canceled limited liability company interests; (ii) the limited liability company interests in Merger Sub B
issued and outstanding immediately prior to the GP Merger Effective Time shall be converted into a 100% limited liability company interest in ETE Acquirer (as the GP Merger Surviving Entity) and (iii) Parent hereby agrees to be bound to the
limited liability company agreement of ETE Acquirer and is hereby admitted as a member of ETE Acquirer. At the GP Merger Effective Time, the books and records of ETE Acquirer shall be revised to reflect the admission of Parent as the sole member of
ETE Acquirer and the simultaneous withdrawal
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of all other members of ETE Acquirer. The certificate of formation and the limited liability company agreement of ETE Acquirer as in effect immediately prior to the GP Merger Effective Time shall
remain unchanged and shall be the certificate of formation and the limited liability company agreement of the GP Merger Surviving Entity (except that the limited liability company agreement is hereby amended to reflect the change in the member) from
and after the GP Merger Effective Time, and thereafter may be amended as provided therein or by Law.
Section 2.7 Parent GP
Interest. The parties hereby acknowledge and agree that, upon the consummation of the Merger and the GP Merger, the Parent Percentage Interest represented by the Parent GP Interests will be increased to equal the sum of (x) the Parent
Percentage Interest represented by the Parent GP Interests immediately prior to the Effective Time, as adjusted to give effect to the issuance of Parent Units to be issued in connection with the Merger pursuant to Section 2.1 and
Section 2.3, and (y) the MLP GP Percentage Interest. In connection therewith, Parent GP shall receive a right to any capital account in MLP associated with the MLP General Partner Interest immediately prior to the Merger.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF MLP
Except as disclosed in (a) the MLP SEC Documents filed with the SEC on or after December 31, 2013 and prior to the date of this
Agreement (but excluding any disclosure contained in any such MLP SEC Documents under the heading Risk Factors or Cautionary Note Regarding Forward-Looking Statements or similar heading (other than any factual information
contained within such headings, disclosure or statements)) or (b) the disclosure letter delivered by MLP to Parent (the MLP Disclosure Schedule) prior to the execution of this Agreement (provided that
(i) disclosure in any section of such MLP Disclosure Schedule shall be deemed to be disclosed with respect to any other section of this Agreement to the extent that it is reasonably apparent on the face of such disclosure that it is applicable
to such other section notwithstanding the omission of a reference or cross reference thereto and (ii) the mere inclusion of an item in such MLP Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission
that such item represents a material exception or material fact, event or circumstance or that such item has had, would have or would reasonably be expected to have, an MLP Material Adverse Effect), MLP represents and warrants to Parent as follows:
Section 3.1 Organization, Standing and Power.
(a) Each of MLP, MLP GP and their respective Subsidiaries is a legal entity duly organized, validly existing and in good standing under the
Laws of the jurisdiction in which it is incorporated, formed or organized, as applicable, and has all requisite partnership, corporate, limited liability company or other applicable power and authority necessary to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, except where the failure to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect on MLP (an MLP Material Adverse
Effect).
(b) Each of MLP, MLP GP and their respective Subsidiaries is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(c) All the
outstanding partnership interests, limited liability company interests, shares of capital stock of, or other equity interests in, each material Subsidiary of MLP that are owned directly or indirectly by MLP have been duly authorized and validly
issued and are fully paid and nonassessable and are owned free and clear of all liens, pledges, charges, mortgages, encumbrances, options, rights of first refusal or other preferential purchase
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rights, adverse rights or claims and security interests of any kind or nature whatsoever (including any restriction on the right to vote or transfer the same, except for such transfer
restrictions of general applicability as may be provided under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the Securities Act), and the blue sky laws of the various
States of the United States) (collectively, Liens). Except for those of the MLP Joint Ventures, all such interests and shares of capital stock of each Subsidiary are owned directly or indirectly by MLP.
(d) MLP has made available to Parent correct and complete copies of its certificate of limited partnership and the MLP Partnership Agreement
(the MLP Charter Documents), and correct and complete copies of the comparable organizational documents of each of its material Subsidiaries (the MLP Subsidiary Documents), in each case as amended to the date of
this Agreement. All such MLP Charter Documents are in full force and effect and MLP is not in violation of any of their provisions.
Section 3.2 Capitalization.
(a) As of the close of business on January 23, 2015, MLP has no MLP Partnership Interests or other partnership interests or equity
interests issued and outstanding, other than: (i) 410,923,159 Common Units; (ii) no Common Units held by MLP in its treasury; (iii) 6,274,483 Class F Units; (iv) 1,912,569 Series A Units; (v) the MLP Incentive Distribution
Rights; (vi) the MLP General Partner Interest; (vii) 2,180,131 Common Units issuable upon the settlement of outstanding Phantom Units and (viii) Unit Options as set forth on Section 3.2(a) of the MLP Disclosure Schedule.
Section 3.2(a) of the MLP Disclosure Schedule sets forth the following information with respect to the outstanding Unit Options on a per Unit Option basis: (i) the grant date and (ii) the number of Common Units subject to the
Unit Option. All outstanding Common Units, Class F Units, Series A Units, the MLP Incentive Distribution Rights have been duly authorized and validly issued and are fully paid, nonassessable (except as such nonassessability may be affected by
matters described in Sections 17-303, 17-607 and 17-804 of the DRULPA) and free of preemptive rights. Except as set forth above in this Section 3.2(a), as of the date of this Agreement there are not, and, as of the Effective Time there
will not be, any MLP Partnership Interests or other partnership interests, voting securities or other equity interests of MLP issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights,
commitments or agreements of any character providing for the issuance of any MLP Partnership Interests or other partnership interests, voting securities or other equity interests of MLP, including any representing the right to purchase or otherwise
receive any of the foregoing.
(b) Since the Balance Sheet Date to the date of this Agreement, MLP has not issued any MLP Partnership
Interests or other partnership interests, voting securities or other equity interests, or any securities convertible into or exchangeable or exercisable for any MLP Partnership Interests or other partnership interests, voting securities or other
equity interests, other than as set forth above in Section 3.2(a). None of MLP or any of its Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights,
commitments or agreements of any character providing for the issuance or disposition of any partnership interests, shares of capital stock, voting securities or equity interests of any Subsidiary of MLP (other than, with respect to the MLP Joint
Ventures, as set forth in the definitive agreements for such MLP Joint Ventures). Except (i) as set forth in the MLP Charter Documents, as in effect as of the date of this Agreement, or (ii) in connection with the vesting, settlement or
forfeiture of, or Tax withholding with respect to, any equity or equity-based awards granted under MLP Equity Plans disclosed in Section 3.2(a) and outstanding as of the date of this Agreement, there are no outstanding obligations of MLP
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any MLP Partnership Interests or other partnership interests, shares of capital stock, voting securities or equity interests (or any options, warrants or other rights to acquire
any MLP Partnership Interests or other partnership interests, shares of capital stock, voting securities or equity interests) of MLP or any of its Subsidiaries (other than, with respect to the MLP Joint Ventures, as set forth in the definitive
agreements for such MLP Joint Ventures).
(c) MLP GP is the sole general partner of MLP. MLP GP is the sole record and beneficial owner of
the MLP General Partner Interest, and such MLP General Partner Interest has been duly authorized and validly issued in
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accordance with applicable Law and the MLP Partnership Agreement. MLP GP owns the MLP General Partner Interest free and clear of any Liens.
(d) MLP Managing GP is the sole general partner of MLP GP. MLP Managing GP is the sole record and beneficial owner of the general partner
interest in MLP GP and such general partner interest has been duly authorized and validly issued in accordance with applicable Law and the partnership agreement of MLP GP. MLP Managing GP owns the general partner interest in MLP GP free and clear of
any Liens.
Section 3.3 Authority; Noncontravention; Voting Requirements.
(a) Each of the MLP Entities has all necessary power and authority to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, including the Merger and the GP Merger, subject to obtaining the MLP Unitholder Approval for the Merger. The execution, delivery and performance by the MLP Entities of this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger and the GP Merger, have been duly authorized and approved by the MLP Managing GP Board, which, at a meeting duly called and held, has, on behalf of MLP and MLP GP, (i) approved and declared advisable
this Agreement and the transactions contemplated hereby, including the Merger and the GP Merger, and (ii) resolved to submit the Agreement to a vote of the MLP Limited Partners and to recommend adoption of this Agreement by the MLP Limited
Partners, and except for obtaining the MLP Unitholder Approval for the adoption of this Agreement, and consummation of the transactions contemplated hereby, no other entity action on the part of the MLP Entities is necessary to authorize the
execution, delivery and performance by the MLP Entities of this Agreement and the consummation of the transactions contemplated hereby, including the Merger and the GP Merger. This Agreement has been duly executed and delivered by the MLP Entities
and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes the legal, valid and binding obligation of each of the MLP Entities, enforceable against each of them in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by the MLP Entities nor the consummation by the MLP Entities of the transactions
contemplated hereby, nor compliance by the MLP Entities with any of the terms or provisions of this Agreement, will (i) assuming that the MLP Unitholder Approval is obtained, conflict with or violate any provision of the MLP Charter Documents,
the MLP GP Charter Documents, the MLP Managing GP Charter Documents or any of the MLP Subsidiary Documents, (ii) assuming that the authorizations, consents and approvals referred to in Section 3.4 and the MLP Unitholder Approval are
obtained and the filings referred to in Section 3.4 are made, (x) violate any Law, judgment, writ or injunction of any Governmental Authority applicable to MLP or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, MLP or any of its Subsidiaries under any of the terms, conditions or provisions of
any loan or credit agreement, debenture, note, bond, mortgage, indenture, deed of trust, license, lease, contract or other agreement, instrument or obligation (each, a Contract) or MLP Permit (including any Environmental Permit)
to which MLP or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected or (iii) result in the exercisability of any right to purchase or acquire any material asset of MLP or
any of its Subsidiaries, except, in the case of clauses (ii)(x) and (ii)(y), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not
reasonably be expected to have an MLP Material Adverse Effect.
(c) The affirmative vote or consent of the holders of a Unit Majority at
the MLP Unitholders Meeting or any adjournment or postponement thereof in favor of the adoption of this Agreement and the transactions contemplated hereby (the MLP Unitholder Approval) is the only vote or approval of the holders
of any class or series of MLP Partnership Interests or other partnership interests, equity interests or capital stock of MLP or any of its Subsidiaries which is necessary to adopt this Agreement and the transactions contemplated hereby.
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Section 3.4 Governmental Approvals. Except for (i) filings required under, and
compliance with other applicable requirements of, the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the Exchange Act), and the Securities Act, including the filing of a proxy
statement with the SEC in connection with the Merger (the Proxy Statement), (ii) the filing of the Certificate of Merger and the Certificate of GP Merger with the Secretary of State of the State of Delaware,
(iii) filings required under, and compliance with other applicable requirements of, the HSR Act or (iv) any consents, authorizations, approvals, filings or exemptions in connection with compliance with the rules of the NYSE, no consents or
approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by MLP and MLP GP and the consummation by MLP and MLP GP of the transactions
contemplated hereby, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to result in an MLP Material Adverse
Effect.
Section 3.5 MLP SEC Documents; Undisclosed Liabilities.
(a) MLP and its Subsidiaries have filed and furnished all reports, schedules, forms, certifications, prospectuses, and registration, proxy and
other statements required to be filed by them with the SEC since December 31, 2012 (collectively and together with all documents filed on a voluntary basis on Form 8-K, and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the MLP SEC Documents). The MLP SEC Documents, as of their respective effective dates (in the case of the MLP SEC Documents that are registration statements filed pursuant to the requirements of
the Securities Act) and as of their respective SEC filing dates (in the case of all other MLP SEC Documents), or, if amended, as finally amended prior to the date of this Agreement, complied in all material respects with the requirements of the
Exchange Act, the Securities Act and the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder (the Sarbanes-Oxley Act), as the case may be, applicable to such MLP SEC Documents, and none of
the MLP SEC Documents as of such respective dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC staff with respect to the MLP SEC Documents. To the Knowledge of MLP, none of the MLP SEC Documents
is the subject of ongoing SEC review or investigation.
(b) The consolidated financial statements of MLP included in the MLP SEC Documents
as of their respective dates (if amended, as of the date of the last such amendment) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP (except, in the case of unaudited quarterly statements, as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of MLP and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations, cash flows and changes in partners equity for the periods
then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments, none of which has been or will be, individually or in the aggregate, material to MLP and its consolidated Subsidiaries, taken as a whole).
(c) MLP has established and maintains internal control over financial reporting and disclosure controls and procedures (as such terms are
defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to MLP, including its consolidated Subsidiaries, required to be disclosed by MLP in the
reports that it files or submits under the Exchange Act is accumulated and communicated to MLPs principal executive officer and its principal financial officer to allow timely decisions regarding required disclosure; and such disclosure
controls and procedures are effective to ensure that information required to be disclosed by MLP in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC
rules and forms. MLPs principal executive officer and its principal financial officer have disclosed, based on
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their most recent evaluation, to MLPs auditors and the audit committee of the MLP Managing GP Board (x) all significant deficiencies in the design or operation of internal controls
which could adversely affect MLPs ability to record, process, summarize and report financial data and have identified for MLPs auditors any material weaknesses in internal controls and (y) any fraud, whether or not material, that
involves management or other employees who have a significant role in MLPs internal controls. The principal executive officer and the principal financial officer of MLP have made all certifications required by the Sarbanes-Oxley Act, the
Exchange Act and any related rules and regulations promulgated by the SEC with respect to the MLP SEC Documents, and the statements contained in such certifications were complete and correct when made. The management of MLP has completed its
assessment of the effectiveness of MLPs internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2013, and such assessment concluded that
such controls were effective. To the Knowledge of MLP, as of the date of this Agreement there are no facts or circumstances that would prevent its principal executive officer and principal financial officer from giving the certifications and
attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.
(d) Except (i) as reflected or otherwise reserved against on the balance sheet of MLP and its Subsidiaries as of December 31, 2013
(the Balance Sheet Date) (including the notes thereto) included in the MLP SEC Documents filed by MLP and publicly available prior to the date of this Agreement, (ii) for liabilities and obligations incurred since the Balance
Sheet Date in the ordinary course of business and (iii) for liabilities and obligations incurred under or in accordance with this Agreement or in connection with the transactions contemplated hereby, neither MLP nor any of its Subsidiaries has
any liabilities or obligations of any nature (whether or not accrued or contingent), that would be required to be reflected or reserved against on a consolidated balance sheet of MLP prepared in accordance with GAAP or the notes thereto, other than
as have not and would not reasonably be expected to have, individually or in the aggregate, an MLP Material Adverse Effect.
(e) Neither
MLP nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship
between or among MLP and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any off-balance sheet
arrangements (as defined in Item 303(a) of Regulation S-K of the SEC)), where the purpose of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, MLP in MLPs published financial
statements or any MLP SEC Documents.
Section 3.6 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date, there has not been an MLP Material Adverse Effect.
(b) Since the Balance Sheet Date, (i) except for this Agreement and the transactions contemplated hereby, MLP and its Subsidiaries have
carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice and (ii) neither MLP nor any of its Subsidiaries has taken any action described in
Section 5.2(a)(ii), (iii), (v), (vi), (vii), (ix), (xiv) or (xv) (but, with respect to (vii), disregarding the proviso to Section 5.2(a)(vii)(A)(1), and with
respect to (xv), only to the extent applicable to the other clauses designated in this Section 3.6(b)(ii)) that, if taken after the date of this Agreement and prior to the Effective Time without the prior written consent of
Parent, would violate such provisions.
Section 3.7 Legal Proceedings. There are no investigations or proceedings pending (or, to
the Knowledge of MLP, threatened) by any Governmental Authority with respect to MLP or any of its Subsidiaries or actions, suits or proceedings pending (or, to the Knowledge of MLP, threatened) against MLP or any of its Subsidiaries or any of their
respective properties, at law or in equity before any Governmental Authority, and there are no orders, judgments or decrees of any Governmental Authority against MLP or any of its Subsidiaries, in each case except
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for those that would not reasonably be expected to have, individually or in the aggregate, an MLP Material Adverse Effect.
Section 3.8 Compliance with Laws; Permits.
(a) MLP and its Subsidiaries are, and since the later of December 31, 2012 and their respective dates of incorporation, formation or
organization have been, in compliance with and are not in default under or in violation of any applicable federal, state, local or foreign or provincial law, statute, tariff, ordinance, rule, regulation, judgment, order, injunction, stipulation,
determination, award or decree or agency requirement of or undertaking to any Governmental Authority, including common law (collectively, Laws and each, a Law), except where such non-compliance, default or
violation would not have, individually or in the aggregate, an MLP Material Adverse Effect.
(b) MLP and its Subsidiaries are in
possession of all Permits (including Environmental Permits) necessary for MLP and its Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (the MLP
Permits), except where the failure to have any of the MLP Permits would not have, individually or in the aggregate, an MLP Material Adverse Effect. All MLP Permits are in full force and effect, except where the failure to be in full force
and effect would not have, individually or in the aggregate, an MLP Material Adverse Effect. No suspension or cancellation of any of the MLP Permits is pending or, to the Knowledge of MLP, threatened, except where such suspension or cancellation
would not have, individually or in the aggregate, an MLP Material Adverse Effect. MLP and its Subsidiaries are not, and since December 31, 2012 have not been, in violation or breach of, or default under, any MLP Permit, except where such
violation, breach or default would not have, individually or in the aggregate, an MLP Material Adverse Effect. As of the date of this Agreement, to the Knowledge of MLP, no event or condition has occurred or exists which would result in a violation
of, breach, default or loss of a benefit under, or acceleration of an obligation of MLP or any of its Subsidiaries under, any MLP Permit, or has caused (or would cause) an applicable Governmental Authority to fail or refuse to issue, renew or extend
any MLP Permit (in each case, with or without notice or lapse of time or both), except for violations, breaches, defaults, losses, accelerations or failures that would not have, individually or in the aggregate, an MLP Material Adverse Effect.
(c) Without limiting the generality of Section 3.8(a), MLP, each of its Subsidiaries, and, to the Knowledge of MLP, each joint
venture partner, joint interest owner, consultant, agent, or representative of any of the foregoing (in their respective capacities as such), (i) has not violated the U.S. Foreign Corrupt Practices Act, and any other U.S. and foreign
anti-corruption Laws that are applicable to MLP or its Subsidiaries; (ii) has not, to the Knowledge of MLP, been given written notice by any Governmental Authority of any facts which, if true, would constitute a violation of the U.S. Foreign
Corrupt Practices Act or any other U.S. or foreign anti-corruption Laws by any such person; and (iii) to the Knowledge of MLP, is not being (and has not been) investigated by any Governmental Authority except, in each case of the foregoing
clauses (i) through (iii), as would not have, individually or in the aggregate, an MLP Material Adverse Effect.
Section 3.9 Information Supplied. Subject to the accuracy of the representations and warranties of Parent set forth in
Section 4.9, none of the information supplied (or to be supplied) in writing by or on behalf of MLP specifically for inclusion or incorporation by reference in (a) the registration statement on Form S-4 to be filed with the SEC by
Parent in connection with the issuance of Parent Units in connection with the Merger (as amended or supplemented from time to time, the Registration Statement) will, at the time the Registration Statement, or any amendment or
supplement thereto, is filed with the SEC or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they are made, not misleading, and (b) the Proxy Statement will, on the date it is first mailed to MLP Unitholders, and at the time of the MLP Unitholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy
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Statement will comply as to form in all material respects with the applicable requirements of the Exchange Act. Notwithstanding the foregoing, MLP makes no representation or warranty with respect
to information supplied by or on behalf of Parent, Merger Sub A or Merger Sub B for inclusion or incorporation by reference in any of the foregoing documents.
Section 3.10 Tax Matters. Except as would not have, individually or in the aggregate, an MLP Material Adverse Effect: (i) all Tax
Returns that were required to be filed by or with respect to MLP or any of its Subsidiaries have been duly and timely filed (taking into account any extension of time within which to file) and all such Tax Returns are complete and accurate,
(ii) all items of income, gain, loss, deduction and credit or other items required to be included in each such Tax Return, have been so included, (iii) all Taxes owed by MLP or any of its Subsidiaries that are or have become due have been
timely paid in full or an adequate reserve for the payment of such Taxes has been established, (iv) all Tax withholding and deposit requirements imposed on or with respect to MLP or any of its Subsidiaries have been satisfied in full in all
respects, (v) there are no Liens on any of the assets of MLP or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax, (vi) there are no audits, examinations, investigations or other
proceedings pending or threatened in writing in respect of Taxes or Tax matters of MLP or any of its Subsidiaries, (vii) there is no written claim against MLP or any of its Subsidiaries for any Taxes, and no assessment, deficiency or adjustment
has been asserted, proposed, or threatened in writing with respect to any Tax Return of or with respect to MLP or any of its Subsidiaries, (viii) there is not in force any extension of time with respect to the due date for the filing of any Tax
Return of or with respect to MLP or any of its Subsidiaries or any waiver or agreement for any extension of time for the assessment or payment of any Tax of or with respect to any of MLP or any of its Subsidiaries, (ix) none of MLP or any of
its Subsidiaries will be required to include any amount in income for any taxable period as a result of a change in accounting method for any taxable period ending on or before the Closing Date or pursuant to any agreement with any Tax authority
with respect to any such taxable period, (x) none of MLP or any of its Subsidiaries is a party to a Tax allocation or sharing agreement, and no payments are due or will become due by MLP or any of its Subsidiaries pursuant to any such agreement
or arrangement or any Tax indemnification agreement, (xi) none of MLP or any of its Subsidiaries has been a member of an affiliated group filing a consolidated federal income Tax Return or has any liability for the Taxes of any Person (other
than MLP or any of its Subsidiaries), as a transferee or successor, by contract, or otherwise, (xii) MLP and each of its Subsidiaries that is classified as a partnership for U.S. federal income tax purposes has in effect a valid election under
Section 754 of the Code, (xiii) MLP is properly classified as a partnership for U.S. federal income tax purposes, and not as an association or a publicly traded partnership taxable as a corporation under Section 7704 of the Code and
has been properly treated as such since its formation, and (xiv) at least 90% of the gross income of MLP for each taxable year since its formation has been from sources that are treated as qualifying income within the meaning of
Section 7704(d) of the Code.
Section 3.11 Employee Benefits.
(a) Section 3.11(a) of the MLP Disclosure Schedule lists all material MLP Benefit Plans. MLP Benefit Plans
means (i) all employee benefit plans (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA)) and (ii) all other compensation or employee benefit
plans, programs, policies, agreements or other arrangements, whether or not subject to ERISA, including, cash or equity or equity-based, employment, retention, change of control, health, medical, dental, disability, accident, life insurance,
vacation, severance, retirement, pension, savings, or termination, in each case of clauses (i) and (ii) that are sponsored, maintained, contributed to or required to be contributed to by MLP or any of its Subsidiaries for the
benefit of current or former employees, directors or consultants of MLP or its Subsidiaries.
(b) Except as would not have, individually
or in the aggregate, an MLP Material Adverse Effect, (i) none of MLP, any of its Subsidiaries, or any of their respective ERISA Affiliates contributes to, is required to contribute to, or has in the last six years contributed to or been
required to contribute to a Multiemployer Plan and none of MLP, any of its Subsidiaries, or any of their respective ERISA Affiliates has incurred any withdrawal liability (within the meaning of Section 4201 of ERISA) to a
Multiemployer Plan that has not been satisfied in full or has
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(or is reasonably expected to have) any other current or contingent liability with respect to any Multiemployer Plan, and (ii) none of MLP, any of its Subsidiaries, or any of their
respective ERISA Affiliates has in the last six years sponsored, maintained, contributed to or been required to contribute to, or has (or is reasonably expected to have) any current or contingent liability with respect to any employee pension
benefit plan, as defined in Section 3(2) of ERISA, that is subject to Title IV or Section 302 of ERISA or Section 412 of the Code.
(c) Except for such claims which would not have, individually or in the aggregate, an MLP Material Adverse Effect, no action, dispute, suit,
claim, arbitration, or legal, administrative or other proceeding or governmental action is pending or, to the Knowledge of MLP, threatened (i) with respect to any MLP Benefit Plan other than claims for benefits in the ordinary course,
(ii) alleging any breach of the material terms of any MLP Benefit Plan or any fiduciary duties with respect thereto or (iii) with respect to any violation of any applicable Law with respect to such MLP Benefit Plan.
(d) Each MLP Benefit Plan has been maintained, funded and administered in compliance with its terms and with applicable Law, including ERISA
and the Code, except for such non-compliance which would not have, individually or in the aggregate, an MLP Material Adverse Effect.
(e)
Except as would not have, individually or in the aggregate, an MLP Material Adverse Effect, with respect to any MLP Benefit Plan, all contributions, premiums and other payments due from any of MLP or its Subsidiaries required by Law or any MLP
Benefit Plan have been made or properly accrued under any such plan to any fund, trust or account established thereunder or in connection therewith by the due date thereof.
(f) The consummation of the transactions contemplated hereby will not, either alone or in combination with another event, (i) entitle any
current or former employee, consultant or officer of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries to any severance pay, retention bonuses, parachute payments, non-competition payments, unemployment compensation or any other
payment, (ii) accelerate the time of payment or vesting, or increase the amount of any compensation due any such employee, consultant or officer, (iii) result in any forgiveness of indebtedness or obligation to fund benefits with respect
to any such employee, director or officer or (iv) result in any amount failing to be deductible by reason of Section 280G of the Code.
Section 3.12 Labor Matters.
(a) None of the employees of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries is represented in his or her capacity as an
employee of MLP, MLP GP, MLP Managing GP or such Subsidiary by any labor organization. None of MLP, MLP GP, MLP Managing GP or any such Subsidiary has recognized any labor organization, nor has any labor organization been elected as the collective
bargaining agent of any employees of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries, nor has MLP, MLP GP, MLP Managing GP or any such Subsidiary entered into any collective bargaining agreement or union contract recognizing any
labor organization as the bargaining agent of any employees of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries.
(b)
Except for such matters which would not have, individually or in the aggregate, an MLP Material Adverse Effect, none of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries has received written notice during the past two years of the
intent of any Governmental Authority responsible for the enforcement of labor, employment, occupational health and safety or workplace safety and insurance/workers compensation laws to conduct an investigation of MLP, MLP GP, MLP Managing GP or any
of their respective Subsidiaries with respect to such matters and, to the Knowledge of MLP and MLP GP, no such investigation is in progress. Except for such matters which would not have, individually or in the aggregate, an MLP Material Adverse
Effect, (i) there are no (and have not been during the two-year period preceding the date of this Agreement) strikes or lockouts with respect to any employees of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries, (ii) to
the Knowledge of MLP and MLP GP, there is no (and has not been during the two-year period preceding the date of this Agreement) union organizing effort pending or threatened against
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MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries, (iii) there is no (and has not been during the two-year period preceding the date of this Agreement) unfair labor
practice, labor dispute (other than routine individual grievances) or labor arbitration proceeding pending or, to the Knowledge of MLP or MLP GP, threatened against MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries and
(iv) there is no (and has not been during the two year period preceding the date of this Agreement) slowdown, or work stoppage in effect or, to the Knowledge of MLP or MLP GP, threatened with respect to any employees of MLP, MLP GP, MLP
Managing GP or any of their respective Subsidiaries. None of MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries has any liabilities under the Worker Adjustment and Retraining Act of 1988 (the WARN Act) as a
result of any action taken by MLP, MLP GP, MLP Managing GP or any of their respective Subsidiaries that would have, individually or in the aggregate, an MLP Material Adverse Effect. Except for such non-compliance which would not have, individually
or in the aggregate, an MLP Material Adverse Effect, MLP, MLP GP, MLP Managing GP and each of their respective Subsidiaries is, and during the two year period preceding the date of this Agreement has been, in compliance with all applicable Laws in
respect of employment and employment practices, terms and conditions of employment, wages and hours and occupational safety and health (including classifications of service providers as employees and/or independent contractors).
Section 3.13 Environmental Matters. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect:
(i) each of MLP and its Subsidiaries is and has been in compliance with all applicable Environmental Laws, which compliance includes obtaining, maintaining and complying with all Environmental Permits, (ii) there has been no release of any
Hazardous Substance by MLP or any of its Subsidiaries, or to the Knowledge of MLP, any other Person in any manner that would reasonably be expected to give rise to MLP or any of its Subsidiaries incurring any remedial obligation or corrective action
requirement under applicable Environmental Laws, (iii) there are no investigations, actions, suits or proceedings pending or, to the Knowledge of MLP, threatened against MLP or any of its Subsidiaries or involving any real property currently
or, to the Knowledge of MLP, formerly owned, operated or leased by or for MLP or any Subsidiary alleging noncompliance with or liability under, any Environmental Law and (iv) to MLPs Knowledge, no Hazardous Substance has been disposed of,
released or transported in violation of any applicable Environmental Law, from any properties owned or operated by MLP or any of its Subsidiaries or as a result of any operations or activities of MLP or any of its Subsidiaries.
Section 3.14 Contracts.
(a) Section 3.14(a) of the MLP Disclosure Schedule contains a true and complete listing of the following Contracts (which term,
for purposes of this Section 3.14, shall not include any MLP Benefit Plan) to which any of MLP or its Subsidiaries is a party in effect on the date of this Agreement (each Contract that is described in this Section 3.14(a)
being an MLP Material Contract):
(i) each Contract that constitutes a commitment relating to
indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in excess of $25,000,000, other than Contracts solely between or among MLP and one or more of
its Subsidiaries;
(ii) each guarantee by MLP of any obligation of any Person that is not MLP or one of its Subsidiaries
under any Contract of the type described in Section 3.14(a)(i);
(iii) each natural gas or oil transportation,
gathering, treating, processing or other Contract, each natural gas liquids or oil fractionation, transportation, purchase, sales or storage Contract and each natural gas, oil, coal or mineral purchase and sales or lease Contract that during the 12
months ended September 30, 2014 individually involved, or is reasonably expected in the future to involve, annual revenues or payments by MLP and its Subsidiaries in excess of $25,000,000 in the aggregate;
(iv) each Contract for lease of personal property or real property involving aggregate payments in excess of $10,000,000 in any
calendar year;
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(v) each Contract between any of MLP or any of its Subsidiaries, on the one hand,
and any MLP Unitholder holding 5% or more of MLPs issued and outstanding Common Units, on the other hand;
(vi) each
Contract containing a non-compete or similar type of provision that, following the Effective Time, would by its terms materially restrict the ability of Parent or any of its Subsidiaries (including the Surviving Entity and its Subsidiaries) to
compete in any line of business or with any Person or in any geographic area during any period of time after the Closing (each Contract described in this Section 3.14(a)(vi), a Non-Competition Agreement);
(vii) each Contract involving the pending acquisition or sale of (or option to purchase or sell) any assets or properties that
are material to MLP and its Subsidiaries, taken as a whole;
(viii) each Contract for futures, swap, collar, put, call,
floor, cap, option, or other Contract that is intended to reduce or eliminate the fluctuations in the prices of commodities, including natural gas, natural gas liquids, crude oil, condensate and coal (each Contract described in this
Section 3.14(a)(viii), a Commodity Derivative Instrument);
(ix) each material partnership,
joint venture or limited liability company agreement to which MLP or any of its Subsidiaries is a party, and each Contract between MLP or any of its Subsidiaries and an MLP Joint Venture;
(x) each collective bargaining agreement to which MLP or any of its Subsidiaries is a party or is subject;
(xi) each Contract under which any of MLP or any of its Subsidiaries has advanced or loaned any amount of money to any of its
officers, directors, employees or consultants, in each case with a principal amount in excess of $10,000; and
(xii) each
material contract (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC).
(b) Except as would not
have, individually or in the aggregate, an MLP Material Adverse Effect: (i) each MLP Material Contract is valid and binding on MLP and its Subsidiaries, as applicable, and is in full force and effect; (ii) MLP and each of its Subsidiaries
has in all material respects performed all obligations required to be performed by it to date under each MLP Material Contract; (iii) neither MLP nor any of its Subsidiaries has received written notice of, or to the Knowledge of MLP, knows of,
the existence of any event or condition which constitutes, or, after notice or lapse of time or both, will constitute, a material default on the part of MLP or any of its Subsidiaries under any such MLP Material Contract; and (iv) to the
Knowledge of MLP, as of the date of this Agreement no other party to any MLP Material Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default by any such other party
thereunder.
(c) Neither the execution and delivery of this Agreement by MLP, nor the consummation by MLP of the transactions contemplated
hereby, nor compliance by MLP with any of the terms or provisions of this Agreement, will violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by MLP or any of its Subsidiaries under any of the terms, conditions or provisions of any governing
document of an MLP Joint Venture.
Section 3.15 Property.
(a) Except as would not have, individually or in the aggregate, an MLP Material Adverse Effect, MLP or a Subsidiary of MLP owns and has good
title to all of its owned real property (other than severed oil, gas and/or mineral rights and other hydrocarbon interests) and good title to all its owned personal property, and has valid leasehold interests in all of its leased real properties
(other than hydrocarbon interests) free and clear of all Liens, in each case, sufficient to conduct their respective businesses as currently conducted (except in all cases for Liens
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permissible under or not prohibited by any applicable material loan agreements and indentures (together with all related mortgages, deeds of trust and other security agreements)). Except as would
not have, individually or in the aggregate, an MLP Material Adverse Effect, all leases under which MLP or any of its Subsidiaries lease any real or personal property (other than hydrocarbon interests) are valid and effective against MLP or any of
its Subsidiaries and, to the Knowledge of MLP, the counterparties thereto, in accordance with their respective terms and there is not, under any of such leases, any existing material default by MLP or any of its Subsidiaries or, to the Knowledge of
MLP, the counterparties thereto, or, to the Knowledge of MLP, any event which, with notice or lapse of time or both, would become a material default by MLP or any of its Subsidiaries, or, to the Knowledge of MLP, the counterparties thereto.
(b) MLP and its Subsidiaries have such consents, easements, rights-of-way, permits or licenses from each person (collectively,
rights-of-way) as are sufficient to conduct their businesses in all material respects as currently conducted, except such rights-of-way that, if not obtained (or which, if obtained, if the same were to expire or be revoked or
terminated), would not, individually or in the aggregate, have an MLP Material Adverse Effect. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect, each of MLP and its Subsidiaries has fulfilled and performed
all its obligations with respect to such rights-of-way which are required to be fulfilled or performed as of the date of this Agreement (subject to all applicable waivers, modifications, grace periods and extensions) and no event has occurred that
allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such rights-of-way, except for rights reserved to, or vested in, any municipality or other
Governmental Authority or any railroad by the terms of any right, power, franchise, grant, license, permit, or by any other provision of any applicable Law, to terminate or to require annual or other periodic payments as a condition to the
continuance of such right (collectively, Revocable Interests).
Section 3.16 Intellectual Property. Except as
would not have, individually or in the aggregate, an MLP Material Adverse Effect, either MLP or a Subsidiary of MLP owns, or is licensed or otherwise possesses adequate rights to use, all material trademarks, trade names, service marks, service
names, mark registrations, logos, assumed names, domain names, registered and unregistered copyrights, patents or applications and registrations, and trade secrets (collectively, the MLP Intellectual Property) used in their
respective businesses as currently conducted. Except as would not have, individually or in the aggregate, an MLP Material Adverse Effect, (i) there are no pending or, to the Knowledge of MLP, threatened claims by any Person alleging
infringement or misappropriation by MLP or any of its Subsidiaries of such Persons intellectual property, (ii) to the Knowledge of MLP, the conduct of the business of MLP and its Subsidiaries does not infringe or misappropriate any
intellectual property rights of any Person, (iii) neither MLP nor any of its Subsidiaries has made any claim of a violation or infringement, or misappropriation by others of its rights to or in connection with the MLP Intellectual Property, and
(iv) to the Knowledge of MLP, no Person is infringing or misappropriating any MLP Intellectual Property.
Section 3.17
Insurance. MLP and its Subsidiaries maintain, or are entitled to the benefits of, insurance covering their properties, operations, personnel and businesses in amounts customary for the businesses in which they operate.
Section 3.17 of the MLP Disclosure Schedule lists the annual premiums paid by MLP for directors and officers liability insurance policies. Except as would not have, individually or in the aggregate, an MLP Material Adverse Effect, none
of MLP or its Subsidiaries has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance, and all such insurance is outstanding and
duly in force.
Section 3.18 Opinion of Financial Advisor. The MLP Conflicts Committee has received the opinion of J.P. Morgan
Securities LLC (the MLP Financial Advisor), dated as of January 25, 2015, to the effect that, as of such date, and subject to the assumptions and qualifications set forth therein, from a financial point of view, the Merger
Consideration (as defined in the Agreement and Plan of Merger dated as of January 25, 2015 by and among MLP, MLP GP, Parent, Parent GP and ETE) is fair to the MLP Unaffiliated Unitholders (the MLP Fairness Opinion). MLP has
been authorized by the MLP Financial Advisor to permit the inclusion of the MLP Fairness Opinion and/or references thereto in the Registration Statement and the Proxy Statement.
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Section 3.19 Brokers and Other Advisors. Except for the MLP Financial Advisor, the fees
and expenses of which will be paid by MLP, no broker, investment banker or financial advisor is entitled to any brokers, finders or financial advisors fee or commission, or the reimbursement of expenses, in connection with the
Merger or the transactions contemplated hereby based on arrangements made by or on behalf of MLP or any of its Subsidiaries. MLP has heretofore made available to Parent a correct and complete copy of MLPs engagement letters with the MLP
Financial Advisor, which letters describe all fees payable to the MLP Financial Advisor, in connection with the transactions contemplated hereby and all agreements under which any such fees or any expenses are payable and all indemnification and
other agreements with the MLP Financial Advisor, entered into in connection with the transactions contemplated hereby.
Section 3.20
State Takeover Statutes. The action of the MLP Managing GP Board in approving this Agreement and the transactions contemplated hereby is sufficient to render inapplicable to this Agreement and the transactions contemplated hereby any state
takeover laws and any applicable provision of the MLP Partnership Agreement. There is no unitholder rights plan in effect, to which MLP is a party or otherwise bound.
Section 3.21 Regulatory Matters.
(a) None of MLP or any of its Subsidiaries owns or operates facilities subject to the Federal Energy Regulatory Commission under the Natural
Gas Act, 15 U.S.C. § 717, et seq. (the NGA) or the Natural Gas Policy Act of 1978, 15 U.S.C. § 3301, et seq. (the NGPA), and there are no proceedings pending, or to the Knowledge of MLP, threatened,
alleging that MLP or any of its Subsidiaries is in material violation of the NGA, or the NGPA.
(b) None of MLP or any of its Subsidiaries
nor any of the services provided by MLP or any of its Subsidiaries are subject to regulation by the Federal Energy Regulatory Commission pursuant to the Interstate Commerce Act, 49 U.S.C. App. § 1, et seq. (1988) (ICA),
and there are no Proceedings pending, or to the Knowledge of MLP, threatened, alleging that MLP or any of its Subsidiaries is in material violation of the ICA.
Section 3.22 No Other Representations or Warranties. Except for the representations and warranties set forth in this Article
III, neither MLP nor any other Person makes or has made any express or implied representation or warranty with respect to MLP or with respect to any other information provided to Parent or Merger Sub A in connection with the Merger or the other
transactions contemplated hereby. Without limiting the generality of the foregoing, neither MLP nor any other Person will have or be subject to any liability or other obligation to Parent, Merger Sub A or any other Person resulting from the
distribution to Parent or Merger Sub A (including their respective Representatives), or Parents or Merger Sub As (or such Representatives) use of, any such information, including any information, documents, projections, forecasts
or other materials made available to Parent or Merger Sub A in certain data rooms or management presentations in expectation of the Merger.
ARTICLE IIIA.
REPRESENTATIONS AND WARRANTIES OF ETE ACQUIRER
ETE Acquirer represents and warrants to Parent and MLP as follows:
Section 3A.1 Organization, Standing and Power.
(a) Each of ETE Acquirer and MLP Managing GP is a legal entity duly organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is incorporated, formed or organized, as applicable, and has all requisite partnership, corporate, limited liability company or other applicable power and authority necessary to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, except where the failure to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect on ETE Acquirer (an ETE Acquirer Material
Adverse Effect).
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(b) Each of ETE Acquirer and MLP Managing GP is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be
so licensed, qualified or in good standing would not, individually or in the aggregate, have an ETE Acquirer Material Adverse Effect.
(c)
The outstanding partnership interests and limited liability company interests in ETE Acquirer, MLP Managing GP and MLP GP that are owned directly or indirectly by ETE have been duly authorized and validly issued and are fully paid and nonassessable
and are owned free and clear of all Liens, except for those Liens arising under the ETE Credit Documents. All such interests of ETE Acquirer, MLP Managing GP and MLP GP are owned directly or indirectly by ETE.
(d) ETE Acquirer has made available to Parent correct and complete copies of its certificate of formation and limited liability company
agreement (the ETE Acquirer Charter Documents), and correct and complete copies of the MLP Managing GP Charter Documents, in each case as amended to the date of this Agreement. All such ETE Acquirer Charter Documents are in full
force and effect and ETE Acquirer is not in violation of any of their provisions.
Section 3A.2 Limited Liability Company Interests;
ETE Acquirer Business.
(a) ETE is the sole member of ETE Acquirer. ETE is the sole record and beneficial owner of all of the issued
and outstanding limited liability company interests of ETE Acquirer and such limited liability company interests have been duly authorized and validly issued in accordance with applicable Law and the limited liability company agreement of ETE
Acquirer. ETE owns the limited liability company interest in ETE Acquirer free and clear of any Liens, except for those Liens arising under the ETE Credit Documents.
(b) ETE Acquirer does not have and has not had any material assets other than the partnership interest in MLP GP and the limited liability
company interest in the MLP Managing GP, and ETE Acquirer does not have and has not had any material operations other than its ownership interests in such entities.
Section 3A.3 Authority; Non-Contravention.
(a) ETE Acquirer has all necessary power and authority to execute and deliver this Agreement and to consummate the transactions contemplated
hereby, including the GP Merger. The execution, delivery and performance by ETE Acquirer of this Agreement, and the consummation of the transactions contemplated hereby, including the GP Merger, have been duly authorized and approved by ETE, as the
sole member of ETE Acquirer, and no other entity action on the part of ETE Acquirer is necessary to authorize the execution, delivery and performance by ETE Acquirer of this Agreement and the consummation of the transactions contemplated hereby,
including the GP Merger. This Agreement has been duly executed and delivered by ETE Acquirer and, assuming due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes the legal, valid and binding obligation
of ETE Acquirer, enforceable against ETE Acquirer in accordance with its terms.
(b) Neither the execution and delivery of this Agreement
by ETE Acquirer nor the consummation by ETE Acquirer of the transactions contemplated hereby, nor compliance by ETE Acquirer with any of the terms or provisions of this Agreement, will (i) conflict with or violate any provision of the ETE
Acquirer Charter Documents or the MLP Managing GP Charter Documents, (ii) assuming that the authorizations, consents and approvals referred to in Section 3A.4 and the filings referred to in Section 3A.4 are made
(x) violate any Law, judgment, writ or injunction of any Governmental Authority applicable to ETE Acquirer, MLP Managing GP or any of their respective properties or assets, or (y) violate, conflict with, result in the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required
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by, or result in the creation of any Lien upon any of the respective properties or assets of, ETE Acquirer or MLP Managing GP under any of the terms, conditions or provisions of any Contract to
which ETE Acquirer or MLP Managing GP is a party, or by which they or any of their respective properties or assets may be bound or affected or (iii) result in the exercisability of any right to purchase or acquire any material asset of ETE
Acquirer or MLP Managing GP, except, in the case of clauses (ii)(x) and (ii)(y), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not reasonably be
expected to have an ETE Acquirer Material Adverse Effect.
Section 3A.4 Governmental Approvals. Except for (i) filings
required under, and compliance with other applicable requirements of, the Exchange Act and the Securities Act, including the filing of the Proxy Statement, (ii) the filing of the Certificate of Merger and the Certificate of GP Merger with the
Secretary of State of the State of Delaware, (iii) filings required under, and compliance with other applicable requirements of, the HSR Act or (iv) any consents, authorizations, approvals, filings or exemptions in connection with
compliance with the rules of the NYSE, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by ETE Acquirer and the
consummation by ETE Acquirer of the transactions contemplated hereby, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be
expected to result in an ETE Acquirer Material Adverse Effect.
Section 3A.5 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date, there has not been an ETE Acquirer Material Adverse Effect.
(b) Since the Balance Sheet Date, (i) except for this Agreement and the transactions contemplated hereby, ETE Acquirer and MLP Managing
GP have carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice and (ii) neither ETE Acquirer nor MLP Managing GP has taken any action described in
Section 5.2(c) that, if taken after the date of this Agreement and prior to the Effective Time without the prior written consent of Parent, would violate such provisions.
Section 3A.6 Brokers and Other Advisors. No broker, investment banker or financial advisor is entitled to any brokers,
finders or financial advisors fee or commission, or the reimbursement of expenses, in connection with the Merger, GP Merger or the transactions contemplated hereby based on arrangements made by or on behalf of ETE Acquirer.
Section 3A.7 No Other Representations or Warranties. Except for the representations and warranties set forth in this Article IIIA,
neither ETE Acquirer nor any other Person makes or has made any express or implied representation or warranty with respect to ETE Acquirer or with respect to any other information provided to Parent or Merger Sub B in connection with the GP Merger
or the other transactions contemplated hereby. Without limiting the generality of the foregoing, neither ETE Acquirer nor any other Person will have or be subject to any liability or other obligation to Parent, Merger Sub B or any other Person
resulting from the distribution to Parent or Merger Sub B (including their respective Representatives), or Parents or Merger Sub Bs (or such Representatives) use of, any such information, including any information, documents,
projections, forecasts or other materials made available to Parent or Merger Sub B in certain data rooms or management presentations in expectation of the GP Merger.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as disclosed in (a) the Parent SEC Documents filed with the SEC on or after December 31, 2013 and prior to the date of this
Agreement (but excluding any disclosure contained in any such Parent SEC Documents under the heading Risk Factors or Forward-Looking Statements or similar heading (other than any factual
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information contained within such headings, disclosure or statements)) or (b) the disclosure letter delivered by Parent to MLP (the Parent Disclosure Schedule) prior to
the execution of this Agreement (provided that (i) disclosure in any section of such Parent Disclosure Schedule shall be deemed to be disclosed with respect to any other section of this Agreement to the extent that it is reasonably
apparent on the face of such disclosure that it is applicable to such other section notwithstanding the omission of a reference or cross reference thereto and (ii) the mere inclusion of an item in such Parent Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had, would have or would reasonably be expected to have, a Parent Material
Adverse Effect), Parent represents and warrants to MLP as follows:
Section 4.1 Organization, Standing and Power.
(a) Each of Parent, Parent GP and their respective Subsidiaries is a legal entity duly organized, validly existing and in good standing under
the Laws of the jurisdiction in which it is incorporated, formed or organized, as applicable, and has all requisite partnership, corporate, limited liability company or other applicable power and authority necessary to own or lease all of its
properties and assets and to carry on its business as it is now being conducted, except where the failure to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect on Parent (a Parent
Material Adverse Effect).
(b) Each of Parent, Parent GP and their respective Subsidiaries is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where
the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(c) All the outstanding partnership interests, limited liability company interests, shares of capital stock of, or other equity interests in,
each material Subsidiary of Parent that are owned directly or indirectly by Parent have been duly authorized and validly issued and are fully paid and nonassessable and are owned free and clear of all Liens. Except for those of the Parent Joint
Ventures, all such interests and shares of capital stock of each Subsidiary are owned directly or indirectly by Parent.
(d) Parent has
made available to MLP correct and complete copies of its certificate of limited partnership and the Parent Partnership Agreement (the Parent Charter Documents) and correct and complete copies of the comparable organizational
documents of each of its material Subsidiaries (the Parent Subsidiary Documents), in each case as amended to the date of this Agreement. All such Parent Charter Documents are in full force and effect and Parent is not in violation
of any of their provisions.
Section 4.2 Capitalization.
(a) As of the close of business on January 23, 2015, the issued and outstanding limited partner interests and general partner interests
of Parent consisted of (i) 355,510,227 Parent Units, (ii) 8,853,832 Class E Units representing limited partner interests in Parent (Parent Class E Units), (iii) 90,706,000 Class G Units representing limited partner
interests in Parent (Parent Class G Units), (iv) 50,106,000 Class H Units representing limited partner interests in Parent (Parent Class H Units), (v) the Parent Incentive Distribution Rights and
(vi) the general partner interest in Parent (Parent GP Interest). Section 4.2(a) of the Parent Disclosure Schedule sets forth the number of Parent Units that were issuable pursuant to employee and director equity
plans of Parent (Parent Equity Plans) as of January 23, 2015, including the number of Parent Units that were subject to outstanding awards under the Parent Equity Plans as of such date. Except (A) as set forth above in
this Section 4.2(a), (B) as otherwise expressly permitted by Section 5.2(b) or (C) as contemplated by that certain Exchange and Repurchase Agreement dated as of December 23, 2014, among Parent, ETE and ETE
Common Holdings, LLC, a Delaware limited liability company (the Exchange and Repurchase Agreement), as of the date of this Agreement there are not, and as of the Effective Time there will not be, any limited partnership
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interests, voting securities or other equity interests of Parent issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments
or agreements of any character providing for the issuance of any Parent Partnership Interests or other partnership interests, voting securities or other equity interests of Parent, including any representing the right to purchase or otherwise
receive any of the foregoing.
(b) None of Parent or any of its Subsidiaries has issued or is bound by any outstanding subscriptions,
options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any partnership interests, shares of capital stock, voting securities or equity
interests of any Subsidiary of Parent (other than, with respect to the Parent Joint Ventures, as set forth in the definitive agreements for such Parent Joint Ventures). Except (i) as set forth in the Parent Charter Documents, as in effect as of
the date of this Agreement, (ii) in connection with the vesting, settlement or forfeiture of, or Tax withholding with respect to, any equity or equity-based awards outstanding as of the date of this Agreement or (iii) in connection with
the Exchange and Repurchase Agreement, there are no outstanding obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any limited partnership interests, shares of capital stock, voting securities or equity
interests (or any options, warrants or other rights to acquire any limited partnership interests, shares of capital stock, voting securities or equity interests) of Parent or any of its Subsidiaries (other than, with respect to the Parent Joint
Ventures, as set forth in the definitive agreements for such Parent Joint Ventures).
(c) Parent GP is the sole general partner of Parent.
Parent GP is the sole record and beneficial owner of the Parent GP Interest, and such Parent GP Interest has been duly authorized and validly issued in accordance with applicable Law and the Parent Partnership Agreement. Parent GP owns the Parent GP
Interest free and clear of any Liens.
(d) Parent Managing GP is the sole general partner of Parent GP. Parent Managing GP is the sole
record and beneficial owner of the general partner interest in Parent GP and such general partner interest has been duly authorized and validly issued in accordance with applicable Law and the partnership agreement of Parent GP. Parent Managing GP
owns the general partner interest in Parent GP free and clear of any Liens, except for those Liens arising under the ETE Credit Documents.
(e) All of the issued and outstanding limited liability company interests in each of Merger Sub A and Merger Sub B are owned, beneficially and
of record, by Parent. Each of Merger Sub A and Merger Sub B was formed solely for the purpose of engaging in the Merger and the GP Merger, as applicable, and the other transactions contemplated hereby. Except for obligations and liabilities incurred
in connection with its formation and the Merger and the GP Merger, as applicable, and the other transactions contemplated hereby, each of Merger Sub A and Merger Sub B has not and will not have incurred, directly or indirectly, any obligations or
engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section
4.3 Authority; Noncontravention; Voting Requirements.
(a) Each of the Parent Entities has all necessary power and authority to
execute and deliver this Agreement and to consummate the transactions contemplated hereby, including the Merger and the GP Merger. The execution, delivery and performance by the Parent Entities of this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger and the GP Merger, have been duly authorized and approved by the Parent Managing GP Board, which, at a meeting duly called and held, has, on behalf of Parent (in its individual capacity and in
its capacity as the sole member and manager of each of Merger Sub A and Merger Sub B) and Parent GP, unanimously approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger and the GP Merger, and no
other entity action on the part of the Parent Entities is necessary to authorize the execution, delivery and performance by the Parent Entities of this Agreement and the consummation of the transactions contemplated hereby, including the Merger and
the GP
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Merger. This Agreement has been, and the Parent Partnership Agreement Amendment will be, duly executed and delivered by the applicable Parent Entities and, assuming due authorization, execution
and delivery of this Agreement by the other parties hereto, this Agreement constitutes, and the Parent Partnership Agreement Amendment will constitute, a legal, valid and binding obligation of each of the applicable Parent Entities, enforceable
against each of them in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by the Parent Entities, nor
the consummation by the Parent Entities of the transactions contemplated hereby, nor compliance by the Parent Entities with any of the terms or provisions of this Agreement, will (i) conflict with or violate any provision of the Parent Charter
Documents, the Parent GP Charter Documents, the Parent Managing GP Charter Documents or any of the Parent Subsidiary Documents, (ii) assuming that the authorizations, consents and approvals referred to in Section 4.4 are obtained
and the filings referred to in Section 4.4 are made, (x) violate any Law, judgment, writ or injunction of any Governmental Authority applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, or
(y) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, Parent or any of its Subsidiaries under any of the terms, conditions or provisions of any Contract
or Parent Permit (including any Environmental Permit) to which Parent or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected or (iii) result in the exercisability of any
right to purchase or acquire any material asset of Parent or any of its Subsidiaries, except, in the case of clauses (ii)(x) and (ii)(y), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or
Liens as, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect.
(c) The vote or
consent of Parent as the sole member and manager of each of Merger Sub A and Merger Sub B, which Parent hereby irrevocably grants by its execution hereof, is the only vote or consent of the members of Merger Sub A and Merger Sub B necessary to adopt
this Agreement and approve the transactions contemplated hereby.
(d) Except for the ownership of 31,372,419 Common Units and 6,274,483
Class F Units, none of the Parent Entities or any of their respective Subsidiaries holds any limited partner interests, capital stock, voting securities or equity interests of MLP or any of its Subsidiaries, or holds any securities or rights
convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any such limited partner interests, shares of capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or
any other agreements of any character to purchase or acquire any such limited partner interests, shares of capital stock, voting securities or equity interests or any securities or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for, any such limited partner interests, shares of capital stock, voting securities or equity interests.
Section 4.4 Governmental Approvals. Except for (i) filings required under, and compliance with other applicable requirements of,
the Exchange Act and the Securities Act, including the filing of the Registration Statement and the Proxy Statement with the SEC, (ii) the filing of the Certificate of Merger and the Certificate of GP Merger with the Secretary of State of the
State of Delaware, (iii) filings required under, and compliance with other applicable requirements of, the HSR Act or (iv) any consents, authorizations, approvals, filings or exemptions in connection with compliance with the rules of the
NYSE, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse
Effect.
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Section 4.5 Parent SEC Documents; Undisclosed Liabilities.
(a) Parent and its Subsidiaries have filed and furnished all reports, schedules, forms, certifications, prospectuses, and registration, proxy
and other statements required to be filed by them with the SEC since December 31, 2012 (collectively and together with all documents filed on a voluntary basis on Form 8-K, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the Parent SEC Documents). The Parent SEC Documents, as of their respective effective dates (in the case of the Parent SEC Documents that are registration statements filed pursuant to
the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Parent SEC Documents), or, if amended, as finally amended prior to the date of this Agreement, complied in all material respects with the
requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, as the case may be, applicable to such Parent SEC Documents, and none of the Parent SEC Documents as of such respective dates contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there
are no outstanding or unresolved comments received from the SEC staff with respect to the Parent SEC Documents. To the Knowledge of Parent, none of the Parent SEC Documents is the subject of ongoing SEC review or investigation.
(b) The consolidated financial statements of Parent included in the Parent SEC Documents as of their respective dates (if amended, as of the
date of the last such amendment) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the
case of unaudited quarterly statements, as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations, cash flows and changes in partners equity for the periods then ended (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments, none of which has been or will be, individually or in the aggregate, material to Parent and its consolidated Subsidiaries, taken as a whole).
(c) Parent has established and maintains internal control over financial reporting and disclosure controls and procedures (as such terms are
defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to Parent, including its consolidated Subsidiaries, required to be disclosed by Parent
in the reports that it files or submits under the Exchange Act is accumulated and communicated to Parents principal executive officer and its principal financial officer to allow timely decisions regarding required disclosure; and such
disclosure controls and procedures are effective to ensure that information required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms. Parents principal executive officer and its principal financial officer have disclosed, based on their most recent evaluation, to Parents auditors and the audit and risk committee of the Parent Managing
GP Board (x) all significant deficiencies in the design or operation of internal controls which could adversely affect Parents ability to record, process, summarize and report financial data and have identified for Parents auditors
any material weaknesses in internal controls and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in Parents internal controls. The principal executive officer and the
principal financial officer of Parent have made all certifications required by the Sarbanes-Oxley Act, the Exchange Act and any related rules and regulations promulgated by the SEC with respect to the Parent SEC Documents, and the statements
contained in such certifications were complete and correct when made. The management of Parent has completed its assessment of the effectiveness of Parents internal control over financial reporting in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2013, and such assessment concluded that such controls were effective. To the Knowledge of Parent, as of the date of this Agreement, there are no facts or circumstances
that would prevent its principal executive officer and principal financial officer from giving the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without
qualification, when next due.
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(d) Except (i) as reflected or otherwise reserved against on the balance sheet of Parent and
its Subsidiaries as of the Balance Sheet Date (including the notes thereto) included in the Parent SEC Documents filed by Parent and publicly available prior to the date of this Agreement, (ii) for liabilities and obligations incurred since the
Balance Sheet Date in the ordinary course of business and (iii) for liabilities and obligations incurred under or in accordance with this Agreement or in connection with the transactions contemplated hereby, neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether or not accrued or contingent), that would be required to be reflected or reserved against on a consolidated balance sheet of Parent prepared in accordance with GAAP or the notes
thereto, other than as have not and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(e) Neither Parent nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among Parent and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured
finance, special purpose or limited purpose entity or Person, on the other hand, or any off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K of the SEC)), where the
purpose of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, Parent in Parents published financial statements or any Parent SEC Documents.
Section 4.6 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date, there has not been a Parent Material Adverse Effect.
(b) Since the Balance Sheet Date, (i) except for this Agreement and the transactions contemplated hereby, Parent and its Subsidiaries
have carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice and (ii) neither Parent nor any of its Subsidiaries has taken any action described in
Section 5.2(b) that, if taken after the date of this Agreement and prior to the Effective Time without the prior written consent of Parent, would violate such provisions.
Section 4.7 Legal Proceedings. There are no investigations or proceedings pending (or, to the Knowledge of Parent, threatened) by any
Governmental Authority with respect to Parent or any of its Subsidiaries or actions, suits or proceedings pending (or, to the Knowledge of Parent, threatened) against Parent or any of its Subsidiaries or any of their respective properties, at law or
in equity before any Governmental Authority, and there are no orders, judgments or decrees of any Governmental Authority against Parent or any of its Subsidiaries, in each case except for those that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.8 Compliance with Laws; Permits.
(a) Parent and its Subsidiaries are, and since the later of December 31, 2012 and their respective dates of incorporation, formation or
organization have been, in compliance with and are not in default under or in violation of any applicable Laws, except where such non-compliance, default or violation would not have, individually or in the aggregate, a Parent Material Adverse
Effect.
(b) Parent and its Subsidiaries are in possession of all Permits (including Environmental Permits) necessary for Parent and its
Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (the Parent Permits), except where the failure to have any of the Parent Permits would not have,
individually or in the aggregate, a Parent Material Adverse Effect. All Parent Permits are in full force and effect, except where the failure to be in full force and effect would not have, individually or in the aggregate, a Parent Material Adverse
Effect. No suspension or cancellation of any of Parent Permits is pending or, to the Knowledge of Parent, threatened, except where such suspension or cancellation would not have, individually or in the aggregate, a Parent Material Adverse Effect.
Parent and its Subsidiaries are not, and since December 31, 2012 have not been, in violation or breach of, or default under, any Parent Permit, except
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where such violation, breach or default would not have, individually or in the aggregate, a Parent Material Adverse Effect. As of the date of this Agreement, to the Knowledge of Parent, no event
or condition has occurred or exists which would result in a violation of, breach, default or loss of a benefit under, or acceleration of an obligation of Parent or any of its Subsidiaries under, any Parent Permit, or has caused (or would cause) an
applicable Governmental Authority to fail or refuse to issue, renew or extend any Parent Permit (in each case, with or without notice or lapse of time or both), except for violations, breaches, defaults, losses, accelerations or failures that would
not have, individually or in the aggregate, a Parent Material Adverse Effect.
(c) Without limiting the generality of
Section 4.8(a), Parent, each of its Subsidiaries, and, to the Knowledge of Parent, each joint venture partner, joint interest owner, consultant, agent, or representative of any of the foregoing (in their respective capacities as such),
(i) has not violated the U.S. Foreign Corrupt Practices Act, and any other U.S. and foreign anti-corruption Laws that are applicable to Parent or its Subsidiaries; (ii) has not, to the Knowledge of Parent, been given written notice by any
Governmental Authority of any facts which, if true, would constitute a violation of the U.S. Foreign Corrupt Practices Act or any other U.S. or foreign anti-corruption Laws by any such person; and (iii) to the Knowledge of Parent, is not being
(and has not been) investigated by any Governmental Authority except, in each case of the foregoing clauses (i) through (iii), as would not have, individually or in the aggregate, a Parent Material Adverse Effect.
(d) None of Parent or any of its Subsidiaries has any liabilities under the WARN Act that would have, individually or in the aggregate, a
Parent Material Adverse Effect. Except for such non-compliance which would not have, individually or in the aggregate, a Parent Material Adverse Effect, Parent and each of its Subsidiaries is, and during the two year period preceding the date of
this Agreement has been, in compliance with all applicable Laws in respect of employment and employment practices, terms and conditions of employment, wages and hours and occupational safety and health (including classifications of service providers
as employees and/or independent contractors).
Section 4.9 Information Supplied. Subject to the accuracy of the representations and
warranties of MLP set forth in Section 3.9, none of the information supplied (or to be supplied) in writing by or on behalf of Parent specifically for inclusion or incorporation by reference in (a) the Registration Statement will,
at the time the Registration Statement, or any amendment or supplement thereto, is filed with the SEC or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, and (b) the Proxy Statement will, on the date it is first mailed to MLP
Unitholders, and at the time of the MLP Unitholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration Statement and Proxy Statement will comply as to form in all material respects with the applicable requirements of the Securities Act or Exchange Act, as applicable.
Notwithstanding the foregoing, Parent makes no representation or warranty with respect to information supplied by or on behalf of MLP for inclusion or incorporation by reference in any of the foregoing documents.
Section 4.10 Tax Matters. Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect: (i) all
Tax Returns that were required to be filed by or with respect to Parent or any of its Subsidiaries have been duly and timely filed (taking into account any extension of time within which to file) and all such Tax Returns are complete and accurate,
(ii) all items of income, gain, loss, deduction and credit or other items required to be included in each such Tax Return, have been so included, (iii) all Taxes owed by Parent or any of its Subsidiaries that are or have become due have
been timely paid in full or an adequate reserve for the payment of such Taxes has been established, (iv) all Tax withholding and deposit requirements imposed on or with respect to Parent or any of its Subsidiaries have been satisfied in full in
all respects, (v) there are no Liens on any of the assets of Parent or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax, (vi) there are no audits, examinations, investigations or other
proceedings pending or threatened in writing in respect of Taxes or Tax matters of Parent or any of its Subsidiaries, (vii) there is no
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written claim against Parent or any of its Subsidiaries for any Taxes, and no assessment, deficiency or adjustment has been asserted, proposed, or threatened in writing with respect to any Tax
Return of or with respect to Parent or any of its Subsidiaries, (viii) there is not in force any extension of time with respect to the due date for the filing of any Tax Return of or with respect to Parent or any of its Subsidiaries or any
waiver or agreement for any extension of time for the assessment or payment of any Tax of or with respect to any of Parent or any of its Subsidiaries, (ix) none of Parent or any of its Subsidiaries will be required to include any amount in
income for any taxable period as a result of a change in accounting method for any taxable period ending on or before the Closing Date or pursuant to any agreement with any Tax authority with respect to any such taxable period, (x) none of
Parent or any of its Subsidiaries is a party to a Tax allocation or sharing agreement, and no payments are due or will become due by Parent or any of its Subsidiaries pursuant to any such agreement or arrangement or any Tax indemnification
agreement, (xi) none of Parent or any of its Subsidiaries has been a member of an affiliated group filing a consolidated federal income Tax Return or has any liability for the Taxes of any Person (other than Parent or any of its Subsidiaries),
as a transferee or successor, by contract, or otherwise, (xii) Parent and each of its Subsidiaries that is classified as a partnership for U.S. federal income tax purposes has in effect a valid election under Section 754 of the Code,
(xiii) Parent is properly classified as a partnership for U.S. federal income tax purposes, and not as an association or a publicly traded partnership taxable as a corporation under Section 7704 of the Code and has been properly treated as
such since its formation, and (xiv) at least 90% of the gross income of Parent for each taxable year since its formation has been from sources that are treated as qualifying income within the meaning of Section 7704(d) of the
Code.
Section 4.11 Environmental Matters. Except as would not, individually or in the aggregate, have a Parent Material Adverse
Effect: (i) each of Parent and its Subsidiaries is and has been in compliance with all applicable Environmental Laws, which compliance includes obtaining, maintaining and complying with all Environmental Permits, (ii) there has been no
release of any Hazardous Substance by Parent or any of its Subsidiaries, or to the Knowledge of Parent, any other Person in any manner that would reasonably be expected to give rise to Parent or any of its Subsidiaries incurring any remedial
obligation or corrective action requirement under applicable Environmental Laws, (iii) there are no investigations, actions, suits or proceedings pending or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries or
involving any real property currently or, to the Knowledge of Parent, formerly owned, operated or leased by or for Parent or any Subsidiary alleging noncompliance with or liability under, any Environmental Law and (iv) to the Knowledge of
Parent, no Hazardous Substance has been disposed of, released or transported in violation of any applicable Environmental Law, from any properties owned or operated by Parent or any of its Subsidiaries or as a result of any operations or activities
of Parent or any of its Subsidiaries.
Section 4.12 Contracts.
(a) Except for this Agreement, the Parent Benefit Plans, or as filed with the SEC prior to the date of this Agreement, neither Parent nor any
of its Subsidiaries is a party to or bound by, as of the date of this Agreement, any Contract (whether written or oral) (i) which is a material contract (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC)
to Parent; or (ii) which constitutes a contract or commitment relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) in excess of
$100,000,000 (all contracts of the type described in this Section 4.12(a) being referred to herein as Parent Material Contracts).
(b) Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect: (i) each Parent Material Contract is
valid and binding on Parent and any of its Subsidiaries, as applicable, and is in full force and effect; (ii) Parent and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date
under each Parent Material Contract; (iii) neither Parent nor any of its Subsidiaries has received written notice of, or to the Knowledge of Parent, knows of, the existence of any event or condition which constitutes, or, after notice or lapse
of time or both, will constitute, a material default on the part of Parent or any of its Subsidiaries under any such Parent Material Contract; and (iv) there is no (and has not been during the two year period preceding the date of this
Agreement) slowdown, or work stoppage in effect or, to the Knowledge of Parent, threatened with respect to any employees of Parent and any of its Subsidiaries.
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Section 4.13 Property.
(a) Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect, Parent or a Subsidiary of Parent owns and
has good title to all of its owned real property (other than severed oil, gas and/or mineral rights and other hydrocarbon interests) and good title to all its owned personal property, and has valid leasehold interests in all of its leased real
properties (other than hydrocarbon interests) free and clear of all Liens, in each case, sufficient to conduct their respective businesses as currently conducted (except in all cases for Liens permissible under or not prohibited by any applicable
material loan agreements and indentures (together with all related mortgages, deeds of trust and other security agreements)). Except as would not have, individually or in the aggregate, a Parent Material Adverse Effect, all leases under which Parent
or any of its Subsidiaries lease any real or personal property (other than hydrocarbon interests) are valid and effective against Parent or any of its Subsidiaries and, to the Knowledge of Parent, the counterparties thereto, in accordance with their
respective terms, and there is not, under any of such leases, any existing material default by Parent or any of its Subsidiaries or, to the Knowledge of Parent, the counterparties thereto, or, to the Knowledge of Parent, any event which, with notice
or lapse of time or both, would become a material default by Parent or any of its Subsidiaries, or, to the Knowledge of Parent, the counterparties thereto.
(b) Parent and its Subsidiaries have such rights-of-way as are sufficient to conduct their businesses in all material respects as currently
conducted, except such rights-of-way that, if not obtained (or which, if obtained, if the same were to expire or be revoked or terminated), would not, individually or in the aggregate, have a Parent Material Adverse Effect. Except as would not,
individually or in the aggregate, have a Parent Material Adverse Effect, each of Parent and its Subsidiaries has fulfilled and performed all its obligations with respect to such rights-of-way which are required to be fulfilled or performed as of the
date of this Agreement (subject to all applicable waivers, modifications, grace periods and extensions) and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any
impairment of the rights of the holder of any such rights-of-way, except for rights reserved to, or vested in, any municipality or other Governmental Authority or any railroad by the terms of any right, power, franchise, grant, license, permit, or
by any other provision of any applicable Law, to terminate or to require annual or other periodic payments as a condition to the continuance of such right.
Section 4.14 Opinion of Financial Advisor. The Parent Conflicts Committee has received the opinion of Barclays Capital Inc. (the
Parent Financial Advisor), dated as of January 25, 2015, to the effect that, as of such date, and subject to the assumptions and qualifications set forth therein, from a financial point of view, the Merger Consideration (as
defined in this Agreement (as in effect on and as of January 25, 2015)) to be paid by Parent is fair to Parent (the Parent Fairness Opinion). Parent has been authorized by the Parent Financial Advisor to permit the inclusion
of the Parent Fairness Opinion and/or references thereto in the Registration Statement and the Proxy Statement, if and to the extent required by law.
Section 4.15 Brokers and Other Advisors. Except for the Parent Financial Advisor, the fees and expenses of which will be paid by
Parent, no broker, investment banker or financial advisor is entitled to any brokers, finders or financial advisors fee or commission, or the reimbursement of expenses, in connection with the Merger or the transactions contemplated
hereby based on arrangements made by or on behalf of Parent or any of its Subsidiaries.
Section 4.16 State Takeover Statutes. The
action of the Parent Managing GP Board in approving this Agreement and the transactions contemplated hereby is sufficient to render inapplicable to this Agreement and the transactions contemplated hereby any state takeover laws and any applicable
provision of the Parent Partnership Agreement.
Section 4.17 Financing. At the Effective Time, Parent will have available to it
sources of immediately available funds sufficient to consummate the Merger and to pay all cash amounts required to be paid in connection with the Merger.
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Section 4.18 No Other Representations or Warranties. Except for the representations and
warranties set forth in this Article IV, neither Parent nor any other Person makes or has made any express or implied representation or warranty with respect to the Parent Entities or with respect to any other information provided to MLP in
connection with the transactions contemplated hereby. Without limiting the generality of the foregoing, neither Parent nor any other Person will have or be subject to any liability or other obligation to MLP or any other Person resulting from the
distribution to MLP (including its Representatives), or MLPs (or such Representatives) use of, any such information, including any information, documents, projections, forecasts or other materials made available to MLP in any data
rooms or management presentations in expectation of the Merger.
ARTICLE V.
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.1 Preparation of the Registration Statement and Proxy Statement; MLP Unitholders Meeting.
(a) As soon as practicable following the date of this Agreement, MLP and Parent shall jointly prepare and MLP shall file with the SEC the
Proxy Statement, and MLP and Parent shall jointly prepare and Parent shall file with the SEC the Registration Statement, in which the Proxy Statement will be included as a prospectus. Each of MLP and Parent shall use its reasonable best efforts to
have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and keep the Registration Statement effective for so long as necessary to consummate the transactions contemplated hereby. MLP
and Parent shall use their respective reasonable best efforts to cause the Proxy Statement to be mailed to the MLP Unitholders, as promptly as practicable after the Registration Statement is declared effective under the Securities Act. No filing of,
or amendment or supplement to, the Registration Statement will be made by Parent, and no filing of, or amendment or supplement to, the Proxy Statement will be made by MLP, without providing the other party a reasonable opportunity to review and
comment thereon. If at any time prior to the Effective Time any information relating to MLP or Parent, or any of their respective Affiliates, directors or officers, is discovered by MLP or Parent that should be set forth in an amendment or
supplement to any of the Registration Statement or the Proxy Statement, so that any such document would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party that discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be jointly prepared and
promptly filed with the SEC and, to the extent required by Law, disseminated to the MLP Unitholders. The parties shall notify each other promptly of the receipt of any comments from the SEC or the staff of the SEC and of any request by the SEC or
the staff of the SEC for amendments or supplements to any of the Proxy Statement or the Registration Statement or for additional information and shall supply each other with copies of (i) all correspondence between it or any of its
Representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to the Proxy Statement, the Registration Statement or the transactions contemplated hereby and (ii) all orders of the SEC relating to the
Registration Statement.
(b) MLP shall, as soon as practicable following the date of this Agreement, establish a record date for, duly
call, give notice of, convene and hold a special meeting of the MLP Unitholders (the MLP Unitholders Meeting) for the purpose of obtaining the MLP Unitholder Approval. Subject to Section 5.3, MLP shall, through the MLP
Managing GP Board, recommend to the MLP Unitholders adoption of this Agreement (the MLP Board Recommendation). Unless the MLP Managing GP Board has effected an MLP Adverse Recommendation Change in accordance with
Section 5.3, MLP shall use its reasonable best efforts to solicit from the MLP Unitholders proxies in favor of the Merger and to take all other action necessary or advisable to secure the MLP Unitholder Approval. The Proxy Statement
shall include a copy of the MLP Fairness Opinion and (subject to Section 5.3) the MLP Board Recommendation. Notwithstanding anything in this Agreement to the contrary, unless this Agreement is terminated in accordance with
Section 7.1, MLP shall submit this Agreement for approval by the MLP Unitholders at such MLP Unitholders Meeting. Notwithstanding anything in this
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Agreement to the contrary, MLP may postpone or adjourn the MLP Unitholders Meeting (i) to solicit additional proxies for the purpose of obtaining the MLP Unitholder Approval, (ii) for
the absence of quorum, (iii) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure that MLP has determined after consultation with outside legal counsel is necessary under applicable Law and
for such supplemental or amended disclosure to be disseminated and reviewed by the MLP Unitholders prior to the MLP Unitholders Meeting and (iv) if MLP has delivered any notice contemplated by Section 5.3(d) and the time periods
contemplated by Section 5.3(d) have not expired.
(c) [Removed and Reserved]
Section 5.2 Conduct of Business.
(a) Except (i) as expressly permitted by this Agreement, (ii) as set forth in Section 5.2(a) of the MLP Disclosure
Schedule, (iii) as required by applicable Law, (iv) as provided for or contemplated by any MLP Material Contract in effect as of the date of this Agreement (including the MLP Partnership Agreement) or (v) as agreed in writing by
Parent (which consent shall not be unreasonably withheld, delayed or conditioned), during the period from the date of this Agreement until the Effective Time, MLP shall, and shall cause each of its Subsidiaries and the MLP Joint Ventures to,
(A) conduct its business in the ordinary course of business consistent with past practice, (B) use commercially reasonable efforts to maintain and preserve intact its business organization and the goodwill of those having business
relationships with it and retain the services of its present officers and key employees, (C) use commercially reasonable efforts to keep in full force and effect all material MLP Permits and all material insurance policies maintained by MLP,
its Subsidiaries and the MLP Joint Ventures, other than changes to such policies made in the ordinary course of business, and (D) use commercially reasonable efforts to comply in all material respects with all applicable Laws and the
requirements of all MLP Material Contracts. Without limiting the generality of the foregoing, except (i) as expressly permitted by this Agreement, (ii) as set forth in Section 5.2(a) of the MLP Disclosure Schedule,
(iii) as required by applicable Law, (iv) as required by any MLP Material Contract in effect as of the date of this Agreement (including the MLP Partnership Agreement) or (v) as agreed in writing by Parent (in the case of clauses
(iii), (iv), (v), (vi), (vii), (viii), (xii), (xiii), (xiv) and (xv) below (but, with respect to (xv), only to the extent applicable to the other clauses designated
in this Section 5.2(a)(iv), such consent shall not be unreasonably withheld, delayed or conditioned), during the period from the date of this Agreement to the Effective Time, MLP shall not, and shall not permit any of its Subsidiaries
and the MLP Joint Ventures to:
(i) (A) issue, sell, grant, dispose of, accelerate the vesting of or modify, as applicable,
any of its Partnership Interests, partnership interests, limited liability company interests, shares of capital stock, voting securities or equity interests, or any securities or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for, any Partnership Interests, partnership interests, limited liability company interests, shares of capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any of its Partnership Interests, partnership interests, limited liability company interests, shares of capital stock, voting securities or equity interests or any securities or rights
convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for, any of the foregoing; provided, that MLP may grant new awards of Phantom Units under the MLP Equity Plans to employees and other service providers of
MLP, MLP GP and their Affiliates in the ordinary course of business consistent with past practices, and may issue Common Units (x) upon the settlement of any Phantom Units or the exercise of Unit Options, in each case which are outstanding on
the date of this Agreement and in accordance with the terms thereof, (y) upon the conversion of the Class F Units or Series A Units to Common Units in accordance with the MLP Partnership Agreement or (z) the issuance and sale from time to
time of up to $500 million aggregate amount of Common Units pursuant to MLPs prospectus supplement dated December 24, 2014 and accompanying base prospectus (Registration No. 333- 201030); (B) redeem, purchase or otherwise
acquire any of its outstanding partnership interests, limited liability company interests, shares of capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of
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any character to acquire any of its partnership interests, limited liability interests, shares of capital stock, voting securities or equity interests, except in connection with the settlement of
or Tax withholding with respect to any Phantom Units or Unit Options, in each case which are outstanding on the date of this Agreement and in accordance with the terms thereof, (C) declare, set aside for payment or pay any distribution on any
Common Units, Class F Units, Series A Units or other Partnership Interests, or otherwise make any payments to the MLP Unitholders in their capacity as such (other than (x) distributions by a direct or indirect Subsidiary of MLP to its parent,
(y) MLPs regular quarterly distribution in an amount not to exceed $0.5025 per Common Unit or (z) MLPs regular quarterly distribution with respect to the Series A Units in accordance with Section 5.15(b)(ii) of the
MLP Partnership Agreement), or (D) split, combine, subdivide or reclassify any Common Units, Class F Units, Series A Units or other Partnership Interests;
(ii) (A) incur, refinance or assume any indebtedness for borrowed money or guarantee any such indebtedness for borrowed money
(or enter into a keep well or similar agreement with respect to such indebtedness) or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of MLP or any of its Subsidiaries or the
MLP Joint Ventures, other than (w) borrowings under MLPs Seventh Amended and Restated Credit Agreement, dated as of November 24, 2014, by and among Regency Gas Services LP, MLP, the other guarantors party thereto, Wells Fargo Bank,
National Association, as administrative agent, and the other financial institutions party thereto, as it may be amended, modified or supplemented from time to time (including to increase the aggregate lender commitments thereunder) (the
Existing Credit Facility), or any replacement thereof, and additional borrowings, in each case in this Section 5.2(a)(ii)(A)(w) not in excess of the amount set forth in Section 5.2(a)(ii)(A)(w) of the MLP
Disclosure Schedule (provided that except with respect to clause (w) above (other than with respect to any additional borrowings pursuant to clause (B) not under the Existing Credit Facility), MLP and its Subsidiaries
shall not be permitted to incur or assume any indebtedness for borrowed money or sell any debt securities to the extent that the terms of such indebtedness or debt securities would be breached by, conflict with or require the consent of any third
party in order to continue in full force following, the consummation of the transactions contemplated hereby), (x) borrowings by MLP in addition to borrowings permitted by the preceding clause (w) in amounts not in excess of
$50,000,000 in the aggregate, (y) borrowings from MLP or any of its Subsidiaries by MLP or any of its Subsidiaries and (z) repayments of borrowings from MLP or any of its Subsidiaries by MLP or any of its Subsidiaries and guarantees by MLP
or any of its Subsidiaries of indebtedness of MLP or any of its Subsidiaries, or (B) except as permitted pursuant to clause (A) above, prepay or repurchase any long-term indebtedness for borrowed money or debt securities of MLP or
any of its Subsidiaries (other than (x) revolving indebtedness, (y) borrowings from MLP or any of its Subsidiaries and (z) repayments or repurchases required pursuant to the terms of such indebtedness or debt securities);
(iii) sell, transfer, lease, farmout or otherwise dispose of (including pursuant to a sale leaseback transaction or an asset
securitization transaction) (A) any of its properties or assets that do not generate cash on a recurring basis with a fair market value in excess of $25,000,000 in the aggregate and (B) any of its properties or assets that generate cash on
a recurring basis (including securities of Subsidiaries), except in the case of clause (A), (w) pursuant to Contracts in force at the date of this Agreement and listed on Section 5.2(a)(iii)(w) of the MLP Disclosure Schedule,
correct and complete copies of which have been made available to Parent and other potential transactions listed on Section 5.2(a)(iii)(w) of the MLP Disclosure Schedule, (x) dispositions of obsolete or worthless equipment which is
replaced with equipment and materials of comparable or better value and utility, (y) transactions (including sales of natural gas, natural gas liquids and other produced hydrocarbons and minerals) in the ordinary course of business consistent
with past practice or (z) sales, transfers, leases, farmouts or other disposals to MLP or any of its Subsidiaries;
(iv) make any capital expenditure or capital expenditures (which shall include, any investments by contribution to capital,
property transfers, purchase of securities or otherwise) in excess of $100,000,000 in the aggregate, except for any such capital expenditures set forth in Section 5.2(a)(iv) of the MLP Disclosure Schedule or except as may be reasonably
required to conduct emergency operations, repairs or replacements on any well, pipeline, or other facility;
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(v) directly or indirectly acquire (A) by merging or consolidating with, or
by purchasing all of or a substantial equity interest in, or by any other manner, any Person or division, business or equity interest of any Person or (B) except in the ordinary course of business consistent with past practice, any assets that,
in the aggregate, have a purchase price in excess of $50,000,000;
(vi) make any loans or advances to any Person (other
than (A) travel, relocation expenses and similar expenses or advances to its employees in the ordinary course of business consistent with past practice, (B) loans and advances to MLP or any of its Subsidiaries and (C) trade credit
granted in the ordinary course of business consistent with past practice);
(vii) (A) except (x) for Contracts
relating to indebtedness permitted under Section 5.2(a)(ii), (y) for Commodity Derivative Instruments entered into in compliance with the Risk Management Policy and (z) as in the ordinary course of business consistent with past
practice (provided, however, that this clause (z) shall not apply in respect of any Non-Competition Agreement), (1) enter into any contract or agreement that would be an MLP Material Contract (provided that, for
purposes of this Section 5.2(a)(vii)(A)(1), the $25,000,000 threshold in Section 3.14(a)(iii) shall be deemed to be a $10,000,000 threshold) if in existence as of the date of this Agreement or (2) terminate or amend in
any material respect any MLP Material Contract, or (B) (w) waive any material rights under any MLP Material Contract, (x) enter into or extend the term or scope of any MLP Material Contract that materially restricts MLP or any of its
Subsidiaries from engaging in any line of business or in any geographic area, (y) enter into any MLP Material Contract that would be breached by, or require the consent of any third party in order to continue in full force following,
consummation of the transactions contemplated hereby, or (z) release any Person from, or modify or waive any provision of, any standstill, confidentiality or similar agreement, in each case, related to a sale of MLP or any of its material
Subsidiaries;
(viii) except in the ordinary course of business of as required by the terms, as of the date hereof, of any
MLP Benefit Plan, (A) increase the compensation of any executive officer, (B) pay any bonus or incentive compensation, (C) grant any new equity or non-equity based compensation award, (D) enter into, establish, amend or terminate
any MLP Benefit Plan or any other agreement or arrangement which would be an MLP Benefit Plan if it were in effect on the date of this Agreement, (E) except as provided in Section 5.2(a)(viii)(E) of the MLP Disclosure Schedule,
accelerate the vesting or payment of any compensation or benefits under any MLP Benefit Plan or (F) fund any MLP Benefit Plan or trust relating thereto;
(ix)(A) change its fiscal year or any method of Tax accounting, (B) make, change or revoke any material Tax election,
(C) settle or compromise any material liability for Taxes or (D) file any material amended Tax Return;
(x) make
any changes in financial accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by a change in GAAP or applicable Law;
(xi) amend the MLP Charter Documents;
(xii) adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger,
consolidation or other reorganization (other than transactions exclusively between wholly owned Subsidiaries of MLP);
(xiii) except as provided under any agreement entered into prior to the date of this Agreement, pay, discharge, settle or
satisfy any suit, action, claims or proceeding, in excess of $5,000,000 individually or $10,000,000 in the aggregate;
(xiv) take any action which would in any material respect impede or delay the ability of the parties to satisfy any of the
conditions to the transactions contemplated hereby, in each case to a date after the Outside Date; or
(xv) agree, in
writing or otherwise, to take any of the foregoing actions.
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(b) Except (i) as expressly permitted by this Agreement, (ii) as set forth in
Section 5.2(b) of the Parent Disclosure Schedule, (iii) as required by applicable Law, (iv) as provided for or contemplated by any Parent Material Contract in effect as of the date of this Agreement or (v) as agreed in
writing by MLP (which consent shall not be unreasonably withheld, delayed or conditioned), during the period from the date of this Agreement until the Effective Time Parent shall, and shall cause each of its Subsidiaries (other than the SXL Entities
and the SUN Entities) to: (w) conduct its business in the ordinary course of business consistent with past practice, (x) use commercially reasonable efforts to comply in all material respects with all applicable Laws and the requirements
of all Parent Material Contracts, (y) use commercially reasonable efforts to maintain and preserve intact its business organization and the goodwill of those having business relationships with it and retain the services of its present officers
and key employees, and (z) use its commercially reasonable efforts to keep in full force and effect all material Parent Permits and all material insurance policies maintained by Parent, its Subsidiaries (other than the SXL Entities and the SUN
Entities), other than changes to such policies made in the ordinary course of business. Without limiting the generality of the foregoing, except (i) as expressly permitted by this Agreement, (ii) as set forth in Section 5.2(b)
of the Parent Disclosure Schedule, (iii) as required by applicable Law, (iv) as required by any Parent Material Contract in effect as of the date of this Agreement or (v) as agreed in writing by MLP (such consent shall not be
unreasonably withheld, delayed or conditioned) during the period from the date of this Agreement to the Effective Time, Parent shall not and shall not permit any of its Subsidiaries (other than the SXL Entities and the SUN Entities) to:
(i) (A) issue, sell, grant, or dispose of, accelerate the vesting of or modify, as applicable, any of its limited partnership
interests, shares of capital stock, voting securities or equity interests, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any of its limited partnership interests, shares of
capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any of its limited partnership interests, shares of capital stock, voting
securities or equity interests or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any of the foregoing, other than (w) in connection with the vesting or settlement of any
equity or equity-based award that is outstanding on, or granted after, the date of this Agreement in accordance with the terms thereof (it being understood that nothing in this Agreement shall restrict the granting of any awards under the Parent
Equity Plans); (x) issuances of up to $1.0 billion in connection with a transaction involving the acquisition of assets or equity interests; (y) issuances exceeding $1.0 billion in connection with a transaction involving the acquisition of
assets or equity interests as to which the Parent Managing GP Board has received an opinion from a nationally recognized investment banking firm to the effect that such transaction is fair, from a financial point of view, to the Parent Unitholders
(any transaction referred to in clauses (x) or (y), a Parent Acquisition Transaction) and (z) the issuance and sale from time to time of up to $1.5 billion aggregate amount of Parent Units pursuant to
Parents prospectus supplement dated November 20, 2014 and accompanying base prospectus (Registration No. 333-199130); (B) redeem, purchase or otherwise acquire any of its outstanding limited partnership interests, shares of
capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of any character to acquire any of its limited partnership interests, shares of capital stock, voting securities or
equity interests, other than Tax withholding with respect to, any equity or equity-based award that is outstanding on, or granted after, the date of this Agreement in accordance with the terms thereof; (C) declare, set aside for payment or pay
any distribution on any Parent Units, or otherwise make any payments to the Parent Unitholders in their capacity as such (other than (w) distributions by a direct or indirect Subsidiary of Parent to its parent, (x) Parents regular
quarterly distributions and associated distributions to the Parent GP or (y) in connection with any Parent Acquisition Transaction); or (D) split, combine, subdivide or reclassify any of its limited partnership units or other interests;
(ii) amend the Parent Charter Documents (other than amendments to the Parent Charter Documents (x) in connection with
any Parent Acquisition Transaction or (y) that are approved by the Parent Managing GP or a Parent Unit Majority);
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(iii) adopt a plan or agreement of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization (other than transactions exclusively between wholly owned Subsidiaries of Parent);
(iv) make, or permit any of its Subsidiaries to make, any acquisition of any other person or business that would reasonably be
expected to prevent, materially impede or materially delay the consummation of the Merger; or
(v) agree, in writing or
otherwise, to take any of the foregoing actions.
(c) Except (i) as expressly permitted by this Agreement, (ii) as required by
applicable Law or (iii) as agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), during the period from the date of this Agreement until the Effective Time ETE Acquirer shall, and shall cause
MLP Managing GP, to: (w) conduct their respective businesses in the ordinary course of business consistent with past practice, (x) use commercially reasonable efforts to comply in all material respects with all applicable Laws and the
requirements of any Contract to which ETE Acquirer or MLP Managing GP is a party, (y) use commercially reasonable efforts to maintain and preserve intact their respective business organization and the goodwill of those having business
relationships with them and retain the services of their respective present officers and key employees, and (z) use its commercially reasonable efforts to keep in full force and effect all of their respective material Permits and all material
insurance policies maintained by ETE Acquirer or MLP Managing GP, other than changes to such policies made in the ordinary course of business.
Section 5.3 No Solicitation by MLP; Etc.
(a) MLP shall, and shall cause its Subsidiaries and use reasonable best efforts to cause MLPs and its Subsidiaries respective
directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives (collectively, Representatives) to, immediately cease and cause to be terminated any discussions or
negotiations with any Person conducted heretofore with respect to an MLP Alternative Proposal, request the return or destruction of all confidential information previously provided to such parties by or on behalf of MLP or its Subsidiaries and
immediately prohibit any access by any Person (other than Parent and its Representatives) to any physical or electronic data room relating to a possible MLP Alternative Proposal. Except as permitted by this Section 5.3, (x) MLP
shall not, and shall cause its Subsidiaries and use reasonable best efforts to cause its Representatives not to, directly or indirectly (i) solicit, initiate, knowingly facilitate, knowingly encourage (including by way of furnishing
confidential information) or knowingly induce or take any other action intended to lead to any inquiries or any proposals that constitute the submission of an MLP Alternative Proposal, (ii) grant approval to any Person under clause
(iii) of the provision in the definition of Outstanding in the MLP Partnership Agreement, (iii) except for a confidentiality agreement permitted pursuant to Section 5.3(b), enter into any confidentiality
agreement, merger agreement, letter of intent, agreement in principle, unit purchase agreement, asset purchase agreement or unit exchange agreement, option agreement or other similar agreement relating to an MLP Alternative Proposal (an MLP
Acquisition Agreement), or (iv) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Parent, the MLP Board Recommendation or publicly recommend the approval or adoption of, or
publicly approve or adopt, or propose to publicly recommend, approve or adopt, any MLP Alternative Proposal and (y) within five business days of receipt of a written request of Parent following the receipt by MLP of any MLP Alternative
Proposal, MLP shall publicly reconfirm the MLP Board Recommendation; provided, that, in the event that Parent requests such public reconfirmation of the MLP Board Recommendation, then MLP may not unreasonably withhold, delay (beyond the five
business day period) or condition the public reconfirmation of the MLP Board Recommendation and provided, further, that Parent shall not be permitted to make such request on more than one occasion in respect of each MLP Alternative
Proposal and each material modification to an MLP Alternative Proposal, if any (the taking of any action described in clause (x)(iv) or the failure to take the action described in clause (y) being referred to as an MLP
Adverse Recommendation Change). Without limiting the foregoing, it is understood that any violation of the foregoing restrictions by MLPs Subsidiaries or Representatives shall be deemed to be a breach of this Section 5.3
by MLP unless such violation is committed
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without the Knowledge of MLP and MLP uses its reasonable best efforts to promptly cure such violation once MLP is made aware of such violation.
(b) Notwithstanding anything to the contrary contained in Section 5.3(a), if at any time following the date of this Agreement and
prior to obtaining the MLP Unitholder Approval, (i) MLP has received a written MLP Alternative Proposal that the MLP Managing GP Board (upon the recommendation of the MLP Conflicts Committee) believes is bona fide, (ii) the MLP Managing GP
Board (upon the recommendation of the MLP Conflicts Committee), after consultation with its financial advisors and outside legal counsel, determines in good faith that (A) such MLP Alternative Proposal constitutes or could reasonably be
expected to lead to or result in an MLP Superior Proposal and (B) failure to take such action would be inconsistent with its duties under the MLP Partnership Agreement or applicable Law and (iii) such MLP Alternative Proposal did not
result from a material breach of this Section 5.3, then MLP may, subject to clauses (x) and (y) below, (A) furnish information, including confidential information, with respect to MLP and its Subsidiaries to
the Person making such MLP Alternative Proposal and (B) participate in discussions or negotiations regarding such MLP Alternative Proposal; provided that (x) MLP will not, and will use reasonable best efforts to cause its
Representatives not to, disclose any non-public information to such Person unless MLP has, or first enters into, a confidentiality agreement with such Person with confidentiality provisions that are not less restrictive to such Person than the
provisions of the Parent Confidentiality Agreement are to Parent and (y) MLP will provide to Parent non-public information about MLP or its Subsidiaries that was not previously provided or made available to Parent prior to or substantially
concurrently with providing or making available such non-public information to such other Person.
(c) In addition to the other
obligations of MLP set forth in this Section 5.3, MLP shall promptly advise Parent, orally and in writing, and in no event later than 24 hours after receipt, if any proposal, offer, inquiry or other contact is received by, any
information is requested from, or any discussions or negotiations are sought to be initiated or continued with, MLP in respect of any MLP Alternative Proposal, and shall, in any such notice to Parent, indicate the identity of the Person making such
proposal, offer, inquiry or other contact and the terms and conditions of any proposals or offers or the nature of any inquiries or contacts (and shall include with such notice copies of any written materials received from or on behalf of such
Person relating to such proposal, offer, inquiry or request), and thereafter shall promptly keep Parent reasonably informed of all material developments affecting the status and terms of any such proposals, offers, inquiries or requests (and MLP
shall promptly provide Parent with copies of any additional written materials received by MLP or that MLP has delivered to any third party making an MLP Alternative Proposal that relate to such proposals, offers, inquiries or requests) and of the
status of any such discussions or negotiations.
(d) Notwithstanding any other provision of this Agreement, at any time prior to obtaining
the MLP Unitholder Approval, the MLP Managing GP Board and the MLP Conflicts Committee may effect an MLP Adverse Recommendation Change in response to an MLP Alternative Proposal or an MLP Changed Circumstance if the MLP Managing GP Board (upon the
recommendation of the MLP Conflicts Committee), after consultation with its outside legal counsel and financial advisors, determines in good faith that the failure to take such action would be inconsistent with its duties under the MLP Partnership
Agreement or applicable Law and:
(i) if the MLP Managing GP Board (upon the recommendation of the MLP Conflicts Committee)
intends to effect such MLP Adverse Recommendation Change in response to an MLP Alternative Proposal:
(A) such MLP
Alternative Proposal is bona fide, in writing and has not been withdrawn or abandoned;
(B) the MLP Managing GP Board (upon
the recommendation of the MLP Conflicts Committee) has determined, after consultation with its outside legal counsel and financial advisors, that such MLP Alternative Proposal constitutes an MLP Superior Proposal after giving effect to all of the
adjustments offered by Parent pursuant to clause (E) below;
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(C) MLP has provided prior written notice to Parent in accordance with
Section 8.9 (the MLP Superior Proposal Notice) of the MLP Managing GP Boards intention to effect an MLP Adverse Recommendation Change, and such MLP Superior Proposal Notice has specified the identity of the
Person making such MLP Alternative Proposal, the material terms and conditions of such MLP Alternative Proposal, and complete copies of any written proposal or offers (including proposed agreements) received by MLP in connection with such MLP
Alternative Proposal;
(D) during the period that commences on the date of delivery of the MLP Superior Proposal Notice as
determined in accordance with Section 8.9 and ends at 11:59 p.m. Central time on the date that is the fifth calendar day following the date of such delivery (the MLP Superior Proposal Notice Period), MLP shall
(1) negotiate with Parent in good faith to make such adjustments to the terms and conditions of this Agreement as would permit the MLP Managing GP Board not to effect an MLP Adverse Recommendation Change; and (2) keep Parent reasonably
informed with respect to the status and changes in the material terms and conditions of such MLP Alternative Proposal or other change in circumstances related thereto; provided, however, that any material revisions to such MLP
Alternative Proposal (it being agreed that any change in the purchase price in such MLP Alternative Proposal shall be deemed a material revision) shall require delivery of a subsequent MLP Superior Proposal Notice and a subsequent MLP Superior
Proposal Notice Period in respect of such revised MLP Alternative Proposal, except that such subsequent MLP Superior Proposal Notice Period shall expire upon the later of (x) the end of the initial MLP Superior Proposal Notice Period and
(y) 11:59 p.m. Central time on the date that is the third calendar day following the date of the delivery of such subsequent MLP Superior Proposal Notice; and
(E) the MLP Managing GP Board shall have considered all revisions to the terms of this Agreement irrevocably offered in writing
by Parent and, at the end of the MLP Superior Proposal Notice Period, shall have determined in good faith that (i) such MLP Alternative Proposal continues to constitute an MLP Superior Proposal even if such revisions were to be given effect and
(ii) failure to effect an MLP Adverse Recommendation Change would be inconsistent with its duties under the MLP Partnership Agreement or applicable Law even if such revisions were to be given effect; or
(ii) if the MLP Managing GP Board intends to effect such MLP Adverse Recommendation Change in response to an MLP Changed
Circumstance:
(A) MLP has provided prior written notice to Parent in accordance with Section 8.9 (the
MLP Recommendation Change Notice) of the MLP Managing GP Boards intention to effect an MLP Adverse Recommendation Change, and such MLP Recommendation Change Notice has specified the details of such MLP Changed Circumstance
and the reasons for the MLP Adverse Recommendation Change;
(B) during the period that commences on the date of delivery of
the MLP Recommendation Change Notice as determined in accordance with Section 8.9 and ends at 11:59 p.m. Central time on the date that is the fifth calendar day following the date of such delivery (the MLP Recommendation Change
Notice Period), MLP shall (i) negotiate with Parent in good faith to make such adjustments to the terms and conditions of this Agreement as would permit the MLP Managing GP Board not to effect an MLP Adverse Recommendation Change; and
(ii) keep Parent reasonably informed of any change in circumstances related thereto; and
(C) the MLP Managing GP
Board shall have considered all revisions to the terms of this Agreement irrevocably offered in writing by Parent and, at the end of the MLP Adverse Recommendation Change Notice Period, shall have determined (upon the recommendation of the MLP
Conflicts Committee) in good faith that the failure to effect an MLP Adverse Recommendation Change would be inconsistent with its duties under the MLP Partnership Agreement or applicable Law even if such revisions were to be given effect.
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(e) Nothing contained in this Agreement shall prevent MLP or the MLP Managing GP Board from
issuing a stop, look and listen communication pursuant to Rule 14d-9(f) under the Exchange Act or complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with respect to an MLP Alternative Proposal if the MLP Managing GP
Board determines in good faith (after consultation with outside legal counsel) that its failure to do so would be reasonably likely to constitute a violation of applicable Law; provided that any MLP Adverse Recommendation Change may only be
made in accordance with Section 5.3(d). For the avoidance of doubt, a public statement that describes MLPs receipt of an MLP Alternative Proposal and the operation of this Agreement with respect thereto shall not be deemed an MLP
Adverse Recommendation Change.
Section 5.4 [Removed and Reserved].
Section 5.5 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement (including Section 5.5(d)), each of the Parent Entities, on the one
hand, and the MLP Entities, on the other hand, shall cooperate with the other and use (and shall cause their respective Subsidiaries to use) its reasonable best efforts to (i) take, or cause to be taken, all actions, and do, or cause to be
done, all things, necessary, proper or advisable to cause the conditions to the Closing to be satisfied as promptly as practicable (and in any event no later than the Outside Date) and to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated hereby, including preparing and filing promptly and fully all documentation to effect all necessary filings, notifications, notices, petitions, statements, registrations, submissions of information,
applications and other documents (including any required or recommended filings under applicable Antitrust Laws), (ii) obtain promptly (and in any event no later than the Outside Date) all approvals, consents, clearances, expirations or
terminations of waiting periods, registrations, permits, authorizations and other confirmations from any Governmental Authority or third party necessary, proper or advisable to consummate the transactions contemplated hereby, (iii) defend any
lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby or seek to have lifted or rescinded any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions contemplated hereby and (iv) obtain all necessary consents, approvals or waivers from third parties.
(b) In furtherance and not in limitation of the foregoing, (i) each party hereto (including by their respective Subsidiaries) agrees to
make an appropriate filing (if required) of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within 15 business days after the date of this
Agreement (unless a later date is mutually agreed to by the parties hereto) and to supply as promptly as practicable any additional information and documentary material that may be requested by any Governmental Authority pursuant to the HSR Act or
any other Antitrust Law and use its reasonable best efforts to take, or cause to be taken (including by their respective Subsidiaries), all other actions consistent with this Section 5.5 necessary to cause the expiration or termination
of any applicable waiting periods under the HSR Act as soon as practicable (and in any event no later than the Outside Date); and (ii) MLP and Parent shall each use its reasonable best efforts to (x) take all action necessary to ensure
that no state takeover statute or similar Law is or becomes applicable to any of the transactions contemplated hereby and (y) if any state takeover statute or similar Law becomes applicable to any of the transactions contemplated hereby, take
all action necessary to ensure that such transaction may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise minimize the effect of such Law on the transaction.
(c) Each of the parties hereto shall use (and shall cause their respective Subsidiaries to use) its reasonable best efforts to
(i) cooperate in all respects with each other in connection with any filing or submission with a Governmental Authority in connection with the transactions contemplated hereby, including by providing the other parties a reasonable opportunity
to review and comment thereon, and in connection with any investigation or other inquiry by or before a Governmental Authority relating to the transactions contemplated hereby, including any proceeding initiated by a private Person,
(ii) promptly inform the other party of (and supply to the
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other party) any communication received by such party from, or given by such party to, the Federal Trade Commission, the Antitrust Division of the Department of Justice, or any other Governmental
Authority and any material communication received or given in connection with any proceeding by a private Person, in each case regarding any of the transactions contemplated hereby, (iii) permit the other party to review in advance and
incorporate the other partys reasonable comments in any communication to be given by it to any Governmental Authority with respect to obtaining any clearances required under any Antitrust Law in connection with the transactions contemplated
hereby and (iv) consult with the other party in advance of any meeting or teleconference with any Governmental Authority or, in connection with any proceeding by a private Person, with any other Person, and, to the extent not prohibited by the
Governmental Authority or other Person, give the other party the opportunity to attend and participate in such meetings and teleconferences. Parent shall have the principal responsibility for devising and implementing the strategy for obtaining any
clearances required under any Antitrust Law in connection with the transactions contemplated hereby and shall take the lead in all meetings and communications with any Governmental Authority in connection with obtaining such clearances,
provided, however, that Parent shall consult in advance with MLP and in good faith take MLPs views into account regarding the overall strategy. Subject to Section 5.7(b), the parties shall take reasonable efforts to
share information protected from disclosure under the attorney-client privilege, work product doctrine, joint defense privilege or any other privilege pursuant to this Section 5.5 in a manner so as to preserve the applicable privilege.
(d) Parent and MLP (including by causing their respective Subsidiaries) agree to use their reasonable best efforts to (x) resolve
any objections that a Governmental Authority or other Person may assert under any Antitrust Law with respect to the transactions contemplated hereby, and (y) avoid or eliminate each and every impediment under any Antitrust Law that may be
asserted by any Governmental Authority with respect to the transactions contemplated hereby, in each case, so as to enable the Closing to occur as promptly as practicable and in any event no later than the Outside Date, and including offering,
accepting and agreeing to (A) dispose or hold separate any part of MLPs, Parents or their respective Subsidiaries businesses, operations or assets (or a combination thereof), (B) not compete in any geographic area or line
of business, and/or (C) restrict the manner in which, or whether, Parent, MLP or any of their respective Subsidiaries may carry on business in any part of the world. MLP shall not, without Parents prior written consent, commit to any
disposal, hold separate, or other restriction related to its or its Subsidiaries businesses, operations or assets.
Section 5.6
Public Announcements. The initial press release with respect to the execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent and MLP. Thereafter, neither MLP nor Parent shall issue or cause the
publication of any press release or other public announcement (to the extent not previously issued or made in accordance with this Agreement) with respect to this Agreement or the transactions contemplated hereby without the prior consent of the
other party (which consent shall not be unreasonably withheld or delayed), except as may be required by Law or by any applicable listing agreement with the NYSE or other national securities exchange as determined in the good faith judgment of the
party proposing to make such release (in which case such party shall not issue or cause the publication of such press release or other public announcement without prior consultation with the other party); provided, however, that MLP shall not be
required by this Section 5.6 to consult with any other party with respect to a public announcement in connection with the receipt and existence of an MLP Alternative Proposal that the MLP Managing GP Board (upon the recommendation of the
MLP Conflicts Committee) believes is bona fide and matters related thereto or an MLP Adverse Recommendation Change but nothing in this proviso shall limit any obligation of MLP under Section 5.3(d) to negotiate with Parent in good faith;
provided, further, that each party and their respective controlled affiliates may make statements that are consistent with statements made in previous press releases, public disclosures or public statements made by Parent or MLP in compliance with
this Section 5.6.
Section 5.7 Access to Information; Confidentiality.
(a) Upon reasonable notice and subject to applicable Laws relating to the exchange of information, each party shall, and shall cause each of
its Subsidiaries to afford to the other party and its Representatives reasonable access during normal business hours (and, with respect to books and records, the right to copy) to all of its and its
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Subsidiaries properties, commitments, books, Contracts, records and correspondence (in each case, whether in physical or electronic form), officers, employees, accountants, counsel,
financial advisors and other Representatives. Each party shall furnish promptly to the other party (i) a copy of each report, schedule and other document filed or submitted by it pursuant to the requirements of federal or state securities Laws
and a copy of any communication (including comment letters) received by such party from the SEC concerning compliance with securities Laws and (ii) all other information concerning its and its Subsidiaries business, properties
and personnel as the other party may reasonably request (including information necessary to prepare the Proxy Statement). Except for disclosures permitted by the terms of the Confidentiality Agreement, dated as of January 16, 2015, between
Parent and MLP (as it may be amended from time to time, the Parent Confidentiality Agreement), each party and its Representatives shall hold information received from the other party pursuant to this Section 5.7 in
confidence in accordance with the terms of the Parent Confidentiality Agreement.
(b) This Section 5.7 shall not require
either party to permit any access, or to disclose any information, that in the reasonable, good faith judgment (after consultation with counsel, which may be in-house counsel) of such party would reasonably be expected to result in (i) any
violation of any contract or Law to which such party or its Subsidiaries is a party or is subject or cause any privilege (including attorney-client privilege) that such party or any of its Subsidiaries would be entitled to assert to be undermined
with respect to such information and such undermining of such privilege could in such partys good faith judgment (after consultation with counsel, which may be in-house counsel) adversely affect in any material respect such partys
position in any pending or, what such party believes in good faith (after consultation with counsel, which may be in-house counsel) could be, future litigation or (ii) if such party or any of its Subsidiaries, on the one hand, and the other
party or any of its Subsidiaries, on the other hand, are adverse parties in a litigation, such information being reasonably pertinent thereto; provided that, in the case of clause (i), the parties hereto shall cooperate in seeking to
find a way to allow disclosure of such information (including by entering into a joint-defense or similar agreement) to the extent doing so (1) would not (in the good faith belief of the party being requested to disclose the information (after
consultation with counsel, which may be in-house counsel)) reasonably be likely to result in the violation of any such contract or Law or reasonably be likely to cause such privilege to be undermined with respect to such information or
(2) could reasonably (in the good faith belief of the party being requested to disclose the information (after consultation with counsel, which may be in-house counsel)) be managed through the use of customary clean-room
arrangements pursuant to which appropriately designated Representatives of the other party shall be provided access to such information; provided, further, that the party being requested to disclose the information shall
(x) notify the other party that such disclosures are reasonably likely to violate its or its Subsidiaries obligations under any such contract or Law or are reasonably likely to cause such privilege to be undermined, (y) communicate
to the other party in reasonable detail the facts giving rise to such notification and the subject matter of such information (to the extent it is able to do so in accordance with the first proviso in this Section 5.7(b)) and (z) in
the case where such disclosures are reasonably likely to violate its or its Subsidiaries obligations under any contract, use reasonable commercial efforts to seek consent from the applicable third party to any such contract with respect to the
disclosures prohibited thereby (to the extent not otherwise expressly prohibited by the terms of such contract).
(c) No investigation, or
information received, pursuant to this Section 5.7 will modify any of the representations and warranties of the parties hereto.
Section 5.8 Notification of Certain Matters. MLP shall give prompt notice to Parent, and Parent shall give prompt notice to MLP, of
(i) any notice or other communication received by such party from any Governmental Authority in connection with the transactions contemplated hereby or from any Person alleging that the consent of such Person is or may be required in connection
with the transactions contemplated hereby, if the subject matter of such communication or the failure of such party to obtain such consent is reasonably likely to be material to MLP or Parent, (ii) any actions, suits, claims, investigations or
proceedings commenced or, to such partys knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries and that relate to the transactions contemplated hereby, (iii) the discovery of
any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence of which,
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would result in the failure to be satisfied of any of the conditions to the Closing in Article VI and (iv) any material failure of such party to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereby which would result in the failure to be satisfied of any of the conditions to the Closing in Article VI; provided that, in the case of clauses (iii) and (iv),
the failure to comply with this Section 5.8 shall not result in the failure to be satisfied of any of the conditions to the Closing in Article VI, or give rise to any right to terminate this Agreement under Article VII, if
the underlying fact, circumstance, event or failure would not in and of itself give rise to such failure or right.
Section 5.9
Indemnification and Insurance.
(a) For purposes of this Section 5.9, (i) Indemnified Person
shall mean any person who is now, or has been or becomes at any time prior to the Effective Time, an officer or director of MLP, MLP GP, ETE Acquirer or any of their respective Subsidiaries and also with respect to any such Person, in their capacity
as a director, officer, employee, member, trustee or fiduciary of another corporation, foundation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (whether or not such other entity or enterprise is affiliated
with MLP) serving at the request of or on behalf of MLP, MLP GP, ETE Acquirer or any of their respective Subsidiaries and together with such Persons heirs, executors or administrators and (ii) Proceeding shall mean any
actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative, investigative or otherwise and whether or not such claim, action, suit, proceeding or investigation results in a formal civil or criminal
litigation or regulatory action.
(b) From and after the Effective Time, to the fullest extent that any MLP Entity, ETE Acquirer or any
applicable Subsidiary thereof would be permitted to indemnify an Indemnified Person, Parent, the Surviving Entity and the GP Merger Surviving Entity agree to (i) indemnify and hold harmless against any cost or expenses (including
attorneys fees), judgments, fines, losses, claims, damages or liabilities and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any thereof) in connection with
any Proceeding, and provide advancement promptly, and in any event within 10 days after any written request, of expenses to, all Indemnified Persons to the fullest extent permitted under applicable Law and (ii) honor the provisions regarding
elimination of liability of directors, indemnification of officers, directors and employees and advancement of expenses contained in the MLP Charter Documents, the MLP GP Charter Documents, the ETE Acquirer Charter Documents and comparable governing
instruments of any Subsidiary of the MLP Entities or ETE Acquirer immediately prior to the Effective Time and ensure that the organizational documents of the Surviving Entity and the GP Merger Surviving Entity shall, for a period of six years
following the Effective Time, contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors, officers and agents of the MLP Entities, ETE Acquirer and their respective
Subsidiaries than are presently set forth in the MLP Charter Documents, the MLP GP Charter Documents, the ETE Acquirer Charter Documents and comparable governing instruments of any Subsidiary of the MLP Entities or ETE Acquirer (it being
acknowledged and agreed that the provisions of the Parent Charter Documents, the Parent GP Charter Documents and the comparable governing instruments of Merger Sub B currently in effect are no less favorable with respect to indemnification,
advancement of expenses and exculpation of such Persons than are presently in the MLP Charter Documents, the MLP GP Charter Documents, the ETE Acquirer Charter Documents and the comparable governing instruments of any Subsidiary of the MLP Entities
or ETE Acquirer). Any right of indemnification of an Indemnified Person pursuant to this Section 5.9(b) shall not be amended, repealed or otherwise modified at any time in a manner that would adversely affect the rights of such
Indemnified Person as provided herein.
(c) Parent shall cause the Surviving Entity and the GP Merger Surviving Entity to, and the
Surviving Entity and the GP Merger Surviving Entity shall, maintain in effect for six years from the Effective Time the current directors and officers liability insurance policies of the MLP Entities and ETE Acquirer covering acts or
omissions occurring at or prior to the Effective Time with respect to Indemnified Persons (provided that the Surviving Entity and the GP Merger Surviving Entity may substitute therefor policies with reputable carriers of at least the same coverage
containing terms and conditions that are no less favorable to the Indemnified Persons);
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provided, however, that in no event shall the Surviving Entity or the GP Merger Surviving Entity be required to expend pursuant to this Section 5.9(c) more than an amount per year
equal to 300% of current annual premiums paid by the MLP Entities or ETE Acquirer, as applicable, for such insurance (the Maximum Amount). In the event that, but for the proviso to the immediately preceding sentence, the Surviving
Entity or the GP Merger Surviving Entity would be required to expend more than the Maximum Amount, the Surviving Entity or the GP Merger Surviving Entity shall obtain the maximum amount of such insurance as is available for the Maximum Amount. If
any MLP Entity or ETE Acquirer in its sole discretion elects, then, in lieu of the obligations of Parent, the Surviving Entity and the GP Merger Surviving Entity under this Section 5.9(c), such MLP Entity or ETE Acquirer, as applicable,
may, prior to the Effective Time, purchase a tail policy with respect to acts or omissions occurring or alleged to have occurred prior to the Effective Time that were committed or alleged to have been committed by such Indemnified
Persons in their capacity as such; provided that in no event shall the cost of such policy exceed six times the Maximum Amount.
(d) The
rights of any Indemnified Person under this Section 5.9 shall be in addition to any other rights such Indemnified Person may have under the organizational documents of MLP, MLP GP, MLP Managing GP, ETE Acquirer, the Surviving Entity, the
GP Merger Surviving Entity, Parent GP, Parent Managing GP, the DRULPA or the DLLCA. The provisions of this Section 5.9 shall survive the consummation of the transactions contemplated hereby for a period of six years and are expressly
intended to benefit each of the Indemnified Persons and their respective heirs and representatives; provided, however, that in the event that any claim or claims for indemnification or advancement set forth in this Section 5.8 are
asserted or made within such six-year period, all rights to indemnification and advancement in respect of any such claim or claims shall continue until disposition of all such claims. If Parent, Parent GP, the Surviving Entity, the GP Merger
Surviving Entity or any of their respective successors or assigns (i) consolidates with or merges into any other Person, or (ii) transfers or conveys all or substantially all of their businesses or assets to any other Person, then, in each
such case, to the extent necessary, a proper provision shall be made so that the successors and assigns of Parent, Parent GP, the Surviving Entity or the GP Merger Surviving Entity, as the case may be, shall assume the obligations of Parent, Parent
GP, the Surviving Entity and the GP Merger Surviving Entity set forth in this Section 5.9.
Section 5.10 Securityholder
Litigation. MLP shall give Parent the opportunity to participate in the defense or settlement of any securityholder litigation against MLP and/or its officers and directors relating to the transactions contemplated hereby; provided that
MLP shall in any event control such defense and/or settlement (subject to Section 5.2(a)(xiii)) and shall not be required to provide information if doing so would be reasonably expected to threaten the loss of any attorney-client
privilege or other applicable legal privilege.
Section 5.11 Financing Matters.
(a) MLP shall, at the request of Parent, (i) call for prepayment or redemption, or prepay or redeem, (ii) attempt to renegotiate the
terms of, (iii) commence an offer to purchase and/or consent solicitation or (iv) satisfy and discharge or defease any then-existing indebtedness for borrowed money of MLP; provided, however, that MLP shall not be obligated
to make or cause to become effective any such action (nor shall MLP be required to incur any cost or liability in respect thereof) prior to the Effective Time. Parent shall prepare all necessary and appropriate documentation in connection with any
action described above, and provide MLP with a reasonable opportunity to comment on such documents. Parent and MLP shall, and shall cause their respective Subsidiaries and Representatives to, reasonably cooperate with each other in the preparation
of such documents.
(b) To the extent requested by Parent, MLP shall cooperate with Parent with respect to, and use its reasonable best
efforts to facilitate, possible alternative or supplemental structures for the acquisition of MLP and its Subsidiaries (including with respect to any financing with respect thereto); provided that such structures do not impede or delay the
Closing of the transactions contemplated hereby or change the Merger Consideration, the Series A Unit Consideration or adversely affect MLP and its Subsidiaries, taken as a whole, should the Merger not occur.
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(c) MLP hereby consents to Parents use of and reliance on any audited or unaudited
financial statements relating to MLP and its consolidated Subsidiaries, any MLP Joint Ventures or entities or businesses acquired by MLP reasonably requested by Parent to be used in any financing or other activities of Parent, including any filings
that Parent desires to make with the SEC. In addition, MLP will use commercially reasonable efforts, at Parents sole cost and expense, to obtain the consents of any auditor to the inclusion of the financial statements referenced above in
appropriate filings with the SEC. Prior to the Closing, MLP will provide such assistance (and will cause its Subsidiaries and its and their respective personnel and advisors to provide such assistance), as Parent may reasonably request in order to
assist Parent in connection with financing activities, including any public offerings to be registered under the Securities Act or private offerings. Such assistance shall include, but not be limited to, the following: (i) providing such
information, and making available such personnel as Parent may reasonably request; (ii) participation in, and assistance with, any marketing activities related to such financing; (iii) participation by senior management of the MLP in, and
their assistance with, the preparation of rating agency presentations and meetings with rating agencies; (iv) taking such actions as are reasonably requested by Parent or its financing sources to facilitate the satisfaction of all conditions
precedent to obtaining such financing; and (v) taking such actions as may be required to permit any cash and marketable securities of the MLP or Parent to be made available to finance the transactions contemplated hereby at the Effective Time.
Section 5.12 Fees and Expenses. All fees and expenses incurred in connection with the transactions contemplated hereby including
all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties incurred by a party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring such fees and expenses.
Section 5.13 Section 16
Matters. Prior to the Effective Time, Parent and MLP shall take all such steps as may be required (to the extent permitted under Applicable Law) to cause any dispositions of Common Units (including derivative securities with respect to Common
Units) or acquisitions of Parent Units (including derivative securities with respect to Parent Units) resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to MLP, or will become subject to such reporting requirements with respect to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 5.14 Listing. Parent shall cause the Parent Units to be issued pursuant to and in accordance with this Agreement to be approved
for listing (subject, if applicable, to notice of issuance) for trading on the NYSE prior to the Closing.
Section 5.15
Distributions. After the date of this Agreement until the Effective Time, each of Parent and MLP shall coordinate with the other regarding the declaration of any distributions in respect of Parent Units, Common Units, Class F Units and Series
A Units and the record dates and payment dates relating thereto, it being the intention of the parties that holders of Common Units or Series A Units shall not receive, for any quarter, distributions both in respect of Common Units, Class F Units or
Series A Units and also distributions in respect of Parent Units or Parent Preferred Units, as the case may be, that they receive in exchange therefor in the Merger, but that they shall receive for any such quarter either: (i) only
distributions in respect of Common Units, Class F Units or Series A Units or (ii) only distributions in respect of Parent Units or Parent Preferred Units, as the case may be, that they receive in exchange therefor in the Merger.
Section 5.16 Conflicts Committees.
(a) Prior to the Effective Time, none of the MLP Entities shall, without the consent of the MLP Conflicts Committee, eliminate the MLP
Conflicts Committee, or revoke or diminish the authority of the MLP Conflicts Committee, or remove or cause the removal of any director of the MLP Managing GP Board that is a member of the MLP Conflicts Committee either as a member of the MLP
Managing GP Board or the MLP Conflicts Committee, without the affirmative vote of the members of the MLP Managing GP Board, including the
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affirmative vote of the other members of the MLP Conflicts Committee. For the avoidance of doubt, this Section 5.16(a) shall not apply to the filling of any vacancies caused by the
death, incapacity or resignation of any director in accordance with the provisions of the MLP Partnership Agreement.
(b) Prior to the
Effective Time, none of the Parent Entities shall, without the consent of the Parent Conflicts Committee, eliminate the Parent Conflicts Committee, or revoke or diminish the authority of the Parent Conflicts Committee, or remove or cause the removal
of any director of the Parent Managing GP Board that is a member of the Parent Conflicts Committee either as a member of the Parent Managing GP Board or the Parent Conflicts Committee, without the affirmative vote of the members of the Parent
Managing GP Board, including the affirmative vote of the other members of the Parent Conflicts Committee. For the avoidance of doubt, this Section 5.16(b) shall not apply to the filling of any vacancies caused by the death, incapacity or
resignation of any director in accordance with the provisions of the Parent Partnership Agreement.
Section 5.17 Voting and
Consent.
(a) ETE and Parent covenant and agree that, until the Effective Time or the earlier of a termination of this Agreement, at
the MLP Unitholders Meeting or any other meeting of MLP Limited Partners or any vote of MLP Limited Partner Interests in connection with a vote of the MLP Limited Partners, however called, each of ETE and Parent will vote, or cause to be voted, all
MLP Limited Partner Interests then owned beneficially or of record by it or any of its Subsidiaries, as of the record date for such meeting, in favor of the approval of this Agreement (as it may be amended or otherwise modified from time to time)
and the Merger and the approval of any actions required in furtherance thereof.
(b) ETE covenants and agrees that, until the Effective
Time or the earlier of a termination of this Agreement, ETE, as the sole member of, and holder of the limited liability company interests in, Parent Managing GP, will cause Parent GP to execute and deliver the Parent Partnership Agreement Amendment
prior to the Effective Time.
(c) ETE hereby consents, and agrees to cause its Subsidiaries that own Parent Class H Units to consent, to
the issuance of the Parent Preferred Units as contemplated by this Agreement.
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Partys Obligation to Effect the Merger and GP Merger. The respective obligations of each party
hereto to effect the Merger and the GP Merger shall be subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a) MLP Unitholder Approval. The MLP Unitholder Approval shall have been obtained in accordance with applicable Law, the certificate of
limited partnership of MLP and the MLP Partnership Agreement;
(b) [Removed and Reserved].
(c) Regulatory Approval. Any waiting period applicable to the transactions contemplated hereby under the HSR Act shall have been
terminated or shall have expired;
(d) No Injunctions or Restraints. No Law, injunction, judgment or ruling enacted, promulgated,
issued, entered, amended or enforced by any Governmental Authority (collectively, Restraints) shall be in effect enjoining, restraining, preventing or prohibiting consummation of the transactions contemplated hereby or making the
consummation of the transactions contemplated hereby illegal;
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(e) Registration Statement. The Registration Statement shall have become effective under
the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC; and
(f) Unit Listing. The Parent Units deliverable to the MLP Unitholders as contemplated by this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
Section 6.2 Conditions to Obligations of the Parent Entities to Effect
the Merger and the GP Merger. The obligations of the Parent Entities to effect the Merger and the GP Merger are further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. (i) The representations and warranties of MLP contained in
Section 3.3(a), Section 3.3(c) and Section 3.6(a), shall be true and correct in all respects, in each case both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date); (ii) the representations and warranties of MLP contained in Section 3.2(a) shall be true and correct in all respects, other than immaterial misstatements or
omissions, both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date); and (iii) all other representations and warranties of MLP
set forth herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of this
clause (iii), where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to materiality or MLP Material Adverse Effect set forth in any individual
such representation or warranty) does not have, and would not reasonably be expected to have, individually or in the aggregate, an MLP Material Adverse Effect. Parent shall have received a certificate signed on behalf of MLP by an executive officer
of MLP to such effect.
(b) Performance of Obligations of the MLP Entities. The MLP Entities shall have performed in all material
respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of MLP by an executive officer of MLP to such effect.
(c) Tax Opinion. Parent shall have received an opinion of Latham & Watkins LLP dated as of the Closing Date to the effect that
for U.S. federal income tax purposes (i) no Parent Entity will recognize any income or gain as a result of the Merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code),
(ii) no gain or loss will be recognized by holders of Parent Units as a result of the Merger (other than any gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code), and (iii) at least 90% of
the combined gross income of each of Parent and MLP for the most recent four complete calendar quarters ending before the Closing Date for which the necessary financial information is available is from sources treated as qualifying
income within the meaning of Section 7704(d) of the Code. In rendering such opinion, such counsel shall be entitled to receive and rely upon representations, warranties and covenants of officers of the Parent Entities and MLP and any of
their respective affiliates as to such matters as such counsel may reasonably request.
Section 6.3 Conditions to Obligation of MLP to
Effect the Merger and the GP Merger. The obligation of MLP to effect the Merger and the GP Merger is further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties of Parent contained in
Section 4.3(a), Section 4.3(c) and Section 4.6(a) shall be true and correct in all respects, in each case both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date); (ii) the representations and warranties of Parent contained in Section 4.2(a) shall be true and correct in all respects, other than immaterial misstatements or
omissions, both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly
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made as of an earlier date, in which case as of such date); and (iii) all other representations and warranties of Parent set forth herein shall be true and correct both when made and at and
as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of this clause (iii), where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as to materiality or Parent Material Adverse Effect set forth in any individual such representation or warranty) does not have, and would not
reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. MLP shall have received a certificate signed on behalf of Parent by an executive officer of Parent to such effect.
(b) Performance of Obligations of the Parent Entities. The Parent Entities shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to the Closing Date, and MLP shall have received a certificate signed on behalf of Parent by an executive officer of Parent to such effect.
(c) Tax Opinion. MLP shall have received opinions of Baker Botts L.L.P. dated as of the Closing Date to the effect that for U.S.
federal income tax purposes,
(i) MLP will not recognize any income or gain as a result of the Merger (other than any gain
resulting from any actual or constructive distribution of cash, including as a result of any decrease in partnership liabilities pursuant to Section 752 of the Code);
(ii) holders of Common Units will not recognize any income or gain as a result of the Merger (other than any gain resulting
from any actual or constructive distribution of cash, including as a result of any decrease in partnership liabilities pursuant to Section 752 of the Code); provided that such opinion shall not extend to any holder who acquired Common
Units from MLP in exchange for property other than cash; and
(iii) at least 90% of the gross income of MLP for the most
recent four complete calendar quarters ending before the Closing Date for which the necessary financial information is available is from sources treated as qualifying income within the meaning of Section 7704(d) of the Code.
In rendering such opinions, Baker Botts L.L.P. shall be entitled to receive and rely upon representations, warranties and covenants of
officers of the Parent Entities and MLP and any of their respective affiliates as to such matters as such counsel may reasonably request.
(d) Parent Partnership Agreement Amendment. Parent GP shall have executed and delivered to MLP the Parent Partnership Agreement
Amendment, with such Parent Partnership Agreement Amendment to be effective as of the Effective Time.
Section 6.4 Frustration of
Closing Conditions. None of MLP or any of the Parent Entities may rely on the failure of any condition set forth in Section 6.1, Section 6.2 or Section 6.3, as the case may be, to be satisfied if such failure
was caused by such partys failure to use its reasonable best efforts to consummate the Merger and the other transactions contemplated hereby, or other breach of or noncompliance with this Agreement.
ARTICLE VII.
TERMINATION
Section 7.1
Termination. This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Effective Time:
(a) by the mutual written consent of MLP and Parent duly authorized by each of the MLP Managing GP Board and the Parent Managing GP Board,
respectively.
(b) by either of MLP or Parent:
(i) if the Closing shall not have been consummated on or before December 31, 2015 (the Outside Date);
provided, that the right to terminate this Agreement under this Section 7.1(b)(i) shall not be
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available (x) to a party if the inability to satisfy such condition was due to the failure of such party to perform any of its obligations under this Agreement or (y) to a party if the
other party has filed (and is then pursuing) an action seeking specific performance as permitted by Section 8.8;
(ii) if any Restraint having the effect set forth in Section 6.1(d) shall be in effect and shall have become final
and nonappealable; provided, however, that the right to terminate this Agreement under this Section 7.1(b)(ii) shall not be available to a party if such Restraint was due to the failure of such party to perform any of its
obligations under this Agreement; or
(iii) if the MLP Unitholders Meeting shall have concluded and the MLP Unitholder
Approval shall not have been obtained.
(iv) [Removed and Reserved].
(c) by Parent:
(i) if an MLP Adverse Recommendation Change shall have occurred;
(ii) prior to the receipt of the MLP Unitholder Approval, if MLP shall be in Willful Breach of its obligations pursuant to the
first three sentences of Section 5.1(b) or Section 5.3, other than in the case where (x) such Willful Breach is a result of an isolated action by a Person that is a Representative of MLP (other than a director or officer
of MLP), (y) such Willful Breach was not caused by, or within the Knowledge of, MLP and (z) MLP takes appropriate actions to remedy such Willful Breach upon discovery thereof; provided that Parent shall not have the right to
terminate this Agreement pursuant to this Section 7.1(c)(ii) if Parent is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement; or
(iii) if MLP shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth
in this Agreement (or if any of the representations or warranties of MLP set forth in this Agreement shall fail to be true), which breach or failure (A) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of
a condition set forth in Section 6.2(a) or (b) and (B) is incapable of being cured, or is not cured by MLP within 30 days following receipt of written notice from Parent of such breach or failure; provided that
Parent shall not have the right to terminate this Agreement pursuant to this Section 7.1(c)(iii) if Parent is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement.
(iv) [Removed and Reserved]
(d) by MLP:
(i)
[Removed and Reserved];
(ii) [Removed and Reserved];
(iii) if Parent shall have breached or failed to perform any of its representations, warranties, covenants or agreements set
forth in this Agreement (or if any of the representations or warranties of Parent set forth in this Agreement shall fail to be true), which breach or failure (A) would (if it occurred or was continuing as of the Closing Date) give rise to the
failure of a condition set forth in Section 6.3(a) or (b) and (B) is incapable of being cured, or is not cured, by Parent within 30 days following receipt of written notice from MLP of such breach or failure;
provided, that MLP shall not have the right to terminate this Agreement pursuant to this Section 7.1(d)(ii) if MLP is then in breach of any of the first three sentences of Section 5.1(b) or Section 5.3 or
in material breach of any of its other representations, warranties, covenants or agreements contained in this Agreement; or
(iv) prior to the receipt of the MLP Unitholder Approval, in order to enter into (concurrently with such termination) any
agreement, understanding or arrangement providing for an MLP Superior Proposal in accordance with Section 5.3; provided, that MLP shall concurrently with such termination pay to Parent the MLP Termination Fee in accordance with
Section 7.3.
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Section 7.2 Effect of Termination. In the event of the termination of this Agreement as
provided in Section 7.1, written notice thereof shall be given to the other party or parties, specifying the provision of this Agreement pursuant to which such termination is made, and this Agreement shall forthwith become null and void
(other than the provisions in Section 5.12, Section 7.2 and Section 7.3 and in the last sentence of Section 5.7(a), and the provisions in Article VIII, all of which shall survive termination of
this Agreement), and there shall be no liability on the part of any Parent Entity or MLP or their respective directors, officers and Affiliates, except (a) MLP and/or Parent may have liability as provided in Section 7.3, and
(b) subject to Sections 7.3(f) and (g), nothing shall relieve any party hereto from any liability or damages for any failure to consummate the Merger and the other transactions contemplated hereby when required pursuant to this
Agreement or any party from liability for fraud or a Willful Breach of any covenant or other agreement contained in this Agreement.
Section 7.3 Fees and Expenses.
(a) In the event that (A) an MLP Alternative Proposal shall have been publicly proposed or publicly disclosed prior to, and not withdrawn
at the time of, the date of the MLP Unitholders Meeting (or, if the MLP Unitholders Meeting shall not have occurred, prior to the termination of this Agreement pursuant to Section 7.1(b)(i) [Outside Date]), (B) this Agreement
is terminated by MLP or Parent pursuant to Section 7.1(b)(i) [Outside Date] or Section 7.1(b)(iii) [Failed MLP Unitholder Vote], and (C) MLP enters into a definitive agreement with respect to, or
consummates, any MLP Alternative Proposal within 12 months after the date this Agreement is terminated (whether or not such MLP Alternative Proposal is the same MLP Alternative Proposal referred to in clause (A)), then MLP shall pay to Parent
a termination fee equal to $450 million, less any Parent Expenses previously paid by MLP pursuant to Section 7.3(g) (the MLP Termination Fee), upon the earlier of the public announcement that MLP has entered into
such definitive agreement or the consummation of any such transaction. For purposes of this Section 7.3(a), the term MLP Alternative Proposal shall have the meaning assigned to such term in Section 8.13,
except that the references to 15% or more shall be deemed to be references to 50% or more.
(b) [Removed and
Reserved].
(c) In the event this Agreement is terminated by MLP pursuant to Section 7.1(b)(iii) [Failed MLP
Unitholder Vote] in a case where an MLP Adverse Recommendation Change has occurred, by MLP pursuant to Section 7.1(d)(iv) [MLP Superior Proposal] or by Parent pursuant to Section 7.1(c)(i) [MLP Adverse
Recommendation Change] or Section 7.1(c)(ii) [MLP Willful Breach] (without limiting Parents remedies described in Section 8.8), then MLP shall pay to Parent, within two business days after the date of
termination, the MLP Termination Fee.
(d) [Removed and Reserved]
(e) Any payment of the MLP Termination Fee shall be made in cash by wire transfer of same day funds to an account designated in writing by
Parent.
(f) In the event that MLP shall fail to pay the MLP Termination Fee required pursuant to this Section 7.3 when due,
such fee shall accrue interest for the period commencing on the date such fee became past due, at a rate equal to the legal rate of interest provided for in Section 2301 of Title 6 of the Delaware Code. In addition, if MLP shall fail to pay the
MLP Termination Fee when due, MLP shall also pay all of Parents reasonable costs and expenses (including attorneys fees) in connection with efforts to collect such fee. The MLP Entities and the Parent Entities acknowledge that the
provisions of this Section 7.3 are an integral part of the transactions contemplated hereby and that, without these agreements, neither the MLP Entities nor the Parent Entities would enter into this Agreement. The parties agree that in
the event that MLP pays the MLP Termination Fee to Parent, no MLP Entity shall have any further liability to any Parent Entity of any kind in respect of this Agreement and the transactions contemplated hereby, and that in no event shall MLP be
required to pay the MLP Termination Fee on more than one occasion.
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(g) Notwithstanding anything to the contrary in this Agreement, in the event of
termination of this Agreement by (i) either party pursuant to Section 7.1(b)(iii) [Failed MLP Unitholder Vote] (or a termination by MLP pursuant to a different provision of Section 7.1 at a time when this
Agreement was terminable pursuant to Section 7.1(b)(iii) [Failed MLP Unitholder Vote]) or (ii) Parent pursuant to Section 7.1(c)(ii) [MLP Willful Breach], then MLP shall promptly, but in no event later than
three business days after receipt of an invoice (with supporting documentation) therefor from Parent, pay Parents designee all of the reasonably documented out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, financing sources, hedging counterparties, experts and consultants) incurred by Parent and its Affiliates in connection with this Agreement and the transactions contemplated hereby up to a maximum amount of $20 million (the
Parent Expenses); provided, however, that in no event shall MLP have any obligation to make any such payment if, at the time of such termination, this Agreement was terminable by MLP pursuant to
Section 7.1(d)(ii) [Parent Uncured Breach].
(h) [Removed and Reserved].
ARTICLE VIII.
MISCELLANEOUS
Section 8.1
No Survival, Etc. Except as otherwise provided in this Agreement, the representations, warranties and agreements of each party hereto shall remain operative and in full force and effect regardless of any investigation made by or on behalf of
any other party hereto, whether prior to or after the execution of this Agreement. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or, except as otherwise provided in Section 7.2,
upon the termination of this Agreement pursuant to Section 7.1, as the case may be, except that the agreements set forth in Article II and Section 5.9, Section 5.12 and Section 5.15 and any
other agreement in this Agreement that contemplates performance after the Effective Time shall survive the Effective Time and those set forth in Section 5.12, Section 7.2 and Section 7.3, in the last sentence of
Section 5.7(a) and this Article VIII shall survive termination of this Agreement. The Parent Confidentiality Agreement shall (i) survive termination of this Agreement in accordance with its terms and (ii) terminate as of
the Effective Time.
Section 8.2 Amendment or Supplement. At any time prior to the Effective Time, this Agreement may be amended or
supplemented in any and all respects, whether before or after receipt of the MLP Unitholder Approval, by written agreement of the parties hereto, by action taken or authorized by the MLP Managing GP Board and the Parent Managing GP Board;
provided, however, that the MLP Managing GP Board and Parent Managing GP Board may not take or authorize any such action unless it has first referred such action to the MLP Conflicts Committee and Parent Conflicts Committee, as
applicable, for its consideration, and permitted the MLP Conflicts Committee and Parent Conflicts Committee, as applicable, not less than two business days to make a recommendation to the MLP Managing GP Board and Parent GP Managing Board, as
applicable, with respect thereto (for the avoidance of doubt, the MLP Managing GP Board and Parent Managing GP Board shall in no way be obligated to follow the recommendation of the MLP Conflicts Committee and Parent Conflicts Committee, as
applicable, and the MLP Managing GP Board and Parent GP Managing Board, as applicable, shall be permitted to take action following the expiration of such two business day period); provided, further, that following approval of the
Merger and the other transactions contemplated hereunder by the MLP Unitholders, there shall be no amendment or change to the provisions of this Agreement which by Law would require further approval by the MLP Unitholders, without such approval.
Unless otherwise expressly set forth in this Agreement, whenever a determination, decision, approval or consent of MLP or the MLP Managing GP Board or of Parent or the Parent Managing GP Board is required pursuant to this Agreement, such
determination, decision, approval or consent must be authorized by the MLP Managing GP Board and Parent GP Managing Board, as applicable; provided, however, that the MLP Managing GP Board and Parent GP Managing Board, as applicable,
may not take or authorize any such action unless it has first referred such action to the MLP Conflicts Committee and Parent Conflicts Committee, as applicable, for its consideration, and permitted the MLP Conflicts Committee and
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Parent Conflicts Committee, as applicable, not less than two business days to make a recommendation to the MLP Managing GP Board and Parent GP Managing Board, as applicable, with respect thereto
(for the avoidance of doubt, the MLP Managing GP Board and Parent GP Managing Board, as applicable, shall in no way be obligated to follow the recommendation of the MLP Conflicts Committee or Parent Conflicts Committee, as applicable, and the MLP
Managing GP Board and Parent Managing GP Board, as applicable, shall be permitted to take action following the expiration of such two business day period).
Section 8.3 Extension of Time, Waiver, Etc. At any time prior to the Effective Time, any party may, subject to applicable Law,
(a) waive any inaccuracies in the representations and warranties of any other party hereto, (b) extend the time for the performance of any of the obligations or acts of any other party hereto or (c) waive compliance by the other party
with any of the agreements contained herein or, except as otherwise provided herein, waive any of such partys conditions. Notwithstanding the foregoing, no failure or delay by any MLP Entity or any Parent Entity in exercising any right
hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 8.4
Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by any of the parties without the prior written consent of the other
parties except that (a) Parent may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any wholly owned Subsidiary of Parent, but no such assignment shall relieve Parent of any of its
obligations hereunder and (b) MLP may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any wholly owned Subsidiary of MLP, but no such assignment shall relieve MLP of any of its
obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not
permitted under this Section 8.4 shall be null and void.
Section 8.5 Counterparts. This Agreement may be executed in
counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered
to the other parties.
Section 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the MLP Disclosure Schedule, the
Parent Disclosure Schedule and the Parent Confidentiality Agreement (a) constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of
this Agreement and thereof and (b) shall not confer upon any Person other than the parties hereto any rights (including third-party beneficiary rights or otherwise) or remedies hereunder, except for, in the case of clause (b),
(i) the provisions of Section 5.9 and Section 8.12 and (ii) the right of the MLP Unitholders to receive the Merger Consideration and the Series A Unit Consideration, as applicable, after the Closing (a claim by the
Unitholders with respect to which may not be made unless and until the Closing shall have occurred) and the right of holders of Unit Options and other equity awards to receive the Merger Consideration to which they are entitled pursuant to this
Agreement after the Closing (a claim by such holders with respect to which may not be made unless and until the Closing shall have occurred).
Section 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, applicable to contracts executed
in and to be performed entirely within that State.
(b) Each of the parties hereto irrevocably agrees that any legal action or proceeding
with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment
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in respect of this Agreement and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the
Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of
Delaware). Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees
that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert as a
defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (i) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in
accordance with this Section 8.7, (ii) any claim that it or its property is exempt or immune from the jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) to the fullest extent permitted by the applicable Law, any claim that (x) the suit, action or proceeding in such court is brought
in an inconvenient forum, (y) the venue of such suit, action or proceeding is improper or (z) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
(c) EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
Section 8.8 Specific Enforcement. The parties agree that irreparable damage would occur and that the parties would
not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and it is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in each case, in accordance with this Section 8.8 in the Delaware Court of Chancery or any federal
court sitting in the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other
equitable relief as provided herein on the basis that (x) either party has an adequate remedy at law or (y) an award of specific performance is not an appropriate remedy for any reason at law or equity. Each party further agrees that no
party shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 8.8, and each party irrevocably waives any right it may have to
require the obtaining, furnishing or posting of any such bond or similar instrument. The parties agree that in the event that Parent receives the MLP Termination Fee, Parent may not seek any award of specific performance under this
Section 8.8.
Section 8.9 Notices. All notices, requests and other communications to any party hereunder shall be in
writing and shall be deemed given if delivered personally, by facsimile (which is confirmed) or electronic transmission, or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
If to the Parent Entities, to:
Energy Transfer Partners, L.P.
3738 Oak Lawn Avenue
Dallas,
Texas 75219
Fax No.: (214) 981-0706
Attn: Thomas P. Mason, Senior Vice President, General
Counsel and Secretary
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with a copy (which shall not constitute notice) to:
Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
Fax No.:
(713) 546-5401
Attn: William N. Finnegan IV
Ryan J. Maierson
Debbie Yee
and to:
Richards,
Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Fax No.:
(302) 651-7701
Attn: Srinivas M. Raju
Gregory W. Ladner
If to the MLP Entities, to:
Regency Energy Partners LP
2001
Bryan Street, Suite 3700
Dallas, Texas 75201
Fax No.: (214) 750-1749
Attn: Conflicts Committee
with
a copy (which shall not constitute notice) to:
Regency Energy Partners LP
2001 Bryan Street, Suite 3700
Dallas, Texas 75201
Fax No.:
(713) 989-1212
Attn: Todd Carpenter, Senior Vice President and General Counsel
and to:
Akin Gump Strauss
Hauer & Feld, LLP
1111 Louisiana Street, 44th Floor
Houston, Texas 77002
Fax No.:
(713) 236-0822
Attn: Christine B. LaFollette
John Goodgame
and to:
Baker Botts L.L.P.
2001 Ross Avenue
Dallas,
Texas 75201
Fax No.: (214) 661-4954
Attn: Neel Lemon
Andrew J. Ericksen
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If to ETE or ETE Acquirer, to:
Energy Transfer Equity, L.P.
3738 Oak Lawn Avenue
Dallas,
Texas 75219
Fax No.: (214) 981-0706
Attn: Jamie Welch, Group Chief Financial Officer and
Head of Business Development
or such other address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other
communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 P.M. in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.
Section 8.10
Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and
conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent
possible.
Section 8.11 Interpretation.
(a) When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without limitation. The words hereof,
herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms
and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments
thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.
(b) The parties
hereto have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as
jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.
Section 8.12 Non-Recourse. No past, present or future director, officer, employee, incorporator, member, partner, stockholder, agent,
attorney, representative or affiliate of any party hereto or any of their respective Affiliates (unless such Affiliate is expressly a party to this Agreement) shall have any liability (whether in contract or in tort) for any obligations or
liabilities of such party arising under, in connection with or related to
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this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby; provided, however, that nothing in this Section 8.12
shall limit any liability of the parties to this Agreement for breaches of the terms and conditions of this Agreement.
Section 8.13
Definitions. As used in this Agreement, the following terms have the meanings ascribed thereto below:
Additional Unit
Consideration means a number of Parent Units equal to the quotient of $0.32 divided by the lesser of (i) the volume weighted average price of the Parent Units on the NYSE for the five trading days ending on the third trading day
immediately preceding the Effective Time and (ii) the closing price of the Parent Units on the NYSE on the third trading day immediately preceding the Effective Time, rounded to the nearest ten thousandth of a unit.
Affiliate means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is
under common control with, such Person. For this purpose, control (including, with its correlative meanings, controlled by and under common control with) means the possession, directly or indirectly, of the power
to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise; provided, however, that for purposes of this
Agreement, MLP and its Subsidiaries shall not be considered Affiliates of Parent or any of Parents other Affiliates, nor shall any such persons be considered Affiliates of MLP or its Subsidiaries.
Antitrust Laws means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission
Act, as amended, and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of
competition.
business day means a day except a Saturday, a Sunday or other day on which the SEC or banks in the City
of New York are authorized or required by Law to be closed.
Cash Unit means a Unit as defined in the
Regency Energy Partners LP Long-Term Incentive Cash Restricted Unit Plan.
Class F Unit means an MLP Security
representing a fractional part of the MLP Securities of all MLP Limited Partners and assignees, and having the rights and obligations specified with respect to a Class F Unit in the MLP Partnership Agreement. A Class F Unit that is convertible into
a Common Unit shall not constitute a Common Unit until such conversion occurs pursuant to the terms of the MLP Partnership Agreement.
Class F Unitholders means the holders of the Class F Units.
Clayton Act means the Clayton Antitrust Act of 1914, as amended, and the rules and regulations promulgated thereunder.
Common Unit means an MLP Security representing a fractional part of the MLP Partnership Interests of all MLP Limited
Partners and assignees, and having the rights and obligations specified with respect to Common Units in the MLP Partnership Agreement. The term Common Unit does not refer to a Class F Unit prior to its conversion into a Common Unit
pursuant to the terms of the MLP Partnership Agreement.
Common Unitholders mean the holders of the Common Units.
DLLCA mean the Delaware Limited Liability Company Act.
DRULPA means the Delaware Revised Uniform Limited Partnership Act.
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Environmental Law means any Law relating to (i) the protection,
preservation or restoration of the environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (ii) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as in effect at the date of this Agreement.
Environmental Permit means all Permits required under Environmental Laws.
ERISA Affiliate means, with respect to any Person, any trade or business, whether or not incorporated, that together with
such Person, would be deemed at the relevant time to be a single employer for purpose of Section 414(b), (c), (m) or (o) of the Code.
ETE Acquirer means ETE GP Acquirer LLC, a Delaware limited liability company.
ETE Acquirer Charter Documents means, collectively, the certificate of formation of ETE Acquirer and the Limited Liability
Company Agreement of ETE GP Acquirer LLC dated as of May 7, 2010.
ETE Credit Documents means, collectively, that
certain (i) Credit Agreement dated as of December 2, 2013 among ETE, Credit Suisse AG, Cayman Islands Branch, as administrative agent, and the other lenders party thereto, as amended, (ii) Senior Secured Term Loan Agreement dated as
of December 2, 2013 among ETE, Credit Suisse AG, Cayman Islands Branch, as administrative agent, and the other lenders party thereto, as amended, and (iii) Indenture dated as of September 20, 2010 between ETE and U.S. Bank National
Association, as trustee, as amended and supplemented, relating to ETEs 7.50% Senior Notes due 2020 and 5.875% Senior Notes due 2024.
Federal Trade Commission Act means the Federal Trade Commission Act of 1914.
GAAP means generally accepted accounting principles in the United States.
Governmental Authority means any government, court, arbitrator, regulatory or administrative agency, commission or
authority or other governmental instrumentality, federal, state or local, domestic, tribal, foreign or multinational.
Hazardous
Substance means any substance, material or waste that is listed, defined, designated or classified as hazardous, toxic, radioactive, dangerous or a pollutant or contaminant or words of similar meaning under any
Environmental Law or are otherwise regulated by any Governmental Authority with jurisdiction over the environment or natural resources, including without limitation petroleum or any derivative or byproduct thereof, radon, radioactive material,
asbestos or asbestos containing material, urea formaldehyde, foam insulation or polychlorinated biphenyls.
HSR Act
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
Knowledge (i) when used with respect to MLP, means the actual knowledge of those individuals listed on
Section 8.13 of the MLP Disclosure Schedule and (ii) when used with respect to Parent, means the actual knowledge of those individuals listed on Section 8.13 of the Parent Disclosure Schedule.
Material Adverse Effect means, when used with respect to a Person, any change, effect, event or occurrence that,
individually or in the aggregate, (x) has had or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole, or
(y) prevents or materially impedes, interferes with or hinders the consummation of the transactions contemplated hereby, including the Merger, on or before the Outside Date; provided, however, that
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any adverse changes, effects, events or occurrences resulting from or due to any of the following shall be disregarded in determining whether there has been a Material Adverse Effect:
(i) changes, effects, events or occurrences generally affecting the United States or global economy, the financial, credit, debt, securities or other capital markets or political, legislative or regulatory conditions or changes in the
industries in which such Person operates; (ii) the announcement or pendency of this Agreement or the transactions contemplated hereby or the performance of this Agreement (including, for the avoidance of doubt, performance of the parties
obligations under Section 5.5) (provided that the exception in this clause (ii) shall not be deemed to apply to references to MLP Material Adverse Effect or Parent Material Adverse Effect in
Section 3.3(b) or Section 4.4, as applicable, and to the extent related thereto, Section 6.2(a) and Section 6.3(a)); (iii) any change in the market price or trading volume of the limited
partnership interests, shares of common stock or other equity securities of such Person (it being understood and agreed that the foregoing shall not preclude any other party to this Agreement from asserting that any facts or occurrences giving rise
to or contributing to such change that are not otherwise excluded from the definition of Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a
Material Adverse Effect); (iv) acts of war or terrorism (or the escalation of the foregoing) or natural disasters or other force majeure events; (v) changes in any Laws or regulations applicable to such Person or applicable accounting
regulations or principles or the interpretation thereof; (vi) any legal proceedings commenced by or involving any current or former member, partner or stockholder of such Person (on their own or on behalf of such Person) arising out of or
related to this Agreement or the transactions contemplated hereby; (vii) changes, effects, events or occurrences generally affecting the prices of oil, natural gas, natural gas liquids or coal or other commodities and (viii) any failure of
a Person to meet any internal or external projections, forecasts or estimates of revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the foregoing shall not preclude any other party to this
Agreement from asserting that any facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of Material Adverse Effect should be deemed to constitute, or be taken into account in
determining whether there has been, or would reasonably be expected to be, a Material Adverse Effect); and (ix) the taking of any action required by this Agreement; provided, however, that changes, effects, events or occurrences
referred to in clauses (i), (iv), (v) and (vii) above shall be considered for purposes of determining whether there has been or would reasonably be expected to be a Material Adverse Effect if and to the extent
such state of affairs, changes, effects, events or occurrences has had or would reasonably be expected to have a disproportionate adverse effect on such Person and its Subsidiaries, taken as a whole, as compared to other companies of similar size
operating in the industries in which such Person and its Subsidiaries operate.
Merger Sub A means Rendezvous I LLC, a
Delaware limited liability company.
Merger Sub B means Rendezvous II LLC, a Delaware limited liability company.
MLP Alternative Proposal means any inquiry, proposal or offer from any Person or group (as defined in
Section 13(d) of the Exchange Act), other than Parent, its Subsidiaries and their Affiliates, relating to any (i) direct or indirect acquisition (whether in a single transaction or a series of related transactions), outside of the ordinary
course of business, of assets of MLP and its Subsidiaries (including securities of Subsidiaries) equal to 15% or more of MLPs consolidated assets or to which 15% or more of MLPs revenues or earnings on a consolidated basis are
attributable, (ii) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of beneficial ownership (within the meaning of Section 13 under the Exchange Act) of 15% or more of any class of equity
securities of MLP, (iii) tender offer or exchange offer that if consummated would result in any Person or group (as defined in Section 13(d) of the Exchange Act) beneficially owning 15% or more of any class of equity securities of
MLP or (iv) merger, consolidation, unit exchange, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving MLP which is structured to permit any Person or group (as defined in
Section 13(d) of the Exchange Act) to acquire beneficial ownership of at least 15% of MLPs consolidated assets or equity interests; in each case, other than the transactions contemplated hereby.
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MLP Changed Circumstance means a material event, circumstance, change or
development, in each case that arises or occurs after the date of this Agreement and was not, prior to the date of this Agreement, known to or reasonably foreseeable by the MLP Managing GP Board; provided, however, that in no event
shall the receipt, existence or terms of an MLP Alternative Proposal or any matter relating thereto or consequence thereof constitute an MLP Changed Circumstance.
MLP Equity Plans means any plans or arrangements of MLP providing for the compensatory grant of awards of Common Units or
awards denominated, in whole or in part, in Common Units, or options or unit appreciation rights or similar awards relating to Common Units, including the Regency GP LLC Long-Term Incentive Plan, the Regency Energy Partners LP 2011 Long-Term
Incentive Plan, the PVR GP, LLC Sixth Amended and Restated Long-Term Incentive Plan and the Regency Energy Partners LP Long-Term Incentive Cash Restricted Unit Plan.
MLP General Partner Interest means the General Partner Interest as defined in the MLP Partnership Agreement.
MLP GP Charter Documents means, collectively, the certificate of limited partnership of MLP GP, and the Amended and
Restated Agreement of Limited Partnership of Regency GP LP, as amended or supplemented from time to time.
MLP GP Common Unit
Equivalent means the product of (i) the quotient of (x) the number of Common Units outstanding immediately prior to the Effective Time and (y) 100% minus the MLP Percentage Interest represented by the MLP General Partner
Interest immediately prior to the Effective Time and (ii) the MLP Percentage Interest represented by the MLP General Partner Interest immediately prior to the Effective Time.
MLP GP Parent Unit Equivalent means the product of (i) the MLP GP Common Unit Equivalent and (ii) the Exchange
Ratio.
MLP GP Percentage Interest means the quotient of (i) the MLP GP Parent Unit Equivalent and (ii) the
sum of (x) the number of Parent Units outstanding immediately prior to the Effective Time after giving effect to the number of Parent Units issued in connection with the Merger and (y) the MLP GP Parent Unit Equivalent.
MLP Incentive Distribution Right means Incentive Distribution Right as defined in the MLP Partnership
Agreement.
MLP Joint Ventures means Aqua-PVR Water Services LLC, a Delaware limited liability company, Ranch Westex JV
LLC, a Delaware limited liability company, RIGS Haynesville Partnership Co., a Delaware general partnership, Midcontinent Express Pipeline LLC, a Delaware limited liability company, Edwards Lime Gathering LLC, a Delaware limited liability company,
Mi Vida JV LLC, a Delaware limited liability company, Ohio River System LLC, a Delaware limited liability company, Lone Star NGL LLC, a Delaware limited liability company, CBC/Leon Limited Partnership, an Oklahoma limited partnership, Leon Limited
Partnership I, an Oklahoma limited partnership, Bright Star Partnership and Sweeny Gathering, L.P., a Texas limited partnership; provided that with respect to any reference in this Agreement to MLP causing any MLP Joint Venture to take any
action, such reference shall only require MLP to cause such MLP Joint Venture to use reasonable best efforts to take such action to the extent permitted by the organizational documents and governance arrangements of such MLP Joint Venture and, to
the extent applicable, its fiduciary duties in relation to such MLP Joint Venture.
MLP Limited Partner means
Limited Partner as defined in the MLP Partnership Agreement.
MLP Limited Partner Interest means the
Limited Partner Interest as defined in the MLP Partnership Agreement.
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MLP Managing GP Charter Documents means, collectively, the certificate of
formation of MLP Managing GP, and the Amended and Restated Limited Liability Company Agreement of Regency GP LLC dated as of February 3, 2006, as amended or supplemented from time to time.
MLP Partnership Agreement means the Amended and Restated Agreement of Limited Partnership of Regency Energy Partners LP, as
amended or supplemented from time to time.
MLP Partnership Interest means an interest in MLP, which shall include the
MLP General Partner Interest and MLP Limited Partner Interests.
MLP Percentage Interest means Percentage
Interest as defined in the MLP Partnership Agreement.
MLP Security means any class or series of equity interest
in MLP (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in MLP), including without limitation, Common Units, Class F Units and Series A Units, which are separate classes of MLP Partnership
Interests.
MLP Special Approval means Special Approval as defined in the MLP Partnership Agreement.
MLP Superior Proposal means a bona fide unsolicited written offer, obtained after the date of this Agreement and not in
breach of Section 5.3 (other than an immaterial breach), to acquire, directly or indirectly, 80% or more of the outstanding equity securities of MLP or 80% or more of the assets of MLP and its Subsidiaries on a consolidated basis, made
by a third party, which is on terms and conditions which the MLP Managing GP Board determines in its good faith to be (i) reasonably capable of being consummated in accordance with its terms, taking into account legal, regulatory, financial,
financing and timing aspects of the proposal, and (ii) if consummated, more favorable to the MLP Unitholders (in their capacity as MLP Unitholders) from a financial point of view than the transactions contemplated hereby, taking into account at
the time of determination any changes to the terms of this Agreement that as of that time had been committed to by Parent in writing.
MLP Unaffiliated Unitholders means Common Unitholders excluding ETE, Parent and their Affiliates.
MLP Unitholder means the Common Unitholders, the Class F Unitholders and the Series A Unitholders.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
NYSE means the New York Stock Exchange.
Parent GP Charter Documents means, collectively, the certificate of limited partnership of Parent GP, and the Third Amended
and Restated Agreement of Limited Partnership of Energy Transfer Partners GP, L.P. dated as of April 17, 2007, as amended or supplemented from time to time.
Parent Incentive Distribution Right has the meaning set forth in the Parent Partnership Agreement.
Parent Joint Ventures means each entity listed on Section 8.13 of the Parent Disclosure Schedule;
provided, that with respect to any reference in this Agreement to Parent causing any Parent Joint Venture to take any action, such reference shall only require Parent to cause such Parent Joint Venture to take such action to the maximum
extent permitted by the organizational documents and governance arrangements of such Parent Joint Venture and, to the extent applicable, its fiduciary duties in relation to such Parent Joint Venture.
Parent Limited Partner means a Limited Partner as defined in the Parent Partnership Agreement.
Parent Limited Partner Interest means the Limited Partner Interest as defined in the MLP Partnership Agreement.
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Parent Managing GP Charter Documents means, collectively, the certificate of
formation of Parent Managing GP, and the Fourth Amended and Restated Limited Liability Company Agreement of Energy Transfer Partners, L.L.C. dated as of August 10, 2010, as amended or supplemented from time to time.
Parent Partnership Agreement means the Second Amended and Restated Agreement of Limited Partnership of Energy Transfer
Partners, L.P., as amended or supplemented from time to time.
Parent Partnership Interest means Partnership
Interest as defined in the Parent Partnership Agreement.
Parent Percentage Interest means Percentage
Interest as defined in the Parent Partnership Agreement.
Parent Unaffiliated Unitholders means Parent
Unitholders excluding ETE and its Affiliates.
Parent Unit means a Common Unit as defined in the Parent
Partnership Agreement.
Parent Unitholders means the holders of Parent Units.
Parent Unit Majority means Unit Majority as defined in the parent partnership Agreement Amendment.
Permit means franchises, tariffs, grants, authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority.
Person means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity, including a Governmental Authority.
Phantom
Unit means an award of phantom units granted under an MLP Equity Plan.
Risk Management Policy means the Risk
Management Policy of MLP as adopted by the MLP Managing GP Board and in effect on the date of this Agreement; provided, that the Risk Management Policy may only be amended or modified after the date of this Agreement by the MLP Managing GP
Board or a committee thereof with the prior written consent of Parent.
SEC means the Securities and Exchange
Commission.
Series A Unit means an MLP Security representing a fractional part of the MLP Securities of all MLP
Limited Partners and assignees, and having the rights and obligations specified with respect to Series A Cumulative Convertible Preferred Units in the MLP Partnership Agreement.
Series A Unitholders means the holders of the Series A Units.
Sherman Act means the Sherman Antitrust Act of 1890, as amended, and the rules and regulations promulgated thereunder.
Subsidiary when used with respect to any party, means any corporation, limited liability company, partnership, association,
trust or other entity the accounts of which would be consolidated with those of such party in such partys consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation,
limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power (or, in the case of a partnership,
more than 50% of the general partnership interests or, in the case of a limited liability company, the managing member) are, as of such date, owned by such party or one or more Subsidiaries of such party or by such party and one or more Subsidiaries
of such party. For purposes of Article III, when used with respect to MLP, the term Subsidiary shall include the MLP Joint Ventures. For purposes of Article IV, when used with respect to Parent, the term
Subsidiary shall include the Parent Joint Ventures.
A-60
SUN Entities means Sunoco GP LLC, a Delaware limited liability company, and
its Subsidiaries, including Sunoco LP, a Delaware limited partnership, and its Subsidiaries.
SXL Entities means Sunoco
Partners LLC, a Pennsylvania limited liability company, and its Subsidiaries, including Sunoco Logistics Partners L.P., a Delaware limited partnership, and its Subsidiaries.
Tax or Taxes means any and all federal, state, local or foreign or provincial taxes, charges, imposts,
levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and similar charges, including any and all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority
in connection with respect thereto.
Tax Return means any return, report or similar filing (including any attached
schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any information return, claim for refund, amended return or declaration of estimated Taxes (and including any amendments
with respect thereto).
Unit Majority means a Unit Majority as defined in the MLP Partnership Agreement.
Unit Option means an award of an option to purchase Common Units granted under an MLP Equity Plan.
Willful Breach means (i) with respect to any breaches or failures to perform any of the covenants or other agreements
contained in this Agreement, a material breach that is a consequence of an act or intentional omission undertaken by the breaching party (or, in the case of Section 5.3 with respect to MLP, the consequence of an act or omission of a
Subsidiary of MLP, or of a Representative of MLP at the direction of MLP) with the Knowledge that the taking of, or failure to take, such act would, or would be reasonably expected to, cause a material breach of such covenant or agreement and
(ii) the failure by any party to consummate the transactions contemplated hereby after all of the conditions set forth in Article VI have been satisfied or waived (by the party entitled to waive any such applicable conditions).
[signature pages follows]
A-61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
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PARENT: |
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ENERGY TRANSFER PARTNERS, L.P. |
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By: Energy Transfer Partners GP, L.P.,
its general partner |
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By: Energy Transfer Partners, L.L.C.,
its general partner |
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By: |
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/s/ Thomas P. Mason |
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Name: |
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Thomas P. Mason |
Title: |
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Senior Vice President and General Counsel |
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PARENT GP: |
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ENERGY TRANSFER PARTNERS GP, L.P. |
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By: Energy Transfer Partners, L.L.C.,
its general partner |
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By: |
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/s/ Thomas P. Mason |
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Name: |
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Thomas P. Mason |
Title: |
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Senior Vice President and General Counsel |
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MERGER SUB A: |
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RENDEZVOUS I LLC |
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By: |
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/s/ Thomas P. Mason |
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Name: |
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Thomas P. Mason |
Title: |
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Senior Vice President and General Counsel |
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MERGER SUB B: |
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RENDEZVOUS II LLC |
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By: |
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/s/ Thomas P. Mason |
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Name: |
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Thomas P. Mason |
Title: |
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Senior Vice President and General Counsel |
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
A-62
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ETE: |
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ENERGY TRANSFER EQUITY, L.P. |
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By: LE GP, LLC, its general
partner |
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By: |
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/s/ Jamie Welch |
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Name: |
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Jamie Welch |
Title: |
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Group Chief Financial Officer |
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MLP: |
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REGENCY ENERGY PARTNERS LP |
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By: Regency GP LP, its general
partner |
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By: Regency GP LLC, its general
partner |
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By: |
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/s/ Thomas E. Long |
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Name: |
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Thomas E. Long |
Title: |
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Executive Vice President and Chief Financial Officer |
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MLP GP: |
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REGENCY GP LP |
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By: Regency GP LLC, its general
partner |
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By: |
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/s/ Thomas E. Long |
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Name: |
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Thomas E. Long |
Title: |
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Executive Vice President and Chief Financial Officer |
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
A-63
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ETE ACQUIRER: |
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ETE GP ACQUIRER LLC |
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By: Energy Transfer Equity, L.P.,
its sole member |
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By: LE GP LLC, its general
partner |
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By: |
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/s/ Jamie Welch |
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Name: |
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Jamie Welch |
Title: |
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Group Chief Financial Officer |
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
A-64
ANNEX B
Opinion of J.P. Morgan Securities LLC
[J.P. Morgan letterhead]
January 25, 2015
Conflicts Committee of the Board of Directors
and Board of
Directors of
Regency GP LLC, the general partner of Regency GP LP,
the general partner of Regency Energy Partners LP
2001 Bryan
Street, Suite 3700
Dallas, Texas 75201
Members of the
Board of Directors and the Conflicts Committee of the Board of Directors:
The Conflicts Committee of the Board of Directors has requested our opinion as
to the fairness, from a financial point of view, to the holders of common units (Common Units) of Regency Energy Partners LP (the Partnership), other than Energy Transfer Equity, L.P. (Energy Transfer Equity),
Energy Transfer Partners, L.P. (Parent) and their respective affiliates (collectively, the Affiliated Holders), of the consideration to be paid to such holders in the proposed merger (the Transaction) of the
Partnership with Parent. Pursuant to the Agreement and Plan of Merger (the Merger Agreement) among Parent, Energy Transfer Partners GP, L.P., the Partnership, Regency GP LP and Energy Transfer Equity, the Partnership will merge with and
into Parent, and each outstanding Common Unit, other than Common Units that are owned by the Partnership or any of its subsidiaries, will be converted into the right to receive consideration per unit equal to (i) $0.32 in cash (the Cash
Consideration) and (ii) 0.4066 common units of Parent (such units, the Parent Units, and such consideration, together with the Cash Consideration, the Consideration).
In connection with preparing our opinion, we have (i) reviewed a draft dated January 25, 2015 of the Merger Agreement; (ii) reviewed certain
publicly available business and financial information concerning the Partnership and Parent and the industries in which they operate; (iii) compared the proposed financial terms of the Transaction with the publicly available financial terms of
certain transactions involving companies we deemed relevant and the consideration paid for such companies; (iv) compared the financial and operating performance of the Partnership and Parent with publicly available information concerning
certain other companies we deemed relevant and reviewed the current and historical market prices of the Common Units and Parent Units and certain publicly traded securities of such other companies; (v) reviewed certain internal financial
analyses and forecasts prepared by the management of the Partnership relating to its business and by the management of Parent relating to its business, as well as the estimated amount and timing of the cost savings and related expenses and synergies
expected to result from the Transaction (the Synergies); (vi) reviewed certain financial forecasts relating to the business of the Partnership based on certain publicly available financial forecasts and adjustments thereto reviewed
by the management of the Partnership, which forecasts were approved by the Partnerships management as reasonable for use in our analysis; (vii) reviewed certain financial forecasts relating to the business of Parent based on certain
publicly available financial forecasts and adjustments thereto reviewed by the management of Parent, which forecasts were approved by the Partnerships management as reasonable for use in our analysis; and (viii) performed such other
financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
In addition, we have held
discussions with the Conflicts Committee and certain members of the management of the Partnership and Parent with respect to certain aspects of the Transaction, and the past and current business operations of the Partnership and Parent, the
financial condition and the future prospects and operations of the Partnership and Parent, the effects of the Transaction on the financial condition and future prospects of the Partnership and Parent, and certain other matters we believed necessary
or appropriate to our inquiry.
B-1
In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was
publicly available or was furnished to or discussed with us by the Partnership and Parent or otherwise reviewed by or for us, and we have not independently verified (nor have we assumed responsibility or liability for independently verifying) any
such information or its accuracy or completeness. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Partnership or Parent under any state or federal laws
relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, including the Synergies, we have assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Partnership and Parent to which such analyses or forecasts relate. We express no view as to
such analyses or forecasts (including the Synergies) or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Merger Agreement will have the tax consequences described in
discussions with, and materials furnished to us by, representatives of the Partnership, and will be consummated as described in the Merger Agreement, and that the definitive Merger Agreement will not differ in any material respects from the draft
thereof furnished to us. We have also assumed that the representations and warranties made by the Partnership and Parent in the Merger Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We
are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Partnership with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary
for the consummation of the Transaction will be obtained without any adverse effect on the Partnership or Parent or on the contemplated benefits of the Transaction.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, of the
Consideration to be paid to the holders of the Common Units (other than the Affiliated Holders) in the proposed Transaction and we express no opinion as to the fairness of any consideration paid in connection with the Transaction to the Affiliated
Holders, the holders of any other class of securities, creditors or other constituencies of the Partnership or as to the underlying decision by the Partnership to engage in the Transaction. Furthermore, we express no opinion with respect to the
amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Consideration to be paid to the holders of the Common Units in the Transaction or with
respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Common Units or Parent Units will trade at any future time.
We note that we were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of
the Partnership or any alternative transaction.
We have acted as financial advisor to the Conflicts Committee of the Board of Directors of Regency GP LLC
with respect to the proposed Transaction and will receive a fee from the Partnership for our services, a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Partnership has agreed to
indemnify us for certain liabilities arising out of our engagement. During the two years preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with the Partnership and Parent, for which we
and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger of a credit facility for Regency Gas Services LP in November 2014, acting as joint bookrunner on a bond offering
by the Partnership in April 2013, acting as a joint bookrunner on a bond offering by the Partnership in February 2014, acting as financial advisor to the Partnership in connection with its acquisition of Southern Union Gas Services, Ltd. in April
2013, acting as bookrunner on a bond offering by Parent in September 2013, acting as a bookrunner on a bond offering by Parents subsidiary Sunoco Logistics Partners L.P. (Sunoco Logistics) in January 2013, and acting as a joint
bookrunner on an equity offering for Sunoco Logistics in September 2014. In addition, during such two year period we have provided Treasury and Securities services to the Partnership, and have provided Treasury and
B-2
Securities services and Asset and Wealth Management services to Parent. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the
Partnership or Parent for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Consideration to be paid to the holders of the Common Units
(other than the Affiliated Holders) in the proposed Transaction is fair, from a financial point of view, to such holders.
The issuance of this opinion
has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Conflicts Committee of the Board of Directors, and to the Board of Directors, of Regency GP LLC (in its capacity as such) in connection
with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any unitholder of the Partnership as to how such unitholder should vote with respect to the Transaction or any other matter. This
opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement
mailed to unitholders of the Partnership but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
J.P. MORGAN SECURITIES LLC
B-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors.
Energy Transfer Partners, L.P.
Under the
ETP partnership agreement, in most circumstances, ETP will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages or similar events:
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any departing general partner; |
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any person who is or was an affiliate of a general partner or any departing general partner; |
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any person who is or was a director, officer, member, partner, fiduciary or trustee of any entity set forth in the preceding three bullet points, as well as the Heritage ETC, L.P. or any other subsidiary; and
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any person who is or was serving as director, officer, member, partner, fiduciary or trustee of another person at the request of ETPs general partner or any departing general partner. |
Any indemnification under these provisions will only be out of ETPs assets. Unless it otherwise agrees, ETPs general partner will
not be personally liable for, or have any obligation to contribute or loan funds or assets to ETP to enable ETP to effectuate indemnification. ETP may purchase insurance for liabilities asserted against, and expenses incurred by, persons for its
activities, regardless of whether ETP would have the power to indemnify the person against liabilities under the ETP partnership agreement.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Reference is made to the Exhibit Index following the signature page hereof, which Exhibit Index is hereby incorporated into this Item.
(b) Financial Statement Schedules.
Financial statement schedules are omitted because they are not required or the required information is shown in the consolidated financial
statements or the notes thereto incorporated by reference in the proxy statement/prospectus that forms a part of this registration statement.
(c) Opinions.
The
opinion of J.P. Morgan Securities LLC, financial advisor to the Regency Conflicts Committee, is attached as Annex B to the proxy statement/prospectus that forms a part of this registration statement.
Item 22. Undertakings.
The
undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of this registration
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.
II-1
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in this
registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability
under the Securities Act of 1933 to any purchaser: if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document
immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in
a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing
prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
II-2
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
(7) That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(8) That every prospectus (i) that is filed pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(9) To respond to requests
for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed subsequent to the effective date of this registration statement through the date of responding to the request.
(10) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in this registration statement when it became effective.
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement, or amendment thereto, to be
signed on its behalf by the undersigned, thereunto duly authorized, in Dallas, Texas on March 20, 2015.
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ENERGY TRANSFER PARTNERS, L.P. |
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By: |
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Energy Transfer Partners GP, L.P., its general partner |
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By: |
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Energy Transfer Partners, L.L.C., its general partner |
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By: |
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/s/ Kelcy L. Warren |
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Kelcy L. Warren Chief Executive Officer and
officer duly authorized to sign on behalf of the registrant |
Pursuant to the requirements of the Securities Act, this registration statement, or amendment
thereto, has been signed by the following persons in the capacities indicated which are with Energy Transfer Partners, L.L.C., the general partner of Energy Transfer Partners GP, L.P., the general partner of Energy Transfer Partners, L.P., on March
20, 2015.
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Signature |
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Title |
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/s/ Kelcy L.
Warren Kelcy L. Warren |
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Chief Executive Officer and Chairman of the Board of
Directors (Principal Executive Officer) |
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*
Martin Salinas, Jr. |
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Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer) |
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*
Marshall S. McCrea, III |
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President, Chief Operating Officer and Director |
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*
Jamie Welch |
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Director |
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*
James R. Perry |
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Director |
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*
Michael K. Grimm |
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Director |
II-4
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Signature |
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Title |
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Ted Collins, Jr. |
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Director |
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*
David K. Skidmore |
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Director |
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*By: |
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/s/ Kelcy L. Warren |
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Attorney-in-Fact |
II-5
EXHIBIT INDEX
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Exhibit Number |
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Description of Exhibit |
2.1* |
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Agreement and Plan of Merger, dated as of January 25, 2015, by and among Energy Transfer Partners, L.P., Energy Transfer Partners GP, L.P., Regency Energy Partners LP, Regency GP LP and, solely for purposes of certain provisions
therein, Energy Transfer Equity, L.P., as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of February 18, 2015, by and among Energy Transfer Partners, L.P., Energy Transfer Partners GP, L.P., Rendezvous I LLC, Rendezvous II LLC,
Regency Energy Partners LP, Regency GP LP, ETE GP Acquirer, LLC and, solely for purposes of certain provisions therein, Energy Transfer Equity, L.P. (composite copy included as Annex A to the proxy statement/prospectus included in this Registration
Statement on Form S-4). |
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3.1 |
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Amended Certificate of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.3 to ETPs Form 10-Q for the quarter ended February 29, 2004 (File No. 001-11727)). |
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3.2 |
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Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed July 29, 2009 (File No.
001-11727)). |
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3.2.1 |
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Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed on March 28, 2012
(File No. 001-11727)). |
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3.2.2 |
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Amendment No. 2 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed October 5, 2012 (File
No. 001-11727)). |
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3.2.3 |
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Amendment No. 3 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K/A filed on April 18, 2013
(File No. 001-11727)). |
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3.2.4 |
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Amendment No. 4 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed on May 1, 2013 (File
No. 001-11727)). |
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3.2.5 |
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Amendment No. 5 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed on November 1, 2013
(File No. 001-11727)). |
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3.2.6 |
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Amendment No. 6 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed on February 19, 2014 (File
No. 001-11727)). |
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3.2.7 |
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Amendment No. 7 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 4.1 to ETPs Current Report on Form 8-K filed on March 5, 2014
(File No. 001-11727)). |
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3.2.8 |
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Amendment No. 8 to Second Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners, L.P. (incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed on August 29, 2014
(File No. 001-11727)). |
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3.3 |
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Certificate of Formation of Energy Transfer Partners, L.L.C. (incorporated by reference to the same numbered Exhibit to ETPs Form 10-Q for the quarter ended March 31, 2010 (File No.
001-11727)). |
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3.4 |
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Fourth Amended and Restated Limited Liability Company Agreement of Energy Transfer Partners, L.L.C. incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed August 10, 2010 (File No.
001-11727)). |
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Exhibit Number |
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Description of Exhibit |
3.4.1 |
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Amendment No. 1 to Fourth Amended and Restated Limited Liability Company Agreement of Energy Transfer Partners, L.L.C. incorporated by reference to Exhibit 3.1 to ETPs Current Report on Form 8-K filed on March 28, 2012 (File
No. 001-11727)). |
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3.5 |
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Restated Certificate of Limited Partnership of Energy Transfer Partners GP, L.P. (incorporated by reference to the same numbered exhibit to ETPs Form 10-Q for the quarter ended March 31, 2010 (File No. 001-11727)). |
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3.6 |
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Third Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners GP, L.P. (incorporated by reference to Exhibit 3.5 to ETPs Form 10-Q for the quarter ended May 31, 2007 (File No. 001-11727)). |
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3.6.1 |
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Amendment No. 2 to Third Amended and Restated Agreement of Limited Partnership of Energy Transfer Partners GP, L.P. (incorporated by reference to Exhibit 3.2 to ETPs Current Report on Form 8-K filed on March 28, 2012 (File No.
001-11727)). |
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5.1 |
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Opinion of Latham & Watkins LLP as to the legality of the securities being offered. |
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8.1* |
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Opinion of Latham & Watkins LLP as to certain tax matters. |
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8.2* |
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Opinion of Baker Botts L.L.P. as to certain tax matters. |
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21.1 |
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List of subsidiaries of Energy Transfer Partners, L.P. (incorporated by reference to ETPs Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 001-11727)). |
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23.1 |
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Consent of Grant Thornton LLP (Energy Transfer Partners, L.P.). |
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23.2 |
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Consent of Ernst & Young LLP (Sunoco Logistics Partners L.P.). |
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23.3 |
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Consent of Ernst & Young LLP (Susser Holdings Corporation) |
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23.4 |
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Consent of Ernst & Young LLP (Sunoco LP) |
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23.5 |
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Consent of Grant Thornton LLP (Regency Energy Partners LP). |
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23.6 |
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Consent of Grant Thornton LLP (RIGS Haynesville Partnership Co.). |
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23.7 |
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Consent of PricewaterhouseCoopers LLP (Midcontinent Express Pipeline LLC). |
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23.8 |
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Consent of Grant Thornton LLP (Lone Star NGL LLC). |
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23.9 |
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Consent of KPMG LLP (Eagle Rock Energy Partners, L.P.s midstream business). |
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23.10 |
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Consent of Latham & Watkins LLP (included in Exhibit 5.1). |
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23.11* |
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Consent of Latham & Watkins LLP (included in Exhibit 8.1). |
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23.12* |
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Consent of Baker Botts L.L.P. (included in Exhibit 8.2). |
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24.1 |
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Powers of attorney. |
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99.1 |
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Consent of J.P. Morgan Securities LLC |
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99.2* |
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Form of Proxy Card for Regency Energy Partners LP Special Meeting. |
Exhibit 8.1
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811 Main Street, Suite 3700 |
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Houston, TX 77002 |
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Tel: +1.713.546.5400 Fax: +1.713.546.5401 |
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www.lw.com |
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FIRM / AFFILIATE OFFICES |
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Abu Dhabi |
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Milan |
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Barcelona |
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Moscow |
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Beijing |
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Munich |
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Doha |
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Dubai |
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Rome |
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San Diego |
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Frankfurt |
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San Francisco |
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Hamburg |
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Shanghai |
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Silicon Valley |
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Houston |
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Los Angeles |
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Washington, D.C. |
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Madrid |
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March 20, 2015
Energy Transfer
Partners, L.P.
3738 Oak Lawn Avenue
Dallas, Texas 75219
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Re: |
Agreement and Plan of Merger, dated as of January 25, 2015, as amended on February 18, 2015 |
Ladies
and Gentlemen:
We have acted as special tax counsel to Energy Transfer Partners, L.P., a Delaware limited partnership (ETP),
in connection with (i) (a) the proposed merger (the LP Merger) of Regency Energy Partners LP, a Delaware limited partnership (Regency) with Rendezvous I LLC, a Delaware limited liability company (Merger Sub
A) and a direct wholly-owned subsidiary of ETP, and (b) the proposed merger (the GP Merger and, together with the LP Merger, the Merger) of ETE GP Acquirer LLC, a Delaware limited partnership (ETE
Acquirer) with Rendezvous II LLC, a Delaware limited liability company (Merger Sub B) and a direct wholly-owned subsidiary of ETP, as contemplated by the Agreement and Plan of Merger dated as of January 25, 2015, and Amendment
No. 1 to the Agreement and Plan of Merger, dated as of February 18, 2015, by and among ETP, Energy Transfer Partners GP, L.P., a Delaware limited liability company (ETP GP), Merger Sub A, Merger Sub B, Regency, Regency GP, LP,
a Delaware limited partnership, and ETE Acquirer (the Merger Agreement), and (ii) the preparation of a Registration Statement on Form S-4 (File No. 333-202319) (as amended through the date hereof, the Registration
Statement) of ETP, including the proxy statement/prospectus forming a part thereof, relating to the transactions contemplated by the Merger Agreement. This opinion is being delivered in connection with the Registration Statement. Capitalized
terms not defined herein have the meanings specified in the Merger Agreement unless otherwise indicated.
March 20, 2015
Page 2
In rendering our opinion, we have examined and, with your consent, are expressly relying upon
(without any independent investigation or review thereof) the truth and accuracy of the factual statements, representations, covenants and warranties contained in (i) the Merger Agreement (including any Exhibits and Schedules thereto),
(ii) the Registration Statement and the proxy statement/prospectus, (iii) the respective tax officers certificates of ETP and Regency, each delivered to us for purposes of this opinion (the Officers Certificates),
and (iv) such other documents and corporate records as we have deemed necessary or appropriate for purposes of our opinion.
In
addition, we have assumed, with your consent, that:
|
1. |
Original documents (including signatures) are authentic, and documents submitted to us as copies conform to the original documents, and there has been (or will be by the effective time of the Merger) execution and
delivery of all documents where execution and delivery are prerequisites to the effectiveness thereof; |
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2. |
The Merger will be consummated in the manner contemplated by, and in accordance with the provisions of, the Merger Agreement, the Registration Statement and the proxy statement/prospectus, and the Merger will be
effective under the laws of the State of Delaware; |
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3. |
All factual statements, descriptions and representations contained in any of the documents referred to herein or otherwise made to us are true, complete and correct in all respects and will remain true, complete and
correct in all respects up to and including the effective time of the Merger, and no actions have been taken or will be taken which are inconsistent with such factual statements, descriptions or representations or which make any such factual
statements, descriptions or representations untrue, incomplete or incorrect at the effective time of the Merger; |
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4. |
Any statements made in any of the documents referred to herein to the knowledge of or similarly qualified are true, complete and correct in all respects and will continue to be true, complete and correct in
all respects at all times up to and including the effective time of the Merger, in each case without such qualification; and |
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5. |
The parties have complied with and, if applicable, will continue to comply with, the covenants contained in the Merger Agreement, the Registration Statement and the proxy statement/prospectus. |
Based upon and subject to the foregoing, and subject to the qualifications, exceptions, assumptions and limitations stated in the Registration
Statement and the proxy statement/prospectus constituting part of the Registration Statement, all statements of legal conclusion in the Registration Statement under the captions Material U.S. Federal Income Tax Consequences of the
MergerTax Consequences of the Merger to ETP and Its Unitholders and Material U.S. Federal Income Tax Consequences of ETP Common Unit Ownership constitute the opinion of Latham & Watkins LLP as to the material U.S.
federal income tax consequences of the matters described therein.
March 20, 2015
Page 3
In addition to the matters set forth above, this opinion is subject to the exceptions,
limitations and qualifications set forth below.
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1. |
This opinion represents our best judgment regarding the application of U.S. federal income tax laws arising under the Internal Revenue Code of 1986, as amended, existing judicial decisions, administrative regulations
and published rulings and procedures, but does not address all of the U.S. federal income tax consequences of the Merger or all of the matters discussed in the Registration Statement under the captions Material U.S. Federal Income Tax
Consequences of the MergerTax Consequences of the Merger to ETP and Its Unitholders and Material U.S. Federal Income Tax Consequences of ETP Common Unit Ownership. We express no opinion as to U.S. federal, state, local,
foreign, or other tax consequences, other than as set forth herein and in the Registration Statement. Our opinion is not binding upon the Internal Revenue Service or the courts, and there is no assurance that the Internal Revenue Service will not
assert a contrary position. Furthermore, no assurance can be given that future legislative, judicial or administrative changes, on either a prospective or retroactive basis, would not adversely affect the validity of the conclusions stated herein
and in the Registration Statement. Nevertheless, we undertake no responsibility to advise you of any new developments in the application or interpretation of the U.S. federal income tax laws. |
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2. |
No opinion is expressed as (i) to any transaction other than the Merger as described in the Merger Agreement, (ii) to any matter not discussed in the Registration Statement under the captions Material
U.S. Federal Income Tax Consequences of the MergerTax Consequences of the Merger to ETP and Its Unitholders and Material U.S. Federal Income Tax Consequences of ETP Common Unit Ownership or (iii) to any matter whatsoever
if, to the extent relevant to our opinion, either all the transactions described in the Merger Agreement are not consummated in accordance with the terms of the Merger Agreement and without waiver or breach of any provisions thereof or all of the
factual statements, representations, warranties and assumptions upon which we have relied, including in the Registration Statement, the proxy statement/prospectus and the Officers Certificates, are not true and accurate at all relevant times.
|
We are furnishing this opinion in connection with the filing of the Registration Statement and this opinion is not to be
relied upon for any other purpose without our prior written consent. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm name therein under the captions Material U.S. Federal
Income Tax Consequences of the Merger and Material U.S. Federal Income Tax Consequences of ETP Common Unit Ownership. In giving this consent, we do not admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules or regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Latham & Watkins LLP
Exhibit 8.2
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2001 ROSS AVENUE |
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AUSTIN |
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LONDON |
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DALLAS, TEXAS |
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BEIJING |
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MOSCOW |
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75201-2980 |
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BRUSSELS |
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NEW YORK |
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214.953.6500 |
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DALLAS |
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PALO ALTO |
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FAX 214.953.6503 |
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DUBAI |
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RIO DE JANEIRO |
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HONG KONG |
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RIYADH |
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HOUSTON |
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WASHINGTON |
March 20, 2015
Regency Energy
Partners LP
2001 Bryan Street, Suite 3700
Dallas, Texas
75201
Ladies and Gentlemen:
We have acted
as counsel to you in connection with (i) the transactions (the Transactions) contemplated by the Agreement and Plan of Merger, dated as of January 15, 2015 and amended on February 18, 2015 (as amended, the Merger
Agreement) among Energy Transfer Partners, L.P., a Delaware limited partnership (ETP), Energy Transfer Partners GP, L.P., a Delaware limited partnership and the general partner of ETP, Rendezvous I LLC, a Delaware limited liability
company and a direct wholly owned subsidiary of ETP, Rendezvous II LLC, a Delaware limited liability company and a direct wholly owned subsidiary of ETP, Regency Energy Partners LP, a Delaware limited partnership (the Partnership),
Regency GP LP, a Delaware limited partnership and the general partner of the Partnership, ETE GP Acquirer LLC, a Delaware limited liability company, and, solely for purposes of Section 5.17 and Article VIII of the Merger Agreement, Energy
Transfer Equity, L.P., a Delaware limited partnership and (ii) the filing of a registration statement on Form S-4 (File No. 333-202319) (as amended, the Registration Statement) with the Securities and Exchange Commission (the
Commission) by ETP relating to the Transactions. In connection therewith, you have requested our opinion regarding certain U.S. federal income tax matters relating to the Partnership and its common unitholders.
In preparing our opinion, we have examined the Merger Agreement and the Registration Statement, including the proxy statement/prospectus that
forms a part of the Registration Statement. In addition, we have examined such other documents, instruments and information as we considered necessary to enable us to express this opinion. Our opinion is also based on (i) the accuracy of the
representations, statements, and facts concerning the Transactions set forth in the Merger Agreement and the Registration Statement (including, without limitation, their respective exhibits) and we have assumed that such representations, statements,
and facts will be accurate and complete as of the closing date of the Transactions (as if made as of such time), (ii) the consummation of the Transactions in the manner contemplated by, and in accordance with the terms set forth in, the Merger
Agreement and the Registration Statement, (iii) representations made by you and ETP with respect to certain factual matters, including the representations set forth in letters from you and ETP (the Officers Certificates), and
we have assumed that such representations will be accurate and complete (without regard to any qualification for knowledge or belief) as of the closing date of the Transactions (as if made as of such time ), and (iv) financial information
Page 2
provided to us by you. For the purpose of our opinion, we have not made an independent investigation or audit of the facts set forth in the above-referenced documents or in the Officers
Certificates.
We hereby confirm that all statements of legal conclusions contained in the discussion in the Registration Statement under
the caption Material U.S. Federal Income Tax Consequences of the Merger as they relate to the tax consequences of the merger to the Partnership and its unitholders constitute the opinion of Baker Botts L.L.P. with respect to the matters
set forth therein as of the effective date of the Registration Statement, subject to the assumptions, qualifications, and limitations set forth therein. Our opinion is based on the Internal Revenue Code of 1986, as amended (the Code),
the legislative history with respect thereto, rules and regulations promulgated thereunder, published rulings and court decisions, all as in effect and existing on the date hereof, and all of which are subject to change at any time, possibly on a
retroactive basis. There can be no assurance that our conclusions will not be rendered invalid as a result of subsequent changes in the law, including changes to the Code, the regulations thereunder, or the interpretation thereof by the courts or
the Internal Revenue Service.
This opinion letter is limited to the matters set forth herein, and no opinions are intended to be implied
or may be inferred beyond those expressly stated herein. We assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of fact, circumstances, or law after the effective date of the
Registration Statement. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court.
This opinion is furnished to you, and is for your use in connection with the Transactions. This opinion may not be relied upon by you for any
other purpose without our prior written consent. However, this opinion may be relied upon by you and by persons entitled to rely on it pursuant to applicable provisions of federal securities law, including persons exchanging Regency units pursuant
to the Registration Statement.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration
Statement and to the references to our firm and this opinion contained in the Registration Statement. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act
of 1933, as amended, or the rules and regulations promulgated by the Commission thereunder.
Very truly yours,
/s/ Baker Botts L.L.P.
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|
Regency Energy Partners LP
2001 Bryan Street, Suite 3700 Dallas, Texas
75201 |
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VOTE BY INTERNET [www.proxyvote.com]
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the
meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE [1-800-690-6903]
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card
in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to [Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717]. |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID
ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
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1. |
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To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of January 25, 2015, as amended by Amendment No. 1 thereto, dated as of February 18, 2015, by and among Energy Transfer Partners,
L.P., Energy Transfer Partners GP, L.P., the general partner of ETP, Rendezvous I LLC, Rendezvous II LLC, Regency Energy Partners LP, Regency GP LP, the general partner of Regency, ETE GP Acquirer LLC and, solely for purposes of certain provisions
therein, Energy Transfer Equity, L.P., and the transactions contemplated thereby. |
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FOR
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AGAINST
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ABSTAIN
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2. |
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To consider and vote on a proposal to approve the adjournment of the special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special
meeting. |
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FOR
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AGAINST
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ABSTAIN
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3. |
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To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the payments that will or may be paid by Regency to its named executive officers in connection with the merger. |
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FOR
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AGAINST
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ABSTAIN
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NOTE: Such other business as may properly come before the meeting or any adjournment thereof.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such.
Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
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Signature [PLEASE
SIGN WITHIN BOX] |
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Date
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Signature (Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: The Prospectus,
Notice & Proxy Statement is/are available at [www.proxyvote.com.]
This proxy is solicited on behalf of
the Board of Directors of
Regency GP LLC
Regency
Energy Partners LP
Special Meeting of Unitholders
April 28, 2015, 11:00 AM
The
undersigned unitholder(s) of Regency Energy Partners LP (the Partnership) hereby appoint(s) Michael J. Bradley, Thomas E. Long and Todd Carpenter, each or any of them, with full power of substitution and revocation, as proxies to
represent the undersigned and to vote, as designated, and otherwise act in such proxyholders sole discretion as to any other matter properly raised in respect of all units of the Partnership, which the undersigned may be entitled to vote at
the Special Meeting of Unitholders of the Partnership to be held on April 28, 2015, at 11:00 am local time at the Partnerships offices at 2001 Bryan St., Suite 3700, Dallas, TX 75201, and at any and all adjournments thereof, with all
rights and powers the undersigned would possess if personally present. Proxies are instructed to vote as specified on the reverse side or in such proxyholders sole discretion as to any other matter that may properly come before the Special
Meeting.
Continued and to be signed on reverse side
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