sv3asr
As filed with the Securities
and Exchange Commission on August 28, 2009
Registration No. 333
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Enterprise GP Holdings L.P.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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13-4297064
(I.R.S. Employer
Identification Number) |
1100 Louisiana Street, 10th Floor
Houston, Texas 77002
(713) 381-6500
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Richard H. Bachmann
1100 Louisiana Street, 10th Floor
Houston, Texas 77002
(713) 381-6500
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
David C. Buck
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
Approximate date of commencement of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered pursuant to dividend or
interest reinvestment plans, please check the following box. o
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) 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. o
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective
amendment thereto that shall become effective upon filing with the Commission pursuant to Rule
462(e) under the Securities Act, check the following box. þ
If this Form is a post-effective amendment to a registration statement filed pursuant to General
Instruction I.D. filed to register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the following box. o
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.
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
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Proposed |
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Maximum |
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Proposed |
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Title of Each Class of |
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Amount to be |
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Offering Price |
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Maximum |
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Amount of |
Securities to be Registered |
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Registered(1) |
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per Unit(1) |
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Offering Price(1) |
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Registration Fee(1) |
Common Units |
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Debt Securities of Enterprise GP Holdings L.P. |
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Total |
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(1) |
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An indeterminate amount of securities to be offered at indeterminate prices is being
registered pursuant to this registration statement. The registrant is deferring payment of the
registration fee pursuant to Rule 456(b) and is excluding this information in reliance on Rule
456(b) and Rule 457(r). Any additional registration fees will be paid subsequently on a
pay-as-you-go basis. |
PROSPECTUS
ENTERPRISE GP HOLDINGS L.P.
Units Representing Limited Partner Interests
Debt Securities
The following securities may be offered in an unlimited number and amount under this
prospectus:
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Units representing limited partner interests in Enterprise GP Holdings L.P.; and |
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Debt securities of Enterprise GP Holdings L.P. |
We may offer and sell these securities to or through one or more underwriters, dealers and
agents, or directly to purchasers, on a continuous or delayed basis, in each case to the extent
such manner of distribution is permitted under applicable SEC rules in connection with this
prospectus. This prospectus describes the
general terms of these securities. The specific terms of any securities and the specific manner in
which we will offer them will be included in a supplement to this prospectus relating to that
offering.
You should read this prospectus and the applicable prospectus supplement and the documents
incorporated by reference herein and therein carefully before you invest in our securities. This
prospectus may not be used to consummate sales of securities unless accompanied by a prospectus
supplement.
Our units are traded on the New York Stock Exchange (NYSE) under the symbol EPE.
Investing in these securities involves a high degree of risk. Limited partnerships are
inherently different from corporations. For a discussion of the factors you should consider before
deciding to purchase these securities, please see Risk
Factors, beginning on page 3 of this
prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is
August 28, 2009.
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus, any prospectus supplement and
the documents we have incorporated by reference. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any state where the offer
is not permitted. You should not assume that the information contained in this prospectus or any
prospectus supplement, as well as the information we previously filed with the Securities and
Exchange Commission that is incorporated by reference herein, is accurate as of any date other than
its respective date.
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ABOUT THIS PROSPECTUS
You should rely only on the information provided in or incorporated by reference in this
prospectus, any prospectus supplement, or documents to which we otherwise refer you. We have not
authorized anyone else to provide you with different information. We are not making an offer of any
securities in any jurisdiction where the offer is not permitted. You should not assume that the
information in this prospectus, any prospectus supplement or any document incorporated by reference
is accurate as of any date other than the date of the document in which such information is
contained or such other date referred to in such document, regardless of the time of any sale or
issuance of a security.
This prospectus is part of a registration statement that we filed with the Securities and
Exchange Commission, or SEC, utilizing a shelf registration process. Under this shelf process, we
may offer and sell from time to time an unlimited number and amount of the securities described in
this prospectus in one or more offerings. This prospectus provides you only with a general
description of the securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of that offering and
the securities offered by us in that offering. The prospectus supplement may also add, update or
change information in this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the headings Where You Can Find
More Information and Incorporation by Reference.
This 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 herein are qualified in their entirety by reference to the actual documents. Copies
of some of the documents referred to herein have been filed or will be filed or incorporated by
reference as exhibits to the registration statement of which this prospectus is a part, and you may
obtain copies of those documents as described below in the section entitled Where You Can Find
More Information.
SIGNIFICANT RELATIONSHIPS REFERENCED IN THIS PROSPECTUS
Unless the context requires otherwise, references to we, us, our, or the Partnership
are intended to mean the business and operations of Enterprise GP Holdings L.P. and its
consolidated subsidiaries.
References to the Parent Company mean Enterprise GP Holdings L.P., individually as the
parent company, and not on a consolidated basis. The Parent Company is owned 99.99% by its limited
partners and 0.01% by its general partner, EPE Holdings, LLC (EPE Holdings). EPE Holdings is a
wholly owned subsidiary of Dan Duncan, LLC, the membership interests of which are owned by Dan L.
Duncan.
References to Enterprise Products Partners mean Enterprise Products Partners L.P., the
common units of which are listed on the New York Stock Exchange (NYSE) under the ticker symbol
EPD. Enterprise Products Partners has no business activities outside those conducted by its
operating subsidiary, Enterprise Products Operating LLC (EPO). References to EPGP refer to
Enterprise Products GP, LLC, which is the general partner of Enterprise Products Partners. EPGP is
owned by the Parent Company.
References to Duncan Energy Partners mean Duncan Energy Partners L.P., which is a
consolidated subsidiary of EPO. Duncan Energy Partners is a publicly traded Delaware limited
partnership, the common units of which are listed on the NYSE under the ticker symbol DEP.
References to DEP GP mean DEP Holdings, LLC, which is the general partner of Duncan Energy
Partners.
References to TEPPCO mean TEPPCO Partners, L.P., a publicly traded affiliate, the common
units of which are listed on the NYSE under the ticker symbol TPP. References to TEPPCO GP
refer to Texas Eastern Products Pipeline Company, LLC, which is the general partner of TEPPCO.
TEPPCO GP is owned by the Parent Company.
References to Energy Transfer Equity mean the business and operations of Energy Transfer
Equity, L.P. and its consolidated subsidiaries, which includes Energy Transfer Partners, L.P.
(ETP). Energy Transfer Equity is a
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publicly traded Delaware limited partnership, the common units of which are listed on the NYSE
under the ticker symbol ETE. The general partner of Energy Transfer Equity is LE GP, LLC (LE
GP). The Parent Company owns non-controlling interests in both Energy Transfer Equity and LE GP
that it accounts for using the equity method of accounting.
References to Employee Partnerships mean EPE Unit L.P. (EPE Unit I), EPE Unit II, L.P.
(EPE Unit II), EPE Unit III, L.P. (EPE Unit III), Enterprise Unit L.P. (Enterprise Unit),
EPCO Unit L.P. (EPCO Unit), TEPPCO Unit L.P. (TEPPCO Unit I), and TEPPCO Unit II L.P. (TEPPCO
Unit II), collectively, all of which are private company affiliates of EPCO, Inc.
References to MLP Entities mean Enterprise Products Partners, TEPPCO and Energy Transfer
Equity.
References to Controlled Entities mean Enterprise Products Partners and TEPPCO. References
to Controlled GP Entities mean TEPPCO GP and EPGP.
References to EPCO mean EPCO, Inc. and its private company affiliates, which are related
party affiliates to all of the foregoing named entities. Mr. Duncan is the Group Co-Chairman and
controlling shareholder of EPCO.
References to DFI mean Duncan Family Interests, Inc. and DFIGP mean DFI GP Holdings, L.P.
DFI and DFIGP are private company affiliates of EPCO. The Parent Company acquired its ownership
interests in TEPPCO and TEPPCO GP from DFI and DFIGP.
The Parent Company, Enterprise Products Partners, EPGP, TEPPCO, TEPPCO GP, the Employee
Partnerships, EPCO, DFI and DFIGP are affiliates under common control of Mr. Duncan. We do not
control Energy Transfer Equity or LE GP.
ABOUT ENTERPRISE GP HOLDINGS L.P.
We are a publicly traded Delaware limited partnership, the limited partnership interests (the
Units) of which are listed on the NYSE under the ticker symbol EPE. The business of Enterprise
GP Holdings L.P. is the ownership of general and limited partner interests of publicly traded
limited partnerships engaged in the midstream energy industry and related businesses to increase
cash distributions to its unitholders.
We were formed in April 2005 and completed our initial public offering in August 2005. The
Parent Company is owned 99.99% by its limited partners and 0.01% by its general partner, EPE
Holdings. EPE Holdings is a wholly owned subsidiary of Dan Duncan LLC, the membership interests of
which are owned by Dan L. Duncan. The Parent Company has no operations apart from its investing
activities and indirectly overseeing the management of the entities
controlled by it. At June 30,
2009, the Parent Company had investments in Enterprise Products Partners, TEPPCO, Energy Transfer
Equity and their respective general partners. Our principal executive offices are located at 1100
Louisiana, 10th Floor, Houston, Texas 77002 and our phone number is (713) 381-6500.
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RISK FACTORS
Limited partner interests are inherently different from the capital stock of a corporation,
although many of the business risks to which we are subject are similar to those that would be
faced by a corporation engaged in a similar business. Before you invest in our securities, you
should carefully consider the risk factors included in our most-recent annual report on Form 10-K
and our quarterly reports on Form 10-Q that are incorporated herein by reference and those that may
be included in the applicable prospectus supplement, together with all of the other information
included in this prospectus, any prospectus supplement and the documents we incorporate by
reference in evaluating an investment in our securities.
If any of the risks discussed in the foregoing documents were actually to occur, our business,
financial condition, results of operations, or cash flow could be materially adversely affected. In
that case, our ability to make distributions to our unitholders or pay interest on, or the
principal of, any debt securities, may be reduced, the trading price of our securities could
decline and you could lose all or part of your investment.
The tax treatment of our structure is subject to potential legislative, judicial or administrative
changes and differing interpretations, possibly on a retroactive basis.
The U.S. federal income tax consequences of unitholders depends in some instances on determinations
of fact and interpretations of complex provisions of U.S. federal income tax law. The U.S. federal
income tax rules are constantly under review by persons involved in the legislative process, the
IRS and the U.S. Treasury Department, frequently resulting in revised interpretations of
established concepts, statutory changes, revisions to Treasury Regulations and other modifications
and interpretations. The present U.S. federal income tax treatment of an investment in our units
may be modified by administrative, legislative or judicial interpretation at any time. Any
modification to the U.S. federal income tax laws and interpretations thereof may or may not be
applied retroactively and could make it more difficult or impossible to meet the exception for us
to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a
corporation, affect or cause us to change our business activities, affect the tax considerations of
an investment in us, change the character or treatment of portions of our income and adversely
affect an investment in our units. For example, in response to recent public offerings of interests
in the management operations of private equity funds and hedge funds, members of Congress are
considering substantive changes to the definition of qualifying income under Section 7704 of the
Internal Revenue Code and changing the characterization of certain types of income received from
partnerships. In particular, one proposal recharacterizes certain income and gain received with
respect to investment service partnership interests as ordinary income for the performance of
services, which may not be treated as qualifying income for publicly traded partnerships. As such
proposal is currently interpreted, a significant portion of our interest in the MLP Entities may be
viewed as an investment service partnership interest. Moreover, the same proposal could change the
tax treatment of future sales of our units. Although we are unable to predict whether the proposed
legislation, or any other proposals, will ultimately be enacted and if so, whether any such
proposed legislation would be applied retroactively, the enactment of any such proposed legislation
could negatively impact the value of an investment in our units.
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FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
Some of the information contained in or incorporated by reference in this prospectus may
contain forward-looking statements. These statements can be identified by the use of
forward-looking terminology including may, believe, will, expect, anticipate, estimate,
continue, or other similar words. These statements discuss future expectations, contain
projections of results of operations or of financial condition, or state other forward-looking
information. These forward-looking statements involve risks and uncertainties. When considering
these forward-looking statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus or incorporated by reference herein, including those described in the
Risk Factors section of our most recent annual report on Form 10-K and, to the extent applicable,
our quarterly reports on Form 10-Q and any prospectus supplement. The risk factors and other
factors noted in this prospectus or incorporated by reference herein could cause our actual results
to differ materially from those contained in any forward-looking statement. Investors are cautioned
that certain statements contained in or incorporated by reference in this prospectus as well as
some statements in periodic press releases and some oral statements made by our officials and our
subsidiaries during presentations about us, are forward-looking statements. Forward-looking
statements are based on current expectations and projections about future events and are inherently
subject to a variety of risks and uncertainties, many of which are beyond our control, which could
cause actual results to differ materially from those anticipated or projected.
Forward-looking statements speak only as of the date of this prospectus or, in the case of
forward-looking statements contained in any document incorporated by reference, the date of such
document, and we expressly disclaim any obligation or undertaking to update these statements to
reflect any change in our expectations or beliefs or any change in events, conditions or
circumstances on which any forward-looking statement is based.
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USE OF PROCEEDS
Unless otherwise indicated in any prospectus supplement, we expect to use the net proceeds
from the sale of securities for general partnership purposes, which may include, among other
things:
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the repayment of outstanding indebtedness; |
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working capital; |
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capital expenditures; and |
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acquisitions. |
The actual application of proceeds we receive from the sale of any particular offering of
securities using this prospectus will be described in the applicable prospectus supplement relating
to such offering.
RATIO OF EARNINGS TO FIXED CHARGES
The Partnerships ratio of earnings to fixed charges for each of the periods indicated is as
follows:
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Six Months |
Year Ended December 31, |
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June 30, |
2004 |
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2005 |
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2009 |
2.55x |
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2.64x |
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2.86x |
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2.33x |
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2.63x |
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2.43x |
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For purposes of these calculations, earnings is the amount
resulting from adding and subtracting the following items.
Add the following, as applicable:
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consolidated pre-tax income before income or loss from equity investees; |
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fixed charges; |
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amortization of capitalized interest; |
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distributed income of equity investees; and |
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our share of pre-tax losses of equity investees for which charges arising from
guarantees are included in fixed charges. |
From the total of the added items, subtract the following, as applicable:
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interest capitalized; |
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preference security dividend requirements of consolidated subsidiaries; and |
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noncontrolling interest in pre-tax income of subsidiaries that have not incurred fixed
charges. |
The term fixed charges means the sum of the following: interest expensed and capitalized;
amortized premiums, discounts and capitalized expenses related to indebtedness; an estimate of
interest within rental expenses; and preference security dividend requirements of consolidated
subsidiaries.
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DESCRIPTION OF OUR UNITS
General
Generally, our units represent limited partner interests that entitle the holders to
participate in our cash distributions and to exercise the rights and privileges available to
limited partners under our partnership agreement. For a description of the relative rights and
preferences of holders of units and our general partner in and to cash distributions, please read
this section and the section entitled How We Make Cash Distributions. For a description of the
rights and privileges of limited partners under our partnership agreement, including voting rights,
please read Material Provisions of The Partnership Agreement of Enterprise GP Holdings L.P.
Our outstanding units are listed on the NYSE under the symbol EPE. Any additional units we
issue will also be listed on the NYSE.
Transfer Agent and Registrar
Mellon Investor Services LLC serves as registrar and transfer agent for the units. We pay all
fees charged by the transfer agent for transfers of units, except the following that must be paid
by unitholders:
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surety bond premiums to replace lost or stolen certificates, taxes and other
governmental charges; |
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special charges for services requested by a holder of a unit; and |
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other similar fees or charges. |
There is no charge to unitholders for disbursements of our cash distributions. We will
indemnify the transfer agent, its agents and each of their stockholders, directors, officers and
employees against all claims and losses that may arise out of acts performed or omitted for its
activities in that capacity, except for any liability due to any gross negligence or intentional
misconduct of the indemnified person or entity.
The transfer agent may resign, by notice to us, or be removed by us. The resignation or
removal of the transfer agent will become effective upon our appointment of a successor transfer
agent and registrar and its acceptance of the appointment. If no successor has been appointed and
has accepted the appointment within 30 days after notice of the resignation or removal, our general
partner may act as the transfer agent and registrar until a successor is appointed.
Transfer of Units
By transfer of our units in accordance with our partnership agreement, each transferee of our
units will be admitted as a unitholder with respect to the units transferred when such transfer and
admission is reflected in our books and records. Additionally, each transferee of our units:
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represents that the transferee has the capacity, power and authority to become bound by
our partnership agreement; |
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automatically agrees to be bound by the terms and conditions of, and is deemed to have
executed, our partnership agreement; and |
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gives the consents and approvals contained in our partnership agreement. |
An assignee will become a substituted limited partner of our partnership for the transferred
units automatically upon the recording of the transfer on our books and records. The general
partner will cause any transfers to be recorded on our books and records no less frequently than
quarterly.
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We may, at our discretion, treat the nominee holder of a 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.
Units are securities and are transferable according to the laws governing transfers of
securities. In addition to other rights acquired upon transfer, the transferor gives the transferee
the right to become a substituted limited partner in our partnership for the transferred units.
Until a unit has been transferred on our books, we 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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DESCRIPTION OF DEBT SECURITIES
We may issue senior debt securities under an indenture between us and a trustee that we will
name in the related prospectus supplement. We refer to this indenture as the senior indenture. We
may also issue subordinated debt securities under an indenture to be entered into between us and a
trustee that we will name in the related prospectus supplement. We refer to this indenture as the
subordinated indenture.
We refer to the senior indenture and the subordinated indenture collectively as the
indentures. The debt securities will be governed by the provisions of the related indenture and
those made part of the indenture by reference to the Trust Indenture Act of 1939.
We have summarized some of the material provisions of the indentures below. This summary does
not restate those agreements in their entirety. A form of senior indenture and a form of
subordinated indenture have been filed as exhibits to the registration statement of which this
prospectus is a part. We urge you to read each of the indentures because each one, and not this
description, defines the rights of holders of debt securities.
Unless the context otherwise requires, references in this Description of the Debt Securities
to we, us and our mean Enterprise GP Holdings L.P. and references herein to an indenture
refer to the particular indenture under which we issue a series of debt securities.
Capitalized terms defined in the indentures have the same meanings when used in this
prospectus.
Provisions Applicable to Each Indenture
General
The debt securities issued under the indentures will be our direct, unsecured general
obligations. The senior debt securities will rank equally with all of our other senior and
unsubordinated debt. The subordinated debt securities will have a junior position to all of our
senior debt.
A substantial portion of our assets are held by our operating subsidiaries. With respect to
these assets, holders of senior debt securities that are not guaranteed by our operating
subsidiaries and holders of subordinated debt securities will have a position junior to the prior
claims of creditors of these subsidiaries, including trade creditors, debtholders, secured
creditors, taxing authorities and guarantee holders, and any preferred unitholders, except to the
extent that we may be a creditor with recognized claims against any subsidiary. Our ability to pay
the principal, premium, if any, and interest on any debt securities is, to a large extent,
dependent upon the payment to us by our subsidiaries of dividends, debt principal and interest or
other charges.
The following description sets forth the general terms and provisions that could apply to debt
securities that we may offer to sell. A prospectus supplement and an indenture relating to any
series of debt securities being offered will include specific terms relating to the offering. These
terms will include some or all of the following:
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the title and type of the debt securities; |
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the total principal amount of the debt securities; |
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the percentage of the principal amount at which the debt securities will be issued and
any payments due if the maturity of the debt securities is accelerated; |
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the dates on which the principal of the debt securities will be payable; |
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the interest rate which the debt securities will bear and the interest payment dates for
the debt securities; |
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any conversion or exchange features; |
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any optional redemption periods; |
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any sinking fund or other provisions that would obligate us to repurchase or otherwise
redeem some or all of the debt securities; |
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any provisions granting special rights to holders when a specified event occurs; |
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any changes to or additional events of default or covenants; |
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any special tax implications of the debt securities, including provisions for original
issue discount securities, if offered; and |
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any other terms of the debt securities. |
None of the indentures will limit the amount of debt securities that may be issued. Each
indenture will allow debt securities to be issued up to the principal amount that may be authorized
by us and may be in any currency or currency unit designated by us.
Debt securities of a series may be issued in registered, coupon or global form.
Covenants
Under the indentures, we:
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will pay the principal of, interest and any premium on, the debt securities when due; |
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will maintain a place of payment; |
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will deliver a certificate to the trustee at the end of each fiscal year reviewing our
obligations under the indentures; |
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will preserve our limited liability company existence; and |
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will deposit sufficient funds with any paying agent on or before the due date for any
principal, interest or premium. |
Mergers and Sale of Assets
Each of the indentures will provide that we may not consolidate with or merge into any other
Person or sell, convey, transfer or lease all or substantially all of our properties and assets (on
a consolidated basis) to another Person, unless:
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either: (a) we are the surviving Person; or (b) the Person formed by or surviving any
such consolidation, amalgamation or merger or resulting from such conversion (if other than
us) or to which such sale, assignment, transfer, conveyance or other disposition has been
made is a corporation, limited liability company or limited partnership organized or
existing under the laws of the United States, any state of the United States or the
District of Columbia; |
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the Person formed by or surviving any such conversion, consolidation, amalgamation or
merger (if other than us) or the Person to which such sale, assignment, transfer,
conveyance or other disposition has been made assumes all of our obligations under such
indenture and the debt securities governed thereby pursuant to agreements reasonably
satisfactory to the trustee; |
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we or the successor will not immediately be in default under such indenture; and |
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we deliver an officers certificate and opinion of counsel to the trustee stating that
such consolidation or merger complies with such indenture and that all conditions precedent
set forth in such indenture have been complied with. |
Upon the assumption of our obligations under each indenture by a successor, we will be
discharged from all obligations under such indenture.
As used in the indenture and in this description, the word Person means any individual,
corporation, company, limited liability company, partnership, limited partnership, joint venture,
association, joint-stock company, trust, other entity, unincorporated organization or government or
any agency or political subdivision thereof.
Events of Default
Event of default, when used in the indentures, with respect to debt securities of any
series, will mean any of the following:
(1) default in the payment of any interest upon any debt security of that series when it
becomes due and payable, and continuance of such default for a period of 30 days;
(2) default in the payment of the principal of (or premium, if any, on) any debt security of
that series at its maturity;
(3) default in the performance, or breach, of any covenant set forth in Article Ten of the
applicable indenture (other than a covenant a default in whose performance or whose breach is
elsewhere specifically dealt with as an event of default or which has expressly been included in
such indenture solely for the benefit of one or more series of debt securities other than that
series), and continuance of such default or breach for a period of 90 days after there has been
given, by registered or certified mail, to us by the trustee or to us and the trustee by the
holders of at least 25% in principal amount of the then-outstanding debt securities of that series
a written notice specifying such default or breach and requiring it to be remedied and stating that
such notice is a Notice of Default thereunder;
(4) default in the performance, or breach, of any covenant in the applicable indenture (other
than a covenant set forth in Article Ten of such indenture or any other covenant a default in whose
performance or whose breach is elsewhere specifically dealt with as an event of default or which
has expressly been included in such indenture solely for the benefit of one or more series of debt
securities other than that series), and continuance of such default or breach for a period of 180
days after there has been given, by registered or certified mail, to us by the trustee or to us and
the trustee by the holders of at least 25% in principal amount of the then-outstanding debt
securities of that series a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a Notice of Default thereunder;
(5) We pursuant to or within the meaning of any bankruptcy law, (i) commence a voluntary case,
(ii) consent to the entry of any order for relief against it in an involuntary case, (iii) consent
to the appointment of a custodian of it or for all or substantially all of its property, or (iv)
make a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under any bankruptcy law that
(i) is for relief against us in an involuntary case, (ii) appoints a custodian for all or
substantially all of our property, or (iii) orders the liquidation of us; and the order or decree
remains unstayed and in effect for 60 consecutive days;
(7) default in the deposit of any sinking fund payment when due; or
(8) any other event of default provided with respect to debt securities of that series in
accordance with provisions of the indenture related to the issuance of such debt securities.
An event of default for a particular series of debt securities does not necessarily constitute
an event of default for any other series of debt securities issued under an indenture. The trustee
may withhold notice to the holders of
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debt securities of any default (except in the payment of principal, interest or any premium)
if it considers the withholding of notice to be in the interests of the holders.
If an event of default for any series of debt securities occurs and continues, the trustee or
the holders of a specified percentage in aggregate principal amount of the debt securities of the
series may declare the entire principal of all of the debt securities of that series to be due and
payable immediately. If this happens, subject to certain conditions, the holders of a specified
percentage of the aggregate principal amount of the debt securities of that series can void the
declaration.
Other than its duties in case of a default, a trustee is not obligated to exercise any of its
rights or powers under any indenture at the request, order or direction of any holders, unless the
holders offer the trustee reasonable indemnity. If they provide this reasonable indemnification,
the holders of a majority in principal amount outstanding of any series of debt securities may
direct the time, method and place of conducting any proceeding or any remedy available to the
trustee, or exercising any power conferred upon the trustee, for any series of debt securities.
Amendments and Waivers
Subject to certain exceptions, the indentures, the debt securities issued thereunder or the
guarantees by us may be amended or supplemented with the consent of the holders of a majority in
aggregate principal amount of the then-outstanding debt securities of each series affected by such
amendment or supplemental indenture, with each such series voting as a separate class (including,
without limitation, consents obtained in connection with a purchase of, or tender offer or exchange
offer for, debt securities) and, subject to certain exceptions, any past default or compliance with
any provisions may be waived with respect to each series of debt securities with the consent of the
holders of a majority in principal amount of the then-outstanding debt securities of such series
voting as a separate class (including consents obtained in connection with a purchase of, or tender
offer or exchange offer for, debt securities).
Without the consent of each holder of the outstanding debt securities affected, an amendment
or waiver may not, among other things:
(1) change the stated maturity of the principal of, or any installment of principal of or
interest on, any debt security, or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal
of an original issue discount security that would be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the applicable indenture, or change any place of
payment where, or the coin or currency in which, any debt security or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of any such payment
on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption
date therefor);
(2) reduce the percentage in principal amount of the then-outstanding debt securities of any
series, the consent of whose holders is required for any such supplemental indenture, or the
consent of whose holders is required for any waiver (of compliance with certain provisions of the
applicable indenture or certain defaults thereunder and their consequences) provided for in the
applicable indenture;
(3) modify any of the provisions set forth in (i) the sections related to matters addressed in
items (1) through (15) of this caption, Amendments and Waivers, immediately below, (ii) the
provisions of the applicable indenture related to the holders unconditional right to receive
principal, premium, if any, and interest on the debt securities or (iii) the provisions of the
applicable indenture related to the waiver of past defaults under such indenture except to increase
any such percentage or to provide that certain other provisions of such indenture cannot be
modified or waived without the consent of the holder of each then-outstanding debt security
affected thereby; provided, however, that this clause shall not be deemed to require the consent of
any holder with respect to changes in the references to the trustee and concomitant changes in
this section of such indenture, or the deletion of this proviso in such indenture, in accordance
with the requirements of such indenture;
(4) waive a redemption payment with respect to any debt security; provided, however, that any
purchase or repurchase of debt securities shall not be deemed a redemption of the debt securities;
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(5) release any guarantor from any of its obligations under its guarantee or the applicable
indenture, except in accordance with the terms of such indenture (as supplemented by any
supplemental indenture); or
(6) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of debt securities, we, the
guarantors and the trustee may amend each of the indentures or the debt securities issued
thereunder to:
(1) cure any ambiguity or to correct or supplement any provision therein that may be
inconsistent with any other provision therein;
(2) evidence the succession of another Person to us and the assumption by any such successor
of our covenants of therein and, to the extent applicable, to the debt securities;
(3) provide for uncertificated debt securities in addition to or in place of certificated debt
securities; provided that the uncertificated debt securities are issued in registered form for
purposes of Section 163(f) of the Internal Revenue Code of 1986, as amended (the Code), or in the
manner such that the uncertificated debt securities are described in Section 163(f)(2)(B) of the
Code;
(4) add a guarantee and cause any Person to become a guarantor, and/or to evidence the
succession of another Person to a guarantor and the assumption by any such successor of the
guarantee of such guarantor therein and, to the extent applicable, endorsed upon any debt
securities of any series;
(5) secure the debt securities of any series;
(6) add to our covenants such further covenants, restrictions, conditions or provisions as we
shall consider to be appropriate for the benefit of the holders of all or any series of debt
securities (and if such covenants, restrictions, conditions or provisions are to be for the benefit
of less than all series of debt securities, stating that such covenants are expressly being
included solely for the benefit of such series) or to surrender any right or power therein
conferred upon us and to make the occurrence, or the occurrence and continuance, of a default in
any such additional covenants, restrictions, conditions or provisions an event of default
permitting the enforcement of all or any of the several remedies provided in the applicable
indenture as set forth therein; provided, that in respect of any such additional covenant,
restriction, condition or provision, such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer than that allowed in the case
of other defaults) or may provide for an immediate enforcement upon such an event of default or may
limit the remedies available to the trustee upon such an event of default or may limit the right of
the holders of a majority in aggregate principal amount of the debt securities of such series to
waive such an event of default;
(7) make any change to any provision of the applicable indenture that does not adversely
affect the rights or interests of any holder of debt securities issued thereunder;
(8) provide for the issuance of additional debt securities in accordance with the provisions
set forth in the applicable indenture on the date of such indenture;
(9) add any additional defaults or events of default in respect of all or any series of debt
securities;
(10) add to, change or eliminate any of the provisions of the applicable indenture to such
extent as shall be necessary to permit or facilitate the issuance of debt securities in bearer
form, registrable or not registrable as to principal, and with or without interest coupons;
(11) change or eliminate any of the provisions of the applicable indenture; provided that any
such change or elimination shall become effective only when there is no debt security outstanding
of any series created prior to the execution of such supplemental indenture that is entitled to the
benefit of such provision;
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(12) establish the form or terms of debt securities of any series as permitted thereunder,
including to reopen any series of any debt securities as permitted thereunder;
(13) evidence and provide for the acceptance of appointment thereunder by a successor trustee
with respect to the debt securities of one or more series and to add to or change any of the
provisions of the applicable indenture as shall be necessary to provide for or facilitate the
administration of the trusts thereunder by more than one trustee, pursuant to the requirements of
such indenture;
(14) conform the text of the applicable indenture (and/or any supplemental indenture) or any
debt securities issued thereunder to any provision of a description of such debt securities
appearing in a prospectus or prospectus supplement or an offering memorandum or offering circular
to the extent that such provision was intended to be a verbatim recreation of a provision of such
indenture (and/or any supplemental indenture) or any debt securities issued thereunder; or
(15) modify, eliminate or add to the provisions of the applicable indenture to such extent as
shall be necessary to effect the qualification of such indenture under the Trust Indenture Act of
1939, as amended (the Trust Indenture Act), or under any similar federal statute subsequently
enacted, and to add to such indenture such other provisions as may be expressly required under the
Trust Indenture Act.
The consent of the holders is not necessary under either indenture to approve the particular
form of any proposed amendment. It is sufficient if such consent approves the substance of the
proposed amendment. After an amendment under an indenture becomes effective, we are required to
mail to the holders of debt securities thereunder a notice briefly describing such amendment.
However, the failure to give such notice to all such holders, or any defect therein, will not
impair or affect the validity of the amendment.
Legal Defeasance and Covenant Defeasance
Each indenture provides that we may, at its option and at any time, elect to have all of its
obligations discharged with respect to the debt securities outstanding thereunder and all
obligations of any guarantors of such debt securities discharged with respect to their guarantees
(Legal Defeasance), except for:
(1) the rights of holders of outstanding debt securities to receive payments in respect of the
principal of, or interest or premium, if any, on such debt securities when such payments are due
from the trust referred to below;
(2) Our obligations with respect to the debt securities concerning issuing temporary debt
securities, registration of debt securities, mutilated, destroyed, lost or stolen debt securities
and the maintenance of an office or agency for payment and money for security payments held in
trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and us and each
guarantors obligations in connection therewith; and
(4) the Legal Defeasance and Covenant Defeasance (as defined below) provisions of the
applicable indenture.
In addition, we may, at its option and at any time, elect to have our obligations released
with respect to certain provisions of each indenture, including certain provisions set forth in any
supplemental indenture thereto (such release and termination being referred to as Covenant
Defeasance), and thereafter any omission to comply with such obligations or provisions will not
constitute a default or event of default. In the event Covenant Defeasance occurs in accordance
with the applicable indenture, the events of default described under clauses (3) and (4) under the
caption Events of Default, in each case, will no longer constitute an event of default
thereunder.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) We must irrevocably deposit with the trustee, in trust, for the benefit of the holders of
the debt securities, cash in U.S. dollars, non-callable government securities, or a combination of
cash in U.S. dollars and non-callable U.S. government securities, in amounts as will be sufficient,
in the opinion of a nationally recognized investment
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bank, appraisal firm or firm of independent public accountants to pay the principal of, or
interest and premium, if any, on the outstanding debt securities on the stated date for payment
thereof or on the applicable redemption date, as the case may be, and we must specify whether the
debt securities are being defeased to such stated date for payment or to a particular redemption
date;
(2) in the case of Legal Defeasance, we have delivered to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that (a) we have received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the issue date of the debt
securities, there has been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel will confirm that, the holders of the
outstanding debt securities will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same time as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, we have delivered to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that the holders of the outstanding debt securities
will not recognize income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no default or event of default has occurred and is continuing on the date of such deposit
(other than a default or event of default resulting from the borrowing of funds to be applied to
such deposit);
(5) the deposit will not result in a breach or violation of, or constitute a default under,
any other instrument to which we or any guarantor is a party or by which we or any guarantor is
bound;
(6) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under, any material agreement or instrument (other than the applicable
indenture) to which we or any of its subsidiaries is a party or by which we or any of its
subsidiaries is bound;
(7) We must deliver to the trustee an officers certificate stating that the deposit was not
made by us with the intent of preferring the holders of debt securities over our other creditors of
us with the intent of defeating, hindering, delaying or defrauding creditors of us or others;
(8) We must deliver to the trustee an officers certificate, stating that all conditions
precedent set forth in clauses (1) through (7) of this paragraph have been complied with; and
(9) We must deliver to the trustee an opinion of counsel (which opinion of counsel may be
subject to customary assumptions, qualifications, and exclusions), stating that all conditions
precedent set forth in clauses (2), (3) and (5) of this paragraph have been complied with; provided
that the opinion of counsel with respect to clause (5) of this paragraph may be to the knowledge of
such counsel.
Satisfaction and Discharge
Each of the indentures will be discharged and will cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of debt securities, as expressly provided
for in such indenture) as to all outstanding debt securities issued thereunder and the guarantees
issued thereunder when:
(1) either (a) all of the debt securities theretofore authenticated and delivered under such
indenture (except lost, stolen or destroyed debt securities that have been replaced or paid and
debt securities for whose payment money or certain United States governmental obligations have
theretofore been deposited in trust or segregated and held in trust by us and thereafter repaid to
us or discharged from such trust) have been delivered to the trustee for cancellation or (b) all
debt securities not theretofore delivered to the trustee for cancellation have become due and
payable or will become due and payable at their stated maturity within one year, or are to be
called for redemption within one year under arrangements satisfactory to the trustee for the giving
of notice of redemption by the trustee in the name, and at our expense, and we or the guarantors
have irrevocably deposited or caused to be deposited with
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the trustee funds or U.S. government obligations, or a combination thereof, in an amount
sufficient to pay and discharge the entire indebtedness on the debt securities not theretofore
delivered to the trustee for cancellation, for principal of and premium, if any, on and interest on
the debt securities to the date of deposit (in the case of debt securities that have become due and
payable) or to the stated maturity or redemption date, as the case may be, together with
instructions from us irrevocably directing the trustee to apply such funds to the payment thereof
at maturity or redemption, as the case may be;
(2) We or the guarantors have paid all other sums then due and payable under such indenture by
us; and
(3) We have delivered to the trustee an officers certificate and an opinion of counsel,
which, taken together, state that all conditions precedent under such indenture relating to the
satisfaction and discharge of such indenture have been complied with.
No Personal Liability of Directors, Officers, Employees, Partners, Members and Unitholders
No director, manager, officer, employee, incorporator, partner, member or unitholder of or any
guarantor, as such, shall have any liability for any obligations of us or the guarantors under the
debt securities, the indentures, the guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder, upon our issuance of the debt
securities and execution of the indentures, waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the debt securities. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the view of the SEC that
such a waiver is against public policy.
Denominations
Unless stated otherwise in the prospectus supplement for each issuance of debt securities, the
debt securities will be issued in denominations of $1,000 each or integral multiples of $1,000.
Paying Agent and Registrar
The trustee will initially act as paying agent and registrar for the debt securities. We may
change the paying agent or registrar without prior notice to the holders of the debt securities,
and we may act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange debt securities in accordance with the applicable indenture.
The registrar and the trustee may require a holder, among other things, to furnish appropriate
endorsements and transfer documents, and we may require a holder to pay any taxes and fees required
by law or permitted by the applicable indenture. We are not required to transfer or exchange any
debt security selected for redemption. In addition, we are not required to transfer or exchange any
debt security for a period of 15 days before a selection of debt securities to be redeemed.
Subordination
The payment of principal of, premium, if any, and interest on, subordinated debt securities
and any other of our payment obligations in respect of subordinated debt securities (including any
obligation to repurchase subordinated debt securities) is subordinated in certain circumstances in
right of payment, as set forth in the subordinated indenture, to the prior payment in full in cash
of all senior debt.
We may not make any payment, whether by redemption, purchase, retirement, defeasance or
otherwise, upon or in respect of subordinated debt securities, except from the trust described
under Legal Defeasance and Covenant Defeasance, if
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a default in the payment of all or any portion of the obligations on any senior debt
(payment default) occurs, or |
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any other default occurs and is continuing with respect to designated senior debt
pursuant to which the maturity thereof may be accelerated (non-payment default) and,
solely with respect to this clause, the trustee or the subordinated debt securities
receives a notice of the default (a Payment Blockage Notice) from the trustee or other
representative for the holders of such designated senior debt. |
Cash payments on subordinated debt securities will be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case of a nonpayment
default, the earlier of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received, unless the maturity of
any designated senior debt has been accelerated or a bankruptcy event of default has occurred and
is continuing. No new period of payment blockage may be commenced unless and until 360 days have
elapsed since the date of commencement of the payment blockage period resulting from the
immediately prior Payment Blockage Notice. No nonpayment default in respect of designated senior
debt that existed or was continuing on the date of delivery of any Payment Blockage Notice to the
trustee for the subordinated debt securities will be, or be made, the basis for a subsequent
Payment Blockage Notice unless such default shall have been cured or waived for a period of no less
than 90 consecutive days.
The subordinated indenture also requires that we promptly notify holders of senior debt if
payment of subordinated debt securities is accelerated because of an event of default.
Upon any payment or distribution of our assets or securities, in connection with any
dissolution or winding up or total or partial liquidation or reorganization of us, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings or other
marshalling of assets for the benefit of creditors, all amounts due or to become due upon all
senior debt shall first be paid in full, in cash or cash equivalents, before the holders of the
subordinated debt securities or the trustee on their behalf shall be entitled to receive any
payment by us on account of the subordinated debt securities, or any payment to acquire any of the
subordinated debt securities for cash, property or securities, or any distribution with respect to
the subordinated debt securities of any cash, property or securities. Before any payment may be
made by, or on behalf of, us on any subordinated debt security (other than with the money,
securities or proceeds held under any defeasance trust established in accordance with the
subordinated indenture), in connection with any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets or securities for us, to which the holders of
subordinated debt securities or the trustee on their behalf would be entitled shall be made by us
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person
making such payment or distribution or by the holders or the trustee if received by them or it,
directly to the holders of senior debt or their representatives or to any trustee or trustees under
any indenture pursuant to which any such senior debt may have been issued, as their respective
interests appear, to the extent necessary to pay all such senior debt in full, in cash or cash
equivalents, after giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such senior debt.
As a result of these subordination provisions, in the event of the liquidation, bankruptcy,
reorganization, insolvency, receivership or similar proceeding or an assignment for the benefit of
our creditors or a marshalling of our assets or liabilities, holders of subordinated debt
securities may receive ratably less than other creditors.
Payment and Transfer
Principal, interest and any premium on fully registered debt securities will be paid at
designated places. Payment will be made by check mailed to the persons in whose names the debt
securities are registered on days specified in the indentures or any prospectus supplement. Debt
securities payments in other forms will be paid at a place designated by us and specified in a
prospectus supplement.
Fully registered debt securities may be transferred or exchanged at the corporation trust
office of the trustee or at any other office or agency maintained by us for such purposes, without
the payment of any service charge except for any tax or governmental charge.
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Global Securities
The debt securities of a series may be issued in whole or in part in the form of one or more
global certificates that we will deposit with a depositary identified in the applicable prospectus
supplement. Unless and until it is exchanged in whole or in part for the individual debt securities
that it represents, a global security may not be transferred except as a whole:
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by the applicable depositary to a nominee of the depositary; |
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by any nominee to the depositary itself or another nominee; or |
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by the depositary or any nominee to a successor depositary or any nominee of the
successor. |
We will describe the specific terms of the depositary arrangement with respect to a series of
debt securities in the applicable prospectus supplement. We anticipate that the following
provisions will generally apply to depositary arrangements.
When we issue a global security in registered form, the depositary for the global security or
its nominee will credit, on its book-entry registration and transfer system, the respective
principal amounts of the individual debt securities represented by that global security to the
accounts of persons that have accounts with the depositary (participants). Those accounts will be
designated by the dealers, underwriters or agents with respect to the underlying debt securities or
by us if those debt securities are offered and sold directly by us. Ownership of beneficial
interests in a global security will be limited to participants or persons that may hold interests
through participants. For interests of participants, ownership of beneficial interests in the
global security will be shown on records maintained by the applicable depositary or its nominee.
For interests of persons other than participants, that ownership information will be shown on the
records of participants. Transfer of that ownership will be effected only through those records.
The laws of some states require that certain purchasers of securities take physical delivery of
securities in definitive form. These limits and laws may impair our ability to transfer beneficial
interests in a global security.
As long as the depositary for a global security, or its nominee, is the registered owner of
that global security, the depositary or nominee will be considered the sole owner or holder of the
debt securities represented by the global security for all purposes under the applicable indenture.
Except as provided below, owners of beneficial interests in a global security:
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will not be entitled to have any of the underlying debt securities registered in their
names; |
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will not receive or be entitled to receive physical delivery of any of the underlying
debt securities in definitive form; and |
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will not be considered the owners or holders under the indenture relating to those debt
securities. |
Payments of principal of, any premium on and any interest on individual debt securities
represented by a global security registered in the name of a depositary or its nominee will be made
to the depositary or its nominee as the registered owner of the global security representing such
debt securities. Neither we, the trustee for the debt securities, any paying agent nor the
registrar for the debt securities will be responsible for any aspect of the records relating to or
payments made by the depositary or any participants on account of beneficial interests in the
global security.
We expect that the depositary or its nominee, upon receipt of any payment of principal, any
premium or interest relating to a global security representing any series of debt securities,
immediately will credit participants accounts with the payments. Those payments will be credited
in amounts proportional to the respective beneficial interests of the participants in the principal
amount of the global security as shown on the records of the depositary or its nominee. We also
expect that payments by participants to owners of beneficial interests in the global security held
through those participants will be governed by standing instructions and customary practices. This
is now the case
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with securities held for the accounts of customers registered in street name. Those payments
will be the sole responsibility of those participants.
If the depositary for a series of debt securities is at any time unwilling, unable or
ineligible to continue as depositary and we do not appoint a successor depositary within 90 days,
we will issue individual debt securities of that series in exchange for the global security or
securities representing that series. In addition, we may at any time in our sole discretion
determine not to have any debt securities of a series represented by one or more global securities.
In that event, we will issue individual debt securities of that series in exchange for the global
security or securities. Furthermore, if we specify, an owner of a beneficial interest in a global
security may, on terms acceptable to us, the trustee and the applicable depositary, receive
individual debt securities of that series in exchange for those beneficial interests. The foregoing
is subject to any limitations described in the applicable prospectus supplement. In any such
instance, the owner of the beneficial interest will be entitled to physical delivery of individual
debt securities equal in principal amount to the beneficial interest and to have the debt
securities registered in its name. Those individual debt securities will be issued in any
authorized denominations.
Governing Law
Each indenture and the debt securities will be governed by and construed in accordance with
the laws of the State of New York.
Notices
Notices to holders of debt securities will be given by mail to the addresses of such holders
as they appear in the security register for such debt securities.
Information Concerning the Trustee
A banking or financial institution will be the trustee under the indentures. A successor
trustee may be appointed in accordance with the terms of the indentures.
The indentures and the provisions of the Trust Indenture Act incorporated by reference
therein, will contain certain limitations on the rights of the trustee, should it become a creditor
of us, to obtain payment of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (within the meaning of the
Trust Indenture Act), it must eliminate such conflicting interest or resign.
A single banking or financial institution may act as trustee with respect to both the
subordinated indenture and the senior indenture. If this occurs, and should a default occur with
respect to either the subordinated debt securities or the senior debt securities, such banking or
financial institution would be required to resign as trustee under one of the indentures within 90
days of such default, pursuant to the Trust Indenture Act, unless such default were cured, duly
waived or otherwise eliminated.
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HOW WE MAKE CASH DISTRIBUTIONS
Set forth above is a summary of the significant provisions of our partnership agreement that
relate to cash distributions.
General
Our partnership agreement requires that, within 50 days after the end of each quarter, we
distribute all of our available cash to the holders of record of our units on the applicable record
date.
Definition of Available Cash
Available cash is defined in our partnership agreement and generally means, with respect to
any calendar quarter, all cash on hand at the end of such quarter:
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less the amount of cash reserves necessary or appropriate, as determined in good faith
by our general partner, to: |
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satisfy general, administrative and other expenses and debt service requirements; |
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permit EPGP to make capital contributions to Enterprise Products Partners if we choose
to maintain our approximately 2% general partner interest upon the issuance of additional
partnership securities by Enterprise Products Partners; |
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comply with applicable law or any debt instrument or other agreement; |
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provide funds for distributions to unitholders and our general partner in respect of any
one or more of the next four quarters; and |
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otherwise provide for the proper conduct of our business; |
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plus all cash on hand immediately prior to the date of the distribution of available
cash for the quarter. |
Adjustments to Capital Accounts
We will make adjustments to capital accounts upon the issuance of additional units. In doing
so, we will allocate any unrealized and, for tax purposes, unrecognized gain or loss resulting from
the adjustments to the unitholders and the general partner in the same manner as we allocate gain
or loss upon liquidation. In the event that we make positive adjustments to the capital accounts
upon the issuance of additional units, we will allocate any later negative adjustments to the
capital accounts resulting from the issuance of additional units or upon our liquidation in a
manner which results, to the extent possible, in the general partners capital account balances
equaling the amount which they would have been if no earlier positive adjustments to the capital
accounts had been made.
Distributions of Cash upon Liquidation
If we dissolve in accordance with the partnership agreement, we will sell or otherwise dispose
of our assets in a process called a liquidation. We will first apply the proceeds of liquidation to
the payment of our creditors in the order of priority provided in the partnership agreement and by
law and, thereafter, we will distribute any remaining proceeds to the unitholders and our general
partner in accordance with their respective capital account balances, as adjusted to reflect any
gain or loss upon the sale or other disposition of our assets in liquidation.
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THE PARTNERSHIP AGREEMENT
The following is a summary of the material provisions of our partnership agreement. Our
partnership agreement is incorporated by reference as an exhibit to the registration statement of
which this prospectus constitutes a part.
We summarize the following provisions of our partnership agreement elsewhere in this
prospectus:
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with regard to distributions of available cash, please read How We Make Cash
Distributions; |
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with regard to rights of holders of our units, please read Description of Our Units;
and |
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with regard to allocations of taxable income and other matters, please read Material
Tax Consequences. |
Organization and Duration
We were organized on April 19, 2005 and have a perpetual existence.
Purpose
Under our partnership agreement, we are permitted to engage in any business activity that is
approved by our general partner and that lawfully may be conducted by a limited partnership
organized under Delaware law and, in connection therewith, to exercise all of the rights and powers
conferred upon us pursuant to the agreements relating to such business activity; provided, however,
unless approved by a majority of the independent directors of our general partners board of
directors, our business will be limited to owning partnership and related interests in Enterprise
Products Partners and owning the membership interests in EPGP; and provided further that our
general partner shall not cause us to engage, directly or indirectly in any business activity that
our general partner determines would cause us or the MLP Entities to be treated as an association
taxable as a corporation or otherwise taxable as an entity for federal income tax purposes. The
directors of our general partners board of directors, including a majority of the independent
directors, have approved our acquisition and ownership of our interests in TEPPCO, TEPPCO GP,
Energy Transfer Equity and ETEGP.
Power of Attorney
Each limited partner, and each person who acquires a unit from a unitholder, by accepting the
unit, automatically grants to our general partner and, if appointed, a liquidator, a power of
attorney to, among other things, execute and file documents required for our qualification,
continuance or dissolution. The power of attorney also grants the authority to amend, and to make
consents and waivers under, our partnership agreement. Please read Amendments to Our
Partnership Agreement.
Capital Contributions
Unitholders are not obligated to make additional capital contributions, except as described
below under Limited Liability.
Limited Liability
Assuming that a limited partner does not participate in the control of our business within the
meaning of the Delaware Revised Uniform Limited Partnership Act, or Delaware Act, and that he
otherwise acts in conformity with the provisions of our partnership agreement, his liability under
the Delaware Act will be limited, subject to possible exceptions, to the amount of capital he is
obligated to contribute to us for his units plus his share of any undistributed profits and assets.
If it were determined, however, that the right, or exercise of the right, by the limited partners
as a group:
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to remove or replace the general partner; |
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to approve some amendments to the partnership agreement; or |
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to take other action under the partnership agreement; |
constituted participation in the control of our business for the purposes of the Delaware
Act, then the limited partners could be held personally liable for our obligations under the laws
of Delaware, to the same extent as the general partner. This liability would extend to persons who
transact business with us and reasonably believe that the limited partner is a general partner.
Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse
against the general partner if a limited partner were to lose limited liability through any fault
of the general partner. While this does not mean that a limited partner could not seek legal
recourse, we know of no precedent for this type of a claim in Delaware case law.
Under the Delaware Act, a limited partnership may not make a distribution to a partner if,
after the distribution, all liabilities of the limited partnership, other than liabilities to
partners on account of their partnership interests and liabilities for which the recourse of
creditors is limited to specific property of the partnership, would exceed the fair value of the
assets of the limited partnership. For the purpose of determining the fair value of the assets of a
limited partnership, the Delaware Act provides that the fair value of property subject to liability
for which recourse of creditors is limited shall be included in the assets of the limited
partnership only to the extent that the fair value of that property exceeds the nonrecourse
liability. The Delaware Act provides that a limited partner who receives a distribution and knew at
the time of the distribution that the distribution was in violation of the Delaware Act shall be
liable to the limited partnership for the amount of the distribution for three years. Under the
Delaware Act, a substituted limited partner of a limited partnership is liable for the obligations
of his assignor to make contributions to the partnership, except that such person is not obligated
for liabilities unknown to him at the time he became a limited partner and that could not be
ascertained from the partnership agreement.
Limitations on the liability of limited partners for the obligations of a limited partner have
not been clearly established in many jurisdictions. While we currently have no operations distinct
from the MLP Entities, if in the future, by our ownership in an operating company or otherwise, it
were determined that we were conducting business in any state without compliance with the
applicable limited partnership or limited liability company statute, or that the right or exercise
of the right by the limited partners as a group to remove or replace the general partner, to
approve some amendments to our partnership agreement, or to take other action under our partnership
agreement constituted participation in the control of our business for purposes of the statutes
of any relevant jurisdiction, then the limited partners could be held personally liable for our
obligations under the law of that jurisdiction to the same extent as the general partner under the
circumstances. We will operate in a manner that the general partner considers reasonable and
necessary or appropriate to preserve the limited liability of the limited partners.
Voting Rights
The following is a summary of the unitholder vote required for the matters specified below. In
voting their units, affiliates of our general partner will have no fiduciary duty or obligation
whatsoever to us or the limited partners, including any duty to act in good faith or in the best
interests of us or the limited partners.
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Issuance of additional units
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No approval right. |
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Amendment of our partnership agreement
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Certain amendments
may be made by our
general partner
without the
approval of our
unitholders. Other
amendments
generally require
the approval of a
majority of our
outstanding units.
Please read
Amendments to Our
Partnership
Agreement. |
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Merger of our partnership or the sale of all or
substantially all of our assets
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A majority of our
outstanding units
in certain
circumstances.
Please read
Merger, Sale or
Other Disposition
of Assets. |
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Dissolution of our partnership
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A majority of our
outstanding units.
Please read
Termination or
Dissolution. |
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Reconstitution of our partnership upon dissolution
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A majority of our
outstanding units.
Please read
Termination or
Dissolution. |
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Withdrawal of our general partner
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Under most
circumstances, the
approval of a
majority of the
units, excluding
units held by our
general partner and
its affiliates, is
required for the
withdrawal of the
general partner
prior to June 30,
2015 in a manner
that would cause a
dissolution of our
partnership. Please
read
Withdrawal or
Removal of Our
General Partner. |
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Removal of our general partner
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Not less than 66
2/3% of the
outstanding units,
including units
held by our general
partner and its
affiliates. Please
read
Withdrawal or
Removal of Our
General Partner. |
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Transfer of the general partner interest
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Our general partner
may transfer all,
but not less than
all, of its general
partner interest in
us without a vote
of our unitholders
to (i) an affiliate
(other than an
individual) or (ii)
another entity in
connection with its
merger or
consolidation with
or into, or sale of
all or
substantially all
of its assets to,
such person. The
approval of a
majority of the
units, excluding
units held by the
general partner and
its affiliates, is
required in other
circumstances for a
transfer of the
general partner
interest to a third
party prior to June
30, 2015. Please
read Transfer
of General Partner
Interest. |
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Transfer of ownership interests in our general partner
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No approval
required at any
time. Please read
Transfer of
Ownership Interests
in Our General
Partner. |
Issuance of Additional Securities
Our partnership agreement authorizes us to issue an unlimited number of additional limited
partner interests and other equity securities that may be senior to our units on terms and
conditions established by our general partner in its sole discretion without the approval of our
unitholders.
It is possible that we will fund acquisitions through the issuance of additional units or
other equity securities. Holders of any additional units we issue will be entitled to share equally
with the then-existing holders of units in our cash distributions. In addition, the issuance of
additional partnership interests may dilute the value of the interests of the then-existing holders
of units in our net assets.
In accordance with Delaware law and the provisions of our partnership agreement, we may also
issue additional partnership interests that, in the sole discretion of our general partner, may
have special voting rights to which other units are not entitled. Pursuant to our partnership
agreement, our general partner has designated and created a class of limited partner interests
designated as non-voting units. These non-voting units are identical to our units with respect to
distributions and allocations of income, gain, loss and deductions, but do not have voting rights.
Each non-voting unit is convertible at the option of the holder into one unit upon approval of such
conversion by holders of a majority of outstanding units (excluding non-voting units).
Upon issuance of additional units or other partnership securities, our general partner will
not be required to make additional capital contributions in order to maintain its 0.01% general
partner interest in us. Our general partner and its affiliates have the right, which they may from
time to time assign in whole or in part to any of their affiliates, to purchase units or other
equity securities whenever, and on the same terms that, we issue those securities to persons other
than our general partner and its affiliates, to the extent necessary to maintain their limited
partner percentage interests in us that existed immediately prior to
the issuance. As of June 30,
2009, our general partner and its affiliates, including the employee partnerships, held
approximately 77.8% of our outstanding units. The holders of units do not have preemptive rights to
acquire additional units or other partnership interests in us.
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Amendments to Our Partnership Agreement
General
Amendments to our partnership agreement may be proposed only by or with the consent of our
general partner. However, our general partner 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 us or the
limited partners, including any duty to act in good faith or in the best interests of us or the
limited partners. In order to adopt a proposed amendment, other than the amendments discussed
below, our general partner is required to seek written approval of the holders of the number of
units required to approve the amendment or 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
majority of our outstanding units.
Prohibited Amendments
No amendment may be made that would:
(1) 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
(2) 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 us to our general
partner or any of its affiliates without the consent of our general partner, which may be given
or withheld at its option.
The provision of our partnership agreement preventing the amendments having the effects
described in clauses (1) or (2) above can be amended upon the approval of the holders of at least
90% of our outstanding units.
No Unitholder Approval
Our general partner may generally make amendments to our partnership agreement without the
approval of any limited partner to reflect:
(1) a change in the name of the partnership, the location of the partnerships principal
place of business, the partnerships registered agent or its registered office;
(2) the admission, substitution, withdrawal or removal of partners in accordance with our
partnership agreement;
(3) a change that, in the sole discretion of our general partner, is necessary or
appropriate for the partnership to qualify or to continue our 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 none of us, EPGP, Enterprise Products Partners or EPO, will be
treated as an association taxable as a corporation or otherwise taxed as an entity for federal
income tax purposes;
(4) an amendment that is necessary, in the opinion of our counsel, to prevent the
partnership or our 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;
(5) any amendment expressly permitted in our partnership agreement to be made by our
general partner acting alone;
(6) an amendment effected, necessitated or contemplated by a merger agreement that has been
approved under the terms of our partnership agreement;
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(7) any amendment that, in the discretion of our general partner, is necessary or
appropriate for the formation by the partnership of, or its investment in, any corporation,
partnership or other entity, as otherwise permitted by our partnership agreement;
(8) a change in our fiscal year or taxable year and related changes;
(9) certain mergers or conveyances set forth in our partnership agreement; and
(10) any other amendments substantially similar to any of the matters described in (1)
through (9) above.
In addition, our general partner may make amendments to our partnership agreement without the
approval of any limited partner or assignee in connection with a merger or consolidation approved
in accordance with our partnership agreement, or if our general partner determines that those
amendments:
(1) do not adversely affect our limited partners in any material respect;
(2) 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;
(3) 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, compliance with any of
which our general partner deems to be in the partnerships best interest and the best interest
of our limited partners;
(4) are necessary or advisable for any action taken by our general partner relating to
splits or combinations of units under the provisions of our partnership agreement; or
(5) are required to effect the intent of the provisions of our partnership agreement or are
otherwise contemplated by our partnership agreement.
Opinion of Counsel and Unitholder Approval
Our 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 none of us,
EPGP, Enterprise Products Partners or EPO being treated as an entity for federal income tax
purposes in connection with any of the amendments described under Amendments to Our Partnership
Agreement No Unitholder Approval. No other amendments to our partnership agreement will become
effective without the approval of holders of at least 90% of the outstanding units unless we first
obtain an opinion of counsel to the effect that the amendment will not affect the limited liability
under applicable law of any of our limited partners. Any amendment that reduces the voting
percentage required to take any action must be approved by the affirmative vote of limited partners
constituting not less than the voting requirement sought to be reduced.
Merger, Sale or Other Disposition of Assets
Our partnership agreement generally prohibits our general partner, without the prior approval
of a majority of our outstanding units, from causing us to, among other things, sell, exchange or
otherwise dispose of all or substantially all of our assets in a single transaction or a series of
related transactions, including by way of merger, consolidation or other combination, or approving
on our behalf the sale, exchange or other disposition of all or substantially all of the assets of
our subsidiaries. Our general partner may, however, mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of our assets without that approval. Our general
partner may also sell all or substantially all of our assets under a foreclosure or other
realization upon those encumbrances without that approval.
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If conditions specified in our partnership agreement are satisfied, our general partner,
without the approval of our unitholders, may merge us or any of our subsidiaries into, or convey
some or all of our assets to, a newly formed entity if the sole purpose of that merger or
conveyance is to effect a mere change in our legal form into another limited liability entity. The
unitholders are not entitled to dissenters rights of appraisal under our partnership agreement or
applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of
our assets or any other transaction or event.
Termination or Dissolution
We will continue as a limited partnership until terminated under our partnership agreement. We
will dissolve upon:
(1) the election of our general partner to dissolve us, if approved by the holders of a
majority of our outstanding units;
(2) there being no limited partners, unless we are continued without dissolution in
accordance with applicable Delaware law;
(3) the entry of a decree of judicial dissolution of our partnership; or
(4) the withdrawal or removal of our general partner or any other event that results in its
ceasing to be our general partner other than by reason of a transfer of its general partner
interest in accordance with our partnership agreement or withdrawal or removal following
approval and admission of a successor.
Upon a dissolution under clause (4) above, the holders of a majority of our outstanding units
may also elect, within specific time limitations, to continue our business on the same terms and
conditions described in our partnership agreement by appointing a successor general partner an
entity approved by the holders of a majority of our outstanding units, excluding those units held
by our general partner and its affiliates, subject to receipt by us of an opinion of counsel to the
effect that:
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the action would not result in the loss of limited liability of any limited partner; and |
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none of us, EPGP, Enterprise Products Partners or EPO 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 and Distribution of Proceeds
Upon our dissolution, unless we are reconstituted and continued as a new limited partnership,
the person authorized to wind up our affairs (the liquidator) will, acting with all the powers of
our general partner that the liquidator deems necessary or desirable in its good faith judgment,
liquidate our assets. The proceeds of the liquidation will be applied as follows:
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first, towards the payment of all of our creditors and the creation of a reserve for
contingent liabilities; and |
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then, to all partners in accordance with the positive balance in their respective
capital accounts. |
Under some circumstances and subject to some limitations, the liquidator may defer liquidation
or distribution of our assets for a reasonable period of time. If the liquidator determines that a
sale would be impractical or would cause undue loss to our partners, our general partner may
distribute assets in kind to our partners.
Withdrawal or Removal of Our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our
general partner prior to June 30, 2015 without obtaining the approval of a majority of our
outstanding units, excluding those held by
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our general partner and its affiliates, and furnishing an opinion of counsel regarding limited
liability and tax matters. On or after June 30, 2015, our 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 our partnership agreement. In addition, our
general partner may withdraw without unitholder approval upon 90 days notice to our limited
partners if at least 50% of our outstanding units are held or controlled by one person and its
affiliates other than our general partner and its affiliates.
Upon the voluntary withdrawal of our general partner, the holders of a majority of our
outstanding units, excluding the units held by the withdrawing general partner and its affiliates,
may elect a successor to the 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,
we will be dissolved, wound up and liquidated, unless within 90 days after that withdrawal, the
holders of a majority of our outstanding units, excluding the units held by the withdrawing general
partner and its affiliates, agree to continue our business and to appoint a successor general
partner.
Our general partner may not be removed unless that removal is approved by (i) the audit and
conflicts committee of the general partner and (ii) not less than 66 2/3 % of our outstanding
units, including units held by our general partner and its affiliates, and we receive an opinion of
counsel regarding limited liability and tax matters. In addition, if our general partner is removed
as our general partner under circumstances where cause does not exist and units held by our general
partner and its affiliates are not voted in favor of such removal, our general partner will have
the right to convert its general partner interest into units or to receive cash in exchange for
such interests. Any removal of this kind is also subject to the approval of a successor general
partner by a majority of our outstanding units, including those held by our general partner and its
affiliates. The ownership of more than 33 1/3 % of the outstanding units by our general partner
and its affiliates would give it the practical ability to prevent its
removal. As of August 15,
2009, affiliates of our general partner owned approximately 77.8% of the outstanding units.
In the event of removal of a general partner under circumstances where cause exists or
withdrawal of a general partner where that withdrawal violates our partnership agreement, a
successor general partner will have the option to purchase the general partner interest of the
departing general partner for a cash payment equal to its fair market value. 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 for a cash payment equal to its 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 will
automatically convert into units equal to the 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, we 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 our benefit.
Transfer of General Partner Interest
Except for transfer by our general partner of all, but not less than all, of its general
partner interest in us to:
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an affiliate of the general partner (other than an individual); or |
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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, |
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our general partner may not transfer all or any part of its general partner interest in
us to another entity prior to June 30, 2015 without the approval of a majority of the units
outstanding, excluding units held by our general partner and its affiliates. As a condition
of this transfer, the transferee must assume the rights and duties of our general partner,
agree to be bound by the provisions of the partnership agreement, and furnish an opinion of
counsel regarding limited liability and tax matters. |
Our general partner and it affiliates may at any time transfer units to one or more persons
without unitholder approval.
Transfer of Ownership Interests in Our General Partner
At any time, Dan Duncan LLC, as the sole member of our general partner, may sell or transfer
all or part of its ownership interest in the general partner without the approval of our
unitholders.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a
person or group from attempting to remove our general partner as general partner or otherwise
change management. If any person or group other than our 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 our general partner or its affiliates and any transferees of that
person or group approved by our general partner.
Limited Call Right
If at any time our general partner and its affiliates hold more than 90% of the outstanding
limited partner interests of any class, our general partner will have the right, but not the
obligation, which it may assign in whole or in part to any of its affiliates or us, to acquire all,
but not less than all, of the remaining limited partner interests of the class held by unaffiliated
persons as of a record date to be selected by our general partner, on at least 10 but not more than
60 days notice. The purchase price in the event of this purchase is the greater of:
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the highest cash price paid by either our general partner or any of its affiliates for
any limited partners interests of the class purchased within the 90 days preceding the date
our general partner first mails notice of its election to purchase the limited partner
interests; and |
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the current market price of the limited partner interests of the class as of the date
three days prior to the date that notice is mailed. |
As a
result of our general partners right to purchase outstanding limited partner interests,
a holder of limited partner interests may have his limited partner interests purchased at an
undesirable time or price. The tax consequences to a unitholder of the exercise of this call right
are the same as a sale by that unitholder of his units in the market. Please read Material Tax
Consequences Disposition of Units.
As of
August 15, 2009, affiliates of our general partner, including the employee partnerships,
owned 108,363,833 of our units, representing approximately 77.8% of our outstanding units.
Meetings; Voting
Except as described below regarding a person or group owning 20% or more of units then
outstanding, unitholders on the record date will be entitled to notice of, and to vote at, meetings
of our limited partners and to act upon matters for which approvals may be solicited. Units that
are owned by non-citizen assignees will be voted by our general partner and our general partner
will distribute the votes on those units in the same ratios as the votes of limited partners on
other units are cast.
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Our general partner does not anticipate that any meeting of unitholders will be called in the
foreseeable future. Any action that is required or permitted to be taken by our 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 our general partner
or by unitholders owning at least 20% of the outstanding units. Unitholders may vote either in
person or by proxy at meetings. The holders of a majority of the outstanding units, 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 us, although
additional limited partner interests having special voting rights could be issued. Please read
Issuance of Additional Securities above. However, if at any time any person or group, other than
our general partner and its affiliates, or a direct or subsequently approved transferee of our
general partner or its affiliates, 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. 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 units under our partnership agreement will be delivered to the record
holder by us or by the transfer agent.
Status as Limited Partner
By transfer of units in accordance with our partnership agreement, each transferee of units
shall be admitted as a limited partner with respect to the transferred units when such transfer and
admission is reflected in our books and records. Except as described under Limited Liability,
the units will be fully paid, and unitholders will not be required to make additional
contributions.
Non-Citizen Assignees; Redemption
If we are or become subject to federal, state or local laws or regulations that, in the
reasonable determination of our general partner, create a substantial risk of cancellation or
forfeiture of any property that we have an interest in because of the nationality, citizenship or
other related status of any limited partner, we may redeem the units held by the limited partner at
their current market price. In order to avoid any cancellation or forfeiture, our 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 our
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 us, 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 our liquidation.
Indemnification
Under our partnership agreement, in most circumstances, we will indemnify the following
persons, to the fullest extent permitted by law, from and against all losses, claims, damages or
similar events:
(1) our general partner;
(2) any departing general partner;
(3) any person who is or was an affiliate of our general partner or any departing general
partner;
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(4) any person who is or was an officer, director, member, partner, fiduciary or trustee of
any entity described in (1), (2) or (3) above;
(5) any person who is or was serving as an officer, director, member, partner, fiduciary or
trustee of another person at the request of the general partner or any departing general
partner; and
(6) any person designated by our general partner.
Any indemnification under these provisions will only be out of our assets. Unless it otherwise
agrees, our general partner will not be personally liable for, or have any obligation to contribute
or loan funds or assets to us to enable us to effectuate, indemnification. We may purchase
insurance against liabilities asserted against and expenses incurred by persons for our activities,
regardless of whether we would have the power to indemnify the person against liabilities under the
partnership agreement.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse our general partner for all direct and
indirect expenses it incurs or payments it makes on our or the Controlled Entities behalf and all
other expenses allocable to us or otherwise incurred by our general partner in connection with
operating our business. These expenses include salary, bonus, incentive compensation and other
amounts paid to persons who perform services for us, our general partner or the Controlled Entities
and expenses allocated to us or otherwise incurred by our general partner in connection with
operating our or the Controlled Entities business. The general partner is entitled to determine in
good faith the expenses that are allocable to us.
Books and Reports
Our general partner is required to keep appropriate books of our business at our principal
offices. The books will be maintained for both tax and financial reporting purposes on an accrual
basis. For tax and fiscal reporting purposes, our fiscal year is the calendar year.
We will furnish or make available to record holders of units, within 120 days after the close
of each fiscal year, an annual report containing audited financial statements and a report on those
financial statements by our independent public accountants. Except for our fourth quarter, we will
also furnish or make available summary financial information within 90 days after the close of each
quarter.
We will furnish each record holder of a unit with information reasonably required for tax
reporting purposes within 90 days after the close of each calendar year. This information is
expected to be furnished in summary form so that some complex calculations normally required of
partners can be avoided. Our ability to furnish this summary information to unitholders will depend
on the cooperation of unitholders in supplying us with specific information. Every unitholder will
receive information to assist him in determining his federal and state tax liability and filing his
federal and state income tax returns, regardless of whether he supplies us with information.
Right to Inspect Our Books and Records
A limited partner can, for a purpose reasonably related to the limited partners interest as a
limited partner, upon reasonable demand stating the purpose of such demand and at his own expense,
obtain:
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a current list of the name and last known address of each partner; |
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a copy of our tax returns; |
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information as to the amount of cash and a description and statement of the agreed value
of any other property or services, contributed or to be contributed by each partner and the
date on which each became a partner; |
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copies of our partnership agreement, our certificate of limited partnership, amendments
to either of them and powers of attorney which have been executed under our partnership
agreement; |
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information regarding the status of our business and financial condition; and |
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any other information regarding our affairs as is just and reasonable. |
Our general partner may, and intends to, keep confidential from the limited partners trade
secrets and other information the disclosure of which our general partner believes in good faith is
not in our best interest or which we are required by law or by agreements with third parties to
keep confidential.
Registration Rights
Under our partnership agreement, we have agreed to register for resale under the Securities
Act and applicable state securities laws any units or other partnership securities proposed to be
sold by our general partner or any of its affiliates or their assignees if an exemption from the
registration requirements is not otherwise available. We are obligated to pay all costs and
expenses incidental to any such registration and offering on behalf of our general partner or its
affiliates, excluding underwriting discounts and commissions.
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MATERIAL TAX CONSEQUENCES
This section is a discussion of the material tax consequences that may be relevant to
prospective unitholders who are individual citizens or residents of the United States and, unless
otherwise noted in the following discussion, represents the opinion of Andrews Kurth LLP, special
counsel to our general partner and us, insofar as it relates to matters of United States federal
income tax law and legal conclusions with respect to those matters. This section is based upon
current provisions of the Internal Revenue Code, existing and proposed regulations and current
administrative rulings and court decisions, all of which are subject to change. Later changes in
these authorities may cause the tax consequences to vary substantially from the consequences
described below.
The following discussion does not address all federal income tax matters affecting us or our
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, trusts,
nonresident aliens or other unitholders subject to specialized tax treatment, such as tax-exempt
institutions, foreign persons, individual retirement accounts (IRAs), real estate investment trusts
(REITs), employee benefit plans or mutual funds. Accordingly, we urge each prospective unitholder
to consult, and depend on, his own tax advisor in analyzing the federal, state, local and foreign
tax consequences particular to him of the ownership or disposition of units.
All statements as to matters of law and legal conclusions, but not as to factual matters,
contained in this section, unless otherwise noted, are the opinion of Andrews Kurth LLP and are
based on the accuracy of the representations made by us and our general partner.
No ruling has been or will be requested from the IRS regarding our status as a partnership for
federal income tax purposes. Instead, we will rely on opinions and advice of Andrews Kurth 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 in this discussion
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 units and the prices at which units trade. In
addition, the costs of any contest with the IRS principally legal, accounting and related fees,
will result in a reduction in cash available for distribution to our unitholders and our general
partner and thus will be borne indirectly by our unitholders and our general partner. Furthermore,
the tax treatment of us, or of an investment in us, may be significantly modified by future
legislative or administrative changes or court decisions. Any modifications may or may not be
retroactively applied.
For the reasons described below, Andrews Kurth LLP has not rendered an opinion with respect to
the following specific federal income tax issues: the treatment of a unitholder whose units are
loaned to a short seller to cover a short sale of units (please read Tax Consequences of Unit
Ownership Treatment of Short Sales); whether our monthly convention for allocating taxable
income and losses is permitted by existing Treasury Regulations (please read Disposition of
Units Allocations Between Transferors and Transferees); and whether our method for depreciating
Section 743 adjustments is sustainable in certain cases (please read Tax Consequences of Unit
Ownership Section 754 Election and Uniformity of 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 partner unless the amount of cash distributed is in excess
of the partners adjusted basis in his partnership interest.
Section 7704 of the Internal Revenue 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, processing,
refining, transportation, storage and
marketing of any mineral or natural resource including our allocable share of such income from the
MLP Entities. Other types of qualifying income include interest (other than from a financial
business), dividends,
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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. We estimate
that less than 5% of our 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 us and our general partner and a review of the applicable legal
authorities, Andrews Kurth LLP is of the opinion that at least 90% of our current gross income
constitutes qualifying income. The portion of our income that is qualifying income can 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
our status as a partnership for federal income tax purposes or whether our operations generate
qualifying income under Section 7704 of the Internal Revenue Code. Instead, we will rely on the
opinion of Andrews Kurth LLP on such matters. It is the opinion of Andrews Kurth LLP that, based
upon the Internal Revenue Code, its regulations, published revenue rulings and court decisions and
the representations described below, we will be classified as a partnership for federal income tax
purposes.
In rendering its opinion, Andrews Kurth LLP has relied on factual representations made by us
and our general partner. The representations made by us and our general partner upon which Andrews
Kurth LLP has relied include:
(a) Neither we nor the MLP Entities has elected nor will elect to be treated as a
corporation; and
(b) For each taxable year, more than 90% of our gross income has been and will be income
that counsel has opined or will opine is qualifying income within the meaning of Section
7704(d) of the Internal Revenue Code.
If we fail 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, we will be
treated as if we had transferred all of our assets, subject to liabilities, to a newly formed
corporation, on the first day of the year in which we fail 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 us. This deemed contribution and liquidation should be tax-free
to unitholders and us so long as we, at that time, do not have liabilities in excess of the tax
basis of our assets. Thereafter, we would be treated as a corporation for federal income tax
purposes.
If we were taxable as a corporation in any taxable year, either as a result of a failure to
meet the Qualifying Income Exception or otherwise, our items of income, gain, loss and deduction
would be reflected only on our tax return rather than being passed through to the unitholders, and
our net income would be taxed to us at corporate rates. Moreover, if any MLP Entity were taxable as
a corporation in any taxable year, our share of that MLP Entitys items of income, gain, loss and
deduction would not be passed through to us and the MLP Entity would pay tax on its income at
corporate rates. If we or any MLP Entity were taxable as a corporation, losses recognized by the
MLP Entity would not flow through to us or our losses would not flow through to our unitholders, as
the case may be. In addition, any distribution made by us to a unitholder (or by the MLP Entity to
us) would be treated as either taxable dividend income, to the extent of 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 units (or our tax basis in the MLP Entity), or
taxable capital gain, after the unitholders tax basis in his units (or our tax basis in the MLP
Entity) is reduced to zero. Accordingly, taxation of either us or any MLP Entity 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 units.
The discussion below is based on Andrews Kurth LLPs opinion that we will be classified as a
partnership for federal income tax purposes.
Limited Partner Status
Unitholders who have become limited partners of Enterprise GP Holdings L.P. will be treated as
partners of Enterprise GP Holdings L.P. for federal income tax purposes. Also, assignees who have
executed and delivered transfer applications, and are awaiting admission as limited partners, and
unitholders whose 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
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to the ownership of their units, will be treated as partners of Enterprise GP Holdings L.P.
for federal income tax purposes. As there is no direct authority addressing assignees of units who
are entitled to execute and deliver transfer applications and thereby become entitled to direct the
exercise of attendant rights, but who fail to execute and deliver transfer applications, Andrews
Kurth LLPs opinion does not extend to these persons. Furthermore, a purchaser or other transferee
of units who does not execute and deliver a transfer application may not receive some federal
income tax information or reports furnished to record holders of units unless the units are held in
a nominee or street name account and the nominee or broker has executed and delivered a transfer
application for those units.
A beneficial owner of 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 Unit Ownership Treatment of Short
Sales.
Items of our income, gains, deductions or losses 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 status as partners in us for federal income tax purposes.
Tax Consequences of Unit Ownership
Flow-through of Taxable Income. We do not pay any federal income tax. Instead, each
unitholder is required to report on his income tax return his share of our income, gains, losses
and deductions without regard to whether corresponding cash distributions are received by him.
Consequently, we 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 our
income, gains, losses and deductions for our taxable year or years ending with or within his
taxable year. Our taxable year ends on December 31.
Treatment of Distributions. Distributions by us to a unitholder generally will not be taxable
to the unitholder for federal income tax purposes to the extent of his tax basis in his units
immediately before the distribution. Our cash distributions in excess of a unitholders tax basis
in his units generally will be considered to be gain from the sale or exchange of the units,
taxable in accordance with the rules described under Disposition of Units below. Any reduction
in a unitholders share of our liabilities for which no partner, including our general partner,
bears the economic risk of loss, known as nonrecourse liabilities, will be treated as a
distribution of cash to that unitholder. To the extent our distributions cause a unitholders at
risk amount to be less than zero at the end of any taxable year, the unitholder must recapture any
losses deducted in previous years. Please read Limitations on Deductibility of Losses.
A decrease in a unitholders percentage interest in us because of our issuance of additional
units will decrease his share of our nonrecourse liabilities, and thus will result in a
corresponding deemed distribution of cash which 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 units, if the distribution reduces the unitholders share of our
unrealized receivables, including depreciation recapture, and/or substantially appreciated
inventory items, both as defined in Section 751 of the Internal Revenue Code, and collectively,
Section 751 Assets. To that extent, he will be treated as having been distributed his
proportionate share of the Section 751 Assets and then having exchanged those assets with us 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 (1) the non-pro rata portion of that distribution over (2) the unitholders tax basis
for the share of Section 751 Assets deemed relinquished in the exchange.
Basis of Units. A unitholders initial tax basis for his units will be the amount he paid for
the units plus his share of our nonrecourse liabilities. That basis generally will be increased by
his share of our income and by any increases in his share of our nonrecourse liabilities. That
basis generally will be decreased, but not below zero, by distributions from us, by the
unitholders share of our losses, by any decreases in his share of our nonrecourse liabilities and
by his share of our expenditures that are not deductible in computing taxable income and are not
required to be capitalized. A unitholder will have no share of our debt which is recourse to our
general partner, but will have a share, generally based on his share of profits, of our nonrecourse
liabilities. Please read Disposition of Units Recognition of Gain or Loss.
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Limitations on Deductibility of Losses. The deduction by a unitholder of his share of our
losses will be limited to the tax basis in his units and, in the case of an individual unitholder
or a 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 our
activities, if that amount is less than his tax basis. A unitholder 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 in a later year to the extent
that his tax basis or at risk amount, whichever is the limiting factor, is subsequently increased
provided such losses are otherwise allowable. Upon the taxable disposition of a 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 excess loss above
that gain previously suspended by the at risk or basis limitations is no longer 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 our nonrecourse liabilities,
reduced by (i) any portion of that basis representing amounts other than were 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 us, is related to another unitholder who has an interest in us 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 our nonrecourse liabilities.
The passive loss limitations generally provide that individuals, estates, trusts and some
closely-held corporations and personal service corporations are permitted to 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. However, the application of the passive loss limitations to tiered publicly traded
partnerships is uncertain. We will take the position that any passive losses we generate that are
reasonably allocable to our investment in an MLP Entity will only be available to offset our
passive income generated in the future that is reasonably allocable to our investment in the
respective MLP Entity and will not be available to offset income from other passive activities or
investments, including other investments in private businesses or investments we may make in other
publicly traded partnerships. Moreover, because the passive loss limitations are applied separately
with respect to each publicly traded partnership, any passive losses we generate will be available
to offset only our passive income generated in the future and will not be available to offset
income from other passive activities or investments, including our investments or investments in
other publicly traded partnerships, or a unitholders salary or active business income. Further,
your share of our net income may be offset by any suspended passive losses from your investment in
us, but may not be offset by your current or carryover losses from other passive activities,
including those attributable to other publicly traded partnerships. Passive losses that are not
deductible because they exceed a unitholders share of income we generate may be deducted in full
when the unitholder disposes of his entire investment in us in a fully taxable transaction with an
unrelated party. The passive activity loss limitations are applied after other applicable
limitations on deductions, including the at risk rules and the basis limitation.
The IRS could take the position that for purposes of applying the passive loss limitation
rules to tiered publicly traded partnerships, such as the MLP Entities and us, the related entities
are treated as one publicly traded partnership. In that case, any passive losses we generate would
be available to offset income from your investments in the MLP Entities. However, passive losses
that are not deductible because they exceed a unitholders share of income we generate would not be
deductible in full until a unitholder disposes of his entire investment in both us and each MLP
Entity in a fully taxable transaction with an unrelated party.
A unitholders share of our net income may be offset by any of our suspended passive losses,
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.
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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our 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 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. The IRS has indicated that net
passive income earned by a publicly traded partnership will be treated as investment income to its
unitholders. In addition, the unitholders share of our portfolio income will be treated as
investment income.
Entity-Level Collections. If we are required or elect under applicable law to pay any
federal, state, local or foreign income tax on behalf of any unitholder or our general partner or
any former unitholder, we are authorized to pay those taxes from our funds. That payment, if made,
will be treated as a distribution of cash to the partner on whose behalf the payment was made. If
the payment is made on behalf of a person whose identity cannot be determined, we are authorized to
treat the payment as a distribution to all current unitholders. We are authorized to amend the
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 the
partnership agreement is maintained as nearly as is practicable. Payments by us 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 we have a net profit, our
items of income, gain, loss and deduction will be allocated among our general partner and the
unitholders in accordance with their percentage interests in us. If we have a net loss for the
entire year, that loss will be allocated first to our general partner and the unitholders in
accordance with their percentage interests in us to the extent of their positive capital accounts
and, second, to our general partner.
Specified items of our income, gain, loss and deduction will be allocated under Section 704(c)
of the Internal Revenue Code to account for the difference between the tax basis and fair market
value of our assets at the time we issue units in an offering, referred to in this discussion as
Contributed Property. These allocations are required to eliminate the difference between a
partners book capital account, credited with the fair market value of Contributed Property, and
the tax capital account, credited with the tax basis of Contributed Property, referred to in this
discussion as the Book-Tax Disparity. The effect of these allocations to a unitholder purchasing
units in such an offering will be essentially the same as if the tax basis of our assets were equal
to their fair market value at the time of such an offering. In the event we issue additional units
or engage in certain other transactions in the future, reverse Section 704(c) allocations,
similar to the Section 704(c) allocations described above, will be made to all partners to account
for the difference, at the time of such future transaction, between the book basis for purposes
of maintaining capital accounts and the fair market value of all property held by us at the time of
the 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 other
unitholders. Finally, although we do not expect that our operations will result in the creation of
negative capital accounts, if negative capital accounts nevertheless result, items of our income
and gain will be allocated in such amount and manner as needed to eliminate the negative balance as
quickly as possible.
An allocation of items of our income, gain, loss or deduction, other than an allocation
required by Section 704(c) 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 substantial economic effect. In any other case, a partners share of an item will be determined
on the basis of his interest in us, which will be determined by taking into account all the facts
and circumstances, including:
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his relative contributions to us; |
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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 other nonliquidating distributions;
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the rights of all the partners to distributions of capital upon liquidation. |
Andrews Kurth LLP is of the opinion that, with the exception of the issues described in
Tax Consequences of Unit Ownership Section 754 Election, Uniformity of Units and
Disposition of Units Allocations Between Transferors and Transferees, allocations under our
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 our income, gain, loss or deduction with respect to those 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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all of these distributions would appear to be ordinary income. |
Andrews Kurth LLP has not rendered an opinion regarding the treatment of a unitholder where
units are loaned to a short seller to cover a short sale of 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 modify any applicable brokerage account agreements to prohibit their brokers
from loaning their units. The IRS has announced that it is studying issues relating to the tax
treatment of short sales of partnership interests. Please also read Disposition of Units
Recognition of Gain or Loss.
Alternative Minimum Tax. Each unitholder will be required to take into account his
distributive share of any items of our income, gain, loss or deduction for purposes of the
alternative minimum tax. The current minimum tax rate for noncorporate taxpayers is 26% on the
first $175,000 of alternative minimum taxable income in excess of the exemption amount and 28% on
any additional alternative minimum taxable income. Prospective unitholders are urged to consult
with their tax advisors as to the impact of an investment in units on their liability for the
alternative minimum tax.
Tax Rates. In general the highest effective United States federal income tax rate for
individuals currently is 35% and the maximum United States federal income tax rate for net capital
gains of an individual is currently 15% if the asset disposed of was a capital asset held for more
than 12 months at the time of disposition. However, absent new legislation extending the current
rates, beginning January 1, 2011, the highest marginal United States federal income tax rate
applicable to ordinary income and long-term capital gains of individuals will increase to 39.6% and
20%, respectively.
Section 754 Election. We have made the election permitted by Section 754 of the Internal
Revenue Code. That election is irrevocable without the consent of the IRS. The election generally
permits us to adjust a unit purchasers tax basis in our assets (inside basis) under Section
743(b) of the Internal Revenue Code to reflect his purchase price. This election applies to a
person who purchases units from a selling unitholder but does not apply to a person who purchases
units directly from us. The Section 743(b) adjustment belongs to the purchaser and not to other
unitholders. For purposes of this discussion, a unitholders inside basis in our assets will be
considered to have two components: (1) his share of our tax basis in our assets (common basis)
and (2) his Section 743(b) adjustment to that basis.
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Treasury Regulations under Section 743 of the Internal Revenue Code require that, if the
remedial allocation method is adopted (which we have adopted), a portion of the Section 743(b)
adjustment attributable to recovery property under Section 168 of the Internal Revenue Code be
depreciated over the remaining cost recovery period for the propertys unamortized Book-Tax
Disparity. Under Treasury Regulation Section 1.167(c)-l(a)(6), a Section 743(b) adjustment
attributable to property subject to depreciation under Section 167 of the Internal Revenue 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 our partnership
agreement, our general partner is authorized to take a position to preserve the uniformity of units
even if that position is not consistent with these Treasury Regulations. Please read Uniformity
of Units.
Although Andrews Kurth LLP is unable to opine as to the validity of this approach because
there is no clear authority on this issue, we intend to depreciate 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 unamortized Book-Tax
Disparity of the property, or treat that portion as non-amortizable to the extent attributable to
property which is not amortizable. This method is consistent with the Treasury Regulations under
Section 743 of the Internal Revenue Code but is arguably inconsistent with Treasury Regulation
Section 1.167(c)-1(a)(6). To the extent this Section 743(b) adjustment is attributable to
appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules
described in the Treasury Regulations and legislative history. If we determine that this position
cannot reasonably be taken, we may take a depreciation or amortization position under which all
purchasers acquiring 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 our 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 Units.
A Section 754 election is advantageous if the transferees tax basis in his units is higher
than the units share of the aggregate tax basis of our assets immediately prior to the transfer.
In that case, as a result of the election, the transferee would have, among other items, a greater
amount of depreciation and depletion deductions and his share of any gain or loss on a sale of our
assets would be less. Conversely, a Section 754 election is disadvantageous if the transferees tax
basis in his units is lower than those units share of the aggregate tax basis of our 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 us if we have a
substantial built-in loss immediately after the transfer, or if we distribute property and have a
substantial basis reduction. Generally a basis reduction or a built-in loss 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 our assets and other matters. For example, the allocation
of the Section 743(b) adjustment among our assets must be made in accordance with the Internal
Revenue Code. The IRS could seek to reallocate some or all of any Section 743(b) adjustment
allocated by us to our tangible assets or the tangible assets owned by the MLP Entities to goodwill
instead. Goodwill, as an intangible asset, is generally either non-amortizable or amortizable over
a longer period of time or under a less accelerated method than our tangible assets. We cannot
assure you that the determinations we make 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 our opinion, the expense of
compliance exceed the benefit of the election, we may seek permission from the IRS to revoke our
Section 754 election. If permission is granted, a subsequent purchaser of 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. We use the year ending December 31 as our 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 our income, gain, loss and deduction for our taxable
year or years ending within or with his taxable year. In addition, a unitholder who has a taxable
year different than our taxable year and who disposes of all of his units following the close of
our taxable year but before the close of his taxable year must include his share of our income,
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gain, loss and deduction in income for his taxable year, with the result that he will be
required to include in income for his taxable year his share of more than one year of our income,
gain, loss and deduction. Please read Disposition of Units Allocations Between Transferors
and Transferees.
Tax Basis, Depreciation and Amortization. The tax basis of our assets and the MLP Entities
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 our assets and their tax basis
immediately prior to the time we issue units in an offering will be borne by our general partner,
its affiliates and our unitholders as of that time. Please read Tax Consequences of Unit
Ownership Allocation of Income, Gain, Loss and Deduction.
To the extent allowable, we may elect to use the depreciation and cost recovery methods that
will result in the largest deductions being taken in the early years after assets are placed in
service. Property we subsequently acquire or construct may be depreciated using accelerated methods
permitted by the Internal Revenue Code.
If we or the MLP Entities dispose of depreciable property by sale, foreclosure, or otherwise,
all or a portion of any gain, determined by reference to the amount of depreciation 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 we own or the MLP Entities own will likely be
required to recapture some, or all, of those deductions as ordinary income upon a sale of his
interest in us. Please read Tax Consequences of Unit Ownership Allocation of Income, Gain,
Loss and Deduction and Disposition of Units Recognition of Gain or Loss.
The costs incurred in selling our units (called syndication expenses) must be capitalized
and cannot be deducted currently, ratably or upon our termination. There are uncertainties
regarding the classification of costs as organization expenses, which we may be able to amortize,
and as syndication expenses, which we may not be able to amortize. The underwriting discounts and
commissions we incur will be treated as syndication expenses.
Valuation and Tax Basis of Our Properties. The federal income tax consequences of the
ownership and disposition of units will depend in part on our estimates of the relative fair market
values, and the tax bases, of our assets and the MLP Entities assets. Although we may from time to
time consult with professional appraisers regarding valuation matters, we will make many of the
relative fair market value estimates ourselves. 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 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 Units
Recognition of Gain or Loss. Gain or loss will be recognized on a sale of units equal to the
difference between the unitholders amount realized and the unitholders tax basis for the units
sold. A unitholders amount 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 our nonrecourse liabilities attributable
to the common units sold. Because the amount realized includes a unitholders share of our
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 us in excess of cumulative net taxable income for a unit that
decreased a unitholders tax basis in that unit will, in effect, become taxable income if the unit
is sold at a price greater than the unitholders tax basis in that 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 held for more than one year will generally be taxable as
capital gain or loss. Capital gain recognized by an individual on the sale of units held more than
12 months will generally be taxed at a maximum rate of 15% through December 31, 2010 and 20%
thereafter (absent legislation extending the current rate). However, a portion of this gain or
loss, which will likely be substantial, will be separately computed and taxed as ordinary
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income or loss under Section 751 of the Internal Revenue Code to the extent attributable to
assets giving rise to depreciation recapture or other unrealized receivables or to inventory
items we own or the MLP Entities own. The term unrealized receivables includes potential
recapture items, including depreciation recapture. Ordinary income attributable to unrealized
receivables, inventory items and depreciation recapture may exceed net taxable gain realized upon
the sale of a 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. Net 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.
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 Internal Revenue Code allow a selling unitholder who can
identify units transferred with an ascertainable holding period to elect to use the actual holding
period of the units transferred. Thus, according to the ruling, a unitholder will be unable to
select high or low basis units to sell as would be the case with corporate stock, but, according to
the Treasury Regulations, may designate specific units sold for purposes of determining the holding
period of units transferred. A unitholder electing to use the actual holding period of units
transferred must consistently use that identification method for all subsequent sales or exchanges
of units. We strongly recommend that a unitholder considering the purchase of additional units or a
sale of units purchased in separate transactions consult his tax advisor as to the possible
consequences of this ruling and application of the final Treasury Regulations.
Specific provisions of the Internal Revenue 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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a short sale; |
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an offsetting notional principal contract; or |
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a futures or forward contract with respect to the partnership interest or substantially
identical property. |
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, our taxable income or loss 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 (the Allocation Date). However,
gain or loss realized on a sale or other disposition of our 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.
The use of this method may not be permitted under existing Treasury Regulations; however, new
Treasury Regulations have been proposed regarding the allocation of items of income, gain, loss and
deduction using a monthly proration method and the allocation of extraordinary items (such as
gain or loss realized on the sale or other disposition of capital assets other than in the ordinary
course of business) to unitholders based on the month
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such items are recognized under the partnerships method of accounting. Although existing
publicly traded partnerships, including us, may rely on the proposed Treasury Regulations, such
proposed Regulations are not currently in effect, and may be modified before being adopted as final
Treasury Regulations. Accordingly, Andrews Kurth LLP is unable to opine on the validity of this
method of allocating income and deductions between unitholders. We use this method because it is
not administratively feasible to make these allocations on a more frequent basis. If this method is
not allowed under the Treasury Regulations, or only applies to transfers of less than all of the
unitholders interest, our taxable income or losses might be reallocated among the unitholders. We
are authorized to revise our method of allocation between unitholders, as well as among 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 our 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 units, other than through a
broker, generally is required to notify us 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 generally required to notify us in writing of that purchase within
30 days after the purchase. We are required to notify the IRS of that transfer and to furnish
specified information to the transferor and transferee. Failure to notify us of a transfer of units
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 requirement.
Constructive Termination. We will be considered to have been terminated for tax purposes if
there is a sale or exchange of 50% or more of the total interests in our capital and profits within
a 12-month period. A constructive termination results in the closing of our taxable year for all
unitholders. In the case of a unitholder reporting on a taxable year different from our taxable
year, the closing of our taxable year may result in more than 12 months of our taxable income or
loss being includable in his taxable income for the year of termination. We would be required to
make new tax elections after a termination, including a new election under Section 754 of the
Internal Revenue Code, and a termination would result in a deferral of our deductions for
depreciation. A termination could also result in penalties if we were unable to determine that the
termination had occurred. Moreover, a termination might either accelerate the application of, or
subject us to, any tax legislation enacted before the termination.
Uniformity of Units
Because we cannot match transferors and transferees of units, we must maintain uniformity of
the economic and tax characteristics of the units to a purchaser of these units. In the absence of
uniformity, we 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 units. Please read Tax Consequences of Unit Ownership Section 754
Election.
We intend to depreciate 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 unamortized Book-Tax Disparity of that property,
or treat that portion as nonamortizable, to the extent attributable to property which is not
amortizable, consistent with the Treasury Regulations under Section 743 of the Internal Revenue
Code, even though that position may be inconsistent with Treasury Regulation Section
1.167(c)-1(a)(6). Please read Tax Consequences of Unit Ownership Section 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, we will apply the rules described in the Treasury Regulations
and legislative history. If we determine that this position cannot reasonably be taken, we may
adopt a depreciation and amortization position under which all purchasers acquiring 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 rate as if they had purchased a
direct interest in our 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
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in the year that these deductions are otherwise allowable. This position will not be adopted
if we determine that the loss of depreciation and amortization deductions will have a material
adverse effect on the unitholders. If we choose not to utilize this aggregate method, we 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. Our counsel, Andrews Kurth LLP, is unable to opine on the validity of any of these
positions. 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 units might be affected, and
the gain from the sale of units might be increased without the benefit of additional deductions. We
do not believe these allocations will affect any material items of income, gain, loss or deduction.
Please read Disposition of Units Recognition of Gain or Loss.
Tax-Exempt Organizations and Other Investors
Ownership of units by employee benefit plans, other tax-exempt organizations, regulated
investment companies, non-resident aliens, foreign corporations, and other foreign persons raises
issues unique to those investors and, as described below, may have substantially adverse tax
consequences to them.
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 our income allocated to a unitholder that is a
tax-exempt organization will be unrelated business taxable income and will be taxable to them. A
regulated investment company or mutual fund is required to derive 90% or more of its gross income
from certain permitted sources. The American Jobs Creation Act of 2004 generally treats net income
from the ownership of publicly traded partnerships as derived from such a permitted source. We
anticipate that all of our net income will be treated as derived from such a permitted source.
Non-resident aliens and foreign corporations, trusts or estates that own 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 our income,
gain, loss or deduction and pay federal income tax at regular rates on their share of our net
income or gain. Moreover, under rules applicable to publicly traded partnerships, we will withhold
tax at the highest applicable effective tax rate from cash distributions made quarterly to foreign
unitholders. Each foreign unitholder must obtain a taxpayer identification number from the IRS and
submit that number to our transfer agent on a Form W-8 BEN or applicable substitute form in order
to obtain credit for these withholding taxes. A change in applicable law may require us to change
these procedures.
In addition, because a foreign corporation that owns units will be treated as engaged in a
United States trade or business, that corporation may be subject to the United States branch
profits tax at a rate of 30%, in addition to regular federal income tax, on its share of our income
and gain, as adjusted for changes in the foreign corporations U.S. net equity, that is
effectively connected with the conduct of a United States 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 Internal Revenue
Code.
Under a ruling of the IRS, a foreign unitholder who sells or otherwise disposes of a unit will
be subject to federal income tax on gain realized on the sale or disposition of that unit to the
extent that this gain is effectively connected with a United States trade or business of the
foreign unitholder. Because a foreign unitholder is considered to be engaged in a trade or business
in the United States by virtue of the ownership of units, under this ruling a foreign unitholder
who sells or otherwise disposes of a unit generally will be subject to federal income tax on gain
realized on the sale or other disposition of units. Apart from the ruling, a foreign unitholder
will not be taxed or subject to withholding upon the sale or disposition of a unit if he has owned
less than 5% in value of the units during the five-year period ending on the date of the
disposition and if the units are regularly traded on an established securities market at the time
of the sale or disposition.
Administrative Matters
Information Returns and Audit Procedures. We intend to furnish to each unitholder, within 90
days after the close of each taxable year, specific tax information, including a Schedule K-1,
which describes each unitholders share of our income, gain, loss and deduction for our preceding
taxable year. In preparing this information, which
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will not be reviewed by counsel, we 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. We cannot assure you that those positions will in all cases yield a result that
conforms to the requirements of the Internal Revenue Code, Treasury Regulations or administrative
interpretations of the IRS. Neither we nor Andrews Kurth 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 units.
The IRS may audit our 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 own return. Any audit of a unitholders return could result in
adjustments not related to our returns as well as those related to our 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 Internal Revenue Code
requires that one partner be designated as the Tax Matters Partner for these purposes. The
partnership agreement names our general partner as our Tax Matters Partner.
The Tax Matters Partner will make some elections on our 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 our returns. The Tax Matters Partner may bind a
unitholder with less than a 1% profits interest in us to a settlement with the IRS unless that
unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax
Matters 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 in that action.
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 our return.
Intentional or negligent disregard of this consistency requirement may subject a unitholder to
substantial penalties.
Nominee Reporting. Persons who hold an interest in us as a nominee for another person are
required to furnish to us:
(1) the name, address and taxpayer identification number of the beneficial owner and the
nominee;
(2) a statement regarding whether the beneficial owner is:
(a) a person that is not a United States person,
(b) a foreign government, an international organization or any wholly owned agency
or instrumentality of either of the foregoing, or
(c) a tax-exempt entity;
(3) the amount and description of units held, acquired or transferred for the beneficial
owner; and
(4) 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 sales.
Brokers and financial institutions are required to furnish additional information, including
whether they are United States persons and specific information on units they acquire, hold or
transfer for their own account. A penalty of $50 per failure, up to a maximum of $100,000 per
calendar year, is imposed by the Internal Revenue
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Code for failure to report that information to us. The nominee is required to supply the
beneficial owner of the units with the information furnished to us.
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 Internal Revenue 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. The amount of any understatement subject to penalty
generally is reduced if any portion is attributable to a position adopted on the return:
(1) for which there is, or was, substantial authority, or
(2) as to which there is a reasonable basis if the pertinent facts of that position are
adequately 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 for which no substantial
authority exists, we must disclose the pertinent facts on our return. In addition, we 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 we do not believe
includes us.
A substantial valuation misstatement exists if 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. For individuals, no penalty is imposed unless
the portion of the underpayment attributable to a substantial valuation misstatement exceeds
$5,000. If the valuation claimed on a return is 200% or more than the correct valuation, the
penalty imposed increases to 40%.
Reportable Transactions. If we were to engage in a reportable transaction, we (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 a transaction of interest or that it produces certain kinds of losses in excess
of $2 million in a single year, or $4 million in a combination of six successive taxable years. Our
participation in a reportable transaction could increase the likelihood that our federal income tax
information return (and possibly your tax return) would be audited by the IRS. Please read
Information Returns and Audit Procedures above.
Moreover, if we 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 provisions of
the American Jobs Creation Act of 2004:
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accuracy-related penalties with a broader scope, significantly narrower exceptions, and
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for those persons otherwise entitled to deduct interest on federal tax deficiencies,
nondeductibility of interest on any resulting tax liability, and |
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in the case of a listed transaction, an extended statute of limitations. We do not
expect to engage in any reportable transactions. |
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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 the various jurisdictions in which we or the MLP Entities
do business or own 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 us. We or the MLP Entities currently own property or do business in a substantial
number of states, virtually all of which impose a personal income tax and many impose an income tax
on corporations and other entities. We or the MLP Entities may also own property or do business in
other states in the future. Although you may not be required to file a return and pay taxes in some
states because your income from that state falls below the filing and payment requirement, you will
be required to file income tax returns and to pay income taxes in some or all of the jurisdictions
in which we do business or own 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 also may not be available to offset income in subsequent taxable years. Some of the
jurisdictions may require us, or we 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 us. Please read Tax Consequences of Unit Ownership
Entity-Level Collections. Based on current law and our estimate of our future operations, our
general partner 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 jurisdictions, of his investment in us. Accordingly, each prospective
unitholder is urged to consult, and depend upon, his own 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 United States federal tax returns, that may be required of him. Andrews
Kurth LLP has not rendered an opinion on the state, local or foreign tax consequences of an
investment in us.
44
INVESTMENT IN ENTERPRISE GP HOLDINGS L.P. BY EMPLOYEE BENEFIT PLANS
An investment in our units by an employee benefit plan is subject to additional considerations
because the investments of these plans are subject to the fiduciary responsibility and prohibited
transaction provisions of ERISA, and restrictions imposed by Section 4975 of the Internal Revenue
Code. For these purposes, the term employee benefit plan includes, but is not limited to,
qualified pension, profit-sharing and stock bonus plans, Keogh plans, simplified employee pension
plans and tax deferred annuities or IRAs established or maintained by an employer or employee
organization. Among other things, consideration should be given to:
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whether the investment is prudent under Section 404(a)(l)(B) of ERISA; |
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whether in making the investment, that plan will satisfy the diversification
requirements of Section 404(a)(l)(C) of ERISA; and |
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whether the investment will result in recognition of unrelated business taxable income
(please read Material Tax Consequences Tax-Exempt Organizations and Other Investors)
by the plan and, if so, the potential after-tax investment return. |
In addition, the person with investment discretion with respect to the assets of an employee
benefit plan, often called a fiduciary, should determine whether an investment in our units is
authorized by the appropriate governing instrument and is a proper investment for the plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit employee benefit
plans, and IRAs that are not considered part of an employee benefit plan, from engaging in
specified transactions involving plan assets with parties that are parties in interest under
ERISA or disqualified persons under the Internal Revenue Code with respect to the plan.
Therefore, a fiduciary of an employee benefit plan or an IRA accountholder that is considering an
investment in our units should consider whether the entitys purchase or ownership of such units
would or could result in the occurrence of such a prohibited transaction.
In addition to considering whether the purchase of units is or could result in a prohibited
transaction, a fiduciary of an employee benefit plan should consider whether the plan will, by
investing in our units, be deemed to own an undivided interest in our assets, with the result that
our general partner also would be a fiduciary of the plan and our operations would be subject to
the regulatory restrictions of ERISA, including fiduciary standard and its prohibited transaction
rules, as well as the prohibited transaction rules of the Internal Revenue Code.
The Department of Labor regulations and Section 3(42) of ERISA provide guidance with respect
to whether the assets of an entity in which employee benefit plans acquire equity interests would
be deemed plan assets under some circumstances. Under
these rules, an entitys assets would
not be considered to be plan assets if, among other things:
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the equity interests acquired by employee benefit plans are publicly offered securities;
i.e., the equity interests are widely held by 100 or more investors independent of the
issuer and each other, freely transferable and registered under some provisions of the
federal securities laws; |
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the entity is an operating company; i.e., it is primarily engaged in the production or
sale of a product or service other than the investment of capital either directly or
through a majority owned subsidiary or subsidiaries; or |
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there is no significant investment by benefit plan investors, which is defined to mean
that less than 25% of the value of each class of equity interest, disregarding some
interests held by our general partner, its affiliates, and some other persons, are held by
employee benefit plans (as defined in Section 3(3) of ERISA) subject to Part 4 of Title I
of ERISA, any plan to which Section 4975 of the Code applies, and any entity whose
underlying assets include plan assets by reason of a plans investment in such entity.
(For example, government plans are excluded from this determination). |
45
Our assets should not be considered plan assets under these regulations because it is
expected that the investment will satisfy the requirements in the first bullet point above.
Plan fiduciaries contemplating a purchase of units should consult with their own counsel
regarding the consequences under ERISA and the Internal Revenue Code in light of the serious
penalties imposed on persons who engage in prohibited transactions or other violations.
46
PLAN OF DISTRIBUTION
We may sell the common units or debt securities directly, through agents, or to or through
underwriters or dealers, in each case to the extent
such manner of distribution is permitted under applicable SEC rules in connection with this
prospectus. Please read the prospectus supplement to find the terms of the common unit
or debt securities offering including:
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the names of any underwriters, dealers or agents; |
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the offering price; |
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underwriting discounts; |
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sales agents commissions; |
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other forms of underwriter or agent compensation; |
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discounts, concessions or commissions that underwriters may pass on to other dealers;
and |
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any exchange on which the common units or debt securities are listed. |
We may change the offering price, underwriter discounts or concessions, or the price to
dealers when necessary. Discounts or commissions received by underwriters or agents and any profits
on the resale of common units or debt securities by them may constitute underwriting discounts and
commissions under the Securities Act.
Unless we state otherwise in the prospectus supplement, underwriters will need to meet certain
requirements before purchasing common units or debt securities. Agents will act on a best efforts
basis during their appointment. We will also state the net proceeds from the sale in the prospectus
supplement.
Any brokers or dealers that participate in the distribution of the common units or debt
securities may be underwriters within the meaning of the Securities Act for such sales. Profits,
commissions, discounts or concessions received by such broker or dealer may be underwriting
discounts and commissions under the Securities Act.
When necessary, we may fix common unit or debt securities distribution using changeable, fixed
prices, market prices at the time of sale, prices related to market prices, or negotiated prices.
We may, through agreements, indemnify underwriters, dealers or agents who participate in the
distribution of the common units or debt securities against certain liabilities including
liabilities under the Securities Act. We may also provide funds for payments such underwriters,
dealers or agents may be required to make. Underwriters, dealers and agents, and their affiliates
may transact with us and our affiliates in the ordinary course of their business.
In connection with offerings under this shelf registration and in compliance with applicable
law, underwriters, brokers or dealers may engage in transactions that stabilize or maintain the
market price of the securities at levels above those that might otherwise prevail in the open
market. Specifically, underwriters, brokers or dealers may over-allot in connection with offerings,
creating a short position in the securities for their own accounts. For the purpose of covering a
syndicate short position or stabilizing the price of the securities, the underwriters, brokers or
dealers may place bids for the securities or effect purchases of the securities in the open market.
Finally, the underwriters may impose a penalty whereby selling concessions allowed to syndicate
members or other brokers or dealers for distribution the securities in offerings may be reclaimed
by the syndicate if the syndicate repurchases previously distributed securities in transactions to
cover short positions, in stabilization transactions or otherwise. These activities may stabilize,
maintain or otherwise affect the market price of the securities, which may be higher than the price
that might otherwise prevail in the open market, and, if commenced, may be discontinued at any
time.
47
LEGAL MATTERS
The validity of the securities, as to matters of United States law and other customary legal
matters relating to the offering the securities issued by us, will be passed upon for us by Andrews
Kurth LLP, Houston, Texas. If the securities are being distributed through underwriters or agents,
the validity of the securities will be passed upon for the underwriters or agents by counsel
identified in the related prospectus supplement.
EXPERTS
The (i) consolidated financial statements of Enterprise GP
Holdings L.P. and subsidiaries (the Company), except
Energy Transfer Equity L.P. , an investment of the Company which
is accounted for by the use of the equity method, incorporated
in this prospectus by reference from the Companys Annual
Report on
form 10-K
for the year ended December 31, 2008, retrospectively
adjusted by the Companys Current Report on
Form 8-K
filed on July 8, 2009 and (ii) the effectiveness of
the Companys internal control over financial reporting
incorporated in this prospectus by reference from the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008 have been audited by
Deloitte & Touche LLP, as stated in their reports,
which are incorporated herein by reference (which reports
(1) express an unqualified opinion on the financial
statements, refer to the report of the other auditors as it relates to an equity
method investment in Energy Transfer Equity L.P. and include an explanatory paragraph concerning the
retrospective adjustments related to the adoption of
SFAS 160 and (2) express an unqualified opinion on the
effectiveness of internal control over financial reporting). The
consolidated financial statements of Energy Transfer Equity
L.P., not presented separately herein, have been audited by
Grant Thornton LLP, as stated in their report, which report is
incorporated herein by reference from the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2008. Such consolidated
financial statements of the Company are incorporated herein by
reference, and have been so incorporated in reliance upon the
report of Deloitte & Touche LLP, and as it relates to the Companys investment in Energy
Transfer Equity L.P., the report of Grant Thornton LLP, given upon the firms authority as
experts in accounting and auditing.
The consolidated balance sheet of EPE Holdings, LLC and
subsidiaries as of December 31, 2008, incorporated in this
prospectus by reference from the Companys Current Report
on
Form 8-K
filed on March 12, 2009, retrospectively adjusted by the
Companys Current Report on
Form 8-K
filed on July 8, 2009, has been audited by
Deloitte & Touche LLP, as stated in their report
incorporated herein by reference, (which report expresses an
unqualified opinion on the financial statement and includes an
explanatory paragraph concerning the retrospective adjustments
related to the adoption of SFAS 160). Such balance sheet
has been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and
auditing.
All
of the foregoing firms are independent registered public
accounting firms.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC under the Securities Act that
registers the securities offered by this prospectus. The registration statement, including the
attached exhibits, contains additional relevant information about us. The rules and regulations of
the SEC allow us to omit from this prospectus some information included in the registration
statement.
We file annual, quarterly, and other reports and other information with the SEC under the
Securities Exchange Act of 1934, as amended (the Exchange Act). You may read and copy any
materials we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. The SEC maintains an Internet website at
http://www.sec.gov that contains reports, proxy and information statements, and other information
regarding issuers, including us, that file electronically with the SEC. General information about
us, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports, is available free of charge through our website at
http://www.enterprisegp.com as soon as reasonably practicable after we electronically file them
with, or furnish them to, the SEC. Information on our website is not incorporated into this
prospectus or our other securities filings and is not a part of these filings.
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference information into this document. This means
that we can disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically update and supersede
the previously filed information. We incorporate by reference the documents listed below and any
future filings made by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, excluding information deemed to be furnished and not filed with the SEC, until all
the securities are sold:
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Registration Statement on Form 8-A filed with the SEC on August 15, 2005; |
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Annual Report on Form 10-K for the year ended
December 31, 2008 (retrospectively adjusted by our Current
Report on Form 8-K as filed with the SEC on July 8,
2009 for the adoption of SFAS 160); |
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Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2009 and June 30, 2009; and |
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Current Reports on Form 8-K filed with the SEC on January 16, 2009, January 23, 2009,
February 5, 2009, March 12, 2009 (retrospectively adjusted by our Current
Report on Form 8-K as filed with the SEC on July 8,
2009 for the adoption of SFAS 160), April 21, 2009,
May 12, 2009, June 29, 2009, July 8, 2009 and
August 10, 2009. |
All documents filed by us under the Exchange Act after the date of the initial registration
statement and prior to the effectiveness of the registration statement shall also be deemed to be
incorporated by reference into this prospectus.
48
Each of these documents is available from the SECs website and public reference rooms
described above. Through our website, http://www.enterprisegp.com, you can access electronic copies
of documents we file with the SEC, including our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K and any amendments to those reports. Information on our
website is not incorporated by reference in this prospectus. Access to those electronic filings is
available as soon as practical after filing with the SEC. You may also request a copy of those
filings, excluding exhibits, at no cost by writing or telephoning Investor Relations, Enterprise GP
Holdings L.P., at our principal executive office, which is: 1100 Louisiana Street, 10th Floor,
Houston, Texas 77002; Telephone: (713) 381-6500.
49
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following sets forth the expenses in connection with the issuance and distribution of the
securities being registered hereby, other than underwriting discounts and commissions. All amounts
set forth below, other than the SEC registration fee and the FINRA filing fee, are estimates.
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SEC
Registration Fee* |
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$ |
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** |
FINRA Filing Fee |
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$ |
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** |
Legal Fees and Expenses |
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$ |
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** |
Accountants Fees and Expenses |
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$ |
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** |
Printing and Engraving Expenses |
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$ |
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** |
Miscellaneous |
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$ |
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** |
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TOTAL |
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$ |
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** |
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* |
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To be deferred pursuant to Rule 456(b) and
calculated in connection with the offering of securities under their
registration statement pursuant to Rule 457(r). |
** |
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These fees are calculated based on the
number of issuances and amount of securities offered and accordingly
cannot be estimated at this time.
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ITEM 15. Indemnification of Directors and Officers.
The section of the prospectus entitled Description of Our Partnership Agreement
Indemnification is incorporated herein by this reference. Subject to any terms, conditions or
restrictions set forth in the Partnership Agreement, Section 17-108 of the Delaware Revised Uniform
Limited Partnership Act empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against all claims and demands whatsoever.
Section 18-108 of the Delaware Limited Liability Company Act provides that, subject to such
standards and restrictions, if any, as are set forth in its limited liability company agreement, a
Delaware limited liability company may, and shall have the power to, indemnify and hold harmless
any member or manager or other person from and against any and all claims and demands whatsoever.
The limited liability company agreement of EPE Holdings, LLC provides for the indemnification of
(i) present or former members of the Board of Directors of EPE Holdings, LLC or any committee
thereof, (ii) present or former officers, employees, partners, agents or trustees of EPE Holdings,
LLC or (iii) persons serving at the request of EPE Holdings, LLC in another entity in a similar
capacity as that referred to in the immediately preceding clauses (i) or (ii) (each, a General
Partner Indemnitee) to the fullest extent permitted by law, from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and
expenses), judgments, fines, penalties, interest, settlements and other amounts arising from any
and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which any such person may be involved, or is threatened to be involved, as a
party or otherwise, by reason of such persons status as a General Partner Indemnitee; provided,
that in each case the General Partner Indemnitee acted in good faith and in a manner which such
General Partner Indemnitee believed to be in, or not opposed to, the best interests of EPE
Holdings, LLC and, with respect to any criminal proceeding, had no reasonable cause to believe such
General Partner Indemnitees conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the General Partner Indemnitee acted in a manner
contrary to that specified above. Any indemnification pursuant to these provisions shall be made
only out of the assets of EPE Holdings, LLC. EPE Holdings, LLC is authorized to purchase and
maintain insurance, on behalf of the members of its Board of Directors, its officers and such other
persons as the Board of Directors may determine, against any liability that may be asserted against
or expense that may be incurred by such person in connection with the activities of EPE Holdings,
LLC, regardless of whether EPE Holdings, LLC would have the power to indemnify such person against
such liability under the provisions of its limited liability company agreement.
ITEM 16. Exhibits.
(a) See the Exhibit Index on the page immediately preceding the exhibits for a list of
exhibits filed as part of this registration statement on Form S-3, which Exhibit Index is
incorporated herein by reference.
II-1
(b) Financial Statement Schedules
Not Applicable.
ITEM 17. Undertakings.
(a) 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 the 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. 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 SEC 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 the registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the
information required to be included in a post-effective amendment by those paragraphs is contained
in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of
the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, 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 to any
purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or
(b)(7) as part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing
the information required by section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of the earlier of the date
such form of prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person that is at that date
an underwriter,
II-2
such date shall be deemed to be a new effective date of the registration statement relating to the
securities in the registration statement to which the prospectus relates, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof. 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 effective date, 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 effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities
Act 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 such 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) The undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrants annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act (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 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.
(c) Insofar as indemnification for liabilities arising under the Securities Act 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 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 whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus or any prospectus supplement filed as part of
this registration statement in reliance on Rule 430A and contained in a form of prospectus or
prospectus supplement filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as of the time it
was declared effective.
II-3
(2) For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus or prospectus supplement 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.
(e) The undersigned registrant hereby undertakes to file an application for the purpose of
determining the eligibility of the trustee under each of its indentures to act under subsection (a)
of Section 310 of the Trust Indenture Act of 1939, as amended (the Act) in accordance with the
rules and regulations prescribed by the SEC under section 305(b)(2) of the Act.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on
August 28,
2009.
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ENTERPRISE GP HOLDINGS L.P.
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By: |
EPE Holdings, LLC, its general partner
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By: |
/s/ Dr. Ralph S. Cunningham
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Name: |
Dr. Ralph S. Cunningham |
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Title: |
President and Chief Executive Officer |
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POWER OF ATTORNEY
The undersigned directors and officers of Enterprise GP Holdings L.P. hereby constitute and
appoint Richard H. Bachmann and Dr. Ralph S. Cunningham, each with full power to act and with full
power of substitution and resubstitution, our true and lawful attorneys-in-fact and agents with
full power to execute in our name and behalf in the capacities indicated below any and all
amendments (including post-effective amendments and amendments thereto) to this registration
statement and to file the same, with all exhibits and other documents relating thereto and any
registration statement relating to any offering made pursuant to this registration statement that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act with the Securities
and Exchange Commission and hereby ratify and confirm all that such attorney-in-fact or his
substitute shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities
and on the 28th day of August,
2009.
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Signature |
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Title (Position with EPE Holdings, LLC) |
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/s/ Dan L. Duncan
Dan L. Duncan
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Director and Chairman |
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/s/ Dr. Ralph S. Cunningham
Dr. Ralph S. Cunningham
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Director, President and Chief Executive Officer |
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/s/ Richard H. Bachmann
Richard H. Bachmann
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Director, Executive Vice President, Chief
Legal Officer and Secretary |
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/s/ W. Randall Fowler
W. Randall Fowler
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Director, Executive Vice President and Chief
Financial Officer |
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/s/ O.S. Andras
O.S. Andras
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Director |
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/s/ Charles E. McMahen
Charles E. McMahen
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Director |
II-5
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Signature |
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Title (Position with EPE Holdings, LLC) |
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/s/ Edwin E. Smith
Edwin E. Smith
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Director |
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/s/ Thurmon Andress
Thurmon Andress
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Director |
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/s/ Randa Duncan Williams
Randa Duncan Williams
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Director |
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/s/ Michael J. Knesek
Michael J. Knesek
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Senior Vice President, Controller and
Principal Accounting Officer |
II-6
EXHIBIT LIST
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Exhibit |
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Number |
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Exhibit |
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**1.1
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Form of Underwriting Agreement. |
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*4.1
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Form of Senior Debt Indenture of Enterprise GP Holdings L.P. |
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*4.2
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Form of Subordinated Debt Indenture of Enterprise GP Holdings L.P. |
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*4.3
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Form of Senior Debt Securities of Enterprise GP Holdings L.P.
(included in Exhibit 4.1). |
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*4.4
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Form of Subordinated Debt Securities of Enterprise GP
Holdings L.P. (included
in Exhibit 4.2). |
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*5.1
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Opinion of Andrews Kurth LLP, as to the validity of the securities. |
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*8.1
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Opinion of Andrews Kurth LLP, as to certain tax matters. |
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*12.1
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Computation of Ratio of Earnings to Fixed Charges. |
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*23.1
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Consent of Deloitte & Touche LLP. |
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*23.2
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Consent of Grant Thornton LLP. |
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*23.3
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Consent of Andrews Kurth LLP (included in Exhibit 5.1 and Exhibit 8.1). |
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*24.1
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Powers of Attorney (included on signature page to the registration statement). |
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+25.1
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Form T-1 Statement of Eligibility and Qualification with respect to the
Senior Debt Indenture of Enterprise GP Holdings L.P. |
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+25.2
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Form T-1 Statement of Eligibility and Qualification with respect to the
Subordinated Debt Indenture of Enterprise GP Holdings L.P. |
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* |
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Indicates exhibits filed herewith. |
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** |
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Indicated exhibits to be filed by amendment or as an exhibit to a Current Report on Form 8-K
in connection with a specific offering. |
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+ |
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To be filed in accordance with the requirements of Section 305(b)(2) of the Trust Indenture
Act and Rule 5b-3 thereunder. |