10 .	PARTNERS’ CAPITAL(DEFICIT) AND DISTRIBUTIONS

In accordance with the terms of its partnership agreement, each quarter the Partnership distributes all of its available cash (as defined in the partnership agreement) to its unitholders. Generally, distributions are allocated as follows:

•

first,

98.4%

to the preferred unitholders and

1.6%

to its general partner until the Partnership distributes for each Preferred Unit an amount equal to the Preferred Units quarterly distribution amount discussed below;

•

second,

98.4%

to the preferred unitholders and

1.6%

to its general partner until the Partnership distributes for each Preferred Unit an amount equal to any Preferred Units cumulative distribution arrearage; and

•

thereafter,

98.4%

to the common unitholders and

1.6%

to its general partner until the common unitholders receive the minimum quarterly distribution of

$0.11

per unit.

The Preferred Units are convertible at the holders’ option into common units. Holders of the Preferred Units are entitled to quarterly distributions of

$0.17875

per unit per quarter. If the Partnership fails to pay in full any distribution on the Preferred Units, the amount of such unpaid distribution will accrue and accumulate from the last day of the quarter for which such distribution is due until paid in full.

The general partner receives incentive distribution rights. Incentive distribution rights represent the right to receive an increasing percentage (

13.0%,

23.0%

and

48.0%

) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. The general partner currently holds the incentive distribution rights, but

may

transfer these rights separately from its general partner interest, subject to restrictions in the partnership agreement. If for any quarter:

•

the Partnership has distributed available cash from operating surplus to the holders of our Preferred Units in an amount equal to the Preferred Units quarterly distribution amount;

•

the Partnership has distributed available cash from operating surplus to the holders of our Preferred Units in an amount necessary to eliminate any cumulative arrearages in the payment of the Preferred Units quarterly distribution amount; and

•

the Partnership has distributed available cash from operating surplus to the common unitholders and Class B unitholders in an amount equal to the minimum quarterly distribution;

then the partnership agreement requires that the Partnership distribute any additional available cash from operating surplus for that quarter among the unitholders and the general partner in the following manner:

•

first,

98.4%

to all unitholders holding common units or Class B units, pro rata, and

1.6%

to the general partner, until each unitholder receives a total of

$0.1265

per unit for that quarter (the “first target distribution”);

•

second,

85.4%

to all unitholders holding common units or Class B units, pro rata, and

14.6%

to the general partner, until each unitholder receives a total of

$0.1375

per unit for that quarter (the “second target distribution”);

•

third,

75.4%

to all unitholders holding common units or Class B units, pro rata, and

24.6%

to the general partner, until each unitholder receives a total of

$0.1825

per unit for that quarter (the “third target distribution”); and

•

thereafter,

50.4%

to all unitholders holding common units or Class B units, pro rata, and

49.6%

to the general partner.

Distributions are also paid to the holders of restricted units and phantom units as disclosed in Note

13.

The Partnership paid the following distributions on the Preferred Units during the years ended

December 31, 2018

and

2019

(in thousands):

Year				Paid to Preferred		Partner
Paid	Periods Covered	Total		Unitholders		Paid to General
2018	Quarters ending December 31, 2017, March 31, 2018, June 30, 2018 and September 30, 2018	$	25,523	$	25,115	$	408
2019	Quarters ending December 31, 2018, March 31, 2019, June 30, 2019 and September 30, 2019	$	25,521	$	25,115	$	406

In addition, on

January 22, 2020

the Board approved a cash distribution of

$0.17875

per outstanding Preferred Unit for the quarter ending

December 31, 2019

. The Partnership paid this distribution on the Preferred Units on

February 14, 2020

, to unitholders of record as of

February 4, 2020

. The total distribution was approximately

$6.4

million, with approximately

$6.3

million and

$0.1

million paid to the Partnership’s preferred unitholders and general partner, respectively.

The Partnership paid the following distributions on the common units during the years ended

December 31, 2018

and

2019

(in thousands):

Year				Paid to Common		Paid to General		Paid to Phantom and Restricted Unitholders Under
Paid	Periods Covered	Total		Unitholders		Partner		the LTIP
2018	Quarters ending December 31, 2017, March 31, 2018, June 30, 2018 and September 30, 2018	$	19,213	$	18,154	$	626	$	433
2019	Quarters ending December 31, 2018, March 31, 2019, June 30, 2019 and September 30, 2019	$	8,468	$	8,150	$	135	$	183

In addition, on

January 22, 2020

the Board approved a cash distribution of

$0.04

per outstanding common unit for the quarter ending

December 31, 2019

. The distribution was paid on

February 14, 2020

, to unitholders of record as of

February 4, 2020

. The total distribution was approximately

$1.7

million, with approximately

$1.6

million paid to the Partnership’s common unitholders and less than

$0.1

million paid to the both the Partnership’s general partner and holders of phantom and restricted units pursuant to awards granted under the LTIP.