Note 10. Partnership Equity and Distributions

Minimum Quarterly Distribution Our partnership agreement requires that we distribute all of our available cash quarterly. Under our current cash distribution policy, we intend to make a minimum quarterly distribution to the holders of our common units and subordinated units of $0.375 per unit for each whole quarter, or $1.50 per unit on an annualized basis, to the extent we have sufficient available cash after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner.

Our distribution for the period ending December 31, 2016 will be adjusted by an amount that covers the period from the closing of the Offering through December 31, 2016, based on the actual number of days in that period.

Subordinated Units Noble owns all of our subordinated units. Our partnership agreement provides that, during the subordination period, the common units have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. No arrearages will accrue or be payable on the subordinated units.

When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will thereafter participate pro rata with the other common units in distributions of available cash.

The subordination period will end on September 30, 2019 after each of the following tests are met:


•	distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded $1.50 (the annualized minimum quarterly distribution), for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date;


•	the adjusted operating surplus generated during each of the three consecutive, nonoverlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of $1.50 (the annualized minimum quarterly distribution) on all of the outstanding common units and subordinated units during those periods on a fully diluted basis; and


•	there are no arrearages in payment of the minimum quarterly distribution on the common units.

Notwithstanding the foregoing, the subordination period will automatically terminate on the first business day following the distribution of available cash in respect of any quarter, beginning with the quarter ending September 30, 2017, that each of the following tests are met:


•	distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded $2.25 (150% of the annualized minimum quarterly distribution), for the four-quarter period immediately preceding that date;


•	the adjusted operating surplus generated during the four-quarter period immediately preceding that date equaled or exceeded the sum of (i) $2.25 (150% of the annualized minimum quarterly distribution) on all of the outstanding common units and subordinated units during that period on a fully diluted basis and (ii) the corresponding distributions on the incentive distribution rights; and


•	there are no arrearages in payment of the minimum quarterly distribution on the common units.

Incentive Distribution Rights (IDRs) Noble currently holds IDRs that entitle it to receive increasing percentages, up to a maximum of 50%, of the available cash we distribute from operating surplus in excess of $0.4313 per unit per quarter. The maximum distribution of 50% does not include any distributions that Noble may receive on common units or subordinated units that it owns.

Percentage Allocations of Available Cash from Operating Surplus For any quarter in which the Partnership has distributed cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum distribution, then the Partnership will distribute any additional available cash from operating surplus for that quarter among the unitholders and the incentive distribution rights holders in the following manner:



		Marginal Percentage Interest in Distributions
	Total Quarterly Distribution Per Unit	Unitholders		IDR Holders
Minimum Quarterly Distribution	$0.375	100	%	—	%
First Target Distribution	above $0.3750 up to $0.4313	100	%	—	%
Second Target Distribution	above $0.4313 up to $0.4688	85	%	15	%
Third Target Distribution	above $0.4688 up to $0.5625	75	%	25	%
Thereafter	above $0.5625	50	%	50	%