This is in response to your correspondence regarding whether a proposed amendment to the terms of the Preferred Units (the “Amendment”) would require shareholder approval as equity compensation to the Director under Listing Rule 5615(a)(4)(H) (the “Rule”).  The Company is a limited partnership with its common units listed on NASDAQ.  The Preferred Units, which are not publicly traded, are convertible into the listed common units on a one-for-one basis.

Following the issuance of the Preferred Units to the Investor nearly two years ago, the Director, an affiliate of the Investor, joined the board of directors of the general partner of the Company.  Prior to the issuance, neither the Director nor the Investor was affiliated with the company.

Currently, the Company is permitted to pay quarterly distributions on the Preferred Units in cash or by issuing additional Preferred Units as payment-in-kind (the “PIK Distributions”).   Pursuant to the Amendment, the quarterly distributions would be payable only as PIK Distributions through the end of next year.  Currently, the original issuance price of the Preferred Units is used to calculate the number of Preferred Units issuable as PIK Distributions.  As such, the number of Preferred Units issuable as PIK Distributions is equal to the total dollar amount of the distributions divided by the original purchase price.  The current market price of the Company’s common units is greater than the original issuance price of the Preferred Units. 

Under the Amendment, instead of being based on the original issuance price, the PIK Distributions would be based on a fixed price equal to an approximate 10% discount to the current market price of the common units subject to a maximum and minimum threshold (“the Amended PIK Price”).  The Amended PIK Price would be capped at an amount which would be approximately 59% greater than the original issuance price, and would not be less than the original issuance price.  Thus, the Amendment could potentially increase, but could not reduce, the price applicable to the PIK Distributions and, correspondingly, could reduce the number of Preferred Units issued as PIK Distributions.  The Amendment would not change the minimum aggregate dollar amount of the quarterly distributions. 

Because it would pay quarterly distributions as PIK Distributions rather than in cash, the Company would achieve its purpose of having additional funds available for capital expenditures.  Likewise, the Investor would achieve its purpose of increasing its equity stake in the Company.

Following our review of the information that you provided, we have determined that the Amendment would not be material for purposes of the Rule and, therefore, would not require shareholder approval as equity compensation. We have reached the conclusion because the Amendment could potentially increase, but could not decrease, the price used to calculate the number of units to be issued with respect to PIK Distributions, and would not result in an increase in benefits available to the Investor.   In addition, the Amendment could reduce the number of Preferred Units issuable as PIK Distributions, resulting in fewer common units being issuable upon conversion.