Something

function theme_distributor_index_item(&$term) {
  $description = ($term->description != '') ? "<p class=\"distributor-desc\">". $term->description ."</p>" : '';
  if ($term->count > 0 && $term->parents != array(0)) {
    return "<li ><div class=\"distributor-title\">". l($term->name, $term->link) ."</div>". $description.$term->children ."</li>";
  }
  else {
    return "<li><div class=\"distributor-title\">". $term->name ." </div>". $description.$term->children ."</li>";
  }
}