Energy Transfer 2012 Annual Report Download - page 44

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• generally provides that affiliated transactions and resolutions of conflicts of interest not involving a required vote of Unitholders
must be “fair and reasonable” to us and that, in determining whether a transaction or resolution is “fair and reasonable,” our
General Partner may consider the interests of all parties involved, including its own. Unless our General Partner has acted in
bad faith, the action taken by our General Partner shall not constitute a breach of its fiduciary duty; and
• provides that our General Partner and its officers and directors will not be liable for monetary damages to us, our limited
partners or assignees for errors of judgment or for any acts or omissions if our General Partner and those other persons acted
in good faith.
In order to become a limited partner of our partnership, a Unitholder is required to agree to be bound by the provisions in our
partnership agreement, including the provisions discussed above.
Some of our executive officers and directors face potential conflicts of interest in managing our business.
Certain of our executive officers and directors are also officers and/or directors of ETE. These relationships may create conflicts
of interest regarding corporate opportunities and other matters. The resolution of any such conflicts may not always be in our or
our Unitholders’ best interests. In addition, these overlapping executive officers and directors allocate their time among us and
ETE. These officers and directors face potential conflicts regarding the allocation of their time, which may adversely affect our
business, results of operations and financial condition.
The General Partner’s absolute discretion in determining the level of cash reserves may adversely affect our ability to make
cash distributions to our Unitholders.
Our partnership agreement requires the General Partner to deduct from operating surplus cash reserves that in its reasonable
discretion are necessary to fund our future operating expenditures. In addition, our partnership agreement permits the General
Partner to reduce available cash by establishing cash reserves for the proper conduct of our business, to comply with applicable
law or agreements to which we are a party or to provide funds for future distributions to partners. These cash reserves will affect
the amount of cash available for distribution to Unitholders.
Our General Partner has conflicts of interest and limited fiduciary responsibilities that may permit our General Partner to
favor its own interests to the detriment of Unitholders.
ETE indirectly owns our General Partner and as a result controls us. ETE also owns the general partner of Regency, a publicly
traded partnership with which we compete in the natural gas gathering, processing and transportation business. The directors and
officers of our General Partner and its affiliates have fiduciary duties to manage our General Partner in a manner that is beneficial
to ETE, the sole owner of our General Partner. At the same time, our General Partner has fiduciary duties to manage us in a manner
that is beneficial to our Unitholders. Therefore, our General Partner’s duties to us may conflict with the duties of its officers and
directors to ETE as its sole owner. As a result of these conflicts of interest, our General Partner may favor its own interest or those
of ETE, Regency or their owners or affiliates over the interest of our Unitholders.
Such conflicts may arise from, among others, the following:
• Our partnership agreement limits the liability and reduces the fiduciary duties of our General Partner while also restricting
the remedies available to our Unitholders for actions that, without these limitations, might constitute breaches of fiduciary
duty. Unitholders are deemed to have consented to some actions and conflicts of interest that might otherwise be deemed a
breach of fiduciary or other duties under applicable state law. Our General Partner is allowed to take into account the interests
of parties in addition to us in resolving conflicts of interest, thereby limiting its fiduciary duties to us.
• Our General Partner is allowed to take into account the interests of parties in addition to us, including ETE, Regency and their
affiliates, in resolving conflicts of interest, thereby limiting its fiduciary duties to us.
• Our General Partner’s affiliates, including ETE, Regency and their affiliates, are not prohibited from engaging in other
businesses or activities, including those in direct competition with us.
• Our General Partner determines the amount and timing of our asset purchases and sales, capital expenditures, borrowings,
repayments of debt, issuances of equity and debt securities and cash reserves, each of which can affect the amount of cash
that is distributed to Unitholders and to ETE.
• Neither our partnership agreement nor any other agreement requires ETE or its affiliates, including Regency, to pursue a
business strategy that favors us. The directors and officers of the general partners of ETE and Regency have a fiduciary duty
to make decisions in the best interest of their members, limited partners and unitholders, which may be contrary to our best
interests.
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