Energy Transfer 2015 Annual Report Download - page 43

Table of Contents
Risks Related to Conflicts of Interest
Our partnership agreement limits our General Partner’s fiduciary duties to our Unitholders and restricts the remedies available to Unitholders for actions
taken by our General Partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that waive or consent to conduct by our General Partner and its affiliates and reduce the obligations to which
our General Partner would otherwise be held by state-law fiduciary duty standards. The following is a summary of the material restrictions contained in our
partnership agreement on the duties owed by our General Partner, and our officers and directors, to the limited partners. Our partnership agreement:
• eliminates all standards of care and duties other than those set forth in our partnership agreement, including fiduciary duties, to the fullest extent
permitted by law;
• permits our General Partner to make a number of decisions in its “sole discretion,” which standard entitles our General Partner to consider only the
interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or
any limited partner;
• provides that our General Partner is entitled to make other decisions in its “reasonable discretion;”
• generally provides that affiliated transactions and resolutions of conflicts of interest 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;
• provides that 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;
• provides that our General Partner may resolve any conflicts of interest involving us and our General Partner and its affiliates, and any resolution of a
conflict of interest by our General Partner that is “fair and reasonable” to us will be deemed approved by all partners, including the Unitholders, and will
not constitute a breach of the partnership agreement;
• provides that our General Partner may, but is not required, in connection with its resolution of a conflict of interest, to seek “special approval” of such
resolution by appointing a conflicts committee of the General Partner’s board of directors composed of two or more independent directors to consider
such conflicts of interest and to recommend action to the board of directors, and any resolution of the conflict of interest by the conflicts committee shall
be conclusively deemed “fair and reasonable” to us;
• provides that our General Partner may consult with consultants and advisors and, subject to certain restrictions, is conclusively deemed to have acted in
good faith when it acts in reliance on the opinion of such consultants and advisors; 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.
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