Sunoco 2012 Annual Report Download - page 29

RISKS RELATED TO OUR PARTNERSHIP STRUCTURE
Our general partner’s discretion in determining the level of cash reserves may adversely affect our ability to
make cash distributions to our unitholders.
Our partnership agreement provides that our general partner may reduce operating surplus by establishing
cash reserves to provide funds for our future operating expenditures. In addition, the partnership agreement
provides that our general partner may 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 our unitholders in any one or more of the next four quarters. These cash reserves will affect
the amount of cash available for current distribution to our unitholders.
Even if unitholders are dissatisfied, they have limited rights under the partnership agreement to remove our
general partner without its consent, which could lower the trading price of the common units.
The partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to
acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence
the manner or direction of management. Unlike the holders of common stock in a corporation, unitholders have
only limited voting rights on matters affecting our business and, therefore, limited ability to influence
management’s decisions regarding our business. Unitholders did not elect our general partner or its board of
directors and will have no right to elect our general partner or its board of directors on an annual or other
continuing basis. The board of directors of our general partner is chosen by ETP, the sole member of our general
partner. Furthermore, if the unitholders are dissatisfied with the performance of our general partner, they will
have little ability to remove our general partner. As a result of these limitations, the price at which the common
units trade could be diminished because of the absence or reduction of a control premium in the trading price.
The control of our general partner may be transferred to a third party without unitholder consent.
Our general partner has the right to transfer its general partner interest to a third party in a merger or in a
sale of all or substantially all of its assets without the consent of the unitholders. Furthermore, there is no
restriction in the partnership agreement on the ability of the owner of our general partner from transferring its
ownership interest in the general partner to a third party. The new owner of our general partner would then be in
a position to replace the board of directors and officers of the general partner with its own appointees.
Conflicts of interest may arise between us and ETP, as the owner of our general partner which, due to limited
fiduciary responsibilities, may permit ETP and its affiliates to favor their own interests to the detriment of our
unitholders.
ETP owns and controls our two percent general partner interest and owns 32.3 percent of our limited
partnership interests. Conflicts of interest may arise, from time to time, between ETP and its affiliates (including
our general partner), on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts,
our general partner may favor its own interests and the interests of its affiliates (including ETP) over the interests
of our unitholders. These conflicts may include, among others, the following situations:
• ETP and its affiliates may engage in competition with us. Neither our partnership agreement nor any
other agreement requires ETP to pursue a business strategy that favors us or utilizes our assets, and our
general partner may consider the interests of parties other than us, such as ETP, in resolving conflicts
of interest;
• under our partnership agreement, our general partner’s fiduciary duties are restricted, and our
unitholders have only limited remedies available in the event of conduct constituting a potential breach
of fiduciary duty by our general partner;
• our general partner determines the amount and timing of asset purchases and sales, capital
expenditures, borrowings, issuance of additional partnership securities, and reserves, each of which can
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