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Sunoco Logistics Partners LP--Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-31219

SUNOCO LOGISTICS PARTNERS L.P.

(Exact name of registrant as specified in its charter)


Delaware		23-3096839
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1818 Market Street, Suite 1500, Philadelphia, PA		19103
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (866) 248-4344

Former name, former address and formal fiscal year, if changed since last report: Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At June 30, 2011, the number of the registrant’s Limited Partnership Units outstanding was 33,128,767.

SUNOCO LOGISTICS PARTNERS L.P.

INDEX


		Page Number
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)		3

	Condensed Consolidated Balance Sheets at June 30, 2011 (unaudited) and December 31, 2010		4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (unaudited)		5

	Condensed Consolidated Statements of Equity for the Six Months Ended June 30, 2011 and 2010 (unaudited)		6

	Notes to Condensed Consolidated Financial Statements (unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33

Item 4.	Controls and Procedures		35

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		36

Item 1A.	Risk Factors		36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36

Item 3.	Defaults Upon Senior Securities		36

Item 4.	Reserved		36

Item 5.	Other Information		36

Item 6.	Exhibits		37

SIGNATURE			38

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

SUNOCO LOGISTICS PARTNERS L.P.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in millions, except per unit amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues
Sales and other operating revenue:
Unaffiliated customers	$	2,385		$	1,815		$	4,340		$	3,322
Affiliates (Note 3)		39			214			342			387
Other income		4			10			6			18

Total Revenues		2,428			2,039			4,688			3,727

Costs and Expenses
Cost of products sold and operating expenses		2,266			1,939			4,411			3,533
Depreciation and amortization expense		19			14			37			29
Selling, general and administrative expenses		22			16			44			37

Total Costs and Expenses		2,307			1,969			4,492			3,599

Operating Income		121			70			196			128
Net interest cost - affiliates (Note 3)		1			—			2			—
Other interest cost and debt expense, net		20			20			40			36
Capitalized interest		(2	)		(1	)		(3	)		(2	)

Income Before Provision for Income Taxes	$	102		$	51		$	157		$	94
Provision for income taxes (Note 6)		6			—			11			—

Net Income	$	96		$	51		$	146		$	94
Net income attributable to noncontrolling interests		2			—			4			—


Net income attributable to Sunoco Logistics Partners L.P.	$	94		$	51		$	142		$	94

Calculation of Limited Partners’ interest:
Net income attributable to Sunoco Logistics Partners L.P.	$	94		$	51		$	142		$	94
Less: General Partner’s interest		(14	)		(11	)		(26	)		(21	)

Limited Partners’ interest	$	80		$	40		$	116		$	73

Net income attributable to Sunoco Logistics Partners L.P. per Limited Partner unit (Note 4):
Basic	$	2.42		$	1.30		$	3.50		$	2.36
Diluted	$	2.40		$	1.29		$	3.48		$	2.35
Weighted average Limited Partners’ units outstanding:
Basic		33.1			31.0			33.1			31.0
Diluted		33.3			31.2			33.3			31.2

(See Accompanying Notes)

SUNOCO LOGISTICS PARTNERS L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)


	June 30, 2011			December 31, 2010
	(UNAUDITED)
Assets
Current Assets
Cash and cash equivalents	$	6		$	2
Advances to affiliated companies (Note 3)		—			44
Accounts receivable, affiliated companies (Note 3)		—			154
Accounts receivable, net		1,912			1,536
Inventories (Note 5)		381			63

Total Current Assets		2,299			1,799

Properties, plants and equipment		3,040			2,799
Less accumulated depreciation and amortization		(702	)		(671	)

Properties, plants and equipment, net		2,338			2,128

Goodwill		63			63
Investment in affiliates (Note 7)		73			73
Intangible assets, net		105			109
Other assets		20			16

Total Assets	$	4,898		$	4,188

Liabilities and Equity
Accounts payable	$	1,900		$	1,591
Current portion of long-term debt (Note 8)		250			—
Accrued liabilities		111			76
Advances from affiliated companies (Note 3)		7			—
Accrued taxes payable (Note 6)		43			44

Total Current Liabilities		2,311			1,711

Long-term debt (Note 8)		1,113			1,129
Long-term debt - affiliated companies (Notes 3 and 8)		100			100
Other deferred credits and liabilities		47			42
Deferred income taxes (Note 6)		223			164
Commitments and contingent liabilities (Note 9)

Total Liabilities		3,794			3,146

Total Equity		1,104			1,042

Total Liabilities and Equity	$	4,898		$	4,188

(See Accompanying Notes)

SUNOCO LOGISTICS PARTNERS L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)


	Six Months Ended June 30,
	2011			2010
Cash Flows from Operating Activities:
Net Income	$	146		$	94
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		37			29
Changes in working capital pertaining to operating activities:
Accounts receivable, affiliated companies		154			(17	)
Accounts receivable, net		(373	)		(127	)
Inventories		(318	)		(282	)
Accounts payable and accrued liabilities		343			329
Other		6			1

Net cash (used in) provided by operating activities		(5	)		27

Cash Flows from Investing Activities:
Capital expenditures		(69	)		(76	)
Acquisitions		(99	)		—

Net cash (used in) investing activities		(168	)		(76	)

Cash Flows from Financing Activities:
Distributions paid to limited and general partners		(103	)		(92	)
Distributions paid to noncontrolling interests		(2	)		—
Payments of statutory withholding on net issuance of limited partner units under restricted unit incentive plan		(3	)		(3	)
Repayments under credit facility		(63	)		(462	)
Borrowings under credit facility		297			308
Net proceeds from issuance of long-term debt		—			494
Repayment of promissory note to general partner		—			(201	)
Advances to affiliated companies, net		51			5

Net cash provided by financing activities		177			49

Net change in cash and cash equivalents		4			—
Cash and cash equivalents at beginning of year		2			2

Cash and cash equivalents at end of period	$	6		$	2

(See Accompanying Notes)

SUNOCO LOGISTICS PARTNERS L.P.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

(in millions)


	Limited Partners			General Partner			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at December 31, 2009	$	837		$	27		$	(2	)	$	—		$	862

Comprehensive Income:
Net Income		73			21			—			—			94
Change in cash flow hedges		—			—			1			—			1

Total comprehensive income		73			21			1			—			95
Units issued under incentive plans		4			—			—			—			4
Distribution equivalent rights		(1	)		—			—			—			(1	)
Payments of statutory withholding on net issuance of limited partner units under restricted unit incentive plan		(3	)		—			—			—			(3	)
Distribution related to IDR transaction		(197	)		(4	)		—			—			(201	)
Distributions paid to limited partners, general partner and noncontrolling interests		(68	)		(24	)		—			—			(92	)

Balance at June 30, 2010	$	645		$	20		$	(1	)	$	—		$	664


	Limited Partners			General Partner			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at December 31, 2010	$	940		$	28		$	(3	)	$	77		$	1,042

Comprehensive Income:
Net Income		116			26			—			4			146
Change in cash flow hedges		—			—			2			—			2

Total comprehensive income		116			26			2			4			148
Units issued under incentive plans		4			—			—			—			4
Distribution equivalent rights		(1	)		—			—			—			(1	)
Payments of statutory withholding on net issuance of limited partner units under restricted unit incentive plan		(3	)		—			—			—			(3	)
Noncontrolling equity in joint venture acquisitions		—			—			—			18			18
Distributions paid to limited partners, general partner and noncontrolling interests		(79	)		(24	)		—			(2	)		(105	)
Other		1			—			(1	)		1			1

Balance at June 30, 2011	$	978		$	30		$	(2	)	$	98		$	1,104

(See Accompanying Notes)

SUNOCO LOGISTICS PARTNERS L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

Sunoco Logistics Partners L.P. (“the Partnership”) is a publicly traded Delaware limited partnership that owns and operates a logistics business, consisting of refined products and crude oil pipelines, terminalling and storage assets, and refined products and crude oil acquisition and marketing assets. The Partnership is principally engaged in the transport, terminalling and storage of refined products and crude oil and the purchase and sale of crude oil in 28 states located in the northeast, midwest, southeast and southwest United States. Sunoco, Inc. and its wholly-owned subsidiaries including Sunoco, Inc. (R&M) are collectively referred to as “Sunoco.” Sunoco accounted for approximately 2 and 7 percent of the Partnership’s total revenues for the three and six months ended June 30, 2011.

The condensed consolidated financial statements reflect the results of Sunoco Logistics Partners L.P. and its wholly-owned subsidiaries, including Sunoco Logistics Partners Operations L.P. and include the accounts of entities in which the Partnership has a controlling financial interest. A controlling financial interest is evidenced by either a controlling voting interest or a risk and rewards model that identifies the Partnership or one of its subsidiaries as the primary beneficiary of a variable interest entity (“VIE”). All significant intercompany accounts and transactions are eliminated in consolidation and noncontrolling interests in equity and net income are shown separately in the condensed consolidated balance sheets and statements of income. Equity ownership interests in corporate joint ventures, in which the Partnership does not have a controlling financial interest, are accounted for under the equity method of accounting.

The accompanying condensed consolidated financial statements are presented in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States for interim financial reporting. They do not include all disclosures normally made in financial statements contained in Form 10-K. In management’s opinion, all adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for the periods shown have been made. All such adjustments are of a normal recurring nature. The Partnership expects the interim increase in quantities of inventory to significantly decline by year end and therefore, has adjusted its interim LIFO calculation to produce a reasonable matching of the most recently incurred costs with current revenues. Results for the three and six months ended June 30, 2011 are not necessarily indicative of results for the full year 2011.

2. Acquisitions

In May 2011, the Partnership acquired an 83.8 percent equity interest in Inland Corporation (“Inland”), which is the owner of 350 miles of active refined products pipelines in Ohio. The pipeline connects three refineries in Ohio to terminals and major markets in Ohio. The Partnership acquired its equity interest for approximately $99 million, net of cash received, through a purchase of a 27.0 percent equity interest from Shell Oil Company (“Shell”) and a 56.8 percent equity interest from Sunoco. The 56.8 percent equity interest acquired from Sunoco is considered a transaction between entities under common control and therefore the assets and liabilities transferred have been recorded by the Partnership at Sunoco’s carrying value. As the Partnership now has a controlling financial interest in Inland, the joint venture is reflected as a consolidated subsidiary of the Partnership from the date of the final acquisition and is included within the Refined Products Pipeline segment. The purchase was ultimately financed with a portion of the net proceeds from the Senior Notes offering in July 2011 (see Note 8).

The following information summarizes the estimated effects of the acquisition on the Partnership’s balance sheet as of the acquisition date:


	Inland
	(in millions)
Increase in:
Current assets	$	3
Properties, plants & equipment, net		175
Current liabilities		(1	)
Other deferred credits and liabilities		(1	)
Deferred income taxes		(59	)
Noncontrolling interests		(18	)

Net cash paid for acquisition	$	99

In June 2011, the Partnership announced the agreement to acquire a refined products terminal, located in East Boston, Massachusetts from affiliates of ConocoPhillips for $56 million plus inventory. The terminal is the sole service provider of Logan International Airport under a long-term contract. The acquisition is expected to close within the third quarter 2011 and will be included within the Terminal Facilities segment as of the acquisition date.

In July 2011, the Partnership acquired the Eagle Point tank farm and related assets from Sunoco for $100 million. The tank farm is located in Westville, New Jersey and consists of approximately 5 million barrels of active storage for clean products and dark oils. The acquisition was funded by the issuance of $98 million of deferred distribution units to Sunoco, which represent a new class of units on which no distributions are paid, and an additional $2 million general partner interest. The new units convert to common units on the one-year anniversary of their issuance. The acquisition will be included within the Terminal Facilities segment as of the acquisition date.

In August 2011, the Partnership acquired a crude oil purchasing and marketing business from Texon L.P. (“Texon”) for $205 million plus the fair market value of its crude oil inventory. The purchase consists of a lease crude business and gathering assets in 16 states, primarily in the western United States. The current crude oil volume of the business is approximately 75,000 barrels per day at the wellhead. The purchase was financed with a portion of the net proceeds from the Senior Notes offering in July 2011 (see Note 8). The acquisition will be included within the Crude Oil Pipeline segment as of the acquisition date.

3. Related Party Transactions

Incentive Distribution Rights Exchange

In January 2010, the Partnership entered into a repurchase agreement with its general partner, whereby the Partnership agreed to the repurchase from the general partner the existing incentive distribution rights (“IDRs”) for $201 million and issue new IDRs. Pursuant to this transaction, the Partnership executed the third amended and restated agreement of limited partnership. This new partnership agreement reflects the cancellation of the original IDRs and the authorization and issuance of the new IDRs. The Partnership ultimately financed the transaction with a portion of the proceeds from the February 2010 issuance of the 5.50 and 6.85 percent Senior Notes.

Promissory Note from Affiliate

In July 2010, the Partnership acquired a butane blending business from Texon L.P. The acquisition was partially funded by a three-year, subordinated, $100 million note from Sunoco, which bears interest at three-month LIBOR plus 275 basis points per annum.

Advances to/from Affiliate

The Partnership has a treasury services agreement with Sunoco pursuant to which it, among other things, participates in Sunoco’s centralized cash management program. Under this program, all of the Partnership’s cash receipts and cash disbursements are

processed, together with those of Sunoco and its other subsidiaries, through Sunoco’s cash accounts with a corresponding credit or charge to an intercompany account. The intercompany balances are settled periodically, but no less frequently than monthly. Amounts due from Sunoco earn interest at a rate equal to the average rate of the Partnership’s third-party money market investments, while amounts due to Sunoco bear interest at a rate equal to the interest rate provided in the Operating Partnership’s $395 million Credit Facility.

Administrative Services

Under the Omnibus Agreement, the Partnership pays Sunoco an annual administrative fee that includes expenses incurred by Sunoco and its affiliates to perform certain centralized corporate functions, such as legal, accounting, treasury, engineering, information technology, insurance, and other corporate services, including the administration of employee benefit plans. This fee was $5 million for the year ended December 31, 2010. The fee increased to $13 million for 2011 to cover shared management costs, including senior executives, which were previously recorded as a direct expense by the Partnership. The increase was also driven by a higher allocation of fees associated with corporate functions which were previously outsourced to third parties. This fee does not include the salaries of pipeline and terminal personnel or other employees of the general partner or the cost of their employee benefits. The Partnership has no employees, and reimburses Sunoco and its affiliates for these costs and other direct expenses incurred on the Partnership’s behalf. These costs may be increased if the acquisition or construction of new assets or businesses requires an increase in the level of general and administrative services received by the Partnership.

In addition to the annual administrative fee, selling, general and administrative expenses in the statements of income include the allocation of shared insurance costs. The Partnership’s share of allocated Sunoco employee benefit plan expenses, including noncontributory defined benefit retirement plans, defined contribution 401(k) plans, employee and retiree medical, dental and life insurance plans, incentive compensation plans and other such benefits are reflected in cost of products sold and operating expenses and selling, general and administrative expenses in the statements of income.

Affiliated Revenues and Accounts Receivable, Affiliated Companies

The Partnership is party to various agreements with Sunoco to supply refined products and to provide pipeline and terminalling services. Affiliated revenues in the statements of income consist of sales of refined products and crude oil as well as the related provision, and services including pipeline transportation, terminalling, and storage and blending to Sunoco. Prior to March 2011, affiliated revenues included sales of crude oil to Sunoco, which were priced using market based rates. Sales of refined product are priced using market based rates under agreements which are negotiated annually. Service revenues are recognized based on published tariffs or negotiated rates under agreements.

In March 2011, Sunoco completed the sale of its Toledo refinery to affiliates of PBF Holding Company LLC (“PBF”). Certain of the Partnership’s agreements with Sunoco to supply or purchase crude oil and provide pipeline and terminalling services to support the Toledo refinery have been assigned to PBF or its agents in connection with the sale. The sale of the refinery is not expected to have a material impact on the Partnership’s financial results.

Acquisitions

In May 2011, the Partnership acquired a controlling financial interest in Inland from Sunoco. The Partnership acquired its equity interest for approximately $99 million, net of cash received, through a purchase of a 27.0 percent equity interest from Shell and a 56.8 percent equity interest from Sunoco. The purchase price paid to Sunoco in connection with its 56.8 percent equity interest was approximately $73 million.

4. Net Income Per Unit Data

The general partner’s interest in net income attributable to Sunoco Logistics Partners L.P. (“net income attributable to the Partnership”) consists of its 2 percent general partner interest and “incentive distributions,” which are increasing percentages, up to 50 percent of quarterly distributions in excess of $0.50 per limited partner unit (see Note 11). The general partner was allocated net income attributable to the Partnership of $14 and $11 million (representing 15 and 22 percent of total net income attributable to the Partnership) for the three months ended June 30, 2011 and 2010, respectively and $26 and $21 million (representing 18 and 22 percent of total net income attributable to the Partnership) for the six months ended June 30, 2011 and 2010, respectively. Diluted net income attributable to the Partnership per limited partner unit is calculated by dividing limited partners’ interest in net income by the sum of the weighted average number of limited partnership units outstanding and the dilutive effect of incentive unit awards (see Note 12), calculated using the treasury stock method.

The following table sets forth the reconciliation of the weighted average number of limited partner units used to compute basic net income attributable to the Partnership per limited partner unit to those used to compute diluted net income attributable to the Partnership per limited partner unit for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(in millions)				(in millions)

Weighted average number of limited partner units outstanding - basic		33.1		31.0		33.1		31.0
Add effect of dilutive incentive awards		0.2		0.2		0.2		0.2

Weighted average number of limited partner units - diluted		33.3		31.2		33.3		31.2

5. Inventories

The components of inventories are as follows:


	June 30, 2011		December 31, 2010
	(in millions)

Crude oil	$	350	$	39
Refined products		21		16
Refined products additives		2		2
Materials, supplies and other		8		6

	$	381	$	63

The increase in the Partnership’s inventory during 2011 was primarily associated with contango inventory positions, which are expected to be significantly reduced by year-end.

6. Income Taxes

The Partnership is not a taxable entity for U.S. federal income tax purposes, or for the majority of states that impose income taxes. However, there are some states in which the Partnership operates where it is subject to both state and local income taxes. Substantially all of the income tax expense and income tax accruals reflected in the condensed consolidated financial statements relate to the consolidation of Mid-Valley Pipeline Company (“Mid-Valley”), West Texas Gulf Pipe Line Company (“West Texas Gulf”) and Inland, all of which are subject to income taxes for federal and state purposes. The Partnership also has deferred tax balances related to the difference between the book and tax bases of the assets and liabilities of Mid-Valley, West Texas Gulf and Inland.

7. Investment in Affiliates

The Partnership’s corporate joint ventures own and operate refined products and crude oil pipeline systems. The Partnership’s ownership percentages in and method of accounting for these corporate joint ventures as of and for the three and six month periods ended June 30, 2011 and 2010 were as follows:


	As of and for the periods ended
	June 30, 2011				June 30, 2010
	Equity Percentage			Accounting Method	Equity Percentage			Accounting Method

Explorer Pipeline Company		9.4	%	Equity method		9.4	%	Equity method
Yellowstone Pipe Line Company		14.0	%	Equity method		14.0	%	Equity method
West Shore Pipe Line Company		17.1	%	Equity method		12.3	%	Equity method
Wolverine Pipe Line Company		31.5	%	Equity method		31.5	%	Equity method
West Texas Gulf Pipe Line Company		60.3	%	Consolidated		43.8	%	Equity method
Mid-Valley Pipeline Company		91.0	%	Consolidated		55.3	%	Equity method

The following table provides summarized, unaudited income statement information on a 100 percent basis for the Partnership’s equity ownership interests for the three and six months ended June 30, 2011 and 2010:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(in millions)				(in millions)
Income Statement Data:⁽¹⁾
Total revenues	$	104	$	122	$	176	$	218
Income before income taxes	$	46	$	58	$	69	$	99
Net income	$	28	$	36	$	41	$	61

⁽¹⁾	The income statement data for the three and six months ended June 30, 2011 excludes amounts related to Mid-Valley and West Texas Gulf. Such amounts are included in the Partnership’s condensed consolidated financial statements.

The following table provides summarized, unaudited balance sheet information on a 100 percent basis for the Partnership’s equity ownership interests as of June 30, 2011 and December 31, 2010:


	June 30,		December 31,
	2011		2010
	(in millions)
Balance Sheet Data:
Current assets	$	142	$	122
Non-current assets	$	639	$	646
Current liabilities	$	113	$	122
Non-current liabilities	$	565	$	546
Net equity	$	103	$	100

8. Debt

The components of the Partnership’s debt balances are as follows:


	June 30, 2011			December 31, 2010
	(in millions)
Affiliated Companies
Promissory note (3.00% as of June 30, 2011), due May 2013	$	100		$	100


Credit Facilities
$63 million Credit Facility (2.69% as of June 30, 2011), due September 2011	$	31		$	31
$395 million Credit Facility (0.50% as of June 30, 2011), due November 2012		234			—

	$	265		$	31

Senior Notes
Senior Notes - 7.25%, due February 15, 2012	$	250		$	250
Senior Notes - 8.75%, due February 15, 2014		175			175
Senior Notes - 6.125%, due May 15, 2016		175			175
Senior Notes - 5.50%, due February 15, 2020		250			250
Senior Notes - 6.85%, due February 15, 2040		250			250

		1,100			1,100
Less:
Unamortized bond discount		(2	)		(2	)

Total debt	$	1,363		$	1,129

Senior Notes

In July, 2011 the Operating Partnership issued $300 million of 4.65 percent Senior Notes and $300 million of 6.10 percent Senior Notes (the “2022 and 2042 Senior Notes”), due February 2022 and February 2042, respectively. The net proceeds of $595 million from the 2022 and 2042 Senior Notes were used to pay down outstanding borrowings under the $63 and $395 million revolving credit facilities, which were used to fund the acquisitions of a controlling financial interest in Inland and the Texon crude oil purchasing and marketing business, and for general partnership purposes.

9. Commitments and Contingent Liabilities

The Partnership is subject to numerous federal, state and local laws which regulate the discharge of materials into the environment or that otherwise relate to the protection of the environment. These laws and regulations can result in liabilities and loss contingencies for remediation at the Partnership’s facilities and at third-party or formerly owned sites. At June 30, 2011 and December 31, 2010, there were accrued liabilities for environmental remediation in the condensed consolidated balance sheets of $4 million. The accrued liabilities for environmental remediation do not include any amounts attributable to unasserted claims, nor have any recoveries from insurance been assumed. Charges against income for environmental remediation totaled $1 million and less than $1 million for the three month periods ended June 30, 2011 and 2010, respectively and $3 and $1 million for the six month periods ended June 30, 2011 and 2010, respectively.

Total future costs for environmental remediation activities will depend upon, among other things, the identification of any additional sites, the determination of the extent of the contamination at each site, the timing and nature of required remedial actions, the technology available and needed to meet the various existing legal requirements, the nature and extent of future environmental laws, inflation rates and the determination of the Partnership’s liability at multi-party sites, if any, in light of uncertainties with respect to joint and several liability, and the number, participation levels and financial viability of other parties.

Sunoco has indemnified the Partnership for 30 years from environmental and toxic tort liabilities related to the assets contributed to the Partnership that arose from the operation of such assets prior to the closing of the February 2002 initial public offering (“IPO”). Sunoco has indemnified the Partnership for 100 percent of all losses asserted within the first 21 years of closing of the IPO. Sunoco’s share of liability for claims asserted thereafter will decrease by 10 percent per year. For example, for a claim asserted during the twenty-third year after closing of the IPO, Sunoco would be required to indemnify the Partnership for 80 percent of its loss. There is no monetary cap on the amount of indemnity coverage provided by Sunoco. The Partnership has agreed to indemnify

Sunoco for events and conditions associated with the operation of the Partnership’s assets that occur on or after the closing of the IPO and for environmental and toxic tort liabilities to the extent Sunoco is not required to indemnify the Partnership.

Sunoco has also indemnified the Partnership for liabilities other than environmental and toxic tort liabilities related to the assets contributed to the Partnership, that arose out of Sunoco’s ownership and operation of the assets prior to the closing of the IPO and that are asserted within 10 years after closing of the IPO. In addition, Sunoco has also indemnified the Partnership from liabilities relating to certain defects in title for the assets contributed to the Partnership; liabilities associated with failure to obtain certain consents and permits necessary to conduct its business that may arise within 10 years after closing of the IPO; liabilities relating to legal actions currently pending against Sunoco or its affiliates; and liabilities related to events and conditions associated with any assets retained by Sunoco or its affiliates.

Management of the Partnership does not believe that any liabilities which may arise from claims indemnified by Sunoco would be material in relation to the financial position of the Partnership at June 30, 2011. There are certain other pending legal proceedings related to matters arising after the IPO that are not indemnified by Sunoco. Management believes that any liabilities that may arise from these legal proceedings will not be material in relation to the financial position of the Partnership at June 30, 2011.

10. Equity

The changes in the number of limited partnership units outstanding from January 1, 2010 through June 30, 2011 are as follows:


	Units
	(in thousands)

Balance at January 1, 2010		30,981
Issuance of Limited Partner units to the public in August 2010		2,013
Units issued under incentive plans		72

Balance at December 31, 2010		33,066


Units issued under incentive plans		63

Balance at June 30, 2011		33,129

11. Cash Distributions

Within 45 days after the end of each quarter, the Partnership distributes all cash on hand at the end of the quarter, less reserves established by the general partner at its discretion. This is defined as “available cash” in the partnership agreement. The general partner has broad discretion to establish cash reserves that it determines are necessary or appropriate to properly conduct the Partnership’s business. The Partnership will make quarterly distributions to the extent there is sufficient cash from operations after the establishment of cash reserves and the payment of fees and expenses, including payments to the general partner.

If cash distributions exceed $0.50 per unit in a quarter, the general partner will receive increasing percentages, up to 50 percent, of the cash distributed in excess of that amount. These distributions are referred to as “incentive distributions.” The percentage interests shown for the unitholders and the general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution.

In January 2010, the Partnership repurchased, and its general partner transferred and assigned to the Partnership for cancellation, the IDRs held by the general partner under the Second Amended and Restated Agreement of Limited Partnership, as amended, as consideration for (i) the Partnership’s issuance to the general partner of new IDRs issued under the Third Amended and Restated Agreement of Limited Partnership and (ii) the issuance to the general partner of a promissory note in the amount of $201 million. In February 2010, the Operating Partnership issued the 5.50 and 6.85 percent Senior Notes. A portion of the net proceeds from this offering was used to repay in full this promissory note.

The following table shows the target distribution levels and distribution “splits” between the general partner and the holders of the Partnership’s limited partnership units under the new IDRs:


	Total Quarterly Distribution Target Amount	Marginal Percentage Interest in Distributions
	Total Quarterly Distribution Target Amount	General Partner			Unitholders

First Target Distribution	up to $0.500		2	%		98	%
Second Target Distribution	above $0.500 up to $0.575		15	%*		85	%
Third Target Distribution	above $0.575 up to $1.5825		37	%*		63	%
Thereafter	above $1.5825		50	%*		50	%

*	Includes 2 percent general partner interest.

The distributions paid by the Partnership for the period from January 1, 2010 through June 30, 2011 are summarized below. The table excludes the distribution of $201 million paid to the general partner in connection with the repurchase and exchange of the general partner’s IDRs.


Date Cash Distribution Paid	Cash Distribution per Limited Partner Unit		Total Cash Distribution to the Limited Partners		Total Cash Distribution to the General Partner
			(in millions)		(in millions)

May 13, 2011	$	1.195	$	40	$	12
February 14, 2011	$	1.180	$	39	$	12
November 12, 2010	$	1.170	$	39	$	12
August 13, 2010	$	1.140	$	35	$	11
May 14, 2010	$	1.115	$	35	$	10
February 12, 2010	$	1.090	$	34	$	14

On July 26, 2011, Sunoco Partners LLC, the general partner of Sunoco Logistics Partners L.P., declared a cash distribution of $1.215 per limited partnership unit ($4.86 annualized), representing the distribution for the second quarter 2011. The $53 million distribution, including $13 million to the general partner, will be paid on August 12, 2011 to unitholders of record on August 8, 2011. The change in distribution “splits” resulted in a $6 million reduction of the general partner’s cash distribution for the second quarter 2011 as compared to the previous methodology.

12. Management Incentive Plan

Sunoco Partners LLC, the general partner of the Partnership, has adopted the Sunoco Partners LLC Long-Term Incentive Plan for employees and directors of the general partner who perform services for the Partnership. The LTIP is administered by the independent directors of the Compensation Committee of the general partner’s board of directors with respect to employee awards, and by the non-independent members of the general partner’s board of directors with respect to awards granted to the independent members. The LTIP currently permits the grant of restricted units and unit options covering an additional 0.4 million limited partnership units. Restricted unit awards may also include tandem distribution equivalent rights (“DERs”) at the discretion of the Compensation Committee.

During the first six months of 2011 and 2010, the Partnership issued 63 and 72 thousand units under the LTIP. The Partnership recognized share-based compensation expense of $4 million for the six month periods ended June 30, 2011 and 2010. Each of the restricted unit grants also have tandem DERs which are recognized as a reduction of equity when earned.

13. Derivatives and Risk Management

The Partnership is exposed to various market risks, including volatility in crude oil and refined product prices, counterparty credit risk and interest rate risk.

Price Risk Management

The Partnership is exposed to risks associated with changes in the market price of crude oil and refined products as a result of the forecasted purchase or sale of these products. These risks are primarily associated with price volatility related to pre-existing or anticipated purchases and sales. Price changes are often caused by shifts in the supply and demand for these commodities, as well as their locations. In order to manage such exposure, the Partnership’s policy is (i) to only purchase crude oil and refined products for which sales contracts have been executed or for which ready markets exist, (ii) to structure sales contracts so that price fluctuations do not materially impact the margins earned, and (iii) not to acquire and hold physical inventory, futures contracts or other derivative instruments for the purpose of speculating on commodity price changes. Although the Partnership seeks to maintain a balanced inventory position within its commodity inventories, net unbalances may occur for short periods of time due to production, transportation and delivery variances. When physical inventory builds or draws do occur, the Partnership continuously manages the variance to a balanced position over a period of time. Pursuant to the Partnership’s risk management policy, derivative contracts may be used to hedge or reduce exposure to price risk associated with acquired inventory or forecasted physical transactions.

The physical contracts related to the Partnership’s crude oil and refined products businesses that qualify as derivatives have been designated as normal purchases and sales and are accounted for using traditional accrual accounting. The Partnership accounts for derivatives that do not qualify as normal purchases and sales at fair value. The Partnership does not utilize derivative instruments to manage its exposure to prices related to crude oil purchase and sale activities. The Partnership does utilize derivatives such as swaps, futures and other derivative instruments to mitigate the risk associated with market movements in the price of refined products. These derivative contracts act as a hedging mechanism against the volatility of prices by allowing the Partnership to transfer this price risk to counterparties who are able and willing to bear it.

While all derivative instruments utilized by the Partnership represent economic hedges, certain of these derivatives are not designated as hedges for accounting purposes. Such derivatives include certain contracts that were entered into and closed during the same accounting period and a limited number of contracts for which there is not sufficient correlation to the related items being economically hedged.

For refined product derivative contracts that are not designated as hedges for accounting purposes, all realized and unrealized gains and losses are recognized in the statement of income during the current period. For refined product derivative contracts that are designated and qualify as cash flow hedges pursuant to generally accepted accounting principles, the portion of the gain or loss on the derivative contract that is effective in offsetting the variable cash flows associated with the hedged forecasted transaction is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative contract in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), is recognized in earnings during the current period.

As of and for the periods ended June 30, 2011 and 2010, the impact of the Partnership’s hedging activities was not material to the condensed consolidated financial statements. The Partnership had open derivative positions of 3 million and less than 1 million barrels of refined products at June 30, 2011 and 2010, respectively. The derivatives outstanding as of June 30, 2011 vary in duration but do not extend beyond one year. As of June 30, 2011 and December 31, 2010, the Partnership had the following derivative asset and liability balances:


	June 30, 2011			December 31, 2010
	(in millions)

Derivative assets	$	4		$	2
Derivative liabilities		(3	)		(6	)

	$	1		$	(4	)

Credit Risk Management

The Partnership faces counterparty credit risk as a result of our use of financial derivative contracts. The Partnership’s counterparties consist primarily of financial institutions and major integrated oil companies. This concentration of counterparties may impact the Partnership’s overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.

The Partnership maintains credit policies with regard to its counterparties that management believes minimize the overall credit risk. The Partnership’s customers’ credit positions are analyzed prior to the extension of credit and periodically after credit has been extended. The Partnership manages its exposure to derivative counterparty credit risk through credit analysis, credit approvals,

credit limits, and monitoring procedures. The Partnership does not have over-the-counter derivatives that are entered into with counterparties outside of regulated exchanges.

Interest Rate Risk Management

The Partnership has interest rate risk exposure for changes in interest rates related to its outstanding borrowings. The Partnership manages its exposure to changes in interest rates through the use of a combination of fixed- and variable-rate debt. At June 30, 2011, the Partnership had $365 million of variable-rate borrowings under the revolving credit facilities and promissory notes from affiliated companies.

14. Fair Value Measurements

The Partnership applies fair value accounting for all financial assets and liabilities that are required to be measured at fair value under current accounting rules, primarily derivatives. The assets and liabilities that are measured at fair value on a recurring basis are not material to the Partnership’s condensed consolidated balance sheets.

The Partnership determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Partnership utilizes valuation techniques that maximize the use of observable inputs (levels 1 and 2) and minimize the use of unobservable inputs (level 3) within the fair value hierarchy established by the Accounting Standards Codification.

The Partnership generally applies the “market approach” to determine fair value. This method uses pricing and other information generated by market transactions for identical or comparable assets and liabilities. Assets and liabilities are classified within the fair value hierarchy based on the lowest level (least observable) input that is significant to the measurement in its entirety.

The estimated fair value of financial instruments has been determined based on the Partnership’s assessment of available market information and appropriate valuation methodologies. The Partnership’s current assets (other than derivatives and inventories) and current liabilities are financial instruments and most of these items are recorded at cost in the consolidated balance sheets. The estimated fair value of these financial instruments approximate their carrying value due to their short-term nature. The Partnership’s derivatives are measured and recorded at fair value, based on observable market prices and other valuation methodologies. At June 30, 2011, the fair values of the credit facilities and the promissory note to Sunoco approximate their carrying value, as these borrowings bear interest based upon short-term floating market interest rates. The estimated fair value of the Senior Notes is based on quoted market prices. The estimated aggregate fair value of the Senior Notes at June 30, 2011 is $1.2 billion, compared to the carrying amount of $1.1 billion. The estimated aggregate fair value of the Senior Notes at December 31, 2010 was $1.2 billion, compared to the carrying amount of $1.1 billion.

15. Business Segment Information

The Partnership operates in three principal business segments: Refined Products Pipeline System, Terminal Facilities, and Crude Oil Pipeline System.

The following tables set forth condensed statement of income information concerning the Partnership’s business segments and reconcile total segment operating income to net income attributable to Sunoco Logistics Partners L.P. for the three and six months ended June 30, 2011 and 2010, respectively.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(in millions)				(in millions)
Segment Operating Income

Refined Products Pipeline System:
Sales and other operating revenue:
Unaffiliated customers	$	15	$	13	$	25	$	24
Affiliates		14		18		31		37
Operating Income	$	8	$	13	$	13	$	21

Terminal Facilities:
Sales and other operating revenue:
Unaffiliated customers	$	62	$	27	$	116	$	53
Affiliates		25		32		58		61
Operating Income	$	34	$	28	$	63	$	50

Crude Oil Pipeline System:
Sales and other operating revenue:
Unaffiliated customers	$	2,307	$	1,775	$	4,199	$	3,244
Affiliates		1		164		253		290
Operating Income	$	79	$	29	$	120	$	57

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(in millions)				(in millions)
Reconciliation of Segment Operating Income to Net Income Attributable to Sunoco Logistics Partners L.P.
Operating Income:
Refined Products Pipeline System	$	8	$	13	$	13	$	21
Terminal Facilities		34		28		63		50
Crude Oil Pipeline System		79		29		120		57

Total segment operating income	$	121	$	70	$	196	$	128
Net interest expense		19		19		39		34

Income before provision for income taxes	$	102	$	51	$	157	$	94
Provision for income taxes		6		—		11		—

Net Income	$	96	$	51	$	146	$	94
Net Income attributable to noncontrolling interests		2		—		4		—

Net Income Attributable to Sunoco Logistics Partners L.P.	$	94	$	51	$	142	$	94

The following table provides the identifiable assets for each segment as of June 30, 2011 and December 31, 2010:


	June 30, 2011		December 31, 2010
	(in millions)

Refined Products Pipeline System	$	720	$	531
Terminal Facilities		884		857
Crude Oil Pipeline System		3,248		2,713
Corporate and other		46		87

Total identifiable assets	$	4,898	$	4,188

Corporate and other assets consist primarily of cash and cash equivalents, advances to affiliates and deferred charges.

16. Supplemental Condensed Consolidating Financial Information

The Partnership serves as guarantor of the Senior Notes and of any obligations under the $395 million and $63 million Credit Facilities. These guarantees are full and unconditional. For purposes of the following footnote, Sunoco Logistics Partners L.P. is referred to as “Parent Guarantor” and Sunoco Logistics Partners Operations L.P. is referred to as “Subsidiary Issuer.” All other consolidated subsidiaries of the Partnership are collectively referred to as “Non-Guarantor Subsidiaries.”

The following supplemental condensed consolidating financial information reflects the Parent Guarantor’s separate accounts, the Subsidiary Issuer’s separate accounts, the combined accounts of the Non-Guarantor Subsidiaries, the combined consolidating adjustments and eliminations and the Parent Guarantor’s consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent Guarantor’s investments in its subsidiaries and the Subsidiary Issuer’s investments in its subsidiaries are accounted for under the equity method of accounting.

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2011

(in millions, unaudited)


	Parent Guarantor		Subsidiary Issuer			Non- Guarantor Subsidiaries		Consolidating Adjustments			Total
Revenues
Sales and other operating revenue:
Unaffiliated customers	$	—	$	—		$	2,385	$	—		$	2,385
Affiliates		—		—			39		—			39
Equity in earnings of subsidiaries		94		112			—		(206	)		—
Other income		—		—			4		—			4

Total Revenues		94		112			2,428		(206	)		2,428

Costs and Expenses
Cost of products sold and operating expenses		—		—			2,266		—			2,266
Depreciation and amortization expense		—		—			19		—			19
Selling, general and administrative expenses		—		—			22		—			22

Total Costs and Expenses		—		—			2,307		—			2,307

Operating Income		94		112			121		(206	)		121
Net interest cost to affiliates		—		—			1		—			1
Other interest cost and debt expense, net		—		20			—		—			20
Capitalized interest		—		(2	)		—		—			(2	)

Income Before Provision for Income Taxes		94		94			120		(206	)		102
Provision for income taxes		—		—			6		—			6

Net Income		94		94			114		(206	)		96
Net income attributable to noncontrolling interests		—		—			2		—			2

Net Income attributable to Sunoco Logistics Partners L.P.	$	94	$	94		$	112	$	(206	)	$	94

Condensed Consolidating Statement of Income

Three Months Ended June 30, 2010

(in millions, unaudited)


	Parent Guarantor		Subsidiary Issuer			Non- Guarantor Subsidiaries		Consolidating Adjustments			Total
Revenues
Sales and other operating revenue:
Unaffiliated customers	$	—	$	—		$	1,815	$	—		$	1,815
Affiliates		—		—			214		—			214
Equity in earnings of subsidiaries		51		69			—		(120	)		—
Other income		—		—			10		—			10

Total Revenues		51		69			2,039		(120	)		2,039

Costs and Expenses
Cost of products sold and operating expenses		—		—			1,939		—			1,939
Depreciation and amortization expense		—		—			14		—			14
Selling, general and administrative expenses		—		—			16		—			16

Total Costs and Expenses		—		—			1,969		—			1,969

Operating Income		51		69			70		(120	)		70
Net interest cost to affiliates		—		(1	)		1		—			—
Other interest cost and debt expense, net		—		20			—		—			20
Capitalized interest		—		(1	)		—		—			(1	)

Income Before Provision for Income Taxes		51		51			69		(120	)		51
Provision for income taxes		—		—			—		—			—

Net Income		51		51			69		(120	)		51
Net income attributable to noncontrolling interests		—		—			—		—			—

Net Income attributable to Sunoco Logistics Partners L.P.	$	51	$	51		$	69	$	(120	)	$	51

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2011

(in millions, unaudited)


	Parent Guarantor		Subsidiary Issuer			Non- Guarantor Subsidiaries		Consolidating Adjustments			Total
Revenues
Sales and other operating revenue:
Unaffiliated customers	$	—	$	—		$	4,340	$	—		$	4,340
Affiliates		—		—			342		—			342
Equity in earnings of subsidiaries		142		179			—		(321	)		—
Other income		—		—			6		—			6

Total Revenues		142		179			4,688		(321	)		4,688

Costs and Expenses
Cost of products sold and operating expenses		—		—			4,411		—			4,411
Depreciation and amortization expense		—		—			37		—			37
Selling, general and administrative expenses		—		—			44		—			44

Total Costs and Expenses		—		—			4,492		—			4,492

Operating Income		142		179			196		(321	)		196
Net interest cost to affiliates		—		—			2		—			2
Other interest cost and debt expense, net		—		40			—		—			40
Capitalized interest		—		(3	)		—		—			(3	)

Income Before Provision for Income Taxes		142		142			194		(321	)		157
Provision for income taxes		—		—			11		—			11

Net Income		142		142			183		(321	)		146
Net income attributable to noncontrolling interests		—		—			4		—			4

Net Income attributable to Sunoco Logistics Partners L.P.	$	142	$	142		$	179	$	(321	)	$	142

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2010

(in millions, unaudited)


	Parent Guarantor		Subsidiary Issuer			Non- Guarantor Subsidiaries		Consolidating Adjustments			Total
Revenues
Sales and other operating revenue:
Unaffiliated customers	$	—	$	—		$	3,322	$	—		$	3,322
Affiliates		—		—			387		—			387
Equity in earnings of subsidiaries		94		126			—		(220	)		—
Other income		—		—			18		—			18

Total Revenues		94		126			3,727		(220	)		3,727

Costs and Expenses
Cost of products sold and operating expenses		—		—			3,533		—			3,533
Depreciation and amortization expense		—		—			29		—			29
Selling, general and administrative expenses		—		—			37		—			37

Total Costs and Expenses		—		—			3,599		—			3,599

Operating Income		94		126			128		(220	)		128
Net interest cost to affiliates		—		(2	)		2		—			—
Other interest cost and debt expense, net		—		36			—		—			36
Capitalized interest		—		(2	)		—		—			(2	)

Income Before Provision for Income Taxes		94		94			126		(220	)		94
Provision for income taxes		—		—			—		—			—

Net Income		94		94			126		(220	)		94
Net income attributable to noncontrolling interests		—		—			—		—			—

Net Income attributable to Sunoco Logistics Partners L.P.	$	94	$	94		$	126	$	(220	)	$	94

Condensed Consolidating Balance Sheet

June 30, 2011

(in millions, unaudited)


	Parent Guarantor		Subsidiary Issuer			Non- Guarantor Subsidiaries		Consolidating Adjustments			Total
Assets
Current Assets
Cash and cash equivalents	$	—	$	2		$	4	$	—		$	6
Accounts receivable, net		—		—			1,912		—			1,912
Inventories		—		—			381		—			381

Total Current Assets		—		2			2,297		—			2,299

Properties, plants and equipment, net		—		—			2,338		—			2,338
Goodwill		—		—			63		—			63
Investment in affiliates		1,030		2,513			73		(3,543	)		73
Intangible assets, net		—		—			105		—			105
Other assets		—		6			14		—			20

Total Assets	$	1,030	$	2,521		$	4,890	$	(3,543	)	$	4,898

Liabilities and Equity
Current Liabilities
Accounts payable	$	—	$	—		$	1,900	$	—		$	1,900
Current portion of long-term debt		—		250			—		—			250
Accrued liabilities		1		24			86		—			111
Advances from affiliated companies		25		(46	)		28		—			7
Accrued taxes payable		—		—			43		—			43

Total Current Liabilities		26		228			2,057		—			2,311

Long-term debt		—		1,113			—		—			1,113
Long-term debt, affiliated companies		—		100			—		—			100
Other deferred credits and liabilities		—		—			47		—			47
Deferred income taxes		—		—			223		—			223

Total Liabilities		26		1,441			2,327		—			3,794

Total Equity		1,004		1,080			2,563		(3,543	)		1,104

Total Liabilities and Equity	$	1,030	$	2,521		$	4,890	$	(3,543	)	$	4,898

Condensed Consolidating Balance Sheet

December 31, 2010

(in millions)


	Parent Guarantor		Subsidiary Issuer		Non- Guarantor Subsidiaries			Consolidating Adjustments			Total
Assets
Current Assets
Cash and cash equivalents	$	—	$	2	$	—		$	—		$	2
Advances to affiliated companies		28		47		(31	)		—			44
Accounts receivable, affiliated companies		—		—		154			—			154
Accounts receivable, net		—		—		1,536			—			1,536
Inventories		—		—		63			—			63

Total Current Assets		28		49		1,722			—			1,799

Properties, plants and equipment, net		—		—		2,128			—			2,128
Goodwill		—		—		63			—			63
Investment in affiliates		937		2,182		73			(3,119	)		73
Intangible assets, net		—		—		109			—			109
Other assets		—		7		9			—			16

Total Assets	$	965	$	2,238	$	4,104		$	(3,119	)	$	4,188

Liabilities and Equity
Current Liabilities
Accounts payable	$	—	$	—	$	1,591		$	—		$	1,591
Accrued liabilities		1		24		51			—			76
Accrued taxes payable		—		—		44			—			44

Total Current Liabilities		1		24		1,686			—			1,711

Long-term debt		—		1,129		—			—			1,129
Long-term debt, affiliated companies		—		100		—			—			100
Other deferred credits and liabilities		—		—		42			—			42
Deferred income taxes		—		—		164			—			164

Total Liabilities		1		1,253		1,892			—			3,146

Total Equity		964		985		2,212			(3,119	)		1,042

Total Liabilities and Equity	$	965	$	2,238	$	4,104		$	(3,119	)	$	4,188

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2011

(in millions, unaudited)


	Parent Guarantor			Subsidiary Issuer			Non- Guarantor Subsidiaries			Consolidating Adjustments			Total
Net Cash Flows from Operating Activities	$	142		$	144		$	30		$	(321	)	$	(5	)

Cash Flows from Investing Activities:
Capital expenditures		—			—			(69	)		—			(69	)
Acquisitions		—			—			(99	)		—			(99	)
Intercompany		(90	)		(378	)		147			321			—

Net cash used in investing activities		(90	)		(378	)		(21	)		321			(168	)

Cash Flows from Financing Activities:
Distributions paid to limited and general partners		(103	)		—			—			—			(103	)
Distributions paid to noncontrolling interests		(2	)		—			—			—			(2	)
Payments of statutory withholding on net issuance of limited partner units under restricted unit incentive plan		—			—			(3	)		—			(3	)
Repayments under credit facility		—			(63	)		—			—			(63	)
Borrowings under credit facility		—			297			—			—			297
Net proceeds from issuance of long term debt		—			—			—			—			—
Repayment of promissory note to general partner		—			—			—			—			—
Advances to affiliates, net		53			—			(2	)		—			51

Net cash provided by financing activities		(52	)		234			(5	)		—			177

Net change in cash and cash equivalents		—			—			4			—			4
Cash and cash equivalents at beginning of period		—			2			—			—			2

Cash and cash equivalents at end of period	$	—		$	2		$	4		$	—		$	6

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2010

(in millions, unaudited)


	Parent Guarantor			Subsidiary Issuer			Non- Guarantor Subsidiaries			Consolidating Adjustments			Total
Net Cash Flows from Operating Activities	$	94		$	100		$	53		$	(220	)	$	27

Cash Flows from Investing Activities:
Capital expenditures		—			—			(76	)		—			(76	)
Intercompany		190			(440	)		29			221			—

Net cash used in investing activities		190			(440	)		(47	)		221			(76	)

Cash Flows from Financing Activities:
Distributions paid to limited and general partners		(92	)		—			—			—			(92	)
Payments of statutory withholding on net issuance of limited partner units under restricted unit incentive plan		—			—			(3	)		—			(3	)
Repayments under credit facility		—			(462	)		—			—			(462	)
Borrowings under credit facility		—			308			—			—			308
Net proceeds from issuance of long term debt		—			494			—			—			494
Repayment of promissory note to general partner		(201	)		—			—			—			(201	)
Advances to affiliates, net		9			—			(4	)		—			5
Other		—			—			1			(1	)		—

Net cash provided by financing activities		(284	)		340			(6	)		(1	)		49

Net change in cash and cash equivalents		—			—			—			—			—
Cash and cash equivalents at beginning of period		—			2			—			—			2

Cash and cash equivalents at end of period	$	—		$	2		$	—		$	—		$	2

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Sunoco Logistics Partners L.P.

Operating Highlights

Three Months Ended June 30, 2011 and 2010


	Three Months Ended June 30,
	2011		2010
Refined Products Pipeline System:⁽¹⁾⁽²⁾
Refined products pipeline throughput (barrels per day)		471		519
Revenue per barrel (cents)		69.1		66.5
Terminal Facilities:
Terminal throughput (barrels per day):
Refined product terminals		479		487
Nederland terminal		771		684
Refinery terminals		393		471
Crude Oil Pipeline System:
Crude oil pipeline throughput (barrels per day)⁽³⁾		1,641		906
Crude oil purchases at wellhead (barrels per day)		196		191
Gross margin per barrel of pipeline throughput (cents)⁽³⁾⁽⁴⁾		57.8		35.7
Average crude oil price (per barrel)	$	102.55	$	77.99

⁽¹⁾	Excludes amounts attributable to equity ownership interests which are not consolidated.

⁽²⁾

In May 2011, the Partnership acquired a controlling financial interest in the Inland refined products pipeline. As a result of this acquisition, the Partnership accounted for this entity as a consolidated subsidiary from the acquisition date. Volumes for the three months ended June 30, 2011 of 72 thousand bpd and the related revenue per barrel, have been included in the refined products pipeline throughput and revenue per barrel. From the date of acquisition, this pipeline had actual throughput of approximately 143 thousand bpd for the three months ended June 30, 2011. The amounts presented for the three month period ended June 30, 2010 exclude amounts attributable to this system.

⁽³⁾

In July 2010, the Partnership acquired additional interests in the Mid-Valley and West Texas Gulf crude oil pipelines, which previously had been recorded as equity investments. The Partnership obtained a controlling financial interest as a result of these acquisitions and began accounting for these entities as consolidated subsidiaries from their respective acquisition dates. Volumes for the three months ended June 30, 2011 of 717 thousand bpd and the related gross margin, have been included in the crude oil pipeline throughput and gross margin per barrel of throughput. The amounts presented for the three month period ended June 30, 2010 exclude amounts attributable to these systems.

⁽⁴⁾	Represents total segment sales and other operating revenue, minus cost of products sold and operating expenses and depreciation and amortization, divided by crude oil pipeline throughput.

Analysis of Consolidated Net Income

Net income for Sunoco Logistics Partners L.P. (“the Partnership”) was $96 million for the second quarter 2011 as compared with $51 million for the second quarter 2010. The $45 million increase is primarily related to expanded crude oil volumes and margins and an increase in operating income associated with the Partnership’s acquisitions and organic growth capital in 2010 and 2011. These increases were partially offset by higher depreciation expense and income tax expense related to acquisitions and organic growth capital.

Analysis of Segment Operating Income

The Partnership operates in three principal business segments: Refined Products Pipeline System, Terminal Facilities and Crude Oil Pipeline System.

Refined Products Pipeline System

Operating income for the second quarter 2011 decreased from the prior year period due to lower pipeline volumes on the Partnership’s refined product pipelines in the southwest and unplanned refinery issues in the northeast. The decreased operating income was partially offset by results from the acquisition of a controlling financial interest in Inland Corporation in the second quarter 2011.

Terminal Facilities

Quarterly operating income was primarily related to increased contributions from the butane blending business acquired in July 2010 and higher tank rentals and fees at the Partnership’s Nederland terminal. These improvements were partially offset by lower throughput at the Partnership’s refined products and refinery terminals.

Crude Oil Pipeline System

Operating income for the second quarter 2011 increased from the prior year period due primarily to expanded crude oil volumes and margins, which benefited from market-related opportunities and the contango market structure. Operating income associated with the Partnership’s acquisitions of additional joint venture interests further contributed to this increase.

Sunoco Logistics Partners L.P.

Operating Highlights

Six Months Ended June 30, 2011 and 2010


	Six Months Ended
	June 30,
	2011		2010
Refined Products Pipeline System:⁽¹⁾⁽²⁾
Refined products pipeline throughput (barrels per day)		441		488
Revenue per barrel (cents)		70.4		68.6
Terminal Facilities:
Terminal throughput (barrels per day):
Refined product terminals		479		473
Nederland terminal		734		705
Refinery terminals		391		484
Crude Oil Pipeline System:
Crude oil pipeline throughput (barrels per day)⁽³⁾		1,568		872
Crude oil purchases at wellhead (barrels per day)		193		188
Gross margin per barrel of pipeline throughput (cents)⁽³⁾⁽⁴⁾		47.4		37.8
Average crude oil price (per barrel)	$	98.42	$	78.39

⁽¹⁾	Excludes amounts attributable to equity ownership interests which are not consolidated.

⁽²⁾

In May 2011, the Partnership acquired a controlling financial interest in the Inland refined products pipeline. As a result of this acquisition, the Partnership accounted for this entity as a consolidated subsidiary from the acquisition date. Volumes for the six months ended June 30, 2011 of 36 thousand bpd and the related revenue per barrel, have been included in the refined products pipeline throughput and revenue per barrel. From the date of acquisition, this pipeline had actual throughput of approximately 143 thousand bpd for the six months ended June 30, 2011. The amounts presented for the six month period ended June 30, 2010 exclude amounts attributable to this system.

⁽³⁾

In July 2010, the Partnership acquired additional interests in the Mid-Valley and West Texas Gulf crude oil pipelines, which previously had been recorded as equity investments. The Partnership obtained a controlling financial interest as a result of these acquisitions and began accounting for these entities as consolidated subsidiaries from their respective acquisition dates. Volumes for the six months ended June 30, 2011 of 687 thousand bpd and the related gross margin, have been included in the crude oil pipeline throughput and gross margin per barrel of throughput. The amounts presented for the six month period ended June 30, 2010 exclude amounts attributable to these systems.

⁽⁴⁾	Represents total segment sales and other operating revenue, minus cost of products sold and operating expenses and depreciation and amortization, divided by crude oil pipeline throughput.

Analysis of Consolidated Net Income

Net income for Sunoco Logistics Partners L.P. (“the Partnership”) was $146 million for the six month period ended June 30, 2011 as compared with $94 million for the six month period ended June 30, 2010. The $52 million increase is primarily related to an increase in operating income associated with expanded crude oil volumes and margins, which benefited from market-related opportunities and the contango market structure, and contributions from the Partnership’s acquisitions and organic growth capital in 2010 and 2011. These increases were partially offset by an increase in interest expense and tax expense associated with acquisitions and organic growth capital.

Analysis of Segment Operating Income

The Partnership operates in three principal business segments: Refined Products Pipeline System, Terminal Facilities and Crude Oil Pipeline System.

Refined Products Pipeline System

Operating income for the six months ended June 30, 2011 decreased from the prior year period due to lower pipeline volumes on the Partnership’s refined product pipelines in the southwest and unplanned refinery issues in the northeast. The decreased operating income was partially offset by results from the acquisition of a controlling financial interest in Inland Corporation in the second quarter 2011.

Terminal Facilities

The improvement in operating income from the prior year period was primarily related to increased results from the butane blending business acquired in July 2010 and higher tank rentals and fees at the Partnership’s Nederland terminal. These improvements were partially offset by lower throughput at the Partnership’s refined products and refinery terminals, which were negatively impacted by unplanned refinery maintenance during the first quarter 2011.

Crude Oil Pipeline System

Operating income for the six months ended June 30, 2011 increased from the prior year period due primarily to expanded crude oil volumes and margins, which benefitted from market-related opportunities and the contango market structure. Operating income associated with the Partnership’s acquisitions of additional joint venture interests further contributed to this increase.

Liquidity and Capital Resources

Liquidity

Cash generated from operations and borrowings under our credit facilities are our primary sources of liquidity. At June 30, 2011, we had a net working capital deficit of $12 million and available borrowing capacity under the credit facilities of $192 million. Our working capital position reflects crude oil and refined products inventories based on historical costs under the LIFO method of accounting. The current replacement cost of all such inventories exceeded their carrying value at June 30, 2011 by approximately $153 million. Inventories valued at LIFO are readily marketable at their current replacement values. We periodically supplement our cash flows from operations with proceeds from debt and equity financing activities.

Capital Resources

Credit Facilities

At June 30, 2011 Sunoco Logistics Partners Operations L.P. (“the Operating Partnership”) had a five-year $395 million Credit Facility, which is available to fund the Partnership’s working capital requirements, to finance future acquisitions and future capital projects and for general partnership purposes. The facility, which is scheduled to mature in November 2012, had $234 million outstanding at June 30, 2011. This facility bears interest at the Operating Partnership’s option, at either (i) LIBOR plus an applicable margin, (ii) the higher of the federal funds rate plus 0.50 percent or the Citibank prime rate (each plus the applicable margin), or (iii) the federal funds rate plus an applicable margin.

The Operating Partnership also has a $63 million revolving credit facility, which is available to fund the Operating Partnership’s working capital requirements, to finance future acquisitions and future capital projects and for general partnership purposes. The facility, which is scheduled to mature in September 2011, had $31 million outstanding at June 30, 2011. This facility bears interest at the Operating Partnership’s option, at either (i) LIBOR plus an applicable margin or (ii) the higher of (a) the federal funds rate plus 0.50 percent plus an applicable margin, (b) Toronto Dominion’s prime rate plus an applicable margin, or (c) LIBOR plus 1.0 percent plus an applicable margin.

The $395 million and $63 million Credit Facilities contain various covenants limiting the Operating Partnership’s ability to a) incur indebtedness, b) grant certain liens, c) make certain loans, acquisitions and investments, d) make any material change to the nature of its business, e) acquire another company, or f) enter into a merger or sale of assets, including the sale or transfer of interests in the Operating Partnership’s subsidiaries. The $395 million and $63 million Credit Facilities also limit the Operating Partnership, on a rolling four-quarter basis, to a maximum total debt to EBITDA ratio of 4.75 to 1 and 4.5 to 1, respectively, which could generally be increased to 5.25 to 1 and 5.0 to 1, respectively, during an acquisition period. The Partnership’s ratio of total debt to EBITDA was 3.1 to 1 at June 30, 2011, as calculated in accordance with the bank covenants.

Senior Notes

In July, 2011 the Operating Partnership issued $300 million of 4.65 percent Senior Notes and $300 million of 6.10 percent Senior Notes (the “2022 and 2042 Senior Notes”), due February 2022 and February 2042, respectively. The net proceeds of $595 million from the 2022 and 2042 Senior Notes were used to pay down the outstanding borrowings under our $63 and $395 million revolving credit facilities, which were used to fund the acquisitions of a controlling financial interest in Inland Corporation and the Texon crude oil purchasing and marketing business, and for general partnership purposes.

Equity Offering

In July 2011, the Partnership issued 1.3 million Class A Units to Sunoco in connection with the acquisition of the Eagle Point tank farm and related assets. The $98 million of deferred distribution units are a new class of units that will convert to common limited partner units on the one-year anniversary of their issuance. In connection with this offering, the General Partner was issued an additional $2 million general partner interest to maintain its 2 percent general partner interest in the Partnership.

Cash Flows and Capital Expenditures

Net cash used in operating activities for the six months ended June 30, 2011 was $5 million compared with net cash provided by operating activities of $27 million for the first six months of 2010. Net cash used by operating activities in 2011 related primarily to a net increase in working capital of $194 million, partially offset by net income of $146 million and non-cash charges of depreciation and amortization of $37 million. The increase in working capital was primarily the result of the Partnership’s contango inventory positions and the associated effect on accounts receivable and accounts payable. The net cash provided by operating activities in 2010 related to net income of $94 million and non-cash charges of depreciation and amortization of $29 million, offset by a $97 million increase in working capital. The increase in working capital was the result of increased contango inventory positions.

Net cash used in investing activities for the first six months of 2011 was $168 million compared with $76 million for the first six months of 2010. Net cash used in investing activities in 2011 consisted of the acquisition of the Inland refined products pipeline system in Ohio for $99 million, capital expenditures to expand upon the Partnership’s existing butane blending business, increase tankage at the Nederland facility and expand the Partnership’s refined products platform in the southwest United States, as well as maintenance capital associated with the Partnership’s existing assets. Net cash used in investing activities in 2010 included construction projects to expand services at the Partnership’s refined products terminals, increase tankage at the Nederland facility and expand upon the Partnership’s refined products platform in the southwest United States.

Net cash provided by financing activities for the first six months of 2011 was $177 million compared with $49 million for the six three months of 2010. Net cash provided by financing activities for the first six months of 2011 resulted from $234 million in net borrowings under the Partnership’s revolving credit facility and a $51 million decrease in advances to affiliates. These sources of cash were partially offset by $103 million in quarterly distributions to limited and general partners. Net cash provided by financing activities for the first six months of 2010 resulted from $494 million in net proceeds from an issuance of senior notes, partially offset by $201 million in distributions to repay in full the promissory note issued in connection with the repurchase and exchange of the general partner’s IDRs, a $154 million net repayment of the Partnership’s credit facilities and $92 million in quarterly distributions paid to limited partners and the general partner.

Capital Requirements

The pipeline, terminalling, and crude oil storage operations are capital intensive, requiring significant investment to maintain, upgrade and enhance existing operations and to meet environmental and operational regulations. The capital requirements have consisted, and are expected to continue to consist, primarily of:

•

Maintenance capital expenditures, such as those required to maintain equipment reliability, tankage and pipeline integrity and safety, and to address environmental regulations; and

•

Expansion capital expenditures to acquire and integrate complimentary assets to grow the business, to improve operational efficiencies or reduce costs and to expand existing and construct new facilities, such as projects that increase storage or throughput volume.

The following table summarizes maintenance and expansion capital expenditures, including net cash paid for acquisitions, for the periods presented:


	Six Months Ended June 30,
	2011		2010
	(in millions)

Maintenance	$	10	$	14
Expansion		158		62

Total	$	168	$	76

Maintenance capital expenditures for both periods presented include recurring expenditures such as pipeline integrity costs, pipeline relocations, repair and upgrade of field instrumentation, including measurement devices, repair and replacement of tank floors and roofs, upgrades of cathodic protection systems, crude trucks and related equipment, and the upgrade of pump stations.

Expansion capital expenditures for the six months ended June 30, 2011 were $158 million compared to $62 million for the first six months of 2010. Expansion capital for 2011 includes the acquisition of an 83.8 percent equity interest in Inland Corporation for $99 million, which owns a refined products pipeline system in Ohio, projects to expand the Partnership’s butane blending business, increased tankage at the Nederland facility and expansion of the Partnership’s refined products platform in the southwest United States. The Partnership expects to invest $100 to $150 million in expansion capital in 2011, excluding major acquisitions.

Additionally in the first quarter 2011, the Partnership announced the development of Project Mariner West as an expansion of Project Mariner to provide additional ethane takeaway capacity out of the Marcellus Shale. Also in the first quarter 2011, West Texas Gulf Pipe Line Company, a consolidated joint venture, announced the development of a project to expand takeaway capacity out of the Permian Basin. Spending on these projects is not included in the estimated $100 to $150 million described above.

In June 2011, the Partnership announced the agreement to acquire a refined products terminal, located in East Boston, Massachusetts from affiliates of ConocoPhillips for $56 million plus inventory. The terminal is the sole service provider of Logan International Airport under a long-term contract. The acquisition is expect to close within the third quarter 2011 and will be included within the Terminal Facilities segment as of the acquisition date.

In August 2011, the Partnership acquired a crude oil purchasing and marketing business from Texon L.P. (“Texon”) for $205 million plus the fair market value of its crude oil inventory. The purchase consists of a lease crude business and gathering assets in 16 states, primarily in the western United States. The current crude oil volume of the business is approximately 75,000 barrels per day at the wellhead. The transaction is subject to customary closing conditions and is expected to close in the third quarter 2011. The acquisition will be included within the Crude Oil Pipeline segment as of the acquisition date.

Expansion capital for the first six months of 2010 included construction projects to expand services at the Partnership’s refined products terminals, increase tankage at the Nederland facility and expand upon the Partnership’s refined products platform in the southwest United States.

We expect to fund capital expenditures, including any additional acquisitions, from cash provided by operations and, to the extent necessary, from the proceeds of borrowings under the credit facilities, other borrowings and the issuance of additional limited partnership units.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including interest rates and volatility in crude oil and refined products commodity prices. To manage such exposure, interest rates and inventory levels and expectations of future commodity prices are monitored when making decisions with respect to risk management.

Interest Rate Risk

We have interest-rate risk exposure for changes in interest rates relating to our outstanding borrowings. We manage our exposure to changing interest rates through the use of a combination of fixed- and variable-rate debt. At June 30, 2011, we had $365 million of variable-rate borrowings under our revolving credit facilities and promissory note to affiliates. The outstanding borrowings bear interest cost of LIBOR plus an applicable margin. An increase in short-term interest rates will have a negative impact on funds borrowed under variable debt arrangements. Our weighted average interest rate on our variable-rate borrowings was 1 percent at June 30, 2011. A one percent change in the weighted average rate would have impacted annual interest expense by approximately $4 million.

At June 30, 2011, we had $1.1 billion of fixed-rate senior notes, with a fair value of $1.2 billion. A hypothetical one-percent decrease in interest rates would increase the fair value of our fixed-rate borrowings at June 30, 2011 by approximately $196 million.

Commodity Market Risk

We are exposed to volatility in crude oil and refined products commodity prices. To manage such exposures, inventory levels and expectations of future commodity prices are monitored when making decisions with respect to risk management and inventory carried. Our policy is to purchase only commodity products for which we have a market and to structure our sales contracts so that price fluctuations for those products do not materially affect the margin we receive. We also seek to maintain a position that is substantially balanced within our various commodity purchase and sales activities. We may experience net unbalanced positions for short periods of time as a result of production, transportation and delivery variances, as well as logistical issues associated with inclement weather conditions. When unscheduled physical inventory builds or draws do occur, they are monitored and constantly managed to a balanced position over a reasonable period of time.

Pursuant to our risk management policy, derivative instruments may be used to hedge or reduce exposure to price risk associated with acquired inventory or forecasted physical transactions. These instruments are not used to speculate on crude oil or refined products prices, as these activities could expose us to significant losses. The physical contracts related to our crude oil and refined products businesses that qualify as derivatives have been designated as normal purchases and sales and are accounted for using traditional accrual accounting. We do not use derivative instruments to manage our exposure to prices related to crude oil purchase and sales activities. We do use derivative instruments as economic hedges against price changes related to our forecasted refined products purchase and sale activities. These derivative instruments are intended to have equal and opposite effects of the purchase and sale activities. At June 30, 2011, the fair market value of our open derivative positions was a net asset of $1 million on 3 million barrels of refined products. These derivative positions vary in length but do not extend beyond one year.

For additional information concerning our commodity market risk activities, see Note 13 to the Condensed Consolidated Financial Statements.

Forward-Looking Statements

Some of the information included in this quarterly report on Form 10-Q contains “forward-looking” statements and information relating to Sunoco Logistics Partners L.P. that is based on the current beliefs of our management as well as assumptions made by, and information currently available to, our management.

Forward-looking statements discuss expected future results based on current and pending business operations, and may be identified by words such as “may,” “anticipates,” “believes,” “expects,” “estimates,” “planned,” “scheduled” or similar phrases or expressions. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions, any or all of which may ultimately prove to be inaccurate. These statements are subject to numerous assumptions, uncertainties and risks that may cause future results to be materially different from the results projected, forecasted, estimated or budgeted, including, but not limited to the following:

•

Our ability to successfully consummate announced acquisitions or expansions and integrate them into its existing business operations;

•

Delays related to construction of, or work on, new or existing facilities and the issuance of applicable permits;

•

Changes in demand for, or supply of, crude oil and petroleum products that impact demand for our pipeline, terminalling and storage services;

•

Changes in the short-term and long-term demand for crude oil, refined petroleum products and natural gas liquids we buy and sell;

•

The loss of Sunoco as a customer or a significant reduction in its current level of throughput and storage with us;

•

An increase in the competition encountered by our terminals, pipelines and commodity acquisition and marketing operations;

•

Changes in the financial condition or operating results of joint ventures or other holdings in which we have an equity ownership interest;

•

Changes in the general economic conditions in the United States;

•

Changes in laws and regulations to which we are subject, including federal, state, and local tax, safety, environmental and employment laws;

•

Changes in regulations governing composition of the products that we transport, terminal and store;

•

Improvements in energy efficiency and technology resulting in reduced demand for petroleum products;

•

Our ability to manage growth and/or control costs;

•

The effect of changes in accounting principles and tax laws and interpretations of both;

•

Global and domestic economic repercussions, including disruptions in the crude oil and petroleum products markets, from terrorist activities, international hostilities and other events, and the government’s response thereto;

•

Changes in the level of operating expenses and hazards related to operating facilities (including equipment malfunction, explosions, fires, spills and the effects of severe weather conditions);

•

The occurrence of operational hazards or unforeseen interruptions for which we may not be adequately insured;

•

The age of, and changes in the reliability and efficiency of our operating facilities;

•

Changes in the expected level of capital, operating, or remediation spending related to environmental matters;

•

Changes in insurance markets resulting in increased costs and reductions in the level and types of coverage available;

•

Risks related to labor relations and workplace safety;

•

Non-performance by or disputes with major customers, suppliers or other business partners;

•

Changes in our tariff rates implemented by federal and/or state government regulators;

•

The amount of our debt, which could make us vulnerable to adverse general economic and industry conditions, limit our ability to borrow additional funds, place us at competitive disadvantages compared to competitors that have less debt, or have other adverse consequences;

•

Restrictive covenants in our credit agreements;

•

Changes in our or Sunoco’s credit ratings, as assigned by ratings agencies;

•

The condition of the debt capital markets and equity capital markets in the United States, and our ability to raise capital in a cost-effective way;

•

Performance of financial institutions impacting our liquidity, including those supporting our credit facilities;

•

The effectiveness of our risk management activities, including the use of derivative financial instruments to hedge commodity risks;

•

Changes in interest rates on our outstanding debt, which could increase the costs of borrowing; and

•

The costs and effects of legal and administrative claims and proceedings against us or any entity in which we have an ownership interest, and changes in the status of, or the initiation of new litigation, claims or proceedings, to which we, or any entity in which we have an ownership interest, are a party.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. We undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events.

Item 4.

Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the Partnership reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Partnership reports under the Exchange Act is accumulated and communicated to management, including the Chairman and Chief Executive Officer and Vice President, Chief Financial Officer of Sunoco Partners LLC (the Partnership’s general partner), as appropriate, to allow timely decisions regarding required disclosure.

As of June 30, 2011, the Partnership carried out an evaluation, under the supervision and with the participation of the management of the general partner (including the Chairman and Chief Executive Officer and the Vice President, Chief Financial Officer), of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the general partner’s Chairman and Chief Executive Officer, and its Vice President, Chief Financial Officer, concluded that the Partnership’s disclosure controls and procedures are effective.

No change in the Partnership’s internal control over financial reporting has occurred during the fiscal quarter ended June 30, 2011 that has materially affected, or that is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

There are certain legal and administrative proceedings arising prior to the February 2002 initial public offering (“IPO”) pending against our Sunoco-affiliated predecessors and us (as successor to certain liabilities of those predecessors). Although the ultimate outcome of these proceedings cannot be ascertained at this time, it is reasonably possible that some of them may be resolved unfavorably. Sunoco has agreed to indemnify the Partnership for 100 percent of all losses from environmental liabilities related to the transferred assets arising prior to, and asserted within 21 years of February 8, 2002. There is no monetary cap on this indemnification from Sunoco. Sunoco’s share of liability for claims asserted thereafter will decrease by 10 percent each year through the thirtieth year following the February 8, 2002 date. Any remediation liabilities not covered by this indemnity will be our responsibility. In addition, Sunoco is obligated to indemnify us under certain other agreements executed after the IPO.

Additionally, we have received notices of violations and potential fines under various federal, state and local provisions relating to the discharge of materials into the environment or protection of the environment. While we believe that even if any one or more of the environmental proceedings were decided against us, it would not be material to our financial position, we are required to report environmental proceedings unless we reasonably believe that such proceedings will result in monetary sanctions of less than $0.1 million.

There are certain other pending legal proceedings related to matters arising after the IPO that are not indemnified by Sunoco. Our management believes that any liabilities that may arise from these legal proceedings will not be material to our financial position at June 30, 2011.

Item 1A.

Risk Factors

There have been no material changes from the risk factors described previously in Part I, Item IA of the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 23, 2011.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Reserved

Item 5.

Other Information

None.

Item 6.

Exhibits


3.1:		Amendment No. 1 to Third Amended and Restated Partnership Agreement of Sunoco Logistics Partners L.P. dated as of July 1, 2011 (incorporated by reference to Exhibit 3.2 of Form 8-K, file No. 1-31219, filed July 5, 2011)

3.2:		Third Amended and Restated Limited Liability Company Agreement of Sunoco Partners LLC dated as of July 1, 2011 (incorporated by reference to Exhibit 3.2 of Form 8-K, file No. 1-31219, filed July 5, 2011)

10.1:		Contribution Agreement, dated as of June 29, 2011, to be effective July 1, 2011, by and among Sunoco, Inc. (R&M), Sunoco Logistics Partners L.P., and certain subsidiaries and affiliates of Sunoco Logistics Partners L.P.

12.1:		Statement of Computation of Ratio of Earnings to Fixed Charges

31.1:		Chief Executive Officer Certification of Periodic Report Pursuant to Exchange Act Rule 13a-14(a)

31.2:		Chief Financial Officer Certification of Periodic Report Pursuant to Exchange Act Rule 13a-14(a)

32.1:		Chief Executive Officer Certification of Periodic Report Pursuant to Exchange Act Rule 13a-14(b) and U.S.C. §1350

32.2:		Chief Financial Officer Certification of Periodic Report Pursuant to Exchange Act Rule 13a-14(b) and U.S.C. §1350

We are pleased to furnish this Form 10-Q to unitholders who request it by writing to:

Sunoco Logistics Partners L.P.

Investor Relations

1818 Market Street

Suite 1500

Philadelphia, PA 19103

or through our website at www.sunocologistics.com.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Sunoco Logistics Partners L.P.

By:		/S/ BRIAN P. MACDONALD
		Brian P. MacDonald
		Vice President, Chief Financial Officer

Date: August 4, 2011

Contribution Agreement

Exhibit 10.1

CONTRIBUTION AGREEMENT

by and among

SUNOCO, INC. (R&M)

SUNOCO PARTNERS LLC

SUNOCO LOGISTICS PARTNERS L.P.

SUNOCO LOGISTICS PARTNERS GP LLC

SUNOCO LOGISTICS PARTNERS OPERATIONS L.P.

SUNOCO LOGISTICS PARTNERS OPERATIONS GP LLC

AND

SUNOCO PARTNERS MARKETING & TERMINALS L.P.

Effective as of July 1, 2011

TABLE OF CONTENTS


ARTICLE 1
DEFINITIONS AND INTERPRETATIONS			2
	Section 1.1	Definitions	2
	Section 1.2	Interpretations	2
ARTICLE 2
BASIC TRANSACTIONS			2
	Section 2.1	Series of Capital Contributions	2
	Section 2.2	Contributed Assets	3
	Section 2.3	Excluded Assets	5
	Section 2.4	Assumed Liabilities	6
	Section 2.5	Excluded Liabilities	7
	Section 2.6	No Assignment If Breach	8
	Section 2.7	The Closing	9
	Section 2.8	Deliveries at the Closing	9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION			10
	Section 3.1	Representations and Warranties Concerning the Contributor	10
	Section 3.2	Representations and Warranties Concerning the Acquirer	11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES CONCERNING THE CONTRIBUTED ASSETS			12
	Section 4.1	Representations and Warranties Concerning the Contributed Assets	12
ARTICLE 5
OTHER COVENANTS			15
	Section 5.1	Further Assurances	15
	Section 5.2	Retention of and Access to Books and Records	15
	Section 5.3	Access to Assets	16
	Section 5.4	Employee Matters	16
	Section 5.5	Environmental Matters	18
	Section 5.6	Foreign Trade Zone	22
	Section 5.7	Termination of Other Agreements	22
	Section 5.8	Contributed Meters	22
ARTICLE 6
REMEDIES FOR BREACHES OF AGREEMENT			23
	Section 6.1	Survival of Representations and Warranties	23
	Section 6.2	Indemnification Provisions for Benefit of the Acquirer	23
	Section 6.3	Indemnification Provisions for Benefit of the Contributor	24
	Section 6.4	Matters Involving Third Parties	26
	Section 6.5	Procedures	26
ARTICLE 7
TAX MATTERS			27
	Section 7.1	Tax Preparation	27
	Section 7.2	Access to Information	28
	Section 7.3	Transfer Taxes	28


	Section 7.4	Assistance and Cooperation	28
	Section 7.5	Tax Indemnity	29
	Section 7.6	Tax Indemnity Claims	29
	Section 7.7	Tax Refunds	30
	Section 7.8	Certification of Non-Foreign Status	30
ARTICLE 8
MISCELLANEOUS			31
	Section 8.1	Press Releases and Confidentiality	31
	Section 8.2	No Third Party Beneficiaries	31
	Section 8.3	Succession and Assignment	31
	Section 8.4	Counterparts	31
	Section 8.5	Notices	32
	Section 8.6	Governing Law	32
	Section 8.7	Entire Agreement and Amendments	33
	Section 8.8	Severability	33
	Section 8.9	Transaction Expenses	33
	Section 8.10	Waiver of Bulk Sales Law Compliance	33
	Section 8.11	Arbitration	33

SCHEDULES


Schedule 1.1		Definitions and Interpretations
Schedule 2.2.1		Contributed Assets – Tangible Assets
Schedule 2.2.7		Contributed Assets – Miscellaneous Assets
Schedule 2.3.2		Excluded Assets – Tangible Assets
Schedule 2.3.3		Excluded Assets – Claims
Schedule 2.4.1		Assumed Liabilities – Guarantees
Schedule 3.1.2		Authorization of Transaction – Contributor
Schedule 3.2.2		Authorization of Transaction – Acquirer
Schedule 4.1.2		Licenses
Schedule 4.1.4		Environmental Matters
Schedule 4.1.5		Litigation
Schedule 4.1.6(A), (B) and (C)		Employee Matters
Schedule 5.4.1		Current Employees
Schedule 5.4.5		Contributor Benefit Plans
Schedule 5.5		Refinery Site-Wide Licenses

iii

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (the “Agreement”) is made and entered into as of this 29^th day of June, 2011 to be effective as of July 1, 2011 (the “Effective Date”) by and between

•

Sunoco, Inc. (R&M), a corporation organized and existing under the laws of Pennsylvania (the “Contributor”);

•

Sunoco Partners LLC, a Pennsylvania limited liability company (“SPLLC”);

•

Sunoco Logistics Partners L.P., a limited partnership organized and existing under the laws of Delaware (“Sunoco Logistics”);

•

Sunoco Logistics Partners GP LLC, a limited liability company organized and existing under the laws of Delaware (“SLPGPLLC”);

•

Sunoco Logistics Partners Operations L.P., a limited partnership organized and existing under the laws of Delaware (“SLPOLP”);

•

Sunoco Logistics Partners Operations GP LLC, a limited liability company organized and existing under the laws of Delaware (“SLPOGP”);

•

Sunoco Partners Marketing & Terminals L.P., a limited partnership organized and existing under the laws of Texas (“SPMT” and together with SPLLC Sunoco Logistics, SLPGPLLC, SLPOLP and SLPOGP, the “Acquirer”).

RECITALS

1. The Contributor is the owner of the Eagle Point refinery and certain tanks, terminal and logistics and other related assets located near Westville, New Jersey (the “Refinery Complex”).

2. The Contributor wishes to contribute and SPMT wishes to receive, as a result of a series of related inter-company contributions more fully described herein, certain tanks, terminal and logistics assets and other related assets located at the Refinery Complex, all as more particularly described in Section 2.2, on the terms and conditions set forth in this Agreement.

3. In connection with the contribution of the Contributed Assets, SPMT and the Contributor (or its Affiliates) will enter into (i) a terminaling and storage agreement (the “Tank Farm Agreement”) setting forth the rights and obligations of the parties thereto with respect to the receipt, storage, measurement and delivery of refined products and VGO at the Tank Farm and over the Docks; (ii) an amended and restated lease agreement (the “Ground Lease”) amending and restating the 2004 Lease and Access Agreement, which provides for the lease of the Premises by SPMT from the Contributor, to include the additional lease by SPMT from the Contributor of the Leased Real Property and provide SPMT with a right to purchase the Premises and the Leased Real Property; (iii) access agreements (the “Access Agreements”) setting forth the relative rights of the parties thereto with respect to access by such parties to certain assets

owned or leased by the other party at the Refinery Complex; (iv) an agreement setting forth the rights and obligations of the parties thereto with respect to certain services to be performed in connection with a portion of the Contributed Assets and the Cogeneration Plant (the “Utility Services Agreement”); (v) an agreement setting forth the terms and conditions pursuant to which the Contributor agrees to perform certain services for SPMT to facilitate the transfer and contribution of the Contributed Assets to SPMT and SPMT agrees to perform certain services for the Contributor at or related to the Refinery Complex (excluding the Cogeneration Plant) (the “Site Services Agreement”); (vi) a temporary support agreement (the “Temporary Support Agreement”) setting forth the terms and conditions pursuant to which SPMT agrees to perform, on a temporary basis, certain services for the Cogeneration Plant; and (vii) an agreement setting forth the relative rights of the parties thereto with respect to certain electrical interconnection equipment at the Refinery Complex (the “Tenant-in-Common Agreement”).

NOW, THEREFORE, in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:

ARTICLE 1

DEFINITIONS AND INTERPRETATIONS

Section 1.1 Definitions. Unless the context otherwise requires, the capitalized terms used in this Agreement shall have the meanings set forth in Section 1.1 of Schedule 1.1.

Section 1.2 Interpretations. Unless expressly provided to the contrary in this Agreement, this Agreement shall be interpreted in accordance with the provisions set forth in Section 1.2 of Schedule 1.1.

ARTICLE 2

BASIC TRANSACTIONS

Section 2.1 Series of Capital Contributions. Subject to the terms and conditions contained in this Agreement, at the Closing, the contributions described in this Section 2.1 shall be consummated and effected in the order and manner described herein.

2.1.1 Contributor Contribution. The Contributor shall grant, contribute, convey, assign, transfer and deliver all of its right, title and interest in and to the Contributed Assets (collectively, “Contribute”) to SPLLC, and SPLLC shall accept the Contributed Assets as a contribution to its capital and shall assume and become liable for the Assumed Liabilities and in exchange for which SPLLC shall issue to the Contributor additional membership interests in SPLLC with a fair market value on the date of Closing equal to One Hundred Million Dollars ($100,000,000.00) (the “SPLLC Membership Interests”).

2.1.2 SPLLC Contribution. SPLLC shall Contribute the Contributed Assets and the Assumed Liabilities to Sunoco Logistics and Sunoco Logistics shall accept the Contributed Assets as a contribution to its capital and shall assume and become liable for the Assumed Liabilities and in exchange for which Sunoco Logistics shall issue and deliver to SPLLC Deferred Distribution Units with a fair market value on the date of Closing equal to

Ninety-Eight Million Dollars ($98,000,000.00) and an additional general partner interest with a fair market value on the date of Closing equal to Two Million Dollars ($2,000,000.00). It is acknowledged and agreed to that 2% of the this contribution by SPLLC is in satisfaction of its obligations under Section 5.2(b) of the Third Amended and Restated Agreement of Limited Partnership for Sunoco Logistics, as amended, and results in a continuation of SPLLC’s 2% general partner interest in Sunoco Logistics.

2.1.3 Sunoco Logistics Contribution. Sunoco Logistics shall Contribute the Contributed Assets and the Assumed Liabilities to SLPOLP (an undivided 0.01% interest of which shall be contributed on behalf of SLPGPLLC), and SLPOLP shall accept the Contributed Assets as a contribution to its capital and shall assume and become liable for the Assumed Liabilities in exchange for a continuation of the respective interests in SLPOLP held by Sunoco Logistics and SLPGPLLC (the “SLPOLP Partnership Interests”).

2.1.4 SLPOLP Contribution. SLPOLP shall Contribute the Contributed Assets and the Assumed Liabilities to SPMT (an undivided 0.01% interest of which shall be contributed on behalf of SLPOGP), and SPMT shall accept the Contributed Assets as a contribution to its capital and shall assume and become liable for the Assumed Liabilities in exchange for a continuation of the respective interests in SPMT held by SLPOLP and SLPOGP (the “SPMT Partnership Interests”).

Section 2.2 Contributed Assets. With respect to each Contribution described in Section 2.1, the following described properties and assets, except to the extent that such properties and assets are Excluded Assets shall be contributed, transferred, assigned and delivered as part of the Contribution (such assets collectively, the “Contributed Assets”):

2.2.1 Tangible Assets. The equipment, tanks, spheres, bullets, pumps, pipelines (including river water intake structures, the 16 inch EPRF-Wood Pipeline and the 8 inch natural gas pipeline that runs from Woodbury terminal to the Refinery Complex (the “Natural Gas Line”)), and fixtures, Related to the Tank Farm, the Wastewater Treatment Plant, and the Power & Boiler Houses, including those items identified in Schedule 2.2.1, and the buildings (including the main office/administrative building, firehouse and river water pump house), rail lines and rail system located on the Leased Real Property (the “Equipment & Facilities”), but excluding (i) power lines, pipelines, telephone lines and other improvements and fixtures owned by public utilities furnishing utilities to the Leased Real Property and the Refinery Complex and (ii) rail lines, pipelines and other improvements and fixtures owned by Third Parties and located on existing easements for such purpose which encumber the Leased Real Property and the Refinery Complex, including any such improvements and fixtures owned by PSE&G and Sunoco Power Generation, LLC.

2.2.2 Licenses. To the extent transferable or assignable, all of the licenses, permits (including Environmental Permits) and consents in favor of the Contributor from any Governmental Authority to the extent applicable to the Contributed Assets and which are necessary to and used in connection with the ownership of the Contributed Assets, including those identified on Schedule 4.1.2 (collectively, the “Licenses”).

2.2.3 Books & Records. All of the records and files Related to the operation of the Contributed Assets, including, plans, drawings, instruction manuals, employment records Related to Continuing Employees and similar items, including all personnel files and, with the consent and release of the affected employees (to the extent legally required), employment related medical records Related to the Continuing Employees, except to the extent prohibited by applicable Law (provided that copies, but not originals, of said personnel files and employment related medical records shall be included in the Books and Records), operating and technical data and records, whether computerized or hard copy, Tax files, books, records, Tax returns and Tax work papers, supplier lists, reference catalogs, surveys, engineering statements, maintenance records and studies, environmental records, environmental reporting information, emission data, testing and sampling data and procedures, data related to the pipelines and tanks associated with construction, inspection and operating records, any and all information necessary to meet compliance obligations with respect to Environmental Laws and any other applicable Laws, in each case Related to the Contributed Assets and existing as of the Effective Date (the “Books and Records”).

2.2.4 Warranties. All of the Contributor’s right, title and interest, if any, in and to unexpired warranties and guarantees from Third Parties to the extent Related to the Contributed Assets and to the extent such warranties or guarantees are transferable to the Acquirer, including warranties set forth in any equipment purchase agreement, construction agreement, lease agreement, consulting agreement or agreement for architectural or engineering services, it being understood that nothing in this paragraph shall be construed as a representation by the Contributor that any such warranty remains in effect or is enforceable.

2.2.5 Trade Name. A royalty-free, non-exclusive license to use the name “Eagle Point” in connection with the Contributed Assets.

2.2.6 Third Party Claims. All claims, demands, causes of action, choses in action, rights of recovery, rights of set-off, rights to refunds and similar rights against Third Parties (including indemnification and contribution) to the extent Related to (i) the ownership or operation of the Contributed Assets after the Effective Date, (ii) any damage to the Contributed Assets not repaired prior to the Effective Date, or (iii) the Assumed Liabilities, or any portion thereof, if any, including any claims for refunds, prepayments, offsets, recoupment, condemnation awards, judgments and the like, whether received as payment or credit against future Liabilities, in each case to the extent Related to the matters covered by clauses (i), (ii) or (iii) above.

2.2.7 Miscellaneous Assets. All those miscellaneous assets, including any Contracts that are assignable or transferable, identified by category on Schedule 2.2.7, and any assets necessary in order for SPMT to provide services under the Utility Services Agreement and the Site Services Agreement, and all of Contributor’s right, title and interest as a tenant-in-common with respect to certain electrical interconnection equipment at the Refinery Complex as more particularly described in the Tenant-in-Common Agreement. For purposes of this Agreement, any Contracts identified on Schedule 2.2.7 are referred to herein as the “Assigned Contracts”.

Section 2.3 Excluded Assets. The assets to be contributed by the Contributor shall include only the Contributed Assets. For the sake of clarity, the Contributor and the Acquirer agree that the Contributed Assets shall not include any of the following specifically enumerated assets, rights and interests (collectively, the “Excluded Assets”):

2.3.1 All of the equipment, pumps, tanks, towers, transformers, and switch gear Related to the Cogeneration Plant that are owned by Sunoco Power Generation, LLC or PSE&G, including the high voltage lines, breakers, relaying and metering equipment located at the area commonly referred to as the “substation,” “breaker station,” or “switchyard,” and the two pumps located at the river water pump house (which pump house is a Contributed Asset).

2.3.2 All of the processing units, all process unit piping and equipment, all raw materials, intermediates, products, byproducts and wastes contained in the process units and process unit piping and equipment, and all wastes generated from the Contributed Assets or Excluded Assets that is stored in containers at or prior to the Closing, located at the Refinery Complex, and any other assets and properties of the Contributor that are located on the Leased Real Property and described on Schedule 2.3.2.

2.3.3 Claims, demands, causes of action, choses in action, rights of recovery, rights of set-off, rights to refunds, Creditable Emission Reductions and similar rights in favor of the Contributor or any of their Affiliates of any kind to the extent Relating to (i) the Excluded Assets or the Excluded Liabilities or identified on Schedule 2.3.3 or (ii) the ownership of the Contributed Assets prior to the Effective Date (other than any damage to the Contributed Assets not repaired prior to the Effective Date).

2.3.4 Subject to the license referred to in Section 2.2.5, the rights of the Contributor to the name “Eagle Point Refinery” or any related or similar trade names, trademarks, service marks, corporate names or logos, or any part, derivative or combination thereof.

2.3.5 All cash on hand and cash equivalents, including bank accounts, money market funds and temporary cash investments.

2.3.6 All of the Contributor’s and any of its Affiliates’ right, title and interest in and to all accounts receivable and all notes, bonds, and other evidences of indebtedness of and rights to receive payments arising out of sales, services, rentals and other activities occurring in connection with and attributable to the ownership or operation of the Contributed Assets prior to the Closing and the security arrangements, if any, Related thereto, including any rights with respect to any Third Party collection procedures or any other actions or proceedings in connection therewith.

2.3.7 Any and all of the Contributor’s and its Affiliates’ rights arising under any outstanding receivable or payable between the Contributor, on the one hand, and any of its Affiliates, on the other hand.

2.3.8 Any and all accounting and Tax files, books, records, Tax returns and Tax work papers not Related to the Contributed Assets.

2.3.9 All assets Related to any pension, profit sharing, stock bonus, stock option, thrift or other retirement plan, medical, hospitalization, dental, life, disability, vacation or other insurance or benefit plan, employee stock ownership plan, deferred compensation, stock ownership, stock purchase, bonus, benefit or other incentive plan, severance plan or other similar plan relating to the Contributor, its Affiliates or their respective employees.

2.3.10 All rights, titles, claims and interests of the Contributor or any of its Affiliates (i) under any policy or agreement of insurance, (ii) under any bond, (iii) to or under any condemnation damages or awards in regard to any taking or (iv) to any insurance or bond proceeds.

2.3.11 All rights or claims by the Contributor or any of its Affiliates to (a) any Tax refund relating to the period prior to the Effective Date or (b) to any refund, claim for drawback or other claims relating to imports, exports, customs or the Subzone relating to the period prior to the Effective Date.

2.3.12 Any equity interest held by the Contributor or its Affiliates in any Person.

2.3.13 Any hydrocarbon inventory located at the Refinery Complex, including linefill.

2.3.14 Any Contract of the Contributor or its Affiliates not listed on Schedule 2.2.7.

Subject to the provisions of the Site Services Agreement, for a period of two (2) years after the Effective Date, the Contributor may remove at any time or from time to time any and all of the Excluded Assets from the Leased Real Property (at the Contributor’s expense, but without charge by the Acquirer for storage), provided that the Contributor shall do so in a manner that does not unduly or unnecessarily disrupt the Acquirer’s normal business activities. Notwithstanding anything to the contrary in Article 6, the Contributor shall indemnify, defend and hold harmless the Acquirer and its Affiliates from and against all Adverse Consequences to the extent incurred as a result of the actions of the Contributor or their Representatives in removing such Excluded Assets, in each case other than to the extent resulting from any gross negligence or willful misconduct of the Acquirer, any Affiliate of the Acquirer or any Representatives of the Acquirer.

Section 2.4 Assumed Liabilities. Except as provided in Section 2.5 and the other terms and conditions set forth in this Agreement or any Ancillary Agreement, the Acquirer shall assume and pay, discharge and perform as and when due, the following Liabilities of the Contributor or its Affiliates (the “Assumed Liabilities”):

2.4.1 Except for any Liabilities of the Contributor that arise under this Agreement or any Ancillary Agreement, all Liabilities that accrue, are caused by, arise out of, are associated with, are in respect of, or are incurred, in each case, at any time after the Closing, in connection with the ownership or operation of the Contributed Assets or other activities occurring in connection with and attributable to the ownership or operation of the Contributed Assets from and after the Closing, including all obligations of the Contributor which arise or

accrue under the Assigned Contracts after the Closing and any other Liability of the Contributor or any of its Affiliates (including those related to letters of credit and performance bonds) that is in the nature of a guaranty of any Assigned Contract and that is specifically disclosed on Schedule 2.4.1.

2.4.2 All Liabilities for which the Acquirer is liable pursuant to Articles 5 and 7 hereof.

Section 2.5 Excluded Liabilities. The Parties agree that Liabilities of the Contributor or its Affiliates that are not identified in Section 2.4 as Assumed Liabilities are not part of the Assumed Liabilities, and the Acquirer shall not assume or become obligated with respect to any other Liability of the Contributor or any of its Affiliates, including the Liabilities existing as of the Effective Date whether or not described specifically in this Section 2.5 (collectively, the “Excluded Liabilities”), all of which shall remain the sole responsibility of, and be discharged and performed as and when due by, the Contributor or its Affiliates. The Acquirer shall not assume nor have Liability with respect to any Excluded Liabilities, including any of the following Liabilities of the Contributor or its Affiliates as the same may exist at or after the Closing:

2.5.1 Liabilities in respect of, associated with or arising from the Excluded Assets and the ownership, operation and conduct of any business by the Contributor or its Affiliates or their respective predecessors and successors in interest Relating to the ownership, operation or use of the Excluded Assets.

2.5.2 Liabilities to Third Parties (including employees) for injury, death or damage to person or property of a Third Party occurring at or prior to the Closing to the extent arising out of the ownership or operation of the Contributed Assets or other activities occurring in connection with and attributable to the ownership or operation of the Contributed Assets prior to the Closing; provided, however, that Excluded Liabilities under this Section 2.5.2 shall not in any event include any Liabilities resulting from negligence or willful misconduct of the Acquirer, any of its respective Affiliates or any of their respective Representatives in connection with any inspection of the Contributed Assets at or prior to the Closing.

2.5.3 Excluded Environmental Liabilities:

2.5.3.1 All Liabilities under or pursuant to ISRA arising from or related to the assignment of assets under this Agreement and all transactions involving the Refinery Complex that occurred prior to the Closing, including ISRA Case Nos. E84158, E20030519, E20030520, and E20030521;

2.5.3.2 All Liabilities arising from or related to the NJPDES DSW/DGW Permit issued June 30, 1989, Permit No. NJ0005401 for closure and post-closure care of the hazardous waste land treatment unit at the Refinery Complex;

2.5.3.3 All Liabilities arising from or related to Contributor’s failure or alleged failure at or prior to the Closing to comply with Environmental Laws applicable to the Contributed Assets, including the matters disclosed or required to be disclosed on Schedule 4.1.4;

2.5.3.4 All Liabilities arising from or related to the CAA Consent Decree attributable to: (a) the ownership or operation of the Refinery Complex at or prior to the Closing, (b) the ownership or operation of the Excluded Assets from and after the Closing, (c) the notice or transfer obligations of Contributor pursuant to Paragraphs 6 or 7 of the CAA Consent Decree, or (d) the termination of the CAA Consent Decree; and

2.5.3.5 All Liabilities arising from or related to the presence of asbestos on Boilers 1, 2, 3 and 4 and Tanks 62 and 63, including the cost of any remediation or removal of such asbestos that may be necessary.

2.5.4 All Liabilities for which the Contributor and/or its Affiliates are responsible pursuant to Article 7 hereof and any Tax that may be imposed on the ownership, operation or use of the Contributed Assets on or prior to the Closing.

2.5.5 Any fines, penalties or costs imposed by a Governmental Authority against the Contributor or its Affiliates, the Contributed Assets or any activities occurring in connection with and attributable to the ownership or operation of the Contributed Assets resulting from the violation of any statute, ordinance, rule or regulation promulgated by a Governmental Authority and attributable to actions or omissions at or prior to the Closing with respect to the Contributed Assets or any activities occurring in connection with and attributable to the ownership or operation of the Contributed Assets at or prior to the Closing.

2.5.6 Liabilities which accrue at or prior to the Closing pursuant to the Assigned Contracts and Licenses.

2.5.7 All Liabilities for which the Contributor and/or its Affiliates are responsible pursuant to Article 5 hereof.

Section 2.6 No Assignment If Breach. Notwithstanding anything to the contrary set forth in this Agreement, this Agreement shall not constitute an agreement of the Contributor to contribute or assign any Contributed Asset to the Acquirer, or cause the Acquirer to assume any Assumed Liability, if the attempted assignment or assumption of the same, as a result of the absence of the consent or authorization of a Third Party or failure of a right of first refusal or first offer notice period to expire, would constitute a breach or Default under any agreement, Encumbrance, or commitment, would violate any Law or would in any way adversely affect the rights, or increase the obligations, of the Acquirer or the Contributor with respect thereto. If any such consent or authorization is not obtained, or if an attempted assignment or assumption would be ineffective or would adversely affect the rights or increase the obligations of the Acquirer or the Contributor, with respect to any such agreement, Encumbrance, or commitment, so that the Acquirer would not, in fact, receive all such rights, or assume the obligations, of the Contributor with respect thereto as they exist prior to such attempted assignment or assumption, then the Contributor and the Acquirer shall enter into such reasonable cooperative arrangements as may be reasonably acceptable to both the Acquirer and the Contributor (including sublease, agency, management, indemnity or payment arrangements and enforcement at the cost and for the benefit of the Acquirer of any and all rights of the Contributor against an involved Third Party) to provide for or impose upon the Acquirer the benefits of such Contributed Assets or the obligations of such Assumed Liability, as the case may be. If the Acquirer and the Contributor

cannot agree on any such arrangement, or any such arrangement would not be reasonably practicable, to provide the Acquirer with materially all the benefits of such Contributed Asset or materially all the obligations of such Assumed Liability, as the case may be, then such Contributed Asset or Assumed Liability shall be excluded from the transactions contemplated under this Agreement and shall be deemed to be an Excluded Asset or an Excluded Liability, as the case may be, and the Parties hereto shall negotiate in good faith an equitable adjustment in the Purchase Price, or resolve any disagreement respecting such adjustment in accordance with the procedures of Section 8.11.

Section 2.7 The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 1818 Market Street, Philadelphia, Pennsylvania, commencing at 10:00 a.m. local time on the Effective Date. Title to, ownership of, control over and risk of loss of the Contributed Assets shall pass to the Acquirer effective 12:01 a.m., local time on the Effective Date.

Section 2.8 Deliveries at the Closing. At the Closing:

2.8.1 SPLLC shall issue the SPLLC Membership Interests to the Contributor in accordance with Section 2.1.1 of this Agreement, and shall amend the SPLLC Limited Liability Company Agreement to reflect the issuance of the SPLLC Membership Interests to the Contributor;

2.8.2 Sunoco Logistics shall issue the Deferred Distribution Units to SPLLC in accordance with Section 2.1.2 of this Agreement and shall deliver to SPLLC certificates for such Deferred Distribution Units;

2.8.3 SLPOLP shall issue the SLPOLP Partnership Interests to Sunoco Logistics and SLPGPLLC in accordance with Section 2.1.3 of this Agreement;

2.8.4 SPMT shall issue the SPMT Partnership Interests to SLPOLP and SLPOGP in accordance with Section 2.1.4 of this Agreement;

2.8.5 the Contributor shall deliver to the Acquirer the certificate required by Section 7.8;

2.8.6 the Contributor shall deliver to the Acquirer all approvals and actions of, filings with and notices to any Governmental Authority necessary to permit the Contributor to perform its obligations under this Agreement including, if required, ISRA approval, and all required Third Party consents or novations (or, in lieu thereof, waivers), but only to the extent the Contributor has obtained (i) such approvals or actions of such Governmental Authorities or (ii) such consents, novations or waivers of such Third Parties;

2.8.7 the respective parties to the Ancillary Agreements shall execute and deliver the Ancillary Agreements; and

2.8.8 the Contributor and the Acquirer shall deliver any other documents, instruments or agreements that are reasonably necessary or appropriate to consummate the transactions contemplated hereby.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES CONCERNING

THE TRANSACTION

Section 3.1 Representations and Warranties Concerning the Contributor. Except as set forth in a correspondingly numbered Schedule delivered to the Acquirer, the Contributor represents and warrants to the Acquirer as of the date of this Agreement as follows:

3.1.1 Organization of the Contributor. The Contributor is a corporation duly organized and validly existing, under the Laws of the Commonwealth of Pennsylvania. The Contributor is duly authorized to conduct business and is in good standing under the Laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a Material Adverse Effect. The Contributor has the requisite corporate power and authority necessary to carry on its business and to own and use the Contributed Assets owned or operated by it.

3.1.2 Authorization of Transaction. The Contributor has full corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is a party and to perform its obligations hereunder and thereunder. This Agreement and each Ancillary Agreement to which the Contributor is a party constitutes its valid and legally binding obligation, enforceable against it in accordance with its terms and conditions, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors’ rights generally and by legal and equitable limitations on the availability of specific remedies. The Contributor need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority or any Third Party in order to consummate the transactions contemplated by this Agreement except for the prior approval of the applicable Governmental Authorities and Third Parties listed in Schedule 3.1.2 or previously obtained by the Parties in connection with the transactions contemplated hereby.

3.1.3 Noncontravention. Except for the prior approval of the applicable Governmental Authorities and Third Parties listed in Schedule 3.1.2 or previously obtained by the Parties in connection with the transactions contemplated hereby, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated under this Agreement, will violate any Law to which the Contributor is subject or to which any Contributed Asset is subject, any Licenses or any provision of the Organizational Documents of the Contributor, or result in a breach of, constitute a Default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or trigger any rights to payment or other compensation under any agreement, Contract, lease, License, instrument, or other arrangement to which the Contributor is a party or by which it is bound that is included in the Contributed Assets or that could prevent or materially delay the consummation of the transactions contemplated by this Agreement.

3.1.4 Brokers’ Fees. The Contributor has no any Liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Acquirer or any Affiliate of the Acquirer will be obligated.

3.1.5 Bankruptcy. There are no bankruptcy, reorganization or rearrangement proceedings under any bankruptcy, insolvency, reorganization, moratorium or other similar laws with respect to creditors pending against, being contemplated by, or, to the knowledge of the Contributor, threatened, against the Contributor.

Section 3.2 Representations and Warranties Concerning the Acquirer. Except as set forth in a correspondingly numbered Schedule delivered to the Contributor, each of SPMT, Sunoco Logistics, SPLLC, SLPGPLLC, SLPOLP, and SLPOGP individually (the “Acquirer Representing Party”), represents and warrants to the Contributor as of the date of this Agreement as follows:

3.2.1 Organization of the Acquirer. The Acquirer Representing Party is duly organized and validly existing under the Laws of the state in which it was formed or incorporated. The Acquirer Representing Party is duly authorized to conduct business and is in good standing under the Laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a Material Adverse Effect. The Acquirer Representing Party has the requisite power and authority that is necessary to carry on the business in which it is engaged and to own and use the properties owned and used by it.

3.2.2 Authorization of Transaction. The Acquirer Representing Party has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Acquirer Representing Party, enforceable in accordance with its terms and conditions, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect that affect creditors’ rights generally and by legal and equitable limitations on the availability of specific remedies. The Acquirer Representing Party need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority or any Third Party in order to consummate the transactions contemplated by this Agreement, except for the prior approval of the applicable Governmental Authorities and Third Parties listed in Schedule 3.2.2 or previously obtained by the Parties in connection with the transaction contemplated hereby.

3.2.3 Noncontravention. Except for the prior approval of the applicable Governmental Authorities and Third Parties listed in Schedule 3.2.2 or previously obtained by the Parties in connection with the transactions contemplated hereby, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated under this Agreement, will violate any Law to which the Acquirer Representing Party is subject, any of its licenses or any provision of the its Organizational Documents or conflict with, result in a breach of, constitute a Default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or trigger any rights to payment or other compensation, or require any notice, approval or consent under any agreement, Contract, lease, license, instrument, or other arrangement to which it is a party or by which it is bound that could prevent or materially delay the consummation of the transactions contemplated under this Agreement.

3.2.4 Brokers’ Fees. The Acquirer Representing Party has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the

transactions contemplated by this Agreement for which the Contributor or any Affiliate of the Contributor will be obligated.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

CONCERNING THE CONTRIBUTED ASSETS

Section 4.1 Representations and Warranties Concerning the Contributed Assets. Except as set forth in a correspondingly numbered Schedule delivered to the Acquirer, the Contributor represents and warrants to the Acquirer as of the Effective Date as follows:

4.1.1 Ownership of the Contributed Assets. The Contributor has good and marketable title to all of the Contributed Assets and such title to the Contributed Assets will be transferred at the Closing to SPLLC free and clear of all Encumbrances.

4.1.2 Licenses. Schedule 4.1.2 lists each License that is material to the Contributed Assets. The Contributor possesses all material Licenses necessary for its operation of the Contributed Assets at the location and in the manner presently operated.

4.1.3 Compliance with Law. Except where the failure to be in compliance would not have a Material Adverse Effect, the Contributor is and has been in compliance with all, and to the Knowledge of Contributor is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of any, applicable Laws and Licenses related to the ownership and operation of the Contributed Assets.

4.1.4 Environmental Matters. Notwithstanding anything in this Agreement to the contrary, the representations and warranties contained in this Section 4.1.4 are the sole and exclusive representations and warranties of the Contributor pertaining or relating to matters arising under or with respect to the environment, Environmental Laws, Environmental Permits, or Hazardous Substances. Except as disclosed or referenced on Schedule 4.1.4 and except for matters that would not reasonably be expected to have a Material Adverse Effect:

4.1.4.1 The Contributor’s ownership and operation of the Contributed Assets as presently owned and operated are in compliance in all material respects with all applicable Environmental Laws and all Environmental Permits.

4.1.4.2 The Contributor is not a party to any outstanding order, injunction, judgment, decree or ruling that arose from the Contributor’s operation or ownership of the Contributed Assets and relates to (i) the Contributor’s compliance with Environmental Laws, (ii) Remedial Work required to be performed by the Contributor, or (iii) any Release of Hazardous Substances or presence of Hazardous Substances.

4.1.4.3 Since January 1, 2009, the Contributor has not received any written communication alleging that, with respect to the Contributor’s operation or ownership of the Contributed Assets, the Contributor may be in violation of any Environmental Law or may have any liability under any Environmental Law.

4.1.4.4 To the Contributor’s Knowledge, there is no investigation by a Governmental Authority of the Contributed Assets, pending or threatened in writing, that would reasonably be expected to result in the imposition of any material liability pursuant to any Environmental Law.

4.1.5 Litigation. Except as set forth on Schedule 4.1.4 and Schedule 4.1.5, there are no actions, suits, claims or proceedings pending with service of process made on the Contributor (or its Affiliates) or, to the Contributor’s Knowledge, threatened or pending without service of process made on the Contributor (or its Affiliates), against the Contributor (or its Affiliates) relating to the Contributed Assets at law or in equity, or before or by any Governmental Authority.

4.1.6 Employee Matters. Except for such noncompliance as would not have a Material Adverse Effect on the operation of the Contributed Assets, Contributor is in compliance in all material respects with all applicable federal, state and local Laws pertaining to employment and employment practices, terms and conditions of employment, wages and hours, payment of unemployment benefits and taxes and workers’ compensation, including Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act, as amended, the Fair Labor Standards Act, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, the National Labor Relations Act and the Code. Contributor is not a party to, nor is it negotiating, any collective bargaining or other agreement with any union or other association of employees relating to the Current Employees or the Contributed Assets. No labor union or employee organization has been certified or recognized as the collective bargaining representative of the Current Employees. There is no labor strike, slowdown or work stoppage or lockout pending or, to Knowledge of Contributor, threatened against or affecting the Contributed Assets. Except as set forth on Schedule 4.1.6(A), none of the Current Employees have a pending or, to Contributor’s or its Affiliates’ Knowledge, threatened claim against Contributor or its Affiliates. Except as set forth on Schedule 4.1.6(B), neither Contributor nor its Affiliates have pending against them related to the Current Employees or the Contributed Assets any unfair labor practice charges, other administrative charges, claims, grievances, proceedings or lawsuits before any court, governmental agency, regulatory body or arbiter arising under any federal, state or local Law governing employment. Except as set forth on Schedule 4.1.6(C), Contributor has no Contracts of employment with any of the Current Employees.

4.1.7 Limitations of Representations and Warranties. NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT OR ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS AGREEMENT, IT IS THE EXPLICIT INTENT AND UNDERSTANDING OF EACH PARTY HERETO THAT THE CONTRIBUTOR IS NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, BEYOND THOSE REPRESENTATIONS OR WARRANTIES EXPRESSLY MADE BY IT IN THIS AGREEMENT OR ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS AGREEMENT, AND IT IS UNDERSTOOD THAT, EXCEPT TO THE EXTENT COVERED BY SUCH A REPRESENTATION OR WARRANTY EXPRESSLY MADE HEREIN OR ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS

AGREEMENT AND WITHOUT LIMITING SUCH EXPRESS REPRESENTATIONS AND WARRANTIES, THE ACQUIRER TAKES THE CONTRIBUTED ASSETS “AS IS” AND “WHERE IS” AND “WITH ALL FAULTS.” WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE OR ANY REPRESENTATIONS OR WARRANTIES EXPRESSLY MADE BY THE CONTRIBUTOR IN THIS AGREEMENT OR ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS AGREEMENT, THE CONTRIBUTOR HEREBY (I) EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, RELATING TO (A) THE CONDITION, USEFULNESS OR ADEQUACY OF THE CONTRIBUTED ASSETS (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), (B) ANY INFRINGEMENT BY THE CONTRIBUTOR OR ANY OF ITS AFFILIATES OF ANY INTELLECTUAL PROPERTY OR PROPRIETARY RIGHT OF ANY THIRD PARTY OR (C) THE ACCURACY, SPECIFICATIONS, QUALITY, FITNESS, MERCHANTABILITY, REPRODUCIBILITY OR CORRECTNESS OF DATA, PRODUCTS OR RESULTS OF ANY INTELLECTUAL PROPERTY; AND (II) NEGATES ANY RIGHTS OF THE ACQUIRER UNDER STATUTES TO CLAIM DIMINUTION OF CONSIDERATION AND ANY CLAIMS BY THE ACQUIRER FOR DAMAGES BECAUSE OF LATENT VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF THE PARTIES THAT, SUBJECT TO THE TERMS OF THIS AGREEMENT OR ANY EXPRESS TERM OF ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS AGREEMENT, THE CONTRIBUTED ASSETS ARE TO BE ACCEPTED BY THE ACQUIRER IN THEIR PRESENT CONDITION AND STATE OF REPAIR.

4.1.8 WITHOUT LIMITING ANY REPRESENTATIONS, WARRANTIES OR INDEMNITIES EXPRESSLY MADE BY THE CONTRIBUTOR IN THIS AGREEMENT OR ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS AGREEMENT, THE CONTRIBUTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO ANY ENVIRONMENTAL CONDITIONS, ENVIRONMENTAL LIABILITIES OR OTHER ENVIRONMENTAL MATTERS, INCLUDING WITH RESPECT TO THE PRESENCE OR ABSENCE OF ANY HAZARDOUS MATERIALS AT, IN, ON OR UNDER, OR DISPOSED OF OR DISCHARGED OR RELEASED FROM, THE CONTRIBUTED ASSETS. FURTHERMORE, WITHOUT LIMITING ANY REPRESENTATIONS OR WARRANTIES EXPRESSLY GIVEN BY THE CONTRIBUTOR IN THIS AGREEMENT OR ANY DOCUMENT DELIVERED BY THE CONTRIBUTOR IN CONNECTION WITH THIS AGREEMENT, THE CONTRIBUTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION, RECORDS, DATA AND INTERPRETATIONS NOW, HERETOFORE OR HEREAFTER MADE AVAILABLE TO THE ACQUIRER IN CONNECTION WITH THIS AGREEMENT; INCLUDING ANY DESCRIPTION OF THE CONTRIBUTED ASSETS, PRICING ASSUMPTIONS, POTENTIAL FOR PROFITS, PROJECTED COSTS AND, ANY ACQUIRED OR LICENSED DATA, ANY ENVIRONMENTAL INFORMATION, OR ANY OTHER MATERIAL FURNISHED TO THE ACQUIRER BY THE CONTRIBUTOR, ANY AFFILIATES OF THE

CONTRIBUTOR OR ANY DIRECTOR, OFFICER, SHAREHOLDER, EMPLOYEE, COUNSEL, AGENT OR ADVISOR OF THE CONTRIBUTOR OR ANY AFFILIATES OF THE CONTRIBUTOR.

ARTICLE 5

OTHER COVENANTS

Section 5.1 Further Assurances.

5.1.1 From time to time after the Closing, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with applicable law, as may be necessary or appropriate to more fully assure that the Acquirer owns all of the Contributed Assets and to more fully and effectively carry out the purposes and intent of this Agreement.

Section 5.2 Retention of and Access to Books and Records.

5.2.1 As promptly as practicable and in any event before thirty (30) days after the Effective Date, the Contributor will deliver or cause to be delivered to the Acquirer, at the Acquirer’s request, the Books and Records that are in the possession or control of the Contributor or its Affiliates and that relate to the operation of the Contributed Assets. The Acquirer agrees to hold and maintain the Books and Records so that they may be reasonably retrievable and not to destroy or dispose of any portion thereof for a period of three (3) years from the Effective Date or such longer time as may be required by Law, provided that, if it desires to destroy or dispose of such Books and Records during such period, it will first offer in writing at least sixty (60) days before such destruction or disposition to surrender them to the Contributor and if the Contributor does not accept such offer within thirty (30) days after receipt of such offer, the Acquirer may take such action.

5.2.2 The Acquirer agrees to afford the Contributor and its Affiliates and their respective accountants, counsel and other designated individuals, during normal business hours, upon reasonable request, at a mutually agreeable time, full access to and the right to make copies of the Books and Records at no cost to the Contributor or its Affiliates (other than for reasonable out-of-pocket expenses); provided that such access will not be construed to require the disclosure of Books and Records that would cause the waiver of any attorney-client, work product or like privilege; provided, further, that in the event of any litigation, nothing herein shall limit any Party’s rights of discovery under applicable Law. Without limiting the generality of the preceding sentences, the Acquirer agrees to provide the Contributor and its Affiliates reasonable access to and the right to make copies of the Books and Records after the Effective Date for the purposes of assisting the Contributor and its Affiliates (a) in complying with the Contributor’s obligations under this Agreement, (b) in preparing and delivering any accounting statements provided for under this Agreement and adjusting, prorating and settling the charges and credits provided for in this Agreement, (c) in owning or operating the Excluded Assets or Excluded Liabilities, (d) in preparing Tax returns, (e) in responding to or disputing any Tax audit, (f) in asserting, defending or otherwise dealing with any claim or dispute, known or unknown, under

this Agreement or with respect to Excluded Assets or Excluded Liabilities or (g) in asserting, defending or otherwise dealing with any Third Party Claim or dispute by or against the Contributor or its Affiliates relating to the Contributed Assets.

Section 5.3 Access to Assets. From and after the Closing, and subject to any applicable provisions of the Ground Lease, the Access Agreements, the Site Services Agreement and the Utility Services Agreement, the Acquirer and its Affiliates shall permit reasonable access to and entry upon the Contributed Assets by the Contributor and its Affiliates and their respective designated individuals, without charge, as necessary (as determined by the Contributor in its sole but reasonable discretion) to conduct and complete any other matters for which the Contributor shall be responsible under this Agreement, including any corrective or remedial actions relating to any Excluded Liabilities. The Acquirer shall use commercially reasonable efforts not to unreasonably interfere with the Contributor in connection with the exercise of such rights of access, including ingress and egress, to perform any corrective action.

Section 5.4 Employee Matters.

5.4.1 Current Employees. Schedule 5.4.1 contains a list of all active employees of the Contributor who are employed in the operation of the Tank Farm or have been designated by the Contributor as having skills which could support the Acquirer’s operations of the Tank Farm after the Closing, including employees who are receiving short-term disability or are on family and medical leave or military leave (collectively, the “Current Employees”). Schedule 5.4.1 shall include each Current Employee’s (a) name, (b) current job title or position, (c) service dates recognized by the Contributor, (d) current base salary or the base hourly rate, (e) accrued but unused vacation benefits, (f) status (e.g., full-time, part-time, on leave) and if on leave, the type of leave (e.g., vacation, short-term disability or Family and Medical Leave Act (“FMLA”) leave).

5.4.2 Employment Offers. Unless the Contributor and the Acquirer mutually agree to a later date, by no later than six (6) days after the Effective Date, the Acquirer will offer (or will have offered) employment to up to eleven (11) Current Employees it selects based on skills, experience and/or qualifications. Unless the Contributor and the Acquirer mutually agree to a later date, all such offer of employment shall be effective as of ten (10) days after the Effective Date (“Offer Effective Date”) and on such terms and conditions determined by the Acquirer in its sole discretion and as required by any applicable collective bargaining agreement to which the Acquirer is subject. The Acquirer will provide the Contributor with a list

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company