AGREEMENT OF LIMITED PARTNERSHIP

Exhibit 10.1  

ARTICLE VI

MANAGEMENT AND OPERATION

ARTICLE VII  

RIGHTS OF OTHER PARTNERS

ARTICLE VIII  

TAXES

ARTICLE IX  

BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

ARTICLE X  

WITHDRAWAL, BANKRUPTCY, REMOVAL, ETC.

ARTICLE XI  

DISSOLUTION, LIQUIDATION, AND TERMINATION

ARTICLE XII  

GENERAL PROVISIONS

This Agreement of Limited Partnership (this “ Agreement ”) of TEPPCO Unit II L.P., a Delaware limited partnership (the “ Partnership ”), is made and entered into effective as of November 13, 2008 by and among the Partners (as defined below).

FOR AND IN CONSIDERATION OF the mutual covenants, rights, and obligations set forth herein, the benefits to be derived therefrom, and other good and valuable consideration, the receipt and sufficiency of which each Partner acknowledges and confesses, the Partners hereby agree as follows:

1.01   Certain Definitions .   As used in this Agreement, the following terms have the following respective meanings:

“ Act ” means the Delaware Revised Uniform Limited Partnership Act and any successor statute, as amended from time to time.

“ Adjusted Capital Account ” means, with respect to any Partner, the balance in such Partner’s Capital Account after giving effect to the following adjustments:

(a)           Credit to such Capital Account of any amounts that such Partner is obligated or deemed obligated to contribute pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and

(b)           Debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.

The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.

“ Adjustment Date ” means (i) the date on which any distributions are made pursuant to Section 5.03 , but no later than the fifth Business Day following the payment date for each distribution made by TPP with respect to the TPP Units, and (ii) as soon as practicable following the receipt of proceeds by the Partnership from the disposition of TPP Units, but no later than the fifth Business Day following the receipt of any proceeds by the Partnership from the disposition of TPP Units.

“ Affiliate ” means with respect to any Person any other Person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.  For the purpose of this definition, “ control ” shall mean the

possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
 

“ Agreement ” has the meaning given it in the introductory paragraph hereof.

“ Applicable Percentage ” means with respect to a disposition of less than all the TPP Units owned by the Partnership, the quotient (expressed as a percentage) of the number of TPP Units held by the Partnership immediately after such disposition divided by the number of TPP Units held by the Partnership immediately before such disposition.

“ Bankrupt Partner ” means any Partner (whether a General Partner or a Limited Partner) with respect to which an event of the type described in Section 17-402(a)(4) or (5) of the Act (or any equivalent successor provision) shall have occurred, subject to the lapsing of any period of time therein specified.

“ Business Day ” means any day other than a Saturday, Sunday, or day on which commercial banks in the State of Texas are authorized or required to be closed for business.

“ Capital Account ” means the account maintained for each Partner pursuant to Section 4.04 .

“ Capital Contribution ” means any contribution by a Partner to the capital of the Partnership.

“ Certificate ” means the Certificate of Limited Partnership of the Partnership referred to in Section 2.05 , as it may be amended or restated from time to time.

“ Change of Control ” means Duncan shall (i) cease to own, directly or indirectly, at least a majority of the equity interests in the General Partner or the general partners of TPP or (ii) shall cease to have the ability to elect, directly or indirectly, at least a majority of the directors of the general partners of TPP.

“ Class A Capital Base ” means the amount of any contributions of cash or cash equivalents made by the Class A Limited Partner to the Partnership, adjusted on each Adjustment Date as follows:

(a)           increased by the Class A Preference Return that has accrued since the previous Adjustment Date (or in the case of the first Adjustment Date, since the Closing Date); and

(b)           decreased by all distributions made to the Class A Limited Partner since the previous Adjustment Date (or in the case of the first Adjustment Date, since the Closing Date).

“ Class A Limited Partner ” means Duncan Family Interests, Inc., a Delaware corporation, and its successors and assigns.

“ Class A Preference Return ” means the sum of the amounts determined for each day, equal to (i) the Class A Preference Return Rate multiplied by (ii) the Class A Capital Base plus the amount, if any, of guarantees issued by the Class A Limited Partner or its affiliate in lieu of collateral that would otherwise be required pursuant to margin loans or other loans made to the Partnership.

“ Class A Preference Return Amount ” means the aggregate Class A Preference Return minus all prior distributions to the Class A Limited Partner pursuant to Sections 5.03(a) and 5.04(a) .

“ Class A Preference Return Rate ” means a percent per annum equal to 6.31%, divided by 365 or 366 days, as the case may be during such calendar year.

“ Class B Limited Partner ” means the Person executing (by power of attorney or otherwise) this Agreement as of the date hereof as the Class B Limited Partner or any Person hereafter admitted to the Partnership as a Class B Limited Partner as herein provided, but shall not include any Person who has ceased to be a Class B Limited Partner in the Partnership.

“ Class B Percentage Interest ” means with respect to any Class B Limited Partner the quotient (expressed as a percentage) of (i) such Class B Limited Partner’s Sharing Points, divided by (ii) the Sharing Points of all Class B Limited Partners.  For purposes of calculating the Class B Percentage Interest, Sharing Points attributable to interests in the Partnership that are forfeited pursuant to Section 3.07 shall be ignored.

“ Closing Date ” means the date on which the Class A Limited Partner first contributes the Initial Contribution to the Partnership.

“ Code ” means the Internal Revenue Code of 1986, and any successor statute, as amended from time to time.

“ Default Interest Rate ” means a varying per annum rate equal at any given time to the lesser of (a) four percentage points in excess of the General Interest Rate and (b) the maximum rate permitted by applicable law.

“ Disability ” means the event whereby a Limited Partner becomes entitled to receive long-term disability benefits under the long-term disability plan of the General Partner or any of its Affiliates.

“ Dispose ,” “ Disposing ,” or “ Disposition ” means a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance, or the acts thereof, other than by divorce, legal separation or other dissolution of a Partner’s marriage.

“ Duncan ” means, collectively, individually or in any combination, Dan L. Duncan, his wife, descendants, heirs and/or legatees and/or distributees of Dan L. Duncan’s estate, and/or trusts established for the benefit of his wife, descendants, such legatees and/or distributees and/or their respective descendants, heirs, legatees and distributees.

“ EPCO ” means EPCO, Inc., a Texas corporation.

“ General Interest Rate ” means a varying per annum rate equal at any given time to the lesser of (a) the interest rate publicly quoted by J.P. Morgan Chase from time to time as its prime commercial or similar reference interest rate, and (b) the maximum rate permitted by applicable law.

“ General Partner ” means EPCO or any Person hereafter admitted to the Partnership as a general partner as herein provided, but shall not include any Person who has ceased to be a general partner in the Partnership.

“ Initial Contribution ” has the meaning set forth in Section 4.01 hereof.

“ Limited Partner ” means the Class A Limited Partner and the Class B Limited Partner.

“ Net Income ” and “ Net Loss ” mean, respectively, subject to Section 4.04 , an amount equal to the Partnership’s taxable income or loss determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a)           Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income and Net Loss shall be added to such taxable income or loss;

(b)           Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income and Net Loss, shall be subtracted from such taxable income or loss;

(c)           In the event the value of any Partnership property is adjusted pursuant to Section 4.04 (i) such adjustment shall be taken into account as gain or loss from the disposition of such Partnership property for purposes of computing Net Income or Net Loss, (ii) if such property is subject to depreciation, cost recovery, depletion or amortization, any further deductions for such depreciation, cost recovery, depletion or amortization attributable to such property shall be determined taking into account such adjustment, and (iii) in determining the amount of any income, gain or loss attributable to the taxable disposition of such property such adjustment (and the related adjustments for depreciation, cost recovery, depletion or amortization) shall be taken into account;

(d)           To the extent an adjustment to the adjusted tax basis of any Partnership Property pursuant to Code Section 734(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such Partnership Property and shall be taken into account for purposes of computing Net Income or Net Loss; and

(e)           Any items that are allocated pursuant to Section 5.01(b) shall not be taken into account in computing Net Income or Net Loss.

“ Partner ” means the General Partner, the Class A Limited Partner or the Class B Limited Partner.

“ Partnership ” has the meaning given it in the introductory paragraph.

“ Person ” has the meaning given it in the Act.

“ Qualifying Termination ” means the termination of the Class B Limited Partner’s employment with the General Partner and its Affiliates due to (i) death, (ii) receiving long-term disability benefits under the long-term disability plan of the General Partner or any of its Affiliates or (iii) retirement with the approval of the General Partner on or after reaching age 60.

“ Regulations ” means the regulations promulgated under Section 704 of the Code.

“ Sharing Points ” means, with respect to the Class B Limited Partner, the number of Sharing Points granted by the General Partner to such Class B Limited Partner (which number is set forth on the Power of Attorney executed by the Class B Limited Partner and delivered to the General Partner), as the same may be amended from time to time pursuant to the terms of this Agreement.

“ TPP ” means TEPPCO Partners, L.P., a Delaware limited partnership, and its successors.

“ TPP Units ” means partnership units representing limited partner interests in TPP.

“ Vesting Date ” means the earliest of (i) the fifth anniversary of the date of this Agreement, (ii) a Change of Control or (iii) dissolution of the Partnership.

1.02   Other Definitions .   Other terms defined herein have the meanings so given them.

2.02   Name .   The name of the Partnership is “TEPPCO Unit II L.P.” and all Partnership business shall be conducted in such name or such other name or names that comply with applicable law as the General Partner may designate from time to time.

2.03   Registered Office; Registered Agent; Other Offices .   The registered office of the Partnership in the State of Delaware shall be at such place as the General Partner may designate from time to time.  The registered agent for service of process on the Partnership in the State of Delaware or any other jurisdiction shall be such Person or Persons as the General Partner

may designate from time to time.  The Partnership may have such other offices as the General Partner may designate from time to time.

2.07   Merger or Consolidation .   The Partnership may merge or consolidate with or into another business entity, or enter into an agreement to do so, with the consent of the General Partner and the Class B Limited Partner.

3.01   Partners .   The General Partner, the Class A Limited Partner and the Class B Limited Partner of the Partnership are the Persons executing (by power of attorney or otherwise) this Agreement as of the date hereof as the General Partner, the Class A Limited Partner and the Class B Limited Partner, respectively, each of which is admitted to the Partnership as the General Partner, Class A Limited Partner or a Class B Limited Partner, as the case may be, effective as of the date hereof.

(a) The Class B Limited Partner may not Dispose of all or part of its interest in the Partnership without the prior written consent (which may be given or withheld in its sole discretion) of the General Partner, and then only after Sections 3.03(c), (d) and (e) have been complied with, except that the Class B Limited Partner may Dispose of all of its interest upon the death of the Class B Limited Partner or upon becoming a Bankrupt Partner, but in each case only after compliance with Sections 3.03(c), (d) and (e).  Neither the General Partner nor the Class A Limited Partner may Dispose of all or a part of its interest in the Partnership to a Person who is not an Affiliate of Duncan without the prior written consent of the Class B Limited Partner, and then only after Sections 3.03(c) , (d) and (e) have been complied with.

(e)   All costs (including, without limitation, the legal fees incurred in connection with the obtaining of the legal opinions referred to in Section 3.03(d) ) incurred by the Partnership in connection with any Disposition or admission of a Person to the Partnership pursuant to this Section 3.03 shall be borne and paid by the Partner effecting such Disposition within 10 days after the receipt by such Person of the Partnership’s invoice for the amount due.

(f)   In the event of a Disposition of an interest in the Partnership pursuant to the death of a Limited Partner that would, in the opinion of the Partnership’s legal counsel, result in the Partnership becoming an “investment company” required to register under the Investment Company Act of 1940, the General Partner shall have the right to purchase such interest from the estate (or beneficiaries) of such deceased Partner for a price equal to the amount that the deceased Partner’s estate (or beneficiaries) would receive if all of the TPP Units held by the Partnership were sold at a price equal to the closing sale price per TPP Unit as reported by the New York Stock Exchange (or such other applicable trading market) on the day prior to the exercise of such right by the General Partner and the proceeds from such sale were distributed to the Partners in accordance with the provisions of Section 5.04 .  The determination by the General Partner of the foregoing purchase price of such deceased Partner’s interest in the Partnership shall be conclusive and binding on the deceased Partner’s estate and beneficiaries.

3.07   Vesting of Limited Partners .   One hundred percent (100%) of the Class B Limited Partner’s interest in the Partnership shall vest on the Vesting Date, but only if (i) on such date the Class B Limited Partner continues to be an active, full-time employee of the General Partner or any of its Affiliates or (ii) prior to the Vesting Date, a Qualifying Termination has occurred with respect to the Class B Limited Partner.  At such time as the Class B Limited Partner ceases, for any reason other than a Qualifying Termination, to be an active, full-time employee of the General Partner or any of its Affiliates prior to the Vesting Date, his unvested interest in the Partnership shall be forfeited.  If the Class B Limited Partner ceases to be an active, full-time employee prior to the Vesting Date, as determined by the General Partner in its sole discretion, without regard as to how his status is treated by the General Partner or any of its Affiliates for any of its other compensation or benefit plans or programs, the Class B Limited Partner will be deemed to have terminated employment with the General Partner and its Affiliates and forfeited his unvested interest in the Partnership for purposes of this Agreement.  The Capital Account attributable to the Class B Limited Partner’s interest in the Partnership that is forfeited pursuant to Section 3.06, this Section 3.07 or otherwise hereunder shall be allocated to any remaining Class B Limited Partners in accordance with their respective Class B Participation Interests or, if there are no remaining Class B Limited Partners, such Capital Account shall be allocated back to the Partnership.