THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

 

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                                                                     EXHIBIT 3.1

 

                      THIRD AMENDED AND RESTATED AGREEMENT

                                       OF

                               LIMITED PARTNERSHIP

                                        OF

                             AMERIGAS PARTNERS, L.P.

 

                          DATED AS OF DECEMBER 1, 2004

 

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                                TABLE OF CONTENTS

 

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ARTICLE I                   ORGANIZATIONAL MATTERS..................................................            1

                  1.1       Formation...............................................................            1

                  1.2       Name....................................................................            1

                  1.3       Registered Office; Principal Office.....................................            1

                   1.4       Power of Attorney.......................................................            1

                  1.5       Term....................................................................            2

                  1.6       Possible Restrictions on Transfer.......................................            2

 

ARTICLE II                  DEFINITIONS.............................................................            3

 

ARTICLE III                 PURPOSE.................................................................           11

                  3.1       Purpose and Business....................................................           11

                  3.2       Powers..................................................................           11

 

ARTICLE IV                  CONTRIBUTIONS AND UNITS.................................................           12

                  4.1       Organization Contributions and Return...................................           12

                   4.2       General Partner and Petrolane Contributions.............................           12

                  4.3       Contributions by Initial Limited Partners...............................           12

                  4.4       Issuances of Additional Partnership Securities..........................           12

                  4.5       Limitations on Issuance of Additional Partnership Securities............           13

                  4.6       Conversion of Subordinated Units........................................           14

                  4.7       Limited Preemptive Rights...............................................           14

                  4.8       Splits and Combinations.................................................           15

                  4.9       Interest and Withdrawal.................................................           15

 

ARTICLE V                   DISTRIBUTIONS...........................................................           15

                  5.1       General Provisions......................................................           15

                  5.2       Distribution Levels.....................................................           16

                  5.3       Operating Distributions During Subordination Period.....................           16

                  5.4       Operating Distributions After Subordination Period......................           16

                  5.5       Capital Distributions...................................................           17

                  5.6       Liquidating Distributions During Subordination Period...................           17

                  5.7       Liquidating Distributions After Subordination Period....................           17

                   5.8       Adjustments to Distribution Levels......................................           18

 

ARTICLE VI                  MANAGEMENT AND OPERATION OF BUSINESS....................................           18

                  6.1       Management..............................................................           18

                  6.2       Certificate of Limited Partnership......................................           20

                  6.3       Restrictions on General Partner's Authority.............................           20

                  6.4       Reimbursement of the General Partner....................................           21

                  6.5       Outside Activities......................................................            21

                  6.6       Loans to and from the General Partner; Contracts with Affiliates........           22

                  6.7       Indemnification.........................................................           23

                  6.8       Liability of Indemnitees................................................           24

                  6.9       Resolution of Conflicts of Interest.....................................           25

                  6.10      Other Matters Concerning the General Partner............................           26

                  6.11      Title to Partnership Assets.............................................           26

                  6.12      Purchase or Sale of Units...............................................           26

                  6.13      Registration Rights of AmeriGas and its Affiliates......................           27

                  6.14      Reliance by Third Parties...............................................           28

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ARTICLE VII                 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..............................           28

                  7.1       Limitation of Liability.................................................           28

                  7.2       Management of Business..................................................           28

                   7.3       Outside Activities......................................................           29

                  7.4       Return of Capital.......................................................           29

                  7.5       Rights of Limited Partners to the Partnership...........................           29

 

ARTICLE VIII                BOOKS, RECORDS, ACCOUNTING AND REPORTS..................................           30

                  8.1       Records and Accounting..................................................           30

                  8.2       Fiscal Year.............................................................           30

                  8.3       Reports.................................................................            30

 

ARTICLE IX                  TAX MATTERS.............................................................           31

                  9.1       Tax Allocations.........................................................           31

                  9.2       Tax Returns and Information.............................................           32

                  9.3       Tax Elections...........................................................           32

                  9.4       Tax Controversies.......................................................           32

 

ARTICLE X                   CERTIFICATES............................................................           32

                  10.1      Certificates............................................................           32

                  10.2      Registration, Registration of Transfer and Exchange.....................           32

                  10.3      Mutilated, Destroyed, Lost or Stolen Certificates.......................           33

                   10.4      Record Holder...........................................................           33

 

ARTICLE XI                  TRANSFER OF INTERESTS...................................................           34

                  11.1      Transfer................................................................           34

                  11.2      Transfer of a General Partner's Partnership Interest....................           34

                  11.3      Transfer of Units.......................................................           34

                  11.4      Restrictions on Transfers...............................................           35

                  11.5      Citizenship Certificates; Non-citizen Assignees.........................           35

                  11.6      Redemption of Interests.................................................           35

 

ARTICLE XII                 ADMISSION OF PARTNERS...................................................           36

                  12.1      Admission of Initial Limited Partners...................................           36

                  12.2      Admission of Substituted Limited Partners...............................           36

                  12.3      Admission of Successor General Partner..................................           37

                  12.4      Admission of Additional Limited Partners................................           37

                  12.5      Amendment of Agreement and Certificate of Limited Partnership...........           37

 

ARTICLE XIII                WITHDRAWAL OR REMOVAL OF PARTNERS.......................................           38

                  13.1      Withdrawal of the General Partner.......................................           38

                   13.2      Removal of the General Partner..........................................           39

                  13.3      Interest of Departing Partner and Successor General Partner.............           39

                  13.4      Withdrawal of Limited Partners..........................................           40

 

ARTICLE XIV                 DISSOLUTION AND LIQUIDATION.............................................           40

                  14.1      Dissolution.............................................................           40

                  14.2      Continuation of the Business of the Partnership After Dissolution.......           41

                  14.3      Liquidator..............................................................           41

                  14.4      Liquidation.............................................................           41

                  14.5      Cancellation of Certificate of Limited Partnership......................           42

                   14.6      Return of Contributions.................................................           42

                  14.7      Waiver of Partition.....................................................           42

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ARTICLE XV                  AMENDMENT OF PARTNERSHIP AGREEMENT;

                           MEETINGS; RECORD DATE...................................................           42

                  15.1      Amendment to be Adopted Solely by General Partner.......................           42

                  15.2      Amendment Procedures....................................................           43

                  15.3      Amendment Requirements..................................................           43

                  15.4      Meetings................................................................           44

                   15.5      Notice of a Meeting.....................................................           44

                  15.6      Record Date.............................................................           44

                  15.7      Adjournment.............................................................           44

                  15.8      Waiver of Notice; Approval of Meeting; Approval of Minutes..............           44

                  15.9      Quorum..................................................................           45

                  15.10     Conduct of Meeting......................................................           45

                  15.11     Action Without a Meeting................................................           45

                  15.12     Voting and Other Rights.................................................           46

 

ARTICLE XVI                 MERGER..................................................................           46

                  16.1      Authority...............................................................           46

                  16.2      Procedure for Merger or Consolidation...................................           46

                  16.3      Approval by Limited Partners of Merger or Consolidation.................           47

                  16.4      Certificate of Merger...................................................           47

                  16.5      Effect of Merger........................................................           47

 

ARTICLE XVII                RIGHT TO ACQUIRE UNITS..................................................           48

                  17.1      Right to Acquire Units..................................................           48

 

ARTICLE XVIII      GENERAL PROVISIONS...............................................................           49

                  18.1      Addresses and Notices...................................................           49

                  18.2      References..............................................................           49

                  18.3      Pronouns and Plurals....................................................           49

                  18.4      Further Action..........................................................           50

                  18.5      Binding Effect..........................................................           50

                  18.6      Integration.............................................................            50

                  18.7      Creditors...............................................................           50

                  18.8      Waiver..................................................................           50

                  18.9       Counterparts............................................................           50

                  18.10     Applicable Law..........................................................           50

                  18.11     Invalidity of Provisions................................................           50

                  18.12     Consent of Partners.....................................................           50

 

EXHIBIT A                   Form of Certificate Evidencing Common Units.............................           52

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         THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF

                             AMERIGAS PARTNERS, L.P.

 

     THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF

AMERIGAS PARTNERS, L.P., dated as of December 1, 2004, is entered into by and

among AmeriGas Propane, Inc., a Pennsylvania corporation, as the General

Partner, and those persons who become Partners in the Partnership or parties

hereto as provided herein. In consideration of the covenants, conditions and

agreements contained herein, the parties hereto hereby agree as follows:

 

                                    ARTICLE I

 

                             ORGANIZATIONAL MATTERS

 

     1.1 FORMATION. The General Partner and the Organizational Limited Partner

have previously formed the Partnership as a limited partnership pursuant to the

provisions of the Delaware Act. The General Partner hereby amends and restates

the Second Amended and Restated Agreement of Limited Partnership of AmeriGas

Partners, L.P., dated as of September 30, 2000, in its entirety. Except as

expressly provided to the contrary in this Agreement, the rights and obligations

of the Partners and the administration, dissolution and termination of the

Partnership shall be governed by the Delaware Act. All Partnership Interests

shall constitute personal property of the owner thereof for all purposes.

 

     1.2 NAME. The name of the Partnership shall be "AmeriGas Partners, L.P."

The Partnership's business may be conducted under any other name or names deemed

necessary or appropriate by the General Partner, including the name of the

General Partner. The words "Limited Partnership," "L.P.," "Ltd." or similar

words or letters shall be included in the Partnership's name where necessary for

the purposes of complying with the laws of any jurisdiction that so requires.

The General Partner in its sole discretion may change the name of the

Partnership at any time and from time to time and shall notify the Limited

Partners of such change in the next regular communication to the Limited

Partners.

 

     1.3 REGISTERED OFFICE; PRINCIPAL OFFICE. Unless and until changed by the

General Partner, the registered office of the Partnership in the State of

Delaware shall be located at 32 Loockerman Square, Suite L-100, Dover, Delaware

19904, and the registered agent for service of process on the Partnership in the

State of Delaware at such registered office shall be The Prentice-Hall

Corporation System, Inc. The principal office of the Partnership shall be

located at, and the address of the General Partner shall be, 460 North Gulph

Road, King of Prussia, Pennsylvania 19406, or such other place as the General

Partner may from time to time designate by notice to the Limited Partners. The

Partnership may maintain offices at such other place or places within or outside

the State of Delaware as the General Partner deems necessary or appropriate.

 

     1.4 POWER OF ATTORNEY. (a) Each Limited Partner and each Assignee hereby

constitutes and appoints each of the General Partner and, if a Liquidator shall

have been selected pursuant to Section 14.3, the Liquidator severally (and any

successor to either thereof by merger, transfer, assignment, election or

otherwise) and each of their authorized officers and attorneys-in-fact, with

full power of substitution, as his true and lawful agent and attorney-in-fact,

with full power and authority in his name, place and stead, to:

 

          (i) execute, swear to, acknowledge, deliver, file and record in the

appropriate public offices (A) all certificates, documents and other instruments

(including this Agreement and the Certificate of Limited Partnership and all

amendments or restatements thereof) that the General Partner or the Liquidator

deems necessary or appropriate to form, qualify or continue the existence or

qualification of the Partnership as a limited partnership (or a partnership in

which the limited partners have limited liability) in the State of Delaware and

in all other jurisdictions in which the Partnership may conduct business or own

property; (B) all certificates, documents and other instruments that the General

Partner or the Liquidator deems necessary or appropriate to reflect, in

accordance with its terms, any amendment, change, modification or restatement of

this Agreement; (C) all certificates, documents and other instruments (including

conveyances and a certificate of cancellation) that the General Partner or the

Liquidator deems necessary or appropriate to reflect the dissolution and

liquidation of the Partnership pursuant to the terms of this Agreement; (D) all

certificates, documents and other instruments relating to the admission,

withdrawal, removal or substitution of any Partner pursuant to, or other events

described in, Article XI, XII, XIII or XIV; (E) all certificates, documents and

other instruments relating to the determination of the rights, preferences and

privileges of any class or

 

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series of Partnership Securities issued pursuant to Section 4.4; and (F) all

certificates, documents and other instruments (including agreements and a

certificate of merger) relating to a merger or consolidation of the Partnership

pursuant to Article XVI; and

 

           (ii) execute, swear to, acknowledge, deliver, file and record all

ballots, consents, approvals, waivers, certificates, documents and other

instruments necessary or appropriate, in the sole discretion of the General

Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote,

consent, approval, agreement or other action that is made or given by the

Partners hereunder or is consistent with the terms of this Agreement or is

necessary or appropriate, in the sole discretion of the General Partner or the

Liquidator, to effectuate the terms or intent of this Agreement; provided, that

when required by Section 15.3 or any other provision of this Agreement that

establishes a percentage of the Limited Partners or of the Limited Partners of

any class or series required to take any action, the General Partner or the

Liquidator may exercise the power of attorney made in this Section 1.4(a)(ii)

only after the necessary vote, consent or approval of the Limited Partners or of

the Limited Partners of such class or series, as applicable.

 

Nothing contained in this Section 1.4(a) shall be construed as authorizing the

General Partner to amend this Agreement except in accordance with Article XV or

as may be otherwise expressly provided for in this Agreement.

 

      (b) The foregoing power of attorney is hereby declared to be irrevocable

and a power coupled with an interest, and it shall survive and not be affected

by the subsequent death, incompetency, disability, incapacity, dissolution,

bankruptcy or termination of any Limited Partner or Assignee and the transfer of

all or any portion of such Limited Partner's or Assignee's Partnership Interest

and shall extend to such Limited Partner's or Assignee's heirs, successors,

assigns and personal representatives. Each such Limited Partner or Assignee

hereby agrees to be bound by any representation made by the General Partner or

the Liquidator acting in good faith pursuant to such power of attorney; and each

such Limited Partner or Assignee hereby waives any and all defenses that may be

available to contest, negate or disaffirm the action of the General Partner or

the Liquidator taken in good faith under such power of attorney. Each Limited

Partner or Assignee shall execute and deliver to the General Partner or the

Liquidator, within 15 days after receipt of the General Partner's or the

Liquidator's request therefor, such further designation, powers of attorney and

other instruments as the General Partner or the Liquidator deems necessary to

effectuate this Agreement and the purposes of the Partnership.

 

     1.5 TERM. The Partnership commenced upon the filing of the Certificate of

Limited Partnership in accordance with the Delaware Act and shall continue in

existence until the close of Partnership business on December 31, 2093, or until

the earlier dissolution of the Partnership in accordance with the provisions of

Article XIV.

 

     1.6 POSSIBLE RESTRICTIONS ON TRANSFER. The General Partner may impose

restrictions on the transfer of Partnership Interests if a subsequent Opinion of

Counsel determines that such restrictions are necessary to avoid a substantial

risk of the Partnership's becoming taxable as a corporation or otherwise as an

entity for federal income tax purposes. The restrictions may be imposed by

making such amendments to this Agreement as the General Partner in its sole

discretion may determine to be necessary or appropriate to impose such

restrictions; provided, however, that any amendment that the General Partner

believes, in the exercise of its reasonable discretion, could result in the

delisting or suspension of trading of any class of Units on any National

Securities Exchange on which such class of Units is then traded must be approved

by the holders of at least a majority of the Outstanding Units of such class.

 

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                                   ARTICLE II

 

                                   DEFINITIONS

 

     The following definitions shall be for all purposes, unless otherwise

clearly indicated to the contrary, applied to the terms used in this Agreement.

 

     "ACQUISITION" means any transaction in which any Group Member acquires

(through an asset acquisition, merger, stock acquisition or other form of

investment) control over all or a portion of the assets, properties or business

of another Person for the purpose of increasing the operating capacity of the

Partnership Group from the operating capacity of the Partnership Group existing

immediately prior to such transaction.

 

     "ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership as

a Limited Partner pursuant to Section 12.4 and who is shown as such on the books

and records of the Partnership.

 

     "ADJUSTED OPERATING SURPLUS" for any period means Operating Surplus

generated during such period as adjusted to (a) exclude Operating Surplus

attributable to (i) any net increase in working capital borrowings during such

period and (ii) any net reduction in cash reserves during such period, and (b)

include any net increases in reserves to provide funds for distributions

resulting from Operating Surplus generated during such period. Adjusted

Operating Surplus does not include that portion of Operating Surplus included in

clause (a)(i) of the definition of Operating Surplus.

 

     "AFFILIATE" means, with respect to any Person, any other Person that

directly or indirectly through one or more intermediaries controls, is

controlled by or is under common control with, the Person in question. As used

herein, the term "control" means the possession, direct or indirect, of the

power to direct or cause the direction of the management and policies of a

Person, whether through ownership of voting securities, by contract or

otherwise.

 

     "AGREEMENT" means this Third Amended and Restated Agreement of Limited

Partnership of AmeriGas Partners, L.P., as it may be amended, supplemented or

restated from time to time.

 

     "AMERIGAS" means AmeriGas Propane, Inc., a Pennsylvania corporation and a

wholly owned subsidiary of AmeriGas, Inc., a Pennsylvania corporation.

 

     "ARREARAGE BALANCE" means, as to each Common Unit as of the end of a

Quarter, the excess of the sum of the Minimum Quarterly Distribution for an

Initial Common Unit for each prior Quarter over the sum of the amounts

distributed pursuant to Sections 5.3(a) and 5.3(b) for such prior Quarter and

all prior Quarters in respect of an Initial Common Unit; except that no

increases shall be made after the Subordination Period and all Arrearage

Balances shall in all events be zero if the General Partner is removed as

general partner of the Partnership upon the requisite vote by Limited Partners

under circumstances where Cause does not exist.

 

     "ASSIGNEE" means a Non-citizen Assignee or a Person to whom one or more

Units have been transferred in a manner permitted under this Agreement and who

has executed and delivered a Transfer Application as required by this Agreement,

but who has not become a Substituted Limited Partner.

 

     "ASSOCIATE" means, when used to indicate a relationship with any Person,

(a) any corporation or organization of which such Person is a director, officer

or partner or is, directly or indirectly, the owner of 20% or more of any class

of voting stock; (b) any trust or other estate in which such Person has at least

a 20% beneficial interest or as to which such Person serves as trustee or in a

similar fiduciary capacity; and (c) any relative or spouse of such Person, or

any relative of such spouse, who has the same residence as such Person.

 

     "AUDIT COMMITTEE" means a committee of the Board of Directors of the

General Partner composed entirely of two or more directors who are neither

officers nor employees of the General Partner or any of its Affiliates.

 

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     "AVAILABLE CASH," as to any Quarter ending before the Liquidation Date,

means

 

          (a) the sum of (i) all cash of the Partnership Group on hand at the

end of such Quarter and (ii) all additional cash of the Partnership Group on

hand on the date of determination of Available Cash with respect to such Quarter

resulting from borrowings subsequent to the end of such Quarter, less

 

          (b) the amount of cash reserves that is necessary or appropriate in

the reasonable discretion of the General Partner to (i) provide for the proper

conduct of the business of the Partnership Group (including reserves for future

capital expenditures) subsequent to such Quarter, (ii) provide funds for

distributions under Sections 5.3(a), (b) and (c) or 5.4(a) in respect of any one

or more of the next four Quarters, or (iii) comply with applicable law or any

debt instrument or other agreement or obligation to which any member of the

Partnership Group is a party or its assets are subject.

 

     "BUSINESS DAY" means Monday through Friday of each week, except that a

legal holiday recognized as such by the government of the United States or the

states of New York or Pennsylvania shall not be regarded as a Business Day.

 

     "CAPITAL IMPROVEMENTS" means (a) additions or improvements to the capital

assets owned by any Group Member or (b) the acquisition of existing or the

construction of new capital assets (including retail distribution outlets,

propane tanks, pipeline systems, storage facilities and related assets), made to

increase the operating capacity of the Partnership Group from the operating

capacity of the Partnership Group existing immediately prior to such addition,

improvement, acquisition or construction.

 

     "CAPITAL SURPLUS" has the meaning assigned to such term in Section 5.5.

 

     "CAUSE" means a court of competent jurisdiction has entered a final,

non-appealable judgment finding the General Partner liable for actual fraud,

gross negligence or willful or wanton misconduct in its capacity as general

partner of the Partnership.

 

     "CERTIFICATE" means a certificate, substantially in the form of Exhibit A

to this Agreement or in such other form as may be adopted by the General Partner

in its sole discretion, issued by the Partnership evidencing ownership of one or

more Common Units, or a certificate, in such form as may be adopted by the

General Partner in its sole discretion, issued by the Partnership evidencing

ownership of one or more other Units.

 

     "CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of Limited

Partnership filed with the Secretary of State of the State of Delaware as

referenced in Section 6.2, as such Certificate of Limited Partnership may be

amended, supplemented or restated from time to time.

 

     "CITIZENSHIP CERTIFICATION" means a properly completed certificate in such

form as may be specified by the General Partner by which an Assignee or a

Limited Partner certifies that he (and if he is a nominee holding for the

account of another Person, that to the best of his knowledge such other Person)

is an Eligible Citizen.

 

     "CLAIM" has the meaning assigned to such term in Section 6.13(c).

 

     "CLOSING DATE" means the first date on which Common Units are sold by the

Partnership to the Underwriters pursuant to the provisions of the Underwriting

Agreement.

 

     "CLOSING PRICE" has the meaning assigned to such term in Section 17.1(a).

 

     "CODE" means the Internal Revenue Code of 1986, as amended and in effect

from time to time. Any reference herein to a specific section or sections of the

Code shall be deemed to include a reference to any corresponding provision of

future law.

 

     "COMBINED INTEREST" has the meaning assigned to such term in Section

13.3(a).

 

     "COMMISSION" means the Securities and Exchange Commission.

 

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     "COMMON UNIT" means a Unit representing a fractional part of the

Partnership Interests of all Limited Partners and Assignees and having the

rights and obligations specified with respect to Common Units in this Agreement.

 

     "CONTRIBUTION" means any cash, cash equivalents or the Net Agreed Value of

any other property or asset that a Partner contributes to the Partnership

pursuant to the Conveyance and Contribution Agreement, the Merger and

Contribution Agreement, Article IV or Section 13.3(c).

 

     "CONVEYANCE AND CONTRIBUTION AGREEMENT" means that certain Conveyance and

Contribution Agreement, dated as of the Closing Date, between Petrolane, the

Partnership, the Operating Partnership and certain other parties, together with

the additional conveyance documents and instruments contemplated or referenced

thereunder.

 

     "CURRENT MARKET PRICE" has the meaning assigned to such term in Section

17.1(a).

 

     "DELAWARE ACT" means the Delaware Revised Uniform Limited Partnership Act,

6 Del C. ss. 17-101, et seq., as amended, supplemented or restated from time to

time, and any successor to such statute.

 

     "DEPARTING PARTNER" means a former General Partner from and after the

effective date of any withdrawal or removal of such former General Partner

pursuant to Section 13.1 or 13.2.

 

     "DISTRIBUTION LEVELS" means the levels of distribution provided in Section

5.2.

 

     "ELIGIBLE CITIZEN" means a Person qualified to own interests in real

property in jurisdictions in which any Group Member does business or proposes to

do business from time to time, and whose status as a Limited Partner or Assignee

does not or would not subject such Group Member to a substantial risk of

cancellation or forfeiture of any of its properties or any interest therein.

 

     "EVENT OF WITHDRAWAL" has the meaning assigned to such term in Section

13.1(a).

 

     "FIRST TARGET DISTRIBUTION" has the meaning assigned to such term in

Section 5.2.

 

     "GENERAL PARTNER" means AmeriGas and its successor as general partner of

the Partnership.

 

     "GROUP" means a Person that with or through any of its Affiliates or

Associates has any agreement, arrangement or understanding for the purpose of

acquiring, holding, voting (except voting pursuant to a revocable proxy or

consent given to such Person in response to a proxy or consent solicitation made

to 10 or more Persons) or disposing of any Partnership Securities with any other

Person that beneficially owns, or whose Affiliates or Associates beneficially

own, directly or indirectly, Partnership Interests.

 

     "GROUP MEMBER" means a member of the Partnership Group.

 

     "HOLDER" has the meaning assigned to such term in Section 6.13(a).

 

     "INCLUDES" means includes, without limitation, and "INCLUDING" means

including, without limitation.

 

     "INDEMNIFIED PERSONS" has the meaning assigned to such term in Section

6.13(c).

 

     "INDEMNITEE" means (a) the General Partner, any Departing Partner, any

Person who is or was an Affiliate of the General Partner or any Departing

Partner, (b) any Person who is or was an officer, director, employee, partner,

agent or trustee of the General Partner or any Departing Partner or any such

Affiliate, or (c) any Person who is or was serving at the request of the General

Partner or any Departing Partner or any such Affiliate as a director, officer,

employee, partner, agent, fiduciary or trustee of another Person; provided, that

a Person shall not be an Indemnitee pursuant to this clause (c) by reason of

providing, on a fee-for-services basis, trustee, fiduciary or custodial

services.

 

     "INITIAL COMMON UNITS" means the Common Units sold in the Initial Offering.

 

     "INITIAL LIMITED PARTNERS" means AmeriGas and Petrolane (with respect to

the Common Units and Subordinated Units received by them pursuant to Section

4.2) and the Underwriters, in each case upon being admitted to the

 

                                       5

<PAGE>

 

Partnership in accordance with Section 12.1.

 

     "INITIAL OFFERING" means the initial offering and sale of Common Units to

the public, as described in the Registration Statement.

 

     "INITIAL UNIT PRICE" means (a) the initial public offering price per Common

Unit at which the Underwriters offered the Common Units to the public for sale

as set forth on the cover page of the prospectus first issued at or after the

time the Registration Statement first became effective or (b) with respect to

any other class or series of Units, the price per Unit at which such class or

series of Units is initially sold by the Partnership, as determined by the

General Partner.

 

     "INTERIM CAPITAL TRANSACTIONS" means the following transactions if they

occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings

of indebtedness and sales of debt securities (other than for working capital

purposes and other than for items purchased on open account in the ordinary

course of business) by any Group Member; (b) sales of equity interests

(including Common Units sold to the Underwriters pursuant to the exercise of the

Overallotment Option) by any Group Member; and (c) sales or other voluntary or

involuntary dispositions of any assets of any Group Member other than (x) sales

or other dispositions of inventory in the ordinary course of business, (y) sales

or other dispositions of other current assets, including receivables and

accounts, and (z) sales or other dispositions of assets as part of normal

retirements or replacements.

 

     "INVESTMENT BALANCE" means, as to each Unit at the end of each Quarter, the

Initial Unit Price for each Initial Common Unit reduced (but not below zero) by

distributions of Capital Surplus under Section 5.5 and by liquidating

distributions under Sections 5.6 or 5.7.

 

     "ISSUE PRICE" means the price at which a Unit is purchased from the

Partnership, after taking into account any sales commission or underwriting

discount charged to the Partnership.

 

     "LIMITED PARTNER" means, unless the context otherwise requires, (a) the

Organizational Limited Partner, each Initial Limited Partner, each Substituted

Limited Partner, each Additional Limited Partner and any Departing Partner upon

the change of its status from General Partner to Limited Partner pursuant to

Section 13.3; and (b) solely for purposes of Articles IV, V, VI and IX and

Sections 14.3 and 14.4, each Assignee.

 

     "LIQUIDATION DATE" means (a) in the case of an event giving rise to the

dissolution of the Partnership of the type described in clauses (a) and (b) of

the first sentence of Section 14.2, the date on which the applicable time period

during which the holders of Outstanding Units have the right to elect to

reconstitute the Partnership and continue its business has expired without such

an election being made, and (b) in the case of any other event giving rise to

the dissolution of the Partnership, the date on which such event occurs.

 

     "LIQUIDATOR" means the General Partner or other Person approved pursuant to

Section 14.3 who performs the functions described therein.

 

                                       6

<PAGE>

 

     "MAINTENANCE CAPITAL EXPENDITURES" means cash capital expenditures made to

maintain, up to the level thereof that existed at the time of such expenditure,

the operating capacity of the capital assets of the Partnership Group, as such

assets existed at the time of such expenditure and shall, therefore, not include

cash capital expenditures made in respect of Acquisitions and Capital

Improvements. Where cash capital expenditures are made in part to maintain the

operating capacity level referred to in the immediately preceding sentence and

in part for other purposes, the General Partner's good faith allocation thereof

between the portion used to maintain such operating capacity level and the

portion used for other purposes shall be conclusive.

 

     "MERGER AGREEMENT" has the meaning assigned to such term in Section 16.1.

 

     "MERGER AND CONTRIBUTION AGREEMENT" means that certain Merger and

Contribution Agreement, dated as of the Closing Date, between AmeriGas, the

Partnership, the Operating Partnership and certain other parties, together with

the additional conveyance documents and instruments contemplated or referenced

thereunder.

 

     "MINIMUM QUARTERLY DISTRIBUTION" has the meaning assigned to such term in

Section 5.2.

 

     "NATIONAL SECURITIES EXCHANGE" means an exchange registered with the

Commission under Section 6(a) of the Securities Exchange Act of 1934, as

amended, supplemented or restated from time to time, and any successor to such

statute, or the NASDAQ Stock Market or any successor thereto.

 

     "NET AGREED VALUE" means the fair market value of any asset or property

contributed to the Partnership reduced by any liabilities either assumed by the

Partnership upon such contribution or to which the asset or property is subject

when contributed, in each case as determined by the General Partner using such

reasonable method of valuation as it may adopt.

 

     "NET LIQUIDATION GAIN" means the excess of all the gains realized after the

Liquidation Date from the sale or other disposition of Partnership assets over

all the losses realized from such dispositions, determined separately for each

asset in accordance with generally accepted accounting principles, except that

the initial basis of each contributed property shall be deemed to equal its fair

market value when contributed, and each intangible asset shall be amortized only

if and at the rate amortizable for federal income tax purposes.

 

     "1989 CUSTOMER LIST" means a customer list established in 1989 on the books

of Petrolane Gas Services LP, a partnership which was merged into Petrolane on

July 15, 1993.

 

     "NON-CITIZEN ASSIGNEE" means a Person whom the General Partner has

determined in its sole discretion does not constitute an Eligible Citizen and as

to whose Partnership Interest the General Partner has become the Substituted

Limited Partner, pursuant to Section 11.5.

 

     "NOTICE OF ELECTION TO PURCHASE" has the meaning assigned to such term in

Section 17.1(b).

 

     "OPERATING EXPENDITURES" means all Partnership Group expenditures,

including taxes, reimbursements of the General Partner, debt service payments,

and capital expenditures, subject to the following:

 

          (a) Payments (including prepayments) of principal and premium on a

debt shall not be an Operating Expenditure if the payment is (i) required in

connection with the sale or other disposition of assets or (ii) made in

connection with the refinancing or refunding of indebtedness with the proceeds

from new indebtedness or from the sale of equity interests. For purposes of the

foregoing, at the election and in the reasonable discretion of the General

Partner, any payment of principal or premium shall be deemed to be refunded or

refinanced by any indebtedness incurred or to be incurred by the Partnership

Group within 180 days before or after such payment to the extent of the

principal amount of such indebtedness.

 

          (b) Operating Expenditures shall not include (i) capital expenditures

made for Acquisitions or for Capital Improvements or (ii) payment of transaction

expenses relating to Interim Capital Transactions. Where capital expenditures

are made in part for Acquisitions or Capital Improvements and in part for other

purposes, the General Partner's good faith allocation between the amounts paid

for each shall be conclusive.

 

     "OPERATING PARTNERSHIP" means AmeriGas Propane, L.P., a Delaware limited

partnership, and any successors

 

                                       7

<PAGE>

 

thereto.

 

     "OPERATING PARTNERSHIP AGREEMENT" means the Agreement of Limited

Partnership of the Operating Partnership, as it may be amended, supplemented or

restated from time to time.

 

     "OPERATING SURPLUS," as to any Quarter ending before the Liquidation Date,

means

 

     (a) the sum of (i) $40 million plus all cash of the Partnership Group on

hand as of the close of business on the Closing Date, (ii) all the cash receipts

of the Partnership Group for the period beginning on the Closing Date and ending

with the last day of such Quarter, other than cash receipts from Interim Capital

Transactions and (iii) all cash receipts of the Partnership Group after the end

of such period but on or before the date of determination of Operating Surplus

with respect to such period resulting from working capital borrowings, less

 

     (b) the sum of (i) Operating Expenditures for the period beginning on the

Closing Date and ending with the last day of such Quarter, (ii) all

distributions made pursuant to Sections 5.3 or 5.4 in respect of all prior

Quarters, and (iii) the amount of cash reserves that is necessary or advisable

in the reasonable discretion of the General Partner to provide funds for future

Operating Expenditures.

 

     "OPINION OF COUNSEL" means a written opinion of counsel (who may be regular

counsel to AmeriGas, any Affiliate of AmeriGas, the Partnership or the General

Partner) acceptable to the General Partner in its reasonable discretion.

 

     "ORGANIZATIONAL LIMITED PARTNER" means Barton D. Whitman, in his capacity

as the organizational limited partner of the Partnership pursuant to this

Agreement.

 

     "OUTSTANDING" means, with respect to Partnership Securities, all

Partnership Securities that are issued by the Partnership and reflected as

outstanding on the Partnership's books and records as of the date of

determination; provided that, if at any time any Person or Group (other than

AmeriGas and its Affiliates) owns beneficially 20% or more of all Common Units,

such Common Units so owned shall not be voted on any matter and shall not be

considered to be Outstanding when sending notices of a meeting of Limited

Partners (unless otherwise required by law), calculating required votes,

determining the presence of a quorum or for other similar purposes under this

Agreement, except that such Common Units shall be considered to be Outstanding

for purposes of Section 13.1(b)(iv) (such Common Units shall not, however, be

treated as a separate class of Partnership Securities for purposes of this

Agreement).

 

     "OVERALLOTMENT OPTION" means the overallotment option granted to the

Underwriters by the Partnership pursuant to the Underwriting Agreement.

 

     "PARITY UNITS" means Common Units and all other Units having rights to

distributions or in liquidation ranking on a parity with the Common Units.

 

     "PARTNERS" means the General Partner and the Limited Partners.

 

     "PARTNERSHIP" means AmeriGas Partners, L.P., a Delaware limited

partnership, and any successors thereto.

 

     "PARTNERSHIP GROUP" means the Partnership, the Operating Partnership and

any partnership Subsidiary of either such entity, treated as a single

consolidated partnership.

 

     "PARTNERSHIP INTEREST" means an interest in the Partnership, which shall

include general partner interests, Common Units, Subordinated Units or other

Partnership Securities, or a combination thereof or interest therein, as the

case may be.

 

     "PARTNERSHIP SECURITY" means any class or series of Unit, any option,

right, warrant or appreciation rights relating thereto, or any other type of

equity interest that the Partnership may lawfully issue, or any unsecured or

secured debt obligation of the Partnership that is convertible into any class or

series of equity interests of the Partnership.

 

     "PERCENTAGE INTEREST" means as of the date of such determination (a) as to

the General Partner, 1%, (b) as to any

 

                                        8

<PAGE>

 

Limited Partner or Assignee holding Units, the product of (i) 99% less the

percentage applicable to paragraph (c) multiplied by (ii) the quotient of the

number of Units held by such Limited Partner or Assignee divided by the total

number of all Outstanding Units, and (c) as to the holders of additional

Partnership Securities issued by the Partnership in accordance with Section 4.3,

the percentage established as a part of such issuance.

 

     "PERSON" means an individual or a corporation, partnership, trust,

unincorporated organization, association or other entity.

 

     "PETROLANE" means Petrolane Incorporated, a California corporation.

 

     "PRO RATA", when modifying Units or any class thereof, means apportioned

equally among all designated Units, and when modifying Partners means 1% to the

General Partner and 99% to the Unitholders Pro Rata.

 

     "PURCHASE DATE" means the date determined by the General Partner as the

date for purchase of all Outstanding Units (other than Units owned by the

General Partner and its Affiliates) pursuant to Article XVII.

 

     "QUARTER" means, unless the context requires otherwise, a three-month

period of time ending on March 31, June 30, September 30, or December 31.

 

     "RECORD DATE" means the date established by the General Partner for

determining (a) the identity of the Record Holder entitled to notice of, or to

vote at, any meeting of Limited Partners or entitled to vote by ballot or give

approval of Partnership action in writing without a meeting or entitled to

exercise rights in respect of any lawful action of Limited Partners or (b) the

identity of Record Holders entitled to receive any report or distribution.

 

     "RECORD HOLDER" means the Person in whose name a Unit is registered on the

books of the Transfer Agent as of the opening of business on a particular

Business Day, or with respect to a holder of a general partner interest, the

Person in whose name such general partner interest is registered on the books of

the General Partner as of the opening of business on such Business Day.

 

     "REDEEMABLE UNITS" means any Units for which a redemption notice has been

given, and has not been withdrawn, pursuant to Section 11.6.

 

     "REGISTRATION STATEMENT" means the Registration Statement on Form S-1

(Registration No. 33-86028), as it has been or as it may be amended or

supplemented from time to time, filed by the Partnership with the Commission

under the Securities Act to register the offering and sale of the Common Units

in the Initial Offering.

 

      "RESTRICTED ACTIVITIES" means the retail sales of propane to end users in

the continental United States in the manner engaged in by AmeriGas and Petrolane

immediately prior to the Closing Date.

 

     "SECOND TARGET DISTRIBUTION" has the meaning assigned to such term in

Section 5.2.

 

     "SECURITIES ACT" means the Securities Act of 1933, as amended, supplemented

or restated from time to time and any successor to such statute.

 

     "SPECIAL APPROVAL" means approval by the Audit Committee.

 

     "SPECIAL PROPANE CORPORATION" means any corporation that is engaged in

Restricted Activities, is not an S Corporation within the meaning of Section

1361 of the Code, and whose tax basis in its assets is in the aggregate

substantially less than the fair market value of such assets.

 

     "SUBORDINATED UNIT" means a Unit representing a fractional part of the

Partnership Interests of all Limited Partners and Assignees and having the

rights and obligations specified with respect to Subordinated Units in this

Agreement.

 

     "SUBORDINATION PERIOD" means the period commencing on the Closing Date and

ending on the first to occur of the following dates:

 

                                       9

<PAGE>

 

          (a) the first day of any Quarter beginning on or after April 1, 2000

in respect of which (i) distributions of Available Cash from Operating Surplus

on each of the Common Units and Subordinated Units equaled or exceeded the

Minimum Quarterly Distribution for each of the four consecutive non-overlapping

four-Quarter periods immediately preceding such date, (ii) the Adjusted

Operating Surplus generated during both (A) each of the two immediately

preceding non-overlapping four-Quarter periods and (B) the immediately preceding

sixteen-Quarter period equaled or exceeded the Minimum Quarterly Distribution on

each of the Common Units and Subordinated Units during such periods, and (iii)

there are no Arrearage Balances on the Common Units; and

 

          (b) the date on which the General Partner is removed as general

partner of the Partnership upon the requisite vote by Limited Partners under

circumstances where Cause does not exist.

 

     "SUBSIDIARY" means, with respect to any Person, (a) a corporation of which

more than 50% of the voting power of shares entitled (without regard to the

occurrence of any contingency) to vote in the election of directors or other

governing body of such corporation is owned, directly or indirectly, by such

Person, by one or more Subsidiaries of such Person or a combination thereof, (b)

a partnership (whether general or limited) in which such Person or a Subsidiary

of such Person is, at the date of determination, a general or limited partner of

such partnership, but only if more than 50% of the partnership interests of such

partnership (considering all of the partnership interests of the partnership as

a single class) is owned or controlled, directly or indirectly, by such Person,

by one or more Subsidiaries of such Person, or a combination thereof, or (c) any

other Person (other than a corporation or a partnership) in which such Person,

directly or indirectly, at the date of determination, has (i) at least a

majority ownership interest or (ii) the power to elect or direct the election of

a majority of the directors or other governing body of such Person.

 

     "SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a Limited

Partner to the Partnership pursuant to Section 12.2 in place of and with all the

rights of a Limited Partner and who is shown as a Limited Partner on the books

and records of the Partnership.

 

     "SURVIVING BUSINESS ENTITY" has the meaning assigned to such term in

Section 16.2(b).

 

     "THIRD TARGET DISTRIBUTION" has the meaning assigned to such term in

Section 5.2.

 

     "TRADING DAY" has the meaning assigned to such term in Section 17.1(a).

 

     "TRANSFER" has the meaning assigned to such term in Section 11.1(a).

 

     "TRANSFER AGENT" means such bank, trust company or other Person (including

the General Partner or one of its Affiliates) as shall be appointed from time to

time by the Partnership to act as registrar and transfer agent for the Units.

 

     "TRANSFER APPLICATION" means an application and agreement for transfer of

Units in the form set forth on the back of a Certificate or in a form

substantially to the same effect in a separate instrument.

 

     "UNDERWRITER" means each Person named as an underwriter in Schedule 1 to

the Underwriting Agreement who purchases Common Units pursuant thereto.

 

     "UNDERWRITING AGREEMENT" means the Underwriting Agreement dated April 12,

1995, among the Underwriters, the Partnership and other parties providing for

the purchase of Common Units by such Underwriters.

 

     "UNIT" means a Partnership Interest of a Limited Partner or Assignee in the

Partnership representing a fractional part of the Partnership Interests of all

Limited Partners and Assignees and shall include, without limitation, Common

Units and Subordinated Units; provided, that each Common Unit at any time

Outstanding shall represent the same fractional part of the Partnership

Interests of all Limited Partners and Assignees holding Common Units as each

other Common Unit and each Subordinated Unit at any time Outstanding shall

represent the same fractional part of the Partnership Interests of all Limited

Partners and Assignees holding Subordinated Units as each other Subordinated

Unit.

 

     "UNIT MAJORITY" means, during the Subordination Period, at least a majority

of the Outstanding Units of each class and, thereafter, at least a majority of

the Outstanding Units.

 

      "WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to such term in

Section 13.1(b).

 

                                       10

<PAGE>

 

                                   ARTICLE III

 

                                     PURPOSE

 

     3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be

conducted by the Partnership shall be to (a) serve as a limited partner in the

Operating Partnership and, in connection therewith, to exercise all the rights

and powers conferred upon the Partnership as a limited partner in the Operating

Partnership pursuant to the Operating Partnership Agreement or otherwise, (b)

engage directly in, or to enter into or form any corporation, partnership, joint

venture, limited liability company or other arrangement to engage indirectly in,

any business activity that the Operating Partnership is permitted to engage in

by the Operating Partnership Agreement and, in connection therewith, to exercise

all of the rights and powers conferred upon the Partnership pursuant to the

agreements relating to such business activity, (c) engage directly in, or to

enter into or form any corporation, partnership, joint venture, limited

liability company or other arrangement to engage indirectly in, any business

activity that is approved by the General Partner and which lawfully may be

conducted by a limited partnership organized pursuant to the Delaware Act and,

in connection therewith, to exercise all of the rights and powers conferred upon

the Partnership pursuant to the agreements relating to such business activity,

and (d) do anything necessary or appropriate to the foregoing, including the

making of capital contributions or loans to the Operating Partnership. The

General Partner has no obligation or duty to the Partnership, the Limited

Partners, or the Assignees to propose or approve, and in its sole discretion may

decline to propose or approve, the conduct by the Partnership of any business.

 

     3.2 POWERS. The Partnership shall be empowered to do any and all acts and

things necessary, appropriate, proper, advisable, incidental to or convenient

for the furtherance and accomplishment of the purposes and business described in

Section 3.1 and for the protection and benefit of the Partnership.

 

                                       11

<PAGE>

 

                                   ARTICLE IV

 

                             CONTRIBUTIONS AND UNITS

 

     4.1 ORGANIZATION CONTRIBUTIONS AND RETURN. In connection with the formation

of the Partnership under the Delaware Act, the General Partner made a

Contribution to the Partnership in the amount of $10 for an interest in the

Partnership and has been admitted as the general partner of the Partnership, and

the Organizational Limited Partner made a Contribution to the Partnership in the

amount of $990 for an interest in the Partnership and has been admitted as a

limited partner of the Partnership. As of the Closing Date, after giving effect

to the transactions contemplated by Sections 4.2 and 4.3, the interest of the

Organizational Limited Partner shall be terminated; the Contributions of each

partner shall be refunded; and the Organizational Limited Partner shall cease to

be a Limited Partner of the Partnership. Ninety-nine percent of any interest or

other profit that may have resulted from the investment or other use of such

initial Contributions shall be allocated and distributed to the Organizational

Limited Partner, and the balance thereof shall be allocated and distributed to

the General Partner.

 

     4.2 GENERAL PARTNER AND PETROLANE CONTRIBUTIONS. (a) On the Closing Date

and pursuant to the Merger and Contribution Agreement, the General Partner shall

contribute to the Partnership a limited partner interest in the Operating

Partnership in exchange for (i) the continuation of its Partnership Interest as

general partner in the Partnership, (ii) 2,922,235 Common Units, and (iii)

13,350,146 Subordinated Units. On the Closing Date and pursuant to the

Conveyance and Contribution Agreement, Petrolane, or Petrolane and one of its

Subsidiaries, shall contribute to the Partnership limited partner interests in

the Operating Partnership in exchange for an aggregate of 1,407,911 Common Units

and 6,432,000 Subordinated Units. The limited partner interests in the Operating

Partnership contributed by the General Partner and Petrolane, together with the

interest previously held by the Partnership, will represent a 98.9899%

Percentage Interest (as defined in the Operating Partnership Agreement) in the

Operating Partnership.

 

     (b) Upon the making of any Contribution to the Partnership by any person,

the General Partner shall be required to make an additional Contribution in an

amount equal to 1/99th of the Net Agreed Value of the additional Contribution

made by such Person.

 

     4.3 CONTRIBUTIONS BY INITIAL LIMITED PARTNERS. On the Closing Date, subject

to completion of the Contributions referred to in Section 4.2, each Underwriter

shall contribute to the Partnership cash in an amount equal to the Issue Price

per Common Unit, multiplied by the number of Common Units specified in the

Underwriting Agreement to be purchased by such Underwriter at the "First Closing

Date," as such term is defined in the Underwriting Agreement. In exchange for

such Contributions by the Underwriters, the Partnership shall issue Common Units

to each Underwriter on whose behalf such Contribution is made in an amount equal

to the quotient obtained by dividing (i) the cash contribution to the

Partnership by or on behalf of such Underwriter by (ii) the Issue Price per

Common Unit.

 

     4.4 ISSUANCES OF ADDITIONAL PARTNERSHIP SECURITIES. (a) Subject to Section

4.5, the General Partner is authorized to cause the Partnership to issue

additional Partnership Securities for any Partnership purpose at any time and

from time to time to such Persons for such consideration and on such terms and

conditions as shall be established by the General Partner in its sole

discretion, all without the approval of any Limited Partners.

 

     (b) Each additional Partnership Security authorized to be issued by the

Partnership pursuant to Section 4.4(a) may be issued in one or more classes, or

one or more series of any such classes, with such designations, preferences,

rights, powers and duties (which may be senior to existing classes and series of

Partnership Securities), as shall be fixed by the General Partner in the

exercise of its sole discretion, including (i) the right to share Partnership

profit and losses or items thereof; (ii) the right to share in Partnership

distributions; (iii) the rights upon dissolution and liquidation of the

Partnership; (iv) whether, and the terms and conditions upon which, the

Partnership may redeem the Partnership Security; (v) whether such Partnership

Security is issued with the privilege of conversion and, if so, the terms and

conditions of such conversion; (vi) the terms and conditions upon which each

Partnership Security will be issued, evidenced by certificates and assigned or

transferred; and (vii) the right, if any, of each such Partnership Security to

vote on Partnership matters, including matters relating to the relative rights,

preferences and privileges of such Partnership Security.

 

     (c) The General Partner is hereby authorized and directed to take all

actions that it deems necessary or appropriate in connection with each issuance

of Partnership Securities pursuant to Section 4.4 and to amend this Agreement in

any

 

                                       12

<PAGE>

 

manner that it deems necessary or appropriate to provide for each such issuance,

to admit Additional Limited Partners in connection therewith and to specify the

relative rights, powers and duties of the holders of the Units or other

Partnership Securities being so issued. The General Partner shall do all things

necessary to comply with the Delaware Act and is authorized and directed to do

all things it deems to be necessary or advisable in connection with any future

issuance of Partnership Securities, including compliance with any statute, rule,

regulation or guideline of any federal, state or other governmental agency or

any National Securities Exchange on which the Units or other Partnership

Securities are listed for trading.

 

      4.5 LIMITATIONS ON ISSUANCE OF ADDITIONAL PARTNERSHIP SECURITIES. The

issuance of Partnership Securities pursuant to Section 4.4 shall be subject to

the following restrictions and limitations:

 

      (a) During the Subordination Period, the Partnership shall not issue an

aggregate of more than 9,400,000 additional Parity Units without the prior

approval of holders of at least a majority of the Outstanding Common Units,

except as provided in Sections 4.5(b) and (c). In applying this limitation,

there shall be excluded Common Units issued in connection with (i) the exercise

of the Overallotment Option, (ii) conversion of Subordinated Units pursuant to

Section 4.6, and (iii) any employee benefit plan, employee program or employee

practice maintained or sponsored by the Partnership or the General Partner or

any of its Affiliates as provided in Section 6.4(c).

 

      (b) The Partnership may also issue an unlimited number of Parity Units

prior to the end of the Subordination Period and without the approval of the

Unitholders if such issuance occurs (i) in connection with an Acquisition or a

Capital Improvement or (ii) within 270 days of, and the net proceeds from such

issuance are used to repay debt incurred in connection with, an Acquisition or a

Capital Improvement, in each case where such Acquisition or Capital Improvement

involves assets that, if acquired by the Partnership as of the date that is one

year prior to the first day of the Quarter in which such Acquisition is to be

consummated or such Capital Improvement is to be completed, would have resulted

in an increase in

 

            (i) the amount of Adjusted Operating Surplus generated by the

Partnership on a per-Unit basis (for all Outstanding Units) with respect to each

of the four most recently completed Quarters over

 

            (ii) the actual amount of Adjusted Operating Surplus generated by

the Partnership on a per-Unit basis (for all Outstanding Units) with respect to

each of such four Quarters.

 

The amount in clause (i) shall be determined on a pro forma basis assuming that

(A) all of the Parity Units to be issued in connection with or within 270 days

of such Acquisition or Capital Addition and Improvement had been issued and

outstanding, (B) all indebtedness for borrowed money to be incurred or assumed

in connection with such Acquisition or Capital Improvement (other than any such

indebtedness that is to be repaid with the proceeds of such offering) had been

incurred or assumed, in each case as of the commencement of such four-Quarter

period, (C) the personnel expenses that would have been incurred by the

Partnership in the operation of the acquired assets are the personnel expenses

for employees to be retained by the Partnership in the operation of the acquired

assets, and (D) the non-personnel costs and expenses are computed on the same

basis as those incurred by the Partnership in the operation of the Partnership's

business at similarly situated Partnership facilities.

 

      (c) The Partnership may also issue an unlimited number of Parity Units

prior to the end of the Subordination Period and without the approval of the

Unitholders if the use of proceeds from such issuance is exclusively to repay up

to an aggregate of $150,000,000 of long-term indebtedness of the Partnership or

the Operating Partnership, in each case only where the aggregate amount of

distributions that would have been paid with respect to such newly issued Units

and the related additional distributions that would have been made to the

General Partner in respect of the four-Quarter period ending prior to the first

day of the Quarter in which the issuance is to be consummated (assuming such

Units had been outstanding throughout such period and that distributions equal

to the distributions that were actually paid on the outstanding Units during the

period were paid on such Units) did not exceed the interest costs actually

incurred during such period on the indebtedness that is to be repaid (or, if

such indebtedness was not outstanding throughout the entire period, would have

been incurred had such indebtedness been outstanding for the entire period).

 

      (d) During the Subordination Period, the Partnership shall not issue

additional Partnership Securities having rights to distributions or in

liquidation ranking prior or senior to the Common Units, without the prior

approval of holders of at least a majority of the Outstanding Common Units.

 

                                        13

<PAGE>

 

      (e) No fractional Units shall be issued by the Partnership.

 

      4.6 CONVERSION OF SUBORDINATED UNITS. (a) A total of 4,945,537

Subordinated Units will convert into Common Units on the first day after the

Record Date for distribution in respect of any Quarter ending on or after March

31, 1998, and an additional 4,945,537 Subordinated Units will convert into

Common Units on the first day after the Record Date for distributions in respect

of any Quarter ending on or after March 31, 1999, in respect of which

 

            (i) for each of the three consecutive non-overlapping four-Quarter

periods immediately preceding such date, distributions under Section 5.3 at

least equal the sum of the Minimum Quarterly Distributions for each Quarter (as

prorated for the actual length of the period from the Closing Date through March

30, 1996) on all Outstanding Common Units and Subordinated Units during such

period;

 

            (ii) the Adjusted Operating Surplus generated during the immediately

preceding twelve-Quarter period at least equals the sum of the Minimum Quarterly

Distributions for each Quarter (as prorated for the actual length of the period

from the Closing Date through March 30, 1996) on all Outstanding Common Units

and Subordinated Units during such period;

 

            (iii) the Arrearages Balances on the Common Units are zero;

 

            (iv) the General Partner makes a good faith estimate (in connection

with which the General Partner shall be entitled to make such assumptions as in

its sole discretion it believes are reasonable) that the Partnership will, with

respect to the four-Quarter period commencing with such date, generate Adjusted

Operating Surplus in an amount at least equal to the sum of the Minimum

Quarterly Distributions on all Outstanding Common Units and Subordinated Units;

and

 

            (v) the General Partner shall obtain Special Approval that it has

complied with the provisions of Section 4.6(a)(iv).

 

In the event less than all of the Outstanding Subordinated Units shall convert

into Common Units pursuant to this Section 4.6(a) at a time when there shall be

more than one holder of Subordinated Units, then, unless all of the holders of

Subordinated Units shall agree to a different allocation, the Subordinated Units

that are to be converted into Common Units shall be allocated among the holders

of Subordinated Units pro rata in respect of the number of Subordinated Units

held by each such holder.

 

      (b) The remaining Subordinated Units shall convert into Common Units on

the first day following the Record Date for distributions in respect of the

final quarter of the Subordination Period.

 

      (c) On the date a Subordination Unit is converted, it shall possess all

the rights and obligations of Common Units. Prior to such time, a Subordinated

Unit shall have all of the rights and obligations of a Common Unit, except with

respect to the right to vote on or approve matters requiring the vote or

approval of a percentage of the holders of Outstanding Common Units and the

right to participate in distributions made with respect to Common Units.

 

      4.7 LIMITED PREEMPTIVE RIGHTS. No Person shall have any preemptive,

preferential or other similar right with respect to the issuance of any

Partnership Security, whether unissued, held in the treasury or hereafter

created, except that the General Partner shall have the right, which it may from

time to time assign in whole or in part to any of its Affiliates, to purchase

Partnership Securities from the Partnership whenever, and on the same terms

that, the Partnership issues Partnership Securities to Persons other than the

General Partner and its Affiliates, to the extent necessary to maintain the

Percentage Interests of the General Partner and its Affiliates equal to that

which existed immediately prior to the issuance of such Partnership Securities.

 

      4.8 SPLITS AND COMBINATIONS. (a) Subject to Sections 4.8(d) and 5.8

(dealing with adjustments of distribution levels), the General Partner may make

a pro rata distribution of Partnership Securities to all Record Holders or may

effect a subdivision or combination of Partnership Securities so long as, after

any such event, each Partner shall have the same Percentage Interest in the

Partnership as before such event, and the Investment Balance, Arrearage Balance,

Initial Unit Price and other amounts calculated on a per Unit basis are

proportionately adjusted retroactive to the beginning of the Partnership.

 

                                       14

<PAGE>

 

      (b) Whenever such a distribution, subdivision or combination of

Partnership Securities is declared, the General Partner shall select a Record

Date as of which the distribution, subdivision or combination shall be effective

and shall send notice thereof at least 20 days prior to such Record Date to each

Record Holder as of the date not less than 10 days prior to the date of such

notice. The General Partner also may cause a firm of independent public

accountants selected by it to calculate the number of Units to be held by each

Record Holder after giving effect to such distribution, subdivision or

combination. The General Partner shall be entitled to rely on any certificate

provided by such firm as conclusive evidence of the accuracy of such

calculation.

 

      (c) Promptly following any such distribution, subdivision or combination,

the General Partner may cause Certificates to be issued to the Record Holders of

Units as of the applicable Record Date representing the new number of Units held

by such Record Holders, or the General Partner may adopt such other procedures

as it may deem appropriate to reflect such changes. If any such combination

results in a smaller total number of Units Outstanding, the General Partner

shall require, as a condition to the delivery to a Record Holder of such new

Certificate, the surrender of any Certificate held by such Record Holder

immediately prior to such Record Date.

 

      (d) The Partnership shall not issue fractional Units upon any

distribution, subdivision or combination of Units. If a distribution,

subdivision or combination of Units would result in the issuance of fractional

Units but for the provisions this Section 4.8(d), each fractional Unit shall be

rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next

higher Unit).

 

      4.9 INTEREST AND WITHDRAWAL. No interest shall be paid by the Partnership

on Contributions, and no Partner shall be entitled to withdraw any part of its

Contributions or otherwise to receive any distribution from the Partnership,

except as provided in Section 4.1 and Articles V, VII, XIII and XIV.

 

                                    ARTICLE V

 

                                  DISTRIBUTIONS

 

      5.1 GENERAL PROVISIONS. The General Partner shall determine each date on

which a distribution will be made, the Available Cash or other applicable amount

to be distributed on such date, and the Record Holders for such distribution,

subject to the following:

 

            (a) Amount of Available Cash and Operating Surplus. The General

Partner shall determine the amount of Available Cash and Operating Surplus with

respect to each Quarter ending before the Liquidation Date within 45 days

following the end of such Quarter. Such determination shall be made by reference

to the books and records of the Partnership Group and, if made in good faith,

shall be conclusive. Promptly following such determination, the amount

distributable pursuant to Section 5.3, 5.4 or 5.5 hereof with respect to such

prior Quarter shall be distributed to the Partners.

 

            (b) Source of Distributions. All distributions for each Quarter

prior to the Liquidation Date shall be deemed to be out of Operating Surplus

until such surplus is reduced to zero. Available Cash in excess of Operating

Surplus shall be distributed as provided in Section 5.5.

 

            (c) Payments Other Than Distributions. Amounts payable as

compensation or reimbursement to the General Partner, or amounts payable to any

person other than in his capacity as a Partner, such as for goods or services,

shall not be treated as distributions.

 

            (d) Record Holder Identification. Any amount otherwise distributable

to a Record Holder may be withheld without interest until ten days after such

Record Holder has provided the Partnership with his taxpayer identification

number (and if such Record Holder is a nominee holding for the account of

another Person, the taxpayer identification number of such other Person).

 

            (e) Gross Income Limitation. Distributions for a Quarter shall be

made other than to the Partners Pro Rata only if and to the extent that the

Partnership has gross income for such Quarter equal to the amount that is not

being distributed to the Partners Pro Rata. Any amount not distributed for a

Quarter because of the foregoing limitation shall be distributed in the next

succeeding Quarter(s) in which gross income exceeds non-Pro Rata distributions.

 

                                       15

<PAGE>

 

            (f) Entity-Level Tax Payments. The General Partner is authorized to

take any action it determines in its sole discretion to be necessary or

appropriate to cause the Partnership to comply with any withholding requirements

established under the Code or any other law. Whether or not pursuant to any

withholding requirement, if the Partnership is required or elects to pay any tax

on behalf of the General Partner, current Unitholder, or former Unitholder that

is attributable to the Partnership, the General Partner is authorized to pay

such taxes from Partnership funds. To the extent feasible, each such payment

shall be treated as a distribution pursuant to Article V in respect of the

person on whose behalf the payment was made. If the payment is made on behalf of

a person whose identity cannot be determined, the General Partner is authorized

to treat the payment as a distribution to current Unitholders of the same class

as the obligor, or if the class is not known, to all Unitholders. Alternatively,

the General Partner may elect to treat an amount paid on behalf of the General

Partner and Unitholders as an expenditure of the Partnership if the amount paid

on behalf of the General Partner is not substantially greater per Percentage

Interest than that paid on behalf of Unitholders.

 

      5.2 DISTRIBUTION LEVELS. Subject to the adjustments provided in Section

5.8, each defined distribution level ("Distribution Level") for a Quarter means

the following:

 

            (a) Minimum Quarterly Distribution means $.550 per Unit.

 

            (b) First Target Distribution means $.055 per Unit.

 

            (c) Second Target Distribution means $.091 per Unit.

 

            (d) Third Target Distribution means $.208 per Unit.

 

      5.3 OPERATING DISTRIBUTIONS DURING SUBORDINATION PERIOD. Subject to

Section 5.1, for each Quarter during the Subordination Period and prior to the

Liquidation Date, Available Cash not in excess of Operating Surplus shall be

distributed in the following priorities:

 

            (a) first, 1% to the General Partner and 99% in respect of Common

Units Pro Rata until the amount distributed per Common Unit equals the Minimum

Quarterly Distribution;

 

            (b) then, 1% to the General Partner and 99% in respect of Common

Units Pro Rata until the amount distributed for each Common Unit equals its

Arrearage Balance as of the end of such Quarter;

 

            (c) then, 1% to the General Partner and 99% in respect of

Subordinated Units until the amount distributed per Subordinated Unit equals the

Minimum Quarterly Distribution; and

 

            (d) thereafter, in the percentages, priorities and amounts provided

in Sections 5.4(b) through (e).

 

      5.4 OPERATING DISTRIBUTIONS AFTER SUBORDINATION PERIOD. Subject to Section

5.1, for each Quarter after the Subordination Period and before the Liquidation

Date, Available Cash not in excess of Operating Surplus shall be distributed in

the following priorities:

 

            (a) first, 1% to the General Partner and 99% in respect of all Units

Pro Rata until the amount distributed per Unit equals the Minimum Quarterly

Distribution;

 

            (b) then, 1% to the General Partner and 99% in respect of all Units

Pro Rata until the amount distributed per Unit pursuant to this Section 5.4(b)

equals the First Target Distribution;

 

            (c) then, 14.1327% to the General Partner and 85.8673% in respect of

all Units Pro Rata until the amount distributed per Unit pursuant to this

Section 5.4(c) equals the Second Target Distribution;

 

            (d) then, 24.2347% to the General Partner and 75.7653% in respect of

all Units Pro Rata until the amount distributed per Unit pursuant to this

Section 5.4(d) equals the Third Target Distribution; and

 

                                       16

<PAGE>

 

            (e) then, 49.4898% to the General Partner and 50.5102% in respect of

all Units Pro Rata.

 

      5.5 CAPITAL DISTRIBUTIONS. Available Cash in excess of Operating Surplus

as of the end of a Quarter ending prior to the Liquidation Date ("Capital

Surplus") shall be distributed to the Partners Pro Rata until the aggregate

amount distributed under this Section 5.5 with respect to an Initial Common Unit

equals the Initial Unit Price. Thereafter, all Available Cash shall be

distributed pursuant to Sections 5.3 and 5.4, as applicable.

 

      5.6 LIQUIDATING DISTRIBUTIONS DURING SUBORDINATION PERIOD. If the

Liquidation Date occurs before the end of the Subordination Period, the amounts

available for distribution pursuant to Section 14.4(c) shall be distributed

after the Liquidation Date in the following priorities:

 

            (a) first, 1% to the General Partner and 99% in respect of Common

Units Pro Rata until the amounts distributed for all Quarters after the

Liquidation Date in respect of each Common Unit equals

 

                  (i) the sum of its Investment Balance, Arrearage Balance, and

Minimum Quarterly Distribution for the current Quarter, or, if less,

 

                  (ii) the sum of (A) the amount that would be distributable in

respect of a Common Unit if 99% of all distributions were made in respect of all

Units Pro Rata, plus (B) the amount that would be allocable to a Common Unit if

99% of the Net Liquidation Gain were allocated to all Common Units Pro Rata;

 

            (b) then, 1% to the General Partner and 99% in respect of

Subordinated Units Pro Rata until the amounts distributed in respect of each

Subordinated Unit equals the amount distributed to each Common Unit under

Section 5.6(a) to the extent of the Common Unit's Investment Balance and the

Minimum Quarterly Distribution for such Quarter; and

 

            (c) thereafter, in the percentages, priorities and amounts provided

in Sections 5.7(c) through (f).

 

      5.7 LIQUIDATING DISTRIBUTIONS AFTER SUBORDINATION PERIOD. If the

Liquidation Date occurs after the Subordination Period, the amounts available

for distribution pursuant to Section 14.4(c) shall be distributed after the

Liquidation Date in the following priorities:

 

            (a) first, 1% to the General Partner and 99% in respect of all Units

Pro Rata until the amounts distributed in respect of each Common Unit equals its

Investment Balance;

 

            (b) then, 1% to the General Partner and 99% in respect of all Units

Pro Rata until the aggregate amount distributed in respect of all Units

outstanding on the Liquidation Date equals the sum of the Minimum Quarterly

Distribution for each Quarter that each such Unit has been outstanding, less the

amounts previously distributed pursuant to Section 5.3(a) or (b) or Section

5.4(a) (Minimum Quarterly Distributions and Arrearage Balances) or this Section

5.7(b) in respect of all such Units for all such Quarters;

 

            (c) then, 1% to the General Partner and 99% in respect of all Units

Pro Rata until the aggregate amount distributed in respect of all Units

outstanding on the Liquidation Date equals the sum of the First Target

Distribution for each Quarter that each such Unit has been outstanding, less the

amounts previously distributed pursuant to Section 5.4(b) (First Target

Distributions) or this Section 5.7(c) in respect of all such Units for all such

Quarters;

 

            (d) then, 14.1327% to the General Partner and 85.8673% in respect of

all Units Pro Rata until the aggregate amount distributed in respect of all

Units outstanding on the Liquidation Date equals the sum of the Second Target

Distribution for each Quarter that each such Unit has been outstanding, less the

amounts previously distributed pursuant to Section 5.4(c) (Second Target

Distributions) or this Section 5.7(d) in respect of all such Units for all such

Quarters;

 

            (e) then, 24.2347% to the General Partner and 75.7653% in respect of

all Units Pro Rata until the aggregate amount distributed in respect of all

Units outstanding on the Liquidation Date equals the sum of the Third Target

Distribution for each Quarter that each such Unit has been outstanding, less the

amounts previously distributed pursuant to Section 5.4(d) (Third Target

Distributions) or this Section 5.7(e) in respect of all such Units for all such

Quarters; and

 

            (f) then, 49.4898% to the General Partner and 50.5102% in respect of

all Units Pro Rata.

 

                                       17

<PAGE>

 

      5.8 ADJUSTMENTS TO DISTRIBUTION LEVELS.

 

      (a) First Quarter Proration. For the period commencing on the Closing Date

and ending on June 30, 1995, the stated amount for each Distribution Level shall

be multiplied by a fraction whose numerator is the number of days in such period

and whose denominator is 90.

 

      (b) Capital Distribution Adjustment. Upon a distribution under Section

5.5, each Distribution Level shall be multiplied by a fraction whose numerator

is the Investment Balance of the Common Units immediately after giving effect to

such distribution and whose denominator is such Investment Balance immediately

before giving effect to such distribution. Each reduction shall apply to the

Quarter following the Quarter in which the distribution is made and to each

Quarter thereafter until further adjusted, but shall not reduce the level

applicable to any prior Quarter.

 

      (c) Splits and Combinations. Upon any distribution, split or combination

of Units provided under Section 4.8, each Distribution Level shall be

proportionately adjusted retroactive to the beginning of the Partnership.

 

      (d) Entity Level Taxation. If any federal, state or local income tax is at

any time imposed on the Partnership as a result of the enactment of legislation

or a modification in the interpretation by the relevant governmental authority

of existing language, then, beginning with the Quarter for which such tax is

first imposed, each Distribution Level will be multiplied by a percentage equal

to one minus the sum of (i) the maximum marginal federal income tax rate to

which the Partnership is subject as an entity plus (ii) any increase in the

effective overall state and local income tax rate to which the Partnership is

subject as a result of the new imposition of the entity level tax (after taking

into account the benefit of any deduction allowable for federal income tax

purposes with respect to the payment of state and local income taxes).

 

                                    ARTICLE VI

 

                      MANAGEMENT AND OPERATION OF BUSINESS

 

      6.1 MANAGEMENT. (a) The General Partner shall conduct, direct and manage

all activities of the Partnership. Except as otherwise expressly provided in

this Agreement, all management powers over the business and affairs of the

Partnership shall be exclusively vested in the General Partner, and no Limited

Partner or Assignee shall have any management power over the business and

affairs of the Partnership. In addition to the powers now or hereafter granted a

general partner of a limited partnership under applicable law or which are

granted to the General Partner under any other provision of this Agreement, the

General Partner, subject to Section 6.3, shall have full power and authority to

do all things and on such terms as it, in its sole discretion, may deem

necessary or appropriate to conduct the business of the Partnership, to exercise

all powers set forth in Section 3.2 and to effectuate the purposes set forth in

Section 3.1, including the following:

 

            (i) the making of any expenditures, the lending or borrowing of

money, the assumption or guarantee of, or other contracting for, indebtedness

and other liabilities, the issuance of evidences of indebtedness and the

incurring of any other obligations;

 

            (ii) the making of tax, regulatory and other filings, or rendering

of periodic or other reports to governmental or other agencies having

jurisdiction over the business or assets of the Partnership;

 

            (iii) the acquisition, disposition, mortgage, pledge, encumbrance,

hypothecation or exchange of any or all of the assets of the Partnership or the

merger or other combination of the Partnership with or into another Person;

 

            (iv) the use of the assets of the Partnership (including cash on

hand) for any purpose consistent with the terms of this Agreement, including the

financing of the conduct of the operations of the Partnership or the Operating

Partnership, the lending of funds to other Persons (including the Operating

Partnership, the General Partner and its Affiliates), the repayment of

obligations of the Partnership and the Operating Partnership and the making of

capital contributions to the Operating Partnership;

 

                                        18

<PAGE>

 

            (v) the negotiation, execution and performance of any contracts,

conveyances or other instruments (including instruments that limit the liability

of the Partnership under contractual arrangements to all or particular assets of

the Partnership, with the other party to the contract to have no recourse

against the General Partner or its assets other than its interest in the

Partnership, even if same results in the terms of the transaction being less

favorable to the Partnership than would otherwise be the case);

 

            (vi) the distribution of Partnership cash;

 

            (vii) the selection and dismissal of employees (including employees

having titles such as "president," "vice president," "secretary" and

"treasurer") and agents, outside attorneys, accountants, consultants and

contractors and the determination of their compensation and other terms of

employment or hiring;

 

            (viii) the maintenance of such insurance for the benefit of the

Partnership Group and the Partners as it deems necessary or appropriate;

 

            (ix) the formation of, or acquisition of an interest in, and the

contribution of property and the making of loans to, any further limited or

general partnerships, joint ventures, corporations or other relationships

(including the acquisition of interests in, and the contributions of property

to, the Operating Partnership from time to time);

 

            (x) the control of any matters affecting the rights and obligations

of the Partnership, including the bringing and defending of actions at law or in

equity and otherwise engaging in the conduct of litigation and the incurring of

legal expense and the settlement of claims and litigation;

 

            (xi) the indemnification of any Person against liabilities and

contingencies to the extent permitted by law;

 

            (xii) the entering into of listing agreements with The New York

Stock Exchange, Inc. and any other National Securities Exchange and the

delisting of some or all of the Units from, or requesting that trading be

suspended on, any such exchange (subject to any prior approval that may be

required under Section 1.6);

 

            (xiii) the purchase, sale or other acquisition or disposition of

Units; and

 

            (xiv) the undertaking of any action in connection with the

Partnership's participation in the Operating Partnership as the limited partner.

 

      (b) Notwithstanding any other provision of this Agreement, the Operating

Partnership Agreement, the Delaware Act or any applicable law, rule or

regulation, each of the Partners and Assignees and each other Person who may

acquire an interest in Units hereby (i) approves, ratifies and confirms the

execution, delivery and performance by the parties thereto of the Operating

Partnership Agreement, the Underwriting Agreement, the Conveyance and

Contribution Agreement, the Merger and Contribution Agreement, the agreements

and other documents filed as exhibits to the Registration Statement, and the

other agreements described in or filed as a part of the Registration Statement;

(ii) agrees that the General Partner (on its own or through any officer of the

Partnership) is authorized to execute, deliver and perform the agreements

referred to in clause (i) of this sentence and the other agreements, acts,

transactions and matters described in or contemplated by the Registration

Statement on behalf of the Partnership without any further act, approval or vote

of the Partners or the Assignees or the other Persons who may acquire an

interest in Units; and (iii) agrees that the execution, delivery or performance

by the General Partner, any Group Member or any Affiliate of any of them, of

this Agreement or any agreement authorized or permitted under this Agreement

(including the exercise by the General Partner or any Affiliate of the General

Partner of the rights accorded pursuant to Article XVII), shall not constitute a

breach by the General Partner of any duty that the General Partner may owe the

Partnership or the Limited Partners or the Assignees or any other Persons under

this Agreement (or any other agreements) or of any duty stated or implied by law

or equity.

 

      6.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner has caused the

Certificate of Limited Partnership to be filed with the Secretary of State of

the State of Delaware as required by the Delaware Act and shall use all

reasonable efforts to cause to be filed such other certificates or documents as

may be determined by the General Partner in its sole discretion to be reasonable

and necessary or appropriate for the formation, continuation, qualification and

operation of a limited partnership (or a partnership in which the limited

partners have limited liability) in the State of

 

                                       19

<PAGE>

 

Delaware or any other state in which the Partnership may elect to do business or

own property. To the extent that such action is determined by the General

Partner in its sole discretion to be reasonable and necessary or appropriate,

the General Partner shall file amendments to and restatements of the Certificate

of Limited Partnership and do all things to maintain the Partnership as a

limited partnership (or a partnership in which the limited partners have limited

liability) under the laws of the State of Delaware or of any other state in

which the Partnership may elect to do business or own property. Subject to the

terms of Section 7.5(a), the General Partner shall not be required, before or

after filing, to deliver or mail a copy of the Certificate of Limited

Partnership, any qualification document or any amendment thereto to any Limited

Partner or Assignee.

 

      6.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY. (a) The General Partner

may not, without written approval of the specific act by all of the Outstanding

Units or by other written instrument executed and delivered by all of the

Outstanding Units subsequent to the date of this Agreement, take any action in

contravention of this Agreement, including, except as otherwise provided in this

Agreement, (i) committing any act that would make it impossible to carry on the

ordinary business of the Partnership; (ii) possessing Partnership property, or

assigning any rights in specific Partnership property, for other than a

Partnership purpose; (iii) admitting a Person as a Partner; (iv) amending this

Agreement in any manner; or (v) transferring its interest as general partner of

the Partnership.

 

      (b) Except as provided in Articles XIV and XVI, the General Partner may

not sell, exchange or otherwise dispose of all or substantially all of the

Partnership's assets in a single transaction or a series of related transactions

or approve on behalf of the Partnership the sale, exchange or other disposition

of all or substantially all of the assets of the Operating Partnership, without

the approval of holders of at least a Unit Majority; provided, however, that

this provision shall not preclude or limit the General Partner's ability to

mortgage, pledge, hypothecate or grant a security interest in all or

substantially all of the Partnership's assets and shall not apply to any forced

sale of any or all of the Partnership's assets pursuant to the foreclosure of,

or other realization upon, any such encumbrance. Without the approval of holders

of at least a Unit Majority, the General Partner shall not, on behalf of the

Partnership, (i) consent to any amendment to the Operating Partnership Agreement

or, except as expressly permitted by Section 6.9(d), take any action permitted

to be taken by a partner of the Operating Partnership, in either case, that

would have a material adverse effect on the Partnership as a partner of the

Operating Partnership or (ii) except as permitted under Sections 11.2, 13.1 and

13.2, elect or cause the Partnership to elect a successor general partner of the

Operating Partnership.

 

      (c) At all times while serving as the general partner of the Partnership,

the General Partner shall not make any dividend or distribution on, or

repurchase any shares of, its stock or take any other action within its control

if the effect of such action would cause its net worth, independent of its

interest in the Partnership Group, to be less than $10 million.

 

      6.4 REIMBURSEMENT OF THE GENERAL PARTNER. (a) Except as provided in this

Section 6.4 and elsewhere in this Agreement or in the Operating Partnership

Agreement, the General Partner shall not be compensated for its services as

general partner of any Group Member.

 

      (b) The General Partner shall be reimbursed on a monthly basis, or such

other basis as the General Partner may determine in its sole discretion, for (i)

all direct and indirect expenses it incurs or payments it makes on behalf of the

Partnership (including salary, bonus, incentive compensation and other amounts

paid to any Person to perform services for the Partnership or for the General

Partner in the discharge of its duties to the Partnership), and (ii) all other

necessary or appropriate expenses allocable to the Partnership or otherwise

reasonably incurred by the General Partner in connection with operating the

Partnership's business (including expenses allocated to the General Partner by

its Affiliates). The General Partner shall determine the expenses that are

allocable to the Partnership in any reasonable manner determined by the General

Partner in its sole discretion. Reimbursements pursuant to this Section 6.4

shall be in addition to any reimbursement to the General Partner as a result of

indemnification pursuant to Section 6.7.

 

      (c) Subject to Section 4.5, the General Partner, in its sole discretion

and without the approval of the Limited Partners (who shall have no right to

vote in respect thereof), may propose and adopt on behalf of the Partnership

employee benefit plans, employee programs and employee practices (including

plans, programs and practices involving the issuance of Units), or issue

Partnership Securities pursuant to any employee benefit plan, employee program

or employee practice maintained or sponsored by the General Partner or any of

its Affiliates, in each case for the benefit of employees of the General

Partner, any Group Member or any Affiliate, or any of them, in respect of

services performed, directly or indirectly, for the benefit of the Partnership

Group. The Partnership agrees to issue and sell to the General Partner or any of

its Affiliates any Units or other Partnership Securities that the General

Partner or such

 

                                       20

<PAGE>

 

Affiliate is obligated to provide to any employees pursuant to any such employee

benefit plans, employee programs or employee practices. Expenses incurred by the

General Partner in connection with any such plans, programs and practices

(including the net cost to the General Partner or such Affiliate of Units or

other Partnership Securities purchased by the General Partner or such Affiliate

from the Partnership to fulfill options or awards under such plans, programs and

practices) shall be reimbursed in accordance with Section 6.4(b). Any and all

obligations of the General Partner under any employee benefit plans, employee

programs or employee practices adopted by the General Partner as permitted by

this Section 6.4(c) shall constitute obligations of the General Partner

hereunder and shall be assumed by any successor General Partner approved

pursuant to Section 13.1 or 13.2 or the transferee of or successor to all of the

General Partner's Partnership Interest as a general partner in the Partnership

pursuant to Section 11.2.

 

      6.5 OUTSIDE ACTIVITIES. (a) After the Closing Date, the General Partner,

for so long as it is the general partner of the Partnership, shall not engage in

any business or activity or incur any debts or liabilities except in connection

with or incidental to (i) its performance as general partner of one or more

Group Members or as described in or contemplated by the Registration Statement,

(ii) the acquiring, owning or disposing of debt or equity securities in any

Group Member, (iii) engaging in an activity permitted by Section 6.5(b), and

(iv) permitting its employees to perform services for its Affiliates, including

Affiliates engaging in an activity permitted by Section 6.5(b).

 

      (b) The General Partner or any of its Affiliates may engage in an activity

that is a Restricted Activity only if

 

            (i) the General Partner determines, prior to commencing such

activity, that it is inadvisable for the Partnership to engage in such activity

either because (A) of the financial commitments associated with such activity or

(B) such activity is not consistent with the Partnership's business strategy or

cannot otherwise be integrated with the Partnership's operations on a beneficial

basis, and such determination is approved by Special Approval;

 

            (ii) such activity arises as a result of an acquisition utilizing

primarily equity securities of a corporate Affiliate of the Partnership, and the

aggregate consideration paid in connection with such acquisition and all other

acquisitions of then-owned entities made pursuant to the exception provided by

this Section 6.5(b)(ii) does not exceed $50 million; or

 

            (iii) such activity arises as a result of an acquisition of stock of

one or more Special Propane Corporations, and the aggregate total assets of all

then-owned Special Propane Corporations acquired pursuant to the exception

provided by this Section 6.5(b)(iii) and owned for more than 24 months does not

exceed 10% of the total assets of the Partnership (in each case as such assets

shall be determined in accordance with generally accepted accounting

principles).

 

Subject to the restrictions of Section 6.5(c), the General Partner or its

Affiliates may engage in the activity described in Section 6.5(b), either

through the direct ownership of the assets of a business or indirectly through

the ownership of equity interests in a business, may sell or otherwise transfer

such assets or equity interests to any Group Member or any third person, and may

retain all the profits derived from any of the foregoing.

 

      (c) During the period the activity being undertaken pursuant to Section

6.5(b), is being carried on directly or indirectly by the General Partner or an

Affiliate, the personnel engaged in such activity shall not (A) attempt to sell

propane to persons to whom any Group Member is selling propane or (B) seek new

customers in geographical areas in which any Group Member is engaged in the

retail propane business and in which the business was not engaged at the time it

was acquired by the General Partner or an Affiliate.

 

      (d) Except as restricted by Sections 6.5(a), (b) or (c), each Indemnitee

shall have the right to engage in businesses of every type and description and

other activities for profit and to engage in and possess an interest in other

business ventures of any and every type or description, whether in businesses

engaged in or anticipated to be engaged in by any Group Member, independently or

with others, including business interests and activities in direct competition

with the business and activities of any Group Member, and none of the same shall

constitute a breach of this Agreement or any duty to any Group Member or any

Partner or Assignee. Neither any Group Member, any Limited Partner nor any other

Person shall have any rights by virtue of this Agreement, the Operating

Partnership Agreement or the partnership relationship established hereby or

thereby in any business ventures of any Indemnitee.

 

      (e) Notwithstanding anything to the contrary in