Exhibit 3.1






















            AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF

                         KANEB PIPE LINE PARTNERS, L.P.

                               SEPTEMBER 18, 1995

                            AS REVISED: JULY 23, 1998


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                                TABLE OF CONTENTS

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<CAPTION>
                                                                                                               Page
<S>      <C>                                                                                                   <C>
ARTICLE 1 DEFINITIONS.............................................................................................1
         Additional Limited Partner...............................................................................1
         Adjusted Capital Account.................................................................................1
         Adjusted Property........................................................................................1
         Affiliate................................................................................................2
         Agreed Allocation........................................................................................2
         Agreed Value.............................................................................................2
         Agreement................................................................................................2
         Assignee.................................................................................................2
         Assignment of Leases.....................................................................................2
         Available Cash...........................................................................................2
         Book-Tax Disparity.......................................................................................2
         Business Day.............................................................................................2
         Capital Account..........................................................................................2
         Capital Asset............................................................................................2
         Capital Contribution.....................................................................................2
         Carrying Value...........................................................................................2
         Cash from Interim Capital Transactions...................................................................3
         Cash from Operations.....................................................................................3
         Certificate..............................................................................................3
         Certificate of Limited Partnership.......................................................................3
         Citizenship Certification................................................................................3
         Closing Date.............................................................................................3
         Closing Price............................................................................................3
         Code.....................................................................................................3
         Combined Interest........................................................................................3
         Commission...............................................................................................3
         Common Unit..............................................................................................3
         Contributed Property.....................................................................................3
         Contributing Partner.....................................................................................3
         Contribution Agreement...................................................................................3
         Cumulative Preference Unit Deficiency....................................................................4
         Cumulative Senior Preference Unit Deficiency.............................................................4
         Curative Allocation......................................................................................4
         Current Market Price.....................................................................................4
         Delaware Act.............................................................................................4
         Departing Partner........................................................................................4
         Economic Risk of Loss....................................................................................4
         Eligible Citizen.........................................................................................4
         Exchange Act.............................................................................................4
         Exchangeable Amount......................................................................................4
         Exchange Date............................................................................................4
         Exchange Factor..........................................................................................4
         Expansive Capital Expenditures...........................................................................4
         First Liquidation Target Amount..........................................................................4
         First Target Distribution................................................................................4
         First Target Distribution Cumulative Deficiency..........................................................4
         General Partner..........................................................................................4
         General Partner Equity Value.............................................................................4
         Indemnitee...............................................................................................5
         Independent Committee....................................................................................5
         Initial Offering.........................................................................................5
         Interim Capital Transaction..............................................................................5
         Kaneb....................................................................................................5
         KPL......................................................................................................5
         Limited Partner..........................................................................................5
         Limited Partner Equity Value.............................................................................5
         Liquidating Trustee......................................................................................5
         LP Unit..................................................................................................5
         Majority Interest........................................................................................5
         Minimum Gain Attributable to Partner Nonrecourse Debt....................................................5
         Minimum Quarterly Distribution...........................................................................5
         NASDAQ...................................................................................................5
         National Securities Exchange.............................................................................6
         Net Agreed Value.........................................................................................6
         Net Income...............................................................................................6
         Net Loss.................................................................................................6
         Net Termination Sales Gain...............................................................................6
         Net Termination Sales Loss...............................................................................6
         New Entity...............................................................................................6
         Non-citizen Assignee.....................................................................................6
         Nonrecourse Built-in Gain................................................................................6
         Nonrecourse Deductions...................................................................................6
         Nonrecourse Liability....................................................................................6
         Notice of Election to Purchase...........................................................................6
         Operating Partnership....................................................................................6
         Operating Partnership Agreement:.........................................................................7
         Opinion of Counsel.......................................................................................7
         Outstanding..............................................................................................7
         Partner..................................................................................................7
         Partner Nonrecourse Debt.................................................................................7
         Partner Nonrecourse Deductions...........................................................................7
         Partnership..............................................................................................7
         Partnership Assets.......................................................................................7
         Partnership Interest.....................................................................................7
         Partnership Minimum Gain.................................................................................7
         Partnership Securities...................................................................................7
         Partnership Year.........................................................................................7
         Partnership's Accountants................................................................................7
         Payment Priority Agreement...............................................................................7
         Per Unit Capital Amount..................................................................................7
         Percentage Interest......................................................................................7
         Permitted Indebtedness...................................................................................8
         Person...................................................................................................8
         Pipeline System..........................................................................................8
         Preference Period........................................................................................8
         Preference Unit..........................................................................................8
         Preference B Unit........................................................................................8
         Preference Unit Deficiency...............................................................................8
         Preference B Unit Deficiency.............................................................................8
         Purchase Date............................................................................................8
         Recapture Income.........................................................................................8
         Recaptured Credits.......................................................................................8
         Reconstituted Partnership................................................................................8
         Record Date..............................................................................................8
         Record Holder............................................................................................8
         Redeemable Units.........................................................................................8
         Registrar................................................................................................8
         Registration Statement...................................................................................9
         Remaining Capital........................................................................................9
         Required Allocation......................................................................................9
         Residual Gain............................................................................................9
         Residual Loss............................................................................................9
         Second Liquidation Target Amount.........................................................................9
         Second Target Distribution...............................................................................9
         Second Target Distribution Cumulative Deficiency.........................................................9
         Section 754 Election.....................................................................................9
         Securities Act...........................................................................................9
         Senior Preference Unit...................................................................................9
         Senior Preference Unit Deficiency........................................................................9
         Special Approval.........................................................................................9
         Substituted Limited Partner..............................................................................9
         Subsidiaryof any Person..................................................................................9
         Subsidiary...............................................................................................9
         Subsidiary Partnership Agreement.........................................................................9
         Surviving Business Entity................................................................................9
         Terminating Capital Transaction.........................................................................10
         Third Liquidation Target Amount.........................................................................10
         Third Target Distribution...............................................................................10
         Third Target Distribution Cumulative Deficiency.........................................................10
         Trading Day.............................................................................................10
         Transfer Agent..........................................................................................10
         Transfer Application....................................................................................10
         Underwriting Agreement..................................................................................10
         Unit Certificate........................................................................................10
         Unit Price..............................................................................................10
         Unrealized Gain.........................................................................................10
         Unrealized Loss.........................................................................................10
         Unrecovered Capital.....................................................................................10


ARTICLE 2 FORMATION AND CONTINUATION OF PARTNERSHIP.............................................................11
         2.1  Formation and Continuation.........................................................................11
         2.2  Name...............................................................................................11
         2.3  Names and Addresses of Partners....................................................................11
         2.4  Principal Office of the Partnership; Registered Office and Agent...................................11
         2.5  Term...............................................................................................11
         2.6  Possible Restrictions on Transfer..................................................................11


ARTICLE 3 PURPOSE...............................................................................................12


ARTICLE 4 CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS...............................................................12
         4.1  Initial Contributions..............................................................................12
         4.2  Contributions on the Closing Date..................................................................12
         4.3  Additional Issuances of Securities.................................................................12
         4.4  Limitations on Issuances During the Preference Period..............................................13
         4.5  Capital Accounts...................................................................................13
         4.6  Interest...........................................................................................15
         4.7  No Withdrawal......................................................................................15
         4.8  Loans from Partners................................................................................15
         4.9  No Fractional LP Units.............................................................................15
         4.10  Record of Contributions...........................................................................15
         4.11  Splits and Combinations...........................................................................16
         4.12  No Preemptive Rights..............................................................................16


ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS.........................................................................16
         5.1  Allocations For Capital Account Purposes...........................................................16
         5.2  Allocations for Tax Purposes.......................................................................21
         5.3  Requirement and Characterization of Distributions..................................................22
         5.4  Distributions During Preference Period.............................................................23
         5.5  Distributions After Preference Period..............................................................24
         5.6  Distributions of Cash from Interim Capital Transactions............................................24
         5.7  Definitions........................................................................................25
         5.8  Adjustment of Distribution and Target Distribution Levels..........................................28
         5.9  Exchange of LP Units...............................................................................28
         5.10 Restrictions on Distributions  on, and Acquisitions of,  Preference  Units,  Preference B Units and Common Units
                  during the Preference Period...................................................................29
         5.11  Reimbursements and Payments.......................................................................29


ARTICLE 6 MANAGEMENT AND OPERATION OF BUSINESS..................................................................29
         6.1  Management.........................................................................................29
         6.2  Reliance By Third Parties..........................................................................31
         6.3  Purchase or Sale of LP Units.......................................................................31
         6.4  Compensation and Reimbursement of the General Partner..............................................31
         6.5  Partnership Funds..................................................................................32
         6.6  Loans from the General Partner; Contracts with Affiliates..........................................32
         6.7  Liability of Indemnitees...........................................................................32
         6.8  Indemnification....................................................................................33
         6.9  Other Matters Concerning the General Partner.......................................................34
         6.10  Registration Rights of KPL and its Affiliates.....................................................34
         6.11  Title to Partnership Assets.......................................................................35
         6.12  Resolution of Conflicts of Interest...............................................................35
         6.13  Restrictions on General Partner's Authority.......................................................36
         6.14  Outside Activities................................................................................37


ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............................................................38
         7.1  Limitation of Liability............................................................................38
         7.2  Management of Business.............................................................................38
         7.3  Outside Activities.................................................................................38
         7.4  Return of Capital..................................................................................38
         7.5  Access to Information..............................................................................38


ARTICLE 8 BOOKS, RECORDS, ACCOUNTING AND REPORTS................................................................39
         8.1  Records and Accounting.............................................................................39
         8.2  Fiscal Year........................................................................................39
         8.3  Reports............................................................................................39


ARTICLE 9 TAX MATTERS...........................................................................................39
         9.1  Section 754 Allocations............................................................................39
         9.2  Preparation of Tax Returns.........................................................................39
         9.3  Tax Elections......................................................................................40
         9.4  Tax Controversies..................................................................................40
         9.5  Tax Basis and Value Determinations.................................................................40
         9.6  Entity-Level Taxation..............................................................................40
         9.7  Entity-Level Deficiency Collections................................................................40
         9.8  Opinions of Counsel................................................................................41
         9.9  Withholding........................................................................................41
         9.10 General Partner Net Worth..........................................................................41


ARTICLE 10 POWER OF ATTORNEY....................................................................................41


ARTICLE 11 ISSUANCE OF UNIT CERTIFICATES........................................................................42
         11.1  Issuance of Unit Certificates.....................................................................42
         11.2  Registration, Registration of Transfer and Exchange...............................................42
         11.3  Lost, Stolen or Destroyed Certificates............................................................43
         11.4  Registered Owner..................................................................................43


ARTICLE 12 TRANSFER OF PARTNERSHIP INTERESTS....................................................................43
         12.1  Transfer..........................................................................................43
         12.2  Transfer of Interests of the General Partner......................................................44
         12.3  Transfer of LP Units..............................................................................44
         12.4  Restrictions on Transfers.........................................................................45
         12.5  Citizenship Certificates; Non-citizen Assignees...................................................45
         12.6  Redemption of Interests...........................................................................46


ARTICLE 13 ADMISSION OF PARTNERS................................................................................47
         13.1  Admission of Substituted Limited Partners.........................................................47
         13.2  Admission of Additional Limited Partners..........................................................47
         13.3  Admission of Successor or Additional General Partner..............................................48


ARTICLE 14 WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER.........................................................48
         14.1  Withdrawal or Removal of the General Partner......................................................48
         14.2  Withdrawal........................................................................................49
         14.3  Removal...........................................................................................49
         14.4  Opinion of Counsel................................................................................49
         14.5  Amendment of Certificate of Limited Partnership...................................................49
         14.6  Interest of Departing Partner and Successor.......................................................50


ARTICLE 15 DISSOLUTION AND LIQUIDATION..........................................................................51
         15.1  Dissolution.......................................................................................51
         15.2  Continuation of the Business of the Partnership...................................................51
         15.3  Liquidation.......................................................................................52
         15.4  Distribution in Kind..............................................................................52
         15.5  Cancellation of Certificate of Limited Partnership................................................53
         15.6  Reasonable Time for Winding Up....................................................................53
         15.7  Return of Contributions...........................................................................53
         15.8  No Capital Account Restoration....................................................................53
         15.9  Waiver of Partition...............................................................................53


ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE............................................53
         16.1  Amendments to be Adopted Solely by the General Partner............................................53
         16.2  Amendment Procedures..............................................................................54
         16.3  Special Amendment Requirements....................................................................54
         16.4  Meetings..........................................................................................54
         16.5  Notice of a Meeting...............................................................................55
         16.6  Record Date.......................................................................................55
         16.7  Adjournment.......................................................................................55
         16.8  Waiver of Notice..................................................................................55
         16.9  Quorum............................................................................................55
         16.10  Conduct of Meeting...............................................................................55
         16.11  Action Without a Meeting.........................................................................56
         16.12  Voting and Other Rights..........................................................................56


ARTICLE 17 MERGER...............................................................................................56
         17.1  Authority.........................................................................................56
         17.2  Procedure for Merger or Consolidation.............................................................57
         17.3  Approval by Limited Partners of Merger or Consolidation...........................................57
         17.4  Certificate of Merger.............................................................................58
         17.5  Effect of Merger..................................................................................58


ARTICLE 18 RIGHT TO PURCHASE LP UNITS...........................................................................58
         18.1  Right to Purchase.................................................................................58
         18.2  Procedure.........................................................................................58


ARTICLE 19 GENERAL PROVISIONS...................................................................................59
         19.1  Addresses and Notices.............................................................................59
         19.2  Consent of Limited Partners.......................................................................59
         19.3  Titles and Captions...............................................................................59
         19.4  Pronouns and Plurals..............................................................................59
         19.5  Further Action....................................................................................59
         19.6  Binding Effect....................................................................................59
         19.7  Integration.......................................................................................59
         19.8  Creditors.........................................................................................60
         19.9  Waiver............................................................................................60
         19.10  Counterparts.....................................................................................60
         19.11  Applicable Law...................................................................................60
         19.12  Invalidity of Provisions.........................................................................60

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APPENDIX A-1
APPENDIX A-2
APPENDIX A-3
APPENDIX A-4
APPENDIX B


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            AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF

                         KANEB PIPE LINE PARTNERS, L.P.


         This Amended and Restated  Agreement  of Limited  Partnership  of Kaneb
Pipe Line Partners, L.P. (herein called this ?Agreement?) is entered into by and
among  Kaneb Pipe Line  Company,  a  Delaware  corporation  (?KPL?),  as general
partner of the  Partnership,  and the limited  partners of the  Partnership,  as
hereinafter provided.

         WHEREAS,  KPL and the other parties  thereto  entered into that certain
Amended and Restated  Agreement of Limited  Partnership of the Partnership dated
as of September 27, 1989; and

         WHEREAS,  such  agreement was  subsequently  amended by Amendment No. 1
thereto dated July 28, 1994; and

         WHEREAS,  such  agreement  was  subsequently  amended  and  restated on
September 18, 1995; and

         WHEREAS, KPL now desires to further amend Section 5.9 of such agreement
as set forth herein and to restate the agreement of limited  partnership  of the
Partnership, as so amended ; and

         WHEREAS,  Section 16.1 of such agreement of limited partnership permits
the General  Partner to amend such  agreement to reflect a change  that,  in the
sole discretion of the General  Partner,  does not adversely  affect the Limited
Partners in any  material  respect or,  subject to Section 4.4, a change that is
necessary or desirable in connection  with the issuance of any class of LP Units
pursuant to Section 4.3; and

         WHEREAS,  the General  Partner has determined  that each of the changes
effected  hereby is  permitted  by an  amendment  to the  agreement  of  limited
partnership  of the  Partnership  effected  by the General  Partner  without the
consent of any Limited Partner or Assignee;

         NOW,  THEREFORE,  the General Partner does hereby amend and restate the
agreement of limited partnership of the Partnership to provide, in its entirety,
as follows:

                              ARTICLE 1 DEFINITIONS

         Unless  clearly  indicated to the  contrary,  the terms defined in this
Article 1 shall,  for the purposes of this  Agreement,  have the meanings herein
specified.

         Additional  Limited Partner:  A Person admitted to the Partnership as a
Limited  Partner  pursuant to Section 13.2 and who is shown as such on the books
and records of the Partnership.

         Adjusted  Capital  Account:  The Capital  Account  maintained  for each
Partner as of the end of each fiscal year of the  Partnership  (a)  increased by
any amounts  which such Partner is obligated to restore  under the standards set
by Treasury Regulation Section  1.704-1(b)(2)(ii)(c)  (or is deemed obligated to
restore under Treasury  Regulation Sections 1.704-2(g) and 1.704-2(i)(5) and (b)
decreased by (i) the amount of all losses and deductions  that, as of the end of
such fiscal  year,  are  reasonably  expected to be allocated to such Partner in
subsequent  years under  Sections  704(e)(2) and 706(d) of the Code and Treasury
Regulation Section  1.751-1(b)(2)(ii),  and (ii) the amount of all distributions
that, as of the end of such fiscal year, are  reasonably  expected to be made to
such Partner in subsequent  years in accordance with the terms of this Agreement
or otherwise to the extent they exceed  offsetting  increases to such  Partner's
Capital  Account that are reasonably  expected to occur during (or prior to) the
year in which such distributions are reasonably  expected to be made (other than
increases pursuant to a minimum gain chargeback  pursuant to Section 5.1.4.1 and
5.1.4.2,  5.1.4.2).  The  foregoing  definition of Adjusted  Capital  Account is
intended  to  comply  with  the  provisions  of  Treasury   Regulation   Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

         Adjusted  Property:  Any property the Carrying  Value of which has been
adjusted  pursuant to Section 4.5.4.1 or 4.5.4.2.  Once an Adjusted  Property is
deemed  distributed by, and recontributed to, the Partnership for federal income
tax purposes pursuant to Section 708 of the Code, such property shall thereafter
constitute a Contributed  Property  until the Carrying Value of such property is
further adjusted pursuant to Section 4.5.4.1 or 4.5.4.2.


         Affiliate: Any Person directly or indirectly controlling, controlled by
or under common control with the Person in question.  As used in this definition
of ?Affiliate?, the term ?control? means the possession, directly or indirectly,
of the power to direct or cause the direction of the  management and policies of
a Person,  whether  through the ownership of voting  securities,  by contract or
otherwise.

         Agreed Allocation: Any allocation, other than a Required Allocation, of
an item of income, gain, deduction or loss pursuant to the provisions of Section
5.1, including a Curative Allocation (if appropriate to the context in which the
term ?Agreed Allocation? is used).

         Agreed Value: Of any  Contributed  Property means the fair market value
of  such  property  or  other  consideration  at the  time  of  contribution  as
determined by the General Partner using such  reasonable  method of valuation as
it may adopt;  provided,  however,  that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon  termination
and  reconstitution  thereof  pursuant  to  Section  708 of the  Code  shall  be
determined in  accordance  with Section  4.5.3.  Subject to Section  4.5.3,  the
General  Partner  shall,  in its sole  discretion,  use such  method as it deems
reasonable and appropriate to allocate the aggregate Agreed Value of Contributed
Properties  contributed to the Partnership in a single or integrated transaction
among each  separate  property  on a basis  proportional  to their  fair  market
values.

         Agreement:  This Amended and Restated Agreement of Limited Partnership,
as it may be amended, supplemented or restated from time to time.

         Assignee: A Non-citizen Assignee or Person to whom one or more LP 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.

         Assignment  of Leases:  Collectively,  those two certain  Assignment of
Lease Agreements dated October 3, 1989, among KPL, Kaneb and the Partnership.

         Available Cash:  Has the meaning set forth in Section 5.7.1.

         Book-Tax Disparity: With respect to any item of Contributed Property or
Adjusted Property,  as of the date of any determination,  the difference between
the Carrying  Value of such  Contributed  Property or Adjusted  Property and the
adjusted  basis  thereof for  federal  income tax  purposes  as of such date.  A
Partner's  share  of  the  Partnership's  Book-Tax  Disparities  in  all  of its
Contributed  Property and Adjusted  Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
4.5 and the hypothetical  balance of such Partner's  Capital Account computed as
if it had been  maintained  strictly  in  accordance  with  federal  income  tax
accounting principles.

         Business Day:  Monday through Friday of each week,  except that a legal
holiday  recognized as such by the  Government of the United States or the State
of New York shall not be regarded as a Business Day.

         Capital  Account:  The  capital  account  maintained  for a Partner  or
Assignee pursuant to Section 4.5.

         Capital Asset: Any asset on the Partnership's balance sheet, other than
inventory, accounts receivable or any other current asset and assets disposed of
in connection with normal retirements or replacements.

         Capital ContributionCapital Contribution: Any cash, cash equivalents or
the Net Agreed Value of Contributed  Property which a Partner contributes to the
Partnership pursuant to Section 4.1, 4.2, 4.3, 4.5 or 14.6.2.2.


         Carrying Value: (a) With respect to a Contributed Property,  the Agreed
Value of such  property  reduced  (but  not  below  zero)  by all  depreciation,
amortization  and  cost  recovery   deductions  charged  to  the  Partner's  and
Assignee's  Capital  Accounts,  and (b) with  respect  to any other  Partnership
property,  the adjusted  basis of such property for federal income tax purposes,
all as of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Section  4.5.4.1 and 4.5.4.2,  and
to reflect  changes,  additions or other  adjustments  to the Carrying Value for
dispositions and acquisitions of Partnership  Assets,  as deemed  appropriate by
the General Partner.

         Cash from Interim  Capital  Transactions:  Has the meaning set forth in
Section 5.7.2.

         Cash from Operations: Has the meaning set forth in Section 5.7.3.

         Certificate:   A  certificate  issued  by  the  Partnership  evidencing
ownership of one or more LP Units.

         Certificate  of  Limited   Partnership:   The  Certificate  of  Limited
Partnership,  and any and all amendments thereto and restatements thereof, filed
on behalf of the Partnership as required under the Delaware Act.

         Citizenship  Certification:  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 his best knowledge such other Person) is an
Eligible Citizen.

         Closing Date:  October 3, 1989.

         Closing  Price:  With  respect  to any day means the last sale price on
such day,  regular  way,  or in case no such sale takes  place on such day,  the
average of the closing bid and asked prices on such day,  regular way, in either
case as reported on the principal consolidated transaction reporting system with
respect  to  securities  listed or  admitted  to  trading  on the New York Stock
Exchange  or, if the LP Units are not listed or  admitted  to trading on the New
York Stock  Exchange,  as reported  in the  principal  consolidated  transaction
reporting  system with respect to securities  listed on the National  Securities
Exchange  on which the LP Units are listed or  admitted or trading or, if the LP
Units are not listed or admitted to trading on any National Securities Exchange,
the last quoted price on such day or, if not so quoted,  the average of the high
bid and low asked prices on such day in the over-the-counter market, as reported
by NASDAQ or such other  system then in use, or, if on any such day the LP Units
are not quoted by any such  organization,  the  average of the  closing  bid and
asked prices on such day as furnished  by a  professional  market maker making a
market in the LP Units selected by the Independent  Committee or, if on such day
no market  maker is making a market in the LP Units,  the fair  market  value of
such LP Units  on such day as  determined  reasonably  and in good  faith by the
Independent Committee.

         Code:  The  Internal  Revenue  Code of 1986,  as amended and  hereafter
amended,  and  applicable  regulations  thereunder.  Any  reference  herein to a
specific  section or sections  of the Code or  applicable  regulations  shall be
deemed to include a reference  to any  corresponding  provision of future law or
regulation.

         Combined Interest: Has the meaning set forth in Section 14.6.1.

         Commission:  The Securities and Exchange Commission.

         Common Unit:  One of that certain  class of LP Units with those special
rights and  obligations  specified in this  Agreement as being  appurtenant to a
?Common Unit?.

         Contributed Property: Each property or other asset, in such form as may
be permitted  by the Delaware  Act,  but  excluding  cash and cash  equivalents,
contributed to the  Partnership  (or deemed  contributed  to the  Partnership on
termination and  reconstitution  thereof  pursuant to Section 708 of the Code or
otherwise).  Once the  Carrying  Value of a  Contributed  Property  is  adjusted
pursuant  to  Section  4.5.4.1,  such  property  shall no  longer  constitute  a
Contributed Property but shall be deemed an Adjusted Property for such purposes.

         Contributing  Partner:  Any  Partner  contributing  (or  deemed to have
contributed on the termination and reconstitution of the Partnership pursuant to
Section 708 of the Code or otherwise) Contributed Property to the Partnership.

         Contribution Agreement: That certain Contribution Agreement dated as of
October 3, 1989, among KPL, the Partnership, the Operating Partnership and Kaneb
wherein  KPL agrees  (i) to  contribute  to the  Operating  Partnership  certain
designated  assets  and the  Operating  Partnership  agrees  to  assume  certain
designated  liabilities and (ii) to contribute its limited  partner  interest in
the Operating Partnership to the Partnership in exchange for LP Units.

         Cumulative  Preference  Unit  Deficiency:  Has the meaning set forth in
Section 5.7.4.

         Cumulative  Preference B Unit Deficiency:  Has the meaning set forth in
Section 5.7.5.

         Cumulative Senior Preference Unit Deficiency: Has the meaning set forth
in Section 5.7.6.

         Curative  Allocation:  Any  allocation  of an  item  of  income,  gain,
deduction, loss or credit pursuant to the provisions of Section 5.1.4.11.

         Current  Market Price:  With respect to an LP Unit as of any date means
the  average  of the  daily  Closing  Price  per LP Unit for the 20  consecutive
Trading Days immediately prior to such date.

         Delaware Act: The Delaware  Revised Uniform Limited  Partnership Act (6
Del.  C.  ?17-101,  et seq.),  as it may be amended  from time to time,  and any
successor to such statute.

         Departing Partner:  A former General Partner,  as of the effective date
of any withdrawal or removal of such General Partner pursuant to Section 14.1.

         Economic Risk of Loss: Has the meaning set forth in Treasury Regulation
Section 1.752-2(a).

         Eligible Citizen:  A Person qualified to own interests in real property
in  jurisdictions  in which the  Partnership or the Operating  Partnership  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 the Partnership or the
Operating Partnership to a substantial risk of cancellation or forfeiture of any
of their property or any interest therein.

         Exchange Act: The Securities Exchange Act of 1934, as amended,  and any
successor to such statute.

         Exchangeable Amount: Has the meaning set forth in Section 5.9.1

         Exchange Date:  Has the meaning set forth in Section 5.9.1.

         Exchange Factor: Has the meaning set forth in Section 5.9.1.

         Expansive  Capital  Expenditures:  Cash  capital  expenditures  made to
increase  the  throughput  or  deliverable   capacity  or  terminaling  capacity
(assuming normal operating  conditions,  including down-time and maintenance) of
the assets of the  Partnership,  the Operating  Partnership  and any Subsidiary,
taken as a whole,  from the  throughput or  deliverable  capacity or terminaling
capacity  (assuming  normal  operating   conditions,   including  down-time  and
maintenance) existing immediately prior to such capital expenditures. Where cash
capital  expenditures are made in part to increase the throughput or deliverable
capacity or terminaling  capacity of the assets of the  Partnership,  taken as a
whole,  and in part  for  other  purposes,  the  General  Partner's  good  faith
allocation thereof between the portion  increasing  capacity and the portion for
other purposes shall be conclusive.

         First Liquidation  Target Amount:  Has the meaning set forth in Section
5.7.7.

         First Target Distribution: Has the meaning set
forth in Section 5.7.8.

         First Target Distribution  Cumulative  Deficiency:  Has the meaning set
forth in Section 5.7.9.

         General  Partner:  KPL or any successor or additional  General  Partner
admitted pursuant to Section 13.3.

         General Partner Equity Value: As of any date of determination, the fair
market value of the General  Partner's  Partnership  Interest  (including any LP
Units owned by the General Partner or any Affiliate of the General Partner),  as
determined by the General Partner using whatever  reasonable method of valuation
it may adopt.

         Indemnitee:  The General Partner, any Departing Partner, any Person who
is or was an  Affiliate of the General  Partner or any  Departing  Partner,  any
Person who is or was an officer, director,  employee,  partner, agent or trustee
of the General Partner or any Departing  Partner or any Affiliate of the General
Partner or Departing Partner, or any Person who is or was serving at the request
of the General Partner or any Departing  Partner or any Affiliate of the General
Partner or the  Departing  Partner as a director,  officer,  employee,  partner,
agent or trustee of another Person.

         Independent  Committee:  A committee  of the Board of  Directors of the
General  Partner  composed  entirely of directors  who are neither  officers nor
employees of Kaneb, the General Partner or any of their Affiliates.

         Initial  Offering:  The initial  public  offering of Senior  Preference
Units, as described in the Registration Statement.

         Interim  Capital  Transaction:  Has the  meaning  set forth in  Section
5.7.10.

         Kaneb:  Kaneb Services, Inc., a Delaware corporation.

         KPL:  Kaneb Pipe Line Company, a Delaware corporation.

         Limited Partner:  Kaneb, each Additional Limited Partner, any Departing
Partner  upon the change of its status from General  Partner to Limited  Partner
pursuant to Section  14.6.2,  each  Substituted  Limited Partner and, solely for
purposes of Articles 4, 5 and 6 and Sections 15.3 and 15.4, each Assignee.

         Limited  Partner  Equity Value:  As of any date of  determination,  the
amount  equal to the  product  of (a) the total  number of LP Units  Outstanding
(immediately  prior  to an  issuance  of LP  Units  or  distribution  of cash or
Partnership  property),  other than LP Units owned by the General  Partner or an
Affiliate  of the  General  Partner,  multiplied  by  (b)(i)  in the  case  of a
valuation  required by Section 4.5.4.1 (other than valuations caused by sales of
a de minimis  quantity of LP Units),  the price at which an LP Unit is purchased
from the  Partnership  or (ii) in the case of a  valuation  required  by Section
4.5.4.2 (or a  valuation  required  by Section  4.5.4.1  caused by sales of a de
minimis quantity of LP Units) the Closing Price.

         Liquidating Trustee: The General Partner, unless dissolution was caused
by an event  described  in Section  15.1.2 then the  liquidator  or  liquidating
committee chosen pursuant to Section 15.3.

         LP Unit: A Partnership Interest of a Limited Partner or Assignee in the
Partnership  representing  such fractional part of the Partnership  Interests of
all the Limited  Partners and  Assignees as shall be  determined  by the General
Partner   pursuant  to  this  Agreement  in  connection  with  the  issuance  of
Partnership   Interests  pursuant  to  Article  4  and  the  making  of  Capital
Contributions  by  Additional  Limited  Partners  and shall  include  the Senior
Preference  Units,  Preference  Units,  Preference  B Units  and  Common  Units;
provided,  however, that each LP Unit of any class at any time outstanding shall
represent the same fractional part of the Partnership Interests of such class of
all Limited Partners as each other LP Unit of such class.

         Majority Interest: Limited Partners holding more than 50% of the issued
and Outstanding LP Units at any given time, voting as a single class.

         Minimum Gain  Attributable  to Partner  Nonrecourse  Debt:  That amount
determined in accordance  with the  principles  of Treasury  Regulation  Section
1.704-2(i)(3).

         Minimum  Quarterly  Distribution:  Has the meaning set forth in Section
5.7.11.

         NASDAQ: The National Association of Securities Dealers,  Inc. Automated
Quotation System.

         National   Securities   Exchange:   An  exchange  registered  with  the
Commission under Section 6(a) of the Exchange Act.

         Net Agreed Value:  Means, (a) in the case of any Contributed  Property,
the Agreed Value of such property  reduced by any liabilities  either assumed by
the Partnership upon such contribution or to which such property is subject when
contributed  and (b) in the case of any  property  distributed  to a Partner  or
Assignee by the Partnership,  the Partnership's  Carrying Value of such property
at the time such property is  distributed,  reduced by any  indebtedness  either
assumed by such  Partner or  Assignee  upon such  distribution  or to which such
property is subject at the time of  distribution,  in either case, as determined
under Section 752 of the Code.

         Net  Income:  For any  taxable  period,  the  excess,  if  any,  of the
Partnership's  items of income and gain (other than those items  attributable to
dispositions  constituting  Terminating  Capital  Transactions) for such taxable
period  over the  Partnership's  items of loss and  deduction  (other than those
items   attributable   to   dispositions    constituting   Terminating   Capital
Transactions) for such taxable period.  The items included in the calculation of
Net Income shall be determined  in  accordance  with Section 4.5.2 and shall not
include any items  specially  allocated  under  Section  5.1.4.  Once an item of
income,  gain,  loss  or  deduction  that  has  been  included  in  the  initial
computation  of Net Income is subjected to a Required  Allocation  or a Curative
Allocation,  Net Income or the  resulting  Net Loss,  whichever the case may be,
shall be recomputed without regard to such item.

         Net  Loss:  For  any  taxable  period,  the  excess,  if  any,  of  the
Partnership's  items of loss and deduction (other than those items  attributable
to dispositions  constituting Terminating Capital Transactions) for such taxable
period over the  Partnership's  items of income and gain (other than those items
attributable to dispositions  constituting Terminating Capital Transactions) for
such taxable period.  The items included in the calculation of Net Loss shall be
determined  in  accordance  with  Section  4.5.2 and shall not include any items
specially  allocated under Section 5.1.4. Once an item of income,  gain, loss or
deduction  that has been  included  in the  initial  computation  of Net Loss is
subjected to a Required  Allocation  or a Curative  Allocation,  Net Loss or the
resulting Net Income,  whichever  the case may be, shall be  recomputed  without
regard to such item.

         Net  Termination  Sales  Gain:  Has the  meaning  set forth in  Section
5.7.12.

         Net  Termination  Sales  Loss:  Has the  meaning  set forth in  Section
5.7.13.

         New Entity:  Has the meaning set forth in Section 2.6.

         Non-citizen  Assignee:  A Person who 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 12.5.

         Nonrecourse  Built-in Gain: With respect to any Contributed  Properties
or  Adjusted  Properties  that are  subject to a  mortgage  or  negative  pledge
securing a Nonrecourse  Liability,  the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 5.2.2.1(A), 5.2.2.2(A) or 5.2.2.4
if  such  properties  were  disposed  of  in  a  taxable   transaction  in  full
satisfaction of such liabilities and for no other consideration.

         Nonrecourse  Deductions:  Any and  all  items  of  loss,  deduction  or
expenditure  (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b),  are attributable
to a Nonrecourse Liability.

         Nonrecourse Liability: Has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).

         Notice of  Election to  Purchase:  Has the meaning set forth in Section
18.2.1.

         Operating Partnership:  Kaneb Pipe Line Operating Partnership,  L.P., a
Delaware limited partnership  established pursuant to the Operating  Partnership
Agreement.

         Operating Partnership Agreement:  The Amended and Restated Agreement of
Limited  Partnership  of  the  Operating  Partnership  as  it  may  be  amended,
supplemented or restated from time to time.

         Opinion of Counsel:  A written  opinion of counsel  (who may be regular
counsel to the  Partnership  or the General  Partner)  acceptable to the General
Partner.

         Outstanding:  All LP  Units or other  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.

         Partner: A General Partner or a Limited Partner and solely for purposes
of Articles 4, 5 and 6 and Sections 15.3 and 15.4 shall include an Assignee.

         Partner  Nonrecourse  Debt:  Has the  meaning  set  forth  in  Treasury
Regulation Section 1.704-2(b)(4).

         Partner Nonrecourse Deductions: Any and all items of loss, deduction or
expenditure  (described in Section  705(a)(2)(B) of the Code) that in accordance
with the principles of Treasury Regulation Section 1.704-2(i),  are attributable
to a Partner Nonrecourse Debt.

         Partnership:  The limited  partnership  heretofore formed and continued
pursuant to this Agreement, and any successor thereto.

         Partnership  Assets:  All assets,  whether  tangible or intangible  and
whether real, personal or mixed, at any time owned by the Partnership.

         Partnership  Interest:  As to any Partner, all of the interests of that
Partner in the Partnership,  including,  without limitation,  his (i) right to a
distributive share of the profits and losses of the Partnership, (ii) right to a
distributive  share of  Partnership  Assets  and  (iii)  right,  if the  General
Partner, to participate in the management of the affairs of the Partnership.

         Partnership Minimum Gain: That amount determined in accordance with the
principles of Treasury Regulation Section 1.704-2(d).

         Partnership Securities: Has the meaning set forth in Section 4.3.1.

         Partnership Year: Means the fiscal year of the Partnership, which shall
be the calendar year.

         Partnership's   Accountants:   Such   nationally   recognized  firm  of
independent public accountants as is selected, from time to time, by the General
Partner.

         Payment  Priority  Agreement:   Means  that  certain  Payment  Priority
Agreement  dated  as  of  October  3,  1989,   between  KPL  and  the  Operating
Partnership.

         Per Unit Capital Amount: As of any date of  determination,  the Capital
Account,  stated on a per LP Unit basis  underlying any LP Unit held by a Person
other than the General Partner or any Affiliate of the General Partner who holds
LP Units.

         Percentage Interest: Means, as of the date of determination,  (a) as to
the  General  Partner in its  capacity  as such,  1/99th,  (b) as to any Limited
Partner or Assignee  holding LP Units,  the product of (i) 98/99  multiplied  by
(ii) the  quotient  of the  number of LP Units held by such  Limited  Partner or
Assignee divided by the total number of all LP Units then Outstanding; provided,
however,  that following any issuance of additional LP Units by the  Partnership
pursuant  to Section  4.3,  proper  adjustment  shall be made to the  Percentage
Interest represented by each LP Unit to reflect such issuance.


         Permitted  Indebtedness:   $45  million,  plus  80%  of  the  aggregate
Expansive Capital Expenditures of the Partnership since the Closing Date greater
than $45 million.  Permitted  Indebtedness shall be determined on a consolidated
basis.

         Person: Any individual,  corporation,  association,  partnership, joint
venture, trust, estate or other entity or organization.

         Pipeline System:  shall mean the refined  petroleum  products  pipeline
assets and related  terminal  facilities  that was  transferred to the Operating
Partnership by KPL on the Closing Date, as such  facilities may be maintained or
improved from time to time.

         Preference Period: Has the meaning set forth in Section 5.7.14.

         Preference  Unit:  One of that  certain  class of LP Units  with  those
special rights and obligations  specified in this Agreement as being appurtenant
to a ?Preference Unit?.

         Preference  B Unit:  One of that  certain  class of LP Units with those
special rights and obligations  specified in this Agreement as being appurtenant
to a ?Preference B Unit?.

         Preference  Unit  Deficiency:  Has the  meaning  set  forth in  Section
5.7.15.

         Preference  B Unit  Deficiency:  Has  the
meaning set forth in Section 5.7.16.

         Purchase Date: The date  determined by the General  Partner as the date
for  purchase  of all  Outstanding  LP Units  (other  than LP Units owned by the
General Partner and its Affiliates) pursuant to Section 18.2.

         Recapture  Income:  Any gain  recognized by the  Partnership  (computed
without  regard to any  adjustment  required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership,  which gain is
characterized  as  ordinary  income  because  it  represents  the  recapture  of
deductions previously taken with respect to such property or asset.

         Recaptured Credits: Credits previously taken against federal income tax
liability  which are  required  to be  recaptured  upon the  disposition  of any
property by the Partnership  prior to the end of such property's  useful life in
determining the amount of the credit relating thereto.

         Reconstituted  Partnership:  The new limited  partnership formed in the
manner described in Section 15.2.

         Record  Date:  The  date   established  by  the  General   Partner  for
determining  (i) the identity of Limited  Partners or Assignees,  if applicable,
entitled  to (a) notice of or to vote at any  meeting of Limited  Partners,  (b)
give  consent in writing in lieu of or in  connection  with a meeting of Limited
Partners or (c) exercise rights in respect of any other lawful action of Limited
Partners or (ii) the identity of Record Holders  entitled to receive any report,
distribution or notice.

         Record  Holder:  As applied to an LP Unit, the Person in whose name the
Unit  Certificate  evidencing  such LP Unit is issued  and in whose name such LP
Unit is  registered  on the books of the Registrar as of the opening of business
on a particular Business Day.

         Redeemable  Units: Any LP Units for which a redemption  notice has been
given and has not been withdrawn, under Section 12.6.

         Registrar:  American Stock Transfer & Trust Co., acting in its capacity
as a registered  transfer agent of the LP Units,  and any successor as registrar
of the LP Units.


         Registration   Statement:   The  Registration  Statement  on  Form  S-1
(Commission  File  No.  33-30330),  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 Senior  Preference
Units in the Initial Offering.

         Remaining Capital: Has the meaning set forth in Section 5.7.17.

         Required  Allocation:  Any  allocation  (or  limitation  imposed on any
allocation)  of an item of income,  gain,  deduction or loss pursuant to (a) the
proviso-clause  of Section  5.1.2.2  and  Sections  5.1.4.1,  5.1.4.2,  5.1.4.2,
5.1.4.4,   5.1.4.5,   5.1.4.6,   5.1.4.7,  and  5.1.4.9,  such  allocations  (or
limitations  thereon)  being  directly or  indirectly  required by the  Treasury
Regulations promulgated under Section 704(b) of the Code.

         Residual Gain or Residual  Loss:  Any item of gain or loss, as the case
may be, of the Partnership  recognized for federal income tax purposes resulting
from a sale, exchange or other disposition of a Contributed Property or Adjusted
Property,  to the extent such item of gain or loss is not allocated  pursuant to
Sections 5.2.2.1(A) or 5.2.2.2(A) to eliminate Book-Tax Disparities.

         Second  Liquidation Target Amount: Has the meaning set forth in Section
5.7.18.

         Second Target Distribution: Has the meaning provided in Section 5.7.19.

         Second Target Distribution  Cumulative Deficiency:  Has the meaning set
forth in Section 5.7.20.

         Section  754  Election:  An  election  under  Section  754 of the  Code
relating  to the  adjustment  of the  adjusted  basis of  Partnership  Assets as
provided in Sections 734 and 743 of the Code.

         Securities  Act:  The  Securities  Act of  1933,  as  amended,  and any
successor to such statute.

         Senior  Preference  Unit:  One of that  certain  class of LP Units with
those  special  rights and  obligations  specified  in this  Agreement  as being
appurtenant to a ?Senior Preference Unit?.

         Senior Preference Unit Deficiency: Has the meaning set forth in Section
5.7.21.

         Special Approval: Approval by a majority of the members of the Board of
Directors  of the General  Partner that  includes  approval by a majority of the
members of the Independent Committee.

         Substituted  Limited  Partner:  A Person who is  admitted  as a Limited
Partner in the Partnership pursuant to Section 13.1 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.

         Subsidiary of any Person:  Either (i) a corporation a majority of whose
voting  capital  stock is at the time,  directly  or  indirectly,  owned by such
Person,  by one or more subsidiaries of such Person or by such Person and one or
more  subsidiaries  of such Person,  (ii) a partnership  in which such Person or
subsidiary of such Person is, at the date of determination, a general or limited
partner  of such  partnership,  but only if such  Person  or its  subsidiary  is
entitled to receive  more than fifty  percent of the assets of such  partnership
upon its  dissolution,  or (iii) any other Person (other than a  corporation  or
partnership)  in which such Person,  a subsidiary  of such Person or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the date
of determination  thereof, has (x) at least a majority ownership interest or (y)
the power to elect or direct the  election  of a majority  of the  directors  or
other governing body of such Person.

         Subsidiary: Any subsidiary of the Partnership.

         Subsidiary Partnership  Agreement:  With respect to any Subsidiary that
is a  partnership,  the agreement of the partners  thereof as to the affairs and
the conduct of the business of such partnership.

         Surviving Business Entity: Has the meaning set forth in Section 17.2.2

         Terminating Capital  Transaction:  Has the meaning set forth in Section
5.7.22.

         Third Liquidation  Target Amount:  Has the meaning set forth in Section
5.7.23.

         Third  Target  Distribution:  Has the  meaning  set  forth in  Sections
5.7.24.

         Third Target Distribution  Cumulative  Deficiency:  Has the meaning set
forth in Section 5.7.25.

         Trading Day:  Means a day on which the  principal  National  Securities
Exchange  on which such class or series of LP Units are  listed or  admitted  to
trading is open for the transaction of business or, if no LP Units are listed or
admitted to trading on any National Securities  Exchange, a day on which banking
institutions in New York City generally are open.

         Transfer  Agent:  The  Registrar  or any bank,  trust  company or other
Person (including the General Partner or any of its Affiliates) appointed by the
Partnership to act as a transfer agent for the LP Units.

         Transfer  Application:  An application and agreement for transfer of LP
Units  for such  class of LP Units in the form set forth on the back of the Unit
Certificate  and attached to this  Agreement as Appendix B by which a transferee
(i) requests admission to the Partnership as a Substituted Limited Partner, (ii)
agrees  to be  bound  by the  terms  and  conditions  of this  Agreement,  (iii)
represents  that he has  authority to enter into this  Agreement,  (iv) grants a
power of attorney to the General  Partner and the Liquidating  Trustee,  and (v)
makes the consents and waivers contained in this Agreement.

         Underwriting  Agreement:  The agreement dated as of September 25, 1989,
among  the  Partnership,   KPL,  the  Operating   Partnership,   Kaneb  and  the
underwriters named therein with respect to the Initial Offering.

         Unit Certificate: Has the meaning set forth in Section 11.1.

         Unit  Price:  Of an LP  Unit  of a  given  class,  as of  any  date  of
determination,  (i) if the LP Units of such  class  are  listed or  admitted  to
trading on one or more National  Securities  Exchanges,  the average of the last
reported  sales prices per LP Unit of such class regular way or, in case no such
reported  sale takes place on any such day, the average of the last reported bid
and asked  prices per LP Units of such class  regular way, in either case on the
principal National  Securities  Exchange on which the LP Units of such class are
listed or admitted to trading,  for the five trading days immediately  preceding
the date of determination;  (ii) if the LP Units of such class are not listed or
admitted to trading on a National  Securities Exchange but are quoted by NASDAQ,
the average of the last reported  sales prices per LP Unit of such class regular
way or,  in case no  reported  sale  takes  place  on any  such  day or the last
reported sales prices are not then quoted, the average of the closing bid prices
per LP Unit of such class for the five trading days  immediately  preceding such
date  of   determination,   as  furnished  by  the  National   Quotation  Bureau
Incorporated or such other  nationally  recognized  quotation  service as may be
selected by the General  Partner for such purpose,  if such Bureau is not at the
time  furnishing  quotations;  or (iii) if the LP  Units of such  class  are not
listed or  admitted  to trading on a National  Securities  Exchange or quoted by
NASDAQ,  an amount equal to the fair market value of an LP Unit of such class as
of such date of determination,  as determined by the Independent Committee using
any reasonable method of valuation.

         Unrealized  Gain:  Attributable to a Partnership  property means, as of
any date of determination,  the excess, if any, of the fair market value of such
property  as of such  date of  determination  over  the  Carrying  Value of such
property as of such date of  determination  (prior to any  adjustment to be made
pursuant to Section 4.5.4 as of such date).

         Unrealized  Loss:  Attributable to a Partnership  property means, as of
any date of  determination,  the excess,  if any, of the Carrying  Value of such
property as of such date of  determination  (prior to any  adjustment to be made
pursuant to Section  4.5.4 as of such date) over the fair  market  value of such
property as of such date of determination.

         Unrecovered Capital: Has the meaning set forth in Section 5.8.1.



<PAGE>


     ARTICLE 2 FORMATION AND CONTINUATION OF PARTNERSHIP

         2.1  Formation  and  Continuation.  Subject to the  provisions  of this
Agreement,  the General  Partner and each Limited  Partner  hereby  continue the
Partnership as a limited partnership  pursuant to the provisions of the Delaware
Act.  Except as  expressly  provided  herein to the  contrary,  the  rights  and
obligations of the Partners and the administration,  dissolution and termination
of the  Partnership  shall be  governed by the  Delaware  Act.  The  Partnership
Interest of each Partner shall be personal property for all purposes.

         2.2  Name.  The name of the  Partnership  shall  be  ?Kaneb  Pipe  Line
Partners,  L.P.?.  The business of the Partnership  shall be conducted under the
name of ?Kaneb Pipe Line Partners,  L.P.? or such other name, including the name
of the General Partner or any Affiliate, as the General Partner may from time to
time determine.  The words ?L.P.? or ?Limited  Partnership?  or similar words or
letters  shall be included in the  Partnership's  name where  necessary  for the
purpose 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 Limited  Partners.  Notwithstanding
the foregoing,  unless  otherwise  permitted by Kaneb, in the event that neither
KPL nor any Affiliate of Kaneb is the general  partner of the  Partnership,  the
Partnership  shall  change its name to a name not  including  ?Kaneb?  and shall
cease using the name ?Kaneb? or other names or symbols associated therewith.

         2.3 Names  and  Addresses  of  Partners.  The  General  Partner  of the
Partnership  is KPL. The business  address of the General  Partner is 2435 North
Central Expressway,  Richardson, Texas 75080. The General Partner may change its
address  at any time and from  time to time.  The date upon  which  the  General
Partner  became a Partner  in the  Partnership  is as set forth in the books and
records  of the  Partnership.  The  names and  business,  residence  or  mailing
addresses of the Limited  Partners and the date on which each such Person became
a Limited Partner are as set forth from time to time in the books and records of
the Partnership.

         2.4 Principal Office of the Partnership;  Registered  Office and Agent.
The principal  office of the Partnership  shall be located at 2435 North Central
Expressway,  Richardson,  Texas 75080.  The General Partner may, at any time and
from time to time, change the location of the Partnership's principal office and
may establish such additional  offices of the Partnership as the General Partner
may from time to time  determine.  The General Partner shall provide the Limited
Partners with written notice of any change in the Partnership's principal office
within 90 days after such change.  The name of the registered  agent for service
of process on the Partnership in Delaware is The Corporation Trust Company.  The
address of the registered agent and the address of the registered  office of the
Partnership  in Delaware  is  Corporation  Trust  Center,  1209  Orange  Street,
Wilmington, New Castle County, Delaware 19801.

         2.5 Term. The Partnership  commenced upon the filing of the Certificate
of Limited  Partnership in accordance  with the Delaware Act on August 14, 1989,
and shall  continue  in  existence  until  December  31,  2039,  unless  earlier
terminated in accordance with any provisions of this Agreement.

         2.6 Possible Restrictions on Transfer.  Notwithstanding anything to the
contrary  herein,  in the event of (i) the enactment (or imminent  enactment) of
any  legislation,  (ii) the publication of any temporary or final  regulation by
the Treasury  Department,  (iii) any ruling by the Internal  Revenue  Service or
(iv) any judicial  decision,  that, in any such case, in the Opinion of Counsel,
would result in the taxation of the  Partnership for federal income tax purposes
as a corporation or as an association taxable as a corporation, then, either (a)
the General Partner may impose such  restrictions on the transfer of LP Units or
Partnership  Interests as may be required, in the Opinion of Counsel, to prevent
the taxation of the Partnership for federal income tax purposes as a corporation
or as an association  taxable as a corporation,  including making any amendments
to this Agreement as the General Partner in its sole discretion may determine to
be necessary or appropriate in order to impose such restrictions, provided, that
any such  amendment to this  Agreement  which would  result in the  delisting or
suspension  of  trading  of any  class of LP Units  on any  National  Securities
Exchange  on which such class of LP Units is then traded must be approved by the
Record Holders of at least a majority in interest of the Outstanding LP Units of
such class of LP Units (excluding for purposes of such determination LP Units of
such class owned by the General  Partner and its  Affiliates  unless the General
Partner and its Affiliates own all of the LP Units of such class of LP Units) or
(b) upon  the  recommendation  of the  General  Partner  and the  approval  of a
Majority Interest  (excluding for purposes of such  determination LP Units owned
by the General  Partner and its  Affiliates),  the  Partnership may be converted
into and  reconstituted  as a trust or any other type of legal  entity (the ?New
Entity?) in the manner and on other terms so recommended  and approved.  In such
event,  the business of the Partnership  shall be continued by the New Entity in
the manner and on the terms so  recommended  and approved.  Notwithstanding  the
foregoing,  no such reconstitution shall take place unless the Partnership shall
have  received  an Opinion of Counsel to the effect  that the  liability  of the
Limited  Partners  for the debts and  obligations  of the New Entity  shall not,
unless such Limited Partners take part in the control of the business of the New
Entity, exceed that which otherwise had been applicable to such Limited Partners
as limited partners of the Partnership under the Delaware Act.


                              ARTICLE 3 PURPOSE

         The  purpose  and  nature  of  the  business  to be  conducted  by  the
Partnership  shall  be  (i)  to  serve  as  limited  partner  in  the  Operating
Partnership  and, in  connection  therewith,  to exercise  all of the rights and
powers  conferred  upon the  Partnership  as a limited  partner in the Operating
Partnership pursuant to the Operating Partnership  Agreement or otherwise,  (ii)
to  conduct  any other  business  that may be  lawfully  conducted  by a limited
partnership  organized  pursuant  to the  Delaware  Act and (iii) to do anything
necessary or incidental to the foregoing  (including,  without  limitation,  the
making of capital  contributions  or loans to the Operating  Partnership  or any
Subsidiary).  The General Partner has no obligation or duty to the  Partnership,
Limited Partners or Assignees to propose or approve,  and in its sole discretion
may decline to propose or approve,  the conduct by the  Partnership  pursuant to
clause  (ii)  above of any  business  other than as  contemplated  by clause (i)
above.  The General Partner 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 herein and
for the protection and benefit of the Partnership.

                ARTICLE 4 CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS

         4.1 Initial  Contributions.  The initial Capital  Contributions  to the
Partnership   consisted  of  $1,000,  which  the  Partners  contributed  to  the
Partnership  upon  the  formation  of  the  Partnership.   The  General  Partner
contributed  $10 in cash and  received in exchange  therefor a 1.0%  Partnership
Interest as General Partner and Kaneb  contributed  $990 in cash and received in
exchange  therefor 46 Senior  Preference  Units  representing a 99%  Partnership
Interest as Limited Partner in the Partnership.

         4.2 Contributions on the Closing Date. On the Closing Date, the General
Partner  contributed  to  the  Partnership,  as  provided  in  the  Contribution
Agreement,  all of its interest as limited partner in the Operating  Partnership
and  received  in exchange  therefor  (i)  4,649,954  Senior  Preference  Units,
6,000,000  Preference  Units and 3,160,000 Common Units  representing  (together
with the 46 Senior Preference Units previously issued to Kaneb) in the aggregate
a 98/99th Partnership  Interest as Limited Partner in the Partnership and (ii) a
Partnership  Interest and a credit to its capital  account as General Partner in
the amount  required  to increase  such  capital  account to an amount  equal to
1/99th of the aggregate capital accounts of all the Partners after giving effect
to the issuance of LP Units  contemplated by clause (i) of this Section 4.2. The
Agreed  Value of the  General  Partner's  interest  as  limited  partner  in the
Operating Partnership on the Closing Date was $306,920,196.

         4.3  Additional  Issuances  of  Securities.

         4.3.1 Subject to the provisions of Section 4.4, the General  Partner is
authorized  to cause  the  Partnership  to issue LP Units or  classes  or series
thereof, or options,  rights,  warrants or appreciation rights relating thereto,
or any other type of equity  security that the  Partnership  may lawfully issue,
any unsecured or secured debt obligations of the Partnership or debt obligations
of the Partnership  convertible into any class or series of equity securities of
the Partnership (collectively  ?Partnership  Securities?),  in addition to those
issued  pursuant  to Sections  4.1 and 4.2,  from time to time to Partners or to
other Persons and to admit such Partners or other Persons to the  Partnership as
Additional Limited Partners,  all without the consent or approval of the Limited
Partners  or any  percentage  or  class  thereof.  The  Partnership  may  assume
liabilities in connection  with any such issuance.  Subject to the provisions of
Section 4.4 and the  requirements of the Delaware Act, the General Partner shall
have sole and complete  discretion in determining the  considerations  and terms
and conditions  with respect to any future  issuance of Partnership  Securities.
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 such  future  issuance,  including,  without
limitation,  compliance with any statute,  rule,  regulation or guideline of any
federal,  state or other governmental agency or any National Securities Exchange
on which any Partnership Securities are listed for trading. Subject to the terms
of Section  4.4,  the General  Partner is  authorized  to cause the  issuance of
Partnership  Securities  pursuant  to any  plan  for the  benefit  of  employees
responsible for the operations of the  Partnership or the Operating  Partnership
maintained or sponsored by the General Partner,  the Partnership,  the Operating
Partnership or any Affiliate of any of them.

         4.3.2 Subject to the provisions of Section 4.4 and the  requirements of
the Delaware Act, but  notwithstanding  any other provision of this Agreement to
the contrary,  Partnership  Securities  issuable by the Partnership  pursuant to
this  Section 4.3 shall be issuable  from time to time in one or more classes or
series  of  classes   with  such   designations,   preferences   and   relative,
participating,  optional or other special rights,  powers and duties,  including
rights,  powers and duties senior to existing  classes and series of Partnership
Securities,  all as shall be fixed by the General Partner in the exercise of its
sole and complete discretion, including, without limitation, (i) the allocation,
for  federal  income  and  other  purposes,  to each  such  class or  series  of
Partnership Securities of items of Partnership income, gain, loss, deduction and
credit;  (ii) the right of such  class or series of  Partnership  Securities  to
share in  Partnership  distributions;  (iii) the  rights  of each such  class or
series  of  Partnership  Securities  upon  dissolution  and  liquidation  of the
Partnership;  (iv) whether  such class or series of  Partnership  Securities  is
redeemable  by the  Partnership  and,  if so,  the price  at,  and the terms and
conditions  on,  which such  class or series of  Partnership  Securities  may be
redeemed by the  Partnership;  (v) whether  such class or series of  Partnership
Securities is issued with the  privilege of conversion  and, if so, the rate at,
and the terms and  conditions  upon,  which such class or series of  Partnership
Securities  may be  converted  into any other  class or  series  of  Partnership
Securities;  (vi) the terms and  conditions  of the  issuance  of such  class or
series of Partnership  Securities,  the issuance of Unit Certificates in respect
thereof, and all other matters relating to the assignment thereof; and (vii) the
rights,  if any, of each such class or series of Partnership  Securities to vote
on matters relating to the Partnership and this Agreement.  Upon the issuance of
any class or series of Partnership Securities,  the General Partner (pursuant to
the General Partner's powers of attorney from the Limited Partners), without the
approval at the time of any Limited  Partner or Assignee (each Person  accepting
Partnership  Securities being deemed to approve of such amendment) may amend any
provision of this Agreement,  and execute, swear to, acknowledge,  deliver, file
and record, if required,  an amended  Certificate of Limited Partnership and any
other  documents  that may be  required  in  connection  therewith,  as shall be
necessary or desirable to reflect the  authorization  and issuance of such class
or series of Partnership  Securities and the relative  rights and preferences of
such class or series of  Partnership  Securities  as to the matters set forth in
the preceding sentence.

         4.4   Limitations  on  Issuances   During  the  Preference   Period.4.4
Limitations on Issuances During the Preference Period. Notwithstanding the terms
of Section 4.3, during the Preference Period the Partnership shall not issue (i)
an aggregate of more than  10,000,000  Senior  Preference  Units  (excluding for
purposes of such  determination  the 5,000,000 Senior Preference Units issued by
the  Partnership  in  connection  with its initial  public  offering  and Senior
Preference  Units issued upon exchanges of Preference  Units pursuant to Section
5.9.1); (ii) other Partnership  Interests on a parity with,  convertible into or
exchangeable for Senior  Preference Units or (iii) other  Partnership  Interests
having  rights to  distributions  or in  liquidation  ranking prior or senior to
Senior Preference Units;  without the prior approval of the Record Holders of at
least  a  majority  in  interest  of the  Outstanding  Senior  Preference  Units
(excluding  for purposes of the approval,  Senior  Preference  Units held by the
General Partner and its Affiliates).

         4.5  Capital Accounts.

         4.5.1 The Partnership  shall maintain for each Partner (or a beneficial
owner of LP  Units  held by a  nominee  in any case in  which  the  nominee  has
furnished  the  identity of such owner to the  Partnership  in  accordance  with
Section  6031(c)  of the Code or any  other  method  acceptable  to the  General
Partner in its sole  discretion) a separate  Capital  Account in accordance with
the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital  Contributions  made by such
Partner to the  Partnership  pursuant  to this  Agreement  and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in  accordance  with Section  4.5.2 and  allocated  to such Partner  pursuant to
Article 5, and  decreased  by (x) the amount of cash or Net Agreed  Value of all
actual  and  deemed  distributions  of cash  or  property  made to such  Partner
pursuant to this Agreement and (y) all items of  Partnership  deduction and loss
computed in accordance with Section 4.5.2 and allocated to such Partner pursuant
to Section 5.1.

         4.5.2 For purposes of computing the amount of any item of income, gain,
deduction  or  loss to be  reflected  in the  Partners'  Capital  Accounts,  the
determination, recognition and classification of any such item shall be the same
as its  determination,  recognition  and  classification  for federal income tax
purposes  (including any method of  depreciation,  cost recovery or amortization
used for that purpose), provided that:

                  4.5.2.1   All  fees  and  other   expenses   incurred  by  the
         Partnership to promote the sale of (or to sell) a Partnership  Interest
         that can neither be deducted  nor  amortized  under  Section 709 of the
         Code, if any, shall,  for purposes of Capital Account  maintenance,  be
         treated  as an item of  deduction  at the  time  such  fees  and  other
         expenses  are  incurred  and  shall be  allocated  among  the  Partners
         pursuant to Section 5.1.

                  4.5.2.2  Except as otherwise  provided in Treasury  Regulation
         Section  1.704-1(b)(2)(iv)(m),  the computation of all items of income,
         gain,  loss and deduction  shall be made without regard to any election
         under Section 754 of the Code which may be made by the Partnership and,
         as to those items described in Section  705(a)(1)(B) or 705(a)(2)(B) of
         the Code, without regard to the fact that such items are not includable
         in gross income or are neither currently deductible nor capitalized for
         federal  income  tax  purposes.  To the  extent  an  adjustment  to the
         adjusted tax basis of any Partnership  Asset pursuant to Section 734(b)
         or 743(b) of the Code is  required,  pursuant  to  Treasury  Regulation
         Section  1.704-1(b)(2)(iv)(m),  to be taken into account in determining
         Capital Accounts, the amount of such adjustment to the Capital Accounts
         shall be treated as an item of gain (if the  adjustment  increases  the
         basis of the asset) or loss (if the  adjustment  decreases the basis of
         the asset).

                  4.5.2.3 Any income,  gain or loss  attributable to the taxable
         disposition of any  Partnership  property shall be determined as if the
         adjusted  basis of such  property as of such date of  disposition  were
         equal in amount to the  Partnership's  Carrying  Value with  respect to
         such property as of such date.

                  4.5.2.4 In accordance with the  requirements of Section 704(b)
         of  the  Code,  any  deductions  for  depreciation,  cost  recovery  or
         amortization   attributable  to  any  Contributed   Property  shall  be
         determined as if the adjusted basis of such property on the date it was
         acquired  by the  Partnership  were equal to the  Agreed  Value of such
         property.  Upon an adjustment pursuant to Section 4.5.4 to the Carrying
         Value  of  any  Partnership  property  subject  to  depreciation,  cost
         recovery or amortization, any further deductions for such depreciation,
         cost recovery or  amortization  attributable  to such property shall be
         determined  (A) as if the adjusted basis of such property were equal to
         the  Carrying  Value  of  such  property  immediately   following  such
         adjustment  and (B)  using a rate of  depreciation,  cost  recovery  or
         amortization  derived  from the same  method  and useful  life (or,  if
         applicable, the remaining useful life) as is applied for federal income
         tax purposes; provided, however, that, if the asset has a zero adjusted
         basis for federal income tax purposes,  depreciation,  cost recovery or
         amortization deductions shall be determined using any reasonable method
         that the General Partner may adopt.

                  4.5.2.5 If the Partnership's  adjusted basis in depreciable or
         cost  recovery  property  is reduced for  federal  income tax  purposes
         pursuant to Section  48(q)(1)  or  48(q)(3) of the Code,  the amount of
         such reduction shall,  solely for purposes  hereof,  be deemed to be an
         additional  depreciation  or cost  recovery  deduction in the year such
         property is placed in service and shall be allocated among the Partners
         pursuant to Section  5.1.  Any  restoration  of such basis  pursuant to
         Section  48(q)(2)  of the  Code  shall,  to  the  extent  possible,  be
         allocated  in the same  manner  to the  Partners  to whom  such  deemed
         deduction was allocated.

                  4.5.2.6  Solely for the  purpose of this  Section  4.5.2,  the
         Partnership shall be treated as owning directly its proportionate share
         (as determined by the General  Partner based upon the provisions of the
         Operating Partnership Agreement) of all property owned by the Operating
         Partnership.

         4.5.3 Generally,  a transferee of a Partnership  Interest shall succeed
to that  portion  of the  Capital  Account  of the  transferor  relating  to the
Partnership Interest so transferred;  provided,  however,  that, if the transfer
causes a termination of the Partnership under Section  708(b)(1)(B) of the Code,
the  Partnership's  properties  shall be  deemed  to have  been  distributed  in
liquidation  of the  Partnership  to the  Partners  and  recontributed  by  such
Partners in  reconstitution  of the  Partnership.  In such event,  the  Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed  distribution  pursuant to Section 4.5.4.2 and such Carrying Values shall
then constitute the Agreed Values of such  properties.  The Capital  Accounts of
such  reconstituted  Partnership  shall be  maintained  in  accordance  with the
principles of this Section 4.5.

         4.5.4

                  4.5.4.1 Consistent with the provisions of Treasury  Regulation
         Section 1.704-1(b)(2)(iv)(f), on an issuance of additional LP Units for
         cash or Contributed Property or the conversion of the General Partner's
         Partnership Interest as the General Partner to Common Units pursuant to
         Section 14.6.2.2, the Capital Accounts of all Partners and the Carrying
         Value of each Partnership  property  immediately prior to such issuance
         shall be adjusted  upward or downward to reflect any Unrealized Gain or
         Unrealized Loss attributable to such Partnership  property,  as if such
         Unrealized  Gain or  Unrealized  Loss had been  recognized on an actual
         sale of each such property  immediately  prior to such issuance and had
         been allocated to the Partners at such time pursuant to Section 5.1. In
         determining  Unrealized  Gain or  Unrealized  Loss for purposes of this
         Section  4.5.4.1 the aggregate cash amount and fair market value of all
         Partnership  assets  (including cash or cash  equivalents)  immediately
         prior to the issuance of Partnership  Interests  shall be determined by
         the General Partner using such reasonable method of valuation as it may
         adopt;  provided,  however,  the General  Partner,  in arriving at such
         valuation,  must take into account the Limited Partner Equity Value and
         the General  Partner Equity Value.  The General  Partner shall allocate
         such  aggregate  value  among the  assets of the  Partnership  (in such
         manner as it determines in its sole  discretion  to be  reasonable)  to
         arrive at a fair market value for individual properties.

                  4.5.4.2  In  accordance  with  Treasury   Regulation   Section
         1.704-1(b)(2)(iv)(f),   immediately  prior  to  any  actual  or  deemed
         distribution to a Partner of any Partnership  property (other than cash
         or cash  equivalents),  the Capital  Accounts of all  Partners  and the
         Carrying Value of each Partnership property shall, immediately prior to
         any such  distribution,  be adjusted  upward or downward to reflect any
         Unrealized  Gain or Unrealized Loss  attributable  to such  Partnership
         property,  as if such  Unrealized  Gain or  Unrealized  Loss  had  been
         recognized  in a sale  of  such  property  immediately  prior  to  such
         distribution for an amount equal to its fair market value, and had been
         allocated to the Partners,  at such time,  pursuant to Section 5.1. Any
         Unrealized Gain or Unrealized Loss  attributable to such property shall
         be  allocated in the same manner as Net  Termination  Sales Gain or Net
         Termination  Sales Loss pursuant to Section 5.1.3;  provided,  however,
         that, in making any such allocation,  Net Termination Sales Gain or Net
         Termination  Sales Loss actually  realized shall be allocated first. In
         determining  Unrealized  Gain or  Unrealized  Loss for purposes of this
         Section  4.5.4.2,  the aggregate  cash amount and fair market values of
         all Partnership assets (including cash or cash equivalents) immediately
         prior to a distribution shall (A) in the case of a deemed  distribution
         occurring as a result of a termination of the  Partnership  pursuant to
         Section 708 of the Code,  be  determined  and  allocated  in the manner
         provided  in  Section  4.5.4.1  or  (B) in the  case  of a  liquidating
         distribution  pursuant  to  Section  15.3  or 15.4  be  determined  and
         allocated by the Liquidator using such reasonable  methods of valuation
         as it may adopt.

         4.6 Interest.  No interest shall be paid by the  Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.

         4.7 No Withdrawal. No Partner shall be entitled to withdraw any part of
his Capital  Contribution or his Capital Account or to receive any  distribution
from the Partnership, except as provided in Articles 5, 14 and 15.

         4.8 Loans from Partners.  Loans by a Partner to the  Partnership  shall
not constitute Capital Contributions.  If any Partner shall advance funds to the
Partnership in excess of the amounts required  hereunder to be contributed by it
to the capital of the Partnership,  the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner. The
amount of any such excess advances shall be a debt obligation of the Partnership
to such Partner and shall be payable or collectible  only out of the Partnership
Assets in accordance  with the terms and conditions upon which such advances are
made.

         4.9 No Fractional  LP Units.  No fractional LP Units shall be issued by
the Partnership.

         4.10 Record of Contributions.  The books and records of the Partnership
shall  include true and full  information  regarding the amount of cash and cash
equivalents  and a  designation  and  statement  of the Net  Value of any  other
property contributed by each Partner to the Partnership.

         4.11  Splits and Combinations.

         4.11.1 Subject to the provisions of Section 4.11.4, the General Partner
may make a distribution  in Partnership  Securities to all Record Holders or may
effect a subdivision or combination of Partnership Securities,  but in each case
only on a pro rata basis so that,  after any such  distribution,  subdivision or
combination,  each Record Holder shall have the same Percentage  Interest in the
Partnership as before such distribution, subdivision or combination.

         4.11.2  Whenever such a  distribution,  subdivision  or  combination is
declared,  the  General  Partner  shall  select  a Record  Date as of which  the
distribution,  subdivision  or  combination  shall be effective and shall notify
each Record Holder of the distribution,  subdivision or combination. The General
Partner may, but shall not be required  to, cause a firm of  independent  public
accountants  selected  by it to  calculate  the number of LP 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  correctness  of such a
calculation.

         4.11.3   Promptly   following   such   distribution,   subdivision   or
combination,  the  General  Partner  may cause the  Partnership  to issue to the
Record Holders as of such Record Date new Unit Certificates representing the new
number of LP Units held by such Record Holders,  or adopt such other  procedures
as it  may  deem  appropriate  to  reflect  such  distribution,  subdivision  or
combination;  provided,  however,  that in the  case of any  such  distribution,
subdivision or combination resulting in a smaller total number of Outstanding LP
Units,  the General Partner may require,  as a condition to the delivery of such
new Unit Certificate,  the surrender of any Unit Certificate representing the LP
Units prior to such declaration.

         4.11.4 The  Partnership  shall not issue  fractional  LP Units upon any
distribution,  subdivision  or  combination  of  LP  Units.  If a  distribution,
subdivision  or  combination  of LP  Units  would  result  in  the  issuance  of
fractional  LP Units but for the  provisions  of  Section  4.9 and this  Section
4.11.4,  each  fractional  LP Unit shall be rounded to the nearest whole LP Unit
(and a 0.5 LP Unit shall be rounded to the next higher LP Unit).

         4.12 No Preemptive Rights.12 No Preemptive Rights. No Person shall have
any  preemptive,  preferential  or  other  similar  right  with  respect  to (i)
additional  Capital  Contributions;  (ii) the  issuance  or sale of any class or
series of Partnership  Securities,  whether  unissued or held in the treasury or
hereafter  created;  (iii)  the  issuance  of  any  obligations,   evidences  of
indebtedness  or  other  securities  of  the  Partnership  convertible  into  or
exchangeable for, or carrying or accompanied by any rights to receive,  purchase
or subscribe to, any such Partnership Securities; (iv) the issuance of any right
of  subscription  to or right to  receive,  or any  warrant  or  option  for the
purchase of, any of the foregoing securities; or (v) the issuance or sale of any
other securities that may be issued or sold by the Partnership.

                 ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS

         5.1  Allocations  For  Capital  Account   Purposes.   For  purposes  of
maintaining  the Capital  Accounts and in determining the rights of the Partners
among themselves,  the Partnership's  items of income,  gain, loss and deduction
(computed  in  accordance  with  Section  4.5.2)  shall be  allocated  among the
Partners in each taxable year (or portion thereof) as provided herein below.

         5.1.1 Net Income.  After giving effect to the special  allocations  set
forth in Section 5.1.4, all items of income, gain, loss and deduction taken into
account in computing  Net Income for such  taxable  period shall be allocated in
the same manner as such Net Income is allocated hereunder.

                  5.1.1.1 First, 100% to the General Partner until aggregate Net
         Income  allocated  to the  General  Partner  pursuant  to this  Section
         5.1.1.1 for the current taxable year and all previous  taxable years is
         equal to the  aggregate  Net Losses  allocated  to the General  Partner
         pursuant to Section 5.1.2.3 for all previous taxable years;

                  5.1.1.2 Second,  100% to the Limited  Partners and the General
         Partner,  in accordance  with their  respective  Percentage  Interests,
         until the  aggregate Net Income  allocated to the Limited  Partners and
         the General  Partner  pursuant to this Section  5.1.1.2 for the current
         taxable year and all previous  taxable  years is equal to the aggregate
         Net Losses  allocated to the Limited  Partners and the General  Partner
         pursuant to Section 5.1.2.2 for all previous taxable years; and

                  5.1.1.3 Third, the balance, if any, shall be allocated between
         the  General  Partner,  in its  capacity  as general  partner,  and the
         Limited  Partners  in each  taxable  year  in the  same  proportion  as
         Available  Cash for such taxable  year  (including,  for this  purpose,
         distributions of Available Cash made in a subsequent  taxable year with
         respect to the last quarter of the Partnership  year for which the item
         of income,  gain,  loss,  deduction  or credit,  as the case may be, is
         being allocated) was distributed to the General Partner and the Limited
         Partners.  If the Partnership does not distribute any Available Cash in
         respect of a taxable  year,  Net Income  (computed in  accordance  with
         Section 4.5.2) shall be allocated among the Partners in accordance with
         their respective Percentage Interests.  Except as otherwise provided in
         this Section 5.1, each item of income,  gain, loss, deduction or credit
         (computed in accordance  with Section  4.5.2)  allocated to the Limited
         Partners, in the aggregate,  shall be allocated to each Limited Partner
         pro rata in accordance with the number of LP Units held by such Limited
         Partner.

         5.1.2 Net Loss.  After  giving  effect to the special  allocations  set
forth in Section 5.1.4, all items of income, gain, loss and deduction taken into
account in computing Net Loss for such taxable  period shall be allocated in the
same manner as such Net Loss is allocated hereunder:

                  5.1.2.1  First,  100% to the  General  Partner and the Limited
         Partners,  until the  aggregate Net Losses  allocated  pursuant to this
         Section 5.1.2.1 for the current  taxable year and all previous  taxable
         years is equal to the aggregate  Net Income  allocated to such Partners
         pursuant  to  Section  5.1.1.3  for all  previous  taxable  years.  For
         purposes of this Section  5.1.2.1,  Net Loss for any taxable year shall
         be  allocated  to the General  Partner and the Limited  Partners in the
         same  proportion  as any Net  Income  was  allocated  to such  Partners
         pursuant to Section  5.1.1.3 in any previous  taxable years  (beginning
         with the first such taxable  year in which Net Income was  allocated to
         the Partners  pursuant to Section  5.1.1.3 up to an amount equal to the
         amount of Net Income  allocated  to the  Partners  in any such  taxable
         year);

                  5.1.2.2 Second,  100% to the Limited  Partners and the General
         Partner,  in accordance  with their  respective  Percentage  Interests;
         provided, that Net Loss shall not be allocated pursuant to this Section
         5.1.2.2 to the extent  that such  allocation  would  cause any  Limited
         Partner to have a deficit  balance in its Adjusted  Capital  Account at
         the end of such taxable year (or increase any existing  deficit balance
         in its Adjusted Capital Account);

                  5.1.2.3  Third,  the  balance,  if any,  100%  to the  General
Partner.

         5.1.3 Net  Termination  Gains and Losses.  After  giving  effect to the
special allocations set forth in Section 5.1.4, all items of gain and loss taken
into account in computing Net Termination  Sales Gain or Net  Termination  Sales
Loss for such  taxable  period shall be allocated in the same manner as such Net
Termination Sales Gain or Net Termination Sales Loss is allocated hereunder. All
allocations  under  this  Section  5.1.3  shall be made  after  Capital  Account
balances have been adjusted by all other allocations provided under this Section
5.1 and after all  distributions  of Available  Cash provided under Sections 5.4
and 5.5 have  been  made  with  respect  to the  taxable  period  ending  on the
liquidation date.

                  5.1.3.1  If a Net  Termination  Sales Gain is  recognized  (or
         deemed recognized pursuant to Section 4.5.4) such Net Termination Sales
         Gain  shall be  allocated  during the  Preference  Period  between  the
         General Partner and the Limited  Partners in the following  manner (and
         the Capital  Accounts of the Partners  shall be increased by the amount
         so allocated in each of the following subclauses,  in the order listed,
         before  an  allocation   is  made  pursuant  to  the  next   succeeding
         subclause):

                  First,  to each  Partner  having  a  deficit  balance  in such
         Partner's  Capital  Account to the extent of and in  proportion to such
         deficit balances;

                  Second,  98/99ths  to  all  Limited  Partners  holding  Senior
         Preference Units in the proportion that the respective number of Senior
         Preference  Units  held by them  bears to the  total  number  of Senior
         Preference  Units  Outstanding  and 1/99th to the General Partner until
         each such Limited  Partner's  Capital Account in respect of each Senior
         Preference Unit (determined on a per LP Unit basis) is equal to the sum
         of (aa) its Remaining Capital in respect of such Senior Preference Unit
         plus  (bb)  any  then  existing   Cumulative   Senior  Preference  Unit
         Deficiency;

                  Third,  98/99ths to all Limited  Partners  holding  Preference
         Units in the proportion that the respective  number of Preference Units
         held by them bears to the total number of Preference Units  Outstanding
         and 1/99th to the General  Partner  until each such  Limited  Partner's
         Capital Account in respect of each Preference Unit (determined on a per
         LP Unit basis) is equal to the sum of (aa) its  Remaining  Capital plus
         (bb) any then existing Cumulative Preference Unit Deficiency;

                  Fourth,  98/99ths to all Limited Partners holding Preference B
         Units in the  proportion  that the  respective  number of  Preference B
         Units  held by them  bears to the total  number of  Preference  B Units
         Outstanding  and 1/99th to the General  Partner until each such Limited
         Partner's  Capital  Account  in  respect  of  each  Preference  B  Unit
         (determined  on a per LP Unit  basis)  is  equal to the sum of (aa) its
         Remaining Capital plus (bb) any then existing  Cumulative  Preference B
         Unit Deficiency;

                  Fifth,  98/99ths to all Limited  Partners holding Common Units
         in the proportion  that the  respective  number of Common Units held by
         them bears to the total number of Common Units  Outstanding  and 1/99th
         to the  General  Partner  until  each such  Limited  Partner's  Capital
         Account in respect of each  Common  Unit  (determined  on a per LP Unit
         basis) is equal to its Remaining Capital;

                  Sixth, 98/99ths to all Limited Partners in the proportion that
         their  respective  Percentage  Interest bears to 98/99ths and 1/99th to
         the General Partner until each such Limited  Partner's  Capital Account
         in respect of each LP Unit (determined on a per LP Unit basis) is equal
         to the First Liquidation Target Amount;

                  Seventh,  90/99ths to all Limited  Partners in the  proportion
         that their respective Percentage Interest bears to 98/99ths and 9/99ths
         to the  General  Partner  until  each such  Limited  Partner's  Capital
         Account in respect of each LP Unit  (determined on a per LP Unit basis)
         is equal to the Second Liquidation Target Amount;

                  Eighth,  80/99ths  to all Limited  Partners in the  proportion
         that  their  respective  Percentage  Interest  bears  to  98/99ths  and
         19/99ths  to the  General  Partner  until each such  Limited  Partner's
         Capital Account in respect of each LP Unit (determined on a per LP Unit
         basis) is equal to the Third Liquidation Target Amount; and

                  Thereafter, 70/99ths to all Limited Partners in the proportion
         that  their  respective  Percentage  Interest  bears  to  98/99ths  and
         29/99ths to the General Partner.

         After  the  third  calendar  quarter  of 1997,  no  allocations  of Net
         Termination  Sales Gain shall be made  under  paragraph  Fourth of this
         Section  5.1.3.1  and the  Preference  B Units  shall be  deemed  to be
         Preference  Units for  purposes of this Section  5.1.3.1.  In addition,
         after the  Preference  Period,  Net  Termination  Sales  Gain  shall be
         allocated in the same manner as described  above;  provided,  that,  no
         allocation will be made under paragraphs  Second,  Third and Fourth and
         the  references to ?Common  Units?  in paragraph  Fifth shall after the
         Preference Period refer to ?Units?.

                  5.1.3.2  If a Net  Termination  Sales Loss is  recognized  (or
         deemed  recognized  pursuant to Section  4.5.4),  such Net  Termination
         Sales Loss shall be allocated to the Partners in the following manner:

                           (i)  First,  100%  to the  General  Partner  and  the
                  Limited  Partners in proportion  to, and to the extent of, the
                  positive balances in their respective Capital Accounts; and

                           (ii) Second, the balance, if any, 100% to the General
                  Partner.

         5.1.4 Special Allocations.  Notwithstanding any other provision of this
Section 5.1, the following  special  allocations  shall be made for such taxable
period:

                  5.1.4.1 Partnership  Minimum Gain Chargeback.  Notwithstanding
         any other  provision of this Section 5.1, if there is a net decrease in
         Partnership  Minimum Gain during any Partnership  taxable period,  each
         Partner  shall be allocated  items of  Partnership  income and gain for
         such period (and, if necessary,  subsequent  periods) in the manner and
         amounts  provided  in  Treasury  Regulation   Sections   1.704-2(f)(6),
         1.704-2(g)(2) and  1.704-2(j)(2)(i),  or any successor  provision.  For
         purposes of this  Section  5.1.4.1,  each  Partner's  Adjusted  Capital
         Account  balance shall be  determined,  and the allocation of income or
         gain required hereunder shall be effected,  prior to the application of
         any other  allocations  pursuant to this Section  5.1.4 with respect to
         such taxable  period.  This Section  5.1.4.1 is intended to comply with
         the  Partnership  Minimum  Gain  chargeback   requirement  in  Treasury
         Regulation  Section  1.704-2(f) and shall be  interpreted  consistently
         therewith;

                  5.1.4.2  Chargeback  of Minimum Gain  Attributable  to Partner
         Nonrecourse Debt.  Notwithstanding the other provisions of this Section
         5.1 (other  than  Section  5.1.4.1),  except as  provided  in  Treasury
         Regulation Section 1.704-2(i)(4), if there is a net decrease in Minimum
         Gain  Attributable to Partner  Nonrecourse  Debt during any Partnership
         taxable period,  any Partner with a share of Minimum Gain  Attributable
         to Partner  Nonrecourse  Debt at the  beginning of such taxable  period
         shall be allocated items of Partnership income and gain for such period
         (and,  if  necessary,  subsequent  periods)  in the manner and  amounts
         provided   in   Treasury   Regulation   Sections    1.704-2(i)(4)   and
         1.704-2(j)(2)(ii),  or any successor  provisions.  For purposes of this
         Section  5.1.4.2,  5.1.4.2,  each Partner's  Adjusted  Capital  Account
         balance  shall be  determined  and the  allocation  of  income  or gain
         required  hereunder shall be effected,  prior to the application of any
         other  allocations  pursuant to this Section 5.1.4,  other than Section
         5.1.4.1,  with respect to such taxable  period.  This Section  5.1.4.2,
         5.1.4.2 is intended to comply  with the  chargeback  of items of income
         and gain requirement in Treasury  Regulation Section  1.704-2(i)(4) and
         shall be interpreted consistently therewith;

                  5.1.4.3 Priority Allocation. If the amount of cash distributed
         (except cash  distributed  pursuant to Section  15.3) with respect to a
         class or series of LP Units is disproportionately  greater (on a per LP
         Unit basis)  than the amount of cash  distributed  with  respect to the
         Common Units (on a per LP Unit basis),  then before the  allocation  of
         Net  Income  or Net  Loss,  as the case  may be,  between  the  Limited
         Partners and the General  Partner  pursuant to the other  provisions of
         this Section 5.1, (a) first, each Limited Partner holding LP Units with
         respect to which such disproportionately  greater cash distribution was
         made shall be allocated  gross income in an amount equal to the product
         of (X) the amount by which the distribution  with respect to such class
         or series of LP Units exceeds (on a per LP Unit basis) the distribution
         on the  Common  Units and (Y) the  number of LP Units of such  class or
         series held by such Limited  Partner  receiving the  disproportionately
         greater distribution,  (b) the General Partner shall be allocated gross
         income  in an  amount  equal  to 1.01% of the  gross  income  allocated
         pursuant to the immediately preceding clause (a) and (c) the Net Income
         or Net  Loss  otherwise  allocable  to the  Partners  under  the  other
         provisions of this Agreement shall be recomputed by excluding the gross
         income allocated pursuant to the immediately  preceding clauses (a) and
         (b);

                  5.1.4.4 Qualified Income Offset. Except as provided in Section
         5.1.4.1 and  5.1.4.2,  5.1.4.2,  in the event any Partner  unexpectedly
         receives any  adjustments,  allocations or  distributions  described in
         Treasury       Regulation       Sections       1.704-1(b)(2)(ii)(d)(4),
         1.704-1(b)(2)(ii)(d)(5)    or    1.704-1(b)(2)(ii)(d)(6),    items   of
         Partnership  income  and gain  shall  be  specially  allocated  to such
         Partner in an amount and manner sufficient to eliminate,  to the extent
         required by the Treasury  Regulations,  the deficit balance, if any, in
         its Adjusted Capital Account created by such  adjustments,  allocations
         or distributions as quickly as possible;  provided,  that an allocation
         pursuant  to this  Section  5.1.4.4  shall  be made  only if and to the
         extent that such Partner  would have a deficit  balance in its Adjusted
         Capital  Account after all other  allocations  provided in this Section
         5.1 have been  tentatively  made as if this Section  5.1.4.4 was not in
         this Agreement;

                  5.1.4.5 Gross Income Allocations. In the event any Partner has
         a deficit  balance in its  Adjusted  Capital  Account at the end of any
         Partnership  taxable period,  such Partner shall be specially allocated
         items of Partnership gross income and gain in the amount of such excess
         as quickly as possible;  provided,  that an allocation pursuant to this
         Section  5.1.4.5  shall be made  only if and to the  extent  that  such
         Partner would have a deficit balance in its Adjusted Capital Account in
         excess of such sum after all  other  allocations  provided  for in this
         Section 5.1 have been  tentatively  made as if Section 5.1.4.4 and this
         Section 5.1.4.5 were not in this Agreement;

                  5.1.4.6 Nonrecourse Deductions. Nonrecourse Deductions for any
         taxable  period  shall be  allocated to the Partners in the same ratios
         that Net Income or Net Loss,  as the case may be, is allocated  for the
         taxable  year.  If the  General  Partner  determines  in its good faith
         discretion  that  the  Partnership's  Nonrecourse  Deductions  must  be
         allocated in a different ratio to satisfy the safe harbor  requirements
         of the Treasury  regulations  promulgated  under Section  704(b) of the
         Code,  the General  Partner is  authorized,  upon notice to the Limited
         Partners,  to revise the prescribed  ratio to the  numerically  closest
         ratio which does satisfy such requirements;

                  5.1.4.7 Partner  Nonrecourse  Deductions.  Partner Nonrecourse
         Deductions  for any  taxable  period  shall  be  allocated  100% to the
         Partner  that  bears  the  Economic  Risk of Loss with  respect  to the
         Partner Nonrecourse Debt to which such Partner  Nonrecourse  Deductions
         are  attributable  in  accordance  with  Treasury   Regulation  Section
         1.704-2(i).  If more than one Partner  bears the Economic  Risk of Loss
         with respect to a Partner  Nonrecourse  Debt, such Partner  Nonrecourse
         Deductions  attributable  thereto  shall be allocated  between or among
         such  Partners in  accordance  with the ratios in which they share such
         Economic Risk of Loss;

                  5.1.4.8  Nonrecourse  Liabilities.  For  purposes  of Treasury
         Regulation Section  1.752-3(a)(3),  the Partners agree that Nonrecourse
         Liabilities  of the  Partnership in excess of the sum of (A) the amount
         of  Partnership  Minimum Gain and (B) the total  amount of  Nonrecourse
         Built-in Gain shall be allocated  among the Partners in accordance with
         their respective Percentage Interests;

                  5.1.4.9  Code  Section  754  Adjustments.  To  the  extent  an
         adjustment to the adjusted tax basis of any Partnership  asset pursuant
         to Section  734(b) or 743(b) of the Code is to be taken into account in
         determining  Capital  Accounts,  the amount of such  adjustment  to the
         Capital  Accounts treated as an item of gain or loss shall be specially
         allocated  to the  Partners in a manner  consistent  with the manner in
         which their  Capital  Accounts are required to be adjusted  pursuant to
         Treasury Regulation Section 1.704-1(b)(2)(iv)(m);

                  5.1.4.10 Economic  Uniformity.  At the election of the General
         Partner with respect to any taxable  period ending upon, or after,  the
         termination of the Preference Period, all or a portion of the remaining
         items of Partnership  gross income or gain for such taxable period,  if
         any can be allocated 100% to each Partner  holding Common Units, in the
         proportion  of the number of Common  Units held by such  Partner to the
         total number of Common Units then outstanding,  until each such Partner
         has been  allocated an amount of gross  income or gain which  increases
         the Capital Account  maintained with respect to such Common Units to an
         amount  equal to the product of (A) the number of Common  Units held by
         such Partner and (B) the Per Unit Capital  Amount.  The purpose of this
         allocation  is to  establish  uniformity  between the Capital  Accounts
         underlying  Common Units and the Capital  Accounts  underlying LP Units
         held by Persons other than the General  Partner or any Affiliate of the
         General Partner  immediately  prior to the sale of such Common Units to
         unaffiliated third parties.

                  5.1.4.11  Curative Allocation.

                           (A)  Notwithstanding  any  other  provision  of  this
                  Section 5.1, other than the Required Allocations, the Required
                  Allocations  shall be taken into  account in making the Agreed
                  Allocations so that, to the extent possible, the net amount of
                  items of income,  gain,  loss and deduction  allocated to each
                  Partner  pursuant to the Required  Allocations  and the Agreed
                  Allocations,  together,  shall be equal to the net  amount  of
                  such  items that would  have been  allocated  to each  Partner
                  under the Agreed Allocations had the Required  Allocations and
                  this Curative  Allocation  not otherwise been provided in this
                  Section 5.1. Notwithstanding the preceding sentence,  Required
                  Allocations  relating to (1) Nonrecourse  Deductions shall not
                  be taken into account except to the extent that there has been
                  a  decrease  in  Partnership  Minimum  Gain  and  (2)  Partner
                  Nonrecourse  Deductions shall not be taken into account except
                  to the extent that there has been a decrease  in Minimum  Gain
                  Attributable  to  Partner   Nonrecourse   Debts.   Allocations
                  pursuant to this Section  5.1.4.11(A)  shall only be made with
                  respect to  Required  Allocations  to the  extent the  General
                  Partner  reasonably  determines  that  such  allocations  will
                  otherwise be  inconsistent  with the economic  agreement among
                  the Partners.  Further,  allocations  pursuant to this Section
                  5.1.4.11(A)  shall be  deferred  with  respect to  allocations
                  pursuant  to  clauses  (1) and (2)  hereof to the  extent  the
                  General Partner  reasonably  determines that such  allocations
                  are likely to be offset by subsequent Required Allocations;

                           (B)  The  General   Partner  shall  have   reasonable
                  discretion,  with respect to each taxable period, to (1) apply
                  the  provisions of Section  5.1.4.11(A)  in whatever  order is
                  most likely to minimize  the economic  distortions  that might
                  otherwise result from the Required Allocations, and (2) divide
                  all  allocations  pursuant  to Section  5.1.4.11(A)  among the
                  Partners in a manner that is likely to minimize  such economic
                  distortions.

         5.2  Allocations for Tax Purposes.

         5.2.1  Except as  otherwise  provided  herein,  for federal  income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of income, gain, loss or
deduction  (computed in accordance with Section 4.5.2) is allocated  pursuant to
Section 5.1.

         5.2.2 In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed  Property  or  Adjusted  Property,  items  of  income,  gain,  loss,
depreciation and cost recovery  deductions shall be allocated for federal income
tax purposes among the Partners as follows:

                  5.2.2.1 (A) In the case of a Contributed Property,  such items
         attributable  thereto  shall be  allocated  among the  Partners  in the
         manner  provided  under  Section  704(c)  of the Code that  takes  into
         account the variation between the Agreed Value of such property and its
         adjusted basis at the time of contribution; and (B) except as otherwise
         provided in Section 5.2.2.4, any item of Residual Gain or Residual Loss
         attributable  to a Contributed  Property  shall be allocated  among the
         Partners in the same manner as its correlative  item of gain or loss is
         allocated pursuant to Section 5.1.

                  5.2.2.2  (A) In the case of an Adjusted  Property,  such items
         shall (1) first, be allocated among the Partners in a manner consistent
         with the  principles of Section 704(c) of the Code to take into account
         the Unrealized  Gain or Unrealized  Loss  attributable to such property
         and the allocations thereof pursuant to Section 4.5.4.1 or 4.5.4.2, and
         (2) second,  in the event such  property was  originally a  Contributed
         Property,  be allocated among the Partners in a manner  consistent with
         Section  5.2.2.1(A);  and (B) except as  otherwise  provided in Section
         5.2.2.4,  any item of Residual Gain or Residual Loss attributable to an
         Adjusted  Property  shall be  allocated  among the Partners in the same
         manner as its correlative item of gain or loss is allocated pursuant to
         Section 5.1.

                  5.2.2.3 Except as otherwise  provided in Section 5.2.2.4,  all
         other items of income,  gain,  loss and  deduction  shall be  allocated
         among the Partners in the same manner as their correlative item of gain
         or loss is allocated pursuant to Section 5.1.

                  5.2.2.4 Any items of income, gain, loss or deduction otherwise
         allocable  under  Section  5.2.2.1(B),  5.2.2.2(B)  or 5.2.2.3 shall be
         subject to  allocation by the General  Partner in a manner  designed to
         eliminate,  to the maximum extent possible,  Book-Tax  Disparities in a
         Contributed  Property or Adjusted Property otherwise resulting from the
         applications of the ?ceiling?  limitation  (under Section 704(c) of the
         Code or Section 704(c)  principles) to the  allocations  provided under
         Section 5.2.2.1(A) or 5.2.2.2(A).

         5.2.3  For  proper  administration  of  the  Partnership  and  for  the
preservation  of uniformity  of the LP Units (or any class or classes  thereof),
the General Partner shall have sole discretion to (i) adopt such  conventions as
it deems appropriate in determining the amount of depreciation, amortization and
cost recovery  deductions;  (ii) make special allocations for federal income tax
purposes of income  (including gross income) or deductions;  and (iii) amend the
provisions  of this  Agreement  as  appropriate  (x) to reflect the  proposal or
promulgation of Treasury  Regulations  under Section 704(b) or Section 704(c) of
the Code or (y) otherwise to preserve or achieve  uniformity of the LP Units (or
any class or classes  thereof).  The General Partner may adopt such conventions,
make such  allocations and make such amendments to this Agreement as provided in
this Section 5.2.3 only if such conventions, allocations or amendments would not
have a material  adverse  effect on the  Partners,  the  holders of any class or
classes  of LP Units  issued and  outstanding  or the  Partnership,  and if such
allocations are consistent with the principles of Section 704 of the Code.

         5.2.4 The  General  Partner in its sole  discretion  may  determine  to
depreciate  the  portion  of an  adjustment  under  Section  743(b)  of the Code
attributable to unrealized  appreciation in any Adjusted Property (to the extent
of the unamortized  Book-Tax  Disparity) using a predetermined rate derived from
the  depreciation  method and useful life  applied to the  Partnership's  common
basis of such property, despite the inconsistency of such approach with Proposed
Treasury   Regulation  Section   1.168-2(n)  and  Treasury   Regulation  Section
1.167(c)-1(a)(6).  If the General  Partner later  determines that such reporting
position  cannot   reasonably  be  taken,   the  General  Partner  may  adopt  a
depreciation  convention  under which all  purchasers  acquiring LP Units in the
same month would receive depreciation, based upon the same applicable rate as if
they had  purchased a direct  interest  in the  Partnership's  property.  If the
General  Partner  chooses  not to utilize  such  aggregate  method,  the General
Partner may use any other  reasonable  depreciation  convention  to preserve the
uniformity of the intrinsic tax  characteristics  of any LP Units that would not
have a material  adverse effect on the Limited Partners or the Record Holders of
any class or classes of LP Units.

         5.2.5 Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership Asset shall, to the extent possible, after taking
into account other required  allocations of gain pursuant to this Section 5.2 be
characterized as Recapture Income in the same proportions and to the same extent
as such  Partners  have been  allocated  any  deductions  directly or indirectly
giving rise to the treatment of such gains as Recapture Income.

         5.2.6 All items of income,  gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions  hereof shall be determined  without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided,  however,  that such  allocations  once  made,  shall be  adjusted  as
necessary or  appropriate  to take into account those  adjustments  permitted or
required by Sections 734 or 743 of the Code.

         5.2.7  Each  item of  Partnership  income,  gain,  loss  and  deduction
attributable to a transferred  Partnership Interest of the General Partner or to
transferred LP Units shall, for federal income tax purposes, be determined on an
annual  basis and  prorated  on a monthly  basis and shall be  allocated  to the
Partners as of the opening of the New York Stock  Exchange on the first Business
Day of each  month;  provided,  however,  that  gain or loss on a sale or  other
disposition  of any  Partnership  Assets  other than in the  ordinary  course of
business  shall be  allocated  to the Partners as of the opening of the New York
Stock Exchange on the first business Day of the month in which such gain or loss
is recognized for federal income tax purposes.  The General  Partner may revise,
alter or otherwise modify such methods of allocation as it determines necessary,
to the  extent  permitted  or  required  by  Section  706 of the  Code  and  the
regulations or rulings promulgated thereunder.

         5.2.8  Allocations  that would  otherwise be made to a Limited  Partner
under the  provisions of this Article 5 shall instead be made to the  beneficial
owner of LP  Units  held by a  nominee  in any case in  which  the  nominee  has
furnished  the  identity of such owner to the  Partnership  in  accordance  with
Section  6031(c)  of the Code or any  other  method  acceptable  to the  General
Partner in its sole discretion.

         5.2.9 The General  Partner shall amend or supplement  this Article 5 to
provide for the  allocation  of any item of income,  gain,  loss,  deduction  or
credit for federal,  state or local  income tax purposes for which  provision is
not otherwise made herein in the manner that the General  Partner  determines to
be reasonable, taking into account the requirements of the Code.

         5.2.10  Notwithstanding any other provision of this Section 5.2, if the
Internal Revenue Service is successful in asserting an adjustment to the taxable
income of the  General  Partner  and,  as a result of any such  adjustment,  the
Partnership  is entitled to a deduction  for federal  income tax  purposes  with
respect to any portion of such adjustment,  such deduction shall be allocated to
the General Partner.

         5.3 Requirement and  Characterization of Distributions.  Within 45 days
following the end of each calendar quarter, an amount equal to 100% of Available
Cash with respect to such quarter (or period) shall be distributed in accordance
with this Article 5 by the  Partnership  to the Partners,  as of the Record Date
selected by the General  Partner in its  reasonable  discretion.  All amounts of
Available Cash  distributed by the Partnership on any date from any source shall
be treated for purposes of determining  the order of priority for  distributions
of  Available  Cash as Cash  from  Operations  until the sum of all  amounts  of
Available Cash theretofore  distributed by the Partnership to Partners  pursuant
to Sections 5.4 and 5.5 equals the aggregate  amount of all Cash from Operations
actually  produced by the Partnership  since the Closing Date through such date.
Any remaining  amounts of Available Cash  distributed by the Partnership on such
date shall,  except as otherwise  provided in Section 5.6,  constitute Cash from
Interim  Capital  Transactions  and shall be  treated  as such for  purposes  of
determining the order of priority for distributions of Available Cash.

         5.4 Distributions During Preference Period. Available Cash with respect
to any calendar  quarter within the Preference  Period that  constitutes or, for
purposes of  determining  the priority of  distributions  of Available  Cash, is
treated as if it constitutes Cash from Operations  pursuant to the provisions of
Section 5.3 or 5.6, shall be distributed as follows:

                  5.4.1  First,  98/99ths  to Limited  Partners  holding  Senior
         Preference  Units,  in the  proportion  that the  respective  number of
         Senior  Preference  Units  held by them  bears to the  total  number of
         Senior  Preference Units  Outstanding and 1/99th to the General Partner
         until there has been  distributed in respect of each Senior  Preference
         Unit an amount  equal to the Minimum  Quarterly  Distribution  for such
         quarter;

                  5.4.2  Second,  98/99ths to Limited  Partners  holding  Senior
         Preference  Units,  in the  proportion  that the  respective  number of
         Senior  Preference  Units  held by them  bears to the  total  number of
         Senior  Preference Units  Outstanding and 1/99th to the General Partner
         until there has been  distributed in respect of each Senior  Preference
         Unit  an  amount  equal  to  any  Cumulative   Senior  Preference  Unit
         Deficiency;

                  5.4.3 Third,  98/99ths to Limited Partners holding  Preference
         Units, in the proportion that the respective number of Preference Units
         held by them bears to the total number of Preference Units  Outstanding
         and 1/99th to the General  Partner until there has been  distributed in
         respect of each  Preference  Unit  Outstanding  an amount  equal to the
         Minimum Quarterly Distribution for such quarter;

                  5.4.4 Fourth,  98/99ths to Limited Partners holding Preference
         Units, in the proportion that the respective number of Preference Units
         held by them bears to the total number of Preference Units  Outstanding
         and 1/99th to the General  Partner until there has been  distributed in
         respect  of each  Preference  Unit an  amount  equal to any  Cumulative
         Preference Unit Deficiency;

                  5.4.5 Fifth, 98/99ths to Limited Partners holding Preference B
         Units,  in the proportion  that the  respective  number of Preference B
         Units  held by them  bears to the total  number of  Preference  B Units
         Outstanding  and 1/99th to the  General  Partner  until  there has been
         distributed in respect of each Preference B Unit  Outstanding an amount
         equal to the Minimum Quarterly Distribution for such quarter;

                  5.4.6 Sixth, 98/99ths to Limited Partners holding Preference B
         Units,  in the proportion  that the  respective  number of Preference B
         Units  held by them  bears to the total  number of  Preference  B Units
         Outstanding  and 1/99th to the  General  Partner  until  there has been
         distributed in respect of each Preference B Unit an amount equal to any
         Cumulative Preference B Unit Deficiency;

                  5.4.7  Seventh,  98/99ths to Limited  Partners  holding Common
         Units,  in the proportion  that the  respective  number of Common Units
         held by them bears to the total number of Common Units  Outstanding and
         1/99th to the  General  Partner  until  there has been  distributed  in
         respect of each  Common Unit an amount  equal to the Minimum  Quarterly
         Distribution for such quarter;

                  5.4.8  Eighth,  98/99ths  to  all  Limited  Partners,  in  the
         proportion that their respective  Percentage Interest bears to 98/99ths
         and 1/99ths to the General Partner until there has been  distributed in
         respect of each LP Unit  Outstanding  an amount  equal to the excess of
         the First Target Distribution over the Minimum Quarterly Distribution;

                  5.4.9  Ninth,   90/99ths  to  all  Limited  Partners,  in  the
         proportion that their respective  Percentage Interest bears to 98/99ths
         and 9/99ths to the General Partner until there has been  distributed in
         respect of each LP Unit  Outstanding  an amount  equal to the excess of
         the Second Target Distribution over the First Target Distribution;

                  5.4.10  Tenth,  80/99ths  to  all  Limited  Partners,  in  the
         proportion that their respective Percentage Interest bears to 98/99ths,
         and 19/99ths to the General Partner until there has been distributed in
         respect of each LP Unit  Outstanding  an amount  equal to the excess of
         the Third Target Distribution over the Second Target Distribution;

                  5.4.11  Thereafter,  70/99ths to all Limited Partners,  in the
         proportion that their respective Percentage Interest bears to 98/99ths,
         and 29/99ths to the General Partner;

provided,  however,  that after the distribution of Available Cash to holders of
Preference  Units  with  respect  to the  third  calendar  quarter  of 1997,  no
distribution  will be  made  pursuant  to  Sections  5.4.5  and  5.4.6,  and the
Preference B Units shall be deemed to be  Preference  Units for purposes of this
Section 5.4.

         5.5 Distributions After Preference Period.  Available Cash with respect
to any calendar  quarter after the Preference  Period that  constitutes  or, for
purposes of  determining  the priority of  distributions  of Available  Cash, is
treated as if it constitutes Cash from Operations  pursuant to the provisions of
Section 5.3 or 5.6, shall be distributed as follows:

                  First,  98/99ths to all Limited  Partners,  in the  proportion
         that their respective Percentage Interest bears to 98/99ths, and 1/99th
         to the General  Partner until there has been  distributed in respect of
         each of the  Outstanding  LP  Units  an  amount  equal  to the  Minimum
         Quarterly Distribution;

                  Second,  98/99ths to all Limited  Partners,  in the proportion
         that their respective  Percentage Interest bears to 98/99ths and 1/99th
         to the General  Partner until there has been  distributed in respect of
         each of the  Outstanding  LP Units an amount equal to the excess of the
         First Target Distribution over the Minimum Quarterly Distribution;

                  Third,  90/99ths to all Limited  Partners,  in the  proportion
         that  their  respective  Percentage  Interest  bears to  98/99ths,  and
         9/99ths to the  General  Partner  until there has been  distributed  in
         respect  of each of the  Outstanding  LP Units an  amount  equal to the
         excess  of  the  Second  Target  Distribution  over  the  First  Target
         Distribution; and

                  Fourth,  80/99ths to all Limited  Partners,  in the proportion
         that  their  respective  Percentage  Interest  bears to  98/99ths,  and
         19/99ths to the General  Partner  until there has been  distributed  in
         respect  of each of the  Outstanding  LP Units an  amount  equal to the
         excess  of  the  Third  Target  Distribution  over  the  Second  Target
         Distribution;

                  Thereafter,   70/99ths  to  all  Limited   Partners,   in  the
         proportion that their respective Percentage Interest bears to 98/99ths,
         and 29/99ths to the General Partner.

         5.6   Distributions   of  Cash  from  Interim   Capital   Transactions.
Distributions  by the Partnership of Available Cash that  constitutes  Cash from
Interim  Capital  Transactions  shall be  distributed,  unless the provisions of
Section 5.3 require otherwise, 98/99ths to all Limited Partners in proportion to
the respective number of LP Units held by them and 1/99th to the General Partner
until there has been distributed in respect of each Senior  Preference Unit sold
in the Initial Offering, since the Closing Date through such date, distributions
of Available Cash that are deemed to be Cash from Interim  Capital  Transactions
in an aggregate amount equal to $22 per Senior Preference Unit. Thereafter,  all
Available Cash shall be distributed as if it were Cash from Operations and shall
be distributed in accordance with Section 5.4 or 5.5, whichever is applicable.



<PAGE>


         5.7 Definitions. As used herein:

         5.7.1 ?Available Cash?, with respect to any calendar quarter, means (i)
the sum of (a) all cash receipts of the Partnership during such quarter from all
sources   (including   distributions   of  cash   received  from  the  Operating
Partnership)  and (b) any reduction in reserves  established in prior  quarters,
less (ii) the sum of (aa) all cash  disbursements of the Partnership during such
quarter,  including,  without limitation,  disbursements for operating expenses,
taxes on the  Partnership as an entity or paid by the  Partnership on behalf of,
or  amounts  withheld  with  respect  to,  all,  but not  less  than  all of the
Unitholders,  if any, debt service (including the payment of principal,  premium
and interest),  capital expenditures and contributions,  if any, to a subsidiary
corporation or partnership  (but excluding all cash  distributions to Partners),
(bb) any  reserves  established  in such  quarter in such amounts as the General
Partner  determines in its reasonable  discretion to be necessary or appropriate
(x) to  provide  for the  proper  conduct  of the  business  of the  Partnership
(including reserves for future capital expenditures) or (y) to provide funds for
distributions with respect to any one or more of the next four calendar quarters
and (cc) any other  reserves  established in such quarter in such amounts as the
General Partner determines in its reasonable  discretion to be necessary because
the distribution of such amounts would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets  are  subject.  Taxes  paid by the  Partnership  on behalf of, or amounts
withheld  with  respect  to,  less  than  all of the  Unitholders  shall  not be
considered cash  disbursements of the Partnership which reduce ?Available Cash?.
Notwithstanding  the  foregoing,  ?Available  Cash?  shall not  include any cash
receipts or reductions in reserves or take into account any  disbursements  made
or reserves established after commencement of the dissolution and liquidation of
the Partnership.

         5.7.2 ?Cash from Interim Capital Transactions? means, at any date, such
amounts of Available  Cash as are  determined by the General  Partner to be Cash
from Interim Capital Transactions pursuant to Section 5.3.

         5.7.3  ?Cash  from  Operations?   means,  at  any  date  but  prior  to
commencement  of  the  dissolution  and  liquidation  of the  Partnership,  on a
cumulative  basis, all cash receipts of the Partnership plus any cash balance of
the  Partnership on the Closing Date (including  distributions  of cash received
from the Operating  Partnership and excluding any cash proceeds from any Interim
Capital  Transactions  or Terminating  Capital  Transactions)  during the period
since the commencement of operations by the Partnership  through such date, less
the sum of (a) all cash operating  expenditures of the  Partnership  during such
period including,  without limitation,  taxes on the Partnership as an entity or
taxes paid by the Partnership on behalf of, or amounts withheld with respect to,
all, but not less than all of the Unitholders, if any, (b) all cash debt service
payments  of  the  Partnership  during  such  period  (other  than  payments  or
prepayments  of  principal  and premium  required  by reason of loan  agreements
(including covenants and default provisions therein) or by lenders, in each case
in connection  with sales or other  dispositions of assets or made in connection
with  refinancings or refundings of  indebtedness,  provided that any payment or
prepayment  of  principal,  whether or not then due,  shall be determined at the
election  and in the  discretion  of the  General  Partner,  to be  refunded  or
refinanced  by any  indebtedness  incurred or to be incurred by the  Partnership
simultaneously  with or  within  180  days  prior to or after  such  payment  or
prepayment  to the  extent  of the  principal  amount  of such  indebtedness  so
incurred),  (c) all cash capital  expenditures  of the  Partnership  during such
period (other than (i) Expansive Capital Expenditures and (ii) cash expenditures
made  in  payment  of   transaction   expenses   relating  to  Interim   Capital
Transactions),  (d) an amount  equal to  revenues  collected  pursuant to a rate
increase  that are  subject to  possible  refund,  (e) any  additional  reserves
outstanding  as of  such  date  which  the  General  Partner  determines  in its
reasonable  discretion to be necessary or  appropriate to provide for the future
cash payment of items of the type referred to in (a) through (c) above,  and (f)
any reserves that the General Partner determines in its reasonable discretion to
be necessary or appropriate to provide funds for  distributions  with respect to
any one or more of the next  four  calendar  quarters,  all as  determined  on a
consolidated  basis  and  after  elimination  of  intercompany  items and of the
interest   attributable  to  the  general  partner  interest  in  the  Operating
Partnership.  Taxes  paid by the  Partnership  on behalf of less than all of the
Unitholders  shall  not  be  considered  cash  operating   expenditures  of  the
Partnership which reduce ?Cash from Operations?.

         5.7.4  ?Cumulative  Preference Unit Deficiency?  means, with respect to
any Preference Unit and as to any calendar  quarter,  the excess, if any, of (a)
the sum resulting from adding  together the Preference  Unit  Deficiency as to a
Preference  Unit acquired in the initial  offering of the  Preference  Units for
each of the quarters  within the Preference  Period ending prior to such quarter
over  (b)  the sum of any  distributions  theretofore  made  with  respect  to a
Preference  Unit  acquired  in the  initial  offering  of the  Preference  Units
pursuant to Section 5.4.4.


<PAGE>


         5.7.5 ?Cumulative Preference B Unit Deficiency?  means, with respect to
any Preference B Unit and as to any calendar quarter, the excess, if any, of (a)
the sum resulting from adding  together the Preference B Unit Deficiency as to a
Preference B Unit acquired in the initial  exchange of the Preference  Units for
Preference B Units pursuant to Section 5.9.2 for each of the quarters within the
Preference  Period  ending  prior  to  such  quarter  over  (b)  the  sum of any
distributions  theretofore  made  pursuant  to Section  5.4.6 with  respect to a
Preference B Unit acquired in the initial  exchange of the Preference  Units for
Preference B Units pursuant to Section 5.9.2.

         5.7.6  ?Cumulative  Senior  Preference  Unit  Deficiency?  means,  with
respect  to any  Senior  Preference  Unit and as to any  calendar  quarter,  the
excess,  if any,  of (a) the sum  resulting  from  adding  together  the  Senior
Preference  Unit  Deficiency  as to a Senior  Preference  Unit  acquired  in the
Initial  Offering for each of the quarters  within the Preference  Period ending
prior to such quarter  over (b) the sum of any  distributions  theretofore  made
with  respect to a Senior  Preference  Unit  acquired  in the  Initial  Offering
pursuant to Section 5.4.2.

         5.7.7 ?First  Liquidation Target Amount?  means, an amount,  determined
with respect to any LP Unit, which equals, as of the date of its  determination,
the sum of (a) the Remaining Capital, if any, attributable to such LP Unit, plus
(b)(i) in the case of a Senior Preference Unit, the Cumulative Senior Preference
Unit  Deficiency,  (ii)  in  the  case  of a  Preference  Unit,  the  Cumulative
Preference  Unit  Deficiency  or (iii) in the case of a Preference  B Unit,  the
Cumulative Preference B Unit Deficiency,  plus (c) the First Target Distribution
Cumulative Deficiency.

         5.7.8 ?First Target  Distribution?  means $.60 per LP Unit per calendar
quarter, subject to adjustment in accordance with Sections 5.8 and 9.6.

         5.7.9 ?First  Target  Distribution  Cumulative  Deficiency?  means,  an
amount  attributable to any LP Unit and determined with respect to all preceding
calendar quarters,  which equals the excess of (i) the First Target Distribution
less the Minimum  Quarterly  Distribution for each quarter of the  Partnership's
existence over (ii) the amount of any distributions (on a per LP Unit basis) for
such quarter of Available Cash that were  distributed  pursuant to Section 5.4.8
or paragraph Second of Section 5.5.

         5.7.10 ?Interim Capital  Transaction?  means (a) borrowing 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 the
Partnership  or  the  Operating  Partnership,  (b)  sales  of  Interests  in the
Partnership  by the  Partnership or the Operating  Partnership  and (c) sales or
other voluntary or involuntary  dispositions of any assets of the Partnership or
the  Operating  Partnership  (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 or (z) sales or other
dispositions of assets as a part of normal retirements or replacements), in each
case  prior  to the  commencement  of the  dissolution  and  liquidation  of the
Partnership.

         5.7.11  ?Minimum  Quarterly  Distribution?  means  $.55 per LP Unit per
calendar quarter, subject to adjustment in accordance with Sections 5.8 and 9.6.

         5.7.12 ?Net Termination Sales Gain? means, for each Partnership Year or
shorter period, the sum, if positive, of all items of gain or loss recognized by
the  Partnership  (including  such  amounts  recognized  through  the  Operating
Partnership) from Terminating Capital Transactions occurring in such Partnership
Year  or  shorter  period.  The  items  included  in  the  determination  of Net
Termination  Sales Gain shall be determined in accordance with Section 4.5.2 and
shall not include any items of income,  gain or loss specially  allocated  under
Section 5.1. Once an item of income,  gain or loss that has been included in the
initial  computation  of Net  Termination  Sales Gain is subjected to a Required
Allocation or a Curative Allocation, Net Termination Sales Gain or the resulting
Net  Termination  Sales Loss,  whichever  the case may be,  shall be  recomputed
without regard to such item.



<PAGE>


         5.7.13 ?Net Termination Sales Loss? means, for each Partnership Year or
shorter period, the sum, if negative, of all items of gain or loss recognized by
the  Partnership  (including  such  amounts  recognized  through  the  Operating
Partnership) from Terminating Capital Transactions occurring in such Partnership
Year  or  shorter  period.  The  items  included  in  the  determination  of Net
Termination  Sales Loss shall be determined in accordance with Section 4.5.2 and
shall not include any items of income,  gain or loss specially  allocated  under
Section  5.1.4.  Once an item of gain or loss  that  has  been  included  in the
initial  computation  of Net  Termination  Sales Loss is subjected to a Required
Allocation or a Curative Allocation, Net Termination Sales Loss or the resulting
Net  Termination  Sales Gain,  whichever  the case may be,  shall be  recomputed
without regard to such item.

         5.7.14 ?Preference Period? means the period commencing upon the Closing
Date and ending effective as of the end of the calendar quarter as to which each
of the following  conditions is met: (i) the Partnership  shall have distributed
to all  Unitholders in respect of such calendar  quarter and each of the 11 full
consecutive  preceding  calendar  quarters  Available Cash that constitutes Cash
from  Operations  in  an  amount  at  least  equal  to  the  Minimum   Quarterly
Distribution,  and (ii) as of the end of such calendar  quarter,  the sum of (A)
plus (B) is less than an amount  equal to  Permitted  Indebtedness  where (A) is
equal to the outstanding  principal balance as of such date of the Partnership's
consolidated  indebtedness  (excluding  borrowings for working capital purposes)
and (B) is equal to the amount of revenues collected by the Partnership that (x)
are then  subject to possible  refund  under a pending rate case and (y) are not
maintained by the Partnership in a separate reserve fund.

         5.7.15  ?Preference  Unit  Deficiency?   means,  with  respect  to  any
Preference Unit and as to any calendar quarter within the Preference Period, the
excess  of (a)  the  Minimum  Quarterly  Distribution  over  (b)  the sum of all
Available Cash distributed in such calendar quarter with respect to a Preference
Unit  acquired  in the  initial  offering of the  Preference  Units  pursuant to
Section 5.4.3.

         5.7.16  ?Preference  B Unit  Deficiency?  means,  with  respect  to any
Preference B Unit and as to any calendar  quarter within the Preference  Period,
the excess of (a) the  Minimum  Quarterly  Distribution  over (b) the sum of all
Available Cash  distributed in such calendar  quarter  pursuant to Section 5.4.5
with  respect to a  Preference  B Unit  acquired in the initial  exchange of the
Preference  Units for  Preference B Units  pursuant to Section  5.9.2;  provided
however,  that after the Record Date for the  distribution  of Available Cash to
holders of Preference  Units with respect to the third calendar quarter of 1997,
no Preference B Unit Deficiency shall exist, and for all quarters  subsequent to
the third calendar quarter of 1997, the Preference B Units shall be deemed to be
Preference Units for purposes of Sections 5.7.4, 5.7.7 and 5.7.15.

         5.7.17 ?Remaining  Capital?  means, at any time with respect to a class
or series of LP Units, the price per LP Unit at which such class or series of LP
Units was  initially  sold by the  Partnership,  as  determined  by the  General
Partner,  less the sum of any  distributions of Available Cash constituting Cash
from Interim  Capital  Transactions  and any  distributions  of cash (or the Net
Agreed Value of any  distributions  in kind) in connection  with the dissolution
and liquidation of the Partnership  theretofore  made in respect of a LP Unit of
such class or series that was sold in the initial offering of such LP Units.

         5.7.18 ?Second Liquidation Target Amount?  means an amount,  determined
with respect to any LP Unit which equals,  as of the date of its  determination,
the sum of (a) the First  Liquidation  Target  Amount plus (b) the Second Target
Distribution Cumulative Deficiency.

         5.7.19 ?Second Target Distribution?  means $.65 per LP Unit, subject to
adjustment in accordance with Sections 5.8 and 9.6.

         5.7.20  ?Second Target  Distribution  Cumulative  Deficiency?  means an
amount  attributable to any LP Unit and determined with respect to all preceding
calendar quarters, which equals the excess of (i) the Second Target Distribution
less the  First  Target  Distribution  for  each  quarter  of the  Partnership's
existence over (ii) the amount of any distributions (on a per LP Unit basis) for
such quarter of Available Cash that were  distributed  pursuant to Section 5.4.9
or paragraph Third of Section 5.5.

         5.7.21 ?Senior  Preference Unit Deficiency?  means, with respect to any
Senior  Preference  Unit and as to any calendar  quarter  within the  Preference
Period, the excess of (a) the Minimum Quarterly Distribution over (b) the sum of
all Available Cash distributed in such calendar quarter with respect to a Senior
Preference Unit acquired in the Initial Offering pursuant to Section 5.4.1.

         5.7.22  ?Terminating  Capital  Transaction?  means  any  sale or  other
disposition of assets of the Partnership or the Operating  Partnership following
commencement  of the  dissolution  and  liquidation  of the  Partnership  or the
Operating Partnership.


<PAGE>


         5.7.23 ?Third  Liquidation Target Amount?  means an amount,  determined
with respect to any LP Unit, which equals, as of the date of its  determination,
the sum of (a) the Second  Liquidation  Target  Amount plus (b) the Third Target
Distribution Cumulative Deficiency.

         5.7.24 ?Third Target  Distribution?  means $.70 per LP Unit, subject to
adjustment in accordance with Sections 5.8 and 9.6.

         5.7.25  ?Third  Target  Distribution  Cumulative  Deficiency?  means an
amount  attributable to any LP Unit and determined with respect to all preceding
calendar quarters,  which equals the excess of (i) the Third Target Distribution
less the  Second  Target  Distribution  for each  quarter  of the  Partnership's
existence over (ii) the amount of any distributions (on a per LP Unit basis) for
such quarter of Available Cash that were distributed  pursuant to Section 5.4.10
or paragraph Fourth of Section 5.5.

         5.8  Adjustment  of  Distribution  and Target  Distribution  Levels25.8
Adjustment of Distribution and Target Distribution Levels.

         5.8.1 The Minimum Quarterly  Distribution,  First Target  Distribution,
Second   Target   Distribution   and   Third   Target   Distribution   shall  be
proportionately  adjusted  in the  event  of any  distribution,  combination  or
subdivision  (whether  effected  by  a  distribution  payable  in  LP  Units  or
otherwise) of  Partnership  Securities  in accordance  with Section 4.11. In the
event of a  distribution  of  Available  Cash  that  constitutes,  and which for
purposes of determining  the priority of such  distribution of Available Cash is
treated as  constituting,  Cash from Interim Capital  Transactions in respect of
Interim Capital Transactions,  the Minimum Quarterly Distribution,  First Target
Distribution,  Second Target Distribution and Third Target Distribution shall be
adjusted  proportionately  downward  to  equal  the  product  of  the  otherwise
applicable Minimum Quarterly  Distribution,  First Target  Distribution,  Second
Target  Distribution  and Third  Target  Distribution,  as the case may be, by a
fraction,  of which the numerator is the Unrecovered  Capital  immediately after
giving  effect  to such  distribution  and of  which  the  denominator  shall be
Unrecovered Capital  immediately prior to such distribution.  For such purposes,
?Unrecovered  Capital?  means, at any time, an amount equal to the excess of $22
per LP Unit over the sum of all  distributions  theretofore made in respect of a
Senior  Preference  Unit acquired in the Initial  Offering out of Available Cash
constituting,  and  which for  purposes  of  determining  the  priority  of such
distribution  of Available  Cash is treated as  constituting,  Cash from Interim
Capital Transactions.

         5.8.2 The Minimum Quarterly  Distribution,  First Target  Distribution,
Second Target  Distribution and Third Target  Distribution shall also be subject
to adjustment pursuant to Section 9.6.

         5.9  Exchange of LP Units.9  Exchange of LP Units.



<PAGE>


         5.9.1 After the Exchange  Date,  KPL may from time to time  exchange an
aggregate  of up to  2,650,000  Preference  Units  or  Preference  B Units  or a
combination  thereof (the  ?Exchangeable  Amount?) for an equal number of Senior
Preference  Units;   provided,   however,  that  each  such  exchange  shall  be
conditioned  upon receipt by the  Partnership  of an Opinion of Counsel that the
intrinsic  economic  and  federal  income  tax  characteristics  of  the  Senior
Preference  Units  issuable  upon such  exchange are  identical to the intrinsic
economic and federal income tax  characteristics  of the Senior Preference Units
outstanding  immediately prior to such exchange.  As used in this Section 5.9.1,
the  ?Exchange  Date?   shall  mean  the  later  of  (i)  the  Record  Date  for
distributions  of Available Cash to the holders of Senior  Preference Units with
respect to the third calendar  quarter of 1997, and (ii) the end of the calendar
quarter as to which the Partnership shall have distributed to all Unitholders in
respect  of such  quarter  and  each of the  three  full  consecutive  preceding
calendar  quarters  Available Cash that  constitutes  Cash from Operations in an
amount at least equal to the Third Target  Distribution;  provided  that,  as of
such date, the sum of (A) plus (B) is less than Permitted Indebtedness where (A)
is  equal  to  the  outstanding  principal  balance  as  of  such  date  of  the
Partnership's   consolidated  indebtedness  (excluding  borrowings  for  working
capital  purposes)  and (B) is equal to the amount of revenues  collected by the
Partnership  that (x) are then  subject to possible  refund under a pending rate
case and (y) are not maintained by the  Partnership in a separate  reserve fund.
In the event of a  distribution,  combination  or  subdivision of the Preference
Units or Preference B Units pursuant to Section 4.11, the ?Exchangeable  Amount?
shall be adjusted  to and become  that amount  which bears the same ratio to the
aggregate number of Outstanding  Preference  Units and Outstanding  Preference B
Units after giving effect to such  distribution,  combination  or subdivision as
the Exchangeable Amount bears to the aggregate number of Outstanding  Preference
Units and Outstanding Preference B Units immediately prior to such distribution,
combination  or  subdivision.  In the event of a  distribution,  combination  or
subdivision  of the Senior  Preference  Units,  the number of Senior  Preference
Units for which one Preference  Unit or Preference B Unit is  exchangeable  (the
?Exchange  Factor?)  shall be adjusted to and become that amount which bears the
same ratio to the number of  Outstanding  Senior  Preference  Units after giving
effect to such  distribution,  combination or subdivision as the Exchange Factor
immediately prior to such distribution,  combination or subdivision bears to the
number of  Outstanding  Senior  Preference  Units  after  giving  effect to such
distribution, combination or subdivision.

         5.9.2 KPL may, at its option, exchange up to 1,000,000 Preference Units
for an equal number of Preference B Units. In addition, any holder of Preference
B Units may at its option,  exercisable  from time to time after the Record Date
for  distributions  of Available Cash to the holders of Senior  Preference Units
with respect to the third calendar quarter of 1997,  exchange Preference B Units
for an equal  number  of  Preference  Units.  In the  event  of a  distribution,
combination or subdivision of the Preference  Units,  the exchange ratio between
the Preference B Units and the Preference  Units shall be adjusted to and become
that ratio  which bears the same ratio to the number of  Outstanding  Preference
Units after giving effect to such  distribution,  combination  or subdivision as
the  exchange  ratio  immediately  prior to such  distribution,  combination  or
subdivision  bears to the number of  Outstanding  Preference  Units after giving
effect to such distribution, combination or subdivision.

         5.9.3 Upon the expiration of the Preference Period, all differences and
distinctions  between Senior  Preference Units,  Preference Units,  Preference B
Units and Common Units shall  automatically  cease. The Senior Preference Units,
Preference  Units,  Preference B Units and Common Units shall remain  separately
identified until such time as the Partnership has received an Opinion of Counsel
that the intrinsic economic and federal income tax characteristics of the Senior
Preference  Units,  the Preference  Units, the Preference B Units and the Common
Units are  identical.  Upon  receipt of such an Opinion of  Counsel,  the Senior
Preference  Units,  Preference  Units  and  Common  Units  shall  thereafter  be
designated ?Units?,  and each Unit Certificate of the Partnership  purporting to
represent  Senior  Preference  Units,  Preference Units or Common Units shall be
deemed to represent Units.

         5.10  Restrictions on Distributions on, and Acquisitions of, Preference
Units,  Preference  B Units and Common  Units  during the  Preference  Period.10
Restrictions  on  Distributions  on,  and  Acquisitions  of,  Preference  Units,
Preference  B  Units  and  Common  Units  during  the  Preference   Period.  The
Partnership  will  not  distribute  Available  Cash  on  the  Preference  Units,
Preference B Units or Common  Units or acquire  Preference  Units,  Preference B
Units or Common Units with Available Cash in respect of any calendar  quarter if
(i) the Preference  Period  continues in effect during the quarter in respect of
which the distribution or acquisition would be made and (ii) after giving effect
to such  distribution  or  acquisition,  the sum of (A) plus (B) would exceed an
amount equal to the Permitted Indebtedness where (A) is equal to the outstanding
principal  balance as of the proposed  distribution or acquisition  date, as the
case may be, of the Partnership's consolidated indebtedness (excluding borrowing
for  working  capital  purposes)  and (B) is equal  to the  amount  of  revenues
collected by the Partnership  that (i) are then subject to possible refund under
a pending rate case and (ii) are not maintained by the Partnership in a separate
reserve fund.

         5.11  Reimbursements  and  Payments.11   Reimbursements  and  Payments.
Amounts payable as  reimbursement of the General Partner pursuant to Section 6.4
or amounts  payable to any Person other than in his capacity as a Partner,  such
as for  services  rendered,  goods  purchased  or money  borrowed,  shall not be
treated as distributions for purposes of this Article 5.

          ARTICLE 6 MANAGEMENT AND OPERATION OF BUSINESS

         6.1 Management.

         6.1.1 Except as otherwise  expressly  provided in this  Agreement,  all
decisions  respecting  any matter set forth  herein or  otherwise  affecting  or
arising out of the conduct of the business of the  Partnership  shall be made by
the General Partner,  and the General Partner shall have the exclusive right and
full  authority  to manage,  conduct,  control  and  operate  the  Partnership's
business and effect the purposes and  provisions  of this  Agreement.  Except as
otherwise  expressly provided in this Agreement,  the General Partner shall have
full authority to do all things on behalf of the Partnership deemed necessary or
desirable  by it in the conduct of the business of the  Partnership,  including,
without limitation, (i) the making of any expenditures,  the borrowing of money,
the  guaranteeing  of  indebtedness  and  other  liabilities,  the  issuance  of
evidences  of  indebtedness  and  the  incurring  of any  obligations  it  deems
necessary for the conduct of the activities of the Partnership;  (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 assets of the Partnership or the
merger or other  combination of the Partnership with or into another entity (all
of the foregoing  subject to any prior approval which may be required by Section
6.13);  (iv)  the  use of the  assets  of the  Partnership  (including,  without
limitation,  cash on hand)  for any  purpose  consistent  with the terms of this
Agreement  and on any  terms it sees fit,  including,  without  limitation,  the
financing of the conduct of the  operations  of the  Partnership,  the Operating
Partnership or any Subsidiary,  the lending of funds to other persons (including
the Operating Partnership or any Subsidiary) and the repayment of obligations of
the Partnership,  the Operating  Partnership or any Subsidiary and the making of
capital contributions to the Operating  Partnership and any Subsidiary;  (v) the
negotiation  and execution on any terms deemed  desirable in its sole discretion
and the performance of any contracts,  conveyances or other  instruments that it
considers  useful or necessary to the conduct of the  Partnership  operations or
the implementation of its powers under this Agreement;  (vi) the distribution of
Partnership  cash;  (vii) the selection  and dismissal of employees  (including,
without  limitation,   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  and the Partners as it deems
necessary or  appropriate;  (ix) the formation of, or acquisition of an interest
in,  and the  contribution  of  property  to,  any  further  limited  or general
partnerships,  joint  ventures or other  relationships  that it deems  desirable
(including,  without  limitation,  the  acquisition  of  interests  in,  and the
contributions  of property to, the Operating  Partnership or any Subsidiary from
time to  time);  (x)  the  control  of any  matters  affecting  the  rights  and
obligations  of the  Partnership,  including the conduct of  litigation  and the
incurring of legal expense and the settlement of claims and litigation; (xi) 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 securing of same by  mortgage,  deed of trust or other
lien or  encumbrance,  the bringing and defending of actions at law or in equity
and 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 and any other securities exchange and delisting some
or all of the LP Units from,  or  requesting  that trading be suspended  on, any
such exchange (subject to any prior approval which may be required under Section
2.6);  and  (xiii)  the  undertaking  of  any  action  in  connection  with  the
Partnership's  participation in the Operating Partnership as the limited partner
(including,  without limitation,  the contribution or loan by the Partnership to
the Operating Partnership of funds).

         6.1.2 Each of the  Partners  and each other  Person who may  acquire an
interest in LP Units hereby  approves,  ratifies  and  confirms  the  execution,
delivery and  performance  by the parties  thereof to the Operating  Partnership
Agreement,   the  Underwriting  Agreement,   the  Contribution  Agreement,   the
Conveyance and  Assignment,  the  Assignment of Leases and the other  agreements
described in the  Registration  Statement and agrees that the General Partner is
authorized to execute,  deliver and perform the  above-mentioned  agreements and
transactions and such other agreements  described in the Registration  Statement
on behalf of the  Partnership  without any further act,  approval or vote of the
Partners  or  any  other  Person  who  may  acquire  an  interest  in  LP  Units
notwithstanding any other provision of this Agreement, the Operating Partnership
Agreement,  the Delaware Act or any applicable law, rule or regulation.  None of
the execution,  delivery or performance by the General Partner, the Partnership,
the  Operating  Partnership  or any  Affiliate  of any of them of any  agreement
authorized or permitted  under this Agreement  shall  constitute a breach by the
General  Partner of any duty that the General Partner may owe the Partnership or
the Limited  Partners or any other Persons  under this  Agreement or of any duty
stated or implied by law or equity.

         6.1.3 The  General  Partner has caused to be filed the  Certificate  of
Limited  Partnership as required by the Delaware Act and shall cause to be filed
such other  certificates  or  documents  as may be required  for the  formation,
continuation,  qualification and operation of a limited partnership in the State
of Delaware or any other state in which the Partnership elects to do business or
own property.  The General  Partner  shall file any necessary  amendments to the
Certificate of Limited Partnership, including, without limitation, amendments to
reflect a successor or additional  General Partner admitted  pursuant to Section
13.3, and shall  otherwise use its best efforts to do all things  (including the
appointment  of  registered   agents  of  the  Partnership  and  maintenance  of
registered  offices of the  Partnership)  requisite  to the  maintenance  of the
Partnership as a limited  partnership under the laws of the State of Delaware or
any  other  state in which  the  Partnership  may  elect to do  business  or own
property.  Where  applicable law so permits,  the General  Partner may omit from
certificates  filed  in the  State  of  Delaware  and in  states  in  which  the
Partnership  elects to do business or own property all  information not required
by law,  including  the names and  addresses of Partners,  and omit  information
relating  to capital  contributions  and shares of  profits or  compensation  of
Partners,  or  state  such  information  in  the  aggregate  rather  than  on an
individual  Partner  basis.  Except as  provided in Section  7.5.1,  the General
Partner shall not be required, before or after filing, to deliver or mail a copy
of the  Certificate  of  Limited  Partnership  or any  amendment  thereto to any
Limited Partner or Record Holder.

         6.2 Reliance By Third Parties.  Notwithstanding  any other provision of
this  Agreement to the contrary,  no lender,  purchaser or other Person  dealing
with the  Partnership  shall be required to look to the  application of proceeds
hereunder  or to verify  any  representation  by the  General  Partner as to the
extent of the  interest  in  Partnership  Assets  that the  General  Partner  is
entitled to encumber,  sell or otherwise use, and any such lender,  purchaser or
other Person shall be entitled to rely exclusively on the representations of the
General Partner as to its authority to enter into such arrangements and shall be
entitled  to deal with the  General  Partner,  without  the joinder of any other
Person, as if the General Partner were the sole party in interest therein,  both
legally  and  beneficially.  Each  Limited  Partner  hereby  waives  any and all
defenses or other remedies that may be available against such lender,  purchaser
or other  Person to  contest,  negate or  disaffirm  any  action of the  General
Partner in connection  with any such  arrangement.  In no event shall any Person
dealing with the General Partner or the General  Partner's  representative  with
respect to any business or property of the Partnership be obligated to ascertain
that the terms of this  Agreement  have been  complied  with, or be obligated to
inquire  into the  necessity or  expedience  of any act or action of the General
Partner or the General Partner's representative;  and every contract, agreement,
deed,  mortgage,  security  agreement,  promissory  note or other  instrument or
document executed by the General Partner or the General Partner's representative
with respect to any business or property of the Partnership  shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery  thereof,  this Agreement was
in full force and effect,  (ii) such instrument or document was duly executed in
accordance  with the terms and  provisions of this Agreement and is binding upon
the  Partnership  and  (iii)  the  General  Partner  or  the  General  Partner's
representative  was duly authorized and empowered to execute and deliver any and
every such instrument or document for and on behalf of the Partnership.

         6.3 Purchase or Sale of LP Units.  Subject to the provisions of Section
5.10,  the General  Partner may cause the  Partnership  to purchase or otherwise
acquire LP Units and may also purchase or otherwise acquire LP Units for its own
account  and may  sell or  otherwise  dispose  of such LP  Units.  Any LP  Units
purchased  for  or  otherwise  held  by the  Partnership  shall  not  be  deemed
outstanding for any purposes under this Agreement.

         6.4   Compensation  and   Reimbursement   of  the  General   Partner.

         6.4.1  Except as  otherwise  provided in this  Section 6.4, the General
Partner  shall not be  compensated  for its  services as general  partner of the
Partnership.

         6.4.2  The  General  Partner  shall  be  reimbursed  for all  expenses,
disbursements  and advances incurred or made in connection with the organization
of  the  Partnership,   the  Initial  Offering  and  the  qualification  of  the
Partnership and the General Partner to do business.

         6.4.3 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  expenses  it incurs  or makes on behalf of the  Partnership
(including  amounts paid to any Person to perform  services for the Partnership)
and (ii) the  portion of the General  Partner's  legal,  accounting,  utilities,
investor   communication,   telephone,   secretarial,   travel,   entertainment,
bookkeeping,  reporting, data processing,  office rent and other office expenses
(including overhead charges),  salaries, fees and other compensation and benefit
expenses of employees,  officers and directors, other administrative or overhead
expenses  and all  other  direct  and  indirect  administrative  and  incidental
expenses,  in  each  case  necessary  or  appropriate  to  the  conduct  of  the
Partnership's business (including, without limitation, expenses allocated to the
General  Partner by its  Affiliates).  The General  Partner shall determine such
fees and expenses that are allocated to the Partnership in any reasonable manner
in  its  sole  discretion.  Such  reimbursements  shall  be in  addition  to any
reimbursement to the General Partner as a result of indemnification  pursuant to
Section 6.8.

         6.4.4 Subject to the provisions of Section 4.4, the General Partner may
propose and adopt or cause to be adopted on behalf of the  Partnership,  without
the approval of the Limited  Partners,  employee benefit plans,  including plans
involving the issuance of LP Units,  for the benefit of employees of the General
Partner, the Partnership, the Operating Partnership or any Affiliate of any such
Persons,  with respect to services  performed,  directly or indirectly,  for the
benefit of the Partnership or the Operating Partnership.


<PAGE>


         6.5 Partnership  Funds. The funds of the Partnership shall be deposited
in such  account or  accounts as are  designated  by the  General  Partner.  The
General Partner may, in its sole discretion, deposit funds of the Partnership in
a central  account  maintained  by or in the name of the General  Partner or the
Partnership  in which funds of the  Operating  Partnership  are also  deposited,
provided that at all times books of account are maintained which show the amount
of funds of the Partnership on deposit in such account.  All withdrawals from or
charges  against such  accounts  shall be made by the General  Partner or by its
officers or agents.  Funds of the  Partnership  may be invested as determined by
the General Partner, except in connection with acts otherwise prohibited by this
Agreement.

         6.6 Loans from the General Partner; Contracts with Affiliates.

         6.6.1 The  General  Partner or any  Affiliate  thereof  may lend to the
Partnership,  the Operating  Partnership or any  Subsidiary  funds needed by the
Partnership  for such  periods of time as the  General  Partner  may  determine;
provided, however, that the General Partner or such Affiliate may not charge the
Partnership,  the Operating  Partnership  or any  Subsidiary  interest at a rate
greater than the lesser of (i) the actual  interest  cost  (including  points or
other  financing  charges or fees) that the General Partner or such Affiliate is
required to pay on funds borrowed by it from commercial  banks and (ii) the rate
(including  points or other financing charges or fees) that would be charged the
Partnership,  the Operating  Partnership or any Subsidiary (without reference to
the General Partner's financial abilities or guaranties) by unrelated lenders on
comparable loans. The Partnership,  the Operating Partnership or such Subsidiary
shall  reimburse the General  Partner or any Affiliate,  as the case may be, for
any costs  incurred by it in connection  with the borrowing of funds obtained by
the  General  Partner  or such  Affiliate  and  loaned to the  Partnership,  the
Operating Partnership or any Subsidiary.  The Partnership may lend or contribute
to the Operating Partnership or any Subsidiary, and the Operating Partnership or
any  Subsidiary may borrow funds from the  Partnership,  on terms and conditions
established  at the  sole  discretion  of the  General  Partner.  The  foregoing
authority shall be exercised by the General Partner in its reasonable discretion
and shall not create any right or benefit in favor of the Operating Partnership,
any Subsidiary or any other Person.  The  Partnership  may not lend funds to the
General Partner or any of its Affiliates.

         6.6.2 The General  Partner may itself,  or may enter into an  agreement
with an Affiliate of the General Partner to, render services to the Partnership.
Any service  rendered  to the  Partnership  by the  General  Partner or any such
Affiliate shall be on terms that are fair and reasonable to the Partnership.

         6.6.3 The  General  Partner or any of its  Affiliates  may use or lease
property (including, but not limited to, office equipment,  computers, vehicles,
aircraft and office space) of the  Partnership,  and the General Partner or such
Affiliate will reimburse the Partnership  based on the  incremental  cost to the
Partnership of such usage.

         6.6.4 Neither the General Partner nor any of its Affiliates shall sell,
transfer  or convey  any  property  to,  or  purchase  any  property  from,  the
Partnership,  directly or indirectly,  except pursuant to transactions  that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section  6.6.4 shall be deemed to be  satisfied  as to the  transactions
effected pursuant to Section 4.2, the Contribution  Agreement and the Conveyance
and Assignment.

         6.7  Liability of Indemnitees.7  Liability of Indemnitees.

          6.7.1  No  Indemnitee  shall be  liable  to the  Partnership,  Limited
Partners,  Assignees or any Persons who have acquired any interests in LP Units,
whether as Limited  Partners,  Assignees or otherwise,  for losses  sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith and in a manner it  reasonably  believed  to be in, or not opposed
to, the best  interests of the  Partnership  and if such act or omission did not
constitute  gross  negligence  or  willful   misconduct  on  the  part  of  such
Indemnitee.

         6.7.2 The General  Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or through its agents, and the General Partner shall not be responsible
for any act or omission on the part of any such agent  appointed  by the General
Partner in good faith if the agent acted in a manner it  reasonably  believed to
be in, or not opposed to, the best interests of the  Partnership and if such act
or omission did not  constitute  gross  negligence or willful  misconduct on the
part of such Person.

         6.7.3 Any amendment,  modification or repeal of this Section 6.7 or any
provision  hereof shall be prospective  only and shall not in any way affect the
limitations or the liability to the Partnership and the Limited  Partners of the
General Partner, their directors,  officers and employees under this Section 6.7
as in effect  immediately  prior to such amendment,  modification or repeal with
respect to claims arising from or relating to matters occurring,  in whole or in
part, prior to such amendment,  modification or repeal,  regardless of when such
claims may arise or be asserted.

         6.8  Indemnification.

         6.8.1  To the  fullest  extent  permitted  by law  but  subject  to the
limitations  expressly  provided in this  Agreement,  each  Indemnitee  shall be
indemnified  and held harmless by the  Partnership  from and against any and all
losses,  claims,  damages,  liabilities,  whether  joint  or  several,  expenses
(including  legal fees and expenses),  judgments,  fines,  settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved,  or threatened to be involved,  as a party or otherwise,  by reason of
its  status  as (x) a  General  Partner,  a  Departing  Partner  or any of their
Affiliates, (y) an officer, director,  employee,  partner, trustee or agent of a
General  Partner,  any  Departing  Partner or any of their  Affiliates  or (z) a
Person serving at the request of the  Partnership in another entity in a similar
capacity, regardless of whether the Indemnitee continues to be a General Partner
or an Affiliate of a General Partner or an officer, director,  employee, partner
or agent of a General  Partner or an Affiliate of a General  Partner at the time
any such  liability or expense is paid or incurred,  provided  that in each case
the Indemnitee acted in good faith and in a manner it reasonably  believed to be
in, or not opposed to, the best interests of the Partnership and such action did
not  constitute  gross  negligence  or  willful  misconduct  on the  part of the
Indemnitee,  and, with respect to any criminal proceeding, the Indemnitee had no
reasonable  cause to believe its conduct was unlawful.  The  termination  of any
action, suit or proceeding by a judgment, order, settlement,  conviction or upon
a plea of nolo  contendere,  or its equivalent,  shall not, of itself,  create a
presumption  that the  Indemnitee  acted in a manner  contrary to that specified
above.

         6.8.2 To the fullest extent permitted by law, expenses (including legal
fees and expenses)  incurred by an  Indemnitee  in defending any claim,  demand,
action,  suit or proceeding  subject to this Section 6.8, or in establishing any
right to indemnification hereunder, shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim,  demand,  action, suit
or proceeding upon receipt by the Partnership of any undertaking (which need not
be secured) by or on behalf of the  Indemnitee  to repay such amount if it shall
be determined  that such Person is not entitled to be  indemnified as authorized
in this Section 6.8.

         6.8.3 The advancement of expenses and indemnification  provided by this
Section 6.8 shall be in addition to any other rights to which an Indemnitee  may
be entitled  under any  agreement,  pursuant to any vote of the  Partners,  as a
matter of law or  otherwise,  and shall  continue  as to an  Indemnitee  who has
ceased to serve in such  capacity  and shall  inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.

         6.8.4 To the  extent  deemed  commercially  reasonable  by the  General
Partner,  the  Partnership  shall  purchase  and  maintain at the expense of the
Partnership  insurance on behalf of the General  Partner,  its  Affiliates,  and
their respective officers, directors,  employees,  partners, agents and trustees
and such other  Persons as the  General  Partner  shall  determine  against  any
liability  that may be asserted  against or expense that may be incurred by such
Person in  connection  with the  activities  of the  Partnership,  regardless of
whether the  Partnership  would have the power to indemnify  such Person against
such liability under the provisions of this Agreement.

         6.8.5 For purposes of this Section 6.8, the Partnership shall be deemed
to have  requested an  Indemnitee  to serve as fiduciary of an employee  benefit
plan  whenever  the  performance  by it of its  duties to the  Partnership  also
imposes  duties  on,  or  otherwise  involves  services  by,  it to the  plan or
participants  or  beneficiaries  of  the  plan;  excise  taxes  assessed  on  an
Indemnitee  with respect to an employee  benefit plan pursuant to applicable law
shall be deemed ?fines? within the meaning of Section 6.8.1; and action taken or
omitted by it with respect to an employee benefit plan in the performance of its
duties for a purpose  reasonably  believed  by it to be in the  interest  of the
participants  and  beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.

         6.8.6 Any  indemnification  hereunder shall be satisfied  solely out of
the assets of the Partnership. In no event may an Indemnitee subject the General
Partner,  the Limited  Partners or Assignees to personal  liability by reason of
these indemnification provisions.

         6.8.7 An Indemnitee shall not be denied  indemnification in whole or in
part under this  Section  6.8  because  the  Indemnitee  had an  interest in the
transaction with respect to which the indemnification applied if the transaction
was otherwise permitted by the terms of this Agreement.

         6.8.8  The  indemnification  provided  in this  Section  6.8 is for the
benefit  of the  Indemnitees  and shall  not be  deemed  to create  any right to
indemnification for any other Persons.

         6.8.9 No amendment,  modification  or repeal of this Section 6.8 or any
provision  hereof shall in any manner  terminate,  reduce or impair the right of
any past,  present or future Indemnitee to be indemnified by the Partnership nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance  with the  provisions  of this  Section 6.8 as in effect  immediately
prior to such  amendment,  modification or repeal with respect to claims arising
from or  relating  to  matters  occurring,  in whole  or in part,  prior to such
amendment,  modification or repeal,  regardless of when such claims may arise or
be asserted.

         6.9 Other  Matters  Concerning  the  General  Partner.

         6.9.1 The General  Partner may rely and shall be protected in acting or
refraining from acting upon any resolution,  certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.

         6.9.2 The General Partner may consult with legal counsel,  accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers  selected by it and any  opinion of any such Person as to matters  that
the General Partner reasonably believes to be within such Person's  professional
or expert competence shall be full and complete  authorization and protection in
respect of any action  taken or  suffered  or  omitted  by the  General  Partner
hereunder in good faith and in accordance with such opinion.

         6.9.3 The General  Partner  shall have the right,  in respect of any of
its powers or obligations  hereunder,  to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact.  Each such attorney
shall,  to the extent  provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.

         6.10  Registration  Rights  of KPL and its  Affiliates.

         6.10.1  In the  event  that  (i)  KPL or  any of its  Affiliates  holds
Partnership  Securities  which  it  desires  to sell  and  (ii)  Rule 144 of the
Securities  Act  (or  any  successor  rule or  regulation  to  Rule  144) is not
available  to  enable  KPL  or  such  Affiliate  to  dispose  of the  number  of
Partnership  Securities it desires to sell at the time it desires to do so, then
upon the request of KPL or such Affiliate,  the Partnership  shall file with the
Commission as promptly as practicable after receiving such request,  and use all
reasonable  efforts  to cause to become  effective  and remain  effective  for a
period not more than six months a  registration  statement  under the Securities
Act  registering  the offering and sale of the number of Partnership  Securities
specified  by KPL or such  Affiliate,  provided,  however,  that if the  General
Partner or, if at the time a request  pursuant to this Section 6.10 is submitted
to the Partnership, KPL or such Affiliate requesting registration is the General
Partner or an Affiliate of the General  Partner,  the  Independent  Committee in
connection  with Special  Approval  determines in its good faith judgment that a
postponement of the requested  registration for up to six months would be in the
best interests of the Partnership and its Partners due to a pending transaction,
investigation or other event, the filing of such  registration  statement or the
effectiveness  thereof may be deferred for up to six months but not  thereafter.
In connection  with any  registration  pursuant to the preceding  sentence,  the
Partnership  shall promptly  prepare and file such documents as may be necessary
to register or qualify the  securities  subject to such  registration  under the
securities laws of such states as KPL or such Affiliate shall reasonably request
and do any and all other acts and things that may  reasonably  be  necessary  or
advisable to enable KPL or such  Affiliate  to  consummate a public sale of such
Partnership  Securities  in  such  states;  provided,   however,  that  no  such
qualification  shall be required in any jurisdiction where, as a result thereof,
the  Partnership  would  become  subject  to  general  service  of process or to
taxation or qualification to do business as a foreign limited  partnership doing
business in such jurisdiction.  In no event shall the Partnership be required to
effect a  registration  relating  to  Partnership  Securities  pursuant  to this
Section 6.10 for less than $2 million in amount of such Partnership  Securities.
All costs and  expenses  of any such  registration  shall be paid by KPL or such
Affiliate and none of such costs will be allocated to the Partnership.

         6.10.2  If  the  Partnership  shall  at  any  time  propose  to  file a
registration statement under the Securities Act for an offering of securities of
the Partnership for cash (other than an offering  relating solely to an employee
benefit plan), the Partnership shall use all reasonable  efforts to include such
number or amount of  securities  held by KPL and any of its  Affiliates  in such
registration  statement as KPL or any of its Affiliates  shall  request.  If the
proposed  offering  pursuant to this  Section  6.10.2  shall be an  underwritten
offering,  then,  in  the  event  that  the  managing  underwriter  advises  the
Partnership  and KPL or such  Affiliate  in  writing  that  in its  opinion  the
inclusion of all or some of KPL's or such Affiliate's securities would adversely
and materially affect the success of the offering, the Partnership shall include
in such offering only that number or amount,  if any, of securities  held by KPL
or such Affiliate which, in the opinion of the managing underwriter, will not so
adversely  and  materially   affect  the  offering.   In  connection   with  any
registration  pursuant to this Section 6.10.2,  KPL or such Affiliate shall bear
the expense of all  underwriting  discounts and commissions  attributable to the
securities  sold for its own account and shall reimburse the Partnership for all
incremental   costs  incurred  by  the   Partnership  in  connection  with  such
registration  resulting  from the  inclusion of  securities  held by KPL or such
Affiliate.

         6.10.3 If underwriters  are engaged in connection with any registration
referred to in this Section 6.10, the Partnership shall provide  indemnification
to the  underwriters  in form  and  substance  reasonably  satisfactory  to such
underwriters.

         6.10.4  The  provisions  of this  Section  6.10  shall  continue  to be
applicable  with  respect  to KPL (and its  Affiliates)  if KPL  ceases  to be a
general partner of the Partnership, during a period of three years subsequent to
the effective date of such cessation and for so long thereafter as is reasonably
required for KPL or its  Affiliates  to sell all of the  Partnership  Securities
with  respect to which it has  requested  during such  three-year  period that a
registration statement be filed.

         6.10.5 The rights of KPL and its Affiliates under this Section 6.10 may
be assigned by KPL and any of its  Affiliates  to any Person  acquiring LP Units
from KPL or any of its  Affiliates,  and any such assignee  shall be entitled to
the  benefits of this  Section  6.10 during such period as the  assignor  was so
entitled.

         6.11 Title to Partnership Assets. All Partnership Assets,  whether real
or personal or mixed and whether  tangible or intangible,  shall be deemed to be
owned  by  the  Partnership  as an  entity,  and  no  Partner,  individually  or
collectively,  shall have any ownership  interest in such Partnership  Assets or
any portion thereof.  Title to any or all of the Partnership  Assets may be held
in the name of the Partnership,  the General Partner or one or more nominees, as
the General  Partner may  determine.  The General  Partner  hereby  declares and
warrants that any  Partnership  Assets for which legal title is held in the name
of the General Partner shall be held in trust by the General Partner for the use
and benefit of the  Partnership  in accordance  with the terms and provisions of
this Agreement;  provided,  however, that the General Partner shall use its best
efforts to cause  beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably  practicable.  All Partnership Assets shall be
recorded  as  the  property  of  the  Partnership  on  its  books  and  records,
irrespective  of the name in which  legal  title to such  Partnership  Assets is
held.

         6.12 Resolution of Conflicts of Interest.

         6.12.1  Unless  otherwise  expressly  provided in this  Agreement,  the
Operating  Partnership  Agreement  or  any  Subsidiary   Partnership  Agreement,
whenever a potential  conflict of interest  exists or arises between the General
Partner or any of its  Affiliates,  on the one hand,  and the  Partnership,  the
Operating  Partnership,  any  Subsidiary or any Partner,  on the other hand, any
resolution or course of action in respect of such conflict of interest  shall be
permitted and deemed approved by all Partners, and shall not constitute a breach
of this Agreement,  of the Operating  Partnership  Agreement,  of any Subsidiary
Partnership  Agreement,  of any agreement  contemplated herein or therein, or of
any duty  stated or  implied by law or equity,  if the  resolution  or course of
action  is or,  by  operation  of this  Agreement,  is  deemed  to be  fair  and
reasonable to the  Partnership.  The General Partner shall be authorized but not
required in connection  with its resolution of such conflict of interest to seek
Special  Approval of a  resolution  of such  conflict  or course of action.  Any
conflict of interest and any  resolution of such  conflict of interest  shall be
deemed fair and  reasonable  to the  Partnership  upon Special  Approval of such
conflict  of  interest  or  resolution.  The  General  Partner  may also adopt a
resolution or course of action that has not received Special Approval.  Any such
resolution or course of action in respect of any conflict of interest  shall not
constitute a breach of this Agreement,  of the Operating Partnership  Agreement,
any Subsidiary Partnership Agreement, of any other agreement contemplated herein
or  therein  or of any  duties  stated  or  implied  by law or  equity,  if such
resolution or course of action is fair and  reasonable to the  Partnership.  The
General Partner (including the Independent  Committee in connection with Special
Approval)  shall be authorized in connection with its resolution of any conflict
of  interest  to  consider  (i) the  relative  interests  of any  party  to such
conflict,  agreement,  transaction  or  situation  and the  benefits and burdens
relating to such interest;  (ii) any customary or accepted  industry  practices;
(iii) any applicable  generally accepted accounting or engineering  practices or
principles;  and (iv) such additional  factors as the General Partner (including
such  Independent  Committee)  determines in its sole discretion to be relevant,
reasonable or appropriate  under the  circumstances.  Nothing  contained in this
Agreement,  however,  is  intended to nor shall it be  construed  to require the
General Partner (including such Independent  Committee) to consider the interest
of any Person  other than the  Partnership.  In the  absence of bad faith by the
General Partner, the resolutions,  action or terms so made, taken or provided by
the General Partner with respect to such matter shall not constitute a breach of
this  Agreement or any other  agreement  contemplated  herein or a breach of any
standard of care or duty imposed  herein or therein or under the Delaware Act or
any other law, rule or regulation.

         6.12.2  Whenever  this  Agreement or any other  agreement  contemplated
hereby  provides that the General  Partner or any of its Affiliates is permitted
or  required  to make a  decision  (i) in its  ?discretion?  or under a grant of
similar  authority or latitude,  the General  Partner or such Affiliate shall be
entitled to  consider  only such  interests  and factors as it desires and shall
have no duty or  obligation  to give any  consideration  to any  interest of, or
factors affecting, the Partnership, the Operating Partnership, any Subsidiary or
any Limited Partner,  or (ii) in ?good faith? or under another express standard,
the General Partner or such Affiliate shall act under such express  standard and
shall  not be  subject  to any  other or  different  standards  imposed  by this
Agreement or any other agreement  contemplated hereby. In addition,  any actions
taken by the  General  Partner  consistent  with the  standards  of  ?reasonable
discretion?  set  forth  in the  definitions  of  Available  Cash or  Cash  from
Operations  shall not constitute a breach of any duty of the General  Partner to
the  Partnership  or the Limited  Partners.  During the Preference  Period,  the
General  Partner  shall have no duty,  express or implied,  to sell or otherwise
dispose  of any  asset  of the  Operating  Partnership,  any  Subsidiary  or the
Partnership,  other than in the ordinary course of business. No borrowing by the
Partnership  or any  Subsidiary  or the  Operating  Partnership  or the approval
thereof by the General  Partner  shall be deemed to  constitute  a breach of any
duty of the General Partner to the Partnership or the Limited Partners solely by
reason of the fact that the purpose or effect of such  borrowing  is directly or
indirectly to avoid subordination of the Preference Units, Preference B Units or
Common Units by reason of the provisions of Section 5.4 or 5.5.

         6.12.3 Whenever a particular transaction,  arrangement or resolution of
a  conflict  of  interest  is  required  under  this  Agreement  to be ?fair and
reasonable?  to any Person,  the fair and reasonable nature of such transaction,
arrangement  or resolution  shall be considered in the context of all similar or
related transactions.

         6.12.4 The Limited Partners hereby  authorize the General  Partner,  on
behalf of the  Partnership as limited partner of the Operating  Partnership,  to
approve of actions by the general partner of the Operating  Partnership  similar
to those actions  permitted to be taken by the General Partner  pursuant to this
Section 6.12.

         6.13  Restrictions on General  Partner's  Authority.

         6.13.1 The General Partner may not, without the written approval of the
specific  act by all of the  Limited  Partners  or by other  written  instrument
executed and delivered by all of the Limited Partners  subsequent to the date of
this Agreement,  take any action in contravention of this Agreement,  including,
without  limitation,  (i) any act that would make it  impossible to carry on the
ordinary  business  of the  Partnership,  except as  otherwise  provided in this
Agreement;  or (ii)  possess  Partnership  property,  or  assign  any  rights in
specific Partnership property, for other than a Partnership purpose.

         6.13.2  Except as provided  in Article 15, 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
(including by way of merger,  consolidation or other  combination with any other
Person),  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  in  a  single  transaction  or a  series  of  related  transactions
(including by way of merger,  consolidation or other  combination with any other
Person):  (a) during the Preference  Period,  without the approval of at least a
Majority  Interest  including  the approval of the Record  Holders of at least a
majority in interest of the Senior Preference Units (excluding Senior Preference
Units  owned by the  General  Partner  and its  Affiliates)  and (b)  after  the
Preference  Period,  without  the  approval  of a Majority  Interest;  provided,
however,  that this provision shall not preclude or limit the mortgage,  pledge,
hypothecation or grant of 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 a Majority  Interest  including,
during the Preference  Period,  the approval of the Record Holders of at least a
majority in interest of the Senior Preference Units (excluding Senior Preference
Units owned by the  General  Partner and its  Affiliates),  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
6.12.4,  take any action  permitted  to be taken by the  limited  partner of the
Operating  Partnership,   in  either  case,  that  would  adversely  affect  the
Partnership as the limited partner of the Operating Partnership,  (ii) amend the
Contribution  Agreement,  the  Assignment  of  Leases  or the  Payment  Priority
Agreement,  (iii) except as permitted  under  Sections  12.2 and 14.1,  elect or
cause the  Partnership  to elect a successor  general  partner of the  Operating
Partnership or (iv) vote for or cause the Partnership to vote for the withdrawal
or removal of the general partner of the Operating Partnership.

         6.13.3 Unless approved by the affirmative vote of the Record Holders of
at least a  majority  of each  class of  Outstanding  LP Units  (and  during the
Preference  Period  the vote of the Record  Holders  of at least a  majority  in
interest of the Outstanding  Senior  Preference Units (excluding for purposes of
such determination  Senior Preference Units owned by the General Partner and its
Affiliates)),  the General  Partner  shall not take any action or refuse to take
any reasonable  action the effect of which,  if taken or not taken,  as the case
may be, would be to cause the  Partnership to become taxable as a corporation or
to be treated for federal  income tax  purposes as an  association  taxable as a
corporation.

         6.13.4  At all  times  while  serving  as the  general  partner  of the
Partnership,  the General  Partner will not pay any dividend on,  repurchase any
shares  of its  capital  stock or take any other  action  if the  effect of such
dividend,  repurchase  or other action would be to reduce its net worth below an
amount  necessary to receive an Opinion of Counsel that the Partnership  will be
treated as a partnership for federal income tax purposes.

         6.13.5  The  Partnership  will at all  times  own  100% of the  limited
partner interests of the Operating  Partnership and the General Partner will not
cause the  Partnership  to take or approve  any action  which will result in the
Partnership  owning  less  than 100% of the  limited  partner  interests  of the
Operating  Partnership  and will not permit the Operating  Partnership  to issue
additional  general  partner  interests,  without  the  approval  of a  Majority
Interest,  including  during the  Preference  Period the  approval of the Record
Holders of at least a  majority  in  interest  of the  Senior  Preference  Units
(excluding  Senior  Preference  Units  owned  by the  General  Partner  and  its
Affiliates).

         6.14 Outside Activities.

         6.14.1 Except as described in the Registration Statement or as provided
in Section 6.14.2, no Indemnitee shall be expressly or implicitly  restricted or
proscribed pursuant to this Agreement,  the Operating Partnership Agreement,  or
any Subsidiary Partnership Agreement or the partnership relationship established
hereby or thereby from engaging in other  activities for profit,  whether in the
business  engaged  in by  the  Partnership,  the  Operating  Partnership  or any
Subsidiary or  anticipated  to be engaged in by the  Partnership,  the Operating
Partnership or any Subsidiary or otherwise, including, without limitation, those
businesses  described in or  contemplated by the  Registration  Statement or any
subsequent  registration statement of the Partnership registering the sale of LP
Units.  Without  limitation of and subject to the foregoing and Section  6.14.2,
each Indemnitee shall have the right to engage in the  transportation of refined
petroleum products, liquids terminaling and any other business of every type and
description and to engage in and possess an interest in other business  ventures
of any and every type and description,  independently or with others,  including
business  interests and activities in direct  competition  with the Partnership,
the  Operating  Partnership  or any  Subsidiary.  Neither the  Partnership,  the
Operating Partnership, any Subsidiary, any Limited Partner, nor any other Person
shall have any rights by virtue of this  Agreement,  the  Operating  Partnership
Agreement,  any Subsidiary Partnership Agreement or the partnership relationship
established  hereby or thereby in any business ventures of any Indemnitee,  and,
except as set forth in the Registration  Statement,  such Indemnitees shall have
no  obligation  to offer  any  interest  in any such  business  ventures  to the
Partnership,  the Operating Partnership,  any Subsidiary, any Limited Partner or
any such other Person. The General Partner and any other Persons affiliated with
the General  Partner may acquire  Partnership  Securities,  in addition to those
acquired  by any of such  Persons on the  Closing  Date,  and shall be  entitled
(except to the extent  otherwise  provided in this  Agreement)  to exercise  all
rights of an  Assignee  or Limited  Partner,  as  applicable,  relating  to such
Partnership Securities, as the case may be.

         6.14.2  Without  limitation  of  this  Section  6.14,  the  competitive
activities of certain  Indemnitees  and the  restrictions  on the  Partnership's
activities described in the Registration  Statement under the caption ?Conflicts
of Interest and Fiduciary Responsibilities? are hereby approved by all Partners;
provided,  however  that this  Section 6.14 shall not operate as a waiver by the
Partnership, the Operating Partnership, any Subsidiary or any Limited Partner of
any breach of fiduciary duty resulting  from  competition by an Indemnitee  with
the Partnership, the Operating Partnership or any Subsidiary.

    ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

         7.1  Limitation  of  Liability.  The  Limited  Partners  shall  have no
liability  under this  Agreement  except as provided in this Agreement or by the
Delaware Act.

         7.2 Management of Business.  No Limited Partner or Assignee (other than
the General  Partner,  any of its Affiliates or any director,  officer,  general
partner,  employee or agent of the General Partner or any of its Affiliates,  in
his  capacity  as such,  if such  Person  shall also be a Limited  Partner or an
Assignee)  shall take part in the operation,  management or control  (within the
meaning  of the  Delaware  Act)  of the  Partnership's  business,  transact  any
business in the  Partnership's  name or have the power to sign  documents for or
otherwise  bind the  Partnership.  The  transaction  of any such  business  by a
director,  officer, general partner, employee or agent of the General Partner or
any of its Affiliates  shall not affect,  impair or eliminate the limitations on
the liability of any Limited Partner under this Agreement.

         7.3 Outside  Activities.  Subject to the  provisions  of Section  6.14,
which  shall  continue  to be  applicable  to the  Persons  referred to therein,
regardless of whether such Persons shall also be Limited  Partners or Assignees,
each Limited  Partner and Assignee shall have the right to engage in and possess
an interest in other  business  ventures of any and every type and  description,
independently  or with others,  including  business  interests and activities in
direct  competition  with the  Partnership,  the  Operating  Partnership  or any
Subsidiary.  Neither  the  Partnership  nor any of the  Partners  shall have any
rights by virtue  of this  Agreement  or the  partnership  relationship  created
hereby or thereby in any such business  ventures,  and each Limited  Partner and
Assignee  shall have no  obligation  to offer any interest in any such  business
ventures to the Partnership or any Partner.

         7.4 Return of Capital. No Limited Partner or Assignee shall be entitled
to the withdrawal or return of its Capital  Contribution,  except to the extent,
if any, that  distributions  made pursuant to this Agreement or upon termination
of the Partnership may be considered as such by law, and then only to the extent
provided for in this Agreement. Except to the extent provided by Article 5 or as
otherwise  expressly provided in this Agreement,  no Limited Partner or Assignee
shall have priority over any other Limited  Partner or Assignee either as to the
return of Capital Contribution or as to profits, losses or distributions.

         7.5  Access to Information.

         7.5.1 In addition to other  rights  provided  by this  Agreement  or by
applicable  law, each Limited Partner and Assignee,  and each Limited  Partner's
and  Assignee's  duly  authorized   representatives  shall  have  the  right  at
reasonable  times,  upon  reasonable  notice  which shall not be less than three
Business  Days,  and at such  Person's  own  expense,  but only upon its written
request  and for a purpose  reasonably  related to such  Person's  interest as a
Limited Partner or Assignee, to (i) have true and full information regarding the
status of the business and financial condition of the Partnership,  (ii) inspect
and copy, promptly after they become available, the Partnership's federal, state
and local income tax returns for each year,  (iii) have on demand a current list
of the full name and last known  business,  residence or mailing address of each
Partner,  (iv) have true and full information  regarding the Net Agreed Value of
any Capital  Contributions  made by the General Partner and the Limited Partners
and the date on which  each such  Person  became a General  Partner  or  Limited
Partner,  (v)  have a copy of this  Agreement  and the  Certificate  of  Limited
Partnership and all amendments thereto,  together with copies of executed powers
of attorney  pursuant to which this Agreement or any such  Certificate  has been
executed  and (vi) have any  other  information  regarding  the  affairs  of the
Partnership as is just and reasonable.

         7.5.2  Anything in Section 7.5.1 to the contrary  notwithstanding,  the
General Partner may keep  confidential  from the Limited Partners and Assignees,
and each Limited Partner's and Assignee's duly authorized  representatives,  for
such period of time as the General  Partner deems  reasonable,  any  information
that the  General  Partner  reasonably  believes  to be in the  nature  of trade
secrets or other information the disclosure of which the General Partner in good
faith  believes is not in the best interests of the  Partnership,  the Operating
Partnership or any  Subsidiary or could damage the business of the  Partnership,
the  Operating  Partnership  or any  Subsidiary  or which the  Partnership,  the
Operating Partnership or any Subsidiary is required by law or by agreements with
third parties to keep confidential.

        ARTICLE 8 BOOKS, RECORDS, ACCOUNTING AND REPORTS

         8.1 Records and Accounting.  The General Partner shall keep or cause to
be  kept   complete  and  accurate   books  and  records  with  respect  to  the
Partnership's  business,  which books and records  shall at all times be kept at
the  principal  office  of  the  Partnership.  Any  records  maintained  by  the
Partnership  in the regular course of its business,  including  books of account
and  records  of  Partnership  proceedings,  may be kept on or be in the form of
punch cards, magnetic media, photographs, micrographics or any other information
storage device,  provided that the records so kept are convertible  into clearly
legible  written  form  within a  reasonable  period  of time.  The books of the
Partnership  shall  be  maintained  on the  accrual  basis  in  accordance  with
generally  accepted  accounting  principles,  except  to  the  extent  otherwise
required herein.

         8.2  Fiscal  Year.  The  fiscal  year of the  Partnership  shall be the
calendar year.

         8.3  Reports.

         8.3.1 As soon as practicable, but in no event later than 120 days after
the close of each  Partnership  Year, the General  Partner shall deliver to each
Record  Holder,  as of a recent date  selected by the General  Partner,  reports
containing  financial  statements  of  the  Partnership  for  the  fiscal  year,
including a balance sheet and  statements of  operations,  Partners'  equity and
changes in financial position, all of which shall be prepared in accordance with
generally   accepted   accounting   principles  and  shall  be  audited  by  the
Partnership's Accountants.

         8.3.2 As soon as practicable,  but in no event later than 60 days after
the close of each calendar  quarter,  except the last  calendar  quarter of each
fiscal year, the General  Partner shall deliver to each Record  Holder,  as of a
recent date selected by the General Partner, a quarterly report for the calendar
quarter  containing  such  financial  and other  information  (which need not be
audited)  as may be  required  by  applicable  law,  regulation  or  rule of any
National  Securities  Exchange on which  Partnership  Securities  are listed for
trading or as the General Partner deems appropriate.

         8.3.3 The General Partner may release such  information  concerning the
operations of the Partnership to such sources as is customary in the industry or
required by law or regulation of any regulatory body.

                             ARTICLE 9 TAX MATTERS

         9.1 Section 754  Allocations.  The  adjustments to basis to Partnership
Assets that are  attributable  to the Section 754 Election shall be allocated to
the Partners in the manner that the General  Partner  determines is  reasonable,
however,  no such  adjustment  shall  be  credited  or  charged  to the  Capital
Accounts.

         9.2  Preparation of Tax Returns.  The General Partner shall arrange for
the preparation  and timely filing of all returns of the  Partnership  necessary
for federal  income tax  purposes and state and local income tax purposes in the
jurisdictions  in which  the  Partnership  conducts  business  and shall use all
reasonable  efforts to furnish to the Record Holders within 75 days of the close
of the taxable year the tax information  reasonably required for federal,  state
and local income tax reporting  purposes.  The  classification,  realization and
recognition of income,  gain,  losses and deductions and other items shall be on
the accrual method of accounting  for federal  income tax purposes.  The taxable
year of the Partnership shall be the calendar year.

         9.3  Tax Elections.

         9.3.1 The Partnership shall make the Section 754 Election in accordance
with applicable regulations thereunder,  subject to the reservation of the right
to seek to revoke any such  election  upon the General  Partner's  determination
that  such  revocation  is in the best  interest  of the  Limited  Partners  and
Assignees.

         9.3.2 The  Partnership  shall  elect to  deduct  expenses  incurred  in
organizing  the  Partnership  ratably over a  sixty-month  period as provided in
Section 709 of the Code.

         9.3.3 Except as otherwise  provided  herein,  the General Partner shall
determine whether to make any other available elections (including the elections
provided for in Sections  167 and 168 of the Code) on behalf of the  Partnership
under the Code.

         9.3.4 For purposes of computing adjustments under Section 743(b) of the
Code,  the General  Partner  shall be  authorized  (but not required) to adopt a
convention  whereby the price paid by a transferee of LP Units will be deemed to
be the lowest quoted  trading  price of the LP Units on any National  Securities
Exchange on which such LP Units are traded  during the  calendar  month in which
such transfer is deemed to occur pursuant to Section 5.2.7 without regard to the
actual price paid by such transferee.

         9.4 Tax  Controversies.  Subject to the provisions  hereof, the General
Partner is designated as the Tax Matters  Partner (as defined in Section 6231 of
the Code) and is authorized  and required to represent the  Partnership  (at the
Partnership's  expense) in connection with all examinations of the Partnership's
affairs by tax  authorities,  including  resulting  administrative  and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith.  Each Partner agrees to cooperate with the General Partner
and to do or refrain  from doing any or all things  reasonably  required  by the
General Partner to conduct such proceedings.

         9.5 Tax Basis and Value Determinations.  To the extent that the General
Partner  is  required  to  establish  fair  market  values or  allocate  amounts
realized,  tax basis,  Carrying Values or Net Agreed Values, the General Partner
shall  establish  such  values  and make such  allocations  in a manner  that is
reasonable  and  fair to the  holders  of LP  Units,  taking  into  account  all
applicable laws, governmental  regulations,  rulings and decisions.  The General
Partner may, in its sole discretion,  modify or revise such allocations in order
to comply with such laws, governmental  regulations,  rulings or decisions or to
the extent it  otherwise  deems such  modification  or revision  appropriate  or
necessary.  The General Partner is authorized,  to the extent deemed by it to be
appropriate or necessary,  to utilize the service of an independent appraiser in
establishing  such values or allocations  and the General  Partner shall in such
cases be  entitled  to rely on the  values or  allocations  established  by such
independent appraiser.

         9.6 Entity-Level  Taxation.  If legislation is enacted which causes the
Partnership  to become treated as an  association  taxable as a corporation  for
federal  income tax  purposes,  the following  shall occur:  with respect to any
calendar  quarter  ending after the  Preference  Period,  the Minimum  Quarterly
Distribution,  First Target Distribution,  the Second Target Distribution or the
Third Target Distribution,  as the case may be, shall be equal to the product of
(i) the amount of such  distribution  multiplied  by (ii) 1 minus the sum of (x)
the highest marginal federal  corporate income tax rate for the Partnership Year
in which such quarter occurs  (expressed as a percentage) plus (y) the effective
overall state and local income tax rate  (expressed as a percentage)  applicable
to the  Partnership  for the calendar  year next  preceding the calendar year in
which  such  quarter  occurs  (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).  Such effective overall state and local income
tax rate shall be  determined  for the calendar  year next  preceding  the first
calendar  year during which the  Partnership  is taxable for federal  income tax
purposes as a corporation or treated as an association  taxable as a corporation
by determining  such rate as if the  Partnership  had been subject to such state
and local taxes during such preceding calendar year.


         9.7 Entity-Level Deficiency Collections. If the Partnership is required
by applicable law to pay any federal, state or local income tax on behalf of, or
withhold  such  amount  with  respect  to, any Partner or Assignee or any former
Partner or Assignee but the  Partnership  is not required by applicable  law and
does not  elect to pay such tax on behalf  of,  or  withhold  such  amount  with
respect to, all Partners or Assignees  (i) the General  Partner  shall cause the
Partnership  to pay such tax on behalf of, or withhold  such amount with respect
to, such Partner or Assignee or former Partner or Assignee from the funds of the
Partnership  and such  payment of tax shall not be deducted as a cash  operating
expenditure of the Partnership in calculating ?Cash from Operations? pursuant to
Section  5.7.3,  but shall be deemed to be a  distribution  of Available Cash to
such  Partner or  Assignee  on whose  behalf  the tax was paid;  and (ii) to the
extent any such  Partner or Assignee  (but not a former  Partner or Assignee) is
not then entitled to such distribution under this Agreement, the General Partner
shall be authorized,  without the approval of any Partner or Assignee,  to amend
this  Agreement  insofar as is necessary to maintain or establish the uniformity
of intrinsic tax characteristics as to all LP Units or the uniformity of Capital
Accounts  underlying  all  LP  Units  and  to  make  subsequent  adjustments  to
distributions  in a manner  which,  in the  reasonable  judgment  of the General
Partner,  will  make  as  little  alteration  in  the  priority  and  amount  of
distributions otherwise applicable under this Agreement,  and will not otherwise
alter the  distributions  to which Partners and Assignees are entitled under the
Agreement.  The General  Partner shall be authorized (but not required) to cause
the  Partnership  to pay any state or local income tax on behalf of, or withhold
such amount  with  respect to, all the  Partners or  Assignees  even though such
payment or amount  withheld  may be greater than the amount that would have been
required to be paid if such payment or  withholding  had been made directly by a
particular  Partner or  Assignee;  provided,  however,  that such tax payment or
amount withheld shall be in the same amount with respect to each LP Unit and, in
the General Partner's sole discretion, that such payment of tax on behalf of, or
such withholding with respect to all of the Partners or Assignees is in the best
interests of the Partners or Assignees as a whole.  Any amount so paid on behalf
of all Partners or Assignees  shall be deducted as a cash operating  expenditure
of the Partnership in calculating,  ?Cash from Operations?, and shall be treated
as a  distribution  to the Partners or Assignees for purposes of Section  4.5.1,
but shall not be  treated  as a  distribution  of  Available  Cash for any other
purpose of this  Agreement.  The General  Partner shall be  authorized  (but not
required)  to take all  necessary or  appropriate  actions to collect all or any
portion of a  deficiency  in the payment of any such tax which  relates to prior
periods which is attributable to Persons who were Limited  Partners or Assignees
when such deficiencies arose, from such Persons.

         9.8 Opinions of Counsel.  Notwithstanding  any other  provision of this
Agreement,  if the  Partnership  is taxable for federal income tax purposes as a
corporation  or treated as an  association  taxable as a corporation at any time
and, pursuant to the provisions hereof, an Opinion of Counsel would otherwise be
required to the effect that an action will not cause the  Partnership  to become
so taxable as a  corporation  or to be  treated as an  association  taxable as a
corporation,  such  requirement  for an  Opinion  of  Counsel  shall  be  deemed
automatically waived.

         9.9  Withholding.  The General Partner is authorized to take any action
that 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  federal,  state or local  law  including,  without
limitation, pursuant to Section 1441, 1442, 1445 and 1446 of the Code.

         9.10 General  Partner Net Worth.  The General Partner shall not declare
or make payment of any dividends  (except  dividends  payable  solely in capital
stock),  purchase,  redeem,  retire or  otherwise  acquire  for value any of its
capital  stock now or  hereafter  outstanding,  return  any  capital or make any
distribution  of assets on account of any shares of its  capital  stock,  if any
such action  would reduce its net worth  (computed  by  excluding  any net worth
attributable  to its interest in, and accounts  and notes  receivable  from,  or
payable to, the  Partnership,  the  Operating  Partnership  or any other limited
partnership in which it is a general partner) below $5,000,000.00 (or such other
lesser  amount as may be  required  to obtain an  Opinion  of  Counsel  that the
Partnership  is not  taxable  as a  corporation  and will not be  treated  as an
association taxable as a corporation).

                          ARTICLE 10 POWER OF ATTORNEY

         Each  Person who accepts LP Units is deemed to  constitute  and appoint
the General  Partner and the  Liquidating  Trustee (and any successor by merger,
transfer,  election or  otherwise),  and each of the General  Partner's  and the
Liquidating Trustee's authorized officers and attorneys-in-fact, with full power
of substitution, as its true and lawful agents and attorneys-in-fact,  with full
power and authority in its name, place and stead to:

                  (a) execute,  swear to, acknowledge,  deliver, file and record
         in the  appropriate  public  offices  (i) all  certificates  and  other
         instruments  including,  at the  option of the  General  Partner,  this
         Agreement and the Certificate of Limited Partnership and all amendments
         and  restatements  hereof and thereof  that the General  Partner or the
         Liquidating  Trustee  deems  appropriate  or necessary to carry out the
         purposes  of this  Agreement  and 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 all jurisdictions in which the Partnership
         may  or  may  wish  to  conduct  business  or own  property;  (ii)  all
         instruments  that the General Partner or the Liquidating  Trustee deems
         appropriate   or  necessary  to  reflect  any   amendment,   change  or
         modification of this Agreement in accordance with its terms;  (iii) all
         conveyances and other instruments or documents that the General Partner
         or the  Liquidating  Trustee deems  appropriate or necessary to reflect
         the  dissolution  and  liquidation of the  Partnership  pursuant to the
         terms of this Agreement (including a certificate of cancellation);  and
         (iv) all instruments (including, if required by law, this Agreement and
         the Certificate of Limited  Partnership and amendments and restatements
         thereof)  relating  to the  admission  of any  Partner,  the initial or
         increased  Capital  Contribution of any Partner or the determination of
         the rights,  preferences  and  privileges  of any class or series of LP
         Units or other securities issued pursuant to Section 4.3; and

                  (b)  sign,  execute,  swear to and  acknowledge  all  ballots,
         consents,   approvals,  waivers,  certificates  and  other  instruments
         appropriate or necessary, in the sole discretion of the General Partner
         or the Liquidating Trustee, 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  appropriate or necessary,  in the sole  discretion of the
         General Partner or the Liquidating  Trustee, to effectuate the terms or
         intent of this Agreement;  provided, however, that when required by any
         provision of this  Agreement  which  establishes  a  percentage  of the
         Limited  Partners or Limited Partners of any class required to take any
         action, the General Partner or the Liquidating Trustee may exercise the
         power of attorney made in this  subsection (b) only after the necessary
         vote,  consent or approval  by the  Limited  Partners or of the Limited
         Partners of such class or series.

Nothing herein  contained  shall be construed as authorizing the General Partner
to amend  this  Agreement  except in  accordance  with  Article  16 or as may be
otherwise expressly provided for in this Agreement.

         The foregoing  power of attorney is hereby  declared to be  irrevocable
and a power  coupled with an interest,  and it shall  survive,  and shall not be
affected  by,  the  subsequent  death,  incompetency,  dissolution,  disability,
incapacity, bankruptcy or termination of the Limited Partner and shall extend to
the Limited Partner's heirs,  successors and assigns. Each Person who accepts LP
Units is  deemed  to  consent  to be bound  by any  representations  made by the
General Partner or the Liquidating Trustee, acting in good faith hereby pursuant
to such power of attorney. Each Person who accepts LP Units is deemed to consent
to and waive any and all defenses  that may be  available to contest,  negate or
disaffirm the action of the General  Partner or  Liquidating  Trustee,  taken in
good faith under such power of attorney.  The Limited  Partner shall execute and
deliver to the  General  Partner or  Liquidating  Trustee,  within 15 days after
receipt of the General Partner's or Liquidating Trustee's request therefor, such
further  designations,  powers of attorney and other  instruments as the General
Partner or Liquidating  Trustee deems necessary to effectuate this Agreement and
the purposes of the Partnership.

                    ARTICLE 11 ISSUANCE OF UNIT CERTIFICATES

         11.1  Issuance of Unit  Certificates.  Upon the issuance of LP Units to
any Person,  the  Partnership  will issue one or more unit  certificates  (?Unit
Certificates?) in the name of such Person evidencing the number of such LP Units
being  so  issued.  Unit  Certificates  shall  be  executed  on  behalf  of  the
Partnership by the General Partner.  No Unit Certificate  shall be valid for any
purpose until manually countersigned by the Registrar.

         11.2  Registration, Registration of Transfer and Exchange.

         11.2.1  The  Partnership  will  cause to be kept a  register  in which,
subject to such reasonable regulations as it may prescribe, the Partnership will
provide for the  registration of LP Units and of transfers of such LP Units. The
Registrar is hereby  appointed  Registrar for the purpose of registering  Senior
Preference  Units and Preference  Units and transfers of such Senior  Preference
Units and Preference Units as herein provided. The General Partner may from time
to time  designate  such  additional  or  successor  Registrars  as it may  deem
appropriate.

         11.2.2 Upon surrender for  registration  of transfer or exchange of any
Unit  Certificate,  and subject to the provisions of Section  11.2.3 below,  the
General  Partner on behalf of the  Partnership  will execute,  and the Registrar
will countersign and deliver, in the name of the Record Holder or the designated
transferee  or  transferees,   as  required  pursuant  to  the  Record  Holder's
instructions,  one or more new Unit Certificates,  evidencing the same aggregate
number of LP Units of the same class as did the Unit Certificate so surrendered.

         11.2.3 Every Unit Certificate  surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form  satisfactory to the General  Partner or the Registrar,  as the
case may be, duly executed by the Record Holder thereof or such Record  Holder's
attorney  duly  authorized  in  writing.  No  charge  shall  be  imposed  by the
Partnership for such transfer,  provided that, as a condition to the issuance of
any new Unit  Certificate  under this  Section  11.2,  the  General  Partner may
require the payment of a sum  sufficient to cover any tax or other  governmental
charge that may be imposed in relation thereto.

         11.3 Lost,  Stolen or Destroyed  Certificates.  The  Partnership  shall
issue a new Unit Certificate in place of any Unit Certificate  previously issued
if the registered owner of the Unit Certificate:

         11.3.1 makes proof by affidavit,  in form and substance satisfactory to
the General  Partner,  that a previously  issued Unit Certificate has been lost,
destroyed or stolen;

         11.3.2  requests  the  issuance  of a new Unit  Certificate  before the
Partnership  has  notice  that  the Unit  Certificate  has  been  acquired  by a
purchaser for value in good faith and without notice of an adverse claim;

         11.3.3 if requested by the General Partner, delivers to the Partnership
a bond, in form and substance  satisfactory  to the General  Partner,  with such
surety or sureties and with fixed or open  penalty,  as the General  Partner may
direct to indemnify the Partnership and the Registrar against any claim that may
be made on  account  of the  alleged  loss,  destruction  or  theft  of the Unit
Certificate; and

         11.3.4  satisfies  any other  reasonable  requirements  imposed  by the
General Partner.

When a Unit  Certificate  has been lost,  destroyed  or  stolen,  and the holder
thereof fails to notify the  Partnership  within a reasonable  time after he has
notice of it, and a transfer of the LP Units represented by the Unit Certificate
is registered  before the Partnership  receives such  notification,  such holder
shall be precluded from making any claim against the Partnership,  the Registrar
or any Transfer Agent for such transfer or for a new Unit Certificate.

         11.4 Registered  Owner. The Partnership  shall be entitled to treat the
Record Holder as the Limited  Partner or  Assignee-in-fact  of any LP Units and,
accordingly,  shall not be bound to recognize any equitable or other claim to or
interest in such LP Units on the part of any other Person, regardless of whether
it shall have actual or other notice  thereof,  except as otherwise  provided by
law or any applicable rule, regulation, guideline or requirement of any National
Securities  Exchange  on which  the LP Units are  listed  for  trading.  Without
limiting the foregoing,  when a Person (such as a broker,  dealer,  bank,  trust
company or clearing corporation,  or an agent of any of the foregoing) is acting
as a nominee, agent or in some other representative  capacity for another Person
in acquiring or holding LP Units, as between the Partnership on the one hand and
such  Persons on the other  hand,  such  representative  Person (i) shall be the
Limited  Partner or  Assignee  (as the case may be) of record and  beneficially,
(ii) must execute and deliver a Transfer Application and (iii) shall be bound by
the Partnership Agreement and shall have the obligations of a Limited Partner or
Assignee (as the case may be) hereunder and as provided for herein.

                  ARTICLE 12 TRANSFER OF PARTNERSHIP INTERESTS

         12.1 Transfer.

         12.1.1 The term  ?transfer?,  when used in this Article 12 with respect
to a Partnership  Interest,  shall be deemed to refer to a transaction  by which
the General Partner  assigns all or any part of its Partnership  Interest as the
General Partner (which is the  Partnership  Interest of the General Partner that
is not  represented  by LP Units) to another Person or by which the holder of an
LP Unit assigns the Partnership  Interest evidenced thereby to another Person as
Assignee,  and  includes  a  sale,  assignment,  gift,  pledge,   hypothecation,
mortgage, exchange or any other disposition.

         12.1.2 No  Partnership  Interest shall be  transferred,  in whole or in
part,  except in  accordance  with the terms  and  conditions  set forth in this
Article 12. Any transfer or purported  transfer of any Partnership  Interest not
made in accordance with this Article 12 shall be null and void.

         12.2  Transfer  of  Interests  of the  General  Partner.

         12.2.1  The  General  Partner  may  not  transfer  any  portion  of its
Partnership  Interest  as the General  Partner  unless (i) (A) in the event such
transfer is to be effective at any time prior to January 1, 2000,  such transfer
is approved by the affirmative vote of a Majority  Interest (other than LP Units
owned by the General Partner and its Affiliates) and by the affirmative  vote of
Record Holders of a majority of the Senior  Preference  Units (other than during
the Preference  Period Senior  Preference Units owned by the General Partner and
its  Affiliates)  and (B) the  transferee  agrees to assume  and be bound by the
provisions of this  Agreement and the Operating  Partnership  Agreement and (ii)
the Partnership  receives an Opinion of Counsel that such transfer and admission
(A) may be taken without the approval of all  Partners,  (B) would not cause the
loss of limited  liability of the Limited  Partners  under this Agreement or the
Operating  Partnership  Agreement and (C) would not cause the  Partnership to be
taxable as a corporation or treated as an  association  taxable as a corporation
for federal  income tax  purposes.  Notwithstanding  the  provisions  of Section
14.6.1,  but subject to the foregoing,  upon any transfer by the General Partner
of all or any  portion of its  Partnership  Interest  pursuant  to this  Section
12.2.1, the General Partner may receive and retain such purchase price as it may
negotiate with the transferee.

         12.2.2 No other  provision  of this  Agreement  shall be  construed  to
prevent (and all Partners hereby  expressly  approve of) (i) the transfer by the
General Partner of all or any part of its Partnership  Interest to an Affiliate,
and the  assumption  of the  rights and  duties of the  General  Partner by such
Affiliate and its admission as General Partner; (ii) the transfer by the General
Partner of its  Partnership  Interest upon its merger or  consolidation  with or
into any other Person or the transfer by it of all or  substantially  all of its
assets to another Person and admission as General Partner, and the assumption of
the rights  and duties of the  General  Partner  by such  transferee;  (iii) the
transfer  by the  General  Partner of any part (but not all) of its  interest in
items of Partnership income, gain, losses, deductions, credits, distributions or
surplus;  (iv) the  transfer  by the General  Partner of all of its  interest in
items of Partnership income, gain, losses, deduction, credits, distributions and
surplus if the General Partner agrees,  notwithstanding  Section 17-702(a)(4) of
the Delaware Act, to continue as the General  Partner and, if it so agrees,  all
Partners  hereby agree that it shall  continue as the General  Partner;  (v) the
General  Partner's  mortgaging,  pledging,  hypothecating or granting a security
interest in all or any part of its Partnership Interest; or (vi) the forced sale
by the General Partner of any or all of its Partnership Interest pursuant to the
foreclosure of, or other realization  upon, any encumbrance  created pursuant to
clause (v) of this Section 12.2.2; provided, in the event of a transfer pursuant
to clauses (i) through (vi) of this Section 12.2.2, such transferee furnishes to
the Partnership an Opinion of Counsel that such transfer, merger,  consolidation
or assumption  (i) may be taken without the approval of all Limited  Partners to
such  specific  act,  (ii) would not cause the loss of limited  liability of the
Limited Partners under this Agreement or the Operating Partnership Agreement and
(iii) would not cause the Partnership to be treated as an association taxable as
a corporation for federal income tax purposes.

         12.3 Transfer of LP Units.

         12.3.1 LP Units, including LP Units held by the General Partner, may be
transferred as provided in Section 11.2.

         12.3.2  A  transferee  who  has  completed  and  delivered  a  Transfer
Application  shall be deemed to have (i)  requested  admission as a  Substituted
Limited  Partner  and  executed  and agreed to comply  with and be bound by this
Agreement,  (ii)  represented  and  warranted  that he has all right,  power and
authority  necessary to enter into this  Agreement,  (iii) appointed the General
Partner  and  any  Liquidating  Trustee  his  attorney  to  execute,  swear  to,
acknowledge and file any document,  including this  Agreement,  any amendment of
this  Agreement  and  the  Certificate  of  Limited  Partnership,  necessary  or
appropriate for his admission as a Substituted Limited Partner and as a party to
this  Agreement,  (iv)  granted  the  powers of  attorney  provided  for in this
Agreement  and (v) made the waivers and given the  approvals  contained  in this
Agreement.  Until admitted as a Substituted  Limited Partner pursuant to Article
13, the Record  Holder of LP Units  shall be an  Assignee  in respect of such LP
Units. Limited Partners may include custodians, nominees or any other individual
or entity in its own or any representative capacity.

         12.3.3 Each  distribution in respect of LP Units of a given class shall
be paid by the  Partnership,  directly or through the  Registrar  or through any
other Person or agent,  only to the Record  Holders of LP Units of such class as
of the Record Date set for the distribution.  Such payment shall constitute full
payment  and  satisfaction  of the  Partnership's  liability  in respect of such
payment,  regardless of any claim of any Person who may have an interest in such
payment by reason of any assignment or otherwise.

         12.4 Restrictions on Transfers. Notwithstanding the other provisions of
this Article 12, no transfer of any LP Unit or interest therein shall be made if
such transfer (i) would violate the then applicable  federal or state securities
laws or rules and regulations of the Commission, any state securities commission
or any other governmental authorities with jurisdiction over such transfer, (ii)
would  result in the  taxation  of the  Partnership  as a  corporation  or as an
association  taxable as a corporation  for federal  income tax purposes or (iii)
would  affect  the  Partnership's   existence  or  qualification  as  a  limited
partnership under the Delaware Act.

         12.5  Citizenship  Certificates;  Non-citizen  Assignees.

         12.5.1 In the event  that,  because  of the  nationality  (or any other
status) of a Limited Partner or Assignee,  the Partnership is or becomes subject
to federal, state or local laws or regulations the effect of which would, in the
reasonable   determination  of  the  General  Partner,   cause  cancellation  or
forfeiture of any property in which the Partnership or the Operating Partnership
has an interest,  the General  Partner may request any such  Limited  Partner or
Assignee to furnish to the General  Partner within 30 days after receipt of such
request  an  executed  Citizenship   Certification  or  such  other  information
concerning  his  nationality,  citizenship  or other  status (or, if the Limited
Partner or Assignee is a nominee holding for the account of another Person,  the
nationality,  citizenship or other status of such Person) as the General Partner
may request.  If a Limited Partner or Assignee fails to furnish such Citizenship
Certification  or other  information as may be requested,  or if upon receipt of
such  Citizenship   Certification  or  other  information  the  General  Partner
determines, with the advice of counsel, that a Limited Partner or an Assignee is
not an Eligible Citizen,  the LP Units owned by such Limited Partner or Assignee
shall be subject to  redemption  in  accordance  with the  provisions of Section
12.6. In addition to becoming  subject to  redemption,  the General  Partner may
require  that the status of any such  Limited  Partner or Assignee be changed to
that of a Non-citizen  Assignee,  and,  thereupon,  the General Partner shall be
substituted for such  Non-citizen  Assignee as the Limited Partner in respect of
his LP Units.

         12.5.2 The  General  Partner  shall,  in  exercising  voting  rights in
respect of LP Units held by it on behalf of  Non-citizen  Assignees,  distribute
the votes in the same  ratios as the votes of Limited  Partners in respect of LP
Units other than those of Non-citizen Assignees are cast, either for, against or
abstaining as to the matter.

         12.5.3 Upon  dissolution  of the  Partnership,  a Non-citizen  Assignee
shall have no right to receive a  distribution  in kind pursuant to Section 15.4
but shall be entitled to the cash  equivalent  thereof,  and the General Partner
shall provide cash in exchange for an assignment of the  Non-citizen  Assignee's
share of the  distribution in kind. Such payment and assignment shall be treated
for  Partnership  purposes  as a  purchase  by  the  General  Partner  from  the
Non-citizen  Assignee of his  Partnership  Interest  (representing  his right to
receive his share of such distribution in kind).

         12.5.4 At any time after he can and does  certify that he has become an
Eligible  Citizen,  a Non-citizen  Assignee may, upon application to the General
Partner,  request admission as a Substituted Limited Partner with respect to any
Partnership  Interest of such  Non-citizen  Assignee  not  redeemed  pursuant to
Section  12.6,  and upon his  admission  pursuant to Section  13.2,  the General
Partner  shall  cease to be deemed to be the  Limited  Partner in respect of the
Non-citizen Assignee's LP Units.

         12.6  Redemption of Interests.

         12.6.1 If at any time a Limited  Partner or Assignee fails to furnish a
Citizenship  Certification  or other  information  requested  within  the 30-day
period  specified  in Section  12.5.1,  or if upon  receipt of such  Citizenship
Certification  or other  information  the General Partner  determines,  with the
advice of  counsel,  that a  Limited  Partner  or  Assignee  is not an  Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the General Partner that such Limited Partner or Assignee
is an Eligible Citizen or has transferred his LP Units to a person who furnishes
a Citizenship  Certification  to the General Partner prior to the date fixed for
redemption as provided below,  redeem the  Partnership  Interest of such Limited
Partner or Assignee as follows:

                  12.6.1.1 The General  Partner  shall,  not later than the 30th
         day before the date fixed for redemption,  give notice of redemption to
         the Limited Partner or Assignee,  at his last address designated on the
         records of the  Partnership,  by registered or certified mail,  postage
         prepaid.  The notice shall be deemed to have been given when so mailed.
         The notice  shall  specify  the  Redeemable  Units,  the date fixed for
         redemption,  the place of payment, that payment of the redemption price
         will  be  made  upon  surrender  of  the  Certificate   evidencing  the
         Redeemable Units and that on and after the date fixed for redemption no
         further  allocations or  distributions  to which the Limited Partner or
         Assignee would otherwise be entitled in respect of the Redeemable Units
         will accrue or be made.

                  12.6.1.2 The aggregate  redemption  price for Redeemable Units
         shall be an  amount  equal to the  Current  Market  Price  (the date of
         determination  of which shall be the date fixed for  redemption)  of LP
         Units of the class to be so  redeemed  multiplied  by the  number of LP
         Units of each such  class  included  among the  Redeemable  Units.  The
         redemption  price shall be paid, in the sole  discretion of the General
         Partner, in cash or by delivery of a promissory note of the Partnership
         in the principal  amount of the redemption  price,  bearing interest at
         the rate of 10% annually and payable in three equal annual installments
         of principal, together with accrued interest, commencing one year after
         the redemption date.

                  12.6.1.3 Upon surrender by or on behalf of the Limited Partner
         or Assignee, at the place specified in the notice of redemption, of the
         Certificate  evidencing the Redeemable Units, duly endorsed in blank or
         accompanied  by an  assignment  duly  executed  in blank,  the  Limited
         Partner or  Assignee  or his duly  authorized  representative  shall be
         entitled to receive the payment therefor.

                  12.6.1.4 After the redemption date,  Redeemable Units shall no
longer constitute issued and Outstanding LP Units.

         12.6.2 The  provisions  of this Section 12.6 shall be  applicable to LP
Units held by a Limited Partner or Assignee as nominee of a Person determined to
be other than an Eligible Citizen.

         12.6.3  Nothing in this Section 12.6 shall  prevent the  recipient of a
notice of redemption from  transferring  his LP Units before the redemption date
if such transfer is otherwise  permitted under this  Agreement.  Upon receipt of
notice of such a transfer,  the General  Partner  shall  withdraw  the notice of
redemption,  provided, the transferee of such LP Units certifies in the Transfer
Application that he is an Eligible Citizen. If the transferee fails to make such
certification,  such  redemption  shall be effected  from the  transferee on the
original redemption date.

         12.6.4  If the  Partnership  or the  General  Partner  determines  that
because of the nationality (or other status) of the General Partner,  whether or
not in its capacity as such, the  Partnership is or becomes  subject to federal,
state  or  local  regulations  the  effect  of which  would,  in the  reasonable
determination  of the General Partner,  cause  cancellation or forfeiture of any
property in which the Partnership or the Operating  Partnership has an interest,
the  Partnership  may,  unless the General  Partner has  furnished a Citizenship
Certification  to the  Independent  Committee  or  transferred  his  Partnership
Interest or LP Units to a Person who furnishes a Citizenship Certification prior
to the date fixed for redemption, redeem the Partnership Interest or Partnership
Interests  of the  General  Partner in the  Partnership  as  provided in Section
12.6.1, which redemption shall also constitute redemption of the general partner
interest of the general partner of the Operating Partnership. If such redemption
involves a redemption  of the Combined  Interest the  redemption  price  thereof
shall be equal to the  aggregate  sum of the Current  Market  Price (the date of
determination for which shall be the date fixed for redemption) of each class of
LP Units  then  Outstanding,  in each such case  multiplied  by the number of LP
Units of such class into which the Combined  Interest  would then be convertible
under the terms of Section 14.6.2, if the General Partner were to withdraw or be
removed as General Partner (the date of the determination for which shall be the
date fixed for  redemption).  The  redemption  price shall be paid in cash or by
delivery of a promissory note of the Partnership in the principal  amount of the
redemption  price,  bearing  interest at the rate of 10% annually and payable in
three equal annual  installments of principal,  together with accrued  interest,
commencing one year after the redemption date.

                        ARTICLE 13 ADMISSION OF PARTNERS

         13.1  Admission  of  Substituted   Limited   Partners.

         13.1.1 A Limited  Partner or Assignee shall have the power to give, and
by transfer of LP Units shall be deemed to have given,  the transferee the right
to become a Substituted  Limited Partner subject to the conditions of and in the
manner permitted under this Agreement.  A transferor of LP Units shall only have
the power to give a  transferee  who does not  execute  and  deliver a  Transfer
Application,  (i) the right to negotiate such LP Units to another transferee and
(ii) the right to transfer  the right to become a  Substituted  Limited  Partner
subject to the conditions of and in the manner permitted under this Agreement to
such other transferee.  Each transferee of LP Units (including any Person,  such
as a broker,  dealer, bank, trust company,  clearing corporation,  other nominee
holder  or an agent of any of the  foregoing,  acquiring  such LP Units  for the
account of another  Person) shall apply to become a Substituted  Limited Partner
with respect to LP Units  transferred to such Person by executing and delivering
a Transfer Application at the time of such transfer as provided in Section 12.3.
A Record  Holder  of LP  Units  shall be an  Assignee  at and from the  close of
business on the Business Day on which a properly executed  Transfer  Application
is  received by the  Registrar  or a Transfer  Agent  until the General  Partner
consents to the admission of the Assignee as a Substituted  Limited  Partner and
such admission is reflected on the books and records of the  Partnership,  after
which time such Record Holder shall be a Substituted  Limited Partner. A Limited
Partner who has  transferred  his LP Units to an Assignee shall remain a Limited
Partner  in  respect  of such LP Units  until such  Assignee  is  admitted  as a
Substituted  Limited  Partner  pursuant to this Section 13.1. The consent of the
General Partner may be granted or withheld in its sole discretion.  Such consent
shall be deemed to have been given if the  General  Partner has not, in writing,
withheld its consent  within 24 hours  following the  recordation of the name of
the Assignee on the books and records of the Partnership.

         13.1.2 The  Partnership  will cause the  Registrar to prepare as of the
close  of  business  on the last  Business  Day of each  month,  a list or other
appropriate  evidence of transfers of LP Units registered by all Transfer Agents
since the last  Business  Day of the  preceding  month  (hereinafter  called the
?transfer  record?) and, as promptly as practicable  after the last Business Day
of each  month,  to submit the  transfer  record to the  General  Partner.  Upon
receipt of the transfer record by the General Partner, the name of the Assignees
appearing on such  transfer  record will be recorded on the books and records of
the  Partnership,  so that each  transferee  who is a Record  Holder on the last
Business  Day of the month is  admitted  as a  Substituted  Limited  Partner  in
respect  of the  underlying  LP Units as  promptly  as  practicable  thereafter,
subject, however, to the right of the General Partner to withhold its consent to
the admission of any transferee as a Substituted Limited Partner.

         13.1.3 Each Limited Partner,  by requesting and receiving  admission to
the  Partnership,  is deemed to approve  of the  admission  of each  Substituted
Limited Partner  pursuant to the terms of this Agreement and no further approval
of Partners, other than that of the General Partner, shall be required to effect
such admission.

         13.2 Admission of Additional Limited Partners.

         13.2.1 A Person who makes a Contribution  to the  Partnership  shall be
admitted to the Partnership as an Additional  Limited Partner upon furnishing to
the General Partner (i) evidence of his acceptance,  in form satisfactory to the
General Partner,  of all the terms and conditions of this Agreement,  including,
without  limitation,  the power of attorney granted in Article 10, and (ii) such
other  documents  or  instruments  as may be  required  in order to  effect  his
admission as a Limited Partner.

         13.2.2  Notwithstanding  anything in this Section 13.2 to the contrary,
no Person shall be admitted as an Additional  Limited  Partner until the General
Partner  has  consented  to such  admission,  which  consent  may be withheld or
granted in the sole  discretion  of the General  Partner.  Such consent shall be
deemed to have been given if the General  Partner has not, in writing,  withheld
its consent within 24 hours following the recordation of the name of such Person
on the books and records of the Partnership. Each Limited Partner, by requesting
and  receiving  admission  to the  Partnership,  is  deemed  to  approve  of the
admission  of each  Additional  Limited  Partner  pursuant  to the terms of this
Agreement  and no further  approval of partners,  other than that of the General
Partner, shall be required to effect such admission.

         13.2.3 The  admission of any Person as an  Additional  Limited  Partner
shall  become  effective  on the date  upon  which  the name of such  Person  is
recorded on the books and records of the Partnership and the General Partner has
consented or is deemed to have consented to such  admission  pursuant to Section
13.2.2.

         13.3 Admission of Successor or Additional  General Partner. A successor
or additional  General Partner selected  pursuant to Section 14.1 or 15.1 or the
transferee or successor to of all or any portion of the Partnership  Interest of
the  General  Partner  pursuant  to  Section  12.2  shall  be  admitted  to  the
Partnership as a General Partner (in the place of or in addition to, as the case
may be,  the  transferor  General  Partner),  effective  as of the date  that an
amendment to the Certificate of Limited  Partnership,  adding its name and other
required  information,  is filed pursuant to Section 6.1.3 (which,  in the event
the successor or transferee  General Partner is in the place of the withdrawing,
removed  or  transferor  General  Partner,  shall  be  contemporaneous  with the
withdrawal of such withdrawing, removed or transferor General Partner), and upon
receipt by the withdrawing,  removed or transferor General Partner of all of the
following:  (i) acceptance of all of the terms and provisions of this Agreement;
(ii) written  agreement of the proposed General Partner to continue the business
of the  Partnership;  and (iii) such other  documents or  instruments  as may be
required  in order to effect  its  admission  as a General  Partner  under  this
Agreement and applicable  law. Each Limited  Partner by requesting and receiving
admission  to the  Partnership  is  deemed  to  approve  of the  admission  of a
successor or additional  General Partner selected  pursuant to the terms of this
Agreement,  and no further approval of Partners shall be required to effect such
admission.

             ARTICLE 14 WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER

         14.1 Withdrawal or Removal of the General Partner.  The General Partner
shall be deemed to have  withdrawn from the  Partnership  upon the occurrence of
any one of the  following  events  listed in this  Section 14.1 (each such event
herein referred to as an ?Event of Withdrawal?);

         14.1.1 The General Partner  voluntarily  withdraws from the Partnership
by giving written notice to the other Partners.

         14.1.2  The  General  Partner  transfers  all of its  rights as General
Partner pursuant to Section 12.2 hereof.

         14.1.3 The General Partner is removed pursuant to Section 14.3 hereof.

         14.1.4  The General Partner

                  14.1.4.1 makes  a  general   assignment  for  the  benefit  of
         creditors;

                  14.1.4.2  files a voluntary bankruptcy petition;

                  14.1.4.3  files a  petition  or answer  seeking  for  itself a
         reorganization,  arrangement, composition,  readjustment,  liquidation,
         dissolution or similar relief under any law;

                  14.1.4.4  files an  answer  or  other  pleading  admitting  or
         failing to contest the material allegations of a petition filed against
         the General Partner in a proceeding of the type described in paragraphs
         (a) through (c) of this subsection; or

                  14.1.4.5  seeks,  consents to or acquiesces in the appointment
         of a trustee,  receiver or liquidator of the General  Partner or of all
         or any substantial part of its properties.

         14.1.5 A final and  non-appealable  judgment is entered by a court with
appropriate  jurisdiction  ruling  that  the  General  Partner  is  bankrupt  or
insolvent,  or a final and non-appealable order for relief is entered by a court
with appropriate  jurisdiction  against the General Partner,  in each case under
any  federal or state  bankruptcy  or  insolvency  laws as now or  hereafter  in
effect.

         14.1.6 A certificate  of dissolution or its equivalent is filed for the
General  Partner,  or 90 days  expire  after the date of  notice to the  General
Partner of revocation  of its charter  without a  reinstatement  of its charter,
under the laws of its state of incorporation.

         14.1.7 The general partner of the Operating Partnership withdraws from,
or is removed as the general partner of, the Operating Partnership.

If an Event of Withdrawal specified in Sections 14.1.4, 14.1.5 or 14.1.6 occurs,
the  withdrawing  General  Partner  shall  give  written  notice to the  Limited
Partners  within 30 days after such  occurrence.  The Partners hereby agree that
only the Events of  Withdrawal  described  in this  Section 14.1 shall result in
withdrawal of the General Partner from the Partnership.

         14.2 Withdrawal.  The General Partner covenants and agrees that it will
not  voluntarily  withdraw as the general  partner of the  Partnership  prior to
January 1, 2000,  other than a withdrawal  effective upon the transfer of all of
the General  Partner's  Partnership  Interest as the General Partner pursuant to
Section 12.2.1,  unless such  withdrawal is approved by a Majority  Interest and
the affirmative vote of Record Holders of at least a majority in interest of the
Senior  Preference Units (excluding  Senior Preference Units held by the General
Partner and its  Affiliates);  provided  that the General  Partner may  withdraw
without such  approval by the Limited  Partners  upon 90 days'  advance  written
notice to the Limited  Partners if more than 50% of the Outstanding LP Units are
held or controlled by one Person and its Affiliates  other than the  withdrawing
General  Partner  and its  Affiliates.  The  General  Partner  may,  at any time
subsequent  to  January  1,  2000,  voluntarily  withdraw  from the  Partnership
effective on at least 90 days' advance  written notice to the Limited  Partners,
such  withdrawal  to take  effect  on the date  specified  in such  notice.  The
withdrawal  or removal of the General  Partner from the  Partnership  shall also
constitute the  withdrawal or removal of the General  Partner from the Operating
Partnership.  The  General  Partner  shall  have no  liability  on  account of a
withdrawal  permitted  hereunder.   If  the  General  Partner  gives  notice  of
withdrawal,  a  Majority  Interest  may,  prior  to the  effective  date of such
withdrawal,  elect a  successor  General  Partner.  The Person so elected  shall
automatically become the successor General Partner of the Operating Partnership,
as provided in the Operating Partnership  Agreement.  If, prior to the effective
date of the  General  Partner's  withdrawal,  no  successor  General  Partner is
elected,  the provisions of Section 15.1 shall apply.  Any withdrawal  permitted
pursuant to this  Section  shall not affect the LP Units owned by a  withdrawing
General Partner.

         14.3 Removal. The affirmative vote of (i) Limited Partners, voting as a
single class,  holding at least 85% of the issued and  Outstanding  LP Units and
(ii)  Limited  Partners  holding at least 85% of the issued and  Outstanding  LP
Units,  with the holders of Senior  Preference  Units and Common Units voting as
separate classes and with the holders of Preference Units and Preference B Units
voting  together as one separate  class, in each case including LP Units held by
the General Partner and its Affiliates,  shall be required to remove the General
Partner.  Any such  vote of the  Limited  Partners  must  also  provide  for the
election of a successor  General  Partner.  Any removal pursuant to this Section
shall not affect the LP Units owned by a removed General Partner.

         14.4 Opinion of Counsel. Notwithstanding the provisions of Section 14.2
or 14.3, the rights of the Limited Partners under Section 14.2 or 14.3 shall not
be  exercised  until such time as the  Partnership  has  received  an Opinion of
Counsel that the action in question (i) may be taken without the approval of all
Partners  to such  specific  act,  (ii)  would  not  cause  the loss of  limited
liability  of the  Limited  Partners  under  this  Agreement  or  the  Operating
Partnership  Agreement,  (iii) would not cause the  Partnership or the Operating
Partnership  to be taxable as a corporation  or to be treated as an  association
taxable as a corporation  for federal  income tax purposes and (iv) any required
consents of any regulatory authorities to such action have been obtained.

         14.5 Amendment of Certificate of Limited  Partnership.  The Certificate
of Limited  Partnership  shall be amended to reflect the withdrawal,  removal or
succession of the General Partner.

         14.6  Interest of Departing Partner and Successor.

         14.6.1  14.6.1.1 A  successor  General  Partner  shall have the option,
exercisable  prior  to the  effective  date of the  departure  of the  Departing
Partner, to acquire such Departing Partner's Partnership Interest as the General
Partner as described in Section 14.6.1.2 for an amount in cash equal to the fair
market  value of the  Departing  Partner's  Partnership  Interest as the General
Partner  herein,  determined as of the effective date of its  departure.  If the
successor General Partner acquires the Departing Partner's  Partnership Interest
as the General Partner, such successor General Partner must also acquire at such
time the general partner interest of such Departing  Partner or its Affiliate as
general  partner of the  Operating  Partnership  for an amount equal to the fair
market value of such interest, determined as of the effective date of departure.

         14.6.1.2 For purposes of this  Section  14.6,  the fair market value of
the Departing Partner's  Partnership  Interest as the General Partner herein and
the  partnership  interest of such  Departing  Partner or its  Affiliate  as the
general  partner  of the  Operating  Partnership  (collectively,  the  ?Combined
Interest?)  shall be determined by agreement  between the Departing  Partner and
its successor or, failing  agreement  within 30 days after the effective date of
such Departing Partner's departure, by an independent investment banking firm or
other  independent  expert selected by the Departing  Partner and its successor,
which, in turn, may rely on other experts and the  determination  of which shall
be  conclusive  as to such  matter.  If  such  parties  cannot  agree  upon  one
independent  investment  banking firm or other independent expert within 45 days
after the effective date of such  departure,  then such firm shall be designated
by the independent  investment banking firm or other independent expert selected
by each of the Departing Partner and its successor. In making its determination,
such  independent  investing  banking  firm or other  independent  expert  shall
consider the then current  trading price of LP Units on any National  Securities
Exchange  on which LP Units  are then  listed,  the  value of the  Partnership's
assets,  the rights and  obligations of the General Partner and other factors it
may deem relevant.

         14.6.2 14.6.2.1 If the Combined  Interest is not acquired in the manner
set forth in Section 14.6, the Departing  Partner shall become a Limited Partner
and its  Combined  Interest  shall be  converted  into Common Units with a value
equivalent  to  the  Combined  Interest  pursuant  to a  valuation  made  by  an
investment banking firm or other independent expert selected pursuant to Section
14.6.1.2,  without  reduction  in such  Partnership  Interest  (but  subject  to
proportionate  dilution by reason of admission of its successor).  Any successor
General  Partner  shall  indemnify  the  Departing  Partner  as to all debts and
liabilities  of the  Partnership  arising  on or after  the  date on  which  the
Departing Partner becomes a Limited Partner.

         14.6.2.2 If the option  described in Section 14.6.1 is not exercised by
the party  entitled  to do so,  the  successor  General  Partner  shall,  at the
effective date of its admission to the Partnership, contribute to the capital of
the Partnership cash equal to the greater of (i) 1/98th of the aggregate Capital
Account  balances  of the  Unitholders  as of such date or (ii) the fair  market
value of a 1/99th general partner's interest in the Partnership, determined by a
valuation  made by an  investment  banking  firm  or  other  independent  expert
selected  pursuant to Section  14.6.1.  In such  event,  the  successor  General
Partner shall, subject to the following sentence, be entitled to such Percentage
Interest  of  all  Partnership  allocations  and  distributions  and  any  other
allocations  and  distributions  to which the Departing  Partner was entitled as
general partner.  In addition,  such successor  General Partner shall cause this
Partnership  Agreement to be amended to reflect that, from and after the date of
such successor  General  Partner's  admission,  the successor  General Partner's
interest in all Partnership  distributions  and allocations  shall be 1/99th and
that of the Unitholders shall be 98/99ths.

         14.6.3 The  Partnership  shall  reimburse  the  Departing  Partner  for
employee related liabilities including but not limited to, severance liabilities
incurred  in  connection  with the  termination  of  employees  employed  by the
Departing Partner for the benefit of the Partnership;  and if the Partnership is
otherwise  indebted  to the  Departing  Partner  at the  effective  time  of its
departure  for funds  advanced,  properties  sold or  services  rendered  to the
Partnership by the Departing Partner or otherwise, the Partnership shall, at the
option of the  successor  General  Partner,  either (i) within 60 days after the
effective time of such departure,  pay to the Departing  Partner the full amount
of such  indebtedness  or (ii) pay such  indebtedness  or any portion thereof in
accordance with its then existing terms. The successor to the Departing  Partner
shall assume all obligations  theretofore  incurred by the Departing  Partner as
the General Partner of the  Partnership,  and the Partnership and such successor
General  Partner  shall take all such action as shall be  necessary to terminate
any  guarantees  of the  Departing  Partner  and  any of its  Affiliates  of any
obligations  of the  Partnership.  If for whatever  reason the  creditors of the
Partnership will not consent to such termination of guarantees, the successor to
the Departing  Partner shall be required to indemnify the Departing  Partner for
any  liabilities  and expenses  incurred by the Departing  Partner on account of
such guarantees.

                     ARTICLE 15 DISSOLUTION AND LIQUIDATION

         15.1  Dissolution.  Except as provided in Section 15.2, the Partnership
shall be dissolved upon:

         15.1.1  the expiration of its term as provided in Section 2.5;

         15.1.2 An Event of  Withdrawal  of the  General  Partner as provided in
Section  14.1  (other than by reason of a transfer  pursuant to Section  12.2 or
withdrawal occurring upon or after, or removal effective upon or after, approval
by the Limited Partners of a successor  pursuant to Section 14.2 or 14.3, as the
case may be);

         15.1.3 a written  determination  by the General  Partner that projected
future  revenues of the  Partnership  will be  insufficient to enable payment of
projected  Partnership  costs and expenses or, if sufficient,  will be such that
continued  operation  of the  Partnership  is not in the best  interests  of the
Partners;

         15.1.4 an election to dissolve the  Partnership by the General  Partner
which  is  approved  by the  affirmative  vote of a  Majority  Interest  and the
approval  of the  Record  Holders  of at least a  majority  in  interest  of the
Outstanding  Senior Preference Units (excluding Senior Preference Units owned by
the General Partner and its Affiliates);  provided,  that no such election shall
be effective at any time when the Partnership  has outstanding any  indebtedness
for borrowed money unless provision shall have been made in connection with such
dissolution for the payment in full of such indebtedness;

         15.1.5 except as otherwise provided herein, any other event that, under
the Delaware Act, would cause its dissolution;

         15.1.6  the  sale  of  all or  substantially  all  of  the  assets  and
properties of the Partnership or the Operating Partnership.

The Partnership  shall not be dissolved by the admission of a successor  Limited
Partner or by the  admission  of  additional  or successor  General  Partners in
accordance with the terms of this Agreement.

         15.2 Continuation of the Business of the Partnership.

         15.2.1 Within 180 days following an event  described in Section 15.1.2,
in the event action  pursuant to Section 15.3 is not taken, a Majority  Interest
may  elect  in  writing  to  reconstitute  and  continue  the  business  of  the
Partnership  by  forming  a  Reconstituted  Partnership  on the same  terms  and
provisions  as are set  forth in this  Agreement.  Any such  election  must also
provide for the election of a general partner of the Reconstituted  Partnership.
If such an election  is made,  all of the  Limited  Partners of the  Partnership
shall continue as limited  partners of the  Reconstituted  Partnership.  No such
election  shall be made,  however,  unless  prior  thereto the  Partnership  has
received an Opinion of Counsel  that (i) the  election  may be made  without the
approval  of all  Partners,  (ii)  the  limited  partners  in the  Reconstituted
Partnership will have the same limited  liability as the Limited Partners in the
Partnership,  (iii) the Reconstituted  Partnership and the Operating Partnership
will be treated as partnerships and not as associations  taxable as corporations
for federal income tax purposes and (iv) any required consents of any regulatory
authorities have been obtained.  The Partnership  Interest as General Partner of
the former  General  Partner  shall be  treated as though it were an  equivalent
general  partner's  interest  in the  Reconstituted  Partnership,  and  shall be
subject to disposition at the option of the general partner of the Reconstituted
Partnership  in the manner  provided  in Section  14.6.1  (which  option must be
exercised contemporaneously with the selection of the new general partner).

         15.2.2 Upon an event  described in this  Section  15.2,  all  necessary
steps shall be taken to cancel this  Agreement  and the  Certificate  of Limited
Partnership of the Partnership and to enter into a new partnership agreement and
certificate of limited  partnership of the  Reconstituted  Partnership,  and the
general  partner of the  Reconstituted  Partnership may for this purpose and all
purposes  stated  therein  exercise  the power of attorney  granted  pursuant to
Article 10 or in the Transfer Application.

         15.3  Liquidation.

         15.3.1  Upon  dissolution  of the  Partnership,  unless an  election to
continue the business of the  Partnership  is made pursuant to Section 15.2, the
General Partner or in the event the dissolution was caused by an event described
in Section 15.1.2, a liquidator or liquidating  committee  elected by a Majority
Interest,  shall be the  Liquidating  Trustee.  The  Liquidating  Trustee  shall
liquidate the  Partnership  Assets and apply and distribute the proceeds of such
liquidation in the following  order of priority,  unless  otherwise  required by
applicable law:

                  15.3.1.1 the payment to creditors  of the  Partnership,  other
         than  Partners,  in order of priority  provided by law,  including  the
         establishment of reserves for the payment thereof;

                  15.3.1.2  pro rata  payment  to  Partners  for  loans or other
amounts owed to them by the Partnership;

                  15.3.1.3  to all  Partners  in  accordance  with the  positive
         balances in their respective Capital Accounts after taking into account
         adjustments to such Capital Accounts pursuant to Section 5.1.3;

                  15.3.1.4 to the  Partners in  proportion  to their  respective
Percentage Interests.

         15.3.2 The  Liquidating  Trustee  (if other than the  General  Partner)
shall be  entitled  to receive  such  compensation  for its  services  as may be
approved by the vote of a Majority Interest. The Liquidating Trustee shall agree
not to resign at any time  without 60 days' prior  written  notice and (if other
than the General  Partner) may be removed at any time, with or without cause, by
written  notice of removal  approved  by the vote of a Majority  Interest.  Upon
dissolution,  removal or resignation of the Liquidating Trustee, a successor and
substitute Liquidating Trustee (who shall have and succeed to all rights, powers
and  duties  of  the  original   Liquidating  Trustee)  shall,  within  90  days
thereafter, be selected by a Majority Interest. The right to appoint a successor
or  substitute  Liquidating  Trustee  in the  manner  provided  herein  shall be
recurring  and  continuing  for so long as the  functions  and  services  of the
Liquidating  Trustee are authorized to continue under the provisions hereof, and
every reference  herein to the Liquidating  Trustee will be deemed to refer also
to any such successor or substitute  Liquidating Trustee appointed in the manner
herein  provided.   Except  as  expressly  provided  in  this  Article  15,  the
Liquidating  Trustee  appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the parties hereto,
all of the powers  conferred upon the General  Partner,  under the terms of this
Agreement (but subject to all of the  applicable  limitations,  contractual  and
otherwise,  upon  the  exercise  of such  powers)  to the  extent  necessary  or
desirable in the good faith judgment of the Liquidating Trustee to carry out the
duties  and  functions  of the  Liquidating  Trustee  hereunder  (including  the
establishment  of reserves for  liabilities  that are contingent or uncertain in
amount) for and during such  period of time as shall be  reasonably  required in
the good faith  judgment of the  Liquidating  Trustee to complete the winding-up
and  liquidation  of the  Partnership  as provided  for  herein.  In the event a
Majority Interest fails to approve of a Person to be the Liquidating  Trustee as
herein  provided  within 120 days following the event of dissolution or fails to
approve of a successor and substitute Liquidating Trustee within the time period
set forth above,  any Partner may make application to a Court of Chancery of the
State of  Delaware  to wind up the  affairs of the  Partnership  and,  if deemed
appropriate, to appoint a Liquidating Trustee.

         15.4  Distribution in Kind.  Notwithstanding  the provisions of Section
15.3 which require the liquidation of the Partnership Assets, but subject to the
order of priorities set forth therein,  if on dissolution of the Partnership the
Liquidating  Trustee  determines  that an  immediate  sale of part or all of the
Partnership  Assets  would be  impractical  or  would  cause  undue  loss to the
Partners,  the Liquidating Trustee may, in its absolute discretion,  defer for a
reasonable time the liquidation of any Partnership Assets except those necessary
to satisfy  liabilities of the Partnership and may, in its absolute  discretion,
distribute  to the  Partners,  in lieu of cash,  as  tenants  in  common  and in
accordance with Section 15.3,  undivided interests in such Partnership Assets as
the Liquidating Trustee deems not suitable for liquidation. Any distributions in
kind  shall be  subject  to such  conditions  relating  to the  disposition  and
management thereof as the Liquidating Trustee deems reasonable and equitable and
to any  agreements  governing the operation of such  Partnership  Assets at such
time.  The  Liquidating  Trustee  shall  determine  the fair market value of any
Partnership Assets distributed in kind using such reasonable method of valuation
as it may adopt.

         15.5  Cancellation  of  Certificate  of Limited  Partnership.  Upon the
completion of the  distribution  of  Partnership  Assets as provided in Sections
15.3 and 15.4, the Partnership shall be terminated,  and the Liquidating Trustee
(or the  General  Partner or Limited  Partners,  if  necessary)  shall cause the
cancellation of the Certificate of Limited Partnership and all qualifications of
the Partnership as a foreign limited partnership in jurisdictions other than the
State of  Delaware  and shall take such other  actions  as may be  necessary  to
terminate the Partnership.

         15.6 Reasonable Time for Winding Up. A reasonable time shall be allowed
for the orderly  winding up of the business and affairs of the  Partnership  and
the  liquidation of its assets pursuant to Section 15.3 in order to minimize any
losses otherwise attendant upon such winding up.

         15.7 Return of  Contributions.  The General Partner shall not be liable
for the return of the  Capital  Contributions  of the Limited  Partners,  or any
portion  thereof,  it being  expressly  understood that any such return shall be
made solely from Partnership Assets.

         15.8  No  Capital  Account  Restoration.  No  Partner  shall  have  any
obligation  to  restore  any  negative  balance  in  its  Capital  Account  upon
liquidation of the Partnership.

         15.9 Waiver of Partition. Each Partner hereby waives any and all rights
that it may have to  maintain  an  action  for  partition  of the  Partnership's
Assets.

      ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

         16.1  Amendments  to be  Adopted  Solely by the  General  Partner.  The
General Partner (pursuant to the General  Partner's power of attorney),  without
the consent at the time of any  Limited  Partner or  Assignee  (each  Person who
accepts LP Units being deemed to approve of any such  amendment),  may amend any
provision of this Agreement,  and execute, swear to, acknowledge,  deliver, file
and record  whatever  documents  may be required  in  connection  therewith,  to
reflect:

                  16.1.1 a change in the name of the Partnership or the location
         of the principal place of business of the Partnership;

                  16.1.2 the admission,  substitution,  withdrawal or removal of
Partners in accordance with this Agreement;

                  16.1.3 a change that is  necessary or advisable in the opinion
         of the General Partner to qualify or continue the  qualification of the
         Partnership  as a limited  partnership  or a  partnership  in which the
         Limited Partners have limited  liability under the laws of any state or
         to ensure that the Partnership  will not be taxable as a corporation or
         treated as an association  taxable as a corporation  for federal income
         tax purposes;

                  16.1.4 a change that (i) in the sole discretion of the General
         Partner does not adversely  affect the Limited Partners in any material
         respect,  (ii) is necessary  or desirable to satisfy any  requirements,
         conditions or guidelines  contained in any opinion,  directive,  order,
         ruling or regulation of any federal or state agency or contained in any
         federal or state statute, (iii) is necessary or desirable to facilitate
         the  trading  of the LP Units or  comply  with  any  rule,  regulation,
         guideline or requirement of any National  Securities  Exchange on which
         the LP Units are or will be listed for trading,  compliance with any of
         which the  General  Partner  deems to be in the best  interests  of the
         Partnership   and  the   Limited   Partners  or  (iv)  is  required  or
         contemplated by this Agreement or the Registration Statement;

                  16.1.5 an  amendment  that is  necessary,  as  reflected in an
         Opinion of Counsel,  to prevent the  Partnership or the General Partner
         or its directors or officers from in any manner being  subjected to the
         provisions  of the  Investment  Company Act of 1940,  as  amended,  the
         Investment Advisors Act of 1940, as amended, the Public Utility Holding
         Company Act of 1935, as amended,  or ?plan asset?  regulations  adopted
         under the Employee  Retirement Income Security Act of 1974, as amended,
         whether  or  not  substantially   similar  to  plan  asset  regulations
         currently applied or proposed by the United States Department of Labor;

                  16.1.6 a  change  in any  provision  of this  Agreement  which
         requires any action to be taken by or on behalf of the General  Partner
         or the Partnership  pursuant to the requirements of the Delaware Act if
         the provisions of the Delaware Act are amended,  modified or revoked so
         that the taking of such  action is no longer  required;  provided  that
         this Section  16.1.6 shall be  applicable  only if such changes are not
         materially adverse to the Limited Partners;

                  16.1.7  Subject to the terms of Section  4.4, a change that is
         necessary or desirable in connection  with the issuance of any class of
         LP Units pursuant to Section 4.3;

                  16.1.8  a change that is authorized by Section 9.7; or

                  16.1.9  any other amendments similar to the foregoing.

         16.2  Amendment  Procedures.  Except as provided  in Sections  16.1 and
16.3,  all  amendments to this  Agreement  shall be made in accordance  with the
following requirements:

         16.2.1  Amendments  of this  Agreement  may be  proposed  solely by the
General Partner by submitting the text of the amendment to all Limited  Partners
in writing.

         16.2.2 If an  amendment  is  proposed,  the General  Partner may call a
meeting of the Limited  Partners to consider and vote on the proposed  amendment
or solicit the written approval by the Limited  Partners unless,  in the opinion
of counsel to the  Partnership,  such proposed  amendment would be illegal under
Delaware law if adopted.  Subject to Section 16.3, a proposed amendment shall be
effective upon its adoption by the General Partner and the affirmative vote of a
Majority  Interest  unless a greater or different  percentage or a class vote is
required by this Agreement.  The General Partner shall keep all Partners advised
of the status of any proposed amendment and shall notify all Partners upon final
adoption or rejection of any proposed amendment.

         16.3 Special Amendment Requirements.  Notwithstanding the provisions of
Sections 16.1 and 16.2,

                  16.3.1 Unless  approved by the General  Partner and by Limited
         Partners  holding at least 90% of the issued and  outstanding LP Units,
         voting as separate classes, no amendment to this Agreement,  other than
         amendments  pursuant to Section  16.1,  shall be  permitted  unless the
         Partnership  has received an Opinion of Counsel that such amendment (i)
         would not cause the loss of limited  liability of the Limited  Partners
         under  this   Agreement  or  the  limited   partner  of  the  Operating
         Partnership  under the Operating  Partnership  Agreement and (ii) would
         not cause the Partnership or the Operating Partnership to be taxable as
         a  corporation  or  to  be  treated  as  an  association  taxable  as a
         corporation for federal income tax purposes.

                  16.3.2  If the  effect  of any  amendment  shall be to  affect
         materially and adversely any holders of LP Units of a particular  class
         in  relation  to any  other  class of LP Units or the  General  Partner
         interest in the  Partnership,  the affirmative  vote of Record Holder's
         holding at least a majority in interest of the  Outstanding LP Units of
         the class so affected (excluding for purposes of such determination, LP
         Units of such class  owned by the General  Partner and its  Affiliates,
         unless the General  Partner and its  Affiliates own all of the LP Units
         of such class) shall be required to adopt such amendment.

                  16.3.3 No  provision of this  Agreement  which  establishes  a
         percentage  of the Partners (or an  identified  class or other  portion
         thereof)  required  to take  any  action  shall  be  amended,  altered,
         changed,  repealed  or  rescinded  in any  respect  that would have the
         effect of reducing such voting  requirement,  unless such  amendment is
         approved by written  approval or the affirmative vote of Record Holders
         whose   aggregate  LP  Units   constitute  not  less  than  the  voting
         requirement sought to be reduced.

         16.4 Meetings.  Meetings of the Limited  Partners may be called only by
the General  Partner or the Liquidating  Trustee,  if any. Action at the meeting
shall be limited to those matters specified in the call of the meeting.  Limited
Partners may vote either in person or by proxy at any  meeting.  No action shall
be taken at any  meeting  unless  the  Partnership  has  received  an Opinion of
Counsel  that such action (i) would not cause the loss of limited  liability  of
the  Limited  Partners  under  this  Agreement  and (ii)  would  not  cause  the
Partnership  to be taxed as a  corporation  or to be treated  as an  association
taxable as a corporation  for federal income tax purposes.  Each Limited Partner
shall  have one vote  for  each LP Unit of  which he is a Record  Holder  on the
Record Date for such vote, and may cast such vote in person or by proxy.  Except
as provided in Section 16.11,  no action shall be taken by the Limited  Partners
without a meeting  duly  called and held.  Except as  otherwise  required by the
terms of this Agreement,  and except as otherwise required by law, when a quorum
is present at a meeting of Limited  Partners as specified in Section  16.9,  the
vote of a Majority  Interest present in person or by proxy at such meeting shall
decide all matters  submitted to the Limited Partners for  determination at such
meeting.  For meetings at which there is class voting, the foregoing  provisions
shall be applied  separately  to the Limited  Partners  holding each class of LP
Units.

         16.5  Notice  of a  Meeting.  Notice of a meeting  called  pursuant  to
Section  16.4 shall be given  either  personally  in writing or by mail or other
means of written communication  addressed to each Limited Partner at the address
of  the  Limited  Partner  appearing  on  the  books  of  the  Registrar  or the
Partnership.  An affidavit or  certificate of mailing of any notice or report in
accordance  with the  provisions  of this  Article 16  executed  by the  General
Partner or the Registrar,  Transfer Agent or mailing organization shall be prima
facie  evidence of the giving of notice.  If any notice  addressed  to a Limited
Partner at the  address of the  Limited  Partner  appearing  on the books of the
Partnership or the Registrar is returned to the Partnership by the United States
Postal  Service  marked to indicate  that the United  States  Postal  Service is
unable to deliver it, such notice and any subsequent notices or reports shall be
deemed to have been duly given without further mailing if they are available for
the Limited Partner at the principal  executive  office of the Partnership for a
period  of one year  from the date of the  giving  of the  notice  to all  other
Limited Partners.

         16.6 Record Date.  For  purposes of  determining  the Limited  Partners
entitled  to notice  of or to vote at a meeting  of the  Limited  Partners,  the
General Partner or the Liquidating Trustee, if any, may set a Record Date, which
shall  not be less than ten days nor more  than 60 days  before  the date of the
meeting (unless such requirement conflicts with any rule, regulation,  guideline
or  requirement  of any National  Securities  Exchange on which the LP Units are
listed for trading, in which case the rule, regulation, guideline or requirement
of such National Securities Exchange shall govern).

         16.7 Adjournment. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting and a new Record Date need not
be fixed,  if the time and place  thereof are  announced at the meeting at which
the  adjournment  is taken,  unless such  adjournment  shall be for more than 45
days. At the adjourned  meeting,  the Partnership may transact any business that
might have been  transacted at the original  meeting.  If the adjournment is for
more than 45 days or if a new Record Date is fixed for the adjourned  meeting, a
notice of the adjourned  meeting shall be given in accordance  with this Article
16.

         16.8  Waiver of Notice.  Attendance  of a Limited  Partner at a meeting
shall  constitute  a waiver of notice of the  meeting,  except  when the Limited
Partner  objects,  at the beginning of the meeting,  to the  transaction  of any
business  because the meeting is not lawfully  called or  convened;  except that
attendance  at a  meeting  is  not a  waiver  of  any  right  to  object  to the
consideration  of matters  required to be included in the notice of the meeting,
but not so included, if the objection is expressly made at the meeting.

         16.9 Quorum.  A majority of the  Outstanding  LP Units of the class for
which a meeting is to be held represented in person or by proxy shall constitute
a quorum at a meeting of Limited  Partners.  The Limited  Partners  present at a
duly  called  or held  meeting  at which a quorum is  present  may  continue  to
transact business until  adjournment,  notwithstanding  the withdrawal of enough
Limited  Partners to leave less than a quorum,  if any action  taken (other than
adjournment) is approved by Limited  Partners holding the requisite number of LP
Units  specified in this Agreement.  In the absence of a quorum,  any meeting of
Limited  Partners may be adjourned  from time to time by the General  Partner or
upon the affirmative vote of Limited Partners holding a majority of the LP Units
represented  either  in  person  or by  proxy,  but  no  other  business  may be
transacted.  For  meetings  at  which  there  is  class  voting,  the  foregoing
provisions  shall be applied  separately  to the Limited  Partners  holding each
class of LP Units.


         16.10  Conduct of  Meeting.  The  General  Partner  or the  Liquidating
Trustee,  if any,  shall have full power and authority  concerning the manner of
conducting any meeting of Limited Partners including,  without  limitation,  the
determination  of Persons  entitled  to vote,  the  existence  of a quorum,  the
satisfaction  of the  requirements  of Section 16.4, the conduct of voting,  the
validity and effect of any proxies,  and the determination of any controversies,
votes or challenges  arising in connection with or during the meeting or voting.
The  General  Partner  or the  Liquidating  Trustee,  as the case may be,  shall
designate  a Person  to serve as  chairman  of any  meeting  and  shall  further
designate a Person to take the minutes of any meeting in either case  including,
without  limitation,  a Partner or an employee or agent of the General  Partner.
All minutes shall be kept with the records of the Partnership  maintained by the
General Partner. The General Partner or the Liquidating Trustee, as the case may
be, may make such other  regulations  consistent  with  applicable  law and this
Agreement as they may deem  advisable  concerning  the conduct of any meeting of
the Limited  Partners,  including  regulations  in regard to the  appointment of
proxies,  the appointment and duties of inspectors of votes,  the submission and
examination of proxies and other evidence of the right to vote.

         16.11  Action  Without a  Meeting.  Any  action  that may be taken at a
meeting  of the  Limited  Partners  may be taken  without  a  meeting  if (i) an
approval  in  writing  setting  forth the  action so taken is signed by  Limited
Partners  holding  not less than the  minimum  number of LP Units  that would be
necessary to authorize or take such action at a meeting at which all the Limited
Partners  were  present and voted and (ii) such action is approved in writing by
the General  Partner.  Prompt  notice of the taking of action  without a meeting
shall be given to the  Limited  Partners  who have not  approved  such action in
writing.  The General  Partner may specify that any written ballot  submitted to
Limited Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time, not less than 20 days, specified by
the General  Partner.  If a ballot returned to the Partnership does not vote all
of the LP Units held by the Limited Partner,  the Partnership shall be deemed to
have  failed  to  receive a ballot  for the LP Units  that  were not  voted.  If
approval of the taking of any action by the Limited Partners is solicited by any
Person other than by or on behalf of the General Partner,  the written approvals
shall have no force and effect unless and until (a) they are deposited  with the
Partnership in care of the General Partner, (b) approvals sufficient to take the
action  proposed  are dated as of a date not more than 90 days prior to the date
sufficient  consents are deposited with the  Partnership,  and (c) an Opinion of
Counsel is delivered  to the General  Partner to the effect that the exercise of
such right and the action  proposed to be taken with  respect to any  particular
matter (i) will not cause the Limited Partners to be deemed to be taking part in
the management and control of the business and affairs of the  Partnership so as
to subject the Limited Partners to unlimited liability, (ii) will not jeopardize
the status of the  Partnership  as a partnership  under  applicable tax laws and
regulations  and (iii) is otherwise  permissible  under the state  statutes then
governing  the  rights,  duties  and  liabilities  of the  Partnership  and  the
Partners.

         16.12  Voting and Other Rights.

         16.12.1 Only Limited Partners who are Record Holders of LP Units on the
Record Date set  pursuant to Section  16.6 shall be entitled to notice of, or to
vote at, a meeting of Limited Partners; provided, however, that the admission of
such Record  Holder as a Limited  Partner may have occurred at any time prior to
the  taking  of the  vote  at  such  meeting.  With  respect  to  voting  rights
attributable  to LP Units  that are  owned  by  Assignees  who have not yet been
admitted  as Limited  Partners,  the General  Partner  shall be deemed to be the
Limited Partner with respect  thereto and shall, in exercising  voting rights in
respect  of such LP  Units on any  matter,  vote  such LP  Units at the  written
direction of such Record Holder;  or, if no such direction is given, the General
Partner shall exercise voting rights with respect to such LP Units.

         16.12.2 With  respect to LP Units that are held for a Person's  account
by another  Person (such as a broker,  dealer,  bank,  trust company or clearing
corporation,  or an agent of any of the foregoing),  in whose name such LP Units
are  registered,  such broker,  dealer or other agent shall,  in exercising  any
voting  rights in respect of such LP Units on any matter,  vote such LP Units in
favor of,  and at the  direction  of, the Person on whose  behalf  such  broker,
dealer or other agent is holding  such LP Units,  and the  Partnership  shall be
entitled to assume it is so acting without further inquiry.

         16.12.3  Except  as  otherwise  specifically  provided  herein,  if the
General  Partner  is also a Limited  Partner  by virtue of its  ownership  of LP
Units, it may vote its LP Units on any matter  submitted to the Limited Partners
for consideration in such manner as it in its sole discretion shall determine.

                                ARTICLE 17 MERGER


         17.1 Authority.  The  Partnership may merge or consolidate  with one or
more  corporations,  business  trusts or  associations,  real estate  investment
trusts,  common  law trusts or  unincorporated  businesses,  including,  without
limitation, a general partnership or limited partnership,  formed under the laws
of the State of  Delaware  or any other  state of the  United  States of America
pursuant to a written agreement of merger or consolidation  (?Merger Agreement?)
in accordance with this Article.

         17.2 Procedure for Merger or Consolidation.  Merger or consolidation of
the  Partnership  pursuant to this Article  requires  the prior  approval of the
General Partner. If the General Partner shall determine,  in the exercise of its
sole discretion, to consent to the merger or consolidation,  the General Partner
shall approve the Merger Agreement, which shall set forth:

         17.2.1 The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;

         17.2.2 The name and  jurisdictions  of formation or organization of the
business  entity  that  is to  survive  the  proposed  merger  or  consolidation
(hereafter designated as the ?Surviving Business Entity?);

         17.2.3   The  terms  and   conditions   of  the   proposed   merger  or
consolidation;

         17.2.4 The  manner and basis of  exchanging  or  converting  the equity
securities of each  constituent  business  entity for or into cash,  property or
general or limited partnership interests,  rights,  securities or obligations of
the Surviving  Business  Entity;  and (a) if any general or limited  partnership
interests, securities or rights of any constituent business entity are not to be
exchanged or converted solely for, or into, cash, property or general or limited
partnership  interests,  rights,  securities  or  obligations  of the  Surviving
Business Entity, the cash, property or general or limited partnership interests,
rights, securities or obligations of any limited partnership, corporation, trust
or other entity (other than the Surviving  Business Entity) which the holders of
such general or limited partnership interests are to receive in exchange for, or
upon  conversion  of,  their  securities  or  rights,  and  (b) in the  case  of
securities represented by certificates, upon the surrender of such certificates,
which  cash,  property  or  general or limited  partnership  interests,  rights,
securities  or  obligations  of the  Surviving  Business  Entity or any  limited
partnership,  corporation,  trust  or other  entity  (other  than the  Surviving
Business Entity), or evidences thereof, are to be delivered;

         17.2.5 A statement  of any changes in the  constituent  documents  (the
articles or  certificate  of  incorporation,  articles of trust,  declaration of
trust,  certificate or agreement of limited partnership or other similar charter
or governing  document) of the Surviving  Business Entity to be effected by such
merger or consolidation;

         17.2.6 The effective  time of the merger,  which may be the date of the
filing of the  certificate of merger  pursuant to Section hereof or a later date
specified in or determinable in accordance with the Merger  Agreement  (provided
that if the  effective  time of the  merger is to be later  than the date of the
filing of the certificate of merger, it shall be fixed no later than the time of
the filing of the certificate of merger and stated therein); and

         17.2.7 Such other  provisions  with respect to the  proposed  merger or
consolidation as are deemed necessary or desirable.

         17.3  Approval  by  Limited  Partners  of  Merger  or  Consolidation.

         17.3.1 The General Partner of the Partnership, upon its approval of the
Merger Agreement,  shall direct that the Merger Agreement be submitted to a vote
of Limited Partners  whether at a meeting or by written consent,  in either case
in accordance with the requirements of Article 16 hereof. A copy or a summary of
the Merger  Agreement  shall be  included  in or  enclosed  with the notice of a
meeting or the written consent.

         17.3.2  The Merger  Agreement  shall be  approved  upon  receiving  the
affirmative  vote or  consent  of the  holders  of at  least a  majority  of the
Outstanding LP Units of each class (provided that with respect to the class vote
of Senior Preference Units, Senior Preference Units owned by the General Partner
and its  Affiliates  shall be excluded and provided  further that the holders of
Preference  Units and  Preference B Units shall vote together as a single class)
unless the Merger  Agreement  contains any provision  which,  if contained in an
amendment to the Agreement, the provisions of this Agreement or the Delaware Act
would  require  the vote or consent of a greater  percentage  of the  Percentage
Interests of the Limited Partners or of any class of Limited Partners,  in which
case such greater  percentage  vote or consent shall be required for approval of
the Merger Agreement.

         17.3.3 After such approval by vote or consent of the Limited  Partners,
and at any time prior to the filing of the  certificate  of merger  pursuant  to
Section 17.4 hereof,  the merger or consolidation  may be abandoned  pursuant to
provisions therefor, if any, set forth in the Merger Agreement.

         17.4 Certificate of Merger.  Upon the required  approval by the General
Partner and Limited  Partners of a Merger  Agreement,  a  certificate  of merger
shall be executed and filed with the Secretary of State of the State of Delaware
in conformity with the requirements of the Delaware Act.

         17.5  Effect of Merger.

         17.5.1 Upon the effective date of the certificate of merger:

                  17.5.1.1 all of the rights,  privileges  and powers of each of
         the  business  entities  that  has  merged  or  consolidated,  and  all
         property,  real,  personal and mixed, and all debts due to any of those
         business  entities and all other things and causes of action  belonging
         to each of those  business  entities  shall be vested in the  Surviving
         Business  Entity  and after the  merger or  consolidation  shall be the
         property of the  Surviving  Business  Entity to the extent they were of
         each constituent business Entity;

                  17.5.1.2  the  title to any real  property  vested  by deed or
         otherwise  in any of those  constituent  business  entities  shall  not
         revert  and is not  in  any  way  impaired  because  of the  merger  or
         consolidation;

                  17.5.1.3 all rights of creditors  and all liens on or security
         interests  in property of any of those  constituent  business  entities
         shall be preserved unimpaired; and

                  17.5.1.4   all   debts,   liabilities   and  duties  of  those
         constituent  business  entities shall attach to the Surviving  Business
         Entity,  and may be  enforced  against it to the same  extent as if the
         debts, liabilities and duties had been incurred or contracted by it.

         17.5.2 A merger or  consolidation  effected  pursuant  to this  Article
shall  not be  deemed  to  result  in a  transfer  or  assignment  of  assets or
liabilities from one entity to another having occurred.

                      ARTICLE 18 RIGHT TO PURCHASE LP UNITS

         18.1 Right to  Purchase.  Notwithstanding  any other  provision of this
Agreement, if at any time after the Preference Period less than 750,000 LP Units
(such number to be increased or decreased from time to time in proportion to any
distributions,  combination or subdivisions of the LP Units) are held by Persons
other than the General  Partner and its  Affiliates,  the General  Partner shall
then have the right,  which it may assign and transfer to the Partnership or any
of its Affiliates,  exercisable in its sole discretion, to purchase all, but not
less than all,  of the  Outstanding  LP Units  held by  Persons  other  than the
General  Partner  and its  Affiliates.  The price  payable for any LP Units of a
particular  class will be the greater of (i) the Current  Market Price as of the
date the  General  Partner  mails  written  notice of its  election  to purchase
Outstanding LP Units or (ii) the highest cash price paid by the General  Partner
or any of its  Affiliates  for any LP Unit of such  class  purchased  within the
ninety days next preceding the date on which a Notice of Election to Purchase is
given to the Registrar pursuant to Section 18.2.1, if any such purchase occurred
during such period.

         18.2  Procedure.

         18.2.1 In the event the General  Partner,  any Affiliate of the General
Partner or the  Partnership  elects to exercise  such right to purchase LP Units
pursuant to this Article 18, the General  Partner shall deliver to the Registrar
written  notice of such  election to purchase  (hereinafter  in this  Article 18
called the ?Notice of Election to Purchase?)  specifying the date (the ?Purchase
Date?) on which such purchase is to be effected and shall cause the Registrar to
mail a copy of such Notice of  Election  to  Purchase  to the Record  Holders at
least ten, but not more than 60, days prior to the Purchase Date. Such Notice of
Election to Purchase shall also be printed in the English language and published
in daily  newspapers of general  circulation  in the Borough of  Manhattan,  New
York.  The Notice of Election to Purchase shall specify the class of LP Units to
be  purchased,  the  Purchase  Date and the  Purchase  Price and state  that the
General Partner, its Affiliate or the Partnership, as the case may be, elects to
purchase such LP Units, upon surrender thereof in exchange for payment,  at such
office or offices of the Registrar as the  Registrar  may specify,  or as may be
required by any National Securities Exchange on which the LP Units are listed or
admitted to trading.  Any such Notice of Election to Purchase mailed to a Record
Holder of LP Units at his address as reflected  in the records of the  Registrar
shall be  conclusively  presumed  to have been given  regardless  of whether the
owner  receives  such  notice.  On or prior to the  Purchase  Date,  the General
Partner,  its  Affiliate or the  Partnership,  as the case may be, shall deposit
with the Registrar cash in an amount equal to the purchase price of the LP Units
to be  purchased.  If the Notice of Election  to  Purchase  shall have been duly
given as aforesaid at least ten days prior to the  Purchase  Date,  and if on or
prior to the Purchase Date the Purchase Funds shall have been deposited with the
Registrar  in trust  for the  benefit  of the  holders  of LP Units  subject  to
purchase  as  provided   herein,   then  from  and  after  the  Purchase   Date,
notwithstanding  that any LP Unit  Certificates  shall not have been surrendered
for  purchase,  all rights of the holders of such LP Units  (including,  without
limitation,  any rights pursuant to Articles 4, 5 and 16) shall thereupon cease,
except the right to receive the Purchase Price thereof,  without interest,  upon
surrender to the Registrar of the Unit  Certificates  representing LP Units, and
such LP Units  shall  thereupon  be  deemed  to be  transferred  to the  General
Partner,  its  Affiliate or the  Partnership,  as the case may be, on the record
books of the  Registrar  and the  Partnership,  and the  General  Partner or any
Affiliate of the General Partner or the  Partnership,  as the case may be, shall
be deemed to be the owner of all such LP Units from and after the Purchase  Date
and shall  have the  rights as the  owner of such LP Units  (including,  without
limitation,  all rights as owner of such LP Units  pursuant to Articles 4, 5 and
16).

         18.2.2 At any time from and after the Purchase Date, a Record Holder of
an issued and  outstanding  LP Unit  subject to  purchase  as  provided  in this
Article 18 may surrender  his Unit  Certificate  evidencing  such LP Unit to the
Registrar  in  exchange  for payment of the  Purchase  Price  therefor,  without
interest thereon.

                          ARTICLE 19 GENERAL PROVISIONS

         19.1 Addresses and Notices.  The address of the General Partner for all
purposes  shall  be the  address  set  forth on the  books  and  records  of the
Partnership  and for each  Limited  Partner or Assignee the address set forth in
the books and  records of the  Partnership  or such  other  address of which the
General Partner has received  written  notice.  Any notice,  demand,  request or
report  required  or  permitted  to be given  or made to a  Partner  under  this
Agreement  shall be in writing and shall be deemed given or made when  delivered
in person or when sent to the Partner at such  address by first class mail or by
other means of written communication.

         19.2 Consent of Limited Partners.  By acceptance of a Unit Certificate,
each  Limited  Partner  expressly  approves  and agrees  that,  whenever in this
Agreement it is specified that an action may be taken upon the affirmative  vote
of less than all of the Limited  Partners,  such action may be so taken upon the
concurrence  of less than all of the Limited  Partners and each Limited  Partner
shall be bound by the results of such action.

         19.3 Titles and Captions.  All article or section titles or captions in
this Agreement are for  convenience  only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof.

         19.4  Pronouns  and  Plurals.  Whenever  the context may  require,  any
pronoun  used herein  shall  include the  corresponding  masculine,  feminine or
neuter forms,  and the singular form of nouns,  pronouns and verbs shall include
the plural and vice versa.

         19.5  Further  Action.  The  parties  shall  execute  and  deliver  all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purpose of this Agreement.

         19.6 Binding Effect.  This Agreement shall be binding upon and inure to
the  benefit  of  the  parties  and  their  heirs,  executors,   administrators,
successors, legal representatives and permitted assigns.

         19.7 Integration. This Agreement constitutes the entire agreement among
the parties  pertaining to the subject  matter hereof and  supersedes  all prior
agreements and understandings pertaining thereto.

         19.8  Creditors.  Except for the provisions of Section 6.2, none of the
provisions of this  Agreement  shall be for the benefit of or enforceable by any
creditors of the Partnership.

         19.9  Waiver.  No  failure  by any  party to  insist  upon  the  strict
performance of any covenant,  duty,  agreement or condition of this Agreement or
to  exercise  any  right  or  remedy  consequent  upon a  breach  thereof  shall
constitute waiver of any such breach or any other covenant,  duty,  agreement or
condition.

         19.10 Counterparts. This Agreement may be executed in counterparts, all
of which  together  shall  constitute  one agreement  binding on all the parties
notwithstanding  that all the parties are not signatories to the original or the
same  counterpart.  Each party shall become bound by this Agreement  immediately
upon affixing its signature hereto,  independently of the signature of any other
party.

         19.11  Applicable Law.  Notwithstanding  the place where this Agreement
may be executed by any of the parties hereto,  the parties  expressly agree that
all of the terms and provisions  hereof shall be construed under the substantive
laws of the State of Delaware as now adopted or as may hereafter be amended, and
such laws shall  govern this  Agreement,  without  regard to the  principles  of
conflicts of law.

         19.12  Invalidity of Provisions.  If any provision of this Agreement is
or becomes  invalid,  illegal or  unenforceable  in any respect,  the  validity,
legality and enforceability of the remaining  provisions  contained herein shall
not be affected thereby.

         IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 23rd day of July, 1998.

GENERAL PARTNER:

KANEB PIPE LINE COMPANY



By:..............................
Name:
Title:

LIMITED PARTNERS:

All  Limited  Partners  now and  hereafter  admitted as limited  partners of the
     Partnership,  pursuant to Powers of Attorney now and hereafter  executed in
     favor of, and granted and delivered to, the General Partner

     By: Kaneb Pipe Line Company General Partner, as attorney-in-fact for all
         Limited Partners pursuant to the Powers of Attorney granted pursuant
         to Article 10 hereof



By:...............................
Name:
Title:
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