Document:

exv10w2

Exhibit 10.2

AGREEMENT OF LIMITED PARTNERSHIP

OF

TEPPCO UNIT L.P.

Dated as of

September 4, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I
	DEFINITIONS
	 
	 	 	 	 
	1.01 Certain Definitions
	 	 	1	 
	1.02 Other Definitions
	 	 	5	 
	 
	 	 	 	 
	ARTICLE II
	ORGANIZATIONAL MATTERS
	 
	 	 	 	 
	2.01 Formation
	 	 	5	 
	2.02 Name
	 	 	5	 
	2.03 Registered Office; Registered Agent; Other Offices
	 	 	6	 
	2.04 Purposes
	 	 	6	 
	2.05 Certificate; Foreign Qualification
	 	 	6	 
	2.06 Term
	 	 	6	 
	2.07 Merger or Consolidation
	 	 	6	 
	 
	 	 	 	 
	ARTICLE III
	PARTNERS; DISPOSITIONS OF INTERESTS
	 
	 	 	 	 
	3.01 Partners
	 	 	6	 
	3.02 Representations and Warranties
	 	 	7	 
	3.03 Restrictions on the Disposition of an Interest
	 	 	7	 
	3.04 Additional Partners
	 	 	9	 
	3.05 Interests in a Partner
	 	 	9	 
	3.06 Spouses of Partners
	 	 	9	 
	3.07 Vesting of Limited Partners
	 	 	9	 
	 
	 	 	 	 
	ARTICLE IV
	CAPITAL CONTRIBUTIONS
	 
	 	 	 	 
	4.01 Initial and Additional Capital Contributions
	 	 	9	 
	4.02 Return of Contributions
	 	 	10	 
	4.03 Advances by General Partner
	 	 	10	 
	4.04 Capital Accounts
	 	 	10	 
	 
	 	 	 	 
	ARTICLE V
	ALLOCATIONS AND DISTRIBUTIONS
	 
	 	 	 	 
	5.01 Allocations
	 	 	11	 
	5.02 Income Tax Allocations
	 	 	13	 
	5.03 Distributions of Cashflow from EPE Units
	 	 	14	 
	5.04 Distributions of Proceeds from Sales of EPE Units
	 	 	14	 
	5.05 Restrictions on Distributions of EPE Units
	 	 	15	 

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	ARTICLE VI
	MANAGEMENT AND OPERATION
	 
	 	 	 	 
	6.01 Management of Partnership Affairs
	 	 	15	 
	6.02 Duties and Obligations of General Partner
	 	 	16	 
	6.03 Release and Indemnification
	 	 	16	 
	6.04 Power of Attorney
	 	 	17	 
	 
	 	 	 	 
	ARTICLE VII
	RIGHTS OF OTHER PARTNERS
	 
	 	 	 	 
	7.01 Information
	 	 	18	 
	7.02 Limitations
	 	 	18	 
	7.03 Limited Liability
	 	 	18	 
	 
	 	 	 	 
	ARTICLE VIII
	TAXES
	 
	 	 	 	 
	8.01 Tax Returns
	 	 	19	 
	8.02 Tax Elections
	 	 	19	 
	8.03 Tax Matters Partner
	 	 	19	 
	 
	 	 	 	 
	ARTICLE IX
	BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
	 
	 	 	 	 
	9.01 Maintenance of Books
	 	 	20	 
	9.02 Financial Statements
	 	 	20	 
	9.03 Bank Accounts
	 	 	20	 
	 
	 	 	 	 
	ARTICLE X
	WITHDRAWAL, BANKRUPTCY, REMOVAL, ETC.
	 
	 	 	 	 
	10.01 Withdrawal, Bankruptcy, Etc. of General Partner
	 	 	20	 
	10.02 Conversion of Interest
	 	 	21	 
	 
	 	 	 	 
	ARTICLE XI
	DISSOLUTION, LIQUIDATION, AND TERMINATION
	 
	 	 	 	 
	11.01 Dissolution
	 	 	21	 
	11.02 Liquidation and Termination
	 	 	22	 
	11.03 Cancellation of Certificate
	 	 	23	 
	 
	 	 	 	 
	ARTICLE XII
	GENERAL PROVISIONS
	 
	 	 	 	 
	12.01 Offset
	 	 	23	 
	12.02 Notices
	 	 	23	 
	12.03 Entire Agreement; Supersedure
	 	 	24	 

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	12.04 Effect of Waiver or Consent
	 	 	24	 
	12.05 Amendment or Modification
	 	 	24	 
	12.06 Binding Effect; Joinder of Additional Parties
	 	 	24	 
	12.07 Construction
	 	 	24	 
	12.08 Further Assurances
	 	 	24	 
	12.09 Indemnification
	 	 	25	 
	12.10 Waiver of Certain Rights
	 	 	25	 
	12.11 Counterparts
	 	 	25	 
	12.12 Dispute Resolution
	 	 	25	 
	12.13 No Effect on Employment Relationship
	 	 	28	 
	12.14 Legal Representation
	 	 	28	 

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AGREEMENT OF LIMITED PARTNERSHIP

OF

TEPPCO UNIT L.P.

     This Agreement of Limited Partnership (this “Agreement”) of TEPPCO Unit L.P., a
Delaware limited partnership (the “Partnership”), is made and entered into effective as of
September 4, 2008 by and among the Partners (as defined below).

RECITALS

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

ARTICLE I

DEFINITIONS

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

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

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

	 	(a)	 	Credit to such Capital Account of any amounts that such Partner is obligated or
deemed obligated to contribute pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
	 
	 	(b)	 	Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.

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

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

     “Affiliate” means with respect to any Person any other Person that directly or
indirectly through one or more intermediaries, controls or is controlled by, or is under common
control

 

 

with, the Person specified. For the purpose of this definition, “control” shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract or
otherwise.

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

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

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

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

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

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

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

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

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

	 	(a)	 	increased by the Class A Preference Return that has accrued since the previous
Adjustment Date (or in the case of the first Adjustment Date, since the Closing Date);
and
	 
	 	(b)	 	decreased by all distributions made to the Class A Limited Partner since the
previous Adjustment Date (or in the case of the first Adjustment Date, since the
Closing Date).

     “Class A Limited Partner” means EPCO Holdings, Inc., a Delaware corporation, and its
successors and assigns.

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     “Class A Preference Return” means the sum of the amounts determined for each day,
equal to the Class A Preference Return Rate multiplied by the Class A Capital Base.

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

     “Class A Preference Return Rate” means a floating preference rate to be determined by
the General Partner, in its sole discretion, not less than annually on or prior to the date on
which any annual tax allocations are required to be determined in accordance with the Partnership
Agreement, that will be no less than 4.5% and no greater than 5.725% per annum, in each case
divided by 365 or 366 days, as the case may be during such calendar year.

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

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

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

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

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

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

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

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

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

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     “EPE” means Enterprise GP Holdings L.P., a Delaware limited partnership.

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

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

     “Limited Partner” means the Class A Limited Partner or any Class B Limited Partner.

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

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

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

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

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

- 4 -

 

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

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

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

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

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

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

     “Required Interest” means one or more Class B Limited Partners having among them more
than 50% of the Class B Percentage Interests of all Limited Partners in its or their capacities as
such.

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

     “TEPPCO” means TEPPCO Partners, L.P., a Delaware limited partnership.

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

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

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

ARTICLE II

ORGANIZATIONAL MATTERS

     2.01 Formation. The Partnership has been previously formed as a Delaware limited partnership for the
purposes hereinafter set forth under and pursuant to the provisions of the Act.

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

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

     2.04 Purposes. The purposes of the Partnership are to acquire, own, sell, exchange or
otherwise dispose of TEPPCO Units, and to enter into, make and perform all contracts and other
undertakings and to engage in any other business, activity or transaction that now or hereafter may
be necessary, incidental, proper, advisable, or convenient, as determined by the General Partner,
to accomplish the foregoing purposes.

     2.05 Certificate; Foreign Qualification. The General Partner has previously executed
and caused to be filed with the Secretary of State of the State of Delaware a Certificate of
Limited Partnership, effective as of August 13, 2008, containing information required by the Act
and such other information as the General Partner deemed appropriate. Prior to conducting business
in any jurisdiction other than Delaware, the General Partner shall cause the Partnership to comply,
to the extent such matters are reasonably within the control of the General Partner, with all
requirements necessary to qualify the Partnership as a foreign limited partnership (or a
partnership in which the Limited Partners have limited liability) in such jurisdiction. Upon the
request of the General Partner, each Partner shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Agreement that are necessary or appropriate
as determined by the General Partner to qualify, continue, and terminate the Partnership as a
limited partnership under the laws of the State of Delaware and to qualify, continue, and terminate
the Partnership as a foreign limited partnership (or a partnership in which the Limited Partners
have limited liability) in all other jurisdictions in which the Partnership may conduct business,
and to this end the General Partner may use the power of attorney described in Section
6.04.

     2.06 Term. The term of this Partnership shall continue in existence until the close
of Partnership business on the earliest to occur of (i) the fiftieth anniversary of the date of
this Agreement, and (ii) such earlier time as this Agreement may specify.

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

ARTICLE III

PARTNERS; DISPOSITIONS OF INTERESTS

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

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     3.02 Representations and Warranties. Each Partner hereby represents and warrants to
the Partnership and each other Partner that (a) if such Partner is a corporation, it is duly
organized, validly existing, and in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified and in good standing as a foreign corporation in the
jurisdiction of its principal place of business (if not incorporated therein), (b) if such Partner
is a trust, estate or other entity, it is duly formed, validly existing, and (if applicable) in
good standing under the laws of the jurisdiction of its formation, and if required by law is duly
qualified to do business and (if applicable) in good standing in the jurisdiction of its principal
place of business (if not formed therein), (c) such Partner has full corporate, trust, or other
applicable right, power and authority to enter into this Agreement and to perform its obligations
hereunder and all necessary actions by the board of directors, trustees, beneficiaries, or other
Persons necessary for the due authorization, execution, delivery, and performance of this Agreement
by such Partner have been duly taken, and such authorization, execution, delivery, and performance
do not conflict with any other agreement or arrangement to which such Partner is a party or by
which it is bound, and (d) such Partner is acquiring its interest in the Partnership for investment
purposes and not with a view to distribution thereof.

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

     (b) Subject to the provisions of Sections 3.03(c), (d) and (e), a
permitted transferee of all or a part of a Partner’s interest in the Partnership shall be admitted
to the Partnership as a General Partner or a Limited Partner (as applicable) with, in the case of
the Class B Limited Partner, such Sharing Points (no greater than the Sharing Points of the Class B
Limited Partner effecting such Disposition immediately prior thereto) as the Partner effecting such
Disposition and such permitted transferee may agree.

     (c) The Partnership shall not recognize for any purpose any purported Disposition of an
interest in the Partnership or distributions therefrom unless and until the provisions of this
Section 3.03 shall have been satisfied and there shall have been delivered to the General
Partner a document (i) executed by both the Partner effecting such Disposition and the Person to
which such interest or interest in distributions are to be Disposed, (ii) including the written
acceptance by any Person to be admitted to the Partnership of all the terms and provisions of this
Agreement, such Person’s notice address, and an agreement by such Person to perform and discharge
timely all of the obligations and liabilities in respect of the interest being obtained, (iii)
setting forth, in the case of the Class B Limited Partner, the Sharing Points of the Class B
Limited Partner effecting such Disposition and the Person to which such interest is Disposed after
such Disposition (which together shall total the Sharing Points of the Class B Limited Partner
effecting such Disposition prior thereto), (iv) containing a representation and warranty

- 7 -

 

that such
Disposition complied with all applicable laws and regulations (including securities laws) and a
representation and warranty by such Person that the representations and warranties in
Section 3.02 are true and correct with respect to such Person. Each such Disposition and,
if applicable, admission shall be effective as of the first day of the calendar month immediately
succeeding the month in which the General Partner shall receive such notification of Disposition
and the other requirements of this Section 3.03 shall have been met unless the General
Partner and the Partner affecting such Disposition agree to a different effective date; provided,
however, that if there shall be only one General Partner and such Disposition or admission and, as
a result of such Disposition such General Partner would cease to be a General Partner, such
permitted transferee shall be deemed admitted as a General Partner immediately prior to such
cessation.

     (d) Notwithstanding any provision of this Agreement to the contrary, the right of any Partner
to Dispose of an interest in the Partnership or distributions therefrom or of any Person to be
admitted to the Partnership in connection therewith shall not exist or be exercised (i) unless and
until the Partnership shall have received a favorable opinion of the Partnership’s legal counsel or
of other legal counsel acceptable to the General Partner to the effect that such Disposition or
admission is not required to be registered under the Securities Act of 1933 or any other applicable
securities laws, and such Disposition or admission would not cause the Partnership to become an
“investment company” required to register under the Investment Company Act of 1940, and (ii) unless
such Disposition or admission would not result in the Partnership being treated as an association
taxable as a corporation for federal income tax purposes or as a publicly traded partnership as
defined in Section 7704 of the Code. The General Partner, however, may waive the requirements of
Section 3.03(d)(i).

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

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

     (g) Any attempted Disposition by a Person of an interest or right, or any part thereof, in or
in respect of the Partnership other than in accordance with this Section 3.03 shall be, and
is hereby declared, null and void ab initio.

- 8 -

 

     3.04 Additional Partners. Subject to the provisions of Section 12.05 and
3.03, additional Persons may be admitted to the Partnership as General Partners or Limited
Partners, only to the extent that, and on such terms and conditions as, the General Partner shall
consent at the time of such admission or issuance. Such admission or issuance shall, in the case
of a Class B Limited Partner, specify the Sharing Points applicable thereto. Any such admission
must comply with the provisions of Section 3.03(d) and shall not be effective until such
new Partner shall have executed and delivered to the General Partner a document including such new
Partner’s notice address, acceptance of all the terms and provisions of this Agreement, an
agreement to perform and discharge timely all of its obligations and liabilities hereunder, and a
representation and warranty that the representations and warranties in Section 3.02 are
true and correct with respect to such new Partner.

     3.05 Interests in a Partner. No Partner that is not a natural person shall cause or
permit an interest, direct or indirect, in itself to be Disposed of such that, on account of such
Disposition, the Partnership would become an association taxable as a corporation for federal
income tax purposes.

     3.06 Spouses of Partners. A spouse of a Partner does not become a Partner as a result
of such marital relationship or by reason of a divorce, legal separation or other dissolution of
marriage. If, in the event of a divorce, legal separation or other dissolution of marriage of a
Partner, a former spouse of a Partner is awarded ownership of, or an interest in, all or part of a
Partner’s interest in the Partnership (the “Awarded Interest”), the Awarded Interest shall
automatically and immediately be forfeited and cancelled without payment on such date.

     3.07 Vesting of Limited Partners. One hundred percent (100%) of the Class B Limited
Partner’s interest in the Partnership shall vest on the Vesting Date, but only if (i) on such date
the Class B Limited Partner continues to be an active, full-time employee of the General Partner or
any of its Affiliates or (ii) prior to the Vesting Date a Qualifying Termination has occurred with
respect to the Class B Limited Partner. At such time as the Class B Limited Partner ceases, for
any reason other than a Qualifying Termination, to be an active, full-time employee of the General
Partner or any of its Affiliates prior to the Vesting Date, his unvested interest in the
Partnership shall be forfeited. If the Class B Limited Partner ceases to be an active, full-time
employee prior to the Vesting Date, as determined by the General Partner in its sole discretion,
without regard as to how his status is treated by the General Partner or any of its Affiliates for
any of its other compensation or benefit plans or programs, the Class B Limited Partner will be
deemed to have terminated employment with the General Partner and its Affiliates and forfeited his
unvested interest in the Partnership for purposes of this Agreement. The Capital Account
attributable to any Class B Limited Partner’s interest in the Partnership that is forfeited
pursuant to Section 3.06, this Section 3.07 or otherwise hereunder shall be
allocated to the Class A Limited Partner.

ARTICLE IV

CAPITAL CONTRIBUTIONS

     4.01 Initial and Additional Capital Contributions. In connection with the formation
of the Partnership, the General Partner contributed $1,000 to the Partnership and on the Closing
Date, the Class A Limited Partner has agreed to contribute to the Partnership $7,000,000. The

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Class B Limited Partner is not obligated to make a contribution to the Partnership. Subject to the
provisions of applicable law or except as otherwise provided for herein, no Partner shall be liable
for or obligated to make an additional Capital Contribution to the Partnership, whether for the
purpose of enabling the Partnership to meet its obligations under Section 6.03 or for any other
purpose. The Class A Limited Partner, in its sole discretion and without the consent of any of the
Class B Limited Partners or the General Partner, may make additional Capital Contributions in
excess of $7,000,000, provided that any such voluntary additional Capital Contributions will not
have the effect of changing the Sharing Points of any Class B Limited Partner. The initial Capital
Account of the General Partner is $1,000, the initial Capital Account of the Class A Limited
Partner as of the Closing Date is the amount of cash actually contributed by the Class A Limited
Partner as of the Closing Date, and the initial Capital Account of the Class B Limited Partner is
zero.

     4.02 Return of Contributions. No Partner shall be entitled to the return of any part
of its Capital Contributions or to be paid interest in respect of either its Capital Account or any
Capital Contribution made by it. No unrepaid Capital Contribution shall be deemed or considered to
be a liability of the Partnership or of any Partner. No Partner shall be required to contribute,
advance or lend any cash or property to the Partnership to enable the Partnership to return any
Partner’s Capital Contributions to the Partnership. To the extent, however, any Partner (by
mistake, overpayment or otherwise)
advances funds to the Partnership in excess of the Capital Contributions called for under
Section 4.01, such excess amounts shall not be Capital Contributions and (other than
advances made by the General Partner pursuant to Section 4.03 below) shall be promptly
returned by the Partnership to the Partner so advancing such funds.

     4.03 Advances by General Partner. At any time that the Partnership shall not have
sufficient cash to pay its obligations, the General Partner may, but shall not be obligated to,
advance such funds for or on behalf of the Partnership. Each such advance shall constitute a loan
from the General Partner to the Partnership and shall bear interest from the date of the advance
until the date of repayment at the General Interest Rate. Any advances made by the General Partner
pursuant to this Section 4.03 shall not be considered to be Capital Contributions. All
advances shall be repaid out of the next available funds of the Partnership, including Capital
Contributions received.

     4.04 Capital Accounts. A Capital Account shall be established and maintained for each
Partner. Each Partner’s Capital Account (a) shall be increased by (i) the amount of money
contributed by that Partner to the Partnership, (ii) the fair market value of property, if any,
contributed by that Partner to the Partnership (net of liabilities secured by such contributed
property that the Partnership is considered to assume or take subject to under Section 752 of the
Code), and (iii) allocations to that Partner of Partnership income and gain (or items thereof),
including income and gain exempt from tax and income and gain described in Regulation
Section 1.704-1(b)(2)(iv)(g), but excluding income and gain described in Regulation
Section 1.704-1(b)(4)(i), and (b) shall be decreased by (i) the amount of money distributed to that
Partner by the Partnership, (ii) the fair market value of property distributed to that Partner by
the Partnership (net of liabilities secured by such distributed property that such Partner is
considered to assume or take subject to under Section 752 of the Code), (iii) allocations to that
Partner of expenditures of the Partnership described in Section 705(a)(2)(B) of the Code, and (iv)
allocations of Partnership loss and deduction (or items thereof), including loss and deduction

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described in Regulation Section 1.704-1(b)(2)(iv)(g), but excluding items described in clause
(b)(iii) above and loss or deduction described in Regulation Section 1.704-1(b)(4)(i). The
Partners’ Capital Accounts also shall be maintained and adjusted as permitted by the provisions of
Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Regulation
Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the allocations to
the Partners of depreciation, amortization, and gain or loss as computed for book purposes rather
than the allocation of the corresponding items as computed for tax purposes, as required by
Regulation Section 1.704-1(b)(2)(iv)(g). A Partner that has more than one interest in the
Partnership shall have a single Capital Account that reflects all such interests, regardless of the
class of interests owned by such Partner and regardless of the time or manner in which such
interests were acquired; provided, that Partners that are Affiliates but nevertheless separate
legal entities shall have separate Capital Accounts. Upon the transfer of all or part of an
interest in the Partnership, the Capital Account of the transferor that is attributable to the
transferred interest in the Partnership shall carry over to the transferee Partner in accordance
with the provisions of Regulation Section 1.704-1(b)(2)(iv)(l).

ARTICLE V

ALLOCATIONS AND DISTRIBUTIONS

     5.01 Allocations.

     (a) Net Income and Net Loss. For purposes of maintaining the Capital Accounts, Net
Income or Net Loss (and all items included in the computation thereof) shall be allocated among the
Partners as follows:

(i) Net Income:

     (A) First, to the Class A Limited Partner until the Class A Limited Partner’s
Adjusted Capital Account equals the Class A Capital Base; and

     (B) Thereafter, to the Class B Limited Partner in accordance with the Class B
Percentage Interest.

(ii) Net Loss:

     (A) First, to the Class B Limited Partner in accordance with the Class B
Percentage Interest until the Adjusted Capital Account of the Class B Limited
Partner is reduced to zero; and

     (B) Thereafter, to the Class A Limited Partner.

     (b) Special Allocations. Notwithstanding any other provision of this Section
5.01, the following special allocations shall be made for such taxable period:

     (i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision
of this Section 5.01, 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

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manner and amounts
provided in 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 5.01(b), 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 5.01(b) with respect to such taxable period (other than an allocation
pursuant to Sections 5.01(b)(vi) and 5.01(b)(vii)). This Section
5.01(b)(i) is intended to comply with the Partnership Minimum Gain chargeback
requirement in Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith.

     (ii) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding the
other provisions of this Section 5.01 (other than Section 5.01(b)(i)),
except as provided in Regulation Section 1.704-2(i)(4), if there is a net decrease in
Partner Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner
with a share of Partner Nonrecourse Debt Minimum Gain 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
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For
purposes of this Section 5.01(b), 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
5.01(b), other than Section 5.01(b)(i) and other than an allocation pursuant to
Sections 5.01(b)(vi) and 5.01(b)(vii), with respect to such taxable period.
This Section 5.01(b)(ii) is intended to comply with the chargeback of items of
income and gain requirement in Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.

     (iii) Qualified Income Offset. In the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in 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 Regulations, the deficit
balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or
distributions as quickly as possible unless such deficit balance is otherwise eliminated
pursuant to Section 5.01(b)(i) or (ii).

     (iv) Gross Income Allocations. In the event any Partner has a deficit balance
in its Capital Account at the end of any Partnership taxable period in excess of the sum of
(A) the amount such Partner is required to restore pursuant to the provisions of this
Agreement and (B) the amount such Partner is deemed obligated to restore pursuant to
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), 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 5.01(b)(iv) shall be
made only if and to the extent that such Partner would have a deficit balance in its Capital
Account as adjusted after all other allocations provided for in this Section 5.01
have been tentatively made as if this Section 5.01(b)(iv) were not in this
Agreement.

     (v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective Percentage Interests.

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If the General Partner determines that the Partnership’s Nonrecourse Deductions should be
allocated in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice
to the other Partners, to revise the prescribed ratio to the numerically closest ratio that
does satisfy such requirements.

     (vi) 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 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.

     (vii) Nonrecourse Liabilities. For purposes of 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.

     (viii) 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 required, pursuant to 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 such basis), and such 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 such Section of the Regulations.

     (c) Allocations Caused by Transfer of Interest. All items of income, gain, loss,
deduction, and credit allocable to any interest in the Partnership that may have been transferred
shall be allocated between the transferor and the transferee based upon that portion of the
calendar year during which each was recognized as owning such interest, without regard to the
results of Partnership operations during any particular portion of such calendar year and without
regard to distributions made to the transferor and the transferee during such calendar year;
provided, however, that such allocation shall be made in accordance with a method permissible under
Section 706 of the Code and the regulations thereunder.

     5.02 Income Tax Allocations.

     (a) Except as provided in this Section 5.02, each item of income, gain, loss and
deduction of the Partnership for federal income tax purposes shall be allocated among the Partners
in the same manner as such items are allocated for purposes of maintaining Capital Account under
Section 5.01.

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     (b) For federal and state income tax purposes, income, gain, loss, and deduction with respect
to property contributed to the Partnership by a Partner or revalued pursuant to Regulation
Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Partners in a manner that takes into
account the variation between the adjusted tax basis of such property and its book value, as
required by Section 704(c) of the Code and Regulation Section 1.704-1(b)(4)(i), using any
allocation method permitted by Regulation Section 1.704-3.

     5.03 Distributions of Cashflow from TEPPCO Units. Promptly following the receipt of
any distributions with respect to TEPPCO Units, the General Partner shall cause to be distributed
to the Partners such receipts (and any income from the temporary investment thereof) in the manner
set forth below, provided, that the General Partner may withhold and not distribute such portion of
any such receipts that the General Partner has determined in its sole but good faith discretion
should be withheld to pay expenses of
the Partnership. Distribution to the Partners pursuant to this Section 5.03 shall be
made as follows:

     (a) First, to the Class A Limited Partner until the Class A Limited Partner’s Class A
Preference Return Amount has been reduced to zero; and

     (b) Thereafter, to the Class B Limited Partner in accordance with the Class B Percentage
Interest.

     (c) The Partnership will follow the proposed Treasury Regulations that were issued on May 24,
2005, regarding the issuance of partnership equity for services (including Proposed Treasury
Regulation Sections 1.83-3, 1.83-6, 1.704-1, 1.706-3, 1.721-1 and 1.761-1), as such regulations may
be subsequently amended, upon the issuance of equity membership interests or options issued for
services rendered or to be rendered to or for the benefit of the Partnership, until final Treasury
Regulations regarding these matters are issued. In furtherance of the foregoing, the definition of
Capital Account and the allocations of Net Income and Net Loss of the Partnership shall be applied
in a manner that is consistent with the proposed Treasury Regulations, including without
limitation, Proposed Treasury Regulation Section 1.704-1(b)(4)(xii). If the provisions of the
proposed Treasury Regulations and the proposed Revenue Procedure described in IRS Notice 2005-43,
or provisions similar thereto, are adopted as final (or temporary) rules (the “New Rules”),
the General Partner is authorized to make such amendments to this Agreement (including provision
for any safe harbor election authorized by the New Rules) as the General Partner may determine to
be necessary or advisable.

     5.04 Distributions of Proceeds from Sales of TEPPCO Units. Promptly following the
receipt of any proceeds from the sale of any TEPPCO Units by the Partnership, the General Partner
shall cause to be distributed to the Partners such receipts in the manner set forth below, provided
that the General Partner may withhold and not distribute such portion of any such receipts that the
General Partner has determined in its sole but good faith discretion should be withheld to pay
expenses of the Partnership. Distribution to the Partners pursuant to this Section 5.04
shall be made as follows:

     (a) First, to the Class A Limited Partner until the Class A Preference Return Amount has been
reduced to zero;

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     (b) Next, to the Class A Limited Partner until the Class A Capital Base is reduced to zero; and

     (c) Thereafter, to the Class B Limited Partner in accordance with the Class B Percentage Interest.

     5.05 Restrictions on Distributions of TEPPCO Units. The Partners and the Partnership hereby agree that they shall not cause the Partnership to offer for sale, sell, pledge or otherwise transfer, distribute or dispose of the TEPPCO Units held by the Partnership prior to the Vesting Date.

ARTICLE VI

MANAGEMENT AND OPERATION

     6.01 Management of Partnership Affairs. Except for situations in which the approval of the Limited Partners is expressly required
by this Agreement or by non-waivable provisions of applicable law, the General Partner shall have
full, complete, and exclusive authority to manage and control the business, affairs, and properties
of the Partnership, to make all decisions regarding the same, and to perform any and all other acts
or activities customary or incident to the management of the Partnership’s business. The General
Partner shall receive no compensation for its services as such. Subject to the other express
provisions hereof, the General Partner shall make or take all decisions and actions for the
Partnership not otherwise provided for herein, including, without limitation, the following:

     (a) acquiring, holding, managing, selling, Disposing of, and otherwise dealing with and
investing in (i) the Partnership’s TEPPCO Units, or (ii) temporary investments of Partnership
capital in U.S. government securities, certificates of deposit with maturities of less than one
year, commercial paper (rated or unrated), and other highly liquid securities;

     (b) entering into, making, and performing all contracts, agreements, and other undertakings
binding the Partnership, as may be necessary, appropriate, or advisable in furtherance of the
purposes of the Partnership and making all decisions and waivers thereunder;

     (c) opening and maintaining bank and investment accounts and drawing checks and other orders
for the payment of monies;

     (d) maintaining the assets of the Partnership in compliance with applicable securities laws
and protecting and preserving the Partnership’s title thereto;

     (e) collecting all sums due the Partnership;

     (f) to the extent that funds of the Partnership are available therefor, paying as they become
due all debts and obligations of the Partnership;

     (g) causing securities owned by the Partnership to be registered in the Partnership’s name or
in the name of a nominee or to be held in street name, as the General Partner may elect;

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     (h) selecting, removing, and changing the authority and responsibility of lawyers,
accountants, brokers, and other advisors and consultants;

     (i) obtaining insurance for the Partnership to the extent the General Partner deems
appropriate; and

     (j) determining distributions of Partnership cash as provided in Sections 5.03 and
5.04.

     6.02 Duties and Obligations of General Partner. The General Partner shall endeavor to conduct the affairs of the Partnership in the best
interests of the Partnership and the mutual best interests of the Partners, including, without
limitation, the safekeeping and use of all Partnership funds and assets and the use thereof for the
benefit of the Partnership. The General Partner at all times shall act in good faith in all
activities relating to the conduct of the business of the Partnership. The General Partner shall
devote such time as it deems necessary to conduct the business and affairs of the Partnership in an
appropriate manner.

     6.03 Release and Indemnification. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTNERSHIP AND EACH OTHER PARTNER ON BEHALF OF
ITSELF AND ITS SUCCESSORS AND ASSIGNS HEREBY RELEASES, ACQUITS, AND FOREVER DISCHARGES THE GENERAL
PARTNER AND THE CLASS A LIMITED PARTNER, THEIR PARTNERS OR SHAREHOLDERS, AND THEIR DIRECTORS,
OFFICERS, EMPLOYEES, PARTNERS, REPRESENTATIVES, AND AGENTS AND EACH OTHER PERSON, IF ANY,
CONTROLLING OR EMPLOYING SUCH PERSONS OR ENTITIES (COLLECTIVELY, THE “INDEMNITEES”) FROM
ALL CLAIMS, DEMANDS, OR CAUSES OF ACTION OF ANY CHARACTER THAT SUCH PARTY MAY HAVE, WHETHER KNOWN
OR UNKNOWN, AGAINST ANY INDEMNITEE IN CONNECTION WITH THE PARTNERSHIP AND/OR THE BUSINESS CONDUCTED
BY THE PARTNERSHIP; PROVIDED, HOWEVER, THAT SUCH RELEASE SHALL NOT APPLY TO ACTIONS CONSTITUTING
WILLFUL MISCONDUCT OR BAD FAITH. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTNERSHIP SHALL
INDEMNIFY AND HOLD HARMLESS EACH INDEMNITEE FROM AND AGAINST ALL LOSSES, COSTS, CLAIMS,
LIABILITIES, DAMAGES, EXPENSES (INCLUDING, WITHOUT LIMITATION, COSTS OF SUIT AND ATTORNEYS’ FEES)
SUCH INDEMNITEE MAY INCUR IN CONNECTION WITH THE GENERAL PARTNER’S PERFORMING ITS OBLIGATIONS
HEREUNDER (INCLUDING WITHOUT LIMITATION LOSSES, COSTS, CLAIMS, LIABILITIES, DAMAGES AND EXPENSES
ARISING FROM, OR ALLEGED TO ARISE FROM, THE INDEMNITEE’S ACTIVE OR PASSIVE, SOLE OR CONCURRENT,
NEGLIGENCE OR GROSS NEGLIGENCE), AND THE PARTNERSHIP SHALL ADVANCE EXPENSES ASSOCIATED WITH THE
DEFENSE OF ANY ACTION RELATED THERETO; PROVIDED, HOWEVER, THAT SUCH INDEMNITY SHALL NOT APPLY TO
ACTIONS WHICH HAVE BEEN FINALLY, WITHOUT FURTHER RIGHT TO APPEAL, JUDICIALLY DETERMINED TO
CONSTITUTE WILLFUL MISCONDUCT OR BAD FAITH. IF THE INDEMNIFICATION PROVIDED FOR ABOVE IS NOT
PERMITTED OR ENFORCEABLE UNDER APPLICABLE LAW OR IS OTHERWISE UNAVAILABLE

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OR INSUFFICIENT TO HOLD
HARMLESS THE INDEMNITEES AS CONTEMPLATED ABOVE, THEN THE PARTNERSHIP SHALL CONTRIBUTE TO THE AMOUNT
PAID OR PAYABLE BY THE INDEMNITEES AS A RESULT OF SUCH LOSSES, COSTS, CLAIMS, LIABILITIES, DAMAGES
AND EXPENSES REFERRED TO ABOVE IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE
BENEFITS CONTEMPLATED TO BE RECEIVED BY THE PARTNERSHIP AND THE INDEMNITEES, RESPECTIVELY, FROM THE
ACTIONS GIVING RISE TO SUCH LOSSES, COSTS, CLAIMS, LIABILITIES, DAMAGES OR EXPENSES.

     6.04 Power of Attorney.

     (a) Each Limited Partner hereby constitutes and appoints the General Partner and, if a
liquidator (other than the General Partner) shall have been selected pursuant to Section
11.02, the liquidator, severally (and any successor to either thereof by merger, transfer,
assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as
the case may be, with full power of substitution, as his true and lawful agent and
attorney-in-fact, with full power and authority in his name, place and stead, to:

     (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public
offices (A) all certificates, documents and other instruments (including this Agreement and
the Certificate of Limited Partnership and all amendments or restatements hereof or thereof)
that the General Partner or the liquidator deems necessary or appropriate to form, qualify
or continue the existence or qualification of the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State of Delaware
and in all other jurisdictions in which the Partnership may conduct business or own
property; (B) all certificates, documents and other instruments that the General Partner or
the liquidator deems necessary or appropriate to reflect, in accordance with its terms, any
amendment, change, modification or restatement of this Agreement; (C) all certificates,
documents and other instruments (including conveyances and a certificate of cancellation)
that the General Partner or the liquidator deems necessary or appropriate to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; and
(D) all certificates, documents and other instruments relating to the admission, withdrawal,
removal or substitution of any Partner; and

     (ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents,
approvals, waivers, certificates, documents and other instruments necessary or appropriate,
in the discretion of the General Partner or the liquidator, to make, evidence, give, confirm
or ratify any vote, consent, approval, agreement or other action that is made or given by
the Partners hereunder or is consistent with the terms of this Agreement or is necessary or
appropriate, in the discretion of the General Partner or the liquidator, to effectuate the
terms or intent of this Agreement; provided, that when required by any provision of this
Agreement that establishes a percentage of the Limited Partners required to take any action,
the General Partner and the liquidator may exercise the power of attorney made in this
Section 6.04 only after the necessary vote, consent or approval of the Limited
Partners.

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This Section 6.04 shall be construed as authorizing the General Partner to amend this
Agreement in any manner subject to any provision of this Agreement that establishes a percentage of
the Limited Partners required to take any action.

     (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled
with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected
by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or
termination of any Limited Partner and the transfer of all or any portion of such Limited Partner’s
Percentage Interest and shall extend to such Limited Partner’s heirs, successors, assigns and
personal representatives. Each such Limited Partner hereby agrees to be bound by any
representation made by the General Partner or the liquidator acting in good faith pursuant to such
power of attorney; and each such Limited Partner, to the maximum extent permitted by law, hereby
waives any and all defenses that may be available to contest, negate or disaffirm the action of the
General Partner or the liquidator taken in good faith under such power of attorney. Each Limited
Partner shall execute and deliver to the General Partner or the liquidator, within 15 days after
receipt of the request therefor, such further designation, powers of attorney and other instruments
as the General Partner or the liquidator deems necessary to effectuate this Agreement and the
purposes of the Partnership.

ARTICLE VII

RIGHTS OF OTHER PARTNERS

     7.01 Information. In addition to the other rights specifically set forth herein, each Partner shall have
access to all information to which such Partner is entitled to have access pursuant to Section
17-305 of the Act under the circumstances and subject to the conditions therein stated. Without
limiting the provisions of Section 17-305(b) of the Act, the Partners agree that if the General
Partner from time to time enters into on behalf of the Partnership or the General Partner
contractual obligations regarding the confidentiality of information received with respect to the
Partnership’s business or assets, it shall not be reasonable for any other Partner or assignee or
representative thereof to examine or copy such information unless such Partner agrees to comply
with the terms of such contractual obligations including without limitation executing a counterpart
of any applicable confidentiality agreements.

     7.02 Limitations. No Limited Partner shall have the authority or power in its capacity as such to act for or
on behalf of the Partnership or any other Partner, to do any act that would be binding on the
Partnership or any other Partner, or to incur any expenditures on behalf of or with respect to the
Partnership. No Limited Partner shall have the right or power to withdraw from the Partnership.

     7.03 Limited Liability. No Limited Partner shall be liable for the losses, debts, liabilities, contracts, or other
obligations of the Partnership except to the extent required by law or otherwise set forth herein.

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ARTICLE VIII

TAXES

     8.01 Tax Returns. The General Partner shall cause to be prepared and filed all necessary federal and state
income tax returns for the Partnership, including making the elections described in Section
8.02. Each Partner shall furnish to the General Partner all pertinent information in its
possession relating to Partnership operations that is necessary to enable such income tax returns
to be prepared and filed.

     8.02 Tax Elections. The following elections shall be made on the appropriate returns of the Partnership:

     (a) to adopt the calendar year as the Partnership’s fiscal year;

     (b) unless the accrual method is required under the applicable sections of the Code, to adopt
the cash method of accounting and to keep the Partnership’s books and records on the income-tax
method;

     (c) if there shall be a distribution of Partnership property as described in Section 734 of
the Code or if there shall be a transfer of a Partnership interest as described in Section 743 of
the Code, upon written request of any Partner, to elect, pursuant to Section 754 of the Code, to
adjust the basis of Partnership properties;

     (d) to elect to amortize the organizational expenses of the Partnership ratably over a period
of 60 months as permitted by Section 709(b) of the Code; and

     (e) any other election the General Partner may deem appropriate and in the best interests of
the Partners.

No election shall be made by the Partnership or any Partner to be treated as an association taxable
as a corporation or to be excluded from the application of the provisions of Subchapter K of
Chapter 1 of Subtitle A of the Code or any similar provisions of applicable state laws.

     8.03 Tax Matters Partner. The General Partner shall be the “tax matters partner” of the Partnership pursuant to
Section 6231(a)(7) of the Code. The General Partner shall take such action as may be necessary to
cause each other Partner to become a “notice partner” within the meaning of Section 6223 of the
Code. The General Partner shall inform each other Partner of all significant matters that may come
to its attention in its capacity as tax matters partner by giving notice thereof within ten
Business Days after becoming aware thereof and, within such time, shall forward to each other
Partner copies of all significant written communications it may receive in such capacity. The
General Partner shall not take any action contemplated by Sections 6222 through 6232 of the Code
without the consent of a Required Interest. This provision is not intended to authorize the
General Partner to take any action left to the determination of an individual Partner under
Sections 6222 through 6232 of the Code.

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ARTICLE IX

BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

     9.01 Maintenance of Books. The books of account for the Partnership shall be maintained on a cash basis in accordance
with the terms of this Agreement except that the Capital Accounts of the Partners shall be
maintained in accordance with Section 4.04. The calendar year shall be the accounting year
of the Partnership.

     9.02 Financial Statements. Within 120 days after the end of each fiscal year during the term of the Partnership, the
General Partner shall cause each other Partner to be furnished with an unaudited balance sheet, an
income statement, and a statement of changes in Partners’ capital of the Partnership for, or as of
the end of, such period. All financial statements shall be prepared in accordance with accounting
principles generally employed for cash-basis records consistently applied (except as therein
noted).

     9.03 Bank Accounts. The General Partner shall establish and maintain one or more separate accounts for
Partnership funds in the Partnership name at such financial institutions as it may designate. The
General Partner may not commingle the Partnership’s funds with other funds of any Partner.

ARTICLE X

WITHDRAWAL, BANKRUPTCY, REMOVAL, ETC.

     10.01 Withdrawal, Bankruptcy, Etc. of General Partner.

     (a) The General Partner covenants and agrees that it will not withdraw from the Partnership as
the general partner within the meaning of Section 17-602 of the Act. If the General Partner shall
so withdraw from the Partnership in violation of such covenant and agreement, such withdrawal shall
be effective only upon 90 days’ prior notice to all other Partners.

     (b) The General Partner shall not cease to be a general partner on the occurrence of an event
of the type described in Section 17-402(a)(4) through (10) of the Act, but shall cease to be a
general partner 90 days thereafter. The General Partner shall notify each other Partner that an
event of the type described in Section 17-402(a)(4) through (10) of the Act has occurred (without
regard to the lapse of any time periods therein) with respect to it within five Business Days after
such occurrence.

     (c) Following any notice pursuant to Section 10.01(a) that the General Partner shall
be withdrawing, or following the occurrence of an event of the type described in Section
17-402(a)(4) through (10) of the Act with respect to the General Partner (without regard to the
lapse of any time periods therein), and unless there shall be one other General Partner
remaining, the greater of the Class A Limited Partner plus a Required Interest of the Class B
Limited Partner or a majority in interest as defined in Internal Revenue Service Procedure 94-46
(or any successor thereof) by written consent may select a new General Partner, which shall be
admitted to the Partnership as a general partner effective immediately prior to the existing
General Partner’s ceasing to be a general partner with such general partner interest as the Limited
Partners making such selection may specify, but only if such new General Partner shall

- 20 -

 

have made
such Capital Contribution as such Limited Partners may specify and shall have executed and
delivered to the Partnership a document including such new General Partner’s notice address,
acceptance of all the terms and provisions of this Agreement, an agreement to perform and discharge
timely all of its obligations and liabilities hereunder, and a representation and warranty that the
representation and warranties in Section 3.02 are true and correct with respect to such new
General Partner. Notwithstanding the foregoing provisions of this Section 10.01(c), the
right to select such new General Partner shall not exist or be exercised unless the Partnership
shall have received the favorable opinion of the Partnership’s legal counsel or of other legal
counsel acceptable to the Limited Partners making such selection to the effect that such selection
and admission will not result in (i) the loss of limited liability of any Limited Partner (except
to the extent a Limited Partner has consented to become the General Partner) or (ii) in the
Partnership being treated as an association taxable as a corporation for federal income tax
purposes. Notwithstanding the foregoing provisions of this Section 10.01(c), no such new
General Partner shall be admitted (and the existing General Partner shall continue as such) if the
event that permitted the selection of a new General Partner shall have been an event of the type
described in Section 17-402(a)(5) of the Act that with the passage of time would cause the existing
General Partner to become a Bankrupt Partner but, due to the failure of such situation to continue,
such General Partner does not become a Bankrupt Partner.

     10.02 Conversion of Interest. Immediately upon the General Partner’s ceasing to be General Partner following the
admission of a new General Partner pursuant to Section 10.01(c), the former General
Partner’s interest in the Partnership as a General Partner shall be converted into the interest of
a Limited Partner in the Partnership having the same economic rights as specified for the General
Partner herein immediately prior to its ceasing to be a General Partner, and such General Partner
shall automatically and without further action be admitted to the Partnership as a Limited Partner.

ARTICLE XI

DISSOLUTION, LIQUIDATION, AND TERMINATION

     11.01 Dissolution. The Partnership shall be dissolved and its affairs shall be wound up upon the first to
occur of any of the following:

     (a) the written consent of the General Partner, the Class A Limited Partner and a Required
Interest;

     (b) unless otherwise agreed to by the General Partner, the Class A Limited Partner and a
Required Interest 30 days following the occurrence of the Vesting Date;

     (c) the end of the term of the Partnership as set forth in Section 2.06;

     (d) the General Partner’s ceasing to be the General Partner as described in Section
10.01(b) with no new General Partner having been selected and admitted as provided in
Section 10.01(c); or

     (e) any other event causing dissolution as described in Section 17-801 of the Act (other than
an event described in Section 17-402(a)(4) through (10) of the Act, except as provided in
Sections 10.01(b) and 11.01(d));

- 21 -

 

it being understood that if an “event of withdrawal of a general partner” (as defined in Section
17-101(3) of the Act) shall occur with respect to the General Partner and at least one other
General Partner shall have been or is about to be admitted pursuant to Section 3.03(b),
10.01(c), or 10.02, the Partnership shall not dissolve but shall continue and the
remaining General Partner shall, and hereby agrees to, carry on the business of the Partnership.

     11.02 Liquidation and Termination. Upon dissolution of the Partnership, unless it is continued as provided in Section
11.01, the General Partner shall act as liquidator or may appoint one or more other Persons as
liquidator; provided, however, that if the Partnership shall be dissolved on account of an event of
the type described in Section 17-402(a)(4) through (10) of Act with respect to the General Partner,
the liquidator shall be one or more Persons selected in writing by the Class A Limited Partner and
a Required Interest. The liquidator shall proceed diligently to wind up the affairs of the
Partnership and make final distributions as provided herein, and shall file any amendments to the
Certificate as may be required by applicable law. The costs of liquidation shall be borne as a
Partnership expense. Until final distribution, the liquidator shall continue to manage the
Partnership assets with all of the power and authority of the General Partner. The steps to be
accomplished by the liquidator are as follows:

     (a) as promptly as possible after dissolution and again after final liquidation, the
liquidator shall cause a proper accounting to be made by a recognized firm of certified public
accountants of the Partnership’s assets, liabilities, and operations through the last day of the
calendar month in which the dissolution shall have occurred or the final liquidation shall be
completed, as applicable;

     (b) the liquidator shall pay all of the debts and liabilities of the Partnership (including,
without limitation, all expenses incurred in liquidation and any advances made by the General
Partner pursuant to Section 4.03) or otherwise make adequate provision therefor (including,
without limitation, the establishment of a cash escrow fund for contingent liabilities in such
amount and for such term as the liquidator may reasonably determine); and

     (c) all remaining assets of the Partnership shall be distributed to the Partners as follows:

     (i) the fair market value of the property shall be determined and the capital accounts
of the Partners shall be adjusted to reflect the manner in which the unrealized income,
gain, loss, and deduction inherent in such property (that has not been reflected in the
capital accounts previously) would be allocated among the Partners if there were a taxable
disposition of such property for the fair market value of such property on the Vesting Date;
and

     (ii) the Partnership property shall be distributed among the Partners in accordance
with the positive capital account balances of the Partners, as determined after taking into
account all capital account adjustments for the taxable year of the Partnership during which
the liquidation of the Partnership occurs (other than those made by reason of this clause);
and such distributions shall be made by the end of the taxable year of the Partnership
during which the liquidation of the Partnership occurs (or, if later, within 90 days after
the date of such liquidation). While the General Partner has the right to sell

- 22 -

 

TEPPCO Units as noted in Section 5.04, and subject to the restrictions set forth in Section
5.05, it is the intent of the General Partner upon liquidation and termination of the
Partnership to distribute TEPPCO Units to the Partners rather than sell the TEPPCO Units and
distribute the cash proceeds of such sale to the Partners.

For purposes of this Section 11.02(c), the “fair market value” of each TEPPCO Unit held by
the Partnership on the Vesting Date shall be equal to the average of the closing sale prices per
TEPPCO Unit for the 20 trading days ending on the Vesting Date (or, if no closing sale price is
reported, the average of the bid and asked prices) as reported in the composite transactions for
the principal United States securities exchange on which the TEPPCO Units are traded or if the
TEPPCO Units are not listed on a national or regional stock exchange, as reported by The NASDAQ
National Market. All distributions in kind to the Partners shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or for which the
Partnership shall have committed prior to the date of termination and such costs, expenses, and
liabilities shall be allocated to such distributee pursuant to this Section 11.02. The
distribution of property to a Partner in accordance with the provisions of this Section
11.02 shall constitute a complete return to the Partner of its Capital Contributions and a
complete distribution to the Partner of its interest in the Partnership and all the Partnership’s
property and shall constitute a compromise to which all Partners have consented within the meaning
of Section 17-502(b) of the Act.

     11.03 Cancellation of Certificate. Upon completion of the distribution of Partnership assets as provided herein, the
Partnership shall be terminated, and the General Partner (or, if there shall be no General Partner,
the Limited Partners) shall cause the cancellation of the Certificate and any other filings made
pursuant to Section 2.05 and shall take such other actions as may be necessary to terminate
the Partnership.

ARTICLE XII

GENERAL PROVISIONS

     12.01 Offset. In the event that any sum is payable to any Partner pursuant to this Agreement, any amounts
owed by such Partner to the Partnership shall be deducted from said sum before payment to said
Partner.

     12.02 Notices. All notices or requests or consents provided for or permitted to be given pursuant to this
Agreement must be in writing and must be given (a) by depositing same in the United States mail,
addressed to the Person to be notified, postpaid, and registered or certified with return receipt
requested or (b) by delivering such notice by courier or in person to such party. Notices given or
served pursuant hereto shall be effective two Business Days after such deposit, or upon receipt if
delivered in person to the person to be notified. All notices to be sent to a Partner shall be
sent to or made at the address given on the Power of Attorney executed by the Partner and delivered
to the General Partner on the date hereof or in the instrument described in Section
3.03(c), 3.04, or 10.01(c), or such other address as such Partner may specify
by notice to the General Partner. Any notice to the Partnership shall be given to the General
Partner.

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     12.03 Entire Agreement; Supersedure. This Agreement constitutes the entire agreement of the Partners relating to the matters
contained herein and supersedes all prior contracts or agreements, whether oral or written, among
the parties hereto with respect to such matters.

     12.04 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Person with respect to any breach or
default by any other Person of its obligations hereunder shall be deemed or construed to be a
consent or waiver with respect to any other breach or default by such other Person of the same or
any other obligations of such other Person hereunder. Failure on the part of any Person to
complain of any act or omission of any other Person, or to declare any other Person in default,
irrespective of how long such failure continues, shall not constitute a waiver by such Person of
its rights hereunder until the applicable limitation period has run.

     12.05 Amendment or Modification. This Agreement may be amended or modified from time to time only by a written instrument
executed by the General Partner; provided, however, that (a) the vesting and distribution
provisions of this Agreement may be amended or modified only by a written instrument executed by
the General Partner, the Class A Limited Partner and a Required Interest, and (b) no amendment or
modification reducing a Partner’s Sharing Points (other than to reflect changes otherwise provided
hereby) or increasing its duties or adversely affecting its limited liability shall be effective
without such Partner’s consent.

     12.06 Binding Effect; Joinder of Additional Parties. Subject to the restrictions on Dispositions set forth herein, this Agreement shall be
binding upon and shall inure to the benefit of the Partners, as well as the respective heirs, legal
representatives, successors, and assigns of such Partners.

     12.07 Construction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE, EXCLUDING ANY CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR
CONSTRUCTION OF THIS AGREEMENT TO THE LAWS OF ANOTHER JURISDICTION. The headings in this Agreement
are inserted for convenience and identification only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement or any provision hereof. Whenever
the context requires, the gender of all words used in this Agreement shall include the masculine,
feminine, and neuter. All references to Articles and Sections refer to articles and sections of
this Agreement. All sums and amounts payable or to be payable pursuant to the provisions of this
Agreement shall be payable in coin or currency of the United States of America that, at the time of
payment, is legal tender for the payment of public and private debts in the United States of
America. If any provision of this Agreement or the application thereof to any Person or
circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement
and the application of such provision to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.

     12.08 Further Assurances. In connection with this Agreement, as well as all transactions contemplated by this
Agreement, each Partner agrees to execute and deliver such additional documents and instruments and
to perform such additional acts as may be necessary or

- 24 -

 

appropriate to effectuate, carry out, and
perform all of the terms, provisions, and conditions of this Agreement and all such transactions.

     12.09 Indemnification. To the fullest extent permitted by law, each Partner shall indemnify the Partnership and
each other Partner and hold them harmless from and against all losses, costs, liabilities, damages,
and expenses (including, without limitation, costs of suit and attorney’s fees) they may incur on
account of any breach by such indemnifying Partner of this Agreement.

     12.10 Waiver of Certain Rights. Each Partner irrevocably waives any right it might have to maintain any action for
dissolution of the Partnership or to maintain any action for partition of the property of the
Partnership.

     12.11 Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all
signatory parties had signed the same document. All counterparts shall be construed together and
shall constitute one and the same instrument.

     12.12 Dispute Resolution. (a) If the General Partner and one or more Limited Partners are unable to resolve any
controversy, dispute, claim or other matter in question arising out of, or relating to, this
Agreement, any provision hereof, the alleged breach hereof, or in any way relating to the subject
matter of this Agreement, or the relationship between the parties created by this Agreement,
including questions concerning the scope and applicability of this Section 12.12, whether
sounding in contract, tort or otherwise, at law or in equity, under state or federal law, whether
provided by statute or common law, for damages or any other relief (any such controversy, dispute,
claim or other matter in question, a “Dispute”), on or before the 30th day following the
receipt by the General Partner or such Limited Partners of written notice of such Dispute from the
other party, which notice describes in reasonable detail the nature of the Dispute and the facts
and circumstances relating thereto, the General Partner or such Limited Partners may, by delivery
of written notice to the other party, require that a representative of the General Partner and of
such Limited Partners meet at a mutually agreeable time and place in an attempt to resolve such
Dispute. Such meeting shall take place on or before the 15th day following the date of the notice
requiring such meeting, and if the Dispute has not been resolved within 15 days following such
meeting, the General Partner or such Limited Partners may cause such Dispute to be resolved by
binding arbitration in Houston, Texas, by submitting such Dispute for arbitration within 30 days
following the expiration of such 15-day period. This agreement to arbitrate shall be specifically
enforceable against the parties.

     (b) It is the intention of the parties that the arbitration shall be governed by and conducted
pursuant to the Federal Arbitration Act, as such Act is modified by this Section 12.12. If
it is determined the Federal Arbitration Act is not applicable to this Agreement (e.g., this
Agreement does not evidence a transaction involving interstate commerce), this agreement to
arbitrate shall nevertheless be enforceable pursuant to applicable State law. While the
arbitrators may refer to the Commercial Arbitration Rules of the American Arbitration Association
(the “Rules”) for guidance with respect to procedural matters, the arbitration proceeding
shall not be administered by the American Arbitration Association but instead shall be
self-administered by the parties until the arbitrators are selected and then the proceeding shall
be administered by the arbitrators.

- 25 -

 

     (c) The validity, construction, and interpretation of this agreement to arbitrate, and all
procedural aspects of the arbitration conducted pursuant to this agreement to arbitrate, including
but not limited to, the determination of the issues that are subject to arbitration (i.e.,
arbitrability), the scope of the arbitrable issues, allegations of “fraud in the inducement” to
enter into this Agreement or this arbitration provision, allegations of waiver, laches, delay or
other defenses to arbitrability, and the rules governing the conduct of the arbitration (including
the time for filing an answer, the time for the filing of counterclaims, the times for amending the
pleadings, the specificity of the pleadings, the extent and scope of discovery, the issuance of
subpoenas, the times for the designation of experts, whether the arbitration is to be stayed
pending resolution of related litigation involving third parties not bound by this arbitration
agreement, the receipt of evidence, and the like), shall be decided by the arbitrators.

     (d) The rules of arbitration of the Federal Arbitration Act, as modified by this Agreement,
shall govern procedural aspects of the arbitration; to the extent the Federal Arbitration Act as
modified by this Agreement does not address a procedural issue, the arbitrators may refer for
guidance to the Commercial Arbitration Rules then in effect with the
American Arbitration Association. The arbitrators may refer for guidance to the Federal Rules
of Civil Procedure, the Federal Rules of Civil Evidence, and the federal law with respect to the
discovery process, applicable legal privileges, and admissible evidence. In deciding the substance
of the parties’ Dispute, the arbitrators shall refer to the substantive laws of the State of
Delaware for guidance (excluding Delaware’s conflict-of-law rules or principles that might call for
the application of the law of another jurisdiction); provided, however, IT IS EXPRESSLY AGREED THAT
NOTWITHSTANDING ANY OTHER PROVISION IN THIS SECTION 12.12 TO THE CONTRARY, THE ARBITRATORS
SHALL HAVE ABSOLUTELY NO AUTHORITY TO AWARD CONSEQUENTIAL DAMAGES (SUCH AS LOSS OF PROFIT), TREBLE,
EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE UNDER ANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER DELAWARE LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL LAW, OR UNDER
THE FEDERAL ARBITRATION ACT, OR UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. The arbitrators shall have the authority to assess the costs and expenses of the
arbitration proceeding (including the arbitrators’ fees and expenses) against either or both
parties. However, each party shall bear its own attorneys fees and the arbitrators shall have no
authority to award attorneys fees.

     (e) When a Dispute has been submitted for arbitration, within 30 days of such submission, the
General Partner will choose an arbitrator, and such Limited Partners will choose an arbitrator.
The two arbitrators shall select a third arbitrator, failing agreement on which within 90 days of
the original notice, the General Partner and such Limited Partners (or either of them) shall apply
to any United States District Judge for the Southern District of Texas, who shall appoint the third
arbitrator. While the third arbitrator shall be neutral, the two party-appointed arbitrators are
not required to be neutral and it shall not be grounds for removal of either of the two
party-appointed arbitrators or for vacating the arbitrators’ award that either of such arbitrators
has past or present minimal relationships with the party that appointed such arbitrator. Evident
partiality on the part of an arbitrator exists only where the circumstances are such that a
reasonable person would have to conclude there in fact existed actual bias and a mere appearance or
impression of bias will not constitute evident partiality or otherwise disqualify an

- 26 -

 

arbitrator. Minimal or trivial past or present relationships between the neutral arbitrator and the party
selecting such arbitrator or any of the other arbitrators, or the failure to disclose such minimal
or trivial past or present relationships, will not by themselves constitute evident partiality or
otherwise disqualify any arbitrator. Upon selection of the third arbitrator, each of the three
arbitrators shall agree in writing to abide faithfully by the terms of this agreement to arbitrate.
The three arbitrators shall make all of their decisions by majority vote. If one of the
party-appointed arbitrators refuses to participate in the proceedings or refuses to vote, the
decision of the other two arbitrators shall be binding. If an arbitrator dies or becomes
physically incapacitated and is unable to fulfill his or her duties as an arbitrator, the
arbitration proceeding shall continue with a substitute arbitrator selected as follows: if the
incapacitated arbitrator is a party-appointed arbitrator, the party shall promptly select a new
arbitrator, and if the incapacitated arbitrator is the neutral arbitrator, the two-party appointed
arbitrators shall select a substitute neutral arbitrator, failing agreement on which the General
Partner and such Limited Partners (or either of them) shall apply to any United States District
Judge for the Southern District of Texas, who shall appoint the substitute neutral arbitrator.

     (f) The final hearing shall be conducted within 120 days of the selection of the third
arbitrator. The final hearing shall not exceed ten working days, with each party to be granted
one-half of the allocated time to present its case to the arbitrators. There shall be a transcript
of the hearing before the arbitrators. The arbitrators shall render their ultimate decision within
20 days of the completion of the final hearing completely resolving all of the Disputes between the
parties that are the subject of the arbitration proceeding. The arbitrators’ ultimate decision
after final hearing shall be in writing, but shall be as brief as possible, and the arbitrators
shall assign their reasons for their ultimate decision. In the case the arbitrators award any
monetary damages in favor of either party, the arbitrators shall certify in their award that they
have not included any treble, exemplary or punitive damages.

     (g) The arbitrators’ award shall, as between the parties to this Agreement and those in
privity with them, be final and entitled to all of the protections and benefits of a final
judgment, e.g., res judicata (claim preclusion) and collateral estoppel (issue preclusion), as to
all Disputes, including compulsory counterclaims, that were or could have been presented to the
arbitrators. The arbitrators’ award shall not be reviewable by or appealable to any court, except
to the extent permitted by the Federal Arbitration Act.

     (h) It is the intent of the parties that the arbitration proceeding shall be conducted
expeditiously, without initial recourse to the courts and without interlocutory appeals of the
arbitrators’ decisions to the courts. However, if a party refuses to honor its obligations under
this agreement to arbitrate, the other party may obtain appropriate relief compelling arbitration
in any court having jurisdiction over the parties; the order compelling arbitration shall require
that the arbitration proceedings take place in Houston, Texas, as specified above. The parties may
apply to any court for orders requiring witnesses to obey subpoenas issued by the arbitrators.
Moreover, any and all of the arbitrators’ orders and decisions may be enforced if necessary by any
court. The arbitrators’ award may be confirmed in, and judgment upon the award entered by, any
federal or State court having jurisdiction over the parties.

     (i) To the fullest extent permitted by law, this arbitration proceeding and the arbitrators
award shall be maintained in confidence by the parties. However, a violation of this

- 27 -

 

covenant shall not affect the enforceability of this arbitration agreement or of the arbitrators’ award.

     (j) A party’s breach of this Agreement shall not affect this agreement to arbitrate.
Moreover, the parties’ obligations under this arbitration provision are enforceable even after this
Agreement has terminated. The invalidity or unenforceability of any provision of this arbitration
agreement shall not affect the validity or enforceability of the parties’ obligation to submit
their Disputes to binding arbitration or the other provisions of this agreement to arbitrate.

     12.13 No Effect on Employment Relationship. Nothing in this Agreement shall confer upon any employee of the General Partner or any
Affiliate thereof any right to continued employment nor shall it interfere in any way with the
right of the General Partner or any of its Affiliates to terminate the employment of any employee
at any time.

     12.14 Legal Representation. This Agreement and related documents have been prepared by Andrews Kurth LLP, as counsel
for the General Partner, and not as counsel for any other Partner or the Partnership. Each party
other than the General Partner has been advised to seek independent counsel in connection with this
Agreement and the related documents.

[Signature Pages to Follow.]

- 28 -

 

     IN WITNESS WHEREOF, the Partners have executed this Agreement as of the date first set forth
above.

	 	 	 	 	 
	GENERAL PARTNER:	 	EPCO, INC.
	 
	 	 	 	 
	 

	 	By:
	 	W. Randall Fowler
	 

	 	 	 	 
	 

	 	 	 	W. Randall Fowler
	 	 	 	 	President and Chief Executive Officer
	 
	 	 	 	 
	CLASS A LIMITED PARTNER:	 	EPCO HOLDINGS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	W. Randall Fowler
	 

	 	 	 	 
	 

	 	 	 	W. Randall Fowler
	 	 	 	 	President and Chief Executive Officer
	 
	 	 	 	 
	CLASS B LIMITED PARTNERS:	 	The Class B Limited Partners initially admitted
as Class B Limited Partners of the Partnership,
pursuant to Powers of Attorney executed in favor
of, and granted and delivered to the General
Partner
	 
	 	 	 	 
	 	 	By: EPCO, INC.

(As attorney-in-fact for the Class B Limited
Partners pursuant to powers of attorney)
	 
	 	 	 	 
	 

	 	By:
	 	W. Randall Fowler
	 

	 	 	 	 
	 

	 	 	 	W. Randall Fowler
	 	 	 	 	President and Chief Executive Officer

Agreement of Limited Partnership of TEPPCO Unit L.P.

 

 

Exhibit A

FORM OF POWER OF ATTORNEY

For Executing Agreement of Limited Partnership of TEPPCO Unit L.P.

     Know all by these presents, that the undersigned hereby constitutes and appoints EPCO, Inc.
and its authorized representatives the undersigned’s true and lawful attorney-in-fact to:

	 	(1)	 	execute for and on behalf of the undersigned as a limited partner thereunder
that certain Agreement of Limited Partnership of TEPPCO Unit L.P. (the “Partnership
Agreement”);
	 
	 	(2)	 	take any other action of any type whatsoever in connection with the foregoing
that, in the opinion of each such attorney-in-fact, may be of benefit to, in the best
interest of, or legally required of the undersigned, it being understood that the
documents executed by the attorney-in-fact on behalf of the undersigned pursuant to
this Power of Attorney shall be in such form and shall contain such terms and
conditions as the attorney-in-fact may approve in the attorney-in-fact’s discretion.

     The undersigned hereby grants to each attorney-in-fact full power and authority to do and
perform all and every act and thing whatsoever requisite, necessary or proper to be done in the
exercise of any of the rights and powers herein granted, as fully to all intents and purposes as
the undersigned might or could do if personally present, with full power of substitution or
revocation, hereby ratifying and confirming all that the attorney-in-fact, or the attorney-in-facts
substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of
Attorney and the rights and powers herein granted.

     The undersigned acknowledges and agrees by execution of this Power of Attorney that the
undersigned’s initial Sharing Points (as defined in the Partnership Agreement) under the
Partnership Agreement equal ___, which represents ___% of the total initial Sharing Points
granted by the General Partner pursuant to the Partnership Agreement.

     IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of the
date written below.

	 	 	 
	 

	 	 
	 

	 	Signature
	 
	 	 
	 

	 	 
	 

	 	Type or Print Name
	 
	 	 
	 

	 	 
	 

	 	Dateexv10w3

EXHIBIT 10.3

STEWART ENTERPRISES, INC.

RETENTION PLAN AND SUMMARY PLAN DESCRIPTION

     In order to encourage the continued employment of key employees of Stewart Enterprises, Inc.
(the “Company”), and to alleviate concerns about any possible loss of employment upon a change of
control of the Company, the Company has adopted a Retention Plan (the “Plan”) having the following
terms and conditions. This document also constitutes the Plan’s Summary Plan Description, as
described in Section 102 of the Employee Retirement Income Security Act of 1974 (“ERISA”).

ARTICLE 1

DEFINITIONS

     1.1 Affiliate. “Affiliate” or “affiliated companies” shall mean any company controlled by,
controlling, or under common control with, the Company.

     1.2 Board. “Board” shall mean the Board of Directors of the Company.

     1.3 Cause. With respect to each Participant, “Cause” shall mean:

          (a) the willful and continued failure of the Participant to perform substantially the
Participant’s duties with the Company or its Affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for substantial performance
is delivered to the Participant by the Board of the Company which specifically identifies the
manner in which the Board believes that the Participant has not substantially performed the
Participant’s duties;

          (b) the willful engaging by the Participant in illegal conduct or gross misconduct;

          (c) unauthorized acts or omissions that could reasonably be expected to cause material
financial harm to the Company or materially disrupt Company operations;

          (d) commission of an act of dishonesty (even if not a crime) resulting in the enrichment of
the Participant at the expense of the Company; or

          (e) knowing falsification or knowing attempted falsification of financial records of the
Company in violation of SEC Rule 13b2-1.

For purposes of subparagraphs (a) and (b) above, no act or failure to act, on the part of the
Participant, shall be considered “willful” unless it is done, or omitted to be done, by the
Participant in bad faith or without reasonable belief that the Participant’s action or omission was
in the best interests of the Company or its Affiliates. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the instructions of a

1

 

senior officer of the Company or based upon the advice of counsel for the Company or its Affiliates
shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith
and in the best interests of the Company or its Affiliates.

The cessation of employment of the Participant shall not be deemed to be for Cause unless and until
there shall have been delivered to the Participant a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is provided to the
Participant and the Participant is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Participant is guilty of the
conduct described in subparagraphs (a) through (e) above, and specifying the particulars thereof in
detail.

     1.4 Company. As used in this Plan, “Company” shall mean the Company as defined above and any
successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or
otherwise) all or substantially all of the assets or business of the Company.

     1.5 Change of Control. “Change of Control” shall mean:

          (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the
outstanding shares of the Company’s Class A Common Stock, no par value per share (the “Common
Stock”); provided, however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control:

               (i) any acquisition of Common Stock directly from the Company,

               (ii) any acquisition of Common Stock by the Company,

               (iii) any acquisition of Common Stock by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the Company, or

               (iv) any acquisition of Common Stock by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 1.5; or

          (b) individuals who, as of the date this Plan is executed (the “Effective Date”) constitute
the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Company’s shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall be considered a
member of the Incumbent Board, unless such individual’s initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Incumbent Board; or

2

 

          (c) consummation of a reorganization, merger or consolidation, or sale or other disposition of
all or substantially all of the assets of the Company (a “Business Combination”), in each case,
unless, following such Business Combination,

               (i) all or substantially all of the individuals and entities who were the beneficial owners of
the Company’s outstanding common stock and the Company’s voting securities entitled to vote
generally in the election of directors immediately prior to such Business Combination have direct
or indirect beneficial ownership, respectively, of 50% or more of the then outstanding shares of
common stock, and 50% or more of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, of the corporation resulting
from such Business Combination (which, for purposes of this paragraph (i) and paragraphs (ii) and
(iii), shall include a corporation which as a result of such transaction controls the Company or
all or substantially all of the Company’s assets either directly or through one or more
subsidiaries), and

               (ii) except to the extent that such ownership existed prior to the Business Combination, no
person (excluding any corporation resulting from such Business Combination or any employee benefit
plan or related trust of the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common
stock of the corporation resulting from such Business Combination or 20% or more of the combined
voting power of the then outstanding voting securities of such corporation, and

               (iii) at least 50% of the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business Combination; or

          (d) approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

     1.6 Disability. “Disability” shall mean a condition that would entitle the Participant to
receive benefits under the Company’s long-term disability insurance policy in effect at the time
either because he or she is Totally Disabled or Partially Disabled, as such terms are defined in
the Company’s policy in effect as of the Effective Date or as similar terms are defined in any
successor policy. If the Company has no long-term disability plan in effect, “Disability” shall
occur if (a) the Participant is rendered incapable because of physical or mental illness of
satisfactorily discharging his or her duties and responsibilities to the Company for a period of 90
consecutive days, (b) a duly qualified physician chosen by the Company and acceptable to the
Participant or his legal representatives so certifies in writing, and (c) the Board determines that
the Participant has become disabled.

     1.7 Good Reason. “Good Reason” shall mean any action or inaction during the Employment Term
that constitutes a material negative change in the service relationship between the Participant and
the Company and a material breach by the Company of its obligations under the terms of this Plan,
provided that, the Participant shall have provided written notice to the Company within 90 days of
the initial existence of the condition described in this Section 1.7 and

3

 

such event or condition continues uncured for a period of 30 days after written notice thereof
is given by the Participant to the Company. A termination by a Participant with Good Reason shall
constitute an involuntary termination for purposes of Section 409A of the Internal Revenue Code of
1986, as amended.

     1.8 Participant. “Participant” shall mean those key employees of the Company who hold the
positions listed on Schedule 1 hereto. Notwithstanding the provisions of this Section 1.8,
any Participant entitled to receive benefits from the Company upon a Change of Control pursuant to
the terms of an employment or change of control agreement between the Participant and the Company
that are greater than those provided by this Plan shall not be a Participant in the Plan, and shall
not be entitled to benefits under this Plan. Schedule 1 may be amended by the Compensation
Committee of the Board from time to time in its sole discretion; except that no Participant can be
removed from the Plan upon or after a Change of Control.

ARTICLE 2

CHANGE OF CONTROL BENEFIT

     2.1 Employment Term and Capacity after Change of Control. (a) If a Change of Control occurs
at a time that the Participant continues to be employed by the Company or a subsidiary, then the
Participant’s employment shall continue on the terms provided in Sections 2.1 and 2.2 hereof
through the first anniversary of the Change of Control, such one year period being referred to
herein as the “Employment Term.” Upon any earlier termination of the Participant’s status as an
employee by the Company without Cause or by the Participant for Good Reason during the Employment
Term, the Participant shall be entitled to the payment and benefits provided in Section 2.3 hereof.

          (b) After a Change of Control and during the Employment Term, (i) the Participant’s position,
authority, duties and responsibilities shall be at least comparable in all material respects with
the most significant of those held, exercised and assigned at any time during the 120-day period
immediately preceding the Change of Control and (ii) the Participant’s service shall be performed
during normal business hours at the location where the Participant was employed immediately
preceding the Change of Control or any office or location less than 40 miles from such location.

     2.2 Compensation and Benefits. During the Employment Term, the Participant shall be entitled
to the following compensation and benefits:

          (a) Base Salary. The Participant shall receive an annual base salary (“Base Salary”),
which shall be paid at a monthly, semi-monthly or bi-weekly rate, at least equal to 12 times the
highest monthly base salary paid or payable, including any base salary which has been earned but
deferred by the Participant, by the Company and its affiliated companies in respect of the 12-month
period immediately preceding the month in which the Change of Control occurs. During the Employment
Term, the Base Salary shall be reviewed no more than 12 months after the last salary increase
awarded to the Participant prior to the Change of Control and shall be increased no more than 12
months after the last salary increase awarded to the Participant prior to the Change of Control in
an amount equal to the percentage increase (excluding promotional increases) in base salary
generally awarded to peer employees of the Company and its affiliated

4

 

companies for the year of determination. Any increase in Base Salary shall not serve to limit
or reduce any other obligation to the Participant under this Plan. Base Salary shall not be reduced
after any such increase and the term Base Salary as utilized in this Plan shall refer to Base
Salary as so increased.

          (b) Annual Bonus. In addition to Base Salary, the Participant shall be awarded, for
the fiscal year ending during the Employment Term, an annual bonus (the “Bonus”) in cash at least
equal to (i) the average Bonus paid to the Participant for the last three completed fiscal years
prior to the Change of Control, (ii) the average Bonus paid for the last two completed fiscal years
prior to the Change of Control, if the Participant has participated in a Company Bonus plan only
for the last two fiscal years, or (iii) the actual Bonus paid for the last completed fiscal year
prior to the Change of Control, if the Participant has participated in a Company Bonus plan only
for the last completed fiscal year. Notwithstanding the foregoing, in calculating the minimum
Bonus payment under this section 2.2(b), a Bonus amount for a prior fiscal year that was reduced
pro rata because the Participant was not a participant in a Company Bonus plan for a full year
shall be annualized. If a Participant did not participate in a Company Bonus plan in a prior
fiscal year, the Participant shall be awarded for the fiscal year ending during the Employment Term
a Bonus in cash at least equal to the target Bonus to which the Participant is entitled for such
fiscal year. Each such Bonus shall be paid no later than 21/2 months following the end of the fiscal
year for which the Bonus is awarded, unless the Participant shall have elected to defer the receipt
of such Bonus in accordance with procedures established by the Company.

          (c) Fringe Benefits. The Participant shall be entitled to fringe benefits in
accordance with the most favorable agreements, plans, practices, programs and policies of the
Company and its affiliated companies in effect for the Participant at any time during the 120-day
period immediately preceding the Change of Control or, if more favorable to the Participant, as in
effect generally at any time thereafter with respect to other peer employees of the Company and its
affiliated companies.

          (d) Expenses. The Participant shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Participant in accordance with the most favorable
agreements, policies, practices and procedures of the Company and its affiliated companies in
effect for the Participant at any time during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Participant, as in effect generally at any time thereafter
with respect to other peer employees of the Company and its affiliated companies.

          (e) Incentive, Savings and Retirement Plans. The Participant shall be entitled to
participate in all equity incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer employees of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Participant with equity grants
(measured with respect to both regular and special equity incentive opportunities, to the extent,
if any, that such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable than the most favorable of those provided by the
Company and its affiliated companies for the Participant under any agreements, plans, practices,
policies and programs as in effect at any time during the 120-day period

5

 

immediately preceding the Change of Control or, if more favorable to the Participant, those
provided generally at any time after the Change of Control to other peer employees of the Company
and its affiliated companies.

          (f) Welfare Benefit Plans. The Participant and/or the Participant’s family, as the
case may be, shall be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and programs) to the extent
applicable generally to other peer employees of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Participant with benefits, in
each case, less favorable than the most favorable of any agreements, plans, practices, policies and
programs in effect for the Participant at any time during the 120-day period immediately preceding
the Change of Control or, if more favorable to the Participant, those provided generally at any
time after the Change of Control to other peer employees of the Company and its affiliated
companies.

          (g) Vacation. The Participant shall be entitled to paid vacation in accordance with
the most favorable agreements, plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Participant at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable to the Participant, as in effect
generally at any time thereafter with respect to other peer employees of the Company and its
affiliated companies.

     2.3 Obligations upon Termination after a Change of Control.

          (a) Termination by Company for Reasons other than Death, Disability or Cause or by
Participant for Good Reason. If, after a Change of Control and during the Employment Term, the
Company terminates the Participant’s employment other than for Cause, death or Disability, or the
Participant terminates employment for Good Reason,

               (i) the Company shall pay to the Participant in a lump sum in cash within 30 days after the
date of termination an amount equal to the sum of (x) the amount of Base Salary in effect at the
date of termination, plus (y), an amount equal to (i) the average Bonus paid to the Participant for
the last three completed fiscal years, (ii) the average Bonus paid for the last two completed
fiscal years, if the Participant has participated in a Company Bonus plan only for the last two
fiscal years, or (iii) the actual Bonus paid for the last completed fiscal year, if the Participant
has participated in a Company Bonus plan only for the last completed fiscal year. Notwithstanding
the foregoing, in calculating the Bonus payment under this section 2.3(a)(i), a Bonus amount for a
prior fiscal year that was reduced pro rata because the Participant was not a participant in a
Company Bonus plan for a full year shall be annualized. If a Participant did not participate in a
Company Bonus plan in a prior fiscal year, the Participant shall be entitled to a Bonus payment
under this Section 2.3(a)(i) equal to the target Bonus to which the Participant was entitled for
the fiscal year during which termination occurred; and

               (ii) for a period of twelve (12) months following the date of termination of employment (the
“Continuation Period”), the Company shall continue on behalf

6

 

of the Participant and his or her dependents and beneficiaries the medical, dental and
hospitalization benefits provided (x) to the Participant at any time during the 90-day period prior
to the Change of Control or (y) to other similarly situated employees who continue in the employ of
the Company during the Continuation Period. The coverage and benefits (including deductibles and
costs) provided in this Section 2.3(a)(ii) during the Continuation Period shall be no less
favorable to the Participant and his or her dependents and beneficiaries, than the most favorable
of such coverages and benefits (including deductibles and percentage of cost paid by the
Participant) during any of the periods referred to in clauses (x) or (y) above. The Company’s
obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the
Participant obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which
case the Company may reduce the coverage of any benefits it is required to provide the Participant
hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less
favorable to the Participant than the coverages and benefits required to be provided hereunder. The
coverage during the Continuation Period will run concurrently with the coverage provided under the
Consolidated Omnibus Budget Reconciliation Act.

          (b) Death. If, after a Change of Control and during the Employment Term, the
Participant’s status as an employee is terminated by reason of the Participant’s death, there shall
be no further obligation under this Plan to the Participant’s legal representatives (other than
those already accrued to the Participant), other than the obligation to make any payments due
pursuant to employee benefit plans maintained by the Company or its affiliated companies.

          (c) Disability. If, after a Change of Control and during the Employment Term,
Participant’s status as an employee is terminated by reason of Participant’s Disability, there
shall be no further obligation under this Plan to the Participant (other than those already accrued
to the Participant), other than the obligation to make any payments due pursuant to employee
benefit plans maintained by the Company or its affiliated companies.

          (d) Cause. If, after a Change of Control and during the Employment Term, the
Participant’s status as an employee is terminated by the Company for Cause, there shall be no
further obligation under this Plan to the Participant other than for obligations imposed by law and
obligations imposed pursuant to any employee benefit plan maintained by the Company or its
affiliated companies.

          (e) Voluntary Termination. If, after a Change of Control and during the Employment
Term, the Participant voluntarily terminates his or her employment with the Company other than for
Good Reason, there shall be no further obligation under this Plan to the Participant other than for
obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained
by the Company or its affiliated companies.

     2.4 Accrued Obligations and Other Benefits. It is the intent of this Plan that upon
termination of employment for any reason the Participant be entitled to receive promptly, and in
addition to any other benefits specifically provided, (a) the Participant’s Base Salary through the
date of termination to the extent not theretofore paid, (b) any accrued vacation pay, to the extent
not theretofore paid, and (c) any other amounts or benefits required to be paid or provided or
which the Participant is entitled to receive under any plan, program, policy practice or agreement
of the Company or by law.

7

 

     2.5 Stock Options and Restricted Stock. The foregoing benefits are intended to be in addition
to the value of any options to acquire Common Stock of the Company the exercisability of which is
accelerated or shares of restricted stock or restricted stock units the vesting of which is
accelerated pursuant to the terms of any stock incentive or other similar plan heretofore or
hereafter adopted by the Company.

     2.6 Legal Fees. Should a Participant prevail in any cause of action, suit, arbitration or
other legal proceeding, which proceeding was initiated in whole or in part to enforce the
provisions of the Plan, the Company shall reimburse the Participant for all costs, including
reasonable attorneys’ fees, incurred by the Participant in connection with such cause of action,
suit, arbitration or other legal proceeding.

     2.7 Set-Off; Mitigation. After a Change of Control, the Company’s and its Affiliates’
obligations to make the payments provided for in this Plan and otherwise to perform their
obligations hereunder shall not be affected by any set-off for compensation from new employment or
otherwise, counterclaim, recoupment, defense or other claim, right or action which the Company or
its Affiliates may have against the Participant or others; except that to the extent the
Participant accepts other employment in connection with which he or she is provided medical, dental
or hospitalization benefits, the Company shall only be required to provide such benefits as
described in Section 2.3 (a)(ii). It is the intent of this Plan that in no event shall the
Participant be obligated to seek other employment or take any other action by way of mitigation of
the amounts payable to the Participant under any of the provisions of this Plan.

ARTICLE 3

MISCELLANEOUS

     3.1 Successors. (a) The Company shall require any successor to or assignee of (whether
direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of
the assets or businesses of the Company in writing (i) assume unconditionally and expressly this
Plan and (ii) agree to perform or to cause to be performed all of the obligations under this Plan
in the same manner and to the same extent as would have been required of the Company had no
assignment or succession occurred.

          (b) The Company shall also require all entities that control or that after the transaction
will control (directly or indirectly) the Company or any such successor or assignee to agree in
writing to cause to be performed all of the obligations under this Plan.

     3.2 Funding. The Plan is funded solely through general assets of the Company or of any
successor or assignee and no employee contributions are taken nor are any funds held in trust.

     3.3 Plan Amendment or Termination. The Company reserves the right to amend or terminate this
Plan at any time and without advance notice. An amendment shall be made in writing, executed by an
officer of the Company, as authorized by the Compensation Committee of the Company’s Board of
Directors. No benefits will be paid to anyone whose employment is terminated after the Plan is
terminated or amended to exclude that Participant. Notwithstanding

8

 

the foregoing, no amendment or termination of the Plan may be made following a Change of
Control unless approved in writing by 80% of the Participants.

     3.4 Applicable Laws. The Plan shall be governed by the laws of the State of Louisiana to the
extent not preempted by ERISA.

     3.5 Administration of the Plan. The Plan shall be administered by the Compensation Committee
of the Board of Directors of Stewart Enterprises, Inc. (the “Plan Administrator”). The Plan
Administrator’s address is: 1333 South Clearview Parkway, Jefferson, Louisiana 70121. The Plan
Administrator shall have the exclusive right to interpret the Plan and all such interpretations
shall be binding on all affected parties. The Stewart Enterprises, Inc. Retention Plan document is
a legal document that controls the operation of the Plan. Its provisions cover all situations
relating to benefits and its provisions will be final authority. The ERISA Plan Number is 505.
The Company’s Employer Identification Number is 72-0693290.

     3.6 Company’s Reservation of Rights. A Participant is employed at the pleasure of the Company
and the Company has the right at any time to terminate the Participant’s status as an employee of
the Company, to change or diminish his or her status during the Employment Term, subject to the
rights of the Participant hereunder, and to add to or remove positions from the list of
Participants set forth on Schedule 1. Only employees of the Company or its affiliated
companies listed on Schedule 1 at the time of a Change of Control shall be entitled to
claim the benefits conferred on Participants by the Plan.

     3.7 Type of Plan. This Plan is intended to be a severance welfare benefit plan under the
Employee Retirement Income Security Act of 1974 (“ERISA”). In no event shall benefits payable to
any Participant under this Plan exceed twice the Participant’s “Annual Compensation” (as defined in
ERISA regulation §2510.3-2(b)(2)) during the year immediately preceding the year of termination.

     3.8 Section 409A. The benefits provided under this Plan are intended to satisfy the exception
from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder
applicable to short-term deferrals and shall be construed accordingly.

ARTICLE 4

CLAIMS FOR BENEFITS

     4.1 Claims Procedure. Claims for benefits may be made to the Plan Administrator at the above
address. Payments of the amounts provided in this Plan shall ordinarily be made without the need
for demand at the discretion of the Company. Nevertheless, a Participant who claims entitlement to
a benefit can file a written claim for benefits with the Plan Administrator within 90 days after
the Participant’s employment is terminated. The Plan Administrator shall accept or reject the claim
within 30 days of its receipt. If the claim is denied, the Plan Administrator shall give the reason
for denial in a written notice in plain English so as to be understood by the claimant, referring
to the Plan provisions that provide the basis for the denial. If any additional information or
material is necessary to perfect the claim, the Plan Administrator shall identify these items and
explain why such additional material is necessary.

9

 

     4.2 Claim Denial and Appeal. Upon denial of the claim, the claimant may file a written request
for review of the denied claim to the Plan Administrator within 60 days of the denial. The claimant
shall have the opportunity to be represented by counsel and may request to be heard at a hearing.
The claimant shall have the opportunity to review the pertinent documents and the opportunity to
submit written reasons opposing the denial. The decision upon the appeal will be made within 60
days of receipt of the requested review unless special circumstances (such as a need to hold a
hearing) require an extension of time for processing, in which case a decision will be made as soon
as possible, but no later than 120 days after receipt of a request for review. If such extension of
time for review is required, because of special circumstances, written notice of the extension will
be furnished to the claimant prior to the commencement of the extension. If the appeal is denied,
the denial shall be in writing.

ARTICLE 5

ERISA RIGHTS

     Participants are entitled to certain rights and protections under ERISA and regulations and
rulings issued thereunder. Some of the benefits provided by the Plan may be subject to ERISA.
ERISA provides that Participants shall be entitled to:

     Receive information about Plan and benefits. Examine, without charge, at the Plan
Administrator’s office and at other specified locations, such as work sites, all Plan documents,
and a copy of the latest annual report (Form 5500 Series), available at the Public Disclosure Room
of the Employee Benefits Security Administration, if such report is required to be filed.

     Obtain copies of all Plan documents and other plan information upon written request to the
Plan Administrator. The Plan Administrator may make a reasonable charge for the copies. (This
document is the only Plan document and Summary Plan Description.)

     Prudent actions by Plan fiduciaries. In addition to creating rights for Participants, ERISA
imposes duties upon the people who are responsible for the operation of the Plan. The people who
operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the
interest of Participants. No one, including the Company or any other person, may terminate a
Participant’s employment or otherwise discriminate against a Participant in any way to prevent the
Participant from obtaining a welfare benefit or exercising his or her rights under ERISA.

     Enforce rights. If a claim for a benefit is denied or ignored, in whole or in part, the
Participant has a right to know why this was done, to obtain copies of documents relating to the
decision without charge, and to appeal any denial, all within certain time schedules.

     Under ERISA, there are steps Participants can take to enforce the above rights. For instance,
if a Participant requests a copy of Plan documents or the latest annual report from the Plan and
does not receive them within 30 days, the Participant may file suit in a Federal court. In such a
case, the court may require the Plan Administrator to provide the materials and pay the Participant
up to $110 a day until he or she receives the materials, unless the materials were not sent because
of reasons beyond the control of the administrator. If the Participant has a claim for benefits
which is denied or ignored, in whole or in part, the Participant may file suit in a Federal

10

 

court. If it should happen that Plan fiduciaries misuse plan assets, or if the Participant is
discriminated against for asserting his or her rights, the Participant may seek assistance from the
U.S. Department of Labor, or the Participant may file suit in a Federal court. The court will
decide who should pay court costs and legal fees. If the Participant is successful the court may
order the person he or she has sued to pay these costs and fees. If the Participant loses, the
court may order the Participant to pay these costs and fees, for example, if it finds the claim is
frivolous.

     Assistance with questions. If the Participant has any questions about this Plan, he or she
should contact the Plan Administrator. If the Participant has any questions about this statement or
about his or her rights under ERISA, or if he or she needs assistance in obtaining documents from
the Plan Administrator, he or she should contact the nearest office of the Employee Benefits
Security Administration, U.S. Department of Labor, listed in the telephone directory, or the
Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S.
Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. The Participant may also
obtain certain publications about his or her rights and responsibilities under ERISA by calling the
publications hotline of the Employee Benefits Security Administration.

11

 

     This Plan was executed in Jefferson, Louisiana, this 18th day of June, 2008.

	 	 	 	 	 	 	 	 	 	 	 
	WITNESSES:	 	 	 	STEWART ENTERPRISES, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

12

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