<SUBMISSION>
<ACCESSION-NUMBER>0000950129-00-006051
<TYPE>S-1/A
<PUBLIC-DOCUMENT-COUNT>11
<FILING-DATE>20001219
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>SHAMROCK LOGISTICS LP
<CIK>0001110805
<ASSIGNED-SIC>4610
<IRS-NUMBER>742958817
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>S-1/A
<ACT>33
<FILE-NUMBER>333-43668
<FILM-NUMBER>791980
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>6000 NORTH LOOP 1604 WEST
<CITY>SAN ANTONIO
<STATE>TX
<ZIP>78249
<PHONE>2105922000
</BUSINESS-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>S-1/A
<SEQUENCE>1
<FILENAME>h79326a3s-1a.txt
<DESCRIPTION>SHAMROCK LOGISTICS, L.P. - AMENDMENT NO. 3
<TEXT>

<PAGE>   1


   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 2000


                                                      REGISTRATION NO. 333-43668
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------

                                AMENDMENT NO. 3


                                       TO

                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------

                            SHAMROCK LOGISTICS, L.P.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                             <C>                             <C>
           DELAWARE                          4610                         74-2958817
(State or other jurisdiction of  (Primary Standard Industrial          (I.R.S. Employer
incorporation or organization)    Classification Code Number)         Identification No.)
</TABLE>

                           6000 NORTH LOOP 1604 WEST
                         SAN ANTONIO, TEXAS 78249-1112
                                 (210) 592-2000
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)

                             ---------------------
                              CURTIS V. ANASTASIO

                     PRESIDENT AND CHIEF EXECUTIVE OFFICER

                           6000 NORTH LOOP 1604 WEST
                            SAN ANTONIO, TEXAS 78249
                                 (210) 592-2000
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                                   Copies to:

<TABLE>
<S>                                            <C>
            ANDREWS & KURTH L.L.P.                           BAKER BOTTS L.L.P.
            600 TRAVIS, SUITE 4200                     ONE SHELL PLAZA, 910 LOUISIANA
             HOUSTON, TEXAS 77002                           HOUSTON, TEXAS 77002
                (713) 220-4200                                 (713) 229-1234
           ATTN: GISLAR DONNENBERG                         ATTN: JOSHUA DAVIDSON
</TABLE>

                             ---------------------
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
                             ---------------------
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

   The information in this preliminary prospectus is not complete and may be
   changed. These securities may not be sold until the registration statement
   filed with the Securities and Exchange Commission is effective. This
   preliminary prospectus is not an offer to sell nor does it seek an offer to
   buy these securities in any jurisdiction where the offer or sale is not
   permitted.

[SHAMROCK LOGO]

                Subject to Completion. Dated December 19, 2000.

                             4,000,000 Common Units

                            SHAMROCK LOGISTICS, L.P.
                     REPRESENTING LIMITED PARTNER INTERESTS
                             ----------------------
       This is an initial public offering by Shamrock Logistics, L.P. of common
units representing limited partner interests. Shamrock Logistics intends to
distribute to each common unit the minimum quarterly distribution of $0.60 per
quarter or $2.40 per year, to the extent it has sufficient cash from operations
after payment of fees and expenses to its general partner. During the
subordination period, which will generally not end before December 31, 2005, the
common units must receive the full minimum quarterly distribution for all
quarters before the subordinated units, which are held by an affiliate of the
general partner, are entitled to receive any distributions.


     Prior to this offering, there has been no public market for the common
units. We currently estimate that the initial public offering price per common
unit will be between $19.00 and $21.00. The common units have been approved for
listing on the New York Stock Exchange under the symbol "UDL," subject to notice
of issuance.


     Our general partner and its affiliates will receive substantially all of
the proceeds of the offering.

     See "Risk Factors" on page 14 to read about important risks that you should
consider before buying common units.

     These risks include the following:

     - We may not generate sufficient cash from operations to pay the minimum
       quarterly distribution on the common units every quarter.
     - The success of our operations depends upon the continued use of our
       pipelines, terminals, and storage facilities by Ultramar Diamond
       Shamrock.
     - A material decline in production by Ultramar Diamond Shamrock's
       refineries would materially reduce the volumes of crude oil or refined
       product transported in our pipelines.
     - A reduced demand for refined products could decrease the volumes
       transported in our pipelines.
     - Conflicts of interest may arise between the general partner and its
       affiliates, on the one hand, and Shamrock Logistics and the unitholders,
       on the other hand. The legal duties of our general partner and its
       affiliates to unitholders are limited.
     - Our general partner manages our business. You will have limited voting
       rights and limited ability to remove our general partner.
     - Purchasers of common units will experience immediate and substantial
       dilution.
     - You may be required to pay taxes on income from us even if you receive no
       cash distributions.
                             ----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
                             ----------------------

<TABLE>
<CAPTION>
                                                                    Per
                                                                Common Unit               Total
                                                                -----------               -----
<S>                                                        <C>                    <C>
Initial public offering price.............................           $                      $
Underwriting discount.....................................           $                      $
Proceeds, before expenses, to Shamrock Logistics..........           $                      $
</TABLE>

     To the extent that the underwriters sell more than 4,000,000 common units,
the underwriters have the option to purchase up to an additional 600,000 common
units from Shamrock Logistics at the initial public offering price less the
underwriting discount.
                             ----------------------

     The underwriters expect to deliver the common units against payment in New
York, New York on             , 2001.


GOLDMAN, SACHS & CO.
               DAIN RAUSCHER WESSELS
                               A.G. EDWARDS & SONS, INC.
                                             LEHMAN BROTHERS

                                UBS WARBURG LLC

                             ----------------------

                       Prospectus dated           , 2001.

<PAGE>   3

                     [MAP OF SHAMROCK LOGISTICS OPERATIONS]
     Map showing the locations of the following pipelines, Terminals and
Refineries:

CRUDE OIL PIPELINES
Corpus Christi to Three Rivers, Texas
Ringgold to Wasson to Ardmore, Oklahoma
Dixon to McKee, Texas
Cheyenne Wells, Colorado to McKee, Texas
Hooker, Oklahoma to Clawson to McKee, Texas
Healdton to Ringling, Oklahoma

REFINED PRODUCT PIPELINES
McKee, Texas to Colorado Springs to Denver, Colorado
McKee to El Paso, Texas
Amarillo, Texas to Albuquerque, New Mexico
Ardmore to Wynnewood, Oklahoma
Three Rivers to Laredo, Texas
Three Rivers to San Antonio, Texas
McKee to Amarillo to Abernathy, Texas
McKee, Texas to Denver, Colorado

<TABLE>
<CAPTION>
                         TERMINALS                            LOCATION
                         ---------                            --------
<S>                                                           <C>
Denver Terminal                                                  CO
Colorado Springs Terminal                                        CO
Albuquerque Terminal                                             NM
El Paso Terminal                                                 TX
Amarillo Terminal                                                TX
Abernathy Terminal                                               TX
San Antonio Terminal                                             TX
Laredo Terminal                                                  TX
Corpus Christi Marine Terminal                                   TX
Harlingen Marine Terminal                                        TX
</TABLE>

<TABLE>
<CAPTION>
                         REFINERIES                           LOCATION
                         ----------                           --------
<S>                                                           <C>
McKee Refinery                                                   TX
Ardmore Refinery                                                 OK
Three Rivers Refinery                                            TX
</TABLE>
<PAGE>   4

                               TABLE OF CONTENTS


<TABLE>
<S>                                                           <C>
PROSPECTUS SUMMARY..........................................    1
  Shamrock Logistics........................................    1
  Expansion Projects........................................    1
  Business Strategies.......................................    2
  Competitive Strengths.....................................    2
  Our Relationship with Ultramar Diamond Shamrock...........    3
SUMMARY OF RISK FACTORS.....................................    4
  Risks Inherent in Our Business............................    4
  Risks Inherent in an Investment in Shamrock Logistics.....    5
  Tax Risks.................................................    5
SHAMROCK LOGISTICS STRUCTURE AND MANAGEMENT.................    6
OWNERSHIP CHART.............................................    7
THE OFFERING................................................    8
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING
  DATA......................................................   10
SUMMARY OF CONFLICTS OF INTEREST AND FIDUCIARY
  RESPONSIBILITIES..........................................   13
RISK FACTORS................................................   14
  Risks Inherent in Our Business............................   14
  Risks Inherent in an Investment in Shamrock Logistics.....   23
  Tax Risks.................................................   25
USE OF PROCEEDS.............................................   28
CAPITALIZATION..............................................   29
DILUTION....................................................   30
CASH DISTRIBUTION POLICY....................................   31
  Quarterly Distributions of Available Cash.................   31
  Operating Surplus and Capital Surplus.....................   32
  Incentive Distribution Rights.............................   32
  Subordination Period......................................   32
  Distributions of Available Cash from Operating Surplus
     During the Subordination Period........................   33
  Distributions of Available Cash from Operating Surplus
     After the Subordination Period.........................   34
  Tabular Illustration of Distributions of Available Cash
     from Operating Surplus.................................   34
  Distributions from Capital Surplus........................   35
  Adjustment of Minimum Quarterly Distribution and Target
     Distribution Levels....................................   35
  Distributions of Cash upon Liquidation....................   36
CASH AVAILABLE FOR DISTRIBUTION.............................   38
SELECTED HISTORICAL AND OPERATING DATA OF THE ULTRAMAR
  DIAMOND SHAMROCK LOGISTICS BUSINESS AND SHAMROCK LOGISTICS
  OPERATIONS, AND PRO FORMA FINANCIAL AND OPERATING DATA OF
  SHAMROCK LOGISTICS........................................   40
  Impact of Tariff Rate and Terminalling Revenue Changes....   44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS.................................   47
  Introduction..............................................   47
  Overview..................................................   47
  Results of Operations -- Nine Months ended September 30,
     1999 Compared to Nine Months Ended September 30,
     2000...................................................   49
  Results of Operations -- Year Ended December 31, 1998
     Compared to Year Ended December 31, 1999...............   52
  Results of Operations -- Year Ended December 31, 1997
     Compared to Year Ended December 31, 1998...............   54
  Liquidity and Capital Resources...........................   56
  Environmental.............................................   62
  Impact of Inflation.......................................   62
  New Accounting Pronouncements.............................   62
</TABLE>


                                        i
<PAGE>   5

<TABLE>
<S>                                                           <C>
  Quantitative and Qualitative Disclosures About Market
     Risk...................................................   63
BUSINESS....................................................   64
  Our Relationship with Ultramar Diamond Shamrock...........   66
  Business Strategies.......................................   67
  Competitive Strengths.....................................   68
  Pipeline Operations.......................................   70
  Crude Oil Pipelines.......................................   71
  Refined Product Pipelines.................................   73
  Recently Completed and Planned Expansion Projects.........   77
  Recently Completed Expansion Projects.....................   78
  Planned Expansion Projects................................   78
  Terminalling and Storage Operations.......................   79
  Crude Oil Storage Facilities..............................   79
  Refined Product Terminals.................................   79
  Pipeline, Storage Facility, and Terminal Control
     Operations.............................................   81
  Safety and Maintenance....................................   81
  Competition...............................................   81
  Ultramar Diamond Shamrock's Refining and Marketing
     Operations.............................................   83
  Refineries................................................   83
  Marketing.................................................   85
  Assets Retained by Ultramar Diamond Shamrock..............   86
  Regulation................................................   87
  Environmental Regulation..................................   92
  Environmental Remediation.................................   95
  Title to Properties.......................................   97
  Employees.................................................   97
  Legal Proceedings.........................................   98
MANAGEMENT..................................................   99
  Management of Shamrock Logistics..........................   99
  Directors and Executive Officers of Shamrock Logistics GP,
     LLC....................................................  100
  Administrative Fee and Reimbursement of Expenses..........  101
  Executive Compensation....................................  101
  Compensation of Directors.................................  101
  Employment Agreement......................................  102
  Intermediate-Term Incentive Plan..........................  103
  Long-Term Incentive Plan..................................  103
  Short-Term Incentive Plan.................................  104
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT................................................  105
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............  106
  Distributions and Payments to the General Partner and its
     Affiliates.............................................  106
  Agreements Governing the Transactions.....................  107
  Omnibus Agreement.........................................  107
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES........  109
  Conflicts of Interest.....................................  109
  Fiduciary Duties Owed to Unitholders by the General
     Partner are Prescribed by Law and the Partnership
     Agreement..............................................  112
DESCRIPTION OF THE COMMON UNITS.............................  114
  The Units.................................................  114
  Transfer Agent and Registrar..............................  114
  Transfer of Common Units..................................  114
DESCRIPTION OF THE SUBORDINATED UNITS.......................  117
  Conversion of Subordinated Units..........................  117
  Limited Voting Rights.....................................  117
  Distributions upon Liquidation............................  118
</TABLE>


                                       ii
<PAGE>   6

<TABLE>
<S>                                                           <C>
THE PARTNERSHIP AGREEMENT...................................  119
  Organization and Duration.................................  119
  Purpose...................................................  119
  Power of Attorney.........................................  119
  Capital Contributions.....................................  120
  Limited Liability.........................................  120
  Issuance of Additional Securities.........................  121
  Amendment of the Partnership Agreement....................  122
  Merger, Sale or Other Disposition of Assets...............  124
  Termination and Dissolution...............................  124
  Liquidation and Distribution of Proceeds..................  125
  Withdrawal or Removal of the General Partner..............  125
  Transfer of General Partner Interests and Incentive
     Distribution Rights....................................  126
  Change of Management Provisions...........................  127
  Limited Call Right........................................  127
  Meetings; Voting..........................................  128
  Status as Limited Partner or Assignee.....................  129
  Non-Citizen Assignees; Redemption.........................  129
  Indemnification...........................................  129
  Books and Reports.........................................  130
  Right to Inspect Shamrock Logistics' Books and Records....  130
  Registration Rights.......................................  130
UNITS ELIGIBLE FOR FUTURE SALE..............................  131
TAX CONSIDERATIONS..........................................  133
  Partnership Status........................................  133
  Tax Treatment of Unitholders..............................  135
  Tax Treatment of Operations...............................  139
  Disposition of Common Units...............................  141
  Tax-Exempt Organizations and Other Investors..............  144
  Administrative Matters....................................  145
  State, Local and Other Tax Considerations.................  147
INVESTMENT IN SHAMROCK LOGISTICS BY EMPLOYEE BENEFIT
  PLANS.....................................................  149
UNDERWRITING................................................  151
VALIDITY OF THE COMMON UNITS................................  153
EXPERTS.....................................................  153
WHERE YOU CAN FIND MORE INFORMATION.........................  154
FORWARD-LOOKING STATEMENTS..................................  154
</TABLE>


<TABLE>
<S>                                                           <C>
INDEX TO FINANCIAL STATEMENTS...............................  F-1
Appendix A -- Form of Second Amended and Restated Agreement
  of Limited Partnership....................................  A-1
Appendix B -- Form of Application for Transfer of Common
  Units.....................................................  B-1
Appendix C -- Glossary of Terms.............................  C-1
Appendix D -- Pro Forma Available Cash from Operating
  Surplus...................................................  D-1
</TABLE>

                                       iii
<PAGE>   7

                               PROSPECTUS SUMMARY

     The summary highlights information contained elsewhere in this prospectus.
It does not contain all of the information that you should consider before
investing in the common units. You should read the entire prospectus carefully,
including the historical and pro forma financial statements and notes to those
financial statements. We refer to the assets and related operations that have
been transferred to Shamrock Logistics Operations, L.P. effective as of July 1,
2000, as the "Ultramar Diamond Shamrock logistics business." The information
presented in this prospectus assumes that the underwriters' over-allotment
option is not exercised. Please read "Summary of Risk Factors" on page 4 and
"Risk Factors" on page 14 for more information about important factors that you
should consider before buying common units. A glossary of some of the terms used
in this prospectus is included as Appendix C.

                               SHAMROCK LOGISTICS

     We own and operate most of the crude oil and refined product pipeline,
terminalling, and storage assets that support Ultramar Diamond Shamrock
Corporation's refining and marketing operations located in Texas, Oklahoma,
Colorado, New Mexico, and Arizona. Effective July 1, 2000, Ultramar Diamond
Shamrock transferred assets to us representing 72% of the book value of its
pipeline, terminalling, and storage assets supporting those refining and
marketing operations. Our pipeline, terminalling, and storage assets consist of:

     - approximately 510 miles of crude oil pipelines, including approximately
       31 miles jointly owned with third parties, and three major crude oil
       storage facilities with a total storage capacity of approximately 2.1
       million barrels; and

     - approximately 2,820 miles of refined product pipelines, including
       approximately 1,970 miles jointly owned with third parties, and ten
       refined product terminals, one of which is jointly owned, with a total
       storage capacity of approximately 2.5 million barrels.

     We generate revenues by charging tariffs for transporting crude oil and
refined products through our pipelines and by charging a fee for use of our
terminals. We do not own any of the crude oil or refined products transported
through our pipelines, and we do not engage in the trading of crude oil or
refined products. As a result, we will not be directly exposed to any risks
associated with fluctuating commodities prices, although these risks indirectly
influence our activities and results of operations.


     In the first nine months of 2000, we transported an average of 296,413
barrels per day through our crude oil pipelines, and an average of 315,807
barrels per day through our refined product pipelines and handled an average of
167,650 barrels per day through our refined product terminals. Assuming our
current tariff rates had been in effect on January 1, 1999, our revenues for the
year ended December 31, 1999, and the nine-month period ended September 30, 2000
would have been approximately $87.9 million and $69.4 million, respectively.
Effective January 1, 2000, we filed revised tariff rates on many of our
pipelines to reflect the total cost of the pipelines, the current capacity and
utilization of the pipelines and other market conditions, which resulted in a
$21.9 million or 20% reduction in revenues for the year ended December 31, 1999.


EXPANSION PROJECTS

     Since 1995, we have expanded the total capacity of our refined product
pipelines by 46,250 barrels per day by adding pumping stations to increase
horsepower and replacing existing pipe with larger-diameter pipe. By the end of
the first quarter of 2002, we expect to exercise options to purchase the
following assets from Ultramar Diamond Shamrock:

     - For $64 million, the 271.7-mile crude oil pipeline from Wichita Falls,
       Texas to Ultramar Diamond Shamrock's McKee Refinery, along with related
       crude oil storage facilities, once
<PAGE>   8

       Ultramar Diamond Shamrock has completed increasing the capacity on this
       pipeline from 85,000 to 110,000 barrels per day.

     - For $6.5 million, crude oil storage facilities with a capacity of 600,000
       barrels being constructed at Ringgold, Texas.

     - For $5.7 million, a 19-mile refined product pipeline with a capacity of
       12,000 barrels per day that Ultramar Diamond Shamrock plans to construct
       from our Laredo, Texas refined product terminal to the refined product
       terminal operated by Petroleos Mexicanos, or Pemex, in Nuevo Laredo,
       Mexico.

BUSINESS STRATEGIES

     The primary objective of our business strategies is to increase
distributable cash flow per unit by:

     - Sustaining high levels of volumes transported in our pipelines and cash
       flow;

     - Increasing volumes transported in our existing pipelines and shifting
       volumes to higher tariff pipelines;

     - Increasing our pipeline capacity through expansions and new construction;

     - Pursuing selective strategic and accretive acquisitions that complement
       our existing asset base; and

     - Continuing to improve our operating efficiency.

COMPETITIVE STRENGTHS

     We believe we are well positioned to successfully execute our business
strategies due to the following competitive strengths:

     - Our pipelines provide the principal access to and from Ultramar Diamond
       Shamrock's McKee, Three Rivers and Ardmore refineries located near
       Amarillo, Texas, Corpus Christi, Texas and Ardmore, Oklahoma. As a
       result, we transport approximately 75% of the crude oil and other raw
       material supplied to, and approximately 75% of the refined products
       produced by, these refineries.

     - Our refined product pipelines serve Ultramar Diamond Shamrock's marketing
       operations in the southwestern and Rocky Mountain regions of the United
       States. These operations are concentrated in metropolitan areas in the
       states of Texas, Colorado, New Mexico, and Arizona that are expected to
       exceed the national average of projected cumulative population growth for
       the next 10 years.

     - We believe our pipeline, terminalling, and storage assets are modern,
       efficient, and well maintained, with 50% of our ownership mileage having
       been built since 1990.

     - Our pipelines have available capacity that provides us the opportunity to
       increase the volumes transported in our pipelines and distributable cash
       flow from existing assets.


     - Our $120 million revolving credit facility, coupled with our ability to
       issue new partnership units, provides us with financial flexibility to
       pursue expansion and acquisition opportunities.


     You should be aware that our business is subject to a number of risks.
Please read "Risk Factors" for a description of the risk factors that you should
consider before electing to purchase our common units.

                                        2
<PAGE>   9

OUR RELATIONSHIP WITH ULTRAMAR DIAMOND SHAMROCK

     Description of Ultramar Diamond Shamrock's Business. Ultramar Diamond
Shamrock is an independent refiner and marketer of high-quality refined products
and convenience store merchandise in the central, southwest, and northeast
regions of the United States, and eastern Canada. Its operations consist of
refineries, convenience stores, pipelines and terminals, a home heating oil
business, and related petrochemical and natural gas liquids operations.

     We transport crude oil to and refined products from three of Ultramar
Diamond Shamrock's seven refineries through our pipelines. These three
refineries have the capacity to process a total of approximately 353,000 barrels
of crude oil and other raw materials per day.


     Our operations are strategically located within Ultramar Diamond Shamrock's
refining and marketing supply chain in the southwestern and Rocky Mountain
regions of the United States, but we do not own or operate any refining or
marketing operations. Ultramar Diamond Shamrock is dependent upon us to provide
transportation services that support its refining and marketing operations in
these markets. Ultramar Diamond Shamrock and its affiliates accounted for 99% of
our pro forma revenues in 1999 and in the first nine months of 2000. Ultramar
Diamond Shamrock has advised us that it currently does not intend to close any
of the McKee, Three Rivers, or Ardmore refineries or to cause any changes that
would have a materially adverse effect on these refineries' operations.



     Our Pipelines and Terminals Usage Agreement with Ultramar Diamond
Shamrock. Ultramar Diamond Shamrock has generally agreed to transport at least
75% of the aggregate volumes of crude oil shipped to and at least 75% of the
aggregate volumes of refined products shipped from the McKee, Three Rivers, and
Ardmore refineries in our crude oil pipelines and refined product pipelines,
respectively, and to use our refined product terminals for terminalling services
for at least 50% of the refined products shipped from these refineries. These
percentages reflect the recent historical volumes shipped to and from these
refineries and terminalled at these terminals.


     Ultramar Diamond Shamrock's obligation to use our pipelines and terminals
will be suspended if material changes in market conditions occur that have a
material adverse effect on Ultramar Diamond Shamrock or if we are unable to
handle the volumes due to operational difficulties with the pipelines or
terminals. For a more detailed description of this agreement, please read
"Business -- Our Relationship with Ultramar Diamond Shamrock."

     In addition, Ultramar Diamond Shamrock has agreed, for a period of seven
years, to remain the shipper for its crude oil or refined products transported
in our pipelines, and not to challenge our tariff rates for the transportation
of crude oil, refined products, or petrochemical products.

     Ultramar Diamond Shamrock Owns Our General Partner. Ultramar Diamond
Shamrock owns and controls our general partner, Riverwalk Logistics, L.P. and
will indirectly own an aggregate 75.5% limited partner interest in Shamrock
Logistics and Shamrock Logistics Operations.

     Risks Associated with Our Relationship with Ultramar Diamond Shamrock. We
are dependent on the continued use of our pipelines, terminals, and storage
facilities by Ultramar Diamond Shamrock and the ability of Ultramar Diamond
Shamrock's refineries to maintain their production of refined products.
Conflicts of interest are inherent in our relationship with Ultramar Diamond
Shamrock. We have entered into an omnibus agreement with Ultramar Diamond
Shamrock which governs potential competition between us and Ultramar Diamond
Shamrock. For a more detailed description of this agreement, please read
"Certain Relationships and Related Transactions -- Omnibus Agreement."

                                        3
<PAGE>   10

                            SUMMARY OF RISK FACTORS

RISKS INHERENT IN OUR BUSINESS

     - We may not be able to generate sufficient cash from operations to enable
       us to pay the minimum quarterly distribution on the common units every
       quarter.

     - You may receive less than the minimum quarterly distribution because fees
       and cost reimbursements due to Ultramar Diamond Shamrock and its
       affiliates may be substantial and will reduce our cash available for
       distribution.

     - We depend upon Ultramar Diamond Shamrock for the crude oil and refined
       products transported in our pipelines and handled at our terminals and
       storage facilities, and any reduction in those quantities could reduce
       our ability to make distributions to our unitholders.

     - Distributions to unitholders could be adversely affected by a significant
       decrease in demand for refined products in the markets served by our
       pipelines.

     - Our ability to make distributions to unitholders could be reduced by a
       material decline in production by any of Ultramar Diamond Shamrock's
       McKee, Three Rivers, or Ardmore refineries.

     - Ultramar Diamond Shamrock's seven-year agreement to use our pipelines and
       terminals will be suspended if material changes in market conditions
       occur that have a material adverse effect on Ultramar Diamond Shamrock,
       which could adversely affect our ability to make distributions to our
       unitholders.

     - Any loss by Ultramar Diamond Shamrock of customers in the markets served
       by our refined product pipelines may adversely affect our ability to make
       distributions to unitholders.

     - If our assumptions concerning population growth are inaccurate or
       Ultramar Diamond Shamrock's growth strategy is not successful, our
       ability to make or increase distributions to unitholders may be adversely
       affected.

     - New competing refined product pipelines could cause downward pressure on
       market prices, as a result of which Ultramar Diamond Shamrock might
       decrease the volumes transported in our pipelines.

     - If one or more of our tariff rates is reduced, if future increases in our
       tariff rates do not allow us to recover future increases in our costs, or
       if ratemaking methodologies are altered, our ability to make
       distributions to unitholders may be adversely affected.

     - A material decrease in the supply, or a material increase in the price,
       of crude oil available for transport through our pipelines to Ultramar
       Diamond Shamrock's refineries, could materially reduce our ability to
       make distributions to unitholders.

     - If we are not able to successfully acquire, expand, and build pipelines
       and other logistics assets or attract shippers in addition to Ultramar
       Diamond Shamrock, the growth of our business will be limited.

     - Any reduction in the capability of or the allocations to our shippers on
       interconnecting third party pipelines could cause a reduction of volumes
       transported in our pipelines and could negatively affect our ability to
       distribute cash to unitholders.

     - Ultramar Diamond Shamrock and its affiliates have conflicts of interest
       and limited fiduciary responsibilities, which may permit them to favor
       their own interests to the detriment of unitholders.

                                        4
<PAGE>   11

     - Our indebtedness may limit our ability to borrow additional funds, make
       distributions to unitholders, or capitalize on business opportunities.

     - The transportation and storage of crude oil and refined products is
       subject to federal and state laws relating to environmental protection
       and operational safety and results in a risk that crude oil and other
       hydrocarbons may be released into the environment, potentially causing
       substantial expenditures that could limit our ability to make
       distributions to unitholders.

RISKS INHERENT IN AN INVESTMENT IN SHAMROCK LOGISTICS

     - Even if the unitholders are dissatisfied, they cannot remove our general
       partner without its consent.


     - Purchasers of common units will experience immediate and substantial
       dilution of $7.13 per common unit.


     - We may issue additional common units without your approval, which may
       dilute existing unitholders' interests.

     - Our general partner has a limited call right that may require you to sell
       your common units at an undesirable time or price.

     - You may not have limited liability if a State or court finds that we are
       not in compliance with the applicable statutes or that unitholder action
       constitutes control of our business.

TAX RISKS

     - The IRS could treat us as a corporation, which would substantially reduce
       the cash available for distribution to unitholders.

     - A successful IRS contest of the federal income tax positions we take may
       adversely impact the market for common units and the costs of any contest
       will be borne by some or all of the unitholders.

     - You may be required to pay taxes on income from us even if you do not
       receive any cash distributions.

     - Tax gain or loss on the disposition of common units could be different
       than expected.

     - Investors, other than individuals who are U.S. residents, may have
       adverse tax consequences from owning common units.


     - We have registered as a "tax shelter" with the Secretary of the Treasury.
       This may increase the risk of an IRS audit of us or a unitholder.


     - We treat a purchaser of common units as having the same tax benefits as
       the seller. A successful IRS challenge could adversely affect the value
       of the common units.

     - You will likely be subject to state and local taxes and return filing
       requirements as a result of an investment in common units.

                                        5
<PAGE>   12

                  SHAMROCK LOGISTICS STRUCTURE AND MANAGEMENT

     Our subsidiary, Shamrock Logistics Operations, L.P., owns our operating
assets and conducts our operations. Upon consummation of the offering of the
common units:

     - Shamrock Logistics will own a 98.9899% limited partner interest in
       Shamrock Logistics Operations;

     - Riverwalk Logistics, L.P., our general partner, will own a 1% general
       partner interest in Shamrock Logistics, a 1.0101% general partner
       interest in Shamrock Logistics Operations, and all of the incentive
       distribution rights; and

     - UDS Logistics LLC, the limited partner of our general partner, will own a
       combined 75.5% limited partner interest in us and Shamrock Logistics
       Operations.

     Our general partner, therefore, will own a 2% general partner interest in
us and Shamrock Logistics Operations on a combined basis. In this prospectus, we
refer to this interest owned by the general partner as its combined 2% general
partner interest.

     Our general partner will have sole responsibility for the management and
operation of our business. The senior management and employees of Ultramar
Diamond Shamrock and its affiliates who currently manage and operate our
business will continue to do so. Ultramar Diamond Shamrock and its affiliates
will receive an annual administrative fee, initially in the amount of $5.2
million, in connection with its management of our business.

     Our principal executive offices are located at 6000 North Loop 1604 West,
San Antonio, Texas 78249-1112, and our phone number is (210) 592-2000.

     The chart on the following page depicts the organization and ownership of
Shamrock Logistics and Shamrock Logistics Operations after giving effect to the
offering of the common units and the related transactions. The percentages
reflected in the organization chart represent the approximate ownership interest
in Shamrock Logistics and Shamrock Logistics Operations individually and not on
a combined basis, unlike the other presentations in this prospectus.

                                        6
<PAGE>   13

                                    [CHART]
           EFFECTIVE AGGREGATE OWNERSHIP OF SHAMROCK LOGISTICS, L.P.
                    AND SHAMROCK LOGISTICS OPERATIONS, L.P.
Organizational chart depicting the following organizational and ownership
information.
  OWNERSHIP OF UDS LOGISTICS, LLC (THE LIMITED PARTNER OF THE GENERAL PARTNER)

<TABLE>
<S>                                            <C>
             Percentage Interest                                   Interest Held By
            ----------------------                                ------------------
                     100%                                     Ultramar Diamond Shamrock
                                                          and its wholly owned subsidiaries
</TABLE>

  OWNERSHIP OF SHAMROCK LOGISTICS GP, LLC (THE GENERAL PARTNERS OF THE GENERAL
                                    PARTNER)

<TABLE>
<S>                                            <C>
             Percentage Interest                                   Interest Held By
            ----------------------                                ------------------
                     100%                                     Ultramar Diamond Shamrock
                                                          and its wholly owned subsidiaries
</TABLE>

          OWNERSHIP OF RIVERWALK LOGISTICS, L.P. (THE GENERAL PARTNER)

<TABLE>
<S>                                            <C>
       Percentage/Type of Interest Held                            Interest Held By
   ---------------------------------------                        ------------------
             0.1% general partner                             Shamrock Logistics GP, LLC
            99.9% limited partner                                 UDS Logistics, LLC
</TABLE>

            OWNERSHIP OF SHAMROCK LOGISTICS, L.P. (THE PARTNERSHIP)

<TABLE>
<S>                             <C>                             <C>

  Percentage/Type of Interest     Number/Type of Unit Rights           Interest Held By
             Held               -------------------------------       ------------------
-------------------------------
     1.0% general partner        Incentive Distribution Rights     Riverwalk Logistics, L.P.
     76.2% limited partner       8,999,322 subordinated units         UDS Logistics, LLC
                                              and
                                    4,399,322 common units
     22.8% limited partner          4,000,000 common units            public unitholders
</TABLE>

                OWNERSHIP OF SHAMROCK LOGISTICS OPERATIONS, L.P.
                          (THE OPERATING PARTNERSHIP)

<TABLE>
<S>                                            <C>
       Percentage/Type of Interest Held                            Interest Held By
   ---------------------------------------                        ------------------
           1.0101% general partner                            Riverwalk Logistics, L.P.
           98.9899% limited partner                            Shamrock Logistics, L.P.
</TABLE>

              OWNERSHIP OF SKELLY-BELVIEU PIPELINE COMPANY, L.L.C.

<TABLE>
<S>                                            <C>
             Percentage Interest                                   Interest Held By
            ----------------------                                ------------------
                     50%                                 Shamrock Logistics Operations, L.P.
                     50%                                      Phillips Petroleum Company
</TABLE>

                                        7
<PAGE>   14

                                  THE OFFERING

Common units offered.......  4,000,000 common units.

                             4,600,000 common units if the underwriters exercise
                             their over-allotment option in full.

Units outstanding after
this offering..............  8,399,322 common units and 8,999,322 subordinated
                             units, representing 47.3% and 50.7% limited partner
                             interests in Shamrock Logistics.

                             If the underwriters exercise their over-allotment
                             option in full, 8,999,322 common units and
                             8,999,322 subordinated units, representing 49.0%
                             and 49.0% limited partner interests in Shamrock
                             Logistics, will be outstanding.

Cash distributions.........  We are required to distribute all of our cash on
                             hand at the end of each quarter, less reserves
                             established by our general partner in its
                             discretion. We refer to this cash as "available
                             cash" and its meaning is defined in our partnership
                             agreement. We have also included this definition in
                             our glossary in Appendix C. The amount of this cash
                             may be greater than or less than the minimum
                             quarterly distribution.

                             Prior to making quarterly distributions, our
                             general partner may establish reserves for our
                             operations. Our general partner has broad
                             discretion in establishing reserves.

                             In general, we intend to pay cash distributions
                             each quarter in the following manner:

                             - first, 98% to the common units and 2% to the
                               general partner, until each common unit has
                               received a minimum quarterly distribution of
                               $0.60 plus any arrearages in the payment of the
                               minimum quarterly distribution from prior
                               quarters; and

                             - second, 98% to the subordinated units and 2% to
                               the general partner, until each subordinated unit
                               has received a minimum quarterly distribution of
                               $0.60.

                             If cash distributions exceed $0.60 per unit in a
                             quarter, our general partner will receive a higher
                             percentage of the cash distributed. If cash
                             distributions exceed still higher target levels,
                             our general partner will receive increasingly
                             higher percentages of the cash distributed, up to
                             50%. We refer to these distributions as incentive
                             distributions.

                             We intend to make cash distributions generally
                             within 45 days after the end of each quarter. We
                             will make the first distribution to unitholders
                             within 45 days after the quarter ending December
                             31, 2000. We will adjust the minimum quarterly
                             distribution downward for the period from the
                             closing of the offering through December 31, 2000
                             based on the actual length of the period.

                             Based on the assumptions listed on page 38 of the
                             prospectus, we believe that we will have sufficient
                             cash from operations to enable us to make the
                             minimum quarterly distribution of $0.60 on the
                             common units and the subordinated units for each
                                        8
<PAGE>   15


                             quarter through December 31, 2001. The amount of
                             pro forma cash available for distribution generated
                             during the year ended December 31, 1999 and the
                             nine and twelve months ended September 30, 2000, as
                             adjusted to reflect the revised tariff rates, would
                             have been sufficient to allow us to pay the full
                             minimum quarterly distribution on the common units
                             and the subordinated units during these periods.
                             Please read "Cash Available for Distribution."


Subordination period.......  The subordination period will end once we meet the
                             financial tests in the partnership agreement, but
                             it generally cannot end before December 31, 2005.

                             When the subordination period ends, all
                             subordinated units will convert into common units
                             on a one-for-one basis, and the common units will
                             no longer be entitled to arrearages.

Issuance of additional
units......................  In general, during the subordination period we can
                             issue up to 4,199,661 additional common units
                             without obtaining unitholder approval. We can also
                             issue an unlimited number of common units for
                             acquisitions that increase cash flow from
                             operations per unit on a pro forma basis.


Voting rights..............  Our general partner will manage and operate
                             Shamrock Logistics. Unlike the holders of common
                             stock in a corporation, you will have only limited
                             voting rights on matters affecting our business.
                             You will have no right to elect our general partner
                             or the directors of its general partner on an
                             annual or other continuing basis. The general
                             partner may not be removed except by a vote of the
                             holders of at least 66 2/3% of the outstanding
                             units, including any units owned by our general
                             partner and its affiliates.


Limited call right.........  If at any time not more than 20% of the outstanding
                             common units are held by persons other than our
                             general partner and its affiliates, our general
                             partner has the right, but not the obligation, to
                             purchase all of the remaining common units at a
                             price not less than the then current market price
                             of the common units.


Estimated ratio of taxable
  income to
  distributions............  We estimate that if you hold the common units you
                             purchase in this offering through December 31,
                             2003, you will be allocated, on a cumulative basis,
                             an amount of federal taxable income for that period
                             that will be approximately 20% of the cash
                             distributed to you with respect to that period.
                             Please read "Tax Considerations -- Tax Treatment of
                             Unitholders -- Ratio of Taxable Income to
                             Distributions" for the basis of this estimate.


NYSE symbol................  "UDL"

                                        9
<PAGE>   16

         SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA


     The following tables set forth summary historical financial and operating
data of the Ultramar Diamond Shamrock logistics business and Shamrock Logistics
Operations, and pro forma financial and operating data of Shamrock Logistics, in
each case for the periods and as of the dates indicated. "Ultramar Diamond
Shamrock logistics business" refers to the assets and liabilities and related
operations transferred to Shamrock Logistics Operations effective July 1, 2000.
The assets and liabilities of the Ultramar Diamond Shamrock logistics business
have been transferred at historical cost to Shamrock Logistics Operations. These
tables are derived from, should be read together with, and are qualified in
their entirety by reference to the historical and pro forma financial statements
and accompanying notes included elsewhere in this prospectus.



     The pro forma financial information adjusts the historical financial
information to give effect to the formation of Shamrock Logistics and the
completion of this offering and related transactions. The historical and pro
forma financial statements included in this prospectus reflect the actual
pipeline tariff rates in effect during the periods presented. The tariff rates
on many of the pipelines were revised effective as of January 1, 2000 to reflect
the total cost of the pipeline, the current capacity and utilization of the
pipelines, and other market conditions. For comparative purposes, we have
included a pro forma, as adjusted column for the year ended December 31, 1999
and an as adjusted column for the nine months ended September 30, 1999, to give
effect to the revised tariff rates. In addition, beginning January 1, 1999, the
Ultramar Diamond Shamrock logistics business began charging a separate
terminalling fee at its refined product terminals.



     We define Adjusted EBITDA as operating income, less gain on sale of
property, plant and equipment, plus depreciation and amortization, plus
distributions from Skelly-Belvieu Pipeline Company, of which we own 50%, and
excluding the impact of volumetric expansions, contractions, and measurement
discrepancies in our pipelines. Beginning July 1, 2000, the impact of these
exclusions is borne by the shippers in our pipelines and is therefore not
reflected in operating income. Adjusted EBITDA provides additional information
for evaluating our ability to make the minimum quarterly distribution and is
presented solely as a supplemental measure. You should not consider Adjusted
EBITDA as an alternative to net income, income before income taxes, cash flows
from operations, or any other measure of financial performance presented in
accordance with generally accepted accounting principles. Our Adjusted EBITDA
may not be comparable to EBITDA or similarly titled measures of other entities
as other entities may not calculate EBITDA in the same manner as we do. Excluded
from Adjusted EBITDA is the impact of volumetric expansions, contractions, and
measurement discrepancies in our pipelines of a $1,647,000 loss for 1997, a
$555,000 loss for 1998, and a $378,000 loss for 1999.


     Maintenance capital expenditures represent capital expenditures to replace
partially or fully depreciated assets to maintain the existing operating
capacity of existing assets and extend their useful lives. Expansion capital
expenditures represent capital expenditures to expand our operating capacity of
existing assets, whether through construction or acquisition. Repair and
maintenance expenses associated with existing assets that are minor in nature
and do not extend the useful life of existing assets are charged to operating
expenses as incurred. The capital expenditure amounts in the following table
exclude the capital expenditures relating to our interest in the Skelly-Belvieu
Pipeline Company.

     Use of the term throughput in this prospectus generally refers to the crude
oil or refined product barrels, as applicable, that pass through each pipeline,
even if those barrels also are transported in another of our pipelines for which
we received a separate tariff. In the case of four of our pipelines, the
pipelines transport barrels relating to two tariff rates, one of which begins at
this pipeline's origin and ends at this pipeline's destination, and one of which
is a longer tariff route with an origin or destination in another pipeline of
ours which connects to this pipeline. Throughput for those pipelines reflect
only the barrels subject to the tariff route beginning at the pipeline's origin
and ending at the pipeline's destination. To accurately determine the actual
capacity utilization of those pipelines, as well as aggregate capacity
utilization, all barrels passing through the pipelines have been taken into
account for purposes of calculating capacity utilization.

                                       10
<PAGE>   17

     The pro forma financial information adjusts the historical financial
information to give effect to the formation of Shamrock Logistics and the
completion of this offering and related transactions. The pro forma as adjusted
financial information further adjusts the pro forma financial information to
give effect to the revised tariff rates. The amounts in the table below, except
for the operating data and per unit data, are in thousands.


<TABLE>
<CAPTION>
                                                                                            YEAR ENDED
                                                                                         DECEMBER 31, 1999
                                                        YEAR ENDED DECEMBER 31,       -----------------------
                                                     ------------------------------                PRO FORMA
                                                     1997(1)      1998       1999     PRO FORMA   AS ADJUSTED
                                                     -------      ----       ----     ---------   -----------
                                                                                            (unaudited)
<S>                                                  <C>        <C>        <C>        <C>         <C>
STATEMENT OF INCOME DATA:
Revenues...........................................  $84,881    $ 97,883   $109,773   $109,773     $ 87,881
Operating costs and expenses:
  Operating expenses...............................   24,042      28,027     24,248     24,248       24,248
  General and administrative expenses..............    4,761       4,552      4,698      4,698        4,698
  Depreciation and amortization....................   11,328      12,451     12,318     12,318       12,318
  Taxes other than income taxes....................    4,235       4,152      4,765      4,765        4,765
                                                     --------   --------   --------   --------     --------
        Total operating costs and expenses.........   44,366      49,182     46,029     46,029       46,029
Gain on sale of property, plant and equipment(2)...       --       7,005      2,478      2,478        2,478
                                                     --------   --------   --------   --------     --------
Operating income...................................   40,515      55,706     66,222     66,222       44,330
  Interest expense.................................     (158)       (796)      (777)    (5,930)      (5,930)
  Equity income from Skelly-Belvieu................    3,025       3,896      3,874      3,874        3,874
                                                     --------   --------   --------   --------     --------
Income before income taxes.........................   43,382      58,806     69,319     64,166       42,279
  Provision for income taxes.......................  (16,559)    (22,517)   (26,521)        --           --
                                                     --------   --------   --------   --------     --------
Net income.........................................  $26,823    $ 36,289   $ 42,798   $ 64,166     $ 42,279
                                                     ========   ========   ========   ========     ========
Pro forma net income per unit......................                                   $   3.61     $   2.38
                                                                                      ========     ========
Pro forma weighted average limited partners' units
  outstanding......................................                                     17,399       17,399
                                                                                      ========     ========
OTHER FINANCIAL DATA:
Adjusted EBITDA....................................  $57,499    $ 65,399   $ 80,678   $ 80,678     $ 58,786
Distributions from Skelly-Belvieu..................    4,009       3,692      4,238      4,238        4,238
Net cash provided by operating activities..........   44,731      44,950     49,977
Net cash provided by (used in) investing
  activities.......................................  (52,141)     18,395      6,865
Net cash provided by (used in) financing
  activities.......................................    7,410     (63,345)   (56,842)
Maintenance capital expenditures...................      633       2,345      2,060      2,060        2,060
Expansion capital expenditures.....................   12,359       9,952      7,313      7,313        7,313
        Total capital expenditures.................   12,992      12,297      9,373      9,373        9,373
OPERATING DATA:
Crude oil pipeline throughput (barrels/day)........  282,736     265,243    280,041    280,041      280,041
Refined product pipeline throughput
  (barrels/day)....................................  257,183     268,064    297,397    297,397      297,397
Refined product terminal throughput
  (barrels/day)....................................  136,454     144,093    161,340    161,340      161,340
</TABLE>



<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                     ------------------------------
                                                       1997       1998       1999
                                                       ----       ----       ----
<S>                                                  <C>        <C>        <C>        <C>         <C>
BALANCE SHEET DATA:
Net property, plant and equipment..................  $319,169   $297,121   $284,954
Total assets.......................................  346,082     321,002    308,213
Long-term debt, including current portion..........   11,738      11,455     11,102
Net parent investment/partners' equity.............  295,403     268,497    254,806
</TABLE>


---------------

(1) On September 25, 1997, Ultramar Diamond Shamrock acquired Total Petroleum
    (North America) Ltd. in a purchase business combination. The purchase price
    was allocated to the various assets (including three refineries, 550
    convenience stores and various crude oil and refined product pipeline and
    storage assets) and liabilities acquired based on their fair value. The
    acquired assets included in the Ultramar Diamond Shamrock logistics business
    consist of pipelines and a crude oil storage facility serving the Ardmore
    refinery, which were allocated $43,158,000 of the purchase price, including
    $5,994,000 of goodwill. The results of operations of the crude oil and
    refined product pipelines and the crude oil storage facility serving the
    Ardmore refinery have been included from the date of acquisition.

(2) In March 1998, the Ultramar Diamond Shamrock logistics business recognized a
    gain on the sale of a 25% interest in the McKee to El Paso refined product
    pipeline and the El Paso refined product terminal to Phillips Petroleum
    Company. In August 1999, the Ultramar Diamond Shamrock logistics business
    recognized a gain on the sale of an additional 8.33% interest in the McKee
    to El Paso refined product pipeline and terminal to Phillips Petroleum
    Company.

                                       11
<PAGE>   18


     Excluded from Adjusted EBITDA is the impact of volumetric expansions,
contractions and measuring discrepancies in our pipelines of a $62,000 gain in
the first nine months of 1999 and a $916,000 loss in the first nine months of
2000. The as adjusted financial information adjusts the historical financial
information to give effect to the revised tariff rates. The amounts in the table
below, except for the operating data and per unit data, are in thousands and are
unaudited.



<TABLE>
<CAPTION>
                                                                  NINE MONTHS          NINE MONTHS ENDED
                                                                     ENDED               SEPTEMBER 30,
                                                                 SEPTEMBER 30,      -----------------------
                                                              -------------------      1999         2000
                                                                1999       2000     AS ADJUSTED   PRO FORMA
                                                                ----       ----     -----------   ---------
<S>                                                           <C>        <C>        <C>           <C>
STATEMENT OF INCOME DATA:
Revenues....................................................  $ 81,535   $ 69,406    $ 65,397     $ 69,406
Operating costs and expenses:
  Operating expenses........................................    17,183     22,465      17,183       22,465
  General and administrative expenses.......................     3,523      3,771       3,523        3,771
  Depreciation and amortization.............................     9,162      9,889       9,162        9,889
  Taxes other than income taxes.............................     3,624      3,318       3,624        3,318
                                                              --------   --------    --------     --------
        Total operating costs and expenses..................    33,492     39,443      33,492       39,443
                                                              --------   --------    --------     --------
  Gain on sale of property, plant and equipment.............     2,478         --       2,478           --
                                                              --------   --------    --------     --------
Operating income............................................    50,521     29,963      34,383       29,963
  Interest expense..........................................      (669)    (2,808)       (669)      (4,519)
  Equity income from Skelly-Belvieu.........................     2,370      3,044       2,370        3,044
                                                              --------   --------    --------     --------
Income before income taxes..................................    52,222     30,199      36,084       28,488
  Benefit (provision) for income taxes......................   (19,980)    30,812     (13,806)          --
                                                              --------   --------    --------     --------
Net income..................................................  $ 32,242   $ 61,011    $ 22,278     $ 28,488
                                                              ========   ========    ========     ========
Pro forma net income per unit...............................                                      $   1.60
                                                                                                  ========
Pro forma weighted average limited partners' units
  outstanding...............................................                                        17,399
                                                                                                  ========
OTHER FINANCIAL DATA:
Adjusted EBITDA.............................................  $ 59,751   $ 44,256    $ 43,613     $ 44,256
Distributions from Skelly-Belvieu...........................     2,608      3,488       2,608        3,488
Net cash provided by operating activities...................    40,420     18,140
Net cash provided by (used in) investing activities.........     8,178     (2,398)
Net cash used in financing activities.......................   (48,598)   (15,741)
Maintenance capital expenditures............................     1,842      1,804       1,842        1,804
Expansion capital expenditures..............................     4,588      4,082       4,588        4,082
        Total capital expenditures..........................     6,430      5,886       6,430        5,886
OPERATING DATA:
Crude oil pipeline throughput (barrels/day).................   277,930    296,413     277,930      296,413
Refined product pipeline throughput (barrels/day)...........   294,799    315,807     294,799      315,807
Refined product terminal throughput (barrels/day)...........   159,367    167,650     159,367      167,650
</TABLE>



<TABLE>
                                                                              SEPTEMBER 30,
                                                              ---------------------------------------------
                                                                1999       2000                     2000
                                                              --------   --------                 ---------
<S>                                                           <C>        <C>        <C>           <C>
BALANCE SHEET DATA:
Net property, plant and equipment...........................  $285,092    281,176                  281,176
Total assets................................................   308,683    319,035                  313,419
Long-term debt, including current portion...................    11,149    118,494                   74,536
Net parent investment/partners' equity......................   252,447    195,191                  233,533
</TABLE>


                                       12
<PAGE>   19

        SUMMARY OF CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

     Riverwalk Logistics, L.P., our general partner, has a legal duty to manage
us in a manner beneficial to our unitholders. This legal duty originates in
statutes and judicial decisions and is commonly referred to as a "fiduciary"
duty. However, because Riverwalk Logistics is indirectly owned by Ultramar
Diamond Shamrock the officers and directors of Shamrock Logistics GP, LLC, who
manage and operate our general partner, have fiduciary duties to manage the
business of our general partner in a manner beneficial to Ultramar Diamond
Shamrock and its affiliates. As a result of this relationship, conflicts of
interest may arise in the future between Shamrock Logistics and our unitholders,
on the one hand, and our general partner and its affiliates, on the other hand.
For a more detailed description of the conflicts of interest and fiduciary
responsibilities of our general partner, including issues related to setting
tariff rates, please read "Conflicts of Interest and Fiduciary
Responsibilities."

     Our partnership agreement limits the liability and reduces the fiduciary
duties of our general partner to the unitholders. Our partnership agreement also
restricts the remedies available to unitholders for actions that might otherwise
constitute breaches of our general partner's fiduciary duty. By purchasing a
common unit, you are treated as having consented to various actions contemplated
in the partnership agreement and conflicts of interest that might otherwise be
considered a breach of fiduciary or other duties under applicable state law.


     Ultramar Diamond Shamrock and its controlled affiliates have generally
agreed not to engage in the business of transporting crude oil or refined
products or operating crude oil storage or refined products terminalling assets
in the southwestern and Rocky Mountain regions of the United States, although
there are exceptions to this agreement. For a more detailed discussion of this
noncompete agreement, please read "Certain Relationships and Related
Transactions -- Omnibus Agreement."


                                       13
<PAGE>   20

                                  RISK FACTORS

     Limited partner interests are inherently different from the capital stock
of a corporation, although many of the business risks to which we are subject
are similar to those that would be faced by a corporation engaged in a similar
business. You should carefully consider the following risk factors together with
all of the other information included in this prospectus in evaluating an
investment in the common units.

     If any of the following risks were actually to occur, our business,
financial condition, or results of operations could be materially adversely
affected. In that case, the trading price of our common units could decline and
you could lose all or part of your investment.

RISKS INHERENT IN OUR BUSINESS

  WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FROM OPERATIONS TO ENABLE US TO
  PAY THE MINIMUM QUARTERLY DISTRIBUTION ON THE COMMON UNITS EVERY QUARTER.

     Because the amount of cash we are able to distribute on the common units is
principally dependent on the amount of cash we are able to generate from
operations, which will fluctuate from quarter to quarter based on our
performance, we may not be able to pay the minimum quarterly distribution on the
common units for each quarter. The amount of cash flow we generate from
operations is in turn principally dependent on the average daily volumes of
crude oil and refined products transported through our pipelines, the tariff
rates and terminalling fees we charge, and our level of operating costs.

     In determining the number of units we would have outstanding after the
offering and the minimum quarterly distribution, and therefore our expected cash
available for distribution, we necessarily made some assumptions about
throughput, tariffs and fees and operating costs. Whether these assumptions are
realized is not within our control or the control of our general partner and if
they are not realized, we may not generate sufficient cash to pay the full
minimum quarterly distribution on the common units.

     Other factors affecting the actual amount of cash that we will have
available to distribute to unitholders include the following:

     - required principal and interest payments on our debt;

     - the costs of acquisitions;

     - restrictions contained in our debt instruments;

     - issuances of debt and equity securities;

     - fluctuations in working capital;

     - capital expenditures; and

     - adjustments in reserves made by the general partner in its discretion.

     Cash distributions are dependent primarily on cash flow, including cash
flow from financial reserves and working capital borrowings, and not solely on
profitability, which is affected by non-cash items. Therefore, we may make cash
distributions during periods when we record losses and may not make cash
distributions during periods when we record net income.

  YOU MAY RECEIVE LESS THAN THE MINIMUM QUARTERLY DISTRIBUTION BECAUSE FEES AND
  COST REIMBURSEMENTS DUE TO ULTRAMAR DIAMOND SHAMROCK AND ITS AFFILIATES MAY BE
  SUBSTANTIAL AND WILL REDUCE OUR CASH AVAILABLE FOR DISTRIBUTION.

     Prior to making any distribution on the common units, we will pay Ultramar
Diamond Shamrock and its affiliates an annual administrative fee that will
initially equal $5.2 million as a

                                       14
<PAGE>   21


reimbursement of the overhead and administrative expenses incurred by them on
our behalf. Our general partner, with approval and consent of the conflicts
committee of its general partner, will have the right to increase the annual
administrative fee by up to 1.5% each year, as further adjusted for inflation,
during the eight-year term of the services agreement between us and the general
partner and may agree to further increases in connection with expansions of our
operations through the acquisition or construction of new logistics assets that
require additional management personnel. Additionally, we will reimburse
Ultramar Diamond Shamrock and its affiliates for direct expenses it incurs on
our behalf (for example, salaries). On a pro forma basis for 1999, we estimate
that the direct expenses to be reimbursed to Ultramar Diamond Shamrock and its
affiliates would have been $9.7 million. The payment of the annual
administrative fee and the reimbursement of expenses could adversely affect our
ability to make cash distributions to our unitholders.


  WE DEPEND UPON ULTRAMAR DIAMOND SHAMROCK FOR THE CRUDE OIL AND REFINED
  PRODUCTS TRANSPORTED IN OUR PIPELINES AND HANDLED AT OUR TERMINALS AND STORAGE
  FACILITIES, AND ANY REDUCTION IN THOSE QUANTITIES COULD REDUCE OUR ABILITY TO
  MAKE DISTRIBUTIONS TO OUR UNITHOLDERS.

     Because of the geographic location of our pipelines, terminals, and storage
facilities, we depend almost exclusively upon Ultramar Diamond Shamrock to
provide throughput for our pipelines and terminals. If Ultramar Diamond Shamrock
were to decrease the throughput of crude oil and/or refined products transported
in our pipelines for any reason, we would experience great difficulty in
replacing those lost barrels. Because our operating costs are primarily fixed, a
reduction in throughput would result in not only a reduction of revenues but a
decline in net income and cash flow of similar or greater magnitude, which would
reduce our ability to make distributions to our unitholders.

     Ultramar Diamond Shamrock may reduce throughput in our pipelines either
because of market conditions that affect refiners generally or because of
factors that specifically affect Ultramar Diamond Shamrock. These conditions and
factors include the following:

     - a decrease in demand for refined products in the markets served by our
       pipelines;

     - a temporary or permanent decline in the ability of the McKee, Three
       Rivers, or Ardmore refineries to produce refined products;

     - a decision by Ultramar Diamond Shamrock to redirect refined products
       transported in our pipelines to markets not served by our pipelines or to
       transport crude oil other than in our pipelines;

     - a loss of customers by Ultramar Diamond Shamrock in the markets served by
       our pipelines or a failure to gain additional customers in growing
       markets; and

     - the completion of competing refined product pipelines in the western,
       southwestern, and Rocky Mountain market regions.

  DISTRIBUTIONS TO UNITHOLDERS COULD BE ADVERSELY AFFECTED BY A SIGNIFICANT
  DECREASE IN DEMAND FOR REFINED PRODUCTS IN THE MARKETS SERVED BY OUR
  PIPELINES.

     Any sustained decrease in demand for refined products in the markets served
by our pipelines could result in a significant reduction in throughput in our
crude oil and refined product pipelines and therefore in our cash flow, reducing
our ability to make distributions to unitholders. Factors that could lead to a
decrease in market demand include:

     - a recession or other adverse economic condition that results in lower
       spending by consumers on gasoline, diesel, and travel;

     - higher fuel taxes or other governmental or regulatory actions that
       increase, directly or indirectly, the cost of gasoline;
                                       15
<PAGE>   22

     - an increase in fuel economy, whether as a result of a shift by consumers
       to more fuel-efficient vehicles or technological advances by
       manufacturers. There is also pending legislation in the U.S. Congress
       proposing to mandate higher fuel economy;

     - an increase in the market price of crude oil that leads to higher refined
       product prices, which may reduce demand for gasoline. Market prices for
       crude oil and refined products are subject to wide fluctuation in
       response to changes in global and regional supply over which neither we
       nor Ultramar Diamond Shamrock have any control, and recent significant
       increases in the price of crude oil may result in a lower demand for
       refined products; and

     - the increased use of alternative fuel sources, such as battery-powered
       engines. Several state and federal initiatives mandate this increased
       use. For example, under the Energy Policy Act of 1992, 75% of new
       vehicles purchased by state governments must use some type of alternative
       fuels by 2002, and California has enacted a law requiring that by the
       year 2003, 10% of all fleets delivered to California be zero-emissions
       vehicles.

  OUR ABILITY TO MAKE DISTRIBUTIONS TO UNITHOLDERS COULD BE REDUCED BY A
  MATERIAL DECLINE IN PRODUCTION BY ANY OF ULTRAMAR DIAMOND SHAMROCK'S MCKEE,
  THREE RIVERS, OR ARDMORE REFINERIES.

     Any significant curtailing of production at the McKee, Three Rivers, or
Ardmore refineries could, by reducing throughput in our pipelines, result in our
realizing materially lower levels of revenues and cash flow for the duration of
the shutdown. Operations at a refinery could be partially or completely shut
down, temporarily or permanently, as the result of a number of circumstances,
none of which are within our control, such as:

     - unscheduled turnarounds or catastrophic events at the refinery, such as
       the power failure and resulting fire at the Ardmore refinery which caused
       a 50% decrease in production for two months in the summer of 1998;

     - labor difficulties that result in a work stoppage or slowdown at a
       refinery;

     - environmental proceedings or other litigation that compel the cessation
       of all or a portion of the operations at a refinery;

     - increasingly stringent environmental regulations. The Clean Gasoline Act
       of 1999, currently pending before both the Senate and House of
       Representatives, would amend the Clean Air Act of 1990 to limit the
       concentration of sulfur in motor gasoline and diesel fuel;

     - a disruption in the supply of crude oil to a refinery; and

     - a governmental ban or other limitation on the use of an important product
       of the refinery.

     The magnitude of the effect on us of any shutdown will depend on the length
of the shutdown and the extent of the refinery operations affected by the
shutdown. Furthermore, we have no control over the factors that may lead to a
shutdown or the measures Ultramar Diamond Shamrock may take in response to a
shutdown. Ultramar Diamond Shamrock will make all decisions at the refineries
concerning levels of production, regulatory compliance, refinery turnarounds,
labor relations, environmental remediation, and capital expenditures.

                                       16
<PAGE>   23

  ULTRAMAR DIAMOND SHAMROCK'S SEVEN-YEAR AGREEMENT TO USE OUR PIPELINES AND
  TERMINALS WILL BE SUSPENDED IF MATERIAL CHANGES IN MARKET CONDITIONS OCCUR
  THAT HAVE A MATERIAL ADVERSE EFFECT ON ULTRAMAR DIAMOND SHAMROCK, WHICH COULD
  ADVERSELY AFFECT OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR UNITHOLDERS.

     If market conditions with respect to the transportation of crude oil or
refined products or with respect to the end markets in which Ultramar Diamond
Shamrock sells refined products change in a material manner such that Ultramar
Diamond Shamrock would suffer a material adverse effect if it were to continue
to use our pipelines and terminals at the required levels, Ultramar Diamond
Shamrock's obligation to us will be suspended during the period of the change in
market conditions to the extent required to avoid the material adverse effect.
Any suspension of Ultramar Diamond Shamrock's obligation could adversely affect
throughput in our pipelines and terminals and therefore our ability to make
distributions to our unitholders.


     The concepts of a material change in market conditions and material adverse
effect on Ultramar Diamond Shamrock are not defined in the agreement. However,
situations that might constitute a material change in market conditions having a
material adverse effect on Ultramar Diamond Shamrock include the cost of
transporting crude oil or refined products by our pipelines becoming materially
more expensive than transporting crude oil or refined products by other means or
a material change in refinery profit that makes it materially more advantageous
for Ultramar Diamond Shamrock to shift large volumes of refined products from
markets served by our pipelines to pipelines retained by Ultramar Diamond
Shamrock or owned by third parties. Ultramar Diamond Shamrock may suspend
obligations by presenting a certificate from its chief financial officer that
there has been a material change in market conditions having a material adverse
effect on Ultramar Diamond Shamrock. If we disagree with Ultramar Diamond
Shamrock, we have the right to refer the matter to an independent accounting
firm for resolution.


  ANY LOSS BY ULTRAMAR DIAMOND SHAMROCK OF CUSTOMERS IN THE MARKETS SERVED BY
  OUR REFINED PRODUCT PIPELINES MAY ADVERSELY AFFECT OUR ABILITY TO MAKE
  DISTRIBUTIONS TO UNITHOLDERS.

     Should Ultramar Diamond Shamrock's retail marketing efforts become
unsuccessful and result in declining or stagnant sales of its refined products,
Ultramar Diamond Shamrock would have to find other end-users for its refined
products. It may not choose or be able to replace lost branded retail sales
through wholesale, spot, and exchange sales. Any failure by Ultramar Diamond
Shamrock to replace lost branded retail sales could adversely affect throughput
in our pipelines and, therefore, our cash flow and ability to make distributions
to unitholders.

  IF OUR ASSUMPTIONS CONCERNING POPULATION GROWTH ARE INACCURATE OR ULTRAMAR
  DIAMOND SHAMROCK'S GROWTH STRATEGY IS NOT SUCCESSFUL, OUR ABILITY TO MAKE OR
  INCREASE DISTRIBUTIONS TO UNITHOLDERS MAY BE ADVERSELY AFFECTED.

     Our growth strategy is dependent upon:

     - the accuracy of our assumption that many of the markets that we serve in
       the southwestern and Rocky Mountain regions of the United States will
       experience population growth that is higher than the national average;
       and

     - upon the willingness and ability of Ultramar Diamond Shamrock to capture
       a share of this additional demand in its existing markets and to identify
       and penetrate new markets in the southwestern and Rocky Mountain regions
       of the United States.


     If our assumption about growth in market demand proves incorrect, Ultramar
Diamond Shamrock may not have any incentive to increase refinery capacity and
production, shift additional throughput to our pipelines, or shift volumes from
our lower tariff pipelines to our higher tariff pipelines, which would adversely
affect our growth strategy. Furthermore, Ultramar Diamond Shamrock is under no
obligation to pursue a growth strategy with respect to its

                                       17
<PAGE>   24

business that favors us. If Ultramar Diamond Shamrock chooses not, or is unable,
to gain additional customers in new or existing markets in the western,
southwestern, and Rocky Mountain regions of the United States, our growth
strategy would be adversely affected.

  NEW COMPETING REFINED PRODUCT PIPELINES COULD CAUSE DOWNWARD PRESSURE ON
  MARKET PRICES, AS A RESULT OF WHICH ULTRAMAR DIAMOND SHAMROCK MIGHT DECREASE
  THE VOLUMES TRANSPORTED IN OUR PIPELINES.


     We are aware of a number of proposals or industry discussions regarding
refined product pipeline projects that, if or when undertaken and completed,
could adversely impact some of the most significant markets we serve. One of
these projects, the Longhorn Pipeline, will transport refined products from the
Texas Gulf Coast to El Paso. Most of the pipeline has been constructed and it
has obtained regulatory approval but is awaiting the resolution of litigation to
commence operations. It is uncertain if and when this pipeline will commence
operations. Another of these announced projects, the southern section of the
Aspen Pipeline, which will transport refined products from western Texas to New
Mexico could begin its services as early as 2001. The completion of the Longhorn
Pipeline and the southern section of the Aspen Pipeline Project will increase
the amount of refined products available in the El Paso, New Mexico, and Arizona
markets, which could put downward pressure on refined product prices in those
markets. As a result, Ultramar Diamond Shamrock might not find it economically
attractive to maintain its current market share in those markets and might
decrease the throughput in our pipelines to those markets.


  IF ONE OR MORE OF OUR TARIFF RATES IS REDUCED, IF FUTURE INCREASES IN OUR
  TARIFF RATES DO NOT ALLOW US TO RECOVER FUTURE INCREASES IN OUR COSTS, OR IF
  RATEMAKING METHODOLOGIES ARE ALTERED, OUR ABILITY TO MAKE DISTRIBUTIONS TO
  UNITHOLDERS MAY BE ADVERSELY AFFECTED.

     Our interstate pipelines are subject to extensive regulation by the Federal
Energy Regulatory Commission under the Interstate Commerce Act. This Act allows
the FERC, shippers, and potential shippers to challenge our current rates that
are already effective and any proposed changes to those rates, as well as our
terms and conditions of service. The FERC may subject any proposed changes to
investigation and possible refund or reduce our current rates and order that we
pay reparations for overcharges caused by these rates during the two years prior
to the beginning of the FERC's investigation. In addition, a state commission
could also investigate our intrastate rates or our terms and conditions of
service on its own initiative or at the urging of a shipper or other interested
parties.

     Ultramar Diamond Shamrock has agreed not to challenge, or cause others to
challenge, our tariff rates for seven years. This agreement does not prevent
other shippers or future shippers from challenging our tariff rates. At the end
of the seven years, Ultramar Diamond Shamrock will be free to challenge, or
cause other parties to challenge, our tariff rates. If Ultramar Diamond Shamrock
or any third party is successful in challenging our tariff rates, we may not be
able to sustain our rates, which may adversely affect our revenues. Cash
available for distribution to you could be materially reduced by a successful
challenge to our rates.

     Despite Ultramar Diamond Shamrock's agreement not to challenge rates,
adverse market conditions could nevertheless cause us to lower our tariff rates.
Ultramar Diamond Shamrock may find it economically advantageous to reduce the
feedstock consumption or the production of refined products at the McKee, Three
Rivers, or Ardmore refineries or to transport refined products to markets other
than those we serve, any of which would have the effect of reducing throughput
in our pipelines. If a material change in market conditions occurs, the
pipelines and terminals usage agreement allows Ultramar Diamond Shamrock to
reduce throughput in our pipelines. Accordingly, we could be forced to lower our
tariff rates in an effort to make transportation through our pipelines
economically attractive to Ultramar Diamond Shamrock in order to maintain
throughput volumes. However, even a significant reduction of our tariffs may
                                       18
<PAGE>   25

not provide enough economic incentive to Ultramar Diamond Shamrock to maintain
historical throughput levels.

     Under the FERC's current ratemaking methodology, the maximum rate we may
charge with respect to interstate pipelines is adjusted up or down each year by
the percentage change in the producer price index for finished goods minus 1%.
The FERC's current methodology also allows us, in some circumstances, to change
rates based either on our cost of service, or market-based rates, or on a
settlement or agreement with all of our shippers, instead of the index-based
rate change. Under any of these methodologies, our ability to set rates based on
our true costs may be limited or delayed. If for any reason future increases in
our tariff rates are not sufficient to allow us to recover increases in our
costs, our ability to make distributions to unitholders may be adversely
affected.

     Potential changes to current ratemaking methods and procedures of the FERC
and state regulatory commissions may impact the federal and state regulations
under which we will operate in the future. In addition, if the FERC's petroleum
pipeline ratemaking methodology were reviewed by a federal appeals court and
changed, this change could reduce our revenues and reduce cash available for
distribution to our unitholders. Please read "Business -- Regulation -- Rate
Regulation" for more information on our tariff rates.

  A MATERIAL DECREASE IN THE SUPPLY, OR A MATERIAL INCREASE IN THE PRICE, OF
  CRUDE OIL AVAILABLE FOR TRANSPORT THROUGH OUR PIPELINES TO ULTRAMAR DIAMOND
  SHAMROCK'S REFINERIES, COULD MATERIALLY REDUCE OUR ABILITY TO MAKE
  DISTRIBUTIONS TO UNITHOLDERS.


     The volume of crude oil we transport in our crude oil pipelines depends on
the availability of attractively-priced crude oil produced in the areas
accessible to our crude oil pipelines, imported to our Corpus Christi storage
facilities, and received from common carrier pipelines outside of our areas of
operations. If Ultramar Diamond Shamrock does not replace volumes lost due to a
material temporary or permanent decrease in supply from any of these sources
with volumes transported in one of our other crude oil pipelines, we would
experience an overall decline in volumes of crude oil transported through our
pipelines and therefore a corresponding reduction in cash flow. Similarly, if
there were a material increase in the price of crude oil supplied from any of
these sources, either temporary or permanent, which caused Ultramar Diamond
Shamrock to reduce its shipments in the related crude oil pipelines, we could
experience a decline in volumes of crude oil transported in our pipelines and
therefore a corresponding reduction in cash flow. Furthermore, a reduction of
supply from our pipelines, either because of the unavailability or high price of
crude oil, would likely result in reduced production of refined product at the
McKee, Three Rivers, and Ardmore refineries, causing a reduction in the volumes
of refined products we transport and our cash flow. Some of the local gathering
systems that supply crude oil transported to McKee and Ardmore refineries are
experiencing a decline in production. Furthermore, international political and
economic uncertainties over which neither we nor Ultramar Diamond Shamrock have
any control may affect imports of crude oil.


  IF WE ARE NOT ABLE TO SUCCESSFULLY ACQUIRE, EXPAND, AND BUILD PIPELINES AND
  OTHER LOGISTICS ASSETS OR ATTRACT SHIPPERS IN ADDITION TO ULTRAMAR DIAMOND
  SHAMROCK, THE GROWTH OF OUR BUSINESS WILL BE LIMITED.

     We intend to grow our business in part through selective acquisitions,
expansions of pipelines, and construction of new pipelines, as well as by
attracting shippers in addition to Ultramar Diamond Shamrock. Each of these
components has uncertainties and risks associated with it, and none of these
approaches may be successful.

     We may be unable to consummate any acquisitions or identify attractive
acquisition candidates in the future, to acquire assets or businesses on
economically acceptable terms, or to obtain financing for any acquisition on
satisfactory terms or at all. Ultramar Diamond Shamrock

                                       19
<PAGE>   26

may not make any acquisitions that would provide acquisition opportunities to us
or, if these opportunities arose, they may not be on terms attractive to us.
Moreover, Ultramar Diamond Shamrock is not obligated in all instances to offer
to us logistics assets acquired as part of an acquisition by it. Ultramar
Diamond Shamrock is also under no obligation to sell to us any pipeline assets
being retained by it, except the Nuevo Laredo pipeline, the Wichita Falls crude
oil pipeline and storage facility and the Ringgold, Texas crude storage facility
which we may acquire under options.

     Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, technologies, and services of the acquired
companies or business segments, the diversion of management's attention from
other business concerns, and the potential loss of key employees of the acquired
businesses. As a result, our business could be adversely affected by an
acquisition.

     The construction of a new pipeline or the expansion of an existing
pipeline, by adding additional horsepower or pump stations or by adding a second
pipeline along an existing pipeline, involves numerous regulatory,
environmental, political, and legal uncertainties beyond our control. These
projects may not be completed on schedule or at all or at the budgeted cost.
Moreover, our revenues may not increase immediately upon the expenditure of
funds on a particular project. For instance, if we build a new pipeline, the
construction will occur over an extended period of time and we will not receive
any material increases in revenues until after completion of the project. This
could have an adverse affect on our ability to distribute cash to unitholders.

     Once we increase our capacity through acquisitions, construction of new
pipelines, or expansion of existing pipelines, we may not be able to obtain or
sustain throughput to utilize the new available capacity. The underutilization
of a recently acquired, constructed, or expanded pipeline could adversely affect
our ability to distribute cash to unitholders.

     We may not be able to obtain financing of any acquisitions, expansions, and
new construction on satisfactory terms or at all. Furthermore, any debt we incur
may adversely affect our ability to make distributions to the unitholders, or
any future acquisitions, expansions or new construction may dilute net income
per unit and distributions to the unitholders.

     We also plan to seek volumes of crude oil or refined products to transport
on behalf of shippers other than Ultramar Diamond Shamrock. However, volumes
transported by us for third parties have been very limited historically and
because of our lack of geographic relationship or inter-connections with other
refineries, we may not be able to obtain material third party volumes.

  ANY REDUCTION IN THE CAPABILITY OF OR THE ALLOCATIONS TO OUR SHIPPERS ON
  INTERCONNECTING THIRD PARTY PIPELINES COULD CAUSE A REDUCTION OF VOLUMES
  TRANSPORTED IN OUR PIPELINES AND COULD NEGATIVELY AFFECT OUR ABILITY TO
  DISTRIBUTE CASH TO UNITHOLDERS.

     Ultramar Diamond Shamrock and the other shippers in our pipelines are
dependent upon connections to third party pipelines both to receive crude oil
from the Texas Gulf Coast, the Permian Basin, and other areas and to deliver
refined products to outlying market areas in Arizona, the midwestern United
States, and the Rocky Mountain region of the United States. Any reduction of
capabilities in these interconnecting pipelines due to testing, line repair,
reduced operating pressures, or other causes could result in reduced volumes
transported in our pipelines. Similarly, any reduction in the allocations to our
shippers on these interconnecting pipelines because additional shippers begin
transporting volumes over the pipelines could also result in reduced volumes
transported in our pipelines. Any reduction in volumes transported in our
pipelines could adversely affect our profitability.

                                       20
<PAGE>   27

  ULTRAMAR DIAMOND SHAMROCK AND ITS AFFILIATES HAVE CONFLICTS OF INTEREST AND
  LIMITED FIDUCIARY RESPONSIBILITIES, WHICH MAY PERMIT THEM TO FAVOR THEIR OWN
  INTERESTS TO THE DETRIMENT OF UNITHOLDERS.

     Following the offering, Ultramar Diamond Shamrock and its affiliates will
have an aggregate 75.5% limited partner interest in us and Shamrock Logistics
Operations and will own and control our general partner. Conflicts of interest
may arise between Ultramar Diamond Shamrock and its affiliates, including the
general partner, on the one hand, and us, on the other hand. As a result of
these conflicts, the general partner may favor its own interests and the
interests of its affiliates over the interests of the unitholders. These
conflicts include, among others, the following situations:

     - Ultramar Diamond Shamrock, as the primary shipper in our pipelines, has
       an economic incentive to seek lower tariff rates for our pipelines and
       lower terminalling fees.

     - Some officers of Ultramar Diamond Shamrock, who will provide services to
       us, will also devote significant time to the businesses of Ultramar
       Diamond Shamrock and will be compensated by Ultramar Diamond Shamrock for
       the services rendered to them.

     - Neither the partnership agreement nor any other agreement requires
       Ultramar Diamond Shamrock to pursue a business strategy that favors us or
       utilizes our assets, including whether to increase or decrease refinery
       production or what markets to pursue or grow. Ultramar Diamond Shamrock's
       directors and officers have a fiduciary duty to make these decisions in
       the best interests of the stockholders of Ultramar Diamond Shamrock.

     - Ultramar Diamond Shamrock and its affiliates may engage in limited
       competition with us.

     - Ultramar Diamond Shamrock may use other transportation methods or
       providers for up to 25% of its crude oil and refined products and is not
       required to use our pipelines and terminals to the extent that there is a
       material change in the market conditions for the transportation of crude
       oil and refined products, or in the markets for refined products served
       by these refineries that has a material adverse effect on Ultramar
       Diamond Shamrock.

     - Our general partner is allowed to take into account the interests of
       parties other than us, such as Ultramar Diamond Shamrock, in resolving
       conflicts of interest, limiting its fiduciary duty to the unitholders.

     - Our general partner may limit its liability and reduce its fiduciary
       duties, while also restricting the remedies available to unitholders for
       actions that might, without the limitations, constitute breaches of
       fiduciary duty. As a result of purchasing units, holders consent to some
       actions and conflicts of interest that might otherwise constitute a
       breach of fiduciary or other duties under applicable state law.

     - Our general partner determines the amount and timing of asset purchases
       and sales, capital expenditures, borrowings, issuance of additional
       limited partner interests and reserves, each of which can affect the
       amount of cash that is distributed to unitholders.

     - Our general partner determines which costs incurred by Ultramar Diamond
       Shamrock and its affiliates are reimbursable by us.

     - The partnership agreement does not restrict our general partner from
       causing us to pay the general partner or its affiliates for any services
       rendered on terms that are fair and reasonable to us or entering into
       additional contractual arrangements with any of these entities on our
       behalf.

     - Our general partner controls the enforcement of obligations owed to us by
       our general partner and its affiliates, including the pipelines and
       terminals usage agreement with Ultramar Diamond Shamrock.
                                       21
<PAGE>   28

     - Our general partner decides whether to retain separate counsel,
       accountants or others to perform services for us.

     - In some instances, our general partner may cause us to borrow funds in
       order to permit the payment of distributions, even if the purpose or
       effect of the borrowing is to make a distribution on the subordinated
       units or to make incentive distributions or to hasten the expiration of
       the subordination period.

     The partnership agreement gives our general partner broad discretion in
establishing financial reserves for the proper conduct of our business. These
reserves also will affect the amount of cash available for distribution. Our
general partner may establish reserves for distributions on the subordinated
units, but only if those reserves will not prevent us from distributing the full
minimum quarterly distribution, plus any arrearages, on the common units for the
following four quarters.

  OUR INDEBTEDNESS MAY LIMIT OUR ABILITY TO BORROW ADDITIONAL FUNDS, MAKE
  DISTRIBUTIONS TO UNITHOLDERS, OR CAPITALIZE ON BUSINESS OPPORTUNITIES.

     Upon completion of the transactions contemplated in this prospectus, we
expect our total indebtedness to be $74.5 million, consisting of approximately
$63.7 million outstanding under our revolving credit facility and $10.8 million
of other partnership debt. Our leverage may:

     - adversely affect our ability to finance future operations and capital
       needs;

     - limit our ability to pursue acquisitions and other business
       opportunities; and

     - make our results of operations more susceptible to adverse economic or
       operating conditions.

     Assuming the underwriters do not exercise their over-allotment option, we
expect to make interest payments of approximately $5.9 million per year on the
amount of debt expected to be outstanding immediately after the offering of
which approximately $5.2 million will be interest payments under our revolving
credit facility and the remainder will be interest payments on the debt assumed
July 1, 2000.


     In addition, we will have approximately $56.3 million of aggregate unused
borrowing capacity under our revolving credit facility at the closing of this
offering. Future borrowings, under our revolving credit facility or otherwise,
could result in a significant increase in our leverage.


     The payment of principal and interest on our indebtedness will reduce the
cash available for distribution on the units. We will not be able to make any
distributions to our unitholders if there is or will be an event of default
under our debt agreements. Our ability to make principal and interest payments
depends on our future performance, which is subject to many factors, several of
which are outside our control.


     The revolving credit facility contains restrictive covenants that limit our
ability to incur additional debt and to engage in some types of transactions.
These limitations could reduce our ability to capitalize on business
opportunities that arise. Any subsequent refinancing of our current indebtedness
or any new indebtedness could have similar or greater restrictions.



     The revolving credit facility contains provisions relating to changes in
ownership. If these provisions are triggered, the outstanding debt may become
due. If that happens, we cannot guarantee that we would be able to pay the debt.
The general partner and its direct and indirect owners are not prohibited by the
partnership agreement from entering into a transaction that would trigger these
change-in-ownership provisions.


                                       22
<PAGE>   29

  THE TRANSPORTATION AND STORAGE OF CRUDE OIL AND REFINED PRODUCTS IS SUBJECT TO
  FEDERAL AND STATE LAWS RELATING TO ENVIRONMENTAL PROTECTION AND OPERATIONAL
  SAFETY AND RESULTS IN A RISK THAT CRUDE OIL AND OTHER HYDROCARBONS MAY BE
  RELEASED INTO THE ENVIRONMENT, POTENTIALLY CAUSING SUBSTANTIAL EXPENDITURES
  THAT COULD LIMIT OUR ABILITY TO MAKE DISTRIBUTIONS TO UNITHOLDERS.


     Our operations are subject to federal and state laws and regulations
relating to environmental protection and operational safety. Risks of
substantial costs and liabilities are inherent in pipeline, gathering, storage,
and terminalling operations, and we may incur these costs and liabilities in the
future.


     Moreover, it is possible that other developments, such as increasingly
strict environmental and safety laws, regulations and enforcement policies of
those laws, and claims for damages to property or persons resulting from our
operations, could result in substantial costs and liabilities to us. If we were
not able to recover these resulting costs through insurance or increased
revenues, cash distributions to unitholders could be adversely affected. The
transportation and storage of crude oil and refined products results in a risk
of a sudden or gradual release of crude oil or refined products into the
environment, potentially causing substantial expenditures for a response action,
significant government penalties, liability for natural resources damages to
government agencies, personal injury, or property damages to private parties and
significant business interruption.

RISKS INHERENT IN AN INVESTMENT IN SHAMROCK LOGISTICS

  EVEN IF THE UNITHOLDERS ARE DISSATISFIED, THEY CANNOT REMOVE OUR GENERAL
  PARTNER WITHOUT ITS CONSENT.

     The general partner will manage and operate Shamrock Logistics. Unlike the
holders of common stock in a corporation, you will have only limited voting
rights on matters affecting our business. You will have no right to elect the
general partner or the directors of its general partner on an annual or other
continuing basis. Furthermore, our general partner and its affiliates will own
sufficient units upon completion of the offering to be able to prevent its
removal as general partner.

     In addition, the effect of the following provisions of the partnership
agreement may be to discourage a person or group from attempting to remove our
general partner or otherwise change the management of Shamrock Logistics:

     - if the holders of at least 66 2/3% of the units remove the general
       partner without cause, all remaining subordinated units will
       automatically convert into common units and will share distributions with
       the existing common units pro rata, existing arrearages on the common
       units will be extinguished and the common units will no longer be
       entitled to arrearages if we fail to pay the minimum quarterly
       distribution in any quarter. Cause is narrowly defined to mean that a
       court of competent jurisdiction has entered a final, non-appealable
       judgment finding the general partner liable for actual fraud, gross
       negligence, or willful or wanton misconduct in its capacity as our
       general partner;

     - any units held by a person that owns 20% or more of any class of units
       then outstanding, other than the general partner and its affiliates,
       cannot be voted on any matter; and

     - the partnership agreement contains provisions limiting the ability of
       unitholders to call meetings or to acquire information about our
       operations, as well as other provisions limiting the unitholders' ability
       to influence the manner or direction of management.

     As a result of these provisions, the price at which the common units will
trade could be diminished because of the absence or reduction of a takeover
premium in the trading price.

                                       23
<PAGE>   30


  PURCHASERS OF COMMON UNITS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
  OF $7.13 PER COMMON UNIT.



     The assumed initial public offering price of $20.00 per unit exceeds pro
forma tangible book value of $12.87 per unit. Based on the assumed price, you
will incur immediate and substantial dilution of $7.13 per common unit. Please
read "Dilution."


  WE MAY ISSUE ADDITIONAL COMMON UNITS WITHOUT YOUR APPROVAL, WHICH MAY DILUTE
  EXISTING UNITHOLDERS' INTERESTS.

     During the subordination period, our general partner, without the approval
of the unitholders, may cause us to issue common units in a number of
circumstances such as:

     - the exercise of the underwriters' over-allotment option;

     - the conversion of the general partner interest and the incentive
       distribution rights as a result of the withdrawal of our general partner;
       or

     - other future issuances of common units.

     The issuance of additional common units or other equity securities of equal
or senior rank will have the following effects:

     - your proportionate ownership interest in Shamrock Logistics will
       decrease;

     - the amount of cash available for distribution on each unit may decrease;

     - since a lower percentage of total outstanding units will be subordinated
       units, the risk that a shortfall in the payment of the minimum quarterly
       distribution will be borne by the common unitholders will increase;

     - the relative voting strength of each previously outstanding unit may be
       diminished; and

     - the market price of the common units may decline.

     After the end of the subordination period, we may issue an unlimited number
of limited partner interests of any type without the approval of the
unitholders. Our partnership agreement does not give the unitholders the right
to approve our issuance of equity securities ranking junior to the common units
at any time.

  OUR GENERAL PARTNER HAS A LIMITED CALL RIGHT THAT MAY REQUIRE YOU TO SELL YOUR
  COMMON UNITS AT AN UNDESIRABLE TIME OR PRICE.

     If at any time our general partner and its affiliates own 80% or more of
the common units, our general partner will have the right, but not the
obligation, which it may assign to any of its affiliates or to us, to acquire
all, but not less than all, of the remaining common units held by unaffiliated
persons at a price not less than their then-current market price. As a result,
you may be required to sell your common units at an undesirable time or price
and may therefore not receive any return on your investment. You may also incur
a tax liability upon a sale of your units. For additional information about the
call right, please read "The Partnership Agreement -- Limited Call Right."

  YOU MAY NOT HAVE LIMITED LIABILITY IF A STATE OR COURT FINDS THAT WE ARE NOT
  IN COMPLIANCE WITH THE APPLICABLE STATUTES OR THAT UNITHOLDER ACTION
  CONSTITUTES CONTROL OF OUR BUSINESS.

     The limitations on the liability of holders of limited partner interests
for the obligations of a limited partnership have not been clearly established
in some states. You could be held liable in

                                       24
<PAGE>   31

some circumstances for Shamrock Logistics' obligations to the same extent as a
general partner if a state or a court determined that:

     - Shamrock Logistics had been conducting business in any state without
       compliance with the applicable limited partnership statute; or

     - the right or the exercise of the right by the unitholders as a group to
       remove or replace our general partner, to approve some amendments to the
       partnership agreement, or to take other action under the partnership
       agreement constituted participation in the "control" of Shamrock
       Logistics' business.

     The general partner, under applicable state law, has unlimited liability
for the obligations of the partnership, for example its debts and environmental
liabilities, if any, except for those contractual obligations of the partnership
that are expressly made without recourse to the general partner.

     In addition, under some circumstances a unitholder may be liable to
Shamrock Logistics for the amount of a distribution for a period of three years
from the date of the distribution. Please read "The Partnership
Agreement -- Limited Liability" for a discussion of the implications of the
limitations on liability to a unitholder.

TAX RISKS

     For a discussion of all of the expected material federal income tax
consequences of owning and disposing of common units, please read "Tax
Considerations."

  THE IRS COULD TREAT US AS A CORPORATION, WHICH WOULD SUBSTANTIALLY REDUCE THE
  CASH AVAILABLE FOR DISTRIBUTION TO UNITHOLDERS.

     The federal income tax benefit of an investment in us depends largely on
our classification as a partnership for federal income tax purposes. We have not
requested, and do not plan to request, a ruling from the IRS on this or any
other matter affecting us. We have, however, received an opinion of counsel
that, based on current law, we will be a partnership for federal income tax
purposes. Opinions of counsel are based on specified factual assumptions and are
not binding on the IRS or any court.

     If we were classified as a corporation for federal income tax purposes, we
would pay tax on our income at corporate rates, currently 35%, distributions
would generally be taxed again to you as corporate distributions, and no income,
gains, losses, or deductions would flow through to you. Because a tax would be
imposed upon us as an entity, the cash available for distribution to you would
be substantially reduced. Treatment of us as a corporation would result in a
material reduction in the anticipated cash flow and after-tax return to you and
thus would likely result in a substantial reduction in the value of the common
units.

     Current law may change so as to cause us to be taxable as a corporation for
federal income tax purposes or otherwise to be subject to entity-level taxation.
The partnership agreement provides that, if a law is enacted or existing law is
modified or interpreted in a manner that subjects us to taxation as a
corporation or otherwise subjects us to entity-level taxation for federal, state
or local income tax purposes, then distributions will be decreased to reflect
the impact of that law on us.

  A SUCCESSFUL IRS CONTEST OF THE FEDERAL INCOME TAX POSITIONS WE TAKE MAY
  ADVERSELY IMPACT THE MARKET FOR COMMON UNITS AND THE COSTS OF ANY CONTEST WILL
  BE BORNE BY SOME OR ALL OF THE UNITHOLDERS.

     We have not requested any ruling from the IRS with respect to our
classification as a partnership for federal income tax purposes or any other
matter affecting us. The IRS may adopt
                                       25
<PAGE>   32

positions that differ from counsel's conclusions expressed in this prospectus.
It may be necessary to resort to administrative or court proceedings in an
effort to sustain some or all of counsel's conclusions or positions we take. A
court may not concur with some or all of our conclusions. Any contest with the
IRS may materially and adversely impact the market for the common units and the
prices at which common units trade. In addition, the costs of any contest with
the IRS will be borne directly or indirectly by some or all of the unitholders
and the general partner.

  YOU MAY BE REQUIRED TO PAY TAXES ON INCOME FROM US EVEN IF YOU DO NOT RECEIVE
  ANY CASH DISTRIBUTIONS.

     You will be required to pay federal income taxes and, in some cases, state
and local income taxes on your share of our taxable income, whether or not you
receive cash distributions from us. You may not receive cash distributions equal
to your allocable share of our taxable income or even the tax liability that
results from that income. Further, you may incur a tax liability, in excess of
the amount of cash you receive, upon the sale of your common units.

  TAX GAIN OR LOSS ON THE DISPOSITION OF COMMON UNITS COULD BE DIFFERENT THAN
  EXPECTED.

     Upon a sale of common units, you will recognize gain or loss equal to the
difference between the amount realized and your adjusted tax basis in those
common units. Prior distributions from us in excess of the total net taxable
income you were allocated for a common unit which decreased your tax basis in
the common unit will, in effect, become taxable income if the common unit is
sold at a price greater than your tax basis in the common unit, even if the
price is less than your original cost. A portion of the amount realized whether
or not representing gain, will likely be ordinary income. Furthermore, should
the IRS successfully contest some conventions we use, you could realize more
gain on the sale of common units than would be the case under those conventions
without the benefit of decreased income in prior years.

  INVESTORS, OTHER THAN INDIVIDUALS WHO ARE U.S. RESIDENTS, MAY HAVE ADVERSE TAX
  CONSEQUENCES FROM OWNING COMMON UNITS.

     Investment in common units by some tax-exempt entities, regulated
investment companies (mutual funds) and foreign persons raises issues unique to
these persons. For example, virtually all of the taxable income derived by most
organizations exempt from federal income tax, including individual retirement
accounts and other retirement plans, from the ownership of a common unit will be
unrelated business income and thus will be taxable to the unitholder. Very
little of our income will be qualifying income to a regulated investment
company. Distributions to foreign persons will be reduced by withholding taxes.
Foreign persons will be required to file federal income tax returns and pay tax
on their share of our taxable income.


  WE HAVE REGISTERED AS A "TAX SHELTER" WITH THE SECRETARY OF THE TREASURY. THIS
  MAY INCREASE THE RISK OF AN IRS AUDIT OF US OR A UNITHOLDER.



     We have registered as a "tax shelter" with the Secretary of the Treasury.
As a result, we may be audited by the IRS and tax adjustments could be made. The
rights of a unitholder owning less than a 1% interest in us to participate in
the income tax audit process are very limited. Further, any adjustments in our
tax returns will lead to adjustments in your tax returns and may lead to audits
of your tax returns and adjustments of items unrelated to us. You would bear the
cost of any expenses incurred in connection with an examination of your personal
tax return.


                                       26
<PAGE>   33

  WE TREAT A PURCHASER OF COMMON UNITS AS HAVING THE SAME TAX BENEFITS AS THE
  SELLER. A SUCCESSFUL IRS CHALLENGE COULD ADVERSELY AFFECT THE VALUE OF THE
  COMMON UNITS.

     Because we cannot match transferors and transferees of common units and
because of other reasons, we will adopt depreciation conventions that do not
conform with all aspects of final Treasury regulations. A successful IRS
challenge to those conventions could adversely affect the amount of tax benefits
available to you or could affect the timing of these tax benefits or the amount
of gain from the sale of common units and could have a negative impact on the
value of the common units or result in audit adjustments to your tax returns.

  YOU WILL LIKELY BE SUBJECT TO STATE AND LOCAL TAXES AND RETURN FILING
  REQUIREMENTS AS A RESULT OF AN INVESTMENT IN COMMON UNITS.

     In addition to federal income taxes, unitholders will likely be subject to
other taxes, such as state and local taxes, unincorporated business taxes and
estate, inheritance, or intangible taxes that are imposed by the various
jurisdictions in which we do business or own property. You will likely be
required to file state and local income tax returns and pay state and local
income taxes in some or all of the various jurisdictions in which we do business
or own property and may be subject to penalties for failure to comply with those
requirements. We will initially own property and conduct business in Texas,
Colorado, New Mexico, Kansas, and Oklahoma. Of these states, Colorado, New
Mexico, Kansas, and Oklahoma currently impose a personal income tax. It is the
responsibility of each unitholder to file all federal, state and, local tax
returns that may be required of the unitholder. Our counsel has not rendered an
opinion on the state or local tax consequences of an investment in us.

                                       27
<PAGE>   34

                                USE OF PROCEEDS


     We estimate that the net proceeds we will receive from this offering of
common units will be approximately $74.4 million, assuming an initial public
offering price of $20.00 per unit after deducting the underwriting discount, but
before paying other offering expenses. We anticipate using the net proceeds of
this offering and $63.7 million of borrowings under our $120 million revolving
credit facility to:


     - repay all of the $107.7 million in indebtedness due to Ultramar Diamond
       Shamrock and its affiliates that we assumed in connection with the
       transfer of the assets to us effective July 1, 2000. This indebtedness
       bears interest at an annual rate of 8% and matures June 30, 2005;

     - make a distribution of approximately $20.5 million to affiliates of
       Ultramar Diamond Shamrock for reimbursement of capital expenditures,
       incurred with respect to the assets transferred to us, including capital
       expenditures to expand the McKee to Colorado Springs and the McKee to El
       Paso refined product pipelines;


     - pay $4.9 million in fees and expenses incurred in connection with this
       offering and the related transactions; and


     - have approximately $5.0 million available for working capital and other
       general corporate purposes.

     We will use the proceeds from any exercise of the underwriters'
over-allotment option to repay a portion of the indebtedness incurred under the
revolving credit facility at closing.

                                       28
<PAGE>   35

                                 CAPITALIZATION

     The following table shows:


     - our historical capitalization as of September 30, 2000; and



     - our pro forma capitalization as of September 30, 2000, adjusted to
       reflect the offering of the common units, the borrowings under the
       revolving credit facility, and the application of the net proceeds we
       receive in the offering and these financings in the manner described
       under "Use of Proceeds."


This table is derived from, should be read together with and is qualified in its
entirety by reference to our historical and pro forma financial statements and
the accompanying notes included elsewhere in this prospectus.


<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30,
                                                                      2000
                                                              --------------------
                                                               ACTUAL    PRO FORMA
                                                               ------    ---------
                                                                 (in thousands)
<S>                                                           <C>        <C>
Long-term debt, including current portion...................  $ 10,818   $ 74,536
Debt due to parent..........................................   107,676         --
Equity:
  Net partnership equity....................................   195,191         --
  Common unitholders........................................        --    122,553
  Subordinated unitholders..................................        --    107,707
  General partner...........................................        --      3,273
                                                              --------   --------
          Total equity......................................   195,191    233,533
                                                              --------   --------
          Total capitalization..............................  $313,685   $308,069
                                                              ========   ========
</TABLE>


                                       29
<PAGE>   36

                                    DILUTION


     On a pro forma basis as of September 30, 2000 after giving effect to the
offering of common units and the related transactions, our net tangible book
value was $228.4 million, or $12.87 per common unit. Purchasers of common units
in this offering will experience substantial and immediate dilution in net
tangible book value per common unit for financial accounting purposes, as
illustrated in the following table.



<TABLE>
<S>                                                           <C>      <C>
Assumed initial public offering price per common unit.......           $20.00
Pro forma net tangible book value per common unit before the
  offering(1)...............................................   11.53
Increase in net tangible book value per common unit
  attributable to new investors.............................    1.34
                                                              ------
Less: Pro forma net tangible book value per common unit
      after the offering(2).................................            12.87
                                                                       ------
Immediate dilution in net tangible book value per common
  unit to new investors.....................................           $ 7.13
                                                                       ======
</TABLE>


---------------

(1) Determined by dividing the number of units (4,399,322 common units,
    8,999,322 subordinated units and the combined 2% general partner interest,
    which has a dilutive effect equivalent to 355,074 units) to be issued to
    affiliates of the general partner for their contribution of assets and
    liabilities to Shamrock Logistics into the net tangible book value of the
    contributed assets and liabilities.

(2) Determined by dividing the total number of units (8,399,322 common units,
    8,999,322 subordinated units and the combined 2% general partner interest,
    which has a dilutive effect equivalent to 355,074 units) to be outstanding
    after the offering into the pro forma net tangible book value of Shamrock
    Logistics, after giving effect to the application of the net proceeds of the
    offering.

     The following table sets forth the number of units that we will issue and
the total consideration contributed to Shamrock Logistics by the general partner
and its affiliates in respect of their units and by the purchasers of common
units in this offering upon consummation of the transactions contemplated by
this prospectus.


<TABLE>
<CAPTION>
                                                                       TOTAL CONSIDERATION
                                                 UNITS ACQUIRED      ------------------------
                                              --------------------       AMOUNT
                                                NUMBER     PERCENT   (IN THOUSANDS)   PERCENT
                                                ------     -------   --------------   -------
<S>                                           <C>          <C>       <C>              <C>
General partner and affiliate(1)(2).........  13,753,718     77.5%      $163,633        67.2%
New investors...............................   4,000,000     22.5         80,000        32.8
                                              ----------    -----       --------       -----
          Total.............................  17,753,718    100.0%      $243,633       100.0%
                                              ==========    =====       ========       =====
</TABLE>


---------------

(1) Upon the consummation of the transactions contemplated by this prospectus, a
    subsidiary of Ultramar Diamond Shamrock will own an aggregate of 4,399,322
    common units and 8,999,322 subordinated units and our general partner will
    own a 2% general partner interest in Shamrock Logistics having a dilutive
    effect equivalent to 355,074 units.


(2) The assets contributed by the general partner and its affiliates were
    recorded at historical cost in accordance with generally accepted accounting
    principles. Book value of the consideration provided by the general partner
    and its affiliates, as of September 30, 2000, after giving effect to the
    application of the net proceeds of the offering, is as follows:



<TABLE>
<CAPTION>
                                                              (in thousands)
                                                              --------------
<S>                                                           <C>            <C>
Book value of net assets contributed........................     $195,191
Less: Distribution of Shamrock Logistics Operations net
  income from July 1, 2000 through September 30, 2000.......      (11,041)
Less: Reimbursement of capital expenditures to affiliates of
  Ultramar Diamond Shamrock incurred with respect to
  transferred assets........................................      (20,517)
                                                                 --------
          Total consideration...............................     $163,633
                                                                 ========
</TABLE>


                                       30
<PAGE>   37

                            CASH DISTRIBUTION POLICY

QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH


     General. Within approximately 45 days after the end of each quarter,
beginning with the quarter ending December 31, 2000, we will distribute all of
our available cash to unitholders of record on the applicable record date and to
our general partner.


     Definition of Available Cash. Available cash is defined in the glossary and
generally means, for each fiscal quarter, all cash on hand at the end of the
quarter.

     - less the amount of cash reserves that is necessary or appropriate in the
      reasonable discretion of our general partner to:

          - provide for the proper conduct of our business;


          - comply with applicable law or any of our debt agreements or other
            agreements; or


          - provide funds for distributions to unitholders and the general
            partner for any one or more of the next four quarters;

     - plus all cash on hand from working capital borrowings after the end of
       the quarter.

     Available Cash is net of all our expenses, including the annual
administrative fee we will pay to Ultramar Diamond Shamrock, the additional
administrative fee as a result of us being a public entity and the cost
reimbursements to our general partner. For a more detailed description, please
read "Management -- Administrative Fee and Reimbursement of Expenses." Available
Cash is also net of our interest expenses.

     Intent to Distribute the Minimum Quarterly Distribution. We intend, to the
extent we have sufficient available cash from operating surplus, as defined
below, to distribute to each common unit and subordinated unit at least the
minimum quarterly distribution of $0.60 per quarter or $2.40 per year. We will
adjust the minimum quarterly distribution and the target distribution levels for
the period from the closing of the offering through December 31, 2000 based on
the actual length of this period. However, there is no guarantee that we will
pay the minimum quarterly distribution on the common units in any quarter and we
will be prohibited from making any distributions to unitholders if it would
cause an event of default under our revolving credit facility.

     Distribution of Available Cash During Subordination Period. During the
subordination period, which will generally not end prior to December 31, 2005,
to the extent we generate sufficient available cash, the holders of the common
units will have the right to receive the minimum quarterly distribution of $0.60
per unit, plus the amount of any arrearages in payments of minimum quarterly
distributions on the common units from prior quarters, prior to any distribution
of available cash to the holders of subordinated units.

     Arrearages. If we distribute less than $0.60 per common unit for any
quarter during the subordination period, holders of common units will be
entitled to arrearages. After the subordination period, the common units will no
longer be entitled to arrearages.

     Conversion of Subordinated Units. At the end of the subordination period,
the subordinated units will convert into common units on a one-for-one basis.
The converted subordinated units will then participate pro rata with the other
common units in distributions of available cash.


     Event of Default under the Credit Facility. The revolving credit facility
we will enter into simultaneously with the closing of this offering will contain
a prohibition on distributions by Shamrock Logistics Operations to us if any
event of default under the revolving credit facility is continuing or would
result from the distribution. As a result, we would not be able to make
distributions to our unitholders.


                                       31
<PAGE>   38

OPERATING SURPLUS AND CAPITAL SURPLUS

     General. All cash distributed to unitholders will be characterized either
as "operating surplus" or "capital surplus." Available cash from operating
surplus is distributed differently from available cash from capital surplus.

     Definition of Operating Surplus. Operating surplus for any period is
defined in the glossary and generally means:

     - our cash balance date on the closing date of this offering, plus

     - $10 million, plus

     - all of our cash receipts since the closing of this offering, excluding
       cash from borrowings that are not working capital borrowings, sales of
       equity and debt securities and sales of assets outside the ordinary
       course of business, plus

     - working capital borrowings made after the end of a quarter but before the
       date of determination of operating surplus for the quarter, less

     - all of our operating expenditures since the closing of this offering,
       including the repayment of working capital borrowings, but not the
       repayment of other borrowings, and including maintenance capital
       expenditures.

     Definition of Capital Surplus. Capital surplus is also defined in the
glossary and will generally be generated only by:

     - borrowings other than working capital borrowings,

     - sales of debt and equity securities, and

     - sales or other dispositions of assets for cash, other than inventory,
       accounts receivable and other current assets sold in the ordinary course
       of business or as part of normal retirements or replacements of assets.

     Characterization of Cash Distributions. We will treat all available cash
distributed as coming from operating surplus until the sum of all available cash
distributed since we began operations equals the operating surplus as of the
most recent date of determination of available cash. We will treat any amount
distributed in excess of operating surplus, regardless of its source, as capital
surplus. We do not anticipate that we will make significant distributions from
capital surplus.

INCENTIVE DISTRIBUTION RIGHTS

     We issued incentive distribution rights to our general partner as partial
consideration for the transfer to us of the Ultramar Diamond Shamrock logistics
business. These rights entitle the general partner to receive increasingly
higher percentages of quarterly distributions, or incentive distributions, as
the amount of cash from operating surplus distributed exceeds the minimum
quarterly distributions and specified target distribution levels. The general
partner may transfer the incentive distribution rights separately from its
general partner interest, subject to restrictions contained in the partnership
agreement.

SUBORDINATION PERIOD

     General. During the subordination period, which is defined below, the
common units will have the right to receive distributions of available cash from
operating surplus in an amount equal to the minimum quarterly distribution of
$0.60 per quarter, plus any arrearages in the payment of the minimum quarterly
distribution on the common units from prior quarters, before any distributions
of available cash from operating surplus may be made on the subordinated
                                       32
<PAGE>   39

units. The purpose of the subordinated units is to increase the likelihood that
during the subordination period there will be cash available to be distributed
on the common units.

     Definition of Subordination Period. The subordination period is defined in
the glossary and will extend until the first day of any quarter beginning after
December 31, 2005 that each of the following tests are met:

     - distributions of available cash from operating surplus on each of the
       outstanding common units and subordinated units equaled or exceeded the
       minimum quarterly distribution for each of the three consecutive,
       non-overlapping four-quarter periods immediately preceding that date;

     - the "adjusted operating surplus" generated during each of the three
       immediately preceding non-overlapping four-quarter periods equaled or
       exceeded the sum of the minimum quarterly distributions on all of the
       outstanding common units and subordinated units during those periods on a
       fully diluted basis and the related distribution on the 2% general
       partner interest during those periods; and

     - there are no arrearages in payment of the minimum quarterly distribution
       on the common units.

     If the unitholders remove the general partner without cause, the
subordination period may end before December 31, 2005.

     Definition of Adjusted Operating Surplus. "Adjusted operating surplus" for
any period generally means:

     - operating surplus generated during that period, less

     - any net increase in working capital borrowings during that period, less

     - any net reduction in cash reserves for operating expenditures during that
       period not relating to an operating expenditure made during that period,
       plus

     - any net decrease in working capital borrowings during that period, plus


     - any net increase in cash reserves for operating expenditures during that
       period required by any debt agreement for the repayment of principal,
       interest or premium.


     Generally speaking, adjusted operating surplus is intended to reflect the
cash generated from operations during a particular period and therefore excludes
net increases in working capital borrowings and net drawdowns of reserves of
cash generated in prior periods.

     Effect of Expiration of the Subordination Period. Upon expiration of the
subordination period, each outstanding subordinated unit will convert into one
common unit and will then participate pro rata with the other common units in
distributions of available cash. In addition, if the unitholders remove our
general partner other than for cause, the subordination period will end, any
then-existing arrearages on the common units will terminate, and each
subordinated unit will immediately convert into one common unit.

DISTRIBUTIONS OF AVAILABLE CASH FROM OPERATING SURPLUS DURING THE SUBORDINATION
PERIOD

     We will make distributions of available cash from operating surplus for any
quarter during the subordination period as follows:

     - First, 98% to the common unitholders, pro rata, and 2% to the general
       partner, until we have distributed for each outstanding common unit an
       amount equal to the minimum quarterly distribution of $0.60 for that
       quarter;

                                       33
<PAGE>   40

     - Second, 98% to the common unitholders, pro rata, and 2% to the general
       partner, until we have distributed for each outstanding common unit an
       amount equal to any arrearages in payment of the minimum quarterly
       distribution on the common units for any prior quarters during the
       subordination period;

     - Third, 98% to the subordinated unitholders, pro rata, and 2% to the
       general partner, until we have distributed for each outstanding
       subordinated unit an amount equal to the minimum quarterly distribution
       of $0.60 for that quarter;

     - Fourth, 90% to all unitholders, pro rata, 8% to the holders of the
       incentive distribution rights, and 2% to the general partner, until we
       have distributed for each unit a total amount of $0.66 (the "first target
       distribution") for that quarter;

     - Fifth, 75% to all unitholders, pro rata, 23% to the holders of the
       incentive distribution rights, and 2% to the general partner, until we
       have distributed for each unit a total amount of $0.90 (the "second
       target distribution") for that quarter; and

     - Thereafter, 50% to all unitholders, pro rata, 48% to the holders of the
       incentive distribution rights, and 2% to the general partner.

     In each case, the amount of the target distribution set forth above
excludes any distributions to common unitholders to eliminate any cumulative
arrearages in payment of the minimum quarterly distribution on the common units.

DISTRIBUTIONS OF AVAILABLE CASH FROM OPERATING SURPLUS AFTER THE SUBORDINATION
PERIOD

     We will make distributions of available cash from operating surplus for any
quarter after the subordination period as follows:

     - First, 98% to the unitholders, pro rata, and 2% to the general partner,
       until we have distributed for each outstanding unit an amount equal to
       the minimum quarterly distribution of $0.60 for that quarter;

     - Second, 90% to all unitholders, pro rata, 8% to the holders of the
       incentive distribution rights, and 2% to the general partner, until we
       have distributed for each outstanding unit a total amount of $0.66 for
       that quarter;

     - Third, 75% to all unitholders, pro rata, 23% to the holders of the
       incentive distribution rights, and 2% to the general partner, until we
       have distributed for each outstanding unit a total amount of $0.90 for
       that quarter; and

     - Thereafter, 50% to all unitholders, pro rata, 48% to the holders of the
       incentive distribution rights, and 2% to the general partner.

TABULAR ILLUSTRATION OF DISTRIBUTIONS OF AVAILABLE CASH FROM OPERATING SURPLUS

     The following table illustrates the amount of available cash from operating
surplus that would be distributed on a yearly basis to the unitholders and the
general partner at each of the target distribution levels. This table is based
on the 8,399,322 common units and the 8,999,322 subordinated units to be
outstanding immediately after the offering and assumes that there are no
arrearages in payment of the minimum quarterly distribution on the common units.
The "Marginal Percentage" columns under "Yearly Distributions" in the table
below show the percentage interest of the unitholders and the general partner in
available cash from operating surplus that would be distributed on a yearly
basis between the indicated target distribution levels. The "Amount" columns
under "Yearly Distributions" in the table below show the cumulative amount

                                       34
<PAGE>   41

that would be distributed on a yearly basis to the unitholders and the general
partner if available cash from operating surplus equaled the indicated target
distribution level.

<TABLE>
<CAPTION>
                                                           YEARLY DISTRIBUTIONS
                                            ---------------------------------------------------
                                                  UNITHOLDERS              GENERAL PARTNER
                               QUARTERLY    ------------------------   ------------------------
                               AMOUNT PER     AMOUNT       MARGINAL      AMOUNT       MARGINAL
TARGET DISTRIBUTION               UNIT      (THOUSANDS)   PERCENTAGE   (THOUSANDS)   PERCENTAGE
-------------------            ----------   -----------   ----------   -----------   ----------
<S>                            <C>          <C>           <C>          <C>           <C>
Minimum Quarterly
  Distribution...............  $    0.60     $ 41,757         98%       $    852          2%
First Target Distribution....       0.66       45,932         90%          1,316         10%
Second Target Distribution...       0.90       62,635         75%          6,884         25%
Thereafter...................  above 0.90          --         50%             --         50%
</TABLE>

     The amounts and percentages shown under "Yearly Distributions -- General
Partner" include its combined 2% general partner interest and the general
partner's incentive distribution rights. The amounts and percentages shown under
"Yearly Distributions -- Unitholders" include amounts distributable on both the
common units and the subordinated units.

DISTRIBUTIONS FROM CAPITAL SURPLUS

     How Distributions from Capital Surplus Will Be Made. We will make
distributions of available cash from capital surplus in the following manner:

     - First, 98% to all unitholders, pro rata, and 2% to the general partner,
       until we have distributed for each common unit that was issued in this
       offering, an amount of available cash from capital surplus equal to the
       initial public offering price;

     - Second, 98% to the common unitholders, pro rata, and 2% to the general
       partner, until we have distributed for each common unit that was issued
       in the offering, an amount of available cash from capital surplus equal
       to any unpaid arrearages in payment of the minimum quarterly distribution
       on the common units; and

     - Thereafter, all distributions of available cash from capital surplus will
       be distributed as if they were from operating surplus.

     Effect of a Distribution from Capital Surplus. The partnership agreement
treats a distribution of capital surplus as the repayment of the initial unit
price from this initial public offering, which is a return of capital. The
initial public offering price less any distributions of capital surplus per unit
is referred to as the "unrecovered initial unit price." Each time a distribution
of capital surplus is made, the minimum quarterly distribution and the target
distribution levels will be reduced in the same proportion as the corresponding
reduction in the unrecovered initial unit price. Because distributions of
capital surplus will reduce the minimum quarterly distribution, after any such
distributions have been made it may be easier for the general partner to receive
incentive distributions and for the subordinated units to convert into common
units. However, any distribution of capital surplus before the unrecovered
initial unit price is reduced to zero cannot be applied to the payment of the
minimum quarterly distribution or any arrearages.

     Once we have distributed capital surplus on a unit issued in this offering
in an amount equal to the initial unit price, the minimum quarterly distribution
and the target distribution levels will be reduced to zero and all future
distributions will be made from operating surplus, with 50% being paid to the
holders of units, 48% to the holders of the incentive distribution rights and 2%
to the general partner.

ADJUSTMENT OF THE MINIMUM QUARTERLY DISTRIBUTION AND TARGET DISTRIBUTION LEVELS

     In addition to adjusting the minimum quarterly distribution and target
distribution levels to reflect a distribution of capital surplus, we will
proportionately adjust the minimum quarterly

                                       35
<PAGE>   42

distribution, target distribution levels, unrecovered initial unit price, the
number of common units issuable during the subordination period without a
unitholder vote and the number of common units into which a subordinated unit is
convertible if we combine our units into fewer units or subdivide our units into
a greater number of units. In addition, if legislation is enacted or if existing
law is modified or interpreted in a manner that causes us to become taxable as a
corporation or otherwise subject to taxation as an entity for federal, state or
local income tax purposes, we will reduce the minimum quarterly distribution and
the target distribution levels by multiplying the same by one minus the sum of
the highest marginal federal corporate income tax rate that could apply and any
increase in the effective overall state and local income tax rates. For example,
if we became subject to a maximum marginal federal, and effective state and
local, income tax rate of 38%, then the minimum quarterly distribution and the
target distributions levels would each be reduced to 62% of their previous
levels.

DISTRIBUTIONS OF CASH UPON LIQUIDATION

     If we dissolve in accordance with the partnership agreement, we will sell
or otherwise dispose of our assets in a process called liquidation. We will
first apply the proceeds of liquidation to the payment of our creditors. We will
distribute any remaining proceeds to the unitholders and the general partner, in
accordance with their capital account balances, as adjusted to reflect any gain
or loss upon the sale or other disposition of our assets in liquidation.

     The allocations of gain and loss upon liquidation are intended, to the
extent possible, to entitle the holders of outstanding common units to a
preference over the holders of outstanding subordinated units upon the
liquidation of Shamrock Logistics, to the extent required to permit common
unitholders to receive their unrecovered initial unit price plus the minimum
quarterly distribution for the quarter during which liquidation occurs plus any
unpaid arrearages in payment of the minimum quarterly distribution on the common
units. However, there may not be sufficient gain upon liquidation of Shamrock
Logistics to enable the holder of common units to fully recover all of these
amounts, even though there may be cash available for distribution to the holders
of subordinated units. Any further net gain recognized upon liquidation will be
allocated in a manner that takes into account the incentive distribution rights
of the general partner.

     Manner of Adjustments for Gain. The manner of the adjustment is as provided
in the partnership agreement. If our liquidation occurs before the end of the
subordination period, we will allocate any gain, or unrealized gain attributable
to assets distributed in kind, to the partners in the following manner:

     - First, to the general partner and the holders of units who have negative
       balances in their capital accounts to the extent of and in proportion to
       those negative balances;

     - Second, 98% to the common unitholders, pro rata, and 2% to the general
       partner, until the capital account for each common unit is equal to the
       sum of:

      (1) the unrecovered initial unit price for that common unit; plus

      (2) the amount of the minimum quarterly distribution for the quarter
          during which our liquidation occurs; plus

      (3) any unpaid arrearages in payment of the minimum quarterly distribution
          on that common unit;

     - Third, 98% to the subordinated unitholders, pro rata, and 2% to the
       general partner, until the capital account for each subordinated unit is
       equal to the sum of:

      (1) the unrecovered initial unit price on that subordinated unit; and

      (2) the amount of the minimum quarterly distribution for the quarter
          during which our liquidation occurs;

                                       36
<PAGE>   43

     - Fourth, 90% to all unitholders, pro rata, 8% to the holders of the
       incentive distribution rights, and 2% to the general partner, until there
       has been allocated under this paragraph an amount per unit equal to:

      (1) the sum of the excess of the first target distribution per unit over
          the minimum quarterly distribution per unit for each quarter of our
          existence; less

      (2) the cumulative amount per unit of any distributions of available cash
          from operating surplus in excess of the first target distribution per
          unit that was distributed 90% to the units, pro rata, and 10% to the
          general partner for each quarter of our existence;

     - Fifth, 75% to all unitholders, pro rata, 23% to the holders of the
       incentive distribution rights, and 2% to the general partner, until there
       has been allocated under this paragraph an amount per unit equal to:

      (1) the sum of the excess of the second target distribution per unit over
          the first target distribution per unit for each quarter of our
          existence; less

      (2) the cumulative amount per unit of any distributions of available cash
          from operating surplus in excess of the second target distribution per
          unit that was distributed 75% to the units, pro rata, 23% to the
          holders of the incentive distribution rights, and 2% to the general
          partner for each quarter of our existence; and

     - Thereafter, 50% to all unitholders, pro rata, 48% to the holders of the
       incentive distribution rights and 2% to the general partner.

     If the liquidation occurs after the end of the subordination period, the
distinction between common units and subordinated units will disappear, so that
clause (3) of the second bullet point above and all of the third bullet point
above will no longer be applicable.

     Manner of Adjustments for Losses. Upon our liquidation, we will generally
allocate any loss to the general partner and the unitholders in the following
manner:

     - First, 98% to holders of subordinated units in proportion to the positive
       balances in their capital accounts and 2% to the general partner, until
       the capital accounts of the holders of the subordinated units have been
       reduced to zero;

     - Second, 98% to the holders of common units in proportion to the positive
       balances in their capital accounts and 2% to the general partner, until
       the capital accounts of the common unitholders have been reduced to zero;
       and

     - Thereafter, 100% to the general partner.

     If the liquidation occurs after the end of the subordination period, the
distinction between common units and subordinated units will disappear, so that
all of the first bullet point above will no longer be applicable.

     Interim Adjustments to Capital Accounts. We will make interim adjustments
to capital accounts at the time we issue additional interests in Shamrock
Logistics or make distributions of property. These adjustments will be based on
the fair market value of the interests or the property distributed. We will
allocate any gain or loss resulting from the adjustments to the unitholders and
the general partner in the same manner as gain or loss is allocated upon
liquidation. If positive interim adjustments are made to the capital accounts,
we will allocate any later negative adjustments to the capital accounts
resulting from the issuance of additional Shamrock Logistics' interests, our
distributions of property or upon our liquidation, in a manner which results, to
the extent possible, in the capital account balances of the general partner
equaling the amount that would have been the general partner's capital account
balances if earlier positive adjustments to the capital accounts had not been
made.

                                       37
<PAGE>   44

                        CASH AVAILABLE FOR DISTRIBUTION

     We believe that based on the amount of working capital that we expect to
have at the time we commence operations and our ability to borrow working
capital funds under the revolving credit facility, we will have sufficient
available cash from operating surplus to allow us to make the full minimum
quarterly distribution on all the outstanding units for each quarter through
December 31, 2001.

     Assumptions. Our belief is based on the following assumptions:

     - The tariff rates we charge will not decline from the tariff rates in
       effect on January 1, 2000.

     - The average daily throughput in our pipelines and terminals will increase
       at least 1% annually based on increasing consumer demand for refined
       products. In addition, we expect to transport, on behalf of Ultramar
       Diamond Shamrock, a higher percentage of refined products over longer,
       higher tariff pipelines as a result of expected increasing demand for
       refined products in growing market areas such as Denver, Colorado,
       Laredo, Texas, and Tucson and Phoenix, Arizona (through the McKee to El
       Paso refined product pipeline).


     - General and administrative expenses, which include the annual
       administrative fee of $5.2 million to be paid to Ultramar Diamond
       Shamrock and its affiliates for reimbursement of the overhead and
       administrative expenses incurred by them on our behalf, will increase by
       approximately 1.5% annually. In addition, we will incur additional
       general and administrative expenses of approximately $1.5 million
       annually as a result of being a publicly held entity. These additional
       expenses include the cost of tax return preparation, annual and quarterly
       reports to unitholders, audit fees, investor relations and registrar and
       transfer agent fees.


     - We will incur additional interest expenses of approximately $5.2 million
       annually as a result of our borrowings under the revolving credit
       facility at closing, assuming that the underwriters' over-allotment
       option is not exercised. This interest expense will be in addition to the
       interest expense of approximately $700,000 incurred on the $10.8 million
       indebtedness owed to the Port of Corpus Christi Authority.


     - Operating expenses, such as payroll, utilities, maintenance and
       insurance, including the direct expenses to be reimbursed to Ultramar
       Diamond Shamrock and its affiliates which totaled $9.7 million in 1999 on
       a pro forma basis, will increase in the aggregate by approximately 3%
       annually.



     - Ad valorem taxes and depreciation and amortization expense will not
       change significantly from the annualized levels incurred in the first
       nine months of 2000.


     - No material accidents or other events will occur that disrupt our
       pipelines, terminalling, or storage facilities or pipelines with which
       they have significant interconnections.

     - Market, regulatory, and overall economic conditions will not change
       substantially. Although we are not directly exposed to any risks
       associated with fluctuating commodities prices, these risks will
       indirectly influence our results of operations.

Our assumptions above do not include the exercise of the options to purchase the
Wichita Falls to McKee crude oil pipeline and storage facility, the Ringgold
crude oil storage facility or the Laredo to Nuevo Laredo refined products
pipeline, which we do not intend to exercise until late 2001 and early 2002.
Furthermore, incremental cash flow from these expansion projects is expected to
increase our ability to make the minimum quarterly distributions, even after
consideration of additional debt service costs.

                                       38
<PAGE>   45

     Although we believe our assumptions are within a range of reasonableness,
whether the assumptions are realized is not within our control or the control of
our general partner and cannot be predicted with any degree of certainty. If our
assumptions are not realized, the actual available cash from operating surplus
that we generate could be substantially less than that currently expected and
could, therefore, be insufficient to permit us to make cash distributions at the
levels described above. Accordingly, we may not be able to make distributions of
the minimum quarterly distribution or any other amounts.

     Shamrock Logistics' Pro Forma Available Cash. The amount of available cash
from operating surplus we need to pay the minimum quarterly distribution for one
quarter and for four quarters on the common units, the subordinated units, and
the general partner interest to be outstanding immediately after the
transactions is approximately:

<TABLE>
<CAPTION>
                                                                ONE       FOUR
                                                              QUARTER   QUARTERS
                                                              -------   --------
                                                                (in thousands)
<S>                                                           <C>       <C>
Common Units................................................  $ 5,039   $20,158
  Related General Partner Distributions.....................      103       412

Subordinated Units..........................................    5,400    21,598
  Related General Partner Distributions.....................      110       441
                                                              -------   -------
          Total.............................................  $10,652   $42,609
                                                              =======   =======
</TABLE>


     The amount of available cash needed to pay the minimum quarterly
distribution for four quarters on the common units, the subordinated units, and
the general partner interests to be outstanding immediately after the offering
is approximately $42.6 million. If we had completed the transactions
contemplated in this prospectus on January 1, 1999, pro forma available cash
from operating surplus generated during 1999, as adjusted to reflect our current
tariff rates, would have been approximately $50.8 million, as shown on Appendix
D. If we had completed the transactions on October 1, 1999, the amount of pro
forma available cash from operating surplus generated for the twelve months
ended September 30, 2000, as adjusted to reflect our current tariff rates, would
have been $51.5 million. If we had completed the transactions on January 1,
2000, the amount of pro forma available cash from operating surplus generated
for the nine months ended September 30, 2000, as adjusted to reflect our current
tariff rates, would have been $37.9 million. These amounts would have been
sufficient in each case to allow us to pay the full minimum quarterly
distribution on the common units, the subordinated units, and the related
distribution on the general partner interest during all these periods. These
amounts do not include approximately $1.5 million of incremental general and
administrative expenses that we expect to incur annually as a result of being a
public entity.


     We derived the amounts of pro forma available cash from operating surplus
shown above from our pro forma financial statements in the manner described in
Appendix D. The pro forma adjustments are based upon currently available
information and specific estimates and assumptions. The pro forma financial
statements do not purport to present our results of operations had the
transactions contemplated in this prospectus actually been completed as of the
dates indicated. Furthermore, available cash from operating surplus as defined
in the partnership agreement is a cash accounting concept, while our pro forma
financial statements have been prepared on an accrual basis. As a result, the
amount of pro forma available cash from operating surplus should only be viewed
as a general indication of the amount of available cash from operating surplus
that we might have generated had Shamrock Logistics been formed in earlier
periods. For definitions of available cash and operating surplus, please read
the glossary.

                                       39
<PAGE>   46

                   SELECTED HISTORICAL AND OPERATING DATA OF
                THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                       AND SHAMROCK LOGISTICS OPERATIONS,

        AND PRO FORMA FINANCIAL AND OPERATING DATA OF SHAMROCK LOGISTICS


     The following tables set forth selected historical financial and operating
data of the Ultramar Diamond Shamrock logistics business and Shamrock Logistics
Operations, and pro forma financial and operating data of Shamrock Logistics, in
each case for the periods and as of the dates indicated. The selected historical
financial data set forth below for the Ultramar Diamond Shamrock logistics
business as of and for the years ended December 31, 1996, 1997, 1998, and 1999
is derived from the audited financial statements of the Ultramar Diamond
Shamrock logistics business. The selected historical financial data below as of
and for the year ended December 31, 1995 and as of and for the nine months ended
September 30, 1999 and 2000 is derived from the unaudited financial statements
of the Ultramar Diamond Shamrock logistics business and Shamrock Logistics
Operations.



     The pro forma financial statements of Shamrock Logistics give pro forma
effect to the transfer of Shamrock Logistics Operations to Shamrock Logistics
and the related transactions in connection with the closing of this offering as
described more fully in the notes to the pro forma financial statements. The
summary pro forma financial and operating data presented below as of and for the
year ended December 31, 1999 and as of and for the nine months ended September
30, 2000 is derived from the unaudited pro forma financial statements. The pro
forma balance sheet data assumes that the offering and the related transactions
occurred as of September 30, 2000 and the pro forma statement of income data
assumes the offering and the related transactions occurred on January 1, 1999
and 2000, respectively.


     The historical and pro forma financial statements, prior to 2000, included
in the prospectus have been prepared utilizing the historical pipeline tariff
rates and terminalling fees in effect during the periods presented. The
historical tariff rates were based on initial pipeline cost and were not revised
upon subsequent expansions or increases or decreases in throughput levels. As a
result, the Ultramar Diamond Shamrock logistics business filed revised tariff
rates on many of its crude oil and refined product pipelines to reflect the
total cost of the pipeline, the current throughput capacity, the current
throughput utilization, and other market conditions. The revised tariff rates
were implemented effective January 1, 2000 and resulted in lower revenues. Prior
to 1999, the Ultramar Diamond Shamrock logistics business did not charge a
separate terminalling fee for terminalling services at its refined product
terminals. Terminalling revenues were recognized based on total costs incurred
at the terminals. These costs were charged back to the related refinery.
Beginning January 1, 1999, the Ultramar Diamond Shamrock logistics business
began to charge a separate terminalling fee at its refined product terminals.


     The historical and pro forma financial statements included in this
prospectus for periods prior to January 1, 2000 do not reflect the revised
tariff rates, and the historical financial statements for periods prior to
January 1, 1999 do not reflect the establishment of terminalling fees effective
January 1, 1999. However, in the tables below we have included a pro forma as
adjusted column presenting information for the year ended December 31, 1999
giving effect to the formation of Shamrock Logistics and the consummation of
this offering and related transactions, adjusted to reflect the revised tariff
rates, and an as adjusted column for the nine months ended September 30, 1999 to
give effect to the revised tariff rates.



     We define Adjusted EBITDA as operating income, less gain on sale of
property, plant, and equipment, plus depreciation and amortization, plus
distributions from Skelly-Belvieu Pipeline Company, of which we own 50%, and
excluding the impact of volumetric expansions, contractions, and measurement
discrepancies in our pipelines. Beginning July 1, 2000, the impact of these
exclusions is borne by the shippers in our pipelines and is therefore not
reflected in operating income. Adjusted EBITDA provides additional information
for evaluating our ability to


                                       40
<PAGE>   47


make the minimum quarterly distribution and is presented solely as a
supplemental measure. You should not consider Adjusted EBITDA as an alternative
to net income, income before income taxes, cash flows from operations, or any
other measure of financial performance presented in accordance with generally
accepted accounting principles. Our Adjusted EBITDA may not be comparable to
EBITDA or similarly titled measures of other entities as other entities may not
calculate EBITDA in the same manner as we do. Excluded from Adjusted EBITDA is
the impact of volumetric expansions, contractions, measurement discrepancies in
our pipelines of a $250,000 loss in 1995, a $838,000 loss in 1996, a $1,647,000
loss in 1997, a $555,000 loss in 1998, a $378,000 loss in 1999, a $62,000 gain
in the first nine months of 1999 and a $916,000 loss in the first nine months of
2000.


     Maintenance capital expenditures represent capital expenditures to replace
partially or fully depreciated assets to maintain the existing operating
capacity of existing assets and extend their useful lives. Expansion capital
expenditures represent capital expenditures to expand our operating capacity of
existing assets, whether through construction or acquisition. Repair and
maintenance expenses associated with existing assets that are minor in nature
and do not extend the useful life of existing assets are charged to operating
expenses as incurred. The capital expenditure amounts in the following table
exclude the capital expenditures relating to our interest in the Skelly-Belvieu
Pipeline Company, which have totaled approximately $275,000 for the past five
years.

     Use of the term throughput in this prospectus generally refers to the crude
oil or refined product barrels, as applicable, that pass through each pipeline,
even if those barrels also are transported in another of our pipelines for which
we received a separate tariff. In the case of four pipelines, the pipeline
transports barrels relating to two tariff rates, one of which begins at this
pipeline's origin and ends at this pipeline's destination, and one of which is a
longer tariff route with an origin or destination in another pipeline of ours
which connects to this pipeline. Throughput for those pipelines reflect only the
barrels subject to the tariff route beginning at the pipeline's origin and
ending at the pipeline's destination. To accurately determine the actual
capacity utilization of those pipelines, as well as aggregate capacity
utilization, all barrels passing through the pipelines have been taken into
account for purposes of calculating capacity utilization.

     The pro forma financial information adjusts the historical financial
information to give effect to the formation of Shamrock Logistics and the
completion of this offering and related transactions. The pro forma as adjusted
financial information further adjusts the pro forma information to give effect
to the revised tariff rates. The as adjusted financial information adjusts the
historical financial information to give effect to the revised tariff rates.

                                       41
<PAGE>   48

     The following tables are derived from, should be read together with, and
are qualified in their entirety by reference to the historical and pro forma
financial statements and the accompanying notes included elsewhere in this
prospectus. This table should also be read together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
amounts in the tables below, except for the operating data, the per unit data,
and barrel information, are in thousands.


<TABLE>
<CAPTION>
                                                                                                    YEAR ENDED
                                                                                                 DECEMBER 31, 1999
                                                     YEAR ENDED DECEMBER 31,                  -----------------------
                                       ----------------------------------------------------                PRO FORMA
                                         1995       1996     1997(1)      1998       1999     PRO FORMA   AS ADJUSTED
                                         ----       ----     -------      ----       ----     ---------   -----------
                                                                                                    (unaudited)
<S>                                    <C>        <C>        <C>        <C>        <C>        <C>         <C>
STATEMENT OF INCOME DATA:
Revenues.............................  $ 46,375   $ 71,421   $ 84,881   $ 97,883   $109,773   $109,773     $ 87,881
Operating costs and expenses:
  Operating expenses.................    18,066     26,743     24,042     28,027     24,248     24,248       24,248
  General and administrative
    expenses.........................     4,358      4,724      4,761      4,552      4,698      4,698        4,698
  Depreciation and amortization......     6,573      9,879     11,328     12,451     12,318     12,318       12,318
  Taxes other than income taxes......     1,963      3,530      4,235      4,152      4,765      4,765        4,765
                                       --------   --------   --------   --------   --------   --------     --------
        Total operating costs and
          expenses...................    30,960     44,876     44,366     49,182     46,029     46,029       46,029
Gain on sale of property, plant and
  equipment(2).......................        --         --         --      7,005      2,478      2,478        2,478
                                       --------   --------   --------   --------   --------   --------     --------
Operating income.....................    15,415     26,545     40,515     55,706     66,222     66,222       44,330
  Interest expense...................        --         --       (158)      (796)      (777)    (5,930)      (5,930)
  Equity income from
    Skelly-Belvieu...................     3,184      2,990      3,025      3,896      3,874      3,874        3,874
                                       --------   --------   --------   --------   --------   --------     --------
Income before income taxes...........    18,599     29,535     43,382     58,806     69,319     64,166       42,274
  Provision for income taxes.........    (7,086)   (11,253)   (16,559)   (22,517)   (26,521)        --           --
                                       --------   --------   --------   --------   --------   --------     --------
Net income...........................  $ 11,513   $ 18,282   $ 26,823   $ 36,289   $ 42,798   $ 64,166     $ 42,274
                                       ========   ========   ========   ========   ========   ========     ========
Pro forma net income per unit........                                                         $   3.61     $   2.38
                                                                                              ========     ========
Pro forma weighted average limited
  partners' units outstanding........                                                           17,399       17,399
                                                                                              ========     ========
OTHER FINANCIAL DATA:
Adjusted EBITDA......................  $ 26,344   $ 40,413   $ 57,499   $ 65,399   $ 80,678   $ 80,678     $ 58,786
Distributions from Skelly-Belvieu....     4,106      3,151      4,009      3,692      4,238      4,238        4,238
Net cash provided by operating
  activities.........................    19,355     28,652     44,731     44,950     49,977
Net cash provided by (used in)
  investing activities...............   (74,775)   (42,409)   (52,141)    18,395      6,865
Net cash provided by (used in)
  financing activities...............    55,420     13,757      7,410    (63,345)   (56,842)
Maintenance capital expenditures.....     3,407      3,745        633      2,345      2,060      2,060        2,060
Expansion capital expenditures.......    75,474     41,815     12,359      9,952      7,313      7,313        7,313
        Total capital expenditures...    78,881     45,560     12,992     12,297      9,373      9,373        9,373
OPERATING DATA:
Crude oil pipeline throughput
  (barrels/day)......................   140,103    157,963    282,736    265,243    280,041    280,041      280,041
Refined product pipeline throughput
  (barrels/day)......................   184,637    210,548    257,183    268,064    297,397    297,397      297,397
Refined product terminal throughput
  (barrels/day)......................   109,506    131,504    136,454    144,093    161,340    161,340      161,340
</TABLE>


<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                              ----------------------------------------------------
                                                                1995       1996     1997(1)      1998       1999
                                                                ----       ----     -------      ----       ----
<S>                                                           <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Net property, plant, and equipment..........................  $243,076   $280,084   $319,169   $297,121   $284,954
Total assets................................................   262,032    300,011    346,082    321,002    308,213
Long-term debt, including current portion...................    12,000     12,000     11,738     11,455     11,102
Net parent investment/partners' equity......................   227,364    260,731    295,403    268,497    254,806
</TABLE>

---------------

(1) On September 25, 1997, Ultramar Diamond Shamrock acquired Total Petroleum
    (North America) Ltd. in a purchase business combination. The purchase price
    was allocated to the various assets (including three refineries, 550

                                       42
<PAGE>   49

    convenience stores and various crude oil and refined product pipeline and
    storage assets) and liabilities acquired based on their fair value. The
    acquired assets included in the Ultramar Diamond Shamrock logistics business
    consist of pipelines and a crude oil storage facility serving the Ardmore
    refinery, which were allocated $43,158,000 of the purchase price, including
    $5,994,000 of goodwill. The results of operations of the crude oil and
    refined product pipelines and the crude oil storage facility serving the
    Ardmore refinery have been included from the date of acquisition.

(2) In March 1998, the Ultramar Diamond Shamrock logistics business recognized a
    gain on the sale of a 25% interest in the McKee to El Paso refined product
    pipeline and the El Paso refined product terminal to Phillips Petroleum
    Company. In August 1999, the Ultramar Diamond Shamrock logistics business
    recognized a gain on the sale of an additional 8.33% interest in the McKee
    to El Paso refined product pipeline and terminal to Phillips Petroleum
    Company.


<TABLE>
<CAPTION>
                                                                  NINE MONTHS          NINE MONTHS ENDED
                                                                     ENDED               SEPTEMBER 30,
                                                                 SEPTEMBER 30,      -----------------------
                                                              -------------------      1999         2000
                                                                1999       2000     AS ADJUSTED   PRO FORMA
                                                                ----       ----     -----------   ---------
                                                                               (unaudited)
<S>                                                           <C>        <C>        <C>           <C>
STATEMENT OF INCOME DATA:
Revenues....................................................  $ 81,535   $ 69,406    $ 65,397     $ 69,406
Operating costs and expenses:
  Operating expenses........................................    17,183     22,465      17,183       22,465
  General and administrative expenses.......................     3,523      3,771       3,523        3,771
  Depreciation and amortization.............................     9,162      9,889       9,162        9,889
  Taxes other than income taxes.............................     3,624      3,318       3,624        3,318
                                                              --------   --------    --------     --------
        Total operating costs and expenses..................    33,492     39,443      33,492       39,443
                                                              --------   --------    --------     --------
  Gain on sale of property, plant and equipment.............     2,478         --       2,478           --
Operating income............................................    50,521     29,963      34,383       29,963
  Interest expense..........................................      (669)    (2,808)       (669)      (4,519)
  Equity income from Skelly-Belvieu.........................     2,370      3,044       2,370        3,044
                                                              --------   --------    --------     --------
Income before income taxes..................................    52,222     30,199      36,084       28,488
  Benefit (provision) for income taxes......................   (19,980)    30,812     (13,806)          --
                                                              --------   --------    --------     --------
Net income..................................................  $ 32,242   $ 61,011    $ 22,278     $ 28,488
                                                              ========   ========    ========     ========
Pro forma net income per unit...............................                                      $   1.60
                                                                                                  ========
Pro forma weighted average limited partners' units
  outstanding...............................................                                        17,399
                                                                                                  ========
OTHER FINANCIAL DATA:
Adjusted EBITDA.............................................  $ 59,751     44,256      43,613       44,256
Distributions from Skelly-Belvieu...........................     2,608      3,488       2,608        3,488
Net cash provided by operating activities...................    40,420     18,140
Net cash provided by (used in) investing activities.........     8,178     (2,398)
Net cash used in financing activities.......................   (48,598)   (15,741)
Maintenance capital expenditures............................     1,842      1,804       1,842        1,804
Expansion capital expenditures..............................     4,588      4,082       4,588        4,082
        Total capital expenditures..........................     6,430      5,886       6,430        5,886
OPERATING DATA:
Crude oil pipeline throughput (barrels/day).................   277,930    296,413     277,930      296,413
Refined product pipeline throughput (barrels/day)...........   294,799    315,807     294,799      315,807
Refined product terminal throughput (barrels/day)...........   159,367    167,650     159,367      167,650
</TABLE>



<TABLE>
<CAPTION>
                                                                              SEPTEMBER 30,
                                                              ---------------------------------------------
                                                                1999       2000                     2000
                                                                ----       ----                     ----
<S>                                                           <C>        <C>        <C>           <C>
BALANCE SHEET DATA:
Net property, plant and equipment...........................   285,092    281,176                  281,176
Total assets................................................   308,683    319,035                  313,419
Long-term debt, including current portion...................    11,149    118,494                   74,536
Net parent investment/partners' equity......................   252,447    195,191                  233,533
</TABLE>


                                       43
<PAGE>   50

IMPACT OF TARIFF RATE AND TERMINALLING REVENUE CHANGES

  TARIFF RATE CHANGES

     The following tables reflect the overall impact, if any, to revenues of the
revised tariff rates using historical throughput barrels, including the impact,
if any, on each of our principal crude oil and refined product pipelines. The
amounts in the tables below are in thousands. As adjusted revenue amounts are
unaudited.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31, 1999
                                                              --------------------------------------
                                                              HISTORICAL   AS ADJUSTED   (DECREASE)
                                                               REVENUES     REVENUES     OR INCREASE
                                                              ----------   -----------   -----------
<S>                                                           <C>          <C>           <C>
Crude Oil Pipelines:
  Corpus Christi to Three Rivers............................   $  7,479      $10,884      $  3,405
  Wasson to Ardmore(1) (both pipelines).....................         --        2,534         2,534
  Ringgold to Wasson(1).....................................         --        3,591         3,591
  Dixon to McKee............................................      3,243        2,244          (999)
  Other crude oil pipelines(1)..............................      2,209        3,348         1,139
                                                               --------      -------      --------
         Total crude oil pipelines..........................     12,931       22,601         9,670
                                                               --------      -------      --------
Refined Product Pipelines(2):
  McKee to Colorado Springs to Denver.......................     12,796       12,580          (216)
  McKee to El Paso..........................................     42,563       13,855       (28,708)
  Amarillo to Albuquerque...................................      3,811        3,811            --
  Ardmore to Wynnewood......................................      4,882        4,882            --
  Three Rivers to Laredo....................................      7,293        2,762        (4,531)
  Three Rivers to San Antonio...............................      2,121        2,730           609
  McKee to Amarillo (both pipelines) to Abernathy...........      2,989        2,989            --
  McKee to Denver (Phillips)................................      2,769        2,769            --
  Other refined product pipelines...........................      2,380        3,664         1,284
                                                               --------      -------      --------
         Total refined product pipelines....................     81,604       50,042       (31,562)
Refined Product Terminals...................................     15,238       15,238            --
                                                               --------      -------      --------
         Total pipelines and terminals......................   $109,773      $87,881      $(21,892)
                                                               ========      =======      ========
</TABLE>

                                       44
<PAGE>   51


<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED SEPTEMBER 30, 1999
                                                              ----------------------------------------
                                                              HISTORICAL    AS ADJUSTED    (DECREASE)
                                                               REVENUES      REVENUES      OR INCREASE
                                                              ----------    -----------    -----------
<S>                                                           <C>           <C>            <C>
Crude Oil Pipelines:
  Corpus Christi to Three Rivers............................    $ 5,620       $ 8,076       $  2,456
  Wasson to Ardmore(1) (both pipelines).....................         --         1,850          1,850
  Ringgold to Wasson(1).....................................         --         2,914          2,914
  Dixon to McKee............................................      2,418         1,696           (722)
  Other crude oil pipelines(1)..............................      1,576         2,403            827
                                                                -------       -------       --------
         Total crude oil pipelines..........................      9,614        16,939          7,325
                                                                -------       -------       --------
Refined Product Pipelines(2):
  McKee to Colorado Springs to Denver.......................     10,135         9,840           (295)
  McKee to El Paso..........................................     31,523        10,234        (21,289)
  Amarillo to Albuquerque...................................      2,896         2,896             --
  Ardmore to Wynnewood......................................      3,499         3,499             --
  Three Rivers to Laredo....................................      5,291         2,004         (3,287)
  Three Rivers to San Antonio...............................      1,587         2,044            457
  McKee to Amarillo (both pipelines) to Abernathy...........      2,170         2,170             --
  McKee to Denver (Phillips)................................      2,083         2,083             --
  Other refined product pipelines...........................      1,763         2,714            951
                                                                -------       -------       --------
         Total refined product pipelines....................     60,947        37,484        (23,463)
Refined Product Terminals...................................     10,974        10,974             --
                                                                -------       -------       --------
         Total pipelines and terminals......................    $81,535       $65,397       $(16,138)
                                                                =======       =======       ========
</TABLE>


---------------


(1) Tariff revenues were not recognized for the Ardmore crude oil pipelines
    prior to 2000, because the Ultramar Diamond Shamrock logistics business did
    not charge Ultramar Diamond Shamrock for the transportation of crude oil to
    the Ardmore refinery. Had the Ultramar Diamond Shamrock logistics business
    charged for these services, revenues would have increased $6,377,000 for the
    year ended December 31, 1999 and $4,853,000 for the nine months ended
    September 30, 1999, using revised tariff rates multiplied by the historical
    throughput barrels.


(2) The tariff rates for the Skellytown to Mont Belvieu refined product
    pipeline, which is owned by Skelly-Belvieu Pipeline Company, of which we own
    50% and account for under the equity method, were not revised.

  TERMINALLING REVENUE CHANGES

     Prior to 1999, the Ultramar Diamond Shamrock logistics business did not
charge a separate terminalling fee for terminalling services at its refined
product terminals. Terminalling revenues were recognized based on total costs
incurred at the terminals, which costs were charged back to the related
refinery. Beginning January 1, 1999, the Ultramar Diamond Shamrock logistics
business began to charge a separate terminalling fee at its refined product
terminals.

     The terminalling fee was established at a rate that the Ultramar Diamond
Shamrock logistics business believes is competitive with the rate charged by
other companies for terminalling similar refined products. Because the newly
established terminalling fee includes a profit margin, terminalling revenues
have increased as reflected in the table below. The increase in terminalling
revenue in the table below is determined using the historical throughput barrels
for all the refined product terminals multiplied by the terminalling fee, less
the historical terminalling revenue recognized.

  SUMMARY OF REVENUE CHANGES

     If the revised tariff rates and the terminalling fee had been implemented
effective January 1, 1997, historical revenues, operating income, net income and
Adjusted EBITDA would have been as follows for the periods presented. The
revised tariff rates and terminalling fee were in effect

                                       45
<PAGE>   52


during 2000. Therefore, no adjustment was necessary for the nine months ended
September 30, 2000. The pro forma net income as adjusted and the pro forma net
income as adjusted per limited partner unit is based on the pro forma ownership
interest expected to be outstanding at the closing of the offering. The general
partner interest is expected to be 2% and limited partners' interest is expected
to be 98%, consisting of the 17,398,644 outstanding common and subordinated
units. The amounts in the table below are unaudited and, except for per unit
data, are in thousands.



<TABLE>
<CAPTION>
                                                                                       NINE MONTHS
                                                                                          ENDED
                                                        YEAR ENDED DECEMBER 31,       SEPTEMBER 30,
                                                     ------------------------------   -------------
                                                       1997       1998       1999         1999
                                                       ----       ----       ----         ----
<S>                                                  <C>        <C>        <C>        <C>
Revenues -- historical.............................  $ 84,881   $ 97,883   $109,773     $ 81,535
  Decrease in tariff revenues......................   (16,197)   (17,067)   (21,892)     (16,138)
  Increase in terminalling revenues................     1,778      1,649         --           --
                                                     --------   --------   --------     --------
    Net decrease...................................   (14,419)   (15,418)   (21,892)     (16,138)
                                                     --------   --------   --------     --------
Revenues -- as adjusted............................  $ 70,462   $ 82,465   $ 87,881     $ 65,397
                                                     ========   ========   ========     ========
Operating income -- historical.....................  $ 40,515   $ 55,706   $ 66,222     $ 50,521
  Net decrease.....................................   (14,419)   (15,418)   (21,892)     (16,138)
                                                     --------   --------   --------     --------
Operating income -- as adjusted....................  $ 26,096   $ 40,288   $ 44,330     $ 34,383
                                                     ========   ========   ========     ========
Net income -- historical...........................  $ 26,823   $ 36,289   $ 42,798     $ 32,242
  Net decrease, net of income taxes................    (8,914)    (9,514)   (13,516)      (9,964)
                                                     --------   --------   --------     --------
Net income -- as adjusted..........................  $ 17,909   $ 26,775   $ 29,282     $ 22,278
                                                     ========   ========   ========     ========
Adjusted EBITDA -- historical......................  $ 57,499   $ 65,399   $ 80,678     $ 59,751
  Net decrease.....................................   (14,419)   (15,418)   (21,892)     (16,138)
                                                     --------   --------   --------     --------
Adjusted EBITDA -- as adjusted(1)..................  $ 43,080   $ 49,981   $ 58,786     $ 43,613
                                                     ========   ========   ========     ========
Pro forma minimum quarterly distributions..........  $ 42,609   $ 42,609   $ 42,609     $ 31,956
                                                     ========   ========   ========     ========
Pro forma net income as adjusted
  Limited partners.................................  $ 23,334   $ 37,470   $ 41,429     $ 31,575
  General partner..................................       476        765        845          644
                                                     --------   --------   --------     --------
         Total(2)..................................  $ 23,810   $ 38,235   $ 42,274     $ 32,219
                                                     ========   ========   ========     ========
Pro forma net income as adjusted per limited
  partner units....................................  $   1.34   $   2.15   $   2.38     $   1.81
                                                     ========   ========   ========     ========
</TABLE>


---------------


(1) Adjusted EBITDA as adjusted is greater than the pro forma minimum quarterly
    distributions for the year ended December 31, 1998 which is due to the
    additional earnings generated from the Ardmore pipelines acquired on
    September 25, 1997 and the additional earnings generated from the Colorado
    Springs to Denver refined product pipeline completed in 1997. Adjusted
    EBITDA as adjusted over the pro forma minimum quarterly distributions for
    the year ended December 31, 1999 and the nine months ended September 30,
    1999 as compared to the year ended December 31, 1998 is due to increased
    throughput in the pipelines and terminals in 1999 as compared to 1998.



(2)Pro forma net income as adjusted is greater than net income as adjusted
   because pro forma net income as adjusted excludes federal and state income
   taxes, which are the responsibility of the unitholders and not Shamrock
   Logistics, the effect of which is offset in part by an increase in interest
   expense which is higher, on a pro forma basis, due to the additional
   borrowings under the revolving credit facility at the closing of the
   offering.


                                       46
<PAGE>   53

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS


     The following discussion of the financial condition and results of
operations for the Ultramar Diamond Shamrock logistics business and Shamrock
Logistics Operations should be read in conjunction with the historical financial
statements of the Ultramar Diamond Shamrock logistics business, and Shamrock
Logistics Operations and the pro forma financial statements of Shamrock
Logistics included elsewhere in this prospectus. For more detailed information
regarding the basis of presentation for the following information, see the notes
to the historical and pro forma financial statements.


INTRODUCTION

     Shamrock Logistics owns and operates crude oil and refined product
pipeline, terminalling, and storage assets that support Ultramar Diamond
Shamrock's refining and marketing operations located in Texas, Oklahoma,
Colorado, New Mexico, and Arizona.

     Historically, these pipeline, terminalling, and storage assets have been
owned by several wholly-owned subsidiaries, partnerships, and joint ventures of
Ultramar Diamond Shamrock. Effective July 1, 2000, Ultramar Diamond Shamrock
transferred the assets and liabilities of the Ultramar Diamond Shamrock
logistics business to Shamrock Logistics Operations by asset conveyances and
mergers.

     The assets and liabilities and related operations transferred to us are
referred to as the Ultramar Diamond Shamrock logistics business. The historical
financial statements included in this prospectus reflect the assets and
liabilities and related operations of the Ultramar Diamond Shamrock logistics
business. Ultramar Diamond Shamrock retained selected assets described in more
detail under "Business -- Assets Retained by Ultramar Diamond Shamrock"
including refined product pipelines and terminals which have experienced
declining profitability over the last several years, crude oil gathering
pipelines originating in older crude oil producing fields, and several assets we
have the option to buy when their construction or expansion is completed. Please
read "Business -- Recently Completed and Planned Expansion Projects -- Planned
Expansion Projects" for a description of these assets and our options to buy
them. These retained assets have been excluded from the Ultramar Diamond
Shamrock logistics business.

OVERVIEW


     The pipeline, terminalling, and storage operations of the Ultramar Diamond
Shamrock logistics business have historically supported the refining and
marketing operations of Ultramar Diamond Shamrock and its affiliates. The
operations of the Ultramar Diamond Shamrock logistics business provide crude oil
storage and transportation services and refined product transportation and
terminalling services for three of Ultramar Diamond Shamrock's refineries. These
refineries are the McKee refinery near Amarillo, Texas, the Three Rivers
refinery near San Antonio, Texas, and the Ardmore refinery near Ardmore,
Oklahoma. The McKee, Three Rivers, and Ardmore refineries have total throughput
capacities of 170,000, 98,000, and 85,000 barrels per day, respectively. These
refineries transport their refined product primarily to markets in Texas,
Colorado, Oklahoma, New Mexico, and Arizona and the refined products are
distributed primarily through the extensive retail system of Ultramar Diamond
Shamrock in the southwestern and Rocky Mountain regions of the United States.
For the year ended December 31, 1999 and the nine months ended September 30,
2000, the Ultramar Diamond Shamrock logistics business derived approximately 99%
of its revenue from Ultramar Diamond Shamrock and its affiliates. The remaining
portion of revenue is derived from our transportation of refined products for
third parties over our Amarillo to Albuquerque and Amarillo to Abernathy refined
product pipelines.


     The Ultramar Diamond Shamrock logistics business historically has derived,
and Shamrock Logistics will derive, substantially all of its revenue from
pipeline tariff revenue and fees for
                                       47
<PAGE>   54


terminalling services received for the transportation of crude oil and refined
products, and terminalling revenue as refined products are moved into the
refined product terminals. The Ultramar Diamond Shamrock logistics business does
not, and Shamrock Logistics will not, receive any separate revenues for the
crude oil storage facility operations, as the cost of these services is
incorporated in the crude oil pipeline tariff rate. Assuming the revised tariff
rates had been in effect on January 1, 1999, revenues for both the year ended
December 31, 1999 and the nine months ended September 30, 2000 were generated
26% from the crude oil pipelines and storage assets, 57% from the refined
product pipelines and 17% from our terminalling assets.


     A separate pipeline tariff rate is established for each pipeline or, in the
case of pipelines with multiple origination or destination points, tariff rates
are established for transportation to and from multiple origination or
destination points. The customer is charged the tariff rate for each barrel
transported through the pipeline, or in the case of pipelines with multiple
tariffs, for the barrels transported on the applicable tariff route for a
customer. For example, on the McKee to Colorado Springs to Denver pipeline,
separate tariffs have been established depending upon whether the ultimate
destination of the refined products transported from the McKee refinery is
Colorado Springs or Denver.


     Except for the discussion related to revenues for the nine-month period
ended September 30, 2000, which reflect the revised tariff rates, the following
discussion is based on the historical operating results of the Ultramar Diamond
Shamrock logistics business and, accordingly, the operating results reflect the
historical tariff rates and terminalling fees in effect during the periods
discussed. We have revised our pipeline tariff rates on many of our pipelines
effective January 1, 2000 to reflect the total cost of the pipeline, the current
throughput capacity, the current throughput utilization, and other market
conditions. We also began charging a terminalling fee for terminalling services
at our refined product terminals effective January 1, 1999. Prior to 1999, the
Ultramar Diamond Shamrock logistics business did not charge a separate
terminalling fee at its refined product terminals. Terminalling revenues were
recognized based on total costs incurred at the terminals, which costs were
charged back to the related refinery.


     Aside from the implementation of tariff rates on new pipelines and the
revisions to tariff rates effective January 1, 2000, the only changes to tariff
rates since January 1, 1995 have been annual decreases or increases related to
inflation factor indexing, which decreases or increases were in each instance
less than 2% annually.

     Operating costs and expenses we incur in the transportation and
terminalling operations are typically fixed costs related to maintenance,
insurance, control rooms, telecommunications, and pipeline field and support
personnel. Some operating costs, such as fuel and power costs and utilities to
run the various pump stations along the pipelines, fluctuate with throughput.

     Ultramar Diamond Shamrock allocates approximately 5% of its general and
administrative expenses incurred in the United States to its pipeline,
terminalling, and storage operations to cover costs of functions such as legal,
accounting, treasury, engineering, information technology, and other corporate
services. The 5% allocation has approximated $5 million annually for the past
five years. A portion of the allocated general and administrative costs are
passed on to partners, which jointly own some of the pipelines and terminals
with the Ultramar Diamond Shamrock logistics business.


     Under an eight-year services agreement effective as of July 1, 2000,
between Shamrock Logistics Operations and Ultramar Diamond Shamrock, Ultramar
Diamond Shamrock will continue to provide general and administrative services
discussed above for an annual administrative fee of $5,200,000. Our general
partner, with approval and consent of the conflicts committee of its general
partner, will have the right to increase the annual administrative fee by up to
1.5% each year, as further adjusted for inflation, and may agree to further
increases in connection with expansions of our operations through the
acquisition or construction of new logistics assets that


                                       48
<PAGE>   55

require additional management personnel. In addition, Shamrock Logistics
anticipates incurring additional general and administrative costs for tax return
preparation, annual and quarterly reports to unitholders, investor relations,
registrar and transfer agent fees, and other costs related to maintaining a
separate publicly-held entity. These incremental costs are estimated at
approximately $1,500,000 per year.

     The operating results of the Ultramar Diamond Shamrock logistics business
are affected by factors affecting the business of Ultramar Diamond Shamrock,
including refinery utilization rates, crude oil prices, the demand for and
prices of refined products, and industry refining capacity. Please read "Risk
Factors."

     The throughput of the refined products we transport is directly affected by
the level of, and user demand for, refined products in the markets served
directly or indirectly by our pipelines. Demand for gasoline in most markets
peaks during the summer driving season, which extends from April to September,
and declines during the fall and winter months. Demand for gasoline in the
Arizona market, however, generally is higher in the winter months than summer
months due to greater tourist activity and second home usage in the winter
months. Historically, the Ultramar Diamond Shamrock logistics business has not
experienced significant seasonal fluctuations in throughput due to the stable
demand for refined products and the growing population base in the southwestern
and Rocky Mountain regions of the United States.


RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2000



     The following table reflects throughput for each of our principal crude oil
and refined product pipelines and the total throughput for all of our refined
product terminals for the nine months ended September 30, 1999 and 2000. The
barrel volumes presented in the table below reflect only our ownership interest
and are in thousands.



<TABLE>
<CAPTION>
                                                                NINE MONTHS
                                                                   ENDED
                                                               SEPTEMBER 30,
                                                              ----------------
                                                               1999      2000
                                                               ----      ----
                                                                 (barrels)
<S>                                                           <C>       <C>
Crude Oil Pipelines:
  Corpus Christi to Three Rivers............................  21,827    23,853
  Wasson to Ardmore (both pipelines)........................  19,236    20,978
  Ringgold to Wasson........................................   8,911     7,707
  Dixon to McKee............................................  16,861    17,076
Refined Product Pipelines:
  McKee to Colorado Springs to Denver.......................   7,022     6,710
  McKee to El Paso..........................................  14,645    17,428
  Amarillo to Albuquerque...................................   3,470     3,515
  Ardmore to Wynnewood......................................  14,571    15,347
  Three Rivers to Laredo....................................   3,905     4,430
  Three Rivers to San Antonio...............................   7,602     7,385
  McKee to Amarillo (both pipelines) to Abernathy...........  10,753    10,117
  McKee to Denver (Phillips)................................   2,965     3,266
Refined Product Terminals...................................  43,507    45,936
</TABLE>


     The following table reflects the overall impact to revenues of the revised
tariff rates using historical throughput barrels, including the impact on each
of our principal crude oil and refined

                                       49
<PAGE>   56


product pipelines, if any, for the nine months ended September 30, 1999. The
amounts in the table below are in thousands and are unaudited.



<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED SEPTEMBER 30, 1999
                                                             --------------------------------------------
                                                             HISTORICAL     AS ADJUSTED      (DECREASE)
                                                              REVENUES       REVENUES        OR INCREASE
                                                             ----------     -----------     -------------
<S>                                                          <C>            <C>             <C>
Crude Oil Pipelines:
  Corpus Christi to Three Rivers...........................   $ 5,620         $ 8,076         $  2,456
  Wasson to Ardmore (1)(both pipelines)....................        --           1,850            1,850
  Ringgold to Wasson(1)....................................        --           2,914            2,914
  Dixon to McKee...........................................     2,418           1,696             (722)
  Other crude oil pipelines(1).............................     1,576           2,403              827
                                                              -------         -------         --------
         Total crude oil pipelines.........................     9,614          16,939            7,325
                                                              -------         -------         --------
Refined Product Pipelines:(2)
  McKee to Colorado Springs to Denver......................    10,135           9,840             (295)
  McKee to El Paso.........................................    31,523          10,234          (21,289)
  McKee to Amarillo (both pipelines) to Abernathy..........     2,170           2,170               --
  McKee to Denver (Phillips)...............................     2,083           2,083               --
  Amarillo to Albuquerque..................................     2,896           2,896               --
  Ardmore to Wynnewood.....................................     3,499           3,499               --
  Three Rivers to Laredo...................................     5,291           2,004           (3,287)
  Three Rivers to San Antonio..............................     1,587           2,044              457
  Other refined product pipelines..........................     1,763           2,714              951
                                                              -------         -------         --------
         Total refined product pipelines...................    60,947          37,484          (23,463)
Refined Product Terminals..................................    10,974          10,974               --
                                                              -------         -------         --------
         Total pipelines and terminals.....................   $81,535         $65,397         $(16,138)
                                                              =======         =======         ========
</TABLE>


---------------

(1) Tariff revenues were not recognized for the Ardmore refinery crude oil
    pipelines prior to 2000, because the Ultramar Diamond Shamrock logistics
    business did not charge Ultramar Diamond Shamrock for the transportation of
    crude oil to the Ardmore refinery.

(2) The tariff rates for the Skellytown to Mont Belvieu refined product
    pipeline, which is owned by Skelly-Belvieu Pipeline Company, of which we own
    50% and account for under the equity method, were not revised.


     Revenues for the nine months ended September 30, 2000 were $69,406,000 as
compared to $81,535,000 for the nine months ended September 30, 1999, a decrease
of 15% or $12,129,000. Effective January 1, 2000, we implemented revised tariff
rates on many of our pipelines, which resulted in the lower revenues being
recognized in the first nine months of 2000 as compared to the first nine months
of 1999. Adjusting the revenues for the nine months ended September 30, 1999
using the newly established tariff rates and the historical throughput barrels
results in revised revenues of $65,397,000. On a comparative basis, revenues
increased $4,009,000 or 6%. The following discussion is based on a comparison of
the adjusted revenues for the nine months ended September 30, 1999 and the
actual revenues for the nine months ended September 30, 2000:



     - revenues generated from the refined product terminals were $11,690,000
       for the nine months ended September 30, 2000 as compared to $10,974,000
       for the nine months ended September 30, 1999 due to a combined 6%
       increase in throughput at the various terminals;



     - revenues for the McKee to El Paso refined product pipeline increased
       $1,781,000 due to a 19% increase in throughput barrels, resulting from
       higher refined product demand in El Paso and the Arizona market and
       temporary refinery disruptions on the West Coast;



     - revenues for McKee to Colorado Springs to Denver refined product pipeline
       decreased $419,000 in the first nine months of 2000 as compared to the
       first nine months of 1999 due to a 4% decline in throughput barrels. A
       temporary decline in demand in the Colorado Springs market resulted in
       Ultramar Diamond Shamrock transporting fewer barrels to the Colorado
       Springs market and instead transporting greater quantities through the
       McKee to


                                       50
<PAGE>   57


       El Paso refined product pipeline. In addition, due to varying demands for
       different refined products in Colorado Springs and Denver, production and
       scheduling requirements at the McKee refinery resulted in Ultramar
       Diamond Shamrock transporting greater quantities of refined products to
       Denver by way of the McKee to Denver (Phillips) refined product pipeline;



     - revenues increased $908,000 for the Corpus Christi to Three Rivers crude
       oil pipeline due to a 9% increase in throughput barrels. During the first
       nine months of 2000, Ultramar Diamond Shamrock increased production at
       the Three Rivers refinery to meet the growing demand in south Texas;



     - revenues generated from the McKee to Denver (Phillips) refined product
       pipeline increased $219,000 in the first nine months of 2000 as compared
       to the first nine months of 1999 as throughput increased 10% due to
       increasing demand in Denver, Colorado;



     - revenues generated from the Three River to Pettus (Corpus Christi
      segment) refined product pipeline increased $346,000 in the first nine
      months of 2000 as compared to the first nine months of 1999 as throughput
      increased 129% due to rising refined product demand in South Texas; and



     - revenues for the Three Rivers to Laredo refined product pipeline
       increased $270,000 for the first nine months of 2000 as compared to the
       first nine months of 1999 due to a 13% increase in throughput barrels,
       resulting from increased refined product demand in Laredo, Texas and its
       sister city of Nuevo Laredo, Mexico. Laredo, Texas is one of the fastest
       growing cities in the United States and Ultramar Diamond Shamrock is the
       major supplier of refined products to this area of Texas.



     Operating expenses increased $5,282,000 or 31% in the first nine months of
2000 from the first nine months of 1999 primarily due to the following items:



     - higher operating expenses of $978,000 resulting from a loss of $916,000
       in the first six months of 2000 as compared to a gain of $62,000 in the
       first nine months of 1999 due to the impact of volumetric expansions and
       contractions and discrepancies in the measurement of throughput.
       Effective July 1, 2000, the impact of these items is borne by the
       shippers in our pipelines and is therefore not reflected in operating
       income.



     - higher maintenance expenses of $1,148,000 primarily related to
       discretionary environmental expenditures on terminal operations;



     - utility expenses increasing $1,232,000 in the first nine months of 2000
       as compared to 1999 as a result of higher throughput barrels in most
       pipelines and terminals; and



     - higher salary and employee benefit expenses of $1,122,000 in the first
       nine months of 2000 as compared to the first nine months of 1999 due to
       increased benefit accruals and rising salary costs.



     Depreciation and amortization expense increased $727,000 or 8% in the first
nine months of 2000 as compared to the comparable period in 1999 due to the
additional depreciation related to the recently completed capital projects,
including the expansion of the McKee to Colorado Springs and the Amarillo to
Albuquerque refined product pipelines. Partially offsetting the increase was
lower depreciation related to the sale of an additional 8.33% interest in the
McKee to El Paso refined product pipeline and terminal in August 1999.



     General and administrative expenses increased 7% in the first nine months
of 2000 as compared to the 1999 period due to increased general and
administrative costs at Ultramar Diamond Shamrock, and the fact that the net
amount reimbursed by partners on jointly owned pipelines in the first nine
months of 2000 remained comparable to 1999. General and administrative expense
of $3,771,000 for the first nine months of 2000 was comprised of $4,142,000 of
allocations from Ultramar Diamond Shamrock less $371,000 reimbursed by partners
on jointly owned pipelines. General and administrative expense of $3,523,000 for
the

                                       51
<PAGE>   58


first nine months of 1999 was comprised of $3,901,000 of allocations from
Ultramar Diamond Shamrock less $378,000 reimbursed by partners on jointly owned
pipelines.



     Interest expense of $2,808,000 for the first nine months of 2000 was higher
than the $669,000 recognized in the same period in 1999 due to the additional
interest expense recognized in the third quarter of 2000 related to the
$107,676,000 of debt due to parent.



     Equity income from affiliate represents the Ultramar Diamond Shamrock
logistics business' 50% interest in the net income of Skelly-Belvieu Pipeline
Company, which operates the Skellytown to Mont Belvieu refined product pipeline.
Equity income from affiliate for the first nine months of 2000 was $3,044,000 as
compared to $2,370,000 for the comparable period in 1999 as throughput increased
17% due to rising demand for petrochemical raw materials along the Texas Gulf
Coast.



     Effective July 1, 2000, Ultramar Diamond Shamrock transferred the assets
and certain liabilities of the Ultramar Diamond Shamrock logistics business to
Shamrock Logistics Operations. As a limited partnership, Shamrock Logistics
Operations is not subject to federal or state income taxes. Due to this change
in tax status, the deferred income tax liability of $38,217,000 as of June 30,
2000 was written off in the statement of income for the nine months ended
September 30, 2000. The resulting net benefit for income taxes of $30,812,000
for the nine months ended September 30, 2000, includes the write off of the
deferred income tax liability less the provision for income taxes of $7,405,000
for the first six months of 2000. The income tax provision for the first nine
months of 1999 was based upon the effective income tax rate for the Ultramar
Diamond Shamrock logistics business of 38.3%. The effective income tax rate
exceeds the U.S. federal statutory income tax rate due to state income taxes.



     Net income in the first nine months of 2000 was $61,011,000 as compared to
$32,242,000 in 1999. The increase of $28,769,000, or 89%, is primarily due to
the write off of the $38,217,000 deferred income tax liability as of July 1,
2000 partially offset by decreased tariff revenues as a result of the revised
tariff rates that went into effect January 1, 2000, the impact of which was
$9,964,000 after income taxes.


RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED
DECEMBER 31, 1999

     The following table reflects throughput for each of our principal crude oil
and refined product pipelines and the total throughput for all of our refined
product terminals for the year ended December 31, 1998 and 1999. The barrel
volumes presented in the table below reflect only our ownership interest and are
in thousands.


<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                               ------------
                                                               1998     1999
                                                               ----     ----
                                                                 (barrels)
<S>                                                           <C>      <C>
Crude Oil Pipelines:
  Corpus Christi to Three Rivers............................  29,431   29,417
  Wasson to Ardmore(1) (both pipelines).....................  21,435   26,339
  Ringgold to Wasson(1).....................................  10,013   10,982
  Dixon to McKee............................................  21,167   22,305
Refined Product Pipelines:
  McKee to Colorado Springs to Denver.......................   8,744    9,064
  McKee to El Paso..........................................  14,502   19,767
  Amarillo to Albuquerque...................................   5,185    4,584
  Ardmore to Wynnewood......................................  11,675   20,014
  Three Rivers to Laredo....................................   4,557    5,381
  Three Rivers to San Antonio...............................   9,616   10,154
  McKee to Amarillo (both pipelines) to Abernathy...........  16,866   14,995
  McKee to Denver (Phillips)................................   4,108    3,924
Refined Product Terminals...................................  52,594   58,889
</TABLE>


                                       52
<PAGE>   59

---------------
(1) Since the acquisition of the Ardmore pipelines on September 25, 1997 through
    December 31, 1999, the Ultramar Diamond Shamrock logistics business did not
    charge Ultramar Diamond Shamrock for transportation of crude oil through the
    Ardmore refinery crude oil pipelines. Had the Ultramar Diamond Shamrock
    logistics business charged for these services, revenues would have increased
    by $5,348,000 and $6,377,000 for the years ended December 31, 1998 and 1999,
    respectively, using the revised tariff rates multiplied by the historical
    throughput barrels.

     Revenues for the year ended December 31, 1999 were $109,773,000 as compared
to $97,883,000 for the year ended December 31, 1998, an increase of 12% or
$11,890,000. This increase in revenues is primarily due to the following items:

     - revenues for the McKee to El Paso refined product pipeline increased
       $8,591,000 due to a 36% increase in throughput barrels, resulting from
       higher refined product demand in El Paso and the Arizona market and
       temporary refinery disruptions on the West Coast;

     - revenues generated from the refined product terminals were $15,238,000
       for the year ended December 31, 1999 as compared to $11,604,000 for the
       year ended December 31, 1998 due to a combined 12% increase in throughput
       at the various terminals and the establishment, effective January 1,
       1999, of a separate terminalling fee ($1,649,000 of the increase in
       1999). Prior to 1999, terminalling revenues were based on total costs
       incurred at the terminal;

     - revenues for the Three Rivers to Laredo refined product pipeline
       increased $1,119,000 due to an 18% increase in throughput barrels,
       resulting from increased refined product demand in Laredo, Texas and its
       sister city of Nuevo Laredo, Mexico; and


     - revenues for the McKee to Amarillo to Abernathy refined product pipelines
       decreased $808,000 or 21% due to a 11% decrease in throughput barrels and
       revenues for the Amarillo to Albuquerque refined product pipeline
       decreased $322,000 or 8% due to a 12% decrease in throughput barrels.
       These decreases in throughput resulted from Ultramar Diamond Shamrock
       transporting more refined products through the McKee to El Paso refined
       product pipeline to more profitable retail markets in Arizona.


     Operating expenses decreased $3,779,000 or 13% in 1999 from 1998 primarily
due to the following items:

     - in 1998, a $2,100,000 impairment charge related to the Harlingen refined
       product terminal was recorded;

     - lower operating expenses in 1999 on the McKee to El Paso refined product
       pipeline and terminal due to the sale of a 25% interest to Phillips
       Petroleum Company in March 1998 and an additional 8.33% interest in
       August 1999; and

     - cost reductions initiated in 1998 and early 1999, including centralizing
       pipeline control rooms into two locations, one in San Antonio and the
       other at the McKee refinery, negotiating lower utility rates with
       suppliers and lower personnel costs due to fewer operating employees.

     The above expense reductions were partially offset by higher utility costs
to operate the various pump stations along the pipelines to move the higher
overall throughput.

     Depreciation and amortization expense decreased $133,000 or 1%, in 1999 due
to the sale of an additional 8.33% interest in the McKee to El Paso refined
product pipeline and terminal in August 1999. Partially offsetting the decrease
was additional depreciation related to the Amarillo to Albuquerque refined
product pipeline and other capital projects completed in 1998.

     General and administrative expenses increased 3% in 1999 as compared to
1998 due to increased general and administrative costs at Ultramar Diamond
Shamrock, and the fact that the net amount reimbursed by partners on jointly
owned pipelines in 1999 remained comparable to 1998. General and administrative
expense of $4,698,000 for 1999 was comprised of $5,201,000 of allocations from
Ultramar Diamond Shamrock less $503,000 reimbursed by partners on jointly

                                       53
<PAGE>   60

owned pipelines. General and administrative expense of $4,552,000 for 1998 was
comprised of $5,067,000 of allocations from Ultramar Diamond Shamrock less
$515,000 reimbursed by partners on jointly owned pipelines. Offsetting the
allocations to partners were additional amounts allocated from the McKee to
Denver refined product pipeline due to higher maintenance costs.

     Interest expense of $777,000 for 1999 was slightly lower than the $796,000
recognized in 1998 due to lower outstanding debt during 1999 as compared to 1998
as $353,000 of debt was repaid in early 1999.

     Equity income from affiliate for 1999 was $3,874,000 as compared to
$3,896,000 for 1998. Excluding a state income tax refund received by
Skelly-Belvieu Pipeline Company in 1998, equity income increased 16% due to
lower expenses.

     The income tax provision for 1999 and 1998 was based upon the effective
income tax rate for the Ultramar Diamond Shamrock logistics business for those
periods of 38.3%. The effective income tax rate exceeds the U.S. federal
statutory income tax rate due to state income taxes.


     Net income in 1999 was $42,798,000 as compared to $36,289,000 in 1998. The
increase of $6,509,000, or 18%, is due to increased revenues and lower operating
costs and expenses, partially offset by a lower gain on sale of property, plant,
and equipment. In August 1999, the Ultramar Diamond Shamrock logistics business
recognized a $2,478,000 pre-tax gain on sale of an 8.33% interest in the McKee
to El Paso refined product pipeline and terminal to Phillips Petroleum Company
upon the completion of the 20,000 barrel per day expansion project. In March
1998, the Ultramar Diamond Shamrock logistics business recognized a pre-tax gain
of $7,005,000 from the sale of a 25% interest to Phillips Petroleum Company in
this pipeline and terminal. The sales of ownership interest in the McKee to El
Paso refined product pipeline and terminal represent sales of excess throughput
capacity that was not being utilized by the Ultramar Diamond Shamrock logistics
business, thus revenues did not decline as a result of the sales. As a result of
the August 1999 sale, the Ultramar Diamond Shamrock logistics business'
available capacity in the pipeline was reduced to 66.67% or 40,000 barrels per
day.


RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1998

     The following table reflects throughput for each of our principal crude oil
and refined product pipelines and the total throughput for all of our refined
product terminals for the years ended December 31, 1997 and 1998. The barrel
volumes presented in the table below reflect only our ownership interest and are
in thousands.


<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                                                 ------------
                                                               1997        1998
                                                               ----        ----
                                                                  (barrels)
<S>                                                           <C>         <C>
Crude Oil Pipelines:
  Corpus Christi to Three Rivers............................  27,612      29,431
  Wasson to Ardmore(1)(2) (both pipelines)..................   6,842      21,435
  Ringgold to Wasson(1)(2)..................................   3,415      10,013
  Dixon to McKee............................................  17,385      21,167
Refined Product Pipelines:
  McKee to Colorado Springs to Denver.......................   7,597       8,744
  McKee to El Paso..........................................  13,143      14,502
  Amarillo to Albuquerque...................................   5,152       5,185
  Ardmore to Wynnewood(1)...................................   2,866      11,675
  Three Rivers to Laredo....................................   3,952       4,557
  Three Rivers to San Antonio...............................   9,615       9,616
  McKee to Amarillo (both pipelines) to Abernathy...........  16,483      16,866
  McKee to Denver (Phillips)................................   4,173       4,108
Refined Product Terminals...................................  49,806      52,594
</TABLE>


                                       54
<PAGE>   61

---------------

(1) The Ardmore pipelines were acquired on September 25, 1997, when Ultramar
    Diamond Shamrock acquired Total Petroleum (North America) Ltd. in a purchase
    business combination. Throughput for 1997 in the table above represents the
    quantities transported since the acquisition. Throughput for all of 1997 was
    26,465,000 barrels for the Wasson to Ardmore crude oil pipeline, 13,803,000
    barrels for the Ringgold to Wasson crude oil pipeline, and 10,379,000
    barrels for the Ardmore to Wynnewood refined product pipeline.

(2) Since the acquisition of the Ardmore pipelines on September 25, 1997 through
    December 31, 1999, the Ultramar Diamond Shamrock logistics business did not
    charge Ultramar Diamond Shamrock for transportation of crude oil through the
    Ardmore refinery crude oil pipelines. Had the Ultramar Diamond Shamrock
    logistics business charged for these services, revenues would have increased
    by $1,783,000 and $5,348,000 for the years ended December 31, 1997 and 1998,
    respectively, using revised tariff rates multiplied by the historical
    throughput barrels.

     Revenues for the year ended December 31, 1998 were $97,883,000 as compared
to $84,881,000 for the year ended December 31, 1997, an increase of 15%, or
$13,002,000. This increase in revenues is due to the following items:

     - revenues generated from the Ardmore to Wynnewood refined product pipeline
       increased $2,694,000 from 1997 to 1998 as the Ultramar Diamond Shamrock
       logistics business owned this pipeline for all of 1998 versus only the
       last three months of 1997;

     - revenues for the McKee to El Paso refined product pipeline increased
       $2,940,000 due to a 10% increase in throughput barrels, resulting from
       higher refined product demand in El Paso and the Arizona markets. This
       increase occurred even though in March 1998, a 25% interest in the
       pipeline and the related terminal was sold, reducing the Ultramar Diamond
       Shamrock logistics business' available capacity by 25%;

     - revenues for the Dixon to McKee crude oil pipeline increased $657,000,
       and revenues for the Corpus Christi to Three Rivers crude oil pipeline
       increased $499,000 due to a combined 12% increase in throughput barrels
       as the McKee and Three Rivers refineries were operated at full capacity
       in 1998 due to the low cost of and demand for crude oil;

     - revenues for the McKee to Colorado Springs to Denver refined product
       pipeline increased $4,241,000 due to a 2,891,000 barrel increase in
       throughput in the Colorado Springs to Denver segment of the pipeline.
       Prior to the completion of the Colorado Springs to Denver segment of the
       pipeline in late 1997, Ultramar Diamond Shamrock transported refined
       product by truck from Colorado Springs to Denver to supply the growing
       demand in Denver. The Total Petroleum retail stores acquired by Ultramar
       Diamond Shamrock in 1997 and the newly constructed Ultramar Diamond
       Shamrock retail stores experienced increased gasoline demand in 1998;

     - revenues for the Three Rivers to Laredo refined product pipeline
       increased $818,000 due to a 15% increase in throughput barrels resulting
       from increased refined product demand in Laredo, Texas and its sister
       city of Nuevo Laredo, Mexico; and

     - revenues generated from the refined product terminals were $11,604,000
       for the year ended December 31, 1998 as compared to $10,771,000 for the
       year ended December 31, 1997, an increase of $833,000. This 8% increase
       is due to a 6% increase in throughput at the refined product terminals
       which resulted in increased operating costs.

     Operating expenses increased $3,985,000, or 17%, in 1998 from 1997
primarily due to:

     - higher utility costs to operate the pump stations along the pipelines to
       transport the higher throughput; and

     - a $2,100,000 impairment charge recognized in 1998 related to the
       Harlingen refined product terminal.

     Partially offsetting the above increases were lower operating expenses on
the McKee to El Paso refined product pipeline and terminal as a result of the
sale of a 25% interest in the pipeline and terminal in March 1998 to Phillips
Petroleum Company.

                                       55
<PAGE>   62

     Over the past several years, the refined product volume delivered by
Ultramar Diamond Shamrock to the south Texas market of Harlingen has declined
due to increased competition. In light of these competitive conditions, in June
1998, the Ultramar Diamond Shamrock logistics business recorded an impairment
charge of $2,100,000 to reduce the carrying value ($4,100,000 prior to the
write-down) of the Harlingen refined product terminal to its estimated
realizable value. The Ultramar Diamond Shamrock logistics business has and will
continue to operate the terminal because it is strategic to servicing the south
Texas region.


     Depreciation and amortization expense increased 10% in 1998 as compared to
1997 due to the additional depreciation related to the Ardmore refinery crude
oil pipelines and refined product pipeline acquired in September 1997. Partially
offsetting the increase is decreased depreciation on the McKee to El Paso
refined product pipeline and terminal as a result of the sale of a 25% interest
in the assets in March 1998.


     General and administrative expenses decreased 4% in 1998 as compared to
1997 due to increased costs being allocated to jointly owned pipeline partners,
including amounts allocated to Phillips Petroleum Company for the McKee to El
Paso refined product pipeline and terminal, while the allocated costs from
Ultramar Diamond Shamrock remained constant. In 1998, the amount allocated to
the Ultramar Diamond Shamrock logistics business from Ultramar Diamond Shamrock
was $5,067,000 as compared to $5,100,000 in 1997. Reimbursements by partners in
jointly owned pipelines were $515,000 in 1998 as compared to $339,000 in 1997.

     Interest expense was $796,000 for 1998 as compared to $158,000 for 1997 due
to only $121,000 of interest being capitalized in 1998 as compared to $782,000
being capitalized for 1997. Also during the year ended December 31, 1998,
$283,000 of debt was repaid as compared to repayments of $262,000 during 1997.

     Equity income from affiliate for 1998 was $3,896,000 as compared to
$3,025,000 for 1997 due to lower operating expenses in 1998 for the Skellytown
to Mont Belvieu refined product pipeline and a state income tax refund realized
in 1998 by Skelly-Belvieu Pipeline Company.

     The income tax provision for 1998 and 1997 was based upon the effective
income tax rate for the Ultramar Diamond Shamrock logistics business for those
periods of 38.3% and 38.2%, respectively. The effective income tax rate exceeds
the U.S. federal statutory income tax rate due to state income taxes.


     Net income for the year ended December 31, 1998 was $36,289,000 as compared
to $26,823,000 for the year ended December 31, 1997. The increase of $9,466,000
or 35% is due to increased revenues, a gain on sale of property, plant, and
equipment, and increased equity income from Skelly-Belvieu Pipeline Company. In
March 1998, the Ultramar Diamond Shamrock logistics business recognized a
$7,005,000 pre-tax gain on sale of a 25% interest in the McKee to El Paso
refined product pipeline and terminal to Phillips Petroleum Company. The sale of
a 25% ownership interest in the McKee to El Paso refined product pipeline and
terminal represents the sale of excess throughput capacity that was not being
utilized by the Ultramar Diamond Shamrock logistics business, thus revenues did
not decline as a result of the sale.


LIQUIDITY AND CAPITAL RESOURCES

  CASH FLOWS AND CAPITAL EXPENDITURES


     Net cash provided by operating activities was $18,140,000 for the nine
months ended September 30, 2000, as compared to $40,420,000 for the nine months
ended September 30, 1999. The decrease is primarily due to the overall decrease
in tariff revenues, as a result of the revised tariff rates implemented
effective January 1, 2000. Capital expenditures for the first nine months of
2000 were $5,886,000, including expenditures related to the completion of the
McKee to Colorado Springs expansion from 32,000 barrels per day to 52,000
barrels per day.


                                       56
<PAGE>   63


     Effective June 30, 2000, in conjunction with the transfer of the assets and
liabilities to Shamrock Logistics Operations on July 1, 2000, Ultramar Diamond
Shamrock formalized the terms under which intercompany accounts and working
capital loans will be settled by executing promissory notes with the various
subsidiaries included in the Ultramar Diamond Shamrock logistics business,
resulting in the recognition of $107,676,000 of debt due to the parent and its
affiliates. The promissory notes require that the principal be repaid no later
than June 30, 2005 and bear interest at a rate of 8.0% per annum on the unpaid
balance. In conjunction with the initial public offering, Shamrock Logistics
intends to fully repay the promissory notes.


     Net cash provided by operating activities was $44,731,000, $44,950,000, and
$49,977,000 for the years ended December 31, 1997, 1998, and 1999, respectively.
The increase in net cash provided by operating activities is due to an increase
in operating income of 37% in 1998 over 1997 and an increase of 19% in 1999 over
1998. Operating income has increased as higher throughput barrels have been
transported through the Ultramar Diamond Shamrock logistics business' pipelines
and through the refined product terminals.

     Net cash provided by investing activities of $6,865,000 for 1999 resulted
from the sale of an 8.33% interest in the McKee to El Paso refined product
pipeline and terminal to Phillips Petroleum Company for total proceeds of
$12,000,000 and the distributions received from Skelly-Belvieu Pipeline Company
of $4,238,000. Partially offsetting the proceeds and distributions in 1999 were
capital expenditures of $9,373,000, including $1,565,000 relating to the
expansion of the total capacity of the McKee to El Paso refined product pipeline
from 40,000 barrels per day to 60,000 barrels per day.

     Net cash provided by investing activities of $18,395,000 for the year ended
December 31, 1998 resulted from the sale of a 25% interest in the McKee to El
Paso refined product pipeline and terminal to Phillips Petroleum Company for
total proceeds of $27,000,000 and the distributions received from Skelly-Belvieu
Pipeline Company of $3,692,000. Partially offsetting the proceeds and
distributions in 1998 were capital expenditures of $12,297,000, including the
following:

     - $6,625,000 relating to the expansion of the McKee to El Paso refined
       product pipeline from 40,000 barrels per day to 60,000 barrels per day;
       and

     - $2,060,000 to complete the expansion of the Amarillo to Albuquerque
       refined product pipeline by 5,500 barrels per day.

     Net cash used in investing activities of $52,141,000 during the year ended
December 31, 1997, included expenditures of $43,158,000 for the acquisition of
the Ardmore pipelines acquired on September 25, 1997, when Ultramar Diamond
Shamrock acquired Total Petroleum (North America) Ltd. in a purchase business
combination. Distributions received from Skelly-Belvieu Pipeline Company during
1997 totaled $4,009,000. Capital expenditures of $12,992,000 included the
following:

     - $4,849,000 to complete the Colorado Springs to Denver refined product
       pipeline;

     - $3,297,000 to complete the expansion of the McKee to El Paso refined
       product pipeline to increase the total capacity of the pipeline from
       27,000 barrels per day to 40,000 barrels per day; and

     - $2,423,000 to expand the Amarillo to Albuquerque refined product pipeline
       by 5,500 barrels per day.

     Cash flows from financing activities relate primarily to the centralized
cash management program utilized by Ultramar Diamond Shamrock and all its
affiliates. During the years ended December 31, 1998 and 1999, the Ultramar
Diamond Shamrock logistics business distributed $63,062,000 and $56,489,000,
respectively, of net cash back to Ultramar Diamond Shamrock. The
                                       57
<PAGE>   64

large distributions in 1998 and 1999 were due to increased net income and the
cash received from Phillips Petroleum Company for the sales of the 33.33%
interest in the McKee to El Paso refined product pipeline and terminal. During
the year ended December 31, 1997, Ultramar Diamond Shamrock advanced $7,672,000
to the Ultramar Diamond Shamrock logistics business to partially fund the
pipelines acquired from Total Petroleum. Also included in cash flows from
financing activities are repayments of debt related to the Corpus Christi crude
oil storage facility of $262,000 in 1997, $283,000 in 1998, and $353,000 in
1999.

  CAPITAL REQUIREMENTS

     The pipeline, terminalling and storage business is capital-intensive,
requiring significant investment to upgrade or enhance existing operations and
to meet environmental regulations. The capital requirements of the Ultramar
Diamond Shamrock logistics business have consisted primarily of, and for the
Shamrock Logistics operations will consist primarily of:

     - maintenance capital expenditures, such as those required to maintain
       equipment reliability and safety and to address environmental
       regulations; and

     - expansion capital expenditures, such as those to expand and upgrade
       pipeline capacity and to construct new pipelines, terminals, and storage
       facilities to meet Ultramar Diamond Shamrock's logistics needs.

     Shamrock Logistics expects to fund its capital expenditures from cash
provided by operations and, to the extent necessary, from the proceeds of:

     - borrowings under the revolving credit facility discussed below; and

     - the issuance of additional common units.

     Expansion capital expenditures for the next three years will include the
following three projects which we expect to exercise options to purchase from
Ultramar Diamond Shamrock by the end of the first quarter of 2002:

     - $64 million for a 271.7-mile crude oil pipeline which runs from Wichita
       Falls, Texas to the McKee refinery and a 360,000 barrel storage facility
       in Wichita Falls. Ultramar Diamond Shamrock is currently expanding the
       capacity of the crude oil pipeline from 85,000 barrels per day to 110,000
       barrels per day;

     - $6.5 million for a 600,000 barrel storage facility in Ringgold, Texas
       that Ultramar Diamond Shamrock is constructing. This facility will
       enhance the crude oil supply system for the Ardmore and McKee refineries;
       and

     - $5.7 million for a 19-mile refined product pipeline that Ultramar Diamond
       Shamrock is constructing from our Laredo, Texas refined product terminal
       to a refined product terminal owned by Pemex in Nuevo Laredo, Mexico.

     Shamrock Logistics expects to fund the purchase of these expansion capital
projects with proceeds from the revolving credit facility. We expect that the
additional revenues generated from operating these pipelines will more than
offset the additional interest expense to be incurred and will increase the cash
flows and our ability to pay the minimum quarterly distributions. For a more
detailed description please read "Business -- Recently Completed and Planned
Expansion Projects."


     Maintenance capital expenditures, including environmental capital
expenditures, are expected to approximate $0.5 million for the last three months
of 2000 and $4.6 million for the year ending December 31, 2001.


                                       58
<PAGE>   65

  RELATED PARTY TRANSACTIONS


     Effective July 1, 2000, Shamrock Logistics Operations entered into a
Service Agreement with Ultramar Diamond Shamrock and its affiliates to provide
general and administrative services to Shamrock Logistics Operations for an
annual fee of $5.2 million, payable monthly. The services to be provided under
this agreement include the corporate functions of legal, accounting, treasury,
information technology and other corporate services.


     In addition to the administrative fee paid to Ultramar Diamond Shamrock,
Shamrock Logistics will incur incremental costs to third parties as a
publicly-traded entity (e.g., cost of tax return preparation, annual and
quarterly reports to unitholders, investor relations, and registrar and transfer
agent fees) of approximately $1.5 million per year.


     Since Shamrock Logistics will not have any employees, Shamrock Logistics
will reimburse Ultramar Diamond Shamrock and its affiliates for the various
costs of the employees who work within the pipeline, storage and terminalling
operations, which salary, wages and benefit costs approximated $9.7 million in
1999.


     The payment of the incremental costs to third parties, and the
administrative fee and the reimbursement of expenses to Ultramar Diamond
Shamrock could adversely affect our ability to make cash distributions to our
unitholders.

  DEBT ASSUMED BY SHAMROCK LOGISTICS OPERATIONS

     Effective July 1, 2000, the assets and liabilities of the Ultramar Diamond
Shamrock logistics business were contributed to Shamrock Logistics Operations in
exchange for the ownership interest in Shamrock Logistics Operations. In
conjunction with this transfer, Shamrock Logistics Operations assumed from an
affiliate of Ultramar Diamond Shamrock the $10.8 million outstanding
indebtedness owed to the Port of Corpus Christi Authority. This amount of debt
is payable in annual installments and matures on December 31, 2015. Interest
accrues on the unpaid principal balance at the rate of 8% per annum.

  DESCRIPTION OF REVOLVING CREDIT FACILITY


     We expect that at closing of the offering, Shamrock Logistics Operations
will borrow approximately $63.7 million under our five year $120 million
revolving credit facility with The Chase Manhattan Bank and other lenders. The
following is a summary of the material terms of the revolving credit facility.



     Shamrock Logistics Operations will use approximately $58.7 million borrowed
under the revolving credit facility at closing to repay intercompany
indebtedness and working capital loans and to reimburse Ultramar Diamond
Shamrock and its affiliates for capital expenditures. In addition, we expect
Shamrock Logistics Operations will borrow approximately $5 million of working
capital under the revolving credit facility at closing. We may use up to $25
million of the total amount available under the revolving credit facility to
provide working capital and, if necessary, to fund distributions to unitholders.
The remainder of the borrowings under the revolving credit facility may be used
for working capital and general partnership purposes, but borrowings in excess
of the $25 million sublimit may not be used to fund distributions to
unitholders. The obligations under the revolving credit facility will be
unsecured. The indebtedness under the revolving credit facility will rank
equally with all the outstanding unsecured and unsubordinated debt of Shamrock
Logistics Operations and will be non-recourse to Shamrock Logistics and the
general partner.


     All loans may be prepaid at any time without penalty. All borrowings
designated as borrowings subject to the $25 million sublimit must be reduced to
zero for a period of at least 15 consecutive days during each fiscal year.

                                       59
<PAGE>   66

     The revolving credit facility also has a $25 million sublimit for letters
of credit which may be used for general business purposes in the ordinary course
of business or any other purpose approved by The Chase Manhattan Bank.


     Indebtedness under the revolving credit facility will bear interest at the
option of Shamrock Logistics Operations at either the alternative base rate or
the LIBOR rate (preadjusted for reserves), as those terms are defined in the
revolving credit facility, plus, in the case of loans bearing interest at the
LIBOR rate, an applicable margin. Shamrock Logistics Operations will incur a
facility fee on the aggregate commitments of the lenders under the revolving
credit facility, whether used or unused. From December 15, 2000, the date of the
execution of the credit facility, to February 28, 2001, when the lenders'
commitment expires, we will incur a facility fee of 0.10% per year.



     The revolving credit facility contains a prohibition on distributions by
Shamrock Logistics Operations if any default, as defined in the revolving credit
facility, is continuing or would result from the distribution.



     In addition, the revolving credit facility contains various covenants
limiting the ability of Shamrock Logistics Operations and the ability of its
subsidiaries to:


     - incur indebtedness;

     - grant liens;

     - engage in transactions with affiliates;

     - make investments, loans and acquisitions;

     - enter into a merger, consolidation or sale of assets or liquidate;

     - engage to a material extent in another type of business;

     - enter into interest or currency exchange rate or commodity price hedging
       agreements;

     - incur restrictions affecting the ability to grant liens;

     - in the case of Shamrock Logistics Operations, create or acquire any
       subsidiary that does not guarantee the obligations under the revolving
       credit facility; or

     - incur restrictions affecting subsidiaries' ability to make dividends or
       distributions or to make or repay loans or advances to, or guarantee
       indebtedness of, Shamrock Logistics Operations or any other subsidiary.


     In addition, the revolving credit facility contains the following financial
covenants:


     - the ratio of Consolidated EBITDA (as defined in the revolving credit
       facility), pro forma for any dispositions or acquisitions of assets, to
       Consolidated Interest Expense (as defined in the revolving credit
       facility) must be at least 3.5 to 1.0 for any period of four consecutive
       fiscal quarters; and

     - the ratio of consolidated indebtedness to Consolidated EBITDA, pro forma
       for any dispositions or acquisitions of assets, may not exceed 3.0 to 1.0
       for any period of four consecutive fiscal quarters.

     If an event of default exists under the revolving credit facility, the
lenders may accelerate the maturity of the revolving credit facility and
exercise other rights and remedies. Each of the following is an event of
default:

     - failure to pay any principal when due, or any interest or other amount
       within five business days of when due;

                                       60
<PAGE>   67

     - failure of any representation or warranty to be true and correct;

     - failure to perform or otherwise comply with the covenants in the
       revolving credit facility;

     - default by Shamrock Logistics Operations or any of its subsidiaries on
       the payment of any indebtedness in excess of $10,000,000, or any default
       in the performance of any obligation or condition with respect to
       indebtedness in excess of $10,000,000 if the effect of the default is to
       accelerate the indebtedness or to permit the holder of the indebtedness
       to accelerate its maturity;

     - bankruptcy or insolvency events involving Shamrock Logistics Operations
       or its subsidiaries;

     - one or more satisfied judgments in excess of $10,000,000 in the aggregate
       that is not covered by insurance is rendered against Shamrock Logistics
       Operations and/or its subsidiaries;

     - various events occur in connection with employee benefit plans involving
       expected liability in excess of $10,000,000;

     - the incurrence by Shamrock Logistics Operations or any subsidiary of
       environmental liabilities requiring payment in excess of $5,000,000 in
       any four consecutive fiscal quarters;

     - the incurrence of indebtedness by Shamrock Logistics;

     - Shamrock Logistics

        - engages in any business or operation other than those incidental to
          its ownership of the limited partner interests of Shamrock Logistics
          Operations;

        - incurs or permits to exist any liabilities or other obligations other
          than nonconsentual obligations imposed by law, obligations with
          respect to the units of Shamrock Logistics and guarantees with respect
          to indebtedness permitted by law; and

        - owns, leases or operates any assets (including cash or cash
          equivalents) other than the limited partner interest in Shamrock
          Logistics Operations, ownership interests (not to exceed 1%) in a
          subsidiary of Shamrock Logistics Operations and cash received as
          distributions from Shamrock Logistics Operations in accordance with
          the revolving credit facility;

     - the occurrence of a change of control, which is defined to include any of
       the following events:

          - Ultramar Diamond Shamrock ceases to own, directly or indirectly
            either 100% of the general partner of Shamrock Logistics or of
            Shamrock Logistics Operations, or at least 20% of the units of
            Shamrock Logistics;

          - any person or group of persons other than Ultramar Diamond Shamrock
            and its wholly-owned subsidiaries becomes the owner, directly or
            indirectly, of a greater percentage of the units than those owned,
            directly or indirectly, by Ultramar Diamond Shamrock; or

          - 100% of the limited partnership interests in Shamrock Logistics
            Operations ceases to be owned directly or indirectly by Shamrock
            Logistics or Ultramar Diamond Shamrock; and


     - the sale by Ultramar Diamond Shamrock of a material portion of the McKee,
       Three Rivers, and Ardmore refineries, on an aggregate basis unless the
       long-term indebtedness of the purchaser has an investment grade rating
       and the purchaser assumes the rights and obligations of Ultramar Diamond
       Shamrock and its affiliates under the pipelines and terminals usage
       agreement with respect to the purchased refineries.

                                       61
<PAGE>   68

ENVIRONMENTAL


     The operations of the Ultramar Diamond Shamrock logistics business have
been subject to environmental laws and regulations adopted by various
governmental authorities in the jurisdictions in which these operations have
been conducted. The Ultramar Diamond Shamrock logistics business has accrued
liabilities for estimated site restoration costs to be incurred in the future at
its facilities and properties, including liabilities for environmental
remediation obligations at various sites where it has been identified as a
potentially responsible party. Under the accounting policies of the Ultramar
Diamond Shamrock logistics business, liabilities are recorded when site
restoration and environmental remediation and cleanup obligations are either
known or considered probable and can be reasonably estimated. In connection with
this offering and related transactions, Ultramar Diamond Shamrock has agreed to
indemnify Shamrock Logistics and Shamrock Logistics Operations for environmental
liabilities related to the assets transferred to Shamrock Logistics Operations
that arose prior to closing and are discovered within 10 years after closing
(excluding liabilities resulting from the change in law after closing).
Accordingly, the existing environmental liabilities at the date of closing will
remain an obligation of Ultramar Diamond Shamrock and will not be transferred to
Shamrock Logistics.


     Shamrock Logistics does expect to incur capital expenditures in the future
for environmental costs, including but not limited to, air pollution control
equipment, enhanced pipeline risk assessment programs, tank environmental
control upgrades and upgrades of certain wastewater systems. For 2000, we
estimate we will incur environmental maintenance capital expenditures of
$1,350,000 and environmental operating expenses of $750,000.


     As of June 30, 2000, accruals for environmental matters amounted to
$2,507,000 including $100,000 accrued during the first six months of 2000.
Effective July 1, 2000, the $2,507,000 accrual for existing environmental
liabilities was not transferred to Shamrock Logistics Operations in the transfer
of the Ultramar Diamond Shamrock Logistics business to Shamrock Logistics
Operations effective July 1, 2000, but rather was retained by Ultramar Diamond
Shamrock.


     As of December 31, 1997, 1998, and 1999, accruals for environmental matters
amounted to $4,547,000, $4,319,000, and $2,757,000, respectively. Additions to
accrual for environmental matters during the year ended December 31, 1997
amounted to $1,802,000. There were no additions to the accrual for environmental
matters during the year ended December 31, 1998. During 1999, based on Ultramar
Diamond Shamrock's annual review of environmental liabilities, Ultramar Diamond
Shamrock determined that it had overstated certain liabilities as the required
cleanup obligations were less than originally estimated. Accordingly,
environmental liabilities were reduced by $1,114,000.

IMPACT OF INFLATION

     The impact of inflation has slowed in recent years. However, it is still a
factor in the United States economy and may increase the cost to acquire or
replace property, plant and equipment and/or increase the costs of supplies and
labor. To the extent permitted by competition and regulation and the pipelines
and terminals usage agreement, the Ultramar Diamond Shamrock logistics business
has and Shamrock Logistics will continue to pass along increased costs to its
customers in the form of higher tariff rates.

NEW ACCOUNTING PRONOUNCEMENTS

     In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Startup
Activities." This Statement of Position requires startup activity costs and
organization costs to be expensed as incurred. Statement of Position 98-5 is
effective for financial statements for fiscal years beginning after December 15,

                                       62
<PAGE>   69

1998. We adopted the Statement of Position effective January 1, 1999. The impact
of implementation of Statement of Position 98-5 was not material.

     The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" in June 1998. Statement of Financial Accounting Standards No. 133
establishes new and revises several existing standards for derivative
instruments, including some derivative instruments embedded in other contracts,
and hedging activities. It requires an entity to recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. If some conditions are met, a derivative may be designated as a
cash flow hedge, a fair value hedge or a foreign currency hedge. An entity that
elects to apply hedge accounting is required to establish at the inception of
the hedge the method it will use for assessing the effectiveness of the hedge
and the measurement method to be used. Changes in the fair value of derivatives
are either recognized in earnings in the period of change or as a component of
other comprehensive income in the case of some hedges. Statement of Financial
Accounting Standards No. 133 should not be applied retroactively to financial
statements of prior periods. In June 1999, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 137, "Accounting
for Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of FASB Statement No. 133," which defers the effective date of Statement of
Financial Accounting Standards No. 133 for one year to be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000.

     In June, 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133." FASB No. 133 addresses a number of issues causing
implementation difficulties for entities that apply FASB Statement No. 138. FASB
Statement No. 138 amends the accounting and reporting requirements of FASB
Statement No. 133 for certain derivative instruments and certain hedging
activities. We expect to adopt Statement of Financial Accounting Standards No.
133 and No. 138 as of January 1, 2001. Management believes that there will be no
material effect to the financial position or results of operation of the
Ultramar Diamond Shamrock logistics business as a result of implementing
Statements No. 133 and No. 138.

     In August 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 99,
"Materiality," which provides guidance in applying materiality thresholds to the
preparation of financial statements filed with the SEC and the performance of
audits of those financial statements. In November 1999, the SEC issued SAB No.
100, "Restructuring and Impairment Charges," which provides guidance regarding
the accounting for and disclosure of certain expenses commonly reported in
connection with exit activities and business combinations. In December 1999, the
SEC issued SAB No. 101, "Revenue Recognition in Financial Statements," which
provides the SEC's views in applying generally accepted accounting principles to
selected revenue recognition issues. We have reviewed the guidance of these SABs
and related amendments and believe that the accounting policies of the Ultramar
Diamond Shamrock logistics business and the disclosures in the financial
statements and in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are appropriate and adequately address the
requirements of these SABs.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The principal market risk (i.e. the risk of loss arising from the adverse
changes in market rates and prices) to which we are exposed is interest rate
risk on our debt. We manage our debt considering various financing alternatives
available in the market. Since the current debt is fixed rate debt with an 8%
interest rate and the total of this debt is not material to the financial
position or performance of the Ultramar Diamond Shamrock logistics business,
there is currently minimal impact to market interest rate risk.
                                       63
<PAGE>   70

                                    BUSINESS


     We are a Delaware limited partnership formed in December 1999 to acquire,
own, and operate most of Ultramar Diamond Shamrock's crude oil and refined
product pipeline, terminalling, and storage assets that support the McKee, Three
Rivers, and Ardmore refineries and its marketing operations located in Texas,
Oklahoma, Colorado, New Mexico, and Arizona. Effective July 1, 2000, Ultramar
Diamond Shamrock transferred assets to Shamrock Logistics Operations
representing 72% of the book value of its pipeline, terminalling and storage
assets supporting those refining and marketing operations.


     We generate revenues from our pipeline operations by charging tariffs for
transporting crude oil and refined products through our pipelines. We also
generate revenue through our terminalling operations by charging a terminalling
fee to our customers, including Ultramar Diamond Shamrock and its affiliates.
The terminalling fee is earned when the refined products enter the terminal and
includes the cost of transferring the refined products from the terminal to
trucks. At our El Paso terminal effective January 1, 2000, we began receiving an
additional fee for delivering refined products to a third-party pipeline. We do
not generate any separate revenue from our crude oil storage facilities.
Instead, the costs associated with these facilities were considered in
establishing the tariff rates charged for transporting crude oil from the
storage facilities to the refineries.

     Effective January 1, 2000 we filed revised tariff rates on many of our
crude oil and refined product pipelines to reflect the total cost of the
pipelines, the current throughput capacity and utilization of the pipelines, and
other market conditions. Assuming the revised tariff rates had been effective on
January 1, 1999, the revised tariff rates would have resulted in an aggregate
$21.9 million, or 20%, decrease in our revenues for the year ended December 31,
1999. In addition, beginning January 1, 1999, the Ultramar Diamond Shamrock
logistics business began charging a separate terminalling fee at its refined
product terminals.


     The following table sets forth our principal pipelines, the revenues for
the nine months ended September 30, 2000 and the revenues for the year ended
December 31, 1999 and the nine months ended September 30, 1999, as adjusted to
apply our current tariff rates to historical volumes. In instances where we do
not own 100% of a pipeline, the capacity, the throughput, capacity utilization,
and as adjusted revenue information generally relate only to our percentage
ownership in the pipeline. Pipeline length is not adjusted for ownership
percentage. We have also presented aggregate information in the table below
regarding our other pipelines and all of our refined product terminals.


<TABLE>
<CAPTION>

                                                                                                     YEAR ENDED
                                                                           DECEMBER 31, 1999        DECEMBER 31,
                                                                      ---------------------------       1999
                                                                                                    ------------
                                                                                       CAPACITY     AS ADJUSTED
ORIGIN AND DESTINATION          LENGTH    OWNERSHIP     CAPACITY      THROUGHPUT(1)   UTILIZATION     REVENUES
----------------------          ------    ---------     --------      -------------   -----------   ------------
                                (miles)               (barrels/day)   (barrels/day)                 (in thousands)
<S>                             <C>       <C>         <C>             <C>             <C>           <C>
CRUDE OIL PIPELINES:
Corpus Christi, TX to Three
 Rivers.......................     69.7      100%         120,000         80,594            67%       $10,884
Wasson, OK to Ardmore.........     24.5(3)    100%         90,000         72,161            80%         2,534
Ringgold, TX to Wasson,
 OK(2)........................     44.2      100%          90,000         30,086            40%         3,591
Dixon, TX to McKee............     44.2      100%          85,000         61,110            72%         2,244
Other Crude Oil Pipelines.....    327.2       (4)         127,500         36,090            35%         3,348
                                -------                 ---------        -------                      -------
       TOTAL CRUDE OIL
        PIPELINES.............    509.8                   512,500        280,041            57%        22,601

<CAPTION>
                                  NINE MONTHS ENDED
                                    SEPTEMBER 30,
                                ----------------------

                                   1999
                                AS ADJUSTED     2000
ORIGIN AND DESTINATION           REVENUES     REVENUES
----------------------          -----------   --------
                                  (in thousands)
<S>                             <C>           <C>
CRUDE OIL PIPELINES:
Corpus Christi, TX to Three
 Rivers.......................    $ 8,076     $ 8,984
Wasson, OK to Ardmore.........      1,850       2,021
Ringgold, TX to Wasson,
 OK(2)........................      2,914       2,492
Dixon, TX to McKee............      1,696       1,723
Other Crude Oil Pipelines.....      2,403       2,670
                                  -------     -------
       TOTAL CRUDE OIL
        PIPELINES.............     16,939      17,890
</TABLE>


                                       64
<PAGE>   71

<TABLE>
<CAPTION>

                                                                                                     YEAR ENDED
                                                                           DECEMBER 31, 1999        DECEMBER 31,
                                                                      ---------------------------       1999
                                                                                                    ------------
                                                                                       CAPACITY     AS ADJUSTED
ORIGIN AND DESTINATION          LENGTH    OWNERSHIP     CAPACITY      THROUGHPUT(1)   UTILIZATION     REVENUES
----------------------          ------    ---------     --------      -------------   -----------   ------------
                                (miles)               (barrels/day)   (barrels/day)                 (in thousands)
<S>                             <C>       <C>         <C>             <C>             <C>           <C>
REFINED PRODUCT PIPELINES:
McKee to Colorado Springs,
 CO(2)........................    256.4      100%          32,000(5)      15,061            73%(5)      7,414
McKee to El Paso, TX..........    407.7       67%          40,000         33,688            84%        13,108
Amarillo, TX to Albuquerque,
 NM...........................    292.7       50%          16,083         12,558            78%         3,811
Ardmore to Wynnewood, OK......     31.1      100%          90,000         54,833            61%         4,882
McKee to Denver, CO
 (Phillips)...................    321.1       30%          12,450         10,752            86%         2,769
Three Rivers to Laredo, TX....     98.1      100%          16,800         14,743            88%         2,762
Three Rivers to San Antonio,
 TX...........................     81.1      100%          33,600         27,819            83%         2,730
McKee to Amarillo, TX
 (6")(2)......................     49.1      100%          51,000         33,548            76%         1,958
McKee to Amarillo, TX
 (8")(2)......................     49.1      100%              (6)            (6)           (6)            (6)
Colorado Springs, CO to
 Denver, CO...................    100.6      100%          32,000          8,283            26%         5,079
Skellytown, TX to Mont
 Belvieu, TX(7)...............    571.2       50%          26,000         16,486            63%            (7)
Other Refined Product
 Pipelines....................    561.5(8)     (4)        167,288         69,626            42%(8)      5,529
                                -------                 ---------        -------                      -------
       TOTAL REFINED PRODUCT
        PIPELINES.............  2,819.7                   517,221        297,397            60%        50,042
                                -------                 ---------        -------                      -------
       TOTAL FOR ALL
        PIPELINES.............  3,329.5                 1,029,721        577,438            59%        72,643
                                                                                                      -------
REFINED PRODUCT TERMINALS.....                                                                         15,238
                                                                                                      -------
       TOTAL..................                                                                        $87,881
                                                                                                      =======

<CAPTION>
                                  NINE MONTHS ENDED
                                    SEPTEMBER 30,
                                ----------------------

                                   1999
                                AS ADJUSTED     2000
ORIGIN AND DESTINATION           REVENUES     REVENUES
----------------------          -----------   --------
                                  (in thousands)
<S>                             <C>           <C>
REFINED PRODUCT PIPELINES:
McKee to Colorado Springs,
 CO(2)........................      5,453       5,134
McKee to El Paso, TX..........      9,677      11,332
Amarillo, TX to Albuquerque,
 NM...........................      2,896       2,920
Ardmore to Wynnewood, OK......      3,499       3,543
McKee to Denver, CO
 (Phillips)...................      2,083       2,302
Three Rivers to Laredo, TX....      2,004       2,274
Three Rivers to San Antonio,
 TX...........................      2,044       1,986
McKee to Amarillo, TX
 (6")(2)......................      1,451       1,623
McKee to Amarillo, TX
 (8")(2)......................         (6)         (6)
Colorado Springs, CO to
 Denver, CO...................      4,322       4,221
Skellytown, TX to Mont
 Belvieu, TX(7)...............         (7)         (7)
Other Refined Product
 Pipelines....................      4,055       4,491
                                  -------     -------
       TOTAL REFINED PRODUCT
        PIPELINES.............     37,484      39,826
                                  -------     -------
       TOTAL FOR ALL
        PIPELINES.............     54,423      57,716
                                  -------     -------
REFINED PRODUCT TERMINALS.....     10,974      11,690
                                  -------     -------
       TOTAL..................    $65,397     $69,406
                                  =======     =======
</TABLE>


---------------
(1) Average daily throughput for the year ended December 31, 1999, measured in
    barrels. Please read "-- Pipeline Operations."

(2) This pipeline transports barrels relating to two tariff routes, one of which
    begins at this pipeline's origin and ends at this pipeline's destination and
    one of which is a larger tariff route with an origin or destination on
    another pipeline of ours which connects to this pipeline. Throughput
    disclosed above for this pipeline reflects only the barrels subject to the
    tariff route beginning at this pipeline's origin and ending at this
    pipeline's destination. To accurately determine the actual capacity
    utilization of the pipeline, as well as aggregate capacity utilization, all
    barrels passing through the pipelines have been taken into account for
    purposes of calculating capacity utilization.

(3) Represents combined length of two pipelines.

(4) We own less than a 100% interest in some of the pipelines which are included
    in the aggregate amounts opposite the line items "Other Crude Oil Pipelines"
    and "Other Refined Product Pipelines."

(5) Effective March 31, 2000, the McKee to Colorado Springs refined product
    pipeline expansion was completed, increasing the capacity to 52,000 barrels
    per day. The 1999 capacity utilization is based on a capacity of 32,000
    barrels per day.


(6) The throughput, capacity, capacity utilization and as adjusted revenue
    information listed opposite the McKee to Amarillo 6-inch pipeline includes
    both McKee to Amarillo pipelines on a combined basis.


(7) We own a 50% interest in Skelly-Belvieu Pipeline Company, LLC, which owns
    the Skellytown to Mont Belvieu refined product pipeline. The throughput and
    capacity information represent 50% of the total amounts for the pipeline. In
    1999, we received $4.2 million in distributions as a result of our 50% share
    of Skelly-Belvieu Pipeline Company.

(8) Includes 263.6 miles of idle looped 6-inch sections of the Amarillo to
    Albuquerque refined product pipeline. The capacity utilization calculation
    excludes idle pipe.

                                       65
<PAGE>   72

OUR RELATIONSHIP WITH ULTRAMAR DIAMOND SHAMROCK

     Ultramar Diamond Shamrock is an independent refiner and marketer of refined
products in North America. Ultramar Diamond Shamrock owns and operates seven
refineries, three of which are served by our pipelines and terminals:

     - the McKee refinery, which has a current total capacity to process 170,000
       barrels of crude oil and other raw materials per day, making it the
       largest refinery located between the Texas Gulf Coast and the West Coast;

     - the Three Rivers refinery, which has a current total capacity to process
       98,000 barrels of crude oil and other raw materials per day; and

     - the Ardmore refinery, which has a current total capacity to process
       85,000 barrels of crude oil and other raw materials per day.


     Ultramar Diamond Shamrock markets the refined products produced by these
refineries primarily in Texas, Oklahoma, Colorado, New Mexico, and Arizona
through approximately 1,362 company-operated retail convenience stores and
approximately 1,660 independently owned and operated retail and convenience
stores and outlets under Ultramar Diamond Shamrock brands, as well as through
other wholesale and spot market sales and exchange agreements.



     Our operations are strategically located within Ultramar Diamond Shamrock's
refining and marketing supply chain, but we do not own or operate any refining
or marketing assets. Ultramar Diamond Shamrock is dependent upon us to provide
transportation services that support its refining and marketing operations. In
1999 and the first nine months of 2000, the McKee, Three Rivers, and Ardmore
refineries obtained approximately 75% of their crude oil and other feedstocks
through our crude oil pipelines. During the same periods, Ultramar Diamond
Shamrock transported through our refined product pipelines approximately 75% of
the production from its McKee, Three Rivers, and Ardmore refineries. The three
refineries received the remaining 25% of their crude oil and other raw materials
and transported the remaining 25% of their refined products over pipelines
retained by Ultramar Diamond Shamrock and by truck and rail.


     In 1999, assuming we had realized our revised tariff rates on historical
throughput barrels, we would have generated revenues of $87.9 million. Ultramar
Diamond Shamrock and its affiliates would have accounted for 99% of this amount.
Although we intend to pursue strategic acquisitions of logistics assets as
opportunities may arise, we expect to continue to derive substantially all of
our revenues from Ultramar Diamond Shamrock and its affiliates for the
foreseeable future.

     Pipelines and Terminals Usage Agreement with Ultramar Diamond
Shamrock. Under a pipelines and terminals usage agreement, Ultramar Diamond
Shamrock has agreed for seven years:

     - to transport in our crude oil pipelines at least 75% of the aggregate
       volumes of the crude oil shipped to the McKee, Three Rivers and Ardmore
       refineries;


     - to transport in our refined product pipelines at least 75% of the
       aggregate volumes of the refined products (excluding residual oils,
       primarily asphalt and fuel oil) shipped from these refineries; and



     - to use our refined product terminals for terminalling services for at
       least 50% of the refined products (excluding residual oils, primarily
       asphalt and fuel oil) shipped from these refineries.


     Ultramar Diamond Shamrock's obligation to use our crude oil and refined
product pipelines and terminals will be suspended if material changes occur in
the market conditions for the
                                       66
<PAGE>   73

transportation of crude oil and refined products, or in the markets served by
these refineries at the closing of this offering that have a material adverse
effect on Ultramar Diamond Shamrock or if we are unable to handle the volumes
Ultramar Diamond Shamrock requests that we transport due to operational
difficulties with the pipelines or terminals.

     In addition, Ultramar Diamond Shamrock has agreed to remain the shipper for
crude oil or refined products owned by it transported through our pipelines, and
neither challenge, nor cause others to challenge, our interstate or intrastate
tariff rates for the transportation of crude oil and refined products for seven
years.

     Ultramar Diamond Shamrock owns and controls our general partner. We will
not have any employees. Employees of Ultramar Diamond Shamrock and its
affiliates will perform services on our behalf, and those entities will be
reimbursed for the services rendered by their employees. In addition, we will
pay Ultramar Diamond Shamrock and its affiliates an annual administrative fee of
$5.2 million. UDS Logistics, LLC, the limited partner of our general partner,
will also own a total of 4,399,322 common units and 8,999,322 subordinated units
representing an aggregate 75.5% limited partner interest in us and Shamrock
Logistics Operations. Our general partner will also own incentive distribution
rights giving it higher percentages of our cash distributions as various target
distribution levels are met. In addition, we have entered into an omnibus
agreement with Ultramar Diamond Shamrock which, among other things, governs
potential competition between us and our subsidiaries, on the one hand, and
Ultramar Diamond Shamrock and its affiliates, on the other. Please read
"Management -- Administrative Fee and Reimbursement of Expenses" and "Certain
Relationships and Related Transactions -- Omnibus Agreement."

BUSINESS STRATEGIES

     The primary objective of our business strategies is to increase
distributable cash flow per unit. Our business strategies include:


     SUSTAINING HIGH LEVELS OF THROUGHPUT AND CASH FLOW. Our base strategy is to
sustain our current levels of throughput and cash flow, which will provide a
strong platform for the future growth of our transportation, terminalling, and
storage business. Accordingly, we intend to continue to invest in our existing
pipeline, terminalling, and storage assets in order to maintain and increase the
current capacity and throughput of our pipelines. In order to ensure stable
throughput of crude oil and refined products for our pipelines, we have
established what we believe are competitive tariff rates for our pipelines, and
we have also entered into a seven-year agreement with Ultramar Diamond Shamrock
governing the transportation of the crude oil supplied to and refined products
transported from its McKee, Three Rivers, and Ardmore refineries.



     INCREASING THROUGHPUT IN OUR EXISTING PIPELINES AND SHIFTING VOLUMES TO
HIGHER TARIFF PIPELINES. We have available capacity in all of our existing
pipelines. In 1999, we averaged 57% capacity utilization in our crude oil
pipelines and 60% capacity utilization in our refined product pipelines. Over
time, we believe the strong refined product demand growth in the southwestern
and Rocky Mountain regions of the United States will allow us to shift some
refined product throughput to our higher tariff, long-distance refined product
pipelines from some of our lower tariff refined product pipelines. In addition,
we expect Ultramar Diamond Shamrock to increase the capacity and throughput at
the McKee refinery to supply a part of this growing refined product demand and
to transport the resulting increased volumes of crude oil and other raw
materials and refined products through our pipelines. In the future, depending
on market conditions, we may also have the opportunity to transport through our
pipelines crude oil and refined products that are currently transported through
pipelines retained by Ultramar Diamond Shamrock and to transport additional
third-party volumes.


     INCREASING OUR PIPELINE CAPACITY THROUGH EXPANSIONS AND NEW
CONSTRUCTION. We are continually evaluating opportunities to increase capacity
in our existing pipelines by adding

                                       67
<PAGE>   74


pumping stations or horsepower to existing pumping stations or increasing
pipeline diameter to keep pace with increases in crude oil and refined product
demand. Since 1990, we have increased our aggregate crude oil pipeline capacity
by 90,000 barrels per day and our aggregate refined product pipeline capacity by
over 220,000 barrels per day through an acquisition, expansion projects, and the
construction of new pipelines. Recently we completed an expansion project to
increase the capacity of our McKee to Colorado Springs refined product pipeline
by 20,000 barrels per day. Ultramar Diamond Shamrock plans to construct a new
pipeline from our Laredo Terminal to Nuevo Laredo, Mexico to supply refined
product to the market in Nuevo Laredo and the surrounding area. At our option,
Ultramar Diamond Shamrock has agreed to transfer this pipeline to us for
approximately $5.7 million upon completion, which is expected to occur during
the fourth quarter of 2001. In addition, by the end of the first quarter of
2002, we intend to exercise our option to purchase a crude oil pipeline that
runs from Wichita Falls, Texas to the McKee refinery and related storage
facility at Wichita Falls, Texas for $64 million that supply a significant
portion of the crude oil processed at Ultramar Diamond Shamrock's McKee refinery
and to purchase newly constructed crude oil tankage for approximately $6.5
million at Ringgold, Texas, which is part of the system supplying crude oil to
Ultramar Diamond Shamrock's Ardmore and McKee refineries. We will also consider
extending existing refined product pipelines or constructing new refined product
pipelines to meet rising refined product demand that Ultramar Diamond Shamrock
intends to supply in high growth areas in the southwestern and Rocky Mountain
regions of the United States.



     PURSUING SELECTIVE STRATEGIC AND ACCRETIVE ACQUISITIONS THAT COMPLEMENT OUR
EXISTING ASSET BASE. We plan to actively pursue opportunities that may arise to
purchase logistics assets that can increase our cash flow per unit. In September
1997, as part of Ultramar Diamond Shamrock's acquisition of Total Petroleum
(North America) Ltd., we acquired the pipelines supplying crude oil to and
transporting refined products from the Ardmore refinery. As a result, the
aggregate average daily throughput in our crude oil pipelines increased 71% for
the fourth quarter of 1997 over 1996's average daily throughput and the
aggregate average daily throughput in our refined product pipelines increased
15% for the fourth quarter of 1997 over 1996's average daily throughput. We
believe future acquisition opportunities may include assets acquired by Ultramar
Diamond Shamrock after the offering and some of the pipeline assets retained by
Ultramar Diamond Shamrock at closing as well as assets owned by third parties.
We expect that the assets to be acquired may include pipeline assets, terminal
and storage facilities, and other logistics assets that we believe will
contribute to the successful execution of our business strategies.


     CONTINUING TO IMPROVE OUR OPERATING EFFICIENCY. We aggressively monitor and
control our cost structure. We have been able to implement cost saving
initiatives such as utilizing chemical additives to reduce friction in some of
our pipelines and by aggressively negotiating more favorable rate structures
with our power providers. Over the last five years, these cost-saving
initiatives have resulted in savings in excess of $5 million. We intend to
continue to make investments to improve our operations and pursue cost saving
initiatives.

COMPETITIVE STRENGTHS

     We believe we are well positioned to successfully execute our business
strategies due to the following competitive strengths:

     WE HAVE A UNIQUE STRATEGIC RELATIONSHIP WITH ULTRAMAR DIAMOND SHAMROCK'S
REFINING AND MARKETING OPERATIONS. Our pipelines, terminals, and storage
facilities were built by Ultramar Diamond Shamrock to provide the most efficient
and cost-effective transportation and logistics services to the refining and
marketing operations they serve in the southwestern and Rocky Mountain regions
of the United States. Pipeline transportation is the most efficient and cost
effective mode of transportation of petroleum commodities over long and
intermediate distances to inland markets. Truck and rail are traditionally more
competitive only on short-haul transport.
                                       68
<PAGE>   75


Our pipelines, which are directly connected to Ultramar Diamond Shamrock's
McKee, Three Rivers and Ardmore refineries, provide the most competitive access
to crude oil and other raw materials for these refineries, and for distribution
of the refined products produced at these refineries to Ultramar Diamond
Shamrock's markets in Texas, Oklahoma, Colorado, New Mexico, and Arizona because
there are no other significant pipelines that directly connect these refineries
to sources of crude oil, markets for refined products and third party pipelines,
other than the pipelines being retained by Ultramar Diamond Shamrock and with
respect to which we have an option to purchase as described under "Business --
Recently Completed and Planned Expansion Projections -- Planned Expansion
Projects." Further, our pipelines are most competitive because they are already
connected to these refineries. New pipelines would require extensive capital
investments and would most likely not be competitive if they were also required
to produce a fair return to the investor. In 1999, the McKee, Three Rivers, and
Ardmore refineries obtained approximately 75% of their crude oil and other raw
materials through our crude oil pipelines and transported approximately 75% of
their refined products through our refined product pipelines.



     In addition, Ultramar Diamond Shamrock has committed to use our pipelines
to transport 75% of the crude oil shipped to and 75% of the refined product
shipped from the McKee, Three Rivers, and Ardmore refineries and to use our
refined product terminals for 50% of the refined products shipped from these
refineries. Further, Ultramar Diamond Shamrock has a significant economic
incentive to see that our pipeline, terminalling, and storage assets are managed
in the best interests of unitholders because, as the ultimate parent of our
general partner and other affiliates, it will indirectly own an aggregate 75.5%
limited partner interest in us and Shamrock Logistics Operations.


     WE PROVIDE ULTRAMAR DIAMOND SHAMROCK WITH STRATEGIC LINKS TO GROWING
MARKETS. Our refined product pipelines serve Ultramar Diamond Shamrock's
marketing operations in the southwestern and Rocky Mountain regions of the
United States. These operations are concentrated in metropolitan areas in the
states of Texas, Colorado, New Mexico, and Arizona that are expected to exceed
the national average of projected cumulative population growth for the years
2000 through 2010. In addition, we expect the projected above-average population
growth in these markets, which are directly or, in the case of Arizona,
indirectly linked to our operations, to result in increased demand for gasoline
and diesel. In 1999, gasoline and distillates (which includes diesel and jet
fuel) represented, in the aggregate, approximately 83% of the throughput we
transported through our refined product pipelines. We believe that any increase
of refined products sold by Ultramar Diamond Shamrock into these markets will
directly result in increased throughput for our refined product pipelines.


     WE BELIEVE OUR PIPELINE, TERMINALLING, AND STORAGE ASSETS ARE MODERN,
EFFICIENT, AND WELL MAINTAINED. Approximately 50% of our total pipeline
ownership mileage has been built since 1990. The remainder of our pipeline,
terminalling, and storage assets have been built at various times since 1954,
but have been continually upgraded and are kept in excellent operating
condition. We have spent approximately $14 million since 1995 to maintain our
pipeline, terminalling, and storage assets. All of our crude oil and refined
product pipelines are operated via satellite communications systems from one of
our two control centers. The control centers operate with state-of-the-art
computer systems designed to automatically detect leaks and to continuously
monitor real time operational data, including crude oil and refined product
quantities, flow rates, and pressures.



     OUR PIPELINES HAVE AVAILABLE CAPACITY WHICH PROVIDES US THE OPPORTUNITY TO
INCREASE THROUGHPUT AND DISTRIBUTABLE CASH FLOW FROM EXISTING ASSETS. We have
available capacity in all of our existing pipelines; in 1999, we averaged 57%
capacity utilization in our crude oil pipelines and 60% capacity utilization in
our refined product pipelines. Any increased throughput that utilizes available
capacity or any shift of throughput to higher tariff, long-haul pipelines will
have a


                                       69
<PAGE>   76

positive effect on our net income and distributable cash flow because a major
portion of the operating costs associated with our pipelines are fixed.


     WE HAVE THE FINANCIAL FLEXIBILITY TO PURSUE EXPANSION AND ACQUISITION
OPPORTUNITIES. Concurrently with the closing of this offering, we will enter
into a $120 million revolving credit facility under which we expect to have
borrowing capacity of approximately $56.3 million immediately after the closing
of this offering. In addition, we believe we have additional debt capacity
beyond that available under the revolving credit facility. In combination with
our ability to issue new partnership units, we have significant resources to
finance strategic expansion and acquisition opportunities.


     OUR GENERAL PARTNER HAS AN EXPERIENCED MANAGEMENT TEAM. Our general
partner's senior management team has an average of approximately 20 years of
industry experience. In order to provide incentives to management and to align
their economic interests with those of common unitholders, the general partner
intends to adopt short-, intermediate- and long-term incentive plans under which
common units will be awarded to executive officers of the general partner and
employees of Ultramar Diamond Shamrock performing key functions for our
operations. In addition, we expect that Ultramar Diamond Shamrock will pay
bonuses to the general partner's executive officers based on our financial
performance.

PIPELINE OPERATIONS

     We have an ownership interest in eight crude oil pipelines with an
aggregate length of 509.8 miles and 18 refined product pipelines with an
aggregate length of 2,819.7 miles. We currently operate all of these pipelines
except for:

     - the McKee to Denver (Phillips) refined product pipeline in which we have
       a minority ownership interest and which is operated by the Phillips
       Petroleum Company; and

     - the Hooker to Clawson segment of the Hooker to McKee crude oil pipeline
       in which segment we have a 50% ownership interest and which is operated
       by the Jayhawk Pipeline Company.

     On each of the pipelines, only Ultramar Diamond Shamrock transports crude
oil and refined products on the capacity attributable to our ownership interest
except for:

     - the Amarillo to Albuquerque refined product pipeline, on which Equiva
       Trading Company also transports refined products through our share of the
       pipeline's capacity; and

     - the Amarillo to Abernathy refined product pipeline, on which Phillips
       Texas Pipeline Company also transports refined products through our share
       of the pipeline's capacity.

     On the pipelines where we own less than a 100% ownership interest, we fund
capital expenditures in proportion to our respective ownership percentages.

     The term throughput as used in this prospectus generally refers to the
crude oil or refined product barrels, as applicable, that pass through each
pipeline, even if those barrels also are transported in another of our pipelines
for which we received a separate tariff. In the case of each of the Clawson to
McKee, Ringgold to Wasson, McKee to Colorado Springs and McKee to Amarillo
pipelines, the pipeline transports barrels relating to two tariff rates, one of
which begins at this pipeline's origin and ends at this pipeline's destination
and one of which is a longer tariff route with an origin or destination in
another pipeline of ours which connects to this pipeline. Throughput for those
pipelines reflect only the barrels subject to the tariff route beginning at the
pipeline's origin and ending at the pipeline's destination. To accurately
determine the actual capacity utilization of those pipelines, as well as
aggregate capacity utilization, all barrels passing through the pipelines have
been taken into account for purposes of calculating capacity utilization.
                                       70
<PAGE>   77

  CRUDE OIL PIPELINES


     Our crude oil pipelines deliver crude oil and other raw materials, such as
gas oil and normal butane, from various points in Texas, Oklahoma, Kansas, and
Colorado to Ultramar Diamond Shamrock's McKee, Three Rivers, and Ardmore
refineries. Since 1995, throughput on our crude oil pipelines, including the
effect of acquisitions, has increased at an average annual rate of 19% per year.
The table below sets forth the average daily number of barrels of crude oil we
transported through our crude oil pipelines, in the aggregate, in each of the
periods presented. The increase in throughput for the year 1997 is primarily
attributable to the acquisition of the Ringgold to Wasson, the Healdton to
Ringling, and the Wasson to Ardmore crude oil pipelines in September 1997. The
throughput set forth below for 1997 reflects the average daily throughput in
those crude oil pipelines from the date of the acquisition through the end of
the year.



<TABLE>
<CAPTION>
                                                                     AGGREGATE THROUGHPUT
                                              ------------------------------------------------------------------
                                                                        (barrels/day)
                                                                                                  NINE MONTHS
                                                          YEAR ENDED DECEMBER 31,                    ENDED
                                              -----------------------------------------------    SEPTEMBER 30,
                                               1995      1996      1997      1998      1999           2000
                                               ----      ----      ----      ----      ----      -------------
<S>                                           <C>       <C>       <C>       <C>       <C>       <C>
Crude oil...................................  140,103   157,963   282,736   265,243   280,041       296,413
</TABLE>



     The following table sets forth, for each of our crude oil pipelines, the
origin and destination, length in miles (not adjusted for ownership percentage),
ownership percentage, capacity, throughput, and capacity utilization for the
year ended December 31, 1999 and for the nine months ended September 30, 1999
and 2000. Additional information regarding each crude oil pipeline is contained
in the text following the table.


<TABLE>
<CAPTION>
                                                                      YEAR ENDED
                                                                     DECEMBER 31,
                                                                         1999
                                                              ---------------------------
                                                                               CAPACITY
ORIGIN AND DESTINATION  LENGTH    OWNERSHIP     CAPACITY       THROUGHPUT     UTILIZATION
----------------------  ------    ---------     --------       ----------     -----------
                        (miles)               (barrels/day)   (barrels/day)
<S>                     <C>       <C>         <C>             <C>             <C>
Cheyenne Wells, CO to
 McKee................   252.2       100%         17,500          11,045          63%
Dixon, TX to McKee....    44.2       100%         85,000          61,110          72%
Hooker, OK to Clawson,
 TX(1)................    30.8        50%         22,000           8,012          36%
Clawson, TX to
 McKee(2).............    40.7       100%         36,000          11,140          53%
Corpus Christi, TX to
 Three Rivers.........    69.7       100%        120,000          80,594          67%
Ringgold, TX to
 Wasson, OK(2)........    44.2       100%         90,000          30,086          40%
Healdton, OK to
 Ringling, OK.........     3.5       100%         52,000           5,893          11%
Wasson, OK to
 Ardmore..............    24.5(3)    100%         90,000          72,161          80%
                        ------                   -------         -------
                         509.8                   512,500         280,041          57%
                        ======                   =======         =======

<CAPTION>
                                     NINE MONTHS ENDED SEPTEMBER 30,
                        ---------------------------------------------------------
                                   1999                          2000
                        ---------------------------   ---------------------------
                                         CAPACITY                      CAPACITY
ORIGIN AND DESTINATION   THROUGHPUT     UTILIZATION    THROUGHPUT     UTILIZATION
----------------------   ----------     -----------    ----------     -----------
                        (barrels/day)                 (barrels/day)
<S>                     <C>             <C>           <C>             <C>
Cheyenne Wells, CO to
 McKee................      11,029          63%           12,069          69%
Dixon, TX to McKee....      61,761          73%           62,322          73%
Hooker, OK to Clawson,
 TX(1)................       7,922          36%            5,507          25%
Clawson, TX to
 McKee(2).............      11,383          54%           10,409          44%
Corpus Christi, TX to
 Three Rivers.........      79,954          67%           87,053          73%
Ringgold, TX to
 Wasson, OK(2)........      32,641          39%           28,128          47%
Healdton, OK to
 Ringling, OK.........       2,778           5%           14,361          28%
Wasson, OK to
 Ardmore..............      70,462          78%           76,564          85%
                           -------                       -------
                           277,930          56%          296,413          62%
                           =======                       =======
</TABLE>


---------------

(1) We receive a split tariff with respect to 100% of the barrels transported in
    the Hooker to Clawson segment, notwithstanding our 50% ownership interest.
    Accordingly, the capacity, throughput and capacity utilization are given
    with respect to 100% of the pipeline.

(2) This pipeline transports barrels relating to two tariff routes, one of which
    begins at this pipeline's origin and ends at this pipeline's destination and
    one of which is a longer tariff route with an origin or destination on
    another pipeline of ours which connects to this pipeline. Throughput
    disclosed above for this pipeline reflects only the barrels subject to the
    tariff route beginning at this pipeline's origin and ending at this
    pipeline's destination. To accurately determine the actual capacity
    utilization of the pipeline, as well as aggregate capacity utilization, all
    barrels passing through the pipelines have been taken into account for
    purposes of calculating capacity utilization.

(3) Represents combined length of two pipelines.

     Cheyenne Wells to McKee. The Cheyenne Wells to McKee crude oil pipeline is
a 252.2-mile, 6-inch diameter pipeline with 17,500 barrels per day of total
capacity. The pipeline originates in

                                       71
<PAGE>   78

Cheyenne Wells, Colorado and transports crude oil to the McKee refinery from
gathering systems owned by Ultramar Diamond Shamrock and third party pipelines
in eastern Colorado and southwestern Kansas. The pipeline has an additional
5.5-mile section which originates in southwestern Kansas and intersects with the
pipeline just north of Sturgis, Oklahoma. We are the sole owner of this
pipeline. Ultramar Diamond Shamrock is currently the only shipper. The pipeline
is subject to the regulatory jurisdiction of the FERC. The pipeline was
constructed in 1969.

     Dixon to McKee. The Dixon to McKee crude oil pipeline is a 44.2-mile
pipeline, which consists of 28.4 miles of 14-inch diameter pipe and 15.8 miles
of 16-inch diameter pipe. The pipeline has a total capacity of 85,000 barrels
per day. The pipeline originates at the Dixon Pump Station in Borger, Texas and
transports crude oil to the McKee refinery from third party crude oil pipelines
and gathering systems in the Texas panhandle. We are the sole owner of this
pipeline. Ultramar Diamond Shamrock is currently the only shipper. The pipeline
is subject to the regulatory jurisdiction of the Texas Railroad Commission. The
pipeline was constructed in 1979.


     Hooker to Clawson to McKee. The Hooker to Clawson to McKee crude oil
pipeline is a 71.5-mile, 8-inch diameter, pipeline originating in Hooker,
Oklahoma, passing through Clawson, Texas, and terminating at the McKee refinery.
The pipeline has two segments: the 30.8-mile Hooker to Clawson segment and the
40.7-mile Clawson to McKee segment. We have a 50% interest in the Hooker to
Clawson segment, with the remaining 50% owned by Jayhawk Pipeline Company, which
operates that segment. We are the sole owner of the Clawson to McKee segment.
The Hooker to Clawson segment has a total capacity of 22,000 barrels per day.
The Clawson to McKee segment has a total capacity of 36,000 barrels per day. The
pipeline transports crude oil to the McKee refinery from third party gathering
systems in Oklahoma, Kansas, and the Texas panhandle. We receive two different
tariffs for crude oil transported over this pipeline: one for crude oil
transported from Hooker to McKee and one for crude oil transported from Clawson
to McKee. The Hooker to McKee tariff is a "joint" tariff which we split with
Jayhawk Pipeline Company with respect to all barrels transported in the Hooker
to Clawson segment. Ultramar Diamond Shamrock has access to Jayhawk's unused
capacity in the Hooker to Clawson segment at the established tariff rate.
Ultramar Diamond Shamrock is currently the only shipper in each segment. The
pipeline is subject to the regulatory jurisdiction of the FERC. The Clawson to
McKee segment was constructed in 1957 and the Hooker to Clawson segment was
constructed in 1990.


     Corpus Christi to Three Rivers. The Corpus Christi to Three Rivers crude
oil pipeline is a 69.7-mile, 16-inch diameter pipeline with 120,000 barrels per
day of total capacity. The pipeline originates at our Corpus Christi crude oil
storage facility and transports primarily foreign crude oil offloaded from
ocean-going vessels at the crude oil storage facility to the Three Rivers
refinery. We are the sole owner of the pipeline. Ultramar Diamond Shamrock is
currently the only shipper. The pipeline is subject to the regulatory
jurisdiction of the Texas Railroad Commission. The pipeline was constructed in
1994.

     Ringgold to Wasson. The Ringgold to Wasson crude oil pipeline is a
44.2-mile, 16-inch diameter pipeline with 90,000 barrels per day of total
capacity. The pipeline originates in Ringgold, Texas and passes through the
Ringling junction in Ringling, Oklahoma before terminating at our crude oil
storage facility in Wasson, Oklahoma. The pipeline transports crude oil to
Wasson from Ringgold, where it connects a common carrier pipeline that delivers
crude oil from the Permian Basin in western Texas and the Texas Gulf Coast. We
are the sole owner of this pipeline. Ultramar Diamond Shamrock is currently the
only shipper. The pipeline is subject to the regulatory jurisdiction of the
FERC. The pipeline segment from Ringling junction to Wasson was built in 1993
and extended from Ringling junction to Ringgold in 1995.

     Healdton to Ringling. The Healdton to Ringling crude oil pipeline is a
3.5-mile, 12-inch diameter pipeline with 52,000 barrels per day of total
capacity. The pipeline originates at the

                                       72
<PAGE>   79

Amoco Station in Healdton, Oklahoma and transports crude oil from a common
carrier crude oil pipeline in southern Oklahoma to the Ringling junction where
it connects to the Ringgold to Wasson crude oil pipeline. However, the tariff we
receive on this pipeline covers the transportation of crude oil all the way from
Healdton to Wasson. We are the sole owner of this pipeline. Ultramar Diamond
Shamrock is currently the only shipper. The pipeline is subject to the
regulatory jurisdiction of the FERC. The pipeline was constructed in 1996.

     Wasson to Ardmore. The Wasson to Ardmore crude oil pipelines consist of a
15-mile, 8- and 10-inch diameter pipeline and a 9.5-mile, 8-inch diameter
pipeline. The longer pipeline runs the entire distance from Wasson to the
Ardmore refinery, while the shorter pipeline runs parallel to it for 9.5 miles
from Wasson to an interconnection with the longer pipeline, where the crude oil
shipped on the shorter pipeline feeds into the longer pipeline for transport
over the remaining distance to the refinery. The pipelines have a combined total
capacity of 90,000 barrels per day. The pipelines originate at our crude oil
storage facility in Wasson, Oklahoma and transport crude oil from Wasson to the
Ardmore refinery in Ardmore, Oklahoma. We are the sole owner of these pipelines.
Ultramar Diamond Shamrock is currently the only shipper. The pipelines are
subject to the regulatory jurisdiction of the FERC. The 15-mile pipeline was
constructed in 1984 and the 9.5-mile pipeline was constructed in 1991.

  REFINED PRODUCT PIPELINES


     Our refined product pipelines transport refined products from Ultramar
Diamond Shamrock's McKee, Three Rivers, and Ardmore refineries, directly or
indirectly, to markets in Texas, Oklahoma, Colorado, New Mexico, and Arizona.
The refined products transported in these pipelines include conventional
gasoline, federal specification reformulated gasoline, other oxygenated
gasolines, distillates (including high- and low-sulfur diesel and jet fuel),
natural gas liquids (such as propane and butane), blendstocks, and petrochemical
raw materials such as toluene, xylene, and raffinate. Blendstocks are
intermediate products in the refining process that are used as raw materials by
other refineries. Toluene, xylene, and raffinate are raw materials used by
petrochemical plants in the manufacture of diverse products such as styrofoam,
nylon, plastic bottles, and foam cushions. In 1999, gasoline and distillates
represented approximately 55% and 28%, respectively, of the total throughput in
our refined product pipelines.


     Since 1995, throughput for our refined product pipelines, including
acquisitions, has increased at an average annual rate of 12% per year. The table
below sets forth the average daily number of barrels of refined products we
transported through our refined product pipelines, in the aggregate, in each of
the periods presented. We acquired the Ardmore to Wynnewood refined product
pipeline in September 1997. In the case of that pipeline, the throughput set
forth below for 1997 reflects the average daily throughput from the date of the
acquisition through the end of the year.


<TABLE>
<CAPTION>
                                                               AGGREGATE THROUGHPUT
                                        -------------------------------------------------------------------
                                                                   (BARRELS/DAY)
                                                    YEAR ENDED DECEMBER 31,               NINE MONTHS ENDED
                                        -----------------------------------------------     SEPTEMBER 30,
                                         1995      1996      1997      1998      1999           2000
                                         ----      ----      ----      ----      ----     -----------------
<S>                                     <C>       <C>       <C>       <C>       <C>       <C>
Refined products......................  184,637   210,548   257,183   268,064   297,397        315,807
</TABLE>


                                       73
<PAGE>   80


     The following table sets forth, for each of our refined product pipelines,
the origin and destination, length in miles (not adjusted for ownership
percentage), ownership percentage, throughput, capacity, and capacity
utilization for the year ended December 31, 1999 and the nine months ended
September 30, 1999 and 2000. Additional information regarding each refined
product pipeline is contained in the text following the table. In instances
where we own less than 100% of a pipeline, our ownership percentage is
indicated, and the capacity, throughput, and capacity utilization information
reflect only our ownership interest in these pipelines.


<TABLE>
<CAPTION>

                                                                                            DECEMBER 31,
                                                                                                1999
                                                                                     ---------------------------
                                                                                                      CAPACITY
ORIGIN AND DESTINATION                         LENGTH    OWNERSHIP     CAPACITY       THROUGHPUT     UTILIZATION
----------------------                         ------    ---------     --------       ----------     -----------
                                               (miles)               (barrels/day)   (barrels/day)
<S>                                            <C>       <C>         <C>             <C>             <C>
McKee to El Paso, TX.........................   407.7       67%          40,000          33,688          84%
McKee to Colorado Springs, CO(1).............   256.4      100%          32,000(4)       15,061          73%(4)
Colorado Springs, CO to Airport..............     1.7      100%          12,000           1,488          12%
Colorado Springs, CO to Denver, CO...........   100.6      100%          32,000           8,283          26%
McKee to Denver, CO (Phillips)...............   321.1       30%          12,450          10,752          86%
McKee to Amarillo, TX (6")(1)(2).............    49.1      100%          51,000          33,548          76%
McKee to Amarillo, TX (8")(1)(2).............    49.1      100%
Amarillo, TX to Abernathy, TX................   102.1       39%           9,288           7,533          81%
Amarillo, TX to Albuquerque, NM..............   292.7       50%          16,083          12,558          78%
McKee to Skellytown, TX......................    52.8      100%          52,000           9,169          18%
Skellytown, TX to Mont Belvieu, TX (Skelly-
 Belvieu)....................................   571.2       50%          26,000          16,486          63%
Three Rivers to San Antonio, TX..............    81.1      100%          33,600          27,819          83%
Three Rivers to Laredo, TX...................    98.1      100%          16,800          14,743          88%
Three Rivers to Corpus Christi, TX...........    71.6      100%          15,000           6,061          40%
Three Rivers to Pettus, TX (12").............    28.8      100%          24,000          18,859          79%
Three Rivers to Pettus, TX (8")..............    28.8      100%          15,000           6,047          40%
Ardmore to Wynnewood, OK.....................    31.1      100%          90,000          54,833          61%
El Paso, TX to Kinder Morgan.................    12.1       67%          40,000          20,469          51%
Other refined product pipelines(3)...........   263.6       50%             N/A             N/A         N/A
                                               -------                  -------         -------
                                               2,819.7                  517,221         297,397          60%
                                               =======                  =======         =======

<CAPTION>
                                                            NINE MONTHS ENDED SEPTEMBER 30,
                                               ---------------------------------------------------------
                                                          1999                          2000
                                               ---------------------------   ---------------------------
                                                                CAPACITY                      CAPACITY
ORIGIN AND DESTINATION                          THROUGHPUT     UTILIZATION    THROUGHPUT     UTILIZATION
----------------------                          ----------     -----------    ----------     -----------
                                               (barrels/day)                 (barrels/day)
<S>                                            <C>             <C>           <C>             <C>
McKee to El Paso, TX.........................      33,251          83%           38,706          97%
McKee to Colorado Springs, CO(1).............      14,812          76%           13,858          72%
Colorado Springs, CO to Airport..............       1,485          12%            1,493          12%
Colorado Springs, CO to Denver, CO...........       9,423          29%            9,136          29%
McKee to Denver, CO (Phillips)...............      10,859          87%           11,919          96%
McKee to Amarillo, TX (6")(1)(2).............      31,660          71%           30,869          70%
McKee to Amarillo, TX (8")(1)(2).............
Amarillo, TX to Abernathy, TX................       7,730          83%            6,053          65%
Amarillo, TX to Albuquerque, NM..............      12,710          79%           12,827          80%
McKee to Skellytown, TX......................      10,176          20%            9,893          19%
Skellytown, TX to Mont Belvieu, TX (Skelly-
 Belvieu)....................................      16,079          62%           18,877          73%
Three Rivers to San Antonio, TX..............      27,848          83%           26,953          80%
Three Rivers to Laredo, TX...................      14,303          85%           16,168          96%
Three Rivers to Corpus Christi, TX...........       5,477          37%            5,992          40%
Three Rivers to Pettus, TX (12").............      19,389          81%           18,810          78%
Three Rivers to Pettus, TX (8")..............       5,830          39%           13,343          89%
Ardmore to Wynnewood, OK.....................      53,374          59%           56,011          62%
El Paso, TX to Kinder Morgan.................      20,393          51%           24,899          62%
Other refined product pipelines(3)...........         N/A         N/A               N/A         N/A
                                                  -------                       -------
                                                  294,799          60%          315,807          64%
                                                  =======                       =======
</TABLE>


---------------

(1) This pipeline transports barrels relating to two tariff rates, one of which
    begins at this pipeline's origin and ends at this pipeline's destination and
    one of which is a longer tariff route with an origin or destination on
    another pipeline of ours which connects to this pipeline. Throughput
    disclosed above for this pipeline reflects only the barrels subject to the
    tariff route beginning at this pipeline's origin and ending at this
    pipeline's destination. To accurately determine the actual capacity
    utilization of the pipeline, as well as aggregate capacity utilization, all
    barrels passing through the pipelines have been taken into account for
    purposes of calculating capacity utilization.

(2) The throughput, capacity, and capacity utilization information listed
    opposite the McKee to Amarillo 6-inch pipeline includes both McKee to
    Amarillo pipelines on a combined basis.

(3) Represents the idle looped 6-inch sections of the Amarillo to Albuquerque
    refined product pipeline.

(4) Effective March 31, 2000, the McKee to Colorado Springs refined product
    pipeline expansion was completed, increasing the capacity to 52,000 barrels
    per day. The 1999 capacity utilization is based on a capacity of 32,000
    barrels per day.

     McKee to El Paso. The McKee to El Paso refined product pipeline is a
407.7-mile, 10-inch diameter pipeline with 60,000 barrels per day of total
capacity. The pipeline transports refined products from the McKee refinery to
the El Paso terminal. We own a 66.67% interest in the pipeline, with the
remaining 33.33% interest owned by Phillips Petroleum Company. Our share of the
pipeline's capacity is 40,000 barrels per day. Approximately 60% of throughput
in 1999 was transported on to the Arizona markets via the Kinder Morgan pipeline
and approximately 40% was distributed from the El Paso terminal. Ultramar
Diamond Shamrock is currently the only shipper on our share of the capacity. The
pipeline is subject to the regulatory jurisdiction of the FERC. The pipeline was
constructed in 1995, and was expanded in 1997 and again in 1999.

     We also own a 6-mile refined product pipeline connection from our El Paso
terminal to the east line of Kinder Morgan's pipeline. The connection consists
of two parallel pipelines, one 16 inches in diameter and the other 8 inches in
diameter, which transport refined products from the El Paso terminal to Kinder
Morgan's Santa Fe Pacific east pipeline for further transport to the
                                       74
<PAGE>   81

Arizona markets. We own a 66.67% interest in this connection, with the remaining
33.33% interest owned by Phillips Petroleum Company. Only the 16-inch line was
used in 1999. The 8-inch line is used only to return product for staging batches
into Kinder Morgan's Santa Fe Pacific east pipeline. Ultramar Diamond Shamrock
is currently the only shipper on our share of the capacity of the connection.
This connection was constructed in 1995.


     McKee to Colorado Springs to Denver. The McKee to Colorado Springs to
Denver refined product pipeline is a 357.0-mile, 10-inch pipeline. The pipeline
has two segments: a 256.4-mile segment from the McKee refinery to our Colorado
Springs terminal with 52,000 barrels per day total capacity and a 100.6-mile
segment from our Colorado Springs terminal to our Denver terminal with 32,000
barrels per day total capacity. The pipeline transports refined products from
the McKee refinery to the two terminals. We are the sole owner of the pipeline.
We also own a 1.7-mile intrastate pipeline connection with 12,000 barrels per
day of total capacity that carries jet fuel from the Colorado Springs terminal
to the Colorado Springs airport. Approximately 60% of throughput in 1999 was
distributed from our Colorado Springs terminal and the balance was transported
through to our Denver terminal over the Colorado Springs to Denver segment. We
receive two different tariffs for refined products transported on this pipeline:
one for refined products transported from McKee to Colorado Springs and one for
refined products transported from McKee to Denver. Ultramar Diamond Shamrock is
currently the only shipper on both segments. The pipeline is subject to the
regulatory jurisdiction of the FERC. The McKee to Colorado Springs segment of
the pipeline was constructed beginning in 1994 and was recently expanded by
20,000 barrels per day to its current capacity of 52,000 barrels per day. The
Colorado Springs to Denver segment was constructed in 1996.


     McKee to Denver (Phillips). The McKee to Denver (Phillips) refined product
pipeline is a 321.1-mile pipeline, which consists of 266.1 miles of 8-inch
diameter pipe and 55.0 miles of 12-inch diameter pipe. The pipeline transports
refined products from Phillips' refinery in Borger, Texas and the McKee refinery
to our and Phillips Petroleum Company's Denver terminals, which are adjacent to
one another. The pipeline has a total capacity of 41,500 barrels per day. There
is an initial segment of the pipeline which runs 45.0 miles from Borger to the
McKee refinery in which we do not have an ownership interest. The first segment
in which we have an interest runs 167.6 miles from the McKee refinery to La
Junta, Colorado and the second segment runs 153.5 miles from La Junta, Colorado
to the Denver terminals. We have a 35.44% interest in the McKee to La Junta
segment and a 30% interest in the La Junta to Denver segment. Phillips Petroleum
Company owns the remaining interests in these segments and operates the
pipeline. Our share of the pipeline's capacity is effectively 12,450 barrels per
day for both segments because we do not offload any refined products in La
Junta. Ultramar Diamond Shamrock is currently the only shipper on our share of
the pipeline's capacity. The pipeline is subject to the regulatory jurisdiction
of the FERC. The pipeline was constructed in 1955.

     McKee to Amarillo. The McKee to Amarillo refined product pipelines consist
of one 6-inch and one 8-inch diameter pipeline that run parallel 49.1 miles from
the McKee refinery to our Amarillo terminal, with 51,000 barrels per day of
combined total capacity. We are the sole owner of these pipelines. Throughput is
distributed from our Amarillo terminal, transported on to Albuquerque, New
Mexico and Abernathy, Texas via our Amarillo to Albuquerque and Amarillo to
Abernathy refined product pipelines, and transported over a short refined
product pipeline connection, in which we do not have an ownership interest, to a
third-party end user. Ultramar Diamond Shamrock is currently the only shipper.
The pipelines are subject to the regulatory jurisdiction of the Texas Railroad
Commission. The 6-inch and 8-inch pipelines were constructed in 1954 and 1984,
respectively.

     Amarillo to Abernathy. The Amarillo to Abernathy refined product pipeline
is a 102.1-mile, 6-inch diameter pipeline with 24,000 barrels per day of total
capacity. The pipeline transports refined products from our Amarillo terminal to
our Abernathy terminal. We own 38.7% of the pipeline and operate the pipeline.
Phillips Petroleum Company owns 33.3% of the pipeline and
                                       75
<PAGE>   82


Texaco owns the remaining 28.0%. Our share of the pipeline's capacity is 9,288
barrels per day. Throughput attributable to our ownership interest is
distributed from our Abernathy terminal. We receive two different tariffs for
refined products transported over this pipeline in our share of the pipeline's
capacity: one for refined products transported from McKee to Abernathy and one
for refined products transported from Amarillo to Abernathy. Ultramar Diamond
Shamrock and Phillips Petroleum Company both currently transport refined
products on our share of the pipeline's capacity. The Texaco Pipeline Company
transported refined products in our share of the pipeline's capacity in 1998.
The pipeline is subject to the regulatory jurisdiction of the Texas Railroad
Commission. The pipeline was constructed in 1955 and expanded in 1984.


     Amarillo to Albuquerque. The Amarillo to Albuquerque refined product
pipeline is a 292.7-mile pipeline, which consists of 263.8 miles of 10-inch
diameter pipe and 28.9 miles of 6-inch diameter pipe. The pipeline transports
refined products from our Amarillo terminal to our Albuquerque terminal and has
a total capacity of 32,166 barrels per day. We own a 50% interest in the
pipeline, with the remaining 50% owned by Phillips Petroleum Company. Our share
of the pipeline's capacity is 16,083 barrels per day. Throughput attributable to
our ownership interest is ultimately distributed to end-users in the Albuquerque
market area. This throughput was distributed from our Albuquerque terminal,
delivered to Phillips Petroleum Company, and transported to the Navajo/Conoco
terminal. Ultramar Diamond Shamrock and the Texaco Pipeline Company both
currently transport refined products in our share of the pipeline's capacity.
The pipeline is subject to the regulatory jurisdiction of the FERC. The pipeline
was built in 1958 as a 6-inch diameter pipeline. We have been laying 10-inch
diameter pipe along side the 6-inch diameter pipe in several expansions in 1991,
1995 and 1998.

     McKee to Skellytown. The McKee to Skellytown refined product pipeline is a
52.8-mile, 6-inch diameter pipeline with 52,000 barrels per day of total
capacity. The pipeline transports natural gas liquids from the McKee refinery to
Skellytown, Texas where it connects to the Skellytown to Mont Belvieu refined
product pipeline. We are the sole owner of this pipeline. Throughput is
transported to Mont Belvieu, Texas over the Skellytown to Mont Belvieu refined
product pipeline. Ultramar Diamond Shamrock is currently the only shipper. The
pipeline is subject to the regulatory jurisdiction of the FERC. The pipeline was
constructed in 1969.

     Skellytown to Mont Belvieu. The Skellytown to Mont Belvieu refined product
pipeline is a 571.2-mile, 8-inch diameter pipeline. The pipeline transports
natural gas liquids from Skellytown, where it connects to the McKee to
Skellytown refined product pipeline, to Mont Belvieu. The pipeline is owned by
Skelly-Belvieu Pipeline Company, LLC, a Delaware limited liability company, in
which we have a 50% ownership interest. The remaining 50% interest in the
limited liability company is owned by Phillips Petroleum Company. Although we
share the pipeline capacity evenly with Phillips Petroleum Company, either party
may transport up to the total capacity of the pipeline. The pipeline has a total
capacity of 52,000 barrels per day. Due to our 50% ownership of the
Skelly-Belvieu Pipeline Company, our effective share of the pipelines' total
capacity is 26,000 barrels per day. The Skelly-Belvieu Pipeline Company has
established separate tariffs for each type of product transported through the
pipeline. Throughput is transported to the Diamond-Koch terminal in Mont
Belvieu, which is jointly owned by Koch Industries and Ultramar Diamond
Shamrock, for storage prior to transportation to petrochemical plants on the
Texas Gulf Coast. The pipeline is subject to the regulatory jurisdiction of the
FERC. The pipeline was originally constructed in 1969 and 258 miles were
replaced in 1992.

     Three Rivers to San Antonio. The Three Rivers to San Antonio refined
product pipeline is an 81.1-mile, 8-inch diameter pipeline with 33,600 barrels
per day of total capacity. The pipeline transports refined products from the
Three Rivers refinery to our San Antonio terminal. We are the sole owner of this
pipeline. Throughput is sold at our San Antonio terminal or transported through
our connection to Koch Industries' San Antonio terminal. Ultramar Diamond
Shamrock is the only shipper. The pipeline is subject to the regulatory
jurisdiction of the Texas Railroad Commission. The pipeline was constructed in
1979.
                                       76
<PAGE>   83


     We have a connecting 12.1-mile, 8-inch refined product pipeline, which
extends from our terminal in San Antonio to Koch Industries' San Antonio
terminal. We are the sole owner of the pipeline. The pipeline has a capacity of
33,600 barrels per day. Ultramar Diamond Shamrock is currently the only shipper.
The pipeline is subject to the regulatory jurisdiction of the Texas Railroad
Commission. The pipeline was constructed in 1990.


     Three Rivers to Laredo. The Three Rivers to Laredo refined product pipeline
is a 98.1-mile, 8-inch diameter pipeline with 16,800 barrels per day of total
capacity. The pipeline transports refined products from the Three Rivers
refinery to our Laredo terminal. We are the sole owner of this pipeline.
Throughput is transported to our Laredo terminal. A portion of the throughput is
subsequently transported by truck from the Laredo terminal across the Mexican
border to the Nuevo Laredo and northern Mexico markets. Ultramar Diamond
Shamrock is currently the only shipper. The pipeline is subject to the
regulatory jurisdiction of the Texas Railroad Commission. The pipeline was
constructed in 1992.

     Three Rivers to Corpus Christi. The Three Rivers to Corpus Christi refined
product pipeline is a 71.6-mile, 6-inch diameter pipeline with 15,000 barrels
per day of total capacity. The pipeline transports toluene and xylene from the
Three Rivers refinery to our Corpus Christi refined product terminal. We are the
sole owner of the pipeline. Throughput is transported to our Corpus Christi
refined product terminal for further shipment by boat to domestic and foreign
chemical manufacturers. Ultramar Diamond Shamrock is currently the only shipper.
The pipeline is subject to the regulatory jurisdiction of the Texas Railroad
Commission. The pipeline was constructed in 1957 and expanded in 1980.

     Three Rivers to Pettus. The Three Rivers to Pettus refined product
pipelines consist of one 8-inch and one 12-inch diameter pipeline which run
parallel 28.8 miles from the Three Rivers refinery to Pettus Station at Pettus,
Texas. The 12-inch pipeline transports gasoline and distillates and the 8-inch
pipeline transports raffinate, distillates, and natural gas liquids (such as
propane and butane) from the Three Rivers refinery to Pettus Station at Pettus,
Texas where both pipelines connect to a common carrier pipeline. We are the sole
owner of these pipelines. The total capacity of the 12-inch pipeline is 24,000
barrels per day, and the total capacity of the 8-inch pipeline is 15,000 barrels
per day. Gasoline and distillate throughput in the 12-inch pipeline is
transported over a common carrier pipeline to Coastal's San Antonio terminal and
all of the throughput in the 8-inch pipeline is transported to various Corpus
Christi destinations over common carrier pipelines. Ultramar Diamond Shamrock is
currently the only shipper on both pipelines. The pipelines are subject to the
regulatory jurisdiction of the Texas Railroad Commission. The 8-inch pipeline
was constructed in 1976 and expanded in 1984 and the 12-inch pipeline was
constructed in 1982.

     Ardmore to Wynnewood. The Ardmore to Wynnewood refined product pipeline is
a 31.1-mile, 12-inch diameter pipeline with 90,000 barrels per day of total
capacity. The pipeline transports refined products from the Ardmore refinery to
Wynnewood, Oklahoma where it connects to a common carrier pipeline. We are the
sole owner of this pipeline. Throughput is transported to markets in the Rocky
Mountain region of the United States over a common carrier pipeline. We receive
a "split" tariff for transportation of refined products from the Ardmore
refinery to Wynnewood. The full tariff depends upon the ultimate destination to
which the refined products are shipped over the common carrier pipeline.
Ultramar Diamond Shamrock is currently the only shipper. The pipeline is subject
to the regulatory jurisdiction of the FERC. The pipeline was constructed in 1975
and expanded in 1998.

RECENTLY COMPLETED AND PLANNED EXPANSION PROJECTS

     We believe that our pipeline systems are modern, efficient, and
well-maintained. Approximately 50% of our total pipeline mileage has been
constructed since 1990. In addition, the

                                       77
<PAGE>   84


remaining pipelines have, in many cases, been expanded and upgraded since
installation. Set forth below is a list of our recently completed and planned
expansion projects.


  RECENTLY COMPLETED EXPANSION PROJECTS


     - McKee to El Paso. In 1997, we were the sole owner of this refined product
       pipeline, and at that time, it had a total capacity of 27,000 barrels per
       day. We increased horsepower in 1997 by adding new pump stations,
       expanding the pipeline's total capacity to 40,000 barrels per day. We
       subsequently sold a 25% interest in the pipeline and terminal to Phillips
       Petroleum Company. In 1999, we added more pump stations to further
       increase horsepower which expanded the pipeline's total capacity to
       60,000 barrels per day. In August 1999, we sold an additional 8.33%
       interest in the pipeline and terminal to Phillips Petroleum Company,
       reducing our share of the total capacity on the pipeline to 66.67%, or
       40,000 barrels per day. Our share of the cost of these expansions was
       approximately $13.2 million.



     - McKee to Colorado Springs to Denver. We recently added new pump stations
       and tanks along this refined product pipeline at the Colorado Springs
       terminal that will increase scheduling efficiency. Total capacity of the
       pipeline was increased from 32,000 barrels per day to 52,000 barrels per
       day on the McKee to Colorado Springs segment which will ultimately
       increase utilization of the Colorado Springs to Denver segment. As the
       sole owner, we bore the entire $6.2 million cost of the expansion.



     - Amarillo to Albuquerque. We and Phillips Petroleum Company each have a
       50% ownership interest in this refined product pipeline. In 1995, the
       pipeline's total capacity was expanded from 17,000 barrels per day to
       23,000 barrels per day by constructing a second, parallel 10-inch
       diameter pipeline along several segments of the 6-inch diameter pipeline.
       Our share of the cost of this expansion was $6.1 million. The pipeline
       was expanded again in 1998 by adding 10-inch diameter pipe along
       additional segments of the 6-inch diameter pipeline. The second expansion
       increased the pipeline's total capacity to 32,166 barrels per day. Our
       share of the cost of the second expansion was $7.4 million.



     - Ardmore to Wynnewood. In 1998, we increased the capacity on this refined
       product pipeline from 75,000 barrels per day to 90,000 barrels per day by
       adding pumps to an existing pump station to increase horsepower. As the
       sole owner, we bore the entire $0.8 million cost of the expansion.


  PLANNED EXPANSION PROJECTS

     - Wichita Falls to McKee Crude Oil Pipeline and Storage Facility. By the
       end of the first quarter of 2002, we intend to exercise our option to
       purchase for $64 million the crude oil pipeline from Wichita Falls, Texas
       to the Ultramar Diamond Shamrock refinery at McKee, Texas, along with
       related crude oil storage facilities. The McKee refinery receives 40%-
       50% of its crude oil supply through the Wichita Falls line, the capacity
       of which is being expanded from 85,000 barrels per day to 110,000 barrels
       per day. We expect the throughput in the pipeline to increase as the
       McKee refinery's other inland sources of crude oil supply continue to
       decline.

     - Ringgold, Texas Storage Facility Expansion. By the end of the first
       quarter of 2002, we intend to purchase from Ultramar Diamond Shamrock for
       approximately $6.5 million crude oil storage facilities at Ringgold,
       Texas. These facilities are currently under construction and will enhance
       the crude oil supply system for the Ardmore and McKee refineries.


     - Nuevo Laredo, Mexico Pipeline. Ultramar Diamond Shamrock plans to
       construct a 19-mile refined product pipeline from our Laredo, Texas
       refined products terminal to the refined products terminal operated by
       Pemex in Nuevo Laredo, Mexico. The new pipeline will


                                       78
<PAGE>   85


       supply refined products to the rapidly growing market in the Nuevo Laredo
       area, and will have a capacity to deliver 12,000 barrels per day. We
       intend to purchase this pipeline upon completion for approximately $5.7
       million and expect to be operating it by the end of 2001. Ultramar
       Diamond Shamrock is currently negotiating a transportation agreement with
       an affiliate of Pemex and a refined product sales agreement with Pemex.


TERMINALLING AND STORAGE OPERATIONS

  CRUDE OIL STORAGE FACILITIES

     We do not generate separate revenue through our crude oil storage
facilities. Instead, the costs associated with these facilities were considered
in establishing the tariffs charged for transporting crude oil from the storage
facilities to the refineries.

     Our crude oil storage facilities are designed to serve the needs of the
McKee, Three Rivers, and Ardmore refineries. Our storage facilities have been
designed to handle increasing throughput and varieties of foreign and domestic
crude oil. These design attributes include:

     - multiple tanks to facilitate simultaneous handling of multiple crude oil
       varieties in accordance with normal pipeline batch sizes;

     - electronic switching systems connecting each tank to the main crude oil
       pipelines to facilitate efficient switching and, in some cases, blending
       between crude oil grades with minimal contamination.


     Our most significant crude oil storage asset is the marine-based Corpus
Christi crude oil storage facility. It has a storage capacity of 1.6 million
barrels of crude oil, which allows our customer, Ultramar Diamond Shamrock, to
accept larger quantities delivered by tankers and more varieties of crude oil.
The four tanks in this storage facility provide us with added flexibility in
blending crude oil to achieve the optimal crude oil slate for the Three Rivers
refinery.



     The following table outlines our crude oil storage facilities' location,
capacity, average throughput for the year ended December 31, 1999 and nine
months ended September 30, 1999 and 2000, number of tanks, and mode of receipt
and delivery:



<TABLE>
<CAPTION>
                                                                                            AVERAGE THROUGHPUT
                                                                                     ---------------------------------
                                                                                                       NINE MONTHS
                                                                                                          ENDED
                                                                 MODE        MODE     YEAR ENDED      SEPTEMBER 30,
                                                      NUMBER      OF          OF     DECEMBER 31,   ------------------
                                         CAPACITY    OF TANKS   RECEIPT    DELIVERY      1999        1999       2000
                                         --------    --------   -------    --------  ------------    ----       ----
                                         (barrels)                                        (barrels/day)
<S>                                      <C>         <C>        <C>        <C>       <C>            <C>        <C>
Corpus Christi, TX.....................  1,600,000      4       Marine     Pipeline     80,594       79,954     87,053
Dixon, TX..............................    240,000      3       Pipeline   Pipeline     61,110       61,761     62,322
Wasson, OK.............................    226,000      2       Pipeline   Pipeline     72,161       70,462     76,564
                                         ---------      --                             -------      -------    -------
        Total..........................  2,066,000      9                              213,865      212,177    225,939
                                         =========      ==                             =======      =======    =======
</TABLE>


     Eighty-eight percent of our major crude oil storage facility assets, by
shell capacity, have been built since 1990. The average throughput for our crude
oil storage operations increased at an annual rate of 24% from 91,393 barrels
per day in 1995 to 213,865 barrels per day in 1999.

  REFINED PRODUCT TERMINALS


     Our refined product terminalling operations generate revenue through a
terminalling fee paid by customers, primarily Ultramar Diamond Shamrock and its
affiliates. The fee is incurred when the refined products enter the terminal and
includes the cost of transferring the refined products from the terminal to
trucks. In addition, at the El Paso terminal effective January 1, 2000, we also
began receiving an additional fee for transporting refined products through the
connecting pipeline for injection into a third-party pipeline.


                                       79
<PAGE>   86

     Our terminals are modern and efficient. They have automated loading
facilities available 24 hours a day. Billing of customers is electronically
accomplished by our Fuels Automation and Nomination System (FANS). This
automatic system provides for control of allocations, credit, and carrier
certification by remote input of data by our customers. All terminals have an
electronic monitoring and control system that monitors the effectiveness of the
ground protection and vapor control and will cause an automated shut down of the
terminal operations if necessary. For environmental and safety protection, all
terminals (except our Abernathy terminal which is currently being modified) have
primary vapor control systems consisting of flares, vapor combustors, or carbon
absorption vapor recovery units.

     All terminal tanks and underground terminal piping are protected against
corrosion. See "-- Safety and Maintenance." Tanks designed for gasoline are
equipped with either internal or external floating roofs which minimize
emissions and prevent potentially flammable vapor accumulation between fluid
levels and the roof of the tank. All terminal facilities have facility response
plans, spill prevention and control measures plans and other plans and programs
to respond to emergencies.

     Many of our terminal loading racks are protected with water deluge systems
activated by vapor sensors, heat sensors, or an emergency switch. Our Colorado
Springs, El Paso and San Antonio terminals are also protected by foam systems to
be activated in case of fire. The only terminal that stores and loads propane is
El Paso. Our propane tanks are protected against fire hazards with a deluge
system. This system automatically activates with heat sensors in the event of a
fire. All terminals are subject to participation in a comprehensive
environmental management plan to assure compliance with air, solid wastes, and
wastewater regulations.

     Our Harlingen, Texas terminal does not directly connect to any of our
pipelines; it handles refined products delivered by Ultramar Diamond Shamrock by
barge.

     We own the property on which our terminals are located, except in Colorado
Springs, Corpus Christi, and Harlingen, where the underlying real estate is
subject to long-term operating leases.


     The following table outlines our refined product terminals' location,
capacity, average throughput for the year ended December 31, 1999 and nine
months ended September 30, 2000, number of tanks, and mode of receipt and
delivery:



<TABLE>
<CAPTION>
                                                                                        AVERAGE THROUGHPUT
                                                                               ------------------------------------
                                                                                YEAR ENDED      NINE MONTHS ENDED
                                                                               DECEMBER 31,       SEPTEMBER 30,
                                        NUMBER    MODE OF        MODE OF       ------------   ---------------------
LOCATION                   CAPACITY    OF TANKS   RECEIPT       DELIVERY           1999        1999        2000
--------                   --------    --------   -------       --------           ----        ----        ----
                           (barrels)                                                      (barrels/day)
<S>                        <C>         <C>        <C>        <C>               <C>            <C>       <C>
Abernathy, TX............   172,000       13      Pipeline        Truck            5,094       4,851        5,103
Amarillo, TX.............   271,000       15      Pipeline   Truck/Pipeline       21,792      21,944       21,469
Albuquerque, NM..........   193,000       10      Pipeline   Truck/Pipeline       10,646      10,570       11,045
Denver, CO...............   111,000       10      Pipeline        Truck           17,233      16,807       17,232
Colorado Springs, CO.....   324,000        8      Pipeline   Truck/Pipeline       15,321      15,100       14,342
El Paso, TX (1)..........   346,684       22      Pipeline   Truck/Pipeline       35,661      35,205       41,601
Corpus Christi, TX.......   372,000       16      Pipeline   Marine/Pipeline       8,044       7,424       12,073
San Antonio, TX..........   221,000       10      Pipeline        Truck           20,081      20,173       19,482
Laredo, TX...............   203,000        6      Pipeline        Truck           14,687      14,423       16,174
Harlingen, TX............   314,000        7       Marine         Truck           12,781      12,870        9,129
                           ---------     ---                                     -------      -------     -------
        Total............  2,527,684     117                                     161,340      159,367     167,650
                           =========     ===                                     =======      =======     =======
</TABLE>


---------------

(1) We have a 66.67% ownership interest in the El Paso refined product terminal.
    The capacity and throughput amounts represent the proportionate share of
    capacity and throughput attributable to our ownership interest. The
    throughput represents barrels distributed from the El Paso refined product
    terminal and deliveries to a third-party refined product pipeline.

                                       80
<PAGE>   87

     Thirty-five percent of our refined product terminalling assets, by
capacity, have been built since 1990. The average throughput for our refined
product terminalling operations increased at an annual rate of 10% from 109,506
barrels per day in 1995 to 161,340 barrels per day in 1999.

PIPELINE, STORAGE FACILITY, AND TERMINAL CONTROL OPERATIONS

     All of our crude oil and refined product pipelines are operated via
satellite communication systems from one of two central control rooms located in
San Antonio and McKee, Texas. The San Antonio control center primarily monitors
and controls our refined product pipelines, and the McKee control center
primarily monitors and controls our crude oil pipelines. Each control center can
provide backup capability for the other, and each center is capable of
monitoring and controlling all of our pipelines. There is also a backup control
center located at our San Antonio refined product terminal approximately 25
miles from our primary control center in San Antonio.

     The control centers operate with modern, state-of-the-art System Control
and Data Acquisition systems (SCADA). Both control centers are equipped with
computer systems designed to continuously monitor real time operational data,
including crude oil and refined product throughput, flow rates, and pressures.
In addition, the control centers monitor alarms and throughput balances. The
control centers operate remote pumps, motors, engines, and valves associated
with the delivery of crude oil and refined products. The computer systems are
designed to enhance leak-detection capabilities, sound automatic alarms if
operational conditions outside of pre-established parameters occur, and provide
for remote-controlled shutdown of pump stations on the pipelines. Pump stations,
crude oil storage facilities, and meter-measurement points along the pipelines
are linked by satellite or telephone communication systems for remote monitoring
and control, which reduces our requirement for full-time on-site personnel at
most of these locations.

     A number of our crude oil storage facilities and refined product terminals
are also operated through our central control centers. Other crude oil storage
facilities and refined product terminals are modern, automated facilities but
are locally controlled.

SAFETY AND MAINTENANCE

     We perform scheduled maintenance on all of our pipelines and make repairs
and replacements when necessary or appropriate. We attempt to control internal
corrosion of the mainlines through the use of corrosion-inhibiting chemicals
injected into the crude oil and refined products. External coatings and
impressed-current cathodic protection systems are used to protect against
external corrosion. We continuously monitor the effectiveness of our corrosion
control programs. In addition, we monitor the structural integrity of selected
segments of the pipelines through a program of periodic internal inspections
using electronic "smart pig" instruments. Maintenance facilities containing
equipment for pipe repairs, spare parts, and trained response personnel are
strategically located along the pipelines and in concentrated operating areas.
We believe that all of our pipelines have been constructed and are maintained in
all material respects in accordance with applicable federal, state, and local
laws and the regulations and standards prescribed by the American Petroleum
Institute, the Department of Transportation, and accepted industry practice.

COMPETITION

     As a result of our physical integration with Ultramar Diamond Shamrock's
refineries and our contractual relationship with Ultramar Diamond Shamrock, we
believe that we will not face significant competition for barrels of crude oil
transported to, and barrels of refined products transported from, the McKee,
Three Rivers, and Ardmore refineries, particularly during the term of our
pipelines and terminals usage agreement with Ultramar Diamond Shamrock. However,
we face competition from other pipelines who may be able to supply our end-user
markets with

                                       81
<PAGE>   88


refined products on a more competitive basis. If Ultramar Diamond Shamrock
reduced its retail sales of refined products or its wholesale customers reduced
their purchases of refined products, the volumes transported through our
pipelines would be reduced, which would cause a decrease in cash and revenues
generated from our operations.


     We do not expect any competition from Ultramar Diamond Shamrock based on
the retained assets described below under "-- Assets Retained by Ultramar
Diamond Shamrock" since these assets are either in a different business, such as
crude oil gathering, serve different markets or are currently idle or under
construction and may be acquired by us within the next two years.

     The Texas and Oklahoma markets served by the refined product pipelines
originating at the Three Rivers and Ardmore refineries are accessible by Texas
Gulf Coast refiners through common carrier pipelines, with the exception of the
Laredo, Texas and Nuevo Laredo, Mexico markets. In addition, the markets served
by the refined product pipelines originating at the McKee refinery are also
accessible by Texas Gulf Coast and Midwestern refiners through common carrier
pipelines.

     We believe that high capital requirements, environmental considerations,
and the difficulty in acquiring rights-of-way and related permits make it
difficult for other companies to build competing pipelines in areas served by
our pipelines. As a result, competing pipelines are likely to be built only in
those cases in which strong market demand and attractive tariff rates support
additional capacity in an area. Two additional refined product pipelines may
serve our market areas:


     - The Longhorn Pipeline is a common carrier refined product pipeline with
       70,000 barrels per day of initial capacity capable of delivering refined
       products from the Texas Gulf Coast to El Paso, Texas. Most of the
       pipeline has been constructed and it has obtained regulatory approval but
       is awaiting the resolution of litigation to commence operations. It is
       uncertain if and when this pipeline will commence operations. The
       pipeline is jointly owned by ExxonMobil, Williams Pipeline, BP Amoco, and
       several other minority participants. We expect that a portion of the
       refined products transported into the El Paso area in this pipeline will
       ultimately be transported into the Phoenix and Tucson, Arizona markets.
       As a result, Ultramar Diamond Shamrock's allocated capacity on Kinder
       Morgan's Santa Fe Pacific East pipeline, which transports refined
       products from El Paso to the Arizona markets, may be reduced. In
       addition, the increased supply of refined products entering the El Paso
       and Arizona markets through the Longhorn Pipeline may cause a decline in
       the demand for refined products from Ultramar Diamond Shamrock. These
       factors, in turn, might reduce the demand for transportation of refined
       products through the pipeline from McKee to El Paso.


     - The Aspen Pipeline, with an initial capacity of 65,000 barrels per day,
       was a joint venture project between Williams Pipeline and Equilon
       Pipeline Company LLC. Williams and Equilon have recently announced that
       the joint venture will be discontinued. The original project was planned
       to connect to Equilon's pipeline in West Texas to Salt Lake City, Utah.
       Refined products from the Texas Gulf Coast are transported in an existing
       Equilon pipeline to the point of origin in West Texas. Equilon announced
       that it would continue the southern portion of the Aspen project. The
       southern section would connect the Equilon pipeline in West Texas to
       Bloomfield, New Mexico with a new terminal near Albuquerque, New Mexico.
       We believe the southern section is scheduled to begin service in 2001. If
       completed, the southern section of the Aspen pipeline could cause a
       reduction in demand for the transportation of refined products through
       our Amarillo to Albuquerque refined product pipeline. The southern
       section of the Aspen Pipeline would cross two of our refined product
       pipelines, the McKee to El Paso pipeline and the Amarillo to Albuquerque
       pipeline.

                                       82
<PAGE>   89

     Given the expected increase in demand for refined products in the
southwestern and Rocky Mountain market regions, we do not believe that these new
pipelines, when fully operational, will have a material adverse effect on our
financial condition or results of operations.

ULTRAMAR DIAMOND SHAMROCK'S REFINING AND MARKETING OPERATIONS

     Although we do not own or operate any refining or marketing assets, our
pipelines systems are located within Ultramar Diamond Shamrock's refining and
marketing supply chain. Accordingly, we have included the following discussion
of Ultramar Diamond Shamrock's refining and marketing operations.

     Ultramar Diamond Shamrock is an independent refiner and marketer of
high-quality refined products and convenience store merchandise in the central,
southwest, and northeast regions of the United States, and eastern Canada. Its
operations consist of refineries, convenience stores, pipelines and terminals, a
home heating oil business, and related petrochemical and natural gas liquids
operations. Ultramar Diamond Shamrock currently employs approximately 20,000
people. Ultramar Diamond Shamrock owns and operates seven refineries
strategically located near its key markets:

     - McKee refinery located near Amarillo in north Texas;

     - Three Rivers refinery located near San Antonio in south Texas;

     - Ardmore refinery located near the Oklahoma/Texas border in south central
       Oklahoma;

     - Wilmington refinery located near Los Angeles in southern California;

     - Denver refinery located near Denver in eastern Colorado;

     - Quebec refinery located near Quebec City in Quebec, Canada; and


     - Golden Eagle refinery located in the San Francisco bay area of
       California.


     In the United States, Ultramar Diamond Shamrock markets refined products
and a broad range of convenience store merchandise under the Diamond
Shamrock(R), Beacon(R), Ultramar(R), and Total(R) brand names through a network
of approximately 3,800 convenience stores across 17 central and southwest
states. In the Northeast, Ultramar Diamond Shamrock markets refined products
through approximately 1,200 convenience stores and 82 cardlocks. The Northeast
operations include one of the largest retail home heating oil businesses in the
northeastern region of North America, selling heating oil to approximately
250,000 households.

  REFINERIES

     Our pipelines deliver crude oil to and transport refined products from the
McKee, Three Rivers, and Ardmore refineries owned by Ultramar Diamond Shamrock.


     McKee Refinery. The McKee refinery has a total capacity to process 170,000
barrels of crude oil and other raw materials per day, making it the largest
refinery located between the Texas Gulf Coast and the West Coast. In 1999, its
total throughput was 157,740 barrels per day, of which 58% was supplied by our
crude oil pipelines. The refinery relies primarily on a varying blend of
domestically produced sweet crude oil and gas oil for its raw material. The
refinery produces primarily conventional gasoline, federal specification
reformulated gasoline, other oxygenated gasolines, low-sulfur diesel meeting
governmental specifications for on-road use, high-sulfur diesel, jet fuel,
liquified petroleum gas and asphalt. In 1999, 73% of the refined products
produced from the refinery were transported from the refinery through our
refined product pipelines.


     The McKee refinery is a modern and efficient refinery. Since 1997, Ultramar
Diamond Shamrock completed a number of upgrades, modifications, and expansion
projects.
                                       83
<PAGE>   90


     As shown below, the refinery's total throughput, which includes crude oil
and other raw materials, has increased since 1995 by an aggregate throughput of
22,044 barrels per day.



<TABLE>
<CAPTION>
                                                                                      NINE MONTHS
                                               YEAR ENDED DECEMBER 31,                   ENDED
                                   -----------------------------------------------   SEPTEMBER 30,
                                    1995      1996      1997      1998      1999          2000
                                    ----      ----      ----      ----      ----     -------------
                                                          (barrels per day)
<S>                                <C>       <C>       <C>       <C>       <C>       <C>
THROUGHPUT.......................  141,551   149,310   145,633   156,507   157,740      163,595
</TABLE>



     The McKee refinery has access to crude oil from a number of sources,
including the Texas panhandle, Oklahoma, southwestern Kansas and eastern
Colorado through our crude oil pipelines and additional crude oil lines owned by
subsidiaries of Ultramar Diamond Shamrock. The refinery is also connected by
common carrier pipelines to a major crude oil center in Midland, Texas. It also
has access through Ultramar Diamond Shamrock's Wichita Falls to McKee crude oil
pipeline at the Wichita Falls crude oil storage facility to major common carrier
pipelines that transport crude oil from the Texas Gulf Coast and major West
Texas oil fields into the mid-continent region. Total storage capacity for crude
oil and other raw materials at the McKee refinery is approximately 655,000
barrels.



     Three Rivers Refinery. The Three Rivers refinery has a total capacity to
process 98,000 barrels of crude oil and other raw materials per day. In 1999,
its total throughput was 88,234 barrels per day, of which 91% was supplied by
our Corpus Christi to Three Rivers crude oil pipeline. The refinery relies
primarily on blends of predominantly sweet foreign crude oils as its raw
materials. The refinery produces primarily conventional gasoline, high and low
sulfur diesel, fuel oil, petrochemical products, LPG propane and jet fuel. In
1999, 83% of the refined products produced at the refinery were distributed from
the refinery through our refined product pipelines.



     Since 1995 Ultramar Diamond Shamrock has completed a number of expansion
projects at the Three Rivers refinery which increased the refinery's total
throughput by an aggregate throughput of 16,350 barrels per day.



<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                             ------------------------------------------   NINE MONTHS ENDED
                                              1995     1996     1997     1998     1999    SEPTEMBER 30, 2000
                                              ----     ----     ----     ----     ----    ------------------
                                                                    (barrels per day)
<S>                                          <C>      <C>      <C>      <C>      <C>      <C>
THROUGHPUT.................................  77,029   87,223   85,884   91,996   88,234         93,379
</TABLE>


     The Three Rivers refinery has access to crude oil from foreign sources
delivered to the Texas Gulf Coast at the Corpus Christi crude oil storage
facility, as well as crude oil from domestic sources. Our crude oil storage
facility in Corpus Christi has a total storage capacity of 1.6 million barrels,
and allows us to accept delivery of larger crude oil cargoes, decreasing the
number of deliveries and related dockage expense. The Corpus Christi crude oil
storage facility is connected to the Three Rivers refinery by our 69.7-mile
crude oil pipeline which has a capacity of 120,000 barrels per day. The Three
Rivers refinery also has access to South Texas crude oils through common carrier
pipelines.


     Ardmore Refinery. The Ardmore refinery has a total capacity to process
85,000 barrels of crude oil and other raw materials per day. In 1999, its total
throughput was 81,263 barrels per day, of which 89% was supplied by our crude
oil pipelines. The refinery relies primarily on a variety of domestic and
imported sweet and sour crude oils for its raw material. The refinery produces
primarily conventional gasolines, high and low sulfur diesel fuels, LPGs and
asphalt. In 1999, 67% of the refined products produced at the refinery were
transported from the refinery through our Ardmore to Wynnewood refined product
pipeline.



     Ultramar Diamond Shamrock purchased the Ardmore refinery from Total
Petroleum (North America), Ltd. in September 1997.


                                       84
<PAGE>   91


     As shown below, the refinery's throughput has increased since 1995 by an
aggregate throughput of 10,504 barrels per day.



<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                             ------------------------------------------   NINE MONTHS ENDED
                                              1995     1996     1997     1998     1999    SEPTEMBER 30, 2000
                                              ----     ----     ----     ----     ----    ------------------
                                                                    (barrels per day)
<S>                                          <C>      <C>      <C>      <C>      <C>      <C>
THROUGHPUT.................................  72,481   66,837   78,032   67,405   81,263         82,985
</TABLE>


     The Ardmore refinery can also be supplied with crude oil by common carrier
pipelines and trucking operations.

  MARKETING

     We believe that our pipeline, terminalling, and storage assets are
well-positioned for future growth because these assets are located in attractive
market regions and are associated with a significant participant in those market
regions. We believe that the population growth and the growth in demand for
refined products in the southwestern and Rocky Mountain regions of the United
States will lead to increased throughput for our refined product and crude oil
pipelines as Ultramar Diamond Shamrock's sales volumes of refined products in
those markets continue to grow.

     The following table sets forth cumulative projected population growth for
the years 2000 through 2010 in the indicated states and metropolitan areas as
compared to the national average of 8.4%.

<TABLE>
<CAPTION>
                                                               PROJECTED
                                                               POPULATION
                 STATE OR METROPOLITAN AREA                      GROWTH
                 --------------------------                    ----------
<S>                                                            <C>
ARIZONA(1)..................................................      15.1%
  Phoenix(2)................................................      25.5%
  Tucson(2).................................................      20.8%
COLORADO(1).................................................      11.8%
  Colorado Springs(3).......................................      17.6%
  Denver(3).................................................      16.3%
NEW MEXICO(1)...............................................      15.9%
  Albuquerque(4)............................................      16.6%
OKLAHOMA(1).................................................       7.9%
TEXAS(1)....................................................      13.6%
  El Paso(5)................................................      21.1%
  Laredo(5).................................................      34.1%
  San Antonio(5)............................................      13.4%
National Average(1).........................................       8.4%
</TABLE>

---------------

(1) Source: U.S. Department of Commerce, Economics and Statistics
    Administration, Bureau of the Census.

(2) Source: Arizona Department of Economic Security, Research Administration,
    Population Statistics Unit.

(3) Source: Colorado Department of Local Affairs.

(4) Source: Bureau of Business and Economic Research, University of New Mexico.

(5) Source: Texas State Data Center.

     Ultramar Diamond Shamrock is a retailer of gasoline, through branded and
unbranded sales in each of Colorado, Texas, Oklahoma, New Mexico, and Arizona.
The following table sets forth

                                       85
<PAGE>   92

the sales rank and market share of Ultramar Diamond Shamrock's total gasoline
sales in each of these states:

<TABLE>
<CAPTION>
                                                                   MARKET
                                                SALES RANK       SHARE (%)
STATE                                           GASOLINE(1)     GASOLINE(1)      DATE OF SURVEY
-----                                           -----------     -----------      --------------
<S>                                             <C>           <C>                <C>
Colorado......................................      2nd            18.07%         May 2000
Texas.........................................      2nd            15.18%         May 2000
Oklahoma......................................      5th             9.08%         June 2000
New Mexico....................................      6th            10.51%         July 2000
Arizona.......................................      6th             7.09          June 2000
</TABLE>

---------------

(1) Source: Lundberg Survey, Inc.

ASSETS RETAINED BY ULTRAMAR DIAMOND SHAMROCK


     Effective July 1, 2000, Ultramar Diamond Shamrock transferred to Shamrock
Logistics Operations assets representing 72% of the book value of its pipeline,
terminalling, and storage assets that support the McKee, Three Rivers, and
Ardmore refineries and its marketing operations located in Texas, Oklahoma,
Colorado, New Mexico, and Arizona. Ultramar Diamond Shamrock retained the
pipelines and other assets described below. These assets are either utilized in
a different business, such as crude oil gathering, serve different markets or
are currently idle or under construction and may be acquired by us within the
next two years.


     - A crude oil pipeline from Wichita Falls, Texas to the McKee refinery with
       a capacity of 110,000 barrels per day and crude oil storage facilities at
       Ringgold, Texas which we have options to acquire before the end of the
       first quarter of 2002.

     - A refined product pipeline from the Three Rivers refinery to Odem, near
       Corpus Christi, Texas, which was built to transport natural gas liquids,
       is not included because it is currently idle.


     - The crude oil gathering pipelines that connect into a number of our
       pipelines are not included because they are subject to inherent
       short-term volatility in throughput caused by fluctuations in the price
       of crude oil and long-term declining throughput. We believe that
       excluding the gathering pipelines allows us to lessen indirect exposure
       to fluctuating volumes. These gathering systems are also not included as
       they are expected to experience long-term declining throughput because
       they transport crude oil from areas that are characterized by declining
       crude oil production.



     - A 357.5-mile, 8-inch diameter refined product pipeline from the McKee
       refinery to the Southlake terminal in the Dallas/Fort Worth area and the
       Southlake refined product terminal are not included because the pipeline
       has been experiencing declining throughput. The Dallas/Ft. Worth market
       is more competitive than other southwestern and Rocky Mountain markets.
       Ultramar Diamond Shamrock prefers to transport its refined products to
       those markets over our long-haul refined product pipelines and uses the
       Southlake refined product pipeline to transport incremental barrels to
       Dallas/Ft. Worth that it cannot sell in the southwestern and Rocky
       Mountain markets. As demand in the southwestern and Rocky Mountain
       markets grows, we expect throughput in the McKee to Southlake pipeline to
       continue to decline. The McKee to Southlake refined product pipeline is
       also strongly affected by seasonality as throughput declines in the
       summer when demand in the more attractive Rocky Mountain market
       increases.


     - A refined product pipeline from the McKee refinery to Turpin, Oklahoma
       and the Turpin refined product terminal are not included because of
       relatively low throughput. In addition, the pipeline and terminal serve a
       rural market that is not expected to show any increase in demand in the
       near future.

                                       86
<PAGE>   93

     - A low capacity refined product terminal in Grand Junction, Colorado is
       not included because it is not accessible by pipeline and is currently
       supplied by railcar only.

     - A 2.1-mile refined product pipeline from the McKee refinery to a carbon
       black processing plant in the Texas panhandle is not included because it
       transports a low volume of heavy gas oil, a byproduct of refining
       operations.

     - Various other pipelines are not included because they are currently idle.

REGULATION

  RATE REGULATION

     Prior to this offering and the related transactions, affiliates of Ultramar
Diamond Shamrock owned and operated our pipelines. These affiliates were the
only shippers in Ultramar Diamond Shamrock's ownership capacity on most of the
pipelines, including the common carrier pipelines. In preparation for this
offering, we filed with the appropriate regulatory commissions changes to adjust
the tariffs on many of our pipelines to better reflect current throughput
volumes and market conditions or cost-based pricing. We have filed the
appropriate notices of the changed tariffs with the FERC for our interstate
pipelines. For our intrastate pipelines, we have made tariff filings with the
Texas Railroad Commission. All of these tariff filings became effective in the
first quarter of 2000. We have obtained the agreement of Ultramar Diamond
Shamrock and its affiliates, which are the only shippers on most of our
pipelines, not to challenge the validity of our tariff rates for a period of
seven years.

     General Interstate Regulation. Our interstate common carrier pipeline
operations are subject to rate regulation by the FERC under the Interstate
Commerce Act. The Interstate Commerce Act requires that tariff rates for crude
oil pipelines, which includes petroleum products and petrochemical pipelines
(crude oil, petroleum product, and petrochemical pipelines are referred to
collectively as "petroleum pipelines" in this prospectus), be just and
reasonable and non-discriminatory. The Interstate Commerce Act permits
challenges to proposed new or changed rates by protest, and challenges to rates
that are already on file and in effect by complaint. Upon the appropriate
showing, a successful complainant may obtain damages or reparations for
generally up to two years prior to the filing of a complaint. Ultramar Diamond
Shamrock has agreed to be responsible for any Interstate Commerce Act
liabilities with respect to activities or conduct occurring during periods prior
to the closing of this offering, and we will be responsible for Interstate
Commerce Act liabilities with respect to activities or conduct occurring during
periods following the closing of this offering.

     The FERC is authorized to suspend the effectiveness of a new or changed
tariff rate for a period of up to seven months and to investigate the rate. The
FERC may also place into effect a new or changed tariff rate on at least one
days notice, subject to refund and investigation. If upon the completion of an
investigation the FERC finds that the rate is unlawful, it may require the
pipeline operator to refund to shippers, with interest, any difference between
the rates the FERC determines to be lawful and the rates under investigation. In
addition, the FERC will order the pipeline to change its rates prospectively to
the lawful level. In general, petroleum pipeline rates must be cost-based,
although settlement rates, which are rates that have been agreed to by all
shippers, are permitted, and market-based rates may be permitted in certain
circumstances.

     From 1906 until 1978, the Interstate Commerce Commission, rather than the
FERC, was charged with exercising regulatory authority over petroleum pipeline
rates. During the latter years of this period, the Interstate Commerce
Commission determined pipeline rates on a "valuation" methodology under which
pipeline rate base was calculated on "fair value" rather than on depreciated
original cost. The valuation rate base approach was applied by the Interstate
Commerce Commission until 1978, when its oversight authority for petroleum
pipeline rates was

                                       87
<PAGE>   94

transferred to the FERC. The FERC was then required by judicial review to
reevaluate its petroleum pipeline ratemaking methods.

     In 1985, the FERC issued an opinion in the Williams case (Opinion No.
154-B) which adopted the trended original cost methodology for determining the
justness and reasonableness of petroleum pipeline tariff rates. The trended
original cost methodology provides that in calculating a petroleum pipeline's
rate base, after a starting rate base has been determined, the pipeline's rate
base is to be:

     - increased by property additions at cost plus an amount equal to the
       equity portion of the rate base multiplied or "trended" by an inflation
       factor; and

     - decreased by property retirements and depreciation and amortization of
       the rate base write-ups reflecting inflation and amortization of the
       starting rate base write-up.

     The starting rate base must be determined for pipelines that previously
were regulated under the Interstate Commerce Commission valuation methodology in
order to provide a transition from the valuation methodology to the trended
original cost methodology. For these pipelines, a portion of the starting rate
base will continue to reflect reproduction costs in excess of the depreciated
original cost of the pipeline's assets. The Williams opinion provides that the
starting rate base is to be the sum of the following components:

     - the depreciated original cost of the carrier's property, multiplied by
       the ratio of debt to total capitalization;

     - the net depreciated reproduction cost based on the FERC reproduction cost
       rate base (as of 1983) derived under the Interstate Commerce Commission
       valuation methodology, multiplied by the ratio of equity to total
       capitalization; and

     - the original cost of land, the net book value of rights-of-way and
       allowed working capital.

     The difference between the starting rate base and the depreciated original
cost rate base is referred to as the starting rate base write-up. This write-up
is amortized over the useful life of the facilities. The Williams opinion
expressly provides that the use of a starting rate base in excess of the
original cost of the assets is subject to challenge by showing that the
investors in the carrier had not relied on the Interstate Commerce Commission
valuation rate base methodology. Some of our rates involve rate base components
built or acquired prior to 1983, and if the rates were challenged, defending
these rates on a cost-of-service basis may require technical rate base
calculations.

     Energy Policy Act of 1992 and Subsequent Developments. In October 1992,
Congress passed the Energy Policy Act of 1992. The Energy Policy Act deemed
interstate petroleum pipeline rates in effect for the 365-day period ending on
the date of enactment of the Energy Policy Act, or that were in effect on the
365th day preceding enactment and had not been subject to complaint, protest, or
investigation during the 365-day period, to be just and reasonable under the
Interstate Commerce Act. Some of our pipeline rates are deemed just and
reasonable and therefore are grandfathered under the Energy Policy Act. The
Energy Policy Act provides that the FERC may change grandfathered rates upon
complaints only under the following limited circumstances:

     - a substantial change has occurred since enactment in either the economic
       circumstances or the nature of the services which were a basis for the
       rate;

     - the complainant was contractually barred from challenging the rate prior
       to enactment of the Energy Policy Act and filed the complaint within 30
       days of the expiration of the contractual bar; or

     - a provision of the tariff is unduly discriminatory or preferential.

                                       88
<PAGE>   95

     The Energy Policy Act further required the FERC to issue rules establishing
a simplified and generally applicable ratemaking methodology for interstate
petroleum pipelines and to streamline procedures in petroleum pipeline
proceedings. On October 22, 1993, the FERC responded to the Energy Policy Act
directive by issuing Order No. 561, which adopts a new indexing rate methodology
for interstate petroleum pipelines. Under the new regulations, effective January
1, 1995, petroleum pipelines are able to change their rates within prescribed
ceiling levels that are tied to changes in the Producer Price Index for Finished
Goods, minus one percent. Rate increases made under the index will be subject to
protest, but the scope of the protest proceeding will be limited to an inquiry
into whether the portion of the rate increase resulting from application of the
index is substantially in excess of the pipeline's increase in costs. The new
indexing methodology is applicable to any existing rate, whether grandfathered
or whether established after enactment of the Energy Policy Act.

     In Order No. 561, the FERC said that as a general rule pipelines must
utilize the indexing methodology to change their rates. Indexing includes the
requirement that, in any year in which the index is negative, pipelines must
file to lower their rates provided, however, that the pipeline is not required
to reduce its rates below the level deemed just and reasonable under the Energy
Policy Act. The FERC further indicated in Order No. 561, however, that it is
retaining cost-of-service ratemaking, market-based rates, and settlement rates
as alternatives to the indexing approach. A pipeline can follow a
cost-of-service approach when seeking to increase its rates above index levels
(or when seeking to avoid lowering rates to index levels) provided that the
pipeline can establish that there is a substantial divergence between the actual
costs experienced by the pipeline and the rate resulting from application of the
index. A pipeline can seek to charge market-based rates if it establishes that
it lacks significant market power. In addition, a pipeline can establish rates
under settlement if agreed upon by all current shippers. A pipeline can seek to
establish initial rates for new services through a cost-of-service proceeding, a
market-based rate proceeding, or through an agreement between the pipeline and
at least one shipper not affiliated with the pipeline.

     The Court of Appeals for the District of Columbia Circuit affirmed Order
No. 561, concluding that the general indexing methodology, along with the
limited exceptions to indexed rates, reasonably balances the FERC's dual
responsibilities of ensuring just and reasonable rates and streamlining
ratemaking through generally applicable procedures. The FERC indicated in Order
No. 561 that it will assess in 2000 how the rate-indexing method is operating.
The FERC issued a Notice of Inquiry on July 27, 2000 seeking comments on whether
to retain or to change the existing index.

     Another development affecting petroleum pipeline ratemaking arose in
Opinion No. 397, involving a partnership operating a crude oil pipeline. In
Opinion No. 397, the FERC concluded that there should not be a corporate income
tax allowance built into a petroleum pipeline's rates for income attributable to
noncorporate partners because those partners, unlike corporate partners, do not
pay a corporate income tax on partnership distributions. Opinion No. 397 was
affirmed by the FERC on rehearing in May 1996. The parties subsequently settled
the case, so no judicial review of the tax ruling took place.

     A current proceeding, however, is pending at the FERC that could result in
changes to the FERC's income tax method announced in Opinion No. 397 as well as
to other elements of the FERC's rate methods for petroleum pipelines. This
proceeding involves another publicly traded limited partnership engaged in crude
oil pipeline transportation. In this proceeding, the FERC or the appellate
courts could modify FERC's current policy related to the income tax allowance
permitted in the rates of publicly traded partnerships and/or revise other
aspects of the FERC's petroleum pipeline ratemaking methodology. More
specifically, on January 13, 1999, the FERC issued Opinion No. 435 in this
proceeding, which, among other things, affirmed Opinion No. 397's determination
that there should not be a corporate income tax allowance built into a petroleum
pipeline's rates for income attributable to noncorporate partners. Requests for
rehearing of
                                       89
<PAGE>   96

Opinion No. 435 were filed with the FERC on the tax issue and on other aspects
of the FERC's crude oil pipeline ratemaking methodology. Petitions for review of
Opinion No. 435 are before the Court of Appeals for the District of Columbia
Circuit. On May 17, 2000, the FERC issued Opinion No. 435-A which, as it
respects the income tax allowance issue, denied rehearing requests. Petitions
for Review of Opinion No. 435-A are before the Court of Appeals for the District
of Columbia. No assurances regarding the income tax allowance issue and other
issues subject to judicial review can be provided at this time.

     Market-Based Rates. In a proceeding involving Buckeye Pipeline Company,
L.P., the FERC found that a petroleum pipeline able to demonstrate a lack of
market power may be allowed a lighter standard of regulation than that imposed
by the trended original cost methodology. In such a case, the pipeline company
has the opportunity to establish that it faces sufficient competition to justify
relief from the strict application of the cost-based principles. In Buckeye, the
FERC determined, based on the existing level of market concentration in the
pipeline's market areas, that Buckeye exercised significant market power in only
five of its twenty-one market areas and therefore was entitled to charge
market-based rates in the other sixteen market areas. The opportunity to charge
market-based rates means that the pipeline may charge what the market will bear.
Order No. 572, a companion order to Order No. 561, was issued by the FERC on
October 25, 1994 and established procedural rules governing petroleum pipelines'
applications for a finding that the pipeline lacks significant market power in
the relevant market.

     Settlement Rates. In Order No. 561, the FERC specifically held that it
would also permit changes in rates that are the product of unanimous agreement
between the pipeline and all the shippers using the service to which the rate
applies. In the case of pipelines where we filed new rates in preparation for
the offering, those rates have been agreed to by affiliates of Ultramar Diamond
Shamrock, who are the only current shippers on the pipelines where we have filed
new rates. The rationale behind allowing this type of rate change is to further
the FERC's policy of favoring settlements among parties and to lessen the
regulatory burdens on all concerned. The FERC, however, also will entertain a
challenge to settlement rates, in response to a protest or a complaint which
alleges the same circumstances required to challenge an indexed rate. An example
of this type of challenge is that there is a discrepancy between the rate and
the pipeline's cost of service that is so substantial as to render the
settlement (or indexed) rate unjust and unreasonable.

     Intrastate Regulation. Some of our pipeline operations are subject to
regulation by the Texas Railroad Commission or the Colorado Public Utility
Commission. The applicable state statutes require that pipeline rates be
non-discriminatory and provide a fair return on the aggregate value of the
pipeline property used to render services. State commissions have generally not
been aggressive in regulating common carrier pipelines and have generally not
investigated the rates or practices of petroleum pipelines in the absence of
shipper complaints. Complaints to state agencies have been infrequent and are
usually resolved informally. Although no assurance can be given that our
intrastate rates would ultimately be upheld if challenged, we believe that,
given this history, the tariffs now in effect are not likely to be challenged.

     Our pipelines. The FERC generally has not investigated interstate rates on
its own initiative when those rates, like ours, have been mutually agreed to by
the pipeline and the shippers. In addition, as discussed above, intrastate
pipelines generally are subject to "light-handed" regulation by state
commissions and we do not believe the intrastate tariffs now in effect are
likely to be challenged. However, the FERC or a state regulatory commission
could investigate our rates at the urging of a third party if the third party is
either a current shipper or is able to show that it has a substantial economic
interest in our tariff rate level. If an interstate rate were challenged, we
would seek to either rely on a cost of service justification or to establish
that, due

                                       90
<PAGE>   97

to the presence of competing alternatives to our pipeline, the tariff rate
should be a market-based rate. If the FERC investigated our rate levels, it
could inquire into our costs, including:

     - the overall cost of service, including operating costs and overhead;

     - the allocation of overhead and other administrative and general expenses
       to the rate;

     - the appropriate capital structure to be utilized in calculating rates;

     - the appropriate rate of return on equity;

     - the rate base, including the proper starting rate base;

     - the throughput underlying the rate; and

     - the proper allowance for federal and state income taxes.

     If our rates were successfully challenged, the amount of cash available for
distribution to holders of units could be materially reduced.

     We do not believe that it is likely that there will be a challenge to our
rates by a current shipper that would materially affect our revenues or cash
flows. Ultramar Diamond Shamrock is the only current shipper shipping in our
ownership capacity on substantially all of our pipelines. Ultramar Diamond
Shamrock has committed not to challenge our rates for a period of seven years.
Under the pipelines and terminals usage agreement, in which Ultramar Diamond
Shamrock has committed not to challenge our rates, Ultramar Diamond Shamrock
also has committed to continue its historical practice of:

     - buying crude oil before it enters our crude oil pipelines, and


     - owning the refined products at least until the refined products exit the
       refined products terminal.



     Ultramar Diamond Shamrock has agreed further to retain its status as
shipper in our pipelines and will not transfer that status to third parties who
otherwise could become shippers of


     - crude oil purchased by Ultramar Diamond Shamrock at the refineries, or

     - refined products sold by Ultramar Diamond Shamrock at the refineries.


     We also do not anticipate challenges from new shippers because we believe
that it is unlikely we will have new shippers in any of our existing pipelines.
In the case of crude oil pipelines, Ultramar Diamond Shamrock in almost all
cases would be the shipper and would therefore not challenge our own tariffs for
a period of seven years. In the case of refined product pipelines, we do not
anticipate new shippers because Ultramar Diamond Shamrock will be the owner of
substantially all of the refined products produced at the refineries and the
refineries are the only current origin points for shipments in our refined
product pipelines. Therefore, Ultramar Diamond Shamrock will be the principal
shipper on our refined product pipelines, and it has agreed not to challenge our
rates for a period of seven years.



     Because our pipelines are common carrier pipelines, we may be required to
accept new shippers who wish to transport in our pipelines. It is possible that
any new shippers, or current shippers or other interested parties, may decide to
challenge our tariff rates. If any rate challenge or challenges were successful,
cash available for distribution could be materially reduced.


                                       91
<PAGE>   98

ENVIRONMENTAL REGULATION

  GENERAL

     Various federal, state, and local laws and regulations governing the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, affect our operations and costs. In particular,
our activities in connection with storage and transportation of crude oil,
refined products and other liquid hydrocarbons are subject to stringent
environmental regulation. As with the industry generally, compliance with
existing and anticipated regulations increases our overall cost of business.
Areas affected include capital costs to construct, maintain, and upgrade
equipment and facilities. While these regulations affect our maintenance capital
expenditures and net income, we believe that these regulations do not affect our
competitive position in that the operations of our competitors that comply with
these regulations are similarly affected. Environmental regulations have
historically been subject to frequent change by regulatory authorities, and we
are unable to predict the ongoing cost to us of complying with these laws and
regulations or the future impact of these regulations on our operations.
Violation of federal or state environmental laws, regulations, and permits can
result in the imposition of significant civil and criminal penalties,
injunctions, and construction bans or delays. A discharge of hydrocarbons or
hazardous substances into the environment could, to the extent the event is not
insured, subject us to substantial expense, including both the cost to comply
with applicable regulations and claims by neighboring landowners and other third
parties for personal injury and property damage. In connection with our
acquisition of crude oil and refined product pipeline, terminalling and storage
assets from Ultramar Diamond Shamrock, Ultramar Diamond Shamrock has agreed to
indemnify us from environmental liabilities related to the assets transferred to
us that arose prior to closing and are discovered within 10 years after closing
(excluding liabilities resulting from a change in law after closing).

  WATER

     The Oil Pollution Act was enacted in 1990 and amends provisions of the
Federal Water Pollution Control Act of 1972 and other statutes as they pertain
to prevention and response to petroleum spills. The Oil Pollution Act subjects
owners of facilities to strict, joint, and potentially unlimited liability for
removal costs and other consequences of a petroleum spill, where the spill is
into navigable waters, along shorelines or in the exclusive economic zone of the
U.S. In the event of a petroleum spill into navigable waters, substantial
liabilities could be imposed upon us. States in which we operate have also
enacted similar laws. Regulations are currently being developed under the Oil
Pollution Act and state laws that may also impose additional regulatory burdens
on our operations. Spill prevention control and countermeasure requirements of
federal laws and some state laws require diking and similar structures to help
prevent contamination of navigable waters in the event of a petroleum overflow,
rupture or leak. We are in substantial compliance with these laws. Additionally,
the Office of Pipeline Safety of the U.S. Department of Transportation has
approved our petroleum spill emergency response plans.

     The Federal Water Pollution Control Act of 1972 imposes restrictions and
strict controls regarding the discharge of pollutants into navigable waters.
Permits must be obtained to discharge pollutants into state and federal waters.
The Federal Water Pollution Control Act of 1972 imposes substantial potential
liability for the costs of removal, remediation and damages. In addition, some
states maintain groundwater protection programs that require permits for
discharges or operations that may impact groundwater conditions. We believe that
compliance with existing permits and compliance with foreseeable new permit
requirements will not have a material adverse effect on our financial condition
or results of operations.

                                       92
<PAGE>   99

  AIR EMISSIONS

     Our operations are subject to the Federal Clean Air Act and comparable
state and local statutes. Amendments to the Federal Clean Air Act enacted in
late 1990 require or will require most industrial operations in the U.S. to
incur capital expenditures in order to meet air emission control standards
developed by the Environmental Protection Agency and state environmental
agencies. In addition, the 1990 Federal Clean Air Act Amendments include a new
operating permit for major sources, which applies to some of our facilities. We
will be required to incur certain capital expenditures in the next several years
for air pollution control equipment in connection with maintaining or obtaining
permits and approvals addressing air emission related issues. Although we can
give no assurances, we believe implementation of the 1990 Federal Clean Air Act
Amendments will not have a material adverse effect on our financial condition or
results of operations.

     An affiliate of Ultramar Diamond Shamrock, Diamond Shamrock Refining and
Marketing Company, received a Notice of Violation under the Clean Air Act dated
December 30, 1998 from the U.S. Environmental Protection Agency, Region VI,
alleging that the company failed to abide by certain regulatory requirements at
its Albuquerque, New Mexico terminal. Ultramar Diamond Shamrock is investigating
the allegations of the Notice of Violation and expects to reach a voluntary
resolution of the allegations with the Environmental Protection Agency. No
penalty demand has yet been made by the Environmental Protection Agency, and
Ultramar Diamond Shamrock has no basis to predict a penalty amount at this time.
However, it is not anticipated that any penalty will have a material impact on
our financial condition.

     Under the Clean Air Act, the Environmental Protection Agency and state
agencies acting with authority delegated by the Environmental Protection Agency,
have announced new rules or their intent to strengthen other rules, all
affecting the composition of motor vehicle fuels and automobile emissions.
Beginning in 2006, a recent Environmental Protection Agency rule limits the
sulfur content of motor vehicle gasoline to 80 parts per million, and limits
corporate average sulfur content to 30 parts per million. Moreover, the
Environmental Protection Agency and various states, including the state of
Texas, are reportedly considering further restricting the sulfur content of
motor vehicle gasoline below the limitations taking effect in 2006, and a
further proposal being considered by the Environmental Protection Agency rule
would limit the sulfur content of diesel fuel. The Environmental Protection
Agency is also reportedly considering limiting the level of benzene and other
toxic substances in gasoline, as well as a ban on methyl tert-butyl ether, MTBE,
in gasoline, which may require the use of other chemical additives to serve as
oxygenates instead of MTBE. We have no control over Ultramar Diamond Shamrock's
responses to these emerging requirements, and we cannot be assured that those
responses will not reduce the throughput on our pipelines, and therefore, our
cash flow and ability to make distributions to unitholders.

  SOLID WASTE

     We generate non-hazardous solid wastes that are subject to the requirements
of the Federal Resource Conservation and Recovery Act and comparable state
statutes. The Environmental Protection Agency is considering the adoption of
stricter disposal standards for non-hazardous wastes, including crude oil and
gas wastes. The Federal Resource Conservation and Recovery Act also governs the
disposal of hazardous wastes. We are not currently required to comply with a
substantial portion of the Federal Resource Conservation and Recovery Act
requirements because our operations generate minimal quantities of hazardous
wastes. However, it is possible that additional wastes, which could include
wastes currently generated during operations, will in the future be designated
as "hazardous wastes." Hazardous wastes are subject to more rigorous and costly
disposal requirements than are non-hazardous wastes. These changes in the
regulations could result in additional maintenance capital expenditures or
operating expenses.

                                       93
<PAGE>   100

     Following an industrial solid waste inspection of the Corpus Christi, Texas
terminal on December 12, 1997, the Texas Natural Resource Conservation
Commission issued an Enforcement Order Pursuing Administrative Penalties,
seeking penalties of $115,200 from Ultramar Diamond Shamrock Corporation for
violations concerning emergency containment sumps. Ultramar Diamond Shamrock has
remedied the issues identified by the Texas National Resource Conservation
Commission and reached a voluntary resolution of this matter for less than
$50,000.

  HAZARDOUS SUBSTANCES

     The Comprehensive Environmental Response, Compensation and Liability Act,
referred to as CERCLA, also known as Superfund, imposes liability, without
regard to fault or the legality of the original act, on some classes of persons
that contributed to the release of a "hazardous substance" into the environment.
These persons include the owner or operator of the site and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. CERCLA also authorizes the Environmental Protection Agency and, in some
instances, third parties to act in response to threats to the public health or
the environment and to seek to recover from the responsible classes of persons
the costs they incur. In the course of our ordinary operations, we may generate
waste that falls within CERCLA's definition of a "hazardous substance." We may
be jointly and severally liable under CERCLA for all or part of the costs
required to clean up sites at which these hazardous substances have been
disposed of or released into the environment.

     We currently own or lease, and have in the past owned or leased, properties
where hydrocarbons are being or have been handled. Although we have utilized
operating and disposal practices that were standard in the industry at the time,
hydrocarbons or other waste may have been disposed of or released on or under
the properties owned or leased by us or on or under other locations where these
wastes have been taken for disposal. In addition, many of these properties have
been operated by third parties whose treatment and disposal or release of
hydrocarbons or other wastes was not under our control. These properties and
wastes disposed thereon may be subject to CERCLA, the Federal Resource
Conservation and Recovery Act, and analogous state laws. Under these laws, we
could be required to remove or remediate previously disposed wastes (including
wastes disposed of or released by prior owners or operators), to clean up
contaminated property (including contaminated groundwater) or to perform
remedial operations to prevent future contamination.

     We are obligated to perform remedial activities at the Albuquerque, New
Mexico South Valley Superfund Site. Although we are not named as a potentially
responsible party, we are performing remediation under a Non-Interference Order
issued by the Environmental Protection Agency under CERCLA to insure that
historical petroleum product contamination from our pipeline system does not
interfere with the cleanup being performed by potentially responsible parties at
this Superfund site. We have a soil vapor extraction system in place and closure
levels have almost been achieved. We expect to close our remediation efforts at
this site in the near future. We do not expect remedial obligations at this site
to have a material impact on our financial position or results of operations.
Ultramar Diamond Shamrock has agreed to indemnify us for these remedial
obligations.

     In October, 1999 the State of New Mexico filed a CERCLA Natural Resource
Damage claim naming certain subsidiaries of Ultramar Diamond Shamrock as
defendants in a lawsuit seeking $2 billion for natural resource damages
associated with the Albuquerque South Valley Superfund Site. Our subsidiaries'
involvement with this site is minimal compared to other defendants named in this
lawsuit. We expect this matter to be resolved by the main parties. Although we
are unable to estimate with certainty our ultimate liability in this case, we
believe that it will not have a material adverse impact on our financial
condition or results of operations. Ultramar Diamond Shamrock has agreed to
indemnify us for these remedial obligations.
                                       94
<PAGE>   101

  OSHA

     We are subject to the requirements of the Federal Occupational Safety and
Health Act and comparable state statutes that regulate the protection of the
health and safety of workers. In addition, the Federal Occupational Safety and
Health Act hazard communication standard requires that information be maintained
about hazardous materials used or produced in operations and that this
information be provided to employees, state and local government authorities and
citizens. We believe that our operations are in substantial compliance with the
Federal Occupational Safety and Health Act requirements, including general
industry standards, record keeping requirements, and monitoring of occupational
exposure to regulated substances.

  ENDANGERED SPECIES ACT

     The Endangered Species Act restricts activities that may affect endangered
species or their habitats. While some of our facilities are in areas that may be
designated as habitat for endangered species, we believe that we are in
substantial compliance with the Endangered Species Act. However, the discovery
of previously unidentified endangered species could cause us to incur additional
costs or operation restrictions or bans in the affected area.

  HAZARDOUS MATERIALS TRANSPORTATION REQUIREMENTS

     The Department of Transportation regulations affecting pipeline safety
require pipeline operators to implement measures designed to reduce the
environmental impact of crude oil discharge from onshore crude oil pipelines.
These regulations require operators to maintain comprehensive spill response
plans, including extensive spill response training for pipeline personnel. In
addition, the Department of Transportation regulations contain detailed
specifications for pipeline operation and maintenance. We believe our operations
are in substantial compliance with these regulations.

ENVIRONMENTAL REMEDIATION

     Contamination resulting from spills of crude oil and refined products is
not unusual within the petroleum pipeline industry. Historic spills along our
pipeline and storage operations as a result of past operations have resulted in
soil and groundwater contamination. Ultramar Diamond Shamrock is currently
addressing soil or groundwater contamination at 17 sites through assessment,
monitoring and remediation programs with oversight by the applicable state
agencies. Adequate accruals have been established to address all known remedial
obligations. The following is a summary of the significant current remediation
projects. In the aggregate, Ultramar Diamond Shamrock has estimated that the
total liability for remediating these 17 sites to be $2,507,000 although there
can be no guarantee that the actual remedial costs or associated liabilities
will not exceed this amount.

  AMARILLO, TEXAS


     At our Amarillo, Texas terminal, historical surface releases have resulted
in soil and on-site and off-site groundwater contamination. We are in the
process of performing refined product recovery operations and are continuing
delineation of the extent of groundwater contamination. Remediation efforts at
the Amarillo, Texas terminal are expected to continue for the next 10 years.


  CUERVO, NEW MEXICO

     A pump failure at the Cuervo, New Mexico pump station recently caused the
release of 494 barrels of turbine fuel. The release was immediately addressed
and all affected on-site and off-site soils were excavated and are being
remediated on-site on a bermed area. We are in the

                                       95
<PAGE>   102

process of investigating whether groundwater was affected. Remediation and
monitoring efforts at this site are expected to continue for the next five
years.

  CURRY RANCH SITE, NEW MEXICO

     A gasoline leak was discovered in 1995 on a pipeline right of way on the
Curry Ranch in New Mexico. Contaminated soils were excavated to five feet and an
air venting system was installed to address any remaining contamination.
However, further investigation may be required to determine whether groundwater
contamination exists. Remediation efforts are expected to continue for the next
three years and monitoring and soil sampling will be performed for the next five
years.

  ENDEE, NEW MEXICO


     A release of 2,496 barrels of turbine fuel occurred in 1992 on a pipeline
right of way near Endee, New Mexico. Both soil and groundwater were affected and
refined product recovery efforts are still being performed. Additional
assessments are required to fully delineate the extent of the contamination.
Clay soils in the area have inhibited recovery efforts. A high vacuum recovery
system may be required to properly remediate the site. Remediation and
monitoring efforts at this site are expected to continue for the next ten years.


  HARLINGEN, TEXAS

     Historic refined product contamination of soil and groundwater was
discovered at the Harlingen, Texas terminal site in the early 1990s. Product
recovery has been completed, and we are in the process of installing an air
sparging and soil venting remediation system. There is some potential that the
contamination has migrated offsite; however, the impact from offsite migration,
if any, is believed to be immaterial. Remediation efforts at the Harlingen,
Texas terminal are expected to continue for the next seven years.

  MATHIS, TEXAS

     A historical gasoline release was discovered on a pipeline right of way
near Mathis, Texas in 1995. Affected soils have been removed down to a depth of
six feet and a soil vent system has been installed. However, full delineation of
the contamination has not occurred and there is some evidence that groundwater
has been impacted which may require the installation of a vapor extraction or
other remedial system. Remediation and monitoring efforts are expected to
continue for the next five to ten years.

  PALO DURO, TEXAS

     A diesel fuel release was discovered in 1997 at the Palo Duro, Texas pump
station. Contaminated soils were excavated and a vent system was installed. The
full lateral and vertical extent of the contamination has not yet been
completed. There is some possibility of off-site migration near the facility
boundary. The depth of groundwater in this area minimizes the likelihood of any
major groundwater impacts from this release. Tight clay soils may require the
installation of a vapor extraction system. Remediation and monitoring efforts
are expected to continue for the next six years.

     Similar remedial efforts are ongoing at other sites including Abernathy,
Texas; Albuquerque, New Mexico; Corpus Christi, Texas; Denver, Colorado; Dixon,
Texas; El Paso, Texas; Laredo, Texas; T-4 Cattle Ranch, New Mexico; Tucumcari,
New Mexico; and Wynnewood, Oklahoma. However, based upon the extent of known or
suspected contamination and current remedial standards, we do not believe that
these remedial obligations will have a material impact on our financial position
or results of operations.

                                       96
<PAGE>   103

     We may experience future releases of crude oil or refined products into the
environment from our pipeline, terminalling and storage operations, or discover
releases that were previously unidentified. While we maintain an extensive
inspection program designed to prevent and, as applicable, to detect and address
these releases promptly, damages, and liabilities incurred due to any future
environmental releases from our assets may substantially affect our business.

TITLE TO PROPERTIES

     Substantially all of our pipelines are constructed on rights-of-way granted
by the apparent record owners of the property and in some instances these
rights-of-way are revocable at the election of the grantor. In many instances,
lands over which rights-of-way have been obtained are subject to prior liens
that have not been subordinated to the right-of-way grants. In some cases, not
all of the apparent record owners have joined in the right-of-way grants, but in
substantially all of these cases, signatures of the owners of majority interests
have been obtained. We have obtained permits from public authorities to cross
over or under, or to lay facilities in or along watercourses, county roads,
municipal streets, and state highways, and in some instances, these permits are
revocable at the election of the grantor. We have also obtained permits from
railroad companies to cross over or under lands or rights-of-way, many of which
are also revocable at the grantor's election. In some cases, property for
pipeline purposes was purchased in fee. All of the pump stations are located on
property owned in fee or property under long-term leases. In some states and
under some circumstances, we have the right of eminent domain to acquire
rights-of-way and lands necessary for our common carrier pipelines.


     Some of the leases, easements, rights-of-way, permits, and licenses
transferred to Shamrock Logistics Operations effective July 1, 2000 required the
consent of the grantor to transfer these rights, which in some instances is a
governmental entity. The general partner believes that it has obtained
sufficient third-party consents, permits, and authorizations for the transfer of
the assets necessary for us to operate our business in all material respects as
described in this prospectus. With respect to any consents, permits, or
authorizations that have not been obtained, the general partner believes that
these consents, permits, or authorizations will be obtained within a reasonable
period, or that the failure to obtain these consents, permits, or authorizations
will have no material adverse effect on the operation of our business.


     Our general partner believes that we have satisfactory title to all of our
assets. Although title to these properties is subject to encumbrances in some
cases, such as customary interests generally retained in connection with
acquisition of real property, liens related to environmental liabilities
associated with historical operations, liens for current taxes and other
burdens, and minor easements, restrictions, and other encumbrances to which the
underlying properties were subject at the time of acquisition by our predecessor
or us, our general partner believes that none of these burdens will materially
detract from the value of these properties or from our interest in these
properties or will materially interfere with their use in the operation of our
business.

EMPLOYEES


     To carry out our operations, Ultramar Diamond Shamrock employs
approximately 150 employees. The vast majority of these employees are not
represented by a union. There are employees that support Ultramar Diamond
Shamrock's crude oil gathering systems who are represented by unions. These
employees primarily support the crude gathering operations, but on some
occasions support crude trunkline operations associated with Shamrock Logistics
Operations.


                                       97
<PAGE>   104

LEGAL PROCEEDINGS

     We are a party to various legal actions that have arisen in the ordinary
course of our business. We do not believe that the resolution of these matters
will, in the aggregate, have a material adverse effect on our financial
condition or results of operations.

                                       98
<PAGE>   105

                                   MANAGEMENT

MANAGEMENT OF SHAMROCK LOGISTICS

     Shamrock Logistics GP, LLC, as the general partner of our general partner,
will manage our operations and activities on behalf of our general partner.
Unitholders will not directly or indirectly participate in our management or
operation. The general partner owes a fiduciary duty to the unitholders. The
general partner will be liable, as general partner, for all of our debts (to the
extent not paid from our assets), except for indebtedness or other obligations
that are made specifically non-recourse to it. However, whenever possible, the
general partner intends to incur indebtedness or other obligations that are
non-recourse.

     At least three members of the board of directors of Shamrock Logistics GP,
LLC, will serve on a conflicts committee to review specific matters that the
board believes may involve conflicts of interest. The conflicts committee will
determine if the resolution of the conflict of interest is fair and reasonable
to Shamrock Logistics. The members of the conflicts committee may not be
officers or employees of the general partner or directors, officers, or
employees of their affiliates. Any matters approved by the conflicts committee
will be conclusively deemed to be fair and reasonable to us, approved by all of
our partners, and not a breach by the general partner of any duties it may owe
Shamrock Logistics or our unitholders. In addition, the members of the conflicts
committee will also serve on an audit committee that will review our external
financial reporting, recommend engagement of our independent auditors and review
procedures for internal auditing and the adequacy of our internal accounting
controls. The members of the conflicts committee will also serve on the
compensation committee, which will oversee compensation decisions for the
officers of Shamrock Logistics GP, LLC as well as the compensation plans
described below.

     We are managed and operated by the directors and officers of Shamrock
Logistics GP, LLC on behalf of our general partner. Most of our operational
personnel will be employees of Ultramar Diamond Shamrock or its affiliates.


     Some officers of Shamrock Logistics GP, LLC may spend a substantial amount
of time managing the business and affairs of Ultramar Diamond Shamrock and its
other affiliates. These officers may face a conflict regarding the allocation of
their time between our business and the other business interests of Ultramar
Diamond Shamrock. Shamrock Logistics GP, LLC intends to cause its officers to
devote as much time to the management of our business and affairs as is
necessary for the proper conduct of our business and affairs. We expect that
Rodney Reese will devote at least 75% of his time to Shamrock Logistics and
Steven Blank will devote approximately half of his time to our operations. As
Director, Pipelines and Terminals of Ultramar Diamond Shamrock, Mr. Reese will
continue to oversee the operations of the logistics assets retained by Ultramar
Diamond Shamrock. Mr. Blank will continue to serve as Vice President and
Treasurer of Ultramar Diamond Shamrock. Curtis Anastasio, as our President, will
devote all of his time to our operations.


                                       99
<PAGE>   106

DIRECTORS AND EXECUTIVE OFFICERS OF SHAMROCK LOGISTICS GP, LLC

     The following table shows information for the directors and executive
officers of Shamrock Logistics GP, LLC. Executive officers and directors are
elected for one-year terms.


<TABLE>
<CAPTION>
NAME                                        AGE       POSITION WITH THE GENERAL PARTNER
----                                        ---       ---------------------------------
<S>                                         <C>   <C>
William R. Klesse.........................  53    Chairman of the Board
Curtis V. Anastasio.......................  44    President, Chief Executive Officer and
                                                    Director
Steven Blank..............................  45    Chief Accounting and Financial Officer,
                                                    Director
Rodney L. Reese...........................  50    Vice President -- Operations
Timothy J. Fretthold......................  50    Director
Robert S. Shapard.........................  45    Director
</TABLE>


     William R. Klesse has been the Chairman of the Board of Shamrock Logistics
GP, LLC since December 7, 1999. He was named Executive Vice President,
Operations of Ultramar Diamond Shamrock in January 1999. From the December 1996
merger of Ultramar Corporation and Diamond Shamrock, forming Ultramar Diamond
Shamrock, through December 1998, he served as Executive Vice President,
Refining, Product Supply and Logistics of Ultramar Diamond Shamrock. He served
as Executive Vice President of Diamond Shamrock from February 1995 through
November 1996. From June 1989 through January 1995, he was Senior Vice
President/Group Executive for Diamond Shamrock.

     Curtis V. Anastasio has been the President and a director of Shamrock
Logistics GP, LLC since December 7, 1999. On June 27, 2000, he was appointed
President and Chief Executive Officer. He served as Vice President, General
Counsel and Corporate Secretary of Ultramar Diamond Shamrock from July 31, 1997
until July 1, 2000. Mr. Anastasio also serves as Vice President of Ultramar
Diamond Shamrock. From December 1996 through July 1997, he was Vice President
and Deputy General Counsel of Ultramar Diamond Shamrock. During 1996, he was
Vice President-Marketing, Distribution and Development for Ultramar Energy Ltd.,
a subsidiary of Ultramar, with responsibility for wholesale marketing, product
supply and logistics, and development of Ultramar's business in New England.
From 1994 to 1996, he was Vice President -- Supply, Shipping & Trading for
Ultramar Canada, Inc., a subsidiary of Ultramar, with responsibility for
refinery production planning, raw materials supply, worldwide shipping, product
distribution and derivatives trading. He was General Counsel and Secretary of
Ultramar Canada 1992 to 1994, and served as Corporate Counsel of American
Ultramar Limited from 1988 until 1992.


     Steven Blank has been the Chief Accounting and Financial Officer and a
director of Shamrock Logistics GP, LLC since December 7, 1999. He has served as
Vice President and Treasurer of Ultramar Diamond Shamrock since December 1996.
Prior to that he was Vice President-Information Technology and Investor
Relations for Ultramar Corporation from March 1996 to December 1996, and before
that Director of Investor Relations for Ultramar Corporation from July 1992 to
March 1996.



     Rodney L. Reese has been the Vice President-Operations of Shamrock
Logistics GP, LLC since December 7, 1999. He has been employed for 19 years in
various pipeline engineering and operations positions by Ultramar Diamond
Shamrock and its predecessors, and has served as Director, Pipelines and
Terminals for Ultramar Diamond Shamrock since October 1999. Prior to that, among
other things, he was Director, Product Pipelines Operations from October 1997 to
October 1999; Regional Manager, Southern Division from May 1996 to October 1997;
and Manager of Operations, Northern Division prior to May 1996.


                                       100
<PAGE>   107

     Timothy J. Fretthold has served as a director of Shamrock Logistics GP, LLC
since December 7, 1999. He is the Executive Vice President and Chief
Administrative and Legal Officer of Ultramar Diamond Shamrock, Mr. Fretthold has
served as Executive Vice President and Chief Administrative Officer for Ultramar
Diamond Shamrock since the merger between Ultramar and Diamond Shamrock in
December 1996. Since August 1997, he has also served as Chief Legal Officer.
From June 1989 through November 1996, he served as Senior Vice President/Group
Executive and General Counsel of Diamond Shamrock.


     Robert S. Shapard has served as a director of Shamrock Logistics GP, LLC
since August 1, 2000. Mr. Shapard was appointed Executive Vice President and
Chief Financial Officer of Ultramar Diamond Shamrock on August 1, 2000. Prior to
that he was Chief Executive Officer of TXU Australia from September 1998 to
August 2000. Mr. Shapard has held various positions at subsidiaries of TXU
Corporation from June 1994 to September 1998. TXU is an electricity and natural
gas company with significant operations in the United States, Europe and
Australia.


ADMINISTRATIVE FEE AND REIMBURSEMENT OF EXPENSES


     We will pay Ultramar Diamond Shamrock and its affiliates an annual
administrative fee that will initially equal $5.2 million as a reimbursement of
the overhead and administrative expenses incurred by them on our behalf. Our
general partner, with approval and consent of the conflicts committee of its
general partner, will have the right to increase the annual administrative fee
by up to 1.5% each year, as further adjusted for inflation, during the initial
eight-year term of the services agreement between Shamrock Logistics Operations
and the general partner and may agree to further increases in connection with
expansions of our operations through the acquisition or construction of new
logistics assets that require additional management personnel. The
administrative services agreement will automatically renew for successive
two-year terms unless terminated by either party by giving one year prior
notice. We currently do not intend to establish administrative functions
independently of Ultramar Diamond Shamrock. Additionally, we will reimburse
Ultramar Diamond Shamrock and its affiliates for direct expenses they incur on
our behalf (for example, salaries). On a pro forma basis for 1999, we estimate
that the direct expenses to be reimbursed to Ultramar Diamond Shamrock and its
affiliates would have been $9.7 million. The payment of the annual
administrative fee and the reimbursement of other expenses could adversely
affect our ability to make cash distributions to our unitholders.


EXECUTIVE COMPENSATION


     Shamrock Logistics was formed in December 1999, and Shamrock Logistics GP,
LLC, the general partner of the General Partner, was formed in December 1999.
Accordingly, Shamrock Logistics GP, LLC paid no compensation to its directors
and officers with respect to the 1999 fiscal year. No obligations were accrued
in respect of management incentive or retirement benefits for the directors and
officers with respect to the 1999 fiscal year. Officers and employees of
Shamrock Logistics GP, LLC may participate in employee benefit plans and
arrangements sponsored by Shamrock Logistics GP, LLC, including plans which may
be established by the general partner or its affiliates in the future.


COMPENSATION OF DIRECTORS

     No additional remuneration will be paid to officers of Shamrock Logistics
GP, LLC or employees of Ultramar Diamond Shamrock or its affiliates who also
serve as directors. Shamrock Logistics GP, LLC anticipates that each independent
director will receive cash compensation for attending meetings of the board of
directors as well as committee meetings. In addition, each independent director
will be reimbursed for his out-of-pocket expenses in connection with attending
meetings of the board of directors or committees. Each director will be fully
indemnified by Shamrock Logistics for his actions associated with being a
director to the extent permitted under Delaware law.
                                       101
<PAGE>   108

EMPLOYMENT AGREEMENT


     Pursuant to his employment agreement with Ultramar Diamond Shamrock, Mr.
Anastasio serves as the President and Chief Executive Officer of Shamrock
Logistics GP, LLC as well as a Vice President of Ultramar Diamond Shamrock. Mr.
Anastasio is responsible for the overall operations of Shamrock Logistics. Under
the administrative services agreement, we have agreed to reimburse Ultramar
Diamond Shamrock for the compensation and benefits to be paid under this
agreement. The agreement with Mr. Anastasio, as entered into in 1996 and amended
in May and August of 2000, is filed as an exhibit to the registration statement
of which this prospectus is a part.



     The employment agreement automatically renews for a one-year term each
November unless Mr. Anastasio or Ultramar Diamond Shamrock gives notice of
termination three months prior to the annual renewal date. In addition, Mr.
Anastasio may terminate the agreement at any time. The employment agreement
includes confidentiality and nonsolicitation provisions. The employment
agreement also contains non-competition provisions with respect to Mr.
Anastasio's participation in the refining and marketing business during the term
of the agreement and for one year thereafter.



     The agreement, as amended, provides for an annual base salary of $255,400,
which the board of directors of Ultramar Diamond Shamrock may increase from time
to time. In addition, Mr. Anastasio is eligible to participate in any cash
incentive compensation or management incentive program or arrangement authorized
by the board of directors of Ultramar Diamond Shamrock.



     If Mr. Anastasio's employment is terminated by him for good reason, as that
term is defined in the agreement, which includes notice of non-renewal by
Ultramar Diamond Shamrock in accordance with the agreement, or by Ultramar
Diamond Shamrock other than for death, disability or cause, as defined in the
agreement, he will be entitled to a lump sum payment equal to three times the
sum of:


     - his highest annual base salary in effect during the preceding three
       years, and

     - the highest annual incentive compensation paid during the preceding three
       years.


     In addition, Mr. Anastasio will be entitled to:



     - a lump sum payment equal to three times the maximum contribution which
      could have been made on his behalf to any defined contribution retirement
      plans in which he participated during the three years prior to
      termination,



     - the continuation for three years of his employee welfare benefits or the
      present value of such benefits, and



     - three additional years of age and service credit under all employee
      benefit plans and in the case of any qualified defined benefit pension
      plan, a lump sum payment of the present value of the incremental benefit
      that would have resulted from the additional years of credit.



     Upon a change in control of Ultramar Diamond Shamrock, as defined in the
agreement, all cash benefits due under the agreement must be secured by an
irrevocable trust for the benefit of Mr. Anastasio and the definition of good
reason is also expanded, among other things, to include Mr. Anastasio's
termination of employment during the 30-day window period following the first
anniversary of the change in control. In addition, following a change in
control, if Mr. Anastasio terminates employment for good reason or he is
terminated by Ultramar Diamond Shamrock without cause, the non-competition
provision does not apply following termination and the confidentiality provision
applies only for three years following termination.


                                       102
<PAGE>   109

     Mr. Anastasio will also participate in the intermediate-term, long-term,
and short-term incentive plans described below with other members of management.
He will also be entitled to participate in the other employee benefit plans and
programs that Ultramar Diamond Shamrock or its affiliates provide for their
employees.

INTERMEDIATE-TERM INCENTIVE PLAN


     Shamrock Logistics GP, LLC intends to establish an intermediate-term
incentive plan for its officers and designated key employees of its affiliates
who perform services for us.



     The intermediate-term incentive plan will be administered by the
compensation committee of Shamrock Logistics GP, LLC's board of directors. The
intermediate-term incentive plan will be a performance unit plan extending over
a three-year performance cycle. A new three-year performance cycle begins each
year. Subject to the review and approval of the compensation committee, the
number of performance units granted to participants for each performance cycle
will be established at the beginning of each cycle and will be based on a target
compensation value and anticipated distribution payout. We will reimburse the
general partner for all payments made under the plan described below. Grants may
be made annually of performance units that entitle the recipient to receive an
equivalent amount of cash upon the vesting of the unit.


     The value of the payout of the performance units granted depends upon the
distributions paid to the common unitholders: fifty percent of the grant will be
paid out in cash after year two of the performance cycle, and the remaining
fifty percent will be paid out in cash after year three. However, if a grantee's
employment is terminated for any reason prior to the date of payment of any
performance units, those performance units will be automatically forfeited,
unless the compensation committee, in its sole discretion, provides otherwise.

     The grant of performance units under the intermediate-term incentive plan
is designed to serve as a means of incentive compensation for performance.

     Shamrock Logistics GP, LLC's board of directors, in its discretion, may
terminate the intermediate-term incentive plan at any time. Shamrock Logistics
GP, LLC's board of directors will also have the right to alter or amend the
intermediate-term incentive plan or any part of it from time to time, provided,
however, that no change in any outstanding grant may be made that would
materially impair the rights of the participant without the consent of the
affected participant. In addition, the general partner may, in its discretion,
establish additional compensation and incentive arrangements as it deems
appropriate to motivate and reward its employees. Shamrock Logistics GP, LLC
will be reimbursed for all compensation expenses incurred on our behalf.

LONG-TERM INCENTIVE PLAN


     Shamrock Logistics GP, LLC intends to adopt the long-term incentive plan
for directors of Shamrock Logistics GP, LLC and employees of affiliates of
Shamrock Logistics GP, LLC who perform services for us. The following summary of
the long-term incentive plan outlines its material provisions.


     The long-term incentive plan will be administered by the compensation
committee of Shamrock Logistics GP, LLC's board of directors. Annual grant
levels for designated employees will be recommended by the Chief Executive
Officer of Shamrock Logistics GP, LLC, subject to the review and approval of the
compensation committee. We will reimburse Shamrock Logistics GP, LLC for all
payments made under the programs described below. Grants may be made either of
restricted units, which are "phantom" units that entitle the grantee to receive
a common unit or an equivalent amount of cash upon the vesting of a phantom unit
or options to purchase common units. Common units to be delivered upon the
vesting of restricted units or to be issued upon exercise of a unit option will
be acquired by the general partner in the open market at a

                                       103
<PAGE>   110


price equal to the then-prevailing price on the principal national securities
exchange upon which the common units are then traded, or directly from Shamrock
Logistics, any affiliate or any other third party, including units newly issued
by us, or units already owned by the general partner, or any combination of the
foregoing. Shamrock Logistics GP, LLC will be entitled to reimbursement by us
for the cost incurred in acquiring these common units or in paying cash in lieu
of common units upon vesting of the restricted units. If we issue new common
units upon payment of the restricted units or unit options instead of purchasing
them, the total number of common units outstanding will increase. The aggregate
number of phantom units reserved for issuance under the long-term incentive plan
is 250,000. We anticipate making initial grants of up to 75,000 restricted
phantom units following the closing of the offering of the common units to the
members of senior management.



     Restricted Phantom Units. The compensation committee will determine the
conditions under which the restricted phantom units will vest. However, if a
grantee's employment is terminated for any reason prior to the vesting of any
restricted phantom units, those restricted units will be automatically
forfeited, unless otherwise provided in a written employment agreement or the
compensation committee, in its sole discretion, provides otherwise.



     The issuance of the common units under the restricted unit plan is designed
to serve as a means of incentive compensation for performance and not primarily
as an opportunity to participate in the equity appreciation in respect of the
common units. Therefore, no consideration will be payable by the plan
participants upon receipt of the common units, and we will receive no
remuneration for these units. The compensation committee, in its discretion, may
grant distribution equivalent rights with respect to restricted units.



     Unit Options. Initially, we will not make any grants of unit options. The
compensation committee may, in the future, determine to make option grants to
employees and directors containing the specific terms that they determine. When
granted, unit options will have an exercise price set by the compensation
committee that may be above, below or equal to the fair market value of a common
unit on the date of grant.


     Shamrock Logistics GP, LLC's board of directors, in its discretion, may
terminate the long-term incentive plan at any time with respect to any common
units for which a grant has not been made under the plan. Shamrock Logistics GP,
LLC's board of directors will also have the right to alter or amend the
long-term incentive plan or any part of it from time to time, subject to
unitholder approval as required by the exchange upon which the common units may
be listed at that time; provided, however, that no change in any outstanding
grant may be made that would materially impair the rights of the participant
without the consent of the affected participant. In addition, Shamrock Logistics
GP, LLC may, in its discretion, establish additional compensation and incentive
arrangements as it deems appropriate to motivate and reward its employees.
Shamrock Logistics GP, LLC will be reimbursed for all compensation expenses
incurred on our behalf.

SHORT-TERM INCENTIVE PLAN


     Shamrock Logistics GP, LLC also intends to adopt a short-term incentive
plan for management and other salaried employees of its affiliates who provide
services for us. The short-term incentive plan is designed to enhance our
financial or operational performance by rewarding management and salaried
employees with cash awards for achieving an annual financial performance
objective and operational performance objectives, such as safety and
environmental goals. The annual financial performance objective for each year
will be recommended by the president of Shamrock Logistics GP, LLC and approved
by the compensation committee of its board of directors prior to January 1 of
that year. The short-term incentive plan will be administered by the
compensation committee. Individual participants and payments each year will be
determined by and in the discretion of the compensation committee,


                                       104
<PAGE>   111

and Shamrock Logistics GP, LLC will be able to amend the plan at any time.
Shamrock Logistics GP, LLC will be entitled to reimbursement by us for payments
and costs incurred under the short-term incentive plan.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


     The following table sets forth the beneficial ownership of units of
Shamrock Logistics that will be issued upon the consummation of this offering
and the related transactions and held by beneficial owners of 5% or more of the
units. The general partner and Shamrock Logistics GP, LLC are owned through
Diamond Shamrock Refining and Marketing by Ultramar Diamond Shamrock. The
general partner and Shamrock Logistics GP, LLC are indirect wholly owned
subsidiaries of Ultramar Diamond Shamrock. We anticipate making initial grants
of up to a total of 75,000 restricted phantom units following the closing of the
offering to members of senior management, including the named executive
officers. Please read "Management -- Long-Term Incentive Plan." The address for
UDS Logistics, LLC is 6000 North Loop 1604 West, San Antonio, Texas 78249.


<TABLE>
<CAPTION>
                                              PERCENTAGE OF                  PERCENTAGE OF   PERCENTAGE OF
                                  COMMON         COMMON       SUBORDINATED   SUBORDINATED     TOTAL UNITS
                               UNITS TO BE     UNITS TO BE    UNITS TO BE     UNITS TO BE        TO BE
                               BENEFICIALLY   BENEFICIALLY    BENEFICIALLY   BENEFICIALLY    BENEFICIALLY
NAME OF BENEFICIAL OWNER          OWNED           OWNED          OWNED           OWNED           OWNED
------------------------       ------------   -------------   ------------   -------------   -------------
<S>                            <C>            <C>             <C>            <C>             <C>
Ultramar Diamond Shamrock....   4,399,322         52.4%        8,999,322          100%           76.2%
</TABLE>

     Ultramar Diamond Shamrock may be deemed to beneficially own the common
units and the subordinated units held by UDS Logistics, LLC as a result of
Ultramar Diamond Shamrock's indirect ownership of all of the member interests in
UDS Logistics, LLC.

                                       105
<PAGE>   112

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     After this offering, UDS Logistics, LLC will own 4,399,322 common units and
8,999,322 subordinated units representing an aggregate 75.5% limited partner
interest in us and Shamrock Logistics Operations. In addition, the general
partner will own an aggregate 2% general partner interest in us and Shamrock
Logistics Operations. The general partner's ability, as general partner, to
manage and operate Shamrock Logistics and UDS Logistics, LLC's ownership of an
aggregate 75.5% limited partner interest in us and Shamrock Logistics
Operations, effectively gives the general partner the ability to veto some
actions of Shamrock Logistics and to control the management of Shamrock
Logistics.


DISTRIBUTIONS AND PAYMENTS TO THE GENERAL PARTNER AND ITS AFFILIATES

     The following table summarizes the distributions and payments to be made by
us to our general partner and its affiliates in connection with the formation,
ongoing operation, and liquidation of Shamrock Logistics. These distributions
and payments were determined by and among affiliated entities and, consequently,
are not the result of arm's length negotiations.

                                FORMATION STAGE

The consideration received by
  our general partner and its
  affiliates for the transfer
  of the Ultramar Diamond
  Shamrock logistics
  business...................  - 4,399,322 common units;

                               - 8,999,322 subordinated units;

                               - an aggregate 2% general partner interest in
                                 Shamrock Logistics and Shamrock Logistics
                                 Operations on a combined basis;

                               - the incentive distribution rights; and

                               - $128.2 million of the net proceeds of the
                                 offering of the common units and the borrowings
                                 under the credit facility.

                               OPERATIONAL STAGE

Distributions of available
cash to our general
  partner....................  We will generally make cash distributions 98% to
                               the unitholders, including to UDS Logistics, LLC
                               as holder of 4,399,322 common units and all of
                               the subordinated units, and 2% to the general
                               partner. In addition, if distributions exceed the
                               minimum quarterly distribution and other higher
                               target levels, our general partner will be
                               entitled to increasing percentages of the
                               distributions, up to 50% of the distributions
                               above the highest target level.

                               Assuming we have sufficient available cash to pay
                               the full minimum quarterly distribution on all of
                               our outstanding units for four quarters, our
                               general partner would receive distributions of
                               approximately $0.9 million on the combined 2%
                               general partner interest. UDS Logistics, LLC
                               would receive an aggregate annual distribution of
                               approximately $32.2 million on its common units
                               and the subordinated units.

                                       106
<PAGE>   113


Payments to our general
partner and its affiliates...  We will pay Ultramar Diamond Shamrock and its
                               affiliates an annual administrative fee that will
                               initially equal $5.2 million as a reimbursement
                               of the overhead and administrative expenses
                               incurred by them on our behalf, including legal,
                               accounting, treasury, information technology and
                               other centralized corporate functions.
                               Additionally, we will reimburse Ultramar Diamond
                               Shamrock and its affiliates for direct expenses
                               they incur on our behalf such as salaries, wages
                               and employee benefit costs, including health
                               insurance, pension and retiree medical. On a pro
                               forma basis for 1999, we estimate that the direct
                               expenses to be reimbursed to Ultramar Diamond
                               Shamrock and its affiliates would have been
                               approximately $9.7 million.


Withdrawal or removal of our
  general partner............  If the general partner withdraws or is removed,
                               its general partner interest and its incentive
                               distribution rights will either be sold to the
                               new general partner for cash or converted into
                               common units, in each case for an amount equal to
                               the fair market value of those interests. Please
                               read "The Partnership Agreement -- Withdrawal or
                               Removal of the General Partner."

                               LIQUIDATION STAGE

Liquidation..................  Upon our liquidation, the partners, including our
                               general partner, will be entitled to receive
                               liquidating distributions according to their
                               particular capital account balances.

AGREEMENTS GOVERNING THE TRANSACTIONS

     Shamrock Logistics, the general partner, Shamrock Logistics GP, LLC,
Shamrock Logistics Operations and other parties have entered into or will enter
into the various documents and agreements that will effect transactions,
including the vesting of assets in, and the assumption of liabilities by, the
subsidiaries, and the application of the proceeds of this offering. These
agreements will not be the result of arm's-length negotiations, and they, or any
of the transactions which they provide for, may be effected on terms at least as
favorable to the parties to these agreements as they could have been obtained
from unaffiliated third parties. All of the transaction expenses incurred in
connection with these transactions, including the expenses associated with
vesting assets into our subsidiaries, will be paid from the proceeds of this
offering. For a detailed description of the expenses payable to Ultramar Diamond
Shamrock by Shamrock Logistics, please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Related Party Transactions."

OMNIBUS AGREEMENT


     Concurrent with the closing of the offering of the common units, we will
enter into an agreement with Ultramar Diamond Shamrock and the general partner,
which will govern potential competition among us and the other parties to the
agreement. Ultramar Diamond Shamrock will agree, and will cause its controlled
affiliates to agree, for so long as Ultramar Diamond Shamrock or its affiliates
control the general partner, not to engage in, whether by acquisition or
otherwise, the business of transporting crude oil or refined products including
petrochemicals or operating


                                       107
<PAGE>   114


crude oil storage or refined products terminalling assets in the United States.
This restriction will not apply to:


     - any business retained by Ultramar Diamond Shamrock at the closing of this
       offering;

     - any further development of the Diamond-Koch Joint Venture petrochemicals
       business;

     - any business with a fair market value of less than $10 million;

     - any business acquired by Ultramar Diamond Shamrock that constitutes less
       than 50% of the fair market value of a larger acquisition; provided we
       have been offered and declined (with the concurrence of the conflicts
       committee) the opportunity to purchase this business;

     - the Wichita Falls crude oil pipeline, the Nuevo Laredo refined product
       pipeline and the Ringgold crude oil storage facility should we decline to
       exercise our option to purchase them; or

     - any newly constructed logistics assets that we have not offered to
       purchase within one year of construction at fair market value, not to
       exceed 105% of the cost to Ultramar Diamond Shamrock.

     The omnibus agreement will also provide for a ten-year environmental
indemnity by Ultramar Diamond Shamrock as described under
"Business -- Environmental Regulation -- General."


     In addition, effective July 1, 2000 the general partner and Ultramar
Diamond Shamrock will enter into an eight-year administrative services agreement
under which Ultramar Diamond Shamrock and its affiliates agree to provide
general and administrative services to the general partner. We will pay Ultramar
Diamond Shamrock and its affiliates an annual administrative fee that will
initially equal $5.2 million. See "Management -- Administrative Fee and
Reimbursement of Expenses."


     Further, concurrently with the closing of this offering, we will enter into
a seven-year pipelines and terminal usage agreement with Ultramar Diamond
Shamrock, as described under "Business -- Our Relationship with Ultramar Diamond
Shamrock."

                                       108
<PAGE>   115

              CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITIES

CONFLICTS OF INTEREST

     Conflicts of interest exist and may arise in the future as a result of the
relationships between the general partner and its affiliates, on the one hand,
and Shamrock Logistics and its limited partners, on the other hand. The
directors and officers of the general partner's general partner, Shamrock
Logistics GP, LLC, have fiduciary duties to manage the general partner in a
manner beneficial to its partners. At the same time, the general partner has a
fiduciary duty to manage Shamrock Logistics in a manner beneficial to Shamrock
Logistics and the unitholders.


     The partnership agreement contains provisions that allow the general
partner to take into account the interests of parties in addition to Shamrock
Logistics in resolving conflicts of interest. In effect, these provisions limit
the general partner's fiduciary duties to the unitholders. The partnership
agreement also restricts the remedies available to unitholders for actions taken
that might, without those limitations, constitute breaches of fiduciary duty.
Whenever a conflict arises between the general partner or its affiliates, on the
one hand, and Shamrock Logistics or any other partner, on the other hand, the
general partner will resolve that conflict. A conflicts committee of the board
of directors of Shamrock Logistics GP, LLC will, at the request of the general
partner, review conflicts of interest. The general partner will not be in breach
of its obligations under the partnership agreement or its duties to Shamrock
Logistics or the unitholders if the resolution of the conflict is considered to
be fair and reasonable to Shamrock Logistics. Any resolution is considered to be
fair and reasonable to Shamrock Logistics if that resolution is:


     - approved by the conflicts committee, although no party is obligated to
       seek approval and the general partner may adopt a resolution or course of
       action that has not received approval;

     - on terms no less favorable to Shamrock Logistics than those generally
       being provided to or available from unrelated third parties; or

     - fair to Shamrock Logistics, taking into account the totality of the
       relationships between the parties involved, including other transactions
       that may be particularly favorable or advantageous to Shamrock Logistics.

     In resolving a conflict, the general partner may, unless the resolution is
specifically provided for in the partnership agreement, consider:

     - the relative interests of the parties involved in the conflict or
       affected by the action;

     - any customary or accepted industry practices or historical dealings with
       a particular person or entity; and

     - generally accepted accounting practices or principles and other factors
       it considers relevant, if applicable.

     Conflicts of interest could arise in the situations described below, among
others.

  ACTIONS TAKEN BY THE GENERAL PARTNER MAY AFFECT THE AMOUNT OF CASH AVAILABLE
  FOR DISTRIBUTION TO UNITHOLDERS OR ACCELERATE THE RIGHT TO CONVERT
  SUBORDINATED UNITS.

     The amount of cash that is available for distribution to unitholders is
affected by decisions of the general partner regarding:

     - amount and timing of asset purchases and sales;

     - cash expenditures;

     - borrowings;
                                       109
<PAGE>   116

     - issuance of additional units; and


     - the creation, decrease or increase of reserves in any quarter.


     In addition, borrowings by Shamrock Logistics do not constitute a breach of
any duty owed by the general partner to the unitholders, including borrowings
that have the purpose or effect of:

     - enabling UDS Logistics, LLC to receive distributions on any subordinated
       units held by it or enabling the general partner to receive distributions
       or the incentive distribution rights; or

     - accelerating the expiration of the subordination period.

     The partnership agreement provides that Shamrock Logistics may borrow funds
from the general partner and its affiliates. The general partner and its
affiliates may not borrow funds from Shamrock Logistics.

  WE WILL NOT HAVE ANY EMPLOYEES AND WILL RELY ON THE EMPLOYEES OF THE GENERAL
  PARTNER AND ITS AFFILIATES.


     We will not have any officers or employees and will rely solely on officers
and employees of Shamrock Logistics GP, LLC, and its affiliates. Affiliates of
the general partner will conduct businesses and activities of their own in which
we will have no economic interest. If these separate activities are
significantly greater than our activities, there could be material competition
for the time and effort of the officers and employees who provide services to
the general partner and Shamrock Logistics GP, LLC. The officers of Shamrock
Logistics GP, LLC, with the exception of its president and chief executive
officer, will not be required to work full time on our affairs. These officers
may devote significant time to the affairs of Ultramar Diamond Shamrock or its
affiliates and will be compensated by these affiliates for the services rendered
to them.


  SHAMROCK LOGISTICS WILL REIMBURSE ULTRAMAR DIAMOND SHAMROCK AND ITS AFFILIATES
  FOR EXPENSES AND COSTS INCURRED ON OUR BEHALF.

     Shamrock Logistics will reimburse Ultramar Diamond Shamrock and its
affiliates for costs incurred in managing and operating Shamrock Logistics. The
partnership agreement provides that the general partner will determine the
expenses that are allocable to Shamrock Logistics in any reasonable manner
determined by the general partner in its sole discretion. For a more detailed
description of the administrative fees and expense reimbursements we will be
obligated to pay our general partner, please read "Management -- Administrative
Fee and Reimbursement of Expenses."

  THE GENERAL PARTNER INTENDS TO LIMIT ITS LIABILITY REGARDING SHAMROCK
  LOGISTICS' OBLIGATIONS.

     The general partner intends to limit its liability under contractual
arrangements so that the other party has recourse only to all or particular
assets of Shamrock Logistics, and not against the general partner or its assets.
The partnership agreement provides that any action taken by the general partner
to limit its liability is not a breach of the general partner's fiduciary
duties, even if we could have obtained more favorable terms without the
limitation on liability.

  COMMON UNITHOLDERS WILL HAVE NO RIGHT TO ENFORCE OBLIGATIONS OF THE GENERAL
  PARTNER AND ITS AFFILIATES UNDER AGREEMENTS WITH SHAMROCK LOGISTICS.

     Any agreements between Shamrock Logistics on the one hand, and the general
partner and its affiliates, on the other, will not grant to the unitholders,
separate and apart from Shamrock Logistics, the right to enforce the obligations
of the general partner and its affiliates in favor of Shamrock Logistics.
Therefore, the general partner, in its capacity as the general partner of
Shamrock Logistics, will be primarily responsible for enforcing these
obligations.
                                       110
<PAGE>   117

  CONTRACTS BETWEEN SHAMROCK LOGISTICS, ON THE ONE HAND, AND THE GENERAL PARTNER
  AND ITS AFFILIATES, ON THE OTHER, WILL NOT BE THE RESULT OF ARM'S-LENGTH
  NEGOTIATIONS.

     The partnership agreement allows the general partner to pay itself or its
affiliates for any services rendered, provided these services are rendered on
terms that are fair and reasonable to us. The general partner may also enter
into additional contractual arrangements with any of its affiliates on our
behalf. Neither the partnership agreement nor any of the other agreements,
contracts and arrangements between Shamrock Logistics, on the one hand, and the
general partner and its affiliates, on the other, are or will be the result of
arm's-length negotiations.

     All of these transactions entered into after the sale of the common units
offered in this offering are to be on terms which are fair and reasonable to
Shamrock Logistics.

     The general partner and its affiliates will have no obligation to permit us
to use any facilities or assets of the general partner and its affiliates,
except as may be provided in contracts entered into specifically dealing with
that use. The general partner and its affiliates will not have any obligation to
enter into any contracts of this kind.

  COMMON UNITS ARE SUBJECT TO THE GENERAL PARTNER'S LIMITED CALL RIGHT.

     The general partner may exercise its right to call and purchase common
units as provided in the partnership agreement or assign this right to one of
its affiliates or to us. The general partner may use its own discretion, free of
fiduciary duty restrictions, in determining whether to exercise this right. As a
consequence, a common unitholder may have his common units purchased from him at
an undesirable time or price. For a description of this right, please read "The
Partnership Agreement -- Limited Call Right."

  SHAMROCK LOGISTICS MAY CHOOSE NOT TO RETAIN SEPARATE COUNSEL FOR ITSELF OR FOR
  THE HOLDERS OF COMMON UNITS.

     The attorneys, independent auditors and others who have performed services
for us regarding the offering have been retained by the general partner and may
continue to be retained by the general partner after the offering. Attorneys,
independent auditors and others who will perform services for us in the future
will be selected by the general partner or the conflicts committee and may also
perform services for the general partner and its affiliates. The general partner
may retain separate counsel for Shamrock Logistics or the holders of common
units in the event of a conflict of interest arising between the general partner
and its affiliates, on the one hand, and Shamrock Logistics or the holders of
common units, on the other, after the sale of the common units offered in this
prospectus, depending on the nature of the conflict. The general partner does
not intend to do so in most cases.

  THE GENERAL PARTNER'S AFFILIATES MAY COMPETE WITH SHAMROCK LOGISTICS.


     Ultramar Diamond Shamrock will agree, and will cause its controlled
affiliates to agree, for so long as Ultramar Diamond Shamrock or its affiliates
control the general partner, not to engage in, whether by acquisition or
otherwise, the business of transporting crude oil or refined products including
operating crude oil storage or refined products terminalling assets in the
United States. The restriction will not apply to:


     - any business retained by Ultramar Diamond Shamrock at the closing of this
       offering;

     - any further development of the Diamond-Koch Joint Venture petrochemicals
       business;

     - any business with a fair market value of less than $10 million;

     - any business acquired by Ultramar Diamond Shamrock that constitutes less
       than 50% of the fair market value of a larger acquisition; provided we
       have been offered and declined

                                       111
<PAGE>   118

       (with the concurrence of the conflicts committee) the opportunity to
       purchase this business;

     - the Wichita Falls crude oil pipeline, the Nuevo Laredo refined product
       pipeline and the Ringgold crude oil storage facility should we decline to
       exercise our option to purchase them; or

     - any newly constructed logistics assets that we have not offered to
       purchase within one year of construction at fair market value, not to
       exceed 105% of the cost to Ultramar Diamond Shamrock.


       THE GENERAL PARTNER HAS THE AUTHORITY TO DECREASE OR INCREASE OUR TARIFF
       RATES AND TERMINAL FEES.



     Ultramar Diamond Shamrock, as the primary shipper in our pipelines, has an
economic incentive to seek lower tariff rates for our pipelines and lower
terminalling fees. Although Ultramar Diamond Shamrock has agreed not to
challenge our rates for a seven-year period, we may decrease our tariff rates
and terminal fees voluntarily at any time in instances where we need to respond
to competitive pressure or where increased volumes warrant a decrease of tariff
rates or terminalling fees. The general partner has the authority to determine
if and to what extent tariff rates and terminal fees will be decreased. The
general partner also has the authority to determine whether we seek an increase
in our tariff rates and terminal fees, and if so, the size of the increase.
However, any proposals by our general partner to reduce our tariff rates or
terminal fees will be submitted to our conflicts committee for their approval.


FIDUCIARY DUTIES OWED TO UNITHOLDERS BY THE GENERAL PARTNER ARE PRESCRIBED BY
LAW AND THE PARTNERSHIP AGREEMENT.

     The general partner is accountable to us and our unitholders as a
fiduciary. Fiduciary duties are generally considered to include an obligation to
act with due care and loyalty. The duty of care, in the absence of a provision
in a partnership agreement providing otherwise, generally requires a general
partner to act for the partnership in the same manner as a prudent person would
act on his own behalf. The duty of loyalty, in the absence of a provision in a
partnership agreement providing otherwise, generally prohibits a general partner
from taking any action or engaging in any transaction where a conflict of
interest is present. The Delaware Act generally provides that a limited partner
may institute legal action on a partnership's behalf to recover damages from a
third party where a general partner has refused to institute the action or where
an effort to cause a general partner to do so is not likely to succeed. In
addition, the statutory or case law of some jurisdictions may permit a limited
partner to institute legal action on behalf of himself and all other similarly
situated limited partners to recover damages from a general partner for
violations of its fiduciary duties to the limited partners.

     The Delaware Act provides that Delaware limited partnerships may, in their
partnership agreements, restrict or expand the fiduciary duties owed by general
partner to limited partners and the partnership.

     In order to induce the general partner to manage the business of Shamrock
Logistics, the partnership agreement contains various provisions restricting the
fiduciary duties that might otherwise be owed by the general partner. The
following is a summary of the material restrictions of the fiduciary duties owed
by the general partner to the limited partners:

     The partnership agreement contains provisions that waive or consent to
conduct by the general partner and its affiliates that might otherwise raise
issues as to compliance with fiduciary duties or applicable law. For example,
the partnership agreement permits the general partner to make a number of
decisions in its "sole discretion," such as:

     - the incurrence of indebtedness;

                                       112
<PAGE>   119

     - the acquisition or disposition of assets, except for the disposition of
       all of the assets of the partnership which requires unitholder approval;

     - the negotiation of any contracts;

     - the disposition of partnership cash; and

     - the purchase or disposition of partnership securities, other than
       issuance of securities senior to the common units and the issuance of
       additional common units in excess of 4,199,661 during the subordination
       period without the approval of a majority of the unitholders if the
       issuance is not in connection with a transaction resulting in the
       increase in available cash per unit.

     Sole discretion entitles the general partner to consider only the interests
and factors that it desires and it shall have no duty or obligation to give any
consideration to any interest of, or factors affecting, Shamrock Logistics, its
affiliates or any limited partner. Other provisions of the partnership agreement
provide that the general partner's actions must be made in its reasonable
discretion.

     The partnership agreement generally provides that affiliated transactions
and resolutions of conflicts of interest not involving a required vote of
unitholders must be "fair and reasonable" to Shamrock Logistics under the
factors previously set forth. In determining whether a transaction or resolution
is "fair and reasonable" the general partner may consider interests of all
parties involved, including its own. Unless the general partner has acted in bad
faith, the action taken by the general partner shall not constitute a breach of
its fiduciary duty.

     In addition to the other more specific provisions limiting the obligations
of the general partner, the partnership agreement further provides that the
general partner and the officers and directors of Shamrock Logistics GP, LLC
will not be liable for monetary damages to Shamrock Logistics, the limited
partners or assignees for errors of judgment or for any acts or omissions if the
general partner and those other persons acted in good faith.

     In order to become a limited partner of Shamrock Logistics, a common
unitholder is required to agree to be bound by the provisions in the partnership
agreement, including the provisions discussed above. This is in accordance with
the policy of the Delaware Act favoring the principle of freedom of contract and
the enforceability of partnership agreements. The failure of a limited partner
or assignee to sign a partnership agreement does not render the partnership
agreement unenforceable against that person.

     Shamrock Logistics is required to indemnify the general partner and
Shamrock Logistics GP, LLC and their officers, directors, employees, affiliates,
partners, members, agents and trustees, to the fullest extent permitted by law,
against liabilities, costs and expenses incurred by the general partner and
Shamrock Logistics GP, LLC or these other persons. This indemnification is
required if the general partner or these persons acted in good faith and in a
manner they reasonably believed to be in, or (in the case of a person other than
the general partner) not opposed to, the best interests of Shamrock Logistics.
Indemnification is required for criminal proceedings if the general partner and
Shamrock Logistics GP, LLC or these other persons had no reasonable cause to
believe their conduct was unlawful. Thus, the general partner and Shamrock
Logistics GP, LLC could be indemnified for their negligent acts if they met
these requirements concerning good faith and the best interests of Shamrock
Logistics. Please read "The Partnership Agreement -- Indemnification."

                                       113
<PAGE>   120

                        DESCRIPTION OF THE COMMON UNITS

     Once this offering is complete, the common units will be registered under
the Exchange Act and Shamrock Logistics will be subject to the reporting and
other requirements of the Exchange Act. Shamrock Logistics will be required to
file periodic reports containing financial and other information with the
Securities and Exchange Commission.

THE UNITS

     The common units and the subordinated units represent limited partner
interests in Shamrock Logistics. The holders of units are entitled to
participate in partnership distributions and exercise the rights and privileges
available to limited partners under the Shamrock Logistics partnership
agreement. For a description of the relative rights and preferences of holders
of common units and subordinated units in and to partnership distributions,
please read "Cash Distribution Policy" and "Description of the Subordinated
Units." For a description of the rights and privileges of limited partners under
the Shamrock Logistics partnership agreement, please read "The Partnership
Agreement."

TRANSFER AGENT AND REGISTRAR

  DUTIES

     Chase Mellon Shareholder Services LLC will serve as registrar and transfer
agent for the common units and will receive a fee from Shamrock Logistics. All
fees charged by the transfer agent for transfers of common units will be borne
by Shamrock Logistics, except for the following, which will be paid by
unitholders:

     - surety bond premiums to replace lost or stolen certificates, taxes and
       other governmental charges;

     - special charges for services requested by a holder of a common unit; and

     - other similar fees or charges.

     There will be no charge to holders for disbursements of Shamrock Logistics
cash distributions. Shamrock Logistics will indemnify the transfer agent, its
agents and each of their shareholders, directors, officers and employees against
all claims and losses that may arise out of acts performed or omitted for its
activities in that capacity, except for any liability due to any gross
negligence or intentional misconduct of the indemnified person or entity.

  RESIGNATION OR REMOVAL

     The transfer agent may at any time resign, by notice to Shamrock Logistics,
or be removed by Shamrock Logistics. The resignation or removal of the transfer
agent will become effective upon the appointment by Shamrock Logistics of a
successor transfer agent and registrar and its acceptance of the appointment. If
no successor has been appointed and has accepted the appointment within 30 days
after notice of the resignation or removal, the general partner is authorized to
act as the transfer agent and registrar until a successor is appointed.

TRANSFER OF COMMON UNITS

     The transfer of the common units to persons that purchase directly from the
underwriters will be accomplished through the completion, execution, and
delivery of a transfer application by the investor. Any later transfers of a
common unit will not be recorded by the transfer agent or recognized by Shamrock
Logistics unless the transferee executes and delivers a transfer application.
The form of transfer application is set forth as Appendix B to this prospectus
and is

                                       114
<PAGE>   121

also set forth on the reverse side of the certificates representing units. By
executing and delivering a transfer application, the transferee of common units:

          (1) becomes the record holder of the common units and is an assignee
     until admitted into Shamrock Logistics as a substituted limited partner;

          (2) automatically requests admission as a substituted limited partner
     in Shamrock Logistics;

          (3) agrees to be bound by the terms and conditions of, and executes,
     the Shamrock Logistics partnership agreement;

          (4) represents that the transferee has the capacity, power and
     authority to enter into the partnership agreement;

          (5) grants powers of attorney to officers of Shamrock Logistics GP,
     LLC and any liquidator of Shamrock Logistics as specified in the
     partnership agreement; and

          (6) makes the consents and waivers contained in the partnership
     agreement.

     An assignee will become a substituted limited partner of Shamrock Logistics
for the transferred common units upon the consent of the general partner and the
recording of the name of the assignee on the books and records of Shamrock
Logistics. The general partner may withhold its consent in its sole discretion.

     Transfer applications may be completed, executed and delivered by a
transferee's broker, agent or nominee. Shamrock Logistics is entitled to treat
the nominee holder of a common unit as the absolute owner. In that case, the
beneficial owners' rights are limited solely to those that it has against the
nominee holder as a result of any agreement between the beneficial owner and the
nominee holder.

     Common units are securities and are transferable according to the laws
governing transfer of securities. In addition to other rights acquired upon
transfer, the transferor gives the transferee the right to request admission as
a substituted limited partner in Shamrock Logistics for the transferred common
units. A purchaser or transferee of common units who does not execute and
deliver a transfer application obtains only:

     - the right to assign the common unit to a purchaser or other transferee;
       and

     - the right to transfer the right to seek admission as a substituted
       limited partner in Shamrock Logistics for the transferred common units.

     Therefore, a purchaser or transferee of common units who does not execute
and deliver a transfer application:

     - will not receive cash distributions or federal income tax allocations,
       unless the common units are held in a nominee or "street name" account
       and the nominee or broker has executed and delivered a transfer
       application; and

     - may not receive some federal income tax information or reports furnished
       to record holders of common units.

     The transferor of common units will have a duty to provide the transferee
with all information that may be necessary to transfer the common units. The
transferor will not have a duty to ensure the execution of the transfer
application by the transferee and will have no liability or responsibility if
the transferee neglects or chooses not to execute and forward the transfer
application to the transfer agent. Please read "The Partnership
Agreement -- Status as Limited Partner or Assignee."

                                       115
<PAGE>   122

     Until a common unit has been transferred on the books of Shamrock
Logistics, Shamrock Logistics and the transfer agent, notwithstanding any notice
to the contrary, may treat the record holder of the unit as the absolute owner
for all purposes, except as otherwise required by law or stock exchange
regulations.

                                       116
<PAGE>   123

                     DESCRIPTION OF THE SUBORDINATED UNITS

     The subordinated units are a separate class of limited partner interests in
Shamrock Logistics, and the rights of holders to participate in distributions to
partners differ from, and are subordinated to, the rights of the holders of
common units. For any given quarter, any available cash will first be
distributed to the general partner and to the holders of common units, until the
holders of common units have received the minimum quarterly distribution plus
any arrearages, and then will be distributed to the general partner and holders
of subordinated units, until the holders of subordinated units have received the
minimum quarterly distribution. Please read "Cash Distribution Policy."

CONVERSION OF SUBORDINATED UNITS

     As described in more detail under "Cash Distribution
Policy -- Subordination Period", the subordination period will generally extend
from the closing of this offering until the first day of any quarter beginning
after December 31, 2005 that we meet certain financial tests.

     Upon expiration of the subordination period, all subordinated units will
convert into common units on a one-for-one basis and will then participate, pro
rata, with the other common units in distributions of available cash. In
addition, if the general partner is removed as general partner of Shamrock
Logistics under circumstances where cause does not exist and units held by the
general partner and its affiliates are not voted in favor of that removal:

          (1) the subordination period will end and all outstanding subordinated
     units will immediately convert into common units on a one-for-one basis;

          (2) any existing arrearages in payment of the minimum quarterly
     distribution on the common units will be extinguished; and

          (3) the general partner will have the right to convert its general
     partner interest and its incentive distribution rights into common units or
     to receive cash in exchange for those interests at fair market value as
     determined by agreement between the general partner and its successor or by
     an independent investment banking firm or other independent expert.

LIMITED VOTING RIGHTS

     Holders of subordinated units will sometimes vote as a single class
together with the common units and sometimes vote as a class separate from the
holders of common units and, as in the case of holders of common units, will
have very limited voting rights. During the subordination period, common units
and subordinated units each vote separately as a class on the following matters:

          (1) a sale or exchange of all or substantially all of our assets;

          (2) the election of a successor general partner in connection with the
     removal of the general partner;

          (3) a dissolution or reconstitution of Shamrock Logistics;

          (4) a merger of Shamrock Logistics;

          (5) issuance of limited partner interests in some circumstances; and

          (6) some amendments to the partnership agreement, including any
     amendment that would cause Shamrock Logistics to be treated as an
     association taxable as a corporation.

                                       117
<PAGE>   124

     The subordinated units are not entitled to vote on approval of the
withdrawal of the general partner or the transfer by the general partner of its
general partner interest or incentive distribution rights under some
circumstances. Removal of the general partner requires:

     - a two-thirds vote of all outstanding units voting as a single class; and

     - the election of a successor general partner by the holders of a majority
       of the outstanding common units and subordinated units, voting as
       separate classes.

     Under the partnership agreement, the general partner generally will be
permitted to effect amendments to the partnership agreement that do not
materially adversely affect unitholders without the approval of any unitholders.

DISTRIBUTIONS UPON LIQUIDATION

     If Shamrock Logistics liquidates during the subordination period, in some
circumstances holders of outstanding common units will be entitled to receive
more per unit in liquidating distributions than holders of outstanding
subordinated units. The per unit difference will be dependent upon the amount of
gain or loss recognized by Shamrock Logistics in liquidating its assets.
Following conversion of the subordinated units into common units, all units will
be treated the same upon liquidation of Shamrock Logistics.

                                       118
<PAGE>   125

                           THE PARTNERSHIP AGREEMENT

     The following is a summary of the material provisions of the Shamrock
Logistics partnership agreement. The form of the partnership agreement is
included in this prospectus as Appendix A. The form of partnership agreement of
the operating partnership is included as an exhibit to the registration
statement of which this prospectus is a part. Shamrock Logistics will provide
prospective investors with a copy of the form of this agreement upon request at
no charge. Unless the context otherwise requires, references in this prospectus
to the "partnership agreement" constitute references to the partnership
agreement of Shamrock Logistics and the partnership agreement of the operating
partnership.

     The following provisions of the partnership agreement are summarized
elsewhere in this prospectus.

     - With regard to the transfer of common units, please read "Description of
       the Common Units -- Transfer of Common Units."

     - With regard to distributions of available cash, please read "Cash
       Distribution Policy."

     - With regard to allocations of taxable income and taxable loss, please
       read "Tax Considerations."

ORGANIZATION AND DURATION

     Shamrock Logistics was organized in December 1999, and will have a
perpetual existence.

PURPOSE

     Our purpose under the partnership agreement is limited to serving as the
limited partner of the operating partnership and engaging in any business
activities that may be engaged in by the partnership or that are approved by the
general partner. The partnership agreement of Shamrock Logistics Operations
provides that Shamrock Logistics Operations may, directly or indirectly, engage
in:

          (1) its operations as conducted immediately before this offering;

          (2) any other activity approved by the general partner but only to the
              extent that the general partner reasonably determines that, as of
              the date of the acquisition or commencement of the activity, the
              activity generates "qualifying income" as this term is defined in
              Section 7704 of the Internal Revenue Code; or

          (3) any activity that enhances the operations of an activity that is
              described in (1) or (2) above.

     Although the general partner has the ability to cause Shamrock Logistics
and Shamrock Logistics Operations to engage in activities other than the
transportation, terminalling and storage of crude oil and refined products, the
general partner has no current plans to do so. The general partner is authorized
in general to perform all acts deemed necessary to carry out our purposes and to
conduct our business.

POWER OF ATTORNEY

     Each limited partner, and each person who acquires a unit from a unitholder
and executes and delivers a transfer application, grants to the general partner
and, if appointed, a liquidator, a power of attorney to, among other things,
execute and file documents required for the qualification, continuance or
dissolution of Shamrock Logistics. The power of attorney also grants the general
partner and the liquidator the authority to amend the partnership agreement, and
to make consents and waivers under the partnership agreement.

                                       119
<PAGE>   126

CAPITAL CONTRIBUTIONS

     Unitholders are not obligated to make additional capital contributions,
except as described below under "-- Limited Liability."

LIMITED LIABILITY

     Assuming that a limited partner does not participate in the control of our
business within the meaning of the Delaware Act and that he otherwise acts in
conformity with the provisions of the partnership agreement, his liability under
the Delaware Act will be limited, subject to possible exceptions, to the amount
of capital he is obligated to contribute to us for his common units plus his
share of any undistributed profits and assets. If it were determined, however,
that the right or exercise of the right by the limited partners as a group

     - to remove or replace the general partner,

     - to approve some amendments to the partnership agreement or

     - to take other action under the partnership agreement

constituted "participation in the control" of our business for the purposes of
the Delaware Act, then the limited partners could be held personally liable for
our obligations under the laws of Delaware, to the same extent as the general
partner. This liability would extend to persons who transact business with us
who reasonably believe that the limited partner is a general partner. Neither
the partnership agreement nor the Delaware Act specifically provides for legal
recourse against the general partner if a limited partner were to lose limited
liability through any fault of the general partner. While this does not mean
that a limited partner could not seek legal recourse, we have found no precedent
for this type of a claim in Delaware case law.

     Under the Delaware Act, a limited partnership may not make a distribution
to a partner if, after the distribution, all liabilities of the limited
partnership, other than liabilities to partners on account of their partnership
interests and liabilities for which the recourse of creditors is limited to
specific property of the partnership, would exceed the fair value of the assets
of the limited partnership. For the purpose of determining the fair value of the
assets of a limited partnership, the Delaware Act provides that the fair value
of property subject to liability for which recourse of creditors is limited
shall be included in the assets of the limited partnership only to the extent
that the fair value of that property exceeds the nonrecourse liability. The
Delaware Act provides that a limited partner who receives a distribution and
knew at the time of the distribution that the distribution was in violation of
the Delaware Act shall be liable to the limited partnership for the amount of
the distribution for three years. Under the Delaware Act, an assignee who
becomes a substituted limited partner of a limited partnership is liable for the
obligations of his assignor to make contributions to the partnership, except the
assignee is not obligated for liabilities unknown to him at the time he became a
limited partner and that could not be ascertained from the partnership
agreement. The operating partnership will initially conduct business in Texas,
Colorado, New Mexico, Oklahoma, Kansas and Skelly-Belvieu Pipeline Company will
initially conduct business in Texas. Maintenance of limited liability for
Shamrock Logistics, as a limited partner of the operating partnership, may
require compliance with legal requirements in the jurisdictions in which the
operating partnership conducts business. Limitations on the liability of limited
partners for the obligations of a limited partner have not been clearly
established in many jurisdictions. If it were determined that we were, by virtue
of our limited partner interest in the operating partnership or otherwise,
conducting business in any state without compliance with the applicable limited
partnership or limited liability company statute, or that the right or exercise
of the right by the limited partners as a group to remove or replace the general
partners, to approve some amendments to the partnership agreement, or to take
other action under the partnership agreement constituted "participation in the
control" of our business for purposes of the statutes of any relevant
jurisdiction, then the limited partners could be held personally liable for our
                                       120
<PAGE>   127

obligations under the law of that jurisdiction to the same extent as the general
partner under the circumstances. We will operate in a manner as the general
partner considers reasonable and necessary or appropriate to preserve the
limited liability of the limited partners.

ISSUANCE OF ADDITIONAL SECURITIES


     The partnership agreement authorizes us to issue an unlimited number of
additional limited partner interests and other equity securities for the
consideration and on the terms and conditions established by the general partner
in its sole discretion without the approval of any limited partners. During the
subordination period, however, we may not issue equity securities ranking senior
to the common units or in aggregate of more than 4,199,661 additional common
units or units on a parity with the common units, in each case, without the
approval of the holders of a majority of the outstanding common units (excluding
those common units held by the general partner and its affiliates so long as the
general partner and its affiliates own 20% or more of the outstanding common
units) and subordinated units, voting as separate classes, except that we may
issue an unlimited number of common units as follows:


        (1) upon exercise of the underwriters' over-allotment option;

        (2) under employee benefit plans;

        (3) upon conversion of the general partner interest and incentive
            distribution rights as a result of a withdrawal of the general
            partner;

        (4) in the event of a combination or subdivision of common units; or

        (5) to finance an acquisition or a capital improvement that would have
            resulted, on a pro forma basis, in an increase in adjusted operating
            surplus on a per unit basis for the preceding four-quarter period.

     It is possible that we will fund acquisitions through the issuance of
additional common units or other equity securities. Holders of any additional
common units we issue will be entitled to share equally with the then-existing
holders of common units in our distributions of available cash. In addition, the
issuance of additional partnership interests may dilute the value of the
interests of the then-existing holders of common units in our net assets.

     After the subordination period, there will be no restriction under the
Partnership Agreement on the ability of the general partner to issue common
units or units junior or senior to the common units.

     In accordance with Delaware law and the provisions of the partnership
agreement, we may also issue additional partnership securities that, in the sole
discretion of the general partner, may have special voting rights to which the
common units are not entitled.

     Upon issuance of additional partnership securities, the general partner
will be required to make additional capital contributions to the extent
necessary to maintain its combined 2% general partner interest in us and
Shamrock Logistics Operations. Moreover, the general partner will have the
right, which it may from time to time assign in whole or in part to any of its
affiliates, to purchase common units, subordinated units or other equity
securities whenever, and on the same terms that we issue those securities to
persons other than the general partner and its affiliates, to the extent
necessary to maintain its percentage interest, including its interest
represented by common units and subordinated units, that existed immediately
prior to each issuance. The holders of common units will not have preemptive
rights to acquire additional common units or other partnership interests.

                                       121
<PAGE>   128

AMENDMENT OF THE PARTNERSHIP AGREEMENT


     Amendments to the partnership agreement may be proposed only by or with the
consent of the general partner, which consent may be given or withheld in its
sole discretion. In order to adopt a proposed amendment, other than the
amendments discussed below, the general partner is required to seek written
approval of the holders of the number of units required to approve the amendment
or call a meeting of the limited partners to consider and vote upon the proposed
amendment. Except as described below, an amendment must be approved by:



     - during the subordination period, by a majority of the common units
      (excluding those common units held by the general partner and its
      affiliates so long as the general partner and its affiliates own 20% or
      more of the outstanding common units), and a majority of the subordinated
      units, voting as separate classes; and



     - after the subordination period, by a majority of the common units.



     We refer to the voting provision described above as a "unit majority."


     Prohibited Amendments. No amendment may be made that would:

          (1) enlarge the obligations of any limited partner without its
              consent, unless approved by at least a majority of the type or
              class of limited partner interests so affected;

          (2) enlarge the obligations of, restrict in any way any action by or
              rights of, or reduce in any way the amounts distributable,
              reimbursable or otherwise payable by Shamrock Logistics to the
              general partner or any of its affiliates without the consent of
              the general partner, which may be given or withheld in its sole
              discretion;

          (3) change the term of Shamrock Logistics;

          (4) provide that Shamrock Logistics is not dissolved upon an election
              to dissolve Shamrock Logistics by the general partner that is
              approved by the holders of a majority of the outstanding common
              units and subordinated units, voting as separate classes; or

          (5) give any person the right to dissolve Shamrock Logistics other
              than the general partner's right to dissolve Shamrock Logistics
              with the approval of the holders of a majority of the outstanding
              common units and subordinated units, voting as separate classes.

     The provision of the partnership agreement preventing the amendments having
the effects described in clauses (1) through (5) above can be amended upon the
approval of the holders of at least 90% of the outstanding units voting together
as a single class.

     No Unitholder Approval. The general partner may generally make amendments
to the partnership agreement without the approval of any limited partner or
assignee to reflect:

          (1) a change in the name of Shamrock Logistics, the location of the
              principal place of business of Shamrock Logistics, the registered
              agent or the registered office of Shamrock Logistics;

          (2) the admission, substitution, withdrawal or removal of partners in
              accordance with the partnership agreement;

          (3) a change that, in the sole discretion of the general partner, is
              necessary or advisable to qualify or continue the qualification of
              Shamrock Logistics as a limited partnership or a partnership in
              which the limited partners have limited liability under the laws
              of any state or to ensure that neither Shamrock Logistics nor
              Shamrock

                                       122
<PAGE>   129

           Logistics Operations will be treated as an association taxable as a
           corporation or otherwise taxed as an entity for federal income tax
           purposes;

          (4) an amendment that is necessary, in the opinion of counsel to
              Shamrock Logistics, to prevent Shamrock Logistics, the general
              partner, Shamrock Logistics GP, LLC, or any of the directors,
              officers, agents or trustees of Shamrock Logistics GP, LLC from in
              any manner being subjected to the provisions of the Investment
              Company Act of 1940, the Investment Advisors Act of 1940, or "plan
              asset" regulations adopted under the Employee Retirement Income
              Security Act of 1974, whether or not substantially similar to plan
              asset regulations currently applied or proposed;

          (5) subject to the limitations on the issuance of additional common
              units or other limited or general partner interests described
              above, an amendment that in the discretion of the general partner
              is necessary or advisable for the authorization of additional
              limited or general partner interests;

          (6) any amendment expressly permitted in the partnership agreement to
              be made by the general partner acting alone;

          (7) an amendment effected, necessitated or contemplated by a merger
              agreement that has been approved under the terms of the
              partnership agreement;

          (8) any amendment that, in the discretion of the general partner, is
              necessary or advisable for the formation by Shamrock Logistics of,
              or its investment in, any corporation, partnership or other
              entity, as otherwise permitted by the partnership agreement;

          (9) a change in the fiscal year or taxable year of Shamrock Logistics
              and related changes; and

          (10) any other amendments substantially similar to any of the matters
               described in (1) through (9) above.

     In addition, the general partner may make amendments to the partnership
agreement without the approval of any limited partner or assignee if those
amendments, in the discretion of the general partner:

          (1) do not adversely affect the limited partners (or any particular
              class of limited partners) in any material respect;

          (2) are necessary or advisable to satisfy any requirements, conditions
              or guidelines contained in any opinion, directive, order, ruling
              or regulation of any federal or state agency or judicial authority
              or contained in any federal or state statute;

          (3) are necessary or advisable to facilitate the trading of limited
              partner interests or to comply with any rule, regulation,
              guideline or requirement of any securities exchange on which the
              limited partner interests are or will be listed for trading,
              compliance with any of which the general partner deems to be in
              the best interests of Shamrock Logistics and the limited partners;

          (4) are necessary or advisable for any action taken by the general
              partner relating to splits or combinations of units under the
              provisions of the partnership agreement; or

          (5) are required to effect the intent expressed in this prospectus or
              the intent of the provisions of the partnership agreement or are
              otherwise contemplated by the partnership agreement.

     Opinion of Counsel and Unitholder Approval. The general partner will not be
required to obtain an opinion of counsel that an amendment will not result in a
loss of limited liability to the
                                       123
<PAGE>   130

limited partners or result in Shamrock Logistics being treated as an entity for
federal income tax purposes if one of the amendments described above under
"-- No Unitholder Approval" should occur. No other amendments to the partnership
agreement will become effective without the approval of holders of at least 90%
of the units unless Shamrock Logistics obtains an opinion of counsel to the
effect that the amendment will not affect the limited liability under applicable
law of any limited partner in Shamrock Logistics or cause Shamrock Logistics or
Shamrock Logistics Operations to be taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not previously
taxed as such).

     Any amendment that would have a material adverse effect on the rights or
preferences of any type or class of outstanding units in relation to other
classes of units will require the approval of at least a majority of the type or
class of units so affected. Any amendment that reduces the voting percentage
required to take any action is required to be approved by the affirmative vote
of limited partners constituting not less than the voting requirement sought to
be reduced.

MERGER, SALE, OR OTHER DISPOSITION OF ASSETS


     The general partner is generally prohibited, without the prior approval of
the holders of units representing a unit majority, from causing Shamrock
Logistics to, among other things, sell, exchange, or otherwise dispose of all or
substantially all of its assets in a single transaction or a series of related
transactions, including by way of merger, consolidation, or other combination,
or approving on behalf of Shamrock Logistics the sale, exchange, or other
disposition of all or substantially all of the assets of the subsidiaries;
provided that the general partner may mortgage, pledge, hypothecate, or grant a
security interest in all or substantially all of Shamrock Logistics' assets
without that approval. The general partner may also sell all or substantially
all of Shamrock Logistics' assets under a foreclosure or other realization upon
the encumbrances above without that approval. Furthermore, provided that
conditions specified in the partnership agreement are satisfied, the general
partner may merge Shamrock Logistics or any of its subsidiaries into, or convey
some or all of their assets to, a newly formed entity if the sole purpose of
that merger or conveyance is to effect a mere change in the legal form of
Shamrock Logistics into another limited liability entity. The unitholders are
not entitled to dissenters' rights of appraisal under the partnership agreement
or applicable Delaware law in the event of a merger or consolidation, a sale of
substantially all of Shamrock Logistics' assets, or any other transaction or
event.


TERMINATION AND DISSOLUTION

     We will continue in existence as a limited partnership in perpetuity unless
terminated sooner under the partnership agreement. We will dissolve upon:


          (1) the election of the general partner to dissolve us, if approved by
              the holders of units representing a unit majority;


          (2) the sale, exchange or other disposition of all or substantially
              all of the assets and properties of Shamrock Logistics;

          (3) the entry of a decree of judicial dissolution of Shamrock
              Logistics; or

          (4) the withdrawal or removal of the general partner or any other
              event that results in its ceasing to be the general partner other
              than by reason of a transfer of its general partner interest in
              accordance with the partnership agreement or withdrawal or removal
              following approval and admission of a successor.


     Upon a dissolution under clause (4), the holders of units representing a
unit majority may also elect, within specific time limitations, to reconstitute
Shamrock Logistics and continue its


                                       124
<PAGE>   131


business on the same terms and conditions described in the partnership agreement
by forming a new limited partnership on terms identical to those in the
partnership agreement and having as general partner an entity approved by the
holders of units representing a unit majority, subject to receipt by Shamrock
Logistics of an opinion of counsel to the effect that:


          (1) the action would not result in the loss of limited liability of
     any limited partner; and

          (2) neither Shamrock Logistics, the reconstituted limited partnership,
              nor Shamrock Logistics Operations would be treated as an
              association taxable as a corporation or otherwise be taxable as an
              entity for federal income tax purposes upon the exercise of that
              right to continue.

LIQUIDATION AND DISTRIBUTION OF PROCEEDS

     Upon our dissolution, unless we are reconstituted and continued as a new
limited partnership, the liquidator authorized to wind up our affairs will,
acting with all of the powers of the general partner that the liquidator deems
necessary or desirable in its judgment, liquidate our assets and apply the
proceeds of the liquidation as provided in "Cash Distribution Policy --
Distributions of Cash upon Liquidation." The liquidator may defer liquidation or
distribution of our assets for a reasonable period of time or distribute assets
to partners in kind if it determines that a sale would be impractical or would
cause undue loss to the partners.

WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER

     Except as described below, our general partner has agreed not to withdraw
voluntarily as general partner of Shamrock Logistics or as the general partner
of Shamrock Logistics Operations prior to December 31, 2010 without obtaining
the approval of the holders of at least a majority of the outstanding common
units, excluding common units held by the general partner and its affiliates,
and furnishing an opinion of counsel regarding limited liability and tax
matters. On or after December 31, 2010, our general partner may withdraw as
general partner without first obtaining approval of any unitholder by giving 90
days' written notice, and that withdrawal will not constitute a violation of the
partnership agreement. Notwithstanding the information above, our general
partner may withdraw without unitholder approval upon 90 days' notice to the
limited partners if at least 50% of the outstanding common units are held or
controlled by one person and its affiliates other than the general partner and
its affiliates. In addition, the partnership agreement permits the general
partner in some instances to sell or otherwise transfer all of its general
partner interests in Shamrock Logistics without the approval of the unitholders.
Please read "-- Transfer of General Partner Interests and Incentive Distribution
Rights."


     Upon the withdrawal of the general partner under any circumstances, other
than as a result of a transfer of all or a part of its general partner interest
in Shamrock Logistics, the holders of units representing a unit majority may
select a successor to that withdrawing general partner. If a successor is not
elected, or is elected but an opinion of counsel regarding limited liability and
tax matters cannot be obtained, Shamrock Logistics will be dissolved, wound up
and liquidated, unless within 180 days after that withdrawal, the holders of a
majority of the outstanding common units and subordinated units, voting as
separate classes, agree in writing to continue the business of Shamrock
Logistics and to appoint a successor general partner. Please read "--
Termination and Dissolution."


     The general partner may not be removed unless that removal is approved by
the vote of the holders of not less than 66 2/3% of the outstanding units,
including units held by the general partner and its affiliates, and Shamrock
Logistics receives an opinion of counsel regarding limited liability and tax
matters. Any removal of the general partner is also subject to the approval of a
successor general partner by the vote of the holders of a majority of the
outstanding common units and subordinated units, voting as separate classes. The
ownership of an aggregate of more than 33 1/3% of the outstanding units by the
general partner and its affiliates gives it the practical
                                       125
<PAGE>   132

ability to prevent its removal. At the closing of this offering, the general
partner and its affiliates will own 75.5% of the outstanding units.

     The partnership agreement also provides that if the general partner is
removed under circumstances where cause does not exist:

          (1) the subordination period will end and all outstanding subordinated
              units will immediately convert into common units on a one-for-one
              basis;

          (2) any existing arrearages in payment of the minimum quarterly
              distribution on the common units will be extinguished; and

          (3) the general partner will have the right to convert its general
              partner interest and its incentive distribution rights into common
              units or to receive cash in exchange for those interests.

     Withdrawal or removal of the general partner of Shamrock Logistics also
constitutes withdrawal or removal of the general partner of Shamrock Logistics
Operations.

     In the event of removal of a general partner under circumstances where
cause exists or withdrawal of a general partner where that withdrawal violates
the partnership agreement, a successor general partner will have the option to
purchase the general partner interests and incentive distribution rights of the
departing general partner for a cash payment equal to the fair market value of
those interests. Under all other circumstances where a general partner withdraws
or is removed by the limited partners, the departing general partner will have
the option to require the successor general partner to purchase the general
partner interests of the departing general partner and its incentive
distribution rights for the fair market value. In each case, this fair market
value will be determined by agreement between the departing general partner and
the successor general partner. If no agreement is reached, an independent
investment banking firm or other independent expert selected by the departing
general partner and the successor general partner will determine the fair market
value. Or, if the departing general partner and the successor general partner
cannot agree upon an expert, then an expert chosen by agreement of the experts
selected by each of them will determine the fair market value.

     If the above-described option is not exercised by either the departing
general partner or the successor general partner, the departing general
partner's general partner interest and its incentive distribution rights will
automatically convert into common units equal to the fair market value of those
interests as determined by an investment banking firm or other independent
expert selected in the manner described in the preceding paragraph.

     In addition, Shamrock Logistics will be required to reimburse the departing
general partner for all amounts due the departing general partner, including,
without limitation, all employee-related liabilities, including severance
liabilities, incurred for the termination of any employees employed by the
departing general partner for the benefit of Shamrock Logistics.

TRANSFER OF GENERAL PARTNER INTERESTS AND INCENTIVE DISTRIBUTION RIGHTS

     Except for transfer by the general partner of all, but not less than all,
of its general partner interests in Shamrock Logistics and the managing interest
in the operating partnership to:

          (a) an affiliate of the general partner; or

          (b) another person as part of the merger or consolidation of the
              general partner with or into another person or the transfer by the
              general partner of all or substantially all of its assets to
              another person,

the general partner may not transfer all or any part of its general partner
interest in Shamrock Logistics and in the operating partnership to another
person prior to December 31, 2010, without
                                       126
<PAGE>   133


the approval of the holders of at least a majority of the outstanding common
units, excluding common units held by the general partner and its affiliates. As
a condition of this transfer, the transferee must assume the rights and duties
of the general partner to whose interest that transferee has succeeded, agree to
be bound by the provisions of the partnership agreement, furnish an opinion of
counsel regarding limited liability and tax matters, agree to acquire the
general partner interest in Shamrock Logistics Operations and agree to be bound
by the provisions of the partnership agreement of Shamrock Logistics Operations.
The general partner and its affiliates may at any time, however, transfer
subordinated units to one or more persons, other than Shamrock Logistics,
without unitholder approval. At any time, the partner(s) of the general partner
may sell or transfer all or part of their partnership interests in the general
partner to an affiliate or a third party without the approval of the
unitholders. The general partner or its affiliates or a later holder may
transfer its incentive distribution rights to an affiliate or another person as
part of its merger or consolidation with or into, or sale of all or
substantially all of its assets to, that person without the prior approval of
the unitholders; provided that, in each case, the transferee agrees to be bound
by the provisions of the partnership agreement. Prior to December 31, 2010,
other transfers of the incentive distribution rights will require the
affirmative vote of holders of units representing a unit majority. On or after
December 31, 2010, the incentive distribution rights will be freely
transferable.


CHANGE OF MANAGEMENT PROVISIONS

     The partnership agreement contains specific provisions that are intended to
discourage a person or group from attempting to remove Shamrock Logistics GP,
L.P. as general partner of Shamrock Logistics or otherwise change management. If
any person or group other than the general partner and its affiliates acquires
beneficial ownership of 20% or more of any class of units, that person or group
loses voting rights on all of its units. This loss of voting rights does not
apply to any person or group that acquires the units from our general partner or
its affiliates and any transferees of that person or group approved by our
general partner.

     The partnership agreement also provides that if the general partner is
removed under circumstances where cause does not exist and units held by the
general partner and its affiliates are not voted in favor of that removal:

          (1) the subordination period will end and all outstanding subordinated
              units will immediately convert into common units on a one-for-one
              basis;

          (2) any existing arrearages in payment of the minimum quarterly
              distribution on the common units will be extinguished; and

          (3) the general partner will have the right to convert its general
              partner interest and its incentive distribution rights into common
              units or to receive cash in exchange for those interests.

LIMITED CALL RIGHT

     If at any time not more than 20% of the then-issued and outstanding limited
partner interests of any class are held by persons other than the general
partner and its affiliates, the general partner will have the right, which it
may assign in whole or in part to any of its affiliates or to Shamrock
Logistics, to acquire all, but not less than all, of the remaining limited
partner interests of the class held by unaffiliated persons as of a record date
to be selected by the general partner, on at least 10 but not more than 60 days'
notice. The purchase price in the event of this purchase is the greater of:

          (1) the highest cash price paid by the general partner or any of its
              affiliates for any limited partner interests of the class
              purchased within the 90 days preceding the

                                       127
<PAGE>   134

           date on which the general partner first mails notice of its election
           to purchase those limited partner interests; and

          (2) the current market price as of the date three days before the date
              the notice is mailed.

     As a result of the general partner's right to purchase outstanding limited
partner interests, a holder of limited partner interests may have his limited
partner interests purchased at an undesirable time or price. The tax
consequences to a unitholder of the exercise of this call right are the same as
a sale by that unitholder of his common units in the market. Please read "Tax
Considerations -- Disposition of Common Units."

MEETINGS; VOTING

     Except as described below regarding a person or group owning 20% or more of
any class of units then outstanding, unitholders or assignees who are record
holders of units on the record date will be entitled to notice of, and to vote
at, meetings of limited partners of Shamrock Logistics and to act upon matters
for which approvals may be solicited. Common units that are owned by an assignee
who is a record holder, but who has not yet been admitted as a limited partner,
shall be voted by the general partner at the written direction of the record
holder. Absent direction of this kind, the common units will not be voted,
except that, in the case of common units held by the general partner on behalf
of non-citizen assignees, the general partner shall distribute the votes on
those common units in the same ratios as the votes of limited partners on other
units are cast.

     The general partner does not anticipate that any meeting of unitholders
will be called in the foreseeable future. Any action that is required or
permitted to be taken by the unitholders may be taken either at a meeting of the
unitholders or without a meeting if consents in writing describing the action so
taken are signed by holders of the number of units as would be necessary to
authorize or take that action at a meeting. Meetings of the unitholders may be
called by the general partner or by unitholders owning at least 20% of the
outstanding units of the class for which a meeting is proposed. Unitholders may
vote either in person or by proxy at meetings. The holders of a majority of the
outstanding units of the class or classes for which a meeting has been called
represented in person or by proxy shall constitute a quorum unless any action by
the unitholders requires approval by holders of a greater percentage of the
units, in which case the quorum shall be the greater percentage.

     Each record holder of a unit has a vote according to his percentage
interest in Shamrock Logistics, although additional limited partner interests
having special voting rights could be issued. Please read "-- Issuance of
Additional Securities." However, if at any time any person or group, other than
the general partner and its affiliates, or a direct or subsequently approved
transferee of the general partner or its affiliates, acquires, in the aggregate,
beneficial ownership of 20% or more of any class of units then outstanding, the
person or group will lose voting rights on all of its units and the units may
not be voted on any matter and will not be considered to be outstanding when
sending notices of a meeting of unitholders, calculating required votes,
determining the presence of a quorum or for other similar purposes. Common units
held in nominee or street name account will be voted by the broker or other
nominee in accordance with the instruction of the beneficial owner unless the
arrangement between the beneficial owner and his nominee provides otherwise.
Except as otherwise provided in the partnership agreement, subordinated units
will vote together with common units as a single class.

     Any notice, demand, request, report, or proxy material required or
permitted to be given or made to record holders of common units under the
partnership agreement will be delivered to the record holder by Shamrock
Logistics or by the transfer agent.

                                       128
<PAGE>   135

STATUS AS LIMITED PARTNER OR ASSIGNEE

     Except as described above under "-- Limited Liability," the common units
will be fully paid, and unitholders will not be required to make additional
contributions.

     An assignee of a common unit, after executing and delivering a transfer
application, but pending its admission as a substituted limited partner, is
entitled to an interest equivalent to that of a limited partner for the right to
share in allocations and distributions from Shamrock Logistics, including
liquidating distributions. The general partner will vote and exercise other
powers attributable to common units owned by an assignee who has not become a
substituted limited partner at the written direction of the assignee. Please
read "-- Meetings; Voting." Transferees who do not execute and deliver a
transfer application will be treated neither as assignees nor as record holders
of common units, and will not receive cash distributions, federal income tax
allocations or reports furnished to holders of common units. Please read
"Description of the Common Units -- Transfer of Common Units."

NON-CITIZEN ASSIGNEES; REDEMPTION

     If we are or become subject to federal, state or local laws or regulations
that, in the reasonable determination of the general partner, create a
substantial risk of cancellation or forfeiture of any property that we have an
interest in because of the nationality, citizenship or other related status of
any limited partner or assignee, we may redeem the units held by the limited
partner or assignee at their current market price. In order to avoid any
cancellation or forfeiture, the general partner may require each limited partner
or assignee to furnish information about his nationality, citizenship or related
status. If a limited partner or assignee fails to furnish information about this
nationality, citizenship or other related status within 30 days after a request
for the information or the general partner determines after receipt of the
information that the limited partner or assignee is not an eligible citizen, the
limited partner or assignee may be treated as a non-citizen assignee. In
addition to other limitations on the rights of an assignee who is not a
substituted limited partner, a non-citizen assignee does not have the right to
direct the voting of his units and may not receive distributions in kind upon
our liquidation.

INDEMNIFICATION

     Under the partnership agreement, in most circumstances, we will indemnify
the following persons, to the fullest extent permitted by law, from and against
all losses, claims, damages or similar events:

          (1) the general partner;

          (2) any departing general partner;

          (3) any person who is or was an affiliate of the general partner or
              any departing general partner;

          (4) any person who is or was a partner, officer, director, employee,
              agent, or trustee of the general partner, Shamrock Logistics GP,
              LLC, or departing general partner or any affiliate of the general
              partner, Shamrock Logistics GP, LLC, or departing general partner;
              or

          (5) any person who is or was serving at the request of the general
              partner or departing general partner or any affiliate of the
              general partner or departing general partner as an officer,
              director, employee, member, partner, agent, or trustee of another
              person.

     Any indemnification under these provisions will only be out of our assets.
Unless it otherwise agrees in its sole discretion, the general partner shall not
be personally liable for any of our

                                       129
<PAGE>   136

indemnification obligations, nor have any obligation to contribute or loan funds
or assets to us to enable us to effectuate indemnification. We are authorized to
purchase insurance against liabilities asserted against and expenses incurred by
persons for our activities, regardless of whether we would have the power to
indemnify the person against liabilities under the partnership agreement.

BOOKS AND REPORTS

     The general partner is required to keep appropriate books of our business
at our principal offices. The books will be maintained for both tax and
financial reporting purposes on an accrual basis. For tax and fiscal reporting
purposes, our fiscal year is the calendar year.

     We will furnish or make available to record holders of common units, within
120 days after the close of each fiscal year, an annual report containing
audited financial statements and a report on those financial statements by our
independent public accountants. Except for our fourth quarter, we will also
furnish or make available summary financial information within 90 days after the
close of each quarter.

     We will furnish each record holder of a unit with information reasonably
required for tax reporting purposes within 90 days after the close of each
calendar year. This information is expected to be furnished in summary form so
that some complex calculations normally required of partners can be avoided. Our
ability to furnish this summary information to unitholders will depend on the
cooperation of unitholders in supplying us with specific information. Every
unitholder will receive information to assist him in determining his federal and
state tax liability and filing his federal and state income tax returns,
regardless of whether he supplies us with information.

RIGHT TO INSPECT SHAMROCK LOGISTICS' BOOKS AND RECORDS

     The partnership agreement provides that a limited partner can, for a
purpose reasonably related to his interest as a limited partner, upon reasonable
demand and at his own expense, have furnished to him:

          (1) a current list of the name and last known address of each partner;

          (2) a copy of our tax returns;

          (3) information as to the amount of cash, and a description and
              statement of the agreed value of any other property or services,
              contributed or to be contributed by each partner and the date on
              which each became a partner;

          (4) copies of the partnership agreement, the certificate of limited
              partnership of the partnership, related amendments and powers of
              attorney under which they have been executed;

          (5) information regarding the status of our business and financial
     condition; and

          (6) any other information regarding our affairs as is just and
     reasonable.

     The general partner may, and intends to, keep confidential from the limited
partners trade secrets or other information the disclosure of which the general
partner believes in good faith is not in our best interests or which we are
required by law or by agreements with third parties to keep confidential.

REGISTRATION RIGHTS

     Under the partnership agreement, we have agreed to register for resale
under the Securities Act and applicable state securities laws any common units,
subordinated units or other

                                       130
<PAGE>   137

partnership securities proposed to be sold by the general partner or any of its
affiliates or their assignees if an exemption from the registration requirements
is not otherwise available. These registration rights continue for two years
following any withdrawal or removal of our general partner as the general
partner of Shamrock Logistics. We are obligated to pay all expenses incidental
to the registration, excluding underwriting discounts and commissions. Please
read "Units Eligible for Future Sale."

                         UNITS ELIGIBLE FOR FUTURE SALE

     After the sale of the common units offered under this prospectus, UDS
Logistics, LLC will hold 4,399,322 common units and 8,999,322 subordinated
units. All of these subordinated units will convert into common units at the end
of the subordination period. The sale of these common and subordinated units
could have an adverse impact on the price of the common units or on any trading
market that may develop.

     The common units sold in the offering will generally be freely transferable
without restriction or further registration under the Securities Act, except
that any common units owned by an "affiliate" of Shamrock Logistics may not be
resold publicly except in compliance with the registration requirements of the
Securities Act or under an exemption under Rule 144 or otherwise. Rule 144
permits securities acquired by an affiliate of the issuer to be sold into the
market in an amount that does not exceed, during any three-month period, the
greater of:

          (1) 1% of the total number of the securities outstanding; or

          (2) the average weekly reported trading volume of the common units for
              the four calendar weeks prior to the sale.

     Sales under Rule 144 are also subject to specific manner of sale
provisions, notice requirements and the availability of current public
information about Shamrock Logistics. A person who is not deemed to have been an
affiliate of Shamrock Logistics at any time during the three months preceding a
sale, and who has beneficially owned his or her common units for at least two
years, would be entitled to sell common units under Rule 144 without regard to
the public information requirements, volume limitations, manner of sale
provisions and notice requirements of Rule 144.

     Prior to the end of the subordination period, Shamrock Logistics may not
issue equity securities of the partnership ranking prior or senior to the common
units or an aggregate of more than 4,199,661 additional common units or an
equivalent amount of securities ranking on a parity with the common units,
without the approval of the holders of a majority of the outstanding common
units and subordinated units, voting as separate classes. This number is subject
to adjustment in the event of a combination or subdivision of common units and
shall exclude common units issued in a number of circumstances. Please read "The
Partnership Agreement -- Issuance of Additional Securities."

     The partnership agreement provides that, after the subordination period,
Shamrock Logistics may issue an unlimited number of limited partner interests of
any type without a vote of the unitholders. The partnership agreement does not
restrict Shamrock Logistics' ability to issue equity securities ranking junior
to the common units at any time. Any issuance of additional common units or
other equity securities would result in a corresponding decrease in the
proportionate ownership interest in Shamrock Logistics represented by, and could
adversely affect the cash distributions to and market price of, common units
then outstanding. Please read "The Partnership Agreement -- Issuance of
Additional Securities."

     Under the partnership agreement, the general partner and its affiliates
have the right to cause Shamrock Logistics to register under the Securities Act
and state laws the offer and sale of any units that they hold. Subject to the
terms and conditions of the partnership agreement,
                                       131
<PAGE>   138

these registration rights allow the general partner and its affiliates or its
assignees holding any units to require registration of any of these units and to
include any of these units in a registration by Shamrock Logistics of other
units, including units offered by Shamrock Logistics or by any unitholder. The
general partner will continue to have these registration rights for two years
following its withdrawal or removal as a general partner of Shamrock Logistics.
In connection with any registration of this kind, Shamrock Logistics will
indemnify each unitholder participating in the registration and its officers,
directors and controlling persons from and against any liabilities under the
Securities Act or any state securities laws arising from the registration
statement or prospectus. Shamrock Logistics will bear all costs and expenses
incidental to any registration, excluding any underwriting discounts and
commissions. Except as described below, the general partner and its affiliates
may sell their units in private transactions at any time, subject to compliance
with applicable laws.


     Ultramar Diamond Shamrock, Shamrock Logistics GP, LLC, UDS Logistics, LLC,
the general partner, Shamrock Logistics, Shamrock Logistics Operations and the
officers and directors of the general partner of the general partner have agreed
with the Underwriters not to dispose of or hedge any of their common units or
subordinated units or securities convertible into or exchangeable for, or that
represent the right to receive, common units or subordinated units or any
securities that are senior to or on a parity with common units during the period
from the date of this prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee benefit
plans.


                                       132
<PAGE>   139

                               TAX CONSIDERATIONS

     This section is a summary of the material tax considerations that may be
relevant to prospective unitholders who are individual citizens or residents of
the United States and, unless otherwise noted in the following discussion,
expresses the opinion of Andrews & Kurth L.L.P., special counsel to the general
partner and us, insofar as it relates to matters of United States federal income
tax law and legal conclusions with respect to those matters. This section is
based upon current provisions of the Internal Revenue Code, existing and
proposed regulations and current administrative rulings and court decisions, all
of which are subject to change. Later changes in these authorities may cause the
tax consequences to vary substantially from the consequences described below.
Unless the context otherwise requires, references in this section to us are
references to both Shamrock Logistics and Shamrock Logistics Operations.

     No attempt has been made in the following discussion to comment on all
federal income tax matters affecting us or the unitholders. Moreover, the
discussion focuses on unitholders who are individual citizens or residents of
the United States and has only limited application to corporations, estates,
trusts, non-resident aliens or other unitholders subject to specialized tax
treatment, such as tax-exempt institutions, foreign persons, individual
retirement accounts, REITs or mutual funds. Accordingly, each prospective
unitholder should consult, and should depend on, his own tax advisor in
analyzing the federal, state, local and foreign tax consequences to him of the
ownership or disposition of common units.

     All statements as to matters of law and legal conclusions contained in this
section, unless otherwise noted, are the opinion of counsel.

     No ruling has been or will be requested from the IRS regarding any matter
affecting us or prospective unitholders. An opinion of counsel represents only
that counsel's best legal judgment and does not bind the IRS or the courts.
Accordingly, the opinions and statements made here may not be sustained by a
court if contested by the IRS. Any contest of this sort with the IRS may
materially and adversely impact the market for the common units and the prices
at which the common units trade. In addition, the costs of any contest with the
IRS will be borne directly or indirectly by the unitholders and the general
partner. Furthermore, the treatment of us, or an investment in us, may be
significantly modified by future legislative or administrative changes or court
decisions. Any modifications may or may not be retroactively applied.

     For the reasons described below, counsel has not rendered an opinion with
respect to the following specific federal income tax issues:

        (1) the treatment of a unitholder whose common units are loaned to a
            short seller to cover a short sale of common units (please read
            "-- Tax Treatment of Unitholders -- Treatment of Short Sales");

          (2) whether our monthly convention for allocating taxable income and
              losses is permitted by existing Treasury Regulations (please read
              "-- Disposition of Common Units -- Allocations Between Transferors
              and Transferees"); and

          (3) whether our method for depreciating Section 743 adjustments is
              sustainable (please read "-- Disposition of Common
              Units -- Section 754 Election").

PARTNERSHIP STATUS

     A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner of a partnership is required to take into
account his allocable share of items of income, gain, loss, and deduction of the
partnership in computing his federal income tax liability, regardless of whether
cash distributions are made. Distributions by a partnership to a partner are
generally not taxable unless the amount of cash distributed is in excess of the
partner's adjusted basis in his partnership interest.

                                       133
<PAGE>   140

     No ruling has been or will be sought from the IRS and the IRS has made no
determination as to our, or Shamrock Logistics Operations', status as a
partnership for federal income tax purposes or whether our operations generate
"qualifying income" under Section 7704 of the Code. Instead, we have relied on
the opinion of counsel that, based upon the Internal Revenue Code, its
regulations, published revenue rulings and court decisions and the
representations described below, we will be classified as a partnership and
Shamrock Logistics Operations will be classified as a partnership for federal
income tax purposes.

     In rendering its opinion, counsel has relied on factual representations and
covenants made by us and the general partner. The representations and covenants
made by us and our general partner upon which counsel has relied are:

          (a) Neither we nor Shamrock Logistics Operations will elect to be
              treated as an association or corporation;

          (b) We will be operated in accordance with

             (1) all applicable partnership statutes,

             (2) our partnership agreement and

             (3) the description of us in this prospectus;

          (c) Shamrock Logistics Operations will be operated in accordance with

             (1) all applicable partnership statutes,

             (2) the partnership agreement for Shamrock Logistics Operations and

             (3) the description of Shamrock Logistics Operations in this
                 prospectus; and

          (d) For each taxable year, more than 90% of our gross income will be
              derived from

             (1) the exploration, development, production, processing, refining,
                 transportation, storage or marketing of any mineral or natural
                 resource, including oil, gas, or products thereof which come
                 from either a crude oil refinery or a natural gas processing
                 facility, or

             (2) other items of income as to which counsel has opined or will
                 opine are "qualifying income" within the meaning of Section
                 7704(d) of the Internal Revenue Code.

     Section 7704 of the Internal Revenue Code provides that publicly-traded
partnerships will, as a general rule, be taxed as corporations. However, an
exception (the "Qualifying Income Exception") exists with respect to
publicly-traded partnerships of which 90% or more of the gross income for every
taxable year consists of "qualifying income." Qualifying income includes income
and gains derived from the transportation and marketing of crude oil, natural
gas, and products thereof. Other types of qualifying income include interest
other than from a financial business, dividends, gains from the sale of real
property, and gains from the sale or other disposition of capital assets held
for the production of income that otherwise constitutes qualifying income. We
estimate that less than 4% of our current income is not qualifying income;
however, this estimate could change from time to time. Based upon and subject to
this estimate, the factual representations made by us and the general partner
and a review of the applicable legal authorities, counsel is of the opinion that
at least 90% of our gross income constitutes qualifying income.

     If we fail to meet the Qualifying Income Exception, other than a failure
which is determined by the IRS to be inadvertent and which is cured within a
reasonable time after discovery, we will be treated as if we had transferred all
of our assets, subject to liabilities, to a newly formed corporation, on the
first day of the year in which we fail to meet the Qualifying Income Exception,
                                       134
<PAGE>   141

in return for stock in that corporation, and then distributed that stock to the
partners in liquidation of their interests in us. This contribution and
liquidation should be tax-free to us and the unitholders so long as we, at that
time, do not have liabilities in excess of the tax basis of our assets.
Thereafter, we would be treated as a corporation for federal income tax
purposes.

     If Shamrock Logistics or Shamrock Logistics Operations were treated as an
association taxable as a corporation in any taxable year, either as a result of
a failure to meet the Qualifying Income Exception or otherwise, its items of
income, gain, loss and deduction would be reflected only on a separate tax
return rather than being passed through to the unitholders, and its net income
would be taxed at corporate rates. In addition, any distribution made to a
unitholder would be treated as either taxable dividend income, to the extent of
Shamrock Logistics' current or accumulated earnings and profits, or, in the
absence of earnings and profits, a nontaxable return of capital, to the extent
of the unitholder's tax basis in his common units, or taxable capital gain,
after the unitholder's tax basis in his common units is reduced to zero.
Accordingly, treatment of either Shamrock Logistics or Shamrock Logistics
Operations as an association taxable as a corporation would result in a material
reduction in a unitholder's cash flow and after-tax return and thus would likely
result in a substantial reduction of the value of the units.

     The discussion below is based on the opinion that we will be classified as
a partnership for federal income tax purposes.

TAX TREATMENT OF UNITHOLDERS

     Limited Partner Status. Unitholders who have become limited partners of
Shamrock Logistics will be treated as partners of Shamrock Logistics for federal
income tax purposes. Counsel is also of the opinion that

          (a) assignees who have executed and delivered transfer applications,
              and are awaiting admission as limited partners, and

          (b) unitholders whose common units are held in street name or by a
              nominee and who have the right to direct the nominee in the
              exercise of all substantive rights attendant to the ownership of
              their common units,

will be treated as partners of Shamrock Logistics for federal income tax
purposes. As there is no direct authority addressing assignees of common units
who are entitled to execute and deliver transfer applications and become
entitled to direct the exercise of attendant rights, but who fail to execute and
deliver transfer applications, counsel's opinion does not extend to these
persons. Furthermore, a purchaser or other transferee of common units who does
not execute and deliver a transfer application may not receive some federal
income tax information or reports furnished to record holders of common units
unless the common units are held in a nominee or street name account and the
nominee or broker has executed and delivered a transfer application for those
common units.

     A beneficial owner of common units whose units have been transferred to a
short seller to complete a short sale would appear to lose his status as a
partner with respect to these units for federal income tax purposes. Please read
"-- Treatment of Short Sales."

     Income, gain, deductions, or losses would not appear to be reportable by a
unitholder who is not a partner for federal income tax purposes, and any cash
distributions received by a unitholder who is not a partner for federal income
tax purposes would therefore be fully taxable as ordinary income. These holders
should consult their own tax advisors with respect to their status as partners
of Shamrock Logistics for federal income tax purposes.

     Flow-Through of Taxable Income. We will not pay any federal income tax.
Instead, each unitholder will be required to report on his income tax return his
allocable share of our income, gains, losses, and deductions without regard to
whether corresponding cash distributions are
                                       135
<PAGE>   142

received by that unitholder. Consequently, a unitholder may be allocated income
from us even if he has not received a cash distribution. Each unitholder will be
required to include in income his allocable share of our income, gain, loss, and
deduction for our taxable year ending with or within the taxable year of the
unitholder.

     Treatment of Distributions. Our distributions to a unitholder generally
will not be taxable to the unitholder for federal income tax purposes to the
extent of his tax basis in his common units immediately before the distribution.
Our cash distributions in excess of a unitholder's tax basis generally will be
considered to be gain from the sale or exchange of the common units, taxable in
accordance with the rules described under "-- Disposition of Common Units"
below. Any reduction in a unitholder's share of our liabilities for which no
partner, including the general partner, bears the economic risk of loss, known
as "nonrecourse liabilities," will be treated as a distribution of cash to that
unitholder. To the extent our distributions cause a unitholder's "at risk"
amount to be less than zero at the end of any taxable year, he must recapture
any losses deducted in previous years. Please read "-- Limitations on
Deductibility of Our Losses."

     A decrease in a unitholder's percentage interest in us because of our
issuance of additional common units will decrease his share of our nonrecourse
liabilities, and thus will result in a corresponding deemed distribution of
cash. A non-pro rata distribution of money or property may result in ordinary
income to a unitholder, regardless of his tax basis in his common units, if the
distribution reduces the unitholder's share of our "unrealized receivables",
including depreciation recapture, and/or substantially appreciated "inventory
items", both as defined in Section 751 of the Internal Revenue Code, and
collectively, "Section 751 Assets." To that extent, a unitholder will be treated
as having been distributed his proportionate share of the Section 751 Assets and
having exchanged those assets with us in return for the non-pro rata portion of
the actual distribution made to him. This latter deemed exchange will generally
result in the unitholder's realization of ordinary income under Section 751(b)
of the Internal Revenue Code. That income will equal the excess of (1) the
non-pro rata portion of that distribution over (2) the unitholder's tax basis
for the share of the Section 751 Assets deemed relinquished in the exchange.


     Ratio of Taxable Income to Distributions. We estimate that a purchaser of
common units in this offering who holds those common units from the date of
closing of this offering through December 31, 2003, will be allocated an amount
of federal taxable income for that period that will be less than 20% of the cash
distributed with respect to that period. We anticipate that after the taxable
year ending December 31, 2003, the ratio of allocable taxable income to cash
distributions to the unitholders will increase. These estimates are based upon
the assumption that gross income from operations will approximate the amount
required to make the minimum quarterly distribution on all units and other
assumptions with respect to capital expenditures, cash flow and anticipated cash
distributions. These estimates and assumptions are subject to, among other
things, numerous business, economic, regulatory, competitive, and political
uncertainties beyond our control. Further, the estimates are based on current
tax law and specified tax reporting positions that we intend to adopt and with
which the IRS could disagree. Accordingly, these estimates may not prove to be
correct. The actual percentage of distributions that will constitute taxable
income could be higher or lower, and any differences could be material and could
materially affect the value of the common units.


     Tax Rates. In general, the highest effective United States federal income
tax rate for individuals for 2000 is 39.6% and the maximum United States federal
income tax rate for net capital gains of an individual is generally 20% if the
asset was held for more than 12 months at the time of disposition.

     Alternative Minimum Tax. Each unitholder will be required to take into
account his distributive share of any items of our income, gain, deduction or
loss for purposes of the alternative minimum tax. The minimum tax rate for
noncorporate taxpayers is 26% on the first $175,000 of alternative minimum
taxable income in excess of the exemption amount and 28% on any

                                       136
<PAGE>   143

additional alternative minimum taxable income. Prospective unitholders should
consult with their own tax advisors as to the impact of an investment in units
on their liability for the alternative minimum tax.

     Basis of Common Units. A unitholder's initial tax basis for his common
units will be the amount he paid for the common units plus his share of our
nonrecourse liabilities. That basis will be increased by his share of our income
and by any increases in his share of our nonrecourse liabilities. That basis
will be decreased, but not below zero, by distributions from us, by the
unitholder's share of our losses, by any decreases in his share of our
nonrecourse liabilities and by his share of our expenditures that are not
deductible in computing taxable income and are not required to be capitalized. A
limited partner will have no share of our debt which is recourse to the general
partner, but will have a share, generally based on his share of profits, of our
nonrecourse liabilities. Please read "-- Disposition of Common
Units -- Recognition of Gain or Loss."

     Limitations on Deductibility of Our Losses. The deduction by a unitholder
of his share of our losses will be limited to the tax basis in his units and, in
the case of an individual unitholder or a corporate unitholder, if more than 50%
of the value of its stock is owned directly or indirectly by five or fewer
individuals or some tax-exempt organizations, to the amount for which the
unitholder is considered to be "at risk" with respect to our activities, if that
is less than his tax basis. A unitholder must recapture losses deducted in
previous years to the extent that distributions cause his at risk amount to be
less than zero at the end of any taxable year. Losses disallowed to a unitholder
or recaptured as a result of these limitations will carry forward and will be
allowable to the extent that his tax basis or at risk amount, whichever is the
limiting factor, is subsequently increased. Upon the taxable disposition of a
unit, any gain recognized by a unitholder can be offset by losses that were
previously suspended by the at risk limitation but may not be offset by losses
suspended by the basis limitation. Any excess loss above that gain previously
suspended by the at risk or basis limitations is no longer utilizable.

     In general, a unitholder will be at risk to the extent of the tax basis of
his units, excluding any portion of that basis attributable to his share of our
nonrecourse liabilities, reduced by any amount of money he borrows to acquire or
hold his units, if the lender of those borrowed funds owns an interest in us, is
related to the unitholder or can look only to the units for repayment. A
unitholder's at risk amount will increase or decrease as the tax basis of the
unitholder's units increases or decreases, other than tax basis increases or
decreases attributable to increases or decreases in his share of our nonrecourse
liabilities.

     The passive loss limitations generally provide that individuals, estates,
trusts and some closely-held corporations and personal service corporations can
deduct losses from passive activities, which are generally, activities in which
the taxpayer does not materially participate, only to the extent of the
taxpayer's income from those passive activities. The passive loss limitations
are applied separately with respect to each publicly-traded partnership.
Consequently, any passive losses we generate will only be available to offset
our passive income generated in the future and will not be available to offset
income from other passive activities or investments, including other
publicly-traded partnerships, or salary or active business income. Passive
losses that are not deductible because they exceed a unitholder's share of the
income we generate may be deducted in full when he disposes of his entire
investment in us in a fully taxable transaction with an unrelated party. The
passive activity loss rules are applied after other applicable limitations on
deductions, including the at risk rules and the basis limitation.

     A unitholder's share of our net income may be offset by any suspended
passive losses, but it may not be offset by any other current or carryover
losses from other passive activities, including those attributable to other
publicly-traded partnerships. The IRS has announced that Treasury Regulations
will be issued that characterize net passive income from a publicly-traded

                                       137
<PAGE>   144

partnership as investment income for purposes of the limitations on the
deductibility of investment interest.

     Limitations on Interest Deductions. The deductibility of a non-corporate
taxpayer's "investment interest expense" is generally limited to the amount of
that taxpayer's "net investment income." As noted, a unitholder's share of our
net passive income will be treated as investment income for this purpose. In
addition, the unitholder's share of our portfolio income will be treated as
investment income. Investment interest expense includes:

     - interest on indebtedness properly allocable to property held for
       investment;

     - our interest expense attributed to portfolio income; and

     - the portion of interest expense incurred to purchase or carry an interest
       in a passive activity to the extent attributable to portfolio income.

     The computation of a unitholder's investment interest expense will take
into account interest on any margin account borrowing or other loan incurred to
purchase or carry a unit. Net investment income includes gross income from
property held for investment and amounts treated as portfolio income under the
passive loss rules, less deductible expenses, other than interest, directly
connected with the production of investment income, but generally does not
include gains attributable to the disposition of property held for investment.

     Allocation of Income, Gain, Loss, and Deduction. In general, if we have a
net profit, our items of income, gain, loss, and deduction will be allocated
among the general partner and the unitholders in accordance with their
particular percentage interests in us. At any time that distributions are made
to the common units and not to the subordinated units, or that incentive
distributions are made to the general partner, gross income will be allocated to
the recipients to the extent of these distributions. If we have a net loss, the
amount of that loss will be allocated first, to the general partner and the
unitholders in accordance with their particular percentage interests in us to
the extent of their positive capital accounts, and, second, to the general
partner.

     Specified items of our income, deduction, gain, and loss will be allocated
to account for the difference between the tax basis and fair market value of
property contributed to us by the general partner and affiliates of the general
partner referred to in this discussion as "Contributed Property." The effect of
these allocations to a unitholder will be essentially the same as if the tax
basis of the Contributed Property were equal to its fair market value at the
time of contribution. In addition, specified items of recapture income will be
allocated to the extent possible to the partner who was allocated the deduction
giving rise to the treatment of that gain as recapture income in order to
minimize the recognition of ordinary income by some unitholders. Finally,
although we do not expect that our operations will result in the creation of
negative capital accounts, if negative capital accounts nevertheless result,
items of our income and gain will be allocated in an amount and manner
sufficient to eliminate the negative balance as quickly as possible.

     An allocation of items of our income, gain, loss, or deduction, other than
an allocation required by the Internal Revenue Code to eliminate the difference
between a partner's "book" capital account, credited with the fair market value
of Contributed Property, and "tax" capital account, credited with the tax basis
of Contributed Property, referred to in this discussion as the "Book-Tax
Disparity," will generally be given effect for federal income tax purposes in
determining a partner's distributive share of an item of income, gain, loss or
deduction only if the allocation has substantial economic effect. In any other
case, a partner's distributive share of an item will be determined on the basis
of the partner's interest in us, which will be determined by taking into account
all the facts and circumstances, including the partner's relative contributions
to us, the interests of the partners in economic profits and losses, the
interests of the partners in

                                       138
<PAGE>   145

cash flow and other nonliquidating distributions and rights of the partners to
distributions of capital upon liquidation.

     Counsel is of the opinion that, with the exception of the issues described
in "-- Disposition of Common Units -- Section 754 Election" and "-- Disposition
of Common Units -- Allocations Between Transferors and Transferees," allocations
under our partnership agreement will be given effect for federal income tax
purposes in determining a partner's distributive share of an item of income,
gain, loss or deduction.

     Entity-Level Collections. If we are required or elect under applicable law
to pay any federal, state or local income tax on behalf of any unitholder or any
general partner or any former unitholder, we are authorized to pay those taxes
from our funds. That payment, if made, will be treated as a distribution of cash
to the partner on whose behalf the payment was made. If the payment is made on
behalf of a person whose identity cannot be determined, we are authorized to
treat the payment as a distribution to all current unitholders. We are
authorized to amend the partnership agreement in the manner necessary to
maintain uniformity of intrinsic tax characteristics of units and to adjust
later distributions, so that after giving effect to these distributions, the
priority and characterization of distributions otherwise applicable under the
partnership agreement is maintained as nearly as is practicable. Payments by us
as described above could give rise to an overpayment of tax on behalf of an
individual partner in which event the partner could file a claim for credit or
refund.

     Treatment of Short Sales. A unitholder whose units are loaned to a "short
seller" to cover a short sale of units may be considered as having disposed of
ownership of those units. If so, he would no longer be a partner for those units
during the period of the loan and may recognize gain or loss from the
disposition. As a result, during this period:

     - any of our income, gain, deduction or loss with respect to those units
       would not be reportable by the unitholder;

     - any cash distributions received by the unitholder for those units would
       be fully taxable; and

     - all of these distributions would appear to be treated as ordinary income.

     Counsel has not rendered an opinion regarding the treatment of a unitholder
whose common units are loaned to a short seller to cover a short sale of common
units; therefore, unitholders desiring to assure their status as partners and
avoid the risk of gain recognition should modify any applicable brokerage
account agreements to prohibit their brokers from borrowing their units. The IRS
has announced that it is actively studying issues relating to the tax treatment
of short sales of partnership interests. Please also read "-- Disposition of
Common Units -- Recognition of Gain or Loss."

TAX TREATMENT OF OPERATIONS

     Accounting Method and Taxable Year. We will use the year ending December 31
as our taxable year and we will adopt the accrual method of accounting for
federal income tax purposes. Each unitholder will be required to include in
income his allocable share of our income, gain, loss and deduction for our
taxable year ending within or with his taxable year. In addition, a unitholder
who has a taxable year ending on a date other than December 31 and who disposes
of all of his units following the close of our taxable year but before the close
of his taxable year must include his allocable share of our income, gain, loss
and deduction in income for his taxable year, with the result that he will be
required to report income for his taxable year that includes his share of more
than one year of income, gain, loss and deduction. Please read "-- Disposition
of Common Units -- Allocations Between Transferors and Transferees."

     Initial Tax Basis, Depreciation, and Amortization. The tax basis of our
assets will be used for purposes of computing depreciation and cost recovery
deductions and, ultimately, gain or loss on
                                       139
<PAGE>   146

the disposition of these assets. The federal income tax burden associated with
the difference between the fair market value of property contributed and the tax
basis established for that property will be borne by the contributing partners.
Please read "-- Tax Treatment of Unitholders -- Allocation of Income, Gain, Loss
and Deduction."

     To the extent allowable, we may elect to use the depreciation and cost
recovery methods that will result in the largest deductions being taken in the
early years after assets are placed in service. We will not be entitled to any
amortization deductions with respect to any goodwill conveyed to us on
formation. Property we subsequently acquire or construct may be depreciated
using accelerated methods permitted by the Internal Revenue Code.

     If we dispose of depreciable property by sale, foreclosure, or otherwise,
all or a portion of any gain, determined by reference to the amount of
depreciation previously deducted and the nature of the property, may be subject
to the recapture rules and taxed as ordinary income rather than capital gain.
Similarly, a partner who has taken cost recovery or depreciation deductions with
respect to property we own may be required to recapture those deductions as
ordinary income upon a sale of his interest in us. Please read "-- Tax Treatment
of Unitholders -- Allocation of Income, Gain, Loss and Deduction" and
"-- Disposition of Common Units -- Recognition of Gain or Loss."

     Costs incurred in our organization may be amortized over any period we
select not shorter than 60 months. The costs incurred in promoting the issuance
of units (i.e. syndication expenses) must be capitalized and cannot be deducted
currently, ratably or upon our termination. There are uncertainties regarding
the classification of costs as organization expenses, which may be amortized,
and as syndication expenses, which may not be amortized. Under recently adopted
regulations, underwriting discounts and commissions are treated as syndication
costs.

     Uniformity of Units. Because we cannot match transferors and transferees of
units, uniformity of the economic and tax characteristics of the units to a
purchaser of these units must be maintained. In the absence of uniformity,
compliance with a number of federal income tax requirements, both statutory and
regulatory, could be substantially diminished. A lack of uniformity can result
from a literal application of Treasury Regulation Section 1.167(c)-1(a)(6). Any
non-uniformity could have a negative impact on the value of the units. Please
read "-- Disposition of Common Units -- Section 754 Election."

     Consistent with the recently finalized regulations under Section 743, we
intend to depreciate the portion of a Section 743(b) adjustment attributable to
unrealized appreciation in the value of contributed property or adjusted
property, to the extent of any unamortized Section 704(c) built-in gain, using a
rate of depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the common basis of that
property, or treat that portion as nonamortizable, to the extent attributable to
property the common basis of which is not amortizable, consistent with the
regulations under Section 743, but despite its inconsistency with Treasury
Regulation Section 1.167(c)-1(a)(6). Please read "-- Disposition of Common
Units -- Section 754 Election." To the extent that the Section 743(b) adjustment
is attributable to appreciation in value in excess of the unamortized Section
704(c) built-in gain, we will apply the rules described in the Regulations and
legislative history. If we determine that this type of position cannot
reasonably be taken, we may adopt a depreciation and amortization convention
under which all purchasers acquiring units in the same month would receive
depreciation and amortization deductions, whether attributable to a common basis
or Section 743(b) adjustment, based upon the same applicable rate as if they had
purchased a direct interest in our property. If this kind of an aggregate
approach is adopted, it may result in lower annual depreciation and amortization
deductions than would otherwise be allowable to some unitholders and risk the
loss of depreciation and amortization deductions not taken in the year that
these deductions are otherwise allowable. This convention will not be adopted if
we determine that the loss of

                                       140
<PAGE>   147

depreciation and amortization deductions will have a material adverse effect on
the unitholders. If we choose not to utilize this aggregate method, we may use
any other reasonable depreciation and amortization convention to preserve the
uniformity of the intrinsic tax characteristics of any units that would not have
a material adverse effect on the unitholders. The IRS may challenge any method
of depreciating the Section 743(b) adjustment described in this paragraph. If
this type of challenge were sustained, the uniformity of units might be
affected, and the gain from the sale of units might be increased without the
benefit of additional deductions. Please read "-- Disposition of Common
Units -- Recognition of Gain or Loss."

     Valuation and Tax Basis of Our Properties. The federal income tax
consequences of the ownership and disposition of units will depend in part on
our estimates of the relative fair market values, and determinations of the
initial tax bases, of our assets. Although we may from time to time consult with
professional appraisers regarding valuation matters, we will make many of the
relative fair market value estimates ourselves. These estimates and
determinations of basis are subject to challenge and will not be binding on the
IRS or the courts. If the estimates of fair market value or determinations of
basis are later found to be incorrect, the character and amount of items of
income, gain, loss, or deductions previously reported by unitholders might
change, and unitholders might be required to adjust their tax liability for
prior years.

     State and Local Tax Considerations. For a discussion of the state and local
tax considerations arising from an investment in common units, please read
"-- State, Local and Other Tax Considerations" at the end of this "Tax
Considerations."

DISPOSITION OF COMMON UNITS

     Recognition of Gain or Loss. Gain or loss will be recognized on a sale of
units equal to the difference between the amount realized and the unitholder's
tax basis for the units sold. A unitholder's amount realized will be measured by
the sum of the cash or the fair market value of other property received plus his
share of our nonrecourse liabilities. Because the amount realized includes a
unitholder's share of our nonrecourse liabilities, the gain recognized on the
sale of units could result in a tax liability in excess of any cash received
from the sale.

     Prior distributions from us in excess of cumulative net taxable income for
a common unit that decreased a unitholder's tax basis in that common unit will,
in effect, become taxable income if the common unit is sold at a price greater
than the unitholder's tax basis in that common unit, even if the price is less
than his original cost.

     Except as noted below, gain or loss recognized by a unitholder, other than
a "dealer" in units, on the sale or exchange of a unit held for more than one
year will generally be taxable as capital gain or loss. Capital gain recognized
by an individual on the sale of units held more than 12 months will generally be
taxed at a maximum rate of 20%. A portion of this gain or loss, which will
likely be substantial, however, will be separately computed and taxed as
ordinary income or loss under Section 751 of the Internal Revenue Code to the
extent attributable to assets giving rise to depreciation recapture or other
"unrealized receivables" or to "inventory items" we own. The term "unrealized
receivables" includes potential recapture items, including depreciation
recapture. Ordinary income attributable to unrealized receivables, inventory
items and depreciation recapture may exceed net taxable gain realized upon the
sale of the unit and may be recognized even if there is a net taxable loss
realized on the sale of the unit. Thus, a unitholder may recognize both ordinary
income and a capital loss upon a disposition of units. Net capital loss may
offset no more than $3,000 of ordinary income in the case of individuals and may
only be used to offset capital gain in the case of corporations.

     The IRS has ruled that a partner who acquires interests in a partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis. Upon a sale or other disposition of less than all of those
interests, a portion of that tax basis must be allocated to the interests sold
using an "equitable apportionment" method. Although the ruling is
                                       141
<PAGE>   148

unclear as to how the holding period of these interests is determined once they
are combined, recently finalized regulations allow a selling unitholder who can
identify common units transferred with an ascertainable holding period to elect
to use the actual holding period of the units transferred. Thus, according to
the ruling, a unitholder will be unable to select high or low basis common units
to sell as would be the case with corporate stock, but, according to the
regulations, may designate specific common units sold for purposes of
determining the holding period of units transferred. A unitholder electing to
use the actual holding period of common units transferred must consistently use
that identification method for all subsequent sales or exchanges of common
units. A unitholder considering the purchase of additional units or a sale of
common units purchased in separate transactions should consult his tax advisor
as to the possible consequences of the ruling and application of the final
regulations.

     Specific provisions of the Internal Revenue Code affect the taxation of
some financial products and securities, including partnership interests, by
treating a taxpayer as having sold an "appreciated" partnership interest, one in
which gain would be recognized if it were sold, assigned or terminated at its
fair market value, if the taxpayer or related persons enter(s) into:

     - a short sale;

     - an offsetting notional principal contract; or

     - a futures or forward contract with respect to the partnership interest or
       substantially identical property.

     Moreover, if a taxpayer has previously entered into a short sale, an
offsetting notional principal contract or a futures or forward contract with
respect to the partnership interest, the taxpayer will be treated as having sold
that position if the taxpayer or a related person then acquires the partnership
interest or substantially identical property. The Secretary of Treasury is also
authorized to issue regulations that treat a taxpayer that enters into
transactions or positions that have substantially the same effect as the
preceding transactions as having constructively sold the financial position.

     Allocations Between Transferors and Transferees. In general, our taxable
income and losses will be determined annually, will be prorated on a monthly
basis and will be subsequently apportioned among the unitholders in proportion
to the number of units owned by each of them as of the opening of the NYSE on
the first business day of the month (the "Allocation Date"). However, gain or
loss realized on a sale or other disposition of our assets other than in the
ordinary course of business will be allocated among the unitholders on the
Allocation Date in the month in which that gain or loss is recognized. As a
result, a unitholder transferring units in the open market may be allocated
income, gain, loss and deduction accrued after the date of transfer.

     The use of this method may not be permitted under existing Treasury
Regulations. Accordingly, counsel is unable to opine on the validity of this
method of allocating income and deductions between the transferors and the
transferees of units. If this method is not allowed under the Treasury
Regulations, or only applies to transfers of less than all of the unitholder's
interest, our taxable income or losses might be reallocated among the
unitholders. We are authorized to revise our method of allocation between
transferors and transferees, as well as among partners whose interests otherwise
vary during a taxable period, to conform to a method permitted under future
Treasury Regulations.

     A unitholder who owns units at any time during a quarter and who disposes
of these units prior to the record date set for a cash distribution for that
quarter will be allocated items of our income, gain, loss and deductions
attributable to that quarter but will not be entitled to receive that cash
distribution.

                                       142
<PAGE>   149

     Section 754 Election. We intend to make the election permitted by Section
754 of the Internal Revenue Code. That election is irrevocable without the
consent of the IRS. The election will generally permit us to adjust a common
unit purchaser's tax basis in our assets ("inside basis") under Section 743(b)
of the Internal Revenue Code to reflect his purchase price. This election does
not apply to a person who purchases common units directly from us. The Section
743(b) adjustment belongs to the purchaser and not to other partners. For
purposes of this discussion, a partner's inside basis in our assets will be
considered to have two components, (1) his share of our tax basis in our assets
("common basis") and (2) his Section 743(b) adjustment to that basis.

     Treasury Regulations under Section 743 of the Internal Revenue Code
require, if the remedial allocation method is adopted (which we intend to do), a
portion of the Section 743(b) adjustment attributable to recovery property to be
depreciated over the remaining cost recovery period for the Section 704(c)
built-in gain. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section
743(b) adjustment attributable to property subject to depreciation under Section
167 of the Internal Revenue Code rather than cost recovery deductions under
Section 168 is generally required to be depreciated using either the
straight-line method or the 150% declining balance method. Under our partnership
agreement, the general partner is authorized to adopt a convention to preserve
the uniformity of units even if that convention is not consistent with specified
Treasury Regulations. Please read "-- Tax Treatment of Operations -- Uniformity
of Units."

     Although counsel is unable to opine as to the validity of this approach, we
intend to depreciate or amortize the portion of a Section 743(b) adjustment
attributable to unrealized appreciation in the value of contributed property, to
the extent of any unamortized Section 704(c) built-in gain, using a rate of
depreciation or amortization derived from the depreciation or amortization
method and useful life applied to the common basis of the property, or treat
that portion as non-amortizable to the extent attributable to property the
common basis of which is not amortizable. This method is consistent with the
regulations under Section 743 but is arguably inconsistent with Treasury
Regulation Section 1.167(c)-1(a)(6). To the extent this Section 743(b)
adjustment is attributable to appreciation in value in excess of the unamortized
Section 704(c) built-in gain, we will apply the rules described in the Treasury
Regulations and legislative history. If we determine that this position cannot
reasonably be taken, we may adopt a depreciation or amortization convention
under which all purchasers acquiring units in the same month would receive
depreciation or amortization, whether attributable to common basis or Section
743(b) adjustment, based upon the same applicable rate as if they had purchased
a direct interest in our assets. This kind of aggregate approach may result in
lower annual depreciation or amortization deductions than would otherwise be
allowable to specified unitholders. Please read "-- Tax Treatment of
Operations -- Uniformity of Units."

     The allocation of the Section 743(b) adjustment among our assets must be
made in accordance with the Internal Revenue Code. The IRS could seek to
reallocate some or all of any Section 743(b) adjustment to goodwill not so
allocated by us. Goodwill, as an intangible asset, is generally amortizable over
a longer period of time or under a less accelerated method than our tangible
assets.

     A Section 754 election is advantageous if the transferee's tax basis in his
units is higher than the units' share of the aggregate tax basis of our assets
immediately prior to the transfer. In that case, as a result of the election,
the transferee would have a higher tax basis in his share of our assets for
purposes of calculating, among other items, his depreciation and depletion
deductions and his share of any gain or loss on a sale of our assets.
Conversely, a Section 754 election is disadvantageous if the transferee's tax
basis in his units is lower than those units' share of the aggregate tax basis
of our assets immediately prior to the transfer. Thus, the fair market value of
the units may be affected either favorably or adversely by the election.

                                       143
<PAGE>   150

     The calculations involved in the Section 754 election are complex, and we
will make them on the basis of assumptions as to the value of our assets and
other matters. The determinations we make may be successfully challenged by the
IRS and the deductions resulting from them may be reduced or disallowed
altogether. Should the IRS require a different basis adjustment to be made, and
should, in our opinion, the expense of compliance exceed the benefit of the
election, we may seek permission from the IRS to revoke our Section 754
election. If permission is granted, a subsequent purchaser of units may be
allocated more income than he would have been allocated had the election not
been revoked.

     Notification Requirements. A unitholder who sells or exchanges units is
required to notify us in writing of that sale or exchange within 30 days after
the sale or exchange. We are required to notify the IRS of that transaction and
to furnish specified information to the transferor and transferee. However,
these reporting requirements do not apply to a sale by an individual who is a
citizen of the United States and who effects the sale or exchange through a
broker. Additionally, a transferor and a transferee of a unit will be required
to furnish statements to the IRS, filed with their income tax returns for the
taxable year in which the sale or exchange occurred, that describe the amount of
the consideration received for the unit that is allocated to our goodwill or
going concern value. Failure to satisfy these reporting obligations may lead to
the imposition of substantial penalties.

     Constructive Termination. We will be considered to have been terminated for
tax purposes if there is a sale or exchange of 50% or more of the total
interests in our capital and profits within a 12-month period. If we elect to be
treated as a large partnership, which we do not currently intend to do, we will
not terminate by reason of the sale or exchange of interests in us. Our
termination will cause a termination of Shamrock Logistics Operations. Our
termination will result in the closing of our taxable year for all unitholders.
In the case of a unitholder reporting on a taxable year other than a fiscal year
ending December 31, the closing of our taxable year may result in more than 12
months of our taxable income or loss being includable in his taxable income for
the year of termination. We would be required to make new tax elections after a
termination, including a new election under Section 754 of the Internal Revenue
Code, and a termination would result in a deferral of our deductions for
depreciation. A termination could also result in penalties if we were unable to
determine that the termination had occurred. Moreover, a termination might
either accelerate the application of, or subject us to, any tax legislation
enacted before the termination.

TAX-EXEMPT ORGANIZATIONS AND OTHER INVESTORS

     Ownership of units by employee benefit plans, other tax-exempt
organizations, nonresident aliens, foreign corporations, other foreign persons,
and regulated investment companies raises issues unique to those investors and,
as described below, may have substantially adverse tax consequences. Employee
benefit plans and most other organizations exempt from federal income tax,
including individual retirement accounts and other retirement plans, are subject
to federal income tax on unrelated business taxable income. Virtually all of our
taxable income allocated to a unitholder which is a tax-exempt organization will
be unrelated business taxable income and will be taxable to that unitholder.

     A regulated investment company or "mutual fund" is required to derive 90%
or more of its gross income from interest, dividends and gains from the sale of
stocks or securities or foreign currency or specified related sources. It is not
anticipated that any significant amount of our gross income will include that
type of income.

     Non-resident aliens and foreign corporations, trusts, or estates that own
units will be considered to be engaged in business in the United States on
account of ownership of units. As a consequence they will be required to file
federal tax returns for their share of our income, gain, loss, or deduction and
pay federal income tax at regular rates on any net income or gain.

                                       144
<PAGE>   151

Generally, a partnership is required to pay a withholding tax on the portion of
the partnership's income that is effectively connected with the conduct of a
United States trade or business and which is allocable to the foreign partners,
regardless of whether any actual distributions have been made to these partners.
However, under rules applicable to publicly traded partnerships, we will
withhold (currently at the rate of 39.6%) on actual cash distributions made
quarterly to foreign unitholders. Each foreign unitholder must obtain a taxpayer
identification number from the IRS and submit that number to our transfer agent
on a Form W-8 BEN or applicable substitute form in order to obtain credit for
the taxes withheld. A change in applicable law may require us to change these
procedures.

     Because a foreign corporation that owns units will be treated as engaged in
a United States trade or business, that corporation may be subject to United
States branch profits tax at a rate of 30%, in addition to regular federal
income tax, on its share of our income and gain, as adjusted for changes in the
foreign corporation's "U.S. net equity," which are effectively connected with
the conduct of a United States trade or business. That tax may be reduced or
eliminated by an income tax treaty between the United States and the country in
which the foreign corporate unitholder is a "qualified resident." In addition,
this type of unitholder is subject to special information reporting requirements
under Section 6038C of the Internal Revenue Code.

     Under a ruling of the IRS, a foreign unitholder who sells or otherwise
disposes of a unit will be subject to federal income tax on gain realized on the
disposition of that unit to the extent that this gain is effectively connected
with a United States trade or business of the foreign unitholder. Apart from the
ruling, a foreign unitholder will not be taxed or subject to withholding upon
the disposition of a unit if he has owned less than 5% in value of the units
during the five-year period ending on the date of the disposition and if the
units are regularly traded on an established securities market at the time of
the disposition.

ADMINISTRATIVE MATTERS

     Information Returns and Audit Procedures. We intend to furnish to each
unitholder, within 90 days after the close of each calendar year, specific tax
information, including a Schedule K-1, which describes each unitholder's share
of our income, gain, loss and deduction for our preceding taxable year. In
preparing this information, which will generally not be reviewed by counsel, we
will use various accounting and reporting conventions, some of which have been
mentioned earlier, to determine the unitholder's share of income, gain, loss and
deduction. Any of those conventions may not yield a result that conforms to the
requirements of the Internal Revenue Code, regulations or administrative
interpretations of the IRS. The IRS may successfully contend in court that those
accounting and reporting conventions are impermissible. Any challenge by the IRS
could negatively affect the value of the units.

     The IRS may audit our federal income tax information returns. Adjustments
resulting from any audit of this kind may require each unitholder to adjust a
prior year's tax liability, and possibly may result in an audit of that
unitholder's own return. Any audit of a unitholder's return could result in
adjustments not related to our returns as well as those related to our returns.

     Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of administrative adjustments by the IRS and
tax settlement proceedings. The tax treatment of partnership items of income,
gain, loss and deduction are determined in a partnership proceeding rather than
in separate proceedings with the partners. The Internal Revenue Code provides
for one partner to be designated as the "Tax Matters Partner" for these
purposes. The partnership agreement appoints the general partner as the Tax
Matters Partner of Shamrock Logistics.

     The Tax Matters Partner will make some elections on our behalf and on
behalf of unitholders. In addition, the Tax Matters Partner can extend the
statute of limitations for assessment of tax deficiencies against unitholders
for items in our returns. The Tax Matters
                                       145
<PAGE>   152

Partner may bind a unitholder with less than a 1% profits interest in us to a
settlement with the IRS unless that unitholder elects, by filing a statement
with the IRS, not to give that authority to the Tax Matters Partner. The Tax
Matters Partner may seek judicial review, by which all the unitholders are
bound, of a final partnership administrative adjustment and, if the Tax Matters
Partner fails to seek judicial review, judicial review may be sought by any
unitholder having at least a 1% interest in profits and by the unitholders
having in the aggregate at least a 5% profits interest. However, only one action
for judicial review will go forward, and each unitholder with an interest in the
outcome may participate. However, if we elect to be treated as a large
partnership, a unitholder will not have the right to participate in settlement
conferences with the IRS or to seek a refund. We do not expect to elect to have
the large partnership provisions apply due to the cost of their application.

     A unitholder must file a statement with the IRS identifying the treatment
of any item on his federal income tax return that is not consistent with the
treatment of the item on our return. Intentional or negligent disregard of the
consistency requirement may subject a unitholder to substantial penalties.
However, if we elect to be treated as a large partnership, the unitholders would
be required to treat all partnership items in a manner consistent with our
return.

     Nominee Reporting. Persons who hold an interest in us as a nominee for
another person are required to furnish to us:

          (a) the name, address and taxpayer identification number of the
              beneficial owner and the nominee;

          (b) whether the beneficial owner is

             (1) a person that is not a United States person,

             (2) a foreign government, an international organization or any
                 wholly-owned agency or instrumentality of either of the
                 foregoing, or

             (3) a tax-exempt entity;

          (c) the amount and description of units held, acquired or transferred
              for the beneficial owner; and

          (d) specific information including the dates of acquisitions and
              transfers, means of acquisitions and transfers, and acquisition
              cost for purchases, as well as the amount of net proceeds from
              sales.

     Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and specific
information on units they acquire, hold or transfer for their own account. A
penalty of $50 per failure, up to a maximum of $100,000 per calendar year, is
imposed by the Internal Revenue Code for failure to report that information to
us. The nominee is required to supply the beneficial owner of the units with the
information furnished to us.


     Registration as a Tax Shelter. The Internal Revenue Code requires that "tax
shelters" be registered with the Secretary of the Treasury. The temporary
Treasury Regulations interpreting the tax shelter registration provisions of the
Internal Revenue Code are extremely broad. It is arguable that we are not
subject to the registration requirement on the basis that we will not constitute
a tax shelter. However, we have registered as a tax shelter with the Secretary
of Treasury in the absence of assurance that we will not be subject to tax
shelter registration and in light of the substantial penalties which might be
imposed if registration is required and not undertaken.


                                       146
<PAGE>   153

ISSUANCE OF THIS REGISTRATION NUMBER DOES NOT INDICATE THAT AN INVESTMENT IN US
OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE IRS.


     Our tax shelter registration number is 00294000008. A unitholder who sells
or otherwise transfers a unit in a later transaction must furnish the
registration number to the transferee. The penalty for failure of the transferor
of a unit to furnish the registration number to the transferee is $100 for each
failure. The unitholders must disclose our tax shelter registration number on
Form 8271 to be attached to the tax return on which any deduction, loss or other
benefit we generate is claimed or on which any of our income is included. A
unitholder who fails to disclose the tax shelter registration number on his
return, without reasonable cause for that failure, will be subject to a $250
penalty for each failure. Any penalties discussed are not deductible for federal
income tax purposes.


     Accuracy-related Penalties. An additional tax equal to 20% of the amount of
any portion of an underpayment of tax that is attributable to one or more
specified causes, including negligence or disregard of rules or regulations,
substantial understatements of income tax and substantial valuation
misstatements, is imposed by the Internal Revenue Code. No penalty will be
imposed, however, for any portion of an underpayment if it is shown that there
was a reasonable cause for that portion and that the taxpayer acted in good
faith regarding that portion.

     A substantial understatement of income tax in any taxable year exists if
the amount of the understatement exceeds the greater of 10% of the tax required
to be shown on the return for the taxable year or $5,000 ($10,000 for most
corporations). The amount of any understatement subject to penalty generally is
reduced if any portion is attributable to a position adopted on the return:

          (1) for which there is, or was, "substantial authority"; or

          (2) as to which there is a reasonable basis and the pertinent facts of
              that position are disclosed on the return.

     More stringent rules apply to "tax shelters," a term that in this context
does not appear to include us. If any item of income, gain, loss or deduction
included in the distributive shares of unitholders might result in that kind of
an "understatement" of income for which no "substantial authority" exists, we
must disclose the pertinent facts on our return. In addition, we will make a
reasonable effort to furnish sufficient information for unitholders to make
adequate disclosure on their returns to avoid liability for this penalty.

     A substantial valuation misstatement exists if the value of any property,
or the adjusted basis of any property, claimed on a tax return is 200% or more
of the amount determined to be the correct amount of the valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment attributable
to a substantial valuation misstatement exceeds $5,000 ($10,000 for most
corporations). If the valuation claimed on a return is 400% or more than the
correct valuation, the penalty imposed increases to 40%.

STATE, LOCAL, AND OTHER TAX CONSIDERATIONS

     In addition to federal income taxes, you will be subject to other taxes,
including state and local income taxes, unincorporated business taxes, and
estate, inheritance, or intangible taxes that may be imposed by the various
jurisdictions in which we do business or own property. Although an analysis of
those various taxes is not presented here, each prospective unitholder should
consider their potential impact on his investment in us. We will initially own
property or do business in Texas, Colorado, New Mexico, Kansas, and Oklahoma. Of
these states, Colorado, New Mexico, Kansas, and Oklahoma currently impose a
personal income tax. A unitholder will be required to file state income tax
returns and to pay state income taxes in some or all of these states in which we
do business or own property and may be subject to penalties for failure to

                                       147
<PAGE>   154

comply with those requirements. In some states, tax losses may not produce a tax
benefit in the year incurred and also may not be available to offset income in
subsequent taxable years. Some of the states may require us, or we may elect, to
withhold a percentage of income from amounts to be distributed to a unitholder
who is not a resident of the state. Withholding, the amount of which may be
greater or less than a particular unitholder's income tax liability to the
state, generally does not relieve a nonresident unitholder from the obligation
to file an income tax return. Amounts withheld may be treated as if distributed
to unitholders for purposes of determining the amounts distributed by us. Please
read "-- Tax Treatment of Unitholders -- Entity-Level Collections." Based on
current law and our estimate of our future operations, the general partner
anticipates that any amounts required to be withheld will not be material.

     IT IS THE RESPONSIBILITY OF EACH UNITHOLDER TO INVESTIGATE THE LEGAL AND
TAX CONSEQUENCES, UNDER THE LAWS OF PERTINENT STATES AND LOCALITIES, OF HIS
INVESTMENT IN US. ACCORDINGLY, EACH PROSPECTIVE UNITHOLDER SHOULD CONSULT, AND
MUST DEPEND UPON, HIS OWN TAX COUNSEL OR OTHER ADVISOR WITH REGARD TO THOSE
MATTERS. FURTHER, IT IS THE RESPONSIBILITY OF EACH UNITHOLDER TO FILE ALL STATE
AND LOCAL, AS WELL AS UNITED STATES FEDERAL TAX RETURNS THAT MAY BE REQUIRED OF
HIM. COUNSEL HAS NOT RENDERED AN OPINION ON THE STATE OR LOCAL TAX CONSEQUENCES
OF AN INVESTMENT IN US.

                                       148
<PAGE>   155

           INVESTMENT IN SHAMROCK LOGISTICS BY EMPLOYEE BENEFIT PLANS

     An investment in Shamrock Logistics by an employee benefit plan is subject
to additional considerations because the investments of these plans are subject
to the fiduciary responsibility and prohibited transaction provisions of ERISA,
and restrictions imposed by Section 4975 of the Internal Revenue Code. For these
purposes the term "employee benefit plan" includes, but is not limited to,
qualified pension, profit-sharing and stock bonus plans, Keogh plans, simplified
employee pension plans and tax deferred annuities or IRAs established or
maintained by an employer or employee organization. Among other things,
consideration should be given to:

          (a) whether the investment is prudent under Section 404(a)(1)(B) of
     ERISA;

          (b) whether in making the investment, that plan will satisfy the
              diversification requirements of Section 404(a)(1)(C) of ERISA; and

          (c) whether the investment will result in recognition of unrelated
              business taxable income by the plan and, if so, the potential
              after-tax investment return.

     The person with investment discretion with respect to the assets of an
employee benefit plan, often called a fiduciary, should determine whether an
investment in Shamrock Logistics is authorized by the appropriate governing
instrument and is a proper investment for the plan.

     Section 406 of ERISA and Section 4975 of the Internal Revenue Code
prohibits employee benefit plans, and also IRAs that are not considered part of
an employee benefit plan, from engaging in specified transactions involving
"plan assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Internal Revenue Code with respect to the plan.

     In addition to considering whether the purchase of common units is a
prohibited transaction, a fiduciary of an employee benefit plan should consider
whether the plan will, by investing in Shamrock Logistics, be deemed to own an
undivided interest in the assets of Shamrock Logistics, with the result that the
general partner would also be a fiduciary of the plan and the operations of
Shamrock Logistics would be subject to the regulatory restrictions of ERISA,
including its prohibited transaction rules, as well as the prohibited
transaction rules of the Internal Revenue Code.

     The Department of Labor regulations provide guidance with respect to
whether the assets of an entity in which employee benefit plans acquire equity
interests would be deemed "plan assets" under some circumstances. Under these
regulations, an entity's assets would not be considered to be "plan assets" if,
among other things,

          (a) the equity interests acquired by employee benefit plans are
              publicly offered securities -- i.e., the equity interests are
              widely held by 100 or more investors independent of the issuer and
              each other, freely transferable and registered under some
              provisions of the federal securities laws,

          (b) the entity is an "operating company," -- i.e., it is primarily
              engaged in the production or sale of a product or service other
              than the investment of capital either directly or through a
              majority-owned subsidiary or subsidiaries, or

          (c) there is no significant investment by benefit plan investors,
              which is defined to mean that less than 25% of the value of each
              class of equity interest, disregarding some interests held by our
              general partner, its affiliates, and some other persons, is held
              by the employee benefit plans referred to above, IRAs and other
              employee benefit plans not subject to ERISA, including
              governmental plans.

     Shamrock Logistics' assets should not be considered "plan assets" under
these regulations because it is expected that the investment will satisfy the
requirements in (a) above.
                                       149
<PAGE>   156

     Plan fiduciaries contemplating a purchase of common units should consult
with their own counsel regarding the consequences under ERISA and the Internal
Revenue Code in light of the serious penalties imposed on persons who engage in
prohibited transactions or other violations.

                                       150
<PAGE>   157

                                  UNDERWRITING

     Shamrock Logistics and the underwriters named below have entered into an
underwriting agreement with respect to the common units being offered. Subject
to specified conditions, each underwriter has severally agreed to purchase the
number of common units indicated in the following table. Goldman, Sachs & Co.,
Dain Rauscher Incorporated, A.G. Edwards & Sons, Inc., Lehman Brothers Inc., and
PaineWebber Incorporated are the representatives of the underwriters.


<TABLE>
<CAPTION>
                                                       NUMBER OF
UNDERWRITERS                                          COMMON UNITS
------------                                          ------------
<S>                                                   <C>
Goldman, Sachs & Co................................
Dain Rauscher Incorporated.........................
A.G. Edwards & Sons, Inc...........................
Lehman Brothers Inc................................
UBS Warburg LLC....................................

                                                       ---------
          Total....................................    4,000,000
                                                       =========
</TABLE>


     If the underwriters sell more common units than the total number set forth
in the table above, the underwriters have an option to buy up to an additional
600,000 common units from Shamrock Logistics to cover the sales. They may
exercise that option for 30 days. If any common units are purchased under this
option, the underwriters will severally purchase common units in approximately
the same proportion as set forth in the table above.

     The following table shows the per common unit and total underwriting
discounts and commissions to be paid to the underwriters by Shamrock Logistics.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase 600,000 additional common units.

<TABLE>
<CAPTION>
                                                         PAID BY SHAMROCK LOGISTICS
                                                         ---------------------------
                                                         NO EXERCISE   FULL EXERCISE
                                                         -----------   -------------
<S>                                                      <C>           <C>
Per common unit........................................   $              $
          Total........................................
</TABLE>

     Common units sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the cover of this
prospectus. Any common units sold by the underwriters to securities dealers may
be sold at a discount of up to $     per common unit from the initial public
offering price. Any such securities dealers may resell any common units
purchased from the underwriters to various other brokers or dealers at a
discount of up to $     per common unit from the initial public offering price.
If all the common units are not sold at the initial public offering price, the
representatives may change the offering price and the other selling terms.


     Ultramar Diamond Shamrock, Shamrock Logistics, GP, LLC, UDS Logistics, LLC,
Riverwalk Logistics, L.P., Shamrock Logistics, Shamrock Logistics Operations and
the officers and directors of the general partner of the general partner have
agreed with the underwriters not to dispose of or hedge any of their common
units or subordinated units or securities convertible into or exchangeable for,
or that represent the right to receive, common units or subordinated units or
any securities that are senior to or on a parity with common units during the
period from the date of this prospectus continuing through the date 180 days
after the date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee


                                       151
<PAGE>   158

benefit plans. Please read "Units Eligible for Future Sale" for a discussion of
transfer restrictions.

     Prior to the offering, there has been no public market for the common
units. The initial public offering price will be negotiated among the general
partner and the representatives. Principal factors to be considered in
determining the initial public offering price of the common units, in addition
to prevailing market conditions, will be Ultramar Diamond Shamrock Logistic
Business' historical performance, Shamrock Logistics' pro forma historical
performance, estimates of the business potential and earnings prospects of
Shamrock Logistics, an assessment of Shamrock Logistics' management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.

     The common units will be listed on the New York Stock Exchange under the
symbol "UDL". In order to meet one of the requirements for listing the common
units on the NYSE, the Underwriters have undertaken to sell lots of 100 or more
common units to a minimum of 2,000 beneficial holders.

     In connection with the offering, the underwriters may purchase and sell
units in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
units than they are required to purchase in the offering. "Covered" short sales
are sales made in an amount not greater than the underwriters' option to
purchase additional units from the issuer in the offering. The underwriters may
close out any covered short position by either exercising their option to
purchase additional units or purchasing units in the open market. In determining
the source of units to close out the covered short position, the underwriters
will consider, among other things, the price of units available for purchase in
the open market as compared to the price at which they may purchase units
through the overallotment option. "Naked" short sales are any sales in excess of
such option. The underwriters must close out any naked short position by
purchasing units in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on
the price of the units in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist
of various bids for or purchases of units made by the underwriters in the open
market prior to the completion of the offering.

     The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased units sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

     Purchases to cover short position and stabilizing transactions may have the
effect of preventing or retarding a decline in the market price of the units,
and together with the imposition of the penalty bid, may stabilize, maintain or
otherwise affect the market price of the units. As a result, the price of the
units may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued at any time.
These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.


     At the request of Shamrock Logistics, the underwriters are reserving up to
300,000 common units for sale at the initial public offering price to directors,
officers, employees and friends through a directed share program. The number of
common units available for sale to the general public in the public offering
will be reduced to the extent these persons purchase these reserved units. Any
common units not so purchased will be offered by the underwriters to the general
public on the same basis as the other common units offered by this prospectus.
Employees, officers and directors of Shamrock Logistics or any of its affiliates
purchasing units in the directed share program have agreed not to pledge,
dispose of or enter into any swap or other

                                       152
<PAGE>   159


arrangement that transfers all or portion of the economic consequences
associated with the ownership of, any common units or any securities convertible
into or exercisable or exchangeable for common units during the period from the
date of this prospectus continuing through the date 180 days after the date of
this prospectus without the prior written consent of PaineWebber Incorporated,
an affiliate of UBS Warburg LLC.


     Shamrock Logistics estimates that its share of the total expenses of the
offering, excluding underwriting discounts and commissions, will be
approximately $4.5 million.

     A prospectus in electronic format may be made available on the web sites
maintained by one or more underwriters or selected dealers. The underwriters may
agree to allocate a number of common units to underwriters for sale to their
online brokerage account holders. Internet distributions will be allocated by
the lead managers to underwriters that may make Internet distributions on the
same basis as other allocations.

     Because the National Association of Securities Dealers, Inc. views the
common units offered under this prospectus as interests in a direct
participation program, the offering is being made in compliance with Rule 2810
of the NASD's Conduct Rules. Investor suitability with respect to the common
units should be judged similarly to the suitability with respect to other
securities that are listed for trading on the New York Stock Exchange or a
national securities exchange.

     The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of common units offered.

     Ultramar Diamond Shamrock, Shamrock Logistics GP, LLC, UDS Logistics, LLC,
the general partner, Shamrock Logistics and Shamrock Logistics Operations has
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act.

     Some of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Ultramar Diamond Shamrock and its
subsidiaries in the ordinary course of business and have received customary fees
for performing these services.

                          VALIDITY OF THE COMMON UNITS

     The validity of the common units will be passed upon for Shamrock Logistics
by Andrews & Kurth L.L.P., Houston, Texas. Certain legal matters in connection
with the common units offered by this prospectus will be passed upon for the
Underwriters by Baker Botts L.L.P., Houston, Texas.

                                    EXPERTS

     The audited financial statements of Shamrock Logistics, L.P., Riverwalk
Logistics, L.P. and the Ultramar Diamond Shamrock logistics business included in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.

                                       153
<PAGE>   160

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the SEC a registration statement on Form S-1 regarding
the common units offered by this prospectus. This prospectus does not contain
all of the information set forth in the registration statement. For further
information with respect to Shamrock Logistics and the common units offered in
this prospectus, you may desire to review the registration statement, including
its exhibits and schedules. You may desire to review the full text of any
contracts, agreements or other documents filed as exhibits to the registration
statement for a more detailed description of the matter involved. The
registration statement, including the exhibits and schedules, may be inspected
and copied at the public reference facilities maintained by the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New York,
New York 10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of
this material can also be obtained upon written request from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates or from the SEC's web site on the
Internet at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for
further information on public reference rooms.

     As a result of the offering, we will file periodic reports and other
information with the SEC. These reports and other information may be inspected
and copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates or obtained from the
SEC's web site on the Internet at http://www.sec.gov.

     We intend to furnish our unitholders annual reports containing audited
financial statements and furnish or make available quarterly reports containing
unaudited interim financial information for the first three fiscal quarters of
each fiscal year of Shamrock Logistics.

                           FORWARD-LOOKING STATEMENTS

     Some of the information in this prospectus may contain forward-looking
statements. These statements can be identified by the use of forward-looking
terminology including "may," "believe," "will," "expect," "anticipate,"
"estimate," "continue," or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. These forward-looking
statements involve risks and uncertainties. When considering these
forward-looking statements, you should keep in mind the risk factors and other
cautionary statements in this prospectus. The risk factors and other factors
noted throughout this prospectus could cause our actual results to differ
materially from those contained in any forward-looking statement.

                                       154
<PAGE>   161

                         INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
SHAMROCK LOGISTICS, L.P.
  UNAUDITED PRO FORMA FINANCIAL STATEMENTS
     Introduction...........................................   F-2
     Pro Forma Balance Sheet as of September 30, 2000.......   F-3
     Pro Forma Statement of Income for the nine months ended
      September 30, 2000....................................   F-4
     Pro Forma Statement of Income for the year ended
      December 31, 1999.....................................   F-5
     Notes to Pro Forma Financial Statements................   F-6
SHAMROCK LOGISTICS OPERATIONS, L.P.
  (Successor to the Ultramar Diamond Shamrock Logistics
  Business)
  UNAUDITED FINANCIAL STATEMENTS
     Balance Sheets as of September 30, 1999 and 2000.......  F-11
     Statements of Income for the nine months ended
      September 30, 1999 and 2000...........................  F-12
     Statements of Cash Flows for the nine months ended
      September 30, 1999 and 2000...........................  F-13
     Notes to Financial Statements..........................  F-14
ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS
  AUDITED FINANCIAL STATEMENTS
     Report of Independent Public Accountants...............  F-17
     Balance Sheets as of December 31, 1998 and 1999........  F-18
     Statements of Income for the years ended December 31,
      1997, 1998 and 1999...................................  F-19
     Statements of Net Parent Investment for the years ended
      December 31, 1997, 1998 and 1999......................  F-20
     Statements of Cash Flows for the years ended December
      31, 1997, 1998 and 1999...............................  F-21
     Notes to Financial Statements..........................  F-22
SHAMROCK LOGISTICS, L.P.
  AUDITED BALANCE SHEET
     Report of Independent Public Accountants...............  F-35
     Balance Sheet as of June 30, 2000......................  F-36
     Note to Balance Sheet..................................  F-37
RIVERWALK LOGISTICS, L.P.
  AUDITED BALANCE SHEET
     Report of Independent Public Accountants...............  F-38
     Balance Sheet as of June 30, 2000......................  F-39
     Note to Balance Sheet..................................  F-40
</TABLE>


                                       F-1
<PAGE>   162

                    UNAUDITED PRO FORMA FINANCIAL STATEMENTS

INTRODUCTION


     The following are the pro forma financial statements of Shamrock Logistics,
L.P., a newly formed Delaware limited partnership, as of and for the nine months
ended September 30, 2000 and for the year ended December 31, 1999. The pro forma
balance sheet assumes that the offering and the related transactions occurred as
of September 30, 2000, and the pro forma statements of income assume that the
offering and the related transactions occurred on January 1, 2000 and 1999,
respectively. The related transactions include the following reorganization
transactions:


     - Effective July 1, 2000, the assets and liabilities of the Ultramar
       Diamond Shamrock logistics business were transferred to Shamrock
       Logistics Operations; and

     - Effective with the closing of the offering, Shamrock Logistics Operations
       will be transferred to Shamrock Logistics.

Both of these transactions will be recorded at historical cost as they are
considered to be a reorganization of entities under common control. Please read
Note 1: Basis of Presentation and Note 2: Offering and Transactions on page F-6
for a more detailed explanation of all the related transactions.

     The pro forma financial statements have been prepared utilizing the
historical pipeline tariff rates in effect during the periods presented.
Effective January 1, 2000, we have revised tariff rates on many of our pipelines
as described in Note 7 of Notes to Pro Forma Financial Statements. The pro forma
financial statements for the year ended December 31, 1999 do not reflect the
revised tariff rates. The pro forma financial statements and accompanying notes
should be read together with the historical financial statements and related
notes included elsewhere in this prospectus.


     The pro forma balance sheet and the pro forma statements of income are
unaudited and were derived by adjusting the historical financial statements of
Shamrock Logistics Operations and the Ultramar Diamond Shamrock logistics
business. The adjustments are based on currently available information and
certain estimates and assumptions; and therefore, the actual adjustments may
differ from the pro forma adjustments. However, management believes that the
assumptions provide a reasonable basis for presenting the significant effects of
the offering and the transactions as contemplated and that the pro forma
adjustments give appropriate effect to those assumptions and are properly
applied in the pro forma financial statements. The unaudited pro forma financial
statements do not purport to present the financial position or results of
operations of Shamrock Logistics had the offering and the related transactions
to be effected at the closing actually been completed as of the dates indicated.
Moreover, they do not project Shamrock Logistics' financial position or results
of operations for any future date or period.


                                       F-2
<PAGE>   163

                            SHAMROCK LOGISTICS, L.P.

                            PRO FORMA BALANCE SHEET

                               SEPTEMBER 30, 2000

                        (IN THOUSANDS, EXCEPT UNIT DATA)


<TABLE>
<CAPTION>
                                                                   OFFERING AND
                                                                   TRANSACTION
                                                      HISTORICAL   ADJUSTMENTS      PRO FORMA
                                                      ----------   ------------     ---------
                                                                   (unaudited)     (unaudited)
<S>                                                   <C>          <C>             <C>
                                            ASSETS
CURRENT ASSETS:
  Cash..............................................  $       4     $  80,000(A)    $   5,004
                                                                      (10,525)(B)
                                                                       63,718(C)
                                                                     (128,193)(D)
  Receivable from parent............................     15,879       (11,041)(E)       4,838
  Accounts and notes receivable.....................        362                           362
                                                      ---------                     ---------
          TOTAL CURRENT ASSETS......................     16,245                        10,204
                                                      ---------                     ---------
Property, plant and equipment.......................    387,401                       387,401
Less accumulated depreciation and amortization......   (106,225)                     (106,225)
                                                      ---------                     ---------
  Property, plant and equipment, net................    281,176                       281,176
Other assets, net...................................      5,090           425(B)        5,515
Investment in affiliate.............................     16,524                        16,524
                                                      ---------                     ---------
          TOTAL ASSETS..............................  $ 319,035                     $ 313,419
                                                      =========                     =========

                                    LIABILITIES AND EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt.................  $     356     $   5,000(C)    $   5,356
  Accounts payable and accrued liabilities..........      2,009                         2,009
  Taxes other than income taxes.....................      3,341                         3,341
                                                      ---------                     ---------
          TOTAL CURRENT LIABILITIES.................      5,706                        10,706
Long-term debt, less current portion................     10,462        58,718(C)       69,180
Debt due to parent..................................    107,676      (107,676)(D)          --
EQUITY:
  Net partnership equity............................    195,191       (20,517)(D)          --
                                                                     (163,633)(F)
                                                                      (11,041)(E)
  Common units held by public (4,000,000 common
     units subject to a limited call right if less
     than 20% of all outstanding common units are
     held by the public)............................         --        80,000(A)       69,900
                                                                      (10,100)(B)
  Common units held indirectly by Ultramar Diamond
     Shamrock (4,399,322 common units subject to a
     limited call right if less than 20% of all
     outstanding common units are held by the
     public)........................................         --        52,653(F)       52,653
  Subordinated units (8,999,322 subordinated units
     generally subject to automatic conversion to
     common units after December 31, 2005 if certain
     financial tests are met).......................         --       107,707(F)      107,707
  General partner interest..........................         --         3,273(F)        3,273
                                                      ---------                     ---------
          TOTAL EQUITY..............................    195,191                       233,533
                                                      ---------                     ---------
          TOTAL LIABILITIES AND EQUITY..............  $ 319,035                     $ 313,419
                                                      =========                     =========
</TABLE>


           See accompanying notes to pro forma financial statements.

                                       F-3
<PAGE>   164

                            SHAMROCK LOGISTICS, L.P.

                         PRO FORMA STATEMENT OF INCOME

                      NINE MONTHS ENDED SEPTEMBER 30, 2000

                        (IN THOUSANDS, EXCEPT UNIT DATA)


<TABLE>
<CAPTION>
                                                                 OFFERING AND
                                                                 TRANSACTION
                                                    HISTORICAL   ADJUSTMENTS      PRO FORMA
                                                    ----------   ------------     ---------
                                                                 (unaudited)     (unaudited)
<S>                                                 <C>          <C>             <C>
REVENUES..........................................   $69,406                     $   69,406
OPERATING COSTS AND EXPENSES:
  Operating expenses..............................    22,465                         22,465
  General and administrative expenses.............     3,771                          3,771
  Depreciation and amortization...................     9,889                          9,889
  Taxes other than income taxes...................     3,318                          3,318
                                                     -------                     ----------
          TOTAL OPERATING COSTS AND EXPENSES......    39,443                         39,443
                                                     -------                     ----------
OPERATING INCOME..................................    29,963                         29,963
  Interest expense................................    (2,808)      $(3,801)(G)       (4,519)
                                                                     2,154(H)
                                                                       (64)(I)
  Equity income from affiliate....................     3,044                          3,044
                                                     -------                     ----------
INCOME BEFORE INCOME TAXES........................    30,199                         28,488
  Benefit (provision) for income taxes............    30,812       (30,812)(J)           --
                                                     -------                     ----------
NET INCOME........................................   $61,011                         28,488
                                                     =======
GENERAL PARTNER'S INTEREST IN NET INCOME..........                                     (570)
                                                                                 ----------
LIMITED PARTNERS' INTEREST IN NET INCOME..........                               $   27,918
                                                                                 ==========
NET INCOME PER UNIT...............................                               $     1.60
                                                                                 ==========
WEIGHTED AVERAGE LIMITED PARTNERS' UNITS
  OUTSTANDING.....................................                               17,398,644(K)
                                                                                 ==========
</TABLE>


            See accompanying notes to pro forma financial statements

                                       F-4
<PAGE>   165

                            SHAMROCK LOGISTICS, L.P.

                         PRO FORMA STATEMENT OF INCOME
                          YEAR ENDED DECEMBER 31, 1999
                        (IN THOUSANDS, EXCEPT UNIT DATA)


<TABLE>
<CAPTION>
                                                                 OFFERING AND
                                                                 TRANSACTION
                                                   HISTORICAL    ADJUSTMENTS      PRO FORMA
                                                   ----------    ------------     ---------
                                                                 (unaudited)     (unaudited)
<S>                                                <C>           <C>             <C>
REVENUES.........................................   $109,773                     $  109,773
OPERATING COSTS AND EXPENSES:
  Operating expenses.............................     24,248                         24,248
  General and administrative expenses............      4,698                          4,698
  Depreciation and amortization..................     12,318                         12,318
  Taxes other than income taxes..................      4,765                          4,765
                                                    --------                     ----------
          TOTAL OPERATING COSTS AND EXPENSES.....     46,029                         46,029
  Gain on sale of property, plant and
     equipment...................................      2,478                          2,478
                                                    --------                     ----------
OPERATING INCOME.................................     66,222                         66,222
  Interest expense...............................       (777)      $(5,068)(G)       (5,930)
                                                                       (85)(I)
  Equity income from affiliate...................      3,874                          3,874
                                                    --------                     ----------
INCOME BEFORE INCOME TAXES.......................     69,319                         64,166
  Provision for income taxes.....................    (26,521)       26,521(J)            --
                                                    --------                     ----------
NET INCOME.......................................   $ 42,798                         64,166
                                                    ========
GENERAL PARTNER'S INTEREST IN NET INCOME.........                                    (1,283)
                                                                                 ----------
LIMITED PARTNERS' INTEREST IN NET INCOME.........                                $   62,883
                                                                                 ==========
NET INCOME PER UNIT..............................                                $     3.61
                                                                                 ==========
WEIGHTED AVERAGE LIMITED PARTNERS' UNITS
  OUTSTANDING....................................                                17,398,644(K)
</TABLE>


            See accompanying notes to pro forma financial statements

                                       F-5
<PAGE>   166

                            SHAMROCK LOGISTICS, L.P.

                    NOTES TO PRO FORMA FINANCIAL STATEMENTS

                    DECEMBER 31, 1999 AND SEPTEMBER 30, 2000

                                  (UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

     The pro forma financial statements are based on the historical financial
position and results of operations of the pipeline, terminalling and storage
operations of the Ultramar Diamond Shamrock Logistics Business that were
transferred to Shamrock Logistics Operations, L.P., a newly formed Delaware
limited partnership effective July 1, 2000. The assets and liabilities related
to these operations were transferred at historical cost.

NOTE 2: OFFERING AND TRANSACTIONS

     The pro forma financial statements reflect the closing of the following
transactions:


     - The transfer of Shamrock Logistics Operations, L.P. to Shamrock Logistics
       and its affiliates in exchange for the issuance by Shamrock Logistics of
       4,399,322 common units, 8,999,322 subordinated units, the incentive
       distribution rights and a 2% general partner interest in Shamrock
       Logistics and Shamrock Logistics Operations, L.P.;


     - The borrowing by Shamrock Logistics Operations, L.P. of $63,718,000 of
       debt, including $5,000,000 under the working capital revolving facility;

     - The public offering by Shamrock Logistics of 4,000,000 common units at an
       assumed initial public offering price of $20.00 per common unit resulting
       in aggregate gross proceeds to Shamrock Logistics of $80,000,000;

     - The distribution to affiliates of Ultramar Diamond Shamrock of
       approximately $128,193,000; and,

     - The payment of underwriting fees and commissions, and other fees and
       expenses associated with the offering and the related transactions,
       expected to be approximately $10,100,000.

     Upon completion of the offering, Shamrock Logistics anticipates incurring
incremental general and administrative costs (e.g., cost of tax return
preparation, annual and quarterly reports to unitholders, investor relations,
and registrar and transfer agent fees) at an annual rate of approximately
$1,500,000. The pro forma financial statements do not reflect any adjustment for
these estimated incremental costs.

NOTE 3: PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

     (A) Reflects the proceeds to Shamrock Logistics of $80,000,000 from the
         issuance and sale of 4,000,000 common units at an assumed initial
         public offering price of $20.00 per unit.

     (B) Reflects the payment of debt financing fees and underwriting
         commissions and expenses of $425,000 and $10,100,000, respectively. The
         debt financing fees will be capitalized and amortized and the
         underwriting commissions and expenses will be allocated to the common
         units.


     (C) Represents the borrowing by Shamrock Logistics Operations, L.P. of
         $58,718,000 to repay intercompany indebtedness and working capital
         loans and for capital expenditure reimbursements and $5,000,000 for
         working capital purposes.


     (D) Represents the distribution to affiliates of Ultramar Diamond Shamrock
         of $128,193,000, of which $107,676,000 is repayment of debt due to
         parent and $20,517,000 is reimbursement for capital expenditures.

                                       F-6
<PAGE>   167
                            SHAMROCK LOGISTICS, L.P.

             NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)


     (E) Represents the distribution to affiliates of Ultramar Diamond Shamrock
         of $11,041,000, which represents the distributable net income of
         Shamrock Logistics Operations, L.P. from July 1, 2000 to September 30,
         2000.



     (F) Represents the allocation of the net assets of the Ultramar Diamond
         Shamrock Logistics Business of $163,633,000 of which $52,653,000 is
         allocated to the 4,399,322 common units, $107,707,000 is allocated to
         the subordinated units and $3,273,000 to the general partner interest.


     (G) Reflects interest expense as if the debt was issued and drawn down on
         January 1, 1999 and 2000. The pro forma adjustment to interest expense
         applicable to Shamrock Logistics is as follows:


<TABLE>
<CAPTION>
                                                   YEAR ENDED    NINE MONTHS ENDED
                                                  DECEMBER 31,     SEPTEMBER 30,
                                                      1999             2000
                                                  ------------   -----------------
                                                           (in thousands)
<S>                                               <C>            <C>
PRO FORMA ADJUSTMENT TO INTEREST EXPENSE
  Bank debt ($58,718,000 principal balance), at
     an assumed annual interest rate of 7.91%...     $4,645           $3,483
  Bank debt ($5,000,000 principal balance for
     working capital purposes), at an assumed
     annual interest rate of 6.50%..............        325              244
  Fee on unused portion of revolving credit
     facility ($56,282,000 unused portion) at an
     assumed annual rate of 0.175%..............         98               74
                                                     ------           ------
  Pro forma adjustment to interest expense......     $5,068           $3,801
                                                     ======           ======
</TABLE>


          The interest rates in the above table are based on preliminary debt
          negotiations with a bank group. Should the actual negotiated interest
          rates increase or decrease by  1/2%, pro forma net income for the year
          ended December 31, 1999 would decrease or increase by $319,000.


     (H)Reflects the reduction of interest expense related to the repayment of
        the $107,676,000 of debt due to parent, as if the repayment was
        completed on January 1, 2000. Interest accrued at a rate of 8% per annum
        effective with the execution of the promissory notes on June 30, 2000
        through September 30, 2000.



     (I) Reflects the amortization of deferred debt financing fees and expenses
         for the year ended December 31, 1999 and the nine months ended
         September 30, 2000, as if the debt was issued and drawn down on January
         1, 1999 and 2000, respectively.



     (J) Pro forma net income excludes federal and state income taxes as income
         taxes will be the responsibility of the unitholders and not Shamrock
         Logistics.



     (K) The weighted average limited partners' units outstanding used in the
         net income per unit calculation includes the limited partners' common
         and subordinated units and excludes general partner interest.


NOTE 4: PRO FORMA NET INCOME PER UNIT


     Pro forma net income per unit is determined by dividing the pro forma net
income per unit that would have been allocated to the common and subordinated
unitholders, which is 98% of

                                       F-7
<PAGE>   168
                            SHAMROCK LOGISTICS, L.P.

             NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)


pro forma net income, by the number of common and subordinated units expected to
be outstanding at the closing of the offering. For purposes of this calculation,
the number of common and subordinated units outstanding of 17,398,644 was
assumed to have been outstanding since January 1, 1999 and 2000. Basic and
diluted pro forma net income per unit are equal as there are no dilutive units.


NOTE 5: DESCRIPTION OF EQUITY INTEREST IN SHAMROCK LOGISTICS

     The common units and the subordinated units represent limited partner
interest in Shamrock Logistics. The holders of units are entitled to participate
in partnership distributions and exercise the rights and privileges available to
limited partners under the Shamrock Logistics partnership agreement.

     The common units will have the right to receive a minimum quarterly
distribution of $0.60 per unit, plus any arrearages on the common units before
any distribution is made to the holders of subordinated units. In addition, if
the aggregate ownership of common and subordinated units owned by persons other
than the general partner and its affiliates is less than 20%, the general
partner will have a right to call the common units at a price which approximates
fair market value.

     The subordinated units generally receive quarterly cash distributions only
when the common units have received a minimum quarterly distribution of $0.60
per unit for each quarter since the commencement of operations. Subordinated
units will convert into common units on a one-for-one basis when the
subordination period ends. The subordination period will end when Shamrock
Logistics meets financial tests specified in the partnership agreement but
generally cannot end before December 31, 2005.

     The general partner interest will have the right to receive a minimum
quarterly distribution based on its ownership interest (2% currently) in
Shamrock Logistics. In addition, the general partner holds incentive
distribution rights, which allow the general partner to receive a higher
percentage of quarterly distributions of Available Cash from Operating Surplus
after the minimum quarterly distributions have been achieved, and as additional
target levels are met. The higher percentages range from 10% up to 50%.


     Based on the number of common and subordinated units and the general
partner interest to be outstanding immediately after the offering, the amount of
Available Cash from Operating Surplus needed to pay the minimum quarterly
distributions for four quarters will be $42,609,000. For both the year ended
December 31, 1999 and the nine months ended September 30, 2000, the amount of
Pro Forma Available Cash from Operating Surplus was sufficient to pay the
minimum quarter distributions.


NOTE 6: TRANSACTIONS WITH ULTRAMAR DIAMOND SHAMROCK

     In conjunction with the offering and related transactions, Ultramar Diamond
Shamrock and Shamrock Logistics intend to enter into the following agreements.


     PIPELINE AND TERMINALS USAGE AGREEMENT -- Under this agreement, Ultramar
Diamond Shamrock has agreed to use our pipelines to transport at least 75% of
the crude oil shipped to and at least 75% of the refined products shipped from
the McKee, Three Rivers and Ardmore refineries and to use our refined product
terminals for terminalling services for at least 50% of all refined products
shipped from these refineries for a period of seven years.


                                       F-8
<PAGE>   169
                            SHAMROCK LOGISTICS, L.P.

             NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

     If market conditions with respect to the transportation of crude oil or
refined products or with respect to the end markets in which Ultramar Diamond
Shamrock sells refined products change in a material manner such that Ultramar
Diamond Shamrock would suffer a material adverse effect if it were to continue
to use our pipelines and terminals at the required levels, Ultramar Diamond
Shamrock's obligation to us will be suspended during the period of the change in
market conditions to the extent required to avoid the material adverse effect.


     The concepts of a material change in market conditions and material adverse
effect on Ultramar Diamond Shamrock are not defined in the agreement. However,
situations that might constitute a material change in market conditions having a
material adverse effect on Ultramar Diamond Shamrock include the cost of
transporting crude oil or refined products by our pipelines becoming materially
more expensive than transporting crude oil or refined products by other means or
a material change in refinery profit that makes it materially more advantageous
for Ultramar Diamond Shamrock to shift large volumes of refined products from
markets served by our pipelines to pipelines retained by Ultramar Diamond
Shamrock or owned by third parties. Ultramar Diamond Shamrock may suspend
obligations by presenting a certificate from its chief financial officer that
there has been a material change in market conditions having a material adverse
effect on Ultramar Diamond Shamrock. If we disagree with Ultramar Diamond
Shamrock, we have the right to refer the matter to an independent accounting
firm for resolution.


     In addition, Ultramar Diamond Shamrock has agreed, for a period of seven
years, to remain the shipper for its crude oil and refined products transported
through our pipelines, and neither to challenge, nor cause others to challenge,
our interstate or intrastate tariff rates for the transportation of crude oil,
refined products or petrochemical feedstocks.


     SERVICES AGREEMENT -- Effective July 1, 2000, Ultramar Diamond Shamrock and
its affiliates have agreed to provide general and administrative services to
Shamrock Logistics Operations, L.P. for an annual fee of $5,200,000, payable
monthly. The services to be provided under this agreement include the corporate
functions of legal, accounting, treasury, information technology and other
corporate services. This fee is in addition to the incremental general and
administrative costs of $1,500,000 to be incurred from third parties as a result
of becoming a public entity.



     The services agreement also requires that Shamrock Logistics reimburse
Ultramar Diamond Shamrock and its affiliates for the various recurring costs of
the employees who work within the pipeline, terminalling and storage operations,
which salary, wages and benefits costs approximated $9,700,000 in 1999.



     ENVIRONMENTAL INDEMNITY -- In connection with this offering and related
transactions, Ultramar Diamond Shamrock has agreed to indemnify Shamrock
Logistics for environmental liabilities related to the assets transferred to
Shamrock Logistics Operations, L.P. that arose prior to closing and are
discovered within 10 years after closing. Excluded from this indemnification are
liabilities, which result from a change in environmental law after closing. In
addition, as an operator or owner of the assets, Shamrock Logistics and Shamrock
Logistics Operations, L.P. could be held liable for pre-closing environmental
damage should Ultramar Diamond Shamrock be unable to fulfill its obligation.
However, Shamrock Logistics believes that such situation is remote given
Ultramar Diamond Shamrock's financial condition.


NOTE 7: IMPACT OF TARIFF RATE CHANGE

     The historical statement of income for the year ended December 31, 1999 was
prepared utilizing the historical pipeline tariff rates in effect during 1999.
The historical tariff rates were

                                       F-9
<PAGE>   170
                            SHAMROCK LOGISTICS, L.P.

             NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

based on initial pipeline cost and not revised upon subsequent expansion or for
increases and decreases in throughput levels.

     As a result, the Ultramar Diamond Shamrock Logistics Business filed revised
tariff rates on many of its crude oil and refined product pipelines to reflect
the total cost of the pipeline, the current throughput capacity, the current
throughput utilization and other market conditions. The revised tariff rates
were implemented effective January 1, 2000 and the overall impact of the tariff
rate changes result in a decrease to revenues as reflected in the table below.

     If the revised tariff rates had been implemented effective January 1, 1999,
the pro forma as adjusted revenues, operating income, net income and Adjusted
EBITDA would have been as follows:


<TABLE>
<CAPTION>
                                                    YEAR ENDED
                                                 DECEMBER 31, 1999
                                                 -----------------
                                                  (in thousands)
<S>                                              <C>
Historical revenues............................      $109,773
  Pro forma adjustments........................            --
                                                     --------
Pro forma revenues.............................       109,773
  Decrease in tariff revenues..................       (21,892)
                                                     --------
Pro forma as adjusted revenues.................      $ 87,881
                                                     ========
Historical operating income....................      $ 66,222
  Pro forma adjustments........................            --
                                                     --------
Pro forma operating income.....................        66,222
  Decrease due to tariff revenues..............       (21,892)
                                                     --------
Pro forma as adjusted operating income.........      $ 44,330
                                                     ========
Historical net income..........................      $ 42,798
  Pro forma adjustments........................        21,368
                                                     --------
Pro forma net income...........................        64,166
  Decrease due to tariff revenues..............       (21,892)
                                                     --------
Pro forma as adjusted net income...............      $ 42,274
                                                     ========
Historical Adjusted EBITDA(1)..................      $ 80,678
  Pro forma adjustments........................            --
                                                     --------
Pro forma Adjusted EBITDA......................        80,678
  Decrease due to tariff revenues..............       (21,892)
                                                     --------
Pro forma Adjusted EBITDA as adjusted(1).......      $ 58,786
                                                     ========
</TABLE>


---------------

(1) Adjusted EBITDA is defined as operating income, less gain on sale of
    property, plant and equipment, plus depreciation and amortization, plus
    distributions from Skelly-Belvieu Pipeline Company, of which the Ultramar
    Diamond Shamrock Logistics Business owns 50% and excluding the impact of
    volumetric expansions, contractions and measurement discrepancies in our
    pipelines. Any future impact of these exclusions will be borne by the
    shippers in our pipelines.

                                      F-10
<PAGE>   171


                      SHAMROCK LOGISTICS OPERATIONS, L.P.


        (SUCCESSOR TO THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS)


                                 BALANCE SHEETS
                           (UNAUDITED, IN THOUSANDS)


<TABLE>
<CAPTION>
                                                          SEPTEMBER 30,         PRO FORMA
                                                       --------------------   SEPTEMBER 30,
                                                         1999       2000          2000
                                                         ----       ----          ----
<S>                                                    <C>        <C>         <C>
                                          ASSETS
CURRENT ASSETS:
  Cash...............................................  $      3   $       4     $       4
  Receivable from parent.............................        --      15,879        15,879
  Accounts and notes receivable......................     1,104         362           362
                                                       --------   ---------     ---------
          TOTAL CURRENT ASSETS.......................     1,107      16,245        16,245
                                                       --------   ---------     ---------
Property, plant and equipment........................   378,554     387,401       387,401
Less accumulated depreciation and amortization.......   (93,462)   (106,225)     (106,225)
                                                       --------   ---------     ---------
  Property, plant and equipment, net.................   285,092     281,176       281,176
Goodwill, net........................................     5,390       5,090         5,090
Investment in affiliate..............................    17,094      16,524        16,524
                                                       --------   ---------     ---------
          TOTAL ASSETS...............................  $308,683   $ 319,035     $ 319,035
                                                       ========   =========     =========
                 LIABILITIES AND NET PARENT INVESTMENT/PARTNERSHIP EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt..................  $    330   $     356     $     356
  Accounts payable and accrued liabilities...........     2,170       2,009         2,009
  Taxes other than income taxes......................     3,747       3,341         3,341
                                                       --------   ---------     ---------
          TOTAL CURRENT LIABILITIES..................     6,247       5,706         5,706
Long-term debt, less current portion.................    10,819      10,462        10,462
Debt due to parent...................................        --     107,676       107,676
Other long-term liabilities..........................     3,578          --            --
Deferred income taxes................................    35,592          --            --
Distributions due to parent..........................        --          --        31,558
Commitments and contingencies
NET PARENT INVESTMENT/PARTNERSHIP EQUITY:
  Net parent investment..............................   252,447          --            --
  Limited partner's equity...........................        --     193,239            --
  General partner's equity...........................        --       1,952            --
  Common units.......................................        --          --        52,653
  Subordinated units (convertible to common units
     after December 31, 2005 if certain financial
     tests are met)..................................        --          --       107,707
  General partner interest...........................        --          --         3,273
                                                       --------   ---------     ---------
          TOTAL NET PARENT INVESTMENT/PARTNERSHIP
            EQUITY...................................   252,447     195,191       163,633
                                                       --------   ---------     ---------
          TOTAL LIABILITIES AND NET PARENT
            INVESTMENT/PARTNERSHIP EQUITY............  $308,683   $ 319,035     $ 319,035
                                                       ========   =========     =========
</TABLE>


                See accompanying notes to financial statements.

                                      F-11
<PAGE>   172


                      SHAMROCK LOGISTICS OPERATIONS, L.P.


        (SUCCESSOR TO THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS)


                              STATEMENTS OF INCOME
                  (UNAUDITED, IN THOUSANDS, EXCEPT UNIT DATA)


<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED
                                                                   SEPTEMBER 30,
                                                              ------------------------
                                                                1999          2000
                                                                ----          ----
<S>                                                           <C>          <C>
REVENUES....................................................  $ 81,535     $    69,406
OPERATING COSTS AND EXPENSES:
  Operating expenses........................................    17,183          22,465
  General and administrative expenses.......................     3,523           3,771
  Depreciation and amortization.............................     9,162           9,889
  Taxes other than income taxes.............................     3,624           3,318
                                                              --------     -----------
          TOTAL OPERATING COSTS AND EXPENSES................    33,492          39,443
                                                              --------     -----------
  Gain on sale of property, plant and equipment.............     2,478              --
                                                              --------     -----------
OPERATING INCOME............................................    50,521          29,963
  Interest expense..........................................      (669)         (2,808)
  Equity income from affiliate..............................     2,370           3,044
                                                              --------     -----------
INCOME BEFORE INCOME TAXES..................................    52,222          30,199
  Benefit (provision) for income taxes......................   (19,980)         30,812
                                                              --------     -----------
NET INCOME..................................................  $ 32,242     $    61,011
                                                              ========     ===========
PRO FORMA NET INCOME........................................               $    61,011
  General partner's interest in pro forma net income........                    (1,220)
                                                                           -----------
  Limited partners' interest in pro forma net income........               $    59,791
                                                                           ===========
  Pro forma net income per unit.............................               $      3.44
                                                                           ===========
  Pro forma weighted average limited partners' units
     outstanding............................................                17,398,644
                                                                           ===========
</TABLE>


                See accompanying notes to financial statements.

                                      F-12
<PAGE>   173


                      SHAMROCK LOGISTICS OPERATIONS, L.P.


        (SUCCESSOR TO THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS)


                            STATEMENTS OF CASH FLOWS
                           (UNAUDITED, IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                   NINE MONTHS
                                                                      ENDED
                                                                  SEPTEMBER 30,
                                                              ---------------------
                                                               1999          2000
                                                               ----          ----
<S>                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................  $32,242      $ 61,011
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................    9,162         9,889
  Equity income from affiliate..............................   (2,370)       (3,044)
  Gain on sale of property, plant and equipment.............   (2,478)           --
  Provision (benefit) for deferred income taxes.............    2,537       (36,677)
  Changes in operating assets and liabilities:
     Decrease (increase) in accounts and notes receivable...     (173)          611
     Increase in receivable from parent.....................       --       (15,879)
     Increase in accounts payable, accrued liabilities and
      taxes other than income taxes.........................    1,664         2,366
  Decrease in other long-term liabilities...................     (164)         (137)
                                                              -------      --------
          NET CASH PROVIDED BY OPERATING ACTIVITIES.........   40,420        18,140
                                                              -------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Maintenance capital expenditures..........................   (1,842)       (1,804)
  Expansion capital expenditures............................   (4,588)       (4,082)
  Distributions received from affiliate.....................    2,608         3,488
  Proceeds from sale of property, plant and equipment.......   12,000            --
                                                              -------      --------
          NET CASH PROVIDED BY (USED IN) INVESTING
            ACTIVITIES......................................    8,178        (2,398)
                                                              -------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Partners' contributions...................................       --             1
  Net distributions to parent...............................  (48,292)      (15,458)
  Repayment of long-term debt...............................     (306)         (284)
                                                              -------      --------
          NET CASH USED IN FINANCING ACTIVITIES.............  (48,598)      (15,741)
                                                              -------      --------
NET INCREASE (DECREASE) IN CASH.............................       --             1
CASH AT BEGINNING OF THE PERIOD.............................        3             3
                                                              -------      --------
CASH AT END OF THE PERIOD...................................  $     3      $      4
                                                              =======      ========
NON-CASH ACTIVITIES:
  Debt due to parent........................................  $    --      $107,676
  Other short-term and long-term liabilities
     (environmental)........................................       --         2,507
                                                              -------      --------
     Total non-cash activities..............................  $    --      $110,183
                                                              =======      ========
</TABLE>


                See accompanying notes to financial statements.

                                      F-13
<PAGE>   174


                      SHAMROCK LOGISTICS OPERATIONS, L.P.


        (SUCCESSOR TO THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS)


                         NOTES TO FINANCIAL STATEMENTS

                 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000

                                  (UNAUDITED)


NOTE 1: ORGANIZATION



     A. Reorganization



     Effective July 1, 2000, the assets and liabilities (excluding environmental
liabilities and income tax liabilities) of the Ultramar Diamond Shamrock
Logistics Business were contributed to Shamrock Logistics Operations, L.P. by
the various subsidiaries of Ultramar Diamond Shamrock in exchange for the
ownership interest in Shamrock Logistics Operations. The general partner of
Shamrock Logistics Operations is Riverwalk Logistics, L.P. (an entity indirectly
owned by Ultramar Diamond Shamrock) and the limited partner is an affiliate of
Ultramar Diamond Shamrock. The general partner's ownership interest is 1% and
the limited partner's ownership interest is 99%.



     The transfer of assets and liabilities to Shamrock Logistics Operations
represents a reorganization of entities under common control and was recorded at
historical cost. Accordingly, the statements of income and cash flows for the
nine months ended September 30, 2000, combine the results for the Ultramar
Diamond Shamrock Logistics Business for the six months ended June 30, 2000 with
the results of Shamrock Logistics Operations for the three months ended
September 30, 2000 as if the operations were combined on January 1, 2000. Since
Shamrock Logistics Operations is not subject to income taxes and the Ultramar
Diamond Shamrock Logistics Business is subject to income taxes, the transfer of
assets and liabilities among the entities is deemed a change in tax status.
Accordingly, the deferred income tax liability as of June 30, 2000 of
$38,217,000 was written off through the statement of income in the caption,
benefit for income taxes.



     In conjunction with the July 1, 2000 transfer of assets and liabilities to
Shamrock Logistics Operations, the $10,818,000 outstanding indebtedness owed to
the Port of Corpus Christi Authority by an affiliate of Ultramar Diamond
Shamrock was assumed by Shamrock Logistics Operations. This debt is due in
annual installments of $1,222,000 through December 31, 2015. Interest accrues on
the unpaid principal balance at the rate of 8% per annum.



     B. Basis of Presentation



     The accompanying unaudited interim financial statements of Shamrock
Logistics Operations have been prepared in accordance with United States'
generally accepted accounting principles for interim financial reporting and
with Securities and Exchange Commission rules and regulations for interim
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. These unaudited interim financial statements should be read in
conjunction with the audited historical financial statements and notes thereto
of the Ultramar Diamond Shamrock Logistics Business included elsewhere in this
prospectus.



     Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. The results of operations may be affected by seasonal
factors, such as the demand for refined products or industry factors that may be
specific to a particular period, such as movements in and the general level of
crude oil prices, the demand for and prices of refined products, refining
industry supply capacity, and refinery maintenance turnarounds. In addition, the
operations of


                                      F-14
<PAGE>   175

                      SHAMROCK LOGISTICS OPERATIONS, L.P.


        (SUCCESSOR TO THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS)


                  NOTES TO FINANCIAL STATEMENTS --(CONTINUED)


Shamrock Logistics Operations are directly impacted by Ultramar Diamond
Shamrock's refining and retail operations in the mid-continent region of the
United States.


NOTE 2: COMMITMENTS AND CONTINGENCIES

     The Ultramar Diamond Shamrock Logistics Business is involved in various
lawsuits, claims and regulatory proceedings incidental to its business. In the
opinion of management, the outcome of such matters will not have a material
adverse effect on the Ultramar Diamond Shamrock Logistics Business' financial
position or results of operations.

NOTE 3: DEBT DUE TO PARENT


     Ultramar Diamond Shamrock, through various subsidiaries has constructed or
acquired the various crude oil and refined product pipeline, terminalling and
storage assets of the Ultramar Diamond Shamrock Logistics Business. In
conjunction with the initial public offering of common units of Shamrock
Logistics, effective June 30, 2000, the subsidiaries which own the various
assets of the Ultramar Diamond Shamrock Logistics Business formalized the terms
under which certain intercompany accounts and working capital loans will be
settled by executing promissory notes with an aggregate principal balance of
$107,676,000. The promissory notes require that the principal be repaid no later
than June 30, 2005 and bear interest at a rate of 8.0% per annum on the unpaid
balance. Effective July 1, 2000, the $107,676,000 of debt due to parent was
assumed by Shamrock Logistics Operations.



     Shamrock Logistics intends to repay these promissory notes using the entire
proceeds from the offering and borrowings under a new $120,000,000 revolving
credit facility entered into by Shamrock Logistics Operations in conjunction
with the initial public offering.


NOTE 4: IMPACT OF TARIFF RATE CHANGES


     The statement of income for the nine months ended September 30, 1999 was
prepared utilizing the historical pipeline tariff rates in effect during 1999.
The historical tariff rates were based on initial pipeline cost and not revised
upon subsequent expansion or for increases and decreases in throughput levels.


     As a result, the Ultramar Diamond Shamrock Logistics Business filed revised
tariff rates on many of its crude oil and refined product pipelines to reflect
the total cost of the pipeline, the current throughput capacity, the current
throughput utilization and other market conditions. The revised tariff rates
were implemented effective January 1, 2000 and the overall impact of the tariff
rate changes result in a decrease to revenues as reflected in the table below.

     If the revised tariff rates had been implemented effective January 1, 1999,
the revenues, operating income, net income and Adjusted EBITDA would have been
as follows:


<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED
                                                              SEPTEMBER 30, 1999
                                                              ------------------
                                                                (in thousands)
<S>                                                           <C>
Revenues -- historical......................................       $81,535
  Decrease in tariff revenues...............................       (16,138)
                                                                   -------
Revenues -- as adjusted.....................................       $65,397
                                                                   =======
Operating income -- historical..............................       $50,521
  Decrease due to tariff revenues...........................       (16,138)
                                                                   -------
Operating income -- as adjusted.............................       $34,383
                                                                   =======
</TABLE>


                                      F-15
<PAGE>   176

                      SHAMROCK LOGISTICS OPERATIONS, L.P.


        (SUCCESSOR TO THE ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS)


                  NOTES TO FINANCIAL STATEMENTS --(CONTINUED)


<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED
                                                              SEPTEMBER 30, 1999
                                                              ------------------
                                                                (in thousands)
<S>                                                           <C>
Net income -- historical....................................       $32,242
  Decrease due to tariff revenues, net of income taxes......        (9,964)
                                                                   -------
Net income -- as adjusted...................................       $22,278
                                                                   =======
Adjusted EBITDA(1) -- historical............................       $59,751
  Decrease due to tariff revenues...........................       (16,138)
                                                                   -------
Adjusted EBITDA(1) -- as adjusted...........................       $43,613
                                                                   =======
</TABLE>


---------------


(1) Adjusted EBITDA is defined as operating income, less gain on sale of
    property, plant and equipment, plus depreciation and amortization, plus
    distributions from Skelly-Belvieu Pipeline Company, of which the Shamrock
    Logistics Operations owns 50% and excluding the impact of volumetric
    expansions, contractions and measurement discrepancies in our pipelines. Any
    future impact of these exclusions will be borne by the shippers in our
    pipelines.


NOTE 5: PRO FORMA INFORMATION

A. SUBSEQUENT REORGANIZATION


     Effective with the closing of the initial public offering of common units
of Shamrock Logistics, Shamrock Logistics Operations will be transferred to
Shamrock Logistics. The transfer of Shamrock Logistics Operations to Shamrock
Logistics represents a reorganization of entities under common control and will
be recorded at historical cost.



B. PRO FORMA BALANCE SHEET INFORMATION



     Pro forma amounts give effect to the following transactions as though these
transactions occurred as of September 30, 2000:



1. Effective prior to the closing of the offering, Shamrock Logistics Operations
   will be transferred to Shamrock Logistics. The resulting ownership of
   Shamrock Logistics prior to the initial public offering is that 4,399,322
   common units are outstanding, 8,999,322 subordinated units are outstanding
   and a 2% general partner interest is outstanding.



2. The distribution by Shamrock Logistics Operations of $11,041,000,
   representing the distributable net income from July 1, 2000 to September 30,
   2000.



3. The reclassification of $20,517,000 from net partnership equity to
   distributions due to parent representing additional amounts to be distributed
   to Ultramar Diamond Shamrock and affiliates upon completion of the initial
   public offering.


C. PRO FORMA EARNINGS PER UNIT INFORMATION


     The Ultramar Diamond Shamrock Logistics Business was a division within
Ultramar Diamond Shamrock and Shamrock Logistics Operations is a wholly-owned
partnership subsidiary of Ultramar Diamond Shamrock, thus these operations do
not have outstanding shares. Therefore, earnings per unit is calculated on a pro
forma basis for 2000 only. Unaudited pro forma net income per unit is determined
by dividing the pro forma net income per unit that would have been allocated to
the common and subordinated unitholders, which is 98% of pro forma net income,
by the number of common and subordinated units expected to be outstanding at the
closing of the offering. For purposes of this calculation, it was assumed that
17,398,644 common and subordinated units have been outstanding since January 1,
2000. Basic and diluted pro forma net income per unit are equal as there are no
dilutive units.


                                      F-16
<PAGE>   177

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Ultramar Diamond Shamrock Corporation:

     We have audited the accompanying balance sheets of the Ultramar Diamond
Shamrock Logistics Business as of December 31, 1998 and 1999, and the related
statements of income, net parent investment and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Ultramar Diamond
Shamrock Logistics Business as of December 31, 1998 and 1999, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.

                                                /s/ ARTHUR ANDERSEN LLP

San Antonio, Texas
April 19, 2000

                                      F-17
<PAGE>   178

                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                                 BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                 ------------
                                                                1998       1999
                                                                ----       ----
<S>                                                           <C>        <C>
                                     ASSETS

CURRENT ASSETS:
  Cash......................................................  $      3   $      3
  Accounts and notes receivable.............................       931        973
                                                              --------   --------
          TOTAL CURRENT ASSETS..............................       934        976
                                                              --------   --------
Property, plant and equipment...............................   382,221    381,515
Less accumulated depreciation and amortization..............   (85,100)   (96,561)
                                                              --------   --------
  Property, plant and equipment, net........................   297,121    284,954
Goodwill, net...............................................     5,615      5,315
Investment in affiliate.....................................    17,332     16,968
                                                              --------   --------
          TOTAL ASSETS......................................  $321,002   $308,213
                                                              ========   ========

                      LIABILITIES AND NET PARENT INVESTMENT

CURRENT LIABILITIES:
  Current portion of long-term debt.........................  $    636   $    640
  Accrued liabilities.......................................     2,469      2,437
  Taxes other than income taxes.............................     1,784      1,674
                                                              --------   --------
          TOTAL CURRENT LIABILITIES.........................     4,889      4,751
Long-term debt, less current portion........................    10,819     10,462
Other long-term liabilities.................................     3,742      1,517
Deferred income taxes.......................................    33,055     36,677
Commitments and contingencies
NET PARENT INVESTMENT:
  Net parent investment.....................................   268,497    254,806
                                                              --------   --------
          TOTAL LIABILITIES AND NET PARENT INVESTMENT.......  $321,002   $308,213
                                                              ========   ========
</TABLE>

                See accompanying notes to financial statements.

                                      F-18
<PAGE>   179

                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                              STATEMENTS OF INCOME
                        (IN THOUSANDS, EXCEPT UNIT DATA)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                               -----------------------
                                                              1997       1998       1999
                                                              ----       ----       ----
<S>                                                         <C>        <C>        <C>
REVENUES..................................................  $ 84,881   $ 97,883   $109,773
                                                            --------   --------   --------
OPERATING COSTS AND EXPENSES:
  Operating expenses......................................    24,042     28,027     24,248
  General and administrative expenses.....................     4,761      4,552      4,698
  Depreciation and amortization...........................    11,328     12,451     12,318
  Taxes other than income taxes...........................     4,235      4,152      4,765
                                                            --------   --------   --------
          TOTAL OPERATING COSTS AND EXPENSES..............    44,366     49,182     46,029
  Gain on sale of property, plant and equipment...........        --      7,005      2,478
                                                            --------   --------   --------
OPERATING INCOME..........................................    40,515     55,706     66,222
  Interest expense........................................      (158)      (796)      (777)
  Equity income from affiliate............................     3,025      3,896      3,874
                                                            --------   --------   --------
INCOME BEFORE INCOME TAXES................................    43,382     58,806     69,319
  Provision for income taxes..............................   (16,559)   (22,517)   (26,521)
                                                            --------   --------   --------
NET INCOME................................................  $ 26,823   $ 36,289   $ 42,798
                                                            ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                         UNAUDITED
                         ---------
<S>                                                            <C>
Pro forma net income........................................   $    42,798
General partner's interest in pro forma net income..........          (856)
                                                               -----------
Limited partner's interest in pro forma net income..........   $    41,942
                                                               ===========
Pro forma net income per unit...............................   $      2.41
                                                               ===========
Pro forma weighted average limited partners' units
  outstanding...............................................    17,398,644
                                                               ===========
</TABLE>

                See accompanying notes to financial statements.

                                      F-19
<PAGE>   180

                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                      STATEMENTS OF NET PARENT INVESTMENT
                  YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                                 (IN THOUSANDS)

<TABLE>
<S>                                                            <C>
BALANCE AT JANUARY 1, 1997..................................   $260,731
  Net income................................................     26,823
  Net change in parent advances.............................      7,849
                                                               --------
BALANCE AT DECEMBER 31, 1997................................    295,403
  Net income................................................     36,289
  Net change in parent advances.............................    (63,195)
                                                               --------
BALANCE AT DECEMBER 31, 1998................................    268,497
  Net income................................................     42,798
  Net change in parent advances.............................    (56,489)
                                                               --------
BALANCE AT DECEMBER 31, 1999................................   $254,806
                                                               ========
</TABLE>

                See accompanying notes to financial statements.

                                      F-20
<PAGE>   181

                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                            ------------------------------
                                                              1997       1998       1999
                                                              ----       ----       ----
<S>                                                         <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................  $ 26,823   $ 36,289   $ 42,798
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Depreciation and amortization...........................    11,328     12,451     12,318
  Impairment charge -- write-down of property, plant and
     equipment............................................        --      2,100         --
  Equity income from affiliate............................    (3,025)    (3,896)    (3,874)
  Gain on sale of property, plant and equipment...........        --     (7,005)    (2,478)
  Provision for deferred income taxes.....................    11,480      2,190      3,622
  Changes in operating assets and liabilities:
     Decrease (increase) in accounts and notes
       receivable.........................................    (2,055)     2,901        (42)
     Increase (decrease) in accrued liabilities and taxes
       other than income taxes............................    (1,507)        20       (142)
     Increase (decrease) in other long-term liabilities...     1,687       (100)    (2,225)
                                                            --------   --------   --------
          NET CASH PROVIDED BY OPERATING ACTIVITIES.......    44,731     44,950     49,977
                                                            --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Maintenance capital expenditures........................      (633)    (2,345)    (2,060)
  Expansion capital expenditures..........................   (12,359)    (9,952)    (7,313)
  Pipelines acquired in Total Petroleum acquisition.......   (43,158)        --         --
  Distributions received from affiliate...................     4,009      3,692      4,238
  Proceeds from sales of property, plant and equipment....        --     27,000     12,000
                                                            --------   --------   --------
          NET CASH PROVIDED BY (USED IN) INVESTING
            ACTIVITIES....................................   (52,141)    18,395      6,865
                                                            --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net advances from (distributions to) parent.............     7,672    (63,062)   (56,489)
  Repayment of long-term debt.............................      (262)      (283)      (353)
                                                            --------   --------   --------
          NET CASH PROVIDED BY (USED IN) FINANCING
            ACTIVITIES....................................     7,410    (63,345)   (56,842)
                                                            --------   --------   --------
NET INCREASE (DECREASE) IN CASH...........................        --         --         --
CASH AT BEGINNING OF YEAR.................................         3          3          3
                                                            --------   --------   --------
CASH AT END OF YEAR.......................................  $      3   $      3   $      3
                                                            ========   ========   ========
</TABLE>

                See accompanying notes to financial statements.

                                      F-21
<PAGE>   182

                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                         NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 1997, 1998 AND 1999

NOTE 1: ORGANIZATION

     Ultramar Diamond Shamrock Corporation (Ultramar Diamond Shamrock) through
several subsidiaries and affiliated entities, owns and operates various
interstate and intrastate crude oil and refined product pipelines, refined
product terminals, and crude oil storage facilities located in Texas, New
Mexico, Colorado, Oklahoma, and Kansas. In conjunction with the formation of
Shamrock Logistics, L.P. (Shamrock Logistics), Ultramar Diamond Shamrock intends
to transfer most of these assets and operations (the Ultramar Diamond Shamrock
Logistics Business) to Shamrock Logistics in connection with a public offering
of common units of Shamrock Logistics.

     Ultramar Diamond Shamrock and its affiliates will retain certain assets,
including refined product pipelines and terminals which have experienced
declining profitability over the past several years, certain crude oil gathering
pipelines originating in older crude oil producing fields, and the Wichita Falls
to McKee crude oil pipeline and storage facility which is currently undergoing a
major expansion. These retained assets have been excluded from the Ultramar
Diamond Shamrock Logistics Business. These financial statements present the
Ultramar Diamond Shamrock Logistics Business as if it had existed as a single
separate entity from Ultramar Diamond Shamrock during the periods presented.

     The Ultramar Diamond Shamrock Logistics Business includes interstate
pipelines, which are subject to regulation by the Federal Energy Regulatory
Commission (FERC) and intrastate pipelines, which are subject to regulation by
either the Texas Railroad Commission, the Oklahoma Public Utility Commission or
the Colorado Public Utility Commission, depending on the location of the
pipeline. These regulations include rate regulations, which govern the tariff
rates charged to pipeline customers for transportation through a pipeline.
Tariff rates for each pipeline are required to be filed with the respective
commission upon completion of a pipeline and when a tariff rate is being
revised. In addition, the regulations include annual reporting requirements for
each pipeline.

     The following is a listing of the principal assets and operations that
comprise the Ultramar Diamond Shamrock Logistics Business:

CRUDE OIL PIPELINES

Corpus Christi to Three Rivers
Wasson to Ardmore (both pipelines)
Ringgold to Wasson
Dixon to McKee
Various other crude oil pipelines

REFINED PRODUCT PIPELINES

McKee to El Paso
McKee to Denver (operated by Phillips Pipeline Company)
McKee to Colorado Springs to Denver
McKee to Amarillo (both pipelines) to Abernathy
Amarillo to Albuquerque
Three Rivers to San Antonio
Three Rivers to Laredo
Ardmore to Wynnewood
Various other refined product pipelines

                                      F-22
<PAGE>   183
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CRUDE OIL STORAGE FACILITIES AND REFINED PRODUCT TERMINALS

Corpus Christi crude oil storage facility
El Paso refined product terminal
Amarillo refined product terminal
Denver refined product terminal
Colorado Springs refined product terminal
San Antonio refined product terminal
Laredo refined product terminal
Harlingen refined product terminal
Various other crude oil storage facilities and refined product terminals

INVESTMENT IN AFFILIATE -- SKELLY-BELVIEU PIPELINE COMPANY, LLC

     Formed in 1993, the Skelly-Belvieu Pipeline Company, LLC owns a natural gas
liquids pipeline that begins in Skellytown, Texas and extends to Mont Belvieu,
Texas near Houston. Skelly-Belvieu Pipeline Company is owned 50% by the Ultramar
Diamond Shamrock Logistics Business and 50% by Phillips Pipeline Company.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation: The financial statements include the accounts and
operations of the Ultramar Diamond Shamrock Logistics Business listed above. All
intercompany transactions have been eliminated. The investment in affiliate is
accounted for under the equity method. The operations of certain of the refined
product pipelines that are jointly owned with other companies are
proportionately consolidated in the accompanying financial statements.

     Use of Estimates: The preparation of financial statements in accordance
with United States' generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates. On an ongoing basis, management reviews its estimates,
including those related to commitments, contingencies, and environmental
liabilities, based on currently available information. Changes in facts and
circumstances may result in revised estimates.

     Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Additions to property, plant and equipment, including maintenance and
expansion capital expenditures and capitalized interest, are recorded at cost.
Maintenance capital expenditures represent capital expenditures to replace
partially or fully depreciated assets to maintain the existing operating
capacity of existing assets and extend their useful lives. Expansion capital
expenditures represent capital expenditures to expand our operating capacity of
existing assets, whether through construction or acquisition. Repair and
maintenance expenses associated with existing assets that are minor in nature
and do not extend the useful life of existing assets are charged to operating
expenses as incurred.

     Depreciation is provided principally using the straight-line method over
the estimated useful lives of the related assets. For certain interstate
pipelines, the depreciation rate used is based on FERC requirements and ranges
from 1% to 17% of the net asset value. When property, plant and equipment is
retired or otherwise disposed of, the cost less net proceeds is recognized as
gain or loss in the statement of income in the year retired.

     Goodwill: The excess of cost (purchase price) over the fair value of net
assets acquired (goodwill) is being amortized using the straight-line method
over 20 years.

                                      F-23
<PAGE>   184
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     Impairment: Long-lived assets, including goodwill, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The evaluation of recoverability is
performed using undiscounted estimated net cash flows generated by the related
asset. The amount of impairment is determined as the amount by which the net
carrying value exceeds discounted estimated net cash flows.

     Environmental Remediation Costs: Environmental remediation costs are
expensed and the associated accrual established when site restoration and
environmental remediation and cleanup obligations are either known or considered
probable and can be reasonably estimated. Accrued liabilities are not discounted
to present value. Environmental costs include initial site surveys, costs for
remediation and restoration (including direct internal costs), and ongoing
monitoring costs, as well as fines, damages and other costs, when estimable.
Adjustments to initial estimates are recorded, from time to time, to reflect
changing circumstances and estimates based upon additional information developed
in subsequent periods.

     Federal and State Income Taxes: The Ultramar Diamond Shamrock Logistics
Business is included in the consolidated federal and state income tax returns of
Ultramar Diamond Shamrock. Deferred income taxes are computed based on
recognition of future tax expense or benefits, measured by enacted tax rates
that are attributable to taxable or deductible temporary differences between
financial statement and income tax reporting bases of assets and liabilities.
The current portion of income taxes payable is due to Ultramar Diamond Shamrock
and has been included in the net parent investment amount. Shamrock Logistics is
a limited partnership and is not subject to federal or state income taxes.
Accordingly, the taxable income or loss of Shamrock Logistics, which may vary
substantially from income or loss reported for financial reporting purposes, is
generally includable in the federal and state income tax returns of the
individual partners.

     Revenue Recognition: The Ultramar Diamond Shamrock Logistics Business'
revenues are derived from interstate and intrastate pipeline transportation,
storage and terminalling of refined products and crude oil. Transportation
revenues (based on pipeline tariff rates) are recognized as refined product or
crude oil is transported through the pipelines. In the case of crude oil
pipelines, the cost of the storage operations are included in the crude oil
pipeline tariff rates. Prior to 1999, the Ultramar Diamond Shamrock Logistics
Business did not charge a separate terminalling fee for terminalling services at
the refined product terminals. Terminalling revenues for 1998 and prior years
were recognized based on the total costs incurred at the terminals, which costs
were charged back to the related refinery. Effective January 1, 1999, the
Ultramar Diamond Shamrock Logistics Business began charging a separate
terminalling fee at its refined product terminals and such fees are recognized
as refined products are moved into the terminal. The terminalling fee was
established at a rate that the Ultramar Diamond Shamrock Logistics Business
believes to be competitive with rates charged by other companies for
terminalling similar refined products.

     Operating Expenses: Operating expenses consist primarily of fuel and power
costs, telecommunication costs, labor costs of pipeline field and support
personnel, maintenance, utilities, and insurance. Such expenses are recognized
as incurred.

     Net Parent Investment: The net parent investment represents a net balance
as the result of various transactions between the Ultramar Diamond Shamrock
Logistics Business and Ultramar Diamond Shamrock. There are no terms of
settlement or interest charges associated with this balance. The balance is the
result of the Ultramar Diamond Shamrock Logistics Business' participation in
Ultramar Diamond Shamrock's central cash management program, wherein all of the
Ultramar Diamond Shamrock Logistics Business' cash receipts are remitted to
Ultramar
                                      F-24
<PAGE>   185
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Diamond Shamrock and all cash disbursements are funded by Ultramar Diamond
Shamrock. Other transactions include intercompany transportation, storage and
terminalling revenues and related expenses, administrative and support expenses
incurred by Ultramar Diamond Shamrock and allocated to the Ultramar Diamond
Shamrock Logistics Business, and income taxes.

     Segment Disclosures: Effective December 31, 1998, the Ultramar Diamond
Shamrock Logistics Business adopted Statement of Financial Accounting Standard
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement established new standards for reporting information
about operating segments in annual financial statements and selected information
about operating segments in interim financial statements issued to
securityholders. It also established standards for related disclosures about
products and services, geographic areas, and major customers. The Ultramar
Diamond Shamrock Logistics Business operates in only one segment, the pipeline
and terminal segment of the oil and gas industry.

     Comprehensive Income: Effective March 31, 1998, the Ultramar Diamond
Shamrock Logistics Business adopted SFAS No. 130, "Reporting Comprehensive
Income," which established standards for reporting comprehensive income and its
components. The Ultramar Diamond Shamrock Logistics Business has not reported
comprehensive income due to the absence of items of other comprehensive income
in any period presented.

     Derivative Instruments: In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. This standard will be effective for the
Ultramar Diamond Shamrock Logistics Business' financial statements beginning
January 1, 2001. The Ultramar Diamond Shamrock Logistics Business has not yet
assessed the impact of this new standard on its financial position or results of
operations.

NOTE 3: ACQUISITION OF TOTAL PETROLEUM (NORTH AMERICA) LTD.

     On September 25, 1997, Ultramar Diamond Shamrock completed its acquisition
of Total Petroleum (North America) Ltd. in a purchase business combination.
Total Petroleum's operations consisted of three refineries (Ardmore, Alma and
Denver), 550 convenience stores and various crude oil and refined product
pipeline and storage assets. The total purchase price of $851,800,000,
representing both common stock issued by Ultramar Diamond Shamrock and debt
assumed, was allocated based on the fair values of the individual assets
acquired and the liabilities assumed. The excess of purchase price over the fair
value of net assets acquired of $123,500,000 is being amortized as goodwill on a
straight-line basis over 20 years.

     Included in the Ultramar Diamond Shamrock Logistics Business are certain of
the acquired Ardmore refinery's pipelines and storage facilities, which were
allocated $43,158,000 of the purchase price including $5,994,000 of the
goodwill. Expenses associated with the Ardmore refinery's crude oil pipelines
and storage facilities and revenues and expenses associated with the Ardmore to
Wynnewood refined product pipeline are included in the statements of income
since their acquisition on September 25, 1997.

     Revenues have not been recognized related to the Ardmore refinery's crude
oil pipelines because the Ultramar Diamond Shamrock Logistics Business had not
established a separate internal tariff rate for transportation on these
pipelines. Effective with the filing of revised tariff

                                      F-25
<PAGE>   186
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

rates, as discussed in "Note 15: Subsequent Events," separate tariff rates have
been established and revenues will be recognized. Had the tariff rates been in
place since the acquisition, revenues for 1997, 1998 and 1999 would have
increased $1,783,000, $5,348,000 and $6,377,000, respectively, based on the
barrels transported through the various Ardmore refinery's crude oil pipelines.

NOTE 4: 1998 IMPAIRMENT CHARGE

     Prior to 1998, the Ultramar Diamond Shamrock Logistics Business expanded
the throughput capacity and completed other improvements at the Harlingen
refined product terminal because Ultramar Diamond Shamrock believed its refined
product sales would continue to increase as the south Texas market grew.
However, due to new competitors entering the south Texas market, Ultramar
Diamond Shamrock has not been able to significantly increase its refined product
sales, thus throughput at the Harlingen refined product terminal has not
increased. In light of these competitive conditions, in June 1998, the Ultramar
Diamond Shamrock Logistics Business recorded an impairment charge of $2,100,000
to reduce the carrying value ($4,100,000 prior to write-down) of the Harlingen
refined product terminal to its estimated net realizable value. The estimated
net realizable value was based on the discounted cash flows of the terminal. The
Ultramar Diamond Shamrock Logistics Business has and will continue to operate
the terminal.

NOTE 5: ACCOUNTS AND NOTES RECEIVABLE

     Accounts and notes receivable consisted of the following:

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              --------------
                                                              1998      1999
                                                              ----      ----
                                                              (in thousands)
<S>                                                           <C>       <C>
Accounts receivable.........................................  $872      $936
Notes receivable............................................    59        37
                                                              ----      ----
          Accounts and notes receivable.....................  $931      $973
                                                              ====      ====
</TABLE>

NOTE 6: PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment, at cost, consisted of the following:

<TABLE>
<CAPTION>
                                                   ESTIMATED      DECEMBER 31,
                                                    USEFUL     -------------------
                                                     LIVES       1998       1999
                                                   ---------     ----       ----
                                                    (years)      (in thousands)
<S>                                                <C>         <C>        <C>
Land and land improvements.......................        --    $  2,850   $  2,818
Buildings........................................        35       3,826      3,785
Pipeline and equipment...........................      8-40     338,453    339,481
Right of Ways....................................     20-35      26,680     26,212
Construction in progress.........................        --      10,412      9,219
                                                               --------   --------
          Total..................................               382,221    381,515
Accumulated depreciation and amortization........               (85,100)   (96,561)
                                                               --------   --------
          Property, plant and equipment, net.....              $297,121   $284,954
                                                               ========   ========
</TABLE>


     In March 1998, the Ultramar Diamond Shamrock Logistics Business sold a 25%
interest in the McKee to El Paso refined product pipeline and El Paso refined
product terminal to Phillips


                                      F-26
<PAGE>   187
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)


Petroleum Company for $27,000,000, resulting in a pre-tax gain of $7,005,000. In
August 1999, upon the completion of the pipeline's expansion, an additional
8.33% interest in the McKee to El Paso refined product pipeline and terminal was
sold to Phillips Petroleum Company for $12,000,000, resulting in a pre-tax gain
of $2,478,000. The 33.33% ownership interest sold in the McKee to El Paso
refined product pipeline and terminal represented excess throughput capacity
that was not being utilized by the Ultramar Diamond Shamrock Logistics Business,
thus revenues did not decline as a result of the sales.



     Capitalized interest costs included in property, plant and equipment were
$782,000, $121,000 and $115,000 for the years ended December 31, 1997, 1998 and
1999, respectively.


NOTE 7: INVESTMENT IN AFFILIATE

     The Ultramar Diamond Shamrock Logistics Business owns a 50% interest in the
Skelly-Belvieu Pipeline Company, which is accounted for under the equity method.
The following presents summarized unaudited financial information related to
Skelly-Belvieu Pipeline Company as of December 31, 1998 and 1999, and for the
years ended December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                        ---------------------------
                                                         1997      1998      1999
                                                         ----      ----      ----
                                                              (in thousands)
<S>                                                     <C>       <C>       <C>
STATEMENT OF INCOME INFORMATION:
Revenues..............................................  $12,235   $12,304   $12,133
Income before income taxes............................    5,705     5,627     5,954
Ultramar Diamond Shamrock Logistics
Business' share of net income.........................    3,025     3,896     3,874
</TABLE>

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1998      1999
                                                               ----      ----
                                                               (in thousands)
<S>                                                           <C>       <C>
BALANCE SHEET INFORMATION:
Current assets..............................................  $ 1,575   $ 1,686
Property, plant and equipment, net..........................   54,492    52,576
                                                              -------   -------
          Total assets......................................  $56,067   $54,262
                                                              =======   =======
Current liabilities.........................................  $   397   $    30
Members' equity.............................................   55,670    54,232
                                                              -------   -------
          Total liabilities and members' equity.............  $56,067   $54,262
                                                              =======   =======
</TABLE>

NOTE 8: ENVIRONMENTAL MATTERS

     The operations of the Ultramar Diamond Shamrock Logistics Business are
subject to environmental laws and regulations adopted by various federal, state,
and local governmental authorities in the jurisdictions in which it operates.
Although the Ultramar Diamond Shamrock Logistics Business believes its
operations are in general compliance with applicable environmental regulations,
risks of additional costs and liabilities are inherent in pipeline, terminalling
and storage operations, and there can be no assurance that significant costs and
liabilities will not be incurred by the Ultramar Diamond Shamrock Logistics
Business. Moreover, it is possible that other developments, such as increasingly
stringent environmental laws, regulations, and enforcement policies thereunder,
and claims for damages to property or persons resulting from

                                      F-27
<PAGE>   188
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the operations of the Ultramar Diamond Shamrock Logistics Business, could result
in substantial costs and liabilities. Accordingly, the Ultramar Diamond Shamrock
Logistics Business has adopted policies, practices and procedures in the areas
of pollution control, product safety, occupational health and the handling,
storage, use and disposal of hazardous materials to prevent material
environmental or other damage, and to limit the financial liability which could
result from such events. However, some risk of environmental or other damage is
inherent in the Ultramar Diamond Shamrock Logistics Business, as it is with
other entities engaged in similar businesses.

     The balances of and changes in accruals for environmental matters which are
included in accrued liabilities and other long-term liabilities consisted of the
following:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                          -------------------------
                                                           1997     1998     1999
                                                           ----     ----     ----
                                                               (in thousands)
<S>                                                       <C>      <C>      <C>
Balance at beginning of year............................  $2,860   $4,547   $ 4,319
  Additions to (deletions from) accrual.................   1,802       --    (1,114)
  Payments..............................................    (115)    (228)     (448)
                                                          ------   ------   -------
Balance at end of year..................................  $4,547   $4,319   $ 2,757
                                                          ======   ======   =======
</TABLE>

     During 1999, based on the annual review of environmental liabilities, it
was determined that certain liabilities were overstated as the required cleanup
obligations were less than originally estimated. Accordingly, environmental
liabilities were reduced by $1,114,000.

     The accruals noted above represent the Ultramar Diamond Shamrock Logistics
Business' best estimate of the costs which will be incurred over an extended
period for restoration and environmental remediation at various sites. These
liabilities have not been reduced by possible recoveries from third parties and
projected cash expenditures have not been discounted. Environmental exposures
are difficult to assess and estimate due to unknown factors such as the
magnitude of possible contamination, the timing and extent of remediation, the
determination of the Ultramar Diamond Shamrock Logistics Business' liability in
proportion to other parties, improvements in cleanup technologies and the extent
to which environmental laws and regulations may change in the future. Although
environmental costs may have a significant impact on results of operations for
any single period, the Ultramar Diamond Shamrock Logistics Business believes
that such costs will not have a material adverse effect on its financial
position.

NOTE 9: LONG TERM DEBT

     In May 1994, the Ultramar Diamond Shamrock Logistics Business entered into
a financing agreement with the Port of Corpus Christi Authority of Nueces
County, Texas (Port Authority of Corpus Christi) for the construction of a crude
oil storage facility. The original note totaled $12,000,000 and is due in annual
installments through December 31, 2015. Interest on the unpaid principal balance
accrues at a rate of 8% per annum. The land on which the crude oil storage
facility was constructed is leased from the Port Authority of Corpus Christi
(see Note 10: Commitments and Contingencies).

                                      F-28
<PAGE>   189
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     Long-term debt repayments are due as follows (in thousands):

<TABLE>
<S>                                                         <C>
2000.....................................................   $   640
2001.....................................................       385
2002.....................................................       416
2003.....................................................       449
2004.....................................................       485
Thereafter...............................................     8,727
                                                            -------
          Total repayments...............................   $11,102
                                                            =======
</TABLE>

     Interest payments totaled $931,000, $1,028,000 and $948,000 for the years
ended December 31, 1997, 1998 and 1999, respectively.

NOTE 10: COMMITMENTS AND CONTINGENCIES

     In May 1994, the Ultramar Diamond Shamrock Logistics Business entered into
several agreements with the Port Authority of Corpus Christi including a crude
oil dock user agreement, a land lease agreement and a note agreement. The crude
oil dock user agreement allows the Ultramar Diamond Shamrock Logistics Business
to operate and manage a crude oil dock in Corpus Christi for a five-year period
beginning August 1, 1994 and the agreement is renewable yearly thereafter. The
Ultramar Diamond Shamrock Logistics Business shares use of the crude oil dock
with two other users and operating costs are split evenly among the three users.
The crude oil dock user agreement requires that the Ultramar Diamond Shamrock
Logistics Business collect wharfage fees, based on the quantity of barrels off
loaded from each vessel, and dockage fees, based on vessels berthing at the
dock. These fees are remitted to the Port Authority of Corpus Christi monthly.
The wharfage and one-half of the dockage fees paid by the Ultramar Diamond
Shamrock Logistics Business for its use of the crude oil dock reduce the annual
amount owed by the Ultramar Diamond Shamrock Logistics Business to the Port
Authority of Corpus Christi under the note agreement discussed in "Note 9: Long
Term Debt". The wharfage and dockage fees for the crude oil dock totaled
$1,194,000, $1,311,000 and $1,302,000 for the years ended December 31, 1997,
1998 and 1999, respectively.


     Effective April 1988, the Ultramar Diamond Shamrock Logistics Business and
five other users entered into a refined product dock user agreement with the
Port Authority of Corpus Christi to use a refined product dock for a two-year
period and renewable yearly thereafter. The Ultramar Diamond Shamrock Logistics
Business also operates the refined product dock and operating costs are split
evenly among the six users. The Ultramar Diamond Shamrock Logistics Business is
responsible for collecting and remitting the refined product wharfage and
dockage fees to the Port Authority of Corpus Christi. The wharfage and dockage
fees for the refined product dock totaled $127,000, $235,000 and $211,000 for
the years ended December 31, 1997, 1998 and 1999, respectively.


     The crude oil and the refined product docks provide Ultramar Diamond
Shamrock's Three Rivers refinery access to marine facilities to receive crude
oil and deliver refined products. For the years ended December 31, 1997, 1998
and 1999, the Three Rivers refinery received 88%, 88% and 91%, respectively, of
its crude oil requirements from crude oil received at the crude oil dock. Also,
for the years ended December 31, 1997, 1998 and 1999, 8%, 7% and 7%,
respectively, of the refined products produced at the Three Rivers refinery were
transported via pipeline to the Corpus Christi refined product dock.

                                      F-29
<PAGE>   190
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The Ultramar Diamond Shamrock Logistics Business has the following land
leases related to refined product terminals and crude oil storage facilities:

     - Corpus Christi crude oil storage facility: a 20-year noncancellable
       operating lease on 31.35 acres of land through 2014, at which time the
       lease is renewable every five years, for a total of 20 renewable years.

     - Corpus Christi refined product terminal: two five-year noncancellable
       operating lease agreements on 13.63 acres of land through 2002, at which
       time the agreements are renewable for at least three five-year periods.

     - Harlingen refined product terminal: a 13-year noncancellable operating
       lease on 5.88 acres of land through 2008.

     - Colorado Springs airport terminal: a 50-year noncancellable operating
       lease on 46.26 acres of land through 2043, at which time the lease is
       renewable for another 50-year period.

     The above land leases require monthly payments totaling $15,000 and are
adjustable every five years based on changes in the Consumer Price Index.

     In addition, the Ultramar Diamond Shamrock Logistics Business leases
certain equipment and vehicles under short-term operating lease agreements
expiring through 2002. Future minimum rental payments applicable to
noncancellable operating leases as of December 31, 1999, are as follows (in
thousands):

<TABLE>
<S>                                                           <C>
2000.......................................................   $  184
2001.......................................................      177
2002.......................................................      159
2003.......................................................      142
2004.......................................................      141
Thereafter.................................................    1,685
                                                              ------
  Future minimum lease payments............................   $2,488
                                                              ======
</TABLE>

     Total rental expense for all operating leases during 1997, 1998 and 1999
was $218,000, $253,000 and $264,000, respectively.

     The Ultramar Diamond Shamrock Logistics Business is involved in various
lawsuits, claims and regulatory proceedings incidental to its business. In the
opinion of management, the outcome of such matters will not have a material
adverse effect on the Ultramar Diamond Shamrock Logistics Business' financial
position or results of operations.

NOTE 11: INCOME TAXES

     As discussed in "Note 2: Summary of Significant Accounting Policies," the
Ultramar Diamond Shamrock Logistics Business' results are included in Ultramar
Diamond Shamrock's consolidated federal and state income tax returns. The
amounts presented below were calculated as if the Ultramar Diamond Shamrock
Logistics Business filed separate federal and state tax returns.

                                      F-30
<PAGE>   191
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                        ---------------------------
                                                         1997      1998      1999
                                                         ----      ----      ----
                                                              (in thousands)
<S>                                                     <C>       <C>       <C>
Current:
  Federal.............................................  $11,281   $17,786   $20,036
  State...............................................    1,612     2,541     2,863
Deferred:
  Federal.............................................    3,368     2,012     3,327
  State...............................................      298       178       295
                                                        -------   -------   -------
Provision for income taxes............................  $16,559   $22,517   $26,521
                                                        =======   =======   =======
</TABLE>

     Deferred income taxes arise from temporary differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. The components of the Ultramar Diamond Shamrock Logistics Business'
net deferred tax liability consisted of the following:

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                                ------------
                                                               1998      1999
                                                               ----      ----
                                                               (in thousands)
<S>                                                           <C>       <C>
Deferred tax liabilities:
  Excess of book basis over tax basis of:
     Property, plant and equipment..........................  $32,259   $34,983
     Investment in affiliate................................    2,442     2,744
                                                              -------   -------
          Total deferred tax liabilities....................   34,701    37,727
Deferred tax assets --
     Accrued liabilities and payables.......................   (1,646)   (1,050)
                                                              -------   -------
          Net deferred tax liability........................  $33,055   $36,677
                                                              =======   =======
</TABLE>

     The realization of net deferred tax assets is dependent on the Ultramar
Diamond Shamrock Logistics Business' ability to generate future taxable income.
Although realization is not assured, the Ultramar Diamond Shamrock Logistics
Business believes it is more likely than not that the net deferred tax assets
will be realized.

     The differences between the Ultramar Diamond Shamrock Logistics Business'
effective income tax rate and the U.S. federal statutory rate is reconciled as
follows:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                                                 ------------
                                                              1997   1998   1999
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
U.S. federal statutory rate.................................  35.0%  35.0%  35.0%
State income taxes, net of federal taxes....................  3.1    3.1     3.1
Non-deductible goodwill.....................................  0.1    0.2     0.2
                                                              ----   ----   ----
  Effective income tax rate.................................  38.2%  38.3%  38.3%
                                                              ====   ====   ====
</TABLE>

                                      F-31
<PAGE>   192
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     Income taxes paid to Ultramar Diamond Shamrock during 1997, 1998 and 1999
were $12,893,000, $20,327,000 and $22,899,000, respectively.

NOTE 12: FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

     The estimated fair value of the Ultramar Diamond Shamrock Logistics
Business' debt as of December 31, 1998 and 1999 was $12,501,000 and $11,137,000
as compared to the carrying value of $11,455,000 and $11,102,000, respectively.
These fair values were estimated using discounted cash flow analysis, based on
the Ultramar Diamond Shamrock Logistics Business' current incremental borrowing
rates for similar types of borrowing arrangements. The Ultramar Diamond Shamrock
Logistics Business has no derivative financial instruments.

     Substantially all of the Ultramar Diamond Shamrock Logistics Business
revenues are derived from Ultramar Diamond Shamrock and its various
subsidiaries. Ultramar Diamond Shamrock transports crude oil to three of its
refineries using various Ultramar Diamond Shamrock Logistics Business' crude oil
pipelines and storage facilities and transports refined products to Ultramar
Diamond Shamrock's company-owned retail operations or wholesale customers using
various Ultramar Diamond Shamrock Logistics Business' refined product pipelines
and terminals. Ultramar Diamond Shamrock and its subsidiaries are investment
grade customers; therefore, the Ultramar Diamond Shamrock Logistics Business
does not believe that the trade receivables from Ultramar Diamond Shamrock
represent a significant credit risk. However, the concentration of business with
Ultramar Diamond Shamrock, who is a large refining and retail marketing company,
has the potential to impact the Ultramar Diamond Shamrock Logistics Business'
overall exposure, both positively and negatively, to changes in the refining and
marketing industry.

NOTE 13: RELATED PARTY TRANSACTIONS

     The Ultramar Diamond Shamrock Logistics Business has no employees and is
managed and controlled by Ultramar Diamond Shamrock, the parent company.
Employees who work in the pipeline, terminalling and storage operations are
charged directly to the Ultramar Diamond Shamrock Logistics Business' operations
and such charges include salary and employee benefit costs. Ultramar Diamond
Shamrock also allocates approximately 5% of its general and administrative
expenses incurred in the United States to its pipeline, terminalling and storage
operations to cover costs of centralized corporate functions such as legal,
accounting, treasury, engineering, information technology and other corporate
services. Management believes that 5% is a reasonable approximation of the
general and administrative costs related to the pipeline, terminalling and
storage operations. General and administrative costs allocated to the Ultramar
Diamond Shamrock Logistics Business totaled $5,100,000, $5,067,000 and
$5,201,000 for the years ended December 31, 1997, 1998 and 1999, respectively. A
portion of the allocated general and administrative costs is passed on to
partners, which jointly own certain pipelines and terminals with the Ultramar
Diamond Shamrock Logistics Business. The net amount of general and
administrative costs allocated to partners totaled $339,000, $515,000 and
$503,000 for the years ended December 31, 1997, 1998 and 1999, respectively.

NOTE 14: EMPLOYEE BENEFIT PLANS

     The employees who work in the Ultramar Diamond Shamrock Logistics Business
are included in the various employee benefit plans of Ultramar Diamond Shamrock.
These plans include qualified, non-contributory defined benefit retirement
plans, defined contribution 401(k) plans, employee and retiree medical, dental
and life insurance plans, long-term incentive plans (i.e. stock options and
bonuses) and other such benefits.

                                      F-32
<PAGE>   193
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The Ultramar Diamond Shamrock Logistics Business' share of allocated parent
company employee benefit plan expenses was $733,000, $1,153,000, and $1,197,000
for the years ended December 31, 1997, 1998 and 1999, respectively. These
employee benefit plan expenses are included in operating expenses with the
related payroll costs.

NOTE 15: SUBSEQUENT EVENTS (UNAUDITED)

A. IMPACT OF TARIFF RATE AND TERMINALLING REVENUE CHANGES

     Over the past several years, the Ultramar Diamond Shamrock Logistics
Business has expanded the throughput capacity of several of its crude oil and
refined product pipelines. The historical tariff rates were based on initial
pipeline cost and were not revised upon subsequent expansions or increases or
decreases in throughput levels.

     As a result, the Ultramar Diamond Shamrock Logistics Business filed revised
tariff rates on many of its crude oil and refined product pipelines to reflect
the total cost of the pipeline, the current throughput capacity, the current
throughput utilization and other market conditions. The revised tariff rates
were implemented January 1, 2000 and the overall impact of the tariff rate
changes result in a decrease to revenues as reflected in the table below.

     As discussed in "Note 2: Summary of Significant Accounting Policies,"
effective January 1, 1999, the Ultramar Diamond Shamrock Logistics Business
began charging a terminalling fee for terminalling services at the refined
product terminals. Prior to 1999, terminalling revenues were recognized based on
total cost incurred at the terminal, which costs were charged back to the
related refineries. Since the terminalling fee now includes a margin of profit,
terminalling revenues increased as reflected in the table below.

     If the revised tariff rates and the terminalling fee had been implemented
effective January 1, 1997, revenues, operating income and net income would have
been as follows:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                            ------------------------------
                                                              1997       1998       1999
                                                            --------   --------   --------
                                                                    (in thousands)
<S>                                                         <C>        <C>        <C>
Revenues -- historical....................................  $ 84,881   $ 97,883   $109,773
  Decrease in tariff revenues.............................   (16,197)   (17,067)   (21,892)
  Increase in terminalling revenues.......................     1,778      1,649         --
                                                            --------   --------   --------
     Net decrease.........................................   (14,419)   (15,418)   (21,892)
                                                            --------   --------   --------
Revenues -- as adjusted...................................  $ 70,462   $ 82,465   $ 87,881
                                                            ========   ========   ========
Operating income -- historical............................  $ 40,515   $ 55,706   $ 66,222
     Net decrease.........................................   (14,419)   (15,418)   (21,892)
                                                            --------   --------   --------
Operating income -- as adjusted...........................  $ 26,096   $ 40,288   $ 44,330
                                                            ========   ========   ========
Net income -- historical..................................  $ 26,823   $ 36,289   $ 42,798
     Net decrease, net of income taxes....................    (8,914)    (9,514)   (13,516)
                                                            --------   --------   --------
Net income -- as adjusted.................................  $ 17,909   $ 26,775   $ 29,282
                                                            ========   ========   ========
</TABLE>

B. SUBSEQUENT REORGANIZATION

     Effective July 1, 2000, the assets and liabilities of the Ultramar Diamond
Shamrock Logistics Business were contributed to Shamrock Logistics Operations,
L.P. by the various subsidiaries of Ultramar Diamond Shamrock in exchange for
the ownership interest in Shamrock Logistics

                                      F-33
<PAGE>   194
                  ULTRAMAR DIAMOND SHAMROCK LOGISTICS BUSINESS

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Operations. The general partner of Shamrock Logistics Operations is Riverwalk
Logistics, L.P. (an entity indirectly owned by Ultramar Diamond Shamrock) and
the limited partner is an affiliate of Ultramar Diamond Shamrock. Effective with
the closing of the initial public offering of common units of Shamrock
Logistics, Shamrock Logistics Operations will be transferred to Shamrock
Logistics. Both of these transfers will be recorded at historical cost.

     Also in conjunction with the initial public offering of common units of
Shamrock Logistics, effective June 30, 2000, the subsidiaries which own the
various assets of the Ultramar Diamond Shamrock Logistics Business formalized
the terms under which certain intercompany accounts and working capital loans
will be settled by executing promissory notes with an aggregate principal
balance of $107,676,000. The promissory notes require that the principal be
repaid no later than June 30, 2005 and bear interest at a rate of 8.0% per annum
on the unpaid balance.


     Shamrock Logistics intends to repay these promissory notes using the entire
proceeds from the offering and borrowings under a new $120,000,000 revolving
credit facility entered into by Shamrock Logistics Operations in conjunction
with the initial public offering. In addition to the repayment of the
$107,676,000 of promissory notes, Shamrock Logistics intends to make additional
distributions to affiliates of Ultramar Diamond Shamrock totaling $20,517,000
from borrowings under the revolving credit facility.


C. PRO FORMA EARNINGS PER UNIT INFORMATION

     The Ultramar Diamond Shamrock Logistics Business is a division within
Ultramar Diamond Shamrock thus it did not have shares outstanding. Therefore,
earnings per unit is calculated on a pro forma basis for 1999 only. Unaudited
pro forma net income per unit is determined by dividing the pro forma net income
per unit that would have been allocated to the Common and Subordinated
Unitholders, which is 98% of pro forma net income, by the number of Common and
Subordinated units expected to be outstanding at the closing of the offering.
For purposes of this calculation, it was assumed that 17,398,644 Common and
Subordinated units have been outstanding since January 1, 1999. Basic and
diluted pro forma net income per unit are equal as there are no dilutive units.

                                      F-34
<PAGE>   195

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Shamrock Logistics GP, LLC:

     We have audited the accompanying balance sheet of Shamrock Logistics, L.P.
(a Delaware limited partnership) as of June 30, 2000. This financial statement
is the responsibility of the Partnership's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the balance sheet is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

     In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Shamrock Logistics, L.P. as of
June 30, 2000 in conformity with accounting principles generally accepted in the
United States.

                                            /s/ ARTHUR ANDERSEN LLP

San Antonio, Texas
August 10, 2000

                                      F-35
<PAGE>   196

                            SHAMROCK LOGISTICS, L.P.

                                 BALANCE SHEET
                                 JUNE 30, 2000

<TABLE>
<S>                                                           <C>
                               ASSETS
CURRENT ASSETS
  Receivables from affiliates...............................  $1,000
                                                              ------
                                                              $1,000
                                                              ======
                        LIABILITY AND EQUITY
LIABILITY
  Payable to affiliate......................................  $  100
                                                              ------
EQUITY:
  Limited partner's equity..................................     891
  General partner's equity..................................       9
                                                              ------
          Total equity......................................     900
                                                              ------
                                                              $1,000
                                                              ======
</TABLE>

                    See accompanying note to balance sheet.

                                      F-36
<PAGE>   197

                            SHAMROCK LOGISTICS, L.P.

                             NOTE TO BALANCE SHEET
                                 JUNE 30, 2000

NOTE 1: NATURE OF OPERATIONS

     Shamrock Logistics, L.P., a Delaware limited partnership, was formed on
December 7, 1999 to ultimately acquire all of the crude oil and refined product
pipeline, terminalling and storage assets of the Ultramar Diamond Shamrock
Logistics Business. The Partnership's general partner is Riverwalk Logistics,
L.P. In conjunction with the offering contemplated by this prospectus, Shamrock
Logistics, L.P. intends to sell limited partnership units to the public
representing a 22.5% ownership interest in the Partnership (excluding the
underwriters' overallotment option).

     Effective July 1, 2000, Ultramar Diamond Shamrock transferred the crude oil
and refined product pipeline, terminalling and storage assets and liabilities of
the Ultramar Diamond Shamrock Logistics Business to Shamrock Logistics
Operations, L.P., a Delaware limited partnership that was formed on December 7,
1999. Shamrock Logistics Operations' general partner is Riverwalk Logistics,
L.P. At the closing of the public offering and related transactions, Shamrock
Logistics Operations, L.P., will become a subsidiary of Shamrock Logistics, L.P.

                                      F-37
<PAGE>   198

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of Shamrock Logistics GP, LLC:

     We have audited the accompanying balance sheet of Riverwalk Logistics, L.P.
(a Delaware limited partnership) as of June 30, 2000. This financial statement
is the responsibility of the Partnership's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the balance sheet is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

     In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Riverwalk Logistics, L.P. as of
June 30, 2000 in conformity with accounting principles generally accepted in the
United States.

                                            /s/ ARTHUR ANDERSEN LLP

San Antonio, Texas
August 10, 2000

                                      F-38
<PAGE>   199

                           RIVERWALK LOGISTICS, L.P.

                                 BALANCE SHEET
                                 JUNE 30, 2000

<TABLE>
<S>                                                           <C>
                               ASSETS
Current assets
  Cash......................................................  $  980
Investment in Shamrock Logistics, L.P.......................      10
Investment in Shamrock Logistics Operations, L.P............      10
                                                              ------
                                                              $1,000
                                                              ======
                               EQUITY
Limited partner's equity....................................  $  999
General partner's equity....................................       1
                                                              ------
                                                              $1,000
                                                              ======
</TABLE>

                    See accompanying note to balance sheet.

                                      F-39
<PAGE>   200

                           RIVERWALK LOGISTICS, L.P.

                             NOTE TO BALANCE SHEET
                                 JUNE 30, 2000

NOTE 1: NATURE OF OPERATIONS

     Riverwalk Logistics, L.P. is a Delaware limited partnership formed on June
5, 2000 to become the general partner of Shamrock Logistics, L.P. and Shamrock
Logistics Operations, L.P. The general partner of Riverwalk Logistics, L.P. is
Shamrock Logistics GP, LLC and the limited partner is UDS Logistics, LLC. Both
Shamrock Logistics GP, LLC and UDS Logistics, LLC are indirect wholly-owned
subsidiaries of Ultramar Diamond Shamrock. Effective July 1, 2000, Ultramar
Diamond Shamrock transferred the crude oil and refined product pipeline,
terminalling and storage assets of the Ultramar Diamond Shamrock Logistics
Business to Shamrock Logistics Operations, L.P. In conjunction with the initial
public offering and the related transactions, Shamrock Logistics Operations,
L.P. will become a subsidiary of Shamrock Logistics, L.P.

                                      F-40
<PAGE>   201

                                   APPENDIX A
                      FORM OF SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
<PAGE>   202

                          SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP

                                       OF

                            SHAMROCK LOGISTICS, L.P.
<PAGE>   203

                               TABLE OF CONTENTS


<TABLE>
<S>                                                           <C>
                            ARTICLE I

                           DEFINITIONS

SECTION 1.1  Definitions....................................  A-1
SECTION 1.2  Construction...................................  A-16

                            ARTICLE II

                           ORGANIZATION

SECTION 2.1  Formation......................................  A-16
SECTION 2.2  Name...........................................  A-16
SECTION 2.3  Registered Office; Registered Agent; Principal
  Office; Other Offices.....................................  A-16
SECTION 2.4  Purpose and Business...........................  A-16
SECTION 2.5  Powers.........................................  A-17
SECTION 2.6  Power of Attorney..............................  A-17
SECTION 2.7  Term...........................................  A-18
SECTION 2.8  Title to Partnership Assets....................  A-18

                           ARTICLE III

                    RIGHTS OF LIMITED PARTNERS

SECTION 3.1  Limitation of Liability........................  A-19
SECTION 3.2  Management of Business.........................  A-19
SECTION 3.3  Outside Activities of the Limited Partners.....  A-19
SECTION 3.4  Rights of Limited Partners.....................  A-19

                            ARTICLE IV

 CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
               REDEMPTION OF PARTNERSHIP INTERESTS

SECTION 4.1  Certificates...................................  A-20
SECTION 4.2  Mutilated, Destroyed, Lost or Stolen
  Certificates..............................................  A-21
SECTION 4.3  Record Holders.................................  A-21
SECTION 4.4  Transfer Generally.............................  A-22
SECTION 4.5  Registration and Transfer of Limited Partner
  Interests.................................................  A-22
SECTION 4.6  Transfer of the General Partner's General
  Partner Interest..........................................  A-23
SECTION 4.7  Transfer of Incentive Distribution Rights......  A-23
SECTION 4.8  Restrictions on Transfers......................  A-24
SECTION 4.9  Citizenship Certificates; Non-citizen
  Assignees.................................................  A-24
SECTION 4.10  Redemption of Partnership Interests of
  Non-citizen Assignees.....................................  A-25

                            ARTICLE V

   CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

SECTION 5.1  Organizational Contributions...................  A-26
SECTION 5.2  Contributions by the General Partner and its
  Affiliates................................................  A-26
SECTION 5.3  Contributions by Initial Limited Partners and
Reimbursement of the
                   General Partner..........................  A-27
SECTION 5.4  Interest and Withdrawal........................  A-27
SECTION 5.5  Capital Accounts...............................  A-28
SECTION 5.6  Issuances of Additional Partnership
  Securities................................................  A-30
</TABLE>


                                       A-i
<PAGE>   204

<TABLE>
<S>                                                           <C>
SECTION 5.7  Limitations on Issuance of Additional
  Partnership Securities....................................  A-31
SECTION 5.8  Conversion of Subordinated Units...............  A-32
SECTION 5.9  Limited Preemptive Right.......................  A-33
SECTION 5.10  Splits and Combination........................  A-33
SECTION 5.11  Fully Paid and Non-Assessable Nature of
  Limited Partner Interests.................................  A-33

                            ARTICLE VI

                  ALLOCATIONS AND DISTRIBUTIONS

SECTION 6.1  Allocations for Capital Account Purposes.......  A-34
SECTION 6.2  Allocations for Tax Purposes...................  A-39
SECTION 6.3  Requirement and Characterization of
Distributions; Distributions to
                   Record Holders...........................  A-41
SECTION 6.4  Distributions of Available Cash from Operating
  Surplus...................................................  A-42
SECTION 6.5  Distributions of Available Cash from Capital
  Surplus...................................................  A-43
SECTION 6.6  Adjustment of Minimum Quarterly Distribution
and Target Distribution
                   Levels...................................  A-43
SECTION 6.7  Special Provisions Relating to the Holders of
  Subordinated Units........................................  A-43
SECTION 6.8  Special Provisions Relating to the Holders of
Incentive Distribution
                   Rights...................................  A-44
SECTION 6.9  Entity-Level Taxation..........................  A-44

                           ARTICLE VII

               MANAGEMENT AND OPERATION OF BUSINESS

SECTION 7.1  Management.....................................  A-45
SECTION 7.2  Certificate of Limited Partnership.............  A-46
SECTION 7.3  Restrictions on General Partner's Authority....  A-47
SECTION 7.4  Reimbursement of the General Partner...........  A-47
SECTION 7.5  Outside Activities.............................  A-48
SECTION 7.6  Loans from the General Partner; Loans or
Contributions from the
                   Partnership; Contracts with Affiliates;
Certain Restrictions on the
                   General Partner..........................  A-49
SECTION 7.7  Indemnification................................  A-50
SECTION 7.8  Liability of Indemnitees.......................  A-52
SECTION 7.9  Resolution of Conflicts of Interest............  A-52
SECTION 7.10  Other Matters Concerning the General
  Partner...................................................  A-53
SECTION 7.11  Purchase or Sale of Partnership Securities....  A-54
SECTION 7.12  Registration Rights of the General Partner and
  its Affiliates............................................  A-54
SECTION 7.13  Reliance by Third Parties.....................  A-56

                           ARTICLE VIII

              BOOKS, RECORDS, ACCOUNTING AND REPORTS

SECTION 8.1  Records and Accounting.........................  A-57
SECTION 8.2  Fiscal Year....................................  A-57
</TABLE>


                                      A-ii
<PAGE>   205

<TABLE>
<S>                                                           <C>
SECTION 8.3  Reports........................................  A-57

                            ARTICLE IX

                           TAX MATTERS

SECTION 9.1  Tax Returns and Information....................  A-57
SECTION 9.2  Tax Elections..................................  A-58
SECTION 9.3  Tax Controversies..............................  A-58
SECTION 9.4  Withholding....................................  A-58

                            ARTICLE X

                      ADMISSION OF PARTNERS

SECTION 10.1  Admission of Initial Limited Partners.........  A-58
SECTION 10.2  Admission of Substituted Limited Partner......  A-59
SECTION 10.3  Admission of Successor General Partner........  A-59
SECTION 10.4  Admission of Additional Limited Partners......  A-59
SECTION 10.5  Amendment of Agreement and Certificate of
  Limited Partnership.......................................  A-60

                            ARTICLE XI

                WITHDRAWAL OR REMOVAL OF PARTNERS

SECTION 11.1  Withdrawal of the General Partner.............  A-60
SECTION 11.2  Removal of the General Partner................  A-61
SECTION 11.3  Interest of Departing Partner and Successor
  General Partner...........................................  A-62
SECTION 11.4  Termination of Subordination Period,
Conversion of Subordinated Units
                     and Extinguishment of Cumulative Common
Unit Arrearages.............................................  A-63
SECTION 11.5  Withdrawal of Limited Partners................  A-63

                           ARTICLE XII

                   DISSOLUTION AND LIQUIDATION

SECTION 12.1  Dissolution...................................  A-63
SECTION 12.2  Continuation of the Business of the
  Partnership After Dissolution.............................  A-64
SECTION 12.3  Liquidator....................................  A-64
SECTION 12.4  Liquidation...................................  A-65
SECTION 12.5  Cancellation of Certificate of Limited
  Partnership...............................................  A-65
SECTION 12.6  Return of Contributions.......................  A-66
SECTION 12.7  Waiver of Partition...........................  A-66
SECTION 12.8  Capital Account Restoration...................  A-66

                           ARTICLE XIII

    AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

SECTION 13.1  Amendment to be Adopted Solely by the General
  Partner...................................................  A-66
SECTION 13.2  Amendment Procedures..........................  A-67
SECTION 13.3  Amendment Requirements........................  A-67
SECTION 13.4  Special Meetings..............................  A-68
SECTION 13.5  Notice of a Meeting...........................  A-68
SECTION 13.6  Record Date...................................  A-69
SECTION 13.7  Adjournment...................................  A-69
SECTION 13.8  Waiver of Notice; Approval of Meeting;
  Approval of Minutes.......................................  A-69
SECTION 13.9  Quorum........................................  A-69
</TABLE>


                                      A-iii
<PAGE>   206

<TABLE>
<S>                                                           <C>
SECTION 13.10  Conduct of a Meeting.........................  A-70
SECTION 13.11  Action Without a Meeting.....................  A-70
SECTION 13.12  Voting and Other Rights......................  A-71

                           ARTICLE XIV

                              MERGER
SECTION 14.1  Authority.....................................  A-71
SECTION 14.2  Procedure for Merger or Consolidation.........  A-71
SECTION 14.3  Approval by Limited Partners of Merger or
  Consolidation.............................................  A-72
SECTION 14.4  Certificate of Merger.........................  A-73
SECTION 14.5  Effect of Merger..............................  A-73

                            ARTICLE XV

            RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

SECTION 15.1  Right to Acquire Limited Partner Interests....  A-73

                           ARTICLE XVI

                        GENERAL PROVISIONS

SECTION 16.1  Addresses and Notices.........................  A-75
SECTION 16.2  Further Action................................  A-75
SECTION 16.3  Binding Effect................................  A-75
SECTION 16.4  Integration...................................  A-76
SECTION 16.5  Creditors.....................................  A-76
SECTION 16.6  Waiver........................................  A-76
SECTION 16.7  Counterparts..................................  A-76
SECTION 16.8  Applicable Law................................  A-76
SECTION 16.9  Invalidity of Provisions......................  A-76
SECTION 16.10  Consent of Partners..........................  A-76
</TABLE>


                                      A-iv
<PAGE>   207

             AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                            SHAMROCK LOGISTICS, L.P.

     THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF SHAMROCK
LOGISTICS, L.P. dated as of             , 2001, is entered into by and among
Riverwalk Logistics, L.P., a Delaware limited partnership, as the General
Partner, and Todd Walker, as the Organizational Limited Partner, together with
any other Persons who become Partners in the Partnership or parties hereto as
provided herein. In consideration of the covenants, conditions and agreements
contained herein, the parties hereto hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

SECTION 1.1  Definitions.

     The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.

     "Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.

     "Additional Book Basis" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-Up Events. For purposes of determining
the extent that Carrying Value constitutes Additional Book Basis:

          (i) Any negative adjustment made to the Carrying Value of an Adjusted
     Property as a result of either a Book-Down Event or a Book-Up Event shall
     first be deemed to offset or decrease that portion of the Carrying Value of
     such Adjusted Property that is attributable to any prior positive
     adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.

          (ii) If Carrying Value that constitutes Additional Book Basis is
     reduced as a result of a Book-Down Event and the Carrying Value of other
     property is increased as a result of such Book-Down Event, an allocable
     portion of any such increase in Carrying Value shall be treated as
     Additional Book Basis; provided that the amount treated as Additional Book
     Basis pursuant hereto as a result of such Book-Down Event shall not exceed
     the amount by which the Aggregate Remaining Net Positive Adjustments after
     such Book-Down Event exceeds the remaining Additional Book Basis
     attributable to all of the Partnership's Adjusted Property after such
     Book-Down Event (determined without regard to the application of this
     clause (ii) to such Book-Down Event).

     "Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
"Excess Additional Book Basis"), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.
<PAGE>   208

     "Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.

     "Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner
Interest, a Common Unit, a Subordinated Unit or an Incentive Distribution Right
or any other specified interest in the Partnership shall be the amount which
such Adjusted Capital Account would be if such General Partner Interest, Common
Unit, Subordinated Unit, Incentive Distribution Right or other interest in the
Partnership were the only interest in the Partnership held by a Partner from and
after the date on which such General Partner Interest, Common Unit, Subordinated
Unit, Incentive Distribution Right or other interest was first issued.

     "Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in Working
Capital Borrowings with respect to such period and (ii) any net reduction in
cash reserves for Operating Expenditures with respect to such period not
relating to an Operating Expenditure made with respect to such period, and (b)
plus (i) any net decrease in Working Capital Borrowings with respect to such
period and (ii) any net increase in cash reserves for Operating Expenditures
with respect to such period required by any debt instrument for the repayment of
principal, interest or premium. Adjusted Operating Surplus does not include that
portion of Operating Surplus included in clause (a)(i) of the definition of
Operating Surplus.

     "Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).

     "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.

     "Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.

     "Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).

     "Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner using such

                                       A-2
<PAGE>   209

reasonable method of valuation as it may adopt. The General Partner shall, in
its discretion, use such method as it deems reasonable and appropriate to
allocate the aggregate Agreed Value of Contributed Properties contributed to the
Partnership in a single or integrated transaction among each separate property
on a basis proportional to the fair market value of each Contributed Property.

     "Agreement" means this Amended and Restated Agreement of Limited
Partnership of Shamrock Logistics, L.P., as it may be amended, supplemented or
restated from time to time.

     "Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.

     "Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.

     "Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date, and without duplication:

          (a) the sum of (i) all cash and cash equivalents of the Partnership
     Group on hand at the end of such Quarter, and (ii) all additional cash and
     cash equivalents of the Partnership Group on hand on the date of
     determination of Available Cash with respect to such Quarter resulting from
     Working Capital Borrowings made subsequent to the end of such Quarter, less

          (b) the amount of any cash reserves that are necessary or appropriate
     in the reasonable discretion of the General Partner to (i) provide for the
     proper conduct of the business of the Partnership Group (including reserves
     for future capital expenditures and for anticipated future credit needs of
     the Partnership Group) subsequent to such Quarter, (ii) comply with
     applicable law or any loan agreement, security agreement, mortgage, debt
     instrument or other agreement or obligation to which any Group Member is a
     party or by which it is bound or its assets are subject or (iii) provide
     funds for distributions under Section 6.4 or 6.5 in respect of any one or
     more of the next four Quarters; provided, however, that the General Partner
     may not establish cash reserves pursuant to (iii) above if the effect of
     such reserves would be that the Partnership is unable to distribute the
     Minimum Quarterly Distribution on all Common Units, plus any Cumulative
     Common Unit Arrearage on all Common Units, with respect to such Quarter;
     and, provided further, that disbursements made by a Group Member or cash
     reserves established, increased or reduced after the end of such Quarter
     but on or before the date of determination of Available Cash with respect
     to such Quarter shall be deemed to have been made, established, increased
     or reduced, for purposes of determining Available Cash, within such Quarter
     if the General Partner so determines.

     Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.

     "Book Basis Derivative Items" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).

                                       A-3
<PAGE>   210

     "Book-Down Event" means an event which triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).

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

     "Book-Up Event" means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).

     "Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a Business
Day.

     "Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the amount which
such Capital Account would be if such General Partner Interest, Common Unit,
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
were the only interest in the Partnership held by a Partner from and after the
date on which such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other Partnership Interest was first issued.

     "Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement or the Contribution and Conveyance Agreement.

     "Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member or (b) acquisition of existing, or the
construction of new, capital assets (including, without limitation, pipeline
systems, terminalling and storage facilities and related assets), in each case
made to increase the operating capacity or revenues of the Partnership Group
from the operating capacity or revenues of the Partnership Group existing
immediately prior to such addition, improvement, acquisition or construction.

     "Capital Surplus" has the meaning assigned to such term in Section 6.3(a).

     "Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.

     "Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual fraud,
gross negligence or willful or wanton misconduct in its capacity as general
partner of the Partnership.

     "Certificate" means a certificate (i) substantially in the form of Exhibit
A to this Agreement, (ii) issued in global form in accordance with the rules and
regulations of the Depositary or (iii) in such other form as may be adopted by
the General Partner in its discretion, issued by the
                                       A-4
<PAGE>   211

Partnership evidencing ownership of one or more Common Units or a certificate,
in such form as may be adopted by the General Partner in its discretion, issued
by the Partnership evidencing ownership of one or more other Partnership
Securities.

     "Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.

     "Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.

     "Claim" has the meaning assigned to such term in Section 7.12(c).

     "Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.

     "Closing Price" has the meaning assigned to such term in Section 15.1(a).

     "Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.

     "Combined Interest" has the meaning assigned to such term in Section
11.3(a).

     "Commission" means the United States Securities and Exchange Commission.

     "Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees and of the
General Partner and having the rights and obligations specified with respect to
Common Units in this Agreement. The term "Common Unit" does not refer to a
Subordinated Unit prior to its conversion into a Common Unit pursuant to the
terms hereof.

     "Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section 6.4(a).

     "Conflicts Committee" means a committee of the Board of Directors of
Shamrock GP composed entirely of up to three directors (or such greater number
as the Board of Directors of Shamrock GP determines to be appropriate) who meet
the independence standards required to serve on an audit committee of a board of
directors by the National Securities Exchange on which the Common Units are
listed for trading.

     "Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.

     "Contribution Agreement" means that certain Contribution and Assumption
Agreement, dated as of the Closing Date, among the General Partner, the
Partnership, the Operating Partnership and certain other parties, together with
the additional conveyance documents and instruments contemplated or referenced
thereunder.

     "Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the
                                       A-5
<PAGE>   212

Quarters within the Subordination Period ending on or before the last day of
such Quarter over (b) the sum of any distributions theretofore made pursuant to
Section 6.4(a)(ii) and the second sentence of Section 6.5 with respect to an
Initial Common Unit (including any distributions to be made in respect of the
last of such Quarters).

     "Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).

     "Current Market Price" has the meaning assigned to such term in Section
15.1(a).

     "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. sec.17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.

     "Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.

     "Depositary" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.

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

     "Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.

     "Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).

     "Final Subordinated Units" has the meaning assigned to such term in Section
6.1(d)(x).

     "First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(D).

     "First Target Distribution" means $0.66 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on December 31,
2000, it means the product of $0.66 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.

     "General Partner" means Riverwalk Logistics, L.P. and its successors and
permitted assigns as general partner of the Partnership.

     "General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be evidenced by
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General Partner
to comply with the terms and provisions of this Agreement.

     "Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.

     "Group Member" means a member of the Partnership Group.

                                       A-6
<PAGE>   213

     "Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).

     "Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to the General Partner in connection with the transfer of substantially
all of its general partner interest in the Operating Partnership to the
Partnership pursuant to Section 5.2, which Partnership Interest will confer upon
the holder thereof only the rights and obligations specifically provided in this
Agreement with respect to Incentive Distribution Rights (and no other rights
otherwise available to or other obligations of a holder of a Partnership
Interest). Notwithstanding anything in this Agreement to the contrary, the
holder of an Incentive Distribution Right shall not be entitled to vote such
Incentive Distribution Right on any Partnership matter except as may otherwise
be required by law.

     "Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(iv),
(v) and (vi) and 6.4(b)(ii), (iii) and (iv).

     "Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).

     "Indemnitee" means (a) the General Partner, (b) any Departing Partner, (c)
any Person who is or was an Affiliate of the General Partner or any Departing
Partner, (d) any Person who is or was a member, partner, officer, director,
employee, agent or trustee of any Group Member, the General Partner or any
Departing Partner or any Affiliate of any Group Member, the General Partner or
any Departing Partner, and (e) any Person who is or was serving at the request
of the General Partner or any Departing Partner or any Affiliate of the General
Partner or any Departing Partner as an officer, director, employee, member,
partner, agent, fiduciary or trustee of another Person; provided, that a Person
shall not be an Indemnitee by reason of providing, on a fee-for-services basis,
trustee, fiduciary or custodial services.

     "Initial Common Units" means the Common Units sold in the Initial Offering.

     "Initial Limited Partners" means the General Partner and UDS Logistics, LLC
(with respect to the Common Units, Subordinated Units and the Incentive
Distribution Rights received by it pursuant to Section 5.2) and the
Underwriters, in each case upon being admitted to the Partnership in accordance
with Section 10.1.

     "Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.

     "Initial Unit Price" means (a) with respect to the Common Units and the
Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on
the cover page of the prospectus included as part of the Registration Statement
and first issued at or after the time the Registration Statement first became
effective or (b) with respect to any other class or series of Units, the price
per Unit at which such class or series of Units is initially sold by the
Partnership, as determined by the General Partner, in each case adjusted as the
General Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of Units.

     "Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account in the ordinary
course of business) by any Group Member; (b) sales of equity interests by any
Group Member (other than the Common Units sold to the Underwriters pursuant to
the exercise of their over-allotment option); and (c) sales or other voluntary
or involuntary dispositions of any assets of any Group Member other than (i)
sales or other dispositions of inventory, accounts receivable and other assets
in the ordinary course of business, and (ii) sales or other dispositions of
assets as part of normal retirements or replacements.

                                       A-7
<PAGE>   214

     "Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.

     "Limited Partner" means, unless the context otherwise requires, (a) the
Organizational Limited Partner prior to its withdrawal from the Partnership,
each Initial Limited Partner, each Substituted Limited Partner, each Additional
Limited Partner and any Partner upon the change of its status from General
Partner to Limited Partner pursuant to Section 11.3 or (b) solely for purposes
of Articles V, VI, VII and IX and Sections 12.3 and 12.4, each Assignee;
provided, however, that when the term "Limited Partner" is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any holder
of an Incentive Distribution Right except as may otherwise be required by law.

     "Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Subordinated Units, Incentive Distribution Rights or other Partnership
Securities or a combination thereof or interest therein, and includes any and
all benefits to which such Limited Partner or Assignee is entitled as provided
in this Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement; provided,
however, that when the term "Limited Partner Interest" is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any holder
of an Incentive Distribution Right except as may otherwise be required by law.

     "Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
reconstitute the Partnership and continue its business has expired without such
an election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.

     "Liquidator" means one or more Persons selected by the General Partner to
perform the functions described in Section 12.3 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.

     "Merger Agreement" has the meaning assigned to such term in Section 14.1.

     "Minimum Quarterly Distribution" means $0.60 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on December 31,
2000, it means the product of $0.60 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.

     "National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.

     "Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.

     "Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net

                                       A-8
<PAGE>   215

Termination Gain or Net Termination Loss) for such taxable year over the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year. The items included in the calculation of Net Income shall be
determined in accordance with Section 5.5(b) and shall not include any items
specially allocated under Section 6.1(d); provided that the determination of the
items that have been specially allocated under Section 6.1(d) shall be made as
if Section 6.1(d)(xii) were not in this Agreement.

     "Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d); provided that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.

     "Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.

     "Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).

     "Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).

     "Non-citizen Assignee" means a Person whom the General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the General Partner has become the Substituted
Limited Partner, pursuant to Section 4.9.

     "Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.

     "Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (including, without limitation, any expenditures described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse
Liability.

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

     "Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b).

     "Omnibus Agreement" means that Omnibus Agreement, dated as of the Closing
Date, among Ultramar Diamond Shamrock, Inc., the General Partner, the
Partnership and the Operating Partnership.

                                       A-9
<PAGE>   216

     "Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General Partner,
repayment of Working Capital Borrowings, debt service payments, and capital
expenditures, subject to the following:

          (a) Payments (including prepayments) of principal and premium on
     indebtedness other than Working Capital Borrowings shall not constitute
     Operating Expenditures; and

          (b) Operating Expenditures shall not include (i) capital expenditures
     made for Acquisitions or Capital Improvements, (ii) payment of transaction
     expenses relating to Interim Capital Transactions and (iii) distributions
     to Partners. Where capital expenditures are made in part for Acquisitions
     or for Capital Improvements and in part for other purposes, the General
     Partner's good faith allocation between the amounts paid for each shall be
     conclusive.

     "Operating Partnership" means Shamrock Logistics Operations, L.P., a
Delaware limited partnership and any successors thereto.

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

     "Operating Surplus" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,

          (a) the sum of (i) $10 million plus all cash and cash equivalents of
     the Partnership Group on hand as of the close of business on the Closing
     Date, (ii) all cash receipts of the Partnership Group for the period
     beginning on the Closing Date and ending with the last day of such period,
     other than cash receipts from Interim Capital Transactions (except to the
     extent specified in Section 6.5) and (iii) all cash receipts of the
     Partnership Group after the end of such period but on or before the date of
     determination of Operating Surplus with respect to such period resulting
     from Working Capital Borrowings, less

          (b) the sum of (i) Operating Expenditures for the period beginning on
     the Closing Date and ending with the last day of such period and (ii) the
     amount of cash reserves that is necessary or advisable in the reasonable
     discretion of the General Partner to provide funds for future Operating
     Expenditures; provided, however, that disbursements made (including
     contributions to a Group Member or disbursements on behalf of a Group
     Member) or cash reserves established, increased or reduced after the end of
     such period but on or before the date of determination of Available Cash
     with respect to such period shall be deemed to have been made, established,
     increased or reduced, for purposes of determining Operating Surplus, within
     such period if the General Partner so determines.

     Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.

     "Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or the General Partner or any of its Affiliates)
acceptable to the General Partner in its reasonable discretion.

     "Organizational Limited Partner" means Todd Walker in his capacity as the
organizational limited partner of the Partnership pursuant to this Agreement.

     "Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partner or its Affiliates) beneficially owns 20% or more of any
Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to

                                      A-10
<PAGE>   217

be Outstanding when sending notices of a meeting of Limited Partners to vote on
any matter (unless otherwise required by law), calculating required votes,
determining the presence of a quorum or for other similar purposes under this
Agreement, except that Common Units so owned shall be considered to be
Outstanding for purposes of Section 11.1(b)(iv) (such Common Units shall not,
however, be treated as a separate class of Partnership Securities for purposes
of this Agreement); provided, further, that the foregoing limitation shall not
apply (i) to any Person or Group who acquired 20% or more of any Outstanding
Partnership Securities of any class then Outstanding directly from the General
Partner or its Affiliates or (ii) to any Person or Group who acquired 20% or
more of any Outstanding Partnership Securities of any class then Outstanding
directly or indirectly from a Person or Group described in clause (i) provided
that the General Partner shall have notified such Person or Group in writing
that such limitation shall not apply.

     "Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.

     "Parity Units" means Common Units and all other Units of any other class or
series that have the right to (i) receive distributions of Available Cash from
Operating Surplus pro rata with distributions of the Minimum Quarterly
Distribution and Cumulative Common Unit Arrearages on the Common Units and (ii)
receive allocations of Net Termination Gain pro rata with allocations of Net
Termination Gain to the Common Units pursuant to Section 6.1(c)(i)(B), in each
case regardless of whether the amounts or value so distributed or allocated on
each Parity Unit equals the amount or value so distributed or allocated on each
Common Unit. Units whose participation in such (i) distributions of Available
Cash from Operating Surplus and (ii) allocations of Net Termination Gain are
subordinate in order of priority to such distributions and allocations on Common
Units shall not constitute Parity Units even if such Units are convertible under
certain circumstances into Common Units or Parity Units.

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

     "Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).

     "Partner Nonrecourse Deductions" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.

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

     "Partnership" means Shamrock Logistics, L.P., a Delaware limited
partnership, and any successors thereto.

     "Partnership Group" means the Partnership, the Operating Partnership and
any Subsidiary of any such entity, treated as a single consolidated entity.

     "Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interest and Limited Partner Interests.

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

     "Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including without
limitation, Common Units, Subordinated Units and Incentive Distribution Rights.

     "Percentage Interest" means as of any date of determination (a) as to the
General Partner (with respect to its General Partner Interest), an aggregate
1.0%, (b) as to any Unitholder or
                                      A-11
<PAGE>   218

Assignee holding Units, the product obtained by multiplying (i) 99% less the
percentage applicable to paragraph (c) by (ii) the quotient obtained by dividing
(A) the number of Units held by such Unitholder or Assignee by (B) the total
number of all Outstanding Units, and (c) as to the holders of additional
Partnership Securities issued by the Partnership in accordance with Section 5.6,
the percentage established as a part of such issuance. The Percentage Interest
with respect to an Incentive Distribution Right shall at all times be zero.

     "Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

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

     "Pro Rata" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests, (b) when modifying Partners and Assignees, apportioned among all
Partners and Assignees in accordance with their relative Percentage Interests
and (c) when modifying holders of Incentive Distribution Rights, apportioned
equally among all holders of Incentive Distribution Rights in accordance with
the relative number of Incentive Distribution Rights held by each such holder.

     "Purchase Date" means the date determined by the General Partner as the
date for purchase of all Outstanding Units of a certain class (other than Units
owned by the General Partner and its Affiliates) pursuant to Article XV.

     "Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.

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

     "Record Date" means the date established by the General Partner for
determining (a) the identity of the Record Holders entitled to notice of, or to
vote at, any meeting of Limited Partners or entitled to vote by ballot or give
approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.

     "Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Securities, the Person in
whose name any such other Partnership Security is registered on the books which
the General Partner has caused to be kept as of the opening of business on such
Business Day.

     "Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.

     "Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-43668) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.

     "Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units or Subordinated
Units, the excess of (a) the Net Positive Adjustments of the Unitholders holding
Common Units or Subordinated Units as of the end of such period over (b) the sum
of those Partners' Share of Additional Book Basis

                                      A-12
<PAGE>   219

Derivative Items for each prior taxable period, (ii) with respect to the General
Partner (as holder of the General Partner Interest), the excess of (a) the Net
Positive Adjustments of the General Partner as of the end of such period over
(b) the sum of the General Partner's Share of Additional Book Basis Derivative
Items with respect to the General Partner Interest for each prior taxable
period, and (iii) with respect to the holders of Incentive Distribution Rights,
the excess of (a) the Net Positive Adjustments of the holders of Incentive
Distribution Rights as of the end of such period over (b) the sum of the Share
of Additional Book Basis Derivative Items of the holders of the Incentive
Distribution Rights for each prior taxable period.

     "Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).

     "Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.

     "Restricted Business" has the meaning assigned to such term in the Omnibus
Agreement.

     "Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).

     "Second Target Distribution" means $0.90 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on December 31,
2000, it means the product of $0.90 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.

     "Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.

     "Shamrock GP" means Shamrock Logistics GP, LLC, a Delaware limited
liability company and the general partner of the General Partner.

     "Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units or Subordinated Units,
the amount that bears the same ratio to such Additional Book Basis Derivative
Items as the Unitholders' Remaining Net Positive Adjustments as of the end of
such period bears to the Aggregate Remaining Net Positive Adjustments as of that
time, (ii) with respect to the General Partner (as holder of the General Partner
Interest), the amount that bears the same ratio to such additional Book Basis
Derivative Items as the General Partner's Remaining Net Positive Adjustments as
of the end of such period bears to the Aggregate Remaining Net Positive
Adjustment as of that time, and (iii) with respect to the Partners holding
Incentive Distribution Rights, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the Remaining Net Positive Adjustments
of the Partners holding the Incentive Distribution Rights as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustments as of that
time.

     "Special Approval" means approval by a majority of the members of the
Conflicts Committee, provided that at the time of such approval all of the
material facts known to the General Partner or any of its Affiliates regarding
the proposed transaction in respect of which such approval is given were fully
disclosed to or otherwise known by the Conflicts Committee.

     "Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees (other than of
holders of the Incentive Distribution Rights),
                                      A-13
<PAGE>   220

(i) otherwise having the rights and obligations specified with respect to
Subordinated Units in this Agreement or (ii) issued in accordance with Section
5.7(d). The term "Subordinated Unit" as used herein does not include a Common
Unit or a Parity Unit. A Subordinated Unit that is convertible into a Common or
Parity Unit shall not constitute a Common Unit or Parity Unit until such
conversion occurs.

     "Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:

          (a) the first day of any Quarter beginning after December 31, 2005 in
     respect which (i) (A) distributions of Available Cash from Operating
     Surplus on each of the Outstanding Common Units and Subordinated Units with
     respect to each of the three consecutive, non-overlapping four-Quarter
     periods immediately preceding such date equaled or exceeded the sum of the
     Minimum Quarterly Distribution on all Outstanding Common Units and
     Subordinated Units during such periods and (B) the Adjusted Operating
     Surplus generated during each of the three consecutive, non-overlapping
     four-Quarter periods immediately preceding such date equaled or exceeded
     the sum of the Minimum Quarterly Distribution on all of the Common Units
     and Subordinated Units that were Outstanding during such periods on a fully
     diluted basis (i.e., taking into account for purposes of such determination
     all Outstanding Common Units, all Outstanding Subordinated Units, all
     Common Units and Subordinated Units issuable upon exercise of employee
     options that have, as of the date of determination, already vested or are
     scheduled to vest prior to the end of the Quarter immediately following the
     Quarter with respect to which such determination is made, and all Common
     Units and Subordinated Units that have as of the date of determination,
     been earned by but not yet issued to management of the Partnership in
     respect of incentive compensation), plus the related distribution on the
     General Partner Interest in the Partnership and on the general partner
     interest in the Operating Partnership, during such periods and (ii) there
     are no Cumulative Common Unit Arrearages; and

          (b) the date on which the General Partner is removed as general
     partner of the Partnership upon the requisite vote by holders of
     Outstanding Units under circumstances where Cause does not exist and Units
     held by the General Partner and its Affiliates are not voted in favor of
     such removal.

     "Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.

     "Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.

     "Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).

     "Trading Day" has the meaning assigned to such term in Section 15.1(a).

                                      A-14
<PAGE>   221

     "Transfer" has the meaning assigned to such term in Section 4.4(a).

     "Transfer Agent" means such bank, trust company or other Person (including
the General Partner or one of its Affiliates) as shall be appointed from time to
time by the Partnership to act as registrar and transfer agent for the Common
Units; provided that if no Transfer Agent is specifically designated for any
other Partnership Securities, the General Partner shall act in such capacity.

     "Transfer Application" means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.

     "Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.

     "Underwriting Agreement" means the Underwriting Agreement dated
            , 2000 among the Underwriters, the Partnership and certain other
parties, providing for the purchase of Common Units by such Underwriters.

     "Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units and Subordinated Units, but shall not include (i) a
General Partner Interest or (ii) Incentive Distribution Rights.

     "Unitholders" means the holders of Common Units and Subordinated Units.

     "Unit Majority" means, during the Subordination Period, at least a majority
of the Outstanding Common Units (excluding for purposes of such determination
Common Units held by the General Partner and its Affiliates so long as the
General Partner and its Affiliates own 20% or more of the Outstanding Common
Units) voting as a class and at least a majority of the Outstanding Subordinated
Units voting as a class, and thereafter, at least a majority of the Outstanding
Common Units.

     "Unpaid MQD" has the meaning assigned to such term in Section 6.1(c)(i)(B).

     "Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).

     "Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).

     "Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units.

     "U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.

     "Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).

     "Working Capital Borrowings" means borrowings used solely for working
capital purposes or to pay distributions to partners made pursuant to a credit
facility or other arrangement requiring all such borrowings thereunder to be
reduced to a relatively small amount each year for an economically meaningful
period of time.
                                      A-15
<PAGE>   222

SECTION 1.2  Construction.

     Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.

                                   ARTICLE II

                                  ORGANIZATION

SECTION 2.1  Formation.

     The General Partner and the Organizational Limited Partner have previously
formed the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and hereby amend and restate the First Amended and Restated
Agreement of Limited Partnership of Shamrock Logistics, L.P. in its entirety.
This second amendment and restatement shall become effective on the date of this
Agreement. Except as expressly provided to the contrary in this Agreement, the
rights, duties (including fiduciary duties), liabilities and obligations of the
Partners and the administration, dissolution and termination of the Partnership
shall be governed by the Delaware Act. All Partnership Interests shall
constitute personal property of the owner thereof for all purposes and a Partner
has no interest in specific Partnership property.

SECTION 2.2  Name.

     The name of the Partnership shall be "Shamrock Logistics, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner in its sole discretion,
including the name of the General Partner. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purpose of complying with the laws of
any jurisdiction that so requires. The General Partner in its discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.

SECTION 2.3  Registered Office; Registered Agent; Principal Office; Other
Offices.

     Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at Corporation Trust
Company, 1209 Orange Street, Wilmington, DE 19801, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership shall be located at 6000 North Loop 1604 West, San Antonio,
Texas 78249 or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems necessary or appropriate. The address of the General
Partner shall be 6000 North Loop 1604 West, San Antonio, Texas 78249 or such
other place as the General Partner may from time to time designate by notice to
the Limited Partners.

SECTION 2.4  Purpose and Business.

     The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a partner of the Operating Partnership and, in
connection therewith, to exercise all the rights and powers conferred upon the
Partnership as a partner of an Operating Partnership pursuant to the Operating
Partnership Agreement for such Operating Partnership or otherwise,

                                      A-16
<PAGE>   223

(b) engage directly in, or enter into or form any corporation, partnership,
joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that the Operating Partnership is permitted
to engage in by the Operating Partnership Agreement and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity, (c)
engage directly in, or enter into or form any corporation, partnership, joint
venture, limited liability company or other arrangement to engage indirectly in,
any business activity that is approved by the General Partner and which lawfully
may be conducted by a limited partnership organized pursuant to the Delaware Act
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity; provided, however, that the General Partner reasonably determines, as
of the date of the acquisition or commencement of such activity, that such
activity (i) generates "qualifying income" (as such term is defined pursuant to
Section 7704 of the Code) or (ii) enhances the operations of an activity of the
Operating Partnership or a Partnership activity that generates qualifying
income, and (d) do anything necessary or appropriate to the foregoing, including
the making of capital contributions or loans to a Group Member. The General
Partner has no obligation or duty to the Partnership, the Limited Partners or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.

SECTION 2.5  Powers.

     The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.

SECTION 2.6  Power of Attorney.

     (a) Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner and, if a Liquidator shall have been selected pursuant to
Section 12.3, the Liquidator (and any successor to the Liquidator 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;
     (D) all certificates, documents and other instruments relating to the
     admission, withdrawal, removal or substitution of any Partner pursuant to,
     or other events described in, Article IV, X, XI or XII; (E) all
     certificates, documents and other instruments relating to the determination
     of the rights, preferences and privileges of any class or series of
     Partnership Securities issued pursuant to Section 5.6; and (F) all
     certificates, documents and other instruments

                                      A-17
<PAGE>   224

     (including agreements and a certificate of merger) relating to a merger or
     consolidation of the Partnership pursuant to Article XIV; 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 Section 13.3 or any other provision of this
     Agreement that establishes a percentage of the Limited Partners or of the
     Limited Partners of any class or series required to take any action, the
     General Partner and the Liquidator may exercise the power of attorney made
     in this Section 2.6(a)(ii) only after the necessary vote, consent or
     approval of the Limited Partners or of the Limited Partners of such class
     or series, as applicable.

     Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.

     (b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, 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 or Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the General Partner or the Liquidator acting in good
faith pursuant to such power of attorney; and each such Limited Partner or
Assignee, 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 or Assignee 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.

SECTION 2.7  Term.

     The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall have a
perpetual existence unless dissolved in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.

SECTION 2.8  Title to Partnership Assets.

     Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such

                                      A-18
<PAGE>   225

Affiliate or nominee for the use and benefit of the Partnership in accordance
with the provisions of this Agreement; provided, however, that the General
Partner shall use reasonable efforts to cause record title to such assets (other
than those assets in respect of which the General Partner determines that the
expense and difficulty of conveyancing makes transfer of record title to the
Partnership impracticable) to be vested in the Partnership as soon as reasonably
practicable; provided, further, that, prior to the withdrawal or removal of the
General Partner or as soon thereafter as practicable, the General Partner shall
use reasonable efforts to effect the transfer of record title to the Partnership
and, prior to any such transfer, will provide for the use of such assets in a
manner satisfactory to the General Partner. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets is
held.

                                  ARTICLE III

                           RIGHTS OF LIMITED PARTNERS

SECTION 3.1  Limitation of Liability.

     The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.

SECTION 3.2  Management of Business.

     No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 17-303(a)
of the Delaware Act) and shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.

SECTION 3.3  Outside Activities of the Limited Partners.

     Subject to the provisions of Section 7.5 and the Omnibus Agreement, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.

SECTION 3.4  Rights of Limited Partners.

     (a) In addition to other rights provided by this Agreement or by applicable
law, and except as limited by Section 3.4(b), each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon reasonable written demand and at
such Limited Partner's own expense:

          (i) to obtain true and full information regarding the status of the
     business and financial condition of the Partnership;

          (ii) promptly after becoming available, to obtain a copy of the
     Partnership's federal, state and local income tax returns for each year;
                                      A-19
<PAGE>   226

          (iii) to have furnished to him a current list of the name and last
     known business, residence or mailing address of each Partner;

          (iv) to have furnished to him a copy of this Agreement and the
     Certificate of Limited Partnership and all amendments thereto, together
     with a copy of the executed copies of all powers of attorney pursuant to
     which this Agreement, the Certificate of Limited Partnership and all
     amendments thereto have been executed;

          (v) to obtain true and full information regarding the amount of cash
     and a description and statement of the Net Agreed Value of any other
     Capital Contribution by each Partner and which each Partner has agreed to
     contribute in the future, and the date on which each became a Partner; and

          (vi) to obtain such other information regarding the affairs of the
     Partnership as is just and reasonable.

     (b) The General Partner may keep confidential from the Limited Partners and
Assignees, for such period of time as the General Partner deems reasonable, (i)
any information that the General Partner reasonably believes to be in the nature
of trade secrets or (ii) other information the disclosure of which the General
Partner in good faith believes (A) is not in the best interests of the
Partnership Group, (B) could damage the Partnership Group or (C) that any Group
Member is required by law or by agreement with any third party to keep
confidential (other than agreements with Affiliates of the Partnership the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).

                                   ARTICLE IV

        CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
                      REDEMPTION OF PARTNERSHIP INTERESTS

SECTION 4.1  Certificates.

     Upon the Partnership's issuance of Common Units or Subordinated Units to
any Person, the Partnership shall issue one or more Certificates in the name of
such Person evidencing the number of such Units being so issued. In addition,
(a) upon the General Partner's request, the Partnership shall issue to it one or
more Certificates in the name of the General Partner evidencing its interests in
the Partnership and (b) upon the request of any Person owning Incentive
Distribution Rights or any other Partnership Securities other than Common Units
or Subordinated Units, the Partnership shall issue to such Person one or more
certificates evidencing such Incentive Distribution Rights or other Partnership
Securities other than Common Units or Subordinated Units. Certificates shall be
executed on behalf of the Partnership by the Chairman of the Board, President or
any Executive Vice President or Vice President and the Secretary or any
Assistant Secretary of Shamrock Logistics GP, LLC, a Delaware limited liability
company and the general partner of the General Partner ("Shamrock GP"). No
Common Unit Certificate shall be valid for any purpose until it has been
countersigned by the Transfer Agent; provided, however, that if the General
Partner elects to issue Common Units in global form, the Common Unit
Certificates shall be valid upon receipt of a certificate from the Transfer
Agent certifying that the Common Units have been duly registered in accordance
with the directions of the Partnership and the Underwriters. Subject to the
requirements of Section 6.7(b), the Partners holding Certificates evidencing
Subordinated Units may exchange such Certificates for Certificates evidencing
Common Units on or after the date on which such Subordinated Units are converted
into Common Units pursuant to the terms of Section 5.8.

                                      A-20
<PAGE>   227

SECTION 4.2  Mutilated, Destroyed, Lost or Stolen Certificates.

     (a) If any mutilated Certificate is surrendered to the Transfer Agent, the
appropriate officers of Shamrock GP on behalf of the Partnership shall execute,
and the Transfer Agent shall countersign and deliver in exchange therefor, a new
Certificate evidencing the same number and type of Partnership Securities as the
Certificate so surrendered.

     (b) The appropriate officers of Shamrock GP on behalf of the Partnership
shall execute and deliver, and the Transfer Agent shall countersign a new
Certificate in place of any Certificate previously issued if the Record Holder
of the Certificate:

          (i) makes proof by affidavit, in form and substance satisfactory to
     the Partnership, that a previously issued Certificate has been lost,
     destroyed or stolen;

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

          (iii) if requested by the Partnership, delivers to the Partnership a
     bond, in form and substance satisfactory to the Partnership, with surety or
     sureties and with fixed or open penalty as the Partnership may reasonably
     direct, in its sole discretion, to indemnify the Partnership, the Partners,
     the General Partner and the Transfer Agent against any claim that may be
     made on account of the alleged loss, destruction or theft of the
     Certificate; and

          (iv) satisfies any other reasonable requirements imposed by the
     Partnership.

     If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by the
Certificate is registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner or Assignee shall
be precluded from making any claim against the Partnership, the General Partner
or the Transfer Agent for such transfer or for a new Certificate.

     (c) As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.

SECTION 4.3  Record Holders.

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

                                      A-21
<PAGE>   228

SECTION 4.4  Transfer Generally.

     (a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner, by which the holder of a Limited Partner Interest
assigns such Limited Partner Interest to another Person who is or becomes a
Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise.

     (b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.

     (c) Nothing contained in this Agreement shall be construed to prevent (i) a
disposition by any limited partner of the General Partner of any or all of the
issued and outstanding limited partner interests of the General Partner or (ii)
a disposition by any general partner of the General Partner of any or all of the
issued and outstanding capital stock or other equity interests of such general
partner.

SECTION 4.5  Registration and Transfer of Limited Partner Interests.

     (a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of Shamrock GP on behalf of the Partnership shall execute and deliver,
and in the case of Common Units, the Transfer Agent shall countersign and
deliver, in the name of the holder or the designated transferee or transferees,
as required pursuant to the holder's instructions, one or more new Certificates
evidencing the same aggregate number and type of Limited Partner Interests as
was evidenced by the Certificate so surrendered.

     (b) Except as otherwise provided in Section 4.9, the Partnership shall not
recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and such Certificates are accompanied by a Transfer Application duly
executed by the transferee (or the transferee's attorney-in-fact duly authorized
in writing). No charge shall be imposed by the Partnership for such transfer;
provided, that as a condition to the issuance of any new Certificate under this
Section 4.5, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed with respect
thereto.

     (c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.

     (d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.

     (e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement,
                                      A-22
<PAGE>   229

(iii) represented and warranted that such transferee has the right, power and
authority and, if an individual, the capacity to enter into this Agreement, (iv)
granted the powers of attorney set forth in this Agreement and (v) given the
consents and approvals and made the waivers contained in this Agreement.

     (f) The General Partner and its Affiliates shall have the right at any time
to transfer their Subordinated Units and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more Persons.

SECTION 4.6  Transfer of the General Partner's General Partner Interest.

     (a) Subject to Section 4.6(c) below, prior to December 31, 2010, the
General Partner shall not transfer all or any part of its General Partner
Interest to a Person unless such transfer (i) has been approved by the prior
written consent or vote of the holders of at least a majority of the Outstanding
Common Units (excluding Common Units held by the General Partner and its
Affiliates) or (ii) is of all, but not less than all, of its General Partner
Interest to (A) an Affiliate of the General Partner or (B) another Person in
connection with the merger or consolidation of the General Partner with or into
another Person or the transfer by the General Partner of all or substantially
all of its assets to another Person.

     (b) Subject to Section 4.6(c) below, on or after December 31, 2010, the
General Partner may transfer all or any of its General Partner Interest without
Unitholder approval.

     (c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of the General Partner under this Agreement and the Operating
Partnership Agreement and to be bound by the provisions of this Agreement and
the Operating Partnership Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner or of any limited partner of the Operating Partnership or
cause the Partnership or the Operating Partnership to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not already so treated or taxed) and
(iii) such transferee also agrees to purchase all (or the appropriate portion
thereof, if applicable) of the partnership interest of the General Partner as
the general partner of each other Group Member. In the case of a transfer
pursuant to and in compliance with this Section 4.6, the transferee or successor
(as the case may be) shall, subject to compliance with the terms of Section
10.3, be admitted to the Partnership as a General Partner immediately prior to
the transfer of the Partnership Interest, and the business of the Partnership
shall continue without dissolution.

SECTION 4.7  Transfer of Incentive Distribution Rights.

     Prior to December 31, 2010, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate or (b) to another
Person in connection with (i) the merger or consolidation of such holder of
Incentive Distribution Rights with or into such other Person or (ii) the
transfer by such holder of all or substantially all of its assets to such other
Person. Any other transfer of the Incentive Distribution Rights prior to
December 31, 2010, shall require the prior approval of holders at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partner and its Affiliates). On or after December 31, 2010, the General
Partner or any other holder of Incentive Distribution Rights may transfer any or
all of its Incentive Distribution Rights without Unitholder approval.
Notwithstanding anything herein to the contrary, no transfer of Incentive
Distribution Rights to another Person shall be permitted unless the transferee
agrees to be bound by the provisions of this Agreement. The General Partner
shall have the authority (but shall not be required) to adopt such reasonable
restrictions on the

                                      A-23
<PAGE>   230

transfer of Incentive Distribution Rights and requirements for registering the
transfer of Incentive Distribution Rights as the General Partner, in its sole
discretion, shall determine are necessary or appropriate.

SECTION 4.8  Restrictions on Transfers.

     (a) Except as provided in Section 4.8(d) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership Interests
shall be made if such transfer would (i) violate the then applicable federal or
state securities laws or rules and regulations of the Commission, any state
securities commission or any other governmental authority with jurisdiction over
such transfer, (ii) terminate the existence or qualification of the Partnership
or the Operating Partnership under the laws of the jurisdiction of its
formation, or (iii) cause the Partnership or the Operating Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).

     (b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
Operating Partnership becoming taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes. The restrictions may be imposed by
making such amendments to this Agreement as the General Partner may determine to
be necessary or appropriate to impose such restrictions; provided, however, that
any amendment that the General Partner believes, in the exercise of its
reasonable discretion, could result in the delisting or suspension of trading of
any class of Limited Partner Interests on the principal National Securities
Exchange on which such class of Limited Partner Interests is then traded must be
approved, prior to such amendment being effected, by the holders of at least a
majority of the Outstanding Limited Partner Interests of such class.

     (c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b).

     (d) Nothing contained in this Article IV, or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through the facilities of any National Securities
Exchange on which such Partnership Interests are listed for trading.

SECTION 4.9  Citizenship Certificates; Non-citizen Assignees.

     (a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that, in the reasonable determination of the General
Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
General Partner may request any Limited Partner or Assignee to furnish to the
General Partner, within 30 days after receipt of such request, an executed
Citizenship Certification or such other information concerning his nationality,
citizenship or other related status (or, if the Limited Partner or Assignee is a
nominee holding for the account of another Person, the nationality, citizenship
or other related status of such Person) as the General Partner may request. If a
Limited Partner or Assignee fails to furnish to the General Partner within the
aforementioned 30-day period such Citizenship Certification or other requested
information or if upon receipt of such Citizenship Certification or other
requested information the General Partner determines, with the advice of
counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the
Partnership Interests owned by such Limited Partner or Assignee shall be subject
to redemption in accordance with the provisions of Section 4.10. In addition,
the General Partner may require that the status of any such Partner or Assignee
be changed to that of a Non-citizen Assignee and, thereupon, the General Partner
shall be substituted for such Non-citizen Assignee as the Limited Partner in
respect of his Limited Partner Interests.

                                      A-24
<PAGE>   231

     (b) The General Partner shall, in exercising voting rights in respect of
Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including
without limitation the General Partner) in respect of Limited Partner Interests
other than those of Non-citizen Assignees are cast, either for, against or
abstaining as to the matter.

     (c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof, and the Partnership shall provide cash
in exchange for an assignment of the Non-citizen Assignee's share of the
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).

     (d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.10, and upon his admission pursuant to Section 10.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's Limited Partner Interests.

SECTION 4.10  Redemption of Partnership Interests of Non-citizen Assignees.

     (a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the General Partner that such Limited Partner or Assignee
is an Eligible Citizen or has transferred his Partnership Interests to a Person
who is an Eligible Citizen and who furnishes a Citizenship Certification to the
General Partner prior to the date fixed for redemption as provided below, redeem
the Partnership Interest of such Limited Partner or Assignee as follows:

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

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

          (iii) Upon surrender by or on behalf of the Limited Partner or
     Assignee, at the place specified in the notice of redemption, of the
     Certificate evidencing the Redeemable Interests, duly endorsed in blank or
     accompanied by an assignment duly executed in blank, the Limited

                                      A-25
<PAGE>   232

     Partner or Assignee or his duly authorized representative shall be entitled
     to receive the payment therefor.

          (iv) After the redemption date, Redeemable Interests shall no longer
     constitute issued and Outstanding Limited Partner Interests.

     (b) The provisions of this Section 4.10 shall also be applicable to Limited
Partner Interests held by a Limited Partner or Assignee as nominee of a Person
determined to be other than an Eligible Citizen.

     (c) Nothing in this Section 4.10 shall prevent the recipient of a notice of
redemption from transferring his Limited Partner Interest before the redemption
date if such transfer is otherwise permitted under this Agreement. Upon receipt
of notice of such a transfer, the General Partner shall withdraw the notice of
redemption, provided the transferee of such Limited Partner Interest certifies
to the satisfaction of the General Partner in a Citizenship Certification
delivered in connection with the Transfer Application that he is an Eligible
Citizen. If the transferee fails to make such certification, such redemption
shall be effected from the transferee on the original redemption date.

                                   ARTICLE V

          CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

SECTION 5.1  Organizational Contributions.

     In connection with the formation of the Partnership under the Delaware Act,
Shamrock GP, the former general partner, made an initial Capital Contribution to
the Partnership in the amount of $10.00, for an interest in the Partnership and
was admitted as the General Partner of the Partnership, and the Organizational
Limited Partner made an initial Capital Contribution to the Partnership in the
amount of $990.00 for an interest in the Partnership and has been admitted as a
Limited Partner of the Partnership. On August 10, 2000, the Certificate of
Limited Partnership of the Partnership was amended to reflect the substitution
of the General Partner as general partner of the Partnership and the removal of
Shamrock GP. As of the Closing Date, the interest of the Organizational Limited
Partner shall be redeemed as provided in the Contribution Agreement; the initial
Capital Contributions of each Partner shall thereupon be refunded; and the
Organizational Limited Partner shall cease to be a Limited Partner of the
Partnership. Ninety-nine percent of any interest or other profit that may have
resulted from the investment or other use of such initial Capital Contributions
shall be allocated and distributed to the Organizational Limited Partner, and
the balance thereof shall be allocated and distributed to the General Partner.

SECTION 5.2  Contributions by the General Partner and its Affiliates.

     (a) On the Closing Date and pursuant to the Contribution Agreement, (i) the
General Partner shall contribute to the Partnership, as a Capital Contribution,
all but its 1.0101% general partner interest in the Operating Partnership in
exchange for (A) a 1% general partner interest, and (B) the Incentive
Distribution Rights, and (ii) UDS Logistics, LLC, a Delaware limited liability
company ("UDS Logistics") shall contribute its limited partner interests in the
Operating Partnership to the Partnership in exchange for (A) 8,999,332
Subordinated Units and (B) 4,399,322 Common Units.

     (b) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the issuance of the Common Units issued in the Initial
Offering or pursuant to the Over-Allotment Option), the General Partner shall be
required to make additional Capital Contributions equal to 1/99th of any amount
contributed to the Partnership by the Limited Partners in exchange for such
additional Limited Partner Interests. Except as set forth in the immediately

                                      A-26
<PAGE>   233

preceding sentence and Article XII, the General Partner shall not be obligated
to make any additional Capital Contributions to the Partnership.

SECTION 5.3  Contributions by Initial Limited Partners.

     (a) On the Closing Date and pursuant to the Underwriting Agreement, each
Underwriter shall pay to the Partnership cash in an amount equal to the Issue
Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. Each Underwriter's payment of cash to the Partnership pursuant
to the preceding sentence shall be regarded as representing (i) a contribution
by such Underwriter to the Partnership in an amount equal to the Initial Unit
Price per Initial Common Unit multiplied by the number of Common Units purchased
by such Underwriter at the Closing Date and (ii) a payment by the Partnership to
such Underwriter of the underwriting discount and commissions in an amount equal
to (A) the excess of the Initial Unit Price over the Issue Price multiplied by
(B) the number of Common Units purchased by such Underwriter at the Closing
Date. In exchange for such Capital Contributions by the Underwriters, the
Partnership shall issue Common Units to each Underwriter on whose behalf such
Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash paid to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Initial Common Unit.

     (b) Notwithstanding anything else herein contained, all of the proceeds
received by the Partnership from the issuance of Common Units pursuant to
Section 5.3(a) will be contributed to the Operating Partnership.

     (c) Upon the exercise of the Over-Allotment Option, each Underwriter shall
pay to the Partnership cash in an amount equal to the Issue Price per Initial
Common Unit, multiplied by the number of Common Units specified in the
Underwriting Agreement to be purchased by such Underwriter at the Option Closing
Date. Each Underwriter's payment of cash to the Partnership pursuant to the
preceding sentence shall be regarded as representing (i) a contribution by such
Underwriter to the Partnership in an amount equal to the Initial Unit Price per
Initial Common Unit multiplied by the number of Common Units purchased by such
Underwriter at the Option Closing Date and (ii) a payment by the Partnership to
such Underwriter of the underwriting discount and commissions in an amount equal
to (A) the excess of the Initial Unit Price over the Issue Price multiplied by
(B) the number of Common Units purchased by such Underwriter at the Option
Closing Date. In exchange for such Capital Contributions by the Underwriters,
the Partnership shall issue Common Units to each Underwriter on whose behalf
such Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash paid to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Initial Common Unit. Upon receipt by the
Partnership of the Capital Contributions from the Underwriters as provided in
this Section 5.3(c), the Partnership shall use such cash to pay down debt of the
Partnership.

     (d) No Limited Partner Interests will be issued or issuable as of or at the
Closing Date other than (i) the Common Units issuable pursuant to subparagraph
(a) hereof in aggregate number equal to 4,000,000, (ii) the "Additional Units"
as such term is used in the Underwriting Agreement in an aggregate number up to
600,000 issuable upon exercise of the Over-Allotment Option pursuant to
subparagraph (c) hereof, (iii) the 4,399,322 Common Units issuable to UDS
Logistics or its Affiliates pursuant to Section 5.2 hereof, (iv) the 8,999,322
Subordinated Units issuable to UDS Logistics or its Affiliates pursuant to
Section 5.2 hereof, and (v) the Incentive Distribution Rights.

SECTION 5.4  Interest and Withdrawal.

     No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if

                                      A-27
<PAGE>   234

any, that distributions made pursuant to this Agreement or upon termination of
the Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this
Agreement, no Partner or Assignee shall have priority over any other Partner or
Assignee either as to the return of Capital Contributions or as to profits,
losses or distributions. Any such return shall be a compromise to which all
Partners and Assignees agree within the meaning of 17-502(b) of the Delaware
Act.

SECTION 5.5  Capital Accounts.

     (a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion) owning a Partnership Interest a separate Capital
Account with respect to such Partnership Interest in accordance with the rules
of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be
increased by (i) the amount of all Capital Contributions made to the Partnership
with respect to such Partnership Interest pursuant to this Agreement and (ii)
all items of Partnership income and gain (including, without limitation, income
and gain exempt from tax) computed in accordance with Section 5.5(b) and
allocated with respect to such Partnership Interest pursuant to Section 6.1, and
decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 5.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 6.1.

     (b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:

          (i) Solely for purposes of this Section 5.5, the Partnership shall be
     treated as owning directly its proportionate share (as determined by the
     General Partner based upon the provisions of the Operating Partnership
     Agreement) of all property owned by the Operating Partnership or any other
     Subsidiary that is classified as a partnership for federal income tax
     purposes.

          (ii) All fees and other expenses incurred by the Partnership to
     promote the sale of (or to sell) a Partnership Interest that can neither be
     deducted nor amortized under Section 709 of the Code, if any, shall, for
     purposes of Capital Account maintenance, be treated as an item of deduction
     at the time such fees and other expenses are incurred and shall be
     allocated among the Partners pursuant to Section 6.1.

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

                                      A-28
<PAGE>   235

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

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

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

     (c) (i) A transferee of a Partnership Interest shall succeed to a pro rata
     portion of the Capital Account of the transferor relating to the
     Partnership Interest so transferred.

          (ii) Immediately prior to the transfer of a Subordinated Unit or of a
     Subordinated Unit that has converted into a Common Unit pursuant to Section
     5.8 by a holder thereof (other than a transfer to an Affiliate unless the
     General Partner elects to have this subparagraph 5.5(c)(ii) apply), the
     Capital Account maintained for such Person with respect to its Subordinated
     Units or converted Subordinated Units will (A) first, be allocated to the
     Subordinated Units or converted Subordinated Units to be transferred in an
     amount equal to the product of (x) the number of such Subordinated Units or
     converted Subordinated Units to be transferred and (y) the Per Unit Capital
     Amount for a Common Unit, and (B) second, any remaining balance in such
     Capital Account will be retained by the transferor, regardless of whether
     it has retained any Subordinated Units or converted Subordinated Units.
     Following any such allocation, the transferor's Capital Account, if any,
     maintained with respect to the retained Subordinated Units or converted
     Subordinated Units, if any, will have a balance equal to the amount
     allocated under clause (B) hereinabove, and the transferee's Capital
     Account established with respect to the transferred Subordinated Units or
     converted Subordinated Units will have a balance equal to the amount
     allocated under clause (A) hereinabove.

     (d) (i) In accordance with Treasury Regulation Section
     1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests
     for cash or Contributed Property or the conversion of the General Partner's
     Combined Interest to Common Units pursuant to Section 11.3(b), the Capital
     Account of all Partners and the Carrying Value of each Partnership property
     immediately prior to such issuance shall be adjusted upward or downward to
     reflect any Unrealized Gain or Unrealized Loss attributable to such
     Partnership property, as if such Unrealized Gain or Unrealized Loss had
     been recognized on an actual sale of each such property immediately prior
     to such issuance and had been allocated to the

                                      A-29
<PAGE>   236

     Partners at such time pursuant to Section 6.1(c) in the same manner as any
     item of gain or loss actually recognized during such period would have been
     allocated. In determining such Unrealized Gain or Unrealized Loss, the
     aggregate cash amount and fair market value of all Partnership assets
     (including, without limitation, cash or cash equivalents) immediately prior
     to the issuance of additional Partnership Interests shall be determined by
     the General Partner using such reasonable method of valuation as it may
     adopt; provided, however, that the General Partner, in arriving at such
     valuation, must take fully into account the fair market value of the
     Partnership Interests of all Partners at such time. The General Partner
     shall allocate such aggregate value among the assets of the Partnership (in
     such manner as it determines in its discretion to be reasonable) to arrive
     at a fair market value for individual properties.

          (ii) In accordance with Treasury Regulation Section
     1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
     distribution to a Partner of any Partnership property (other than a
     distribution of cash that is not in redemption or retirement of a
     Partnership Interest), the Capital Accounts of all Partners and the
     Carrying Value of all Partnership property shall be adjusted upward or
     downward to reflect any Unrealized Gain or Unrealized Loss attributable to
     such Partnership property, as if such Unrealized Gain or Unrealized Loss
     had been recognized in a sale of such property immediately prior to such
     distribution for an amount equal to its fair market value, and had been
     allocated to the Partners, at such time, pursuant to Section 6.1(c) in the
     same manner as any item of gain or loss actually recognized during such
     period would have been allocated. In determining such Unrealized Gain or
     Unrealized Loss the aggregate cash amount and fair market value of all
     Partnership assets (including, without limitation, cash or cash
     equivalents) immediately prior to a distribution shall (A) in the case of
     an actual distribution which is not made pursuant to Section 12.4 or in the
     case of a deemed distribution, be determined and allocated in the same
     manner as that provided in Section 5.5(d)(i) or (B) in the case of a
     liquidating distribution pursuant to Section 12.4, be determined and
     allocated by the Liquidator using such reasonable method of valuation as it
     may adopt.

SECTION 5.6  Issuances of Additional Partnership Securities.

     (a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the General Partner in its sole
discretion, all without the approval of any Limited Partners.

     (b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the General Partner in the
exercise of its sole discretion, including (i) the right to share Partnership
profits and losses or items thereof; (ii) the right to share in Partnership
distributions; (iii) the rights upon dissolution and liquidation of the
Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may redeem the Partnership Security; (v) whether such Partnership
Security is issued with the privilege of conversion or exchange and, if so, the
terms and conditions of such conversion or exchange; (vi) the terms and
conditions upon which each Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of each
such Partnership Security to vote on Partnership matters, including matters
relating to the relative rights, preferences and privileges of such Partnership
Security.

     (c) The General Partner is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this
                                      A-30
<PAGE>   237

Section 5.6, (ii) the conversion of the General Partner Interest and Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the admission of Additional Limited Partners and (iv) all additional issuances
of Partnership Securities. The General Partner is further authorized and
directed to specify the relative rights, powers and duties of the holders of the
Units or other Partnership Securities being so issued. The General Partner shall
do all things necessary to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or advisable in connection
with any future issuance of Partnership Securities or in connection with the
conversion of the General Partner Interest and Incentive Distribution Rights
into Units pursuant to the terms of this Agreement, including compliance with
any statute, rule, regulation or guideline of any federal, state or other
governmental agency or any National Securities Exchange on which the Units or
other Partnership Securities are listed for trading.

SECTION 5.7  Limitations on Issuance of Additional Partnership Securities.

     The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:

     (a) During the Subordination Period, the Partnership shall not issue (and
shall not issue any options, rights, warrants or appreciation rights relating
to) an aggregate of more than 4,199,661 additional Parity Units without the
prior approval of the holders of a Unit Majority. In applying this limitation,
there shall be excluded Common Units and other Parity Units (and options,
rights, warrants or appreciation rights relating thereto) issued (A) in
connection with the exercise of the Over-Allotment Option, (B) in accordance
with Sections 5.7(b) and 5.7(c), (C) upon conversion of the General Partner
Interest and Incentive Distribution Rights pursuant to Section 11.3(b), (D)
pursuant to the employee benefit plans of the General Partner, the Partnership
or any other Group Member and (E) in the event of a combination or subdivision
of Common Units.

     (b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the prior approval of
the Unitholders, if such issuance occurs (i) in connection with an Acquisition
or a Capital Improvement or (ii) within 365 days of, and the net proceeds from
such issuance are used to repay debt incurred in connection with, an Acquisition
or a Capital Improvement, in each case where such Acquisition or Capital
Improvement involves assets that, if acquired by the Partnership as of the date
that is one year prior to the first day of the Quarter in which such Acquisition
is to be consummated or such Capital Improvement is to be completed, would have
resulted, on a pro forma basis, in an increase in:

          (A) the amount of Adjusted Operating Surplus generated by the
     Partnership on a per-Unit basis (for all Outstanding Units) with respect to
     the most recently completed four-Quarter period (on a pro forma basis as
     described below) as compared to

          (B) the actual amount of Adjusted Operating Surplus generated by the
     Partnership on a per-Unit basis (for all Outstanding Units) (excluding
     Adjusted Operating Surplus attributable to the Acquisition or Capital
     Improvement) with respect to such most recently completed four-Quarter
     period.

     If the issuance of Parity Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of the
Partnership generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis consistent with the procedures, as applicable, set
forth in Appendix D to the Registration Statement. Furthermore, the amount in
clause (A) shall be determined on a pro forma basis
                                      A-31
<PAGE>   238

assuming that (1) all of the Parity Units to be issued in connection with or
within 365 days of such Acquisition or Capital Improvement had been issued and
outstanding, (2) all indebtedness for borrowed money to be incurred or assumed
in connection with such Acquisition or Capital Improvement (other than any such
indebtedness that is to be repaid with the proceeds of such issuance of Parity
Units) had been incurred or assumed, in each case as of the commencement of such
four-Quarter period, (3) the personnel expenses that would have been incurred by
the Partnership in the operation of the acquired assets are the personnel
expenses for employees to be retained by the Partnership in the operation of the
acquired assets, and (4) the non-personnel costs and expenses are computed on
the same basis as those incurred by the Partnership in the operation of the
Partnership's business at similarly situated Partnership facilities.

     (c) During the Subordination Period, without the prior approval of the
holders of a Unit Majority, the Partnership shall not issue any additional
Partnership Securities (or options, rights, warrants or appreciation rights
related thereto) (i) that are entitled in any Quarter to receive in respect of
the Subordination Period any distributions of Available Cash from Operating
Surplus before the Common Units and any Parity Units have received (or amounts
have been set aside for payment of) the Minimum Quarterly Distribution and any
Cumulative Common Unit Arrearage for such Quarter or (ii) that are entitled to
allocations in respect of the Subordination Period of Net Termination Gain
before the Common Units and any Parity Units have been allocated Net Termination
Gain pursuant to Section 6.1(c)(i)(B).

     (d) During the Subordination Period, without the prior approval of the
holders of a Unit Majority, the Partnership may issue additional Partnership
Securities (or options, rights, warrants or appreciation rights related thereto)
(i) that are not entitled in any Quarter during the Subordination Period to
receive any distributions of Available Cash from Operating Surplus until after
the Common Units and any Parity Units have received (or amounts have been set
aside for payment of) the Minimum Quarterly Distribution and any Cumulative
Common Unit Arrearage for such Quarter and (ii) that are not entitled to
allocations in respect of the Subordination Period of Net Termination Gain
before the Common Units and any Parity Units have been allocated Net Termination
Gain pursuant to Section 6.1(c)(i)(B), even if (A) the amount of Available Cash
from Operating Surplus to which each such Partnership Security is entitled to
receive after the Minimum Quarterly Distribution and any Cumulative Common Unit
Arrearage have been paid or set aside for payment on the Common Units exceeds
the Minimum Quarterly Distribution, (B) the amount of Net Termination Gain to be
allocated to such Partnership Security after Net Termination Gain has been
allocated to any Common Units and Parity Units pursuant to Section 6.1(c)(i)(B)
exceeds the amount of such Net Termination Gain to be allocated to each Common
Unit or Parity Unit or (C) the holders of such additional Partnership Securities
have the right to require the Partnership or its Affiliates to repurchase such
Partnership Securities at a discount, par or a premium.

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

SECTION 5.8  Conversion of Subordinated Units.

     (a) All Subordinated Units shall convert into Common Units on a one-for-one
basis on the first day following the Record Date for distributions in respect of
the final Quarter of the Subordination Period.

     (b) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units on a
one-for-one basis as set forth in, and pursuant to the terms of, Section 11.4.

     (c) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).

                                      A-32
<PAGE>   239

SECTION 5.9  Limited Preemptive Right.

     Except as provided in this Section 5.9 and in Section 5.2, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of any Partnership Security, whether unissued, held in the treasury or
hereafter created. The General Partner shall have the right, which it may from
time to time assign in whole or in part to any of its Affiliates, to purchase
Partnership Securities from the Partnership whenever, and on the same terms
that, the Partnership issues Partnership Securities to Persons other than the
General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership Securities.

SECTION 5.10  Splits and Combination.

     (a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with adjustments of
distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units (including the number of Subordinated Units that may convert prior to the
end of the Subordination Period and the number of additional Parity Units that
may be issued pursuant to Section 5.7 without a Unitholder vote) are
proportionately adjusted retroactive to the beginning of the Partnership.

     (b) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the General Partner shall select a Record Date as of
which the distribution, subdivision or combination shall be effective and shall
send notice thereof at least 20 days prior to such Record Date to each Record
Holder as of a date not less than 10 days prior to the date of such notice. The
General Partner also may cause a firm of independent public accountants selected
by it to calculate the number of Partnership Securities to be held by each
Record Holder after giving effect to such distribution, subdivision or
combination. The General Partner shall be entitled to rely on any certificate
provided by such firm as conclusive evidence of the accuracy of such
calculation.

     (c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the General Partner may
adopt such other procedures as it may deem appropriate to reflect such changes.
If any such combination results in a smaller total number of Partnership
Securities Outstanding, the Partnership shall require, as a condition to the
delivery to a Record Holder of such new Certificate, the surrender of any
Certificate held by such Record Holder immediately prior to such Record Date.

     (d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of Section 5.7(e) and this Section 5.10(d), each fractional Unit
shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to
the next higher Unit).

SECTION 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests.

     All Limited Partner Interests issued pursuant to, and in accordance with
the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-assessability
may be affected by Section 17-607 of the Delaware Act.

                                      A-33
<PAGE>   240

                                   ARTICLE VI

                         ALLOCATIONS AND DISTRIBUTIONS

SECTION 6.1  Allocations for Capital Account Purposes.

     For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.

     (a) Net Income.  After giving effect to the special allocations set forth
in Section 6.1(d), Net Income for each taxable year and all items of income,
gain, loss and deduction taken into account in computing Net Income for such
taxable year shall be allocated as follows:

          (i) First, 100% to the General Partner in an amount equal to the
     aggregate Net Losses allocated to the General Partner pursuant to Section
     6.1(b)(iii) for all previous taxable years until the aggregate Net Income
     allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
     current taxable year and all previous taxable years is equal to the
     aggregate Net Losses allocated to the General Partner pursuant to Section
     6.1(b)(iii) for all previous taxable years;

          (ii) Second, 1% to the General Partner in an amount equal to the
     aggregate Net Losses allocated to the General Partner pursuant to Section
     6.1(b)(ii) for all previous taxable years and 99% to the Unitholders, in
     accordance with their respective Percentage Interests, until the aggregate
     Net Income allocated to such Partners pursuant to this Section 6.1(a)(ii)
     for the current taxable year and all previous taxable years is equal to the
     aggregate Net Losses allocated to such Partners pursuant to Section
     6.1(b)(ii) for all previous taxable years; and

          (iii) Third, the balance, if any, 1% to the General Partner and 99%
     the Unitholders in accordance with their respective Percentage Interests.

     (b) Net Losses.  After giving effect to the special allocations set forth
in Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:

          (i) First, 1% to the General Partner and 99% to the Unitholders, Pro
     Rata, until the aggregate Net Losses allocated pursuant to this Section
     6.1(b)(i) for the current taxable year and all previous taxable years is
     equal to the aggregate Net Income allocated to such Partners pursuant to
     Section 6.1(a)(iii) for all previous taxable years, provided that the Net
     Losses shall not be allocated pursuant to this Section 6.1(b)(i) to the
     extent that such allocation would cause any Unitholder to have a deficit
     balance in its Adjusted Capital Account at the end of such taxable year (or
     increase any existing deficit balance in its Adjusted Capital Account);

          (ii) Second, 1% to the General Partner and 99% to the Unitholders, Pro
     Rata; provided, that Net Losses shall not be allocated pursuant to this
     Section 6.1(b)(ii) to the extent that such allocation would cause any
     Unitholder to have a deficit balance in its Adjusted Capital Account at the
     end of such taxable year (or increase any existing deficit balance in its
     Adjusted Capital Account);

          (iii) Third, the balance, if any, 100% to the General Partner.

     (c) Net Termination Gains and Losses.  After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been

                                      A-34
<PAGE>   241

adjusted by all other allocations provided under this Section 6.1 and after all
distributions of Available Cash provided under Sections 6.4 and 6.5 have been
made; provided, however, that solely for purposes of this Section 6.1(c),
Capital Accounts shall not be adjusted for distributions made pursuant to
Section 12.4.

          (i) If a Net Termination Gain is recognized (or deemed recognized
     pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
     among the Partners in the following manner (and the Capital Accounts of the
     Partners shall be increased by the amount so allocated in each of the
     following subclauses, in the order listed, before an allocation is made
     pursuant to the next succeeding subclause):

             (A) First, to each Partner having a deficit balance in its Capital
        Account, in the proportion that such deficit balance bears to the total
        deficit balances in the Capital Accounts of all Partners, until each
        such Partner has been allocated Net Termination Gain equal to any such
        deficit balance in its Capital Account;

             (B) Second, 99% to all Unitholders holding Common Units, Pro Rata,
        and 1% to the General Partner until the Capital Account in respect of
        each Common Unit then Outstanding is equal to the sum of (1) its
        Unrecovered Capital plus (2) the Minimum Quarterly Distribution for the
        Quarter during which the Liquidation Date occurs, reduced by any
        distribution pursuant to Section 6.4(a)(i) or (b)(i) with respect to
        such Common Unit for such Quarter (the amount determined pursuant to
        this clause (2) is hereinafter defined as the "Unpaid MQD") plus (3) any
        then existing Cumulative Common Unit Arrearage;

             (C) Third, if such Net Termination Gain is recognized (or is deemed
        to be recognized) prior to the expiration of the Subordination Period,
        99% to all Unitholders holding Subordinated Units, Pro Rata, and 1% to
        the General Partner until the Capital Account in respect of each
        Subordinated Unit then Outstanding equals the sum of (1) its Unrecovered
        Capital, determined for the taxable year (or portion thereof) to which
        this allocation of gain relates, plus (2) the Minimum Quarterly
        Distribution for the Quarter during which the Liquidation Date occurs,
        reduced by any distribution pursuant to Section 6.4(a)(iii) with respect
        to such Subordinated Unit for such Quarter;

             (D) Fourth, 90.9184% to all Unitholders, Pro Rata, 8.0816% to the
        holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
        General Partner until the Capital Account in respect of each Common Unit
        then Outstanding is equal to the sum of (1) its Unrecovered Capital,
        plus (2) the Unpaid MQD, plus (3) any then existing Cumulative Common
        Unit Arrearage, plus (4) the excess of (aa) the First Target
        Distribution less the Minimum Quarterly Distribution for each Quarter of
        the Partnership's existence over (bb) the cumulative per Unit amount of
        any distributions of Operating Surplus that was distributed pursuant to
        Sections 6.4(a)(iv) and 6.4(b)(ii) (the sum of (1) plus (2) plus (3)
        plus (4) is hereinafter defined as the "First Liquidation Target
        Amount");

             (E) Fifth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
        holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
        General Partner until the Capital Account in respect of each Common Unit
        then Outstanding is equal to the sum of (1) the First Liquidation Target
        Amount, plus (2) the excess of (aa) the Second Target Distribution less
        the First Target Distribution for each Quarter of the Partnership's
        existence over (bb) the cumulative per Unit amount of any distributions
        of Operating Surplus that was distributed pursuant to Sections 6.4(a)(v)
        and 6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as the
        "Second Liquidation Target Amount"); and

             (F) Finally, any remaining amount 50.5102% to all Unitholders, Pro
        Rata, 48.4898% to the holders of the Incentive Distribution Rights, Pro
        Rata, and 1% to the General Partner.

                                      A-35
<PAGE>   242

          (ii) If a Net Termination Loss is recognized (or deemed recognized
     pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
     among the Partners in the following manner:

             (A) First, if such Net Termination Loss is recognized (or is deemed
        to be recognized) prior to the conversion of the last Outstanding
        Subordinated Unit, 99% to the Unitholders holding Subordinated Units,
        Pro Rata, and 1% to the General Partner until the Capital Account in
        respect of each Subordinated Unit then Outstanding has been reduced to
        zero;

             (B) Second, 99% to all Unitholders holding Common Units, Pro Rata,
        and 1% to the General Partner until the Capital Account in respect of
        each Common Unit then Outstanding has been reduced to zero; and

             (C) Third, the balance, if any, 100% to the General Partner.

     (d) Special Allocations.  Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:

          (i) Partnership Minimum Gain Chargeback.  Notwithstanding any other
     provision of this Section 6.1, if there is a net decrease in Partnership
     Minimum Gain during any Partnership taxable period, each Partner shall be
     allocated items of Partnership income and gain for such period (and, if
     necessary, subsequent periods) in the manner and amounts provided in
     Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
     1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
     6.1(d), 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 6.1(d) with respect to such taxable period (other than an
     allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section
     6.1(d)(i) is intended to comply with the Partnership Minimum Gain
     chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
     be interpreted consistently therewith.

          (ii) Chargeback of Partner Nonrecourse Debt Minimum
     Gain.  Notwithstanding the other provisions of this Section 6.1 (other than
     Section 6.1(d)(i)), except as provided in Treasury 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 Treasury Regulation Sections 1.704-2(i)(4) and
     1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
     Section 6.1(d), 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 6.1(d), other than Section 6.1(d)(i) and other than an
     allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to
     such taxable period. This Section 6.1(d)(ii) is intended to comply with the
     chargeback of items of income and gain requirement in Treasury Regulation
     Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

          (iii) Priority Allocations.

             (A) If the amount of cash or the Net Agreed Value of any property
        distributed (except cash or property distributed pursuant to Section
        12.4) to any Unitholder with respect to its Units for a taxable year is
        greater (on a per Unit basis) than the amount of cash or the Net Agreed
        Value of property distributed to the other Unitholders with respect to
        their Units (on a per Unit basis), then (1) each Unitholder receiving
        such greater cash or property distribution shall be allocated gross
        income in an amount equal to the product of (aa) the amount by which the
        distribution (on a per Unit basis) to
                                      A-36
<PAGE>   243

        such Unitholder exceeds the distribution (on a per Unit basis) to the
        Unitholders receiving the smallest distribution and (bb) the number of
        Units owned by the Unitholder receiving the greater distribution; and
        (2) the General Partner shall be allocated gross income in an aggregate
        amount equal to 1/99th of the sum of the amounts allocated in clause (1)
        above.

             (B) After the application of Section 6.1(d)(iii)(A), all or any
        portion of the remaining items of Partnership gross income or gain for
        the taxable period, if any, shall be allocated 100% to the holders of
        Incentive Distribution Rights, Pro Rata, until the aggregate amount of
        such items allocated to the holders of Incentive Distribution Rights
        pursuant to this paragraph 6.1(d)(iii)(B) for the current taxable year
        and all previous taxable years is equal to the cumulative amount of all
        Incentive Distributions made to the holders of Incentive Distribution
        Rights from the Closing Date to a date 45 days after the end of the
        current taxable year.

          (iv) Qualified Income Offset.  In the event any Partner unexpectedly
     receives any adjustments, allocations or distributions described in
     Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
     1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
     income and gain shall be specially allocated to such Partner in an amount
     and manner sufficient to eliminate, to the extent required by the Treasury
     Regulations promulgated under Section 704(b) of the Code, 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 6.1(d)(i)
     or (ii).

          (v) 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 Treasury 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 6.1(d)(v) 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 6.1 have been
     tentatively made as if this Section 6.1(d)(v) were not in this Agreement.

          (vi) Nonrecourse Deductions.  Nonrecourse Deductions for any taxable
     period shall be allocated to the Partners in accordance with their
     respective Percentage Interests. If the General Partner determines in its
     good faith discretion that the Partnership's Nonrecourse Deductions must be
     allocated in a different ratio to satisfy the safe harbor requirements of
     the Treasury Regulations promulgated under Section 704(b) of the Code, the
     General Partner is authorized, upon notice to the other Partners, to revise
     the prescribed ratio to the numerically closest ratio that does satisfy
     such requirements.

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

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

                                      A-37
<PAGE>   244

          (ix) 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(c) of the Code is required, pursuant to Treasury Regulation Section
     1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
     Accounts, the amount of such adjustment to the Capital Accounts shall be
     treated as an item of gain (if the adjustment increases the basis of the
     asset) or loss (if the adjustment decreases 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 Treasury Regulations.

          (x) Economic Uniformity.  At the election of the General Partner with
     respect to any taxable period ending upon, or after, the termination of the
     Subordination Period, all or a portion of the remaining items of
     Partnership gross income or gain for such taxable period, after taking into
     account allocations pursuant to Section 6.1(d)(iii), shall be allocated
     100% to each Partner holding Subordinated Units that are Outstanding as of
     the termination of the Subordination Period ("Final Subordinated Units") in
     the proportion of the number of Final Subordinated Units held by such
     Partner to the total number of Final Subordinated Units then Outstanding,
     until each such Partner has been allocated an amount of gross income or
     gain which increases the Capital Account maintained with respect to such
     Final Subordinated Units to an amount equal to the product of (A) the
     number of Final Subordinated Units held by such Partner and (B) the Per
     Unit Capital Amount for a Common Unit. The purpose of this allocation is to
     establish uniformity between the Capital Accounts underlying Final
     Subordinated Units and the Capital Accounts underlying Common Units held by
     Persons other than the General Partner and its Affiliates immediately prior
     to the conversion of such Final Subordinated Units into Common Units. This
     allocation method for establishing such economic uniformity will only be
     available to the General Partner if the method for allocating the Capital
     Account maintained with respect to the Subordinated Units between the
     transferred and retained Subordinated Units pursuant to Section 5.5(c)(ii)
     does not otherwise provide such economic uniformity to the Final
     Subordinated Units.

          (xi) Curative Allocation.

             (A) Notwithstanding any other provision of this Section 6.1, other
        than the Required Allocations, the Required Allocations shall be taken
        into account in making the Agreed Allocations so that, to the extent
        possible, the net amount of items of income, gain, loss and deduction
        allocated to each Partner pursuant to the Required Allocations and the
        Agreed Allocations, together, shall be equal to the net amount of such
        items that would have been allocated to each such Partner under the
        Agreed Allocations had the Required Allocations and the related Curative
        Allocation not otherwise been provided in this Section 6.1.
        Notwithstanding the preceding sentence, Required Allocations relating to
        (1) Nonrecourse Deductions shall not be taken into account except to the
        extent that there has been a decrease in Partnership Minimum Gain and
        (2) Partner Nonrecourse Deductions shall not be taken into account
        except to the extent that there has been a decrease in Partner
        Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
        6.1(d)(xi)(A) shall only be made with respect to Required Allocations to
        the extent the General Partner reasonably determines that such
        allocations will otherwise be inconsistent with the economic agreement
        among the Partners. Further, allocations pursuant to this Section
        6.1(d)(xi)(A) shall be deferred with respect to allocations pursuant to
        clauses (1) and (2) hereof to the extent the General Partner reasonably
        determines that such allocations are likely to be offset by subsequent
        Required Allocations.

             (B) The General Partner shall have reasonable discretion, with
        respect to each taxable period, to (1) apply the provisions of Section
        6.1(d)(xi)(A) in whatever order is most likely to minimize the economic
        distortions that might otherwise result from the
                                      A-38
<PAGE>   245

        Required Allocations, and (2) divide all allocations pursuant to Section
        6.1(d)(xi)(A) among the Partners in a manner that is likely to minimize
        such economic distortions.

          (xii) Corrective Allocations.  In the event of any allocation of
     Additional Book Basis Derivative Items or any Book-Down Event or any
     recognition of a Net Termination Loss, the following rules shall apply:

             (A) In the case of any allocation of Additional Book Basis
        Derivative Items (other than an allocation of Unrealized Gain or
        Unrealized Loss under Section 5.5(d) hereof), the General Partner shall
        allocate additional items of gross income and gain away from the holders
        of Incentive Distribution Rights to the Unitholders and the General
        Partner, or additional items of deduction and loss away from the
        Unitholders and the General Partner to the holders of Incentive
        Distribution Rights, to the extent that the Additional Book Basis
        Derivative Items allocated to the Unitholders or the General Partner
        exceed their Share of Additional Book Basis Derivative Items. For this
        purpose, the Unitholders and the General Partner shall be treated as
        being allocated Additional Book Basis Derivative Items to the extent
        that such Additional Book Basis Derivative Items have reduced the amount
        of income that would otherwise have been allocated to the Unitholders or
        the General Partner under the Partnership Agreement (e.g., Additional
        Book Basis Derivative Items taken into account in computing cost of
        goods sold would reduce the amount of book income otherwise available
        for allocation among the Partners). Any allocation made pursuant to this
        Section 6.1(d)(xii)(A) shall be made after all of the other Agreed
        Allocations have been made as if this Section 6.1(d)(xii) were not in
        this Agreement and, to the extent necessary, shall require the
        reallocation of items that have been allocated pursuant to such other
        Agreed Allocations.

             (B) In the case of any negative adjustments to the Capital Accounts
        of the Partners resulting from a Book-Down Event or from the recognition
        of a Net Termination Loss, such negative adjustment (1) shall first be
        allocated, to the extent of the Aggregate Remaining Net Positive
        Adjustments, in such a manner, as reasonably determined by the General
        Partner, that to the extent possible the aggregate Capital Accounts of
        the Partners will equal the amount which would have been the Capital
        Account balance of the Partners if no prior Book-Up Events had occurred,
        and (2) any negative adjustment in excess of the Aggregate Remaining Net
        Positive Adjustments shall be allocated pursuant to Section 6.1(c)
        hereof.

             (C) In making the allocations required under this Section
        6.1(d)(xii), the General Partner, in its sole discretion, may apply
        whatever conventions or other methodology it deems reasonable to satisfy
        the purpose of this Section 6.1(d)(xii).

SECTION 6.2  Allocations for Tax Purposes.

     (a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Section 6.1.

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

          (i) (A) In the case of a Contributed Property, such items attributable
     thereto shall be allocated among the Partners in the manner provided under
     Section 704(c) of the Code that takes into account the variation between
     the Agreed Value of such property and its adjusted basis at the time of
     contribution; and (B) any item of Residual Gain or Residual Loss
     attributable to a Contributed Property shall be allocated among the
     Partners in the same manner as its correlative item of "book" gain or loss
     is allocated pursuant to Section 6.1.

                                      A-39
<PAGE>   246

          (ii) (A) In the case of an Adjusted Property, such items shall (1)
     first, be allocated among the Partners in a manner consistent with the
     principles of Section 704(c) of the Code to take into account the
     Unrealized Gain or Unrealized Loss attributable to such property and the
     allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
     second, in the event such property was originally a Contributed Property,
     be allocated among the Partners in a manner consistent with Section
     6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
     attributable to an Adjusted Property shall be allocated among the Partners
     in the same manner as its correlative item of "book" gain or loss is
     allocated pursuant to Section 6.1.

          (iii) The General Partner shall apply the principles of Treasury
     Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.

     (c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise
to preserve or achieve uniformity of the Limited Partner Interests (or any class
or classes thereof). The General Partner may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Limited Partner Interests issued and Outstanding or the Partnership,
and if such allocations are consistent with the principles of Section 704 of the
Code.

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

     (e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.

     (f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be

                                      A-40
<PAGE>   247

adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.

     (g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest, shall for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of each month; provided, however, that (i) such items for
the period beginning on the Closing Date and ending on the last day of the month
in which the Option Closing Date or the expiration of the Over-allotment Option
occurs shall be allocated to the Partners as of the opening of the New York
Stock Exchange on the first Business Day of the next succeeding month; and
provided, further, that gain or loss on a sale or other disposition of any
assets of the Partnership other than in the ordinary course of business shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of the month in which such gain or loss is recognized for
federal income tax purposes. The General Partner may revise, alter or otherwise
modify such methods of allocation as it determines necessary, to the extent
permitted or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.

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

SECTION 6.3  Requirement and Characterization of Distributions; Distributions to
             Record Holders.

     (a) Within 45 days following the end of (i) the period beginning on the
Closing Date and ending on March 31, 2001 and (ii) each Quarter commencing with
the Quarter beginning on April 1, 2001, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners as of the Record Date selected by the General
Partner in its reasonable discretion. All amounts of Available Cash distributed
by the Partnership on any date from any source shall be deemed to be Operating
Surplus until the sum of all amounts of Available Cash theretofore distributed
by the Partnership to the Partners pursuant to Section 6.4 equals the amount of
the Partnership's Operating Surplus as calculated with respect to the Quarter in
respect of which such distribution of Available Cash is to be made through the
close of the Quarter. Any remaining amounts of Available Cash distributed by the
Partnership on such date shall, except as otherwise provided in Section 6.5, be
deemed to be "Capital Surplus." All distributions required to be made under this
Agreement shall be made subject to Section 17-607 of the Delaware Act.

     (b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.

     (c) The General Partner shall have the discretion to treat taxes paid by
the Partnership on behalf of, or amounts withheld with respect to, all or less
than all of the Partners, as a distribution of Available Cash to such Partners.

     (d) Each distribution in respect of a Partnership Interest shall be paid by
the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of

                                      A-41
<PAGE>   248

such payment, regardless of any claim of any Person who may have an interest in
such payment by reason of an assignment or otherwise.

SECTION 6.4  Distributions of Available Cash from Operating Surplus.

     (a) During Subordination Period.  Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section
17-607 of the Delaware Act, be distributed as follows, except as otherwise
required by Section 5.6(b) in respect of additional Partnership Securities
issued pursuant thereto:

          (i) First, 99% to the Unitholders holding Common Units, Pro Rata, and
     1% to the General Partner until there has been distributed in respect of
     each Common Unit then Outstanding an amount equal to the Minimum Quarterly
     Distribution for such Quarter;

          (ii) Second, 99% to the Unitholders holding Common Units, Pro Rata,
     and 1% to the General Partner until there has been distributed in respect
     of each Common Unit then Outstanding an amount equal to the Cumulative
     Common Unit Arrearage existing with respect to such Quarter;

          (iii) Third, 99% to the Unitholders holding Subordinated Units, Pro
     Rata, and 1% to the General Partner until there has been distributed in
     respect of each Subordinated Unit then Outstanding an amount equal to the
     Minimum Quarterly Distribution for such Quarter;

          (iv) Fourth, 90.9184% to all Unitholders, Pro Rata, 8.0816% to the
     holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
     General Partner until there has been distributed in respect of each Unit
     then Outstanding an amount equal to the excess of the First Target
     Distribution over the Minimum Quarterly Distribution for such Quarter;

          (v) Fifth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
     holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
     General Partner until there has been distributed in respect of each Unit
     then Outstanding an amount equal to the excess of the Second Target
     Distribution over the First Target Distribution for such Quarter; and

          (vi) Thereafter, 50.5102% to all Unitholders, Pro Rata, 48.4898% to
     the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
     General Partner;

provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution and the Second Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(a)(vi).

     (b) After Subordination Period.  Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of the
Delaware Act, shall be distributed as follows, except as otherwise required by
Section 5.6(b) in respect of additional Partnership Securities issued pursuant
thereto:

          (i) First, 99% to all Unitholders, Pro Rata, and 1% to the General
     Partner until there has been distributed in respect of each Unit then
     Outstanding an amount equal to the Minimum Quarterly Distribution for such
     Quarter;

          (ii) Second, 90.9184% to all Unitholders, Pro Rata, and 8.0816% to the
     holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
     General Partner until there has been distributed in respect of each Unit
     then Outstanding an amount equal to the excess of the First Target
     Distribution over the Minimum Quarterly Distribution for such Quarter;

          (iii) Third, 75.7653% to all Unitholders, Pro Rata, and 23.2347% to
     the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
     General Partner until there has been
                                      A-42
<PAGE>   249

     distributed in respect of each Unit then Outstanding an amount equal to the
     excess of the Second Target Distribution over the First Target Distribution
     for such Quarter; and

          (iv) Thereafter, 50.5102% to all Unitholders, Pro Rata, and 48.4898%
     to the holders of the Incentive Distribution Rights, Pro Rata, and 1% to
     the General Partner;

provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution and the Second Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(b)(iv).

SECTION 6.5  Distributions of Available Cash from Capital Surplus.

     Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise, 99%
to all Unitholders, Pro Rata, and 1% to the General Partner until a hypothetical
holder of a Common Unit acquired on the Closing Date has received with respect
to such Common Unit, during the period since the Closing Date through such date,
distributions of Available Cash that are deemed to be Capital Surplus in an
aggregate amount equal to the Initial Unit Price. Available Cash that is deemed
to be Capital Surplus shall then be distributed 99% to all Unitholders holding
Common Units, Pro Rata, and 1% to the General Partner until there has been
distributed in respect of each Common Unit then Outstanding an amount equal to
the Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be
distributed as if it were Operating Surplus and shall be distributed in
accordance with Section 6.4.

SECTION 6.6  Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.

     (a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Common Unit Arrearages and Cumulative Common Unit
Arrearages shall be proportionately adjusted in the event of any distribution,
combination or subdivision (whether effected by a distribution payable in Units
or otherwise) of Units or other Partnership Securities in accordance with
Section 5.10. In the event of a distribution of Available Cash that is deemed to
be from Capital Surplus, the then applicable Minimum Quarterly Distribution,
First Target Distribution and Second Target Distribution shall be adjusted
proportionately downward to equal the product obtained by multiplying the
otherwise applicable Minimum Quarterly Distribution, First Target Distribution
and Second Target Distribution, as the case may be, by a fraction of which the
numerator is the Unrecovered Capital of the Common Units immediately after
giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.

     (b) The Minimum Quarterly Distribution, First Target Distribution and
Second Target Distribution shall also be subject to adjustment pursuant to
Section 6.9.

SECTION 6.7  Special Provisions Relating to the Holders of Subordinated Units.

     (a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8, the
Unitholder holding a Subordinated Unit shall possess all of the rights and
obligations of a Unitholder holding Common Units hereunder, including the right
to vote as a Common Unitholder and the right to participate in allocations of
income, gain, loss and deduction and distributions made with respect

                                      A-43
<PAGE>   250

to Common Units; provided, however, that such converted Subordinated Units shall
remain subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x) and 6.7(b).

     (b) The Unitholder holding a Subordinated Unit that has converted into a
Common Unit pursuant to Section 5.8 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer its
converted Subordinated Units to a Person which is not an Affiliate of the holder
until such time as the General Partner determines, based on advice of counsel,
that a converted Subordinated Unit should have, as a substantive matter, like
intrinsic economic and federal income tax characteristics, in all material
respects, to the intrinsic economic and federal income tax characteristics of an
Initial Common Unit. In connection with the condition imposed by this Section
6.7(b), the General Partner may take whatever reasonable steps are required to
provide economic uniformity to the converted Subordinated Units in preparation
for a transfer of such converted Subordinated Units, including the application
of Sections 5.5(c)(ii) and 6.1(d)(x); provided, however, that no such steps may
be taken that would have a material adverse effect on the Unitholders holding
Common Units represented by Common Unit Certificates.

SECTION 6.8  Special Provisions Relating to the Holders of Incentive
Distribution Rights.

     Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(iv), (v) and (vi), 6.4(b)(ii), (iii) and (iv),
and 12.4 or (iii) be allocated items of income, gain, loss or deduction other
than as specified in this Article VI.

SECTION 6.9  Entity-Level Taxation.

     If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership or
the Operating Partnership to be treated as an association taxable as a
corporation or otherwise subjects the Partnership or the Operating Partnership
to entity-level taxation for federal, state or local income tax purposes, the
then applicable Minimum Quarterly Distribution, First Target Distribution and
Second Target Distribution shall be adjusted to equal the product obtained by
multiplying (a) the amount thereof by (b) one minus the sum of (i) the highest
marginal federal corporate (or other entity, as applicable) income tax rate of
the Partnership or the Operating Partnership for the taxable year of the
Partnership or the Operating Partnership in which such Quarter occurs (expressed
as a percentage) plus (ii) the effective overall state and local income tax rate
(expressed as a percentage) applicable to the Partnership or the Operating
Partnership for the calendar year next preceding the calendar year in which such
Quarter occurs (after taking into account the benefit of any deduction allowable
for federal income tax purposes with respect to the payment of state and local
income taxes), but only to the extent of the increase in such rates resulting
from such legislation or interpretation. Such effective overall state and local
income tax rate shall be determined for the taxable year next preceding the
first taxable year during which the Partnership or the Operating Partnership is
taxable for federal income tax purposes as an association taxable as a
corporation or is otherwise subject to entity-level taxation by determining such
rate as if the Partnership or the Operating Partnership had been subject to such
state and local taxes during such preceding taxable year.

                                      A-44
<PAGE>   251

                                  ARTICLE VII

                      MANAGEMENT AND OPERATION OF BUSINESS

SECTION 7.1  Management.

     (a) The General Partner shall conduct, direct and manage all activities of
the Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner or Assignee
shall have any management power over the business and affairs of the
Partnership. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 2.5 and to effectuate the purposes set forth in Section
2.4, including the following:

          (i) the making of any expenditures, the lending or borrowing of money,
     the assumption or guarantee of, or other contracting for, indebtedness and
     other liabilities, the issuance of evidences of indebtedness, including
     indebtedness that is convertible into Partnership Securities, and the
     incurring of any other obligations;

          (ii) the making of tax, regulatory and other filings, or rendering of
     periodic or other reports to governmental or other agencies having
     jurisdiction over the business or assets of the Partnership;

          (iii) the acquisition, disposition, mortgage, pledge, encumbrance,
     hypothecation or exchange of any or all of the assets of the Partnership or
     the merger or other combination of the Partnership with or into another
     Person (the matters described in this clause (iii) being subject, however,
     to any prior approval that may be required by Section 7.3);

          (iv) the use of the assets of the Partnership (including cash on hand)
     for any purpose consistent with the terms of this Agreement, including the
     financing of the conduct of the operations of the Partnership Group;
     subject to Section 7.6(a), the lending of funds to other Persons (including
     the Operating Partnership); the repayment of obligations of the Partnership
     Group and the making of capital contributions to any member of the
     Partnership Group;

          (v) the negotiation, execution and performance of any contracts,
     conveyances or other instruments (including instruments that limit the
     liability of the Partnership under contractual arrangements to all or
     particular assets of the Partnership, with the other party to the contract
     to have no recourse against the General Partner or its assets other than
     its interest in the Partnership, even if same results in the terms of the
     transaction being less favorable to the Partnership than would otherwise be
     the case);

          (vi) the distribution of Partnership cash;

          (vii) the selection and dismissal of employees (including employees
     having titles such as "president," "vice president," "secretary" and
     "treasurer") and agents, outside attorneys, accountants, consultants and
     contractors and the determination of their compensation and other terms of
     employment or hiring;

          (viii) the maintenance of such insurance for the benefit of the
     Partnership Group and the Partners as it deems necessary or appropriate;

          (ix) the formation of, or acquisition of an interest in, and the
     contribution of property and the making of loans to, any further limited or
     general partnerships, joint ventures, corporations or other relationships
     (including the acquisition of interests in, and the

                                      A-45
<PAGE>   252

     contributions of property to, the Operating Partnership from time to time)
     subject to the restrictions set forth in Section 2.4;

          (x) the control of any matters affecting the rights and obligations of
     the Partnership, including the bringing and defending of actions at law or
     in equity and otherwise engaging in the conduct of litigation and the
     incurring of legal expense and the settlement of claims and litigation;

          (xi) the indemnification of any Person against liabilities and
     contingencies to the extent permitted by law;

          (xii) the entering into of listing agreements with any National
     Securities Exchange and the delisting of some or all of the Limited Partner
     Interests from, or requesting that trading be suspended on, any such
     exchange (subject to any prior approval that may be required under Section
     4.8);

          (xiii) unless restricted or prohibited by Section 5.7, the purchase,
     sale or other acquisition or disposition of Partnership Securities, or the
     issuance of additional options, rights, warrants and appreciation rights
     relating to Partnership Securities; and

          (xiv) the undertaking of any action in connection with the
     Partnership's participation in the Operating Partnership as a partner.

     (b) Notwithstanding any other provision of this Agreement, the Operating
Partnership Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and the Assignees and each other Person who may
acquire an interest in Partnership Securities hereby (i) approves, ratifies and
confirms the execution, delivery and performance by the parties thereto of the
Operating Partnership Agreement, the Underwriting Agreement, the Omnibus
Agreement, the Contribution Agreement, and the other agreements described in or
filed as exhibits to the Registration Statement that are related to the
transactions contemplated by the Registration Statement; (ii) agrees that the
General Partner (on its own or through any officer of the Partnership) is
authorized to execute, deliver and perform the agreements referred to in clause
(i) of this sentence and the other agreements, acts, transactions and matters
described in or contemplated by the Registration Statement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
Assignees or the other Persons who may acquire an interest in Partnership
Securities; and (iii) agrees that the execution, delivery or performance by the
General Partner, any Group Member or any Affiliate of any of them, of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the General Partner or any Affiliate of the General
Partner of the rights accorded pursuant to Article XV), shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or equity.

SECTION 7.2  Certificate of Limited Partnership.

     The General Partner has caused the Certificate of Limited Partnership and
the Certificate of Amendment to the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity

                                      A-46
<PAGE>   253

in which the limited partners have limited liability) under the laws of the
State of Delaware or of any other state in which the Partnership may elect to do
business or own property. Subject to the terms of Section 3.4(a), the General
Partner shall not be required, before or after filing, to deliver or mail a copy
of the Certificate of Limited Partnership, any qualification document or any
amendment thereto to any Limited Partner.

SECTION 7.3  Restrictions on General Partner's Authority.

     (a) The General Partner may not, without written approval of the specific
act by holders of all of the Outstanding Limited Partner Interests or by other
written instrument executed and delivered by holders of all of the Outstanding
Limited Partner Interests subsequent to the date of this Agreement, take any
action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner; or (v) transferring its interest as
general partner of the Partnership.

     (b) Except as provided in Articles XII and XIV, the General Partner may not
sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Operating Partnership, taken as a whole,
without the approval of holders of a Unit Majority; provided however that this
provision shall not preclude or limit the General Partner's ability to mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of
the assets of the Partnership or the Operating Partnership and shall not apply
to any forced sale of any or all of the assets of the Partnership or the
Operating Partnership pursuant to the foreclosure of, or other realization upon,
any such encumbrance. Without the approval of holders of a Unit Majority, the
General Partner shall not, on behalf of the Partnership, (i) consent to any
amendment to the Operating Partnership Agreement or, except as expressly
permitted by Section 7.9(d), take any action permitted to be taken by a partner
of the Operating Partnership, in either case, that would have a material adverse
effect on the Partnership as a partner of the Operating Partnership or (ii)
except as permitted under Sections 4.6, 11.1 and 11.2, elect or cause the
Partnership to elect a successor general partner of the Partnership or the
Operating Partnership.

SECTION 7.4  Reimbursement of the General Partner.

     (a) Except as provided in this Section 7.4 and elsewhere in this Agreement
or in the Operating Partnership Agreement, the General Partner shall not be
compensated for its services as general partner of any Group Member.

     (b) The General Partner shall be reimbursed on a monthly basis, or such
other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 7.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.

                                      A-47
<PAGE>   254

     (c) Subject to Section 5.7, the General Partner, in its sole discretion and
without the approval of the Limited Partners (who shall have no right to vote in
respect thereof), may propose and adopt on behalf of the Partnership employee
benefit plans, employee programs and employee practices (including plans,
programs and practices involving the issuance of Partnership Securities or
options to purchase Partnership Securities), or cause the Partnership to issue
Partnership Securities in connection with, or pursuant to, any employee benefit
plan, employee program or employee practice maintained or sponsored by the
General Partner or any of its Affiliates, in each case for the benefit of
employees of the General Partner, any Group Member or any Affiliate, or any of
them, in respect of services performed, directly or indirectly, for the benefit
of the Partnership Group. The Partnership agrees to issue and sell to the
General Partner or any of its Affiliates any Partnership Securities that the
General Partner or such Affiliate is obligated to provide to any employees
pursuant to any such employee benefit plans, employee programs or employee
practices. Expenses incurred by the General Partner in connection with any such
plans, programs and practices (including the net cost to the General Partner or
such Affiliate of Partnership Securities purchased by the General Partner or
such Affiliate from the Partnership to fulfill options or awards under such
plans, programs and practices) shall be reimbursed in accordance with Section
7.4(b). Any and all obligations of the General Partner under any employee
benefit plans, employee programs or employee practices adopted by the General
Partner as permitted by this Section 7.4(c) shall constitute obligations of the
General Partner hereunder and shall be assumed by any successor General Partner
approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to
all of the General Partner's General Partner Interest pursuant to Section 4.6.

SECTION 7.5  Outside Activities.

     (a) After the Closing Date, the General Partner, for so long as it is the
General Partner of the Partnership (i) agrees that its sole business will be to
act as the general partner of the Partnership, the Operating Partnership, and
any other partnership or limited liability company of which the Partnership or
the Operating Partnership is, directly or indirectly, a partner and to undertake
activities that are ancillary or related thereto (including being a limited
partner in the Partnership), (ii) shall not engage in any business or activity
or incur any debts or liabilities except in connection with or incidental to (A)
its performance as general partner of one or more Group Members or as described
in or contemplated by the Registration Statement or (B) the acquiring, owning or
disposing of debt or equity securities in any Group Member and (iii) except to
the extent permitted in the Omnibus Agreement, shall not, and shall cause its
Affiliates not to, engage in any Restricted Business.

     (b) UDS has entered into the Omnibus Agreement with the Partnership and the
Operating Partnership, which agreement sets forth certain restrictions on the
ability of UDS and its Affiliates to engage in Restricted Businesses.

     (c) Except as specifically restricted by Section 7.5(a) and the Omnibus
Agreement, each Indemnitee (other than the General Partner) shall have the right
to engage in businesses of every type and description and other activities for
profit and to engage in and possess an interest in other business ventures of
any and every type or description, whether in businesses engaged in or
anticipated to be engaged in by any Group Member, independently or with others,
including business interests and activities in direct competition with the
business and activities of any Group Member, and none of the same shall
constitute a breach of this Agreement or any duty express or implied by law to
any Group Member or any Partner or Assignee. Neither any Group Member, any
Limited Partner nor any other Person shall have any rights by virtue of this
Agreement, the Operating Partnership Agreement or the partnership relationship
established hereby or thereby in any business ventures of any Indemnitee.

     (d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section 7.5(c)
and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the
                                      A-48
<PAGE>   255

engaging in competitive activities by any Indemnitees (other than the General
Partner) in accordance with the provisions of this Section 7.5 is hereby
approved by the Partnership and all Partners, (ii) it shall be deemed not to be
a breach of the General Partner's fiduciary duty or any other obligation of any
type whatsoever of the General Partner for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) except as set
forth in the Omnibus Agreement, the General Partner and the Indemnitees shall
have no obligation to present business opportunities to the Partnership.

     (e) The General Partner and any of its Affiliates may acquire Units or
other Partnership Securities in addition to those acquired on the Closing Date
and, except as otherwise provided in this Agreement, shall be entitled to
exercise all rights of the General Partner or Limited Partner, as applicable,
relating to such Units or Partnership Securities.

     (f) The term "Affiliates" when used in Section 7.5(a) and Section 7.5(e)
with respect to the General Partner shall not include any Group Member or any
Subsidiary of the Group Member.

     (g) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of this
Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partner has complied with its
fiduciary duties in connection with determinations made by it under this Section
7.5.

SECTION 7.6 Loans from the General Partner; Loans or Contributions from the
            Partnership; Contracts with Affiliates; Certain Restrictions on the
            General Partner.

     (a) The General Partner or its Affiliates may lend to any Group Member, and
any Group Member may borrow from the General Partner or any of its Affiliates,
funds needed or desired by the Group Member for such periods of time and in such
amounts as the General Partner may determine; provided, however, that in any
such case the lending party may not charge the borrowing party interest at a
rate greater than the rate that would be charged the borrowing party or impose
terms less favorable to the borrowing party than would be charged or imposed on
the borrowing party by unrelated lenders on comparable loans made on an
arm's-length basis (without reference to the lending party's financial abilities
or guarantees). The borrowing party shall reimburse the lending party for any
costs (other than any additional interest costs) incurred by the lending party
in connection with the borrowing of such funds. For purposes of this Section
7.6(a) and Section 7.6(b), the term "Group Member" shall include any Affiliate
of a Group Member that is controlled by the Group Member. No Group Member may
lend funds to the General Partner or any of its Affiliates (other than another
Group Member).

     (b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.

     (c) The General Partner may itself, or may enter into an agreement with any
of its Affiliates to, render services to a Group Member or to the General
Partner in the discharge of its duties as general partner of the Partnership.
Any services rendered to a Group Member by the General Partner or any of its
Affiliates shall be on terms that are fair and reasonable to the Partnership;
                                      A-49
<PAGE>   256

provided, however, that the requirements of this Section 7.6(c) shall be deemed
satisfied as to (i) any transaction approved by Special Approval, (ii) any
transaction, the terms of which are no less favorable to the Partnership Group
than those generally being provided to or available from unrelated third parties
or (iii) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership Group), is
equitable to the Partnership Group. The provisions of Section 7.4 shall apply to
the rendering of services described in this Section 7.6(c).

     (d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.

     (e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution
Agreement and any other transactions described in or contemplated by the
Registration Statement, (ii) any transaction approved by Special Approval, (iii)
any transaction, the terms of which are no less favorable to the Partnership
than those generally being provided to or available from unrelated third
parties, or (iv) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership), is equitable
to the Partnership. With respect to any contribution of assets to the
Partnership in exchange for Partnership Securities, the Conflicts Committee, in
determining whether the appropriate number of Partnership Securities are being
issued, may take into account, among other things, the fair market value of the
assets, the liquidated and contingent liabilities assumed, the tax basis in the
assets, the extent to which tax-only allocations to the transferor will protect
the existing partners of the Partnership against a low tax basis, and such other
factors as the Conflicts Committee deems relevant under the circumstances.

     (f) The General Partner and its Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partner
and its Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.

     (g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.

SECTION 7.7  Indemnification.

     (a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee; provided, that in each case the Indemnitee acted in
good faith and in a manner that such Indemnitee reasonably believed to be in, or
(in the case of a Person other than the General Partner) not opposed to, the
best interests of the Partnership and, with respect to any criminal proceeding,
had no reasonable cause to believe its conduct was unlawful; provided, further,
no indemnification pursuant to this Section 7.7 shall be available to the
General Partner with respect to its

                                      A-50
<PAGE>   257

obligations incurred pursuant to the Underwriting Agreement or the Contribution
Agreement (other than obligations incurred by the General Partner on behalf of
the Partnership or the Operating Partnership). The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not create a presumption that the
Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partner shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.

     (b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.7(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Partnership
of any undertaking by or on behalf of the Indemnitee to repay such amount if it
shall be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.7.

     (c) The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding Limited Partner Interests, as
a matter of law or otherwise, both as to actions in the Indemnitee's capacity as
an Indemnitee and as to actions in any other capacity (including any capacity
under the Underwriting Agreement), and shall continue as to an Indemnitee who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.

     (d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner, its Affiliates and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expense that
may be incurred by such Person in connection with the Partnership's activities
or such Person's activities on behalf of the Partnership, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.

     (e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 7.7(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.

     (f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.

     (g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.

     (h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.

     (i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be
                                      A-51
<PAGE>   258

indemnified by the Partnership, nor the obligations of the Partnership to
indemnify any such Indemnitee under and in accordance with the provisions of
this Section 7.7 as in effect immediately prior to such amendment, modification
or repeal with respect to claims arising from or relating to matters occurring,
in whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.

SECTION 7.8  Liability of Indemnitees.

     (a) Notwithstanding anything to the contrary set forth in this Agreement,
no Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, the Assignees or any other Persons who have acquired interests
in the Partnership Securities, for losses sustained or liabilities incurred as a
result of any act or omission if such Indemnitee acted in good faith.

     (b) Subject to its obligations and duties as General Partner set forth in
Section 7.1(a), the General Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.

     (c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partner and any other Indemnitee acting in
connection with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.

     (d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

SECTION 7.9  Resolution of Conflicts of Interest.

     (a) Unless otherwise expressly provided in this Agreement or the Operating
Partnership Agreement, whenever a potential conflict of interest exists or
arises between the General Partner or any of its Affiliates, on the one hand,
and the Partnership, the Operating Partnership, any Partner or any Assignee, on
the other, any resolution or course of action by the General Partner or its
Affiliates in respect of such conflict of interest shall be permitted and deemed
approved by all Partners, and shall not constitute a breach of this Agreement,
of the Operating Partnership Agreement, of any agreement contemplated herein or
therein, or of any duty stated or implied by law or equity, if the resolution or
course of action is, or by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. The General Partner shall be authorized but not
required in connection with its resolution of such conflict of interest to seek
Special Approval of such resolution. Any conflict of interest and any resolution
of such conflict of interest shall be conclusively deemed fair and reasonable to
the Partnership if such conflict of interest or resolution is (i) approved by
Special Approval, (ii) on terms no less favorable to the Partnership than those
generally being provided to or available from unrelated third parties or (iii)
fair to the Partnership, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership). The General Partner
may also adopt a resolution or course of action that has not received Special
Approval. The General Partner (including the Conflicts Committee in connection

                                      A-52
<PAGE>   259

with Special Approval) shall be authorized in connection with its determination
of what is "fair and reasonable" to the Partnership and in connection with its
resolution of any conflict of interest to consider (A) the relative interests of
any party to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interest; (B) any customary or accepted industry
practices and any customary or historical dealings with a particular Person; (C)
any applicable generally accepted accounting practices or principles; and (D)
such additional factors as the General Partner (including the Conflicts
Committee) determines in its sole discretion to be relevant, reasonable or
appropriate under the circumstances. Nothing contained in this Agreement,
however, is intended to nor shall it be construed to require the General Partner
(including the Conflicts Committee) to consider the interests of any Person
other than the Partnership. In the absence of bad faith by the General Partner,
the resolution, action or terms so made, taken or provided by the General
Partner with respect to such matter shall not constitute a breach of this
Agreement or any other agreement contemplated herein or a breach of any standard
of care or duty imposed herein or therein or, to the extent permitted by law,
under the Delaware Act or any other law, rule or regulation.

     (b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or "necessary or advisable" or under a grant
of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, the
Operating Partnership, any Limited Partner or any Assignee, (ii) it may make
such decision in its sole discretion (regardless of whether there is a reference
to "sole discretion" or "discretion") unless another express standard is
provided for, or (iii) in "good faith" or under another express standard, the
General Partner or such Affiliate shall act under such express standard and
shall not be subject to any other or different standards imposed by this
Agreement, the Operating Partnership Agreement, any other agreement contemplated
hereby or under the Delaware Act or any other law, rule or regulation. In
addition, any actions taken by the General Partner or such Affiliate consistent
with the standards of "reasonable discretion" set forth in the definitions of
Available Cash or Operating Surplus shall not constitute a breach of any duty of
the General Partner to the Partnership or the Limited Partners. The General
Partner shall have no duty, express or implied, to sell or otherwise dispose of
any asset of the Partnership Group other than in the ordinary course of
business. No borrowing by any Group Member or the approval thereof by the
General Partner shall be deemed to constitute a breach of any duty of the
General Partner to the Partnership or the Limited Partners by reason of the fact
that the purpose or effect of such borrowing is directly or indirectly to (A)
enable distributions to the General Partner or its Affiliates (including in
their capacities as Limited Partners) to exceed 1% of the total amount
distributed to all partners or (B) hasten the expiration of the Subordination
Period or the conversion of any Subordinated Units into Common Units.

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

     (d) The Unitholders hereby authorize the General Partner, on behalf of the
Partnership as a partner of a Group Member, to approve of actions by the general
partner of such Group Member similar to those actions permitted to be taken by
the General Partner pursuant to this Section 7.9.

SECTION 7.10  Other Matters Concerning the General Partner.

     (a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent,
                                      A-53
<PAGE>   260

order, bond, debenture or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties.

     (b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.

     (c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.

     (d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited, to the extent permitted by law, as required to permit the General
Partner to act under this Agreement or any other agreement contemplated by this
Agreement and to make any decision pursuant to the authority prescribed in this
Agreement, so long as such action is reasonably believed by the General Partner
to be in, or not inconsistent with, the best interests of the Partnership.

SECTION 7.11  Purchase or Sale of Partnership Securities.

     The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities; provided that, except as permitted pursuant to
Section 4.10, the General Partner may not cause any Group Member to purchase
Subordinated Units during the Subordination Period. As long as Partnership
Securities are held by any Group Member, such Partnership Securities shall not
be considered Outstanding for any purpose, except as otherwise provided herein.
The General Partner or any Affiliate of the General Partner may also purchase or
otherwise acquire and sell or otherwise dispose of Partnership Securities for
its own account, subject to the provisions of Articles IV and X.

SECTION 7.12  Registration Rights of the General Partner and its Affiliates.

     (a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an Affiliate of
the General Partner at the date hereof notwithstanding that it may later cease
to be an Affiliate of the General Partner) holds Partnership Securities that it
desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule
or regulation to Rule 144) or another exemption from registration is not
available to enable such holder of Partnership Securities (the "Holder") to
dispose of the number of Partnership Securities it desires to sell at the time
it desires to do so without registration under the Securities Act, then upon the
request of the General Partner or any of its Affiliates, the Partnership shall
file with the Commission as promptly as practicable after receiving such
request, and use all reasonable efforts to cause to become effective and remain
effective for a period of not less than six months following its effective date
or such shorter period as shall terminate when all Partnership Securities
covered by such registration statement have been sold, a registration statement
under the Securities Act registering the offering and sale of the number of
Partnership Securities specified by the Holder; provided, however, that the
Partnership shall not be required to effect more than three registrations
pursuant to this Section 7.12(a); and provided further, however, that if the
Conflicts Committee determines in its good faith judgment that a postponement of
the requested registration for up to six months would be in the best interests
of the Partnership and its Partners due to a pending transaction, investigation
or other event, the filing of such registration statement or the effectiveness
thereof may be deferred for up to six months, but not thereafter. In connection
with any registration pursuant to the immediately preceding sentence, the
Partnership shall promptly prepare and file (x) such

                                      A-54
<PAGE>   261

documents as may be necessary to register or qualify the securities subject to
such registration under the securities laws of such states as the Holder shall
reasonably request; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Partnership would
become subject to general service of process or to taxation or qualification to
do business as a foreign corporation or partnership doing business in such
jurisdiction solely as a result of such registration, and (y) such documents as
may be necessary to apply for listing or to list the Partnership Securities
subject to such registration on such National Securities Exchange as the Holder
shall reasonably request, and do any and all other acts and things that may
reasonably be necessary or advisable to enable the Holder to consummate a public
sale of such Partnership Securities in such states. Except as set forth in
Section 7.12(c), all costs and expenses of any such registration and offering
(other than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.

     (b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include such
number or amount of securities held by the Holder in such registration statement
as the Holder shall request. If the proposed offering pursuant to this Section
7.12(b) shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by the Holder which, in the
opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(c), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.

     (c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
                                      A-55
<PAGE>   262

     (d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be
applicable with respect to the General Partner (and any of the General Partner's
Affiliates) after it ceases to be a Partner of the Partnership, during a period
of two years subsequent to the effective date of such cessation and for so long
thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.

     (e) Any request to register Partnership Securities pursuant to this Section
7.12 shall (i) specify the Partnership Securities intended to be offered and
sold by the Person making the request, (ii) express such Person's present intent
to offer such shares for distribution, (iii) describe the nature or method of
the proposed offer and sale of Partnership Securities, and (iv) contain the
undertaking of such Person to provide all such information and materials and
take all action as may be required in order to permit the Partnership to comply
with all applicable requirements in connection with the registration of such
Partnership Securities.

SECTION 7.13  Reliance by Third Parties.

     Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of Shamrock GP authorized by Shamrock GP to act on
behalf of and in the name of the Partnership has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any authorized contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
or any such officer as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or any such officer or its representatives be obligated to
ascertain that the terms of the Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
any such officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.

                                      A-56
<PAGE>   263

                                  ARTICLE VIII

                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

SECTION 8.1  Records and Accounting.

     The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including the record of the Record Holders
and Assignees of Units or other Partnership Securities, books of account and
records of Partnership proceedings, may be kept on, or be in the form of,
computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with U.S. GAAP.

SECTION 8.2  Fiscal Year.

     The fiscal year of the Partnership shall be a fiscal year ending December
31.

SECTION 8.3  Reports.

     (a) As soon as practicable, but in no event later than 120 days after the
close of each fiscal year of the Partnership, the General Partner shall cause to
be mailed or furnished to each Record Holder of a Unit as of a date selected by
the General Partner in its discretion, an annual report containing financial
statements of the Partnership for such fiscal year of the Partnership, presented
in accordance with U.S. GAAP, including a balance sheet and statements of
operations, Partnership equity and cash flows, such statements to be audited by
a firm of independent public accountants selected by the General Partner.

     (b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each fiscal year, the General
Partner shall cause to be mailed or furnished to each Record Holder of a Unit,
as of a date selected by the General Partner in its discretion, a report
containing unaudited financial statements of the Partnership and such other
information as may be required by applicable law, regulation or rule of any
National Securities Exchange on which the Units are listed for trading, or as
the General Partner determines to be necessary or appropriate.

                                   ARTICLE IX

                                  TAX MATTERS

SECTION 9.1  Tax Returns and Information.

     The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.

                                      A-57
<PAGE>   264

Section 9.2  Tax Elections.

     (a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the purposes
of computing the adjustments under Section 743(b) of the Code, the General
Partner shall be authorized (but not required) to adopt a convention whereby the
price paid by a transferee of a Limited Partner Interest will be deemed to be
the lowest quoted closing price of the Limited Partner Interests on any National
Securities Exchange on which such Limited Partner Interests are traded during
the calendar month in which such transfer is deemed to occur pursuant to Section
6.2(g) without regard to the actual price paid by such transferee.

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

     (c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.

SECTION 9.3  Tax Controversies.

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

SECTION 9.4  Withholding.

     Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership and the Operating Partnership
to comply with any withholding requirements established under the Code or any
other federal, state or local law including, without limitation, pursuant to
Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the
Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner or Assignee (including, without limitation, by reason of Section
1446 of the Code), the amount withheld may at the discretion of the General
Partner be treated by the Partnership as a distribution of cash pursuant to
Section 6.3 in the amount of such withholding from such Partner.

                                   ARTICLE X

                             ADMISSION OF PARTNERS

SECTION 10.1  Admission of Initial Limited Partners.

     Upon the issuance by the Partnership of Common Units, Subordinated Units
and Incentive Distribution Rights to UDS Logistics and the General Partner as
described in Section 5.2, each of UDS Logistics and the General Partner shall be
deemed to have been admitted to the Partnership as a Limited Partner in respect
of the Common Units, Subordinated Units and Incentive Distribution Rights issued
to it. Upon the issuance by the Partnership of Common Units to the Underwriters
as described in Section 5.3 in connection with the Initial Offering and the
execution by each Underwriter of a Transfer Application, the General Partner
shall admit the Underwriters to the Partnership as Initial Limited Partners in
respect of the Common Units purchased by them.
                                      A-58
<PAGE>   265

SECTION 10.2  Admission of Substituted Limited Partner.

     By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interests so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's discretion, and (y) when any such admission is
shown on the books and records of the Partnership. If such consent is withheld,
such transferee shall be an Assignee. An Assignee shall have an interest in the
Partnership equivalent to that of a Limited Partner with respect to allocations
and distributions, including liquidating distributions, of the Partnership. With
respect to voting rights attributable to Limited Partner Interests that are held
by Assignees, the General Partner shall be deemed to be the Limited Partner with
respect thereto and shall, in exercising the voting rights in respect of such
Limited Partner Interests on any matter, vote such Limited Partner Interests at
the written direction of the Assignee who is the Record Holder of such Limited
Partner Interests. If no such written direction is received, such Limited
Partner Interests will not be voted. An Assignee shall have no other rights of a
Limited Partner.

SECTION 10.3  Admission of Successor General Partner.

     A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of the General Partner Interest pursuant
to Section 4.6 who is proposed to be admitted as a successor General Partner
shall be admitted to the Partnership as the General Partner, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.6, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.6 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.

SECTION 10.4  Admission of Additional Limited Partners.

     (a) A Person (other than the General Partner, an Initial Limited Partner or
a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the General Partner to effect such Person's
admission as an Additional Limited Partner.

     (b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any
                                      A-59
<PAGE>   266

Person as an Additional Limited Partner shall become effective on the date upon
which the name of such Person is recorded as such in the books and records of
the Partnership, following the consent of the General Partner to such admission.

SECTION 10.5  Amendment of Agreement and Certificate of Limited Partnership.

     To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.

                                   ARTICLE XI

                       WITHDRAWAL OR REMOVAL OF PARTNERS

SECTION 11.1  Withdrawal of the General Partner.

     (a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");

          (i) The General Partner voluntarily withdraws from the Partnership by
     giving written notice to the other Partners (and it shall be deemed that
     the General Partner has withdrawn pursuant to this Section 11.1(a)(i) if
     the General Partner voluntarily withdraws as general partner of the
     Operating Partnership);

          (ii) The General Partner transfers all of its rights as General
     Partner pursuant to Section 4.6;

          (iii) The General Partner is removed pursuant to Section 11.2;

          (iv) The General Partner (A) makes a general assignment for the
     benefit of creditors; (B) files a voluntary bankruptcy petition for relief
     under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
     or answer seeking for itself a liquidation, dissolution or similar relief
     (but not a reorganization) under any law; (D) files an answer or other
     pleading admitting or failing to contest the material allegations of a
     petition filed against the General Partner in a proceeding of the type
     described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks,
     consents to or acquiesces in the appointment of a trustee (but not a
     debtor-in-possession), receiver or liquidator of the General Partner or of
     all or any substantial part of its properties;

          (v) A final and non-appealable order of relief under Chapter 7 of the
     United States Bankruptcy Code is entered by a court with appropriate
     jurisdiction pursuant to a voluntary or involuntary petition by or against
     the General Partner; or

          (vi) (A) in the event the General Partner is a corporation, a
     certificate of dissolution or its equivalent is filed for the General
     Partner, or 90 days expire after the date of notice to the General Partner
     of revocation of its charter without a reinstatement of its charter, under
     the laws of its state of incorporation; (B) in the event the General
     Partner is a partnership or a limited liability company, the dissolution
     and commencement of winding up of the General Partner; (C) in the event the
     General Partner is acting in such capacity by virtue of being a trustee of
     a trust, the termination of the trust; (D) in the event the General Partner
     is a natural person, his death or adjudication of incompetency; and (E)
     otherwise in the event of the termination of the General Partner.

                                      A-60
<PAGE>   267

     If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A),
(B), (C) or (E) occurs, the withdrawing General Partner shall give notice to the
Limited Partners within 30 days after such occurrence. The Partners hereby agree
that only the Events of Withdrawal described in this Section 11.1 shall result
in the withdrawal of the General Partner from the Partnership.

     (b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2010, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by Unitholders holding at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partner and
its Affiliates) and the General Partner delivers to the Partnership an Opinion
of Counsel ("Withdrawal Opinion of Counsel") that such withdrawal (following the
selection of the successor General Partner) would not result in the loss of the
limited liability of any Limited Partner or of a limited partner of the
Operating Partnership or cause the Partnership or the Operating Partnership to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes (to the extent not previously
treated as such); (ii) at any time after 12:00 midnight, Eastern Standard Time,
on December 31, 2010, the General Partner voluntarily withdraws by giving at
least 90 days' advance notice to the Unitholders, such withdrawal to take effect
on the date specified in such notice; (iii) at any time that the General Partner
ceases to be the General Partner pursuant to Section 11.1(a)(ii) or is removed
pursuant to Section 11.2; or (iv) notwithstanding clause (i) of this sentence,
at any time that the General Partner voluntarily withdraws by giving at least 90
days' advance notice of its intention to withdraw to the Limited Partners, such
withdrawal to take effect on the date specified in the notice, if at the time
such notice is given one Person and its Affiliates (other than the General
Partner and its Affiliates) own beneficially or of record or control at least
50% of the Outstanding Units. The withdrawal of the General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the General Partner as general partner of the other Group
Members. If the General Partner gives a notice of withdrawal pursuant to Section
11.1(a)(i), the holders of a Unit Majority, may, prior to the effective date of
such withdrawal, elect a successor General Partner. The Person so elected as
successor General Partner shall automatically become the successor general
partner of the other Group Members of which the General Partner is a general
partner. If, prior to the effective date of the General Partner's withdrawal, a
successor is not selected by the Unitholders as provided herein or the
Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership
shall be dissolved in accordance with Section 12.1. Any successor General
Partner elected in accordance with the terms of this Section 11.1 shall be
subject to the provisions of Section 10.3.

SECTION 11.2  Removal of the General Partner.

     The General Partner may be removed if such removal is approved by the
Unitholders holding at least 66 2/3% of the Outstanding Units (including Units
held by the General Partner and its Affiliates). Any such action by such holders
for removal of the General Partner must also provide for the election of a
successor General Partner by the Unitholders holding a Unit Majority (including
Units held by the General Partner and its Affiliates). Such removal shall be
effective immediately following the admission of a successor General Partner
pursuant to Section 10.3. The removal of the General Partner shall also
automatically constitute the removal of the General Partner as general partner
of the other Group Members of which the General Partner is a general partner. If
a Person is elected as a successor General Partner in accordance with the terms
of this Section 11.2, such Person shall, upon admission pursuant to Section
10.3, automatically become a successor general partner of the other Group
Members of which the General Partner
                                      A-61
<PAGE>   268

is a general partner. The right of the holders of Outstanding Units to remove
the General Partner shall not exist or be exercised unless the Partnership has
received an opinion opining as to the matters covered by a Withdrawal Opinion of
Counsel. Any successor General Partner elected in accordance with the terms of
this Section 11.2 shall be subject to the provisions of Section 10.3.

SECTION 11.3  Interest of Departing Partner and Successor General Partner.

     (a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, the Departing
Partner shall have the option exercisable prior to the effective date of the
departure of such Departing Partner to require its successor to purchase its
General Partner Interest and its general partner interest (or equivalent
interest) in the other Group Members and all of its Incentive Distribution
Rights (collectively, the "Combined Interest") in exchange for an amount in cash
equal to the fair market value of such Combined Interest, such amount to be
determined and payable as of the effective date of its departure. If the General
Partner is removed by the Unitholders under circumstances where Cause exists or
if the General Partner withdraws under circumstances where such withdrawal
violates this Agreement or the Operating Partnership Agreement, and if a
successor General Partner is elected in accordance with the terms of Section
11.1 or 11.2, such successor shall have the option, exercisable prior to the
effective date of the departure of such Departing Partner, to purchase the
Combined Interest for such fair market value of such Combined Interest of the
Departing Partner. In either event, the Departing Partner shall be entitled to
receive all reimbursements due such Departing Partner pursuant to Section 7.4,
including any employee-related liabilities (including severance liabilities),
incurred in connection with the termination of any employees employed by the
Departing Partner for the benefit of the Partnership or the other Group Members.

     For purposes of this Section 11.3(a), the fair market value of a Departing
Partner's Combined Interest shall be determined by agreement between the
Departing Partner and its successor or, failing agreement within 30 days after
the effective date of such Departing Partner's departure, by an independent
investment banking firm or other independent expert selected by the Departing
Partner and its successor, which, in turn, may rely on other experts, and the
determination of which shall be conclusive as to such matter. If such parties
cannot agree upon one independent investment banking firm or other independent
expert within 45 days after the effective date of such departure, then the
Departing Partner shall designate an independent investment banking firm or
other independent expert, the Departing Partner's successor shall designate an
independent investment banking firm or other independent expert, and such firms
or experts shall mutually select a third independent investment banking firm or
independent expert, which third independent investment banking firm or other
independent expert shall determine the fair market value of the Combined
Interest of the Departing Partner. In making its determination, such third
independent investment banking firm or other independent expert may consider the
then current trading price of Units on any National Securities Exchange on which
Units are then listed, the value of the Partnership's assets, the rights and
obligations of the Departing Partner and other factors it may deem relevant.

     (b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this

                                      A-62
<PAGE>   269

Agreement, conversion of the Combined Interest of the Departing Partner to
Common Units will be characterized as if the Departing Partner (or its
transferee) contributed its Combined Interest to the Partnership in exchange for
the newly issued Common Units.

     (c) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to 1/99th of the Net Agreed Value of the
Partnership's assets on such date. In such event, such successor General Partner
shall, subject to the following sentence, be entitled to the Percentage Interest
of all Partnership allocations and distributions to which the Departing Partner
was entitled. The successor General Partner shall cause this Agreement to be
amended to reflect that, from and after the date of such successor General
Partner's admission, the successor General Partner's interest in all Partnership
distributions and allocations shall be 1%.

SECTION 11.4 Termination of Subordination Period, Conversion of Subordinated
             Units and Extinguishment of Cumulative Common Unit Arrearages.

     Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units held by the General Partner and its Affiliates are not
voted in favor of such removal, (i) the Subordination Period will end and all
Outstanding Subordinated Units will immediately and automatically convert into
Common Units on a one-for-one basis and (ii) all Cumulative Common Unit
Arrearages on the Common Units will be extinguished.

SECTION 11.5  Withdrawal of Limited Partners.

     No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.

                                  ARTICLE XII

                          DISSOLUTION AND LIQUIDATION

SECTION 12.1  Dissolution.

     The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:

          (a) the expiration of its term as provided in Section 2.7;

          (b) an Event of Withdrawal of the General Partner as provided in
     Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is
     elected and an Opinion of Counsel is received as provided in Section
     11.1(b) or 11.2 and such successor is admitted to the Partnership pursuant
     to Section 10.3;

          (c) an election to dissolve the Partnership by the General Partner
     that is approved by the holders of a Unit Majority;

          (d) the entry of a decree of judicial dissolution of the Partnership
     pursuant to the provisions of the Delaware Act; or
                                      A-63
<PAGE>   270

          (e) the sale of all or substantially all of the assets and properties
     of the Partnership Group.

SECTION 12.2  Continuation of the Business of the Partnership After Dissolution.

     Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor general partner a Person
approved by the holders of a Unit Majority. Unless such an election is made
within the applicable time period as set forth above, the Partnership shall
conduct only activities necessary to wind up its affairs. If such an election is
so made, then:

          (i) the reconstituted Partnership shall continue until dissolved in
     accordance with this Article XII;

          (ii) if the successor General Partner is not the former General
     Partner, then the interest of the former General Partner shall be treated
     in the manner provided in Section 11.3; and

          (iii) all necessary steps shall be taken to cancel this Agreement and
     the Certificate of Limited Partnership and to enter into and, as necessary,
     to file a new partnership agreement and certificate of limited partnership,
     and the successor general partner may for this purpose exercise the powers
     of attorney granted the General Partner pursuant to Section 2.6; provided,
     that the right of the holders of a Unit Majority to approve a successor
     General Partner and to reconstitute and to continue the business of the
     Partnership shall not exist and may not be exercised unless the Partnership
     has received an Opinion of Counsel that (x) the exercise of the right would
     not result in the loss of limited liability of any Limited Partner and (y)
     neither the Partnership, the reconstituted limited partnership nor the
     Operating Partnership would be treated as an association taxable as a
     corporation or otherwise be taxable as an entity for federal income tax
     purposes upon the exercise of such right to continue.

SECTION 12.3  Liquidator.

     Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by holders of
at least a majority of the Outstanding Common Units and Subordinated Units
voting as a single class. The Liquidator (if other than the General Partner)
shall agree not to resign at any time without 15 days' prior notice and may be
removed at any time, with or without cause, by notice of removal approved by
holders of at least a majority of the Outstanding Common Units and Subordinated
Units voting as a single class. Upon dissolution, removal or resignation of the
Liquidator, a successor and substitute Liquidator (who shall have and succeed to
all rights, powers and duties of the original Liquidator) shall within 30 days
thereafter be approved by holders of at least a majority of the Outstanding
Common Units and Subordinated Units voting as a single class. The right to
approve a successor or substitute Liquidator in the manner provided herein shall
be deemed to refer also to any such successor or substitute Liquidator approved
in the manner herein provided. Except as expressly provided in this Article XII,
the Liquidator approved in the manner provided herein shall have and may
exercise, without further

                                      A-64
<PAGE>   271

authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.

SECTION 12.4  Liquidation.

     The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:

          (a) Disposition of Assets.  The assets may be disposed of by public or
     private sale or by distribution in kind to one or more Partners on such
     terms as the Liquidator and such Partner or Partners may agree. If any
     property is distributed in kind, the Partner receiving the property shall
     be deemed for purposes of Section 12.4(c) to have received cash equal to
     its fair market value; and contemporaneously therewith, appropriate cash
     distributions must be made to the other Partners. The Liquidator may, in
     its absolute discretion, defer liquidation or distribution of the
     Partnership's assets for a reasonable time if it determines that an
     immediate sale or distribution of all or some of the Partnership's assets
     would be impractical or would cause undue loss to the Partners. The
     Liquidator may, in its absolute discretion, distribute the Partnership's
     assets, in whole or in part, in kind if it determines that a sale would be
     impractical or would cause undue loss to the Partners.

          (b) Discharge of Liabilities.  Liabilities of the Partnership include
     amounts owed to the Liquidator as compensation for serving in such capacity
     (subject to the terms of Section 12.3) and amounts owed to Partners
     otherwise than in respect of their distribution rights under Article VI.
     With respect to any liability that is contingent, conditional or unmatured
     or is otherwise not yet due and payable, the Liquidator shall either settle
     such claim for such amount as it thinks appropriate or establish a reserve
     of cash or other assets to provide for its payment. When paid, any unused
     portion of the reserve shall be distributed as additional liquidation
     proceeds.

          (c) Liquidation Distributions.  All property and all cash in excess of
     that required to discharge liabilities as provided in Section 12.4(b) shall
     be distributed to the Partners in accordance with, and to the extent of,
     the positive balances in their respective Capital Accounts, as determined
     after taking into account all Capital Account adjustments (other than those
     made by reason of distributions pursuant to this Section 12.4(c)) for the
     taxable year of the Partnership during which the liquidation of the
     Partnership occurs (with such date of occurrence being determined pursuant
     to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution
     shall be made by the end of such taxable year (or, if later, within 90 days
     after said date of such occurrence).

SECTION 12.5  Cancellation of Certificate of Limited Partnership.

     Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.

                                      A-65
<PAGE>   272

SECTION 12.6  Return of Contributions.

     The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.

SECTION 12.7  Waiver of Partition.

     To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.

SECTION 12.8  Capital Account Restoration.

     No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.

                                  ARTICLE XIII

           AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

SECTION 13.1  Amendment to be Adopted Solely by the General Partner.

     Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:

          (a) a change in the name of the Partnership, the location of the
     principal place of business of the Partnership, the registered agent of the
     Partnership or the registered office of the Partnership;

          (b) admission, substitution, withdrawal or removal of Partners in
     accordance with this Agreement;

          (c) a change that, in the sole discretion of the General Partner, is
     necessary or advisable to qualify or continue the qualification of the
     Partnership as a limited partnership or a partnership in which the Limited
     Partners have limited liability under the laws of any state or to ensure
     that the Partnership and the Operating Partnership will not be treated as
     an association taxable as a corporation or otherwise taxed as an entity for
     federal income tax purposes;

          (d) a change that, in the discretion of the General Partner, (i) does
     not adversely affect the Limited Partners (including any particular class
     of Partnership Interests as compared to other classes of Partnership
     Interests) in any material respect, (ii) is necessary or advisable to (A)
     satisfy any requirements, conditions or guidelines contained in any
     opinion, directive, order, ruling or regulation of any federal or state
     agency or judicial authority or contained in any federal or state statute
     (including the Delaware Act) or (B) facilitate the trading of the Limited
     Partner Interests (including the division of any class or classes of
     Outstanding Limited Partner Interests into different classes to facilitate
     uniformity of tax consequences within such classes of Limited Partner
     Interests) or comply with any rule, regulation, guideline or requirement of
     any National Securities Exchange on which the Limited Partner Interests are
     or will be listed for trading, compliance with any of which the General
     Partner determines in its discretion to be in the best interests of the
     Partnership and the Limited Partners, (iii) is necessary or advisable in
     connection with action taken by the General
                                      A-66
<PAGE>   273

     Partner pursuant to Section 5.10 or (iv) is required to effect the intent
     expressed in the Registration Statement or the intent of the provisions of
     this Agreement or is otherwise contemplated by this Agreement;

          (e) a change in the fiscal year or taxable year of the Partnership and
     any changes that, in the discretion of the General Partner, are necessary
     or advisable as a result of a change in the fiscal year or taxable year of
     the Partnership including, if the General Partner shall so determine, a
     change in the definition of "Quarter" and the dates on which distributions
     are to be made by the Partnership;

          (f) an amendment that is necessary, in the Opinion of Counsel, to
     prevent the Partnership, or the General Partner or its directors, officers,
     trustees or agents from in any manner being subjected to the provisions of
     the Investment Company Act of 1940, as amended, the Investment Advisers Act
     of 1940, as amended, or "plan asset" regulations adopted under the Employee
     Retirement Income Security Act of 1974, as amended, regardless of whether
     such are substantially similar to plan asset regulations currently applied
     or proposed by the United States Department of Labor;

          (g) subject to the terms of Section 5.7, an amendment that, in the
     discretion of the General Partner, is necessary or advisable in connection
     with the authorization of issuance of any class or series of Partnership
     Securities pursuant to Section 5.6;

          (h) any amendment expressly permitted in this Agreement to be made by
     the General Partner acting alone;

          (i) an amendment effected, necessitated or contemplated by a Merger
     Agreement approved in accordance with Section 14.3;

          (j) an amendment that, in the discretion of the General Partner, is
     necessary or advisable to reflect, account for and deal with appropriately
     the formation by the Partnership of, or investment by the Partnership in,
     any corporation, partnership, joint venture, limited liability company or
     other entity, in connection with the conduct by the Partnership of
     activities permitted by the terms of Section 2.4;

          (k) a merger or conveyance pursuant to Section 14.3(d); or

          (l) any other amendments substantially similar to the foregoing.

SECTION 13.2  Amendment Procedures.

     Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of the
General Partner, which consent may be given or withheld in its sole discretion.
A proposed amendment shall be effective upon its approval by the holders of a
Unit Majority, unless a greater or different percentage is required under this
Agreement or by Delaware law. Each proposed amendment that requires the approval
of the holders of a specified percentage of Outstanding Units shall be set forth
in a writing that contains the text of the proposed amendment. If such an
amendment is proposed, the General Partner shall seek the written approval of
the requisite percentage of Outstanding Units or call a meeting of the
Unitholders to consider and vote on such proposed amendment. The General Partner
shall notify all Record Holders upon final adoption of any such proposed
amendments.

SECTION 13.3  Amendment Requirements.

          (a) Notwithstanding the provisions of Sections 13.1 and 13.2, no
     provision of this Agreement that establishes a percentage of Outstanding
     Units (including Units deemed owned by the General Partner) required to
     take any action shall be amended, altered, changed, repealed or rescinded
     in any respect that would have the effect of reducing such
                                      A-67
<PAGE>   274

     voting percentage unless such amendment is approved by the written consent
     or the affirmative vote of holders of Outstanding Units whose aggregate
     Outstanding Units constitute not less than the voting requirement sought to
     be reduced.

          (b) Notwithstanding the provisions of Sections 13.1 and 13.2, no
     amendment to this Agreement may (i) enlarge the obligations of any Limited
     Partner without its consent, unless such shall be deemed to have occurred
     as a result of an amendment approved pursuant to Section 13.3(c), (ii)
     enlarge the obligations of, restrict in any way any action by or rights of,
     or reduce in any way the amounts distributable, reimbursable or otherwise
     payable to, the General Partner or any of its Affiliates without its
     consent, which consent may be given or withheld in its sole discretion,
     (iii) change Section 12.1(a) or 12.1(c), or (iv) change the term of the
     Partnership or, except as set forth in Section 12.1(c), give any Person the
     right to dissolve the Partnership.

          (c) Except as otherwise provided, and without limitation of the
     General Partner's authority to adopt amendments to this Agreement without
     the approval of any Partners or Assignee as contemplated in Section 13.1,
     any amendment that would have a material adverse effect on the rights or
     preferences of any class of Partnership Interests in relation to other
     classes of Partnership Interests must be approved by the holders of not
     less than a majority of the Outstanding Partnership Interests of the class
     affected.

          (d) Notwithstanding any other provision of this Agreement, except for
     amendments pursuant to Section 13.1 and except as otherwise provided by
     Section 14.3(b), no amendments shall become effective without the approval
     of the holders of at least 90% of the Outstanding Common Units and
     Subordinated Units voting as a single class unless the Partnership obtains
     an Opinion of Counsel to the effect that such amendment will not affect the
     limited liability of any Limited Partner under applicable law.

          (e) Except as provided in Section 13.1, this Section 13.3 shall only
     be amended with the approval of the holders of at least 90% of the
     Outstanding Units.

SECTION 13.4  Special Meetings.

     All acts of Limited Partners to be taken pursuant to this Agreement shall
be taken in the manner provided in this Article XIII. Special meetings of the
Limited Partners may be called by the General Partner or by Limited Partners
owning 20% or more of the Outstanding Limited Partner Interests of the class or
classes for which a meeting is proposed. Limited Partners shall call a special
meeting by delivering to the General Partner one or more requests in writing
stating that the signing Limited Partners wish to call a special meeting and
indicating the general or specific purposes for which the special meeting is to
be called. Within 60 days after receipt of such a call from Limited Partners or
within such greater time as may be reasonably necessary for the Partnership to
comply with any statutes, rules, regulations, listing agreements or similar
requirements governing the holding of a meeting or the solicitation of proxies
for use at such a meeting, the General Partner shall send a notice of the
meeting to the Limited Partners either directly or indirectly through the
Transfer Agent. A meeting shall be held at a time and place determined by the
General Partner on a date not less than 10 days nor more than 60 days after the
mailing of notice of the meeting. Limited Partners shall not vote on matters
that would cause the Limited Partners to be deemed to be taking part in the
management and control of the business and affairs of the Partnership so as to
jeopardize the Limited Partners' limited liability under the Delaware Act or the
law of any other state in which the Partnership is qualified to do business.

SECTION 13.5  Notice of a Meeting.

     Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which a
meeting is proposed in writing by
                                      A-68
<PAGE>   275

mail or other means of written communication in accordance with Section 16.1.
The notice shall be deemed to have been given at the time when deposited in the
mail or sent by other means of written communication.

SECTION 13.6  Record Date.

     For purposes of determining the Limited Partners entitled to notice of or
to vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11 the General Partner may set a Record Date,
which shall not be less than 10 nor more than 60 days before (a) the date of the
meeting (unless such requirement conflicts with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the Limited Partner
Interests are listed for trading, in which case the rule, regulation, guideline
or requirement of such exchange shall govern) or (b) in the event that approvals
are sought without a meeting, the date by which Limited Partners are requested
in writing by the General Partner to give such approvals.

SECTION 13.7  Adjournment.

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

SECTION 13.8  Waiver of Notice; Approval of Meeting; Approval of Minutes.

     The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the
meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting.

SECTION 13.9  Quorum.

     The holders of a majority of the Outstanding Limited Partner Interests of
the class or classes for which a meeting has been called (including Limited
Partner Interests deemed owned by the General Partner) represented in person or
by proxy shall constitute a quorum at a meeting of Limited Partners of such
class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Limited Partner Interests,
in which case the quorum shall be such greater percentage. At any meeting of the
Limited Partners duly called and held in accordance with this Agreement at which
a quorum is present, the act of Limited Partners holding Outstanding Limited
Partner Interests that in the aggregate represent a majority of the Outstanding
Limited Partner Interests entitled to vote and be present in person or by proxy
at such meeting shall be deemed to constitute the act of all Limited Partners,
unless a greater or different percentage is required with respect to such action
under the provisions of this Agreement, in which case the act of the Limited
Partners holding Outstanding Limited
                                      A-69
<PAGE>   276

Partner Interests that in the aggregate represent at least such greater or
different percentage shall be required. The Limited Partners present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough Limited
Partners to leave less than a quorum, if any action taken (other than
adjournment) is approved by the required percentage of Outstanding Limited
Partner Interests specified in this Agreement (including Limited Partner
Interests deemed owned by the General Partner). In the absence of a quorum any
meeting of Limited Partners may be adjourned from time to time by the
affirmative vote of holders of at least a majority of the Outstanding Limited
Partner Interests entitled to vote at such meeting (including Limited Partner
Interests deemed owned by the General Partner) represented either in person or
by proxy, but no other business may be transacted, except as provided in Section
13.7.

SECTION 13.10  Conduct of a Meeting.

     The General Partner shall have full power and authority concerning the
manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section 13.4,
the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The General Partner shall designate a
Person to serve as chairman of any meeting and shall further designate a Person
to take the minutes of any meeting. All minutes shall be kept with the records
of the Partnership maintained by the General Partner. The General Partner may
make such other regulations consistent with applicable law and this Agreement as
it may deem advisable concerning the conduct of any meeting of the Limited
Partners or solicitation of approvals in writing, including regulations in
regard to the appointment of proxies, the appointment and duties of inspectors
of votes and approvals, the submission and examination of proxies and other
evidence of the right to vote, and the revocation of approvals in writing.

SECTION 13.11  Action Without a Meeting.

     If authorized by the General Partner, any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if an approval in
writing setting forth the action so taken is signed by Limited Partners owning
not less than the minimum percentage of the Outstanding Limited Partner
Interests (including Limited Partner Interests deemed owned by the General
Partner) that would be necessary to authorize or take such action at a meeting
at which all the Limited Partners were present and voted (unless such provision
conflicts with any rule, regulation, guideline or requirement of any National
Securities Exchange on which the Limited Partner Interests are listed for
trading, in which case the rule, regulation, guideline or requirement of such
exchange shall govern). Prompt notice of the taking of action without a meeting
shall be given to the Limited Partners who have not approved in writing. The
General Partner may specify that any written ballot submitted to Limited
Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the General Partner. If a ballot returned to the
Partnership does not vote all of the Limited Partner Interests held by the
Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted. If approval of the
taking of any action by the Limited Partners is solicited by any Person other
than by or on behalf of the General Partner, the written approvals shall have no
force and effect unless and until (a) they are deposited with the Partnership in
care of the General Partner, (b) approvals sufficient to take the action
proposed are dated as of a date not more than 90 days prior to the date
sufficient approvals are deposited with the Partnership and (c) an Opinion of
Counsel is delivered to the General Partner to the effect that the exercise of
such right and the action proposed to be taken with respect to any particular
matter (i) will not cause the Limited Partners to be deemed to be taking part in
the management and control of the business and affairs of the Partnership so as
to jeopardize the Limited Partners' limited liability, and (ii) is otherwise
                                      A-70
<PAGE>   277

permissible under the state statutes then governing the rights, duties and
liabilities of the Partnership and the Partners.

SECTION 13.12  Voting and Other Rights.

     (a) Only those Record Holders of the Limited Partner Interests on the
Record Date set pursuant to Section 13.6 (and also subject to the limitations
contained in the definition of "Outstanding") shall be entitled to notice of,
and to vote at, a meeting of Limited Partners or to act with respect to matters
as to which the holders of the Outstanding Limited Partner Interests have the
right to vote or to act. All references in this Agreement to votes of, or other
acts that may be taken by, the Outstanding Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.

     (b) With respect to Limited Partner Interests that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company or
clearing corporation, or an agent of any of the foregoing), in whose name such
Limited Partner Interests are registered, such other Person shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
and unless the arrangement between such Persons provides otherwise, vote such
Limited Partner Interests in favor of, and at the direction of, the Person who
is the beneficial owner, and the Partnership shall be entitled to assume it is
so acting without further inquiry. The provisions of this Section 13.12(b) (as
well as all other provisions of this Agreement) are subject to the provisions of
Section 4.3.

                                  ARTICLE XIV

                                     MERGER

SECTION 14.1  Authority.

     The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.

SECTION 14.2  Procedure for Merger or Consolidation.

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

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

          (b) The name and jurisdiction of formation or organization of the
     business entity that is to survive the proposed merger or consolidation
     (the "Surviving Business Entity");

          (c) The terms and conditions of the proposed merger or consolidation;

          (d) The manner and basis of exchanging or converting the equity
     securities of each constituent business entity for, or into, cash, property
     or general or limited partner interests, rights, securities or obligations
     of the Surviving Business Entity; and (i) if any general or limited partner
     interests, securities or rights of any constituent business entity are not
     to be exchanged or converted solely for, or into, cash, property or general
     or limited partner interests, rights, securities or obligations of the
     Surviving Business Entity, the cash, property
                                      A-71
<PAGE>   278

     or general or limited partner interests, rights, securities or obligations
     of any limited partnership, corporation, trust or other entity (other than
     the Surviving Business Entity) which the holders of such general or limited
     partner interests, securities or rights are to receive in exchange for, or
     upon conversion of their general or limited partner interests, securities
     or rights, and (ii) in the case of securities represented by certificates,
     upon the surrender of such certificates, which cash, property or general or
     limited partner interests, rights, securities or obligations of the
     Surviving Business Entity or any general or limited partnership,
     corporation, trust or other entity (other than the Surviving Business
     Entity), or evidences thereof, are to be delivered;

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

          (f) The effective time of the merger, which may be the date of the
     filing of the certificate of merger pursuant to Section 14.4 or a later
     date specified in or determinable in accordance with the Merger Agreement
     (provided, that if the effective time of the merger is to be later than the
     date of the filing of the certificate of merger, the effective time shall
     be fixed no later than the time of the filing of the certificate of merger
     and stated therein); and

          (g) Such other provisions with respect to the proposed merger or
     consolidation as are deemed necessary or appropriate by the General
     Partner.

SECTION 14.3  Approval by Limited Partners of Merger or Consolidation.

     (a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.

     (b) Except as provided in Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a Unit
Majority unless the Merger Agreement contains any provision that, if contained
in an amendment to this Agreement, the provisions of this Agreement or the
Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.

     (c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.

     (d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, in its discretion, without Limited
Partner approval, to merge the Partnership or any Group Member into, or convey
all of the Partnership's assets to, another limited liability entity which shall
be newly formed and shall have no assets, liabilities or operations at the time
of such Merger other than those it receives from the Partnership or other Group
Member if (i) the General Partner has received an Opinion of Counsel that the
merger or conveyance, as the case may be, would not result in the loss of the
limited liability of any Limited Partner or any partner in the Operating
Partnership or cause the Partnership or Operating Partnership to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such),
(ii) the

                                      A-72
<PAGE>   279

sole purpose of such merger or conveyance is to effect a mere change in the
legal form of the Partnership into another limited liability entity and (iii)
the governing instruments of the new entity provide the Limited Partners and the
General Partner with the same rights and obligations as are herein contained.

SECTION 14.4  Certificate of Merger.

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

SECTION 14.5  Effect of Merger.

     (a) At the effective time of the certificate of merger:

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

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

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

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

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

                                   ARTICLE XV

                   RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

SECTION 15.1  Right to Acquire Limited Partner Interests.

     (a) Notwithstanding any other provision of this Agreement, if at any time
not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partner and its
Affiliates, the General Partner shall then have the right, which right it may
assign and transfer in whole or in part to the Partnership or any Affiliate of
the General Partner, exercisable in its sole discretion, to purchase all, but
not less than all, of such Limited Partner Interests of such class then
Outstanding held by Persons other than the General Partner and its Affiliates,
at the greater of (x) the Current Market Price as of the date three days prior
to the date that the notice described in Section 15.1(b) is mailed and (y) the
highest price paid by the General Partner or any of its Affiliates for any such
Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) "Current Market Price" as of any date of any class
of Limited Partner Interests listed or admitted to trading on any National
Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "Closing Price" for any day means the last sale price on such
                                      A-73
<PAGE>   280

day, regular way, or in case no such sale takes place on such day, the average
of the closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading on
any National Securities Exchange (other than the Nasdaq Stock Market), the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the General Partner, or if on any such day
no market maker is making a market in such Limited Partner Interests of such
class, the fair value of such Limited Partner Interests on such day as
determined reasonably and in good faith by the General Partner; and (iii)
"Trading Day" means a day on which the principal National Securities Exchange on
which such Limited Partner Interests of any class are listed or admitted to
trading is open for the transaction of business or, if Limited Partner Interests
of a class are not listed or admitted to trading on any National Securities
Exchange, a day on which banking institutions in New York City generally are
open.

     (b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section 15.1(a), the General Partner shall deliver to the
Transfer Agent notice of such election to purchase (the "Notice of Election to
Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of
Election to Purchase to the Record Holders of Limited Partner Interests of such
class (as of a Record Date selected by the General Partner) at least 10, but not
more than 60, days prior to the Purchase Date. Such Notice of Election to
Purchase shall also be published for a period of at least three consecutive days
in at least two daily newspapers of general circulation printed in the English
language and published in the Borough of Manhattan, New York. The Notice of
Election to Purchase shall specify the Purchase Date and the price (determined
in accordance with Section 15.1(a)) at which Limited Partner Interests will be
purchased and state that the General Partner, its Affiliate or the Partnership,
as the case may be, elects to purchase such Limited Partner Interests, upon
surrender of Certificates representing such Limited Partner Interests in
exchange for payment, at such office or offices of the Transfer Agent as the
Transfer Agent may specify, or as may be required by any National Securities
Exchange on which such Limited Partner Interests are listed or admitted to
trading. Any such Notice of Election to Purchase mailed to a Record Holder of
Limited Partner Interests at his address as reflected in the records of the
Transfer Agent shall be conclusively presumed to have been given regardless of
whether the owner receives such notice. On or prior to the Purchase Date, the
General Partner, its Affiliate or the Partnership, as the case may be, shall
deposit with the Transfer Agent cash in an amount sufficient to pay the
aggregate purchase price of all of such Limited Partner Interests to be
purchased in accordance with this Section 15.1. If the Notice of Election to
Purchase shall have been duly given as aforesaid at least 10 days prior to the
Purchase Date, and if on or prior to the Purchase Date the deposit described in
the preceding sentence has been made for the benefit of the holders of Limited
Partner Interests subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Limited Partner
Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall
thereupon cease, except the right to receive the purchase price (determined in
accordance with Section 15.1(a)) for Limited Partner Interests therefor, without
interest, upon surrender to the Transfer Agent of the Certificates representing
such Limited Partner Interests, and such Limited Partner Interests shall
thereupon be deemed to be transferred to the General Partner, its Affiliate or
the Partnership, as the case may be, on the record books of the Transfer Agent
and the Partnership, and the

                                      A-74
<PAGE>   281

General Partner or any Affiliate of the General Partner, or the Partnership, as
the case may be, shall be deemed to be the owner of all such Limited Partner
Interests from and after the Purchase Date and shall have all rights as the
owner of such Limited Partner Interests (including all rights as owner of such
Limited Partner Interests pursuant to Articles IV, V, VI and XII).

     (c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.

                                  ARTICLE XVI

                               GENERAL PROVISIONS

SECTION 16.1  Addresses and Notices.

     Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the General
Partner, the Transfer Agent or the mailing organization shall be prima facie
evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner or
Assignee at the principal office of the Partnership for a period of one year
from the date of the giving or making of such notice, payment or report to the
other Partners and Assignees. Any notice to the Partnership shall be deemed
given if received by the General Partner at the principal office of the
Partnership designated pursuant to Section 2.3. The General Partner may rely and
shall be protected in relying on any notice or other document from a Partner,
Assignee or other Person if believed by it to be genuine.

SECTION 16.2  Further Action.

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

SECTION 16.3  Binding Effect.

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

                                      A-75
<PAGE>   282

Section 16.4  Integration.

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

Section 16.5  Creditors.

     None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.

Section 16.6  Waiver.

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

Section 16.7  Counterparts.

     This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.

Section 16.8  Applicable Law.

     This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.

Section 16.9  Invalidity of Provisions.

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

Section 16.10  Consent of Partners.

     Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.

                    [Rest of Page Intentionally Left Blank]

                                      A-76
<PAGE>   283

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

                                            GENERAL PARTNER:

                                            RIVERWALK LOGISTICS, L.P.

                                            By: Shamrock Logistics GP, LLC,
                                                its General Partner

                                                Name: --------------------------
                                                Title: -------------------------

                                            ORGANIZATIONAL LIMITED PARTNER:

                                            ------------------------------------
                                                        Todd Walker

                                            LIMITED PARTNERS:

                                            All Limited Partners now and
                                            hereafter
                                            admitted as Limited Partners of the
                                            Partnership, pursuant to powers of
                                            attorney
                                            now and hereafter executed in favor
                                            of, and
                                            granted and delivered to the General
                                            Partner.

                                            RIVERWALK LOGISTICS, L.P.

                                            By: Shamrock Logistics GP, LLC,
                                                its General Partner

                                                Name: --------------------------
                                                Title: -------------------------

                                            UDS LOGISTICS, LLC

                                            By: Diamond Shamrock Refining and
                                                Marketing Company, its Sole
                                                Member

                                                Name: --------------------------
                                                Title: -------------------------

                                      A-77
<PAGE>   284

                                   EXHIBIT A
                               TO THE AMENDED AND
                  RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
                            SHAMROCK LOGISTICS, L.P.

                      CERTIFICATE EVIDENCING COMMON UNITS
                   REPRESENTING LIMITED PARTNER INTERESTS IN
                            SHAMROCK LOGISTICS, L.P.

No.                                                                 Common Units

     In accordance with Section 4.1 of the Amended and Restated Agreement of
Limited Partnership of Shamrock Logistics, L.P., as amended, supplemented or
restated from time to time (the "Partnership Agreement"), Shamrock Logistics,
L.P., a Delaware limited partnership (the "Partnership"), hereby certifies
that            (the "Holder") is the registered owner of             Common
Units representing limited partner interests in the Partnership (the "Common
Units") transferable on the books of the Partnership, in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed and
accompanied by a properly executed application for transfer of the Common Units
represented by this Certificate. The rights, preferences and limitations of the
Common Units are set forth in, and this Certificate and the Common Units
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Partnership Agreement. Copies of the Partnership
Agreement are on file at, and will be furnished without charge on delivery of
written request to the Partnership at, the principal office of the Partnership
located at 6000 North Loop 1604 West, San Antonio, Texas 78249. Capitalized
terms used herein but not defined shall have the meanings given them in the
Partnership Agreement.

     The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.

     This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.

<TABLE>
<S>                                                    <C>
Dated:                                                 SHAMROCK LOGISTICS, L.P.
                                                       By: Riverwalk Logistics, L.P.,
                                                           its General Partner

Countersigned and Registered by:                       By: Shamrock Logistics GP, LLC,
                                                               its General Partner

-----------------------------------------------------  By: ----------------------------------------------
as Transfer Agent and Registrar
                                                       Name: --------------------------------------------

By: -------------------------------------------------  By: -------------------------------------------------
    Authorized Signature                               Secretary
</TABLE>

                            [REVERSE OF CERTIFICATE]
                                      A-78
<PAGE>   285

                                 ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:

<TABLE>
<S>        <C>                                     <C>
TEN        as tenants in common                    UNIF GIFT/TRANSFERS MIN ACT
  COM --
TEN        as tenants by the entireties            Custodian
  ENT --
                                                        (Cust)                     (Minor)
JT TEN --  as joint tenants with right of          under Uniform Gifts/Transfers to
           survivorship and not as tenants in      Minors Act
           common                                  (State)
</TABLE>

     Additional abbreviations, though not in the above list, may also be used.

                           ASSIGNMENT OF COMMON UNITS
                                       IN
                            SHAMROCK LOGISTICS, L.P.
              IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
             DUE TO TAX SHELTER STATUS OF SHAMROCK LOGISTICS, L.P.

     You have acquired an interest in Shamrock Logistics, L.P., 6000 North Loop
1604 West, San Antonio, Texas 78249, whose taxpayer identification number is
74-2958817. The Internal Revenue Service has issued Shamrock Logistics, L.P. the
following tax shelter registration number:     .

     YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME
BY REASON OF YOUR INVESTMENT IN SHAMROCK LOGISTICS, L.P.

     You must report the registration number as well as the name and taxpayer
identification number of Shamrock Logistics, L.P. on Form 8271. FORM 8271 MUST
BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS, CREDIT OR
OTHER TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN SHAMROCK
LOGISTICS, L.P.

     If you transfer your interest in Shamrock Logistics, L.P. to another
person, you are required by the Internal Revenue Service to keep a list
containing (a) that person's name, address and taxpayer identification number,
(b) the date on which you transferred the interest and (c) the name, address and
tax shelter registration number of Shamrock Logistics, L.P. If you do not want
to keep such a list, you must (1) send the information specified above to the
Partnership, which will keep the list for this tax shelter, and (2) give a copy
of this notice to the person to whom you transfer your interest. Your failure to
comply with any of the above-described responsibilities could result in the
imposition of a penalty under Section 6707(b) or 6708(a) of the Internal Revenue
Code of 1986, as amended, unless such failure is shown to be due to reasonable
cause.

     ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.

     FOR VALUE RECEIVED,           HEREBY ASSIGNS, CONVEYS, SELLS AND TRANSFERS
UNTO

------------------------------------------------------
------------------------------------------------------

<TABLE>
<S>                                                    <C>
           (Please print or typewrite name              (Please insert Social Security or other identifying
              and address of Assignee)                                  number of Assignee)
</TABLE>

                                      A-79
<PAGE>   286

               Common Units representing limited partner interests evidenced by
this Certificate, subject to the Partnership Agreement, and does hereby
irrevocably constitute and appoint           as its attorney-in-fact with full
power of substitution to transfer the same on the books of Shamrock Logistics,
L.P.

<TABLE>
<S>                                        <C>     <C>
Date:                                      NOTE:   The signature to any endorsement hereon
                                                   must correspond with the name as written
                                                   upon the face of this Certificate in
                                                   every particular, without alteration,
SIGNATURE(S) MUST BE                               enlargement or change.
GUARANTEED BY A MEMBER FIRM OF THE
NATIONAL ASSOCIATION OF SECURITIES                 (Signature)
DEALERS, INC. OR BY A COMMERCIAL BANK OR
TRUST COMPANY                                      (Signature)
</TABLE>

SIGNATURE(S) GUARANTEED

     No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.

                                      A-80
<PAGE>   287

                    APPLICATION FOR TRANSFER OF COMMON UNITS

     The undersigned ("Assignee") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.

     The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Shamrock Logistics, L.P. (the
"Partnership"), as amended, supplemented or restated to the date hereof (the
"Partnership Agreement"), (b) represents and warrants that the Assignee has all
right, power and authority and, if an individual, the capacity necessary to
enter into the Partnership Agreement, (c) appoints the General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee's attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Partnership Agreement
and any amendment thereto and the Certificate of Limited Partnership of the
Partnership and any amendment thereto, necessary or appropriate for the
Assignee's admission as a Substituted Limited Partner and as a party to the
Partnership Agreement, (d) gives the powers of attorney provided for in the
Partnership Agreement, and (e) makes the waivers and gives the consents and
approvals contained in the Partnership Agreement. Capitalized terms not defined
herein have the meanings assigned to such terms in the Partnership Agreement.

<TABLE>
<S>                                                        <C>
Date: -----------------------------------------------
                                                           -----------------------------------------------------
                                                                           Signature of Assignee

-----------------------------------------------------      -----------------------------------------------------
        Social Security or other identifying                           Name and Address of Assignee
                 number of Assignee

-----------------------------------------------------
    Purchase Price including commissions, if any
</TABLE>

     Type of Entity (check one):

<TABLE>
<S>                                 <C>                                 <C>
[ ] Individual                      [ ] Partnership                     [ ] Corporation
[ ] Trust                           [ ] Other (specify) ------------------------------
</TABLE>

     Nationality (check one):

<TABLE>
<S>                                                              <C>
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation                                          [ ] Non-resident Alien
</TABLE>

     If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.

     Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person. To
inform the Partnership that no withholding is required with respect to the
undersigned interestholder's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).

     Complete Either A or B:

     A. Individual Interestholder

          1. I am not a non-resident alien for purposes of U.S. income taxation.

          2. My U.S. taxpayer identification number (Social Security Number) is
                    .

          3. My home address is                     .

                                      A-81
<PAGE>   288

     B. Partnership, Corporation or Other Interestholder

          1.                          is not a foreign corporation, foreign
             partnership, foreign trust
             (Name of Interestholder)

     or foreign estate (as those terms are defined in the Code and Treasury
Regulations).

          2. The interestholder's U.S. employer identification number is
                    .

          3. The interestholder's office address and place of incorporation (if
     applicable) is                     .

     The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.

     The interestholder understands that this certificate may be disclosed to
the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.

     Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:

             ------------------------------------------------------
                             Name of Interestholder

             ------------------------------------------------------
                               Signature and Date

             ------------------------------------------------------
                             Title (if applicable)

     NOTE:  If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.

                                      A-82
<PAGE>   289

                                                                      APPENDIX B

                        FORM OF APPLICATION OF TRANSFER
                                OF COMMON UNITS
<PAGE>   290

                    APPLICATION FOR TRANSFER OF COMMON UNITS

     The undersigned ("Assignee") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.

     The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Shamrock Logistics, L.P. (the
"Partnership"), as amended, supplemented or restated to the date hereof (the
"Partnership Agreement"), (b) represents and warrants that the Assignee has all
right, power and authority and, if an individual, the capacity necessary to
enter into the Partnership Agreement, (c) appoints the General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee's attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Partnership Agreement
and any amendment thereto and the Certificate of Limited Partnership of the
Partnership and any amendment thereto, necessary or appropriate for the
Assignee's admission as a Substituted Limited Partner and as a party to the
Partnership Agreement, (d) gives the powers of attorney provided for in the
Partnership Agreement, and (e) makes the waivers and gives the consents and
approvals contained in the Partnership Agreement. Capitalized terms not defined
herein have the meanings assigned to such terms in the Partnership Agreement.

<TABLE>
<S>                                                        <C>
Date: -----------------------------------------------
                                                           -----------------------------------------------------
                                                                           Signature of Assignee

-----------------------------------------------------      -----------------------------------------------------
        Social Security or other identifying                           Name and Address of Assignee
                 number of Assignee

-----------------------------------------------------
    Purchase Price including commissions, if any
</TABLE>

     Type of Entity (check one):

<TABLE>
<S>                                 <C>                                 <C>
[ ] Individual                      [ ] Partnership                     [ ] Corporation
[ ] Trust                           [ ] Other (specify) ------------------------------
</TABLE>

     Nationality (check one):

<TABLE>
<S>                                                              <C>
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation                                          [ ] Non-resident Alien
</TABLE>

     If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.

     Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person. To
inform the Partnership that no withholding is required with respect to the
undersigned interestholder's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).

     Complete Either A or B:

     A. Individual Interestholder

          1. I am not a non-resident alien for purposes of U.S. income taxation.

          2. My U.S. taxpayer identification number (Social Security Number) is
                    .

          3. My home address is                     .

                                       B-1
<PAGE>   291

     B. Partnership, Corporation or Other Interestholder

          1.                          is not a foreign corporation, foreign
             partnership, foreign trust
             (Name of Interestholder)

     or foreign estate (as those terms are defined in the Code and Treasury
Regulations).

          2. The interestholder's U.S. employer identification number is
                    .

          3. The interestholder's office address and place of incorporation (if
     applicable) is                     .

     The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.

     The interestholder understands that this certificate may be disclosed to
the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.

     Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:

             ------------------------------------------------------
                             Name of Interestholder

             ------------------------------------------------------
                               Signature and Date

             ------------------------------------------------------
                             Title (if applicable)

     NOTE:  If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.

                                       B-2
<PAGE>   292

                                                                      APPENDIX C

                               GLOSSARY OF TERMS

     Adjusted Operating Surplus: For any period, Operating Surplus generated
during that period as adjusted to:

          (a) decrease Operating Surplus by:

             (1) any net increase in Working Capital Borrowings with respect to
        that period, and

             (2) any net reduction in cash reserves for Operating Expenditures
                 during that period not relating to an Operating Expenditure
                 made during that period; and

          (b) increase Operating Surplus by:

             (1) any net decrease in Working Capital Borrowings with respect to
                 that period; and


             (2) any net increase in cash reserves for Operating Expenditures
                 with respect to that period required by any debt agreement for
                 the repayment of principal, interest or premium.


     Adjusted Operating Surplus does not include that portion of Operating
Surplus included in clause (a)(1) of the definition of Operating Surplus.

     Available Cash: For any quarter prior to liquidation:

          (a) the sum of:

             (1) all cash and cash equivalents of Shamrock Logistics and its
                 subsidiaries on hand at the end of that quarter; and

             (2) all additional cash and cash equivalents of Shamrock Logistics
                 and its subsidiaries on hand on the date of determination of
                 Available Cash for that quarter resulting from Working Capital
                 Borrowings after the end of that quarter; less

          (b) the amount of cash reserves that is necessary or appropriate in
              the reasonable discretion of the general partner to:

             (1) provide for the proper conduct of the business of Shamrock
                 Logistics and its subsidiaries (including reserves for future
                 capital expenditures) after that quarter;


             (2) comply with applicable law or any debt agreement or other
                 agreement or obligation to which any member of Shamrock
                 Logistics and its subsidiaries is a party or its assets are
                 subject; and


             (3) provide funds for minimum quarterly distributions and
                 cumulative common unit arrearages for any one or more of the
                 next four quarters;

     provided, however, that the general partner may not establish cash reserves
for distributions to the subordinated units unless the general partner has
determined that, in its judgment, the establishment of reserves will not prevent
Shamrock Logistics from distributing the minimum quarterly distribution on all
common units and any common unit arrearages thereon for the next four quarters;
and


     provided further, that disbursements made by Shamrock Logistics and its
subsidiaries or cash reserves established, increased or decreased after the end
of that quarter but on or before the date of determination of Available Cash for
that quarter shall be deemed to have been made,


                                       C-1
<PAGE>   293

established, increased or reduced, for purposes of determining Available Cash,
within that quarter if the general partner so determines.

     Capital Account: The capital account maintained for a partner under the
amended and restated partnership agreement. The capital account for a common
unit, a subordinated unit or any other specified interest in Shamrock Logistics
shall be the amount which that capital account will be if that common unit,
subordinated unit or other interest in Shamrock Logistics were the only interest
in Shamrock Logistics held by a partner.

     Capital Surplus: All Available Cash distributed by Shamrock Logistics from
any source will be treated as distributed from Operating Surplus until the sum
of all Available Cash distributed since the commencement of Shamrock Logistics
equals the Operating Surplus as of the end of the quarter before that
distribution. Any excess Available Cash will be deemed to be Capital Surplus.

     Closing Price: The last sale price on a day, regular way, or in case no
sale takes place on that day, the average of the closing bid and asked prices on
that day, regular way. In either case, as reported in the principal consolidated
transaction reporting system for securities listed or admitted to trading on the
principal national securities exchange on which the units of that class are
listed or admitted to trading. If the units of that class are not listed or
admitted to trading on any national securities exchange, the last quoted price
on that day. If no quoted price exists, the average of the high bid and low
asked prices on that day in the over-the-counter market, as reported by the New
York Stock Exchange or any other system then in use. If on any day the units of
that class are not quoted by any organization of that type, the average of the
closing bid and asked prices on that day as furnished by a professional market
maker making a market in the units of the class selected by the board of
directors of the general partner. If on that day no market maker is making a
market in the units of that class, the fair value of the units on that day as
determined reasonably and in good faith by the board of directors of the general
partner.

     Common Carrier Pipelines: A pipeline engaged in the transportation of
petroleum as a public utility and common carrier for hire.

     Current Market Price: With respect to any class of units listed or admitted
to trading on any national securities exchange as of any date, the average of
the daily Closing Prices for the 20 consecutive trading days immediately prior
to the date.

     Gathering Systems: The gathering lines, pumps, auxiliary tans (in the case
of oil), and other equipment used to move oil or gas from the well site to the
main pipeline for eventual delivery to the refinery or consumer, as the case may
be.

     Interim Capital Transactions:

          (a) borrowings, refinancings or refundings of indebtedness and sales
              of debt securities (other than Working Capital Borrowings and
              other than for items purchased on open account in the ordinary
              course of business) by any member of Shamrock Logistics and its
              subsidiaries;

          (b) sales of equity interests (including the common units sold to the
              Underwriters upon the exercise of their over-allotment option) by
              any member of Shamrock Logistics and its subsidiaries; and

          (c) sales or other voluntary or involuntary dispositions of any assets
              by any member of Shamrock Logistics and its subsidiaries (other
              than sales or other dispositions of inventory in the ordinary
              course of business, sales or other dispositions of other current
              assets, including, without limitation, receivables and accounts,
              in the ordinary course of business and sales or other dispositions
              of assets as a part of normal retirements or replacements), in
              each case before the dissolution and liquidation of Shamrock
              Logistics.
                                       C-2
<PAGE>   294


     Operating Expenditures: All expenditures of Shamrock Logistics and its
subsidiaries including, but not limited to, taxes, reimbursements of the general
partner, repayment of Working Capital Borrowings, debt service payments and
maintenance capital expenditures, subject to the following:


          (a) payments (including prepayments) of principal of and premium on
              indebtedness other than Working Capital Borrowings shall not
              constitute Operating Expenditures;


          (b) Operating Expenditures shall not include (1) expansion capital
              expenditures made for acquisitions or capital improvements, (2)
              payment of transaction expenses relating to Interim Capital
              Transactions or (3) distributions to partners.


     Operating Surplus: means, with respect to any period before liquidation, on
a cumulative basis and without duplication:

          (a) the sum of:

             (1) $10 million plus the net working capital of Shamrock Logistics
                 and its subsidiaries as of the close of business on the closing
                 date of the initial public offering;

             (2) all the cash receipts of Shamrock Logistics and its
                 subsidiaries for the period beginning on the closing date of
                 the initial public offering and ending with the last day of
                 that period, other than cash receipts from Interim Capital
                 Transactions (except to the extent specified in the amended and
                 restated partnership agreement); and

             (3) all cash receipts of Shamrock Logistics and its subsidiaries
                 after the end of that period but on or before the date of
                 determination of Operating Surplus for the period resulting
                 from Working Capital Borrowings; less

          (b) the sum of:

             (1) Operating Expenditures for the period beginning on the date of
                 the closing of the initial public offering and ending with the
                 last day of that period; and


             (2) the amount of cash reserves that is necessary or advisable in
                 the reasonable discretion of the general partner to provide
                 funds for future Operating Expenditures; provided, however,
                 that disbursements made (including contribution to Shamrock
                 Logistics or any of its subsidiaries or disbursements on behalf
                 of Shamrock Logistics or any of its subsidiaries) or cash
                 reserves established, increased or decreased after the end of
                 the period but on or before the date of determination of
                 Available Cash with respect to the period shall be deemed to
                 have been made, established, increased or decreased for the
                 purposes of determining Operating Surplus within the period if
                 the general partner so determines.


     Notwithstanding the foregoing, "Operating Surplus" for the quarter in which
the liquidation date occurs and any later quarter shall equal zero.

     Subordination Period: the subordination period will extend from the date of
the closing of the initial public offering until the first to occur of the
following:

          (a) the first day of any quarter beginning on or after December 31,
     2005 for which:

             (1) distributions of Available Cash from Operating Surplus on each
                 of the outstanding common units and subordinated units equaled
                 or exceeded the sum of the minimum quarterly distribution on
                 all of the outstanding common

                                       C-3
<PAGE>   295

               units and subordinated units for each of the three
               non-overlapping four-quarter periods immediately preceding that
               date;


             (2) the Adjusted Operating Surplus, generated during each of the
                 three immediately preceding, non-overlapping four-quarter
                 periods equaled or exceeded the sum of minimum quarterly
                 distribution on all of the common units and subordinated units
                 that were outstanding during those periods on a fully diluted
                 basis and the related distribution on the general partner
                 interest in Shamrock Logistics and the general partner interest
                 in Shamrock Logistics Operations during these periods; and


             (3) there are no arrearages in payment of the minimum quarterly
                 distribution on the common units.

          (b) the date on which the general partner is removed as general
              partner of Shamrock Logistics upon the requisite vote by limited
              partners under circumstances where cause does not exist and units
              held by the general partner and its affiliates are not voted in
              favor of removal.


     Terminalling: the temporary storage of refined products in a facility
connected to a refined product pipeline.



     Working Capital Borrowings: Borrowings under our revolving credit facility
or other arrangement requiring all of its borrowings to be reduced to a
relatively small amount each year for an economically meaningful period of time.
Borrowings that are not intended exclusively for working capital purposes shall
not be treated as Working Capital Borrowings.


                                       C-4
<PAGE>   296

                                                                      APPENDIX D

                PRO FORMA AVAILABLE CASH FROM OPERATING SURPLUS


     The following table shows the calculation of Pro Forma Available Cash from
Operating Surplus and should be read in conjunction with "Cash Available for
Distribution," Shamrock Logistics Operations Unaudited Financial Statements, the
Ultramar Diamond Shamrock Logistics Business Audited Financial Statements, and
Shamrock Logistics Unaudited Pro Forma Financial Statements. The amounts in the
tables below are in thousands and are unaudited.



<TABLE>
<CAPTION>
                                                                            TWELVE MONTHS    NINE MONTHS
                                                              YEAR ENDED        ENDED           ENDED
                                                             DECEMBER 31,   SEPTEMBER 30,   SEPTEMBER 30,
                                                                 1999           2000            2000
                                                             ------------   -------------   -------------
<S>                                                          <C>            <C>             <C>
Pro forma operating income.................................    $ 66,222        $45,664         $29,963]
  Net decrease due to revised tariff rates.................     (21,892)        (5,754)             --
                                                               --------        -------         -------
Pro forma operating income as adjusted.....................      44,330         39,910          29,963
Add:   Pro forma depreciation and amortization.............      12,318         13,045           9,889
        Pro forma distributions from Skelly-Belvieu........       4,238          5,118           3,488
        Pro forma volumetric expansion, contractions
         and measurement discrepancy.......................         378          1,356             916
Less:  Pro forma gain on sale of property, plant and
         equipment.........................................      (2,478)            --              --
                                                               --------        -------         -------
Pro forma Adjusted EBITDA(a)...............................      58,786         59,429          44,256
Less:  Pro forma interest expense..........................      (5,930)        (5,915)         (4,519)
       Pro forma maintenance capital expenditures(b).......      (2,060)        (2,022)         (1,804)
                                                               --------        -------         -------
Pro forma Available Cash from Operating Surplus(c)(d)(e)...    $ 50,796        $51,492         $37,933
                                                               ========        =======         =======
</TABLE>


---------------

(a) We define Adjusted EBITDA as operating income, less gain on sale of
    property, plant, and equipment, plus depreciation and amortization plus
    distributions from Skelly-Belvieu Pipeline Company, of which we own 50%, and
    excluding the impact of volumetric expansions, contractions and measurement
    discrepancies in our pipelines.

(b) Shamrock Logistics estimates maintenance capital expenditures will average
    approximately $4.0 million per year for as least the next two years. Please
    read "Management's Discussion and Analysis of Financial Condition and
    Results of Operations."

(c) The pro forma adjustments in the pro forma financial statements are based
    upon currently available information and certain estimates and assumptions.
    The pro forma financial statements do not purport to present the financial
    position or results of operations of Shamrock Logistics had the transactions
    to be effected at the closing of this Offering actually been completed as of
    the date indicated. Furthermore, the pro forma financial statements are
    based on accrual accounting concepts whereas Available Cash and Operating
    Surplus are defined in the Partnership Agreement. As a consequence, the
    amount of Pro Forma Cash Available from Operating Surplus shown above should
    only be viewed as a general indication of the amounts of Available Cash from
    Operating Surplus that may in fact have been generated by Shamrock Logistics
    had it been formed in earlier periods.

(d) We estimate that we will incur incremental general and administrative
    expenses as a result of being a separate public entity (e.g. costs of tax
    return preparation, audit fees, annual and quarterly reports to Unitholders,
    investor relations, and registrar and transfer agent fees) of approximately
    $1.5 million per year. This amount is not included in the pro forma amounts
    shown above.


(e) The amount of Available Cash from Operating Surplus needed to distribute the
    Minimum Quarterly Distribution for four quarters on the Common Units and
    Subordinated Units to be outstanding immediately after this offering and on
    the 2% general partner interest is approximately $42.6 million. The pro
    forma amounts reflected above would have been sufficient to cover the
    Minimum Quarterly Distribution during 1999, the twelve months ended
    September 30, 2000 and the nine months ended September 30, 2000 on all of
    the Common Units, the Subordinated Units and the related distribution on the
    general partner interest.


                                       D-1
<PAGE>   297

------------------------------------------------------
------------------------------------------------------

    NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY FORMATION
OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON
ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO
SELL ONLY THE COMMON UNITS OFFERED BY THIS PROSPECTUS, BUT ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.

                             ----------------------

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                  PAGE
                                                  ----
<S>                                               <C>
Prospectus Summary..............................    1
Risk Factors....................................   14
Use of Proceeds.................................   28
Capitalization..................................   29
Dilution........................................   30
Cash Distribution Policy........................   31
Cash Available for Distribution.................   38
Selected Historical and Operating Data of the
  Ultramar Diamond Shamrock Logistics Business
  and Shamrock Logistics Operations, and Pro
  Forma Financial and Operating Data of Shamrock
  Logistics.....................................   40
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations....................................   47
Business........................................   64
Management......................................   99
Security Ownership of Certain Beneficial Owners
  and Management................................  105
Certain Relationships and Related
  Transactions..................................  106
Conflicts of Interest and Fiduciary
  Responsibilities..............................  109
Description of the Common Units.................  114
Description of the Subordinated Units...........  117
The Partnership Agreement.......................  119
Units Eligible for Future Sale..................  131
Tax Considerations..............................  133
Investment in Shamrock Logistics by Employee
  Benefit Plans.................................  149
Underwriting....................................  151
Validity of the Common Units....................  153
Experts.........................................  153
Where You Can Find More Information.............  154
Forward-Looking Statements......................  154
Index to Financial Statements...................  F-1
Appendix A -- Form of Second Amended and
  Restated Agreement of Limited Partnership.....  A-1
Appendix B -- Form of Application of Transfer of
  Common Units..................................  B-1
Appendix C -- Glossary of Terms.................  C-1
Appendix D -- Pro Forma Available Cash from
  Operating Surplus.............................  D-1
</TABLE>



    Through and including          , 2001 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.

------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------

                             4,000,000 Common Units

                             SHAMROCK LOGISTICS, LP

                              Representing Limited
                               Partner Interests
                             ----------------------

                                [SHAMROCK LOGO]
                             ----------------------
                              GOLDMAN, SACHS & CO.

                             DAIN RAUSCHER WESSELS

                           A.G. EDWARDS & SONS, INC.

                                LEHMAN BROTHERS


                                UBS WARBURG LLC


------------------------------------------------------
------------------------------------------------------
<PAGE>   298

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee, the NASD filing fee and the
NYSE filing fee, the amounts set forth below are estimates:

<TABLE>
<S>                                                       <C>
Securities and Exchange Commission registration fee....   $   25,502
NASD filing fee........................................       10,160
NYSE listing fee.......................................      275,000
Printing and engraving expenses........................      450,000
Legal fees and expenses................................    1,530,000
Accounting fees and expenses...........................    1,680,000
Transfer agent and registrar fees......................        4,000
Miscellaneous..........................................      525,338
                                                          ----------
          TOTAL........................................   $4,500,000
                                                          ==========
</TABLE>

---------------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The section of the Prospectus entitled "The Partnership
Agreement -- Indemnification" is incorporated herein by this reference.
Reference is made to Section 8 of the Underwriting Agreement filed as Exhibit
1.1 to the Registration Statement. Subject to any terms, conditions or
restrictions set forth in the Partnership Agreement, Section 17-108 of the
Delaware Revised Uniform Limited Partnership Act empowers a Delaware limited
partnership to indemnify and hold harmless any partner or other person from and
against all claims and demands whatsoever.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     Shamrock Logistics, L.P. issued to UDS Logistics, LLC limited partner
interests in the partnership and issued to Riverwalk Logistics, L.P. general
partner interests in the partnership in connection with the formation of the
partnership in December 1999 in an offering exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended. There have been no other
sales of unregistered securities within the past three years.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     a. Exhibits:

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF EXHIBITS
        -------                            -----------------------
<C>                      <S>
           1.1           -- Form of Underwriting Agreement
          +3.1           -- Certificate of Limited Partnership of Shamrock Logistics,
                            L.P.
          +3.2           -- Certificate of Amendment to Certificate of Limited
                            Partnership of Shamrock Logistics, L.P.
          +3.3           -- Form of Second Amended and Restated Agreement of Limited
                            Partnership of Shamrock Logistics, L.P. (included as
                            Appendix A to the Prospectus)
          +3.4           -- Certificate of Limited Partnership of Shamrock Logistics
                            Operations, L.P.
</TABLE>

                                      II-1
<PAGE>   299


<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF EXHIBITS
        -------                            -----------------------
<C>                      <S>
          +3.5           -- Certificate of Amendment to Certificate of Limited
                            Partnership of Shamrock Logistics Operations, L.P.
          *3.6           -- Form of Second Amended and Restated Agreement of Limited
                            Partnership of Shamrock Logistics Operations, L.P.
          +3.7           -- Certificate of Limited Partnership of Riverwalk
                            Logistics, L.P.
          +3.8           -- Agreement of Limited Partnership of Riverwalk Logistics,
                            L.P.
          +3.9           -- Certificate of Formation of Shamrock Logistics GP, LLC
          +3.10          -- Form of Amended and Restated Limited Liability Company
                            Agreement of Shamrock Logistics GP, LLC
          *5.1           -- Form of Opinion of Andrews & Kurth L.L.P. as to the
                            legality of the securities being registered
          +8.1           -- Form of Opinion of Andrews & Kurth L.L.P. relating to tax
                            matters
         *10.1           -- Credit Agreement dated as of December 15, 2000 among
                            Shamrock Logistics Operations, L.P., the Lenders party
                            thereto, and The Chase Manhattan Bank, as Administrative
                            Agent, Royal Bank of Canada, as Syndication Agent,
                            Suntrust Bank, as Documentation Agent, Chase Securities
                            Inc., as Arranger
         *10.2           -- Form of Contribution Agreement
         *10.3           -- Form of Shamrock Logistics GP, LLC Long-Term Incentive
                            Plan
          10.4           -- Form of Shamrock Logistics GP, LLC Short-Term Incentive
                            Plan
         *10.5           -- Employment Agreement (Curtis V. Anastasio), as amended by
                            Amendment No. 1 and Amendment No. 2
         *10.6           -- Form of Pipelines and Terminals Usage Agreement
         *10.7           -- Form of Omnibus Agreement
         *10.8           -- Form of Services Agreement
          10.9           -- Form of Shamrock Logistics GP, LLC Intermediate-Term
                            Incentive Plan
         +21.1           -- List of subsidiaries of Shamrock Logistics, L.P.
         *23.1           -- Consent of Arthur Andersen LLP
          23.2           -- Consent of Andrews & Kurth L.L.P. (contained in Exhibits
                            5.1 and 8.1)
         +24.1           -- Powers of Attorney (included on the signature page)
         +27.1           -- Financial Data Schedule.
</TABLE>


---------------

 +  Previously filed.

 *  Filed herewith. All other exhibits will be filed by amendment.

     (b) Financial Statement Schedules

     All financial statement schedules are omitted because the information is
not required, is not material or is otherwise included in the financial
statements or related notes thereto.

ITEM 17. UNDERTAKINGS

     The undersigned Registrant hereby undertakes to provide at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

                                      II-2
<PAGE>   300

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

     The undersigned Registrant hereby undertakes that:

        (1) For purposes of determining any liability under the Securities Act,
            the information omitted from the form of prospectus filed as part of
            this Registration Statement in reliance upon Rule 430A and contained
            in a form of prospectus filed by the Registrant pursuant to Rule
            424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
            to be part of this Registration Statement as of the time it was
            declared effective.

        (2) For the purposes of determining any liability under the Securities
            Act, each post-effective amendment that contains a form of
            prospectus shall be deemed to be a new registration statement
            relating to the securities offered therein, and the offering of such
            securities at that time shall be deemed to be the initial bona fide
            offering thereof.

                                      II-3
<PAGE>   301

                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Antonio, State of
Texas, on December 19, 2000.


                                            SHAMROCK LOGISTICS, L.P.

                                            By: Riverwalk Logistics, L.P.
                                                its general partner

                                            By: Shamrock Logistics GP, LLC

                                            By:  /s/ CURTIS V. ANASTASIO
                                              ----------------------------------
                                            Name: Curtis V. Anastasio

                                            Title:President, Chief Executive
                                                  Officer


                                                    and Director


     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
AND ON THE DATES INDICATED BELOW.


<TABLE>
<CAPTION>
                      SIGNATURE                                      TITLE                       DATE
                      ---------                                      -----                       ----
<C>                                                    <S>                                 <C>

                          *                            Chairman of the Board
-----------------------------------------------------
                  William R. Klesse

               /s/ CURTIS V. ANASTASIO                 President, Chief Executive Officer  December 19, 2000
-----------------------------------------------------    and Director (Principal
                 Curtis V. Anastasio                     Executive Officer)

                          *                            Chief Accounting and Financial
-----------------------------------------------------    Officer and Director (Principal
                    Steven Blank                         Accounting and Financial
                                                         Officer)

                          *                            Director
-----------------------------------------------------
                Timothy J. Fretthold

                          *                            Director
-----------------------------------------------------
                  Robert S. Shapard

           *By:    /s/ CURTIS V. ANASTASIO
  ------------------------------------------------
                 Curtis V. Anastasio
                  Attorney-in-fact
              Dated: December 19, 2000
</TABLE>


                                      II-4
<PAGE>   302

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF EXHIBITS
        -------                            -----------------------
<C>                      <S>
          1.1            -- Form of Underwriting Agreement
         +3.1            -- Certificate of Limited Partnership of Shamrock Logistics,
                            L.P.
         +3.2            -- Certificate of Amendment to Certificate of Limited
                            Partnership of Shamrock Logistics, L.P.
         +3.3            -- Form of Second Amended and Restated Agreement of Limited
                            Partnership of Shamrock Logistics, L.P. (included as
                            Appendix A to the Prospectus)
         +3.4            -- Certificate of Limited Partnership of Shamrock Logistics
                            Operations, L.P.
         +3.5            -- Certificate of Amendment to Certificate of Limited
                            Partnership of Shamrock Logistics Operations, L.P.
         *3.6            -- Form of Second Amended and Restated Agreement of Limited
                            Partnership of Shamrock Logistics Operations L.P.
         +3.7            -- Certificate of Limited Partnership of Riverwalk
                            Logistics, L.P.
         +3.8            -- Agreement of Limited Partnership of Riverwalk Logistics,
                            L.P.
         +3.9            -- Certificate of Formation of Shamrock Logistics GP, LLC
         +3.10           -- Form of Amended and Restated Limited Liability Company
                            Agreement of Shamrock Logistics GP, LLC
         *5.1            -- Form of Opinion of Andrews & Kurth L.L.P. as to the
                            legality of the securities being registered
         +8.1            -- Form of Opinion of Andrews & Kurth L.L.P. relating to tax
                            matters
        *10.1            -- Credit Agreement dated as of December 15, 2000 among
                            Shamrock Logistics Operations, L.P., the Lenders party
                            thereto, and The Chase Manhattan Bank, as Administrative
                            Agent, Royal Bank of Canada, as Syndication Agent,
                            Suntrust Bank, as Documentation Agent, Chase Securities
                            Inc., as Arranger
        *10.2            -- Form of Contribution, Conveyance and Assumption Agreement
        *10.3            -- Form of Shamrock Logistics GP, LLC Long-Term Incentive
                            Plan
         10.4            -- Form of Shamrock Logistics GP, LLC Short-Term Incentive
                            Plan
        *10.5            -- Employment Agreement (Curtis V. Anastasio), as amended by
                            Amendment No. 1 and Amendment No. 2
        *10.6            -- Form of Pipelines and Terminals Usage Agreement
        *10.7            -- Form of Omnibus Agreement
        *10.8            -- Form of Services Agreement
         10.9            -- Form of Shamrock Logistics GP, LLC Intermediate-Term
                            Incentive Plan
        +21.1            -- List of subsidiaries of Shamrock Logistics, L.P.
        *23.1            -- Consent of Arthur Andersen LLP
         23.2            -- Consent of Andrews & Kurth L.L.P. (contained in Exhibits
                            5.1 and 8.1)
        +24.1            -- Powers of Attorney (included on the signature page)
        +27.1            -- Financial Data Schedule.
</TABLE>


---------------

+ Previously filed.

* Filed herewith. All other exhibits will be filed by amendment.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.6
<SEQUENCE>2
<FILENAME>h79326a3ex3-6.txt
<DESCRIPTION>FORM OF AMEND.TO AGREEMENT OF LIMITED PARTNERSHIP
<TEXT>

<PAGE>   1
                                                                     EXHIBIT 3.6

                           SECOND AMENDED AND RESTATED


                        AGREEMENT OF LIMITED PARTNERSHIP


                                       OF


                       SHAMROCK LOGISTICS OPERATIONS, L.P.





<PAGE>   2





                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                                              <C>
ARTICLE I
         DEFINITIONS..............................................................................................2
         SECTION 1.1   Definitions................................................................................2
         SECTION 1.2   Construction..............................................................................13

ARTICLE II
         ORGANIZATION ...........................................................................................13
         SECTION 2.1   Formation.................................................................................13
         SECTION 2.2   Name......................................................................................13
         SECTION 2.3   Registered Office; Registered Agent; Principal Office; Other Offices......................14
         SECTION 2.4   Purpose and Business......................................................................14
         SECTION 2.5   Powers....................................................................................15
         SECTION 2.6   Power of Attorney.........................................................................15
         SECTION 2.7   Term......................................................................................16
         SECTION 2.8   Title to Partnership Assets...............................................................16

ARTICLE III
         RIGHTS OF LIMITED PARTNERS .............................................................................17
         SECTION 3.1   Limitation of Liability...................................................................17
         SECTION 3.2   Management of Business....................................................................17
         SECTION 3.3   Outside Activities of the Limited Partners................................................17
         SECTION 3.4   Rights of Limited Partners................................................................17

ARTICLE IV
         TRANSFERS OF PARTNERSHIP INTERESTS......................................................................19
         SECTION 4.1   Transfer Generally........................................................................19
         SECTION 4.2   Transfer of General Partner's Partnership Interest........................................19
         SECTION 4.3   Transfer of a Limited Partner's Partnership Interest......................................19
         SECTION 4.4   Restrictions on Transfers.................................................................20

ARTICLE V
         CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS.............................................20
         SECTION 5.1   Initial Contributions.....................................................................20
         SECTION 5.2   Contributions Pursuant to the Contribution Agreement......................................20
         SECTION 5.3   Additional Capital Contributions..........................................................22
         SECTION 5.4   Interest and Withdrawal...................................................................22
         SECTION 5.5   Capital Accounts..........................................................................23
         SECTION 5.6   Loans from Partners.......................................................................26
</TABLE>



                                       -i-

<PAGE>   3


<TABLE>


<S>                                                                                                             <C>
         SECTION 5.7   Limited Preemptive Rights.................................................................26
         SECTION 5.8   Fully Paid and Non-Assessable Nature of Partnership Interests.............................26

ARTICLE VI
         ALLOCATIONS AND DISTRIBUTIONS ..........................................................................26
         SECTION 6.1   Allocations for Capital Account Purposes..................................................26
         SECTION 6.2   Allocations for Tax Purposes..............................................................31
         SECTION 6.3   Distributions.............................................................................33

ARTICLE VII
         MANAGEMENT AND OPERATION OF BUSINESS....................................................................33
         SECTION 7.1   Management................................................................................33
         SECTION 7.2   Certificate of Limited Partnership........................................................36
         SECTION 7.3   Restrictions on General Partner's Authority...............................................36
         SECTION 7.4   Reimbursement of the General Partner......................................................37
         SECTION 7.5   Outside Activities........................................................................38
         SECTION 7.6   Loans from the General Partner; Loans or
                           Contributions from the Partnership; Contracts with Affiliates;
                           Certain Restrictions on the General Partner...........................................39
         SECTION 7.7   Indemnification...........................................................................41
         SECTION 7.8   Liability of Indemnitees..................................................................43
         SECTION 7.9   Resolution of Conflicts of Interest.......................................................43
         SECTION 7.10   Other Matters Concerning the General Partner.............................................45
         SECTION 7.11   Reliance by Third Parties................................................................46

ARTICLE VIII
         BOOKS, RECORDS, ACCOUNTING AND REPORTS..................................................................46
         SECTION 8.1   Records and Accounting....................................................................46
         SECTION 8.2   Fiscal Year...............................................................................47

ARTICLE IX
         TAX MATTERS.............................................................................................47
         SECTION 9.1   Tax Returns and Information...............................................................47
         SECTION 9.2   Tax Elections.............................................................................47
         SECTION 9.3   Tax Controversies.........................................................................47
         SECTION 9.4   Withholding...............................................................................48

ARTICLE X
         ADMISSION OF PARTNERS...................................................................................48
         SECTION 10.1   Admission of General Partner.............................................................48
         SECTION 10.2   Admission of Substituted Limited Partner.................................................48
         SECTION 10.3   Admission of Additional Limited Partners.................................................49
</TABLE>



                                      -ii-

<PAGE>   4


<TABLE>


<S>                                                                                                             <C>
         SECTION 10.4   Admission of Successor or Transferee General Partner.....................................49
         SECTION 10.5   Amendment of Agreement and Certificate of Limited Partnership............................49

ARTICLE XI
         WITHDRAWAL OR REMOVAL OF PARTNERS.......................................................................50
         SECTION 11.1   Withdrawal of the General Partner........................................................50
         SECTION 11.2   Removal of the General Partner...........................................................51
         SECTION 11.3   Interest of Departing Partner............................................................52
         SECTION 11.4   Withdrawal of a Limited Partner..........................................................52

ARTICLE XII
         DISSOLUTION AND LIQUIDATION.............................................................................52
         SECTION 12.1   Dissolution..............................................................................52
         SECTION 12.2   Continuation of the Business of the Partnership After Dissolution........................53
         SECTION 12.3   Liquidator...............................................................................54
         SECTION 12.4   Liquidation..............................................................................55
         SECTION 12.5   Cancellation of Certificate of Limited Partnership.......................................55
         SECTION 12.6   Return of Contributions..................................................................56
         SECTION 12.7   Waiver of Partition......................................................................56
         SECTION 12.8   Capital Account Restoration..............................................................56

ARTICLE XIII
         AMENDMENT OF PARTNERSHIP AGREEMENT......................................................................56
         SECTION 13.1   Amendment to be Adopted Solely by the General Partner....................................56
         SECTION 13.2   Amendment Procedures.....................................................................58

ARTICLE XIV
         MERGER .................................................................................................58
         SECTION 14.1   Authority................................................................................58
         SECTION 14.2   Procedure for Merger or Consolidation....................................................58
         SECTION 14.3   Approval by Limited Partners of Merger or Consolidation..................................59
         SECTION 14.4   Certificate of Merger....................................................................60
         SECTION 14.5   Effect of Merger.........................................................................60

ARTICLE XV
         GENERAL PROVISIONS .....................................................................................61
         SECTION 15.1   Addresses and Notices....................................................................61
         SECTION 15.2   Further Action...........................................................................61
         SECTION 15.3   Binding Effect...........................................................................61
         SECTION 15.4   Integration..............................................................................62
         SECTION 15.5   Creditors................................................................................62
         SECTION 15.6   Waiver...................................................................................62
</TABLE>



                                      -iii-

<PAGE>   5


<TABLE>
<S>                                                                                                              <C>

         SECTION 15.7   Counterparts.............................................................................62
         SECTION 15.8   Applicable Law...........................................................................62
         SECTION 15.9   Invalidity of Provisions.................................................................62
         SECTION 15.10   Consent of Partners.....................................................................62
</TABLE>





                                      -iv-

<PAGE>   6




                           SECOND AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                       SHAMROCK LOGISTICS OPERATIONS, L.P.

         THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
SHAMROCK LOGISTICS OPERATIONS, L.P., dated as of December _____, 2001 is entered
into by and between Riverwalk Logistics, L.P., a Delaware limited liability
company, as the General Partner, Todd Walker, as Organizational Limited Partner,
and Shamrock Logistics, L.P., a Delaware limited partnership, as the Limited
Partner, together with any other Persons who hereafter become Partners in the
Partnership or parties hereto as provided herein.

                                    RECITALS:

         WHEREAS, Shamrock Logistics GP, LLC, a Delaware limited liability
company ("Shamrock GP"), and Todd Walker formed the Partnership pursuant to the
Agreement of Limited Partnership of Shamrock Logistics Operations, L.P. dated as
of December 7, 1999 (the "Prior Agreement") and a Certificate of Limited
Partnership filed with the Secretary of State of the State of Delaware on such
date; and

         WHEREAS, on June 5, 2000 the Certificate of Limited Partnership of the
Partnership was thereby amended to reflect the substitution of Riverwalk
Logistics, L.P. as general partner of the Partnership, and the withdrawal of
Shamrock GP from the Partnership, in its entirety; and

         WHEREAS, pursuant to certain mergers that were consummated on June 30,
2000 and certain contributions that occurred on July 1, 2000, Diamond Shamrock
Refining and Marketing Company, a Delaware corporation, and Sigmor Corporation,
a Delaware Corporation, received limited partner interests in the Partnership;
and

         WHEREAS, on August 10, 2000 the Prior Agreement was thereby amended to
reflect the substitution of Riverwalk Logistics, L.P. as general partner of the
Partnership, and the withdrawal of Shamrock GP from the Partnership, in its
entirety (as amended, the "First Amended Agreement"); and

         WHEREAS, the Partners of the Partnership now desire to amend the First
Amended Agreement to reflect (i) the addition of Shamrock Logistics, L.P. as a
limited partner of the Partnership, (ii) additional contributions by the
Partners and (iii) certain other matters.

         NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the First Amended
Agreement and, as so amended, restate it in its entirety as follows:



                                       -1-

<PAGE>   7






                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1   Definitions.

         The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.

                  "Additional Limited Partner" means a Person admitted to the
         Partnership as a Limited Partner pursuant to Section 10.3 and who is
         shown as such on the books and records of the Partnership.

                  "Adjusted Capital Account" means the Capital Account
         maintained for each Partner as of the end of each fiscal year of the
         Partnership, (a) increased by any amounts that such Partner is
         obligated to restore under the standards set by Treasury Regulation
         Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under
         Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
         decreased by (i) the amount of all losses and deductions that, as of
         the end of such fiscal year, are reasonably expected to be allocated to
         such Partner in subsequent years under Sections 704(e)(2) and 706(d) of
         the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii)
         the amount of all distributions that, as of the end of such fiscal
         year, are reasonably expected to be made to such Partner in subsequent
         years in accordance with the terms of this Agreement or otherwise to
         the extent they exceed offsetting increases to such Partner's Capital
         Account that are reasonably expected to occur during (or prior to) the
         year in which such distributions are reasonably expected to be made
         (other than increases as a result of a minimum gain chargeback pursuant
         to Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of
         Adjusted Capital Account is intended to comply with the provisions of
         Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
         interpreted consistently therewith. The "Adjusted Capital Account" of a
         Partner in respect of a General Partner Interest or any other specified
         interest in the Partnership shall be the amount which such Adjusted
         Capital Account would be if such General Partner Interest or other
         interest in the Partnership were the only interest in the Partnership
         held by a Partner from and after the date on which such General Partner
         Interest or other interest was first issued.

                  "Adjusted Property" means any property the Carrying Value of
         which has been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).

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



                                       -2-

<PAGE>   8




         common control with, the Person in question. As used herein, the term
         "control" means the possession, direct or indirect, of the power to
         direct or cause the direction of the management and policies of a
         Person, whether through ownership of voting securities, by contract or
         otherwise.

                  "Agreed Allocation" means any allocation, other than a
         Required Allocation, of an item of income, gain, loss or deduction
         pursuant to the provisions of Section 6.1, including, without
         limitation, a Curative Allocation (if appropriate to the context in
         which the term "Agreed Allocation" is used).

                  "Agreed Value" of any Contributed Property means the fair
         market value of such property or other consideration at the time of
         contribution as determined by the General Partner using such reasonable
         method of valuation as it may adopt. The General Partner shall, in its
         discretion, use such method as it deems reasonable and appropriate to
         allocate the aggregate Agreed Value of Contributed Properties
         contributed to the Partnership in a single or integrated transaction
         among each separate property on a basis proportional to the fair market
         value of each Contributed Property.

                  "Agreement" means this Second Amended and Restated Agreement
         of Limited Partnership of Shamrock Logistics Operations, L.P., as it
         may be amended, supplemented or restated from time to time.

                  "Assignee" means a Person to whom one or more Partnership
         Interests have been transferred in a manner permitted under this
         Agreement, but who has not been admitted as a Substituted Limited
         Partner.

                  "Associate" means, when used to indicate a relationship with
         any Person, (a) any corporation or organization of which such Person is
         a director, officer or partner or is, directly or indirectly, the owner
         of 20% or more of any class of voting stock or other voting interest;
         (b) any trust or other estate in which such Person has at least a 20%
         beneficial interest or as to which such Person serves as trustee or in
         a similar fiduciary capacity; and (c) any relative or spouse of such
         Person, or any relative of such spouse, who has the same principal
         residence as such Person.

                  "Available Cash" means, with respect to any Quarter ending
         prior to the Liquidation Date, and without duplication:

                           (a) the sum of (i) all cash and cash equivalents of
         the Partnership on hand at the end of such Quarter, and (ii) all
         additional cash and cash equivalents of the Partnership on hand on the
         date of determination of Available Cash with respect to such Quarter
         resulting from Working Capital Borrowings made subsequent to the end of
         such Quarter, less



                                       -3-

<PAGE>   9




                           (b) the amount of any cash reserves that is necessary
         or appropriate in the reasonable discretion of the General Partner to
         (i) provide for the proper conduct of the business of the Partnership
         (including reserves for future capital expenditures and for anticipated
         future credit needs of the Partnership Group) subsequent to such
         Quarter, (ii) comply with applicable law or any loan agreement,
         security agreement, mortgage, debt instrument or other agreement or
         obligation to which any Group Member is a party or by which it is bound
         or its assets are subject or (iii) provide funds for distributions
         under Section 6.4 or 6.5 of the MLP Agreement in respect of any one or
         more of the next four Quarters; provided, however, that the General
         Partner may not establish cash reserves pursuant to (iii) above if the
         effect of such reserves would be that the MLP is unable to distribute
         the Minimum Quarterly Distribution on all Common Units, plus any
         Cumulative Common Unit Arrearage on all Common Units, with respect to
         such Quarter; and provided further, that disbursements made by a Group
         Member or cash reserves established, increased or reduced after the end
         of such Quarter but on or before the date of determination of Available
         Cash with respect to such Quarter shall be deemed to have been made,
         established, increased or reduced, for purposes of determining
         Available Cash, within such Quarter if the General Partner so
         determines.

                           Notwithstanding the foregoing, "Available Cash" with
         respect to the Quarter in which the Liquidation Date occurs and any
         subsequent Quarter shall equal zero.

                  "Book-Tax Disparity" means with respect to any item of
         Contributed Property or Adjusted Property, as of the date of any
         determination, the difference between the Carrying Value of such
         Contributed Property or Adjusted Property and the adjusted basis
         thereof for federal income tax purposes as of such date. A Partner's
         share of the Partnership's Book-Tax Disparities in all of its
         Contributed Property and Adjusted Property will be reflected by the
         difference between such Partner's Capital Account balance as maintained
         pursuant to Section 5.5 and the hypothetical balance of such Partner's
         Capital Account computed as if it had been maintained strictly in
         accordance with federal income tax accounting principles.

                  "Business Day" means Monday through Friday of each week,
         except that a legal holiday recognized as such by the government of the
         United States of America or the states of New York or Texas shall not
         be regarded as a Business Day.

                  "Capital Account" means the capital account maintained for a
         Partner pursuant to Section 5.5. The "Capital Account" of a Partner in
         respect of a General Partner Interest or any other specified interest
         in the Partnership shall be the amount which such Capital Account would
         be if such General Partner Interest or other specified interest in the
         Partnership were the only interest in the Partnership held by a Partner
         from and after the



                                       -4-

<PAGE>   10




         date on which such General Partner Interest or other specified interest
         in the Partnership was first issued.

                  "Capital Contribution" means any cash, cash equivalents or the
         Net Agreed Value of Contributed Property that a Partner contributes to
         the Partnership pursuant to this Agreement or the Contribution
         Agreement.

                  "Carrying Value" means (a) with respect to a Contributed
         Property, the Agreed Value of such property reduced (but not below
         zero) by all depreciation, amortization and cost recovery deductions
         charged to the Partners' and Assignees' Capital Accounts in respect of
         such Contributed Property, and (b) with respect to any other
         Partnership property, the adjusted basis of such property for federal
         income tax purposes, all as of the time of determination. The Carrying
         Value of any property shall be adjusted from time to time in accordance
         with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
         additions or other adjustments to the Carrying Value for dispositions
         and acquisitions of Partnership properties, as deemed appropriate by
         the General Partner.

                  "Certificate of Limited Partnership" means the Certificate of
         Limited Partnership of the Partnership filed with the Secretary of
         State of the State of Delaware as referenced in the recitals, as such
         Certificate of Limited Partnership may be amended, supplemented or
         restated from time to time.

                  "Closing Date" means the first date on which Common Units are
         sold by the MLP to the Underwriters pursuant to the provisions of the
         Underwriting Agreement.

                  "Code" means the Internal Revenue Code of 1986, as amended and
         in effect from time to time. Any reference herein to a specific section
         or sections of the Code shall be deemed to include a reference to any
         corresponding provision of successor law.

                  "Commission" means the United States Securities and Exchange
         Commission.

                  "Common Unit" has the meaning assigned to such term in the MLP
         Agreement.

                  "Contributed Property" means each property or other asset, in
         such form as may be permitted by the Delaware Act, but excluding cash,
         contributed to the Partnership. Once the Carrying Value of a
         Contributed Property is adjusted pursuant to Section 5.5(d), such
         property shall no longer constitute a Contributed Property, but shall
         be deemed an Adjusted Property.

                  "Contribution Agreement" means that certain Contribution
         Agreement, dated as of the Closing Date, among the General Partner, the
         MLP, the Partnership and certain



                                       -5-

<PAGE>   11




         other parties named therein, together with any additional documents and
         instruments contemplated or referenced thereunder.

                  "Curative Allocation" means any allocation of an item of
         income, gain, deduction, loss or credit pursuant to the provisions of
         Section 6.1(d)(ix).

                  "Delaware Act" means the Delaware Revised Uniform Limited
         Partnership Act, 6 Del. C. Section 17-101, et seq., as amended,
         supplemented or restated from time to time, and any successor to such
         statute.

                  "Departing Partner" means a former General Partner from and
         after the effective date of any withdrawal or removal of such former
         General Partner pursuant to Section 11.1 or 11.2.

                  "DSRMC" has the meaning assigned to such term in the recitals.

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

                  "Event of Withdrawal" has the meaning assigned to such term in
         Section 11.1(a).

                  "First Amended Agreement" is defined in the recitals.

                  "General Partner" means Riverwalk Logistics, L.P. and its
         successors and permitted assigns as General partner of the Partnership.

                  "General Partner Interest" means the ownership interest of a
         General Partner in the Partnership (in its capacity as a general
         partner) and includes any and all benefits to which a General Partner
         is entitled as provided in this Agreement, together with all
         obligations of a General Partner to comply with the terms and
         provisions of this Agreement.

                  "Group Member" means a member of the Partnership Group.

                  "Indemnitee" means (a) each General Partner, (b) any Departing
         Partner, (c) any Person who is or was an Affiliate of a General Partner
         or any Departing Partner, (d) any Person who is or was a member,
         partner, officer, director, employee, agent or trustee of any Group
         Member, a General Partner or any Departing Partner or any Affiliate of
         any Group Member, a General Partner or any Departing Partner, and (e)
         any Person who is or was serving at the request of a General Partner or
         any Departing Partner or any Affiliate of a General Partner or any
         Departing Partner as an officer, director, employee, member, partner,
         agent, fiduciary or trustee of another Person; provided, that a Person
         shall not be



                                       -6-

<PAGE>   12




         an Indemnitee by reason of providing, on a fee-for-services basis,
         trustee, fiduciary or custodial services.

                  "Initial Offering" means the initial offering and sale of
         Common Units to the public, as described in the Registration Statement.

                  "Limited Partner" means any Person that is admitted to the
         Partnership as a limited partner pursuant to the terms and conditions
         of this Agreement; but the term Limited Partner shall not include any
         Person from and after the time such Person withdraws as a Limited
         Partner from the Partnership.

                  "Limited Partner Interest" means the ownership interest of a
         Limited Partner or Assignee in the Partnership and includes any and all
         benefits to which such Limited Partner or Assignee is entitled as
         provided in this Agreement, together with all obligations of such
         Limited Partner or Assignee to comply with the terms and provisions of
         this Agreement.

                  "Liquidation Date" means (a) in the case of an event giving
         rise to the dissolution of the Partnership of the type described in
         clauses (a) and (b) of the first sentence of Section 12.2, the date on
         which the applicable time period during which the Partners have the
         right to elect to reconstitute the Partnership and continue its
         business has expired without such an election being made, and (b) in
         the case of any other event giving rise to the dissolution of the
         Partnership, the date on which such event occurs.

                  "Liquidator" means one or more Persons selected by the General
         Partner to perform the functions described in Section 12.3 as
         liquidating trustee of the Partnership within the meaning of the
         Delaware Act.

                  "Merger Agreement" has the meaning assigned to such term in
         Section 14.1.

                  "Minimum Quarterly Distribution" has the meaning assigned to
         such term in the MLP Agreement.

                  "MLP" means Shamrock Logistics, L.P.

                  "MLP Agreement" means the Second Amended and Restated
         Agreement of Limited Partnership of Shamrock Logistics, L.P., as it may
         be amended, supplemented or restated from time to time.

                  "MLP Security" has the meaning assigned to the term
         "Partnership Security" in the MLP Agreement.




                                       -7-

<PAGE>   13




                  "National Securities Exchange" has the meaning assigned to
         such term in the MLP Agreement.

                  "Net Agreed Value" means, (a) in the case of any Contributed
         Property, the Agreed Value of such property reduced by any liabilities
         either assumed by the Partnership upon such contribution or to which
         such property is subject when contributed, and (b) in the case of any
         property distributed to a Partner or Assignee by the Partnership, the
         Partnership's Carrying Value of such property (as adjusted pursuant to
         Section 5.5(d)(ii)) at the time such property is distributed, reduced
         by any indebtedness either assumed by such Partner or Assignee upon
         such distribution or to which such property is subject at the time of
         distribution, in either case, as determined under Section 752 of the
         Code.

                  "New Debt" has the meaning assigned to such term in Section
         5.2(f).

                  "Net Income" means, for any taxable year, the excess, if any,
         of the Partnership's items of income and gain (other than those items
         taken into account in the computation of Net Termination Gain or Net
         Termination Loss) for such taxable year over the Partnership's items of
         loss and deduction (other than those items taken into account in the
         computation of Net Termination Gain or Net Termination Loss) for such
         taxable year. The items included in the calculation of Net Income shall
         be determined in accordance with Section 5.5(b) and shall not include
         any items specially allocated under Section 6.1(d).

                  "Net Loss" means, for any taxable year, the excess, if any, of
         the Partnership's items of loss and deduction (other than those items
         taken into account in the computation of Net Termination Gain or Net
         Termination Loss) for such taxable year over the Partnership's items of
         income and gain (other than those items taken into account in the
         computation of Net Termination Gain or Net Termination Loss) for such
         taxable year. The items included in the calculation of Net Loss shall
         be determined in accordance with Section 5.5(b) and shall not include
         any items specially allocated under Section 6.1(d).

                  "Net Termination Gain" means, for any taxable year, the sum,
         if positive, of all items of income, gain, loss or deduction recognized
         by the Partnership after the Liquidation Date. The items included in
         the determination of Net Termination Gain shall be determined in
         accordance with Section 5.5(b) and shall not include any items of
         income, gain or loss specially allocated under Section 6.1(d).

                  "Net Termination Loss" means, for any taxable year, the sum,
         if negative, of all items of income, gain, loss or deduction recognized
         by the Partnership after the Liquidation Date. The items included in
         the determination of Net Termination Loss shall



                                       -8-

<PAGE>   14




         be determined in accordance with Section 5.5(b) and shall not include
         any items of income, gain or loss specially allocated under Section
         6.1(d).

                  "Nonrecourse Built-in Gain" means with respect to any
         Contributed Properties or Adjusted Properties that are subject to a
         mortgage or pledge securing a Nonrecourse Liability, the amount of any
         taxable gain that would be allocated to the Partners pursuant to
         Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties
         were disposed of in a taxable transaction in full satisfaction of such
         liabilities and for no other consideration.

                  "Nonrecourse Deductions" means any and all items of loss,
         deduction or expenditure (including, without limitation, any
         expenditure described in Section 705(a)(2)(B) of the Code) that, in
         accordance with the principles of Treasury Regulation Section
         1.704-2(b), are attributable to a Nonrecourse Liability.

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

                  "Opinion of Counsel" means a written opinion of counsel (which
         may be regular counsel to the Partnership or the General Partner or any
         of its Affiliates) acceptable to the General Partner in its reasonable
         discretion.

                  "Organizational Limited Partner" means Todd Walker in his
         capacity as the organizational limited partner of the Partnership
         pursuant to this Agreement.

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

                  "Partner Nonrecourse Debt Minimum Gain" has the meaning set
         forth in Treasury Regulation Section 1.704-2(i)(2).

                  "Partner Nonrecourse Deductions" means any and all items of
         loss, deduction or expenditure (including, without limitation, any
         expenditure described in Section 705(a)(2)(B) of the Code) that, in
         accordance with the principles of Treasury Regulation Section
         1.704-2(i), are attributable to a Partner Nonrecourse Debt.

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

                  "Partnership" means Shamrock Logistics Operations, L.P., a
         Delaware limited partnership, and any successors thereto.

                  "Partnership Group" means the Partnership and any Subsidiary
         of any such entity, treated as a single consolidated entity.



                                       -9-

<PAGE>   15




                  "Partnership Interest" means an ownership interest of a
         Partner in the Partnership, which shall include the General Partner
         Interest and the Limited Partner Interests.

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

                  "Percentage Interest" means the percentage interest in the
         Partnership held by each Partner upon completion of the transactions in
         Section 5.2 and shall mean, (a) as to the General Partner, 1.0101%, and
         (b) as to the Limited Partner, 98.9899%.

                  "Person" means an individual or a corporation, limited
         liability company, partnership, joint venture, trust, unincorporated
         organization, association, government agency or political subdivision
         thereof or other entity.

                  "Prior Agreement" is defined in the recitals.

                  "Pro Rata" means, when modifying Partners and Assignees,
         apportioned among all Partners and Assignees in accordance with their
         relative Percentage Interests.

                  "Quarter" means, unless the context requires otherwise, a
         fiscal quarter of the Partnership.

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

                  "Registration Statement" means the Registration Statement on
         Form S-1 (Registration No. 333-43668) as it has been or as it may be
         amended or supplemented from time to time, filed by the MLP with the
         Commission under the Securities Act to register the offering and sale
         of the Common Units in the Initial Offering.

                  "Required Allocations" means (a) any limitation imposed on any
         allocation of Net Losses or Net Termination Losses under Section 6.1(b)
         or 6.1(c)(ii) and (b) any allocation of an item of income, gain, loss
         or deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
         6.1(d)(vii) or 6.1(d)(ix).

                  "Residual Gain" or "Residual Loss" means any item of gain or
         loss, as the case may be, of the Partnership recognized for federal
         income tax purposes resulting from a sale, exchange or other
         disposition of a Contributed Property or Adjusted Property, to the



                                      -10-

<PAGE>   16




         extent such item of gain or loss is not allocated pursuant to Section
         6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate Book-Tax
         Disparities.

                  "Restricted Business" has the meaning assigned to such term in
         the Omnibus Agreement.

                  "Securities Act" means the Securities Act of 1933, as amended,
         supplemented or restated from time to time and any successor to such
         statute.

                  "Shamrock GP" has the meaning assigned to such term in the
         recitals.

                  "Skelly-Belvieu" has the meaning assigned to such term in
         Section 2.4.

                  "Skelly-Belvieu Agreement" means the limited liability company
         operating agreement of Skelly-Belvieu Pipeline Company, LLC, as it may
         be amended, supplemented or restated from time to time.

                  "Special Approval" has the meaning assigned to such term in
         the MLP Agreement.

                  "Subordinated Unit" has the meaning assigned to such term in
         the MLP Agreement.

                  "Subordination Period" has the meaning assigned to such term
         in the MLP Agreement.

                  "Subsidiary" means, with respect to any Person, (a) a
         corporation of which more than 50% of the voting power of shares
         entitled (without regard to the occurrence of any contingency) to vote
         in the election of directors or other governing body of such
         corporation is owned, directly or indirectly, at the date of
         determination, by such Person, by one or more Subsidiaries of such
         Person or a combination thereof, (b) a partnership (whether general or
         limited) in which such Person or a Subsidiary of such Person is, at the
         date of determination, a general or limited partner of such
         partnership, but only if more than 50% of the partnership interests of
         such partnership (considering all of the partnership interests of the
         partnership as a single class) is owned, directly or indirectly, at the
         date of determination, by such Person, by one or more Subsidiaries of
         such Person, or a combination thereof, or (c) any other Person (other
         than a corporation or a partnership) in which such Person, one or more
         Subsidiaries of such Person, or a combination thereof, directly or
         indirectly, at the date of determination, has (i) at least a majority
         ownership interest or (ii) the power to elect or direct the election of
         a majority of the directors or other governing body of such Person.




                                      -11-

<PAGE>   17




                  "Substituted Limited Partner" means a Person who is admitted
         as a Limited Partner to the Partnership pursuant to Section 10.2 in
         place of and with all the rights of a Limited Partner and who is shown
         as a Limited Partner on the books and records of the Partnership.

                  "Surviving Business Entity" has the meaning assigned to such
         term in Section 14.2(b).

                  "Transfer" has the meaning assigned to such term in Section
         4.1(a).

                  "UDS Logistics" has the meaning assigned to such term in
         Section 5.2(b).

                  "Underwriter" means each Person named as an underwriter in
         Schedule I to the Underwriting Agreement who purchases Common Units
         pursuant thereto.

                  "Underwriting Agreement" means the Underwriting Agreement
         dated December ____, 2000 among the Underwriters, the MLP, the
         Partnership and certain other parties, providing for the purchase of
         Common Units by such Underwriters.

                  "Unit" has the meaning assigned to such term in the MLP
         Agreement.

                  "Unit Majority" has the meaning assigned to such term in the
         MLP Agreement.

                  "Unrealized Gain" attributable to any item of Partnership
         property means, as of any date of determination, the excess, if any, of
         (a) the fair market value of such property as of such date (as
         determined under Section 5.5(d)) over (b) the Carrying Value of such
         property as of such date (prior to any adjustment to be made pursuant
         to Section 5.5(d) as of such date).

                  "Unrealized Loss" attributable to any item of Partnership
         property means, as of any date of determination, the excess, if any, of
         (a) the Carrying Value of such property as of such date (prior to any
         adjustment to be made pursuant to Section 5.5(d) as of such date) over
         (b) the fair market value of such property as of such date (as
         determined under Section 5.5(d)).

                  "U.S. GAAP" means United States Generally Accepted Accounting
         Principles consistently applied.

                  "Withdrawal Opinion of Counsel" has the meaning assigned to
         such term in Section 11.1(b).




                                      -12-

<PAGE>   18




                  "Working Capital Borrowings" means borrowings used solely for
         working capital purposes or to pay distribution to Partners made
         pursuant to a credit facility or other arrangement requiring all such
         borrowings thereunder to be reduced to a relatively small amount each
         year for an economically meaningful period of time.

SECTION 1.2   Construction.

         Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.

                                   ARTICLE II
                                  ORGANIZATION

SECTION 2.1   Formation.

         The General Partner and the Organizational Limited Partner have
previously formed the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act and hereby amend and restate the First Amended
Agreement in its entirety. This second amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.

SECTION 2.2   Name.

         The name of the Partnership shall be "Shamrock Logistics Operations,
L.P." The Partnership's business may be conducted under any other name or names
deemed necessary or appropriate by the General Partner in its sole discretion,
including the name of the General Partner. The words "Limited Partnership,"
"L.P." or "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purpose of complying with the laws of
any jurisdiction that so requires. The General Partner in its discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.




                                      -13-

<PAGE>   19




SECTION 2.3   Registered Office; Registered Agent; Principal Office; Other
Offices.

         Unless and until changed by the General Partner, the registered office
of the Partnership in the State of Delaware shall be located at 1209 Orange
Street, Wilmington, Delaware 19801, and the registered agent for service of
process on the Partnership in the State of Delaware at such registered office
shall be The Corporation Trust Company. The principal office of the Partnership
shall be located at 6000 North Loop 1604 West, San Antonio, Texas 78249 or such
other place as the General Partner may from time to time designate by notice to
the Limited Partners. The Partnership may maintain offices at such other place
or places within or outside the State of Delaware as the General Partner deems
necessary or appropriate. The address of the General Partner shall be 6000 North
Loop 1604 West, San Antonio, Texas 78249 or such other place as the General
Partner may from time to time designate by notice to the Limited Partners.

SECTION 2.4   Purpose and Business.

         The purpose and nature of the business to be conducted by the
Partnership shall be to (a) acquire, manage, operate, lease, sell and otherwise
deal with the assets or properties contributed to the Partnership by the
Partners or hereafter acquired by the Partnership, (b) serve as a non-managing
member of Skelly-Belvieu Pipeline Company, LLC, ("Skelley-Belvieu") a Delaware
limited liability company and, in connection therewith, to exercise all the
rights and powers conferred upon the Partnership as a non-managing member of
Skelley-Belvieu pursuant to the Skelly-Belvieu Agreement (c) engage directly in,
or enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in any type of
business or activity engaged in by Skelly-Belvieu and its Subsidiaries prior to
the Closing Date and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements relating to
such business activity, (d) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is approved by
the General Partner and which lawfully may be conducted by a limited partnership
organized pursuant to the Delaware Act and, in connection therewith, to exercise
all of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity, and (e) do anything necessary or
appropriate to the foregoing, including the making of capital contributions or
loans to a Group Member, the MLP or any Subsidiary of the MLP; provided,
however, in the case of (c) and (d) above, that the General Partner reasonably
determines, as of the date of the acquisition or commencement of such activity,
that such activity (i) generates "qualifying income" (as such term is defined
pursuant to Section 7704 of the Code) or (ii) enhances the operations of an
activity of the Partnership that generates qualifying income. The General
Partner has no obligation or duty to the Partnership, the Limited Partners, or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.




                                      -14-

<PAGE>   20




SECTION 2.5   Powers.

         The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.

SECTION 2.6   Power of Attorney.

                  (a) Each Partner and each Assignee hereby constitutes and
appoints the General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator 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 its 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; (D) all certificates, documents and other instruments
         relating to the admission, withdrawal, removal or substitution of any
         Partner pursuant to, or other events described in, Article IV, X, XI or
         XII; (E) all certificates, documents and other instruments relating to
         the determination of the rights, preferences and privileges of any
         class or series of Partnership Interests issued pursuant hereto; and
         (F) all certificates, documents and other instruments (including
         agreements and a certificate of merger) relating to a merger or
         consolidation of the Partnership pursuant to Article XIV; 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



                                      -15-

<PAGE>   21




         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 or of
         the Limited Partners of any class or series required to take any
         action, the General Partner and the Liquidator may exercise the power
         of attorney made in this Section 2.6(a)(ii) only after the necessary
         vote, consent or approval of the Limited Partners or of the Limited
         Partners of such class or series, as applicable.

         Nothing contained in this Section 2.6(a) shall be construed as
authorizing the General Partner to amend this Agreement except in accordance
with Article XIII or as may be otherwise expressly provided for in this
Agreement.

                  (b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, 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 or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's successors and assigns. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or the Liquidator acting in good faith pursuant to such power of
attorney; and each such Limited Partner or Assignee, 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 or
Assignee 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.

SECTION 2.7   Term.

         The term of the Partnership commenced upon the filing of the
Certificate of Limited Partnership in accordance with the Delaware Act and shall
have a perpetual existence unless dissolved in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.

SECTION 2.8   Title to Partnership Assets.

         Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner or Assignee, individually or collectively, shall
have any ownership interest in such Partnership



                                      -16-

<PAGE>   22




assets or any portion thereof. Title to any or all of the Partnership assets may
be held in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided, further, that, prior to the
withdrawal or removal of the General Partner or as soon thereafter as
practicable, the General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the General
Partner. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which record
title to such Partnership assets is held.

                                   ARTICLE III
                           RIGHTS OF LIMITED PARTNERS

SECTION 3.1   Limitation of Liability.

         The Limited Partners and the Assignees shall have no liability under
this Agreement except as expressly provided in this Agreement or in the Delaware
Act.

SECTION 3.2   Management of Business.

         No Limited Partner or Assignee, in its capacity as such, shall
participate in the operation, management or control (within the meaning of the
Delaware Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. Any action taken by any Affiliate of the General Partner or any
officer, director, employee, member, general partner, agent or trustee of the
General Partner or any of its Affiliates, or any officer, director, employee,
member, general partner, agent or trustee of a Group Member, in its capacity as
such, shall not be deemed to be participation in the control of the business of
the Partnership by a limited partner of the Partnership (within the meaning of
Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.

SECTION 3.3 Outside Activities of the Limited Partners.

         Subject to the provisions of Section 7.5 and the Omnibus Agreement,
which shall continue to be applicable to the Persons referred to therein,
regardless of whether such Persons



                                      -17-

<PAGE>   23




shall also be Limited Partners or Assignees, any Limited Partner or Assignee
shall be entitled to and may have business interests and engage in business
activities in addition to those relating to the Partnership, including business
interests and activities in direct competition with the Partnership Group.
Neither the Partnership nor any of the other Partners or Assignees shall have
any rights by virtue of this Agreement in any business ventures of any Limited
Partner or Assignee.

SECTION 3.4   Rights of Limited Partners.

                  (a) In addition to other rights provided by this Agreement or
by applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:

                  (i) to obtain true and full information regarding the status
         of the business and financial condition of the Partnership;

                  (ii) promptly after becoming available, to obtain a copy of
         the Partnership's federal, state and local income tax returns for each
         year;

                  (iii) to have furnished to him a current list of the name and
         last known business, residence or mailing address of each Partner;

                  (iv) to have furnished to him a copy of this Agreement and the
         Certificate of Limited Partnership and all amendments thereto, together
         with a copy of the executed copies of all powers of attorney pursuant
         to which this Agreement, the Certificate of Limited Partnership and all
         amendments thereto have been executed;

                  (v) to obtain true and full information regarding the amount
         of cash and a description and statement of the Net Agreed Value of any
         other Capital Contribution by each Partner and which each Partner has
         agreed to contribute in the future, and the date on which each became a
         Partner; and

                  (vi) to obtain such other information regarding the affairs of
         the Partnership as is just and reasonable.

                  (b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes to
be in the nature of trade secrets or (ii) other information the disclosure of
which the General Partner in good faith believes (A) is not in the best
interests of the MLP or the Partnership Group, (B) could damage the MLP or the
Partnership Group or (C) that any Group Member is required by law or by
agreement with any third party to



                                      -18-

<PAGE>   24




keep confidential (other than agreements with Affiliates of the Partnership the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).

                                   ARTICLE IV
                       TRANSFERS OF PARTNERSHIP INTERESTS

SECTION 4.1   Transfer Generally.

                  (a) The term "transfer," when used in this Agreement with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which the General Partner assigns its General Partner Interest to another Person
who becomes the General Partner (or an Assignee) or by which the holder of a
Limited Partner Interest assigns such Limited Partner Interest to another Person
who becomes a Limited Partner (or an Assignee), and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.

                  (b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article IV. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article IV shall be null and void.

                  (c) Nothing contained in this Agreement shall be construed to
prevent (i) a disposition by any limited partner of the General Partner of any
or all of the issued and outstanding limited partner interests of the General
Partner or (ii) a disposition by any general partner of the General Partner of
any or all of the issued and outstanding capital stock or other equity interests
of such general partner.

SECTION 4.2   Transfer of General Partner's Partnership Interest.

                  If a General Partner transfers its interest as a general
partner of the MLP to any Person in accordance with the provisions of the MLP
Agreement, such General Partner shall contemporaneously therewith transfer all,
but not less than all, of its General Partner Interest herein to such Person,
and the Limited Partners and Assignees, if any, hereby expressly consent to such
transfer. Except as set forth in the immediately preceding sentence and in
Section 5.2, a General Partner may not transfer all or any part of its
Partnership Interest as a General Partner.

SECTION 4.3   Transfer of a Limited Partner's Partnership Interest.

                  A Limited Partner may transfer all, but not less than all, of
its Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially all
of its assets to another Person, and following any such transfer such Person may



                                      -19-

<PAGE>   25




become a Substituted Limited Partner pursuant to Article X. Except as set forth
in the immediately preceding sentence and in Section 5.2, or in connection with
any pledge of (or any related foreclosure on) a Partnership Interest as a
Limited Partner solely for the purpose of securing, directly or indirectly,
indebtedness of the Partnership or the MLP, and except for the transfers
contemplated by Sections 5.2 and 10.2, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.

SECTION 4.4   Restrictions on Transfers.

                  (a) Notwithstanding the other provisions of this Article IV,
no transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Partnership or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).

                  (b) The General Partner may impose restrictions on the
transfer of Partnership Interests if a subsequent Opinion of Counsel determines
that such restrictions are necessary to avoid a significant risk of the
Partnership or the MLP becoming taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes. The restrictions may be
imposed by making such amendments to this Agreement as the General Partner may
determine to be necessary or appropriate to impose such restrictions.

                                    ARTICLE V
           CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

SECTION 5.1   Initial Contributions.

         In connection with the formation of the Partnership under the Delaware
Act, Shamrock GP, the former general partner, made an initial Capital
Contribution to the Partnership in the amount of $10.00, for an interest in the
Partnership and was admitted as the General Partner of the Partnership, and the
Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $990.00 for an interest in the Partnership and has
been admitted as a Limited Partner of the Partnership. On August 10, 2000, the
Certificate of Limited Partnership of the Partnership was amended to reflect the
substitution of the General Partner as general partner of the Partnership and
the withdrawal of Shamrock GP. As of the Closing Date, the interest of the
Organizational Limited Partner shall be redeemed as provided in the Contribution
Agreement; the initial Capital Contributions of each Partner shall thereupon be
refunded; and the Organizational Limited Partner shall cease to be a Limited
Partner of the Partnership. Ninety-nine percent of any interest or other profit
that may have resulted from the



                                      -20-

<PAGE>   26




investment or other use of such initial Capital Contributions shall be allocated
and distributed to the Organizational Limited Partner, and the balance thereof
shall be allocated and distributed to the General Partner.

SECTION 5.2   Contributions Pursuant to the Contribution Agreement.

                  (a) On the Closing Date and pursuant to the Contribution
Agreement, DSRMC will contribute a portion of its limited partner interests in
the Partnership to the General Partner sufficient to result in the General
Partner owning a 1.0101% interest in the Partnership and 1% interest in the MLP.
Such transfers will be accomplished by DSRMC transferring as capital
contributions (1) such limited partner interests in the Partnership to Shamrock
GP as are necessary so that Shamrock GP will have a 0.1% interest in the General
Partner and (2) such limited partner interests in the Partnership to UDS
Logistics, LLC, a Delaware limited liability company ("UDS Logistics") as are
necessary so that UDS Logistics will have a 99.99% interest in the General
Partner.

                  (b) On the Closing Date and pursuant to the Contribution
Agreement, Shamrock GP and UDS Logistics will contribute limited partner
interests in the Partnership to the General Partner as capital contributions.
Such limited partner interests owned by the General Partner will be converted to
general partner interests so that the General Partner has a 1.0101% general
partner interest in the Partnership.

                  (c) On the Closing Date and pursuant to the Contribution
Agreement, DSRMC and Sigmor Corporation will contribute limited partner
interests in the Partnership to UDS Logistics in exchange for member interests.

                  (d) On the Closing Date and pursuant to the Contribution
Agreement, the General Partner will contribute limited partner interests in the
Partnership to the MLP in exchange for a 1% general partner interest in the MLP.

                  (e) On the Closing Date and pursuant to the Contribution
Agreement, UDS Logistics will contribute limited partner interests in the
Partnership to the MLP in exchange for Common Units and Subordinated Units.

                  (f) On the Closing Date and pursuant to the Contribution
Agreement, the Partnership will borrow new third party debt ("New Debt"). As a
result of the preceding transactions, the General Partner will then have a
1.0101% general partner interest in the Partnership and Shamrock GP will then
have a 0.1% general partner interest in the General Partner.




                                      -21-

<PAGE>   27




                  (g) On the Closing Date and pursuant to the Contribution
Agreement, the public (through the underwriters) will contribute cash ($[80]
million gross and $______ million net) to the MLP in exchange for common units.

                  (h) On the Closing Date and pursuant to the Contribution
Agreement, the MLP will contribute $__________ to the Partnership.

                  (i) On the Closing Date and pursuant to the Contribution
Agreement, the Partnership will (a) pay expenses ($______, including
underwriters' spread), (b) repay working capital loan ($[9] million), (c)
reimburse the General Partner and others for capital expenditures ($ [20.52]
million), and (d) pay qualified debt assumed by the Partnership in certain of
the mergers and asset conveyances ($[98.68] million).

                  (j) Following the foregoing transactions, the General Partner
shall hold a 1.0101% Partnership Interest as General Partner, and the MLP shall
hold a 98.9899% Partnership Interest as a Limited Partner.

SECTION 5.3   Additional Capital Contributions.

         With the consent of the General Partner, any Limited Partner may, but
shall not be obligated to, make additional Capital Contributions to the
Partnership. Contemporaneously with the making of any Capital Contributions by a
Limited Partner, in addition to those provided in Sections 5.1 and 5.2, the
General Partner shall be obligated to make an additional Capital Contribution to
the Partnership in an amounts equal to 1.0101 divided by 98.9899 times the
amount of the additional Capital Contribution then made by such Limited Partner.
Except as set forth in the immediately preceding sentence and in Article XII,
the General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.

SECTION 5.4   Interest and Withdrawal.

         No interest shall be paid by the Partnership on Capital Contributions.
No Partner or Assignee shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement. Except to the extent expressly provided in this Agreement, no Partner
or Assignee shall have priority over any other Partner or Assignee either as to
the return of Capital Contributions or as to profits, losses or distributions.
Any such return shall be a compromise to which all Partners and Assignees agree
within the meaning of Section 17-502(b) of the Delaware Act.




                                      -22-

<PAGE>   28


SECTION 5.5   Capital Accounts.

                  (a) The Partnership shall maintain for each Partner (or a
beneficial owner of Partnership Interests held by a nominee in any case in which
the nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) owning a Partnership Interest a
separate Capital Account with respect to such Partnership Interest in accordance
with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.

                  (b) For purposes of computing the amount of any item of
income, gain, loss or deduction which is to be allocated pursuant to Article VI
and is to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:

                  (i) Solely for purposes of this Section 5.5, the Partnership
         shall be treated as owning directly its proportionate share (as
         determined by the General Partner) of all property owned by any
         Subsidiary of the Partnership that is classified as a partnership for
         federal income tax purposes.

                  (ii) All fees and other expenses incurred by the Partnership
         to promote the sale of (or to sell) a Partnership Interest that can
         neither be deducted nor amortized under Section 709 of the Code, if
         any, shall, for purposes of Capital Account maintenance, be treated as
         an item of deduction at the time such fees and other expenses are
         incurred and shall be allocated among the Partners pursuant to Section
         6.1.

                  (iii) Except as otherwise provided in Treasury Regulation
         Section 1.704- 1(b)(2)(iv)(m), computation of all items of income,
         gain, loss and deduction shall be made without regard to any election
         under Section 754 of the Code which may be made by the Partnership and,
         as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of
         the Code, without regard to the fact that such items are not includable
         in gross income or are neither currently deductible nor capitalized for
         federal income tax



                                      -23-

<PAGE>   29




         purposes. To the extent an adjustment to the adjusted tax basis of any
         Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
         required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m),
         to be taken into account in determining Capital Accounts, the amount of
         such adjustment in the Capital Accounts shall be treated as an item of
         gain or loss.

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

                  (v) In accordance with the requirements of Section 704(b) of
         the Code, any deductions for depreciation, cost recovery or
         amortization attributable to any Contributed Property shall be
         determined as if the adjusted basis of such property on the date it was
         acquired by the Partnership were equal to the Agreed Value of such
         property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying
         Value of any Partnership property subject to depreciation, cost
         recovery or amortization, any further deductions for such depreciation,
         cost recovery or amortization attributable to such property shall be
         determined (A) as if the adjusted basis of such property were equal to
         the Carrying Value of such property immediately following such
         adjustment and (B) using a rate of depreciation, cost recovery or
         amortization derived from the same method and useful life (or, if
         applicable, the remaining useful life) as is applied for federal income
         tax purposes; provided, however, that, if the asset has a zero adjusted
         basis for federal income tax purposes, depreciation, cost recovery or
         amortization derived from the same method and useful life (or, if
         applicable, the remaining useful life) as is applied for federal income
         tax purposes; provided, however, that, if the asset has a zero adjusted
         basis for federal income tax purposes, depreciation, cost recovery or
         amortization deductions shall be determined using any reasonable method
         that the General Partner may adopt.

                  (vi) If the Partnership's adjusted basis in a depreciable or
         cost recovery property is reduced for federal income tax purposes
         pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of
         such reduction shall, solely for purposes hereof, be deemed to be an
         additional depreciation or cost recovery deduction in the year such
         property is placed in service and shall be allocated among the Partners
         pursuant to Section 6.1. Any restoration of such basis pursuant to
         Section 48(q)(2) of the Code shall, to the extent possible, be
         allocated in the same manner to the Partners to whom such deemed
         deduction was allocated.

                  (c) A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.




                                      -24-

<PAGE>   30




                  (d)      (i) In accordance with Treasury Regulation Section
         1.704- 1(b)(2)(iv)(f), on an issuance of additional Partnership
         Interests for cash or Contributed Property or the conversion of the
         General Partner's Partnership Interest to Common Units pursuant to
         Section 11.3(a), the Capital Accounts of all Partners and the Carrying
         Value of each Partnership property immediately prior to such issuance
         shall be adjusted upward or downward to reflect any Unrealized Gain or
         Unrealized Loss attributable to such Partnership property, as if such
         Unrealized Gain or Unrealized Loss had been recognized on an actual
         sale of each such property immediately prior to such issuance and had
         been allocated to the Partners at such time pursuant to Section 6.1(c)
         in the same manner as any item of gain or loss actually recognized
         during such period would have been allocated. In determining such
         Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair
         market value of all Partnership assets (including, without limitation,
         cash or cash equivalents) immediately prior to the issuance of
         additional Partnership Interests shall be determined by the General
         Partner using such reasonable method of valuation as it may adopt;
         provided, however, that the General Partner, in arriving at such
         valuation, must take fully into account the fair market value of the
         Partnership Interests of all Partners at such time. The General Partner
         shall allocate such aggregate value among the assets of the Partnership
         (in such manner as it determines in its discretion to be reasonable) to
         arrive at a fair market value for individual properties.

                           (ii) In accordance with Treasury Regulation Section
         1.704- 1(b)(2)(iv)(f), immediately prior to any actual or deemed
         distribution to a Partner of any Partnership property (other than a
         distribution of cash that is not in redemption or retirement of a
         Partnership Interest), the Capital Accounts of all Partners and the
         Carrying Value of all Partnership property shall be adjusted upward or
         downward to reflect any Unrealized Gain or Unrealized Loss attributable
         to such Partnership property, as if such Unrealized Gain or Unrealized
         Loss had been recognized in a sale of such property immediately prior
         to such distribution for an amount equal to its fair market value, and
         had been allocated to the Partners, at such time, pursuant to Section
         6.1(c) in the same manner as any item of gain or loss actually
         recognized during such period would have been allocated. In determining
         such Unrealized Gain or Unrealized Loss the aggregate cash amount and
         fair market value of all Partnership assets (including, without
         limitation, cash or cash equivalents) immediately prior to a
         distribution shall (A) in the case of an actual distribution which is
         not made pursuant to Section 12.4 or in the case of a deemed
         distribution, be determined and allocated in the same manner as that
         provided in Section 5.5(d)(i) or (B) in the case of a liquidating
         distribution pursuant to Section 12.4, be determined and allocated by
         the Liquidator using such reasonable method of valuation as it may
         adopt.




                                      -25-

<PAGE>   31




SECTION 5.6   Loans from Partners.

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

SECTION 5.7   Limited Preemptive Rights.

         Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.

SECTION 5.8   Fully Paid and Non-Assessable Nature of Partnership Interests.

         All Partnership Interests issued to Limited Partners pursuant to, and
in accordance with the requirements of, this Article V shall be fully paid and
non-assessable Partnership Interests, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.

                                   ARTICLE VI
                          ALLOCATIONS AND DISTRIBUTIONS

SECTION 6.1   Allocations for Capital Account Purposes.

         For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.

                  (a) Net Income. After giving effect to the special allocations
set forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated among the Partners as follows:




                                      -26-

<PAGE>   32




                  (i) First, 100% to the General Partner until the aggregate Net
         Income allocated to the General Partner pursuant to this Section
         6.1(a)(i) for the current taxable year and all previous taxable years
         is equal to the aggregate Net Losses allocated to the General Partner
         pursuant to Section 6.1(b)(ii) for all previous taxable years;

                  (ii) Second, 1.0101% to the General Partner and 98.9899% to
         the Limited Partners, in proportion to their respective Percentage
         Interests.

                  (b) Net Losses. After giving effect to the special allocations
set forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Partners as follows:

                  (i) First, 1.0101% to the General Partner and 98.9899% to the
         Limited Partners, in accordance with their respective Percentage
         Interests; provided, however, that Net Losses shall not be allocated to
         a Limited Partner pursuant to this Section 6.1(b)(i) to the extent that
         such allocation would cause a Limited Partner to have a deficit balance
         in its Adjusted Capital Account at the end of such taxable year (or
         increase any existing deficit balance in such Limited Partners's
         Adjusted Capital Account);

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

                  (c) Net Termination Gains and Losses. After giving effect to
the special allocations set forth in Section 6.1(d), all items of income, gain,
loss and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.

                           (i) If a Net Termination Gain is recognized (or
         deemed recognized pursuant to Section 5.5(d)), such Net Termination
         Gain shall be allocated among the Partners in the following manner (and
         the Capital Accounts of the Partners shall be increased by the amount
         so allocated in each of the following subclauses, in the order listed,
         before an allocation is made pursuant to the next succeeding
         subclause):

                           (A) First, to each Partner having a deficit balance
                  in its Capital Account, in the proportion that such deficit
                  balance bears to the total deficit



                                      -27-

<PAGE>   33




                  balances in the Capital Accounts of all Partners, until each
                  such Partner has been allocated Net Termination Gain equal to
                  any such deficit balance in its Capital Account; and

                           (B) Second, 1.0101% to the General Partner and
                  98.9899% to the Limited Partners, in proportion to their
                  respective Percentage Interests.

                           (ii) If a Net Termination Loss is recognized (or
         deemed recognized pursuant to Section 5.5(d)), such Net Termination
         Loss shall be allocated among the Partners in the following manner:

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

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

                  (d) Special Allocations. Notwithstanding any other provision
of this Section 6.1, the following special allocations shall be made for such
taxable period:

                  (i) Partnership Minimum Gain Chargeback. Notwithstanding any
         other provision of this Section 6.1, if there is a net decrease in
         Partnership Minimum Gain during any Partnership taxable period, each
         Partner shall be allocated items of Partnership income and gain for
         such period (and, if necessary, subsequent periods) in the manner and
         amounts provided in Treasury Regulation Sections 1.704-2(f)(6),
         1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For
         purposes of this Section 6.1(d), 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 6.1(d) with respect to
         such taxable period (other than an allocation pursuant to Sections
         6.1(d)(v) and 6.1(d)(vi)). This Section 6.1(d)(i) is intended to comply
         with the Partnership Minimum Gain chargeback requirement in Treasury
         Regulation Section 1.704-2(f) and shall be interpreted consistently
         therewith.

                  (ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
         Notwithstanding the other provisions of this Section 6.1 (other than
         Section 6.1(d)(i)), except as provided in Treasury 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 Treasury Regulation Sections 1.704-2(i)(4) and
         1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
         Section 6.1(d), each Partner's Adjusted Capital Account balance shall
         be



                                      -28-

<PAGE>   34




         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 6.1(d), other than Section 6.1(d)(i) and other
         than an allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi), with
         respect to such taxable period. This Section 6.1(d)(ii) is intended to
         comply with the chargeback of items of income and gain requirement in
         Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
         consistently therewith.

                  (iii) Qualified Income Offset. In the event any Partner
         unexpectedly receives any adjustments, allocations or distributions
         described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
         1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of
         Partnership income and gain shall be specially allocated to such
         Partner in an amount and manner sufficient to eliminate, to the extent
         required by the Treasury Regulations promulgated under Section 704(b)
         of the Code, 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 6.1(d)(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
         Treasury 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 6.1(d)(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 6.1 have been tentatively made as if this Section
         6.1(d)(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. If the General Partner
         determines in its good faith discretion that the Partnership's
         Nonrecourse Deductions must be allocated in a different ratio to
         satisfy the safe harbor requirements of the Treasury Regulations
         promulgated under Section 704(b) of the Code, the General Partner is
         authorized, upon notice to the 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 Treasury Regulation Section
         1.704-2(i). If more than one Partner bears the Economic Risk of Loss
         with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
         Deductions attributable thereto shall be



                                      -29-

<PAGE>   35




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

                  (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(c) of the Code is required, pursuant to
         Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into
         account in determining Capital Accounts, the amount of such adjustment
         to the Capital Accounts shall be treated as an item of gain (if the
         adjustment increases the basis of the asset) or loss (if the adjustment
         decreases 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 Treasury Regulations.

                  (ix) Curative Allocation.

                           (A) Notwithstanding any other provision of this
                  Section 6.1, other than the Required Allocations, the Required
                  Allocations shall be taken into account in making the Agreed
                  Allocations so that, to the extent possible, the net amount of
                  items of income, gain, loss and deduction allocated to each
                  Partner pursuant to the Required Allocations and the Agreed
                  Allocations, together, shall be equal to the net amount of
                  such items that would have been allocated to each such Partner
                  under the Agreed Allocations had the Required Allocations and
                  the related Curative Allocation not otherwise been provided in
                  this Section 6.1. Notwithstanding the preceding sentence,
                  Required Allocations relating to (1) Nonrecourse Deductions
                  shall not be taken into account except to the extent that
                  there has been a decrease in Partnership Minimum Gain and (2)
                  Partner Nonrecourse Deductions shall not be taken into account
                  except to the extent that there has been a decrease in Partner
                  Nonrecourse Debt Minimum Gain. Allocations pursuant to this
                  Section 6.1(d)(ix)(A) shall only be made with respect to
                  Required Allocations to the extent the General Partner
                  reasonably determines that such allocations will otherwise be
                  inconsistent with the economic agreement among the Partners.
                  Further, allocations pursuant to this Section 6.1(d)(ix)(A)
                  shall be deferred with respect to allocations pursuant to
                  clauses (1) and (2) hereof to the extent the General Partner
                  reasonably determines that such allocations are likely to be
                  offset by subsequent Required Allocations.



                                      -30-

<PAGE>   36




                           (B) The General Partner shall have reasonable
                  discretion, with respect to each taxable period, to (1) apply
                  the provisions of Section 6.1(d)(ix)(A) in whatever order is
                  most likely to minimize the economic distortions that might
                  otherwise result from the Required Allocations, and (2) divide
                  all allocations pursuant to Section 6.1(d)(ix)(A) among the
                  Partners in a manner that is likely to minimize such economic
                  distortions.

SECTION 6.2   Allocations for Tax Purposes.

                  (a) Except as otherwise provided herein, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 6.1.

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

                  (i) (A) In the case of a Contributed Property, such items
         attributable thereto shall be allocated among the Partners in the
         manner provided under Section 704(c) of the Code that takes into
         account the variation between the Agreed Value of such property and its
         adjusted basis at the time of contribution; and (B) any item of
         Residual Gain or Residual Loss attributable to a Contributed Property
         shall be allocated among the Partners in the same manner as its
         correlative item of "book" gain or loss is allocated pursuant to
         Section 6.1.

                  (ii) (A) In the case of an Adjusted Property, such items shall
         (1) first, be allocated among the Partners in a manner consistent with
         the principles of Section 704(c) of the Code to take into account the
         Unrealized Gain or Unrealized Loss attributable to such property and
         the allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii),
         and (2) second, in the event such property was originally a Contributed
         Property, be allocated among the Partners in a manner consistent with
         Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual
         Loss attributable to an Adjusted Property shall be allocated among the
         Partners in the same manner as its correlative item of "book" gain or
         loss is allocated pursuant to Section 6.1.

                  (iii) The General Partner shall apply the principles of
         Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax
         Disparities.

                  (c) For the proper administration of the Partnership and for
the preservation of uniformity of the Units or other limited partner interests
of the MLP (or any class or classes



                                      -31-

<PAGE>   37




thereof), the General Partner shall have sole discretion to (i) adopt such
conventions as it deems appropriate in determining the amount of depreciation,
amortization and cost recovery deductions; (ii) make special allocations for
federal income tax purposes of income (including, without limitation, gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of the Units or other limited partner interests of the MLP
(or any class or classes thereof). The General Partner may adopt such
conventions, make such allocations and make such amendments to this Agreement as
provided in this Section 6.2(c) only if such conventions, allocations or
amendments would not have a material adverse effect on the Partners, the holders
of any class or classes of Units or other limited partner interests of the MLP
issued and outstanding or the Partnership and if such allocations are consistent
with the principles of Section 704 of the Code.

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

                  (e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.

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



                                      -32-

<PAGE>   38





                  (g) The General Partner may adopt such methods of allocation
of income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.

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

SECTION 6.3   Distributions.

                  (a) Within 45 days following the end of (i) the period
beginning on the Closing Date and ending on March 31, 2001 and (ii) each Quarter
commencing with the Quarter beginning on April 1, 2001, an amount equal to 100%
of Available Cash with respect to such Quarter shall, subject to Section 17-607
of the Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject. All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.

                  (b) In the event of the dissolution and liquidation of the
Partnership, all amounts received during or after the Quarter in which the
Liquidation Date occurs, other than from borrowings described in (a)(ii) of the
definition of Available Cash, shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of, Section 12.4.

                  (c) The General Partner shall have the discretion to treat
taxes paid by the Partnership on behalf of, or amounts withheld with respect to,
all or less than all of the Partners, as a distribution of Available Cash to
such Partners.

                                   ARTICLE VII
                      MANAGEMENT AND OPERATION OF BUSINESS

SECTION 7.1   Management.

                  (a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner,



                                      -33-

<PAGE>   39




and neither the Limited Partner nor Assignee shall have any management power
over the business and affairs of the Partnership. In addition to the powers now
or hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3, shall have full
power and authority to do all things and on such terms as it, in its sole
discretion, may deem necessary or appropriate to conduct the business of the
Partnership, to exercise all powers set forth in Section 2.5 and to effectuate
the purposes set forth in Section 2.4, including the following:

                  (i) the making of any expenditures, the lending or borrowing
         of money, the assumption or guarantee of, or other contracting for,
         indebtedness and other liabilities, the issuance of evidences of
         indebtedness, including indebtedness that is convertible into a
         Partnership Interest, and the incurring of any other obligations;

                  (ii) the making of tax, regulatory and other filings, or
         rendering of periodic or other reports to governmental or other
         agencies having jurisdiction over the business or assets of the
         Partnership;

                  (iii) the acquisition, disposition, mortgage, pledge,
         encumbrance, hypothecation or exchange of any or all of the assets of
         the Partnership or the merger or other combination of the Partnership
         with or into another Person (the matters described in this clause (iii)
         being subject, however, to any prior approval that may be required by
         Section 7.3);

                  (iv) the use of the assets of the Partnership (including cash
         on hand) for any purpose consistent with the terms of this Agreement,
         including the financing of the conduct of the operations of the
         Partnership Group, subject to Section 7.6, the lending of funds to
         other Persons (including the MLP and any member of the Partnership
         Group), the repayment of obligations of the MLP or any member of the
         Partnership Group and the making of capital contributions to any member
         of the Partnership Group;

                  (v) the negotiation, execution and performance of any
         contracts, conveyances or other instruments (including instruments that
         limit the liability of the Partnership under contractual arrangements
         to all or particular assets of the Partnership, with the other party to
         the contract to have no recourse against the General Partner or its
         assets other than its interest in the Partnership, even if same results
         in the terms of the transaction being less favorable to the Partnership
         than would otherwise be the case);

                  (vi) the distribution of Partnership cash;

                  (vii) the selection and dismissal of employees (including
         employees having titles such as "president," "vice president,"
         "secretary" and "treasurer") and agents,



                                      -34-

<PAGE>   40




         outside attorneys, accountants, consultants and contractors and the
         determination of their compensation and other terms of employment or
         hiring;

                  (viii) the maintenance of such insurance for the benefit of
         the Partnership Group and the Partners as it deems necessary or
         appropriate;

                  (ix) the formation of, or acquisition of an interest in, and
         the contribution of property and the making of loans to, any further
         limited or general partnerships, joint ventures, corporations or other
         relationships subject to the restrictions set forth in Section 2.4;

                  (x) the control of any matters affecting the rights and
         obligations of the Partnership, including the bringing and defending of
         actions at law or in equity and otherwise engaging in the conduct of
         litigation and the incurring of legal expense and the settlement of
         claims and litigation; and

                  (xi) the indemnification of any Person against liabilities and
         contingencies to the extent permitted by law.

                  (b) Notwithstanding any other provision of this Agreement, the
MLP Agreement, the Delaware Act or any applicable law, rule or regulation, each
of the Partners and Assignees and each other Person who may acquire an interest
in the Partnership hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the Partnership Agreement,
the MLP Agreement, the Underwriting Agreement, the Bank Credit Agreement, the
Omnibus Agreement, the Contribution Agreement and the other agreements and
documents described in or filed as exhibits to the Registration Statement that
are related to the transactions contemplated by the Registration Statement; (ii)
agrees that the General Partner (on its own or through any officer of the
Partnership) is authorized to execute, deliver and perform the agreements
referred to in clause (i) of this sentence and the other agreements, acts,
transactions and matters described in or contemplated by the Registration
Statement on behalf of the Partnership without any further act, approval or vote
of the Partners or the Assignees or the other Persons who may acquire an
interest in the Partnership; and (iii) agrees that the execution, delivery or
performance by the General Partner, the MLP, any Group Member or any Affiliate
of any of them, of this Agreement or any agreement authorized or permitted under
this Agreement (including the exercise by the General Partner or any Affiliate
of the General Partner of the rights accorded pursuant to Article XV), shall not
constitute a breach by the General Partner of any duty that it may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or equity.




                                      -35-

<PAGE>   41




SECTION 7.2   Certificate of Limited Partnership.

         The General Partner has caused the Certificate of Limited Partnership
and the Certificate of Amendment to the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms of Section 3.4(a), the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner or Assignee.

SECTION 7.3   Restrictions on General Partner's Authority.

                  (a) The General Partner may not, without written approval of
the specific act by the Limited Partners or by other written instrument executed
and delivered by the Limited Partners subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, except as
otherwise provided in this Agreement, (i) committing any act that would make it
impossible to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring of its General
Partner Interests.

                  (b) Except as provided in Articles XII and XIV, the General
Partner may not sell, exchange or otherwise dispose of all or substantially all
of the Partnership's assets in a single transaction or a series of related
transactions (including by way of merger, consolidation or other combination) or
approve on behalf of the Partnership the sale, exchange or other disposition of
all or substantially all of the assets of the Partnership, without the approval
of the Limited Partners; provided, however, that this provision shall not
preclude or limit the General Partner's ability to mortgage, pledge, hypothecate
or grant a security interest in all or substantially all of the assets of the
Partnership and shall not apply to any forced sale of any or all of the assets
of the Partnership pursuant to the foreclosure of, or other realization upon,
any such encumbrance. Without the approval of at least a Unit Majority, the
General Partner shall not, on behalf of the MLP, (i) consent to any amendment to
this Agreement or, except as expressly permitted by Section 7.9(d) of the MLP
Agreement, take any action permitted to be taken by a



                                      -36-

<PAGE>   42




Partner, in either case, that would have a material adverse effect on the MLP as
a Partner or (ii) except as permitted under Sections 4.6, 11.1, 11.2 or 11.3 of
the MLP Agreement, elect or cause the MLP to elect a successor general partner
of the Partnership.

SECTION 7.4   Reimbursement of the General Partner.

                  (a) Except as provided in this Section 7.4 and elsewhere in
this Agreement or in the MLP Agreement, the General Partner shall not be
compensated for its services as General Partner, general partner of the MLP or
as a general partner or managing member of any Group Member.

                  (b) The General Partner shall be reimbursed on a monthly
basis, or such other reasonable basis as the General Partner may determine in
its sole discretion, for (i) all direct and indirect expenses it incurs or
payments it makes on behalf of the Partnership (including salary, bonus,
incentive compensation and other amounts paid to any Person including Affiliates
of the General Partner to perform services for the Partnership or for the
General Partner in the discharge of its duties to the Partnership), and (ii) all
other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection with
operating the Partnership's business (including expenses allocated to the
General Partner by its Affiliates). The General Partner shall determine the
expenses that are allocable to the Partnership in any reasonable manner
determined by the General Partner in its sole discretion. Reimbursements
pursuant to this Section 7.4 shall be in addition to any reimbursement to the
General Partner as a result of indemnification pursuant to Section 7.7.

                  (c) The General Partner, in its sole discretion and without
the approval of the Limited Partners (who shall have no right to vote in respect
thereof), may propose and adopt on behalf of the Partnership employee benefit
plans, employee programs and employee practices, or cause the Partnership to
issue Partnership Interests, in connection with, pursuant to any employee
benefit plan, employee program or employee practice maintained or sponsored by
the General Partner or any of its Affiliates, in each case for the benefit of
employees of the General Partner, any Group Member or any Affiliate, or any of
them, in respect of services performed, directly or indirectly, for the benefit
of the Partnership Group. Expenses incurred by the General Partner in connection
with any such plans, programs and practices shall be reimbursed in accordance
with Section 7.4(b). Any and all obligations of the General Partner under any
employee benefit plans, employee programs or employee practices adopted by the
General Partner as permitted by this Section 7.4(c) shall constitute obligations
of the General Partner hereunder and shall be assumed by any successor General
Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or
successor to all of the General Partner's General Partner Interest pursuant to
Section 4.2.




                                      -37-

<PAGE>   43




SECTION 7.5   Outside Activities.

                  (a) After the Closing Date, the General Partner, for so long
as it is a General Partner of the Partnership (i) agrees that its sole business
will be to act as a general partner of the Partnership, a general partner of the
MLP, and a general partner or managing member of any other partnership or
limited liability company of which the Partnership or the MLP is, directly or
indirectly, a partner or member, as the case may be, and to undertake activities
that are ancillary or related thereto (including being a limited partner in the
MLP), (ii) shall not engage in any business or activity or incur any debts or
liabilities except in connection with or incidental to (A) its performance as
general partner of the Partnership, the MLP or one or more Group Members or as
described in or contemplated by the Registration Statement or (B) the acquiring,
owning or disposing of debt or equity securities in any Group Member and (iii)
except to the extent permitted in the Omnibus Agreement, shall not, and shall
cause its Affiliates not to, engage in any Restricted Business.

                  (b) The Omnibus Agreement, to which the Partnership is a
party, sets forth certain restrictions on the ability of Ultramar Diamond
Shamrock and its Affiliates to engage in Restricted Businesses.

                  (c) Except as specifically restricted by Section 7.5(a) and
the Omnibus Agreement, each Indemnitee (other than the General Partner) shall
have the right to engage in businesses of every type and description and other
activities for profit and to engage in and possess an interest in other business
ventures of any and every type or description, whether in businesses engaged in
or anticipated to be engaged in by the MLP or any Group Member, independently or
with others, including business interests and activities in direct competition
with the business and activities of the MLP or any Group Member, and none of the
same shall constitute a breach of this Agreement or any duty express or implied
by law to the MLP or any Group Member or any Partner or Assignee. Neither the
MLP nor any Group Member, any Limited Partner, nor any other Person shall have
any rights by virtue of this Agreement, the MLP Agreement or the partnership
relationship established hereby or thereby in any business ventures of any
Indemnitee.

                  (d) Subject to the terms of Section 7.5(a), Section 7.5(b),
Section 7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything
to the contrary in this Agreement, (i) the engaging in competitive activities by
any Indemnitees (other than the General Partner) in accordance with the
provisions of this Section 7.5 is hereby approved by the Partnership and all
Partners, (ii) it shall be deemed not to be a breach of the General Partner's
fiduciary duty or any other obligation of any type whatsoever of the General
Partner for the Indemnitees (other than the General Partner) to engage in such
business interests and activities in preference to or to the exclusion of the
Partnership and (iii) except as set forth in the Omnibus Agreement, the General
Partner and the Indemnities shall have no obligation to present business
opportunities to the Partnership.



                                      -38-

<PAGE>   44





                  (e) The General Partner and any of its Affiliates may acquire
Units or other MLP Securities in addition to those acquired on the Closing Date
and, except as otherwise provided in this Agreement, shall be entitled to
exercise all rights relating to such Units or MLP Securities.

                  (f) The term "Affiliates" when used in Section 7.5(a) and
Section 7.5(e) with respect to the General Partner shall not include any Group
Member or any Subsidiary of the MLP or any Group Member.

                  (g) Anything in this Agreement to the contrary
notwithstanding, to the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10
or other Sections of this Agreement purport or are interpreted to have the
effect of restricting the fiduciary duties that might otherwise, as a result of
Delaware or other applicable law, be owed by the General Partner to the
Partnership and its Limited Partners, or to constitute a waiver or consent by
the Limited Partners to any such restriction, such provisions shall be
inapplicable and have no effect in determining whether the General Partner has
complied with its fiduciary duties in connection with determinations made by it
under this Section 7.5.

SECTION 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner.

                  (a) The General Partner or any of its Affiliates may lend to
the MLP or any Group Member, and the MLP or any Group Member may borrow from the
General Partner or any of its Affiliates, funds needed or desired by the MLP or
the Group Member for such periods of time and in such amounts as the General
Partner may determine; provided, however, that in any such case the lending
party may not charge the borrowing party interest at a rate greater than the
rate that would be charged the borrowing party or impose terms less favorable to
the borrowing party than would be charged or imposed on the borrowing party by
unrelated lenders on comparable loans made on an arm's-length basis (without
reference to the lending party's financial abilities or guarantees). The
borrowing party shall reimburse the lending party for any costs (other than any
additional interest costs) incurred by the lending party in connection with the
borrowing of such funds. For purposes of this Section 7.6(a) and Section 7.6(b),
the term "Group Member" shall include any Affiliate of a Group Member that is
controlled by the Group Member. No Group Member may lend funds to the General
Partner or any of its Affiliates (other than the MLP, a Subsidiary of the MLP or
a Subsidiary of another Group Member).

                  (b) The Partnership may lend or contribute to any Group
Member, and any Group Member may borrow from the Partnership, funds on terms and
conditions established in the sole discretion of the General Partner; provided,
however, that the Partnership may not charge the Group Member interest at a rate
less than the rate that would be charged to the Group Member (without reference
to the General Partner's financial abilities or guarantees) by unrelated



                                      -39-

<PAGE>   45




lenders on comparable loans. The foregoing authority shall be exercised by the
General Partner in its sole discretion and shall not create any right or benefit
in favor of any Group Member or any other Person.

                  (c) The General Partner may itself, or may enter into an
agreement with any of its Affiliates to, render services to a Group Member or to
the General Partner in the discharge of its duties as general partner of the
Partnership. Any services rendered to a Group Member by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).

                  (d) The Partnership Group may transfer assets to joint
ventures, other partnerships, corporations, limited liability companies or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions as are consistent with this Agreement and
applicable law.

                  (e) Neither the General Partner nor any of its Affiliates
shall sell, transfer or convey any property to, or purchase any property from,
the Partnership, directly or indirectly, except pursuant to transactions that
are fair and reasonable to the Partnership; provided, however, that the
requirements of this Section 7.6(e) shall be deemed to be satisfied as to (i)
the transactions effected pursuant to Sections 5.2 and 5.3, the Contribution
Agreement and any other transactions described in or contemplated by the
Registration Statement, (ii) any transaction approved by Special Approval, (iii)
any transaction, the terms of which are no less favorable to the Partnership
than those generally being provided to or available from unrelated third
parties, or (iv) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership), is equitable
to the Partnership.

                  (f) The General Partner and its Affiliates will have no
obligation to permit any Group Member to use any facilities or assets of the
General Partner and its Affiliates, except as may be provided in contracts
entered into from time to time specifically dealing with such use, nor shall
there be any obligation on the part of the General Partner or its Affiliates to
enter into such contracts.




                                      -40-

<PAGE>   46




                  (g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.

SECTION 7.7   Indemnification.

                  (a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution Agreement
(other than obligations incurred by the General Partner on behalf of the MLP or
the Partnership). The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the Indemnitee acted in a manner
contrary to that specified above. Any indemnification pursuant to this Section
7.7 shall be made only out of the assets of the Partnership, it being agreed
that the General Partner shall not be personally liable for such indemnification
and shall have no obligation to contribute or loan any monies or property to the
Partnership to enable it to effectuate such indemnification.

                  (b) To the fullest extent permitted by law, expenses
(including legal fees and expenses) incurred by an Indemnitee who is indemnified
pursuant to Section 7.7(a) in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of any undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.

                  (c) The indemnification provided by this Section 7.7 shall be
in addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting Agreement and the Bank Credit Agreement), and shall continue as to
an



                                      -41-

<PAGE>   47




Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.

                  (d) The Partnership may purchase and maintain (or reimburse
the General Partner or its Affiliates for the cost of) insurance, on behalf of
the General Partner, its Affiliates and such other Persons as the General
Partner shall determine, against any liability that may be asserted against or
expense that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.

                  (e) For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.

                  (f) In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.

                  (g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.

                  (h) The provisions of this Section 7.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.

                  (i) No amendment, modification or repeal of this Section 7.7
or any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligations of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 7.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.




                                      -42-

<PAGE>   48




SECTION 7.8   Liability of Indemnitees.

                  (a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Partnership, Units or other MLP Securities, for losses
sustained or liabilities incurred as a result of any act or omission if such
Indemnitee acted in good faith.

                  (b) Subject to its obligations and duties as General Partner
set forth in Section 7.1(a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.

                  (c) To the extent that, at law or in equity, an Indemnitee has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Limited Partners, the General Partner and any other
Indemnitee acting in connection with the Partnership's business or affairs shall
not be liable to the Partnership or to any Partner for its good faith reliance
on the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict or otherwise modify the duties and liabilities of an
Indemnitee otherwise existing at law or in equity, are agreed by the Partners to
replace such other duties and liabilities of such Indemnitee.

                  (d) Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Partnership, the Limited
Partners, the General Partner, and the Partnership's and General Partner's
directors, officers and employees under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

SECTION 7.9   Resolution of Conflicts of Interest.

                  (a) Unless otherwise expressly provided in this Agreement or
the MLP Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute a breach of this Agreement of the MLP Agreement, of any
agreement contemplated herein or therein, or of any duty stated or implied by
law or equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution. Any
conflict of



                                      -43-

<PAGE>   49




interest and any resolution of such conflict of interest shall be conclusively
deemed fair and reasonable to the Partnership if such conflict of interest or
resolution is (i) approved by Special Approval, (ii) on terms no less favorable
to the Partnership than those generally being provided to or available from
unrelated third parties or (iii) fair to the Partnership, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership). The General Partner may also adopt a resolution or course of
action that has not received Special Approval. The General Partner (including
the Conflicts Committee in connection with Special Approval) shall be authorized
in connection with its determination of what is "fair and reasonable" to the
Partnership and in connection with its resolution of any conflict of interest to
consider (A) the relative interests of any party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such interest;
(B) any customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances.
Nothing contained in this Agreement, however, is intended to nor shall it be
construed to require the General Partner (including the Conflicts Committee) to
consider the interests of any Person other than the Partnership. In the absence
of bad faith by the General Partner, the resolution, action or terms so made,
taken or provided by the General Partner with respect to such matter shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or a breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.

                  (b) Whenever this Agreement or any other agreement
contemplated hereby provides that the General Partner or any of its Affiliates
is permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems "necessary or appropriate" or "necessary or
advisable" or under a grant of similar authority or latitude, except as
otherwise provided herein, the General Partner or such Affiliate shall be
entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, the MLP, any Limited Partner or any
Assignee, (ii) it may make such decision in its sole discretion (regardless of
whether there is a reference to "sole discretion" or "discretion") unless
another express standard is provided for, or (iii) in "good faith" or under
another express standard, the General Partner or such Affiliate shall act under
such express standard and shall not be subject to any other or different
standards imposed by this Agreement, the MLP Agreement, or any other agreement
contemplated hereby or under the Delaware Act or any other law, rule or
regulation. In addition, any actions taken by the General Partner or such
Affiliate consistent with the standards of "reasonable discretion" set forth in
the definition of Available Cash shall not constitute a breach of any duty of
the General Partner to the Partnership or the Limited Partners. The General
Partner shall have no duty, express or implied, to sell or otherwise dispose of
any asset of the Partnership Group other than in the ordinary course of
business. No borrowing by any Group Member or the approval thereof by the
General Partner shall be deemed to constitute a breach of any duty of the
General Partner



                                      -44-

<PAGE>   50




to the Partnership or the Limited Partners by reason of the fact that the
purpose or effect of such borrowing is directly or indirectly to (A) enable
distributions to the General Partner or its Affiliates to exceed 1.0101% of the
total amount distributed to all Partners or (B) hasten the expiration of the
Subordination Period or the conversion of any Subordinated Units into Common
Units.

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

                  (d) The Limited Partner hereby authorizes the General Partner,
on behalf of the Partnership as a partner or member of a Group Member, to
approve of actions by the general partner of such Group Member similar to those
actions permitted to be taken by the General Partner pursuant to this Section
7.9.

SECTION 7.10  Other Matters Concerning the General Partner.

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

                  (b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion (including an Opinion of Counsel) of such
Persons as to matters that the General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.

                  (c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers, a duly appointed attorney or attorneys-in-fact or the duly
authorized officers of the Partnership.

                  (d) Any standard of care and duty imposed by this Agreement or
under the Delaware Act or any applicable law, rule or regulation shall be
modified, waived or limited, to the extent permitted by law, as required to
permit the General Partner to act under this Agreement or any other agreement
contemplated by this Agreement and to make any decision pursuant to the
authority prescribed in this Agreement, so long as such action is reasonably
believed by the General Partner to be in, or not inconsistent with, the best
interests of the Partnership.




                                      -45-

<PAGE>   51




SECTION 7.11  Reliance by Third Parties.

         Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of Shamrock GP authorized by Shamrock GP to act on
behalf of and in the name of the Partnership has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any authorized contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
or any such officer as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or any such officer or its representatives be obligated to
ascertain that the terms of the Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
any such officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.

                                  ARTICLE VIII
                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

SECTION 8.1   Records and Accounting.

         The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including books of account and records of
Partnership proceedings, may be kept on, or be in the form of, computer disks,
hard drives, punch cards, magnetic tape, photographs, micrographics or any other
information storage device; provided, that the books and records so maintained
are convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.




                                      -46-

<PAGE>   52




SECTION 8.2   Fiscal Year.

         The fiscal year of the Partnership shall be a fiscal year ending
December 31.

                                   ARTICLE IX
                                   TAX MATTERS

SECTION 9.1   Tax Returns and Information.

         The Partnership shall timely file all returns of the Partnership that
are required for federal, state and local income tax purposes on the basis of
the accrual method and a taxable year ending on December 31. The tax information
reasonably required by the Partners for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.

SECTION 9.2   Tax Elections.

                  (a) The Partnership shall make the election under Section 754
of the Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners.

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

                  (c) Except as otherwise provided herein, the General Partner
shall determine whether the Partnership should make any other elections
permitted by the Code.

SECTION 9.3   Tax Controversies.

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




                                      -47-

<PAGE>   53




SECTION 9.4   Withholding.

         Notwithstanding any other provision of this Agreement, the General
Partner is authorized to take any action that it determines in its discretion to
be necessary or appropriate to cause the Partnership to comply with any
withholding requirements established under the Code or any other federal, state
or local law including, without limitation, pursuant to Sections 1441, 1442,
1445 and 1446 of the Code. To the extent that the Partnership is required or
elects to withhold and pay over to any taxing authority any amount resulting
from the allocation or distribution of income to any Partner or Assignee
(including, without limitation, by reason of Section 1446 of the Code), the
amount withheld may at the discretion of the General Partner be treated by the
Partnership as a distribution of cash pursuant to Section 6.3 in the amount of
such withholding from such Partner.

                                    ARTICLE X
                              ADMISSION OF PARTNERS

SECTION 10.1  Admission of General Partner.

         Upon the consummation of the transfers and conveyances described in
Section 5.2, the General Partner shall be admitted as a General Partner , and
the General Partner shall be the only general partner of the Partnership and the
MLP shall be the sole limited partner of the Partnership.

SECTION 10.2  Admission of Substituted Limited Partner.

         By transfer of a Limited Partner Interest in accordance with Article
IV, the transferor shall be deemed to have given the transferee the right to
seek admission as a Substituted Limited Partner subject to the conditions of,
and in the manner permitted under, this Agreement. A transferor of a Limited
Partner Interest shall, however, only have the authority to convey to a
purchaser or other transferee (a) the right to negotiate such Limited Partner
Interest to a purchaser or other transferee and (b) the right to request
admission as a Substituted Limited Partner to such purchaser or other transferee
in respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest shall be an Assignee and be deemed to have applied to
become a Substituted Limited Partner with respect to the Limited Partner
Interests so transferred to such Person. Such Assignee shall become a
Substituted Limited Partner (x) at such time as the General Partner consents
thereto, which consent may be given or withheld in the General Partner's
discretion, and (y) when any such admission is shown on the books and records of
the Partnership. If such consent is withheld, such transferee shall remain an
Assignee. An Assignee shall have an interest in the Partnership equivalent to
that of a Limited Partner with respect to allocations and distributions,
including liquidating distributions, of the Partnership. With respect to voting
rights attributable to Limited Partner Interests that are held by Assignees, the
General Partner shall be deemed to be the Limited Partner with respect thereto
and shall, in exercising the



                                      -48-

<PAGE>   54




voting rights in respect of such Limited Partner Interests on any matter, vote
such Limited Partner Interests at the written direction of the Assignee. If no
such written direction is received, such Partnership Interests will not be
voted. An Assignee shall have no other rights of a Limited Partner.

SECTION 10.3  Admission of Additional Limited Partners.

                  (a) A Person (other than the General Partner, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including the power of attorney granted
in Section 2.6, and (ii) such other documents or instruments as may be required
in the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner.

                  (b) Notwithstanding anything to the contrary in this Section
10.3, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded as such in the books and records of the Partnership,
following the consent of the General Partner to such admission.

SECTION 10.4  Admission of Successor or Transferee General Partner.

         A successor General Partner approved pursuant to Section 11.1 or 11.2
or the transferee of or successor to all of the General Partner's Partnership
Interest pursuant to Section 4.2 who is proposed to be admitted as a successor
General Partner shall, subject to compliance with the terms of Section 11.3, if
applicable, be admitted to the Partnership as the General Partner effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.2, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.2 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.

SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership.

         To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an



                                      -49-

<PAGE>   55




amendment to this Agreement and, if required by law, the General Partner shall
prepare and file an amendment to the Certificate of Limited Partnership, and the
General Partner may for this purpose, among others, exercise the power of
attorney granted pursuant to Section 2.6.

                                   ARTICLE XI
                        WITHDRAWAL OR REMOVAL OF PARTNERS

SECTION 11.1  Withdrawal of the General Partner.

                  (a) The General Partner shall be deemed to have withdrawn from
the Partnership upon the occurrence of any one of the following events (each
such event herein referred to as an "Event of Withdrawal");

                  (i) The General Partner voluntarily withdraws from the
         Partnership by giving written notice to the other Partners;

                  (ii) The General Partner transfers all of its rights as
         General Partner pursuant to Section 4.2;

                  (iii) The General Partner is removed pursuant to Section 11.2;

                  (iv) The General Partner withdraws from, or is removed as the
         General Partner of, the MLP;

                  (v) The General Partner (A) makes a general assignment for the
         benefit of creditors; (B) files a voluntary bankruptcy petition for
         relief under Chapter 7 of the United States Bankruptcy Code; (C) files
         a petition or answer seeking for itself a liquidation, dissolution or
         similar relief (but not a reorganization) under any law; (D) files an
         answer or other pleading admitting or failing to contest the material
         allegations of a petition filed against the General Partner in a
         proceeding of the type described in clauses (A)-(C) of this Section
         11.1(a)(v); or (E) seeks, consents to or acquiesces in the appointment
         of a trustee (but not a debtor in possession), receiver or liquidator
         of the General Partner or of all or any substantial part of its
         properties;

                  (vi) A final and non-appealable order of relief under Chapter
         7 of the United States Bankruptcy Code is entered by a court with
         appropriate jurisdiction pursuant to a voluntary or involuntary
         petition by or against the General Partner; or

                  (vii) (A) if the General Partner is a corporation, a
         certificate of dissolution or its equivalent is filed for the General
         Partner, or 90 days expire after the date of notice to the General
         Partner of revocation of its charter without a reinstatement of its
         charter, under the laws of its state of incorporation; (B) if the
         General Partner is a partnership or limited



                                      -50-

<PAGE>   56




         liability company, the dissolution and commencement of winding up of
         the General Partner; (C) if the General Partner is acting in such
         capacity by virtue of being a trustee of a trust, the termination of
         the trust; (D) if the General Partner is a natural person, his death or
         adjudication of incompetency; and (E) otherwise in the event of the
         termination of the General Partner.

         If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect
to withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
General Partner shall give notice to the Limited Partners within 30 days after
such occurrence. The Partners hereby agree that only the Events of Withdrawal
described in this Section 11.1 shall result in the withdrawal of the General
Partner from the Partnership.

                  (b) Withdrawal of the General Partner from the Partnership
upon the occurrence of an Event of Withdrawal shall not constitute a breach of
this Agreement under the following circumstances: (i) at any time during the
period beginning on the Closing Date and ending at 12:00 midnight, Eastern
Standard Time, on December 31, 2010, the General Partner voluntarily withdraws
by giving at least 90 days' advance notice of its intention to withdraw to the
Limited Partners; provided, that prior to the effective date of such withdrawal,
the withdrawal is approved by the Limited Partners and the General Partner
delivers to the Partnership an Opinion of Counsel ("Withdrawal Opinion of
Counsel") that such withdrawal (following the selection of the successor General
Partner) would not result in the loss of the limited liability of any Limited
Partner, of the limited partners of the MLP or cause the Partnership or the MLP
to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not previously
treated as such); (ii) at any time after 12:00 midnight, Eastern Standard Time,
on December 31, 2010, the General Partner voluntarily withdraws by giving at
least 90 days' advance notice to the Limited Partners, such withdrawal to take
effect on the date specified in such notice; (iii) at any time that the General
Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii), (iii)
or (iv). If the General Partner gives a notice of withdrawal pursuant to Section
11.1(a)(i) hereof or Section 11.1(a)(i) of the MLP Agreement, the Limited
Partners may, prior to the effective date of such withdrawal, elect a successor
General Partner; provided, however, that such successor shall be the same
person, if any, that is elected by the limited partners of the MLP pursuant to
Section 11.1 of the MLP Agreement as the successor to the general partner of the
MLP. If, prior to the effective date of the General Partner's withdrawal, a
successor is not selected by the Limited Partners as provided herein or the
Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership
shall be dissolved in accordance with Section 12.1. Any successor General
Partner elected in accordance with the terms of this Section 11.1 shall be
subject to the provisions of Section 10.3.

SECTION 11.2  Removal of the General Partner.

         The General Partner shall be removed if the General Partner is removed
as the general partner of the MLP pursuant to Section 11.2 of the MLP Agreement.
Such removal shall be



                                      -51-

<PAGE>   57




effective concurrently with the effectiveness of the removal of the General
Partner as the general partner of the MLP pursuant to the terms of the MLP
Agreement. If a successor general partner for the MLP is elected in connection
with the removal of the General Partner, such successor general partner for the
MLP shall, upon admission pursuant to Article X, automatically become the
successor General Partner of the Partnership. The admission of any such
successor General Partner to the Partnership shall be subject to the provisions
of Section 10.4.

SECTION 11.3  Interest of Departing Partner.

                  (a) The Partnership Interest of the Departing Partner
departing as a result of withdrawal or removal pursuant to Section 11.1 or 11.2
shall (unless it is otherwise required to be converted into Common Units
pursuant to Section 11.3(b) of the MLP Agreement) be purchased by the successor
to the Departing Partner for cash in the manner specified in the MLP Agreement.
Such purchase (or conversion into Common Units, as applicable) shall be a
condition to the admission to the Partnership of the successor as the General
Partner. Any successor General Partner shall indemnify the Departing Partner as
to all debts and liabilities of the Partnership arising on or after the
effective date of the withdrawal or removal of the Departing Partner.

                  (b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.

SECTION 11.4  Withdrawal of a Limited Partner.

         Without the prior written consent of the General Partner, which may be
granted or withheld in its sole discretion, and except as provided in Section
10.1, no Limited Partner shall have the right to withdraw from the Partnership.

                                   ARTICLE XII
                           DISSOLUTION AND LIQUIDATION

SECTION 12.1  Dissolution.

         The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:




                                      -52-

<PAGE>   58




                  (a) the expiration of its term as provided in Section 2.7;

                  (b) an Event of Withdrawal of the General Partner as provided
in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section 11.1(b) or
11.2 and such successor is admitted to the Partnership pursuant to Section 10.4;

                  (c) an election to dissolve the Partnership by the General
Partner that is approved by all of the Limited Partners;

                  (d) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Delaware Act;

                  (e) the sale of all or substantially all of the assets and
properties of the Partnership Group; or

                  (f) the dissolution of the MLP.

SECTION 12.2 Continuation of the Business of the Partnership After Dissolution.

         Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to
select a successor to such Departing Partner pursuant to Section 11.1 or 11.2,
then within 90 days thereafter, or (b) dissolution of the Partnership upon an
event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v)
or (vi) of the MLP Agreement, then, to the maximum extent permitted by law,
within 180 days thereafter, all of the Limited Partners may elect to
reconstitute the Partnership and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited partnership on
terms identical to those set forth in this Agreement and having as a General
partner a Person approved by a majority in interest of the Limited Partners. In
addition, upon dissolution of the Partnership pursuant to Section 12.1(f), if
the MLP is reconstituted pursuant to Section 12.2 of the MLP Agreement, the
reconstituted MLP may, within 180 days after such event of dissolution, acting
alone, regardless of whether there are any other Limited Partners, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partners or the MLP, as the case
may be, all Partners shall be bound thereby and shall be deemed to have approved
same. Unless such an election is made within the applicable time period as set
forth above, the Partnership shall conduct only activities necessary to wind up
its affairs. If such an election is so made, then:

                  (a) the reconstituted Partnership shall continue unless
dissolved in accordance with this Article XII;




                                      -53-

<PAGE>   59




                  (b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be purchased by
the successor General Partner or converted into Common Units as provided in the
MLP Agreement; and

                  (c) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and to enter into and, as
necessary, to file, a new partnership agreement and certificate of limited
partnership, and the successor General Partner may for this purpose exercise the
power of attorney granted the General Partner pursuant to Section 2.6; provided,
that the right to approve a successor General Partner and to reconstitute and to
continue the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of Counsel that (x) the
exercise of the right would not result in the loss of limited liability of the
Limited Partners or any limited partner of the MLP and (y) neither the
Partnership, the reconstituted limited partnership, nor the MLP would be treated
as an association taxable as a corporation or otherwise be taxable as an entity
for federal income tax purposes upon the exercise of such right to continue.

SECTION 12.3  Liquidator.

         Upon dissolution of the Partnership, unless the Partnership is
continued under an election to reconstitute and continue the Partnership
pursuant to Section 12.2, the General Partner shall select one or more Persons
to act as Liquidator. The Liquidator (if other than the General Partner) shall
be entitled to receive such compensation for its services as may be approved by
a majority of the Limited Partners. The Liquidator (if other than the General
Partner) shall agree not to resign at any time without 15 days' prior notice and
may be removed at any time, with or without cause, by notice of removal approved
by a majority in interest of the Limited Partners. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by at least a majority in interest
of the Limited Partners. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XII, the Liquidator approved in the
manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.




                                      -54-

<PAGE>   60




SECTION 12.4  Liquidation.

         The Liquidator shall proceed to dispose of the assets of the
Partnership, discharge its liabilities, and otherwise wind up its affairs in
such manner and over such period as the Liquidator determines to be in the best
interest of the Partners, subject to Section 17-804 of the Delaware Act and the
following:

                  (a) Disposition of Assets. The assets may be disposed of by
public or private sale or by distribution in kind to one or more Partners on
such terms as the Liquidator and such Partner or Partners may agree. If any
property is distributed in kind, the Partner receiving the property shall be
deemed for purposes of Section 12.4(c) to have received cash equal to its fair
market value; and contemporaneously therewith, appropriate cash distributions
must be made to the other Partners. The Liquidator may, in its absolute
discretion, defer liquidation or distribution of the Partnership's assets for a
reasonable time if it determines that an immediate sale or distribution of all
or some of the Partnership's assets would be impractical or would cause undue
loss to the Partners. The Liquidator may, in its absolute discretion, distribute
the Partnership's assets, in whole or in part, in kind if it determines that a
sale would be impractical or would cause undue loss to the Partners.

                  (b) Discharge of Liabilities. Liabilities of the Partnership
include amounts owed to the Liquidator as compensation for serving in such
capacity (subject to the terms of Section 12.3) and amounts owed to Partners
otherwise than in respect of their distribution rights under Article VI. With
respect to any liability that is contingent, conditional or unmatured or is
otherwise not yet due and payable, the Liquidator shall either settle such claim
for such amount as it thinks appropriate or establish a reserve of cash or other
assets to provide for its payment. When paid, any unused portion of the reserve
shall be distributed as additional liquidation proceeds.

                  (c) Liquidation Distributions. All property and all cash in
excess of that required to discharge liabilities as provided in Section 12.4(b)
shall be distributed to the Partners in accordance with, and to the extent of,
the positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).

SECTION 12.5 Cancellation of Certificate of Limited Partnership.

         Upon the completion of the distribution of Partnership cash and
property as provided in Section 12.4 in connection with the liquidation of the
Partnership, the Partnership shall be



                                      -55-

<PAGE>   61




terminated and the Certificate of Limited Partnership, and all qualifications of
the Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware, shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.

SECTION 12.6  Return of Contributions.

         No General Partner shall be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.

SECTION 12.7  Waiver of Partition.

         To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.

SECTION 12.8  Capital Account Restoration.

         No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. Each General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.

                                  ARTICLE XIII
                       AMENDMENT OF PARTNERSHIP AGREEMENT

SECTION 13.1 Amendment to be Adopted Solely by the General Partner.

         Each Partner agrees that the General Partner, without the approval of
any Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:

                  (a) a change in the name of the Partnership, the location of
the principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;

                  (b) admission, substitution, withdrawal or removal of Partners
in accordance with this Agreement;

                  (c) a change that, in the sole discretion of the General
Partner, is necessary or advisable to qualify or continue the qualification of
the Partnership as a limited partnership or a



                                      -56-

<PAGE>   62




partnership in which the Limited Partners have limited liability under the laws
of any state or to ensure that no Group Member will be treated as an association
taxable as a corporation or otherwise taxed as an entity for federal income tax
purposes;

                  (d) a change that, in the discretion of the General Partner,
(i) does not adversely affect the Limited Partners (including any particular
class of Partnership Interests as compared to other classes of Partnership
Interests) in any material respect, (ii) is necessary or advisable to (A)
satisfy any requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute (including the
Delaware Act) or (B) facilitate the trading of limited partner interests of the
MLP (including the division of any class or classes of outstanding limited
partner interests of the MLP into different classes to facilitate uniformity of
tax consequences within such classes of limited partner interests of the MLP) or
comply with any rule, regulation, guideline or requirement of any National
Securities Exchange on which such limited partner interests are or will be
listed for trading, compliance with any of which the General Partner determines
in its discretion to be in the best interests of the MLP and the limited
partners of the MLP, (iii) is required to effect the intent expressed in the
Registration Statement or the intent of the provisions of this Agreement or is
otherwise contemplated by this Agreement or (iv) is required to conform the
provisions of this Agreement with the provisions of the MLP Agreement as the
provisions of the MLP Agreement may be amended, supplemented or restated from
time to time;

                  (e) a change in the fiscal year or taxable year of the
Partnership and any changes that, in the discretion of the General Partner, are
necessary or advisable as a result of a change in the fiscal year or taxable
year of the Partnership including, if the General Partner shall so determine, a
change in the definition of "Quarter" and the dates on which distributions are
to be made by the Partnership;

                  (f) an amendment that is necessary, in the Opinion of Counsel,
to prevent the Partnership, or the General Partner or its general partner's
directors, officers, trustees or agents from in any manner being subjected to
the provisions of the Investment Company Act of 1940, as amended, the Investment
Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the
Employee Retirement Income Security Act of 1974, as amended, regardless of
whether such are substantially similar to plan asset regulations currently
applied or proposed by the United States Department of Labor;

                  (g) any amendment expressly permitted in this Agreement to be
made by the General Partner acting alone;

                  (h) an amendment effected, necessitated or contemplated by a
Merger Agreement approved in accordance with Section 14.3;




                                      -57-

<PAGE>   63




                  (i) an amendment that, in the discretion of the General
Partner, is necessary or advisable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 2.4;

                  (j) a merger or conveyance pursuant to Section 14.3(d); or

                  (k) any other amendments substantially similar to the
foregoing.

SECTION 13.2  Amendment Procedures.

         Except with respect to amendments of the type described in Section
13.1, all amendments to this Agreement shall be made in accordance with the
following requirements: Amendments to this Agreement may be proposed only by or
with the consent of the General Partner, which consent may be given or withheld
in its sole discretion. A proposed amendment shall be effective upon its
approval by the Limited Partner.



                                   ARTICLE XIV
                                     MERGER

SECTION 14.1  Authority.

         The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.

SECTION 14.2  Procedure for Merger or Consolidation.

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

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




                                      -58-

<PAGE>   64




                  (b) The name and jurisdiction of formation or organization of
the business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");

                  (c) The terms and conditions of the proposed merger or
consolidation;

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

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

                  (f) The effective time of the merger, which may be the date of
the filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and

                  (g) Such other provisions with respect to the proposed merger
or consolidation as are deemed necessary or appropriate by the General Partner.

SECTION 14.3 Approval by Limited Partners of Merger or Consolidation.

                  (a) Except as provided in Section 14.3(d), the General
Partner, upon its approval of the Merger Agreement, shall direct that the Merger
Agreement be submitted to a vote of the Limited Partners, whether at a special
meeting or by written consent, in either case in accordance with the
requirements of Article XIII. A copy or a summary of the Merger Agreement shall
be included in or enclosed with the notice of a special meeting or the written
consent.



                                      -59-

<PAGE>   65





                  (b) Except as provided in Section 14.3(d), the Merger
Agreement shall be approved upon receiving the affirmative vote or consent of
the Limited Partners.

                  (c) Except as provided in Section 14.3(d), after such approval
by vote or consent of the Limited Partners, and at any time prior to the filing
of the certificate of merger pursuant to Section 14.4, the merger or
consolidation may be abandoned pursuant to provisions therefor, if any, set
forth in the Merger Agreement.

                  (d) Notwithstanding anything else contained in this Article
XIV or in this Agreement, the General Partner is permitted, in its discretion,
without Limited Partner approval, to merge the Partnership or any Group Member
into, or convey all of the Partnership's assets to, another limited liability
entity which shall be newly formed and shall have no assets, liabilities or
operations at the time of such Merger other than those it receives from the
Partnership or other Group Member if (i) the General Partner has received an
Opinion of Counsel that the merger or conveyance, as the case may be, would not
result in the loss of the limited liability of any Limited Partner, any limited
partner in the MLP or cause the Partnership or the MLP or the to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such),
(ii) the sole purpose of such merger or conveyance is to effect a mere change in
the legal form of the Partnership into another limited liability entity and
(iii) the governing instruments of the new entity provide the Limited Partners
and the General Partner with the same rights and obligations as are herein
contained.

SECTION 14.4  Certificate of Merger.

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

SECTION 14.5  Effect of Merger.

                  (a) At the effective time of the certificate of merger:

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




                                      -60-

<PAGE>   66




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

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

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

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

                                   ARTICLE XV
                               GENERAL PROVISIONS

SECTION 15.1  Addresses and Notices.

         Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner at the address described below. Any notice to the
Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be protected in relying on any notice or
other document from a Partner, Assignee or other Person if believed by it to be
genuine.

SECTION 15.2  Further Action.

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

SECTION 15.3  Binding Effect.

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




                                      -61-

<PAGE>   67




SECTION 15.4  Integration.

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

SECTION 15.5  Creditors.

         None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Partnership.

SECTION 15.6  Waiver.

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

SECTION 15.7  Counterparts.

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

SECTION 15.8  Applicable Law.

         This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of conflicts
of law.

SECTION 15.9  Invalidity of Provisions.

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

SECTION 15.10 Consent of Partners.

         Each Partner hereby expressly consents and agrees that, whenever in
this Agreement it is specified that an action may be taken upon the affirmative
vote or consent of less than all of the



                                      -62-

<PAGE>   68




Partners, such action may be so taken upon the concurrence of less than all of
the Partners and each Partner shall be bound by the results of such action.







                 The Rest of this Page Intentionally Left Blank





                                      -63-

<PAGE>   69



         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                                    GENERAL PARTNER:

                                    RIVERWALK LOGISTICS, L.P.

                                    By: Shamrock Logistics GP, LLC
                                          its general partner


                                    By:
                                        ---------------------------------
                                    Name:
                                         --------------------------------
                                    Title:
                                          -------------------------------

                                    ORGANIZATIONAL LIMITED PARTNER

                                    By:
                                        ---------------------------------
                                        Todd Walker

                                    LIMITED PARTNER:

                                    SHAMROCK LOGISTICS, L.P.

                                    By: Riverwalk Logistics, L.P.
                                          its General Partner

                                    By: Shamrock Logistics GP, LLC
                                          its General Partner

                                    By:
                                       -----------------------------------
                                    Name:
                                         ---------------------------------
                                    Title:
                                          --------------------------------




                                      -64-




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>3
<FILENAME>h79326a3ex5-1.txt
<DESCRIPTION>FORM OF OPINION OF ANDREWS & KURTH L.L.P.
<TEXT>

<PAGE>   1


                       [Andrews & Kurth L.L.P. Letterhead]


                                     , 2001




Shamrock Logistics, L.P.
6000 North Loop 1604 West
San Antonio, Texas 78249-1112

Gentlemen:

                  We have acted as special counsel to Shamrock Logistics, L.P.,
a Delaware limited partnership (the "Partnership"), Riverwalk Logistics, L.P., a
Delaware limited partnership and the general partner of the Partnership (the
"General Partner"), and Shamrock Logistics GP, LLC, a Delaware limited liability
company and the general partner of the General Partner, in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of the
offering and sale of up to an aggregate of 4,600,000 common units representing
limited partner interests in the Partnership (the "Common Units").

                  As the basis for the opinion hereinafter expressed, we have
examined such statutes, regulations, corporate records and documents,
certificates of corporate and public officials, and other instruments as we have
deemed necessary or advisable for the purposes of this opinion. In such
examination we have assumed the authenticity of all documents submitted to us as
originals and the conformity with the original documents of all documents
submitted to us as copies.

                  Based on the foregoing and on such legal considerations as we
deem relevant, we are of the opinion that:

                  1. The Partnership has been duly formed and is validly
existing as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act").

                  2. The Common Units will, when issued and paid for as
described in the Partnership's Registration Statement on Form S-1 (File No.
333-43668) relating to the Common Units, as amended, be duly authorized, validly
issued, fully paid and nonassessable, except as such nonassessability may be
affected by the matters described below:



         o        If a court were to determine that the right or exercise of the
                  right under the Second Amended and Restated Agreement of
                  Limited Partnership of the Partnership (the "Partnership
                  Agreement") by the holders of Common Units and subordinated
                  units (the "Limited Partners") of the Partnership as a group
                  (i) to remove or replace the General


<PAGE>   2
Shamrock Logistics, L.P.
                    ,2001
Page 2

                  Partner, (ii) to approve certain amendments to the Partnership
                  Agreement or (iii) to take certain other actions under the
                  Partnership Agreement that constitute "participation in the
                  control" of the Partnership's business for the purposes of the
                  Delaware Act, then the Limited Partners could be held
                  personally liable for the Partnership's obligations under the
                  laws of Delaware, to the same extent as the General Partner
                  with respect to persons who transact business with the
                  Partnership reasonably believing, based on the conduct of any
                  of the Limited Partners, that such Limited Partner is a
                  general partner.

         o        Section 17-607 of the Delaware Act provides that a limited
                  partner who receives a distribution and knew at the time of
                  the distribution that it was made in violation of the Delaware
                  Act shall be liable to the limited partnership for three years
                  for the amount of the distribution.

         o        Limitations on the liability of limited partners for the
                  obligations of a limited partner have not been clearly
                  established in many jurisdictions. If a court were to
                  determine that the Partnership was, by virtue of its limited
                  partner interest in Shamrock Logistics Operations, L.P. or
                  otherwise, conducting business in any state without compliance
                  with the applicable limited partnership statute, then the
                  Limited Partners could be held personally liable for the
                  Partnership's obligations under the law of that jurisdiction
                  to the same extent as the General Partner under the
                  circumstances.

         This opinion is limited in all respects to the Delaware Act and the
federal laws of the United States of America insofar as such laws are
applicable.

         We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Validity of
the Common Units" in the Prospectus. In giving such consent, we do not hereby
admit that we are in the category of such persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended.


                                       Very truly yours,



                                       /s/ Andrews & Kurth L.L.P.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>h79326a3ex10-1.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.1


================================================================================


                                CREDIT AGREEMENT


                                   DATED AS OF

                                DECEMBER 15, 2000


                                      AMONG


                       SHAMROCK LOGISTICS OPERATIONS, L.P.


                            THE LENDERS PARTY HERETO


                                       AND


                            THE CHASE MANHATTAN BANK,
                             AS ADMINISTRATIVE AGENT


                              ROYAL BANK OF CANADA,
                              AS SYNDICATION AGENT


                                 SUNTRUST BANK,
                             AS DOCUMENTATION AGENT


                             CHASE SECURITIES INC.,
                                   AS ARRANGER


================================================================================


<PAGE>   2



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----
                                      ARTICLE I

                                     Definitions

<S>            <C>                                                                <C>
SECTION 1.01.  Defined Terms.........................................................1
SECTION 1.02.  Classification of Loans and Borrowings...............................15
SECTION 1.03.  Terms Generally......................................................15
SECTION 1.04.  Accounting Terms; GAAP...............................................16

                                     ARTICLE II

                                     The Credits

SECTION 2.01.  Commitments..........................................................16
SECTION 2.02.  Loans and Borrowings.................................................16
SECTION 2.03.  Requests for Borrowings..............................................17
SECTION 2.04.  Letters of Credit....................................................18
SECTION 2.05.  Funding of Borrowings................................................21
SECTION 2.06.  Interest Elections...................................................21
SECTION 2.07.  Termination and Reduction of Commitments.............................22
SECTION 2.08.  Repayment of Loans; Evidence of Debt.................................23
SECTION 2.09.  Prepayment of Loans..................................................23
SECTION 2.10.  Fees.................................................................24
SECTION 2.11.  Interest.............................................................25
SECTION 2.12.  Alternate Rate of Interest...........................................25
SECTION 2.13.  Increased Costs......................................................26
SECTION 2.14.  Break Funding Payments...............................................26
SECTION 2.15.  Taxes................................................................27
SECTION 2.16.  Payments Generally; Pro Rata Treatment; Sharing of Set-offs..........28
SECTION 2.17.  Mitigation Obligations; Replacement of Lenders.......................29
SECTION 2.18.  Procedures Regarding Increases to the Commitments....................29

                                     ARTICLE III

                           Representations and Warranties

SECTION 3.01.  Organization; Powers.................................................32
SECTION 3.02.  Authorization; Enforceability........................................32
SECTION 3.03.  Governmental Approvals; No Conflicts.................................32
SECTION 3.04.  Financial Condition; No Material Adverse Change......................32
SECTION 3.05.  Properties...........................................................33
SECTION 3.06.  Litigation and Environmental Matters.................................33
SECTION 3.07.  Compliance with Laws and Agreements..................................33
SECTION 3.08.  Investment and Holding Company Status................................33
SECTION 3.09.  Taxes................................................................33
SECTION 3.10.  ERISA................................................................33
SECTION 3.11.  Disclosure...........................................................34
</TABLE>


                                       -i-
<PAGE>   3



<TABLE>
<S>            <C>                                                                <C>
SECTION 3.12.  Investments and Guarantees...........................................34
SECTION 3.13.  Subsidiaries.........................................................34
SECTION 3.14.  Casualties; Taking of Property.......................................34

                                     ARTICLE IV

                                     Conditions

SECTION 4.01.  Effective Date.......................................................34
SECTION 4.02.  Each Credit Event....................................................35

                                      ARTICLE V

                                Affirmative Covenants

SECTION 5.01.  Financial Statements and Other Information...........................36
SECTION 5.02.  Notices of Material Events...........................................37
SECTION 5.03.  Existence; Conduct of Business.......................................38
SECTION 5.04.  Payment of Obligations...............................................38
SECTION 5.05.  Maintenance of Properties; Insurance.................................38
SECTION 5.06.  Books and Records; Inspection Rights.................................38
SECTION 5.07.  Compliance with Laws.................................................38
SECTION 5.08.  Use of Proceeds and Letters of Credit................................38
SECTION 5.09.  Environmental Laws...................................................39
SECTION 5.10.  Clean-Down...........................................................39
SECTION 5.11.  Subsidiaries.........................................................39

                                     ARTICLE VI

                                 Negative Covenants

SECTION 6.01.  Indebtedness.........................................................39
SECTION 6.02.  Liens................................................................40
SECTION 6.03.  Fundamental Changes..................................................40
SECTION 6.04.  Investments, Loans, Advances, Guarantees and Acquisitions............41
SECTION 6.05.  Hedging Agreements...................................................41
SECTION 6.06.  Restricted Payments..................................................41
SECTION 6.07.  Transactions with Affiliates.........................................41
SECTION 6.08.  Restrictive Agreements...............................................41
SECTION 6.09.  Limitation on Modifications of Other Agreements......................42
SECTION 6.10.  Creation of Subsidiaries.............................................42
SECTION 6.11.  Financial Condition Covenants........................................42

                                     ARTICLE VII

                                  Events of Default
</TABLE>



                                        -ii-
<PAGE>   4



<TABLE>
<S>            <C>                                                                <C>
                                    ARTICLE VIII

                              The Administrative Agent


                                     ARTICLE IX

                                    Miscellaneous

SECTION 9.01.  Notices..............................................................46
SECTION 9.02.  Waivers; Amendments..................................................46
SECTION 9.03.  Expenses; Indemnity; Damage Waiver...................................47
SECTION 9.04.  Successors and Assigns...............................................48
SECTION 9.05.  Survival.............................................................50
SECTION 9.06.  Counterparts; Integration; Effectiveness.............................50
SECTION 9.07.  Severability.........................................................50
SECTION 9.08.  Right of Setoff......................................................50
SECTION 9.09.  Governing Law; Jurisdiction; Consent to Service of Process...........51
SECTION 9.10.  WAIVER OF JURY TRIAL.................................................51
SECTION 9.11.  Headings.............................................................51
SECTION 9.12.  Confidentiality......................................................51
SECTION 9.13.  Interest Rate Limitation.............................................52
</TABLE>


SCHEDULES:
----------

Schedule 2.01 -  Commitments
Schedule 3.06 -  Disclosed Matters
Schedule 3.13 -  Subsidiaries
Schedule 6.07 -  Affiliate Agreements
Schedule 6.08 -  Existing Restrictions



EXHIBITS:
---------

Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Borrower's Counsel
Exhibit C-1 -- Form of Initial Notice of Commitment Increase
Exhibit C-2 -- Form of Confirmation of Commitment Increase
Exhibit D -- Form of Guaranty Agreement








                                        -iii-
<PAGE>   5



         CREDIT AGREEMENT dated as of December 15, 2000, among SHAMROCK
LOGISTICS OPERATIONS, L.P., a Delaware limited partnership, the LENDERS party
hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent, ROYAL BANK OF
CANADA, as Syndication Agent, and SUNTRUST BANK, as Documentation Agent.

                  The parties hereto agree as follows:


                                    ARTICLE I

                                   Definitions

                  SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:

                  "ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.

                  "Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.

                  "Administrative Agent" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.

                  "Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.

                  "Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.

                  "Alternate Base Rate" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.

                  "Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.

                  "Applicable Rate" means, (a) with respect to the facility fee
for the period from the Closing Date until the Effective Date, a rate per annum
equal to 0.10%, (b) for any day prior to the date the Borrower obtains a rating
on its Index Debt from either Moody's or S&P, with respect to any ABR Loan or
Eurodollar Loan, or with respect to the facility fees payable hereunder after
the Effective Date, as the case may be, the applicable rate per annum set forth
below under the caption "ABR Spread", "Eurodollar Spread" or "Facility Fee
Rate", as the case may be, based upon the Consolidated Debt Coverage Ratio for
the Rolling Period

                                       -1-
<PAGE>   6



ending on the last day of the most recent fiscal quarter with respect to which
the Administrative Agent has received the financial statements and other
information (the "Current Information") required to be delivered to the
Administrative Agent pursuant to Section 5.01 and the calculation showing the
then Applicable Rate (such calculation to be made by the Borrower as soon as
practicable after the end of each fiscal quarter, with written notice by the
Borrower to the Administrative Agent, as soon as practicable thereafter, whether
the Applicable Rate has changed or is to remain constant for the applicable
period):


<TABLE>
<CAPTION>
     CONSOLIDATED DEBT COVERAGE            ABR           EURODOLLAR       FACILITY FEE
               RATIO:                    SPREAD            SPREAD             RATE
     --------------------------          ------          ----------       ------------
<S>                                      <C>             <C>              <C>
               Tier 1

Less than or equal to 1.50:1.00           0.00%             0.70%           0.175%

               Tier 2

Greater than 1.50:1.00 and less           0.00%             0.80%           0.200%
than or equal to 2.50:1.00

               Tier 3

Greater than 2.50:1.00                    0.00%             1.00%           0.250%
</TABLE>


Each change in the Applicable Rate based on a change in the Current Information
shall become effective on the date on which Current Information is delivered to
the Lenders pursuant to Section 5.01 (but in any event not later than the 45th
day after the end of each of the first three quarterly periods of each fiscal
year or the 90th day after the end of each fiscal year, as the case may be) and
shall remain in effect until the next change to be effected pursuant to this
paragraph. If any Current Information is not delivered within the time periods
specified in Section 5.01, then, until such Current Information is delivered,
the Consolidated Debt Coverage Ratio at the end of the Rolling Period that would
have been covered thereby shall for the purposes of this definition be deemed to
be greater than 2.50 to 1.00 and (c) for any day after the Borrower has obtained
a rating on its Index Debt from either Moody's or S&P, with respect to any ABR
Loan or Eurodollar Loan, or with respect to the facility fees payable hereunder
after the Effective Date, as the case may be, the applicable rate per annum set
forth below under the caption "ABR Spread", "Eurodollar Spread" or "Facility Fee
Rate", as the case may be, based upon the ratings by Moody's and/or S&P,
respectively, applicable on such date to the Index Debt:



                                       -2-
<PAGE>   7


<TABLE>
<CAPTION>
                                           ABR           EURODOLLAR       FACILITY FEE
         INDEX DEBT RATINGS:             SPREAD            SPREAD             RATE
     --------------------------          ------          ----------       ------------
<S>                                      <C>             <C>              <C>

               Tier 1

      Greater than or equal to
              BBB/Baa2                    0.00%            0.70%            0.175%

               Tier 2

         Equal to BBB-/Baa3               0.00%            0.80%             0.20%

               Tier 3

         Less than BBB-/Baa3              0.00%            1.00%             0.25%
</TABLE>

For purposes of the foregoing, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (after having established such a rating and
other than by reason of the circumstances referred to in the last sentence of
this definition), then such rating agency shall be deemed to have established a
rating in Tier 3; (ii) if both Moody's and S&P have established a rating for the
Index Debt and such ratings established or deemed to have been established by
Moody's and S&P shall fall within different Tiers, the Applicable Rate shall be
based on the higher of the two ratings unless one of the two ratings is two or
more Tiers lower than the other, in which case the Applicable Rate shall be
determined by reference to the Tier next below that of the higher of the two
ratings; and (iii) if the ratings established or deemed to have been established
by Moody's and S&P for the Index Debt shall be changed (other than as a result
of a change in the rating system of Moody's or S&P), such change shall be
effective as of the date on which it is first announced by the applicable rating
agency. Each change in the Applicable Rate shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of Moody's or S&P shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt obligations, the Borrower
and the Lenders shall negotiate in good faith to amend this definition to
reflect such changed rating system or the unavailability of ratings from such
rating agency and, pending the effectiveness of any such amendment, the
Applicable Rate shall be determined by reference to the rating most recently in
effect prior to such change or cessation.

                  "Assessment Rate" means, for any day, the annual assessment
rate in effect on such day that is payable by a member of the Bank Insurance
Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.

                  "Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.

                  "Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.

                  "Base CD Rate" means the sum of (a) the Three-Month Secondary
CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.


                                       -3-
<PAGE>   8



                  "Board" means the Board of Governors of the Federal Reserve
System of the United States of America.

                  "Borrower" means Shamrock Logistics Operations, L.P., a
Delaware limited partnership.

                  "Borrowing" means Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.

                  "Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.03.

                  "Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.

                  "Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

                  "Change in Control" means any of the following events:

                  (a) UDS shall cease, indirectly or directly, (i) to own 100%
of the issued and outstanding Equity Interest of the general partner(s) of the
Limited Partner or of the Borrower or; (ii) to own at least 20% of the
outstanding Units; or

                  (b) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding UDS and its wholly-owned Subsidiaries, shall become,
or obtain rights (whether by means of warrants, options or otherwise) to become,
the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of more than the percentage of the
outstanding Units owned, directly or indirectly, by UDS; or

                  (c) 100% of the limited partnership interests of the Borrower
shall cease to be owned, directly or indirectly, by the Limited Partner or UDS.

                  "Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.13(b), by any lending office of
such Lender or by such Lender's or the Issuing Bank's holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.

                  "Class", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are General
Revolving Loans or Working Capital Revolving Loans.

                  "Closing Date" means the date set forth in the first paragraph
of this Agreement.

                  "Code" means the Internal Revenue Code of 1986, as amended
from time to time.


                                       -4-
<PAGE>   9



                  "Commitment" means, with respect to each Lender, such Lender's
General Revolving Commitment and Working Capital Revolving Commitment. The
initial aggregate amount of the Lenders' Commitments is $120,000,000. The
Working Capital Revolving Commitments are a subset of the General Revolving
Commitments and the maximum amount of the Commitments is equal to the maximum
amount of the General Revolving Commitments.

                  "Commitment Increase Effective Date" has the meaning assigned
such term in Section 2.18.

                  "Common Units" means the common units of limited partner
interests in the Limited Partner.

                  "Consolidated Debt Coverage Ratio" means, for any day, the
ratio of (a) all Indebtedness of the Borrower and its Subsidiaries, on a
consolidated basis, as of the last day of the then most recent Rolling Period
over (b) Consolidated EBITDA for such Rolling Period.

                  "Consolidated EBITDA" means, without duplication, as to the
Borrower and its Subsidiaries, on a consolidated basis for each Rolling Period,
the amount equal to Consolidated Operating Income for such period plus (a)
depreciation and amortization for such period, (b) cash distributions received
by the Borrower from Skelly-Belvieu Pipeline Company during such period, and (c)
any loss resulting from volumetric expansions, contractions and measurement
discrepancies for such period with respect to the pipelines of the Borrower and
its Subsidiaries minus any gain resulting from volumetric expansions,
contractions and measurement discrepancies for such period with respect to the
pipelines of the Borrower and its Subsidiaries; provided that Consolidated
EBITDA shall be adjusted from time to time as necessary to give pro forma effect
to permitted acquisitions or Investments (other than Joint Venture Interests) or
sales of property by the Borrower and its Subsidiaries.

                  "Consolidated Interest Coverage Ratio" means, for any day, the
ratio of (i) Consolidated EBITDA for the then most recent Rolling Period to (ii)
Consolidated Interest Expense for such Rolling Period.

                  "Consolidated Interest Expense" means, for any Rolling Period,
total interest expense (including that attributable to Capital Lease
Obligations) of the Borrower and its Subsidiaries for such period with respect
to all outstanding Indebtedness of the Borrower and its Subsidiaries (including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs under any Hedging Agreements to the extent such net costs are allocable to
such period in accordance with GAAP).

                  "Consolidated Operating Income" means, as to the Borrower and
its Subsidiaries on a consolidated basis for each Rolling Period, the amount
equal to gross income minus operating expenses, general and administrative
expenses, depreciation and amortization, and taxes other than income taxes, in
each case for such period.

                  "Consolidated Tangible Net Worth" means, at any time, an
amount equal to (a) the consolidated partners' equity of the Borrower and its
Subsidiaries, plus (b) the aggregate amount of any non- cash write downs, on a
consolidated basis, of the Borrower and its Subsidiaries during the term hereof,
less (c) the sum of the amount of consolidated intangible assets of the Borrower
and its Subsidiaries as of the date of determination plus the aggregate amount
of any non-cash write ups, on a consolidated basis, of the Borrower and its
Subsidiaries during the term hereof.

                  "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.


                                       -5-
<PAGE>   10


                  "Current Information" has the meaning assigned to such term in
the definition of "Applicable Rate".

                  "Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.

                  "Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 3.06.

                  "dollars" or "$" refers to lawful money of the United States
of America.

                  "Effective Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
9.02).

                  "Environmental Approvals" means any Governmental Approvals
required under applicable Environmental Laws.

                  "Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.

                  "Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

                  "Equity Interest" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any member interests in a limited liability company, and general or
limited partnership interests in a partnership, any and all equivalent ownership
interests in a Person and any and all warrants, options or other rights to
purchase any of the foregoing. In addition, "Equity Interest" shall include,
without limitation, with respect to the Borrower, the limited partner interests
of the Borrower and the General Partner Interests and, with respect to the
Limited Partner, the Units and the general partner interest of the Limited
Partner.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.

                  "ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

                  "ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to


                                       -6-
<PAGE>   11


Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (d) the
incurrence by the Borrower or any of its ERISA Affiliates of any liability under
Title IV of ERISA with respect to the termination of any Plan; (e) the receipt
by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of
any notice relating to an intention to terminate any Plan or Plans or to appoint
a trustee to administer any Plan; (f) the incurrence by the Borrower or any of
its ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the
Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

                  "Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.

                  "Event of Default" has the meaning assigned to such term in
Article VII.

                  "Excluded Taxes" means, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.15(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.15(a).

                  "Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.

                  "Financial Officer" means the chief accounting and financial
officer, treasurer or controller of the Borrower.

                  "Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

                  "Form S-1" means the Form S-1 Registration Statement of the
Limited Partner as filed with the Securities and Exchange Commission on August
14, 2000, as amended.

                  "GAAP" means generally accepted accounting principles in the
United States of America.


                                       -7-
<PAGE>   12


                  "General Partner" means Riverwalk Logistics, L.P., a Delaware
limited partnership.

                  "General Partner Interest" means all general partner interests
in the Borrower.

                  "General Revolving Commitment" means, with respect to each
Lender, the commitment of such Lender to make General Revolving Loans and to
acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's General Revolving
Credit Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.07, (b) increased from time to time pursuant to
Section 2.18 and (c) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount of
each Lender's General Revolving Commitment is set forth on Schedule 2.01, or in
the Assignment and Acceptance pursuant to which such Lender shall have assumed
its General Revolving Commitment, as applicable. The initial aggregate amount of
the Lenders' General Revolving Commitments is $125,000,000.

                  "General Revolving Credit Exposure" means, with respect to any
Lender at any time, the sum of the outstanding principal amount of such Lender's
General Revolving Loans and its LC Exposure at such time.

                  "General Revolving Loan" has the meaning assigned to such term
in Section 2.01(b).

                  "Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

                  "Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

                  "Guarantor" means each Person that from time to time executes
and delivers a Guaranty.

                  "Guaranty" means any guaranty executed and delivered pursuant
to Section 5.11, as from time to time amended, modified, or supplemented.

                  "Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

                  "Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.


                                       -8-
<PAGE>   13


                  "Increasing Lender" has the meaning assigned to such term in
Section 2.18.

                  "Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments or by any other securities providing
for the mandatory payment of money (including, without limitation, preferred
stock subject to mandatory redemption or sinking fund provisions), (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (e) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations of such Person as a lessee of any real or personal property (or
any interest therein) which have been recorded as operating lease obligations in
accordance with GAAP and in connection with which, for federal income tax
purposes, the property that is leased pursuant thereto is treated as being owned
in fee or subject to a Capital Lease by such Person, (j) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty, (k) all obligations, contingent or
otherwise, of such Person in respect of bankers' acceptances, (l) all
obligations of such Person with respect to any arrangement, directly or
indirectly, whereby such Person or its Subsidiaries shall sell or transfer any
material asset, and whereby such Person or any of its Subsidiaries shall then or
immediately thereafter rent or lease as lessee such asset or any part thereof,
(m) all recourse and support obligations of such Person or any of its
Subsidiaries with respect to the sale or discount of any of its accounts
receivable, and (n) all obligations of such Person or any of its Subsidiaries
with respect to any arrangement for the purchase of materials, supplies, other
property or services if such arrangement by its express terms requires that
payment be made by the Borrower or such Subsidiary regardless of whether such
materials, supplies, other property or services are delivered or furnished to
it. The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

                  "Indemnified Taxes" means Taxes other than Excluded Taxes.

                  "Index Debt" means senior, unsecured, long-term indebtedness
for borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any other credit enhancement.

                  "Information Memorandum" means the Confidential Information
Memorandum dated September 2000 relating to the Borrower and the Transactions.

                  "Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.06.

                  "Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each March, June, September and December and (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period.

                  "Interest Period" means with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that


                                       -9-
<PAGE>   14


is one, two, three or six months thereafter, as the Borrower may elect;
provided, that (i) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, in the case of a Eurodollar Borrowing only, such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period pertaining to a Eurodollar Borrowing that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period. For
purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and, in the case of a Borrowing, thereafter shall be the
effective date of the most recent conversion or continuation of such Borrowing.

                  "Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by such Person of any Equity Interests in
any other Person, or any direct or indirect loan, advance or capital
contribution by such Person to any other Person, including all Indebtedness and
receivables from such other Person which are not current assets or did not arise
from sales to such other Person in the ordinary course of business, and any
direct or indirect purchase or other acquisition by such Person of any assets
(other than any acquisition of assets in the ordinary course of business).

                  "Issuing Bank" means The Chase Manhattan Bank, in its capacity
as the issuer of Letters of Credit hereunder, and its successors in such
capacity as provided in Section 2.04(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the Issuing Bank, in which case the term "Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.

                  "Joint Venture Interest" means an acquisition of or Investment
in Equity Interests in another Person, held directly or indirectly by the
Borrower, that will not be a Subsidiary after giving effect to such acquisition
or Investment.

                  "LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.

                  "LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.

                  "Lenders" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.

                  "Letter of Credit" means any letter of credit issued pursuant
to this Agreement.

                  "LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in


                                      -10-
<PAGE>   15


immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

                  "Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

                  "Limited Partner" means Shamrock Logistics, L.P., a Delaware
limited partnership.

                  "Loan" means each General Revolving Loan or each Working
Capital Revolving Loan.

                  "Loan Documents" means this Agreement, the Guaranty, any notes
issued pursuant to Section 2.08(e), any Letter of Credit, any Hedging Agreement,
in the form delivered to the Administrative Agent on the Effective Date, as each
such agreement may be amended, supplemented or otherwise modified from time to
time as permitted hereby, and any and all instruments, certificates, or other
agreements delivered in connection with the foregoing.

                  "Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations or condition (financial or otherwise) of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under this Agreement or (c) the
rights of or benefits available to the Lenders under this Agreement.

                  "Material Agreements" means the Partnership Agreement
(Borrower), the Transportation Agreement and the Omnibus Agreement, as each such
agreement may be amended, supplemented or otherwise modified from time to time
as permitted hereby.

                  "Material Indebtedness" means Indebtedness (other than the
Loans and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and its Subsidiaries in an
aggregate principal amount exceeding $10,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Hedging Agreement
were terminated at such time.

                  "Maturity Date" means the earlier of the date that is 5 years
from the Effective Date and January 15, 2006.

                  "Moody's" means Moody's Investors Service, Inc. (or any
successor rating organization).

                  "Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.

                  "New Funds Amount" means the amount by which a New Lender's or
an Increasing Lender's outstanding Loans increase as of a Commitment Increase
Effective Date (without regard to any such increase as a result of Borrowings
made on such Commitment Increase Effective Date).

                  "New Lender" has the meaning assigned to such term in Section
2.18.

                  "Notice of Commitment Increase" has the meaning assigned to
such term in Section 2.18.


                                      -11-
<PAGE>   16


                  "Omnibus Agreement" means the Omnibus Agreement among UDS, the
General Partner, the Limited Partner and the Borrower in the form previously
provided to the Lenders, as amended, modified and supplemented from time to time
in accordance herewith.

                  "Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.

                  "Partially Increasing Lender" has the meaning assigned to such
term in Section 2.18.

                  "Partnership Agreement (Borrower)" means the Agreement of
Limited Partnership of the Borrower among the General Partner and the Limited
Partner in the form previously provided to the Lenders, as amended, modified and
supplemented from time to time in accordance herewith.

                  "Partnership Agreement (MLP)" means the Amended and Restated
Agreement of Limited Partnership of the Limited Partner among the General
Partner and Todd Walker, as the organizational limited partner, together with
any other Persons who become partners in such partnership, as amended, modified
and supplemented from time to time in accordance herewith.

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.

                  "Permitted Encumbrances" means:

                  (a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04;

                  (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.04;

                  (c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;

                  (d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business;

                  (e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII; and

                  (f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any Subsidiary;

provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.


                                      -12-
<PAGE>   17


                  "Permitted Investments" means:

                  (a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

                  (b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;

                  (c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of not
less than $500,000,000; and

                  (d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above.

                  "Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.

                  "Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.

                  "Prime Rate" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly announced
as being effective.

                  "Reducing Lender" has the meaning assigned to such term in
Section 2.18.

                  "Reduction Amount" means the amount by which a Reducing
Lender's or a Partially Increasing Lender's outstanding Loans decrease as of a
Commitment Increase Effective Date (without regard to any such increase as a
result of Borrowings made on such Commitment Increase Effective Date).

                  "Refinery Assets" means the refineries and related assets of
UDS or its Affiliates that accept crude oil, feedstock or ship product pursuant
to the Transportation Agreement.

                  "Register" has the meaning set forth in Section 9.04.

                  "Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.

                  "Required Lenders" means, at any time, Lenders having
Revolving Credit Exposures and unused Commitments representing at least 66 2/3%
of the sum of the total Revolving Credit Exposures and unused Commitments at
such time.

                  "Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property, with the exception of a Unit
split, combination, or dividend, in each case so long as the only


                                      -13-
<PAGE>   18


consideration paid in connection therewith is an in-kind payment of additional
Units) with respect to any Equity Interest of the Borrower or any Subsidiary, or
any payment (whether in cash, securities or other property, with the exception
of a Unit split, combination, or dividend, in each case so long as the only
consideration paid in connection therewith is an in-kind payment of additional
Units), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such Equity Interest of the Borrower or any option, warrant or other right
to acquire any such Equity Interest of the Borrower.

                  "Revolving Credit Exposure" means, with respect to any Lender
at any time, the sum of the outstanding principal amount of such Lender's
Working Capital Revolving Loans and its General Revolving Credit Exposure at
such time.

                  "Rolling Period" means any period of four consecutive fiscal
quarters.

                  "S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill Companies, Inc. (or any successor rating organization).

                  "Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal
time deposits in dollars of over $100,000 with maturities approximately equal to
three months, in the case of the Base CD Rate, and (b) with respect to the
Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

                  "Subordinated Units" means the subordinated units of limited
partner interests in the Limited Partner.

                  "subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.

                  "Subsidiary" means any subsidiary of the Borrower.

                  "Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.

                  "Transactions" means the execution, delivery and performance
by the Borrower of this Agreement, the borrowing of Loans, the use of the
proceeds thereof and the issuance of Letters of Credit hereunder.


                                      -14-
<PAGE>   19


                  "Transportation Agreement" means the Pipeline and Terminals
Usage Agreement by and among UDS and certain of its Affiliates and the Borrower
dated effective July 1, 2000.

                  "Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.

                  "UDS" means Ultramar Diamond Shamrock Corporation, a Delaware
corporation.

                  "UDS Logistics Business" means the major portion of UDS's
crude oil and refined product pipelines, terminalling and storage assets and its
related business enterprise including interstate and intrastate crude oil and
refined product pipelines, refined product terminals, crude and refined product
storage facilities and related marketing operations previously owned by
subsidiaries of UDS and Affiliated Persons and located in the states of Texas,
Oklahoma, Colorado, and New Mexico.

                  "Units" means the collective reference to the Common Units and
the Subordinated Units.

                  "Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

                  "Working Capital Revolving Commitment" means, with respect to
each Lender, the commitment of such Lender to make Working Capital Revolving
Loans hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Working Capital Loans hereunder, as such commitment may
be (a) reduced from time to time pursuant to Section 2.07, (b) increased from
time to time pursuant to Section 2.18 and (c) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Working Capital Revolving Commitment is set
forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which
such Lender shall have assumed its Working Capital Revolving Commitment, as
applicable. The initial aggregate amount of the Lenders' Working Capital
Revolving Commitments is $25,000,000. The Working Capital Revolving Commitments
are a subset of the General Revolving Commitments and the maximum amount of the
Commitments is equal to the maximum amount of the General Revolving Commitments.

                  "Working Capital Revolving Loan" has the meaning assigned to
such term in Section 2.01.

                  SECTION 1.02. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and referred to by Class
(e.g., a "General Revolving Loan") or by Type (e.g., a "Eurodollar Loan").
Borrowings also may be classified and referred to by Class (e.g., a "General
Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing").

                  SECTION 1.03. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits


                                      -15-
<PAGE>   20


and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.

                  SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

                                   ARTICLE II

                                   The Credits

                  SECTION 2.01. Commitments. (a) Subject to the terms and
conditions set forth herein, each Lender agrees to make revolving credit loans
(the "General Revolving Loans") to the Borrower from time to time during the
Availability Period, in an aggregate principal amount that will not result in
(i) such Lender's Revolving Credit Exposure exceeding such Lender's General
Revolving Commitment, or (ii) the sum of the total Revolving Credit Exposures
exceeding the total General Revolving Commitments, or (iii) the sum of the total
Revolving Credit Exposures exceeding the total Commitments.

                  (b) Subject to the terms and conditions set forth herein,
including, without limitation, Section 5.08, each Lender agrees to make
revolving credit loans (the "Working Capital Revolving Loans") to the Borrower
from time to time during the Availability Period, in an aggregate principal
amount that will not result in (i) such Lender's Working Capital Revolving Loans
exceeding such Lender's Working Capital Revolving Commitment, (ii) the sum of
the total Working Capital Revolving Loans exceeding the total Working Capital
Revolving Commitments, or (iii) the sum of the total Revolving Credit Exposure
exceeding the total Commitments.

                  (c) The Working Capital Revolving Commitment of each Lender
constitutes a subset of such Lender's General Revolving Commitment such that the
availability of (i) the General Revolving Commitment of such Lender shall be
reduced by the outstanding principal amount of such Lender's Working Capital
Revolving Loans as of the time of determination and (ii) the Working Capital
Revolving Commitment of each Lender shall be reduced by the amount, if any, by
which (A) the outstanding principal amount of such Lender's General Revolving
Credit Exposure as of the time of determination exceeds (B) the amount equal to
such Lender's General Revolving Commitment minus such Lender's Working Capital
Revolving Commitment. The sum of the total Revolving Credit Exposures shall not
exceed at any time the total Commitments.

                  (d) Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans
during the Availability Period.

                  SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be
made as part of a Borrowing comprised entirely of General Revolving Loans or
Working Capital Revolving Loans as the Borrower may request in accordance
herewith and made by the Lenders ratably in accordance with their respective


                                      -16-
<PAGE>   21


Commitments. The failure of any Lender to make any Loan required to be made by
it shall not relieve any other Lender of its obligations hereunder; provided
that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender's failure to make Loans as required.

                  (b) Subject to Section 2.12, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.

                  (c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. At the time that
each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $500,000 and not less than $1,000,000; provided that
an ABR Borrowing may be in an aggregate amount that is equal to (i) with respect
to Working Capital Revolving Borrowings, the entire unused and available balance
of the Working Capital Revolving Commitments, (ii) with respect to General
Revolving Borrowings, (A) the entire unused and available balance of the General
Revolving Commitments less total Revolving Credit Exposure, or (B) the amount
that is required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.04(e). Borrowings of more than one Type and Class may
be outstanding at the same time; provided that there shall not at any time be
more than a total of five Eurodollar Borrowings outstanding.

                  (d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.

                  SECTION 2.03. Requests for Borrowings. To request a Borrowing,
the Borrower shall notify the Administrative Agent of such request by telephone
(a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York
City time, three Business Days before the date of the proposed Borrowing or (b)
in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of the proposed Borrowing; provided that any
such notice of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.04(e) may be given not later than
10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such
telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.02:

                  (i)      the aggregate amount of the requested Borrowing;

                  (ii)     the date of such Borrowing, which shall be a Business
                           Day;

                  (iii)    whether such Borrowing is to be comprised of Working
                           Capital Revolving Loans or General Revolving Loans;

                  (iv)     whether such Borrowing is to be an ABR Borrowing or a
                           Eurodollar Borrowing;

                  (v)      in the case of a Eurodollar Borrowing, the initial
                           Interest Period to be applicable thereto, which shall
                           be a period contemplated by the definition of the
                           term "Interest Period"; and


                                      -17-
<PAGE>   22


                  (vi)     the location and number of the Borrower's account to
                           which funds are to be disbursed, which shall comply
                           with the requirements of Section 2.05.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no election as to the Class of Borrowing
is specified, then the requested Borrowing shall be a General Revolving
Borrowing. If no Interest Period is specified with respect to any requested
Eurodollar Borrowing, then the Borrower shall be deemed to have selected an
Interest Period of one month's duration. Promptly following receipt of a
Borrowing Request in accordance with this Section, the Administrative Agent
shall advise each Lender of the details thereof and of the amount of such
Lender's Loan to be made as part of the requested Borrowing.

                  SECTION 2.04. Letters of Credit.

                  (a) General. Subject to the terms and conditions set forth
herein, the Borrower may request the issuance of Letters of Credit for its own
account, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time during the Availability Period.
In the event of any inconsistency between the terms and conditions of this
Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms
and conditions of this Agreement shall control.

                  (b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by the Issuing Bank, the Borrower
also shall submit a letter of credit application on the Issuing Bank's standard
form in connection with any request for a Letter of Credit. A Letter of Credit
shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the LC Exposure shall not exceed $25,000,000
and (ii) the sum of the total Revolving Credit Exposures shall not exceed the
total General Revolving Commitments.

                  (c) Expiration Date. Each Letter of Credit shall expire at or
prior to the close of business on the date that is five Business Days prior to
the Maturity Date.

                  (d) Participations. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Lender, and each Lender hereby acquires from the
Issuing Bank, a participation in such Letter of Credit equal to such Lender's
Applicable Percentage of the aggregate amount available to be drawn under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Administrative
Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage
of each LC Disbursement made by the Issuing Bank and not reimbursed by the
Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason.
Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit


                                      -18-
<PAGE>   23


is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

                  (e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 that such payment be financed with an
ABR Borrowing in an equivalent amount and, to the extent so financed, the
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting ABR Borrowing. If the Borrower fails to make such payment when
due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.05 with respect to Loans made by such Lender (and Section
2.05 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear. Any payment made by a Lender pursuant to
this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than
the funding of ABR Loans as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.

                  (f) Obligations Absolute. The Borrower's obligation to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's


                                      -19-
<PAGE>   24


failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or wilful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised care
in each such determination. In furtherance of the foregoing and without limiting
the generality thereof, the parties agree that, with respect to documents
presented which appear on their face to be in substantial compliance with the
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.

                  (g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.

                  (h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Loans; provided that,
if the Borrower fails to reimburse such LC Disbursement when due pursuant to
paragraph (e) of this Section, then Section 2.11(d) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be
for the account of such Lender to the extent of such payment.

                  (i) Replacement of the Issuing Bank. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.10(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.

                  (j) Cash Collateralization. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Lenders with LC Exposure representing greater
than 66 2/3% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date plus any accrued and unpaid interest thereon; provided that the obligation
to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Event of Default with respect to the
Borrower described in clause (h) or


                                      -20-
<PAGE>   25


(i) of Article VII. Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrower's risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated (but subject to the
consent of Lenders with LC Exposure representing greater than 66 2/3% of the
total LC Exposure), be applied to satisfy other obligations of the Borrower
under this Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been cured
or waived.

                  SECTION 2.05. Funding of Borrowings. (a) Each Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing
Request; provided that ABR Loans made to finance the reimbursement of an LC
Disbursement as provided in Section 2.04(e) shall be remitted by the
Administrative Agent to the Issuing Bank.

                  (b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.

                  SECTION 2.06. Interest Elections. (a) Each Borrowing initially
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue such Borrowing and, in
the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.

                  (b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Borrower
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic Interest Election
Request shall


                                      -21-
<PAGE>   26


be irrevocable and shall be confirmed promptly by hand delivery or telecopy to
the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Borrower.

                  (c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:

                  (i)      the Borrowing to which such Interest Election Request
                           applies and, if different options are being elected
                           with respect to different portions thereof, the
                           portions thereof to be allocated to each resulting
                           Borrowing (in which case the information to be
                           specified pursuant to clauses (iii) and (iv) below
                           shall be specified for each resulting Borrowing);

                  (ii)     the effective date of the election made pursuant to
                           such Interest Election Request, which shall be a
                           Business Day;

                  (iii)    whether the resulting Borrowing is to be an ABR
                           Borrowing or a Eurodollar Borrowing; and

                  (iv)     if the resulting Borrowing is a Eurodollar Borrowing,
                           the Interest Period to be applicable thereto after
                           giving effect to such election, which shall be a
                           period contemplated by the definition of the term
                           "Interest Period".

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.

                  (d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.

                  (e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing and the Administrative Agent,
at the request of the Required Lenders, so notifies the Borrower, then, so long
as an Event of Default is continuing (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

                  SECTION 2.07. Termination and Reduction of Commitments. (a)
Unless previously terminated, the Commitments shall terminate on the Maturity
Date.

                  (b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000 and
not less than $5,000,000, (ii) any such reduction shall apply only to the
General Revolving Commitments until such time that the amount of the General
Revolving Commitments equals the amount of the Working Capital Revolving
Commitments and, thereafter, shall reduce both the General Revolving Commitments
and the Working Capital Revolving Commitments, and (iii) the Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent
prepayment of the Loans in accordance with Section 2.09, the sum of the
Revolving Credit Exposures would exceed the total Commitments.


                                      -22-
<PAGE>   27


                  (c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a notice
of termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.

                  SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender the then unpaid principal amount of each Loan on the
Maturity Date.

                  (b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.

                  (c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.

                  (d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.

                  (e) Any Lender may request that Loans made by it be evidenced
by a promissory note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a promissory note payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns) and
in a form approved by the Administrative Agent. Thereafter, the Loans evidenced
by such promissory note and interest thereon shall at all times (including after
an increase in such Lender's Commitment pursuant to Section 2.18 or an increase
or reduction in such Lender's Commitment pursuant to an assignment pursuant to
Section 9.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered assigns).

                  SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have
the right at any time and from time to time to prepay any Borrowing in whole or
in part, subject to prior notice in accordance with paragraph (b) of this
Section.

                  (b) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment, or (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
prepayment


                                      -23-
<PAGE>   28


is given in connection with a conditional notice of termination of the
Commitments as contemplated by Section 2.07, then such notice of prepayment may
be revoked if such notice of termination is revoked in accordance with Section
2.07. Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing. Prepayments shall be accompanied by
accrued interest to the extent required by Section 2.11 and any break funding
payments required by Section 2.14.

                  SECTION 2.10. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a facility fee, which shall
accrue at the Applicable Rate on the daily amount of the Commitment of such
Lender (whether used or unused) during the period from and including the date
hereof to but excluding the date on which such Commitment terminates; provided
that, if such Lender continues to have any Revolving Credit Exposure after its
Commitment terminates, then such facility fee shall continue to accrue on the
daily amount of such Lender's Revolving Credit Exposure from and including the
date on which its Commitment terminates to but excluding the date on which such
Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall
be payable in arrears on the last day of March, June, September and December of
each year and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof; provided that any facility fees
accruing after the date on which the Commitments terminate shall be payable on
demand. All facility fees shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed (including the first
day but excluding the last day).

                  (b) The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Rate as that applicable to Eurodollar Loans on the average daily amount of such
Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed
LC Disbursements) during the period from and including the Effective Date to but
excluding the later of the date on which such Lender's Commitment terminates and
the date on which such Lender ceases to have any LC Exposure, and (ii) to the
Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per annum
on the average daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure, as well as the Issuing Bank's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all such fees
shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable
on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph
shall be payable within 10 days after demand. All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).

                  (c) The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.

                  (d) All fees payable hereunder shall be paid on the dates due,
in immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.


                                      -24-
<PAGE>   29


                  SECTION 2.11. Interest. (a) The Loans comprising each ABR
Borrowing shall bear interest at the Alternate Base Rate plus the Applicable
Rate.

                  (b) The Loans comprising each Eurodollar Borrowing shall bear
interest in the case of a Eurodollar Loan, at the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Rate.

                  (c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 2%
plus the rate applicable to ABR Loans as provided in paragraph (a) of this
Section.

                  (d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and upon termination of the
Commitments; provided that (i) interest accrued pursuant to paragraph (c) of
this Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end
of the Availability Period), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.

                  (e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

                  SECTION 2.12. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:

                  (a) the Administrative Agent determines (which determination
         shall be conclusive absent manifest error) that adequate and reasonable
         means do not exist for ascertaining the Adjusted LIBO Rate for such
         Interest Period; or

                  (b) the Administrative Agent is advised by the Required
         Lenders that the Adjusted LIBO Rate for such Interest Period will not
         adequately and fairly reflect the cost to such Lenders (or Lender) of
         making or maintaining their Loans (or its Loan) included in such
         Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.


                                      -25-
<PAGE>   30


                  SECTION 2.13. Increased Costs. (a) If any Change in Law shall:

                  (i)      impose, modify or deem applicable any reserve,
                           special deposit or similar requirement against assets
                           of, deposits with or for the account of, or credit
                           extended by, any Lender (except any such reserve
                           requirement reflected in the Adjusted LIBO Rate) or
                           the Issuing Bank; or

                  (ii)     impose on any Lender or the Issuing Bank or the
                           London interbank market any other condition affecting
                           this Agreement or Eurodollar Loans made by such
                           Lender or any Letter of Credit or participation
                           therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

                  (b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or on
the capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender's or the Issuing Bank's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's or the Issuing Bank's
policies and the policies of such Lender's or the Issuing Bank's holding company
with respect to capital adequacy), then from time to time the Borrower will pay
to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender's
or the Issuing Bank's holding company for any such reduction suffered.

                  (c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.

                  (d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or the
Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than 270 days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.

                  SECTION 2.14. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Loan on the date specified


                                      -26-
<PAGE>   31


in any notice delivered pursuant hereto (regardless of whether such notice may
be revoked under Section 2.09(b) and is revoked in accordance therewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.17, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate (in the case of a
Eurodollar Loan) that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the Eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.

                  SECTION 2.15. Taxes. (a) Any and all payments by or on account
of any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.

                  (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

                  (c) The Borrower shall indemnify the Administrative Agent,
each Lender and the Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.

                  (d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

                  (e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and


                                      -27-
<PAGE>   32


executed documentation prescribed by applicable law or reasonably requested by
the Borrower as will permit such payments to be made without withholding or at a
reduced rate.

                  SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing
of Set-offs. (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.13, 2.14 or 2.15, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Sections 2.13,
2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.

                  (b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.

                  (c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements and accrued interest thereon
than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in LC
Disbursements; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

                  (d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders or
the Issuing Bank, as the case may be, the amount due. In such event,


                                      -28-
<PAGE>   33


if the Borrower has not in fact made such payment, then each of the Lenders or
the Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.

                  (e) If any Lender shall fail to make any payment required to
be made by it pursuant to Sections 2.04(d) or (e), 2.05(b) or 2.16(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.

                  SECTION 2.17. Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under Section 2.13, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.15, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

                  (b) If any Lender requests compensation under Section 2.13, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.13 or payments required to be made
pursuant to Section 2.15, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.

                  SECTION 2.18. Procedures Regarding Increases to the
Commitments. (a) So long as no Default or Event of Default has occurred and is
continuing, the Borrower may request from time to time, subject to the terms and
conditions hereinafter set forth, that the aggregate amount of the Lenders'
Commitments be increased. Any such request shall be made by written notice to
the Administrative Agent; provided, however, that any such notice must be given
no later than 60 days prior to the Maturity Date. Each such notice (a "Initial
Notice of Commitment Increase") shall be in the form of Exhibit C-1 and specify
therein:


                                      -29-
<PAGE>   34


                  (i)      the proposed effective date of such increase, which
                           date (the requested "Commitment Increase Effective
                           Date") shall be no earlier than forty-five days after
                           receipt by the Administrative Agent of such notice;
                           and

                  (ii)     the amount of the requested increase; provided,
                           however, that (A) such increase must be at least
                           $25,000,000, (B) after giving effect to such
                           requested increase, the aggregate amount of the
                           Lenders' Commitments shall not exceed $175,000,000,
                           (C) such increase shall be applied in full to the
                           General Revolving Commitments, and (D) the Working
                           Capital Revolving Commitments, which are a subset of
                           the General Revolving Commitments, shall be increased
                           by an amount equal to one- fifth of the amount of the
                           increase of the General Revolving Commitments.

The Administrative Agent shall deliver a copy of such Initial Notice of
Commitment Increase to each Lender via facsimile transmission on or before the
third Business Day next succeeding the date the Administrative Agent receives
such Initial Notice of Commitment. After receipt of the Initial Notice of
Commitment, each Lender shall determine, in its sole discretion, whether to
participate, and to what extent, if any, in such Commitment Increase and shall
communicate such decision in writing to the Administrative Agent and the
Borrower on or before the eleventh day prior to the proposed Commitment Increase
Effective Date.

                  (b) On the tenth day prior to the proposed Commitment Increase
Effective Date, so long as no Default or Event of Default has occurred and is
continuing, the Borrower shall deliver to the Administrative Agent a written
notice confirming the requested increase in the aggregate amount of the Lenders'
Commitments. Each such notice (a "Notice of Confirmation of Commitment
Increase") shall be in the form of Exhibit C-2 and specify therein:

                  (i)      the proposed Commitment Increase Effective Date,
                           which date shall be no earlier than five Business
                           Days after receipt by the Administrative Agent of
                           such Notice of Confirmation of Commitment Increase;
                           and

                  (ii)     the amount of the requested increase; provided,
                           however, that (A) such increase must be at least
                           $25,000,000, (B) after giving effect to such
                           requested increase, the aggregate amount of the
                           Lenders' Commitments shall not exceed $175,000,000,
                           (C) such increase shall be applied in full to the
                           General Revolving Commitments, and (D) the Working
                           Capital Revolving Commitments, which are a subset of
                           the General Revolving Commitments, shall be increased
                           by an amount equal to one-fifth of the amount of the
                           increase of the General Revolving Commitments.

                  (iii)    the identity of each of the then Lenders, if any,
                           which has agreed with the Borrower to increase its
                           Commitment in an amount such that its Applicable
                           Percentage after giving effect to such requested
                           increase will be the same or greater than its
                           Applicable Percentage prior to giving effect to such
                           requested increase (each such Lender being an
                           "Increasing Lender"), each of the other then Lenders,
                           if any, which has agreed to increase its Commitment
                           in an amount such that its Applicable Percentage
                           after giving effect to such a requested increase will
                           be less than its Applicable Percentage prior to
                           giving effect to such requested increase (each such
                           Lender being a "Partially Increasing Lender") and the
                           identity of each financial institution not already a
                           Lender, if any, which has agreed with the Borrower to
                           become a Lender to effect such requested increase in
                           the aggregate amount of the Lenders' Commitments
                           (each such financial institution shall be reasonably
                           acceptable to the Administrative Agent and each such
                           financial institution being a


                                      -30-
<PAGE>   35


                           "New Lender" and each of the other then Lenders, if
                           any, which has not agreed to increase its Commitment
                           being a "Reducing Lender"); and

                  (iv)     the amount of the respective Commitments of the then
                           existing Lenders, such Increasing Lenders, such
                           Partially Increasing Lenders, such Reducing Lenders
                           and such New Lenders from and after the effective
                           date of such increase.

                  (c)      On or before each Commitment Increase Effective Date:

                  (i)      the Borrower, each Increasing Lender, each Partially
                           Increasing Lender and each then New Lender shall
                           execute and deliver to the Administrative Agent for
                           its acceptance, as to form, documentation embodying
                           the provisions of the Notice of Commitment Increase
                           relating to the increase in the aggregate amount of
                           the Lenders' Commitments to be effected on such
                           Commitment Increase Effective Date; and

                  (ii)     upon acceptance of such documentation by the
                           Administrative Agent, which acceptance shall not be
                           unreasonably withheld, and so long as no Default or
                           Event of Default has occurred and is continuing, (A)
                           the Administrative Agent shall give prompt notice of
                           such acceptance to each Lender, (B) it shall become
                           effective, and each Increasing Lender's and Partially
                           Increasing Lender's Commitment shall be increased to
                           the amount specified therein, on such Commitment
                           Increase Effective Date and (C) the Administrative
                           Agent shall record each New Lender's information in
                           the Register.

                  (d)      On each Commitment Increase Effective Date:

                  (i)      each then New Lender and each then Increasing Lender
                           shall, by wire transfer of immediately available
                           funds, deliver to the Administrative Agent such
                           Lenders' New Funds Amount for such Commitment
                           Increase Effective Date, which amount, for each such
                           Lender, shall constitute Loans made by such Lender to
                           the Borrower pursuant to Section 2.01 on such
                           Commitment Increase Effective Date; and

                  (ii)     the Administrative Agent shall, by wire transfer of
                           immediately available funds, pay to each then
                           Reducing Lender and to each Partially Increasing
                           Lender its Reduction Amount for such Commitment
                           Increase Effective Date, which amount, for each such
                           Lender, shall constitute a prepayment by the Borrower
                           pursuant to Section 2.09, ratably in accordance with
                           the respective principal amounts thereof, of the
                           principal amounts of all then outstanding Loans of
                           such Lender.

The Administrative Agent shall record each then New Lender's, each then
Increasing Lender's and each then Partially Increasing Lender's information in
the Register. Also effective as of each Commitment Increase Effective Date, each
then New Lender and each then Increasing Lender shall be deemed to have
purchased and had transferred to it, and each then Reducing Lender and each
Partially Increasing Lender shall be deemed to have sold and transferred as
provided in Section 2.04(d) to such New Lenders and Increasing Lenders, such
undivided interest and participation in such Reducing Lender's and such
Partially Increasing Lender's interest and participation in all then outstanding
Letters of Credit, to the extent necessary so that such undivided interests and
participations of all Lenders (including each New Lender) shall accord with
their respective Applicable Percentages after giving effect to the increase in
the aggregate amount of the Lenders' Commitments on such Commitment Increase
Effective Date.


                                      -31-
<PAGE>   36


                                   ARTICLE III

                         Representations and Warranties

                  The Borrower represents and warrants to the Lenders that:

                  SECTION 3.01. Organization; Powers. Each of the Borrower and
its Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.

                  SECTION 3.02. Authorization; Enforceability. The Transactions
are within the Borrower's partnership powers and have been duly authorized by
all necessary corporate, limited liability company or partnership and, if
required, stockholder, member or limited partner action. This Agreement has been
duly executed and delivered by the Borrower and constitutes a legal, valid and
binding obligation of the Borrower, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

                  SECTION 3.03. Governmental Approvals; No Conflicts. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries or any order
of any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or any of
its Subsidiaries or its assets, or give rise to a right thereunder to require
any payment to be made by the Borrower or any of its Subsidiaries, and (d) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.

                  SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders (i) its pro forma
balance sheet and statements of income, giving effect to the formation of the
Borrower and the completion of offering of the Units and related transactions
(A) for the fiscal year ended December 31,1999, prepared by the Borrower, and
(B) as of September 30, 2000 and for the nine months ended September 30, 2000,
certified by a Financial Officer and (ii) the historical balance sheets,
statements of income, net parent investment and cash flows of the UDS Logistics
Business (A) as of December 31, 1998 and 1999 and for each of the three years in
the period ended December 31, 1999, reported on by Arthur Andersen LLP,
independent public accountants, and (B) as of September 30, 1999 and 2000 and
for the nine months ended September 30, 2000, certified by a Financial Officer.
The financial statements referenced in clause (i) above were prepared based on
currently available information and certain estimates and assumptions.
Management of the Borrower believes that the assumptions provide a reasonable
basis for presenting the significant effects of the offering of the Units and
the related transactions and that the pro forma adjustments give appropriate
effect to those assumptions and are properly applied in the pro form financial
statements. The financial statements referenced in clause (ii) above present
fairly, in all material respects, the financial position and results of
operations and cash flows on a historical basis of the UDS Logistics Business as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii)(B) above.

                  (b) Since September 30, 2000, there has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole.


                                      -32-
<PAGE>   37


                  SECTION 3.05. Properties. (a) Each of the Borrower and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, free and clear of all Liens
except Permitted Encumbrances and Liens otherwise permitted or contemplated by
this Agreement.

                  (b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, or has made all required federal filings (and has not been
notified of any contest) with respect to, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business,
and the use thereof by the Borrower and its Subsidiaries does not infringe upon
the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

                  SECTION 3.06. Litigation and Environmental Matters. (a) There
are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.

                  (b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

                  (c) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

                  SECTION 3.07. Compliance with Laws and Agreements. Each of the
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.

                  SECTION 3.08. Investment and Holding Company Status. Neither
the Borrower nor any of its Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935. The Borrower is not subject to
regulation under any Federal or State statute or regulation which limits its
ability to incur Indebtedness.

                  SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.

                  SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial


                                      -33-
<PAGE>   38


Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $10,000,000
the fair market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $10,000,000 the fair market value of the
assets of all such underfunded Plans.

                  SECTION 3.11. Disclosure. The Borrower has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to which
it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. Neither the Form S-1, nor the Information
Memorandum nor any of the other reports, financial statements, certificates or
other information furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.

                  SECTION 3.12. Investments and Guarantees. As of the Effective
Date, neither the Borrower nor any Subsidiary has any Investments or has
outstanding any Guarantees, except as permitted by this Agreement or reflected
in the financial statements described in Section 3.04(a)(i).

                  SECTION 3.13. Subsidiaries. As of the Effective Date, the
Borrower has no Subsidiaries.

                  SECTION 3.14. Casualties; Taking of Property. Neither the
business nor the assets of the Borrower or any Subsidiary have been materially
and adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of any assets or cancellation of contracts, permits or
concessions by any domestic or foreign government or any agency thereof, riot,
activities of armed forces or acts of God or of any public enemy.


                                   ARTICLE IV

                                   Conditions

                  SECTION 4.01. Effective Date. The obligations of the Lenders
to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall
not become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):

                  (a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.

                  (b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of (i) Andrews & Kurth L.L.P., counsel for the Borrower, and
(ii) Todd Walker, in-house counsel of UDS, collectively providing the opinions
set forth in Exhibit B, and each such opinion covering such other matters
relating to the Borrower, the General Partner, the Limited Partner, this
Agreement or the Transactions as the Lenders shall reasonably request. The
Borrower hereby requests each such counsel to deliver its applicable opinion to
the Administrative Agent and the Lenders.


                                      -34-
<PAGE>   39


                  (c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
the Borrower, the General Partner, the Limited Partner, the authorization of the
Transactions and any other legal matters relating to the Borrower, the General
Partner, the Limited Partner, this Agreement or the Transactions, all in form
and substance satisfactory to the Administrative Agent and its counsel.

                  (d) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a Vice
President or a Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.

                  (e) The Administrative Agent shall have received (i)
counterpart originals of the Partnership Agreement (MLP) substantially in the
form filed as an exhibit to the Form S-1, the Omnibus Agreement, the
Transportation Agreement and the Partnership Agreement (Borrower) in form and
substance acceptable to the Lenders, in each case duly executed by each of the
parties thereto and (ii) evidence satisfactory to the Lenders that the UDS
Logistics Business has been conveyed to the Borrower and that the Partnership
Agreement (Borrower), the Omnibus Agreement, the Transportation Agreement and
the Partnership Agreement (MLP) are in full force and effect, which evidence may
be in the form of a certificate of the President or a Vice President (or
equivalent officer) of the Borrower.

                  (f) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.

                  (g) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Financial Officer,
confirming that the Limited Partner has received gross proceeds of not less than
$65,000,000 from the offering of the Common Units pursuant to and as described
in the Form S-1 (including, without limitation, the satisfaction of the
applicable conditions precedent to such offering) and that the Limited Partner
has contributed the net proceeds of such offering to the Borrower.

                  (h) The Administrative Agent shall have received satisfactory
evidence regarding the scope and materiality of any environmental risks
affecting the Project.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at
or prior to 3:00 p.m., New York City time, on February 28, 2001 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).

                  SECTION 4.02. Each Credit Event. The obligation of each Lender
to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to
issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:

                  (a) The representations and warranties of the Borrower set
forth in this Agreement shall be true and correct on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable (unless such representations and warranties are
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date).


                                      -35-
<PAGE>   40


                  (b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.

                  (c) The Administrative Agent shall have received each
additional document, instrument, legal opinion or item of information reasonably
requested by the Administrative Agent, including, without limitation, a copy of
any debt instrument, security agreement or other material contract to which the
Borrower or any Subsidiary may be a party.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section 4.02.


                                    ARTICLE V

                              Affirmative Covenants

                  Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:

                  SECTION 5.01. Financial Statements and Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:

                  (a) within 120 days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements of
income, partners equity and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Arthur Andersen LLP or other independent public
accountants of recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition, results of
operations and cash flows of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;

                  (b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of income, partners equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;

                  (c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 6.11 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 3.04 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate;


                                      -36-
<PAGE>   41


                  (d) promptly and in any event within ten (10) business days
after the existence of any of the following conditions, a certificate of the
President or a Vice President (or equivalent officer) of the Borrower, or of the
officer of the Borrower primarily responsible for monitoring compliance by the
Borrower and its Subsidiaries with Environmental Laws, specifying in detail the
nature of such condition and the Borrower's proposed response thereto, in each
case if the occurrence of such event could reasonably be expected to have a
Material Adverse Effect:

                           (i) the receipt by the Borrower or the General
         Partner of any communication (written or oral), whether from a
         Governmental Authority or other Person that alleges that the Borrower
         or any Subsidiary is not in compliance with applicable Environmental
         Laws or Environmental Approvals,

                           (ii) the President or a Vice President (or equivalent
         officer) of the Borrower, or the officer of the Borrower primarily
         responsible for monitoring compliance by the Borrower and its
         Subsidiaries with Environmental Laws, shall obtain actual knowledge
         that there exists any Environmental Liability pending or threatened
         against the Borrower or any Subsidiary, or

                           (iii) any release, emission, discharge or disposal of
         any Hazardous Materials that could reasonably be expected to form the
         basis of any Environmental Liability with respect to the Borrower or
         any Subsidiary.

The Borrower will also maintain and make available for inspection by the
Administrative Agent and the Lenders and their agents and employees accurate and
complete records of all investigations, studies, sampling and testing conducted,
and any and all remedial actions taken, by the Borrower, any Subsidiary or, to
its knowledge and to the extent obtained by the Borrower and the General
Partner, by any Governmental Authority or other Person in respect to Hazardous
Materials on or affecting the properties of Borrower and its Subsidiaries.

                  (e) Prior to the end of each fiscal year, a copy of the
projections of the operating budget and cash flows for the next succeeding
fiscal year, such projections to be accompanied by a certificate of a Financial
Officer to the effect that the projections have been prepared on the basis of
sound financial planning practice and that such Financial Officer has no reason
to believe that such projections are incorrect or misleading in any material
respect; and

                  (f) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably request.

                  SECTION 5.02. Notices of Material Events. The Borrower will
furnish to the Administrative Agent and each Lender prompt written notice of the
following:

                  (a) the occurrence of any Default;

                  (b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;

                  (c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate amount
exceeding $10,000,000;


                                      -37-
<PAGE>   42


                  (d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect; and

                  (e) any material amendment to the Partnership Agreement (MLP)
or any Material Agreement, together with a certified copy of such amendment.

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or President or any Vice President (or equivalent officer)
of the Borrower setting forth the details of the event or development requiring
such notice and any action taken or proposed to be taken with respect thereto.

                  SECTION 5.03. Existence; Conduct of Business. The Borrower
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
6.03.

                  SECTION 5.04. Payment of Obligations. The Borrower will, and
will cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Borrower or such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.

                  SECTION 5.05. Maintenance of Properties; Insurance. The
Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations.

                  SECTION 5.06. Books and Records; Inspection Rights. The
Borrower will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.

                  SECTION 5.07. Compliance with Laws. The Borrower will, and
will cause each of its Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property and
the terms and provisions of the Material Agreements, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

                  SECTION 5.08. Use of Proceeds and Letters of Credit. The
proceeds of the Working Capital Revolving Loans will be used to finance the
working capital requirements of the Borrower and its Subsidiaries, or to pay, in
whole or in part, Restricted Payments permitted pursuant to the terms hereof.
The proceeds of the General Revolving Loans will be used to finance the working
capital requirements and general partnership purposes of the Borrower and its
Subsidiaries, but will not be used to make any Restricted Payment permitted by
Section 6.06(b). The Letters of Credit shall be used for general business
purposes in the ordinary course of business or for such other purposes as may be
approved by the Administrative Agent. No part of the proceeds of any Loan will
be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations T, U and
X.


                                      -38-
<PAGE>   43


                  SECTION 5.09. Environmental Laws. The Borrower will, and will
cause each of its Subsidiaries to:

                  (a) comply with, and ensure compliance by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply with and maintain, and ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws except to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect; and

                  (b) conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not reasonably be expected to have a
Material Adverse Effect.

                  SECTION 5.10. Clean-Down. The Borrower will cause the
aggregate outstanding principal balance of the Working Capital Revolving Loans
to be zero for a period of at least 15 consecutive days during each calendar
year.

                  SECTION 5.11. Subsidiaries. The Borrower will, substantially
contemporaneously with its formation or acquisition, cause each Subsidiary to
become a Guarantor with respect to, and jointly and severally liable with all
other Guarantors for, all obligations of the Borrower under this Agreement by
executing and delivering to the Administrative Agent, for the benefit of the
Lenders, a Guaranty, substantially in the form of Exhibit D. The Borrower shall,
or shall cause such Subsidiary to, further deliver any and all instruments,
documents, approvals, consents or opinions of counsel reasonably requested by
the Administrative Agent or the Required Lenders in connection with any such
Guaranty.


                                   ARTICLE VI

                               Negative Covenants

                  Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:

                  SECTION 6.01. Indebtedness. The Borrower will not, and will
not permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:

                  (a) Indebtedness created hereunder;

                  (b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;

                  (c) Guarantees by the Borrower of Indebtedness of any
Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other
Subsidiary;

                  (d) other Indebtedness of the Borrower and any Subsidiary;
provided that, both before and after such Indebtedness is created, incurred or
assumed, no Default shall exist under this Agreement,


                                      -39-
<PAGE>   44


including, without limitation, a Default with respect to (i) the Consolidated
Interest Coverage Ratio set forth in Section 6.11(a) and (ii) the Consolidated
Debt Coverage Ratio set forth in Section 6.11(b).

                  SECTION 6.02. Liens. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:

                  (a) Permitted Encumbrances;

                  (b) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary; provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition or
such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not
apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as the case
may be;

                  (c) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary; provided that (i) such security
interest secures Indebtedness permitted by clause (d) of Section 6.01, (ii) such
security interests and the Indebtedness secured thereby are incurred prior to or
within 90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the
Borrower or any Subsidiary; and

                  (d) other Liens securing Indebtedness in an amount that does
not at any time exceed 10% of Consolidated Tangible Net Worth.

                  SECTION 6.03. Fundamental Changes. (a) The Borrower will not,
and will not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or any substantial part of its assets, or all or
substantially all of the stock of any of its Subsidiaries (in each case whether
now owned or hereafter acquired), or liquidate or dissolve, except that, if at
the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing (i) any Subsidiary may merge into the Borrower
in a transaction in which the Borrower is the surviving corporation or the
Borrower may merge with another Person so long as (A) the surviving entity or
purchaser, if other than the Borrower, assumes, pursuant to the terms of such
transaction, each of the obligations of the Borrower hereunder and under any
other documents entered into in connection with the Loans and (B) each such
assumption is expressly evidenced by an agreement executed and delivered to the
Lenders in a form reasonably satisfactory to the Administrative Agent, (ii) any
Subsidiary may merge into any Subsidiary in a transaction in which the surviving
entity is a Subsidiary, and (iii) any Subsidiary may liquidate or dissolve if
the Borrower determines in good faith that such liquidation or dissolution is in
the best interests of the Borrower and is not materially disadvantageous to the
Lenders; provided that any such merger involving a Person that is not a wholly
owned Subsidiary immediately prior to such merger shall not be permitted unless
also permitted by Section 6.04.

                  (b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.


                                      -40-
<PAGE>   45


                  SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any Investment in
or Guarantee any obligations of, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:

                  (a) Permitted Investments;

                  (b) Investments by the Borrower in the Equity Interest of its
         Subsidiaries, so long as each such Subsidiary has Guaranteed the
         Indebtedness of the Borrower under this Agreement;

                  (c) loans or advances made by the Borrower to any Subsidiary
         and made by any Subsidiary to the Borrower or any other Subsidiary, so
         long as each such Subsidiary has Guaranteed the Indebtedness of the
         Borrower under this Agreement;

                  (d) Guarantees constituting Indebtedness permitted by Section
         6.01; and

                  (e) the Borrower's interest in the Skelly-Belvieu Pipeline
         Company, L.L.C.; and

                  (f) Investments in Joint Venture Interests and the purchase or
         other acquisition of the assets of another Person constituting a
         business unit; provided, that, both before and after giving effect to
         any such Investment, no Default shall exist, including, without
         limitation, a Default with respect to (i) use of proceeds set forth in
         Section 5.08, (ii) the Consolidated Interest Coverage Ratio set forth
         in Section 6.11(a), or (iii) the Consolidated Debt Coverage Ratio set
         forth in Section 6.11(b).

                  SECTION 6.05. Hedging Agreements. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any Hedging Agreement,
other than Hedging Agreements entered into in the ordinary course of business to
hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in
the conduct of its business or the management of its liabilities.

                  SECTION 6.06. Restricted Payments. The Borrower will not, and
will not permit any of its Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (a) any Subsidiary
may declare and pay Restricted Payments to the Borrower and (b) as long as no
Default has occurred and is continuing or would result therefrom, the Borrower
may make Restricted Payments consisting of cash distributions in accordance with
the terms of the Partnership Agreement (Borrower).

                  SECTION 6.07. Transactions with Affiliates. The Borrower will
not, and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its wholly owned Subsidiaries
not involving any other Affiliate, (c) any Restricted Payment permitted by
Section 6.06, and (d) pursuant to the agreements listed on Schedule 6.07, which
agreements are at prices and on terms and conditions not less favorable to the
Borrower than could be obtained on an arm's-length basis from unrelated third
parties.

                  SECTION 6.08. Restrictive Agreements. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the
Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets, or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any shares of its capital stock or to
make or repay loans


                                      -41-
<PAGE>   46


or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness
of the Borrower or any other Subsidiary; provided that (i) the foregoing shall
not apply to restrictions and conditions imposed by law or by this Agreement,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 6.08 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases and other contracts restricting the
assignment thereof.

                  SECTION 6.09. Limitation on Modifications of Other Agreements.
The Borrower will not, and will not permit any Subsidiary to, amend, modify or
change, or consent to any amendment, modification or change to, any of the terms
of, the Material Agreements, except to the extent the same could not reasonably
be expected to have a Material Adverse Effect.

                  SECTION 6.10. Creation of Subsidiaries. The Borrower will not
at any time create or acquire any Subsidiary unless Borrower has caused such
Subsidiary to comply with the requirements of Section 5.11.

                  SECTION 6.11. Financial Condition Covenants. The Borrower will
not permit at any time (a) its Consolidated Interest Coverage Ratio to be less
than 3.50 to 1.00 or (b) its Consolidated Debt Coverage Ratio to be in excess of
3.00 to 1.00.


                                   ARTICLE VII

                                Events of Default

                  If any of the following events ("Events of Default") shall
occur:

                  (a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;

                  (b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of five
Business Days;

                  (c) any representation or warranty made or deemed made by or
on behalf of the Borrower or any Subsidiary in or in connection with this
Agreement or any amendment or modification hereof or waiver hereunder, or in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with this Agreement or any amendment or modification hereof or
waiver hereunder, shall prove to have been incorrect when made or deemed made;

                  (d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, 5.03 (with respect
to the Borrower's existence) 5.06 (with respect to inspection rights), 5.08 or
5.10 or in Article VI;


                                      -42-
<PAGE>   47


                  (e) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article), and such failure shall
continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender);

                  (f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable;

                  (g) a default shall occur in the payment when due (subject to
any applicable grace period), whether by acceleration or otherwise, of any
Material Indebtedness; or a default shall occur in the performance or observance
of any obligation or condition with respect to any Material Indebtedness if the
effect of such default is to accelerate the maturity of any such Indebtedness or
such default shall continue unremedied for any applicable period of time
sufficient to permit the holder or holders of such Indebtedness, or any trustee
or agent for such holders, to cause such Indebtedness to become due and payable
prior to its expressed maturity.

                  (h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the General Partner, the Borrower or any Subsidiary
or its debts, or of a substantial part of its assets, under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or hereafter
in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the General Partner, the
Borrower or any Subsidiary or for a substantial part of its assets, and, in any
such case, such proceeding or petition shall continue undismissed for 60 days or
an order or decree approving or ordering any of the foregoing shall be entered;

                  (i) the General Partner, the Borrower or any Subsidiary shall
(i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the General
Partner, the Borrower or any Subsidiary or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of effecting any of the
foregoing;

                  (j) the General Partner, the Borrower or any Subsidiary shall
become unable, admit in writing its inability or fail generally to pay its debts
as they become due;

                  (k) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 and that are not covered by insurance
shall be rendered against the Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to attach or levy upon any assets of the
Borrower or any Subsidiary to enforce any such judgment;

                  (l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and its Subsidiaries in an aggregate amount exceeding $10,000,000;

                  (m) the Borrower or any Subsidiary shall incur an
Environmental Liability requiring payment in any Rolling Period in excess of
$5,000,000;


                                      -43-
<PAGE>   48


                  (n) the Limited Partner shall (i) conduct, transact or
otherwise engage in, or commit to conduct, transact or otherwise engage in, any
business or operations other than those incidental to its ownership of the
limited partner interests in the Borrower, (ii) incur, create, assume or suffer
to exist any Indebtedness or other liabilities or financial obligations, other
than (A) nonconsensual obligations imposed by operation of law, (B) obligations
with respect to the Units, (C) Guarantees with respect to Indebtedness permitted
by subsections 6.01(f), or (iii) own, lease, manage or otherwise operate any
properties or assets (including cash and cash equivalents), other than (X) the
limited partner interests in the Borrower, (Y) ownership interests (not to
exceed 1% in each such case) of a Subsidiary and (Z) cash received in connection
with dividends made by the Borrower in accordance with subsection 6.06 pending
application to the holders of the Units and the General Partner Interest;

                  (o) a Change in Control shall occur; or

                  (p) the sale by UDS of a material portion of its Refinery
Assets unless each purchaser thereof has (i) a debt rating of its senior,
unsecured, long-term indebtedness for borrowed money that is not guaranteed by
any other Person or subject to any other credit enhancement of at least
BBB-/Baa3 and (ii) and has fully assumed, with respect to such purchased
Refinery Assets, the rights and obligations of UDS and its Affiliates under the
Transportation Agreement.

then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event with respect to the Borrower described in clause (h) or (i) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

                                  ARTICLE VIII

                            The Administrative Agent

                  Each of the Lenders and the Issuing Bank hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto.

                  The bank serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not the Administrative Agent hereunder.


                                      -44-
<PAGE>   49


                  The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing by the Required Lenders
(or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 9.02), and (c) except as expressly set
forth herein, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by the
bank serving as Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken
by it with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross
negligence or wilful misconduct. The Administrative Agent shall be deemed not to
have knowledge of any Default unless and until written notice thereof is given
to the Administrative Agent by the Borrower or a Lender, and the Administrative
Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

                  The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

                  The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub- agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

                  Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a Lender and a commercial bank with an office in New York, New York and
having a combined capital and surplus of at least $500,000,000, or an Affiliate
of any such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and


                                      -45-
<PAGE>   50


obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.

                  Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.

                                   ARTICLE IX

                                  Miscellaneous

                  SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

                  (a) if to the Borrower, to it at 6000 North Loop 1604 West,
San Antonio, Texas 78249- 1112, Attention of Chief Accounting and Financial
Officer (Telecopy No. (210) 592-2010);

                  (b) if to the Administrative Agent, to The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New
York, New York 10081, Attention of Muniram Appanna (Telecopy No. (212)
552-2261), with a copy to The Chase Manhattan Bank, 707 Travis, Houston, Texas
77002, Attention of Kelly Schrock (Telecopy No. (713) 216-2291);

                  (c) if to the Issuing Bank, to it at The Chase Manhattan Bank,
Letter of Credit Group, 717 Travis, Houston, Texas 77002, Attention of Teresa
Dever (Telecopy No. (713) 216-2219);

                  (d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.

Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

                  SECTION 9.02. Waivers; Amendments. (a) No failure or delay by
the Administrative Agent, the Issuing Bank or any Lender in exercising any right
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent, the Issuing Bank and the Lenders
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting


                                      -46-
<PAGE>   51


the generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.

                  (b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower
and the Administrative Agent with the consent of the Required Lenders; provided
that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (v) change any of the provisions of this
Section or the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or the Issuing Bank hereunder without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may be.

                  SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement or any amendments, modifications or waivers
of the provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Administrative Agent, the Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

                  (b) The Borrower shall indemnify the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrower or any of its Subsidiaries, or any Environmental Liability related
in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be


                                      -47-
<PAGE>   52


available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.

                  (c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent or the Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Issuing Bank in its capacity as such.

                  (d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.

                  (e) All amounts due under this Section shall be payable not
later than 5 Business Days after written demand therefor.

                  SECTION 9.04. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby (including
any Affiliate of the Issuing Bank that issues any Letter of Credit), except that
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

                  (b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment to a Lender or an Affiliate of a Lender,
each of the Borrower and the Administrative Agent (and, in the case of an
assignment of all or a portion of a Commitment or any Lender's obligations in
respect of its LC Exposure and the Issuing Bank) must give their prior written
consent to such assignment (which consent shall not be unreasonably withheld),
(ii) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender's
Commitment, the amount of the Commitment of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500, and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrower otherwise
required under this paragraph shall not be required if an Event of Default has
occurred and is continuing. Subject to acceptance and recording thereof pursuant
to paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have


                                      -48-
<PAGE>   53


the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.

                  (c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

                  (d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.

                  (e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.16(c) as though it were a
Lender.

                  (f) A Participant shall not be entitled to receive any greater
payment under Section 2.13 or 2.15 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.15 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.15(e) as though it were a Lender.


                                      -49-
<PAGE>   54


                  (g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

                  SECTION 9.05. Survival. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of this Agreement and the
making of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

                  SECTION 9.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement and
any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

                  SECTION 9.07. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

                  SECTION 9.08. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the account
of the Borrower against any of and all the obligations of the Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.


                                      -50-
<PAGE>   55


                  SECTION 9.09. Governing Law; Jurisdiction; Consent to Service
of Process. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.

                  (b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
the Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Borrower or its properties in
the courts of any jurisdiction.

                  (c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

                  (d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

                  SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

                  SECTION 9.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.

                  SECTION 9.12. Confidentiality. Each of the Administrative
Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates' directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing


                                      -51-
<PAGE>   56


provisions substantially the same as those of this Section, to any assignee of
or Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
from a source other than the Borrower. For the purposes of this Section,
"Information" means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to
the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by the Borrower; provided that, in the case of
information received from the Borrower after the date hereof, such information
is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

                  SECTION 9.13. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.





                                      -52-
<PAGE>   57




                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.


                          SHAMROCK LOGISTICS OPERATIONS, L.P.

                            By: Riverwalk Logistics, L.P., its General Partner

                             By: Shamrock Logistics GP, LLC, its General Partner



                                By: /s/ STEVE BLANK
                                    --------------------------------------------
                                    Name:  Steve Blank
                                    Title: Chief Financial Officer







                               [Signature Page-1]
<PAGE>   58




                                  THE CHASE MANHATTAN BANK, individually and
                                  as Administrative Agent,



                                  By: /s/ STEVE A. NORDAKER
                                      ------------------------
                                      Name:  Steve A. Nordaker
                                      Title: Managing Director







                               [Signature Page-2]
<PAGE>   59



                                 ROYAL BANK OF CANADA



                                 By: /s/ ANDREA M. SICKLER
                                     ------------------------
                                     Name:  Andrea M. Sickler
                                     Title: Senior Manager







                               [Signature Page-3]
<PAGE>   60



                                SUNTRUST BANK



                                By: /s/ STEVEN J. NEWBY
                                    ----------------------
                                    Name:  Steven J. Newby
                                    Title: Vice President







                               [Signature Page-4]
<PAGE>   61



                                THE SUMITOMO BANK, LIMITED



                                By: /s/ PETER R.C. KNIGHT
                                    ----------------------------
                                    Name:  Peter R.C. Knight
                                    Title: Senior Vice President







                               [Signature Page-5]
<PAGE>   62



                               THE INDUSTRIAL BANK OF JAPAN, LIMITED
                               NEW YORK BRANCH



                               By: /s/ MICHAEL N. OAKS
                                   --------------------------------------------
                                   Name:  Michael N. Oaks
                                   Title: Senior Vice President, Houston Office







                               [Signature Page-6]
<PAGE>   63



                               THE BANK OF TOKYO-MITSUBISHI, LTD.



                               By: /s/ K. GLASSCOCK
                                   ---------------------------------
                                   Name:  K.  Glasscock
                                   Title: Vice President and Manager







                               [Signature Page-7]
<PAGE>   64



                               THE FUJI BANK, LIMITED



                               By: /s/ JACQUES AZAGURY
                                   ----------------------------------------
                                   Name:  Jacques Azagury
                                   Title: Senior Vice President and Manager








                               [Signature Page-8]
<PAGE>   65



                                                                       EXHIBIT A

                                    [FORM OF]

                            ASSIGNMENT AND ACCEPTANCE

                  Reference is made to the Credit Agreement dated as of December
15, 2000 (as amended and in effect on the date hereof, the "Credit Agreement"),
among Shamrock Logistics Operations, L.P., the Lenders named therein and The
Chase Manhattan Bank, as Administrative Agent for the Lenders. Terms defined in
the Credit Agreement are used herein with the same meanings.

                  The Assignor named on the reverse hereof hereby sells and
assigns, without recourse, to the Assignee named on the reverse hereof, and the
Assignee hereby purchases and assumes, without recourse, from the Assignor,
effective as of the Assignment Date set forth on the reverse hereof, the
interests set forth on the reverse hereof (the "Assigned Interest") in the
Assignor's rights and obligations under the Credit Agreement, including, without
limitation, the interests set forth on the reverse hereof in the Commitment of
the Assignor on the Assignment Date and Loans owing to the Assignor which are
outstanding on the Assignment Date, together with the participations in Letters
of Credit and LC Disbursements held by the Assignor on the Assignment Date, but
excluding accrued interest and fees to and excluding the Assignment Date. The
Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and
after the Assignment Date (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the Assigned
Interest, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent of the Assigned Interest, relinquish its rights
and be released from its obligations under the Credit Agreement.

                  This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is a Foreign Lender, any
documentation required to be delivered by the Assignee pursuant to Section
2.15(e) of the Credit Agreement, duly completed and executed by the Assignee,
and (ii) if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form supplied by the Administrative Agent,
duly completed by the Assignee. The Assignee/Assignor shall pay the fee payable
to the Administrative Agent pursuant to Section 9.04(b) of the Credit Agreement.


                  This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee's Address for Notices:

Effective Date of Assignment
("Assignment Date"):



                                       A-1
<PAGE>   66





<TABLE>
<CAPTION>
                                              Percentage Assigned of
                                              Facility/Commitment (set
                                              forth, to at least 8 decimals,
                                              as a percentage of the Facility
                                              and the aggregate
                        Principal Amount      Commitments of all Lenders
Facility                Assigned              thereunder)
--------                ----------------      -------------------------------
<S>                     <C>                   <C>

Commitment Assigned:    $                                                  %

Loans:
</TABLE>

The terms set forth above and on the reverse side hereof are hereby agreed to:

                                         [Name of Assignor]   , as Assignor


                                         By:
                                            ------------------------------------
                                                  Name:
                                                  Title:


                                         [Name of Assignee]   , as Assignee


                                         By:
                                            ------------------------------------
                                                  Name:
                                                  Title:


                                       A-2


<PAGE>   67



The undersigned hereby consent to the within assignment:



Shamrock Logistics Operations, L.P.,     The Chase Manhattan Bank,
                                         as Administrative Agent,


By:                                      By:
   -----------------------------------      ------------------------------------
         Name:                                     Name:
         Title:                                    Title:


                                         The Chase Manhattan Bank,
                                         as Issuing Bank


                                         By:
                                            ------------------------------------
                                                    Name:
                                                    Title:


                                       A-3


<PAGE>   68



                                    EXHIBIT B



                       OPINION OF COUNSEL FOR THE BORROWER


                                                                [Effective Date]

To the Lenders and the Administrative
   Agent Referred to Below
c/o The Chase Manhattan Bank, as
   Administrative Agent
270 Park Avenue
New York, New York 10017

Dear Sirs:

         [I/We] have acted as counsel for Shamrock Logistics Operations, L.P.
(the "Borrower"), in connection with the Credit Agreement dated as of December
15, 2000 (the "Credit Agreement"), among the Borrower, the banks and other
financial institutions identified therein as Lenders, and The Chase Manhattan
Bank, as Administrative Agent. This opinion is being furnished to you pursuant
to Section 4.01(b) of the Agreement. Terms defined in the Credit Agreement are
used herein with the same meanings.

         [I, or individuals under my direction,/We] have examined originals or
copies, certified or otherwise identified to [my/our] satisfaction, of such
documents, corporate records, certificates of public officials and other
instruments and have conducted such other investigations of fact and law as
[I/we] have deemed necessary or advisable for purposes of this opinion.

         Upon the basis of the foregoing, [I am/we are] of the opinion that:

         1. The Borrower (a) is a limited partnership duly organized and validly
existing under the laws of the State of Delaware and (b) has the limited
partnership power and authority to (i) own property and conduct the business in
which it is currently engaged and in which it proposes, as of the date hereof,
to be engaged after the date hereof, (ii) make, deliver and perform the Credit
Agreement and each of the other Loan Documents in accordance with the terms and
provisions thereof and (iii) borrow under the Credit Agreement.
         2. The Borrower has taken all necessary limited partnership action to
authorize the borrowings by the Borrower on the terms and conditions of the
Credit Agreement and to authorize the execution, delivery and performance of
each of the Loan Documents.
         3. The Credit Agreement has been duly executed and delivered on behalf
of the Borrower. The Credit Agreement constitutes the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
its terms.
         4. No approvals or consents of any Governmental Authority or other
consents or approvals by any other Person which have not been obtained on or
prior to the date hereof are required in connection with the (a) participation
by the Borrower in the transactions contemplated


                                       B-1
<PAGE>   69


by the Credit Agreement and the other loan documents, or the execution, delivery
and performance by the Borrower of the Credit Agreement or any of the other loan
documents and (b) the validity and enforceability thereof and the exercise by
the Lenders of their rights and remedies thereunder.
         5. The execution, delivery and performance by the Borrower of the
Credit Agreement and each of the other loan documents to which it is a party in
accordance with the terms thereof will not (a) violate any provision of the
Partnership Agreement (Borrower), (b) result in the breach of, or constitute a
default under, any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which the Borrower is a party or by which its
properties may be bound, (c) result in, or require, the creation or imposition
of any Lien on any of its properties or revenues pursuant to any Requirement of
Law or Contractual Obligation, or (d) result in any violation by the Borrower of
any applicable law.
         6. The partnership interests in the Borrower listed on Schedule [ ]
hereto constitute all the partnership interests of record in the Borrower and
are owned of record by the Persons designated on Schedule [ ].
         7. No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best of our
knowledge, threatened by or against the Borrower or against any of its
properties or revenues (a) with respect to the Credit Agreement or any of the
loan documents to which the Borrower is a party or any of the transactions
contemplated thereby or (b) which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
         8. A Texas court or a federal court sitting in Texas applying Texas
choice of law principles and statutes would enforce the provisions of the Loan
Documents stating that such Loan Documents are to be governed by and construed
in accordance with the laws of the State of New York.
         9. The making of the Loans to the Borrower will not violate Section 7
of the Securities Exchange Act of 1934, as amended, or any regulation issued
pursuant thereto, including without limitation, the provisions of Regulations T,
U or X of the Board of Governors of the Federal Reserve System.
         10. The Borrower is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended. The Borrower is not subject to regulation under
any federal or Texas statute or regulation which limits its ability to incur
indebtedness.
         11. The Borrower is not subject to, or is exempt from, regulation as a
"holding company" under the Public Utility Holding Company Act of 1935, as
amended, or pursuant to such Act or the rules and regulations promulgated
thereunder or any order or interpretation of the Securities and Exchange
Commission or its staff issued pursuant thereto.


                                       B-2
<PAGE>   70



                                   EXHIBIT C-1


                  FORM OF INITIAL NOTICE OF COMMITMENT INCREASE


                                     [Date]


The Chase Manhattan Bank,
  as Administrative Agent
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081

Attention:  __________________

Ladies and Gentlemen:

         The undersigned, Shamrock Logistics Operations, L.P., refers to the
Credit Agreement dated as of December 15, 2000, (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement", with terms defined
in the Credit Agreement and not otherwise defined herein being used herein as
therein defined) among Shamrock Logistics Operations, L.P., a Delaware limited
partnership (the "Borrower"), the Lenders party thereto, and The Chase Manhattan
Bank, as Administrative Agent, Royal Bank of Canada, as Syndication Agent and
SunTrust Bank, as Documentation Agent and hereby gives you notice, pursuant to
Section 2.18 of the Credit Agreement that the undersigned hereby requests that
(x) the Lenders agree to increase their respective Commitments and/or (y) the
New Lenders agree to provide Commitments under the Credit Agreement, and in that
connection sets forth below the information relating to such proposed Commitment
Increase as required by Section 2.18 of the Credit Agreement:

                  (i) the effective date of such increase of aggregate amount of
         the Lenders' Commitments is _______________; and

                  (ii) the amount of the requested increase (and/or provision,
         as applicable) of the aggregate Lenders' Commitments is
         $________________ [$25,000,000 minimum];

         Delivery of an executed counterpart of this Initial Notice of
Commitment Increase by telecopier shall be effective as delivery of an original
executed counterpart of this Initial Notice of Commitment Increase.

                           Very truly yours,

                           SHAMROCK LOGISTICS OPERATIONS, L.P.

                           By: Riverwalk Logistics, L.P., its General Partner

                           By: Shamrock Logistics GP, LLC, its General Partner


                           By:
                              --------------------------------------------------
                           Name:
                                ------------------------------------------------
                           Title:
                                 -----------------------------------------------




                                      C-1-2
<PAGE>   71



                                   EXHIBIT C-2


              FORM OF NOTICE OF CONFIRMATION OF COMMITMENT INCREASE


                                     [Date]


The Chase Manhattan Bank,
  as Administrative Agent
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081

Attention:  __________________

Ladies and Gentlemen:

         The undersigned, Shamrock Logistics Operations, L.P., refers to the
Credit Agreement dated as of December 15, 2000, (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement", with terms defined
in the Credit Agreement and not otherwise defined herein being used herein as
therein defined) among Shamrock Logistics Operations, L.P., a Delaware limited
partnership (the "Borrower"), the Lenders party thereto, and The Chase Manhattan
Bank, as Administrative Agent, Royal Bank of Canada, as Syndication Agent and
SunTrust Bank, as Documentation Agent and hereby gives you notice, irrevocably,
pursuant to Section 2.18 of the Credit Agreement that the undersigned hereby
requests that (x) the Lenders agree to increase their respective Commitments
and/or (y) the New Lenders agree to provide Commitments under the Credit
Agreement, and in that connection sets forth below the information relating to
such proposed Commitment Increase as required by Section 2.18 of the Credit
Agreement:

                  (i) the effective date of such increase of aggregate amount of
         the Lenders' Commitments is _______________;

                  (ii) the amount of the requested increase (and/or provision,
         as applicable) of the aggregate Lenders' Commitments is
         $________________ [$25,000,000 minimum];

                  (iii) the Increasing Lenders, the Partially Increasing Lenders
         or the New Lenders, if any, which have agreed with the Borrower to
         increase (and/or provide, as applicable) their respective Commitments
         or to provide Commitments, as the case may be, are: [INSERT NAMES OF
         THE INCREASING LENDERS, THE PARTIALLY INCREASING LENDERS AND/OR NEW
         LENDERS];

                  (iv) the Reducing Lenders, if any, which have not agreed to
         increase their respective Commitments are: [INSERT THE NAMES OF THE
         REDUCING LENDERS]; and

                  (v) set forth on Schedule I hereto is the amount of the
         respective Commitments of all Increasing Lenders, Partially Increasing
         Lenders, Reducing Lenders and New Lenders after the effective date of
         such increase.

         Delivery of an executed counterpart of this Notice of Confirmation of
Commitment Increase by telecopier shall be effective as delivery of an original
executed counterpart of this Notice of Confirmation of Commitment Increase.

                           Very truly yours,

                           SHAMROCK LOGISTICS OPERATIONS, L.P.

                           By: Riverwalk Logistics, L.P., its General Partner

                           By: Shamrock Logistics GP, LLC, its General Partner


                           By:
                              --------------------------------------------------
                           Name:
                                ------------------------------------------------
                           Title:
                                 -----------------------------------------------



                                      C-2-1
<PAGE>   72



                                  SCHEDULE 2.01



<TABLE>
<CAPTION>
LENDER                                                    COMMITMENT
------                                                    ----------
<S>                                                       <C>
The Chase Manhattan Bank                                  $20,000,000
Royal Bank of Canada                                      $20,000,000
SunTrust Bank                                             $20,000,000
The Sumitomo Bank, Limited.                               $15,000,000
The Industrial Bank of Japan, Limited                     $15,000,000
The Bank of Tokyo-Mitsubishi, Ltd.                        $15,000,000
The Fuji Bank, Limited                                    $15,000,000
</TABLE>





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>5
<FILENAME>h79326a3ex10-2.txt
<DESCRIPTION>FORM OF CONTRIBUTION, CONVEYANCE & ASSUMPTION AGMT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.2



                             CONTRIBUTION AGREEMENT

                  THIS CONTRIBUTION AGREEMENT dated as of __________, 2001 (this
"Agreement"), is entered into by and among SHAMROCK LOGISTICS, L.P., a Delaware
limited partnership (the "Partnership"), SHAMROCK LOGISTICS OPERATIONS, L.P. a
Delaware limited partnership (the "Operating Partnership"), RIVERWALK LOGISTICS,
L.P., a Delaware limited partnership (the "General Partner"), SHAMROCK LOGISTICS
GP, LLC, a Delaware limited liability company ("Shamrock Logistics GP"), UDS
LOGISTICS, LLC, a Delaware limited liability company ("UDS Logistics"), DIAMOND
SHAMROCK REFINING AND MARKETING COMPANY, a Delaware corporation ("DSRMC") and
SIGMOR CORPORATION, a Delaware corporation ("Sigmor").

                                    RECITALS

                  WHEREAS, the General Partner and Todd Walker (the
"Organizational Limited Partner") have heretofore formed the Partnership
pursuant to the Delaware Revised Uniform Limited Partnership (the "Delaware
Act") for the purpose of serving as a limited partner of the Operating
Partnership; and

                  WHEREAS, the General Partner contributed $10.00 to the capital
of the Partnership and received a 1% general partner interest therein, and the
Organizational Limited Partner contributed $990.00 to the capital of the
Partnership and received a 99% limited partner interest therein; and

                  WHEREAS, the General Partner and the Organizational Limited
Partner have heretofore formed the Operating Partnership pursuant to the
Delaware Act for the purpose of


<PAGE>   2


owning and operating certain crude oil and refined product pipeline,
terminalling and storage assets previously owned and operated by certain
subsidiaries of Ultramar Diamond Shamrock Corporation ("UDS") (the "Business"),
which assets have previously been transferred to the Operating Partnership by
mergers with and by conveyances and assignments from subsidiaries of UDS; and

                  WHEREAS, the General Partner contributed $10.00 to the capital
of the Operating Partnership and received a 1% general partner interest therein,
and the Organizational Limited Partner contributed $990.00 to the capital of the
Operating Partnership and received a 99% limited partner interest therein; and

                  WHEREAS, the Operating Partnership has entered into a bank
credit agreement (the "Bank Credit Agreement") providing for a $120 million
revolving credit facility; and

                  WHEREAS, concurrently with the consummation of the
transactions contemplated by this Agreement, the General Partner and the
Partnership have entered into that certain Second Amended and Restated Agreement
of Limited Partnership of the Operating Partnership (the "Operating Partnership
Agreement"); and

                  WHEREAS, concurrently with the consummation of the
transactions contemplated by this Agreement, the General Partner and the
Organizational Limited Partner have entered into that certain Second Amended and
Restated Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement");

                  NOW, THEREFORE, in consideration of their mutual undertakings
and agreements hereunder, the parties to this Agreement undertake and agree as
follows:


                                       -2-
<PAGE>   3


                                    ARTICLE I

                                   DEFINITIONS

         1.1 Definitions. The following capitalized terms shall have the
meanings given below.

                  "Agreement" means this Contribution Agreement.

                  "Bank Credit Agreement" has the meaning assigned to such term
in the Recitals to this Agreement.

                  "Business" has the meaning assigned to such term in the
Recitals to this Agreement.

                  "Common Units" means common limited partner interests in the
Partnership.

                  "Delaware Act" has the meaning assigned to such term in the
Recitals to this Agreement.

                  "DSRMC" has the meaning assigned to such term in the opening
paragraph of this Agreement.

                  "Effective Time" means 12:01 a.m. Eastern Standard Time on
__________, 2001.

                  "General Partner" has the meaning assigned to such term in the
opening paragraph of this Agreement.

                  "OLP Interests" means limited partnership interests in the
Operating Partnership.

                  "Operating Partnership" has the meaning assigned to such term
in the opening paragraph of this Agreement.

                  "Operating Partnership Agreement" has the meaning assigned to
such term in the Recitals to this Agreement.


                                       -3-
<PAGE>   4


                  "Organizational Limited Partner" has the meaning assigned to
such term in the Recitals to this Agreement.

                  "Partnership" has the meaning assigned to such term in the
opening paragraph of this Agreement.

                  "Partnership Agreement" has the meaning assigned to such term
in the Recitals to this Agreement.

                  "Shamrock Logistics GP" has the meaning assigned to such term
in the opening paragraph of this Agreement.

                  "Sigmor" has the meaning assigned to such term in the opening
paragraph of this Agreement.

                  "Subordinated Units" means subordinated limited partner
interests in the Partnership.

                  "UDS" has the meaning assigned to such term in the Recitals to
this Agreement.

                  "UDS Logistics" has the meaning assigned to such term in the
opening paragraph of this Agreement.

                                   ARTICLE II

                            CONTRIBUTIONS AT CLOSING

         2.1 DSRMC Contribution to Shamrock Logistics GP. DSRMC hereby
contributes OLP Interests to Shamrock Logistics GP and Shamrock Logistics GP
hereby accepts such OLP Interests as a contribution to the capital of Shamrock
Logistics GP.


                                       -4-
<PAGE>   5


         2.2 DSRMC Contribution to UDS Logistics. DSRMC hereby contributes OLP
Interests to UDS Logistics and UDS Logistics hereby accepts such OLP Interests
as a contribution to the capital of UDS Logistics.

         2.3 Shamrock Logistics GP Contribution to the General Partner. Shamrock
Logistics GP hereby contributes the OLP Interests received in Section 2.1 above
to the General Partner in exchange for a 0.1% general partner interest in the
General Partner and the General Partner hereby accepts such OLP Interests as a
contribution to the capital of the General Partner.

         2.4 UDS Logistics Contribution to the General Partner. UDS Logistics
hereby contributes the OLP Interests received in Section 2.2 above to the
General Partner in exchange for 99.9% limited partner interest in the General
Partner and the General Partner hereby accepts such OLP Interests as a
contribution to the capital of the General Partner.

         2.5 Conversion of OLP Interests. The parties acknowledge that pursuant
to the Operating Partnership Agreement, a portion of the OLP Interests held by
the General Partner have been converted into general partner interests so that
the General Partner holds a 1.0101% general partner interest in the Operating
Partnership.

         2.6 DSRMC Contribution to UDS Logistics. DSRMC hereby contributes OLP
Interests to UDS Logistics in exchange for member interests in UDS Logistics and
UDS Logistics hereby accepts such OLP Interests as a contribution to the capital
of UDS Logistics.

         2.7 Sigmor Contribution to UDS Logistics. Sigmor hereby contributes OLP
Interests to UDS Logistics in exchange for member interests in UDS Logistics and
UDS Logistics hereby accepts such OLP Interests as a contribution to the capital
of UDS Logistics.


                                       -5-
<PAGE>   6


         2.8 GP Contribution to the Partnership. General Partner hereby
contributes its OLP Interests to the Partnership in exchange for a 1% general
partner interest in the Partnership and the Partnership hereby accepts such OLP
Interests as a contribution to the capital of the Partnership.

         2.9 UDS Logistics Contribution to the Partnership. UDS Logistics hereby
contributes its OLP Interests to the Partnership in exchange for 8,999,222
Subordinated Units and 4,399,322 Common Units and the Partnership hereby accepts
such OLP Interests as a contribution to the capital of the Partnership.

         2.10 Bank Credit Agreement Borrowing. The parties acknowledge that the
Operating Partnership has borrowed $__________ under the Bank Credit Agreement.

                                   ARTICLE III

                       PUBLIC OFFERING AND USE OF PROCEEDS

         3.1 Public Cash Contribution. The parties to this Agreement acknowledge
a cash contribution to the Partnership of $__________ ($__________ after payment
of underwriting discounts and commissions) from the public in exchange for
4,000,000 Common Units.

         3.2 Partnership Cash Contribution. The Partnership hereby contributes
cash in the amount of $[net amount received from public] to the Operating
Partnership in exchange for OLP Interests and the Operating Partnership hereby
accepts such cash contribution as a contribution to the capital of the Operating
Partnership.

         3.3 Operating Partnership Use of Proceeds. The parties to this
Agreement acknowledge that the Operating Partnership has used the cash received
as set forth in Section 3.2


                                       -6-
<PAGE>   7


above along with $ ___________ from the Bank Credit Agreement as follows: (a)
reimbursement to the General Partner and others for certain capital expenditures
in the amount of $20.52 million; (b) payment of certain transaction expenses in
the aggregate amount of $ ___________ million including, without limitation, all
of the syndication costs incurred by the Partnership in connection with the
public offering of the Common Units; (c) payment in the aggregate amount of [$9]
million to DSRMC as repayment of a working capital loan previously made by DSRMC
to the Operating Partnership; (d) repayment of qualified debt previously assumed
by the Operating Partnership pursuant to certain mergers and asset conveyances
related to the Business in the aggregate amount of $98.68 million; and (e) $5.0
million for working capital and general corporate purposes.

                                   ARTICLE IV

                               FURTHER ASSURANCES

         4.1. Further Assurances. From time to time after the date hereof, and
without any further consideration, each party upon request from another shall
execute, acknowledge and deliver all such additional instruments, notices and
other documents, and will do all such other acts and things, all in accordance
with applicable law, as may be reasonably necessary or appropriate to more fully
and effectively carry out the purposes and intent of this Agreement.


                                       -7-
<PAGE>   8


                                    ARTICLE V

                                  MISCELLANEOUS

         5.1. Order of Completion of Transactions; Effective Time. The
transactions provided for in Articles II and III of this Agreement shall be
completed on the date of this Agreement in the following order:

                  First, the transactions provided for in Article II shall be
completed; and

                  Second, the transactions provided for in Article III shall be
completed.

         5.2. Costs. The Operating Partnership shall pay all sales, use and
similar taxes arising out of the contributions and deliveries to be made
hereunder, and shall pay all documentary, filing, recording, transfer, deed, and
conveyance taxes and fees required in connection therewith, if any.

         5.3. Headings: References: Interpretation. All Article and Section
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof," "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole, including,
without limitation, all Schedules and Exhibits attached hereto, if any, and not
to any particular provision of this Agreement. All references herein to
Articles, Sections, Schedules and Exhibits, if any, shall, unless the context
requires a different construction, be deemed to be references to the Articles
and Sections of this Agreement and the Schedules and Exhibits attached hereto,
and all such Schedules and Exhibits attached hereto are hereby incorporated
herein and made a part hereof for all purposes. All personal pronouns used in
this Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders, and the singular shall include the plural and vice
versa. The use herein of the word "including" following any general


                                       -8-
<PAGE>   9


statement, term or matter shall not be construed to limit such statement, term
or matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not non-limiting language (such
as "without limitation," "but not limited to," or words of similar import) is
used with reference thereto, but rather shall be deemed to refer to all other
items or matters that could reasonably fall within the broadest possible scope
of such general statement, term or matter.

         5.4. Successors and Assigns. The Agreement shall be binding upon and
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.

         5.5. No Third Party Rights. The provisions of this Agreement are
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.

         5.6. Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.

         5.7. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas applicable to contracts made
and to be performed wholly within such state without giving effect to conflict
of law principles thereof.

         5.8. Severability. If any of the provisions of this Agreement are held
by any court of competent jurisdiction to contravene, or to be invalid under,
the laws of any political body having jurisdiction over the subject matter
hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and


                                       -9-
<PAGE>   10


necessary provision added so as to give effect to the intention of the parties
as expressed in this Agreement at the time of execution of this Agreement.

         5.9. Amendment or Modification. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto.

         5.10 Integration. This Agreement supersedes all previous understandings
or agreements between the parties, whether oral or written, with respect to its
subject matter. This document is an integrated agreement which contains the
entire understanding of the parties. No understanding, representation, promise
or agreement, whether oral or written, is intended to be or shall be included in
or form part of this Agreement unless it is contained in a written amendment
hereto executed by the parties hereto after the date of this Agreement.

         5.11 Power of Attorney. Each of the parties hereby constitutes and
appoints the General Partner and its successors and assigns as its true and
lawful attorney with full power of substitution, having full right and authority
in each of the parties' name and their respective successors and assigns, to
demand, sue for, recover, collect and receive any and all accounts receivable
hereby distributed and delivered to the General Partner, and to use and take any
and all lawful means for the recovery thereof by legal process or otherwise; to
give receipts, releases and acquittances for or in respect of the same or any
part thereof; to institute and prosecute in the name of each of the parties or
otherwise, and to defend and compromise, any and all actions, suits or
proceedings in respect of any accounts receivable hereby distributed and
delivered to the General Partner, which the General Partner and its successors
and assigns shall deem desirable. Each of the parties hereby declares that the
foregoing powers are coupled with an interest and shall be irrevocable by it in
any manner or for any reason.


                                      -10-
<PAGE>   11



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





                                      -11-
<PAGE>   12


         IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.

                                   SHAMROCK LOGISTICS, L.P.,
                                   a Delaware limited partnership

                                   By: Riverwalk Logistics, L.P.
                                       its general partner

                                       By: Shamrock Logistics GP, LLC


                                            By:
                                               -----------------------------


                                   SHAMROCK LOGISTICS OPERATIONS, L.P.,
                                   a Delaware limited partnership

                                   By: Riverwalk Logistics, L.P.
                                       its general partner

                                       By: Shamrock Logistics GP, LLC


                                            By:
                                               -----------------------------


                                   RIVERWALK LOGISTICS, L.P.,
                                   a Delaware limited partnership

                                   By: Shamrock Logistics GP, LLC
                                       its general partner

                                       By: Diamond Shamrock Refining and
                                           Marketing Company, a Delaware
                                           corporation


                                            By:
                                               -----------------------------


<PAGE>   13


                                   DIAMOND SHAMROCK REFINING AND
                                   MARKETING COMPANY,
                                   a Delaware corporation


                                   By:
                                      ----------------------------------------


                                   SIGMOR CORPORATION,
                                   a Delaware corporation


                                   By:
                                      ----------------------------------------


                                   SHAMROCK LOGISTICS GP, LLC,
                                   a Delaware limited liability company

                                   By: Diamond Shamrock Refining and Marketing
                                       Company, a Delaware corporation


                                       By:
                                          ------------------------------------


                                   UDS LOGISTICS LLC,
                                   a Delaware limited liability company

                                   By: Diamond Shamrock Refining and Marketing
                                       Company, a Delaware corporation


                                       By:
                                          ------------------------------------


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>6
<FILENAME>h79326a3ex10-3.txt
<DESCRIPTION>FORM OF LONG-TERM INCENTIVE PLAN
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.3


                           SHAMROCK LOGISTICS GP, LLC

                          2000 LONG-TERM INCENTIVE PLAN



SECTION 1.  Purpose of the Plan.

         The Shamrock Logistics GP, LLC 2000 Long-Term Incentive Plan (the
         "Plan") is intended to promote the interests of Shamrock Logistics,
         L.P., a Delaware limited partnership (the "Partnership"), by providing
         to employees and directors of Shamrock Logistics GP, LLC, a Delaware
         limited liability company (the "Company") and its Affiliates who
         perform services for the Partnership and its subsidiaries, incentive
         awards for superior performance that are based on Units. The Plan is
         also intended to enhance the Company's and its Affiliates' ability to
         attract and retain employees whose services are key to the growth and
         profitability of the Partnership, and to encourage them to devote their
         best efforts to the business of the Partnership, thereby advancing the
         Partnership's interests.


SECTION 2.   Definitions.

         As used in the Plan, the following terms shall have the meanings set
         forth below:


         2.1      "Affiliate" means, with respect to any Person, any other
                  Person that directly or indirectly, through one or more
                  intermediaries, controls, is controlled by or is under common
                  control with, the Person in question. As used herein, the term
                  "control" means the possession, direct or indirect, of the
                  power to direct or cause the direction of the management and
                  policies of a Person, whether through ownership of voting
                  securities, by contract or otherwise.

         2.2      "Award" means a grant of one or more Options or Restricted
                  Units pursuant to the Plan, and shall include any tandem DERs
                  granted with respect to such Award.

         2.3      "Board" means the Board of Directors of the Company.

         2.4      "Cause" means:

                           (i) fraud or embezzlement on the part of the
                           Participant;

                           (ii) conviction of or the entry of a plea of nolo
                  contendere by the Participant to any felony;

                           (iii) gross insubordination or a material breach of,
                  or the willful failure or refusal by the Participant to
                  perform and discharge his duties, responsibilities or
                  obligations (other than by reason of disability or death) that
                  is not corrected within thirty (30) days following written
                  notice thereof to the Participant, such notice to state with
                  specificity the nature of the breach, failure or refusal; or


<PAGE>   2


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 2 of 11

                           (iv) any act of willful misconduct by the Participant
                  which (a) is intended to result in substantial personal
                  enrichment of the Participant at the expense of the
                  Partnership, the Company or any of their Affiliates or (b) has
                  a material adverse impact on the business or reputation of the
                  Partnership, the Company or any of their Affiliates (such
                  determination to be made by the Partnership, the Company or
                  any of their Affiliates in the good faith exercise of their
                  reasonable judgment).

         2.5      "Change of Control" means, and shall be deemed to have
                  occurred upon the occurrence of one or more of the following
                  events: (i) any sale, lease, exchange or other transfer (in
                  one transaction or a series of related transactions) of all or
                  substantially all of the assets of the Company or the
                  Partnership to any Person or its Affiliates, unless
                  immediately following such sale, lease, exchange or other
                  transfer such assets are owned, directly or indirectly, by
                  Ultramar Diamond Shamrock Corporation and its Affiliates or
                  the Company; (ii) the consolidation or merger of the
                  Partnership or the Company with or into another Person
                  pursuant to a transaction in which the outstanding voting
                  interests of the Company is changed into or exchanged for
                  cash, securities or other property, other than any such
                  transaction where, in the case of the Company, (a) all
                  outstanding voting interest of the Company is changed into or
                  exchanged for voting stock or interests of the surviving
                  corporation or entity or its parent and (b) the holders of the
                  voting interests of the Company immediately prior to such
                  transaction own, directly or indirectly, not less than a
                  majority of the voting stock or interests of the surviving
                  corporation or entity or its parent immediately after such
                  transaction and, in the case of the Partnership, Ultramar
                  Diamond Shamrock retains operational control, whether by way
                  of holding a general partner interest, managing member
                  interest or a majority of the outstanding voting interests of
                  the surviving corporation or entity or its parent; or (iii) a
                  "person" or "group" (within the meaning of Sections 13(d) or
                  14(d)(2) of the Exchange Act) being or becoming the
                  "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
                  the Exchange Act) of more than 50% of all voting interests of
                  the Company then outstanding, other than (a) in a merger or
                  consolidation which would not constitute a Change of Control
                  under clause (ii) above and (b) Ultramar Diamond Shamrock and
                  its Affiliates.

         2.6      "Committee" means the Compensation Committee of the Board or
                  such other committee of the Board appointed to administer the
                  Plan.

         2.7      "DER" means a contingent right, granted in tandem with a
                  specific Restricted Unit, to receive an amount in cash equal
                  to the cash distributions made by the Partnership with respect
                  to a Unit during the period such Restricted Unit is
                  outstanding.

         2.8      "Director" means a "non-employee director" of the Company, as
                  defined in Rule 16b-3.

<PAGE>   3

Shamrock Logistics 2000 Long-Term Incentive Plan
Page 3 of 11


         2.9      "Employee" means any employee of the Company or an Affiliate,
                  as determined by the Committee.

         2.10     "Exchange Act" means the Securities Exchange Act of 1934, as
                  amended.

         2.11     "Fair Market Value" means the closing sales price of a Unit on
                  the applicable date (or if there is no trading in the Units on
                  such date, on the next preceding date on which there was
                  trading) as reported in The Wall Street Journal (or other
                  reporting service approved by the Committee). If Units are not
                  publicly traded at the time a determination of fair market
                  value is required to be made hereunder, the determination of
                  fair market value shall be made in good faith by the
                  Committee.

         2.12     "Good Reason" means:

                           (i) a reduction in the Participant's annual base
                  salary;

                           (ii) failure to pay the Participant any compensation
                  due under an employment agreement, if any;

                           (iii) failure to continue to provide benefits
                  substantially similar to those then enjoyed by the Participant
                  unless the Partnership, the Company or their Affiliates
                  provide aggregate benefits equivalent to those then in effect;
                  or

                           (iv) failure to continue a compensation plan or to
                  continue the Participant's participation in a plan on a basis
                  not materially less favorable to the Participant, subject to
                  the power of the Partnership, the Company or their Affiliates
                  to amend such plans in their reasonable discretion;

                           (v) the Partnership, the Company or their Affiliates
                  purported termination of the Participant's employment for
                  Cause or disability not pursuant to a procedure indicating the
                  specific provision of the definition of Cause contained in
                  this Plan as the basis for such termination of employment;

                  The Participant may not terminate for Good Reason unless he
                  has given written notice delivered to the Partnership, the
                  Company or their Affiliates, as appropriate, of the action or
                  inaction giving rise to Good Reason, and if such action or
                  inaction is not corrected within thirty (30) days thereafter,
                  such notice to state with specificity the nature of the
                  breach, failure or refusal.

         2.13     "Option" means on option to purchase Units granted under the
                  Plan.

         2.14     "Participant" means any Employee or Director granted an Award
                  under the Plan.

<PAGE>   4


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 4 of 11


         2.15     "Partnership Agreement" means the Second Amended and Restated
                  Agreement of Limited Partnership of the Partnership.

         2.16     "Person" means an individual or a corporation, limited
                  liability company, partnership, joint venture, trust,
                  unincorporated organization, association, government agency or
                  political subdivision thereof or other entity.

         2.17     "Restricted Period" means the period established by the
                  Committee with respect to an Award during which the Award
                  either remains subject to forfeiture or is not exercisable by
                  the Participant.

         2.18     "Restricted Unit" means a phantom unit granted under the Plan
                  which is equivalent in value and in dividend and interest
                  rights to a Unit, and which upon or following vesting entitles
                  the Participant to receive a Unit or its Fair Market Value in
                  cash.


         2.19     "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the
                  Exchange Act, or any successor rule or regulation thereto as
                  in effect from time to time.

         2.20     "SEC" means the Securities and Exchange Commission, or any
                  successor thereto.

         2.21     "Unit" means a Common Unit of the Partnership.

SECTION 3. Administration.

         Annual grant levels for Participants will be recommended by the Chief
         Executive Officer of the Company, subject to the review and approval of
         the Committee. The Plan shall be administered by the Committee. A
         majority of the Committee shall constitute a quorum, and the acts of
         the members of the Committee who are present at any meeting thereof at
         which a quorum is present, or acts unanimously approved by the members
         of the Committee in writing, shall be the acts of the Committee.
         Subject to the terms of the Plan and applicable law, and in addition to
         other express powers and authorizations conferred on the Committee by
         the Plan, the Committee shall have full power and authority to: (i)
         designate Participants; (ii) determine the type or types of Awards to
         be granted to a Participant; (iii) determine the number of Units to be
         covered by Awards; (iv) determine the terms and conditions of any
         Award; (v) determine whether, to what extent, and under what
         circumstances Awards may be settled, exercised, canceled, or forfeited;
         (vi) interpret and administer the Plan and any instrument or agreement
         relating to an Award made under the Plan; (vii) establish, amend,
         suspend, or waive such rules and regulations and appoint such agents as
         it shall deem appropriate for the proper administration of the Plan;
         and (viii) make any other determination and take any other action that
         the Committee deems necessary or desirable for the administration of
         the Plan. Unless otherwise expressly provided in the Plan, all
         designations, determinations, interpretations, and other decisions
         under or with respect to the Plan or any Award shall be within the sole
         discretion of the Committee, may be made at any time and shall be

<PAGE>   5


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 5 of 11


         final, conclusive, and binding upon all Persons, including the Company,
         the Partnership, any Affiliate, any Participant, and any beneficiary of
         any Award.


SECTION 4.  Units Available for Awards.

         4.1      Units Available. Subject to adjustment as provided in Section
                  4.3, the number of Units with respect to which Awards may be
                  granted under the Plan is 250,000. If any Award is forfeited
                  or otherwise terminates or is canceled without the delivery of
                  Units, then the Units covered by such Award, to the extent of
                  such forfeiture, termination , or cancellation, shall again be
                  Units with respect to which Awards may be granted.

         4.2      Sources of Units Deliverable Under Awards. Any Units delivered
                  pursuant to an Award shall consist, in whole or in part, of
                  Units acquired in the open market, from any Affiliate, the
                  Partnership or any other Person, or any combination of the
                  foregoing, as determined by the Committee in its discretion.

         4.3      Adjustments. If the Committee determines that any distribution
                  (whether in the form of cash, Units, other securities, or
                  other property), recapitalization, split, reverse split,
                  reorganization, merger, consolidation, split-up, spin-off,
                  combination, repurchase, or exchange of Units or other
                  securities of the Partnership, issuance of warrants or other
                  rights to purchase Units or other securities of the
                  Partnership, or other similar transaction or event affects the
                  Units such that an adjustment is determined by the Committee
                  to be appropriate in order to prevent dilution or enlargement
                  of the benefits or potential benefits intended to be made
                  available under the Plan, then the Committee shall, in such
                  manner as it may deem equitable, adjust any or all of (i) the
                  number and type of Units (or other securities or property)
                  with respect to which Awards may be granted, (ii) the number
                  and type of Units (or other securities or property) subject to
                  outstanding Awards, and (iii) if deemed appropriate, make
                  provision for a cash payment to the holder of an outstanding
                  Award; provided, that the number of Units subject to any Award
                  shall always be a whole number.

SECTION 5. Eligibility.

         Any Employee and Director shall be eligible to be designated a
         Participant.


<PAGE>   6

Shamrock Logistics 2000 Long-Term Incentive Plan
Page 6 of 11


SECTION 6. Awards.

         6.1      Options. The Committee shall have the authority to determine
                  the Employees and Directors to whom Options shall be granted,
                  the number of Units to be covered by each Option, the purchase
                  price therefor and the conditions and limitations applicable
                  to the exercise of the Option, including the following terms
                  and conditions and such additional terms and conditions, as
                  the Committee shall determine, that are not inconsistent with
                  the provisions of the Plan.

                           (i) Exercise Price. The purchase price per Unit
                           purchasable under an Option shall be determined by
                           the Committee at the time the Option is granted but
                           shall not be less than its Fair Market Value as of
                           the date of grant.

                           (ii) Time and Method of Exercise. The Committee shall
                           determine the Restricted Period, i.e., the time or
                           times at which an Option may be exercised in whole or
                           in part, and the method or methods by which payment
                           of the exercise price with respect thereto may be
                           made or deemed to have been made which may include,
                           without limitation, cash, check acceptable to the
                           Company, a "cashless-broker" exercise (through
                           procedures approved by the Company), other securities
                           or other property, a note from the Participant (in a
                           form acceptable to the Company), or any combination
                           thereof, having a Fair Market Value on the exercise
                           date equal to the relevant exercise price.

                           (iii) Term. Subject to earlier termination as
                           provided in the grant agreement or the Plan, each
                           Option shall expire on the 10th anniversary of its
                           date of grant.

                           (iv) Forfeiture. Except as otherwise provide in the
                           terms of the Option grant, upon termination of a
                           Participant's employment with the Company and its
                           Affiliates or membership on the Board, whichever is
                           applicable, for any reason during the applicable
                           Restricted Period, all Options shall be forfeited by
                           the Participant, unless otherwise provided in a
                           written employment agreement (if any) between the
                           Participant and the Company or one or more of its
                           Affiliates. The Committee may, in its discretion,
                           waive in whole or in part such forfeiture with
                           respect to a Participant's Options.

         6.2      Restricted Units. The Committee shall have the authority to
                  determine the Employees and Directors to whom Restricted Units
                  shall be granted, the number of Restricted Units to be granted
                  to each such Participant, the duration of the Restricted
                  Period (if any), the conditions under which the Restricted
                  Units may become vested (which may be immediate upon grant) or
                  forfeited, and such other terms and conditions as the
                  Committee may establish respecting such Awards, including
                  whether DERs are granted with respect to such Restricted
                  Units.

<PAGE>   7


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 7 of 11


                           (i) DERs. To the extent provided by the Committee, in
                           its discretion, a grant of Restricted Units may
                           include a tandem DER grant, which may provided that
                           such DERs shall be paid directly to the Participant,
                           be credited to a bookkeeping account (with or without
                           interest in the discretion of the Committee) subject
                           to the same restrictions as the tandem Award, or be
                           subject to such other provisions or restrictions as
                           determined by the Committee in its discretion.

                           (ii) Forfeiture. Except as otherwise provided in the
                           terms of the Award agreement, upon termination of a
                           Participant's employment with the Company and its
                           Affiliates or membership on the Board, whichever is
                           applicable, for any reason during the applicable
                           Restricted Period, all Restricted Units shall be
                           forfeited by the Participant, unless otherwise
                           provided in a written employment agreement (if any)
                           between the Participant and the Company or one or
                           more of its Affiliates. The Committee may, in its
                           discretion, waive in whole or in part such forfeiture
                           with respect to a Participant's Restricted Units.

                           (iii) Lapse of Restrictions. Upon the vesting of each
                           Restricted Unit, the Participant shall be entitled to
                           receive from the Company one Unit or its Fair Market
                           Value, as determined by the Committee, subject to the
                           provisions of Section 8.2.

         6.3      General.

                  (i) Awards May Be Granted Separately or Together. Awards may,
                  in the discretion of the Committee, be granted either alone or
                  in addition to, in tandem with, or in substitution for any
                  other Award granted under the Plan or any award granted under
                  any other plan of the Company or any Affiliate, including the
                  Annual Incentive Plan or the Intermediate Incentive
                  Compensation Plan. Awards granted in addition to or in tandem
                  with other Awards or awards granted under any other plan of
                  the Company or any Affiliate may be granted either at the same
                  time as or at a different time from the grant of such other
                  Awards or awards.

                  (ii) Limits on Transfer of Awards. No Award and no right under
                  any such Award may be assigned, alienated, pledged, attached,
                  sold or otherwise transferred or encumbered by a Participant
                  otherwise than by will or by the laws of descent and
                  distribution and any such purported assignment, alienation,
                  pledge, attachment, sale, transfer or encumbrance shall be
                  void and unenforceable against the Company or any Affiliate.

                  (iii) Term of Awards. The term of each Award shall be for such
                  period as may be determined by the Committee.

                  (iv) Unit Certificates. All certificates for Units or other
                  securities of the Partnership delivered under the Plan
                  pursuant to any Award or the exercise thereof shall be subject
                  to such stop transfer orders and other restrictions as the
                  Committee

<PAGE>   8

Shamrock Logistics 2000 Long-Term Incentive Plan
Page 8 of 11


                  may deem advisable under the Plan or the rules, regulations,
                  and other requirements of the SEC, any stock exchange upon
                  which such Units or other securities are then listed, and any
                  applicable federal or state laws, and the Committee may cause
                  a legend or legends to be put on any such certificates to make
                  appropriate reference to such restrictions.

                  (v) Consideration for Grants. Awards may be granted for no
                  cash consideration or for such consideration as the Committee
                  determines including, without limitation, such minimal cash
                  consideration as may be required by applicable law.

                  (vi) Delivery of Units or other Securities and Payment by
                  Participant of Consideration. Notwithstanding anything in the
                  Plan or any grant agreement to the contrary, delivery of Units
                  pursuant to the exercise or vesting of an Award may be
                  deferred for any period during which, in the good faith
                  determination of the Committee, the Company is not reasonably
                  able to obtain Units to deliver pursuant to such Award without
                  violating the rules or regulations of any applicable law or
                  securities exchange. No Units or other securities shall be
                  delivered pursuant to any Award until payment in full of any
                  amount required to be paid pursuant to the Plan or the
                  applicable Award agreement (including, without limitation, any
                  exercise price or any tax withholding) is received by the
                  Company. Such payment may be made by such method or methods
                  and in such form or forms as the Committee shall determine,
                  including, without limitation, cash, other Awards, withholding
                  of Units, or any combination thereof; provided that the
                  combined value, as determined by the Committee, of all cash
                  and cash equivalents and the Fair Market Value of any such
                  Units or other property so tendered to the Company, as of the
                  date of such tender, is at least equal to the full amount
                  required to be paid to the Company pursuant to the Plan or the
                  applicable Award agreement.

                  (vii) Change of Control. Upon a Change of Control, all Awards
                  shall automatically vest and become payable or exercisable, as
                  the case may be, in full. In this regard, all Restricted
                  Periods shall terminate and all performance criteria, if any,
                  shall be deemed to have been achieved at the maximum level.

                  (viii) Sale of Significant Assets. In the event the Company or
                  the Partnership sells or otherwise disposes of a significant
                  portion of the assets under its control, (such significance to
                  be determined by action of the Board of the Company in its
                  sole discretion) and as a consequence of such disposition (a)
                  a Participant's employment is terminated by the Partnership,
                  the Company or their affiliates without Cause or by the
                  Participant for Good Reason or (b) as a result of such sale or
                  disposition, the Participant's employer shall no longer be the
                  Partnership, the Company or one of their Affiliates, then all
                  of such Participant's Awards shall automatically vest and
                  become payable or exercisable, as the case may be, in full. In
                  this regard, all Restricted Periods shall terminate and all
                  performance criteria, if any, shall be deemed to have been
                  achieved at the maximum level.

<PAGE>   9


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 9 of 11


SECTION 7. Amendment and Termination.

         Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award agreement or in the Plan:

         (i) Amendments to the Plan. Except as required by applicable law or the
         rules of the principal securities exchange on which the Units are
         traded and subject to Section 7(ii) below, the Board or the Committee
         may amend, alter, suspend, discontinue, or terminate the Plan in any
         manner, including increasing the number of Units available for Awards
         under the Plan, without the consent of any partner, Participant, other
         holder or beneficiary of an Award, or other Person.

         (ii) Amendments to Awards. The Committee may waive any conditions or
         rights under, amend any terms of, or alter any Award theretofore
         granted, provided no change, other than pursuant to Section 7(iii), in
         any Award shall materially reduce the benefit to Participant without
         the consent of such Participant.

         (iii) Adjustment of Awards Upon the Occurrence of Certain Unusual or
         Nonrecurring Events. The Committee is hereby authorized to make
         adjustments in the terms and conditions of, and the criteria included
         in, Awards in recognition of unusual or nonrecurring events (including,
         without limitation, the events described in Section 4.3 of the Plan)
         affecting the Partnership or the financial statements of the
         Partnership, or of changes in applicable laws, regulations, or
         accounting principles, whenever the Committee determines that such
         adjustments are appropriate in order to prevent dilution or enlargement
         of the benefits or potential benefits intended to be made available
         under the Plan.

SECTION 8.  General Provisions.

         8.1      No Rights to Awards. No Person shall have any claim to be
                  granted any Award, and there is no obligation for uniformity
                  of treatment of Participants. The terms and conditions of
                  Awards need not be the same with respect to each Participant.

         8.2      Withholding. The Company or any Affiliate is authorized to
                  withhold from any Award, from any payment due or transfer made
                  under any Award or from any compensation or other amount owing
                  to a Participant the amount (in cash, Units, other securities,
                  Units that would otherwise be issued pursuant to such Award or
                  other property) of any applicable taxes payable in respect of
                  the grant of an Award, the lapse of restrictions thereon, or
                  any payment or transfer under an Award or under the Plan and
                  to take such other action as may be necessary in the opinion
                  of the Company to satisfy all obligations for the payment of
                  such taxes.

         8.3      No Right to Employment. The grant of an Award shall not be
                  construed as giving a Participant the right to be retained in
                  the employ of the Company or any Affiliate or to remain on the
                  Board, as applicable. Further, the Company or an Affiliate may
                  at any time dismiss a Participant from employment, free from
                  any liability or any

<PAGE>   10


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 10 of 11


                  claim under the Plan, unless otherwise expressly provided in
                  the Plan or in any Award agreement.

         8.4      Governing Law. The validity, construction, and effect of the
                  Plan and any rules and regulations relating to the Plan shall
                  be determined in accordance with the laws of the State of
                  Delaware and applicable federal law.

         8.5      Severability. If any provision of the Plan or any Award is or
                  becomes or is deemed to be invalid, illegal, or unenforceable
                  in any jurisdiction or as to any Person or Award, or would
                  disqualify the Plan or any Award under any law deemed
                  applicable by the Committee, such provision shall be construed
                  or deemed amended to conform to the applicable laws, or if it
                  cannot be construed or deemed amended without, in the
                  determination of the Committee, materially altering the intent
                  of the Plan or the Award, such provision shall be stricken as
                  to such jurisdiction, Person or Award and the remainder of the
                  Plan and any such Award shall remain in full force and effect.

         8.6      Other Laws. The Committee may refuse to issue or transfer any
                  Units or other consideration under an Award if, in its sole
                  discretion, it determines that the issuance or transfer of
                  such Units or such other consideration might violate any
                  applicable law or regulation, the rules of the principal
                  securities exchange on which the Units are then traded, or
                  entitle the Partnership or an Affiliate to recover the entire
                  then Fair Market Value thereof under Section 16(b) of the
                  Exchange Act, and any payment tendered to the Company by a
                  Participant, other holder or beneficiary in connection with
                  the exercise of such Award shall be promptly refunded to the
                  relevant Participant, holder or beneficiary.

         8.7      No Trust or Fund Created. Neither the Plan nor the Award shall
                  create or be construed to create a trust or separate fund of
                  any kind or a fiduciary relationship between the Company or
                  any Affiliate and a Participant or any other Person. To the
                  extent that any Person acquires a right to receive payments
                  from the Company or any Affiliate pursuant to an Award, such
                  right shall be no greater than the right of any general
                  unsecured creditor of the Company or any Affiliate.

         8.8      No Fractional Units. No fractional Units shall be issued or
                  delivered pursuant to the Plan or any Award, and the Committee
                  shall determine whether cash, other securities, or other
                  property shall be paid or transferred in lieu of any
                  fractional Units or whether such fractional Units or any
                  rights thereto shall be canceled, terminated, or otherwise
                  eliminated.

         8.9      Headings. Headings are given to the Sections and subsections
                  of the Plan solely as a convenience to facilitate reference.
                  Such headings shall not be deemed in any way material or
                  relevant to the construction or interpretation of the Plan or
                  any provision thereof.

<PAGE>   11


Shamrock Logistics 2000 Long-Term Incentive Plan
Page 11 of 11


         8.10     Gender and Number. Words in the masculine gender shall include
                  the feminine gender, the plural shall include the singular and
                  the singular shall include the plural.


SECTION 9. Term of the Plan.

         The Plan shall be effective on the date of its approval by the Board
and shall continue until the date terminated by the Board or Units are no longer
available for grants of Awards under the Plan, whichever occurs first; provided,
however, that notwithstanding the foregoing, no Award shall be made under the
Plan after the tenth anniversary of the Effective Date. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award granted prior to such termination, and the authority of the Board or
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under such Award, shall extend
beyond such termination date.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>h79326a3ex10-5.txt
<DESCRIPTION>FORM OF EMPLOYMENT AGREEMENT - CURTIS V ANASTASIO
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of November 25,
1996, but effective as provided herein, is made and entered into by and between
Ultramar Corporation, a Delaware corporation (the "Company"), and Curtis
Anastasio (the "Executive").

         WHEREAS, the Executive has been serving as a senior executive officer
of Ultramar Corporation;

         WHEREAS, the Executive is a party to an Employment Agreement with
Ultramar Corporation, dated as of June 1, 1992 (the "Prior Agreement");

         WHEREAS, pursuant to the Agreement and Plan of Merger between Ultramar
Corporation, and Diamond Shamrock, Inc., a Delaware corporation ("Diamond
Shamrock, Inc."), dated as of September 22, 1996 (the "Merger Agreement"), as of
the effective time of the Merger (the "Effective Date"), Diamond Shamrock, Inc.
will be merged with and into Ultramar Corporation, with Ultramar Corporation as
the surviving entity (the "Merger");

         WHEREAS, pursuant to the Merger Agreement, the Company is authorized to
enter into this Agreement with Executive;

         WHEREAS, the Company considers it in the best interests of its
stockholders to foster the continuous employment of certain key management
personnel;

         WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined herein)
exists;

         WHEREAS, the Company wishes to assure itself of both present and future
continuation of management in light of the Merger and in the event of a Change
in Control subsequent to the Merger;

         WHEREAS, the Company wishes to continue to employ the Executive and the
Executive is willing to continue to render services, both on the terms and
subject to the conditions set forth in this Agreement;

         NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:

         1. Employment.

               1.1. The Company hereby agrees to continue to employ the
Executive and the Executive hereby agrees to undertake employment with the
Company upon the terms and conditions herein set forth.

               1.2. Employment will be for a term commencing on the Effective
Date and, subject to earlier expiration upon the Executive's termination under
Section 5, expiring two years from the Effective Date (the "Term").
Notwithstanding the previous sentence, this Agreement

                                      -1-

<PAGE>   2

and the employment of the Executive will be automatically renewed and the Term
extended, subject to Section 5, for the successive one-year periods upon the
terms and conditions set forth herein, commencing on the second anniversary of
the Effective Date, and on each anniversary date thereafter, unless either party
to this Agreement gives the other party written notice (in accordance with
Section 12.5) of such party's intention to terminate this Agreement at least
three months prior to the end of such initial or extended term. For purposes of
this Agreement, any reference to the "Term" of this Agreement will include the
original term and any extension thereof.

         2. Position and Duties.

               2.1. Position and Duties. During the Term, the Executive will
serve as Vice President and Deputy General Counsel of the Company, and will have
such duties, functions, responsibilities and authority as are (i) consistent
with the Executive's position as Vice President and Deputy General Counsel of
the Company; or (ii) assigned to his office in the Company's bylaws; or (iii)
reasonably assigned to him by the Company's Board of Directors (the "Board").

               2.2. Commitment. During the Term, the Executive will be the
Company's full-time employee and, except as may otherwise be approved in advance
in writing by the Board, and except during vacation periods and reasonable
periods of absence due to sickness, personal injury or other disability, the
Executive will devote substantially all of his business time and attention to
the performance of his duties to the Company.

         3. Place of Performance. In connection with his employment during the
Term, unless otherwise agreed by the Executive, the Executive will be based at
such location as may be determined by the Board. The Executive will undertake
normal business travel on behalf of the Company.

         4. Compensation and Related Matters.

               4.1. Compensation and Benefits.

                     (i) Annual Base Salary. During the Term of this
Agreement, the Company will pay to the Executive an annual base salary of not
less than $200,000, which annual base salary may be modified from time to time
by the Board (or the Compensation Committee thereof) in its sole discretion,
payable at the times and in the manner consistent with the Company's general
policies regarding compensation of executive employees. The Board may from time
to time authorize such additional compensation to the Executive, in cash or in
property, as the Board may determine in its sole discretion to be appropriate.

                    (ii) Annual Incentive Compensation. If the Board (or the
Compensation Committee thereof) authorizes any cash incentive compensation or
approves any other management incentive program or arrangement, the Executive
will be eligible to participate in such plan, program or arrangement under the
general terms and conditions applicable to executive and management employees;
provided, however, that so long as the Executive remains employed by the Company
at the end of the applicable fiscal year, (a) the annual cash incentive
compensation paid by the Company to the Executive for the Company's fiscal year
that includes the Effective Date, aggregated with any other annual incentive

                                       -2-

<PAGE>   3

compensation earned by the Executive for calendar year 1996, will be in an
amount not less than 100% of the Executive's 1996 target bonus, and (b) the cash
incentive compensation paid to the Executive for the Company's next succeeding
fiscal year will be in an amount not less than 100% of the Executive's target
bonus for that year. Except as set forth in the proviso to the preceding
sentence, nothing in this Section 4.1(ii) will guarantee to the Executive any
specific amount of incentive compensation, or prevent the Board (or the
Compensation Committee thereof) from establishing performance goals and
compensation targets applicable only to the Executive.

               4.2. Executive Benefits. In addition to the compensation
described in Section 4.1, the Company will make available to the Executive and
his eligible dependents, subject to the terms and conditions of the applicable
plans, including without limitation the eligibility rules, participation in all
Company-sponsored employee benefit plans including all employee retirement
income and welfare benefit policies, plans, programs or arrangements in which
senior executives of the Company participate, including any stock option, stock
purchase, stock appreciation, savings, pension, supplemental executive
retirement or other retirement income or welfare benefit, disability, salary
continuation, and any other deferred compensation, incentive compensation, group
and/or executive life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), expense
reimbursement or other employee benefit policies, plans, programs or
arrangements or any equivalent successor policies, plans, programs or
arrangements that may now exist or be adopted hereafter by the Company.

               4.3. Expenses. The Company will promptly reimburse the Executive
for all travel and other business expenses the Executive incurs in order to
perform his duties to the Company under this Agreement in a manner commensurate
with the Executive's position and level of responsibility with the Company, and
in accordance with the Company's policy regarding substantiation of expenses.

         5. Termination. Notwithstanding the Term specified in Section 1.2, the
termination of the Executive's employment hereunder will be governed by the
following provisions:

               5.1. Death. In the event of the Executive's death during the
Term, the Company will pay to the Executive's beneficiaries or estate, as
appropriate, promptly after the Executive's death, (i) the unpaid annual base
salary to which the Executive is entitled, pursuant to Section 4.1, through the
date of the Executive's death, and (ii) for any accrued but unused vacation
days, to the extent and in the amounts, if any, provided under the Company's
usual policies and arrangements. This Section 5.1 will not limit the entitlement
of the Executive's estate or beneficiaries to any death or other benefits then
available to the Executive under any life insurance, stock ownership, stock
options, or other benefit plan or policy that is maintained by the Company for
the Executive's benefit.

               5.2. Disability.

                    (i) If the Company determines in good faith that the
Executive has incurred a Disability (as defined below) during the Term, the
Company may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the

                                      -3-

<PAGE>   4

Executive's employment with the Company will terminate effective on the 30th day
after receipt of such notice by the Executive, provided that within the 30 days
after such receipt, the Executive will not have returned to full-time
performance of his duties. The Executive will continue to receive his annual
base salary and benefits until the date of termination. In the event of the
Executive's Disability, the Company will pay the Executive, promptly after the
Executive's termination, (a) the unpaid annual base salary to which he is
entitled, pursuant to Section 4.1, through the date of the Executive's
termination, (b) for any accrued but unused vacation days, to the extent and in
the amounts, if any, provided under the Company's usual policies and
arrangements, and (c) a lump sum in cash in an amount equal to 50% of his annual
base salary at the time of termination. This Section 5.2 will not limit the
entitlement of the Executive, the Executive's estate or beneficiaries to any
disability or other benefits then available to the Executive under any
disability insurance or other benefit plan or policy that is maintained by the
Company for the Executive's benefit.

                    (ii) For purposes of this Agreement, "Disability" will mean
the Executive's incapacity due to physical or mental illness substantially to
perform his duties on a full-time basis for six consecutive months and within 30
days after a notice of termination is thereafter given by the Company the
Executive will not have returned to the full-time performance of the Executive's
duties; provided, however, if the Executive disagrees with a determination to
terminate him because of Disability, the question of the Executive's disability
will be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party will nominate a
qualified medical doctor and the two doctors will select a third doctor, who
will make the determination as to Disability. In order to facilitate such
determination, the Executive will, as reasonably requested by the Company, (a)
make himself available for medical examinations by a doctor in accordance with
this Section 5.2(ii), and (b) grant the Company and any such doctor access to
all relevant medical information concerning him, arrange to furnish copies of
medical records to such doctor and use his best efforts to cause his own doctor
to be available to discuss his health with such doctor.

               5.3. Cause.

                    (i) The Company may terminate the Executive's employment
hereunder for Cause (as defined below). In the event of the Executive's
termination for Cause, the Company will promptly pay to the Executive (or his
representative) the unpaid annual base salary to which he is entitled, pursuant
to Section 4.1, through the date the Executive is terminated and the Executive
will be entitled to no other compensation, except as otherwise due to him under
applicable law.

                    (ii) For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment hereunder upon a finding by the
Board that (a) the Executive committed an illegal act or acts that were intended
to and did defraud the Company, (b) the Executive engaged in gross negligence or
gross misconduct against the Company or another employee, or in carrying out his
duties and responsibilities, or (c) the Executive materially breached any of the
express covenants set forth in Section 9.1, 9.2 or 9.3. The Company will not
have Cause unless and until the Company provides the Executive with written

                                      -4-

<PAGE>   5

notice that the Company intends to terminate his employment for Cause. Such
written notice will specify the particular act or acts, or failure to act, that
is or are the basis for the decision to so terminate the Executive's employment
for Cause. The Employee will be given the opportunity within 30 calendar days of
the receipt of such notice to meet with the Board to defend such act or acts, or
failure to act. The Executive's employment by the Company automatically will be
terminated under this Section 5.3 for Cause as of the receipt of the written
notice from the Company or, if later, the date specified in such notice. A
notice given under this Section 5.3 must set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment for Cause, and if the termination date is other than the
date of receipt of such notice, specify the date on which the Executive's
employment is to be terminated (which date will not be earlier than the date on
which such notice is given in accordance with Section 13.5). Such notice must be
given no later than 180 business days after a director of the Company (excluding
the Executive, if applicable) first has actual knowledge of the events
justifying the purported termination.

               5.4. Termination.

                    (i) Involuntary Termination. The Executive's employment
hereunder may be terminated by the Company for any reason by written notice as
provided in Section 12.5. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company other than for
Cause if the Executive terminates his employment with the Company for any of the
following reasons (each, a "Good Reason"): without the Executive's written
consent, (a) the Company has breached any material provision of this Agreement
and within 30 days after notice thereof from the Executive, the Company fails to
cure such breach; (b) a successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company fails to assume liability under the
Agreement; (c) at any time after the Company has notified the Executive pursuant
to Section 1.2 that the Company does not intend to renew the Agreement and the
Executive's employment at the end of the Term (including any previous renewals)
(rather than to allow the Agreement automatically to renew); (d) a material
reduction in the aggregate benefits described by Section 4.2 (other than
stock-based compensation) provided to the Executive, unless such decrease is
required by law or is applicable to all employees of the Company eligible to
participate in any employee benefit arrangement affected by such reduction; (e)
a significant reduction in the Executive's duties or the addition of duties,
which in either case are materially inconsistent with the Executive's title or
position; or (f) a reduction in the Executive's annual base salary.

                    (ii) Voluntary Termination. The Executive may voluntarily
terminate the Agreement at any time by notice to the Company as provided in
Section 12.5. The Executive's death or Disability (as defined in Section
5.2(ii)) during the term of the Agreement will constitute a voluntary
termination of employment for purposes of eligibility for termination payments
and benefits as provided in Section 5.5, but for no other purpose.

               5.5. Termination Payments and Benefits.

                    (i) Form and Amount. Upon the Executive's involuntary
termination, other than for Cause, (a) subject to Section 5.5(iii), the Company
will pay or provide to the

                                      -5-

<PAGE>   6

Executive (1) his annual base salary and benefits until the date of termination,
(2) within five business days after termination of his employment, a lump sum
cash payment equal in amount to two times the sum of (x) the Executive's highest
annual base salary in effect during the two years prior to his date of
termination, and (y) the highest annual incentive compensation earned by the
Executive during the same two-year period, (3) two additional years of age and
service credit under the qualified and nonqualified defined benefit retirement
plans of the Company in which the Executive participates at the time of
termination; provided, however, that in the case of a qualified defined benefit
pension plan, the present value of the additional benefit the Executive would
have accrued if he had been credited for all purposes with the additional years
of age and service under such plan as of the Executive's date of termination
with the Company will be paid in a lump sum in cash within five business days
after termination of the Executive's employment, and (4) for a period of one
year after termination of his employment, the continuation of the employee
welfare benefits set forth in Section 4.2 except as offset by benefits paid by
other sources as set forth in Section 8, or as prohibited by law or as a
condition of maintaining the tax-favored status of any such benefits to the
Company or its employees; (b) the Executive's benefit under the applicable
supplemental executive retirement plan will be not less than the benefit the
Executive would have received under the terms of the corresponding plan
(including any individual modifications thereof) applicable to the Executive as
in effect immediately prior to the Effective Date determined as if the Executive
had continued employment under the terms of such corresponding plan (and
modifications) until his actual termination of employment; and (c) if the
Executive had theretofore relocated to San Antonio and his employment has been
terminated within two years after the Effective Date, Executive will be
reimbursed the costs of relocation from San Antonio to any other location in the
continental United States under the same policies and procedures applicable to
Executive's reimbursement for relocation to San Antonio.

                    (ii) Maintenance of Benefits. During the period set forth in
Section 5.5(i)(a)(4), the Company will use its best efforts to maintain in full
force and effect for the continued benefit of the Executive all referenced
benefits or will arrange to make available to the Executive benefits
substantially similar to those that the Executive would otherwise have been
entitled to receive if his employment had not been terminated. Such benefits
will be provided to the Executive on the same terms and conditions (including
employee contributions toward the premium payments) under which the Executive
was entitled to participate immediately prior to his termination.

                    (iii) Release. No benefit will be paid or made available
under Section 5.5(i) (a) unless the Executive first executes a release in the
form attached as an exhibit to this Agreement, and (b) to the extent any portion
of such release is subject to the seven-day revocation period prescribed by the
Age Discrimination in Employment Act of 1967, as amended, or to any similar
revocation period in effect on the date of termination of Executive's
employment, such revocation period has expired.

         6. Change in Control Provisions.

               6.1. Impact of Change in Control. In the event of a "Change in
Control" of the Company, as defined in Section 6.2, (i) the Company will cause
all cash benefits due under this Agreement to be secured by an irrevocable trust
for the benefit of the Executive, the assets of

                                      -6-

<PAGE>   7

which will be subject to the claims of the Company's creditors, and will
transfer to such trust cash and other property adequate to satisfy all of the
expenses of the trust for at least five years after the Change in Control and
any of the Company's actual and potential cash obligations under this Agreement,
(ii) if the Executive's employment is involuntarily terminated without Cause
after the Change in Control, (A) the covenants of Sections 9.1 and 10 will be
inapplicable to the Executive, and (B) the covenant of Section 9.2 will expire
on the third anniversary of the date of termination of the Executive's
employment, and (iii) the definition of Good Reason, as set forth in Section
5.4(i) above, will be expanded to include the following:

               (a) A good faith determination by the Executive that, as a result
of the Change in Control and a change in circumstances thereafter significantly
affecting his positions, including a change in the scope of business or other
activities for which he was responsible, he has been rendered substantially
unable to carry out, has been substantially hindered in the performance of, or
has suffered a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to any of the Executive's
positions; the Executive's determination will be presumed to have been made in
good faith unless otherwise shown by the Company by clear and convincing
evidence;

               (b) The relocation of the Company's principal executive offices
(but only if, immediately prior to the Change in Control, the Executive's
principal place of employment was at the Company's principal executive offices),
or requirement that the Executive have as his principal location of work any
location that is, in excess of 50 miles from the location thereof immediately
preceding the Change in Control or to travel away from his home or office
significantly more often than that required immediately prior to the Change in
Control; or

               (c) For any reason, or without reason, during the 30-day period
immediately following the first anniversary of the first occurrence of a Change
in Control.

               6.2. Definition of Change in Control. For purposes of this
Agreement, a "Change in Control" will be deemed to occur if at any time during
the term of the Agreement any of the following events will occur:

                    (i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization, less than 50% of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
Voting Stock (as that term is hereafter defined) of the Company immediately
prior to such transaction;

                    (ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal person,
and as a result of such sale or transfer, less than 50% of the combined voting
power of the then-outstanding voting securities of such corporation or person
are held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale;

                    (iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated pursuant
to the Securities Exchange

                                      -7-

<PAGE>   8

Act of 1934 (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
has become the beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in the
election of Directors of the Company ("Voting Stock");

                    (iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-existing
contract or transaction; or

                    (v) If during the period of two consecutive years
individuals who at the beginning of any such period constitute the Directors of
the Company cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by the Company's
shareholders, of each Director of the Company first elected during such period
was approved by a vote of at least two-thirds of the Directors of the Company
then still in office who were Directors of the Company at the beginning of any
such period (excluding for this purpose the election of any new Director in
connection with an actual or threatened election or proxy contest).

               Notwithstanding the foregoing provisions of Section 6.2(iii) or
(iv) hereof, unless otherwise determined in a specific case by majority vote of
the Board (or the Compensation Committee thereof), a "Change in Control" will
not be deemed to have occurred for purposes of this Agreement solely because the
Company, an entity in which the Company directly or beneficially owns 50% or
more of the voting securities of such entity, any Company-sponsored employee
stock ownership plan or any other employee benefit plan of the Company either
files or becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the Exchange Act,
disclosing beneficial ownership by it of shares of voting securities of the
Company, whether in excess of 20% or otherwise, or because the Company reports
that a change in control of the Company has or may have occurred or will or may
occur in the future by reason of such beneficial ownership. Notwithstanding the
foregoing provisions of Section 6.2, the Merger will not constitute a Change in
Control.

         7. Certain Additional Payments by the Company:

               (i) Anything in this Agreement to the contrary notwithstanding,
if it is determined (as hereafter provided) that any payment or distribution by
the Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code (or any successor provision thereto) by reason of being "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of

                                      -8-

<PAGE>   9

the Code (or any successor provision thereto) or to any similar tax imposed by
state or local law, or any interest or penalties with respect to such excise tax
(such tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the "Excise Tax"), then the Executive will be
entitled to receive an additional payment or payments (a "Gross-Up Payment") in
an amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. No Gross-Up
Payment will be made with respect to the Excise Tax, if any, attributable to (a)
any incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement (unless a comparable Gross-Up
Payment has theretofore been made available with respect to such option), or (b)
any stock appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (a).

                    (ii) Subject to the provisions of Section 7(vi) hereof, all
determinations required to be made under this Section 7, including whether an
Excise Tax is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment,
will be made by a nationally recognized firm of certified public accountants
(the "Accounting Firm") selected by the Executive in his sole discretion. The
Executive will direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within 15
calendar days after the Termination Date, if applicable, and any other such time
or times as may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the Company
will pay the required Gross-Up Payment to the Executive within five business
days after receipt of such determination and calculations. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it will, at the
same time as it makes such determination, furnish the Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal,
state, local income or other tax return. Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment will be binding upon the Company
and the Executive. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 7(vi) hereof and the Executive thereafter is required to make a
payment of any Excise Tax, the Executive will direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the Company and the
Executive as promptly as possible. Any such Underpayment will be promptly paid
by the Company to, or for the benefit of, the Executive within five business
days after receipt of such determination and calculations.

                    (iii) The Company and the Executive will each provide the
Accounting Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determination
contemplated by Section 7(ii) hereof.

                                      -9-

<PAGE>   10

                    (iv) The federal, state and local income or other tax
returns filed by the Executive will be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to the Excise Tax
payable by the Executive. The Executive will make proper payment of the amount
of any Excise Tax, and at the request of the Company, provide to the Company
true and correct copies (with any amendments) of his federal income tax return
as filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, as such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive will within five business days pay to the Company the amount of such
reduction.

                    (v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated by
Sections 7(ii) and (iv) hereof will be borne by the Company. If such fees and
expenses are initially advanced by the Executive, the Company will reimburse the
Executive the full amount of such fees and expenses within five business days
after receipt from the Executive of a statement therefor and reasonable evidence
of his payment thereof.

                    (vi) The Executive will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification will be given as
promptly as practicable but no later than 10 business days after the Executive
actually receives notice of such claim and the Executive will further apprise
the Company of the nature of such claim and the date on which claim is requested
to be paid (in each case, to the extent known by the Executive). The Executive
will not pay such claim prior to the earlier of (a) the expiration of the
30-calendar-day period following the date on which he gives such notice to the
Company and (b) the date that any payment of amount with respect to such claim
is due. If the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive will:

                    (1) provide the Company with any written records or
               documents in his possession relating to such claim reasonably
               requested by the Company;

                    (2) take such action in connection with contesting such
               claim as the Company will reasonably request in writing from time
               to time, including without limitation accepting legal
               representation with respect to such claim by an attorney
               competent in respect of the subject matter and reasonably
               selected by the Company;

                    (3) cooperate with the Company in good faith in order
               effectively to contest such claim; and

                    (4) permit the Company to participate in any proceedings
               relating to such claim;

                                      -10-

<PAGE>   11

provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of this
Section 7(vi), the Company will control all proceedings taken in connection with
the contest of any claim contemplated by this Section 7(vi) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company will determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue for a refund, the
Company will advance the amount of such payment to the Executive on an
interest-free basis and will indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested claim
will be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive will be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.

                    (vii) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(vi) hereof, the Executive receives
any refund with respect to such claim, the Executive will (subject to the
Company's complying with the requirements of Section 7(vi) hereof) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 7(vi)
hereof, a determination is made that the Executive will not be entitled to any
refund with respect to such claim and the Company does not notify the Executive
in writing of its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination, then such advance will
be forgiven and will not be required to be repaid and the amount of such advance
will offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid pursuant to this Section 7.

         8. Mitigation and Offset. The Executive is under no obligation to
mitigate damages or the amount of any payment or benefit provided for hereunder
by seeking other employment or otherwise; provided, however, that the
Executive's coverage under the Company's welfare benefit plans will be reduced
to the extent that the Executive becomes covered under any comparable employee
benefit plan made available by another employer and covering the same type of
benefits. The Executive will report to the Company any such benefits actually
received by him.

                                      -11-

<PAGE>   12

         9. Competition; Confidentiality; Nonsolicitation.

          9.1. (i) Subject to Section 6.1(ii), the Executive hereby covenants
and agrees that during the Term and for one year following the Term he will not,
without the prior written consent of the Company, engage in Competition (as
defined below) with the Company. For purposes of this Agreement, if the
Executive takes any of the following action he will be engaged in "Competition":
engaging in or carrying on, directly or indirectly, any enterprise, whether as
an advisor, principal, agent, partner, officer, director, employee, stockholder,
associate or consultant to any person, partnership, corporation or any other
business entity, that is principally engaged in the business of refining and/or
marketing oil or related products in States or Provinces in which the Company,
(or any division or segment thereof) has operation; provided, however, that
"Competition" will not include (a) the mere ownership of securities in any
enterprise and exercise of rights appurtenant thereto or (b) participation in
management of any enterprise or business operation thereof other than in
connection with the competitive operation of such enterprise.

                    (ii) Subject to Section 6.1(ii), the Executive hereby
covenants and agrees that during the Term and for three years following the Term
he will not assist a third party in preparing or making an unsolicited bid for
the Company, engaging in a proxy contents with the Company, or engaging in
another other similar activity.

               9.2. During the Term, the Company agrees that it will disclose to
Executive its confidential or proprietary information (as defined in this
Section 9.2) to the extent necessary for Executive to carry out his obligations
under this Agreement. Subject to Section 6.1(ii), the Executive hereby covenants
and agrees that he will not, without the prior written consent of the Company,
during the Term or thereafter disclose to any person not employed by the
Company, or use in connection with engaging in Competition with the Company, any
confidential or proprietary information of the Company. For purposes of this
Agreement, the term "confidential or proprietary information" will include all
information of any nature and in any form that is owned by the Company and that
is not publicly available or generally known to persons engaged in businesses
similar or related to those of the Company. Confidential information will
include, without limitation, the Company's financial matters, customers,
employees, industry contracts, and all other secrets and all other information
of a confidential or proprietary nature. The foregoing obligations imposed by
this Section 9.2 will cease if such confidential or proprietary information will
have become, through no fault of the Executive, generally known to the public or
the Executive is required by law to make disclosure (after giving the Company
notice and an opportunity to contest such requirement).

               9.3. The Executive hereby covenants and agrees that during the
Term and for one year thereafter he will not attempt to influence, persuade or
induce, or assist any other person in so persuading or inducing, any employee of
the Company to give up, or to not commence, employment or a business
relationship with the Company.

               9.4. Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of his post-termination obligations
under Sections 9.1, 9.2 and 9.3 would be inadequate and that damages flowing
from such a breach may not readily be susceptible to being measured in monetary
terms. Accordingly, Executive acknowledges,

                                      -12-

<PAGE>   13

consents and agrees that, in addition to any other rights or remedies which the
Company may have at law, in equity or under this Agreement, upon adequate proof
of his violation of any such provision of this Agreement, the Company will be
entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach, without the necessity of proof of
actual damage.

         10. Post-termination Assistance. Subject to Section 6.1(ii), the
Executive agrees that after his employment with the Company has terminated he
will provide, upon reasonable notice, such information and assistance to the
Company as may reasonably be requested by the Company in connection with any
audit, governmental investigation or litigation in which it or any of its
affiliates is or may become a party; provided, however, that (i) the Company
agrees to reimburse the Executive for any related out-of-pocket expenses,
including travel expenses, and to pay the Executive reasonable compensation for
his time based on his rate of annual salary at the time of termination and (ii)
any such assistance may not unreasonably interfere with the then-current
employment of the Executive.

         11. Survival. The expiration or termination of the Term will not impair
the rights or obligations of any party hereto that accrue hereunder prior to
such expiration or termination, except to the extent specifically stated herein.
In addition to the foregoing, the Executive's covenants contained in Sections
9.1, 9.2, 9.3 and 10 and the Company's obligations under Sections 5, 7 and 12.1
will survive the expiration or termination of Executive's employment.

         12. Miscellaneous Provisions.

               12.1. Legal Fees and Expenses. Without regard to whether the
Executive prevails, in whole or in part, in connection therewith, the Company
will pay and be financially responsible for 100% of any and all attorneys' and
related fees and expenses incurred by the Executive in connection with any
dispute associated with the interpretation, enforcement or defense of the
Executive's rights under this Agreement by litigation or otherwise; provided
that, in regard to such dispute, the Executive has not acted in bad faith or
with no colorable claim of success. All such fees and expenses will be paid by
the Company as incurred by the Executive on a monthly basis upon an undertaking
by the Executive to repay such advanced amounts if a court determines, in a
decision against which no appeal may be taken or with respect to which the time
period to appeal has expired, that he acted in bad faith or with no colorable
claim of success.

               12.2. Binding on Successors. This Agreement will be binding upon
and inure to the benefit of the Company, the Executive and each of their
respective successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.

               12.3. Governing Law. This Agreement will be governed, construed,
interpreted and enforced in accordance with the substantive laws of the State of
Delaware, without regard to conflicts of law principles.

               12.4. Severability. Any provision of this Agreement that is
deemed invalid, illegal or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent

                                      -13-

<PAGE>   14

of such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provisions of this Agreement invalid, illegal, or unenforceable in any
other jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant will be
modified so that the scope of the covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and enforceable.

               12.5. Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof confirmed), or five
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service such as
Federal Express, UPS, or Purolator, addressed to the Company (to the attention
of the Secretary of the Company) at its principal executive offices and to the
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices or changes of address will be effective only upon receipt.

                    (i) To the Company. If to the Company, addressed to the
attention of General Counsel at 9830 Colonnade Boulevard, San Antonio, Texas
78230.

                    (ii) To the Executive. If to the Executive, to him in care
of the Company at the above address.

               12.6. Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same Agreement.

               12.7. Entire Agreement. The terms of this Agreement are intended
by the parties to be the final expression of their agreement with respect to the
Executive's employment by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement will constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative or other legal proceeding to vary the terms of this Agreement.

               12.8. Amendments; Waivers. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, approved by the
Company and signed by the Executive and the Company. Failure on the part of
either party to complain of any action or omission, breach or default on the
part of the other party, no matter how long the same may continue, will never be
deemed to be a waiver of any rights or remedies hereunder, at law or in equity.
The Executive or the Company may waive compliance by the other party with any
provision of this Agreement that such other party was or is obligated to comply
with or perform only through an executed writing; provided, however, that such
waiver will not operate as a waiver of, or estoppel with respect to, any other
or subsequent failure.

                                      -14-

<PAGE>   15

               12.9. No Inconsistent Actions. The parties will not voluntarily
undertake or fail to undertake any action or course of action that is
inconsistent with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair and
reasonable manner with respect to the interpretation and application of the
provisions of this Agreement.

               12.10. Headings and Section References. The headings used in this
Agreement are intended for convenience or reference only and will not in any
manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are to
sections of this Agreement, unless otherwise noted.

               12.11. Indemnification. The Company will indemnify, defend and
hold the Executive harmless, to the maximum extent permitted by law, from any
and all claims, litigations or suits arising out of the activities of the
Executive reasonably taken in the performance of his duties hereunder, including
all reasonable expenses and professional fees that may relate thereto. The
Company agrees to use its best efforts to obtain a directors and officers
liability insurance policy covering the Executive in a sufficient amount to
provide such indemnification, and to maintain such policy during the Term (and
for so long thereafter as is practicable in the circumstances taking into
account the availability of such insurance).

         13. Effectiveness and Prior Agreement. This Agreement will become
effective upon, and the Prior Agreement will terminate immediately prior to, the
Effective Date. Notwithstanding any other provision of this Agreement, if the
Merger Agreement is terminated prior to the Effective Date, this Agreement will
have no further force or effect, and the Prior Agreement will continue in effect
as though this Agreement had not been entered into.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written but effective as provided in Section 13.


                                                   /s/ Curtis Anastasio
                                                   -----------------------------
                                                   Curtis Anastasio

                                                   ULTRAMAR CORPORATION
                                                   a Delaware corporation



                                                   By: /s/ Jean Gaulin
                                                      --------------------------
                                                       Jean Gaulin
                                                       Chief Executive Officer




                                      -15-
<PAGE>   16




                                     Exhibit

                          GENERAL RELEASE OF ALL CLAIMS

         This General Release of all Claims (this "Agreement") is entered into
by and between __________ ("Executive") and Ultramar Diamond Shamrock
Corporation (including its subsidiaries) (collectively the "Company") effective
as of _______.

         In consideration of the promises set forth in the employment agreement
between Executive and the Company, dated ________, 1996, as amended as of the
effective date hereof (the "Employment Agreement"), as well as any promises set
forth in this Agreement, Executive and the Company agree as follows:

(1)      Employment Agreement Entitlements

         The Company will provide Executive the post-termination payments and
         benefits to which he is entitled under the Employment Agreement.

(2)      Return of Property

         All Company files, access keys, desk keys, ID badges and credit cards,
         and such other property of the Company as the Company may reasonable
         request, in Executive's possession must be returned no later than the
         date of Executive's termination from the Company (the "Termination
         Date").

(3)      General Release and Waiver of Claims

         Except as provided in the last sentence of this paragraph (3),
         Executive hereby unconditionally and forever releases, discharges and
         waives any and all claims of any nature whatsoever, whether legal,
         equitable or otherwise, which Executive may have against the Company
         arising at any time on or before the Termination Date, other than with
         respect to the obligations of the Company to the Executive under the
         Employment Agreement. This release of claims extends to any and all
         claims of any nature whatsoever, other than with respect to the
         obligations of the Company to the Executive under the Employment
         Agreement, whether known, unknown or capable or incapable of being
         known as of the Termination Date of thereafter. This Agreement is a
         release of all claims of any nature whatsoever by Executive against the
         Company, other than with respect to the obligations of the Company to
         the Executive under the Employment Agreement, and includes, other than
         as herein provided, any and all claims, demands, causes of action,
         liabilities whether known or unknown including those caused by, arising
         from or related to Executive's employment relationship with the Company
         including, but without limitation, any and all alleged discrimination
         or acts of discrimination which occurred or may have occurred on or
         before the Termination Date based upon race, color, sex, creed,
         national origin, age, disability or any other violation of any Equal
         Employment Opportunity Law, ordinance, rule, regulation or order,
         including, but not limited to, Title VII of the Civil Rights Act of
         1964, as amended; the Civil Rights Act of 1991; the Age Discrimination
         in Employment Act, as amended (as further described in

                                      -16-

<PAGE>   17

         Section 7 below); the Americans with Disabilities Act; claims under
         the Employee Retirement Income Security Act ("ERISA"); or any other
         federal, state or local laws or regulations regarding employment
         discrimination or termination of employment. This also includes claims
         for wrongful discharge, fraud, or misrepresentation under any statute,
         rule, regulation or under the common law.

         The Executive agrees and understands and knowingly agrees to this
         release because it is his intent in executing this Agreement to forever
         discharge the Company from any and all present, future, foreseen or
         unforeseen causes of action except for the obligations of the Company
         set forth in the Employment Agreement.

         Notwithstanding the foregoing, Executive does not release, discharge or
         waive any rights to indemnification that he may have under the By-Laws
         of the Company, the laws of the State of Delaware, any indemnification
         agreement between the Executive and the Company or any insurance
         coverage maintained by or on behalf of the Company.

(4)      Release and Waiver of Claims Under the Age Discrimination in Employment
         Act

         Executive acknowledges that the Company encouraged him to consult with
         an attorney of his choosing, and through this Agreement encourages him
         to consult with his attorney with respect to possible claims under the
         Age Discrimination in Employment Act of 1967, as amended ("ADEA") and
         that Executive acknowledges that he understands that the ADEA is a
         federal statute that prohibits discrimination, on the basis of age, in
         employment, benefits and benefit plans. Executive whishes to waive any
         and all claims under the ADEA that he may have, as of the Termination
         Date, against the Company, its shareholders, employees, or successors
         and hereby waives such claims. Executive further understands that by
         signing this Agreement he is in fact waiving, releasing and forever
         giving up any claim under the ADEA that may have existed on or prior to
         the Termination Date. Executive acknowledges that the Company has
         informed him that he has at his option, twenty-one (21) days in which
         to sign the waiver of this claim under ADEA, and he does hereby
         knowingly and voluntarily waive said twenty-one (21) day period.
         Executive also understands that he has seven (7) days following the
         Termination Date within which to revoke the release contained in this
         paragraph by providing a written notice of his revocation of the
         release and waiver contained in this paragraph to the Company.
         Executive further understands that this right to revoke the release
         contained in this paragraph relates only to this paragraph and does not
         act as a revocation of any other term of this Agreement.

(5)      Proceedings

         Executive has not filed, and agrees not to initiate or cause to be
         initiated on his behalf, any complaint, charge, claim or proceeding
         against the Company before any local, state or federal agency, court or
         other body relating to his employment or the termination of his
         employment, other than with respect to the obligations of the Company
         to the Executive under the Employment Agreement (each individually, a
         "Proceeding"), and agrees not to voluntarily participate in any
         Proceeding. Executive waives any right he

                                      -17-

<PAGE>   18

         may have to benefit in any manner from any relief (whether monetary or
         otherwise) arising out of any Proceeding.

(6)      Remedies

         In the event Executive initiates or voluntarily participates in any
         Proceeding, or if he fails to abide by any of the terms of this
         Agreement or his post-termination obligations contained in the
         Employment Agreement, or if he revokes the ADEA release contained in
         Paragraph 4 of this Agreement within the seven-day period provided
         under Paragraph 4, the Company may, in addition to any other remedies
         it may have, reclaim any amounts paid to him under the termination
         provisions of the Employment Agreement or terminate any benefits or
         payments that are subsequently due under the Employment Agreement,
         without waiving the release granted herein. Executive acknowledges and
         agrees that the remedy at law available to the Company for breach of
         any of his post-termination obligations under the Employment Agreement
         or his obligations under Paragraphs 3, 4, and 5 of this Agreement would
         be inadequate and that damages flowing from such a breach may not
         readily be susceptible to being measured in monetary terms.
         Accordingly, Executive acknowledges, consents and agrees that, in
         addition to any other rights or remedies which the Company may have at
         law, in equity or under this Agreement, upon adequate proof of his
         violation of any such provision of this Agreement, the Company shall be
         entitled to immediate injunctive relief and may obtain a temporary
         order restraining any threatened or further breach, without the
         necessity of proof of actual damage.

         Executive understands that by entering into this Agreement he will be
         limiting the availability of certain remedies that he may have against
         the Company and limiting also his ability to pursue certain claims
         against the Company.

(7)      Severability Clause

         In the event any provision or part of this Agreement is found to be
         invalid or unenforceable, only that particular provision or part so
         found, and not the entire agreement, will be inoperative.

(8)      Non-Admission

         Nothing contained in this Agreement will be deemed or construed as an
         admission of wrongdoing or liability on the part of the Company.

(9)      Governing Law

         This Agreement shall be governed by and construed in accordance with
         the laws of the State of Delaware, applicable to agreements made and to
         be performed in that State; and the parties agree to the jurisdiction
         of the U.S. District Court for the District of Delaware, and agree to
         appear in any action in such courts by service of process by certified
         mail, return receipt requested, at the following addresses:

                                      -18-

<PAGE>   19

         To Company:        ULTRAMAR DIAMOND SHAMROCK CORPORATION
                            9830 Colonnade Boulevard
                            San Antonio, Texas 78230

                            and

         To Executive:
                            -------------------------------------

                            -------------------------------------

                            -------------------------------------

THE EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND THAT HE FULLY
KNOWS, UNDERSTANDS, AND APPRECIATES ITS CONTENTS, AND THAT HE HERBY EXECUTES THE
SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN
VOLUNTARILY AND OF HIS OWN FREE WILL.

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


                                             -----------------------------------
                                             Curtis Anastasio

                                             ULTRAMAR DIAMOND SHAMROCK
                                             CORPORATION, a Delaware corporation


                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------



                                      -19-

<PAGE>   20

                     FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

Curtis Anastasio ("Executive") and Ultramar Diamond Shamrock Corporation, a
Delaware corporation (the "Company"), hereby enter into this First Amendment to
the Employment Agreement between Executive and the Company, dated as of November
25, 1996 and effective as of December 3, 1996 (the "Agreement").

WHEREAS, the Executive serves as Vice President of the Company; and

WHEREAS, the Executive and the Company entered into the Agreement as of the date
stated above; and

WHEREAS, Section 12.8 of the Agreement provides that it may be amended only by
an instrument in writing approved by the Company and signed by the Executive and
the Company; and

WHEREAS, the Company considers it in the best interests of its stockholders to
foster the continued employment of certain key management personnel; and

WHEREAS, the Company wishes to amend the Agreement to add certain provisions
approved by the Compensation Committee of the Board of Directors of the Company
at a meeting held on May 1, 2000.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained
herein and in the Agreement, it is agreed that, effective as of May 1, 2000, the
Agreement shall be amended as follows:

                                       I.

The first sentence of Section 1.2 shall be amended by striking the reference to
"two years" and inserting "three years" in lieu thereof.

                                      II.

Section 5.2(i) of the Agreement is hereby deleted and substituted with the
following:

                  (i) If the Company determines in good faith that the Executive
         has incurred a Disability (as defined below) during the Term, the
         Company may give the Executive written notice of its intention to
         terminate its obligations under this Agreement, which notice may, but
         not need not, include a statement of the Company's intent to terminate
         the Executive's employment. In such event, the Company's obligations
         under this Agreement, and the Executive's employment (if applicable),
         will terminate effective on the 30th day after receipt of such notice
         by the Executive (the "Disability Termination Date"), provided that
         within the 30 days after such receipt, the Executive will not have
         returned to full-time



<PAGE>   21

         performance of his duties. The Executive will continue to receive his
         annual base salary until the Disability Termination Date. The
         Executive will continue to receive benefits until the Disability
         Termination Date, provided that if the Company has not elected to
         terminate the Executive's employment under this provision (but rather
         to terminate only its obligations under this Agreement), the
         Executive's right to continue to receive benefits following the
         Disability Termination Date will be governed by the policies and
         procedures of the Company generally applicable to disabled employees.
         In that event, the Executive will be considered an "employee at will"
         following the Disability Termination Date, and either the Executive or
         the Company may thereafter terminate the Executive's employment for
         any reason or for no reason, and the rights and obligations of the
         Executive and the Company upon such termination will be governed by
         the policies and procedures of the Company applicable to employees at
         will, and by applicable law.

         In the event of the Executive's disability, the Company will pay the
         Executive, promptly after the Disability Termination Date, (a) the
         unpaid annual base salary to which he is entitled, pursuant to Section
         4.1, through the Disability Termination Date, (b) for any accrued but
         unused vacation days, to the extent and in the amounts, if any,
         provided under the Company's usual policies and arrangements, and (c) a
         lump sum in cash in an amount equal to 50% of his annual base salary at
         the Disability Termination Date. This Section 5.2 will not limit the
         entitlement of the Executive, the Executive's estate or beneficiaries
         to any disability or other benefits then available to the Executive
         under any disability insurance or other benefit plan or policy that is
         maintained by the Company for the Executive's benefit; provided that
         (i) any amounts paid as base salary shall offset, on a
         dollar-for-dollar basis (but not below zero), the Company's obligation
         to pay the Executive short-term disability benefits under any
         short-term disability plan, program or arrangement of the Company, in
         respect of the same period for which such base salary is paid, and (ii)
         any benefits paid pursuant to the Company's long-term disability plan
         shall reduce, on a dollar-for-dollar basis (but not below zero), the
         Company's obligation to pay the Executive base salary in respect of the
         same period for which such benefits are paid; provided, however, that
         any such offset or reduction shall not affect, or be affected by, the
         payments provided to be made in accordance with clauses (a), (b), or
         (c) of this Section 5.2(i).

                                      III.

Section 5.5(i)(a) of the Agreement shall be revised to read as follows:

         (i) Form and Amount. Upon Executive's involuntary termination, other
         than for Cause, the Company shall:

                                       2

<PAGE>   22

                  (a) subject to Section 5.5(iii), pay or provide Executive

                           (1) his annual salary and benefits until the date of
                  termination,

                           (2) within five business days after any revocation
                  period in the release described in Section 5.5(iii) has
                  expired, a lump sum cash payment equal to three multiplied by
                  the sum of (x) and (y), where (x) is Executive's highest
                  annual base salary in effect during the three years prior to
                  his date of termination, and (y) is the highest annual
                  incentive compensation earned by Executive during the three
                  years prior to his termination; provided, however, that all
                  amounts received by Executive pursuant to the Ultramar Diamond
                  Shamrock Corporation Intermediate Incentive and
                  Performance-Based Restricted Stock Plan shall not be
                  considered "annual incentive compensation" for purposes of
                  this Section 5.5(i)(a)(2),

                           (3) three additional years of age and service credit
                  under all Company-sponsored employee benefit plans, including
                  all retirement income plans and welfare benefit plans,
                  policies or programs or arrangements in which Executive
                  participates, including any savings, pension, supplemental
                  executive retirement or other retirement income or welfare
                  benefit, short or long-term disability, and any other deferred
                  compensation, group and/or executive life, health, retiree
                  health, medical/hospital, or other insurance (whether funded
                  by actual insurance or self-insured by the Company), expense
                  reimbursement or other employee benefit plans, policies,
                  programs or arrangements or any equivalent successor plans,
                  policies, programs or arrangements that may not now exist or
                  may be adopted hereafter by the Company (but only to the
                  extent that eligibility, vesting, or the timing or amount of
                  the benefit are dependent upon age and service); provided,
                  however, that in the case of a qualified defined benefit
                  pension plan, the present value of the additional benefit
                  Executive would have accrued if he had been credited for all
                  purposes with the three additional years of age and service
                  under such plan as of his date of termination with the Company
                  will be paid in a lump sum in cash within five business after
                  any revocation period in the release described in Section
                  5.5(iii) has expired, with (i) in the event that Executive's
                  aforementioned involuntary termination occurs on or after a
                  "Change in Control" of the Company, as defined in Section 6.2
                  (or prior to, but in anticipation of, such a "Change in
                  Control," such present value being determined using the
                  interest rate and mortality table set forth in Section
                  4.1(m)(i) and 4.1(n)(i), respectively, of the Ultramar
                  Corporation Supplemental Executive

                                       3

<PAGE>   23

                  Retirement Plan (or any equivalent successor plan, policy,
                  program or arrangement) (collectively, the "Ultramar SERP")
                  and (ii) in the event that Executive's aforementioned
                  involuntary termination occurs prior to such a "Change in
                  Control" of the Company (other than such a termination in
                  anticipation of such a "Change in Control"), such present
                  value being determined using the interest rate and mortality
                  table set forth in Section 4.1(m)(ii) and 4.1(n)(ii),
                  respectively, of the Ultramar SERP, and further, provided,
                  in crediting the three additional years of age and service
                  for purposes of calculating current and unused vacation such
                  additional years shall be applied in determining the amount
                  of annual vacation to which Executive is entitled, but shall
                  not be deemed to cause Executive to have earned three
                  additional years worth of unused vacation,

                           (4) within five business days after any revocation
                  period in the release described in Section 5.5(iii) has
                  expired, a lump sum cash payment equal to three times the
                  maximum amount the Company could have contributed on behalf of
                  Executive to all of the Company-sponsored qualified and
                  nonqualified defined contribution retirement plans in which
                  Executive participated for any of the three years ending on
                  the date of Executive's termination of employment, assuming
                  that Executive made the maximum voluntary contributions
                  thereto,

                           (5) for a period of three years after the date of
                  Executive's termination of employment, the continuation of the
                  employee welfare benefits set forth in Section 4.2 (other than
                  short-term or long-term disability benefits), except as offset
                  by benefits paid by other sources as set forth in Section 8.2,
                  or as provided in Section 5.5(ii) (provided, however, that in
                  the event that any such continued coverage is not permitted
                  under the terms of any applicable welfare plan or policy, the
                  Company shall provide Executive with the after-tax economic
                  equivalent of any coverage foregone, such economic equivalent
                  to be deemed to be no less than the total cost to Executive of
                  obtaining such coverage on an individual basis and to be paid
                  quarterly in advance without discount);

                                      IV.

Section 5.5(i)(b) of the Agreement shall be revised to read as follows:

                  (b) the Company shall provide Executive with outplacement
         services for a period of one year commencing on the date his employment
         is terminated in accordance with the Company's executive outplacement

                                       4

<PAGE>   24

         policy in effect at the time his employment is terminated or
         immediately prior to a Change in Control (if prior to his termination
         of employment), whichever is more generous.

                                       V.

Section 5.5(i)(c) of the Agreement shall be deleted from the Agreement.

                                      VI.

Section 5.5(ii) of the Agreement shall be amended by striking the reference to
"Section 5.5(i)(a)(4)" and inserting "Section 5.5(i)(a)(5)" in lieu thereof and
adding a new sentence to the end thereof which shall read as follows:

         Notwithstanding the above, if Executive's continued participation in
         any of the benefits referenced in Section 5.5(i)(a)(5) would violate
         any applicable law or cause any benefits plan, policy, or arrangement
         of the Company to fail to qualify for tax-favored status, the Company
         shall not be required to provide such benefits to Executive through the
         Company's plans, policies, or arrangements, but instead shall either
         (A) arrange to make a substantially similar benefit available to
         Executive at no cost to the Executive or (B) pay Executive a sufficient
         amount of cash to allow Executive to purchase, on an after-tax basis, a
         substantially similar benefit on the open market at no incremental cost
         to Executive.

                                      VII.

Section 5.5 of the Agreement shall be amended by adding a new subsection (iv) to
the end thereof which shall read as follows:

                  (iv) Other Severance Benefits. Notwithstanding any provision
         of this Agreement to the contrary, Executive shall be entitled to
         receive the greater of (a) the termination payments and benefits
         provided under Section 5.5 of this Agreement, or (b) the termination
         payments and benefits provided by any other Company-sponsored plan,
         program or policy which has as its primary purpose the provision of
         severance benefits, but in no event shall Executive be eligible to
         receive termination payments and benefits provided under both this
         Agreement and any such plan, program or policy.

                                     VIII.

Section 8 of the Agreement shall be revised to read as follows:

                                       5

<PAGE>   25



         8. Mitigation and Offset.

                  8.1 Executive's right to receive when due the payments and
         other benefits provided for under and in accordance with the terms of
         this Agreement is absolute, unconditional and subject to no set-off,
         counterclaim or legal equitable defense. Any claim which the Company
         may have against Executive, whether for breach of this Agreement or
         otherwise, shall be brought in a separate action or proceeding and not
         part of any action or proceeding brought by Executive to enforce the
         rights against the Company under this Agreement.

                  8.2 Executive shall not have any duty to mitigate the amounts
         payable by the Company under this Agreement upon any termination of
         employment by seeking new employment following termination. All amounts
         payable pursuant to this Agreement shall be paid without reduction
         regardless of any amount of salary, compensation or other amounts which
         may be paid or payable to Executive as the result of Executive's
         employment by another employer; provided, however, that Executive's
         coverage under the Company's welfare benefit plans will be reduced to
         the extent that Executive becomes covered under any comparable employee
         benefit plan made available by another employer and covering the same
         type of benefits. Executive shall report to the Company any such
         benefits actually received by him.

                                      IX.

Section 12.5(i) of the Agreement shall be amended to read as follows:

                  (i) To The Company. If to the Company, addressed to the
         attention of the Chief Executive Officer at P.O. Box 696000, San
         Antonio, Texas, 78269-6000, with a copy sent to the attention of the
         General Counsel at such address.

                                       X.

Section 12 of the Agreement shall be amended to add a new Subsection 12.12 which
shall read as follows:

                  12.12 Dialogue. Unless Executive otherwise consents by the
         execution of an instrument in writing that specifically refers to
         Section 12.12 of this Agreement, no claim or dispute arising out of or
         related to this Agreement or any other agreement, policy, plan, program
         or arrangement, including, without limitation, any qualified or
         nonqualified retirement plan, stock option plan or agreement, or any
         other equity incentive plan in which Executive participated prior to
         his termination, shall be subject to the Company's Dialogue Dispute
         Resolution Program.

                                       6

<PAGE>   26

                                      XI.

The model release attached to this First Amendment as "Exhibit A" shall be
substituted for the exhibit referred to in Section 5.5(iii) of the Agreement.

                                      XII.

Except as otherwise provided herein, the Agreement shall remain in full force
and effect.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the first day
of May, 2000.


/s/  CURTIS ANASTASIO
--------------------------------------
Curtis Anastasio


ULTRAMAR DIAMOND SHAMROCK CORPORATION


By: /s/ JEAN GAULIN
   -----------------------------------
Title:  Chairman, President & CEO
      --------------------------------



                                       7

<PAGE>   27
                    SECOND AMENDMENT TO EMPLOYMENT AGREEMENT


Curtis Anastasio ("Executive") and Ultramar Diamond Shamrock Corporation, a
Delaware corporation (the "Company"), hereby enter into this Second Amendment to
the Employment Agreement between Executive and the Company, dated as of November
25, 1996 and effective as of December 3, 1996 (the "Agreement") as amended by
the First Amendment to the Agreement.

WHEREAS, the Executive serves as Vice President of the Company; and

WHEREAS, the Executive and the Company entered into the Agreement as of the date
stated above; and

WHEREAS, Section 12.8 of the Agreement provides that it may be amended only by
an instrument in writing approved by the Company and signed by the Executive and
the Company; and

WHEREAS, the Company considers it in the best interests of its stockholders to
foster the continued employment of certain key management personnel; and

WHEREAS, the Company wishes to amend the Agreement to conform the Agreement to a
change in Executive's position approved by the Compensation Committee of the
Board of Directors of the Company.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained
herein and in the Agreement, it is agreed that, effective as of August 1, 2000,
the Agreement shall be amended as follows:

                                       I.

Section 2.1 of the Agreement is hereby deleted and substituted with the
following:

         2.1 Position and Duties. During the Term, the Executive will serve as
         Vice President of the Company and President and Chief Executive Officer
         of Shamrock Logistics GP, LLC, a wholly owned indirect subsidiary of
         the Company. Executive will devote substantially all of his attention
         to the duties and functions, and shall have such responsibilities and
         authority, as are consistent with the Executive's position as President
         and Chief Executive Officer of Shamrock Logistics GP, LLC, and shall
         have such additional duties, functions, responsibilities, and authority
         as are (i) assigned to his office in the Company's bylaws or (ii)
         reasonably assigned to him by the Company's Board of Directors (the
         "Board").



<PAGE>   28

                                      II.

The first sentence of Section 4.1(i) of the Agreement shall be revised to read
as follows:

                  (i) Annual Base Salary. During the term of this Agreement, the
         Company will pay to the Executive an annual base salary of not less
         than $255,400, which annual base salary may be modified from time to
         time by the Board (or the Compensation Committee thereof) in its sole
         discretion, payable at the times and in the manner consistent with the
         Company's general policies regarding compensation of executive
         employees. The Board may from time to time authorize such additional
         compensation to the Executive, in cash or in property, as the Board may
         determine in its sole discretion to be appropriate.

                                      III.

Except as otherwise provided herein, the Agreement shall remain in full force
and effect.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the first day
of August, 2000.


/s/ CURTIS ANASTASIO
-------------------------------------
Curtis Anastasio


ULTRAMAR DIAMOND SHAMROCK CORPORATION


By: /s/ JEAN GAULIN
   ----------------------------------
        Jean Gaulin
        Chairman, President & CEO


                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>8
<FILENAME>h79326a3ex10-6.txt
<DESCRIPTION>FORM OF PIPELINES & TERMINALS USAGE AGREEMENT
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 10.6


                     PIPELINES AND TERMINALS USAGE AGREEMENT

         This Pipelines and Terminals Usage Agreement ("Agreement") is dated as
of this _________ _____, 2001, by and among Ultramar Diamond Shamrock
Corporation, a Delaware corporation ("UDS"), Shamrock Logistics Operations,
L.P., a Delaware limited partnership (the "Operating Partnership"), Shamrock
Logistics, L.P., a Delaware limited partnership ("Shamrock Logistics"),
Riverwalk Logistics, L.P., a Delaware limited partnership (the "General
Partner"), and Shamrock Logistics GP, LLC, a Delaware limited liability company
("Shamrock LLC").


                                    RECITALS:

         WHEREAS, pursuant to the terms and conditions of those certain
Conveyance, Assignment and Bill of Sale Agreements dated effective as of July 1,
2000, by and among the Operating Partnership and certain subsidiaries of UDS,
certain crude oil pipeline and storage assets and refined product pipeline and
terminalling assets were contributed by those subsidiaries to the Operating
Partnership in exchange for limited partner interests therein (collectively, the
"Contributions"); and

         WHEREAS, by virtue of mergers (collectively, the "Mergers") of certain
subsidiaries of UDS with and into the Operating Partnership effective July 1,
2000, certain additional crude oil pipeline and storage assets and refined
product pipeline and terminalling assets and certain ownership interests in
Skelly-Belvieu Pipeline Company, L.L.C., a Delaware limited liability company
("Skelly-Belvieu"), were transferred to the Operating Partnership; and

         WHEREAS, concurrently with the execution and delivery of this
Agreement, all of the limited partner interests in the Operating Partnership
held by subsidiaries of UDS are being contributed to Shamrock Logistics in
exchange for limited partner interests in Shamrock Logistics; and

         WHEREAS, as of July 1, 2000 and the date hereof, by virtue of its
indirect ownership interests in the General Partner, the Operating Partnership
or Shamrock Logistics, as applicable, UDS had and has an economic interest in
the financial and commercial success of the Operating Partnership; and

         WHEREAS, the Operating Partnership is substantially dependent upon UDS
for the volumes of Crude Oil and refined products transported through the
Operating Partnership's pipelines and the volumes of refined products handled at
the Operating Partnership's terminals such that a significant reduction in UDS'
use of the Operating Partnership's assets would likely result in a
correspondingly significant reduction in the financial and commercial success of
the Operating Partnership; and

         WHEREAS, in connection with the Contributions and the Mergers, UDS
desires to enter into this Agreement;


<PAGE>   2

         NOW, THEREFORE, in consideration of the covenants and obligations
contained herein and in the agreements relating to the Contributions and the
Mergers, the parties to this Agreement hereby agree as follows:

         SECTION 1. DEFINITIONS. Capitalized terms used throughout this
Agreement and not otherwise defined herein shall have the meanings set forth
below.

         "Applicable Law" shall mean any applicable statute, law, regulation,
ordinance, rule, judgment, rule of law, order, decree, permit, approval,
concession, grant, franchise, license, agreement, requirement, or other
governmental restriction or any similar form of decision of, or any provision or
condition of any permit, license or other operating authorization issued under
any of the foregoing by, or any determination by any Governmental Authority
having or asserting jurisdiction over the matter or matters in question, whether
now or hereafter in effect and in each case as amended (including without
limitation, all of the terms and provisions of the common law of such
Governmental Authority), as interpreted and enforced at the time in question.

         "Arbitrable Dispute" shall mean any and all disputes, Claims,
counterclaims, demands, causes of action, controversies and other matters in
question between any of the Partnership Parties, on the one hand, and UDS, on
the other hand, arising out of or relating to this Agreement or the alleged
breach hereof, or in any way relating to the subject matter of this Agreement or
the relationship between any of the Partnership Parties, on the one hand, and
UDS, on the other hand, created by this Agreement regardless of whether (a)
allegedly extra-contractual in nature, (b) sounding in contract, tort or
otherwise, (c) provided for by Applicable Law or otherwise or (d) seeking
damages or any other relief, whether at law, in equity or otherwise.

         "Claim" shall mean any existing or threatened future claim, demand,
suit, action, investigation, proceeding, governmental action or cause of action
of any kind or character (in each case, whether civil, criminal, investigative
or administrative), known or unknown, under any theory, including those based on
theories of contract, tort, statutory liability, strict liability, employer
liability, premises liability, products liability, breach of warranty or
malpractice.

         "Controlled Affiliates" shall mean an entity that directly or
indirectly through one or more intermediaries is controlled by UDS, excluding
the Partnership Parties and Subsidiaries. For the purposes of this definition,
"control" (including with correlative meaning, the term "controlled by"), as
used with respect to any such entity, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such entity, whether through the ownership of voting securities, by
agreement or otherwise.

         "CRUDE OIL" SHALL MEAN CRUDE OIL AND GAS OIL USED BY UDS AS REFINERY
FEEDSTOCKS.

         "Crude Oil Pipelines" shall mean (a) the pipelines described on Exhibit
A attached hereto and (b) any other pipeline that transports Crude Oil in which
the Operating Partnership or any of


                                       -2-

<PAGE>   3


its Subsidiaries acquires, after the date hereof, an ownership interest or the
right to use all or a portion of its capacity.

         "Governmental Authority" shall mean any federal, state, local or
foreign government or any provincial, departmental or other political
subdivision thereof, or any entity, body or authority exercising executive,
legislative, judicial, regulatory, administrative or other governmental
functions or any court, department, commission, board, bureau, agency,
instrumentality or administrative body of any of the foregoing.

         "Partnership Parties" shall mean the Operating Partnership, Shamrock
Logistics, the General Partner and Shamrock LLC.

         "Prime Rate" shall mean the prime rate per annum established by The
Chase Manhattan Bank, or if The Chase Manhattan Bank no longer establishes a
prime rate for any reason, the prime rate per annum established by the largest
U.S. bank measured by deposits from time to time as its base rate on corporate
loans, automatically fluctuating upward or downward with each announcement of
such prime rate.

         "Refined Products" shall mean gasoline, distillates, natural gas
liquids, blend stocks and petrochemical feedstocks.

         "Refined Product Pipelines" shall mean (a) the pipelines described on
Exhibit B attached hereto and (b) any other pipeline that transports Refined
Products in which the Operating Partnership or any of its Subsidiaries acquires,
after the date hereof, an ownership interest or the right to use all or a
portion of its capacity.

         "Refined Product Terminals" shall mean (a) the terminals described on
Exhibit C attached hereto and (b) any other terminal for the handling of Refined
Products in which the Operating Partnership or any of its Subsidiaries acquires,
after the date hereof, an ownership interest or the right to use all or a
portion of its capacity.

         "Refineries" shall mean the following three refineries owned by UDS or
Controlled Affiliates: the Three Rivers refinery located near Three Rivers,
Texas, the McKee refinery located near Dumas, Texas and the Ardmore refinery
located near Ardmore, Oklahoma.

         "Subsidiary" shall mean any entity in which the Operating Partnership,
directly or indirectly through one or more intermediaries, has an ownership
interest.

         SECTION 2. AGREEMENT TO USE PIPELINES AND TERMINALS

         During the term of this Agreement and subject to the terms and
conditions of this Agreement, UDS agrees as follows:



                                      -3-
<PAGE>   4

         (a) Crude Oil Pipelines. Subject to Section 3, UDS will, and will cause
its Controlled Affiliates to, transport in the Crude Oil Pipelines an aggregate
of not less than 75%, calculated on an average basis over each full fiscal year
during the term of this Agreement (commencing on January 1 and ending on
December 31 of each such year), of all of the Crude Oil transported to the
Refineries, whether by pipeline, truck or other means.

         (b) Refined Product Pipelines. Subject to Section 3, UDS will, and will
cause its Controlled Affiliates to, transport in the Refined Product Pipelines
an aggregate of not less than 75%, calculated on an average basis over each full
fiscal year during the term of this Agreement (commencing on January 1 and
ending on December 31 of each such year), of all of the Refined Products
transported from the Refineries, whether transported from the Refineries by
pipeline, truck or other means.

         (c) Terminalling Assets. Subject to Section 3, UDS will, and will cause
its Controlled Affiliates to, utilize the Refined Product Terminals for
terminalling services for not less than 50%, calculated on an average basis over
each full fiscal year during the term of this Agreement (commencing on January 1
and ending on December 31 of each such year), of all of the Refined Products
transported from the Refineries, whether transported from the Refinery by
pipeline, truck or other means.

         For purposes of each of paragraph (a), (b) and (c) of this section 2,
for the initial year of the Agreement and for the year in which this Agreement
terminates, the respective percentage levels shall be calculated for the
respective effective periods of the Agreement in such years pro rata on an
annualized basis.

         (d) Jointly Owned Assets. In any instance in which the Operating
Partnership or a Subsidiary owns an interest in a pipeline or terminal jointly
with other parties, the terms "Crude Oil Pipelines," "Refined Product Pipelines"
and "Refined Product Terminals" when used in reference to such pipeline or
terminal, as applicable, shall mean only the ownership interest therein held by
the Operating Partnership or the Subsidiary. In any such instance, volumes
transported or terminalled for UDS and its Controlled Affiliates by or for the
account of other owners of the pipeline or terminal shall not be considered as
volumes transported in a Crude Oil Pipeline or a Refined Product Pipeline or
terminalled through a Refined Product Terminal, as applicable, for purposes of
determining whether UDS's obligations have been met under this Agreement.

         (e) Jointly Owned Subsidiaries. In any instance in which a Subsidiary
that is not, directly or indirectly through one or more intermediaries, a
wholly-owned Subsidiary of the Operating Partnership owns a pipeline or
terminal, the volumes deemed transported in a Crude Oil Pipeline or a Refined
Product Pipeline or terminalled through a Refined Product Terminal, as
applicable, by such Subsidiary shall be equal to the total volume transported on
such pipeline or terminalled through such terminal multiplied by the direct or
indirect ownership interest, on a percentage basis, of the Operating Partnership
in such Subsidiary.



                                      -4-
<PAGE>   5

         (f) Transport Through Multiple Pipelines or Handling at Multiple
Terminals. No barrel of Crude Oil that has already been transported in one Crude
Oil Pipeline and that has been counted as a barrel transported in the Crude Oil
Pipelines for purposes of Section 2(a) shall be counted again as a barrel
transported for purposes of Section 2(a), notwithstanding that it is transported
on one or more additional Crude Oil Pipelines. No barrel of Refined Products
that has already been transported in one Refined Product Pipeline and that has
been counted as a barrel transported in the Refined Product Pipelines for
purposes of Section 2(b) shall be counted again as a barrel transported for
purposes of Section 2(b), notwithstanding that it is transported on one or more
additional Refined Product Pipelines.

         SECTION 3. EXCEPTIONS TO UDS' OBLIGATIONS

         (a) Crude Oil Pipeline Market Conditions. If market conditions with
respect to the transportation of Crude Oil to a Refinery change in a material
manner after the date hereof such that it would have a material adverse effect
on UDS if UDS were to continue to transport in the Crude Oil Pipelines an
aggregate of not less than 75% of the Crude Oil transported to the Refineries
pursuant to Section 2(a), [after taking into consideration the ability of UDS,
if commercially practicable, to increase volumes of Crude Oil transported in
Crude Oil Pipelines not affected by the change in market conditions], UDS shall
be relieved of its obligations under Section 2(a) from the inception of the
change in market conditions and during the continuance thereof only to the
extent the decrease below 75% results from the change in market conditions and
cannot be mitigated by UDS, if commercially practicable, by increasing volumes
of Crude Oil transported in Crude Oil Pipelines not affected by the change in
market conditions; provided, that upon partial or full reversal of the change in
market conditions, the obligations of UDS under Section 2(a) shall resume
partially or in full, respectively.

         (b) Refined Product Pipeline Market Conditions. If market conditions
with respect to the transportation of Refined Products from a Refinery to any of
the markets to which UDS or any of its Controlled Affiliates directly or
indirectly market Refined Products change in a material manner after the date
hereof, or if market conditions in any of such markets change in a material
manner after the date hereof, in each case such that it would have a material
adverse effect on UDS if UDS were to continue to transport in the refined
Product Pipelines an aggregate of not less than 75% of the Refined Products
produced by the Refineries pursuant to Section 2(b), [after taking into
consideration the ability of UDS, if commercially practicable, to increase
volumes of Refined Products transported in Refined Product Pipelines not
affected by the change in market conditions], UDS shall be relieved of its
obligations under Section 2(b) from the inception of the change in market
conditions and during the continuance thereof only to the extent the decrease
below 75% results from the change in market conditions and cannot be mitigated
by UDS, if commercially practicable, by increasing volumes of Refined Products



                                      -5-
<PAGE>   6

transported in Refined Product Pipelines not affected by the change in market
conditions; provided, that upon partial or full reversal of the change in market
conditions, the obligations of UDS under Section 2(b) shall resume partially or
in full, respectively.

         (c) Failure of Operating Partnership to Provide Services. UDS shall not
be deemed to have failed to satisfy its obligations under Section 2(a), (b) or
(c), as applicable, if UDS and its Controlled Affiliates are unable to ship or
terminal the required volumes because of the inability of the Operating
Partnership to transport volumes of Crude Oil made available for shipment by UDS
and its Controlled Affiliates or to transport or terminal volumes of Refined
Products made available for shipment or terminalling by UDS and its Controlled
Affiliates, whether because of operational difficulties with the Crude Oil
Pipelines, Refined Products Pipelines or Refined Product Terminals or otherwise.

         SECTION 4. AGREEMENT TO REMAIN SHIPPER

         Subject to the availability of adequate supplies of crude oil at
commercially reasonable prices, UDS agrees that it will, and will cause its
Controlled Affiliates to, continue their historical commercial practice of
purchasing Crude Oil for their own account at Crude Oil receipt points
consistent with their past practices and to continue acting in the capacity of
the shipper of Crude Oil on the Crude Oil Pipelines. Subject to the availability
of adequate supplies of Refined Products at commercially reasonable prices, UDS
agrees that it will, and will cause its Controlled Affiliates to, continue their
historical commercial practice of acting in the capacity of the shipper of
Refined Products for their own account to delivery points consistent with their
past practices and to continue acting in the capacity of the shipper of Refined
Products on the Refined Product Pipelines.

         SECTION 5. AGREEMENT NOT TO CHALLENGE TARIFF RATES OR TERMINAL CHARGES

         UDS agrees not to challenge, nor to cause its Controlled Affiliates to
challenge, nor to encourage or recommend to any other person that it challenge,
in any forum, interstate or intrastate tariff rates (including joint tariffs)
for transportation of Crude Oil or Refined Products of the Operating Partnership
and its Subsidiaries. UDS agrees neither to protest or to file a complaint, nor
to cause its Controlled Affiliates to protest or to file a complaint, regulatory
filings of the Operating Partnership and its Subsidiaries to change interstate
or intrastate tariff rates (including joint tariffs) for transportation of Crude
Oil or Refined Products. UDS agrees not to seek, nor to cause its Controlled
Affiliates to seek, nor to encourage or recommend to any other person that it
seek regulatory review of, or regulatory jurisdiction over, the contractual
rates charged by the Operating Partnership and its Subsidiaries for terminalling
services or to challenge, in any forum, such rates or changes to such rates.

         SECTION 6. EFFECTIVENESS AND TERM

         This Agreement shall be effective as of _______________, 2001. The
Agreement shall



                                      -6-
<PAGE>   7

extend for a term of seven years from such date and shall terminate at 12:01
a.m. San Antonio, Texas, time on the seventh anniversary of such date, unless
extended by written mutual agreement of the parties hereto.

         SECTION 7. NOTICES

         All notices, requests, demands, and other communications pertaining to
this Agreement shall be delivered personally, or by registered or certified mail
(postage prepaid and return receipt requested), or by express carrier or
delivery service, or by telecopy, to the parties hereto at the addresses below
(or at such other addresses as shall be specified by notice under this Section
6):

         (i)      if to UDS:

                  Ultramar Diamond Shamrock Corporation
                  6000 North Loop 1604 West
                  San Antonio, Texas 78249
                  Attn: President
                  Telecopy:

         (ii)     if to the Operating Partnership, Shamrock Logistics, the
                  General Partner or Shamrock LLC:

                  Shamrock Logistics, L.P.
                  6000 North Loop 1604 West
                  San Antonio, Texas 78249
                  Attn: President
                  Telecopy:

         SECTION 8. SUCCESSORS AND ASSIGNS

         This Agreement shall inure to the benefit of, and shall be binding
upon, UDS, the Operating Partnership, Shamrock Logistics, the General Partner
and Shamrock LLC and their respective successors and permitted assigns.
Successors shall include any corporation (limited liability or otherwise), any
partnership (limited or otherwise), or any person which succeeds to a
controlling interest in, or all of the economic interest of, UDS, the Operating
Partnership, Shamrock Logistics, the General Partner or Shamrock LLC, as
applicable. The parties hereto agree to require their respective successors, if
any, to expressly assume, in a form of agreement acceptable to the other
parties, the obligations under this Agreement.

         SECTION 9. ANNUAL CERTIFICATION.

         (a) Within 45 days of the end of each fiscal year, the chief financial
officer of UDS shall deliver a certificate (the "Compliance Certificate") to the
Operating Partnership, certifying



                                      -7-
<PAGE>   8

that, based upon due inquiry, the obligations of UDS under Sections 2(a), 2(b)
and 2(c) of this Agreement for such fiscal year, have been satisfied and setting
forth calculations and other information evidencing compliance with each such
provision, and, if any exception provided for pursuant to Section 3 of this
Agreement is being relied upon, (i) specifying which provision of Section 3 is
applicable, (ii) specifying in reasonable detail the basis for reliance on such
provision, (iii) specifying in reasonable detail the volume of Crude Oil or
Refined Products, as applicable, by which the applicable Section 2 obligation
should be reduced by reason of the applicable provision of Section 3, and (iv)
specifying in reasonable detail the basis for such volume reduction calculation.
Each Compliance Certificate will, in addition, be accompanied by an information
package containing such additional information as the parties may mutually agree
before the delivery thereof.

         (b) During the 30-day period following expiration of the 45-day period
referred to in Section 9(a), the Operating Partnership and its independent
public accountants will be permitted to review the accounting records of UDS and
any applicable Controlled Affiliates, any working papers of independent public
accountants of UDS and its Controlled Affiliates prepared in connection with the
Compliance Certificate and such additional information as the Operating
Partnership or its independent public accountants shall reasonably request for
the purpose of determining whether UDS has satisfied its obligations under each
of Sections 2(a), 2(b) and 2(c) of this Agreement. In this connection, UDS and
the Operating Partnership and their respective independent public accountants
shall, and UDS shall cause its Controlled Affiliates to, cooperate with each
other.

         (c) If, in connection with the period of review and consultation
provided for in Section 9(b), the Operating Partnership has reason to believe
that UDS has not fulfilled its obligations under any of Sections 2(a), 2(b) or
2(c), then within 30 days following the expiration of the period provided in
Section 9(a), the Operating Partnership may give UDS a written notice of its
disagreement (a "Notice of Disagreement"). If such Notice of Disagreement is not
timely given by the Operating Partnership, UDS will not have any liability under
this Section 9. Any Notice of Disagreement shall (i) specify in reasonable
detail the nature of any disagreement so asserted (including by specifying which
provision of Section 2 has not been satisfied), (ii) specify in reasonable
detail the basis for the Operating Partnership's belief that UDS has failed to
fulfill its obligations under the applicable provision of Section 2, (iii)
specify the approximate dollar amount which the Operating Partnership believes
would have been paid by UDS and its Controlled Affiliates to the Operating
Partnership if it had complied with the applicable provision(s) of Section 2
(the "Shortfall Payment") and (iv) specify in reasonable detail, in a manner
consistent with Section 9(e), the basis for such calculation. If a Notice of
Disagreement is received by UDS in a timely manner, then the determination of
whether UDS has fulfilled its obligations under Sections 2(a), 2(b) and 2(c)
and, if it has not, the amount of the Shortfall Payment, shall become final and
binding upon all parties hereto on either (i) the date the chief financial
officers of UDS and the General Partnership (on behalf of the Operating
Partnership) resolve in writing any differences they have with respect to the
matters specified in the Notice of Disagreement or (ii) the date any disputed
matters are finally resolved in writing by the Accounting Firm pursuant to
Section 9(d), as applicable.



                                      -8-
<PAGE>   9

         (d) If a Notice of Disagreement is delivered, within 15 days
thereafter, the chief financial officers of UDS and the General Partnership (on
behalf of the Operating Partnership) shall meet or communicate by telephone at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary and shall negotiate in good faith to attempt to resolve any
differences which they may have with respect to matters specified in the Notice
of Disagreement. During the 30-day period following delivery of the Notice of
Delivery, UDS and its independent public accountants shall have access to the
working papers of the Operating Partnership relating to the Notice of
Disagreement and the working papers of the Operating Partnership's independent
public accountants prepared in connection with the Notice of Disagreement. If
such differences are not resolved within 30 days following delivery of the
Notice of Delivery, UDS and the Operating Partnership shall, within 45 days
following the delivery of the Notice of Delivery, submit to a dispute resolution
group of an independent public accounting firm (the "Accounting Firm") for
review and resolution any and all matters which remain in dispute and which were
properly included in the Notice of Disagreement, in the form of a written brief.
The scope of the Accounting Firm's review shall include (i) determining whether
the Compliance Certificate that is the subject of the Notice of Disagreement has
been prepared in accordance with Section 9(a), (ii) determining whether UDS
fulfilled it obligations under Sections 2(a), 2(b) and 2(c), (iii) if a
determination is made that UDS has not so fulfilled its obligations,
determining, in a manner consistent with Section 9(e), the amount of the
Shortfall Payment and (iv) allocating the responsibility for paying the fees and
expenses of such Accounting Firm; provided that, except as provided in the
preceding clause (iv), such review shall be limited to only those matters which
remain in dispute and which were properly included in the Notice of
Disagreement. The Accounting Firm shall be such nationally recognized
independent public accounting firm as shall be agreed upon by UDS and the
Operating Partnership in writing. The Accounting Firm's decision shall be
accompanied by a certificate of the Accounting Firm that it reached its decision
in accordance with the provisions of this Section 9(d). The parties agree to use
commercially reasonably best efforts to cause the Accounting Firm to render a
decision resolving the matters submitted to the Accounting Firm within 30 days
following submission. The parties agree that judgment may be entered upon the
determination of the Accounting Firm in the Court of _______________ of Bexar
County, Texas and the United States District Court for the __________ District
of Texas. The fees and expenses of the Accounting Firm shall be borne by UDS and
the Operating Partnership in inverse proportion as they may prevail on matters
resolved by the Accounting Firm, which proportionate allocations shall also be
determined by the Accounting Firm at the time the determination of the
Accounting Firm is rendered on the merits of the matters submitted. Any fees and
disbursements of independent public accountants of UDS or the Operating
Partnership incurred in connection with their preparation or review of the
Compliance Certificate or the Notice of Disagreement shall be borne by the party
retaining such independent public accountants.

         (e) For purposes of this Section 9, the amount of any Shortfall Payment
for a Fiscal year shall be based on the aggregate dollar amount of tariffs or
terminalling fees, as applicable,



                                      -9-
<PAGE>   10
that would have been paid by UDS and its Controlled Affiliates to the Operating
Partnership if UDS and its Controlled Affiliates had transported or terminalled,
as applicable, during such Fiscal year, such aggregate number of barrels of
Crude Oil or Refined Products, as applicable, in the Crude Oil Pipelines,
Refined Product Pipelines or Refined Product Terminals, as applicable, as UDS
and its Controlled Affiliates did on average during the twelve months prior to
such Fiscal year, excluding any period as to which an exception under Section 3
to the obligations of UDS is, or is asserted to be, applicable; provided,
however, that UDS shall not be obligated to pay any amount with respect to
throughput that would have been in excess of the minimum usage obligations set
forth in Sections 2(a), 2(b) or 2(c), as applicable.

         (f) If it is finally determined pursuant to this Section 9 that UDS is
required to make a Shortfall Payment, UDS shall promptly make the Shortfall
Payment to the Operating Partnership in immediately available funds, plus
interest on the Shortfall Payment at the Prime Rate from the first day on or
after the midpoint of the calendar quarter to which the Notice of Disagreement
relates to the date of payment.

         SECTION 10. MISCELLANEOUS

         (a) UDS Intention as to Refineries. UDS represents to the Partnership
Parties that, as of the date of this Agreement, it does not intend to close any
of the Refineries or to cause any changes that would have a material adverse
effect on the operation of any of the Refineries.

         (b) Amendments and Waivers. No amendment or modification of this
Agreement shall be valid unless it is in writing and signed by the parties
hereto and, in the case of any amendment or modification adverse to the
Operating Partnership, approved by the Conflicts Committee of Shamrock
Logistics. No waiver of any provision of this Agreement shall be valid unless it
is in writing and signed by the party against whom the waiver is sought to be
enforced, and, in the case of any waiver by the Operating Partnership, approved
by the Conflicts Committee of Shamrock Logistics. No failure or delay in
exercising any right hereunder, and no course of conduct, shall operate as a
waiver of any provision of this Agreement. No single or partial exercise of a
right hereunder shall preclude further or complete exercise of that right or any
other right hereunder.

         (c) Permitted Assignments. Neither this Agreement nor any of the rights
or obligations hereunder shall be assigned without the prior written consent of
UDS (in the case of any assignment by the Operating Partnership, Shamrock
Logistics, the General Partner or Shamrock LLC) or the Operating Partnership (in
the case of any assignment by UDS); provided, however, that the Operating
Partnership may make such an assignment to an affiliate of the Operating
Partnership. Any attempt to make an assignment otherwise than as permitted by
the foregoing shall be null and void. Any assignment agreed to by UDS or the
Operating Partnership as applicable, shall not relieve the assignor of its
obligations under this Agreement.

         (d) Severability. If any provision of this Agreement shall be held
invalid or



                                      -10-
<PAGE>   11

unenforceable by a court or regulatory body of competent jurisdiction, the
remainder of this Agreement shall remain in full force and effect.

         (e) No Inconsistent Actions. No party hereto shall undertake any course
of action inconsistent with the provisions of this Agreement. Without limiting
the foregoing sentence, no party hereto shall enter into, modify, amend, or
waive any contract right or obligation if such action would conflict with or
impair the rights and protections granted to any other party under this
Agreement.

         (f) Arbitration Provision. Except as provided in Section 9, any and all
Arbitrable Disputes must be resolved through the use of binding arbitration
using three arbitrators, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, as supplemented to the extent necessary to
determine any procedural appeal questions by the Federal Arbitration Act (Title
9 of the United States Code). If there is any inconsistency between this Section
and the Commercial Arbitration Rules or the Federal Arbitration Act, the terms
of this Section will control the rights and obligations of the parties.
Arbitration must be initiated within the applicable time limits set forth in
this Agreement and not thereafter or if no time limit is given, within the time
period allowed by the applicable statute of limitations. Arbitration may be
initiated by a party ("Claimant") serving written notice on the other party
("Respondent") that the Claimant elects to refer the Arbitrable Dispute to
binding arbitration. Claimant's notice initiating binding arbitration must
identify the arbitrator Claimant has appointed. The Respondent shall respond to
Claimant within 30 days after receipt of Claimant's notice, identifying the
arbitrator Respondent has appointed. If the Respondent fails for any reason to
name an arbitrator within the 30 day period, Claimant shall petition to the
American Arbitration Association for appointment of an arbitrator for
Respondent's account. The two arbitrators so chosen shall select a third
arbitrator within 30 days after the second arbitrator has been appointed. The
Claimant will pay the compensation and expenses of the arbitrator named by or
for it, and the Respondent will pay the compensation and expenses of the
arbitrator named by or for it. The costs of petitioning for the appointment of
an arbitrator, if any, shall be paid by Respondent. The Claimant and Respondent
will each pay one-half of the compensation and expenses of the third arbitrator.
All arbitrators must (a) be neutral parties who have never been officers,
directors or employees of UDS, the Operating Partnership or any of their
affiliates and (b) have not less than seven years experience in the energy
industry. The hearing will be conducted in San Antonio, Texas and commence
within 30 days after the selection of the third arbitrator. UDS, the Operating
Partnership and the arbitrators should proceed diligently and in good faith in
order that the award may be made as promptly as possible. Except as provided in
the Federal Arbitration Act, the decision of the arbitrators will be binding on
and non-appealable by the parties hereto. The arbitrators shall have no right to
grant or award indirect, consequential, punitive or exemplary damages of any
kind.



                                      -11-
<PAGE>   12

                  IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the date first written above.

                                       ULTRAMAR DIAMOND SHAMROCK
                                       CORPORATION



                                       By:
                                          --------------------------------------
                                          Name: William R. Klesse
                                          Title: Executive Vice President


                                       SHAMROCK LOGISTICS OPERATIONS, L.P.



                                       By:
                                          --------------------------------------
                                          Name: Curtis V. Anastasio
                                          Title: President and Chief Operating
                                                 Officer



                                       SHAMROCK LOGISTICS, L.P.



                                       By:
                                          --------------------------------------
                                          Name: Curtis V. Anastasio
                                          Title: President and Chief Operating
                                                 Officer


                                       RIVERWALK LOGISTICS, L.P.



                                       By:
                                          --------------------------------------
                                          Name: Curtis V. Anastasio
                                          Title: President and Chief Operating
                                                 Officer



                                      -12-
<PAGE>   13

                                       SHAMROCK LOGISTICS GP, LLC


                                       By:
                                          --------------------------------------
                                          Name: Curtis V. Anastasio
                                          Title: President and Chief Operating
                                                 Officer



                                      -13-
<PAGE>   14

                                                                       EXHIBIT A


                               CRUDE OIL PIPELINES


<TABLE>
<CAPTION>
                                                                                  OWNERSHIP INTEREST
                                                                                      OF OPERATING           THROUGHPUT
                                                                    LENGTH        PARTNERSHIP AND ITS         CAPACITY
ORIGIN AND DESTINATION                                            (MILES)(1)          SUBSIDIARIES          (BARRELS/DAY)
----------------------                                            ----------      -------------------       -------------
<S>                                                               <C>             <C>                       <C>
Cheyenne Wells, CO to McKee, TX ..................                  252.2                100%                    17,500
Dixon, TX to McKee, TX ...........................                   44.2                100%                    85,000
Hooker, OK  to Clawson, TX(2) ....................                   30.8                 50%                    22,000(2)
Clawson, TX to McKee, TX .........................                   40.7                100%                    36,000
Corpus Christi, TX to Three Rivers, TX ...........                   69.7                100%                   120,000
Ringgold, TX to Wasson, OK .......................                   44.2                100%                    90,000
Healdton, OK to Ringling, OK .....................                    3.5                100%                    52,000
Wasson, OK to Ardmore, OK ........................                   24.5(3)             100%                    90,000(3)
</TABLE>

----------

(1)      Length not adjusted for ownership interest.

(2)      The Operating Partnership owns 50% of the pipeline. However the
         Operating Partnership receives a split tariff with respect to 100% of
         the barrels transported on the pipeline. The throughput capacity given
         is for 100% of the pipeline.

(3)      Represents combined length and throughput capacity of two parallel
         pipelines.



                                       A-1
<PAGE>   15

                                                                       EXHIBIT B


                            REFINED PRODUCT PIPELINES


<TABLE>
<CAPTION>
                                                                            OWNERSHIP
                                                                           INTEREST OF
                                                                            OPERATING           THROUGHPUT
                                                           LENGTH         PARTNERSHIP AND        CAPACITY
             ORIGIN AND DESTINATION                      (MILES)(1)        SUBSIDIARIES      (BARRELS/DAY)(2)
             ----------------------                      ----------       ---------------    ----------------
<S>                                                      <C>              <C>                <C>
McKee, TX to El Paso, TX ....................              407.7              66.67%             40,000
McKee, TX to Colorado Springs, CO ...........              256.4                100%             52,000
Colorado Springs, CO to Airport .............                1.7                100%             12,000
Colorado Springs, CO to Denver, CO ..........              100.6                100%             32,000
McKee, TX to Denver, CO (Phillips) ..........              321.1                 30%             12,450
McKee, TX to Amarillo, TX (6") ..............               49.1                100%             51,000(3)
McKee, TX to Amarillo, TX (8") ..............               49.1                100%                   (3)
Amarillo, TX to Abernathy, TX ...............              102.1               38.7%              9,288
Amarillo, TX to Albuquerque, NM .............              292.7                 50%             16,083
McKee, TX to Skellytown, TX .................               52.8                100%             52,000
Skellytown, TX to Mont Belvieu, TX (4) ......              571.2                 50%             26,000
Three Rivers, TX to San Antonio, TX .........               81.1                100%             33,600
Three Rivers, TX to Laredo, TX ..............               98.1                100%             16,800
Three Rivers, TX to Corpus Christi, TX ......               71.6                100%             15,000
Three Rivers, TX to Pettus, TX (8") .........               28.8                100%             15,000
Three Rivers, TX to Pettus, TX (12") ........               28.8                100%             24,000
Ardmore, OK to Wynnewood, OK ................               31.1                100%             90,000
El Paso, TX to Kinder Morgan ................               12.1              66.67%             40,000
Amarillo, TX to Albuquerque, NM(5) ..........              263.6                 50%                   (5)
</TABLE>

----------

(1)      Length not adjusted for ownership interest.

(2)      Throughput capacity adjusted for relative ownership interest.

(3)      Throughput capacity shown for 6" pipeline is combined throughput
         capacity for 6" and 8".

(4)      Pipeline is owned 100% by Skelly-Belvieu Pipeline Company, L.L.C. of
         which Operating Partnership owns 50%. Throughput capacity given is for
         50% of pipeline.

(5)      Pipeline is currently idle.



                                       B-1
<PAGE>   16

                                                                       EXHIBIT C


                          REFINED PRODUCTS TERMINALS(1)



<TABLE>
<CAPTION>
                                                  NUMBER
                                     CAPACITY       OF
LOCATION                             (BARRELS)     TANKS
--------                             ---------    ------
<S>                                  <C>          <C>
Abernathy, TX....................     172,000        13
Amarillo, TX.....................     271,000        15
Albuquerque, NM..................     193,000        10
Denver, CO.......................     111,000        10
Colorado Springs, CO.............     324,000         8
El Paso, TX(1)...................     346,684        22
Corpus Christi, TX...............     372,000        16
San Antonio, TX..................     221,000        10
Laredo, TX.......................     203,000         6
Harlingen, TX....................     314,000         7
</TABLE>

----------

(1)        All terminals owned 100% by the Operating Partnership other than El
           Paso terminal of which the Operating Partnership owns 66.67%.
           Capacity shown for the El Paso terminal is adjusted for relative
           ownership interest.



                                       C-1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>9
<FILENAME>h79326a3ex10-7.txt
<DESCRIPTION>FORM OF OMNIBUS AGREEMENT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.7

------------------------------------------------------------------------------
                                OMNIBUS AGREEMENT

                                      among

                      ULTRAMAR DIAMOND SHAMROCK CORPORATION

                           SHAMROCK LOGISTICS GP, LLC

                            RIVERWALK LOGISTICS, L.P.


                                       and

                            SHAMROCK LOGISTICS, L.P.



--------------------------------------------------------------------------------
<PAGE>   2

                                OMNIBUS AGREEMENT

         THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the
Closing Date by and among Ultramar Diamond Shamrock Corporation, a Delaware
corporation ("UDS"), Shamrock Logistics GP, LLC, a Delaware limited liability
company ("Shamrock GP"), Riverwalk Logistics, L.P., a Delaware limited
partnership and general partner of the MLP ("Riverwalk") and Shamrock Logistics,
L.P., a Delaware limited partnership (the "MLP").

                                    RECITAL:

         UDS, the MLP, Shamrock GP in its capacity as the general partner of
Riverwalk, and Riverwalk in its capacity as the general partner of each of the
MLP and Shamrock Logistics Operations L.P., a Delaware limited partnership (the
"OLP"), desire by their execution of this Agreement to evidence their
understanding, (i) as more fully set forth in Article II of this Agreement, with
respect to (a) those business opportunities that UDS will not pursue unless the
MLP has declined to engage in such business opportunity for its own account and
(b) the procedures whereby such business opportunities are to be offered to the
MLP and accepted or declined; and (ii) as more fully set forth in Article III of
this Agreement, with respect to the indemnification obligations of UDS in favor
of relating to certain environmental liabilities.

         In consideration of the premises and the covenants, conditions, and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

         1.1 DEFINITIONS. (a) Capitalized terms used herein but not defined
herein shall have the meanings given them in the MLP Agreement.

                  (b) As used in this Agreement, the following terms shall have
the respective meanings set forth below:

                  "Affiliate" shall have the meaning attributed to such term in
         the MLP Agreement.

                  "Agreement" means this Omnibus Agreement, as amended,
         modified, or supplemented from time to time in accordance with the
         terms hereof.

                  "Authority" shall mean any governmental, regulatory or
         administrative body, agency, subdivision or authority, any court or
         judicial authority, any public, private or industry regulatory
         authority, whether in the United States of America or any foreign
         country and whether national, Federal, state or local or otherwise, or
         any Person lawfully empowered by any of the foregoing to enforce or
         seek compliance with any Regulation.

                  "Change of Control" shall have the meaning attributed to such
         term in Section 2.4.




                                       1
<PAGE>   3

                  "Claim" means any claim, lawsuit, demand, suit, inquiry made,
         hearing, investigation, notice of a violation, litigation, proceeding,
         arbitration, or other dispute, whether civil, criminal, administrative
         or otherwise.

                  "Closing Date" means the date of the closing of the initial
         public offering of common units representing limited partner interests
         in the MLP.

                  "Conflicts Committee" shall have the meaning attributed to
         such term in the MLP Agreement.

                  "Contaminant" means any substance regulated under any
         Environmental Law, or any substance defined as or included in the
         statutory or regulatory definitions of hazardous substances, hazardous
         wastes, hazardous materials, or "toxic substances" under any
         Environmental Law.

                  "Contract" means any agreement, contract, commitment, or other
         binding arrangement or understanding, whether written or oral.

                  "Environmental Law" means any and all laws, statutes,
         judgments, ordinances, rules, regulations, orders, determinations,
         interpretations, or guidance of any Governmental Authority pertaining
         to health or the environment in effect in any and all jurisdictions in
         which any UDS Entity or Partnership Entity or any of their respective
         Affiliates is conducting or at any time has conducted business, or
         where any property of any UDS Entity or Partnership Entity or any of
         their respective Affiliates, whether leased or owned, is located, or
         where any hazardous substances generated or disposed of by any UDS
         Entity or Partnership Entity or any of their respective Affiliates are
         located.

                  "Environmental Liabilities and Costs" means all Losses from
         any Claim by any Person whether based on Contract, tort, implied or
         express warranty, strict liability, criminal or civil statute,
         including under any Remedial Action, Environmental Law, Environmental
         Permit, Environmental Lien, Order or agreement with any Authority,
         arising from environmental, health or safety conditions, or the release
         of a Contaminant into the environment.

                  "Environmental Lien" means any Lien in favor of any Authority
         for Environmental Liabilities and Costs.

                  "Environmental Permit" shall mean any Permit, license,
         approval, consent or other authorization required by or pursuant to any
         applicable Environmental Law.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended.

                  "Formation Transactions" means (i) the contributions to the
         OLP of certain crude oil pipeline and storage assets and refined
         product pipeline and terminalling assets pursuant to that certain
         Conveyance, Assignment and Bill of Sale Agreements dated effective as
         of July 1, 2000, by and among the OLP and certain subsidiaries of UDS
         and



                                       2
<PAGE>   4

         (ii) the transfers of certain crude oil pipeline and storage assets and
         refined product pipeline and terminalling assets and certain ownership
         interests in Skelly-Belvieu Pipeline Company, L.L.C. to the OLP by
         virtue of the mergers of certain subsidiaries of UDS with and into the
         OLP effective as of July 1, 2000.

                   "Governmental Authority" shall mean (a) the United States of
         America, (b) any state, county, municipality, or other governmental
         subdivision within the United States of America, and (c) any court or
         any governmental department, commission, board, bureau, agency, or
         other instrumentality of the United States of America or of any state,
         county, municipality, water rights, taxing, or zoning authority, or
         other governmental subdivision within the United States of America.

                  "Indemnified Party" shall have the meaning assigned to such
         term in Section 3.2(a).

                  "Indemnifying Party" shall have the meaning assigned to such
         term in Section 3.2(a).

                  "Losses" means all liabilities, losses, costs, damages
         (including punitive, consequential and treble damages), penalties or
         expenses (including, without limitation, reasonable attorneys' fees and
         expenses and costs of investigation and litigation), and also including
         any expenditures or expenses incurred to cover, remedy or rectify any
         such Losses.

                  "MLP" means Shamrock Logistics, L.P., a Delaware limited
         partnership, and any successors thereto.

                  "MLP Agreement" means the Second Amended and Restated
         Agreement of Limited Partnership of the MLP, dated as of the Closing
         Date, as such agreement is in effect on the Closing Date, to which
         reference is hereby made for all purposes of this Agreement. No
         amendment or modification to the MLP Agreement subsequent to the
         Closing Date shall be given effect for the purposes of this Agreement
         unless consented to by each of the parties to this Agreement.

                  "OLP" means Shamrock Logistics Operations, L.P., a Delaware
         limited partnership, and any successors thereto.

                  "Partnership Entities" means Shamrock GP, Riverwalk, the MLP
         and the OLP.

                   "Person" means an individual, partnership, corporation,
         limited liability company, trust, incorporated or unincorporated
         association, joint venture, joint stock company, Governmental Authority
         or other legal entity of any kind.

                  "Permits" means any licenses, permits, registrations,
         variances, interim permits, permit applications, certificates,
         approvals or other authorizations under any Regulation applicable to
         any UDS Entity or Partnership Entity.



                                       3
<PAGE>   5

                  "Order" means any decree, order, injunction, rule, judgment,
         consent of or by an Authority.

                  "Regulation" means any law, statute, regulation, ruling, rule,
         Order or Permit, of, administered or enforced by or on behalf of any
         Authority, as may be amended from time to time.

                  "Remedial Action" means all actions required to (a) clean up,
         remove, treat or in any other way address Contaminants in the indoor or
         outdoor environment; (b) prevent the release or threat of release or
         minimize the further release of Contaminants so they do not migrate or
         endanger or threaten to endanger public health or welfare or the indoor
         or outdoor environment; or (c) perform pre-remedial studies and
         investigations and post-remedial monitoring and care.

                  "Restricted Business" has the meaning attributed to such term
         in Section 2.1.

                  "Riverwalk" means Riverwalk Logistics, L.P., a Delaware
         limited partnership and general partner of the MLP.

                  "Shamrock GP" means Shamrock GP, LLC, a Delaware limited
         liability company and general partner of Riverwalk.

                  "UDS" means Ultramar Diamond Shamrock Corporation.

                  "UDS Entities" means UDS and any of its Affiliates, other than
         the Partnership Entities.

                  "Voting Stock" means securities or membership interests of any
         class or series of either UDS, Shamrock GP or Riverwalk entitling the
         holders thereof to vote on a regular basis in the election of members
         of the board of directors, board of managers or other governing body of
         such entity.

                                  ARTICLE II.
                             BUSINESS OPPORTUNITIES

         2.1 RESTRICTED BUSINESSES. Subject to the terms of the MLP Agreement,
for as long as (i) Shamrock GP (or any Affiliate of UDS) is the general partner
of Riverwalk and (ii) Riverwalk (or any Affiliate of UDS) is the general partner
of the MLP or the OLP, each of the UDS Entities are prohibited from engaging in,
whether by acquisition or otherwise, the business of transporting crude oil or
refined petroleum products (including petrochemicals) or operating crude oil
storage or refined petroleum products terminalling assets in the United States
(a "Restricted Business").

         2.2 PERMITTED EXCEPTIONS. Notwithstanding any provision of Section 2.1,
an UDS Entity may pursue an opportunity to purchase or invest in, and may
ultimately purchase, own and/or operate, a Restricted Business under any of the
following circumstances:



                                       4
<PAGE>   6

                  (a)      Any business retained by a UDS Entity at the Closing;

                  (b)      Any further development of the Diamond-Koch Joint
                           Venture petrochemicals business;

                  (c)      Any business with a fair market value of less than
                           $10 million;

                  (d)      Any business acquired by a UDS Entity that
                           constitutes less than 50% of the fair market value of
                           a larger acquisition by such UDS Entity; provided the
                           MLP has been offered and declined (with the
                           concurrence of the Conflicts Committee) the
                           opportunity to purchase such business in accordance
                           with the procedures set forth in Section 2.3;

                  (e)      The Wichita Falls crude oil pipeline, the Nuevo
                           Laredo refined product pipeline and the Ringold crude
                           oil storage facility should the MLP decline to
                           exercise its option to purchase them pursuant to the
                           [Option Agreement(s) dated effective as of July 1,
                           2000 among the UDS Entities and the MLP]; or

                  (f)      Any logistics assets newly constructed by a UDS
                           Entity that the MLP has not offered to purchase
                           within one year of construction at fair market value,
                           not to exceed 105% of the cost to such UDS Entity.

         2.3 PROCEDURES.

                  (a) In the event that an UDS Entity becomes aware of an
opportunity to purchase a Restricted Business, then, as soon as practicable,
such UDS Entity shall notify Shamrock GP of such opportunity and deliver to
Shamrock GP all information prepared by or on behalf of such UDS Entity relating
to such potential purchase. As soon as practicable but in any event within 30
days after receipt of such notification and information, Shamrock GP, on behalf
of the Partnership, shall notify the UDS Entity that either (i) Shamrock GP, on
behalf of the Partnership, has elected, with the approval of the Conflicts
Committee, not to cause the MLP to pursue the opportunity to acquire such
Restricted Business, or (ii) Shamrock GP, on behalf of the Partnership, has
elected to cause the MLP to pursue the opportunity to acquire such Restricted
Business. If, at any time, Shamrock GP or its Affiliates abandons such
opportunity (as evidenced in writing by Shamrock GP or such Affiliates following
the request of the UDS entity), the UDS Entity may pursue such opportunity. Any
Restricted Business which is permitted to be purchased by an UDS Entity must be
so purchased (i) within 12 months of the time the UDS Entity becomes able to
pursue such acquisition in accordance with the provisions of this Section 2.3
and (ii) on terms not materially more favorable to the UDS Entity than were
offered to the Partnership. If either of these conditions are not satisfied, the
opportunity must be reoffered to the Partnership.

                  (b) In the event that an UDS Entity acquires a Restricted
Business as part of a larger transaction in accordance with the provisions of
Section 2.2(d), then, within 30 days of the consummation of such purchase, such
UDS Entity shall notify Shamrock GP of such purchase and offer the MLP the
opportunity to purchase the Restricted Business constituting a portion of



                                       5
<PAGE>   7

such purchase and deliver to Shamrock GP all information prepared by or on
behalf of or in the possession of such UDS Entity relating to the Restricted
Business. As soon as practicable but in any event within 30 days after receipt
of such notification, Shamrock GP shall notify the UDS Entity that either (i)
Shamrock GP, on behalf of the Partnership, has elected, with the approval of the
Conflicts Committee, not to cause the MLP to purchase such Restricted Business,
in which event the UDS Entity shall be free to continue to engage in such
Restricted Business, or (ii) Shamrock GP, on behalf of the Partnership, has
elected to cause the MLP to purchase such Restricted Business, in which event
the following procedures shall be followed:

                           (i) The UDS Entity shall submit a good faith offer to
         Shamrock GP to sell the Restricted Business (the "Offer") to any member
         of the Partnership Group designated by Shamrock GP on the terms and for
         the consideration stated in the Offer.

                           (ii) The UDS Entity and Shamrock GP shall negotiate
         in good faith, for 60 days after receipt of such Offer by Shamrock GP,
         the terms on which the Restricted Business will be sold to the MLP. The
         UDS Entity shall provide all information concerning the business,
         operations and finances of such Restricted Business as may be
         reasonably requested by Shamrock GP.

                                    (A) If the UDS Entity and Shamrock GP agree
                  on such terms within 60 days after receipt by Shamrock GP of
                  the Offer, the MLP shall purchase the Restricted Business on
                  such terms as soon as commercially practicable after such
                  agreement has been reached.

                                    (B) If the UDS Entity and Shamrock GP are
                  unable to agree on the terms of a sale during such 60-day
                  period, the UDS Entity shall attempt to sell the Restricted
                  Business to a Person that is not an Affiliate of the UDS
                  Entity (a "NonAffiliate Purchaser") within nine months of the
                  termination of such 60-day period. Any such sale to a
                  NonAffiliate Purchaser must be for a purchase price, as
                  determined by the board of directors of UDS, not less than 95%
                  of the purchase price last offered by the MLP.

                           (iii) If, after the expiration of such nine-month
         period, the UDS Entity has not sold the Restricted Business to a
         NonAffiliate Purchaser, it shall submit another Offer (the "Second
         Offer") to Shamrock GP within seven days after the expiration of such
         nine-month period. The UDS Entity shall provide all information
         concerning the business, operations and finances of such Restricted
         Business as may be reasonably requested by Shamrock GP.

                                    (A) If Shamrock GP, with the concurrence of
                  the Conflicts Committee, elects not to cause the MLP to pursue
                  the Second Offer, the UDS Entity shall be free to continue to
                  engage in such Restricted Business.

                                    (B) If Shamrock GP shall elect to cause the
                  MLP to purchase such Restricted Business, then Shamrock GP and
                  the UDS Entity shall negotiate the terms of such purchase for
                  60 days. If the UDS Entity and Shamrock GP agree on such terms
                  within 60 days after receipt by Shamrock GP of the Second



                                       6
<PAGE>   8

                  Offer, the MLP shall purchase the Restricted Business on such
                  terms as soon as commercially practicable after such agreement
                  has been reached.

                                    (C) If during such 60-day period, no
                  agreement has been reached between the UDS Entity and Shamrock
                  GP or a member of the Partnership Group, the UDS Entity and
                  Shamrock GP will engage an independent investment banking firm
                  with a national reputation to determine the value of the
                  Restricted Business. Such investment banking firm will
                  determine the value of the Restricted Business within 30 days
                  and furnish the UDS Entity and Shamrock GP its opinion of such
                  value. The UDS Entity and Shamrock GP shall share equally the
                  fees and expenses of such investment banking firm. Upon
                  receipt of such opinion, Shamrock GP will have the option,
                  subject to the approval of the Conflicts Committee, to (A)
                  cause the MLP to purchase the Restricted Business for an
                  amount equal to the value determined by such investment
                  banking firm or (B) decline to purchase such Restricted
                  Business, in which event the UDS Entity will be free to
                  continue to engage in such Restricted Business.

         2.4 TERMINATION. The provisions of this Article II may be terminated by
UDS upon or at any time after a "Change of Control" of UDS or each of Shamrock
GP or Riverwalk by written notice to the MLP. A Change of Control of UDS or each
of Shamrock GP or Riverwalk shall be deemed to have occurred upon the occurrence
of one or more of the following events: (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the UDS or Shamrock GP to any Person or its
Affiliates, unless immediately following such sale, lease, exchange or other
transfer such assets are owned, directly or indirectly, by the UDS Entities or
Shamrock GP; (ii) the consolidation or merger of UDS or Shamrock GP with or into
another Person pursuant to a transaction in which the outstanding Voting Stock
of UDS or Shamrock GP is changed into or exchanged for cash, securities or other
property, other than any such transaction where (a) the outstanding Voting Stock
of UDS or Shamrock GP is changed into or exchanged for Voting Stock of the
surviving corporation or its parent and (b) the holders of the Voting Stock of
UDS or Shamrock GP immediately prior to such transaction own, directly or
indirectly, not less than a majority of the Voting Stock of the surviving
corporation or its parent immediately after such transaction; or (iii) a
"person" or "group" (within the meaning of Sections 13(d) or 14(d)(2) of the
Exchange Act) being or becoming the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of more than 50% of all Voting Stock of
UDS or Shamrock GP then outstanding, other than in a merger or consolidation
which would not constitute a Change of Control under clause (ii) above.

         2.5 SCOPE OF RESTRICTED BUSINESS PROHIBITION. Except as provided in
this Article II and the Partnership Agreement, each UDS Entity shall be free to
engage in any business activity whatsoever, including those that may be in
direct competition with any Partnership Entity.

         2.6 ENFORCEMENT. The UDS Entities agree and acknowledge that the
Partnership Group does not have an adequate remedy at law for the breach by the
UDS Entities of


                                       7
<PAGE>   9

the covenants and agreements set forth in this Article II, and that any breach
by the UDS Entities of the covenants and agreements set forth in Article II
would result in irreparable injury to the Partnership Group. The UDS Entities
further agree and acknowledge that any member of the Partnership Group may, in
addition to the other remedies which may be available to the Partnership Group
hereunder or under applicable law, file a suit in equity to enjoin the UDS
Entities from such breach, and consent to the issuance of injunctive relief
hereunder.

                                  ARTICLE III.
                                 INDEMNIFICATION

         3.1 Indemnification of Partnership Entities by UDS(a) . In addition to
its indemnification obligations under that certain (i) Indemnification
Agreements entered into in connection with the mergers of certain subsidiaries
of UDS with and into the OLP effective as of July 1, 2000, and (ii) Conveyance,
Assignment and Bill of Sale Agreements dated effective as of July 1, 2000, by
and among the OLP and certain subsidiaries of UDS, UDS, on behalf of each of the
respective UDS Entities, shall indemnify, defend and hold harmless the
Partnership Entities from and against any and all Losses that are caused by,
arise out of or are attributable to Environmental Liabilities and Costs related
to the assets transferred by the UDS Entities to the MLP in connection with the
Formation Transactions that arose prior to Closing and which are discovered by
the MLP within 10 years of the Closing (excluding Environmental Liabilities and
Costs resulting from a change in law after closing).

         3.2 INDEMNIFICATION PROCEDURES.

                  (a) As used in this Section 3.2, the term "Indemnifying Party"
refers to UDS in the case of any indemnification obligation arising under
Section 3.1, and the term "Indemnified Party" refers to the Partnership
Entities, as applicable, in the case of any indemnification obligation arising
under Section 3.1.

                  (b) If any action, suit or proceeding shall be brought against
an Indemnified Party, or if the Indemnified Party should otherwise become aware
of facts giving rise to a claim for indemnification pursuant to Section 3.1 the
Indemnified Party shall promptly notify the Indemnifying Party in writing
specifying the nature of and specific basis for such claim.

                  (c) The Indemnifying Party shall have the right to control all
aspects of the defense of (and any counterclaims with respect to) any claims
brought against the Indemnified Party that are covered by the indemnification
set forth in Section 3.1, including, without limitation, the selection of
counsel, determination of whether to appeal any decision of any court and the
settling of any such matter or any issues relating thereto; provided, however,
that no such settlement shall be entered into without the consent of the
Indemnified Party unless it includes a full release of the Indemnified Party
from such matter or issues, as the case may be.

                  (d) The Indemnified Party agree, at its own cost and expense,
to cooperate fully with the Indemnifying Party with respect to all aspects of
the defense of any claims covered by the indemnification set forth in Section
3.1, including, without limitation, the prompt furnishing to the Indemnifying
Party of any correspondence or other notice relating thereto that the
Indemnified Party may receive, permitting the name(s) of the Indemnified Party
to be utilized in connection with such defense, the making available to the
Indemnifying Party of any files,


                                       8
<PAGE>   10

records or other information of the Indemnified Party that the Indemnifying
Party considers relevant to such defense and the making available to the
Indemnifying Party of any employees of the Indemnified Party; provided, however,
that in connection therewith the Indemnifying Party agrees to use reasonable
efforts to minimize the impact thereof on the operations of such Indemnified
Party. In no event shall the obligation of the Indemnified Party to cooperate
with the Indemnifying Party as set forth in the immediately preceding sentence
be construed as imposing upon the Indemnified Party an obligation to hire and
pay for counsel in connection with the defense of any claims covered by the
indemnification set forth in this Article III; provided, however, that the
Indemnified Party may, at their own option, cost and expense, hire and pay for
counsel in connection with any such defense. The Indemnifying Party agrees to
keep any such counsel hired by the Indemnified Party reasonably informed as to
the status of any such defense, but the Indemnifying Party shall have the right
to retain sole control over such defense.

                  (e) In determining the amount of any loss, liability or
expense for which any Indemnified Party is entitled to indemnification under
this Article III, the gross amount thereof will be reduced by any insurance
proceeds realized or to be realized by such Indemnified Party, and such
correlative insurance benefit shall be net of any insurance premium that becomes
due as a result of such claim.

                                  ARTICLE IV.
                                  MISCELLANEOUS

         4.1 CHOICE OF LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
subject to and governed by the laws of the State of Delaware, excluding any
conflicts-of-law rule or principle that might refer the construction or
interpretation of this Agreement to the laws of another state.

         4.2 NOTICE. 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 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 by delivering such notice in person or by telecopier or telegram to such
party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. All notices to be sent to a party
pursuant to this Agreement shall be sent to or made at the address set forth
below such party's signature to this Agreement, or at such other address as such
party may stipulate to the other parties in the manner provided in this Section
5.2.

         4.3 ENTIRE AGREEMENT; SUPERSEDURE. This Agreement constitutes the
entire agreement of the parties relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written, relating
to the matters contained herein.

         4.4 EFFECT OF WAIVER OR CONSENT. No waiver or consent, express or
implied, by any party to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Person of the same or any other obligations of


                                       9
<PAGE>   11

such Person hereunder. Failure on the part of a party to complain of any act of
any Person or to declare any Person in default, irrespective of how long such
failure continues, shall not constitute a waiver by such party of its rights
hereunder until the applicable statute of limitations period has run.

         4.5 AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified from time to time only by the written agreement of all the parties
hereto; provided, however, that the MLP may not, without the prior approval of
the Conflicts Committee, agree to any amendment or modification of this
Agreement that, in the reasonable discretion of Shamrock GP, will adversely
affect the holders of Common Units. Each such instrument shall be reduced to
writing and shall be designated on its face an "Amendment" or an "Addendum" to
this Agreement.

         4.6 ASSIGNMENT. No party shall have the right to assign its rights or
obligations under this Agreement without the consent of the other parties
hereto.

         4.7 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.

         4.8 SEVERABILITY. 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.

         4.9 GENDER, PARTS, ARTICLES AND SECTIONS. Whenever the context
requires, the gender of all words used in this Agreement shall include the
masculine, feminine and neuter, and the number of all words shall include the
singular and plural. All references to Article numbers and Section numbers refer
to Parts, Articles and Sections of this Agreement, unless the context otherwise
requires.

         4.10 FURTHER ASSURANCES. In connection with this Agreement and all
transactions contemplated by this Agreement, each signatory party hereto agrees
to execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.

         4.11 WITHHOLDING OR GRANTING OF CONSENT. Each party may, with respect
to any consent or approval that it is entitled to grant pursuant to this
Agreement, grant or withhold such consent or approval in its sole and
uncontrolled discretion, with or without cause, and subject to such conditions
as it shall deem appropriate.

         4.12 LAWS AND REGULATIONS. Notwithstanding any provision of this
Agreement to the contrary, no party hereto shall be required to take any act, or
fail to take any act, under this Agreement if the effect thereof would be to
cause such party to be in violation of any applicable law, statute, rule or
regulation.




                                       10
<PAGE>   12

         4.13 NEGOTIATION OF RIGHTS OF LIMITED PARTNERS, ASSIGNEES, AND THIRD
PARTIES. The provisions of this Agreement are enforceable solely by the parties
to this Agreement, and no Limited Partner, Assignee or other Person shall have
the right, separate and apart from the MLP, to enforce any provision of this
Agreement or to compel any party to this Agreement to comply with the terms of
this Agreement.



                                       11
<PAGE>   13




         IN WITNESS WHEREOF, the parties have executed this Agreement on, and
effective as of, the Closing Date.

                                             ULTRAMAR DIAMOND SHAMROCK
                                             CORPORATION


                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------


                                             Address for Notice:
                                                                ----------------


                                             Telecopy Number:
                                                             -------------------


                                             SHAMROCK LOGISTICS GP, LLC


                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------


                                             Address for Notice:
                                                                ----------------


                                             Telecopy Number:
                                                             -------------------



<PAGE>   14



                                             RIVERWALK LOGISTICS, L.P.


                                             By: Shamrock Logistics GP, LLC
                                                 its general partner

                                             By:
                                                -------------------------------
                                             Name:
                                                  -----------------------------
                                             Title:
                                                   ----------------------------

                                             Address for Notice:
                                                                ---------------


                                             Telecopy Number:
                                                             ------------------





                                             SHAMROCK LOGISTICS, L.P.


                                             By: Riverwalk Logistics, L.P.
                                                 its general partner

                                             By: Shamrock Logistics GP, LLC
                                                 Its general partner


                                             By:
                                                -------------------------------
                                             Name:
                                                  -----------------------------
                                             Title:
                                                   ----------------------------

                                             Address for Notice:
                                                                ---------------


                                             Telecopy Number:
                                                             ------------------



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>10
<FILENAME>h79326a3ex10-8.txt
<DESCRIPTION>FORM OF SERVICES AGREEMENT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.8

                               SERVICES AGREEMENT

                  THIS SERVICES AGREEMENT is entered into on, and effective as
of, July 1, 2000 (the "Effective Date") by and between DIAMOND SHAMROCK REFINING
AND MARKETING COMPANY, a Delaware corporation ("DSRMC") and certain of its
affiliates listed on Exhibit A attached hereto (hereinafter referred to
collectively as "Diamond"), SHAMROCK LOGISTICS, L.P. ("Master Partnership"),
SHAMROCK LOGISTICS OPERATIONS, L.P. ("Operating Partnership"), and their general
partner RIVERWALK LOGISTICS, L.P. ("General Partner Partnership"), all Delaware
limited partnerships (collectively, the "Partnership Entities"), and Riverwalk
Logistics, L.P.'s general partner, SHAMROCK LOGISTICS GP, LLC ("General
Partner"). The Partnership Entities and the General Partner will sometimes be
referred to herein as the "Entities".

                                    RECITALS:

                  WHEREAS, the General Partner, as the general partner of the
General Partner Partnership, manages all activities of the Partnership Entities;

                  WHEREAS, DSRMC and certain of DSRMC's Affiliates, on behalf of
the General Partner, will provide certain services to the Entities, for which
they will be compensated as provided herein; and

                  WHEREAS, Diamond and the Entities desire by their execution of
this Agreement to evidence their understanding concerning the provision of those
services by Diamond to the Entities;

                  THEREFORE, in consideration of the premises and the covenants,
conditions, and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:



                                      -1-
<PAGE>   2

                  1. Services.

                  (i) Corporate, General, and Administrative Services. During
the term of this Agreement, in exchange for a fee set forth in Section 4(i)
herein, Diamond agrees to provide to the Entities the services set forth on
Exhibit B hereto (the "Corporate, General, and Administrative Services") as an
incidental part of its ongoing operations.

                  (ii) Other Services. In addition, during the term of this
Agreement, in exchange for reimbursement as set forth in Section 4(ii) herein,
Diamond agrees to provide to the Entities the services and personnel necessary
to operate and maintain the Entities to the extent such activities and services
would not otherwise have been retained or occurred as an incidental part of
Diamond's ongoing operations, such services and personnel to include but not
limited to those relating to the items set forth on Exhibit C hereto (the "Other
Services" and, together with the Corporate, General, and Administrative
Services, the "Services").

                  (iii) Use of Third-Party Service Providers. Diamond may cause
one or more third party contractors to provide any Service (with any Service so
provided by a third party contractor being referred to herein as an "Outsourced
Service"); provided, however, that (a) any Outsourced Service provided solely
for the benefit of the Entities shall require approval by the General Partner
Partnership, and (b) any Outsourced Services shall be subject to the provisions
of this Agreement the same way a Service is subject to the provisions of this
Agreement. If, from time to time, Diamond determines to publish a Request for
Proposal for a third party to provide as Outsourced Services any one or more of
the Services then being provided under this Agreement, Diamond shall give the
Entities at least ten days prior written notice of such decision and shall
promptly advise the Entities of the terms of any winning bid. The Entities shall
hold confidential the terms of any proposal disclosed to them pursuant to the
foregoing sentence. The Entities shall advise Diamond in writing within seven
business days after receipt of notice of the terms whether or not the Entities
desire to participate in the Outsourced Services at the level of service set out
in the winning bid (the "Agreed Level of Service") and, in the case of an



                                      -2-
<PAGE>   3

Outsourced Service provided solely for the benefit of the Entities, whether the
General Partner Partnership, on behalf of the Entities, has approved the
contractor and the terms and conditions of such Outsourced Service. In the event
the Entities decide to terminate such Outsourced Service, it shall be terminated
effective as of the effective date of the new contract between Diamond and the
third party providing the Service. If the Entities desire to continue to be
provided with such Outsourced Service, they shall be obligated to reimburse
Diamond for their allocable portion of the costs incurred by Diamond under the
agreement between Diamond and the third party provider of the Outsourced Service
(up to the Agreed Level of Service). The Entities may not terminate any such
Outsourced Service except upon proper notice as provided in the agreement for
such Outsourced Service. No agreement entered into by Diamond after the
Effective Date shall give to any third party a preferential right to provide the
Entities with services following the expiration of this Agreement.

                  2. Cancellation or Reduction of Services.

                  Except as provided below in this Section 2, the Entities may
terminate or reduce the level of any Other Service on thirty (30) days' prior
written notice to Diamond. Should the Entities terminate any Other Service being
provided hereunder, Diamond shall have no liability to the Entities for the
Entities' failure or inability to replace such terminated Other Services except
in the form of a downward adjustment required to Direct Charges pursuant to
Section 4(ii). Further, if the Entities terminate any Other Service, the
Entities agree that Diamond shall not be required to provide the terminated
Other Service to the Entities in the future.

                  3. Nature/Quality of Services. The nature and quality of the
Services shall be substantially identical to those provided to other
subsidiaries and affiliates of DSRMC. Diamond alone may determine whether or not
to outsource a Service; provided, however, that in the case of an Outsourced
Service provided solely for the benefit of the Entities the selection of the
contractor and the terms and conditions of the agreement shall be subject to the
approval of the



                                      -3-
<PAGE>   4

General Partner Partnership. Outsourced Services will be of the nature and
quality provided in the agreement with the third party provider.

                  4. Payment.

                  (i) Corporate, General, and Administrative Services. In
         consideration of the Corporate, General, and Administrative Services,
         the General Partner Partnership shall pay DSRMC $5,200,000 annually
         (the "Administrative Fee"), which amount shall be paid in twelve equal
         monthly installments in arrears, the first such payment being made with
         respect to the month ended July 31, 2000; provided, however, that the
         Administrative Fee may be increased at the request of Diamond and
         subject to the approval and consent of the Audit Committee of the
         General Partner, as follows:

                           (a) for each year during the term of this agreement,
         beginning with the year that starts on the first anniversary of the
         Effective Date, up to 1.5% per year and an additional percentage not to
         exceed the percentage increase in the Consumer Price Index for Urban
         Wage Earners and Clerical published by the United States Department of
         Labor Bureau of Labor Statistics for the preceding calendar year; and

                           (b) in connection with expansions of the Operating
         Partnership's operations through acquisition or construction of new
         assets that require additional Corporate, General, and Administrative
         Services.

                  The Administrative Fee shall be decreased on a pro rata basis
         if one or more of the Corporate, General, and Administrative Services
         are for any reason no longer provided under this Agreement, whether on
         a temporary or permanent basis, for such time as such Services are not
         provided.

                  (ii) Other Services. In consideration of the Other Services,
         the General Partner Partnership shall reimburse Diamond for (i) all
         out-of-pocket expenses incurred by Diamond exclusively to provide the
         Other Services to the Entities, (ii) the actual cost of any item
         purchased exclusively for the use of the Entities by Diamond, and (iii)
         all



                                      -4-
<PAGE>   5

         expenses actually incurred by Diamond for Outsourced Services and
         allocable to the Entities consistent with Section 1 (iii) of this
         Agreement (the amounts referred to in (i), (ii), and (iii) being
         collectively referred to as the "Direct Charges"); provided, however,
         that in no event shall Direct Charges include expenses or costs
         incurred for the provision of Corporate, General, and Administrative
         Services, and provided further that the General Partner Partnership
         shall not be invoiced for or required to pay Direct Charges in
         connection with an Other Service that is not being provided under this
         Agreement for any reason, whether on a temporary or permanent basis,
         for such time as such Services are not provided.

                  (iii) Taxes. If the compensation for the Services does not
         include sales, use, excise, value added or similar taxes, and if any
         such taxes are imposed on the Services, the General Partner shall pay
         or reimburse Diamond for any such taxes.

                  5. Invoicing for Direct Charges.

                  (i) Diamond shall invoice, or cause its affiliates to invoice,
         the General Partner Partnership by the 30th working day of each month
         for all Direct Charges with respect to the preceding month and any
         adjustments that may be necessary to correct prior invoices. All
         invoices shall reflect in reasonable detail a description of the Other
         Services performed during the preceding month, and shall be due and
         payable on the last day of the month of the invoice. In the event of
         default in payment by the General Partner Partnership, upon thirty (30)
         days= written notice to the General Partner Partnership, delivered as
         provided below, Diamond may terminate this Agreement as to those
         Services which relate to the unpaid portion of the invoice if it has
         not received payment within such thirty (30) days. In the event of a
         dispute as to the propriety of invoiced amounts (a "Dispute"), the
         General Partner Partnership shall pay all undisputed amounts on each
         invoice, but shall be entitled to withhold payment of any amount in
         dispute and shall notify Diamond within ten (10) business days from
         receipt of the



                                      -5-
<PAGE>   6

         disputed invoice of the disputed amount and the reasons each such
         charge is disputed. Diamond shall provide the General Partner
         Partnership with records relating to the disputed amount so as to
         enable the parties to resolve the Dispute. If the Dispute cannot be
         resolved within fifteen (15) days of Diamond's receiving such
         notification, any party may initiate arbitration proceedings in the
         manner provided for by Section 5(iii). So long as the parties are
         attempting in good faith to resolve the Dispute, Diamond shall not be
         entitled to terminate the Services related to and by reason of the
         disputed charge.

                  (ii) Any statement or payment not disputed in writing by
         either party within one year of the date of such statement or payment
         shall be considered final and no longer subject to adjustment. The
         General Partner Partnership shall not be obligated to pay for any
         Direct Charges for which statements for payment are submitted more than
         one year after the termination of this Agreement.

                  (iii) Resolution of Disputes shall be exclusively governed by
         and settled in accordance with the provisions of this Section 5(iii);
         provided however, that nothing contained herein shall preclude any
         party from seeking or obtaining (i) injunctive relief or (ii) equitable
         or other judicial relief, in each case to preserve the status quo,
         pending resolution of Disputes hereunder. DSRMC or any of the Entities
         may commence proceedings hereunder by delivering written notice to the
         other party expressly requesting arbitration hereunder after a Dispute
         has remained unresolved for the period of time specified under Section
         5(i) hereof. The parties hereby agree to submit all Disputes to
         arbitration hereunder, which arbitration shall be final, conclusive,
         and binding upon the parties, their successors and assigns. The
         arbitration shall be conducted in San Antonio, Texas by a sole
         arbitrator selected by mutual agreement of the parties not later than
         ten (10) days after delivery of such notice, or, failing such
         agreement, appointed pursuant to the commercial arbitration rules of
         the American Arbitration Association, as amended from time to time
         ("AAA Rules"). The arbitrators shall be generally knowledgeable



                                      -6-
<PAGE>   7
         about the pipeline and terminal operating industry and the nature of
         the issues to be arbitrated and shall be qualified by education,
         experience, and training to render a decision upon the issues to be
         arbitrated. If the arbitrator selected becomes unable to serve, his or
         her successor shall be similarly selected or appointed. The arbitration
         shall be conducted in accordance with the AAA Rules to the extent such
         rules do not conflict with the terms of this agreement. Notwithstanding
         the foregoing: (i) each party shall have the right to audit the books
         and records of any other party that are reasonably related to a
         Dispute; (ii) each party shall provide to the other parties involved in
         a Dispute, reasonably in advance of any hearing, copies of all
         documents which such party intends to present at such hearing; and
         (iii) each party shall be allowed to conduct reasonable discovery
         through written requests for information, document requests, requests
         for stipulation of fact, and depositions, the nature and extent of
         which discovery shall be determined by the arbitrator, taking into
         account the needs of the parties and the desirability of making
         discovery expeditious and cost effective. All hearings shall be
         conducted on an expedited schedule, and all proceedings shall be
         confidential. Any party may at its, expense, make a stenographic record
         thereof. The arbitrator shall complete all hearings not later than
         sixty days after his or her selection or appointment and shall make a
         final award not later than thirty days thereafter. All claims presented
         for arbitration shall be particularly identified, and the parties to
         the arbitration shall each prepare a written statement of their
         position and their proposed course of action. These written statements
         of positions and proposed courses of action shall be submitted to the
         arbitrator. In making his or her decision, the arbitrator must accept
         in its entirety the position of one party or the other and make an
         arbitration award based on that party's proposed course of action. The
         arbitrator shall not be empowered in reaching his or her decision to
         equitably adjust the scope of the written statements. All costs and
         expenses of arbitration, including the fees and expenses of the
         arbitrator or of any experts, shall be



                                      -7-
<PAGE>   8

         borne equally between the prevailing and non-prevailing party, except
         that each party shall pay all of its respective attorney's fees,
         consultant's fees, and other costs of participating in the Arbitration
         proceeding. Notwithstanding the foregoing, in no event may the
         arbitrator award multiple, punitive, or exemplary damages. Any
         arbitration award shall be binding and enforceable against each party
         involved in the Dispute and judgment may be entered thereon in any
         court of competent jurisdiction. Payment of any such award shall be
         make within five (5) business days of the arbitrator's decision.

                  6. Input from Entities. Any input necessary for Diamond or any
third party provider to perform any Services shall be submitted by the Entities
in a manner consistent with the practices utilized during the one year period
prior to the Effective Date, which manner shall not be altered except by mutual
written agreement of the parties. Should the Entities' failure to supply such
input render performance of any Services by or on behalf of Diamond unreasonably
difficult, Diamond, upon reasonable notice, may provide a lesser quality of
Services or refuse to perform such Services.

                  7. Entities are Sole Beneficiaries. The Entities acknowledge
that the Services shall be provided only with respect to their business as
currently operated or as mutually agreed by the parties hereto. The Entities
shall not request performance of any Services for the benefit of any entity
other than themselves. The Entities represent and agree that they will use the
Services only in accordance with all applicable federal, state, and local laws
and regulations and communications and common carrier tariffs, and in accordance
with the reasonable conditions, rules, regulations, and specifications which may
be set forth in any manuals, materials, documents, or instructions furnished
from time to time by Diamond to the Entities. Diamond reserves the right to take
all actions, including termination of any Services, that Diamond reasonably
believes to be necessary to assure compliance with applicable laws, regulations,
and tariffs. Diamond will notify the Entities of the reasons for any such
termination of Services.



                                      -8-
<PAGE>   9

                  8. LIMITED WARRANTY, LIMITATION OF LIABILITY.

                  Diamond represents that it will provide or cause the Services
to be provided to the Entities with reasonable care and in accordance with all
applicable laws, rules, and regulations, including without limitation those of
the Federal Energy Regulatory Commission. EXCEPT AS SET FORTH IN THE IMMEDIATELY
PRECEDING SENTENCE AND IN SECTION 3, ALL PRODUCTS OBTAINED FOR THE ENTITIES ARE
AS IS, WHERE IS, WITH ALL FAULTS. DIAMOND MAKES NO (AND HEREBY DISCLAIMS AND
NEGATES ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE SERVICES RENDERED OR PRODUCTS OBTAINED FOR THE ENTITIES.
FURTHERMORE, THE ENTITIES MAY NOT RELY UPON ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE MADE TO DIAMOND BY ANY PARTY (INCLUDING, AN AFFILIATE OF
DIAMOND) PERFORMING SERVICES ON BEHALF ON DIAMOND HEREUNDER, UNLESS SUCH PARTY
MAKES AN EXPRESS WARRANTY TO THE GENERAL PARTNER OR THE PARTNERSHIP ENTITIES.
HOWEVER, IN THE CASE OF OUTSOURCED SERVICES PROVIDED SOLELY FOR THE ENTITIES, IF
THE THIRD PARTY PROVIDER OF SUCH SERVICES MAKES AN EXPRESS WARRANTY, THE
ENTITIES ARE ENTITLED TO CAUSE DIAMOND TO RELY ON SUCH WARRANTY.

                  IT IS EXPRESSLY UNDERSTOOD BY THE ENTITIES THAT DIAMOND AND
ITS AFFILIATES SHALL HAVE NO LIABILITY FOR THE FAILURE OF THIRD PARTY PROVIDERS
TO PERFORM ANY SERVICES HEREUNDER AND FURTHER THAT DIAMOND AND ITS AFFILIATES
SHALL HAVE NO LIABILITY WHATSOEVER FOR THE SERVICES PROVIDED BY ANY SUCH THIRD
PARTY UNLESS SUCH SERVICES ARE PROVIDED IN A MANNER WHICH WOULD EVIDENCE GROSS



                                      -9-
<PAGE>   10

NEGLIGENCE OR INTENTIONAL MISCONDUCT ON THE PART OF DSRMC OR ITS AFFILIATES. THE
ENTITIES AGREE THAT THE REMUNERATION PAID TO DIAMOND HEREUNDER FOR THE SERVICES
TO BE PERFORMED REFLECT THIS LIMITATION OF LIABILITY AND DISCLAIMER OF
WARRANTIES. IN NO EVENT SHALL DIAMOND BE LIABLE TO THE ENTITIES OR ANY OTHER
PERSON FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY
ERROR IN THE PERFORMANCE OF SERVICES OR FROM THE BREACH OF THIS AGREEMENT,
REGARDLESS OF THE FAULT OF DIAMOND, ANY DIAMOND AFFILIATE, OR ANY THIRD PARTY
PROVIDER OR WHETHER DIAMOND, ANY DIAMOND AFFILIATE, OR THE THIRD PARTY PROVIDER
ARE WHOLLY, CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT. TO THE EXTENT ANY
THIRD PARTY PROVIDER HAS LIMITED ITS LIABILITY TO DIAMOND OR ITS AFFILIATE FOR
SERVICES UNDER AN OUTSOURCING OR OTHER AGREEMENT, THE ENTITIES AGREE TO BE BOUND
BY SUCH LIMITATION OF LIABILITY FOR ANY PRODUCT OR SERVICE PROVIDED TO THE
ENTITIES BY SUCH THIRD PARTY PROVIDER UNDER DIAMOND'S OR SUCH AFFILIATE'S
AGREEMENT.

                  9. FORCE MAJEURE.

                  DIAMOND SHALL HAVE NO OBLIGATION TO PERFORM OR CAUSE THE
SERVICES TO BE PERFORMED IF ITS FAILURE TO DO SO IS CAUSED BY OR RESULTS FROM
ANY ACT OF GOD, GOVERNMENTAL ACTION, NATURAL DISASTER, STRIKE, FAILURE OF
ESSENTIAL EQUIPMENT OR ANY OTHER CAUSE OR CIRCUMSTANCE BEYOND THE REASONABLE
CONTROL OF DIAMOND, OR, IF APPLICABLE, ITS AFFILIATES OR THIRD PARTY PROVIDERS
OF SERVICES TO DIAMOND ("EVENT OF FORCE MAJEURE"). DIAMOND WILL NOTIFY THE
ENTITIES OF ANY EVENT OF FORCE MAJEURE. DIAMOND AGREES THAT UPON RESTORING THE
SERVICE FOLLOWING ANY EVENT OF FORCE MAJEURE, DIAMOND WILL



                                      -10-
<PAGE>   11

ALLOW THE ENTITIES TO HAVE EQUAL PRIORITY WITH DIAMOND AND ITS AFFILIATES, IN
ACCORDANCE WITH PRIOR PRACTICE, WITH RESPECT TO ACCESS TO THE RESTORED SERVICE.

                  10. Severability.

                  In the event any portion of this Agreement shall be found by a
court of competent jurisdiction to be unenforceable, that portion of the
Agreement will be null and void and the remainder of the Agreement will be
binding on the parties as if the unenforceable provisions had never been
contained herein.

                  11. Assignment.

                  Except for the ability of Diamond to cause one or more of the
Services to be performed by a third party provider (subject to the terms of this
Agreement), no party shall have the right to assign its rights or obligations
under this Agreement without the consent of the other party.

                  12. Entire Agreement, Supersedure.

                  This Agreement constitutes the entire agreement of the parties
relating to the performance of the Services; all prior or contemporaneous
written or oral agreements are merged herein; this Agreement may not be changed
except by a writing signed by both parties.

                  13. Choice of Law.

                  This Agreement shall be subject to and governed by the laws of
the State of Texas, excluding any conflicts-of-law rule or principle that might
refer the construction or interpretation of this Agreement to the laws of
another state.

                  14. Amendment or Modification.

                  This Agreement may be amended or modified from time to time
only by a written amendment signed by the Entities and Diamond; provided however
that the Master Partnership and the Operating Partnership may not, without the
prior approval of the Audit Committee of the Master Partnership, agree to any
amendment or modification of this Agreement that, in the



                                      -11-
<PAGE>   12

reasonable discretion of the General Partner Partnership, will adversely affect
the Holders of the Common Units.

                  15. Notices.

                  Any notice, request, instruction, correspondence or other
document to be given hereunder by either party to the other (herein collectively
called "Notice") shall be in writing and delivered personally or mailed, postage
prepaid, or by telegram or telecopier, as follows:

                           If to Diamond:

                           Diamond Shamrock Refining and Marketing Company
                           P.O. Box 696000
                           San Antonio, TX 78269-6000
                           Attention: Legal Department
                           Telecopy: (210)592-2202

                           If to the Entities:

                           Shamrock Logistics GP, LLC
                           P.O. Box 696000
                           San Antonio, TX 78269-6000
                           Attention: President
                           Telecopy: (210)592-2202

Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telecopier shall be effective upon actual receipt if
received during the recipient=s normal business hours, or at the beginning of
the recipient's next business day after receipt if not received during the
recipient's normal business hours. Any party may change any address to which
Notice is to be given to it by giving Notice as provided above of such change of
address.

                  16. Further Assurances.

                  In connection with this Agreement and all transactions
contemplated by this Agreement each signatory party hereto agrees to execute and
deliver such additional documents and instruments as may be required for Diamond
to provide the Services hereunder and to perform such other additional acts as
may be necessary or appropriate to effectuate, carry out, and perform all of the
terms, provisions, and conditions of this Agreement.



                                      -12-
<PAGE>   13

                  17. Designated Contact Person.

                  Without limiting the obligations of the parties hereto with
respect to the delivery of notices, requests or consents pursuant to sections 14
and 15, Diamond hereby designates ___________________ (phone no. (___________)
as a person with whom representatives of the Entities may communicate regarding
any Services to be performed hereunder. The Entities hereby designate
_____________________ (phone no. (_______________) as its designated person with
whom Diamond may communicate regarding any problems or other matters that
Diamond may have in providing any Service hereunder by itself or any third party
provider.

                  18. Acknowledgment Regarding Certain Provisions.

                  EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES AND
AGREES (a) THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THAT IT IS CHARGED WITH
NOTICE AND KNOWLEDGE OF THE TERMS HEREOF, (b) THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT, (c) THAT IT HAS BEEN REPRESENTED BY
LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING THE EXECUTION
OF THIS AGREEMENT AND HAS RECEIVED THE COUNSEL IN CONNECTION WITH ENTERING INTO
THIS AGREEMENT, AND (d) THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS
AGREEMENT PROVIDE FOR THE ASSUMPTION BY ONE PARTY OF, AND/OR RELEASE OF THE
OTHER PARTY FROM, CERTAIN LIABILITIES ATTRIBUTABLE TO THE MATTERS COVERED BY
THIS AGREEMENT THAT SUCH PARTY WOULD OTHERWISE BE RESPONSIBLE FOR UNDER THE LAW.
EACH PARTY HERETO FURTHER AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY SUCH PROVISIONS OF THIS AGREEMENT ON THE BASIS
THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT SUCH
PROVISIONS ARE NOT "CONSPICUOUS".



                                      -13-
<PAGE>   14

                  19. Definitions. The following terms shall have the indicated
meanings for the purposes of this Agreement:

                  "Affiliate" shall have the meaning attributed to such term in
         the Master Partnership Agreement; provided, however, that for the
         purposes of this Agreement neither the General Partner, the General
         Partner Partnership, the Master Partnership, the Operating Partnership,
         nor any Person controlled by the Master Partnership or the Operating
         Partnership (as the term "control" is used in the definition of
         "Affiliate" in the Master Partnership Agreement) shall be deemed to be
         an Affiliate of Diamond.

                  "Common Units" shall mean limited partnership interests that
         have been so designated under the terms of the Master Partnership
         Agreement.

                  "Master Partnership Agreement" shall mean the Second Amended
         and Restated Agreement of Limited Partnership of the Master
         Partnership, as it may be hereafter amended or restated.

                  20. No Third Party Beneficiary. The provisions of this
Agreement are enforceable solely by the parties to this Agreement, and no
Limited Partner, Assignee or other Person shall have the right, separate and
apart from the General Partner and the General Partner Partnership, to enforce
any provision of this Agreement or to compel any party to this Agreement to
comply with the terms of this Agreement.

                  21. Duration; Termination. This Agreement shall terminate upon
the eighth anniversary of the Effective Date (the "Initial Term"); provided that
this Agreement shall automatically continue for successive two year terms after
the Initial Term unless or until one year's advance notice is given to terminate
this Agreement is given by Diamond or the General Partner Partnership, in which
case this agreement shall terminate one year after such notice is delivered.
Notwithstanding the foregoing, the General Partner Partnership (a) may terminate
the provision of one or more Other Services or reduce the level of one or more
Other Services in accordance with the provisions of Section 2 hereof and (b)
shall have the right at any time to terminate this Agreement by giving written
notice to Diamond, and in such event this Agreement shall terminate one hundred
and eighty (180) days from the date on which such notice is given.



                                      -14-
<PAGE>   15




                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed on their behalf by their duly authorized officers on the
date first above written.


                                       DIAMOND SHAMROCK REFINING AND MARKETING
                                       COMPANY, ON BEHALF OF ITSELF AND ITS
                                       AFFILIATES LISTED ON SCHEDULE A



                                       By:
                                          --------------------------------------
                                          --------------------------------------




                                       SHAMROCK LOGISTICS, L.P.

                                            BY: RIVERWALK LOGISTICS, L.P.,
                                                its General Partner

                                                BY: SHAMROCK LOGISTICS GP, LLC,
                                                    its General Partner

                                                    By:
                                                       -------------------------
                                                    Its:
                                                        ------------------------





                                       SHAMROCK LOGISTICS OPERATIONS, L.P.

                                            BY: RIVERWALK LOGISTICS, L.P.,
                                                its General Partner

                                                BY: SHAMROCK LOGISTICS GP, LLC,
                                                    its General Partner

                                                    By:
                                                       -------------------------
                                                    Its:
                                                        ------------------------



                                      -15-
<PAGE>   16

                                       RIVERWALK LOGISTICS, LP

                                            BY: SHAMROCK LOGISTICS GP, LLC,
                                                its General Partner

                                                By:
                                                   -----------------------------
                                                Its:
                                                    ----------------------------

                                            SHAMROCK LOGISTICS GP, LLC,


                                                By:
                                                   -----------------------------
                                                Its:
                                                    ----------------------------



                                      -16-
<PAGE>   17

                                    EXHIBIT A

Diamond Shamrock Refining Company, L.P.
Sigmor Corporation
TPI Pipeline Corporation
The Shamrock Pipe Line Corporation



                                      -17-
<PAGE>   18

                                    EXHIBIT B


CORPORATE, GENERAL AND ADMINISTRATIVE SERVICES

Aviation and Travel Services
Corporate Development
Financial Accounting and Reporting
Foreign Trade Zone Reporting and Accounting
Group Accounting
Health and Safety Services
Human Resources Services
     Benefits
     Benefit Accounting
     Benefit Plans
     Retirement Plans
     401(k) Savings Plans
     Payroll Services
     Training Services
Internal Audit
Legal
     General Litigation Support
     General Corporate
     Corporate Secretary
     Tariff Maintenance
Office Services
     Mail Center
     Health Club
     Building and Office Maintenance
Purchasing/Fleet Management
Records Management
Real Estate Management
Risk and Claims Management Services
Security Services
Shareholder, Investor, Public, and Government Relations
Tax Accounting
Treasury & Banking
     Finance Services
     Cash Management
     Credit Services
Data Processing and Information Technology Services



                                      -18-
<PAGE>   19

                                    EXHIBIT C

Costs incurred in the Pipeline and Terminal Operating and Maintenance
Departments include the following:

         o        Construction

         o        Safety

         o        Engineering

         o        Right of Way

         o        Corrosion Control

         o        SCADA and Automation

         o        Control Centers

         o        Product and Crude Administration

         o        In addition to the above departments, there are direct
                  operating personnel that operating the individual pipelines
                  and terminals.

Costs incurred in the Operations and Maintenance of the Pipelines and Terminals
include the following:

o        Salary, Wages and Benefits Costs for Employees devoted to the operation
         and maintenance of the MLP assets. Including the following:

         -Gross payroll, including bonuses

         -FICA

         -Vacation pay

         -Sick pay

         -Life insurance

         -Disability insurance

         -401(k) matching contribution costs (qualified and non-qualified plans)

         -Defined benefit pension costs

         -Post retirement health and medical costs

o        Insurance Costs for the following insurance coverages:

         -General liability

         -Automobile liability

         -Comprehensive liability

         -Excess liability

         -Property

         -Directors & Officers

o        Other Costs incurred by the MLP or Employees devoted to the operation
         and maintenance of the MLP assets.



                                      -19-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>11
<FILENAME>h79326a3ex23-1.txt
<DESCRIPTION>CONSENT OF ARTHUR ANDERSEN LLP
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 23.1



                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



     As independent public accountants, we hereby consent to the use of our
report dated April 19, 2000 on the financial statements of the Ultramar Diamond
Shamrock logistics business as of December 31, 1998 and 1999 and for each of the
three years in the period ended December 31, 1999 and our reports dated August
10, 2000 on the financial statements of Shamrock Logistics, L.P. and Riverwalk
Logistics, L.P. as of June 30, 2000 included in or made a part of this
Registration Statement.



                                            ARTHUR ANDERSEN LLP



San Antonio, Texas


December 14, 2000

</TEXT>
</DOCUMENT>
</SUBMISSION>
