Exhibit 10.7

                                                                  CONFORMED COPY






                           REVOLVING CREDIT AGREEMENT

                          dated as of December 28, 2000

                                      among

                   KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
                                   as Borrower


                         KANEB PIPE LINE PARTNERS, L.P.
                                     as KPP


                   THE LENDERS FROM TIME TO TIME PARTY HERETO


                                       and


                                  SUNTRUST BANK
                             as Administrative Agent



                    SUNTRUST EQUITABLE SECURITIES CORPORATION
                          as Arranger and Book Manager


                                 BANK ONE, N.A.
                             as Documentation Agent

                                FLEET BANK BOSTON
                              as Syndication Agent

                              BANK OF AMERICA, N.A.
                            as Senior Managing Agent

<PAGE>
                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                                              Page
Article I
<S>      <C>                                                                                                   <C>
         DEFINITIONS; CONSTRUCTION
         Section 1.1.Definitions..................................................................................1
         Section 1.2.Classifications of Loans and Borrowings.....................................................19
         Section 1.3.Accounting Terms and Determination..........................................................19
         Section 1.4.Terms Generally.............................................................................19


Article II
         AMOUNT AND TERMS OF THE COMMITMENTS
         Section 2.1.The Revolving Credit Facility...............................................................20
         Section 2.2.The Loans...................................................................................20
         Section 2.3.Procedure for Borrowings....................................................................20
         Section 2.4.Funding of Borrowings.......................................................................21
         Section 2.5.Interest Elections..........................................................................21
         Section 2.6.Reduction and Termination of Commitments....................................................22
         Section 2.7.Repayment of Loans..........................................................................23
         Section 2.8.Evidence of Indebtedness....................................................................23
         Section 2.9.Prepayments.................................................................................23
         Section 2.10.Interest on Loans..........................................................................24
         Section 2.11.Fees.......................................................................................25
         Section 2.12.Computation of Interest and Fees...........................................................25
         Section 2.13.Inability to Determine Interest Rates......................................................25
         Section 2.14.Illegality.................................................................................25
         Section 2.15.Increased Costs............................................................................26
         Section 2.16.Funding Indemnity..........................................................................27
         Section 2.17.Taxes......................................................................................27
         Section 2.18.Payments Generally; Pro Rata Treatment; Sharing of Set-offs................................29
         Section 2.19.Mitigation of Obligations; Replacement of Lenders..........................................30


Article III
         CONDITIONS PRECEDENT TO LOANS
         Section 3.1.Conditions To Effectiveness.................................................................31
         Section 3.2.Each Borrowing..............................................................................32
         Section 3.3.Post Closing................................................................................33
         Section 3.4.Delivery of Documents.......................................................................33


Article IV
         REPRESENTATIONS AND WARRANTIES
         Section 4.1.Existence; Power............................................................................33
         Section 4.2.Organizational Power; Authorization; Enforceability.........................................33
         Section 4.3.Governmental Approvals; No Conflicts........................................................33
         Section 4.4.Financial Statements........................................................................34
         Section 4.5.Litigation and Environmental Matters........................................................34
         Section 4.6.Compliance with Laws and Agreements.........................................................35
         Section 4.7.Investment Company Act, Etc.................................................................35
         Section 4.8.Taxes.......................................................................................35
         Section 4.9.Margin Regulations..........................................................................35
         Section 4.10.ERISA......................................................................................35
         Section 4.11.Ownership of Property......................................................................36
         Section 4.12.Disclosure.................................................................................36
         Section 4.13.Labor Relations............................................................................36
         Section 4.14.Acquisition Agreement......................................................................36
         Section 4.15.Subsidiaries, Significant Affiliates and Guarantors........................................37
         Section 4.16.Liens......................................................................................37


Article V
         AFFIRMATIVE COVENANTS
         Section 5.1.Financial Statements and Other Information..................................................37
         Section 5.2.Notices of Material Events..................................................................38
         Section 5.3.Existence; Conduct of Business..............................................................39
         Section 5.4.Compliance with Laws, Etc...................................................................39
         Section 5.5.Payment of Obligations......................................................................39
         Section 5.6.Books and Records...........................................................................39
         Section 5.7.Visitation, Inspection, Etc.................................................................40
         Section 5.8.Maintenance of Properties; Insurance........................................................40
         Section 5.9.Use of Proceeds.............................................................................40
         Section 5.10.Additional Subsidiaries....................................................................40


Article VI
         FINANCIAL COVENANTS
         Section 6.1.Funded Debt to EBITDA.......................................................................41
         Section 6.2.Consolidated EBITDA to Consolidated Interest Expense........................................41
         Section 6.3.Consolidated Net Worth......................................................................41


Article VII
         NEGATIVE COVENANTS
         Section 7.1.Indebtedness................................................................................41
         Section 7.2.Negative Pledge.............................................................................42
         Section 7.3.Fundamental Changes.........................................................................42
         Section 7.4.Investments, Loans, Etc.....................................................................43
         Section 7.5.Restricted Payments.........................................................................44
         Section 7.6.Sale of Assets..............................................................................44
         Section 7.7.Transactions with Affiliates................................................................44
         Section 7.8.Restrictive Agreements......................................................................44
         Section 7.9.Sale and Leaseback Transactions.............................................................45
         Section 7.10.Hedging Agreements.........................................................................45
         Section 7.11.Amendment to Material Documents............................................................45
         Section 7.12.Accounting Changes.........................................................................45


Article VIII
         KPP GUARANTEe
         Section 8.1.Guarantee...................................................................................46
         Section 8.2.Guaranteed Obligations Not Waived...........................................................46
         Section 8.3.Guarantee of Payment........................................................................46
         Section 8.4.No Discharge or Diminishment of Guarantee...................................................47
         Section 8.5.Defenses of Borrower Waived.................................................................47
         Section 8.6.Agreement to Pay; Subordination.............................................................47
         Section 8.7.Information.................................................................................48
         Section 8.8.Representations and Warranties..............................................................48
         Section 8.9.Termination.................................................................................48


Article IX
         EVENTS OF DEFAULT
         Section 9.1.Events of Default...........................................................................48


Article X
         THE ADMINISTRATIVE AGENT
         Section 10.1.Appointment of Administrative Agent........................................................51
         Section 10.2.Nature of Duties of Administrative Agent...................................................51
         Section 10.3.Lack of Reliance on the Administrative Agent...............................................52
         Section 10.4.Certain Rights of the Administrative Agent.................................................52
         Section 10.5.Reliance by Administrative Agent...........................................................52
         Section 10.6.The Administrative Agent in its Individual Capacity........................................52
         Section 10.7.Successor Administrative Agent.............................................................53
         Section 10.8.Authorization to Execute other Loan Documents..............................................53


Article XI
         MISCELLANEOUS
         Section 11.1.Notices....................................................................................54
         Section 11.2.Waiver; Amendments.........................................................................55
         Section 11.3.Expenses; Indemnification..................................................................56
         Section 11.4.Successors and Assigns.....................................................................57
         Section 11.5.Governing Law; Jurisdiction; Consent to Service of Process.................................60
         Section 11.6.WAIVER OF JURY TRIAL.......................................................................60
         Section 11.7.Right of Setoff............................................................................61
         Section 11.8.Counterparts; Integration..................................................................61
         Section 11.9.Survival...................................................................................61
         Section 11.10.Severability..............................................................................62
         Section 11.11.Confidentiality...........................................................................62
         Section 11.12.Interest Rate Limitation..................................................................62

</TABLE>


Schedules

       Schedule I           -       Applicable Margin and Applicable Percentage
       Schedule II          -       Existing Indebtedness
       Schedule 4.5         -       Environmental Matters
       Schedule 4.15        -       Subsidiaries
       Schedule 7.2         -       Existing Liens


Exhibits

       Exhibit A            -       Form of Note
       Exhibit B            -       Form of Assignment and Acceptance
       Exhibit C            -       Form of Subsidiary Guarantee Agreement
       Exhibit D            -       Form of Notice of Borrowing
       Exhibit E            -       Form of Continuation/Conversion
       Exhibit F            -       Form of Opinion




<PAGE>





                           REVOLVING CREDIT AGREEMENT


         THIS REVOLVING CREDIT  AGREEMENT (this  Agreement") is made and entered
into  as  of  December  28,  2000,  by  and  among  KANEB  PIPE  LINE  OPERATING
PARTNERSHIP,  L.P., a Delaware limited partnership (the "Borrower"),  KANEB PIPE
LINE PARTNERS, L.P., a Delaware limited partnership ("KPP"), the banks and other
financial  institutions  from time to time  party  hereto  (the  "Lenders")  and
SUNTRUST  BANK,  in its  capacity as  Administrative  Agent for the Lenders (the
"Administrative Agent").


                              W I T N E S S E T H:

         WHEREAS,  the  Borrower  has  requested  that the  Lenders  establish a
$275,000,000 revolving credit facility;

         WHEREAS,  subject  to  the  terms  and  conditions  of  this  Agreement
(including,  without  limitation,  the guaranty and other  agreements of KPP set
forth  herein),  the Lenders to the extent of their  respective  Commitments  as
defined  herein,  are willing  severally to establish  the  requested  revolving
credit facility for the Borrower.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants   herein   contained,   the   Borrower,   KPP,  the  Lenders  and  the
Administrative Agent agree as follows:


DEFINITIONS; CONSTRUCTION
         Definitions.
         In addition to the other terms defined herein, the following terms used
herein shall have the meanings  herein  specified  (to be equally  applicable to
both the singular and plural forms of the terms defined):

                  "Acquisition  Agreement"  shall mean the  Securities  Purchase
         Agreement,  dated September 22, 2000, among KPP, Shore Terminals L.L.C.
         and the Sellers named therein.

                  "Additional Debt" shall mean  Indebtedness  issued or incurred
         by KPP or any Significant  Affiliate after the date hereof,  other than
         (i)  Indebtedness  under this  Agreement,  (ii) Permitted  Non-Recourse
         Debt,  (iii)  Indebtedness in the aggregate  principal  amount of up to
         $30,000,000 of ST Linden,  L.L.C.,  or (iv)  Indebtedness of KPP or any
         Guarantor  in the  aggregate  principal  amount  of up to  $200,000,000
         issued  pursuant to a public offering  registered  under the Securities
         Act of 1933, as amended.

                  "Adjusted LIBO Rate" shall mean, with respect to each Interest
         Period  for a  Eurodollar  Borrowing,  the rate per annum  obtained  by
         dividing (i) LIBOR for such Interest Period by (ii) a percentage  equal
         to 1.00 minus the Eurodollar Reserve Percentage.

                  "Administrative Agent" shall have the meaning set forth in the
         opening paragraph hereof.

                  "Administrative  Questionnaire"  shall mean,  with  respect to
         each Lender,  an  administrative  questionnaire in the form prepared by
         the Administrative Agent and submitted to the Administrative Agent duly
         completed by such Lender.

                  "Affiliate"  shall mean,  as 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,  such
         Person.

                  "Aggregate   Commitments"   shall  mean,   collectively,   all
         Commitments of all Lenders at any time outstanding.

                  "Applicable  Lending  Office" shall mean,  for each Lender and
         for each Type of Loan,  the  "Lending  Office"  of such  Lender  (or an
         Affiliate  of such  Lender)  designated  for  such  Type of Loan in the
         Administrative  Questionnaire  submitted  by such  Lender or such other
         office of such Lender (or an  Affiliate  of such Lender) as such Lender
         may from  time to time  specify  to the  Administrative  Agent  and the
         Borrower  as the  office by which its Loans of such Type are to be made
         and maintained.

                  "Applicable   Margin"  shall  mean  a  percentage   per  annum
         determined  (i) until the date on which  any  Reference  Party has been
         assigned a Credit  Rating,  by  reference  to the  applicable  ratio of
         Consolidated  Funded Debt to Consolidated EBITDA in effect on such date
         as set forth on  Schedule I and (ii) on and after the date on which any
         Reference Party has been assigned a Credit Rating,  by reference to the
         Reference  Rating(s)  then  in  effect  as set  forth  on  Schedule  I;
         provided, that (A) any change in the Applicable Margin resulting from a
         change in the ratio of Consolidated  Funded Debt to Consolidated EBITDA
         shall be  effective  on the third day after  which KPP is  required  to
         deliver the financial  statements required by Section 5.1(a) or (b) and
         the  compliance  certificate  required by Section  5.1(c),  and (B) any
         change  in  the  Applicable  Margin  resulting  from  a  change  in any
         Reference  Rating shall be effective on the day on which the applicable
         rating agency changes its rating and shall continue until the day prior
         to the day that a further change becomes  effective;  provided further,
         that if, at any time that the Applicable  Margin is to be determined by
         reference  to the ratio of  Consolidated  Funded  Debt to  Consolidated
         EBITDA,  KPP shall have failed to deliver the financial  statements and
         certificate  described in clause (A) above, the Applicable Margin shall
         be at  Level  IV  until  such  time as such  financial  statements  and
         certificate are delivered, at which time the Applicable Margin shall be
         determined as provided  above.  Notwithstanding  the foregoing,  at all
         times from the date hereof until date six months  following the date of
         this Agreement,  the Applicable Margin with respect to Eurodollar Loans
         shall be the greater of (x) the Applicable Margin  determined  pursuant
         to the foregoing provisions and (y) 0.75% per annum.

                  "Applicable   Percentage"  shall  mean  with  respect  to  the
         commitment fee a percentage per annum  determined (i) until the date on
         which  any  Reference  Party  has been  assigned  a Credit  Rating,  by
         reference  to the  applicable  ratio  of  Consolidated  Funded  Debt to
         Consolidated  EBITDA in effect on such date as set forth on  Schedule I
         and (ii) on and after the date on which  any  Reference  Party has been
         assigned a Credit Rating, by reference to the Reference  Rating(s) then
         in effect as set forth on Schedule I; provided,  that (A) any change in
         the  Applicable  Percentage  resulting  from a change  in the  ratio of
         Consolidated  Funded Debt to Consolidated  EBITDA shall be effective on
         the third day after  which KPP is  required  to deliver  the  financial
         statements  required  by  Section  5.1(a)  or (b)  and  the  compliance
         certificate  required  by  Section  5.1(c),  and (B) any  change in the
         Applicable  Percentage  resulting from a change in any Reference Rating
         shall be effective  on the day on which the  applicable  rating  agency
         changes  its rating and shall  continue  until the day prior to the day
         that a further change becomes effective;  provided, further, that if at
         any time KPP shall have failed to deliver the financial  statements and
         certificate  described in clause (A) above,  the Applicable  Percentage
         shall be at Level IV until such time as such  financial  statements and
         certificate  are  delivered,  at which time the  Applicable  Percentage
         shall be determined as provided above.  Notwithstanding  the foregoing,
         at all times from the date hereof  until the date six months  following
         the date of this  Agreement,  the  Applicable  Percentage  shall be the
         greater  of  (x)  the  Applicable  Margin  determined  pursuant  to the
         foregoing provisions and (y) 0.25% per annum.

                  "Asset  Disposition"  shall mean,  with  respect to KPP or any
         Significant Affiliate, any sale, transfer,  conveyance,  lease or other
         disposition   (including   by   way   of   merger,   consolidation   or
         sale-leaseback)  by KPP or  such  Significant  Affiliate  to any  other
         Person  (other  than  by  any  Person  to KPP  or a  Guarantor  or by a
         Significant Affiliate to any other Significant Affiliate) of any assets
         of KPP or such Significant  Affiliate  (including,  without limitation,
         any Equity Interests owned by KPP or such Significant  Affiliate).  The
         term  "Asset   Disposition"  shall  not  include  (i)  dispositions  of
         inventory in the  ordinary  course of business,  (ii)  dispositions  of
         other assets in the ordinary  course of business having a Diluted Value
         of not more than $25,000,000 in the aggregate during any fiscal year of
         KPP and not more than $50,000,000 in the aggregate from the date hereof
         until the date three years following the date of this Agreement,  (iii)
         dispositions  of assets the proceeds of which are  reinvested  in other
         assets  used by or  useful  to KPP or  such  Significant  Affiliate  in
         conducting   its  customary   business  if  (A)  a  binding   purchase,
         subscription  or similar  agreement  relating to such  reinvestment  is
         entered  into within 60 days after the receipt of all or  substantially
         all of the cash  proceeds from the  disposition  of such assets and (B)
         the Net Cash Proceeds from such  disposition  are so reinvested  within
         120 days after the receipt of such cash  proceeds,  (iv) the grant of a
         Lien by KPP or any  Significant  Affiliate  in any  assets  securing  a
         borrowing by, or  contractual  performance  obligation  of, KPP or such
         Significant Affiliate otherwise permitted under this Agreement, and (v)
         dispositions   of  Equity   Interests  in  connection  with  directors'
         qualifying shares or comparable Equity Interests.

                  "Assignment  and  Acceptance"  shall  mean an  assignment  and
         acceptance  entered into by a Lender and an assignee  (with the consent
         of any party the consent of which is required by Section  11.4(b))  and
         accepted by the Administrative Agent, in the form of Exhibit B attached
         hereto or any other form approved by the Administrative Agent.

                  "Base  Rate"  shall  mean the higher of (i) the per annum rate
         which the Administrative  Agent publicly announces from time to time to
         be its prime lending rate, as in effect from time to time, and (ii) the
         Federal  Funds Rate as in effect from time to time plus one-half of one
         percent  (0.50%).  The  Administrative  Agent's prime lending rate is a
         reference  rate and does not  necessarily  represent the lowest or best
         rate charged to customers. The Administrative Agent may make commercial
         loans or  other  loans at rates  of  interest  at,  above or below  the
         Administrative   Agent's  prime  lending  rate.   Each  change  in  the
         Administrative  Agent's prime lending rate shall be effective  from and
         including  the  date  such  change  is  publicly   announced  as  being
         effective.

                  "Borrower"   shall  have  the  meaning  in  the   introductory
         paragraph hereof.

                  "Borrowing" shall mean a borrowing  consisting of Loans of the
         same Type, made, converted or continued on the same date and in case of
         Eurodollar Loans, as to which a single Interest Period is in effect.

                  "Business  Day" shall mean (i) any day other than a  Saturday,
         Sunday or other day on which commercial  banks in Atlanta,  Georgia and
         New York,  New York are authorized or required by law to close and (ii)
         if such day  relates  to a  Borrowing  of, a payment or  prepayment  of
         principal  or  interest  on, a  conversion  of or into,  or an Interest
         Period for, a  Eurodollar  Loan or a notice with  respect to any of the
         foregoing,  any day on which  dealings in Dollars are carried on in the
         London interbank market.

                  "Capital  Lease  Obligations"  of any  Person  shall  mean all
         obligations of such Person to pay rent or other amounts under any lease
         (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"  shall mean the  occurrence of one or more
         of the  following  events:  (i) any  sale,  lease,  exchange  or  other
         transfer (in a single transaction or a series of related  transactions)
         of all or substantially all of the assets of KPP or the General Partner
         to any other  Person or "group"  (within the meaning of the  Securities
         Exchange  Act of 1934 and the  rules  of the  Securities  and  Exchange
         Commission   thereunder  in  effect  on  the  date  hereof),  (ii)  the
         acquisition of ownership,  directly or indirectly,  beneficially  or of
         record,  by any Person or "group" (within the meaning of the Securities
         Exchange  Act of 1934 and the  rules  of the  Securities  and  Exchange
         Commission  thereunder as in effect on the date hereof) (other than, in
         the case of the General  Partner,  by the Investor Group) of sufficient
         Equity  Interests  in KPP or the General  Partner to Control KPP or the
         General Partner,  as the case may be; or (iii) occupation of a majority
         of the seats (other than vacant seats) on the board of directors of the
         General  Partner by  Persons  who were  neither  (A)  nominated  by the
         current board of directors or (B) appointed by directors so nominated.

                  "Change in Law" shall mean (i) the adoption of any  applicable
         law,  rule or  regulation  after the date of this  Agreement,  (ii) any
         change in any applicable law, rule or regulation,  or any change in the
         interpretation or application  thereof,  by any Governmental  Authority
         after the date of this Agreement, or (iii) compliance by any Lender (or
         its Applicable  Lending Office) by such Lender's  holding  company,  if
         applicable)  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.

                  "Charges" shall have the meaning set forth in Section 11.12.

                  "Closing  Date"  shall  mean the date on which the  conditions
         precedent  set forth in Section  3.1 have been  satisfied  or waived in
         accordance with Section 11.2.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
         amended and in effect from time to time.

                  "Commitment"  shall mean,  with  respect to each  Lender,  the
         obligation of such Lender to make Loans to the Borrower in an aggregate
         principal  amount not  exceeding  the amount set forth with  respect to
         such Lender on the signature pages to this Agreement, or in the case of
         a Person  becoming a Lender  after the date  hereof,  the amount of the
         assigned  Commitment  as  provided  in the  Assignment  and  Acceptance
         Agreement  executed by such Person as an  assignee,  as the same may be
         changed pursuant to terms hereof.

                  "Consolidated EBITDA" shall mean, for KPP and its Subsidiaries
         for any  period,  an amount  equal to the sum of (i)  Consolidated  Net
         Income for such period plus (ii) to the extent  deducted in determining
         Consolidated  Net Income for such  period,  (A)  Consolidated  Interest
         Expense,  (B) income tax expense, (C) depreciation and amortization and
         (D) all other non-cash charges,  determined on a consolidated  basis in
         accordance with GAAP in each case for such period.

                  "Consolidated  Funded  Debt" shall mean Funded Debt of KPP and
         its consolidated Subsidiaries, other than Permitted Non-Recourse Debt.

                  "Consolidated  Interest  Expense"  shall mean, for KPP and its
         Subsidiaries  for any  period  determined  on a  consolidated  basis in
         accordance  with  GAAP,  the sum of (i) total  cash  interest  expense,
         (other  than in  respect  of  Permitted  Non-Recourse  Debt)  including
         without limitation the interest component of any payments in respect of
         Capital Lease  Obligations  capitalized or expensed  during such period
         (whether or not  actually  paid during such  period)  plus (ii) the net
         amount  payable  (or minus the net  amount  receivable)  under  Hedging
         Agreements during such period (whether or not actually paid or received
         during such period).

                  "Consolidated Net Income" shall mean, for any period,  the sum
         of (i) the net  income (or loss) of KPP and its  Subsidiaries  for such
         period determined on a consolidated  basis in accordance with GAAP, but
         (A) excluding  therefrom (to the extent otherwise included therein) (1)
         any  extraordinary  gains or  losses,  (2) any  gains  attributable  to
         write-ups of assets,  (3) any equity  interest of KPP or any Subsidiary
         of  KPP  in  the  unremitted  earnings  of  any  Person  that  is not a
         Subsidiary  other  than ST  Linden,  L.L.C.  and (4) any  income of any
         Person  other  than KPP or the  Borrower  for such  period  if (x) such
         Person has any Permitted Non-Recourse Indebtedness outstanding owing to
         any Person other than KPP or a  wholly-owned  subsidiary of KPP and (y)
         such income is not received in cash by KPP or the Borrower, as the case
         may be, during such period,  and (B)  including  therein (to the extent
         not otherwise  included  therein) any income (or loss) of any Person or
         attributable  to any assets if such  income  accrued  prior to the date
         that  (x)  such  Person  became  a  Subsidiary  or was  merged  into or
         consolidated  with KPP or any Subsidiary of KPP or (y) such assets were
         acquired  by KPP or any  Subsidiary,  as the case may be, plus (ii) the
         net income (or loss) of the General Partner in such period attributable
         to the  General  Partner's  interest  in the  Borrower,  determined  in
         accordance with GAAP.

                  "Consolidated  Net Worth"  means as at any date the sum of (x)
         total partners' capital of KPP and its consolidated  Subsidiaries as at
         such date,  excluding the effects of any write-ups  after  December 31,
         1999 of assets owned by KPP and its consolidated subsidiaries as of the
         date of this  Agreement  plus (y)  minority  interests  of the  General
         Partner in the Borrower,  in each case  determined  in accordance  with
         GAAP.

                  "Constituent  Documents"  shall  mean,  for  any  Person,  the
         documents for its formation and organization,  which, for example,  (i)
         for a  corporation  are its  corporate  charter and bylaws,  (ii) for a
         partnership is its partnership agreement, (iii) for a limited liability
         company are its certificate of organization and  regulations,  and (iv)
         for a trust is the  trust  agreement  or  indenture  under  which it is
         created.

                  "Control" shall mean the power, directly or indirectly, either
         to (i) vote 15% or more of securities  having ordinary voting power for
         the election of directors (or persons  performing similar functions) of
         a Person or (ii) direct or cause the  direction of the  management  and
         policies of a Person,  whether  through the ability to exercise  voting
         power, by contract or otherwise.  The terms  "Controlled by" and "under
         common Control with" have meanings correlative thereto.

                  "Credit Exposure" shall mean with respect to any Lender at any
         time the aggregate  principal  amount of all Loans  outstanding at such
         time that were made by such Lender.

                  "Credit Rating" of any Person shall mean any rating  published
         by S&P or Moody's for such Person's  senior  unsecured  long-term  debt
         without third-party credit enhancement.

                  "Default"  shall mean any  condition  or event that,  with the
         giving  of notice or the  lapse of time or both,  would  constitute  an
         Event of Default.

                  "Default Interest" shall have the meaning set forth in Section
         2.10(b).

                  "Diluted Value" shall mean, with respect to any assets of KPP,
         the Fair Market Value of such assets,  and,  with respect to any assets
         of any other Person, the Fair Market Value of such assets multiplied by
         the  percentage of the Equity  Interests held directly or indirectly by
         KPP in such Person.

                  "Distribution"   shall  mean,   with  respect  to  any  Equity
         Interests issued by a Person (i) the retirement,  redemption,  purchase
         or other  acquisition  for value of those  Equity  Interests,  (ii) the
         declaration  or  payment of any  dividend  or  distribution  on or with
         respect to those Equity Interests,  (iii) any Investment by that Person
         in the  holder  of any of those  Equity  Interests,  and (iv) any other
         payment by that Person with respect to those Equity Interests.

                  "Dollar(s)"  and the sign "$" shall mean  lawful  money of the
         United States of America.

                  "Environmental Liability" shall mean any liability, contingent
         or  otherwise   (including   any  liability   for  damages,   costs  of
         environmental  investigation  and remediation,  costs of administrative
         oversight,  fines, natural resource damages, penalties or indemnities),
         of KPP or any Subsidiary directly or indirectly resulting from or based
         upon (i) any actual or alleged violation of any Environmental Law, (ii)
         the generation,  use, handling,  transportation,  storage, treatment or
         disposal  of any  Hazardous  Materials,  (iii) any  actual  or  alleged
         exposure to any  Hazardous  Materials,  (iv) the Release or  threatened
         Release of any Hazardous  Materials or (v) any  contract,  agreement or
         other consensual  arrangement pursuant to which liability is assumed or
         imposed with respect to any of the foregoing.

                  "Equity  Event"  shall  mean (i) the  contribution  in cash of
         capital to KPP or any Subsidiary of KPP by any Person other than KPP or
         a Wholly-Owned  Subsidiary of KPP or any Subsidiary of KPP, or (ii) any
         issuance of Equity  Interests  by KPP or any  Subsidiary  of KPP to any
         Person  other  than  KPP or  any  Subsidiary  of KPP or a  Wholly-Owned
         Subsidiary of KPP.

                  "Equity   Interests"   shall  mean,  (i)  with  respect  to  a
         corporation,  shares of capital stock of such  corporation or any other
         interest convertible or exchangeable into any such interest,  (ii) with
         respect to a limited liability company,  a membership  interest in such
         company, (iii) with respect to a partnership, a partnership interest in
         such  partnership,  and (iv)  with  respect  to any  other  Person,  an
         interest in such Person analogous to interests described in clauses (i)
         through (iii).

                  "ERISA" shall mean the Employee Retirement Income Security Act
         of 1974, as amended from time to time, and any successor statute.

                  "ERISA Affiliate" shall mean any trade or business (whether or
         not  incorporated),  which,  together  with KPP, is treated as a single
         employer  under  Section  414(b) or (c) of the Code or,  solely for the
         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"  shall  mean  (i) 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);  (ii) 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;  (iii) the filing
         pursuant to 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; (iv) the incurrence by KPP or any of its ERISA  Affiliates
         of  any  liability  under  Title  IV  of  ERISA  with  respect  to  the
         termination of any Plan; (v) the receipt by KPP or any ERISA  Affiliate
         from  the  PBGC or a plan  administrator  appointed  by the PBGC of any
         notice  relating to an intention  to terminate  any Plan or Plans or to
         appoint a trustee to administer any Plan; (vi) the incurrence by KPP or
         any of its  ERISA  Affiliates  of any  liability  with  respect  to the
         withdrawal or partial  withdrawal from any Plan or Multiemployer  Plan;
         or (vii) the receipt by KPP or any ERISA  Affiliate  of any notice,  or
         the receipt by any  Multiemployer  Plan from KPP 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,
         bears  interest at a rate  determined by reference to the Adjusted LIBO
         Rate.

                  "Eurodollar  Reserve  Percentage"  shall mean the aggregate of
         the maximum reserve percentages  (including,  without  limitation,  any
         emergency,  supplemental, special or other marginal reserves) expressed
         as a decimal  (rounded  upwards to the next 1/100th of 1%) in effect on
         any day to which the  Administrative  Agent is subject  with respect to
         the Adjusted LIBO Rate pursuant to  regulations  issued by the Board of
         Governors of the Federal Reserve System (or any Governmental  Authority
         succeeding  to  any  of  its  principal   functions)  with  respect  to
         eurocurrency   funding   (currently   referred   to  as   "eurocurrency
         liabilities"  under 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
         Regulation  D. The  Eurodollar  Reserve  Percentage  shall be  adjusted
         automatically  on and as of the  effective  date of any  change  in any
         reserve percentage.

                  "Event of Default" shall have the meaning set forth in Article
         IX.

                  "Excluded  Affiliate"  shall mean,  for any Person (the "first
         Person"),  any other  Person (the  "second  Person") in which the first
         Person owns  Equity  Interests  and where the second  Person (i) has no
         Indebtedness  other than Permitted  Non-Recourse Debt and (ii) the sole
         purpose  of  which  is to  engage  in  the  acquisition,  construction,
         development  and/or  operation  activities  financed or refinanced with
         such Permitted Non-Recourse Debt.

                  "Excluded Subsidiary" shall mean any Subsidiary of KPP that is
         an Excluded Affiliate.

                  "Excluded Taxes" shall mean with respect to the Administrative
         Agent,  any Lender or any other  recipient of any payment to be made by
         or on account of any obligation of the Borrower  hereunder,  (i) 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,  (ii) any branch profits taxes imposed by the United
         States of America or any similar tax imposed by any other  jurisdiction
         in which  any  Lender  is  located  and  (iii) in the case of a Foreign
         Lender,  any  withholding tax that (A) is imposed on amounts payable to
         such Foreign  Lender at the time such Foreign Lender becomes a party to
         this  Agreement,  (B) is  imposed on  amounts  payable to such  Foreign
         Lender at any time that such  Foreign  Lender  designates a new lending
         office,  other than taxes that have accrued prior to the designation of
         such lending office that are otherwise not Excluded  Taxes,  and (C) is
         attributable  to such Foreign  Lender's  failure to comply with Section
         2.17(e).

                  "Existing  Indebtedness" shall mean the Indebtedness described
         on Schedule II of this Agreement.

                  "Fair  Market  Value"  shall mean,  with respect to any Equity
         Interest or other  property  or asset,  the price  obtainable  for such
         Equity  Interest  or other  property or asset in an  arm's-length  sale
         between an  informed  and  willing  purchaser  under no  compulsion  to
         purchase and an informed  and willing  seller  under no  compulsion  to
         sell.

                  "Fee Letters"  shall mean (i) that certain  letter  agreement,
         dated August 9, 2000, among the Borrower,  the Administrative Agent and
         SunTrust  Equitable  Securities  Corporation,  relating to certain fees
         payable  in  connection  with  administrative  agency  and  arrangement
         services  provided  in  connection  with this  Agreement  and (ii) that
         certain letter  agreement,  dated the date hereof,  among the Borrower,
         KPP,  SunTrust  Bank and  SunTrust  Equitable  Securities  Corporation,
         relating to certain  upfront and ticking fees payable to the Lenders in
         connection with this Agreement.

                  "Federal  Funds Rate" shall  mean,  for any day,  the rate per
         annum (rounded upwards, if necessary,  to the next 1/100th of 1%) equal
         to the  weighted  average  of the  rates  on  overnight  Federal  funds
         transactions  with member banks of the Federal  Reserve System arranged
         by Federal funds brokers,  as published by the Federal  Reserve Bank of
         New York on the next succeeding  Business Day or if such rate is not so
         published  for any Business  Day,  the Federal  Funds Rate for such day
         shall be the average rounded upwards, if necessary, to the next 1/100th
         of 1% of the quotations for such day on such  transactions  received by
         the Administrative Agent from three Federal funds brokers of recognized
         standing selected by the Administrative Agent.

                  "Foreign  Lender"  shall mean any Lender  that is not a United
         States person under Section 7701(a)(3) of the Code.

                  "Foreign  Subsidiary" shall mean any Subsidiary of KPP that is
         not  organized  under the law of the  United  States of  America or any
         state or territory thereof.

                  "Funded Debt" of any Person shall mean (i) all Indebtedness of
         such  Person of the types  described  in clauses  (i) though (v) of the
         definition of "Indebtedness", (ii) all Guarantees of such Person of the
         types of  Indebtedness  described  in  clause  (i)  above and (iii) all
         obligations  that are  secured  (or for  which  the  holder of any such
         obligation  has an existing  right,  contingent or otherwise,  to be so
         secured) by any Lien on property  owned or acquired by such Person,  in
         an amount limited to the lesser of (x) the unpaid amount of all of such
         obligations from time to time outstanding and (y) the Fair Market Value
         of the property securing all of such obligations,  liabilities  secured
         (or for which the holder of such  obligations  has an  existing  right,
         contingent  or  otherwise,  to be so secured)  by any Lien  existing on
         property owned or acquired by such Person.

                  "GAAP" shall mean generally accepted accounting  principles in
         the United  States  applied on a  consistent  basis and  subject to the
         terms of Section 1.3.

                  "General  Partner"  shall  mean  Kaneb  Pipe Line  Company,  a
         Delaware corporation.

                  "Governmental  Authority"  shall  mean 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.

                  "Granting  Lender" shall have the meaning set forth in Section
         11.4(e).

                  "Guarantee" of or by any Person (the  "guarantor")  shall mean
         any obligation,  contingent or otherwise, of the guarantor guaranteeing
         or having the economic effect of guaranteeing  any  Indebtedness of any
         other Person (the "primary obligor") in any manner, whether directly or
         indirectly,  and including any obligation,  direct or indirect,  of the
         guarantor  (i) 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,  (ii) 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,  (iii) 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
         (iv) as an  account  party in respect of any letter of credit or letter
         of  guaranty  issued in support  of such  Indebtedness  or  obligation;
         provided,  that the term "Guarantee" shall not include endorsements for
         collection or deposits in the ordinary  course of business.  The amount
         of any Guarantee shall be deemed to be an amount equal to the stated or
         determinable  amount of the  primary  obligation  in  respect  of which
         Guarantee  is made or, if not so stated or  determinable,  the  maximum
         reasonably  anticipated  liability in respect  thereof  (assuming  such
         Person is required to perform  thereunder) as determined by such Person
         in good faith.  The term "Guarantee" used as a verb has a corresponding
         meaning.

                  "Guaranteed  Obligations"  shall have the meaning set forth in
         Section 8.01.

                  "Guarantor"  shall mean KPP and each  party to the  Subsidiary
         Guarantee Agreement.

                  "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  Agreements"  shall mean interest  rate swap,  cap or
         collar agreements,  interest rate future or option contracts,  currency
         swap  agreements,   currency  future  or  option  contracts,  commodity
         agreements  and other similar  agreements or  arrangements  designed to
         protect  against  fluctuations  in interest  rates,  currency values or
         commodity values, in each case to which KPP or any Subsidiary of KPP is
         a party.

                  "Indebtedness" of any Person shall mean,  without  duplication
         (i) all  obligations  of such  Person  for  borrowed  money,  (ii)  all
         obligations  of such Person  evidenced by bonds,  debentures,  notes or
         other  similar  instruments,  (iii) all  obligations  of such Person in
         respect of the deferred  purchase price of property or services  (other
         than  trade  payables  incurred  in the  ordinary  course of  business;
         provided,  that for purposes of Section 9.1(f),  trade payables overdue
         by more than 120 days shall be  included in this  definition  except to
         the extent that any of such trade  payables are being  disputed in good
         faith and by appropriate measures), (iv) all obligations of such Person
         under  any  conditional  sale or  other  title  retention  agreement(s)
         relating to property  acquired by such  Person,  (v) all Capital  Lease
         Obligations of such Person and all obligations in respect of the unpaid
         principal  amount  or  component  of all  obligations  under  synthetic
         leases, (vi) all obligations,  contingent or otherwise,  of such Person
         in respect of letters of credit,  acceptances or similar  extensions of
         credit, (vii) all Guarantees of such Person of the type of Indebtedness
         described in clauses (i) through (vi) above, (viii) all Indebtedness of
         a third  party  secured by any Lien on property  owned by such  Person,
         whether or not such Indebtedness has been assumed by such Person,  (ix)
         all obligations of such Person,  contingent or otherwise,  to purchase,
         redeem,  retire or otherwise acquire for value any common stock of such
         Person, and (x) Off-Balance Sheet Liabilities.  The Indebtedness of any
         Person  shall  include the  Indebtedness  of any  partnership  or joint
         venture in which such Person is a general  partner or a joint venturer,
         except to the extent that the terms of such  Indebtedness  provide that
         such Person is not liable therefor.

                  "Indemnified  Taxes"  shall  mean Taxes  other  than  Excluded
         Taxes.

                  "Indemnitee"  shall  have the  meaning  set  forth in  Section
         11.3(b).

                  "Information   Memorandum"   shall   mean   the   Confidential
         Information  Memorandum  dated  September  2000  relating  to KPP,  the
         Borrower and the  transactions  contemplated  by this Agreement and the
         other Loan Documents.

                  "Interest  Coverage  Ratio"  shall mean for any period of four
         consecutive  fiscal  quarters  of KPP,  the  ratio of (i)  Consolidated
         EBITDA for such period to (ii)  Consolidated  Interest Expense for such
         period.

                  "Interest  Period"  shall mean with respect to any  Eurodollar
         Borrowing, a period of one, two, three or six months; provided, that:

         (i)      the initial  Interest Period for such Borrowing shall commence
                  on the  date  of such  Borrowing  (including  the  date of any
                  conversion  from  a  Borrowing  of  another  Type),  and  each
                  Interest  Period  occurring  thereafter  in  respect  of  such
                  Borrowing  shall  commence  on  the  day  on  which  the  next
                  preceding Interest Period expires;

         (ii)     if any Interest Period would otherwise end on a day other than
                  a Business Day, such Interest  Period shall be extended to the
                  next  succeeding  Business Day, unless such Business Day falls
                  in another  calendar month, in which case such Interest Period
                  would end on the next preceding Business Day;

         (iii)    any Interest  Period that begins on the last Business Day of a
                  calendar  month or on a day for which there is no  numerically
                  corresponding  day in the  calendar  month  at the end of such
                  Interest  Period  shall end on the last  Business  Day of such
                  calendar month;

         (iv)     no Interest Period may extend beyond the Termination Date.

                  "Investment"  shall mean, in respect of any Person,  any loan,
         advance,  extension of credit or capital  contribution  to that Person,
         any other  investment in that Person,  or any purchase or commitment to
         purchase any Equity Interest or  Indebtedness  issued by that Person or
         substantially all of the assets or a division or other business unit of
         that Person.

                  "Investor  Group"  shall mean  Kaneb  Services,  Inc.  and its
         Subsidiaries.

                  "Lenders" shall have the meaning  assigned to such term in the
         opening paragraph of this Agreement.

                  "LIBOR" shall mean,  for any applicable  Interest  Period with
         respect to any  Eurodollar  Loan,  the rate per annum for  deposits  in
         Dollars for a period  equal to such  Interest  Period  appearing on the
         display  designated as Page 3750 on the Dow Jones  Markets  Service (or
         such other page on that service or such other service designated by the
         British  Banker's  Association  for the  display of such  Association's
         Interest  Settlement  Rates  for  Dollar  deposits)  as of  11:00  a.m.
         (London,  England  time) on the day that is two Business  Days prior to
         the  first  day  of  the  Interest  Period  or if  such  Page  3750  is
         unavailable  for any reason at such time, the rate which appears on the
         Reuters Screen ISDA Page as of such date and such time; provided,  that
         if the  Administrative  Agent  determines  that the relevant  foregoing
         sources are unavailable for the relevant  Interest Period,  LIBOR shall
         mean the rate of interest determined by the Administrative  Agent to be
         the average  (rounded upward,  if necessary,  to the nearest 1/100th of
         1%) of the rates per annum at which  deposits in Dollars are offered to
         the  Administrative  Agent two Business Days preceding the first day of
         such Interest Period by leading banks in the London interbank market as
         of 10:00 a.m.  for delivery on the first day of such  Interest  Period,
         for the number of days comprised therein and in an amount comparable to
         the amount of the Eurodollar Loan of the Administrative Agent.

                  "Lien" shall mean any  mortgage,  pledge,  security  interest,
         financing   statement,   lien   (statutory   or   otherwise),   charge,
         encumbrance,  hypothecation,  assignment, deposit arrangement, or other
         arrangement  having  the  practical  effect  of  the  foregoing  or any
         preference,  priority  or  other  security  agreement  or  preferential
         arrangement of any kind or nature whatsoever (including any conditional
         sale or other title  retention  agreement  and any capital lease having
         the same economic effect as any of the foregoing).

                  "Loan"  shall  mean a loan  made by a Lender  to the  Borrower
         under  its  Commitment,  which  may  either  be a Base  Rate  Loan or a
         Eurodollar Loan.

                  "Loan Documents" shall mean, collectively, this Agreement, the
         Notes (if any),  the  Subsidiary  Guarantee  Agreement,  all Notices of
         Borrowing and all Notices of Conversion/Continuation.

                  "Loan  Parties" shall mean the General  Partner,  the Borrower
         and the Guarantors.

                  "Material  Adverse  Effect"  shall mean,  with  respect to any
         event,  act,  condition or occurrence of whatever nature (including any
         adverse determination in any litigation,  arbitration,  or governmental
         investigation or proceeding), whether singularly or in conjunction with
         any  other  event or  events,  act or acts,  condition  or  conditions,
         occurrence or occurrences  whether or not related,  a material  adverse
         change in, or a material  adverse effect on, (i) the business,  results
         of operations, financial condition, assets, liabilities or prospects of
         the Borrower or of KPP and its Subsidiaries  taken as a whole, (ii) the
         ability of any Loan Party to perform any of its  obligations  under the
         Loan  Documents,  (iii) the rights and  remedies of the  Administrative
         Agent  and the  Lenders  under  any of the Loan  Documents  or (iv) the
         legality, validity or enforceability of any of the Loan Documents.

                  "Material  Indebtedness"  shall mean Indebtedness  (other than
         the Loans) or obligations in respect of one or more Hedging  Agreements
         of any  one or  more  of  KPP  and  its  Subsidiaries  in an  aggregate
         principal  amount  exceeding  $5,000,000.  For purposes of  determining
         Material Indebtedness, the "principal amount" of the obligations of KPP
         or any  Subsidiary  of KPP in respect to any Hedging  Agreement  at any
         time  shall be the  maximum  aggregate  amount  (giving  effect  to any
         netting  agreements)  that KPP or such Subsidiary  would be required to
         pay if such Hedging Agreement were terminated at such time.

                  "Maximum  Rate"  shall have the  meaning  set forth in Section
         11.12.

                  "Moody's" shall mean Moody's Investors Service, Inc.

                  "Multiemployer  Plan"  shall  have the  meaning  set  forth in
         Section 4001(a)(3) of ERISA.

                  "Net Cash  Proceeds"  shall  mean,  with  respect to any Asset
         Disposition,  Recovery Event or Additional Debt (each,  for purposes of
         this  definition,  a  "transaction"),  the  aggregate  amount  of  cash
         received,  as the case may be,  by (x) KPP or the  Borrower  or (y) any
         Significant Affiliate and legally available to be distributed to KPP or
         the Borrower in the form of dividends or  distributions  in  connection
         with such  transaction  after,  in each case,  deducting  therefrom (i)
         payments  made in respect of any  Indebtedness  to the extent that such
         payments are required to be made (other than under the Loan  Documents)
         as a result of or in connection with such transaction by applicable law
         or  the  terms  of  any   contractual   agreement   relating   to  such
         Indebtedness, (ii) reasonable and customary transaction costs (which in
         the  case of any  Recovery  Event  may  include  litigation  costs  and
         expenses  and other  costs and  expenses  of  collecting  payments  and
         settlements  therefrom)  that are paid or reserved for payment (A) to a
         Person that is not an Affiliate of KPP or (B) to KPP or an Affiliate of
         KPP to  reimburse  such  Person  for  payments  made by such  Person to
         another  Person  that is not KPP or an  Affiliate  of KPP in respect of
         such transaction  costs, (iii) the amount of taxes paid or reserved for
         payment by KPP or such Significant Affiliate in connection with or as a
         result of such transaction and (iv) any Reinvestment Amount.

                  "Non-Recourse"  shall  mean,  with  respect  to any  Person as
         applied to any  Indebtedness  (i) that such  Person is not  directly or
         indirectly   liable  to  make  any   payments   with  respect  to  such
         Indebtedness, (ii) that such Indebtedness (or portion thereof) does not
         constitute  Indebtedness  of such  Person  other  than to the extent of
         recourse to such  Person's  Equity  Interests  in the Person  primarily
         incurring such Debt (or any shareholder, partner, member or participant
         of such Person) and that (iii) such  Indebtedness  (or portion thereof)
         is not  secured by a Lien on any asset of such  Person  other than such
         Person's  Equity  Interests  in the  Person  primarily  incurring  such
         Indebtedness or any shareholder,  partner, member, participant or other
         owner,  directly  or  indirectly,  of such  Person  or the  Person  the
         obligations of which were guaranteed.

                  "Note" shall mean a promissory note of the Borrower payable to
         the  order of a  requesting  Lender  in the  principal  amount  of such
         Lender's commitment, in substantially the form of Exhibit A.

                  "Notice  of  Borrowing"  shall have the  meaning  set forth in
         Section 2.3.

                  "Notice  of  Conversion/Continuation"  shall  mean the  notice
         given by the  Borrower  to the  Administrative  Agent in respect of the
         conversion or continuation  of an outstanding  Borrowing as provided in
         Section 2.5(b) hereof.

                  "Obligations"  shall mean all amounts owing by the Borrower to
         the  Administrative  Agent or any Lender  pursuant to or in  connection
         with this  Agreement  or any other  Loan  Document,  including  without
         limitation,  all principal,  interest  (including any interest accruing
         after the filing of any petition in bankruptcy or the  commencement  of
         any  insolvency,  reorganization  or like  proceeding  relating  to the
         Borrower,  whether  or not a claim  for  post-filing  or  post-petition
         interest is allowed in such proceeding), all reimbursement obligations,
         fees, expenses,  indemnification and reimbursement payments,  costs and
         expenses   (including   all  fees  and   expenses  of  counsel  to  the
         Administrative Agent and any Lender incurred pursuant to this Agreement
         or any other Loan  Document),  whether direct or indirect,  absolute or
         contingent,  liquidated  or  unliquidated,  now  existing or  hereafter
         arising  hereunder or  thereunder,  and all  obligations  arising under
         Hedging  Agreements  relating to the foregoing to the extent  permitted
         hereunder,  and all obligations and liabilities  incurred in connection
         with  collecting  and  enforcing  the  foregoing,   together  with  all
         renewals, extensions, modifications or refinancings thereof.

                  "Off-Balance  Sheet  Liabilities" of any Person shall mean (i)
         any  repurchase  obligation or liability of such Person with respect to
         accounts or notes receivable sold by such Person, (ii) any liability of
         such  Person  under  any sale and  leaseback  transactions  that do not
         create a liability on the balance  sheet of such  Person,  or (iii) any
         obligation  arising with respect to any other  transaction which is the
         functional  equivalent of or takes the place of borrowing but that does
         not constitute a liability on the balance sheet of such Person.

                  "Other  Taxes"  shall mean 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 or any other Loan Document.

                  "Participant"  shall  have the  meaning  set forth in  Section
         11.4(c).

                  "Payment  Office" shall mean the office of the  Administrative
         Agent located at 25 Park Place, N.E.,  Atlanta,  Georgia 30303, or such
         other  location as to which the  Administrative  Agent shall have given
         written notice to the Borrower and the other Lenders.

                  "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation
         referred to and defined in ERISA, and any successor  entity  performing
         similar functions.

                  "Permitted Encumbrances" shall mean

         (i)      Liens  imposed by law for taxes not yet due or which are being
                  contested in good faith by  appropriate  proceedings  and with
                  respect to which  adequate  reserves are being  maintained  in
                  accordance with GAAP;

         (ii)     statutory   Liens  of   landlords   and  Liens  of   carriers,
                  warehousemen,  mechanics,  materialmen and other Liens imposed
                  by law created in the ordinary  course of business for amounts
                  not yet due or which  are  being  contested  in good  faith by
                  appropriate  proceedings  and with  respect to which  adequate
                  reserves are being maintained in accordance with GAAP;

         (iii)    pledges and deposits  made in the ordinary  course of business
                  in  compliance   with  workers'   compensation,   unemployment
                  insurance and other social security laws or regulations;

         (iv)     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;

         (v)      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  materially   interfere  with  the
                  ordinary   conduct  of  business  of  the   Borrower  and  its
                  Subsidiaries taken as a whole; and

         (vi)     Liens  granted  in favor of the  Administrative  Agent for the
                  benefit of the Lenders.

                  "Permitted Investments" shall mean:

         (i)      direct  obligations  of, or  obligations  the principal of and
                  interest  on which  are  unconditionally  guaranteed  by,  the
                  United  States  (or by any agency  thereof to the extent  such
                  obligations  are  backed by the full  faith and  credit of the
                  United States), in each case maturing within one year from the
                  date of acquisition thereof;

         (ii)     commercial  paper  having the highest  rating,  at the time of
                  acquisition  thereof,  of S&P or  Moody's  and in either  case
                  maturing  within  six  months  from  the  date of  acquisition
                  thereof;

         (iii)    certificates  of  deposit,   bankers'   acceptances  and  time
                  deposits  maturing  within 180 days of 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  or any  state  thereof  which  has a  combined
                  capital  and surplus  and  undivided  profits of not less than
                  $500,000,000;

         (iv)     fully collateralized  repurchase agreements with a term of not
                  more than 30 days for securities described in clause (i) above
                  and entered into with a financial  institution  satisfying the
                  criteria described in clause (iii) above; and

         (v)      mutual  funds  investing  solely  in any  one or  more  of the
                  Permitted  Investments  described  in clauses (i) through (iv)
                  above.

                  "Permitted  Non-Recourse  Debt" shall mean Indebtedness of any
         Person  (other than any Loan Party)  that is  Non-Recourse  to any Loan
         Party and is used by such Person to acquire, construct,  develop and/or
         operate assets not owned by KPP or any Significant  Affiliate as of the
         date hereof or to refinance Permitted Non-Recourse Debt.

                  "Person"  shall  mean  any  individual,   partnership,   firm,
         corporation,  association,  joint venture,  limited liability  company,
         trust or other entity, or any Governmental Authority.

                  "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 KPP 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.

                  "Pro Rata Share" shall mean with respect to any  Commitment of
         any Lender at any time, a  percentage,  the numerator of which shall be
         such Lender's  Commitment (or if such  Commitments have been terminated
         or expired or the Loans have been declared to be due and payable,  such
         Lender's  Credit  Exposure),  and the denominator of which shall be the
         sum of such  Commitments  of all Lenders (or if such  Commitments  have
         been  terminated  or expired or the Loans have been  declared to be due
         and payable, the sum of the Credit Exposures of all Lenders).

                  "Recovery  Event" shall mean any  settlement  of or payment in
         respect of any property or casualty insurance claim or any condemnation
         proceeding  relating to any property or asset of KPP or any Significant
         Affiliate, the Diluted Value of which settlement or payment, when added
         to the Diluted  Value of all such  settlements  and payments (x) in any
         fiscal  year of KPP  exceeds  $25,000,000  or (y) from the date  hereof
         until the date three years following the date of this Agreement exceeds
         $50,000,000.

                  "Reference Parties" shall mean KPP and the Borrower.

                  "Reference  Ratings"  shall  mean the  Credit  Ratings  of the
         Reference Party with the lowest Credit Rating.

                  "Regulation  D"  shall  mean  Regulation  D of  the  Board  of
         Governors of the Federal Reserve  System,  as the same may be in effect
         from time to time, and any successor regulations.

                  "Reinvestment  Amount"  means,  with  respect to any  Recovery
         Event, the amount of cash received by KPP or any Significant  Affiliate
         that the Borrower,  by written notice  delivered to the  Administrative
         Agent on or prior to the date 10  Business  Days  following  receipt of
         such  cash  by KPP or such  Significant  Affiliate,  certifies  will be
         reinvested,  and  within  180 days of  receipt  of such cash is in fact
         reinvested,  in assets to replace, restore or refurbish the assets that
         were the subject of such Recovery Event.

                  "Related  Parties"  shall mean,  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.

                  "Release"  means  any  release,   spill,  emission,   leaking,
         dumping, injection, pouring, deposit, disposal,  discharge,  dispersal,
         leaching or  migration  into the  environment  (including  ambient air,
         surface  water,  groundwater,  land  surface or  subsurface  strata) or
         within any building, structure, facility or fixture.

                  "Required  Lenders" shall mean, at any time,  Lenders  holding
         more than 51% of the aggregate outstanding Loans and unused Commitments
         at such time or if the Lenders have no Loans outstanding,  then Lenders
         holding more than 51% of the Commitments.

                  "Responsible  Officer" shall mean, with respect to any Person,
         any of the president,  the chief executive officer, the chief operating
         officer, the chief financial officer, the treasurer or a vice president
         of such  Person or such other  representative  of such Person as may be
         designated in writing by any one of the  foregoing  with the consent of
         the Administrative Agent.

                  "Restricted  Payment"  shall  have the  meaning  set  forth in
         Section 7.5.

                  "S&P" shall mean Standard & Poor's  Ratings  Group, a division
         of The McGraw-Hill Companies, Inc..

                  "SPV" shall have the meaning set forth in Section 11.4(c).

                  "Significant  Affiliate"  shall means each Person (i) in which
         KPP's direct and indirect  Investments in such Person  constitute  more
         than 10% of the total assets of KPP and its consolidated  Subsidiaries,
         (ii) in which  KPP's and its  Subsidiaries'  share of the total  assets
         (after  intercompany  eliminations)  of such  Person  exceed 10% of the
         total  assets  of KPP and its  consolidated  Subsidiaries,  or (iii) in
         which  the  equity  of KPP  and its  Subsidiaries  in the  income  from
         continuing operations of such Person before income taxes, extraordinary
         items and  cumulative  effects  of  changes  in  accounting  principles
         exceeds 10% of such income of KPP and its consolidated Subsidiaries.

                  "Significant Subsidiary" means any Subsidiary of KPP that is a
         Significant Affiliate.

                  "Subsidiary"  shall  mean,  with  respect to any  Person  (the
         "parent"),  any  corporation,   partnership,   joint  venture,  limited
         liability  company,  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,  partnership,  joint venture,  limited liability  company,
         association or other entity (i) 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 (ii)  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  Guarantee  Agreement"  shall mean the  Subsidiary
         Guarantee  Agreement,  substantially  in the form of Exhibit C, made by
         the Guarantors  (other than KPP) in favor of the  Administrative  Agent
         for the benefit of the Lenders.

                  "Taxes"  shall  mean  any and all  present  or  future  taxes,
         levies, imposts, duties, deductions, charges or withholdings imposed by
         any Governmental Authority.

                  "Termination  Date"  shall mean the  earliest  of (i) the date
         three years from the date of this Agreement, (ii) the date on which the
         Commitments  are terminated  pursuant to Section 2.6 and (iii) the date
         on which  all  amounts  outstanding  under  this  Agreement  have  been
         declared  or have  automatically  become due and  payable  (whether  by
         acceleration or otherwise).

                  "Type", when used in reference to a 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 Base Rate.

                  "UK  Facility"  shall mean the Credit  Agreement,  dated as of
         January  29,  1999,  among  the  borrower  and ST  Services,  Ltd.,  as
         borrowers,  and  SunTrust  Bank,  as lender,  as amended,  modified and
         supplemented from time to time.

                  "Wholly-Owned  Subsidiary"  shall  mean  any  Subsidiary  of a
         Person, all of the issued and outstanding Equity Interests of which are
         directly or indirectly owned by such Person,  excluding (i) any general
         partner  interests  owned by the General Partner in any such Subsidiary
         that is a  partnership  and (ii) any  directors'  qualifying  shares or
         similar type of Equity Interests, as applicable.

                  "Withdrawal Liability" shall mean 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.

         Classifications of Loans and Borrowings.

         For purposes of this Agreement, Loans may be classified and referred to
by Type (e.g., a "Eurodollar Loan" or "Base Rate Loan").  Borrowings also may be
classified and referred to by Type (e.g.,  "Eurodollar  Borrowing" or "Base Rate
Borrowing").

         Accounting Terms and Determination.

         Unless otherwise defined or specified herein, all accounting terms used
herein shall be interpreted,  all accounting  determinations  hereunder shall be
made, and all financial  statements  required to be delivered hereunder shall be
prepared,  in accordance with GAAP as in effect from time to time,  applied on a
basis consistent  (except for such changes approved by KPP's independent  public
accountants) with the most recent audited  consolidated  financial  statement of
KPP delivered  pursuant to Section  5.1(a);  provided,  that if KPP notifies the
Administrative  Agent  that KPP  wishes to amend any  covenant  in Article VI to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if the Administrative Agent notifies KPP that the Required Lenders wish to amend
Article VI for such purpose),  then KPP's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to KPP and the Required Lenders.

         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".  In the  computation  of periods of time
from a specified date to a later specified date, the word "from" means "from and
including"  and the word  "to"  means "to but  excluding".  Unless  the  context
requires  otherwise  (i)  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 it was originally  executed or as it
may from time to time be amended, supplemented or otherwise modified (subject to
any  restrictions on such  amendments,  supplements or  modifications  set forth
herein),  (ii) any reference  herein to any Person shall be construed to include
such  Person's  successors  and  permitted  assigns,  (iii) the words  "hereof",
"herein" and "hereunder" and words of similar import shall be construed to refer
to this Agreement as a whole and not to any particular  provision  hereof,  (iv)
all references to Articles,  Sections, Exhibits and Schedules shall be construed
to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v)
all references to a specific time shall be construed to refer to the time in the
city and state of the Administrative  Agent's principal office, unless otherwise
indicated.


AMOUNT AND TERMS OF THE COMMITMENTS

         The Revolving Credit Facility.

         Subject to and upon the terms and  conditions  herein  set  forth,  the
Lenders hereby  establish in favor of the Borrower a revolving  credit  facility
pursuant to which each Lender  severally  agrees (to the extent of such Lender's
Commitment) to make Loans to the Borrower in accordance with Section 2.2.

         The Loans.

         Subject  to the terms and  conditions  set forth  herein,  each  Lender
severally agrees to make Loans to the Borrower,  from time to time from the date
hereof until the Termination Date, in an aggregate  principal amount outstanding
at any time that will not result in (i) such Lender's Credit Exposure  exceeding
such Lender's  Commitment or (ii) the sum of the aggregate  Credit  Exposures of
all Lenders exceeding the Aggregate Commitments. Until the Termination Date, the
Borrower  shall be entitled to borrow,  prepay and reborrow  Loans in accordance
with the terms and conditions of this Agreement.

         Procedure for Borrowings.

         The Borrower  shall give the  Administrative  Agent written  notice (or
telephonic notice promptly confirmed in writing) of each Borrowing substantially
in the form of Exhibit D (a "Notice of  Borrowing")  (x) prior to 11:00 a.m. one
Business Day prior to the  requested  date of each Base Rate  Borrowing  and (y)
prior to 11:00 a.m.  three  Business  Days prior to the  requested  date of each
Eurodollar  Borrowing.  Each Notice of Borrowing  shall be irrevocable and shall
specify: (i) the aggregate principal amount of such Borrowing,  (ii) the date of
such  Borrowing  (which  shall be a Business  Day),  (iii) the Type of such Loan
comprising  such Borrowing and (iv) in the case of a Eurodollar  Borrowing,  the
duration of the  initial  Interest  Period  applicable  thereto  (subject to the
provisions of the definition of Interest  Period).  Each Borrowing shall consist
entirely of Base Rate Loans or  Eurodollar  Loans,  as the Borrower may request.
The aggregate  principal  amount of each Eurodollar  Borrowing shall be not less
than $5,000,000 or a larger multiple of $1,000,000,  and the aggregate principal
amount of each Base Rate Borrowing shall not be less than $1,000,000 or a larger
multiple of $100,000. At no time shall the total number of Eurodollar Borrowings
outstanding at any time exceed five.  Promptly following the receipt of a Notice
of Borrowing in accordance herewith,  the Administrative Agent shall advise each
Lender of the details thereof and the amount of such Lender's Loan to be made as
part of the requested Borrowing.

         Funding of  Borrowings.

         Each Lender will make available each Loan to be made by it hereunder on
the proposed date thereof by wire  transfer in  immediately  available  funds by
11:00 a.m. to the Administrative Agent at the Payment Office. The Administrative
Agent will make such Loans  available to the Borrower by promptly  crediting the
amounts  that it  receives,  in like  funds  by the  close of  business  on such
proposed date, to an account  maintained by the Borrower with the Administrative
Agent or at the Borrower's  option, by effecting a wire transfer of such amounts
to an account designated by the Borrower to the Administrative Agent.  Unlessthe
Administrative  Agent shall have been notified by any Lender prior to 5 p.m. one
Business  Day  prior  to the  date  of a  Borrowing  in  which  such  Lender  is
participating  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 amount available to the  Administrative  Agent on
such date, and the  Administrative  Agent, in reliance on such  assumption,  may
make  available to the  Borrower on such date a  corresponding  amount.  If such
corresponding  amount is not in fact made available to the Administrative  Agent
by such Lender on the date of such Borrowing,  the Administrative Agent shall be
entitled  to  recover  such  corresponding  amount  on demand  from such  Lender
together  with  interest  at the  Federal  Funds  Rate  for up to two  days  and
thereafter at the rate specified for such Borrowing. If such Lender does not pay
such  corresponding  amount  forthwith  upon the  Administrative  Agent's demand
therefor,  the Administrative Agent shall promptly notify the Borrower,  and the
Borrower shall immediately pay such  corresponding  amount to the Administrative
Agent together with interest at the rate specified for such  Borrowing.  Nothing
in this subsection  shall be deemed to relieve any Lender from its obligation to
fund its Pro Rata Share of any  Borrowing  hereunder or to prejudice  any rights
which the  Borrower  may have  against  any Lender as a result of any default by
such Lender hereunder.  All Borrowings shall be made by the Lenders on the basis
of their  respective  Pro Rata Shares.  No Lender shall be  responsible  for any
default by any other Lender in its obligations hereunder,  and each Lender shall
be obligated to make its Loans  provided to be made by it hereunder,  regardless
of the  failure  of any  other  Lender  to make its  Loans  hereunder.  Interest
Elections.  Each  Borrowing  initially  shall  be of the Type  specified  in the
applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing, shall
have an  initial  Interest  Period as  specified  in such  Notice of  Borrowing.
Thereafter,  the Borrower may elect to convert such  Borrowing  into 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  Loans  comprising  such  Borrowing,  and the Loans
comprising each such portion shall be considered a separate  Borrowing.  To make
an election pursuant to this Section, the Borrower shall give the Administrative
Agent prior written notice (or telephonic notice promptly  confirmed in writing)
of  each  Borrowing  (a  "Notice  of  Conversion/Continuation")  that  is  to be
converted or continued, as the case may be, (x) prior to 10:00 a.m. one Business
Day prior to the requested  date of a conversion  into a Base Rate Borrowing and
(y) prior to 11:00  a.m.  three  Business  Days  prior to a  continuation  of or
conversion    into   a    Eurodollar    Borrowing.    Each   such    Notice   of
Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing
to which  such  Notice of  Continuation/Conversion  applies  and,  if  different
options are being  elected  with  respect to  different  portions  thereof,  the
portions thereof that are to be allocated to each resulting  Borrowing (in which
case the information to be specified pursuant to clauses (iii) and (iv) shall be
specified for each resulting Borrowing); (ii) the effective date of the election
made  pursuant  to such  Notice  of  Continuation/Conversion,  which  shall be a
Business  Day,  (iii)  whether  the  resulting  Borrowing  is to be a Base  Rate
Borrowing or a Eurodollar  Borrowing;  and (iv) if the resulting Borrowing is to
be a Eurodollar  Borrowing,  the Interest Period applicable thereto after giving
effect to such election,  which shall be a period contemplated by the definition
of "Interest Period". If any such Notice of  Continuation/Conversion  requests a
Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall
be deemed to have selected an Interest Period of one month. The principal amount
of any  resulting  Borrowing  shall  satisfy  the minimum  borrowing  amount for
Eurodollar  Borrowings and Base Rate Borrowings set forth in Section 2.3. If, on
the expiration of any Interest  Period in respect of any  Eurodollar  Borrowing,
the Borrower shall have failed to deliver a Notice of Conversion/  Continuation,
then, unless such Borrowing is repaid as provided herein,  the Borrower shall be
deemed to have elected to convert such  Borrowing to a Base Rate  Borrowing.  No
Borrowing may be converted  into,  or continued as, a Eurodollar  Borrowing if a
Default  or an Event of  Default  has  occurred  and is  continuing,  unless the
Administrative  Agent and each of the Lenders shall have otherwise  consented in
writing.  No conversion of any Eurodollar Loans shall be permitted except on the
last day of the Interest Period in respect  thereof.  Upon receipt of any Notice
of Conversion/Continuation,  the Administrative Agent shall promptly notify each
Lender of the details  thereof and of such  Lender's  portion of each  resulting
Borrowing.  Reduction and  Termination of  Commitments.  All  Commitments  shall
terminate on the  Termination  Date.  Upon at least three  Business  Days' prior
written  notice (or  telephonic  notice  promptly  confirmed  in writing) to the
Administrative  Agent  (which  notice  shall be  irrevocable),  the Borrower may
reduce the Aggregate  Commitments in part or terminate the Aggregate Commitments
in  whole;  provided,  that (i) any  partial  reduction  shall  apply to  reduce
proportionately  and permanently the Commitment of each Lender, (ii) any partial
reduction  pursuant  to this  Section  2.6  shall  be in an  amount  of at least
$5,000,000 and any larger  multiple of  $1,000,000,  and (iii) no such reduction
shall be permitted that would reduce the Aggregate Commitments to an amount less
than  the  outstanding  Credit  Exposures  of all  Lenders.  On the  date of any
required  prepayment of Loans pursuant to Section 2.9(b),  the Commitments shall
automatically reduce by an amount equal to such required prepayment  (regardless
of whether any Loans are outstanding or are prepaid on such date).  Repayment of
Loans.  The outstanding  principal  amount of all Loans shall be due and payable
(together with accrued and unpaid interest thereon) on the Termination Date.

         Evidence of Indebtedness.

         Each  Lender  shall  maintain  in  accordance  with its usual  practice
appropriate  records  evidencing the indebtedness of the Borrower to such Lender
resulting  from each Loan made by such Lender from time to time,  including  the
amounts of principal and interest  payable  thereon and paid to such Lender from
time to time under this  Agreement.  The  Administrative  Agent  shall  maintain
appropriate  records  in which  shall be  recorded  (i) the  Commitment  of each
Lender,  (ii) the amount of each Loan made  hereunder by each  Lender,  the Type
thereof  and the  Interest  Period  applicable  thereto,  (iii) the date of each
continuation  thereof  pursuant to Section 2.5, (iv) the date of each conversion
of all or a portion  thereof to another  Type  pursuant to Section  2.5, (v) the
date and amount of any  principal  or interest  due and payable or to become due
and payable from the Borrower to each Lender  hereunder in respect of such Loans
and (vi) both the date and  amount  of any sum  received  by the  Administrative
Agent  hereunder from the Borrower in respect of the Loans and each Lender's Pro
Rata Share  thereof.  The  entries  made in such  records  shall be prima  facie
evidence of the existence and amounts of the obligations of the Borrower therein
recorded;   provided,   that  the   failure  or  delay  of  any  Lender  or  the
Administrative  Agent in  maintaining  or making entries into any such record or
any error therein shall not in any manner affect the  obligation of the Borrower
to repay the Loans (both  principal and unpaid accrued  interest) of such Lender
in accordance with the terms of this Agreement.  At the request of any Lender at
any time, the Borrower  agrees that it will execute and deliver to such Lender a
Note, payable to the order of such Lender. Prepayments.  The Borrower shall have
the right at any time and from time to time to prepay any Borrowing, in whole or
in part, without premium or penalty,  by giving  irrevocable  written notice (or
telephonic notice promptly confirmed in writing) to the Administrative  Agent no
later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m.
not less than three Business Days prior to any such prepayment,  and (ii) in the
case of any  prepayment of any Base Rate  Borrowing,  not less than one Business
Day prior to the date of such prepayment.  Each such notice shall be irrevocable
and shall specify the proposed date of such prepayment and the principal  amount
of each  Borrowing  or portion  thereof to be prepaid.  Upon receipt of any such
notice, the  Administrative  Agent shall promptly notify each affected Lender of
the contents thereof and of such Lender's Pro Rata Share of any such prepayment.
If such notice is given,  the aggregate amount specified in such notice shall be
due and payable on the date  designated  in such notice,  together  with accrued
interest  to such date on the  amount so  prepaid  in  accordance  with  Section
2.10(c);  provided,  that if a  Eurodollar  Borrowing is prepaid on a date other
than the last day of an Interest Period applicable  thereto,  the Borrower shall
also pay all amounts required pursuant to Section 2.16. Each partial  prepayment
of any Loan  shall be in an amount  that  would be  permitted  in the case of an
advance of a Borrowing of the same Type pursuant to Section 2.2. Each prepayment
of a Borrowing shall be applied ratably to the Loans  comprising such Borrowing.
The Borrower shall promptly notify the Administrative  Agent upon the receipt of
any Net Cash Proceeds  and, at any time that Net Cash Proceeds  received and not
previously applied to any prepayment pursuant to this Section 2.9(b) shall equal
or exceed  $10,000,000,  the Borrower  shall prepay  Borrowings,  together  with
payment of all amounts required pursuant to Section 2.16, in an aggregate amount
equal  to  100%  (without  duplication)  the  Net  Cash  Proceeds  of any  Asset
Disposition, Recovery Event or Additional Debt.

         Interest on Loans.

         The Borrower shall pay interest on each Base Rate Loan at the Base Rate
in effect from time to time and on each  Eurodollar  Loan at the  Adjusted  LIBO
Rate for the applicable  Interest Period in effect for such Loan,  plus, in each
case, the Applicable  Margin in effect from time to time. If an Event of Default
has  occurred and is  continuing,  at the option of the  Required  Lenders,  the
Borrower shall pay interest ("Default  Interest") with respect to all Eurodollar
Loans at the rate otherwise applicable for the then-current Interest Period plus
an  additional  2% per annum  until the last day of such  Interest  Period,  and
thereafter,  and with  respect to all Base Rate Loans and all other  Obligations
hereunder  (other than Loans),  at an all-in rate in effect for Base Rate Loans,
plus an additional 2% per annum.  Interest on the principal  amount of all Loans
shall accrue from and  including  the date such Loans are made to but  excluding
the date of any repayment  thereof.  Interest on all outstanding Base Rate Loans
shall be  payable  quarterly  in arrears  on the last day of each  March,  June,
September and December and on the Termination Date.  Interest on all outstanding
Eurodollar  Loans  shall be  payable  on the last  day of each  Interest  Period
applicable thereto,  and, in the case of any Eurodollar Loans having an Interest
Period in excess of three  months,  on each day that occurs every three  months,
after the initial date of such Interest  Period,  and on the  Termination  Date.
Interest on any Loan that is  converted  into a Loan of another  Type or that is
repaid or prepaid shall be payable on the date of such conversion or on the date
of any such repayment or prepayment  (on the amount repaid or prepaid)  thereof.
All Default Interest shall be payable on demand. The Administrative  Agent shall
determine  each  interest  rate  applicable  to the  Loans  hereunder  and shall
promptly  notify the  Borrower  and the  Lenders of such rate in writing  (or by
telephone,  promptly  confirmed in  writing).  Any such  determination  shall be
conclusive  and  binding  for  all  purposes,   absent  manifest  error.   Fees.
AgencyFees.  The  Borrower  shall  pay to the  Administrative  Agent for its own
account  fees in the amounts and at the times agreed upon by the Borrower in the
Fee  Letter  described  in  clause  (i)  of the  definition  of  "Fee  Letters".
Commitment Fee. The Borrower agrees to pay to the  Administrative  Agent for the
account of each Lender a  commitment  fee which shall  accrue at the  Applicable
Percentage  (determined daily in accordance with Schedule I) on the daily amount
of the  unused  Commitment  of such  Lender  from  the  date  hereof  until  the
Termination  Date.  Accrued  commitment  fees shall be payable in arrears on the
last day of each March,  June,  September and December,  commencing on the first
such  date  to  occur  after  the  date  hereof,  and on the  Termination  Date.
Computation of Interest and Fees.  Interest based on the Administrative  Agent's
prime rate  pursuant  to clause (i) of the  definition  of "Base  Rate" shall be
computed  on the  basis of a year of 365 days (or 366 days in a leap  year)  and
paid  for the  actual  number  of days  elapsed  (including  the  first  day but
excluding  the last day).  All other  interest and all fees shall be computed on
the basis of a year of 360 days and paid for the actual  number of days  elapsed
(including the first day but excluding the last day).

         Inability to Determine Interest Rates.

         If prior to the  commencement of any Interest Period for any Eurodollar
Borrowing,   (i)  the   Administrative   Agent  shall  have  determined   (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances  affecting the relevant interbank market, adequate means do not
exist  for   ascertaining   LIBOR  for  such  Interest   Period,   or  (ii)  the
Administrative  Agent shall have received notice from the Required  Lenders that
the Adjusted LIBO Rate does not  adequately  and fairly reflect the cost to such
Lenders (or Lender, as the case may be) of making,  funding or maintaining their
Eurodollar Loans for such Interest Period, the  Administrative  Agent shall give
written  notice (or  telephonic  notice,  promptly  confirmed in writing) to the
Borrower  and to the  Lenders  as  soon as  practicable  thereafter.  Until  the
Administrative  Agent  shall  notify  the  Borrower  and the  Lenders  that  the
circumstances giving rise to such notice no longer exist, (i) the obligations of
the Lenders to make Eurodollar Loans or to continue or convert outstanding Loans
as or into Eurodollar  Loans shall be suspended and (ii) all such affected Loans
shall be  converted  into  Base Rate  Loans on the last day of the then  current
Interest  Period  applicable  thereto unless the Borrower  prepays such Loans in
accordance with this Agreement.

         Illegality.

         If any  Change in Law shall  make it  unlawful  or  impossible  for any
Lender to make,  maintain or fund any  Eurodollar  Loan and such Lender shall so
notify the Administrative  Agent, the  Administrative  Agent shall promptly give
notice  thereof to the  Borrower  and the other  Lenders,  whereupon  until such
Lender notifies the Administrative Agent and the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligation of such Lender to
make Eurodollar  Loans, or to continue or convert  outstanding  Loans as or into
Eurodollar Loans, shall be suspended.  In the case of the making of a Eurodollar
Borrowing,  such  Lender's Loan shall be made as a Base Rate Loan as part of the
same  Borrowing for the same Interest  Period,  and, if the affected  Eurodollar
Loan is then  outstanding,  such  Loan  shall be  converted  to a Base Rate Loan
either (i) on the last day of the then current  Interest  Period  applicable  to
such Eurodollar Loan if such Lender may lawfully  continue to maintain such Loan
to such date or (ii)  immediately if such Lender shall determine that it may not
lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding
the  foregoing,  the affected  Lender shall,  prior to giving such notice to the
Administrative  Agent,  designate a different  Applicable Lending Office if such
designation  would avoid the need for giving such notice and if such designation
would not otherwise be disadvantageous to such Lender in the good faith exercise
of its discretion.

         Increased Costs.

         If any Change in Law shall (i) impose,  modify or deem  applicable  any
reserve,  special deposit or similar  requirement that is not otherwise included
in the  determination  of the Adjusted LIBO Rate  hereunder  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 (ii)
impose on any Lender or the  eurodollar  interbank  market  any other  condition
affecting this Agreement or any  Eurodollar  Loans made by such Lender,  and the
result of the  foregoing  is to  increase  the cost to such  Lender  of  making,
converting  into,  continuing or maintaining a Eurodollar  Loan or to reduce the
amount  received or receivable by such Lender  hereunder  (whether of principal,
interest or any other  amount),  then the  Borrower  shall  promptly  pay,  upon
written  notice from and demand by such Lender on the  Borrower  (with a copy of
such notice and demand to the Administrative Agent), to the Administrative Agent
for the account of such Lender, within five Business Days after the date of such
notice and demand,  additional  amount or amounts  sufficient to compensate such
Lender for such additional costs incurred or reduction  suffered.  If any Lender
or the  Issuing  Bank  shall have  determined  that on or after the date of this
Agreement any Change in Law regarding capital requirements has or would have the
effect  of  reducing  the rate of  return on such  Lender's  capital  (or on the
capital of such Lender's parent corporation) as a consequence of its obligations
hereunder  to a level  below  that  which such  Lender or such  Lender's  parent
corporation  could  have  achieved  but for  such  Change  in Law  (taking  into
consideration  such Lender's  policies or the policies of such  Lender's  parent
corporation  with respect to capital  adequacy) then, from time to time,  within
five  Business  Days after  receipt by the  Borrower  of written  demand by such
Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay
to such Lender such  additional  amounts as will  compensate such Lender or such
Lender's parent corporation for any such reduction suffered.  A certificate of a
Lender setting forth the amount or amounts  necessary to compensate  such Lender
or such Lender's  parent  corporation  as specified in subsection  (a) or (b) of
this  Section  shall  be  delivered  to  the  Borrower   (with  a  copy  to  the
Administrative  Agent)  and shall be  conclusive,  absent  manifest  error.  The
Borrower  shall pay any such Lender such amount or amounts  within 10 days after
receipt  thereof.  Failure  or  delay  on the  part  of  any  Lender  to  demand
compensation  pursuant to this  Section  shall not  constitute  a waiver of such
Lender's right to demand such compensation.  Funding Indemnity.  In the event of
(i) the payment of any principal of a Eurodollar Loan other than on the last day
of the Interest Period applicable  thereto (including as a result of an Event of
Default), (ii) the conversion or continuation of a Eurodollar Loan other than on
the last day of the Interest Period applicable  thereto, or (iii) the failure by
the Borrower to borrow,  prepay,  convert or continue any Eurodollar Loan on the
date  specified in any applicable  notice  (regardless of whether such notice is
withdrawn or revoked),  then, in any such event,  the Borrower shall  compensate
each Lender,  within five Business  Days after written  demand from such Lender,
for any loss,  cost or  expense  attributable  to such  event.  In the case of a
Eurodollar Loan, such loss, cost or expense shall be deemed to include an amount
determined  by such  Lender  to be the  excess,  if any,  of (A) the  amount  of
interest that would have accrued on the principal amount of such Eurodollar Loan
if such event had not  occurred at the  Adjusted  LIBO Rate  applicable  to such
Eurodollar  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  Eurodollar  Loan) over (B) the  amount of  interest  that would
accrue on the principal  amount of such  Eurodollar  Loan for the same period if
the Adjusted LIBO Rate were set on the date such Eurodollar Loan were prepaid or
converted  or the date on which  the  Borrower  failed  to  borrow,  convert  or
continue such Eurodollar Loan. A certificate as to any additional amount payable
under this Section 2.16  submitted to the Borrower by any Lender (with a copy to
the Administrative Agent) shall be conclusive, absent manifest error.

         Taxes.

         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, any Lender shall receive 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.  In  addition,  the  Borrower  shall pay any Other Taxes to the
relevant Governmental  Authority in accordance with applicable law. The Borrower
shall indemnify the Administrative  Agent and each Lender,  within five Business
Days after written demand therefor, for the full amount of any Indemnified Taxes
or Other Taxes paid by the Administrative  Agent or such Lender, 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 by the  Administrative  Agent on its own behalf or on
behalf  of a Lender,  shall be  conclusive  absent  manifest  error.  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. Each Foreign Lender represents and warrants to the
Administrative Agent and the Borrower that, as of the date such Lender becomes a
party  to  this  Agreement,  such  Lender  is  entitled  to  an  exemption  from
withholding  tax under the Code or any  treaty to which the  United  States is a
party with respect to payments  under this  Agreement,  and each Foreign  Lender
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 executed
documentation  prescribed  by  applicable  law or  reasonably  requested  by the
Borrower as will permit such  payments to be made without  withholding.  Without
limiting the  generality of the  foregoing,  each Foreign  Lender agrees that it
will deliver to the  Administrative  Agent and the Borrower (or in the case of a
Participant,  to the Lender from which the related participation shall have been
purchased),  as appropriate,  two duly completed  copies of (i) Internal Revenue
Service  Form  W-8 ECI,  or any  successor  form  thereto,  certifying  that the
payments  received from the Borrower  hereunder are  effectively  connected with
such Foreign  Lender's  conduct of a trade or business in the United States;  or
(ii)  Internal  Revenue  Service Form W-8 BEN, or any  successor  form  thereto,
certifying  that such Foreign Lender is entitled to benefits under an income tax
treaty to which the United States is a party that exempts from U.S.  withholding
tax payments of interest  hereunder;  or (iii) Internal Revenue Service Form W-8
BEN, or any successor form prescribed by the Internal Revenue Service,  together
with a  certificate  (A)  establishing  that the payment to the  foreign  lender
qualifies as "portfolio  interest"  exempt from U.S.  withholding tax under Code
section  871(h) or 881(c),  and (B) stating that (1) the Foreign Lender is not a
bank  for  purposes  of Code  section  881(c)(3)(A),  or the  obligation  of the
Borrower hereunder is not, with respect to such Foreign Lender, a loan agreement
entered into in the ordinary course of its trade or business, within the meaning
of that section; (2) the Foreign Lender is not a 10% shareholder of the Borrower
within the  meaning  of Code  section  871(h)(3)  or  881(c)(3)(B);  and (3) the
Foreign Lender is not a controlled  foreign  corporation  that is related to the
Borrower  within the meaning of Code  section  881(c)(3)(C);  or (iv) such other
Internal  Revenue  Service  forms as may be  applicable  to the Foreign  Lender,
including  Forms W-8 IMY or W-8 EXP.  Each such Foreign  Lender shall deliver to
the Borrower and the Administrative  Agent such forms on or before the date that
it becomes a party to this  Agreement  (or in the case of a  Participant,  on or
before  the date such  Participant  purchases  the  related  participation).  In
addition,  each such Foreign  Lender shall deliver such forms  promptly upon the
obsolescence  or  invalidity  of any form  previously  delivered by such Foreign
Lender.  Each such  Foreign  Lender shall  promptly  notify the Borrower and the
Administrative  Agent at any time that it  determines  that it is no longer in a
position to provide any previously delivered certificate to the Borrower (or any
other form of  certification  adopted by the Internal  Revenue  Service for such
purpose).  Payments  Generally;  Pro Rata  Treatment;  Sharing of Set-offs.  The
Borrower shall make each payment required to be made by it hereunder (whether of
principal,  interest or fees, or of amounts  payable under Section 2.15, 2.16 or
2.17,  or  otherwise)  prior to 12:00  noon 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 the Payment  Office,  except that payments  pursuant to
Sections  2.15,  2.16 and 2.17 and 11.3 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 made payable for the period of such  extension.  All
payments  hereunder shall be made in Dollars.  If at any time insufficient funds
are  received  by and  available  to the  Administrative  Agent to pay fully all
amounts of principal,  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  then due  hereunder,  ratably among the parties  entitled  thereto in
accordance with the amounts of principal then due to such parties. 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 that
would result in such Lender  receiving  payment of a greater  proportion  of the
aggregate  amount of its Loans 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 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; provided,  that (i)
if any such  participation  is  purchased  and all or any portion of the payment
giving rise thereto is recovered,  such participation shall be rescinded and the
purchase price restored to the extent of such recovery,  without  interest,  and
(ii) the  provisions of this  subsection  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 to any assignee
or  participant,  other than to the  Borrower  or any  Subsidiary  or  Affiliate
thereof  (as to which  the  provisions  of this  subsection  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.  Unlessthe  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  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 the amount or amounts due. In such event,
if the Borrower has not in fact made such  payment,  then each Lender  severally
agrees to repay to the  Administrative  Agent  forthwith on demand the amount so
distributed  to such  Lender  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 Rate
and a rate  determined by the  Administrative  Agent in accordance  with banking
industry rules on interbank  compensation.  If any Lender shall fail to make any
payment  required to be made by it pursuant to Section  2.4(a) or 11.3(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. Mitigation
of  Obligations;  Replacement of Lenders.  If any Lender  requests  compensation
under Section 2.15, 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  2.17,  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  sole  judgment  of  such  Lender,  such
designation  or assignment (i) would  eliminate or reduce amounts  payable under
Section 2.15 or Section  2.17,  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  costs  and  expenses  incurred  by  any  Lender  in  connection  with  such
designation or assignment.  If any Lender  requests  compensation  under Section
2.15, or if the Borrower is required to pay any additional  amount to any Lender
or any  Governmental  Authority of the account of any Lender pursuant to Section
2.17, 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  set forth in
Section 11.4(b) all its interests,  rights and obligations  under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender);  provided,  that (i) the Borrower shall have received the prior written
consent of the  Administrative  Agent,  which consent shall not be  unreasonably
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding  principal amount of all Loans owed to it, accrued interest thereon,
accrued fees and all other amounts  payable to it  hereunder,  from the assignee
(in the case of such  outstanding  principal and accrued  interest) and from the
Borrower (in the case of all other amounts) and (iii) in the case of a claim for
compensation  under  Section  2.15 or payments  required to be made  pursuant to
Section 2.17, 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.

CONDITIONS PRECEDENT TO LOANS

         Conditions To Effectiveness.

         The obligations of the Lenders to make Loans hereunder shall not become
effective until the date on which each of the following  conditions is satisfied
(or waived in accordance with Section 11.2).

         The Administrative Agent shall have received all fees and other amounts
due and payable under the Loan  Documents and the Fee Letters on or prior to the
Closing Date, including  reimbursement or payment of all out-of-pocket  expenses
(including  reasonable  fees,  charges  and  disbursements  of  counsel  to  the
Administrative  Agent) required to be reimbursed or paid by the Borrower,  under
any Loan Document or the Fee Letters.

         The  Administrative  Agent (or its  counsel)  shall have  received  the
following,  each in the form specified or, if no form is specified,  in form and
substance  satisfactory  to the  Administrative  Agent:  a  counterpart  of this
Agreement  signed by or on behalf of each  party  thereto  or  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;  ifrequested  by any  Lender,  a Note
payable to such Lender,  duly  executed by the Borrower;  a  counterpart  of the
Subsidiary Guarantee Agreement,  duly executed by each Guarantor;  a certificate
of the  Secretary  or  Assistant  Secretary  of each Loan Party,  attaching  and
certifying  copies of its  Constituent  Documents and of the  resolutions of its
board  of  directors  (or  other  comparable  authorizations),  authorizing  the
execution, delivery and performance of the Loan Documents to which it is a party
and certifying  the name,  title and true signature of each officer of such Loan
Party executing the Loan Documents to which it is a party;  certificates of good
standing or  existence,  as the case may be, from the  Secretary of State of the
jurisdiction  of  organization  of each Loan Party and each  other  jurisdiction
where each such Loan Party is (x)  required to be  qualified to do business as a
foreign  corporation and (y) owns,  leases or operates  common carrier  pipeline
assets; a favorable written opinion of Fulbright & Jaworski,  L.L.P., counsel to
the Loan Parties, addressed to the Administrative Agent and each of the Lenders,
substantially  in the form of Exhibit F; a  certificate,  dated the Closing Date
and signed by a Responsible Officer of the Borrower,  confirming compliance with
the conditions set forth in clauses (i) and (ii) of Section 3.2; acertified copy
of the Acquisition  Agreement,  together with evidence that upon the application
of the  proceeds of the  initial  Loans,  the  acquisition  contemplated  by the
Acquisition  Agreement will be consummated in accordance  with the terms thereof
and without any material deviations therefrom; a certificate of the Secretary or
Assistant  Secretary of the  Borrower,  attaching and  certifying  copies of all
consents,  approvals,  authorizations,  registrations  and  filings  and  orders
required or advisable to be made or obtained under any Requirement of Law, or by
any  contractual or legal  obligation of each Loan Party, in connection with the
execution,  delivery,  performance,  validity  and  enforceability  of the  Loan
Documents or any of the transactions  contemplated  thereby,  and such consents,
approvals,  authorizations,  registrations,  filings and orders shall be in full
force and effect and all  applicable  waiting  periods shall have  expired;  and
Copies  of (A)  the  unaudited  quarterly  financial  statements  of KPP and its
Subsidiaries on a consolidated  basis for the fiscal quarter ending on September
30, 2000, and (B) the audited  consolidated  financial statements of KPP and its
Subsidiaries  for the fiscal year ending December 31, 1999. Each Borrowing.  The
obligation  of each Lender to make a Loan on the  occasion of any  Borrowing  is
subject to the satisfaction of the following conditions:

                  at the time of and  immediately  after  giving  effect to such
         Borrowing,  no Default or Event of Default  shall have  occurred and be
         continuing;  and the  representations and warranties of each Loan Party
         set forth in the Loan  Documents  to which  each  such Loan  Party is a
         party shall be true and correct in all  material  respects on and as of
         the date of such Borrowing, in each case before and after giving effect
         thereto;  the  Administrative  Agent  shall  have  received  Notice  of
         Borrowing,  duly  completed,  executed and delivered in accordance with
         the terms hereof; and the Administrative Agent shall have received such
         other  documents,  certificates,  information  or legal opinions as the
         Administrative  Agent or the Required  Lenders may reasonably  request,
         all in form and substance reasonably satisfactory to the Administrative
         Agent or the  Required  Lenders.  Each  Borrowing  shall be  deemed  to
         constitute  a  representation  and warranty by the Borrower on the date
         thereof as to the  matters  specified  in clauses  (i) and (ii) of this
         Section 3.2. Post Closing.  Within 45 days  following the Closing Date,
         the  Administrative  Agent shall have received  evidence that all Liens
         securing the obligations of the Borrower and its Subsidiaries under the
         UK Facility have been released. Within seven days following the Closing
         Date,  the  Administrative  Agent  shall have  received  copies of duly
         executed  payoff letters  evidencing  that upon the  application of the
         proceeds of the initial Loans,  the Existing  Indebtedness  was paid in
         full.

         Delivery of Documents.

         All Loan  Documents,  certificates,  legal opinions and other documents
referred to in this Article III shall, unless otherwise specified,  be delivered
to the  Administrative  Agent for the account of each Lender and, except for the
Notes, in sufficient counterparts or copies for each Lender.


REPRESENTATIONS AND WARRANTIES

         The Borrower  represents and warrants to the  Administrative  Agent and
each Lender as follows:

         Existence; Power.

         Each Loan  Party and each of its  Subsidiaries  (i) is duly  organized,
validly  existing and in good standing under the laws of the jurisdiction of its
organization,  (ii)  has all  requisite  power  and  authority  to  carry on its
business as now conducted,  and (iii) is duly qualified to do business and is in
good standing in each jurisdiction where such qualification is required,  except
where a failure to be so qualified could not reasonably be expected to result in
a Material Adverse Effect.

         Organizational Power; Authorization; Enforceability.

         The execution,  delivery and performance by each Loan Party of the Loan
Documents  to which it is a party are within  such Loan  Party's  organizational
powers and have been duly  authorized  by all necessary  organizational,  and if
required, stockholder, member or partner (as applicable), action. This Agreement
has been duly executed and delivered by KPP and the Borrower,  and  constitutes,
and each other Loan  Document to which any Loan Party is a party,  when executed
and delivered by such Loan Party, will constitute,  the legal, valid and binding
obligation  of KPP,  the  Borrower  or such  Loan  Party  (as the  case may be),
enforceable against KPP, the Borrower or such Loan Party (as the case may be) in
accordance with its respective terms.

         Governmental Approvals; No Conflicts.

         The execution, delivery and performance by each Loan Party of each Loan
Document to which it is a party (i) do not  require any consent or approval  of,
registration  or filing  with,  or any action by,  any  Governmental  Authority,
except  those as have been  obtained  or made and are in full force and  effect,
(ii) will not  violate  any  applicable  law or  regulation  or the  Constituent
Documents of such Loan Party or any of its Subsidiaries or any judgment or order
of any  Governmental  Authority,  (iii) will not  violate or result in a default
under any indenture,  material agreement or other material instrument binding on
such Loan Party or any of its  Subsidiaries or any of its assets or give rise to
a right  thereunder  to require any payment to be made by such Loan Party or any
of its  Subsidiaries  and (iv) will not result in the creation or  imposition of
any Lien on any  asset of such  Loan  Party or any of its  Subsidiaries,  except
Liens (if any) created under the Loan Documents.

         Financial Statements.

         The Borrower has furnished to each Lender (i) the audited  consolidated
balance  sheet  of KPP and its  Subsidiaries  as of  December  31,  1999 and the
related consolidated  statements of income,  shareholders' equity and cash flows
for the  fiscal  year then  ended  prepared  by KPMG LLP and (ii) the  unaudited
consolidated  balance  sheet  of KPP and its  Subsidiaries  as at the end of the
September 30, 2000, and the related unaudited consolidated  statements of income
and cash flows for the fiscal  quarter  and  year-to-date  period  then  ending,
certified by a Responsible  Officer of KPP.  Such  financial  statements  fairly
present the consolidated  financial  condition of KPP and its Subsidiaries as of
such  dates and the  consolidated  results  of  operations  for such  periods in
conformity with GAAP consistently applied, subject to year end audit adjustments
and the absence of footnotes in the case of the statements referred to in clause
(ii).  Since  December 31, 1999,  there have been no changes with respect to KPP
and its  Subsidiaries  or the  Borrower  which have had or could  reasonably  be
expected to have, singly or in the aggregate, a Material Adverse Effect.

         Litigation and Environmental Matters.

         No litigation, investigation or proceeding of or before any arbitrators
or  Governmental  Authorities  is pending  against or, to the  knowledge  of the
Borrower,  threatened  against  or  affecting  any  Loan  Party  or  any  of its
Subsidiaries (i) that could reasonably be expected to have, either  individually
or in the aggregate,  a Material Adverse Effect or (ii) that in any manner draws
into question the validity or enforceability of this Agreement or any other Loan
Document. Exceptfor the matters set forth on Schedule 4.5, no Loan Party 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, where any such event or circumstance described in clauses (i) through
(iv) above(A) could  reasonably be expected to have,  either  individually or in
the  aggregate,  a  Material  Adverse  Effect or (B) in any  manner  draws  into
question  the  validity or  enforceability  of this  Agreement or any other Loan
Document.  Compliance with Laws and Agreements.  Each Loan Party and each of its
Subsidiaries is in compliance with (i) all applicable laws,  rules,  regulations
and orders of any Governmental Authority, and (ii) all indentures, agreements or
other   instruments   binding   upon  it  or  its   properties,   except   where
non-compliance,  either  singly or in the  aggregate,  could not  reasonably  be
expected to result in a Material Adverse Effect.

         Investment Company Act, Etc.

         Neither KPP nor any of its Subsidiaries is (i) an "investment company",
as defined in, or subject to regulation  under,  the  Investment  Company Act of
1940,  as  amended,  (ii) a  "holding  company"  as  defined  in, or  subject to
regulation  under, the Public Utility Holding Company Act of 1935, as amended or
(iii) otherwise  subject to any other regulatory  scheme limiting its ability to
incur debt.

         Taxes.

         KPP and its  Subsidiaries  and each other Person the taxes of which KPP
or any  Subsidiary  of KPP could become liable have timely filed or caused to be
filed all Federal income tax returns and all other material tax returns that are
required  to be filed  by them,  and  have  paid all  taxes  shown to be due and
payable on such  returns or on any  assessments  made against it or its property
and all other taxes,  fees or other charges imposed on it or any of its property
by any  Governmental  Authority,  except (i) to the extent the  failure to do so
would not have a Material  Adverse  Effect or (ii) where the same are  currently
being  contested in good faith by appropriate  proceedings  and for which KPP or
such  Subsidiary,  as the  case may be,  has set  aside  on its  books  adequate
reserves.  The  charges,  accruals  and  reserves  on the  books  of KPP and its
Subsidiaries in respect of such taxes are adequate,  and no tax liabilities that
could be materially in excess of the amount so provided are anticipated.

         Margin Regulations.

         None of the proceeds of any of the Loans will be used for  "purchasing"
or "carrying" any "margin  stock" with the  respective  meanings of each of such
term under Regulation U or for any purpose that violates the Margin Regulations.

         ERISA.

         No ERISA Event has  occurred or is  reasonably  expected to occur that,
when taken  together  with all other  such ERISA  Events,  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 Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts,  exceed by more
than  $5,000,000  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  Standards
No.  87)  did  not,  as of the  date of the  most  recent  financial  statements
reflecting such amounts, exceed by more than $5,000,000 the fair market value of
the assets of all such underfunded Plans.

         Ownership of Property.

         Each of the Loan Party and its Subsidiaries has good title to, or valid
leasehold  interests in, all of its real and personal  property  material to the
operation of its business.  Each of the Loan Party and its Subsidiaries owns, or
is licensed,  or  otherwise  has the right,  to use,  all  patents,  trademarks,
service marks,  tradenames,  copyrights and other intellectual property material
to its  business,  and the use  thereof by such Loan Party and its  Subsidiaries
does not  infringe  on the  rights  of any  other  Person,  except  for any such
infringements that, individually or in the aggregate,  would not have a Material
Adverse  Effect.  Disclosure.  The  Borrower  has  disclosed  to the Lenders all
agreements,  instruments and corporate or other  restrictions to which each Loan
Party or any of its Subsidiaries is subject,  and all other matters known to any
of them, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.  Neither the Information Memorandum nor any
of the reports  (including  without  limitation all reports that the Borrower is
required  to file  with  the  Securities  and  Exchange  Commission),  financial
statements,  certificates or other information  furnished by or on behalf of any
Loan  Party to the  Administrative  Agent or any Lender in  connection  with the
negotiation  or  syndication  of this  Agreement  or any other Loan  Document or
delivered  hereunder or  thereunder  (as modified or  supplemented  by any other
information so furnished) contains any material misstatement of fact or omits to
state any material fact  necessary to make the  statements  therein,  taken as a
whole, in 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.

         Labor Relations.

         There are no strikes,  lockouts  or other  material  labor  disputes or
grievances  against  any  Loan  Party  or any of its  Subsidiaries,  or,  to the
Borrower's  knowledge,  threatened against or affecting any Loan Party or any of
its  Subsidiaries,   and  no  significant  unfair  labor  practice,  charges  or
grievances are pending  against the Borrower or any of its  Subsidiaries,  or to
the Borrower's knowledge, threatened against any of them before any Governmental
Authority.  All  payments  due from any  Loan  Party or any of its  Subsidiaries
pursuant to the provisions of any collective bargaining agreement have been paid
or accrued as a liability on the books of such Loan Party or such Subsidiary (as
applicable),  except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect.

         Acquisition Agreement.

         The Acquisition Agreement is the legal, valid and binding obligation of
each party thereto,  enforceable  against each such party in accordance with its
terms.

         Subsidiaries, Significant Affiliates and Guarantors.

         Schedule 4.15 sets forth the name of, the ownership interest of KPP in,
the  jurisdiction of  incorporation  of, and the type of, each Subsidiary of KPP
and each  Significant  Affiliate and identifies  each Subsidiary of KPP and each
Significant Affiliate that is a Guarantor, in each case, as of the date hereof.

         Liens.

         Schedule  7.2 sets forth all Liens  existing  on the date hereof on any
property or asset of KPP or any Subsidiary of KPP.


AFFIRMATIVE COVENANTS

         KPP and the Borrower (as applicable) covenant and agree that so long as
any Lender has a Commitment  hereunder  or the  principal of and interest on any
Loan or any fee or any other amount payable hereunder remains unpaid:

         Financial Statements and Other Information.

         The Borrower will deliver to the Administrative Agent and each Lender:

                  as soon as available and in any event within 95 days after the
         end of each fiscal year of KPP, a copy of the annual audited report for
         such  fiscal  year  for  KPP  and  its   Subsidiaries,   containing   a
         consolidated balance sheet of KPP and its Subsidiaries as of the end of
         such  fiscal year and the related  consolidated  statements  of income,
         stockholders'  equity  and cash  flows  (together  with  all  footnotes
         thereto)  of KPP and its  Subsidiaries  for such fiscal  year,  setting
         forth in each case in  comparative  form the figures  for the  previous
         fiscal year,  all in  reasonable  detail and reported on by KPMG LLP or
         other independent public accountants of nationally  recognized standing
         (without  a  "going  concern"  or  like  qualification,   exception  or
         explanation and without any  qualification  or exception as to scope of
         such audit) to the effect that such financial statements present fairly
         in all material  respects the  financial  condition  and the results of
         operations  of KPP and  its  Subsidiaries  for  such  fiscal  year on a
         consolidated  basis in accordance with GAAP and that the examination by
         such  accountants  in  connection  with  such  consolidated   financial
         statements has been made in accordance with generally accepted auditing
         standards;  as soon as available  and in any event within 50 days after
         the end of each of the first three fiscal  quarters of each fiscal year
         of  KPP,  an  unaudited  consolidated  balance  sheet  of KPP  and  its
         Subsidiaries  as of the  end of such  fiscal  quarter  and the  related
         unaudited  consolidated  statements of income and cash flows of KPP and
         its  Subsidiaries  for such fiscal quarter and the then elapsed portion
         of such fiscal year, setting forth in each case in comparative form the
         figures for the corresponding  quarter and the corresponding portion of
         KPP's previous  fiscal year, all certified by a Responsible  Officer of
         KPP  as  presenting  fairly  in all  material  respects  the  financial
         condition and results of operations  of KPP and its  Subsidiaries  on a
         consolidated  basis in accordance with GAAP, subject to normal year-end
         audit  adjustments and the absence of footnotes;  concurrently with the
         delivery of the financial statements referred to in subsections (a) and
         (b) above, a certificate of a Responsible Officer of the Borrower,  (i)
         certifying as to whether a Default or Event of Default has occurred and
         is continuing on the date of such  certificate,  and if a Default or an
         Event of Default then has occurred and is  continuing,  specifying  the
         details  thereof and the action that the Borrower has taken or proposes
         to take with respect thereto,  (ii) setting forth in reasonable  detail
         calculations demonstrating compliance with Article VI and (iii) stating
         whether any change in GAAP or the  application  thereof  affecting  the
         calculations described in clause (ii) above has occurred since the date
         of the audited  financial  statements of KPP referred to in Section 4.4
         and, if any change has occurred,  specifying  the effect of such change
         on the financial statements accompanying such certificate; concurrently
         with the delivery of the financial statements referred to in subsection
         (a) above, a certificate  of the accounting  firm that reported on such
         financial  statements  stating whether it obtained any knowledge during
         the  course of its  examination  of such  financial  statements  of any
         Default or Event of Default  (which  certificate  may be limited to the
         extent required by accounting rules or guidelines);  promptly after the
         same  become  publicly  available,  copies  of all  periodic  and other
         reports, proxy statements and other materials filed with the Securities
         and Exchange  Commission,  or any Governmental  Authority succeeding to
         any  or  all  functions  of  said  Commission,  or  with  any  national
         securities  exchange,  or  distributed  by KPP or the  Borrower  to its
         security  holders   generally;   and  promptly  following  any  request
         therefor,  such other information  regarding the results of operations,
         business  affairs and  financial  condition  of KPP, the Borrower or of
         their respective Subsidiaries as the Administrative Agent or any Lender
         may reasonably  request.  Notices of Material Events. The Borrower will
         furnish to the  Administrative  Agent and each  Lender  prompt  written
         notice  of the  following,  in  each  case,  accompanied  by a  written
         statement of a  Responsible  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:

                  the occurrence of any Default or Event of Default;  the filing
         or  commencement  of any action,  suit or  proceeding  by or before any
         arbitrator or  Governmental  Authority  against or, to the knowledge of
         the Borrower,  affecting  any Loan Party or any  Subsidiary of any Loan
         Party that, if adversely  determined,  could  reasonably be expected to
         result in a Material Adverse Effect; the occurrence of any event or any
         other development by which any Loan Party or any Subsidiary of any Loan
         Party (i)  fails 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) becomes subject to any Environmental
         Liability,  (iii)  receives  notice of any claim  with  respect  to any
         Environmental  Liability,  or (iv)  becomes  aware of any basis for any
         Environmental  Liability  and in each of the preceding  clauses,  which
         individually  or in the  aggregate,  could  reasonably  be  expected to
         result in a Material Adverse Effect;  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 KPP and its
         Subsidiaries in an aggregate amount exceeding $5,000,000; and any other
         development  that results in, or could reasonably be expected to result
         in, a Material  Adverse  Effect.  Existence;  Conduct of Business.  KPP
         will,  and will  cause each of its  Subsidiaries  to, do or cause to be
         done all things necessary to preserve, renew and maintain in full force
         and effect its legal  existence and its  respective  rights,  licenses,
         permits, privileges,  franchises,  patents, copyrights,  trademarks and
         trade names  material to the conduct of its business and will  continue
         to engage in the same  business as  presently  conducted  or such other
         businesses that are reasonably related thereto;  provided, that nothing
         in this Section shall prohibit any merger,  consolidation,  liquidation
         or dissolution permitted under Section 7.3.

         Compliance with Laws, Etc.

         KPP will, and will cause each of its  Subsidiaries  to, comply with all
laws,  rules,   regulations  and  requirements  of  any  Governmental  Authority
applicable  to its  properties,  except  where  the  failure  to do  so,  either
individually or in the aggregate,  could not reasonably be expected to result in
a Material Adverse Effect.

         Payment of Obligations.

         KPP will, and will cause each of its Subsidiaries to, pay and discharge
at or before maturity, all of its obligations and liabilities (including without
limitation all tax liabilities and claims that could result in a statutory Lien)
before the same shall  become  delinquent  or in default,  except  where (i) the
validity  or amount  thereof is being  contested  in good  faith by  appropriate
proceedings,  (ii) KPP or such  Subsidiary  has set aside on its books  adequate
reserves with respect  thereto in accordance  with GAAP and (iii) the failure to
make payment  pending such contest could not reasonably be expected to result in
a Material Adverse Effect.

         Books and Records.

         KPP will, and will cause each of its Subsidiaries to, keep proper books
of record and account in which full,  true and correct  entries shall be made of
all dealings and  transactions in relation to its business and activities to the
extent necessary to prepare the consolidated financial statements of Borrower in
conformity with GAAP.

         Visitation, Inspection, Etc.

         KPP will,  and will  cause  each of its  Subsidiaries  to,  permit  any
representative of the  Administrative  Agent or any Lender, to visit and inspect
its  properties,  to examine  its books and  records and to make copies and take
extracts therefrom,  and to discuss its affairs,  finances and accounts with any
of its officers and with its independent  certified public  accountants,  all at
such reasonable times and as often as the Administrative Agent or any Lender may
reasonably request after reasonable prior notice to KPP; provided,  however,  if
an Event of Default has  occurred  and is  continuing,  no prior notice shall be
required.

         Maintenance of Properties; Insurance.

         KPP will,  and will  cause  each of its  Subsidiaries  to, (i) keep and
maintain  all  property  material to the conduct of its business in good working
order and  condition,  except for  ordinary  wear and tear and except  where the
failure to do so, either individually or in the aggregate,  could not reasonably
be  expected  to result in a  Material  Adverse  Effect and (ii)  maintain  with
financially sound and reputable insurance  companies,  insurance with respect to
its   properties   and  business,   and  the  properties  and  business  of  its
Subsidiaries, against loss or damage of the kinds customarily insured against by
companies  in the same or similar  businesses  operating  in the same or similar
locations.

         Use of Proceeds.

         The  Borrower  will  use the  proceeds  of all  Loans  to  finance  the
acquisition contemplated by the Acquisition Agreement, to refinance the Existing
Indebtedness  (including  the payment of associated  make-wholes)  and for other
general corporate purposes of the Borrower and its Subsidiaries.  No part of the
proceeds  of any Loan will be used,  whether  directly  or  indirectly,  for any
purpose that would  violate any rule or  regulation of the Board of Governors of
the Federal Reserve System, including Regulation T, U or X.

         Additional Subsidiaries.

         If any  additional  Significant  Subsidiary  (other  than any  Excluded
Subsidiary  and any Foreign  Subsidiary)  is  acquired or formed  after the date
hereof, KPP will, within ten business days after such Significant  Subsidiary is
acquired or formed,  notify the Administrative Agent and the Lenders thereof and
will  cause such  Significant  Subsidiary  to become a  Guarantor  by  executing
agreements  in the form of Annex I to Exhibit C and will cause such  Significant
Subsidiary to deliver  simultaneously  therewith such  certificates,  documents,
opinions of counsel  and other  information  regarding  such  Guarantor  and the
enforceability  against such Guarantor of the Subsidiary  Guarantee Agreement as
the Administrative Agent may reasonably request.


FINANCIAL COVENANTS

         KPP and the Borrower (as applicable) covenant and agree that so long as
any Lender has a Commitment  hereunder or the principal of or interest on or any
Loan remains  unpaid or any fee or any other amount  payable  hereunder  remains
unpaid:

         Funded Debt to EBITDA.

         KPP and its  Subsidiaries  will maintain,  as of the end of each fiscal
quarter of KPP, a ratio of Consolidated  Funded Debt to  Consolidated  EBITDA of
not more than 3.75 to 1.00, measured,  in each case, for the four-fiscal quarter
period ending on each date of such determination.

         Consolidated EBITDA to Consolidated Interest Expense.

         KPP and its  Subsidiaries  will maintain,  as of the end of each fiscal
quarter of KPP, a ratio of Consolidated EBITDA to Consolidated  Interest Expense
of not less than  3.00 to 1.00,  measured,  in each  case,  for the  four-fiscal
quarter period ending on each date of such determination..

         Consolidated Net Worth.

         KPP will not permit its  Consolidated  Net Worth at any time to be less
than an amount  equal to 80% of the  Consolidated  Net Worth as at December  31,
1999, plus 80% of the Net Cash Proceeds of any Equity Event by KPP or any of its
Subsidiaries.


NEGATIVE COVENANTS

         KPP and the Borrower (as applicable) covenant and agree that so long as
any Lender has a  Commitment  hereunder  or the  principal of or interest on any
Loan remains  unpaid or any fee or any other amount  payable  hereunder  remains
unpaid:

         Indebtedness.

         KPP will not, and will not permit any of its  Subsidiaries  to, create,
incur, assume or suffer to exist any Indebtedness, except:

                  Indebtedness created pursuant to the Loan Documents and, until
         the  application  of the  proceeds of the initial  Loans,  the Existing
         Indebtedness;  and other  Indebtedness the incurrence of which does not
         otherwise result in the occurrence of a Default or an Event of Default.

         Negative Pledge.

         KPP will not, and will not permit any of its  Subsidiaries  to, create,
incur,  assume or suffer to exist any Lien on any of its assets or property  now
owned or hereafter acquired, except:

                  Permitted Encumbrances;  any Liens on any property or asset of
         KPP or any  Subsidiary  of KPP existing on the date hereof set forth on
         Schedule  7.2;  provided,  that such Lien  shall not apply to any other
         property or asset of KPP or any such  Subsidiary;  purchase money Liens
         upon or in any fixed or capital  assets to secure the purchase price or
         the cost of construction or improvement of such fixed or capital assets
         or to secure Indebtedness  incurred solely for the purpose of financing
         the  acquisition,  construction or improvement of such fixed or capital
         assets (including Liens securing Capital Lease Obligations);  provided,
         that (i) such Lien  attaches  to such asset  concurrently  or within 90
         days  after  the   acquisition,   improvement   or  completion  of  the
         construction  thereof;  (ii)  such  Lien  does not  extend to any other
         asset; and (iii) the  Indebtedness  secured thereby does not exceed the
         cost of  acquiring,  constructing  or  improving  such fixed or capital
         assets;  any Lien (i)  existing  on any asset of any Person at the time
         such Person  becomes a Subsidiary of KPP, (ii) existing on any asset of
         any  Person at the time such  Person is merged  with or into KPP or any
         Subsidiary  of  KPP  or  (iii)  existing  on  any  asset  prior  to the
         acquisition thereof by KPP or any Subsidiary of KPP; provided, that any
         such Lien was not created in the  contemplation of any of the foregoing
         and any such Lien  secures only those  obligations  which it secures on
         the date that such  Person  becomes  a  Subsidiary  or the date of such
         merger  or the  date  of such  acquisition;  extensions,  renewals,  or
         replacements  of any Lien referred to in subsections (a) through (d) of
         this Section;  provided,  that the principal amount of the Indebtedness
         secured thereby is not increased and that any such  extension,  renewal
         or replacement is limited to the assets originally  encumbered thereby;
         and duringthe  period from the date hereof until the 45th day following
         the Closing  Date,  Liens in existence on the date hereof  securing the
         obligations of the Borrower and its Subsidiaries under the UK Facility.
         Fundamental  Changes.  KPP will not, and will not permit any Subsidiary
         to,  merge into or  consolidate  into any other  Person,  or permit any
         other  Person to merge  into or  consolidate  with it, or sell,  lease,
         transfer or otherwise  dispose of (in a single  transaction or a series
         of transactions)  all or substantially all of its assets (in each case,
         whether now owned or hereafter acquired) 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;  provided,  that if at
         the time  thereof and  immediately  after  giving  effect  thereto,  no
         Default or Event of Default shall have  occurred and be continuing  (i)
         any  Subsidiary  of the  Borrower  may  merge  with a  Person  if  such
         Subsidiary is the surviving Person,  (ii) any Subsidiary may merge into
         another  Subsidiary;  provided,  that if any party to such  merger is a
         Guarantor,  the  Guarantor  shall be the  surviving  Person,  (iii) any
         Subsidiary  of the  Borrower  may sell,  transfer,  lease or  otherwise
         dispose of all or substantially all of its assets to the Borrower or to
         a  Guarantor  and (iv) any  Subsidiary  (other  than a  Guarantor)  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. KPP will
         not,  and will not permit  any of its  Subsidiaries  to,  engage in any
         business  other than  businesses  of the type  conducted by KPP and its
         Subsidiaries  on the date  hereof  and  businesses  reasonably  related
         thereto. Investments, Loans, Etc. KPP 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 common stock,  evidence of  indebtedness or
         other  securities  (including  any option,  warrant,  or other right to
         acquire any of the  foregoing) of, make or permit to exist any loans or
         advances to,  Guarantee any  obligations of, or make or permit to exist
         any  investment or any other  interest in, any other Person or purchase
         or otherwise  acquire (in one transaction or a series of  transactions)
         any assets of any other Person (all of the foregoing being collectively
         called "Investments"), except:

                  Investments (other than Permitted Investments) existing on the
         date  hereof  (including   Investments  in   Subsidiaries);   Permitted
         Investments   and  the  Investment   contemplated  by  the  Acquisition
         Agreement;  Guarantees  constituting  Indebtedness permitted by Section
         7.1; provided,  that the aggregate  principal amount of Indebtedness of
         Subsidiaries  that are not  Guarantors  that are Guaranteed by any Loan
         Party shall be subject to the  limitation  set forth in subsection  (d)
         hereof; Investments made by KPP or any Subsidiary of KPP (in each case,
         whether directly or indirectly, through one or more subsidiaries of KPP
         or one or more  Excluded  Affiliates),  provided,  that  for  any  such
         Investment  of at least  $50,000,000  individually,  and for each  such
         Investment of at least $10,000,000 individually if the aggregate of all
         such  Investments  during  any fiscal  year of KPP shall have  exceeded
         $75,000,000,  KPP shall first have provided to the Administrative Agent
         financial   statements  of  KPP  and  its   consolidated   Subsidiaries
         demonstrating,  to the reasonable  satisfaction  of the  Administrative
         Agent, that after giving pro forma effect to such Investment, KPP shall
         continue to be in compliance with Article VI hereof;  loans or advances
         to employees,  officers or directors of KPP or any Subsidiary of KPP in
         the  ordinary  course of business  for travel,  relocation  and related
         expenses;  provided,  however,  that the  aggregate  amount of all such
         loans and advances does not exceed $1,000,000 at any time; and pursuant
         to Hedging Agreements  permitted by Section 7.10.  Restricted Payments.
         KPP will not, and will not permit its Subsidiaries to, make or agree to
         make, directly or indirectly, any Distribution,  or make any payment on
         account of, or set apart assets for a sinking or other  analogous  fund
         for,  the  purchase,  redemption,   retirement,   defeasance  or  other
         acquisition of, any Equity  Interests or  Indebtedness  subordinated to
         the  Obligations  of the  Borrower or any options,  warrants,  or other
         rights to purchase Equity Interests or such  Indebtedness,  whether now
         or hereafter outstanding (each, a "Restricted Payment"), except for (i)
         Distributions  payable  by KPP  solely in its  Equity  Interests,  (ii)
         Restricted  Payments made by any Subsidiary of KPP to KPP or to another
         Subsidiary  of KPP and  (iii)  cash  Distributions  paid  on,  and cash
         redemptions of, the Equity Interests of KPP or the Borrower;  provided,
         that no Default or Event of Default has occurred and is  continuing  at
         the time such Distribution is paid or redemption is made.

         Sale of Assets.

         KPP will not, and will not permit any of its  Subsidiaries  (other than
any Excluded Subsidiary) to, convey, sell, lease, assign,  transfer or otherwise
dispose  of, any of its  assets,  business  or  property,  whether  now owned or
hereafter acquired, other than in compliance with Section 2.9(b).

         Transactions with Affiliates.

         KPP 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 (i) in the ordinary course of
business at prices and on terms and conditions not less favorable to KPP or such
Subsidiary than could be obtained on an arm's-length  basis from unrelated third
parties,   (ii)   transactions   between  or  among  KPP  and  its  wholly-owned
Subsidiaries not involving any other Affiliates and (iii) any Restricted Payment
permitted by Section 7.5.

         Restrictive Agreements.

         KPP will not, and will not permit any Subsidiary of KPP (other than any
Excluded Subsidiary) to, directly or indirectly,  enter into, incur or permit to
exist any agreement that prohibits,  restricts or imposes any condition upon (i)
the ability of KPP or any such  Subsidiary  to create,  incur or permit any Lien
upon any of its assets or properties,  whether now owned or hereafter  acquired,
or (ii) the ability of any such Subsidiary to make Distributions with respect to
its Equity  Interests,  to make or repay  loans or  advances to KPP or any other
Subsidiary,  to guarantee Indebtedness of KPP or any other such Subsidiary or to
transfer  any of its  property or assets to KPP or any such  Subsidiary  of KPP;
provided,  that (A) the foregoing  shall not apply to restrictions or conditions
imposed  by law or by  this  Agreement  or any  other  Loan  Document,  (B)  the
foregoing shall not apply to customary  restrictions and conditions contained in
agreements  relating to the sale of any  Subsidiary  of KPP  pending  such sale,
provided such  restrictions  and conditions apply only to the Subsidiary that is
sold and such sale is  permitted  hereunder,  (C)  clause (i) shall not apply to
restrictions  or  conditions  imposed  by  any  agreement  relating  to  secured
Indebtedness  permitted by this  Agreement if such  restrictions  and conditions
apply only to the property or assets securing such  Indebtedness  and (D) clause
(i) shall not  apply to  customary  provisions  in  leases  and other  contracts
restricting the assignment thereof.

         Sale and Leaseback Transactions.

         KPP will not, and will not permit any of its  Subsidiaries  (other than
any Excluded Subsidiary) to, enter into any arrangement, directly or indirectly,
whereby it shall sell or transfer any property, real or personal, used or useful
in its business,  whether now owned or hereinafter acquired, and thereafter rent
or  lease  such  property  or  other   property  that  it  intends  to  use  for
substantially the same purpose or purposes as the property sold or transferred.

         Hedging Agreements.

         KPP will not,  and will not permit any of the  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 KPP or any such
Subsidiary  is exposed in the conduct of its business or the  management  of its
liabilities.  Solely for the avoidance of doubt, KPP acknowledges that a Hedging
Agreement  entered  into for  speculative  purposes or of a  speculative  nature
(which shall be deemed to include any Hedging  Agreement  under which KPP or any
Subsidiary of KPP is or may become obliged to make any payment (A) in connection
with the purchase by any third party of any common stock or any  Indebtedness or
(B) as a result  of  changes  in the  market  value of any  common  stock or any
Indebtedness) is not a Hedging  Agreement entered into in the ordinary course of
business to hedge or mitigate risks.

         Amendment to Material Documents.

         KPP will not,  and will not permit  any  Subsidiary  of KPP to,  amend,
modify or waive any of its rights in a manner materially  adverse to the Lenders
under (i) its Constituent Documents or (ii) the Acquisition Agreement.

         Accounting Changes.

         KPP will not,  and will not permit any  Subsidiary  of KPP to, make any
significant  change in accounting  treatment or reporting  practices,  except as
required by GAAP,  or change the fiscal  year of KPP or of any such  Subsidiary,
except to change the fiscal  year of any such  Subsidiary  to conform its fiscal
year to that of KPP.


KPP GUARANTEE

         The Borrower is a direct and  wholly-owned  subsidiary  of KPP, and KPP
will derive substantial  benefit from the making of the Loans by the Lenders. As
consideration  therefor  and in order to induce the Lenders to make  Loans,  KPP
agrees as follows:

         Guarantee.

         KPP unconditionally  guarantees,  jointly with the other Guarantors and
severally,  as a primary  obligor  and not  merely as a surety,  (i) the due and
punctual  payment of (A) the  principal  of and  premium,  if any,  and interest
(including interest accruing during the pendency of any bankruptcy,  insolvency,
receivership  or other  similar  proceeding,  regardless  of whether  allowed or
allowable  in  such  proceeding)  on the  Loans,  when  and as due,  whether  at
maturity,  by  acceleration,  upon  one or  more  dates  set for  prepayment  or
otherwise,  and (B) all  other  monetary  obligations,  including  fees,  costs,
expenses and indemnities,  whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency,  receivership or other similar proceeding, regardless of
whether allowed or allowable in such  proceeding),  of the other Loan Parties to
the  Administrative  Agent and the Lenders  under this  Agreement the other Loan
Documents,  (ii) the due and punctual performance of all covenants,  agreements,
obligations  and liabilities of the other Loan Parties under or pursuant to this
Agreement and the other Loan Documents;  and (iii) the due and punctual  payment
and performance of all obligations of the Borrower, monetary or otherwise, under
each Hedging  Agreement entered into with a counterparty that was a Lender or an
Affiliate of a Lender at the time such Hedging  Agreement  was entered into (all
the  monetary and other  obligations  referred to in the  preceding  clauses (i)
through  (iii) being  collectively  called the  "Guaranteed  Obligations").  KPP
further agrees that the Guaranteed  Obligations  may be extended or renewed,  in
whole or in part,  without notice to or further assent from it, and that it will
remain bound upon its guarantee  notwithstanding any extension or renewal of any
Guaranteed Obligation.

         Guaranteed Obligations Not Waived.

         To  the  fullest  extent   permitted  by  applicable  law,  KPP  waives
presentment  to, demand of payment from and protest to the other Loan Parties of
any of the Guaranteed  Obligations,  and also waives notice of acceptance of its
guarantee and notice of protest for nonpayment.  To the fullest extent permitted
by applicable law, the obligations of KPP hereunder shall not be affected by (i)
the  failure  of the  Administrative  Agent or any Lender to assert any claim or
demand or to enforce or exercise any right or remedy against the Borrower or any
other Guarantor under the provisions of this Agreement,  any other Loan Document
or otherwise, (ii) any rescission,  waiver, amendment or modification of, or any
release from any of the terms or provisions of, this  Agreement,  any other Loan
Document or any other  agreement,  including with respect to any other Guarantor
under the Subsidiary  Guarantee  Agreement,  or (iii) the failure to perfect any
security  interest  in, or the  release  of, any of the  security  held by or on
behalf of the Administrative Agent or any Lender.

         Guarantee of Payment.

         KPP  further  agrees that its  guarantee  constitutes  a  guarantee  of
payment when due and not of collection, and waives any right to require that any
resort be had by the  Administrative  Agent or any Lender to any of the security
held for payment of the Guaranteed  Obligations or to any balance of any deposit
account  or  credit on the books of the  Administrative  Agent or any  Lender in
favor of the Borrower or any other Person.

         No Discharge or Diminishment of Guarantee.

         The obligations of KPP hereunder shall not be subject to any reduction,
limitation,   impairment  or   termination   for  any  reason  (other  than  the
indefeasible payment in full in cash of the Guaranteed  Obligations),  including
any claim of waiver, release, surrender,  alteration or compromise of any of the
Guaranteed  Obligations,  and shall not be  subject  to any  defense  or setoff,
counterclaim,  recoupment or termination whatsoever by reason of the invalidity,
illegality  or  unenforceability  of the  Guaranteed  Obligations  or otherwise.
Without  limiting  the  generality  of the  foregoing,  the  obligations  of KPP
hereunder  shall not be  discharged  or  impaired or  otherwise  affected by the
failure of the Administrative  Agent or any Lender to assert any claim or demand
or to enforce any remedy under this  Agreement,  any other Loan  Document or any
other agreement,  by any waiver or modification of any provision of any thereof,
by any default,  failure or delay,  willful or otherwise,  in the performance of
the Guaranteed Obligations, or by any other act or omission that may or might in
any manner or to any extent vary the risk of KPP or that would otherwise operate
as a  discharge  of a  guarantor  as a matter of law or equity  (other  than the
indefeasible payment in full in cash of all the Guaranteed Obligations).

         Defenses of Borrower Waived.

         To the fullest  extent  permitted  by  applicable  law,  KPP waives any
defense  based  on or  arising  out of any  defense  of any  Loan  Party  or the
unenforceability  of the  Guaranteed  Obligations  or any part  thereof from any
cause, or the cessation from any cause of the liability of any Loan Party, other
than  the  final  and  indefeasible  payment  in full in cash of the  Guaranteed
Obligations.  The  Administrative  Agent and the Lenders may, at their election,
foreclose on any security held by one or more of them by one or more judicial or
nonjudicial  sales,  accept  an  assignment  of any  such  security  in  lieu of
foreclosure,  compromise or adjust any part of the Guaranteed Obligations,  make
any other  accommodation  with the other Loan  Parties  or any other  guarantor,
without  affecting or impairing in any way the liability of KPP hereunder except
to  the  extent  the  Guaranteed   Obligations  have  been  fully,  finally  and
indefeasibly  paid in cash.  Pursuant to applicable  law, KPP waives any defense
arising out of any such election even though such election operates, pursuant to
applicable  law,  to  impair or to  extinguish  any  right of  reimbursement  or
subrogation  or other right or remedy of KPP  against the  Borrower or any other
Guarantor or guarantor, as the case may be, or any security.

         Agreement to Pay; Subordination.

         In  furtherance  of the  foregoing  and not in  limitation of any other
right  that the  Administrative  Agent  or any  Lender  has at law or in  equity
against KPP by virtue hereof, upon the failure of the Borrower or any other Loan
Party to pay any  Guaranteed  Obligation  when and as the same shall become due,
whether at maturity,  by acceleration,  after notice of prepayment or otherwise,
KPP hereby  promises  to and will  forthwith  pay,  or cause to be paid,  to the
Administrative  Agent for the  benefit of the Lenders in cash the amount of such
unpaid  Guaranteed  Obligations.  Upon  payment  by  KPP  of  any  sums  to  the
Administrative  Agent,  all rights of KPP  against  any Loan Party  arising as a
result  thereof  by way of right of  subrogation,  contribution,  reimbursement,
indemnity or otherwise  shall in all respects be subordinate and junior in right
of  payment  to the  prior  indefeasible  payment  in  full  in  cash of all the
Guaranteed  Obligations.  In addition,  any indebtedness of any other Loan Party
now or hereafter held by KPP is hereby  subordinated  in right of payment to the
prior payment in full in cash of the Guaranteed Obligations. If any amount shall
erroneously  be paid to KPP on  account of (i) such  subrogation,  contribution,
reimbursement,  indemnity or similar right or (ii) any such indebtedness of such
Loan  Party,  such  amount  shall  be  held in  trust  for  the  benefit  of the
Administrative  Agent  and  the  Lenders  and  shall  forthwith  be  paid to the
Administrative  Agent to be  credited  against  the  payment  of the  Guaranteed
Obligations,  whether matured or unmatured,  in accordance with the terms of the
Loan Documents.

         Information.

         KPP assumes all responsibility for being and keeping itself informed of
the  other  Loan  Parties'  financial  condition  and  assets,  and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed  Obligations
and the  nature,  scope and  extent of the risks  that KPP  assumes  and  incurs
hereunder,  and agrees that none of the Administrative Agent or the Lenders will
have any duty to advise KPP of information  known to it or any of them regarding
such circumstances or risks.

         Representations and Warranties.

         KPP represents and warrants as to itself that all  representations  and
warranties relating to it contained in this Agreement are true and correct.

         Termination.

         The  guarantees  made  hereunder  (i)  shall  terminate  when  all  the
Guaranteed  Obligations  have been paid in full in cash and the Lenders  have no
further  commitment to lend under this  Agreement and (ii) shall  continue to be
effective or be reinstated,  as the case may be, if at any time payment,  or any
part thereof,  of any  Guaranteed  Obligation is rescinded or must  otherwise be
restored by any Lender or any Guarantor upon the bankruptcy or reorganization of
the Borrower, any Guarantor or otherwise. In connection with the foregoing,  the
Administrative  Agent shall  execute and  deliver to KPP or KPP's  designee,  at
KPP's expense,  any documents or instruments that KPP shall  reasonably  request
from time to time to evidence such termination and release.


EVENTS OF DEFAULT

         Events of Default.

         If any of the  following  events  (each an  "Event of  Default")  shall
occur:

                  the Borrower  shall fail to pay any principal of any Loan when
         and as the same shall become due and  payable,  whether at the due date
         thereof or at a date fixed for prepayment or otherwise; or

                  the Borrower shall fail to pay any interest on any Loan or any
         fee or any other amount (other than an amount payable under  subsection
         (a) of this  Article)  payable  under this  Agreement or any other Loan
         Document,  when and as the same shall become due and payable,  and such
         failure shall continue unremedied for a period of 3 Business Days; or

                  any  representation  or warranty  made or deemed made by or on
         behalf of any Loan Party in or in connection with this Agreement or any
         other Loan Document  (including the Schedules attached thereto) and any
         amendments  or  modifications  hereof or waivers  hereunder,  or in any
         certificate, report, financial statement or other document submitted to
         the  Administrative  Agent  or the  Lenders  by any  Loan  Party or any
         representative of any Loan Party pursuant to or in connection with this
         Agreement or any other Loan Document shall prove to be incorrect in any
         material respect when made or deemed made or submitted; or

                  the Borrower or KPP, as  applicable,  shall fail to observe or
         perform any  covenant or agreement  contained in Section  5.2(a) or 5.3
         (with  respect to KPP's or the  Borrower's  existence) or Article VI or
         VII; or

                  any Loan Party shall fail to observe or perform  any  covenant
         or agreement  contained in any Loan Document (other than those referred
         to in  subsections  (a),  (b) and (d) above),  and such  failure  shall
         remain  unremedied  for 30 days after the earlier of (i) any officer of
         the Borrower  becomes  aware of such  failure,  or (ii) notice  thereof
         shall have been given to the  Borrower by the  Administrative  Agent or
         any Lender; or

                  the Borrower,  KPP or any  Significant  Affiliate  (whether as
         primary  obligor or as guarantor or other surety) shall fail to pay any
         principal of or premium or interest on any Material  Indebtedness  that
         is  outstanding,  when and as the same  shall  become  due and  payable
         (whether at  scheduled  maturity,  required  prepayment,  acceleration,
         demand  or  otherwise),  and such  failure  shall  continue  after  the
         applicable  grace  period,  if  any,  specified  in  the  agreement  or
         instrument evidencing such Indebtedness; or any other event shall occur
         or condition shall exist under any agreement or instrument  relating to
         such Indebtedness and shall continue after the applicable grace period,
         if any,  specified in such  agreement or  instrument,  if the effect of
         such event or condition is to  accelerate,  or permit the  acceleration
         of, the maturity of such  Indebtedness;  or any such Indebtedness shall
         be  declared  to be due and  payable;  or  required  to be  prepaid  or
         redeemed (other than by a regularly  scheduled  required  prepayment or
         redemption),  purchased  or defeased,  or any offer to prepay,  redeem,
         purchase or defease such Indebtedness  shall be required to be made, in
         each case prior to the stated maturity thereof; or


                  the  Borrower,  KPP or any  Significant  Affiliate  shall  (i)
         commence a  voluntary  case or other  proceeding  or file any  petition
         seeking liquidation,  reorganization or other relief under any federal,
         state or foreign  bankruptcy,  insolvency  or other  similar law now or
         hereafter in effect or seeking the appointment of a custodian, trustee,
         receiver, liquidator or other similar official of it or any substantial
         part of its property,  (ii) consent to the  institution  of, or fail to
         contest in a timely and appropriate  manner, any proceeding or petition
         described in subsection (i) of this Section, (iii) apply for or consent
         to the  appointment of a custodian,  trustee,  receiver,  liquidator or
         other similar  official for the Borrower,  KPP or any such  Significant
         Affiliate 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; or

                  an involuntary proceeding shall be commenced or an involuntary
         petition  shall be filed  seeking (i)  liquidation,  reorganization  or
         other  relief  in  respect  of the  Borrower,  KPP  or any  Significant
         Affiliate or its debts,  or any substantial  part of its assets,  under
         any federal,  state or foreign bankruptcy,  insolvency or other similar
         law now or hereafter in effect or (ii) the  appointment of a custodian,
         trustee,  receiver,  liquidator  or  other  similar  official  for  the
         Borrower, KPP or any Significant Affiliate or for a substantial part of
         its assets,  and in any such case,  such  proceeding or petition  shall
         remain  undismissed  for a  period  of 60 days or an  order  or  decree
         approving or ordering  any of the  foregoing  shall be entered;  or the
         Borrower, KPP or any Significant Subsidiary shall become unable to pay,
         shall admit in writing its  inability to pay, or shall fail to pay, its
         debts as they become due; or an ERISA Event shall have  occurred  that,
         in the opinion of the Required Lenders,  when taken together with other
         ERISA Events that have occurred, could reasonably be expected to result
         in  liability  to the  Borrower  and the  Subsidiaries  in an aggregate
         amount exceeding  $5,000,000;  or any judgment or order for the payment
         of money in excess of  $5,000,000  in the  aggregate  shall be rendered
         against the Borrower, KPP or any Significant Affiliate,  and either (i)
         enforcement  proceedings shall have been commenced by any creditor upon
         such  judgment  or  order  or  (ii)  there  shall  be a  period  of  30
         consecutive days during which a stay of enforcement of such judgment or
         order,  by  reason of a pending  appeal or  otherwise,  shall not be in
         effect; or any non-monetary judgment or order shall be rendered against
         the Borrower, KPP or any Significant Affiliate that could reasonably be
         expected to have a Material Adverse Effect, and there shall be a period
         of 30  consecutive  days  during  which a stay of  enforcement  of such
         judgment or order,  by reason of a pending  appeal or otherwise,  shall
         not be in effect;  or a Change in Control shall occur or exist;  or any
         provision of the Subsidiary  Guarantee  Agreement  shall for any reason
         cease  to  be  valid  and  binding  on,  or  enforceable  against,  any
         Guarantor,  or any  Guarantor  shall so state  in  writing,  or (a) any
         provision  of Article  VIII shall for any reason  cease to be valid and
         binding  on,  or  enforceable  against  KPP,  or KPP  shall so state in
         writing;  Guarantor shall seek to terminate its  obligations  under the
         Loan  Documents;  or then, and in every such event (other than an event
         with respect to KPP or the Borrower  described in subsection (g) or (h)
         of this Section) and at any time  thereafter  during the continuance of
         such event, the Administrative  Agent may, and upon the written request
         of the Required  Lenders shall, by notice to the Borrower,  take any or
         all of the  following  actions,  at the same or  different  times:  (i)
         terminate  the  Commitments,  whereupon  the  Commitment of each Lender
         shall  terminate  immediately;  (ii)  declare the  principal of and any
         accrued  interest  on  the  Loans,  and  all  other  Obligations  owing
         hereunder,  to be,  whereupon  the same 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 (iii)
         exercise all remedies  contained in any other Loan Document;  and that,
         if an Event of Default  specified in either subsection (g) or (h) shall
         occur, the Commitments shall automatically  terminate and the principal
         of the Loans then outstanding,  together with accrued interest thereon,
         and all fees, and all other Obligations 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.

THE ADMINISTRATIVE AGENT

         Appointment of Administrative Agent.

         Each Lender  irrevocably  appoints SunTrust Bank as the  Administrative
Agent and  authorizes it to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent under this Agreement and the
other  Loan  Documents,  together  with all such  actions  and  powers  that are
reasonably  incidental thereto.  The Administrative Agent may perform any of its
duties  hereunder  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 of its duties and  exercise  its rights and powers  through
their respective Related Parties.  The exculpatory  provisions set forth in this
Article  shall  apply to any  such  sub-agent  and 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  facility  provided
for herein as well as activities as Administrative Agent.

         Nature of Duties of Administrative Agent.

         The  Administrative  Agent  shall not have any  duties  or  obligations
except those expressly set forth in this Agreement and the other Loan Documents.
Without limiting the generality of the foregoing,  (i) the Administrative  Agent
shall not be subject to any  fiduciary or other  implied  duties,  regardless of
whether a Default or an Event of Default has  occurred and is  continuing,  (ii)
the  Administrative  Agent  shall  not have  any duty to take any  discretionary
action or exercise any discretionary  powers,  except those discretionary rights
and powers expressly  contemplated by the Loan Documents 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  11.2),  and (iii) except as expressly set
forth in the Loan Documents, 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  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  11.2) or in the absence of its own gross
negligence or willful misconduct.  The Administrative  Agent shall not be deemed
to have  knowledge of any Default or Event of Default  unless and until  written
notice  thereof  is given to the  Administrative  Agent by the  Borrower  or any
Lender,  and the  Administrative  Agent shall not be responsible for or have any
duty to ascertain or inquire into (A) any statement,  warranty or representation
made in or in  connection  with  any  Loan  Document,  (B) the  contents  of any
certificate,  report or other document  delivered  hereunder or thereunder or in
connection  herewith or therewith,  (C) the  performance or observance of any of
the covenants,  agreements,  or other terms and conditions set forth in any Loan
Document, (D) the validity, enforceability,  effectiveness or genuineness of any
Loan  Document  or any  other  agreement,  instrument  or  document,  or (E) the
satisfaction  of any condition set forth in Article III or elsewhere in any Loan
Document,  other  than to  confirm  receipt of items  expressly  required  to be
delivered to the Administrative Agent.

         Lack of Reliance on the Administrative Agent.

         Each of the Lenders 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 of the Lenders 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 has deemed appropriate,  continue to make its own decisions in
taking or not taking of any action under or based on this Agreement, any related
agreement or any document furnished hereunder or thereunder.

         Certain Rights of the Administrative Agent.

         If  the  Administrative  Agent  shall  request  instructions  from  the
Required Lenders with respect to any action or actions (including the failure to
act) in  connection  with this  Agreement,  the  Administrative  Agent  shall be
entitled to refrain from such act or taking such act,  unless and until it shall
have received instructions from such Lenders; and the Administrative Agent shall
not incur liability to any Person by reason of so refraining.  Without  limiting
the foregoing,  no Lender shall have any right of action whatsoever  against the
Administrative  Agent  as  a  result  of  the  Administrative  Agent  acting  or
refraining  from acting  hereunder in accordance  with the  instructions  of the
Required Lenders where required by the terms of this Agreement.

         Reliance by 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,  sent or made by the proper Person.  The Administrative
Agent may also 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
(including  counsel for the Borrower),  independent public 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 such counsel, accountants or experts.

         The Administrative Agent in its Individual Capacity.

         The bank serving as the Administrative Agent shall have the same rights
and powers under this Agreement and any other Loan Document in its capacity as a
Lender as any other Lender and may exercise or refrain from  exercising the same
as  though  it were  not the  Administrative  Agent;  and the  terms  "Lenders",
"Required  Lenders",  "holders of Notes", or any similar terms shall, unless the
context clearly otherwise  indicates,  include the  Administrative  Agent in its
individual  capacity.  The  bank  acting  as the  Administrative  Agent  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  Affiliate  of the
Borrower as if it were not the Administrative Agent hereunder.

         Successor Administrative Agent.

         The  Administrative  Agent  may  resign  at any time by  giving  notice
thereof to the Lenders and the  Borrower  and may be removed at any time with or
without cause by the Required Lenders. Upon any such resignation or removal, the
Required  Lenders  shall  have the right to appoint a  successor  Administrative
Agent, subject to the approval by the Borrower provided that no Default or Event
of Default  shall have  occurred and be continuing at such time. If no successor
Administrative Agent shall have been so appointed,  and shall have accepted such
appointment within 30 days after the retiring  Administrative Agent gives notice
of resignation or the Required  Lenders' removal of the Agent, then the retiring
Administrative  Agent  may,  on  behalf  of the  Lenders,  appoint  a  successor
Administrative  Agent, which shall be a commercial bank organized under the laws
of the United States of America or any state  thereof or a bank which  maintains
an office in the United  States,  having a combined  capital  and  surplus of at
least $500,000,000.

         Upon the  acceptance of its  appointment  as the  Administrative  Agent
hereunder by a successor,  such successor  Administrative  Agent shall thereupon
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 obligations under this Agreement and the
other Loan  Documents.  If within 45 days after  written  notice is given of the
retiring  Administrative  Agent's resignation or removal under this Section 10.7
no  successor  Administrative  Agent  shall have been  appointed  and shall have
accepted such appointment, then on such 45th day (i) the retiring Administrative
Agent's  resignation  or  removal  shall  become  effective,  (ii) the  retiring
Administrative   Agent  shall  thereupon  be  discharged  from  its  duties  and
obligations  under  the Loan  Documents  and (iii) the  Required  Lenders  shall
thereafter  perform all duties of the  retiring  Administrative  Agent under the
Loan  Documents  until such time as the  Required  Lenders  appoint a  successor
Administrative  Agent as  provided  above.  After  any  retiring  Administrative
Agent's resignation hereunder,  the provisions of this Article IX shall continue
in  effect  for  the  benefit  of such  retiring  Administrative  Agent  and its
representatives  and agents in respect of any actions  taken or not taken by any
of them while it was serving as the Administrative Agent.

         Authorization to Execute other Loan Documents.

         Each Lender hereby  authorizes the  Administrative  Agent to execute on
behalf of all Lenders all Loan Documents other than this Agreement.


MISCELLANEOUS

         Notices.

         Except  in the  case of  notices  and  other  communications  expressly
permitted to be given by telephone,  all notices and other communications to any
party herein to be effective  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:

        To the Borrower:             2435 North Central Expressway
                                     Suite 700
                                     Richardson, Texas 75080-2731
                                     Attention:  Ed Doherty
                                                 Mark Jones
                                     Telecopy Number: (972) 699-1894

                 To KPP:             2435 North Central Expressway
                                     Suite 700
                                     Richardson, Texas 75080-2731
                                     Attention:  Ed Doherty
                                                 Mark Jones
                                     Telecopy Number: (972) 699-1894

  To the Administrative Agent:       SunTrust Bank
                                     303 Peachtree Street, N. E.
                                     Atlanta, Georgia 30308
                                     Attention:
                                     Telecopy Number:

                  With a copy to:    SunTrust Equitable Securities Corporation
                                     303 Peachtree Street, N. E./ 24th Floor
                                     Atlanta, Georgia 30308
                                     Attention:
                                     Telecopy Number:

  To any other Lender:               the address set forth in the 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
such  notices and other  communications  shall,  when  transmitted  by overnight
delivery,  or faxed,  be  effective  when  delivered  for  overnight  (next-day)
delivery, or transmitted in legible form by facsimile machine,  respectively, or
if mailed,  upon the third  Business Day after the date deposited into the mails
or if  delivered,  upon  delivery;  provided,  that  notices  delivered  to  the
Administrative  Agent shall not be  effective  until  actually  received by such
Person at its address  specified  in this  Section  11.1.  Any  agreement of the
Administrative  Agent and the  Lenders  herein to  receive  certain  notices  by
telephone or facsimile is solely for the  convenience  and at the request of the
Borrower.  The Administrative Agent and the Lenders shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Borrower
to give such notice and the Administrative  Agent and Lenders shall not have any
liability  to the Borrower or other Person on account of any action taken or not
taken  by the  Administrative  Agent  or  the  Lenders  in  reliance  upon  such
telephonic  or facsimile  notice.  The  obligation  of the Borrower to repay the
Loans and all other Obligations hereunder shall not be affected in any way or to
any extent by any failure of the Administrative Agent and the Lenders to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent and the Lenders of a confirmation which is at variance with
the terms understood by the Administrative Agent and the Lenders to be contained
in any such telephonic or facsimile notice.  Waiver;  Amendments.  No failure or
delay by the Administrative Agent or any Lender in exercising any right or power
hereunder  or any other  Loan  Document,  and no course of dealing  between  the
Borrower and the Administrative  Agent or any Lender,  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 right or power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right  or  power  hereunder  or  thereunder.  The  rights  and  remedies  of the
Administrative  Agent  and the  Lenders  hereunder  and  under  the  other  Loan
Documents  are  cumulative  and are not  exclusive  of any  rights  or  remedies
provided by law. No waiver of any provision of this  Agreement or any other Loan
Document or consent to any  departure  by the  Borrower  therefrom  shall in any
event be effective  unless the same shall be permitted by subsection (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 the generality of
the  foregoing,  the making of a Loan shall not be  construed as a waiver of any
Default or Event of Default,  regardless of whether the Administrative  Agent or
any Lender may have had notice or  knowledge of such Default or Event of Default
at the time.  No amendment or waiver of any  provision of this  Agreement or the
other Loan Documents,  nor consent to any departure by any Loan Party therefrom,
shall in any event be  effective  unless the same shall be in writing and signed
by the Borrower and the Required Lenders or the Borrower and the  Administrative
Agent with the consent of the  Required  Lenders and then such waiver or consent
shall be effective  only in the specific  instance and for the specific  purpose
for which given;  provided,  that no amendment or waiver shall: (i) increase the
Commitment of any Lender without the written consent of such Lender, (ii) reduce
the  principal  amount of any Loan 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 date fixed for any payment of any principal
of, or  interest  on,  any Loan or any fees  hereunder  or reduce the amount of,
waive or  excuse  any such  payment,  or  postpone  the  scheduled  date for the
termination or reduction of any Commitment,  without the written consent of each
Lender  affected  thereby,  (iv) change Section  2.18(b) or (c) in a manner that
would  alter the pro rata  sharing of  payments  required  thereby,  without the
written consent of each Lender, (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 which are required to waive, amend or modify
any rights hereunder or make any  determination or grant any consent  hereunder,
without the consent of each  Lender;  (vi)  release any  guarantor  or limit the
liability  of any such  guarantor  under any  guaranty  agreement,  without  the
written  consent  of  each  Lender;  (vii)  release  all  or  substantially  all
collateral (if any) securing any of the Obligations, without the written consent
of each Lender;  provided further, that no such agreement shall amend, modify or
otherwise affect the rights,  duties or obligations of the Administrative  Agent
without the prior written consent of the Administrative  Agent.  Notwithstanding
the foregoing, any provision of this Agreement may be amended by an agreement in
writing   entered  into  by  the   Borrower,   the  Required   Lenders  and  the
Administrative  Agent if (i) by the terms of such  agreement  the  Commitment of
each Lender not consenting to the amendment provided for therein shall terminate
(but such Lender shall continue to be entitled to the benefits of Sections 2.15,
2.16,  and 2.17 and 11.3) upon the  effectiveness  of such amendment and (ii) at
the time such amendment becomes  effective,  each Lender not consenting  thereto
receives  payment in full principal of and interest accrued on each Loan made by
it and all other  amounts  owing to it or  accrued  for its  account  under this
Agreement   and  is  released   from  its   obligations   hereunder.   Expenses;
Indemnification.  The Borrower shall pay (i) all reasonable, out-of-pocket costs
and  expenses of the  Administrative  Agent and its  Affiliates,  including  the
reasonable fees,  charges and  disbursements  of counsel for the  Administrative
Agent and its  Affiliates,  in  connection  with the  syndication  of the credit
facilities  provided for herein,  the preparation and administration of the Loan
Documents and any amendments,  modifications  or waivers thereof (whether or not
the transactions contemplated in this Agreement or any other Loan Document shall
be  consummated),  and (ii) all  out-of-pocket  costs and  expenses  (including,
without  limitation,  the reasonable fees,  charges and disbursements of outside
counsel and the allocated cost of inside counsel) incurred by the Administrative
Agent or any Lender in  connection  with the  enforcement  or  protection of its
rights in connection  with the Loan  Documents,  including its rights under this
Section,  or in  connection  with the Loans made  hereunder,  including all such
out-of-pocket   expenses   incurred   during  any  workout,   restructuring   or
negotiations  in  respect  of such  Loans.  The  Borrower  shall  indemnify  the
Administrative Agent, each Lender and each Related Party of any of the foregoing
(each, an  "Indemnitee")  against,  and hold each of them harmless from, any and
all costs, losses, liabilities,  claims, damages and related expenses, including
the fees, charges and disbursements of any counsel for any Indemnitee, which may
be 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
other  agreement or  instrument  contemplated  hereby,  the  performance  by the
parties hereto of their respective  obligations hereunder or the consummation of
any of the transactions  contemplated hereby, (ii) any Loan, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
by the Borrower or any Subsidiary or any Environmental  Liability related in any
way to the Borrower or any Subsidiary 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 the Borrower  shall not be
obligated to indemnify any  Indemnitee  for any of the foregoing  arising out of
such  Indemnitee's  gross  negligence  or willful  misconduct as determined by a
court of  competent  jurisdiction  in a final and  nonappealable  judgment.  The
Borrower  shall pay, and hold the  Administrative  Agent and each of the Lenders
harmless from and against,  any and all present and future  stamp,  documentary,
and other  similar  taxes  with  respect  to this  Agreement  and any other Loan
Documents, any collateral described therein, or any payments due thereunder, and
save the Administrative  Agent and each Lender harmless from and against any and
all  liabilities  with respect to or resulting from any delay or omission to pay
such taxes.  To the extent that the Borrower fails to pay any amount required to
be paid to the Administrative Agent under subsection (a), (b) or (c) above, each
Lender  severally  agrees to pay to the  Administrative  Agent such Lender's Pro
Rata Share (determined as of the time that the unreimbursed expense or indemnity
payment  is sought)  of such  unpaid  amount;  provided,  that the  unreimbursed
expense or indemnified payment, claim, damage,  liability or related expense, as
the case may be, was incurred by or asserted against the  Administrative  Agent,
in its  capacity  as such.  To the  extent  permitted  by  applicable  law,  the
Borrower, KPP and all Significant Affiliates shall not assert, and hereby waive,
any claim  against any  Indemnitee,  on any theory of  liability,  for  special,
indirect,  consequential  or  punitive  damages  (as opposed to actual or direct
damages) arising out of, in connection with or as a result of, this Agreement or
any agreement or instrument  contemplated hereby, the transactions  contemplated
therein,  any Loan or the use of  proceeds  thereof.  All amounts due under this
Section shall be payable promptly after written demand therefor.  Successors and
Assigns. The provisions of this Agreement shall be binding upon and inure to the
benefit of the  parties  hereto and their  respective  successors  and  assigns,
except that the Borrower may not assign or transfer any of its rights  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).  Any
Lender may at any time assign to one or more  assignees  all or a portion of its
rights  and  obligations  under  this  Agreement  and the other  Loan  Documents
(including all or a portion of its Commitment and the Loans at the time owing to
it and including non-pro rata assignments of its Commitments and related Loans);
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 must give their
prior  written  consent  (which  consent shall not be  unreasonably  withheld or
delayed),  (ii) except in the case of an  assignment to a Lender or an Affiliate
of a Lender or an  assignment  of the entire  amount of the  assigning  Lender's
Commitment hereunder or an assignment while an Event of Default has occurred and
is continuing,  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 $1,000,000  (unless the Borrower and the  Administrative  Agent
shall  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  with respect to any Commitment and the Loans related  thereto under
this Agreement and the other Loan Documents,  (iv) the assigning  Lender and the
assignee shall execute and deliver to the Administrative Agent an Assignment and
Acceptance,  together  with a  processing  and  recordation  fee  payable by the
assigning  Lender or the assignee  (as  determined  between such  Persons) in an
amount  equal to $1,000  and (v) such  assignee,  if it is not a  Lender,  shall
deliver a duly  completed  Administrative  Questionnaire  to the  Administrative
Agent;  provided,  that any consent of the Borrower otherwise required hereunder
shall not be  required if an Event of Default has  occurred  and is  continuing.
Upon the execution and delivery of the  Assignment and Acceptance and payment by
such assignee to the assigning  Lender of an amount equal to the purchase  price
agreed  between  such  Persons,  such  assignee  shall  become  a party  to this
Agreement and any other Loan Documents to which such assigning Lender is a party
and, to the extent of such interest  assigned by such Assignment and Acceptance,
shall have the rights and obligations of a Lender under this Agreement,  and the
assigning  Lender  shall  be  released  from  its  obligations  hereunder  to  a
corresponding  extent (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 2.15, 2.16 and 2.17 and 11.3. Upon the  consummation of any
such assignment  hereunder,  the assigning Lender, the Administrative  Agent and
the Borrower shall make appropriate  arrangements to have new Notes issued if so
requested by either or both the assigning Lender or the assignee. Any assignment
or other  transfer by a Lender that does not fully comply with the terms of this
subsection  (b) shall be treated for  purposes of this  Agreement as a sale of a
participation  pursuant  to  subsection  (c) below.  Any Lender may at any time,
without  the  consent  of  the  Borrower  or  the  Administrative   Agent,  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 its obligations hereunder, and (iii) the Borrower,
the Administrative Agent 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 and the other Loan  Documents.  Any agreement
between such Lender and the Participant with respect to such participation shall
provide  that such  Lender  shall  retain the sole right and  responsibility  to
enforce this Agreement and the other Loan Documents and the right to approve any
amendment,  modification  or  waiver  of  this  Agreement  and  the  other  Loan
Documents;  provided,  that such  participation  agreement may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification  or waiver of this  Agreement  described  in the first  proviso  of
Section  11.2(b) that  affects the  Participant.  The Borrower  agrees that each
Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to
the same extent as if it were a Lender  hereunder  and had acquired its interest
by assignment pursuant to subsection (b); provided, that no Participant shall be
entitled to receive  any greater  payment  under  Section  2.15 or 2.17 than the
applicable  Lender  would  have been  entitled  to receive  with  respect to the
participation  sold to such Participant unless the sale of such participation is
made with the Borrower's prior written consent.  To the extent permitted by law,
the Borrower agrees that each  Participant  shall be entitled to the benefits of
Section 2.18 as though it were a Lender,  provided, that such Participant agrees
to share with the Lenders the proceeds  thereof in accordance  with Section 2.18
as fully as if it were a Lender hereunder. A Participant that would be a Foreign
Lender if it were a Lender shall not be entitled to the benefits of Section 2.17
unless the Borrower is notified of such  participation  sold to such Participant
and such  Participant  agrees,  for the benefit of the Borrower,  to comply with
Section 2.17(e) as though it were a Lender hereunder. Any Lender may at any time
pledge or assign a security  interest in all or any portion of its rights  under
this  Agreement  and its Notes (if any) to secure its  obligations  to a Federal
Reserve Bank without complying with this Section;  provided, that no such pledge
or assignment  shall release a Lender from any of its  obligations  hereunder or
substitute  any such  pledgee or  assignee  for such  Lender as a party  hereto.
Notwithstanding  anything  to the  contrary  contained  herein,  any  Lender  (a
"Granting  Lender") may grant to a special  purpose  funding vehicle (an "SPV"),
identified  as such in writing from time to time by the  Granting  Lender to the
Administrative Agent and the Borrower, the option to provide to the Borrower all
or any part of any Loan that such Granting  Lender would  otherwise be obligated
to make to the Borrower pursuant to this Agreement;  provided,  that (i) nothing
herein shall  constitute a commitment by any SPV to make any Loan and (ii) if an
SPV elects not to exercise such option or otherwise  fails to provide all or any
part of any Loan,  the  Granting  Lender  shall be  obligated  to make such Loan
pursuant to the terms  hereof.  The making of a Loan by an SPV  hereunder  shall
utilize the Commitment of the Granting Lender to the same extent, and as if such
Loan were made by such Granting Lender.  Each party hereto hereby agrees that no
SPV shall be liable for any indemnity or similar payment  obligation  under this
Agreement  (all liability for which shall remain with the Granting  Lender).  In
furtherance of the foregoing,  each party hereto hereby agrees (which  agreement
shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the  payment  in full of all  outstanding  commercial
paper or other senior indebtedness of any SPV, it will not institute against, or
join  any  other  person  in  instituting  against,  such  SPV  any  bankruptcy,
reorganization,  arrangement,  insolvency or liquidation  proceedings  under the
laws of the United States or any State. Notwithstanding anything to the contrary
in this  Section  11.4,  any SPV may (i) with  notice to, but  without the prior
written consent of, the Borrower and the Administrative Agent and without paying
any  processing  fee  therefor,  assign all or a portion of its interests in any
Loans to the Granting Lender or to any financial  institutions  (consented to by
the Borrower and the  Administrative  Agent)  providing  liquidity and/or credit
support to or for the account of such SPV to support the funding or  maintenance
of Loans and (ii) disclose on a confidential  basis any  non-public  information
relating to its Loans to any rating agency,  commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPV. As this
Section  11.4(e)  applies to any particular SPV, this Section may not be amended
without the written consent of such SPV. Governing Law; Jurisdiction; Consent to
Service  of  Process.  This  Agreement  and the other  Loan  Documents  shall be
construed in accordance  with and be governed by the law (without  giving effect
to the conflict of law principles thereof) of the State of New York. Each of the
Borrower and KPP hereby irrevocably and unconditionally  submits, for itself and
its property,  to the  non-exclusive  jurisdiction of the United States District
Court of the  Southern  District of New York,  and of the  Supreme  Court of the
State of New York  sitting in New York County and any  appellate  court from any
thereof,  in any  action  or  proceeding  arising  out of or  relating  to  this
Agreement or any other Loan Document or the transactions  contemplated hereby or
thereby,  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 court or, to the extent  permitted by  applicable  law,  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 or any other Loan Document shall affect any right that
the Administrative Agent or any Lender may otherwise have to bring any action or
proceeding  relating to this  Agreement or any other Loan  Document  against the
Borrower  or its  properties  in the  courts  of any  jurisdiction.  Each of the
Borrower and KPP irrevocably and  unconditionally  waives any objection which it
may now or  hereafter  have to the laying of venue of any such  suit,  action or
proceeding  described in subsection (b) of this Section and brought in any court
referred  to in  subsection  (b) of this  Section.  Each of the  parties  hereto
irrevocably  waives,  to the fullest  extent  permitted by  applicable  law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such  court.  Each party to this  Agreement  irrevocably  consents to the
service of process in the manner  provided for notices in Section 11.1.  Nothing
in this  Agreement  or in any other Loan  Document  will affect the right of any
party hereto to serve  process in any other manner  permitted by law.  WAIVER OF
JURY  TRIAL.  EACH  PARTY  HERETO  IRREVOCABLY  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 THIS  AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR THEREBY (WHETHER
BASED ON CONTRACT,  TORT OR ANY OTHER  THEORY).  EACH PARTY HERETO (i) 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 (ii) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER  LOAN  DOCUMENTS  BY,  AMONG  OTHER  THINGS,  THE MUTUAL  WAIVERS  AND
CERTIFICATIONS IN THIS SECTION.

         Right of Setoff.

         In addition to any rights now or hereafter granted under applicable law
and not by way of  limitation  of any such  rights,  each Lender  shall have the
right,  at any time or from  time to time upon the  occurrence  and  during  the
continuance of an Event of Default, without prior notice to the Borrower or KPP,
any such notice  being  expressly  waived by the  Borrower and KPP to the extent
permitted by applicable law, to set off and apply against all deposits  (general
or special, time or demand,  provisional or final) of the Borrower or KPP at any
time held or other  obligations  at any time owing by such  Lender to or for the
credit or the account of the  Borrower  or KPP  against any and all  Obligations
held by such Lender,  irrespective of whether such Lender shall have made demand
hereunder and although  such  Obligations  may be unmatured.  Each Lender agrees
promptly  to notify the  Administrative  Agent and the  Borrower  after any such
set-off and any application made by such Lender;  provided,  that the failure to
give such notice shall not affect the validity of such set-off and application.

         Counterparts; Integration.

         This  Agreement  may be  executed by one or more of the parties to this
Agreement on any number of separate  counterparts  (including by telecopy),  and
all of said  counterparts  taken  together shall be deemed to constitute one and
the same  instrument.  This  Agreement,  the other  Loan  Documents  and the Fee
Letters  constitute  the entire  agreement  among the parties hereto and thereto
regarding  the  subject  matters  hereof and  thereof  and  supersede  all prior
agreements and understandings, oral or written, regarding such subject matters.

         Survival.

         All covenants,  agreements,  representations and warranties made by the
Borrower and KPP 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,  regardless  of any
investigation made by any such other party or on its behalf and  notwithstanding
that the Administrative  Agent 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 and so long as the
Commitments  have not expired or  terminated.  The  provisions of Sections 2.15,
2.16,  2.17 and 11.3 and  Article X 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 Commitments or
the termination of this Agreement or any provision hereof.  All  representations
and warranties made herein, in the  certificates,  reports,  notices,  and other
documents  delivered  pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the other Loan  Documents,  and the making of the
Loans.

         Severability.

         Any  provision of this  Agreement or any other Loan Document held to be
illegal,  invalid  or  unenforceable  in any  jurisdiction,  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  illegality,  invalidity or
unenforceability  without affecting the legality,  validity or enforceability of
the remaining  provisions hereof or thereof;  and the illegality,  invalidity or
unenforceability  of a particular  provision in a particular  jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

         Confidentiality.

         Each of the Administrative  Agent and each Lender agrees to take normal
and reasonable  precautions to maintain the  confidentiality  of any information
designated  in  writing  as  confidential  and  provided  to it by  KPP  or  any
Subsidiary  of KPP,  except that such  information  may be disclosed  (i) to any
Related Party of the Administrative Agent or any such Lender,  including without
limitation  accountants,  legal counsel and other  advisors,  (ii) to the extent
required by applicable  laws or  regulations or by any subpoena or similar legal
process,  (iii) to the extent  requested by any regulatory  agency or authority,
(iv) to the extent that such information  becomes publicly  available other than
as a result of a breach of this Section 11.11, or which becomes available to the
Administrative  Agent  or  any  Related  Party  of any  of  the  foregoing  on a
nonconfidential basis from a source other than KPP or any Subsidiary of KPP, (v)
in connection with the exercise of any remedy  hereunder or any suit,  action or
proceeding  relating to this Agreement or the  enforcement of rights  hereunder,
and (vi) subject to provisions  substantially  similar to this Section 11.11, to
any actual or prospective assignee or Participant,  or (vii) with the consent of
the  Borrower.  Any Person  required  to  maintain  the  confidentiality  of any
information  as provided for in this Section  11.11 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 its own confidential information.

         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 may be treated as  interest  on such Loan  under  applicable  law
(collectively,  the "Charges"), shall exceed the maximum lawful rate of interest
(the "Maximum Rate") that may be contracted  for,  charged,  taken,  received or
reserved by a 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  11.12 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 Rate to the date of  repayment,  shall have been
received by such Lender.



         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.

                                     KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.

                                     By KANEB PIPE LINE COMPANY,
                                        General Partner

                                     By /s/Edward D. Doherty
                                     Name:     Edward D. Doherty
                                     Title:    Chairman of the Board


                                      KANEB PIPE LINE PARTNERS, L.P.

                                      By KANEB PIPE LINE COMPANY,
                                         General Partner

                                      By /s/Edward D. Doherty
                                      Name:     Edward D. Doherty
                                      Title:    Chairman of Board


                                      SUNTRUST BANK
                                      as Administrative Agent and as a Lender


                                      By /s/John A. Fields, Jr.
                                      Name:     John A. Fields, Jr.
                                      Title:    Managing Director

                                      Commitment: $50,000,000.00


                                      BANK OF AMERICA, N.A.


                                      By /s/J. Scott Fowler
                                      Name:     J. Scott Fowler
                                      Title:    Managing Director

                                      Commitment: $35,000,000.00


                                      BANK ONE, NA


                                      By /s/Jeanie Harman
                                      Name:     Jeanie Harman
                                      Title:    First Vice President

                                      Commitment: $70,000,000.00



                                       BNP PARIBAS


                                       By /s/Larry Robinson
                                       Name:     Larry Robinson
                                       Title:    Vice President



                                       By /s/John H. Roberts
                                       Name:     John H. Roberts
                                       Title:    Vice President

                                       Commitment: $25,000,000.00



                                       FLEET NATIONAL BANK


                                        By /s/Sarah P.Z. Dwyer
                                        Name:     Sarah P.Z. Dwyer
                                        Title:    Vice President

                                        Commitment: $70,000,000.00



                                        THE INDUSTRIAL BANK OF JAPAN, LIMITED
                                        New York Branch


                                        By /s/Ryusuke Aya
                                        Name:     Ryusuke Aya
                                        Title:    Senior Vice President

                                        Commitment: $25,000,000.00




                                   Schedule I
                   APPLICABLE MARGIN AND APPLICABLE PERCENTAGE

<TABLE>
<CAPTION>
<S>            <C>                               <C>                     <C>                    <C>
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
                                                                                                     Applicable
   Pricing           Consolidated Funded         Applicable Margin for     Applicable Margin       Percentage for
    Level                Debt:EBITDA                Eurodollar Loans      for Base Rate Loans      Commitment Fee
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
--------------                                   ----------------------- ---------------------- ----------------------
                      Reference Ratings
--------------                                   ----------------------- ---------------------- ----------------------
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
      I        Less than 2.50:1:00                     .625% p.a.               0% p.a.               .20% p.a.
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
--------------                                   ----------------------- ---------------------- ----------------------
               BBB+ or higher/Baa1 or higher
--------------                                   ----------------------- ---------------------- ----------------------
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
     II        Less than 3.00:1.00 but greater         .750% p.a.               0% p.a.              .250% p.a.
               than or equal to 2.50:1.00
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
--------------                                   ----------------------- ---------------------- ----------------------
               BBB or higher/Baa2 or higher
--------------                                   ----------------------- ---------------------- ----------------------
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
     III       Less than 3.50:1.00 but greater        1.000% p.a.               0% p.a.              .250% p.a.
               than or equal to 3.00:1.0
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
--------------                                   ----------------------- ---------------------- ----------------------
               BBB- or higher/Baa3 or higher
--------------                                   ----------------------- ---------------------- ----------------------
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
     IV        Equal to or greater than               1.250% p.a.               0% p.a.              .375% p.a.
               3.50:1:00
-------------- --------------------------------- ----------------------- ---------------------- ----------------------
--------------                                   ----------------------- ---------------------- ----------------------
               BB+ or higher/Ba1 or higher/or
               unrated
-------------- --------------------------------- ----------------------- ---------------------- ----------------------

</TABLE>

         If (i) the Applicable  Margin and the  Applicable  Percentage are to be
determined by the Reference  Ratings,  (ii) more than one Reference Rating is in
effect, (iii) such Reference Ratings are "split ratings" and (iv)(A) the ratings
differential is one category,  the lower of the two Reference Ratings will apply
(e.g., BBB+/Baa2 results in Level II status) and (B) the ratings differential is
more  than one  category,  the rate  shall be  determined  by  reference  to the
category  next  above  that of the  lower of the two  Reference  Ratings  (e.g.,
A-/Baa3,  then the rate  would be  based  on  Level  II  status).  If,  once any
Reference Party has obtained a Credit Rating,  neither Reference Party continues
to maintain any Credit  Rating,  then the rate shall be established by reference
to Level IV.

         If the  rating  system of S&P or  Moody's  shall  change,  or if either
rating  agency  shall  cease to be in the  business  of  rating  corporate  debt
obligations,  the  Borrower,  the  Lenders  and the  Administrative  Agent shall
negotiate in good faith to amend this  Schedule 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  Margin and the Applicable
Percentage  shall be  determined  by  reference  to the  Reference  Ratings most
recently in effect prior to any such change or cessation.  If after a reasonable
time the parties cannot agree to a mutually acceptable amendment, the Applicable
margin and the Applicable  Percentage  shall be determined by reference to Level
IV.



<PAGE>


                                  Schedule 4.5
                                   Schedule II

                              EXISTING INDEBTEDNESS



$15,000,000 7.89% Notes due June 27, 2016

$35,000,000 7.08% Notes due June 27, 2001

$33,000,000 8.05% Senior Notes due December 22, 2001

$27,000,000 8.37% Notes due February 24, 2002

$ 8,000,000 7.43% Notes due June 27, 2003

$10,000,000 7.60% Senior Notes due June 27, 2006

[CHASE REVOLVER]



<PAGE>


                                                                    SCHEDULE 4.5


                              ENVIRONMENTAL MATTERS

                                     [None]




<PAGE>


                                  Schedule 7.2
                                  SCHEDULE 4.15


                     SUBSIDIARIES, SIGNIFICANT SUBSIDIARIES,
                      SIGNIFICANT AFFILIATES AND GUARANTORS


<TABLE>
<CAPTION>

<S>                                 <C>                      <C>                         <C>
Subsidiary or Affiliate             State of Incorp.             Entity Type             KPP's ownership

Kaneb Pipe Line Partners, L.P.         Delaware              Limited Partnership         N/A*

Kaneb Pipe Line Operating
     Partnership, L.P.                 Delaware              Limited Partnership          99% L.P. interest

Support Terminal Operating                                                                99% L.P. interest*
     Partnership, L.P.                 Delaware              Limited Partnership          1% G.P. interest

ST Services Ltd.                     United Kingdom          Limited Corporation          100%

ST Eastham  Ltd.                     United Kingdom          Limited Corporation          100%

ST Linden Terminal LLC                 Delaware              Limited Liability Corporation 50% managing member

ST/Center Chillicothe LLC              Delaware              Limited Liability Corporation 50% managing member

Support Terminal Services, Inc.        Delaware              Corporation                  100%*

StanTrans, Inc.                        Delaware              Corporation                  100%*

StanTrans Holding, Inc.                Delaware              Corporation                  100%

StanTrans Partners, L.P.               Delaware              Limited Partnership           99% L.P. interest
                                                                                            1% G.P. interest
</TABLE>


* Guarantor

<PAGE>
                                                                    SCHEDULE 7.2
                                 EXISTING LIENS


$27,000,000                    First Mortgage Notes              due 2/24/02*
$33,000,000                    First Mortgage Notes              due 1/22/01*
$35,000,000                    First Mortgage Notes              due 6/27/01*
$ 8,000,000                    First Mortgage Notes              due 6/27/03*
$10,000,000                    First Mortgage Notes              due 6/27/06*
$15,000,000                    First Mortgage Notes              due 6/27/16*
$15,000,000                    Revolver                          due 1/31/01*
(pound)16,000,000              Term Loan                         due 1/31/02**

The  indebtedness  listed  above is  secured  by a pledge  by  Kaneb  Pipe  Line
Operating Partnership, L.P. of the East pipeline and gathering system located in
Kansas,  Nebraska,  Iowa,  North  Dakota and South  Dakota  (the "East  Pipeline
Collateral") and a pledge by Kaneb Pipe Line Operating Partnership,  L.P. of all
of the issued and outstanding  common stock of Support Terminal  Services,  Inc.
The East Pipeline Collateral includes,  but is not limited to, (a) all fee lands
and other  rights,  (b) all  surface  and other  leases,  (c) all rights of way,
easements,  servitudes, rights under oil & gas leases, licenses and permits, (d)
all franchises,  licenses,  certificates of public  convenience,  (e) all loops,
laterals,   mains,  lines,  (f)  all  contracts  and  agreements  for  purchase,
acquisition,  gathering,  (g) all hydrocarbons within the pipeline systems,  (h)
all present and future  accounts and (i) all present  tenements,  hereditaments,
appurtenances,  profits and  properties.  The East Pipeline  Collateral and such
stock are described further in the Collateral Trust and Intercreditor Agreement,
dated as of  December  22,  1994,  by and among  Texas  Commerce  Bank  National
Association as Agent,  the Original  Banks,  the Original  Noteholders,  and the
Collateral Trustee (each as defined therein) as amended from time to time.

* Indebtedness to be paid on January 2, 2001.
** Lien to be released on the Closing Date.




<PAGE>




                                                                       EXHIBIT A


                                  FORM OF NOTE


[$___________]



         FOR  VALUE  RECEIVED,  the  undersigned,   KANEB  PIPE  LINE  OPERATING
PARTNERSHIP,  L.P., a Delaware  limited  partnership  (the  "Borrower"),  hereby
promises to pay to [name of Lender] (the "Lender") or its registered assigns, at
the office of  SunTrust  Bank  ("SunTrust")  at 25 Park  Place,  N.E.,  Atlanta,
Georgia  30303,  on the  Termination  Date (as defined in the  Revolving  Credit
Agreement,  dated  as of  December  28,  2000  (as  the  same  may  be  amended,
supplemented or otherwise  modified from time to time, the "Credit  Agreement"),
among the Borrower,  Kaneb Pipe Line  Partners,  L.P.,  the lenders from time to
time party thereto and SunTrust,  as administrative  agent for the lenders,  the
lesser of the  principal  sum of [AMOUNT OF SUCH  LENDER'S  COMMITMENT]  and the
aggregate  unpaid  principal  amount  of all  Loans  made by the  Lender  to the
Borrower pursuant to the Credit Agreement,  in lawful money of the United States
of America in  immediately  available  funds,  and to pay interest from the date
hereof on the principal  amount thereof from time to time  outstanding,  in like
funds, at said office,  at the rate or rates per annum and payable on such dates
as provided in the Credit  Agreement.  In  addition,  should  legal action or an
attorney-at-law  be utilized to collect any amount due  hereunder,  the Borrower
further  promises  to pay all  costs of  collection,  including  the  reasonable
attorneys' fees of the Lender.

         The  Borrower  promises  to pay  interest,  on demand,  on any  overdue
principal and, to the extent  permitted by law,  overdue interest from their due
dates at a rate or rates provided in the Credit Agreement.

         All borrowings  evidenced by this Note and all payments and prepayments
of the  principal  hereof and the date  thereof  shall be endorsed by the holder
hereof  on  the  schedule  attached  hereto  and  made  a  part  hereof  or on a
continuation  thereof which shall be attached hereto and made a part hereof,  or
otherwise  recorded by such holder in its internal records;  provided,  that the
failure  of the  holder  hereof  to make  such a  notation  or any error in such
notation  shall not affect the  obligations of the Borrower to make the payments
of  principal  and  interest in  accordance  with the terms of this Note and the
Credit Agreement.

         This Note is issued in connection with, and is entitled to the benefits
of, the Credit Agreement which, among other things,  contains provisions for the
acceleration of the maturity  hereof upon the happening of certain  events,  for
prepayment  of the  principal  hereof prior to the  maturity  hereof and for the
amendment or waiver of certain provisions of the Credit Agreement,  all upon the
terms  and  conditions  therein  specified.  THIS  NOTE  SHALL BE  CONSTRUED  IN
ACCORDANCE  WITH  AND  GOVERNED  BY THE  LAWS OF THE  STATE  OF NEW YORK AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.


                                     KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.

                                     By KANEB PIPE LINE COMPANY,
                                        General Partner

                                     By
                                     Name:
                                     Title:






<PAGE>
                               LOANS AND PAYMENTS

<TABLE>
<CAPTION>
<S>              <C>                       <C>                   <C>                        <C>
---------------- ------------------------- --------------------- -------------------------- --------------------------

                                                                     Unpaid Principal            Name of Person
                        Amount and             Payments of              Balance of                   Making
     Date              Type of Loan              Principal                 Note                     Notation
---------------- ------------------------- --------------------- -------------------------- --------------------------
---------------- ------------------------- --------------------- -------------------------- --------------------------


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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

</TABLE>


<PAGE>
                                     FORM OF

                            ASSIGNMENT AND ACCEPTANCE





         Reference  is made to the Credit  Agreement,  dated as of December  28,
2000 (as amended  and in effect on the date  hereof,  the  "Credit  Agreement"),
among  Kaneb  Pipe  Line  Operating   Partnership,   L.P.,  a  Delaware  limited
partnership, Kaneb Pipe Line Partners, L.P., a Delaware limited partnership, the
Lenders  from time to time party  hereto and SunTrust  Bank,  as  Administrative
Agent for the Lenders.  Terms  defined in the Credit  Agreement  are used herein
with the same meanings.

         The  Assignor  hereby  sells  and  assigns,  without  recourse,  to the
Assignee  designated  below,  and the  Assignee  hereby  purchases  and assumes,
without  recourse,  from the Assignor,  effective as of the Assignment  Date set
forth below,  the  interests  set forth below (the  "Assigned  Interest") in the
Assignor's rights and obligations under the Credit Agreement, including, without
limitation,  the interests set forth below in the  Commitment of the Assignor on
the Assignment  Date and Loans owing to the Assignor that are outstanding 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  2.17(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  shall pay the fee payable to the  Administrative
Agent pursuant to Section 11.4(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"):


<PAGE>






                                                                       EXHIBIT C



                                     FORM OF

                         SUBSIDIARY GUARANTEE AGREEMENT


This SUBSIDIARY  GUARANTEE  AGREEMENT (the "Agreement"),  dated as of [ ], among
each of the  Subsidiaries  listed on  Schedule I hereto  (each  such  subsidiary
individually,  a "Guarantor" and  collectively,  the "Guarantors") of KANEB PIPE
LINE  OPERATING   PARTNERSHIP,   L.P.,  a  Delaware  limited   partnership  (the
"Borrower"),  and SUNTRUST BANK, a Georgia banking corporation as administrative
agent (the  "Administrative  Agent")  for the  Lenders (as defined in the Credit
Agreement referred to below).
         Reference  is made  to the  Revolving  Credit  Agreement,  dated  as of
December 28, 2000 (as amended,  supplemented or otherwise  modified from time to
time,  the "Credit  Agreement"),  among the Borrower,  Kaneb Pipe Line Partners,
L.P.,  the lenders from time to time party thereto (the  "Lenders") and SunTrust
Bank,  as  administrative   agent  for  the  Lenders  (in  such  capacity,   the
"Administrative  Agent").  Capitalized  terms used herein and not defined herein
shall have the meanings assigned to such terms in the Credit Agreement.

         The Lenders have agreed to make Loans to the Borrower  pursuant to, and
upon the terms and subject to the conditions specified in, the Credit Agreement.
Each of the  Guarantors  is a direct or indirect  Subsidiary of the Borrower and
acknowledges  that it will  derive  substantial  benefit  from the making of the
Loans  by the  Lenders.  The  obligations  of the  Lenders  to  make  Loans  are
conditioned on, among other things, the execution and delivery by the Guarantors
of a  Subsidiary  Guarantee  Agreement  in the  form  hereof.  As  consideration
therefor and in order to induce the Lenders to make Loans,  the  Guarantors  are
willing to execute this Subsidiary Guarantee Agreement.

         Accordingly, the parties hereto agree as follows:

Guarantee.
         Each  Guarantor  unconditionally  guarantees,  jointly with KPP and the
other Guarantors and severally, as a primary obligor and not merely as a surety,
(i) the due and punctual  payment of (A) the  principal of and premium,  if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency,  receivership  or other  similar  proceeding,  regardless of whether
allowed or allowable in such proceeding) on the Loans,  when and as due, whether
at  maturity,  by  acceleration,  upon one or more dates set for  prepayment  or
otherwise,  and (B) all  other  monetary  obligations,  including  fees,  costs,
expenses and indemnities,  whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency,  receivership or other similar proceeding, regardless of
whether  allowed or  allowable in such  proceeding),  of the Loan Parties to the
Administrative  Agent and the Lenders  under the Credit  Agreement and the other
Loan  Documents,  (ii)  the  due  and  punctual  performance  of all  covenants,
agreements, obligations and liabilities of the Loan Parties under or pursuant to
the  Credit  Agreement  and the  other  Loan  Documents;  and  (iii) the due and
punctual payment and performance of all obligations of the Borrower, monetary or
otherwise,  under each Hedging  Agreement  entered into with a counterparty that
was a Lender or an Affiliate of a Lender at the time such Hedging  Agreement was
entered  into  (all  the  monetary  and  other  obligations  referred  to in the
preceding   clauses   (i)   through   (iii)   being   collectively   called  the
"Obligations").  Each  Guarantor  further  agrees  that the  Obligations  may be
extended or renewed,  in whole or in part,  without  notice to or further assent
from it, and that it will remain bound upon its  guarantee  notwithstanding  any
extension or renewal of any Obligation.

Obligations Not Waived.
         To the fullest  extent  permitted by  applicable  law,  each  Guarantor
waives  presentment  to,  demand of payment  from and  protest to the other Loan
Parties of any of the  Obligations,  and also waives notice of acceptance of its
guarantee and notice of protest for nonpayment.  To the fullest extent permitted
by applicable  law, the  obligations  of each Guarantor  hereunder  shall not be
affected by (i) the failure of the Administrative  Agent or any Lender to assert
any claim or demand or to enforce or  exercise  any right or remedy  against the
Borrower or any other  Guarantor  under the provisions of the Credit  Agreement,
any other Loan Document or otherwise, (ii) any rescission,  waiver, amendment or
modification  of, or any release  from any of the terms or  provisions  of, this
Agreement,  any other  Loan  Document  or any other  agreement,  including  with
respect to any other  Guarantor  under this  Agreement,  or (iii) the failure to
perfect any security interest in, or the release of, any of the security held by
or on behalf of the Administrative Agent or any Lender.

Guarantee of Payment.
         Each  Guarantor  further  agrees  that  its  guarantee   constitutes  a
guarantee  of payment  when due and not of  collection,  and waives any right to
require that any resort be had by the Administrative  Agent or any Lender to any
of the  security  held for payment of the  Obligations  or to any balance of any
deposit account or credit on the books of the Administrative Agent or any Lender
in favor of the Borrower or any other Person.

No Discharge or Diminishment of Guarantee.
         The obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation,  impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations), including any claim of
waiver, release, surrender,  alteration or compromise of any of the Obligations,
and shall not be subject to any defense or setoff,  counterclaim,  recoupment or
termination   whatsoever   by   reason   of  the   invalidity,   illegality   or
unenforceability   of  the  Obligations  or  otherwise.   Without  limiting  the
generality of the foregoing,  the obligations of each Guarantor  hereunder shall
not be  discharged  or  impaired  or  otherwise  affected  by the failure of the
Administrative  Agent or any  Lender to assert any claim or demand or to enforce
any remedy  under the Credit  Agreement,  any other Loan  Document  or any other
agreement, by any waiver or modification of any provision of any thereof, by any
default,  failure or delay,  willful or  otherwise,  in the  performance  of the
Obligations,  or by any other act or omission that may or might in any manner or
to the extent vary the risk of any Guarantor or that would otherwise  operate as
a  discharge  of each  Guarantor  as a matter of law or equity  (other  than the
indefeasible payment in full in cash of all the Obligations).

Defenses of Borrower Waived.
         To the fullest  extent  permitted by  applicable  law,  each  Guarantor
waives any  defense  based on or arising out of any defense of any Loan Party or
the  unenforceability  of the Obligations or any part thereof from any cause, or
the cessation from any cause of the liability of any Loan Party,  other than the
final  and  indefeasible  payment  in  full  in  cash  of the  Obligations.  The
Administrative  Agent and the Lenders may, at their  election,  foreclose on any
security  held by one or more of  them by one or more  judicial  or  nonjudicial
sales,  accept  an  assignment  of any  such  security  in lieu of  foreclosure,
compromise or adjust any part of the Obligations,  make any other  accommodation
with any other Loan Party or any other guarantor, without affecting or impairing
in any way the  liability of any  Guarantor  hereunder  except to the extent the
Obligations have been fully,  finally and indefeasibly paid in cash. Pursuant to
applicable  law,  each  Guarantor  waives any  defense  arising  out of any such
election even though such  election  operates,  pursuant to  applicable  law, to
impair or to extinguish any right of reimbursement or subrogation or other right
or remedy of such  Guarantor  against  the  Borrower or any other  Guarantor  or
guarantor, as the case may be, or any security.

Agreement to Pay; Subordination.
         In  furtherance  of the  foregoing  and not in  limitation of any other
right  that the  Administrative  Agent  or any  Lender  has at law or in  equity
against any Guarantor by virtue hereof,  upon the failure of the Borrower or any
other Loan Party to pay any  Obligation  when and as the same shall  become due,
whether at maturity,  by acceleration,  after notice of prepayment or otherwise,
each Guarantor  hereby  promises to and will forthwith pay, or cause to be paid,
to the Administrative Agent for the benefit of the Lenders in cash the amount of
such  unpaid  Obligations.  Upon  payment  by any  Guarantor  of any sums to the
Administrative  Agent,  all  rights of such  Guarantor  against  any Loan  Party
arising  as a  result  thereof  by way of right  of  subrogation,  contribution,
reimbursement,  indemnity or otherwise  shall in all respects be subordinate and
junior in right of payment to the prior indefeasible  payment in full in cash of
all the  Obligations.  In addition,  any  indebtedness  of any Loan Party now or
hereafter  held by any Guarantor is hereby  subordinated  in right of payment to
the  prior  payment  in full in cash of the  Obligations.  If any  amount  shall
erroneously  be  paid to any  Guarantor  on  account  of (i)  such  subrogation,
contribution,  reimbursement,  indemnity  or  similar  right  or (ii)  any  such
indebtedness  of any Loan  Party,  such  amount  shall be held in trust  for the
benefit of the Administrative  Agent and the Lenders and shall forthwith be paid
to  the  Administrative  Agent  to  be  credited  against  the  payment  of  the
Obligations,  whether matured or unmatured,  in accordance with the terms of the
Loan Documents.

Information.
         Each Guarantor assumes all  responsibility for being and keeping itself
informed of other Loan Parties' financial condition and assets, and of all other
circumstances  bearing upon the risk of  nonpayment of the  Obligations  and the
nature,  scope and extent of the risks that such  Guarantor  assumes  and incurs
hereunder,  and agrees that none of the Administrative Agent or the Lenders will
have any duty to advise any of the Guarantors of information  known to it or any
of them regarding such circumstances or risks.

Representations and Warranties.
         Each   Guarantor   represents  and  warrants  as  to  itself  that  all
representations and warranties relating to it (as a Subsidiary of KPP) contained
in the Credit Agreement are true and correct.

Termination.
         The  guarantees  made  hereunder  (i)  shall  terminate  when  all  the
Obligations  have  been  paid in full in cash and the  Lenders  have no  further
commitment  to lend under the Credit  Agreement  and (ii) shall  continue  to be
effective or be reinstated,  as the case may be, if at any time payment,  or any
part thereof,  of any  Obligation is rescinded or must  otherwise be restored by
any  Lender  or any  Guarantor  upon the  bankruptcy  or  reorganization  of the
Borrower,  any Guarantor or otherwise.  In connection  with the  foregoing,  the
Administrative  Agent shall execute and deliver to such Guarantor or Guarantor's
designee,  at such Guarantor's  expense, any documents or instruments which such
Guarantor  shall  reasonably   request  from  time  to  time  to  evidence  such
termination and release.

Binding Effect; Several Agreement; Assignments.
         Whenever in this  Agreement  any of the parties  hereto is referred to,
such  reference  shall be deemed to include the  successors  and assigns of such
party;  and all  covenants,  promises  and  agreements  by or on  behalf  of the
Guarantors  that are  contained  in this  Agreement  shall bind and inure to the
benefit of each party hereto and their respective  successors and assigns.  This
Agreement shall become  effective as to any Guarantor when a counterpart  hereof
executed  on  behalf  of  such  Guarantor  shall  have  been  delivered  to  the
Administrative  Agent,  and a  counterpart  hereof  shall have been  executed on
behalf of the  Administrative  Agent,  and thereafter shall be binding upon such
Guarantor  and the  Administrative  Agent and their  respective  successors  and
assigns,  and shall inure to the benefit of such Guarantor,  the  Administrative
Agent and the Lenders, and their respective successors and assigns,  except that
no Guarantor shall have the right to assign its rights or obligations  hereunder
or any interest herein (and any such attempted assignment shall be void). If all
of the capital stock of a Guarantor is sold,  transferred or otherwise  disposed
of pursuant to a transaction  permitted by the Credit Agreement,  such Guarantor
shall be released from its  obligations  under this  Agreement  without  further
action.  This Agreement shall be construed as a separate  agreement with respect
to each Guarantor and may be amended, modified, supplemented, waived or released
with respect to any  Guarantor  without the approval of any other  Guarantor and
without affecting the obligations of any other Guarantor hereunder.

         Waivers;  Amendment. No failure or delay of the Administrative Agent of
any in  exercising  any  power  or right  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 of the Administrative  Agent hereunder and of the
Lenders under the other Loan  Documents 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 any  Guarantor
therefrom shall in any event be effective  unless the same shall be permitted by
subsection  (b) below,  and then such waiver and consent shall be effective only
in the  specific  instance  and for the  purpose for which  given.  No notice or
demand on any Guarantor in any case shall entitle such Guarantor to any other or
further notice in similar or other circumstances. Neither this Agreement nor any
provision hereof may be waived, amended or modified except pursuant to a written
agreement entered into between the Guarantors with respect to which such waiver,
amendment or modification  relates and the Administrative  Agent, with the prior
written  consent of the Required  Lenders  (except as otherwise  provided in the
Credit  Agreement).  Governing  Law.  THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Notices.
         All  communications and notices hereunder shall be in writing and given
as provided in Section 11.01 of the Credit  Agreement.  All  communications  and
notices  hereunder  to each  Guarantor  shall be given to it at its  address set
forth on Schedule I attached hereto.

         Survival  of  Agreement;   Severability.   All  covenants,   agreements
representations  and  warranties  made  by  the  Guarantors  herein  and  in the
certificates  or other  instruments  prepared or delivered in connection with or
pursuant to this  Agreement or the other Loan  Document  shall be  considered to
have been  relied  upon by the  Administrative  Agent and the  Lenders and shall
survive the making by the Lenders of the Loans  regardless of any  investigation
made by any of them or on their  behalf,  and shall  continue  in full force and
effect as long as the  principal  of or any accrued  interest on any Loan or any
other fee or amount  payable under this  Agreement or any other Loan Document is
outstanding and unpaid and as long as the Commitments  have not been terminated.
In the event one or more of the provisions contained in this Agreement or in any
other Loan Document  should be held  invalid,  illegal or  unenforceable  in any
respect,  the validity,  legality and enforceability of the remaining provisions
contained  herein  and  therein  shall not in any way be  affected  or  impaired
thereby (it being understood that the invalidity of a particular  provision in a
particular  jurisdiction  shall not in and of itself affect the validity of such
provision in any other  jurisdiction).  The parties shall endeavor in good-faith
negotiations to replace the invalid,  illegal or  unenforceable  provisions with
valid provisions the economic effect of which comes as close as possible to that
of  the  invalid,  illegal  or  unenforceable  provisions.   Counterparts.  This
Agreement  may be executed in  counterparts,  each of which shall  constitute an
original,  but all of  which  when  taken  together  shall  constitute  a single
contract  (subject to Section  10),  and shall  become  effective as provided in
Section  10.  Delivery  of an  executed  signature  page  to this  Agreement  by
facsimile  transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.

Rules of Interpretation.
         The rules of  interpretation  specified  in Section  1.03 of the Credit
Agreement shall be applicable to this Agreement.

         Jurisdiction;  Consent to Service of Process. (a) Each Guarantor hereby
irrevocably and  unconditionally  submits,  for itself and its property,  to the
non-exclusive  jurisdiction  of the United States District Court of the Southern
District of New York,  and of the Supreme Court of the State of New York sitting
in New York County and any  appellate  court from any thereof,  in any action or
proceeding  arising  out of or  relating  to this  Agreement  or the other  Loan
Documents or the transactions contemplated hereby or thereby, 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 court
or, to the extent  permitted by applicable  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 or any Lender may otherwise have
to bring any action or proceeding  relating to this  Agreement or the other Loan
Documents  against  any  Guarantor  or  its  properties  in  the  courts  of any
jurisdiction.   Each  Guarantor  irrevocably  and  unconditionally   waives  any
objection  which it may now or hereafter have to the laying of venue of any such
suit,  action or  proceeding  described  in  subsection  (a) of this Section and
brought in any court referred to in subsection (a) of this Section.  Each of the
parties hereto irrevocably waives, to the fullest extent permitted by applicable
law, the defense of an  inconvenient  forum to the maintenance of such action or
proceeding in any such court. Each party to this Agreement  irrevocably consents
to the  service of process in the manner  provided  for  notices in Section  13.
Nothing in this  Agreement  will  affect the right of any party  hereto to serve
process in any other manner  permitted by law. SECTION 18. Waiver of Jury Trial.
EACH PARTY  HERETO  IRREVOCABLY  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 THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR THE TRANSACTIONS  CONTEMPLATED  HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT  OR  ANY  OTHER   THEORY).   EACH  PARTY  HERETO  (i)  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 (ii)  ACKNOWLEDGES  THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS BY, AMONG OTHER THINGS,  THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

Additional Guarantors.
         Pursuant  to Section  5.11 of the Credit  Agreement,  each  Significant
Subsidiary (other than any Foreign Subsidiary and any Excluded  Subsidiary) that
was not in  existence  on the date of the Credit  Agreement is required to enter
into this  Agreement as a Guarantor.  Upon execution and delivery after the date
hereof by the  Administrative  Agent and such Subsidiary of an instrument in the
form of Annex 1, such  Subsidiary  shall become a Guarantor  hereunder  with the
same  force  and  effect  as if  originally  named as a  Guarantor  herein.  The
execution and delivery of any  instrument  adding an  additional  Guarantor as a
party to this  Agreement  shall not require  the consent of any other  Guarantor
hereunder.  The rights and obligations of each Guarantor  hereunder shall remain
in full force and effect  notwithstanding the addition of any new Guarantor as a
party to this Agreement.

Right of Setoff.
         If an Event of Default  shall have  occurred  and be  continuing,  each
Lender are 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
Indebtedness  at any  time  owing by such  Lender  to or for the  credit  or the
account of any Guarantor  against any or all the  obligations  of such Guarantor
now or hereafter existing under this Agreement and the other Loan Documents held
by such Lender,  irrespective  of whether or not such Person shall have made any
demand  under  this  Agreement  or any other Loan  Document  and  although  such
obligations  may be  unmatured.  The rights of each Lender under this Section 20
are in addition to other rights and remedies  (including other rights of setoff)
that such Lender may have.





<PAGE>


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the day and year first above written.


                                                     EACH OF THE SUBSIDIARIES
                                                     LISTED ON SCHEDULE I HERETO


                                                     By
                                                        Name:
                                                        Title:


                                                     SUNTRUST BANK, as
                                                     Administrative Agent


                                                     By
                                                        Name:
                                                        Title:



<PAGE>
                                SCHEDULE I TO THE
                         SUBSIDIARY GUARANTEE AGREEMENT



Guarantor(s)                                                Address







<PAGE>
                                                                  ANNEX 1 TO THE
                                                  SUBSIDIARY GUARANTEE AGREEMENT


         SUPPLEMENT  NO.  [ ]  dated  as of [ ],  to  the  Subsidiary  Guarantee
Agreement,  dated  as of [ ] (the  "Guarantee  Agreement"),  among  each  of the
subsidiaries listed on Schedule I thereto (each such Subsidiary individually,  a
"Guarantor" and  collectively,  the  "Guarantors")  of KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "Borrower"), and SUNTRUST
BANK,   a  Georgia   banking   corporation,   as   Administrative   Agent   (the
"Administrative  Agent") for the  Lenders  (as  defined in the Credit  Agreement
referred to below).

         B.  Reference  is made to the  Credit  Agreement,  dated  as of [ ] (as
amended,  supplemented  or  otherwise  modified  from time to time,  the "Credit
Agreement"),  among the  Borrower,  the lenders from time to time party  thereto
(the "Lenders") and SunTrust Bank, as  Administrative  Agent.  Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Guarantee  Agreement and the Credit Agreement.  The Guarantors
have entered into the Guarantee Agreement in order to induce the Lenders to make
Loans.  Pursuant  to Section  5.12 of the  Credit  Agreement,  each  Significant
Subsidiary (other than any Foreign Subsidiary and any Excluded  Subsidiary) that
was not in existence  or not a Guarantor on the date of the Credit  Agreement is
required to enter into the Guarantee Agreement as a Guarantor. Section 19 of the
Guarantee  Agreement  provides that additional  Subsidiaries of the Borrower may
become Guarantors under the Guarantee  Agreement by execution and delivery of an
instrument in the form of this  Supplement.  The  undersigned  Subsidiary of the
Borrower (the "New  Guarantor") is executing this  Supplement in accordance with
the  requirements  of the  Credit  Agreement  to  become a  Guarantor  under the
Guarantee  Agreement in order to induce the Lenders to make additional Loans and
as  consideration  for Loans previously made.  Accordingly,  the  Administrative
Agent and the New Guarantor agree as follows:

         In  accordance  with  Section 19 of the  Guarantee  Agreement,  the New
Guarantor  by its  signature  below  becomes a  Guarantor  under  the  Guarantee
Agreement  with the same force and effect as if  originally  named  therein as a
Guarantor  and the  New  Guarantor  hereby  (i)  agrees  to all  the  terms  and
provisions of the Guarantee Agreement  applicable to it as Guarantor  thereunder
and (ii) represents and warrants that the representations and warranties made by
it as a Guarantor  thereunder are true and correct on and as of the date hereof.
Each  reference to a Guarantor  in the  Guarantee  Agreement  shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated herein
by reference.  The New Guarantor  represents and warrants to the  Administrative
Agent and the Lenders that this  Supplement has been duly  authorized,  executed
and delivered by it and that each of this Supplement and the Guarantee Agreement
constitutes its legal, valid and binding  obligation,  enforceable against it in
accordance with its terms.  This Supplement may be executed in counterparts each
of which shall  constitute  an  original,  but all of which when taken  together
shall constitute a single contract.  This Supplement shall become effective when
the  Administrative  Agent shall have received  counterparts  of this Supplement
that,  when taken  together,  bear the  signatures  of the New Guarantor and the
Administrative  Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.  Except as expressly  supplemented  hereby,  the
Guarantee Agreement shall remain in full force and effect. THIS SUPPLEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW
YORK.  In case any one or more of the  provisions  contained in this  Supplement
should be held invalid,  illegal or unenforceable in any respect,  the validity,
legality and enforceability of the remaining  provisions contained herein and in
the Guarantee Agreement shall not in any way be affected or impaired thereby (it
being  understood  that the  invalidity  of a particular  provision  hereof in a
particular  jurisdiction  shall not in and of itself affect the validity of such
provision  in any other  jurisdiction).  The parties  hereto  shall  endeavor in
good-faith  negotiations  to  replace  the  invalid,  illegal  or  unenforceable
provisions with valid  provisions the economic effect of which comes as close as
possible  to that of the  invalid,  illegal  or  unenforceable  provisions.  All
communications  and notices  hereunder shall be in writing and given as provided
in  Section  13 of the  Guarantee  Agreement.  All  communications  and  notices
hereunder  to the New  Guarantor  shall be given to it at the  address set forth
under its signature below, with a copy to the Borrower. The New Guarantor agrees
to  reimburse  the  Administrative  Agent  for  its  out-of-pocket  expenses  in
connection with this  Supplement,  including the fees,  disbursements  and other
charges of counsel for the Administrative Agent.

         IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Guarantee  Agreement as of the day and year
first above written.


                                                     [Name of New Guarantor]


                                                     By
                                                        Name:
                                                        Title:
                                                        Address:


                                                     SUNTRUST BANK, as
                                                     Administrative Agent


                                                     By
                                                        Name:
                                                        Title:




<PAGE>
                                                                       EXHIBIT D


                                     FORM OF

                               NOTICE OF BORROWING


                                     [Date]

SunTrust Bank,
  as Administrative Agent
  for the Lenders referred to below
303 Peachtree Street, N.E.
Atlanta, GA  30308

Attention:

Ladies and Gentlemen:

         Reference  is made to the Credit  Agreement,  dated as of December  28,
2000 (as amended  and in effect on the date  hereof,  the  "Credit  Agreement"),
among the  undersigned,  as Borrower,  the Lenders named  therein,  and SunTrust
Bank, as  Administrative  Agent.  Terms defined in the Credit Agreement are used
herein with the same  meanings.  This notice  constitutes a Notice of Borrowing,
and the Borrower hereby requests a Borrowing under the Credit Agreement,  and in
that connection the Borrower specifies the following information with respect to
the Borrowing requested hereby:

(A)      Aggregate principal amount of Borrowing 1/ __________________

(B)      Date of Borrowing (which is a Business Day): __________________

(C)      Interest Rate basis 2/: __________________

(D)      Interest Period 3/: __________________

(E)      Location  and  number  of  Borrower's  account  to  which  proceeds  of
         Borrowing are to be disbursed: __________________

         The  Borrower  hereby  represents  and  warrants  that  the  conditions
specified in clauses (i), (ii) and (iii) of Section 3.2 of the Credit  Agreement
are satisfied.


                                     Very truly yours,

                                     KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.

                                     By KANEB PIPE LINE COMPANY,
                                        General Partner

                                     By
                                     Name:
                                     Title:



1/       Not less than $5,000,000 and an integral multiple of $1,000,000.
2/       Eurodollar Borrowing or Base Rate Borrowing.
3/ Which must comply with the definition of "Interest  Period" and end not later
than the Termination Date.



<PAGE>
                                                                      EXHIBIT E

                         FORM OF CONTINUATION/CONVERSION


                                     [Date]



SunTrust Bank,
  as Administrative Agent
for the Lenders referred to below
303 Peachtree Street, N.E.
Atlanta, GA  30308

Attention:

Ladies and Gentlemen:

         Reference  is made to the Credit  Agreement,  dated as of December  28,
2000 (as amended  and in effect on the date  hereof,  the  "Credit  Agreement"),
among the  undersigned,  as Borrower,  the Lenders named  therein,  and SunTrust
Bank, as  Administrative  Agent.  Terms defined in the Credit Agreement are used
herein with the same meanings. This notice constitutes a Continuation/Conversion
and the Borrower  hereby  requests the conversion or continuation of a Borrowing
under the Credit  Agreement,  and in that connection the Borrower  specifies the
following information with respect to the Borrowing to be converted or continued
as requested hereby:

(A)      Borrowing to which this request applies: __________________

(B)      Principal amount of Borrowing to be converted/continued: ___________

(C)      Effective date of election (which is a Business Day): _____________

(D)      Interest rate basis: __________________

(E)      Interest Period: __________________


                                     Very truly yours,

                                     KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.

                                     By KANEB PIPE LINE COMPANY,
                                        General Partner

                                     By
                                     Name:
                                     Title:


<PAGE>


[Closing Date]
Page 7



                                                                       EXHIBIT F

                 FORM OF OPINION OF COUNSEL FOR THE LOAN PARTIES





                                                     [Closing Date]



To each of the Lenders  party to the Credit  Agreement  referred to below and to
SunTrust Bank, as Administrative Agent thereunder

Ladies and Gentlemen:

         This opinion is furnished to you pursuant to Section  3.1(b)(vi) of the
Credit Agreement,  dated as of December 28, 2000 (such agreement,  excluding the
schedules and exhibits thereto, the "Credit  Agreement"),  among Kaneb Pipe Line
Operating Partnership,  L.P., (the "Borrower"),  Kaneb Pipe Line Partners,  L.P.
("KPP"),  the Lenders parties thereto and SunTrust Bank, as Administrative Agent
for said Lenders.  Unless otherwise defined herein,  terms defined in the Credit
Agreement  are used herein as therein  defined.  We have acted as counsel to the
Loan Parties (as defined below) in connection  with the  preparation,  execution
and delivery of the Credit Agreement.  In connection with this opinion,  we have
examined:

(1)      A  counterpart  of the Credit  Agreement,  executed by the Borrower and
         KPP;

(2)      the Notes, executed by the Borrower;

(3)      a  counterpart  of the  Subsidiary  Guarantee  Agreement,  executed  by
         Support  Terminal   Services,   Inc.,   Support   Terminals   Operating
         Partnership, L.P. and StanTrans, Inc. (collectively,  the "Guarantors",
         and, together with the Borrower and KPP, the "Loan Parties");

(4)      The other documents  furnished by the Loan Parties  pursuant to Section
         3.1 of the Credit Agreement;

(5)      The  Constituent  Documents  of each  Loan  Party  and  all  amendments
         thereto; and

(6)      A  certificate  of the  Secretary  of State of each State in which each
         Loan Party is formed,  organized or  incorporated,  as the case may be,
         attesting  to the  continued  existence  and good  standing of the Loan
         Parties in the applicable States.

         The Credit Agreement and the other agreements and instruments  referred
to in clauses  (1), (2) and (3) above are  hereinafter  referred to as the "Loan
Documents".  In  addition to the Loan  Documents,  we have  examined  such other
documents  and  corporate  and  partnership  records  (collectively,  the "Other
Documents")  and questions of law as we deem  necessary for the purposes of this
opinion. We have also examined such certificates of public officials,  corporate
officers of the Loan  Parties and other  Persons as we have deemed  relevant and
appropriate as a basis for the opinions  expressed  herein,  and we have made no
effort  to  independently  verify  the  facts  set  forth in such  certificates.
Further, in making the foregoing  examinations,  we have assumed the genuineness
of all signatures (other than signatures of the Loan Parties with respect to the
Loan  Documents),  the legal  capacity  of each person  signatory  to any of the
documents  reviewed by us, the authenticity of all documents  submitted to us as
originals and the  conformity to authentic  original  documents of all documents
submitted to us as copies. In making the foregoing examinations, we have assumed
that, as to factual  matters,  all  representations  and warranties  made in the
aforesaid  documents  (other  than  those  which  are  expressed  herein  as our
opinions) were and are true, correct and complete in all material respects.

         In rendering the opinions expressed herein, we have assumed that:

                  (a) each of the documents  examined by us (other than the Loan
         Documents) has been duly authorized,  executed and delivered by each of
         the  parties  thereto  and  constitutes  the legal,  valid and  binding
         obligation of each such party thereto  enforceable  in accordance  with
         its terms;

                  (b) the Loan Documents have been duly authorized, executed and
         delivered by or on behalf of each of the parties thereto other than the
         Loan Parties,  that each such party other than the Loan Parties has the
         requisite  power and  authority  to execute,  deliver and perform  such
         documents  to  which  it  is a  party,  and  that  the  Loan  Documents
         constitute the legal, valid and binding  obligations of each such other
         party thereto enforceable in accordance with its terms;

                  (c) no order, consent, approval,  license,  authorization,  or
         validation of, or filing,  recording or registration with, or exemption
         by, any  court,  governmental  body or  authority,  or any  subdivision
         thereof,  is required to authorize or is required in  connection  with,
         the  execution  and  delivery  by any  Person  identified  in any  Loan
         Document as a party thereto,  or in connection  with the performance of
         its  obligations  thereunder or the  consummation  of the  transactions
         contemplated thereby,  other than those that have been obtained or made
         and  are in  full  force  and  effect  (provided,  that we make no such
         assumption with respect to consents,  approvals and the like applicable
         to Loan  Parties to the extent that we express our opinion  rendered in
         paragraph 4 below);

                  (d)  the  Administrative  Agent  has  been  and  is  the  duly
         appointed  agent of each of the other  Lenders  pursuant  to the Credit
         Agreement; and

                  (e) there are no extrinsic  agreements or understandings among
         the  parties  to the Loan  Documents  that  would  modify or affect the
         interpretation  of the terms of the Loan  Documents  or the  respective
         rights or obligations of the parties thereunder.

         In rendering this opinion, we have made no independent investigation of
the facts  referred to herein and have relied for the purpose of rendering  this
opinion  exclusively  on the facts set forth in the Loan Documents and the Other
Documents  and the  certificates  referred to above,  which facts we assume have
been  and will  continue  to be  true,  accurate  and  correct  in all  material
respects.

         Based upon the foregoing,  and upon an examination of such questions of
law  as we  have  considered  necessary  or  appropriate,  and  subject  to  the
assumptions,  exceptions,  qualifications  and limitations set forth herein,  we
advise you that, in our opinion:

                  1. Each Loan  Party (a) has been duly  formed  and is  validly
         existing in good standing under the laws of its state of formation, (b)
         has the corporate or partnership power and authority to own and operate
         its property,  to lease the property which it operates as lessee and to
         conduct the business in which it is  currently  engaged and in which it
         proposes to be engaged after the date hereof, in each case as described
         in the periodic reports filed by KPP under the Securities  Exchange Act
         of 1934, as amended (the "Exchange  Act"), and (c) is duly qualified as
         a  foreign  entity  and is in  good  standing  under  the  laws of each
         jurisdiction listed on Schedule I hereto.

                  2. Each Loan Party has the corporate or partnership  power and
         authority to execute and deliver, and to perform its obligations under,
         each Loan  Document  to which  such Loan  Party is a party.  The Credit
         Agreement has been duly executed and delivered by KPP and the Borrower,
         the Notes have been duly executed and  delivered by the  Borrower,  and
         the Subsidiary Guarantee Agreement has been duly executed and delivered
         by each Guarantor.

                  3.  Assuming the proceeds of the Loans are used solely for the
         purposes set forth in the Credit  Agreement,  neither the execution and
         delivery of a Loan Document by a Loan Party,  nor performance by a Loan
         Party of its  obligations  under a Loan Document,  will (a) result in a
         breach of, or constitute a default under, any agreement to which any of
         the Loan  Parties  is a party  or by which  any of them or any of their
         respective  properties  is bound that has been filed under the Exchange
         Act by KPP as an exhibit to its annual report on Form 10-K for the year
         ended December 31, 1999, or as an exhibit to a quarterly report on Form
         10-Q filed  during  the year 2000 or (b)  violate  (i) the  Constituent
         Documents of any Loan Party,  (ii) any  statutory  law or regulation or
         (iii)  any  decree  or  order  of any  court,  governmental  agency  or
         arbitrator  that is  known  by us to be  applicable  to any of the Loan
         Parties or any of their respective properties.

                  4. No consent, approval, authorization or waiver of, or notice
         to or filing with,  or other action by, any  governmental  authority is
         required by any statutory  law,  regulation or ruling as a condition to
         the execution  and delivery by the Loan Parties of the Loan  Documents,
         or the performance by the Loan Parties of their  obligations  under the
         Loan Documents.

                  5. To our knowledge,  other than as disclosed in KPP's filings
         under the Exchange Act, there are no legal or governmental  proceedings
         pending  to which  any of the  Loan  Parties  is a party or  threatened
         against any of the Loan  Parties  which is required to be  disclosed in
         such filings.

                  6. None of the Loan  Parties is an  "investment  company" or a
         company  "controlled"  by an  "investment  company"  as such  terms are
         defined in the Investment Company Act of 1940, as amended, or a "public
         utility company" or a "holding company," or a "subsidiary company" of a
         "holding  company," or an  "affiliate"  of a "holding  company" or of a
         "subsidiary  company" of a "holding company," as such terms are defined
         in the Public Utility Holding Company Act of 1935, as amended.  None of
         the Loan  Parties  is subject to  regulation  under the Public  Utility
         Holding Company Act of 1935, as amended.

                  7. Under the laws of the State of New York, each Loan Document
         constitutes the legal,  valid and binding obligation of each Loan Party
         that is a party  thereto,  enforceable  against each such Loan Party in
         accordance with its terms.

                  8.  The  foregoing  opinions  are  subject  to  the  following
         assumptions, exceptions, qualifications and limitations.

         (i) The foregoing  opinions are expressly  limited to matters under and
governed by the internal  substantive  laws of the States of New York and Texas,
the  General  Corporation  Law of the State of  Delaware,  the  Revised  Uniform
Limited Partnership Act of the State of Delaware, and applicable Federal laws of
the  United  States of  America,  in each case in effect on the date  hereof and
which, in our experience,  are normally applicable to the transactions  provided
for in the Loan  Documents,  in each case,  however,  exclusive  of, and without
regard to, any Excluded Laws. The term "Excluded  Laws" means all (i) municipal,
political  subdivision (whether created or enabled through legislative action at
the  federal,  state,  regional or local  level),  local and county  ordinances,
statutes,  administrative decisions, laws, rules and regulations,  (ii) conflict
of law  principles and  choice-of-law  statutes and rules,  and (iii)  statutes,
laws,  rules and  regulations  relating to (a)  pollution or  protection  of the
environment,  (b) zoning,  land use, building or construction,  (c) operation of
any asset or property, (d) labor,  employment,  employee rights and benefits, or
occupational  safety and health, (e) utility regulation or regulation of matters
pertaining to the acquisition,  transportation,  transmission, storage or use of
energy sources used in connection therewith or generated thereby, (f) antitrust,
(g) taxation and (h)  securities  laws, in each case with respect to each of the
foregoing,  (x) as interpreted,  construed or enforced pursuant to any judicial,
arbitral or other  decision or  pronouncement,  (y) as enacted,  promulgated  or
issued by, or  otherwise  existing  in effect in, any  jurisdiction,  including,
without  limitation,  any State of the United  States of America  and the United
States  of  America,  and  (z)  including,   without  limitation,  any  and  all
authorizations,  permits, consents, applications,  licenses, approvals, filings,
registrations, publications, exemptions and t he like required by any of them.

         (ii) The foregoing  opinions  regarding the  enforceability of the Loan
Documents are subject to the following:

                  (A) The enforceability of the Loan Documents may be limited or
         affected by (a)  bankruptcy,  insolvency,  reorganization,  moratorium,
         liquidation,   rearrangement,   probate,  conservatorship,   fraudulent
         transfer, fraudulent conveyance and other similar laws (including court
         decisions)  now or  hereafter  in effect and  affecting  the rights and
         remedies of creditors  generally or providing for the relief of debtors
         generally, (b) the refusal of a particular court to grant (i) equitable
         remedies,  including, without limiting the generality of the foregoing,
         specific performance and injunctive relief, or (ii) a particular remedy
         sought under any Loan  Document as opposed to another  remedy  provided
         for  therein  or another  remedy  available  at law or in  equity,  (c)
         general principles of equity, including without limitation requirements
         of good  faith,  fair  dealing  and  reasonableness,  and the  possible
         unavailability of specific performance or injunctive relief (regardless
         of whether such  remedies  are sought in a  proceeding  in equity or at
         law), and (d) judicial discretion.

                  (B) In rendering the foregoing opinions, we express no opinion
         as to (1)(a)  provisions in the Loan Documents that purport to restrict
         access to legal or equitable  remedies,  that purport to affect service
         of  process,   that  purport  to  permit  any  party  to  increase  the
         obligations  of any person or entity without the consent of such person
         or entity, that purport to require any party to waive any notice which,
         as a matter of law or  equity,  may not be waived,  or that  purport to
         reinstate any  obligation  after payment or otherwise,  that purport to
         establish   property   classifications,   presumptions  or  evidentiary
         standards or to waive either illegality as a defense to the performance
         of contract  obligations or any other defense for such performance that
         cannot,  as a matter  of law or  equity,  be  effectively  waived,  (b)
         provisions  in the Loan  Documents  relating  to future  subordination,
         receivership,  delay or omission of enforcement of rights and remedies,
         covenants  not to sue or assert valid  claims,  marshalling  of assets,
         waiver of rights of redemption,  and severability  clauses or rights of
         third  parties,  (c)  provisions  of the Loan  Documents  purporting to
         waive,  eliminate,  prejudice  or restrict  claims for damages or other
         remedies for trespass,  conversion,  negligence, failure to comply with
         requirements concerning notices, disposition of collateral or otherwise
         waiving,  affecting or altering  rights or defenses of any party which,
         in each case, as a matter of law or equity, may not be waived, affected
         or altered or the  Lenders'  obligations  under  applicable  law or (d)
         other provisions having substantially similar effect, (2) the legality,
         validity,  enforceability  or binding  effect of provisions of the Loan
         Documents  relating to indemnities  and rights of  contribution  to the
         extent   prohibited   by   public   policy  or  which   might   require
         indemnification  for losses or  expenses  caused by  negligence,  gross
         negligence,  willful misconduct,  fraud or illegality of an indemnified
         party,  (3) the effect of any provision of the Loan Documents  which is
         intended to permit  modification  thereof only by means of an agreement
         signed in  writing  by the  parties  thereto,  or (4) the effect of any
         provision of the Loan Documents  insofar as it provides that any person
         purchasing a  participation  from a Lender or other Person may exercise
         set-off or similar  rights with respect to such  participation  or that
         any Lender or other Person may exercise set-off or similar rights other
         than in accordance with applicable law.

                  (C) We note that the enforceability of specific  provisions of
         the Loan Documents may be subject to standards of reasonableness,  care
         and  diligence and "good faith"  limitations  and  obligations  such as
         those  provided in  Sections  1-102(3),  1-203,  1-208 and 5-109 of the
         Uniform  Commercial  Code as  currently  in  effect in the State of New
         York,  and the related  provisions  of the Uniform  Commercial  Code as
         currently in effect in the State of Texas, and applicable principles of
         common law and judicial decisions.

                  (D) We have  assumed  that the Lenders  will enforce each Loan
         Document in compliance with the provisions thereof and all requirements
         of applicable law.

                  (E) In connection  with the  provisions of the Loan  Documents
         whereby the Credit  Parties  submit to the  jurisdiction  of the United
         States  District  Court for the Southern  District of New York, we note
         the  limitations  of 28 U.S.C.  ss.ss.  1331 and 1332 on Federal  court
         jurisdiction,  and we also note that such submissions  cannot supersede
         such court's  discretion in  determining  whether to transfer an action
         from one Federal court to another under 28 U.S.C. ss. 1404(a). (iii) In
         rendering  the  opinion   expressed  in  paragraph  1  above  regarding
         existence and good standing,  we have relied solely on  certificates of
         public  officials  of a recent  date,  and have  conducted  no  further
         investigation.  Our opinion  expressed  in  paragraph 6 with respect to
         each  Loan  Party  is based  solely  upon  our  understanding  of their
         respective businesses as described in the periodic reports filed by KPP
         under the Exchange Act.

         (iv) We do not express any opinion  with  respect to any exhibit to, or
other agreement referred to in, any of the Loan Documents.

         (v) In rendering the foregoing  opinions,  we have not, pursuant to our
engagement,  endeavored to express any opinions, and we express no opinions, and
none are intended to be implied hereby nor shall be inferred herefrom, as to (a)
the various  state and federal  laws,  statutes,  regulations,  interpretations,
opinions, directives, orders, rulings, authorities or similar matters regulating
or governing the Administrative Agent or any Lender (collectively,  the "Rules")
and/or  their  entry  into,  execution,  delivery  or  performance  of the  Loan
Documents,  or the  transactions  provided  for  therein,  or the conduct of its
business  related  thereto,  or (b) the  Administrative  Agent's or any Lender's
compliance  with any of the Rules in connection  with any Loan Document,  or the
transactions provided for therein.

         (vi) As used herein,  the phrase "to our knowledge" or words of similar
import means conscious awareness of facts or other information by the lawyers in
our firm who,  based on our records as of 3:00 p.m. on December 27,  2000,  have
devoted  substantive  attention  to legal  matters on behalf of the Loan Parties
since January 1, 2000.


         The  opinions  expressed  herein  are  furnished  to you for your  sole
benefit  in  connection  with  the  transactions   contemplated  by  the  Credit
Agreement.  The opinions  expressed herein may not be relied upon by you for any
other  purpose and may not be relied  upon for any  purpose by any other  person
without  our prior  written  consent,  except  that any Person that may become a
Lender after the date hereof may rely upon this opinion in connection with those
transactions.  The opinions  expressed herein are as of the date hereof (and not
as of any other date) or, to the extent a reference  to a  certificate  or other
document is made herein,  to such date,  and we make no  undertaking to amend or
supplement  such  opinions as facts and  circumstances  come to our attention or
changes in the law occur which could affect such opinions.

                                                     Very truly yours,




<PAGE>

                                   SCHEDULE I

             JURISDICTIONS IN WHICH LOAN PARTIES ARE COMMON CARRIERS

KANEB PIPE LINE COMPANY

Delaware*
Colorado
Iowa
Kansas
Nebraska
North Dakota
South Dakota
Wyoming

KANEB PIPE LINE PARTNERS, L.P.

Delaware*

KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.

Delaware*
Colorado
Iowa
Kansas
Nebraska
North Dakota ** Still pending - should have  certificate  prior to funding South
Dakota Wyoming

* State of incorporation or formation.

SUPPORT TERMINAL SERVICES, INC.

Delaware*
Alabama
Arizona
California
Washington D.C.
Florida
Georgia
Illinois
Indiana
Kansas
Louisiana
Maryland
Minnesota
New Mexico
Oklahoma
Texas
Virginia
Washington
Wisconsin

SUPPORT TERMINALS OPERATING PARTNERSHIP, L.P.

Delaware*
Alabama
California
Washington D.C.
Florida
Georgia
Illinois
Indiana
Kansas
Louisiana
Maryland
Minnesota
New Mexico
Oklahoma
Pennsylvania
Texas
Virginia
Washington
Wisconsin

STANTRANS, INC.

Delaware*
Texas


* State of incorporation or formation.




<PAGE>



To each of the Lenders  party to the Credit  Agreement  referred to below and to
SunTrust Bank, as Administrative Agent thereunder

Ladies and Gentlemen:

         This opinion is furnished to you pursuant to Section  3.1(b)(vi) of the
Credit Agreement,  dated as of December 28, 2000 (such agreement,  excluding the
schedules and exhibits thereto, the "Credit  Agreement"),  among Kaneb Pipe Line
Operating Partnership, L.P., Kaneb Pipe Line Partners, L.P., the Lenders parties
thereto and SunTrust  Bank, as  Administrative  Agent for said  Lenders.  Unless
otherwise defined herein,  terms defined in the Credit Agreement are used herein
as therein defined.

         We have acted as  counsel to the Loan  Parties  (as  defined  below) in
connection with the preparation, execution and delivery of the Credit Agreement.

         In connection with this opinion,  we have examined a certificate of the
Secretary of State of North Dakota attesting to the continued existence and good
standing of Kaneb Pipe Line  Operating  Partnership,  L.P.  ("KPLOP"),  the Loan
Documents  and such  other  documents  and  corporate  and  partnership  records
(collectively,  the "Other Documents") and questions of law as we deem necessary
for the  purposes of this  opinion.  We have also  examined  such  certificates,
corporate  officers  of the Loan  Parties  and other  Persons as we have  deemed
relevant and appropriate as a basis for the opinions  expressed  herein,  and we
have  made no  effort  to  independently  verify  the  facts  set  forth in such
certificates. Further, in making the foregoing examinations, we have assumed the
genuineness  of all signatures  (other than  signatures of the Loan Parties with
respect to the Loan  Documents),  the legal capacity of each person signatory to
any of the documents reviewed by us, the authenticity of all documents submitted
to us as originals  and the  conformity to authentic  original  documents of all
documents  submitted to us as copies. In making the foregoing  examinations,  we
have assumed that, as to factual  matters,  all  representations  and warranties
made in the aforesaid  documents (other than those which are expressed herein as
our opinions) were and are true, correct and complete in all material respects.

         Based upon the foregoing,  and upon an examination of such questions of
law  as we  have  considered  necessary  or  appropriate,  and  subject  to  the
assumptions,  exceptions,  qualifications  and limitations set forth herein,  we
advise you that, in our opinion,  KPLOP is duly  qualified as a foreign  limited
partnership and is in good standing under the laws of the State of North Dakota.

         The  foregoing  opinions  are  subject  to the  following  assumptions,
exceptions, qualifications and limitations.

         (i) The foregoing  opinions are expressly  limited to matters under and
governed by the internal  substantive  laws of the States of New York and Texas,
the  General  Corporation  Law of the State of  Delaware,  the  Revised  Uniform
Limited Partnership Act of the State of Delaware, and applicable Federal laws of
the United States of America, in each case in effect on the date hereof.

         (ii) In  rendering  the  opinion  expressed  above  regarding  the good
standing of KPLOP,  we have relied solely on a  certificate  of the Secretary of
State of the State of North Dakota and have conducted no further investigation.

         The  opinions  expressed  herein  are  furnished  to you for your  sole
benefit  in  connection  with  the  transactions   contemplated  by  the  Credit
Agreement.  The opinions  expressed herein may not be relied upon by you for any
other  purpose and may not be relied  upon for any  purpose by any other  person
without  our prior  written  consent,  except  that any Person that may become a
Lender after the date hereof may rely upon this opinion in connection with those
transactions.  The opinions  expressed herein are as of the date hereof (and not
as of any other date) or, to the extent a reference  to a  certificate  or other
document is made herein,  to such date,  and we make no  undertaking to amend or
supplement  such  opinions as facts and  circumstances  come to our attention or
changes in the law occur which could affect such opinions.

                                                     Very truly yours,