EXECUTION COPY






                                CREDIT AGREEMENT


                                   dated as of
                                February 17, 1998

                                      AMONG

                      KINDER MORGAN ENERGY PARTNERS, L.P.,
                                 as the Company


                        KINDER MORGAN OPERATING L.P. "B",
                           as the Subsidiary Borrower


                           THE SUBSIDIARY GUARANTORS,


                            THE LENDERS PARTY HERETO,


                       GOLDMAN SACHS CREDIT PARTNERS L.P.,
                   as Lead Arranger and the Syndication Agent

                                       and

                           FIRST UNION NATIONAL BANK,
           as Co-Arranger, the Administrative Agent, the Issuing Bank
                            and the Swingline Lender







<PAGE>
                                TABLE OF CONTENTS
                                                                   Page

PRELIMINARY STATEMENTS...........................................   1

                         ARTICLE I.     Definitions

SECTION  1.01   Defined Terms.......................................2
SECTION  1.02   Classification of Loans and Borrowings.............27
SECTION  1.03   Accounting Terms; Changes in GAAP..................27
SECTION  1.04   Interpretation.....................................27

                         ARTICLE II.    The Credits

SECTION  2.01   Commitments........................................28
SECTION  2.02   Loans and Borrowings...............................28
SECTION  2.03   Requests for Revolving Borrowings..................29
SECTION  2.04   Swingline Loans....................................30
SECTION  2.05   Telephonic Notices.................................31
SECTION  2.06   Letters of Credit..................................31
SECTION  2.07   Funding of Borrowings..............................36
SECTION  2.08   Interest Elections.................................36
SECTION  2.09   Termination and Reduction of Commitments...........37
SECTION  2.10   Repayment of Loans; Evidence of Debt...............38
SECTION  2.11   Prepayment of Loans................................40
SECTION  2.12   Fees...............................................41
SECTION  2.13   Interest...........................................42
SECTION  2.14   Alternate Rate of Interest.........................42
SECTION  2.15   Increased Costs....................................43
SECTION  2.16   Break Funding Payments.............................44
SECTION  2.17   Taxes..............................................45
SECTION  2.18   Payments  Generally; Pro Rata Treatment;
                Sharing of Set-offs................................45
SECTION  2.19   Mitigation Obligations; Replacement of
                Lenders............................................47
SECTION  2.20   Extensions of Maturity Date and Reduction
                Dates; Removal of Lenders..........................48


                        ARTICLE III.    Conditions Precedent

SECTION  3.01   Conditions Precedent to the Initial
                 Credit Event......................................50
SECTION  3.02   Conditions Precedent to All Credit Events..........52
SECTION  3.03   Conditions Precedent to the Initial Credit Event
                Made on or After any Increase in Availability......53
SECTION  3.04   Conditions Precedent to Conversions................53
SECTION  3.05   Delivery of Documents..............................53

                                      -ii-
<PAGE>

                       ARTICLE IV.  Representations and Warranties

SECTION  4.01   Organization and Qualification.....................53
SECTION  4.02   Authorization, Validity, Etc.......................54
SECTION  4.03   Governmental Consents, Etc.........................54
SECTION  4.04   Conflicting or Adverse Agreements or Restrictions..54
SECTION  4.05   Properties........................................ 55
SECTION  4.06   Litigation and Environmental Matters...............55
SECTION  4.07   Financial Statements...............................56
SECTION  4.08   Disclosure.........................................56
SECTION  4.09   Investment Company Act.............................56
SECTION  4.10   Public Utility Holding Company Act.................56
SECTION  4.11   ERISA..............................................57
SECTION  4.12   Tax Returns and Payments...........................57
SECTION  4.13   Compliance with Laws and Agreements................57
SECTION  4.14   Purpose of Loans...................................57
SECTION  4.15   No Intent to Hinder, Delay or Defraud..............58

                         ARTICLE V. Affirmative Covenants

SECTION  5.01   Financial Statements and Other Information.........58
SECTION  5.02   Litigation.........................................60
SECTION  5.03   Existence, Conduct of Business.....................61
SECTION  5.04   Payment of Obligations.............................61
SECTION  5.05   Maintenance of Properties; Insurance...............61
SECTION  5.06   Books and Records; Inspection Rights...............61
SECTION  5.07   Compliance with Laws...............................61
SECTION  5.08   Use of Proceeds and Letters of Credit..............61
SECTION  5.09   Further Assurances.................................62
SECTION  5.10   Performance of Obligations.........................62
SECTION  5.11   Lines of Business..................................62
SECTION  5.12   Intercompany Notes and Security for
                Intercompany Notes.................................62
SECTION  5.13   KMNGL Subsidiary Guarantors Security Agreement.....63

                         ARTICLE VI.   Negative Covenants

SECTION  6.01   Indebtedness.......................................64
SECTION  6.02   Liens..............................................65
SECTION  6.03   Fundamental Changes................................65
SECTION  6.04   Investments, Loans, Advances, Guarantees
                and Acquisitions; Hedging Agreements...............66
SECTION  6.05   Restricted Payments................................68
SECTION  6.06   Transactions with Affiliates.......................68

                                     -iii-
<PAGE>

SECTION  6.07   Restrictive Agreements.............................68
SECTION  6.08   Sale of Assets.....................................68
SECTION  6.09   Financial Covenants................................69
SECTION  6.10   Amendments to Certain Agreements...................69

                        ARTICLE VII.     Events of Default

SECTION  7.01   Events of Default and Remedies.....................69
SECTION  7.02   Other Remedies.....................................72
SECTION  7.03   Application of Moneys During Continuation
                of Event of Default................................72

                        ARTICLE VIII.  The Administrative Agent

SECTION  8.01   Appointment, Powers and Immunities.................73
SECTION  8.02   Reliance by Administrative Agent...................74
SECTION  8.03   Defaults; Events of Default........................74
SECTION  8.04   Rights as a Lender.................................74
SECTION  8.05   INDEMNIFICATION....................................74
SECTION  8.06   Non-Reliance on Agents and other Lenders...........75
SECTION  8.07   Action by Administrative Agent.....................75
SECTION  8.08   Resignation or Removal of Administrative Agent.....76
SECTION  8.09   Consents under Security Documents..................76
SECTION  8.10   Duties of Syndication Agent........................76

                         ARTICLE IX.     Company Guaranty

SECTION  9.01   Company Guaranty...................................77
SECTION  9.02   Continuing Guaranty................................77
SECTION  9.03   Effect of Debtor Relief Laws.......................80
SECTION  9.04   Waiver.............................................80
SECTION  9.05   Full Force and Effect..............................81

                         ARTICLE X. Subsidiary Guarantors Guaranty

SECTION  10.01   Subsidiary Guarantors Guaranty....................81
SECTION  10.02   Continuing Guaranty...............................82
SECTION  10.03   Effect of Debtor Relief Laws......................84
SECTION  10.04   General Limitation on Borrower Guaranteed
                 Obligations.......................................85
SECTION  10.05   Rights of Contribution............................85
SECTION  10.06   Subrogation.......................................86
SECTION  10.07   Subordination.....................................86
SECTION  10.08   Waiver............................................87
SECTION  10.09   Full Force and Effect.............................87

                                      -iv-
<PAGE>

                         ARTICLE XI.     Miscellaneous

SECTION  11.01   Notices, Etc......................................88
SECTION  11.02   Waivers; Amendments...............................89
SECTION  11.03   Payment of Expenses, Indemnities, etc.............90
SECTION  11.04   Successors and Assigns............................92
SECTION  11.05   Assignments and Participations....................93
SECTION  11.06   Survival; Reinstatement...........................95
SECTION  11.07   Counterparts; Integration; Effectiveness..........95 
SECTION  11.08   Severability......................................96
SECTION  11.09   Right of Setoff...................................96
SECTION  11.10   Governing Law; Jurisdiction; Consent  to
                 Service of Process................................96
SECTION  11.11   WAIVER OF JURY TRIAL..............................97
SECTION  11.12   Confidentiality...................................98
SECTION  11.13   Interest Rate Limitation..........................98
SECTION  11.14   EXCULPATION PROVISIONS............................99


SCHEDULES:
----------

Schedule 1.01A    Existing Indebtedness
Schedule 4.01     Existing Subsidiaries
Schedule 4.06     Disclosed Matters
Schedule 6.02     Existing Liens
Schedule 6.07     Existing Restrictions

EXHIBITS:
---------

Exhibit 1.01A --  Form of Administrative Questionnaire
Exhibit 1.01B --  Form of Assignment and Acceptance
Exhibit 1.01C --  Existing Letter of Credit
Exhibit 2.03 --   Form of Borrowing Request
Exhibit 2.06 --   Form of Letter of Credit Request
Exhibit 2.07 --   Form of Notice of Account Designation
Exhibit 2.08 --   Form of Interest Election Request
Exhibit 2.10 --   Form of (Revolving/Swingline) Note
Exhibit 2.11 --   Form of Notice of Prepayment
Exhibit 5.01 --   Form of Compliance Certificate
Exhibit 6.04 --   Form of Subsidiary Guarantor Counterpart


                                      -v-
<PAGE>
                                CREDIT AGREEMENT


         THIS CREDIT AGREEMENT, dated as of February 17, 1998 (this "Agreement")
is among:

         (a)       Kinder Morgan Energy  Partners,   L.P.,  a  Delaware  limited
partnership (the "Company");

         (b)       Kinder  Morgan  Operating  L.P.  "B",  a  Delaware    limited
partnership (the "Subsidiary Borrower");

         (c) Kinder Morgan  Operating L.P. "A", a Delaware  limited  partnership
("OLP `A'");  Kinder Morgan Operating L.P. "C", a Delaware  limited  partnership
("OLP `C'");  Kinder Morgan Operating L.P. "D", a Delaware limited   partnership
("OLP  `D'");  Kinder  Morgan  Natural  Gas  Liquids  Corporation,   a  Delaware
corporation  ("KMNGL");  and Kinder Morgan CO2 LLC, a Delaware limited liability
company  ("KMCO2",  and  together  with OLP "A", OLP "C",  OLP "D",  KMNGL,  the
Subsidiary  Borrower in its  capacity  as a guarantor  pursuant to Article X and
each other Person that becomes a Subsidiary  Guarantor pursuant to Section 6.03,
collectively, the "Subsidiary Guarantors");

         (d) The banks and other financial  institutions listed on the signature
pages hereof under the caption  "Lenders"  (together with each other Person that
becomes a Lender pursuant to Section 11.05, collectively, the "Lenders");

         (e) Goldman Sachs Credit Partners L.P., a Bermuda limited  partnership,
individually  as a Lender and as Lead  Arranger  and  syndication  agent for the
other Lenders (in such capacity, the "Syndication Agent"); and

         (f)  First  Union  National  Bank,  a  national  banking   association,
individually as a Lender and as Co-Arranger and as administrative  agent for the
other  Lenders (in such  capacity  together  with any other  Person that becomes
Administrative Agent pursuant to Section 8.08, the "Administrative Agent").


                             PRELIMINARY STATEMENTS

         The Company and the  Subsidiary  Borrower have  requested that a credit
facility be extended to them  pursuant to which (a) the Company will borrow from
the Lenders and advance to OLP "A" funds sufficient to enable it to (i) repay in
full  the  principal  of  and  accrued   interest  and  make-whole   premium  on
$110,000,000  of its 8.79%  First  Mortgage  Notes due June 30,  2007 and issued
pursuant  to a Note  Agreement  dated as of July 30,  1992  (the  "OLP `A' First
Mortgage Notes") and (ii) repay in full the principal of and accrued interest on
all loans and other amounts  outstanding under that certain Loan Agreement dated
effective  May 24,  1995 by and  between  OLP "A" and Bank  One,  Texas,  NA, as
amended to the date hereof ("OLP `A' Loan  Agreement"  and together with the OLP
"A" First Mortgage Notes collectively,  the "OLP `A' Refinancing");  (b) (i) 

<PAGE>

the Company  will borrow from the Lenders and advance to the Subsidiary Borrower
funds  sufficient  to enable it to repay in full the  principal  of and  accrued
interest on all loans and other amounts  outstanding  under that certain  Credit
Agreement  dated as of February  14,  1997 among the  Subsidiary  Borrower,  the
lenders party thereto and First Union  National Bank, as agent for such lenders,
as amended to the date hereof (the "Subsidiary Borrower Credit Agreement"),  and
(ii) the account  party's  reimbursement  obligations in respect of that certain
irrevocable letter of credit No. S113181 issued by First Union National Bank for
the  benefit  of Bank  One,  Texas,  NA,  as  trustee,  for the  account  of the
Subsidiary Borrower in the face amount of $24,128,548 and in the form of Exhibit
1.01C hereto (the "Existing  Letter of Credit") will become and be an obligation
of the Subsidiary Borrower,  and the Existing Letter of Credit will be deemed to
have been issued, under this Agreement (collectively the "OLP `B' Refinancing");
(c) the  Company  may borrow  from the Lenders and advance to OLP "A" the sum of
$25,000,000  to enable it to  contribute  such amount  together  with its carbon
dioxide  pipeline system located in West Texas (the "Central Basin Pipeline") to
Shell CO2 Company,  Ltd., a Texas limited partnership ("Shell CO2"), in exchange
for  a  20%  limited  partner  interest  in  that  partnership  (the  "Shell  JV
Investment"); (d) the Company may borrow from the Lenders and advance to OLP "D"
the sum of  approximately  $90,000,000  to (i)  enable OLP "D" to  purchase  the
entire general partner interest in Santa Fe Pacific Pipeline  Partners,  L.P., a
Delaware limited partnership  ("SFMLP") (ii) complete the purchase from SFMLP of
its  limited  partner  interest in SFPP,  and (iii)  complete  the  transactions
contemplated in Section 1.3(a) and (b) of the Purchase Agreement,  including the
contribution to OLP "D" of 100% of the Company's  partnership  interest in SFPP,
L.P., a Delaware limited  partnership  ("SFPP")  (which,  after giving effect to
such  transactions,  will consist of a 99.5% general  partner  interest in SFPP)
(collectively,  the  "Santa Fe  Acquisition");  and (e) the  Company  may obtain
working capital to be used for its other partnership purposes.

         NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I.

                                   Definitions

          SECTION 1.01.  Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:

     "ABR",  when used in reference to any Loan or Borrowing,  refers to whether
such Loan, or the Loans  comprising  such Borrowing,  are bearing  interest at a
rate determined by reference to the Alternate Base Rate.

     "Administrative  Agent" has the meaning  specified  in the introduction  to
this Agreement.

     "Administrative Questionnaire" means an Administrative Questionnaire in the
form of Exhibit 1.01A.

     "Affiliate" of any Person shall mean (i) any Person  directly or indirectly
controlled by, controlling or under common control with such first Person,  (ii)
any  director  or officer of such first 

                                      -2-
<PAGE>

Person or of any Person  referred to in clause (i) above and (iii) if any Person
in clause  (i)  above is an  individual,  any  member  of the  immediate  family
(including  parents,  siblings,  spouse and children) of such individual and any
trust whose  principal  beneficiary is such individual or one or more members of
such  immediate  family and any Person who is  controlled  by any such member or
trust.  For  purposes  of this  definition,  any Person  which owns  directly or
indirectly 25% or more of the securities  having  ordinary  voting power for the
election of directors or other governing body of a corporation or 25% or more of
the partnership or other ownership  interests of any other Person (other than as
a limited partner of such other Person) will be deemed to "control"  (including,
with its correlative meanings,  "controlled by" and "under common control with")
such corporation or other Person.

     "Agreement"   has  the   meaning   specified   in  the introduction to this
Agreement.

     "Alternate  Base Rate"  means,  for any day, a rate per annum  equal to the
greater of (a) the Federal Funds  Effective  Rate in effect on such day plus 1/2
of 1% and (b) the Prime Rate in effect for such day. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds  Effective Rate
shall be effective  from and including the effective  date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

     "Anniversary Date" means each of February 1,  1999 and February 1, 2000.

     "Applicable  Margin"  means,  for any day,  with respect to any  Eurodollar
Revolving Loan, or with respect to the commitment fees payable hereunder, as the
case may be, the  Applicable  Margin per annum set forth below under the caption
"Eurodollar Spread" or "Commitment Fee Rate", as
the case may be:

          (a)  during  the  period  from the  Execution  Date to  the  Financial
Statement Delivery Date for the fiscal  quarter of the Company ending March  31,
1998, the Applicable Margin shall be as follows:

          (i)      prior to the Santa Fe Acquisition,

                    Eurodollar Spread    Commitment Fee Rate
                    -----------------    -------------------
                          1.25%           .375%


          (ii)     on and after the Santa Fe Acquisition,

                    Eurodollar Spread    Commitment Fee Rate
                    -----------------    -------------------
                          1.0%            .25%

                                       -3-
<PAGE>

          (b) if the  Applicable  Margin  is to be  determined  with  respect to
the financial statements  delivered  pursuant  to  Section  5.01(a)  or  Section
5.01(b) on any  Financial Statement  Delivery Date for any fiscal quarter of the
Company ending on or after March 31, 1998,  the  Applicable  Margin  shall be as
follows:

          (i)  if at the end of such fiscal quarter,  the ratio of the Indebted-
ness of the Company to Company  Cash Flow for the four full fiscal quarters then
most recently ended is less than 2.0 to 1.0:

                    Eurodollar Spread    Commitment Fee Rate
                    -----------------    -------------------
                          .75%            .25%

          (ii) if at the end of such fiscal quarter,  the ratio of the Indebted-
ness of the Company to Company  Cash Flow for the four full fiscal quarters then
most recently  ended is equal to or greater than 2.0 to 1.0 but less than 2.5 to
1.0:

                    Eurodollar Spread   Commitment Fee Rate
                    -----------------   -------------------
                          .875%           .25%

          (iii)if at the end of such fiscal quarter, the ratio of the  Indebted-
ness of the Company to Company  Cash Flow for the four full fiscal quarters then
most recently  ended is equal to or greater than 2.5 to 1.0 but less than 3.0 to
1.0:

                    Eurodollar Spread   Commitment Fee Rate
                    -----------------   -------------------
                          1.0%            .25%

          (iv) if at the end of such fiscal quarter,  the ratio of the Indebted-
ness of the Company to Company  Cash Flow for the four full fiscal quarters then
most recently  ended is equal to or greater than 3.0 to 1.0 but less than 3.5 to
1.0:

                    Eurodollar Spread   Commitment Fee Rate
                    -----------------   -------------------
                         1.125%           .375%

          (v)  if at the end of such fiscal quarter,  the ratio of the Indebted-
ness of the Company to Company Cash Flow for the four full fiscal  quarters then
most recently  ended is equal to or greater than 3.5 to 1.0 but less than 4.0 to
1.0:


                                      -4-
<PAGE>

    
                    Eurodollar Spread   Commitment Fee Rate
                    -----------------   -------------------
                          1.25%           .375%

          (vi) if at the end of such fiscal quarter, the ratio of the  Indebted-
ness of the  Company to Company Cash Flow for the four full fiscal quarters then
most recently ended is equal to or greater than 4.0 to 1.0 but less than 4.5  to
1.0:

                    Eurodollar Spread   Commitment Fee Rate
                    -----------------   -------------------
                         1.375%           .375%

          (vii)if at the end of such fiscal quarter,  the ratio of the Indebted-
ness of the Company to Company  Cash Flow for the four full fiscal quarters then
most recently ended is equal to or greater than 4.5 to 1.0:

                    Eurodollar Spread   Commitment Fee Rate
                    -----------------   -------------------
                          1.5%            .375%

         Notwithstanding  the foregoing,  if on or after the Financial Statement
Delivery Date for the fiscal quarter of the Company ending on March 31, 1998 any
of the  financial  statements  required  pursuant to Section  5.01(a) or Section
5.01(b),  as the  case  may be,  shall  not  have  been  timely  delivered,  the
Applicable Margin shall be determined pursuant to clause(b)(vii) above until the
date that is five Business Days after the date such statements are delivered.

         Each  change in the  Applicable  Margin  shall  become  effective  five
Business  Days  after the  Administrative  Agent  receives  notification  of the
financial information forming the basis of such change.

     "Applicable  Percentage"  means, with respect to any Lender, the percentage
of the Total Commitment  represented by such Lender's  Commitment.  If the Total
Commitment  has  terminated  or expired,  the  Applicable  Percentages  shall be
determined  based upon the Total  Commitment  most  recently  in effect,  giving
effect to any assignments.

     "Application" has the meaning specified in Section 2.06(c).

     "Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an  assignee  (with the  consent of any party  whose  consent is
required by Section  11.05),  and accepted by the  Administrative  Agent, in the
form of Exhibit 1.01B or any other form approved by the Administrative Agent.

     "Available  Cash" means,  with respect to any fiscal quarter of the Company
(a "Test Quarter"), an amount equal to the algebraic sum of (a) the aggregate of
all cash  distributions  actually 

                                      -5-
<PAGE>

made to and received by the Company from  theRestricted  Subsidiaries in respect
of their Capital Stock during such fiscal quarter minus (b) the aggregate amount
of all cash  disbursements,  including  disbursements  for  operating  expenses,
payments of  principal of and interest on  Indebtedness  and taxes,  and capital
expenditures (net of any borrowings to fund such capital expenditures  permitted
pursuant  to this  Agreement),  actually  paid by the  Company  during such Test
Quarter,  plus, in the case of a decrease,  or minus, in the case of an increase
(c) the  amount by  which,  as at the end of such Test  Quarter,  cash  reserves
necessary in the  reasonable  discretion  of the  Company's  management  for the
proper  conduct of the business of the Company and the  Restricted  Subsidiaries
subsequent to such Test Quarter,  decreased or increased from the amount of such
reserves as at the end of the immediately  preceding  fiscal quarter;  provided,
that  "Available  Cash"  for any Test  Quarter  shall  always  exclude,  without
duplication  (i) a reserve equal to at least 50% of the aggregate  amount of all
semiannual or less frequent (or 100% of all more frequent)  interest payments on
Indebtedness of the Company and/or the Restricted  Subsidiaries  other than SFPP
payable in the fiscal quarter next  succeeding  such Test Quarter  (assuming for
this purpose in respect of Indebtedness  with a variable  interest rate that the
same  bears  interest  at  the  highest  rate  per  annum   applicable  to  such
Indebtedness  during  the  Test  Quarter),   (ii)  a  reserve  with  respect  to
Indebtedness of the Company and/or the Restricted  Subsidiaries  other than SFPP
requiring  annual  amortization  of  principal,  equal to the  product of (A) an
amount equal to 25% of the installment of such principal maturing next after the
end of such Test Quarter  multiplied  by (B) the number of full fiscal  quarters
which will, as of the end of such Test  Quarter,  have elapsed since the date of
the next  preceding  such  payment  (but not more than 75% of the amount of such
installment),  and  (iii) if such Test  Quarter  immediately  precedes  a fiscal
quarter in which a principal  payment is due in respect of  Indebtedness  of the
Company and/or the Restricted  Subsidiaries other than SFPP requiring semiannual
or  more  frequent  amortization  of  principal,  a  reserve  equal  to 50%  (if
amortization  is semiannual) or 100% (if  amortization  is more frequent) of the
installment of such principal maturing next after the end of such Test Quarter.

     "Availability"  means,  at all  times  on and  after  the  Effective  Date,
$185,000,000,  but,  subject to Section 3.03,  such amount shall be increased by
(a)  $115,000,000  contemporaneously  with  the  consummation  of the  Santa  Fe
Acquisition and (b) $25,000,000  contemporaneously  with the making of the Shell
JV  Investment,  provided  that,  in the case of each such  increase,  the event
giving rise thereto shall occur prior to the Initial Reduction Date.

     "Availability  Period"  means the period from and  including  the Effective
Date,  to but  excluding  the  earlier  of the  Maturity  Date  and the  date of
termination of the Commitments.

     "Bankruptcy   Code"  has  the  meaning   specified  in Section 9.01(a).

     "Board" means the Board of Governors of the Federal  Reserve  System of the
United States of America.

     "Board of  Directors"  means,  with  respect  to any  Person,  the Board of
Directors  of such Person or any  committee  of the Board of  Directors  of such
Person  duly  authorized  to act on  behalf of the  Board of  Directors  of such
Person.

                                      -6-
<PAGE>

     "Board  Resolution"  means,  with  respect  to  any  Person,  a  copy  of a
resolution  certified by the Secretary or an Assistant  Secretary of such Person
to have been duly  adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such  certification,  and  delivered to the
Administrative Agent.

     "Bonds"   means  the  Port   Facility   Refunding   Revenue   Bonds  (Enron
Transportation  Services,  L.P. Project) Series 1994 in the aggregate  principal
amount of $23,700,000,  as issued by the  Jackson-Union  Counties  Regional Port
District.

     "Borrower  Guaranteed  Obligations"  has the meaning  specified  in Section
10.01.

     "Borrowers" means,  collectively,  the Company and the Subsidiary  Borrower
and "Borrower" means either one of them.

     "Borrowing" means (a) Revolving Loans of the same Type, made,  converted or
continued on the same date and, in the case of Eurodollar  Loans,  as to which a
single Interest Period is in effect, or (b) a Swingline Loan.

     "Borrowing  Date" means the Business Day upon which any Letter of Credit is
to be issued or any Loan is to be made available to the Company.

     "Borrowing  Request"  has  the  meaning  specified  in Section 2.03.

     "Business Day" means any day that is not a Saturday, Sunday or other day on
which  commercial  banks in Houston,  Texas,  New York,  New York, or Charlotte,
North  Carolina are  authorized  or required by law to remain  closed;  provided
that,  when used in connection  with a Eurodollar  Loan, the term "Business Day"
shall also  exclude any day on which  banks are not open for  dealings in dollar
deposits in the London interbank market.

     "Capital  Lease  Obligations"  of any Person means the  obligations of such
Person to pay rent or other  amounts  under  any lease of (or other  arrangement
conveying the right to use) real or personal property, or a combination thereof,
which  obligations  are required to be  classified  and accounted for as capital
leases on a balance  sheet of such  Person  under  GAAP,  and the amount of such
obligations  shall be the  capitalized  amount thereof  determined in accordance
with GAAP.

     "Capital  Stock"  means,  with  respect to any Person,  any and all shares,
interests,  rights  to  purchase,  warrants,  options,  participations  or other
equivalents (however  designated) of such Person's equity,  including all common
stock and preferred stock, any limited or general  partnership  interest and any
limited liability company membership.

     "Central  Basin  Pipeline"  has the meaning  specified  in the  Preliminary
Statements.

     "Change in  Control"  means  either (a) the failure of Richard D. Kinder or
William Morgan or both such Persons to control,  directly or indirectly,  51% of
the  Voting  Stock and 51% of the  economic  interest  in the  General  Partner,
whether through the ability to exercise voting power by 


                                      -7-
<PAGE>

control or otherwise, or b) the  General  Partner  shall  cease to be  the  sole
general  partner  of the Company.

     "Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Agreement,  (b) any change in any law, rule or regulation or in
the  interpretation or application  thereof by any Governmental  Authority after
the date of this  Agreement or (c)  compliance by any Lender or the Issuing Bank
(or, for purposes of Section 2.15(b), by any lending office of such Lender or by
such Lender's or the Issuing Bank's holding  company,  if any) with any request,
guideline  or  directive  (whether  or not  having  the  force  of  law)  of any
Governmental Authority made or issued after the date of this Agreement.

     "Change of Control Event" means the execution of any  definitive  agreement
which, when fully performed by the parties thereto,  would result in a Change of
Control.

     "Charges" has the meaning specified in Section 11.13.

     "Class", when used in reference to any Loan or Borrowing, refers to whether
such Loan,  or the Loans  comprising  such  Borrowing,  are  Revolving  Loans or
Swingline Loans.

     "Code"  means the Internal  Revenue  Code of 1986,  as amended from time to
time.

     "Collateral" means, collectively, all the properties and assets of the Loan
Parties  described  in and  subject to the Lien  purported  to be created by the
Security Documents.

     "Commitment"  means,  with respect to each Lender,  the  commitment of such
Lender to make  Revolving  Loans and to  acquire  participations  in  Letters of
Credit and Swingline Loans  hereunder,  expressed as an amount  representing the
maximum aggregate amount of such Lender's  Revolving Credit Exposure  hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.09
and (b) reduced or increased  from time to time pursuant to assignments by or to
such Lender  pursuant to Section  11.05.  The  initial  amount of each  Lender's
Commitment is set forth on its signature  page hereto,  or in the Assignment and
Acceptance  pursuant to which such Lender shall have assumed its Commitment,  as
applicable.

     "Communications" has the meaning specified in Section 11.01.

     "Company" has the meaning specified in the introduction to this Agreement.

     "Company Interest  Expense" means, for any period,  all Interest Expense of
the Company actually paid during such period.

     "Company Cash Flow" means (without duplication), for any period, the sum of
(a) OLP "A" EBITDA for such period,  (b) the EBITDA of the  Subsidiary  Borrower
for  such  period,  (c)  the  EBITDA  of OLP  "C"  for  such  period,  (d)  cash
distributions  actually  received by the Company from OLP "D" for such period in
respect of its Capital Stock (but not in excess of an amount equal to the EBITDA
of SFPP for the same period  less the sum for such  period of (i) all  scheduled
payments  of  principal  in  respect  of  Indebtedness  of SFPP,  including  the
principal   component  of  any  such 

                                      -8-
<PAGE>

payments in respect of Capital Lease Obligations, (ii) Interest Expense of SFPP,
and  (iii)  without   duplication   the  amount  of  all   Maintenance   Capital
Expenditures),  (e) the EBITDA of any other Wholly-Owned  Restricted  Subsidiary
that is a Subsidiary  Guarantor  whose Capital Stock secures the Obligations for
such period,  and (f) cash  distributions  actually received by the Company from
any  other  Restricted   Subsidiary   (other  than  a  Wholly-Owned   Restricted
Subsidiary)  whose  Capital  Stock  secures  the  Obligations  for such  period;
provided,  however,  if during any period the Company acquires any Person or all
or  substantially  all of the assets of any Person,  the EBITDA  attributable to
such assets or an amount  equal to the  percentage  ownership  of the Company in
such Person times the EBITDA of such Person, for such period determined on a pro
forma basis (which determination,  in each case, shall be subject to approval of
the  Required  Lenders,  not to be  unreasonably  withheld)  may be  included as
Company  Cash  Flow  for such  period,  if on the  date of such  acquisition  no
Indebtedness  (other than  Indebtedness  permitted  pursuant to Section 6.01) is
incurred by reason of and giving effect to such  acquisition  and such Person or
the  entity  acquiring  such  assets,  as  the  case  may  be,  is a  Restricted
Subsidiary.

     "Company  Guaranty" means the guaranty of the Company  contained in Article
IX.

     "Company Security  Agreement" means a Pledge Agreement dated as of the date
hereof from the Company in favor of the  Administrative  Agent  covering,  inter
alia, (a) all limited partner interests in OLP "A", the Subsidiary Borrower, OLP
"C", and OLP "D" and (b) the Intercompany Notes.

     "Consenting Lenders" has the meaning specified in Section 2.20.

     "Credit  Event" means the making of any Loan or the issuance or the  exten-
sion of any Letter of Credit.

     "Default" means any event or condition which upon notice,  lapse of time or
both would, unless cured or waived, become an Event of Default.

     "Disclosed  Matters"  means  the  actions,  suits and  proceedings  and the
environmental matters disclosed in Schedule 4.06.

     "Disqualified Stock" means any Capital Stock issued by the Company that, by
its terms (or by the terms of any security into which it is  convertible  or for
which it is exercisable,  redeemable or exchangeable),  or upon the happening of
an event or with the passage of time,  matures,  or is  mandatorily  redeemable,
pursuant to a sinking fund  obligation  or  otherwise,  or is  redeemable at the
option of the holder thereof, in whole or in part, in each case on, or prior to,
the Maturity Date, or which is exchangeable or convertible  into debt securities
of the  Company or any  Restricted  Subsidiary,  except to the extent  that such
exchange or conversion rights cannot be exercised prior to the Maturity Date.

     "Distribution  Date"  has  the  meaning  specified  in Section 7.03

     "Dollars"  or "$" refers to lawful money of the United States of America.

                                      -9-
<PAGE>

     "EBITDA"  means (without  duplication),  with respect to any Person for any
period,  the Net Income of such Person for such period  determined in accordance
with GAAP,  increased (to the extent  deducted in determining  such earnings for
such period) by the sum of (a) all income taxes (including state franchise taxes
based upon  income) of such  Person paid or accrued  according  to GAAP for such
period;   (b)  Interest  Expense  of  such  Person  for  such  period;  and  (c)
depreciation  and  amortization  of such  Person for such period  determined  in
accordance with GAAP.

     "Effective  Date"  means  the date on which  the  conditions  specified  in
Section 3.01 are satisfied (or waived in accordance with Section 11.02).

     "Eligible  Assignee" means (a) any Lender; (b) any Affiliate of any Lender;
(c) a commercial bank organized or licensed under the laws of the United States,
or a state thereof,  and having total assets in excess of $1,000,000,000;  (d) a
commercial  bank organized under the laws of any other country which is a member
of the OECD, or a political  subdivision  of any such country,  and having total
assets in excess of $1,000,000,000,  provided that such bank is acting through a
branch or agency  located  in the  country in which it is  organized  or another
country  which is also a member of the OECD;  (e) a finance  company,  insurance
company  or  other  financial   institution  or  fund  (whether  a  corporation,
partnership,  trust or other  entity) that is engaged in making,  purchasing  or
otherwise  investing in commercial  loans in the ordinary course of its business
and  having  a  combined  capital  and  surplus  or  total  assets  of at  least
$100,000,000;  and (f) any other entity approved by the Administrative Agent and
the Company.

     "Environmental Laws" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments,  injunctions,  notices or binding agreements issued,
promulgated or entered into by any Governmental  Authority,  relating in any way
to the  environment,  preservation  or  reclamation  of natural  resources,  the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

     "Environmental  Liability"  means any  liability,  contingent  or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties  or  indemnities),  of the  Company  or  any  Subsidiary  directly  or
indirectly  resulting from or based upon (a) violation of any Environmental Law,
(b)  the  generation,  use,  handling,  transportation,  storage,  treatment  or
disposal of any Hazardous  Materials,  (c) exposure to any Hazardous  Materials,
(d) the release of any  Hazardous  Materials  into the  environment,  or (e) any
contract,  agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
that,  together with the Company,  is treated as a single employer under Section
414(b) or (c) of the Code or,  solely for  purposes  of Section 302 of ERISA and
Section 412 of the Code,  is treated as a single  employer  under Section 414 of
the Code.

                                      -10-
<PAGE>

     "ERISA  Event"  means (a) any  "reportable  event",  as  defined in Section
4043of ERISA or the regulations  issued thereunder with respect to a Plan (other
than an event for which the 30-day  notice period is  waived);(b)  the existence
with respect to any Plan of an "accumulated  funding  deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing  pursuant to Section  412(d) of the Code or Section 303(d) of ERISA of an
application  for a waiver of the minimum  funding  standard  with respect to any
Plan;  (d) the  incurrence by the Company or any of its ERISA  Affiliates of any
liability  under Title IV of ERISA with respect to the  termination of any Plan;
(e) the  receipt by the Company or any ERISA  Affiliate  from the PBGC or a plan
administrator  of any notice  relating to an intention to terminate  any Plan or
Plans or to appoint a trustee to administer  any Plan; (f) the incurrence by the
Company or any ERISA  Affiliate of any liability  with respect to the withdrawal
or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the  Company  or any  ERISA  Affiliate  of any  notice,  or the  receipt  by any
Multiemployer  Plan from the  Company  or any  ERISA  Affiliate  of any  notice,
concerning  the  imposition of Withdrawal  Liability or a  determination  that a
Multiemployer  Plan is, or is expected to be,  insolvent  or in  reorganization,
within the meaning of Title IV of ERISA.

     "Eurodollar",  when used in reference to any Loan or  Borrowing,  refers to
whether such Loan, or the Loans comprising such Borrowing,  are bearing interest
at a rate determined by reference to the LIBOR Rate.

     "Event  of  Default"  has  the  meaning  specified  in Section 7.01.

     "Excess Funding Obligor" has the meaning  specified in Section 10.05.

     "Excess   Payment"   has  the  meaning   specified  in Section 10.05.

     "Exchange  Act" means the  Securities  Exchange Act of 1934, as amended.

     "Excluded  Taxes"  means,  with respect to the  Administrative  Agent,  any
Lender,  the Issuing Bank or any other recipient of any payment to be made by or
on  account of any  Obligation,  (a) income or  franchise  taxes  imposed on (or
measured  by)  its  net  income  by the  United  States  of  America,  or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal  office  is  located  or,  in the case of any  Lender,  in  which  its
applicable  lending  office is located,  (b) any branch profits taxes imposed by
the  United  States  of  America  or  any  similar  tax  imposed  by  any  other
jurisdiction  in  which  either  Borrower  is  located  and (c) in the case of a
Foreign  Lender  (other  than an  assignee  pursuant to a request by the Company
under Section  2.19(b)),  any withholding tax that is imposed on amounts payable
to such Foreign  Lender at the time such Foreign  Lender becomes a party to this
Agreement or is  attributable to such Foreign  Lender's  failure or inability to
comply with Section  2.17(e),  except to the extent that such  Foreign  Lender's
assignor (if any) was entitled, at the time of assignment, to receive additional
amounts from a Borrower with respect to such withholding tax pursuant to Section
2.17(a).

     "Execution  Date" means the earliest  date upon which all of the  following
shall have occurred:  counterparts of this Agreement shall have been executed by
the Loan Parties and each Lender  listed on the  signature  pages hereof and the
Administrative  Agent  shall  have  received  

                                      -11-
<PAGE>

counterparts hereof which taken together, bear the signature of the Loan Parties
and each Lender and the Administrative Agent.

     "Existing Letter of Credit" has the meaning  specified in  the  Preliminary
Statements.

     "Existing  Maturity Date" has the meaning specified in Section 2.20. 

     "Existing  Reduction  Date" has the meaning  specified in Section 2.20.

     "Federal Funds  Effective  Rate" means,  for any day, the weighted  average
(rounded  upwards,  if  necessary,  to the  next  1/100  of 1%) of the  rates on
overnight Federal funds  transactions with members of the Federal Reserve System
arranged by Federal funds brokers,  as published on the next succeeding Business
Day by the  Federal  Reserve  Bank  of New  York,  or,  if  such  rate is not so
published for any day that is a Business Day, the average (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

     "Fee Letter" has the meaning specified in Section 2.12(c).

     "Financial  Statement  Delivery Date" means the date on which the quarterly
or annual  financial  statements of the Company are to be delivered  pursuant to
Section 5.01(a) or Section 5.01(b), as the case may be.

     "Fixed Charges" means, at the end of any fiscal quarter of the Company, the
sum of (a) all payments of principal in respect of  Indebtedness  of the Company
and the  Restricted  Subsidiaries  (other than SFPP)  (including  the  principal
component  of any  payments  in respect of Capital  Lease  Obligations)  payable
during  the  next  four  consecutive   fiscal  quarters  after  eliminating  all
offsetting   debits  and  credits   between  the  Company  and  such  Restricted
Subsidiaries  and all other items required to be eliminated in the course of the
preparation  of  consolidated  financial  statements  of  the  Company  and  the
Restricted Subsidiaries in accordance with GAAP and (b) Company Interest Expense
for the four consecutive fiscal quarters then ended.

     "Foreign  Lender"  means any Lender that is  organized  under the laws of a
jurisdiction  other than that in which either Borrower is located.  For purposes
of this  definition,  the United  States of America,  each state thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

     "GAAP" means generally accepted accounting  principles in the United States
of America from time to time, including as set forth in the opinions, statements
and pronouncements of the Accounting  Principles Board of the American Institute
of Certified Public Accountants and
the Financing Accounting Standards Board.

     "General Partner" means Kinder Morgan G.P., Inc., a Delaware corporation.

                                      -12-
<PAGE>

     "Governmental  Authority"  means the  government  of the  United  States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

     "Guarantee"  of or by any Person (the  "guarantor")  means any  obligation,
contingent or otherwise,  of the guarantor  guaranteeing  or having the economic
effect of guaranteeing  any Indebtedness or other obligation of any other Person
(the  "primary  obligor") in any manner,  whether  directly or  indirectly,  and
including any obligation of the guarantor,  direct or indirect,  (a) to purchase
or pay (or  advance  or  supply  funds  for the  purchase  or  payment  of) such
Indebtedness  or other  obligation or to purchase (or to advance or supply funds
for the purchase of) any  security for the payment  thereof,  (b) to purchase or
lease property,  securities or services for the purpose of assuring the owner of
such  Indebtedness or other obligation of the payment  thereof,  (c) to maintain
working capital,  equity capital or any other financial  statement  condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness  or other  obligation  or (d) as an account party in respect of any
letter of credit or letter of guaranty  issued to support such  Indebtedness  or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.

     "Hazardous  Materials"  means all  explosive or  radioactive  substances or
wastes  and all  hazardous  or toxic  substances,  wastes  or other  pollutants,
including  petroleum or petroleum  distillates,  asbestos or asbestos containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

     "Hedging Agreement" means any interest rate protection  agreement,  foreign
currency  exchange  agreement,  commodity  price  protection  agreement or other
interest or currency exchange rate or commodity price hedging arrangement.

     "Indebtedness"  of  any  Person  means,   without   duplication,   (a)  all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or similar  instruments,  (c) all  obligations of such Person
under conditional sale or other title retention  agreements relating to property
acquired by such Person,  (d) all  obligations  of such Person in respect of the
deferred purchase price of property or services or any other similar  obligation
upon which  interest  charges are  customarily  paid  (excluding  trade accounts
payable  incurred in the ordinary course of business),  (e) all  Indebtedness of
others secured by (or for which the holder of such  Indebtedness has an existing
right,  contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person,  whether or not the  Indebtedness  secured  thereby has
been assumed,  (f) all Guarantees by such Person of Indebtedness of others,  (g)
all Capital Lease Obligations of such Person, (h) all obligations, contingent or
otherwise,  of such  Person as an account  party in respect of letters of credit
and letters of guaranty and (i) all  obligations,  contingent or  otherwise,  of
such Person in respect of bankers'  acceptances.  The Indebtedness of any Person
shall include the Indebtedness of any other Person (including any partnership in
which such  Person is a general  partner)  to the extent  such  Person is liable
therefor  as  a  result  of  such  Person's   ownership  interest  in  or  other
relationship  with  such  

                                      -13-
<PAGE>

entity,  except to the extent the terms of such  Indebtedness  provide that such
Person is not liable therefor.

     "Indemnified Taxes" means Taxes other than Excluded Taxes.

     "Information  Memorandum"  means the  Confidential  Information  Memorandum
dated January 1998 (Kinder  Morgan  Energy  Partners  L.P.  $300,000,000  Senior
Secured Credit Facility).

     "Initial  Reduction Date" has the meaning specified in Section 2.09(a).

     "Intercompany  Notes"  has the  meaning  specified  in Section 5.12.

     "Intercompany  Security  Documents"  has the meaning  specified  in Section
5.12.

     "Interest  Election Request" has the meaning specified in Section 2.08.

     "Interest  Expense"  means  (without  duplication),  for any Person for any
period, the aggregate amount of interest, whether expensed or capitalized, paid,
accrued  or  scheduled  to  be  paid  during  such  period  in  respect  of  the
Indebtedness of such Person  including (a) the interest  portion of any deferred
payment  obligation;  (b) the  portion  of any rental  obligation  in respect of
Capital Lease Obligations  allocable to interest expenses;  and (c) any non-cash
interest payments or accruals, all determined in accordance with GAAP.

     "Interest Payment Date" means (a) with respect to any ABR Loan (including a
Swingline Loan), the last day of each January,  April,  July and October and (b)
with  respect  to any  Eurodollar  Loan,  the  last day of the  Interest  Period
applicable  to the  Borrowing of which such Loan is a part and, in the case of a
Eurodollar  Borrowing  with an  Interest  Period  of  more  than  three  months'
duration,  each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period.

     "Interest  Period"  means with  respect to any  Eurodollar  Borrowing,  the
period  commencing on the date of such  Borrowing and ending on the  numerically
corresponding  day in the calendar  month that is one, two,  three or six months
thereafter,  as the Company may elect; provided, that (a) if any Interest Period
would end on a day other than a Business  Day,  such  Interest  Period  shall be
extended  to the next  succeeding  Business  Day  unless  such  next  succeeding
Business Day would fall in the next calendar  month, in which case such Interest
Period shall end on the next preceding  Business Day and (b) any Interest Period
that  commences on the last  Business  Day of a calendar  month (or on a day for
which there is no  numerically  corresponding  day in the last calendar month of
such  Interest  Period)  shall end on the last Business Day of the last calendar
month of such  Interest  Period.  For purposes  hereof,  the date of a Borrowing
initially  shall be the date on which such Borrowing is made and, in the case of
a Revolving Borrowing, thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.

     "Issuing  Bank" means First Union  National  Bank,  in its  capacity as the
issuer of Letters of Credit  hereunder,  and its  successors in such capacity as
provided in Section 2.06(j).

                                      -14-
<PAGE>

     "KMNGL" has the meaning  specified in the introduction to this Agreement.

     "KMCO2"has the meaning  specified in the  introduction to this Agreement.

     "LC  Disbursement"  means a payment made by the Issuing Bank  pursuant to a
Letter of Credit.

     "LC Exposure"  means,  at any time,  the sum of (a) the  aggregate  undrawn
amount of all outstanding  Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the  applicable  Borrower at such time.  The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.

     "Lender" has the meaning specified in   the introduction to this Agreement.

     "Lenders" has the meaning  specified in the introduction to this Agreement.
Unless the context otherwise requires, the term "Lenders" includes the Swingline
Lender.

     "Letter of  Credit"  means the  Existing  Letter of Credit or any letter of
credit issued pursuant to this Agreement.

     "Letter of Credit  Request" has the meaning  specified in Section 2.06.

     "LIBOR" shall mean the rate of interest determined on the basis of the rate
for  deposits in dollars in an amount  substantially  equal to the amount of the
applicable Loan for a period equal to the applicable  Interest Period commencing
on the first day of such Interest  Period  appearing on Dow Jones Market Service
(formerly  Telerate) Page 3750 as of 11:00 a.m.  (London time) two Business Days
prior to the first day of the applicable Interest Period. In the event that such
rate does not appear on Telerate  Page 3750,  "LIBOR" shall be determined by the
Administrative  Agent to be the rate per annum at which  deposits in dollars are
offered by leading reference banks in the London interbank market to First Union
at  approximately  11:00 a.m. (London time) two Business Days prior to the first
day of the applicable Interest Period for a period equal to such Interest Period
and in an amount substantially equal to the amount of the applicable Loan.

     "LIBOR  Rate" shall mean,  with  respect to any LIBOR Loan for any Interest
Period for such Loan, a rate per annum (rounded  upwards,  if necessary,  to the
nearest 1/100 of 1%) determined by the  Administrative  Agent to be equal to the
quotient of (i) LIBOR for such Loan for such Interest  Period  divided by (ii) 1
minus the Reserve Requirement for such Loan for such Interest Period.

     "Lien" means,  with respect to any asset, (a) any mortgage,  deed of trust,
lien, pledge, hypothecation,  encumbrance, charge or security interest in, on or
of such asset and (b) the interest of a vendor or a lessor under any conditional
sale  agreement,  capital lease or title  retention  agreement (or any financing
lease having  substantially  the same economic  effect as any of the  foregoing)
relating to such asset.

                                      -15-
<PAGE>

     "Loan Documents" mean, collectively,  this Agreement (including the Company
Guaranty  and the  Subsidiary  Guarantors  Guaranty),  the  Notes,  if any,  the
Security Documents, the Intercompany Notes, the Applications, the Fee Letter and
all  other  instruments  and  documents  (including  the  Intercompany  Security
Documents, if any) from time to time executed and delivered by any Loan Party in
connection herewith and therewith; provided, however, for purposes of Article IX
and Article X, Loan Documents  shall not include the  Intercompany  Notes or the
Intercompany Security Documents.

     "Loan Party" means the Company,  the Subsidiary  Borrower or any Subsidiary
Guarantor and "Loan Parties" means the Company,  the Subsidiary Borrower and the
Subsidiary Guarantors.

     "Loans" means advances made by the Lenders to the Company  pursuant to this
Agreement.

     "Maintenance Capital  Expenditures" means cash capital expenditures made to
maintain,  up to the level  thereof  that  existed on the  Execution  Date,  the
throughput,   deliverable  capacity,   terminaling  capacity,  or  fractionation
capacity  (assuming  normal  operating   conditions,   including  down-time  and
maintenance) of the assets of the Company and the Restricted Subsidiaries, taken
as a whole,  as such assets existed on the Execution Date and shall,  therefore,
not include cash capital  expenditures  made in respect of capital additions and
improvements. Where cash capital expenditures are made in part to effectuate the
capacity maintenance level referred to in the immediately preceding sentence and
in part for other purposes,  the General Partner's good faith allocation thereof
between  the part used to  maintain  such  capacity  level and the part used for
other purposes shall be conclusive.

     "Make-Whole  Premium" means the  make-whole  premium paid by OLP "A" on its
8.79% First Mortgage Notes due June 30, 2007.

     "Material  Adverse  Effect"  means,  relative to any occurrence of whatever
nature  (including any adverse  determination in any litigation,  arbitration or
governmental  investigation  or proceeding) and after taking into account actual
insurance   coverage  and  effective   indemnification   with  respect  to  such
occurrence,  (a) a material adverse effect on the financial condition,  business
or operations of the Company and the Restricted  Subsidiaries  taken as a whole,
(b) the  impairment  of (i) the  ability  of the Loan  Parties  to  collectively
perform the payment or other material  obligations  hereunder or under the other
Loan Documents or (ii) the ability of the Administrative Agent or the Lenders to
realize the material  benefits intended to be provided by the Loan Parties under
the Loan Documents or (c) the subjection of any of the Administrative Agent, the
Issuing Bank or any Lender to any civil or criminal liability.

     "Maturity Date" means the earlier of (a) February 1, 2005, as such date may
be  extended  pursuant  to  Section  2.20,  and  (b)  the  acceleration  of  the
Obligations pursuant to Section 7.01.

     "Maximum  Rate" has the meaning  specified in Section 11.13.

                                      -16-
<PAGE>

     "Mont Belvieu" means Mont Belvieu  Associates,  a Texas general partnership
of which each of KMNGL and  Enterprise  Products Co. owns a 50% general  partner
interest.

     "Moody's" means Moody's Investors Service, Inc.

     "Multiemployer  Plan"  means a  multiemployer  plan as  defined  in Section
4001(a)(3) of ERISA.

     "Net  Income"  means for any Person for any period,  the net income or (net
loss)  of such  Person  for  such  period  (taken  as a  cumulative  whole),  as
determined  in  accordance  with GAAP,  provided  that there shall be  excluded,
without  duplication,  from such net income (to the  extent  otherwise  included
therein):

         (a) net extra  ordinary  gains and losses  (other than,  in the case of
     losses,  losses  resulting from charges  against net income to establish or
     increase reserves for potential environmental  liabilities and reserves for
     exposure of such Person under rate cases);

         (b) net gains or losses in respect of dispositions of assets other than
     in the ordinary course of business; and

         (c) any gains or losses  attributable  to write-ups or  write-downs  of
     assets; and

         (d) proceeds of any key man  insurance,  or any  insurance on property,
     plant or equipment.

     "New Subsidiary" has the meaning specified in Section 6.04.

     "Nominee" has the meaning specified in Section 2.20.

     "Non-Consenting  Lenders" has the meaning specified in Section 2.20.

     "Note" has the meaning specified in Section 2.10.

     "Notice of Account Designation" has the meaning specified in Section 2.07.

     "Notice  of  Default"  has the  meaning  specified  in Section 7.01.

     "Notice of  Extension"  has the meaning  specified  in Section 2.20.

     "Notice of Prepayment" has the meaning specified in Section 2.11.

     "Obligations" means collectively:

         (a)   the payment of all indebtedness and liabilities by, and  perform-
ance of all other obligations of, the Company in respect of the Loans;


                                      -17-
<PAGE>

         (b) all  obligations of the Company and the Subsidiary  Borrower under,
with respect to, and  relating to the Letters of Credit  whether  contingent  or
matured;

         (c) all obligations of the Company or any Restricted  Subsidiary (other
than SFPP) owing to any Lender under any Hedging Agreement;

         (d) the  payment  of all  other  indebtedness  and  liabilities  by and
performance of all other obligations of, the Company and the Subsidiary Borrower
to the  Administrative  Agent,  the  Issuing  Bank and the Lenders  under,  with
respect to, and arising in connection with, the Loan Documents,  and the payment
of all indebtedness  and liabilities of the Company and the Subsidiary  Borrower
to the  Administrative  Agent, the Issuing Bank and the Lenders for fees, costs,
indemnification and expenses (including reasonable attorneys' fees and expenses)
under the Loan Documents;

         (e) the  reimbursement  of all sums  advanced  and costs  and  expenses
incurred by the  Administrative  Agent under any Loan Document (whether directly
or  indirectly)  in connection  with the  Obligations or any part thereof or any
renewal, extension or change of or substitution for the Obligations or, any part
thereof,  whether such advances, costs and expenses were made or incurred at the
request of any Loan Party or the Administrative Agent; and

         (f)  all   renewals,   extensions,   amendments   and  changes  of,  or
substitutions or replacements  for, all or any part of the items described under
clauses (a) through (e) above.

     "OECD" means the Organization for Economic  Cooperation and Development (or
any successor).

     "OLP `A'" has the meaning specified in the introduction to this Agreement.

     "OLP `A' EBITDA" means (without  duplication),  for any period,  the sum of
(a) the EBITDA of OLP " A" for such period (not including,  however,  the EBITDA
of any  Person in which  OLP "A" owned  Capital  Stock at any time  during  such
period),  plus (b) the aggregate of all  distributions  actually received by OLP
"A" in respect  of such  period  from any Person in which OLP "A" owned  Capital
Stock during all or any portion of such period;  provided however,  that (y) the
EBITDA  of OLP "A" will be  calculated  for such  period  without  regard to the
Make-Whole Premium and (z) notwithstanding anything to the contrary contained in
this definition,  upon completion of the Shell JV Investment,  the EBITDA of OLP
"A" for each of the four quarters  preceding the effective date of completion of
such  investment  shall be computed on a pro forma basis which  assumes that the
EBITDA from  ownership and operation of the Central Basin Pipeline for each such
quarter  was  $3,625,000  (i.e.,  an  amount  equal  to the  quarterly  priority
distribution  to be  received by KMCO2  during the first 16  quarters  following
completion of the Shell JV Investment).

     "OLP `A' First Mortgage Notes" has the meaning specified in the Preliminary
Statements.

     "OLP `A' Loan  Agreement"  has the  meaning  specified  in the  Preliminary
Statements.

     "OLP  `A'  Refinancing"  has  the  meaning  specified  in  the  Preliminary
Statements.

                                      -18-
<PAGE>

     "OLP `B'  Refinancing"  has the meaning specified in the Preliminary State-
ments.

     "OLP `C'" has the meaning specified in the introduction to this Agreement.

     "OLP `D'" has the meaning specified in the introduction to this Agreement.

     "Other  Taxes"  means any and all  present or future  stamp or  documentary
taxes or any other excise or property  taxes,  charges or similar levies arising
from any payment made hereunder or from the  execution,  delivery or enforcement
of, or otherwise with respect to, this Agreement.

     "Participant"  has the meaning  specified  in Section 11.05(e).

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

     "Permitted Encumbrances" means:

         (a) Liens  imposed  by law for taxes  that are not yet due or are being
contested in compliance with Section 5.04;

         (b) carriers', warehousemen's,  mechanics', materialmen's,  repairmen's
and other like Liens imposed by law,  arising in the ordinary course of business
and securing  obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;

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

         (d)  deposits  to secure  the  performance  of bids,  trade  contracts,
leases,  statutory obligations,  surety and appeal bonds,  performance bonds and
other  obligations  of a like  nature,  in each case in the  ordinary  course of
business;

         (e)  easements,   zoning   restrictions,   rights-of-way   and  similar
encumbrances  on real property  imposed by law or arising in the ordinary course
of business that do not secure any monetary  obligations  and do not  materially
detract from the value of the affected  property or interfere  with the ordinary
conduct of business of the Company or any Subsidiary;

         (f)  judgment  and  attachment  Liens  not  giving  rise to an Event of
Default or Liens created by or existing from any litigation or legal  proceeding
that are currently  being  contested in good faith by  appropriate  proceedings,
promptly  instituted and diligently  conducted,  and for which adequate reserves
have been made to the extent required by GAAP;

         (g) any  interest  or title  of a lessor  in  property  subject  to any
Capitalized  Lease  Obligation  or  operating  lease  which,  in each  case,  is
permitted under this Agreement; and

                                      -19-
<PAGE>

         (h)  Liens in  favor of  collecting  or payor  banks  having a right of
setoff, revocation, refund or chargeback with respect to money or instruments of
the Company or any  Restricted  Subsidiary  on deposit with or in  possession of
such bank;

provided  that the term  "Permitted  Encumbrances"  shall not  include  any Lien
securing Indebtedness.

     "Permitted Investments" means:

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

         (b) investments in commercial  paper issued by a Person that is not the
Company or an Affiliate of the Company maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, an investment grade
rating from S&P or from Moody's;

         (c) investments in certificates  of deposit,  banker's  acceptances and
time  deposits  maturing  within 180 days from the date of  acquisition  thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic  office of any commercial  bank organized  under the
laws of the United  States of America or any state  thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;

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

         (e)  investments in demand  deposit  accounts with any Lender or with a
financial institution satisfying the criteria described in clause (c) above.

     "Person" means any natural person, corporation,  limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

     "Plan" means any employee  pension benefit plan (other than a Multiemployer
Plan) subject to the  provisions of Title IV of ERISA or Section 412 of the Code
or  Section  302 of ERISA,  and in  respect  of which the  Company  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.

     "Pledged Bonds" has the meaning specified in Section 2.06.

     "Prime  Rate" shall mean the rate of interest  from time to time  announced
publicly  by the  Administrative  Agent at the  Principal  Office  as its  prime
commercial  lending  rate.  Such  rate is set by the  Administrative  Agent as a
general  reference  rate of  interest,  taking into  account such factors as the
Administrative Agent may deem appropriate,  it being understood that many of the
Administrative  Agent's commercial or other loans are priced in relation to such
rate, that it is not necessarily the lowest or best rate actually charged to any
customer and that the Administrative 

                                      -20-
<PAGE>

Agent may make various  commercial or other loans at rates of interest having no
relationship to such rate.

     "Principal  Office" shall mean the principal  office of the  Administrative
Agent,  presently located at 301 South College Street, TW-10,  Charlotte,  North
Carolina 28288-0608 or such other location as designated by the
Administrative Agent from time to time.

     "Pro Rata Share" has the meaning specified in Section 10.05.

     "Purchase Agreement" shall mean the Purchase Agreement dated as of the 18th
day of October,  1997,  by and among the Company,  the General  Partner,  SFMLP,
Santa Fe Pacific  Pipelines,  Inc., a Delaware  corporation,  and SFP Pipelines,
Inc.,  a Delaware  corporation,  and SFP  Pipeline  Holdings,  Inc.,  a Delaware
corporation, as amended.

     "Qualified Stock" means any Capital Stock issued by the Company that is not
Disqualified Stock.

     "Reduction   Date"  has  the  meaning   specified   in Section 2.09(a).

     "Refinancing  Indebtedness"  means any  Indebtedness  of the Company or any
Restricted  Subsidiary  issued in exchange for, or the net proceeds of which are
applied  entirely to  substantially  concurrently  repay,  refinance,  refund or
replace,  Indebtedness of the Company or any Restricted  Subsidiary (a) existing
on the Execution  Date and listed on Schedule  1.01A or (b) which would exist on
the Execution Date  (assuming that all unfunded  commitments to advance any such
Indebtedness  are fully funded) (the "Refinanced  Indebtedness"),  to the extent
such Refinancing Indebtedness:

         (a) is issued in a principal amount (or if such  Indebtedness is issued
at an  original  issue  discount,  is issued at an  original  issue  price)  not
exceeding the outstanding principal amount (or, if such Refinanced  Indebtedness
was issued at an original issue discount,  not exceeding the outstanding accrued
principal amount) of such Refinanced Indebtedness; and

         (b) if the Refinanced  Indebtedness  is Indebtedness of the Company and
ranks by contract,  by its terms or otherwise  junior in right of payment to the
Obligations,  (A) does not have a final scheduled maturity and is not subject to
any principal payments, including payments upon mandatory or optional redemption
prior to the dates of analogous payments under the Refinanced Indebtedness,  and
(B) has subordination  provisions  effective to subordinate such Indebtedness to
the  Obligations  at least to the extent that such  Refinanced  Indebtedness  is
subordinated to the Obligations; and

         (c) if the Refinanced Indebtedness is Indebtedness of the Company which
is pari passu in right of payment with the Obligations, (A) is either pari passu
or is subordinated in right of payment to the  Obligations,  (B) does not have a
final scheduled maturity and is not subject to any principal payments, including
payments upon  mandatory or optional  redemption,  prior to the final  scheduled
maturity date of the Refinanced  Indebtedness,  and (C) is not secured by a Lien
on any  


                                      -21-
<PAGE>

property or assets of the Company or  any  Restricted  Subsidiary in addition to
Liens securing the Refinanced Indebtedness.

     "Register" has the meaning specified in Section 11.05.

     "Regulation A" means Regulation A of the Board, as the same is from time to
time in effect,  and all  official  rulings and  interpretations  thereunder  or
thereof.

     "Regulation D" means Regulation D of the Board, as the same is from time to
time in effect,  and all  official  rulings and  interpretations  thereunder  or
thereof.

     "Regulation G" means Regulation G of the Board, as the same is from time to
time in effect,  and all  official  rulings and  interpretations  thereunder  or
thereof.

     "Regulation T" means Regulation T of the Board, as the same is from time to
time in effect,  and all  official  rulings and  interpretations  thereunder  or
thereof.

     "Regulation U" means Regulation U of the Board, as the same is from time to
time in effect,  and all  official  rulings and  interpretations  thereunder  or
thereof.

     "Regulation X" means Regulation X of the Board, as the same is from time to
time in effect,  and all  official  rulings and  interpretations  thereunder  or
thereof.

     "Related  Parties"  means,  with  respect  to any  specified  Person,  such
Person's Affiliates and the respective directors,  officers,  employees,  agents
and advisors of such Person and such Person's Affiliates.

     "Relevant  Anniversary Date" has the meaning specified in Section 2.20.

     "Required  Lenders" means,  at any time,  Lenders having  Revolving  Credit
Exposures and unused  Commitments  representing  66 2/3% of the sum of the total
Revolving Credit Exposures and unused Commitments at such time.

     "Requirement of Law" shall mean any law, statute,  code, ordinance,  order,
determination,   rule,  regulation,  judgment,  decree,  injunction,  franchise,
permit,  certificate,  license,  authorization or other directive or requirement
(whether or not having the force of law),  including  Environmental Laws, energy
regulations and  occupational,  safety and health standards or controls,  of any
Governmental Authority.

     "Reserve  Requirement"  means, for any day as applied to a Eurodollar Loan,
the  aggregate  (without  duplication)  of the  rates  (expressed  as a  decimal
fraction)  of  reserve  requirements  in  effect on such day  (including  basic,
supplemental, marginal and emergency reserves under any regulations of the Board
or other  Governmental  Authority  having  jurisdiction  with  respect  thereto)
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as  "Eurocurrency  Liabilities"  in  Regulation  D)  maintained by a
member bank of the Federal Reserve System.  


                                      -22-
<PAGE>

Eurodollar Loans shall be deemed to constitute  Eurocurrency  Liabilities and to
be  subject  to such  reserve  requirements  without  benefit  of or credit  for
proration, exceptions or offsets which may be available from time to time to any
Lender under Regulation D.

     "Responsible Officer" of any Loan Party means the Chairman,  Vice Chairman,
President,  Chief Financial Officer or Chief Accounting Officer of (a) as to any
Loan Party that is a limited  partnership,  the General  Partner of such Person,
(b) as to any Loan  Party  that is a limited  liability  company,  the  managing
member of such Person, and (c) as to any Loan Party that is a corporation,  such
Person.

     "Restricted Payment" means any distribution (whether in cash, securities or
other property) with respect to any partnership  interest in the Company, or any
payment (whether in cash, securities or other property),  including any deposit,
on account of the purchase, redemption, retirement, acquisition, cancellation or
termination  of any such  partnership  interest  or any option or other right to
acquire any such partnership  interest;  provided,  however,  that distributions
with  respect to the  partnership  interests  in the Company that do not exceed,
with respect to any fiscal quarter of the Company,  the amount of Available Cash
for such quarter  shall not  constitute  Restricted  Payments so long as in each
case, both before and after the making of such distribution, no Event of Default
or Default shall have occurred and be continuing;  and provided,  further,  that
any partnership interest split,  partnership interest reverse split, dividend of
Company  partnership  interests  or similar  transaction  will not  constitute a
Restricted  Payment and the issuance of Company partner  interests in connection
with  completion  of the Santa Fe  Acquisition  or the purchase or exchange (for
cash not exceeding  $25,000,000  or Company  partner  interests) of the Variable
Rate Exchangeable Debentures due 2010 issued by SFP Pipeline Holdings, Inc. will
not constitute a Restricted Payment.

     "Restricted  Subsidiary"  means any Subsidiary of the Company other than an
Unrestricted  Subsidiary.  The Board of Directors of the general  partner of the
Company, by a Board Resolution,  may designate any Unrestricted Subsidiary to be
a  Restricted  Subsidiary;  provided,  that (a) before and after  giving  effect
thereto no Default or Event of Default  shall have  occurred and be  continuing,
(b) the Company and the Restricted Subsidiaries shall be in compliance, on a pro
forma  basis,  after  giving  effect  to such  designation,  with the  covenants
contained  in Article  VI,  recomputed  as at the last day of the most  recently
ended fiscal quarter of the Company and the Restricted  Subsidiaries  as if such
designation  had occurred on the first day of each  relevant  period for testing
such  compliance and (c) the Company shall have delivered to the  Administrative
Agent and the Lenders a  certificate  of a  Responsible  Officer to such effect,
together with all relevant financial information and calculations  demonstrating
such  compliance.  For  purposes of this  definition  and of Article VI, a newly
designated or acquired Restricted Subsidiary shall be deemed to have incurred or
made on the date of its designation or acquisition, as the case may be, all such
Indebtedness,  Liens and investments  then  outstanding as would be reflected on
its balance sheet, prepared in accordance with GAAP, as at such date.

     "Revolving  Borrowing" means a Borrowing  comprised of Revolving Loans.

                                      -23-
<PAGE>

     "Revolving  Credit Exposure" means, with respect to any Lender at any time,
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure and Swingline Exposure at such time.

     "Revolving   Loan"  means  a  Loan  made  pursuant  to Section 2.03.

     "S&P" means Standard & Poor's.

     "Santa  Fe  Acquisition"  has  the  meaning  specified  in the  Preliminary
Statements.

     "Security  Documents" means,  collectively,  the Company Security Agreement
and the Subsidiary Guarantors Security Agreements.

     "SFMLP" has the meaning  specified in the  Preliminary Statements.

     "SFPP" has the meaning  specified  in the  Preliminary Statements.

     "SFPP First Mortgage Notes" means those certain First Mortgage Notes issued
by SFPP (under its prior name  Southern  Pacific Pipe Lines  Partnership,  L.P.)
pursuant  to a Note  Agreement  dated  December  8,  1988  between  SFPP and the
purchasers  named therein,  which on the Execution  Date are  outstanding in the
aggregate principal amount of $279,500,000.

     "SFPP  Revolving  Credit  Facility" means that certain Amended and Restated
Credit  Agreement  dated as of August 11,  1997 among SFPP,  the  lenders  party
thereto, Bank of America National Trust and Savings Association, as agent, Chase
Bank of Texas,  National  Association  (formerly  Texas  Commerce  Bank National
Association), as syndication agent, Bank of Montreal, as documentation agent and
BancAmerica Securities,  Inc., as arranger,  providing for revolving loans to be
made to SFPP in an aggregate principal amount not exceeding  $175,000,000 at any
time outstanding.

     "Shell"  means Shell  Western E & P Inc.,  Shell Cortez  Pipeline  Company,
Shell Land & Energy Company and their Affiliates.

     "Shell CO2" has the meaning specified in the Preliminary Statements.

     "Shell JV Investment" has the meaning specified  in the Preliminary  State-
ments.

     "Subsidiary"  means, with respect to any Person (the "parent") at any date,
any corporation,  limited liability company,  partnership,  association or other
entity the accounts of which would be  consolidated  with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared  in  accordance  with  GAAP as of  such  date,  as  well  as any  other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests  representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership,  more than 50% of the general partnership interests are, as of such
date,  owned,  controlled  or held,  or (b) that is, as of such date,  otherwise


                                      -24-
<PAGE>

controlled,  by the parent or one or more  subsidiaries  of the parent or by the
parent and one or more subsidiaries of the parent.  Unless the context otherwise
clearly  requires,  references  in  this  Agreement  to a  "Subsidiary"  or  the
"Subsidiaries" refer to a Subsidiary or the Subsidiaries of the Company.

     "Subsidiary Borrower" has the meaning specified in the introduction to this
Agreement.

     "Subsidiary  Borrower  Credit  Agreement" has the meaning  specified in the
Preliminary Statements.

     "Subsidiary  Borrower Guaranteed  Obligations" has the meaning specified in
Section 9.01.

     "Subsidiary  Guarantor  Counterpart"  has the meaning  specified in Section
6.04.

     "Subsidiary  Guarantors  Security  Agreements" means,  collectively,  (a) a
Pledge  Agreement  dated  as of the  date  hereof  from  OLP "A" in favor of the
Administrative  Agent  covering,  inter alia, 100% of the issued and outstanding
shares of stock of KMNGL and 100% of the issued and outstanding member interests
in KMCO2,  (b) a Pledge  Agreement  dated as of the date  hereof from OLP "D" in
favor of the Administrative Agent covering its general partner interest in SFPP,
and (c) when the necessary  consents  have been obtained and such  agreement has
become  effective in accordance with its terms, a Subsidiary  Guarantors  Pledge
Agreement from KMNGL in favor of the Administrative Agent covering,  inter alia,
its 50% general partner interest in Mont Belvieu.

     "Subsidiary  Guarantors" has the meaning  specified in the  introduction to
this Agreement.

     "Subsidiary Guarantors Guaranty" means the guaranty contained in Article X.

     "Swingline  Exposure" means, at any time, the aggregate principal amount of
all Swingline  Loans  outstanding  at such time.  The Swingline  Exposure of any
Lender at any time shall be its  Applicable  Percentage  of the total  Swingline
Exposure at such time.

     "Swingline  Lender"  means First Union  National  Bank,  in its capacity as
lender of Swingline Loans hereunder.

     "Swingline   Loan"  means  a  Loan  made  pursuant  to Section 2.04.

     "Syndication  Agent" has the meaning  specified in the introduction to this
Agreement.

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

     "Total  Commitment"  means the sum of the  Commitments of the Lenders.

                                      -25-
<PAGE>

     "Transactions"  means the execution,  delivery and  performance by the Loan
Parties of this Agreement and the other Loan Documents,  the borrowing of Loans,
the use of the  proceeds  thereof  and the  Existing  Letter of  Credit  and the
issuance of the other Letters of Credit hereunder.

     "Triggering  Event" means the earlier to occur of December 31, 1998 and the
Santa Fe Acquisition.

     "Trustee"  means Bank One,  Texas,  NA as the  beneficiary  of the Existing
Letter of Credit and any successor beneficiary.

     "Type", when used in reference to any Loan or Borrowing,  refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the LIBOR Rate or the Alternate Base Rate.

     "United States" and "U.S."each  means United States of America.

     "Unrestricted  Subsidiary"  means  (a) any  Subsidiary  of an  Unrestricted
Subsidiary or (b) any  Subsidiary  of the Company or of a Restricted  Subsidiary
that is designated as an  Unrestricted  Subsidiary by a Board  Resolution of the
general  partner  of the  Company in  accordance  with the  requirements  of the
following sentence with the consent of the Required Lenders (which consent shall
not  be  unreasonably  withheld).   The  Company  may  hereafter  designate  any
Subsidiary  of  the  Company  or of a  Restricted  Subsidiary  (other  than  the
Subsidiary  Borrower,  a Subsidiary Guarantor or, after it becomes a Subsidiary,
SFPP) to be an  Unrestricted  Subsidiary  by a Board  Resolution  of the general
partner of the Company,  as evidenced by written notice thereof delivered to the
Administrative  Agent,  if at the  time  of and  after  giving  effect  to  such
designation,  (i) no  Default or Event of Default  shall  have  occurred  and be
continuing,  (ii) such  Subsidiary does not own or hold any Capital Stock of, or
any Lien on any property of, the Company or any Restricted  Subsidiary and (iii)
such  Subsidiary  does not own or hold any  Indebtedness  of the  Company or any
Restricted Subsidiary that would not be permitted pursuant to Section 6.01 as if
incurred on the date of such designation. As of the date hereof, the Company has
no Unrestricted Subsidiaries.

     "Voting Stock" means,  with respect to any Person,  securities of any class
or classes of Capital Stock in such Person entitling holders thereof (whether at
all times or only so long as no senior class of stock has voting power by reason
of any contingency) to vote in the election of members of the Board of Directors
or other  governing  body of such Person or its  managing  member or its general
partner  (or its  managing  general  partner  if there is more than one  general
partner).

     "Wholly-Owned Restricted Subsidiary" means a Restricted Subsidiary of which
all  issued  and  outstanding  Capital  Stock  (excluding  (a) in the  case of a
corporation,  directors'  qualifying  shares,  (b)  in  the  case  of a  limited
partnership,  a 1.5% general  partner  interest and (c) in the case of a limited
liability  company,  a 1.5% member  interest) is directly or indirectly owned by
the Company.

     "Withdrawal  Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer  Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.


                                      -26-
<PAGE>

         SECTION 1.02  Classification  of Loans and  Borrowing.  For purposes of
this  Agreement,  Loans may be  classified  and  referred to by Class  (e.g.,  a
"Revolving  Loan") or by Type (e.g.,  a "Eurodollar  Loan") or by Class and Type
(e.g., a "Eurodollar  Revolving  Loan").  Borrowings  also may be classified and
referred  to by Class  (e.g.,  a  "Revolving  Borrowing")  or by Type  (e.g.,  a
"Eurodollar  Borrowing")  or by Class and Type (e.g.,  a  "Eurodollar  Revolving
Borrowing").

         SECTION 1.03. Accounting  Terms; Changes in GAAP.  All  accounting  and
financial  terms used n GAAP  herein and not  otherwise  defined  herein and the
compliance  with each  covenant  contained  herein  which  relates to  financial
matters shall be determined in accordance  with GAAP applied by the Company on a
consistent basis,  except to the extent that a deviation  therefrom is expressly
stated.  Should  there be a change in GAAP from that in effect on the  Execution
Date, such that the defined terms set forth in Section 1.01 or the covenants set
forth in Article  VI would  then be  calculated  in a  different  manner or with
different  components  or would  render  the same not  meaningful  criteria  for
evaluating the matters  contemplated to be evidenced by such covenants,  (a) the
Company and the Required  Lenders agree,  within the 60-day period following any
such  change,  to  negotiate  in good faith and enter into an  amendment to this
Agreement in order to conform the defined terms set forth in Section 1.01 or the
covenants set forth in Article VI, or both, in such respects as shall reasonably
be deemed  necessary by the Required Lenders so that the criteria for evaluating
the matters contemplated to be evidenced by such covenants are substantially the
same criteria as were  effective  prior to any such change in GAAP,  and (b) the
Company  shall be deemed to be in  compliance  with such  covenants  during  the
60-day period following any such change,  or until the earlier date of execution
of such  amendment,  if and to the extent  that the  Company  would have been in
compliance therewith under GAAP as in effect immediately prior to such change.

         SECTION 1.04.  Interpretation.   (a) In   this   Agreement,   unless   
a  clear contrary intention appears:

         (i)   the singular number includes the plural number and vice versa;


         (ii)  reference to any gender includes each other gender;


         (iii) the words  "herein,"  "hereof" and "hereunder" and other words of
     similar import refer to this Agreement as a whole and not to any particular
     Article, Section or other subdivision;

          (iv) reference  to any Person  includes such Person's  successors  and
     assigns  but,  if  applicable,  only if such  successors  and  assigns  are
     permitted  by this  Agreement,  and  reference  to a Person in a particular
     capacity  excludes  such  Person in any  other  capacity  or  individually;
     provided  that  nothing in this clause (iv) is  intended to  authorize  any
     assignment not otherwise permitted by this Agreement;

          (v)  except as expressly provided to the contrary herein, reference to
     any agreement, document or instrument (including this Agreement) means such
     agreement,  document or instrument as amended, supplemented or modified and
     in effect from time to

                                      -27-
<PAGE>

     time in  accordance  with the terms thereof and, if  applicable,  the terms
     hereof,  and  reference to any Note or other note  includes any note issued
     pursuant  hereto in extension  or renewal  thereof and in  substitution  or
     replacement therefor;

          (vi) unless the context indicates otherwise, reference to any Article,
     Section,  Schedule or Exhibit means such Article or Section  hereof or such
     Schedule or Exhibit hereto;

          (vii) the word "including" (and with  correlative  meaning  "include")
     means  including,  without  limiting  the  generality  of  any  description
     preceding such term;

          (viii) with respect to the determination of any period of time, except
     as  expressly  provided to the  contrary,  the word "from"  means "from and
     including" and the word "to" means "to but excluding";

          (ix)  reference to any law, rule or regulation  means such as amended,
     modified,  codified or reenacted,  in whole or in part,  and in effect from
     time to time; and

          (x) the words  "asset" and  "property"  shall be construed to have the
     same meaning and effect and refer to any and all  tangible  and  intangible
     assets and properties.

                                   ARTICLE II.

                                   The Credits

          SECTION 2.01  Commitments. Subject to  the  terms and  conditions  set
forth  herein,  each Lender agrees to make  Revolving  Loans to the Company from
time to time during the  Availability  Period in an aggregate  principal  amount
that will not result in (a) such Lender's  Revolving  Credit Exposure  exceeding
such Lender's  Commitment or (b) the sum of the total Revolving Credit Exposures
exceeding the Availability. Within the foregoing limits and subject to the terms
and  conditions  set forth herein,  the Company may borrow,  prepay and reborrow
Revolving Loans.

          SECTION 2.02.  Loans  and  Borrowings.  (a) Each  Revolving Loan shall
be made as part of a Borrowing consisting of Revolving Loans made by the Lenders
ratably in  accordance  with their  respective  Commitments.  The failure of any
Lender to make any Loan  required  to be made by it shall not  relieve any other
Lender of its obligations hereunder.

         (b)  Subject  to  Section  2.14,  each  Revolving  Borrowing  shall  be
comprised  entirely of ABR Loans or Eurodollar  Loans as the Company may request
in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at
its  option may make any  Eurodollar  Loan by causing  any  domestic  or foreign
branch or Affiliate of such Lender to make such Loan; provided that any exercise
of such option shall not affect the obligation of the Company to repay such Loan
in accordance with the terms of this Agreement.


                                      -28-
<PAGE>

         (c) At  the commencement  of each  Interest  Period for any  Eurodollar
Revolving  Borrowing,  such Borrowing shall be in an aggregate amount that is an
integral  multiple of $1,000,000 and not less than $3,000,000.  At the time that
each ABR Revolving  Borrowing is made,  such Borrowing  shall be in an aggregate
amount that is an integral  multiple of $500,000  and not less than  $1,000,000;
provided that an ABR Revolving  Borrowing may be in an aggregate  amount that is
equal to the entire unused  balance of the Total  Commitment or that is required
to finance the  reimbursement  of an LC  Disbursement as contemplated by Section
2.06(f).  Each Swingline Loan shall be in an amount that is an integral multiple
of $100,000  and not less than  $500,000.  Borrowings  of more than one Type and
Class may be outstanding at the same time;  provided that there shall not at any
time be more than a total of six Eurodollar Revolving Borrowings outstanding.

         (d) Notwithstanding any other provision of this Agreement,  the Company
shall not be  entitled  to  request,  or to elect to  convert or  continue,  any
Borrowing if the Interest Period  requested with respect thereto would end after
the Maturity Date.

          SECTION 2.03.  Requests  for  Revolving   Borrowings.   To  request  a
Revolving  Borrowing,  the Company shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar  Borrowing,  not later than
10:00 a.m., Charlotte,  North Carolina time, three Business Days before the date
of the proposed Borrowing (provided, however, no such request may be given prior
to the third  Business Day after the  Effective  Date) and (b) in the case of an
ABR Borrowing, not later than 10:00 a.m., Charlotte, North Carolina time, on the
date of the proposed Borrowing.  Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed  promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form of Exhibit 2.03 (a
"Borrowing Request") and signed by the Company. Each such telephonic and written
Borrowing  Request shall specify the following  information  in compliance  with
Section 2.02:

          (i)   the aggregate amount of the requested Borrowing;

          (ii)  the date of such Borrowing, which shall be a Business Day;

         (iii)  whether such Borrowing is to be an ABR Borrowing or a Eurodollar
     Borrowing;

         (iv) in the case of a Eurodollar Borrowing, the initial Interest Period
     to be  applicable  thereto,  which  shall be a period  contemplated  by the
     definition of the term "Interest Period"; and

         (v) the location and number of the Company's account to which funds are
     to be disbursed, which shall comply with the requirements of Section 2.07.

If no election as to the Type of  Revolving  Borrowing  is  specified,  then the
requested Revolving  Borrowing shall be an ABR Borrowing.  If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing,  then
the Company shall be deemed to have  selected an Interest  Period of one month's
duration.  Promptly  following receipt of a Borrowing Request in 


                                      -29-
<PAGE>

accordance  with this Section 2.03, the  Administrative  Agent shall advise each
Lender of the details thereof and of the amount of such Lender's Loan to be made
as part of the requested Borrowing.

          SECTION 2.04.  Swingline Loans. (a) Subject to the terms and 
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans
to the Company from time to time during the Availability Period, in an aggregate
principal  amount  at any  time  outstanding  that  will not  result  in (i) the
aggregate principal amount of outstanding  Swingline Loans exceeding  $5,000,000
or (ii) the sum of the total Revolving Credit Exposures  exceeding the lesser of
the Total  Commitment and the  Availability;  provided that the Swingline Lender
shall not be required  to make a  Swingline  Loan to  refinance  an  outstanding
Swingline  Loan.  Within  the  foregoing  limits  and  subject  to the terms and
conditions  set forth  herein,  the  Company  may  borrow,  prepay and  reborrow
Swingline Loans.

         (b)  To  request  a  Swingline  Loan,  the  Company  shall  notify  the
Administrative Agent of such request by telephone  (confirmed by telecopy),  not
later than 12:00 noon, Charlotte,  North Carolina time, on the day of a proposed
Swingline  Loan.  Each such notice shall be  irrevocable  and shall  specify the
requested  date  (which  shall be a Business  Day) and  amount of the  requested
Swingline  Loan.  The  Administrative  Agent (if not the Swingline  Lender) will
promptly  advise  the  Swingline  Lender of any such  notice  received  from the
Company. So long as the Swingline Lender and the Administrative  Agent are First
Union  National  Bank,  the  Swingline  Lender  shall make each  Swingline  Loan
available  to the  Company  by means of a credit to the  deposit  account of the
Company  with the  Swingline  Lender  identified  in the most  recent  Notice of
Account  Designation  by 3:00  p.m.,  Charlotte,  North  Carolina  time,  on the
requested date of such Swingline Loan.

         (c)  The  Swingline   Lender  may  by  written   notice  given  to  the
Administrative Agent not later than 12:00 noon, Charlotte,  North Carolina time,
on any  Business  Day  require  the  Lenders to acquire  participations  on such
Business Day in all or a portion of the Swingline Loans outstanding. Such notice
shall  specify the  aggregate  amount of Swingline  Loans in which  Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice  thereof to each  Lender,  specifying  in such notice such  Lender's
Applicable  Percentage  of such  Swingline  Loan or Loans.  Each  Lender  hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the  Administrative  Agent,  for the account of the Swingline  Lender,
such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges  and  agrees  that its  obligation  to  acquire  participations  in
Swingline  Loans  pursuant to this paragraph is absolute and  unconditional  and
shall not be affected by any circumstance  whatsoever,  including the occurrence
and  continuance of a Default or Event of Default or reduction or termination of
the Total  Commitment,  and that each such  payment  shall be made  without  any
offset, abatement, withholding or reduction whatsoever. Each Lender shall comply
with its  obligation  under  this  paragraph  by wire  transfer  of  immediately
available  funds, in the same manner as provided in Section 2.07 with respect to
Loans made by such Lender (and Section 2.07 shall apply,  mutatis  mutandis,  to
the payment  obligations  of the Lenders),  and the  Administrative  Agent shall
promptly  pay to the  Swingline  Lender the  amounts so  received by it from the
Lenders. The Administrative Agent shall notify the Company of any participations
in any  Swingline  Loan  acquired  pursuant to this  paragraph,  and  thereafter
payments in respect of such Swingline  Loan shall be made to the  Administrative
Agent and not to the  Swingline  Lender.  Any amounts  received by the 


                                      -30-
<PAGE>

Swingline  Lender from the Company (or other party on behalf of the  Company) in
respect  of a  Swingline  Loan  after  receipt  by the  Swingline  Lender of the
proceeds of a sale of  participations  therein shall be promptly remitted to the
Administrative  Agent;  any such amounts  received by the  Administrative  Agent
shall be promptly remitted by the Administrative Agent to the Lenders that shall
have made their payments pursuant to this paragraph and to the Swingline Lender,
as their  interests may appear.  The purchase of  participations  in a Swingline
Loan pursuant to this paragraph  shall not relieve the Company or any other Loan
Party of any default in the payment thereof.

         SECTION 2.05.  Telephonic  Notices.   Without  in  any way limiting the
obligation  of he Company  or any other  Loan  Party to  confirm in writing  any
telephonic  notice it is entitled to give under this Agreement or any other Loan
Document, the Administrative Agent may act without liability upon the basis of a
telephonic notice believed in good faith by the Administrative  Agent to be from
the Company or such Loan Party prior to receipt of written confirmation. In each
such case, each Loan Party hereby waives the right to dispute the Administrative
Agent's record of the terms of such telephonic notice.

         SECTION 2.06  Letters  of  Credit.  (a) Existing  Letter of Credit. The
parties  hereto  acknowledge  that on and after the Effective  Date the Existing
Letter of Credit shall be a Letter of Credit  issued by the Issuing Bank for the
account of the Subsidiary  Borrower  pursuant to this Agreement.  The Subsidiary
Borrower hereby pledges, assigns, transfers and delivers to the Issuing Bank all
its right,  title and interest to all Bonds purchased with funds drawn under the
Existing  Letter of Credit  (the  "Pledged  Bonds"),  and  hereby  grants to the
Issuing  Bank a first lien on, and security  interest in, its rights,  title and
interest in and to the Pledged  Bonds,  the  interest  thereon and all  proceeds
thereof or  substitutions  therefor,  as collateral  security for the prompt and
complete  payment  when due of the  amounts  payable in respect of the  Existing
Letter of Credit.  During such time as any Bonds are Pledged Bonds,  the Issuing
Bank shall be entitled  to exercise  all of the rights of a holder of Bonds with
respect to voting,  consenting  and directing the Trustee as if the Issuing Bank
were the owner of such Bonds,  and the  Subsidiary  Borrower  hereby  grants and
assigns to the Issuing Bank all such rights.

          (b) General. Subject to the terms and conditions set forth herein, the
Company may request the issuance of Letters of Credit for its own account or for
its own  account and that of any  Restricted  Subsidiary,  in a form  reasonably
acceptable  to the  Administrative  Agent and the Issuing  Bank, at any time and
from  time  to  time  during  the  Availability  Period.  In  the  event  of any
inconsistency  between the terms and  conditions of this Agreement and the terms
and  conditions  of any  Application  (as  defined in Section  2.06(c)) or other
agreement  submitted by the Company to, or entered into by the Company with, the
Issuing Bank relating to any Letter of Credit,  the terms and conditions of this
Agreement shall control.

          (c)  Notice  of  Issuance,   Amendment,  Renewal,  Extension;  Certain
Conditions.  To request the  issuance  of a Letter of Credit (or the  amendment,
renewal or extension of an outstanding Letter of Credit), the Company shall hand
deliver or telecopy (or transmit by electronic  communication,  if  arrangements
for doing so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative  Agent  (not less  than  five  Business  Days in  advance  of the
requested date of issuance, amendment, renewal or extension) a notice (a "Letter
of  Credit  Request")  


                                      -31-
<PAGE>

requesting  the  issuance of a Letter of Credit,  or  identifying  the Letter of
Credit to be amended,  renewed or  extended,  the date of  issuance,  amendment,
renewal  or  extension,  the date on which  such  Letter  of Credit is to expire
(which  shall comply with this  Section  2.06(c)),  the amount of such Letter of
Credit,  the  name  and  address  of the  beneficiary  thereof  and  such  other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit.  If  requested by the Issuing  Bank,  the Company also shall submit a
letter  of  credit   application  on  the  Issuing  Bank's   standard  form  (an
"Application")  in connection with any request for a Letter of Credit.  A Letter
of Credit  shall be  issued,  amended,  renewed  or  extended  only if (and upon
issuance,  amendment,  renewal or extension of each Letter of Credit the Company
shall be deemed to represent  and warrant  that),  after  giving  effect to such
issuance,  amendment,  renewal or extension (i) the LC Exposure shall not exceed
$75,000,000 and (ii) the sum of the total Revolving  Credit  Exposures shall not
exceed the lesser of the Total Commitment and the Availability.

          (d)  Expiration  Date.  Each Letter of Credit (other than the Existing
Letter of  Credit)  shall  expire at or prior to the  close of  business  on the
earlier of (i) the date one year after the date of the  issuance  of such Letter
of Credit (or, in the case of any renewal or extension  thereof,  one year after
such renewal or extension) and (ii) the date that is five Business Days prior to
the Maturity Date.

          (e) Participations. On the Effective Date with respect to the Existing
Letter of Credit  and by the  issuance  of each  other  Letter of Credit  (or an
amendment to a Letter of Credit  increasing the amount  thereof) and without any
further action on the part of the Issuing Bank or the Lenders,  the Issuing Bank
hereby grants to each Lender,  and each Lender hereby  acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender's Applicable
Percentage  of the aggregate  amount  available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and  unconditionally  agrees to pay to the Administrative  Agent, for
the account of the Issuing Bank, such Lender's Applicable  Percentage of each LC
Disbursement  made by the Issuing Bank and not  reimbursed by the Company on the
date  due as  provided  in  Section  2.06(f),  or of any  reimbursement  payment
required to be refunded to the Company for any reason.  Each Lender acknowledges
and agrees  that its  obligation  to  acquire  participations  pursuant  to this
paragraph  in respect of Letters of Credit is  absolute  and  unconditional  and
shall not be affected by any circumstance  whatsoever,  including any amendment,
renewal or extension of any Letter of Credit or the occurrence  and  continuance
of a  Default  or an  Event  of  Default  or  reduction  or  termination  of the
Commitments,  and that each  such  payment  shall be made  without  any  offset,
abatement, withholding or reduction whatsoever.

          (f) Reimbursement.  If the Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit,  the Borrower for whose account such Letter of
Credit  was  issued  shall  reimburse  such LC  Disbursement  by  paying  to the
Administrative  Agent an amount  equal to such LC  Disbursement  not later  than
12:00  noon,  Charlotte,   North  Carolina  time,  on  the  date  that  such  LC
Disbursement  is made,  if such Borrower  shall have received  notice of such LC
Disbursement prior to 10:00 a.m., Charlotte,  North Carolina time, on such date,
or, if such notice has not been received by such Borrower  prior to such time on
such date,  then not later than 12:00 noon,  Charlotte,  North Carolina time, on
(i) the Business Day that such Borrower  receives such notice, if such notice is
received  prior to 10:00 a.m.,  Charlotte,  North  Carolina  time, on the day of
receipt,  or (ii) the  

                                      -32-
<PAGE>

Business Day  immediately  following  the day that such  Borrower  receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that if such Borrower fails to make such payment when due,  then,  upon
demand by the  Issuing  Bank sent to the  Administrative  Agent and each  Lender
before 10:00 a.m., Charlotte, North Carolina time, each Lender shall pursuant to
Section  2.07 on the same day make  available  to the  Administrative  Agent for
delivery to the Issuing Bank,  immediately available funds in an amount equal to
such Lender's Applicable Percentage of the amount of such payment by the Issuing
Bank,  and the funding of such amount  shall be treated as the funding of an ABR
Loan by such Lender to such Borrower.  Notwithstanding anything herein or in any
other Loan Document to the contrary,  the funding obligations of the Lenders set
forth in this Section  2.06(f)  shall be binding  regardless of whether or not a
Default or an Event of Default shall exist or the other conditions  precedent in
Article III are satisfied at such time. If and to the extent any Lender fails to
effect any payment due from it under this Section 2.06(f) to the  Administrative
Agent,  then interest shall accrue on the obligation of such Lender to make such
payment from the date such  payment  became due to the date such  obligation  is
paid in full at a rate per annum equal to the Federal Funds  Effective Rate. The
failure of any Lender to pay its Applicable  Percentage of any payment under any
Letter of Credit shall not relieve any other Lender of its obligation  hereunder
to pay to the  Administrative  Agent its  Applicable  Percentage  of any payment
under any Letter of Credit on the date  required,  as  specified  above,  but no
Lender  shall be  responsible  for the failure of any other Lender to pay to the
Administrative  Agent  such other  Lender's  Applicable  Percentage  of any such
payment.

          (g) Obligations Absolute. The Company's obligation to reimburse (or in
the case of the Existing Letter of Credit, the Subsidiary  Borrower's obligation
to reimburse) LC  Disbursements  as provided in Section  2.06(f)  shall,  to the
extent permitted by law, be absolute,  unconditional and irrevocable,  and shall
be performed  strictly in accordance  with the terms of this Agreement under any
and all circumstances whatsoever and irrespective of:

         (i) any lack of  validity  or  enforceability  of any Letter of Credit,
     this Agreement or any other Loan Document,  or any term or provision herein
     or therein;

         (ii) any amendment or waiver of or any consent to departure from all or
     any of the provisions of any Letter of Credit,  this Agreement or any other
     Loan Document;

         (iii) the existence of any claim,  setoff,  defense or other right that
     either  Borrower,  any other Loan Party or other  Affiliate  thereof or any
     other Person may at any time have against the beneficiary  under any Letter
     of Credit, the Issuing Bank, the Administrative  Agent or any Lender or any
     other  Person,  whether  in  connection  with this  Agreement  or any other
     related or unrelated agreement or transaction;

         (iv) any  draft or other  document  presented  under a Letter of Credit
     proving to be forged, fraudulent or invalid in any respect or any statement
     therein being untrue or inaccurate in any respect;

         (v)  payment  by the  Issuing  Bank  under a Letter of  Credit  against
     presentation  of a draft or other  document  that does not comply  with the
     terms of such Letter of Credit; and

                                      -33-
<PAGE>

         (vi)  any  other  act or  omission  to act or  delay of any kind of the
     Issuing Bank, the Lenders,  the Administrative Agent or any other Person or
     any other event or circumstance  whatsoever,  whether or not similar to any
     of the foregoing,  that might, but for the provisions of this Section 2.06,
     constitute a legal or equitable  discharge of any Loan Party's  obligations
     hereunder.

Neither the  Administrative  Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties,  shall have any liability or  responsibility by reason of
or in  connection  with the  issuance or transfer of any Letter of Credit or any
payment  or  failure  to  make  any  payment  thereunder,  including  any of the
circumstances specified in clauses (i) through (vi) above, as well as any error,
omission,  interruption, loss or delay in transmission or delivery of any draft,
notice  or other  communication  under  or  relating  to any  Letter  of  Credit
(including  any document  required to make a drawing  thereunder),  any error in
interpretation of technical terms or any consequence  arising from causes beyond
the  control of the  Issuing  Bank;  provided  that the  foregoing  shall not be
construed  to excuse the Issuing  Bank from  liability to the Borrower for whose
account such Letter of Credit was issued to the extent of any direct damages (as
opposed to consequential  damages,  claims in respect of which are hereby waived
by each  Borrower to the extent  permitted by  applicable  law) suffered by such
Borrower  that are caused by the Issuing  Bank's  failure to exercise the agreed
standard of care (as set forth below) in  determining  whether  drafts and other
documents presented under a Letter of Credit comply with the terms thereof.  The
parties  hereto  expressly  agree that the Issuing Bank shall have exercised the
agreed standard of care in the absence of gross negligence,  willful  misconduct
or  unlawful  conduct on the part of the  Issuing  Bank.  Without  limiting  the
generality of the foregoing,  it is understood  that the Issuing Bank may accept
documents  that appear on their face to be in  substantial  compliance  with the
terms of a Letter of Credit,  without  responsibility for further investigation,
regardless of any notice or  information  to the contrary,  and may make payment
upon  presentation  of documents  that appear on their face to be in substantial
compliance  with the terms of such Letter of Credit;  provided  that the Issuing
Bank shall have the right,  in its sole  discretion,  to decline to accept  such
documents  and to  make  such  payment  if  such  documents  are  not in  strict
compliance with the terms of such Letter of Credit.

          (h)  Disbursement   Procedures.   The  Issuing  Bank  shall,  promptly
following its receipt thereof,  examine all documents  purporting to represent a
demand for payment  under a Letter of Credit.  The Issuing  Bank shall  promptly
notify the  Administrative  Agent and the Borrower for whose account such Letter
of Credit was issued by  telephone  (confirmed  by  telecopy) of such demand for
payment and whether  the Issuing  Bank has made or will make an LC  Disbursement
thereunder;  provided  that any  failure to give or delay in giving  such notice
shall not relieve  either  Borrower of its  obligation  to reimburse the Issuing
Bank and the Lenders with respect to any such LC Disbursement.

          (i)  Interim  Interest.   If  the  Issuing  Bank  shall  make  any  LC
Disbursement,  then,  unless the Company (or, in the case of the Existing Letter
of Credit, the Subsidiary Borrower) shall reimburse such LC Disbursement in full
on the date specified in Section  2.06(f),  the unpaid amount thereof shall bear
interest,  for each day from the date such LC  Disbursement  is made to the date
that the  Company  (or,  in the  case of the  Existing  Letter  of  Credit,  the
Subsidiary  Borrower)  reimburses such LC Disbursement  (or all Lenders make the
payments to the Administrative Agent contemplated 

                                      -34-
<PAGE>

by Section  2.06(f) and treated  pursuant to said  Section as  constituting  the
funding of ABR Loans),  at the rate per annum then  applicable  to ABR Revolving
Loans.

          (j)  Replacement of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Borrowers,  the Administrative Agent,
the replaced  Issuing Bank and the successor  Issuing Bank.  The  Administrative
Agent shall notify the Lenders of any such  replacement  of the Issuing Bank. At
the time any such replacement  shall become  effective,  the Borrowers shall pay
all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement,  (i)
the  successor  Issuing  Bank shall have all the rights and  obligations  of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all  previous  Issuing  Banks,  as the  context  shall  require.  After  the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall  continue to have all the rights and  obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

          (k) Cash  Collateralization.  If (i) any Event of Default  shall occur
and be continuing, on the Business Day that the Company receives notice from the
Administrative  Agent or the Required  Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 66_% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph or (ii) a Change in Control shall occur,  the Company shall deposit in
an account  with the  Administrative  Agent,  in the name of the  Administrative
Agent and for the  benefit  of the  Lenders,  an amount in cash  equal to the LC
Exposure as of such date plus any accrued and unpaid interest thereon;  provided
that the  obligation  to deposit such cash  collateral  shall  become  effective
immediately,  and such deposit shall become immediately due and payable, without
demand or notice of any kind,  upon the  occurrence of any Event of Default with
respect to any Loan Party  described in clause (g) or (h) of Section 7.01.  Such
deposit shall be held by the Administrative  Agent as collateral for the payment
and  performance of the obligations of the Loan Parties under this Agreement and
the other Loan Documents. The Administrative Agent shall have exclusive dominion
and control,  including the exclusive  right of  withdrawal,  over such account.
Other  than any  interest  earned  on the  investment  of such  deposits,  which
investments   shall  be  made  at  the  option  and  sole   discretion   of  the
Administrative Agent and at the Company's risk and expense,  such deposits shall
not bear  interest.  Interest or  profits,  if any,  on such  investments  shall
accumulate  in such  account.  Moneys in such  account  shall be  applied by the
Administrative  Agent to  reimburse  the Issuing Bank for LC  Disbursements  for
which it has not been  reimbursed  and, to the extent not so  applied,  shall be
held for the satisfaction of the reimbursement  obligations of the Borrowers for
the LC  Exposure  at such  time  or,  if the  maturity  of the  Loans  has  been
accelerated (but subject to the consent of Lenders with LC Exposure representing
greater  than  66_% of the total LC  Exposure),  be  applied  to  satisfy  other
obligations  of the  Loan  Parties  under  this  Agreement  and the  other  Loan
Documents.  If the Company is  required to provide an amount of cash  collateral
hereunder as a result of the occurrence of an Event of Default,  such amount (to
the extent not applied as  aforesaid)  shall be  returned to the Company  within
three Business Days after all Events of Default have been cured or waived.

                                      -35-
<PAGE>


         SECTION 2.07.  Funding  of  Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 2:00 p.m., Charlotte, North Carolina time, to the
account of the  Administrative  Agent most  recently  designated  by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made as
provided  in  Section  2.04.  Not later than 2:00 p.m.  (Charlotte  time) on the
proposed  borrowing date, each Lender will make available to the  Administrative
Agent,  for the  account of the  Borrower,  at the office of the  Administrative
Agent in funds immediately  available to the Administrative Agent, such Lender's
Commitment  Percentage  of the  Loans  to be made on such  borrowing  date.  The
Company hereby irrevocably  authorizes the Administrative  Agent to disburse the
proceeds  of  each  borrowing   requested  pursuant  to  this  Section  2.07  in
immediately  available funds by crediting or wiring such proceeds to the deposit
account  of the  Company  identified  in  the  most  recent  Notice  of  Account
Designation  substantially  in the form of  Exhibit  2.07  hereto (a  "Notice of
Account  Designation")  delivered by the Company to the Administrative  Agent or
may be otherwise agreed upon by the Borrower and the  Administrative  Agent from
time  to  time;   provided  that  ABR  Revolving   Loans  made  to  finance  the
reimbursement  of an LC  Disbursement  as provided  in Sections  2.06(e) and (f)
shall be remitted by the Administrative Agent to the Issuing Bank.

         (b) Unless the  Administrative  Agent shall have received notice from a
Lender  prior to the  proposed  date of any  Borrowing  (or prior to 12:00 noon,
Charlotte,  North  Carolina  time, on such date in the case of an ABR Borrowing)
that such  Lender  will not make  available  to the  Administrative  Agent  such
Lender's share of such Borrowing,  the Administrative Agent may assume that such
Lender has made such share  available  on such date in  accordance  with Section
2.07(a) and may, in reliance upon such assumption, make available to the Company
a  corresponding  amount.  In such  event,  if a Lender has not in fact made its
share of the applicable  Borrowing  available to the Administrative  Agent, then
the  applicable   Lender  and  the  Company   severally  agree  to  pay  to  the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from the date such amount is made available to the Company
to the date of payment to the  Administrative  Agent, at (i) in the case of such
Lender, the Federal Funds Effective Rate or (ii) in the case of the Company, the
interest rate  applicable  to ABR Loans.  If such Lender pays such amount to the
Administrative  Agent,  then such amount shall  constitute  such  Lender's  Loan
included in such Borrowing.

         SECTION  2.08  Interest  Elections.   (a)  Each   Revolving   Borrowing
initially  shall be of the Type  specified in the applicable  Borrowing  Request
and,  in the case of a  Eurodollar  Revolving  Borrowing,  shall have an initial
Interest Period as specified in such Borrowing Request.  Thereafter, the Company
may elect to convert  such  Borrowing  to a different  Type or to continue  such
Borrowing  and,  in the case of a  Eurodollar  Revolving  Borrowing,  may  elect
Interest Periods therefor, all as provided in this Section 2.08. The Company may
elect  different  options  with  respect to  different  portions of the affected
Borrowing,  in which case each such portion shall be allocated ratably among the
Lenders holding the Loans  comprising such Borrowing,  and the Loans  comprising
each such portion  shall be considered a separate  Borrowing.  This Section 2.08
shall  not  apply  to  Swingline  Borrowings,  which  may  not be  converted  or
continued.

         (b) To make an election  pursuant  to this  Section  2.08,  the Company
shall notify the Administrative  Agent of such election by telephone by the time
that a Borrowing  Request  would 

                                      -36-
<PAGE>

be required  under  Section  2.03 if the  Company  were  requesting  a Revolving
Borrowing of the Type  resulting  from such election to be made on the effective
date of such election.  Each such telephonic  Interest Election Request shall be
irrevocable and shall be confirmed  promptly by hand delivery or telecopy to the
Administrative  Agent of a  written  Interest  Election  Request  in the form of
Exhibit 2.08 (an "Interest Election Request").

         (c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02:

          (i) the Borrowing to which such Interest Election Request applies and,
     if different  options are being elected with respect to different  portions
     thereof,  the portions thereof to be allocated to each resulting  Borrowing
     (in which case the  information  to be specified  pursuant to clauses (iii)
     and (iv) below shall be specified for each resulting Borrowing);

          (ii) the effective date of the election made pursuant to such Interest
     Election Request, which shall be a Business Day;

          (iii) whether the  resulting  Borrowing is to be an ABR Borrowing or a
     Eurodollar Borrowing; and

          (iv)  if  the  resulting  Borrowing  is a  Eurodollar  Borrowing,  the
     Interest  Period  to be  applicable  thereto  after  giving  effect to such
     election,  which shall be a period  contemplated  by the  definition of the
     term "Interest Period".

If any such Interest  Election Request requests a Eurodollar  Borrowing but does
not  specify  an  Interest  Period,  then the  Company  shall be  deemed to have
selected an Interest Period of one month's duration.

         (d) Promptly  following receipt of an Interest  Election  Request,  the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.

         (e) If the Company fails to deliver a timely Interest  Election Request
with  respect  to a  Eurodollar  Revolving  Borrowing  prior  to the  end of the
Interest Period  applicable  thereto,  then,  unless such Borrowing is repaid as
provided  herein,  at the end of such Interest  Period such  Borrowing  shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
and so long as an Event of Default is continuing  (i) no  outstanding  Revolving
Borrowing  may be converted to or continued as a Eurodollar  Borrowing  and (ii)
unless repaid, each Eurodollar  Revolving Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

          SECTION  2.09  Termination  and  Reduction of Commitments. (a)  Unless
previously terminated,  on May 1, 2000 (as such date may be extended pursuant to
Section 2.20, the "Initial  Reduction Date") and on each of the other dates (the
Initial  Reduction  Date and each such  other  date,  as such  other date may be
extended  pursuant to Section 2.20,  being a "Reduction  Date") specified 

                                      -37-
<PAGE>

below,  the  Total  Commitment  shall  reduce  by an  amount  equal to the Total
Commitment in effect on the Initial  Reduction Date multiplied by the percentage
set forth opposite such dates below:

                     Dates                       Percentage

         May 1 and August 1, 2000                  4.00%
         November 1, 2000 and February 1, 2001     4.25%
         May 1 and August 1, 2001                  4.50%
         November 1, 2001 and February 1, 2002     4.75%
         May 1 and August 1, 2002                  5.00%
         November 1, 2002 and February 1, 2003     5.00%
         May 1 and August 1, 2003                  5.25%
         November 1, 2003 and February 1, 2004     5.50%
         May 1 and August 1, 2004                  5.75%
         November 1, 2004 and February 1, 2005     6.00%

Notwithstanding  the  foregoing,   unless  previously   terminated,   the  Total
Commitment shall terminate on the Maturity Date.

         (b) The Company may at any time terminate, or from time to time reduce,
the  Total  Commitment,  in  whole or in part;  provided  that (i) each  partial
reduction  of the Total  Commitment  shall be in an amount  that is an  integral
multiple of $1,000,000  and not less than  $5,000,000 and (ii) the Company shall
not  terminate  or  reduce  the  Commitments  if,  after  giving  effect  to any
concurrent  prepayment of the Loans in accordance  with Section 2.11, the sum of
the Revolving  Credit  Exposures would exceed the lesser of the Total Commitment
and the  Availability.  Each reduction of the Total Commitment  pursuant to this
Section  2.09(b) made after the Initial  Reduction  Date shall reduce the amount
that must be reduced  on each  subsequent  Reduction  Date in the order in which
each such reduction is to occur.

         (c) The Company shall notify the  Administrative  Agent of any election
to terminate or reduce the Total Commitment under Section 2.09(b) at least three
Business  Days prior to the  effective  date of such  termination  or reduction,
specifying  such election and the effective  date  thereof.  Promptly  following
receipt of any notice, the Administrative  Agent shall advise the Lenders of the
contents thereof.  Each notice delivered by the Company pursuant to this Section
2.09 shall be  irrevocable;  provided that a notice of  termination of the Total
Commitment  delivered  by the Company may state that such notice is  conditioned
upon the effectiveness of other credit facilities, in which case such notice may
be revoked by the Company (by notice to the Administrative  Agent on or prior to
the  specified  effective  date)  if  such  condition  is  not  satisfied.   Any
termination  or  reduction  of the Total  Commitment  shall be  permanent.  Each
reduction of the Total  Commitment  shall be made  ratably  among the Lenders in
accordance with their respective Commitments.

         SECTION  2.10  Repayment  of Loans;  Evidence of Debt . (a) The Company
hereby  unconditionally  promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid  principal  amount of each Revolving Loan
on the Maturity Date and (ii) to the Swingline  Lender the then unpaid principal
amount of each Swingline Loan on demand thereof or by the 

                                      -38-
<PAGE>

Swingline  Lender.  In addition,  if after giving effect to the reduction of the
Total  Commitment on each Reduction Date, the Revolving  Credit Exposure exceeds
the lesser of the Total Commitment and the  Availability,  the Company shall pay
to the  Administrative  Agent  for the  account  of  each  Lender  an  aggregate
principal  amount of Revolving  Loans  sufficient to cause the Revolving  Credit
Exposure not to exceed the lesser of the Total Commitment and the  Availability;
provided,  however, if the repayment of the outstanding Revolving Loans does not
cause the  Revolving  Credit  Exposure to be equal to or less than the lesser of
the Total  Commitment  and the  Availability,  the Company  shall  deposit in an
account with the Administrative  Agent in the name of the  Administrative  Agent
and for the benefit of the Lender,  an amount in cash equal to the excess of the
Revolving Credit Exposure over the Total Commitment, which cash deposit shall be
held by the Administrative  Agent for the payment of the obligations of the Loan
Parties under this Agreement and the other Loan  Documents.  The  Administrative
Agent shall have exclusive  dominion and control,  including the exclusive right
of  withdrawal,  over  such  account  other  than  any  interest  earned  on the
investment of such deposit,  which  investments  shall be made at the option and
sole  discretion  of the  Administrative  Agent  and at the  Company's  risk and
expense.  Interest or profits,  if any, on such investments  shall accumulate in
such  account.  Moneys in such  account  shall be applied by the  Administrative
Agent to reimburse  the Issuing Bank for LC  Disbursements  for which it has not
been  reimbursed  and,  to the  extent  not so  applied,  shall  be held for the
satisfaction  of the  reimbursement  obligations  of the  Borrowers  for  the LC
Exposure at such time, or if the maturity of the Loans has been accelerated (but
subject to the consent of the Lenders with LC Exposure representing greater than
66_% of the total LC Exposure),  be applied to satisfy other  obligations of the
Loan Parties under this Agreement and the other Loan Documents. At any time when
the Revolving Credit Exposure does not exceed the lesser of the Total Commitment
and the  Availability  and so long as no Default or Event of Default  shall then
exist, upon the request of the Company the amount of such deposit (to the extent
not applied as aforesaid) shall be returned to the Company within three Business
Days after receipt of such request.

         (b) On the date that a Change in  Control  occurs,  the  Company  shall
repay the  outstanding  principal  amount  of the  Loans  and all other  amounts
outstanding  hereunder and under the other Loan  Documents and shall comply with
the provisions of Section 2.06(k);  provided,  however, if the Change in Control
is a result of the death or disability of Richard D. Kinder or William V. Morgan
or both, the Company shall make such repayment and comply with the provisions of
Section  2.06(k)  on the date that is 180 days  after  such  Change  in  Control
occurs, unless such date is not a Business Day in which event such repayment and
compliance shall be due on the next Business Day occurring after such date.

         (c) Each Lender shall maintain in accordance with its usual practice an
account or accounts  evidencing the  indebtedness  of the Company to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

         (d) The Administrative  Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made  hereunder,  the Class and Type  thereof
and the Interest Period applicable thereto,  (ii) the amount of any principal or
interest due and payable or to become due and 

                                      -39-
<PAGE>

payable  from the Company to each Lender  hereunder  and (iii) the amount of any
sum  received  by the  Administrative  Agent  hereunder  for the  account of the
Lenders and each Lender's share thereof.

         (e) The entries  made in the  accounts  maintained  pursuant to Section
2.10(c) or (d) shall be prima facie evidence of the existence and amounts of the
obligations  recorded  therein;  provided  that the failure of any Lender or the
Administrative  Agent to maintain such accounts or any error or conflict therein
shall not in any manner affect the  obligation of the Company to repay the Loans
in accordance with the terms of this Agreement.

         (f) Any Lender may  request  that  Loans made by it be  evidenced  by a
promissory note. In such event,  the Company shall prepare,  execute and deliver
to such Lender a promissory  note payable to the order of such Lender and in the
form attached as Exhibit 2.10 (each a "Note").  Thereafter,  the Loans evidenced
by such promissory note and interest thereon shall at all times (including after
assignment  pursuant to Section 11.05) be represented by one or more  promissory
notes in such form payable to the order of the payee named therein.

         SECTION 2.11  Prepayment of Loans.  (a)  The  Company  shall  have  the
right at any time and from time to time to prepay any  Borrowing  in whole or in
part,  subject to prior  notice in accordance with Section 2.11(b).

         (b) The Company shall notify the Administrative Agent (and, in the case
of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed
by  telecopy  in the form of Exhibit  2.11 (a "Notice  of  Prepayment"))  of any
prepayment  hereunder (i) in the case of  prepayment  of a Eurodollar  Revolving
Borrowing,  not later than 11:00 a.m.,  Charlotte,  North Carolina  time,  three
Business Days before the date of  prepayment,  (ii) in the case of prepayment of
an ABR Revolving Borrowing, not later than 11:00 a.m., Charlotte, North Carolina
time,  one  Business Day before the date of  prepayment  or (iii) in the case of
prepayment  of a Swingline  Loan,  not later than 11:00 a.m.,  Charlotte,  North
Carolina time, on the date of prepayment.  Each such notice shall be irrevocable
and shall specify the  prepayment  date,  Type and the principal  amount of each
Borrowing  or  portion  thereof to be  prepaid;  provided  that,  if a notice of
prepayment is given in connection  with a conditional  notice of  termination of
the  Commitments as contemplated by Section 2.09, then such notice of prepayment
may be revoked if such  notice of  termination  is  revoked in  accordance  with
Section 2.09. Each partial  prepayment  shall be in an aggregate amount not less
than, and shall be an integral multiple of, the amounts shown below with respect
to the applicable Type of Loan or Borrowing:

              Type of              Integral            Minimum
          Loan/Borrowing           Multiple of     Aggregate Amount

      Eurodollar Revolving         $  1,000,000     $  3,000,000
      Borrowing

      ABR Revolving Borrowing           500,000        1,000,000
      Borrowing

      Swingline Loan                    100,000          500,000


                                      -4-
<PAGE>

Promptly following receipt of any such notice relating to a Revolving Borrowing,
the  Administrative  Agent shall advise the Lenders of the contents thereof.  If
the Company fails to designate  the Type of  Borrowings  to be prepaid,  partial
prepayments  shall be applied first to the outstanding ABR Borrowings  until all
such outstanding principal of ABR Borrowings are repaid in full, and then to the
outstanding principal amount of Eurodollar  Borrowings.  Each partial prepayment
of any Revolving  Borrowing shall be in an amount that would be permitted in the
case of an advance of a  Revolving  Borrowing  of the same Type as  provided  in
Section 2.02. Each prepayment of a Revolving  Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.13.

          SECTION 2.12 Fees. (a) The Company agrees to pay to the Administrative
Agent for the account of each Lender a commitment fee, which shall accrue at the
Applicable  Margin on the daily amount of the unused  Commitment  of such Lender
during the period from and including the date of this Agreement to but excluding
the date on which such Commitment  terminates.  Accrued commitment fees shall be
payable in arrears on the last day of January,  April,  July and October of each
year and on the date on which the Commitments terminate, commencing on the first
such date to occur after the date hereof.  All commitment fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).

         (b) The Company agrees to pay (i) to the  Administrative  Agent for the
account of each Lender a participation fee with respect to its participations in
Letters  of  Credit,  which  shall  accrue  at a rate  per  annum  equal  to the
Applicable  Margin  applicable to interest on Eurodollar  Revolving Loans on the
average daily amount of such Lender's LC Exposure (excluding any portion thereof
attributable  to  unreimbursed  LC  Disbursements)  during the  period  from and
including  the  Effective  Date to but  excluding the later of the date on which
such Lender's Commitment  terminates and the date on which such Lender ceases to
have any LC Exposure,  and (ii) to the Issuing Bank a fronting fee,  which shall
accrue  at the rate of .125%  per annum on the  average  daily  amount of the LC
Exposure  (excluding  any  portion  thereof   attributable  to  unreimbursed  LC
Disbursements)  during the period from and including  the Effective  Date to but
excluding the later of the date of termination of the  Commitments  and the date
on which  there  ceases to be any LC  Exposure,  as well as the  Issuing  Bank's
standard fees with respect to the issuance,  amendment,  renewal or extension of
any Letter of Credit or processing of drawings thereunder. Accrued participation
fees shall be payable in  arrears on the last day of  January,  April,  July and
October  of each  year,  commencing  on the first  such date to occur  after the
Effective  Date;  provided  that all such fees  shall be  payable on the date on
which the  Commitments  terminate and any such fees  accruing  after the date on
which the  Commitments  terminate  shall be payable  on  demand.  Any other fees
payable to the Issuing Bank pursuant to this  paragraph  shall be payable within
10 days after demand. All participation fees and fronting fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).

         (c) The Company agrees to pay to the Administrative  Agent, for its own
account,  fees payable in the amounts and at the times  specified in that letter
agreement dated January 14, 1998 among the Company,  the Subsidiary  Guarantors,
the  Administrative  Agent,  Goldman Sachs Credit


                                      -41-
<PAGE>

Partners  L.P.  and  First  Union  Capital  Markets  Corp.(as  from time to time
amended, the "Fee Letter").

         (d) All fees  payable  hereunder  shall be paid on the  dates  due,  in
immediately  available  funds,  to the  Administrative  Agent (or to the Issuing
Bank,  in the  case of fees  payable  to it) for  distribution,  in the  case of
commitment fees and  participation  fees, to the Lenders.  Except as required by
law, fees paid shall not be refundable under any circumstances.

         SECTION 2.13.  Interest.  (a) The Loans  comprising  each ABR Borrowing
(including each Swingline Loan) shall bear interest at a rate per annum equal to
the Alternate Base Rate.

         (b) The Loans comprising each Eurodollar  Borrowing shall bear interest
at a rate per annum  equal to LIBOR Rate for the  Interest  Period in effect for
such Borrowing plus the Applicable Margin.

         (c) Notwithstanding  the foregoing,  if any principal of or interest on
any Loan or any fee or other amount payable by the Company hereunder is not paid
when due,  whether at stated  maturity,  upon  acceleration  or otherwise,  such
overdue amount shall bear interest,  after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise  applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the Alternate Base Rate.

         (d)  Accrued  interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to  Section  2.13(c)  shall  be  payable  on  demand,  (ii) in the  event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving
Loan  prior to the end of the  Availability  Period),  accrued  interest  on the
principal  amount  repaid  or  prepaid  shall  be  payable  on the  date of such
repayment or prepayment,  (iii) in the event of any conversion of any Eurodollar
Revolving Loan prior to the end of the current Interest Period therefor, accrued
interest on such Loan shall be payable on the effective date of such  conversion
and (iv) all accrued  interest  shall be payable upon  termination  of the Total
Commitment.

         (e) All interest  hereunder shall be computed on the basis of a year of
360 days,  except that interest computed by reference to the Alternate Base Rate
at times  when the  Alternate  Base  Rate is based on the  Prime  Rate  shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed  (including the
first day but excluding the last day).  The  applicable  Alternate  Base Rate or
LIBOR  Rate  shall  be  determined  by  the   Administrative   Agent,  and  such
determination shall be conclusive absent manifest error.

         SECTION 2.14.  Alternate Rate of Interest. If prior to the commencement
of any  Interest Period for a Eurodollar Borrowing:

                                      -42-
<PAGE>

         (a) the Administrative  Agent determines (which  determination shall be
conclusive  absent  manifest  error) that adequate and  reasonable  means do not
exist for ascertaining the LIBOR Rate for such Interest Period; or

         (b) the  Administrative  Agent is advised by the Required  Lenders that
the LIBOR Rate for such Interest  Period will not  adequately and fairly reflect
the cost to such Lenders of making or  maintaining  their Loans included in such
Borrowing for such Interest Period;

then the  Administrative  Agent shall give notice thereof to the Company and the
Lenders by  telephone  or telecopy as promptly as  practicable  thereafter  and,
until the  Administrative  Agent  notifies  the Company and the Lenders that the
circumstances  giving  rise to such  notice no longer  exist,  (i) any  Interest
Election Request that requests the conversion of any Revolving  Borrowing to, or
continuation  of any  Revolving  Borrowing as, a Eurodollar  Borrowing  shall be
ineffective and (ii) if any Borrowing  Request  requests a Eurodollar  Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing.

         SECTION 2.15.  Increased Costs.  (a) If any Change in Law shall:

          (i)  impose,  modify or deem applicable any reserve,  special  deposit
     or similar requirement against assets of, deposits with or for the  account
     of, or credit extended by, any Lender except any such  reserve  requirement
     reflected in the LIBOR Rate) or the Issuing Bank; or

          (ii) impose on any Lender or the Issuing Bank or the London  interbank
     market any other condition  affecting this  Agreement or  Eurodollar  Loans
     made by such Lender or any Letter of Credit or participation therein;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of making or  maintaining  any  Eurodollar  Loan (or of  maintaining  its
obligation  to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum  received  or  receivable  by such Lender or the
Issuing Bank hereunder (whether of principal,  interest or otherwise),  then the
Company  will pay to such Lender or the Issuing  Bank,  as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.

          (b) If any  Lender  or the  Issuing  Bank  determines that any  Change
in Law regarding  capital  requirements has or would have the effect of reducing
the rate of return on such  Lender's  or the  Issuing  Bank's  capital or on the
capital of such Lender's or the Issuing  Bank's  holding  company,  if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender,  or the Letters of Credit  issued by the Issuing
Bank,  to a level  below  that  which such  Lender or the  Issuing  Bank or such
Lender's or the Issuing Bank's holding  company could have achieved but for such
Change in Law (taking into  consideration  such  Lender's or the Issuing  Bank's
policies and the policies of such Lender's or the Issuing Bank's holding company
with respect to capital  adequacy),  then from time to time the Company will pay

                                      -43-
<PAGE>

to such Lender or the Issuing Bank, as the case may be, such  additional  amount
or amounts as will  compensate  such Lender or the Issuing Bank or such Lender's
or the Issuing Bank's holding company for any such reduction suffered.

          (c) A  certificate of a Lender or the Issuing Bank setting  forth  the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding  company,  as the case may be, as specified  in paragraph  (a) or (b) of
this  Section  2.15 shall be  delivered  to the Company and shall be  conclusive
absent manifest error. The Company shall pay such Lender or the Issuing Bank, as
the case may be, the amount shown as due on any such certificate  within 10 days
after receipt thereof.

          (d)  Failure  or delay on the part of any Lender or the  Issuing  Bank
to demand  compensation  pursuant to this  Section  2.15 shall not  constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation;
provided  that the Company  shall not be required to  compensate a Lender or the
Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions
incurred  more than six months prior to the date that such Lender or the Issuing
Bank, as the case may be,  notifies the Company of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation  therefor;  provided further that, if the Change
in Law giving rise to such increased  costs or reductions is  retroactive,  then
the six-month  period  referred to above shall be extended to include the period
of retroactive effect thereof.

         SECTION 2.16.  Break Funding Payments. In the event of (a) the  payment
of any  principal  of any  Eurodollar  Loan  other  than on the  last  day of an
Interest  Period  applicable  thereto  (including  as a  result  of an  Event of
Default),  (b) the conversion of any Eurodollar  Loan other than on the last day
of the Interest Period applicable thereto,  (c) the failure to borrow,  convert,
continue or prepay any Eurodollar Loan, or the failure to convert an ABR Loan to
a Eurodollar Loan, on the date specified in any notice delivered pursuant hereto
(regardless  of whether such notice is permitted to be revocable  under  Section
2.09  and is  revoked  in  accordance  herewith)  or (d) the  assignment  of any
Eurodollar  Loan other than on the last day of the  Interest  Period  applicable
thereto as a result of a request by the Company  pursuant to Section 2.19, then,
in any such event,  the Company shall  compensate each Lender for the loss, cost
and expense  attributable to such event.  In the case of a Eurodollar  Loan, the
loss to any Lender  attributable to any such event shall be deemed to include an
amount  determined by such Lender to be equal to the excess,  if any, of (i) the
amount of  interest  that  such  Lender  would  pay for a  deposit  equal to the
principal  amount of such  Loan for the  period  from the date of such  payment,
conversion,  failure or assignment to the last day of the then current  Interest
Period  for such  Loan (or,  in the case of a  failure  to  borrow,  convert  or
continue, the duration of the Interest Period that would have resulted from such
borrowing,  conversion  or  continuation)  if the interest  rate payable on such
deposit  were equal to the LIBOR Rate for such  Interest  Period,  over (ii) the
amount of interest that such Lender would earn on such principal amount for such
period if such Lender were to invest  such  principal  amount for such period at
the  interest  rate that would be bid by such  Lender (or an  affiliate  of such
Lender) for dollar  deposits  from other banks in the  Eurodollar  market at the
commencement  of such period.  A  certificate  of any Lender  setting  forth any
amount or amounts  that such  Lender is  entitled  to receive  pursuant  to this
Section 2.16 shall be

                                      -44-
<PAGE>

delivered to the Company and shall be  conclusive  absent  manifest  error.  The
Company  shall pay such Lender the amount  shown as due on any such  certificate
within 10 days after receipt thereof.

         SECTION 2.17.  Taxes. (a) Any and all payments by or an account  of any
obligation  of  either  Borrower  hereunder  shall be made free and clear of and
without  deduction for any  Indemnified  Taxes or Other Taxes;  provided that if
either 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  2.17) the  Administrative  Agent,
Lender or Issuing  Bank (as the case may be) receives an amount equal to the sum
it would have  received had no such  deductions  been made,  (ii) such  Borrower
shall make such  deductions  and (iii) such  Borrower  shall pay the full amount
deducted to the relevant  Governmental  Authority in accordance  with applicable
law.

         (b) In  addition,  such  Borrower  shall  pay any  Other  Taxes  to the
relevant Governmental Authority in accordance with applicable law.

         (c) The Company shall indemnify the  Administrative  Agent, each Lender
and the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified  Taxes or Other Taxes (including  Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section 2.17(c)) paid by the  Administrative  Agent,  such Lender or the Issuing
Bank, as the case may be, 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 Company by a Lender or the Issuing  Bank,  or by the
Administrative  Agent on its own behalf or on behalf of a Lender or the  Issuing
Bank, shall be conclusive absent manifest error.

         (d) As soon as practicable  after any payment of  Indemnified  Taxes or
Other  Taxes by the  Company to a  Governmental  Authority,  the  Company  shall
deliver  to the  Administrative  Agent the  original  or a  certified  copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return  reporting such payment or other evidence of such payment  reasonably
satisfactory to the Administrative Agent.

         (e)  Any  Foreign  Lender  that is  entitled  to an  exemption  from or
reduction  of  withholding  tax under the law of the  jurisdiction  in which the
Borrowers are located, or any treaty to which such jurisdiction is a party, with
respect to payments  under this  Agreement  shall deliver to the Company (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by the Company, such properly completed and executed
documentation  prescribed by  applicable  law as will permit such payments to be
made without withholding or at a reduced rate.

         SECTION 2.18  Payments  Generally;  Pro  Rata  Treatment;  Sharing   of
Set-offs.  (a) The Company shall make or, in the case of the Existing  Letter of
Credit, the Subsidiary  Borrower shall make, each payment required to be made by
such Borrower hereunder (whether of principal,

                                      -45-
<PAGE>

interest, fees or reimbursement of LC Disbursements, or under Section 2.15, 2.16
or 2.17, or otherwise) prior to 12:00 noon,  Charlotte,  North Carolina time, on
the  date  when  due,  in  immediately   available  funds,  without  set-off  or
counterclaim.  Any  amounts  received  after  such time on any date may,  in the
discretion of the  Administrative  Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating  interest thereon.  All
such payments shall be made to the Administrative Agent at its Principal Office,
except  payments to be made directly to the Issuing Bank or Swingline  Lender as
expressly  provided  herein and except that payments  pursuant to Sections 2.15,
2.16, 2.17 and 11.03 shall be made directly to the Persons entitled thereto. The
Administrative  Agent shall distribute any such payments  received by it for the
account of any other  Person to the  appropriate  recipient  promptly  following
receipt  thereof.  If any payment  hereunder shall be due on a day that is not a
Business  Day,  the date for payment  shall be  extended to the next  succeeding
Business  Day,  and,  in the case of any  payment  accruing  interest,  interest
thereon  shall  be  payable  for the  period  of such  extension.  All  payments
hereunder shall be made in dollars.

         (b) If at any time insufficient  funds are received by and available to
the Administrative Agent to pay fully all amounts of principal,  unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i)  first,  to pay  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, to pay principal and unreimbursed LC
Disbursements then due hereunder,  ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements  then
due to such parties.

         (c) If any  Lender  shall,  by  exercising  any  right  of  set-off  or
counterclaim  or  otherwise,  obtain  payment in respect of any  principal of or
interest on any of its Revolving Loans or  participations in LC Disbursements or
Swingline  Loans  resulting  in  such  Lender  receiving  payment  of a  greater
proportion of the aggregate amount of its Revolving Loans and  participations in
LC  Disbursements  and  Swingline  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
Revolving Loans and  participations  in LC Disbursements  and Swingline 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  Revolving  Loans and
participations in LC Disbursements and Swingline Loans; provided that (i) if any
such  participations  are purchased and all or any portion of the payment giving
rise  thereto is  recovered,  such  participations  shall be  rescinded  and the
purchase price restored to the extent of such recovery,  without  interest,  and
(ii) the  provisions  of this  paragraph  shall not be construed to apply to any
payment made by any Loan Party  pursuant to and in  accordance  with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the  assignment  of  or  sale  of  a  participation  in  any  of  its  Loans  or
participations in LC Disbursements to any assignee or participant, other than to
a Loan Party or any subsidiary or Affiliate  thereof (as to which the provisions
of this  paragraph  shall apply).  Each Loan Party 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 such Loan Party rights of set-off and counterclaim with respect
to such  participation  as fully as if such Lender were a direct creditor of the
Company in the amount of such participation.

                                      -46-
<PAGE>

         (d) Unless the Administrative Agent shall have received notice from the
Company  prior to the date on which  any  payment  is due to the  Administrative
Agent for the  account of the  Lenders or the Issuing  Bank  hereunder  that the
Company  will not make (or in the case of the  Existing  Letter of  Credit,  the
Subsidiary  Borrower will not make) such payment,  the Administrative  Agent may
assume  that the  applicable  Borrower  has made  such  payment  on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the Issuing  Bank, as the case may be, the amount due. In such event,
if the applicable  Borrower has not in fact made such payment,  then each of the
Lenders or the Issuing  Bank, as the case may be,  severally  agrees to repay to
the  Administrative  Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with  interest  thereon,  for each day from and including
the date such amount is  distributed  to it to but excluding the date of payment
to the Administrative Agent, at the Federal Funds Effective Rate.

         (e) If any Lender shall fail to make any payment required to be made by
it  pursuant  to  Section  2.04(c),   2.06(e),  2.07(b)  or  2.18(d),  then  the
Administrative  Agent  may,  in its  discretion  (notwithstanding  any  contrary
provision hereof),  apply any amounts thereafter  received by the Administrative
Agent for the account of such Lender to satisfy such Lender's  obligations under
such Sections until all such unsatisfied obligations are fully paid.

         SECTION  2.19  Mitigation Obligations; Replacement of  Lenders.  (a) If
any Lender  requests  compensation  under Section 2.15, or if either 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 judgment
of such Lender,  such  designation or assignment  (i) would  eliminate or reduce
amounts  payable  pursuant to Section  2.15 or 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 Company
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

         (b) If any Lender  requests  compensation  under  Section  2.15,  or if
either  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,
or if any Lender  defaults in its obligation to fund Loans  hereunder,  then the
Company may, at its sole expense and effort,  upon notice to such Lender and the
Administrative  Agent,  require  such  Lender to assign  and  delegate,  without
recourse  (in  accordance  with and  subject to the  restrictions  contained  in
Section 11.05),  all its interests,  rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender,  if a Lender  accepts such  assignment);  provided  that (i) the Company
shall have received the prior written consent of the Administrative  Agent (and,
if a Commitment is being assigned, the Issuing Bank and Swingline Lender), which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment  of an  amount  equal to the  outstanding  principal  of its  Loans  and
participations  in  LC  Disbursements  and  Swingline  Loans,  accrued  interest
thereon,  accrued fees and all other amounts  payable to it hereunder,  from the
assignee (to the extent of such  outstanding  principal and accrued interest and
fees) or the Company (in the case of all other 

                                      -47-
<PAGE>

amounts) and (iii) in the case of any such assignment resulting from 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 Company to require such assignment
and delegation cease to apply.

         SECTION 2.20   Extensions of Maturity Date and Reduction Dates; Removal
of Lenders.  (a) The Company may, by written notice to the Administrative  Agent
(a "Notice of Extension")  given not less than 60 nor more than 90 days prior to
each Anniversary  Date,  advise the Lenders that it requests an extension of the
then  effective  Maturity  Date (the  "Existing  Maturity  Date")  and each then
effective  Reduction Date (an "Existing  Reduction Date") by 12 calendar months,
effective on the relevant  Anniversary Date (the "Relevant  Anniversary  Date").
The  Administrative  Agent will promptly,  and in any event within five Business
Days of the  receipt of such  Notice of  Extension,  notify  the  Lenders of the
contents of each such Notice of Extension.

         (b)  Each  Notice  of  Extension  shall  (i) be  irrevocable  and  (ii)
constitute  a  representation  by the Loan Parties that (A) neither any Event of
Default  nor  any  Default  has   occurred  and  is   continuing   and  (B)  the
representations and warranties  contained in Article IV are correct on and as of
the Relevant Anniversary Date, as though made on and as of such date.

         (c) In the event a Notice of Extension  is given to the  Administrative
Agent as provided in Section  2.20(a) and the  Administrative  Agent  notifies a
Lender of the contents thereof, such Lender shall on or before the 30th day next
preceding the then Relevant  Anniversary Date advise the Administrative Agent in
writing whether or not such Lender consents to the extension  requested  thereby
and if any Lender fails so to advise the Administrative Agent, such Lender shall
be deemed to have not  consented to such  extension.  If Lenders  holding 80% or
more of the Total  Commitment  so consent  (the  "Consenting  Lenders")  to such
extension  and any and all Lenders who have not consented  (the  "Non-Consenting
Lenders") are replaced,  the Maturity Date and each Reduction Date for the Notes
held by, and the  Commitments  of, the  Consenting  Lenders and the Nominees (as
defined  below)  shall be  automatically  extended 12  calendar  months past the
Existing Maturity Date and each corresponding Existing Reduction Date, effective
on the Relevant Anniversary Date. The Administrative Agent shall promptly notify
the  Borrowers  and all of the Lenders of each written  notice of consent  given
pursuant to this Section 2.20(c).

         (d) In the  event  the  Consenting  Lenders  hold less than 100% of the
Total Commitment,  the Consenting  Lenders, or any of them, shall have the right
(but not the  obligation)  to assume all or any  portion  of the  Non-Consenting
Lenders'   Commitments   by  giving  written  notice  to  the  Company  and  the
Administrative  Agent of their  election to do so on or before the 20th day next
preceding the Relevant  Anniversary  Date, which notice shall be irrevocable and
shall  constitute an undertaking  to (i) assume,  as of the close of business on
the Relevant  Anniversary  Date,  all or such portion of the  Commitments of the
Non-Consenting  Lenders, as the case may be, as may be specified in such written
notice, and (ii) purchase (without recourse) from the Non-Consenting Lenders, at
the close of business on the Relevant  Anniversary  Date,  the Revolving  Credit
Exposure  outstanding on the Relevant  Anniversary  Date that corresponds to the
portion of the  Commitments  to be so assumed at a price equal to the sum of (x)
the unpaid  principal  amount of all Loans so 

                                      -48-
<PAGE>

purchased,  plus (y) the  aggregate  amount,  if any,  previously  funded by the
transferor or any  participations so purchased,  plus (z) all accrued and unpaid
interest  thereon.  Such Commitments and Revolving  Credit Exposure,  or portion
thereof,  to be assumed and purchased by  Consenting  Lenders shall be allocated
among those  Consenting  Lenders who have so elected to assume the same pro rata
in accordance with the respective  Commitments of such Consenting  Lenders as of
the Relevant Anniversary Date (provided, however, in no event shall a Consenting
Lender  be  required  to  assume  and  purchase  an  amount  or  portion  of the
Commitments  and  Revolving  Credit  Exposure of the  Non-Consenting  Lenders in
excess of the amount which such Consenting  Lender agreed to assume and purchase
pursuant to the immediately  preceding  sentence) or on such other basis as such
Consenting  Lender shall agree. The  Administrative  Agent shall promptly notify
the Company and the other Consenting Lenders in the event it receives any notice
from a Consenting Lender pursuant to this Section 2.20(d).

         (e) In the  event  that  the  Consenting  Lenders  shall  not  elect as
provided in Section  2.20(d) to assume and  purchase  all of the  Non-Consenting
Lenders'  Commitments and Revolving Credit Exposure,  the Company may designate,
by written notice to the  Administrative  Agent and the Consenting Lenders given
on or before the tenth day next preceding the Relevant  Anniversary Date, one or
more Eligible Assignees not a party to this Agreement (individually, a "Nominee"
and  collectively,  the  "Nominees")  to  assume  all  or  any  portion  of  the
Non-Consenting  Lenders' Commitments not to be assumed by the Consenting Lenders
and to purchase (without recourse) from the Non-Consenting Lenders all Revolving
Credit Exposure outstanding at the close of business on the Relevant Anniversary
Date that  corresponds to the portion of the Commitments so to be assumed at the
price  specified in Section  2.20(d).  Each  assumption  and purchase under this
Section  2.20(e)  shall be effective as of the close of business on the Relevant
Anniversary  Date when each of the following  conditions has been satisfied in a
manner satisfactory to the Administrative Agent:

          (i) each  Nominee  and the  Non-Consenting  Lenders  have  executed an
     Assignment and  Acceptance  pursuant to which such Nominee shall (A) assume
     in  writing  its share of the  obligations  of the  Non-Consenting  Lenders
     hereunder,  including its share of the  Commitments  of the  Non-Consenting
     Lenders  and (B)  agree  to be  bound  as a  Lender  by the  terms  of this
     Agreement; and

          (ii)  each  Nominee   shall  have   completed  and  delivered  to  the
     Administrative Agent an Administrative Questionnaire.

         (f) In the  event  that  the  Consenting  Lenders  shall  not  elect as
provided  in  Section  2.20(d)  to  assume  all of the  Non-Consenting  Lenders'
Commitments  and the Company shall not have  effectively  designated one or more
Nominees to assume the Commitments of and purchase the Revolving Credit Exposure
of the Non-Consenting Lenders as contemplated by Section 2.20(e), there shall be
no extension of the Existing Maturity Date nor any Existing Reduction Date.


                                      -49-
<PAGE>

                                 ARTICLE III.

                              Conditions Precedent

         SECTION  3.01  Conditions  Precedent  to the Initial Credit Event.  The
obligation  of each Lender to make its initial Loan or the Issuing Bank to issue
the initial Letter of Credit is subject to the following conditions:

          (a) The Administrative  Agent shall have received the following, each
dated the initial  Borrowing  Date,  except for the Loan Documents  described in
clauses (i) through (v) below which shall be dated the Execution Date:

          (i)     this Agreement executed by each party hereto;

          (ii) if  requested by any Lender,  a Note  executed by the Company and
     payable to the order of such Lender;

          (iii)   the Company Security Agreement executed by the Company;

          (iv)    the Subsidiary  Guarantors Security Agreements executed by the
     respective Subsidiary Guarantors party thereto;

          (v)     the Intercompany Notes executed by the  respective  Subsidiary
     Guarantors makers thereof;

          (vi) a certificate  of an officer and of the secretary or an assistant
     secretary of each Loan Party or its general partner or managing member,  as
     applicable, certifying, inter alia, (A) true and complete copies of each of
     the  certificate  or articles of  incorporation,  partnership  agreement or
     articles of organization,  as the case may be, as amended and in effect, of
     such Loan Party and of its general partner or managing member,  if any, the
     bylaws,  as amended and in effect,  of such Loan Party and the  resolutions
     adopted by the Board of Directors of such Loan Party or its general partner
     or managing member (1) authorizing the execution,  delivery and performance
     by such Loan Party of this  Agreement and the other Loan Documents to which
     it is or will be a party and, in the case of the Company, the Borrowings to
     be made and the  Letters  of  Credit  (other  than the  Existing  Letter of
     Credit)  to be  issued  hereunder,  (2)  approving  the  forms  of the Loan
     Documents to which it is a party and which will be delivered at or prior to
     the initial Borrowing Date and (3) authorizing  officers of such Loan Party
     or its general  partner or managing  member to execute and deliver the Loan
     Documents  to which such Loan  Party is or will be a party and any  related
     documents,  including any agreement contemplated by this Agreement, (B) the
     incumbency  and specimen  signatures  of the officers of such Loan Party or
     its general  partner or managing  member  executing  any  documents  on its
     behalf, (C) (1) that the  representations  and warranties made by such Loan
     Party in each Loan  Document  to which such Loan Party is a party and which
     will be  delivered at or prior to the initial  Borrowing  Date are true and
     correct in all material  respects,  (2) the absence of any  proceedings for
     the  dissolution  or  liquidation of such Person and (3) the absence of the
     occurrence and continuance of any Default or

                                       -50-
<PAGE>

     Event  of  Default  and (D) in the  case of the  Company,  that the OLP "A"
     Refinancing has occurred and, in the case of the Company and the Subsidiary
     Borrower, that the OLP "B" Refinancing has occurred;

          (vii)  satisfactory  evidence that the OLP "A" Loan  Agreement and the
     Subsidiary  Borrower Credit Agreement have been terminated and that the OLP
     "A" First Mortgage Notes have been prepaid in full;

          (viii) letters from CT Corporation  System, Inc. in form and substance
     satisfactory to the  Administrative  Agent  evidencing the obligation of CT
     Corporation  System,  Inc. to accept service of process in the State of New
     York on behalf of each Loan Party that is not  authorized to do business as
     a foreign corporation in the State of New York;

          (ix) a favorable, signed opinion addressed to the Administrative Agent
     and the Lenders from Morrison & Hecker L.L.P., counsel to the Loan Parties,
     given upon the express instruction of the Loan Parties; and

          (x) certificates of appropriate  public officials as to the existence,
     good standing and  qualification  to do business as a foreign  corporation,
     partnership or limited liability company, as applicable, of each Loan Party
     in each  jurisdiction  in which  the  ownership  of its  properties  or the
     conduct of its business  requires such  qualification and where the failure
     so to qualify would, individually or collectively,  have a Material Adverse
     Effect.

          (b)  The  Administrative  Agent  shall  have  received,  in  form  and
substance satisfactory to the Administrative Agent:

          (i) searches of Uniform Commercial Code filings in the jurisdiction in
     which each Loan party to a Security  Document has its place of business (or
     if such Loan Party has more than one place of business, the jurisdiction of
     its chief executive office); and

          (ii) duly executed  Uniform  Commercial Code financing  statements for
     each  appropriate  jurisdiction  as is  necessary  to  perfect  the Lien of
     Administrative Agent in the Collateral.

          (c) The  Administrative  Agent  shall  have  received  (a) all  of the
certificates  evidencing  outstanding shares of stock  of  KMNGL  described  on 
Schedule I to the Subsidiary  Guarantors Security Agreement  executed by OLP "A"
together  with  related  stock powers  executed in blank  by  OLP  "A", (b)  the
Intercompany  Notes,  endorsed in blank by the Company, and (c) if certificated,
all of  the  member interests of KMCO2 described in Schedule I to the Subsidiary
Guarantors Security Agreement,  executed by OLP "A" together with related  stock
powers executed in blank by OLP "A".
     
          (d) All Collateral in which the Administrative Agent  shall,  at  such
time, be entitled to have a Lien  pursuant to the Security  Documents shall have
been physically delivered to the Administrative Agent to the  extent  possession
by the Administrative Agent is necessary to perfect a Lien in such Collateral.

                                      -51-
<PAGE>

          (e)  The Administrative Agent shall have received a Notice of  Account
Designation.

          (f)  The  Administrative Agent  shall be reasonably satisfied that all
required consents and approvals of any  applicable  Governmental  Authority  and
any  other Person  in connection  with the  transactions  contemplated  by  this
Section 3.01 shall have been obtained and remain in  effect  (except  where  the
failure to obtain  such  approvals  would  not have a  Material Adverse Effect),
and all applicable  waiting  periods shall have expired (or been waived) without
any action being taken by any Governmental Authority.

          (g) All agreements  relating to, and the  organizational structure of,
the  Loan  Parties,  and  all  organic documents of the Loan Parties,  shall  be
reasonably satisfactory to the Administrative Agent and the Syndication Agent.

          (h) The Company shall have paid to First Union Capital  Markets Corp.,
Goldman Sachs Credit  Partners L.P. and First Union  National Bank all fees and
expenses pursuant to the Fee Letter agreed upon by such parties to be paid on or
prior to the Execution Date.

          (i) The Company  shall have paid to Andrews & Kurth  L.L.P.   pursuant
to Section 11.03 all fees and  disbursements  invoiced  to  the  Company   on or
prior to the Execution Date.

         SECTION 3.02   Conditions  Precedent to All Credit Events.  Except with
respect to  Revolving  Credit  Loans  made by the  Lenders  pursuant  to Section
2.06(f),  the  obligation  of the Lenders to make any Loan or to issue or extend
any Letter of Credit  (including any Loan made or Letter of Credit issued on the
initial Borrowing Date) is subject to the further  conditions  precedent that on
the date of such Credit Event:

          (a) The  conditions  precedent  set  forth  in Section 3.01 shall have
theretofore been satisfied;  

          (b) The  representations and warranties set forth in Article IV and in
the other Loan Documents  shall be true and correct in all material  respects as
of, and as if such  representations and warranties were made on, the date of the
proposed   Loan  or  Letter  of  Credit,   as  the  case  may  be  (unless  such
representation  and warranty expressly relates to an earlier date), and the Loan
Parties shall be deemed to have  certified to the  Administrative  Agent and the
Lenders that such  representations  and  warranties  are true and correct in all
material respects by the Company's delivery of a Borrowing Request;

          (c) The Company shall have complied with  the  provisions  of  Section
2.03 or Section 2.04, as the case may be;

          (d) No Default or Event of Default shall have occurred and be continu-
ing or would result from such Credit Event; and

          (e) The  Administrative  Agent and  the  Lenders  shall have  received
such other approvals, opinions or documents as the Agent or the Required Lenders
may reasonably request.



                                      -52-
<PAGE>

The  acceptance  of the  benefits  of  each  Credit  Event  shall  constitute  a
representation  and warranty by the Loan Parties to each of the Lenders that all
of the conditions specified in this Section 3.02 above exist as of that time.

         SECTION 3.03  Conditions  Precedent to the Initial Credit Event Made on
or After any Increase in  Availability.  The  obligation of  the Lenders to make
the initial Loan or the Issuing  Bank to issue the initial Letter of Credit upon
or after any increase in Availability is subject to the further  conditions that
the  Administrative  Agent shall have  received a  certificate  of a Responsible
Officer  of  the  Company   certifying  (a)  the  amount  of  such  increase  in
Availability  and a description of the event  resulting in such increase and (b)
that the representations and warranties contained in Article IV (unless any such
representation  and warranty  expressly relates to an earlier date) are true and
correct  in all  material  respects  as of, and as if such  representations  and
warranties were made on, the date of such initial Loan or such initial Letter of
Credit,  as the case may be,  after  giving  effect on a pro forma  basis to the
event  resulting  in such  increase  and the use on such date of the proceeds of
such Loan or of such Letter of Credit.

         SECTION 3.04 Conditions Precedent to Conversions. The obligation of the
Lenders to convert or continue  any  existing  Borrowing as or into a Eurodollar
Borrowing  is  subject  to the  condition  precedent  that  on the  date of such
conversion  or  continuation  no Default or Event of Default shall have occurred
and be  continuing  or would  result  from the  making of such  conversion.  The
acceptance  of the  benefits  of each  such  conversion  or  continuation  shall
constitute  a  representation  and  warranty by the Loan  Parties to each of the
Lenders  that no  Default  or  Event  of  Default  shall  have  occurred  and be
continuing or would result from the making of such conversion or continuation.

         SECTION 3.05  Delivery of Documents. All of the Loan  Documents, certi-
ficates,  legal  opinions and other documents  and  papers  referred  to in this
Article III, unless otherwise specified, shall be  delivered to the  Administra-
tive  Agent for the account of each of the Lenders and, except for any Notes, in
sufficient  counterparts  or copies for each of the Lenders and shall be  satis-
factory in form and substance to the Lenders.

                                   ARTICLE IV.

                         Representations and Warranties

     In order to induce the Lenders to enter into this Agreement and to make the
Loans  provided  for herein and to induce the Issuing  Bank to issue  Letters of
Credit and the other Lenders to participate  therein and in the Existing  Letter
of Credit,  each Loan Party makes for itself,  and the Company  makes for itself
and the other Loan Parties, on or as of the Effective Date and the occurrence of
each  Credit  Event,  the  following   representations  and  warranties  to  the
Administrative Agent and the Lenders:

         SECTION 4.01.  Organization an Qualification. The Company  and  each of
the  Restricted  Subsidiaries  (a)  is a  corporation,  partnership  or  limited
liability  company  duly  organized  or  formed,  validly  existing  and in good
standing  under  the laws of the  state of its  incorporation,  organization  or
formation,  (b) has all  requisite  corporate,  partnership,  limited  liability
company or


                                      -53-
<PAGE>

other power to own its property  and to carry on its  business as now  conducted
and (c) is duly  qualified  to do  business  and is in good  standing  in  every
jurisdiction  in which the failure to be so  qualified  would,  individually  or
together  with  all  such  other  failures  of the  Company  and the  Restricted
Subsidiaries,  have a Material  Adverse  Effect.  As of the Execution  Date, the
Persons and other entities named in Schedule 4.01 are all of the Subsidiaries of
the Company, and such Schedule 4.01 (x) accurately reflects (i) the direct owner
of the Capital  Stock of each such  Subsidiary  and (ii) the  percentage  of the
issued and outstanding  Capital Stock of each such Subsidiary  owned by any Loan
Party, (y) accurately identifies such Subsidiaries and (z) accurately sets forth
the jurisdictions of their respective incorporation,  organization or formation,
as the case may be, and  jurisdictions  in which they are  qualified  as foreign
corporations, foreign partnerships, foreign limited liability companies or other
foreign entities to do business.

         SECTION 4.02  Authorization, Validity,  Etc.   Each  Loan Party has all
requisite corporate,  partnership,  limited liability company or other power and
authority to execute,  deliver and perform its  obligations  hereunder and under
the other Loan Documents to which it is a party and, in the case of the Company,
to make the  Borrowings  and in the case of each Borrower to obtain the issuance
of Letters of Credit hereunder,  and all such action has been duly authorized by
all  necessary  corporate,  partnership,  limited  liability  company  or  other
proceedings  on its part.  This  Agreement and the Security  Documents have been
duly and  validly  executed  and  delivered  by or on behalf of each Loan  Party
thereto and constitute  valid and legally binding  agreements of such Loan Party
enforceable  against such Loan Party in  accordance  with the  respective  terms
thereof,  and the Loan Documents to which such Loan Party is a party,  when duly
executed and  delivered by such Loan Party,  will  constitute  valid and legally
binding  obligations  of such Loan  Party  enforceable  in  accordance  with the
respective terms thereof and of this Agreement, except, in each case, (a) as may
be limited by bankruptcy,  insolvency,  reorganization,  moratorium,  fraudulent
transfer,  fraudulent  conveyance or other similar laws relating to or affecting
the enforcement of creditors'  rights  generally,  and by general  principles of
equity (including principles of good faith, reasonableness, materiality and fair
dealing)  which may,  among other  things,  limit the right to obtain  equitable
remedies  (regardless of whether considered in a proceeding in equity or at law)
and (b) as to the enforceability of provisions for indemnification for violation
of applicable securities laws, limitations thereon arising as a matter of law or
public  policy and (c) as  enforceability  of certain  remedial  and  procedural
provisions of the Security Documents may be limited by laws and court decisions,
but such laws and court  decisions  will not render the remedies and  procedures
afforded to the  Administrative  Agent and the Lenders by the Security Documents
inadequate  for  the  practical  realization  of the  benefits  purported  to be
afforded by the Security Documents (except for the economic  consequences of any
delay).

         SECTION 4.03.  Governmental Consents, Etc. No  authorization, consent,
approval,  license or exemption of or  registration,  declaration or filing with
any Governmental  Authority,  is necessary for the valid execution,  delivery or
performance  by any  Loan  Party of any  Loan  Document  to which it is a party,
except those that have been obtained and such matters relating to performance as
would  ordinarily be done in the ordinary course of business after the Execution
Date.

         SECTION 4.04 Conflicting or Adverse Agreement.  Neither the Company nor
any of the  Restricted  Subsidiaries  is a party to any contract or agreement or
subject to 


                                      -54-
<PAGE>

any  restriction  that would  reasonably be expected to have a Material  Adverse
Effect. Neither the execution, delivery and performance by any Loan Party of the
Loan  Documents  to which it is a  party,  nor  compliance  with the  terms  and
provisions  thereof,  nor the  extensions  of  credit  contemplated  by the Loan
Documents,  (a) will breach or violate any  applicable  Requirement  of Law, (b)
will  result  in any  breach  or  violation  of,  any of the  terms,  covenants,
conditions or provisions  of, or  constitute a default  under,  or result in the
creation or imposition of (or the  obligation to create or impose) any Lien upon
any of its property or assets (other than Liens  created by the Loan  Documents)
pursuant to the terms of any indenture,  mortgage,  deed of trust,  agreement or
other instrument to which it or any of its Subsidiaries is party or by which any
property  or asset of it or any of its  Subsidiaries  is bound or to which it is
subject, except for breaches,  violations and defaults under clauses (a) and (b)
that  neither  individually  nor in the  aggregate  for all Loan  Parties  could
reasonably  be  expected  to result  in a  Material  Adverse  Effect or (c) will
violate any provision of the organic documents of any Loan Party.

          SECTION 4.05. Properties. (a) Each of the Company and the
Subsidiaries  has good title to, or valid  leasehold or other  interests in, all
its real and  personal  property  material  to its  business,  except  for minor
defects in title that do not  materially  interfere  with its ability to conduct
its business as currently  conducted  or to utilize  such  properties  for their
intended purposes.

         (b) Each of the Company and the  Restricted  Subsidiaries  owns,  or is
licensed to use,  all  trademarks,  trade names,  copyrights,  patents and other
intellectual  property  material  to its  business,  and the use  thereof by the
Company and the Restricted Subsidiaries does not infringe upon the rights of any
other Person,  except for any such infringements that, neither  individually nor
in the  aggregate  for the Company and such  Subsidiaries,  could  reasonably be
expected to result in a Material Adverse Effect.

         SECTION 4.06  Litigation and  Environmental  Matters . (a) There are no
actions,  suits or  proceedings  by or before  any  arbitrator  or  Governmental
Authority  pending  against  or, to the  knowledge  of the  Company,  threatened
against or  affecting  the  Company or any of its  Subsidiaries  (i) as to which
there is a  reasonable  possibility  of an adverse  determination  and that,  if
adversely  determined,  could  reasonably  be expected,  individually  or in the
aggregate for the Company and such Subsidiaries, to result in a Material Adverse
Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or
the Transactions.

         (b) Except for the  Disclosed  Matters and except  with  respect to any
other  matters  that,  individually  or in the aggregate for the Company and the
Subsidiaries,  could not reasonably be expected to result in a Material  Adverse
Effect, neither the Company nor any of the Subsidiaries (i) has failed to comply
with any  Environmental  Law or to obtain,  maintain  or comply with any permit,
license or other approval required under any Environmental  Law, (ii) has become
subject to any Environmental  Liability,  (iii) has received notice of any claim
with respect to any  Environmental  Liability or (iv) knows of any basis for any
Environmental Liability.

         (c) Since the Execution Date, there has been no change in the status of
the Disclosed Matters that,  individually or in the aggregate,  has resulted in,
or materially increased the likelihood of, a Material Adverse Effect.



                                      -55-
<PAGE>

          SECTION  4.07   Financial Statements. (a) The audited consolidated and
consolidating balance sheets of the Company and its consolidated Subsidiaries as
at December 31, 1996 and the related  consolidated and consolidating  statements
of income,  partners',  shareholders'  or  members'  equity and cash flow of the
Company  and its  consolidated  Subsidiaries  for the fiscal  year ended on said
date, with the opinion thereon of Arthur Andersen L.L.P. heretofore furnished to
the Lenders and the unaudited  consolidated and consolidating  balance sheets of
the Company and its consolidated Subsidiaries as at September 30, 1997 and their
related  consolidated  and  consolidating   statements  of  income,   partners',
shareholders'  or  members'  equity  and  cash  flow  of  the  Company  and  its
consolidated   Subsidiaries  for  the  nine-month  period  ended  on  such  date
heretofore furnished to the Lenders, are complete and correct and fairly present
the  consolidated  financial  condition  of the  Company  and  its  consolidated
Subsidiaries as at said dates and the results of their operations for the fiscal
year and the nine-month period ended on said dates, all in accordance with GAAP,
as applied on a consistent basis (subject,  in the case of the interim financial
statements,  to the  absence  of  footnotes  and to  normal  year-end  and audit
adjustments).

         (b) Since December 31, 1996,  there has been no material adverse change
in the business, assets, operations or condition, financial or otherwise, of the
Company and the Restricted Subsidiaries, taken as a whole.

         SECTION 4.08  Disclosure.  The Company has disclosed to the Lenders all
agreements,  instruments and corporate or other  restrictions to which it or any
of the Restricted  Subsidiaries  is subject,  and all other matters known to it,
that,  individually  or in the aggregate for the Company and such  Subsidiaries,
could reasonably be expected to result in a Material Adverse Effect. None of the
reports, financial statements, certificates or other information furnished by or
on behalf of the Company to the Administrative Agent or any Lender in connection
with the syndication or negotiation of this Agreement or delivered hereunder (as
modified  or  supplemented  by other  information  so  furnished)  contains  any
material  misstatement  of fact or omits to state any material fact necessary to
make the statements  therein, in the light of the circumstances under which they
were made, not misleading; provided that (i) with respect to projected financial
information,  the Company  represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time and (ii)
with respect to information respecting the Santa Fe Acquisition and the Shell JV
Investment,  such  information  was  provided  to the Company by SFMLP and Shell
respectively  and  therefore the Company only  represents  that to its knowledge
such information is correct and complete.

         SECTION 4.09  Investment Company Act.  Neither  the Company nor any  of
its Subsidiaries  is, or is regulated as, an "investment  company," as such term
is defined in the Investment Company Act of 1940, as amended.

         SECTION 4.10 Public Utility  Holding  Company Act . Neither the Company
nor any of its  Subsidiaries  is a non-exempt  "holding  company,"or  subject to
regulation as such, or an  "affiliate"  of a "holding  company" or a "subsidiary
company" of a "holding company,"within the meaning of the Public Utility Holding
Company Act of 1935, as amended.



                                      -56-
<PAGE>

         SECTION 4.11  ERISA. No ERISA  Event  has  occurred  or  is  reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a  Material  Adverse  Effect.  The  present  value of all  accumulated
benefit  obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial  Accounting  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 Accounting
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.

         Section 4.12  Tax Returns and  Payments.  (a)  The  Company  and    its
Subsidiaries  have caused to be filed all  federal  income tax returns and other
material  tax  returns,  statements  and reports (or  obtained  extensions  with
respect  thereto)  which are  required to be filed and have paid or deposited or
made  adequate  provision in  accordance  with GAAP for the payment of all taxes
(including estimated taxes shown on such returns,  statements and reports) which
are shown to be due  pursuant to such  returns,  except where the failure to pay
such taxes  (individually or in the aggregate for the Company and the Restricted
Subsidiaries)  would not have a Material Adverse Effect.  No material income tax
liability of the Company or the Restricted Subsidiaries has been asserted by the
Internal  Revenue  Service  of  the  United  States  or any  other  Governmental
Authority for any taxes in excess of those already paid,  except for taxes which
are being  contested  in good  faith by  appropriate  proceedings  and for which
adequate  reserves in accordance with GAAP have been created on the books of the
Company and the Restricted Subsidiaries.

         (b) The federal income tax liabilities,  if any, of the Company and its
Subsidiaries  (and of all Persons who are  partners  of the  Company) have  been
finally determined by the Internal Revenue Service and satisfied for all taxable
years through the fiscal year ending in 1994.

         SECTION 4.13  Compliance  with Laws and Agreement.  Each of the Company
and the Restricted  Subsidiaries is in compliance with all laws, regulations and
orders of any  Governmental  Authority  applicable to it or its property and all
indentures,  agreements and other  instruments  binding upon it or its property,
except  where the failure to do so,  individually  or in the  aggregate  for the
Company and the  Restricted  Subsidiaries,  could not  reasonably be expected to
result in a Material Adverse Effect. No Default or Event of Default has occurred
and is continuing.

         SECTION 4.14  Purpose of Loans. (a) All proceeds of the Loans  will  be
used for the purposes set forth in Section  5.08.  All Letters of Credit  (other
than the  Existing  Letter of  Credit)  will be issued  in  connection  with the
working capital requirements of the Company or a Restricted Subsidiary.

         (b) None of the  proceeds of the loans under any portion of the OLP "A"
Refinancing  or the OLP "B"  Refinancing  or this Agreement were or will be used
directly or indirectly  for the purpose of buying or carrying any "margin stock"
within the meaning of  Regulation U (herein  called  "margin  stock") or for the
purpose of reducing or retiring any  indebtedness


                                      -57-
<PAGE>

(including the indebtedness repaid with the proceeds of the loans made under the
agreements  constituting  the OLP "A"  Refinancing  or the OLP "B"  Refinancing)
which was originally  incurred to buy or carry a margin stock,  or for any other
purpose which might  constitute this  transaction a "purpose"  credit within the
meaning of  Regulation G, T, U or X. Neither any Loan Party nor any agent acting
on its behalf has taken or will take any action which might cause this Agreement
or any other Loan Document to violate  Regulation G, Regulation T, Regulation U,
Regulation X, or any other  regulation of the Board or to violate the Securities
Exchange  Act of 1934.  Margin  stock does not  constitute  more than 25% of the
assets of the  Company  or any Loan  Party and the  Company  does not  intend or
foresee that it will ever do so.

         SECTION  4.15 No Intent to Hinder,  Delay or Defraud . Each  Subsidiary
Guarantor has entered into this Agreement,  including the Subsidiary  Guarantors
Guaranty  and the other  Loan  Documents,  with no intent  to  hinder,  delay or
defraud any Person to whom such Subsidiary Guarantor was or becomes, on or after
the  Execution  Date,  indebted,  within  the  meaning  of  Section  548  of the
Bankruptcy Code or any similar provision of state law.

                                   ARTICLE V.

                              Affirmative Covenants

         Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been paid
in full and all Letters of Credit  shall have expired or  terminated  and all LC
Disbursements shall have been reimbursed,  the Company covenants and agrees with
the Lenders that:

         SECTION 5.01 Financial Statements and Other Informati. The Company will
furnish to the  Administrative  Agent, in each case with  sufficient  copies for
each Lender:

         (a) As soon as available and in any event within 120 days after the end
of each fiscal year of the Company: (i) the audited  consolidated  statements of
income,  partners'  equity,  changes in financial  position and cash flow of the
Company for such fiscal year, and the related  consolidated balance sheet of the
Company  as at the  end of such  fiscal  year,  setting  forth  in each  case in
comparative form the figures for (or in the case of the balance sheet, as of the
end  of) the  previous  fiscal  year,  accompanied  by the  related  opinion  of
independent public accountants of recognized national standing acceptable to the
Administrative  Agent,  which  opinion  shall  (x)  state  that  said  financial
statements of the Company fairly present the  consolidated  financial  condition
and results of  operations of the Company as at the end of, and for, such fiscal
year and that such financial  statements  have been prepared in accordance  with
GAAP  except for such  changes  in such  principles  with which the  independent
public  accountants shall have concurred,  and (y) not contain a "going concern"
or  other  adverse  qualification  or  exception  unacceptable  to the  Required
Lenders;  and (ii) a certificate of such accountants stating that, in making the
examination necessary for their opinion,  they obtained no knowledge,  except as
specifically stated, of any Event of Default or Default, and stating whether any
change in GAAP or in the application  thereof has occurred since the date of the
audited  financial  statements  referred to in Section  4.07(b) and, if any such
change  has  occurred,  specifying  the effect of such  change on the  financial
statements accompanying such certificate.



                                      -58-
<PAGE>

         (b) (i)As soon as  available  and in any event within 60 days after the
end of each of the first three fiscal  quarterly  periods of each fiscal year of
the Company,  unaudited  consolidated  statements of income,  partners'  equity,
changes in  financial  position and cash flow of the Company for such period and
for the period from the  beginning of the  respective  fiscal year to the end of
such period, and the related unaudited  consolidated balance sheet as at the end
of such period,  setting forth in each case in comparative  form the figures for
(or in the case of balance sheets, as of the end of) the  corresponding  periods
in the previous  fiscal year,  accompanied  by the  certificate of a Responsible
Officer of the  Company,  which  certificate  shall  state  that said  financial
statements  fairly present the consolidated  financial  condition and results of
operations  of the Company in  accordance  with GAAP, as at the end of, and for,
such period  (subject to the absence of  footnotes  and changes  resulting  from
normal year-end audit adjustments).

         (ii) As soon as available and in any event within 60 days after the end
of each of the first three fiscal  quarterly  periods of each fiscal  year,  and
within 120 days after the end of each  fiscal  year of OLP "A",  the  Subsidiary
Borrower,  OLP "C",  OLP "D" and each other  Restricted  Subsidiary  the Capital
Stock  of  which  is  owned  directly  by the  Company,  unaudited  consolidated
statements of income,  partners',  shareholders' or members' equity, as the case
may be,  changes  in  financial  position  and cash flow of such  Person and its
Subsidiaries  for such  period  and for the  period  from the  beginning  of the
respective  fiscal year to the end of such  period,  and the  related  unaudited
consolidated  balance sheet as at the end of such period,  setting forth in each
case in comparative  form the figures for (or in the case of balance sheets,  as
of  the  end  of)  the  corresponding  periods  in  the  previous  fiscal  year,
accompanied by the  certificate of a Responsible  Officer of such Person,  which
certificate  shall  state that said  financial  statements  fairly  present  the
consolidated and consolidating  financial condition and results of operations of
such  Person in  accordance  with GAAP,  as at the end of, and for,  such period
(subject to the absence of footnotes and changes  resulting from normal year-end
audit adjustments).

         (c)  Promptly  upon  receipt  thereof,  and in the form  received,  all
audited  and  unaudited  financial  statements  (whether  quarterly  or  annual)
received  by any Loan Party from any Person  (other  than an  individual)  whose
income is  accounted  for  through  any of the  Persons  referenced  in  Section
5.01(b)(ii) and whose EBITDA or distributions, as the case may be, exceed 15% of
the Company Cash Flow.

         (d) Prompt written notice of the following:

         (i)  the occurrence of any Default or Event of  Default  or  Change  of
     Control Event;

         (ii) the occurrence of any ERISA Event that, alone or together with any
     other ERISA  Events that have  occurred,  could  reasonably  be expected to
     result in liability of the Company and the  Restricted  Subsidiaries  in an
     aggregate amount exceeding $5,000,000; and

          (iii) any other development that results in, or  could  reasonably  be
     expected to result in, a Material Adverse Effect.



                                      -59-
<PAGE>

Each  notice  delivered  under  this  Section  5.01  shall be  accompanied  by a
statement of a  Responsible  Officer  setting  forth the details of the event or
development  requiring  such notice and any action taken or proposed to be taken
with respect thereto.

         (e)  Promptly  upon  receipt  thereof,  a copy of each other  report or
letter  submitted to the Company by independent  accountants in connection  with
any annual,  interim or special  audit made by them of the books of the Company,
and a copy of any  response by the  Company,  or the Board of  Directors  of the
general partner of the Company, to such letter or report.

         (f) Promptly upon its becoming  available,  each  financial  statement,
report, notice or proxy statement sent by the Company to stockholders  generally
and each regular or periodic report and any registration statement or prospectus
filed by the Company with any securities exchange or the Securities and Exchange
Commission or any successor agency.

         (g) Promptly  after the  furnishing  thereof,  copies of any statement,
report or notice furnished to any Person pursuant to the terms of any indenture,
loan or credit or other  similar  agreement,  other than this  Agreement and not
otherwise required to be furnished to the  Administrative  Agent pursuant to any
other provision of this Section 5.01.

         (h) From time to time such other  information  regarding  the business,
affairs or  financial  condition  of the  Company or any  Restricted  Subsidiary
(including any Plan or Multiemployer  Plan and any reports or other  information
required to be filed under ERISA) as the Required Lenders or the  Administrative
Agent may reasonably request.

The Company will furnish to the  Administrative  Agent, at the time it furnishes
each set of  financial  statements  pursuant to  paragraph  (a) or (b) above,  a
certificate  substantially in the form of Exhibit 5.01 executed by a Responsible
Officer of the Company (i)  certifying  as to the matters set forth  therein and
stating that no Event of Default or Default has occurred and is continuing  (or,
if any Event of Default or Default has  occurred and is  continuing,  describing
the same in reasonable  detail),  (ii) setting  forth in  reasonable  detail the
computations  necessary to determine  whether the Company is in compliance  with
Sections  6.09(a),  (b) and (c) and the computations  necessary to determine the
ratio referred to in the definition of "Applicable  Margin" as of the end of the
respective fiscal quarter or fiscal year, and (iii) a statement, with respect to
each Intercompany Note, of (A) the actual outstanding  principal amount thereof,
and the amount of any accrued and unpaid interest thereon,  as at the end of the
respective  quarter or fiscal year,  as the case may be, and (B) the highest and
lowest principal  amount thereof at any time outstanding  during such quarter or
fiscal year and the periods  during such quarter or fiscal year during which the
principal of such Intercompany Note was outstanding in each such amount.

         SECTION 5.02.   Litigation. The Company  shall  promptly  give  to  the
Administrative  Agent  notice of all legal or arbitral  proceedings,  and of all
proceedings  before any  Governmental  Authority  affecting  the  Company or any
Restricted Subsidiary,  except proceedings which, if adversely determined, would
not have a Material Adverse Effect. The Company will, and will cause each of the
Restricted  Subsidiaries  to,  promptly notify the  Administrative  Agent of any
claim,  judgment,  Lien or other encumbrance affecting any property or assets of
the Company or any such


                                      -60-
<PAGE>

Subsidiary  if the value of the  claim,  judgment,  Lien,  or other  encumbrance
affecting such property or assets shall exceed $5,000,000.

         SECTION 5.03.  Existence, Conduct of  Business. The Company  will,  and
will cause each of the  Restricted  Subsidiaries  to, do or cause to be done all
things necessary to preserve,  renew and keep in full force and effect its legal
existence and the rights, licenses,  permits, privileges and franchises material
to the conduct of its business;  provided that the foregoing  shall not prohibit
any merger,  consolidation,  liquidation or dissolution  permitted under Section
6.03.

         SECTION 5.04.  Payment  of  Obligations.  The Company  will,  and  will
cause  each  of  the  Subsidiaries  to,  pay  its  obligations,   including  tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings,  (b)
the Company or such Subsidiary has set aside on its books adequate reserves with
respect  thereto in  accordance  with GAAP and (c) the  failure to make  payment
pending such contest  could not  reasonably  be expected to result in a Material
Adverse Effect.

         SECTION 5.05  Maintenance of Properties;  Insurance.  The Company will,
and will cause each of the Restricted Subsidiaries to, (a) keep and maintain all
property  material to the  conduct of its  business  in good  working  order and
condition,  ordinary wear and tear excepted, and (b) maintain,  with financially
sound and reputable insurance  companies,  insurance in such amounts and against
such risks as are  customarily  maintained  by companies  engaged in the same or
similar businesses operating in the same or similar locations.

         SECTION 5.06 Books and Records;  Inspection  Rights . The Company will,
and will cause each of the  Restricted  Subsidiaries  to, keep  proper  books of
record and  account in which  full,  true and  correct  entries  are made of all
dealings  and  transactions  in relation to its  business  and  activities.  The
Company will, and will cause each of the Restricted  Subsidiaries to, permit any
representatives  designated  by the  Administrative  Agent or any  Lender,  upon
reasonable  prior notice,  to visit and inspect its  properties,  to examine and
make extracts from its books and records,  and to discuss its affairs,  finances
and  condition  with  its  officers  and  independent  accountants,  all at such
reasonable times and as often as reasonably requested.

         SECTION 5.07.  Compliance with Laws. The Company will, and  will  cause
each of the  Subsidiaries  to, comply with all Requirements of Law applicable to
it or its property,  except where the failure to do so,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect.
         SECTION  5.08 Use of Proceeds  and Letters of Credit . The  proceeds of
the Loans will be used only (i) to the extent of not more than $185,000,000,  to
effect the OLP "A" Refinancing  and (to the extent of not more than  $24,128,548
of said  $185,000,000)  the OLP "B" Refinancing,  (ii) to the extent of not more
than  $115,000,000,  to effect the Santa Fe Acquisition,  (iii) to the extent of
not more than  $25,000,000,  to  effect  the  Shell JV  Investment  and (iv) for
working capital and other partnership  purposes.  No part of the proceeds of any
Loan will be used, whether directly or indirectly,  for any purpose that entails
a violation of any of the Regulations of the Board, including 


                                      -61-
<PAGE>

Regulations  G, T, U and X. The  Existing  Letter of Credit will be deemed to be
issued under this Agreement,  to the extent of  $24,128,548,  in connection with
the OLP "B" Refinancing, and Letters of Credit (including the Existing Letter of
Credit) to be issued under this Agreement  shall as provided in Section  2.06(c)
be subject to an overall limit of $75,000,000.

         SECTION 5.09. Further Assurances. (a) The Company will  cure  promptly,
or cause  another Loan Party to cure  promptly,  any defects in the creation and
issuance of any Notes and the execution  and delivery of the Security  Documents
and this  Agreement.  The  Company at its  expense  will  promptly  execute  and
deliver,  or cause the appropriate  other Loan Party to execute and deliver,  to
the Administrative  Agent upon request all such other documents,  agreements and
instruments  to comply with or accomplish  the  covenants and  agreements of the
Loan  Parties  in the  Security  Documents  and this  Agreement,  or to  further
evidence  and more fully  describe the  Collateral  intended as security for the
Obligations,  or to correct any omissions in the Security Documents, or to state
more fully the  security  obligations  set out herein or in any of the  Security
Documents, or to perfect,  protect or preserve any Liens created pursuant to any
of the Security  Documents,  or to make any  recordings,  to file any notices or
obtain any  consents,  all as may be  necessary  or  appropriate  in  connection
therewith.

         (b) The  Company  will not  cause,  suffer or permit  amendment  of the
partnership  agreement or the  operating  agreement of any Loan Party to provide
that any  interest in such Loan Party is a  "security"  governed by Article 8 of
the Uniform Commercial Code of any jurisdiction.

         SECTION 5.10.  Performance of Obligations. The  Company  will  pay  the
Loans according to the reading,  tenor and effect thereof;  and the Company will
do and  perform or cause each other Loan Party to do and  perform  every act and
discharge all of the  Obligations to be performed and discharged by it hereunder
and under the Security  Documents to which it is a party and this Agreement,  at
the time or times and in the manner specified.

         SECTION 5.11.  Lines of Business. The Company will, and will cause each
Restricted  Subsidiary to, be and remain engaged in only those lines of business
in which the  Company  and such  Subsidiaries  are  engaged  on the date of this
Agreement,  any additional lines of business reasonably related thereto,  and no
others.

         SECTION 5.12 Intercompany Notes and Security  for  Intercompany  Notes.
(a) The Company  will cause each  Subsidiary  Guarantor  to execute a promissory
note in favor of the Company in an original principal amount equal to the lesser
of (i) the Commitment  and (ii) the actual amount from time to time  outstanding
of  Indebtedness of such Subsidiary to the Company (being the sum of the amounts
specified pursuant to clause (i) of the next sentence),  and dated the Execution
Date in the case of the  Subsidiary  Guarantors  party to this Agreement on such
date and in the case of any other  Subsidiary  Guarantor,  the date such  Person
becomes a  Subsidiary  Guarantor  pursuant to Section  6.03  (collectively,  the
"Intercompany  Notes").  The Company will  concurrently  with the  execution and
delivery  thereof,  pledge each Intercompany  Note to the  Administrative  Agent
pursuant to and as provided in the Company Security  Agreement and will maintain
accounts in which it shall  record (i) the amount of the  proceeds of each Loan,
and each other amount,  from time to time advanced to such Subsidiary  Guarantor
and the amount of each payment made by the Company to


                                      -62-
<PAGE>

reimburse  the Issuing  Bank for any drawing  made under any Letter of Credit on
which such  Subsidiary  Guarantor is an account  party;  (ii) the interest  rate
applicable  to such  advance or payment;  and (iii) each payment of principal or
interest made by such Subsidiary Guarantor.

         (b) If at the end of any fiscal  quarter the ratio of the  Indebtedness
of the  Company at the end of such fiscal  quarter to Company  Cash Flow for the
four  consecutive  fiscal  quarters  then ending is greater than (i) 4.75 to 1.0
prior the date of the Triggering Event or (ii) 3.5 to 1.0 on or after such date,
upon the request of the Required Lenders, the Company will cause each Subsidiary
Guarantor to secure its  Intercompany  Note with Liens on all of its assets.  In
this  connection  the Company at its own cost and expense  will cause (i)(A) all
security  agreements,   deeds  of  trust,  mortgages,   assignments  and  pledge
agreements  (collectively,   the  "Intercompany  Security  Documents"),  Uniform
Commercial Code Financing  Statements and all other documents to be executed and
delivered by such Subsidiary  Guarantor to the Administrative  Agent and (B) all
filings and  recordings to be made as are necessary or  appropriate in each case
to create and perfect such Liens and (ii)  delivery of such  opinions of counsel
to each Subsidiary  Guarantor as the Administrative Agent may reasonably request
(such  counsel  and the form,  scope and  substance  of each such  opinion to be
satisfactory in each case to the  Administrative  Agent) as to the  organization
and  good  standing  of  such  Subsidiary   Guarantor,   enforceability  of  the
Intercompany  Security Documents to which such Subsidiary  Guarantor is a party,
the  creation  and  perfection  of the Liens  purported  to be  executed by such
Intercompany  Security  Documents  and such other  matters as may be  reasonably
requested by the Administrative Agent or any Lender.

         SECTION 5.13  KMNGL  Subsidiary  Guarantors  Security  Agreement.   The
Company  shall,  and shall  cause  KMNGL  to,  immediately  commence  to use its
reasonable  efforts to obtain the consents of each Person whose consent (whether
to the pledge  thereunder  of the Capital Stock of Mont Belvieu or otherwise) is
required for the Subsidiary  Guarantors  Security Agreement executed by KMNGL to
become and be fully  effective,  without  causing a default by KMNGL  under,  or
triggering  a right of first  refusal to acquire its  interest  in Mont  Belvieu
under,  any agreement  binding upon it, and upon  obtaining  such  consent(s) to
deliver to the  Administrative  Agent an original signed copy thereof,  together
with an opinion of counsel satisfactory to the Administrative Agent, in form and
substance  satisfactory to the Administrative  Agent, as to the same matters, as
to KMNGL, the Subsidiary Guarantors Security Agreement executed and delivered by
KMNGL and the  pledge of Capital  Stock of Mount  Belivieu  thereunder,  mutatis
mutandis,as are covered in respect of the other Subsidiary Guarantors, the other
Subsidiary  Guarantors  Security  Agreements  and  the  pledges  and  grants  of
collateral  security  thereunder  by the opinion  delivered  pursuant to Section
3.01(a)(ix).

                                   ARTICLE VI.

                               Negative Covenants

         Until the  Commitments  have expired or terminated and the principal of
and interest on each Loan and all fees payable  hereunder have been paid in full
and all Letters of Credit have expired or  terminated  and all LC  Disbursements
shall have been  reimbursed,  the Company  covenants and agrees with the Lenders
that:



                                      -63-
<PAGE>

         SECTION 6.01  Indebtedness. The Company will not, and will  not  permit
any  Restricted  Subsidiary  to,  create,  incur,  assume or permit to exist any
Indebtedness (including any obligation of the Company or a Restricted Subsidiary
in respect of  Indebtedness  of an  Unrestricted  Subsidiary,  whether by way of
guaranty or other direct or indirect support or assurance  against loss provided
to the holder of such Indebtedness) except:

         (a)   Indebtedness created hereunder;

         (b)   Refinancing Indebtedness;

         (c) from and after the  consummation of the Santa Fe  Acquisition,  the
SFPP First  Mortgage  Notes and  Indebtedness  under the SFPP  Revolving  Credit
Facility not in excess of $380,000,000  aggregate  principal amount for all such
Indebtedness at any one time outstanding;  provided that neither the Company nor
any other Restricted Subsidiary shall be liable for any such Indebtedness except
for any  Indebtedness  for which OLP "D" may be liable solely as a result of its
being the general partner of SFPP.

         (d)  Indebtedness  of the Company to any Restricted  Subsidiary  (other
than  SFPP)  and of  any  Restricted  Subsidiary  to the  Company  or any  other
Restricted  Subsidiary  (other than SFPP),  provided that (i) any such borrowing
Restricted Subsidiary shall be a Subsidiary Guarantor, and (ii) any such lending
Restricted  Subsidiary  shall  subordinate,  on  terms  (including  terms  as to
maturity,  required  amortization,  and  limitations  on voluntary  prepayments)
reasonably  satisfactory to the Required Lenders,  its right to repayment of the
Indebtedness of the Company or the borrowing Restricted Subsidiary,  as the case
may be,  owing to it and  otherwise  permitted  by this  Section  6.01(d) to the
rights of the Lenders to  repayment  of all  Obligations  of the Company or such
borrowing  Restricted  Subsidiary,  as the  case  may  be,  from  time  to  time
outstanding and owing to them under this Agreement;

         (e)  Indebtedness  of  the  Company  or a  Restricted  Subsidiary,  not
otherwise permitted by this Section 6.01 in an aggregate principal amount at any
one time outstanding (i) until the consummation of the Santa Fe Acquisition, not
in excess of $10,000,000, and (ii) thereafter, not in excess of $25,000,000;

         (f)   Indebtedness permitted under Section 6.04(f); and

         (g) additional  Indebtedness of the Company,  provided that no required
principal  payment  (whether  at stated  maturity,  or by  virtue  of  scheduled
amortization, required prepayment or redemption) shall be due in respect thereof
prior to the final maturity of the Indebtedness outstanding hereunder.

Notwithstanding  any other provision of this Agreement,  KMCO2, the owner of the
limited  partner  interests in Shell CO2,  shall not at any time create,  incur,
assume or permit to exist any Indebtedness whatsoever.



                                      -64-
<PAGE>

         SECTION 6.12.  Liens. The Company will not, and will  not  permit   any
Restricted  Subsidiary to, create,  incur,  assume or permit to  exist  any Lien
on any property or asset now owned or hereafter acquired by  it,  or  assign  or
sell any income or revenues (including accounts receivable) or rights in respect
of any thereof, except:

         (a)   Permitted Encumbrances;

         (b) any Lien on any property or asset of the Company or any  Restricted
Subsidiary  existing on the date hereof and set forth in Schedule 6.02; provided
that (i) such Lien  shall  not  extend  to any  other  property  or asset of the
Company  or  such  Subsidiary  and  (ii)  such  Lien  shall  secure  only  those
obligations which it secures on the date hereof;

         (c) from and after the consummation of the Santa Fe Acquisition,  Liens
on properties or assets of SFPP securing the SFPP First  Mortgage  Notes and the
SFPP Revolving Credit Facility,  and Liens on the same properties or assets that
secure the SFPP First Mortgage Notes, or the SFPP Revolving Credit Facility,  as
the  case  may be  (and  that  do not  extend  to any  other  assets),  securing
Indebtedness  issued in exchange  for, or the net  proceeds of which are applied
substantially concurrently to repay, refinance, refund or replace the SFPP First
Mortgage Notes or the SFPP Revolving Credit Facility,  which Indebtedness would,
if the SFPP First Mortgage Notes or the SFPP Revolving Credit  Facility,  as the
case may be, constituted  "Refinanced  Indebtedness" (as said term is defined in
the  definition  of  "Refinancing  Indebtedness"  in  Section  1.01)  constitute
Refinancing Indebtedness in respect thereof.

         (d) any Lien existing on any property or asset prior to the acquisition
thereof by the Company or any Restricted  Subsidiary or existing on any property
or asset of any  Person  that  becomes a  Restricted  Subsidiary  after the date
hereof prior to the time such Person becomes a Restricted  Subsidiary;  provided
that (i) such Lien is not created in contemplation of or in connection with such
acquisition  or such Person  becoming a Restricted  Subsidiary , as the case may
be,  (ii) such Lien  shall  not  apply to any  other  property  or assets of the
Company or any  Restricted  Subsidiary,  (iii) such Lien shall secure only those
obligations  which it secures on the date of such  acquisition  or the date such
Person  becomes a  Restricted  Subsidiary,  as the case may be,  and (iv)  after
giving  effect  to  such  acquisition  or  such  Person  becoming  a  Restricted
Subsidiary,  the Indebtedness secured by such Lien would be permitted by Section
6.01(e), and extensions,  renewals and replacements thereof that do not increase
the outstanding principal amount thereof; and

         (e) Liens on fixed or capital assets acquired,  constructed or improved
by the Company or any  Restricted  Subsidiary;  provided  that (i) such security
interests secure Indebtedness permitted by clause (e) of Section 6.01, (ii) such
security interests and the Indebtedness secured thereby are incurred prior to or
within 90 days after such acquisition or the completion of such  construction or
improvement,  (iii) the Indebtedness  secured thereby does not exceed 80% of the
cost of acquiring,  constructing  or improving  such fixed or capital assets and
(iv) such security  interests shall not apply to any other property or assets of
the Company or any Restricted Subsidiary.

         SECTION 6.03.  Fundamental Changes. The Company will not,  and will not
permit any  Restricted  Subsidiary to, merge into or consolidate with  any other
Person, or permit any other Person to  merge  into  or  consolidate  with it, or
sell,  transfer,  lease or  otherwise dispose  of  (in  one  



                                       -65-
<PAGE>

transaction or in a series of transactions)  all (or  substantially  all) of its
assets,  or all or substantially all of the stock of or other equity interest in
any of its Restricted Subsidiaries (in each case, whether now owned or hereafter
acquired),  or liquidate or  dissolve,  except that,  if at the time thereof and
immediately  after giving  effect  thereto no Event of Default or Default  shall
have occurred and be  continuing  (a) any Person may merge into the Company in a
transaction  in which the Company is the  surviving  entity,  (b) any Person may
merge into any  Restricted  Subsidiary in a  transaction  in which the surviving
entity is a Wholly-Owned  Restricted  Subsidiary,  (c) any Restricted Subsidiary
may sell,  transfer,  lease or otherwise dispose of its assets to the Company or
to a  Wholly-Owned  Restricted  Subsidiary  (other  than  SFPP),  (d)  KMNGL may
dissolve and liquidate into OLP "A" and (e) any  Restricted  Subsidiary  (other
than a Subsidiary Guarantor) may liquidate or dissolve if the Company determines
in good faith that such  liquidation  or dissolution is in the best interests of
the  Company  and is not  materially  disadvantageous  to the  Lenders  and such
liquidation or dissolution complies with this Section 6.03.

         SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions;
Hedging  Agreements.  The  Company  will  not,  and will not  permit  any of its
Restricted Subsidiaries to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a Wholly-Owned  Restricted  Subsidiary prior
to such merger) any Capital Stock, evidences 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 (in the case of  investments  in Shell  CO2)  commit to 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 constituting a business unit, except:

         (a)   the Company Guaranty and the Subsidiary Guarantors  Guaranty  and
Permitted Investments; 

         (b) investments, existing on the Execution Date, by the Company and the
Restricted Subsidiaries in the Capital Stock of their respective Subsidiaries;

         (c)  investments  in, loans to and Guarantees of  Indebtedness or other
obligations of any Person (other than SFPP) that is a Restricted Subsidiary both
before and  immediately  after the  making of such  investment  or loan,  or the
giving of such Guarantee;

         (d)  investments  in  the  Capital  Stock  of  any  other  Person,   if
immediately after and giving effect to the making of such investment:

         (i)  no  Event  of  Default  or  Default  shall  have  occurred  and be
     continuing or would result therefrom;

         (ii) any acquired or newly-formed corporation, partnership, association
     or other  business  entity  (a "New  Subsidiary")  shall be a  Wholly-Owned
     Restricted  Subsidiary whose Capital Stock is owned directly by the Company
     or one or more Wholly-Owned  Restricted Subsidiaries (other than SFPP), and
     such New  Subsidiary  shall become a Restricted  Subsidiary  and be engaged
     primarily in one or more lines of business  permitted by 



                                       -66-
<PAGE>

     Section 5.11, and shall  have  executed a  Subsidiary Guarantor Counterpart
     in the form of Exhibit 6.03 (a "Subsidiary Guarantor Counterpart");

         (iii)  the  Company  and  the  Restricted   Subsidiaries  shall  be  in
     compliance,  on a pro forma basis,  after giving effect to such acquisition
     or formation,  with the covenants contained in Article VI, recomputed as at
     the last day of the most recently  ended fiscal  quarter of the Company and
     the  Restricted  Subsidiaries  as if such  acquisition  had occurred on the
     first day of each  relevant  period for testing such  compliance,  and, the
     Company shall have delivered to the Administrative  Agent, the Issuing Bank
     and the Lenders a  certificate  of a  Responsible  Officer to such  effect,
     together with all relevant financial  information of such New Subsidiary or
     assets and calculations demonstrating such compliance;

         (iv)  any New  Subsidiary  shall  not be  liable  for any  Indebtedness
     (except for Indebtedness permitted by Section 6.01);

         (v) the Required  Lenders shall have given their prior written  consent
     (which   consent   shall  not  be   unreasonably   withheld,   taking  into
     consideration the merits of the acquisition) in the case of any acquisition
     made, directly or indirectly, with the proceeds of Indebtedness incurred by
     the  Company  or one or  more  Restricted  Subsidiaries  in  excess  of (A)
     $35,000,000  at  any  time  prior  to  the  Santa  Fe  Acquisition  or  (B)
     $75,000,000 thereafter; and

         (vi) the Administrative  Agent shall have received (A) such opinions of
     counsel to such New  Subsidiary as the  Administrative  Agent,  the Issuing
     Bank and the Lenders may reasonably  request as to the  organization,  good
     standing and enforceability of this Agreement and the Subsidiary  Guarantor
     Counterpart and such other matters as the Administrative Agent, the Issuing
     Bank and the Lenders may reasonably  require and (B) such other agreements,
     certificates,  financing statements, approvals, reports, consents, waivers,
     estoppels, subordination agreements, filings and other documentation as the
     Administrative Agent and the Required Lenders may reasonably request.

Notwithstanding  the  foregoing,  the Company will cause SFPP at such time as no
default  under any of its  Indebtedness  would  result  therefrom  to  execute a
Subsidiary Guarantor Counterpart and comply with clause (vi) above;

         (e)  the OLP "A" Refinancing, the Santa Fe Acquisition and the Shell JV
Investment; and

         (f)  investments, loans and Guarantees and mandatory  contributions  to
Shell CO2 under the partnership agreement of Shell CO2, in addition to the Shell
JV Investment,  in an aggregate amount at any one time outstanding not exceeding
(i)  $15,000,000  prior to  consummation  of the Santa Fe  Acquisition,  or (ii)
$50,000,000  thereafter,  provided  that  investments,  loans and  Guarantees in
respect of Unrestricted  Subsidiaries  and mandatory  contributions to Shell CO2
permitted by this clause (ii) shall not exceed in the aggregate  $25,000,000  at
any one time outstanding.


                                       -67-
<PAGE>


Notwithstanding  the foregoing  provisions of this Section 6.04, the Company may
at any time or from  time to time make  investments,  loans  and  Guarantees  in
amounts that, in the  aggregate,  when made, do not exceed the net proceeds of a
substantially  concurrent  sale  of the  Company's  Qualified  Stock,  provided,
however, after giving effect to such investment,  loan or guarantee, the Company
and the Restricted  Subsidiaries  shall be in compliance  with the terms of this
Agreement (other than the preceding provisions of this Section 6.04).

         SECTION 6.05. Restricted Payments. The  Company will not, and will  not
permit  any of the  Restricted Subsidiaries to, declare or make, or agree to pay
or  make,  directly  or indirectly, any Restricted Payment.

         SECTION 6.06.  Transactions with Affiliates. The  Company will not, and
will not permit any of the  Restricted Subsidiaries to, sell, lease or otherwise
transfer any  property or assets to, or purchase,  lease  or  otherwise  acquire
any  property  or  assets  from,  or otherwise engage in any  other transactions
with, any of its Affiliates,  except (a) in the ordinary course of  business  at
prices and on terms and conditions not less favorable to  the  Company  or  such
Subsidiary  than  could  be  obtained  on an  arm's-length basis  from unrelated
third  parties,  (b)  transactions  between or among the  Company and Guarantors
not  involving  any  other  Affiliate,  (c) any Restricted  Payment permitted by
Section  6.05 and (d) loans and  advances  by the Company to the General Partner
to  enable  the  General  Partner to  pay  general  and administrative costs and
expenses  pursuant to the partnership agreement of the Company and in accordance
with past practices.

         SECTION 6.07  Restrictive Agreements. The  Company will not,  and  will
not permit any of the Restricted Subsidiaries to, directly or indirectly,  enter
into,  incur or  permit  to  exist  any  agreement  or  other  arrangement  that
prohibits,  restricts  or imposes  any  condition  upon the  ability of any such
Subsidiary to pay dividends or other distributions with respect to any shares of
its  Capital  Stock or to make or repay  loans or advances to the Company or any
other such  Subsidiary or to Guarantee  Indebtedness of the Company or any other
such  Subsidiary  or to grant  Liens to secure the  Obligations  (except for any
agreement  or  arrangement  with  respect  to the  assets  subject  to the Liens
permitted by Section 6.02(d) and Section  6.02(e));  provided that the foregoing
shall not apply to (i)  restrictions  and  conditions  imposed by law or by this
Agreement,  (ii) customary  restrictions and conditions  contained in agreements
relating  to  the  sale  of  a  Subsidiary  pending  such  sale,  provided  such
restrictions  and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder,  or (iii) restrictions and conditions existing
on the date hereof identified on Schedule 6.07 (but shall apply to any extension
or renewal of, or any amendment or modification expanding the scope of, any such
restriction  or  condition)  and (iv)  from and  after  the date of the Santa Fe
Acquisition  restrictions and conditions  contained in the agreement pursuant to
which  the  Santa  Fe First  Mortgage  Notes  were  issued  and in the  Santa Fe
Revolving Credit Facility.

SECTION 6.08.  Sale of Assets.  The Company will not, and will not permit any of
the Restricted  Subsidiaries to, sell, lease or otherwise  dispose of any of its
properties  or assets  (other  than sales of product in the  ordinary  course of
business) if, at the time of the proposed sale, lease or other disposition,  and
giving effect  thereto,  the aggregate  fair market value (as determined in good
faith by the Board of the  Company's  general  partner)  of all  properties  and
assets  of the  Company 



                                       -68-
<PAGE>

and its  Restricted Subsidiaries so sold, leased or otherwise disposed of during
the  then  current  fiscal  year  would  exceed $10,000,000.

         SECTION 6.09  Financial Covenants. The Company will observe each of the
following requirements:

          (a) Ratio of  Indebtedness  to Cash Flow.  The Company will not permit
the ratio of  outstanding  Indebtedness  of the Company to Company Cash Flow for
the four full fiscal quarters then most recently ended to exceed (i) at any time
prior to the date on which the  Triggering  Event shall  occur,  4.75 to 1.0, or
(ii) at any time on or after such date, 3.75 to 1.0.

          (b) Ratio of Cash  Flow to  Interest  Expense.  The  Company  will not
permit the ratio of Company  Cash Flow for the four full  fiscal  quarters  then
most  recently  ended to  Company  Interest  Expense  for such four full  fiscal
quarters  to be less  than  (i) at any  time  prior  to the  date on  which  the
Triggering Event shall occur,  2.75 to 1.0, or (ii) at any time on or after such
date, 3.50 to 1.0.

          (c) Ratio of Cash Flow to Fixed Charges.  The Company will not, at the
end of any fiscal  quarter,  permit the ratio of Company  Cash Flow for the four
full fiscal  quarters  then most  recently  ended to Fixed Charges at the end of
such fiscal quarter to be less than 1.25 to 1.0.

         SECTION 6.10.  Amendments to Certain Agreements. The Company  will  not
and will not permit any Restricted Subsidiary (including SFPP after the Santa Fe
Acquisition) to amend its partnership agreement or operating agreement or in the
case of SFPP, the SFPP Revolving Credit Facility,  the SFPP First Mortgage Notes
or the Note  Agreement  pursuant to which such First Mortgage Notes were issued,
in each case,  in any manner  that  could be adverse to the  Lenders;  provided,
however,  the partnership  agreement of SFPP may be amended to conform it to the
partnership  agreement of the Company and to enable the Santa Fe  Acquisition to
be effected.

                                  ARTICLE VII.

                                Events of Default

          SECTION 7.01.  Events of Default and Remedies. If any of the following
events  ("Events  of  Default") shall occur and be continuing:

         (a) any  installment  of  principal  of any  Loan or any  reimbursement
obligation in respect of any LC  Disbursement  shall not be paid when and as the
same shall become due and payable,  whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise;

         (b) any interest on any Loan or any fee or any other amount (other than
an  amount  referred  to in  clause  (a) of this  Article)  payable  under  this
Agreement  or any other Loan  Document  shall not be paid,  when and as the same
shall become due and payable,  and such failure shall continue  unremedied for a
period of three days;


                                       -69-
<PAGE>

         (c) any  representation  or warranty  made or, for  purposes of Article
III,  deemed made by or on behalf of any Loan Party herein,  at the direction of
any Loan  Party  or by any  Loan  Party in any  other  Loan  Document  or in any
document,  certificate or financial  statement delivered in connection with this
Agreement or any other Loan Document  shall prove to have been  incorrect in any
material respect when made or deemed made or reaffirmed, as the case may be;

         (d) any Loan Party  shall fail to  observe  or  perform  any  covenant,
condition or agreement contained in Section 5.01(d)(iii),  5.03 (with respect to
such Loan Party's existence) or 5.08 or in Article VI;

         (e) any Loan Party  shall fail to  perform or observe  any other  term,
covenant or agreement contained in this Agreement (other than those specified in
Section 7.01(a),  Section 7.01(b) or Section 7.01(d)) or any other Loan Document
to which it is a party and, in any event,  such failure shall remain  unremedied
for 30 calendar  days after the earlier of (i)  written  notice of such  failure
shall have been given to the Company by the  Administrative  Agent or any Lender
or, (ii) an officer of any Loan Party becomes aware of such failure;

         (f) other than as specified in Section  7.01(a) or (b), (i) the Company
or any  Restricted  Subsidiary  fails to make (whether as primary  obligor or as
guarantor or other  surety) any payment of principal of, or interest or premium,
if any, on any item or items of Indebtedness (other than as specified in Section
7.01(a),  Section 7.01(b) or Article IX or Article X) beyond any period of grace
provided  with  respect  thereto  (not to  exceed 30  days);  provided  that the
aggregate  outstanding  principal  amount of all Indebtedness as to which such a
payment default shall occur and be continuing is equal to or exceeds $2,000,000,
or (ii) the Company or any Restricted Subsidiary fails to duly observe,  perform
or comply with any  agreement  with any Person or any term or  condition  of any
instrument, if such failure, either individually or in the aggregate, shall have
caused or shall have the  ability to cause the  acceleration  of the  payment of
Indebtedness  with an  aggregate  face  amount  which  is  equal  to or  exceeds
$2,000,000;  provided  that this  Section  7.01(f)  shall  not apply to  secured
Indebtedness  that becomes due as a result of the voluntary  sale or transfer of
the property or assets securing such Indebtedness;

         (g) an involuntary  case shall be commenced or an involuntary  petition
shall be filed  seeking  (i)  liquidation,  reorganization  or other  relief  in
respect  of the  Company or any  Restricted  Subsidiary  or its  debts,  or of a
substantial part of its assets, under any Federal,  state or foreign bankruptcy,
insolvency,  receivership  or similar law now or hereafter in effect or (ii) the
appointment  of a receiver,  trustee,  custodian,  sequestrator,  conservator or
similar  official  for  the  Company  or  any  Restricted  Subsidiary  or  for a
substantial  part of its  assets,  and,  in any such case,  such  proceeding  or
petition shall continue  undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

         (h) the Company,  or any Restricted  Subsidiary  shall (i)  voluntarily
commence any proceeding or file any petition  seeking  liquidation,  winding-up,
reorganization or other relief under any Federal,  state or foreign  bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii) consent
to the institution  of, or fail to contest in a timely and  appropriate  manner,
any  proceeding  or petition  described in Section  7.01(g),  (iii) apply for or
consent to the  appointment  of a receiver,  trustee,  custodian,  sequestrator,
conservator or similar official for the Company or any 



                                       -70-
<PAGE>

Restricted  Subsidiary  or for a  substantial  part of its assets,  (iv) file an
answer admitting the material  allegations of a petition filed against it in any
such proceeding,  (v) make a general  assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;

         (i) the Company or any Restricted Subsidiary shall become unable, admit
in writing or fail generally to pay its debts as they become due;

         (j) the General Partner fails to make (whether as primary  obligator or
as  guarantor  or other  surety)  any  payment of  principal  of, or interest or
premium, if any, on any item or items of Indebtedness beyond any period of grace
provided  with  respect  thereto  (not to  exceed 30  days);  provided  that the
aggregate outstanding principal amount of all such Indebtedness as to which such
a  payment  default  shall  occur  and be  continuing  is  equal  to or  exceeds
$5,000,000;

         (k) one or more  judgments  for the  payment  of money in an  aggregate
amount in excess of  $5,000,000  shall be  rendered  against  the  Company,  any
Restricted  Subsidiary  or any  combination  thereof  and the same shall  remain
undischarged  for a period of 30 consecutive  days during which  execution shall
not be  effectively  stayed,  or any action shall be legally taken by a judgment
creditor  to attach or levy upon any  assets of the  Company  or any  Restricted
Subsidiary to enforce any such judgment;

         (l) an ERISA  Event  shall have  occurred  that,  in the opinion of the
Required  Lenders,  when taken  together  with all other ERISA  Events that have
occurred, could reasonably be expected to result in liability of the Company and
the Restricted  Subsidiaries in an aggregate  amount exceeding (i) $5,000,000 in
any year or (ii) $10,000,000 for all periods;

         (m) any Security  Document or any Intercompany  Security Document after
delivery  thereof  shall for any reason,  except to the extent  permitted by the
terms  thereof,  cease to be in full force and effect  and  valid,  binding  and
enforceable  in  accordance  with its  terms,  or cease  to  create a valid  and
perfected  Lien  of the  priority  required  thereby  on  any of the  Collateral
purported to be covered thereby,  except to the extent permitted by the terms of
this Agreement or such Security Document or Intercompany  Security Document,  as
the case may be, or any Loan Party shall so assert; or

         (n) either  Borrower or any other Person shall petition or apply for or
obtain any order  restricting  payment by the  Issuing  Bank under any Letter of
Credit or extending  the Issuing  Bank's  liability  under such Letter of Credit
beyond the expiration date stated therein or otherwise  agreed to by the Issuing
Bank;

then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing,  the  Administrative  Agent, may, and upon the written
request of the Required Lenders shall, by written notice  (including notice sent
by  telecopy)  to the  Company (a "Notice  of  Default")  take any or all of the
following actions,  without prejudice to the rights of the Administrative Agent,
any  Lender or other  holder of any of the  Obligations  to  enforce  its claims
against  any Loan Party  (provided  that,  if an Event of Default  specified  in
Section  7.01(g) or Section  7.01(h)  shall occur with respect to the Company or
any Restricted Subsidiary,  the result of which would occur upon the giving of a
Notice of Default as specified in clauses (i),  (ii) and (v) below,  shall occur
automatically  



                                       -71-
<PAGE>

without the giving of any Notice of Default):  (i) declare the Total  Commitment
terminated,  whereupon the Commitments of the Lenders shall forthwith  terminate
immediately  and any  accrued  commitment  fees shall  forthwith  become due and
payable  without any other notice of any kind; (ii) declare the principal of and
any  accrued  interest  in respect of all Loans,  and all the other  Obligations
owing  hereunder and under the other Loan Documents,  to be,  whereupon the same
shall become,  forthwith due and payable without presentment,  demand, notice of
demand or of dishonor  and  nonpayment,  protest,  notice of protest,  notice of
intent to accelerate,  declaration or notice of acceleration or any other notice
of any kind,  all of which are hereby waived by each Loan Party;  (iii) exercise
any rights or remedies  under the Loan  Documents;  (iv) terminate any Letter of
Credit which may be  terminated  in  accordance  with its terms  (whether by the
giving of written notice to the  beneficiary  or otherwise);  and (v) direct the
Company to comply,  and the Company  agrees that upon receipt of such notice (or
upon the  occurrence  of an Event of Default  specified  in  Section  7.01(g) or
Section 7.01(h)) it will comply, with the provisions of Section 2.06(k).

         SECTION 7.02.   Other Remedies.  Upon  the  occurrence  and  during the
continuance of any Event of Default,  the  Administrative  Agent,  acting at the
request of the Required Lenders,  may proceed to protect and enforce its rights,
either by suit in equity or by action at law or both,  whether for the  specific
performance  of any covenant or agreement  contained in this Agreement or in any
other  Loan  Document  or in aid of the  exercise  of any power  granted in this
Agreement or in any other Loan  Document;  or may proceed to enforce the payment
of all amounts owing to the Administrative  Agent and the Lenders under the Loan
Documents  and interest  thereon in the manner set forth  herein or therein;  it
being  intended  that no remedy  conferred  herein  or in any of the other  Loan
Documents  is to be  exclusive  of any other  remedy,  and each and every remedy
contained  herein or in any other Loan Document shall be cumulative and shall be
in addition  to every  other  remedy  given  hereunder  and under the other Loan
Documents  now or  hereafter  existing  at law or in  equity  or by  statute  or
otherwise.

         SECTION 7.03   Application  of Moneys  During  Continuation of Event of
Default.  (a) So long as an Event of Default of which the  Administrative  Agent
shall have given notice to the Lenders shall  continue,  all moneys  received by
the  Administrative  Agent from any Loan Party under the Loan  Documents  shall,
except as otherwise required by law, be distributed by the Administrative  Agent
on the dates selected by the Administrative Agent (individually, a "Distribution
Date" and collectively, the "Distribution Dates") as follows:

     first, to payment of the unreimbursed expenses for which the Administrative
     Agent or any  Lender is to be  reimbursed  pursuant  to  Section  11.03 and
     unpaid fees owing to the Administrative Agent pursuant to the Fee Letter;

     second,  to the ratable  payment of accrued but unpaid interest on the 
     Obligations;

     third, to the ratable  payment of unpaid  principal of the Obligations;

     fourth,  to the ratable  payment of all other  amounts payable by the  Loan
     Parties hereunder;



                                       -72-
<PAGE>

     fifth, to the ratable payment of all other Obligations, until  all  Obliga-
     tions shall have been paid in full; and

     finally, to payment to the Loan Parties, or their respective  successors or
     assigns, or as a court of competent jurisdiction may direct, of any surplus
     then remaining from such proceeds.

         (b) The term  "unpaid"  as used in this  Section  7.03  shall  mean all
Obligations  outstanding as of a Distribution Date (including any amounts unpaid
under  clause  (v) of the last  sentence  of  Section  7.01)  as to which  prior
distributions  have not been made, after giving effect to any adjustments  which
are made pursuant to Section 11.09 of which the Administrative  Agent shall have
been notified.

                                  ARTICLE VIII.

                            The Administrative Agent

         SECTION 8.01 Appointment,  Powers and Immunities.  Each  Lender  hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the Security  Documents with such powers as are specifically
delegated to the  Administrative  Agent by the terms of this  Agreement and such
other  Loan  Documents,  together  with  such  other  powers  as are  reasonably
incidental  thereto.  The  Administrative  Agent  (which  term  as  used in this
sentence  and in  Section  8.05 and the first  sentence  of  Section  8.06 shall
include  reference to its Affiliates and its  Affiliates'  officers,  directors,
employees, attorneys, accountants, experts and agents): (a) shall have no duties
or responsibilities except those expressly set forth in the Loan Documents,  and
shall not by reason of the Loan  Documents  be a trustee  or  fiduciary  for any
Lender;  (b) makes no  representation or warranty to any Lender and shall not be
responsible  to the Lenders for any  recitals,  statements,  representations  or
warranties contained in this Agreement,  or in any certificate or other document
referred  to or  provided  for  in,  or  received  by any of  them  under,  this
Agreement, or for the value, validity,  effectiveness,  genuineness,  execution,
legality,  enforceability or sufficiency of this Agreement,  other Loan Document
or any other  document  referred to or provided for herein or therein or for any
failure by any Loan Party or any other  Person  (other  than the  Administrative
Agent) to perform any of its  obligations  hereunder  or  thereunder  or for the
existence  or value of, or the  perfection  or  priority  of any Lien upon,  any
collateral  security or the  financial or other  condition  of the Company,  the
Subsidiaries  or any other obligor or guarantor;  (c) except pursuant to Section
8.07 shall not be required to initiate or conduct any  litigation  or collection
proceedings hereunder;  and (d) shall not be responsible for any action taken or
omitted to be taken by it  hereunder or under any other  document or  instrument
referred to or provided for herein or in connection  herewith  including its own
ordinary negligence, except for its own gross negligence,  willful misconduct or
unlawful  conduct.  The  Administrative  Agent may employ  agents,  accountants,
attorneys  and  experts  and  shall not be  responsible  for the  negligence  or
misconduct of any such agents, accountants,  attorneys or experts selected by it
in good faith or any action  taken or omitted to be taken in good faith by it in
accordance  with the advice of such agents,  accountants,  attorneys or experts.
The  Administrative  Agent may deem and treat the payee named in any Note as the
holder thereof for all purposes  hereof unless and until a written notice of the
assignment or transfer  thereof  permitted  hereunder shall have 



                                       -73-
<PAGE>

been filed with the Administrative Agent. The Administrative Agent is authorized
to release any Collateral  that is permitted to be sold or released  pursuant to
the terms of the Loan Documents.

         SECTION 8.02.  Reliance by Administrative Agent.   The   Administrative
Agent  shall  be  entitled  to rely  upon  any  certification,  notice  or other
communication (including any thereof by telephone,  telex, telecopier,  telegram
or cable)  believed  by it to be genuine  and correct and to have been signed or
sent by or on behalf  of the  proper  Person or  Persons,  and upon  advice  and
statements of legal counsel,  independent accountants and other experts selected
by the Administrative Agent in good faith.

         SECTION 8.03.  Defaults; Events of Default.  The  Administrative  Agent
shall not be deemed to have knowledge of the occurrence of a Default or an Event
of Default  (other than the  non-payment of principal of or interest on Loans or
of fees or failure to  reimburse  LC  Disbursements)  unless the  Administrative
Agent has received notice from a Lender or a Borrower specifying such Default or
Event of Default and stating  that such notice is a "Notice of  Default."In  the
event that the Administrative  Agent receives such a notice of the occurrence of
a Default or Event of Default, the Administrative Agent shall give prompt notice
thereof to the Lenders.  In the event of a payment  Default or Event of Default,
the  Administrative  Agent  shall give each  Lender  prompt  notice of each such
payment Default or Event of Default.

         SECTION 8.04.  Rights as a Lender. With  respect  to  its   Commitments
and the Loans made by it and its issuance, or its participation in the issuance,
of each Letter of Credit, First Union National Bank (and any successor acting as
Administrative  Agent) in its capacity as a Lender hereunder shall have the same
rights and powers  hereunder  as any other  Lender and may  exercise the same as
though it were not acting as the Administrative  Agent, and the term "Lender" or
"Lenders"  shall,   unless  the  context   otherwise   indicates,   include  the
Administrative Agent in its individual capacity.  First Union National Bank (and
any successor  acting as  Administrative  Agent) and its Affiliates may (without
having to account  therefor to any Lender) accept  deposits from,  lend money to
and generally  engage in any kind of banking,  trust or other  business with any
Loan  Party  (and  any  of its  Affiliates)  as if it  were  not  acting  as the
Administrative  Agent.  Goldman Sachs Credit Partners L.P., First Union National
Bank and their  respective  Affiliates  may accept fees and other  consideration
from the Company or any other Loan Party for  services in  connection  with this
Agreement or otherwise without having to account for the same to the Lenders.

         SECTION  8.05  INDEMNIFICATION. THE  LENDERS  AGREE  TO  INDEMNIFY  THE
ADMINISTRATIVE  AGENT AND THE SYNDICATION AGENT RATABLY IN ACCORDANCE WITH THEIR
APPLICABLE  PERCENTAGES FOR THE INDEMNITY  MATTERS AS DESCRIBED IN SECTION 11.03
TO THE EXTENT NOT  INDEMNIFIED OR REIMBURSED BY THE COMPANY UNDER SECTION 11.03,
BUT WITHOUT LIMITING THE OBLIGATIONS OF THE COMPANY UNDER SAID SECTION 11.03 AND
FOR ANY AND ALL OTHER  LIABILITIES,  OBLIGATIONS,  LOSSES,  DAMAGES,  PENALTIES,
ACTIONS,  JUDGMENTS,  SUITS,  COSTS,  EXPENSES OR  DISBURSEMENTS OF ANY KIND AND
NATURE  WHATSOEVER  WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE
ADMINISTRATIVE  AGENT OR THE SYNDICATION AGENT IN ANY WAY RELATING TO OR ARISING


                                       -74-
<PAGE>

OUT OF: (A) THIS  AGREEMENT,  THE SECURITY  DOCUMENTS OR ANY OTHER LOAN DOCUMENT
CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS  CONTEMPLATED  HEREBY,
BUT  EXCLUDING,  UNLESS A DEFAULT OR AN EVENT OF  DEFAULT  HAS  OCCURRED  AND IS
CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE
OF ITS AGENCY  DUTIES,  IF ANY,  HEREUNDER OR (B) THE  ENFORCEMENT OF ANY OF THE
TERMS  OF THIS  AGREEMENT,  ANY  SECURITY  DOCUMENT  OR OF ANY SUCH  OTHER  LOAN
DOCUMENT;  WHETHER OR NOT ANY OF THE  FOREGOING  SPECIFIED  IN THIS SECTION 8.05
ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE ADMINISTRATIVE AGENT OR THE
SYNDICATION  AGENT,  AS THE CASE MAY BE; PROVIDED THAT NO LENDER SHALL BE LIABLE
FOR ANY OF THE  FOREGOING  TO THE EXTENT  THEY ARISE FROM THE GROSS  NEGLIGENCE,
WILLFUL MISCONDUCT OR UNLAWFUL CONDUCT OF THE ADMINISTRATIVE AGENT.

         SECTION  8.06  Non-Reliance  on Agents and other  Lenders . Each Lender
acknowledges and agrees that it has,  independently  and without reliance on the
Administrative  Agent, the Syndication  Agent or any other Lender,  and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Company and the Subsidiaries and its decision to enter into this
Agreement,  and  that it  will,  independently  and  without  reliance  upon the
Administrative  Agent, the Syndication  Agent or any other Lender,  and based on
such  documents  and  information  as it shall  deem  appropriate  at the  time,
continue to make its own analysis and  decisions in taking or not taking  action
under this Agreement. Neither the Administrative Agent nor the Syndication Agent
shall be required to keep itself informed as to the performance or observance by
any Loan Party of this Agreement, the other Loan Documents or any other document
referred to or provided for herein or to inspect the  properties or books of any
Loan Party.  Except for notices,  reports and other  documents  and  information
expressly  required to be furnished to the Lenders by the  Administrative  Agent
hereunder, neither the Administrative Agent nor the Syndication Agent shall have
any duty or  responsibility  to  provide  any  Lender  with any  credit or other
information concerning the affairs,  financial condition or business of any Loan
Party  (or any of its  Affiliates)  which may come  into the  possession  of the
Administrative Agent, the Syndication Agent or any of its respective Affiliates.
In this regard,  each Lender  acknowledges that Andrews & Kurth L.L.P. is acting
in this  transaction  as  special  counsel to the  Administrative  Agent and the
Syndication  Agent only.  Each Lender will consult with its own legal counsel to
the extent that it deems  necessary in connection  with this Agreement and other
Loan Documents and the matters contemplated herein and therein.

         SECTION 8.07. Action by Administriave Agent. Except for action or other
matters  expressly   required  of  the   Administrative  Agent   hereunder,  the
Administrative  Agent  shall in all  cases  be fully  justified  in  failing  or
refusing to act hereunder unless it shall (a) receive written  instructions from
the  Required  Lenders (or all of the Lenders as  expressly  required by Section
11.02)  specifying  the  action  to be  taken,  and  (b) be  indemnified  to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions  of the  Required  Lenders  (or  all of the  Lenders  as  expressly
required  by  Section  11.02) and any  action  taken or failure to act  pursuant
thereto by the 



                                       -75-
<PAGE>

Administrative  Agent  shall be binding on all of the  Lenders.  If a Default or
Event of Default has occurred and is continuing,  the Administrative Agent shall
take such  action with  respect to such  Default or Event of Default as shall be
directed by the  Required  Lenders (or all of the Lenders as required by Section
11.02) in the written instructions (with indemnities)  described in this Section
8.07;  provided  that,  unless  and until the  Administrative  Agent  shall have
received  such  directions,  the  Administrative  Agent  may (but  shall  not be
obligated to) take such action, or refrain from taking such action, with respect
to such  Default  or Event of Default  as it shall  deem  advisable  in the best
interests of the Lenders. In no event,  however,  shall the Administrative Agent
be  required  to take any  action  which  exposes  the  Administrative  Agent to
personal  liability  or which is  contrary  to this  Agreement  or any  Security
Document or applicable law.

         SECTION 8.08  Resignation or Removal of  Administrative Agent.  Subject
to the  appointment  and  acceptance  of a  successor  Administrative  Agent  as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the  Lenders and the  Company,  and the  Administrative  Agent 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. If no successor Administrative Agent shall have
been  so  appointed  by the  Required  Lenders  and  shall  have  accepted  such
appointment  within thirty (30) days after the retiring  Administrative  Agent's
giving of notice of resignation or the Required Lenders' removal of the retiring
Administrative  Agent, then the retiring  Administrative Agent may, on behalf of
the Lenders,  appoint a successor  Administrative  Agent. Upon the acceptance of
such appointment  hereunder by a successor  Administrative Agent, 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 hereunder.  After any retiring Administrative Agent's resignation or
removal hereunder as  Administrative  Agent, the provisions of this Article VIII
and  Section  11.03  shall  continue in effect for its benefit in respect of any
actions  taken  or  omitted  to be  taken  by it  while  it  was  acting  as the
Administrative Agent.

         SECTION 8.09.  Consents under Security Documents.   The  Administrative
Agent may, with the prior  consent of the Required Lenders (but not  otherwise),
consent to any  modification,  supplement  or waiver  under any of the  Security
Documents;  provided  that,  without the prior  consent of all the Lenders,  the
Administrative  Agent  shall not  release any  Collateral  (except as  expressly
permitted  in the Loan  Documents)  or  otherwise  terminate  any Lien under any
Security  Document  providing for  collateral  security,  or agree to additional
obligations being secured by such collateral security.

         SECTION 8.10.  Duties  of  Syndication  Agent.   Notwithstanding    the
indemnity of the Syndication Agent  contained  in  Section  8.05  and in Section
11.03,  the  Syndication  Agent  shall  not have  any  duty,  responsibility  or
liability in such capacity with respect to the  administration or enforcement of
this Agreement or any other Loan Document.



                                       -76-
<PAGE>

                                   ARTICLE IX.
                                Company Guaranty

          SECTION 9.01.  Company Guaranty. (a) In consideration of, and in order
to induce the Administrative  Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make the Loans and the Issuing Bank to maintain the
Existing  Letter of Credit  and to issue new  Letters of Credit  hereunder,  the
Company  hereby  absolutely,  unconditionally  and  irrevocably  guarantees  the
punctual  payment  and  performance  when due,  whether at stated  maturity,  by
acceleration  or otherwise,  of the  Obligations of the Subsidiary  Borrower (as
such), and all covenants of the Subsidiary  Borrower (as such), now or hereafter
existing  under  this  Agreement  and the  other  Loan  Documents  to which  the
Subsidiary  Borrower is a party,  whether  for  principal,  interest  (including
interest  accruing  or  becoming  owing  both  prior  to and  subsequent  to the
commencement  of any  proceeding  against  or  with  respect  to the  Subsidiary
Borrower  under any  chapter of Title 11 of the United  States  Code,  as now or
hereafter in effect,  or any successor thereto (the "Bankruptcy  Code")),  fees,
commissions,  expenses  (including  reasonable  attorneys' fees and expenses) or
otherwise  (all such  obligations  being  the  "Subsidiary  Borrower  Guaranteed
Obligations"),  it being understood,  for the avoidance of doubt, that such term
shall not include any Obligations of the Person that is the Subsidiary  Borrower
in any other capacity,  e.g., as a Subsidiary  Guarantor.  The Company agrees to
pay any and all expenses incurred by each Lender and the Administrative Agent in
enforcing this Company Guaranty against the Company.

         (b) This Company  Guaranty is an absolute,  unconditional,  present and
continuing  guaranty  of  payment  and  not of  collectibility  and is in no way
conditioned  upon any  attempt to collect  from the  Subsidiary  Borrower or any
other Loan Party or any other action, occurrence or circumstance whatsoever.

         SECTION 9.02.  Continuing Guaranty. (a) The Company guarantees that the
Subsidiary Borrower  Guaranteed  Obligations will be paid strictly in accordance
with the terms of this  Agreement  and the other  Loan  Documents.  The  Company
agrees that, to the maximum extent  permitted by applicable  law, the Subsidiary
Borrower  Guaranteed  Obligations  and Loan  Documents  to which the  Subsidiary
Borrower  is a party may be extended or  renewed,  and  indebtedness  thereunder
repaid and  reborrowed in whole or in part,  without  notice to or assent by the
Company,   and  that  it  will   remain   bound  upon  this   Company   Guaranty
notwithstanding  any  extension,  renewal or other  alteration of any Subsidiary
Borrower  Guaranteed  Obligations or such Loan  Documents,  or any repayment and
reborrowing of Loans. To the maximum extent  permitted by applicable law, except
as otherwise  expressly provided in this Agreement or any other Loan Document to
which the Company is a party,  the obligations of the Company under this Company
Guaranty  shall  be  absolute,  unconditional  and  irrevocable,  and  shall  be
performed  strictly in accordance with the terms hereof under any  circumstances
whatsoever, including:

         (i) any modification, amendment, supplement, renewal, extension for any
     period, increase, decrease,  alteration or rearrangement of all or any part
     of the Subsidiary Borrower Guaranteed Obligations,  or of this Agreement or
     any other Loan Document executed in connection herewith, or any contract or
     understanding among the Company,  the Subsidiary 



                                       -77-
<PAGE>

     Borrower,  any Subsidiary  Guarantor, the Administrative Agent and/or the 
     Lenders, or any other Person, pertaining to the Subsidiary Borrower 
     Guaranteed Obligations;

         (ii) any adjustment,  indulgence,  forbearance or compromise that might
     be  granted  or given  by the  Lenders  to the  Company  or any  Subsidiary
     Guarantor or any other Person liable on the Subsidiary  Borrower Guaranteed
     Obligations;

         (iii) the insolvency, bankruptcy, arrangement, adjustment, composition,
     liquidation,  disability,  dissolution or lack of power of the Company, the
     Subsidiary  Borrower,  any Subsidiary  Guarantor or any other Person at any
     time  liable  for the  payment  of all or part of the  Subsidiary  Borrower
     Guaranteed  Obligations;  or any dissolution of the Company, the Subsidiary
     Borrower,  or any Subsidiary  Guarantor,  or any sale, lease or transfer of
     any or all of the assets of the Company,  the Subsidiary  Borrower,  or any
     Subsidiary  Guarantor,  or any changes in the  shareholders of the Company,
     the Subsidiary Borrower, or any Subsidiary Guarantor; or any reorganization
     of the Company, the Subsidiary Borrower, or any Subsidiary Guarantor;

         (iv) the invalidity,  illegality or unenforceability of all or any part
     of the  Subsidiary  Borrower  Guaranteed  Obligations,  or any  document or
     agreement  executed in connection with the Subsidiary  Borrower  Guaranteed
     Obligations,  for any reason  whatsoever,  including  the fact that (A) the
     Subsidiary Borrower Guaranteed  Obligations,  or any part thereof,  exceeds
     the  amount  permitted  by  law,  (B) the act of  creating  the  Subsidiary
     Borrower Guaranteed Obligations or any part thereof is ultra vires, (C) the
     officers or  representatives  executing the documents or otherwise creating
     the Subsidiary  Borrower  Guaranteed  Obligations  acted in excess of their
     authority,  (D) the Subsidiary Borrower Guaranteed  Obligations or any part
     thereof  violate  applicable  usury laws,  (E) the Company,  the Subsidiary
     Borrower or any Subsidiary Guarantor has valid defenses, claims and offsets
     (whether at law or in equity,  by agreement or by statute) which render the
     Subsidiary   Borrower   Guaranteed    Obligations   wholly   or   partially
     uncollectible from the Company,  the Subsidiary Borrower or such Subsidiary
     Guarantor,  (F) the creation,  performance  or repayment of the  Subsidiary
     Borrower Guaranteed Obligations (or execution,  delivery and performance of
     any document or instrument  representing  part of the  Subsidiary  Borrower
     Guaranteed  Obligations  or  executed  in  connection  with the  Subsidiary
     Borrower  Guaranteed  Obligations,  or given to secure the repayment of the
     Subsidiary  Borrower  Guaranteed  Obligations)  is illegal,  uncollectible,
     legally impossible or unenforceable,  or (G) this Agreement, any other Loan
     Document,  or any other document or instrument pertaining to the Subsidiary
     Borrower  Guaranteed  Obligations has been forged or otherwise is irregular
     or not genuine or authentic;


          (v) any full or partial  release of the liability of the Company,  the
     Subsidiary Borrower or any Subsidiary  Guarantor on the Subsidiary Borrower
     Guaranteed  Obligations  or any part  thereof,  or any other  Person now or
     hereafter liable, whether directly or indirectly,  jointly,  severally,  or
     jointly and severally, to pay, perform,  guarantee or assure the payment of
     the Subsidiary  Borrower  Guaranteed  Obligations  or any part thereof;  it
     being  recognized,  acknowledged and agreed by the Company that the Company
     may be required to pay the 



                                       -78-
<PAGE>

     Subsidiary Borrower Guaranteed  Obligations in  full  without assistance or
     support of any other  Person,  and the Company  has  not  been  induced  to
     enter  into  this  Guaranty  on  the  basis  of  a  contemplation,  belief,
     understanding  or agreement that any other Person will be liable to perform
     the Subsidiary Borrower Guaranteed Obligations,  or that the Administrative
     Agent or any Lender will look to any other Person to perform the Subsidiary
     Borrower Guaranteed Obligations;

         (vi) the  taking or  accepting  of any other  security,  collateral  or
     guaranty,  or  other  assurance  of  payment,  for  all or any  part of the
     Subsidiary Borrower Guaranteed Obligations;

         (vii) any release, surrender, exchange,  subordination,  deterioration,
     waste, loss or impairment of any collateral,  property or security,  at any
     time existing in connection  with, or assuring or securing  payment of, all
     or any part of the Subsidiary Borrower Guaranteed Obligations;

         (viii) the  failure of the  Administrative  Agent,  the  Lenders or any
     other Person to exercise  diligence or reasonable care in the preservation,
     protection,  enforcement, sale or other handling or treatment of all or any
     part of such collateral, property or security;

         (ix) the fact that any  collateral,  security or Lien  contemplated  or
     intended to be given,  created or granted as security for the  repayment of
     the  Subsidiary  Borrower  Guaranteed  Obligations  shall  not be  properly
     perfected or created,  or shall prove to be unenforceable or subordinate to
     any other Lien;  it being  recognized  and agreed by the  Company  that the
     Company is not entering  into this  Company  Guaranty in reliance on, or in
     contemplation   of  the   benefits   of,  the   validity,   enforceability,
     collectibility  or  value  of any  of the  collateral  for  the  Subsidiary
     Borrower Guaranteed Obligations;

         (x) any  payment  by the  Subsidiary  Borrower  or the  Company  to the
     Administrative Agent or any Lender is held to constitute a preference under
     bankruptcy laws, or for any other reason either the Administrative Agent or
     any Lender is  required  to refund  such  payment or pay such amount to the
     Subsidiary Borrower or any other Person; or

         (xi) any other action taken or omitted to be taken with respect to this
     Agreement,  any other Loan  Document,  the Subsidiary  Borrower  Guaranteed
     Obligations,  or the security and collateral therefor,  whether or not such
     action or omission  prejudices the Company or increases the likelihood that
     the  Company  will be required to pay the  Subsidiary  Borrower  Guaranteed
     Obligations pursuant to the terms hereof;

it being the  unambiguous  and  unequivocal  intention  of the Company  that the
Company shall be obligated to pay the Subsidiary Borrower Guaranteed Obligations
when due,  notwithstanding  any  occurrence,  circumstance,  event,  action,  or
omission whatsoever, whether contemplated or uncontemplated,  and whether or not
otherwise  or  particularly  described  herein,  except  for the full and  final
payment and satisfaction of the Subsidiary Borrower Guaranteed Obligations after
the  termination  of the  Commitments  of all  Lenders  and  the  expiration  or
termination of the Existing Letter of Credit.



                                       -79-
<PAGE>

         (b) The Company further agrees that, to the fullest extent permitted by
law,  as  between  the  Company,  on the  one  hand,  and  the  Lenders  and the
Administrative  Agent,  on the other hand,  (i) the  maturity of the  Subsidiary
Borrower  Guaranteed  Obligations  may be accelerated as provided in Article VII
for the purposes of this Company Guaranty,  notwithstanding any stay, injunction
or other  prohibition  preventing such  acceleration of the Subsidiary  Borrower
Guaranteed  Obligations,  and  (ii)  in the  event  of any  acceleration  of the
Subsidiary  Borrower  Guaranteed  Obligations  as provided in Article  VII,  the
Subsidiary  Borrower  Guaranteed  Obligations  (whether or not due and  payable)
shall  forthwith  become due and  payable by the Company for the purpose of this
Company Guaranty.

         SECTION 9.03.  Effect of Debtor Relief Laws.  IF after receipt  of  any
payment of, or ws proceeds of any  security  applied (or intended to be applied)
to the  payment  of  all or any  part  of  the  Subsidiary  Borrower  Guaranteed
Obligations, the Administrative Agent, the Issuing Bank or any Lender is for any
reason  compelled  to  surrender  or  voluntarily  surrenders,  such  payment or
proceeds to any Person (a) because such payment or application of proceeds is or
may be avoided,  invalidated,  declared fraudulent,  set aside, determined to be
void or voidable as a preference,  fraudulent  conveyance,  fraudulent transfer,
impermissible set-off or a diversion of trust funds or (b) for any other reason,
including (i) any judgment,  decree or order of any court or administrative body
having jurisdiction over the Administrative  Agent, the Issuing Bank, any Lender
or any of their  respective  properties or (ii) any  settlement or compromise of
any such claim  effected by the  Administrative  Agent,  the Issuing Bank or any
Lender with any such claimant  (including  the  Subsidiary  Borrower),  then the
Subsidiary  Borrower  Guaranteed  Obligations  or part  thereof  intended  to be
satisfied  shall be reinstated  and continue,  and this Company  Guaranty  shall
continue in full force as if such  payment or proceeds  have not been  received,
notwithstanding  any revocation  thereof or the  cancellation  of any instrument
evidencing any of the Subsidiary Borrower  Guaranteed  Obligations or otherwise;
and the Company  shall be liable to pay the  Administrative  Agent,  the Issuing
Bank and the Lenders,  and hereby do indemnify  the  Administrative  Agent,  the
Issuing  Bank and the  Lenders  and hold them  harmless  for the  amount of such
payment or  proceeds  so  surrendered  and all  reasonable  expenses  (including
reasonable  attorneys'  fees,  court costs and  expenses  attributable  thereto)
incurred by the  Administrative  Agent,  the  Issuing  Bank or any Lender in the
defense of any claim made  against it that any payment or  proceeds  received by
the  Administrative  Agent,  the Issuing Bank or any Lender in respect of all or
part of the Subsidiary Borrower Guaranteed Obligations must be surrendered.  The
provisions  of this  paragraph  shall  survive the  termination  of this Company
Guaranty,  and any  satisfaction  and  discharge of the  Subsidiary  Borrower by
virtue of any payment, court order or any Federal or state law.

     SECTION 9.04. Waiver. The  Company  hereby  waives  promptness,  diligence,
notice of acceptance and any other notice with respect to any of the  Subsidiary
Borrower  Guaranteed  Obligations  and  this  Company   Guaranty    and   waives
presentment, demand for payment, notice  of  intent  to  accelerate,  notice  of
dishonor or nonpayment and any requirement that the Administrative  Agent or any
Lender institute suit, collection   proceedings  or  take  any other  action  to
collect  the  Subsidiary Borrower Guaranteed Obligations, including any require-
ment that the Administrative Agent or any  Lender  protect,  secure,  perfect or
insure any Lien against  any  property  subject  thereto or exhaust any right or
take any action against the Subsidiary  Borrower or  any  other  Person  or  any
collateral (it being the intention of the Administrative Agent, the Lenders  and
the Company that this


                                       -80-
<PAGE>

Company Guaranty is to be a guaranty of payment and not of collection). It shall
not be necessary for the Administrative Agent or any Lender, in order to enforce
any payment by the Company  hereunder,  to institute  suit or exhaust its rights
and remedies against the Subsidiary  Borrower,  any Subsidiary  Guarantor or any
other Person,  including others liable to pay any Subsidiary Borrower Guaranteed
Obligations,  or to enforce its rights against any security ever given to secure
payment  thereof.  The Company  hereby  expressly  waives to the maximum  extent
permitted by applicable  law each and every right to which it may be entitled by
virtue of the  suretyship  laws of the  State of New York or any other  state in
which it may be located,  including  any and all rights it may have  pursuant to
Rule 31,  Texas  Rules of Civil  Procedure,  Section  17.001 of the Texas  Civil
Practice  and  Remedies  Code and Chapter 34 of the Texas  Business and Commerce
Code. The Company hereby waives marshaling of assets and liabilities,  notice by
the Administrative Agent or any Lender of any indebtedness or liability to which
such Lender applies or may apply any amounts received by such Lender, and of the
creation, advancement, increase, existence, extension, renewal, rearrangement or
modification  of the Subsidiary  Borrower  Guaranteed  Obligations.  The Company
expressly  waives, to the extent permitted by applicable law, the benefit of any
and all laws providing for exemption of property from execution or for valuation
and appraisal upon foreclosure.

         SECTION  9.05.  Full Force and  Effect.  This  Company  Guaranty  is  a
continuing  guaranty  and shall remain in full force and effect until all of the
Subsidiary  Borrower  Guaranteed  Obligations under this Agreement and the other
Loan Documents to which the Subsidiary Borrower is a party and all other amounts
payable  under  this  Company  Guaranty  have  been  paid  in  full  (after  the
termination of the  Commitments of the Lenders and the termination or expiration
of the Existing Letter of Credit).  All rights,  remedies and powers provided in
this  Company  Guaranty  may be  exercised,  and all waivers  contained  in this
Company  Guaranty  may be  enforced,  only to the extent  that the  exercise  or
enforcement  thereof does not violate any provisions of applicable law which may
not be waived.

                                   ARTICLE X.
                         Subsidiary Guarantors Guaranty

          SECTION 10.01.  Subsidiary Guarantors Guaranty.  (a) In  consideration
of, and in order to induce  the  Administrative  Agent and the  Lenders to enter
into this  Agreement and to induce the Lenders to make the Loans and the Issuing
Bank to  maintain  the  Existing  Letter of Credit  and to issue new  Letters of
Credit hereunder,  each Subsidiary Guarantor hereby absolutely,  unconditionally
and  irrevocably,  jointly and  severally  guarantees  the punctual  payment and
performance when due, whether at stated maturity,  by acceleration or otherwise,
of the  Obligations of the Borrowers (as such),  and all other  obligations  and
covenants  of the  Borrowers  (as such),  now or hereafter  existing  under this
Agreement  and the other Loan  Documents  to which  either  Borrower is a party,
whether for principal,  interest  (including interest accruing or becoming owing
both prior to and subsequent to the  commencement  of any proceeding  against or
with  respect to such  Borrower  under the  Bankruptcy  Code,  commitment  fees,
commissions,  expenses  (including  reasonable  attorneys' fees and expenses) or
otherwise,  subject  however to the  limitation  set forth in Section 10.04 (all
such  obligations  being  the  "Borrower  Guaranteed   Obligations",   it  being
understood,  for the  avoidance  of doubt,  that such term shall not include any
Obligations  of  either  Borrower  in any  



                                       -81-
<PAGE>

capacity other than as a Borrower  hereunder,  e.g., as the maker of the Company
Guaranty or this Subsidiary  Borrower  Guaranty).  Moreover,  the term "Borrower
Guaranteed  Obligations"  shall  not,  as to the Person  that is the  Subsidiary
Borrower,  include  its own  obligations,  either  as  such  or as a  Subsidiary
Guarantor. Each Subsidiary Guarantor agrees to pay any and all expenses incurred
by each  Lender  and the  Administrative  Agent  in  enforcing  this  Subsidiary
Guarantors Guaranty against such Subsidiary Guarantor.

         (b) Each  Subsidiary  Guarantor  agrees that the amount of the Borrower
Guaranteed  Obligations  may at any time and from time to time exceed the amount
of the maximum  liability of such Subsidiary  Guarantor in respect thereof under
this Subsidiary  Guarantors  Guaranty (by reason of the limitations set forth in
Section  10.04)  without  impairing  this  Subsidiary   Guarantors  Guaranty  or
affecting  the rights and remedies of the  Administrative  Agent and the Lenders
hereunder.

         (c) This Subsidiary Guarantors Guaranty is an absolute,  unconditional,
present and continuing  guaranty of payment and not of collectibility  and is in
no way conditioned upon any attempt to collect from the Company,  any other Loan
Party or any other action, occurrence or circumstance whatsoever.

         SECTION 10.02.  Continuing  Guaranty.  (a)  Each  Subsidiary  Guarantor
guarantees  that the Borrower  Guaranteed  Obligations  will be paid strictly in
accordance with the terms of this Agreement and the other Loan  Documents.  Each
Subsidiary  Guarantor agrees that, to the maximum extent permitted by applicable
law, the Borrower Guaranteed  Obligations and the Loan Documents may be extended
or renewed,  and Loans repaid and reborrowed in whole or in part, without notice
to or assent by such  Subsidiary  Guarantor,  and that it will remain bound upon
this Subsidiary  Guarantors Guaranty  notwithstanding any extension,  renewal or
other  alteration  of any of the  Borrower  Guaranteed  Obligations  or the Loan
Documents,  or any repayment and  reborrowing  of Loans.  To the maximum  extent
permitted by  applicable  law,  except as otherwise  expressly  provided in this
Agreement  or any other Loan  Document to which such  Subsidiary  Guarantor is a
party,  the  obligations  of each  Subsidiary  Guarantor  under this  Subsidiary
Guarantors Guaranty shall be absolute,  unconditional and irrevocable, and shall
be  performed   strictly  in   accordance   with  the  terms  hereof  under  any
circumstances whatsoever, including:

         (i) any modification, amendment, supplement, renewal, extension for any
     period, increase, decrease,  alteration or rearrangement of all or any part
     of the Borrower Guaranteed  Obligations or this Agreement or any other Loan
     Document executed in connection herewith,  or any contract or understanding
     among either Borrower,  any Subsidiary Guarantor,  the Administrative Agent
     and/or  the  Lenders,  or any  other  Person,  pertaining  to the  Borrower
     Guaranteed Obligations;

         (ii) any adjustment,  indulgence,  forbearance or compromise that might
     be granted or given by the  Lenders to either  Borrower  or any  Subsidiary
     Guarantor   or  any  other  Person   liable  on  the  Borrower   Guaranteed
     Obligations;



                                       -82-
<PAGE>

         (iii) the insolvency, bankruptcy, arrangement, adjustment, composition,
     liquidation,  disability,  dissolution or lack of power of either Borrower,
     any  Subsidiary  Guarantor  or any other  Person at any time liable for the
     payment  of all or  part of the  Borrower  Guaranteed  Obligations;  or any
     dissolution of either  Borrower or any Subsidiary  Guarantor,  or any sale,
     lease or  transfer  of any or all of the assets of either  Borrower  or any
     Subsidiary Guarantor, or any changes in the holders of the equity in either
     Borrower  or any  Subsidiary  Guarantor;  or any  reorganization  of either
     Borrower or any Subsidiary Guarantor;

         (iv) the invalidity,  illegality or unenforceability of all or any part
     of the  Borrower  Guaranteed  Obligations,  or any  document  or  agreement
     executed in connection with the Borrower  Guaranteed  Obligations,  for any
     reason  whatsoever,  including  the fact that (A) the  Borrower  Guaranteed
     Obligations,  or any part thereof, exceeds the amount permitted by law, (B)
     the act of creating the Borrower Guaranteed Obligations or any part thereof
     is ultra vires, (C) the officers or representatives executing the documents
     or otherwise creating the Borrower  Guaranteed  Obligations acted in excess
     of their  authority,  (D) the Borrower  Guaranteed  Obligations or any part
     thereof  violate   applicable  usury  laws,  (E)  either  Borrower  or  any
     Subsidiary Guarantor has valid defenses, claims and offsets (whether at law
     or in equity,  by  agreement  or by  statute)  which  render  the  Borrower
     Guaranteed  Obligations  wholly  or  partially  uncollectible  from  either
     Borrower or such  Subsidiary  Guarantor,  (F) the creation,  performance or
     repayment of the Borrower  Guaranteed  Obligations (or execution,  delivery
     and  performance  of any document or  instrument  representing  part of the
     Borrower Guaranteed Obligations or executed in connection with the Borrower
     Guaranteed  Obligations,  or given to secure the  repayment of the Borrower
     Guaranteed  Obligations) is illegal,  uncollectible,  legally impossible or
     unenforceable, or (G) this Agreement, any other Loan Document, or any other
     document or instrument  pertaining to the Borrower  Guaranteed  Obligations
     has been forged or otherwise is irregular or not genuine or authentic;

         (v) any full or partial  release of the liability of either Borrower or
     any Subsidiary Guarantor on the Borrower Guaranteed Obligations or any part
     thereof,  or any other Person now or hereafter liable,  whether directly or
     indirectly,  jointly, severally, or jointly and severally, to pay, perform,
     guarantee or assure the payment of the Borrower  Guaranteed  Obligations or
     any part  thereof;  it being  recognized,  acknowledged  and agreed by each
     Subsidiary  Guarantor that such Subsidiary Guarantor may be required to pay
     the Borrower  Guaranteed  Obligations in full without assistance or support
     of any other Person, and such Subsidiary  Guarantor has not been induced to
     enter  into  this  Guaranty  on  the  basis  of  a  contemplation,  belief,
     understanding  or agreement that any other Person will be liable to perform
     the Borrower Guaranteed  Obligations,  or that the Administrative  Agent or
     any Lender will look to any other Person to perform the Borrower Guaranteed
     Obligations;

         (vi) the  taking or  accepting  of any other  security,  collateral  or
     guaranty,  or  other  assurance  of  payment,  for  all or any  part of the
     Borrower Guaranteed Obligations;

         (vii) any release, surrender, exchange,  subordination,  deterioration,
     waste, loss or impairment of any collateral,  property or security,  at any
     time existing in connection  with, or assuring or securing  payment of, all
     or any part of the Borrower Guaranteed Obligations;



                                       -83-
<PAGE>

         (viii) the  failure of the  Administrative  Agent,  the  Lenders or any
     other Person to exercise  diligence or reasonable care in the preservation,
     protection,  enforcement, sale or other handling or treatment of all or any
     part of such collateral, property or security;

         (ix) the fact that any  collateral,  security or Lien  contemplated  or
     intended to be given,  created or granted as security for the  repayment of
     the  Borrower  Guaranteed  Obligations  shall not be properly  perfected or
     created,  or shall prove to be  unenforceable  or  subordinate to any other
     Lien; it being recognized and agreed by each Subsidiary Guarantor that such
     Subsidiary  Guarantor  is not  entering  into  this  Subsidiary  Guarantors
     Guaranty  in  reliance  on, or in  contemplation  of the  benefits  of, the
     validity, enforceability,  collectibility or value of any of the collateral
     for the Borrower Guaranteed Obligations;

         (x) any  payment by the  Company  or any  Subsidiary  Guarantor  to the
     Administrative Agent or any Lender is held to constitute a preference under
     bankruptcy laws, or for any reason either the  Administrative  Agent or any
     Lender is required to refund such payment or pay such amount to the Company
     or any other Person; or

         (xi) any other action taken or omitted to be taken with respect to this
     Agreement, any other Loan Document, the Borrower Guaranteed Obligations, or
     the  security  and  collateral  therefor,  whether  or not such  action  or
     omission  prejudices any  Subsidiary  Guarantor or increases the likelihood
     that  any  Subsidiary  Guarantor  will  be  required  to pay  the  Borrower
     Guaranteed Obligations pursuant to the terms hereof;

it being the unambiguous and unequivocal  intention of each Subsidiary Guarantor
that such Subsidiary Guarantor shall be obligated to pay the Borrower Guaranteed
Obligations  when due,  notwithstanding  any  occurrence,  circumstance,  event,
action, or omission  whatsoever,  whether  contemplated or  uncontemplated,  and
whether or not otherwise or particularly  described herein,  except for the full
and final payment and satisfaction of the Borrower Guaranteed  Obligations after
the  termination  of the  Commitments  of all  Lenders  and  the  expiration  or
termination of all Letters of Credit.

         (b) Each  Subsidiary  Guarantor  further  agrees that,  as between such
Subsidiary  Guarantor,  on the one hand, and the Lenders and the  Administrative
Agent,  on  the  other  hand,  (i)  the  maturity  of  the  Borrower  Guaranteed
Obligations  may be  accelerated  as provided in Article VII for the purposes of
this Subsidiary  Guarantors  Guaranty,  notwithstanding any stay,  injunction or
other  prohibition  preventing  such  acceleration  of the  Borrower  Guaranteed
Obligations,  and (ii) in the event of any  acceleration  of the  Obligations as
provided in Article VII, the Borrower Guaranteed Obligations (whether or not due
and payable) shall forthwith become due and payable by each Subsidiary Guarantor
for the purpose of this Subsidiary Guarantors Guaranty.

         SECTION 10.03.  Effect of Debtor Relief Laws. If after receipt  of  any
payment of, or ws proceeds of any  security  applied (or intended to be applied)
to the payment of all or any part of the Borrower  Guaranteed  Obligations,  the
Administrative Agent, the Issuing Bank or any Lender is for any reason compelled
to surrender or voluntarily  surrenders,  such payment or proceeds to any Person
(a)  because  such  payment or  application  of  proceeds  is or may be avoided,
invalidated,  declared fraudulent,  set aside, determined to be void or voidable
as a  preference,  fraudulent  conveyance,  



                                       -84-
<PAGE>

fraudulent transfer,  impermissible set-off or a diversion of trust funds or (b)
for any other reason,  including (i) any judgment,  decree or order of any court
or administrative  body having  jurisdiction over the Administrative  Agent, the
Issuing  Bank,  any  Lender or any of their  respective  properties  or (ii) any
settlement or compromise of any such claim effected by the Administrative Agent,
the Issuing Bank or any Lender with any such claimant  (including  the Company),
then  the  Borrower  Guaranteed  Obligations  or  part  thereof  intended  to be
satisfied  shall be reinstated  and  continue,  and this  Subsidiary  Guarantors
Guaranty  shall  continue in full force as if such payment or proceeds  have not
been received, notwithstanding any revocation thereof or the cancellation of any
Note  or  any  other  instrument  evidencing  any  of  the  Borrower  Guaranteed
Obligations or otherwise; and the Subsidiary Guarantors,  jointly and severally,
shall be  liable  to pay the  Administrative  Agent,  the  Issuing  Bank and the
Lenders, and hereby do indemnify the Administrative  Agent, the Issuing Bank and
the Lenders and hold them harmless for the amount of such payment or proceeds so
surrendered and all reasonable expenses (including  reasonable  attorneys' fees,
court costs and expenses  attributable  thereto) incurred by the  Administrative
Agent,  the Issuing  Bank or any Lender in the defense of any claim made against
it that any  payment or  proceeds  received  by the  Administrative  Agent,  the
Issuing Bank or any Lender in respect of all or part of the Borrower  Guaranteed
Obligations must be surrendered.  The provisions of this paragraph shall survive
the termination of this Subsidiary Guarantors Guaranty, and any satisfaction and
discharge of the Company by virtue of any payment, court order or any Federal or
state law.

         SECTION 10.04  General  Limitation on Borrower  Guaranteed Obligations.
In any action or proceeding  involving any state  corporate law, or any state or
Federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors  generally,  if the  obligations of any Subsidiary  Guarantor under
Section  10.01 would  otherwise,  taking into account the  provisions of Section
10.05,  be  held  or  determined  to  be  void,  invalid  or  unenforceable,  or
subordinated to the claims of any other  creditors,  on account of the amount of
its liability  under Section 10.01,  then,  notwithstanding  any other provision
hereof to the contrary,  the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable  and not  subordinated to the claims of other creditors as
determined in such action or proceeding.

         SECTION 10.05. Rights of Contribution. The Subsidiary Guarantors hereby
agree, as between themselves,  that if any Subsidiary  Guarantor shall become an
Excess  Funding  Obligor  (as  defined  below) by reason of the  payment by such
Subsidiary Guarantor of any of the Borrower Guaranteed  Obligations,  each other
Subsidiary  Guarantor  shall,  on demand of such  Excess  Funding  Obligor  (but
subject to the next  sentence),  pay to such  Excess  Funding  Obligor an amount
equal to such  Subsidiary  Guarantor's  Pro Rata  Share  (as  defined  below and
determined,  for this purpose,  without  reference to the properties,  debts and
liabilities  of such Excess  Funding  Obligor) of the Excess Payment (as defined
below) in respect of such Borrower Guaranteed Obligations.

         For purposes of this Section 10.05,  (i) "Excess Funding Obligor" shall
mean,  in respect of any of the Borrower  Guaranteed  Obligations,  a Subsidiary
Guarantor  that has  paid an  amount  in  excess  of its Pro Rata  Share of such
Borrower Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of
any of the Borrower Guaranteed Obligations, the amount paid by an Excess Funding
Obligor in excess of its Pro Rata Share of such Borrower Guaranteed  



                                       -85-
<PAGE>

Obligations and (iii) "Pro Rata Share" shall mean, for any Subsidiary Guarantor,
the ratio  (expressed as a percentage)  of (x) the amount by which the aggregate
fair saleable value of all properties of such  Subsidiary  Guarantor on the date
of this  Agreement  exceeds the amount of all the debts and  liabilities of such
Subsidiary  Guarantor  (including   contingent,   subordinated,   unmatured  and
unliquidated   liabilities,   but  excluding  the  obligations  that  have  been
guaranteed by such  Subsidiary  Guarantor in Section 10.01) to (y) the amount by
which the aggregate  fair saleable  value of all assets of the Borrowers and all
the Subsidiary  Guarantors  exceeds the amount of all the debts and  liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding  the  obligations  of the  Borrowers  and  the  Subsidiary  Guarantors
hereunder)  of the Borrowers and all the  Subsidiary  Guarantors,  all as of the
Execution Date.

         SECTION 10.06.  Subrogation.  Notwithstanding any payment or   payments
made  by  any  Subsidiary  Guarantor hereunder, or any set-off or application by
the  Administrative  Agent or  any  Lender of any security or of any credits  or
claims,  no  Subsidiary  Guarantor  will assert  or exercise any rights  of  the
Administrative  Agent  or  any  Lender or of such Subsidiary  Guarantor  against
either  Borrower to recover the amount of any  payment  made by such  Subsidiary
Guarantor  to the  Administrative  Agent or any Lender  hereunder  by way of any
claim,  remedy  or  subrogation,   reimbursement,   exoneration,   contribution,
indemnity,  participation or otherwise  arising by contract,  by statute,  under
common law or otherwise,  and such Subsidiary Guarantor shall not have any right
of recourse to or any claim against assets or property of either Borrower, until
all  of  the  Borrower  Guaranteed  Obligations  are  paid  in  full  after  the
termination of the  Commitments of all Lenders and the expiration or termination
of all  Letters  of  Credit.  If any  amount  shall  nevertheless  be  paid to a
Subsidiary Guarantor by either Borrower or another Subsidiary Guarantor prior to
payment in full of the  Borrower  Guaranteed  Obligations,  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 and applied
to the  Borrower  Guaranteed  Obligations,  whether  matured or  unmatured.  The
provisions of this paragraph  shall survive the  termination of this  Subsidiary
Guarantors  Guaranty,  and any  satisfaction and discharge of either Borrower by
virtue of any payment, court order or any Federal or state law.

         SECTION 10.07.  Subordination. If any Subsidiary Guarantor becomes  the
holder of any  indebtedness  payable by either  Borrower  or another  Subsidiary
Guarantor,  each Subsidiary Guarantor hereby subordinates all indebtedness owing
to it from such Borrower or such other Subsidiary  Guarantor to all indebtedness
of such Borrower or such other Subsidiary  Guarantor to the Administrative Agent
and the Lenders,  and agrees that during the continuance of any Default or Event
of Default it shall not accept any  payment on the same until the first to occur
of (a) the date  such  Default  or Event of  Default  no longer  exists  and (b)
payment in full of the Borrower  Guaranteed  Obligations of the Borrowers  under
this  Agreement  and the  other  Loan  Documents  after the  termination  of the
Commitments  of the Lenders and the  termination or expiration of the Letters of
Credit and all other Loan Documents,  and, while any Default or Event of Default
exists,  shall in no  circumstance  whatsoever  attempt to set-off or reduce any
obligations  hereunder  because  of  such  indebtedness.  If  any  amount  shall
nevertheless  be paid to a Subsidiary  Guarantor  by either  Borrower or another
Subsidiary  Guarantor  prior  to  payment  in  full of the  Borrower  Guaranteed
Obligations and, while any Default or Event of Default exists, such amount shall
be held in trust for the benefit



                                       -86-
<PAGE>

of the  Administrative  Agent and the Lenders and shall forthwith be paid to the
Administrative  Agent to be  credited  and  applied to the  Borrower  Guaranteed
Obligations, whether matured or unmatured.

         SECTION  10.08.   Waiver.   Each  Subsidiary  Guarantor  hereby  waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the  Borrower  Guaranteed  Obligations  and  this  Subsidiary  Guarantors
Guaranty  and  waives  presentment,  demand  for  payment,  notice  of intent to
accelerate,  notice of  dishonor  or  nonpayment  and any  requirement  that the
Administrative  Agent or any Lender  institute suit,  collection  proceedings or
take any other action to collect the Borrower Guaranteed Obligations,  including
any requirement  that the  Administrative  Agent or any Lender protect,  secure,
perfect or insure any Lien against any property  subject  thereto or exhaust any
right  or take any  action  against  the  Company  or any  other  Person  or any
collateral (it being the intention of the Administrative  Agent, the Lenders and
each Subsidiary  Guarantor that this Subsidiary  Guarantors  Guaranty is to be a
guaranty of payment and not of  collection).  It shall not be necessary  for the
Administrative  Agent or any  Lender,  in order to  enforce  any  payment by any
Subsidiary  Guarantor  hereunder,  to  institute  suit or exhaust its rights and
remedies  against either Borrower,  any other Subsidiary  Guarantor or any other
Person,  including others liable to pay any Borrower Guaranteed Obligations,  or
to enforce its rights against any security ever given to secure payment thereof.
Each  Subsidiary  Guarantor  hereby  expressly  waives  to  the  maximum  extent
permitted by applicable  law each and every right to which it may be entitled by
virtue of the  suretyship  laws of the  State of New York or any other  state in
which it may be located,  including  any and all rights it may have  pursuant to
Rule 31,  Texas  Rules of Civil  Procedure,  Section  17.001 of the Texas  Civil
Practice  and  Remedies  Code and Chapter 34 of the Texas  Business and Commerce
Code.  Each  Subsidiary   Guarantor  hereby  waives  marshaling  of  assets  and
liabilities,   notice  by  the  Administrative   Agent  or  any  Lender  of  any
indebtedness  or liability to which such Lender applies or may apply any amounts
received by such Lender, and of the creation, advancement,  increase, existence,
extension,  renewal,  rearrangement  or modification of the Borrower  Guaranteed
Obligations. Each Subsidiary Guarantor expressly waives, to the extent permitted
by  applicable  law, the benefit of any and all laws  providing for exemption of
property from execution or for valuation and appraisal upon foreclosure.

         SECTION 10.09.  Full Force and Effect.   This   Subsidiary   Guarantors
Guaranty  is a  continuing  guaranty  and shall  remain in full force and effect
until all of the Borrower  Guaranteed  Obligations  under this Agreement and the
other  Loan  Documents  and all other  amounts  payable  under  this  Subsidiary
Guarantors  Guaranty  have  been  paid in full  (after  the  termination  of the
Commitments  of the Lenders and the  termination or expiration of the Letters of
Credit). All rights,  remedies and powers provided in this Subsidiary Guarantors
Guaranty  may be  exercised,  and  all  waivers  contained  in  this  Subsidiary
Guarantors  Guaranty  may be  enforced,  only to the extent that the exercise or
enforcement  thereof does not violate any provisions of applicable law which may
not be waived.



                                       -87-
<PAGE>

                                   ARTICLE XI.

                                  Miscellaneous

          SECTION 11.01  Notices, Etc.  The  Administrative  Agent,  the Issuing
Bank,  any Lender or the  holder of any of the  Obligations,  giving  consent or
notice or making any request of any Loan Party  provided  for  hereunder,  shall
notify each Lender (in the case of the  Administrative  Agent and/or the Issuing
Bank) and the  Administrative  Agent (in the case of a Lender)  thereof.  In the
event  that the  holder  of any Note or any of the  Obligations  (including  any
Lender) shall transfer such Note or Obligations, it shall promptly so advise the
Administrative  Agent which shall be  entitled  to assume  conclusively  that no
transfer  of any  Note or any of the  Obligations  has been  made by any  holder
(including  any  Lender)  unless  and until the  Administrative  Agent  receives
written  notice to the  contrary.  Except  with  respect  to  notices  and other
communications  expressly  permitted  to be given  by  telephone,  all  notices,
consents,  requests,  approvals,  demands and other communications (collectively
"Communications")  provided for herein shall be in writing (including  facsimile
Communications) and mailed, telecopied or delivered:

          (a)  if to the  Company, to it at 1301 McKinney  Street,  Suite  3450,
Houston,  Texas 77010,  Attention of David G. Dehaemers,  Jr. (Telecopy No.
(713) 844-9570);

         (b)   if to any other Loan Party, to it in care of the Company; 

         (c)   if to the  Administrative  Agent,  to it at _ First Union Capital
Markets Corp., 1001 Fannin Street, Suite 2255, Houston,  Texas 77002,  Attention
of Paul Riddle (Telecopy No. 713-650-6354);

         (d) if to the  Issuing  Bank,  to it at _ First Union  Capital  Markets
Corp., 1001 Fannin Street, Suite 2255, Houston,  Texas 77002,  Attention of Paul
Riddle (Telecopy No. 713-650-6354);

         (e) if to the Swingline  Lender, to it at _ First Union Capital Markets
Corp., 1001 Fannin Street, Suite 2255, Houston,  Texas 77002,  Attention of Paul
Riddle (Telecopy No. 713-650-6354); and

         (f) If to any other Lender, as specified on the signature page for such
Lender  hereto or, in the case of any Person who becomes a Lender after the date
hereof, as specified on the Assignment and Acceptance executed by such Person or
in the Administrative  Questionnaire delivered by such Person or, in the case of
any party  hereto,  such  other  address  or  telecopy  number as such party may
hereafter specify for such purpose by notice to the other parties.

         All  Communications  shall,  when mailed,  telecopied or delivered,  be
effective when mailed by certified mail,  return receipt  requested to any party
at its address specified above, on the signature page hereof or on the signature
page of such  Assignment  and  Acceptance  (or other address  designated by such
party in a  Communication  to the other  parties  hereto),  or telecopied to any
party to the telecopy number set forth above, on the signature page hereof or on
the signature page of such  Assignment and Acceptance (or other telecopy  number
designated by such party in a  Communication 



                                       -88-
<PAGE>

to the  other  parties  hereto),  or  delivered  personally  to any party at its
address  specified  above, on the signature page hereof or on the signature page
of such Assignment and Acceptance (or other address  designated by such party in
a Communication to the other parties hereto); provided, however,  Communications
to the Administrative  Agent pursuant to Article II or Article VIII shall not be
effective until received by the  Administrative  Agent and Communications to the
Administrative  Agent,  the Issuing  Bank or the  Swingline  Lender  pursuant to
Article II shall be at the Principal Office.

         SECTION 11.02  Waivers; Amendments. (a) No  failure  or  delay  by  the
Administrative  Agent,  the  Issuing  Bank or any Lender in  exercising,  and no
course of dealing with respect to, any right or power hereunder shall operate as
a waiver thereof,  nor shall any single or partial exercise of any such right or
power, or any abandonment or  discontinuance of steps to enforce such a right or
power,  preclude  any other or further  exercise  thereof or the exercise of any
other right or power. No notice to or demand on any Loan Party in any case shall
entitle  such Loan Party to any other or further  notice or demand in similar or
other circumstances.  No waiver of any provision of this Agreement or consent to
any departure therefrom shall in any event be effective unless the same shall be
permitted  by  Section  11.02(b),  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 or
issuance of a Letter of Credit shall not be construed as a waiver of any Default
or Event of Default,  regardless of whether the Administrative Agent, any Lender
or the  Issuing  Bank may have had notice or  knowledge  of such  Default at the
time.

         (b) No provision of this Agreement or any other Loan Document provision
may be waived, amended or modified except pursuant to an agreement or agreements
in writing  entered into by the Loan Parties and the Required  Lenders or by the
Loan  Parties  and the  Administrative  Agent with the  consent of the  Required
Lenders;  provided that no such  agreement  shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or
reduce any fees payable  hereunder,  without the written  consent of each Lender
affected thereby,  (iii) postpone the scheduled date of payment of the principal
amount of any Loan or LC  Disbursement,  or any  interest  thereon,  or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a
manner  that would  alter the pro rata  sharing of  payments  required  thereby,
without the written  consent of each  Lender,  or (v) release the Company or any
Subsidiary Guarantor from their respective guarantees contained in Article IX or
Article  X,  release  any  Collateral  or change any of the  provisions  of this
Section 11.02(b),  Section 11.05 or the definition of "Required  Lenders" or any
other provision  hereof  specifying the number or percentage of Lenders required
to waive,  amend or modify any rights  hereunder  or make any  determination  or
grant any consent  hereunder,  without  the  written  consent of each Lender (it
being  understood  that,  with  the  consent  of  Required  Lenders,  additional
extensions  of  credit  pursuant  to  this  Agreement  may  be  included  in the
determination  of  "Required  Lenders" and  provisions  relating to the pro rata
sharing of payments on  substantially  the same basis as the Revolving Loans and
Commitments are included on the Execution  Date);  provided further that no such
agreement  shall amend,  modify or otherwise  affect the rights or duties of the
Administrative  Agent or the 



                                       -89-
<PAGE>

Issuing Bank hereunder  without the prior written consent of the  Administrative
Agent or the Issuing Bank, as the case may be.

         SECTION  11.03   Payment of  Expenses, Indemnities,  etc.  The  Company
agrees:

         (a)  whether  or  not  the   transactions   hereby   contemplated   are
consummated,  pay all  reasonable  expenses of the  Administrative  Agent in the
administration  (both before and after the execution hereof and including advice
of  counsel as to the  rights  and  duties of the  Administrative  Agent and the
Lenders  with  respect  thereto)  of, and in  connection  with the  negotiation,
syndication, investigation, preparation, execution and delivery of, recording or
filing of,  preservation  of rights  under,  enforcement  of,  and  refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment,  waiver
or consent relating thereto (including,  without limitation,  travel, photocopy,
mailing,  courier,  telephone and other similar  expenses of the  Administrative
Agent,  the cost of environmental  audits,  surveys and appraisals at reasonable
intervals,  the reasonable fees and  disbursements  of counsel and other outside
consultants for the Administrative Agent and, in the case of enforcement of this
Agreement and the other Loan Documents, the reasonable fees and disbursements of
counsel,  including  the  allocated  costs of  inside  counsel,  for each of the
Administrative  Agent and the  Issuing  Bank,  and each  Lender);  and  promptly
reimburse  the  Administrative  Agent  for all  amounts  expended,  advanced  or
incurred by the Administrative Agent or the Lenders to satisfy any obligation of
any Loan Party under this Agreement or any Security Document,  including without
limitation, all costs and expenses of foreclosure.

          (b) TO INDEMNIFY THE ADMINISTRATIVE  AGENT, THE SYNDICATION AGENT, THE
ISSUING  BANK AND EACH  LENDER  AND EACH OF THEIR  AFFILIATES  AND EACH OF THEIR
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES,  AGENTS, ATTORNEYS, ACCOUNTANTS
AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE  EACH OF THEM FOR, THE  INDEMNITY  MATTERS
WHICH MAY BE INCURRED BY OR ASSERTED  AGAINST OR INVOLVE ANY OF THEM (WHETHER OR
NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR
IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED  USE BY EITHER  BORROWER OF THE
PROCEEDS  OF ANY OF THE  LOANS OR THE  LETTER  OF  CREDIT,  (II) THE  EXECUTION,
DELIVERY AND  PERFORMANCE  OF THE LOAN  DOCUMENTS,  (III) THE  OPERATIONS OF THE
BUSINESS OF THE COMPANY AND THE RESTRICTED SUBSIDIARIES, (IV) THE FAILURE OF THE
COMPANY OR ANY  RESTRICTED  SUBSIDIARY  TO COMPLY WITH THE TERMS OF ANY SECURITY
DOCUMENT OR THIS  AGREEMENT,  OR WITH ANY REQUIREMENT OF LAW, (V) ANY INACCURACY
OF ANY  REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF ANY LOAN PARTY SET FORTH
IN ANY OF THE LOAN  DOCUMENTS,  (VI) THE  ISSUANCE,  EXECUTION  AND  DELIVERY OR
TRANSFER  OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT,  (VII) THE
PAYMENT  OF  A  DRAWING   UNDER  ANY  LETTER  OF  CREDIT   NOTWITHSTANDING   THE
NON-COMPLIANCE,  NON-DELIVERY  OR OTHER  IMPROPER  PRESENTATION  OF THE MANUALLY
EXECUTED  DRAFT(S) AND  CERTIFICATION(S),  (VIII) ANY ASSERTION THAT THE 



                                       -90-
<PAGE>

LENDERS  WERE NOT  ENTITLED TO RECEIVE  THE  PROCEEDS  RECEIVED  PURSUANT TO THE
SECURITY DOCUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING THE
REASONABLE FEES AND  DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION,
SUIT,  PROCEEDING  (INCLUDING  ANY  INVESTIGATIONS,  LITIGATION OR INQUIRIES) OR
CLAIM AND  INCLUDING  ALL  INDEMNITY  MATTERS  ARISING BY REASON OF THE ORDINARY
NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING
SOLELY  BY  REASON  OF  CLAIMS  BETWEEN  THE  LENDERS  OR  ANY  LENDER  AND  THE
ADMINISTRATIVE AGENT OR THE SYNDICATION AGENT OR A LENDER'S SHAREHOLDERS AGAINST
THE ADMINISTRATIVE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE, WILLFUL
MISCONDUCT  OR UNLAWFUL  CONDUCT ON THE PART OF THE  INDEMNIFIED  PARTY  SEEKING
INDEMNIFICATION.

          (c) TO INDEMNIFY AND HOLD  HARMLESS FROM TIME TO TIME THE  INDEMNIFIED
PARTIES  FROM AND AGAINST ANY AND ALL LOSSES,  CLAIMS,  COST  RECOVERY  ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS,  DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME  SUBJECT (I) UNDER ANY  ENVIRONMENTAL  LAW  APPLICABLE  TO THE
COMPANY OR ANY  SUBSIDIARY OR ANY OF THEIR  PROPERTIES OR ASSETS,  INCLUDING THE
TREATMENT  OR DISPOSAL OF HAZARDOUS  SUBSTANCES  ON ANY OF THEIR  PROPERTIES  OR
ASSETS,  (II) AS A RESULT OF THE BREACH OR  NON-COMPLIANCE BY THE COMPANY OR ANY
SUBSIDIARY  WITH  ANY  ENVIRONMENTAL  LAW  APPLICABLE  TO  THE  COMPANY  OR  ANY
SUBSIDIARY,  (III) DUE TO PAST OWNERSHIP BY THE COMPANY OR ANY SUBSIDIARY OF ANY
OF THEIR  PROPERTIES  OR ASSETS OR PAST  ACTIVITY ON ANY OF THEIR  PROPERTIES OR
ASSETS WHICH,  THOUGH LAWFUL AND FULLY  PERMISSIBLE AT THE TIME, COULD RESULT IN
PRESENT  LIABILITY,  (IV) THE  PRESENCE,  USE,  RELEASE,  STORAGE,  TREATMENT OR
DISPOSAL  OF  HAZARDOUS  SUBSTANCES  ON OR AT  ANY OF THE  PROPERTIES  OWNED  OR
OPERATED BY THE  BORROWER  OR ANY  SUBSIDIARY,  OR (V) ANY OTHER  ENVIRONMENTAL,
HEALTH OR SAFETY  CONDITION IN  CONNECTION  WITH THE LOAN  DOCUMENTS,  PROVIDED,
HOWEVER,  THAT NO INDEMNITY  SHALL BE AFFORDED  UNDER THIS  SECTION  11.03(c) IN
RESPECT OF ANY  PROPERTY OR ASSET FOR ANY  OCCURRENCE  ARISING  FROM THE ACTS OR
OMISSIONS  OF THE  ADMINISTRATIVE  AGENT OR ANY LENDER  DURING THE PERIOD  AFTER
WHICH SUCH PERSON,  ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED  POSSESSION OF
SUCH PROPERTY OR ASSET (WHETHER BY  FORECLOSURE OR DEED IN LIEU OF  FORECLOSURE,
AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).

         (d) No Indemnified Party may settle any claim to be indemnified without
the consent of the  indemnitor,  such consent not to be  unreasonably  withheld;
provided,  that  the  indemnitor  may not  reasonably  withhold  consent  to any
settlement that an Indemnified  Party proposes,  if the indemnitor does not have
the  financial  ability  to pay all its  obligations outstanding


                                       -91-
<PAGE>

and asserted  against the  indemnitor   at  that  time,  including  the  maximum
potential  claims  against  the  Indemnified  Party  to be  indemnified pursuant
to this Section 11.03.

         (e) In the case of any  indemnification  hereunder,  the Administrative
Agent or Lender,  as  appropriate  shall give  notice to the Company of any such
claim or demand being made against the  Indemnified  Party and the Company shall
have the  non-exclusive  right to join in the defense  against any such claim or
demand;  provided that if the Company provides a defense,  the Indemnified Party
shall  bear its own cost of  defense  unless  there is a  conflict  between  the
Company and such Indemnified Party.

          (f) THE FOREGOING  INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING  THE SOLE OR  CONCURRENT  NEGLIGENCE  OF EVERY KIND OR CHARACTER
WHATSOEVER,  WHETHER  ACTIVE  OR  PASSIVE,  WHETHER  AN  AFFIRMATIVE  ACT  OR AN
OMISSION,   INCLUDING,   ALL  TYPES  OF  NEGLIGENT  CONDUCT  IDENTIFIED  IN  THE
RESTATEMENT  (SECOND) OF TORTS OF ONE OR MORE OF THE  INDEMNIFIED  PARTIES OR BY
REASON  OF  STRICT  LIABILITY  IMPOSED  WITHOUT  FAULT ON ANY ONE OR MORE OF THE
INDEMNIFIED  PARTIES.  TO THE EXTENT THAT AN INDEMNIFIED  PARTY IS FOUND TO HAVE
COMMITTED  AN ACT OF GROSS  NEGLIGENCE  OR  WILLFUL  MISCONDUCT  OR  ENGAGED  IN
UNLAWFUL CONDUCT, THIS CONTRACTUAL  OBLIGATION OF INDEMNIFICATION SHALL CONTINUE
BUT  SHALL  ONLY  EXTEND  TO THE  PORTION  OF THE  CLAIM  THAT IS DEEMED TO HAVE
OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT
OR UNLAWFUL CONDUCT OF THE INDEMNIFIED PARTY.

         (g) The  Company's  obligations  under this Section 11.03 shall survive
any termination of this  Agreement,  the payment of the Loans and the expiration
of the Letters of Credit and shall continue thereafter in full force and effect,
for a period of six years.

         (h) To the extent that the Company fails to pay any amount  required to
be paid by it to the Administrative Agent or the Issuing Bank under this Section
11.03,  each Lender severally agrees to pay to the  Administrative  Agent or the
Issuing  Bank,  as  the  case  may  be,  such  Lender's  Applicable   Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim,  damage,  liability or related expense,  as the case
may be, was  incurred by or asserted  against  the  Administrative  Agent or the
Issuing Bank in its capacity as such.

         (i) The  Company  shall pay any amounts  due under this  Section  11.03
within  thirty  (30) days of the  receipt by the Company of notice of the amount
due.

         SECTION 11.04  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 permitted hereby.  Nothing in this Agreement,
expressed or implied,  shall be construed to confer upon any Person  (other than
the parties hereto,  their  respective  successors and assigns  permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each of
the



                                       -92-
<PAGE>

Administrative  Agent,  the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

         SECTION 11.05  Assignments and Participations.  Assignments and 

         (a) No Loan Party may assign its  rights or  obligations  hereunder  or
under the Notes or any Letter of Credit  without the prior consent of all of the
Lenders and the Administrative Agent.

         (b) Any Lender may assign to one or more  assignees all or a portion of
its rights and obligations  under this Agreement  (including all or a portion of
its Commitment and the Loans at the time owing to it);  provided that (i) except
in the case of an assignment to a Lender or an Affiliate of a Lender,  any other
Eligible Assignee, each of the Company and the Administrative Agent (and, in the
case of an  assignment  of all or a  portion  of a  Commitment  or any  Lender's
obligations  in respect of its LC Exposure or  Swingline  Exposure,  the Issuing
Bank and the  Swingline  Lender) must give their prior  written  consent to such
assignment  (which consent shall not be unreasonably  withheld),  (ii) except in
the  case of an  assignment  to a  Lender  or an  Affiliate  of a  Lender  or an
assignment of the entire remaining amount of the assigning Lender's  Commitment,
the  amount of the  Commitment  of the  assigning  Lender  subject  to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the  Administrative  Agent) shall not be less
than  $10,000,000  unless  each  of the  Company  and the  Administrative  Agent
otherwise consent,  (iii) each partial assignment shall be made as an assignment
of a  proportionate  part of all the assigning  Lender's  rights and obligations
under this  Agreement,  (iv) the parties to each  assignment  shall  execute and
deliver to the Administrative Agent an Assignment and Acceptance,  together with
a processing and recordation  fee of $3,500 for each such  assignment  (provided
that the processing and  recordation  fee for each assignment made by any Lender
party to this  Agreement  on the  Execution  Date shall be $2,000),  and (v) the
assignee, if it shall not be a Lender, shall deliver to the Administrative Agent
an  Administrative  Questionnaire;  provided  further  that any  consent  of the
Company otherwise  required under this Section 11.05(b) shall not be required if
an Event of Default under Section 7.01(g) or Section 7.01(h) has occurred and is
continuing. Upon acceptance and recording pursuant to Section 11.05(d), from and
after the  effective  date  specified in each  Assignment  and  Acceptance,  the
assignee  thereunder  shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement,  and the assigning Lender  thereunder shall, to the
extent of the interest  assigned by such Assignment and Acceptance,  be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance  covering all of the assigning  Lender's rights and obligations under
this Agreement,  such Lender shall cease to be a party hereto but shall continue
to be entitled to the  benefits of Sections  2.15,  2.16,  2.17 and 11.03).  Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this  paragraph  shall be treated for purposes of this
Agreement  as a sale by such  Lender  of a  participation  in  such  rights  and
obligations in accordance with Section 11.05(e).

         (c) The  Administrative  Agent,  acting for this purpose as an agent of
the Loan  Parties,  shall  maintain  at one of its offices in  Charlotte,  North
Carolina a copy of each Assignment and Acceptance delivered to it and a register
for  the  recordation  of the  names  and  addresses  of the  



                                       -93-
<PAGE>

Lenders,  and the  Commitment  of,  and  principal  amount  of the  Loans and LC
Disbursements  owing to, each Lender  pursuant to the terms  hereof from time to
time (the "Register"). The entries in the Register shall be conclusive, and each
Loan Party, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register  pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the  contrary.  The Register  shall be available  for  inspection by any Loan
Party, the Issuing Bank and any Lender,  at any reasonable time and from time to
time upon reasonable prior notice.

         (d) Upon its  receipt of a duly  completed  Assignment  and  Acceptance
executed  by an  assigning  Lender and an  assignee,  the  assignee's  completed
Administrative  Questionnaire  (unless the  assignee  shall  already be a Lender
hereunder),  the processing and recordation fee referred to in Section  11.05(b)
and any written consent to such  assignment  required by Section  11.05(b),  the
Administrative  Agent shall accept such Assignment and Acceptance and record the
information  contained therein in the Register. No assignment shall be effective
for purposes of this  Agreement  unless it has been  recorded in the Register as
provided in this paragraph.

         (e) Any  Lender  may,  without  the  consent  of any  Loan  Party,  the
Administrative  Agent or the Issuing Bank,  sell  participations  to one or more
banks or other entities (a  "Participant")  in all or a portion of such Lender's
rights and obligations  under this Agreement  (including all or a portion of its
Commitment  and the  Loans  owing  to  it);  provided  that  (i)  such  Lender's
obligations under this Agreement shall remain unchanged,  (ii) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such obligations and (iii) the Company,  the  Administrative  Agent, the Issuing
Bank and the other Lenders shall  continue to deal solely and directly with such
Lender in  connection  with such  Lender's  rights  and  obligations  under this
Agreement.  Any agreement or instrument  pursuant to which a Lender sells such a
participation  shall  provide  that such Lender  shall  retain the sole right to
enforce this Agreement and to approve any amendment,  modification  or waiver of
any provision of this Agreement;  provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any  amendment,  modification  or waiver  described  in the first  proviso to
Section  11.02(b) that affects such  Participant.  Subject to Section  11.05(f),
each Loan Party 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 and
had acquired its interest by  assignment  pursuant to Section  11.05(b),  and be
indemnified  under  Section  11.03 as if it were a  Lender.  In  addition,  each
agreement   creating  any  participation   must  include  an  agreement  by  the
Participant to be bound by the provisions of Section 11.12.

         (f) A Participant  shall not 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 the  participation  to such  Participant  is made with the Company's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender  shall not be entitled to the benefits of Section 2.17 unless the Company
is notified of the  participation  sold to such Participant and such Participant
agrees, for the benefit of the Company, to comply with Section 2.17(e) as though
it were a Lender.



                                       -94-
<PAGE>

         (g) The Lenders may furnish any information  concerning the Borrower in
the  possession of the Lenders from time to time to assignees  and  Participants
(including prospective assignees and participants);  provided that, such Persons
agree to be bound by the provisions of Section 11.12 hereof.

         (h) Notwithstanding anything in this Section 11.05 to the contrary, any
Lender may assign and pledge its Notes to any Federal Reserve Bank or the United
States  Treasury  as  collateral  security  pursuant  to  Regulation  A and  any
operating  circular  issued by such Federal  Reserve  System and/or such Federal
Reserve  Bank.  No such  assignment  and/or  pledge shall  release the assigning
and/or pledging Lender from its obligations hereunder.

         (i)  Notwithstanding  any other  provisions of this Section  11.05,  no
transfer or  assignment  of the  interests or  obligations  of any Lender or any
grant of participations therein shall be permitted if such transfer,  assignment
or grant would require a Borrower to file a registration  statement with the SEC
or to qualify the Loans under the "Blue Sky" laws of any state.

         SECTION 11.06  Survival; Resintatement. (a) All covenants, agreements,
tement  representations  and  warranties made by the Company herein and  in  the
certificates  or  other  instruments  delivered  in  connection with or pursuant
to this  Agreement   shall  be  considered to have been relied upon by the other
parties  hereto and shall  survive  the execution and delivery of this Agreement
and the making of any Loans and  issuance  of any  Letters of Credit, regardless
of any  investigation made by any such other party or on its behalf and notwith-
standing  that the  Administrative  Agent,  the Issuing  Bank or any Lender  may
have had notice or  knowledge  of any  Default or Event of Default or  incorrect
representation  or  warranty  at the  time  any  credit  is  extended hereunder,
and shall continue in full force and effect as long as the principal of  or  any
accrued  interest on any Loan or any fee or any other  amount payable under this
Agreement  is  outstanding  and  unpaid or any  Letter of Credit  is outstanding
and so long as the Commitments  have not expired or terminated.  The  provisions
of Sections 2.15, 2.16, 2.17 and 11.03 and Article VIII shall survive and remain
in full  force and  effect  regardless  of the  consummation of the transactions
contemplated hereby,  the  repayment of the Loans, the expiration or termination
of the Letters of  Credit   and the  Commitments  or  the   termination  of this
Agreement or any provision hereof.

         (b) To the extent that any payments on the  Obligations  or proceeds of
any  Collateral  are  subsequently  invalidated,  declared to be  fraudulent  or
preferential,  set  aside or  required  to be  repaid  to a  trustee,  debtor in
possession,  receiver or other Person under any  bankruptcy  law,  common law or
equitable  cause,  then to such extent,  the  Obligations so satisfied  shall be
revived and continue as if such  payment or proceeds  had not been  received and
the Administrative  Agent's, the Issuing Bank's and the Lenders' Liens, security
interests,  rights,  powers and remedies  under this Agreement and each Security
Document shall continue in full force and effect.  In such event,  each Security
Document  shall be  automatically  reinstated  and each Loan Party thereto shall
take such action as may be reasonably requested by the Administrative Agent, the
Issuing Bank and the Lenders to effect such reinstatement.

         SECTION 11.07 Counterparts;  Integration; Effectiveness. This Agreement
may be executed in  counterparts  (and by different  parties hereto on different
counterparts), each of which


                                       -95-
<PAGE>

shall  constitute  an  original,  but all of which  when  taken  together  shall
constitute a single contract.  This Agreement,  the other Loan Documents and the
Fee Letter  constitute the entire  contract among the parties hereto relating to
the subject  matter  hereof and supersede  any and all previous  agreements  and
understandings,   oral  or  written,  relating  to  the  subject  matter  hereof
(including the Information Memorandum). Except as provided in Section 3.01, this
Agreement  shall  become  effective  when it shall  have  been  executed  by the
Administrative  Agent and when the  Administrative  Agent  shall  have  received
counterparts  hereof which, when taken together,  bear the signatures of each of
the other parties hereto,  and thereafter shall be binding upon and inure to the
benefit of the  parties  hereto and their  respective  successors  and  assigns.
Delivery of an executed  counterpart  of a signature  page of this  Agreement by
telecopy  shall be effective as delivery of a manually  executed  counterpart of
this Agreement.

         SECTION 11.08  Severability. Any   provision  of  this  Agreement  held
to be invalid,  illegal or unenforceable  in any jurisdiction  shall, as to such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

         SECTION 11.09  Right of Setoff.  If  an  Event  of  Default  shall have
occurred and be continuing, each Lender is hereby  authorized   at  any time and
from time to time,  to the fullest extent permitted by law, to set off and apply
any and all deposits  (general or special, time or demand, provisional or final)
at any time  held and other indebtedness at any time owing by such Lender  to or
for the  credit  or the account of any Loan Party against any  of  and  all  the
Obligations  now or hereafter existing under this Agreement and the  other  Loan
Documents held by such  Lender, irrespective of whether or not such Lender shall
have  made any demand under this Agreement and although such Obligations may  be
unmatured.  The rights of each Lender under this  Section  11.09 are in addition
to other rights and remedies  (including  other  rights  of  setoff)  which such
Lender may have.

         SECTION  11.10  Governing Laws;  Jurisdiction;  Consent  to  Service of
Process.

         (a) This Agreement and the other Loan  Documents  shall be construed in
accordance with and governed by the law of the State of New York.

          (b) ANY LEGAL ACTION OR PROCEEDING  WITH RESPECT TO THIS AGREEMENT AND
THE OTHER LOAN  DOCUMENTS  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES FOR THE SOUTHERN  DISTRICT OF NEW YORK AND, BY EXECUTION
AND DELIVERY OF THIS  AGREEMENT,  EACH OF THE PARTIES HERETO HEREBY  IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY  AND ASSETS,  UNCONDITIONALLY,
THE NON-EXCLUSIVE  JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING.  EACH LOAN PARTY HEREBY IRREVOCABLY  DESIGNATES,  APPOINTS
AND EMPOWERS CT  CORPORATION  SYSTEM,  INC.,  WITH OFFICES ON THE DATE HEREOF AT
1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND 


                                       -96-
<PAGE>

AGENT TO RECEIVE,  ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF,  AND IN RESPECT
OF ITS  PROPERTY,  SERVICE OF ANY AND ALL LEGAL  PROCESS,  SUMMONS,  NOTICES AND
DOCUMENTS  WHICH  MAY BE SERVED IN ANY SUCH  ACTION  OR  PROCEEDING.  IF FOR ANY
REASON SUCH DESIGNEE,  APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS
SUCH,  EACH SUCH LOAN PARTY AGREES TO DESIGNATE A NEW  DESIGNEE,  APPOINTEE  AND
AGENT IN NEW YORK,  NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE  ADMINISTRATIVE  AGENT. EACH LOAN PARTY FURTHER  IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS  OUT OF ANY OF THE  AFOREMENTIONED  COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES  THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.01,
SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH MAILING.  NOTHING HEREIN
SHALL  AFFECT  THE  RIGHT OF THE  ADMINISTRATIVE  AGENT OR ANY  LENDER  TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER JURISDICTION.

         (c) EACH OF THE LOAN PARTIES  HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION
WHICH  IT MAY  NOW OR  HEREAFTER  HAVE  TO THE  LAYING  OF  VENUE  OF ANY OF THE
AFORESAID  ACTIONS OR  PROCEEDINGS  ARISING  OUT OF OR IN  CONNECTION  WITH THIS
AGREEMENT  BROUGHT  IN THE  COURTS  REFERRED  TO IN CLAUSE  (b) ABOVE AND HEREBY
FURTHER  IRREVOCABLY  WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
AND  AGREES  NOT TO PLEAD OR CLAIM IN ANY SUCH  COURT  THAT ANY SUCH  ACTION  OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

         (d) EACH PARTY HERETO  HEREBY (I)  IRREVOCABLY  WAIVES,  TO THE MAXIMUM
EXTENT  PERMITTED  BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN,  OR IN ADDITION TO, ACTUAL  DAMAGES;  (II)  CERTIFIES  THAT NO PARTY
HERETO  NOR ANY  REPRESENTATIVE  OR AGENT OR  COUNSEL  FOR ANY PARTY  HERETO HAS
REPRESENTED,  EXPRESSLY OR  OTHERWISE,  OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF  LITIGATION,  SEEK TO  ENFORCE  THE  FOREGOING  WAIVERS,  AND (III)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE SECURITY
DOCUMENTS AND THE TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 11.10.

         SECTION 11.11  WAIVER OF JURY TRIAL. EACH PARTY HERETO  HEREBY  WAIVES,
TO THE FULLEST  EXTENT  PERMITTED BY APPLICABLE  LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR
RELATING TO THIS  


                                       -97-
<PAGE>

AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY (WHETHER BASED ON CONTRACT,
TORT  OR  ANY  OTHER   THEORY).   EACH  PARTY  HERETO  (A)  CERTIFIES   THAT  NO
REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,  SEEK
TO  ENFORCE  THE  FOREGOING  WAIVER AND (B)  ACKNOWLEDGES  THAT IT AND THE OTHER
PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.11.

         SECTION 11.12  Confidentiality. Each  of  the   Administrative   Agent,
the Issuing Bank and the Lenders agrees to maintain the  confidentiality  of the
Information (as defined below),  except that Information may be disclosed (a) to
its Affiliates,  directors,  officers and employees and to its agents, including
accountants,  legal  counsel and other  advisors  who have been  informed of the
confidential nature of the information provided,  (b) to the extent requested by
any  regulatory  authority,  including  the  National  Association  of Insurance
Commissioners or any similar  organization,  or any nationally recognized rating
agency  that  requires  access  to  information  about  a  Lender's   investment
portfolio,  (c) to the extent a Lender  reasonably  believes  it is  required by
applicable laws or regulations or by any subpoena or similar legal process,  (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding  relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f)  subject to an  understanding  with such Person that such Person will comply
with  this  Section  11.12,  to  any  assignee  of or  Participant  in,  or  any
prospective  assignee  of or  Participant  in, any of its rights or  obligations
under this  Agreement,  (g) with the consent of the Company or (h) to the extent
such  Information  (i) becomes  publicly  available  other than as a result of a
breach of this  Section  11.12 or (ii) becomes  available to the  Administrative
Agent, the Issuing Bank or any Lender from a source other than a Loan Party. For
the purposes of this Section 11.12, "Information" means all information received
from any Loan Party  relating to any Loan Party or its business,  other than any
such  information  that is  known  to a  Lender,  publicly  known  or  otherwise
available to the Administrative Agent, the Issuing Bank or any Lender other than
through disclosure (a) by a Loan Party, or (b) from a source actually known to a
Lender to be bound by a confidentiality  agreement or other legal or contractual
obligation of confidentiality  with respect to such information;  provided that,
in the case of  information  received from any Loan Party after the date hereof,
such information is clearly  identified at the time of delivery as confidential.
Any Person required to maintain the  confidentiality  of Information as provided
in this Section 11.12 shall be  considered to have complied with its  obligation
to do so if such Person  maintains the  confidentiality  of such  Information in
accordance  with  procedures  adopted  in good  faith  to  protect  confidential
information of third parties delivered to a lender.

         SECTION 11.13   Interest  Rate  Limitation.   Notwithstanding  anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees,  charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted  for,  charged,
taken, received or reserved by the Lender holding such Loan in accordance  with
applicable law, the rate of interest  payable in respect of such Loan hereunder,
together with all 


                                       -98-
<PAGE>

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  11.13 shall be cumulated  and the interest and Charges  payable to such
Lender in respect of other Loans or periods  shall be  increased  (but not above
the Maximum Rate therefor) until such cumulated  amount,  together with interest
thereon at the Federal Funds Effective Rate to the date of repayment, shall have
been received by such Lender.


         SECTION 11.14.  EXCULPATION  PROVISIONS.  EACH  OF  THE  PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS  AND AGREES THAT IT IS CHARGED WITH NOTICE AND  KNOWLEDGE OF THE TERMS
OF THIS  AGREEMENT AND THE OTHER LOAN  DOCUMENTS;  THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY  INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT AND THE OTHER LOAN  DOCUMENTS;  THAT IT
HAS BEEN REPRESENTED BY INDEPENDENT  LEGAL COUNSEL OF ITS CHOICE  THROUGHOUT THE
NEGOTIATIONS  PRECEDING  ITS  EXECUTION  OF THIS  AGREEMENT  AND THE OTHER  LOAN
DOCUMENTS;  AND HAS RECEIVED  THE ADVICE OF ITS  ATTORNEY IN ENTERING  INTO THIS
AGREEMENT AND THE OTHER LOAN  DOCUMENTS;  AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS  AGREEMENT  AND THE OTHER LOAN  DOCUMENTS  RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING
THE OTHER PARTY OF ITS  RESPONSIBILITY  FOR SUCH  LIABILITY.  EACH PARTY  HERETO
AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR  ENFORCEABILITY OF
ANY  EXCULPATORY  PROVISION OF THIS AGREEMENT AND THE SECURITY  DOCUMENTS ON THE
BASIS THAT THE PARTY HAD NO NOTICE OR  KNOWLEDGE  OF SUCH  PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."

                                      -99-
<PAGE>


      The parties  hereto have caused this  Agreement to be duly  executed as of
the date and year first above written.

                           KINDER MORGAN ENERGY PARTNERS, L.P.,
                           as the Company

                                By: Kinder Morgan G.P., Inc.
                                    its General Partner
 


                                    By: /s/ William V. Morgan
                                    Name:  William V. Morgan
                                    Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010


                                      S-1
<PAGE>


                          KINDER MORGAN OPERATING L.P. "B",
                          as the Subsidiary Borrower and as a
                          Subsidiary Guarantor

                               By:  Kinder Morgan G.P., Inc.
                                    its General Partner



                                    By: /s/ William V. Morgan
                                    Name:  William V. Morgan
                                    Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                                      S-2
<PAGE>


                          KINDER MORGAN OPERATING L.P. "A",
                          as a Subsidiary Guarantor

                               By:  Kinder Morgan G.P., Inc.
                                    its General Partner



                                    By: /s/ William V. Morgan
                                    Name:  William V. Morgan
                                    Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010


                                      S-3
<PAGE>


                          KINDER MORGAN OPERATING L.P. "C",
                          as a Subsidiary Guarantor

                               By:  Kinder Morgan G.P., Inc.
                                    its General Partner



                                    By: /s/ William V. Morgan
                                    Name:  William V. Morgan
                                    Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010


                                      S-4
<PAGE>


                          KINDER MORGAN OPERATING L.P. "D",
                          as a Subsidiary Guarantor

                               By:  Kinder Morgan G.P., Inc.
                                    its General Partner



                                    By: /s/ Wiliam V. Morgan

                                    Name:  William V. Morgan
                                    Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010


                                      S-5
<PAGE>


                          KINDER MORGAN NATURAL GAS LIQUIDS CORPORATION,
                          as a Subsidiary Guarantor

                               By: /s/ William V. Morgan
                               Name:  William V. Morgan
                               Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                                      S-6
<PAGE>


                          KINDER MORGAN CO2, LLC,
                          as a Subsidiary Guarantor

                               By:  Kinder Morgan Operating L.P., "A",
                                    its Sole Member

                                    By:   Kinder Morgan G.P., Inc.
                                          its General Partner



                                          By: /s/ William V. Morgan
                                          Name:  William V. Morgan
                                          Title:  Vice Chairman

                               Address for Notices:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                               Telecopier No.:  (713) 844-9570
                               Telephone No.:  (713) 844-9500
                               Attention: David G. Dehaemers, Jr.

                               Chief Executive Office and
                               Principal Place of Business:

                               1301 McKinney Street
                               Suite 3450
                               Houston, Texas 77010

                                      S-7
<PAGE>


Revolving Loan Commitment      FIRST UNION NATIONAL BANK, as the Administrative
$32,500,000                    the Issuing Bank, the Swingline Lender and as a
                               Lender



                               By: /s/ David Roberts
                               Name: David Roberts
                               Title: Senior Vice President

                               First Union National Bank
                               301 South College Street, TW-10
                               Charlotte, North Carolina 28288-0608

                               Telecopier No.:  (704) 383-0288
                               Telephone No.:  (704) 383-0281
                               Attention: Syndication Agency Services

                               With copy to:

                               First Union Capital Markets Corp.
                               1001 Fannin, Suite 2255
                               Houston, Texas  77002

                               Telecopier No.:  (713) 650-6354
                               Telephone No.:  (713) 650-3716
                               Attention:  Paul N. Riddle



                                      S-8
<PAGE>


Revolving Loan Commitment      GOLDMAN SACHS CREDIT PARTNERS L.P., as
$32,500,000                    the Syndication Agent and as a Lender



                               By: /s/ Ed Forst
                               Name: Ed Forst
                               Title:  Authorized Signatory

                               Address for Notices:

                               Goldman, Sachs & Co.
                               85 Broad Street, 27th Floor
                               New York, NY 10004

                               Telecopier No.: (212) 357-8680
                               Telephone No.:  (212) 902-8123
                               Attention:  Stephen B. King


                                      S-9
<PAGE>


Revolving Loan Commitment      BANK OF AMERICA NATIONAL TRUST AND SAVINGS
$10,000,000                    ASSOCIATION



                                By: /s/ Daryl G. Patterson
                                Name:  Daryl G. Patterson
                                Title:  Vice President

                               Address for Notices:

                               Bank of America NT&SA
                               1850 Gateway Blvd.
                               Concord, California 94520

                               Telecopier No.:  (510) 603-7243
                               Telephone No.:  (510) 675-7148
                               Attention: Laurie Warner

                               With copy to:

                               Pamela K. Rodgers
                               Bank of America NT&SA
                               333 Clay Street, Suite 4550
                               Houston, Texas  77002
                               Telecopier No.:  (713) 651-4808
                               Telephone No.:  (713) 651-4880


                                      S-10
<PAGE>


Revolving Loan Commitment      BANK OF MONTREAL
$12,500,000.00



                                By: /s/ B.R. Gallow
                                Name: B.R. Gallow
                                Title:  Managing Director

                                Address for Notices:

                                Bank of Montreal
                                700 Louisiana Street, Suite 4400
                                Houston, Texas 77002

                                Telecopier No.:  (713) 223-4007
                                Telephone No.:  (713) 546-9750
                                Attention: Cahal B. Carmody, Director



                                      S-11
<PAGE>


Revolving Loan Commitment      BANK OF SCOTLAND
$10,000,000



                               By: /s/ Annie Chin Tat
                               Name:  Annie Chin Tat
                               Title:  Vice President

                               Address for Notices:

                               Bank of Scotland
                               565 Fifth Avenue
                               New York, New York 10017

                               Telecopier No.:  (212) 557-9460
                               Telephone No.:  (212) 450-0871
                               Attention: Annie Chin Tat

                               With copy to:

                               Bank of Scotland
                               1750 Two Allen Center
                               1200 Smith Street
                               Houston, Texas  77002-4312
                               Telecopier No.:  (713) 651-9714
                               Telephone No.:  (713) 651-1870
                               Attention:  Janna Blanter


                                      S-12
<PAGE>


Revolving Loan Commitment      BANK ONE, TEXAS, NA
$12,500,000



                               By: /s/ John B. Lane
                               Name: John B. Lane
                               Title:  Vice President

                               Address for Notices:

                               Bank One, Texas, NA
                               910 Travis, 6th Floor
                               Houston, Texas  77002

                               Telecopier No.:  (713) 751-3544
                               Telephone No.:  (713) 751-6246
                               Attention: David Phillips


                                      S-13
<PAGE>


Revolving Loan Commitment      BANQUE PARIBAS
$12,500,000



                               By: /s/ Marian Livingston
                               Name:  Marian Livingston
                               Title:  Vice President



                               By: /s/ Michael H. Fiuzat
                               Name:  Michael H. Fiuzat
                               Title:  Vice President

                               Address for Notices:

                               Banque Paribas
                               1200 Smith Street, Suite 3100
                               Houston, Texas 77002

                               Telecopier No.:  (713) 659-6915
                               Telephone No.:  (713) 659-4811
                               Attention: Marian Livingston


                                      S-14
<PAGE>


Revolving Loan Commitment      BARCLAYS BANK PLC
$22,000,000



                               By: /s/ J. Onischuk
                               Name: J. Onischuk
                               Title:  Associate Director

                               Address for Notices:

                               Barclays Bank PLC
                               222 Broadway
                               New York, New York 10038

                               Telecopier No.:  (212) 412-7585
                               Telephone No.:  (212) 412-7584
                               Attention: J. Onischuk



                                      S-15
<PAGE>


Revolving Loan Commitment      CIBC INC.
$10,000,000



                               By: /s/ Aleksandra K. Dymanus
                               Name:  Aleksandra K. Dymanus
                               Title:  Authorized Signatory

                               Address for Notices:

                               CIBC, Inc.
                               Two Paces West, Suite 1200
                               2727 Paces Ferry Road
                               Atlanta, Georgia 30339

                               Telecopier No.:  (770) 319-4950
                               Telephone No.:  (770) 319-4821
                               Attention: Kathryn S. McGovern


                                      S-16
<PAGE>


Revolving Loan Commitment      COMMERZBANK AG, ATLANTA AGENCY
$10,000,000



                               By: /s/ Harry P. Yergey
                               Name:  Harry P. Yergey
                               Title:  Senior Vice President and Manager



                               By: /s/ Eric R. Kagerer
                               Name:  Eric R. Kagerer
                               Title:  Vice President

                               Address for Notices:

                               Commerzbank AG, Atlanta Agency
                               Promenade Two, Suite 3500
                               1230 Peachtree Street, NE
                               Atlanta, Georgia  30309

                               Telecopier No.:  (404) 888-6539
                               Telephone No.:  (404) 888-6524
                               Attention: David Suttles, Vice President

                               With a copy to:

                               Dempsey L. Gable, Senior Vice President
                               Commerzbank AG, New York Branch
                               2 World Financial Center
                               New York, New York  10281-1050
                               Telecopier No.:  (212) 266-7530
                               Telephone No.:  (212) 266-7560

                                      S-17
<PAGE>


Revolving Loan Commitment      CREDIT LYONNAIS NEW YORK BRANCH
$10,000,000.00



                               By: /s/ Phillippe Soustra
                               Name:  Phillippe Soustra
                               Title:  Senior Vice President

                               Address for Notices:

                               Credit Lyonnais Houston Representative Office
                               1000 Louisiana, Suite 5360
                               Houston, Texas  77002

                               Telecopier No.:  (713) 751-0307
                               Telephone No.:  (713) 753-8723
                               Attention: Bernadette Archie


                                      S-18
<PAGE>


Revolving Loan Commitment      DEN NORSKE BANK ASA
$12,500,000



                               By: /s/ Charles E. Hall
                               Name:  Charles E. Hall
                               Title:  Senior Vice President



                               By: /s/ J. Morten Kreutz
                               Name:  J. Morten Kreutz
                               Title:  Vice President

                               333 Clay Street, Suite 4890
                               Houston, Texas  77002

                               Telecopier No.:  (713) 757-1167
                               Telephone No.:  (713) 844-9255
                               Attention: Charles E. Hall, Senior Vice President

                               With copy to:

                               Den norske Bank ASA
                               200 Park Avenue, 31st Floor
                               New York, New York  10066-0396
                               Attention:  Cathleen Buckley, Credit 
                                           Administration
                               Telecopier No.:  (212) 681-3900
                               Telephone No.: (212) 681-3824


                                      S-19
<PAGE>


Revolving Loan Commitment      THE FIRST NATIONAL BANK OF CHICAGO
$22,000,000



                                By: /s/ Gail F. Scannell
                                Name:  Gail F. Scannell
                                Title:  Vice President

                                Address for Notices:

                                The First National Bank of Chicago
                                One First National Plaza
                                Suite 0634, I-10
                                Chicago, Illinois 60670

                                Telecopier No.:  (312) 732-4840
                                Telephone No.:  (312) 732-3659
                                Attention: John Beirne




                                      S-20
<PAGE>



Revolving Loan Commitment      THE FUJI BANK, LIMITED (HOUSTON AGENCY)
$10,000,000



                               By: /s/ David Kelley
                               Name: David Kelley
                               Title:  Senior Vice President

                               Address for Notices:

                               The Fuji Bank, Limited (Houston Agency)
                               1221 McKinney Street, Suite 4100
                               Houston, Texas  77010

                               Telecopier No.:  (713) 759-0048
                               Telephone No.:  (713) 650-7829
                               Attention: Charles van Ravenswaay

                               With copy to:

                               Jinny Lin, Vice President and Manager
                               Loan Administration
                               1221 McKinney, Suite 4100
                               Houston, Texas  77010
                               Telecopier No.:  (713) 951-0590
                               Telephone No.:  (713) 650-7821


                                      S-21
<PAGE>


Revolving Loan Commitment      NATIONSBANK OF TEXAS, N.A.
$22,000,000



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

                               Address for Notices:

                               NationsBank of Texas, N.A.
                               700 Louisiana
                               Houston, Texas 77002

                               Telecopier No.:  (713) 247-6568
                               Telephone No.:  (713) 247-6952
                               Attention: Paul A. Squires


                                      S-22
<PAGE>


Revolving Loan Commitment      THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
$22,000,000



                               By: /s/ Steven D. Arnold
                               Name:  Steven D. Arnold
                               Title:  Vice President

                               Address for Notices:

                               The Prudential Insurance Company of America
                               c/o Prudential Capital Group
                               Four Gateway Center
                               100 Mulberry Street
                               Newark, New Jersey 07102-4869

                               Telecopier No.:  (973) 802-9425
                               Telephone No.:
                               Attention: Trade Management Manager

                               With copy to:

                               The Prudential Insurance Company of America
                               c/o Prudential Capital Group
                               2200 Ross Avenue, Suite 4200 East
                               Dallas, Texas 75201
                               Attention:  Managing Director

                                      S-23
<PAGE>


Revolving Loan Commitment      ROYAL BANK OF CANADA
$10,000,000



                                By: /s/ Andy Williamson
                                Name:  Andy Williamson
                                Title:  Senior Manager

                                Address for Notices:

                                Royal Bank of Canada
                                1 Financial Square, 23rd Floor
                                New York, NY  10005-3531
                                Attn:  Asst. Manager, Loan Processing
                                Fax:  (212) 428-2372
                                Phone:  (212) 428-6321

                                With Copies to:

                                Royal Bank of Canada
                                12450 Greenspoint Drive, Suite 1450
                                Houston, TX  77060

                                Telecopier No.:  (281) 874-0081
                                Telephone No.:  (281) 874-5662
                                Attention: Gil J. Bernard, Senior Manager


                                      S-24
<PAGE>


Revolving Loan Commitment      SOCIE'TE' GE'NE'RALE
$22,000,000



                               By: /s/ Richard A. Gould
                               Name:  Richard A. Gould
                               Title:  Vice President

                               Address for Notices:

                               Socie'te' Ge'ne'rale
                               2001 Ross Avenue, Suite 4800
                               Dallas, Texas 75201

                               Telecopier No.:  (214) 979-0171
                               Telephone No.:  (214) 979-2769
                               Attention: Lia Guerra

                               With copy to:
                               Societe Generale
                               1111 Bagby, Suite 2020
                               Houston, Texas 77002

                               Telecopier No.:  (713) 650-0824
                               Telephone No.:  (713) 759-6324
                               Attention:  Richard Gould

                                      S-25
<PAGE>


Revolving Loan Commitment      PNC BANK, NATIONAL ASSOCIATION
$10,000,000



                                By: /s/ John R. Way
                                Name: John R. Way
                                Title:  Assistant Vice President

                                Address for Notices:

                                249 5th Avenue
                                Pittsburgh, Pennsylvania 15222

                                Telecopier No.:  (412) 762-2571
                                Telephone No.:  (412) 762-5290
                                Attention: John R. Way


                                      S-26
<PAGE>


Revolving Loan Commitment      UNION BANK OF CALIFORNIA
$10,000,000



                               By: /s/ Carl Stutzman
                               Name: Carl Stutzman
                               Title:  Vice President & Deputy Manager

                               Address for Notices:

                               500 North Akard, Suite 4200
                               Dallas, TX  75201

                               Telecopier No.:  (214) 922-4209
                               Telephone No.:  (214)  922-4200
                               Attention: Gary Shekerjian, Asst. Vice President



                                      S-27
<PAGE>


Revolving Loan Commitment      WELLS FARGO BANK (TEXAS), NA
$10,000,000



                               By: /s/ J. Alan Alexander
                               Name:  J. Alan Alexander
                               Title:  Vice President

                               Address for Notices:

                               Wells Fargo Bank (Texas), N.A.
                               Energy Department
                               1000 Louisiana, Third Floor
                               Houston, Texas  77002

                               Telecopier No.:  (713) 250-7912
                               Telephone No.:  (713) 250-1651
                               Attention: J. Alan Alexander

                               With copy to:
                               Oscar Enriquez
                               201 Third Street, 8th Floor
                               San Francisco, California  94103

                               Telecopier No.:  (415) 979-0675
                               Telephone No.:  (415) 477-5425


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