AMENDED AND RESTATED CREDIT AGREEMENT

                            Dated as of July 31, 1996

                                      among


                                FERRELLGAS, L.P.,


                        STRATTON INSURANCE COMPANY, INC.,


                                FERRELLGAS, INC.,


                         BANK OF AMERICA NATIONAL TRUST
                            AND SAVINGS ASSOCIATION,

                                    as Agent,


                                       and


                  THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO





                           NATIONSBANK OF TEXAS, N.A.
                                   as Co-Agent





                                   Arranged By


                               BA SECURITIES, INC.


<PAGE>


  ARTICLE I
                                   DEFINITIONS

  1.01  Certain Defined Terms..............................................  2
  1.02  Other Interpretive Provisions...................................... 31
  1.03  Accounting Principles.............................................. 32

  ARTICLE II
                                   THE CREDITS
  2.01  Amounts and Terms of Revolving Loan Commitments
             and Facility B Term Loan....................................... 32
             (a)      Facility A Revolving Loans............................ 32
             (b)      Facility B Term Loans................................. 33
             (c)      Facility C Revolving Loans, Letters of
             Credit and Swingline Loans..................................... 33
  2.02  Loan Accounts....................................................... 34
  2.03  Procedure for Borrowing............................................. 35
  2.04  Conversion and Continuation Elections............................... 36
  2.05  Voluntary Termination or Reduction of Revolving
             Loan Commitments............................................... 37
  2.06  Optional Prepayments................................................ 38
  2.07  Mandatory Prepayments of Loans; Mandatory
             Commitment Reductions.......................................... 38
  2.08  Repayment........................................................... 39
             (a)      Facility A Revolving Loans and Facility
                      C Revolving Loans..................................... 39
             (b)      Facility B Term Loans................................. 39
             (c)      Swingline Loans....................................... 39
             (d)      Extension of Revolving Loan Termination Date.......... 39
  2.09  Interest............................................................ 40
  2.10  Fees  41
             (a)  Arrangement, Agency Fees.................................. 41
             (b)  Commitment Fees........................................... 41
  2.11  Computation of Fees and Interest.................................... 41
  2.12  Payments by the Borrower............................................ 42
  2.13  Payments by the Banks to the Agent.................................. 42
  2.14  Sharing of Payments, Etc............................................ 43
  2.15  Discretionary Swingline Loans....................................... 44

  ARTICLE III
                              THE LETTERS OF CREDIT

  3.01  The Letter of Credit Subfacility.................................... 45
  3.02  Issuance, Amendment and Renewal of Letters
             of Credit...................................................... 47
  3.03  Existing Letters of Credit; Risk Participations,
             Drawings and Reimbursements.................................... 49
  3.04  Repayment of Participations......................................... 51
  3.05  Role of the Issuing Banks........................................... 52
  3.06  Obligations Absolute................................................ 53
  3.07  Cash Collateral Pledge.............................................. 54
  3.08  Letter of Credit Fees............................................... 54
  3.09  Uniform Customs and Practice........................................ 55
  3.10  Acknowledgment of Accommodation; Waiver
             of Defenses.................................................... 55

  ARTICLE IV
                     TAXES, YIELD PROTECTION AND ILLEGALITY

  4.01  Taxes............................................................... 57
  4.02  Illegality.......................................................... 58
  4.03  Increased Costs and Reduction of Return............................. 59
  4.04  Funding Losses...................................................... 59
  4.05  Inability to Determine Rates........................................ 60
  4.06  Survival............................................................ 60

  ARTICLE V
                              CONDITIONS PRECEDENT

  5.01  Conditions to Effectiveness......................................... 61
             (a)      Credit Agreement and any Notes........................ 61
             (c)      Resolutions; Incumbency............................... 61
             (d)      Organization Documents; Good Standing................. 61
             (e)      Legal Opinions........................................ 62
             (f)      Payment of Fees....................................... 62
             (g)      Certificate........................................... 62
             (h)      Refinancing of Floating Rate Senior Notes............. 63
             (i)      No Material Change.................................... 63
             (j)      Trading Policies...................................... 63
             (l)      Other Documents....................................... 63
  5.02  Conditions to All Credit Extensions................................. 63
             (a)      Notice, Application................................... 63
             (b)      Continuation of Representations and Warranties........ 63
             (c)      No Existing Default................................... 64

  ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

  6.01  Corporate or Partnership Existence and Power........................ 64
  6.02  Corporate or Partnership Authorization;
             No Contravention............................................... 64
  6.03  Governmental Authorization.......................................... 65
  6.04  Binding Effect...................................................... 65
  6.05  Litigation.......................................................... 65
  6.06  No Default.......................................................... 66
  6.07  ERISA Compliance.................................................... 66
  6.08  Use of Proceeds; Margin Regulations................................. 67
  6.09  Title to Properties................................................. 67
  6.10  Taxes............................................................... 67
  6.11  Financial Condition................................................. 67
  6.12  Environmental Matters............................................... 68
  6.13  Regulated Entities.................................................. 68
  6.14  No Burdensome Restrictions.......................................... 68
  6.15  Copyrights, Patents, Trademarks and Licenses, etc................... 68
  6.16  Subsidiaries and Affiliates......................................... 69
  6.17  Insurance........................................................... 69
  6.18  Tax Status.......................................................... 69
  6.19  Full Disclosure..................................................... 69
  6.20  Fixed Price Supply Contracts........................................ 69
  6.21  Trading Policies.................................................... 69
  6.22  Refinancing of Floating Rate Senior Notes........................... 70

  ARTICLE VII
                              AFFIRMATIVE COVENANTS

  7.01  Financial Statements................................................ 70
  7.02  Certificates; Other Information..................................... 72
  7.03  Notices............................................................. 72
  7.04  Preservation of Corporate or Partnership
             Existence, Etc................................................. 73
  7.05  Maintenance of Property............................................. 74
  7.06  Insurance........................................................... 74
  7.07  Payment of Obligations.............................................. 74
  7.08  Compliance with Laws................................................ 74
  7.09  Inspection of Property and Books and Records........................ 75
  7.10  Environmental Laws.................................................. 75
  7.11  Use of Proceeds..................................................... 75
  7.12  Financial Covenants................................................. 75
  7.13  Trading Policies.................................................... 76
  7.14  Other General Partner Obligations................................... 76
  7.15  Other Stratton Obligations.......................................... 77
  7.16  Monetary Judgments.................................................. 77
  7.17  Maintenance of Subsidiary........................................... 77

  ARTICLE VIII
                               NEGATIVE COVENANTS

  8.01  Limitation on Liens................................................. 78
  8.02  Asset Sales......................................................... 80
  8.03  Consolidations and Mergers.......................................... 81
  8.04  Acquisitions........................................................ 82
  8.05  Limitation on Indebtedness.......................................... 82
  8.06  Transactions with Affiliates........................................ 85
  8.07  Use of Proceeds..................................................... 86
  8.08  Use of Proceeds - Ineligible Securities............................. 86
  8.09  Contingent Obligations.............................................. 86
  8.10  Joint Ventures...................................................... 86
  8.11  Lease Obligations................................................... 86
  8.12  Restricted Payments................................................. 87
  8.13  Prepayments of Subordinated Indebtedness............................ 89
  8.14  Dividend and Other Payment Restrictions
             Affecting Subsidiaries......................................... 89
  8.15  Change in Business.................................................. 90
  8.16  Accounting Changes.................................................. 90
  8.17  Limitation on Sale and Leaseback Transactions....................... 90
  8.18  Restrictions On Nature Of Indebtedness And
             Activities Of Finance Corp..................................... 90
  8.19  Amendments of Organization Documents or 1994
             Indenture or 1996 Indenture.................................... 91
  8.20  Fixed Price Supply Contracts........................................ 91
  8.21  Operations through Subsidiaries..................................... 91
  8.22  Operations of MLP................................................... 92

  ARTICLE IX
                                EVENTS OF DEFAULT

  9.01  Event of Default.................................................... 92
             (a)      Non-Payment........................................... 92
             (b)      Representation or Warranty............................ 92
             (c)      Specific Defaults..................................... 93
             (d)      Other Defaults........................................ 93
             (e)      Cross-Default......................................... 93
             (f)      Insolvency; Voluntary Proceedings..................... 93
             (g)      Involuntary Proceedings............................... 93
             (h)      ERISA................................................. 94
             (i)      Monetary Judgments.................................... 94
             (j)      Non-Monetary Judgments................................ 94
             (k)      Loss of Licenses...................................... 94
             (l)      Adverse Change........................................ 95
             (m)      Certain Indenture Defaults, Etc....................... 95
             (n)      Guarantor Defaults.................................... 95
  9.02  Remedies............................................................ 95
  9.03  Rights Not Exclusive................................................ 96
  9.04  Certain Financial Covenant Defaults................................. 96

  ARTICLE X
                                    THE AGENT

  10.01  Appointment and Authorization...................................... 96
  10.02  Delegation of Duties............................................... 97
  10.03  Liability of Agent and Issuing Banks............................... 97
  10.04  Reliance by Agent and Issuing Banks................................ 98
  10.05  Notice of Default.................................................. 98
  10.06  Credit Decision.................................................... 99
  10.07  Indemnification.................................................... 99
  10.08  Agent in Individual Capacity.......................................100
  10.09  Successor Agent....................................................100
  10.10  Withholding Tax....................................................101

  ARTICLE XI
                                  MISCELLANEOUS

  11.01  Amendments and Waivers.............................................102
  11.02  Notices............................................................103
  11.03  No Waiver; Cumulative Remedies.....................................104
  11.04  Costs and Expenses.................................................104
  11.05  Indemnity..........................................................105
  11.06  Payments Set Aside.................................................105
  11.07  Successors and Assigns.............................................105
  11.08  Assignments, Participations, Etc...................................106
  11.09  Set-off............................................................108
  11.10  Notification of Addresses, Lending Offices, Etc....................109
  11.11  Changes of Revolving Loan Commitments..............................109
  11.12  Counterparts.......................................................111
  11.13  Severability.......................................................111
  11.14  No Third Parties Benefited.........................................111
  11.15  Governing Law and Jurisdiction.....................................111
  11.16  Waiver of Jury Trial...............................................111
  11.17  Entire Agreement...................................................112



<PAGE>









                             SCHEDULES AND EXHIBITS

    Schedule 2.01     Revolving Loan Commitments, Facility B Term
                      Loans
    Schedule 3.03     Existing Letters of Credit
    Schedule 6.07     ERISA
    Schedule 6.16     Subsidiaries and Affiliates
    Schedule 8.05     Existing Indebtedness and Subordination
                      Provisions
    Schedule 10.06    Information to be Provided to Banks by Agent
    Schedule 11.02    Addresses for Notices


    EXHIBITS

    Exhibit A         Form of Notice of Borrowing
    Exhibit B         Form of Notice of Conversion/Continuation
    Exhibit C         Form of Compliance Certificate
    Exhibit D         Form of Legal Opinion of Borrower's Counsel
    Exhibit E         Form of Assignment and Acceptance
    Exhibit F-1       Form of Facility A Revolving Loan Note
    Exhibit F-2       Form of Facility B Term Loan Note
    Exhibit F-3       Form of Facility C Revolving Loan Note
    Exhibit G         Form of Subsidiary Guaranty
    Exhibit H         Form of Commercial Letter of Credit
    Exhibit I         Form of Standby Letter of Credit
    Exhibit J         Alternate Form of Standby Letter of Credit


<PAGE>



                AMENDED AND RESTATED CREDIT AGREEMENT

This AMENDED AND RESTATED CREDIT  AGREEMENT is entered into as of July 31, 1996,
among  FERRELLGAS,  L.P.,  a  Delaware  limited  partnership  (the  "Borrower"),
STRATTON  INSURANCE  COMPANY,  INC., a Vermont  corporation  and a  Wholly-Owned
Subsidiary  of  the  Borrower   ("Stratton"),   FERRELLGAS,   INC.,  a  Delaware
corporation  and  the  sole  general  partner  of  the  Borrower  (the  "General
Partner"),  the several  financial  institutions from time to time party to this
Agreement (collectively,  the "Banks";  individually, a "Bank"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as agent for the Banks (in such
capacity,  the "Agent").  NATIONSBANK  OF TEXAS,  N.A. is named as co-agent (the
"Co-Agent") hereunder.
                                 R E C I T A L S

                  WHEREAS,  the Borrower,  Stratton,  the General  Partner,  the
Banks and the Agent are parties to the  Existing  Credit  Agreement  (as defined
below),  pursuant to which the Banks have (a) made  revolving  credit  loans and
term loans to the Borrower and have issued or  participated in letters of credit
for the account of the Borrower and Stratton,  in each case for working capital,
Acquisitions and general corporate or partnership,  as the case may be, purposes
in an aggregate amount of up to $185,000,000  and (b) made additional  revolving
loans to Borrower solely for working capital  purposes in an aggregate amount of
up to $20,000,000;

                  WHEREAS,  the Borrower has requested that (i) the  $75,000,000
of Facility A Commitments and  $110,000,000 of Facility B Commitments  under the
Existing Credit Agreement and the related Facility A Revolving Loans, Facility B
Revolving Loans and Facility B Term Loans  outstanding under the Existing Credit
Agreement be  refinanced  and  converted  into,  respectively,  $185,000,000  of
Facility C Commitments and Facility C Revolving Loans under this Agreement,  the
proceeds  of  which  are to be used by the  Borrower  and,  in the case of those
Letters of Credit  issued for the account of  Stratton,  by Stratton for working
capital,  Acquisitions and general corporate or partnership, as the case may be,
purposes,  (ii) the  $20,000,000  of Facility C  Commitments  under the Existing
Credit  Agreement and the related Facility C Revolving Loans  outstanding  under
the Existing Credit  Agreement be refinanced and converted  into,  respectively,
$20,000,000 of Facility A Commitments  and Facility A Revolving Loans under this
Agreement,  the  proceeds  of which are to be used by the  Borrower  solely  for
working  capital  purposes,  (iii) separate and apart from the foregoing  credit
facility, the Banks make a new $50,000,000 Facility B Term Loan to the Borrower,
the proceeds of which are to be used to  refinance,  in full,  the Floating Rate
Senior  Notes  (as  defined  below),  and (iv)  the  Existing  Credit  Agreement
otherwise  be amended and  restated  in its  entirety as set forth below in this
Agreement; and

                  WHEREAS,  the Banks are  willing,  on and subject to the terms
and  conditions set forth in this  Agreement,  to amend and restate the terms of
the Existing Credit  Agreement and to extend credit under this Agreement as more
particularly hereinafter set forth.

ACCORDINGLY,  the parties hereto agree to amend and restate the Existing  Credit
Agreement as follows:


                                    ARTICLE I
                                   DEFINITIONS

Certain Defined Terms.  The following terms have the following meanings:

                  "1994 Indenture" means the Indenture dated as of July 5, 1994,
          among the Borrower, Finance Corp. and Norwest Bank Minnesota, National
          Association,  pursuant  to which the Fixed Rate  Senior  Notes and the
          Floating Rate Senior Notes were issued, as it may be amended, modified
          or supplemented from time to time.

                  "1996  Indenture"  means the  Indenture  dated as of April 26,
          1996,  among the MLP,  Ferrellgas  Partners Finance Corp. and American
          Bank National Association, pursuant to which the MLP Senior Notes were
          issued,  as it may be amended,  modified or supplemented  from time to
          time.

                  "Acquired Debt" means,  with respect to any specified  Person,
          (i)  Indebtedness  of any other Person existing at the time such other
          Person  merged with or into or became a Subsidiary  of such  specified
          Person,  including  Indebtedness  incurred in  connection  with, or in
          contemplation of, such other Person merging with or into or becoming a
          Subsidiary of such specified Person and (ii) Indebtedness  encumbering
          any asset acquired by such specified Person.

                  "Acquisition"  means any  transaction  or  series  of  related
          transactions for the purpose of or resulting,  directly or indirectly,
          in (a) the acquisition of all or substantially  all of the assets of a
          Person,  or  of  any  business  or  division  of  a  Person,  (b)  the
          acquisition  of in excess  of 50% of the  capital  stock,  partnership
          interests or equity of any Person or otherwise  causing any Person, to
          become a  Subsidiary,  or (c) a merger or  consolidation  or any other
          combination  with  another  Person  (other  than a  Person  that  is a
          Subsidiary)  provided  that  the  Borrower  or the  Subsidiary  is the
          surviving entity.

                  "Affiliate"  means, as to any Person,  any other Person which,
          directly  or  indirectly,  is in control of, is  controlled  by, or is
          under common  control with,  such Person.  A Person shall be deemed to
          control another Person if the controlling  Person possesses,  directly
          or  indirectly,  the power to direct  or cause  the  direction  of the
          management  and  policies  of the other  Person,  whether  through the
          ownership of voting securities, by contract, or otherwise.

                  "Agent" has the meaning  specified in the introductory  clause
          hereto.  References  to the "Agent" shall include BofA in its capacity
          as agent for the Banks  hereunder,  and any  successor  agent  arising
          under Section 10.09.

                  "Agent-Related  Persons"  means BofA and any  successor  Agent
          arising under Section 10.09, together with their respective Affiliates
          (including,  in the case of BofA,  the  Arranger),  and the  officers,
          directors, employees, agents and attorneys-in-fact of such Persons and
          Affiliates.

                  "Agent's  Payment  Office"  means the address for payments set
          forth on Schedule 11.02 hereto in relation to the Agent, or such other
          address as the Agent may from time to time specify.

                  "Agreement" means this Credit Agreement.

                  "Applicable Margin" means, for each Type of Loan, effective as
          of the first day of each  fiscal  quarter,  the  percentage  per annum
          (expressed in basis points) set forth below  opposite the Level of the
          Pricing Ratio applicable to such fiscal quarter as set forth herein.
<TABLE>
<CAPTION>

         Pricing Ratio                        Base Rate Loans                      Eurodollar Loans

<S>                  <C>                                <C>                                     <C>       
               Level 1                                  0.00 b.p.                               42.50 b.p.
               Level 2                                  0.00 b.p.                               50.00 b.p.
               Level 3                                  0.00 b.p.                               60.00 b.p.
               Level 4                                  0.00 b.p.                               80.00 b.p.
               Level 5                                  0.00 b.p.                              110.00 b.p.
               Level 6                                 12.50 b.p.                              137.50 b.p.
</TABLE>

"Arranger" means BA Securities,  Inc., a Wholly-Owned  Subsidiary of BankAmerica
Corporation.  The  Arranger  is a  registered  broker-dealer  and  permitted  to
underwrite and deal in certain Ineligible Securities.

                  "Asset Sale" has the meaning specified in Section 8.02.

                  "Assignee" has the meaning specified in subsection 11.08(a).

                  "Attorney   Costs"  means  and  includes  all  reasonable  and
          itemized  fees and  disbursements  of any law  firm or other  external
          counsel,  the  allocated  cost  of  internal  legal  services  and all
          disbursements of internal counsel.

                  "Attributable  Debt" means, in respect of a sale and leaseback
          arrangement  of any  property,  as at the time of  determination,  the
          present value  (calculated using a discount rate equal to the interest
          rate of the Fixed Rate  Senior  Notes and annual  compounding)  of the
          total  obligations  of the  lessee  for  rental  payments  during  the
          remaining  term of the lease included in such  arrangement  (including
          any period for which such lease has been extended).

                  "Available  Cash"  has the  meaning  given to such term in the
          Partnership  Agreement,  as  amended  to the  date of this  Agreement;
          provided,  that (i) Available Cash shall not include any amount of Net
          Proceeds  of Asset  Sales  until  the  270-day  period  following  the
          consummation of the applicable Asset Sale, (ii) investments, loans and
          other contributions to a Non-Recourse  Subsidiary are to be treated as
          "cash  disbursements" when made for purposes of determining the amount
          of Available Cash and (iii) cash receipts of a Non-Recourse Subsidiary
          shall not  constitute  cash  receipts of the  Borrower for purposes of
          determining  the  amount of  Available  Cash  until  cash is  actually
          distributed by such Non-Recourse Subsidiary to the Borrower.

                  "Bank" has the meaning  specified in the  introductory  clause
          hereto.  References  to the "Banks"  shall  include BofA and any other
          Bank  designated  by the Agent as an  Issuing  Bank from time to time,
          including  in  their  respective  capacities  as  Issuing  Banks;  for
          purposes of clarification only, to the extent that an Issuing Bank may
          have any rights or  obligations  in addition to those of a Bank due to
          its status as an Issuing Bank, its status as such will be specifically
          referenced.

     "Bankruptcy  Code"  means the  Federal  Bankruptcy  Reform Act of 1978,  as
amended (11 U.S.C. ss.101, et seq.).

                  "Base Rate"  means,  for any day, the higher of: (a) 0.50% per
          annum above the Federal  Funds Rate in effect on such day; and (b) the
          rate of  interest in effect for such day as  publicly  announced  from
          time to time by BofA in San Francisco,  California,  as its "reference
          rate." (The "reference  rate" is a rate set by BofA based upon various
          factors  including  BofA's costs and desired return,  general economic
          conditions  and other  factors,  and is used as a reference  point for
          pricing  some  loans,  which may be priced  at,  above,  or below such
          announced  rate.) Any change in the reference  rate  announced by BofA
          shall take effect at the opening of business on the day  specified  in
          the public  announcement  of such change or if no day is so specified,
          on the day of the announcement.

                  "Base Rate Loan" means a Loan that bears interest based on the
          Base Rate.

                  "BofA" has the meaning specified in the introductory clause
          hereto.

                  "Borrowing" means a borrowing hereunder consisting of Loans of
          the same Type made to the  Borrower  on the same day by the Banks (or,
          in the case of  Swingline  Loans,  by BofA) and, for  Eurodollar  Rate
          Loans,  having the same Interest Period,  in either case under Article
          II.

                  "Borrowing Date" means any date on which a Borrowing occurs.

                  "Business Day" means any day other than a Saturday,  Sunday or
          other day on which commercial banks in San Francisco are authorized or
          required by law to close and, if the  applicable  Business Day relates
          to any  Eurodollar  Rate Loan,  means such a day on which dealings are
          carried on in the London interbank dollar market.

                  "Capital Adequacy Regulation" means any guideline,  request or
          directive of any central bank or other Governmental  Authority, or any
          other law, rule or regulation, whether or not having the force of law,
          in  each  case,  regarding  capital  adequacy  of any  bank  or of any
          corporation controlling a bank.

                  "Capital  Interests"  means,  with respect to any corporation,
          any  and  all  shares,  participations,  rights  or  other  equivalent
          interests in the capital of the  corporation,  and with respect to any
          partnership,  any and all partnership  interests  (whether  general or
          limited) and other interests or participations that confer on a Person
          the  right to  receive  a share  of the  profits  and  losses  of,  or
          distributions of assets of, such partnership.

                  "Capital   Lease   Obligation"   means,   at  the   time   any
          determination  thereof is to be made,  the amount of the  liability in
          respect of a capital  lease that would at such time be so  required to
          be capitalized on the balance sheet in accordance with GAAP.

                  "Cash  Collateralize"  means to  pledge  and  deposit  with or
          deliver to the Agent,  for the benefit of the Agent, the Issuing Banks
          and  the  Banks,   as  collateral  for  the  L/C  Obligations  or  any
          outstanding  Loan,  cash  or  deposit  account  balances  pursuant  to
          documentation  in form and substance  satisfactory to the Agent (which
          documents are hereby  consented to by the Banks).  Derivatives of such
          term shall have corresponding  meaning.  The Borrower hereby grants to
          the Agent,  for the benefit of the Agent,  the  Issuing  Banks and the
          Banks,  a  security  interest  in all such  cash and  deposit  account
          balances. Cash collateral shall be maintained in blocked, non-interest
          bearing deposit accounts at BofA. Such collateral may be invested from
          time  to  time  in  short-term  money  market  instruments  and  other
          investments  with the  consent  of the  Agent and the  Majority  Banks
          (which  consent may be given or  withheld  in their sole and  absolute
          discretion)  provided that the Agent,  the Issuing Banks and the Banks
          shall at all times have a first priority  perfected  security interest
          in such collateral and the proceeds thereof.

                  "Cash  Equivalents"  means (i)  United  States  dollars,  (ii)
          securities  issued or directly and fully  guaranteed or insured by the
          United  States  government  or any agency or  instrumentality  thereof
          having  maturities of not more than  eighteen  months from the date of
          acquisition,   (iii)  certificates  of  deposit  and  eurodollar  time
          deposits  with  maturities  of six  months  or less  from  the date of
          acquisition,  bankers'  acceptances  with maturities not exceeding six
          months and overnight bank deposits, in each case with any Bank or with
          any other  domestic  commercial  bank  having  capital  and surplus in
          excess of $500 million and a Keefe Bank Watch Rating of "B" or better,
          (iv)  repurchase  obligations  with a term of not more than seven days
          for underlying  securities of the types  described in clauses (ii) and
          (iii)  entered  into  with  any  financial   institution  meeting  the
          qualifications  specified in clause (iii) above,  (v) commercial paper
          or direct  obligations of a Person,  provided such Person has publicly
          outstanding debt having the highest  short-term rating obtainable from
          Moody's Investors  Service,  Inc. or Standard & Poor's Corporation and
          provided  further  that such  commercial  paper or  direct  obligation
          matures  within  270  days  after  the date of  acquisition,  and (vi)
          investments  in money  market  funds all of whose  assets  consist  of
          securities of the types described in the foregoing clauses (i) through
          (v).

                  "Change of Control" means (i) the sale,  lease,  conveyance or
          other disposition of all or substantially all of the Borrower's assets
          to any  Person or group (as such term is used in Section  13(d)(3)  of
          the Exchange Act) other than James E. Ferrell, the Related Parties and
          any  Person  of  which  James  E.  Ferrell  and  the  Related  Parties
          beneficially  own in the aggregate  51% or more of the voting  Capital
          Interests  (or if such  Person  is a  partnership,  51% or more of the
          general partner interests), (ii) the liquidation or dissolution of the
          Borrower  or  the  General  Partner,   (iii)  the  occurrence  of  any
          transaction,  the  result of which is that  James E.  Ferrell  and the
          Related  Parties  beneficially  own  in  the  aggregate,  directly  or
          indirectly,  less than 51% of the total voting power  entitled to vote
          for the election of directors of the General  Partner or less than 20%
          of the Capital  Interests of the Borrower,  and (iv) the occurrence of
          any transaction, the result of which is that the General Partner is no
          longer the sole general partner of the Borrower.

                  "Class" means, with respect to any Loan,  whether such Loan is
          a Facility A Revolving Loan,  Swingline Loan, Facility B Term Loan, or
          Facility C Revolving Loan.

                  "Co-Agent" means NationsBank of Texas, N.A.

                  "Code"  means the Internal  Revenue Code of 1986,  as amended,
          and regulations promulgated thereunder.

                  "Commercial  Letters of Credit" means  commercial  documentary
          letters of credit issued by an Issuing Bank pursuant to Article III.

                  "Commercial  Letter of Credit Risk  Participation  Percentage"
          means, as of any date and based upon the Level of the Pricing Ratio on
          such date, the  percentage  per annum  (expressed in basis points) set
          forth below opposite such Level:
<TABLE>
<CAPTION>

                  Pricing Ratio                      Commercial Letter of Credit
Risk Participation Percentage

<S>                          <C>                                                       <C>       
                       Level 1                                                         15.50 b.p.
                       Level 2                                                         18.50 b.p.
                       Level 3                                                         22.50 b.p.
                       Level 4                                                         30.00 b.p.
                       Level 5                                                         35.00 b.p.
                       Level 6                                                         45.00 b.p.
</TABLE>
<TABLE>
<CAPTION>

                  "Commitment Fee Rate" means, as of any date and based upon the
          Level of the  Pricing  Ratio on such date,  the  percentage  per annum
          (expressed in basis points) set forth below opposite such Level:

                  Pricing Ratio                                Commitment Fee Rate

<S>                          <C>                                                       <C>       
                       Level 1                                                         12.50 b.p.
                       Level 2                                                         15.00 b.p.
                       Level 3                                                         20.00 b.p.
                       Level 4                                                         27.50 b.p.
                       Level 5                                                         32.50 b.p.
                       Level 6                                                         37.50 b.p.
</TABLE>

                  "Compliance  Certificate"  means  a  certificate  signed  by a
          Responsible  Officer  of the  Borrower  substantially  in the  form of
          Exhibit  C,  demonstrating  compliance  with the  covenants  contained
          herein,  including  Sections 7.12,  7.13, 7.16 and 8.12 and the 30 day
          clean-up period contained in subsection 2.01(a)(ii).

                  "Consolidated Cash Flow" means, with respect to any Person for
          any  period,  the  Consolidated  Net  Income of such  Person  for such
          period,  plus (a) an amount equal to any  extraordinary  loss plus any
          net loss realized in connection with an asset sale, to the extent such
          losses were deducted in computing  Consolidated  Net Income,  plus (b)
          provision for taxes based on income or profits of such Person for such
          period,  to the  extent  such  provision  for  taxes was  deducted  in
          computing  Consolidated  Net Income,  plus (c)  Consolidated  Interest
          Expense  of such  Person  for such  period,  whether  paid or  accrued
          (including amortization of original issue discount,  non-cash interest
          payments and the interest  component of any payments  associated  with
          Capital  Lease  Obligations  and net  payments  (if any)  pursuant  to
          Hedging  Obligations),  to the extent  such  expense  was  deducted in
          computing   Consolidated   Net  Income,   plus  (d)  depreciation  and
          amortization (including amortization of goodwill and other intangibles
          but excluding  amortization of prepaid cash expenses that were paid in
          a prior  period) of such  Person for such  period,  to the extent such
          depreciation and amortization were deducted in computing  Consolidated
          Net Income,  in each case,  for such period  without  duplication on a
          consolidated basis and determined in accordance with GAAP.

                  "Consolidated  Interest  Expense" means, as of the last day of
          any  fiscal  period,  on a  consolidated  basis,  the  sum of (a)  all
          interest,  fees (including Letter of Credit fees), charges and related
          expenses paid or payable (without  duplication) for that fiscal period
          to the Banks  hereunder  or to any other  lender  in  connection  with
          borrowed  money or the  deferred  purchase  price of  assets  that are
          considered "interest expense" under GAAP, plus (b) the portion of rent
          paid or payable  (without  duplication)  for that fiscal  period under
          Capital  Lease  Obligations  that  should be  treated as  interest  in
          accordance with Financial Accounting Standards Board Statement No. 13,
          on a consolidated basis.

                  "Consolidated  Net Income"  means,  with respect to any Person
          for any period, the aggregate of the Net Income of such Person and its
          Subsidiaries for such period, on a consolidated  basis,  determined in
          accordance with GAAP; provided,  that (i) the Net Income of any Person
          that is not a Subsidiary or that is accounted for by the equity method
          of  accounting  shall be included  only to the extent of the amount of
          dividends  or   distributions   paid  to  the  referent  Person  or  a
          Wholly-Owned  Subsidiary  thereof,  (ii) the Net  Income of any Person
          that is a Subsidiary  (other than a Wholly-Owned  Subsidiary) shall be
          included   only  to  the  extent  of  the  amount  of   dividends   or
          distributions paid to the referent Person or a Wholly-Owned Subsidiary
          thereof,  (iii) the Net Income of any Person  acquired in a pooling of
          interests  transaction  for  any  period  prior  to the  date  of such
          acquisition   shall  be  excluded  except  to  the  extent   otherwise
          includable under clause (i) above and (iv) the cumulative  effect of a
          change in accounting principles shall be excluded.

                  "Consolidated  Net Worth" means, with respect to any Person as
          of any date,  the sum of (i) the  consolidated  equity  of the  common
          stockholders   or  partners  of  such  Person  and  its   consolidated
          Subsidiaries  as of  such  date,  plus  (ii)  the  respective  amounts
          reported on such  Person's  balance sheet as of such date with respect
          to any series of preferred stock (other than  Disqualified  Interests)
          that by its terms is not entitled to the payment of  dividends  unless
          such  dividends  may be declared  and paid only out of net earnings in
          respect of the year of such  declaration and payment,  but only to the
          extent of any cash  received  by such  Person  upon  issuance  of such
          preferred  stock,   less  (x)  all  write-ups  (other  than  write-ups
          resulting from foreign currency translations and write-ups of tangible
          assets of a going  concern  business  made within 12 months  after the
          acquisition of such business) subsequent to the Restatement  Effective
          Date  in the  book  value  of any  asset  owned  by such  Person  or a
          consolidated Subsidiary of such Person, (y) all investments as of such
          date  in  unconsolidated  Subsidiaries  and in  Persons  that  are not
          Subsidiaries  (except, in each case, Permitted  Investments),  and (z)
          all  unamortized  debt discount and expense and  unamortized  deferred
          charges as of such date, all of the foregoing determined in accordance
          with GAAP.

                  "Contingent Obligation" means, as to any Person, any direct or
          indirect liability of that Person, whether or not contingent,  with or
          without  recourse,  (a)  with  respect  to  any  Indebtedness,  lease,
          dividend,  distribution,  letter of credit  or other  obligation  (the
          "primary  obligations")  of another  Person (the  "primary  obligor"),
          including any obligation of that Person (i) to purchase, repurchase or
          otherwise acquire such primary  obligations or any security  therefor,
          (ii) to advance or provide  funds for the payment or  discharge of any
          such  primary  obligation,  or to maintain  working  capital or equity
          capital of the primary  obligor or otherwise to maintain the net worth
          or solvency or any balance  sheet item,  level of income or  financial
          condition  of  the  primary  obligor,   (iii)  to  purchase  property,
          securities or services primarily for the purpose of assuring the owner
          of any such primary  obligation of the ability of the primary  obligor
          to make  payment of such  primary  obligation,  or (iv)  otherwise  to
          assure or hold  harmless  the  holder of any such  primary  obligation
          against loss in respect thereof (each, a "Guaranty  Obligation");  (b)
          with  respect  to any  Surety  Instrument  (other  than any  Letter of
          Credit)  issued  for the  account  of that  Person or as to which that
          Person is otherwise liable for  reimbursement of drawings or payments;
          (c) to purchase any materials,  supplies or other property from, or to
          obtain the services  of,  another  Person if the relevant  contract or
          other related  document or  obligation  requires that payment for such
          materials,  supplies or other property, or for such services, shall be
          made  regardless of whether  delivery of such  materials,  supplies or
          other  property is ever made or  tendered,  or such  services are ever
          performed  or tendered;  or (d) in respect of any Hedging  Obligation.
          The amount of any Contingent Obligation shall, in the case of Guaranty
          Obligations,  be deemed equal to the stated or determinable  amount of
          the primary obligation in respect of which such Guaranty Obligation is
          made or, if not stated or if  indeterminable,  the maximum  reasonably
          anticipated  liability  in respect  thereof,  and in the case of other
          Contingent  Obligations,  shall  be equal  to the  maximum  reasonably
          anticipated liability in respect thereof.

                  "Contractual   Obligation"   means,  as  to  any  Person,  any
          provision of any security  issued by such Person or of any  agreement,
          undertaking,  contract,  indenture,  mortgage,  deed of trust or other
          instrument,  document or  agreement to which such Person is a party or
          by which it or any of its property is bound.

                  "Conversion/Continuation  Date" means any date on which, under
          Section 2.04,  the Borrower (a) converts  Loans of one Type to another
          Type,  or (b)  continues  as Loans of the  same  Type,  but with a new
          Interest Period, Loans having Interest Periods expiring on such date.

                  "Credit  Extension"  means and  includes (a) the making of any
          Loans  hereunder  and  (b)  the  Issuance  of any  Letters  of  Credit
          hereunder.

                  "Default"  means any  event or  circumstance  which,  with the
          giving of notice,  the lapse of time, or both,  would (if not cured or
          otherwise remedied during such time) constitute an Event of Default.

                  "Disqualified Interests" means any Capital Interests which, by
          their  terms  (or by the terms of any  security  into  which  they are
          convertible or for which they are exchangeable), or upon the happening
          of any event,  mature or are  mandatorily  redeemable,  pursuant  to a
          sinking fund  obligation or otherwise,  or redeemable at the option of
          the holder  thereof,  in whole or in part, on or prior to December 31,
          2001.

"Dollars", "dollars" and "$" each mean lawful money of the United States.

                  "Effective  Amount" means (i) with respect to any Loans on any
          date, the aggregate  outstanding principal amount thereof after giving
          effect  to any  Borrowings  and  prepayments  or  repayments  of Loans
          occurring on such date; and (ii) with respect to any  outstanding  L/C
          Obligations  on any date,  the amount of such L/C  Obligations on such
          date  after  giving  effect  to any  Issuances  of  Letters  of Credit
          occurring on such date and any other changes in the  aggregate  amount
          of the L/C  Obligations as of such date,  including as a result of any
          reimbursements  of  outstanding  unpaid  drawings under any Letters of
          Credit or any reductions in the maximum  amount  available for drawing
          under Letters of Credit  taking  effect on such date.  For purposes of
          Section 2.07, the Effective Amount shall be determined  without giving
          effect to any  mandatory  prepayments  to be made under  such  Section
          2.07.

                  "Eligible  Assignee"  means (i) a  commercial  bank  organized
          under the laws of the United States, or any state thereof,  and having
          a  combined  capital  and  surplus  of at least  $100,000,000;  (ii) a
          commercial bank organized under the laws of any other country which is
          a member of the Organization for Economic  Cooperation and Development
          (the "OECD"),  or a political  subdivision  of any such  country,  and
          having a  combined  capital  and  surplus  of at  least  $200,000,000,
          provided that such bank is acting  through a branch or agency  located
          in the United States;  and (iii) a Person that is primarily engaged in
          the business of  commercial  banking and that is (A) a Subsidiary of a
          Bank, (B) a Subsidiary of a Person of which a Bank is a Subsidiary, or
          (C) a Person of which a Bank is a Subsidiary.

                  "Environmental  Claims" means all claims, however asserted, by
          any  Governmental   Authority  or  other  Person  alleging   potential
          liability or responsibility for violation of any Environmental Law, or
          for release or injury to the environment.

                  "Environmental  Laws" means all federal,  state or local laws,
          statutes, common law duties, rules, regulations, ordinances and codes,
          together with all administrative  orders,  directed duties,  requests,
          licenses,  authorizations  and permits of, and  agreements  with,  any
          Governmental  Authorities,  in each case  relating  to  environmental,
          health, safety and land use matters.

                  "Equity  Interests" means Capital  Interests and all warrants,
          options or other rights to acquire  Capital  Interests  (but excluding
          any debt  security that is  convertible  into,  or  exchangeable  for,
          Capital Interests).

                  "ERISA" means the Employee  Retirement  Income Security Act of
          1974, as amended, and regulations promulgated thereunder.

                  "ERISA  Event" means (a) a Reportable  Event with respect to a
          Pension Plan; (b) a withdrawal by the Borrower or the General  Partner
          from a Pension  Plan  subject to Section  4063 of ERISA  during a plan
          year in which it was a  substantial  employer  (as  defined in Section
          4001(a)(2) of ERISA) or a cessation of operations  which is treated as
          such a withdrawal  under Section 4062(e) of ERISA; (c) the filing of a
          notice of intent to terminate,  the treatment of a plan amendment as a
          termination  under Section 4041 or 4041A of ERISA or the  commencement
          of  proceedings  by the PBGC to  terminate a Pension  Plan  subject to
          Title IV of  ERISA;  (d) a  failure  by the  Borrower  or the  General
          Partner to make required contributions to a Pension Plan or other Plan
          subject to Section 412 of the Code;  (e) an event or  condition  which
          might reasonably be expected to constitute  grounds under Section 4042
          of ERISA for the  termination  of, or the  appointment of a trustee to
          administer,  any Pension  Plan;  (f) the  imposition  of any liability
          under  Title  IV of  ERISA,  other  than  PBGC  premiums  due  but not
          delinquent  under  Section  4007 of ERISA,  upon the  Borrower  or the
          General  Partner;  or (g) an  application  for a funding  waiver or an
          extension of any  amortization  period  pursuant to Section 412 of the
          Code with respect to any Pension Plan.

                  "Eurodollar  Rate" shall  mean,  for each  Interest  Period in
          respect  of  Eurodollar  Rate  Loans   comprising  part  of  the  same
          Borrowing,  an interest rate per annum  (rounded to the nearest 1/16th
          of 1% or,  if  there  is no  nearest  1/16th  of 1%,  rounded  upward)
          determined pursuant to the following formula:

          Eurodollar Rate =                   LIBOR
                                       1.00 - Eurodollar Reserve Percentage

         The Eurodollar Rate shall be adjusted automatically as of the effective
         date of any change in the Eurodollar Reserve Percentage.

                  "Eurodollar  Rate Loan" means a Loan that bears interest based
on the Eurodollar Rate.

                  "Eurodollar Reserve Percentage" shall mean the maximum reserve
         percentage  (expressed as a decimal,  rounded to the nearest 1/100th of
         1% or, if there is no nearest  1/100th of 1%, rounded upward) in effect
         on the date LIBOR for such Interest  Period is  determined  (whether or
         not applicable to any Bank) under regulations  issued from time to time
         by the  Federal  Reserve  Board for  determining  the  maximum  reserve
         requirement  (including any emergency,  supplemental  or other marginal
         reserve  requirement) with respect to Eurocurrency  funding  (currently
         referred to as "Eurocurrency  liabilities") having a term comparable to
         such Interest Period. Without limiting the effect of the foregoing, the
         Eurodollar  Reserve  shall  include any other  reserves  required to be
         maintained by any Bank with respect to (a) any category of  liabilities
         that includes  deposits by reference to which the Eurodollar Rate is to
         be determined as provided in the  definition  of  "Eurodollar  Rate" in
         this Section 1.01 or (b) any category of  extensions of credit or other
         assets that includes Eurodollar Rate Loans.

"Event of Default" means any of the events or circumstances specified in Section
9.01.

                  "Exchange Act" means the Securities  Exchange Act of 1934, and
         regulations promulgated thereunder.

                  "Existing  Credit  Agreement" means the Credit Agreement dated
         as of July 5, 1994, as amended prior to the Restatement Effective Date,
         among Borrower,  Stratton,  the General Partner,  the several financial
         institutions  from  time  to time  parties  thereto,  Bank  of  America
         National  Trust  and  Savings  Association,  as  Agent,  with The First
         National  Bank of  Boston  and  NationsBank  of  Texas,  N.A.  as named
         Co-Agents thereunder.

                  "Existing Indebtedness" means Indebtedness of the Borrower and
         its Subsidiaries (other than the Obligations) and certain  Indebtedness
         of the General  Partner  with respect to which the Borrower has assumed
         the General Partner's repayment obligations,  in each case in existence
         on the  Restatement  Effective  Date  and as more  fully  set  forth on
         Schedule 8.05.

                  "Existing  Letters  of  Credit"  means the  letters  of credit
         issued and  outstanding  on the  Restatement  Effective  Date which are
         described in Schedule 3.03.  Each of the Existing  Letters of Credit is
         designated  on  such  schedule  as a  standby  letter  of  credit  or a
         commercial documentary letter of credit.

                  "Facility A Commitment" means, as to each Bank, the amount set
         forth  opposite  such  Bank's name on  Schedule  2.01 hereof  under the
         caption  "Facility  A  Commitment,"  as the same may be  reduced  under
         Section  2.05 or 2.07 or as a result of one or more  assignments  under
         Section  11.08;  provided,   that  the  maximum  aggregate  Facility  A
         Commitment of all Banks shall not exceed $20,000,000 at any time.

                  "Facility  A  Revolving  Loan" has the  meaning  specified  in
         subsection  2.01(a),  and may be a Base Rate Loan or a Eurodollar  Rate
         Loan.

                  "Facility B Term Loan" has the meaning specified in subsection
         2.01(b), and may be a Base Rate Loan or a Eurodollar Rate Loan.

                  "Facility C Commitment" means, as to each Bank, the amount set
         forth  opposite  such  Bank's name on  Schedule  2.01 hereof  under the
         caption  "Facility  C  Commitment,"  as the same may be  reduced  under
         Section  2.05 or 2.07 or as a result of one or more  assignments  under
         Section  11.08;  provided,   that  the  maximum  aggregate  Facility  C
         Commitment of all Banks shall not exceed $185,000,000 at any time.

                  "Facility  C  Revolving  Loan" has the  meaning  specified  in
         subsection  2.01(c),  and may be a Base Rate Loan or a Eurodollar  Rate
         Loan.

                  "FDIC" means the Federal Deposit  Insurance  Corporation,  and
         any  Governmental   Authority   succeeding  to  any  of  its  principal
         functions.

                  "Federal Funds Rate" means, for any day, the rate set forth in
         the  weekly  statistical  release  designated  as  H.15(519),   or  any
         successor  publication,  published  by the Federal  Reserve Bank of New
         York  (including  any such  successor,  "H.15(519)")  on the  preceding
         Business Day opposite the caption "Federal Funds  (Effective)";  or, if
         for  any  relevant  day  such  rate  is not so  published  on any  such
         preceding  Business  Day, the rate for such day will be the  arithmetic
         mean as determined  by the Agent of the rates for the last  transaction
         in overnight  Federal funds  arranged prior to 9:00 a.m. (New York City
         time) on that day by each of three  leading  brokers of  Federal  funds
         transactions in New York City selected by the Agent.

                  "Fee Letter" has the meaning specified in subsection 2.10(a).

"Ferrellgas  Partners Finance Corp." means Ferrellgas  Partners Finance Corp., a
Delaware corporation and a Wholly-Owned Subsidiary of the MLP.

     "Finance Corp." means Ferrellgas Finance Corp., a Delaware  corporation and
a Wholly-Owned Subsidiary of the Borrower.

                  "Fixed Charge Coverage Ratio" means with respect to any Person
         for any period,  the ratio of Consolidated Cash Flow of such Person for
         such period to the Fixed Charges of such Person for such period. In the
         event  that the  referent  Person  or any of its  Subsidiaries  incurs,
         assumes,  guarantees,  redeems or repays any  Indebtedness  (other than
         revolving credit  borrowings  including,  with respect to the Borrower,
         Swingline  Loans,  Facility A Revolving  Loans and Facility C Revolving
         Loans) subsequent to the commencement of the period for which the Fixed
         Charge Coverage Ratio is being  calculated but prior to the date of the
         event for which the  calculation of the Fixed Charge  Coverage Ratio is
         made (the  "Calculation  Date"),  then the Fixed Charge  Coverage Ratio
         shall  be  calculated  giving  pro  forma  effect  to such  incurrence,
         assumption,  guarantee,  redemption or repayment of Indebtedness, as if
         the same had  occurred at the  beginning  of the  applicable  reference
         period.  The foregoing  calculation of the Fixed Charge  Coverage Ratio
         shall also give pro forma effect to Acquisitions (including all mergers
         and consolidations),  dispositions and discontinuances of businesses or
         assets  that  have  been  made  by the  referent  Person  or any of its
         Subsidiaries   during  the  reference  period  or  subsequent  to  such
         reference  period and on or prior to the Calculation Date assuming that
         all such Acquisitions,  dispositions and  discontinuances of businesses
         or  assets  had  occurred  on the first  day of the  reference  period;
         provided, however, that with respect to the Borrower, (a) Fixed Charges
         shall be reduced by amounts  attributable  to businesses or assets that
         are so  disposed  of or  discontinued  only  to  the  extent  that  the
         obligations  giving  rise to such  Fixed  Charges  would no  longer  be
         obligations   contributing   to  the  Fixed  Charges  of  the  Borrower
         subsequent  to the  Calculation  Date and (b)  Consolidated  Cash  Flow
         generated by an acquired  business or asset shall be  determined by the
         actual  gross  profit  (revenues  minus  costs of  goods  sold) of such
         acquired  business or asset during the immediately  preceding number of
         full fiscal quarters as are in the reference period minus the pro forma
         expenses that would have been incurred by the Borrower in the operation
         of such acquired  business or asset during such period  computed on the
         basis of (i) personnel  expenses for employees retained by the Borrower
         in  the   operation  of  the  acquired   business  or  asset  and  (ii)
         non-personnel  costs and  expenses  incurred  by the  Borrower on a per
         gallon basis in the operation of the  Borrower's  business at similarly
         situated Borrower facilities.

                  "Fixed  Charges"  means,  with  respect  to any Person for any
         period,  the sum, without  duplication,  of (a)  consolidated  interest
         expense of such Person for such period, whether paid or accrued, to the
         extent such expense was deducted in computing  Consolidated  Net Income
         (including amortization of original issue discounts,  non-cash interest
         payments,  the  interest  component  of all  payments  associated  with
         Capital Lease Obligations and net payments (if any) pursuant to Hedging
         Obligations permitted hereunder), (b) commissions,  discounts and other
         fees and charges  incurred  with respect to letters of credit,  (c) any
         interest  expense on  Indebtedness of another Person that is guaranteed
         by such Person or secured by a Lien on assets of such  Person,  and (d)
         the product of (i) all cash dividend  payments  (and non-cash  dividend
         payments in the case of a Person that is a Subsidiary) on any series of
         preferred stock of such Person, times (ii) a fraction, the numerator of
         which is one and the denominator of which is one minus the then current
         combined  federal,  state and local  statutory tax rate of such Person,
         expressed as a decimal,  determined,  in each case,  on a  consolidated
         basis and in accordance with GAAP.

                  "Fixed  Rate Senior  Notes"  means the 10% Series A Fixed Rate
         Senior Notes due 2001,  as amended or  supplemented  from time to time,
         issued by the Borrower and Finance Corp pursuant to the 1994 Indenture.

"Floating Rate Senior Notes" means the $50,000,000 Series B Floating Rate Senior
Notes due 2001 issued by the  Borrower  and Finance  Corp.  pursuant to the 1994
Indenture.

                  "FRB"  means the Board of  Governors  of the  Federal  Reserve
         System,  and  any  Governmental  Authority  succeeding  to  any  of its
         principal functions.

                  "Funded  Debt"  means all  Indebtedness  of  Borrower  and its
         Subsidiaries  which by its terms or by the terms of any  instrument  or
         agreement  relating thereto matures,  or which is otherwise  payable or
         unpaid,  one year or more from, or is directly or indirectly  renewable
         or extendable at the option of the obligor in respect thereof to a date
         one year or more  (including,  without  limitation,  an  option of such
         obligor  under  a  revolving  credit  agreement  or  similar  agreement
         obligating  the lender or lenders to extend credit over a period of one
         year or  more)  from,  the  date of  creation  thereof,  excluding  all
         Contingent  Obligations  of Borrower and its  Subsidiaries  under or in
         connection with Letters of Credit outstanding from time to time.

                  "GAAP" means  generally  accepted  accounting  principles  set
         forth  from  time to time in the  opinions  and  pronouncements  of the
         Accounting  Principles  Board and the  American  Institute of Certified
         Public  Accountants and statements and  pronouncements of the Financial
         Accounting  Standards  Board (or  agencies  with  similar  functions of
         comparable   stature   and   authority   within  the  U.S.   accounting
         profession),  which are applicable to the  circumstances as of the date
         of determination.

"General Partner" has the meaning specified in the introductory clause hereto.

                  "Governmental  Authority" means any nation or government,  any
         state or other  political  subdivision  thereof,  any central  bank (or
         similar  monetary  or  regulatory   authority)   thereof,   any  entity
         exercising   executive,    legislative,    judicial,    regulatory   or
         administrative  functions  of or  pertaining  to  government,  and  any
         corporation  or other  entity  owned or  controlled,  through  stock or
         capital ownership or otherwise, by any of the foregoing.

                  "Growth-Related  Capital  Expenditures" means, with respect to
         any Person, all capital  expenditures by such Person made to improve or
         enhance the existing capital assets or to increase the customer base of
         such  Person  or to  acquire  or  construct  new  capital  assets  (but
         excluding  capital  expenditures  made  to  maintain,  up to the  level
         thereof that  existed at the time of such  expenditure,  the  operating
         capacity of the capital assets of such Person as such assets existed at
         the time of such expenditure).

                  "Guarantor" means each Person that executes a Guaranty and its
         successors and assigns, and includes Finance Corp.

                  "Guaranty"  means a continuing  guaranty of the Obligations in
         favor of the  Agent  on  behalf  of the  Banks,  in form and  substance
         satisfactory to the Agent.

"Guaranty Obligation" has the meaning specified in the definition of "Contingent
     Obligation."

                  "Hedging  Obligations"  means, with respect to any Person, the
         obligations  of such Person  under (i) interest  rate swap  agreements,
         interest rate cap  agreements  and interest rate collar  agreements and
         (ii) other  agreements or arrangements  designed to protect such Person
         against fluctuations in interest rates.

                  "Honor Date" has the meaning specified in subsection 3.03(c).

                  "Indebtedness" of any Person means, without  duplication,  (a)
         all  indebtedness  for  borrowed  money;  (b) all  obligations  issued,
         undertaken  or assumed as the  deferred  purchase  price of property or
         services (other than trade payables entered into in the ordinary course
         of business on ordinary terms); (c) all non-contingent reimbursement or
         payment  obligations  with  respect  to  Surety  Instruments;  (d)  all
         obligations   evidenced  by  notes,   bonds,   debentures   or  similar
         instruments,  including obligations so evidenced incurred in connection
         with  the  acquisition  of  property,  assets  or  businesses;  (e) all
         indebtedness  created or arising  under any  conditional  sale or other
         title  retention  agreement,  or incurred as financing,  in either case
         with respect to property acquired by the Person (even though the rights
         and remedies of the seller or bank under such agreement in the event of
         default are limited to repossession or sale of such property);  (f) all
         Capital  Lease  Obligations;  (g)  all  Hedging  Obligations;  (h)  all
         indebtedness  referred to in clauses  (a) through (g) above  secured by
         (or for which the holder of such  Indebtedness  has an existing  right,
         contingent or otherwise, to be secured by) any Lien upon or in property
         (including  accounts and contracts  rights) owned by such Person,  even
         though such Person has not assumed or become  liable for the payment of
         such  Indebtedness;  and (i) all  Guaranty  Obligations  in  respect of
         indebtedness  or  obligations  of others of the  kinds  referred  to in
         clauses (a) through (h) above.

          "Indemnified Liabilities" has the meaning specified in Section 11.05.

          "Indemnified Person" has the meaning specified in Section 11.05.

          "Independent Auditor" has the meaning specified in subsection 7.01(a).

                  "Ineligible  Securities"  means  securities  which  may not be
         underwritten  or dealt in by member banks of the Federal Reserve System
         under  Section  16 of the  Banking  Act of  1933  (12  U.S.C.  ss.  24,
         Seventh), as amended.

                  "Insolvency   Proceeding"   means  (a)  any  case,  action  or
         proceeding before any court or other Governmental Authority relating to
         bankruptcy,  reorganization,   insolvency,  liquidation,  receivership,
         dissolution,  winding-up  or  relief  of  debtors,  or (b) any  general
         assignment  for the benefit of creditors,  composition,  marshalling of
         assets for  creditors,  or other,  similar  arrangement in respect of a
         Person's creditors  generally or any substantial  portion of a Person's
         creditors; undertaken under U.S.
         Federal, state or foreign law, including the Bankruptcy Code.

                  "Interest Payment Date" means, as to any Eurodollar Rate Loan,
         the last day of each Interest Period applicable to such Loan and, as to
         any Base Rate Loan,  the first  Business Day of each fiscal  quarter of
         the  Borrower,  provided,  however,  that if any Interest  Period for a
         Eurodollar  Rate  Loan  exceeds  three  months,  the date that is three
         months  after the  beginning  of such  Interest  Period  and after each
         Interest  Payment Date  thereafter  is also an Interest  Payment  Date,
         provided further, that if there is no numerically  corresponding day in
         the calendar  month during which an Interest  Payment Date is to occur,
         such Interest Payment Date shall occur on the last Business Day of such
         calendar month.

                  "Interest  Period" means,  as to any Eurodollar Rate Loan, the
         period  commencing  on  the  Borrowing  Date  of  such  Loan  or on the
         Conversion/Continuation  Date on which  the Loan is  converted  into or
         continued as a Eurodollar  Rate Loan,  and ending on the date one, two,
         three or six months  thereafter  as  selected  by the  Borrower  in its
         Notice of Borrowing or Notice of Conversion/Continuation;

         provided that:

                           (i) if any Interest  Period would  otherwise end on a
                  day that is not a Business Day, that Interest  Period shall be
                  extended to the  following  Business  Day unless the result of
                  such  extension  would be to carry such  Interest  Period into
                  another  calendar  month,  in which event such Interest Period
                  shall end on the preceding Business Day;

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

(iii) no  Interest  Period  for any  Revolving  Loan  shall  extend  beyond  the
Revolving Loan Termination Date; and

                           (iv) no Interest Period  applicable to the Facility B
                  Term Loan shall extend beyond the Term Loan Maturity Date.

                  "IRS" means the Internal Revenue Service, and any Governmental
         Authority succeeding to any of its principal functions.

               "Issuance Date" has the meaning specified in subsection 3.01(a).

                  "Issue" means,  with respect to any Letter of Credit, to issue
         or to extend the expiry of, or to renew or increase the amount of, such
         Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
         corresponding meanings.

                  "Issuing  Banks"  means  BofA  and  Banque  Paribas  in  their
         respective  capacities  as  issuers  of one or more  Letters  of Credit
         hereunder.

                  "Joint   Venture"   means   a   single-purpose    corporation,
         partnership,  joint venture or other similar legal arrangement (whether
         created by contract or conducted  through a separate  legal entity) now
         or  hereafter  formed by the Borrower or any of its  Subsidiaries  with
         another Person in order to conduct a common venture or enterprise  with
         such Person.

                  "L/C  Advance"  means  each  Bank's  participation  in any L/C
         Borrowing in accordance with its Pro Rata Share.

                  "L/C  Amendment  Application"  means an  application  form for
         amendment  of  outstanding  Standby  Letters  of Credit  or  Commercial
         Letters  of  Credit  as shall  at any time be in use at the  applicable
         Issuing Bank, as such Issuing Bank shall request.

                  "L/C  Application"  means an application form for issuances of
         Standby  Letters of Credit or Commercial  Letters of Credit as shall at
         any time be in use at the applicable Issuing Bank, as such Issuing Bank
         shall request.

                  "L/C Borrowing"  means an extension of credit resulting from a
         drawing under any Letter of Credit which shall not have been reimbursed
         on the date when made nor  converted  into a  Borrowing  of  Facility A
         Revolving Loans under subsection 3.03(c).

                  "L/C Commitment"  means the commitment of the Issuing Banks to
         Issue,  and the commitment of the Banks  severally to  participate  in,
         Letters of Credit from time to time Issued or outstanding under Article
         III,  in an  aggregate  amount  not to exceed on any date the lesser of
         $50,000,000 and the aggregate Facility C Commitment, as such amount may
         be reduced as a result of a reduction in the L/C Commitment pursuant to
         Section  2.05;  provided  that  the  L/C  Commitment  is a part  of the
         aggregate  Facility C Commitment,  rather than a separate,  independent
         commitment.

                  "L/C  Obligations"  means  at any  time  the  sum  of (a)  the
         aggregate  undrawn  amount of all Letters of Credit  then  outstanding,
         plus (b) the amount of all  unreimbursed  drawings under all Letters of
         Credit,  including all outstanding  L/C Borrowings,  plus (c) all other
         Obligations  of the Borrower and Stratton  under or in connection  with
         the  L/C-Related  Documents,  to the extent not included within clauses
         (a) and (b) hereof.

                  "L/C-Related  Documents" means the Letters of Credit,  the L/C
         Applications,  the L/C Amendment  Applications  and any other  document
         relating to any Letter of Credit,  including any of the Issuing  Banks'
         standard form  reimbursement  agreements and other documents for letter
         of credit issuances.

                  "Lending  Office" means, as to any Bank, the office or offices
         of such Bank  specified  as its "Lending  Office" or "Domestic  Lending
         Office" or "Eurodollar Lending Office", as the case may be, on Schedule
         11.02,  or such  other  office or offices as such Bank may from time to
         time notify the Borrower and the Agent.

"Letters  of  Credit"  means,  collectively,   Standby  Letters  of  Credit  and
Commercial Letters of Credit.

                  "Level" means,  at any time,  Level 1, Level 2, Level 3, Level
         4, Level 5 or Level 6 based on the amount of the Pricing  Ratio at such
         time. For purposes of this Agreement, the following "Levels" of Pricing
         Ratio (PR) shall apply:

                  Level                     Pricing Ratio

                  Level 1                         PR less than 1.75
                  Level 2                  1.75 less than PR less than 2.75
                  Level 3                  2.75 less than PR less than 3.25
                  Level 4                  3.25 less than PR less than 3.75
                  Level 5                  3.75 less than PR less than 4.25
                  Level 6                         PR less than 4.25

         The Level of the  Pricing  Ratio for the  period  from the  Restatement
         Effective Date to the end of the fiscal quarter of the Borrower  during
         which the Restatement  Effective Date occurs shall be equal to Level 2.
         Any change in the Level of the Pricing Ratio shall be determined by the
         Agent based upon the financial  information required to be contained in
         the Compliance Certificates delivered by the Borrower to the Agent with
         respect  to each  fiscal  quarter  of the  Borrower  and  shall  become
         effective  as of the  first day of the  fiscal  quarter  following  the
         fiscal  quarter for which such  Compliance  Certificate  was delivered.
         Upon any failure of the  Borrower to deliver a  Compliance  Certificate
         for any  fiscal  quarter  prior to 10 days after the date on which such
         Compliance  Certificate  is required to be delivered to the Agent,  and
         without  limiting  the other  rights and  remedies of the Agent and the
         Banks hereunder,  the Pricing Ratio shall be deemed to be Level 6 as of
         the first day of the fiscal quarter  beginning after the fiscal quarter
         for which such Compliance Certificate was due.

                  "Leverage  Ratio"  means,  with  respect to any Person for any
         period, the ratio of Funded Debt plus Synthetic Lease  Obligations,  in
         each case of such  Person at the end of such  period,  to  Consolidated
         Cash Flow of such  Person for such period plus the portion of rent paid
         or payable (without  duplication) for that period under Synthetic Lease
         Obligations  of such  Person  that  would be  treated  as  interest  in
         accordance with Financial  Accounting  Standards Board Statement No. 13
         if such  Synthetic  Lease  Obligations  were  treated as Capital  Lease
         Obligations  under GAAP (such portion,  the  "Synthetic  Lease Interest
         Component").  In the  event  that  the  referent  Person  or any of its
         Subsidiaries  incurs,  assumes,  guarantees,   redeems  or  repays  any
         Indebtedness (other than revolving credit borrowings) subsequent to the
         commencement  of the  period  for  which  the  Leverage  Ratio is being
         calculated  but  prior  to the  date on which  the  calculation  of the
         Leverage Ratio is made (the "Leverage Ratio  Calculation  Date"),  then
         the Leverage Ratio shall be calculated  giving pro forma effect to such
         incurrence,   assumption,   guarantee,   redemption   or  repayment  of
         Indebtedness,  as if the  same had  occurred  at the  beginning  of the
         applicable reference period. The foregoing  calculation of the Leverage
         Ratio shall also give pro forma effect to  Acquisitions  (including all
         mergers and  consolidations),  Asset Sales and other  dispositions  and
         discontinuances  of  businesses  or  assets  that have been made by the
         referent Person or any of its Subsidiaries  during the reference period
         or subsequent to such reference  period and on or prior to the Leverage
         Ratio Calculation Date assuming that all such Acquisitions, Asset Sales
         and other dispositions and  discontinuances of businesses or assets had
         occurred on the first day of the reference period;  provided,  however,
         that with respect to the Borrower and its Subsidiaries, (a) Funded Debt
         shall be reduced by amounts  attributable  to businesses or assets that
         are so  disposed  of or  discontinued  only  to  the  extent  that  the
         Indebtedness  included  within  such  Funded Debt would no longer be an
         obligation  of the  Borrower  or  its  Subsidiaries  subsequent  to the
         Leverage  Ratio   Calculation  Date  and  (b)  Consolidated  Cash  Flow
         generated by an acquired  business or asset shall be  determined by the
         actual  gross  profit  (revenues  minus  costs of  goods  sold) of such
         acquired  business or asset during the immediately  preceding number of
         full fiscal  quarters as in the  reference  period  minus the pro forma
         expenses  that  would  have  been  incurred  by the  Borrower  and  its
         Subsidiaries in the operation of such acquired business or asset during
         such  period  computed  on the  basis  of (i)  personnel  expenses  for
         employees  retained  by  the  Borrower  and  its  Subsidiaries  in  the
         operation  of the  acquired  business  or asset and (ii)  non-personnel
         costs and expenses  incurred by the Borrower and its  Subsidiaries on a
         per  gallon  basis  in the  operation  of the  Borrower's  business  at
         similarly situated facilities of the Borrower.

                  "LIBOR" means the rate of interest per annum determined by the
         Agent to be the arithmetic  mean (rounded  upward to the next 1/16th of
         1%) of the rates of interest per annum notified to the Agent by BofA as
         the rates of  interest  at which  dollar  deposits  in the  approximate
         amount  of the  amount  of the  Loan  to be made or  continued  as,  or
         converted  into, a  Eurodollar  Rate Loan by BofA and having a maturity
         comparable to such  Interest  Period would be offered to major banks in
         the London  interbank  market at their request at  approximately  11:00
         a.m.  (London time) two Business Days prior to the commencement of such
         Interest Period.

                  "Lien" means any security interest,  mortgage,  deed of trust,
         pledge,  hypothecation,  assignment,  charge  or  deposit  arrangement,
         encumbrance,  lien (statutory or other) or preferential  arrangement of
         any kind or nature  whatsoever  in respect of any  property  (including
         those created by, arising under or evidenced by any conditional sale or
         other title  retention  agreement,  the  interest  of a lessor  under a
         capital  lease,  any  financing  lease  having  substantially  the same
         economic effect as any of the foregoing, or the filing of any financing
         statement  naming the owner of the asset to which such lien  relates as
         debtor,  under the Uniform  Commercial  Code or any comparable law) and
         any contingent or other agreement to provide any of the foregoing,  but
         not including the interest of a lessor under an operating lease.

                  "Loan"  means an extension of credit by a Bank to the Borrower
         under  Article II or Article  III in the form of a Facility A Revolving
         Loan,  Facility B Term Loan,  Facility C Revolving Loan, L/C Advance or
         (in the case of BofA) Swingline Loan.

                  "Loan  Documents"  means this  Agreement,  any Notes,  the Fee
         Letters,  the  L/C-Related  Documents,  the  Guaranties  and all  other
         documents delivered to the Agent or any Bank in connection herewith.

                  "Majority  Banks"  means at any time Banks then holding 51% or
         more of the then aggregate  unpaid principal amount of the Loans (other
         than the  Swingline  Loans),  or, if no such  principal  amount is then
         outstanding,  Banks then having 51% or more of the aggregate  Revolving
         Loan Commitments.

                  "Margin Stock" means "margin stock" as such term is defined in
Regulation U of the FRB.

                  "Material  Adverse Effect" means (a) a material adverse change
         in, or a  material  adverse  effect  upon,  the  operations,  business,
         properties,  condition  (financial  or  otherwise)  or prospects of the
         Borrower or the Borrower and its  Subsidiaries  taken as a whole; (b) a
         material impairment of the ability of the General Partner, the Borrower
         or any  Subsidiary  to perform  under any Loan Document or otherwise to
         avoid any Event of Default;  or (c) a material  adverse effect upon the
         legality,  validity,  binding  effect  or  enforceability  against  the
         Borrower or any Subsidiary of any Loan Document.

                  "MLP" means  Ferrellgas  Partners,  L.P.,  a Delaware  limited
         partnership and the sole limited partner of the Borrower.

"MLP Senior Notes" means the $160,000,000  9-3/8% Senior Secured Notes issued by
the MLP and Ferrellgas Partners Finance Corp. pursuant to the 1996 Indenture.

                  "Net Income" means, with respect to any Person, the net income
         (loss) of such Person,  determined in  accordance  with GAAP and before
         any  reduction  in respect of  preferred  stock  dividends,  excluding,
         however,  (a) any  gain  (but not  loss),  together  with  any  related
         provision for taxes on such gain (but not loss), realized in connection
         with (i) any asset sale (including,  without  limitation,  dispositions
         pursuant to sale and leaseback  transactions),  or (ii) the disposition
         of any securities or the  extinguishment  of any  Indebtedness  of such
         Person or any of its Subsidiaries,  and (b) any extraordinary gain (but
         not  loss),  together  with any  related  provision  for  taxes on such
         extraordinary gain (but not loss);  provided,  however,  that all costs
         and expenses with respect to the retirement of the Floating Rate Senior
         Notes,  including,  without  limitation,  cash  premiums,  tender offer
         premiums,  consent  payments  and all fees and  expenses in  connection
         therewith,  shall be added back to the Net Income of the Borrower,  the
         General  Partner or their  Subsidiaries  to the  extent  that they were
         deducted from such Net Income in accordance with GAAP.

                  "Net Proceeds of Asset Sale" means the aggregate cash proceeds
         received by the Borrower or any of its  Subsidiaries  in respect of any
         Asset  Sale,  net of the  direct  costs  relating  to such  Asset  Sale
         (including,   without  limitation,  legal,  accounting  and  investment
         banking  fees,  and  sales  commissions)  and any  relocation  expenses
         incurred as a result thereof, taxes paid or payable as a result thereof
         (after taking into account any available tax credits or deductions  and
         any tax sharing  arrangements),  and amounts  required to be applied to
         the repayment of Indebtedness  secured by a Lien on the asset or assets
         the subject of such Asset Sale.

                  "Non-Recourse   Subsidiary"   means  any  Person   that  would
         otherwise  be a  Subsidiary  of the  Borrower  but is  designated  as a
         Non-Recourse  Subsidiary  in a resolution  of the Board of Directors of
         the General Partner, so long as each of the following remains true: (a)
         no portion of the Indebtedness or any other  obligation  (contingent or
         otherwise)  of  such  Person  (i)  is a  Contingent  Obligation  of the
         Borrower or any of its Subsidiaries,  (ii) is recourse or obligates the
         Borrower or any of its  Subsidiaries  in any way or (iii)  subjects any
         property or asset of the Borrower or any of its Subsidiaries,  directly
         or indirectly,  contingently or otherwise, to satisfaction thereof, (b)
         neither the  Borrower  nor any of its  Subsidiaries  has any  contract,
         agreement,  arrangement or understanding or is subject to an obligation
         of any kind,  written or oral,  with such Person other than on terms no
         less  favorable to the Borrower  and its  Subsidiaries  than those that
         might be obtained at the time from  persons who are not  Affiliates  of
         the Borrower,  (c) neither the Borrower nor any of its Subsidiaries has
         any  obligation  with  respect  to such  Person  (i) to  subscribe  for
         additional  shares of capital stock,  Capital Interests or other Equity
         Interests therein or (ii) maintain or preserve such Person's  financial
         condition  or to  cause  such  Person  to  achieve  certain  levels  of
         operating or other financial results,  (d) such Person has no more than
         $1,000 of assets at the time of such designation, (e) such Person is in
         compliance  with the  restrictions  applicable to Affiliates of the MLP
         under  Section 8.22 hereof and (f) such Person takes steps  designed to
         assure that neither the Borrower  nor any of its  Subsidiaries  will be
         liable for any portion of the Indebtedness or other obligations of such
         Person,  including  maintenance  of a corporate or limited  partnership
         structure  and  observance of  applicable  formalities  such as regular
         meetings and  maintenance  of minutes,  a  substantial  and  meaningful
         capitalization  and the use of a corporate or partnership  name,  trade
         name or trademark not misleadingly similar to those of the Borrower.

                  "Note"  means a  promissory  note  executed by the Borrower in
         favor of a Bank pursuant to subsection  2.02(b),  in substantially  the
         form of Exhibit F-1, F-2 or F-3.

"Notice of Borrowing" means a notice in substantially the form of Exhibit A.

"Notice of Conversion/Continuation"  means a notice in substantially the form of
Exhibit B.

                  "Obligations"   means  all   advances,   debts,   liabilities,
         obligations,  covenants  and duties  arising  under any Loan  Document,
         owing by the  Borrower  to any  Bank,  the  Agent,  or any  Indemnified
         Person,  whether  direct  or  indirect  (including  those  acquired  by
         assignment), absolute or contingent, due or to become due, now existing
         or hereafter arising including, without limitation, all Indebtedness of
         the  Borrower to the Banks for the payment of principal of and interest
         on all  outstanding  Loans and all  obligations  of the Borrower to the
         Issuing  Banks for  reimbursement  of drawings  under Letters of Credit
         from time to time.

                  "Organization  Documents"  means,  for  any  corporation,  the
         certificate or articles of incorporation,  the bylaws,  any certificate
         of  determination  or  instrument  relating to the rights of  preferred
         shareholders of such corporation, any shareholder rights agreement, and
         all applicable  resolutions of the board of directors (or any committee
         thereof)  of  such   corporation   and,  for  any  general  or  limited
         partnership,  the  partnership  agreement of such  partnership  and all
         amendments thereto and any agreements  otherwise relating to the rights
         of the partners thereof.

                  "Other Taxes" means any present or future stamp or documentary
         taxes or any other excise or property taxes,  charges or similar levies
         which  arise from any payment  made  hereunder  or from the  execution,
         delivery  or  registration  of, or  otherwise  with  respect  to,  this
         Agreement or any other Loan Documents.

                "Participant" has the meaning specified in subsection 11.08(d).

                  "Partners'  Equity" means the  partners'  equity as shown on a
         balance sheet prepared in accordance with GAAP for any partnership.

                  "Partnership  Agreement"  shall mean the  Agreement of Limited
         Partnership of the Borrower dated July 5, 1994, as amended from time to
         time.

                  "PBGC" means the Pension Benefit Guaranty Corporation,  or any
         Governmental  Authority  succeeding to any of its  principal  functions
         under ERISA.

                  "Pension  Plan"  means a pension  plan (as  defined in Section
         3(2) of ERISA)  subject to Title IV of ERISA which the  Borrower or the
         General Partner sponsors,  maintains,  or to which it makes, is making,
         or is  obligated  to make  contributions,  or in the case of a multiple
         employer  plan (as  described  in  Section  4064(a)  of ERISA) has made
         contributions  at any time during the  immediately  preceding  five (5)
         plan years.

                  "Permitted  Acquisitions"  means  Acquisitions by the Borrower
         and its Subsidiaries which comply with the provisions of Section 8.04.

                  "Permitted  Investments"  means  (a) any  Investments  in Cash
         Equivalents;  (b) any  Investments in the Borrower or in a Wholly-Owned
         Subsidiary of the Borrower that is a Guarantor;  (c) Investments by the
         Borrower or any Subsidiary of the Borrower in a Person,  if as a result
         of such Investment (i) such Person becomes a Wholly-Owned Subsidiary of
         the   Borrower   and  a  Guarantor  or  (ii)  such  Person  is  merged,
         consolidated  or  amalgamated  with or into,  or  transfers  or conveys
         substantially all of its assets to, or is liquidated into, the Borrower
         or a Wholly-Owned  Subsidiary of the Borrower that is a Guarantor;  and
         (d) other Investments in Non-Recourse Subsidiaries of the Borrower that
         do not exceed $30 million in the aggregate.

                  "Permitted Liens" has the meaning specified in Section 8.01.

                  "Permitted Refinancing Indebtedness" means any Indebtedness of
         the Borrower or any Subsidiary of the Borrower  issued in exchange for,
         or the net  proceeds  of which are used to  extend,  refinance,  renew,
         replace, defease or refund other Indebtedness of the Borrower or any of
         its  Subsidiaries;  provided  that  (a) the  principal  amount  of such
         Indebtedness  does not exceed the principal  amount of the Indebtedness
         so extended,  refinanced,  renewed, replaced, defeased or refunded (the
         "Prior  Indebtedness") (plus the amount of reasonable expenses incurred
         in connection therewith),  and the effective interest rate per annum on
         such  Indebtedness  does not or is not likely to exceed  the  effective
         interest rate per annum of the Prior Indebtedness, as determined by the
         Agent in its sole  discretion;  (b) such  Indebtedness  has a  Weighted
         Average Life to Maturity equal to or greater than the Weighted  Average
         Life  to  Maturity  of  the  Prior  Indebtedness;   (c)  if  the  Prior
         Indebtedness is subordinated to the Obligations,  such  Indebtedness is
         subordinated  to the  Obligations on the terms and conditions set forth
         on part II of Schedule 8.05; and (d) such  Indebtedness  is incurred by
         the  Borrower  or  the  Subsidiary  who  is the  obligor  on the  Prior
         Indebtedness.

                  "Permitted Senior Debt" means, with respect to any Person, (i)
         any Acquired  Debt of such Person,  (ii) any  Indebtedness  incurred by
         such  Person,  the  proceeds  of which are  applied  solely to  finance
         Growth-Related Capital Expenditures and (iii) any Indebtedness incurred
         by such  Person,  the  proceeds  of which are used  solely for  working
         capital purposes.

                  "Person"  means  an  individual,   partnership,   corporation,
         business trust, joint stock company, trust, unincorporated association,
         Joint Venture or Governmental Authority.

                  "Plan"  means an employee  benefit plan (as defined in Section
         3(3) of ERISA) which the Borrower sponsors or maintains or to which the
         Borrower or the General  Partner makes,  is making,  or is obligated to
         make contributions and includes any Pension Plan.

                  "Pricing  Ratio"  means,  as of the  last  day of each  fiscal
         quarter of the  Borrower,  the  Leverage  Ratio for the  fiscal  period
         consisting  of such  fiscal  quarter  of the  Borrower  and  the  three
         immediately preceding fiscal quarters of the Borrower.

                  "Pro  Rata  Share"  means,  as to any  Bank at any  time,  the
         percentage  set forth on Schedule  2.01 hereto as its "Pro Rata Share,"
         as such amount may be adjusted by assignments under Section 11.08.

                  "Related Party" means (i) the spouse or any lineal  descendant
         of James E. Ferrell,  (ii) any trust for his benefit or for the benefit
         of his spouse or any such lineal  descendants or (iii) any corporation,
         partnership or other entity in which James E. Ferrell and/or such other
         Persons  referred  to in the  foregoing  clauses  (i) and  (ii) are the
         direct record and beneficial  owners of all of the voting and nonvoting
         Equity Interests.

                  "Reportable  Event"  means,  any of the  events  set  forth in
         Section 4043(b) of ERISA or the regulations thereunder,  other than any
         such event for which the 30-day notice requirement under ERISA has been
         waived in regulations issued by the PBGC.

                  "Requirement  of  Law"  means,  as  to  any  Person,  any  law
         (statutory or common),  treaty,  rule or regulation or determination of
         an arbitrator or of a Governmental  Authority,  in each case applicable
         to or binding  upon the Person or any of its  property  or to which the
         Person or any of its property is subject.

                  "Responsible Officer" means the chief executive officer or the
         president  of  the  General   Partner  or  any  other  officer   having
         substantially  the same  authority  and  responsibility  to act for the
         General Partner on behalf of the Borrower;  or, with respect to actions
         taken or to be taken  under  Articles  II and III and  compliance  with
         financial  covenants,  the chief financial  officer or the treasurer of
         the General Partner or any other officer having  substantially the same
         authority and  responsibility  to act for the General Partner on behalf
         of the Borrower or any other employee of the General Partner designated
         in a  certificate  of a Responsible  Officer to have  authority in such
         matters.

                  "Restatement  Effective  Date" means the later to occur of (a)
         the first date on which all  conditions  precedent set forth in Section
         5.01 and Section 5.02 are  satisfied or waived by all Banks (or, in the
         case of subsection  5.01(f),  waived by the Persons entitled to receive
         such payments) and (b) July 31, 1996.

                  "Revolving  Loan  Commitments"  means,  as to each  Bank,  the
         Facility A Commitment and the Facility C Commitment of such Bank.

"Revolving  Loans" means,  collectively,  the Facility A Revolving Loans and the
Facility C Revolving Loans.

                  "Revolving  Loan  Termination  Date"  means the earlier of (a)
         July  31,  1999  (or  such  later  date to  which  the  Revolving  Loan
         Termination Date may be extended pursuant to subsection 2.08(d) of this
         Agreement)  and (b) the date on which the  Revolving  Loan  Commitments
         shall have been terminated pursuant to this Agreement.

                  "SEC" means the  Securities  and Exchange  Commission,  or any
         Governmental Authority succeeding to any of its principal functions.

                  "Senior Debt" means, without duplication, (i) the Obligations,
         (ii) all other  Indebtedness  of the Borrower or Finance Corp.,  unless
         the  instrument  under which such  Indebtedness  is incurred  expressly
         provides that it is subordinated in right of payment to the Obligations
         and (iii) all Indebtedness of Subsidiaries of the Borrower,  other than
         Finance Corp.

                  "Significant  Subsidiary" means any Subsidiary of the Borrower
         that would be a "significant  subsidiary" as defined in Article 1, Rule
         1-02 of  Regulation  S-X,  promulgated  pursuant  to the  Act,  as such
         Regulation is in effect on the date hereof.

                  "Solvent"  shall mean, with respect to any Person on any date,
         that on such date (a) the fair value of the  property of such Person is
         greater  than the fair  value of the  liabilities  (including,  without
         limitation,  contingent  liabilities)  of such Person,  (b) such Person
         does not intend to, and does not believe that it will,  incur debts and
         liabilities  beyond  such  Person's  ability  to pay as such  debts and
         liabilities  mature and (c) such Person is not engaged in business or a
         transaction, and is not about to engage in a business or a transaction,
         for which such Person's property would constitute an unreasonably small
         capital.

                  "Standby  Letters of Credit" means  standby  letters of credit
         Issued by an Issuing Bank pursuant to Article III.

                  "Standby  Letter  of  Credit  Risk  Participation  Percentage"
         means,  as of any date and based upon the Level of the Pricing Ratio on
         such date, the percent per annum  (expressed in basis points) set forth
         below opposite such Level:
<TABLE>
<CAPTION>

                  Pricing Ratio                      Standby Letter of Credit Risk
Participation Percentage

<S>                          <C>                                                       <C>       
                       Level 1                                                         42.50 b.p.
                       Level 2                                                         50.00 b.p.
                       Level 3                                                         60.00 b.p.
                       Level 4                                                         80.00 b.p.
                       Level 5                                                        110.00 b.p.
                       Level 6                                                        137.50 b.p.
</TABLE>

                  "Subsidiary"   means,   with   respect  to  any  Person,   any
          corporation,  association or other business  entity of which more than
          50% of the total voting power of shares of Capital Interests  entitled
          (without  regard to the occurrence of any  contingency) to vote in the
          election of directors,  managers or trustees  thereof (or, in the case
          of a  limited  partnership,  more  than  50%  of  either  the  general
          partners'   Capital   Interests  or  the  limited   partners'  Capital
          Interests) is at the time owned or controlled, directly or indirectly,
          by such Person or one or more of the other Subsidiaries of that Person
          or  a  combination   thereof.   Notwithstanding  the  foregoing,   any
          Subsidiary  of  the  Borrower   that  is  designated  a   Non-Recourse
          Subsidiary  pursuant to the definition  thereof shall,  for so long as
          all of the  statements in the  definition  thereof remain true, not be
          deemed a Subsidiary of the Borrower.

                  "Subsidiary Note Guarantees" means each guarantee of the Fixed
          Rate Senior Notes made pursuant to the 1994 Indenture.

                  "Surety  Instruments"  means all letters of credit  (including
          standby  and  commercial),   bankers'  acceptances,  bank  guaranties,
          shipside bonds, surety bonds and similar instruments.

                  "Swingline Loan" has the meaning specified in Section 2.15.

                  "Synthetic Lease" means each arrangement,  however  described,
          under  which the obligor  accounts  for its  interest in the  property
          covered thereby under GAAP as lessee of a lease which is not a Capital
          Lease and accounts for its  interest in the property  covered  thereby
          for Federal income tax purposes as the owner.

                  "Synthetic  Lease  Obligation"  means,  as to any Person  with
          respect  to any  Synthetic  Lease  at any time of  determination,  the
          amount of the  liability  of such Person in respect of such  Synthetic
          Lease that  would (if such lease was  required  to be  classified  and
          accounted  for as a capital lease on a balance sheet of such Person in
          accordance  with GAAP) be  required to be  capitalized  on the balance
          sheet of such Person at such time.

                  "Taxes"  means any and all  present or future  taxes,  levies,
          imposts, deductions, charges or withholdings, and all liabilities with
          respect  thereto,  excluding,  in the case of each Bank and the Agent,
          such taxes (including  income taxes or franchise taxes) as are imposed
          on or measured by each Bank's net income by the  jurisdiction  (or any
          political  subdivision  thereof)  under the laws of which such Bank or
          the Agent,  as the case may be, is  organized  or  maintains a lending
          office.

                  "Term Loan Maturity Date" means June 1, 2001.

                  "Type" means, with respect to any Loan, whether such Loan is a
          Base Rate Loan or a Eurodollar Rate Loan.

                  "UCP" has the meaning specified in Section 3.09.

                  "Unfunded  Pension  Liability"  means  the  excess of a Plan's
          benefit  liabilities  under  Section  4001(a)(16)  of ERISA,  over the
          current value of that Plan's assets, determined in accordance with the
          assumptions  used for funding the Pension Plan pursuant to Section 412
          of the Code for the applicable plan year.

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

                  "Weighted Average Life to Maturity" means, when applied to any
          Indebtedness at any date, the number of years obtained by dividing (a)
          the sum of the products obtained by multiplying (x) the amount of each
          then remaining  installment,  sinking fund,  serial  maturity or other
          required  payments of principal,  including payment at final maturity,
          in  respect  thereof,  by (y) the number of years  (calculated  to the
          nearest one-twelfth) that will elapse between such date and the making
          of such payment, by (b) the then outstanding  principal amount of such
          Indebtedness;  provided,  however,  that with respect to any revolving
          Indebtedness,  the foregoing  calculation of Weighted  Average Life to
          Maturity   shall  be  determined   based  upon  the  total   available
          commitments and the required  reductions of commitments in lieu of the
          outstanding  principal amount and the required  payments of principal,
          respectively.

                  "Wholly-Owned  Subsidiary"  means a Subsidiary of which all of
          the outstanding  Capital Interests or other ownership interests (other
          than  directors'  qualifying  shares)  or,  in the  case of a  limited
          partnership,  all of the partners' Capital Interests (other than up to
          a 1% general partner interest), is owned,  beneficially and of record,
          by the Borrower, a Wholly-Owned Subsidiary of the Borrower or both.

Other Interpretive Provisions.tive Provisions

(a) The  meanings of defined  terms are equally  applicable  to the singular and
plural forms of the defined terms.

                  (b) The words  "hereof",  "herein",  "hereunder"  and  similar
words refer to this Agreement as a whole and not to any particular  provision of
this Agreement; and subsection,  Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.

                  (c) (i) The term "documents" includes any and all instruments,
          documents,  agreements,  certificates,  indentures,  notices and other
          writings, however evidenced.

(ii)  The  term  "including"  is  not  limiting  and  means  "including  without
limitation."

                           (iii) In the  computation  of  periods of time from a
          specified date to a later  specified date, the word "from" means "from
          and  including";  the  words  "to"  and  "until"  each  mean  "to  but
          excluding", and the word "through" means "to and including."

                  (d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications  thereto,
but  only  to the  extent  such  amendments  and  other  modifications  are  not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation  are to be construed as including  all  statutory  and  regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.

                  (e)  The  captions  and  headings  of this  Agreement  are for
convenience  of reference only and shall not affect the  interpretation  of this
Agreement.

                  (f) This  Agreement  and other Loan  Documents may use several
different  limitations,  tests or  measurements  to regulate the same or similar
matters.  All such limitations,  tests and measurements are cumulative and shall
each be performed in accordance with their terms.

                  (g) Unless  otherwise  expressly  provided  herein,  financial
calculations applicable to the Borrower shall be made on a consolidated basis.

                  (h) This Agreement and the other Loan Documents are the result
of  negotiations  among and have been  reviewed  by counsel  to the  Agent,  the
Borrower  and  the  other  parties,   and  are  the  products  of  all  parties.
Accordingly,  they shall not be construed  against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.

Accounting Principles.ting Principles

                  (a)  Unless  the  context  otherwise  clearly  requires,   all
accounting  terms not  expressly  defined  herein  shall be  construed,  and all
financial   computations  required  under  this  Agreement  shall  be  made,  in
accordance  with GAAP,  consistently  applied.  In the event  that GAAP  changes
during the term of this Agreement  such that the covenants  contained in Section
7.12  would  then  be  calculated  in  a  different  manner  or  with  different
components, (i) the Borrower and the Banks agree to amend this Agreement in such
respects as are necessary to conform those  covenants as criteria for evaluating
Borrower's  financial  condition  to  substantially  the same  criteria  as were
effective  prior to such change in GAAP and (ii) the Borrower shall be deemed to
be in compliance with the covenants  contained in Section 7.12 during the 90-day
period  following any such change in GAAP if and to the extent that the Borrower
would have been in  compliance  therewith  under  GAAP as in effect  immediately
prior to such change.

                  (b)  Except  as  otherwise  specified,  references  herein  to
"fiscal year" and "fiscal quarter" refer to such fiscal periods of the Borrower.


                                   ARTICLE II
                                   THE CREDITS

Amounts and Terms of Revolving Loan  Commitments  and Facility B Term Loan.ity B
Term Loan

Facility A Revolving Loans.A Revolving Loans

                           (i) Each  Bank  severally  agrees,  on the  terms and
          subject  to the  conditions  set forth  herein,  to make  loans to the
          Borrower (each such loan, a "Facility A Revolving  Loan") from time to
          time on any  Business  Day  during  the  period  from the  Restatement
          Effective Date to the Revolving Loan Termination Date, in an aggregate
          principal  amount not to exceed at any time  outstanding  such  Bank's
          Facility  A  Commitment  as in  effect  from  time to time;  provided,
          however,  that,  after  giving  effect to any  Borrowing of Facility A
          Revolving Loans,  the Effective  Amount of all outstanding  Facility A
          Revolving  Loans shall not at any time exceed the combined  Facility A
          Commitments,  and the  Effective  Amount of the  Facility A  Revolving
          Loans of any Bank shall not at any time exceed such Bank's  Facility A
          Commitment.   On  the   Restatement   Effective  Date,  the  aggregate
          outstanding  principal amount of the Facility C Revolving Loans (other
          than  Swingline  Loans) under (and as defined in) the Existing  Credit
          Agreement  shall be  automatically  deemed to be  Facility A Revolving
          Loans under this  Agreement for all purposes of this Agreement and the
          other Loan Documents  (including for the purpose of determining  usage
          of the Facility A Commitment under this Agreement as set forth above).

                           (ii)  Within  the  limits of each  Bank's  Facility A
          Commitment and on the other terms and subject to the other  conditions
          hereof, the Borrower may borrow under this subsection 2.01(a),  prepay
          under  Section  2.06  and  reborrow  under  this  subsection  2.01(a);
          provided,  that the  Borrower  shall cause the  aggregate  outstanding
          principal  amount of Facility A Revolving  Loans to be reduced to zero
          for at least one period of 30 consecutive days during each fiscal year
          of the Borrower,  commencing with its fiscal year beginning  August 1,
          1996.

Facility B Term Loans.  Each Bank severally  agrees, on the terms and subject to
the  conditions  set forth herein,  to make a single loan to the Borrower  (each
such loan,  a  "Facility B Term Loan") on the  Restatement  Effective  Date in a
principal  amount  equal to the amount set forth  opposite  such  Bank's name on
Schedule 2.01 hereof under the caption "Facility B Term Loan" for the purpose of
refinancing the Floating Rate Senior Notes.  Amounts borrowed as Facility B Term
Loans which are repaid or prepaid by the Borrower may not be reborrowed.

Facility C Revolving Loans,  Letters of Credit and Swingline  Loans.d  Swingline
Loans

                           (i) Each  Bank  severally  agrees,  on the  terms and
          subject  to the  conditions  set forth  herein,  to make  loans to the
          Borrower (each such loan, a "Facility C Revolving  Loan") from time to
          time on any  Business  Day  during  the  period  from the  Restatement
          Effective Date to the Revolving Loan Termination Date, in an aggregate
          principal  amount not to exceed at any time  outstanding  such  Bank's
          Facility  C  Commitment  as in  effect  from  time to time;  provided,
          however,  that,  after  giving  effect to any  Borrowing of Facility C
          Revolving  Loans,  the sum of the Effective  Amount of all outstanding
          Facility  C  Revolving  Loans  plus the  Effective  Amount  of all L/C
          Obligations plus the Effective Amount of all Swingline Loans shall not
          at any time  exceed  the  combined  Facility  C  Commitments,  and the
          Effective  Amount of the  Facility C Revolving  Loans of any Bank plus
          the  participation  of such  Bank in the  Effective  Amount of all L/C
          Obligations plus such Bank's Pro Rata Share of the Effective Amount of
          all  outstanding  Swingline  Loans  shall not at any time  exceed such
          Bank's Facility C Commitment.  On the Restatement  Effective Date, the
          aggregate  outstanding  principal  amount of the  Facility A Revolving
          Loans,  the Facility B Revolving  Loans, the Facility B Term Loans and
          Swingline  Loans,  in each case under (and as defined in) the Existing
          Credit  Agreement  shall be  automatically  deemed  to be  Facility  C
          Revolving  Loans  under  this  Agreement  for  all  purposes  of  this
          Agreement and the other Loan  Documents  (including for the purpose of
          determining usage of the Facility C Commitment under this Agreement as
          set forth above).

                           (ii)  Within  the  limits of each  Bank's  Facility C
          Commitment and on the other terms and subject to the other  conditions
          hereof, the Borrower may borrow under this subsection 2.01(c),  prepay
          under Section 2.06 and reborrow under this subsection 2.01(c).

                           (iii)  As a  subfacility  of the  Banks'  Facility  C
          Commitments,  the Borrower and Stratton may request the Issuing  Banks
          to Issue Letters of Credit from time to time pursuant to Article III.

                           (iv) In  addition,  the  Borrower may request BofA to
          make  Swingline  Loans to the Borrower  from time to time  pursuant to
          Section 2.15.

Loan Accounts.  (a) The Loans made by each Bank and the Letters of Credit Issued
by the  Issuing  Banks  shall be  evidenced  by one or more  accounts or records
maintained  by such Bank or Issuing  Bank,  as the case may be, in the  ordinary
course of business. The accounts or records maintained by the Agent, the Issuing
Banks and each Bank shall be conclusive  absent  manifest error of the amount of
the Loans made by the Banks to the Borrower and the Letters of Credit Issued for
the account of the Borrower,  and the interest and payments thereon. Any failure
so to record or any error in doing so shall  not,  however,  limit or  otherwise
affect the  obligation  of the  Borrower  hereunder to pay any amount owing with
respect to the Loans or any Letter of Credit.

                  (b) Upon the request of any Bank made  through the Agent,  the
Loans made by such Bank may be evidenced  by one or more Notes,  instead of loan
accounts.  Each such Bank shall endorse on the schedules  annexed to its Note(s)
the date,  amount  and  maturity  of each Loan made by it and the amount of each
payment of principal made by the Borrower with respect  thereto.  Each such Bank
is irrevocably authorized by the Borrower to endorse its Note(s) and each Bank's
record shall be conclusive absent manifest error;  provided,  however,  that the
failure  of a Bank to make,  or an error in  making,  a  notation  thereon  with
respect to any Loan shall not limit or otherwise  affect the  obligations of the
Borrower hereunder or under any such Note to such Bank.

Procedure  for  Borrowing.  (a) Each  Borrowing of Loans  (other than  Swingline
Loans) shall be made upon the Borrower's irrevocable written notice delivered to
the Agent in the form of a Notice of Borrowing (which notice must be received by
the Agent prior to 11:00 a.m. San Francisco  time (i) three  Business Days prior
to the requested  Borrowing Date, in the case of Eurodollar Rate Loans, and (ii)
one Business Day prior to the requested Borrowing Date, in the case of Base Rate
Loans, specifying:

                                    (A) the amount of the Borrowing, which shall
                  be in  an  aggregate  minimum  amount  of  $3,000,000  or  any
                  multiple of $1,000,000 in excess thereof for Eurodollar Loans,
                  or  $1,000,000  or any multiple of $100,000 in excess  thereof
                  for Base Rate Loans;

(B) the requested Borrowing Date, which shall be a Business Day;

(C) the Type and Class of Loans comprising the Borrowing; and

(D) the duration of the Interest Period  applicable to any Eurodollar Rate Loans
included  in such  notice.

  If the  Notice of  Borrowing  fails to  specify  the
duration of the Interest  Period for any Borrowing  comprised of Eurodollar Rate
Loans, such Interest Period shall be one month.

                  (b) The Agent will  promptly  notify  each Bank of the Agent's
receipt of any  Notice of  Borrowing  and of the amount of such  Bank's Pro Rata
Share of that Borrowing.

                  (c) Each Bank will  make the  amount of its Pro Rata  Share of
each  Borrowing  available  to the Agent for the account of the  Borrower at the
Agent's  Payment  Office by 11:00 a.m. San Francisco  time on the Borrowing Date
requested  by the  Borrower in funds  immediately  available  to the Agent.  The
proceeds of all such Loans will then be made  available  to the  Borrower by the
Agent at such office by  crediting  the account of the  Borrower on the books of
BofA with the aggregate of the amounts made  available to the Agent by the Banks
and in like funds as received by the Agent.

                  (d) After  giving  effect to any  Borrowing,  there may not be
more than 10 different  Interest  Periods in effect with  respect to  Eurodollar
Rate Loans.

Conversion and  Continuation  Elections.  (a) The Borrower may, upon irrevocable
written notice to the Agent in accordance with subsection 2.04(b):

                           (i) elect,  as of any  Business  Day,  in the case of
          Base  Rate  Loans,  or as of the last day of the  applicable  Interest
          Period,  in the case of  Eurodollar  Rate  Loans,  to convert any such
          Loans (or any part thereof in an amount not less than  $3,000,000,  or
          that is in an integral  multiple of $1,000,000 in excess thereof) into
          Loans of the other Type; or

                           (ii)  elect  as of the  last  day  of the  applicable
          Interest Period, to continue as Eurodollar Rate Loans any Loans having
          Interest  Periods  expiring  on such  day (or any part  thereof  in an
          amount not less than $3,000,000, or that is in an integral multiple of
          $1,000,000 in excess thereof);

provided,  that if at any time the aggregate  amount of Eurodollar Rate Loans in
respect of any Borrowing is reduced,  by payment,  prepayment,  or conversion of
part  thereof to be less than  $3,000,000,  such  Eurodollar  Rate  Loans  shall
automatically convert into Base Rate Loans, and on and after such date the right
of the  Borrower  to  continue  such Loans as,  and  convert  such  Loans  into,
Eurodollar Rate Loans shall terminate.

                  (b)   The    Borrower    shall    deliver    a    Notice    of
Conversion/Continuation  to be  received  by the Agent not later than 10:00 a.m.
San  Francisco  time  at  least  (i)  three  Business  Days  in  advance  of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as  Eurodollar  Rate  Loans;  and  (ii)  one  Business  Day  in  advance  of the
Conversion/Continuation  Date,  if the Loans are to be converted  into Base Rate
Loans, specifying:

(A) the proposed Conversion/Continuation Date;

(B) the aggregate amount and Class of Loans to be converted or renewed;

(C) the Type of Loans  resulting from the proposed  conversion or  continuation;
and

                                    (D)  other  than in the case of  conversions
                  into Base Rate Loans,  the duration of the requested  Interest
                  Period.

                  (c) If upon the expiration of any Interest  Period  applicable
to  Eurodollar  Rate Loans,  the  Borrower  has failed to select a new  Interest
Period within the time period  specified in subsection  2.04(b) to be applicable
to such  Eurodollar  Rate  Loans,  or if any  Default or Event of  Default  then
exists,  the Borrower shall be deemed to have elected to convert such Eurodollar
Rate Loans  into Base Rate Loans  effective  as of the  expiration  date of such
Interest Period.

                  (d) The Agent will promptly notify each Bank of its receipt of
a Notice  of  Conversion/Continuation,  or,  if no  notice  is  provided  by the
Borrower within the time period specified in subsection 2.04(b),  the Agent will
promptly  notify  each Bank of the  details  of any  automatic  conversion.  All
conversions and continuations  shall be made ratably according to the respective
outstanding  principal amounts of the Loans with respect to which the notice was
given held by each Bank.

                  (e) Unless the  Majority  Banks  otherwise  agree,  during the
existence of a Default or Event of Default, the Borrower may not elect to have a
Loan converted into or continued as a Eurodollar Rate Loan.

                  (f) After giving effect to any conversion or  continuation  of
Loans, there may not be more than ten different Interest Periods in effect.

Voluntary Termination or Reduction of Revolving Loan Commitments.oan Commitments

                  (a) The Borrower  may, not later than 11:00 a.m. San Francisco
time at least three  Business Days prior to its effective  date by notice to the
Agent,  terminate  or  permanently  reduce  the  Facility  A  Commitments  by an
aggregate  minimum  amount of $5,000,000 or any multiple of $5,000,000 in excess
thereof;  unless,  after giving effect  thereto and to any  prepayments of Loans
made on the  effective  date  thereof,  the  Effective  Amount of all Facility A
Revolving  Loans would exceed the amount of the combined  Facility A Commitments
then in effect.

                  (b) The Borrower  may, not later than 11:00 a.m. San Francisco
time at least three  Business Days prior to its effective  date by notice to the
Agent,  terminate  or  permanently  reduce  the  Facility  C  Commitments  by an
aggregate  minimum  amount of $5,000,000 or any multiple of $5,000,000 in excess
thereof;  unless,  after giving effect  thereto and to any  prepayments of Loans
made on the effective date thereof,  (i) the Effective  Amount of all Facility C
Revolving  Loans,  L/C Obligations and Swingline Loans together would exceed the
amount of the  combined  Facility  C  Commitments  then in  effect,  or (ii) the
Effective Amount of all L/C Obligations  then  outstanding  would exceed the L/C
Commitment.

                  (c)  Once  reduced  in  accordance  with  this  Section,   the
Commitments may not be increased. Any reduction of the Facility A Commitments or
the Facility C  Commitments  shall be applied to each Bank  according to its Pro
Rata Share.

Optional Prepayments. (a) Subject to Section 4.04, the Borrower may, at any time
or from time to time,  not later  than 10:00 a.m.  San  Francisco  time at least
three (3) Business Days prior to its effective date by irrevocable notice to the
Agent, in the case of Eurodollar  Rate Loans,  and not later than 10:00 a.m. San
Francisco  time at least one (1)  Business  Day prior to its  effective  date by
irrevocable notice to the Agent, in the case of Base Rate Loans,  ratably prepay
Loans in whole or in part,  in minimum  amounts of $3,000,000 or any multiple of
$1,000,000 in excess thereof,  for Eurodollar Rate Loans, and in minimum amounts
of  $1,000,000  or any  multiple of $100,000  in excess  thereof,  for Base Rate
Loans.

                  (b) Any such notice of  prepayment  shall specify the date and
amount of such  prepayment  and the  Type(s)  and,  with  respect  to  voluntary
prepayments  occurring on or prior to the Revolving Loan  Termination  Date, the
Class(es)  of Loans to be prepaid.  Prepayments  of Base Rate Loans of any Class
may be made hereunder on any Business Day.  Prepayments of Eurodollar Rate Loans
of any  Class  may be made  hereunder  only on the  last  day of any  applicable
Interest Period; provided, that prepayments of Eurodollar Rate Loans may be made
on a day other than the last day of the  applicable  Interest  Period  only with
payment by the Borrower of the aggregate amount of any associated funding losses
of any affected Banks  pursuant to Section 4.04. The Agent will promptly  notify
each Bank of its receipt of any such  notice,  and of such Bank's Pro Rata Share
of such prepayment.

                  (c) If any such notice is given by the Borrower,  the Borrower
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date  specified  therein,  together,  in the case of a
Eurodollar  Rate Loan,  with  accrued  interest  to each such date on the amount
prepaid and any amounts required pursuant to Section 4.04.

Mandatory Prepayments of Loans; Mandatory Commitment Reductions.  (a) Subject to
Section 4.04, if on any date on or prior to the Revolving Loan  Termination Date
the Effective Amount of all Facility A Revolving Loans then outstanding  exceeds
the combined Facility A Commitments, the Borrower shall immediately, and without
notice  or  demand,  prepay  the  outstanding  principal  amount of  Facility  A
Revolving Loans by an aggregate amount equal to the applicable excess.

                  (b) If on any date the  Effective  Amount  of L/C  Obligations
exceeds the L/C Commitment,  the Borrower shall Cash  Collateralize on such date
the  outstanding  Letters  of  Credit in an  amount  equal to the  excess of the
aggregate  maximum amount then available to be drawn under the Letters of Credit
over the L/C  Commitment.  Subject to Section  4.04, if on any date after giving
effect to any Cash Collateralization made on such date pursuant to the preceding
sentence,   the  Effective  Amount  of  all  Facility  C  Revolving  Loans  then
outstanding  plus the Effective Amount of all L/C Obligations plus the Effective
Amount of all Swingline Loans then outstanding  exceeds the combined  Facility C
Commitments,  the  Borrower  shall  immediately,  and without  notice or demand,
prepay the outstanding  principal  amount of the Facility C Revolving Loans, any
L/C Advances and Swingline Loans by an aggregate  amount equal to the applicable
excess.

                  (c) The  Borrower  shall  immediately,  and without  notice or
demand,  prepay the  Obligations in full,  including,  without  limitation,  the
aggregate  principal  amount of all  outstanding  Loans,  all accrued and unpaid
interest  thereon and all amounts payable under Section 4.04 hereof,  and all of
the Revolving Loan Commitments  shall be automatically  reduced to zero, in each
case on the 30th day after any Change of  Control  shall  have  occurred  and be
continuing.

                  (d) If and to the extent that the Facility A  Commitments  and
the  Facility  C  Commitments  are  not  equal  to zero  on the  Revolving  Loan
Termination Date, such Revolving Loan Commitments shall be automatically reduced
to zero on the Revolving Loan Termination Date.

Repayment. .08  Repayment

Facility A Revolving  Loans and Facility C Revolving  Loans.  The Borrower shall
repay to the Banks in full on the Revolving Loan  Termination Date the aggregate
principal  amount of Facility A Revolving  Loans and Facility C Revolving  Loans
outstanding on such date together with all accrued and unpaid interest thereon.

Facility B Term Loans. The Borrower shall repay to the Banks in full on the Term
Loan  Maturity  Date the  aggregate  principal  amount of  Facility B Term Loans
outstanding on such date together with all accrued and unpaid interest thereon.

Swingline  Loans. The Borrower shall repay to BofA in full on the Revolving Loan
Termination Date the aggregate  principal amount of Swingline Loans  outstanding
on such date, together with all accrued and unpaid interest thereon.

Extension of Revolving Loan Termination  Date. Each Bank, at its sole option and
in its sole discretion,  upon the written request of Borrower given to Agent and
each  Bank not more than 90 days nor less  than 60 days  prior to the  Revolving
Loan Termination Date at any time in effect,  may elect to extend such Revolving
Loan Termination Date by a period of one year.  Within 30 days following receipt
of such  request,  each Bank  shall  give  notice to  Borrower  and Agent of its
decision to extend or not to extend such Revolving Loan Termination Date. If, in
accordance with the immediately preceding sentence, all Banks shall have elected
to extend such Revolving Loan  Termination  Date, the Revolving Loan Termination
Date  shall be  extended  by a period  of one year.  In the event  that any Bank
notifies  Borrower  and  Agent  that it  will  not  extend  the  Revolving  Loan
Termination  Date then in effect,  or if any Bank fails to notify  Borrower  and
Agent of its decision to extend or not to extend such Revolving Loan Termination
Date, in either case within the applicable 30 day period referred to above, such
Revolving  Loan  Termination  Date shall not be extended and the Revolving  Loan
Termination Date then in effect shall be the Revolving Loan Termination Date for
all purposes of this Agreement.

Interest.  (a) Each Loan shall bear interest on the outstanding principal amount
thereof  from the  applicable  Borrowing  Date at a rate per annum  equal to the
Eurodollar  Rate (other than with respect to Swingline  Loans) or the Base Rate,
as the case may be (and  subject  to the  Borrower's  right to  convert to other
Types of Loans under Section 2.04), plus the Applicable Margin.

                  (b)  Interest  on each Loan  shall be paid in  arrears on each
applicable  Interest  Payment Date.  Interest in all cases shall also be paid on
the date of any  prepayment  of Loans under  subsection  2.07(c) and interest on
Eurodollar  Rate Loans shall also be paid on the date of  prepayment of Loans in
all other circumstances under Section 2.06 or 2.07, in each case for the portion
of the Loans so prepaid and upon payment (including  prepayment) in full thereof
and,  during the  existence of any Event of Default,  interest  shall be paid on
demand of the Agent at the request or with the consent of the Majority Banks.

                  (c) Notwithstanding  subsection (a) of this Section, while any
Event of Default exists or after  acceleration,  the Borrower shall pay interest
(after as well as before  entry of judgment  thereon to the extent  permitted by
law) on the principal amount of all outstanding Obligations, at a rate per annum
which is  determined  by adding 2% per annum to the  Applicable  Margin  then in
effect  for  such  Loans  and,  in the case of  Obligations  not  subject  to an
Applicable  Margin,  including,  without  limitation,  all  letter of credit and
commitment fees provided herein, at a rate per annum equal to the Base Rate plus
the  Applicable  Margin  plus 2%;  provided,  however,  that,  on and  after the
expiration  of any  Interest  Period  applicable  to any  Eurodollar  Rate  Loan
outstanding on the date of occurrence of such Event of Default or  acceleration,
the principal  amount of such Loan shall,  during the continuation of such Event
of Default or after acceleration, bear interest at a rate per annum equal to the
Base Rate plus the Applicable Margin plus 2%.

                  (d)  Anything  herein  to the  contrary  notwithstanding,  the
obligations  of the  Borrower  to any Bank  hereunder  shall be  subject  to the
limitation  that  payments of interest  shall not be required for any period for
which  interest  is computed  hereunder,  to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the  provisions of any law  applicable to such Bank limiting the highest rate of
interest that may be lawfully  contracted for, charged or received by such Bank,
and in such event the Borrower  shall pay such Bank interest at the highest rate
permitted by applicable law.

Fees.  In addition to certain fees described in Section 3.08:

Arrangement,  Agency Fees.  The  Borrower  shall pay an  arrangement  fee to the
Arranger  for the  Arranger's  own  account,  and shall pay an agency fee to the
Agent for the Agent's own  account,  as required by the letter  agreement  ("Fee
Letter") between the Borrower and the Arranger and Agent dated July 1, 1996.

Commitment  Fees.  The  Borrower  shall pay to the Agent for the account of each
Bank a commitment fee with respect to such Bank's Facility A Commitment equal to
the  Commitment  Fee Rate per annum times the daily average amount by which such
Bank's Facility A Commitment  exceeded the sum of the aggregate Effective Amount
of its Facility A Revolving  Loans.  The Borrower shall pay to the Agent for the
account of each Bank a  commitment  fee with  respect to such Bank's  Facility C
Commitment,  equal to the  Commitment Fee Rate per annum times the daily average
amount by which  such  Bank's  Facility  C  Commitment  exceeded  the  aggregate
Effective  Amount of its  Facility C Revolving  Loans plus its Pro Rata Share of
the Effective Amount of L/C Obligations.  Such commitment fees shall accrue from
the date of this Agreement to the Revolving Loan  Termination  Date and shall be
due and payable  quarterly  in arrears on the first  Business Day of each fiscal
quarter following the quarter for which payment is to be made, commencing on the
Restatement Effective Date through the Revolving Loan Termination Date, with the
final payment to be made on the Revolving Loan Termination Date;  provided that,
in connection  with the full  termination  of Revolving Loan  Commitments  under
Section 2.05 or Section 2.07,  the accrued  commitment  fees  calculated for the
period  ending on such date shall also be paid on the date of such  termination.
The commitment fees provided in this subsection  shall accrue at all times after
the above-mentioned commencement date, including at any time during which one or
more conditions in Article V are not met.

Computation of Fees and Interest. (a) All computations of interest for Base Rate
Loans when the Base Rate is determined by BofA's  "reference rate" shall be made
on the basis of a year of 365 or 366 days,  as the case may be, and actual  days
elapsed.  All other computations of fees and interest shall be made on the basis
of a 360-day year and actual days elapsed  (which results in more interest being
paid than if computed on the basis of a 365-day  year).  Interest and fees shall
accrue during each period  during which  interest or such fees are computed from
the first day thereof to the last day thereof.

                  (b) Each  determination of an interest rate by the Agent shall
be  conclusive  and  binding  on the  Borrower  and the Banks in the  absence of
manifest error.

Payments by the Borrower.  (a) All payments to be made by the Borrower  shall be
made without set-off, recoupment or counterclaim.  Except as otherwise expressly
provided herein, all payments by the Borrower shall be made to the Agent for the
account of the Banks at the Agent's Payment Office, and shall be made in dollars
and in  immediately  available  funds,  no later than 10:00 a.m. (San  Francisco
time) on the date specified herein.  The Agent will promptly  distribute to each
Bank its Pro Rata Share (or other applicable share as expressly provided herein)
of such  payment in like funds as  received.  Any payment  received by the Agent
later than 10:00 a.m. (San Francisco time) shall be deemed to have been received
on the following Business Day and any applicable  interest or fee shall continue
to accrue.

                  (b) Subject to the  provisions  set forth in the definition of
"Interest  Period"  herein,  whenever  any  payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the  computation of interest
or fees, as the case may be.

                  (c) Unless the Agent  receives  notice from the Borrower prior
to the date on which any payment is due to the Banks that the Borrower  will not
make such  payment in full as and when  required,  the Agent may assume that the
Borrower has made such payment in full to the Agent on such date in  immediately
available  funds and the Agent may (but shall not be so  required),  in reliance
upon such  assumption,  distribute to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the Borrower has not made
such payment in full to the Agent,  each Bank shall repay to the Agent on demand
such amount  distributed  to such Bank,  together with  interest  thereon at the
Federal Funds Rate for each day from the date such amount is distributed to such
Bank until the date repaid.

Payments by the Banks to the Agent.  (a) Unless the Agent receives notice from a
Bank on or prior to the  Restatement  Effective  Date or,  with  respect  to any
Borrowing  after the  Restatement  Effective  Date, by 2:00 p.m. (San  Francisco
time) on the  Business Day prior to the date of such  Borrowing,  that such Bank
will not make  available  as and when  required  hereunder  to the Agent for the
account  of the  Borrower  the  amount  of that  Bank's  Pro  Rata  Share of the
Borrowing, the Agent may assume that each Bank has made such amount available to
the Agent in immediately available funds on the Borrowing Date and the Agent may
(but shall not be so required), in reliance upon such assumption, make available
to the Borrower on such date a  corresponding  amount.  If and to the extent any
Bank shall not have made its full amount  available to the Agent in  immediately
available  funds and the Agent in such  circumstances  has made available to the
Borrower  such  amount,  that Bank  shall on the  Business  Day  following  such
Borrowing Date make such amount  available to the Agent,  together with interest
at the Federal Funds Rate for each day during such period. A notice of the Agent
submitted to any Bank with respect to amounts  owing under this  subsection  (a)
shall be conclusive, absent manifest error. If such amount is so made available,
such  payment to the Agent  shall  constitute  such  Bank's  Loan on the date of
Borrowing  for all  purposes  of this  Agreement.  If such  amount  is not  made
available to the Agent on the Business Day  following the  Borrowing  Date,  the
Agent will notify the Borrower of such  failure to fund and,  upon demand by the
Agent,  the Borrower shall pay such amount to the Agent for the Agent's account,
together  with  interest  thereon  for each day  elapsed  since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such Borrowing.

                  (b) The failure of any Bank to make any Loan on any  Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing  Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.

Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein,
any Bank shall  obtain on account of the Loans made by it any  payment  (whether
voluntary,  involuntary,  through  the  exercise  of any  right of  set-off,  or
otherwise)  in excess of its Pro Rata  Share,  such Bank shall  immediately  (a)
notify  the Agent of such  fact,  and (b)  purchase  from the other  Banks  such
participations  in the Loans  made by them as shall be  necessary  to cause such
purchasing  Bank to  share  the  excess  payment  pro  rata  with  each of them;
provided,  however,  that  if all or any  portion  of  such  excess  payment  is
thereafter  recovered  from the  purchasing  Bank,  such purchase  shall to that
extent be rescinded and each other Bank shall repay to the  purchasing  Bank the
purchase  price paid  therefor,  together  with an amount  equal to such  paying
Bank's  ratable  share  (according  to the  proportion of (i) the amount of such
paying Bank's required  repayment to (ii) the total amount so recovered from the
purchasing  Bank)  of any  interest  or  other  amount  paid or  payable  by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so  purchasing  a  participation  from  another  Bank may,  to the
fullest extent permitted by law,  exercise all its rights of payment  (including
the right of set-off)  with  respect to such  participation  as fully as if such
Bank  were  the  direct   creditor  of  the  Borrower  in  the  amount  of  such
participation.  The Agent  will keep  records  (which  shall be  conclusive  and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Banks  following any such  purchases or
repayments.

Discretionary Swingline Loans.Swingline Loans

                  (a) From time to time,  subject  to the  conditions  set forth
below,  at the  request of the  Borrower,  made  through  the Agent as set forth
below, BofA in its sole and absolute discretion may make short-term loans to the
Borrower  not to  exceed  in the  aggregate  at any  one  time  outstanding  the
principal sum of  $20,000,000,  to be used by the Borrower to cover  overdrafts,
for cash management purposes,  or for other general working capital needs of the
Borrower  (each, a "Swingline  Loan").  The  availability  of Swingline Loans is
conditioned  on the  satisfaction  of each of the following  conditions:  (i) it
shall be in the sole and absolute  discretion  of BofA,  on each occasion that a
Swingline  Loan is requested,  whether to make such  Swingline  Loan;  (ii) each
Swingline Loan shall bear interest from the time made until the time repaid,  or
until the time, if any, that such  Swingline  Loan is converted into a Base Rate
Loan as provided below, at the rate(s) from time to time applicable to Base Rate
Loans  hereunder;  (iii) at the time of making of any Swingline Loan, the sum of
the  Effective  Amount of all  outstanding  Swingline  Loans plus the  Effective
Amount of all outstanding  Facility C Revolving Loans plus the Effective  Amount
of all L/C  Obligations,  without  duplication,  shall not exceed the  aggregate
Facility C Commitment; (iv) each Swingline Loan, when made, all interest accrued
thereon,  and all  reimbursable  costs  and  expenses  incurred  or  payable  in
connection therewith,  shall constitute an Obligation of Borrower hereunder; and
(v) each  request for a Swingline  Loan from BofA  pursuant to this Section 2.15
shall be made by the Borrower to the Agent,  shall be funded by BofA through the
Agent,  and shall be repaid by the Borrower through the Agent (in order that the
Agent may keep an  accurate  record of the  outstanding  balance  at any time of
Swingline  Loans so as to  monitor  compliance  with the  terms  and  provisions
hereof),  and each such request shall be in writing unless the Agent in its sole
discretion accepts an oral or telephonic  request.  Each Swingline Loan shall be
made upon the  Borrower's  irrevocable  written  notice  delivered  to the Agent
substantially  in the  form of a  Notice  of  Borrowing  (which  notice  must be
received by the Agent prior to 1:00 p.m. (San  Francisco  time) on the requested
date of such Swingline Loan, specifying:

(i) the amount of the  Swingline  Loan,  which  shall be in a minimum  amount of
$250,000 or any multiple of $100,000 in excess thereof; and

(ii) the requested date of such Swingline Loan, which shall be a Business Day;

                  (b) If any Swingline  Loan made pursuant to this Section 2.15,
and in compliance  with the  conditions set forth in the  immediately  preceding
paragraph of this Section  2.15,  is not repaid by the Borrower on or before the
seventh  calendar day following  the day that it was funded by BofA,  BofA shall
have the right in BofA's sole and absolute  discretion,  by giving notice to the
Borrower and the Banks,  to cause such  Swingline  Loan  automatically  upon the
giving of such notice to be converted  into a Facility C Revolving Loan which is
a Base Rate Loan,  and upon  receipt of such  notice each Bank shall fund to the
Agent,  for the account of BofA,  such Bank's  ratable  share of such Facility C
Revolving  Loan,  based on such  Bank's Pro Rata  Share;  provided,  that if any
Insolvency  Proceeding  has been  commenced  with  respect to the Borrower on or
prior to the date on which such  Swingline  Loan is due,  and in lieu of funding
its Pro Rata Share of a Facility C Revolving Loan, each Bank shall be deemed to,
and hereby  irrevocably  and  unconditionally  agrees to,  purchase  from BofA a
participation  in such  Swingline  Loan equal to the  product of such Bank's Pro
Rata Share times the amount of such Swingline Loan.

                  (c) Each Bank's  obligation in accordance  with this Agreement
to make  Facility C Revolving  Loans upon the failure of a Swingline  Loan to be
repaid in full when due, or to purchase  participations in such Swingline Loans,
shall, in each case, be absolute and  unconditional and without recourse to BofA
and  shall not be  affected  by any  circumstance,  including  (i) any  set-off,
counterclaim,  recoupment,  defense  or other  right  which  such  Bank may have
against BofA, the Borrower or any other Person for any reason  whatsoever;  (ii)
the occurrence or  continuance  of a Default,  an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance,  happening or event whatsoever,
whether or not similar to any of the foregoing.

                                   ARTICLE III
                              THE LETTERS OF CREDIT

The Letter of Credit Subfacility. (a) On the terms and subject to the conditions
set forth  herein and as a  subfacility  of the Facility C  Commitment,  (i) the
Issuing  Banks  agree,  from time to time on any  Business Day during the period
from the  Restatement  Effective  Date to the date that is 30 days  prior to the
Revolving  Loan  Termination  Date to issue Letters of Credit for the account of
the Borrower and  Stratton  and to amend or renew  Letters of Credit  previously
issued by them, in each case in accordance with subsections 3.02(c) and 3.02(d);
and (ii) the Banks  severally  agree to  participate in Letters of Credit Issued
for the account of the Borrower and Stratton;  provided,  that the Issuing Banks
shall not be obligated to Issue,  and no Bank shall be obligated to  participate
in, any Letter of Credit if, as of the date of Issuance of such Letter of Credit
(the "Issuance Date"),  (1) the Effective Amount of all L/C Obligations plus the
Effective  Amount of all Facility C Revolving Loans plus the Effective Amount of
all Swingline  Loans  exceeds the combined  Facility C  Commitments,  or (2) the
Effective  Amount of L/C  Obligations  exceeds  the L/C  Commitment.  Within the
foregoing  limits,  and subject to the other terms and  conditions  hereof,  the
ability of the Borrower and Stratton to obtain  Letters of Credit shall be fully
revolving, and, accordingly, the Borrower and Stratton may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit which have expired
or which have been drawn upon and reimbursed.

(b) No Issuing Bank is under any obligation to Issue any Letter of Credit if:

                           (i) any order, judgment or decree of any Governmental
          Authority  or  arbitrator  shall by its  terms  purport  to  enjoin or
          restrain such Issuing Bank from Issuing such Letter of Credit,  or any
          Requirement  of Law  applicable to such Issuing Bank or any request or
          directive   (whether  or  not  having  the  force  of  law)  from  any
          Governmental  Authority with jurisdiction over such Issuing Bank shall
          prohibit, or request that such Issuing Bank refrain from, the Issuance
          of letters of credit  generally or such Letter of Credit in particular
          or shall  impose upon such Issuing Bank with respect to such Letter of
          Credit any restriction, reserve or capital requirement (for which such
          Issuing Bank is not otherwise compensated  hereunder) not in effect on
          the Restatement Effective Date, or shall impose upon such Issuing Bank
          any unreimbursed loss, cost or expense which was not applicable on the
          Restatement  Effective  Date and which such Issuing Bank in good faith
          deems material to it;

                           (ii) such Issuing Bank has  received  written  notice
          from any Bank, the Agent, the Borrower or Stratton, on or prior to the
          Business Day prior to the requested date of Issuance of such Letter of
          Credit,  that one or more of the  applicable  conditions  contained in
          Article V is not then satisfied;

                           (iii)  the  expiry  date of any  requested  Letter of
          Credit is (A) with respect to Commercial  Letters of Credit supporting
          the  purchase of  inventory  by the  Borrower,  more than (1) 180 days
          after the date of Issuance or (2) 30 days prior to the Revolving  Loan
          Termination  Date, unless the Majority Banks have approved such expiry
          date in writing, or (B) with respect to any other Letter of Credit, 30
          days prior to the Revolving Loan Termination  Date,  unless all of the
          Banks have approved such expiry date in writing;

                           (iv)  the  expiry  date of any  requested  Letter  of
          Credit is prior to the maturity date of any financial obligation to be
          supported by the requested Letter of Credit;

                           (v) any  requested  Letter of Credit does not provide
          for drafts (unless there is a demand for payment in the  documentation
          required to be delivered in connection  with any  drawing),  or is not
          otherwise in form and  substance  acceptable  to such Issuing Bank, or
          the  Issuance  of a Letter  of Credit  shall  violate  any  applicable
          policies of such Issuing Bank;

                           (vi) any Standby  Letter of Credit is for the purpose
          of supporting the issuance of any letter of credit by any other Person
          other than with respect to any Existing Letter of Credit so designated
          in Schedule 3.03; or

                           (vii)  such  Letter  of  Credit  is to be used  for a
          purpose  other than any  permitted  use of the  proceeds of Facility C
          Revolving Loans as set forth in Section 7.11.

Issuance,  Amendment and Renewal of Letters of Credit. (a) Each Letter of Credit
shall be issued upon the  irrevocable  written  request of the Borrower  and, if
Stratton is the applicant,  Stratton,  received by the Issuing Bank (with a copy
sent by the  Borrower  or  Stratton  to the  Agent)  prior  to 10:00  a.m.  (San
Francisco  time) on the  proposed  date of Issuance for Letters of Credit in the
form of Exhibit  H, I or J hereto  and at least four days prior to the  proposed
date of  Issuance  for other forms of Letters of Credit.  Each such  request for
issuance of a Letter of Credit shall be by facsimile, confirmed by telephone, in
the  form  of  an  L/C  Application,  and  shall  specify  in  form  and  detail
satisfactory  to the applicable  Issuing Bank: (i) the proposed date of issuance
of the Letter of Credit (which shall be a Business Day); (ii) the face amount of
the Letter of Credit;  (iii) the expiry  date of the Letter of Credit;  (iv) the
name and address of the beneficiary  thereof;  (v) the documents to be presented
by the  beneficiary  of the Letter of Credit in case of any drawing  thereunder;
(vi) the full text of any certificate to be presented by the beneficiary in case
of any drawing thereunder;  and (vii) such other matters as the Issuing Bank may
require.

                  (b)  Prior  to the  Issuance  of any  Letter  of  Credit,  the
applicable Issuing Bank will confirm with the Agent (by telephone or in writing)
that the Agent  has  received  a copy of the L/C  Application  or L/C  Amendment
Application  from the Borrower and, if Stratton is the applicant,  from Stratton
and, if not,  such  Issuing  Bank will  provide  the Agent with a copy  thereof.
Unless  such  Issuing  Bank has  received  notice on or before  11:00 a.m.  (San
Francisco time) on the date such Issuing Bank is to issue a requested  Letter of
Credit from the Agent (A)  directing  such Issuing Bank not to issue such Letter
of Credit because such issuance is not then permitted under  subsection  3.01(a)
as a result  of the  limitations  set forth in  clauses  (1) or (2)  thereof  or
subsection 3.01(b)(ii);  or (B) that one or more conditions specified in Article
V are not then satisfied; then, subject to the terms and conditions hereof, such
Issuing  Bank  shall,  on the  requested  date,  issue a  Letter  of  Credit  in
accordance with such Issuing Bank's usual and customary business practices.

                  (c) From time to time while a Letter of Credit is  outstanding
and prior to the Revolving Loan  Termination  Date, any Issuing Bank will,  upon
the written request of the Borrower and, if Stratton is the applicant, Stratton,
received by such  Issuing  Bank (with a copy sent by the Borrower or Stratton to
the Agent) at least four days (or such  shorter  time as such  Issuing  Bank may
agree in a  particular  instance in its sole  discretion)  prior to the proposed
date of  amendment,  amend any Letter of Credit  issued by it. Each such request
for  amendment  of a Letter of Credit shall be made by  facsimile,  confirmed by
telephone, made in the form of an L/C Amendment Application and shall specify in
form and detail  satisfactory  to such Issuing Bank: (i) the Letter of Credit to
be amended;  (ii) the proposed  date of amendment of the Letter of Credit (which
shall be a Business Day); (iii) the nature of the proposed  amendment;  and (iv)
such other matters as such Issuing Bank may require. The applicable Issuing Bank
shall be under no  obligation to amend any Letter of Credit if: (A) such Issuing
Bank would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms of this  Agreement;  or (B) the  beneficiary of any
such Letter of Credit does not accept the  proposed  amendment  to the Letter of
Credit. The Agent will promptly notify the Banks of the receipt by it of any L/C
Application or L/C Amendment Application.

                  (d) The Issuing Banks and the Banks agree that, while a Letter
of Credit is outstanding  and prior to the Revolving Loan  Termination  Date, at
the option of the  Borrower  and  Stratton  and upon the written  request of the
Borrower and, if Stratton is the applicant, Stratton, received by the applicable
Issuing  Bank (with a copy sent by the  Borrower  or  Stratton  to the Agent) at
least  four  days (or such  shorter  time as such  Issuing  Bank may  agree in a
particular  instance  in its  sole  discretion)  prior to the  proposed  date of
notification  of renewal,  such Issuing Bank shall be entitled to authorize  the
automatic  renewal of any Letter of Credit  issued by it. Each such  request for
renewal  of a  Letter  of  Credit  shall  be made  by  facsimile,  confirmed  by
telephone,  in the form of an L/C  Amendment  Application,  and shall specify in
form and detail  satisfactory  to such Issuing Bank: (i) the Letter of Credit to
be renewed;  (ii) the proposed date of  notification of renewal of the Letter of
Credit  (which shall be a Business  Day);  (iii) the revised  expiry date of the
Letter of Credit;  and (iv) such other matters as such Issuing Bank may require.
The applicable  Issuing Bank shall be under no obligation to so renew any Letter
of Credit if: (A) such  Issuing  Bank would have no  obligation  at such time to
issue or amend such Letter of Credit in its renewed form under the terms of this
Agreement;  or (B) the  beneficiary of any such Letter of Credit does not accept
the  proposed  renewal  of the Letter of Credit.  If any  outstanding  Letter of
Credit  shall  provide  that  it  shall  be  automatically  renewed  unless  the
beneficiary  thereof receives notice from the applicable  Issuing Bank that such
Letter  of Credit  shall  not be  renewed,  and if at the time of  renewal  such
Issuing Bank would be entitled to authorize the automatic renewal of such Letter
of Credit in accordance with this subsection  3.02(d) upon the request of either
or both of the Borrower and Stratton, as applicable, but such Issuing Bank shall
not have received any L/C Amendment  Application with respect to such renewal or
other  written  direction  by either or both of the Borrower  and  Stratton,  as
applicable,  with  respect  thereto,  such  Issuing  Bank shall  nonetheless  be
permitted to allow such Letter of Credit to renew, and the Borrower and Stratton
and the Banks hereby authorize such renewal, and, accordingly, such Issuing Bank
shall be deemed to have  received an L/C  Amendment  Application  from either or
both of the Borrower and Stratton, as applicable, requesting such renewal.

                  (e) The Issuing  Banks may, at their  election (or as required
by the Agent at the  direction  of the Majority  Banks),  deliver any notices of
termination  or other  communications  to any  Letter of Credit  beneficiary  or
transferee,  and take any other action as necessary or appropriate,  at any time
and from  time to time,  in order to cause  the  expiry  date of such  Letter of
Credit to be a date not later than the Revolving Loan Termination Date.

                  (f) This Agreement  shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).

                  (g)  The  Issuing  Banks  will  also  deliver  to  the  Agent,
concurrently or promptly  following delivery of a Letter of Credit, or amendment
to or renewal of a Letter of Credit,  to an advising  bank or a  beneficiary,  a
true and complete  copy of each such Letter of Credit or amendment to or renewal
of a Letter of Credit.

Existing Letters of Credit;  Risk  Participations,  Drawings and Reimbursements.
(a) On and after the Restatement  Effective Date, the Existing Letters of Credit
shall be deemed  for all  purposes,  including  for  purposes  of the fees to be
collected pursuant to subsections  3.08(a) and 3.08(c),  and reimbursement costs
and expenses to the extent provided herein,  Letters of Credit outstanding under
this Agreement and entitled to the benefits of this Agreement and the other Loan
Documents,  and shall be governed by the applications and agreements  pertaining
thereto and by this Agreement.  Each Existing  Letter of Credit  designated as a
"standby  letter of  credit"  on  Schedule  3.03 shall be deemed to be a Standby
Letter of Credit, and each Existing Letter of Credit designated as a "commercial
documentary  letter  of  credit"  on  Schedule  3.03  shall  be  deemed  to be a
Commercial  Letter  of  Credit.  Each  Bank  shall  be  deemed  to,  and  hereby
irrevocably  and  unconditionally  agrees to, purchase from the Issuing Banks on
the Restatement Effective Date a participation in each such Letter of Credit and
each drawing thereunder in an amount equal to the product of (i) such Bank's Pro
Rata Share times (ii) the maximum amount available to be drawn under such Letter
of  Credit  and the  amount  of such  drawing,  respectively.  For  purposes  of
subsection 2.01(a) and subsection 2.10(b),  the Existing Letters of Credit shall
be deemed to utilize the Pro Rata Share of each Bank.

                  (b) Immediately  upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.03(a), each Bank shall be deemed to,
and  hereby  irrevocably  and  unconditionally  agrees  to,  purchase  from  the
applicable  Issuing  Bank a  participation  in such  Letter of  Credit  and each
drawing  thereunder  in an amount equal to the product of (i) the Pro Rata Share
of such Bank,  times (ii) the maximum  amount  available  to be drawn under such
Letter of Credit and the amount of such drawing,  respectively.  For purposes of
subsection  2.01(a),  each  Issuance  of a Letter of  Credit  shall be deemed to
utilize the Facility C Commitment  of each Bank by an amount equal to the amount
of such participation.

                  (c) In the event of any request  for a drawing  under a Letter
of Credit by the beneficiary or transferee thereof,  the applicable Issuing Bank
will promptly  notify the Borrower and, if Stratton is the applicant,  Stratton.
The Borrower or Stratton  shall  reimburse such Issuing Bank prior to 10:00 a.m.
(San Francisco  time), on each date that any amount is paid by such Issuing Bank
under any Letter of Credit (each such date, an "Honor Date"), in an amount equal
to the  amount  so paid by such  Issuing  Bank.  In the event  the  Borrower  or
Stratton  fails to  reimburse  such Issuing Bank of any Letter of Credit for the
full  amount of any  drawing  under  such  Letter of Credit by 10:00  a.m.  (San
Francisco  time) on the Honor Date,  such Issuing Bank will promptly  notify the
Agent and the Agent will  promptly  notify each Bank  thereof,  and the Borrower
shall be deemed to have  requested  that Base Rate Loans be made by the Banks to
be  disbursed  on the Honor  Date under  such  Letter of Credit,  subject to the
conditions  set  forth in  Section  5.02  (including,  without  limitation,  the
condition that no Insolvency  Proceeding shall have been commenced by or against
the Borrower or Stratton on the Honor Date). Any notice given by an Issuing Bank
or the Agent  pursuant to this  subsection  3.03(c)  may be oral if  immediately
confirmed in writing (including by facsimile); provided that the lack of such an
immediate  confirmation shall not affect the conclusiveness or binding effect of
such notice.

                  (d) Each Bank  shall upon any notice  pursuant  to  subsection
3.03(c) make  available to the Agent for the account of the  applicable  Issuing
Bank an amount in Dollars and in  immediately  available  funds equal to its Pro
Rata Share of the amount of the drawing, whereupon the participating Banks shall
(subject  to  subsection  3.03(e))  each be  deemed to have  made a  Facility  C
Revolving Loan consisting of a Base Rate Loan to the Borrower in that amount. If
any Bank so notified fails to make available to the Agent for the account of the
applicable  Issuing  Bank the amount of such Bank's Pro Rata Share of the amount
of the  drawing by no later than 11:00 a.m.  (San  Francisco  time) on the Honor
Date, then interest shall accrue on such Bank's obligation to make such payment,
from the Honor  Date to the date such Bank  makes  such  payment,  at a rate per
annum  equal to the  Federal  Funds Rate in effect from time to time during such
period. The Agent will promptly give notice of the occurrence of the Honor Date,
but  failure  of the  Agent to give  any such  notice  on the  Honor  Date or in
sufficient time to enable any Bank to effect such payment on such date shall not
relieve such Bank from its obligations under this Section 3.03.

                  (e)  With  respect  to any  unreimbursed  drawing  that is not
converted into Facility C Revolving  Loans  consisting of Base Rate Loans to the
Borrower in whole or in part,  because of the Borrower's  failure to satisfy the
conditions  set forth in Section 5.02 or for any other reason,  the Borrower and
Stratton  shall be deemed to have incurred from an Issuing Bank an L/C Borrowing
in the amount of such drawing,  which L/C Borrowing  shall be due and payable on
demand  (together  with  interest)  and shall bear  interest at a rate per annum
equal to the Base Rate plus the  Applicable  Margin plus 2% per annum,  and each
Bank's  payment to such Issuing Bank  pursuant to  subsection  3.03(d)  shall be
deemed payment in respect of its  participation  in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in  satisfaction  of its  participation
obligation under this Section 3.03.

                  (f) Each Bank's  obligation in accordance  with this Agreement
to make the Facility C Revolving Loans or L/C Advances,  as contemplated by this
Section  3.03,  as a result of a  drawing  under a Letter  of  Credit,  shall be
absolute and  unconditional and without recourse to the Issuing Banks (except in
circumstances  arising  solely  as a  result  of  willful  misconduct  or  gross
negligence by the Issuing Banks) and shall not be affected by any  circumstance,
including  (i) any  set-off,  counterclaim,  recoupment,  defense or other right
which such Bank may have against any Issuing Bank, the Borrower, Stratton or any
other Person for any reason whatsoever;  (ii) the occurrence or continuance of a
Default,  an Event of Default or a Material  Adverse Effect;  or (iii) any other
circumstance,  happening or event  whatsoever,  whether or not similar to any of
the foregoing.

Repayment of  Participations.  (a) Upon (and only upon) receipt by the Agent for
the account of an Issuing Bank of immediately  available funds from the Borrower
or Stratton (i) in  reimbursement of any payment made by such Issuing Bank under
the Letter of Credit  with  respect to which any Bank has paid the Agent for the
account of such  Issuing  Bank for such  Bank's  participation  in the Letter of
Credit  pursuant  to Section  3.03 or (ii) in payment of interest  thereon,  the
Agent will pay to each Bank,  in the same funds as those  received  by the Agent
for the account of such Issuing  Bank,  the amount of such Bank's Pro Rata Share
of such funds,  and such Issuing  Bank shall  receive the amount of the Pro Rata
Share of such funds of any Bank that did not so pay the Agent for the account of
such Issuing Bank.

                  (b) If the Agent or any  Issuing  Bank is required at any time
to return to the Borrower or Stratton,  or to a trustee,  receiver,  liquidator,
custodian,  or any  official in any  Insolvency  Proceeding,  any portion of the
payments  made by the  Borrower or Stratton to the Agent for the account of such
Issuing Bank pursuant to subsection  3.04(a) in  reimbursement of a payment made
under the Letter of Credit or  interest  or fee  thereon,  each Bank  shall,  on
demand of the  Agent,  forthwith  return to the Agent or such  Issuing  Bank the
amount of its Pro Rata  Share of any  amounts so  returned  by the Agent or such
Issuing Bank plus interest thereon from the date such demand is made to the date
such amounts are returned by such Bank to the Agent or such Issuing  Bank,  at a
rate per annum equal to the Federal Funds Rate in effect from time to time.

Role of the Issuing Banks.  (a) Each Bank, the Borrower and Stratton agree that,
in paying any drawing  under a Letter of Credit,  the  applicable  Issuing  Bank
shall not have any  responsibility  to obtain any document (other than any sight
draft  and  certificates  expressly  required  by the  Letter of  Credit)  or to
ascertain or inquire as to the validity or accuracy of any such  document or the
authority of the Person executing or delivering any such document.

                  (b)  No  Agent-Related   Person  nor  any  of  the  respective
correspondents,  participants or assignees of an Issuing Bank shall be liable to
any Bank for:  (i) any action  taken or omitted in  connection  herewith  at the
request or with the  approval of the Banks  (including  the Majority  Banks,  as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct;  or (iii) the due execution,  effectiveness,  validity or
enforceability of any L/C-Related Document.

                  (c) The Borrower and Stratton  hereby  assume all risks of the
acts or omissions of any  beneficiary  or transferee  with respect to its use of
any Letter of Credit;  provided,  however,  that this assumption is not intended
to, and shall not,  preclude the  Borrower's or Stratton's  pursuing such rights
and remedies as either may have against the  beneficiary or transferee at law or
under any other agreement.  No Agent-Related  Person,  nor any of the respective
correspondents,  participants or assignees of any Issuing Bank,  shall be liable
or responsible for any of the matters  described in clauses (i) through (vii) of
Section  3.06;  provided,  however,  anything  in such  clauses to the  contrary
notwithstanding,  that the Borrower  and  Stratton  may have a claim  against an
Issuing Bank, and an Issuing Bank may be liable to the Borrower and Stratton, to
the extent,  but only to the extent,  of any direct, as opposed to consequential
or exemplary,  damages  suffered by the Borrower and Stratton which the Borrower
and Stratton prove were caused by an Issuing Bank's willful  misconduct or gross
negligence  or an  Issuing  Bank's  willful  failure  to pay under any Letter of
Credit  after the  presentation  to it by the  beneficiary  of a sight draft and
certificate(s)  strictly  complying with the terms and conditions of a Letter of
Credit.  In furtherance  and not in limitation of the foregoing:  (i) an Issuing
Bank may accept  documents  that  appear on their  face to be in order,  without
responsibility   for  further   investigation,   regardless  of  any  notice  or
information  to the contrary;  and (ii) an Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument  transferring  or assigning or
purporting  to  transfer  or assign a Letter of Credit or the rights or benefits
thereunder  or  proceeds  thereof,  in whole or in part,  which  may prove to be
invalid or ineffective for any reason.

Obligations  Absolute.  The  obligations of the Borrower and Stratton under this
Agreement  and any  L/C-Related  Document to  reimburse  the  Issuing  Banks for
drawings  under  Letters  of  Credit,  and to repay  any L/C  Borrowing  and any
drawings  under Letters of Credit  converted  into  Facility C Revolving  Loans,
shall be unconditional and irrevocable, and shall be paid strictly in accordance
with the terms of this Agreement and each such other L/C-Related  Document under
all circumstances, including the following:

(i) any lack of validity or  enforceability of this Agreement or any L/C-Related
Document;

                           (ii)  any  change  in the  time,  manner  or place of
          payment of, or in any other term of, all or any of the  obligations of
          the  Borrower  and  Stratton in respect of any Letter of Credit or any
          other  amendment or waiver of or any consent to departure  from all or
          any of the L/C-Related Documents;

                           (iii) the existence of any claim, set-off, defense or
          other right that the Borrower or Stratton may have at any time against
          any  beneficiary  or any  transferee  of any  Letter of Credit (or any
          Person for whom any such  beneficiary  or any such  transferee  may be
          acting),  an Issuing Bank or any other  Person,  whether in connection
          with this Agreement,  the transactions  contemplated  hereby or by the
          L/C-Related Documents or any unrelated transaction;

                           (iv) any draft, demand, certificate or other document
          presented under any Letter of Credit proving to be forged, fraudulent,
          invalid or insufficient in any respect or any statement  therein being
          untrue  or  inaccurate  in any  respect;  or any  loss or delay in the
          transmission or otherwise of any document  required in order to make a
          drawing under any Letter of Credit;

                           (v) any  payment by an Issuing  Bank under any Letter
          of Credit against presentation of a draft or certificate that does not
          strictly comply with the terms of any Letter of Credit; or any payment
          made by an  Issuing  Bank  under any  Letter  of Credit to any  Person
          purporting  to  be  a  trustee  in  bankruptcy,  debtor-in-possession,
          assignee for the benefit of creditors,  liquidator,  receiver or other
          representative of or successor to any beneficiary or any transferee of
          any Letter of Credit,  including  any arising in  connection  with any
          Insolvency Proceeding;

                           (vi) any exchange,  release or  non-perfection of any
          collateral,  or any  release or  amendment  or waiver of or consent to
          departure from any other guarantee,  for all or any of the obligations
          of the Borrower or Stratton in respect of any Letter of Credit; or

                           (vii) any other circumstance or happening whatsoever,
          whether or not similar to any of the  foregoing,  including  any other
          circumstance  that might otherwise  constitute a defense available to,
          or a discharge of, the Borrower, Stratton or a guarantor.

Cash  Collateral  Pledge.  Upon (i) the request of the Agent,  (A) if an Issuing
Bank has honored any full or partial drawing request on any Letter of Credit and
such drawing has resulted in an L/C  Borrowing  hereunder,  or (B) if, as of the
Revolving Loan Termination Date, any Letters of Credit may for any reason remain
outstanding  and  partially or wholly  undrawn,  or (ii) the  occurrence  of the
circumstances  described in  subsection  2.07(b)  requiring the Borrower to Cash
Collateralize  Letters of Credit,  then,  the Borrower  shall  immediately  Cash
Collateralize the L/C Obligations in an amount equal to the L/C Obligations.

Letter of Credit  Fees.  (a) The  Borrower  agrees  and,  in the case of Standby
Letters of Credit issued for the account of Stratton,  the Borrower and Stratton
jointly and severally  agree, to pay to the Agent for the account of each of the
Banks based on their  respective Pro Rata Shares a letter of credit fee (i) with
respect to the Standby  Letters of Credit equal to the Standby  Letter of Credit
Risk  Participation  Percentage of the average daily maximum amount available to
be drawn of the  outstanding  Standby Letters of Credit and (ii) with respect to
the Commercial  Letters of Credit equal to the Commercial  Letter of Credit Risk
Participation  Percentage of the average daily  maximum  amount  available to be
drawn of the outstanding  Commercial Letters of Credit, in each case computed on
a quarterly  basis in arrears on the last  Business  Day of each fiscal  quarter
based upon Letters of Credit  outstanding  for that quarter as calculated by the
Agent.  Such letter of credit fees shall be due and payable quarterly in arrears
on the first  Business Day following  each fiscal  quarter  during which Standby
Letters  of Credit or  Commercial  Letters  of  Credit,  as the case may be, are
outstanding,  commencing  on the first such  quarterly  date to occur  after the
Restatement  Effective Date,  through the Revolving Loan Termination  Date, with
the final payment to be made on the Revolving Loan Termination Date.

                  (b) The Borrower agrees and, in the case of Standby Letters of
Credit issued for the account of Stratton, the Borrower and Stratton jointly and
severally  agree,  to pay to the applicable  Issuing Bank for its sole account a
letter of credit  fronting fee (i) for each Standby  Letter of Credit  Issued by
such Issuing  Bank,  equal to 0.125% per annum of the face amount (or  increased
face amount,  as the case may be) of such Standby  Letter of Credit and (ii) for
each Commercial Letter of Credit Issued by such Issuing Bank, equal to 0.10% per
annum of the face amount (or increased face amount,  as the case may be) of such
Commercial Letter of Credit. Such Letter of Credit fronting fee shall be due and
payable  quarterly in arrears on the first  Business Day  following  each fiscal
quarter  during which such Letter of Credit is  outstanding,  commencing  on the
first such quarterly date to occur after the  Restatement  Effective  Date, with
the final payment to be made on the Revolving Loan Termination Date.

                  (c) The Borrower agrees and, in the case of Standby Letters of
Credit issued for the account of Stratton, the Borrower and Stratton jointly and
severally  agree,  to pay to the  Issuing  Banks from time to time on demand the
normal  issuance,  presentation,  amendment and other processing fees, and other
standard costs and charges,  of the Issuing Banks relating to Standby Letters of
Credit and Commercial Letters of Credit as from time to time in effect.

Uniform  Customs and Practice.  The Uniform Customs and Practice for Documentary
Credits as  published  by the  International  Chamber of Commerce  ("UCP")  most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to such Letter of Credit.

Acknowledgment  of  Accommodation;  Waiver of Defenses.  (a) For the purposes of
implementing  the provisions of this Article III, the Borrower and Stratton each
irrevocably  appoints  the  other  as its  agent  and  attorney-in-fact  for all
purposes,   including   the  giving   and   receiving   of  notices   and  other
communications.

                  (b) Each of the Borrower and Stratton  acknowledges and agrees
that  Obligations  for Letters of Credit issued for the account of Stratton have
been  established  on a joint  and  several  basis  as an  accommodation  to the
Borrower and Stratton and at their  request,  and that the Borrower is benefited
thereby.

                  (c) The  Borrower  shall  be  absolutely  and  unconditionally
liable  for  the  repayment  of all L/C  Obligations,  whether  incurred  by the
Borrower or Stratton,  all as if the Borrower was the primary beneficiary of all
Letters of Credit.

                  (d) Each of the Borrower and Stratton authorizes the Agent and
the Banks,  without  notice or demand and without  affecting  the  liability  of
either  hereunder,  from time to time, either before or after the termination of
this Agreement, to (i) renew, compromise, extend, accelerate or otherwise change
the time for payment of, or otherwise change the terms of the L/C Obligations or
any other  Obligation or any part thereof  including any increase or decrease of
the rate of interest thereon;  (ii) receive and hold security for the payment of
the L/C  Obligations  or any other  Obligation,  and exchange,  enforce,  waive,
release, fail to perfect, sell, or otherwise dispose of any such security; (iii)
apply such  security and direct the order or manner of sale thereof as the Agent
in its discretion may  determine;  and (iv) release  Stratton or any other party
and hold the Borrower  liable for all L/C  Obligations  or other  Obligations or
other Obligations of Stratton.

                  (e) The Borrower  waives any right to require the Agent to (i)
proceed  against the  Borrower or  Stratton in any  particular  order or proceed
first or concurrently  against any other party;  (ii) proceed against or exhaust
any security  held from the  Borrower or Stratton or any other  party;  or (iii)
pursue  any other  remedy in the  Agent's or the Banks'  power  whatsoever.  The
Borrower  waives  any  defense  arising  by  reason of any  disability  or other
defense,  or the  cessation  from any cause  whatsoever  of the liability of the
Borrower or Stratton or any other party,  or any claim that the  obligations  of
one exceed or are more  burdensome  than those of the other  including,  without
limitation,  any defense of the Borrower arising directly or indirectly from the
failure  of  Stratton  to  obtain  any  required  consent  of  any  Governmental
Authority.  The  Borrower  waives  any  right  of  subrogation,   reimbursement,
indemnification   and  contribution   (contractual,   statutory  or  otherwise),
including  without  limitation,  any  claim or right of  subrogation  under  the
Bankruptcy  Code (Title 11 of the U.S. Code) or any successor  statute,  arising
from the existence or performance of its obligations  hereunder,  and waives any
right to  enforce  any  remedy  which  the  Agent or the  Banks  now have or may
hereafter  have against  either of them, and waives any benefit of and any right
to  participate in any security now or hereafter held by the Agent or the Banks.
The  Borrower  waives all  presentments,  demands  for  performance,  notices of
nonperformance,  protests,  notices of protest, notices of dishonor, and notices
of acceptance of this Agreement and of the existence, creation, or incurrence of
new or additional indebtedness.

                  (f) The  Borrower  warrants  and agrees  that the  waivers and
consents set forth in this  Section  3.10 are made with full  knowledge of their
significance and with the  understanding  that events giving rise to any defense
waived may  diminish,  destroy or otherwise  adversely  affect  rights which the
Borrower or  Stratton  may have  against  each  other,  the Agent,  the Banks or
others.

                  (g)  Stratton  shall be liable only with respect to Letters of
Credit issued for its own account,  and shall have no liability  with respect to
Letters  of  Credit  issued  for  the  account  of  the  Borrower.  The  parties
acknowledge  that this letter of credit  subfacility  is made  available for the
activities of the Borrower and Stratton.  The parties further  acknowledge  that
Stratton,  as a  regulated  insurance  company,  is  prohibited  from  incurring
indebtedness  on behalf of, or  guarantying  the  indebtedness  of, the Borrower
unless such incurrence or guaranty is directly  related to Stratton's  insurance
operations.  Accordingly,  the  parties  agree that,  notwithstanding  any other
provision of this  Agreement to the contrary,  Stratton shall have no obligation
to any party hereunder for any liability  created  hereunder except with respect
to  the  issuance,  drawing,  reimbursement,  repayment,  collateralization  and
payment of interest,  fees and other costs attributable to the Letters of Credit
issued for the account of Stratton  for the benefit of persons to whom  Stratton
has incurred or will incur liability  arising out of the operation of Stratton's
insurance activities in the ordinary course of business.

                                   ARTICLE IV
                     TAXES, YIELD PROTECTION AND ILLEGALITY

Taxes. (a)  Any and all payments by the Borrower to each Bank or the Agent under
this Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes.  In addition,
the Borrower shall pay all Other Taxes.

                  (b) The Borrower  agrees to indemnify  and hold  harmless each
Bank and the Agent for the full  amount of Taxes or Other Taxes  (including  any
Taxes or Other Taxes imposed by any  jurisdiction  on amounts payable under this
Section)  paid by the Bank or the Agent and any liability  (including  interest,
additions  to tax and  expenses)  arising  therefrom  or with  respect  thereto,
whether or not such Taxes or Other  Taxes were  correctly  or legally  asserted.
Payment under this  indemnification  shall be made within 30 days after the date
the Bank or the Agent makes written demand therefor.

                  (c) If the  Borrower  shall be  required  by law to  deduct or
withhold  any  Taxes  or  Other  Taxes  from or in  respect  of any sum  payable
hereunder to any Bank or the Agent, then:

                           (i) the sum payable  shall be  increased as necessary
          so  that  after  making  all  required   deductions  and  withholdings
          (including  deductions and withholdings  applicable to additional sums
          payable under this  Section)  such Bank or the Agent,  as the case may
          be,  receives an amount equal to the sum it would have received had no
          such deductions or withholdings been made;

(ii) the Borrower shall make such deductions and withholdings;

                           (iii) the Borrower shall pay the full amount deducted
          or withheld to the relevant  taxing  authority  or other  authority in
          accordance with applicable law; and

                           (iv) the Borrower  shall also pay to each Bank or the
          Agent for the account of such Bank, at the time interest is paid,  all
          additional amounts which the respective Bank specifies as necessary to
          preserve  the  after-tax  yield the Bank would have  received  if such
          Taxes or Other Taxes had not been imposed.

                  (d)  Within  30 days  after  the  date of any  payment  by the
Borrower  of Taxes or Other  Taxes,  the  Borrower  shall  furnish the Agent the
original or a certified copy of a receipt evidencing  payment thereof,  or other
evidence of payment satisfactory to the Agent.

                  (e) If the Borrower is required to pay  additional  amounts to
any Bank or the Agent pursuant to subsection (c) of this Section, then such Bank
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the  jurisdiction  of its Lending  Office so as to eliminate  any such
additional  payment by the Borrower which may thereafter  accrue, if such change
in the judgment of such Bank is not otherwise disadvantageous to such Bank.

Illegality.  (a) If any Bank determines that the introduction of any Requirement
of Law, or any change in any  Requirement  of Law, or in the  interpretation  or
administration  of any  Requirement  of Law, has made it  unlawful,  or that any
central bank or other  Governmental  Authority has asserted that it is unlawful,
for any Bank or its  applicable  Lending Office to make  Eurodollar  Rate Loans,
then,  on notice  thereof by the Bank to the  Borrower  through  the Agent,  any
obligation of that Bank to make  Eurodollar  Rate Loans shall be suspended until
the Bank notifies the Agent and the Borrower that the circumstances  giving rise
to such determination no longer exist.

                  (b) If a Bank  determines  that it is unlawful to maintain any
Eurodollar  Rate Loan,  the Borrower  shall,  upon its receipt of notice of such
fact and demand from such Bank (with a copy to the  Agent),  prepay in full such
Eurodollar  Rate Loans of that Bank then  outstanding,  together  with  interest
accrued thereon and amounts required under Section 4.04,  either on the last day
of the Interest  Period thereof,  if the Bank may lawfully  continue to maintain
such  Eurodollar  Rate Loans to such day,  or  immediately,  if the Bank may not
lawfully  continue to maintain  such  Eurodollar  Rate Loan.  If the Borrower is
required to so prepay any  Eurodollar  Rate Loan,  then  concurrently  with such
prepayment,  the Borrower  shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.

                  (c)  If the  obligation  of  any  Bank  to  make  or  maintain
Eurodollar  Rate Loans has been so  terminated  or  suspended,  the Borrower may
elect, by giving notice to the Bank through the Agent that all Loans which would
otherwise  be made by the Bank as  Eurodollar  Rate Loans shall be instead  Base
Rate Loans.

                  (d) Before  giving any notice to the Agent under this Section,
the affected Bank shall designate a different Lending Office with respect to its
Eurodollar  Rate Loans if such  designation  will avoid the need for giving such
notice or making  such  demand and will not,  in the  judgment  of the Bank,  be
illegal or otherwise disadvantageous to the Bank.

Increased Costs and Reduction of Return. (a) If any Bank determines that, due to
either (i) the  introduction  of or any change  (other than any change by way of
imposition of or increase in reserve requirements included in the calculation of
the Eurodollar  Rate or in respect of the assessment rate payable by any Bank to
the FDIC for insuring U.S.  deposits) in or in the  interpretation of any law or
regulation  or (ii) the  compliance  by that Bank with any  guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law),  there shall be any increase in the cost to such Bank of agreeing
to make  or  making,  funding  or  maintaining  any  Eurodollar  Rate  Loans  or
participating  in Letters of Credit,  or, in the case of any Issuing  Bank,  any
increase  in the cost to such  Issuing  Bank of  agreeing  to issue,  issuing or
maintaining  any Letter of Credit or of agreeing  to make or making,  funding or
maintaining  any unpaid  drawing  under any Letter of Credit,  then the Borrower
shall be liable for,  and shall from time to time,  upon demand  (with a copy of
such demand to be sent to the  Agent),  pay to the Agent for the account of such
Bank,  additional  amounts as are  sufficient to  compensate  such Bank for such
increased costs.

                  (b)  If  any  Bank   shall  have   determined   that  (i)  the
introduction of any Capital Adequacy Regulation,  (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any  Capital  Adequacy  Regulation  by any  central  bank or other  Governmental
Authority charged with the  interpretation or  administration  thereof,  or (iv)
compliance by the Bank (or its Lending  Office) or any  corporation  controlling
the Bank with any  Capital  Adequacy  Regulation,  affects  or would  affect the
amount of capital  required  or  expected  to be  maintained  by the Bank or any
corporation  controlling the Bank and (taking into  consideration such Bank's or
such  corporation's  policies  with respect to capital  adequacy and such Bank's
desired  return  on  capital)  determines  that the  amount of such  capital  is
increased as a consequence of its Revolving Loan Commitments,  Loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the Borrower
through  the Agent,  the  Borrower  shall pay to the Bank,  from time to time as
specified by the Bank,  additional amounts sufficient to compensate the Bank for
such increase.

Funding  Losses.  The  Borrower  shall  reimburse  each  Bank and hold each Bank
harmless  from any loss or  expense  which  the Bank may  sustain  or incur as a
consequence of:

(a) the  failure  of the  Borrower  to make on a timely  basis  any  payment  of
principal of any Eurodollar Rate Loan;

                  (b) the failure of the Borrower to borrow, continue or convert
a Loan  after the  Borrower  has given (or is deemed to have  given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;

(c) the failure of the Borrower to make any  prepayment in  accordance  with any
notice delivered under Section 2.06;

                  (d) the  prepayment  (including  pursuant to Section  2.07) or
other payment (including after  acceleration  thereof) of a Eurodollar Rate Loan
on a day that is not the last day of the relevant Interest Period; or

(e) the automatic conversion under Section 2.04 of any Eurodollar Rate Loan to a
Base  Rate  Loan on a day  that is not the  last  day of the  relevant  Interest
Period;

including any such loss or expense  arising from the liquidation or reemployment
of funds  obtained  by it to  maintain  its  Eurodollar  Rate Loans or from fees
payable to  terminate  the  deposits  from which such funds were  obtained.  For
purposes of calculating  amounts payable by the Borrower to the Banks under this
Section and under subsection  4.03(a),  each Eurodollar Rate Loan made by a Bank
(and each related  reserve,  special  deposit or similar  requirement)  shall be
conclusively  deemed to have been  funded at the LIBOR used in  determining  the
Eurodollar  Rate for such  Eurodollar  Rate Loan by a matching  deposit or other
borrowing in the interbank  eurodollar  market for a comparable amount and for a
comparable  period,  whether  or not  such  Eurodollar  Rate  Loan is in fact so
funded.

Inability  to  Determine  Rates.  If the Agent  determines  that for any  reason
adequate and reasonable  means do not exist for  determining the Eurodollar Rate
for any requested  Interest  Period with respect to a proposed  Eurodollar  Rate
Loan or that the Eurodollar Rate applicable  pursuant to subsection  2.09(a) for
any requested  Interest  Period with respect to a proposed  Eurodollar Rate Loan
does not  adequately  and fairly  reflect the cost to such Banks of funding such
Loan, the Agent will promptly so notify the Borrower and each Bank.  Thereafter,
the obligation of the Banks to make or maintain Eurodollar Rate Loans, hereunder
shall be suspended  until the Agent upon the  instruction  of the Majority Banks
revokes such notice in writing.  Upon  receipt of such notice,  the Borrower may
revoke  any  Notice  of  Borrowing  or Notice  of  Conversion/Continuation  then
submitted  by it. If the Borrower  does not revoke such Notice,  the Banks shall
make, convert or continue the Loans, as proposed by the Borrower,  in the amount
specified in the  applicable  notice  submitted by the Borrower,  but such Loans
shall be made,  converted or continued as Base Rate Loans  instead of Eurodollar
Rate Loans.

Survival.  The  agreements  and  obligations  of the Borrower in this Article IV
shall survive the payment of all other Obligations.


                                    ARTICLE V
                              CONDITIONS PRECEDENT

Conditions to Effectiveness.  The effectiveness of the amendment and restatement
of the Existing Credit Agreement is subject to the condition that the Agent have
received on or before July 31, 1996 all of the following,  in form and substance
satisfactory  to  the  Agent  and,  where  provided  below,  each  Bank,  and in
sufficient copies for each Bank:

Credit  Agreement and any Notes.  This Agreement and any Notes  requested by the
Banks, executed by each party thereto;

(b)  Guaranty.  A Guaranty  in the form of Exhibit G hereto  executed by Finance
Corp.;

Resolutions; Incumbency.   Resolutions; Incumbency

                           (i)  Copies  of  partnership  authorizations  for the
          Borrower  and  resolutions  of the board of  directors  of the General
          Partner,  Stratton  and Finance  Corp.  authorizing  the  transactions
          contemplated  hereby  and  by  the  Guaranty,   certified  as  of  the
          Restatement  Effective Date by the Secretary or an Assistant Secretary
          of the General Partner, Stratton and Finance Corp.;

                           (ii) A  certificate  of the  Secretary  or  Assistant
          Secretary  of the  General  Partner  certifying  the  names  and  true
          signatures  of the  officers  of the  General  Partner  authorized  to
          execute, deliver and perform, as applicable, on behalf of the Borrower
          and the General  Partner,  this Agreement and all other Loan Documents
          to be delivered by the Borrower and the General Partner hereunder;

                           (iii) A  certificate  of the  Secretary  or Assistant
          Secretary of Stratton  certifying the names and true signatures of the
          officers of Stratton  authorized to execute,  deliver and perform,  as
          applicable,  on behalf of Stratton,  this Agreement and all other Loan
          Documents to be delivered by Stratton hereunder;

(iv) A  certificate  of the  Secretary or Assistant  Secretary of Finance  Corp.
certifying  the  names and the  signatures  of the  officers  of  Finance  Corp.
authorized to execute, deliver and perform, as applicable,  the Guaranty and all
other Loan Documents required to be delivered by Finance Corp. hereunder;

Organization Documents; Good Standing. Each of the following documents:

                           (i) the articles or certificate of incorporation  and
          the bylaws of the General Partner,  Stratton and Finance Corp. and the
          Certificate  of  Limited   Partnership  and  the  Limited  Partnership
          Agreement  of  the  Borrower,  in  each  case  as  in  effect  on  the
          Restatement  Effective  Date,  certified by the Secretary or Assistant
          Secretary  of the  General  Partner,  Stratton  or Finance  Corp.,  as
          applicable, as of the Restatement Effective Date;

                           (ii)  a  good   standing   and  tax   good   standing
          certificate for the General Partner,  Stratton,  Finance Corp. and the
          Borrower  from  the   Secretary  of  State  (or  similar,   applicable
          Governmental Authority) of its state of incorporation or organization,
          as  applicable,  and each other  state  designated  by Agent where the
          General  Partner,  Stratton,  Finance Corp.  or the Borrower  conducts
          significant business, in each case as of a recent date;

Legal Opinions.   (e)      Legal Opinions

                           (i)  opinion  of  Bryan  Cave  LLP,  counsel  to  the
          Borrower, the General Partner,  Stratton and the Guarantor, or of such
          other counsel as are acceptable to the Agent and the Banks,  addressed
          to the Agent and the  Banks,  substantially  in the form of Exhibit D;
          and

(ii) a favorable opinion of Orrick,  Herrington & Sutcliffe,  special counsel to
the Agent;

Payment of Fees.  Evidence of payment by the  Borrower of all accrued and unpaid
fees,  costs and expenses to the extent then due and payable on the  Restatement
Effective Date, together with Attorney Costs of the Agent to the extent invoiced
prior to or on the Restatement  Effective Date, plus such additional  amounts of
Attorney Costs as shall constitute the Agent's  reasonable  estimate of Attorney
Costs incurred or to be incurred by it through the closing proceedings (provided
that such estimate  shall not  thereafter  preclude  final  settling of accounts
between the Borrower and the Agent); including any such costs, fees and expenses
arising  under or referenced in the Fee Letter or otherwise in Sections 2.10 and
11.04;

Certificate.  A certificate  signed by a  Responsible  Officer and an officer of
Stratton, dated as of the Restatement Effective Date, stating that:

(i) the  representations  and  warranties  contained  in Article VI are true and
correct on and as of such date, as though made on and as of such date;

(ii) no  Default  or Event of  Default  exists or would  result  from the Credit
Extension; and

                           (iii) there has  occurred  since April 30,  1996,  no
          event  or  circumstance  that has  resulted  or  could  reasonably  be
          expected to result in a Material Adverse Effect.

Refinancing  of Floating  Rate Senior  Notes.  Evidence  that the Floating  Rate
Senior Notes will be refinanced in full on the  Restatement  Effective Date with
the  proceeds of the  Facility B Term Loan in  accordance  with the terms of the
1994 Indenture (which evidence shall include,  without limitation, a certificate
of the Borrower to the effect that the deposit  required to be made  pursuant to
Section 3.05 of the 1994  Indenture in order to redeem the Floating  Rate Senior
Notes in full shall be made on the Restatement  Effective Date with the proceeds
of the Facility B Term Loan);

No Material  Change.  There shall have been no Material  Adverse  Effect between
April 30, 1996 and the Restatement Effective Date.

Trading Policies.  The trading position policy and the supply inventory position
policy as in effect on the  Restatement  Effective  Date,  as  evidenced  by the
written policies  delivered to the Agent, shall be satisfactory to the Agent and
the Majority Banks.

                  (k) Payments under Existing  Credit  Agreement.  Evidence that
all interest and fees accrued under the Existing  Credit  Agreement  through and
including the Restatement Effective Date shall have been paid by the Borrower.

Other Documents. Such other approvals,  opinions,  documents or materials as the
Agent or any Bank may request.

Conditions  to All Credit  Extensions.  The  obligation of each Bank to make any
Loan to be made by it (including its initial Loan) or to continue or convert any
Loan under  Section 2.04 and the  obligation  of the Issuing  Banks to Issue any
Letters of Credit  (including  any initial  Letters of Credit) is subject to the
satisfaction  of the following  conditions  precedent on the relevant  Borrowing
Date, Conversion/Continuation Date or Issuance Date:

Notice,  Application.  The Agent shall have received  (with,  in the case of the
initial  Loans only,  a copy for each Bank) a Notice of Borrowing or a Notice of
Conversion/Continuation,  as  applicable,  or in the case of any Issuance of any
Letter of Credit,  the applicable Issuing Bank and the Agent shall have received
an L/C Application or L/C Amendment Application, as required under Section 3.02;

Continuation  of  Representations   and  Warranties.   The  representations  and
warranties  in Article VI shall be true and correct in all material  respects on
and as of such  Borrowing  Date,  Conversion/Continuation  Date or Issuance Date
with  the  same  effect  as  if  made  on  and  as  of  such   Borrowing   Date,
Conversion/Continuation  Date  or  Issuance  Date  (except  to the  extent  such
representations and warranties expressly refer to an earlier date, in which case
they  shall be true and  correct in all  material  respects  as of such  earlier
date); and

No Existing Default.  No Default or Event of Default shall exist or shall result
from such Borrowing, continuation or conversion or Issuance.

Each Notice of Borrowing,  Notice of Conversion/Continuation and L/C Application
or  L/C  Amendment   Application  submitted  by  the  Borrower  hereunder  shall
constitute a representation  and warranty by the Borrower  hereunder,  as of the
date of each such notice and as of each Borrowing Date,  Conversion/Continuation
Date or Issuance  Date, as  applicable,  that the conditions in Section 5.02 are
satisfied.


                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

          Each of the Borrower,  the General Partner and Stratton represents and
warrants to the Agent and each Bank that:

Corporate or Partnership Existence and Power. The General Partner, Stratton, the
MLP, the Borrower and each of its Subsidiaries:

(a) is a corporation or partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation;

                  (b) has the power and authority and all governmental licenses,
authorizations,  consents and approvals to own its assets, carry on its business
as now being or as proposed to be conducted and to execute, deliver, and perform
its obligations under the Loan Documents;

                  (c) is duly qualified as a foreign  corporation or partnership
and is licensed and in good standing under the laws of each  jurisdiction  where
its  ownership,  lease or  operation  of property or the conduct of its business
requires such  qualification or license or where the failure so to qualify would
have a Material Adverse Effect; and

                (d)      is in compliance with all material Requirements of Law.

Corporate  or  Partnership  Authorization;  No  Contravention.   The  execution,
delivery and  performance by the Borrower,  the General  Partner and Stratton of
this  Agreement and each other Loan Document to which the General  Partner,  the
Borrower or any Subsidiary is party,  have been duly authorized by all necessary
partnership action on behalf of the Borrower and all necessary  corporate action
on behalf of the General Partner and any Subsidiary, and do not and will not:

(a)  contravene  the  terms of any of the  General  Partner's,  the  MLP's,  the
Borrower's or any Subsidiary's Organization Documents;

                  (b) conflict with or result in any breach or contravention of,
or the  creation of any Lien under,  any  document  evidencing  any  Contractual
Obligation to which the General Partner, the MLP, the Borrower or any Subsidiary
is a  party  or any  order,  injunction,  writ  or  decree  of any  Governmental
Authority to which such Person or its property is subject  where such  conflict,
breach,  contravention  or Lien could  reasonably be expected to have a Material
Adverse Effect; or

                  (c)      violate any material Requirement of Law.

Governmental Authorization.  No approval, consent, exemption,  authorization, or
other action by, or notice to, or filing  with,  any  Governmental  Authority is
necessary  or  required  in  connection  with  (a) the  execution,  delivery  or
performance by, or enforcement against, the General Partner, the Borrower or any
Subsidiary of this  Agreement or any other Loan  Document,  or (b) the continued
operation of Borrower's  business as contemplated to be conducted after the date
hereof by the Loan  Documents,  except in each  case such  approvals,  consents,
exemptions, authorizations or other actions, notices or filings (i) as have been
obtained, (ii) as may be required under state securities or Blue Sky laws, (iii)
as are of a routine or administrative  nature and are either (A) not customarily
obtained  or  made  prior  to  the  consummation  of  transactions  such  as the
transactions  described in clauses (a) or (b) or (B) expected in the judgment of
the Borrower to be obtained in the ordinary course of business subsequent to the
consummation of the transactions  described in clauses (a) or (b), or (iv) that,
if not obtained,  could not  reasonably  be expected to have a Material  Adverse
Effect.

Binding Effect. This Agreement and each other Loan Document to which the General
Partner,  the Borrower or any Subsidiary is a party constitute the legal,  valid
and binding  obligations  of such  Person,  enforceable  against  such Person in
accordance with their respective terms,  except as enforceability may be limited
by applicable bankruptcy,  insolvency, or similar laws affecting the enforcement
of  creditors'  rights  generally  or  by  equitable   principles   relating  to
enforceability.

Litigation.  There  are no  actions,  suits,  proceedings,  claims  or  disputes
pending,  or to the best knowledge of the Borrower,  threatened or contemplated,
at law, in equity, in arbitration or before any Governmental Authority,  against
the General Partner,  the MLP, the Borrower or any of its Subsidiaries or any of
their respective properties which:

(a) purport to affect or pertain to this Agreement or any other Loan Document or
any of the transactions contemplated hereby or thereby; or

                  (b)  if   determined   adversely   to  the   Borrower  or  its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No
injunction,  writ,  temporary  restraining  order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the  execution,  delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.

No  Default.  No  Default or Event of Default  exists or would  result  from the
incurring,  continuing or converting of any  Obligations by the Borrower.  As of
the Restatement  Effective  Date,  neither the Borrower nor any Affiliate of the
Borrower is in default  under or with respect to any  Contractual  Obligation in
any respect  which,  individually  or  together  with all such  defaults,  could
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Restatement  Effective  Date,  create an Event of
Default under subsection 9.01(e).

ERISA  Compliance.  (a) Each Plan is in compliance in all material respects with
the  applicable  provisions  of ERISA,  the Code and other federal or state law.
Each Plan which is  intended  to qualify  under  Section  401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Borrower and the General Partner,  nothing has occurred which would cause
the loss of such qualification.

                  (b) There are no pending, or to the best knowledge of Borrower
and the General Partner,  threatened claims,  actions or lawsuits,  or action by
any Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been no
prohibited  transaction or other violation of the fiduciary  responsibility rule
with  respect to any Plan which could  reasonably  result in a Material  Adverse
Effect.

(c) No ERISA Event has occurred or is reasonably  expected to occur with respect
to any Pension Plan.

                  (d)      No Pension Plan has any Unfunded Pension Liability.

                  (e) The  Borrower  has not  incurred,  nor does it  reasonably
expect to incur,  any  liability  under  Title IV of ERISA  with  respect to any
Pension Plan (other than premiums due and not  delinquent  under Section 4007 of
ERISA).

                  (f) The Borrower  has not  transferred  any  Unfunded  Pension
Liability  to any Person or  otherwise  engaged in a  transaction  that could be
subject to Section 4069 of ERISA.

                  (g) Except as  specifically  disclosed  in Schedule  6.07,  no
trade or business  (whether or not  incorporated  under common  control with the
Borrower  within the  meaning of Section  414(b),  (c),  (m) or (o) of the Code)
maintains  or  contributes  to any Pension Plan or other Plan subject to Section
412 of the Code. Except as specifically  disclosed in Schedule 6.07, neither the
Borrower nor any Person  under  common  control with the Borrower (as defined in
the preceding  sentence) has ever contributed to any  multiemployer  plan within
the meaning of Section 4001(a)(3) of ERISA.

Use of Proceeds;  Margin  Regulations.  The proceeds of the Loans are to be used
solely for the purposes  set forth in and  permitted by Section 7.11 and Section
8.07.  Neither the  Borrower  nor any  Affiliate  of the  Borrower is  generally
engaged in the  business of  purchasing  or selling  Margin  Stock or  extending
credit for the purpose of purchasing or carrying Margin Stock.

Title to  Properties.  The  Borrower  and each  Subsidiary  have good record and
marketable  title in fee simple to, or valid  leasehold  interests  in, all real
property  necessary  or  used  in  the  ordinary  conduct  of  their  respective
businesses,  except for such defects in title as could not,  individually  or in
the aggregate,  have a Material Adverse Effect. As of the Restatement  Effective
Date and subject to the preceding sentence, the property of the Borrower and its
Subsidiaries is subject to no Liens other than Permitted Liens.

Taxes.  The General Partner has filed all Federal and other material tax returns
and reports required to be filed, for itself and for the Borrower,  and has paid
all Federal and other material taxes,  assessments,  fees and other governmental
charges levied or imposed upon it or its properties,  income or assets otherwise
due and  payable,  except  those  which are  being  contested  in good  faith by
appropriate  proceedings  and for which adequate  reserves have been provided in
accordance with GAAP.  There is no proposed tax assessment  against the Borrower
that would, if made, have a Material Adverse Effect.

Financial Condition.  (a) The audited  consolidated  financial statements of the
General Partner, the Borrower,  the MLP and their respective  Subsidiaries dated
July 31, 1995 and the unaudited consolidated financial statements of the General
Partner, the Borrower, the MLP and their respective Subsidiaries dated April 30,
1996, in each case together with the related  consolidated  statements of income
or operations,  shareholders' equity and cash flows for the fiscal periods ended
on those respective dates:

                           (i)   were   prepared   in   accordance   with   GAAP
          consistently applied throughout the period covered thereby,  except as
          otherwise  expressly  noted therein,  subject to ordinary,  good faith
          year end audit adjustments;

                           (ii) fairly  present the  financial  condition of the
          Borrower  and its  Subsidiaries  as of the date thereof and results of
          operations for the period covered thereby; and

                           (iii)  show  all  material   indebtedness  and  other
          liabilities,   direct  or   contingent,   of  the   Borrower  and  its
          consolidated   Subsidiaries   as  of  the  date   thereof,   including
          liabilities   for   taxes,   material   commitments   and   Contingent
          Obligations.

(b) Since April 30, 1996, there has been no Material Adverse Effect.

                  (c) The General Partner, the MLP, the Borrower and each of the
other  Subsidiaries  of the  Borrower  are each  Solvent,  both before and after
giving effect to the  consummation of each of the  transactions  contemplated by
the Loan Documents.

Environmental  Matters. The Borrower conducts in the ordinary course of business
a review of the effect of existing Environmental Laws and existing Environmental
Claims on its business,  operations and properties,  and as a result thereof the
Borrower has reasonably concluded that such Environmental Laws and Environmental
Claims could not,  individually  or in the aggregate,  reasonably be expected to
have a Material Adverse Effect.

Regulated Entities. None of the Borrower or any Affiliate of the Borrower, is an
"Investment  Company" within the meaning of the Investment  Company Act of 1940.
The  Borrower  is not subject to  regulation  under the Public  Utility  Holding
Company Act of 1935,  the Federal  Power Act, the  Interstate  Commerce Act, any
state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.

No Burdensome  Restrictions.  Neither the Borrower nor any Subsidiary is a party
to or bound by any Contractual Obligation,  or subject to any restriction in any
Organization  Document,  or any  Requirement of Law,  which could  reasonably be
expected to have a Material Adverse Effect.

Copyrights,   Patents,  Trademarks  and  Licenses,  etc.  The  Borrower  or  its
Subsidiaries  own or are licensed or  otherwise  has the right to use all of the
patents,  trademarks,  service  marks,  trade  names,  copyrights,   contractual
franchises,  authorizations  and other rights that are reasonably  necessary for
the operation of their respective  businesses,  without conflict with the rights
of any other Person.  To the best knowledge of the Borrower,  no slogan or other
advertising device, product,  process, method, substance, part or other material
now  employed,  or now  contemplated  to be  employed,  by the  Borrower  or any
Subsidiary  infringes  upon any  rights  held by any other  Person.  No claim or
litigation  regarding any of the foregoing is pending or, to the best  knowledge
of the Borrower,  threatened,  and no patent,  invention,  device,  application,
principle or any statute, law, rule, regulation, standard or code is pending or,
to the  knowledge  of the  Borrower,  proposed,  which,  in either  case,  could
reasonably be expected to have a Material Adverse Effect.

Subsidiaries  and  Affiliates.   The  Borrower  has  no  Subsidiaries  or  other
Affiliates other than those specifically  disclosed in part (a) of Schedule 6.16
hereto and has no equity  investments  in any other  corporation or entity other
than those Permitted Investments  specifically disclosed in part (b) of Schedule
6.16.

Insurance.  The properties of the Borrower and its Subsidiaries are insured with
financially  sound and  reputable  insurance  companies  not  Affiliates  of the
Borrower,  in such amounts, with such deductibles and covering such risks as are
customarily  carried  by  companies  engaged in  similar  businesses  and owning
similar properties in localities where the Borrower or such Subsidiary operates.

Tax  Status.  The  Borrower  is  subject  to  taxation  under the Code only as a
partnership and not as a corporation.

Full Disclosure.  None of the representations or warranties made by the Borrower
or any  Affiliate  of the  Borrower  in the Loan  Documents  as of the date such
representations  and  warranties  are  made  or  deemed  made,  and  none of the
statements contained in any exhibit,  report, statement or certificate furnished
by or on behalf of the Borrower or any  Affiliate of the Borrower in  connection
with the Loan  Documents  contains any untrue  statement  of a material  fact or
omits any material fact  required to be stated  therein or necessary to make the
statements  made  therein,  in light of the  circumstances  under which they are
made, not misleading as of the time when made or delivered.

Fixed Price Supply  Contracts.  None of the Borrower and its  Subsidiaries  is a
party to any  contract for the supply of propane or other  product  except where
(a) the  purchase  price  is set  with  reference  to a spot  index  or  indices
substantially  contemporaneously  with  the  delivery  of  such  product  or (b)
delivery  of such  propane or other  product is to be made no more than one year
after the purchase price is agreed to.

Trading  Policies.  The  Borrower  has  provided  to the Agent an  accurate  and
complete summary of its trading  position policy and supply  inventory  position
policy and the Borrower has complied in all respects with such policies.

Refinancing of Floating Rate Senior Notes. As of the Restatement Effective Date,
all actions,  notices and consents  required for the  redemption  in full of the
Floating  Rate  Senior  Notes in  compliance  with the  1994  Indenture  and the
Floating Rate Senior Notes have been made, taken and obtained.


                                   ARTICLE VII
                              AFFIRMATIVE COVENANTS

          So  long  as  any  Bank  shall  have  any  Revolving  Loan  Commitment
hereunder,  or any Loan or other  Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall  remain  outstanding,  unless the  Majority  Banks
waive compliance in writing:

Financial  Statements.  The  Borrower  shall  deliver to the Agent,  in form and
detail  satisfactory to the Agent and the Majority Banks and consistent with the
form and detail of financial statements and projections provided to the Agent by
the Borrower and its Affiliates  prior to the  Restatement  Effective Date, with
sufficient copies for each Bank:

                  (a) as soon as  available,  but not later  than 100 days after
the end of each  fiscal  year  (commencing  with the fiscal  year ended July 31,
1996), a copy of the audited  consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such year and the related consolidated  statements
of income or operations,  partners' or  shareholders'  equity and cash flows for
such year,  setting forth in each case in  comparative  form the figures for the
previous fiscal year, and accompanied by the opinion of a  nationally-recognized
independent  public accounting firm  ("Independent  Auditor") which report shall
state that such consolidated  financial  statements present fairly the financial
position for the periods  indicated in  conformity  with GAAP applied on a basis
consistent  with prior years.  Such opinion shall not be qualified or limited in
any manner, including on account of any limitation on it because of a restricted
or limited examination by the Independent Auditor of any material portion of the
Borrower's or any Subsidiary's records;

                  (b) as soon as available, but not later than 45 days after the
end of each of the first three fiscal  quarters of each fiscal year  (commencing
with the  fiscal  quarter  ended  October  31,  1996),  a copy of the  unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
such quarter and the related  consolidated  statements  of income,  partners' or
shareholders'  equity and cash flows for the period  commencing on the first day
and  ending on the last day of such  quarter,  and  certified  by a  Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end  audit  adjustments),  the financial  position and the results of
operations of the Borrower and the Subsidiaries;

                  (c) as soon as  available,  but not later  than 100 days after
the end of each fiscal year (commencing with the first fiscal year during all or
any part of which the Borrower had one or more Significant Subsidiaries), a copy
of an unaudited consolidating balance sheet of the Borrower and its Subsidiaries
as at the end of such year and the related  consolidating  statement  of income,
partners' or shareholders'  equity and cash flows for such year,  certified by a
Responsible  Officer as having been  developed and used in  connection  with the
preparation of the financial statements referred to in subsection 7.01(a);

                  (d) as soon as available, but not later than 45 days after the
end of each of the first three fiscal  quarters of each fiscal year  (commencing
with the first fiscal  quarter  during all or any part of which the Borrower had
one or more  Significant  Subsidiaries),  a copy of the unaudited  consolidating
balance  sheets  of  the  Borrower  and  its   Subsidiaries,   and  the  related
consolidating  statements of income,  partners' or shareholders' equity and cash
flows for such quarter,  all  certified by a Responsible  Officer as having been
developed  and  used  in  connection  with  the  preparation  of  the  financial
statements referred to in subsection 7.01(b);

                  (e) as soon as available, but not later than 60 days after the
end of each fiscal year  (commencing  with the fiscal year  beginning  August 1,
1996),   projected   consolidated   balance  sheets  of  the  Borrower  and  its
Subsidiaries as at the end of each of the current and following two fiscal years
and  related  projected   consolidated   statements  of  income,   partners'  or
shareholders' equity and cash flows for each such fiscal year, including therein
a budget for the current  fiscal  year,  certified by a  Responsible  Officer as
having been  developed and prepared by the Borrower in good faith and based upon
the Borrower's best estimates and best available information;

                  (f) as soon as  available,  but not later  than 100 days after
the end of each fiscal year of the General  Partner,  commencing with the fiscal
year ended July 31, 1996, a copy of the  unaudited  (or audited,  if  available)
consolidated  balance sheets of the General Partner as of the end of such fiscal
year and the related consolidated statements of income, shareholders' equity and
cash flows for such fiscal year,  certified by a  Responsible  Officer as fairly
presenting,  in accordance with GAAP, the financial  position and the results of
operations  of the General  Partner  and its  Subsidiaries  (or,  if  available,
accompanied by an opinion of an  Independent  Auditor as described in subsection
7.01(a)); and

                  (g) as soon as available, but not later than 45 days after the
end of each of the first three  fiscal  quarters  of each fiscal year and,  with
respect to the final fiscal quarter,  concurrently with the financial statements
referred to in subsection  7.01(a), a trading position report as of the last day
of each fiscal quarter, certified by a Responsible Officer.

Certificates;  Other Information.  The Borrower shall furnish to the Agent, with
sufficient copies for each Bank:

                  (a) concurrently with the delivery of the financial statements
referred to in subsection  7.01(a),  a certificate  of the  Independent  Auditor
stating  that in making the  examination  necessary  therefor no  knowledge  was
obtained  of any  Default  or Event of  Default,  except  as  specified  in such
certificate;

                  (b) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a) and (b), a Compliance Certificate executed by
a  Responsible  Officer  with respect to the periods  covered by such  financial
statements  together  with  supporting  calculations  and such other  supporting
detail as the Agent and Majority Banks shall require;

                  (c) promptly,  copies of all financial  statements and reports
that the Borrower,  the General  Partner,  the MLP or Finance Corp. or any other
Subsidiary  sends to its partners or  shareholders,  and copies of all financial
statements and regular,  periodic or special reports (including Forms 10-K, 10-Q
and 8-K)  that the  Borrower  or any  Affiliate  of the  Borrower,  the  General
Partner,  the MLP or Finance Corp. or any other  Subsidiary may make to, or file
with, the SEC; and

                  (d)  promptly,   such  additional  information  regarding  the
business,  financial or corporate affairs of the Borrower,  the General Partner,
the MLP or Finance Corp. or any other Subsidiary as the Agent, at the request of
any Bank, may from time to time request.

Notices.  The Borrower shall promptly notify the Agent and each Bank:

(a) of the occurrence of any Default or Event of Default,  and of the occurrence
or existence of any event or circumstance that foreseeably will become a Default
or Event of Default;

                  (b) of any  matter  that has  resulted  or may  reasonably  be
expected  to  result in a  Material  Adverse  Effect,  including  (i)  breach or
non-performance  of, or any  default  under,  a  Contractual  Obligation  of the
Borrower, the General Partner, the MLP or Finance Corp. or any other Subsidiary;
(ii) any dispute,  litigation,  investigation,  proceeding or suspension between
the  Borrower,  the  General  Partner,  the MLP or  Finance  Corp.  or any other
Subsidiary and any Governmental  Authority; or (iii) the commencement of, or any
material  development  in, any litigation or proceeding  affecting the Borrower,
the General Partner, the MLP or Finance Corp. or any other Subsidiary, including
pursuant to any applicable Environmental Laws;

                  (c) of any of the following events affecting the Borrower, the
General Partner, the MLP or Finance Corp. or any other Subsidiary, together with
a copy of any notice with respect to such event that may be required to be filed
with a  Governmental  Authority  and  any  notice  delivered  by a  Governmental
Authority to such Person with respect to such event:

                           (i)   an ERISA Event;

(ii) if any of the  representations  and warranties in Section 6.07 ceases to be
true and correct;

(iii) the  adoption of any new Pension Plan or other Plan subject to Section 412
of the Code;

                           (iv) the adoption of any  amendment to a Pension Plan
          or other Plan  subject to Section 412 of the Code,  if such  amendment
          results in a material  increase in  contributions  or Unfunded Pension
          Liability; or

(v) the  commencement of contributions to any Pension Plan or other Plan subject
to Section 412 of the Code;

(d) of any  material  change  in  accounting  policies  or  financial  reporting
practices by the Borrower or any of its consolidated Subsidiaries; and

                  (e) not later than five Business Days after the effective date
of a change  in the  Borrower's  trading  position  policy or  inventory  supply
position policy, of any change in either policy.

                  Each  notice  under this  Section  shall be  accompanied  by a
written  statement  by a  Responsible  Officer  setting  forth  details  of  the
occurrence  referred to therein,  and  stating  what action the  Borrower or any
affected  Affiliate proposes to take with respect thereto and at what time. Each
notice under subsection  7.03(a) shall describe with  particularity  any and all
clauses or  provisions  of this  Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.

Preservation of Corporate or Partnership Existence, Etc. The General Partner and
the Borrower shall, and the Borrower shall cause each Subsidiary to:

                  (a)  preserve  and  maintain  in full  force  and  effect  its
partnership or corporate existence and good standing under the laws of its state
or  jurisdiction  of  organization  or  incorporation  except in connection with
transactions permitted by Section 8.03;

                  (b)  preserve  and  maintain  in full  force  and  effect  all
governmental  rights,   privileges,   qualifications,   permits,   licenses  and
franchises  necessary or desirable in the normal conduct of its business  except
in connection  with  transactions  permitted by Section 8.03 and sales of assets
permitted by Section 8.02;

(c) use reasonable efforts, in the ordinary course of business,  to preserve its
business organization and goodwill; and

                  (d)  preserve  or  renew  all  of  its   registered   patents,
trademarks,  trade names and service marks, the  non-preservation of which could
reasonably be expected to have a Material Adverse Effect.

Maintenance  of Property.  The  Borrower  shall  maintain,  and shall cause each
Subsidiary to maintain, and preserve all its property which is used or useful in
its  business  in good  working  order  and  condition,  ordinary  wear and tear
excepted.  The  Borrower  and each  Subsidiary  shall use the  standard  of care
typical in the industry in the operation and maintenance of its facilities.

Insurance.  The Borrower  shall  maintain,  and shall cause each  Subsidiary  to
maintain,  with financially sound and reputable independent insurers,  insurance
with respect to its properties and business  against loss or damage of the kinds
customarily  insured against by Persons engaged in the same or similar business,
of such  types and in such  amounts as are  customarily  carried  under  similar
circumstances by such other Persons.

Payment of  Obligations.  The Borrower,  the General Partner and Stratton shall,
and shall cause each  Subsidiary  to, pay and discharge as the same shall become
due and payable  (except to the extent the failure to so pay and discharge could
not  reasonably  be  expected  to have a  Material  Adverse  Effect),  all their
respective obligations and liabilities, including:

                  (a) all tax liabilities,  assessments and governmental charges
or  levies  upon it or its  properties  or  assets,  unless  the same are  being
contested in good faith by  appropriate  proceedings  and  adequate  reserves in
accordance with GAAP are being maintained by the Borrower,  the General Partner,
Stratton or such Subsidiary;

                  (b) all lawful claims which, if unpaid,  would by law become a
Lien upon its property,  unless such claims are being contested in good faith by
appropriate  proceedings and adequate reserves in accordance with GAAP are being
maintained by the Borrower,  the General  Partner,  Stratton or such Subsidiary;
and

(c)  all  Indebtedness,  as  and  when  due  and  payable,  but  subject  to any
subordination  provisions  contained in any  instrument or agreement  evidencing
such Indebtedness.

Compliance with Laws. The Borrower shall comply, and shall cause each Subsidiary
to  comply,  in  all  material  respects  with  all  Requirements  of Law of any
Governmental  Authority having  jurisdiction over it or its business  (including
the Federal Fair Labor Standards  Act),  except such as may be contested in good
faith or as to which a bona fide dispute may exist.

Inspection of Property and Books and Records.  The Borrower  shall  maintain and
shall cause each Subsidiary to maintain  proper books of record and account,  in
which  full,  true and  correct  entries in  conformity  with GAAP  consistently
applied shall be made of all financial  transactions  and matters  involving the
assets and  business of the  Borrower and such  Subsidiary.  The Borrower  shall
permit,  and  shall  cause  each  Subsidiary  to  permit,   representatives  and
independent  contractors  of the Agent or any Bank to visit and  inspect  any of
their respective  properties,  to examine their respective corporate,  financial
and operating records,  and make copies thereof or abstracts  therefrom,  and to
discuss their  respective  affairs,  finances and accounts with their respective
directors,  officers, and independent public accountants,  all at the expense of
the Borrower and at such  reasonable  times during normal  business hours and as
often as may be  reasonably  desired,  upon  reasonable  advance  notice  to the
Borrower;  provided,  however,  when an Event of Default exists the Agent or any
Bank may do any of the  foregoing  at the  expense of the  Borrower  at any time
during normal business hours and without advance notice.

Environmental  Laws.  The Borrower  shall,  and shall cause each  Subsidiary to,
conduct its operations and keep and maintain its property in material compliance
with all Environmental Laws.

Use of Proceeds. The Borrower (and Stratton,  with respect to Letters of Credit)
shall use the proceeds of (a) the Facility A Revolving Loans for working capital
purposes only, (b) the Facility B Term Loan for the purpose of  refinancing,  in
full,  on the  Restatement  Effective  Date the  Floating  Rate Senior  Notes in
accordance with the terms of the 1994 Indenture and (c) the Facility C Revolving
Loans for working capital,  Acquisitions and other general partnership purposes,
in each  case  not in  contravention  of any  Requirement  of Law or of any Loan
Document.

Financial Covenants.ncial Covenants

                  (a) Leverage Ratio. The Borrower shall maintain as of the last
day of each fiscal quarter a Leverage Ratio for the fiscal period  consisting of
such fiscal quarter and the seven immediately  preceding fiscal quarters,  equal
to or less than (i) 4.25 to 1.00 for the fiscal  quarters  ending from and after
the Restatement Effective Date through and including July 31, 1999 and (ii) 4.00
to 1.00 for each fiscal quarter ending thereafter;  provided, that to the extent
the Borrower borrows Loans to make Restricted  Payments within 45 days after the
end of any fiscal  quarter,  the aggregate  amount of Loans so borrowed shall be
added to the amount of Funded Debt  outstanding  at the end of such  quarter for
purposes of determining the Leverage Ratio at the end of such quarter.

(b) Minimum Partners' Equity. The Borrower shall maintain at all times a minimum
Partners' Equity of not less than $100,000,000.

Trading  Policies.  The  Borrower  and its  Affiliates  shall  comply  with  the
Borrower's  trading position policy and supply  inventory  position policy as in
effect on July 5, 1994,  copies of which have been  provided  to the Agent on or
prior to the Restatement  Effective Date, provided,  however,  that the Borrower
and its Affiliates may, during any period of four  consecutive  fiscal quarters,
(a) increase the stop loss limit specified in either policy by up to 100% of the
amount of such  limit as in effect on July 5, 1994 and (b)  increase  the volume
limit specified in either policy on the number of barrels of a single product or
of all products in the  aggregate by up to 100% of each such number as in effect
on July 5, 1994. If the Borrower proposes to increase any such amounts in excess
of the amounts  specified in the preceding  sentence,  the Borrower  shall first
obtain the consent of the Agent and the Majority Banks.

Other General Partner Obligations.ner Obligations

                  (a) The General  Partner  shall cause the  Borrower to pay and
perform each of its Obligations  when due. The General Partner  acknowledges and
agrees that it is executing this Agreement as a principal as well as the general
partner on behalf of the Borrower, and that its obligations hereunder as general
partner  are  full  recourse  obligations  to the  same  extent  as those of the
Borrower.

                  (b) The General  Partner  represents,  warrants and  covenants
that it is Solvent,  both before and after giving effect to the  consummation of
the  transactions  contemplated by the Loan  Documents,  and that it will remain
Solvent until all  Obligations  hereunder shall have been repaid in full and all
commitments shall have terminated.

                  (c) The  General  Partner,  for so  long as it is the  general
partner of the Borrower, (i) agrees that its sole business will be to act as the
general partner of the Borrower,  the MLP and any further limited partnership of
which the Borrower or the MLP is, directly or indirectly,  a limited partner and
to undertake activities that are ancillary or related thereto (including being a
limited  partner in the  Borrower),  (ii)  shall not enter  into or conduct  any
business  or incur  any  debts  or  liabilities  except  in  connection  with or
incidental to (A) its  performance of the  activities  required or authorized by
the  MLP  Partnership  Agreement  or the  Borrower's  Partnership  Agreement  or
described  in or  contemplated  by the MLP  Registration  Statement  and (B) the
acquisition,  ownership or disposition of Partnership  Interests in the Borrower
or partnership  interests in the MLP or any further limited partnership of which
the Borrower or the MLP is, directly or indirectly,  a limited  partner,  except
that,  notwithstanding  the  foregoing,  employees  of the  General  Partner may
perform services for Ferrell Companies, Inc. and its Affiliates.

                  (d) The General  Partner  agrees that,  until all  Obligations
hereunder  shall  have  been  repaid  in full  and all  commitments  shall  have
terminated,  it will not exercise any rights it may have (at law, in equity,  by
contract or  otherwise)  to  terminate,  limit or  otherwise  restrict  (whether
through  repurchase  or otherwise  and whether or not the General  Partner shall
remain a general partner in the Borrower) the ability of the Borrower to use the
name "Ferrellgas".

                  (e) The General Partner shall not take any action or refuse to
take any reasonable  action the effect of which,  if taken or not taken,  as the
case may be,  would be to cause the  Borrower  to be treated  as an  association
taxable as a  corporation  or  otherwise  to be taxed as an entity  other than a
partnership for federal income tax purposes.

Other Stratton Obligations. Stratton shall not engage in any business other than
insuring  potential general liability and worker's  compensation  liabilities of
the Borrower and its Affiliates,  provided,  however, that the maximum amount of
the  liabilities  insured by  Stratton  in any  policy  year shall not exceed $3
million per occurrence and $8 million in the aggregate.

Monetary  Judgments.  If one or more judgments,  orders,  decrees or arbitration
awards is entered  against  the  Borrower  or any  Subsidiary  involving  in the
aggregate a  liability  (to the extent not  covered by  independent  third-party
insurance as to which the insurer does not dispute coverage other than through a
standard  reservation  of rights  letter) as to any single or related  series of
transactions,  incidents  or  conditions,  of more  than $10  million,  then the
Borrower shall reserve for such amount in excess of $10 million,  on a quarterly
basis,  with each quarterly  reserve being at least equal to one-twelfth of such
amount in excess of $10  million.  Such amount so  reserved  shall be treated as
establishment of a reserve for purposes of calculating Available Cash hereunder.

Maintenance of Subsidiary. The Borrower agrees at all times to maintain Stratton
as a Wholly-Owned Subsidiary.


                                  ARTICLE VIII
                               NEGATIVE COVENANTS

          So  long  as  any  Bank  shall  have  any  Revolving  Loan  Commitment
hereunder,  or any Loan or other  Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall  remain  outstanding,  unless the  Majority  Banks
waive compliance in writing:

Limitation on Liens.  The Borrower shall not, and shall not suffer or permit any
Subsidiary to, directly or indirectly,  make, create, incur, assume or suffer to
exist any Lien upon or with  respect to any part of its  property or sell any of
its accounts receivable, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):

(a) Liens existing on the Restatement  Effective Date set forth in Schedule 8.01
of the Existing Credit Agreement;

(b)  Liens in favor  of the  Borrower  or  Liens  to  secure  Indebtedness  of a
Subsidiary to the Borrower or a Wholly-Owned Subsidiary;

                  (c) Liens on  property  of a Person  existing at the time such
Person is merged  into or  consolidated  with the  Borrower  or any  Subsidiary,
provided that such Liens were in existence  prior to the  contemplation  of such
merger or consolidation  and do not extend to any assets other than those of the
Person merged into or consolidated with the Borrower;

                  (d) Liens on  property  existing  at the time  acquired by the
Borrower or any Subsidiary,  provided that such Liens were in existence prior to
the contemplation of such acquisition and do not extend to any assets other than
those of the Person acquired;

                  (e) Liens on any property or asset acquired by the Borrower or
any Subsidiary in favor of the seller of such property or asset and construction
mortgages on property, in each case, created within six months after the date of
acquisition,  construction  or  improvement  of such  property  or  asset by the
Borrower or such Subsidiary to secure the purchase price or other  obligation of
the Borrower or such  Subsidiary  to the seller of such property or asset or the
construction or improvement  cost of such property in an amount up to 80% of the
total cost of the  acquisition,  construction or improvement of such property or
asset;  provided  that in each  case,  such  Lien  does not  extend to any other
property or asset of the Borrower and its Subsidiaries;

                  (f) Liens  incurred or pledges and deposits made in connection
with worker's  compensation,  unemployment  insurance and other social  security
benefits and Liens to secure the performance of statutory obligations, surety or
appeal bonds,  performance  bonds or other obligations of a like nature, in each
case, incurred in the ordinary course of business;

                  (g) Liens for taxes,  assessments or  governmental  charges or
claims that are not yet delinquent or that are being  contested in good faith by
appropriate  proceedings promptly instituted and diligently concluded,  provided
that any  reserve  or other  appropriate  provision  as  shall  be  required  in
conformity with GAAP shall have been made therefor;

                  (h)  Liens  imposed  by law,  such as  mechanics',  carriers',
warehousemen's, materialmen's, and vendors' Liens, incurred in good faith in the
ordinary  course of business with respect to amounts not yet delinquent or being
contested  in good  faith  by  appropriate  proceedings  if a  reserve  or other
appropriate  provisions,  if any,  as shall be  required by GAAP shall have been
made therefor;

                  (i)  zoning  restrictions,   easements,  licenses,  covenants,
reservations,  restrictions on the use of real property or minor  irregularities
of title incident thereto that do not, in the aggregate, materially detract from
the  value  of  the  property  or  the  assets  of  the  Borrower  or any of its
Subsidiaries or impair the use of such property in the operation of the business
of the Borrower or any of its Subsidiaries;

                  (j) Liens of  landlords or  mortgages  of  landlords,  arising
solely by operation of law, on fixtures and movable property located on premises
leased by the  Borrower or any of its  Subsidiaries  in the  ordinary  course of
business;

                  (k)  financing  statements  filed or recorded  with respect to
personal  property  leased by the Borrower and its  Subsidiaries in the ordinary
course of business to the owners of such personal  property which are either (i)
operating  leases  (including,  without  limitation,  Synthetic  Leases) or (ii)
Capital Leases to the extent (but only to the extent) permitted by Section 8.05;

(l) judgment  Liens to the extent that such judgments do not cause or constitute
a Default or an Event of Default;

                  (m) Liens  incurred in the ordinary  course of business of the
Borrower  or any  Subsidiary  with  respect  to  obligations  that do not exceed
$5,000,000  in the  aggregate at any one time  outstanding  and that (i) are not
incurred in connection  with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary  course of business) and (ii)
do not in the  aggregate  materially  detract  from the value of the property or
materially  impair the use thereof in the  operation of business by the Borrower
or such Subsidiary;

                  (n)  Liens   securing   Indebtedness   incurred  to  refinance
Indebtedness  that has been  secured by a Lien  otherwise  permitted  under this
Agreement,  provided  that (i) any such Lien  shall  not  extend to or cover any
assets or property not  securing the  Indebtedness  so  refinanced  and (ii) the
refinancing  Indebtedness  secured by such Lien shall have been  permitted to be
incurred  under  Section  8.05 hereof and shall not have a  principal  amount in
excess of the Indebtedness so refinanced;

                  (o) any  extension or renewal,  or  successive  extensions  or
renewals,  in whole or in part,  of Liens  permitted  pursuant to the  foregoing
clauses (a) through (n);  provided that no such  extension or renewal Lien shall
(i) secure more than the amount of Indebtedness or other obligations  secured by
the Lien being so extended  or renewed or (ii) extend to any  property or assets
not subject to the Lien being so extended or renewed; and

(p) Liens in favor of the Agent,  any Issuing Bank and the Banks relating to the
Cash Collateralization of the Borrower's Obligations.

Asset  Sales.  The  Borrower  shall  not,  and  shall  not  permit  any  of  its
Subsidiaries  to, (i) sell,  lease,  convey or  otherwise  dispose of any assets
(including by way of a sale-and-leaseback)  other than sales of inventory in the
ordinary  course of business  consistent  with past practice  (provided that the
sale, lease,  conveyance or other disposition of all or substantially all of the
assets of the  Borrower  shall be governed  by the  provisions  of Section  8.03
hereof and not by the  provisions of this Section  8.02),  or (ii) issue or sell
Equity Interests of any of its Subsidiaries, in the case of either clause (i) or
(ii) above, whether in a single transaction or a series of related transactions,
(A) that  have a fair  market  value in  excess  of  $5,000,000,  or (B) for net
proceeds  in excess of  $5,000,000  (each of the  foregoing,  an "Asset  Sale"),
unless  (X) the  Borrower  (or the  Subsidiary,  as the  case  may be)  receives
consideration  at the time of such Asset Sale at least  equal to the fair market
value  (evidenced  by a  resolution  of the board of  directors  of the  General
Partner (and, if applicable, the audit committee of such board of directors) set
forth in a  certificate  signed by a  Responsible  Officer and  delivered to the
Agent) of the assets sold or  otherwise  disposed of and (Y) at least 80% of the
consideration  therefor  received by the Borrower or such  Subsidiary  is in the
form of cash;  provided,  however,  that the amount of (1) any  liabilities  (as
shown on the Borrower's or such Subsidiary's most recent balance sheet or in the
notes thereto),  of the Borrower or any Subsidiary  (other than liabilities that
are by  their  terms  subordinated  in  right  of  payment  to  the  Obligations
hereunder)  that are  assumed by the  transferee  of any such assets and (2) any
notes or other obligations  received by the Borrower or any such Subsidiary from
such  transferee  that  are  immediately  converted  by  the  Borrower  or  such
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash  for  purposes  of this  provision;  and  provided,  further,  that the 80%
limitation  referred  to in this clause (Y) shall not apply to any Asset Sale in
which the cash portion of the consideration  received  therefrom,  determined in
accordance  with the  foregoing  proviso,  is equal to or greater  than what the
after-tax  proceeds  would  have  been had such  Asset  Sale  complied  with the
aforementioned 80% limitation.  Notwithstanding the foregoing, Asset Sales shall
not be deemed to include (x) any  transfer  of assets by the  Borrower or any of
its  Subsidiaries  to a Subsidiary of the Borrower that is a Guarantor,  (y) any
transfer of assets by the Borrower or any of its  Subsidiaries  to any Person in
exchange for other  assets used in a line of business  permitted  under  Section
8.15 hereof and having a fair  market  value not less than that of the assets so
transferred and (z) any transfer of assets pursuant to a Permitted Investment.

Consolidations and Mergers.ons and Mergers

                  (a) The Borrower  shall not  consolidate or merge with or into
(whether or not the Borrower is the  surviving  corporation),  or sell,  assign,
transfer,  lease, convey or otherwise dispose of all or substantially all of its
properties  or assets in one or more  related  transactions,  to another  Person
unless (i) the  Borrower is the  surviving  Person,  or the Person  formed by or
surviving  any such  consolidation  or merger (if other than the Borrower) or to
which such sale, assignment,  transfer,  lease,  conveyance or other disposition
shall have been made is a corporation or partnership organized or existing under
the laws of the United  States,  any state  thereof or the District of Columbia;
and (ii) the Person formed by or surviving any such  consolidation or merger (if
other than the  Borrower)  or Person to which such sale,  assignment,  transfer,
lease,  conveyance  or other  disposition  shall have been made  assumes all the
Obligations  of the  Borrower  pursuant  to an  assumption  agreement  in a form
reasonably  satisfactory to the Agent,  under this Agreement;  (iii) immediately
after such  transaction  no Default  or Event of  Default  exists;  and (iv) the
Borrower or any Person formed by or surviving any such  consolidation or merger,
or to  which  such  sale,  assignment,  transfer,  lease,  conveyance  or  other
disposition  shall  have  been  made  (A)  shall  have  Consolidated  Net  Worth
(immediately  after  the  transaction  but  prior  to  any  purchase  accounting
adjustments  resulting  from  the  transaction)  equal  to or  greater  than the
Consolidated Net Worth of the Borrower immediately preceding the transaction and
(B) shall,  at the time of such  transaction  and after  giving pro forma effect
thereto as if such  transaction  had occurred at the beginning of the applicable
four-quarter  period,  be  permitted  to  incur at  least  $1.00  of  additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test.

(b) Finance  Corp.  may not  consolidate  or merge with or into  (whether or not
Finance Corp. is the surviving Person), or sell, assign, transfer, lease, convey
or otherwise  dispose of all or substantially all of its properties or assets in
one or more related  transactions,  to another  Person  unless such  transaction
shall be permitted under the terms and conditions of the 1994 Indenture.

                  (c) The Borrower or Finance  Corp.,  as the case may be, shall
deliver  to the Agent  prior to the  consummation  of the  proposed  transaction
pursuant to the foregoing paragraphs (a) and (b) an officers' certificate to the
foregoing  effect  signed by a  Responsible  Officer  and an  opinion of counsel
satisfactory  to the Agent stating that the proposed  transaction  complies with
this Agreement.  The Agent and the Banks shall be entitled to conclusively  rely
upon such officer's certificate and opinion of counsel.

                  (d) Upon any consolidation or merger, or any sale, assignment,
transfer,  lease, conveyance or other disposition of all or substantially all of
the assets of the Borrower in accordance  with this Section 8.03,  the successor
Person formed by such consolidation or into or with which the Borrower is merged
or to  which  such  sale,  assignment,  transfer,  lease,  conveyance  or  other
disposition is made shall succeed to, and be  substituted  for (so that from and
after the date of such consolidation,  merger, sale, lease,  conveyance or other
disposition,  the provisions of this Agreement referring to the "Borrower" shall
refer to or include instead the successor Person and not the Borrower),  and may
exercise  every right and power of the Borrower  under this  Agreement  with the
same effect as if such successor  Person had been named as the Borrower  herein;
provided,  however, that the predecessor Borrower shall not be relieved from the
obligation  to pay the  principal  of,  premium,  if any,  and  interest  on the
Obligations  except in the case of a sale of all of such Borrower's  assets that
meets the requirements of Section 8.03 hereof.

Acquisitions.  Without  limiting the  generality of any other  provision of this
Agreement,  neither  the  Borrower  nor  any  Subsidiary  shall  consummate  any
Acquisition  unless (i) the acquiree is primarily a retail propane  distribution
business;  (ii) such Acquisition is undertaken in accordance with all applicable
Requirements of Law; (iii) the prior,  effective  written consent or approval to
such  Acquisition of the board of directors or equivalent  governing body of the
acquiree is obtained;  and (iv)  immediately  after giving  effect  thereto,  no
Default  or  Event  of  Default  will  occur  or be  continuing  and each of the
representations  and warranties of the Borrower  herein is true on and as of the
date of such Acquisition,  both before and after giving effect thereto.  Nothing
in Section  8.22 shall  prohibit  (x) the making by the  Borrower of a Permitted
Acquisition  indirectly  through the General  Partner,  the MLP or any of its or
their  Affiliates in a series of substantially  contemporaneous  transactions in
which the Borrower shall  ultimately own the assets that are the subject of such
Permitted  Acquisition  or (y) the  assumption  of Acquired  Debt in  connection
therewith to the extent such  Acquired Debt is provided by a Bank and, upon such
assumption,  is (to the extent such Acquired Debt is not otherwise  permitted to
be incurred by the Borrower pursuant to this Agreement) immediately repaid (with
the proceeds of Revolving Loans or otherwise).

Limitation on Indebtedness.  The Borrower shall not, and shall not permit any of
its  Subsidiaries  to, directly or indirectly,  create,  incur,  issue,  assume,
guarantee  or otherwise  become  directly or  indirectly  liable with respect to
(collectively,  "incur")  any  Indebtedness  (including  Acquired  Debt) and the
Borrower shall not issue any Disqualified  Interests and shall not permit any of
its Subsidiaries to issue any shares of preferred stock; provided, however, that
the Borrower may incur Indebtedness and any Subsidiary of the Borrower may incur
Acquired Debt if:

                  (a) the Fixed Charge  Coverage Ratio for the  Borrower's  most
          recently ended four full fiscal quarters for which internal  financial
          statements are available  immediately preceding the date on which such
          additional Indebtedness is incurred would have been at least 2.75 to 1
          if such  date is on or prior to  August  1, 1996 and 3.00 to 1 if such
          date is after August 1, 1996, in each case,  determined on a pro forma
          basis  (including  a  pro  forma   application  of  the  net  proceeds
          therefrom), as if the additional Indebtedness had been incurred at the
          beginning of such four-quarter period; and

                  (b) either (x) such  Indebtedness (A) shall be subordinated to
          the  Obligations  on the terms and  conditions set forth on part II of
          Schedule 8.05, (B) shall not provide for any principal to be scheduled
          to be  due,  or  for  the  direct  or  indirect  acquisition  of  such
          Indebtedness,  in either case prior to July 1, 2001, and (C) shall not
          permit or require mandatory prepayment, acceleration or acquisition of
          all or any part of such  Indebtedness  except on customary  commercial
          terms in all cases  subject to the terms and  conditions  set forth on
          part II of Schedule 8.05, or (y) such Indebtedness  shall be Permitted
          Senior  Debt and the Senior Debt Ratio Test shall have been met at the
          time of incurrence thereof.

                  The foregoing  limitations of this Section 8.05 will not apply
to: (i) the  Indebtedness  represented  by the Fixed Rate  Senior  Notes and any
Subsidiary Note Guarantees;  (ii) the  Obligations;  (iii) the incurrence by the
Borrower of  Indebtedness  in respect of  Capitalized  Lease  Obligations  in an
aggregate  principal  amount  not  to  exceed  $15,000,000;  (iv)  the  Existing
Indebtedness  set forth on part I of Schedule  8.05;  (v) the  incurrence by the
Borrower or any of its  Subsidiaries  of Permitted  Refinancing  Indebtedness in
exchange  for, or the  proceeds of which are used to extend,  refinance,  renew,
replace,  defease or refund any then outstanding Indebtedness of the Borrower or
such  Subsidiary  not  incurred in  violation  of this  Agreement;  (vi) Hedging
Obligations with respect to any floating rate  Indebtedness that is permitted by
the  terms  of this  Agreement  to be  outstanding;  (vii)  Indebtedness  of any
Subsidiary  of  the  Borrower  to  the  Borrower  or  any  of  its  Wholly-Owned
Subsidiaries;  (viii) the incurrence by the Borrower or Stratton of Indebtedness
owing directly to its insurance  carriers  (without  duplication)  in connection
with  the  Borrower's,  its  Subsidiaries'  or  its  Affiliates'  self-insurance
programs  or  other  similar  forms  of  retained  insurable  rights  for  their
respective retail propane businesses,  consisting of reinsurance  agreements and
indemnification  agreements (and guarantees of the foregoing) secured by Letters
of  Credit,  provided  that  the  Indebtedness  evidenced  by  such  reinsurance
agreements,  indemnification agreements,  guarantees and Letters of Credit shall
be counted (without  duplication)  for purposes of all calculations  pursuant to
the Fixed Charge  Coverage Ratio test; (ix) Surety  Instruments  required in the
ordinary  course of business or in connection  with the enforcement of rights or
claims  of  the  Borrower  or  any of its  Subsidiaries  or in  connection  with
judgments  that do not result in a Default or Event of  Default;  (x) subject to
the  provisions  of  Section  8.04,  the  incurrence  by the  Borrower  (or  any
Subsidiary of the Borrower that is a Guarantor)  of  Indebtedness  in connection
with  Acquisitions of retail propane  businesses in favor of the sellers of such
businesses in a principal amount not to exceed $15,000,000 in any fiscal year or
$45,000,000  in the  aggregate  outstanding  at any one time,  provided that the
principal  amount of such  Indebtedness  incurred  in  connection  with any such
acquisition  shall not exceed the fair market  value of the assets so  acquired,
and the Borrower shall deliver an officer's  certificate to the Agent, signed by
a Responsible Officer, stating that the acquiring Person is Solvent, both before
and after  giving  effect  to the  Acquisition;  (xi)  Indebtedness  assumed  as
contemplated  by Section  8.04 that is  immediately  repaid with the proceeds of
Revolving  Loans  or  otherwise;  and  (xii)  in  addition  to the  Indebtedness
permitted  under the foregoing  clauses (i) through (xi),  the incurrence by the
Borrower of Indebtedness  in an aggregate  principal  amount  outstanding not to
exceed $15,000,000 at any time, provided that any Indebtedness incurred pursuant
to this clause (xii) (A) shall be  subordinated  to the Obligations on the terms
and  conditions set forth on part II of Schedule 8.05, (B) shall not provide for
any  principal  to be  scheduled  to be  due,  or for  the  direct  or  indirect
acquisition of such Indebtedness,  in either case prior to July 1, 2001, and (C)
shall not permit or require mandatory prepayment, acceleration or acquisition of
all or any part of such Indebtedness except on customary commercial terms in all
cases subject to the terms and conditions set forth on part II of Schedule 8.05.

                  The "Senior  Debt Ratio Test" will be met with  respect to the
incurrence of any Indebtedness by the Borrower or any Subsidiary of the Borrower
if the ratio of (1) the aggregate outstanding principal amount of Senior Debt on
the date of and after giving effect to the incurrence of such  Indebtedness (the
"Incurrence  Date")  to (2)  Consolidated  Cash  Flow  for the  Borrower's  most
recently ended four full fiscal quarters for which internal financial statements
are available  immediately preceding the Incurrence Date would have been 2.50 to
1 or less.  For  purposes  of the  computation  in clause  (1) of the  foregoing
sentence,  the outstanding principal amount of Indebtedness under this Agreement
shall be deemed to equal the aggregate  amount of the Revolving Loan Commitments
and outstanding  Facility B Term Loans hereunder.  The foregoing  calculation of
Consolidated  Cash Flow shall give pro forma effect to  Acquisitions  (including
all  mergers  and  consolidations),  Asset  Sales  and  other  dispositions  and
discontinuances  of operations that have been made by the Borrower or any of its
Subsidiaries  during the  four-quarter  reference  period or  subsequent to such
reference  period and on or prior to the Incurrence Date in the manner set forth
in the definition of Leverage Ratio.

                  For purposes of this Section 8.05, any revolving  Indebtedness
(under this  Agreement or otherwise)  shall be deemed to have been incurred only
at such time at which the agreements and instruments (or any amendments  thereto
that increase the amount of such  revolving  Indebtedness)  are executed,  in an
amount equal to the maximum amount of such revolving  Indebtedness  permitted to
be borrowed thereunder.

Transactions  with Affiliates.  The Borrower shall not, and shall not permit any
of its Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties  or assets to, or purchase any property or assets from, or enter into
any contract, agreement,  understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate,  including any  Non-Recourse  Subsidiary (each of
the  foregoing,   an  "Affiliate   Transaction"),   unless  (a)  such  Affiliate
Transaction  is on  terms  that are no less  favorable  to the  Borrower  or the
relevant  Subsidiary  than those that would have been  obtained in a  comparable
transaction by the Borrower or such Subsidiary with an unrelated  Person and (b)
with respect to (i) any Affiliate  Transaction with an aggregate value in excess
of $500,000, a majority of the directors of the General Partner having no direct
or  indirect  economic  interest in such  Affiliate  Transaction  determines  by
resolution  that such Affiliate  Transaction  complies with clause (a) above and
approves such Affiliate Transaction and (ii) any Affiliate Transaction involving
the purchase or other acquisition or sale, lease,  transfer or other disposition
of properties or assets other than in the ordinary  course of business,  in each
case,  having a fair market value or for net proceeds in excess of  $15,000,000,
the Borrower delivers to the Agent an opinion as to the fairness to the Borrower
or such  Subsidiary  from a  financial  point of view  issued  by an  investment
banking firm of national standing;  provided,  however,  that (i) any employment
agreement or stock option  agreement  entered into by the Borrower or any of its
Subsidiaries  in the ordinary  course of business and  consistent  with the past
practice of the Borrower (or the General Partner) or such Subsidiary, Restricted
Payments  permitted by the provisions of Section 8.12, and transactions  entered
into  by the  Borrower  or  Stratton  in the  ordinary  course  of  business  in
connection with reinsuring the self-insurance programs or other similar forms of
retained  insurable  risks of the  retail  propane  businesses  operated  by the
Borrower, its Subsidiaries and its Affiliates, in each case, shall not be deemed
Affiliate Transactions,  and (ii) nothing herein shall authorize the payments by
the Borrower to the General  Partner or any other  Affiliate of the Borrower for
administrative  expenses  incurred by such Person other than such  out-of-pocket
administrative expenses as such Person shall incur and the Borrower shall pay in
the ordinary course of business.

Use of  Proceeds.  The  Borrower  shall not,  and shall not suffer or permit any
Subsidiary  to, use any  portion of the Loan  proceeds  or any Letter of Credit,
directly or indirectly,  (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance  indebtedness of the Borrower or others incurred to purchase
or carry Margin  Stock,  (iii) to extend credit for the purpose of purchasing or
carrying any Margin  Stock,  or (iv) to acquire any security in any  transaction
that is subject to Section 13 or 14 of the Exchange Act.

Use of Proceeds - Ineligible  Securities.  The Borrower  shall not,  directly or
indirectly,  use any  portion of the Loan  proceeds  or any Letter of Credit (i)
knowingly to purchase Ineligible  Securities from the Arranger during any period
in  which  the  Arranger  makes a market  in such  Ineligible  Securities,  (ii)
knowingly to purchase  during the  underwriting or placement  period  Ineligible
Securities being  underwritten or privately placed by the Arranger,  or (iii) to
make payments of principal or interest on Ineligible Securities  underwritten or
privately  placed  by the  Arranger  and  issued  by or for the  benefit  of the
Borrower or any Affiliate of the Borrower.

Contingent  Obligations.  The Borrower shall not, and shall not suffer or permit
any  Subsidiary  to,  create,  incur,  assume or suffer to exist any  Contingent
Obligations except:

(a) endorsements for collection or deposit in the ordinary course of business;

                  (b) subject to compliance with the trading  policies in effect
from time to time as submitted to the Agent, Hedging Obligations entered into in
the ordinary course of business as bona fide hedging transactions;

(c) Subsidiary Note Guarantees,  under the terms and conditions set forth in the
1994 Indenture and the Guaranties hereunder; and

                  (d)      Guaranty Obligations permitted by Section 8.05.

Joint  Ventures.  The  Borrower  shall  not,  and shall not suffer or permit any
Subsidiary to enter into any Joint Venture.

Lease   Obligations.   The  aggregate   obligations  of  the  Borrower  and  its
Subsidiaries  for the payment of rent for any property  under lease or agreement
to lease  (including,  without  limitation,  under or with  respect to Synthetic
Leases)  for any fiscal  year shall not exceed the greater of $15 million or 15%
of Consolidated Cash Flow for such fiscal year.

Restricted  Payments.  The  Borrower  shall not and shall not  permit any of its
Subsidiaries  to, directly or indirectly (i) declare or pay any dividend or make
any  distribution  on  account  of the  Borrower's  or any  Subsidiary's  Equity
Interests (other than (x) dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Borrower,  (y) dividends or distributions
payable to the Borrower or a  Wholly-Owned  Subsidiary of the Borrower that is a
Guarantor or (z)  distributions or dividends  payable pro rata to all holders of
Capital  Interests  of any such  Subsidiary);  (ii)  purchase,  redeem,  call or
otherwise  acquire or retire for value any Equity  Interests  of the Borrower or
any  Subsidiary  or other  Affiliate  of the Borrower  (other  than,  subject to
compliance with Section 8.21, any such Equity  Interests owned by a Wholly-Owned
Subsidiary of the Borrower that is a Guarantor); (iii) make any Investment other
than a Permitted Investment;  or (iv) prepay, purchase,  redeem, retire, defease
or  refinance  the Fixed Rate Senior Notes (all  payments and other  actions set
forth in clauses  (i)  through  (iv) above  being  collectively  referred  to as
"Restricted Payments"), unless, at the time of such Restricted Payment:

                  (a) no Default or Event of Default  shall have occurred and be
          continuing  or would  occur as a  consequence  thereof and each of the
          representations  and  warranties  of the  Borrower set forth herein is
          true on and as of the date of such Restricted  Payment both before and
          after giving effect thereto; and

                  (b) the Fixed  Charge  Coverage  Ratio of the Borrower for the
          Borrower's  most  recently  ended four full fiscal  quarters for which
          internal financial statements are available  immediately preceding the
          date on which such  Restricted  Payment is made,  calculated  on a pro
          forma  basis  as if  such  Restricted  Payment  had  been  made at the
          beginning of such four-quarter  period, would have been more than 2.25
          to 1; and

                  (c) such  Restricted  Payment (the amount of any such payment,
          if other than cash, to be determined by the Board of Directors,  whose
          determination  shall be conclusive and evidenced by a resolution in an
          officer's certificate signed by a Responsible Officer and delivered to
          the  Agent),  together  with the  aggregate  of all  other  Restricted
          Payments  (other  than  any  Restricted   Payments  permitted  by  the
          provisions of clause (ii) of the penultimate paragraph of this Section
          8.12) made by the Borrower and its  Subsidiaries in the fiscal quarter
          during  which  such  Restricted  Payment  is made  shall not exceed an
          amount equal to the sum of (x) Available  Cash of the Borrower for the
          immediately  preceding  fiscal  quarter (or, with respect to the first
          fiscal quarter during which  Restricted  Payments are made, the amount
          of Available  Cash of the Borrower  for the period  commencing  on the
          date of this  Agreement and ending on the last day of the  immediately
          preceding  fiscal  quarter),  plus (y) the lesser of (i) the amount of
          any  Available  Cash of the Borrower  during the first 45 days of such
          fiscal  quarter and (ii) the excess of the  aggregate  amount of Loans
          that the Borrower  could have borrowed over the actual amount of Loans
          outstanding,  in  each  case  as of the  last  day of the  immediately
          preceding fiscal quarter; and

                  (d)  such  Restricted   Payment  (other  than  (x)  Restricted
          Payments  described  in  clause  (i) of the  first  paragraph  of this
          Section 8.12 made during the fiscal  quarter  ending  October 31, 1996
          that do not exceed  $16,000,000 in the aggregate or (y) any Restricted
          Payments  described in clauses (iii) or (iv) of the first paragraph of
          this Section 8.12), the amount of which, if made other than with cash,
          to be determined  in accordance  with clause (c) of this Section 8.12,
          shall not  exceed an amount  equal to the  excess of (A)  Consolidated
          Cash Flow of the Borrower and its Subsidiaries for the period from and
          after the  Restatement  Effective  Date through and including the last
          day of the fiscal quarter ending immediately preceding the date of the
          proposed Restricted Payment (the "Determination  Period") over (B) the
          sum  of  Consolidated   Interest  Expense  of  the  Borrower  and  its
          Subsidiaries   for  the   Determination   Period   plus  all   capital
          expenditures (other than Growth-Related  Capital Expenditures) made by
          the Borrower and its Subsidiaries during the Determination Period plus
          the  aggregate  of all  other  Restricted  Payments  (other  than  (x)
          Restricted  Payments described in clause (i) of the first paragraph of
          this Section 8.12 made during the fiscal  quarter  ending  October 31,
          1996  that  do not  exceed  $16,000,000  in the  aggregate  or (y) any
          Restricted  Payments  described in clauses  (iii) or (iv) of the first
          paragraph  of  this  Section  8.12)  made  by  the  Borrower  and  its
          Subsidiaries   during  the  period  from  and  after  the  Restatement
          Effective  Date  through  and  including  the  date  of  the  proposed
          Restricted Payment plus $30,000,000; and

                  (e) with respect to any Restricted Payment described in clause
          (iv) of the first  paragraph of this  Section  8.12,  such  Restricted
          Payment is made in  connection  with a  refinancing  of the Fixed Rate
          Senior Notes permitted by Section 8.05.

                  The foregoing  provisions will not prohibit (i) the payment of
any  distribution  within 60 days after the date on which the  Borrower  becomes
committed to make such distribution,  if at said date of commitment such payment
would  have  complied  with  the  provisions  of this  Agreement;  and  (ii) the
redemption,  repurchase, retirement or other acquisition of any Equity Interests
of the Borrower in exchange  for, or out of the  proceeds of, the  substantially
concurrent  sale (other than to a  Subsidiary  of the  Borrower) of other Equity
Interests of the Borrower (other than any Disqualified Interests).

                  Not later than the date of making any Restricted Payment,  the
General Partner shall deliver to the Agent an officer's  certificate signed by a
Responsible  Officer  stating  that such  Restricted  Payment is  permitted  and
setting  forth the basis upon which the  calculations  required by this  Section
8.12 were computed,  which  calculations may be based upon the Borrower's latest
available financial statements.

Prepayments of Subordinated Indebtedness.  The Borrower shall not, and shall not
permit any of its  Subsidiaries  to, (a) purchase,  redeem,  retire or otherwise
acquire  for value,  or set apart any money for a sinking,  defeasance  or other
analogous fund for, the purchase,  redemption,  retirement or other  acquisition
of, or make any payment or prepayment of the principal of or interest on, or any
other amount owing in respect of, any  Indebtedness  that is subordinated to the
Obligations,  except for regularly  scheduled payments of interest in respect of
such  Indebtedness   required  pursuant  to  the  instruments   evidencing  such
Indebtedness  that are not made in  contravention of the terms and conditions of
subordination  set  forth  on  part  II of  Schedule  8.05  or (b)  directly  or
indirectly,  make any  payment  in  respect  of,  or set  apart  any money for a
sinking,  defeasance or other analogous fund on account of, Guaranty Obligations
subordinated to the Obligations.  The foregoing provisions will not prohibit the
defeasance,  redemption  or  repurchase of  subordinated  Indebtedness  with the
proceeds of Permitted Refinancing Indebtedness.

Dividend and Other Payment  Restrictions  Affecting  Subsidiaries.  The Borrower
shall  not,  and  shall not  permit  any of its  Subsidiaries  to,  directly  or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends
or make any other  distributions  to the Borrower or any of its Subsidiaries (1)
on  its  Capital  Interests  or  (2)  with  respect  to any  other  interest  or
participation in, or interest measured by, its profits, (b) pay any indebtedness
owed to the Borrower or any of its  Subsidiaries,  (c) make loans or advances to
the Borrower or any of its Subsidiaries or (d) transfer any of its properties or
assets to the Borrower or any of its Subsidiaries,  except for such encumbrances
or restrictions existing under or by reason of (i) Existing  Indebtedness,  (ii)
this Agreement, the 1994 Indenture, the Subsidiary Note Guarantees and the Fixed
Rate  Senior  Notes,  (iii)  applicable  law,  (iv)  any  instrument   governing
Indebtedness or Capital Interests of a Person acquired by the Borrower or any of
its  Subsidiaries  as in effect at the time of such  Acquisition  (except to the
extent such  Indebtedness was incurred in connection with or in contemplation of
such  Acquisition),  which  encumbrance  or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person,  so acquired,  provided that the  Consolidated
Cash Flow of such Person to the extent  that  dividends,  distributions,  loans,
advances or transfers  thereof is limited by such  encumbrance or restriction on
the date of acquisition  is not taken into account in  determining  whether such
acquisition  was  permitted  by the  terms  of  this  Agreement,  (v)  customary
non-assignment  provisions  in leases  entered  into in the  ordinary  course of
business and consistent with past practices, (vi) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature  described  in clause (d) above on the  property so  acquired,  (vii)
Permitted Refinancing  Indebtedness of any Existing Indebtedness,  provided that
the   restrictions   contained  in  the  agreements   governing  such  Permitted
Refinancing  Indebtedness  are no more  restrictive  than those contained in the
agreements   governing  the  Indebtedness   being  refinanced  or  (viii)  other
Indebtedness  permitted to be incurred  subsequent to the Restatement  Effective
Date  pursuant to the  provisions  of Section  8.05 hereof,  provided  that such
restrictions are no more restrictive than those contained in this Agreement.

Change in Business.  The Borrower  shall not, and shall not suffer or permit any
Subsidiary to, engage in any material line of business  substantially  different
from those lines of business  carried on by the Borrower and its Subsidiaries on
the date hereof.

Accounting  Changes.  The Borrower shall not, and shall not suffer or permit any
Subsidiary to, make any significant change in accounting  treatment or reporting
practices, except as required by GAAP, or change the fiscal year of the Borrower
or of any Subsidiary except as required by the Code.

Limitation on Sale and Leaseback  Transactions.  The Borrower will not, and will
not permit any of its  Subsidiaries  to,  enter  into any  arrangement  with any
Person  providing  for the  leasing by the  Borrower or such  Subsidiary  of any
property that has been or is to be sold or  transferred  by the Borrower or such
Subsidiary to such Person in contemplation of such leasing;  provided,  however,
that the  Borrower  or such  Subsidiary  may enter into such sale and  leaseback
transaction  if (i) the  Borrower  could have (A)  incurred  Indebtedness  in an
amount  equal to the  Attributable  Debt  relating  to such  sale and  leaseback
transaction  pursuant  to the  Fixed  Charge  Coverage  Ratio  Test set forth in
paragraph  (a) of  Section  8.05  and (B)  secured  a Lien on such  Indebtedness
pursuant  to  Section  8.01  or  (ii)  the  lease  in such  sale  and  leaseback
transaction is for a term not in excess of the lesser of (A) three years and (B)
60% of the remaining useful life of such property.

Restrictions  On  Nature  Of  Indebtedness   And  Activities  Of  Finance  Corp.
Notwithstanding  the provisions of Section 8.05 hereof,  Finance Corp. shall not
incur any  Indebtedness  unless (a) the Borrower is a co-obligor or guarantor of
such  Indebtedness or (b) the net proceeds of such  Indebtedness are lent to the
Borrower,  used to acquire outstanding debt securities issued by the Borrower or
used  directly or indirectly  to refinance or discharge  Indebtedness  permitted
under the limitations of this paragraph.  Finance Corp.  shall not engage in any
business not related  directly or  indirectly  to  obtaining  money or arranging
financing for the Borrower.

Amendments of Organization  Documents or 1994 Indenture or 1996  Indenture.  The
Borrower  shall not  modify,  amend,  supplement  or  replace,  nor  permit  any
modification, amendment, supplement or replacement of the Organization Documents
of the General  Partner,  Borrower or any  Subsidiary of the Borrower,  the 1994
Indenture,  the Fixed Rate Senior  Notes,  the 1996  Indenture or the MLP Senior
Notes or any document  executed  and  delivered  in  connection  with any of the
foregoing,  in any respect that would adversely affect the Banks, the Borrower's
ability to perform the  Obligations,  or the Guarantor's  ability to perform its
obligations  under the  Guaranty,  in each such case  without the prior  written
consent of the Agent and the Majority Banks. Furthermore, the Borrower shall not
permit  any   modification,   amendment,   supplement  or   replacement  of  the
Organization  Documents  of the MLP that  would  have a  material  effect on the
Borrower without the prior written consent of the Agent and the Majority Banks.

Fixed Price Supply Contracts. None of the Borrower and its Subsidiaries shall at
any time be a party or  subject  to any  contract  for the  supply of propane or
other  product  except where (a) the purchase  price is set with  reference to a
spot index or indices substantially  contemporaneously with the delivery of such
product or (b) delivery of such  propane or other  product is to be made no more
than one year after the purchase price is agreed to.

Operations  through  Subsidiaries.  The  Borrower  shall not  conduct any of its
operations through  Subsidiaries unless: (a) such Subsidiary executes a Guaranty
substantially in the form of Exhibit G guaranteeing  payment of the Obligations,
accompanied  by an opinion of counsel to the  Subsidiary  addressed to the Agent
and  the  Banks  as  to  the  due   authorization,   execution,   delivery   and
enforceability  of the  Guaranty;  (b) such  Subsidiary  agrees not to incur any
Indebtedness  other  than (i) trade debt and (ii)  Acquired  Debt  permitted  by
Section 8.05; (c) the Consolidated  Cash Flow of such Subsidiary,  when added to
Consolidated Cash Flow of all other  Subsidiaries for any fiscal year, shall not
exceed 10% of the  Consolidated  Cash Flow of the Borrower and its  Subsidiaries
for such fiscal year; and (d) the value of the assets of such  Subsidiary,  when
added to the value of the assets of all other  Subsidiaries for any fiscal year,
shall not exceed 10% of the consolidated value of the assets of the Borrower and
its Subsidiaries for such fiscal year, as determined in accordance with GAAP.

Operations of MLP. Except in connection with an indirect  Acquisition  permitted
by Section 8.04,  the General  Partner and the Borrower shall not permit the MLP
or any of its Affiliates  (including any Non-Recourse  Subsidiary) to operate or
conduct any business substantially similar to that conducted by the Borrower and
its  Subsidiaries  within a 25 mile  radius  of any  business  conducted  by the
Borrower and its  Subsidiaries.  In order to comply with this Section 8.22,  the
Borrower  may  enter  into one or more  transactions  by which  its  assets  and
properties  are "swapped" or  "exchanged"  for assets and  properties of another
Person prior to or concurrently  with another  transaction  which,  but for such
swap or exchange  would violate this Section,  provided that (i) if the value of
the MLP's assets or units to be so swapped or exchanged exceeds $15 million,  as
determined  by the audit  committee  of the Board of  Directors  of the  General
Partner, the Borrower shall have first obtained at its expense an opinion from a
nationally  recognized  investment banking firm,  addressed to it, the Agent and
the Banks and opining without  material  qualification  and based on assumptions
that are realistic at the time, that the exchange or swap  transactions are fair
to the Borrower and its Subsidiaries,  and (ii) if the value of the MLP's assets
or units to be so swapped or exchanged exceeds $50 million, as determined by the
audit committee of the Board of Directors of the General Partner,  at the option
of the Majority Banks,  the Agent shall have first  retained,  at the Borrower's
expense,  an investment  banking firm on behalf of the Banks who shall also have
rendered an opinion  containing the statements and content referred to in clause
(i).


                                   ARTICLE IX
                                EVENTS OF DEFAULT

Event of Default.  Any of the following shall constitute an "Event of Default":

Non-Payment.  The Borrower,  the General  Partner or Stratton  fails to pay, (i)
when and as required to be paid  herein,  any amount of principal of any Loan or
of any L/C  Obligation,  or (ii) within 5 days after the same  becomes  due, any
interest,  fee or any other  amount  payable  hereunder  or under any other Loan
Document; or

Representation or Warranty.  Any representation or warranty by the Borrower, the
General Partner or any Subsidiary made or deemed made herein,  in any other Loan
Document,  or which is  contained in any  certificate,  document or financial or
other statement by the Borrower,  the General  Partner,  any Subsidiary,  or any
Responsible Officer,  furnished at any time under this Agreement, or in or under
any other Loan  Document,  is incorrect in any material  respect on or as of the
date made or deemed made; or

Specific Defaults.  The Borrower fails to perform or observe any term, covenant
 or agreement contained in any of
Sections 2.01(a)(ii), 7.01, 7.02, 7.03, 7.04, 7.06, 7.09, 7.12, 7.13, 7.16 or in
any Section in Article VIII; or

Other Defaults.  The Borrower,  the General  Partner or any Subsidiary  fails to
perform or observe any other term or covenant contained in this Agreement or any
other Loan Document,  and such default shall continue unremedied for a period of
20 days after the earlier of (i) the date upon which a Responsible  Officer knew
or  reasonably  should  have  known of such  failure or (ii) the date upon which
written notice thereof is given to the Borrower by the Agent or any Bank; or

Cross-Default.  The Borrower, the General Partner or any Subsidiary (i) fails to
make any payment in respect of any Indebtedness or Contingent  Obligation having
an aggregate  principal amount (including undrawn committed or available amounts
and including  amounts  owing to all creditors  under any combined or syndicated
credit  arrangement)  of more than  $10,000,000  when due  (whether by scheduled
maturity,  required  prepayment,  acceleration,  demand,  or otherwise) and such
failure continues after the applicable grace or notice period, if any, specified
in the relevant  document on the date of such failure;  or (ii) fails to perform
or observe any other  condition or  covenant,  or any other event shall occur or
condition  exist,  under  any  agreement  or  instrument  relating  to any  such
Indebtedness  or Contingent  Obligation,  and such failure  continues  after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries  of such  Indebtedness  (or a  trustee  or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated  maturity or to cause such
Indebtedness  or Contingent  Obligation to be prepaid,  purchased or redeemed by
the Borrower, the MLP, the General Partner or any Subsidiary, or such Contingent
Obligation  to become  payable  or cash  collateral  in  respect  thereof  to be
demanded; or

Insolvency; Voluntary Proceedings. The General Partner, the MLP, the Borrower or
any Subsidiary (i) ceases or fails to be solvent,  or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise;  (ii)
voluntarily  ceases to  conduct  its  business  in the  ordinary  course;  (iii)
commences any Insolvency  Proceeding  with respect to itself;  or (iv) takes any
action to effectuate or authorize any of the foregoing; or

Involuntary Proceedings.  (i) Any involuntary Insolvency Proceeding is commenced
or filed against the General  Partner,  the MLP, the Borrower or any Subsidiary,
or any writ, judgment,  warrant of attachment,  execution or similar process, is
issued or levied against a substantial part of any such Person's properties, and
any such proceeding or petition shall not be dismissed,  or such writ, judgment,
warrant of  attachment,  execution  or similar  process  shall not be  released,
vacated or fully bonded within 60 days after commencement,  filing or levy; (ii)
the General Partner, the MLP, the Borrower or any Subsidiary admits the material
allegations of a petition against it in any Insolvency  Proceeding,  or an order
for relief (or similar order under  non-U.S.  law) is ordered in any  Insolvency
Proceeding;  or  (iii)  the  General  Partner,  the  MLP,  the  Borrower  or any
Subsidiary  acquiesces in the  appointment  of a receiver,  trustee,  custodian,
conservator,  liquidator,  mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial  portion of its property or business;
or

ERISA.  (i) An ERISA  Event  occurs  with  respect  to a Pension  Plan which has
resulted or could  reasonably be expected to result in liability of the Borrower
or the General  Partner  under Title IV of ERISA to the Pension Plan or the PBGC
in an  aggregate  amount in excess of $5 million;  or (ii) the  commencement  or
increase of  contributions  to, or the adoption of or the amendment of a Pension
Plan by the Borrower,  the General Partner or any of their  Affiliates which has
resulted  or could  reasonably  be expected to result in an increase in Unfunded
Pension Liability among all Pension Plans in an aggregate amount in excess of $5
million.

Monetary Judgments. One or more judgments, orders, decrees or arbitration awards
is entered against the Borrower, the General Partner or any Subsidiary involving
in the  aggregate  a  liability  (to  the  extent  not  covered  by  independent
third-party  insurance as to which the insurer does not dispute  coverage) as to
any single or related series of transactions,  incidents or conditions,  of more
than $40,000,000; or

Non-Monetary  Judgments.  Any non-monetary judgment,  order or decree is entered
against the Borrower,  the General Partner or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period  of 60  consecutive  days  during  which  a stay of  enforcement  of such
judgment or order,  by reason of a pending appeal or otherwise,  shall not be in
effect; or

Loss of  Licenses.  Any  Governmental  Authority  revokes  or fails to renew any
material license, permit or franchise of the Borrower or any Subsidiary,  or the
Borrower or any Subsidiary for any reason loses any material license,  permit or
franchise,  or the  Borrower or any  Subsidiary  suffers the  imposition  of any
restraining order, escrow, suspension or impound of funds in connection with any
proceeding  (judicial or  administrative)  with respect to any material license,
permit or franchise; or

Adverse Change.  There occurs a Material Adverse Effect; or

Certain  Indenture  Defaults,  Etc. (i) To the extent not  otherwise  within the
scope of subsection  9.01(e)  above,  any "Event of Default"  shall occur and be
continuing  under  and as  defined  in the  1994  Indenture;  or (ii) any of the
following  shall occur under or with respect to the 1996  Indenture or any other
Indebtedness guaranteed by the Borrower or its Subsidiaries  (collectively,  the
"Guaranteed  Indebtedness"):  (A) any demand for payment shall be made under any
such Guaranty  Obligation with respect to the Guaranteed  Indebtedness or (B) so
long as any such Guaranty  Obligation shall be in effect (x) the Borrower or any
such Subsidiary  shall fail to pay principal of or premium,  if any, or interest
on such Guaranteed Indebtedness after the expiration of any applicable notice or
cure periods or (y) any "Event of Default"  (however defined) shall occur and be
continuing under such Guaranteed  Indebtedness which results in the acceleration
of such Guaranteed Indebtedness; or

Guarantor  Defaults.  Any Guarantor fails in any material  respect to perform or
observe any term, covenant or agreement in its Guaranty;  or any Guaranty is for
any reason  partially  (including  with  respect to future  advances)  or wholly
revoked or invalidated,  or otherwise ceases to be in full force and effect,  or
any  Guarantor  or any other  Person  contests  in any  manner the  validity  or
enforceability thereof or denies that it has any further liability or obligation
thereunder;  or any event  described at  subsections  (f) or (g) of this Section
occurs with respect to the Guarantor.

Remedies. If any Event of Default occurs, the Agent shall, at the request of, or
may, with the consent of, the Majority Banks,

                  (a) declare the  commitment of each Bank to make Loans and any
obligation  of an  Issuing  Bank to Issue  Letters  of Credit to be  terminated,
whereupon such commitments and obligation shall be terminated;

                  (b) declare an amount  equal to the maximum  aggregate  amount
that is or at any time  thereafter  may become  available  for drawing under any
outstanding  Letters  of  Credit  (whether  or not any  beneficiary  shall  have
presented,  or shall be entitled  at such time to  present,  the drafts or other
documents  required to draw under such Letters of Credit) to be immediately  due
and payable;

                  (c) declare  the unpaid  principal  amount of all  outstanding
Loans, all interest  accrued and unpaid thereon,  and all other amounts owing or
payable  hereunder or under any other Loan  Document to be  immediately  due and
payable (including, without limitation, amounts due under Section 4.04), without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby expressly waived by the Borrower; and

(d) exercise on behalf of itself and the Banks all rights and remedies available
to it and the Banks under the Loan Documents or applicable law;

provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 9.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein),  the obligation of each Bank
to make Loans and any obligation of the Issuing Banks to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Agent, any Issuing Bank or any Bank.

Rights Not  Exclusive.  The rights  provided for in this Agreement and the other
Loan Documents are cumulative and are not exclusive of any other rights, powers,
privileges  or  remedies  provided  by law or in  equity,  or  under  any  other
instrument, document or agreement now existing or hereafter arising.

Certain  Financial  Covenant  Defaults.  In the event  that,  after  taking into
account any extraordinary  charge to earnings taken or to be taken as of the end
of any fiscal  period of the Borrower (a  "Charge"),  and if solely by virtue of
such  Charge,  there would exist an Event of Default due to the breach of any of
subsections  7.12(a) or 7.12(b) as of such fiscal period end date, such Event of
Default  shall be deemed to arise  upon the  earlier  of (a) the date after such
fiscal period end date on which the Borrower announces publicly it will take, is
taking or has taken such  Charge  (including  an  announcement  in the form of a
statement in a report filed with the SEC) or, if such announcement is made prior
to such fiscal  period end date,  the date that is such fiscal  period end date,
and (b) the date the  Borrower  delivers  to the  Agent  its  audited  annual or
unaudited  quarterly  financial  statements  in  respect of such  fiscal  period
reflecting such Charge as taken.


                                    ARTICLE X
                                    THE AGENT

Appointment  and  Authorization.  (a) Each of the  Banks and each  Issuing  Bank
hereby  irrevocably  appoints,  designates and authorizes the Agent to take such
action on its behalf under the  provisions of this Agreement and each other Loan
Document and to exercise  such powers and perform  such duties as are  expressly
delegated  to it by the  terms of this  Agreement  or any other  Loan  Document,
together with such powers as are reasonably incidental thereto.  Notwithstanding
any provision to the contrary  contained  elsewhere in this  Agreement or in any
other Loan  Document,  the Agent shall not have any duties or  responsibilities,
except those  expressly set forth herein,  nor shall the Agent have or be deemed
to have any fiduciary  relationship  with any Bank or any Issuing  Bank,  and no
implied  covenants,   functions,   responsibilities,   duties,   obligations  or
liabilities  shall be read into this  Agreement  or any other Loan  Document  or
otherwise  exist  against  the  Agent.  The  Co-Agent  shall  have no  duties or
responsibilities in such capacity under this Agreement.

                  (b) Each  Issuing  Bank  shall act on behalf of the Banks with
respect  to any  Letters  of Credit  Issued by it and the  documents  associated
therewith  until  such time and except for so long as the Agent may agree at the
request  of the  Majority  Lenders  to act for such  Issuing  Bank with  respect
thereto;  provided,  however,  that  such  Issuing  Bank  shall  have all of the
benefits and immunities (i) provided to the Agent in this Article X with respect
to any acts taken or omissions  suffered by such Issuing Bank in connection with
Letters  of  Credit  Issued  by it  or  proposed  to be  Issued  by it  and  the
application  and agreements  for letters of credit  pertaining to the Letters of
Credit as fully as if the term "Agent", as used in this Article X, included such
Issuing Bank with respect to such acts or  omissions,  and (ii) as  additionally
provided in this Agreement with respect to such Issuing Bank.

Delegation  of  Duties.  The Agent may  execute  any of its  duties  under  this
Agreement  or any  other  Loan  Document  by or  through  agents,  employees  or
attorneys-in-fact  and shall be  entitled  to advice of counsel  concerning  all
matters  pertaining to such duties.  The Agent shall not be responsible  for the
negligence or misconduct of any agent or  attorney-in-fact  that it selects with
reasonable care.

Liability  of Agent and Issuing  Banks.  None of the  Agent-Related  Persons and
Issuing Banks shall (i) be liable for any action taken or omitted to be taken by
any of them  under or in  connection  with  this  Agreement  or any  other  Loan
Document  or the  transactions  contemplated  hereby  (except  for its own gross
negligence or willful  misconduct),  or (ii) be responsible in any manner to any
of the Banks for any recital, statement,  representation or warranty made by the
Borrower or any Subsidiary or Affiliate of the Borrower, or any officer thereof,
contained  in  this  Agreement  or  in  any  other  Loan  Document,  or  in  any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in  connection  with,  this  Agreement  or any
other Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document,  or for any failure
of the  Borrower  or any  other  party  to any  Loan  Document  to  perform  its
obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation  to any Bank to  ascertain  or to  inquire  as to the  observance  or
performance  of any of the  agreements  contained  in, or  conditions  of,  this
Agreement or any other Loan  Document,  or to inspect the  properties,  books or
records of the Borrower or any of the Borrower's Subsidiaries or Affiliates.

Reliance by Agent and Issuing  Banks.  (a) The Agent and each Issuing Bank shall
be entitled to rely, and shall be fully protected in relying,  upon any writing,
resolution,   notice,  consent,   certificate,   affidavit,   letter,  telegram,
facsimile,   telex  or  telephone  message,   statement  or  other  document  or
conversation  believed by it to be genuine and correct and to have been  signed,
sent or made by the proper Person or Persons,  and upon advice and statements of
legal counsel (including counsel to the Borrower),  independent  accountants and
other experts  selected by the Agent or applicable  Issuing Bank.  The Agent and
each  Issuing  Bank shall be fully  justified in failing or refusing to take any
action  under this  Agreement or any other Loan  Document  unless it shall first
receive such advice or concurrence of the Majority Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks  against any and all  liability and expense which may be incurred by it by
reason of  taking  or  continuing  to take any such  action.  The Agent and each
Issuing Bank shall in all cases be fully  protected in acting,  or in refraining
from acting,  under this Agreement or any other Loan Document in accordance with
a request or consent of the Majority Banks and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Banks.

                  (b) For purposes of determining compliance with the conditions
specified in Section 5.01,  each Bank that has executed this Agreement  shall be
deemed to have consented to,  approved or accepted or to be satisfied with, each
document or other  matter  either  sent by the Agent or an Issuing  Bank to such
Bank for consent, approval,  acceptance or satisfaction,  or required thereunder
to be consented to or approved by or acceptable or satisfactory to the Bank.

Notice of Default.  The Agent shall not be deemed to have knowledge or notice of
the  occurrence  of any  Default or Event of  Default,  except  with  respect to
defaults in the payment of  principal,  interest and fees required to be paid to
the Agent for the  account of the Banks,  unless the Agent  shall have  received
written  notice  from a Bank  or  the  Borrower  referring  to  this  Agreement,
describing  such  Default or Event of Default and stating  that such notice is a
"notice of default".  The Agent will notify the Banks of its receipt of any such
notice.  The Agent shall take such action with  respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance  with Article
IX;  provided,  however,  that unless and until the Agent has  received any such
request,  the 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 or in the best interest of the Banks.

Credit Decision.  Each Bank acknowledges that none of the Agent-Related  Persons
or any Issuing Bank has made any  representation  or warranty to it, and that no
act by the Agent or any Issuing Bank hereinafter taken,  including any review of
the affairs of the Borrower and its Subsidiaries,  shall be deemed to constitute
any  representation or warranty by any Agent-Related  Person or any Issuing Bank
to any Bank.  Each Bank  represents  to the Agent and the Issuing  Banks that it
has,  independently  and without reliance upon any  Agent-Related  Person or any
Issuing  Bank and  based on such  documents  and  information  as it has  deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
prospects,   operations,   property,   financial   and   other   condition   and
creditworthiness  of the Borrower and its Subsidiaries,  and all applicable bank
regulatory laws relating to the transactions  contemplated  hereby, and made its
own decision to enter into this  Agreement  and to extend credit to the Borrower
hereunder.  Each Bank also  represents that it will,  independently  and without
reliance  upon any  Agent-Related  Person or any Issuing  Bank and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  analysis,  appraisals and decisions in taking or not taking
action  under  this  Agreement  and the other Loan  Documents,  and to make such
investigations  as it deems  necessary  to  inform  itself  as to the  business,
prospects,   operations,   property,   financial   and   other   condition   and
creditworthiness  of  the  Borrower.  Except  for  notices,  reports  and  other
documents  to be  furnished  to the  Banks by the Agent or any  Issuing  Bank as
specified on Schedule  10.06,  neither the Agent nor any Issuing Bank shall have
any duty or  responsibility  to  provide  any  Bank  with  any  credit  or other
information concerning the business, prospects,  operations, property, financial
and other condition or  creditworthiness of the Borrower which may come into the
possession of any of the  Agent-Related  Persons or any Issuing Bank.  The Agent
shall promptly  deliver to the Banks the items  specified on Schedule 10.06 that
are  required to be provided by the  Borrower  only to the extent such items are
actually provided by the Borrower.

Indemnification.  Whether  or  not  the  transactions  contemplated  hereby  are
consummated, the Banks shall indemnify upon demand the Agent-Related Persons and
the Issuing Banks (to the extent not  reimbursed by or on behalf of the Borrower
and without  limiting  the  obligation  of the  Borrower to do so),  pro rata in
accordance  with its Pro Rata  Share  on the date the  Borrower's  reimbursement
obligation  arises,  from  and  against  any  and all  Indemnified  Liabilities;
provided,  however,  that  no Bank  shall  be  liable  for  the  payment  to the
Agent-Related  Persons or the Issuing  Banks of any portion of such  Indemnified
Liabilities  resulting  solely from such  Person's  gross  negligence or willful
misconduct.  Without limitation of the foregoing,  each Bank shall reimburse the
Agent and the Issuing  Banks upon demand for their ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by them in connection
with  the  preparation,   execution,  delivery,  administration,   modification,
amendment or enforcement  (whether through  negotiations,  legal  proceedings or
otherwise) of, or legal advice in respect of rights or  responsibilities  under,
this  Agreement,  any other Loan Document,  or any document  contemplated  by or
referred to herein, to the extent that the Agent or the applicable  Issuing Bank
is not  reimbursed  for such  expenses  by or on  behalf  of the  Borrower.  The
undertaking  in this  Section  shall  survive  the  payment  of all  Obligations
hereunder and the resignation or replacement of the Agent or any Issuing Bank.

Agent in Individual  Capacity.  BofA and its Affiliates may make loans to, issue
letters of credit for the account  of,  accept  deposits  from,  acquire  equity
interests  in and  generally  engage in any kind of  banking,  trust,  financial
advisory,  underwriting or other business with the Borrower and its Subsidiaries
and  Affiliates  as though BofA were not the Agent or an Issuing Bank  hereunder
and  without  notice to or  consent of the Banks.  The Banks  acknowledge  that,
pursuant to such  activities,  BofA or its  Affiliates  may receive  information
regarding  the Borrower or its  Affiliates  (including  information  that may be
subject  to  confidentiality  obligations  in  favor  of the  Borrower  or  such
Subsidiary)  and  acknowledge  that the Agent  shall be under no  obligation  to
provide such  information to them. With respect to its Loans and  participations
in  Letters of Credit,  BofA  shall have the same  rights and powers  under this
Agreement  as any other Bank and may exercise the same as though it were not the
Agent or an Issuing Bank.

Successor  Agent. The Agent may, and at the request of the Majority Banks shall,
resign as Agent upon 30 days' notice to the Banks.  If the Agent  resigns  under
this  Agreement,  the  Majority  Banks  shall  appoint  from  among  the Banks a
successor  agent for the Banks.  If no successor agent is appointed prior to the
effective  date of the  resignation of the Agent,  the Agent may appoint,  after
consulting  with the Banks and the  Borrower,  a successor  agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder, such
successor  agent  shall  succeed  to all the  rights,  powers  and duties of the
retiring  Agent and the term  "Agent"  shall mean such  successor  agent and the
retiring  Agent's  appointment,  powers and duties as Agent shall be terminated.
After any retiring  Agent's  resignation  hereunder as Agent,  the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
actions  taken or  omitted  to be taken by it  while  it was  Agent  under  this
Agreement.  If no successor agent has accepted  appointment as Agent by the date
which is 30 days  following  a  retiring  Agent's  notice  of  resignation,  the
retiring Agent's  resignation shall nevertheless  thereupon become effective and
the Banks  shall  perform  all of the duties of the Agent  hereunder  until such
time, if any, as the Majority  Banks  appoint a successor  agent as provided for
above.  Notwithstanding the foregoing,  however,  BofA may not be removed as the
Agent at the request of the Majority Banks unless BofA shall also simultaneously
be replaced as an "Issuing Bank" hereunder pursuant to documentation in form and
substance reasonably satisfactory to BofA.

Withholding  Tax.  (a) If any Bank is a  "foreign  corporation,  partnership  or
trust" within the meaning of the Code and such Bank claims  exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the Agent:

                           (i) if such  Bank  claims  an  exemption  from,  or a
          reduction  of,  withholding  tax  under a United  States  tax  treaty,
          properly  completed  IRS Forms 1001 and W-8 before the  payment of any
          interest  in the first  calendar  year and before  the  payment of any
          interest in each third succeeding  calendar year during which interest
          may be paid under this Agreement;

                           (ii) if such Bank  claims  that  interest  paid under
          this Agreement is exempt from United States withholding tax because it
          is  effectively  connected  with a United  States trade or business of
          such Bank, two properly completed and executed copies of IRS Form 4224
          before the payment of any interest is due in the first taxable year of
          such Bank and in each  succeeding  taxable  year of such  Bank  during
          which interest may be paid under this Agreement, and IRS Form W-9; and

                           (iii)  such  other  form or forms as may be  required
          under the Code or other laws of the United  States as a  condition  to
          exemption from, or reduction of, United States withholding tax.

Such Bank  agrees to  promptly  notify the Agent of any change in  circumstances
which would modify or render invalid any claimed exemption or reduction.

                  (b) If any  Bank  claims  exemption  from,  or  reduction  of,
withholding  tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns,  grants a participation in, or otherwise transfers all
or part of the  Obligations  of the  Borrower to such Bank,  such Bank agrees to
notify  the  Agent  of the  percentage  amount  in  which  it is no  longer  the
beneficial  owner of  Obligations of the Borrower to such Bank. To the extent of
such  percentage  amount,  the Agent will treat such  Bank's IRS Form 1001 as no
longer valid.

                  (c)  If  any  Bank  claiming   exemption  from  United  States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns,  grants a
participation  in, or otherwise  transfers all or part of the Obligations of the
Borrower to such Bank,  such Bank agrees to undertake  sole  responsibility  for
complying with the  withholding  tax  requirements  imposed by Sections 1441 and
1442 of the Code.

                  (d) If any Bank is entitled to a reduction  in the  applicable
withholding  tax, the Agent may withhold from any interest  payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction.  If the forms or other documentation  required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any  interest   payment  to  such  Bank  not  providing   such  forms  or  other
documentation an amount equivalent to the applicable withholding tax.

                  (e) If the  IRS or any  other  Governmental  Authority  of the
United  States  or other  jurisdiction  asserts  a claim  that the Agent did not
properly  withhold  tax  from  amounts  paid to or for the  account  of any Bank
(because the appropriate form was not delivered,  was not properly executed,  or
because such Bank failed to notify the Agent of a change in circumstances  which
rendered the exemption from, or reduction of,  withholding tax  ineffective,  or
for any other reason) such Bank shall  indemnify the Agent fully for all amounts
paid,  directly  or  indirectly,  by the  Agent as tax or  otherwise,  including
penalties and interest,  and including any taxes imposed by any  jurisdiction on
the amounts payable to the Agent under this Section, together with all costs and
expenses  (including  Attorney  Costs).  The  obligation of the Banks under this
subsection  shall survive the payment of all  Obligations and the resignation or
replacement of the Agent.


                                   ARTICLE XI
                                  MISCELLANEOUS

Amendments  and  Waivers.  No  amendment  or  waiver  of any  provision  of this
Agreement  or any other  Loan  Document,  and no  consent  with  respect  to any
departure by the Borrower or the General Partner  therefrom,  shall be effective
unless the same shall be in writing and signed by the Majority  Banks (or by the
Agent at the  written  request  of the  Majority  Banks)  and the  Borrower  and
acknowledged  by the  Agent,  and then  any  such  waiver  or  consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given;  provided,  however,  that no such waiver,  amendment,  or consent shall,
unless in writing and signed by all the Banks,  the  Borrower,  Stratton and the
General Partner and acknowledged by the Agent, do any of the following:

(a) increase or extend the Revolving  Loan  Commitment of any Bank (or reinstate
any Revolving Loan Commitment terminated pursuant to Section 9.02);

                  (b) postpone or delay any date fixed by this  Agreement or any
other Loan  Document  for any  payment  of  principal,  interest,  fees or other
amounts  due to the Banks  (or any of them)  hereunder  or under any other  Loan
Document;

                  (c) reduce the principal of, or the rate of interest specified
herein on any Loan,  or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;

                  (d) change the percentage of the Revolving Loan Commitments or
of the aggregate  unpaid principal amount of the Loans which is required for the
Banks or any of them to take any action hereunder;

(e) amend this Section,  or Section 2.14, or any provision  herein providing for
consent or other action by all Banks; or

                  (f)      release any of the Guaranties;

and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Banks in addition to the Majority Banks or all
the Banks,  as the case may be, affect the rights or duties of the Issuing Banks
under this  Agreement  or any  L/C-Related  Document  relating  to any Letter of
Credit  Issued or to be  Issued by any such  Issuing  Bank,  (ii) no  amendment,
waiver or consent  shall,  unless in writing and signed by the Agent in addition
to the Majority Banks or all the Banks, as the case may be, affect the rights or
duties of the Agent under this Agreement or any other Loan  Document,  and (iii)
the Fee Letter may be amended,  or rights or privileges  thereunder waived, in a
writing executed solely by the parties thereto.

Notices.  (a) Except as otherwise  specifically  provided in Section  3.02,  all
notices,  requests  and other  communications  shall be in  writing  (including,
unless the context  expressly  otherwise  provides,  by facsimile  transmission,
provided that any matter  transmitted  by the Borrower by facsimile (i) shall be
immediately  confirmed  by a  telephone  call  to the  recipient  at the  number
specified on Schedule 11.02, and (ii) shall be followed  promptly by delivery of
a hard copy original thereof) and mailed, faxed or delivered,  to the address or
facsimile number specified for notices on Schedule 11.02; or, as directed to the
Borrower  or the Agent,  to such other  address as shall be  designated  by such
party in a written  notice to the other  parties,  and as  directed to any other
party,  at such other  address as shall be designated by such party in a written
notice to the Borrower and the Agent.

                  (b) All such notices,  requests and communications shall, when
transmitted  by overnight  delivery,  or faxed,  be effective when delivered for
overnight  (next-day)  delivery,  or  transmitted  in legible  form by facsimile
machine,  respectively, or if mailed, upon the third Business Day after the date
deposited  into the U.S.  mail,  or if  delivered,  upon  delivery;  except that
notices  pursuant to Article II, III or X shall not be effective  until actually
received by the Agent,  and notices  pursuant to Article III to any Issuing Bank
shall not be  effective  until  actually  received by such  Issuing  Bank at the
address  specified  for the "Issuing  Banks" on the  applicable  signature  page
hereof.

                  (c) Any agreement of the Agent and the Banks herein to receive
certain  notices by telephone or facsimile is solely for the  convenience and at
the request of the  Borrower.  The Agent and the Banks shall be entitled to rely
on the  authority  of any Person  purporting  to be a Person  authorized  by the
Borrower  to give such  notice  and the  Agent and the Banks  shall not have any
liability  to the Borrower or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance  upon such  telephonic  or facsimile
notice.  The  obligation of the Borrower to repay the Loans and L/C  Obligations
shall not be  affected  in any way or to any extent by any  failure by the Agent
and the Banks to receive  written  confirmation  of any  telephonic or facsimile
notice or the receipt by the Agent and the Banks of a  confirmation  which is at
variance with the terms understood by the Agent and the Banks to be contained in
the telephonic or facsimile notice.

No  Waiver;  Cumulative  Remedies.  No  failure  to  exercise  and no  delay  in
exercising,  on the part of the Agent or any Bank, any right,  remedy,  power or
privilege hereunder,  shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further  exercise  thereof or the exercise of any other right,  remedy,
power or privilege.

Costs and Expenses.  The Borrower shall:

                  (a) whether or not the  transactions  contemplated  hereby are
consummated,  pay or reimburse  BofA  (including in its capacity as Agent and an
Issuing Bank) and the Arranger  within five Business Days after demand  (subject
to subsection 5.01(f)) for all costs and expenses incurred by BofA (including in
its capacity as Agent and an Issuing Bank) and the Arranger in  connection  with
the  development,   preparation,  delivery,   administration,   syndication  and
execution of, and any amendment,  supplement, waiver or modification to (in each
case,  whether or not  consummated),  this  Agreement,  any Loan  Document,  the
Existing  Credit  Agreement  and any  other  documents  prepared  in  connection
herewith or therewith,  and the  consummation of the  transactions  contemplated
hereby and thereby,  including  reasonable  (giving due regard to the prevailing
circumstances)  Attorney  Costs  incurred by BofA  (including in its capacity as
Agent and an Issuing Bank) and the Arranger with respect thereto; and

                  (b) pay or reimburse  the Agent,  the  Arranger,  each Issuing
Bank and each Bank  within  five  Business  Days after  demand for all costs and
expenses  (including  Attorney  Costs)  incurred by them in connection  with the
enforcement,  attempted  enforcement,  or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after  acceleration of the Loans (including in connection with any
"workout" or restructuring  regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).

Indemnity.  Whether or not the transactions contemplated hereby are consummated,
the Borrower shall  indemnify and hold the  Agent-Related  Persons,  the Issuing
Banks,  the  Arranger  and each  Bank and  each of  their  respective  officers,
directors,   employees,   counsel,   agents  and  attorneys-in-fact   (each,  an
"Indemnified  Person")  harmless  from  and  against  any and  all  liabilities,
obligations,   losses,  damages,   penalties,   actions,  judgments,  suits  and
reasonable (giving due regard to the prevailing  circumstances)  costs, charges,
expenses  and  disbursements  (including  Attorney  Costs) of any kind or nature
whatsoever  which may at any time (including at any time following  repayment of
the  Loans,  the  termination  of the  Letters  of Credit  and the  termination,
resignation  or  replacement  of the Agent or replacement of any Bank or Issuing
Bank) be imposed on, incurred by or asserted  against any such Person in any way
relating to or arising out of this Agreement or any document  contemplated by or
referred to herein, or the transactions contemplated hereby, or any action taken
or omitted by any such Person under or in connection  with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency  Proceeding or appellate proceeding) related to or arising out of
this  Agreement  or the Loans or  Letters  of Credit or the use of the  proceeds
thereof,  whether  or not any  Indemnified  Person is a party  thereto  (all the
foregoing,  collectively,  the "Indemnified  Liabilities");  provided,  that the
Borrower  shall have no  obligation  hereunder  to any  Indemnified  Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful  misconduct of such Indemnified  Person.  The agreements in this Section
shall survive payment of all other Obligations.

Payments Set Aside. To the extent that the Borrower makes a payment to the Agent
or the Banks,  or the Agent or the Banks  exercise  their right of set-off,  and
such  payment  or  the  proceeds  of  such  set-off  or  any  part  thereof  are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or required  (including  pursuant to any settlement entered into by the Agent or
such Bank in its  discretion)  to be repaid to a trustee,  receiver or any other
party,  in connection with any Insolvency  Proceeding or otherwise,  then (a) to
the extent of such recovery the obligation or part thereof  originally  intended
to be  satisfied  shall be revived and  continued in full force and effect as if
such  payment had not been made or such set-off had not  occurred,  and (b) each
Bank severally  agrees to pay to the Agent upon demand its pro rata share of any
amount so recovered from or repaid by the Agent.

Successors and Assigns.  The provisions of this Agreement  shall be binding upon
and inure to the benefit of the parties hereto and their  respective  successors
and  assigns,  except that the  Borrower  may not assign or transfer  any of its
rights or obligations  under this Agreement without the prior written consent of
the Agent and each Bank. Any attempted or purported  assignment in contravention
of the preceding sentence shall be null and void.

Assignments,  Participations, Etc. (a) Any Bank may, with the written consent of
the  Borrower  (at all times  other  than  during the  existence  of an Event of
Default), the Agent and the applicable Issuing Bank(s), which consents shall not
be  unreasonably  withheld,  at any  time  assign  and  delegate  to one or more
Eligible Assignees (provided that no written consent of the Borrower,  the Agent
or an Issuing  Bank shall be  required in  connection  with any  assignment  and
delegation by a Bank to an Eligible  Assignee that is an Affiliate of such Bank)
(each  an  "Assignee")  all,  or any  ratable  part of all,  of the  Loans,  the
Revolving  Loan  Commitments,  the L/C  Obligations  and the  other  rights  and
obligations  of  such  Bank   hereunder  in  an  aggregate   minimum  amount  of
$10,000,000, pro-rated in accordance with the respective amounts of the Facility
A  Commitment,  the  Facility  B Term  Loans  outstanding  and  the  Facility  C
Commitment  of such  Bank;  provided  that such Bank shall  retain an  aggregate
amount of not less than $10,000,000 in respect thereof, unless such Bank assigns
and  delegates  all of its  rights  and  obligations  hereunder  to one or  more
Eligible  Assignees on the time and subject to the  conditions set forth herein;
and provided,  further, however, that the Borrower and the Agent may continue to
deal  solely and  directly  with such Bank in  connection  with the  interest so
assigned to an Assignee  until (i) written notice of such  assignment,  together
with payment instructions, addresses and related information with respect to the
Assignee,  shall have been given to the  Borrower and the Agent by such Bank and
the  Assignee;  (ii) such Bank and its  Assignee  shall  have  delivered  to the
Borrower and the Agent an  Assignment  and  Acceptance  in the form of Exhibit E
("Assignment and  Acceptance"),  together with any Note or Notes subject to such
assignment;  and (iii) the  assignor  Bank or  Assignee  has paid to the Agent a
processing fee in the amount of $3,500.

                  (b) From and  after  the date  that  the  Agent  notifies  the
assignor Bank that it has received (and provided its consent with respect to) an
executed   Assignment  and  Acceptance  and  payment  of  the   above-referenced
processing fee, (i) the Assignee  thereunder shall be a party hereto and, to the
extent that rights and  obligations  hereunder have been assigned to it pursuant
to such  Assignment and  Acceptance,  shall have the rights and obligations of a
Bank under the Loan  Documents,  and (ii) the assignor Bank shall, to the extent
that rights and  obligations  hereunder and under the other Loan  Documents have
been assigned by it pursuant to such Assignment and  Acceptance,  relinquish its
rights and be released from its obligations under the Loan Documents.

                  (c) Within five  Business  Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and payment
of the  processing  fee (and  provided  that it consents to such  assignment  in
accordance with subsection 11.08(a)),  if the Assignee so requests, the Borrower
shall execute and deliver to the Agent,  new Notes  evidencing  such  Assignee's
assigned  Loans and  Revolving  Loan  Commitments  and, if the assignor Bank has
retained  a portion  of its  Loans and its  Revolving  Loan  Commitments  and so
requests,  replacement  Notes in the  principal  amount or  amounts of the Loans
retained by the  assignor  Bank (such Notes to be in  exchange  for,  but not in
payment  of,  the Notes held by such  Bank).  Immediately  upon each  Assignee's
making its  processing fee payment under the  Assignment  and  Acceptance,  this
Agreement  shall be deemed to be amended to the extent,  but only to the extent,
necessary to reflect the addition of the Assignee and the  resulting  adjustment
of the Revolving Loan  Commitments and Facility B Term Loans arising  therefrom.
The  Revolving  Loan  Commitments  and  Facility B Term Loans  allocated to each
Assignee shall reduce such Revolving Loan  Commitments and Facility B Term Loans
of the  assigning  Bank pro tanto  and the  Agent  shall  promptly  prepare  and
distribute a new Schedule 2.01 reflecting the new commitments.

                  (d) Any Bank may at any  time  sell to one or more  commercial
banks  or  other  Persons  not  Affiliates  of the  Borrower  (a  "Participant")
participating  interests in any Loans,  the Revolving  Loan  Commitments of that
Bank and the other interests of that Bank (the "originating Bank") hereunder and
under the other Loan  Documents;  provided,  however,  that (i) the  originating
Bank's  obligations  under  this  Agreement  shall  remain  unchanged,  (ii) the
originating  Bank shall remain solely  responsible  for the  performance of such
obligations,  (iii) the Borrower, the Issuing Banks and the Agent shall continue
to deal solely and directly with the  originating  Bank in  connection  with the
originating  Bank's rights and  obligations  under this  Agreement and the other
Loan  Documents,  and (iv) no Bank  shall  transfer  or grant any  participating
interest under which the  Participant has rights to approve any amendment to, or
any  consent  or waiver  with  respect  to,  this  Agreement  or any other  Loan
Document,  except to the extent such amendment,  consent or waiver would require
unanimous  consent  of the Banks as  described  in the first  proviso to Section
11.01. In the case of any such participation,  the Participant shall be entitled
to the  benefit of Sections  4.01,  4.03 and 11.05 as though it were also a Bank
hereunder,  and if amounts  outstanding under this Agreement are due and unpaid,
or shall have been  declared  or shall  have  become  due and  payable  upon the
occurrence of an Event of Default,  each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.

                  (e) Each Bank agrees to take normal and reasonable precautions
and  exercise  due  care to  maintain  the  confidentiality  of all  information
identified as  "confidential"  or "secret" by the Borrower and provided to it by
the  Borrower  or  any  Subsidiary,  or by  the  Agent  on  such  Borrower's  or
Subsidiary's  behalf,  under  this  Agreement  or any other Loan  Document,  and
neither it nor any of its Affiliates shall use any such  information  other than
in  connection  with or in  enforcement  of this  Agreement  and the other  Loan
Documents;  except to the extent such  information (i) was or becomes  generally
available to the public  other than as a result of  disclosure  by the Bank,  or
(ii) was or becomes  available on a  non-confidential  basis from a source other
than the Borrower,  provided that such source is not bound by a  confidentiality
agreement with the Borrower known to the Bank; provided,  however, that any Bank
may disclose such  information (A) at the request or pursuant to any requirement
of any Governmental Authority to which the Bank is subject or in connection with
an examination of such Bank by any such  authority;  (B) pursuant to subpoena or
other  court  process;  (C)  when  required  to  do so in  accordance  with  the
provisions of any applicable  Requirement  of Law; (D) to the extent  reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective  Affiliates may be party; (E) to the extent  reasonably
required in  connection  with the exercise of any remedy  hereunder or under any
other  Loan  Document;  (F)  to  such  Bank's  independent  auditors  and  other
professional  advisors; (G) to any Affiliate of such Bank, or to any Participant
or Assignee, actual or potential,  provided that such Affiliate,  Participant or
Assignee  agrees  to keep  such  information  confidential  to the  same  extent
required of the Banks hereunder,  and (H) as to any Bank, as expressly permitted
under the terms of any other document or agreement regarding  confidentiality to
which the Borrower is party or is deemed party with such Bank.

                  (f) Notwithstanding any other provision in this Agreement, any
Bank may at any time  create a  security  interest  in,  or  pledge,  all or any
portion of its rights under and interest in this  Agreement and any Note held by
it in favor of any Federal  Reserve Bank in accordance  with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14,  and such Federal Reserve Bank
may  enforce  such pledge or security  interest  in any manner  permitted  under
applicable law.

Set-off. In addition to any rights and remedies of the Banks provided by law, if
an Event of  Default  exists or the Loans  have been  accelerated,  each Bank is
authorized  at any time  and from  time to time,  without  prior  notice  to the
Borrower,  any such notice being  waived by the  Borrower 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  by,  and  other
indebtedness at any time owing by, such Bank to or for the credit or the account
of the  Borrower  against  any and all  Obligations  owing to such Bank,  now or
hereafter existing,  irrespective of whether or not the Agent or such Bank shall
have made demand  under this  Agreement or any Loan  Document and although  such
Obligations may be contingent or unmatured.  Each Bank agrees promptly to notify
the Borrower and the Agent after any such set-off and  application  made by such
Bank; provided,  however,  that the failure to give such notice shall not affect
the validity of such set-off and application.

Notification  of  Addresses,  Lending  Offices,  Etc. Each Bank shall notify the
Agent in writing  of any  changes  in the  address to which  notices to the Bank
should be directed,  of addresses of any Lending Office, of payment instructions
in  respect  of all  payments  to be made  to it  hereunder  and of  such  other
administrative information as the Agent shall reasonably request.

Changes of Revolving Lo( On the  Restatement  Effective  Date, each of the Banks
which either (i) has a Facility A Commitment Percentage or Facility C Commitment
Percentage  on the  Restatement  Effective  Date that is less than its  Existing
Facility A Commitment  Percentage or Existing Facility C Commitment  Percentage,
as the case may be,  immediately  prior  to such  date or (ii) had a  commitment
under  the  Existing  Credit  Agreement  immediately  prior  to the  Restatement
Effective  Date but has no  corresponding  Revolving  Loan  Commitment as of the
Restatement   Effective  Date  (each  such  Bank,  a  "Decreasing  Bank")  shall
irrevocably assign,  without recourse or warranty of any kind whatsoever (except
that each Decreasing Bank warrants that it is the legal and beneficial  owner of
the Loans  assigned by it under this Section  11.11 and that such Loans are held
by such Decreasing Bank free and clear of adverse claims),  to each of the Banks
which  has  a  Facility  A  Commitment   Percentage  or  Facility  C  Commitment
Percentage,  as the case  may be,  on the  Restatement  Effective  Date  that is
greater than its Existing Facility A Commitment  Percentage or Existing Facility
C  Commitment  Percentage,  as the case may be,  immediately  prior to such date
(each such Bank, an "Increasing  Bank"),  and each of the Increasing Banks shall
irrevocably acquire from the Decreasing Banks, a portion of the principal amount
of the Facility A Revolving Loans or Facility C Revolving Loans, as the case may
be, of each of the  Decreasing  Banks  (collectively,  the  "Acquired  Portion")
outstanding on the  Restatement  Effective Date (before giving effect to any new
Revolving  Loans made on such date) in an amount such that the principal  amount
of the  Revolving  Loans  held by each of the  Increasing  Banks and each of the
Decreasing  Banks  as of  the  Restatement  Effective  Date  shall  be  held  in
accordance with each such Bank's Facility A Commitment Percentage and Facility C
Commitment  Percentage (if any) as of such date. Such assignment and acquisition
shall be effective on the Restatement  Effective Date  automatically and without
any  action  required  on the part of any party  other  than the  payment by the
Increasing  Banks to the Agent for the  account  of the  Decreasing  Banks of an
amount  equal to the  Acquired  Portion,  which amount shall be allocated to the
Decreasing Banks pro rata based upon the respective  reductions in the principal
amount of the  Facility A Revolving  Loans and  Facility C Revolving  Loans,  as
applicable,  held by such Banks on the Restatement Effective Date (before giving
effect to any new Revolving Loans made on such date).  Each of the Agent and the
Banks  shall  adjust  its  records  accordingly  to reflect  the  payment of the
Acquired Portion and the changes in the Bank's Revolving Loan  Commitments.  The
payment  to be made in  respect  of the  Acquired  Portion  shall be made by the
Increasing  Banks to the Agent in Dollars in immediately  available  funds at or
before 11:00 a.m. San Francisco time on the  Restatement  Effective  Date,  such
payment to be made by the  Increasing  Banks pro rata based upon the  respective
increases in the principal amount of the Facility A Revolving Loans and Facility
C Revolving Loans held by such Banks on the  Restatement  Effective Date (before
giving  effect to any new  Revolving  Loans made on such date).  For purposes of
this subsection 11.11(a), (1) "Existing Facility A Commitment Percentage" means,
with  respect  to any  Bank,  the  ratio of (i) the  amount  of the  Facility  C
Commitment  of such  Bank  under  the  Existing  Credit  Agreement  to (ii)  the
aggregate  amount of the  Facility C  Commitments  of all of the Banks under the
Existing  Credit  Agreement,  (2)  "Existing  Facility C Commitment  Percentage"
means,  with respect to any Bank,  the ratio of (i) the amount of the Facility A
Commitment  plus the amount of the Facility B Commitment  of such Bank under the
Existing  Credit  Agreement  to (ii) the  aggregate  amount  of the  Facility  A
Commitments  plus the aggregate  amount of the Facility B Commitments  of all of
the Banks under the  Existing  Credit  Agreement,  (3)  "Facility  A  Commitment
Percentage"  means, with respect to any Bank, the ratio of (i) the amount of the
Facility A Commitment of such Bank to (ii) the aggregate  amount of the Facility
A  Commitments  of all of the Banks and (4)  "Facility C Commitment  Percentage"
means,  with respect to any Bank,  the ratio of (i) the amount of the Facility C
Commitment  of  such  Bank  to (ii)  the  aggregate  amount  of the  Facility  C
Commitments of all of the Banks.



<PAGE>



                  (b) To the extent any of the Revolving  Loans  acquired by the
Increasing  Banks from the Decreasing  Banks pursuant to subsection  11(a) above
are Eurodollar Rate Loans and the Restatement Effective Date is not the last day
of an Interest Period for such Loans,  the Decreasing Banks shall be entitled to
compensation  from the  Borrower  as provided  in Section  4.04 of the  Existing
Credit  Agreement  (as if the Borrower had prepaid such Loans in an amount equal
to the Acquired Portion on the Restatement  Effective Date). The payment made by
the Increasing  Banks in respect of the Acquired Portion shall constitute a Loan
made by the  Increasing  Banks on the  Restatement  Effective  Date,  and to the
extent any Loan acquired by the Increasing  Banks on the  Restatement  Effective
Date is a Eurodollar  Rate Loan and such date is not the last day of an Interest
Period  for such  Loan,  such  Loan  shall  accrue  interest  at the  rate  then
applicable to such Loan until such last day;  provided however that the Borrower
shall compensate the Increasing Banks for an amount equal to the amount, if any,
by which the cost to the  Increasing  Banks of  funding  the amount of each such
Loan in the  respective  market for the period from such date to the last day of
the then Interest Period for such Loan exceeds such applicable rate.


Counterparts.  This  Agreement  may  be  executed  in  any  number  of  separate
counterparts,  each of which, when so executed, shall be deemed an original, and
all of said  counterparts  taken  together shall be deemed to constitute but one
and the same instrument.

Severability.  The  illegality  or  unenforceability  of any  provision  of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability  of the remaining  provisions of
this Agreement or any instrument or agreement required hereunder.

No Third Parties Benefited. This Agreement is made and entered into for the sole
protection  and legal  benefit of the  Borrower,  the  Banks,  the Agent and the
Agent-Related  Persons, the Arranger and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal  beneficiary of, or have
any  direct  or  indirect  cause of  action or claim in  connection  with,  this
Agreement or any of the other Loan Documents.

Governing  Law  and  Jurisdiction.  (a)  THIS  AGREEMENT  AND ALL  NOTES  ISSUED
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.

                  (b) ANY  LEGAL  ACTION  OR  PROCEEDING  WITH  RESPECT  TO THIS
AGREEMENT  OR ANY OTHER LOAN  DOCUMENT 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 BORROWER,  THE GENERAL
PARTNER,  STRATTON,  THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-EXCLUSIVE  JURISDICTION OF THOSE COURTS. EACH OF THE
BORROWER,  THE GENERAL PARTNER,  STRATTON,  THE AGENT AND THE BANKS  IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON  CONVENIENS,  WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR  PROCEEDING  IN SUCH  JURISDICTION  IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT  RELATED HERETO.  THE BORROWER,  THE GENERAL  PARTNER,
STRATTON,  THE AGENT AND THE BANKS EACH WAIVE  PERSONAL  SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER  PROCESS,  WHICH MAY BE MADE BY ANY OTHER MEANS  PERMITTED BY
NEW YORK LAW.

Waiver of Jury Trial. THE BORROWER, THE GENERAL PARTNER, STRATTON, THE BANKS AND
THE AGENT EACH WAIVE THEIR RESPECTIVE  RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS  AGREEMENT,  THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY  AGENT-RELATED  PERSON,  PARTICIPANT OR ASSIGNEE,
WHETHER  WITH  RESPECT TO  CONTRACT  CLAIMS,  TORT  CLAIMS,  OR  OTHERWISE.  THE
BORROWER, THE GENERAL PARTNER, STRATTON, THE BANKS AND THE AGENT EACH AGREE THAT
ANY SUCH  CLAIM OR CAUSE OF  ACTION  SHALL BE TRIED BY A COURT  TRIAL  WITHOUT A
JURY.  WITHOUT  LIMITING THE  FOREGOING,  THE PARTIES  FURTHER  AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION,  COUNTERCLAIM OR OTHER  PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR  ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS  OR ANY  PROVISION  HEREOF OR THEREOF.  THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS,  RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.

Entire  Agreement.  From and after the  Restatement  Effective Date (if it shall
occur),  this Agreement,  together with the other Loan  Documents,  embodies the
entire agreement and understanding  between and among the Borrower,  the General
Partner,  Stratton,  the Banks and the Agent, and supersedes the Existing Credit
Agreement  and all other  understandings  of such  Persons,  verbal or  written,
relating to the subject matter hereof and thereof.

          IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly  authorized  officers as
of the day and year first above written.

                                FERRELLGAS, L.P.

                                             By:  Ferrellgas, Inc.,
                                                  General Partner


                                             By: /s/ Danley K. Sheldon
                                                     Danley K. Sheldon
                                                     Senior Vice President and
                                                     Chief Financial Officer/
                                                     Treasurer



                                FERRELLGAS, INC.


                                             By: /s/ Danley K. Sheldon
                                                     Danley K. Sheldon
                                                     Senior Vice President and
                                                     Chief Financial Officer/
                                                     Treasurer



                                             STRATTON INSURANCE COMPANY, INC.


                                             By: /s/ Danley K. Sheldon
                                                     Danley K. Sheldon
                                                     Senior Vice President and
                                                     Chief Financial Officer/
                                                     Treasurer


                                                   Address  for Notices for each
                                                   of the Borrower,  the General
                                                   Partner and Stratton:

                                One Liberty Plaza
                             Liberty, Missouri 64068
                          Attention: Danley K. Sheldon
                            Telephone: (816) 792-6828
                            Facsimile: (816) 792-6979



<PAGE>


                                                BANK OF AMERICA NATIONAL TRUST
                                                AND SAVINGS ASSOCIATION,
                                                as Agent



                                             By: /s/ David E. Sisler
                                                  David E. Sisler
                                                  Vice President


                                             BANK OF AMERICA NATIONAL TRUST
                                             AND SAVINGS ASSOCIATION, as a Bank



                                             By: /s/ David E. Sisler
                                                  David E. Sisler
                                                  Vice President


                                             NATIONSBANK OF TEXAS, N.A.,
                                             as a Bank



                                             By: /s/ C. Todd Kulp
                                                  C. Todd Kulp
                                                  Vice President


                                             WELLS FARGO BANK, N.A.,
                                             as a Bank
   


                                             By: /s/ Charles D. Kirkham
                                                  Charles D. Kirkham
                                                  Vice President


                                             THE BANK OF NOVA SCOTIA,
                                             as a Bank



                                             By: /s/ T. C. H. Ashby
                                                  T. C. H. Ashby
                                                  Senior Manager Loan Operations



<PAGE>


                                             THE FIRST NATIONAL BANK OF BOSTON,
                                             as a Bank



                                             By: /s/ H. Louis Bailey
                                                  H. Louis Bailey
                                                  Managing Director


                                             BANQUE PARIBAS, as a Bank



                                             By: /s/ Scott Clingan
                                                  Scott Clingan
                                                  Vice President



                                             By: /s/ Larry Robinson
                                                  Larry Robinson
                                                  Vice President


                                             UNION BANK OF CALIFORNIA, N.A.,
                                             as a Bank



                                             By: /s/ Walter M. Roth
                                                  Walter M. Roth
                                                  Vice President


                                             THE BANK OF NEW YORK, as a Bank



                                             By: /s/ Mark T. Familo
                                                  Mark T. Familo
                                                  Assistant Vice President


                                             CAISSE NATIONALE DE CREDIT


                                             AGRICOLE, as a Bank



                                                   By: /s/ David Bouhl
                                                       David Bouhl, F.V.P.
                                                       Head of Corporate Banking