SECOND AMENDED AND RESTATED CREDIT AGREEMENT



                            Dated as of July 2, 1998



                                      among

                                FERRELLGAS, L.P.,

                                FERRELLGAS, INC.,

                         BANK OF AMERICA NATIONAL TRUST
                            AND SAVINGS ASSOCIATION,

                            as Administrative Agent,

                                       and

                  THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

                               NATIONSBANK, N.A.,

                             as Documentation Agent

                                   Arranged By

                         BANCAMERICA ROBERTSON STEPHENS




<PAGE>

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT


         This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
July 2, 1998,  among  FERRELLGAS,  L.P.,  a Delaware  limited  partnership  (the
"Borrower"),  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
"Administrative Agent").  NATIONSBANK, N.A. is named as documentation agent (the
"Documentation Agent") hereunder.

                                 R E C I T A L S

         WHEREAS,  the  Borrower,   the  General  Partner,  the  Banks  and  the
Administrative  Agent are parties to the Existing  Credit  Agreement (as defined
below),  pursuant to which the Banks have (a) made revolving credit loans to the
Borrower and have issued or participated in letters of credit for the account of
the  Borrower,  in each  case for  working  capital,  Acquisitions  and  general
partnership  purposes in an  aggregate  amount of up to  $185,000,000,  (b) made
additional revolving loans to Borrower solely for working capital purposes in an
aggregate amount of up to $20,000,000 and (c) made term loans to the Borrower to
refinance the $50,000,000 Series B Floating Rate Senior Notes due 2001 issued by
the Borrower and Finance Corp. (as defined below);

         WHEREAS, the Borrower has requested that (i) the outstanding Facility A
Revolving  Loans and  Facility  C  Revolving  Loans  under the  Existing  Credit
Agreement be refinanced and converted into Facility C Revolving Loans under this
Agreement,  (ii) the Facility A Commitments  under the Existing Credit Agreement
be converted into Facility A Commitments  under this Agreement,  the proceeds of
which are to be used by the Borrower solely for working capital purposes,  (iii)
the Facility C Commitments under the Existing Credit Agreement be converted into
Facility C  Commitments  under this  Agreement,  the proceeds of which are to be
used by the Borrower for Acquisitions  and general  partnership  purposes,  (iv)
separate  and apart from the  foregoing  credit  facilities,  the Banks make new
Facility B  Commitments  and  Facility B Revolving  Loans to the  Borrower in an
aggregate  amount of up to $50,000,000,  the proceeds of which are to be used by
the Borrower for working  capital and general  partnership  purposes and (v) the
Existing Credit  Agreement  otherwise be amended and restated in its entirety as
set forth below in this Agreement;

         WHEREAS,  on or prior to the  Restatement  Effective Date, the Borrower
will issue  pursuant to the 1998 Note Purchase  Agreement (as defined below) the
1998 Fixed Rate Senior Notes (as defined below) in an aggregate principal amount
of not greater than  $350,000,000,  the proceeds of which will be used to redeem
the Fixed Rate Senior Notes (as defined below) and to repay in full the Facility
B Term Loans under (and as defined in) the Existing Credit 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

            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.

                  "1998 Fixed Rate Senior  Notes" means,  collectively,  (a) the
         $109,000,000 6.99% Senior Notes,  Series A, due August 1, 2005, (b) the
         $37,000,000  7.08% Senior Notes,  Series B, due August 1, 2006, (c) the
         $52,000,000 7.12% Senior Notes, Series C, due 2008, (d) the $82,000,000
         7.24%  Senior  Notes,  Series  D,  due  August  1,  2010  and  (e)  the
         $70,000,000  7.42% Senior Notes,  Series E, due August 1, 2013, in each
         case  issued  by the  Borrower  pursuant  to  the  1998  Note  Purchase
         Agreement.

                  "1998  Note  Purchase   Agreement"  means  the  Note  Purchase
         Agreement,  dated  as of July  1,  1998,  among  the  Borrower  and the
         Purchasers named therein,  pursuant to which the 1998 Fixed Rate Senior
         Notes will be 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.

                  "Administrative  Agent"  has  the  meaning  specified  in  the
         introductory clause hereto.  References to the  "Administrative  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
         Administrative  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.

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

      Pricing Ratio            Base Rate Loans          Eurodollar Loans
      -------------            ---------------          ----------------
         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.

                  "Arranger"   means   BancAmerica    Robertson   Stephens,    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 7.16%) 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 July 5, 1994; 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 Administrative  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 New York or 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   Administrative   Agent,   for  the  benefit  of  the
         Administrative  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  Administrative  Agent (which  documents are hereby
         consented  to by the  Banks).  Derivatives  of  such  term  shall  have
         corresponding meaning. The Borrower hereby grants to the Administrative
         Agent, for the benefit of the  Administrative  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  Administrative  Agent  and the
         Majority  Banks  (which  consent may be given or withheld in their sole
         and absolute  discretion)  provided that the Administrative  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 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 Revolving Loan,
         or Facility C Revolving Loan.

                  "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:

                      Commercial Letter of Credit Risk
          Pricing Ratio                Participation Percentage
          -------------                ------------------------
             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.

                  "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
          -------------                  -------------------
             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.

                  "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,  plus (e)  non-cash  employee
         compensation  expenses  of such  Person for such  period,  plus (f) the
         Synthetic Lease Principal  Component of such Person for such period; 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,  plus  (c)  the  Synthetic  Lease  Interest
         Component for that fiscal period.

                  "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  such  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
         such 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.

                  "Documentation Agent" means NationsBank, N.A.

                  "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  $500,000,000;   (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  $500,000,000,
         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 Amended and  Restated
         Credit  Agreement,  dated as of July 31, 1996,  as amended prior to the
         Restatement  Effective Date, among Borrower,  the General Partner,  the
         several financial institutions from time to time party thereto, Bank of
         America  National  Trust  and  Savings  Association,   as  Agent,  with
         NationsBank of Texas, N.A. as named Co-Agent 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 $40,000,000 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 Commitment" means, as to each Bank, the amount set
         forth  opposite  such  Bank's name on  Schedule  2.01 hereof  under the
         caption  "Facility  B  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  B
         Commitment of all Banks shall not exceed $50,000,000 at any time.

                  "Facility  B  Revolving  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 $55,000,000 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  Administrative  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
         Administrative Agent.

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

                  "FCI ESOT" means the employee stock ownership trust of Ferrell
         Companies, Inc. organized under section 4975(e)(7) of the Code.

                  "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 such  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,  Facility B  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 such
         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.

                  "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 the Borrower and its
         Subsidiaries  excluding all Contingent  Obligations of the 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.

                  "Guaranty"  means a continuing  guaranty of the Obligations in
         favor of the  Administrative  Agent on behalf of the Banks, in form and
         substance satisfactory to the Administrative 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;  provided,  however, that "Indebtedness"
         shall not include Synthetic Lease Obligations.

                  "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 Coverage Ratio" means with respect to any Person for
         any period, the ratio of Consolidated Cash Flow of such Person for such
         period to Consolidated Interest Expense of such Person for such period.
         The foregoing calculation of the Interest Coverage Ratio shall 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 such Person or any of
         its  Subsidiaries  during the  reference  period or  subsequent to such
         reference  period  and on or prior to the  date of  calculation  of the
         Interest  Coverage  Ratio  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,
         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.

                  "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; and

                           (iii)            no Interest Period for any Revolving
           Loan shall extend beyond the Revolving Loan Termination 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  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 B
         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 B 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 B 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 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 Administrative 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 LT 1.75
         Level 2                  1.75 LT  PR LT 2.75
                                       
         Level 3                  2.75 LT  PR LT 3.25
                                       
         Level 4                  3.25 LT  PR LT 3.75
                                       
         Level 5                  3.75 LT  PR LT 4.25
                                       
         Level 6                          PR LT 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 4.
         Any change in the Level of the Pricing Ratio shall be determined by the
         Administrative  Agent based upon the financial  information required to
         be contained in the Compliance  Certificates  delivered by the Borrower
         to the Administrative  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  Administrative  Agent, and without limiting the other
         rights  and  remedies  of  the  Administrative   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  as of the  last  day of  such  period,  to
         Consolidated  Cash Flow of such  Person for such  period.  In the event
         that  such  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 such  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
         Administrative  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
         Administrative  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 Revolving 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  Administrative  Agent  or  any  Bank  in
         connection herewith.

                  "Majority  Banks"  means at any time Banks then  holding  more
         than 50% 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  more than 50% 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  redemption  of the Fixed 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  Administrative  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 in accordance with the terms of this Agreement.

                  "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
         Administrative 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.
                  "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,  (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,  (iv) the FCI ESOT or (v) any participant in the FCI
         ESOT whose ESOT account has been allocated shares of Ferrell Companies,
         Inc.

                  "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) August 3, 1998.

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

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

                  "Revolving  Loan  Termination  Date"  means the earlier of (a)
         July  2,  2001  (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.

                  "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 Securities Act of
         1933, 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:

                          Standby Letter of Credit Risk
           Pricing Ratio                      Participation Percentage
           -------------                      ------------------------
              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.

                  "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.

                  "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 Interest  Component"  means,  with respect to
         any Person for any period, the portion of rent paid or payable (without
         duplication) for such period under Synthetic Leases of such Person that
         would be treated as interest in accordance  with  Financial  Accounting
         Standards Board Statement No. 13 if such Synthetic  Leases were treated
         as Capital Leases under GAAP.

                  "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.

                  "Synthetic Lease Principal  Component"  means, with respect to
         any Person  for any  period,  the  portion  of rent  (exclusive  of the
         Synthetic   Lease  Interest   Component)   paid  or  payable   (without
         duplication) for such period under Synthetic Leases of such Person that
         was deducted in calculating  Consolidated Net Income of such Person for
         such period.

                  "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
         Administrative  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  Administrative  Agent,  as the case may be, is
         organized or maintains a lending office.

                  "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.

         1.02             Other Interpretive 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  Administrative
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 Administrative
Agent merely  because of the  Administrative  Agent's or Banks'  involvement  in
their preparation.

         1.03              Accounting 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

         2.01              Amounts and Terms of Revolving Loan Commitments

                  (a)               Facility 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.

                           (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,
         1998.

                  (b) Facility B Revolving Loans and Letters of Credit. (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 B  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 B Commitment as in effect
         from time to time; provided,  however, that, after giving effect to any
         Borrowing  of  Facility B  Revolving  Loans,  the sum of the  Effective
         Amount of all outstanding Facility B Revolving Loans plus the Effective
         Amount of all L/C Obligations shall not at any time exceed the combined
         Facility B  Commitments,  and the  Effective  Amount of the  Facility B
         Revolving Loans of any Bank plus the  participation of such Bank in the
         Effective  Amount of all L/C  Obligations  shall not at any time exceed
         such Bank's Facility B Commitment.

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

                           (iii)  As a  subfacility  of the  Banks'  Facility  B
         Commitments,  the  Borrower  may  request  the  Issuing  Banks to Issue
         Letters of Credit  from time to time  pursuant  to Article  III. On the
         Restatement  Effective  Date,  all Existing  Letters of Credit shall be
         Letters of Credit  hereunder and shall constitute usage of the Facility
         B Commitment under this Agreement.

                  (c)           Facility C Revolving Loans and 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 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  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,
         Facility C Revolving 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) In  addition,  the Borrower may request BofA to
         make  Swingline  Loans to the  Borrower  from time to time  pursuant to
         Section 2.15.

     2.02 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
Administrative 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
Administrative  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.

          2.03 Provedure for Borrowing.  (a) Each Borrowing of Loans (other than
     Swingline  Loans)  shall be made upon the  Borrower's  irrevocable  written
     notice  delivered  to the  Administrative  Agent in the form of a Notice of
     Borrowing (which notice must be received by the Administrative  Agent prior
     to 9:00 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 Administrative Agent will promptly notify each Bank of
the Administrative  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  Administrative  Agent for the account of the
Borrower  at the  Administrative  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  Administrative  Agent.  The proceeds of all such
Loans will then be made available to the Borrower by the Administrative 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  Administrative  Agent by the
Banks and in like funds as received by the Administrative Agent.

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

         .  (a) The Borrower may, upon irrevocable written notice to the
 Administrative 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  Administrative  Agent not later
than 9:00 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 resultin
 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 Administrative 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
Administrative  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.

         2.05              Voluntary Termination or Reduction of Revolving Loan
 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
Administrative 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
Administrative Agent, terminate or permanently reduce the Facility B 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 B Revolving Loans and L/C Obligations  together would exceed the amount
of the combined  Facility B  Commitments  then in effect,  or (ii) the Effective
Amount of all L/C Obligations then outstanding would exceed the L/C Commitment.

                  (c) 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
Administrative 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, the Effective Amount of all Facility C
Revolving  Loans and  Swingline  Loans  together  would exceed the amount of the
combined Facility C Commitments then in effect.

                  (d)  Once  reduced  in  accordance  with  this  Section,   the
Commitments  may  not  be  increased.   Any  reduction  of  the  Revolving  Loan
Commitments shall be applied to each Bank according to its Pro Rata Share.

         . (a) Subject to Section  4.04,  the Borrower  may, at any time or from
time to time,  not later than 9:00 a.m.  San  Francisco  time at least three (3)
Business  Days  prior  to  its  effective  date  by  irrevocable  notice  to the
Administrative  Agent, in the case of Eurodollar Rate Loans,  and not later than
9:00  a.m.  San  Francisco  time at  least  one (1)  Business  Day  prior to its
effective date by irrevocable notice to the Administrative 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  Administrative  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.

         . (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  B  Revolving  Loans  then
outstanding  plus the Effective  Amount of all L/C Obligations  then outstanding
exceeds the combined Facility B Commitments, the Borrower shall immediately, and
without  notice  or  demand,  prepay  the  outstanding  principal  amount of the
Facility B Revolving Loans and any L/C Advances by an aggregate  amount equal to
the applicable excess.

                  (c) Subject to Section 4.04, if on any date on or prior to the
Revolving Loan Termination Date the Effective Amount of all Facility C Revolving
Loans then  outstanding  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 and  Swingline  Loans by an aggregate
amount equal to the applicable excess.

                  (d) 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.

                  (e) If and to the extent that the Revolving  Loan  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.

         . 08              Repayment

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

                  (b) 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.

                  (c) 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  Administrative  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 Administrative  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 Administrative  Agent that it will not extend the Revolving Loan Termination
Date then in effect, or if any Bank fails to notify Borrower and  Administrative
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.

         . (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(d) 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  Administrative  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.

         .  In addition to certain fees described in Section 3.08:

                  (a)  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  Administrative  Agent  for the  Administrative  Agent's  own
account,  as required by the letter  agreement  (the "Fee  Letter")  between the
Borrower and the Arranger and Administrative Agent dated May 19, 1998.

                  (b)   Commitment   Fees.   The  Borrower   shall  pay  to  the
Administrative  Agent for the  account  of each Bank (a) a  commitment  fee with
respect to such Bank's  Facility A Commitment  equal to the  Commitment Fee Rate
per  annum  times the  actual  daily  amount by which  such  Bank's  Facility  A
Commitment  exceeded the sum of the aggregate Effective Amount of its Facility A
Revolving  Loans,  (b) a commitment  fee with respect to such Bank's  Facility B
Commitment  equal to the  Commitment  Fee Rate per annum times the actual  daily
amount by which  such  Bank's  Facility  B  Commitment  exceeded  the  aggregate
Effective  Amount of its  Facility B Revolving  Loans plus its Pro Rata Share of
the Effective Amount of L/C Obligations and (c) a commitment fee with respect to
such Bank's  Facility C Commitment  equal to the  Commitment  Fee Rate per annum
times the  actual  daily  amount by which  such  Bank's  Facility  C  Commitment
exceeded the aggregate  Effective Amount of its Facility C Revolving Loans. Such
commitment  fees  shall  accrue  from  the  Restatement  Effective  Date  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.

                  (c)               Participation Fees.  On the Restatement
Effective Date, the Borrower shall pay to the Administrative Agent for the
account of each Bank a participation fee in an amount equal to (i) 0.075 percent
multiplied by (ii) the sum of such Bank's Revolving Loan Commitments.

         . (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
Administrative  Agent shall be  conclusive  and binding on the  Borrower and the
Banks in the absence of manifest error.

         . (a) All payments to be made by the Borrower  under any Loan  Document
shall be made without set-off, recoupment, counterclaim or other defense. Except
as otherwise  expressly  provided herein,  all payments by the Borrower shall be
made  to  the  Administrative  Agent  for  the  account  of  the  Banks  at  the
Administrative  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 Administrative  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
Administrative  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  Administrative  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
Administrative  Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date in immediately  available funds and the
Administrative  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  Administrative  Agent,  each  Bank  shall  repay to the
Administrative  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.

                  (d) Unless a due date is otherwise  specified herein,  the due
date for any Obligation  shall be 30 days after demand therefor by the Person to
whom the Obligation is owed.

         . (a) Unless the Administrative 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  Administrative  Agent for the
account  of the  Borrower  the  amount  of that  Bank's  Pro  Rata  Share of the
Borrowing,  the  Administrative  Agent may  assume  that each Bank has made such
amount available to the Administrative  Agent in immediately  available funds on
the  Borrowing  Date  and the  Administrative  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  Administrative  Agent in  immediately
available  funds and the  Administrative  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  Administrative
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Administrative  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  Administrative
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
Administrative  Agent on the Business Day  following  the  Borrowing  Date,  the
Administrative  Agent will notify the Borrower of such failure to fund and, upon
demand by the  Administrative  Agent,  the Borrower shall pay such amount to the
Administrative  Agent for the  Administrative  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.

           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
Administrative  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  Administrative  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.

         ..15              Discretionary Swingline Loans

                  (a) From time to time,  subject  to the  conditions  set forth
below, at the request of the Borrower,  made through the Administrative 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,  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
Administrative  Agent, shall be funded by BofA through the Administrative Agent,
and shall be repaid by the Borrower through the  Administrative  Agent (in order
that the  Administrative  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  Administrative  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 Administrative  Agent  substantially in the form
of a Notice of Borrowing  (which  notice must be received by the  Administrative
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 $200,000 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
Administrative 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

         . (a) On the terms and subject to the  conditions  set forth herein and
as a subfacility of the Facility B 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
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;  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 B Revolving Loans exceeds the combined  Facility B 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 to obtain  Letters of Credit  shall be fully  revolving,
and, accordingly,  the Borrower 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 Administrative Agent or the Borrower, 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,  (B) with respect to Standby  Letters of Credit,  more
         than (1) 364 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 (C) 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 B
         Revolving Loans as set forth in Section 7.11.

         . (a) Each  Letter  of  Credit  shall be  issued  upon the  irrevocable
written  request of the Borrower  received by the Issuing Bank (with a copy sent
by the Borrower to the Administrative  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 Administrative Agent (by telephone
or in  writing)  that the  Administrative  Agent has  received a copy of the L/C
Application  or L/C  Amendment  Application  from the Borrower and, if not, such
Issuing Bank will provide the Administrative  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 Administrative  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  received by such Issuing Bank (with a copy
sent by the  Borrower to the  Administrative  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 Administrative  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 upon the written request of the Borrower received
by the  applicable  Issuing  Bank  (with  a copy  sent  by the  Borrower  to the
Administrative  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 the
Borrower,  but such  Issuing  Bank  shall not have  received  any L/C  Amendment
Application  with  respect to such  renewal or other  written  direction  by the
Borrower with respect thereto,  such Issuing Bank shall nonetheless be permitted
to allow such Letter of Credit to renew,  and the  Borrower and the Banks hereby
authorize such renewal, and,  accordingly,  such Issuing Bank shall be deemed to
have received an L/C Amendment  Application  from the Borrower  requesting  such
renewal.

                  (e) The Issuing  Banks may, at their  election (or as required
by the Administrative 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  Administrative
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.

         . (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 B 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.  The Borrower  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  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 Administrative  Agent and the Administrative 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 on the Honor Date).  Any notice given by an
Issuing Bank or the Administrative 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  Administrative  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 B 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
Administrative  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  Administrative  Agent
will  promptly give notice of the  occurrence of the Honor Date,  but failure of
the  Administrative  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 B 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 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 B 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 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.

         . (a) Upon (and only upon) receipt by the Administrative  Agent for the
account of an Issuing Bank of immediately  available funds from the Borrower (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 Administrative  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
Administrative  Agent will pay to each Bank, in the same funds as those received
by the Administrative  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 Administrative Agent for the account of such Issuing Bank.

                  (b)  If  the  Administrative  Agent  or any  Issuing  Bank  is
required  at any time to  return to the  Borrower,  or to a  trustee,  receiver,
liquidator, custodian, or any official in any Insolvency Proceeding, any portion
of the payments made by the Borrower to the Administrative 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  Administrative  Agent,   forthwith  return  to  the
Administrative  Agent or such  Issuing  Bank the amount of its Pro Rata Share of
any amounts so returned by the  Administrative  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  Administrative  Agent or such Issuing  Bank,  at a
rate per annum equal to the Federal Funds Rate in effect from time to time.

         . (a) Each Bank and the  Borrower  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  hereby  assumes  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  pursuing such rights and remedies as it 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 may have a claim  against an Issuing  Bank,  and an Issuing Bank may be
liable to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to  consequential  or exemplary,  damages suffered by the Borrower which
the Borrower proves 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.

         .  The  obligations  of the  Borrower  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 B 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 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  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 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 or a guarantor.

         . Upon (i) the request of the  Administrative  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.

         . (a) The Borrower  agrees to pay to the  Administrative  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  Administrative  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 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 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.

         . 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.

                                   ARTICLE IV

                     TAXES, YIELD PROTECTION AND ILLEGALITY

         . (a)  Any  and  all  payments  by the  Borrower  to  each  Bank or the
Administrative  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  Administrative  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 Administrative 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  Administrative  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 Administrative 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  Administrative  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
         Administrative 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  Administrative
Agent the original or a certified copy of a receipt  evidencing payment thereof,
or other evidence of payment satisfactory to the Administrative Agent.

                  (e) If the Borrower is required to pay  additional  amounts to
any Bank or the Administrative 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.

         . (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  Administrative
Agent,  any  obligation  of that Bank to make  Eurodollar  Rate  Loans  shall be
suspended until the Bank notifies the Administrative 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 Administrative 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  Administrative  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 Administrative 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.

         . (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
Administrative  Agent), pay to the Administrative  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 Administrative  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.

         . 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.

         . If the  Administrative  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  Administrative  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  Administrative  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.

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

                                    ARTICLE V

                              CONDITIONS PRECEDENT

         . The  effectiveness  of the amendment and  restatement of the Existing
Credit Agreement is subject to the condition that the Administrative  Agent have
received on or before August 4, 1998 all of the following, in form and substance
satisfactory to the  Administrative  Agent and, where provided below, each Bank,
and in sufficient copies for each Bank:

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

                  (b)               [Intentionally Omitted.]

                  (c)               Resolutions; Incumbency.

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

                           (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.

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

                           (i) the articles or certificate of incorporation  and
         the  bylaws of the  General  Partner  and the  Certificate  of  Limited
         Partnership and the 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 as of the
         Restatement Effective Date;

                           (ii)  a  good   standing   and  tax   good   standing
         certificate for the General Partner 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  Administrative  Agent where the General  Partner or the
         Borrower  conducts  significant  business,  in each case as of a recent
         date.

                  (e)               Legal Opinions.

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

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

                  (f) 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
Administrative  Agent to the  extent  invoiced  prior  to or on the  Restatement
Effective  Date,  plus  such  additional  amounts  of  Attorney  Costs  as shall
constitute  the  Administrative  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 Administrative  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.

                  (g)               Certificate.  A certificate signed by a
Responsible Officer, 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,  1998,  no
         event or circumstance that has resulted or could reasonably be expected
         to result in a Material Adverse Effect.

                  (h)               Redemption of Fixed Rate Senior Notes.  
Evidence that the Fixed Rate Senior Notes will be redeemed in full on the 
Restatement Effective Date in accordance with the terms of the 1994
Indenture.

                  (i)              No Material Change. There shall have been no 
Material AdverseEffect between April 30, 1998 and the Restatement Effective Date

                  (j)  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  Administrative  Agent,
shall be satisfactory to the Administrative 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.

                  (l) Issuance of 1998 Fixed Rate Senior  Notes.  Evidence  that
the 1998 Fixed Rate  Senior  Notes shall have been  issued by the  Borrower,  on
terms and conditions  satisfactory to the Administrative Agent, Arranger and the
Banks, in an aggregate amount of $350,000,000.

                  (m)               Repayment of Existing Facility B Term Loans.
Evidence that the existing Facility B Term Loans under the Existing Credit 
Agreement shall have been repaid in full by the Borrower.

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

         . 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:

                  (a) Notice,  Application.  The Administrative 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  Administrative  Agent  shall have  received an L/C  Application  or L/C
Amendment Application, as required under Section 3.02;

                  (b)  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 other than  Section  6.22,  which shall be true and correct in all  material
respects on the Restatement Effective Date); and

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

                  (d)  1998  Note  Purchase   Agreement.   The   incurrence  and
maintenance  of such  Loan or  Letter of  Credit,  as the case may be,  shall be
permitted  under Section 10.1 or Section 10.3, as  applicable,  of the 1998 Note
Purchase  Agreement and the Borrower shall have delivered to the  Administrative
Agent (1) an officer's certificate  demonstrating  compliance with such sections
and (2) in the case of a Loan or Letter of Credit (other than a Loan for working
capital  purposes),  an opinion of counsel to the Borrower and its Subsidiaries,
which counsel shall be satisfactory to the  Administrative  Agent, to the effect
that the  incurrence  and  maintenance  of such  Loan or Letter  of  Credit,  as
applicable,  does not violate any  indenture,  note purchase  agreement or other
credit arrangement of the Borrower or any of its Subsidiaries, and covering such
other matters as may be reasonably requested by the Administrative Agent.

                  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 and the General  Partner  represents  and
warrants to the Administrative Agent and each Bank that:

         .  The General Partner, 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.

         . The  execution,  delivery  and  performance  by the  Borrower and the
General  Partner 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.

         . 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.

         . 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.

         . 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  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).

         . (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, 
except that the Ferrellgas, Inc. Retirement Income Plan has an Unfunded Pension 
Liability in the amount of $921,304, however, the Ferrellgas, Inc.
Retirement Income Plan is not underfunded.

                  (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.

         . 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.

         . 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.

         . 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.

         . (a) The  audited  consolidated  financial  statements  of the General
Partner, the Borrower, the MLP and their respective  Subsidiaries dated July 31,
1997 and the unaudited consolidated financial statements of the General Partner,
the Borrower, the MLP and their respective Subsidiaries dated April 30, 1998, 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, 1998, 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.

         . 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.

         .  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.

         . 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.

           The  Borrower and its  Subsidiaries  own or are licensed or otherwise
have 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.

         . 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.

         . 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.

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

         . 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.

         . 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.

         . The Borrower has provided to the Administrative 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.

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

         . The  Borrower  and its  Subsidiaries  have  reviewed the areas within
their  business and  operations  which could be adversely  affected by, and have
developed or are  developing a program to address on a timely  basis,  the "Year
2000 Problem" (that is, the risk that computer applications used by the Borrower
and  its   Subsidiaries   may  be  unable  to  recognize  and  perform  properly
date-sensitive  functions  involving  certain  dates prior to and any date on or
after December 31, 1999), and have made related  appropriate inquiry of material
suppliers and vendors.  Based on such review and program,  the Borrower believes
that the "Year 2000 Problem" will not have a Material Adverse Effect.

                                   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:

         . The Borrower shall deliver to the  Administrative  Agent, in form and
detail  satisfactory  to the  Administrative  Agent and the  Majority  Banks and
consistent  with the form and detail of  financial  statements  and  projections
provided to the Administrative 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,
1998), 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,  1998),  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,
1998),   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, 1998, 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.

         .  The Borrower shall furnish to the Administrative 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 Administrative Agent and Majority Banks shall require;

                  (c) promptly,  copies of all financial  statements and reports
that the Borrower,  the General Partner,  the MLP or any 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 any
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 any  Subsidiary as the  Administrative  Agent,  at the request of any
Bank, may from time to time request.

         .  The Borrower shall promptly notify the Administrative Agent and eac
 Bank:

                  (a)               of the occurrence of any Default or Event o
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 any  Subsidiary;  (ii) any dispute,
litigation,  investigation,  proceeding or suspension between the Borrower,  the
General Partner,  the MLP or any 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  any
Subsidiary, including pursuant to any applicable Environmental Laws;

                  (c) of any of the following events affecting the Borrower, the
General Partner,  the MLP or any 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.

           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.

         . 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.

         . 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.

         . The  Borrower  and the General  Partner  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
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 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.

         . 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.

         . 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
Administrative  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  Administrative  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.
         . 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.

         . The  Borrower  shall use the proceeds of (a) the Facility A Revolving
Loans for working capital  purposes only, (b) the Facility B Revolving Loans for
working  capital and other general  partnership  purposes and (c) the Facility C
Revolving Loans for Acquisitions and other general partnership purposes, in each
case not in contravention of any Requirement of Law or of any Loan Document.

         ..12              Financial Covenants

                  (a) Leverage Ratio. The Borrower shall maintain as of the last
day of each fiscal  quarter a Leverage Ratio equal to or less than 4.50 to 1.00;
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.  For  purposes of this Section  7.12(a),  (x)
Funded Debt and Synthetic Lease  Obligations  shall be calculated as of the last
day of such fiscal  quarter and (y)  Consolidated  Cash Flow shall be calculated
for the most recently ended four consecutive fiscal quarters; provided, however,
that prior to or  concurrently  with each  delivery of a Compliance  Certificate
pursuant to Section  7.02(b),  the Borrower may elect to calculate  Consolidated
Cash Flow for the most  recently  ended eight  consecutive  fiscal  quarters (in
which case Consolidated Cash Flow shall be divided by two).

                  (b) Interest  Coverage Ratio. The Borrower shall maintain,  as
of the last day of each fiscal  quarter of the  Borrower,  an Interest  Coverage
Ratio for the fiscal  period  consisting  of such  fiscal  quarter and the three
immediately preceding fiscal quarters of at least 2.50 to 1.00.

         . The Borrower  and its  Affiliates  shall  comply with the  Borrower's
trading  position  policy and supply  inventory  position policy as in effect on
January 31, 1998, copies of which have been provided to the Administrative 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 the  trading
position or supply inventory position 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 of such  policies  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.

         ..14              Other General Partner 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 partnership  agreement of the MLP or the 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.

         . 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.

         . The Borrower shall ensure that all of the computer software, computer
firmware,  computer  hardware  (whether general or special  purpose),  and other
similar or related items of automated,  computerized,  and/or software system(s)
that are used or relied on by the Borrower or any  Subsidiary  in the conduct of
its business will not malfunction, will not cease to function, will not generate
incorrect data, and will not produce material incorrect results when processing,
providing and/or receiving  date-related  data in connection with any valid date
in the twentieth and twenty-first  centuries.  From time to time, at the request
of any Bank, the Borrower and its  Subsidiaries  shall provide to such Bank such
updated  information or  documentation  as is requested  regarding the status of
their efforts to address the Year 2000 Problem (as defined in Section 6.23).

                                  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:

         . 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) Liens incurred and financing statements filed or recorded,
in each case 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; provided, that in each case such Lien does not extend
to any other property or asset of the Borrower and its Subsidiaries;

                  (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 Administrative Agent, 
any Issuing Bank and the Banks
relating to the Cash Collateralization of the Borrower's Obligations.

         . 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  Administrative  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.

         ..03              Consolidations and Mergers

                  (a) The Borrower  shall not  consolidate or merge with or into
(whether  or not  the  Borrower  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 (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 Administrative 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 effect thereto,  be
permitted  to incur at least $1.00 of  additional  Indebtedness  pursuant to the
Leverage Ratio test set forth in Section 7.12(a).

                  (b)               Within five days after the Restatement 
Effective Date, Finance Corp. shall be
either dissolved or merged with or into the Borrower (in which case the Borrower
 shall be the surviving Person).

                  (c) The Borrower  shall  deliver to the  Administrative  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
Administrative  Agent stating that the proposed  transaction  complies with this
Agreement.  The  Administrative  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.

         .  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).

         . The Borrower shall not, and shall not permit any of its  Subsidiaries
to,  directly or indirectly,  create,  incur,  issue,  assume,  suffer to exist,
guarantee or otherwise become directly or indirectly  liable with respect to any
Indebtedness  (including Acquired Debt) or any Synthetic Leases 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 and any Subsidiary of the Borrower may create,  incur,  issue,  assume,
suffer to exist,  guarantee or otherwise  become  directly or indirectly  liable
with respect to any  Indebtedness  or any Synthetic Lease to the extent that the
Leverage Ratio is maintained in accordance with Section 7.12(a), both before and
after giving effect to the  incurrence of such  Indebtedness  or such  Synthetic
Lease,  as the case  may be,  and,  provided,  further,  that (x) the  aggregate
principal  amount of (1) all  Capitalized  Lease  Obligations  and all Synthetic
Lease Obligations  (other than Capitalized Lease Obligations and Synthetic Lease
Obligations in respect of Growth-Related  Capital  Expenditures) of the Borrower
and its  Subsidiaries  and (2) all  Indebtedness  for which the Borrower and any
Subsidiary  of the Borrower  become liable in connection  with  Acquisitions  of
retail propane businesses in favor of the sellers of such businesses and secured
by any Lien on any  property of the Borrower or any of its  Subsidiaries,  shall
not exceed  $65,000,000 at any one time outstanding and (y) the principal amount
of any  Indebtedness  for which the Borrower or any  Subsidiary  of the Borrower
becomes liable in connection with  Acquisitions of retail propane  businesses in
favor of the sellers of such  businesses  shall not exceed the fair market value
of the assets so acquired.

         . 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  Administrative  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 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.

         . 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.

         . 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 or the  Documentation  Agent during any period in
which the Arranger or the Documentation  Agent 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 the  Documentation  Agent, or (iii) to make payments of principal or
interest  on  Ineligible  Securities  underwritten  or  privately  placed by the
Arranger  or the  Documentation  Agent and  issued by or for the  benefit of the
Borrower or any Affiliate of the Borrower.

         . 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 Administrative  Agent, Hedging Obligations
entered  into  in  the  ordinary   course  of  business  as  bona  fide  hedging
transactions;

                  (c)               the Guaranties hereunder; and

                  (d)               Guaranty Obligations to the extent not 
prohibited by Section 8.05.

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

         . The aggregate  obligations of the Borrower and its  Subsidiaries  for
the  payment  of rent  for any  property  under  lease  or  agreement  to  lease
(excluding  obligations  of the  Borrower  and its  Subsidiaries  under  or with
respect to Synthetic Leases) for any fiscal year shall not exceed the greater of
(a) $25,000,000 or (b) 20% of (i) Consolidated Cash Flow of the Borrower for the
most  recently  ended eight  consecutive  fiscal  quarters  divided by (ii) two;
provided,  however,  that any  payment of rent for any  property  under lease or
agreement to lease for a term of less than one year (after  giving effect to all
automatic  renewals)  shall not be subject to this Section 8.11. For purposes of
this Section 8.11,  the  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 businesses or assets that
have been made by the Borrower or any of its  Subsidiaries  during the reference
period or  subsequent  to such  reference  period and on or prior to the date of
calculation of Consolidated Cash Flow 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.

         . 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  Interests) 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 1998 Fixed Rate Senior Notes (all  payments and other  actions
set forth in clauses (i) through  (iv) above being  collectively  referred to as
"Restricted  Payments"),  except  to the  extent  that,  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 Administrative
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 (x)  Available  Cash of the Borrower for 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  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 (1)  Consolidated  Cash  Flow  of  the  Borrower  and  its
Subsidiaries  for the  period  from and  after  October  31,  1996  through  and
including the last day of the fiscal  quarter ending  immediately  preceding the
date of the proposed Restricted Payment (the "Determination  Period"), minus (2)
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  and net of  capital  asset  sales  in the
ordinary  course of business) made by the Borrower and its  Subsidiaries  during
the  Determination  Period plus the aggregate of all other  Restricted  Payments
(other than 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 October 31, 1996 through and including the date
of the proposed Restricted Payment,  plus (3) $30,000,000,  plus (4) the excess,
if any, of consolidated  working capital of the Borrower and its Subsidiaries at
July  31,  1996  over  consolidated  working  capital  of the  Borrower  and its
Subsidiaries at the end of the fiscal year immediately preceding the date of the
proposed  Restricted  Payment,  minus (5) the excess,  if any,  of  consolidated
working  capital of the Borrower and its  Subsidiaries  at the end of the fiscal
year  immediately  preceding  the date of the proposed  Restricted  Payment over
consolidated  working  capital of the Borrower and its  Subsidiaries at July 31,
1996. For purposes of this subsection  8.12(d),  the 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
businesses  or  assets  that  have  been  made  by  such  Person  or  any of its
Subsidiaries  during the reference period or subsequent to such reference period
and on or prior to the date of  calculation of  Consolidated  Cash Flow 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.

                  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  Administrative   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.

         . 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.

         . 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 1998 Note Purchase Agreement and the 1998
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.

         . 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.

         . 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.

         . 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 Leverage Ratio test set
forth in Section 7.12(a) 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.

         8.18              [Intentionally Omitted]

         . 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, the Borrower or any Subsidiary of
the Borrower,  the MLP Senior  Notes,  the 1996  Indenture,  the 1998 Fixed Rate
Senior Notes or the 1998 Note  Purchase  Agreement 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 Administrative 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 Administrative Agent and the Majority Banks.

         . 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.

         .  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 Administrative  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.

         .  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
Administrative  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 Administrative  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

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

                  (a) Non-Payment.  The Borrower or the General Partner 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

                  (b) 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

                  (c)               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,
7.15, 7.16 or in any Section in Article VIII; or

                  (d) 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
Administrative Agent or any Bank; or

                  (e)  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

                  (f) 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

                  (g) 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

                  (h) 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.

                  (i) 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

                  (j) 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

                  (k) 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

                  (l)               Adverse Change.  There occurs a Material 
Adverse Effect; or

                  (m) 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 1998 Note  Purchase
Agreement 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

                  (n) 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.

         .  If any Event of Default occurs, the Administrative 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  Administrative  Agent,  any Issuing
Bank or any Bank.

         . 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.

         . 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  Administrative  Agent its audited annual or unaudited
quarterly financial  statements in respect of such fiscal period reflecting such
Charge as taken.

                                    ARTICLE X

                            THE ADMINISTRATIVE AGENT

         . (a)  Each of the  Banks  and each  Issuing  Bank  hereby  irrevocably
appoints, designates and authorizes the Administrative 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  Administrative  Agent  shall not have any duties or
responsibilities,  except  those  expressly  set  forth  herein,  nor  shall the
Administrative  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
Administrative   Agent.  The  Documentation   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 Administrative 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 Administrative 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  "Administrative  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.

         . The  Administrative  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  Administrative  Agent  shall  not be
responsible  for the  negligence or misconduct of any agent or  attorney-in-fact
that it selects with reasonable care.

         . 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 Administrative 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.

         . (a) The Administrative  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 Administrative  Agent or applicable  Issuing Bank. The Administrative  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 Administrative 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  Administrative  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.

         . The  Administrative  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  Administrative   Agent  for  the  account  of  the  Banks,  unless  the
Administrative  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
Administrative  Agent will notify the Banks of its  receipt of any such  notice.
The Administrative  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 Administrative  Agent
has received any such request,  the  Administrative  Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such  Default or Event of Default as it shall deem  advisable  or in the best
interest of the Banks.

         . 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 Administrative  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  Administrative  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  Administrative  Agent or any
Issuing Bank as specified on Schedule 10.06,  neither the  Administrative  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  Administrative  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.

         . 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  Administrative  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  Administrative  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 Administrative Agent or any Issuing Bank.

         . 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  Administrative  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  Administrative  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
Administrative Agent or an Issuing Bank.

         . The  Administrative  Agent may,  and at the  request of the  Majority
Banks shall,  resign as Administrative  Agent upon 30 days' notice to the Banks.
If the  Administrative  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 Administrative Agent, the Administrative 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
Administrative  Agent  and the  term  "Administrative  Agent"  shall  mean  such
successor agent and the retiring Administrative Agent's appointment,  powers and
duties  as  Administrative  Agent  shall  be  terminated.   After  any  retiring
Administrative  Agent's  resignation  hereunder  as  Administrative  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
Administrative  Agent under this  Agreement.  If no successor agent has accepted
appointment  as  Administrative  Agent by the date which is 30 days  following a
retiring   Administrative   Agent's   notice  of   resignation,   the   retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the  Banks  shall  perform  all of the  duties of the  Administrative  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 Administrative  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.

         . (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  Administrative  Agent,  to deliver to the
Administrative 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 (or any  successor  forms)
         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 (or
         any  successor  form)  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 (or any successor form); 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  Administrative  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  Administrative  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  Administrative  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  Administrative  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 Administrative 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  Administrative  Agent,
then the  Administrative  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  Administrative
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  Administrative  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 Administrative Agent fully for all amounts paid, directly or indirectly,  by
the Administrative Agent as tax or otherwise,  including penalties and interest,
and including any taxes imposed by any  jurisdiction  on the amounts  payable to
the  Administrative  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 Administrative Agent.

                                   ARTICLE XI

                                  MISCELLANEOUS

         . 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  Administrative
Agent at the  written  request  of the  Majority  Banks)  and the  Borrower  and
acknowledged by the  Administrative  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  and the
General  Partner and  acknowledged  by the  Administrative  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  Administrative
Agent in addition to the  Majority  Banks or all the Banks,  as the case may be,
affect the rights or duties of the Administrative  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.

         . (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  Administrative  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 Administrative 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 Administrative 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  Administrative  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 Administrative 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  Administrative
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  Administrative  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 Administrative Agent and the Banks to
receive  written  confirmation  of any  telephonic  or  facsimile  notice or the
receipt by the Administrative  Agent and the Banks of a confirmation which is at
variance with the terms understood by the Administrative  Agent and the Banks to
be contained in the telephonic or facsimile notice.

         . No failure to exercise and no delay in exercising, on the part of the
Administrative  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.

         .  The Borrower shall:s and Expenses

                  (a) whether or not the  transactions  contemplated  hereby are
consummated,  pay or reimburse BofA (including in its capacity as Administrative
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 Administrative 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 Administrative  Agent and an Issuing Bank) and the
Arranger with respect thereto; and

                  (b) pay or reimburse the  Administrative  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).

         . 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  Administrative  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
actual or proposed 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.

         . To the extent that the Borrower makes a payment to the Administrative
Agent or the Banks,  or the  Administrative  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
Administrative  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  Administrative
Agent upon demand its pro rata share of any amount so  recovered  from or repaid
by the Administrative Agent.

         . 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
Administrative  Agent and each Bank.  Any  attempted or purported  assignment in
contravention of the preceding sentence shall be null and void.

           (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
Administrative  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
Administrative 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 Commitment  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  Administrative  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 Administrative Agent by
such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered
to the Borrower and the Administrative 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  has  paid to the
Administrative Agent a processing fee in the amount of $3,500.

                  (b) From and  after  the date  that the  Administrative  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  Administrative  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  Administrative  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 arising
therefrom.  The Revolving  Loan  Commitments  allocated to each  Assignee  shall
reduce such Revolving  Loan  Commitments of the assigning Bank pro tanto and the
Administrative  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 Administrative 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  Administrative  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 Administrative  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.

         . 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 Administrative  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  Administrative  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.

           Each Bank  shall  notify the  Administrative  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 Administrative Agent shall reasonably request.

         . (a) On or prior to the Restatement Effective Date, the Administrative
Agent  shall  notify  each Bank of the amount  required to be paid by or to such
Bank so that the Facility C Revolving Loans held by the Banks on the Restatement
Effective Date (before giving effect to any new Facility C Revolving  Loans made
on such  date)  shall  be held by each  Bank  pro  rata in  accordance  with the
Facility C Commitments of the Banks set forth on Schedule 2.01.  Each Bank which
is required to reduce the amount of Facility C Revolving  Loans held by it (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 Bank which is required to increase the amount
of Facility C Loans held by it (each such Bank, an "Increasing  Bank"), and each
Increasing Bank shall  irrevocably  acquire from the Decreasing Banks, a portion
of the  principal  amount of the Facility C Revolving  Loans of each  Decreasing
Bank  (collectively,  the "Acquired  Portion")  outstanding  on the  Restatement
Effective Date (before giving effect to any new Facility C Revolving  Loans made
on such  date) in an amount  such that the  principal  amount of the  Facility C
Revolving  Loans held by each Increasing Bank and each Decreasing Bank as of the
Restatement  Effective  Date shall be held in  accordance  with each such Bank's
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  Administrative  Agent for the  account  of the
Decreasing  Banks of an aggregate  amount equal to the Acquired  Portion,  which
amount  shall be  allocated  and paid by the  Administrative  Agent at or before
12:00  p.m.  San  Francisco  time  on  the  Restatement  Effective  Date  to the
Decreasing Banks pro rata based upon the respective  reductions in the principal
amount of the Facility C Revolving  Loans held by such Banks on the  Restatement
Effective Date (before giving effect to any new Facility C Revolving  Loans made
on such date). Each of the  Administrative  Agent and the Banks shall adjust its
records accordingly to reflect the payment of the Acquired Portion.  The payment
to be made in respect of the Acquired  Portion  shall be made by the  Increasing
Banks to the Administrative  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 C Revolving Loans held by such
Banks  on the  Restatement  Effective  Date  (before  giving  effect  to any new
Facility C Revolving  Loans made on such date).  For purposes of this subsection
11.11(a),  "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.

                  (b)  To the  extent  any of the  Facility  C  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.

         .  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.  Transmission by telecopier of an executed  counterpart
of this Agreement  shall be deemed to constitute due and sufficient  delivery of
such  counterpart.  The parties  hereto shall  deliver to each other an original
counterpart  of this  Agreement  promptly  after  the  delivery  by  telecopier;
provided,  however,  that the  failure by any party to so  deliver  an  original
counterpart  shall not affect the sufficiency of a telecopy of such  counterpart
(and the fact that such telecopy  constitutes the due and sufficient delivery of
such counterpart), as provided above.

         . 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.

         . This  Agreement is made and entered into for the sole  protection and
legal  benefit of the  Borrower,  the Banks,  the  Administrative  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.

         . (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  ADMINISTRATIVE  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,  THE  ADMINISTRATIVE  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,  THE  ADMINISTRATIVE  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,  THE ADMINISTRATIVE  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.

         . THE BORROWER,  THE GENERAL PARTNER,  THE BANKS AND THE ADMINISTRATIVE
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, THE BANKS AND THE ADMINISTRATIVE 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.

         . 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,
the Banks and the  Administrative  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.

<PAGE>





                  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.
         Its:     General Partner


         By:      /s/      Danley K. Sheldon
         Name:    Danley K. Sheldon
         Title:   President


         FERRELLGAS, INC.


         By:      /s/      Danley K. Sheldon
         Name:    Danley K. Sheldon
         Title:   President


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

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


         BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as 
         Administrative Agent


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





                       [SIGNATURES CONTINUED ON NEXT PAGE]


<PAGE>


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


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




































                       [SIGNATURES CONTINUED ON NEXT PAGE]



<PAGE>


         NATIONSBANK, N.A.,
         as a Bank


         By:      /s/      Linda J. Laurence
         Name:    Linda J. Laurence
         Title:   Vice President

































                       [SIGNATURES CONTINUED ON NEXT PAGE]





<PAGE>


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


         B:       /s/      Charles D. Kirkham
         Name:    Charles D. Kirkham
         Title:   Vice President

































                       [SIGNATURES CONTINUED ON NEXT PAGE]





<PAGE>


                         THE BANK OF NOVA SCOTIA,
                         as a Bank


                         By:        /s/     F. C. H. Ashby
                         Name:      F. C. H. Ashby
                         Title:     Senior Manager Loan Operations

































                       [SIGNATURES CONTINUED ON NEXT PAGE]





<PAGE>


                         PARIBAS, as a Bank


                         By:        /s/     Timothy A. Donnon
                         Name:      Timothy A. Donnon
                         Title:     Managing Director


                         By:        /s/     Rosine K. Matthews
                         Name:      Rosine K. Matthews
                         Title:     Vice President






























                       [SIGNATURES CONTINUED ON NEXT PAGE]





<PAGE>


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


                        By:/s/      Randall Osterberg
                        Name:       Randall Osterberg
                        Title:      Vice President






























                       [SIGNATURES CONTINUED ON NEXT PAGE]





<PAGE>


                  THE BANK OF NEW YORK, as a Bank


                  By:      /s/      William O'Daly
                  Name:    William O'Daly
                  Title:   Vice President






































<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                                                         <C>
ARTICLE I            DEFINITIONS                                                            2
1.01                 Certain Defined Terms                                                  2
1.02                 Other Interpretive Provisions                                          26
1.03                 Accounting Principles                                                  27
ARTICLE II           THE CREDITS                                                            27
2.01                 Amounts and Terms of Revolving Loan Commitments                        27
2.02                 Loan Accounts                                                          29
2.03                 Procedure for Borrowing                                                29
2.04                 Conversion and Continuation Elections                                  30
2.05                 Voluntary Termination or Reduction of Revolving Loan Commitments       31
2.06                 Optional Prepayments                                                   32
2.07                 Mandatory Prepayments of Loans; Mandatory Commitment Reductions        32
2.08                 Repayment                                                              33
2.09                 Interest                                                               34
2.10                 Fees                                                                   34
2.11                 Computation of Fees and Interest                                       35
2.12                 Payments by the Borrower                                               35
2.13                 Payments by the Banks to the Administrative Agent                      36
2.14                 Sharing of Payments, Etc.                                              37
2.15                 Discretionary Swingline Loans                                          37
ARTICLE III          THE LETTERS OF CREDIT                                                  38
3.01                 The Letter of Credit Subfacility                                       38
3.02                 Issuance, Amendment and Renewal of Letters of Credit                   40
3.03                 Existing Letters of Credit; Risk Participations, Drawings and          42
                     Reimbursements
3.04                 Repayment of Participations                                            43
3.05                 Role of the Issuing Banks                                              44
3.06                 Obligations Absolute                                                   44
3.07                 Cash Collateral Pledge                                                 45
3.08                 Letter of Credit Fees                                                  46
3.09                 Uniform Customs and Practice                                           46
ARTICLE IV           TAXES, YIELD PROTECTION AND ILLEGALITY                                 46
4.01                 Taxes                                                                  46
4.02                 Illegality                                                             47
4.03                 Increased Costs and Reduction of Return                                48
4.04                 Funding Losses                                                         49
4.05                 Inability to Determine Rates                                           49
4.06                 Survival                                                               49
ARTICLE V            CONDITIONS PRECEDENT                                                   50
5.01                 Conditions to Effectiveness                                            50
5.02                 Conditions to All Credit Extensions                                    52
ARTICLE VI           REPRESENTATIONS AND WARRANTIES                                         53
6.01                 Corporate or Partnership Existence and Power                           53
6.02                 Corporate or Partnership Authorization; No Contravention               53
6.03                 Governmental Authorization                                             53
6.04                 Binding Effect                                                         54
6.05                 Litigation                                                             54
6.06                 No Default                                                             54
6.07                 ERISA Compliance                                                       54
6.08                 Use of Proceeds; Margin Regulations                                    55
6.09                 Title to Properties                                                    55
6.10                 Taxes                                                                  55
6.11                 Financial Condition                                                    56
6.12                 Environmental Matters                                                  56
6.13                 Regulated Entities                                                     56
6.14                 No Burdensome Restrictions                                             56
6.15                 Copyrights, Patents, Trademarks and Licenses, etc.                     56
6.16                 Subsidiaries and Affiliates                                            57
6.17                 Insurance                                                              57
6.18                 Tax Status                                                             57
6.19                 Full Disclosure                                                        57
6.20                 Fixed Price Supply Contracts                                           57
6.21                 Trading Policies                                                       57
6.22                 Redemption of Fixed Rate Senior Notes.                                 57
6.23                 Year 2000                                                              57
ARTICLE VII          AFFIRMATIVE COVENANTS                                                  58
7.01                 Financial Statements                                                   58
7.02                 Certificates; Other Information                                        59
7.03                 Notices                                                                60
7.04                 Preservation of Corporate or Partnership Existence, Etc.               61
7.05                 Maintenance of Property                                                61
7.06                 Insurance                                                              61
7.07                 Payment of Obligations                                                 61
7.08                 Compliance with Laws                                                   62
7.09                 Inspection of Property and Books and Records                           62
7.10                 Environmental Laws                                                     62
7.11                 Use of Proceeds                                                        62
7.12                 Financial Covenants                                                    62
7.13                 Trading Policies                                                       63
7.14                 Other General Partner Obligations                                      63
7.15                 Monetary Judgments                                                     64
7.16                 Year 2000 Compliance                                                   64
ARTICLE VIII         NEGATIVE COVENANTS                                                     64
8.01                 Limitation on Liens                                                    65
8.02                 Asset Sales                                                            66
8.03                 Consolidations and Mergers                                             67
8.04                 Acquisitions                                                           68
8.05                 Limitation on Indebtedness                                             68
8.06                 Transactions with Affiliates                                           69
8.07                 Use of Proceeds                                                        69
8.08                 Use of Proceeds - Ineligible Securities                                70
8.09                 Contingent Obligations                                                 70
8.10                 Joint Ventures                                                         70
8.11                 Lease Obligations                                                      70
8.12                 Restricted Payments                                                    70
8.13                 Prepayments of Subordinated Indebtedness                               72
8.14                 Dividend and Other Payment Restrictions Affecting Subsidiaries         73
8.15                 Change in Business                                                     73
8.16                 Accounting Changes                                                     73
8.17                 Limitation on Sale and Leaseback Transactions                          73
8.19                 Amendments of Organization Documents or 1996 Indenture or 1998 Note    74
                     Purchase Agreement
8.20                 Fixed Price Supply Contracts                                           74
8.21                 Operations through Subsidiaries                                        74
8.22                 Operations of MLP                                                      74
ARTICLE IX           EVENTS OF DEFAULT                                                      75
9.01                 Event of Default                                                       75
9.02                 Remedies                                                               77
9.03                 Rights Not Exclusive                                                   78
9.04                 Certain Financial Covenant Defaults                                    78
ARTICLE X            THE ADMINISTRATIVE AGENT                                               78
10.01                Appointment and Authorization                                          78
10.02                Delegation of Duties                                                   79
10.03                Liability of Administrative Agent and Issuing Banks                    79
10.04                Reliance by Administrative Agent and Issuing Banks                     79
10.05                Notice of Default                                                      80
10.06                Credit Decision                                                        80
10.07                Indemnification                                                        81
10.08                Administrative Agent in Individual Capacity                            81
10.09                Successor Administrative Agent                                         81
10.10                Withholding Tax                                                        82
ARTICLE XI           MISCELLANEOUS                                                          83
11.01                Amendments and Waivers                                                 83
11.02                Notices                                                                84
11.03                No Waiver; Cumulative Remedies                                         85
11.04                Costs and Expenses                                                     85
11.05                Indemnity                                                              85
11.06                Payments Set Aside                                                     86
11.07                Successors and Assigns                                                 86
11.08                Assignments, Participations, Etc.                                      86
11.09                Set-off                                                                88
11.10                Notification of Addresses, Lending Offices, Etc.                       89
11.11                Assignment of Facility C Revolving Loans                               89
11.12                Counterparts                                                           90
11.13                Severability                                                           90
11.14                No Third Parties Benefited                                             90
11.15                Governing Law and Jurisdiction                                         90
11.16                Waiver of Jury Trial                                                   91
11.17                Entire Agreement                                                       91

</TABLE>

<PAGE>


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