Document:

FERRELLGAS, L.P.

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

                             NOTE PURCHASE AGREEMENT

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

                          DATED AS OF FEBRUARY 1, 2000

        Re: $21,000,000 8.68% Senior Notes, Series A, due August 1, 2006
          $90,000,000 8.78% Senior Notes, Series B, due August 1, 2007
          $73,000,000 8.87% Senior Notes, Series C, due August 1, 2009

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                                TABLE OF CONTENTS

SECTION                                                HEADING                                                PAGE

<S>     <C>                                                                                                      <C>
SECTION 1.                 AUTHORIZATION OF NOTES.................................................................1

SECTION 2.                 SALE AND PURCHASE OF NOTES.............................................................1

SECTION 3.                 CLOSING................................................................................2

SECTION 4.                 CONDITIONS TO CLOSING..................................................................2

       Section 4.1.        Representations and Warranties.........................................................2
       Section 4.2.        Performance; No Default................................................................2
       Section 4.3.        Compliance Certificates................................................................3
       Section 4.4.        Opinions of Counsel....................................................................3
       Section 4.5.        Purchase Permitted by Applicable Law, Etc..............................................3
       Section 4.6.        Related Transactions...................................................................3
       Section 4.7.        Payment of Special Counsel Fees........................................................3
       Section 4.8.        Private Placement Numbers..............................................................3
       Section 4.9.        Changes in Structure...................................................................3
       Section 4.10.       Rating.................................................................................3
       Section 4.11.       Proceedings and Documents..............................................................3

SECTION 5.                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................3

       Section 5.1.        Organization; Power and Authority; Ownership...........................................3
       Section 5.2.        Authorization, Etc.....................................................................3
       Section 5.3.        Disclosure.............................................................................3
       Section 5.4.        Organization and Ownership of Shares of Subsidiaries; Affiliates.......................3
       Section 5.5.        Financial Statements...................................................................3
       Section 5.6.        Compliance with Laws, Other Instruments, Etc...........................................3
       Section 5.7.        Governmental Authorizations, Etc.......................................................3
       Section 5.8.        Litigation; Observance of Agreements, Statutes and Orders..............................3
       Section 5.9.        Taxes..................................................................................3
       Section 5.10.       Title to Property; Leases..............................................................3
       Section 5.11.       Licenses, Permits, Etc.................................................................3
       Section 5.12.       Compliance with ERISA..................................................................3
       Section 5.13.       Private Offering by the Company........................................................3
       Section 5.14.       Use of Proceeds; Margin Regulations....................................................3
       Section 5.15.       Existing Indebtedness; Future Liens....................................................3
       Section 5.16.       Foreign Assets Control Regulations, Etc................................................3
       Section 5.17.       Status under Certain Statutes..........................................................3
       Section 5.18.       Environmental Matters..................................................................3

SECTION 6.                 REPRESENTATIONS OF THE PURCHASER.......................................................3

       Section 6.1.        Purchase for Investment................................................................3
       Section 6.2.        Source of Funds........................................................................3

SECTION 7.                 INFORMATION AS TO COMPANY; STATUS OF SUBSIDIARIES......................................3

       Section 7.1.        Financial and Business Information.....................................................3
       Section 7.2.        Officer's Certificate..................................................................3
       Section 7.3.        Inspection.............................................................................3
       Section 7.4.        Change in Status of Subsidiaries.......................................................3

SECTION 8.                 MATURITY; PREPAYMENT OF THE NOTES......................................................3

       Section 8.1.        Prepayments............................................................................3
       Section 8.2.        Optional Prepayments with Make-Whole Amount............................................3
       Section 8.3.        Allocation of Partial Prepayments......................................................3
       Section 8.4.        Maturity; Surrender, Etc...............................................................3
       Section 8.5.        Purchase of Notes......................................................................3
       Section 8.6.        Make-Whole Amount......................................................................3

SECTION 9.                 AFFIRMATIVE COVENANTS..................................................................3

       Section 9.1.        Compliance with Law....................................................................3
       Section 9.2.        Insurance..............................................................................3
       Section 9.3.        Maintenance of Properties..............................................................3
       Section 9.4.        Payment of Taxes.......................................................................3
       Section 9.5.        Partnership Existence, Etc.............................................................3
       Section 9.6.        Ranking................................................................................3

SECTION 10.                NEGATIVE COVENANTS.....................................................................3

       Section 10.1.       Incurrence of Debt.....................................................................3
       Section 10.2.       Guaranty of MLP Notes..................................................................3
       Section 10.3.       Restricted Subsidiary Debt.............................................................3
       Section 10.4.       Liens..................................................................................3
       Section 10.5.       Restricted Payments....................................................................3
       Section 10.6.       Restrictions on Dividends of Subsidiaries, Etc.........................................3
       Section 10.7.       Mergers and Consolidations.............................................................3
       Section 10.8.       Sale of Assets; Sale of Stock..........................................................3
       Section 10.9.       Nature of Business.....................................................................3
       Section 10.10.      Transactions with Affiliates...........................................................3
       Section 10.11.      Certain Refinancings...................................................................3

SECTION 11.                EVENTS OF DEFAULT......................................................................3

SECTION 12.                REMEDIES ON DEFAULT, ETC...............................................................3

       Section 12.1.       Acceleration...........................................................................3
       Section 12.2.       Other Remedies.........................................................................3
       Section 12.3.       Rescission.............................................................................3
       Section 12.4.       No Waivers or Election of Remedies, Expenses, Etc......................................3

SECTION 13.                REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................................3

       Section 13.1.       Registration of Notes..................................................................3
       Section 13.2.       Transfer and Exchange of Notes.........................................................3
       Section 13.3.       Replacement of Notes...................................................................3

SECTION 14.                PAYMENTS ON NOTES......................................................................3

       Section 14.1.       Place of Payment.......................................................................3
       Section 14.2.       Home Office Payment....................................................................3

SECTION 15.                EXPENSES, ETC..........................................................................3

       Section 15.1.       Transaction Expenses...................................................................3
       Section 15.2.       Survival...............................................................................3

SECTION 16.                SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...........................3

SECTION 17.                AMENDMENT AND WAIVER...................................................................3

       Section 17.1.       Requirements...........................................................................3
       Section 17.2.       Solicitation of Holders of Notes.......................................................3
       Section 17.3.       Binding Effect, Etc....................................................................3
       Section 17.4.       Notes Held by Company, Etc.............................................................3

SECTION 18.                NOTICES................................................................................3

SECTION 19.                REPRODUCTION OF DOCUMENTS..............................................................3

SECTION 20.                CONFIDENTIAL INFORMATION...............................................................3

SECTION 21.                SUBSTITUTION OF PURCHASER..............................................................3

SECTION 22.                MISCELLANEOUS..........................................................................3

       Section 22.1.       Successors and Assigns.................................................................3
       Section 22.2.       Payments Due on Non-Business Days......................................................3
       Section 22.3.       Severability...........................................................................3
       Section 22.4.       Construction...........................................................................3
       Section 22.5.       Counterparts...........................................................................3
       Section 22.6.       Governing Law..........................................................................3

Signatures........................................................................................................3

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SCHEDULE A                 --     INFORMATION RELATING TO PURCHASERs

SCHEDULE B                 --     DEFINED TERMs

SCHEDULE 5.1               --     Ownership of Company

SCHEDULE 5.3               --     Disclosure Materials

SCHEDULE 5.4              --     Subsidiaries of the Company and Ownership of
                                 Subsidiary Equity Interest

SCHEDULE 5.5               --     Financial Statements

SCHEDULE 5.11              --     Patents, etc.

SCHEDULE 5.14              --     Use of Proceeds

SCHEDULE 5.15              --     Existing Indebtedness and Liens

EXHIBIT 1-A                --     Form of Series A Note

EXHIBIT 1-B                --     Form of Series B Note

EXHIBIT 1-C                --     Form of Series C Note

EXHIBIT 4.4(a)            --     Form of Opinion of Special Counsel for the
                                 Company

EXHIBIT 4.4(b)            --     Form of Opinion of Special Counsel for the
                                 Purchasers

EXHIBIT 10.1              --     Subordination Provisions Applicable to
                                 Subordinated Debt

<PAGE>

                                FERRELLGAS, L.P.
                                One Liberty Plaza
                             Liberty, Missouri 64068

          $21,000,000 8.68% Senior Notes, Series A, due August 1, 2006
          $90,000,000 8.78% Senior Notes, Series B, due August 1, 2007
          $73,000,000 8.87% Senior Notes, Series C, due August 1, 2009

TO       EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:

         FERRELLGAS,  L.P.,  a Delaware  limited  partnership  (the  "Company"),
agrees with the Purchasers listed in the attached Schedule A (the  "Purchasers")
as follows:

SECTION 1.           AUTHORIZATION OF NOTES.

         The Company will authorize the issue and sale of $184,000,000 aggregate
principal  amount of its Senior  Notes,  comprised of  $21,000,000  8.68% Senior
Notes,  Series A, due August 1, 2006 (the "Series A Notes"),  $90,000,000  8.78%
Senior Notes,  Series B, due August 1, 2007 (the "Series B Notes"),  $73,000,000
8.87% Senior  Notes,  Series C, due August 1, 2009 (the "Series C Notes")  (said
Series A Notes,  Series B Notes and  Series C Notes  being  herein  collectively
called the "Notes",  such term to include any such notes issued in  substitution
therefor pursuant to Section 13 of this Agreement (as hereinafter defined)). The
Series A, B and C Notes shall be  substantially  in the respective forms set out
in  Exhibit  1, in each case  with such  changes  therefrom,  if any,  as may be
approved by each Purchaser and the Company.  Certain  capitalized  terms used in
this  Agreement  are defined in Schedule B;  references  to a  "Schedule"  or an
"Exhibit" are, unless otherwise specified,  to a Schedule or an Exhibit attached
to this Agreement.

SECTION 2.           SALE AND PURCHASE OF NOTES.

         Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each  Purchaser  and each  Purchaser  will  purchase  from the
Company, at the Closing provided for in Section 3, Notes in the principal amount
and of the series specified  opposite such Purchaser's name in Schedule A at the
purchase price of 100% of the principal amount thereof.  The obligations of each
Purchaser  hereunder are several and not joint  obligations  and each  Purchaser
shall have no obligation  and no liability to any Person for the  performance or
nonperformance by any other Purchaser hereunder.

SECTION 3.           CLOSING.

         The sale and purchase of the Notes to be  purchased  by each  Purchaser
shall  occur at the  offices of Chapman  and  Cutler,  111 West  Monroe  Street,
Chicago, Illinois 60603 at 10:00 A.M. Chicago time, at a closing (the "Closing")
on February  28, 2000 or such other  Business  Day prior to February 29, 2000 as
may be designated by at least five  Business  Days' prior written  notice to the
Purchasers.  At the Closing the Company will deliver to each Purchaser the Notes
of any such series to be  purchased  by such  Purchaser  in the form of a single
Note of each series to be purchased by such Purchaser (or such greater number of
Notes of any such series in denominations of at least $100,000 as such Purchaser
may request)  dated the date of the Closing and  registered in such  Purchaser's
name (or in the name of such  Purchaser's  nominee),  against  delivery  by such
Purchaser  to the  Company or its order of  immediately  available  funds in the
amount of the purchase price therefor by wire transfer of immediately  available
funds for the account of the Company to Wells Fargo Bank, (San  Francisco,  CA),
as cashiering agent, to account  #4518-054085 ABA #121000248.  If at the Closing
the Company shall fail to tender such Notes to any  Purchaser as provided  above
in this  Section 3, or any of the  conditions  specified  in Section 4 shall not
have been fulfilled to any Purchaser's  satisfaction,  such Purchaser  shall, at
such Purchaser's  election,  be relieved of all further  obligations  under this
Agreement,  without thereby waiving any rights such Purchaser may have by reason
of such failure or such nonfulfillment.

SECTION 4.           CONDITIONS TO CLOSING.

         The  obligation of each  Purchaser to purchase and pay for the Notes to
be sold to such  Purchaser at the Closing is subject to the  fulfillment to such
Purchaser's  satisfaction,  prior  to  or  at  the  Closing,  of  the  following
conditions:

         Section 4.1.    Representations  and Warranties.  The representations
and warranties of the Company in this Agreement shall be
correct when made and at the time of the Closing.

         Section 4.2. Performance;  No Default. The Company shall have performed
and complied with all  agreements  and  conditions  contained in this  Agreement
required to be performed or complied with by it prior to or at the Closing,  and
after giving effect to the issue and sale of the Notes (and the  application  of
the proceeds  thereof as  contemplated by Schedule 5.14), no Default or Event of
Default  shall have  occurred  and be  continuing.  Neither  the Company nor any
Subsidiary  shall  have  entered  into  any  transaction  since  the date of the
Memorandum that would have been prohibited by Section 10 hereof had such Section
applied since such date.

         Section 4.3.    Compliance Certificates.

                   (a) Officer's  Certificate.  The Company shall have delivered
         to such  Purchaser  an  Officer's  Certificate,  dated  the date of the
         Closing,  certifying that the conditions specified in Sections 4.1, 4.2
         and 4.9 have been fulfilled.

                   (b) Secretary's  Certificate.  The General Partner shall have
         delivered  to  such  Purchaser  a  certificate  certifying  as  to  the
         resolutions  attached  thereto  and other  proceedings  relating to the
         authorization, execution and delivery of the Notes and this Agreement.

                   (c) ERISA Certificate.  If such Purchaser shall have made the
         disclosures  referred to in Section 6.2(b),  (c) or (e), such Purchaser
         shall have received the certificate  from the Company  described in the
         last paragraph of Section 6.2 and such certificate shall state that (i)
         the  Company  is  neither a "party  in  interest"  nor a  "disqualified
         person" (as defined in Section 4975(e)(2) of the Code), with respect to
         any plan  identified  pursuant  to  Section  6.2(b) or (e) or (ii) with
         respect to any plan, identified pursuant to Section 6.2(c), neither the
         Company nor any  "affiliate"  (as  defined in Section  V(c) of the QPAM
         Exemption)  has, at such time or during the  immediately  preceding one
         year,  exercised  the  authority  to appoint or  terminate  the QPAM as
         manager of the assets of any plan  identified  in writing  pursuant  to
         Section  6.2(c) or to  negotiate  the terms of said  QPAM's  management
         agreement on behalf of any such identified plans.

         Section 4.4.  Opinions of Counsel.  Such Purchaser  shall have received
opinions in form and substance satisfactory to such Purchaser, dated the date of
the Closing (a) from  Bracewell &  Patterson,  L.L.P.,  special  counsel for the
Company,  covering  the matters set forth in Exhibit  4.4(a) and  covering  such
other matters incident to the transactions contemplated hereby as such Purchaser
or such  Purchaser's  counsel may  reasonably  request  (and the Company  hereby
instructs  its counsel to deliver such opinion to such  Purchaser)  and (b) from
Chapman and Cutler,  the  Purchasers'  special  counsel in connection  with such
transactions, substantially in the form set forth in Exhibit 4.4(b) and covering
such  other  matters  incident  to  such  transactions  as  such  Purchaser  may
reasonably request.

         Section 4.5. Purchase  Permitted by Applicable Law, Etc. On the date of
the  Closing  each  purchase  of Notes  shall (a) be  permitted  by the laws and
regulations of each  jurisdiction  to which each  Purchaser is subject,  without
recourse to provisions  (such as Section  1405(a)(8)  of the New York  Insurance
Law) permitting limited  investments by insurance  companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation  (including,  without limitation,  Regulation T, U or X of the
Board of  Governors  of the  Federal  Reserve  System)  and (c) not  subject any
Purchaser to any tax,  penalty or liability  under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by any Purchaser,  such Purchaser  shall have received an Officer's
Certificate  certifying  as to  such  matters  of fact  as  such  Purchaser  may
reasonably  specify to enable such Purchaser to determine  whether such purchase
is so permitted.

         Section 4.6.    Related  Transactions.  The Company  shall have
consummated  the sale of the entire  principal  amount of the
Notes scheduled to be sold on the date of  Closing pursuant to this Agreement.

         Section 4.7.  Payment of Special  Counsel  Fees.  Without  limiting the
provisions of Section 15.1, the Company shall have paid on or before the Closing
the fees, charges and disbursements of the Purchasers'  special counsel referred
to in  Section  4.4 to the  extent  reflected  in a  statement  of such  counsel
rendered to the Company at least one Business Day prior to the Closing.

         Section 4.8.  Private  Placement  Numbers.  A Private  Placement Number
issued by  Standard  & Poor's  CUSIP  Service  Bureau (in  cooperation  with the
Securities   Valuation   Office  of  the  National   Association   of  Insurance
Commissioners) shall have been obtained for each series of the Notes.

         Section 4.9.  Changes in Structure.  The Company shall not have changed
its jurisdiction of organization or, except as described in the Memorandum, been
a party to any merger or  consolidation  and shall not have  succeeded to all or
any  substantial  part of the  liabilities  of any  other  entity,  at any  time
following  the date of the  most  recent  financial  statements  referred  to in
Schedule 5.5.

        Section 4.10.    Rating.  Prior to the date of Closing,  the Notes
shall have  received a rating of "BBB" or better from Fitch
IBCA, Inc.

        Section 4.11.  Proceedings and Documents.  All proceedings in connection
with the  transactions  contemplated  by this  Agreement  and all  documents and
instruments  incident  to  such  transactions  shall  be  satisfactory  to  such
Purchaser and such  Purchaser's  special  counsel,  and such  Purchaser and such
Purchaser's  special counsel shall have received all such counterpart  originals
or  certified  or other  copies  of such  documents  as such  Purchaser  or such
Purchaser's special counsel may reasonably request.

SECTION 5.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to each Purchaser that:

         Section 5.1. Organization;  Power and Authority; Ownership. The Company
is a limited  partnership duly organized,  validly existing and in good standing
under the laws of the State of Delaware,  and is duly licensed or qualified as a
foreign  partnership and is in good standing in each  jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the  power and  authority  to own or hold  under  lease  the  properties  it
purports to own or hold under lease,  to transact the business it transacts  and
proposes to transact, to execute and deliver this Agreement and the Notes and to
perform the  provisions  hereof and thereof.  The name of each Person holding an
equity  interest in the Company  (including a description  of the nature of such
interest) is set forth on Schedule 5.1.

         Section 5.2. Authorization, Etc. This Agreement and the Notes have been
duly  authorized  by all necessary  action on the part of the Company,  and this
Agreement  constitutes,  and upon execution and delivery  thereof each Note will
constitute,  a legal,  valid and binding  obligation of the Company  enforceable
against the Company in accordance with its terms,  except as such enforceability
may  be  limited  by  (i)  applicable  bankruptcy,  insolvency,  reorganization,
moratorium or other similar laws affecting the enforcement of creditors'  rights
generally  and (ii) general  principles  of equity  (regardless  of whether such
enforceability is considered in a proceeding in equity or at law).

         Section  5.3.  Disclosure.  The  Company,  through  its agent,  Bank of
America  Securities  LLC, has  delivered  to each  Purchaser a copy of a Private
Placement Memorandum,  dated January,  2000 (the "Memorandum"),  relating to the
transactions  contemplated  hereby.  The  Memorandum  fairly  describes,  in all
material respects,  the general nature of the business and principal  properties
of the Company and its Restricted Subsidiaries.  Except as disclosed in Schedule
5.3, this  Agreement,  the  Memorandum,  the  documents,  certificates  or other
writings  delivered  to  each  Purchaser  by or on  behalf  of  the  Company  in
connection  with  the  transactions   contemplated   hereby  and  the  financial
statements  listed in Schedule 5.5, taken as a whole,  do not contain any untrue
statement  of a material  fact or omit to state any material  fact  necessary to
make the statements  therein not misleading in light of the circumstances  under
which they were made.  Except as  disclosed  in the  Memorandum  or as expressly
described in Schedule  5.3, or in one of the  documents,  certificates  or other
writings identified  therein, or in the financial  statements listed in Schedule
5.5, since July 31, 1999,  there has been no change in the financial  condition,
operations,  business,  properties  or  prospects  of the  Company or any of its
Restricted  Subsidiaries  except changes that  individually  or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.  There is no
fact known to the Company that could  reasonably  be expected to have a Material
Adverse Effect that has not been set forth herein or in the Memorandum or in the
other documents,  certificates and other writings delivered to each Purchaser by
or on  behalf  of the  Company  specifically  for  use in  connection  with  the
transactions contemplated hereby.

         Section 5.4.  Organization  and  Ownership  of Shares of  Subsidiaries;
Affiliates.  (a) Schedule 5.4 contains  (except as noted  therein)  complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
its status (whether a Restricted or Unrestricted  Subsidiary),  the correct name
thereof,  the jurisdiction of its organization,  and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary,  (ii) of the Company's Affiliates,  other
than Subsidiaries, and (iii) of the Company's directors and senior officers.

         (b) All of the  outstanding  shares of capital stock or similar  equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued,  are fully paid and nonassessable
and are owned by the  Company or another  Subsidiary  free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).

         (c)  Each  Restricted  Subsidiary  identified  in  Schedule  5.4  is  a
corporation or other legal entity duly organized,  validly  existing and in good
standing  under  the  laws  of its  jurisdiction  of  organization,  and is duly
qualified as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which such  qualification is required by law, other than
those  jurisdictions  as to which  the  failure  to be so  qualified  or in good
standing could not, individually or in the aggregate,  reasonably be expected to
have a  Material  Adverse  Effect.  Each  such  Restricted  Subsidiary  has  the
corporate or other power and authority to own or hold under lease the properties
it purports to own or hold under lease and to transact the business it transacts
and proposes to transact.

         (d) No Restricted  Subsidiary  is a party to, or otherwise  subject to,
any  legal  restriction  or  any  agreement  (other  than  this  Agreement,  the
agreements listed on Schedule 5.4 and customary limitations imposed by corporate
law  statutes)  restricting  the ability of such  Restricted  Subsidiary  to pay
dividends out of profits or make any other similar  distributions  of profits to
the Company or any of its Restricted  Subsidiaries that owns outstanding  shares
of capital stock or similar equity interests of such Restricted Subsidiary.

         Section 5.5.  Financial  Statements.  The Company has delivered to each
Purchaser  copies of the financial  statements of the Company and its Restricted
Subsidiaries listed on Schedule 5.5. All of said financial statements (including
in each case the related  schedules  and notes)  fairly  present in all material
respects the consolidated  financial  position of the Company and its Restricted
Subsidiaries as of the respective  dates specified in such financial  statements
and the  consolidated  results  of  their  operations  and  cash  flows  for the
respective  periods so specified and have been prepared in accordance  with GAAP
consistently  applied throughout the periods involved except as set forth in the
notes thereto  (subject,  in the case of any interim  financial  statements,  to
normal year-end adjustments).

         Section  5.6.  Compliance  with  Laws,  Other  Instruments,   Etc.  The
execution,  delivery and  performance  by the Company of this  Agreement and the
Notes will not (a) contravene,  result in any breach of, or constitute a default
under,  or result in the  creation of any Lien in respect of any property of the
Company or any Restricted  Subsidiary  under, any indenture,  mortgage,  deed of
trust,  loan,  purchase  or  credit  agreement,  lease,  partnership  agreement,
corporate charter or by-laws,  or any other agreement or instrument to which the
Company or any  Restricted  Subsidiary  is bound or by which the  Company or any
Restricted  Subsidiary  or any of their  respective  properties  may be bound or
affected,  (b)  conflict  with  or  result  in a  breach  of any  of the  terms,
conditions or provisions of any Material order,  judgment,  decree, or ruling of
any court, arbitrator or Governmental Authority applicable to the Company or any
Restricted  Subsidiary or (c) violate any  provision of any Material  statute or
other rule or regulation of any Governmental Authority applicable to the Company
or any Restricted Subsidiary.

         Section 5.7. Governmental Authorizations,  Etc. No consent, approval or
authorization of, or registration,  filing or declaration with, any Governmental
Authority is required in connection with the execution,  delivery or performance
by the Company of this Agreement or the Notes.

         Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions,  suits or proceedings  pending or, to the knowledge of
the  Company,  threatened  against or  affecting  the Company or any  Restricted
Subsidiary  or any property of the Company or any  Restricted  Subsidiary in any
court or before  any  arbitrator  of any kind or  before or by any  Governmental
Authority that,  individually or in the aggregate,  could reasonably be expected
to have a Material Adverse Effect.

         (b) Neither the Company  nor any  Restricted  Subsidiary  is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment,  decree or ruling of any court,  arbitrator
or Governmental  Authority or is in violation of any applicable law,  ordinance,
rule or regulation  (including  without  limitation  Environmental  Laws) of any
Governmental  Authority,  which  default or  violation,  individually  or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

         Section 5.9. Taxes.  The Company and its Restricted  Subsidiaries  have
filed all tax returns that are required to have been filed in any  jurisdiction,
and have paid all taxes  shown to be due and  payable  on such  returns  and all
other taxes and assessments levied upon them or their properties, assets, income
or  franchises,  to the extent  such taxes and  assessments  have become due and
payable  and  before  they  have  become  delinquent,  except  for any taxes and
assessments  (a) the  amount of which is not  individually  or in the  aggregate
Material or (b) the  amount,  applicability  or  validity of which is  currently
being  contested in good faith by  appropriate  proceedings  and with respect to
which  the  Company  or a  Restricted  Subsidiary,  as  the  case  may  be,  has
established  adequate  reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could  reasonably be expected to have
a Material  Adverse Effect.  The charges,  accruals and reserves on the books of
the  Company and its  Restricted  Subsidiaries  in respect of Federal,  state or
other taxes for all fiscal periods are adequate.

        Section 5.10. Title to Property;  Leases. The Company and its Restricted
Subsidiaries have good and sufficient title to their respective  properties that
individually  or in the aggregate are  Material,  including all such  properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported  to have been  acquired  by the Company or any  Restricted  Subsidiary
after said date (except as sold or otherwise  disposed of in the ordinary course
of business),  in each case free and clear of Liens that  individually or in the
aggregate would have a Material Adverse Effect.  All leases that individually or
in the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.

        Section 5.11.    Licenses, Permits, Etc.  Except as disclosed in
Schedule 5.11,

                   (a)  the  Company  and  its  Restricted  Subsidiaries  own or
         possess all licenses,  permits,  franchises,  authorizations,  patents,
         copyrights,  service  marks,  trademarks  and  trade  names,  or rights
         thereto,  that  individually or in the aggregate are Material,  without
         known conflict with the rights of others;

                   (b) to the best  knowledge of the Company,  no product of the
         Company or any of its Restricted Subsidiaries infringes in any material
         respect  any  license,  permit,   franchise,   authorization,   patent,
         copyright,  service mark, trademark, trade name or other right owned by
         any other Person; and

                   (c)  to  the  best  knowledge  of the  Company,  there  is no
         Material  violation by any Person of any right of the Company or any of
         its  Restricted  Subsidiaries  with  respect to any patent,  copyright,
         service mark, trademark, trade name or other right owned or used by the
         Company or any of its Restricted Subsidiaries.

        Section  5.12.  Compliance  with  ERISA.  (a) The Company and each ERISA
Affiliate  have  operated  and  administered  each Plan in  compliance  with all
applicable laws except for such instances of  noncompliance as have not resulted
in and could not reasonably be expected to result in a Material  Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability  pursuant
to Title I or IV of ERISA or the  penalty or excise tax  provisions  of the Code
relating to employee  benefit  plans (as defined in Section 3 of ERISA),  and no
event,  transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA  Affiliate,  or in the  imposition  of  any  Lien  on  any of the  rights,
properties  or assets of the  Company  or any ERISA  Affiliate,  in either  case
pursuant to Title I or IV of ERISA or to such  penalty or excise tax  provisions
or to Section  401(a)(29)  or 412 of the Code,  other than such  liabilities  or
Liens as would not be individually or in the aggregate Material.

         (b) The present value of the aggregate  benefit  liabilities under each
of the Plans (other than Multiemployer Plans),  determined as of the end of such
Plan's most recently  ended plan year on the basis of the actuarial  assumptions
specified for funding  purposes in such Plan's most recent  actuarial  valuation
report,  did not exceed the  aggregate  current value of the assets of such Plan
allocable to such benefit  liabilities.  The term "benefit  liabilities" has the
meaning  specified  in Section 4001 of ERISA and the terms  "current  value" and
"present value" have the meanings specified in Section 3 of ERISA.

         (c) The Company and its ERISA  Affiliates have not incurred  withdrawal
liabilities  (and are not subject to contingent  withdrawal  liabilities)  under
Section  4201  or  4204  of  ERISA  in  respect  of  Multiemployer   Plans  that
individually or in the aggregate are Material.

         (d) The expected  post-retirement  benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial  Accounting  Standards  Board  Statement  No. 106,  without  regard to
liabilities  attributable to continuation  coverage mandated by Section 4980B of
the Code) of the Company and its Restricted Subsidiaries is not Material.

         (e) The execution  and delivery of this  Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction  that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of each Purchaser's  representation  in Section
6.2 as to the sources of the funds to be used to pay the  purchase  price of the
Notes to be purchased by such Purchaser.

        Section 5.13.  Private Offering by the Company.  Neither the Company nor
anyone acting on its behalf has offered the Notes or any similar  securities for
sale to,  or  solicited  any  offer to buy any of the same  from,  or  otherwise
approached  or negotiated  in respect  thereof  with,  any Person other than the
Purchasers and not more than 40 other institutional investors, each of which has
been offered the Notes at a private sale for investment. Neither the Company nor
anyone  acting on its  behalf has taken,  or will  take,  any action  that would
subject the issuance or sale of the Notes to the  registration  requirements  of
Section 5 of the Securities Act.

        Section  5.14.  Use of Proceeds;  Margin  Regulations.  The Company will
apply the  proceeds of the sale of the Notes as set forth in Schedule  5.14.  No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal  Reserve System
(12 CFR 221),  or for the  purpose  of  buying or  carrying  or  trading  in any
securities under such  circumstances as to involve the Company in a violation of
Regulation  X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation  of  Regulation  T of said Board (12 CFR 220).  Margin  stock does not
constitute more than 0% of the value of the  consolidated  assets of the Company
and its  Restricted  Subsidiaries  and the  Company  does not  have any  present
intention  that margin stock will  constitute  more than 0% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation U.

        Section 5.15.  Existing  Indebtedness;  Future Liens.  (a) Schedule 5.15
sets forth a complete and correct list of all  outstanding  Indebtedness  of the
Company and its Restricted Subsidiaries as of January 31, 2000, since which date
there has been no Material change in the amounts, interest rates, sinking funds,
installment  payments or  maturities of the  Indebtedness  of the Company or its
Restricted Subsidiaries. Neither the Company nor any Restricted Subsidiary is in
default and no waiver of default is currently  in effect,  in the payment of any
principal  or interest  on any  Indebtedness  of the Company or such  Restricted
Subsidiary and no event or condition  exists with respect to any Indebtedness of
the Company or any Restricted  Subsidiary that would permit (or that with notice
or the lapse of time,  or both,  would permit) one or more Persons to cause such
Indebtedness  to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.

         (b) Except as disclosed in Schedule  5.15,  neither the Company nor any
Restricted  Subsidiary  has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property,  whether
now owned or  hereafter  acquired,  to be  subject  to a Lien not  permitted  by
Section 10.4.

        Section 5.16. Foreign Assets Control Regulations,  Etc. Neither the sale
of the Notes by the Company  hereunder nor its use of the proceeds  thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control  regulations of the United States Treasury  Department (31 CFR, Subtitle
B,  Chapter V, as  amended)  or any  enabling  legislation  or  executive  order
relating thereto.

        Section 5.17. Status under Certain Statutes. Neither the Company nor any
Restricted  Subsidiary is an "investment  company"  registered or required to be
registered under the Investment  Company Act of 1940, as amended,  or is subject
to regulation  under the Public Utility Holding Company Act of 1935, as amended,
the ICC  Termination  Act of 1995,  as  amended,  or the  Federal  Power Act, as
amended.

        Section  5.18.  Environmental  Matters.  Neither  the  Company  nor  any
Restricted  Subsidiary  has knowledge of any claim or has received any notice of
any claim,  and no proceeding has been instituted  raising any claim against the
Company or any of its Restricted  Subsidiaries  or any of their  respective real
properties  now or  formerly  owned,  leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws,  except,  in each case, such as could not reasonably be expected to result
in a Material Adverse Effect. Except as otherwise disclosed to each Purchaser in
writing:

                   (a) neither the Company  nor any  Restricted  Subsidiary  has
         knowledge  of any facts which  would give rise to any claim,  public or
         private,   of  violation  of  Environmental   Laws  or  damage  to  the
         environment  emanating from, occurring on or in any way related to real
         properties now or formerly owned,  leased or operated by any of them or
         to other assets or their use,  except,  in each case, such as could not
         reasonably be expected to result in a Material Adverse Effect;

                   (b)  neither   the   Company   nor  any  of  its   Restricted
         Subsidiaries has stored any Hazardous  Materials on real properties now
         or formerly owned, leased or operated by any of them or has disposed of
         any Hazardous  Materials in a manner contrary to any Environmental Laws
         in each case in any manner that could  reasonably be expected to result
         in a Material Adverse Effect; and

                   (c) all buildings on all real properties now owned, leased or
         operated by the Company or any of its  Restricted  Subsidiaries  are in
         compliance with applicable  Environmental Laws, except where failure to
         comply could not reasonably be expected to result in a Material Adverse
         Effect.

SECTION 6.           REPRESENTATIONS OF THE PURCHASER.

         Section 6.1.  Purchase for Investment.  Each Purchaser  represents that
(a) it is  purchasing  the Notes for its own account or for one or more separate
accounts  maintained  by it or for the  account of one or more  pension or trust
funds  and not  with a view  to the  distribution  thereof,  provided  that  the
disposition of such  Purchaser's or such pension or trust funds'  property shall
at all times be within such Purchaser's or such pension or trust funds' control,
and (b) it is an  "accredited  investor"  within  the  meaning  of  Rule  501 of
Regulation D of the Securities  Act. Each Purchaser  understands  that the Notes
have not been  registered  under the  Securities  Act and may be resold  only if
registered  pursuant to the  provisions of the Securities Act or if an exemption
from registration is available,  except under  circumstances  where neither such
registration  nor such an  exemption is required by law, and that the Company is
not required to register the Notes.

         Section 6.2. Source of Funds.  Each Purchaser  represents that at least
one of the following statements is an accurate  representation as to each source
of funds (a "Source") to be used by it to pay the purchase price of the Notes to
be purchased by it hereunder:

                   (a) the  Source is an  "insurance  company  general  account"
         within  the  meaning  of  Department  of Labor  Prohibited  Transaction
         Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
         benefit plan,  treating as a single plan,  all plans  maintained by the
         same  employer  or  employee  organization,  with  respect to which the
         amount  of  the  general  account  reserves  and  liabilities  for  all
         contracts held by or on behalf of such plan,  exceeds ten percent (10%)
         of  the  total  reserves  and   liabilities  of  such  general  account
         (exclusive of separate account  liabilities) plus surplus, as set forth
         in the NAIC Annual  Statement for such  Purchaser  most recently  filed
         with such Purchaser's state of domicile; or

                   (b) the  Source is either  (i) an  insurance  company  pooled
         separate  account,  within the meaning of PTE 90-1 (issued  January 29,
         1990), or (ii) a bank collective investment fund, within the meaning of
         the PTE 91-38 (issued July 12, 1991) and,  except as such Purchaser has
         disclosed to the Company in writing  pursuant to this paragraph (b), no
         employee benefit plan or group of plans maintained by the same employer
         or employee organization  beneficially owns more than 10% of all assets
         allocated  to such pooled  separate  account or  collective  investment
         fund; or

                   (c) the Source  constitutes  assets of an  "investment  fund"
         (within  the  meaning  of Part V of the QPAM  Exemption)  managed  by a
         "qualified professional asset manager" or "QPAM" (within the meaning of
         Part V of the QPAM  Exemption),  no employee benefit plan's assets that
         are included in such investment  fund, when combined with the assets of
         all other employee benefit plans  established or maintained by the same
         employer or by an affiliate  (within the meaning of Section  V(c)(1) of
         the  QPAM   Exemption)  of  such  employer  or  by  the  same  employee
         organization  and managed by such QPAM,  exceed 20% of the total client
         assets managed by such QPAM, the conditions of Part I(c) and (g) of the
         QPAM Exemption are satisfied, neither the QPAM nor a person controlling
         or  controlled  by the QPAM  (applying  the  definition of "control" in
         Section V(e) of the QPAM  Exemption)  owns a 5% or more interest in the
         Company  and (i) the  identity  of such  QPAM and (ii) the names of all
         employee  benefit  plans whose assets are  included in such  investment
         fund have been  disclosed  to the  Company in writing  pursuant to this
         paragraph (c); or

                   (d)     the Source is a governmental plan; or

                   (e) the Source is one or more employee  benefit  plans,  or a
         separate  account  or  trust  fund  comprised  of one or more  employee
         benefit  plans,  each of which has been  identified  to the  Company in
         writing pursuant to this paragraph (e);

                   (f) the  Source  does  not  include  assets  of any  employee
         benefit plan, other than a plan exempt from the coverage of ERISA; or

                   (g) the  Source  is an  insurance  company  separate  account
         maintained solely in connection with the fixed contractual  obligations
         of the insurance company under which the amounts payable,  or credited,
         to  any  employee  benefit  plan  (or  its  related  trust)  and to any
         participant or  beneficiary of such plan  (including any annuitant) are
         not  affected  in any  manner  by  the  investment  performance  of the
         separate account.

If any Purchaser or any subsequent  transferee of the Notes  indicates that such
Purchaser  or such  transferee  is relying on any  representation  contained  in
paragraph  (b),  (c) or (e)  above,  the  Company  shall  deliver on the date of
Closing or on the date of transfer,  as applicable,  a certificate,  which shall
state  whether  (i) it is a party in  interest  or a  "disqualified  person" (as
defined in Section  4975(e)(2) of the Code), with respect to any plan identified
pursuant  to  paragraphs  (b) or (e)  above,  or (ii) with  respect to any plan,
identified  pursuant to paragraph (c) above,  whether it or any  "affiliate" (as
defined in Section V(c) of the QPAM  Exemption) has at such time, and during the
immediately  preceding one year, exercised the authority to appoint or terminate
said QPAM as manager of any plan identified in writing pursuant to paragraph (c)
above or to negotiate the terms of said QPAM's management agreement on behalf of
any such  identified  plan.  As used in this Section  6.2,  the terms  "employee
benefit plan",  "governmental  plan", "party in interest" and "separate account"
shall have the respective meanings assigned to such terms in Section 3 of ERISA.

SECTION 7.           INFORMATION AS TO COMPANY; STATUS OF SUBSIDIARIES.

         Section 7.1.    Financial  and  Business  Information.  The  Company
shall  deliver  to  each  holder  of  Notes  that  is an
Institutional Investor:

                   (a)  Quarterly  Statements -- within 60 days after the end of
         each quarterly  fiscal period in each fiscal year of the Company (other
         than the last  quarterly  fiscal  period  of each  such  fiscal  year),
         duplicate copies of,

                            (i)     an unaudited  consolidated  balance sheet
of the Company and its Restricted Subsidiaries as at the end of such quarter,and

                           (ii)  unaudited  consolidated  statements  of income,
                  changes in partners'  equity and cash flows of the Company and
                  its Restricted Subsidiaries, for such quarter and (in the case
                  of the  second  and third  quarters)  for the  portion  of the
                  fiscal year ending with such quarter,

         setting  forth in each case in  comparative  form the  figures  for the
         corresponding  periods in the previous  fiscal year,  all in reasonable
         detail,  prepared  in  accordance  with GAAP  applicable  to  quarterly
         financial  statements  generally,  and certified by a Senior  Financial
         Officer as fairly presenting,  in all material respects,  the financial
         position  of the  companies  being  reported  on and their  results  of
         operations  and cash flows,  subject to changes  resulting from normal,
         recurring year-end adjustments,  provided that delivery within the time
         period  specified above of copies of the Company's  Quarterly Report on
         Form 10-Q prepared in  compliance  with the  requirements  therefor and
         filed with the  Securities and Exchange  Commission  shall be deemed to
         satisfy the requirements of this Section 7.1(a);

                   (b)     Annual Statements-- within 120 days after the end of
each fiscal year of the Company, duplicate copies of,

                            (i)     a consolidated balance sheet of the Company
and its Restricted Subsidiaries,  as at the end of such year, and

                           (ii)  consolidated  statements of income,  changes in
                  partners'  equity  and  cash  flows  of the  Company  and  its
                  Restricted Subsidiaries, for such year,

         setting  forth in each case in  comparative  form the  figures  for the
         previous fiscal year, all in reasonable detail,  prepared in accordance
         with GAAP, and accompanied by

                            (A) an  opinion  thereon  of  independent  certified
                  public  accountants  of recognized  national  standing,  which
                  opinion  shall state that such  financial  statements  present
                  fairly, in all material  respects,  the financial  position of
                  the  companies  being  reported  upon  and  their  results  of
                  operations and cash flows and have been prepared in conformity
                  with GAAP,  and that the  examination  of such  accountants in
                  connection  with such  financial  statements  has been made in
                  accordance with generally  accepted  auditing  standards,  and
                  that such audit  provides a reasonable  basis for such opinion
                  in the circumstances, and

                            (B) a certificate of such  accountants  stating that
                  they have reviewed this Agreement and stating further whether,
                  in making their audit, they have become aware of any condition
                  or  event  that  then  constitutes  a  Default  or an Event of
                  Default,  and,  if they are aware that any such  condition  or
                  event  then  exists,  specifying  the nature and period of the
                  existence  thereof (it being  understood that such accountants
                  shall not be liable,  directly or indirectly,  for any failure
                  to obtain  knowledge of any Default or Event of Default unless
                  such  accountants  should have obtained  knowledge  thereof in
                  making an audit in accordance with generally accepted auditing
                  standards or did not make such an audit),

         provided that the delivery  within the time period  specified  above of
         the Company's Annual Report on Form 10-K for such fiscal year (together
         with the Company's  annual  report to  shareholders,  if any,  prepared
         pursuant to Rule 14a-3 under the Exchange  Act)  prepared in accordance
         with the  requirements  therefor  and  filed  with the  Securities  and
         Exchange  Commission,   together  with  the  accountant's   certificate
         described  in  clause  (B)  above,  shall  be  deemed  to  satisfy  the
         requirements of this Section 7.1(b);

                   (c) SEC and Other  Reports --  promptly  upon their  becoming
         available,   one  copy  of  each  regular  or  periodic  report,   each
         registration  statement (without exhibits except as expressly requested
         by such holder),  and each prospectus and all amendments  thereto filed
         by the Company or any  Restricted  Subsidiary  with the  Securities and
         Exchange Commission and of all press releases and other statements made
         available generally by the Company or any Restricted  Subsidiary to the
         public concerning developments that are Material;

                   (d) Notice of Default or Event of Default -- promptly, and in
         any  event  within  five  Business  Days  after a  Responsible  Officer
         becoming  aware of the  existence of any Default or Event of Default or
         that any Person has given any notice or taken any action  with  respect
         to a claimed default  hereunder or that any Person has given any notice
         or taken any  action  with  respect  to a claimed  default  of the type
         referred to in Section 11(f),  a written  notice  specifying the nature
         and period of  existence  thereof and what action the Company is taking
         or proposes to take with respect thereto;

                   (e) ERISA  Matters -- promptly,  and in any event within five
         Business Days after a Responsible  Officer becoming aware of any of the
         following,  a written  notice  setting forth the nature thereof and the
         action, if any, that the Company or an ERISA Affiliate proposes to take
         with respect thereto:

                            (i) with respect to any Plan, any reportable  event,
                  as  defined in  section  4043(b) of ERISA and the  regulations
                  thereunder,  for  which  notice  thereof  has not been  waived
                  pursuant to such  regulations as in effect on the date hereof;
                  or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under  section  4042 of ERISA for the  termination  of, or the
                  appointment  of a trustee  to  administer,  any  Plan,  or the
                  receipt by the Company or any ERISA Affiliate of a notice from
                  a  Multiemployer  Plan that such  action has been taken by the
                  PBGC with respect to such Multiemployer Plan; or

                          (iii) any event,  transaction  or condition that could
                  result in the  incurrence  of any  liability by the Company or
                  any ERISA Affiliate  pursuant to Title I or IV of ERISA or the
                  penalty  or excise  tax  provisions  of the Code  relating  to
                  employee  benefit  plans,  or in the imposition of any Lien on
                  any of the rights,  properties or assets of the Company or any
                  ERISA  Affiliate  pursuant  to  Title I or IV of ERISA or such
                  penalty or excise tax  provisions,  if such liability or Lien,
                  taken  together with any other such  liabilities or Liens then
                  existing,  could  reasonably  be  expected  to have a Material
                  Adverse Effect;

                   (f) Notices from Governmental  Authority -- promptly,  and in
         any event  within 30 days of receipt  thereof,  copies of any notice to
         the  Company or any  Restricted  Subsidiary  from any  Federal or state
         Governmental  Authority relating to any order, ruling, statute or other
         law or regulation that could  reasonably be expected to have a Material
         Adverse Effect; and

                   (g) Requested Information -- with reasonable promptness, such
         other  data  and  information  relating  to the  business,  operations,
         affairs,  financial  condition,  assets or properties of the Company or
         any of its  Restricted  Subsidiaries  or relating to the ability of the
         Company to perform  its  obligations  hereunder  and under the Notes as
         from time to time may be  reasonably  requested  by any such  holder of
         Notes,  including,  without  limitation,  Form 8-K to be filed with the
         Securities  and  Exchange  Commission  which shall  include the audited
         financial statements of Thermogas L.L.C. when available.

         Section 7.2. Officer's  Certificate.  Each set of financial  statements
delivered  to a holder of Notes  pursuant  to Section  7.1(a) or Section  7.1(b)
hereof shall be  accompanied  by a  certificate  of a Senior  Financial  Officer
setting forth:

                   (a)  Covenant   Compliance  --  the  information   (including
         detailed  calculations)  required  in order to  establish  whether  the
         Company was in compliance with the requirements of Section 10.1 through
         Section 10.8 hereof,  inclusive,  and Section 10.11 hereof,  during the
         quarterly  or  annual  period  covered  by the  statements  then  being
         furnished   (including  with  respect  to  each  such  Section,   where
         applicable, the calculations of the maximum or minimum amount, ratio or
         percentage,  as the case may be,  permissible  under  the terms of such
         Sections,  and the calculation of the amount,  ratio or percentage then
         in existence); and

                   (b) Event of Default -- a  statement  that such  officer  has
         reviewed the relevant  terms hereof and has made, or caused to be made,
         under  his  or her  supervision,  a  review  of  the  transactions  and
         conditions  of the Company  and its  Restricted  Subsidiaries  from the
         beginning of the quarterly or annual period  covered by the  statements
         then  being  furnished  to the date of the  certificate  and that  such
         review shall not have disclosed the existence during such period of any
         condition  or event that  constitutes  a Default or an Event of Default
         or,  if any such  condition  or event  existed  or  exists  (including,
         without  limitation,  any such event or  condition  resulting  from the
         failure of the Company or any Restricted  Subsidiary to comply with any
         Environmental  Law),  specifying  the nature  and  period of  existence
         thereof  and what  action the  Company  shall have taken or proposes to
         take with respect thereto.

         Section 7.3.    Inspection.  The Company  shall permit the
representatives  of each holder of Notes that is an  Institutional
Investor:

                   (a) No Default  -- if no  Default  or Event of  Default  then
         exists,  at the expense of such holder and upon reasonable prior notice
         to the Company, to visit the principal executive office of the Company,
         to discuss the  affairs,  finances  and accounts of the Company and its
         Restricted  Subsidiaries  with the  Company's  officers,  and (with the
         consent  of  the  Company,  which  consent  will  not  be  unreasonably
         withheld) its independent public accountants,  and (with the consent of
         the Company,  which consent will not be unreasonably withheld) to visit
         the other  offices and  properties  of the Company and each  Restricted
         Subsidiary,  all  at  such  reasonable  times  and as  often  as may be
         reasonably requested in writing; and

                   (b) Default -- if a Default or Event of Default  then exists,
         at the expense of the Company,  to visit and inspect any of the offices
         or properties of the Company or any Restricted  Subsidiary,  to examine
         all their  respective  books of  account,  records,  reports  and other
         papers,  to make copies and extracts  therefrom,  and to discuss  their
         respective  affairs,   finances  and  accounts  with  their  respective
         officers and independent  public accountants (and by this provision the
         Company  authorizes said  accountants to discuss the affairs,  finances
         and accounts of the Company and its  Restricted  Subsidiaries),  all at
         such times and as often as may be requested.

         Section  7.4.  Change  in  Status  of  Subsidiaries.  (a) So long as no
Default or Event of Default shall have occurred and be  continuing,  the Company
may at any time and from time to time, upon not less than 30 days' prior written
notice given to each Holder,  designate a previously Restricted Subsidiary as an
Unrestricted Subsidiary or a previously Unrestricted Subsidiary (including a new
Subsidiary  designated  on the  date  of its  formation  or  acquisition)  which
satisfies the  requirements  of clauses (i), (ii) and (iii) of the definition of
"Restricted  Subsidiary" as a Restricted  Subsidiary,  provided that immediately
after such  designation  and after giving effect  thereto no Default or Event of
Default shall have occurred and be continuing,  and provided  further that after
such  designation  the status of such  Subsidiary had not been changed more than
twice.

         (b) Any notice of  designation  pursuant  to this  Section 7.4 shall be
accompanied  by a  certificate  signed by a  Responsible  Officer of the Company
stating  that the  provisions  of this  Section 7.4 have been  complied  with in
connection  with such  designation  and  setting  forth  the name of each  other
Subsidiary  (if any)  which has or will  become a  Restricted  Subsidiary  or an
Unrestricted Subsidiary, as the case may be, as a result of such designation.

SECTION 8.           MATURITY; PREPAYMENT OF THE NOTES.

         Section 8.1.  Prepayments.  The entire outstanding  principal amount of
the  Series A Notes  shall be due on  August 1,  2006,  the  entire  outstanding
principal  amount of the  Series B Notes  shall be due on August 1, 2007 and the
entire outstanding principal amount of the Series C Notes shall be due on August
1, 2009.  Except as set forth in Section 8.2, the Notes may not be prepaid prior
to maturity at the option of the Company.

         Section 8.2. Optional  Prepayments with Make-Whole  Amount. The Company
may, at its option,  upon notice as provided  below,  prepay at any time all, or
from time to time any part of,  the Notes of any  series,  in an amount not less
than  $5,000,000 in the case of a partial  prepayment of any series,  at 100% of
the principal  amount so prepaid,  together with interest accrued thereon to the
date  of  such  prepayment,  plus  the  Make-Whole  Amount  determined  for  the
prepayment  date with respect to such  principal  amount.  The Company will give
each holder of Notes of any series being prepaid written notice of each optional
prepayment  under  this  Section  8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date,  the  aggregate  principal  amount of the Notes of such  series to be
prepaid on such date,  the principal  amount of each Note of such series held by
such holder to be prepaid  (determined in accordance  with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid,  and shall be accompanied by a certificate of a Senior  Financial
Officer  as to the  estimated  Make-Whole  Amount  due in  connection  with such
prepayment  (calculated  as if the  date of such  notice  were  the  date of the
prepayment),  setting forth the details of such  computation.  Two Business Days
prior to such  prepayment,  the Company  shall deliver to each holder of Notes a
certificate of a Senior  Financial  Officer  specifying the  calculation of such
Make-Whole Amount as of the specified prepayment date.

         Section 8.3.  Allocation  of Partial  Prepayments.  In the case of each
partial prepayment of the Notes of any series, the principal amount of the Notes
of such series to be prepaid  shall be allocated  among all of the Notes of such
series at the time outstanding in proportion,  as nearly as practicable,  to the
respective  unpaid  principal   amounts  thereof  not  theretofore   called  for
prepayment.

         Section 8.4. Maturity;  Surrender,  Etc. In the case of each prepayment
of Notes of any series pursuant to this Section 8, the principal  amount of each
Note of such series to be prepaid shall mature and become due and payable on the
date fixed for such prepayment,  together with interest on such principal amount
accrued to such date and the  applicable  Make-Whole  Amount,  if any.  From and
after such date, unless the Company shall fail to pay such principal amount when
so due and payable, together with the interest and Make-Whole Amount, if any, as
aforesaid,  interest on such  principal  amount shall cease to accrue.  Any Note
paid or prepaid in full shall be  surrendered  to the Company and  cancelled and
shall  not be  reissued,  and no Note  shall be  issued  in lieu of any  prepaid
principal amount of any Note.

         Section  8.5.  Purchase  of Notes.  The  Company  will not and will not
permit any Affiliate to purchase,  redeem, prepay or otherwise acquire, directly
or  indirectly,  any of  the  outstanding  Notes  except  upon  the  payment  or
prepayment of the Notes in accordance with the terms of this Agreement,  and the
Notes.  The  Company  will  promptly  cancel  all  Notes  acquired  by it or any
Affiliate  pursuant to any payment,  prepayment or purchase of Notes pursuant to
any provision of this  Agreement and no Notes may be issued in  substitution  or
exchange for any such Notes.

         Section 8.6.  Make-Whole  Amount.  The term "Make-Whole  Amount" means,
with respect to a Note of any Series,  an amount equal to the excess, if any, of
the  Discounted  Value of the Remaining  Scheduled  Payments with respect to the
Called Principal of such Note over the amount of such Called Principal, provided
that the  Make-Whole  Amount may in no event be less than zero. For the purposes
of determining  the Make-Whole  Amount,  the following  terms have the following
meanings:

                  "Called  Principal"  means,  with  respect  to a  Note  of any
         Series,  the  principal of such Note that is to be prepaid  pursuant to
         Section  8.2 or has become or is  declared  to be  immediately  due and
         payable pursuant to Section 12.1, as the context requires.

                  "Discounted Value" means, with respect to the Called Principal
         of a Note  of any  Series,  the  amount  obtained  by  discounting  all
         Remaining Scheduled Payments with respect to such Called Principal from
         their  respective  scheduled  due  dates to the  Settlement  Date  with
         respect to such Called Principal, in accordance with accepted financial
         practice and at a discount  factor  (applied on the same periodic basis
         as that on which interest on the Notes of such Series is payable) equal
         to the Reinvestment Yield with respect to such Called Principal.

                  "Reinvestment   Yield"  means,  with  respect  to  the  Called
         Principal  of a Note of any  Series,  0.50% over the yield to  maturity
         implied by (i) the  yields  reported,  as of 10:00 A.M.  (New York City
         time) on the second  Business Day  preceding the  Settlement  Date with
         respect to such Called  Principal,  on the display  designated as "Page
         PX-1" on the Bloomberg Financial Markets Services Screen (or such other
         display as may replace  Page PX-1 on the  Bloomberg  Financial  Markets
         Services Screen) for actively traded U.S. Treasury  securities having a
         maturity equal to the Remaining  Average Life of such Called  Principal
         as of such Settlement  Date, or (ii) if such yields are not reported as
         of  such  time  or  the  yields  reported  as  of  such  time  are  not
         ascertainable,  the Treasury  Constant Maturity Series Yields reported,
         for the latest day for which such  yields  have been so  reported as of
         the second  Business Day preceding the Settlement  Date with respect to
         such Called  Principal,  in Federal  Reserve  Statistical  Release H.15
         (519) (or any comparable  successor  publication)  for actively  traded
         U.S.  Treasury  securities  having  a  constant  maturity  equal to the
         Remaining  Average Life of such Called  Principal as of such Settlement
         Date.  Such implied  yield will be  determined,  if  necessary,  by (a)
         converting U.S. Treasury bill quotations to  bond-equivalent  yields in
         accordance  with  accepted  financial  practice  and (b)  interpolating
         linearly  between (1) the actively traded U.S.  Treasury  security with
         the maturity closest to and greater than the Remaining Average Life and
         (2) the  actively  traded  U.S.  Treasury  security  with the  maturity
         closest to and less than the Remaining Average Life.

                  "Remaining  Average  Life"  means,  with respect to any Called
         Principal,  the number of years (calculated to the nearest  one-twelfth
         year) obtained by dividing (i) such Called  Principal into (ii) the sum
         of the products obtained by multiplying (a) the principal  component of
         each Remaining  Scheduled Payment with respect to such Called Principal
         by (b) the number of years (calculated to the nearest one-twelfth year)
         that will  elapse  between  the  Settlement  Date with  respect to such
         Called Principal and the scheduled due date of such Remaining Scheduled
         Payment.

                  "Remaining  Scheduled  Payments"  means,  with  respect to the
         Called  Principal of a Note of any Series,  all payments of such Called
         Principal and interest  thereon that would be due after the  Settlement
         Date with respect to such Called Principal if no payment of such Called
         Principal  were made prior to its scheduled due date,  provided that if
         such Settlement  Date is not a date on which interest  payments are due
         to be made under the terms of the Notes of such Series, then the amount
         of the next succeeding  scheduled  interest  payment will be reduced by
         the amount of interest  accrued to such Settlement Date and required to
         be paid on such Settlement Date pursuant to Section 8.2 or 12.1.

                  "Settlement  Date" means, with respect to the Called Principal
         of a Note of any Series,  the date on which such Called Principal is to
         be prepaid  pursuant  to Section 8.2 or has become or is declared to be
         immediately  due and payable  pursuant to Section  12.1, as the context
         requires.

SECTION 9.           AFFIRMATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

         Section 9.1. Compliance with Law. The Company will, and will cause each
of its Subsidiaries to, comply with all laws,  ordinances or governmental  rules
or regulations to which each of them is subject, including,  without limitation,
Environmental  Laws,  and will  obtain  and  maintain  in effect  all  licenses,
certificates,   permits,   franchises  and  other  governmental   authorizations
necessary to the ownership of their  respective  properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance  with such laws,  ordinances or governmental rules or regulations
or  failures  to  obtain or  maintain  in effect  such  licenses,  certificates,
permits,   franchises   and  other   governmental   authorizations   could  not,
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect.

         Section 9.2.  Insurance.  The Company will,  and will cause each of its
Restricted  Subsidiaries  to,  maintain,  with  financially  sound and reputable
insurers,  insurance with respect to their respective  properties and businesses
against such casualties and  contingencies,  of such types, on such terms and in
such  amounts  (including  deductibles,   co-insurance  and  self-insurance,  if
adequate  reserves are maintained  with respect  thereto) as is customary in the
case of entities  of  established  reputations  engaged in the same or a similar
business and similarly situated and consistent with the existing practice of the
Company and its Restricted Subsidiaries as of the date hereof.

         Section 9.3.  Maintenance  of  Properties.  The Company will,  and will
cause each of its Restricted  Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective  properties in good repair,  working order
and condition  (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section  shall not prevent the Company or any  Restricted  Subsidiary  from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance  is  desirable in the conduct of its business and the Company has
concluded that such discontinuance could not,  individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

         Section 9.4. Payment of Taxes. The Company will, and will cause each of
its  Subsidiaries  to,  file  all  tax  returns  required  to be  filed  in  any
jurisdiction  and to pay and  discharge all taxes shown to be due and payable on
such returns and all other taxes,  assessments,  governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent  such taxes and  assessments  have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on  properties  or assets of the Company or any
Subsidiary,  provided that neither the Company nor any  Subsidiary  need pay any
such tax or  assessment or claims if (i) the amount,  applicability  or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in  appropriate  proceedings,  and the  Company  or a  Subsidiary  has
established  adequate  reserves therefor in accordance with GAAP on the books of
the  Company or such  Subsidiary  or (ii) the  nonpayment  of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.

         Section 9.5. Partnership Existence,  Etc. The Company will at all times
preserve its existence  and its status as a  partnership  and keep in full force
and effect its partnership existence and its status as a partnership not taxable
as a corporation for U.S. federal income tax purposes.  Subject to Sections 10.7
and 10.8,  the  Company  will at all times  preserve  and keep in full force and
effect the corporate or  partnership  existence,  as the case may be, of each of
its  Restricted  Subsidiaries  (unless  merged into the Company or a  Restricted
Subsidiary)  and all rights and  franchises  of the Company  and its  Restricted
Subsidiaries  unless, in the good faith judgment of the Company, the termination
of or failure to preserve  and keep in full force and effect such  corporate  or
partnership  existence,  right or franchise  could not,  individually  or in the
aggregate, have a Material Adverse Effect.

         Section 9.6.  Ranking.  The Company will ensure that, at all times, all
liabilities  of the Company under the Notes will rank in right of payment either
pari passu or senior to all other Debt of the  Company  except for Debt which is
preferred  as a result of being  secured as  permitted by Section 10.4 (but then
only to the extent of such security).

SECTION 10.          NEGATIVE COVENANTS.

         The Company covenants that so long as any of the Notes are outstanding:

        Section  10.1.  Incurrence  of Debt.  The Company will not, and will not
permit any Restricted  Subsidiary to,  directly or  indirectly,  create,  incur,
assume,  guarantee,  or  otherwise  become  directly or  indirectly  liable with
respect to, any Debt, other than:

                   (a)     Debt evidenced by the Notes;

                   (b)  Debt  of the  Company  and its  Restricted  Subsidiaries
         outstanding  on the date of the Closing and  disclosed in Schedule 5.15
         (other than Debt of the Company under the Credit Agreement or under the
         MLP Note Guaranty  referred to in Section  10.2),  and any  extensions,
         refundings,  renewals and refinancings (collectively,  a "Refinancing")
         thereof,  provided that (i) the principal  amount of the Debt resulting
         from such Refinancing shall not exceed the outstanding principal amount
         of such Debt being  Refinanced,  together with any accrued interest and
         premium with respect thereto and any and all costs and expenses related
         to such Refinancing,  (ii) the maturity date of the Debt resulting from
         such  Refinancing  shall not be earlier than the  maturity  date of the
         Debt being  Refinanced,  (iii) the average life to maturity of the Debt
         resulting from such Refinancing shall not be less than the average life
         to maturity of the Debt being  Refinanced  and (iv) no Default or Event
         of Default exists at the time of such Refinancing;

                   (c) Debt of the Company and its Restricted Subsidiaries if on
         the date the Company or such Restricted  Subsidiary becomes liable with
         respect to any such Debt and  immediately  after giving effect  thereto
         and the concurrent retirement of any other Debt:

                            (i)     no Default or Event of Default exists; and

                           (ii)  any such  Debt of a  Restricted  Subsidiary  is
permitted pursuant to Section 10.3; and

                          (iii)  the  ratio of  Consolidated  Cash  Flow for the
                  period of four consecutive  fiscal quarters ending on, or most
                  recently  ended prior to, such date to  Consolidated  Interest
                  Expense is not less than 2.25 to 1;

                           (iv) the ratio of  Consolidated  Debt to Consolidated
                  Cash Flow for the period of four  consecutive  fiscal quarters
                  ending on, or most  recently  ended prior to, such date is not
                  greater than 5.00 to 1;

                            (v) the ratio of Adjusted  Consolidated Cash Flow to
                  Adjusted  Consolidated Interest Expense for the period of four
                  consecutive  fiscal quarters ending on, or most recently ended
                  prior to, such date is not less than 2.15 to 1; and

                           (vi)  the  ratio  of  Adjusted  Consolidated  Debt to
                  Adjusted  Consolidated  Cash  Flow  for  the  period  of  four
                  consecutive  fiscal quarters ending on, or most recently ended
                  prior to, such date is not greater  than (a) 5.40 to 1 if such
                  date is on or  prior to April  30,  2001,  or (b) 5.25 to 1 if
                  such date is after April 30, 2001;

                   (d)  Debt  of the  Company  and its  Restricted  Subsidiaries
         incurred under a Working  Capital  Facility if, on the date the Company
         or such Restricted  Subsidiary  becomes liable with respect to any such
         Debt and  immediately  after giving effect  thereto and the  concurrent
         retirement of any other such Debt, the Debt outstanding thereunder will
         not exceed  Consolidated  Cash Flow for the period of four  consecutive
         fiscal  quarters ending on, or most recently ended prior to, such date,
         provided  that there shall have been during the  immediately  preceding
         four  consecutive  fiscal  quarters a period of at least 30 consecutive
         days on each of which the Company and its Restricted Subsidiaries would
         have been  permitted  to (but did not) incur on such day under  Section
         10.1(c)  (without  reference  to the  condition  stated in  clause  (i)
         thereof)  Debt in the  amount  of the  average  daily  balance  of Debt
         outstanding  under the Working Capital Facility for such 30-day period,
         provided  further  that any such  Debt of a  Restricted  Subsidiary  is
         permitted pursuant to Section 10.3;

                   (e)  Subordinated  Debt of the  Company  if on the  date  the
         Company becomes liable with respect to any such  Subordinated  Debt and
         immediately  after giving effect thereto and the concurrent  retirement
         of any other Debt, the aggregate amount of all outstanding Subordinated
         Debt of the Company shall not exceed $50,000,000;

                   (f) Debt of the Company and its Restricted  Subsidiaries to a
         seller of assets or shares  purchased by the Company or any  Restricted
         Subsidiary  if on the date the Company  becomes  liable with respect to
         any such Debt and  immediately  after  giving  effect  thereto  and the
         concurrent  retirement of any other Debt,  the aggregate  amount of all
         outstanding Debt of the Company to all such sellers of assets or shares
         shall not exceed $60,000,000, provided that the agreement or instrument
         pursuant  to which such Debt is  incurred  (i)  contains  no  financial
         covenants   more   restrictive   on  the  Company  or  its   Restricted
         Subsidiaries  than those  contained in this Agreement and (ii) contains
         no events of default (other than in respect of payment of principal and
         interest on such Debt and in respect of the accuracy of representations
         and  warranties  made by the  Company  or its  Restricted  Subsidiaries
         thereunder)  which are capable of occurring  prior to the occurrence of
         any Event of Default,  and provided,  further,  that any such Debt of a
         Restricted Subsidiary is permitted pursuant to Section 10.3; and

                   (g) Debt of the Company under the "Facility B Commitments" or
         the "Facility C Commitments" pursuant to the Credit Agreement if on the
         date the  Company  becomes  liable  with  respect  to any such Debt and
         immediately  after giving effect thereto and the concurrent  retirement
         of any other Debt, the incurrence of such Debt would be permitted under
         Section  10.1(c) and any  Refinancing  thereof,  provided  that (i) the
         principal amount of the Debt resulting from such Refinancing  shall not
         exceed the outstanding  principal amount of such Debt being Refinanced,
         together with any accrued interest and premium with respect thereto and
         any and all costs and expenses  related to such  Refinancing,  (ii) the
         maturity date of the Debt resulting from such Refinancing  shall not be
         earlier than the maturity date of the Debt being Refinanced,  (iii) the
         average life to maturity of the Debt  resulting  from such  Refinancing
         shall not be less than the  average  life to maturity of the Debt being
         Refinanced,  and (iv) the other terms  applicable to the Debt resulting
         from such Refinancing shall not be more onerous to the Company than the
         terms  applicable to the Debt being  Refinanced,  provided further that
         the aggregate amount of all such Debt of the Company  permitted by this
         clause (g) shall not exceed $75,000,000.

For the  purposes  of this  Section  10.1,  any  Person  becoming  a  Restricted
Subsidiary  after the date  hereof  shall be  deemed,  at the time it  becomes a
Restricted  Subsidiary,  to have incurred all of its then outstanding  Debt, and
any Person  Refinancing  any Debt shall be deemed to have  incurred such Debt at
the time of such Refinancing.

        Section  10.2.  Guaranty of MLP Notes.  The Company  will not permit the
Guaranty  executed in favor of the holders of the 9-3/8% Senior  Secured  Notes,
due 2006 (the "MLP Senior Notes") issued by Ferrellgas Partners,  L.P. (the "MLP
Notes  Guaranty") to become  effective  pursuant to the terms thereof as long as
any obligations, indebtedness or otherwise, of the Company are outstanding under
the  Notes.  Accordingly,   the  earliest  date  that  the  Subsidiary  Guaranty
Effectiveness Date (as defined in the Indenture pursuant to which the MLP Senior
Notes were issued) can occur is 91 days following the indefeasible  discharge in
full  of all  of the  obligations  of the  Company  under  the  Notes  and  this
Agreement.

        Section 10.3.  Restricted  Subsidiary  Debt. The Company will not at any
time permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume, guarantee,  have outstanding,  or otherwise become or remain directly or
indirectly liable with respect to, any Debt other than:

                   (a)     Debt of a Restricted Subsidiary permitted pursuant
to Section 10.1(b);

                   (b)     Debt of a Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary;

                   (c) secured Debt of a Restricted  Subsidiary secured by Liens
         permitted by Section  10.4(h),  and any Refinancing  thereof,  provided
         that  (i)  the  principal  amount  of  the  Debt  resulting  from  such
         Refinancing  shall not exceed the outstanding  principal amount of such
         Debt being  Refinanced,  together with any accrued interest and premium
         with respect thereto and any and all costs and expenses related to such
         Refinancing,  (ii) the maturity  date of the Debt  resulting  from such
         Refinancing  shall not be earlier  than the  maturity  date of the Debt
         being  Refinanced,  (iii)  the  average  life to  maturity  of the Debt
         resulting from such Refinancing shall not be less than the average life
         to maturity of the Debt being  Refinanced  and (iv) no Default or Event
         of Default exists at the time of such Refinancing;

                   (d)  Debt of a  Restricted  Subsidiary  in  addition  to that
         otherwise  permitted by the foregoing  provisions of this Section 10.3,
         provided that on the date the Restricted Subsidiary incurs or otherwise
         becomes liable with respect to any such additional Debt and immediately
         after giving effect thereto and the concurrent  retirement of any other
         Debt,

                            (i)     no Default or Event of Default exists, and

                           (ii)   Priority   Debt  does  not  exceed   12.5%  of
Consolidated Assets.

         For the purposes of this Section 10.3, any Person becoming a Restricted
Subsidiary  after the date  hereof  shall be  deemed,  at the time it  becomes a
Restricted  Subsidiary,  to have incurred all of its then outstanding  Debt, and
any Person  Refinancing  any Debt shall be deemed to have  incurred such Debt at
the time of such  Refinancing.  Also for purposes of this Section 10.3, the Debt
of any  Restricted  Subsidiary to any  Wholly-Owned  Restricted  Subsidiary  the
shares of which are sold by the Company pursuant to Section  10.8(c)(1)(B) shall
be deemed to have been incurred at the time of such sale.

        Section  10.4.  Liens.  The Company will not, and will not permit any of
its Restricted  Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency  or otherwise)  any Lien on
or with respect to any property or asset  (including,  without  limitation,  any
document  or  instrument  in respect  of goods or  accounts  receivable)  of the
Company  or any  such  Restricted  Subsidiary,  whether  now  owned  or  held or
hereafter acquired,  or any income or profits therefrom,  or assign or otherwise
convey any right to receive income or profits, except:

                   (a)     Liens for property taxes, assessments or other
governmental charges which are not yet due and payable;

                   (b)  statutory  Liens of  landlords  and  Liens of  carriers,
         warehousemen,  mechanics,  materialmen and other similar Liens, in each
         case,  incurred in the ordinary course of business for sums not yet due
         and payable;

                   (c) Liens (other than any Lien imposed by ERISA)  incurred or
         deposits made in the ordinary course of business (i) in connection with
         workers' compensation, unemployment insurance and other types of social
         security  or  retirement  benefits,  or (ii) to  secure  (or to  obtain
         letters of credit that secure) the  performance  of tenders,  statutory
         obligations,  surety  bonds,  appeal  bonds,  bids,  leases (other than
         Capital Leases),  performance  bonds,  purchase,  construction or sales
         contracts and other similar  obligations,  in each case not incurred or
         made in  connection  with the  borrowing  of money,  the  obtaining  of
         advances or credit or the  payment of the  deferred  purchase  price of
         property;

                   (d) any attachment or judgment  Lien,  unless the judgment it
         secures shall not,  within 60 days after the entry  thereof,  have been
         discharged or execution  thereof  stayed pending  appeal,  or shall not
         have been  discharged  within 60 days after the  expiration of any such
         stay;

                   (e)  leases  or  subleases  granted  to  others,   easements,
         rights-of-way,  restrictions and other similar charges or encumbrances,
         in each case  incidental  to, and not  interfering  with,  the ordinary
         conduct  of the  business  of  the  Company  or  any of its  Restricted
         Subsidiaries,  provided  that  such  Liens  do not,  in the  aggregate,
         materially detract from the value of such property or impair the use of
         such property;

                   (f) Liens on  property or assets of the Company or any of its
         Restricted  Subsidiaries  securing  Debt  owing to the  Company or to a
         Wholly-Owned Restricted Subsidiary;

                   (g) Liens  existing on the date of the  Closing and  securing
         the Debt of the Company and its Restricted Subsidiaries shown as having
         "Security" pledged on Schedule 5.15;

                   (h)  any  Lien  created  to  secure  all or any  part  of the
         purchase price, or to secure Debt incurred or assumed to pay all or any
         part of the purchase price or cost of construction, of property (or any
         improvement  thereon)  acquired  or  constructed  by the  Company  or a
         Restricted Subsidiary after the date of the Closing, provided that

                            (i) any such Lien shall extend solely to the item or
                  items of such property (or improvement thereon) so acquired or
                  constructed,

                           (ii) the principal  amount of the Debt secured by any
                  such  Lien  shall at no time  exceed  an  amount  equal to the
                  lesser  of (A) the  cost  to the  Company  or such  Restricted
                  Subsidiary  of  the  property  (or  improvement   thereon)  so
                  acquired  or  constructed  and (B) the Fair  Market  Value (as
                  determined  in good  faith by the  board of  directors  of the
                  General Partner) of such property (or improvement  thereon) at
                  the time of such acquisition or construction, and

                          (iii) any such Lien shall be created contemporaneously
                  with,   or  within  270  days  after,   the   acquisition   or
                  construction of such property;

                   (i)     Liens on property or assets of any Restricted
Subsidiary securing Indebtedness owing to the Company or to a
         Wholly-Owned Restricted Subsidiary;

                   (j) any Lien  existing on  property  of a Person  immediately
         prior to its being  consolidated  with or merged  into the Company or a
         Restricted Subsidiary, or any Lien existing on any property acquired by
         the Company or any  Restricted  Subsidiary at the time such property is
         so acquired  (whether or not the Debt secured  thereby  shall have been
         assumed),  provided  that (i) no such Lien shall  have been  created or
         assumed  in  contemplation  of such  consolidation  or  merger  or such
         acquisition of property, and (ii) each such Lien shall extend solely to
         the item or items of property so acquired;

                   (k) Liens on personal property leased under leases (including
         Synthetic  Leases)  entered into by the Company which are accounted for
         as operating leases in accordance with GAAP;

                   (l) any  Lien  renewing,  extending  or  refunding  any  Lien
         permitted by paragraphs (g), (h) or (j) of this Section 10.4,  provided
         that (i) the principal  amount of Debt secured by such Lien immediately
         prior to such  extension,  renewal or refunding is not increased or the
         maturity thereof  reduced,  (ii) such Lien is not extended to any other
         property,  and (iii)  immediately  after  such  extension,  renewal  or
         refunding no Default or Event of Default would exist; and

                   (m) other Liens  securing  Debt not  otherwise  permitted  by
         paragraphs (a) through (l),  provided that on the date any such Lien is
         created, incurred or assumed and immediately after giving effect to the
         incurrence  of any related Debt and the  concurrent  retirement  of any
         other Debt, Priority Debt does not exceed 12.5% of Consolidated Assets.

For the  purposes  of this  Section  10.4,  any  Person  becoming  a  Restricted
Subsidiary after the date of this Agreement shall be deemed to have incurred all
of its then  outstanding  Liens at the time it becomes a Restricted  Subsidiary,
and any Person  Refinancing any Debt secured by any Lien shall be deemed to have
incurred such Lien at the time of such Refinancing.

        Section 10.5.    Restricted Payments.

         (a)  Limitation.  The Company  will not, and will not permit any of its
Restricted Subsidiaries to, at any time, declare or make, or incur any liability
to declare or make,  any Restricted  Payment  provided that the Company may make
one Restricted Payment in each fiscal quarter if:

                   (i)     the amount of such Restricted Payment would not
exceed the sum of

                            (A)     Available Cash for the immediately preceding
 fiscal quarter, plus

                            (B) the  lesser of (1) the  amount of any  Available
                  Cash for the first 45 days of such fiscal quarter, and (2) the
                  excess of the aggregate  amount of Debt that the Company could
                  have incurred under the Working Capital  Facility  pursuant to
                  Section  10.1(d) over the actual  amount of loans  outstanding
                  thereunder  at the  end of the  immediately  preceding  fiscal
                  quarter;

                  (ii) the  ratio of  Adjusted  Consolidated  Cash  Flow for the
         period of eight consecutive fiscal quarters ending on, or most recently
         ended prior to, such time to Adjusted Consolidated Interest Expense for
         such period is greater than 2.0 to 1; and

                 (iii)     no Default or Event of Default would exist;

provided,  further,  that the Company may declare or order, and make, pay or set
apart a Restricted Payment out of the Restricted Payment Reserve if at such time
(I) no  Default  or Event of  Default  exists,  and (II) the  ratio of  Adjusted
Consolidated  Cash Flow for the  period  of eight  consecutive  fiscal  quarters
ending on, or most recently  ended prior to, such time to Adjusted  Consolidated
Interest Expense for such period is greater than 1.25 to 1. For purposes of this
Section  10.5,   "Restricted   Payment   Reserve"  means,  as  of  the  date  of
determination,  the  excess of the  cumulative  amount,  if any,  of  Restricted
Payment  Contributions  generated  each prior  fiscal year  commencing  with the
fiscal year ended July 31,  1999 over the  cumulative  amount of all  Restricted
Payments  previously made from the Restricted  Payment Reserve,  and "Restricted
Payment  Contribution"  means an amount equal to the excess of (x)  Consolidated
Cash Flow for a fiscal year, over (y) the sum of (I) consolidated  cash interest
expense of the Company and its Restricted  Subsidiaries during such fiscal year,
plus (II) Maintenance Capital  Expenditures  incurred by the Company during such
fiscal year, plus (III) the cumulative amount of Restricted Payments made during
such fiscal year.

         (b) Time of Payment.  The Company  will not,  nor will it permit any of
its Subsidiaries  to, authorize a Restricted  Payment that is not payable within
60 days of authorization.

        Section  10.6.  Restrictions  on  Dividends  of  Subsidiaries,  Etc. The
Company will not,  and will not permit any of its  Restricted  Subsidiaries  to,
enter into any  agreement  which  would  restrict  any  Restricted  Subsidiary's
ability or right to pay dividends to, or make advances to or Investments in, the
Company or, if such Restricted  Subsidiary is not directly owned by the Company,
the "parent" Subsidiary of such Restricted Subsidiary.

        Section 10.7. Mergers and Consolidations. The Company will not, and will
not permit any  Restricted  Subsidiary to,  consolidate  with or be a party to a
merger with any other Person or convey,  transfer or lease  substantially all of
its assets in a single  transaction  or series of  transactions  to any  Person;
provided, however, that:

                   (a) any Restricted  Subsidiary may merge or consolidate  with
         or into the Company or any Wholly-Owned  Restricted  Subsidiary so long
         as in any merger or  consolidation  involving the Company,  the Company
         shall be the surviving or continuing corporation; and

                   (b) the  Company  may  consolidate  or merge  with any  other
         Person  if  (i)  the  surviving  entity  is a  solvent  partnership  or
         corporation  organized and existing under the laws of the United States
         of America or any State thereof,  (ii) the surviving  entity  expressly
         assumes in writing the Company's  obligations  under the Notes and this
         Agreement, (iii) at the time of such consolidation or merger, and after
         giving  effect  thereto,  no  Default  or Event of  Default  shall have
         occurred  and be  continuing,  and (iv) the  surviving  entity would be
         permitted by the provisions of Section 10.1(c) hereof to incur at least
         $1.00 of  additional  Debt owing to a Person  other  than a  Restricted
         Subsidiary of the surviving entity.

        Section 10.8. Sale of Assets;  Sale of Stock.  (a) The Company will not,
and will not permit any Restricted Subsidiary to, sell, lease, transfer, abandon
or otherwise  dispose of assets (except assets sold for fair market value (x) in
the  ordinary  course of  business  or (y) in a Sale and  Leaseback  Transaction
within 90 days following the acquisition or construction thereof); provided that
the foregoing restrictions do not apply to:

                   (1) the sale, lease,  transfer or other disposition of assets
         of a Restricted Subsidiary to the Company or a Wholly-Owned  Restricted
         Subsidiary;

                   (2)     the sale of assets for cash or other property to a
Person or Persons if all of the following  conditions are met:

                            (i) such  assets  (valued  at net book  value at the
                  time of such sale) do not,  together  with all other assets of
                  the  Company  and  its  Restricted   Subsidiaries   previously
                  disposed  of  (valued  at net  book  value at the time of such
                  disposition) (other than in the ordinary course of business or
                  in a Sale and Leaseback  Transaction  within 90 days following
                  the  acquisition  or  construction  thereof)  during  the same
                  fiscal  year  exceed  10%  of   Consolidated   Assets   (which
                  Consolidated  Assets shall be determined as of the last day of
                  the fiscal  year ending on, or most  recently  ended prior to,
                  such sale); and

                           (ii) in the opinion of the board of  directors of the
                  General  Partner,  the sale is for Fair Market Value and is in
                  the best interests of the Company.

         provided,  however,  that for  purposes of the  foregoing  calculation,
         there  shall not be included  any assets the  proceeds of which were or
         are  applied  within  180  days of the date of sale of such  assets  to
         either (A) the  acquisition  of fixed assets  useful and intended to be
         used in the operation of the business of the Company and its Restricted
         Subsidiaries  within the  limitations of Section 10.9 and having a Fair
         Market Value (as  determined in good faith by the board of directors of
         the  General  Partner) at least equal to that of the assets so disposed
         of, or (B) the  prepayment at any  applicable  prepayment  premium,  of
         Senior  Funded  Debt  selected  by the  Company of the  Company or such
         Restricted  Subsidiary  that sold such  assets.  It is  understood  and
         agreed by the Company  that any such  proceeds  paid and applied to the
         prepayment of the Notes as hereinabove provided shall be prepaid as and
         to the extent provided in Section 8.2.

If  any  Restricted  Subsidiary  is  designated  as an  Unrestricted  Subsidiary
pursuant  to  Section  7.4,  the total  amount of  property  of such  Restricted
Subsidiary  shall be deemed to be sold for purposes of this Section 10.8 at such
time.

         (b) The Company will not permit any  Restricted  Subsidiary to issue or
sell any shares of stock of any class  (including as "stock" for the purposes of
this  Section  10.8,  any  warrants,  rights or options to purchase or otherwise
acquire stock or other Securities exchangeable for or convertible into stock) of
such  Restricted   Subsidiary  to  any  Person  other  than  the  Company  or  a
Wholly-Owned  Restricted  Subsidiary,  except  for  the  purpose  of  qualifying
directors,  or except in  satisfaction  of the validly  pre-existing  preemptive
rights of minority  stockholders in connection with the simultaneous issuance of
stock to the Company and/or a Restricted  Subsidiary  whereby the Company and/or
such Restricted  Subsidiary  maintain their same proportionate  interest in such
Restricted Subsidiary.

         (c) The Company  will not sell,  transfer or  otherwise  dispose of any
shares of stock of any Restricted  Subsidiary  (except to qualify  directors) or
any  Debt of any  Restricted  Subsidiary,  and will not  permit  any  Restricted
Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a
Wholly-Owned Restricted Subsidiary) any shares of stock or any Debt of any other
Restricted Subsidiary, unless:

                   (1)     either

                            (A)  in  the  case  of  such  a  sale,  transfer  or
                  disposition  of shares of stock or Debt,  simultaneously  with
                  such sale, transfer,  or disposition,  all shares of stock and
                  all Debt of such  Restricted  Subsidiary  at the time owned by
                  the Company and by every other Restricted  Subsidiary shall be
                  sold,  transferred  or  disposed  of as an  entirety,  and the
                  Restricted  Subsidiary  being  disposed  of shall not have any
                  continuing  investment in the Company or any other  Restricted
                  Subsidiary not being simultaneously disposed of; or

                            (B)  in  the  case  of  such  a  sale,  transfer  or
                  disposition  of  shares of  stock,  at the time of such  sale,
                  transfer or disposition and after giving effect  thereto,  (i)
                  no Default or Event of Default  exists,  and (ii) the minority
                  interests in the Restricted Subsidiary the shares of which are
                  being disposed of, after giving effect to such sale,  transfer
                  or disposition, would not exceed 20%;

                   (2) said  shares of stock and Debt are sold,  transferred  or
         otherwise  disposed  of to a Person,  for a cash  consideration  and on
         terms  reasonably  deemed  by the  board of  directors  of the  General
         Partner to be adequate and satisfactory; and

                   (3) such sale or other  disposition  is  permitted by Section
10.8(a).

        Section 10.9. Nature of Business. Neither the Company nor any Restricted
Subsidiary will engage in any business if, as a result thereof,  the Company and
its Restricted  Subsidiaries would not be principally and predominantly  engaged
in the  business  of  retail  and  wholesale  propane  sales  and  purchases  of
inventory,  operation  of related  propane  distribution  networks  and  storage
facilities and the acquisitions, operations and maintenance of such facilities.

       Section 10.10.  Transactions  with  Affiliates.  The Company will not and
will not permit any  Restricted  Subsidiary to enter into directly or indirectly
any transaction or group of related  transactions  (including without limitation
the purchase, lease, sale or exchange of properties of any kind or the rendering
of any service) with any Affiliate,  except in the ordinary  course and pursuant
to the reasonable  requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable  terms no less favorable to the Company or
such Restricted Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.

       Section 10.11.  Certain  Refinancings.  Notwithstanding the provisions of
Section 10.1 or 10.3,  the Company will not, and will not permit any  Restricted
Subsidiary  to,  incur  any  Debt for the  purpose  of  refinancing  the Debt of
Ferrellgas  Partners,  L.P.,  a Delaware  limited  partnership  and the  limited
partner of the  Company,  or any other entity  owning an equity  interest in the
Company, provided that the Company may incur Debt for the purpose of refinancing
the Debt of Ferrellgas Partners,  L.P. so long as it is a limited partner in the
Company and so long as such incurrence is:

                   (a)     otherwise permitted by the provisions of Section
10.1; and

                   (b) after giving  effect to the issuance of such Debt and the
         concurrent  issuance or  retirement  of any other  Debt,  no Default or
         Event of Default exists and either:

                            (i) either Fitch IBCA,  Inc.  shall have  assigned a
                  rating of at least  BBB- to the  Notes,  or  Standard & Poor's
                  Ratings Group, a division of McGraw Hill,  shall have assigned
                  a rating of at least  BBB- to the Notes or  Moody's  Investors
                  Service, Inc. shall have assigned a rating of at least Baa3 to
                  the Notes; or

                           (ii) (A) the ratio of Consolidated  Cash Flow for the
                  period of four consecutive  fiscal quarters ending on, or most
                  recently  ended prior to, the date of issuance of such Debt to
                  Consolidated  Interest Expense is not less than 2.75 to 1; and
                  (B) the ratio of Consolidated  Debt to Consolidated  Cash Flow
                  for the period of four consecutive  fiscal quarters ending on,
                  or most recently ended prior to, such date is not greater than
                  4.50 to 1.

SECTION 11.          EVENTS OF DEFAULT.

         An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:

                   (a) the Company  defaults in the payment of any  principal or
         Make-Whole  Amount,  if any, on any Note when the same  becomes due and
         payable,  whether at maturity or at a date fixed for  prepayment  or by
         declaration or otherwise; or

                   (b) the Company  defaults  in the payment of any  interest on
         any Note for more than five  Business  Days after the same  becomes due
         and payable; or

                   (c)     the Company  defaults in the  performance  of or
compliance  with any term  contained in  Section 7.1(d)  or
         Section 10; or

                   (d) the Company  defaults in the performance of or compliance
         with any  term  contained  herein  (other  than  those  referred  to in
         paragraphs (a), (b) and (c) of this Section 11) and such default is not
         remedied within 30 days after the earlier of (i) a Responsible  Officer
         obtaining  actual  knowledge  of such  default  and  (ii)  the  Company
         receiving written notice of such default from any holder of a Note (any
         such written  notice to be  identified  as a "notice of default" and to
         refer specifically to this paragraph (d) of Section 11); or

                   (e) any  representation  or warranty made in writing by or on
         behalf  of  the  Company  or by any  officer  of the  Company  in  this
         Agreement  or  in  any  writing   furnished  in  connection   with  the
         transactions contemplated hereby proves to have been false or incorrect
         in any material respect on the date as of which made; or

                   (f)  (i)  the  Company  or any  Restricted  Subsidiary  is in
         default (as  principal or as guarantor or other  surety) in the payment
         of any principal of or premium or make-whole  amount or interest on any
         Indebtedness that is outstanding in an aggregate principal amount of at
         least  $10,000,000  beyond any period of grace  provided  with  respect
         thereto, or (ii) the Company or any Restricted Subsidiary is in default
         in the  performance  of or compliance  with any term of any evidence of
         any  Indebtedness in an aggregate  outstanding  principal  amount of at
         least  $10,000,000  or of any  mortgage,  indenture or other  agreement
         relating thereto or any other condition exists, and as a consequence of
         such default or condition  such  Indebtedness  has become,  or has been
         declared  (or  one  or  more  Persons  are  entitled  to  declare  such
         Indebtedness  to be),  due and  payable  before its stated  maturity or
         before  its  regularly  scheduled  dates  of  payment,  or  (iii)  as a
         consequence of the occurrence or continuation of any event or condition
         (other  than  the  passage  of  time  or the  right  of the  holder  of
         Indebtedness to convert such Indebtedness into equity  interests),  (x)
         the  Company  or any  Restricted  Subsidiary  has become  obligated  to
         purchase or repay  Indebtedness  before its regular  maturity or before
         its regularly  scheduled  dates of payment in an aggregate  outstanding
         principal  amount of at least  $10,000,000,  or (y) one or more Persons
         have the right to require the Company or any  Restricted  Subsidiary so
         to purchase or repay such Indebtedness; or

                   (g)  the  Company,  the  General  Partner  or any  Restricted
         Subsidiary  (i) is  generally  not  paying,  or admits in  writing  its
         inability to pay, its debts as they become due, (ii) files, or consents
         by answer or  otherwise  to the filing  against  it of, a petition  for
         relief  or  reorganization  or  arrangement  or any other  petition  in
         bankruptcy,  for  liquidation or to take  advantage of any  bankruptcy,
         insolvency,  reorganization,  moratorium  or other  similar  law of any
         jurisdiction,  (iii)  makes  an  assignment  for  the  benefit  of  its
         creditors,  (iv) consents to the appointment of a custodian,  receiver,
         trustee or other officer with similar powers with respect to it or with
         respect to any substantial part of its property,  (v) is adjudicated as
         insolvent or to be liquidated,  or (vi) takes action for the purpose of
         any of the foregoing; or

                   (h)  a  court  or   governmental   authority   of   competent
         jurisdiction  enters  an  order  appointing,  without  consent  by  the
         Company,  the  General  Partner or any  Subsidiary  of the  Company,  a
         custodian,  receiver, trustee or other officer with similar powers with
         respect to it or with respect to any substantial  part of its property,
         or  constituting an order for relief or approving a petition for relief
         or   reorganization   or  any  other  petition  in  bankruptcy  or  for
         liquidation or to take advantage of any bankruptcy or insolvency law of
         any   jurisdiction,   or  ordering  the   dissolution,   winding-up  or
         liquidation  of the Company,  the General  Partner or any Subsidiary of
         the Company,  or any such petition  shall be filed against the Company,
         the General  Partner or any Subsidiary of the Company and such petition
         shall not be dismissed or appointment discharged within 120 days; or

                   (i) a final  judgment or  judgments  for the payment of money
         aggregating in excess of $10,000,000  are rendered  against one or more
         of the Company and its Restricted  Subsidiaries and which judgments are
         not, within 60 days after entry thereof,  bonded,  discharged or stayed
         pending  appeal,  or are  not  discharged  within  60  days  after  the
         expiration of such stay; or

                   (j) If (i) any Plan shall fail to satisfy the minimum funding
         standards  of ERISA or the Code for any plan year or part  thereof or a
         waiver of such  standards or extension  of any  amortization  period is
         sought or  granted  under  Section  412 of the  Code,  (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably  expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under  Section  4042 of ERISA to  terminate  or  appoint a  trustee  to
         administer  any Plan or the PBGC shall have notified the Company or any
         ERISA  Affiliate  that  a  Plan  may  become  a  subject  of  any  such
         proceedings,   (iii)  the   aggregate   "amount  of  unfunded   benefit
         liabilities" (within the meaning of Section 4001(a)(18) of ERISA) under
         all Plans,  determined  in  accordance  with  Title IV of ERISA,  shall
         exceed $10,000,000,  (iv) the Company or any ERISA Affiliate shall have
         incurred or is reasonably  expected to incur any liability  pursuant to
         Title I or IV of ERISA or the penalty or excise tax  provisions  of the
         Code relating to employee  benefit plans,  (v) the Company or any ERISA
         Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
         any Restricted  Subsidiary  establishes or amends any employee  welfare
         benefit plan that provides post-employment welfare benefits in a manner
         that would  increase  the  liability  of the Company or any  Restricted
         Subsidiary  thereunder;  and any such  event  or  events  described  in
         clauses (i) through (vi) above,  either  individually  or together with
         any other such event or events,  could reasonably be expected to have a
         Material Adverse Effect.

As used in  Section  11(j),  the terms  "employee  benefit  plan" and  "employee
welfare benefit plan" shall have the respective  meanings assigned to such terms
in Section 3 of ERISA.

SECTION 12.          REMEDIES ON DEFAULT, ETC.

        Section 12.1.  Acceleration.  (a) If an Event of Default with respect to
the Company or the General Partner  described in paragraph (g) or (h) of Section
11 (other than an Event of Default  described in clause (i) of paragraph  (g) or
described in clause (vi) of paragraph (g) by virtue of the fact that such clause
encompasses  clause  (i) of  paragraph  (g)) has  occurred,  all the Notes  then
outstanding shall automatically become immediately due and payable.

         (b) If any other Event of Default has occurred and is  continuing,  any
holder or holders of more than 33-1/3% in  principal  amount of the Notes at the
time outstanding may at any time at its or their option, by notice or notices to
the Company,  declare all the Notes then  outstanding to be immediately  due and
payable.

         (c) If any  Event  of  Default  described  in  paragraph  (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time  outstanding  affected by such Event of Default may at any time,  at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.

         Upon any Note's  becoming  due and  payable  under this  Section  12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire  unpaid  principal  amount of such Note,  plus (i) all accrued and unpaid
interest  thereon and (ii) the Make-Whole  Amount  determined in respect of such
principal  amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest  or  further  notice,  all of  which  are  hereby  waived.  The  Company
acknowledges,  and the parties hereto agree,  that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically  provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are  accelerated  as a result of an Event of  Default,  is  intended  to provide
compensation for the deprivation of such right under such circumstances.

        Section  12.2.  Other  Remedies.  If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time  outstanding  may proceed to protect and enforce the rights
of such  holder  by an  action  at law,  suit in  equity  or  other  appropriate
proceeding,  whether for the specific  performance  of any  agreement  contained
herein or in any Note,  or for an  injunction  against a violation of any of the
terms hereof or thereof,  or in aid of the exercise of any power granted  hereby
or thereby or by law or otherwise.

        Section 12.3. Rescission. At any time after any Notes have been declared
due and payable  pursuant to clause (b) or (c) of Section  12.1,  the holders of
not less than 51% in principal amount of the Notes then outstanding,  by written
notice to the  Company,  may  rescind  and annul  any such  declaration  and its
consequences if (a) the Company has paid all overdue  interest on the Notes, all
principal  of and  Make-Whole  Amount,  if any,  on any  Notes  that are due and
payable  and are  unpaid  other  than by  reason  of such  declaration,  and all
interest on such overdue  principal and Make-Whole  Amount,  if any, and (to the
extent  permitted  by  applicable  law) any  overdue  interest in respect of the
Notes,  at the Default Rate, (b) all Events of Default and Defaults,  other than
non-payment   of  amounts  that  have  become  due  solely  by  reason  of  such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no  judgment  or decree  has been  entered  for the  payment  of any  monies due
pursuant  hereto or to the Notes. No rescission and annulment under this Section
12.3 will  extend to or affect  any  subsequent  Event of  Default or Default or
impair any right consequent thereon.

        Section  12.4.  No Waivers or Election of  Remedies,  Expenses,  Etc. No
course  of  dealing  and no  delay  on the  part of any  holder  of any  Note in
exercising  any right,  power or remedy  shall  operate  as a waiver  thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy  conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right,  power or remedy  referred to herein or therein
or now or  hereafter  available  at law,  in equity,  by  statute or  otherwise.
Without  limiting the  obligations  of the Company under Section 15, the Company
will pay to the holder of each Note on demand  such  further  amount as shall be
sufficient  to cover all costs  and  expenses  of such  holder  incurred  in any
enforcement or collection under this Section 12, including,  without limitation,
reasonable attorneys' fees, expenses and disbursements.

SECTION 13.          REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

        Section  13.1.  Registration  of Notes.  The  Company  shall keep at its
principal  executive  office a register for the registration and registration of
transfers  of Notes.  The name and  address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes  shall  be  registered  in such  register.  Prior to due  presentment  for
registration of transfer,  the Person in whose name any Note shall be registered
shall be deemed and  treated as the owner and holder  thereof  for all  purposes
hereof,  and the Company shall not be affected by any notice or knowledge to the
contrary.  The  Company  shall  give  to  any  holder  of  a  Note  that  is  an
Institutional  Investor promptly upon request  therefor,  a complete and correct
copy of the names  and  addresses  of all  registered  holders  of Notes of each
series.

        Section 13.2. Transfer and Exchange of Notes. Upon surrender of any Note
at the principal executive office of the Company for registration of transfer or
exchange  (and in the case of a surrender  for  registration  of transfer,  duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered  holder of such Note or its attorney  duly  authorized in writing and
accompanied  by the address for notices of each  transferee of such Note or part
thereof),  the Company  shall  execute and  deliver,  at the  Company's  expense
(except as provided  below),  one or more new Notes (as  requested by the holder
thereof) of the same  series in exchange  therefor,  in an  aggregate  principal
amount equal to the unpaid principal  amount of the surrendered  Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of the series of Notes being  surrendered as set forth
in Exhibit  1-A,  1-B,  and 1-C, as the case may be. Each such new Note shall be
dated and bear interest from the date to which  interest shall have been paid on
the surrendered  Note or dated the date of the  surrendered  Note if no interest
shall  have  been  paid  thereon.  The  Company  may  require  payment  of a sum
sufficient to cover any stamp tax or  governmental  charge imposed in respect of
any such transfer of Notes.  Notes shall not be transferred in  denominations of
less than  $100,000,  provided that if necessary to enable the  registration  of
transfer  by a holder  of its  entire  holding  of  Notes,  one Note may be in a
denomination of less than $100,000. Any transferee,  by its acceptance of a Note
registered  in its name (or the name of its  nominee),  shall be  deemed to have
made the representation set forth in Section 6.2.

        Section  13.3.  Replacement  of Notes.  Upon  receipt by the  Company of
evidence reasonably  satisfactory to it of the ownership of and the loss, theft,
destruction  or mutilation of any Note (which  evidence shall be, in the case of
an  Institutional  Investor,  notice  from such  Institutional  Investor of such
ownership and such loss, theft, destruction or mutilation), and

                   (a) in the case of loss,  theft or destruction,  of indemnity
         reasonably satisfactory to it (provided that if the holder of such Note
         is, or is a nominee for, an original  Purchaser or another  holder of a
         Note with a minimum net worth of at least  $50,000,000,  such  Person's
         own   unsecured   agreement  of   indemnity   shall  be  deemed  to  be
         satisfactory), or

                   (b)     in the case of mutilation, upon surrender and
cancellation thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series as such lost, stolen, destroyed or mutilated Note, dated
and bearing  interest  from the date to which  interest  shall have been paid on
such lost,  stolen,  destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

SECTION 14.          PAYMENTS ON NOTES.

        Section 14.1.  Place of Payment.  Subject to Section  14.2,  payments of
principal,  Make-Whole  Amount, if any, and interest becoming due and payable on
the Notes shall be made in  Liberty,  Missouri  at the  principal  office of the
Company in such  jurisdiction.  The Company  may at any time,  by notice to each
holder of a Note, change the place of payment of the Notes so long as such place
of  payment  shall  be  either  the  principal  office  of the  Company  in such
jurisdiction  or the  principal  office  of a bank  or  trust  company  in  such
jurisdiction.

        Section  14.2.  Home Office  Payment.  So long as any  Purchaser or such
Purchaser's  nominee  shall  be the  holder  of any  Note,  and  notwithstanding
anything contained in Section 14.1 or in such Note to the contrary,  the Company
will pay all sums becoming due on such Note for principal, Make-Whole Amount, if
any,  and interest by the method and at the address  specified  for such purpose
for such  Purchaser  on  Schedule  A, or by such  other  method or at such other
address as such Purchaser  shall have from time to time specified to the Company
in writing for such purpose,  without the presentation or surrender of such Note
or the making of any notation  thereon,  except that upon written request of the
Company  made  concurrently  with  or  reasonably   promptly  after  payment  or
prepayment in full of any Note,  such  Purchaser  shall  surrender such Note for
cancellation,  reasonably promptly after any such request, to the Company at its
principal  executive office or at the place of payment most recently  designated
by the Company pursuant to Section 14.1. Prior to any sale or other  disposition
of any Note held by any  Purchaser or such  Purchaser's  nominee such  Purchaser
will,  at its  election,  either  endorse  thereon the amount of principal  paid
thereon and the last date to which  interest  has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2.  The  Company  will  afford  the  benefits  of  this  Section  14.2 to any
Institutional  Investor  that is the direct or indirect  transferee  of any Note
purchased  by any  Purchaser  under  this  Agreement  and that has made the same
agreement relating to such Note as such Purchaser has made in this Section 14.2.

SECTION 15.          EXPENSES, ETC.

        Section  15.1.  Transaction  Expenses.  Whether or not the  transactions
contemplated hereby are consummated, the Company will pay all costs and expenses
(including  reasonable attorneys' fees of one special counsel and, if reasonably
required,  local or other counsel)  incurred by the Purchasers or the holders of
Notes  in  connection  with  such   transactions  and  in  connection  with  any
amendments,  waivers or consents  under or in respect of this  Agreement  or the
Notes (whether or not such amendment,  waiver or consent becomes effective). The
Company will pay all costs and expenses (including reasonable attorneys' fees of
a special counsel and, if reasonably required,  local or other counsel) incurred
by each Purchaser or holder of a Note in connection  with enforcing or defending
(or  determining  whether or how to enforce  or  defend)  any rights  under this
Agreement or the Notes or in  responding  to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement or the
Notes,  or by reason  of being a holder  of any  Note,  as well as the costs and
expenses,  including  financial  advisors' fees, incurred in connection with the
insolvency or bankruptcy of the Company or any Subsidiary or in connection  with
any work-out or restructuring of the transactions contemplated hereby and by the
Notes.  The Company will pay, and will save each Purchaser and each other holder
of a Note harmless from, all claims in respect of any fees, costs or expenses if
any, of brokers and finders  (other  than those  retained by such  Purchaser  or
holder).

        Section  15.2.  Survival.  The  obligations  of the  Company  under this
Section 15 will  survive the payment or transfer of any Note,  the  enforcement,
amendment  or waiver of any  provision of this  Agreement or the Notes,  and the
termination of this Agreement.

SECTION 16.        SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

         All representations  and warranties  contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any  Purchaser  of any Note or portion  thereof or  interest  therein and the
payment of any Note, and may be relied upon by any subsequent  holder of a Note,
regardless  of any  investigation  made  at any  time  by or on  behalf  of such
Purchaser  or any  other  holder  of a Note.  All  statements  contained  in any
certificate  or  other  instrument  delivered  by or on  behalf  of the  Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement.  Subject to the preceding sentence, this Agreement
and the Notes  embody  the  entire  agreement  and  understanding  between  each
Purchaser and the Company and supersede all prior agreements and  understandings
relating to the subject matter hereof.

SECTION 17.          AMENDMENT AND WAIVER.

        Section 17.1. Requirements. This Agreement and the Notes may be amended,
and the  observance  of any term  hereof or of the  Notes may be waived  (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders,  except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof,  or any defined term
(as it is used therein),  will be effective as to any Purchaser unless consented
to by such  Purchaser  in  writing,  and (b) no such  amendment  or waiver  may,
without the written  consent of the holder of each Note at the time  outstanding
affected  thereby,  (i)  subject to the  provisions  of Section 12  relating  to
acceleration  or  rescission,  change  the amount or time of any  prepayment  or
payment  of  principal  of, or reduce  the rate or change the time of payment or
method of  computation  of interest or of the  Make-Whole  Amount on, the Notes,
(ii) change the  percentage of the principal  amount of the Notes the holders of
which are required to consent to any such  amendment  or waiver,  or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.

        Section 17.2.    Solicitation of Holders of Notes.

         (a)  Solicitation.  The Company  will  provide each holder of the Notes
(irrespective  of  the  amount  of  Notes  then  owned  by it)  with  sufficient
information,  sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and  considered  decision with respect to
any proposed  amendment,  waiver or consent in respect of any of the  provisions
hereof or of the Notes.  The Company will  deliver  executed or true and correct
copies of each amendment,  waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding  Notes  promptly  following the
date on which it is  executed  and  delivered  by, or  receives  the  consent or
approval of, the requisite holders of Notes.

         (b) Payment.  The Company will not directly or indirectly  pay or cause
to be paid  any  remuneration,  whether  by way of  supplemental  or  additional
interest,  fee or otherwise,  or grant any  security,  to any holder of Notes as
consideration  for or as an  inducement  to the  entering  into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof or of
the Notes  unless  such  remuneration  is  concurrently  paid,  or  security  is
concurrently  granted,  on the same terms,  ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.

        Section 17.3. Binding Effect,  Etc. Any amendment or waiver consented to
as  provided in this  Section 17 applies  equally to all holders of Notes and is
binding  upon them and upon each future  holder of any Note and upon the Company
without  regard to whether such Note has been marked to indicate such  amendment
or waiver.  No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising  any rights  hereunder or
under any Note  shall  operate  as a waiver of any  rights of any holder of such
Note. As used herein,  the term "this  Agreement" and  references  thereto shall
mean this Agreement as it may from time to time be amended or supplemented.

        Section  17.4.  Notes Held by  Company,  Etc.  Solely for the purpose of
determining  whether the holders of the  requisite  percentage  of the aggregate
principal  amount  of  Notes  then  outstanding  approved  or  consented  to any
amendment,  waiver or consent to be given under this Agreement or the Notes,  or
have  directed  the taking of any action  provided  herein or in the Notes to be
taken  upon the  direction  of the  holders  of a  specified  percentage  of the
aggregate  principal  amount  of  Notes  then  outstanding,  Notes  directly  or
indirectly  owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.

SECTION 18.          NOTICES.

         All notices  and  communications  provided  for  hereunder  shall be in
writing  and sent (a) by  telefacsimile  if the  sender  on the same day sends a
confirming  copy of such  notice  by a  recognized  overnight  delivery  service
(charges  prepaid),  or (b) by registered or certified  mail with return receipt
requested (postage prepaid),  or (c) by a recognized  overnight delivery service
(with charges prepaid). Any such notice must be sent:

                   (i) if to a Purchaser or such  Purchaser's  nominee,  to such
         Purchaser or such Purchaser's nominee at the address specified for such
         communications  for such Purchaser  signature on Schedule A, or at such
         other address as such Purchaser or such Purchaser's  nominee shall have
         specified to the Company in writing,

                  (ii) if to any other  holder of any  Note,  to such  holder at
         such address as such other  holder shall have  specified to the Company
         in writing, or

                 (iii) if to the  Company,  to the  Company at its  address  set
         forth  at the  beginning  hereof  to  the  attention  of the  Assistant
         Treasurer, or at such other address as the Company shall have specified
         to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19.          REPRODUCTION OF DOCUMENTS.

         This Agreement and all documents relating thereto,  including,  without
limitation,  (a)  consents,  waivers and  modifications  that may  hereafter  be
executed,  (b) documents  received by each Purchaser at the Closing  (except the
Notes  themselves),  and  (c)  financial  statements,   certificates  and  other
information  previously  or  hereafter  furnished  to  each  Purchaser,  may  be
reproduced  by  such  Purchaser  by any  photographic,  photostatic,  microfilm,
microcard,  miniature  photographic  or other similar process and such Purchaser
may  destroy  any  original  document  so  reproduced.  The  Company  agrees and
stipulates   that,  to  the  extent   permitted  by  applicable  law,  any  such
reproduction  shall be  admissible  in  evidence as the  original  itself in any
judicial  or  administrative  proceeding  (whether  or not  the  original  is in
existence and whether or not such reproduction was made by such Purchaser in the
regular  course  of  business)  and  any   enlargement,   facsimile  or  further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not  prohibit  the  Company  or any other  holder of Notes from
contesting  any such  reproduction  to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.

SECTION 20.          CONFIDENTIAL INFORMATION.

         For the purposes of this Section 20,  "Confidential  Information" means
information  delivered  to any  Purchaser  by or on behalf of the Company or any
Subsidiary  in connection  with the  transactions  contemplated  by or otherwise
pursuant to this  Agreement  that is  proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified in writing when received by
such  Purchaser  as  being  confidential  information  of the  Company  or  such
Subsidiary,  provided that such term does not include  information  that (a) was
publicly known or otherwise  known to such  Purchaser  prior to the time of such
disclosure,  (b) subsequently  becomes publicly known through no act or omission
by such Purchaser or any Person acting on such Purchaser's behalf, (c) otherwise
becomes known to such Purchaser other than through  disclosure by the Company or
any  Subsidiary  or (d)  constitutes  financial  statements  delivered  to  such
Purchaser  under  Section  7.1  that  are  otherwise  publicly  available.  Each
Purchaser will maintain the confidentiality of such Confidential  Information in
accordance  with  procedures  adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser,  provided
that such Purchaser may deliver or disclose Confidential Information to (i) such
Purchaser's directors,  trustees,  officers,  employees,  agents,  attorneys and
affiliates   (to  the  extent  such   disclosure   reasonably   relates  to  the
administration of the investment  represented by such Purchaser's  Notes),  (ii)
such Purchaser's financial advisors and other professional advisors who agree to
hold confidential the Confidential Information  substantially in accordance with
the terms of this  Section  20,  (iii) any  other  holder of any Note,  (iv) any
Institutional Investor to which such Purchaser sells or offers to sell such Note
or any part thereof or any  participation  therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (v) any Person from which such Purchaser  offers
to  purchase  any  security of the Company (if such Person has agreed in writing
prior  to its  receipt  of such  Confidential  Information  to be  bound  by the
provisions of this Section 20), (vi) any federal or state  regulatory  authority
having  jurisdiction  over such  Purchaser,  (vii) the National  Association  of
Insurance   Commissioners  or  any  similar  organization,   or  any  nationally
recognized  rating  agency  that  requires  access  to  information  about  such
Purchaser's  investment  portfolio,  or (viii)  any other  Person to which  such
delivery or disclosure may be necessary or appropriate (w) to effect  compliance
with any law, Rule,  regulation or order  applicable to such  Purchaser,  (x) in
response to any  subpoena or other legal  process,  (y) in  connection  with any
litigation to which such  Purchaser is a party or (z) if an Event of Default has
occurred  and is  continuing,  to  the  extent  such  Purchaser  may  reasonably
determine  such delivery and  disclosure to be necessary or  appropriate  in the
enforcement  or for  the  protection  of the  rights  and  remedies  under  such
Purchaser's  Notes and this Agreement.  Each holder of a Note, by its acceptance
of a Note,  will be deemed to have  agreed to be bound by and to be  entitled to
the benefits of this Section 20 as though it were a party to this Agreement.  On
reasonable  request by the Company in connection with the delivery to any holder
of a Note of  information  required to be  delivered  to such holder  under this
Agreement or  requested  by such holder  (other than a holder that is a party to
this  Agreement or its nominee),  such holder will enter into an agreement  with
the Company embodying the provisions of this Section 20.

SECTION 21.          SUBSTITUTION OF PURCHASER.

         Each  Purchaser  shall  have the  right to  substitute  any one of such
Purchaser's  Affiliates  as the  purchaser of the Notes that such  Purchaser has
agreed to purchase  hereunder,  by written  notice to the Company,  which notice
shall be signed by both such  Purchaser and such  Purchaser's  Affiliate,  shall
contain  such  Affiliate's  agreement  to be bound by this  Agreement  and shall
contain a  confirmation  by such Affiliate of the accuracy with respect to it of
the  representations  set forth in  Section  6.  Upon  receipt  of such  notice,
wherever  the word  "Purchaser"  is used in this  Agreement  (other than in this
Section  21),  such word shall be deemed to refer to such  Affiliate  in lieu of
such  Purchaser.  In the  event  that  such  Affiliate  is so  substituted  as a
purchaser  hereunder and such Affiliate  thereafter  transfers to such Purchaser
all of the Notes then held by such  Affiliate,  upon  receipt by the  Company of
notice of such transfer, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have
all the rights of an original holder of the Notes under this Agreement.

SECTION 22.          MISCELLANEOUS.

        Section 22.1. Successors and Assigns. All covenants and other agreements
contained in this  Agreement  by or on behalf of any of the parties  hereto bind
and inure to the benefit of their respective  successors and assigns (including,
without  limitation,  any  subsequent  holder of a Note) whether so expressed or
not.

        Section  22.2.  Payments  Due on  Non-Business  Days.  Anything  in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a  Business  Day  shall  be made on the next  succeeding  Business  Day  without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

        Section  22.3.  Severability.  Any provision of this  Agreement  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

        Section  22.4.  Construction.  Each covenant  contained  herein shall be
construed  (absent  express  provision to the contrary) as being  independent of
each other covenant  contained  herein, so that compliance with any one covenant
shall  not  (absent  such an  express  contrary  provision)  be deemed to excuse
compliance with any other covenant.  Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking,  such
provision  shall  be  applicable  whether  such  action  is  taken  directly  or
indirectly by such Person.

        Section 22.5. Counterparts. This Agreement may be executed in any number
of  counterparts,  each of which shall be an original but all of which  together
shall  constitute one  instrument.  Each  counterpart may consist of a number of
copies hereof,  each signed by less than all, but together signed by all, of the
parties hereto.

        Section  22.6.  Governing  Law.  This  Agreement  shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of Illinois excluding  choice-of-law  principles of the law
of such State that would require the  application  of the laws of a jurisdiction
other than such State.

                                    * * * * *

<PAGE>

         The  execution  hereof by the  Purchasers  shall  constitute a contract
among the Company and the Purchasers for the uses and purposes  hereinabove  set
forth.  This  Agreement  may be  executed  in any number of  counterparts,  each
executed  counterpart  constituting  an  original  but  all  together  only  one
agreement.

                                Very truly yours,

                                FERRELLGAS, L.P.

By Ferrellgas, Inc., its general partner

By____________________________________________________
Its___________________________________________________

<PAGE>

Accepted as of the first date written above:
                                                          [VARIATION]

By
Name:
Title:

<PAGE>

                                   SCHEDULE A
                          (to Note Purchase Agreement)
<TABLE>
<CAPTION>

                                                                         SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

<S>                                                                         <C>                          <C>
THE NORTHWESTERN MUTUAL LIFE                                           Series A                          --
  INSURANCE COMPANY                                                    Series B                      $19,000,000
720 East Wisconsin Avenue                                              Series C                      $9,000,000
Milwaukee, Wisconsin  53202
Attention:  Securities Department
Telecopier Number:  (414) 299-7124

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN, principal, premium or interest) to:

         Bankers Trust Company (ABA #0210-01033)
         16 Wall Street
         Insurance Unit, 4th Floor
         New York, New York  10005

         for credit to:  The Northwestern Mutual Life Insurance Company
         Account Number 00-000-027

Notices

     All notices and  communications  to be addressed as first  provided  above,
except  notices with respect to payments and written  confirmation  of each such
payment to be addressed,  Attention:  Investment  Operations,  Fax Number: (414)
299-5714.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  39-0509570

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

THE NORTHWESTERN MUTUAL LIFE                                           Series A                          --
  INSURANCE COMPANY FOR ITS GROUP                                      Series B                      $1,000,000
  ANNUITY SEPARATE ACCOUNT                                             Series C                      $1,000,000
720 East Wisconsin Avenue
Milwaukee, Wisconsin  53202
Attention:  Securities Department
Telecopier Number:  (414) 299-7124
</TABLE>

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN, principal, premium or interest) to:

         Bankers Trust Company
         ABA #0210-01033
         16 Wall Street
         Insurance Unit, 4th Floor
         New York, New York  10005

         for credit to:  The Northwestern Mutual Life Insurance Company, for its
         Group Annuity Separate Account
         Account Number 00-000-027

Notices

     All notices and  communications  to be addressed as first  provided  above,
except  notices with respect to payments and written  confirmation  of each such
payment to be addressed,  Attention:  Investment  Operations,  Fax Number: (414)
299-5714.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  39-0509570

<PAGE>

<TABLE>
<CAPTION>
                                                                         SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

<S>                                                                        <C>                           <C>
PROVIDENT LIFE AND ACCIDENT                                            Series A                          --
  INSURANCE COMPANY                                                    Series B                          --
c/o Provident Investment Management, LLC                               Series C                      $10,000,000
One Fountain Square
Chattanooga, Tennessee  37402
Attention:  Private Placements
Telefacsimile:  (423) 755-1172
Confirmation:  (423) 755-3351

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately available funds to:

         CUDD & CO.
         c/o The Chase Manhattan Bank, N.A.
         New York, New York
         ABA #021-000-021
         SSG Private Income Processing
         A/C #900-9-000200
         For credit to:  Provident Life and Accident Insurance Company
         Custodial Account Number G06704

         Please reference: Issuer:  Ferrellgas, L.P.
                                    PPN:  31529# AC 7
                                    Coupon:
                                    Maturity:
                                    Principal=$__________
                                    Interest=$___________

Notices

All notices and  communications,  including notices with respect to payments and
written  confirmation  of each such payment,  to be addressed as first  provided
above.

Name of Nominee in which Notes are to be issued:  CUDD & CO.

Taxpayer I.D. Number for CUDD & Co.:  13-6022143

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

UNUM LIFE INSURANCE COMPANY OF                                         Series C                      $10,000,000
  AMERICA
2211 Congress Street
Portland, Maine  04122-0590
Attention:  Bond Investment Division
Telefacsimile Number:  (207) 770-4000

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately available funds to:

         CUDD & CO.
         c/o The Chase Manhattan Bank, N.A.
         New York, New York
         ABA #021-000-021
         SSG Private Income Processing
         A/C #900-9-000200
         Custodial Account Number G08287

         Please reference: Issuer:  Ferrellgas, L.P.
                                    PPN:  31529# AC 7
                                    Coupon:
                                    Maturity:
                                    Principal=$__________
                                    Interest=$___________

Notices

All notices and  communications,  including notices with respect to payments and
written  confirmation  of each such payment,  to be addressed as first  provided
above.

Name of Nominee in which Notes are to be issued:  CUDD & CO.

Taxpayer I.D. Number for CUDD & Co.:  13-6022143

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

NATIONWIDE LIFE INSURANCE COMPANY                                      SERIES B                      $12,000,000
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities

Payments

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         The Bank of New York
         ABA #021-000-018
         BNF:  IOC566
         F/A/O Nationwide Life Insurance Company
         Attention:  P&I Department
         PPN 31529# AB 9
         Security Description:  ______________________

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Nationwide Life Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey  07195
         Attention:  P&I Department

         With a copy to:

         Nationwide Life Insurance Company
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio  43215-2220
         Attention:  Investment Accounting

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  31-4156830

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

NATIONWIDE MUTUAL INSURANCE COMPANY                                    Series B                      $5,000,000
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities

Payments

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         The Bank of New York
         ABA #021-000-018
         BNF:  IOC566
         F/A/O Nationwide Mutual Insurance Company
         Attention:  P&I Department
         PPN  31529# AB 9
         Security Description:  ____________________

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Nationwide Mutual Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey  07195
         Attention:  P&I Department

         With a copy to:

         Nationwide Mutual Insurance Company
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio  43215-2220
         Attention:  Investment Accounting

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  31-4177100

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

NATIONWIDE MUTUAL FIRE INSURANCE                                       Series B                      $3,000,000
  COMPANY
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities

Payments

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         The Bank of New York
         ABA #021-000-018
         BNF:  IOC566
         F/A/O Nationwide Mutual Fire Insurance Company
         Attention:  P&I Department
         PPN 31529# AB 9
         Security Description:  ________________

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Nationwide Mutual Fire Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey  07195
         Attention:  P&I Department

         With a copy to:

         Nationwide Mutual Fire Insurance Company
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio  43215-2220
         Attention:  Investment Accounting

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  31-4177110

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

JEFFERSON-PILOT LIFE INSURANCE COMPANY                                 Series A                          --
P. O. Box 21008                                                        Series B                          --
Greensboro, North Carolina  27420                                      Series C                      $10,000,000
Attention:  Securities Administration - 3630
Telefacsimile:  (336) 691-3025
Overnight Mail Address:
100 North Greene Street
Greensboro, North Carolina  27401

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AC 7, principal, interest or premium) to:

         Jefferson-Pilot Life Insurance Company
         c/o The Bank of New York
         ABA #021 000 018  BNF:  IOC566
         Attention:  P&I Department

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment, to be addressed to:

         Jefferson-Pilot Life Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey  07195
         Attention:  P&I Department

with duplicate notice to  Jefferson-Pilot  Life Insurance Company at the address
first provided above.

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  56-0359860

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

ALEXANDER HAMILTON LIFE INSURANCE                                      Series A                          --
  COMPANY OF AMERICA                                                   Series B                      $10,000,000
P. O. Box 21008                                                        Series C                          --
Greensboro, North Carolina  27420
Attention:  Securities Administration - 3630
Telefacsimile:  (336) 691-3025
Overnight Mail Address:
100 North Greene Street
Greensboro, North Carolina  27401

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, interest or premium) to:

         Alexander Hamilton Life Insurance Company of America
         c/o The Bank of New York
         ABA #021 000 018  BNF:  IOC566
         Attention:  P&I Department

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment, to be addressed to:

         Alexander Hamilton Life Insurance Company of America
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey  07195
         Attention:  P&I Department

with duplicate notice to Alexander Hamilton Life Insurance Company of America at
the address first provided above.

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  56-1311063

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

TEACHERS INSURANCE AND ANNUITY                                         Series A                          --
  ASSOCIATION OF AMERICA                                               Series B                          --
730 THIRD AVENUE                                                       Series C                      $15,000,000
New York, New York  10017-3263

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas,  L.P. and as to interest rate, security description,  maturity date,
PPN 31529# AC 7, principal, premium or interest) to:

         The Chase Manhattan Bank
         ABA #021000021
         New York, New York
         Account of:  Teachers Insurance and Annuity Association of America
         Account Number 900-9-000200

         For further credit to:  Account Number G07040
         On order of:  Ferrellgas, L.P., PPN 31529# AC 7

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Teachers Insurance and Annuity Association of America
         730 Third Avenue
         New York, New York  10017-3206
         Attention:  Securities Accounting Division
         Telephone:  (212) 916-6004
         Telefacsimile:  (212) 916-6955

All other notices and communications to be addressed to:

         Teachers Insurance and Annuity Association of America
         730 Third Avenue, 4th Floor
         New York, New York  10017-3206
         Attention:  Securities Division, Archibald Team, Felicissimo Falcon
         Telephone:  (212) 916-6210  or (212) 490-9000 (General Number)
         Telefacsimile:  (212) 916-6582 (Team Fax Number)

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  13-1624203

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

MASSACHUSETTS MUTUAL LIFE INSURANCE                                    Series  A                     $3,000,000
  COMPANY                                                              Series  B                     $3,000,000
1295 State Street                                                      Series C                      $3,000,000
Springfield, Massachusetts  01111
Attention:  Securities Investment Division

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN, principal, premium or interest) to:

         Citibank, N.A. (ABA #021000089)
         111 Wall Street
         New York, New York  10043

         for credit to: MassMutual Long Term Pool  Account Number 4067-3488
         Re:  Description of security, principal and interest split

With  telephone  advice of  payment to the  Securities  Custody  and  Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3561.

Notices

All notices and  communications to be addressed as first provided above,  except
notices with respect to payments, to be addressed Attention:  Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  04-1590850

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

MASSACHUSETTS MUTUAL LIFE INSURANCE                                    Series  A                      $800,000
  COMPANY                                                              Series  B                      $800,000
1295 State Street                                                      Series C                       $800,000
Springfield, Massachusetts  01111
Attention:  Securities Investment Division

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN, principal, premium or interest) to:

         Chase Manhattan Bank, N.A. (ABA #021000021)
         4 Chase MetroTech Center
         New York, New York  10081

         for credit to: MassMutual Pension Management Account Number 910-2594018
         Re:  Description of security, principal and interest split

With  telephone  advice of  payment to the  Securities  Custody  and  Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3561.

Notices

All notices and  communications to be addressed as first provided above,  except
notices with respect to payments, to be addressed Attention:  Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  04-1590850

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

C.M. LIFE INSURANCE COMPANY                                            Series A                       $700,000
c/o Massachusetts Mutual Life Insurance Company                        Series B                       $700,000
1295 State Street                                                      Series C                       $700,000
Springfield, Massachusetts  01111
Attention:  Securities Investment Division

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P., and as to interest rate, security, description, maturity date,
PPN, principal, premium or interest) to:

         Citibank, N.A.
         111 Wall Street
         New York, New York  10043
         ABA #021000089

         for credit to:  Segment 43 - Universal Life Account Number 4068-6561
         Re:  Description of security, principal and interest split

with  telephone  advice of  payment to the  Securities  Custody  and  Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3561.

Notices

All notices and  communications to be addressed as first provided above,  except
notices with respect to payments, to be addressed Attention:  Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  06-1041383

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

MASSACHUSETTS MUTUAL LIFE INSURANCE                                    Series  A                      $500,000
  COMPANY                                                              Series  B                      $500,000
1295 State Street                                                      Series C                       $500,000
Springfield, Massachusetts  01111
Attention:  Securities Investment Division

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN, principal, premium or interest) to:

         Chase Manhattan Bank, N.A. (ABA #021000021)
         4 Chase MetroTech Center
         New York, New York  10081

         for credit to: IFM Non-Traditional Account Number 910-2509073
         Re:  Description of security, principal and interest split

With  telephone  advice of  payment to the  Securities  Custody  and  Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3561.

Notices

All notices and  communications to be addressed as first provided above,  except
notices with respect to payments, to be addressed Attention:  Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  04-1590850

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

THE GUARDIAN LIFE INSURANCE COMPANY                                    Series A                          --
   OF AMERICA                                                          Series B                      $15,000,000
7 HANOVER SQUARE                                                       Series C                          --
New York, New York  10004-2616
Attention:  Tom Donohue, Investment Department 20-D
Fax Number:  (212) 919-2656/2658

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         The Chase Manhattan Bank
         FED ABA #021000021
         CHASE/NYC/CTR/BNF
         A/C 900-9-000200
         Reference  A/C #G05978,  Guardian Life And the name and CUSIP for which
         payment is being made

Notices

All notices of payments,  on or in respect of the Notes and written confirmation
of each such payment to:

         The Guardian Life Insurance Company of America
         7 Hanover Square
         New York, New York  10004-2616
         Attention:  Investment Accounting Dept. 17-B
         Fax Number:  (212) 598-7011

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  CUDD & CO.

Taxpayer I.D. Number:  13-6022143

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                      $4,000,000
Wellesley Hills, Massachusetts  02481                                  Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Citibank, N.A.
         Attention:  Gary Quitch
         ABA #021-000-089
         Re:  Ferrellgas, L.P.
         Account No.: 36112805
         For Further Credit:  199 541

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                      $3,000,000
Wellesley Hills, Massachusetts  02481                                  Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Citibank, N.A.
         Attention:  Gary Quitch
         ABA #021-000-089
         Re:  Ferrellgas, L.P.
         Account No.: 36112805
         For Further Credit:  199 541

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                      $1,000,000
Wellesley Hills, Massachusetts  02481                                  Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Citibank, N.A.
         Attention:  Gary Quitch
         ABA #021-000-089
         Re:  Ferrellgas, L.P.
         Account No.: 36112805
         For Further Credit:  199 541

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                       $750,000
Wellesley Hills, Massachusetts  02481                                  Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Citibank, N.A.
         Attention:  Gary Quitch
         ABA #021-000-089
         Re:  Ferrellgas, L.P.
         Account No.: 36112805
         For Further Credit:  199 541

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                       $500,000
Wellesley Hills, Massachusetts  02481                                  Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Citibank, N.A.
         Attention:  Gary Quitch
         ABA #021-000-089
         Re:  Ferrellgas, L.P.
         Account No.: 36112805
         For Further Credit:  199 541

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                       $300,000
Wellesley Hills, Massachusetts  02481                                  Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Bank of New York P&I Department ABA #021-000-018 Account #: IOC 566 Re:
         Ferrellgas, L.P.
         For Further Credit:  IOC 566

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE ASSURANCE COMPANY OF CANADA                                   Series A                          --
One Sun Life Executive Park                                            Series B                       $200,000
Wellesley Hills, Massachusetts  02481-5615                             Series C                          --
Attention:  Investment Department/Private Placements,
SC #1303
Telecopier Number: (781) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest) to:

         Bank of New York P&I Department ABA #021-000-018 Account #: IOC 566 Re:
         Ferrellgas, L.P.
         For Further Credit:  IOC 566

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment and any audit confirmation to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All other notices and communications, including notices of optional prepayments,
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  38-1082080

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

SUN LIFE INSURANCE AND ANNUITY                                         Series A                          --
  COMPANY OF NEW YORK                                                  Series B                       $250,000
One Sun Life Executive Park                                            Series C                          --
Wellesley Hills, Massachusetts  02481-5615
Attention:  Investment Department/Private   Placements, SC #1303
Telecopier Number: (617) 446-2392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AB 9, principal, premium or interest") to:

         The Chase Manhattan Bank
         Private Placement Processing
         ABA No. 021-000-021
         Account No. 900-9-000192
         Re:  Ferrellgas, L.P.
         Chase Account#: G 51642

Notices

All  notices of  mandatory  payment,  on or in respect of the Notes and  written
confirmation of each such payment to:

         Sun Life Assurance Company of Canada
         One Sun Life Executive Park, SC 1395
         Wellesley Hills, Massachusetts  02481
         Attention:  Manager, Securities Accounting

All notices and communications other than those in respect to mandatory payments
to be addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  04-2845273

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

PRINCIPAL LIFE INSURANCE COMPANY                                       Series A                          --
c/o Principal Capital Management, LLC                                  Series B                      $3,000,000
801 Grand Avenue                                                       Series C                          --
Des Moines, Iowa  50392-0800

Payments

All  payments  on or in  respect of the Notes to be made by 12:00 Noon (New York
City time) by wire transfer of immediately available funds to: (identifying each
payment as  Ferrellgas,  L.P. and as to interest  rate,  security,  description,
maturity date, PPN, principal, premium or interest) to:

         ABA #073000228
         Norwest Bank Iowa, N.A.
         7th and Walnut Streets
         Des Moines, Iowa  50309
         For credit to Principal Life Insurance Company
         Account No. 0000014752
         OBI PFGSE (S) B0062740() Ferrellgas L.P.

         With sufficient  information  (including  interest rate, maturity date,
         interest amount, principal amount and premium amount, if applicable) to
         identify the source and application of such funds.

All notices with respect to payments to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0960
         Attention:  Investment Accounting - Securities
         Telefacsimile:  (515) 248-2643
         Confirmation:  (515) 247-0689

All other notices and communications to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0800
         Attention:  Investment - Securities
         Telefacsimile:  (515) 248-2490
         Confirmation:  (515) 248-3495

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  42-0127290

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

PRINCIPAL LIFE INSURANCE COMPANY                                       Series A                          --
c/o Principal Capital Management, LLC                                  Series B                      $3,000,000
801 Grand Avenue                                                       Series C                          --
Des Moines, Iowa  50392-0800

Payments

All  payments  on or in  respect of the Notes to be made by 12:00 Noon (New York
City time) by wire transfer of immediately available funds to: (identifying each
payment as  Ferrellgas,  L.P. and as to interest  rate,  security,  description,
maturity date, PPN, principal, premium or interest) to:

         ABA #073000228
         Norwest Bank Iowa, N.A.
         7th and Walnut Streets
         Des Moines, Iowa  50309
         For credit to Principal Life Insurance Company
         Account No. 0000014752
         OBI PFGSE (S) B0062740() Ferrellgas L.P.

         With sufficient  information  (including  interest rate, maturity date,
         interest amount, principal amount and premium amount, if applicable) to
         identify the source and application of such funds.

All notices with respect to payments to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0960
         Attention:  Investment Accounting - Securities
         Telefacsimile:  (515) 248-2643
         Confirmation:  (515) 247-0689

All other notices and communications to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0800
         Attention:  Investment - Securities
         Telefacsimile:  (515) 248-2490
         Confirmation:  (515) 248-3495

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  42-0127290

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

PRINCIPAL LIFE INSURANCE COMPANY                                       Series A                          --
c/o Principal Capital Management, LLC                                  Series B                      $2,000,000
801 Grand Avenue                                                       Series C                          --
Des Moines, Iowa  50392-0800

Payments

All  payments  on or in  respect of the Notes to be made by 12:00 Noon (New York
City time) by wire transfer of immediately available funds to: (identifying each
payment as  Ferrellgas,  L.P. and as to interest  rate,  security,  description,
maturity date, PPN, principal, premium or interest) to:

         ABA #073000228
         Norwest Bank Iowa, N.A.
         7th and Walnut Streets
         Des Moines, Iowa  50309
         For credit to Principal Life Insurance Company
         Account No. 0000014752
         OBI PFGSE (S) B0062740() Ferrellgas L.P.

         With sufficient  information  (including  interest rate, maturity date,
         interest amount, principal amount and premium amount, if applicable) to
         identify the source and application of such funds.

All notices with respect to payments to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0960
         Attention:  Investment Accounting - Securities
         Telefacsimile:  (515) 248-2643
         Confirmation:  (515) 247-0689

All other notices and communications to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0800
         Attention:  Investment - Securities
         Telefacsimile:  (515) 248-2490
         Confirmation:  (515) 248-3495

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  42-0127290

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

PRINCIPAL LIFE INSURANCE COMPANY                                       Series A                          --
c/o Principal Capital Management, LLC                                  Series B                      $2,000,000
801 Grand Avenue                                                       Series C                          --
Des Moines, Iowa  50392-0800

Payments

All  payments  on or in  respect of the Notes to be made by 12:00 Noon (New York
City time) by wire transfer of immediately available funds to: (identifying each
payment as  Ferrellgas,  L.P. and as to interest  rate,  security,  description,
maturity date, PPN, principal, premium or interest) to:

         ABA #073000228
         Norwest Bank Iowa, N.A.
         7th and Walnut Streets
         Des Moines, Iowa  50309
         For credit to Principal Life Insurance Company
         Account No. 0000014752
         OBI PFGSE (S) B0062740() Ferrellgas L.P.

         With sufficient  information  (including  interest rate, maturity date,
         interest amount, principal amount and premium amount, if applicable) to
         identify the source and application of such funds.

All notices with respect to payments to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0960
         Attention:  Investment Accounting - Securities
         Telefacsimile:  (515) 248-2643
         Confirmation:  (515) 247-0689

All other notices and communications to:

         Principal Capital Management, LLC
         801 Grand Avenue
         Des Moines, Iowa  50392-0800
         Attention:  Investment - Securities
         Telefacsimile:  (515) 248-2490
         Confirmation:  (515) 248-3495

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  42-0127290

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

THE CANADA LIFE ASSURANCE COMPANY                                      Series A                      $5,000,000
330 University Avenue, SP-11                                           Series B                          --
Toronto, Ontario, Canada  M5G 1R8                                      Series C
Attention:  Paul English, Associate Treasurer,
 U.S. Private Placements

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately available funds to:

         FOR REGULAR PRINCIPAL AND INTEREST:
         Chase Manhattan Bank
         ABA #021-000-021
         Account No. 900-9-000200
         Trust Account No. G52708, The Canada Life Assurance Company
         Attention:  Bond Interest

         Reference:  PPN number, name of issuer, rate, maturity date, type of
security, whether principal and/or interest and due date

         FOR CALL OR MATURITY:
         Chase Manhattan Bank
         ABA #021-000-021
         Account No. 900-9-000192
         Trust Account No. G52708, The Canada Life Assurance Company
         Attention:  Doll Balbadar

         Reference:  PPN number, name of issuer, rate, maturity date, whether
principal and/or interest and effective date of call or
         maturity.

<PAGE>

Notices

All notices and communications  (including financial statements) to be addressed
as first  provided  above,  except  notices with respect to payments and written
confirmation of each such payment, to be addressed:

         Chase Manhattan Bank
         North America Insurance
         3 Chase MetroTech Centre - 6th Floor
         Brooklyn, New York  11245
         Attention:  Ms. Doll Balbadar

with a copy to:

         The Canada Life Assurance Company
         330 University Avenue, SP-12
         Toronto, Ontario, Canada  M5G 1R8
         Attention:  Supervisor, Securities Accounting

Name of Nominee in which Notes are to be issued:  J. Romeo & Co.

Taxpayer I.D. Number:  38-0397420

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

CANADA LIFE INSURANCE COMPANY OF                                       Series A
  AMERICA                                                              Series B
c/o The Canada Life Assurance Company                                  Series C                      $4,000,000
Corporate Treasury, SP-11
330 University Avenue
Toronto, Ontario, Canada  M5G 1R8
Attention:  Brian Lynch, Associate Treasurer, U.S. Private Placements

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately available funds to:

         FOR REGULAR PRINCIPAL AND INTEREST:
         Chase Manhattan Bank
         ABA #021-000-021
         Account #900-9-000168
         Trust Account No. G52709, Canada Life Insurance Company of America
         Attention:  Bond Interest

         Reference:  PPN number, name of issuer, rate, maturity date, type of
security, whether principal and/or interest and due date

         FOR CALL OR MATURITY:
         Chase Manhattan Bank
         ABA #021-000-021
         Account No. 900-9-000192
         Trust Account No. G52708, The Canada Life Assurance Company
         Attention:  Doll Balbadar

         Reference:  PPN number, name of issuer, rate, maturity date,
whether principal and/or interest and effective date of call or
         maturity.

Notices

All notices and communications  (including financial statements) to be addressed
as first  provided  above,  except  notices with respect to payments and written
confirmation of each such payment, to be addressed:

         Chase Manhattan Bank
         North America Insurance
         3 Chase MetroTech Centre - 6th Floor
         Brooklyn, New York  11245
         Attention:  Ms. Doll Balbadar

with a copy to:

         The Canada Life Assurance Company
         330 University Avenue, SP-12
         Toronto, Ontario, Canada  M5G 1R8
         Attention:  Supervisor, Securities Accounting

Name of Nominee in which Notes are to be issued:  J. Romeo & Co.

Taxpayer I.D. Number:  38-2816473

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

CANADA LIFE INSURANCE COMPANY OF                                       Series A
  NEW YORK                                                             Series B
c/o The Canada Life Assurance Company                                  Series C                      $1,000,000
Corporate Treasury, SP-11
330 University Avenue
Toronto, Ontario, Canada  M5G 1R8
Attention:  Brian Lynch, Associate Treasurer, U.S. Private Placements

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately available funds to:

         Chase Manhattan Bank
         ABA #021-000-021
         A/C #900-9-000200
         Trust Account No. G52685, Canada Life of New York
         Attention:  Bond Interest

         Reference:  PPN number, name of issuer, rate, maturity date, type of
security, whether principal and/or interest and due date

Notices

All notices and communications  (including financial statements) to be addressed
as first  provided  above,  except  notice with respect to payment,  and written
confirmation of each such payment, to be addressed:

         Chase Manhattan Bank
         North America Insurance
         3 Chase MetroTech Centre - 6th Floor
         Brooklyn, New York  11245
         Attention:  Ms. Doll Balbadar

with a copy to:

         The Canada Life Assurance Company
         330 University Avenue, SP-12
         Toronto, Ontario, Canada  M5G 1R8
         Attention:  Supervisor, Securities Accounting

Name of Nominee in which Notes are to be issued:  J. Romeo & Co.

Taxpayer I.D. Number:  13-2690792

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

LUTHERAN BROTHERHOOD                                                   Series A                      $7,000,000
625 Fourth Avenue South                                                Series B                          --
Minneapolis, Minnesota  55415                                          Series C                          --
Attention:  Investment Division

Payments

All  payments  of  principal,  interest  and premium on the account of the Notes
shall be made by bank wire transfer (in immediately available funds) to:

         Norwest Bank Minnesota, N.A.
         ABA #091000019
         For Credit to Trust Clearing Account #0000840245
         Attention:  Sarah Corcoran
         For credit to:  Lutheran Brotherhood
         Account Number 12651300

         All payments must include the following information:

         A/C Lutheran Brotherhood
         Account No.:  12561300
         Security Description
         PPN Number 31529# AA1
         Reference Purpose of Payment
         Interest and/or Principal Breakdown

Notices

All notices and  communications to be addressed as first provided above,  except
notices with respect to payments and written  confirmation of each such payment,
to be addressed:

         Lutheran Brotherhood
         625 Fourth Avenue South, 10th Floor
         Minneapolis, Minnesota  55415
         Attention:  Investment Accounting/Trading Administrator

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  41-0385700

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

PHOENIX HOME LIFE MUTUAL INSURANCE                                      Series A                         --
 COMPANY                                                               Series B                          --
One American Row                                                       Series C                      $5,000,000
Hartford, Connecticut  06115

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN, principal, premium or interest) to:

         ABA #021 000 021
         Chase Manhattan Bank, N.A.
         New York, New York

         Account Number:  900 9000 200
         Account Name:  Income Processing
         Reference:  Phoenix Home Life Account #G05143
         OBI=[Name of Issuer, PPN=__________, RATE=____%, DUE=___________
(include principal and interest breakdown and premium, if
         any)

Notices

All notices and  communications,  including notices with respect to payments and
written confirmation of each such payment, to be addressed:

         Phoenix Home Life Mutual Insurance Company
         c/o Phoenix Investment Partners, LTD.
         56 Prospect Street
         P. O. Box 150480
         Hartford, Connecticut  06115-0480
         Attention:  Private Placements Division
         Telecopier Number:  (860) 403-5451

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  06-0493340

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

BERKSHIRE LIFE INSURANCE COMPANY                                       Series A                          --
700 South Street                                                       Series B                          --
Pittsfield, Massachusetts  01201                                       Series C                      $3,000,000
Attention:  Securities Department
Telefacsimile:  (413) 442-9763
Telephone:  (413) 499-4321

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal or other immediately available funds for credit to:

         Berkshire Life Insurance Company
         Account Number 002-4-020877
         The Chase Manhattan Bank, N.A.
         ABA #021000021

         With sufficient information (including Ferrellgas L.P., PPN 31529 AC 7,
         interest rate, maturity and whether payment is of principal, premium or
         interest) to identify the source and application of funds.

Notices

All notices and  communications,  including notices with respect to payments and
written  confirmation  of each such payment,  to be addressed as first  provided
above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  04-1083480

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

WOODMEN ACCIDENT AND LIFE COMPANY                                      Series A                      $2,000,000
P.O. Box 82288                                                         Series B                          --
Lincoln, Nebraska  68501                                               Series C                          --
Attention:  Securities Division
Telecopy Number:  (402) 437-4392

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
Ferrellgas, L.P. and as to interest rate, security, description,  maturity date,
PPN 31529# AA 1, principal, premium or interest) to:

         U.S. Bank
         13 and M Streets
         Lincoln, Nebraska  68508
         ABA #104-000-029

         for credit to:  Woodmen Accident and Life Company's General Fund
         Account Number 1-494-0092-9092

Notices

All notices and  communications,  including notices with respect to payments and
written  confirmation  of each such payment,  to be addressed as first  provided
above; provided,  however, all notices and communications delivered by overnight
courier shall be addressed as follows:

         Woodmen Accident and Life Company
         1526 K Street
         Lincoln, Nebraska  68508
         Attention:  Securities Division

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  47-0339220

<PAGE>

                                                                                                  PRINCIPAL AMOUNT
                                                                        SERIES                     OF NOTES TO BE
                  NAME OF PURCHASERS                                   OF NOTES                       PURCHASED

CLARICA LIFE INSURANCE COMPANY-U.S.                                    Series A                      $2,000,000
c/o Clarica U.S. Inc.                                                  Series B                          --
13890 Bishops Drive, Suite 300                                         Series C                          --
Brookfield, Wisconsin  53005
Attention:  Connie Keller
Phone:  (262) 641-4022
Facsimile:  (262) 641-4055

Payments

All  payments  on or in  respect  of the  Notes to be made by wire or  intrabank
transfer of immediately available funds to:

         Norwest Bank Minnesota, N.A.
         ABA #091000019
         BNF A/C:  0000840245 (must be 10 digits in length)
         BNF:  Trust Wire Clearing (must be on line 2)
         OBI= FFC:I.C. 13326600 Ferrellgas, L.P. PPN:   31529# AA 1
         P=___________  I=_____________
         End Balance=_______________

Notices

All notices  with  respect to payments  and  written  confirmation  of each such
payment, to be addressed to:

         Clarica Life Insurance Company-U.S.
         c/o Clarica U.S. Inc.
         13890 Bishops Drive, Suite 300
         Brookfield, Wisconsin  53005
         Attention:  Tamie Greenwood
         Phone:  (262) 641-4027
         Facsimile:  (262) 641-4055

<PAGE>

All other communications to be addressed to:

         Clarica Life Insurance Company-U.S.
         c/o Clarica U.S. Inc.
         13890 Bishops Drive, Suite 300
         Brookfield, Wisconsin  53005
         Phone:  (262) 641-4027
         Facsimile:  (262) 641-4055

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  45-0208990

<PAGE>

                                      B-14
                                   SCHEDULE B
                          (to Note Purchase Agreement)
                                  DEFINED TERMS

GENERAL PROVISIONS

         Where the  character  or amount  of any asset or  liability  or item of
income or expense is required to be  determined  or any  consolidation  or other
accounting  computation  is  required  to be  made  for  the  purposes  of  this
Agreement,  the same  shall  be done in  accordance  with  GAAP,  to the  extent
applicable,  except  where such  principles  are  inconsistent  with the express
requirements of this Agreement.

DEFINITIONS

         As used herein,  the following  terms have the respective  meanings set
forth below or set forth in the Section hereof following such term:

         "Affiliate" means, at any time, and with respect to any Person, (a) any
other  Person  that at such time  directly  or  indirectly  through  one or more
intermediaries  Controls,  or is Controlled by, or is under common Control with,
such first Person, (b) any Person  beneficially  owning or holding,  directly or
indirectly, 10% or more of any class of voting or equity interests of such first
Person or any  subsidiary of such first Person or any  corporation of which such
first Person and the subsidiaries of such first Person beneficially own or hold,
in the aggregate,  directly or indirectly, 10% or more of any class of voting or
equity interests,  and (c) any officer or director of such first Person. As used
in this definition,  "Control" means the possession,  directly or indirectly, of
the power to direct or cause the direction of the  management  and policies of a
Person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise.  Unless the context otherwise  clearly requires,  any reference to an
"Affiliate" is a reference to an Affiliate (other than a Restricted  Subsidiary)
of the Company.

         "Adjusted  Consolidated  Cash Flow" means for any period the sum of (i)
Consolidated Cash Flow during such period, plus (ii) to the extent deducted from
Consolidated Net Income for purposes of determining  Consolidated  Cash Flow for
such period, Synthetic Lease Rent Payments during such period.

         "Adjusted  Consolidated  Debt" means, as of any date of  determination,
the  sum of (i)  Consolidated  Debt,  plus  (ii)  Consolidated  Synthetic  Lease
Obligations on such date.

         "Adjusted  Consolidated  Interest Expense" means for any period the sum
of (i) Consolidated  Interest Expense for such period, plus (ii) Synthetic Lease
Interest Expense for such period.

         "Asset  Acquisition"  means (a) an  Investment  by the  Company  or any
Restricted  Subsidiary  in any other Person  pursuant to which such Person shall
become a  Restricted  Subsidiary  or shall be merged with or into the Company or
any Restricted Subsidiary,  (b) the acquisition by the Company or any Restricted
Subsidiary  of the assets of any Person  (other  than a  Restricted  Subsidiary)
which  constitutes all or substantially  all of the assets of such Person or (c)
the  acquisition by the Company or any Restricted  Subsidiary of any division or
line of business of any Person (other than a Restricted Subsidiary).

         "Asset Sale" means any Transfer except:

                   (a)     any

                            (i)     Transfer from a Restricted Subsidiary to the
 Company or a Wholly-Owned Restricted Subsidiary;

                           (ii)     Transfer from the Company to a Wholly-Owned
Restricted Subsidiary; and

                          (iii)  Transfer  from  the  Company  to  a  Restricted
                  Subsidiary (other than a Wholly-Owned  Restricted  Subsidiary)
                  or  from  a  Restricted   Subsidiary  to  another   Restricted
                  Subsidiary (other than a Wholly-Owned  Restricted Subsidiary),
                  which in either case is for Fair Market Value,

         so long as immediately before and immediately after the consummation of
         any such Transfer and after giving effect thereto,  no Default or Event
         of Default exists; and

                   (b) any Transfer made in the ordinary  course of business and
         involving only property that is inventory held for sale.

         "Available Cash" means with respect to any period and without
duplication:

                   (a)     the sum of:

                            (i) all cash  receipts  of the  Company  during such
                  period  from  all  sources  (including,   without  limitation,
                  distributions   of  cash   received  by  the  Company  from  a
                  Subsidiary  and  borrowings  made  under the  Working  Capital
                  Facility); and

                           (ii) any  reduction  with respect to such period in a
                  cash  reserve  previously  established  pursuant to clause (b)
                  (ii) below (either by reversal or utilization)  from the level
                  of such reserve at the end of the prior period;

                   (b)     less  the sum of:

                            (i) all cash  disbursements  of the  Company  during
                  such period including,  without limitation,  disbursements for
                  operating  expenses,  taxes, if any, debt service  (including,
                  without  limitation,  the  payment of  principal,  premium and
                  interest),   redemption  of  Partnership  Interests,   capital
                  expenditures,  contributions, if any, to a Subsidiary and cash
                  distributions  to the General Partner and the Limited Partners
                  (but only to the extent  that such cash  distributions  to the
                  General Partner and the Limited Partners exceed Available Cash
                  for the immediately preceding fiscal quarter); and

                           (ii) any cash  reserves  established  with respect to
                  such period, and any increase with respect to such period in a
                  cash reserve  previously  established  pursuant to this clause
                  (b) (ii)  from the  level  of such  reserve  at the end of the
                  prior  period,   in  such  amounts  as  the  General   Partner
                  determines  in its  reasonable  discretion  to be necessary or
                  appropriate  (A) to  provide  for the  proper  conduct  of the
                  business  of  the  Company  (including,   without  limitation,
                  reserves   for   future   capital   expenditures   or  capital
                  contributions  to a  Subsidiary)  or (B) to provide  funds for
                  distributions  to the General Partner and the Limited Partners
                  in respect of any one or more of the next four fiscal quarters
                  or (C)  because  the  distribution  of such  amounts  would be
                  prohibited  by  applicable  law  or  by  any  loan  agreement,
                  security  agreement,   mortgage,   debt  instrument  or  other
                  agreement or  obligation to which the Company is a party or by
                  which it is bound or its assets are subject.

Notwithstanding the foregoing (x) disbursements (including,  without limitation,
contributions  to a Subsidiary or  disbursements on behalf of a Subsidiary) made
or  reserves  established,  increased  or  reduced  after the end of any  fiscal
quarter but on or before the date on which the Company makes its distribution of
Available  Cash in respect of such fiscal  quarter  pursuant to Section  10.5(a)
shall be  deemed to have been  made,  established,  increased  or  reduced,  for
purposes of determining  Available  Cash, with respect to such fiscal quarter if
the General  Partner so determines and (y) "Available  Cash" with respect to any
period  shall not include any cash  receipts or  reductions  in reserves or take
into  account  any  disbursements   made  or  reserves   established  after  the
Liquidation Date.

         For purposes of the definition of "Available  Cash" the following terms
have the following meanings:

                  "Additional  Limited  Partner" means a Person  admitted to the
         Company  as  a  Limited  Partner   pursuant  to  Section  11.6  of  the
         Partnership Agreement and who is shown as such on the books and records
         of the Company,

                  "Departing  Partner" means a former General Partner,  from and
         after the  effective  date of any  withdrawal or removal of such former
         General  Partner  pursuant  to  Section  12.1  or  Section  12.2 of the
         Partnership Agreement.

                  "Initial  Limited Partner means Ferrellgas  Partners,  L.P., a
Delaware limited partnership.

                  "Limited  Partner"  means the  Initial  Limited  Partner,  the
         General Partner  pursuant to Section 4.2 of the Partnership  Agreement,
         each  Substituted  Limited  Partner,  if any, each  Additional  Limited
         Partner and any  Departing  Partner  upon the change of its status from
         General  Partner to Limited  Partner  pursuant  to Section  12.3 of the
         Partnership Agreement, but excluding any such Person from and after the
         time it withdraws from the Company.

                  "Liquidation  Date"  means (a) in the case of an event  giving
         rise to the dissolution of the Company of the type described in clauses
         (a) and (b) of the first  sentence of Section  13.2 of the  Partnership
         Agreement,  the date on which the  applicable  time period during which
         the General Partner and the Limited Partners have the right to elect to
         reconstitute  the Company and continue its business has expired without
         such an  election  being  made,  and (b) in the case of any other event
         giving rise to the  dissolution of the Company,  the date on which such
         event occurs.

                  "Partnership  Agreement"  means the Agreement of Limited
Partnership  of  Ferrellgas,  L.P. dated as of July 5, 1995
         among the General Partner and the Initial Limited Partner.

                  "Partnership Interest" means the interest of the General
Partner or a Limited Partner in the Company.

                  "Substituted  Limited  Partner" means a Person who is admitted
         as a Limited  Partner to the Company  pursuant  to Section  11.3 of the
         Partnership  Agreement in place of and with all the rights of a Limited
         Partner and who is shown as a Limited  Partner on the books and records
         of the Company.

         "Business  Day" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday,  a Sunday or a day on which  commercial banks in New York
City are required or  authorized  to be closed,  and (b) for the purposes of any
other provision of this Agreement,  any day other than a Saturday, a Sunday or a
day on which commercial banks in San Francisco, California, Chicago, Illinois or
Kansas City, Missouri are required or authorized to be closed.

         "Capital  Lease" means,  at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

         "Capital  Lease  Obligation"  means,  with  respect to any Person and a
Capital  Lease,  the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance  with GAAP,  appear as a liability
on a balance sheet of such Person.

         "Closing" is defined in Section 3.

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

         "Company" means Ferrellgas, L.P., Delaware limited partnership.

         "Confidential Information" is defined in Section 20.

         "Consolidated  Assets"  means,  at any time,  the  total  assets of the
Company  and its  Restricted  Subsidiaries  which  would be shown as assets on a
consolidated balance sheet of the Company and its Restricted  Subsidiaries as of
such time  prepared  in  accordance  with GAAP,  after  eliminating  all amounts
properly attributable to minority interests, if any, in the stock and surplus of
Restricted Subsidiaries.

         "Consolidated  Cash Flow" means, in respect of any period,  the excess,
if any, of (a) the sum of,  without  duplication,  the amounts for such  period,
taken as a single  accounting  period,  of (i)  Consolidated Net Income for such
period,  plus (ii) to the extent deducted in the  determination  of Consolidated
Net Income for such period,  after  excluding  amounts  attributable to minority
interests in Subsidiaries and without  duplication,  (A)  Consolidated  Non-Cash
Charges,  (B)  Consolidated  Interest  Expense and (C)  Consolidated  Income Tax
Expense, over (b) any non-cash items increasing Consolidated Net Income for such
period to the  extent  that such  items  constitute  reversals  of  Consolidated
Non-Cash  Charges  for  a  previous  period  and  which  were  included  in  the
computation of  Consolidated  Cash Flow for such previous period pursuant to the
provisions  of  the  preceding   clause  (a),   provided  that  in   calculating
Consolidated Cash Flow for any such period,  (1) Consolidated Cash Flow shall be
calculated  after  giving  effect on a pro forma basis for such  period,  in all
respects in accordance with GAAP, to any Asset Acquisitions (including,  without
limitation any Asset  Acquisition  by the Company or any  Restricted  Subsidiary
giving rise to the need to determine  Consolidated  Cash Flow as a result of the
Company or one of its Restricted Subsidiaries (including any Person that becomes
a  Restricted  Subsidiary  as result of any such Asset  Acquisition)  incurring,
assuming or otherwise  becoming liable for any Debt) occurring during the period
commencing  on the first day of such  period to and  including  the date of such
determination,  as if such Asset  Acquisition  occurred on the first day of such
period and (2)  Consolidated  Cash Flow  attributable  to any assets or property
subject to an Asset Sale by the Company or any Restricted Subsidiary on or prior
to the date of such determination shall be deemed to be zero for such period.

         "Consolidated  Debt" means, as of any date of determination,  the total
of all Debt of the Company and its Restricted  Subsidiaries  outstanding on such
date,  after  eliminating all offsetting  debits and credits between the Company
and its Restricted Subsidiaries and all other items required to be eliminated in
the  course of the  preparation  of  consolidated  financial  statements  of the
Company and its Restricted Subsidiaries in accordance with GAAP.

         "Consolidated  Income Tax Expense"  means,  with respect to any period,
all provisions for Federal, state, local and foreign income taxes of the Company
and its Restricted  Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.

         "Consolidated  Interest Expense" means, with respect to any period, the
sum  (without  duplication)  of the  following  (in each case,  eliminating  all
offsetting   debits  and  credits   between  the  Company  and  its   Restricted
Subsidiaries  and all other items required to be eliminated in the course of the
preparation  of  consolidated  financial  statements  of  the  Company  and  its
Restricted Subsidiaries in accordance with GAAP): (a) all interest in respect of
Debt of the Company and its  Restricted  Subsidiaries  whether earned or accrued
(including  non-cash  interest  payments and imputed  interest on Capital  Lease
Obligations)  deducted in determining  Consolidated  Net Income for such period,
and (b) all debt  discount and expense  amortized or required to be amortized in
the determination of Consolidated Net Income for such period,  provided that for
purposes of making any computation  pursuant to Section 10.1(c)(iii) and Section
10.11  (including any calculation of Consolidated  Cash Flow relating  thereto),
Consolidated  Interest  Expense  shall be determined on a pro forma basis giving
effect to the incurrence of Debt (and the application of proceeds thereof) which
is the subject of such  computation  as if such Debt had been  incurred (and the
proceeds thereof applied) on the first day of such period.

         "Consolidated Net Income" means, with reference to any period,  the net
income (or loss) of the Company and its Restricted  Subsidiaries for such period
(taken as a cumulative  whole),  as determined in  accordance  with GAAP,  after
eliminating  all  offsetting  debits and  credits  between  the  Company and its
Restricted  Subsidiaries  and all other items  required to be  eliminated in the
course of the  preparation of consolidated  financial  statements of the Company
and its Restricted  Subsidiaries  in accordance  with GAAP,  provided that there
shall be excluded:

                   (a) the income (or loss) of any Person  accrued  prior to the
         date it becomes a Subsidiary or is merged into or consolidated with the
         Company  or a  Subsidiary,  and the  income  (or  loss) of any  Person,
         substantially  all of the  assets of which  have been  acquired  in any
         manner, realized by such other Person prior to the date of acquisition,

                   (b)  the  income  (or  loss)  of  any  Person  (other  than a
         Subsidiary)  in which the Company or any  Subsidiary  has an  ownership
         interest,  except to the extent that any such income has been  actually
         received  by the  Company  or  such  Subsidiary  in the  form  of  cash
         dividends or similar cash distributions,

                   (c) the undistributed  earnings of any Restricted  Subsidiary
         to the extent that the  declaration  or payment of dividends or similar
         distributions  by  such  Restricted  Subsidiary  is  not  at  the  time
         permitted  by the terms of its  charter or any  agreement,  instrument,
         judgment,  decree,  order,  statute,  rule or  governmental  regulation
         applicable to such Restricted Subsidiary,

                   (d) any aggregate net gain or loss during such period arising
         from the sale,  conversion,  exchange or other  disposition  of capital
         assets (such term to include,  without limitation,  (i) all non-current
         assets and, without duplication, and (ii) the following, whether or not
         current:  all  fixed  assets,  whether  tangible  or  intangible,   all
         inventory sold in conjunction with the disposition of fixed assets, and
         all Securities), and

                   (e) any net income or gain or loss  during  such  period from
         (i) any change in accounting  principles in accordance  with GAAP, (ii)
         any prior period  adjustments  resulting  from any change in accounting
         principles in accordance with GAAP, or (iii) any extraordinary items.

         "Consolidated  Non-Cash Charges" means, with respect to any period, the
aggregate  depreciation  and  amortization  (other  than  amortization  of  debt
discount),  and any non-cash employee  compensation expenses for such period, in
each case,  reducing  Consolidated  Net Income of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.

         "Consolidated  Synthetic  Lease  Obligations"  means, as of any date of
determination,  the  total  amount  of the  liability  of the  Company  and  its
Restricted Subsidiaries in respect of Synthetic Leases that would be required to
be  capitalized  on  the  balance  sheet  of  the  Company  and  its  Restricted
Subsidiaries  at such  time,  if  such  Synthetic  Leases  were  required  to be
classified  and  accounted  for as Capital  Leases on the  balance  sheet of the
Company and its Restricted Subsidiaries in accordance with GAAP.

         "Credit  Agreement"  means  the  Second  Amended  and  Restated  Credit
Agreement  dated July 2, 1998,  between the Company and the banks named therein,
as the same may be amended and supplemented from time to time.

         "Debt" means, with respect to any Person, without duplication,

                   (a)     its liabilities for borrowed money;

                   (b)  its  liabilities  for the  deferred  purchase  price  of
         property acquired by such Person (excluding accounts payable arising in
         the ordinary course of business but including,  without limitation, all
         liabilities  created or  arising  under any  conditional  sale or other
         title retention agreement with respect to any such property);

                   (c)     its Capital Lease Obligations;

                   (d) all  liabilities  for borrowed  money secured by any Lien
         with  respect to any property  owned by such Person  (whether or not it
         has assumed or otherwise become liable for such liabilities); and

                   (e) any Guaranty of such Person with  respect to  liabilities
         of a type described in any of clauses (a) through (d) hereof.

Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (e) to the extent such Person  remains  legally
liable in respect thereof  notwithstanding that any such obligation is deemed to
be extinguished under GAAP.

         "Default"  means an event or condition  the  occurrence or existence of
which would,  with the lapse of time or the giving of notice or both,  become an
Event of Default.

         "Default  Rate"  means with  respect to any Note that rate of  interest
that is the  greater of (i) 2% per annum  above the rate of  interest  stated in
clause  (a) of the  first  paragraph  of such  Note or (ii) 2% over  the rate of
interest publicly announced by Bank of America, N.A. in Chicago, Illinois as its
"base" or "prime" rate.

         "Distribution" means, in respect of any corporation, partnership,
association or other business entity:

                   (a) dividends or other  distributions  or payments on capital
         stock or other  equity  interest of such  corporation,  association  or
         other  business  entity  (except  distributions  in such stock or other
         equity interest); and

                   (b) the  redemption,  retirement,  purchase or acquisition of
         such stock or other equity  interests  or of warrants,  rights or other
         options to purchase such stock or other equity  interests  (except when
         solely in exchange  for such stock or other  equity  interests)  unless
         made, contemporaneously,  from the net proceeds of a sale of such stock
         or other equity interests.

         "Environmental  Laws"  means any and all  Federal,  state,  local,  and
foreign statutes,  laws,  regulations,  ordinances,  rules,  judgments,  orders,
decrees,  permits,  concessions,  grants,  franchises,  licenses,  agreements or
governmental  restrictions  relating  to  pollution  and the  protection  of the
environment or the release of any materials into the environment,  including but
not limited to those related to hazardous  substances  or wastes,  air emissions
and discharges to waste or public systems.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended from time to time, and the rules and regulations  promulgated thereunder
from time to time in effect.

         "ERISA   Affiliate"  means  any  trade  or  business  (whether  or  not
incorporated)  that is treated as a single  employer  together  with the Company
under Section 414 of the Code.

         "Event of Default" is defined in Section 11.

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

         "Fair  Market  Value"  means,  at any  time  and  with  respect  to any
property,  the  sale  value  of such  property  that  would  be  realized  in an
arm's-length  sale at such time  between an informed  and  willing  buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

         "General Partner" means Ferrellgas, Inc., a Delaware corporation.

         "Governmental Authority" means

                   (a)     the government of

                            (i)     the United States of America or any State
or other political subdivision thereof, or

                           (ii) any  jurisdiction  in which the  Company  or any
                  Subsidiary conducts all or any part of its business,  or which
                  asserts jurisdiction over any properties of the Company or any
                  Subsidiary, or

                   (b) any entity exercising executive,  legislative,  judicial,
         regulatory or  administrative  functions of, or pertaining to, any such
         government.

         "Guaranty"  means, with respect to any Person,  any obligation  (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness,  dividend or other  obligation  of any other Person in any manner,
whether  directly or  indirectly,  including  (without  limitation)  obligations
incurred through an agreement, contingent or otherwise, by such Person:

                   (a)     to purchase such Indebtedness or obligation or any
property constituting security therefor;

                   (b) to  advance  or  supply  funds  (i) for the  purchase  or
         payment of such  Indebtedness  or  obligation,  or (ii) to maintain any
         working  capital  or  other  balance  sheet  condition  or  any  income
         statement condition of any other Person or otherwise to advance or make
         available  funds for the  purchase or payment of such  Indebtedness  or
         obligation;

                   (c) to lease properties or to purchase properties or services
         primarily for the purpose of assuring the owner of such Indebtedness or
         obligation  of the ability of any other  Person to make  payment of the
         Indebtedness or obligation; or

                   (d)  otherwise  to assure the owner of such  Indebtedness  or
obligation against loss in respect thereof.

In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

         "Hazardous  Material" means any and all pollutants,  toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal  of which may be  required  or the  generation,  manufacture,  refining,
production, processing, treatment, storage, handling, transportation,  transfer,
use, disposal, release, discharge,  spillage, seepage, or filtration of which is
or  shall  be  restricted,   prohibited  or  penalized  by  any  applicable  law
(including, without limitation,  asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

         "Holder" or "holder"  means,  with  respect to any Note,  the Person in
whose name such Note is  registered  in the register  maintained  by the Company
pursuant to Section 13.1.

         "Indebtedness" with respect to any Person means, at any time, without
duplication,

                   (a)     its  liabilities  for borrowed  money and its
redemption  obligations  in respect of mandatorily  redeemable
         Preferred Stock;

                   (b)  its  liabilities  for the  deferred  purchase  price  of
         property acquired by such Person (excluding accounts payable arising in
         the ordinary course of business but including all  liabilities  created
         or  arising  under  any  conditional  sale  or  other  title  retention
         agreement with respect to any such property);

                   (c)  all  liabilities  appearing  on  its  balance  sheet  in
accordance with GAAP in respect of Capital Leases;

                   (d) all  liabilities  for borrowed  money secured by any Lien
         with  respect to any property  owned by such Person  (whether or not it
         has assumed or otherwise become liable for such liabilities);

                   (e) all its  liabilities  in  respect of letters of credit or
         instruments  serving a similar  function  issued  or  accepted  for its
         account  by banks  and other  financial  institutions  (whether  or not
         representing obligations for borrowed money); and

                   (f) any Guaranty of such Person with  respect to  liabilities
         of a type described in any of clauses (a) through (e) hereof.

Indebtedness  of any Person shall include all  obligations of such Person of the
character described in clauses (a) through (f) to the extent such Person remains
legally liable in respect  thereof  notwithstanding  that any such obligation is
deemed to be extinguished under GAAP.

         "Institutional  Investor"  means (a) any original  purchaser of a Note,
(b) any holder of a Note holding more than 2% of the aggregate  principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association  or other  financial  institution,  any pension plan, any investment
company,  any  insurance  company,  any broker or dealer,  or any other  similar
financial institution or entity, regardless of legal form.

         "Investment"  means  any  investment,  made in cash or by  delivery  of
property,  by the  Company  or any of  its  Restricted  Subsidiaries  (i) in any
Person,  whether by acquisition of stock,  Indebtedness or other  obligations or
Security, or by loan, Guaranty,  advance,  capital contribution or otherwise, or
(ii) in any property that would be classified as  Investments on a balance sheet
prepared in accordance with GAAP.

         "Lien" means, with respect to any Person,  any mortgage,  lien, pledge,
charge, security interest or other encumbrance,  or any interest or title of any
vendor,  lessor,  lender or other  secured  party to or of such Person under any
conditional  sale or other title retention  agreement or Capital Lease,  upon or
with respect to any property or asset of such Person  (including  in the case of
stock,   stockholder  agreements,   voting  trust  agreements  and  all  similar
arrangements).

         "Maintenance Capital Expenditures" means cash 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 the Company and its
Restricted Subsidiaries, taken as a whole, as such assets existed at the time of
such expenditure.

         "Make-Whole Amount" is defined in Section 8.6.

         "Material"  means  material in relation  to the  business,  operations,
affairs, financial condition, assets, properties or prospects of the Company and
its Restricted Subsidiaries taken as a whole.

         "Material  Adverse  Effect" means a material  adverse effect on (a) the
business, operations,  affairs, financial condition, assets or properties of the
Company and its Restricted  Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its  obligations  under this Agreement and the Notes,  or
(c) the validity or enforceability of this Agreement or the Notes.

         "Memorandum" is defined in Section 5.3.

         "Multiemployer  Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).

         "Notes", "Series A Notes", "Series B Notes", and "Series C Notes",
are defined in Section 1.

         "Officer's  Certificate"  means a  certificate  of a  Senior  Financial
Officer or of any other officer of the Company whose responsibilities  extend to
the subject matter of such certificate.

         "PBGC" means the Pension Benefit Guaranty  Corporation  referred to and
defined in ERISA or any successor thereto.

         "Person" means an individual,  partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

         "Plan" means an "employee  benefit plan" (as defined in Section 3(3) of
ERISA) that is or,  within the preceding  five years,  has been  established  or
maintained,  or to which  contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA  Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

         "Preferred  Stock"  means any class of capital  stock of a  corporation
that is preferred  over any other class of capital stock of such  corporation as
to the payment of  dividends  or the payment of any amount upon  liquidation  or
dissolution of such corporation.

         "Priority Debt" means, without duplication,  the sum of (a) all Debt of
the  Company  and its  Restricted  Subsidiaries  secured by Liens  permitted  by
Section  10.4(m),  and  (b)  all  Debt of  Restricted  Subsidiaries  that is not
permitted by Section 10.3(a), (b) or (c).

         "property"  or  "properties"  means,   unless  otherwise   specifically
limited,  real or personal property of any kind, tangible or intangible,  choate
or inchoate.

         "QPAM  Exemption" means  Prohibited  Transaction  Class Exemption 84-14
issued by the United States Department of Labor.

         "Refinancing" is defined in Section 10.1(b).

         "Required  Holders"  means, at any time, the holders of at least 51% in
principal amount of the Notes at the time  outstanding  (exclusive of Notes then
owned by the Company or any of its Affiliates).

         "Responsible  Officer" means any Senior Financial Officer and any other
officer  of the  Company  with  responsibility  for  the  administration  of the
relevant portion of this Agreement.

         "Restricted  Payment" means any Distribution in respect of the Company.
For purposes of this  Agreement,  the amount of any  Restricted  Payment made in
property  shall be the greater of (x) the Fair Market Value of such property (as
determined  in good faith by the board of  directors  (or  equivalent  governing
body) of the Person making such  Restricted  Payment) and (y) the net book value
thereof on the books of such Person,  in each case  determined as of the date on
which such Restricted Payment is made.

         "Restricted Subsidiary" means any Subsidiary (i) of which more than 80%
of the  Voting  Stock is  beneficially  owned,  directly  or  indirectly  by the
Company,  (ii) which is  organized  under the laws of the  United  States or any
State  thereof,  (iii)  which  maintains  substantially  all of its  assets  and
conducts  substantially  all of its business within the United States,  and (iv)
which is properly  designated  as such by the Company in the most recent  notice
(or, prior to any such notice,  on Schedule 5.4) with respect to such Subsidiary
given by the  Company  pursuant  to and in  accordance  with the  provisions  of
Section 7.4.

         "Sale and Leaseback  Transaction"  means,  with respect to a Person and
property, a transaction or series of transactions  pursuant to which such Person
sells  such  property  with  the  intent  at the  time  of  entering  into  such
transaction or transactions of leasing such property for a term in excess of six
months.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time.

         "Security" has the meaning set forth in section 2(a)(1) of the
Securities Act of 1933, as amended.

         "Senior   Debt"  means  (a)  any  Debt  of  the  Company   (other  than
Subordinated Debt) and (b) any Debt of any Restricted Subsidiary.

         "Senior Funded Debt" means, with respect to any Person, all Senior Debt
of such  Person  which  by its  terms,  or by the  terms  of any  instrument  or
agreement  relating  thereto,  matures or is otherwise  payable one year or more
from the date of any determination thereof.

         "Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

         "Subordinated Debt" means any Debt of the Company that shall contain or
have applicable thereto subordination  provisions  substantially in the form set
forth in Exhibit 10.1 attached hereto providing for the subordination thereof to
the Notes,  or other  provisions  as may be  approved  in  writing  prior to the
incurrence  thereof  by the  Holders  of not  less  than  66-2/3%  in  aggregate
principal amount or the outstanding Notes.

         "Subsidiary"  means, as to any Person, any corporation,  association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests  to  enable  it or them (as a group)  ordinarily,  in the  absence  of
contingencies,  to elect a majority  of the  directors  (or  Persons  performing
similar  functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries (unless such partnership can and does ordinarily
take major business  actions without the prior approval of such Person or one or
more of its  Subsidiaries).  Unless the context otherwise clearly requires,  any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.

         "Subsidiary  Stock"  means the stock (or any  options  or  warrants  to
purchase stock or other  Securities  exchangeable for or convertible into stock)
of any Restricted Subsidiary.

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

         "Synthetic Lease Interest  Expense" means, for any period,  the portion
of rent paid or payable  (without  duplication)  for such period under Synthetic
Leases of the Company and its Restricted  Subsidiaries  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 Principal Component" means for any period, the portion
of rent  (exclusive of the  Synthetic  Lease  Interest  Expense) paid or payable
(without duplication) for such period under Synthetic Leases for the Company and
its Restricted  Subsidiaries  that was deducted in calculating  Consolidated Net
Income of the Company and its Restricted Subsidiaries for such period.

         "Synthetic  Lease Rent Payments"  means,  with resect to any Person for
any period,  the sum of the Synthetic  Lease Interest  Expense and the Synthetic
Lease Principal Component for all Synthetic Leases of such Person.

         "Transfer" means, with respect to any Person,  any transaction in which
such  Person  sells,  conveys,  abandons,  transfers,  leases  (as  lessor),  or
otherwise disposes of (including,  without limitation, in connection with a Sale
Leaseback  Transaction),  any of its property,  including,  without  limitation,
Subsidiary Stock.

         "Unrestricted Subsidiary" means a Subsidiary which is not a Restricted
 Subsidiary.

         "Voting  Stock"  means  (i)  Securities  of any class of  classes,  the
holders of which are ordinarily,  in the absence of  contingencies,  entitled to
elect a majority of the directors (or Persons  performing  similar functions) or
(ii) in the case of a partnership or joint venture,  interests in the profits or
capital  thereof  entitling  the  holders of such  interests  to  approve  major
business actions.

         "Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted
Subsidiary  one hundred  percent (100%) of all of the equity  interests  (except
directors' qualifying shares) and voting interests of which are owned by any one
or  more  of  the  Company  and  the  Company's  other  Wholly-Owned  Restricted
Subsidiaries at such time.

         "Working  Capital  Facility"  means the Debt facility made available to
the Company for working  capital  purposes  under the  "Facility A  Commitments"
pursuant to the Credit  Agreement  dated June 30, 1998,  between the Company and
the  banks  named  therein,  as  from  time to time  amended,  supplemented  and
Refinanced and any other credit  agreement from time to time entered into by the
Company  and its  Restricted  Subsidiaries  for  purposes of  obtaining  working
capital Debt.

<PAGE>

                       SCHEDULE 5.1 - OWNERSHIP OF COMPANY

         The Company is owned 1% by Ferrellgas,  Inc., as general  partner,  and
99% by Ferrellgas Partners, L.P., as limited partner.

<PAGE>

                       SCHEDULE 5.3 - DISCLOSURE MATERIALS

                                                                      None

<PAGE>

       SCHEDULE 5.4 - SUBSIDIARIES OF THE COMPANY AND OWNERSHIP INTERESTS

                                               The Company has no Subsidiaries

<PAGE>

                       SCHEDULE 5.5 - FINANCIAL STATEMENTS

         1999 Annual  Report and the  audited  financial  statements  (including
balance  sheets and income  statements) of the Company dated as of July 31, 1999
and July 31, 1998.

         SEC Form 10-K of the Company for the fiscal years ending July 31, 1997,
1996 and 1995.

         Unaudited  financial  statements  (including  balance  sheet and income
statement) of the Company dated as of October 31, 1999.

<PAGE>

                          SCHEDULE 5.11 - PATENTS, ETC.

                                                                      None

<PAGE>

                         SCHEDULE 5.14 - USE OF PROCEEDS

         The  proceeds  of  the  Notes  will  be  used  (a)  to  repay  existing
indebtedness  owing to Bank of America,  N.A.  under the  Company's  Bridge Loan
Credit  Agreement  dated as of February  17, 1999 among the  Company,  the banks
named therein, and Bank of America, N.A., as administrative agent for such banks
and (b) to pay related transaction costs and expenses.

<PAGE>

                 SCHEDULE 5.15 - EXISTING INDEBTEDNESS AND LIENS

         A.       Existing Indebtedness

                  See Attached List

         B.       Existing Liens

                  Liens  securing  copiers and other office  equipment and other
immaterial liens.

<PAGE>

                                     E-1-A-2
                                   EXHIBIT 1-A
                          (to Note Purchase Agreement)

                             [FORM OF SERIES A NOTE]

                                FERRELLGAS, L.P.

                 8.68% SENIOR NOTE, SERIES A, DUE AUGUST 1, 2006

No.  [R-A-]                                                                                                 [Date]
$[__________]                                                                                      PPN 31529# AA 1

         FOR VALUE RECEIVED,  the undersigned,  FERRELLGAS,  L.P. (herein called
the "Company"),  a limited partnership  organized and existing under the laws of
the State of  Delaware,  hereby  promises to pay to  [_____________________]  or
registered assigns,  the principal sum of [______________]  DOLLARS on August 1,
2006 with  interest  (computed on the basis of a 360-day  year of twelve  30-day
months)  (a) on the unpaid  balance  thereof at the rate of 8.68% per annum from
the date hereof,  payable semiannually,  on the first day of February and August
in each year,  commencing  with the February or August next  succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent  permitted  by law on any  overdue  payment  (including  any  overdue
prepayment)  of  principal,  any  overdue  payment of  interest  and any overdue
payment of any  Make-Whole  Amount (as  defined in the Note  Purchase  Agreement
referred to below),  payable semiannually as aforesaid (or, at the option of the
registered  holder  hereof,  on  demand),  at a rate per annum from time to time
equal to the greater of (i) 10.68% or (ii) 2% over the rate of interest publicly
announced by Bank of America, N.A. from time to time in Chicago, Illinois as its
"base" or "prime" rate.

         Payments of principal of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in  lawful  money of the  United  States of
America at the principal  office of the Company in Liberty,  Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.

         This Note is one of the 8.68% Senior Notes, Series A (herein called the
"Series A Notes"),  issued pursuant to the Note Purchase Agreement,  dated as of
February 1, 2000 (as from time to time amended, the "Note Purchase  Agreement"),
between  the  Company and the  Purchasers  named  therein and is entitled to the
benefits  thereof.  Each holder of this Note will be deemed,  by its  acceptance
hereof,  (i) to have  agreed  to the  confidentiality  provisions  set  forth in
Section  20  of  the  Note  Purchase   Agreement  and  (ii)  to  have  made  the
representation set forth in Section 6.2 of the Note Purchase Agreement.

         This Note is a  registered  Series A Note and,  as provided in the Note
Purchase  Agreement,  upon surrender of this Note for  registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the  registered  holder hereof or such holder's  attorney duly  authorized in
writing,  a new Series A Note for a like principal amount will be issued to, and
registered  in the  name  of,  the  transferee.  Prior  to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving  payment and
for all other  purposes,  and the Company  will not be affected by any notice to
the contrary.

         This Note is subject to optional  prepayment,  in whole or from time to
time in part,  at the  times  and on the terms  specified  in the Note  Purchase
Agreement, but not otherwise.

         If an Event of  Default,  as  defined in the Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note  may be  declared  or
otherwise  become due and payable in the  manner,  at the price  (including  any
applicable  Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         This Note shall be construed and enforced in accordance  with,  and the
rights of the issuer  and holder  hereof  shall be  governed  by, the law of the
State of Illinois  excluding  choice-of-law  principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.

                                FERRELLGAS, L.P.

By Ferrellgas, Inc., its general partner

By____________________________________________________
Its_______________________________________________
         ---------

<PAGE>

                                     E-1-B-2
                                   EXHIBIT 1-B
                          (to Note Purchase Agreement)

                             [FORM OF SERIES B NOTE]

                                FERRELLGAS, L.P.

                 8.78% SENIOR NOTE, SERIES B, DUE AUGUST 1, 2007

No.  [R-B-]                                                                                                 [Date]
$[__________]                                                                                      PPN 31529# AB 9

         FOR VALUE RECEIVED,  the undersigned,  FERRELLGAS,  L.P. (herein called
the "Company"),  a limited partnership  organized and existing under the laws of
the State of  Delaware,  hereby  promises to pay to  [_____________________]  or
registered assigns,  the principal sum of [______________]  DOLLARS on August 1,
2007 with  interest  (computed on the basis of a 360-day  year of twelve  30-day
months)  (a) on the unpaid  balance  thereof at the rate of 8.78% per annum from
the date hereof,  payable semiannually,  on the first day of February and August
in each year,  commencing  with the February or August next  succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent  permitted  by law on any  overdue  payment  (including  any  overdue
prepayment)  of  principal,  any  overdue  payment of  interest  and any overdue
payment of any  Make-Whole  Amount (as  defined in the Note  Purchase  Agreement
referred to below),  payable semiannually as aforesaid (or, at the option of the
registered  holder  hereof,  on  demand),  at a rate per annum from time to time
equal to the greater of (i) 10.78% or (ii) 2% over the rate of interest publicly
announced by Bank of America, N.A. from time to time in Chicago, Illinois as its
"base" or "prime" rate.

         Payments of principal of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in  lawful  money of the  United  States of
America at the principal  office of the Company in Liberty,  Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.

         This Note is one of the 8.78% Senior Notes, Series B (herein called the
"Series B Notes"),  issued  pursuant  to Note  Purchase  Agreement,  dated as of
February 1, 2000 (as from time to time amended, the "Note Purchase  Agreement"),
between  the  Company and the  Purchasers  named  therein and is entitled to the
benefits  thereof.  Each holder of this Note will be deemed,  by its  acceptance
hereof,  (i) to have  agreed  to the  confidentiality  provisions  set  forth in
Section  20  of  the  Note  Purchase   Agreement  and  (ii)  to  have  made  the
representation set forth in Section 6.2 of the Note Purchase Agreement.

         This Note is a  registered  Series B Note and,  as provided in the Note
Purchase  Agreement,  upon surrender of this Note for  registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the  registered  holder hereof or such holder's  attorney duly  authorized in
writing,  a new Series B Note for a like principal amount will be issued to, and
registered  in the  name  of,  the  transferee.  Prior  to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving  payment and
for all other  purposes,  and the Company  will not be affected by any notice to
the contrary.

         This Note is subject to optional  prepayment,  in whole or from time to
time in part,  at the  times  and on the terms  specified  in the Note  Purchase
Agreement, but not otherwise.

         If an Event of  Default,  as  defined in the Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note  may be  declared  or
otherwise  become due and payable in the  manner,  at the price  (including  any
applicable  Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         This Note shall be construed and enforced in accordance  with,  and the
rights of the issuer  and holder  hereof  shall be  governed  by, the law of the
State of Illinois  excluding  choice-of-law  principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.

                                FERRELLGAS, L.P.

By Ferrellgas, Inc., its general partner

By____________________________________________________
Its_______________________________________________

<PAGE>

                                     E-1-C-2
                                   EXHIBIT 1-C
                          (to Note Purchase Agreement)
                             [FORM OF SERIES C NOTE]

                                FERRELLGAS, L.P.

                 8.87% SENIOR NOTE, SERIES C, DUE AUGUST 1, 2009

No.  [R-C-]                                                                                                 [Date]
$[__________]                                                                                      PPN 31529# AC 7

         FOR VALUE RECEIVED,  the undersigned,  FERRELLGAS,  L.P. (herein called
the "Company"),  a limited partnership  organized and existing under the laws of
the State of  Delaware,  hereby  promises to pay to  [_____________________]  or
registered assigns,  the principal sum of [______________]  DOLLARS on August 1,
2009 with  interest  (computed on the basis of a 360-day  year of twelve  30-day
months)  (a) on the unpaid  balance  thereof at the rate of 8.87% per annum from
the date hereof,  payable semiannually,  on the first day of February and August
in each year,  commencing  with the February or August next  succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent  permitted  by law on any  overdue  payment  (including  any  overdue
prepayment)  of  principal,  any  overdue  payment of  interest  and any overdue
payment of any  Make-Whole  Amount (as  defined in the Note  Purchase  Agreement
referred to below),  payable semiannually as aforesaid (or, at the option of the
registered  holder  hereof,  on  demand),  at a rate per annum from time to time
equal to the greater of (i) 10.87% or (ii) 2% over the rate of interest publicly
announced by Bank of America, N.A. from time to time in Chicago, Illinois as its
"base" or "prime" rate.

         Payments of principal of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in  lawful  money of the  United  States of
America at the  principal  office of the Company in Liberty  Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.

         This Note is one of the 8.87% Senior Notes, Series C (herein called the
"Series C Notes"),  issued  pursuant  to Note  Purchase  Agreement,  dated as of
February 1, 2000 (as from time to time amended, the "Note Purchase  Agreement"),
between  the  Company and the  Purchasers  named  therein and is entitled to the
benefits  thereof.  Each holder of this Note will be deemed,  by its  acceptance
hereof,  (i) to have  agreed  to the  confidentiality  provisions  set  forth in
Section  20  of  the  Note  Purchase   Agreement  and  (ii)  to  have  made  the
representation set forth in Section 6.2 of the Note Purchase Agreement.

         This Note is a  registered  Series C Note and,  as provided in the Note
Purchase  Agreement,  upon surrender of this Note for  registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the  registered  holder hereof or such holder's  attorney duly  authorized in
writing,  a new Series C Note for a like principal amount will be issued to, and
registered  in the  name  of,  the  transferee.  Prior  to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving  payment and
for all other  purposes,  and the Company  will not be affected by any notice to
the contrary.

         This Note is subject to optional  prepayment,  in whole or from time to
time in part,  at the  times  and on the terms  specified  in the Note  Purchase
Agreement, but not otherwise.

         If an Event of  Default,  as  defined in the Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note  may be  declared  or
otherwise  become due and payable in the  manner,  at the price  (including  any
applicable  Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

         This Note shall be construed and enforced in accordance  with,  and the
rights of the issuer  and holder  hereof  shall be  governed  by, the law of the
State of Illinois  excluding  choice-of-law  principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.

                                FERRELLGAS, L.P.

By Ferrellgas, Inc., its general partner

By____________________________________________________
Its_______________________________________________

<PAGE>

                                   E-4.4(a)-3
                                 EXHIBIT 4.4(a)
                          (to Note Purchase Agreement)
               FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY

         The closing opinion of Bracewell & Patterson,  L.L.P.,  special counsel
for the Company, its Restricted  Subsidiaries and the General Partner,  which is
called for by Section 4.4(a) of the Note Purchase Agreement,  shall be dated the
date of the Closing and addressed to the  Purchasers,  shall be  satisfactory in
scope and form to the Purchasers and shall be to the effect that:

                    1.  The  Company  is a  partnership,  duly  formed,  validly
         existing and in good standing  under the laws of the State of Delaware,
         has the partnership power and authority to execute and perform the Note
         Purchase  Agreement  and to  issue  the  Notes  and has  the  requisite
         partnership power and authority to conduct its business in all material
         respects as presently  conducted and, based solely on  certificates  of
         foreign  qualification  provided  by the  Secretary  of  State  of each
         jurisdiction,  is duly qualified or registered as a foreign partnership
         to  transact  business  in,  and  is  in  good  standing  as a  foreign
         partnership in each  jurisdiction set forth on Schedule I hereto,  and,
         to our knowledge,  such  jurisdictions  are the only  jurisdictions  in
         which the Company conducts any business that requires  qualification or
         registration to conduct business as a foreign partnership, except where
         the failure to so qualify or register would not have a Material Adverse
         Effect.

                    2.  The  General  Partner  is a  corporation,  duly  formed,
         validly  existing and in good  standing  under the laws of the State of
         Delaware,  has the  partnership  power and  authority  to  execute  and
         deliver the Note Purchase Agreement and to issue the Notes on behalf of
         the Company and has the  requisite  power and  authority to conduct its
         business in all material  respects as presently  conducted  and,  based
         solely  on  certificates  of  foreign  qualification  provided  by  the
         Secretary  of  State  of  each  jurisdiction,   is  duly  qualified  or
         registered as a foreign  corporation to transact business in, and is in
         good standing as a foreign  corporation in each  jurisdiction set forth
         on Schedule I hereto, and, to our knowledge, such jurisdictions are the
         only  jurisdictions  in which the General Partner conducts any business
         that requires  qualification  or registration to conduct  business as a
         foreign partnership, except where the failure to so qualify or register
         would not have a Material Adverse Effect.

                    3.  Each   Restricted   Subsidiary   of  the  Company  is  a
         corporation or limited  partnership duly incorporated or formed, as the
         case may be,  validly  existing and in good standing  under the laws of
         its  jurisdiction of  incorporation or formation and, based solely upon
         certificates  of foreign  qualification  provided by the  Secretary  of
         State  of each  jurisdiction,  is duly  qualified  or  registered  as a
         foreign corporation or limited partnership to transact business in, and
         is in good standing as a foreign  corporation or limited partnership in
         each  jurisdiction  set  forth  on  Schedule  II  hereto,  and,  to our
         knowledge,  such  jurisdictions are the only jurisdictions in which the
         Restricted  Subsidiaries  of the  Company  conduct  any  business  that
         requires qualification or registration to conduct business as a foreign
         corporation or  partnership,  except where the failure to so qualify or
         register  would not have a material  adverse effect upon the respective
         Restricted  Subsidiaries;  and all of the issued and outstanding shares
         of capital stock or other  ownership  interests of each such Restricted
         Subsidiary, as applicable, have been validly issued, are fully paid and
         non-assessable   and  the  Company   and/or  one  or  more   Restricted
         Subsidiaries  is the  holder  of record  of such  shares  or  ownership
         interests.

                    4. The Note Purchase  Agreement has been duly  authorized by
         all necessary  partnership action on the part of the Company,  has been
         duly executed and delivered by the Company and  constitutes  the legal,
         valid and binding  obligation of the Company  enforceable in accordance
         with its terms, except to the extent that enforceability may be limited
         by applicable bankruptcy, insolvency, fraudulent conveyance and similar
         laws affecting  creditors' rights generally,  and general principles of
         equity  (regardless of whether the enforceability of such principles is
         considered in a proceeding in equity or at law).

                    5. The  Notes  have been duly  authorized  by all  necessary
         partnership action on the part of the Company,  have been duly executed
         and delivered by the Company, and when paid for by the Purchasers, will
         constitute  the legal,  valid and  binding  obligations  of the Company
         enforceable  in  accordance  with their terms,  subject to  bankruptcy,
         insolvency, fraudulent conveyance and similar laws affecting creditors'
         rights  generally,  and general  principles  of equity  (regardless  of
         whether  the   application  of  such  principles  is  considered  in  a
         proceeding in equity or at law).

                    6. No  approval,  consent,  registration,  qualification  or
         other  action  on the part of, or filing  with any  governmental  body,
         Federal,  state or local,  is required for the execution,  delivery and
         performance  by the  Company  of the  Note  Purchase  Agreement  or the
         execution,  delivery  and  performance  by the  Company  of the  Notes,
         except,  in each case,  such  approvals,  consents,  registrations,  or
         qualifications as have been obtained.

                    7. The  issuance  and sale of the Notes  and the  execution,
         delivery and performance by the Company of the Note Purchase  Agreement
         do not violate applicable  provisions of statutory law applicable to or
         binding  on the  Company  or any  order of any  court  or  governmental
         authority or agency applicable to or binding on the Company, or violate
         or result in any breach of any of the  provisions  of or  constitute  a
         default  under,  or result in the creation or imposition of a Lien with
         respect to, any material  bond,  note,  debenture or other  evidence of
         indebtedness or any material indenture,  mortgage,  deed of trust, loan
         agreement,  contract,  lease or other  material  instrument  for  money
         borrowed  known to us to which the  Company  is a party or by which the
         Company is bound or to which the  property  of the  Company is subject,
         nor will such action result in a breach or violation of the Certificate
         of Formation or Articles of Partnership of the Company.

                    8. The  issuance,  sale  and  delivery  of the  Notes by the
         Company  under  the  circumstances  contemplated  by the Note  Purchase
         Agreement do not, under existing law,  require the  registration of the
         Notes  under  the   Securities   Act  of  1933,  as  amended,   or  the
         qualification  of an  indenture  in  respect  thereof  under  the Trust
         Indenture Act of 1939, as amended.

                    9.  To  our  knowledge,  there  are  no  actions,  suits  or
         proceedings  pending or  overtly  threatened  by written  communication
         against the Company or any Restricted Subsidiary in any court or before
         any arbitrator of any kind or before or by any  Governmental  Authority
         either (i) which purport to affect the Note  Purchase  Agreement or the
         Notes, or (ii) that, individually or in the aggregate, could reasonably
         be expected to have a Material Adverse Effect.

                   10. The  issuance of the Notes and the use of the proceeds of
         the sale of the  Notes in  accordance  with  the  provisions  of and as
         contemplated  by  the  Note  Purchase  Agreement  (including,   without
         limitation,  the  representations  and warranties set forth in the Note
         Purchase  Agreement) do not violate or conflict with Regulation T, U or
         X of the Board of Governors of the Federal Reserve System.

                   11. The Company is not an "investment  company," or a company
         "controlled" by an "investment  company," under the Investment  Company
         Act of 1940, as amended.

                   12. A court sitting in the State of Missouri will look to the
         conflict of law rules of the State of Missouri to  determine  which law
         governs.  Under the conflict of law rules of the State of  Missouri,  a
         court  sitting  in the  State of  Missouri  should  give  effect to the
         contractual choice of law clause in the Note Purchase Agreement and the
         Notes  electing   Illinois  law  assuming  that  the  Purchasers   have
         reasonable  contacts  with the  State of  Illinois,  including  without
         limitation,  that many of the Purchasers  have offices or agents in the
         State of Illinois,  that the Note Purchase Agreement and the Notes will
         be  delivered  in the  State  of  Illinois,  and  that  counsel  to the
         Purchasers is located in the State of Illinois.

         The opinion of  Bracewell & Patterson,  L.L.P.  shall be limited to the
laws of the State of Missouri,  the Delaware Revised Uniform Limited Partnership
Act,  the general  business  corporation  law of the State of  Delaware  and the
Federal  laws of the United  States.  In  rendering  the  opinions  set forth in
paragraphs (4) and (5) above,  Bracewell & Patterson,  L.L.P.  shall assume that
the laws of  Missouri  govern the Note  Purchase  Agreement  and the Notes.  The
opinion of Bracewell & Patterson, L.L.P. shall cover such other matters relating
to the sale of the Notes as the Purchasers may reasonably request.  With respect
to  matters  of fact on which  such  opinion  is based,  such  counsel  shall be
entitled to rely on appropriate certificates of public officials and officers of
the Company and upon representations of the Company and the Purchasers delivered
in connection with the issuance and sale of the Notes.

<PAGE>

                                   E-4.4(b)-2
                                 EXHIBIT 4.4(b)
                          (to Note Purchase Agreement)

                       FORM OF OPINION OF SPECIAL COUNSEL
                                TO THE PURCHASERS

         The  closing  opinion of Chapman and  Cutler,  special  counsel for the
Purchasers,  called for by Section 4.4(b) of the Note Purchase Agreement,  shall
be dated the date of the  Closing  and  addressed  to the  Purchasers,  shall be
satisfactory  in form and substance to the Purchasers and shall be to the effect
that:

                    1. The Company is a  partnership,  validly  existing  and in
         good standing under the laws of the State of Delaware and has the power
         and the  authority to execute and deliver the Note  Purchase  Agreement
         and to issue the Notes.

                    2. The Note Purchase  Agreement has been duly  authorized by
         all necessary action on the part of the Company, has been duly executed
         and  delivered  by the Company  and  constitutes  the legal,  valid and
         binding  contract of the Company  enforceable  in  accordance  with its
         terms,  subject to bankruptcy,  insolvency,  fraudulent  conveyance and
         similar  laws  affecting  creditors'  rights  generally,   and  general
         principles of equity  (regardless  of whether the  application  of such
         principles is considered in a proceeding in equity or at law).

                    3. The  Notes  have been duly  authorized  by all  necessary
         action on the part of the Company, and the Notes being delivered on the
         date hereof have been duly  executed  and  delivered by the Company and
         constitute  the legal,  valid and  binding  obligations  of the Company
         enforceable  in  accordance  with their terms,  subject to  bankruptcy,
         insolvency, fraudulent conveyance and similar laws affecting creditors'
         rights  generally,  and general  principles  of equity  (regardless  of
         whether  the   application  of  such  principles  is  considered  in  a
         proceeding in equity or at law).

                    4. The  issuance,  sale and  delivery of the Notes under the
         circumstances contemplated by the Note Purchase Agreement do not, under
         existing  law,   require  the  registration  of  the  Notes  under  the
         Securities  Act  of  1933,  as  amended,  or  the  qualification  of an
         indenture under the Trust Indenture Act of 1939, as amended.

         The opinion of Chapman and Cutler  shall also state that the opinion of
Bracewell & Patterson,  L.L.P., special counsel for the Company, is satisfactory
in scope  and form to  Chapman  and  Cutler  and  that,  in their  opinion,  the
Purchasers are justified in relying thereon.

         In rendering  the opinion set forth in  paragraph 1 above,  Chapman and
Cutler may rely,  as to matters  referred  to in  paragraph  1,  solely  upon an
examination of the  Certificate of Formation  certified by, and a certificate of
good  standing  of the  Company  from,  the  Secretary  of State of the State of
Delaware, the Articles of Partnership of the Company and the general partnership
law of the State of Delaware. The opinion of Chapman and Cutler shall be limited
to the laws of the State of  Illinois,  the  Delaware  Revised  Uniform  Limited
Partnership Act and the Federal laws of the United States.

         With  respect to  matters  of fact upon  which  such  opinion is based,
Chapman and Cutler may rely on appropriate  certificates of public officials and
officers  of the  Company  and  upon  representations  of the  Company  and  the
Purchasers delivered in connection with the issuance and sale of the Notes.

<PAGE>

                                                                10.1-3
                                  EXHIBIT 10.1
                          (to Note Purchase Agreement)

                     SUBORDINATION PROVISIONS APPLICABLE TO
                                                               Subordinated Debt

         (a)  The  indebtedness  evidenced  by the  subordinated  notes  and any
renewals or extensions thereof,  premium, if any, interest  (including,  without
limitation any such interest accruing subsequent to the filing by or against the
Company of any proceeding  brought under Chapter 11 of the  Bankruptcy  Code (11
U.S.C.  Section  100 et seq.))  and any fees,  charges,  expenses  or other sums
payable  under  or  in  respect  of  the  agreements   pursuant  to  which  such
subordinated notes were issued, shall at all times be wholly and unconditionally
subordinate  and junior in right of payment to any and all  indebtedness  of the
Company  (including  principal,  premium,  if any,  accrued and unpaid interest,
including  any  interest  which  may  accrue   subsequent  to   commencement  of
proceedings  under bankruptcy laws (whether or not such interest is allowed as a
claim pursuant to the provisions of any such  bankruptcy  laws) evidenced by the
Company's  $21,000,000  aggregate principal amount 8.68% Senior Notes, Series A,
due August 1, 2006,  $90,000,000  aggregate principal amount 8.78% Senior Notes,
Series B, due August 1, 2007, and $73,000,000  aggregate  principal amount 8.87%
Senior Notes, Series C, due August 1, 2009, issued pursuant to the Note Purchase
Agreement,  dated as of February 1, 2000, as the same shall be amended from time
to time, between the Company and the institutional investors named in Schedule A
attached  thereto and all other amounts due under said Note  Purchase  Agreement
(together with any renewal,  replacement or refinancing  thereof,  herein called
"Superior Indebtedness"),  in the manner and with the force and effect hereafter
set forth:

                   (1) In the  event  of any  (i)  liquidation,  dissolution  or
         winding  up  of  the  Company,  voluntary  or  involuntary,   (ii)  any
         execution,  sale, receivership,  insolvency,  bankruptcy,  liquidation,
         readjustment,  reorganization or other similar  proceeding  relative to
         the  Company  or its  property,  (iii) any  general  assignment  by the
         Company  for  the  benefit  of  creditors,  or (iv)  any  distribution,
         division, marshalling or application of any of the properties or assets
         of the  Company or the  proceeds  thereof to  creditors,  voluntary  or
         involuntary,  and whether or not involving legal proceedings,  then and
         in any event:

                            (A) all principal, premium, if any, and interest and
                  all other sums owing on all Superior  Indebtedness shall first
                  be  indefeasibly  paid in full in cash  before any  payment or
                  distribution  of any  kind  or  character  is  made  upon  the
                  indebtedness  evidenced by the subordinated  notes; and in any
                  such  event  any  payment  or  distribution  of  any  kind  or
                  character, whether in cash, property or securities (other than
                  in securities, including equity securities, or other evidences
                  of  indebtedness,  the  payment  of which  is  unconditionally
                  subordinated (to the same extent as the subordinated notes) to
                  the payment of all Superior Indebtedness which may at the time
                  be outstanding)  which shall be made upon or in respect of the
                  subordinated  notes  shall  immediately  be  paid  over to the
                  holders  of  such  Superior   Indebtedness,   pro  rata,   for
                  application in payment thereof, unless and until such Superior
                  Indebtedness shall have been indefeasibly paid or satisfied in
                  full in cash;

                   (2) In the event that the  subordinated  notes are in default
         under  circumstances  when  the  foregoing  clause  (l)  shall  not  be
         applicable,  the holders of the subordinated notes shall be entitled to
         payments of  principal,  premium,  if any, or interest only after there
         shall first have been  indefeasibly  paid in full in cash all  Superior
         Indebtedness  outstanding at the time the subordinated  notes so become
         in default; and

                   (3) During the continuance of any default with respect to any
         Superior  Indebtedness,  no payment of principal,  premium,  if any, or
         interest or any other  fees,  charges,  expenses or other sums  payable
         under  or  in  respect  of  the  agreements   pursuant  to  which  such
         subordinated notes were issued shall be made on the subordinated notes.

         (b) The holder of each  subordinated  note agrees that: (1) it will not
initiate a proceeding for liquidation, dissolution or winding-up of the Company,
or for  execution,  sale,  receivership,  insolvency,  bankruptcy,  liquidation,
readjustment, reorganization or other similar proceeding relative to the Company
or its  property and (2) it will not  accelerate  the maturity of or enforce the
collection of the subordinated notes.

         (c) The holder of each  subordinated note undertakes and agrees for the
benefit of each holder of Superior Indebtedness to execute,  verify, deliver and
file any proofs of claim  within 30 days  before the  expiration  of the time to
file the same which any holder of Superior  Indebtedness may at any time require
in order to prove  and  realize  upon any  rights or  claims  pertaining  to the
subordinated  notes and to  effectuate  the full  benefit  of the  subordination
contained herein;  and upon failure of the holder of any subordinated note so to
do, any such holder of Superior  Indebtedness  shall be deemed to be irrevocably
appointed the agent and  attorney-in-fact of the holder of such note to execute,
verify, deliver and file any such proofs of claim.

         (d) No right of any  holder of any  Superior  Indebtedness  to  enforce
subordination  as herein provided shall at any time or in any way be affected or
impaired  by any  failure to act on the part of the  Company  or the  holders of
Superior  Indebtedness,  or by any  noncompliance by the Company with any of the
terms, provisions and covenants of the subordinated notes or the agreement under
which they are issued,  regardless of any knowledge thereof that any such holder
of Superior Indebtedness may have or be otherwise charged with.

         (e) The  subordination  effected by the  foregoing  provisions  and the
rights created thereby of the holders of the Superior  Indebtedness shall not be
affected  by: (1) any  amendment  of or addition or  supplement  to any Superior
Indebtedness or any instrument or agreement  relating thereto,  (2) any exercise
or  non-exercise  of any  right,  power or  remedy  under or in  respect  of any
Superior  Indebtedness or any instrument or agreement  relating thereto,  or (3)
the giving or denial of any waiver,  consent,  release,  indulgence,  extension,
renewal,  modification  or delay or the taking or nontaking of any other action,
inaction or omission,  in respect of any Superior Indebtedness or any instrument
or  agreement  relating  thereto or to any  securities  relating  thereto or any
guarantee  thereof,  whether or not any holder of any  subordinated  notes shall
have had notice or knowledge of any of the foregoing.

         (f) The  Company  agrees,  for the  benefit of the  holders of Superior
Indebtedness,  that in the event that any subordinated  note is declared due and
payable  before its expressed  maturity  because of the  occurrence of a default
hereunder:  (1) the Company will give prompt notice in writing of such happening
to the holders of Superior  Indebtedness and (2) all Superior Indebtedness shall
forthwith  become  immediately  due and payable upon demand,  regardless  of the
expressed  maturity thereof and (3) the holders of such subordinated notes shall
not  entitled  to receive  any  payment or  distribution  in respect  thereof or
applicable thereto until all Superior Indebtedness at the time outstanding shall
have been indefeasibly paid in full in cash.

         (g) No holder of any  subordinated  notes  will sell,  assign,  pledge,
encumber or otherwise dispose of any of its subordinated notes unless such sale,
assignment,  pledge, encumbrance or disposition is made expressly subject to the
foregoing provisions.

         (h) If any payment or distribution  of any character,  whether in cash,
securities or other property shall be received by any holder of any subordinated
notes in  contravention of this Section  ________,  such payment or distribution
shall be  received  and held in trust for the  benefit of, and shall be promptly
paid over or delivered and  transferred  in the form received to, the holders of
the  Superior  Indebtedness  pro  rata for  application  to the  payment  of all
Superior Indebtedness  remaining unpaid, to the extent necessary to indefeasibly
pay all such Superior  Indebtedness in full in cash. In the event of the failure
of any holder of the  subordinated  notes to endorse or assign any such payment,
distribution  or  security,  any  holder of the  Superior  Indebtedness  or such
holder's  representative is hereby  irrevocably  authorized to endorse or assign
the same.
</TABLE><PAGE>

                              TRIVIDA CORPORATION

                          1998 EQUITY INCENTIVE PLAN

              As Adopted July 24, 1998, Amended October 15, 1998
                              and October 7, 1999

     1.  PURPOSE.  The purpose of this Plan is to provide incentives to attract,
         -------
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock.  Capitalized terms not defined
in the text are defined in Section 22 hereof.  This Plan is intended to be a
written compensatory benefit plan within the meaning of Rule 701 promulgated
under the Securities Act.

     2.  SHARES SUBJECT TO THE PLAN.
         --------------------------

         2.1  Number of Shares Available. Subject to Sections 2.2 and 17 hereof,
              --------------------------
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 6,900,000 Shares or such lesser number of Shares
as permitted under Section 260.140.45 of Title 10 of the California Code of
Regulations. Subject to Sections 2.2 and 17 hereof, Shares will again be
available for grant and issuance in connection with future Awards under this
Plan that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option or
(b) are subject to a Restricted Stock Award that otherwise terminates without
Shares being issued. At all times the Company will reserve and keep available a
sufficient number of Shares as will be required to satisfy the requirements of
all Awards granted under this Plan.

         2.2  Adjustment of Shares.  In the event that the number of outstanding
              --------------------
shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
this Plan, (b) the Exercise Prices of and number of Shares subject to
outstanding Options and (c) the Purchase Prices of and number of Shares subject
to other outstanding Awards will be proportionately adjusted, subject to any
required action by the Board or the shareholders of the Company and compliance
with applicable securities laws; provided, however, that fractions of a Share
will not be issued but will either be paid in cash at Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee.

     3.  ELIGIBILITY.  ISOs (as defined in Section 5 hereof) may be granted only
         -----------
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company.  NQSOs (as defined in
Section 5 hereto) and Restricted Stock Awards may be granted to employees,
officers, directors and consultants of the Company or any Parent or Subsidiary
of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction.  A person may be granted more than one Award under this Plan.

     4.  ADMINISTRATION.
         --------------

         4.1  Committee Authority.  This Plan will be administered by the
              -------------------
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

         (a)  construe and interpret this Plan, any Award Agreement and any
              other agreement or document executed pursuant to this Plan;
<PAGE>

         (b)  prescribe, amend and rescind rules and regulations relating to
              this Plan;

         (c)  select persons to receive Awards;

         (d)  determine the form and terms of Awards;

         (e)  determine the number of Shares or other consideration subject to
              Awards;

         (f)  determine whether Awards will be granted singly, in combination
              with, in tandem with, in replacement of, or as alternatives to,
              other Awards under this Plan or awards under any other incentive
              or compensation plan of the Company or any Parent or Subsidiary of
              the Company;

         (g)  grant waivers of Plan or Award conditions;

         (h)  determine the vesting, exercisability and payment of Awards;

         (i)  correct any defect, supply any omission, or reconcile any
              inconsistency in this Plan, any Award, any Award Agreement, any
              Exercise Agreement or any Restricted Stock Purchase Agreement;

         (j)  determine whether an Award has been earned; and

         (k)  make all other determinations necessary or advisable for the
              administration of this Plan.

         4.2  Committee Discretion. Any determination made by the Committee
              --------------------
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, and subject to Section 5.9 hereof, at any later time, and such
determination will be final and binding on the Company and on all persons having
an interest in any Award under this Plan. The Committee may delegate to one or
more officers of the Company the authority to grant an Award under this Plan,
provided such officer or officers are members of the Board.

     5.  OPTIONS.  The Committee may grant Options to eligible persons and will
         -------
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

         5.1  Form of Option Grant.  Each Option granted under this Plan will be
              --------------------
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("Stock Option Agreement"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

         5.2  Date of Grant.  The date of grant of an Option will be the date on
              -------------
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.

         5.3  Exercise Period.  Options may be exercisable immediately (subject
              ---------------
to repurchase pursuant to Section 11 hereof) or may be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("Ten Percent Shareholder") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines. Subject to earlier termination of the Option as
provided herein, each Participant who is not an officer, director or consultant
of the Company or of a Parent or

                                       2
<PAGE>

Subsidiary of the Company shall have the right to exercise an Option granted
hereunder at the rate of at least twenty percent (20%) per year over five (5)
years from the date such Option is granted.

         5.4  Exercise Price.  The Exercise Price of an Option will be
              --------------
determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (a) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (b) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 hereof.

         5.5  Method of Exercise.  Options may be exercised only by delivery to
              ------------------
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.

         5.6  Termination.  Subject to earlier termination pursuant to Sections
              -----------
17 and 18 hereof and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:

         (a)  If the Participant is Terminated for any reason except death,
              Disability or for Cause, then the Participant may exercise such
              Participant's Options only to the extent that such Options are
              exercisable upon the Termination Date and such Options must be
              exercised by the Participant, if at all, as to all or some of the
              Vested Shares calculated as of the Termination Date, within three
              (3) months after the Termination Date (or within such shorter time
              period, not less than thirty (30) days, or within such longer time
              period, not exceeding five (5) years, after the Termination Date
              as may be determined by the Committee, with any exercise beyond
              three (3) months after the Termination Date deemed to be an NQSO)
              but in any event, non later than the expiration date of the
              Options.

         (b)  If the Participant is Terminated because of Participant's death or
              Disability (or the Participant dies within three (3) months after
              a Termination other than for Cause), then Participant's Options
              may be exercised only to the extent that such Options are
              exercisable by Participant on the Termination Date and must be
              exercised by Participant (or Participant's legal representative or
              authorized assignee), if at all, as to all or some of the Vested
              Shares calculated as of the Termination Date, within twelve (12)
              months after the Termination Date (or within such shorter time
              period, not less than six (6) months, or within such longer time
              period, not exceeding five (5) years, after the Termination Date
              as may be determined by the Committee, with any exercise beyond
              (i) three (3) months after the Termination Date when the
              Termination is for any reason other than the Participant's death
              or disability, within the meaning of Section 22(e)(3) of the Code,
              or (ii) twelve (12) months after the Termination Date when the
              Termination is for Participant's disability, within the meaning of
              Section 22(e)(3) of the Code, deemed to be an NQSO) but in any
              event no later than the expiration date of the Options.

         (c)  If the Participant is terminated for Cause, then Participant's
              Options shall expire on such Participant's Termination Date, or at
              such later time and on such conditions as are determined by the
              Committee.

         5.7  Limitations on Exercise. The Committee may specify a reasonable
              -----------------------
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.

                                       3
<PAGE>

         5.8  Limitations on ISOs.  The aggregate Fair Market Value (determined
              -------------------
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of
Shares on the date of grant with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISOs and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date (as defined in Section 18 hereof) to provide for a different
limit on the Fair Market Value of Shares permitted to be subject to ISOs, then
such different limit will be automatically incorporated herein and will apply to
any Options granted after the effective date of such amendment.

         5.9  Modification, Extension or Removal.  The Committee may modify,
              ----------------------------------
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. Subject to Section 5.10 hereof, the Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the Exercise Price
may not be reduced below the minimum Exercise Price that would be permitted
under Section 5.4 hereof for Options granted on the date the action is taken to
reduce the Exercise Price.

         5.10 No Disqualification.  Notwithstanding any other provision in this
              -------------------
Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

     6.  RESTRICTED STOCK.  A Restricted Stock Award is an offer by the Company
         ----------------
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the Purchase Price, the restrictions to which the Shares
will be subject, and all other terms and conditions of the Restricted Stock
Award, subject to the following:

         6.1  Form of Restricted Stock Award.  All purchases under a Restricted
              ------------------------------
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The Restricted Stock Award will be accepted by the Participant's execution
and delivery of the Restricted Stock Purchase Agreement and full payment for the
Shares to the Company within thirty (30) days from the date the Restricted Stock
Purchase Agreement is delivered to the person. If such person does not execute
and deliver the Restricted Stock Purchase Agreement along with full payment for
the Shares to the Company within such thirty (30) days, then the offer will
terminate, unless otherwise determined by the Committee.

         6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
             --------------
Restricted Stock Award will be determined by the Committee and will be at least
eighty-five percent (85%) of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted or at the time the purchase is consummated,
except in the case of a sale to a Ten Percent Shareholder, in which case the
Purchase Price will be one hundred percent (100%) of the Fair Market Value on
the date the Restricted Stock Award is granted or at the time the purchase is
consummated. Payment of the Purchase Price must be made in accordance with
Section 7 hereof.

         6.3  Restrictions.  Restricted Stock Awards may be subject to the
              ------------
restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(o) of the California Corporations Code.

     7.  PAYMENT FOR SHARE PURCHASES.
         ---------------------------

         7.1  Payment.  Payment for Shares purchased pursuant to this Plan may
              -------
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:

                                       4
<PAGE>

          (a)  by cancellation of indebtedness of the Company to the
               Participant;

          (b)  by surrender of shares that:  (i) either (A) have been owned by
               Participant for more than six (6) months and have been paid for
               within the meaning of SEC Rule 144 (and, if such shares were
               purchased from the Company by use of a promissory note, such note
               has been fully paid with respect to such shares) or (B) were
               obtained by Participant in the public market and (ii) are clear
               of all liens, claims, encumbrances or security interests.

          (c)  by tender of a full recourse promissory note having such terms as
               may be approved by the Committee and bearing interest at a rate
               sufficient to avoid imputation of income under Sections 483 and
               1274 of the Code; provided, however, that Participants who are
               not employees or directors of the Company will not be entitled to
               purchase Shares with a promissory note unless the note is
               adequately secured by collateral other than the Shares.

          (d)  by waiver of compensation due or accrued to the Participant for
               services rendered;

          (e)  with respect only to purchases upon exercise of an Option, and
               provided that a public market for the Company's stock exists:

               (1)  through a "same day sale" commitment from the Participant
                    and a broker-dealer that is a member of the National
                    Association of Securities Dealers (an "NASD Dealer") whereby
                    the Participant irrevocably elects to exercise the Option
                    and to sell a portion of the Shares so purchased to pay for
                    the Exercise Price, and whereby the NASD Dealer irrevocably
                    commits upon receipt of such Shares to forward the Exercise
                    Price directly to the Company; or

               (2)  through a "margin" commitment from the Participant and an
                    NASD Dealer whereby the Participant irrevocably elects to
                    exercise the Option and to pledge the Shares so purchased to
                    the NASD Dealer in a margin account as security for a loan
                    from the NASD Dealer in the amount of the Exercise Price,
                    and whereby the NASD Dealer irrevocably commits upon receipt
                    of such Shares to forward the Exercise Price directly to the
                    Company; or

          (f)  by any combination of the foregoing.

          7.2  Loan Guarantees.  The Committee may help the Participant pay for
               ---------------
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.

     8.   WITHHOLDING TAXES.
          -----------------

          8.1  Withholding Generally.  Whenever Shares are to be issued in
               ---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

          8.2  Stock Withholding.  When, under applicable tax laws, a
               -----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.

     9.  PRIVILEGES OF STOCK OWNERSHIP.
         -----------------------------

                                       5
<PAGE>

     9.1  Voting and Dividends.  No Participant will have any of the rights of a
          --------------------
shareholder with respect to any Shares until the Shares are issued to the
Participant.  After Shares are issued to the Participant, the Participant will
be a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Unvested
Shares that are repurchased pursuant to Section 11 hereof.  The Company will
comply with Section 260.140.1 of Title 10 of the California Code of Regulations
with respect to the voting rights of Common Stock.

     9.2  Financial Statements.  The Company will provide financial statements
          --------------------
to each Participant prior to such Participant's purchase of Shares under this
Plan, and to each Participant annually during the period such Participant has
Awards outstanding, or as otherwise required under Section 260.140.46 of Title
10 of the California Code of Regulations. Notwithstanding the foregoing, the
Company will not be required to provide such financial statements to
Participants when issuance is limited to key employees whose services in
connection with the Company assure them access to equivalent information.

     10.  TRANSFERABILITY.  Awards granted under this Plan, and any interest
          ---------------
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution.  During the lifetime of the
Participant an Award will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an Award,
may be made only by the Participant or Participant's legal representative.

     11.  RESTRICTIONS OF SHARES.
          ----------------------

          11.1 Right of First Refusal.  At the discretion of the Committee, the
               ----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided, that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.

          11.2 Right of Repurchase.  At the discretion of the Committee, the
               -------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness following such Participant's
Termination at any time within the later of ninety (90) days after the
Participant's Termination Date and the date the Participant purchases Shares
under the Plan at the Participant's Exercise Price or Purchase Price, as the
case may be, provided, that unless the Participant is an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company, such
right of repurchase lapses at the rate of at least twenty percent (20%) per year
over five (5) years from: (a) the date of grant of the Option or (b) in the case
of Restricted Stock, the date the Participant purchases the Shares.

     12.  CERTIFICATES.  All certificates for Shares or other securities
          ------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

     13.  ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
          ------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as

                                       6
<PAGE>

collateral to secure the payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company will have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

     14. EXCHANGE AND BUYOUT OF AWARDS.  The Committee may, at any time or from
         -----------------------------
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards.  The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.

     15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  This Plan is intended
         ----------------------------------------------
to comply with Section 25102(o) of the California Corporations Code. Any
provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Award will not be effective
unless such Award is in compliance with all applicable federal and state
securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.

     16. NO OBLIGATION TO EMPLOY.  Nothing in this Plan or any Award granted
         -----------------------
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.

     17. CORPORATE TRANSACTIONS.
         ----------------------

         17.1  Assumption or Replacement of Awards by Successor or Acquiring
               -------------------------------------------------------------
Corporation. In the event of (a) a dissolution or liquidation of the Company,
-----------
(b) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor or acquiring
corporation, which assumption, conversion or replacement will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder which merges with the Company in such merger, or
which owns or controls another corporation which merges, with the Company in
such merger) cease to own their shares or other equity interests in the Company,
or (d) the sale of all or substantially all of the assets of the Company (any
such event being referred to herein as a "Corporate Transaction"), any or all
outstanding Awards may be assumed, converted or replaced by the successor or
acquiring corporation (if any), which assumption, conversion or replacement will
be binding on all Participants. In the alternative, the successor or acquiring
corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Awards).  The successor or acquiring
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant,

                                       7
<PAGE>

substantially similar shares or other property subject to repurchase
restrictions and other provisions no less favorable to the Participant than
those which applied to such outstanding Shares immediately prior to a Corporate
Transaction. In addition, if a Termination Event (as defined in the next
sentence) occurs with respect to a Participant within six (6) months of the
consummation of a Corporate Transaction in which such Participant's Awards were
assumed, converted or replaced by the successor or acquiring corporation or in
which such Participant's Awards were substituted with equivalent Awards by the
successor or acquiring corporation, then notwithstanding any other provision in
this Plan to the contrary, the vesting of such Participant's Awards will
accelerate and such Participant's Options will become exercisable in full. For
purposes of this Section 17.1, a "Termination Event" shall have occurred if the
successor or acquiring corporation terminates the employment or consultantcy of
such Participant for any reason other than cause, death or disability or the
successor or acquiring corporation constructively terminates the employment or
consultantcy of such Participant by materially reducing his compensation or
responsibility or requiring such Participant to relocate his principal place of
employment more than seventy-five (75) miles from the Company's present
location. In the event such successor or acquiring corporation (if any) does not
assume or substitute Awards, as provided above, pursuant to a Corporate
Transaction, then notwithstanding any other provision in this Plan to the
contrary, the vesting of all Awards will accelerate and the Options will become
exercisable in full prior to the consummation of such event at such times and on
such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the corporate transaction, they shall
terminate in accordance with the provisions of this Plan.

         17.2  Other Treatment of Awards.  Subject to any greater rights granted
               -------------------------
to Participants under the foregoing provisions of this Section 17, in the event
of the occurrence of any Corporate Transaction, any outstanding Awards will be
treated as provided in the applicable agreement or plan of merger,
consolidation, dissolution, liquidation or sale of assets.

         17.3  Assumption of Awards by the Company. The Company, from time to
               -----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

     18. ADOPTION AND SHAREHOLDER APPROVAL.  This Plan will become effective on
         ---------------------------------
the date that it is adopted by the Board (the "Effective Date").  This Plan will
be approved by the shareholders of the Company (excluding Shares issued pursuant
to this Plan), consistent with applicable laws, within twelve (12) months before
or after the Effective Date.  Upon the effective Date, the Board may grant
Awards pursuant to this Plan; provided, however, that:  (a) no Option may be
exercised prior to initial shareholder approval of this Plan; (b) no Option
granted pursuant to an increase in the number of Shares approved by the Board
shall be exercised prior to the time such increase has been approved by the
shareholders of the Company; (c) in the event that initial shareholder approval
is not obtained within the time period provided herein, all Awards granted
hereunder shall be canceled, any Shares issued pursuant to any Award shall be
canceled and any purchase of Shares issued hereunder shall be rescinded; and (d)
Awards granted pursuant to an increase in the number of Shares approved by the
Board which increase is not timely approved by shareholders shall be canceled,
any Shares issued pursuant to any such Awards shall be canceled, and any
purchase of Shares subject to any such Award shall be rescinded.  In the event
that initial shareholder approval is not obtained within twelve (12) months
before or after the date this Plan is adopted by the Board, all Awards granted
hereunder will be canceled, any Shares issued pursuant to any Award will be
canceled and any purchase of Shares hereunder will be rescinded.

     19. TERM OF PLAN/GOVERNING LAW.  Unless earlier terminated as provided
         --------------------------
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval.  This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.

                                       8
<PAGE>

     20. AMENDMENT OR TERMINATION OF PLAN.  Subject to Section 5.9 hereof, the
         --------------------------------
Board may at any time terminate or amend this Plan in any respect, including
without limitation amendment of any form of Award Agreement or instrument to be
executed pursuant to this Plan; provided, however, that the Board will not,
without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval pursuant to Section 25102(o) of
the California Corporations Code or the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.

     21. NONEXCLUSIVITY OF THE PLAN.  Neither the adoption of this Plan by the
         --------------------------
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.

     22. DEFINITIONS.  As used in this Plan, the following terms will have the
         -----------
following meanings:

         "Award" means any award under this Plan, including any Option or
Restricted Stock Award.

         "Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

         "Board" means the Board of Directors of the Company.

         "Cause" means Termination because of (i) any willful material violation
by the Participant of any law or regulation applicable to the business of the
Company or a Parent or Subsidiary of the Company, the Participant's conviction
for, or guilty plea to, a felony or a crime involving moral turpitude, any
willful perpetration by the Participant of a common law fraud, (ii) the
Participant's commission of an act of personal dishonesty which involves
personal profit in connection with the Company or any other entity having a
business relationship with the Company, (iii) any material breach by the
Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, director or consultant to
the Company or a Parent or Subsidiary of the Company, including without
limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of such Participant as an employee,
director or consultant of the Company or a Parent or Subsidiary of the Company,
other than as a result of having a Disability, or a breach of any applicable
invention assignment and confidentiality agreement or similar agreement between
the Company and the Participant, (iv) Participant's disregard of the policies of
the Company or any Parent or Subsidiary of the Company so as to cause loss,
damage or injury to the property, reputation or employees of the Company or a
Parent or Subsidiary of the Company, or (v) any other misconduct by the
Participant which is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or a Parent
or Subsidiary of the Company.

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

         "Committee" means the committee appointed by the Board to administer
this Plan, or if no committee is appointed, the Board.

         "Company" means Trivida Corporation, or any successor corporation.

         "Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.

         "Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

         "Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

                                       9
<PAGE>

          (a)  if such Common Stock is then quoted on the Nasdaq National
               Market, its closing price on the Nasdaq National Market on the
               date of determination as reported in The Wall Street Journal;
                                                    -----------------------

          (b)  if such Common Stock is publicly traded and is then listed on a
               national securities exchange, its closing price on the date of
               determination on the principal national securities exchange on
               which the Common Stock is listed or admitted to trading as
               reported in The Wall Street Journal;
                           -----------------------

          (c)  if such Common Stock is publicly traded but is not quoted on the
               Nasdaq National Market nor listed or admitted to trading on a
               national securities exchange, the average of the closing bid and
               asked prices on the date of determination as reported by The Wall
                                                                        --------
               Street Journal (or, if not so reported, as otherwise reported by
               --------------
               any newspaper or other source as the Board may determine); or

          (d)  if none of the foregoing is applicable, by the Committee in good
               faith.

          "Option" means an award of an option to purchase Shares pursuant to
Section 5 hereof.

          "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain

          "Participant" means a person who receives an Award under this Plan

          "Plan" means this Trivida Corporation 1998 Equity Incentive Plan, as
amended from time to time.

          "Purchase Price" means the price at which a Participant may purchase
Restricted Stock

          "Restricted Stock" means Shares purchased pursuant to a Restricted
Stock Award.

          "Restricted Stock Award" means an award of Shares pursuant to Section
6 hereof.

          "SEC" means the Securities and Exchange Commission.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and
any successor security.

          "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

          "Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than ninety (90) days unless
reinstatement (or, in the case of an employee with an ISO, reemployment) upon
the expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company and issued and promulgated in writing. In the case of any Participant on
(i) sick leave, (ii) military leave or (iii) an approved leave of absence, the
Committee may make such provisions respecting suspension of vesting of the Award
while on leave from the Company or a Parent or Subsidiary of the Company as it
may deem appropriate, except that in no event may an Option be exercised after
the expiration of the term set forth in the Stock Option Agreement. The

                                       10
<PAGE>

Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").

          "Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.

          "Vested Shares" means "Vested Shares" as defined in the Award
Agreement.

                                       11

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