10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

____________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 31, 2002 Commission File Number 0-31095

DUKE ENERGY FIELD SERVICES, LLC
(Exact name of registrant as specified in its charter)

Delaware	76-0632293
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

370 17th Street, Suite 900
Denver, Colorado 80202
(Address of principal executive offices)
(Zip Code)

303-595-3331
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [   ]

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		CONSOLIDATED BALANCE SHEETS
		CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure about Market Risks
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
364-Day Credit Agreement

DUKE ENERGY FIELD SERVICES, LLC
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2002

INDEX

Item						Page
					PART I. FINANCIAL INFORMATION (UNAUDITED)
	1.	Financial Statements					1
			Consolidated Statements of Operations for the Three Months Ended March 31, 2002 and 2001				1
			Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2002 and 2001				2
			Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001				3
			Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001				4
			Condensed Notes to Consolidated Financial Statements				5
	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations					12
	3.	Quantitative and Qualitative Disclosure about Market Risks					16
				PART II. OTHER INFORMATION
	1.	Legal Proceedings					21
	6.	Exhibits and Reports on Form 8-K					21
		Signatures					22

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

     Our reports, filings and other public announcements may from time to time contain statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can typically identify forward-looking statements by the use of forward-looking words, such as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” “forecast” and other similar words.

     All of such statements other than statements of historical facts, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.

     These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks include, but are not limited to, the following:

• our ability to access the debt and equity markets, which will depend on general market conditions and our credit ratings for our debt obligations;

• our use of derivative financial instruments to hedge commodity and interest rate risks;

• the level of creditworthiness of counterparties to transactions;

• changes in laws and regulations, particularly with regard to taxes, safety and protection of the environment or the increased regulation of the gathering and processing industry;

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• the timing and extent of changes in commodity prices, interest rates and demand for our services;

• weather and other natural phenomena;

• industry changes, including the impact of consolidations, and changes in competition;

• our ability to obtain required approvals for construction or modernization of gathering and processing facilities, and the timing of production from such facilities, which are dependent on the issuance by federal, state and municipal governments, or agencies thereof, of building, environmental and other permits, the availability of specialized contractors and work force and prices of and demand for products; and

• the effect of accounting policies issued periodically by accounting standard-setting bodies.

     In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands)

			THREE MONTHS ENDED,
			MARCH 31,
			2002			2001
OPERATING REVENUES:
	Sales of natural gas and petroleum products		$	1,175,524		$	2,381,883
	Sales of natural gas and petroleum products—affiliates			308,836			940,299
	Transportation, storage and processing			69,577			57,890
		Total operating revenues		1,553,937			3,380,072
COSTS AND EXPENSES:
	Purchases of natural gas and petroleum products			1,204,684			2,699,236
	Purchases of natural gas and petroleum products—affiliates			100,649			313,263
	Operating and maintenance			107,960			89,491
	Depreciation and amortization			73,759			66,856
	General and administrative			36,696			28,217
	General and administrative—affiliates			2,461			4,189
	Net loss (gain) on sale of assets			5,188			(868	)
		Total costs and expenses		1,531,397			3,200,384
OPERATING INCOME				22,540			179,688
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES				6,070			5,176
INTEREST EXPENSE				43,309			42,017
(LOSS) INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE				(14,699	)		142,847
INCOME TAX EXPENSE				2,301			58
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE				(17,000	)		142,789
CUMULATIVE EFFECT OF ACCOUNTING CHANGE				—			(411	)
NET (LOSS) INCOME				(17,000	)		142,378
DIVIDENDS ON PREFERRED MEMBERS’ INTEREST				7,125			7,125
(DEFICIT) EARNINGS AVAILABLE FOR MEMBERS’ INTEREST			$	(24,125	)	$	135,253

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(In Thousands)

			THREE MONTHS ENDED,
			MARCH 31,
			2002			2001
NET (LOSS) INCOME			$	(17,000	)	$	142,378
OTHER COMPREHENSIVE (LOSS) INCOME:
	Cumulative effect of change in accounting principle			—			6,626
	Foreign currency translation adjustment			(2,344	)		(912	)
	Net unrealized losses on cash flow hedges			(57,100	)		(18,202	)
	Reclassification into earnings			(18,534	)		16,994
		Total other comprehensive (loss) income		(77,978	)		4,506
TOTAL COMPREHENSIVE (LOSS) INCOME			$	(94,978	)	$	146,884

See Notes to Consolidated Financial Statements.

2

DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)

				THREE MONTHS ENDED,
				MARCH 31,
				2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net (loss) income			$	(17,000	)	$	142,378
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			73,759			66,856
		Deferred income taxes			(520	)		—
		Change in fair value of derivative instruments			6,509			(11,197	)
		Equity in earnings of unconsolidated affiliates			(6,070	)		(5,176	)
		Net loss (gain) on sale of assets			5,188			(868	)
	Change in operating assets and liabilities (net of effects of acquisitions) which provided (used) cash:
		Accounts receivable			(26,782	)		89,884
		Accounts receivable—affiliates			194,256			(97,851	)
		Inventories			10,663			46,695
		Net unrealized mark-to-market and hedging transactions			46,564			(2,249	)
		Other current assets			2,852			1,836
		Other noncurrent assets			(590	)		(12,692	)
		Accounts payable			(148,780	)		108,781
		Accounts payable—affiliates			(12,244	)		(10,170	)
		Accrued interest payable			(31,757	)		(30,230	)
			Other current liabilities		1,848			(26,310	)
		Other long term liabilities			(1,962	)		(5,589	)
			Net cash provided by operating activities		95,934			254,098
CASH FLOWS FROM INVESTING ACTIVITIES:
	Other capital expenditures				(106,785	)		(63,118	)
	Investment expenditures				(3,463	)		(1,114	)
	Investment distributions				12,488			16,024
	Proceeds from sales of assets				—			18,551
			Net cash used in investing activities		(97,760	)		(29,657	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions to members				(45,672	)		(127,561	)
	Proceeds from issuing debt				—			250,000
	Short term debt—net				43,580			(346,410	)
			Net cash used in financing activities		(2,092	)		(223,971	)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH					2,344			912
NET (DECREASE) INCREASE IN CASH					(1,574	)		1,382
CASH, BEGINNING OF PERIOD					4,906			1,553
CASH, END OF PERIOD				$	3,332		$	2,935
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION — Cash paid for interest (net of amounts capitalized)				$	76,357		$	71,131

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)

					MARCH 31,			DECEMBER 31,
					2002			2001
				ASSETS
CURRENT ASSETS:
	Cash				$	3,332		$	4,906
	Accounts receivable:
		Customers, net				575,769			520,118
		Affiliates				36,265			230,521
		Other				107,941			136,810
	Inventories					72,272			82,935
	Unrealized gains on trading and hedging transactions					90,301			180,809
	Other					7,358			9,060
			Total current assets			893,238			1,165,159
PROPERTY, PLANT AND EQUIPMENT, NET						4,726,854			4,711,960
INVESTMENT IN AFFILIATES						138,315			132,252
INTANGIBLE ASSETS:
	Natural gas liquids sales and purchases contracts, net					91,010			94,019
	Goodwill, net					421,176			421,176
			Total intangible assets			512,186			515,195
UNREALIZED GAINS ON TRADING AND HEDGING TRANSACTIONS						14,051			19,095
OTHER NONCURRENT ASSETS						87,138			86,548
			TOTAL ASSETS		$	6,371,782		$	6,630,209
				LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable:
		Trade			$	492,895		$	620,094
		Affiliates				13,376			25,620
		Other				55,333			76,914
	Short term debt					256,535			212,955
	Unrealized losses on trading and hedging transactions					108,723			84,811
	Accrued interest payable					25,660			57,417
	Accrued taxes other than income					11,524			24,646
	Distributions payable to members					17,490			45,672
	Other					117,664			102,694
			Total current liabilities			1,099,200			1,250,823
DEFERRED INCOME TAXES						14,566			14,362
LONG TERM DEBT						2,232,876			2,235,034
UNREALIZED LOSSES ON TRADING AND HEDGING TRANSACTIONS						41,820			25,188
OTHER LONG TERM LIABILITIES						13,883			15,845
MINORITY INTERESTS						135,989			135,915
PREFERRED MEMBERS’ INTEREST						300,000			300,000
COMMITMENTS AND CONTINGENT LIABILITIES MEMBERS’ EQUITY:
	Members’ interest					1,709,290			1,709,290
	Retained earnings					854,091			895,707
	Accumulated other comprehensive (loss) income					(29,933	)		48,045
			Total members’ equity			2,533,448			2,653,042
TOTAL LIABILITIES AND MEMBERS’ EQUITY					$	6,371,782		$	6,630,209

See Notes to Consolidated Financial Statements.

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DUKE ENERGY FIELD SERVICES, LLC
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. General

     Duke Energy Field Services, LLC (with its consolidated subsidiaries, “the Company” or “Field Services LLC”) operates in the midstream natural gas gathering, processing, marketing and natural gas liquids industries. The Company operates in the two principal segments of the midstream natural gas industry of (1) natural gas gathering, processing, transportation, marketing and storage; and (2) natural gas liquids (“NGLs”) fractionation, transportation, marketing and trading.

2. Accounting Policies

     Consolidation — The Consolidated Financial Statements include the accounts of the Company and all majority-owned subsidiaries, after eliminating significant intercompany transactions and balances. Investments in 20% to 50% owned affiliates are accounted for using the equity method. Investments greater than 50% are consolidated unless the Company does not operate these investments and as a result does not have the ability to exercise control. These Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods.

     Accounting for Hedges and Commodity Trading Activities — All derivatives are recorded in the Consolidated Balance Sheets at their fair value as Unrealized Gains or Unrealized Losses on Trading and Hedging Transactions. On the date that swaps or option contracts are entered into, the Company designates the derivative as either held for trading (trading instruments); as a hedge of a recognized asset, liability or firm commitment (fair value hedges); as a hedge of a forecasted transaction or future cash flows (cash flow hedges); or leaves the derivative undesignated and marks it to market.

     For hedge contracts, the Company formally assesses, both at the hedge contracts inception and on an ongoing basis, whether the hedge contract is highly effective in offsetting changes in fair values or cash flows of hedged items. The Company currently excludes the time value of the options when assessing hedge effectiveness.

     When available, quoted market prices or prices obtained through external sources are used to verify a contract’s fair value. For contracts with a delivery location or duration for which quoted market prices are not available, fair value is determined based on pricing models developed primarily from historical and expected correlations with quoted market prices.

     Values are adjusted to reflect the potential impact of liquidating the positions held in an orderly manner over a reasonable time period under current conditions. Changes in market price and management estimates directly affect the estimated fair value of these contracts. Accordingly, it is reasonably possible that such estimates may change in the near term.

     Commodity Trading — A favorable or unfavorable price movement of any derivative contract held for trading purposes is reported as Purchases of Natural Gas and Petroleum Products in the Consolidated Statements of Operations. An offsetting amount is recorded in the Consolidated Balance Sheets as Unrealized Gains or Unrealized Losses on Trading and Hedging Transactions. When a contract to sell is physically settled, the fair value entries are reversed and the gross amount invoiced to the customer is included as Sales of Natural Gas and Petroleum Products in the Consolidated Statements of Operations. Similarly, when a contract to purchase is physically settled, the purchase price is included as Purchases of Natural Gas and Petroleum Products in the Consolidated Statements of Operations. If a contract is not physically settled, the unrealized gain or unrealized loss in the Consolidated Balance

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Sheets is reclassified to a receivable or payable account. For income statement purposes, financial settlement has no net operating income presentation effect on the Consolidated Statements of Operations.

     Commodity Cash Flow Hedges — The effective portion of the change in fair value of a derivative designated and qualified as a cash flow hedge are included in the Consolidated Statements of Comprehensive (Loss) Income as Other Comprehensive (Loss) Income (“OCI”) until earnings are affected by the hedged item. Settlement amounts of cash flow hedges are removed from OCI and recorded in the Consolidated Statements of Operations in the same accounts as the item being hedged. The Company discontinues hedge accounting prospectively when it is determined that the derivative no longer qualifies as an effective hedge, or when it is no longer probable that the hedged transaction will occur. When hedge accounting is discontinued because the derivative no longer qualifies as an effective hedge, the derivative continues to be carried on the Consolidated Balance Sheets at its fair value, with subsequent changes in its fair value recognized in current-period earnings. Gains and losses related to discontinued hedges that were previously accumulated in OCI will remain in OCI until earnings are affected by the hedged item, unless it is no longer probable that the hedged transaction will occur, in which case, the gains and losses that were accumulated in OCI will be immediately recognized in current-period earnings.

     Commodity Fair Value Hedges — Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge are included in the Consolidated Statements of Operations as Sales of Natural Gas and Petroleum Products and Purchases of Natural Gas and Petroleum Products, as appropriate. Changes in the fair value of the physical portion of a fair value hedge (i.e., the hedged item) are recorded in the Consolidated Statements of Operations in the same accounts as the changes in the fair value of the derivative, with offsetting amounts in the Consolidated Balance Sheets as Other Current Assets, Other Noncurrent Assets, Other Current Liabilities, or Other Long Term Liabilities, as appropriate.

     Interest Rate Fair Value Hedges — The Company enters into interest rate swaps to convert some of its fixed-rate long term debt to floating-rate long term debt. Hedged items in fair value hedges are marked to market with the respective derivative instruments. Accordingly, the Company’s hedged fixed-rate debt is carried at fair value. The terms of the outstanding swap match those of the associated debt which permits the assumption of no ineffectiveness, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” As such, for the life of the swap no ineffectiveness will be recognized.

     Income Taxes — The Company is required to make quarterly distributions to Duke Energy Corporation (“Duke Energy”) and Phillips Petroleum Company (“Phillips”) based on allocated taxable income. The distributions are based on the highest taxable income allocated to either member, with the other member receiving a proportionate amount to maintain the ownership capital accounts at 69.7% for Duke Energy and 30.3% for Phillips.

     New Accounting Standards — The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized over an estimated useful life, as previously required. Instead, goodwill amounts are subject to a fair-value-based annual impairment assessment. The Company did not recognize any impairments due to the implementation of SFAS No. 142. The standard also requires certain identifiable intangible assets to be recognized separately and amortized as appropriate. No such intangibles have been identified by the Company at transition.

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     The following table shows what net income would have been if amortization related to goodwill that is no longer being amortized had been excluded from prior periods.

		For The Three
		Months Ended
		March 31,
		2002			2001
		(In Thousands)
Reported net (loss) income		$	(17,000	)	$	142,378
Add: Goodwill amortization			—			1,492
	Adjusted net (loss) income	$	(17,000	)	$	143,870

The changes in the carrying amount of goodwill for the three months ended March 31, 2002 and March 31, 2001 are as follows:

Goodwill (In Thousands)

		Balance		Acquired				Balance
		December 31, 2001		Goodwill		Other		March 31, 2002
Natural gas gathering, processing, transportation, marketing and storage		$	394,054	$	—	$	—	$	394,054
NGL fractionation, transportation, marketing and trading			27,122		—		—		27,122
	Total consolidated	$	421,176	$	—	$	—	$	421,176

		Balance		Acquired					Balance
		December 31, 2000		Goodwill		Other			March 31, 2001
Natural gas gathering, processing, transportation, marketing and storage		$	376,195	$	—	$	(1,492	)	$	374,703
NGL fractionation, transportation, marketing and trading			—		—		—			—
	Total consolidated	$	376,195	$	—	$	(1,492	)	$	374,703

     The Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” on January 1, 2002. The new rules supersede SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” The new rules retain many of the fundamental recognition and measurement provisions of SFAS No. 121, but significantly change the criteria for classifying an asset as held-for-sale. The impact of adopting SFAS No. 144 was not material to the Company.

     Reclassifications — Certain prior period amounts have been reclassified in the Consolidated Financial Statements and Note 6 to conform to the current presentation.

3. Derivative Instruments, Hedging Activities and Credit Risk

     Commodity price risk — The Company’s principal operations of gathering, processing, transportation and storage of natural gas, and the accompanying operations of fractionation, transportation, trading and marketing of NGLs create commodity price risk exposure due to market fluctuations in commodity prices, primarily with respect to the prices of NGLs and natural gas. As an owner and operator of natural gas processing and other midstream assets, the Company has an inherent exposure to market variables and commodity price risk. The amount and type of price risk is dependent on the underlying natural gas contracts entered in to purchase and process natural gas feedstock. Risk is also dependent on the types and mechanisms for sales of natural gas and natural gas liquid products produced, processed, transported or stored.

     Energy trading (market) risk — Certain of the Company’s subsidiaries are engaged in the business of trading energy related products and services including managing purchase and sales portfolios, storage contracts and

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facilities, and transportation commitments for products. These energy trading operations are exposed to market variables and commodity price risk with respect to these products and services, and may enter into physical contracts and financial instruments with the objective of realizing a positive margin from the purchase and sale of commodity-based instruments.

     Corporate economic risks — The Company enters into debt arrangements that are exposed to market risks related to changes in interest rates. The Company periodically uses interest rate lock agreements and interest rate swaps to hedge interest rate risk associated with new debt issuances. The Company’s primary goals include (1) maintaining an appropriate ratio of fixed-rate debt to total debt for the Company’s debt rating; (2) reducing volatility of earnings resulting from interest rate fluctuations; and (3) locking in attractive interest rates based on historical rates.

     Counterparty risks — The Company sells NGLs to a variety of customers ranging from large, multi-national petrochemical and refining companies to small regional retail propane distributors. Substantially all of the Company’s NGL sales are made at market-based prices, including approximately 40% of NGL production that is committed to Phillips and Chevron Phillips Chemical LLC, under a contract with a primary term that expires on January 1, 2015 . This concentration of credit risk may affect the Company’s overall credit risk in that these customers may be similarly affected by changes in economic, regulatory or other factors. On all transactions where the Company is exposed to credit risk, the Company analyzes the counterparties’ financial condition prior to entering into an agreement, establishes credit limits and monitors the appropriateness of these limits on an ongoing basis. The corporate credit policy prescribes the use of master collateral agreements to mitigate credit exposure. The collateral agreements provide for a counterparty to post cash or letters of credit for exposure in excess of the established threshold. The threshold amount represents an open credit limit, determined in accordance with the corporate credit policy. The collateral agreements also provide that the inability to post collateral is sufficient cause to terminate a contract and liquidate all positions.

     Physical forward contracts and financial derivatives are generally cash settled at the expiration of the contract term. However, these transactions are generally subject to margin agreements with the majority of our counterparties.

     Commodity cash flow hedges — The Company uses cash flow hedges, as specifically defined by SFAS No. 133, to reduce the potential negative impact that commodity price changes could have on the Company’s earnings, and its ability to adequately plan for cash needed for debt service, dividends, capital expenditures and tax distributions. The Company’s primary corporate hedging goals include (1) maintaining minimum cash flows to fund debt service, dividends, production replacement, maintenance capital projects and tax distributions; (2) avoiding disruption of the Company’s growth capital and value creation process; and (3) retaining a high percentage of potential upside relating to price increases of NGLs.

     The Company uses natural gas, crude oil and NGL swaps and options to hedge the impact of market fluctuations in the price of natural gas liquids and other energy-related products. For the three months ended March 31, 2002, the Company recognized a net gain of $7.4 million, of which a $5.9 million loss represented the total ineffectiveness of all cash flow hedges and an $18.5 million gain represented the total derivative settlements. The time value of the options, a recognized $5.2 million loss for the three months ended March 31, 2002, was excluded in the assessment of hedge effectiveness. The time value of the options is included in Sales of Natural Gas and Petroleum Products in the Consolidated Statements of Operations. No derivative gains or losses were reclassified from OCI to current period earnings as a result of the discontinuance of cash flow hedges related to certain forecasted transactions that are not probable of occurring.

     Gains and losses on derivative contracts that are reclassified from accumulated OCI to current period earnings are included in the line item in which the hedged item is recorded. As of March 31, 2002, $15.8 million of the deferred net losses on derivative instruments accumulated in OCI are expected to be reclassified as earnings during the next 12 months as the hedge transactions occur; however, due to the volatility of the commodities markets, the corresponding value in OCI is subject to change prior to its reclassification into earnings. The maximum term over which the Company is hedging its exposure to the variability of future cash flows is three years.

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     Commodity fair value hedges — The Company uses fair value hedges to hedge exposure to changes in the fair value of an asset or a liability (or an identified portion thereof) that is attributable to price risk. The Company hedges producer price locks (fixed price gas purchases) and market locks (fixed price gas sales) to reduce the Company’s exposure to fixed price risk via swapping out the fixed price risk for a floating price position (New York Mercantile Exchange or index based).

     For the three months ended March 31, 2002, the gains or losses representing the ineffective portion of the Company’s fair value hedges were not material. All components of each derivative’s gain or loss are included in the assessment of hedge effectiveness, unless otherwise noted. The Company did not have any firm commitments that no longer qualified as fair value hedge items and therefore, did not recognize an associated gain or loss.

     Interest rate fair value hedge — In October 2001, the Company entered an interest rate swap to convert the fixed interest rate of $250.0 million of debt securities that were issued in August 2000 to floating rate debt. The interest rate fair value hedge is at a floating rate based on a six-month London Interbank Offered Rate (“LIBOR”), which is re-priced semiannually through 2005. The swap meets conditions which permit the assumption of no ineffectiveness, as defined by SFAS 133. As such, for the life of the swap no ineffectiveness will be recognized. As of March 31, 2002, the fair value of the interest rate swap of ($7.4) million was included in the Consolidated Balance Sheets as Unrealized Gains or Losses on Trading and Hedging Transactions with an offset to the underlying debt included in Long Term Debt.

     Commodity Derivatives — Trading — The trading of energy related products and services exposes the Company to the fluctuations in the market values of traded instruments. The Company manages its traded instrument portfolio with strict policies which limit exposure to market risk and require daily reporting to management of potential financial exposure. These policies include statistical risk tolerance limits using historical price movements to calculate a daily earnings at risk measurement.

4. Financing

     Credit Facility with Financial Institutions — On March 29, 2002, the Company entered into a new credit facility (the “New Facility”). The New Facility replaces the credit facility that matured on March 29, 2002. The New Facility is used to support the Company’s commercial paper program and for working capital and other general corporate purposes. The New Facility matures on March 28, 2003, however, any outstanding loans under the New Facility at maturity may, at the Company’s option, be converted to a one-year term loan. The New Facility is a $650.0 million revolving credit facility, of which $150.0 million can be used for letters of credit. The New Facility requires the Company to maintain at all times a debt to total capitalization ratio of less than or equal to 53%. The New Facility bears interest at a rate equal to, at the Company’s option and based on the Company’s current debt rating, either (1) LIBOR plus 0.75% per year or (2) the higher of (a) the Bank of America prime rate and (b) the Federal Funds rate plus 0.50% per year. At March 31, 2002, there were no borrowings against the New Facility.

     At March 31, 2002 the Company had a $30.0 million outstanding Irrevocable Standby Letter of Credit expiring March 31, 2003.

     At March 31, 2002 the Company was the guarantor of approximately $25.6 million of debt associated with an unconsolidated subsidiary. Assets of the unconsolidated subsidiary are pledged as collateral for the debt.

5. Commitments and Contingent Liabilities

     Litigation — The midstream natural gas industry has seen a number of class action lawsuits involving royalty disputes, mismeasurement and mispayment allegations. Although the industry has seen these types of cases before, they were typically brought by a single plaintiff or small group of plaintiffs. A number of these cases are now being brought as class actions. The Company and its subsidiaries are currently named as defendants in some of these

9

cases. Management believes the Company and its subsidiaries have meritorious defenses to these cases, and therefore will continue to defend them vigorously. However, these class actions can be costly and time consuming to defend.

     Management believes that the final disposition of these proceedings will not have a material adverse effect on the consolidated results of operations or financial position of the Company.

6. Business Segments

     The Company operates in two principal business segments as follows: (1) natural gas gathering, processing, transportation, marketing and storage, and (2) NGL fractionation, transportation, marketing and trading. These segments are monitored separately by management for performance against its internal forecast and are consistent with the Company’s internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for these operations. Margin, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings before interest and taxes (“EBIT”) are the performance measures used by management to monitor the business of each segment. The accounting policies for the segments are the same as those described in Note 2. Foreign operations are not material and are therefore not separately identified.

     The following table sets forth the Company’s segment information.

				For The Three
				Months Ended
				March 31,
				2002			2001
				(In Thousands)
Operating revenues:
	Natural gas			$	904,917		$	2,743,413
	NGLs				926,873			1,227,830
	Intersegment (a)				(277,853	)		(591,171	)
		Total operating revenues		$	1,553,937		$	3,380,072
Margin:
	Natural gas			$	232,549		$	355,757
	NGLs				16,055			11,816
		Total margin		$	248,604		$	367,573
Other operating costs:
	Natural gas			$	110,747		$	87,750
	NGLs				2,401			873
	Corporate				39,157			32,406
		Total other operating costs		$	152,305		$	121,029
Equity in earnings of unconsolidated affiliates:
	Natural Gas			$	5,649		$	4,688
	NGLs				421			488
		Total equity in earnings of unconsolidated affiliates		$	6,070		$	5,176
EBITDA (b):
	Natural gas			$	127,451		$	272,695
	NGLs				14,075			11,431
	Corporate				(39,157	)		(32,406	)
		Total EBITDA		$	102,369		$	251,720
Depreciation and amortization:
	Natural gas			$	69,187		$	63,481
	NGLs				3,318			2,295
	Corporate				1,254			1,080
			Total depreciation and amortization	$	73,759		$	66,856

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			For The Three
			Months Ended
			March 31,
			2002			2001
			(In Thousands)
EBIT (b): Natural gas			$	58,264		$	209,214
	NGLs			10,757			9,136
	Corporate			(40,411	)		(33,486	)
		Total EBIT	$	28,610		$	184,864
Corporate interest expense			$	43,309		$	42,017
(Loss) income before income taxes:
	Natural gas		$	58,264		$	209,214
	NGLs			10,757			9,136
	Corporate			(83,720	)		(75,503	)
		Total (loss) income before income taxes	$	(14,699	)	$	142,847
Capital Expenditures:
	Natural gas		$	103,010		$	60,885
	NGLs			179			540
	Corporate			3,596			1,693
		Total capital expenditures	$	106,785		$	63,118

			As Of
			March 31,		December 31,
			2002		2001
			(In Thousands)
Total assets:
	Natural gas		$	5,333,867	$	5,326,889
	NGLs			229,208		258,177
	Corporate (c)			808,707		1,045,143
		Total assets	$	6,371,782	$	6,630,209

(a)	Intersegment sales represent sales of NGLs from the natural gas segment to the NGLs segment at either index prices or weighted average prices of NGLs. Both measures of intersegment sales are effectively based on current economic market conditions.
(b)	EBITDA consists of income from continuing operations before interest expense, income tax expense, and depreciation and amortization expense. EBIT is equal to EBITDA less depreciation and amortization. These measures are not a measurement presented in accordance with generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of the Company’s profitability or liquidity. The measures are included as a supplemental disclosure because it may provide useful information regarding the Company’s ability to service debt and to fund capital expenditures. However, not all EBITDA or EBIT may be available to service debt.
(c)	Includes items such as unallocated working capital, intercompany accounts and other assets.

7. Subsequent Event

     In April 2002 the Company filed a shelf registration statement increasing its ability to issue securities to $500.0 million. The shelf registration statement provides for the issuance of senior notes, subordinated notes and trust preferred securities.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion details the material factors that affected our historical financial condition and results of operations during the three months ended March 31, 2002 and 2001. This discussion should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this report.

Overview

     We operate in the two principal business segments of the midstream natural gas industry:

• natural gas gathering, processing, transportation and storage, from which we generate revenues primarily by providing services such as compression, treating and gathering, processing, local fractionation, transportation of residue gas, storage and marketing;

• natural gas liquids (“NGLs”) fractionation, transportation, marketing and trading, from which we generate revenues from transportation fees, market center fractionation and the marketing and trading of NGLs.

     Our limited liability company agreement limits the scope of our business to the midstream natural gas industry in the United States and Canada, the marketing of NGLs in Mexico and the transportation, marketing and storage of other petroleum products, unless otherwise approved by our board of directors. This limitation in scope is not currently expected to materially impact the results of our operations.

Effects of Commodity Prices

     The Company is exposed to commodity prices as a result of being paid for certain services in the form of commodities rather than cash. For gathering services, the Company receives fees from producers to bring natural gas from the well head to the processing plant. For processing services, the Company either receives fees or commodities as payment for these services, depending on the type of contract. Under a percentage-of-proceeds contract type, the Company is paid for its services by keeping a percentage of both the NGLs produced and the residue gas resulting from processing the natural gas. Under a keep-whole contract, the Company keeps all or a portion of the NGLs produced, but returns the equivalent British thermal unit (“Btu”) content of the gas back to the producer. Based on the Company’s current contract mix, the Company has a net long NGL position and is sensitive to changes in NGL prices. The Company also has a net short residue gas position, however the short residue gas position is less significant than the long NGL position.

     During 2001 and the first quarter of 2002, approximately 75% of our gross margin was generated by commodity sensitive arrangements and approximately 25% of our gross margin was generated by fee-based arrangements. The commodity exposure is actively managed by the Company as discussed below.

     The midstream natural gas industry has been cyclical, with the operating results of companies in the industry significantly affected by the prevailing price of NGLs, which in turn has been generally correlated to the price of crude oil. Although the prevailing price of natural gas has less short term significance to our operating results than the price of NGLs, in the long term the growth of our business depends on natural gas prices being at levels sufficient to provide incentives and capital for producers to increase natural gas exploration and production. In the past, the prices of NGLs and natural gas have been extremely volatile.

     The depressed NGL and natural gas price environment experienced in 1998 prevailed during the first quarter of 1999. However, during the last three quarters of 1999, NGL prices increased sharply as major crude oil exporting countries agreed to maintain crude oil production at predetermined levels and world demand for crude oil and NGLs increased. The lower crude oil and natural gas prices in 1998 and early 1999 caused a significant

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reduction in the exploration activities of United States producers, which in turn had a significant negative effect on natural gas volumes gathered and processed in 1999. Due to reduced supply and strong demand, natural gas and NGL prices increased throughout 2000 along with renewed strength in drilling activity.

     The slowing economy combined with an increase in supply availability resulting from increased drilling levels drove declines in both crude oil and natural gas prices during the final two quarters of 2001. The dramatic decline in NGL prices is attributed to the drop in crude oil prices in addition to a decline in the correlation between NGL prices and crude oil.

     During the last two quarters of 2001 and first quarter of 2002, the relationship or correlation between crude oil value and NGL prices remained depressed. We generally expect NGL prices to follow changes in crude oil prices over the long term, which we believe will in large part be determined by the level of production from major crude oil exporting countries and the demand generated by growth in the world economy.

     In contrast, we believe that future natural gas prices will be influenced by supply deliverability, the severity of winter weather and the level of United States economic growth. We believe that weather will be the strongest determinant of near term natural gas prices. The price increases in crude oil, NGLs and natural gas experienced during 2000 and the first two quarters of 2001 spurred increased natural gas drilling activity. For example, the average number of active drilling rigs in North America increased by approximately 19% from 1,263 in 2000 to 1,497 in 2001. The decline in commodity prices over the final two quarters of 2001 and first quarter of 2002 negatively effected drilling activity as the average number of active rigs in North America declined to 1,136 during the first quarter of 2002. We expect that continued pressure from reduced commodity prices on drilling will negatively impact North American drilling activity in the short term. We expect lower drilling levels over a sustained period will have a negative effect on natural gas volumes gathered and processed.

     To better address the risks associated with volatile commodity prices, the Company employs a comprehensive commodity price risk management program. We closely monitor the risks associated with these commodity price changes on our future operations and, where appropriate, use various commodity instruments such as natural gas, crude oil and NGL contracts to hedge the value of our assets and operations from such price risks. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk.” Our first quarter 2001 and 2002 results of operations include a hedging loss of $14.6 million and gain of $7.4 million, respectively. The hedging loss observed in the first quarter of 2001 relates to hedges placed during periods of increasing prices. The slight gain recognized in the first quarter of 2002 is the result of hedging gains achieved as a result of a sharp decline in commodity prices during the third and fourth quarters of 2001 continuing through the first quarter of 2002.

Results of Operations

			Three Months Ended,
			March 31,
			2002		2001
Operating revenues:
	Sales of natural gas and petroleum products		$	1,484,360	$	3,322,182
	Transportation, storage and processing			69,577		57,890
		Total operating revenues		1,553,937		3,380,072
	Purchases of natural gas and petroleum Products			1,305,333		3,012,499
Gross margin				248,604		367,573
Equity earnings of unconsolidated affiliates				6,070		5,176
Total gross margin and equity earnings of Unconsolidated affiliates(1)			$	254,674	$	372,749

(1) Gross margin and equity in earnings (“Gross Margin”) consists of income from continuing operations

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before operating and general and administrative expense, interest expense, income tax expense, and depreciation and amortization expense plus equity earnings of unconsolidated affiliates. Gross margin as defined is not a measurement presented in accordance with generally accepted accounting principles. You should not consider this measure in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as an isolated measure of our profitability or liquidity. Gross margin is included as a supplemental disclosure because it may provide useful information regarding the impact of key drivers such as commodity prices and supply contract mix on the Company’s earnings.

Three months ended March 31, 2002 compared with three months ended March 31, 2001

     Gross Margin. Gross Margin decreased $118.0 million, or 32% from $372.7 million in the first quarter of 2001 to $254.7 million in 2002. This decrease was primarily the result of lower NGL prices of approximately $165.0 million (net of hedging) due to a $.29 per gallon decrease in average NGL prices. These decreases were partially offset by approximately $36.0 million due to a $4.77 per million British thermal unit (“Btu”) decrease in natural gas prices. These price changes yielded average prices of $.31 per gallon of NGLs and $2.32 per million Btus of natural gas, respectively, as compared with $.60 per gallon and $7.09 per million Btus during the same period 2001.

     Partially offsetting the decrease associated with commodity prices were increases of approximately $15.3 million attributable to the combination of our acquisitions of Canadian Midstream, northeast propane terminal and marketing assets, and additional interests in three Offshore Gulf of Mexico partnerships.

     Gross margin associated with the natural gas gathering, processing, transportation and storage segment decreased $122.2 million, or 34%, from $360.4 million to $238.2 million, mainly as a result of the lower NGL prices. Commodity sensitive processing arrangements accounted for approximately $130.0 million (net of hedging) of this decrease due mainly to the $.29 per gallon decrease in average NGL prices. This reduction was the result of the interaction of commodity prices and our gas supply arrangements.

     NGL production during the first quarter of 2002 increased 17,500 barrels per day, or 5%, from 371,100 barrels per day to 388,600 barrels per day, and natural gas transported and/or processed increased 0.2 trillion Btus per day, or 2%, from 8.2 trillion Btus per day to 8.4 trillion Btus per day. The primary cause of the increase in NGL production was the increase in keep-whole processing activity due to more profitable processing margins in 2002.

     Costs and Expenses. Operating and maintenance expenses increased $18.5 million, or 21%, from $89.5 million in the first quarter of 2001 to $108.0 million in the same period of 2002. This increase is primarily the result of acquisitions and expanded business activity. General and administrative expenses increased $6.8 million, or 21%, from $32.4 million in the first quarter of 2001 to $39.2 million in the same period of 2002. This increase is primarily the result of increased allocated cost from Duke Energy due to increased service levels.

     Depreciation and amortization increased $6.9 million, or 10%, from $66.9 million in the first quarter of 2001 to $73.8 million in the same period of 2002. This increase was due primarily to acquisitions, ongoing capital expenditures for well connections and facility maintenance and enhancements.

     Interest. Interest expense increased $1.3 million, or 3%, from $42.0 million in the first quarter of 2001 to $43.3 million in the same period of 2002. This increase was primarily the result of higher outstanding debt levels, partially offset by lower interest rates.

     Income Taxes. The Company is structured as a limited liability company, which is a pass-through entity for income tax purposes. First quarter 2002 income tax expense of $2.3 million is mainly the result of other miscellaneous taxes associated tax-paying subsidiaries.

     Net Income. Net income decreased $159.4 million from $142.4 million in the first quarter of 2001 to a loss of $17.0 million in the first quarter of 2002. This decrease was largely the result of decreased NGL prices and

14

increases in operating and general administrative expenses, slightly offset by lower natural gas prices and acquisition activity.

Liquidity and Capital Resources

Operating Cash Flows

     Net cash provided by operating activity decreased $158.2 million in the first quarter of 2002 from the first quarter 2001. The decrease is primarily due to a reduction in net income of $159.4 million. The reduction in net income is largely due to significantly lower NGL prices.

     Price volatility in crude oil, NGLs and natural gas prices have a direct impact on our use and generation of cash from operations.

Investing Cash Flows

     Our capital expenditures consist of expenditures for acquisitions and construction of additional gathering systems, processing plants, fractionators and other facilities and infrastructure in addition to well connections and upgrades to our existing facilities. For the period ended March 31, 2002, we spent approximately $106.8 million on capital expenditures. These capital expenditures were primarily for plant expansions, well connections and plant upgrades.

     Our level of capital expenditures for acquisitions and construction depends on many factors, including industry conditions, the availability of attractive acquisition opportunities and construction projects, the level of commodity prices and competition. We expect to finance our capital expenditures with our cash on hand, cash flow from operations and borrowings available under our commercial paper program, our credit facilities or other available sources of financing.

Financing Cash Flows

Bank Financing and Commercial Paper

     In March 2002, we entered into a $650.0 million credit facility (“the Facility”), of which $150.0 million can be used for letters of credit. The Facility is used to support our commercial paper program and for working capital and other general corporate purposes. The Facility matures on March 28, 2003, however, any outstanding loans under the Facility at maturity may, at our option, be converted to a one-year term loan. The Facility requires us to maintain at all times a debt to total capitalization ratio of less than or equal to 53%. The Facility bears interest at a rate equal to, at our option, either (1) the London Interbank Offered Rate (“LIBOR”) plus 0.75% per year or (2) the higher of (a) the Bank of America prime rate and (b) the Federal Funds rate plus 0.50% per year. At March 31, 2002, there were no borrowings against the Facility.

     At March 31, 2002 we had a $30.0 million outstanding Irrevocable Standby Letter of Credit expiring March 31, 2003.

     At March 31, 2002 we had $256.5 million in outstanding commercial paper, with maturities ranging from one day to 19 days and annual interest rates ranging from 2.10% to 2.20%. At no time did the amount of our outstanding commercial paper exceed the available amount under the Facility. In the future, our debt levels will vary depending on our liquidity needs, capital expenditures and cash flow.

     In April 2002 we filed a shelf registration statement increasing our ability to issue securities to $500.0 million. The shelf registration statement provides for the issuance of senior notes, subordinated notes and trust preferred securities.

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     Based on current and anticipated levels of operations, we believe that our cash on hand and cash flow from operations, combined with borrowings available under the commercial paper program and the Facility, will be sufficient to enable us to meet our current and anticipated cash operating requirements and working capital needs for the next year. Actual capital requirements, however, may change, particularly as a result of any acquisitions that we may make. Our ability to meet current and anticipated operating requirements will depend on our future performance.

Contractual Obligations and Commercial Commitments

     As part of our normal business, we are a party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. To varying degrees, these guarantees involve elements of performance and credit risk, which are not included on the Consolidated Balance Sheets. The possibility of us having to honor our contingencies is largely dependent upon future operations of various subsidiaries, investees and other third parties, or the occurrence of certain future events. We would record a reserve if events occurred that required that one be established.

     At March 31, 2002 we were the guarantor of approximately $25.6 million of debt associated with an unconsolidated subsidiary. Assets of the unconsolidated subsidiary are pledged as collateral for the debt.

Item 3. Quantitative and Qualitative Disclosure about Market Risks

Risk and Accounting Policies

     We are exposed to market risks associated with commodity prices, credit exposure, interest rates and foreign currency exchange rates. Management has established comprehensive risk management policies to monitor and manage these market risks. Our Risk Management Committee (“RMC”) oversees risk exposure including fluctuations in commodity prices. The RMC ensures that proper policies and procedures are in place to adequately manage our commodity price risks and is responsible for the overall management of commodity price and other risk exposures.

     Mark-to-Market Accounting (“MTM accounting”) — Under the MTM accounting method, an asset or liability is recognized at fair value and the change in the fair value of that asset or liability is recognized in earnings during the current period. This accounting method has been used by other industries for many years, and in 1998 the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force (“EITF”) issued guidance 98-10 that required MTM accounting for energy trading contracts. MTM accounting reports contracts at their “fair value,” (the value a willing third party would pay for the particular contract at the time a valuation is made).

     When available, quoted market prices are used to record a contract’s fair value. However, market values for energy trading contracts may not be readily determinable because the duration of the contracts exceeds the liquid activity in a particular market. If no active trading market exists for a commodity or for a contract’s duration, holders of these contracts must calculate fair value using pricing models or matrix pricing based on contracts with similar terms and risks. This is validated by an internal group independent of the Company’s trading area. Holders of thinly traded securities or investments (mutual funds, for example) use similar techniques to price such holdings. Correlation and volatility are two significant factors used in the computation of fair values. We validate our internally developed fair values by comparing locations/durations that are highly correlated, using forecasted market intelligence and mathematical extrapolation techniques. While we use industry best practices to develop our pricing models, changes in our pricing methodologies or the underlying assumptions could result in significantly different fair values, income recognition and realization in future periods.

     Hedge Accounting — Hedging typically refers to the mechanism that the Company uses to mitigate the impact of volatility associated with price fluctuations. Hedge accounting treatment is used when we contract to buy or sell a commodity such as natural gas at a fixed price for future delivery corresponding with the anticipated

16

physical sale or purchase of natural gas (cash flow hedge). In addition, hedge accounting treatment is used when the Company holds firm commitments or asset positions, and enters into transactions that “hedge” the risk that the price of natural gas may change between the contract’s inception and the physical delivery date of the commodity ultimately affecting the underlying value of the firm commitment or position (fair value hedge). While the majority of our hedging transactions are used to protect the value of future cash flows related to our physical assets, to the extent the hedge is effective, we recognize in earnings the value of the contract when the commodity is purchased or sold, or the hedged transaction occurs or settles.

Commodity Price Risk

     We are exposed to the impact of market fluctuations primarily in the price of NGLs and natural gas that we own as a result of our processing activities. We employ established policies and procedures to manage our risks associated with these market fluctuations using various commodity derivatives, including forward contracts, swaps and options for non-trading activity (primarily hedge strategies). (See Notes 2 and 3 to the Consolidated Financial Statements.)

     Commodity Derivatives — Trading — The risk in the commodity trading portfolio is measured and monitored on a daily basis utilizing a Value-at-Risk model to determine the potential one-day favorable or unfavorable Daily Earnings at Risk (“DER”) as described below. DER is monitored daily in comparison to established thresholds. Other measures are also used to limit and monitor the risk in the commodity trading portfolio (which includes all trading contracts not designated as hedge positions) on a monthly and annual basis. These measures include limits on the nominal size of positions and periodic loss limits.

     DER computations are based on a historical simulation, which uses price movements over a specified period (generally ranging from seven to 14 days) to simulate forward price curves in the energy markets to estimate the potential favorable or unfavorable impact of one day’s price movement on the existing portfolio. The historical simulation emphasizes the most recent market activity, which is considered the most relevant predictor of immediate future market movements for crude oil, NGLs, gas and other energy-related products. DER computations utilize several key assumptions, including 95% confidence level for the resultant price movement and the holding period specified for the calculation. The Company’s DER amounts for commodity derivatives instruments held for trading purposes are shown in the following table.

	Daily Earnings at Risk
	Estimated Average		Estimated Average		High One-Day		Low One-Day
	One-Day Impact		One-Day Impact		Impact on EBIT		Impact on EBIT
	on EBIT for the		on EBIT for the		for the three		for the three
	three months ended		three months ended		months ended		months ended
	March 31, 2002		March 31, 2001		March 31, 2002		March 31, 2002
			(In millions)
Calculated DER	$	2.3	$	1.5	$	4.8	$	1.3

     DER is an estimate based on historical price volatility. Actual volatility can exceed assumed results. DER also assumes a normal distribution of price changes, thus if the actual distribution is not normal, the DER may understate or overstate actual results. DER is used to estimate the risk of the entire portfolio, and for locations that do not have daily trading activity, it may not accurately estimate risk due to limited price information. Stress tests may be employed in addition to DER to measure risk where market data information is limited. In the current DER methodology, options are modeled in a manner equivalent to forward contracts which may understate the risk.

     Our exposure to commodity price risk is influenced by a number of factors, including contract size, length, market liquidity, location and unique or specific contract terms. The following table illustrates the movements in the fair value of our trading instruments during the three months ending March 31, 2002.

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Changes in Fair Value of Trading Contracts

	(In millions)
Fair value of contracts outstanding at the beginning of the period	$	37.4
Contracts realized or otherwise settled during the period		(51.6	)
Net mark-to-market changes in fair values		4.7
Fair value of contracts outstanding at the end of the period	$	(9.5	)

     For the three months ended March 31, 2002, the unrealized net loss recognized in operating income was $46.9 million as compared to a $6.1 million gain for the same period in 2001. The fair value of these contracts is expected to be realized in future periods, as detailed in the following table. The amount of cash ultimately realized for these contracts will differ from the amounts shown in the following table due to factors such as market volatility, counterparty default and other unforeseen events that could impact the amount and/or realization of these values. At March 31, 2002, we held cash or letters of credit of $7.1 million to secure such future performance, and had no amounts deposited with counterparties. Collateral amounts held or posted vary depending on the value of the underlying contracts and cover trading and hedging contracts outstanding. We may be required to return held collateral and post additional collateral should price movements adversely impact the value of open contracts or positions.

     When available, we use observable market prices for valuing our trading instruments. When quoted market prices are not available, we use established guidelines for the valuation of these contracts. We may use a variety of reasonable methods to assist in determining the valuation of a trading instrument, including analogy to reliable quotations of similar trading instruments, pricing models, matrix pricing and other formula-based pricing methods. These methodologies incorporate factors for which published market data may be available. All valuation methods employed by us are approved by an internal corporate risk management organization independent of the trading function and are applied on a consistent basis.

     The following table shows the fair value of our trading portfolio as of March 31, 2002.

		Fair Value of Contracts as of March 31, 2002
										Maturity in
		Maturity in		Maturity in			Maturity in			2005 and
Sources of Fair Value		2002		2003			2004			Thereafter			Total Fair Value
							(In millions)
Prices supported by quoted market prices and other external sources		$	4.7	$	(3.1	)	$	(0.4	)	$	(2.9	)	$	(1.7	)
Prices based on models and other valuation methods			0.2		(4.0	)		(4.2	)		0.2			(7.8	)
	Total	$	4.9	$	(7.1	)	$	(4.6	)	$	(2.7	)	$	(9.5	)

     The “prices supported by quoted market prices and other external sources” category includes Duke Energy Field Services’ New York Mercantile Exchange (“NYMEX”) swap positions in natural gas and crude oil. The NYMEX has currently quoted prices for the next 32 months. In addition, this category includes our forward positions and options in natural gas and natural gas basis swaps at points for which over-the-counter (“OTC”) broker quotes are available. On average, OTC quotes for natural gas forwards and swaps extend 22 and 32 months into the future, respectively. OTC quotes for natural gas options extend 12 months into the future, on average. We value these positions against internally developed forward market price curves that are validated and recalibrated against OTC broker quotes. This category also includes “strip” transactions whose prices are obtained from external sources and then modeled to daily or monthly prices as appropriate.

     The “prices based on models and other valuation methods” category includes (i) the value of options not quoted by an exchange or OTC broker, (ii) the value of transactions for which an internally developed price curve was constructed as a result of the long dated nature of the transaction or the illiquidity of the market point, and (iii) the value of structured transactions. It is important to understand that in certain instances structured transactions can

18

be decomposed and modeled by us as simple forwards and options based on prices actively quoted. Although the valuation of the simple structures might not be different from the valuation of contracts in other categories, the effective model price for any given period is a combination of prices from two or more different instruments and therefore have been included in this category due to the complex nature of these transactions.

     Hedging Strategies — We are exposed to market fluctuations in the prices of energy commodities related to natural gas gathering, processing and marketing activities. We closely monitor the risks associated with these commodity price changes on our future operations and, where appropriate, use various commodity instruments such as natural gas, crude oil and NGL contracts to hedge the value of our assets and operations from such price risks. In accordance with SFAS No. 133, our primary use of commodity derivatives is to hedge the output and production of assets we physically own. Contract terms are up to four years, however, since these contracts are designated and qualify as effective hedge positions of future cash flows, or fair values of assets owned by us, to the extent that the hedge relationships are effective, their market value change impacts are not recognized in current earnings. The unrealized gains or losses on these contracts are deferred in OCI or included in Other Current or Noncurrent Assets or Liabilities on the Consolidated Balance Sheets for fair value hedges of firm commitments, in accordance with SFAS No. 133. Amounts deferred in OCI are realized in earnings concurrently with the transaction being hedged. However, in instances where the hedging contract no longer qualifies for hedge accounting, amounts included in OCI through the date of de-designation remain in OCI until the underlying transaction actually occurs. The derivative contract (if continued as an open position) will be marked to market currently through earnings. Several factors influence the effectiveness of a hedge contract, including counterparty credit risk and using contracts with different commodities or unmatched terms. Hedge effectiveness is monitored regularly and measured each month.

     The following table shows when gains and losses deferred on the Consolidated Balance Sheets for derivative instruments qualifying as effective hedges of firm commitments or anticipated future transactions will be recognized into earnings. Contracts with terms extending several years are generally valued using models and assumptions developed internally or by industry standards. However, as mentioned previously, the effective portion of the gains and losses for these contracts are not recognized in earnings until settlement at their then market price. Therefore, assumptions and valuation techniques for these contracts have no impact on reported earnings prior to settlement for the effective portion of these hedges.

     The fair value of our qualifying hedge positions at a point in time is not necessarily indicative of the value realized when such contracts settle.

		Contract Value as of March 31, 2002
											Maturity in
		Maturity in			Maturity in			Maturity in			2005 and			Total Fair
Sources of Fair Value		2002			2003			2004			Thereafter			Value
								(In millions)
Quoted market prices		$	(15.9	)	$	(8.5	)	$	(1.0	)	$	—		$	(25.4	)
Prices based on models or other valuation techniques			(2.5	)		(1.3	)		(3.4	)		(4.1	)		(11.3	)
	Total	$	(18.4	)	$	(9.8	)	$	(4.4	)	$	(4.1	)	$	(36.7	)

     Based upon our portfolio of supply contracts, without giving effect to hedging activities that would reduce the impact of commodity price decreases, a decrease of $.01 per gallon in the price of NGLs and $.10 per million Btus in the average price of natural gas would result in changes in annual pre-tax net income of approximately ($25.0) million and $5.0 million, respectively. After considering the affects of commodity hedge positions in place at March 31, 2002, it is estimated that if NGL prices average $.01 per gallon less in the next twelve months, pre-tax net income would decrease approximately $15.8 million. Comparatively, the same sensitivity analysis as of March 31, 2001 estimated that pre-tax net income would decrease approximately $19.5 million. The hedge contracts are intended to mitigate the impact that price changes have on our physical positions.

19

Credit Risk

     We sell NGLs to a variety of customers ranging from large, multi-national petrochemical and refining companies to small regional retail propane distributors. Substantially all of our NGL sales are made at market-based prices, including approximately 40% of NGL production that is committed to Phillips and Chevron Phillips Chemical LLC, under a contract with a primary term that expires on January 1, 2015. This concentration of credit risk may affect our overall credit risk in that these customers may be similarly affected by changes in economic, regulatory or other factors. On all transactions where we are exposed to credit risk, we analyse the counterparties’ financial condition prior to entering into an agreement, establish credit limits and monitor the appropriateness of these limits on an ongoing basis. The corporate credit policy prescribes the use of master collateral agreements to mitigate credit exposure. The collateral agreements provide for a counterparty to post cash or letters of credit for exposure in excess of the established threshold. The threshold amount represents an open credit limit, determined in accordance with the corporate credit policy. The collateral agreements also provide that the inability to post collateral is sufficient cause to terminate a contract and liquidate all positions.

     Physical forward contracts and financial derivatives are generally cash settled at the expiration of the contract term. However, these transactions are generally subject to margin agreements with the majority of our counterparties.

Interest Rate Risk

     We enter into debt arrangements that are exposed to market risks related to changes in interest rates. We periodically utilize interest rate lock agreements and interest rate swaps to hedge interest rate risk associated with new debt issuances. Our primary goals include (1) maintaining an appropriate ratio of fixed-rate debt to total debt for the Company’s debt rating; (2) reducing volatility of earnings resulting from interest rate fluctuations; and (3) locking in attractive interest rates based on historical averages. As of March 31, 2002, the fair value of our interest rate swap was a liability of $7.4 million.

     As of March 31, 2002, we had approximately $256.5 million outstanding under a commercial paper program. As a result, we are exposed to market risks related to changes in interest rates. In the future, we intend to manage our interest rate exposure using a mix of fixed and floating interest rate debt. An increase of .5% in interest rates would result in an increase in annual interest expense of approximately $2.5 million.

Foreign Currency Risk

     Our primary foreign currency exchange rate exposure at March 31, 2002 was the Canadian dollar. Foreign currency risk associated with this exposure was not material.

20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     For information concerning litigation and other contingencies, see Part I. Item 1, Note 5 to the Consolidated Financial Statements, “Commitments and Contingent Liabilities,” of this report and Item 3, “Legal Proceedings,” included in our Form 10-K for December 31, 2001, which are incorporated herein by reference.

     Management believes that the resolution of the matters referred to above will not have a material adverse effect on the consolidated results of operations or financial position of the Company.

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits
	10.01	364-Day Credit Facility among Duke Energy Field Services, LLC, Duke Energy Field Services Corporation, Bank of America, N.A., as Agent and the Lenders named therein, dated March 29, 2002.
(b)	Reports on Form 8-K
	None.

21

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DUKE ENERGY FIELD SERVICES, LLC
May 15, 2002
	/s/ Rose M. Robeson
	Rose M. Robeson Vice President and Chief Financial Officer (On Behalf of the Registrant and as Principal Financial and Accounting Officer)

22

EXHIBIT INDEX

EXHIBIT
NUMBER	DESCRIPTION
10.1	364-Day Credit Facility among Duke Energy Field Services, LLC, Duke Energy Field Services Corporation, Bank of America, N.A., as Agent and the Lenders named therein, dated March 29, 2002.

EX-10.1 3 d96788ex10-1.txt 364-DAY CREDIT AGREEMENT EXHIBIT 10.1 364-DAY CREDIT AGREEMENT among DUKE ENERGY FIELD SERVICES, LLC and DUKE ENERGY FIELD SERVICES CORPORATION as Borrowers, THE LENDERS IDENTIFIED HEREIN AND BANK OF AMERICA, N.A., as Agent, JPMORGAN CHASE BANK and SUNTRUST BANK, As Co-Syndication Agents AND THE BANK OF NOVA SCOTIA and THE ROYAL BANK OF SCOTLAND PLC, As Co-Documentation Agents DATED AS OF MARCH 29, 2002 Arranged by: BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager TABLE OF CONTENTS SECTION 1. DEFINITIONS AND ACCOUNTING TERMS......................................................................1 1.1 Definitions.....................................................................................1 1.2 Computation of Time Periods....................................................................13 1.3 Accounting Terms...............................................................................13 1.4 Time...........................................................................................13 SECTION 2. LOANS................................................................................................13 2.1 Revolving Committed Amount.....................................................................13 2.2 Letter of Credit Subfacility...................................................................14 2.3 Method of Borrowing for Loans..................................................................19 2.4 Funding of Loans...............................................................................19 2.5 Continuations and Conversions..................................................................20 2.6 Minimum Amounts................................................................................20 2.7 Reductions of Revolving Committed Amounts......................................................21 2.8 Notes..........................................................................................21 2.9 Joint and Several Liability of the Borrowers...................................................21 2.10 Limitation of Liability of Borrowers...........................................................22 SECTION 3. PAYMENTS.............................................................................................23 3.1 Interest.......................................................................................23 3.2 Prepayments....................................................................................24 3.3 Payment in full at Maturity....................................................................24 3.4 Fees...........................................................................................25 3.5 Place and Manner of Payments...................................................................26 3.6 Pro Rata Treatment.............................................................................26 3.7 Computations of Interest and Fees..............................................................27 3.8 Sharing of Payments............................................................................28 3.9 Evidence of Debt...............................................................................28 SECTION 4. ADDITIONAL PROVISIONS REGARDING LOANS................................................................29 4.1 Eurodollar Loan Provisions.....................................................................29 4.2 Capital Adequacy...............................................................................31 4.3 Compensation...................................................................................32 4.4 Taxes..........................................................................................32 4.5 Replacement of Lenders.........................................................................35 SECTION 5. CONDITIONS PRECEDENT.................................................................................35 5.1 Closing Conditions.............................................................................35 5.2 Conditions to Loans............................................................................38 SECTION 6. REPRESENTATIONS AND WARRANTIES.......................................................................39 6.1 Organization and Good Standing.................................................................39 6.2 Due Authorization..............................................................................39 6.3 No Conflicts...................................................................................39 6.4 Consents.......................................................................................39 i 6.5 Enforceable Obligations........................................................................40 6.6 Financial Condition............................................................................40 6.7 Taxes..........................................................................................40 6.8 Compliance with Law............................................................................40 6.9 Use of Proceeds; Margin Stock..................................................................40 6.10 Government Regulation..........................................................................41 6.11 Solvency.......................................................................................41 6.12 Environmental Matters..........................................................................41 6.13 Subsidiaries...................................................................................41 6.14 Litigation.....................................................................................41 SECTION 7. AFFIRMATIVE COVENANTS................................................................................41 7.1 Information Covenants..........................................................................42 7.2 Preservation of Existence and Franchises.......................................................44 7.3 Books and Records..............................................................................44 7.4 Compliance with Law............................................................................44 7.5 Payment of Taxes and Other Indebtedness........................................................44 7.6 Maintenance of Property; Insurance.............................................................45 7.7 Use of Proceeds................................................................................45 7.8 Audits/Inspections.............................................................................45 7.9 Maintenance of Ownership.......................................................................45 7.10 Debt to Capitalization Ratio...................................................................46 SECTION 8. NEGATIVE COVENANTS...................................................................................46 8.1 Nature of Business.............................................................................46 8.2. Liens..........................................................................................46 8.3 Consolidation and Merger.......................................................................48 8.4 Sale or Lease of Assets........................................................................49 8.5. Transactions with Affiliates...................................................................49 8.6 Indebtedness...................................................................................49 SECTION 9. EVENTS OF DEFAULT....................................................................................50 9.1 Events of Default..............................................................................50 9.2 Acceleration; Remedies.........................................................................52 9.3 Allocation of Payments After Event of Default..................................................53 SECTION 10. AGENCY PROVISIONS...................................................................................54 10.1 Appointment....................................................................................54 10.2 Delegation of Duties...........................................................................54 10.3 Exculpatory Provisions.........................................................................55 10.4 Reliance on Communications.....................................................................55 10.5 Notice of Default..............................................................................56 10.6 Non-Reliance on Agent and Other Lenders........................................................56 10.7 Indemnification................................................................................56 10.8 Agent in Its Individual Capacity...............................................................57 10.9 Successor Agent................................................................................57 ii SECTION 11. MISCELLANEOUS.......................................................................................57 11.1 Notices........................................................................................57 11.2 Right of Set-Off...............................................................................58 11.3 Benefit of Agreement...........................................................................58 11.4 No Waiver; Remedies Cumulative.................................................................61 11.5 Payment of Expenses, etc.......................................................................61 11.6 Amendments, Waivers and Consents...............................................................62 11.7 Counterparts/Telecopy..........................................................................63 11.8 Headings.......................................................................................63 11.9 Defaulting Lender..............................................................................63 11.10 Survival of Indemnification and Representations and Warranties.................................63 11.11 Governing Law; Venue...........................................................................63 11.12 Waiver of Jury Trial; Waiver of Consequential Damages..........................................64 11.13 Severability...................................................................................64 11.14 Further Assurances.............................................................................64 11.15 Entirety.......................................................................................64 11.16 Binding Effect; Continuing Agreement...........................................................65 SCHEDULES Schedule 1.1 Commitment Percentages Schedule 6.13 Material Subsidiaries Schedule 8.2 Liens Schedule 11.1 Notices EXHIBITS Exhibit 2.3 Form of Notice of Borrowing Exhibit 2.5 Form of Notice of Continuation/Conversion Exhibit 2.8 Form of Note Exhibit 7.1(c) Form of Officer's Certificate Exhibit 11.3(b) Form of Assignment Agreement iii 364-DAY CREDIT AGREEMENT THIS 364-DAY CREDIT AGREEMENT (this "Credit Agreement"), dated as of March 29, 2002, is entered into among DUKE ENERGY FIELD SERVICES, LLC, a Delaware limited liability company and DUKE ENERGY FIELD SERVICES CORPORATION, a Delaware corporation (individually, a "Borrower" and collectively, the "Borrowers"), the Lenders (as defined herein) and BANK OF AMERICA, N.A., as administrative agent for the Lenders (in such capacity, the "Agent"). RECITALS WHEREAS, the Borrowers have requested that the Lenders make available to them a revolving credit facility in the aggregate amount of $650 million for the purposes set forth herein; and WHEREAS, the Lenders have agreed to provide the requested revolving credit facility to the Borrowers on the terms, and subject to the conditions, set forth herein. NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS AND ACCOUNTING TERMS 1.1 DEFINITIONS. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms herein shall include in the singular number the plural and in the plural the singular: "Adjusted Eurodollar Rate" means the Eurodollar Rate plus, as applicable, (a) the Applicable Margin for Eurodollar Loans on and before Maturity Date or (b) the Applicable Margin for Eurodollar Loans subsequent to Maturity Date. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to direct or cause direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Agency Services Address" means Bank of America, N.A., 901 Main Street, 14th Floor, Dallas, Texas 75202, or such other address as may be identified by written notice from the Agent to the Borrowers and the Lenders. "Agent" means Bank of America, N.A. and any successors and assigns in such capacity. "Applicable Margin" means, at any time, the rate per annum set forth in the table below opposite the Debt Rating of the Borrowers:

Applicable Margin Applicable Margin Applicable for Eurodollar Loans for Eurodollar Borrowers' Applicable Margin for Margin for on and before Loans subsequent to Pricing Level Debt Rating Commitment Fees Utilization Fees Maturity Date Maturity Date ------------- -------------------------- --------------------- ---------------- -------------------- ------------------- I greater than or = to A-/A3 .100% .125% .500% .875% II BBB+/Baa1 .125% .125% .625% 1.000% III BBB/Baa2 .150% .125% .750% 1.125% IV BBB-/Baa3 .200% .250% 1.000% 1.500% V less than or = to BB+/Ba1 .300% .250% 1.250% 1.750%

Notwithstanding the above, if at any time there is a split in Debt Ratings between S&P and Moody's, (a) in the event of a single level split, the higher Debt Rating (i.e. the lower pricing) will apply and (b) in the event of a multiple level split, one level below the higher Debt Rating will apply. The Applicable Margin for Eurodollar Loans, the Commitment Fees and the Utilization Fees shall, in each case, be determined and adjusted on the date (each a "Calculation Date") on which there is a change in the Borrowers' Debt Rating. Each determination of the Applicable Margin shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Margin shall be applicable to all existing Eurodollar Loans and Letters of Credit as well as any new Eurodollar Loans made or Letters of Credit issued. The Borrowers shall promptly deliver to the Agent, at the address set forth on Schedule 11.1 and at the Agency Services Address, information regarding any change in the Borrowers' Debt Rating that would change the existing Pricing Level pursuant to the preceding paragraph. "Approved Officer" means the president, a vice president, the treasurer or the assistant treasurer of the Borrowers or such other representative of the Borrowers as may be designated by any one of the foregoing with consent of the Agent. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Base Rate" means, for any day, the rate per annum equal to the greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for any reason the Agent shall have determined (which determination shall 2 be conclusive absent manifest error) that it is unable after due inquiry to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. "Base Rate Loan" means a Loan which bears interest based on the Base Rate. "Borrowers" means, subject to Section 2.10, Duke Energy Field Services, LLC, a Delaware limited liability company, and Duke Energy Field Services Corporation, a Delaware corporation, and "Borrower" means either of them. "Borrowers Obligations" means, without duplication, all of the obligations of the Borrowers to the Lenders and the Agent, whenever arising, under this Credit Agreement, the Notes, the LOC Documents or any of the other Credit Documents. "Business Day" means any day other than a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or required by law or other governmental action to close in Dallas, Texas or New York, New York; provided that in the case of Eurodollar Loans, such day is also a day on which dealings between banks are carried on in U.S. dollar deposits in the London interbank market. "Businesses" has the meaning set forth in Section 6.12. "Capital Stock" means (a) in the case of a corporation, all classes of capital stock of such corporation, (b) in the case of a partnership, partnership interests (whether general or limited), (c) in the case of a limited liability company, membership interests and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Change of Control" means that, as of any date, any "person" or "group" (within the meaning of section 13(d) or 14(d) of the Exchange Act) other than Duke Energy Corporation or Phillips Petroleum Company, or their respective Subsidiaries, has become, directly or indirectly, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 of the Exchange Act), by way of merger, consolidation or otherwise, of 30% or more of the Voting Stock of a Borrower on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of a Borrower convertible into or exercisable for Voting Stock of a Borrower (whether or not such securities are then currently convertible or exercisable). "Closing Date" means the date hereof. "Code" means the Internal Revenue Code of 1986, as amended from time to time. 3 "Commitment" means the commitment of each Lender with respect to the Revolving Committed Amount and "Commitments" means, collectively, all such commitments of the Lenders. "Commitment Fees" has the meaning specified in Section 3.4(a). "Commitment Percentage" means, for each Lender, the percentage identified as its Commitment Percentage opposite such Lender's name on Schedule 1.1, as such percentage may be modified by assignment in accordance with the terms of this Credit Agreement. "Consolidated Capitalization" means, without duplication, the sum of (a) all of the shareholders' equity or net worth of the Borrowers and their Subsidiaries on a consolidated basis in accordance with GAAP (including preferred stock and preferred member interests, but excluding, if applicable, equity or net worth of TEPPCO Partners, L.P.) plus (b) the aggregate outstanding amount of all Equity Preferred Securities plus (c) Consolidated Indebtedness. "Consolidated Indebtedness" means, without duplication, all Indebtedness of the Borrowers and their Subsidiaries on a consolidated basis, other than (a) the amount of Off Balance Sheet Indebtedness of the Borrowers and their Subsidiaries which, in the aggregate, constitutes less than 25% of the total Indebtedness of the Borrowers and their Subsidiaries, (b) Indebtedness, if applicable, of TEPPCO Partners, L.P. and (c) the aggregate outstanding amount of all Equity Preferred Securities. "Corporate Conversion" means (a) the conversion of Duke Energy Field Services, LLC from a limited liability company to a "C" corporation or (b) the merger of Duke Energy Field Services LLC with and into Duke Energy Field Services Corporation. "Credit Documents" means this Credit Agreement, the Notes, the LOC Documents, any Notice of Borrowing, any Notice of Continuation/Conversion and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. "Credit Exposure" means, as applied to each Lender (a) at any time prior to the termination of the Commitments, the Commitment Percentage of such Lender multiplied by the Revolving Committed Amount and (b) at any time after the termination of the Commitments, the sum of (i) the principal balance of the outstanding Loans of such Lender plus (ii) such Lender's Participation Interest in the face amount of outstanding Letters of Credit. "Debt Rating" means the long-term senior unsecured, non-credit enhanced debt rating of the Borrowers by S&P and Moody's. 4 "Debt to Capitalization Ratio" means, the ratio of (a) Consolidated Indebtedness to (b) Consolidated Capitalization. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that, at such time (a) has failed to make a Loan required pursuant to the term of this Credit Agreement, (b) has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement or (c) has been deemed insolvent by a court of competent jurisdiction or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. "Dollars" and "$" means dollars in lawful currency of the United States of America. "Effective Date" means the date on which the conditions set forth in Section 5.1 shall have been fulfilled (or waived in the sole discretion of the Lenders). "Eligible Assignee" means (a) a Lender and (b) any other Person approved by (i) the Borrowers in their sole discretion and (ii) the Agent (such approval not to be unreasonably withheld or delayed); provided that (A) the Borrowers' consent is not required during the existence and continuation of an Event of Default and (B) neither a Borrower nor an Affiliate of a Borrower shall qualify as an Eligible Assignee. "Equity Preferred Securities" means any securities, however denominated, (i) issued by the Borrowers or their Subsidiaries, (ii) that are not subject to mandatory redemption or the underlying securities, if any, of which are not subject to mandatory redemption, (iii) that are perpetual or that mature no earlier than 20 years from the date of issuance and no earlier than one year from the Maturity Date, (iv) the indebtedness issued in connection with which, including any guaranty, is subordinated in right of payment to the unsecured and unsubordinated indebtedness of the issuer of such indebtedness or guaranty and (v) the terms of which permit the deferral of interest or distributions thereon to a date occurring after the first anniversary of the Maturity Date. "Environmental Laws" means any legal requirement of any Governmental Authority pertaining to (a) the protection of health, safety, and the indoor or outdoor environment, (b) the conservation, management, or use of natural resources and wildlife, (c) the protection or use of surface water and groundwater or (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation or handling of, or exposure to, any hazardous or toxic substance or material or (e) pollution (including any release to land surface water and groundwater) and includes, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous 5 and Solid Waste Amendment of 1984, 42 USC 6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et seq., Clean Air Act, as amended, 42 USC 7401 et seq., Toxic Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous Materials Transportation Act, 49 USC App. 1801 et seq., Occupational Safety and Health Act of 1970, as amended, 29 USC 651 et seq., Oil Pollution Act of 1990, 33 USC 2701 et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42 USC 11001 et seq., National Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking Water Act of 1974, as amended, 42 USC 300(f) et seq., any analogous implementing or successor law, and any amendment, rule, regulation, order, or directive issued thereunder. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means an entity, whether or not incorporated, which is under common control with a Borrower or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes a Borrower or any of its Subsidiaries and which is treated as a single employer under Sections 414(b), (c), (m), or (o) of the Code. "Eurodollar Loan" means a Loan bearing interest at the Adjusted Eurodollar Rate. "Eurodollar Rate" means with respect to any Eurodollar Loan, for the Interest Period applicable thereto, a rate per annum equal to the London Interbank Offered Rate. "Eurodollar Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities, as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined). "Event of Default" has the meaning specified in Section 9.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as amended, modified, succeeded or replaced from time to time. "Existing Credit Facility" means the credit facility evidenced by that certain 364-Day Credit Agreement, dated as of March 30, 2001, among the Borrowers, the lenders party thereto and Bank of America, N.A., as administrative agent and all documents and instruments entered into in connection therewith. 6 "Extension of Credit" means, as to any Lender, the making of a Loan by such Lender (or a participation therein by a Lender) or the issuance of, or participation in, a Letter of Credit by such Lender. "Fee Letter" means that certain letter agreement, dated as of February 8, 2002, between the Agent and the Borrowers, as amended, modified, supplemented or replaced from time to time. "Federal Funds Rate" means for any day the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to Section 1.3. "Government Acts" has the meaning specified in Section 2.2(k). "Governmental Authority" means any Federal, state, local or foreign court, monetary authority or governmental agency, authority, instrumentality or regulatory body. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services purchased, (c) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to the property acquired, (d) all obligations of such Person under lease obligations which shall have been, or should be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable as lessee, (e) the face amount of all letter of credit indebtedness available to be drawn (other than letter of credit obligations relating to indebtedness included in Indebtedness pursuant to another clause of this definition) and, without duplication, the unreimbursed amount of all drafts drawn thereunder, (f) obligations secured by a Lien on property or assets of such Person, whether or not assumed (but in any event not exceeding the fair market value of the property or asset), (g) all guarantees of Indebtedness referred to in clauses (a) through (f) above, (h) all amounts payable by such Person in connection with mandatory redemptions or repurchases of preferred stock, (i) any obligations of such Person (in the nature of principal or interest) in respect of acceptances or similar obligations issued or created for the account of such Person and (j) all Off Balance Sheet Indebtedness of such Person. 7 "Interest Payment Date" means (a) as to Base Rate Loans, the first day of each fiscal quarter of the Borrowers, the Maturity Date and the Term Out Maturity Date, if applicable, and (b) as to Eurodollar Loans, the last day of each applicable Interest Period, the Maturity Date and the Term Out Maturity Date, if applicable, and, in addition, where the applicable Interest Period for a Eurodollar Loan is greater than three months, then also on the last day of each three-month period during such Interest Period. If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day. "Interest Period" means, with respect to Eurodollar Loans, a period of one, two, three or six months' duration, as the Borrowers may elect, commencing, in each case, on the date of the borrowing (including continuations and conversions of Eurodollar Loans); provided, however, (a) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (b) no Interest Period shall extend beyond the Maturity Date (or, if the Borrowers choose to term out the then existing Loans pursuant to Section 3.3(b), the Term Out Maturity Date) and (c) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month. "Issuing Lender" means Bank of America, N.A. "Issuing Lender Fees" has the meaning set forth in Section 3.4(c)(ii). "Letter of Credit" means a Letter of Credit issued for the account of the Borrowers or one of their Subsidiaries by the Issuing Lender pursuant to Section 2.2, as such Letter of Credit may be amended, modified, extended, renewed or replaced. "Letter of Credit Fees" shall have the meaning assigned to such term in Section 3.4(c)(i). "Lender" means any Person identified as a Lender on the signature pages hereto and any Eligible Assignee which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors or permitted assigns. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). 8 "Loans" means the loans made by the Lenders to the Borrowers pursuant to Section 2.1 (or extended pursuant to Section 3.3(b)). "LOC Committed Amount" means ONE HUNDRED AND FIFTY MILLION DOLLARS ($150,000,000). "LOC Documents" means, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations. "LOC Obligations" means, at any time, the sum of (a) the maximum amount which is then available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (b) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed. "London Interbank Offered Rate" means, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term "London Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum appearing on such other service as may be nominated by the British Bankers' Association as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified, the applicable rate shall be the arithmetic mean of all such rates. "Mandatory Borrowing" has the meaning specified in Section 2.2(e). "Material Adverse Effect" means a material adverse effect on the business, financial positions or results of operations of the Borrowers and their Subsidiaries taken as a whole. "Material Subsidiary" means any Subsidiary of the Borrowers that, together with its Subsidiaries, owns in excess of 10% of the consolidated assets of the Borrowers and their Subsidiaries. "Maturity Date" means March 28, 2003. 9 "Merger" means the following transaction: (a) the merger of Phillips Gas Company Shareholder, Inc., a Subsidiary of Phillips Petroleum Company and the parent of Phillips Gas Company, with and into Duke Energy Field Services Corporation and (b) the subsequent merger of Phillips Gas Company with and into Duke Energy Field Services Corporation. "Multiemployer Plan" means a Plan covered by Title IV of ERISA which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA. "Multiple Employer Plan" means a Plan covered by Title IV of ERISA, other than a Multiemployer Plan, which a Borrower or any ERISA Affiliate and at least one employer other than a Borrower or any ERISA Affiliate are contributing sponsors. "Non-Excluded Taxes" has the meaning specified in Section 4.4(a). "Notes" means the promissory notes of the Borrowers in favor of each of the Lenders evidencing the Loans provided pursuant to Section 2.1, individually or collectively, as appropriate, as such notes may be amended or modified from time to time and substantially in the form of Exhibit 2.8. "Notice of Borrowing" means a request by the Borrowers for a Loan in the form of Exhibit 2.3. "Notice of Continuation/Conversion" means a request by the Borrowers for the continuation or conversion of a Loan in the form of Exhibit 2.5. "Off Balance Sheet Indebtedness" means any obligation of a Person that would be considered indebtedness for tax purposes but is not set forth on the balance sheet of such Person, including, but not limited to, (a) any synthetic lease, tax retention operating lease, off balance sheet loan or similar off-balance sheet financing product of such Person, (b) the aggregate amount of uncollected accounts receivables of such Person subject at such time to a sale of receivables (or similar transaction) and (c) obligations of any partnership or joint venture that is recourse to such Person. "Participation Interest" means the Extension of Credit by a Lender by way of a purchase of a participation in Letters of Credit or LOC Obligations as provided in Section 2.2 or in any Loans as provided in Section 3.8. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto. "Person" means any individual, partnership, joint venture, firm, corporation, association, trust, limited liability company or other enterprise (whether or not 10 incorporated), or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means any employee pension benefit plan (as defined in Section 3(2) of ERISA) which is covered by ERISA and with respect to which a Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Prime Rate" means the per annum rate of interest established from time to time by the Agent at its principal office in Charlotte, North Carolina (or such other principal office as communicated by the Agent to the Borrowers and the Lenders) as its Prime Rate. Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of 12:01 a.m. of the Business Day on which each change in the Prime Rate is announced by the Agent. The Prime Rate is a reference rate used by the Agent in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. "Properties" has the meaning set forth in Section 6.12. "Register" has the meaning set forth in Section 11.3(c). "Regulation A, D, T, U, or X" means Regulation A, D, T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Reportable Event" means a "reportable event" as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived. "Required Lenders" means Lenders whose aggregate Credit Exposure (as hereinafter defined) constitutes more than 50% of the aggregate Credit Exposure of all Lenders at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time then there shall be excluded from the determination of Required Lenders the aggregate principal amount of Credit Exposure of such Lender at such time. "Responsible Officer" means the president, chief financial officer or treasurer of either Borrower. "Revolving Committed Amount" means SIX HUNDRED AND FIFTY MILLION Dollars ($650,000,000) as such amount may be otherwise reduced in accordance with Section 2.7. "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. 11 "Solvent" means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (b) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (c) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (d) the fair value of the assets of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (e) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed as the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subsidiary" means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, association, joint venture, limited liability company or other entity in which such person directly or indirectly through Subsidiaries has more than 50% equity interest at any time. "Termination Event" means (a) with respect to any Single Employer Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA), (b) the withdrawal of a Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA, (e) any event or condition which might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (f) the complete or partial withdrawal of a Borrower or any ERISA Affiliate from a Multiemployer Plan. "Term Out Maturity Date" has the meaning set forth in Section 3.3(b). "Unused Commitment" means, for any period from the Closing Date to the Maturity Date, the amount by which (a) the Revolving Committed Amount exceeds (b) the daily average sum for such period of the outstanding principal amount of all Loans plus the aggregate amount of outstanding LOC Obligations. 12 "Utilization Fees" has the meaning specified in Section 3.4(b). "Utilized Revolving Committed Amount" means, for any period from the Closing Date to the Maturity Date or the Term Out Maturity Date, if applicable, the amount equal to the daily average sum for such period of the outstanding aggregate principal amount of all Loans plus the aggregate amount of outstanding LOC Obligations. "Voting Stock" means all classes of the Capital Stock (or other voting interests) of such Person then outstanding and normally entitled to vote in the election of directors or other governing body of such Person. 1.2 COMPUTATION OF TIME PERIODS. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." References in this Credit Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits of or to this Credit Agreement unless otherwise specifically provided. 1.3 ACCOUNTING TERMS. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. 1.4 TIME. All references to time herein shall be references to Central Standard Time or Central Daylight time, as the case may be, unless specified otherwise. SECTION 2. LOANS 2.1 REVOLVING COMMITTED AMOUNT. Subject to the terms and conditions set forth herein, each Lender severally agrees to make revolving loans to the Borrowers in Dollars, at any time and from time to time, during the period from the Effective Date to the Maturity Date (each a "Loan" and collectively the "Loans"); provided, however, that (a) the sum of the aggregate amount of Loans outstanding plus the aggregate amount of LOC Obligations outstanding shall not exceed the Revolving Committed Amount and (b) with respect to each individual Lender, such Lender's pro rata share of outstanding Loans plus such Lender's pro rata share of outstanding LOC Obligations shall not exceed such 13 Lender's Commitment Percentage of the Revolving Committed Amount. Subject to the terms of this Credit Agreement, the Borrowers may borrow, repay and reborrow Loans. 2.2 LETTER OF CREDIT SUBFACILITY. (a) Issuance. Subject to the terms and conditions hereof and of the LOC Documents, if any, and any other terms and conditions which the Issuing Lender may reasonably require (so long as such terms and conditions do not impose any financial obligation on or require any Lien (not otherwise contemplated by this Credit Agreement) to be given by a Borrower or conflict with any obligation of, or detract from any action which may be taken by the Borrowers or their Subsidiaries under this Credit Agreement), the Issuing Lender shall from time to time upon request issue, in Dollars, and the Lenders shall participate in, letters of credit (the "Letters of Credit") for the account of a Borrower or any of its Subsidiaries, from the Effective Date until the Maturity Date, in a form reasonably acceptable to the Issuing Lender; provided, however, that (i) the aggregate amount of LOC Obligations shall not at any time exceed the LOC Committed Amount, (ii) the sum of the aggregate amount of LOC Obligations outstanding plus Loans outstanding shall not exceed the Revolving Committed Amount and (iii) with respect to each individual Lender, the Lender's pro rata share of outstanding Loans plus its pro rata share of outstanding LOC Obligations shall not exceed such Lender's Commitment Percentage of the Revolving Committed Amount. The issuance and expiry date of each Letter of Credit shall be a Business Day. Except as otherwise expressly agreed upon by all the Lenders, no Letter of Credit shall have an expiry date extending beyond the Maturity Date. Each Letter of Credit shall be either (x) a standby letter of credit issued to support the obligations (including pension or insurance obligations), contingent or otherwise, of a Borrower, or (y) a commercial letter of credit in respect of the purchase of goods or services by a Borrower in the ordinary course of business. Each Letter of Credit shall comply with the related LOC Documents. (b) Notice and Reports. The request for the issuance of a Letter of Credit shall be submitted to the Issuing Lender at least two Business Days prior to the requested date of issuance. The Issuing Lender will, at least quarterly and more frequently upon request, provide to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the account party, the beneficiary, the face amount, and the expiry date as well as any payments or expirations which may have occurred. The Issuing Lender will further provide to the Agent, promptly upon request, copies of the Letters of Credit. (c) Participations. (i) Each Lender, upon issuance of a Letter of Credit, shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its Commitment Percentage of 14 the obligations under such Letter of Credit, and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Lender therefor and discharge when due, its Commitment Percentage of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to the Issuing Lender its Commitment Percentage of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrowers to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any request for a drawing or any drawing under any Letter of Credit, the Issuing Lender will promptly notify the Borrowers. Unless a Borrower shall immediately notify the Issuing Lender of its intent to otherwise reimburse the Issuing Lender, the Borrowers shall be deemed to have requested a Loan at the Base Rate in the amount of the drawing as provided in subsection (e) hereof, the proceeds of which will be used to satisfy the reimbursement obligations. The Borrowers shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit either with the proceeds of a Loan obtained hereunder or otherwise in same day funds as provided herein or in the LOC Documents. If the Borrowers shall fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing shall bear interest at a per annum rate equal to the Base Rate plus two percent (2%). The Borrowers' reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of (but without waiver of) any rights of set-off, counterclaim or defense to payment that the applicable account party or the Borrowers may claim or have against the Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation, any defense based on any failure of the applicable account party or the Borrowers to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Agent for the account of the Issuing Lender, in Dollars and in immediately available funds, the amount of such Lender's Commitment Percentage of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 p.m., otherwise such payment shall be made at or before 12:00 Noon on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date the Lender received the 15 notice regarding the unreimbursed drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two Business Days of the date of drawing, the Federal Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. Simultaneously with the making of each such payment by a Lender to the Issuing Lender, such Lender shall, automatically and without any further action on the part of the Issuing Lender or such Lender, acquire a participation in an amount equal to such payment (excluding the portion of such payment constituting interest owing to the Issuing Lender) in the related unreimbursed drawing portion of the LOC Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrowers with respect thereto. (e) Repayment with Loans. On any day on which a Borrower shall have requested, or been deemed to have requested, a Loan borrowing to reimburse a drawing under a Letter of Credit, the Agent shall give notice to the applicable Lenders that a Loan has been requested or deemed requested in connection with a drawing under a Letter of Credit, in which case a Loan borrowing comprised solely of Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be immediately made from all applicable Lenders (without giving effect to any termination of the Commitments pursuant to Section 9.2 or otherwise) pro rata based on each Lender's respective Commitment Percentage and the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each such Lender hereby irrevocably agrees to make such Loans immediately upon any such request or deemed request on account of each such Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date notwithstanding (i) the amount of Mandatory Borrowing may not comply with the minimum amount for borrowings of Loans otherwise required hereunder, (ii) whether any conditions specified in Section 5.2 are then satisfied, (iii) whether a Default or Event of Default then exists, (iv) failure of any such request or deemed request for Loans to be made by the time otherwise required hereunder, (v) the date of such Mandatory Borrowing, or (vi) any reduction in the Revolving Committed Amount or any termination of the Commitments. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to a Borrower), then each such Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrowers on or after such date and prior to such purchase) its Participation Interest in the outstanding LOC Obligations; provided, further, that in the event any Lender shall fail to fund its Participation Interest on the day the Mandatory Borrowing would otherwise have occurred, then the amount of such Lender's unfunded Participation Interest therein shall bear interest payable to the Issuing Lender upon demand, at the rate equal to, if paid 16 within two Business Days of such date, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate. (f) Designation of Subsidiaries as Account Parties. Notwithstanding anything to the contrary set forth in this Credit Agreement, a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Subsidiary of the Borrowers; provided that notwithstanding such statement, the Borrowers shall be the actual account party for all purposes of this Credit Agreement for such Letter of Credit and such statement shall not affect the Borrowers' reimbursement obligations hereunder with respect to such Letter of Credit. (g) Modification and Extension. The issuance of any supplement, modification, amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (h) Uniform Customs and Practices. The Issuing Lender may have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits (the "UCP") or the International Standby Practices 1998 (the "ISP98"), in either case as published as of the date of issue by the International Chamber of Commerce, in which case the UCP or ISP98, as applicable, may be incorporated therein and deemed in all respects to be a part thereof. (i) Responsibility of Issuing Lender. It is expressly understood and agreed that the obligations of the Issuing Lender hereunder to the Lenders are only those expressly set forth in this Credit Agreement and that the Issuing Lender shall be entitled to assume that the conditions precedent set forth in Section 5.2 have been satisfied unless it shall have acquired actual knowledge that any such condition precedent has not been satisfied; provided, however, that nothing set forth in this Section 2.2 shall be deemed to prejudice the right of any Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit constituted gross negligence or willful misconduct on the part of the Issuing Lender. (j) Conflict with LOC Documents. In the event of any conflict between this Credit Agreement and any LOC Document, this Credit Agreement shall govern. (k) Indemnification of Issuing Lender. (i) In addition to its other obligations under this Credit Agreement, the Borrowers hereby agree to protect, indemnify, pay and save the Issuing Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that the Issuing Lender may incur or be subject to as a consequence, direct 17 or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of the Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (all such acts or omissions, herein called "Government Acts"). (ii) As between the Borrowers and the Issuing Lender, the Borrowers shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuing Lender shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit; (D) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (G) any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (iii) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put the Issuing Lender under any resulting liability to the Borrowers. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify the Issuing Lender against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrowers, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any present or future Government Acts. The Issuing Lender shall not, in any way, be liable for any failure by the Issuing Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Issuing Lender. (iv) Nothing in this subsection (k) is intended to limit the reimbursement obligation of the Borrowers contained in this Section 2.2. The obligations of the Borrowers under this subsection (k) shall survive the termination of this Credit Agreement. No act or omission of any current or prior 18 beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Issuing Lender to enforce any right, power or benefit under this Credit Agreement. (v) Notwithstanding anything to the contrary contained in this subsection (k) or any of the Credit Documents, the Borrowers shall have no obligation to indemnify the Issuing Lender in respect of any liability incurred by the Issuing Lender arising solely out of the negligence or willful misconduct of the Issuing Lender, as determined by a court of competent jurisdiction. Nothing in this Credit Agreement shall relieve the Issuing Lender of any liability to the Borrowers in respect of any action taken by the Issuing Lender which action constitutes negligence or willful misconduct of the Issuing Lender or a violation of the UCP, the ISP98 or Uniform Commercial Code (as applicable), as determined by a court of competent jurisdiction. 2.3 METHOD OF BORROWING FOR LOANS. By no later than 11:00 a.m. (a) on the date of the requested borrowing of Loans that will be Base Rate Loans or (b) three Business Days prior to the date of the requested borrowing of Loans that will be Eurodollar Loans, the Borrowers shall submit a written Notice of Borrowing in the form of Exhibit 2.3 to the Agent setting forth (i) the amount requested, (ii) whether such Loans shall accrue interest at the Base Rate or the Adjusted Eurodollar Rate, (iii) with respect to Loans that will be Eurodollar Loans, the Interest Period applicable thereto and (iv) certification that the Borrowers have complied in all respects with Section 5.2. 2.4 FUNDING OF LOANS. Upon receipt of a Notice of Borrowing, the Agent shall promptly inform the Lenders as to the terms thereof. Each such Lender shall make its Commitment Percentage of the requested Loans available to the Agent by 2:00 p.m. on the date specified in the Notice of Borrowing by deposit, in Dollars, of immediately available funds at the Agency Services Address. The amount of the requested Loans will then be made available to the Borrowers by the Agent by crediting the account of the Borrowers on the books of such office of the Agent, to the extent the amount of such Loans are made available to the Agent. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make Loans hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Agent shall have been notified by any Lender prior to the date of any such Loan that such Lender does not intend to make available to the Agent its portion of the Loans to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on the date of such Loans, and the Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do so) make available to the Borrowers a corresponding amount. If such corresponding amount is not in fact made available to the Agent, the Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding 19 amount forthwith upon the Agent's demand therefor, the Agent will promptly notify the Borrowers and the Borrowers shall immediately pay such corresponding amount within two Business Days to the Agent. The Agent shall also be entitled to recover from the Lender or the Borrowers, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrowers to the date such corresponding amount is recovered by the Agent at a per annum rate equal to (a) from the Borrowers at the applicable rate for such Loan pursuant to the Notice of Borrowing and (b) from a Lender at the Federal Funds Rate. 2.5 CONTINUATIONS AND CONVERSIONS. The Borrowers shall have the option (subject to the limitations set forth below), on any Business Day, to continue existing Eurodollar Loans for a subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a) each such continuation or conversion must be requested by the Borrowers pursuant to a written Notice of Continuation/Conversion, in the form of Exhibit 2.5, in compliance with the terms set forth below, (b) if a Eurodollar Loan is continued or converted into a Base Rate Loan on any day other than the last day of the Interest Period applicable thereto, then the Borrowers shall be subject to the provisions set forth in Section 4.3, (c) Eurodollar Loans may not be continued nor may Base Rate Loans be converted into Eurodollar Loans during the existence and continuation of a Default or Event of Default and (d) any request to extend a Eurodollar Loan that fails to comply with the terms hereof or any failure to request an extension of a Eurodollar Loan at the end of an Interest Period shall constitute a conversion to a Base Rate Loan on the last day of the applicable Interest Period. Each continuation or conversion must be requested by the Borrowers no later than 11:00 a.m. (i) on the date for a requested conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three Business Days prior to the date for a requested continuation of a Eurodollar Loan or conversion of a Base Rate Loan to a Eurodollar Loan, in each case pursuant to a written Notice of Continuation/Conversion submitted to the Agent which shall set forth (A) whether the Borrowers wish to continue or convert such Loans and (B) if the request is to continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan, the Interest Period applicable thereto. 2.6 MINIMUM AMOUNTS. Each request for a Loan or a conversion or continuation hereunder shall be subject to the following requirements: (a) each Eurodollar Loan shall be in a minimum amount of $10,000,000 (and in integral multiples of $1,000,000 in excess thereof), (b) each Base Rate Loan shall be in a minimum amount of the lesser of $10,000,000 (and in integral multiples of $1,000,000 in excess thereof) or the remaining amount available to be borrowed and (c) no more than ten Eurodollar Loans shall be outstanding hereunder at any one time. For the purposes of this Section, all Eurodollar Loans with the same Interest Periods that begin and end on the same date shall be considered as one Eurodollar Loan, but Eurodollar Loans with different Interest Periods, even if they begin on the same date, shall be considered separate Eurodollar Loans. 20 2.7 REDUCTIONS OF REVOLVING COMMITTED AMOUNTS. Upon at least five Business Days' notice, the Borrowers shall have the right to permanently terminate or reduce the aggregate unused amount of the Revolving Committed Amount at any time or from time to time; provided that (a) each partial reduction shall be in an aggregate amount at least equal to $10,000,000 and in integral multiples of $1,000,000 above such amount, (b) no reduction shall be made which would reduce the Revolving Committed Amount to an amount less than the aggregate amount of the then outstanding Loans plus the aggregate amount of the then outstanding LOC Obligations. Any reduction in (or termination of) the Revolving Committed Amount shall be permanent and may not be reinstated. 2.8 NOTES. The Loans made by the Lenders shall be evidenced by a duly executed promissory note of the Borrowers payable to each Lender in substantially the form of Exhibit 2.8 (the "Notes"). 2.9 JOINT AND SEVERAL LIABILITY OF THE BORROWERS. Subject to Section 2.10: (a) Each of the Borrowers is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Lenders under this Credit Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of each of the Borrowers to accept joint and several liability for the obligations of each of them. (b) Each of the Borrowers jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrower with respect to the payment and performance of all of the obligations arising under this Credit Agreement and the other Credit Documents, it being the intention of the parties hereto that all of the Borrowers Obligations shall be the joint and several obligations of each of the Borrowers without preferences or distinction between them. (c) If and to the extent that either of the Borrowers shall fail to make any payment with respect to any of the obligations hereunder as and when due or to perform any of such obligations in accordance with the terms thereof, then in each such event, the other Borrower will make such payment with respect to, or perform, such obligation. (d) The provisions of this Section 2.9 are made for the benefit of the Lenders and their successors and assigns, and may be enforced by them from time to time against either of the Borrowers as often as occasion therefor may arise and without requirement on the part of the Lenders first to marshall any of its claims or to exercise any of its rights against the other Borrower or to exhaust any remedies available to it against the other Borrower or to resort to any other source or means of obtaining payment of any of the 21 Borrowers Obligations hereunder or to elect any other remedy. The provisions of this Section 2.9 shall remain in effect until all the Borrowers Obligations hereunder shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Borrowers Obligations, is rescinded or must otherwise be restored or returned by the Lenders upon the insolvency, bankruptcy or reorganization of any of the Borrowers, or otherwise, the provisions of this Section 2.9 will forthwith be reinstated and in effect as though such payment had not been made. (e) Notwithstanding any provision to the contrary contained herein or in any of the other Credit Documents, to the extent the obligations of either Borrower shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of such Borrower hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code). (f) Each Borrower hereby appoints the other Borrower to act as its agent for all purposes under this Credit Agreement (including, without limitation, with respect to all matters relating to the borrowing and repayment of Loans) and agrees that (i) a Borrower may execute such documents on behalf of the other Borrower as it deems appropriate and the other Borrower shall be obligated by all of the terms of any such document executed on its behalf, (ii) any notice or communication delivered by the Agent or a Lender to a Borrower shall be deemed delivered to both Borrowers and (iii) the Agent and the Lenders may accept, and be permitted to rely on, any document, instrument or agreement executed by one Borrower on behalf of the other Borrower. 2.10 LIMITATION OF LIABILITY OF BORROWERS. Notwithstanding anything in this Credit Agreement or in the Notes to the contrary, including without limitation, Section 2.9: (a) Duke Energy Field Services Corporation shall have no rights or obligations as a Borrower, and will not be subject to the terms of the Credit Documents, until (i) consummation of the Merger or a Corporate Conversion and (ii) notification from the Borrowers to the Lenders that the Merger or a Corporate Conversion has occurred and that, going forward, Duke Energy Field Services Corporation will irrevocably have all of the rights and obligations of a Borrower, jointly and severally with Duke Energy Field Services, LLC, under the Credit Documents (including, without limitation, any Loans made prior to such notification) and will be subject to the terms of the Credit Documents. (b) If the Merger occurs, the agreement by Duke Energy Field Services Corporation to become jointly and severally liable with Duke Energy Field Services, LLC for the indebtedness under the Credit Documents pursuant to subsection (a) above shall be accomplished in two phases: (i) initially, Duke Energy Field Services Corporation shall become directly liable for 69.7% of such indebtedness and shall become indirectly liable for 22 30.3% of such indebtedness through Phillips Gas Company ("PGC"), a Delaware corporation and, subsequent to the first step of the Merger, a wholly-owned Subsidiary of Duke Energy Field Services Corporation, in each case jointly and severally with Duke Energy Field Services, LLC, which shall remain jointly and severally liable for 100% of such indebtedness; and (ii) immediately thereafter, upon the merger of PGC with and into Duke Energy Field Services Corporation, Duke Energy Field Services Corporation shall become directly liable for the 30.3% of such indebtedness previously attributed to it through its ownership of PGC. (c) On or after the date that, pursuant to subsection (a) or subsections (a) and (b) above, Duke Energy Field Services Corporation has become directly liable for 100% of the indebtedness, rights and obligations of a Borrower under the Credit Documents, the Borrowers may, upon written notice to the Lenders, release Duke Energy Field Services, LLC from its joint and several obligations under the Credit Documents; provided that if as a result of a Corporate Conversion Duke Energy Field Services LLC is converted into a "C" Corporation it shall not be released from its obligations hereunder. Thereafter, Duke Energy Field Services, LLC will have no rights or obligations under the Credit Documents, will no longer be subject to the terms of the Credit Documents (except as the terms thereof may relate to it if it constitutes a Material Subsidiary) and all obligations owing pursuant to the Credit Documents shall be the sole responsibility of Duke Energy Field Services Corporation. (d) Notwithstanding the use of the term "Borrowers" as set forth in the Credit Documents: (i) prior to Duke Energy Field Services Corporation having any rights or obligations as a Borrower and being subject to the terms of the Credit Agreement, as set forth in clause (a) above, the terms "Borrowers" or "a Borrower" as used in the Credit Documents shall only mean a reference to Duke Energy Field Services, LLC and (ii) on and after the date that Duke Energy Field Services, LLC is released from liability, in accordance with clause (c) above, the terms "Borrowers" or "a Borrower" as used in the Credit Documents shall only mean a reference to Duke Energy Field Services Corporation. SECTION 3. PAYMENTS 3.1 INTEREST. (a) Interest Rate. (i) All Base Rate Loans shall accrue interest at the Base Rate. (ii) All Eurodollar Loans shall accrue interest at the Adjusted Eurodollar Rate applicable to such Eurodollar Loan. 23 (b) Default Rate of Interest. Upon the occurrence, and during the continuation, of an Event of Default, all past due principal of and, to the extent permitted by law, past due interest on, the Loans and any other past due amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate equal to one percent (1%) plus the rate which would otherwise be applicable (or if no rate is applicable, then the rate for Loans that are Base Rate Loans plus one percent (1%) per annum). (c) Interest Payments. Interest on Loans shall be due and payable in arrears on each Interest Payment Date. 3.2 PREPAYMENTS. (a) Voluntary Prepayments. The Borrowers shall have the right to prepay Loans in whole or in part from time to time without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on three Business Days' prior written notice to the Agent and any prepayment of Eurodollar Loans will be subject to Section 4.3; and (ii) each such partial prepayment of Loans shall be in the minimum principal amount of $10,000,000. Any payments made under this Section 3.2(a) shall be applied as the Borrowers may elect; provided that if the Borrowers fail to specify how a voluntary prepayment should be applied then such prepayment shall be applied first to Base Rate Loans and then to Eurodollar Loans in direct order of Interest Period maturities. (b) Mandatory Prepayments. If at any time (A) the amount of Loans outstanding plus the aggregate amount of LOC Obligations outstanding exceeds the Revolving Committed Amount or (B) the aggregate amount of LOC Obligations outstanding exceeds the LOC Committed Amount, the Borrowers shall immediately make a principal payment to the Agent in a manner and in an amount necessary to be in compliance with Sections 2.1 and 2.2, as applicable, and as directed by the Agent. All amounts required to be paid pursuant to this Section 3.2(b) shall be (i) applied first to Loans and then to a cash collateral account in respect of LOC Obligations, (ii) subject to Section 4.3 and (iii) applied first to Base Rate Loans and then to Eurodollar Loans in the direct order of Interest Period maturities. 3.3 PAYMENT IN FULL AT MATURITY. (a) Subject to Section 3.3(b) below, on the Maturity Date, the entire outstanding principal balance of all Loans and all LOC Obligations, together with accrued but unpaid interest and all other sums owing under this Credit Agreement, shall be due and payable in full, unless accelerated sooner pursuant to Section 9.2. (b) On or before ten Business Days prior to the Maturity Date, the Borrowers may, as long as no Default or Event of Default exists and is continuing, notify the Agent in writing (and the Agent shall promptly forward such notice to the Lenders) that, as of the Maturity Date, they are converting the outstanding Loans to a term loan which shall be due and payable in full on the date one year subsequent to the Maturity Date (the 24 "Term Out Maturity Date"). It is understood and agreed that subsequent to the Maturity Date, (i) the Borrowers may no longer request, and the Lenders are no longer obligated to make or issue, new Loans or Letters of Credit, (ii) any amounts repaid may not be reborrowed, (iii) interest shall accrue on the outstanding Loans, at the option of the Borrowers, in accordance with the terms of Section 2.5 and, as set forth in the definition of Applicable Margin, the Applicable Margin for Eurodollar Loans subsequent to the Maturity Date shall apply and (iv) the Borrowers shall have the right to prepay all or a portion of the outstanding Loans in accordance with Section 3.2(a). 3.4 FEES. (a) Commitment Fees. In consideration of the Revolving Committed Amount being made available by the Lenders, the Borrowers agree to pay to the Agent, for the pro rata benefit of each Lender, a fee equal to the Applicable Margin for Commitment Fees on the Unused Commitment (the "Commitment Fees"). The accrued Commitment Fees shall be due and payable in arrears on the first Business Day after the end of each fiscal quarter of the Borrowers (as well as on the Maturity Date) for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date. (b) Utilization Fees. If, on any day, the sum of the aggregate outstanding principal amount of all Loans plus the outstanding amount of LOC Obligations exceeds the product of (A) one-third (1/3) times (B) the Revolving Committed Amount, the Borrowers agree to pay to the Agent, for the pro rata benefit of each Lender, a per annum fee equal to the Applicable Margin for Utilization Fees on the Utilized Revolving Committed Amount (the "Utilization Fees"). The accrued Utilization Fees, if any, shall be due and payable in arrears on the first Business Day after the end of each fiscal quarter of the Borrowers (as well as on the Maturity Date and the Term Out Maturity Date, if applicable) for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date. (c) Letter of Credit Fees. (i) Letter of Credit Fees. In consideration of the issuance of Letters of Credit hereunder, the Borrowers agree to pay to the Issuing Lender, for the pro rata benefit of each Lender, a per annum fee equal to the Applicable Margin for Eurodollar Loans on or before the Maturity Date on the aggregate stated amount for each Letter of Credit from the date of issuance to the date of expiration (the "Letter of Credit Fees"). The accrued Letter of Credit Fees shall be due and payable in arrears on the first Business Day after the end of each fiscal quarter of the Borrowers (as well as on the Maturity Date) for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date. (ii) Issuing Lender Fees. In addition to the Letter of Credit Fees payable pursuant to subsection (i) above, the Borrowers shall pay to the Issuing 25 Lender for its own account, without sharing by the other Lenders, (A) a fee equal to one-eighth of one percent (.125%) per annum on the total sum of all Letters of Credit issued by the Issuing Lender, such fee to be paid on the date of issuance of any Letter of Credit and (B) the customary charges from time to time to the Issuing Lender for its services in connection with the issuance, amendment, payment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "Issuing Lender Fees"). 3.5 PLACE AND MANNER OF PAYMENTS. All payments of principal, interest, fees, expenses and other amounts to be made by a Borrower under this Credit Agreement shall be made without setoff, deduction or counterclaim and received not later than 2:00 p.m. on the date when due in Dollars and in immediately available funds by the Agent at the Agency Services Address. A Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Agent the Loans, Letters of Credit, fees or other amounts payable by a Borrower hereunder to which such payment is to be applied (and in the event that it fails to specify, or if such application would be inconsistent with the terms hereof, the Agent shall distribute such payment to the Lenders in such manner as it reasonably determines in its sole discretion). The Agent will distribute such payments to the applicable Lenders on the same Business Day if any such payment is received prior to 2:00 p.m.; otherwise the Agent will distribute each payment to the applicable Lenders prior to 12:00 noon on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall be made on the next preceding Business Day. 3.6 PRO RATA TREATMENT. (a) Loans/Fees. Except to the extent otherwise provided herein, all Loans, each payment or prepayment of principal of any Loan, each payment of interest on the Loans, each payment of Commitment Fees, each payment of Utilization Fees, each payment of Letter of Credit Fees, each reduction of the Revolving Committed Amount and each conversion or continuation of any Loans, shall be allocated pro rata among the applicable Lenders in accordance with their respective Commitment Percentages; provided that, if any Lender shall have failed to pay its applicable pro rata share of any Loan, then any amount to which such Lender would otherwise be entitled pursuant to this Section 3.6 shall instead be payable to the Agent until the share of such Loan not funded by such Lender has been repaid and any interest owed by such Lender as result of such failure to fund has been paid; and provided further, that in the event any amount paid to any Lender pursuant to this Section 3.6 is rescinded or must otherwise be returned by the Agent, each Lender shall, upon the written request of the Agent, repay to the Agent the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Agent until the date the Agent receives such repayment at a rate per annum equal to, during the period to but excluding the date two Business Days after such request, the Federal Funds Rate, and thereafter, the Base Rate plus one percent (1%) per annum. 26 (b) Letters of Credit. Each payment of unreimbursed drawings in respect of LOC Obligations shall be allocated to each Lender pro rata in accordance with its Commitment Percentage; provided that, if any Lender shall have failed to pay its applicable pro rata share of any drawing under any Letter of Credit, then any amount to which such Lender would otherwise be entitled pursuant to this subsection (b) shall instead be payable to the Issuing Lender; provided further, that in the event any amount paid to any Lender pursuant to this subsection (b) is rescinded or must otherwise be returned by the Issuing Lender, each Lender shall, upon the written request of the Issuing Lender, repay to the Agent for the account of the Issuing Lender the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Issuing Lender until the date the Issuing Lender receives such repayment at a rate per annum equal to, during the period to but excluding the date two Business Days after such request, the Federal Funds Rate, and thereafter, the Base Rate plus one percent (1%) per annum. 3.7 COMPUTATIONS OF INTEREST AND FEES. (a) Except for Base Rate Loans that are based upon the Prime Rate, on which interest shall be computed on the basis of a 365 or 366 day year as the case may be, all computations of interest and fees hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days. (b) It is the intent of the Lenders and the Borrowers to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between the Lenders and the Borrowers are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and interest owing pursuant to such documents shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document. If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the Borrowers or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans. The right to demand payment of the Loans or any other indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend 27 to charge or receive any unearned interest in the event of such demand. All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed the maximum nonusurious amount permitted by applicable law. 3.8 SHARING OF PAYMENTS. Each Lender agrees that, in the event that any Lender shall obtain payment in respect of any Loan, any unreimbursed drawing with respect to any LOC Obligations or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of set-off, banker's lien, counterclaim or otherwise (including, but not limited to, pursuant to the Bankruptcy Code) in excess of its pro rata share as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans, LOC Obligations and other obligations, in such amounts and with such other adjustments from time to time, as shall be equitable in order that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. Each Lender further agrees that if a payment to a Lender (which is obtained by such Lender through the exercise of a right of set-off, banker's lien, counterclaim or otherwise) shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit to each Lender whose payment shall have been rescinded or otherwise restored. The Borrowers agree that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including set-off, banker's lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation. Except as otherwise expressly provided in this Credit Agreement, if any Lender shall fail to remit to the Agent or any other Lender an amount payable by such Lender to the Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall accrue interest thereon, for each day from the date such amount is due until the day such amount is paid to the Agent or such other Lender, at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.8 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.8 to share in the benefits of any recovery on such secured claim. 3.9 EVIDENCE OF DEBT. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrowers from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its 28 account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Agent shall maintain the Register pursuant to Section 11.3(c), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from or for the account of the Borrowers and each Lender's share thereof. The Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the Register and subaccounts maintained pursuant to subsection (b) of this Section 3.9, and the entries made in the accounts maintained pursuant to subsection (a) of this Section 3.9, if consistent with the entries of the Agent, shall be prima facie evidence of the existence and amounts of the obligations of the Borrowers therein recorded; provided, however, that the failure of any Lender or the Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrowers to repay the Loans made by such Lender in accordance with the terms hereof. SECTION 4. ADDITIONAL PROVISIONS REGARDING LOANS 4.1 EURODOLLAR LOAN PROVISIONS. (a) Unavailability. If, on or prior to the first day of any Interest Period, (i) the Agent shall have determined in good faith (which determination shall be conclusive and binding upon the Borrowers) that (A) Dollar deposits are not generally available in the London interbank Eurodollar market in the applicable principal amounts and Interest Period of a requested Eurodollar Loan or (B) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (ii) the Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to the Lenders of making or maintaining Eurodollar Loans for such Interest Period (as conclusively certified by such Lenders), the Agent shall give notice thereof to the Borrowers and the Lenders as soon as practicable thereafter. Upon delivery of such notice, (A) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (B) any Loans that were to have been converted to or continued as Eurodollar Loans shall be prepaid by the Borrowers or converted to or continued as Base Rate Loans and (C) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until the 29 Agent has withdrawn such notice, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrowers have the right to convert Base Rate Loans to Eurodollar Loans. (b) Change in Legality. Notwithstanding any other provision herein, if any change, after the date hereof, in any law, governmental rule, regulation, guideline or order (including the introduction of any new law or governmental rule, regulation, guideline or order) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan then, by written notice to the Borrowers and to the Agent, such Lender may: (i) declare that Eurodollar Loans and conversions to or continuations of Eurodollar Loans, will not thereafter be made by such Lender hereunder, whereupon any request by the Borrowers for, or for conversion into or continuation of, Eurodollar Loans shall, as to such Lender only, be deemed a request for, or for conversion into or continuation of, Base Rate Loans, unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans in which event all such Eurodollar Loans shall be converted to Base Rate Loans either (A) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender can lawfully continue to maintain and fund such Eurodollar Loan or (B) immediately if such Lender shall determine that it may not lawfully continue to maintain and fund such Eurodollar Loan to such day. (c) Requirements of Law. If at any time a Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to the making, the commitment to make or the maintaining of any Eurodollar Loan because of (i) any change after the date hereof in any law, governmental rule, regulation, guideline or order (including the introduction of any new law or governmental rule, regulation, guideline or order) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, including, without limitation, the imposition, modification or deemed applicability of any reserves, deposits or similar requirements (such as, for example, but not limited to, a change in official reserve requirements) or (ii) other circumstances affecting the London interbank Eurodollar market; then the Borrowers shall pay to such Lender promptly upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender may determine in its sole discretion) as may be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder. If any Lender becomes entitled to claim any additional amounts pursuant to this Section 4.1(c), it shall provide prompt notice thereof to the Borrowers, through the Agent, certifying (A) that one of the events described in this Section 4.1(c) has occurred and describing in reasonable detail the nature of such event, (B) as to the increased cost or reduced amount resulting from 30 such event and (C) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Lender first notifies the Borrowers of its intention to demand compensation therefor under this Section. (d) Regulation D Compensation. In the event that a Lender is required to maintain reserves of the type contemplated by the definition of "Eurodollar Reserve Percentage", such Lender may require the Borrowers to pay, contemporaneously with each payment of interest on the Eurodollar Loans, additional interest on the related Eurodollar Loan of such Lender at a rate per annum determined by such Lender up to but not exceeding the excess of (i)(A) the applicable London Interbank Offered Rate divided by (B) one minus the Eurodollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrowers and the Agent, in which case such additional interest on the Eurodollar Loans of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least three Business Days after the giving of such notice and (y) shall notify the Borrowers at least three Business Days prior to each date on which interest is payable on the Eurodollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrowers may reasonably request. Each determination and calculation made by a Lender under this Section 4.1 shall, absent manifest error, be binding and conclusive on the parties hereto. Any conversions of Eurodollar Loans made pursuant to this Section 4.1 shall subject the Borrowers to the payments required by Section 4.3 to the extent applicable. This Section shall survive termination of this Credit Agreement and the other Credit Documents and payment of the Loans and all other amounts payable hereunder. 4.2 CAPITAL ADEQUACY. If any Lender has determined that the adoption or becoming effective, after the date hereof, of any applicable law, rule or regulation regarding capital adequacy, or any change therein (after the date hereof), or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or its parent corporation) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's (or parent corporation's) capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender (or its parent corporation) could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's (or parent corporation's) policies with respect to capital adequacy), then, upon notice from such Lender (which shall include the basis and calculations in reasonable detail supporting the compensation requested in such notice), and receipt by the Borrowers of such written notice from such Lender (with a copy to the Agent) the Borrowers shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender on an after tax 31 basis (after taking into account applicable deductions and credits in respect of the amount so indemnified) for such reduction provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Lender first notifies the Borrowers of its intention to demand compensation therefor under this Section. Each determination by any Lender of amounts owing under this Section 4.2 shall, absent manifest error, be conclusive and binding on the parties hereto. The covenants of this Section 4.2 shall survive termination of this Credit Agreement and the other Credit Documents and the payment of the Loans and all other amounts payable hereunder. 4.3 COMPENSATION. The Borrowers promise to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrowers in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrowers have given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrowers in making any prepayment of a Eurodollar Loan after the Borrowers have given a notice thereof in accordance with the provisions of this Credit Agreement, (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto and (d) the payment, continuation or conversion of a Eurodollar Loan on a day which is not the last day of the Interest Period applicable thereto or the failure to repay a Eurodollar Loan when required by the terms of this Credit Agreement. Such indemnification may include an amount equal to (i) an amount of interest calculated at the Eurodollar Rate which would have accrued on the amount in question, for the period from the date of such prepayment or of such failure to borrow, convert, continue or repay to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Loans provided for herein minus (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market. If any Lender becomes entitled to claim any additional amounts pursuant to this Section 4.3, it shall provide prompt notice thereof to the Borrower, through the Agent, as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. The covenants in this Section 4.3 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. 4.4 TAXES. (a) Except as provided below in this Section 4.4, all payments made by the Borrowers under this Credit Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any court, or governmental body, agency or other official, excluding taxes measured by or imposed upon the net income of any Lender or its applicable lending office, or any branch or 32 affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the capital or net worth of any Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to an Agent or any Lender hereunder or under any Notes, (A) the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes, provided, however, that the Borrowers shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this Section 4.4 whenever any Non-Excluded Taxes are payable by the Borrowers, and (B) as promptly as possible after requested, the Borrowers shall send to the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrowers showing payment thereof. If the Borrowers fail to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Agent the required receipts or other required documentary evidence, the Borrowers shall indemnify the Agent and any Lender for any incremental Non-Excluded Taxes, interest or penalties that may become payable by the Agent or any Lender as a result of any such failure. The agreements in this Section 4.4 shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) (A) on or before the date of any payment by the Borrowers under this Credit Agreement or the Notes to such Lender, deliver to the Borrowers and the Agent (x) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, or any successor applicable form, as the case may be, certifying that it is entitled to receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes and (y) an Internal Revenue Service Form W-8 or W-9, or successor 33 applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; (B) deliver to the Borrowers and the Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (C) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrowers or the Agent; or (ii) in the case of any such Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (A) represent to the Borrowers (for the benefit of the Borrowers and the Agent) that it is not a bank within the meaning of Section 881 (c)(3)(A) of the Internal Revenue Code, (B) agree to furnish to the Borrowers, on or before the date of any payment by the Borrowers, with a copy to the Agent, two accurate and complete original signed copies of Internal Revenue Service Form W-8, or successor applicable form, certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Internal Revenue Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrowers and the Agent two further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of time reasonably requested by the Borrowers or the Agent for filing and completing such forms), and (C) agree, to the extent legally entitled to do so, upon reasonable request by the Borrowers, to provide to the Borrowers (for the benefit of the Borrowers and the Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Credit Agreement and any Notes. Notwithstanding the above, if any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrowers and the Agent, then such Lender shall be exempt from such requirements. Each Person that shall become a Lender or a participant of a Lender pursuant to Section 11.3 shall, upon the effectiveness of the related transfer, be required to provide all of the forms, certifications and statements required pursuant to this subsection (b); provided that in the case of a participant of a Lender, the obligations of such participant of a Lender pursuant to this subsection (b) shall be determined as if the participant of a Lender were a Lender 34 except that such participant of a Lender shall furnish all such required forms, certifications and statements to the Lender from which the related participation shall have been purchased. 4.5 REPLACEMENT OF LENDERS. The Agent and each Lender shall use reasonable efforts to avoid or mitigate any increased cost or suspension of the availability of an interest rate under Sections 4.1 through 4.4 above to the greatest extent practicable (including transferring the Loans to another lending office or Affiliate of a Lender) unless, in the opinion of the Agent or such Lender, such efforts would be likely to have an adverse effect upon it. In the event a Lender makes a request to the Borrowers for additional payments in accordance with Section 4.1, 4.2 or 4.4, or suspends Eurodollar Loans under Section 4.1, then, provided that no Default or Event of Default has occurred and is continuing at such time, the Borrowers may, at their own expense (such expense to include any transfer fee payable to the Agent under Section 11.3(b) and any expense pursuant to Section 4) and in its sole discretion, require such Lender to transfer and assign in whole (but not in part), without recourse (in accordance with and subject to the terms and conditions of Section 11.3(b)), all of its interests, rights and obligations under this Credit Agreement to an Eligible Assignee which shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (a) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority and (b) the Borrowers or such assignee shall have paid to the assigning Lender in immediately available funds the principal of and interest accrued to the date of such payment on the portion of the Loans hereunder held by such assigning Lender and all other amounts owed to such assigning Lender hereunder, including amounts owed pursuant to Sections 4.1 through 4.4. SECTION 5. CONDITIONS PRECEDENT 5.1 CLOSING CONDITIONS. The obligation of the Lenders to enter into this Credit Agreement is subject to satisfaction (or waiver) of the following conditions: (a) Executed Credit Documents. Receipt by the Agent of duly executed copies of (i) this Credit Agreement, (ii) the Notes and (iii) all other Credit Documents, each in form and substance acceptable to the Lenders. 35 (b) Organizational Documents. (i) Receipt by the Agent of the following with respect to Duke Energy Field Services, LLC: (A) Certificate of Formation. A copy of the certificate of formation of such Borrower certified to be true and complete by the appropriate Governmental Authority of the State of Delaware and certified by an authorized officer of such Borrower to be true and correct as of the Effective Date. (B) LLC Agreement. A copy of the LLC Agreement of such Borrower certified by an authorized officer of such Borrower to be true and correct as of the Effective Date. (C) Resolutions. Copies of resolutions of the members of such Borrower approving and adopting the Credit Documents to which such Borrower is a party, the transactions contemplated therein and authorizing execution and delivery thereof and certified by an authorized officer of such Borrower to be in full force and effect as of the Effective Date. (D) Good Standing. Copies of certificates of good standing, existence or their equivalent with respect to such Borrower certified as of a recent date by the appropriate Governmental Authorities of the State of Delaware. (E) Incumbency. An incumbency certificate certified by an authorized officer to be true and correct as of the Effective Date. (ii) Receipt by the Agent of the following with respect to Duke Energy Field Services Corporation: (A) Charter Documents. Copies of the articles or certificates of incorporation or other charter documents of such Borrower certified to be true and complete as of a recent date by the appropriate Governmental Authority of the State of Delaware and certified by a secretary or assistant secretary of such Borrower to be true and correct as of the Effective Date. (B) Bylaws. A copy of the bylaws or other governing documents of such Borrower certified by a secretary or assistant secretary of such Borrower to be true and correct as of the Effective Date. (C) Resolutions. Copies of resolutions of the Board of Directors of such Borrower approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution 36 and delivery thereof, certified by a secretary or assistant secretary of such Borrower to be true and correct and in force and effect as of the Effective Date. (D) Good Standing. Copies of certificates of good standing, existence or its equivalent with respect to such Borrower certified as of a recent date by the appropriate Governmental Authorities of the State of Delaware. (E) Incumbency. An incumbency certificate of such Borrower certified by a secretary or assistant secretary to be true and correct as of the Effective Date. (c) Opinion of Counsel. Receipt by the Agent of an opinion from legal counsel to the Borrowers, addressed to the Agent on behalf of the Lenders and dated as of the Effective Date, in form and substance satisfactory to the Agent. (d) Financial Statements. Receipt by the Lenders of such financial information regarding the Borrowers as the Lenders may reasonably request. (e) Fees and Expenses. Payment by the Borrowers of all fees and expenses owed by it to the Lenders and the Agent, including, without limitation, payment to the Agent of the fees set forth in the Fee Letter. (f) Litigation. As of the Closing Date, there shall be no material actions, suits, investigations or legal, equitable, arbitration or administrative proceedings pending or threatened against a Borrower which are likely to be decided adversely to such Borrower and if so decided would have a Material Adverse Effect. (g) Material Adverse Effect. As of the Closing Date, no event or condition shall have occurred since September 30, 2001 that would have or would be reasonably expected to have a Material Adverse Effect. (h) Borrowers' Certificate. The Agent shall have received a certificate or certificates executed by an Approved Officer of the Borrowers, on behalf of the Borrowers, as of the Closing Date stating that (i) the Borrowers are in compliance with all existing financial obligations, unless such non-compliance would not have a Material Adverse Effect, (ii) no action, suit, investigation or proceeding is pending or, to such officer's knowledge, threatened in any court or before any arbitrator or governmental instrumentality that purports to affect a Borrower or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding is likely to be adversely determined and if adversely determined would have a Material Adverse Effect, (iii) the financial statements and information delivered to the Agent on or before the Closing Date were prepared in good faith and in accordance with GAAP, (iv) the amount of Off Balance Sheet Indebtedness of the Borrowers as of December 31, 2001, as set forth on a schedule attached thereto, is true 37 and correct and (v) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions contemplated herein and therein to occur on such date, (A) no Default or Event of Default exists, (B) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects on and as of the date made and (C) the Borrowers are in compliance with the financial covenant set forth in Section 7.10. (i) Existing Credit Facility. All loans and obligations under the Existing Credit Facility shall have been paid in full and all commitments thereunder shall have terminated. (j) Other. Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably requested by any Lender. 5.2 CONDITIONS TO LOANS. In addition to the conditions precedent stated elsewhere herein, the Lenders shall not be obligated to make new Loans nor shall the Issuing Lender be required to issue or extend a Letter of Credit (and the Lenders shall not be obligated to participate in any Letter of Credit) unless: (a) Request. The Borrowers shall have timely delivered (i) in the case of any new Loan, to the Agent, an appropriate Notice of Borrowing, duly executed and completed, by the time specified in Section 2.1 and (ii) in the case of any Letter of Credit, to the Issuing Lender, an appropriate request for issuance of a Letter of Credit in accordance with the provisions of Section 2.2. (b) Representations and Warranties. The representations and warranties made by the Borrowers in this Credit Agreement are true and correct in all material respects at and as if made as of the date of the funding of the Loans or the issuance of the Letters of Credit, as applicable (except to the extent such representations and warranties expressly and exclusively relate to an earlier date). (c) No Default. No Default or Event of Default shall exist or be continuing either prior to or after giving effect thereto. (d) Availability. Immediately after giving effect to the making of a Loan (and the application of the proceeds thereof) or to the issuance of a Letter of Credit, as the case may be, (i) the sum of the Loans outstanding plus LOC Obligations outstanding shall not exceed the Revolving Committed Amount and (ii) the sum of LOC Obligations outstanding shall not exceed the LOC Committed Amount. The delivery of each Notice of Borrowing and each request for a Letter of Credit shall constitute a representation and warranty by the Borrowers of the correctness of the matters specified in subsections (b), (c) and (d) above. 38 SECTION 6. REPRESENTATIONS AND WARRANTIES The Borrowers hereby represents and warrants to each Lender that: 6.1 ORGANIZATION AND GOOD STANDING. Each Borrower (a) is a limited liability company or a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware, (b) is duly qualified and in good standing as a foreign limited liability company or corporation authorized to do business in every jurisdiction where the failure to so qualify would have a Material Adverse Effect and (c) has the requisite power and authority to own its properties and to carry on its business as now conducted and as proposed to be conducted. 6.2 DUE AUTHORIZATION. Each Borrower (a) has the requisite power and authority to execute, deliver and perform this Credit Agreement and the other Credit Documents and to incur the obligations herein and therein provided for and (b) has been authorized by all necessary corporate, partnership or limited liability company action to execute, deliver and perform this Credit Agreement and the other Credit Documents. 6.3 NO CONFLICTS. Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated herein and therein, nor performance of and compliance with the terms and provisions hereof and thereof by each Borrower will (a) violate or conflict with any provision of its organizational documents or bylaws, (b) materially violate, contravene or conflict with any law (including without limitation, the Public Utility Holding Company Act of 1935, as amended), regulation (including without limitation, Regulation U or Regulation X), order, writ, judgment, injunction, decree or permit applicable to it, (c) materially violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound or (d) result in or require the creation of any Lien upon or with respect to its properties. 6.4 CONSENTS. No consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority or third party is required in connection with the execution, delivery or performance of this Credit Agreement or any of the other Credit Documents that has not been obtained. 39 6.5 ENFORCEABLE OBLIGATIONS. This Credit Agreement and the other Credit Documents have been duly executed and delivered and constitute legal, valid and binding obligations of the Borrowers enforceable against the Borrowers in accordance with their respective terms, except as may be limited by bankruptcy or insolvency laws or similar laws affecting creditors' rights generally or by general equitable principles. 6.6 FINANCIAL CONDITION. The financial statements delivered to the Lenders pursuant to Section 5.1(d) and pursuant to Section 7.1(a) and (b): (i) have been prepared in accordance with GAAP (subject to the provisions of Section 1.3) and (ii) present fairly the financial condition, results of operations and cash flows of the Borrowers as of such date and for such periods (subject, in the case of interim statements, to normal year-end adjustments and the absence of footnotes). 6.7 TAXES. Each Borrower and each of its Material Subsidiaries has filed, or caused to be filed, all material tax returns (federal, state, local and foreign) required to be filed and paid all amounts of taxes shown thereon to be due (including interest and penalties) and has paid all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except (a) for such taxes which are not yet delinquent or that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP or (b) where such nonfiling or nonpayment would not have a Material Adverse Effect. 6.8 COMPLIANCE WITH LAW. Each Borrower and each of its Material Subsidiaries is in compliance with all laws, rules, regulations, orders, decrees and requirements of Governmental Authorities applicable to it or to its properties (including, without limitation, ERISA, the Code and Environmental Laws), except (a) where the necessity of compliance therewith is being contested in good faith by appropriate proceedings or (b) such failure to comply would not have or would not be reasonably expected to have a Material Adverse Effect. 6.9 USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Loans hereunder will be used solely for the purposes specified in Section 7.7. None of such proceeds will be used for the purpose of (a) purchasing or carrying any "margin stock" as defined in Regulation U or Regulation X, (b) for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry "margin stock", (c) for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U or Regulation X or (d) for the acquisition of another Person unless the board of 40 directors (or other comparable governing body) or stockholders, as appropriate, of such Person has approved such acquisition. 6.10 GOVERNMENT REGULATION. Each Borrower is exempt from the provisions of the Public Utility Holding Company Act of 1935, as amended. Neither Borrower is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or controlled by such a company. 6.11 SOLVENCY. Each Borrower is and, after the consummation of the transactions contemplated by this Credit Agreement, will be Solvent. 6.12 ENVIRONMENTAL MATTERS. Except as would not result or be reasonably expected to result in a Material Adverse Effect: (a) each of the properties of the Borrowers (the "Properties") and all operations at the Properties are in compliance with all applicable Environmental Laws, (b) there is no violation of any Environmental Law with respect to the Properties or the businesses operated by the Borrowers (the "Businesses"), and (c) there are no conditions relating to the Businesses or Properties that would reasonably be expected to give rise to a liability under any applicable Environmental Laws. 6.13 SUBSIDIARIES. Set forth on Schedule 6.13 is a list of all Material Subsidiaries of the Borrowers. 6.14 LITIGATION. There are no actions, suits or legal, equitable, arbitration or administrative proceedings, pending or, to the knowledge either of the Borrowers, threatened against a Borrower which (a) are likely to be decided adversely against a Borrower and (b) if so decided would have or would reasonably be expected to have a Material Adverse Effect. SECTION 7. AFFIRMATIVE COVENANTS Each Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans and LOC Obligations, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments and Letters of Credit shall have terminated: 41 7.1 INFORMATION COVENANTS. The Borrowers will furnish, or cause to be furnished, to the Agent and each of the Lenders: (a) Annual Financial Statements. As soon as available, and in any event within 120 days after the close of each fiscal year of the Borrowers, a consolidated balance sheet of the Borrowers and their Subsidiaries as of the end of such fiscal year, together with a related consolidated income statement and related statements of cash flows, capitalization and retained earnings for such fiscal year, setting forth in comparative form figures for the preceding fiscal year, all such financial information described above to be audited by independent certified public accountants of recognized national standing and whose opinion, which shall be furnished to the Agent, shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur); provided that the Borrowers' Form 10-K Annual Report as filed with the Securities and Exchange Commission, without exhibits, will satisfy the requirements of this Section 7.1(a). (b) Quarterly Financial Statements. As soon as available, and in any event within 60 days after the close of each fiscal quarter of the Borrowers (other than the fourth fiscal quarter) a consolidated balance sheet of the Borrowers and their Subsidiaries as of the end of such fiscal quarter, together with a related consolidated income statement and related statement of cash flows for such fiscal quarter in each case setting forth in comparative form figures for the corresponding period of the preceding fiscal year, and accompanied by a certificate of an Approved Officer of the Borrowers to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Borrowers and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments to same; provided that the Borrowers' Form 10-Q Quarterly Report as filed with the Securities and Exchange Commission, without exhibits, will satisfy the requirements of this Section 7.1(b). (c) Officer's Certificate. At the time of delivery of the financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of an Approved Officer of the Borrowers, substantially in the Form of Exhibit 7.1(c), (i) demonstrating compliance with the financial covenant contained in Section 7.10 by calculation thereof as of the end of each such fiscal period, (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Borrowers propose to take with respect thereto, (iii) setting forth the amount of Off Balance Sheet Indebtedness of the Borrowers as of the end of each such fiscal period and (iv) updating Schedule 6.13 with respect to Material Subsidiaries, if appropriate. (d) Reports. Promptly upon transmission or receipt thereof, copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements, notices and reports as a Borrower shall send to its equityholders. 42 (e) Notices. Within five days after any officer of a Borrower with responsibility relating thereto obtaining knowledge thereof, the Borrowers will give written notice to the Agent immediately of (i) the occurrence of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrowers propose to take with respect thereto, and (ii) the occurrence of any of the following with respect to the Borrowers: (A) the pendency or commencement of any litigation, arbitral or governmental proceeding against a Borrower the claim of which is likely to be decided adversely to such Borrower and, if adversely determined, would have or would be reasonably expected to have a Material Adverse Effect or (B) the institution of any proceedings against a Borrower with respect to, or the receipt of notice by such Person of potential liability or responsibility for violation or alleged violation of, any federal, state or local law, rule or regulation (including, without limitation, any Environmental Law) that is likely to be decided adversely to a Borrower and, if adversely decided, would have a Material Adverse Effect. (f) ERISA. Upon a Borrower or any ERISA Affiliate obtaining knowledge thereof, the Borrowers will give written notice to the Agent promptly (and in any event within five Business Days) of: (i) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or would be reasonably expected to lead to, a Termination Event if such Termination Event would have a Material Adverse Effect; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against a Borrower or any ERISA Affiliate, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which a Borrower or any of its Subsidiaries or ERISA Affiliates is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that would have or would be reasonably expected to have a Material Adverse Effect; together, with a description of any such event or condition or a copy of any such notice and a statement by an officer of a Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken with respect thereto. Promptly upon request, each Borrower shall furnish the Agent and each of the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). (g) Debt Rating Changes. Upon any change in its Debt Rating, the Borrowers shall promptly deliver such information to the Agent. (h) Other Information. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of the Borrowers and their Subsidiaries as the Agent or the Required Lenders may reasonably request. 43 Information required to be delivered pursuant to this Sections 7.1(a), 7.1(b) and 7.1(d) shall be deemed to have been delivered on the date on which the Borrowers provide notice to the Lenders that such information has been posted on the Securities and Exchange Commission website on the Internet at www.sec.gov/edgar/searchedgar/webusers.htm or at another website identified in such notice and accessible by the Lenders without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 7.1(c) and (ii) the Borrowers shall deliver paper copies of the information referred to in Sections 7.1(a), 7.1(b) and 7.1(d), to any Lender that requests such delivery. 7.2 PRESERVATION OF EXISTENCE AND FRANCHISES. Each Borrower will, and will cause each Material Subsidiary to, do all things necessary to preserve and keep in full force and effect its existence and rights, franchises and authority; provided, however, that, subject to Section 8.3, a Borrower shall not be required to preserve any such existence, right or franchise if it in good faith determines that preservation thereof is no longer necessary or desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Lenders. 7.3 BOOKS AND RECORDS. Each Borrower will keep, and will cause its Material Subsidiaries to keep, complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 7.4 COMPLIANCE WITH LAW. Each Borrower will comply, and will cause each Material Subsidiary to comply, with all laws (including, without limitation, all Environmental Laws and ERISA laws), rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property, if (a) the failure to comply would have or would be reasonably expected to have a Material Adverse Effect or (b) the necessity of compliance therewith is being contested in good faith by appropriate proceedings. 7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS. Each Borrower will, and will cause each Material Subsidiary to, pay, settle or discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (c) all of its other Indebtedness as it shall become due; provided, however, that no Borrower shall be required to pay any such tax, assessment, charge, levy, claim or Indebtedness which (i) is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in accordance with GAAP or (ii) the nonpayment of which would not have a Material Adverse Effect. 44 7.6 MAINTENANCE OF PROPERTY; INSURANCE. (a) Each Borrower will keep, and will cause each Material Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) Each Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of such Borrower or in such Material Subsidiary's own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; provided that self-insurance by a Borrower or any such Material Subsidiary shall not be deemed a violation of this covenant to the extent that companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrowers or such Material Subsidiary operates self-insure. 7.7 USE OF PROCEEDS. The proceeds of the Loans may be used solely (a) to repay any amounts owing under the Existing Credit Facility, (b) to provide credit support for each Borrower's commercial paper and (c) for working capital and other general corporate purposes of each Borrower. The Borrowers will use the Letters of Credit solely for the purposes set forth in Section 2.2(a). 7.8 AUDITS/INSPECTIONS. Upon reasonable notice and during normal business hours, each Borrower will, and will cause its Material Subsidiaries to, permit representatives appointed by the Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect each Borrower's and its Material Subsidiaries' property, including its books and records, its accounts receivable and inventory, each Borrower's and its Material Subsidiaries' facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representatives obtain and shall permit the Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of each Borrower and its Material Subsidiaries. 7.9 MAINTENANCE OF OWNERSHIP. Each Borrower will maintain ownership of all Capital Stock of each Material Subsidiary, directly or indirectly, free and clear of all Liens except as permitted by Section 8.3. The Borrowers will take such action as necessary to ensure that, on and after the date of the Merger, Duke Energy Field Services, LLC will be (and will remain) a wholly owned Subsidiary, direct or indirect, of 45 Duke Energy Field Services Corporation unless Duke Energy Field Services, LLC is merged with and into Duke Energy Field Services Corporation. 7.10 DEBT TO CAPITALIZATION RATIO. The Debt to Capitalization Ratio shall, at all times, be less than or equal to the following: (a) From the Effective Date until but not including the earlier of (i) the date on which the Merger is consummated and (ii) the date on which a Corporate Conversion occurs, .53 to 1.0; and (b) From the earlier of (i) the date on which the Merger is consummated and (ii) the date on which a Corporate Conversion occurs and thereafter, .57 to 1.0. SECTION 8. NEGATIVE COVENANTS Each Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans and LOC Obligations, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments and Letters of Credit shall have terminated: 8.1 NATURE OF BUSINESS. The Borrowers will not, and will not permit any of their Material Subsidiaries to, materially alter the character of their business on a consolidated basis from that conducted as of the Closing Date. 8.2. LIENS. A Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it or any of its Material Subsidiaries, except for the following: (a) Liens granted by such Borrower or any Material Subsidiary existing on the date of this Credit Agreement securing Indebtedness outstanding on the date of this Credit Agreement as set forth on Schedule 8.2. (b) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into a Borrower or any Material Subsidiary and not created in contemplation of such event. (c) any Lien existing on any asset prior to the acquisition thereof by a Borrower or any Material Subsidiary and not created in contemplation of such acquisition. 46 (d) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset; provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof. (e) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section 8.2; provided that such Indebtedness is not increased and is not secured by any additional assets. (f) Liens for taxes, assessments or other governmental charges or levies not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP. (g) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and interest owners of oil and gas production and other Liens imposed by law, created in the ordinary course of business and for amounts not past due for more than 60 days or which are being contested in good faith by appropriate proceedings which are sufficient to prevent imminent foreclosure of such Liens, are promptly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP. (h) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts. (i) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and other restrictions, charges or encumbrances (whether or not recorded) affecting the use of real property. (j) Liens with respect to judgments and attachments which do not result in an Event of Default. (k) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other obligations arising in the ordinary course of business. (l) rights of first refusal entered into in the ordinary course of business. 47 (m) Liens consisting of any (i) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of a Borrower or any Material Subsidiary or to use such property in any manner which does not materially impair the use of such property for the purpose for which it is held by a Borrower or any such Material Subsidiary, (ii) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any Governmental Authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, or (iii) zoning laws, ordinances or municipal regulations. (n) liens on deposits required by any Person with whom a Borrower or any Material Subsidiary enters into forward contracts, futures contracts, swap agreements or other commodities contracts in the ordinary course of business. (o) liens on assets in connection with asset securitizations entered into by a Borrower or one of its Subsidiaries as long as such liens do not secure indebtedness exceeding $400,000,000, in the aggregate, at any one time. (p) other Liens, including Liens imposed by Environmental Laws, arising in the ordinary course of its business which (i) do not secure Indebtedness, (ii) do not secure any obligation in an amount exceeding $100,000,000 at any time, (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business or (iv) in addition to those Liens described in clause (ii) above, secure reimbursement obligations under letters of credit not exceeding $100,000,000 outstanding at any one time other than Letters of Credit. 8.3 CONSOLIDATION AND MERGER. A Borrower will not, and will not permit any of its Material Subsidiaries to, (a) enter into any transaction of merger or (b) consolidate, liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that: (i) a Person (including a Subsidiary of a Borrower) may be merged or consolidated with or into a Borrower so long as (A) such Borrower shall be the continuing or surviving entity, (B) no Default or Event of Default shall exist or be caused thereby and (C) such Borrower is not downgraded by S&P or Moody's as a result of such transaction to a rating below BBB- or Baa3, as applicable, (ii) a Material Subsidiary may merge with or into another Subsidiary of a Borrower and (iii) a Corporate Conversion can occur as long as the Agent receives, on behalf of the Lenders, such documents, instruments, resolutions and opinions as the Agent may reasonably require to ensure that (A) each Borrower remains liable for the Borrowers Obligations in accordance with the terms hereof and (B) all of the rights and remedies of the Lenders under the Credit Documents remain in full force and effect. 48 8.4 SALE OR LEASE OF ASSETS. During the term of this Credit Agreement, a Borrower will not, directly or indirectly, convey, sell, lease, transfer or otherwise dispose of assets, business or operations with an aggregate book value in excess of twenty-five percent (25%) of its consolidated total assets, as determined in accordance with GAAP, as calculated as of the end of the most recent fiscal quarter. 8.5. TRANSACTIONS WITH AFFILIATES. A Borrower will not, and will not permit any Material Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any investment in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect, any transaction with, any officer, director, employee or Affiliate (other than a wholly-owned Subsidiary) unless any and all such transactions between such Borrower and its Material Subsidiaries on the one hand and any officer, director, employee or Affiliate (other than a wholly-owned Subsidiary) on the other hand, shall be on an arms-length basis and on terms no less favorable to such Borrower or such Material Subsidiary than could have been obtained from a third party who was not an officer, director, employee or Affiliate (other than a wholly-owned Subsidiary); provided that the foregoing provisions of this Section shall not (a) prohibit a Borrower and each Material Subsidiary from declaring or paying any lawful dividend, (b) prohibit a Borrower or a Material Subsidiary from providing credit support for its Subsidiaries as it deems appropriate in the ordinary course of business, (c) prohibit a Borrower or a Material Subsidiary from engaging in a transaction or transactions that are not on an arms-length basis or are not on terms as favorable as could have been obtained from a third party, provided that such transaction or transactions occurs within a related series of transactions, which, in the aggregate, are on an arms-length basis and are on terms as favorable as could have been obtained from a third party or (d) prohibit a Borrower or a Material Subsidiary from engaging in non-material transactions with any Subsidiary that are not on an arms-length basis or are not on terms as favorable as could have been obtained from a third party but are in the ordinary course of such Borrower's or Material Subsidiary's business, so long as, in each case, after giving effect thereto, no Default or Event of Default shall have occurred and be continuing. 8.6 INDEBTEDNESS. The Borrowers will not permit the amount of Indebtedness of the Subsidiaries of the Borrowers (excluding Duke Energy Field Services LLC, if applicable) to exceed ten percent (10%) of all Indebtedness of the Borrowers and their Subsidiaries on a consolidated basis. 49 SECTION 9. EVENTS OF DEFAULT 9.1 EVENTS OF DEFAULT. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Payment. A Borrower shall: (i) default in the payment when due of any principal amount of any of the Loans or of any reimbursement obligation arising from drawings under any Letters of Credit; or (ii) default, and such default shall continue for five or more Business Days, in the payment when due of any interest on the Loans or of any fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith. (b) Representations. Any representation, warranty or statement made or deemed to be made by a Borrower herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to have been untrue in any material respect on the date as of which it was deemed to have been made. (c) Covenants. A Borrower shall: (i) default in the due performance or observance of any term, covenant or agreement contained in Section 7.1(e), 7.8, 7.10, 8.1, 8.2, 8.3, 8.4, 8.5 and 8.6. (ii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), or (c)(i) of this Section 9.1) contained in this Credit Agreement or any other Credit Document and such default shall continue unremedied for a period of at least 30 days after the earlier of (A) a Responsible Officer of either Borrower becoming aware of such default or (B) notice of such default is given by the Agent or a Lender to either Borrower. (d) Credit Documents. Any Credit Document shall fail to be in full force and effect or a Borrower shall so assert or any Credit Document shall fail to give the Agent and/or the Lenders the rights, powers and privileges purported to be created thereby. (e) Bankruptcy, etc. The occurrence of any of the following with respect to a Borrower or a Material Subsidiary (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of a Borrower or a Material Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of a Borrower or a Material Subsidiary or for any 50 substantial part of its property or ordering the winding up or liquidation of its affairs; or (ii) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against a Borrower or a Material Subsidiary and such petition remains unstayed and in effect for a period of 90 consecutive days; or (iii) a Borrower or a Material Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) a Borrower or a Material Subsidiary shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by such Person in furtherance of any of the aforesaid purposes. (f) Defaults under Other Agreements. With respect to any Indebtedness, including any Off Balance Sheet Indebtedness, in excess of $100,000,000 (other than Indebtedness outstanding under this Credit Agreement) of a Borrower or any Material Subsidiary, such Borrower or such Material Subsidiary shall (A) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness or fail to timely pay such Indebtedness when due, or (B) default (after giving effect to any applicable grace period) in the observance or performance of any covenant or agreement relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition in this clause (B) is to cause any such Indebtedness to become due prior to its stated maturity. (g) Judgments. One or more judgments, orders, or decrees shall be entered against a Borrower or a Material Subsidiary involving a liability of $50,000,000 or more, in the aggregate, (to the extent not paid or covered by insurance provided by a carrier who has acknowledged coverage) and such judgments, orders or decrees shall continue unsatisfied, undischarged and unstayed for a period ending on the first to occur of (i) the last day on which such judgment, order or decree becomes final and unappealable and, where applicable, with the status of a judicial lien or (ii) 45 days. (h) ERISA. The occurrence of: (i) any of the following events or conditions which could result in a liability of a Borrower or an ERISA Affiliate of $25,000,000 or more in the aggregate: (A) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of a Borrower or any ERISA Affiliate in favor of the PBGC or a Plan; or (B) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which would be reasonably expected to subject a Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under 51 any agreement or other instrument pursuant to which a Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability. (ii) any of the following events or conditions which could result in a liability of a Borrower or an ERISA Affiliate of $50,000,000 or more in the aggregate: (A) a Termination Event shall occur with respect to a Single Employer Plan which is, in the reasonable opinion of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; or (B) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan which is, in the reasonable opinion of the Agent, likely to result in (x) the termination of such Plan for purposes of Title IV of ERISA, or (y) a Borrower or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of such Plan. (i) Change of Control. The occurrence of any Change of Control. 9.2 ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the Required Lenders (or the Lenders as may be required hereunder), the Agent may, with the consent of the Required Lenders, and shall, upon the request and direction of the Required Lenders, by written notice to the Borrowers take any of the following actions without prejudice to the rights of the Agent or any Lender to enforce its claims against the Borrowers, except as otherwise specifically provided for herein: (i) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (ii) Acceleration of Loans and Letters of Credit. Declare the unpaid principal of and any accrued interest in respect of all Loans, any reimbursement obligations arising from drawings under Letters of Credit and any and all other indebtedness or obligations of any and every kind owing by a Borrower to any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers. (iii) Cash Collateral. Direct the Borrowers to pay (and the Borrowers agree that upon receipt of such notice, or upon the occurrence of an Event of Default under Section 9.1(e), it will immediately pay) to the Issuing Lender additional cash, to be held by the Issuing Lender, for the benefit of the Lenders, in a cash collateral account as security for the LOC Obligations in respect of subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. 52 (iv) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents, including, without limitation, all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(e) shall occur, then the Commitments shall automatically terminate and all Loans, all reimbursement obligations under Letters of Credit, all accrued interest in respect thereof, all accrued and unpaid fees and other indebtedness or obligations owing to the Lenders and the Agent hereunder shall immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders. Notwithstanding the fact that enforcement powers reside primarily with the Agent, each Lender has, to the extent permitted by law, a separate right of payment and shall be considered a separate "creditor" holding a separate "claim" within the meaning of Section 101(5) of the Bankruptcy Code or any other insolvency statute. 9.3 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT. Notwithstanding any other provision of this Credit Agreement, after the occurrence of an Event of Default, all amounts collected or received by the Agent or any Lender on account of amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Agent and the Lenders in connection with enforcing the rights of the Lenders under the Credit Documents, pro rata as set forth below; SECOND, to payment of any fees owed to the Agent, or any Lender, pro rata as set forth below; THIRD, to the payment of all accrued interest payable to the Lenders hereunder, pro rata as set forth below; FOURTH, to the payment of the outstanding principal amount of the Loans and to the payment or cash collateralization of the outstanding LOC Obligations, pro rata, as set forth below; FIFTH, to all other obligations which shall have become due and payable under the Credit Documents and not repaid pursuant to clauses "FIRST" through "FOURTH" above; and SIXTH, to the payment of the surplus, if any, to whomever may be lawfully entitled to receive such surplus. 53 In carrying out the foregoing, (a) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (b) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans and LOC Obligations held by such Lender bears to the aggregate then outstanding Loans and LOC Obligations), of amounts available to be applied; and (c) to the extent that any amounts available for distribution pursuant to clause "FOURTH" above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (i) first, to reimburse the Issuing Lender from time to time for any drawings under such Letters of Credit and (ii) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses "FOURTH", "FIFTH" and "SIXTH" above in the manner provided in this Section 9.3. SECTION 10. AGENCY PROVISIONS 10.1 APPOINTMENT. Each Lender hereby designates and appoints Bank of America, N.A. as agent of such Lender to act as specified herein and the other Credit Documents, and each such Lender hereby authorizes the Agent, as the agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Agent. The provisions of this Section are solely for the benefit of the Agent and the Lenders and the Borrowers shall not have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Credit Agreement and the other Credit Documents, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for a Borrower. All institutions acting as a Co-Syndication Agent or Co-Documentation Agent hereunder shall have no obligations in such capacity under the Credit Documents. 10.2 DELEGATION OF DUTIES. The Agent may execute any of its duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible to the Lenders for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 54 10.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by a Borrower contained herein or in any of the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of a Borrower to perform its obligations hereunder or thereunder. The Agent shall not be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Credit Agreement, or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by a Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of a Borrower to the Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of a Borrower. The Agent is not a trustee for the Lenders and owes no fiduciary duty to the Lenders. 10.4 RELIANCE ON COMMUNICATIONS. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrowers, independent accountants and other experts selected by the Agent with reasonable care). The Agent may deem and treat the Lenders as the owner of its interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent in accordance with Section 11.3(b). The Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns). 55 10.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or the Borrowers referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders. 10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent or any Affiliate thereof hereinafter taken, including any review of the affairs of the Borrowers, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrowers and made its own decision to make its Extensions of Credit hereunder and enter into this Credit Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrowers. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrowers which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 10.7 INDEMNIFICATION. Each Lender agrees to indemnify the Agent in its capacity as such (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so), ratably according to its Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment in full of the Borrowers Obligations) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or 56 disbursements resulting from the gross negligence or willful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 10.7 shall survive the payment of the Borrowers Obligations and all other amounts payable hereunder and under the other Credit Documents and the termination of the Commitments. 10.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrowers as though the Agent were not Agent hereunder. With respect to the Loans made, Letters of Credit issued and all Borrowers Obligations owing to it, the Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 10.9 SUCCESSOR AGENT. The Agent may, at any time, resign upon 30 days written notice to the Lenders and the Borrowers. Upon any such resignation, the Borrowers with the consent of the Required Lenders (such consent of the Required Lenders not to be unreasonably withheld or delayed) shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed and shall have accepted such appointment within 30 days after the notice of resignation, then the retiring Agent shall select a successor Agent provided such successor is a Lender hereunder or qualifies as an Eligible Assignee (or if no Eligible Assignee shall have been so appointed by the retiring Agent and shall have accepted such appointment, then the Lenders shall perform all obligations of the retiring Agent hereunder until such time, if any, as a successor Agent shall have been appointed and shall have accepted such appointment as provided for above). Upon the acceptance of any appointment as Agent hereunder by a successor, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations as Agent, as appropriate, under this Credit Agreement and the other Credit Documents and the provisions of this Section 10.9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Credit Agreement. SECTION 11. MISCELLANEOUS 11.1 NOTICES. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when transmitted via telecopy (or other facsimile device), (c) the Business Day following the day on which the same has been 57 delivered prepaid (or pursuant to an invoice arrangement) to a reputable national overnight air courier service, or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address or telecopy numbers set forth on Schedule 11.1, or at such other address as such party may specify by written notice to the other parties hereto. 11.2 RIGHT OF SET-OFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default and the commencement of remedies described in Section 9.2, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of a Borrower against obligations and liabilities of such Borrower to the Lenders hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether the Agent or the Lenders shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto. 11.3 BENEFIT OF AGREEMENT. (a) Generally. This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that, except as set forth in Section 2.10, a Borrower may not assign and transfer any of its interests without the prior written consent of the Lenders; and provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth below in this Section 11.3. (b) Assignments. Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Commitment); provided, however, that: (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Credit Agreement, any such partial assignment shall be in an amount at least equal to $10,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) and an integral multiple of $1,000,000 in excess thereof; and 58 (iii) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment Agreement in substantially the form of Exhibit 11.3(b), together with a processing fee from the assignor of $3,500. Upon execution, delivery, and acceptance of such Assignment Agreement, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights (except those rights hereunder which by their terms expressly survive) and be released from its obligations under this Credit Agreement. Upon the consummation of any assignment pursuant to this Section 11.3(b), the assignor, the Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrowers and the Agent certification as to exemption from deduction or withholding of taxes in accordance with Section 4.4. By executing and delivering an assignment agreement in accordance with this Section 11.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (A) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim created by such assigning Lender and the assignee warrants that it is an Eligible Assignee; (B) except as set forth in clause (A) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrowers or the performance or observance by the Borrowers of any of their obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (C) such assigning Lender and such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (D) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (E) such assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (F) such assignee appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (G) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this 59 Credit Agreement and the other Credit Documents are required to be performed by it as a Lender. (c) Register. The Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Acceptance. Upon its receipt of an Assignment Agreement executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment Agreement has been completed and is in substantially the form of Exhibit 11.3(b) hereto, (i) accept such Assignment Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (e) Participations. Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Credit Agreement (including all or a portion of its Commitment, its Notes and its Loans); provided, however, that (i) such Lender's obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Sections 4.1 through 4.4, inclusive, but shall not be entitled to receive any amount greater than such Lender would have been able to receive, and (iv) the Borrowers shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrowers relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Credit Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Commitment). (f) Nonrestricted Assignments. Notwithstanding any other provision set forth in this Credit Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. 60 (g) Information. Any Lender may furnish any information concerning the Borrowers in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants). 11.4 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrowers and the Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or demand. 11.5 PAYMENT OF EXPENSES, ETC. The Borrowers agree to: (i) pay all reasonable out-of-pocket costs and expenses of the Agent and Banc of America Securities LLC ("BAS") in connection with (A) the negotiation, preparation, execution and delivery, syndication and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to the Agent) and (B) any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrowers under this Credit Agreement, (ii) pay all reasonable out-of-pocket costs and expenses of the Agent and each Lender in connection with (A) enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Agent and each of the Lenders (including the allocated cost of internal counsel)) and (B) any bankruptcy or insolvency proceeding of a Borrower and (iii) indemnify the Agent, BAS and each Lender, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not the Agent, BAS or any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel and settlement costs incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of negligence or willful misconduct on the part of the Person to be indemnified). 61 11.6 AMENDMENTS, WAIVERS AND CONSENTS. Neither this Credit Agreement, nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Required Lenders and the Borrowers; provided that no such amendment, change, waiver, discharge or termination shall without the consent of each Lender affected thereby: (a) extend the Maturity Date or the Term Out Maturity Date, or postpone or extend the time for any payment or prepayment of principal (except pursuant to Section 3.3(b)) or the time of payment of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit; (b) reduce the rate or extend the time of payment of interest thereon or fees or other amounts payable hereunder; (c) reduce or waive the principal amount of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit; (d) increase or extend the Commitment of a Lender (it being understood and agreed that a waiver of any Default or Event of Default or a waiver of any mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender); (e) except as permitted by Section 2.10, consent to the assignment or transfer by a Borrower of any of its rights and obligations under (or in respect of) the Credit Documents or release a Borrower from its obligations under the Credit Documents; (f) amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.8, 5.2, 9.1(a), 11.2, 11.3 or 11.5; or (g) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders. No provision of Section 10 may be amended or modified without the consent of the Agent. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any reorganization plan that affects the Loans or the Letters of Credit, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersede the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow the Borrowers to use cash collateral in the context of a bankruptcy or insolvency proceeding. 62 11.7 COUNTERPARTS/TELECOPY. This Credit Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of executed counterparts by telecopy shall be as effective as an original and shall constitute a representation that an original will be delivered. 11.8 HEADINGS. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 DEFAULTING LENDER. Each Lender understands and agrees that if such Lender is a Defaulting Lender then it shall not be entitled to vote on any matter requiring the consent of the Required Lenders or to object to any matter requiring the consent of all the Lenders; provided, however, that (a) a Lender's Commitment may not be increased without its consent whether or not it is a Defaulting Lender and (b) all other benefits and obligations under the Loan Documents shall apply to such Defaulting Lender. 11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES. All indemnities set forth herein and all representations and warranties made herein shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the issuance of the Letters of Credit and the repayment of the Loans, LOC Obligations and other obligations and the termination of the Commitments hereunder. 11.11 GOVERNING LAW; VENUE. (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of New York, or of the United States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, each Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Each Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address for notices pursuant to Section 11.1, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of a Lender to serve process in any other manner permitted by law or to 63 commence legal proceedings or to otherwise proceed against a Borrower in any other jurisdiction. (b) Each Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 11.12 WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES. EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. Each Borrower agrees not to assert any claim against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys or agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any of the transactions contemplated hereby or by the other Credit Documents. 11.13 SEVERABILITY. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.14 FURTHER ASSURANCES. Each Borrower agrees, upon the request of the Agent, to promptly take such actions, as reasonably requested, as are necessary to carry out the intent of this Credit Agreement and the other Credit Documents. 11.15 ENTIRETY. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 64 11.16 BINDING EFFECT; CONTINUING AGREEMENT. (a) This Credit Agreement shall become effective at such time when all of the conditions set forth in Section 5.1 have been satisfied or waived by the Lenders and it shall have been executed by the Borrowers, the Agent and the Lenders, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrowers, the Agent and each Lender and their respective successors and permitted assigns. (b) This Credit Agreement shall be a continuing agreement and shall remain in full force and effect until all Loans, LOC Obligations, interest, fees and other Borrowers Obligations have been paid in full and all Commitments and Letters of Credit have been terminated. Upon such termination, the Borrowers shall have no further obligations (other than those provisions that expressly survive the termination thereof) under the Credit Documents; provided that should any payment, in whole or in part, of the Borrowers Obligations be rescinded or otherwise required to be restored or returned by the Agent or any Lender, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, then the Credit Documents shall automatically be reinstated and all amounts required to be restored or returned and all costs and expenses incurred by the Agent or any Lender in connection therewith shall be deemed included as part of the Borrowers Obligations. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 65 Signature Page to Duke Energy Field Services 364-Day Credit Agreement Each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. BORROWERS: DUKE ENERGY FIELD SERVICES, LLC - --------- a Delaware limited liability company By: /s/ Rose M. Robeson ---------------------------------------------- Name: Rose M. Robeson -------------------------------------------- Title: Vice President and ------------------------------------------- Chief Financial Officer ------------------------------------------- DUKE ENERGY FIELD SERVICES CORPORATION, a Delaware corporation By: /s/ Thomas E. Long ---------------------------------------------- Name: Thomas E. Long -------------------------------------------- Title: Vice President and Treasurer ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement LENDERS: BANK OF AMERICA, N.A., individually in its - ------- capacity as a Lender and in its capacity as Agent By: /s/ Gretchen P. Burud ---------------------------------------------- Name: Gretchen P. Burud -------------------------------------------- Title: Managing Director ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement JPMORGAN CHASE BANK By: /s/ Steven Wood ---------------------------------------------- Name: Steven Wood -------------------------------------------- Title: Vice President ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement SUNTRUST BANK By: /s/ Linda L. Stanley ---------------------------------------------- Name: Linda L. Stanley -------------------------------------------- Title: Director ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement THE BANK OF NOVA SCOTIA By: /s/ N. Bell ---------------------------------------------- Name: N. Bell -------------------------------------------- Title: Senior Manager ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement THE ROYAL BANK OF SCOTLAND PLC By: /s/ Keith Johnson ---------------------------------------------- Name: Keith Johnson -------------------------------------------- Title: Senior Vice President ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Nicholas R. Battista ---------------------------------------------- Name: Nicholas R. Battista -------------------------------------------- Title: VP and Manager ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ Harry P. Yergey ---------------------------------------------- Name: Harry P. Yergey -------------------------------------------- Title: SVP & Manager ------------------------------------------- By: /s/ Subash R. Viswanathan ---------------------------------------------- Name: Subash R. Viswanathan -------------------------------------------- Title: Senior Vice President ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement FIRST UNION NATIONAL BANK By: /s/ D. Mitch Wilson ---------------------------------------------- Name: D. Mitch Wilson -------------------------------------------- Title: Vice President ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement BANK ONE, N.A. (MAIN OFFICE - CHICAGO) By: /s/ Madeleine N. Pember ---------------------------------------------- Name: Madeleine N. Pember -------------------------------------------- Title: Director ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement U.S. BANK NATIONAL ASSOCIATION By: /s/ Matthew J. Purchase ---------------------------------------------- Name: Matthew J. Purchase -------------------------------------------- Title: Assistant Vice President ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement WELLS FARGO BANK, N.A. By: /s/ Todd Stornetta ---------------------------------------------- Name: Todd Stornetta -------------------------------------------- Title: Vice President ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement UBS AG, STAMFORD BRANCH By: /s/ Patricia O'Kicki ---------------------------------------------- Name: Patricia O'Kicki -------------------------------------------- Title: Director ------------------------------------------- By: /s/ Wilfred V. Saint ---------------------------------------------- Name: Wilfred V. Saint -------------------------------------------- Title: Associate Director ------------------------------------------- Signature Page to Duke Energy Field Services 364-Day Credit Agreement CREDIT SUISSE FIRST BOSTON By: /s/ Paul L. Colon ---------------------------------------------- Name: Paul L. Colon -------------------------------------------- Title: Vice President ------------------------------------------- By: /s/ Vanessa Gomez ---------------------------------------------- Name: Vanessa Gomez -------------------------------------------- Title: Associate ------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1


                            364-DAY CREDIT AGREEMENT

                                      among

                         DUKE ENERGY FIELD SERVICES, LLC
                                       and
                     DUKE ENERGY FIELD SERVICES CORPORATION
                                  as Borrowers,

                          THE LENDERS IDENTIFIED HEREIN

                                       AND


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

                             JPMORGAN CHASE BANK and
                                 SUNTRUST BANK,
                            As Co-Syndication Agents

                                       AND

                           THE BANK OF NOVA SCOTIA and
                         THE ROYAL BANK OF SCOTLAND PLC,
                           As Co-Documentation Agents


                           DATED AS OF MARCH 29, 2002


                                  Arranged by:

                         BANC OF AMERICA SECURITIES LLC,
                   as Sole Lead Arranger and Sole Book Manager






                                TABLE OF CONTENTS


                                                                                                              
SECTION 1.  DEFINITIONS AND ACCOUNTING TERMS......................................................................1
         1.1      Definitions.....................................................................................1
         1.2      Computation of Time Periods....................................................................13
         1.3      Accounting Terms...............................................................................13
         1.4      Time...........................................................................................13

SECTION 2.  LOANS................................................................................................13
         2.1      Revolving Committed Amount.....................................................................13
         2.2      Letter of Credit Subfacility...................................................................14
         2.3      Method of Borrowing for Loans..................................................................19
         2.4      Funding of Loans...............................................................................19
         2.5      Continuations and Conversions..................................................................20
         2.6      Minimum Amounts................................................................................20
         2.7      Reductions of Revolving Committed Amounts......................................................21
         2.8      Notes..........................................................................................21
         2.9      Joint and Several Liability of the Borrowers...................................................21
         2.10     Limitation of Liability of Borrowers...........................................................22

SECTION 3.  PAYMENTS.............................................................................................23
         3.1      Interest.......................................................................................23
         3.2      Prepayments....................................................................................24
         3.3      Payment in full at Maturity....................................................................24
         3.4      Fees...........................................................................................25
         3.5      Place and Manner of Payments...................................................................26
         3.6      Pro Rata Treatment.............................................................................26
         3.7      Computations of Interest and Fees..............................................................27
         3.8      Sharing of Payments............................................................................28
         3.9      Evidence of Debt...............................................................................28

SECTION 4.  ADDITIONAL PROVISIONS REGARDING LOANS................................................................29
         4.1      Eurodollar Loan Provisions.....................................................................29
         4.2      Capital Adequacy...............................................................................31
         4.3      Compensation...................................................................................32
         4.4      Taxes..........................................................................................32
         4.5      Replacement of Lenders.........................................................................35

SECTION 5.  CONDITIONS PRECEDENT.................................................................................35
         5.1      Closing Conditions.............................................................................35
         5.2      Conditions to Loans............................................................................38

SECTION 6.  REPRESENTATIONS AND WARRANTIES.......................................................................39
         6.1      Organization and Good Standing.................................................................39
         6.2      Due Authorization..............................................................................39
         6.3      No Conflicts...................................................................................39
         6.4      Consents.......................................................................................39





                                        i


                                                                                                              
         6.5      Enforceable Obligations........................................................................40
         6.6      Financial Condition............................................................................40
         6.7      Taxes..........................................................................................40
         6.8      Compliance with Law............................................................................40
         6.9      Use of Proceeds; Margin Stock..................................................................40
         6.10     Government Regulation..........................................................................41
         6.11     Solvency.......................................................................................41
         6.12     Environmental Matters..........................................................................41
         6.13     Subsidiaries...................................................................................41
         6.14     Litigation.....................................................................................41

SECTION 7.  AFFIRMATIVE COVENANTS................................................................................41
         7.1      Information Covenants..........................................................................42
         7.2      Preservation of Existence and Franchises.......................................................44
         7.3      Books and Records..............................................................................44
         7.4      Compliance with Law............................................................................44
         7.5      Payment of Taxes and Other Indebtedness........................................................44
         7.6      Maintenance of Property; Insurance.............................................................45
         7.7      Use of Proceeds................................................................................45
         7.8      Audits/Inspections.............................................................................45
         7.9      Maintenance of Ownership.......................................................................45
         7.10     Debt to Capitalization Ratio...................................................................46

SECTION 8.  NEGATIVE COVENANTS...................................................................................46
         8.1      Nature of Business.............................................................................46
         8.2.     Liens..........................................................................................46
         8.3      Consolidation and Merger.......................................................................48
         8.4      Sale or Lease of Assets........................................................................49
         8.5.     Transactions with Affiliates...................................................................49
         8.6      Indebtedness...................................................................................49

SECTION 9.  EVENTS OF DEFAULT....................................................................................50
         9.1      Events of Default..............................................................................50
         9.2      Acceleration; Remedies.........................................................................52
         9.3      Allocation of Payments After Event of Default..................................................53

SECTION 10.  AGENCY PROVISIONS...................................................................................54
         10.1     Appointment....................................................................................54
         10.2     Delegation of Duties...........................................................................54
         10.3     Exculpatory Provisions.........................................................................55
         10.4     Reliance on Communications.....................................................................55
         10.5     Notice of Default..............................................................................56
         10.6     Non-Reliance on Agent and Other Lenders........................................................56
         10.7     Indemnification................................................................................56
         10.8     Agent in Its Individual Capacity...............................................................57
         10.9     Successor Agent................................................................................57





                                       ii



                                                                                                              
SECTION 11.  MISCELLANEOUS.......................................................................................57
         11.1     Notices........................................................................................57
         11.2     Right of Set-Off...............................................................................58
         11.3     Benefit of Agreement...........................................................................58
         11.4     No Waiver; Remedies Cumulative.................................................................61
         11.5     Payment of Expenses, etc.......................................................................61
         11.6     Amendments, Waivers and Consents...............................................................62
         11.7     Counterparts/Telecopy..........................................................................63
         11.8     Headings.......................................................................................63
         11.9     Defaulting Lender..............................................................................63
         11.10    Survival of Indemnification and Representations and Warranties.................................63
         11.11    Governing Law; Venue...........................................................................63
         11.12    Waiver of Jury Trial; Waiver of Consequential Damages..........................................64
         11.13    Severability...................................................................................64
         11.14    Further Assurances.............................................................................64
         11.15    Entirety.......................................................................................64
         11.16    Binding Effect; Continuing Agreement...........................................................65





SCHEDULES

Schedule 1.1               Commitment Percentages
Schedule 6.13              Material Subsidiaries
Schedule 8.2               Liens
Schedule 11.1              Notices

EXHIBITS

Exhibit 2.3                Form of Notice of Borrowing
Exhibit 2.5                Form of Notice of Continuation/Conversion
Exhibit 2.8                Form of Note
Exhibit 7.1(c)             Form of Officer's Certificate
Exhibit 11.3(b)            Form of Assignment Agreement



                                      iii



                            364-DAY CREDIT AGREEMENT


         THIS 364-DAY CREDIT AGREEMENT (this "Credit Agreement"), dated as of
March 29, 2002, is entered into among DUKE ENERGY FIELD SERVICES, LLC, a
Delaware limited liability company and DUKE ENERGY FIELD SERVICES CORPORATION, a
Delaware corporation (individually, a "Borrower" and collectively, the
"Borrowers"), the Lenders (as defined herein) and BANK OF AMERICA, N.A., as
administrative agent for the Lenders (in such capacity, the "Agent").

                                    RECITALS

         WHEREAS, the Borrowers have requested that the Lenders make available
to them a revolving credit facility in the aggregate amount of $650 million for
the purposes set forth herein; and

         WHEREAS, the Lenders have agreed to provide the requested revolving
credit facility to the Borrowers on the terms, and subject to the conditions,
set forth herein.

         NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

                                   SECTION 1.

                        DEFINITIONS AND ACCOUNTING TERMS

         1.1 DEFINITIONS.

         As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:

                  "Adjusted Eurodollar Rate" means the Eurodollar Rate plus, as
         applicable, (a) the Applicable Margin for Eurodollar Loans on and
         before Maturity Date or (b) the Applicable Margin for Eurodollar Loans
         subsequent to Maturity Date.

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

                  "Agency Services Address" means Bank of America, N.A., 901
         Main Street, 14th Floor, Dallas, Texas 75202, or such other address as
         may be identified by written notice from the Agent to the Borrowers and
         the Lenders.






                  "Agent" means Bank of America, N.A. and any successors and
         assigns in such capacity.

                  "Applicable Margin" means, at any time, the rate per annum set
         forth in the table below opposite the Debt Rating of the Borrowers:



                                                                                          Applicable Margin      Applicable Margin
                                                                         Applicable      for Eurodollar Loans      for Eurodollar
                         Borrowers'          Applicable Margin for       Margin for         on and before       Loans subsequent to
 Pricing Level          Debt Rating             Commitment Fees       Utilization Fees      Maturity Date          Maturity Date
 -------------  --------------------------   ---------------------   ----------------   --------------------   -------------------
                                                                                                
       I        greater than or = to A-/A3           .100%                .125%                 .500%                  .875%
      II                         BBB+/Baa1           .125%                .125%                 .625%                 1.000%
     III                          BBB/Baa2           .150%                .125%                 .750%                 1.125%
      IV                         BBB-/Baa3           .200%                .250%                1.000%                 1.500%
       V         less than or = to BB+/Ba1           .300%                .250%                1.250%                 1.750%


                  Notwithstanding the above, if at any time there is a split in
         Debt Ratings between S&P and Moody's, (a) in the event of a single
         level split, the higher Debt Rating (i.e. the lower pricing) will apply
         and (b) in the event of a multiple level split, one level below the
         higher Debt Rating will apply.

                  The Applicable Margin for Eurodollar Loans, the Commitment
         Fees and the Utilization Fees shall, in each case, be determined and
         adjusted on the date (each a "Calculation Date") on which there is a
         change in the Borrowers' Debt Rating. Each determination of the
         Applicable Margin shall be effective from one Calculation Date until
         the next Calculation Date. Any adjustment in the Applicable Margin
         shall be applicable to all existing Eurodollar Loans and Letters of
         Credit as well as any new Eurodollar Loans made or Letters of Credit
         issued.

                  The Borrowers shall promptly deliver to the Agent, at the
         address set forth on Schedule 11.1 and at the Agency Services Address,
         information regarding any change in the Borrowers' Debt Rating that
         would change the existing Pricing Level pursuant to the preceding
         paragraph.

                  "Approved Officer" means the president, a vice president, the
         treasurer or the assistant treasurer of the Borrowers or such other
         representative of the Borrowers as may be designated by any one of the
         foregoing with consent of the Agent.

                  "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
         United States Code, as amended, modified, succeeded or replaced from
         time to time.

                  "Base Rate" means, for any day, the rate per annum equal to
         the greater of (a) the Federal Funds Rate in effect on such day plus
         1/2 of 1% or (b) the Prime Rate in effect on such day. If for any
         reason the Agent shall have determined (which determination shall



                                       2


         be conclusive absent manifest error) that it is unable after due
         inquiry to ascertain the Federal Funds Rate for any reason, including
         the inability or failure of the Agent to obtain sufficient quotations
         in accordance with the terms hereof, the Base Rate shall be determined
         without regard to clause (a) of the first sentence of this definition
         until the circumstances giving rise to such inability no longer exist.
         Any change in the Base Rate due to a change in the Prime Rate or the
         Federal Funds Rate shall be effective on the effective date of such
         change in the Prime Rate or the Federal Funds Rate, respectively.

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

                  "Borrowers" means, subject to Section 2.10, Duke Energy Field
         Services, LLC, a Delaware limited liability company, and Duke Energy
         Field Services Corporation, a Delaware corporation, and "Borrower"
         means either of them.

                  "Borrowers Obligations" means, without duplication, all of the
         obligations of the Borrowers to the Lenders and the Agent, whenever
         arising, under this Credit Agreement, the Notes, the LOC Documents or
         any of the other Credit Documents.

                  "Business Day" means any day other than a Saturday, a Sunday,
         a legal holiday or a day on which banking institutions are authorized
         or required by law or other governmental action to close in Dallas,
         Texas or New York, New York; provided that in the case of Eurodollar
         Loans, such day is also a day on which dealings between banks are
         carried on in U.S. dollar deposits in the London interbank market.

                  "Businesses" has the meaning set forth in Section 6.12.

                  "Capital Stock" means (a) in the case of a corporation, all
         classes of capital stock of such corporation, (b) in the case of a
         partnership, partnership interests (whether general or limited), (c) in
         the case of a limited liability company, membership interests and (d)
         any other interest or participation that confers on a Person the right
         to receive a share of the profits and losses of, or distributions of
         assets of, the issuing Person.

                  "Change of Control" means that, as of any date, any "person"
         or "group" (within the meaning of section 13(d) or 14(d) of the
         Exchange Act) other than Duke Energy Corporation or Phillips Petroleum
         Company, or their respective Subsidiaries, has become, directly or
         indirectly, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
         of the Exchange Act), by way of merger, consolidation or otherwise, of
         30% or more of the Voting Stock of a Borrower on a fully-diluted basis,
         after giving effect to the conversion and exercise of all outstanding
         warrants, options and other securities of a Borrower convertible into
         or exercisable for Voting Stock of a Borrower (whether or not such
         securities are then currently convertible or exercisable).

                  "Closing Date" means the date hereof.

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



                                       3


                  "Commitment" means the commitment of each Lender with respect
         to the Revolving Committed Amount and "Commitments" means,
         collectively, all such commitments of the Lenders.

                  "Commitment Fees" has the meaning specified in Section 3.4(a).

                  "Commitment Percentage" means, for each Lender, the percentage
         identified as its Commitment Percentage opposite such Lender's name on
         Schedule 1.1, as such percentage may be modified by assignment in
         accordance with the terms of this Credit Agreement.

                  "Consolidated Capitalization" means, without duplication, the
         sum of (a) all of the shareholders' equity or net worth of the
         Borrowers and their Subsidiaries on a consolidated basis in accordance
         with GAAP (including preferred stock and preferred member interests,
         but excluding, if applicable, equity or net worth of TEPPCO Partners,
         L.P.) plus (b) the aggregate outstanding amount of all Equity Preferred
         Securities plus (c) Consolidated Indebtedness.

                  "Consolidated Indebtedness" means, without duplication, all
         Indebtedness of the Borrowers and their Subsidiaries on a consolidated
         basis, other than (a) the amount of Off Balance Sheet Indebtedness of
         the Borrowers and their Subsidiaries which, in the aggregate,
         constitutes less than 25% of the total Indebtedness of the Borrowers
         and their Subsidiaries, (b) Indebtedness, if applicable, of TEPPCO
         Partners, L.P. and (c) the aggregate outstanding amount of all Equity
         Preferred Securities.

                  "Corporate Conversion" means (a) the conversion of Duke Energy
         Field Services, LLC from a limited liability company to a "C"
         corporation or (b) the merger of Duke Energy Field Services LLC with
         and into Duke Energy Field Services Corporation.

                  "Credit Documents" means this Credit Agreement, the Notes, the
         LOC Documents, any Notice of Borrowing, any Notice of
         Continuation/Conversion and all other related agreements and documents
         issued or delivered hereunder or thereunder or pursuant hereto or
         thereto.

                  "Credit Exposure" means, as applied to each Lender (a) at any
         time prior to the termination of the Commitments, the Commitment
         Percentage of such Lender multiplied by the Revolving Committed Amount
         and (b) at any time after the termination of the Commitments, the sum
         of (i) the principal balance of the outstanding Loans of such Lender
         plus (ii) such Lender's Participation Interest in the face amount of
         outstanding Letters of Credit.

                  "Debt Rating" means the long-term senior unsecured, non-credit
         enhanced debt rating of the Borrowers by S&P and Moody's.



                                       4


                  "Debt to Capitalization Ratio" means, the ratio of (a)
         Consolidated Indebtedness to (b) Consolidated Capitalization.

                  "Default" means any event, act or condition which with notice
         or lapse of time, or both, would constitute an Event of Default.

                  "Defaulting Lender" means, at any time, any Lender that, at
         such time (a) has failed to make a Loan required pursuant to the term
         of this Credit Agreement, (b) has failed to pay to the Agent or any
         Lender an amount owed by such Lender pursuant to the terms of this
         Credit Agreement or (c) has been deemed insolvent by a court of
         competent jurisdiction or has become subject to a bankruptcy or
         insolvency proceeding or to a receiver, trustee or similar official.

                  "Dollars" and "$" means dollars in lawful currency of the
         United States of America.

                  "Effective Date" means the date on which the conditions set
         forth in Section 5.1 shall have been fulfilled (or waived in the sole
         discretion of the Lenders).

                  "Eligible Assignee" means (a) a Lender and (b) any other
         Person approved by (i) the Borrowers in their sole discretion and (ii)
         the Agent (such approval not to be unreasonably withheld or delayed);
         provided that (A) the Borrowers' consent is not required during the
         existence and continuation of an Event of Default and (B) neither a
         Borrower nor an Affiliate of a Borrower shall qualify as an Eligible
         Assignee.

                  "Equity Preferred Securities" means any securities, however
         denominated, (i) issued by the Borrowers or their Subsidiaries, (ii)
         that are not subject to mandatory redemption or the underlying
         securities, if any, of which are not subject to mandatory redemption,
         (iii) that are perpetual or that mature no earlier than 20 years from
         the date of issuance and no earlier than one year from the Maturity
         Date, (iv) the indebtedness issued in connection with which, including
         any guaranty, is subordinated in right of payment to the unsecured and
         unsubordinated indebtedness of the issuer of such indebtedness or
         guaranty and (v) the terms of which permit the deferral of interest or
         distributions thereon to a date occurring after the first anniversary
         of the Maturity Date.

                  "Environmental Laws" means any legal requirement of any
         Governmental Authority pertaining to (a) the protection of health,
         safety, and the indoor or outdoor environment, (b) the conservation,
         management, or use of natural resources and wildlife, (c) the
         protection or use of surface water and groundwater or (d) the
         management, manufacture, possession, presence, use, generation,
         transportation, treatment, storage, disposal, release, threatened
         release, abatement, removal, remediation or handling of, or exposure
         to, any hazardous or toxic substance or material or (e) pollution
         (including any release to land surface water and groundwater) and
         includes, without limitation, the Comprehensive Environmental Response,
         Compensation, and Liability Act of 1980, as amended by the Superfund
         Amendments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid
         Waste Disposal Act, as amended by the Resource Conservation and
         Recovery Act of 1976 and Hazardous



                                       5


         and Solid Waste Amendment of 1984, 42 USC 6901 et seq., Federal Water
         Pollution Control Act, as amended by the Clean Water Act of 1977, 33
         USC 1251 et seq., Clean Air Act, as amended, 42 USC 7401 et seq., Toxic
         Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous
         Materials Transportation Act, 49 USC App. 1801 et seq., Occupational
         Safety and Health Act of 1970, as amended, 29 USC 651 et seq., Oil
         Pollution Act of 1990, 33 USC 2701 et seq., Emergency Planning and
         Community Right-to-Know Act of 1986, 42 USC 11001 et seq., National
         Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking
         Water Act of 1974, as amended, 42 USC 300(f) et seq., any analogous
         implementing or successor law, and any amendment, rule, regulation,
         order, or directive issued thereunder.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended, and any successor statute thereto, as interpreted by
         the rules and regulations thereunder, all as the same may be in effect
         from time to time. References to sections of ERISA shall be construed
         also to refer to any successor sections.

                  "ERISA Affiliate" means an entity, whether or not
         incorporated, which is under common control with a Borrower or any of
         its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or
         is a member of a group which includes a Borrower or any of its
         Subsidiaries and which is treated as a single employer under Sections
         414(b), (c), (m), or (o) of the Code.

                  "Eurodollar Loan" means a Loan bearing interest at the
         Adjusted Eurodollar Rate.

                  "Eurodollar Rate" means with respect to any Eurodollar Loan,
         for the Interest Period applicable thereto, a rate per annum equal to
         the London Interbank Offered Rate.

                  "Eurodollar Reserve Percentage" means, for any day, that
         percentage (expressed as a decimal) which is in effect from time to
         time under Regulation D as the maximum reserve requirement (including,
         without limitation, any basic, supplemental, emergency, special, or
         marginal reserves) applicable with respect to Eurocurrency liabilities,
         as that term is defined in Regulation D (or against any other category
         of liabilities that includes deposits by reference to which the
         interest rate of Eurodollar Loans is determined).

                  "Event of Default" has the meaning specified in Section 9.1.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended, and the rules and regulations promulgated thereunder, as
         amended, modified, succeeded or replaced from time to time.

                  "Existing Credit Facility" means the credit facility evidenced
         by that certain 364-Day Credit Agreement, dated as of March 30, 2001,
         among the Borrowers, the lenders party thereto and Bank of America,
         N.A., as administrative agent and all documents and instruments entered
         into in connection therewith.



                                       6


                  "Extension of Credit" means, as to any Lender, the making of a
         Loan by such Lender (or a participation therein by a Lender) or the
         issuance of, or participation in, a Letter of Credit by such Lender.

                  "Fee Letter" means that certain letter agreement, dated as of
         February 8, 2002, between the Agent and the Borrowers, as amended,
         modified, supplemented or replaced from time to time.

                  "Federal Funds Rate" means for any day the rate per annum
         (rounded upward to the nearest 1/100th of 1%) equal to the weighted
         average of the rates on overnight Federal funds transactions with
         members of the Federal Reserve System arranged by Federal funds brokers
         on such day, as published by the Federal Reserve Bank of New York on
         the Business Day next succeeding such day; provided that (a) if such
         day is not a Business Day, the Federal Funds Rate for such day shall be
         such rate on such transactions on the next preceding Business Day and
         (b) if no such rate is so published on such next succeeding Business
         Day, the Federal Funds Rate for such day shall be the average rate
         quoted to the Agent on such day on such transactions as determined by
         the Agent.

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

                  "Government Acts" has the meaning specified in Section 2.2(k).

                  "Governmental Authority" means any Federal, state, local or
         foreign court, monetary authority or governmental agency, authority,
         instrumentality or regulatory body.

                  "Indebtedness" of any Person means, without duplication, (a)
         all obligations of such Person for borrowed money, (b) all obligations
         of such Person for the deferred purchase price of property or services
         purchased, (c) all obligations of such Person created or arising under
         any conditional sale or other title retention agreement with respect to
         the property acquired, (d) all obligations of such Person under lease
         obligations which shall have been, or should be, in accordance with
         GAAP, recorded as capital leases in respect of which such Person is
         liable as lessee, (e) the face amount of all letter of credit
         indebtedness available to be drawn (other than letter of credit
         obligations relating to indebtedness included in Indebtedness pursuant
         to another clause of this definition) and, without duplication, the
         unreimbursed amount of all drafts drawn thereunder, (f) obligations
         secured by a Lien on property or assets of such Person, whether or not
         assumed (but in any event not exceeding the fair market value of the
         property or asset), (g) all guarantees of Indebtedness referred to in
         clauses (a) through (f) above, (h) all amounts payable by such Person
         in connection with mandatory redemptions or repurchases of preferred
         stock, (i) any obligations of such Person (in the nature of principal
         or interest) in respect of acceptances or similar obligations issued or
         created for the account of such Person and (j) all Off Balance Sheet
         Indebtedness of such Person.



                                       7


                  "Interest Payment Date" means (a) as to Base Rate Loans, the
         first day of each fiscal quarter of the Borrowers, the Maturity Date
         and the Term Out Maturity Date, if applicable, and (b) as to Eurodollar
         Loans, the last day of each applicable Interest Period, the Maturity
         Date and the Term Out Maturity Date, if applicable, and, in addition,
         where the applicable Interest Period for a Eurodollar Loan is greater
         than three months, then also on the last day of each three-month period
         during such Interest Period. If an Interest Payment Date falls on a
         date which is not a Business Day, such Interest Payment Date shall be
         deemed to be the next succeeding Business Day, except that in the case
         of Eurodollar Loans where the next succeeding Business Day falls in the
         next succeeding calendar month, then on the next preceding Business
         Day.

                  "Interest Period" means, with respect to Eurodollar Loans, a
         period of one, two, three or six months' duration, as the Borrowers may
         elect, commencing, in each case, on the date of the borrowing
         (including continuations and conversions of Eurodollar Loans);
         provided, however, (a) if any Interest Period would end on a day which
         is not a Business Day, such Interest Period shall be extended to the
         next succeeding Business Day (except that where the next succeeding
         Business Day falls in the next succeeding calendar month, then on the
         next preceding Business Day), (b) no Interest Period shall extend
         beyond the Maturity Date (or, if the Borrowers choose to term out the
         then existing Loans pursuant to Section 3.3(b), the Term Out Maturity
         Date) and (c) where an Interest Period begins on a day for which there
         is no numerically corresponding day in the calendar month in which the
         Interest Period is to end, such Interest Period shall end on the last
         Business Day of such calendar month.

                  "Issuing Lender" means Bank of America, N.A.

                  "Issuing Lender Fees" has the meaning set forth in Section
         3.4(c)(ii).

                  "Letter of Credit" means a Letter of Credit issued for the
         account of the Borrowers or one of their Subsidiaries by the Issuing
         Lender pursuant to Section 2.2, as such Letter of Credit may be
         amended, modified, extended, renewed or replaced.

                  "Letter of Credit Fees" shall have the meaning assigned to
         such term in Section 3.4(c)(i).

                  "Lender" means any Person identified as a Lender on the
         signature pages hereto and any Eligible Assignee which may become a
         Lender by way of assignment in accordance with the terms hereof,
         together with their successors or permitted assigns.

                  "Lien" means any mortgage, pledge, hypothecation, assignment,
         deposit arrangement, security interest, encumbrance, lien (statutory or
         otherwise), preference, priority or charge of any kind (including any
         agreement to give any of the foregoing, any conditional sale or other
         title retention agreement, any financing or similar statement or notice
         filed under the Uniform Commercial Code as adopted and in effect in the
         relevant jurisdiction or other similar recording or notice statute, and
         any lease in the nature thereof).



                                       8


                  "Loans" means the loans made by the Lenders to the Borrowers
         pursuant to Section 2.1 (or extended pursuant to Section 3.3(b)).

                  "LOC Committed Amount" means ONE HUNDRED AND FIFTY MILLION
         DOLLARS ($150,000,000).

                  "LOC Documents" means, with respect to any Letter of Credit,
         such Letter of Credit, any amendments thereto, any documents delivered
         in connection therewith, any application therefor, and any agreements,
         instruments, guarantees or other documents (whether general in
         application or applicable only to such Letter of Credit) governing or
         providing for (a) the rights and obligations of the parties concerned
         or at risk or (b) any collateral security for such obligations.

                  "LOC Obligations" means, at any time, the sum of (a) the
         maximum amount which is then available to be drawn under Letters of
         Credit then outstanding, assuming compliance with all requirements for
         drawings referred to in such Letters of Credit plus (b) the aggregate
         amount of all drawings under Letters of Credit honored by the Issuing
         Lender but not theretofore reimbursed.

                  "London Interbank Offered Rate" means, with respect to any
         Eurodollar Loan for the Interest Period applicable thereto, the rate of
         interest per annum appearing on Telerate Page 3750 (or any successor
         page) as the London interbank offered rate for deposits in Dollars at
         approximately 11:00 A.M. (London time) two Business Days prior to the
         first day of such Interest Period for a term comparable to such
         Interest Period; provided, however, if more than one rate is specified
         on Telerate Page 3750, the applicable rate shall be the arithmetic mean
         of all such rates. If, for any reason, such rate is not available, the
         term "London Interbank Offered Rate" shall mean, with respect to any
         Eurodollar Loan for the Interest Period applicable thereto, the rate of
         interest per annum appearing on such other service as may be nominated
         by the British Bankers' Association as the London interbank offered
         rate for deposits in Dollars at approximately 11:00 A.M. (London time)
         two Business Days prior to the first day of such Interest Period for a
         term comparable to such Interest Period; provided, however, if more
         than one rate is specified, the applicable rate shall be the arithmetic
         mean of all such rates.

                  "Mandatory Borrowing" has the meaning specified in Section
         2.2(e).

                  "Material Adverse Effect" means a material adverse effect on
         the business, financial positions or results of operations of the
         Borrowers and their Subsidiaries taken as a whole.

                  "Material Subsidiary" means any Subsidiary of the Borrowers
         that, together with its Subsidiaries, owns in excess of 10% of the
         consolidated assets of the Borrowers and their Subsidiaries.

                  "Maturity Date" means March 28, 2003.



                                       9


                  "Merger" means the following transaction: (a) the merger of
         Phillips Gas Company Shareholder, Inc., a Subsidiary of Phillips
         Petroleum Company and the parent of Phillips Gas Company, with and into
         Duke Energy Field Services Corporation and (b) the subsequent merger of
         Phillips Gas Company with and into Duke Energy Field Services
         Corporation.

                  "Multiemployer Plan" means a Plan covered by Title IV of ERISA
         which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3)
         of ERISA.

                  "Multiple Employer Plan" means a Plan covered by Title IV of
         ERISA, other than a Multiemployer Plan, which a Borrower or any ERISA
         Affiliate and at least one employer other than a Borrower or any ERISA
         Affiliate are contributing sponsors.

                  "Non-Excluded Taxes" has the meaning specified in Section
         4.4(a).

                  "Notes" means the promissory notes of the Borrowers in favor
         of each of the Lenders evidencing the Loans provided pursuant to
         Section 2.1, individually or collectively, as appropriate, as such
         notes may be amended or modified from time to time and substantially in
         the form of Exhibit 2.8.

                  "Notice of Borrowing" means a request by the Borrowers for a
         Loan in the form of Exhibit 2.3.

                  "Notice of Continuation/Conversion" means a request by the
         Borrowers for the continuation or conversion of a Loan in the form of
         Exhibit 2.5.

                  "Off Balance Sheet Indebtedness" means any obligation of a
         Person that would be considered indebtedness for tax purposes but is
         not set forth on the balance sheet of such Person, including, but not
         limited to, (a) any synthetic lease, tax retention operating lease, off
         balance sheet loan or similar off-balance sheet financing product of
         such Person, (b) the aggregate amount of uncollected accounts
         receivables of such Person subject at such time to a sale of
         receivables (or similar transaction) and (c) obligations of any
         partnership or joint venture that is recourse to such Person.

                  "Participation Interest" means the Extension of Credit by a
         Lender by way of a purchase of a participation in Letters of Credit or
         LOC Obligations as provided in Section 2.2 or in any Loans as provided
         in Section 3.8.

                  "PBGC" means the Pension Benefit Guaranty Corporation
         established pursuant to Subtitle A of Title IV of ERISA and any
         successor thereto.

                  "Person" means any individual, partnership, joint venture,
         firm, corporation, association, trust, limited liability company or
         other enterprise (whether or not



                                       10


         incorporated), or any government or political subdivision or any
         agency, department or instrumentality thereof.

                  "Plan" means any employee pension benefit plan (as defined in
         Section 3(2) of ERISA) which is covered by ERISA and with respect to
         which a Borrower or any ERISA Affiliate is (or, if such plan were
         terminated at such time, would under Section 4069 of ERISA be deemed to
         be) an "employer" within the meaning of Section 3(5) of ERISA.

                  "Prime Rate" means the per annum rate of interest established
         from time to time by the Agent at its principal office in Charlotte,
         North Carolina (or such other principal office as communicated by the
         Agent to the Borrowers and the Lenders) as its Prime Rate. Any change
         in the interest rate resulting from a change in the Prime Rate shall
         become effective as of 12:01 a.m. of the Business Day on which each
         change in the Prime Rate is announced by the Agent. The Prime Rate is a
         reference rate used by the Agent in determining interest rates on
         certain loans and is not intended to be the lowest rate of interest
         charged on any extension of credit to any debtor.

                  "Properties" has the meaning set forth in Section 6.12.

                  "Register" has the meaning set forth in Section 11.3(c).

                  "Regulation A, D, T, U, or X" means Regulation A, D, T, U or
         X, respectively, of the Board of Governors of the Federal Reserve
         System as from time to time in effect and any successor to all or a
         portion thereof.

                  "Reportable Event" means a "reportable event" as defined in
         Section 4043 of ERISA with respect to which the notice requirements to
         the PBGC have not been waived.

                  "Required Lenders" means Lenders whose aggregate Credit
         Exposure (as hereinafter defined) constitutes more than 50% of the
         aggregate Credit Exposure of all Lenders at such time; provided,
         however, that if any Lender shall be a Defaulting Lender at such time
         then there shall be excluded from the determination of Required Lenders
         the aggregate principal amount of Credit Exposure of such Lender at
         such time.

                  "Responsible Officer" means the president, chief financial
         officer or treasurer of either Borrower.

                  "Revolving Committed Amount" means SIX HUNDRED AND FIFTY
         MILLION Dollars ($650,000,000) as such amount may be otherwise reduced
         in accordance with Section 2.7.

                  "Single Employer Plan" means any Plan which is covered by
         Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
         Employer Plan.



                                       11


                  "Solvent" means, with respect to any Person as of a particular
         date, that on such date (a) such Person is able to pay its debts and
         other liabilities, contingent obligations and other commitments as they
         mature in the normal course of business, (b) such Person does not
         intend to, and does not believe that it will, incur debts or
         liabilities beyond such Person's ability to pay as such debts and
         liabilities mature in their ordinary course, (c) such Person is not
         engaged in a business or a transaction, and is not about to engage in a
         business or a transaction, for which such Person's assets would
         constitute unreasonably small capital after giving due consideration to
         the prevailing practice in the industry in which such Person is engaged
         or is to engage, (d) the fair value of the assets of such Person is
         greater than the total amount of liabilities, including, without
         limitation, contingent liabilities, of such Person and (e) the present
         fair saleable value of the assets of such Person is not less than the
         amount that will be required to pay the probable liability of such
         Person on its debts as they become absolute and matured. In computing
         the amount of contingent liabilities at any time, it is intended that
         such liabilities will be computed as the amount which, in light of all
         the facts and circumstances existing at such time, represents the
         amount that can reasonably be expected to become an actual or matured
         liability.

                  "Subsidiary" means, as to any Person, (a) any corporation more
         than 50% of whose stock of any class or classes having by the terms
         thereof ordinary voting power to elect a majority of the directors of
         such corporation (irrespective of whether or not at the time, any class
         or classes of such corporation shall have or might have voting power by
         reason of the happening of any contingency) is at the time owned by
         such Person directly or indirectly through Subsidiaries and (b) any
         partnership, association, joint venture, limited liability company or
         other entity in which such person directly or indirectly through
         Subsidiaries has more than 50% equity interest at any time.

                  "Termination Event" means (a) with respect to any Single
         Employer Plan, the occurrence of a Reportable Event or the substantial
         cessation of operations (within the meaning of Section 4062(e) of
         ERISA), (b) the withdrawal of a Borrower or any ERISA Affiliate from a
         Multiple Employer Plan during a plan year in which it was a substantial
         employer (as such term is defined in Section 4001(a)(2) of ERISA), or
         the termination of a Multiple Employer Plan, (c) the distribution of a
         notice of intent to terminate or the actual termination of a Plan
         pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution
         of proceedings to terminate or the actual termination of a Plan by the
         PBGC under Section 4042 of ERISA, (e) any event or condition which
         might reasonably constitute grounds under Section 4042 of ERISA for the
         termination of, or the appointment of a trustee to administer, any
         Plan, or (f) the complete or partial withdrawal of a Borrower or any
         ERISA Affiliate from a Multiemployer Plan.

                  "Term Out Maturity Date" has the meaning set forth in Section
         3.3(b).

                  "Unused Commitment" means, for any period from the Closing
         Date to the Maturity Date, the amount by which (a) the Revolving
         Committed Amount exceeds (b) the daily average sum for such period of
         the outstanding principal amount of all Loans plus the aggregate amount
         of outstanding LOC Obligations.



                                       12


                  "Utilization Fees" has the meaning specified in Section
         3.4(b).

                  "Utilized Revolving Committed Amount" means, for any period
         from the Closing Date to the Maturity Date or the Term Out Maturity
         Date, if applicable, the amount equal to the daily average sum for such
         period of the outstanding aggregate principal amount of all Loans plus
         the aggregate amount of outstanding LOC Obligations.

                  "Voting Stock" means all classes of the Capital Stock (or
         other voting interests) of such Person then outstanding and normally
         entitled to vote in the election of directors or other governing body
         of such Person.

         1.2 COMPUTATION OF TIME PERIODS.

         For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.

         1.3 ACCOUNTING TERMS.

         Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis.

         1.4 TIME.

         All references to time herein shall be references to Central Standard
Time or Central Daylight time, as the case may be, unless specified otherwise.

                                   SECTION 2.

                                      LOANS

         2.1 REVOLVING COMMITTED AMOUNT.

         Subject to the terms and conditions set forth herein, each Lender
severally agrees to make revolving loans to the Borrowers in Dollars, at any
time and from time to time, during the period from the Effective Date to the
Maturity Date (each a "Loan" and collectively the "Loans"); provided, however,
that (a) the sum of the aggregate amount of Loans outstanding plus the aggregate
amount of LOC Obligations outstanding shall not exceed the Revolving Committed
Amount and (b) with respect to each individual Lender, such Lender's pro rata
share of outstanding Loans plus such Lender's pro rata share of outstanding LOC
Obligations shall not exceed such



                                       13


Lender's Commitment Percentage of the Revolving Committed Amount. Subject to the
terms of this Credit Agreement, the Borrowers may borrow, repay and reborrow
Loans.

         2.2 LETTER OF CREDIT SUBFACILITY.

                  (a) Issuance. Subject to the terms and conditions hereof and
         of the LOC Documents, if any, and any other terms and conditions which
         the Issuing Lender may reasonably require (so long as such terms and
         conditions do not impose any financial obligation on or require any
         Lien (not otherwise contemplated by this Credit Agreement) to be given
         by a Borrower or conflict with any obligation of, or detract from any
         action which may be taken by the Borrowers or their Subsidiaries under
         this Credit Agreement), the Issuing Lender shall from time to time upon
         request issue, in Dollars, and the Lenders shall participate in,
         letters of credit (the "Letters of Credit") for the account of a
         Borrower or any of its Subsidiaries, from the Effective Date until the
         Maturity Date, in a form reasonably acceptable to the Issuing Lender;
         provided, however, that (i) the aggregate amount of LOC Obligations
         shall not at any time exceed the LOC Committed Amount, (ii) the sum of
         the aggregate amount of LOC Obligations outstanding plus Loans
         outstanding shall not exceed the Revolving Committed Amount and (iii)
         with respect to each individual Lender, the Lender's pro rata share of
         outstanding Loans plus its pro rata share of outstanding LOC
         Obligations shall not exceed such Lender's Commitment Percentage of the
         Revolving Committed Amount. The issuance and expiry date of each Letter
         of Credit shall be a Business Day. Except as otherwise expressly agreed
         upon by all the Lenders, no Letter of Credit shall have an expiry date
         extending beyond the Maturity Date. Each Letter of Credit shall be
         either (x) a standby letter of credit issued to support the obligations
         (including pension or insurance obligations), contingent or otherwise,
         of a Borrower, or (y) a commercial letter of credit in respect of the
         purchase of goods or services by a Borrower in the ordinary course of
         business. Each Letter of Credit shall comply with the related LOC
         Documents.

                  (b) Notice and Reports. The request for the issuance of a
         Letter of Credit shall be submitted to the Issuing Lender at least two
         Business Days prior to the requested date of issuance. The Issuing
         Lender will, at least quarterly and more frequently upon request,
         provide to the Lenders a detailed report specifying the Letters of
         Credit which are then issued and outstanding and any activity with
         respect thereto which may have occurred since the date of the prior
         report, and including therein, among other things, the account party,
         the beneficiary, the face amount, and the expiry date as well as any
         payments or expirations which may have occurred. The Issuing Lender
         will further provide to the Agent, promptly upon request, copies of the
         Letters of Credit.

                  (c) Participations.

                           (i) Each Lender, upon issuance of a Letter of Credit,
                  shall be deemed to have purchased without recourse a risk
                  participation from the Issuing Lender in such Letter of Credit
                  and the obligations arising thereunder and any collateral
                  relating thereto, in each case in an amount equal to its
                  Commitment Percentage of



                                       14


                  the obligations under such Letter of Credit, and shall
                  absolutely, unconditionally and irrevocably assume, as primary
                  obligor and not as surety, and be obligated to pay to the
                  Issuing Lender therefor and discharge when due, its Commitment
                  Percentage of the obligations arising under such Letter of
                  Credit. Without limiting the scope and nature of each Lender's
                  participation in any Letter of Credit, to the extent that the
                  Issuing Lender has not been reimbursed as required hereunder
                  or under any such Letter of Credit, each such Lender shall pay
                  to the Issuing Lender its Commitment Percentage of such
                  unreimbursed drawing in same day funds on the day of
                  notification by the Issuing Lender of an unreimbursed drawing
                  pursuant to the provisions of subsection (d) hereof. The
                  obligation of each Lender to so reimburse the Issuing Lender
                  shall be absolute and unconditional and shall not be affected
                  by the occurrence of a Default, an Event of Default or any
                  other occurrence or event. Any such reimbursement shall not
                  relieve or otherwise impair the obligation of the Borrowers to
                  reimburse the Issuing Lender under any Letter of Credit,
                  together with interest as hereinafter provided.

                  (d) Reimbursement. In the event of any request for a drawing
         or any drawing under any Letter of Credit, the Issuing Lender will
         promptly notify the Borrowers. Unless a Borrower shall immediately
         notify the Issuing Lender of its intent to otherwise reimburse the
         Issuing Lender, the Borrowers shall be deemed to have requested a Loan
         at the Base Rate in the amount of the drawing as provided in subsection
         (e) hereof, the proceeds of which will be used to satisfy the
         reimbursement obligations. The Borrowers shall reimburse the Issuing
         Lender on the day of drawing under any Letter of Credit either with the
         proceeds of a Loan obtained hereunder or otherwise in same day funds as
         provided herein or in the LOC Documents. If the Borrowers shall fail to
         reimburse the Issuing Lender as provided hereinabove, the unreimbursed
         amount of such drawing shall bear interest at a per annum rate equal to
         the Base Rate plus two percent (2%). The Borrowers' reimbursement
         obligations hereunder shall be absolute and unconditional under all
         circumstances irrespective of (but without waiver of) any rights of
         set-off, counterclaim or defense to payment that the applicable account
         party or the Borrowers may claim or have against the Issuing Lender,
         the Agent, the Lenders, the beneficiary of the Letter of Credit drawn
         upon or any other Person, including without limitation, any defense
         based on any failure of the applicable account party or the Borrowers
         to receive consideration or the legality, validity, regularity or
         unenforceability of the Letter of Credit. The Issuing Lender will
         promptly notify the Lenders of the amount of any unreimbursed drawing
         and each Lender shall promptly pay to the Agent for the account of the
         Issuing Lender, in Dollars and in immediately available funds, the
         amount of such Lender's Commitment Percentage of such unreimbursed
         drawing. Such payment shall be made on the day such notice is received
         by such Lender from the Issuing Lender if such notice is received at or
         before 2:00 p.m., otherwise such payment shall be made at or before
         12:00 Noon on the Business Day next succeeding the day such notice is
         received. If such Lender does not pay such amount to the Issuing Lender
         in full upon such request, such Lender shall, on demand, pay to the
         Agent for the account of the Issuing Lender interest on the unpaid
         amount during the period from the date the Lender received the



                                       15


         notice regarding the unreimbursed drawing until such Lender pays such
         amount to the Issuing Lender in full at a rate per annum equal to, if
         paid within two Business Days of the date of drawing, the Federal Funds
         Rate and thereafter at a rate equal to the Base Rate. Each Lender's
         obligation to make such payment to the Issuing Lender, and the right of
         the Issuing Lender to receive the same, shall be absolute and
         unconditional, shall not be affected by any circumstance whatsoever and
         without regard to the termination of this Credit Agreement or the
         Commitments hereunder, the existence of a Default or Event of Default
         or the acceleration of the obligations hereunder and shall be made
         without any offset, abatement, withholding or reduction whatsoever.
         Simultaneously with the making of each such payment by a Lender to the
         Issuing Lender, such Lender shall, automatically and without any
         further action on the part of the Issuing Lender or such Lender,
         acquire a participation in an amount equal to such payment (excluding
         the portion of such payment constituting interest owing to the Issuing
         Lender) in the related unreimbursed drawing portion of the LOC
         Obligation and in the interest thereon and in the related LOC
         Documents, and shall have a claim against the Borrowers with respect
         thereto.

                  (e) Repayment with Loans. On any day on which a Borrower shall
         have requested, or been deemed to have requested, a Loan borrowing to
         reimburse a drawing under a Letter of Credit, the Agent shall give
         notice to the applicable Lenders that a Loan has been requested or
         deemed requested in connection with a drawing under a Letter of Credit,
         in which case a Loan borrowing comprised solely of Base Rate Loans
         (each such borrowing, a "Mandatory Borrowing") shall be immediately
         made from all applicable Lenders (without giving effect to any
         termination of the Commitments pursuant to Section 9.2 or otherwise)
         pro rata based on each Lender's respective Commitment Percentage and
         the proceeds thereof shall be paid directly to the Issuing Lender for
         application to the respective LOC Obligations. Each such Lender hereby
         irrevocably agrees to make such Loans immediately upon any such request
         or deemed request on account of each such Mandatory Borrowing in the
         amount and in the manner specified in the preceding sentence and on the
         same such date notwithstanding (i) the amount of Mandatory Borrowing
         may not comply with the minimum amount for borrowings of Loans
         otherwise required hereunder, (ii) whether any conditions specified in
         Section 5.2 are then satisfied, (iii) whether a Default or Event of
         Default then exists, (iv) failure of any such request or deemed request
         for Loans to be made by the time otherwise required hereunder, (v) the
         date of such Mandatory Borrowing, or (vi) any reduction in the
         Revolving Committed Amount or any termination of the Commitments. In
         the event that any Mandatory Borrowing cannot for any reason be made on
         the date otherwise required above (including, without limitation, as a
         result of the commencement of a proceeding under the Bankruptcy Code
         with respect to a Borrower), then each such Lender hereby agrees that
         it shall forthwith fund (as of the date the Mandatory Borrowing would
         otherwise have occurred, but adjusted for any payments received from
         the Borrowers on or after such date and prior to such purchase) its
         Participation Interest in the outstanding LOC Obligations; provided,
         further, that in the event any Lender shall fail to fund its
         Participation Interest on the day the Mandatory Borrowing would
         otherwise have occurred, then the amount of such Lender's unfunded
         Participation Interest therein shall bear interest payable to the
         Issuing Lender upon demand, at the rate equal to, if paid



                                       16


         within two Business Days of such date, the Federal Funds Rate, and
         thereafter at a rate equal to the Base Rate.

                  (f) Designation of Subsidiaries as Account Parties.
         Notwithstanding anything to the contrary set forth in this Credit
         Agreement, a Letter of Credit issued hereunder may contain a statement
         to the effect that such Letter of Credit is issued for the account of a
         Subsidiary of the Borrowers; provided that notwithstanding such
         statement, the Borrowers shall be the actual account party for all
         purposes of this Credit Agreement for such Letter of Credit and such
         statement shall not affect the Borrowers' reimbursement obligations
         hereunder with respect to such Letter of Credit.

                  (g) Modification and Extension. The issuance of any
         supplement, modification, amendment, renewal, or extension to any
         Letter of Credit shall, for purposes hereof, be treated in all respects
         the same as the issuance of a new Letter of Credit hereunder.

                  (h) Uniform Customs and Practices. The Issuing Lender may have
         the Letters of Credit be subject to The Uniform Customs and Practice
         for Documentary Credits (the "UCP") or the International Standby
         Practices 1998 (the "ISP98"), in either case as published as of the
         date of issue by the International Chamber of Commerce, in which case
         the UCP or ISP98, as applicable, may be incorporated therein and deemed
         in all respects to be a part thereof.

                  (i) Responsibility of Issuing Lender. It is expressly
         understood and agreed that the obligations of the Issuing Lender
         hereunder to the Lenders are only those expressly set forth in this
         Credit Agreement and that the Issuing Lender shall be entitled to
         assume that the conditions precedent set forth in Section 5.2 have been
         satisfied unless it shall have acquired actual knowledge that any such
         condition precedent has not been satisfied; provided, however, that
         nothing set forth in this Section 2.2 shall be deemed to prejudice the
         right of any Lender to recover from the Issuing Lender any amounts made
         available by such Lender to the Issuing Lender pursuant to this Section
         2.2 in the event that it is determined by a court of competent
         jurisdiction that the payment with respect to a Letter of Credit
         constituted gross negligence or willful misconduct on the part of the
         Issuing Lender.

                  (j) Conflict with LOC Documents. In the event of any conflict
         between this Credit Agreement and any LOC Document, this Credit
         Agreement shall govern.

                  (k) Indemnification of Issuing Lender.

                                    (i) In addition to its other obligations
                  under this Credit Agreement, the Borrowers hereby agree to
                  protect, indemnify, pay and save the Issuing Lender harmless
                  from and against any and all claims, demands, liabilities,
                  damages, losses, costs, charges and expenses (including
                  reasonable attorneys' fees) that the Issuing Lender may incur
                  or be subject to as a consequence, direct



                                       17


                  or indirect, of (A) the issuance of any Letter of Credit or
                  (B) the failure of the Issuing Lender to honor a drawing under
                  a Letter of Credit as a result of any act or omission, whether
                  rightful or wrongful, of any present or future de jure or de
                  facto government or Governmental Authority (all such acts or
                  omissions, herein called "Government Acts").

                                    (ii) As between the Borrowers and the
                  Issuing Lender, the Borrowers shall assume all risks of the
                  acts, omissions or misuse of any Letter of Credit by the
                  beneficiary thereof. The Issuing Lender shall not be
                  responsible for: (A) the form, validity, sufficiency,
                  accuracy, genuineness or legal effect of any document
                  submitted by any party in connection with the application for
                  and issuance of any Letter of Credit, even if it should in
                  fact prove to be in any or all respects invalid, insufficient,
                  inaccurate, fraudulent or forged; (B) the validity or
                  sufficiency of any instrument transferring or assigning or
                  purporting to transfer or assign any Letter of Credit or the
                  rights or benefits thereunder or proceeds thereof, in whole or
                  in part, that may prove to be invalid or ineffective for any
                  reason; (C) failure of the beneficiary of a Letter of Credit
                  to comply fully with conditions required in order to draw upon
                  a Letter of Credit; (D) errors, omissions, interruptions or
                  delays in transmission or delivery of any messages, by mail,
                  cable, telegraph, telex or otherwise, whether or not they be
                  in cipher; (E) errors in interpretation of technical terms;
                  (F) any loss or delay in the transmission or otherwise of any
                  document required in order to make a drawing under a Letter of
                  Credit or of the proceeds thereof; and (G) any consequences
                  arising from causes beyond the control of the Issuing Lender,
                  including, without limitation, any Government Acts. None of
                  the above shall affect, impair, or prevent the vesting of the
                  Issuing Lender's rights or powers hereunder.

                                    (iii) In furtherance and extension and not
                  in limitation of the specific provisions hereinabove set
                  forth, any action taken or omitted by the Issuing Lender,
                  under or in connection with any Letter of Credit or the
                  related certificates, if taken or omitted in good faith, shall
                  not put the Issuing Lender under any resulting liability to
                  the Borrowers. It is the intention of the parties that this
                  Credit Agreement shall be construed and applied to protect and
                  indemnify the Issuing Lender against any and all risks
                  involved in the issuance of the Letters of Credit, all of
                  which risks are hereby assumed by the Borrowers, including,
                  without limitation, any and all risks of the acts or
                  omissions, whether rightful or wrongful, of any present or
                  future Government Acts. The Issuing Lender shall not, in any
                  way, be liable for any failure by the Issuing Lender or anyone
                  else to pay any drawing under any Letter of Credit as a result
                  of any Government Acts or any other cause beyond the control
                  of the Issuing Lender.

                                    (iv) Nothing in this subsection (k) is
                  intended to limit the reimbursement obligation of the
                  Borrowers contained in this Section 2.2. The obligations of
                  the Borrowers under this subsection (k) shall survive the
                  termination of this Credit Agreement. No act or omission of
                  any current or prior



                                       18


                  beneficiary of a Letter of Credit shall in any way affect or
                  impair the rights of the Issuing Lender to enforce any right,
                  power or benefit under this Credit Agreement.

                                    (v) Notwithstanding anything to the contrary
                  contained in this subsection (k) or any of the Credit
                  Documents, the Borrowers shall have no obligation to indemnify
                  the Issuing Lender in respect of any liability incurred by the
                  Issuing Lender arising solely out of the negligence or willful
                  misconduct of the Issuing Lender, as determined by a court of
                  competent jurisdiction. Nothing in this Credit Agreement shall
                  relieve the Issuing Lender of any liability to the Borrowers
                  in respect of any action taken by the Issuing Lender which
                  action constitutes negligence or willful misconduct of the
                  Issuing Lender or a violation of the UCP, the ISP98 or Uniform
                  Commercial Code (as applicable), as determined by a court of
                  competent jurisdiction.

         2.3 METHOD OF BORROWING FOR LOANS.

         By no later than 11:00 a.m. (a) on the date of the requested borrowing
of Loans that will be Base Rate Loans or (b) three Business Days prior to the
date of the requested borrowing of Loans that will be Eurodollar Loans, the
Borrowers shall submit a written Notice of Borrowing in the form of Exhibit 2.3
to the Agent setting forth (i) the amount requested, (ii) whether such Loans
shall accrue interest at the Base Rate or the Adjusted Eurodollar Rate, (iii)
with respect to Loans that will be Eurodollar Loans, the Interest Period
applicable thereto and (iv) certification that the Borrowers have complied in
all respects with Section 5.2.

         2.4 FUNDING OF LOANS.

         Upon receipt of a Notice of Borrowing, the Agent shall promptly inform
the Lenders as to the terms thereof. Each such Lender shall make its Commitment
Percentage of the requested Loans available to the Agent by 2:00 p.m. on the
date specified in the Notice of Borrowing by deposit, in Dollars, of immediately
available funds at the Agency Services Address. The amount of the requested
Loans will then be made available to the Borrowers by the Agent by crediting the
account of the Borrowers on the books of such office of the Agent, to the extent
the amount of such Loans are made available to the Agent.

         No Lender shall be responsible for the failure or delay by any other
Lender in its obligation to make Loans hereunder; provided, however, that the
failure of any Lender to fulfill its obligations hereunder shall not relieve any
other Lender of its obligations hereunder. Unless the Agent shall have been
notified by any Lender prior to the date of any such Loan that such Lender does
not intend to make available to the Agent its portion of the Loans to be made on
such date, the Agent may assume that such Lender has made such amount available
to the Agent on the date of such Loans, and the Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to do so)
make available to the Borrowers a corresponding amount. If such corresponding
amount is not in fact made available to the Agent, the Agent shall be able to
recover such corresponding amount from such Lender. If such Lender does not pay
such corresponding



                                       19


amount forthwith upon the Agent's demand therefor, the Agent will promptly
notify the Borrowers and the Borrowers shall immediately pay such corresponding
amount within two Business Days to the Agent. The Agent shall also be entitled
to recover from the Lender or the Borrowers, as the case may be, interest on
such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrowers to the
date such corresponding amount is recovered by the Agent at a per annum rate
equal to (a) from the Borrowers at the applicable rate for such Loan pursuant to
the Notice of Borrowing and (b) from a Lender at the Federal Funds Rate.

         2.5 CONTINUATIONS AND CONVERSIONS.

         The Borrowers shall have the option (subject to the limitations set
forth below), on any Business Day, to continue existing Eurodollar Loans for a
subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or
to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a)
each such continuation or conversion must be requested by the Borrowers pursuant
to a written Notice of Continuation/Conversion, in the form of Exhibit 2.5, in
compliance with the terms set forth below, (b) if a Eurodollar Loan is continued
or converted into a Base Rate Loan on any day other than the last day of the
Interest Period applicable thereto, then the Borrowers shall be subject to the
provisions set forth in Section 4.3, (c) Eurodollar Loans may not be continued
nor may Base Rate Loans be converted into Eurodollar Loans during the existence
and continuation of a Default or Event of Default and (d) any request to extend
a Eurodollar Loan that fails to comply with the terms hereof or any failure to
request an extension of a Eurodollar Loan at the end of an Interest Period shall
constitute a conversion to a Base Rate Loan on the last day of the applicable
Interest Period. Each continuation or conversion must be requested by the
Borrowers no later than 11:00 a.m. (i) on the date for a requested conversion of
a Eurodollar Loan to a Base Rate Loan or (ii) three Business Days prior to the
date for a requested continuation of a Eurodollar Loan or conversion of a Base
Rate Loan to a Eurodollar Loan, in each case pursuant to a written Notice of
Continuation/Conversion submitted to the Agent which shall set forth (A) whether
the Borrowers wish to continue or convert such Loans and (B) if the request is
to continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan,
the Interest Period applicable thereto.

         2.6 MINIMUM AMOUNTS.

         Each request for a Loan or a conversion or continuation hereunder shall
be subject to the following requirements: (a) each Eurodollar Loan shall be in a
minimum amount of $10,000,000 (and in integral multiples of $1,000,000 in excess
thereof), (b) each Base Rate Loan shall be in a minimum amount of the lesser of
$10,000,000 (and in integral multiples of $1,000,000 in excess thereof) or the
remaining amount available to be borrowed and (c) no more than ten Eurodollar
Loans shall be outstanding hereunder at any one time. For the purposes of this
Section, all Eurodollar Loans with the same Interest Periods that begin and end
on the same date shall be considered as one Eurodollar Loan, but Eurodollar
Loans with different Interest Periods, even if they begin on the same date,
shall be considered separate Eurodollar Loans.



                                       20


         2.7 REDUCTIONS OF REVOLVING COMMITTED AMOUNTS.

         Upon at least five Business Days' notice, the Borrowers shall have the
right to permanently terminate or reduce the aggregate unused amount of the
Revolving Committed Amount at any time or from time to time; provided that (a)
each partial reduction shall be in an aggregate amount at least equal to
$10,000,000 and in integral multiples of $1,000,000 above such amount, (b) no
reduction shall be made which would reduce the Revolving Committed Amount to an
amount less than the aggregate amount of the then outstanding Loans plus the
aggregate amount of the then outstanding LOC Obligations. Any reduction in (or
termination of) the Revolving Committed Amount shall be permanent and may not be
reinstated.

         2.8 NOTES.

         The Loans made by the Lenders shall be evidenced by a duly executed
promissory note of the Borrowers payable to each Lender in substantially the
form of Exhibit 2.8 (the "Notes").

         2.9 JOINT AND SEVERAL LIABILITY OF THE BORROWERS.

         Subject to Section 2.10:

                  (a) Each of the Borrowers is accepting joint and several
         liability hereunder in consideration of the financial accommodation to
         be provided by the Lenders under this Credit Agreement, for the mutual
         benefit, directly and indirectly, of each of the Borrowers and in
         consideration of the undertakings of each of the Borrowers to accept
         joint and several liability for the obligations of each of them.

                  (b) Each of the Borrowers jointly and severally hereby
         irrevocably and unconditionally accepts, not merely as a surety but
         also as a co-debtor, joint and several liability with the other
         Borrower with respect to the payment and performance of all of the
         obligations arising under this Credit Agreement and the other Credit
         Documents, it being the intention of the parties hereto that all of the
         Borrowers Obligations shall be the joint and several obligations of
         each of the Borrowers without preferences or distinction between them.

                  (c) If and to the extent that either of the Borrowers shall
         fail to make any payment with respect to any of the obligations
         hereunder as and when due or to perform any of such obligations in
         accordance with the terms thereof, then in each such event, the other
         Borrower will make such payment with respect to, or perform, such
         obligation.

                  (d) The provisions of this Section 2.9 are made for the
         benefit of the Lenders and their successors and assigns, and may be
         enforced by them from time to time against either of the Borrowers as
         often as occasion therefor may arise and without requirement on the
         part of the Lenders first to marshall any of its claims or to exercise
         any of its rights against the other Borrower or to exhaust any remedies
         available to it against the other Borrower or to resort to any other
         source or means of obtaining payment of any of the



                                       21


         Borrowers Obligations hereunder or to elect any other remedy. The
         provisions of this Section 2.9 shall remain in effect until all the
         Borrowers Obligations hereunder shall have been paid in full or
         otherwise fully satisfied. If at any time, any payment, or any part
         thereof, made in respect of any of the Borrowers Obligations, is
         rescinded or must otherwise be restored or returned by the Lenders upon
         the insolvency, bankruptcy or reorganization of any of the Borrowers,
         or otherwise, the provisions of this Section 2.9 will forthwith be
         reinstated and in effect as though such payment had not been made.

                  (e) Notwithstanding any provision to the contrary contained
         herein or in any of the other Credit Documents, to the extent the
         obligations of either Borrower shall be adjudicated to be invalid or
         unenforceable for any reason (including, without limitation, because of
         any applicable state or federal law relating to fraudulent conveyances
         or transfers) then the obligations of such Borrower hereunder shall be
         limited to the maximum amount that is permissible under applicable law
         (whether federal or state and including, without limitation, the
         Bankruptcy Code).

                  (f) Each Borrower hereby appoints the other Borrower to act as
         its agent for all purposes under this Credit Agreement (including,
         without limitation, with respect to all matters relating to the
         borrowing and repayment of Loans) and agrees that (i) a Borrower may
         execute such documents on behalf of the other Borrower as it deems
         appropriate and the other Borrower shall be obligated by all of the
         terms of any such document executed on its behalf, (ii) any notice or
         communication delivered by the Agent or a Lender to a Borrower shall be
         deemed delivered to both Borrowers and (iii) the Agent and the Lenders
         may accept, and be permitted to rely on, any document, instrument or
         agreement executed by one Borrower on behalf of the other Borrower.

         2.10 LIMITATION OF LIABILITY OF BORROWERS.

         Notwithstanding anything in this Credit Agreement or in the Notes to
the contrary, including without limitation, Section 2.9:

                  (a) Duke Energy Field Services Corporation shall have no
         rights or obligations as a Borrower, and will not be subject to the
         terms of the Credit Documents, until (i) consummation of the Merger or
         a Corporate Conversion and (ii) notification from the Borrowers to the
         Lenders that the Merger or a Corporate Conversion has occurred and
         that, going forward, Duke Energy Field Services Corporation will
         irrevocably have all of the rights and obligations of a Borrower,
         jointly and severally with Duke Energy Field Services, LLC, under the
         Credit Documents (including, without limitation, any Loans made prior
         to such notification) and will be subject to the terms of the Credit
         Documents.

                  (b) If the Merger occurs, the agreement by Duke Energy Field
         Services Corporation to become jointly and severally liable with Duke
         Energy Field Services, LLC for the indebtedness under the Credit
         Documents pursuant to subsection (a) above shall be accomplished in two
         phases: (i) initially, Duke Energy Field Services Corporation shall
         become directly liable for 69.7% of such indebtedness and shall become
         indirectly liable for




                                       22


         30.3% of such indebtedness through Phillips Gas Company ("PGC"), a
         Delaware corporation and, subsequent to the first step of the Merger, a
         wholly-owned Subsidiary of Duke Energy Field Services Corporation, in
         each case jointly and severally with Duke Energy Field Services, LLC,
         which shall remain jointly and severally liable for 100% of such
         indebtedness; and (ii) immediately thereafter, upon the merger of PGC
         with and into Duke Energy Field Services Corporation, Duke Energy Field
         Services Corporation shall become directly liable for the 30.3% of such
         indebtedness previously attributed to it through its ownership of PGC.

                  (c) On or after the date that, pursuant to subsection (a) or
         subsections (a) and (b) above, Duke Energy Field Services Corporation
         has become directly liable for 100% of the indebtedness, rights and
         obligations of a Borrower under the Credit Documents, the Borrowers
         may, upon written notice to the Lenders, release Duke Energy Field
         Services, LLC from its joint and several obligations under the Credit
         Documents; provided that if as a result of a Corporate Conversion Duke
         Energy Field Services LLC is converted into a "C" Corporation it shall
         not be released from its obligations hereunder. Thereafter, Duke Energy
         Field Services, LLC will have no rights or obligations under the Credit
         Documents, will no longer be subject to the terms of the Credit
         Documents (except as the terms thereof may relate to it if it
         constitutes a Material Subsidiary) and all obligations owing pursuant
         to the Credit Documents shall be the sole responsibility of Duke Energy
         Field Services Corporation.

                  (d) Notwithstanding the use of the term "Borrowers" as set
         forth in the Credit Documents: (i) prior to Duke Energy Field Services
         Corporation having any rights or obligations as a Borrower and being
         subject to the terms of the Credit Agreement, as set forth in clause
         (a) above, the terms "Borrowers" or "a Borrower" as used in the Credit
         Documents shall only mean a reference to Duke Energy Field Services,
         LLC and (ii) on and after the date that Duke Energy Field Services, LLC
         is released from liability, in accordance with clause (c) above, the
         terms "Borrowers" or "a Borrower" as used in the Credit Documents shall
         only mean a reference to Duke Energy Field Services Corporation.

                                   SECTION 3.

                                    PAYMENTS

         3.1 INTEREST.

                  (a) Interest Rate.

                           (i) All Base Rate Loans shall accrue interest at the
                  Base Rate.

                           (ii) All Eurodollar Loans shall accrue interest at
                  the Adjusted Eurodollar Rate applicable to such Eurodollar
                  Loan.



                                       23


                  (b) Default Rate of Interest. Upon the occurrence, and during
         the continuation, of an Event of Default, all past due principal of
         and, to the extent permitted by law, past due interest on, the Loans
         and any other past due amounts owing hereunder or under the other
         Credit Documents shall bear interest, payable on demand, at a per annum
         rate equal to one percent (1%) plus the rate which would otherwise be
         applicable (or if no rate is applicable, then the rate for Loans that
         are Base Rate Loans plus one percent (1%) per annum).

                  (c) Interest Payments. Interest on Loans shall be due and
         payable in arrears on each Interest Payment Date.

         3.2 PREPAYMENTS.

                  (a) Voluntary Prepayments. The Borrowers shall have the right
         to prepay Loans in whole or in part from time to time without premium
         or penalty; provided, however, that (i) Eurodollar Loans may only be
         prepaid on three Business Days' prior written notice to the Agent and
         any prepayment of Eurodollar Loans will be subject to Section 4.3; and
         (ii) each such partial prepayment of Loans shall be in the minimum
         principal amount of $10,000,000. Any payments made under this Section
         3.2(a) shall be applied as the Borrowers may elect; provided that if
         the Borrowers fail to specify how a voluntary prepayment should be
         applied then such prepayment shall be applied first to Base Rate Loans
         and then to Eurodollar Loans in direct order of Interest Period
         maturities.

                  (b) Mandatory Prepayments. If at any time (A) the amount of
         Loans outstanding plus the aggregate amount of LOC Obligations
         outstanding exceeds the Revolving Committed Amount or (B) the aggregate
         amount of LOC Obligations outstanding exceeds the LOC Committed Amount,
         the Borrowers shall immediately make a principal payment to the Agent
         in a manner and in an amount necessary to be in compliance with
         Sections 2.1 and 2.2, as applicable, and as directed by the Agent. All
         amounts required to be paid pursuant to this Section 3.2(b) shall be
         (i) applied first to Loans and then to a cash collateral account in
         respect of LOC Obligations, (ii) subject to Section 4.3 and (iii)
         applied first to Base Rate Loans and then to Eurodollar Loans in the
         direct order of Interest Period maturities.

         3.3 PAYMENT IN FULL AT MATURITY.

                  (a) Subject to Section 3.3(b) below, on the Maturity Date, the
         entire outstanding principal balance of all Loans and all LOC
         Obligations, together with accrued but unpaid interest and all other
         sums owing under this Credit Agreement, shall be due and payable in
         full, unless accelerated sooner pursuant to Section 9.2.

                  (b) On or before ten Business Days prior to the Maturity Date,
         the Borrowers may, as long as no Default or Event of Default exists and
         is continuing, notify the Agent in writing (and the Agent shall
         promptly forward such notice to the Lenders) that, as of the Maturity
         Date, they are converting the outstanding Loans to a term loan which
         shall be due and payable in full on the date one year subsequent to the
         Maturity Date (the



                                       24


         "Term Out Maturity Date"). It is understood and agreed that subsequent
         to the Maturity Date, (i) the Borrowers may no longer request, and the
         Lenders are no longer obligated to make or issue, new Loans or Letters
         of Credit, (ii) any amounts repaid may not be reborrowed, (iii)
         interest shall accrue on the outstanding Loans, at the option of the
         Borrowers, in accordance with the terms of Section 2.5 and, as set
         forth in the definition of Applicable Margin, the Applicable Margin for
         Eurodollar Loans subsequent to the Maturity Date shall apply and (iv)
         the Borrowers shall have the right to prepay all or a portion of the
         outstanding Loans in accordance with Section 3.2(a).

         3.4 FEES.

                  (a) Commitment Fees. In consideration of the Revolving
         Committed Amount being made available by the Lenders, the Borrowers
         agree to pay to the Agent, for the pro rata benefit of each Lender, a
         fee equal to the Applicable Margin for Commitment Fees on the Unused
         Commitment (the "Commitment Fees"). The accrued Commitment Fees shall
         be due and payable in arrears on the first Business Day after the end
         of each fiscal quarter of the Borrowers (as well as on the Maturity
         Date) for the immediately preceding fiscal quarter (or portion
         thereof), beginning with the first of such dates to occur after the
         Closing Date.

                  (b) Utilization Fees. If, on any day, the sum of the aggregate
         outstanding principal amount of all Loans plus the outstanding amount
         of LOC Obligations exceeds the product of (A) one-third (1/3) times (B)
         the Revolving Committed Amount, the Borrowers agree to pay to the
         Agent, for the pro rata benefit of each Lender, a per annum fee equal
         to the Applicable Margin for Utilization Fees on the Utilized Revolving
         Committed Amount (the "Utilization Fees"). The accrued Utilization
         Fees, if any, shall be due and payable in arrears on the first Business
         Day after the end of each fiscal quarter of the Borrowers (as well as
         on the Maturity Date and the Term Out Maturity Date, if applicable) for
         the immediately preceding fiscal quarter (or portion thereof),
         beginning with the first of such dates to occur after the Closing Date.

                  (c) Letter of Credit Fees.

                           (i) Letter of Credit Fees. In consideration of the
                  issuance of Letters of Credit hereunder, the Borrowers agree
                  to pay to the Issuing Lender, for the pro rata benefit of each
                  Lender, a per annum fee equal to the Applicable Margin for
                  Eurodollar Loans on or before the Maturity Date on the
                  aggregate stated amount for each Letter of Credit from the
                  date of issuance to the date of expiration (the "Letter of
                  Credit Fees"). The accrued Letter of Credit Fees shall be due
                  and payable in arrears on the first Business Day after the end
                  of each fiscal quarter of the Borrowers (as well as on the
                  Maturity Date) for the immediately preceding fiscal quarter
                  (or portion thereof), beginning with the first of such dates
                  to occur after the Closing Date.

                           (ii) Issuing Lender Fees. In addition to the Letter
                  of Credit Fees payable pursuant to subsection (i) above, the
                  Borrowers shall pay to the Issuing



                                       25


                  Lender for its own account, without sharing by the other
                  Lenders, (A) a fee equal to one-eighth of one percent (.125%)
                  per annum on the total sum of all Letters of Credit issued by
                  the Issuing Lender, such fee to be paid on the date of
                  issuance of any Letter of Credit and (B) the customary charges
                  from time to time to the Issuing Lender for its services in
                  connection with the issuance, amendment, payment, transfer,
                  administration, cancellation and conversion of, and drawings
                  under, such Letters of Credit (collectively, the "Issuing
                  Lender Fees").

         3.5 PLACE AND MANNER OF PAYMENTS.

         All payments of principal, interest, fees, expenses and other amounts
to be made by a Borrower under this Credit Agreement shall be made without
setoff, deduction or counterclaim and received not later than 2:00 p.m. on the
date when due in Dollars and in immediately available funds by the Agent at the
Agency Services Address. A Borrower shall, at the time it makes any payment
under this Credit Agreement, specify to the Agent the Loans, Letters of Credit,
fees or other amounts payable by a Borrower hereunder to which such payment is
to be applied (and in the event that it fails to specify, or if such application
would be inconsistent with the terms hereof, the Agent shall distribute such
payment to the Lenders in such manner as it reasonably determines in its sole
discretion). The Agent will distribute such payments to the applicable Lenders
on the same Business Day if any such payment is received prior to 2:00 p.m.;
otherwise the Agent will distribute each payment to the applicable Lenders prior
to 12:00 noon on the next succeeding Business Day. Whenever any payment
hereunder shall be stated to be due on a day which is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day (subject
to accrual of interest and fees for the period of such extension), except that
in the case of Eurodollar Loans, if the extension would cause the payment to be
made in the next following calendar month, then such payment shall be made on
the next preceding Business Day.

         3.6 PRO RATA TREATMENT.

         (a) Loans/Fees. Except to the extent otherwise provided herein, all
Loans, each payment or prepayment of principal of any Loan, each payment of
interest on the Loans, each payment of Commitment Fees, each payment of
Utilization Fees, each payment of Letter of Credit Fees, each reduction of the
Revolving Committed Amount and each conversion or continuation of any Loans,
shall be allocated pro rata among the applicable Lenders in accordance with
their respective Commitment Percentages; provided that, if any Lender shall have
failed to pay its applicable pro rata share of any Loan, then any amount to
which such Lender would otherwise be entitled pursuant to this Section 3.6 shall
instead be payable to the Agent until the share of such Loan not funded by such
Lender has been repaid and any interest owed by such Lender as result of such
failure to fund has been paid; and provided further, that in the event any
amount paid to any Lender pursuant to this Section 3.6 is rescinded or must
otherwise be returned by the Agent, each Lender shall, upon the written request
of the Agent, repay to the Agent the amount so paid to such Lender, with
interest for the period commencing on the date such payment is returned by the
Agent until the date the Agent receives such repayment at a rate per annum equal
to, during the period to but excluding the date two Business Days after such
request, the Federal Funds Rate, and thereafter, the Base Rate plus one percent
(1%) per annum.



                                       26


         (b) Letters of Credit. Each payment of unreimbursed drawings in respect
of LOC Obligations shall be allocated to each Lender pro rata in accordance with
its Commitment Percentage; provided that, if any Lender shall have failed to pay
its applicable pro rata share of any drawing under any Letter of Credit, then
any amount to which such Lender would otherwise be entitled pursuant to this
subsection (b) shall instead be payable to the Issuing Lender; provided further,
that in the event any amount paid to any Lender pursuant to this subsection (b)
is rescinded or must otherwise be returned by the Issuing Lender, each Lender
shall, upon the written request of the Issuing Lender, repay to the Agent for
the account of the Issuing Lender the amount so paid to such Lender, with
interest for the period commencing on the date such payment is returned by the
Issuing Lender until the date the Issuing Lender receives such repayment at a
rate per annum equal to, during the period to but excluding the date two
Business Days after such request, the Federal Funds Rate, and thereafter, the
Base Rate plus one percent (1%) per annum.

         3.7 COMPUTATIONS OF INTEREST AND FEES.

                  (a) Except for Base Rate Loans that are based upon the Prime
         Rate, on which interest shall be computed on the basis of a 365 or 366
         day year as the case may be, all computations of interest and fees
         hereunder shall be made on the basis of the actual number of days
         elapsed over a year of 360 days.

                  (b) It is the intent of the Lenders and the Borrowers to
         conform to and contract in strict compliance with applicable usury law
         from time to time in effect. All agreements between the Lenders and the
         Borrowers are hereby limited by the provisions of this paragraph which
         shall override and control all such agreements, whether now existing or
         hereafter arising and whether written or oral. In no way, nor in any
         event or contingency (including but not limited to prepayment or
         acceleration of the maturity of any obligation), shall the interest
         taken, reserved, contracted for, charged, or received under this Credit
         Agreement, under the Notes or otherwise, exceed the maximum nonusurious
         amount permissible under applicable law. If, from any possible
         construction of any of the Credit Documents or any other document,
         interest would otherwise be payable in excess of the maximum
         nonusurious amount, any such construction shall be subject to the
         provisions of this paragraph and interest owing pursuant to such
         documents shall be automatically reduced to the maximum nonusurious
         amount permitted under applicable law, without the necessity of
         execution of any amendment or new document. If any Lender shall ever
         receive anything of value which is characterized as interest on the
         Loans under applicable law and which would, apart from this provision,
         be in excess of the maximum lawful amount, an amount equal to the
         amount which would have been excessive interest shall, without penalty,
         be applied to the reduction of the principal amount owing on the Loans
         and not to the payment of interest, or refunded to the Borrowers or the
         other payor thereof if and to the extent such amount which would have
         been excessive exceeds such unpaid principal amount of the Loans. The
         right to demand payment of the Loans or any other indebtedness
         evidenced by any of the Credit Documents does not include the right to
         receive any interest which has not otherwise accrued on the date of
         such demand, and the Lenders do not intend



                                       27


         to charge or receive any unearned interest in the event of such demand.
         All interest paid or agreed to be paid to the Lenders with respect to
         the Loans shall, to the extent permitted by applicable law, be
         amortized, prorated, allocated, and spread throughout the full stated
         term (including any renewal or extension) of the Loans so that the
         amount of interest on account of such indebtedness does not exceed the
         maximum nonusurious amount permitted by applicable law.

         3.8 SHARING OF PAYMENTS.

                  Each Lender agrees that, in the event that any Lender shall
         obtain payment in respect of any Loan, any unreimbursed drawing with
         respect to any LOC Obligations or any other obligation owing to such
         Lender under this Credit Agreement through the exercise of a right of
         set-off, banker's lien, counterclaim or otherwise (including, but not
         limited to, pursuant to the Bankruptcy Code) in excess of its pro rata
         share as provided for in this Credit Agreement, such Lender shall
         promptly purchase from the other Lenders a participation in such Loans,
         LOC Obligations and other obligations, in such amounts and with such
         other adjustments from time to time, as shall be equitable in order
         that all Lenders share such payment in accordance with their respective
         ratable shares as provided for in this Credit Agreement. Each Lender
         further agrees that if a payment to a Lender (which is obtained by such
         Lender through the exercise of a right of set-off, banker's lien,
         counterclaim or otherwise) shall be rescinded or must otherwise be
         restored, each Lender which shall have shared the benefit of such
         payment shall, by repurchase of a participation theretofore sold,
         return its share of that benefit to each Lender whose payment shall
         have been rescinded or otherwise restored. The Borrowers agree that any
         Lender so purchasing such a participation may, to the fullest extent
         permitted by law, exercise all rights of payment, including set-off,
         banker's lien or counterclaim, with respect to such participation as
         fully as if such Lender were a holder of such Loan or other obligation
         in the amount of such participation. Except as otherwise expressly
         provided in this Credit Agreement, if any Lender shall fail to remit to
         the Agent or any other Lender an amount payable by such Lender to the
         Agent or such other Lender pursuant to this Credit Agreement on the
         date when such amount is due, such payments shall accrue interest
         thereon, for each day from the date such amount is due until the day
         such amount is paid to the Agent or such other Lender, at a rate per
         annum equal to the Federal Funds Rate. If under any applicable
         bankruptcy, insolvency or other similar law, any Lender receives a
         secured claim in lieu of a setoff to which this Section 3.8 applies,
         such Lender shall, to the extent practicable, exercise its rights in
         respect of such secured claim in a manner consistent with the rights of
         the Lenders under this Section 3.8 to share in the benefits of any
         recovery on such secured claim.

         3.9 EVIDENCE OF DEBT.

                  (a) Each Lender shall maintain an account or accounts
         evidencing each Loan made by such Lender to the Borrowers from time to
         time, including the amounts of principal and interest payable and paid
         to such Lender from time to time under this Credit Agreement. Each
         Lender will make reasonable efforts to maintain the accuracy of its



                                       28


         account or accounts and to promptly update its account or accounts from
         time to time, as necessary.

                  (b) The Agent shall maintain the Register pursuant to Section
         11.3(c), and a subaccount for each Lender, in which Register and
         subaccounts (taken together) shall be recorded (i) the amount, type and
         Interest Period of each such Loan hereunder, (ii) the amount of any
         principal or interest due and payable or to become due and payable to
         each Lender hereunder and (iii) the amount of any sum received by the
         Agent hereunder from or for the account of the Borrowers and each
         Lender's share thereof. The Agent will make reasonable efforts to
         maintain the accuracy of the subaccounts referred to in the preceding
         sentence and to promptly update such subaccounts from time to time, as
         necessary.

                  (c) The entries made in the Register and subaccounts
         maintained pursuant to subsection (b) of this Section 3.9, and the
         entries made in the accounts maintained pursuant to subsection (a) of
         this Section 3.9, if consistent with the entries of the Agent, shall be
         prima facie evidence of the existence and amounts of the obligations of
         the Borrowers therein recorded; provided, however, that the failure of
         any Lender or the Agent to maintain any such account, such Register or
         such subaccount, as applicable, or any error therein, shall not in any
         manner affect the obligation of the Borrowers to repay the Loans made
         by such Lender in accordance with the terms hereof.

                                   SECTION 4.

                      ADDITIONAL PROVISIONS REGARDING LOANS

         4.1 EURODOLLAR LOAN PROVISIONS.

                  (a) Unavailability. If, on or prior to the first day of any
         Interest Period, (i) the Agent shall have determined in good faith
         (which determination shall be conclusive and binding upon the
         Borrowers) that (A) Dollar deposits are not generally available in the
         London interbank Eurodollar market in the applicable principal amounts
         and Interest Period of a requested Eurodollar Loan or (B) by reason of
         circumstances affecting the relevant market, adequate and reasonable
         means do not exist for ascertaining the Eurodollar Rate for such
         Interest Period, or (ii) the Agent shall have received notice from the
         Required Lenders that the Eurodollar Rate determined or to be
         determined for such Interest Period will not adequately and fairly
         reflect the cost to the Lenders of making or maintaining Eurodollar
         Loans for such Interest Period (as conclusively certified by such
         Lenders), the Agent shall give notice thereof to the Borrowers and the
         Lenders as soon as practicable thereafter. Upon delivery of such
         notice, (A) any Eurodollar Loans requested to be made on the first day
         of such Interest Period shall be made as Base Rate Loans, (B) any Loans
         that were to have been converted to or continued as Eurodollar Loans
         shall be prepaid by the Borrowers or converted to or continued as Base
         Rate Loans and (C) any outstanding Eurodollar Loans shall be converted,
         on the first day of such Interest Period, to Base Rate Loans. Until the



                                       29


         Agent has withdrawn such notice, no further Eurodollar Loans shall be
         made or continued as such, nor shall the Borrowers have the right to
         convert Base Rate Loans to Eurodollar Loans.

                  (b) Change in Legality. Notwithstanding any other provision
         herein, if any change, after the date hereof, in any law, governmental
         rule, regulation, guideline or order (including the introduction of any
         new law or governmental rule, regulation, guideline or order) or in the
         interpretation or administration thereof by any Governmental Authority
         charged with the interpretation or administration thereof shall make it
         unlawful for any Lender to make or maintain any Eurodollar Loan then,
         by written notice to the Borrowers and to the Agent, such Lender may:

                           (i) declare that Eurodollar Loans and conversions to
                  or continuations of Eurodollar Loans, will not thereafter be
                  made by such Lender hereunder, whereupon any request by the
                  Borrowers for, or for conversion into or continuation of,
                  Eurodollar Loans shall, as to such Lender only, be deemed a
                  request for, or for conversion into or continuation of, Base
                  Rate Loans, unless such declaration shall be subsequently
                  withdrawn; and

                           (ii) require that all outstanding Eurodollar Loans
                  made by it be converted to Base Rate Loans in which event all
                  such Eurodollar Loans shall be converted to Base Rate Loans
                  either (A) on the last day of the then current Interest Period
                  applicable to such Eurodollar Loan if such Lender can lawfully
                  continue to maintain and fund such Eurodollar Loan or (B)
                  immediately if such Lender shall determine that it may not
                  lawfully continue to maintain and fund such Eurodollar Loan to
                  such day.

                  (c) Requirements of Law. If at any time a Lender shall incur
         increased costs or reductions in the amounts received or receivable
         hereunder with respect to the making, the commitment to make or the
         maintaining of any Eurodollar Loan because of (i) any change after the
         date hereof in any law, governmental rule, regulation, guideline or
         order (including the introduction of any new law or governmental rule,
         regulation, guideline or order) or in the interpretation or
         administration thereof by any Governmental Authority charged with the
         interpretation or administration thereof, including, without
         limitation, the imposition, modification or deemed applicability of any
         reserves, deposits or similar requirements (such as, for example, but
         not limited to, a change in official reserve requirements) or (ii)
         other circumstances affecting the London interbank Eurodollar market;
         then the Borrowers shall pay to such Lender promptly upon written
         demand therefor, such additional amounts (in the form of an increased
         rate of, or a different method of calculating, interest or otherwise as
         such Lender may determine in its sole discretion) as may be required to
         compensate such Lender for such increased costs or reductions in
         amounts receivable hereunder. If any Lender becomes entitled to claim
         any additional amounts pursuant to this Section 4.1(c), it shall
         provide prompt notice thereof to the Borrowers, through the Agent,
         certifying (A) that one of the events described in this Section 4.1(c)
         has occurred and describing in reasonable detail the nature of such
         event, (B) as to the increased cost or reduced amount resulting from




                                       30


         such event and (C) as to the additional amount demanded by such Lender
         and a reasonably detailed explanation of the calculation thereof
         provided that no such amount shall be payable with respect to any
         period commencing more than 90 days prior to the date such Lender first
         notifies the Borrowers of its intention to demand compensation therefor
         under this Section.

                  (d) Regulation D Compensation. In the event that a Lender is
         required to maintain reserves of the type contemplated by the
         definition of "Eurodollar Reserve Percentage", such Lender may require
         the Borrowers to pay, contemporaneously with each payment of interest
         on the Eurodollar Loans, additional interest on the related Eurodollar
         Loan of such Lender at a rate per annum determined by such Lender up to
         but not exceeding the excess of (i)(A) the applicable London Interbank
         Offered Rate divided by (B) one minus the Eurodollar Reserve Percentage
         over (ii) the applicable London Interbank Offered Rate. Any Lender
         wishing to require payment of such additional interest (x) shall so
         notify the Borrowers and the Agent, in which case such additional
         interest on the Eurodollar Loans of such Lender shall be payable to
         such Lender at the place indicated in such notice with respect to each
         Interest Period commencing at least three Business Days after the
         giving of such notice and (y) shall notify the Borrowers at least three
         Business Days prior to each date on which interest is payable on the
         Eurodollar Loans of the amount then due it under this Section. Each
         such notification shall be accompanied by such information as the
         Borrowers may reasonably request.

         Each determination and calculation made by a Lender under this Section
4.1 shall, absent manifest error, be binding and conclusive on the parties
hereto. Any conversions of Eurodollar Loans made pursuant to this Section 4.1
shall subject the Borrowers to the payments required by Section 4.3 to the
extent applicable. This Section shall survive termination of this Credit
Agreement and the other Credit Documents and payment of the Loans and all other
amounts payable hereunder.

         4.2 CAPITAL ADEQUACY.

         If any Lender has determined that the adoption or becoming effective,
after the date hereof, of any applicable law, rule or regulation regarding
capital adequacy, or any change therein (after the date hereof), or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender (or its parent corporation)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's (or parent corporation's) capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Lender (or
its parent corporation) could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Lender's (or
parent corporation's) policies with respect to capital adequacy), then, upon
notice from such Lender (which shall include the basis and calculations in
reasonable detail supporting the compensation requested in such notice), and
receipt by the Borrowers of such written notice from such Lender (with a copy to
the Agent) the Borrowers shall be obligated to pay to such Lender such
additional amount or amounts as will compensate such Lender on an after tax



                                       31


basis (after taking into account applicable deductions and credits in respect of
the amount so indemnified) for such reduction provided that no such amount shall
be payable with respect to any period commencing more than 90 days prior to the
date such Lender first notifies the Borrowers of its intention to demand
compensation therefor under this Section. Each determination by any Lender of
amounts owing under this Section 4.2 shall, absent manifest error, be conclusive
and binding on the parties hereto. The covenants of this Section 4.2 shall
survive termination of this Credit Agreement and the other Credit Documents and
the payment of the Loans and all other amounts payable hereunder.

         4.3 COMPENSATION.

         The Borrowers promise to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur as a
consequence of (a) default by the Borrowers in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrowers have given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrowers in making any prepayment of a Eurodollar Loan after
the Borrowers have given a notice thereof in accordance with the provisions of
this Credit Agreement, (c) the making of a prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto and (d)
the payment, continuation or conversion of a Eurodollar Loan on a day which is
not the last day of the Interest Period applicable thereto or the failure to
repay a Eurodollar Loan when required by the terms of this Credit Agreement.
Such indemnification may include an amount equal to (i) an amount of interest
calculated at the Eurodollar Rate which would have accrued on the amount in
question, for the period from the date of such prepayment or of such failure to
borrow, convert, continue or repay to the last day of the applicable Interest
Period (or, in the case of a failure to borrow, convert or continue, the
Interest Period that would have commenced on the date of such failure) in each
case at the applicable rate of interest for such Eurodollar Loans provided for
herein minus (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
Eurocurrency market. If any Lender becomes entitled to claim any additional
amounts pursuant to this Section 4.3, it shall provide prompt notice thereof to
the Borrower, through the Agent, as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof. The
covenants in this Section 4.3 shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.

         4.4 TAXES.

                  (a) Except as provided below in this Section 4.4, all payments
         made by the Borrowers under this Credit Agreement and any Notes shall
         be made free and clear of, and without deduction or withholding for or
         on account of, any present or future income, stamp or other taxes,
         levies, imposts, duties, charges, fees, deductions or withholdings, now
         or hereafter imposed, levied, collected, withheld or assessed by any
         court, or governmental body, agency or other official, excluding taxes
         measured by or imposed upon the net income of any Lender or its
         applicable lending office, or any branch or



                                       32


         affiliate thereof, and all franchise taxes, branch taxes, taxes on
         doing business or taxes on the capital or net worth of any Lender or
         its applicable lending office, or any branch or affiliate thereof, in
         each case imposed in lieu of net income taxes: (i) by the jurisdiction
         under the laws of which such Lender, applicable lending office, branch
         or affiliate is organized or is located, or in which its principal
         executive office is located, or any nation within which such
         jurisdiction is located or any political subdivision thereof; or (ii)
         by reason of any connection between the jurisdiction imposing such tax
         and such Lender, applicable lending office, branch or affiliate other
         than a connection arising solely from such Lender having executed,
         delivered or performed its obligations, or received payment under or
         enforced, this Credit Agreement or any Notes. If any such non-excluded
         taxes, levies, imposts, duties, charges, fees, deductions or
         withholdings ("Non-Excluded Taxes") are required to be withheld from
         any amounts payable to an Agent or any Lender hereunder or under any
         Notes, (A) the amounts so payable to the Agent or such Lender shall be
         increased to the extent necessary to yield to the Agent or such Lender
         (after payment of all Non-Excluded Taxes) interest or any such other
         amounts payable hereunder at the rates or in the amounts specified in
         this Credit Agreement and any Notes, provided, however, that the
         Borrowers shall be entitled to deduct and withhold any Non-Excluded
         Taxes and shall not be required to increase any such amounts payable to
         any Lender that is not organized under the laws of the United States of
         America or a state thereof if such Lender fails to comply with the
         requirements of paragraph (b) of this Section 4.4 whenever any
         Non-Excluded Taxes are payable by the Borrowers, and (B) as promptly as
         possible after requested, the Borrowers shall send to the Agent for its
         own account or for the account of such Lender, as the case may be, a
         certified copy of an original official receipt received by the
         Borrowers showing payment thereof. If the Borrowers fail to pay any
         Non-Excluded Taxes when due to the appropriate taxing authority or
         fails to remit to the Agent the required receipts or other required
         documentary evidence, the Borrowers shall indemnify the Agent and any
         Lender for any incremental Non-Excluded Taxes, interest or penalties
         that may become payable by the Agent or any Lender as a result of any
         such failure. The agreements in this Section 4.4 shall survive the
         termination of this Credit Agreement and the payment of the Loans and
         all other amounts payable hereunder.

                  (b) Each Lender that is not incorporated under the laws of the
         United States of America or a state thereof shall:

                                    (i) (A) on or before the date of any payment
                                    by the Borrowers under this Credit Agreement
                                    or the Notes to such Lender, deliver to the
                                    Borrowers and the Agent (x) two duly
                                    completed copies of United States Internal
                                    Revenue Service Form W-8BEN or W-8ECI, or
                                    any successor applicable form, as the case
                                    may be, certifying that it is entitled to
                                    receive payments under this Credit Agreement
                                    and any Notes without deduction or
                                    withholding of any United States federal
                                    income taxes and (y) an Internal Revenue
                                    Service Form W-8 or W-9, or successor



                                       33


                                    applicable form, as the case may be,
                                    certifying that it is entitled to an
                                    exemption from United States backup
                                    withholding tax;

                                            (B) deliver to the Borrowers and the
                                    Agent two further copies of any such form or
                                    certification on or before the date that any
                                    such form or certification expires or
                                    becomes obsolete and after the occurrence of
                                    any event requiring a change in the most
                                    recent form previously delivered by it to
                                    the Borrower; and

                                             (C) obtain such extensions of time
                                    for filing and complete such forms or
                                    certifications as may reasonably be
                                    requested by the Borrowers or the Agent; or

                           (ii) in the case of any such Lender that is not a
                  "bank" within the meaning of Section 881(c)(3)(A) of the
                  Internal Revenue Code, (A) represent to the Borrowers (for the
                  benefit of the Borrowers and the Agent) that it is not a bank
                  within the meaning of Section 881 (c)(3)(A) of the Internal
                  Revenue Code, (B) agree to furnish to the Borrowers, on or
                  before the date of any payment by the Borrowers, with a copy
                  to the Agent, two accurate and complete original signed copies
                  of Internal Revenue Service Form W-8, or successor applicable
                  form, certifying to such Lender's legal entitlement at the
                  date of such certificate to an exemption from U.S. withholding
                  tax under the provisions of Section 881(c) of the Internal
                  Revenue Code with respect to payments to be made under this
                  Credit Agreement and any Notes (and to deliver to the
                  Borrowers and the Agent two further copies of such form on or
                  before the date it expires or becomes obsolete and after the
                  occurrence of any event requiring a change in the most
                  recently provided form and, if necessary, obtain any
                  extensions of time reasonably requested by the Borrowers or
                  the Agent for filing and completing such forms), and (C)
                  agree, to the extent legally entitled to do so, upon
                  reasonable request by the Borrowers, to provide to the
                  Borrowers (for the benefit of the Borrowers and the Agent)
                  such other forms as may be reasonably required in order to
                  establish the legal entitlement of such Lender to an exemption
                  from withholding with respect to payments under this Credit
                  Agreement and any Notes.

                           Notwithstanding the above, if any change in treaty,
                  law or regulation has occurred after the date such Person
                  becomes a Lender hereunder which renders all such forms
                  inapplicable or which would prevent such Lender from duly
                  completing and delivering any such form with respect to it and
                  such Lender so advises the Borrowers and the Agent, then such
                  Lender shall be exempt from such requirements. Each Person
                  that shall become a Lender or a participant of a Lender
                  pursuant to Section 11.3 shall, upon the effectiveness of the
                  related transfer, be required to provide all of the forms,
                  certifications and statements required pursuant to this
                  subsection (b); provided that in the case of a participant of
                  a Lender, the obligations of such participant of a Lender
                  pursuant to this subsection (b) shall be determined as if the
                  participant of a Lender were a Lender



                                       34


                  except that such participant of a Lender shall furnish all
                  such required forms, certifications and statements to the
                  Lender from which the related participation shall have been
                  purchased.

         4.5 REPLACEMENT OF LENDERS.

         The Agent and each Lender shall use reasonable efforts to avoid or
mitigate any increased cost or suspension of the availability of an interest
rate under Sections 4.1 through 4.4 above to the greatest extent practicable
(including transferring the Loans to another lending office or Affiliate of a
Lender) unless, in the opinion of the Agent or such Lender, such efforts would
be likely to have an adverse effect upon it. In the event a Lender makes a
request to the Borrowers for additional payments in accordance with Section 4.1,
4.2 or 4.4, or suspends Eurodollar Loans under Section 4.1, then, provided that
no Default or Event of Default has occurred and is continuing at such time, the
Borrowers may, at their own expense (such expense to include any transfer fee
payable to the Agent under Section 11.3(b) and any expense pursuant to Section
4) and in its sole discretion, require such Lender to transfer and assign in
whole (but not in part), without recourse (in accordance with and subject to the
terms and conditions of Section 11.3(b)), all of its interests, rights and
obligations under this Credit Agreement to an Eligible Assignee which shall
assume such assigned obligations (which assignee may be another Lender, if a
Lender accepts such assignment); provided that (a) such assignment shall not
conflict with any law, rule or regulation or order of any court or other
Governmental Authority and (b) the Borrowers or such assignee shall have paid to
the assigning Lender in immediately available funds the principal of and
interest accrued to the date of such payment on the portion of the Loans
hereunder held by such assigning Lender and all other amounts owed to such
assigning Lender hereunder, including amounts owed pursuant to Sections 4.1
through 4.4.

                                   SECTION 5.

                              CONDITIONS PRECEDENT

         5.1 CLOSING CONDITIONS.

         The obligation of the Lenders to enter into this Credit Agreement is
subject to satisfaction (or waiver) of the following conditions:

                  (a) Executed Credit Documents. Receipt by the Agent of duly
         executed copies of (i) this Credit Agreement, (ii) the Notes and (iii)
         all other Credit Documents, each in form and substance acceptable to
         the Lenders.



                                       35


                  (b) Organizational Documents.

                           (i) Receipt by the Agent of the following with
                  respect to Duke Energy Field Services, LLC:

                                    (A) Certificate of Formation. A copy of the
                           certificate of formation of such Borrower certified
                           to be true and complete by the appropriate
                           Governmental Authority of the State of Delaware and
                           certified by an authorized officer of such Borrower
                           to be true and correct as of the Effective Date.

                                    (B) LLC Agreement. A copy of the LLC
                           Agreement of such Borrower certified by an authorized
                           officer of such Borrower to be true and correct as of
                           the Effective Date.

                                    (C) Resolutions. Copies of resolutions of
                           the members of such Borrower approving and adopting
                           the Credit Documents to which such Borrower is a
                           party, the transactions contemplated therein and
                           authorizing execution and delivery thereof and
                           certified by an authorized officer of such Borrower
                           to be in full force and effect as of the Effective
                           Date.

                                    (D) Good Standing. Copies of certificates of
                           good standing, existence or their equivalent with
                           respect to such Borrower certified as of a recent
                           date by the appropriate Governmental Authorities of
                           the State of Delaware.

                                    (E) Incumbency. An incumbency certificate
                           certified by an authorized officer to be true and
                           correct as of the Effective Date.

                           (ii) Receipt by the Agent of the following with
                  respect to Duke Energy Field Services Corporation:

                                    (A) Charter Documents. Copies of the
                           articles or certificates of incorporation or other
                           charter documents of such Borrower certified to be
                           true and complete as of a recent date by the
                           appropriate Governmental Authority of the State of
                           Delaware and certified by a secretary or assistant
                           secretary of such Borrower to be true and correct as
                           of the Effective Date.

                                    (B) Bylaws. A copy of the bylaws or other
                           governing documents of such Borrower certified by a
                           secretary or assistant secretary of such Borrower to
                           be true and correct as of the Effective Date.

                                    (C) Resolutions. Copies of resolutions of
                           the Board of Directors of such Borrower approving and
                           adopting the Credit Documents to which it is a party,
                           the transactions contemplated therein and authorizing
                           execution



                                       36


                           and delivery thereof, certified by a secretary or
                           assistant secretary of such Borrower to be true and
                           correct and in force and effect as of the Effective
                           Date.

                                    (D) Good Standing. Copies of certificates of
                           good standing, existence or its equivalent with
                           respect to such Borrower certified as of a recent
                           date by the appropriate Governmental Authorities of
                           the State of Delaware.

                                    (E) Incumbency. An incumbency certificate of
                           such Borrower certified by a secretary or assistant
                           secretary to be true and correct as of the Effective
                           Date.

                  (c) Opinion of Counsel. Receipt by the Agent of an opinion
         from legal counsel to the Borrowers, addressed to the Agent on behalf
         of the Lenders and dated as of the Effective Date, in form and
         substance satisfactory to the Agent.

                  (d) Financial Statements. Receipt by the Lenders of such
         financial information regarding the Borrowers as the Lenders may
         reasonably request.

                  (e) Fees and Expenses. Payment by the Borrowers of all fees
         and expenses owed by it to the Lenders and the Agent, including,
         without limitation, payment to the Agent of the fees set forth in the
         Fee Letter.

                  (f) Litigation. As of the Closing Date, there shall be no
         material actions, suits, investigations or legal, equitable,
         arbitration or administrative proceedings pending or threatened against
         a Borrower which are likely to be decided adversely to such Borrower
         and if so decided would have a Material Adverse Effect.

                  (g) Material Adverse Effect. As of the Closing Date, no event
         or condition shall have occurred since September 30, 2001 that would
         have or would be reasonably expected to have a Material Adverse Effect.

                  (h) Borrowers' Certificate. The Agent shall have received a
         certificate or certificates executed by an Approved Officer of the
         Borrowers, on behalf of the Borrowers, as of the Closing Date stating
         that (i) the Borrowers are in compliance with all existing financial
         obligations, unless such non-compliance would not have a Material
         Adverse Effect, (ii) no action, suit, investigation or proceeding is
         pending or, to such officer's knowledge, threatened in any court or
         before any arbitrator or governmental instrumentality that purports to
         affect a Borrower or any transaction contemplated by the Credit
         Documents, if such action, suit, investigation or proceeding is likely
         to be adversely determined and if adversely determined would have a
         Material Adverse Effect, (iii) the financial statements and information
         delivered to the Agent on or before the Closing Date were prepared in
         good faith and in accordance with GAAP, (iv) the amount of Off Balance
         Sheet Indebtedness of the Borrowers as of December 31, 2001, as set
         forth on a schedule attached thereto, is true



                                       37


         and correct and (v) immediately after giving effect to this Credit
         Agreement, the other Credit Documents and all the transactions
         contemplated herein and therein to occur on such date, (A) no Default
         or Event of Default exists, (B) all representations and warranties
         contained herein and in the other Credit Documents are true and correct
         in all material respects on and as of the date made and (C) the
         Borrowers are in compliance with the financial covenant set forth in
         Section 7.10.

                  (i) Existing Credit Facility. All loans and obligations under
         the Existing Credit Facility shall have been paid in full and all
         commitments thereunder shall have terminated.

                  (j) Other. Receipt by the Lenders of such other documents,
         instruments, agreements or information as reasonably requested by any
         Lender.

         5.2 CONDITIONS TO LOANS.

         In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make new Loans nor shall the Issuing Lender be
required to issue or extend a Letter of Credit (and the Lenders shall not be
obligated to participate in any Letter of Credit) unless:

                  (a) Request. The Borrowers shall have timely delivered (i) in
         the case of any new Loan, to the Agent, an appropriate Notice of
         Borrowing, duly executed and completed, by the time specified in
         Section 2.1 and (ii) in the case of any Letter of Credit, to the
         Issuing Lender, an appropriate request for issuance of a Letter of
         Credit in accordance with the provisions of Section 2.2.

                  (b) Representations and Warranties. The representations and
         warranties made by the Borrowers in this Credit Agreement are true and
         correct in all material respects at and as if made as of the date of
         the funding of the Loans or the issuance of the Letters of Credit, as
         applicable (except to the extent such representations and warranties
         expressly and exclusively relate to an earlier date).

                  (c) No Default. No Default or Event of Default shall exist or
         be continuing either prior to or after giving effect thereto.

                  (d) Availability. Immediately after giving effect to the
         making of a Loan (and the application of the proceeds thereof) or to
         the issuance of a Letter of Credit, as the case may be, (i) the sum of
         the Loans outstanding plus LOC Obligations outstanding shall not exceed
         the Revolving Committed Amount and (ii) the sum of LOC Obligations
         outstanding shall not exceed the LOC Committed Amount.

The delivery of each Notice of Borrowing and each request for a Letter of Credit
shall constitute a representation and warranty by the Borrowers of the
correctness of the matters specified in subsections (b), (c) and (d) above.



                                       38



                                   SECTION 6.

                         REPRESENTATIONS AND WARRANTIES

         The Borrowers hereby represents and warrants to each Lender that:

         6.1 ORGANIZATION AND GOOD STANDING.

         Each Borrower (a) is a limited liability company or a corporation duly
formed, validly existing and in good standing under the laws of the State of
Delaware, (b) is duly qualified and in good standing as a foreign limited
liability company or corporation authorized to do business in every jurisdiction
where the failure to so qualify would have a Material Adverse Effect and (c) has
the requisite power and authority to own its properties and to carry on its
business as now conducted and as proposed to be conducted.

         6.2 DUE AUTHORIZATION.

         Each Borrower (a) has the requisite power and authority to execute,
deliver and perform this Credit Agreement and the other Credit Documents and to
incur the obligations herein and therein provided for and (b) has been
authorized by all necessary corporate, partnership or limited liability company
action to execute, deliver and perform this Credit Agreement and the other
Credit Documents.

         6.3 NO CONFLICTS.

         Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated herein and therein, nor
performance of and compliance with the terms and provisions hereof and thereof
by each Borrower will (a) violate or conflict with any provision of its
organizational documents or bylaws, (b) materially violate, contravene or
conflict with any law (including without limitation, the Public Utility Holding
Company Act of 1935, as amended), regulation (including without limitation,
Regulation U or Regulation X), order, writ, judgment, injunction, decree or
permit applicable to it, (c) materially violate, contravene or conflict with
contractual provisions of, or cause an event of default under, any indenture,
loan agreement, mortgage, deed of trust, contract or other agreement or
instrument to which it is a party or by which it may be bound or (d) result in
or require the creation of any Lien upon or with respect to its properties.

         6.4 CONSENTS.

         No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or third
party is required in connection with the execution, delivery or performance of
this Credit Agreement or any of the other Credit Documents that has not been
obtained.



                                       39


         6.5 ENFORCEABLE OBLIGATIONS.

         This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
the Borrowers enforceable against the Borrowers in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.

         6.6 FINANCIAL CONDITION.

         The financial statements delivered to the Lenders pursuant to Section
5.1(d) and pursuant to Section 7.1(a) and (b): (i) have been prepared in
accordance with GAAP (subject to the provisions of Section 1.3) and (ii) present
fairly the financial condition, results of operations and cash flows of the
Borrowers as of such date and for such periods (subject, in the case of interim
statements, to normal year-end adjustments and the absence of footnotes).

         6.7 TAXES.

         Each Borrower and each of its Material Subsidiaries has filed, or
caused to be filed, all material tax returns (federal, state, local and foreign)
required to be filed and paid all amounts of taxes shown thereon to be due
(including interest and penalties) and has paid all other taxes, fees,
assessments and other governmental charges (including mortgage recording taxes,
documentary stamp taxes and intangibles taxes) owing by it, except (a) for such
taxes which are not yet delinquent or that are being contested in good faith and
by proper proceedings, and against which adequate reserves are being maintained
in accordance with GAAP or (b) where such nonfiling or nonpayment would not have
a Material Adverse Effect.

         6.8 COMPLIANCE WITH LAW.

         Each Borrower and each of its Material Subsidiaries is in compliance
with all laws, rules, regulations, orders, decrees and requirements of
Governmental Authorities applicable to it or to its properties (including,
without limitation, ERISA, the Code and Environmental Laws), except (a) where
the necessity of compliance therewith is being contested in good faith by
appropriate proceedings or (b) such failure to comply would not have or would
not be reasonably expected to have a Material Adverse Effect.

         6.9 USE OF PROCEEDS; MARGIN STOCK.

         The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.7. None of such proceeds will be used for the
purpose of (a) purchasing or carrying any "margin stock" as defined in
Regulation U or Regulation X, (b) for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry "margin stock",
(c) for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulation U or Regulation X or (d) for the
acquisition of another Person unless the board of



                                       40


directors (or other comparable governing body) or stockholders, as appropriate,
of such Person has approved such acquisition.

         6.10 GOVERNMENT REGULATION.

         Each Borrower is exempt from the provisions of the Public Utility
Holding Company Act of 1935, as amended. Neither Borrower is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, or controlled by such a company.

         6.11 SOLVENCY.

         Each Borrower is and, after the consummation of the transactions
contemplated by this Credit Agreement, will be Solvent.

         6.12 ENVIRONMENTAL MATTERS.

         Except as would not result or be reasonably expected to result in a
Material Adverse Effect: (a) each of the properties of the Borrowers (the
"Properties") and all operations at the Properties are in compliance with all
applicable Environmental Laws, (b) there is no violation of any Environmental
Law with respect to the Properties or the businesses operated by the Borrowers
(the "Businesses"), and (c) there are no conditions relating to the Businesses
or Properties that would reasonably be expected to give rise to a liability
under any applicable Environmental Laws.

         6.13 SUBSIDIARIES.

         Set forth on Schedule 6.13 is a list of all Material Subsidiaries of
the Borrowers.

         6.14 LITIGATION.

         There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge either of the
Borrowers, threatened against a Borrower which (a) are likely to be decided
adversely against a Borrower and (b) if so decided would have or would
reasonably be expected to have a Material Adverse Effect.

                                   SECTION 7.

                              AFFIRMATIVE COVENANTS

         Each Borrower hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Loans and LOC Obligations, together with
interest, fees and other obligations hereunder, have been paid in full and the
Commitments and Letters of Credit shall have terminated:



                                       41


         7.1 INFORMATION COVENANTS.

         The Borrowers will furnish, or cause to be furnished, to the Agent and
each of the Lenders:

                  (a) Annual Financial Statements. As soon as available, and in
         any event within 120 days after the close of each fiscal year of the
         Borrowers, a consolidated balance sheet of the Borrowers and their
         Subsidiaries as of the end of such fiscal year, together with a related
         consolidated income statement and related statements of cash flows,
         capitalization and retained earnings for such fiscal year, setting
         forth in comparative form figures for the preceding fiscal year, all
         such financial information described above to be audited by independent
         certified public accountants of recognized national standing and whose
         opinion, which shall be furnished to the Agent, shall be to the effect
         that such financial statements have been prepared in accordance with
         GAAP (except for changes with which such accountants concur); provided
         that the Borrowers' Form 10-K Annual Report as filed with the
         Securities and Exchange Commission, without exhibits, will satisfy the
         requirements of this Section 7.1(a).

                  (b) Quarterly Financial Statements. As soon as available, and
         in any event within 60 days after the close of each fiscal quarter of
         the Borrowers (other than the fourth fiscal quarter) a consolidated
         balance sheet of the Borrowers and their Subsidiaries as of the end of
         such fiscal quarter, together with a related consolidated income
         statement and related statement of cash flows for such fiscal quarter
         in each case setting forth in comparative form figures for the
         corresponding period of the preceding fiscal year, and accompanied by a
         certificate of an Approved Officer of the Borrowers to the effect that
         such quarterly financial statements fairly present in all material
         respects the financial condition of the Borrowers and have been
         prepared in accordance with GAAP, subject to changes resulting from
         audit and normal year-end audit adjustments to same; provided that the
         Borrowers' Form 10-Q Quarterly Report as filed with the Securities and
         Exchange Commission, without exhibits, will satisfy the requirements of
         this Section 7.1(b).

                  (c) Officer's Certificate. At the time of delivery of the
         financial statements provided for in Sections 7.1(a) and 7.1(b) above,
         a certificate of an Approved Officer of the Borrowers, substantially in
         the Form of Exhibit 7.1(c), (i) demonstrating compliance with the
         financial covenant contained in Section 7.10 by calculation thereof as
         of the end of each such fiscal period, (ii) stating that no Default or
         Event of Default exists, or if any Default or Event of Default does
         exist, specifying the nature and extent thereof and what action the
         Borrowers propose to take with respect thereto, (iii) setting forth the
         amount of Off Balance Sheet Indebtedness of the Borrowers as of the end
         of each such fiscal period and (iv) updating Schedule 6.13 with respect
         to Material Subsidiaries, if appropriate.

                  (d) Reports. Promptly upon transmission or receipt thereof,
         copies of any filings and registrations with, and reports to or from,
         the Securities and Exchange Commission, or any successor agency, and
         copies of all financial statements, proxy statements, notices and
         reports as a Borrower shall send to its equityholders.



                                       42


                  (e) Notices. Within five days after any officer of a Borrower
         with responsibility relating thereto obtaining knowledge thereof, the
         Borrowers will give written notice to the Agent immediately of (i) the
         occurrence of a Default or Event of Default, specifying the nature and
         existence thereof and what action the Borrowers propose to take with
         respect thereto, and (ii) the occurrence of any of the following with
         respect to the Borrowers: (A) the pendency or commencement of any
         litigation, arbitral or governmental proceeding against a Borrower the
         claim of which is likely to be decided adversely to such Borrower and,
         if adversely determined, would have or would be reasonably expected to
         have a Material Adverse Effect or (B) the institution of any
         proceedings against a Borrower with respect to, or the receipt of
         notice by such Person of potential liability or responsibility for
         violation or alleged violation of, any federal, state or local law,
         rule or regulation (including, without limitation, any Environmental
         Law) that is likely to be decided adversely to a Borrower and, if
         adversely decided, would have a Material Adverse Effect.

                  (f) ERISA. Upon a Borrower or any ERISA Affiliate obtaining
         knowledge thereof, the Borrowers will give written notice to the Agent
         promptly (and in any event within five Business Days) of: (i) any event
         or condition, including, but not limited to, any Reportable Event, that
         constitutes, or would be reasonably expected to lead to, a Termination
         Event if such Termination Event would have a Material Adverse Effect;
         (ii) with respect to any Multiemployer Plan, the receipt of notice as
         prescribed in ERISA or otherwise of any withdrawal liability assessed
         against a Borrower or any ERISA Affiliate, or of a determination that
         any Multiemployer Plan is in reorganization or insolvent (both within
         the meaning of Title IV of ERISA); (iii) the failure to make full
         payment on or before the due date (including extensions) thereof of all
         amounts which a Borrower or any of its Subsidiaries or ERISA Affiliates
         is required to contribute to each Plan pursuant to its terms and as
         required to meet the minimum funding standard set forth in ERISA and
         the Code with respect thereto; or (iv) any change in the funding status
         of any Plan that would have or would be reasonably expected to have a
         Material Adverse Effect; together, with a description of any such event
         or condition or a copy of any such notice and a statement by an officer
         of a Borrower briefly setting forth the details regarding such event,
         condition, or notice, and the action, if any, which has been or is
         being taken or is proposed to be taken with respect thereto. Promptly
         upon request, each Borrower shall furnish the Agent and each of the
         Lenders with such additional information concerning any Plan as may be
         reasonably requested, including, but not limited to, copies of each
         annual report/return (Form 5500 series), as well as all schedules and
         attachments thereto required to be filed with the Department of Labor
         and/or the Internal Revenue Service pursuant to ERISA and the Code,
         respectively, for each "plan year" (within the meaning of Section 3(39)
         of ERISA).

                  (g) Debt Rating Changes. Upon any change in its Debt Rating,
         the Borrowers shall promptly deliver such information to the Agent.

                  (h) Other Information. With reasonable promptness upon any
         such request, such other information regarding the business, properties
         or financial condition of the Borrowers and their Subsidiaries as the
         Agent or the Required Lenders may reasonably request.



                                       43


         Information required to be delivered pursuant to this Sections 7.1(a),
7.1(b) and 7.1(d) shall be deemed to have been delivered on the date on which
the Borrowers provide notice to the Lenders that such information has been
posted on the Securities and Exchange Commission website on the Internet at
www.sec.gov/edgar/searchedgar/webusers.htm or at another website identified in
such notice and accessible by the Lenders without charge; provided that (i) such
notice may be included in a certificate delivered pursuant to Section 7.1(c) and
(ii) the Borrowers shall deliver paper copies of the information referred to in
Sections 7.1(a), 7.1(b) and 7.1(d), to any Lender that requests such delivery.

         7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.

         Each Borrower will, and will cause each Material Subsidiary to, do all
things necessary to preserve and keep in full force and effect its existence and
rights, franchises and authority; provided, however, that, subject to Section
8.3, a Borrower shall not be required to preserve any such existence, right or
franchise if it in good faith determines that preservation thereof is no longer
necessary or desirable in the conduct of its business and that the loss thereof
is not disadvantageous in any material respect to the Lenders.

         7.3 BOOKS AND RECORDS.

         Each Borrower will keep, and will cause its Material Subsidiaries to
keep, complete and accurate books and records of its transactions in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).

         7.4 COMPLIANCE WITH LAW.

         Each Borrower will comply, and will cause each Material Subsidiary to
comply, with all laws (including, without limitation, all Environmental Laws and
ERISA laws), rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its property, if
(a) the failure to comply would have or would be reasonably expected to have a
Material Adverse Effect or (b) the necessity of compliance therewith is being
contested in good faith by appropriate proceedings.

         7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.

         Each Borrower will, and will cause each Material Subsidiary to, pay,
settle or discharge (a) all taxes, assessments and governmental charges or
levies imposed upon it, or upon its income or profits, or upon any of its
properties, before they shall become delinquent, (b) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid, might
give rise to a Lien upon any of its properties, and (c) all of its other
Indebtedness as it shall become due; provided, however, that no Borrower shall
be required to pay any such tax, assessment, charge, levy, claim or Indebtedness
which (i) is being contested in good faith by appropriate proceedings and as to
which adequate reserves therefor have been established in accordance with GAAP
or (ii) the nonpayment of which would not have a Material Adverse Effect.



                                       44


         7.6 MAINTENANCE OF PROPERTY; INSURANCE.

                  (a) Each Borrower will keep, and will cause each Material
         Subsidiary to keep, all property useful and necessary in its business
         in good working order and condition, ordinary wear and tear excepted.

                  (b) Each Borrower will, and will cause each of its Material
         Subsidiaries to, maintain (either in the name of such Borrower or in
         such Material Subsidiary's own name) with financially sound and
         responsible insurance companies, insurance on all their respective
         properties in at least such amounts and against at least such risks
         (and with such risk retention) as are usually insured against in the
         same general area by companies of established repute engaged in the
         same or a similar business; provided that self-insurance by a Borrower
         or any such Material Subsidiary shall not be deemed a violation of this
         covenant to the extent that companies engaged in similar businesses and
         owning similar properties in the same general areas in which the
         Borrowers or such Material Subsidiary operates self-insure.

         7.7 USE OF PROCEEDS.

         The proceeds of the Loans may be used solely (a) to repay any amounts
owing under the Existing Credit Facility, (b) to provide credit support for each
Borrower's commercial paper and (c) for working capital and other general
corporate purposes of each Borrower. The Borrowers will use the Letters of
Credit solely for the purposes set forth in Section 2.2(a).

         7.8 AUDITS/INSPECTIONS.

         Upon reasonable notice and during normal business hours, each Borrower
will, and will cause its Material Subsidiaries to, permit representatives
appointed by the Agent, including, without limitation, independent accountants,
agents, attorneys, and appraisers to visit and inspect each Borrower's and its
Material Subsidiaries' property, including its books and records, its accounts
receivable and inventory, each Borrower's and its Material Subsidiaries'
facilities and its other business assets, and to make photocopies or photographs
thereof and to write down and record any information such representatives obtain
and shall permit the Agent or its representatives to investigate and verify the
accuracy of information provided to the Lenders and to discuss all such matters
with the officers, employees and representatives of each Borrower and its
Material Subsidiaries.

         7.9 MAINTENANCE OF OWNERSHIP.

         Each Borrower will maintain ownership of all Capital Stock of each
Material Subsidiary, directly or indirectly, free and clear of all Liens except
as permitted by Section 8.3. The Borrowers will take such action as necessary to
ensure that, on and after the date of the Merger, Duke Energy Field Services,
LLC will be (and will remain) a wholly owned Subsidiary, direct or indirect, of



                                       45



Duke Energy Field Services Corporation unless Duke Energy Field Services, LLC is
merged with and into Duke Energy Field Services Corporation.

         7.10 DEBT TO CAPITALIZATION RATIO.

         The Debt to Capitalization Ratio shall, at all times, be less than or
equal to the following:

                  (a) From the Effective Date until but not including the
         earlier of (i) the date on which the Merger is consummated and (ii) the
         date on which a Corporate Conversion occurs, .53 to 1.0; and

                  (b) From the earlier of (i) the date on which the Merger is
         consummated and (ii) the date on which a Corporate Conversion occurs
         and thereafter, .57 to 1.0.

                                   SECTION 8.

                               NEGATIVE COVENANTS

         Each Borrower hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Loans and LOC Obligations, together with
interest, fees and other obligations hereunder, have been paid in full and the
Commitments and Letters of Credit shall have terminated:

         8.1 NATURE OF BUSINESS.

         The Borrowers will not, and will not permit any of their Material
Subsidiaries to, materially alter the character of their business on a
consolidated basis from that conducted as of the Closing Date.

         8.2. LIENS.

         A Borrower will not create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it or any of its Material Subsidiaries,
except for the following:

                  (a) Liens granted by such Borrower or any Material Subsidiary
         existing on the date of this Credit Agreement securing Indebtedness
         outstanding on the date of this Credit Agreement as set forth on
         Schedule 8.2.

                  (b) any Lien on any asset of any Person existing at the time
         such Person is merged or consolidated with or into a Borrower or any
         Material Subsidiary and not created in contemplation of such event.

                  (c) any Lien existing on any asset prior to the acquisition
         thereof by a Borrower or any Material Subsidiary and not created in
         contemplation of such acquisition.



                                       46


                  (d) any Lien on any asset securing Indebtedness incurred or
         assumed for the purpose of financing all or any part of the cost of
         acquiring such asset; provided that such Lien attaches to such asset
         concurrently with or within 180 days after the acquisition thereof.

                  (e) any Lien arising out of the refinancing, extension,
         renewal or refunding of any Indebtedness secured by any Lien permitted
         by any of the foregoing clauses of this Section 8.2; provided that such
         Indebtedness is not increased and is not secured by any additional
         assets.

                  (f) Liens for taxes, assessments or other governmental charges
         or levies not yet due or which are being contested in good faith by
         appropriate proceedings and with respect to which adequate reserves or
         other appropriate provisions are being maintained in accordance with
         GAAP.

                  (g) statutory Liens of landlords and Liens of carriers,
         warehousemen, mechanics, materialmen and interest owners of oil and gas
         production and other Liens imposed by law, created in the ordinary
         course of business and for amounts not past due for more than 60 days
         or which are being contested in good faith by appropriate proceedings
         which are sufficient to prevent imminent foreclosure of such Liens, are
         promptly instituted and diligently conducted and with respect to which
         adequate reserves or other appropriate provisions are being maintained
         in accordance with GAAP.

                  (h) Liens incurred or deposits made in the ordinary course of
         business (including, without limitation, surety bonds and appeal bonds)
         in connection with workers' compensation, unemployment insurance and
         other types of social security benefits or to secure the performance of
         tenders, bids, leases, contracts (other than for the repayment of
         Indebtedness), statutory obligations and other similar obligations or
         arising as a result of progress payments under government contracts.

                  (i) easements (including, without limitation, reciprocal
         easement agreements and utility agreements), rights-of-way, covenants,
         consents, reservations, encroachments, variations and other
         restrictions, charges or encumbrances (whether or not recorded)
         affecting the use of real property.

                  (j) Liens with respect to judgments and attachments which do
         not result in an Event of Default.

                  (k) Liens, deposits or pledges to secure the performance of
         bids, tenders, contracts (other than contracts for the payment of
         money), leases (permitted under the terms of this Agreement), public or
         statutory obligations, surety, stay, appeal, indemnity, performance or
         other obligations arising in the ordinary course of business.

                  (l) rights of first refusal entered into in the ordinary
         course of business.



                                       47


                  (m) Liens consisting of any (i) rights reserved to or vested
         in any municipality or governmental, statutory or public authority to
         control or regulate any property of a Borrower or any Material
         Subsidiary or to use such property in any manner which does not
         materially impair the use of such property for the purpose for which it
         is held by a Borrower or any such Material Subsidiary, (ii) obligations
         or duties to any municipality or public authority with respect to any
         franchise, grant, license, lease or permit and the rights reserved or
         vested in any Governmental Authority or public utility to terminate any
         such franchise, grant, license, lease or permit or to condemn or
         expropriate any property, or (iii) zoning laws, ordinances or municipal
         regulations.

                  (n) liens on deposits required by any Person with whom a
         Borrower or any Material Subsidiary enters into forward contracts,
         futures contracts, swap agreements or other commodities contracts in
         the ordinary course of business.

                  (o) liens on assets in connection with asset securitizations
         entered into by a Borrower or one of its Subsidiaries as long as such
         liens do not secure indebtedness exceeding $400,000,000, in the
         aggregate, at any one time.

                  (p) other Liens, including Liens imposed by Environmental
         Laws, arising in the ordinary course of its business which (i) do not
         secure Indebtedness, (ii) do not secure any obligation in an amount
         exceeding $100,000,000 at any time, (iii) do not in the aggregate
         materially detract from the value of its assets or materially impair
         the use thereof in the operation of its business or (iv) in addition to
         those Liens described in clause (ii) above, secure reimbursement
         obligations under letters of credit not exceeding $100,000,000
         outstanding at any one time other than Letters of Credit.

         8.3 CONSOLIDATION AND MERGER.

         A Borrower will not, and will not permit any of its Material
Subsidiaries to, (a) enter into any transaction of merger or (b) consolidate,
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution); provided that: (i) a Person (including a Subsidiary of a Borrower)
may be merged or consolidated with or into a Borrower so long as (A) such
Borrower shall be the continuing or surviving entity, (B) no Default or Event of
Default shall exist or be caused thereby and (C) such Borrower is not downgraded
by S&P or Moody's as a result of such transaction to a rating below BBB- or
Baa3, as applicable, (ii) a Material Subsidiary may merge with or into another
Subsidiary of a Borrower and (iii) a Corporate Conversion can occur as long as
the Agent receives, on behalf of the Lenders, such documents, instruments,
resolutions and opinions as the Agent may reasonably require to ensure that (A)
each Borrower remains liable for the Borrowers Obligations in accordance with
the terms hereof and (B) all of the rights and remedies of the Lenders under the
Credit Documents remain in full force and effect.



                                       48


         8.4 SALE OR LEASE OF ASSETS.

         During the term of this Credit Agreement, a Borrower will not, directly
or indirectly, convey, sell, lease, transfer or otherwise dispose of assets,
business or operations with an aggregate book value in excess of twenty-five
percent (25%) of its consolidated total assets, as determined in accordance with
GAAP, as calculated as of the end of the most recent fiscal quarter.

         8.5. TRANSACTIONS WITH AFFILIATES.

         A Borrower will not, and will not permit any Material Subsidiary to,
directly or indirectly, pay any funds to or for the account of, make any
investment in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any officer, director, employee or Affiliate (other than a wholly-owned
Subsidiary) unless any and all such transactions between such Borrower and its
Material Subsidiaries on the one hand and any officer, director, employee or
Affiliate (other than a wholly-owned Subsidiary) on the other hand, shall be on
an arms-length basis and on terms no less favorable to such Borrower or such
Material Subsidiary than could have been obtained from a third party who was not
an officer, director, employee or Affiliate (other than a wholly-owned
Subsidiary); provided that the foregoing provisions of this Section shall not
(a) prohibit a Borrower and each Material Subsidiary from declaring or paying
any lawful dividend, (b) prohibit a Borrower or a Material Subsidiary from
providing credit support for its Subsidiaries as it deems appropriate in the
ordinary course of business, (c) prohibit a Borrower or a Material Subsidiary
from engaging in a transaction or transactions that are not on an arms-length
basis or are not on terms as favorable as could have been obtained from a third
party, provided that such transaction or transactions occurs within a related
series of transactions, which, in the aggregate, are on an arms-length basis and
are on terms as favorable as could have been obtained from a third party or (d)
prohibit a Borrower or a Material Subsidiary from engaging in non-material
transactions with any Subsidiary that are not on an arms-length basis or are not
on terms as favorable as could have been obtained from a third party but are in
the ordinary course of such Borrower's or Material Subsidiary's business, so
long as, in each case, after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing.

         8.6 INDEBTEDNESS.

         The Borrowers will not permit the amount of Indebtedness of the
Subsidiaries of the Borrowers (excluding Duke Energy Field Services LLC, if
applicable) to exceed ten percent (10%) of all Indebtedness of the Borrowers and
their Subsidiaries on a consolidated basis.



                                       49


                                   SECTION 9.

                                EVENTS OF DEFAULT

         9.1 EVENTS OF DEFAULT.

         An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):

                  (a) Payment. A Borrower shall: (i) default in the payment when
         due of any principal amount of any of the Loans or of any reimbursement
         obligation arising from drawings under any Letters of Credit; or (ii)
         default, and such default shall continue for five or more Business
         Days, in the payment when due of any interest on the Loans or of any
         fees or other amounts owing hereunder, under any of the other Credit
         Documents or in connection herewith.

                  (b) Representations. Any representation, warranty or statement
         made or deemed to be made by a Borrower herein, in any of the other
         Credit Documents, or in any statement or certificate delivered or
         required to be delivered pursuant hereto or thereto shall prove to have
         been untrue in any material respect on the date as of which it was
         deemed to have been made.

                  (c) Covenants. A Borrower shall:

                           (i) default in the due performance or observance of
                  any term, covenant or agreement contained in Section 7.1(e),
                  7.8, 7.10, 8.1, 8.2, 8.3, 8.4, 8.5 and 8.6.

                           (ii) default in the due performance or observance by
                  it of any term, covenant or agreement (other than those
                  referred to in subsections (a), (b), or (c)(i) of this Section
                  9.1) contained in this Credit Agreement or any other Credit
                  Document and such default shall continue unremedied for a
                  period of at least 30 days after the earlier of (A) a
                  Responsible Officer of either Borrower becoming aware of such
                  default or (B) notice of such default is given by the Agent or
                  a Lender to either Borrower.

                  (d) Credit Documents. Any Credit Document shall fail to be in
         full force and effect or a Borrower shall so assert or any Credit
         Document shall fail to give the Agent and/or the Lenders the rights,
         powers and privileges purported to be created thereby.

                  (e) Bankruptcy, etc. The occurrence of any of the following
         with respect to a Borrower or a Material Subsidiary (i) a court or
         governmental agency having jurisdiction in the premises shall enter a
         decree or order for relief in respect of a Borrower or a Material
         Subsidiary in an involuntary case under any applicable bankruptcy,
         insolvency or other similar law now or hereafter in effect, or appoint
         a receiver, liquidator, assignee, custodian, trustee, sequestrator or
         similar official of a Borrower or a Material Subsidiary or for any



                                       50


         substantial part of its property or ordering the winding up or
         liquidation of its affairs; or (ii) an involuntary case under any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in effect is commenced against a Borrower or a Material Subsidiary and
         such petition remains unstayed and in effect for a period of 90
         consecutive days; or (iii) a Borrower or a Material Subsidiary shall
         commence a voluntary case under any applicable bankruptcy, insolvency
         or other similar law now or hereafter in effect, or consent to the
         entry of an order for relief in an involuntary case under any such law,
         or consent to the appointment or taking possession by a receiver,
         liquidator, assignee, custodian, trustee, sequestrator or similar
         official of such Person or any substantial part of its property or make
         any general assignment for the benefit of creditors; or (iv) a Borrower
         or a Material Subsidiary shall admit in writing its inability to pay
         its debts generally as they become due or any action shall be taken by
         such Person in furtherance of any of the aforesaid purposes.

                  (f) Defaults under Other Agreements. With respect to any
         Indebtedness, including any Off Balance Sheet Indebtedness, in excess
         of $100,000,000 (other than Indebtedness outstanding under this Credit
         Agreement) of a Borrower or any Material Subsidiary, such Borrower or
         such Material Subsidiary shall (A) default in any payment (beyond the
         applicable grace period with respect thereto, if any) with respect to
         any such Indebtedness or fail to timely pay such Indebtedness when due,
         or (B) default (after giving effect to any applicable grace period) in
         the observance or performance of any covenant or agreement relating to
         such Indebtedness or contained in any instrument or agreement
         evidencing, securing or relating thereto, or any other event or
         condition shall occur or condition exist, the effect of which default
         or other event or condition in this clause (B) is to cause any such
         Indebtedness to become due prior to its stated maturity.

                  (g) Judgments. One or more judgments, orders, or decrees shall
         be entered against a Borrower or a Material Subsidiary involving a
         liability of $50,000,000 or more, in the aggregate, (to the extent not
         paid or covered by insurance provided by a carrier who has acknowledged
         coverage) and such judgments, orders or decrees shall continue
         unsatisfied, undischarged and unstayed for a period ending on the first
         to occur of (i) the last day on which such judgment, order or decree
         becomes final and unappealable and, where applicable, with the status
         of a judicial lien or (ii) 45 days.

                  (h) ERISA. The occurrence of:

                           (i) any of the following events or conditions which
                  could result in a liability of a Borrower or an ERISA
                  Affiliate of $25,000,000 or more in the aggregate: (A) any
                  "accumulated funding deficiency," as such term is defined in
                  Section 302 of ERISA and Section 412 of the Code, whether or
                  not waived, shall exist with respect to any Plan, or any lien
                  shall arise on the assets of a Borrower or any ERISA Affiliate
                  in favor of the PBGC or a Plan; or (B) any prohibited
                  transaction (within the meaning of Section 406 of ERISA or
                  Section 4975 of the Code) or breach of fiduciary
                  responsibility shall occur which would be reasonably expected
                  to subject a Borrower or any ERISA Affiliate to any liability
                  under Sections 406, 409, 502(i), or 502(l) of ERISA or Section
                  4975 of the Code, or under



                                       51


                  any agreement or other instrument pursuant to which a Borrower
                  or any ERISA Affiliate has agreed or is required to indemnify
                  any person against any such liability.

                           (ii) any of the following events or conditions which
                  could result in a liability of a Borrower or an ERISA
                  Affiliate of $50,000,000 or more in the aggregate: (A) a
                  Termination Event shall occur with respect to a Single
                  Employer Plan which is, in the reasonable opinion of the
                  Agent, likely to result in the termination of such Plan for
                  purposes of Title IV of ERISA; or (B) a Termination Event
                  shall occur with respect to a Multiemployer Plan or Multiple
                  Employer Plan which is, in the reasonable opinion of the
                  Agent, likely to result in (x) the termination of such Plan
                  for purposes of Title IV of ERISA, or (y) a Borrower or any
                  ERISA Affiliate incurring any liability in connection with a
                  withdrawal from, reorganization of (within the meaning of
                  Section 4241 of ERISA), or insolvency (within the meaning of
                  Section 4245 of ERISA) of such Plan.

                  (i) Change of Control. The occurrence of any Change of
         Control.

         9.2 ACCELERATION; REMEDIES.

         Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the Required Lenders
(or the Lenders as may be required hereunder), the Agent may, with the consent
of the Required Lenders, and shall, upon the request and direction of the
Required Lenders, by written notice to the Borrowers take any of the following
actions without prejudice to the rights of the Agent or any Lender to enforce
its claims against the Borrowers, except as otherwise specifically provided for
herein:

                  (i) Termination of Commitments. Declare the Commitments
         terminated whereupon the Commitments shall be immediately terminated.

                  (ii) Acceleration of Loans and Letters of Credit. Declare the
         unpaid principal of and any accrued interest in respect of all Loans,
         any reimbursement obligations arising from drawings under Letters of
         Credit and any and all other indebtedness or obligations of any and
         every kind owing by a Borrower to any of the Lenders hereunder to be
         due whereupon the same shall be immediately due and payable without
         presentment, demand, protest or other notice of any kind, all of which
         are hereby waived by the Borrowers.

                  (iii) Cash Collateral. Direct the Borrowers to pay (and the
         Borrowers agree that upon receipt of such notice, or upon the
         occurrence of an Event of Default under Section 9.1(e), it will
         immediately pay) to the Issuing Lender additional cash, to be held by
         the Issuing Lender, for the benefit of the Lenders, in a cash
         collateral account as security for the LOC Obligations in respect of
         subsequent drawings under all then outstanding Letters of Credit in an
         amount equal to the maximum aggregate amount which may be drawn under
         all Letters of Credits then outstanding.



                                       52


                  (iv) Enforcement of Rights. Enforce any and all rights and
         interests created and existing under the Credit Documents, including,
         without limitation, all rights of set-off.

Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(e) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders and the Agent hereunder shall immediately
become due and payable without the giving of any notice or other action by the
Agent or the Lenders.

Notwithstanding the fact that enforcement powers reside primarily with the
Agent, each Lender has, to the extent permitted by law, a separate right of
payment and shall be considered a separate "creditor" holding a separate "claim"
within the meaning of Section 101(5) of the Bankruptcy Code or any other
insolvency statute.

         9.3 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.

         Notwithstanding any other provision of this Credit Agreement, after the
occurrence of an Event of Default, all amounts collected or received by the
Agent or any Lender on account of amounts outstanding under any of the Credit
Documents shall be paid over or delivered as follows:

                  FIRST, to the payment of all reasonable out-of-pocket costs
         and expenses (including without limitation reasonable attorneys' fees)
         of the Agent and the Lenders in connection with enforcing the rights of
         the Lenders under the Credit Documents, pro rata as set forth below;

                  SECOND, to payment of any fees owed to the Agent, or any
         Lender, pro rata as set forth below;

                  THIRD, to the payment of all accrued interest payable to the
         Lenders hereunder, pro rata as set forth below;

                  FOURTH, to the payment of the outstanding principal amount of
         the Loans and to the payment or cash collateralization of the
         outstanding LOC Obligations, pro rata, as set forth below;

                  FIFTH, to all other obligations which shall have become due
         and payable under the Credit Documents and not repaid pursuant to
         clauses "FIRST" through "FOURTH" above; and

                  SIXTH, to the payment of the surplus, if any, to whomever may
         be lawfully entitled to receive such surplus.



                                       53


In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans and
LOC Obligations held by such Lender bears to the aggregate then outstanding
Loans and LOC Obligations), of amounts available to be applied; and (c) to the
extent that any amounts available for distribution pursuant to clause "FOURTH"
above are attributable to the issued but undrawn amount of outstanding Letters
of Credit, such amounts shall be held by the Agent in a cash collateral account
and applied (i) first, to reimburse the Issuing Lender from time to time for any
drawings under such Letters of Credit and (ii) then, following the expiration of
all Letters of Credit, to all other obligations of the types described in
clauses "FOURTH", "FIFTH" and "SIXTH" above in the manner provided in this
Section 9.3.

                                   SECTION 10.

                                AGENCY PROVISIONS

         10.1 APPOINTMENT.

         Each Lender hereby designates and appoints Bank of America, N.A. as
agent of such Lender to act as specified herein and the other Credit Documents,
and each such Lender hereby authorizes the Agent, as the agent for such Lender,
to take such action on its behalf under the provisions of this Credit Agreement
and the other Credit Documents and to exercise such powers and perform such
duties as are expressly delegated by the terms hereof and of the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and the Borrowers shall not have any rights as a third
party beneficiary of the provisions hereof. In performing its functions and
duties under this Credit Agreement and the other Credit Documents, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for a Borrower. All institutions acting as a Co-Syndication Agent or
Co-Documentation Agent hereunder shall have no obligations in such capacity
under the Credit Documents.

         10.2 DELEGATION OF DUTIES.

         The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible to the Lenders for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.



                                       54


         10.3 EXCULPATORY PROVISIONS.

         Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct), or responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by a Borrower contained herein or in any of the other Credit
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection herewith or
in connection with the other Credit Documents, or enforceability or sufficiency
therefor of any of the other Credit Documents, or for any failure of a Borrower
to perform its obligations hereunder or thereunder. The Agent shall not be
responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by a Borrower in any written or
oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of a Borrower
to the Agent or any Lender or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the proceeds of
the Loans or of the existence or possible existence of any Default or Event of
Default or to inspect the properties, books or records of a Borrower. The Agent
is not a trustee for the Lenders and owes no fiduciary duty to the Lenders.

         10.4 RELIANCE ON COMMUNICATIONS.

         The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrowers, independent accountants and other experts
selected by the Agent with reasonable care). The Agent may deem and treat the
Lenders as the owner of its interests hereunder for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent in accordance with Section 11.3(b). The Agent shall be
fully justified in failing or refusing to take any action under this Credit
Agreement or under any of the other Credit Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).



                                       55


         10.5 NOTICE OF DEFAULT.

         The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or the Borrowers referring to the Credit Document,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Agent receives such a notice, the
Agent shall give prompt notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders.

         10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.

         Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the Agent or any
Affiliate thereof hereinafter taken, including any review of the affairs of the
Borrowers, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrowers
and made its own decision to make its Extensions of Credit hereunder and enter
into this Credit Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Credit Agreement, and to make such investigation as
it deems necessary to inform itself as to the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrowers. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrowers which may come
into the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.

         10.7 INDEMNIFICATION.

         Each Lender agrees to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrowers and without limiting the obligation
of the Borrowers to do so), ratably according to its Commitment Percentage, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including without limitation at any time
following the payment in full of the Borrowers Obligations) be imposed on,
incurred by or asserted against the Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or



                                       56


disbursements resulting from the gross negligence or willful misconduct of the
Agent. If any indemnity furnished to the Agent for any purpose shall, in the
opinion of the Agent, be insufficient or become impaired, the Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
Section 10.7 shall survive the payment of the Borrowers Obligations and all
other amounts payable hereunder and under the other Credit Documents and the
termination of the Commitments.

         10.8 AGENT IN ITS INDIVIDUAL CAPACITY.

         The Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrowers as though the
Agent were not Agent hereunder. With respect to the Loans made, Letters of
Credit issued and all Borrowers Obligations owing to it, the Agent shall have
the same rights and powers under this Credit Agreement as any Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.

         10.9 SUCCESSOR AGENT.

         The Agent may, at any time, resign upon 30 days written notice to the
Lenders and the Borrowers. Upon any such resignation, the Borrowers with the
consent of the Required Lenders (such consent of the Required Lenders not to be
unreasonably withheld or delayed) shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed and shall have
accepted such appointment within 30 days after the notice of resignation, then
the retiring Agent shall select a successor Agent provided such successor is a
Lender hereunder or qualifies as an Eligible Assignee (or if no Eligible
Assignee shall have been so appointed by the retiring Agent and shall have
accepted such appointment, then the Lenders shall perform all obligations of the
retiring Agent hereunder until such time, if any, as a successor Agent shall
have been appointed and shall have accepted such appointment as provided for
above). Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as Agent,
as appropriate, under this Credit Agreement and the other Credit Documents and
the provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Credit
Agreement.

                                   SECTION 11.

                                  MISCELLANEOUS

         11.1 NOTICES.

         Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device), (c)
the Business Day following the day on which the same has been



                                       57


delivered prepaid (or pursuant to an invoice arrangement) to a reputable
national overnight air courier service, or (d) the third Business Day following
the day on which the same is sent by certified or registered mail, postage
prepaid, in each case to the respective parties at the address or telecopy
numbers set forth on Schedule 11.1, or at such other address as such party may
specify by written notice to the other parties hereto.

         11.2 RIGHT OF SET-OFF.

         In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default and the commencement of remedies described in
Section 9.2, each Lender is authorized at any time and from time to time,
without presentment, demand, protest or other notice of any kind (all of which
rights being hereby expressly waived), to set-off and to appropriate and apply
any and all deposits (general or special) and any other indebtedness at any time
held or owing by such Lender (including, without limitation branches, agencies
or Affiliates of such Lender wherever located) to or for the credit or the
account of a Borrower against obligations and liabilities of such Borrower to
the Lenders hereunder, under the Notes, the other Credit Documents or otherwise,
irrespective of whether the Agent or the Lenders shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
may be contingent or unmatured, and any such set-off shall be deemed to have
been made immediately upon the occurrence of an Event of Default even though
such charge is made or entered on the books of such Lender subsequent thereto.

         11.3 BENEFIT OF AGREEMENT.

                  (a) Generally. This Credit Agreement shall be binding upon and
         inure to the benefit of and be enforceable by the respective successors
         and assigns of the parties hereto; provided that, except as set forth
         in Section 2.10, a Borrower may not assign and transfer any of its
         interests without the prior written consent of the Lenders; and
         provided further that the rights of each Lender to transfer, assign or
         grant participations in its rights and/or obligations hereunder shall
         be limited as set forth below in this Section 11.3.

                  (b) Assignments. Each Lender may assign to one or more
         Eligible Assignees all or a portion of its rights and obligations under
         this Credit Agreement (including, without limitation, all or a portion
         of its Loans, its Notes, and its Commitment); provided, however, that:

                           (i) each such assignment shall be to an Eligible
                  Assignee;

                           (ii) except in the case of an assignment to another
                  Lender or an assignment of all of a Lender's rights and
                  obligations under this Credit Agreement, any such partial
                  assignment shall be in an amount at least equal to $10,000,000
                  (or, if less, the remaining amount of the Commitment being
                  assigned by such Lender) and an integral multiple of
                  $1,000,000 in excess thereof; and



                                       58


                           (iii) the parties to such assignment shall execute
                  and deliver to the Agent for its acceptance an Assignment
                  Agreement in substantially the form of Exhibit 11.3(b),
                  together with a processing fee from the assignor of $3,500.

         Upon execution, delivery, and acceptance of such Assignment Agreement,
         the assignee thereunder shall be a party hereto and, to the extent of
         such assignment, have the obligations, rights, and benefits of a Lender
         hereunder and the assigning Lender shall, to the extent of such
         assignment, relinquish its rights (except those rights hereunder which
         by their terms expressly survive) and be released from its obligations
         under this Credit Agreement. Upon the consummation of any assignment
         pursuant to this Section 11.3(b), the assignor, the Agent and the
         Borrowers shall make appropriate arrangements so that, if required, new
         Notes are issued to the assignor and the assignee. If the assignee is
         not incorporated under the laws of the United States of America or a
         state thereof, it shall deliver to the Borrowers and the Agent
         certification as to exemption from deduction or withholding of taxes in
         accordance with Section 4.4.

                  By executing and delivering an assignment agreement in
         accordance with this Section 11.3(b), the assigning Lender thereunder
         and the assignee thereunder shall be deemed to confirm to and agree
         with each other and the other parties hereto as follows: (A) such
         assigning Lender warrants that it is the legal and beneficial owner of
         the interest being assigned thereby free and clear of any adverse claim
         created by such assigning Lender and the assignee warrants that it is
         an Eligible Assignee; (B) except as set forth in clause (A) above, such
         assigning Lender makes no representation or warranty and assumes no
         responsibility with respect to any statements, warranties or
         representations made in or in connection with this Credit Agreement,
         any of the other Credit Documents or any other instrument or document
         furnished pursuant hereto or thereto, or the execution, legality,
         validity, enforceability, genuineness, sufficiency or value of this
         Credit Agreement, any of the other Credit Documents or any other
         instrument or document furnished pursuant hereto or thereto or the
         financial condition of the Borrowers or the performance or observance
         by the Borrowers of any of their obligations under this Credit
         Agreement, any of the other Credit Documents or any other instrument or
         document furnished pursuant hereto or thereto; (C) such assigning
         Lender and such assignee represents and warrants that it is legally
         authorized to enter into such assignment agreement; (D) such assignee
         confirms that it has received a copy of this Credit Agreement, the
         other Credit Documents and such other documents and information as it
         has deemed appropriate to make its own credit analysis and decision to
         enter into such assignment agreement; (E) such assignee will
         independently and without reliance upon the Agent, such assigning
         Lender or any other Lender, and based on such documents and information
         as it shall deem appropriate at the time, continue to make its own
         credit decisions in taking or not taking action under this Credit
         Agreement and the other Credit Documents; (F) such assignee appoints
         and authorizes the Agent to take such action on its behalf and to
         exercise such powers under this Credit Agreement or any other Credit
         Document as are delegated to the Agent by the terms hereof or thereof,
         together with such powers as are reasonably incidental thereto; and (G)
         such assignee agrees that it will perform in accordance with their
         terms all the obligations which by the terms of this



                                       59


         Credit Agreement and the other Credit Documents are required to be
         performed by it as a Lender.

                  (c) Register. The Agent shall maintain a copy of each
         Assignment Agreement delivered to and accepted by it and a register for
         the recordation of the names and addresses of the Lenders and the
         Commitment of, and principal amount of the Loans owing to, each Lender
         from time to time (the "Register"). The entries in the Register shall
         be conclusive and binding for all purposes, absent manifest error, and
         the Borrowers, the Agent and the Lenders may treat each Person whose
         name is recorded in the Register as a Lender hereunder for all purposes
         of this Credit Agreement. The Register shall be available for
         inspection by the Borrowers or any Lender at any reasonable time and
         from time to time upon reasonable prior notice.

                  (d) Acceptance. Upon its receipt of an Assignment Agreement
         executed by the parties thereto, together with any Note subject to such
         assignment and payment of the processing fee, the Agent shall, if such
         Assignment Agreement has been completed and is in substantially the
         form of Exhibit 11.3(b) hereto, (i) accept such Assignment Agreement,
         (ii) record the information contained therein in the Register and (iii)
         give prompt notice thereof to the parties thereto.

                  (e) Participations. Each Lender may sell participations to one
         or more Persons in all or a portion of its rights, obligations or
         rights and obligations under this Credit Agreement (including all or a
         portion of its Commitment, its Notes and its Loans); provided, however,
         that (i) such Lender's obligations under this Credit Agreement shall
         remain unchanged, (ii) such Lender shall remain solely responsible to
         the other parties hereto for the performance of such obligations, (iii)
         the participant shall be entitled to the benefit of the yield
         protection provisions contained in Sections 4.1 through 4.4, inclusive,
         but shall not be entitled to receive any amount greater than such
         Lender would have been able to receive, and (iv) the Borrowers shall
         continue to deal solely and directly with such Lender in connection
         with such Lender's rights and obligations under this Credit Agreement,
         and such Lender shall retain the sole right to enforce the obligations
         of the Borrowers relating to its Loans and its Notes and to approve any
         amendment, modification, or waiver of any provision of this Credit
         Agreement (other than amendments, modifications, or waivers decreasing
         the amount of principal of or the rate at which interest is payable on
         such Loans or Notes, extending any scheduled principal payment date or
         date fixed for the payment of interest on such Loans or Notes, or
         extending its Commitment).

                  (f) Nonrestricted Assignments. Notwithstanding any other
         provision set forth in this Credit Agreement, any Lender may at any
         time assign and pledge all or any portion of its Loans and its Notes to
         any Federal Reserve Bank as collateral security pursuant to Regulation
         A and any Operating Circular issued by such Federal Reserve Bank. No
         such assignment shall release the assigning Lender from its obligations
         hereunder.



                                       60


                  (g) Information. Any Lender may furnish any information
         concerning the Borrowers in the possession of such Lender from time to
         time to assignees and participants (including prospective assignees and
         participants).

         11.4 NO WAIVER; REMEDIES CUMULATIVE.

         No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrowers and the Agent or any
Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Lender would otherwise have. No notice to or demand on the
Borrowers in any case shall entitle the Borrowers to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the Agent or the Lenders to any other or further action in any circumstances
without notice or demand.

         11.5 PAYMENT OF EXPENSES, ETC.

         The Borrowers agree to: (i) pay all reasonable out-of-pocket costs and
expenses of the Agent and Banc of America Securities LLC ("BAS") in connection
with (A) the negotiation, preparation, execution and delivery, syndication and
administration of this Credit Agreement and the other Credit Documents and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and expenses of Moore & Van Allen, PLLC, special counsel to
the Agent) and (B) any amendment, waiver or consent relating hereto and thereto
including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Borrowers under this Credit Agreement, (ii) pay all
reasonable out-of-pocket costs and expenses of the Agent and each Lender in
connection with (A) enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders (including the allocated cost of internal
counsel)) and (B) any bankruptcy or insolvency proceeding of a Borrower and
(iii) indemnify the Agent, BAS and each Lender, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred by
any of them as a result of, or arising out of, or in any way related to, or by
reason of, any investigation, litigation or other proceeding (whether or not the
Agent, BAS or any Lender is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of proceeds of any Loans
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel and settlement
costs incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of negligence or willful misconduct on
the part of the Person to be indemnified).



                                       61


         11.6 AMENDMENTS, WAIVERS AND CONSENTS.

         Neither this Credit Agreement, nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders and the Borrowers; provided that no
such amendment, change, waiver, discharge or termination shall without the
consent of each Lender affected thereby:

                  (a) extend the Maturity Date or the Term Out Maturity Date, or
         postpone or extend the time for any payment or prepayment of principal
         (except pursuant to Section 3.3(b)) or the time of payment of any
         reimbursement obligation, or any portion thereof, arising from drawings
         under Letters of Credit;

                  (b) reduce the rate or extend the time of payment of interest
         thereon or fees or other amounts payable hereunder;

                  (c) reduce or waive the principal amount of any Loan or of any
         reimbursement obligation, or any portion thereof, arising from drawings
         under Letters of Credit;

                  (d) increase or extend the Commitment of a Lender (it being
         understood and agreed that a waiver of any Default or Event of Default
         or a waiver of any mandatory reduction in the Commitments shall not
         constitute a change in the terms of any Commitment of any Lender);

                  (e) except as permitted by Section 2.10, consent to the
         assignment or transfer by a Borrower of any of its rights and
         obligations under (or in respect of) the Credit Documents or release a
         Borrower from its obligations under the Credit Documents;

                  (f) amend, modify or waive any provision of this Section 11.6
         or Section 3.6, 3.8, 5.2, 9.1(a), 11.2, 11.3 or 11.5; or

                  (g) reduce any percentage specified in, or otherwise modify,
         the definition of Required Lenders.

No provision of Section 10 may be amended or modified without the consent of the
Agent.

Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any reorganization plan that affects the Loans or the
Letters of Credit, and each Lender acknowledges that the provisions of Section
1126(c) of the Bankruptcy Code supersede the unanimous consent provisions set
forth herein and (y) the Required Lenders may consent to allow the Borrowers to
use cash collateral in the context of a bankruptcy or insolvency proceeding.



                                       62


         11.7 COUNTERPARTS/TELECOPY.

         This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. Delivery of executed
counterparts by telecopy shall be as effective as an original and shall
constitute a representation that an original will be delivered.

         11.8 HEADINGS.

         The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

         11.9 DEFAULTING LENDER.

         Each Lender understands and agrees that if such Lender is a Defaulting
Lender then it shall not be entitled to vote on any matter requiring the consent
of the Required Lenders or to object to any matter requiring the consent of all
the Lenders; provided, however, that (a) a Lender's Commitment may not be
increased without its consent whether or not it is a Defaulting Lender and (b)
all other benefits and obligations under the Loan Documents shall apply to such
Defaulting Lender.

         11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES.

         All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Loans, the issuance of the Letters of Credit and the repayment
of the Loans, LOC Obligations and other obligations and the termination of the
Commitments hereunder.

         11.11 GOVERNING LAW; VENUE.

                  (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
         THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
         SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
         THE LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with
         respect to this Credit Agreement or any other Credit Document may be
         brought in the courts of the State of New York, or of the United States
         for the Southern District of New York, and, by execution and delivery
         of this Credit Agreement, each Borrower hereby irrevocably accepts for
         itself and in respect of its property, generally and unconditionally,
         the jurisdiction of such courts. Each Borrower further irrevocably
         consents to the service of process out of any of the aforementioned
         courts in any such action or proceeding by the mailing of copies
         thereof by registered or certified mail, postage prepaid, to it at the
         address for notices pursuant to Section 11.1, such service to become
         effective 30 days after such mailing. Nothing herein shall affect the
         right of a Lender to serve process in any other manner permitted by law
         or to



                                       63


         commence legal proceedings or to otherwise proceed against a Borrower
         in any other jurisdiction.

                  (b) Each Borrower hereby irrevocably waives any objection
         which it may now or hereafter have to the laying of venue of any of the
         aforesaid actions or proceedings arising out of or in connection with
         this Credit Agreement or any other Credit Document brought in the
         courts referred to in subsection (a) hereof and hereby further
         irrevocably waives and agrees not to plead or claim in any such court
         that any such action or proceeding brought in any such court has been
         brought in an inconvenient forum.

         11.12 WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES.

         EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY. Each Borrower agrees not to assert any
claim against the Agent, any Lender, any of their Affiliates, or any of their
respective directors, officers, employees, attorneys or agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to any of the transactions contemplated hereby or by
the other Credit Documents.

         11.13 SEVERABILITY.

         If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

         11.14 FURTHER ASSURANCES.

         Each Borrower agrees, upon the request of the Agent, to promptly take
such actions, as reasonably requested, as are necessary to carry out the intent
of this Credit Agreement and the other Credit Documents.

         11.15 ENTIRETY.

         This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.



                                       64


         11.16 BINDING EFFECT; CONTINUING AGREEMENT.

                  (a) This Credit Agreement shall become effective at such time
         when all of the conditions set forth in Section 5.1 have been satisfied
         or waived by the Lenders and it shall have been executed by the
         Borrowers, the Agent and the Lenders, and thereafter this Credit
         Agreement shall be binding upon and inure to the benefit of the
         Borrowers, the Agent and each Lender and their respective successors
         and permitted assigns.

                  (b) This Credit Agreement shall be a continuing agreement and
         shall remain in full force and effect until all Loans, LOC Obligations,
         interest, fees and other Borrowers Obligations have been paid in full
         and all Commitments and Letters of Credit have been terminated. Upon
         such termination, the Borrowers shall have no further obligations
         (other than those provisions that expressly survive the termination
         thereof) under the Credit Documents; provided that should any payment,
         in whole or in part, of the Borrowers Obligations be rescinded or
         otherwise required to be restored or returned by the Agent or any
         Lender, whether as a result of any proceedings in bankruptcy or
         reorganization or otherwise, then the Credit Documents shall
         automatically be reinstated and all amounts required to be restored or
         returned and all costs and expenses incurred by the Agent or any Lender
         in connection therewith shall be deemed included as part of the
         Borrowers Obligations.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       65




      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


         Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.

BORROWERS:                    DUKE ENERGY FIELD SERVICES, LLC
- ---------                     a Delaware limited liability company


                              By: /s/ Rose M. Robeson
                                 ----------------------------------------------
                              Name:  Rose M. Robeson
                                   --------------------------------------------
                              Title: Vice President and
                                    -------------------------------------------
                                     Chief Financial Officer
                                    -------------------------------------------


                              DUKE ENERGY FIELD SERVICES CORPORATION,
                              a Delaware corporation


                              By: /s/ Thomas E. Long
                                 ----------------------------------------------
                              Name:  Thomas E. Long
                                   --------------------------------------------
                              Title: Vice President and Treasurer
                                    -------------------------------------------






      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


LENDERS:                      BANK OF AMERICA, N.A., individually in its
- -------                       capacity as a Lender and in its capacity as Agent


                              By: /s/ Gretchen P. Burud
                                 ----------------------------------------------
                              Name:  Gretchen P. Burud
                                   --------------------------------------------
                              Title: Managing Director
                                    -------------------------------------------








      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              JPMORGAN CHASE BANK


                              By: /s/ Steven Wood
                                 ----------------------------------------------
                              Name:  Steven Wood
                                   --------------------------------------------
                              Title: Vice President
                                    -------------------------------------------






      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              SUNTRUST BANK


                              By: /s/ Linda L. Stanley
                                 ----------------------------------------------
                              Name:  Linda L. Stanley
                                   --------------------------------------------
                              Title: Director
                                    -------------------------------------------






      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              THE BANK OF NOVA SCOTIA


                              By: /s/ N. Bell
                                 ----------------------------------------------
                              Name:  N. Bell
                                   --------------------------------------------
                              Title: Senior Manager
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              THE ROYAL BANK OF SCOTLAND PLC


                              By: /s/ Keith Johnson
                                 ----------------------------------------------
                              Name:  Keith Johnson
                                   --------------------------------------------
                              Title: Senior Vice President
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              BANK OF TOKYO-MITSUBISHI TRUST COMPANY


                              By: /s/ Nicholas R. Battista
                                 ----------------------------------------------
                              Name:  Nicholas R. Battista
                                   --------------------------------------------
                              Title: VP and Manager
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              COMMERZBANK AG, NEW YORK AND
                              GRAND CAYMAN BRANCHES


                              By: /s/ Harry P. Yergey
                                 ----------------------------------------------
                              Name:  Harry P. Yergey
                                   --------------------------------------------
                              Title: SVP & Manager
                                    -------------------------------------------


                              By: /s/ Subash R. Viswanathan
                                 ----------------------------------------------
                              Name:  Subash R. Viswanathan
                                   --------------------------------------------
                              Title: Senior Vice President
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              FIRST UNION NATIONAL BANK


                              By: /s/ D. Mitch Wilson
                                 ----------------------------------------------
                              Name:  D. Mitch Wilson
                                   --------------------------------------------
                              Title: Vice President
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              BANK ONE, N.A. (MAIN OFFICE - CHICAGO)


                              By: /s/ Madeleine N. Pember
                                 ----------------------------------------------
                              Name:  Madeleine N. Pember
                                   --------------------------------------------
                              Title: Director
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              U.S. BANK NATIONAL ASSOCIATION


                              By: /s/ Matthew J. Purchase
                                 ----------------------------------------------
                              Name:  Matthew J. Purchase
                                   --------------------------------------------
                              Title: Assistant Vice President
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              WELLS FARGO BANK, N.A.


                              By: /s/ Todd Stornetta
                                 ----------------------------------------------
                              Name:  Todd Stornetta
                                   --------------------------------------------
                              Title: Vice President
                                    -------------------------------------------







      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              UBS AG, STAMFORD BRANCH


                              By: /s/ Patricia O'Kicki
                                 ----------------------------------------------
                              Name:  Patricia O'Kicki
                                   --------------------------------------------
                              Title: Director
                                    -------------------------------------------


                              By: /s/ Wilfred V. Saint
                                 ----------------------------------------------
                              Name:  Wilfred V. Saint
                                   --------------------------------------------
                              Title: Associate Director
                                    -------------------------------------------









      Signature Page to Duke Energy Field Services 364-Day Credit Agreement


                              CREDIT SUISSE FIRST BOSTON


                              By: /s/ Paul L. Colon
                                 ----------------------------------------------
                              Name:  Paul L. Colon
                                   --------------------------------------------
                              Title: Vice President
                                    -------------------------------------------


                              By: /s/ Vanessa Gomez
                                 ----------------------------------------------
                              Name:  Vanessa Gomez
                                   --------------------------------------------
                              Title: Associate
                                    -------------------------------------------