[EXECUTION VERSION]


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                      AMENDED AND RESTATED CREDIT AGREEMENT
                            Dated as of July 26, 2002


                              PROGRESS ENERGY, INC.
                                   (Borrower)

                                       and

                 THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
                                     (Banks)

                                       and

                                 CITIBANK, N.A.
                             (Administrative Agent)

                                       and

                                  SUNTRUST BANK
                                 (Issuing Bank)




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                            SALOMON SMITH BARNEY INC.
                                 (Lead Arranger)


<PAGE>

                                TABLE OF CONTENTS


Section                                                                   Page


                                    Article I
                        DEFINITIONS AND ACCOUNTING TERMS

Section 1.01. Certain Defined Terms..........................................1
Section 1.02. Computation of Time Periods...................................12
Section 1.03. Accounting Terms..............................................12

                                   Article II
                  AMOUNTS AND TERMS OF THE EXTENSIONS OF CREDIT

Section 2.01. The Commitments...............................................12
Section 2.02. The Advances..................................................12
Section 2.03. Making the Advances...........................................12
Section 2.04. Fees..........................................................14
Section 2.05. Reduction of the Commitments..................................14
Section 2.06. Repayment of Advances.........................................15
Section 2.07. Interest on Advances..........................................15
Section 2.08. Additional Interest on Eurodollar Rate Advances...............15
Section 2.09. Interest Rate Determination...................................15
Section 2.10. Voluntary Conversion of Advances..............................17
Section 2.11. Prepayments of Advances.......................................17
Section 2.12. Increased Costs...............................................18
Section 2.13. Illegality....................................................19
Section 2.14. Payments and Computations.....................................19
Section 2.15. Sharing of Payments, Etc......................................20
Section 2.16. Letters of Credit.............................................20

                                   Article III
                              CONDITIONS OF LENDING

Section 3.01. Conditions Precedent to Initial Extension of Credit...........25
Section 3.02. Conditions Precedent to Each Extension of Credit..............25

                                   Article IV
                         REPRESENTATIONS AND WARRANTIES

Section 4.01. Representations and Warranties of the Borrower................26

                                    Article V
                            COVENANTS OF THE COMPANY

Section 5.01. Affirmative Covenants.........................................28

<PAGE>

Section 5.02. Negative Covenants............................................30

                                   Article VI
                                EVENTS OF DEFAULT

Section 6.01. Events of Default.............................................32

                                   Article VII
                            THE ADMINISTRATIVE AGENT

Section 7.01. Authorization and Action......................................34
Section 7.02. The Administrative Agent's Reliance, Etc......................34
Section 7.03. The Administrative Agent and its Affiliates...................35
Section 7.04. Lender Credit Decision........................................35
Section 7.05. Indemnification...............................................35
Section 7.06. Successor Administrative Agent................................36

                                  Article VIII
                                  MISCELLANEOUS

Section 8.01. Amendments, Etc...............................................36
Section 8.02. Notices, Etc..................................................37
Section 8.03. No Waiver; Remedies...........................................37
Section 8.04. Costs, Expenses, Taxes and Indemnification....................37
Section 8.05. Right of Set-off..............................................40
Section 8.06. Binding Effect................................................40
Section 8.07. Assignments and Participations................................41
Section 8.08. Governing Law.................................................44
Section 8.09. Waiver of Jury Trial..........................................45
Section 8.10. Execution in Counterparts.....................................45
Section 8.11. Severability..................................................45
Section 8.12. Headings......................................................45
Section 8.13. Entire Agreement..............................................45

SCHEDULES
Schedule I  - List of Commitments and Applicable Lending Offices
Schedule II - Permitted Existing Indebtedness

EXHIBITS
Exhibit A-1 - Form of Notice of Borrowing
Exhibit A-2 - Form of Notice of Conversion
Exhibit B   - Form of Assignment and Acceptance
Exhibit C-1 - Form of Opinion of General Counsel to the Borrower
Exhibit C-2 - Form of Opinion of Special Counsel for the Borrower
Exhibit D   - Form of Opinion of Counsel for the Administrative Agent
              and the Lead Arranger
Exhibit E   - Form of Compliance Certificate


<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

                            Dated as of July 26, 2002


     This AMENDED AND RESTATED CREDIT  AGREEMENT  (this  "Agreement") is made by
PROGRESS ENERGY, INC., a North Carolina corporation (the "Borrower"),  the banks
listed on the signature pages hereof (the "Banks"), CITIBANK, N.A. ("Citibank"),
as  administrative  agent  (the  "Administrative  Agent")  for the  Lenders  (as
hereinafter  defined),  and  SUNTRUST  BANK,  as  Issuing  Bank (as  hereinafter
defined).

                                    RECITALS

     WHEREAS,  the Borrower,  certain banks and the Administrative Agent entered
into  the  Credit  Agreement  dated  as of  November  13,  2001  (the  "Original
Agreement"), pursuant to which the lenders thereunder agreed to extend credit to
the Borrower in an  aggregate  amount at any time  outstanding  not in excess of
$450,000,000; and

     WHEREAS, the Original Agreement was amended pursuant to an Amendment, dated
as of February  13, 2002 (the  "Amendment"),  among the Borrower and the Lenders
named therein; and

     WHEREAS, the Majority Lenders consented to a departure by the Borrower from
certain of the terms of the Original Agreement  pursuant to a Consent,  dated as
of January 29, 2002 (the  "Consent"),  among the Borrower and the Lenders  named
therein; and

     WHEREAS,  the parties hereto now wish to amend the Original  Agreement,  as
modified  by the  Consent  and the  Amendment,  to provide  for the  issuance of
Letters of Credit in an aggregate amount not in excess of $125,000,000.

     In order to provide for the  issuance of such  Letters of Credit as well as
to reflect the Consent and the  Amendment,  the parties hereto now wish to amend
and restate the Original Agreement as herein set forth:

                                   Article I
                        DEFINITIONS AND ACCOUNTING TERMS

     Section 1.01. Certain Defined Terms.

     As used in this  Agreement,  the  following  terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

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

     "Advance"  means  an  advance  by a  Lender  to the  Borrower  as part of a
Borrowing and refers to a Base Rate Advance or a Eurodollar  Rate Advance,  each
of which shall be a "Type" of Advance.


<PAGE>
                                                                               2

     "Affiliate"  means,  as to any Person,  any other Person that,  directly or
indirectly,  controls,  is controlled  by, or is under common  control with such
Person or is a director or officer of such Person.

     "Applicable  Lending Office" means,  with respect to each Lender,  (i) such
Lender's  Domestic  Lending  Office in the case of a Base Rate Advance,  or (ii)
such  Lender's  Eurodollar  Lending  Office,  in the case of a  Eurodollar  Rate
Advance.

     "Applicable  Margin"  means for each Type of  Advance  at all times  during
which any  Applicable  Rating  Level set forth below is in effect,  the interest
rate per annum set forth below next to such Applicable Rating Level :

-------------------------- -------------------------- -------------------------
                             Applicable Margin for     Applicable Margin for
 Applicable Rating Level   Eurodollar Rate Advances      Base Rate Advances
-------------------------- -------------------------- -------------------------
            1                       0.275%                       0%
-------------------------- -------------------------- -------------------------
            2                       0.390%                       0%
-------------------------- -------------------------- -------------------------
            3                       0.625%                       0%
-------------------------- -------------------------- -------------------------
            4                       0.725%                       0%
-------------------------- -------------------------- -------------------------
            5                       0.925%                       0%
-------------------------- -------------------------- -------------------------
            6                       1.250%                       0%
-------------------------- -------------------------- -------------------------

provided, that

          (i) the  Applicable  Margins for  Eurodollar  Rate  Advances set forth
     above for each  Applicable  Rating  Level  shall  increase  at any time the
     aggregate  principal amount of Advances  outstanding is greater than 33% of
     the  aggregate  Commitments  by  0.125%  at  Levels 1, 2, 3, 4 and 5 and by
     0.250% at Level 6,

          (ii) the Applicable Margins set forth above for each Applicable Rating
     Level shall increase upon the occurrence and during the  continuance of any
     Event of Default by 2.0%, and

          (iii) any change in the Applicable  Margin  resulting from a change in
     the  Applicable  Rating  Level  shall  become  effective  upon  the date of
     announcement  of a change  in the  Moody's  Rating or the S&P  Rating  that
     results in a change in the Applicable Rating Level.

     "Applicable  Rating  Level" at any time shall be  determined  in accordance
with the then-applicable  S&P Rating and the  then-applicable  Moody's Rating as
follows:
<PAGE>
                                                                               3

----------------------------------------- -----------------------------------
     S&P Rating/Moody's Rating                 Applicable Rating Level
----------------------------------------- -----------------------------------
     A or higher or A2 or higher                          1
----------------------------------------- -----------------------------------
     A- or A3                                             2
----------------------------------------- -----------------------------------
     BBB+ or Baa1                                         3
----------------------------------------- -----------------------------------
     BBB or Baa2                                          4
----------------------------------------- -----------------------------------
     BBB- and Baa3                                        5
----------------------------------------- -----------------------------------
     lower than BBB- and Baa3 or unrated                  6
----------------------------------------- -----------------------------------

In the event  that the S&P  Rating  and the  Moody's  Rating are not at the same
Applicable Rating Level but differ by only one Applicable Rating Level, then the
higher of the two ratings shall  determine the Applicable  Rating Level.  In the
event  that the S&P  Rating  and the  Moody's  Rating  differ  by more  than one
Applicable  Rating Level, then the Applicable Rating Level immediately below the
higher of the two ratings shall be the Applicable  Rating Level.  The Applicable
Rating Level shall be  redetermined  on the date of  announcement of a change in
the S&P Rating or the Moody's Rating.

     "Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an Eligible Assignee,  and accepted by the Administrative Agent,
in substantially the form of Exhibit B hereto.

     "Banks" has the meaning specified in the preamble to this Agreement.

     "Base  Rate"  means,  for  any  Interest  Period  or any  other  period,  a
fluctuating  interest  rate per annum as shall be in  effect  from time to time,
which rate per annum shall at all times be equal to the higher from time to time
of:

          (i) the rate of interest  announced  publicly by Citibank in New York,
     New York, from time to time, as Citibank's base rate; and

          (ii) 1/2 of one  percent  per annum  above the  Federal  Funds Rate in
     effect from time to time.

     "Base Rate  Advance"  means an Advance  that bears  interest as provided in
Section 2.07(a).

     "Base Rate Borrowing" means a Borrowing comprising Base Rate Advances.

     "Borrower" has the meaning specified in the preamble to this Agreement.
<PAGE>
                                                                               4

     "Borrowing"  means a borrowing  consisting of simultaneous  Advances of the
same Type made by each of the  Lenders  pursuant  to Section  2.02 or  Converted
pursuant to Section 2.09 or 2.10.

     "Business  Day" means a day of the year on which banks are not  required or
authorized to close at the principal office of any Lender and, if the applicable
Business Day relates to any  Eurodollar  Rate  Advances,  on which  dealings are
carried on in the London interbank market.

     "Change of Control" means the occurrence, after the date of this Agreement,
of (i) any Person or "group"  (within  the meaning of Rule 13(d) or 14(d) of the
Securities  and  Exchange  Commission  under  the  Exchange  Act),  directly  or
indirectly,  acquiring beneficial ownership of or control over securities of the
Borrower (or other securities convertible into such securities) representing 30%
or more of the combined voting power of all securities of the Borrower  entitled
to vote in the election of directors.

     "Citibank" has the meaning specified in the preamble to this Agreement.

     "Commitment" has the meaning specified in Section 2.01.

     "Consent" has the meaning specified in the recitals to this Agreement.

     "Consolidated"  refers to the consolidation of the accounts of the Borrower
and  its   subsidiaries  in  accordance  with  generally   accepted   accounting
principles, including principles of consolidation, consistent with those applied
in the preparation of the financial statements referred to in Section 4.01(e).

     "Convert",  "Conversion"  and  "Converted"  each refers to a conversion  of
Advances of one Type into  Advances of another  Type, or the selection of a new,
or the  renewal of the same,  Interest  Period  for  Eurodollar  Rate  Advances,
pursuant to Section 2.09(g) or 2.10.

     "CP&L" means the Carolina Power & Light Company.

     "Domestic Lending Office" means, with respect to any Lender,  the office of
such Lender  specified as its  "Domestic  Lending  Office"  opposite its name on
Schedule  I hereto or in the  Assignment  and  Acceptance  pursuant  to which it
became a Lender,  or such other  office of such  Lender as such  Lender may from
time to time specify to the Borrower and the Administrative Agent.

     "Eligible Assignee" means (i) any other Lender or any Affiliate of a Lender
and (ii) (A) any other  commercial  bank organized  under the laws of the United
States,  or any State thereof,  and having a combined  capital and surplus of at
least $250,000,000 (as established in its most recent report of condition to its
primary regulator),  (B) a commercial bank organized under the laws of any other
country  that  is a  member  of  the  OECD  or  has  concluded  special  lending
arrangements  with the  International  Monetary Fund associated with its General
Arrangements to Borrow of the Cayman Islands, or a political  subdivision of any
such country, and having a combined capital and surplus of at least $250,000,000
(as  established  in  its  most  recent  report  of  condition  to  its  primary
regulator); provided that such bank is acting through a branch or agency located

<PAGE>
                                                                               5

in the  United  States or in the  country  in which it is  organized  or another
country  that is  described  in this  clause (B),  (C) the  central  bank of any
country that is a member of the OECD or (D) a finance company, insurance company
or other  financial  institution or fund (whether a corporation,  partnership or
other entity) that is engaged in making,  purchasing  or otherwise  investing in
commercial  loans in the  ordinary  course of its  business,  whose  outstanding
unsecured indebtedness is rated AA- or better by S&P or Aa3 or better by Moody's
(or an equivalent rating by another  nationally-recognized  credit rating agency
of similar  standing if neither of such  corporations is then in the business of
rating unsecured indebtedness).

     "Environmental Laws" means any federal,  state or local laws, ordinances or
codes, rules,  orders, or regulations relating to pollution or protection of the
environment,   including,   without  limitation,   laws  relating  to  hazardous
substances, laws relating to reclamation of land and waterways and laws relating
to  emissions,  discharges,  releases  or  threatened  releases  of  pollutants,
contaminants,  chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water,  land surface or subsurface  strata) or otherwise  relating to the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport or handling of  pollution,  contaminants,  chemicals,  or  industrial,
toxic or hazardous substances or wastes.

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

     "Eurocurrency  Liabilities"  has  the  meaning  assigned  to  that  term in
Regulation  D of the Board of  Governors of the Federal  Reserve  System,  as in
effect from time to time.

     "Eurodollar  Lending Office" means, with respect to each Lender, the office
of such Lender specified as its "Eurodollar Lending Office" opposite its name on
Schedule  I hereto or in the  Assignment  and  Acceptance  pursuant  to which it
became a Lender  (or,  if no such  office is  specified,  its  Domestic  Lending
Office),  or such other  office of such  Lender as such  Lender may from time to
time specify to the Borrower and the Administrative Agent.

     "Eurodollar  Rate" means,  for the Interest Period for each Eurodollar Rate
Advance  comprising  part of the same Borrowing an interest rate per annum equal
to the average  (rounded  upward to the nearest whole  multiple of 1/8 of 1% per
annum,  if such  average is not such a multiple) of the rates per annum at which
deposits  in U.S.  dollars are  offered by the  principal  office of each of the
Reference Banks in London, England to prime banks in the London Interbank market
at 11:00  A.M.  (London  time) two  Business  Days  before the first day of such
Interest  Period  for a period  equal to such  Interest  Period and in an amount
substantially  equal to the amount of such  Eurodollar  Rate Advance  comprising
part of such Borrowing to be outstanding  during such Interest  Period from such
Reference  Bank. The Eurodollar Rate for the Interest Period for each Eurodollar
Rate Advance  comprising  part of the same Borrowing  shall be determined by the
Administrative  Agent on the  basis of the  applicable  rates  furnished  to and
received by the Administrative  Agent from the Reference Banks two Business Days
before  the  first  day  of  such  Interest  Period,  subject,  however,  to the
provisions of Section 2.09.

     "Eurodollar  Rate Advance" means an Advance that bears interest as provided
in Section 2.07(b).
<PAGE>
                                                                               6

     "Eurodollar Rate Reserve  Percentage" of any Lender for the Interest Period
for any Eurodollar Rate Advance means the reserve  percentage  applicable during
such  Interest  Period  (or  if  more  than  one  such  percentage  shall  be so
applicable,  the  daily  average  of such  percentages  for  those  days in such
Interest Period during which any such percentage  shall be so applicable)  under
regulations  issued from time to time by the Board of  Governors  of the Federal
Reserve  System  (or  any  successor)  for   determining   the  maximum  reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal  reserve  requirement)  for such Lender with respect to  liabilities or
assets consisting of or including  Eurocurrency  Liabilities having a term equal
to such Interest Period.

     "Events of Default" has the meaning assigned to that term in Section 6.01.

     "Exchange  Act"  means  the  Securities  Exchange  Act  of  1934,  and  the
regulations promulgated  thereunder,  in each case as amended and in effect from
time to time.

     "Extension  of  Credit"  means  (i) the  making of an  Advance  or (ii) the
issuance of a Letter of Credit or the  amendment of any Letter of Credit  having
the effect of extending the stated  termination  date thereof or increasing  the
maximum amount to be drawn thereunder.

     "Facility Fee  Percentage"  means, at all times during which any Applicable
Rating  Level set forth  below is in effect,  the rate per annum set forth below
next to such Applicable Rating Level:

-------------------- -------------------
 Applicable Rating      Facility Fee
       Level             Percentage
-------------------- -------------------
         1                 0.100%
-------------------- -------------------
         2                 0.110%
-------------------- -------------------
         3                 0.125%
-------------------- -------------------
         4                 0.150%
-------------------- -------------------
         5                 0.200%
-------------------- -------------------
         6                 0.250%
-------------------- -------------------

provided,  that a change in the Facility Fee Percentage  resulting from a change
in the  Applicable  Rating  Level  shall  become  effective  upon  the  date  of
announcement of a change in the Moody's Rating or the S&P Rating that results in
a change in the Applicable Rating Level.

     "Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight  Federal  funds  transactions  with members of the Federal  Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next  preceding  Business Day) by the Federal
Reserve Bank of New York,  or, if such rate is not so published for any day that
is a  Business  Day,  the  average  of the  quotations  for  such  day  on  such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.
<PAGE>
                                                                               7

     "First  Mortgage  Bonds" means those bonds issued from time to time by CP&L
pursuant to the Mortgage.

     "Florida Power" means Florida Power Corporation.

     "Florida Power Mortgage" means the Indenture,  dated as of January 1, 1944,
between  Florida  Power,  Guaranty  Trust  Company  of New York and the  Florida
National Bank of Jacksonville, as modified, amended or supplemented from time to
time.

     "Florida Power  Mortgage  Bonds" means those bonds issued from time to time
by Florida Power pursuant to the Florida Power Mortgage.

     "FPC" means Florida Progress Corporation.

     "GenCo  Financing"  means up to $500,000,000  original  principal amount of
Indebtedness  incurred by or created for the benefit of Progress GenCo Ventures,
LLC, an indirect wholly owned  Subsidiary of the Borrower,  secured by liens and
security  interests  on  the  property  of  Progress  Ventures,   Inc.  and  its
Subsidiaries,  including  Progress GenCo Ventures,  LLC, as to which neither the
Borrower nor any  Subsidiary  of the Borrower  that is not also a Subsidiary  of
Progress Ventures, Inc. shall be liable, except as otherwise contemplated by the
Consent.

     "Guaranty" of any Person means any obligation,  contingent or otherwise, of
such  Person  (i) to pay any  Liability  of any  other  Person  or to  otherwise
protect,  or having the practical  effect of protecting,  the holder of any such
Liability  against loss (whether such obligation arises by virtue of such Person
being a  partner  of a  partnership  or  participant  in a joint  venture  or by
agreement  to pay,  to keep well,  to  purchase  assets,  goods,  securities  or
services or to take or pay, or otherwise)  or (ii)  incurred in connection  with
the  issuance  by a third  Person of a Guaranty  of any  Liability  of any other
Person  (whether such  obligation  arises by agreement to reimburse or indemnify
such third Person or otherwise).  The word  "Guarantee"  when used as a verb has
the correlative meaning.

     "Indebtedness"  of any Person means (i) any  obligation  of such Person for
borrowed  money,  (ii)  any  obligation  of  such  Person  evidenced  by a bond,
debenture, note or other similar instrument, (iii) any obligation of such Person
to pay the  deferred  purchase  price of  property or  services,  except a trade
account  payable that arises in the ordinary  course of business but only if and
so long as the same is payable on customary trade terms,  (iv) any obligation of
such Person as lessee  under a capital  lease,  (v) any  Mandatorily  Redeemable
Stock of such  Person  (the amount of such  Mandatorily  Redeemable  Stock to be
determined for this purpose as the higher of the liquidation  preference and the
amount payable upon redemption of such Mandatorily  Redeemable Stock),  (vi) any
obligation of such Person to purchase  securities or other  property that arises
out of or in  connection  with  the sale of the  same or  substantially  similar
securities or property,  (vii) any  non-contingent  obligation of such Person to
reimburse  any other  Person in respect of amounts paid under a letter of credit
or  other  Guaranty  issued  by  such  other  Person  to the  extent  that  such
reimbursement  obligation remains  outstanding after it becomes  non-contingent,
(viii) any  Indebtedness  of others  secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) a
mortgage, lien, pledge, charge or other encumbrance on any asset of such Person,

<PAGE>
                                                                               8

(ix) any  Liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA,  (x) any Synthetic  Lease  Obligations  of such Person and
(xi) any Indebtedness of others Guaranteed by such Person.

     "Interest  Period" means, for each Eurodollar Rate Advance  comprising part
of the same Borrowing,  the period commencing on the date of such Advance or the
date of the  Conversion  of any  Advance  into such an Advance and ending on the
last day of the period selected by the Borrower pursuant to the provisions below
and,  thereafter,  each  subsequent  period  commencing  on the  last day of the
immediately  preceding  Interest Period and ending on the last day of the period
selected by the Borrower  pursuant to the provisions below. The duration of each
such  Interest  Period shall be one, two,  three or six months,  as the Borrower
may, in the Notice of  Borrowing  given by the  Borrower  to the  Administrative
Agent pursuant to Section 2.03, select; provided, however, that:

          (i) the Borrower  may not select any  Interest  Period that ends after
     the Termination Date;

          (ii)  Interest  Periods  commencing  on the  same  date  for  Advances
     comprising the same Borrowing shall be of the same duration; and

          (iii)  whenever  the last day of any Interest  Period would  otherwise
     occur on a day other than a  Business  Day,  the last day of such  Interest
     Period  shall be extended  to occur on the next  succeeding  Business  Day;
     provided that if such  extension  would cause the last day of such Interest
     Period to occur in the next following  calendar month, the last day of such
     Interest Period shall occur on the next preceding Business Day.

The  Administrative  Agent  shall  promptly  advise  each  Lender by or telecopy
transmission of each Interest Period so selected by the Borrower.

     "Issuing Bank" shall mean SunTrust Bank, as issuer of Letters of Credit, or
any other Lender that agrees to act as Issuing Bank hereunder.

     "LC Commitment"  shall mean that portion of the Commitment that may be used
by the  Borrower  for the  issuance  of Letters of Credit in an  aggregate  face
amount not to exceed $125,000,000.

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

     "LC  Documents"  shall mean the  Letters  of Credit  and all  applications,
agreements and instruments relating to the Letters of Credit.

     "LC Exposure" shall mean, at any time, the sum of (i) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (ii) the aggregate
amount of all LC Disbursements  that have not been reimbursed by or on behalf of
the  Borrower at such time.  The LC Exposure of any Lender shall be its Pro Rata
Share of the total LC Exposure at such time.

     "Lenders"  means the Lenders listed on the signature  pages hereof and each
Eligible Assignee that shall become a party hereto pursuant to Section 8.07.
<PAGE>
                                                                               9

     "Letter of  Credit"  shall mean any  letter of credit  issued  pursuant  to
Section 2.16 by the Issuing Bank for the account of the Borrower.

     "Liability" of any Person means any  indebtedness,  liability or obligation
of or binding  upon,  such Person or any of its assets,  of any kind,  nature or
description,  direct  or  indirect,  absolute  or  contingent,  due or not  due,
contractual  or tortious,  liquidated  or  unliquidated,  whether  arising under
contract,  applicable  law,  or  otherwise,  whether now  existing or  hereafter
arising.

     "Majority  Lenders"  means at any time Lenders  holding at least 66-2/3% of
the aggregate principal amount of the Advances then outstanding,  or, if no such
principal  amount is then  outstanding,  Lenders  having at least 66-2/3% of the
Commitments (provided that, for purposes hereof,  neither the Borrower,  nor any
of its  Affiliates,  if a Lender,  shall be included in (i) the Lenders  holding
such amount of the  Advances or having  such amount of the  Commitments  or (ii)
determining the aggregate  unpaid  principal amount of the Advances or the total
Commitments).

     "Mandatorily Redeemable Stock" means, with respect to any Person, any share
of such Person's capital stock to the extent that it is (i) redeemable,  payable
or required to be purchased or otherwise retired or extinguished, or convertible
into any  Indebtedness  or other  Liability  of such  Person,  (A) at a fixed or
determinable date,  whether by operation of a sinking fund or otherwise,  (B) at
the option of any Person other than such Person or (C) upon the  occurrence of a
condition  not solely  within the control of such  Person,  such as a redemption
required to be made out of future earnings or (ii)  convertible into Mandatorily
Redeemable Stock.

     "Moody's" means Moody's Investors Service, Inc., or any successor thereto.

     "Moody's Rating" means, on any date of determination,  the debt rating most
recently  announced by Moody's with respect to the Borrower's  long-term  senior
unsecured non-credit-enhanced debt.

     "Mortgage"  means the Mortgage and Deed of Trust,  dated as of May 1, 1940,
from  CP&L to The  Bank of New  York  (formerly  Irving  Trust  Company)  and to
Frederick  G. Herbst  (W.T.  Cunningham,  successor),  as  modified,  amended or
supplemented from time to time.

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

     "Notice of Borrowing" has the meaning specified in Section 2.03(a).

     "Notice of Conversion" has the meaning specified in Section 2.10.

     "OECD" means the Organization for Economic Cooperation and Development.

     "Original Agreement" has the meaning specified in the recitals hereto.

     "Outstanding Credits" means, on any date of determination,  an amount equal
to the sum of (i) the aggregate principal amount of all Advances  outstanding on

<PAGE>
                                                                              10

such date plus (ii) the LC Exposure on such date. The  "Outstanding  Credits" of
any Lender means,  on any date of  determination,  an amount equal to the sum of
(A) the  aggregate  principal  amount of all  outstanding  Advances made by such
Lender plus (B) such Lender's LC Exposure on such date.

     "Person"  means  an  individual,  partnership,   corporation  (including  a
business  trust),  limited  liability  company,  joint  stock  company,   trust,
unincorporated association, joint venture or other entity, or a foreign state or
political subdivision thereof or any agency of such state or subdivision.

     "Plan"  means an employee  benefit plan (other than a  Multiemployer  Plan)
maintained for employees of the Borrower or any of its Affiliates and covered by
Title IV of ERISA.

     "Progress Capital" means Progress Capital Holdings, Inc.

     "Portfolio  Transaction"  means the sale of Florida  Progress's  and CP&L's
portfolio of affordable housing investments.

     "Pro Rata Share" shall mean,  with respect to any  Commitment of any Lender
at any  time,  a  percentage,  the  numerator  of which  shall be such  Lender's
Commitment  (or if the  Commitments  have  been  terminated  or  expired  or the
Advances  have been  declared to be due and payable,  the Advances  made by such
Lender), and the denominator of which shall be the sum of the Commitments of all
Lenders (or if the  Commitments  have been terminated or expired or the Advances
have been declared to be due and payable, the Advances made by all Lenders).

     "Rail  Transaction"  means the sale of  substantially  all of the assets or
capital stock of Progress Rail Services, Inc.

     "Reference Banks" means Citibank and JPMorgan Chase Bank.

     "Register" has the meaning specified in Section 8.07(c).

     "Responsible  Officer" means the President,  any Vice President,  the Chief
Financial Officer,  the Treasurer,  the Controller or any Assistant Treasurer of
the Borrower the  signatures of whom, in each case,  have been  certified to the
Administrative  Agent and each other Lender pursuant to Section 3.01(c), or in a
certificate  delivered to the  Administrative  Agent  replacing or amending such
certificate.  Each Lender may conclusively rely on each certificate so delivered
until it shall have  received a copy of a  certificate  from the Secretary or an
Assistant  Secretary of the  Borrower  amending,  canceling  or  replacing  such
certificate.

     "S&P" means Standard & Poor's Ratings Group or any successor thereto.

     "S&P  Rating"  means,  on any date of  determination,  the debt rating most
recently  announced  by S&P with  respect  to the  Borrower's  long-term  senior
unsecured non-credit-enhanced debt.

     "SEC Order"  means Order Nos.  35-27440 and 70-9909 of the  Securities  and
Exchange Commission issued September 20, 2001.
<PAGE>
                                                                              11

     "Significant  Subsidiary" means CP&L, FPC, Florida Power,  Progress Capital
and any  other  Subsidiary  of the  Borrower  that  at any  time  constitutes  a
"significant  subsidiary",  as such term is  defined  in  Regulation  S-X of the
Securities  and Exchange  Commission  as in effect on the date hereof (17 C.F.R.
Part 210).

     "Subsidiary"  means,  with  respect  to  any  Person,  any  corporation  or
unincorporated  entity of which more than 50% of the  outstanding  capital stock
(or comparable  interest) having ordinary voting power  (irrespective of whether
at the time capital stock (or comparable interest) of any other class or classes
of such  corporation  or  entity  shall  or might  have  voting  power  upon the
occurrence of any  contingency)  is at the time directly or indirectly  owned by
said Person (whether directly or through one or more other Subsidiaries).

     "Synthetic  Lease" means a lease transaction under which the parties intend
that (i) the  lease  will be  treated  as an  "operating  lease"  by the  lessee
pursuant to Statement of Financial  Accounting Standards No. 13, as amended, and
(ii) the lessee will be entitled  to various tax and other  benefits  ordinarily
available to owners (as opposed to lessees) of like property.

     "Synthetic Lease Obligations" means, with respect to any Person, the sum of
(i) all remaining  rental  obligations of such Person as lessee under  Synthetic
Leases that are  attributable to principal and,  without  duplication,  (ii) all
rental  and  purchase  price  payment  obligations  of such  Person  under  such
Synthetic Leases assuming such Person exercises the option to purchase the lease
property at the end of the lease term.

     "Termination Date" means, with respect to a Lender, the earlier to occur of
(i)  November  13,  2004  and  (ii)  the  date of  termination  in  whole of the
Commitments pursuant to Section 2.05 or 6.01.

     "Termination  Event" means (i) a Reportable Event described in Section 4043
of ERISA and the regulations  issued  thereunder  (other than a Reportable Event
not subject to the provision for 30-day notice to the Pension  Benefit  Guaranty
Corporation under such  regulations),  or (ii) the withdrawal of the Borrower or
any of its  Affiliates  from  a Plan  during  a  plan  year  in  which  it was a
"substantial  employer" as defined in Section  4001(a)(2) of ERISA, or (iii) the
filing  of a notice of intent to  terminate  a Plan or the  treatment  of a Plan
amendment as a termination  under Section 4041 of ERISA, or (iv) the institution
of proceedings to terminate a Plan by the Pension Benefit Guaranty  Corporation,
or (v) any other event or condition that might constitute  grounds under Section
4042 of ERISA  for the  termination  of,  or the  appointment  of a  trustee  to
administer, any Plan.

     "Total  Capitalization"  means  the sum of the value of the  common  stock,
retained  earnings,  and preferred and preference stock of the Borrower (in each
case,  determined in accordance with generally  accepted  accounting  principles
consistent  with those applied in the  preparation  of the financial  statements
referred to in Section 4.01(e)), plus Consolidated Indebtedness of the Borrower.
<PAGE>
                                                                              12

     Section 1.02. Computation of Time Periods.

     In this  Agreement in the  computation  of periods of time from a specified
date to a later  specified  date, the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding".

     Section 1.03. Accounting Terms.

     All accounting terms not specifically  defined herein shall be construed in
accordance with generally accepted accounting  principles  consistent with those
applied in the  preparation of the financial  statements  referred to in Section
4.01(e).

                                   Article II
                  AMOUNTS AND TERMS OF THE EXTENSIONS OF CREDIT

     Section 2.01. The Commitments.  Each Lender severally  agrees, on the terms
and conditions  hereinafter  set forth,  to make Advances to the Borrower and to
purchase  participations  in Letters of Credit from time to time on any Business
Day during the period  from the date  hereof to and  including  the  Termination
Date, in an aggregate  amount  outstanding  not to exceed at any time the amount
set forth  opposite  such  Lender's name on Schedule I hereto or, if such Lender
has entered into any Assignment and Acceptance, set forth for such Lender in the
Register maintained by the Administrative  Agent pursuant to Section 8.07(c), as
such   amount  may  be  reduced   pursuant  to  Section   2.05  (such   Lender's
"Commitment"),  and the Issuing  Bank agrees to issue  Letters of Credit for the
account of the Borrower  from time to time on any Business Day during the period
from the date hereof until the tenth Business Day prior to the Termination  Date
in an aggregate amount not to exceed the LC Commitment.

     Section 2.02. The Advances.

     (a)  Each  Borrowing  shall  be  in  an  aggregate  amount  not  less  than
$10,000,000  or an integral  multiple of $1,000,000 in excess  thereof and shall
consist of Advances of the same Type made on the same day by the Lenders ratably
according to their respective  Commitments.  Until the Termination  Date, within
the  limits of each  Lender's  Commitment,  the  Borrower  may from time to time
borrow, repay pursuant to Section 2.06 or prepay pursuant to Section 2.11(b) and
reborrow under this Section 2.02.

     (b) Any Lender may request that any Advances made by it be evidenced by one
or more promissory notes. In such event, the Borrower shall prepare, execute and
deliver to such Lender one or more promissory notes payable to the order of such
Lender (or, if requested by such Lender,  to such Lender and its  assignees) and
in a form approved by the Administrative Agent.

     Section 2.03. Making the Advances.

     (a) Each Borrowing shall be made on notice, given not later than 10:00 A.M.
(New York City  time) on the day of such  proposed  Borrowing,  in the case of a
Borrowing comprised of Base Rate Advances, or on the third Business Day prior to
the date of the  proposed  Borrowing,  in the case of a Borrowing  comprised  of

<PAGE>
                                                                              13

Eurodollar Rate Advances,  by the Borrower to the  Administrative  Agent,  which
shall give to each Lender prompt notice thereof by telecopier.  Each such notice
of a  Borrowing  (a "Notice of  Borrowing")  shall be by  telecopier,  confirmed
promptly in writing, in substantially the form of Exhibit A-1 hereto, specifying
therein  the  requested  (i)  date  of such  Borrowing,  (ii)  Type of  Advances
comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in
the case of a Borrowing  comprised of  Eurodollar  Rate  Advances,  the Interest
Period for each such Advance.  In the case of a proposed Borrowing  comprised of
Eurodollar Rate Advances,  the  Administrative  Agent shall promptly notify each
Lender of the applicable interest rate under Section 2.07(b). Each Lender shall,
before  12:00  P.M.  (New York City  time) on the date of such  Borrowing,  make
available for the account of its Applicable Lending Office to the Administrative
Agent at its  address  referred  to in Section  8.02,  in same day  funds,  such
Lender's  ratable portion of such Borrowing.  After the  Administrative  Agent's
receipt of such funds and upon  fulfillment  of the  applicable  conditions  set
forth in Article III, the Administrative Agent will make such funds available to
the Borrower at the Administrative Agent's aforesaid address.

     (b) Each  Notice of  Borrowing  shall be  irrevocable  and  binding  on the
Borrower and, in respect of any Borrowing comprised of Eurodollar Rate Advances,
the Borrower shall indemnify each Lender against any loss or expense incurred by
such Lender as a result of any  failure by the  Borrower to fulfill on or before
the date  specified for such  Borrowing the  applicable  conditions set forth in
Article  III,  including,  without  limitation,  any  loss  (including  loss  of
anticipated  profits)  or  expense  incurred  by  reason of the  liquidation  or
reemployment  of  deposits  or other  funds  acquired by such Lender to fund the
Advance to be made by such Lender as part of such  Borrowing  when such Advance,
as a result of such failure, is not made on such date.

     (c) Unless the  Administrative  Agent  shall have  received  notice  from a
Lender  prior  to the  date of any  Borrowing  that  such  Lender  will not make
available to the  Administrative  Agent such  Lender's  ratable  portion of such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
portion available to the  Administrative  Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.03 and the Administrative Agent
may, in reliance upon such  assumption,  make  available to the Borrower on such
date a corresponding  amount. If and to the extent such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the  Borrower  severally  agree to repay to the  Administrative  Agent  (without
duplication),  forthwith on demand,  such  corresponding  amount,  together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the  Administrative  Agent,  at
(x) in the case of the  Borrower,  the interest  rate  applicable at the time to
Advances  comprising  such  Borrowing  and (y) in the case of such  Lender,  the
Federal Funds Rate. If such Lender shall repay to the Administrative  Agent such
corresponding  amount,  such amount so repaid  shall  constitute  such  Lender's
Advance as part of such Borrowing for purposes of this Agreement.

     (d) The  failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its  obligation,  if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be  responsible  for the  failure of any other  Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
<PAGE>
                                                                              14

     (e) If, for any reason,  a Borrowing  is not made on the date  specified in
any Notice of Borrowing, the Administrative Agent hereby agrees to repay to each
Lender  the  amount,  if  any,  that  such  Lender  has  made  available  to the
Administrative  Agent  as such  Lender's  ratable  portion  of  such  Borrowing,
together  with  interest  thereon for each day from the date such amount is made
available  to the  Administrative  Agent until the date such amount is repaid to
such Lender, at the Federal Funds Rate.

     Section 2.04. Fees.

     (a) The Borrower agrees to pay to the Administrative  Agent for the account
of each  Lender a facility  fee on each  Lender's  Commitment,  irrespective  of
usage,  from the date hereof,  in the case of each Bank,  and from the effective
date specified in the  Assignment  and Acceptance  pursuant to which it became a
Lender, in the case of each other Lender, until the Termination Date at the rate
per annum equal to the Facility Fee Percentage from time to time in effect. Such
fee shall be  calculated on the basis of actual number of days elapsed in a year
of 365 or 366 days.  Such fee shall be payable  quarterly in arrears on the last
day of each March, June, September and December during the term of such Lender's
Commitment, and on the Termination Date.

     (b) The Borrower agrees to pay to the Administrative Agent an agency fee in
such  amounts and payable at such times,  as shall be agreed to between  them in
writing.

     (c) The Borrower agrees to pay to the Administrative  Agent for the account
of each  Lender  a  letter  of  credit  fee at a rate  per  annum  equal  to the
Applicable  Margin for  Eurodollar  Rate Advances in effect from time to time on
the average  daily amount of each such Lender's LC Exposure from the date hereof
until the later to occur of the Termination  Date and the date on which there is
no amount remaining  available to be drawn under any Letter of Credit.  Such fee
shall be  calculated  on the basis of actual number of days elapsed in a year of
365 or 366 days. Such fee shall be payable  quarterly in arrears on the last day
of each March,  June,  September  and  December and on the later to occur of the
Termination Date and the date on which there is no amount remaining available to
be drawn under any Letter of Credit.

     (d) The  Borrower  agrees to pay to the Issuing  Bank for its own account a
fronting  fee and  such  other  customary  fees  relating  to the  issuance  and
maintenance  of Letters of Credit,  in such amounts and payable at such times as
shall be agreed between them in writing.

     Section 2.05. Reduction of the Commitments.

     The  Borrower  shall have the right,  upon at least  three  Business  Days'
notice to the Administrative Agent,  irrevocably to terminate in whole or reduce
ratably  in part  the  unused  portions  of the  respective  Commitments  of the
Lenders;  provided that the aggregate  amount of the  Commitments of the Lenders
shall not be reduced to an amount that is less than the Outstanding Credits; and
provided,  further,  that each partial  reduction of Commitments shall be in the
aggregate amount of $10,000,000 or an integral  multiple of $1,000,000 in excess
thereof. Once terminated or reduced, the Commitments may not be reinstated.
<PAGE>
                                                                              15

     Section 2.06. Repayment of Advances.

     The Borrower shall repay the principal  amount of each Advance made by each
Lender on the Termination Date.

     Section 2.07. Interest on Advances.

     The  Borrower  shall pay  interest on the unpaid  principal  amount of each
Advance made by each Lender from the date of such Advance  until such  principal
amount shall be paid in full, at the following rates per annum:

     (a) Base Rate Advances.  If such Advance is a Base Rate Advance, a rate per
annum equal at all times to the Base Rate in effect from time to time,  plus the
Applicable  Margin,  payable quarterly in arrears on the last day of each March,
June,  September  and December  and on the date such Base Rate Advance  shall be
paid in full; provided,  however, that if and for so long as an Event of Default
has occurred and is continuing,  interest on the unpaid principal amount of each
Base Rate Advance shall be payable on demand.

     (b) Eurodollar Rate Advances. If such Advance is a Eurodollar Rate Advance,
a rate per annum equal at all times during each Interest Period for such Advance
to the sum of the Eurodollar Rate for such Interest Period,  plus the Applicable
Margin for such Eurodollar Rate Advance in effect from time to time,  payable on
the last day of such  Interest  Period  and,  if such  Interest  Period for such
Advance has a duration of more than three months, on each day that occurs during
such  Interest  Period  every three  months from the first day of such  Interest
Period;  provided,  however,  that if and for so long as an Event of Default has
occurred and is  continuing,  interest on the unpaid  amount of each  Eurodollar
Rate Advance shall be payable on demand.

     Section 2.08. Additional Interest on Eurodollar Rate Advances.

     The  Borrower  shall pay to each Lender  additional  interest on the unpaid
principal  amount of each Eurodollar Rate Advance of such Lender,  from the date
of such Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder  obtained by  subtracting  (i) the
Eurodollar  Rate for the  Interest  Period for such  Advance  from (ii) the rate
obtained by dividing such  Eurodollar  Rate by a percentage  equal to 100% minus
the Eurodollar Rate Reserve  Percentage of such Lender for such Interest Period,
payable on each date on which  interest is payable on such  Advance.  All claims
for such  additional  interest shall be submitted by such Lender to the Borrower
(with a copy to the Administrative  Agent) as soon as is reasonably possible and
in all  events  within 90 days  after the  first  day of such  Interest  Period;
provided,  however, that if a claim is not submitted to the Borrower within such
90-day  period,  such Lender shall  thereby  waive its claim to such  additional
interest  incurred  during  such  90-day  period but not to any such  additional
interest incurred thereafter.  A certificate as to the amount of such additional
interest, submitted to the Borrower (with a copy to the Administrative Agent) by
such Lender,  shall be conclusive and binding for all purposes,  absent manifest
error.

     Section 2.09. Interest Rate Determination.

     (a) Each  Reference  Bank  agrees to  furnish to the  Administrative  Agent
timely  information for the purpose of determining  the Eurodollar  Rate. If any

<PAGE>
                                                                              16

one or more of the Reference Banks shall not furnish such timely  information to
the  Administrative  Agent for  determination  of any such  interest  rate,  the
Administrative  Agent shall  determine such interest rate on the basis of timely
information furnished by the remaining Reference Banks.

     (b) The  Administrative  Agent shall give prompt notice to the Borrower and
the Lenders of the  applicable  interest rate  determined by the  Administrative
Agent for purposes of Section  2.07(a) or (b), and the applicable  rate, if any,
furnished by each Reference Bank for  determining  the applicable  interest rate
under Section 2.07(b).

     (c) If fewer than two Reference  Banks furnish  timely  information  to the
Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate
Advances,

          (i) the  Administrative  Agent shall forthwith notify the Borrower and
     the Lenders that the interest rate cannot be determined for such Eurodollar
     Rate Advances,

          (ii) each such Advance will automatically, on the last day of the then
     existing Interest Period therefor,  Convert into a Base Rate Advance (or if
     such  Advance is then a Base Rate  Advance,  will  continue  as a Base Rate
     Advance), and

          (iii) the  obligation of the Lenders to make,  or to Convert  Advances
     into,  Eurodollar Rate Advances shall be suspended until the Administrative
     Agent shall  notify the  Borrower  and the Lenders  that the  circumstances
     causing such suspension no longer exist.

     (d) If, with respect to any Eurodollar Rate Advances,  the Majority Lenders
notify the Administrative Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately  reflect the cost to such Majority Lenders
of making,  funding or maintaining their respective Eurodollar Rate Advances for
such Interest  Period,  the  Administrative  Agent shall forthwith so notify the
Borrower and the Lenders, whereupon

          (i) each Eurodollar Rate Advance will  automatically,  on the last day
     of the then existing  Interest  Period  therefor,  Convert into a Base Rate
     Advance, and

          (ii) the  obligation  of the Lenders to make,  or to Convert  Advances
     into,  Eurodollar Rate Advances shall be suspended until the Administrative
     Agent shall  notify the  Borrower  and the Lenders  that the  circumstances
     causing such suspension no longer exist.

     (e) If the  Borrower  shall fail to select  the  duration  of any  Interest
Period for any  Eurodollar  Rate  Advances  in  accordance  with the  provisions
contained  in  the  definition  of  "Interest   Period"  in  Section  1.01,  the
Administrative  Agent will  forthwith so notify the Borrower and the Lenders and
such Advances will automatically,  on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.

     (f) On the date on which the aggregate  unpaid principal amount of Advances
comprising any Borrowing shall be reduced,  by prepayment or otherwise,  to less
than $20,000,000, such Advances shall, if they are Advances of a Type other than
Base Rate Advances,  automatically  Convert into Base Rate Advances,  and on and
after such date the right of the Borrower to Convert such Advances into Advances

<PAGE>
                                                                              17

of a Type other than Base Rate Advances shall terminate; provided, however, that
if and so long as each such Advance  shall be of the same Type and have the same
Interest Period as Advances  comprising  another  Borrowing or other Borrowings,
and the aggregate  unpaid  principal  amount of all such Advances shall equal or
exceed  $20,000,000,  the  Borrower  shall have the right to  continue  all such
Advances as, or to Convert all such Advances into,  Advances of such Type having
such Interest Period.

     (g) If an  Event  of  Default  has  occurred  and is  continuing,  (i) each
Eurodollar Rate Advance will automatically, on the last day of the then existing
Interest  Period  therefor,  Convert  into a Base  Rate  Advance  and  (ii)  the
obligation of the Lenders to make, or to Convert Advances into,  Eurodollar Rate
Advances shall be suspended.

     Section 2.10. Voluntary Conversion of Advances.

     The Borrower may, on any Business Day prior to the  Termination  Date, upon
notice  given to the  Administrative  Agent not later than 10:00 A.M.  (New York
City  time)  on the  third  Business  Day  prior  to the  date  of the  proposed
Conversion,  in the  case  of  any  proposed  Conversion  into  Eurodollar  Rate
Advances,  and on the  date  of the  proposed  Conversion,  in the  case  of any
proposed  Conversion  into Base Rate Advances,  and subject to the provisions of
Sections  2.09 and 2.13,  Convert all Advances of one Type  comprising  the same
Borrowing into Advances of another Type; provided,  however, that any Conversion
of any Eurodollar  Rate Advances into Advances of another Type shall be made on,
and  only on,  the  last day of an  Interest  Period  for such  Eurodollar  Rate
Advances,  except as otherwise  provided in Section 2.13.  Each such notice of a
Conversion (a "Notice of Conversion") shall be by telecopier, confirmed promptly
in writing,  in substantially  the form of Exhibit A-2 hereto and shall,  within
the restrictions specified above, specify (i) the date of such Conversion,  (ii)
the  aggregate  amount  of,  Type of, and  Interest  Periods  applicable  to the
Advances to be  Converted,  (iii) the Type of Advance to which such Advances (or
portions  thereof) are proposed to be Converted,  and (iv) if such Conversion is
into or with respect to Eurodollar  Rate Advances,  the duration of the Interest
Period for each such Advance.

     Section 2.11. Prepayments of Advances.

     (a) The Borrower shall have no right to prepay any principal  amount of any
Advances other than as provided in subsection (b) below.

     (b) The  Borrower  may,  upon notice given to the  Administrative  Agent at
least two  Business  Days prior to the proposed  prepayment,  in the case of any
Eurodollar Rate Advance, and on the date of the proposed prepayment, in the case
of any Base Rate Advance, and if such notice is given the Borrower shall, prepay
the outstanding  principal amounts of the Advances comprising the same Borrowing
in whole or ratably in part,  together with accrued interest to the date of such
prepayment  on the  amount  prepaid  and,  in the  case of any  Eurodollar  Rate
Advance, any amount payable pursuant to Section 8.04(b); provided, however, that
(i) each partial  prepayment shall be in an aggregate  principal amount not less
than  $5,000,000  and in integral  multiples of $1,000,000 in excess thereof and
(ii) in the  case of any such  prepayment  of a  Eurodollar  Rate  Advance,  the
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant
to Section 8.04(b) on the date of such prepayment.
<PAGE>
                                                                              18

     Section 2.12. Increased Costs.

     (a) If, due to either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve requirements,  in the case of
Eurodollar Rate Advances,  included in the Eurodollar Rate Reserve  Percentage),
in or in the  interpretation  of any law or  regulation,  or (ii) the compliance
with any  guideline  or  request  from any  central  bank or other  governmental
authority  (whether or not having the force of law), there shall be any increase
in the cost to any Lender of agreeing to make or making,  funding or maintaining
Eurodollar  Rate  Advances  or any  increase  in the cost to such  Lender or the
Issuing  Bank of  participating  in or issuing  any  Letter of Credit,  then the
Borrower shall from time to time, upon demand by such Lender or the Issuing Bank
(with  a  copy  of  such  demand  to  the  Administrative  Agent),  pay  to  the
Administrative  Agent for the account of such Lender or Issuing Bank  additional
amounts  sufficient to reimburse  such Lender or Issuing Bank for such increased
cost. All claims for increased cost shall be submitted by such Lender or Issuing
Bank to the  Borrower  (with a copy to the  Administrative  Agent) as soon as is
reasonably  possible and in all events  within 90 days after such  introduction,
such  change,  or the  beginning of such  compliance,  the  occurrence  of which
resulted in such increased cost, and the Borrower shall make such payment within
five  Business Days after notice of such claim is received;  provided,  however,
that if a claim is not submitted to the Borrower within such 90-day period, such
Lender or Issuing  Bank shall  thereby  waive its claim to such  increased  cost
incurred  during such 90-day period but not to any such  increased cost incurred
thereafter.  A certificate as to the amount of such increased cost, submitted to
the Borrower (with a copy to the Administrative Agent) by such Lender or Issuing
Bank, shall be conclusive and binding for all purposes, absent manifest error.

     (b) If any Lender or the Issuing Bank  determines  that compliance with any
law or  regulation  or any  guideline  or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital  required  or  expected  to be  maintained  by such
Lender or Issuing  Bank or any  corporation  controlling  such Lender or Issuing
Bank and that the  amount of such  capital  is  increased  by or based  upon the
existence  of such  Lender's  commitment  to lend or  participate  in Letters of
Credit or the  obligation of Issuing Bank to issue  Letters of Credit  hereunder
and other  commitments  of this type,  then,  upon  demand by such Lender or the
Issuing  Bank  (with a copy of such  demand to the  Administrative  Agent),  the
Borrower shall  immediately pay to the  Administrative  Agent for the account of
such Lender or Issuing  Bank,  from time to time as  specified by such Lender or
Issuing Bank, additional amounts sufficient to compensate such Lender or Issuing
Bank or such corporation in the light of such circumstances,  to the extent that
such Lender or Issuing Bank reasonably determines such increase in capital to be
allocable to the existence of such Lender's commitment to lend or participate in
Letters of Credit or the  obligation  of the  Issuing  Bank to issue  Letters of
Credit hereunder.  All claims for such additional  amounts shall be submitted by
such Lender or Issuing Bank (with a copy to the Administrative Agent) as soon as
is reasonably possible and in all events within 90 days after such determination
by such Lender or Issuing Bank,  and the Borrower shall make such payment within
five  Business Days after notice of such claim is received;  provided,  however,
that if a claim is not submitted to the Borrower within such 90-day period, such
Lender or Issuing Bank shall thereby waive its claim to such additional  amounts
incurred  during  such  90-day  period  but not to any such  additional  amounts
incurred thereafter.  A certificate as to such amounts submitted to the Borrower

<PAGE>
                                                                              19

and the Administrative  Agent by such Lender or Issuing Bank shall be conclusive
and binding for all purposes, absent manifest error.

     Section 2.13. Illegality.

     Notwithstanding any other provision of this Agreement,  if any Lender shall
notify the  Administrative  Agent that the  introduction of, any change in or in
the  interpretation  of any law or regulation makes it unlawful,  or any central
bank or other  governmental  authority  asserts  that it is  unlawful,  for such
Lender or its Eurodollar Lending Office to perform its obligations  hereunder to
make  Eurodollar  Rate Advances or to fund or maintain  Eurodollar Rate Advances
hereunder, (i) the obligation of the Lenders to make Eurodollar Rate Advances or
to Convert  Advances into  Eurodollar Rate Advances shall be suspended until the
Administrative  Agent  shall  notify  the  Borrower  and the  Lenders  that  the
circumstances  causing such  suspension no longer  exist,  and (ii) the Borrower
shall forthwith  prepay in full all Eurodollar Rate Advances of all Lenders then
outstanding, together with interest accrued thereon, unless the Borrower, within
five  Business  Days of  notice  from the  Administrative  Agent,  Converts  all
Eurodollar  Rate  Advances  of all Lenders  then  outstanding  into  Advances of
another Type in accordance with Section 2.10.

     Section 2.14. Payments and Computations.

     (a) The Borrower shall make each payment  hereunder,  without  condition or
deduction for any counterclaim,  defense,  recoupment or setoff,  not later than
11:00  A.M.  (New York  City  time) on the day when due in U.S.  dollars  to the
Administrative  Agent at its  address  referred  to in Section  8.02 in same day
funds. The Administrative Agent will promptly thereafter cause to be distributed
like funds  relating to the payment of principal or interest or fees (other than
pursuant to Section 2.03(c),  2.04(d),  2.08 or 2.12) ratably to the Lenders for
the  account of their  respective  Applicable  Lending  Offices,  and like funds
relating to the payment of any other  amount  payable to the Issuing  Bank or to
any Lender to such Lender for the account of its Applicable  Lending Office,  in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance  of an Assignment  and  Acceptance  and recording of the  information
contained  therein in the Register  pursuant to Section 8.07(d),  from and after
the  effective  date  specified  in  such   Assignment   and   Acceptance,   the
Administrative  Agent  shall  make all  payments  hereunder  in  respect  of the
interest assigned thereby to the Lender assignee thereunder,  and the parties to
such Assignment and Acceptance  shall make all  appropriate  adjustments in such
payments for periods prior to such effective date directly between themselves.

     (b) All  computations  of  interest  based on the base rate  referred to in
clause (i) of the  definition  of Base Rate shall be made by the  Administrative
Agent on the  basis of a year of 365 or 366  days,  as the case may be,  and all
computations  of interest based on the Eurodollar  Rate or Federal Funds Rate or
of fees payable  hereunder shall be made by the  Administrative  Agent,  and all
computations of interest  pursuant to Section 2.08 shall be made by a Lender, on
the basis of a year of 360  days,  in each  case for the  actual  number of days
(including  the first day but excluding the last day) occurring in the period of
which  such   interest  or  fees  are  payable.   Each   determination   by  the
Administrative  Agent  (or,  in the case of  Section  2.08,  by a Lender)  of an
interest rate hereunder shall be conclusive and binding for all purposes.
<PAGE>
                                                                              20

     (c) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding  Business
Day,  and  such  extension  of time  shall  in  such  case  be  included  in the
computation  of  payment  of  interest  or fees,  as the case may be;  provided,
however,  that if such extension would cause payment of interest on or principal
of Eurodollar  Rate Advances to be made in the next  following  calendar  month,
such payment shall be made on the next preceding Business Day.

     (d) Unless the  Administrative  Agent shall have  received  notice from the
Borrower prior to the date on which any payment is due to the Lenders  hereunder
that the Borrower will not make such payment in full, the  Administrative  Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the  Administrative  Agent  may,  in  reliance  upon such
assumption,  cause to be  distributed  to each Lender on such due date an amount
equal to the amount  then due such  Lender.  If and to the  extent the  Borrower
shall not have so made such payment in full to the  Administrative  Agent,  each
Lender shall repay to the  Administrative  Agent forthwith on demand such amount
distributed to such Lender, together with interest thereon for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Administrative Agent at the Federal Funds Rate.

     Section 2.15. Sharing of Payments, Etc.

     If any Lender shall  obtain any payment  (whether  voluntary,  involuntary,
through the exercise of any right of set-off,  or  otherwise)  on account of the
Advances  made by it (other than pursuant to Section  2.03(c),  2.08 or 2.12) in
excess of its ratable  share of payments on account of the  Extensions of Credit
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such  participation in the Extensions of Credit made by them as shall be
necessary to cause such  purchasing  Lender to share the excess payment  ratably
with each of them; provided,  however, that if all or any portion of such excess
payment is thereafter  recovered from such purchasing Lender, such purchase from
each Lender  shall be rescinded  and such Lender  shall repay to the  purchasing
Lender the  purchase  price to the  extent of such  recovery,  together  with an
amount equal to such Lender's  ratable share (according to the proportion of (i)
the  amount of such  Lender's  required  repayment  to (ii) the total  amount so
recovered  from the  purchasing  Lender) of any interest or other amount paid or
payable by the  purchasing  Lender in respect of the total amount so  recovered.
The Borrower agrees that any Lender so purchasing a  participation  from another
Lender  pursuant to this  Section 2.15 may, to the fullest  extent  permitted by
law,  exercise all its rights of payment  (including  the right of set-off) with
respect  to such  participation  as fully  as if such  Lender  were  the  direct
creditor of the Borrower in the amount of such participation.

     Section 2.16. Letters of Credit.

     (a) From time to time and on any  Business  Day during the period  from the
date hereof to the tenth  Business  Day  preceding  the  Termination  Date,  the
Issuing Bank, in reliance upon the  agreements of the other Lenders  pursuant to
subsection  (d) of this  Section  2.16,  agrees to issue,  at the request of the
Borrower,  Letters of Credit for the  account of the  Borrower  on the terms and
conditions hereinafter set forth; provided, that (i) each Letter of Credit shall
expire on the  earlier  of (A) the date one year after the date of  issuance  of
such Letter of Credit (or in the case of any renewal or extension  thereof,  one
year after such  renewal or  extension)  and (B) the date that is five  Business

<PAGE>
                                                                              21

Days prior to the  Termination  Date;  (ii) each Letter of Credit  shall be in a
stated  amount of at least  $25,000;  and (iii) the Borrower may not request any
Extension of Credit  relating to a Letter of Credit if,  after giving  effect to
such  Extension of Credit,  (X) the  aggregate  LC Exposure  would exceed the LC
Commitment   or  (Y)  the  aggregate   Outstanding   Credits  would  exceed  the
Commitments.  Upon each Extension of Credit relating to a Letter of Credit, each
Lender shall be deemed,  and hereby irrevocably and  unconditionally  agrees, to
purchase from the Issuing Bank without  recourse a participation  in such Letter
of  Credit  equal to such  Lender's  Pro  Rata  Share  of the  aggregate  amount
available  to be drawn under such Letter of Credit.  Each Letter of Credit shall
utilize the  Commitment  of each Lender by an amount equal to the amount of such
participation.

     (b) To request an Extension of Credit  relating to a Letter of Credit,  the
Borrower shall give the Issuing Bank and the  Administrative  Agent  irrevocable
written  notice at least three Business Days prior to the requested date of such
Extension of Credit specifying the date (which shall be a Business Day) on which
such  Extension  of Credit is to occur,  the  expiration  date of such Letter of
Credit,  the  amount  of such  Letter of  Credit,  the name and  address  of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. In addition to the satisfaction of
the conditions in Section 3.02,  such Extension of Credit will be subject to the
further  conditions that such Letter of Credit shall be in such form and contain
such terms as the Issuing Bank shall  approve and that the  Borrower  shall have
executed and delivered any additional  applications,  agreements and instruments
relating  to such  Extension  of Credit as the  Issuing  Bank  shall  reasonably
require;  provided, that in the event of any conflict between such applications,
agreements or instruments and this Agreement,  the terms of this Agreement shall
control.

     (c) At least two Business Days prior to each  Extension of Credit  relating
to a Letter of Credit,  the Issuing Bank will  confirm  with the  Administrative
Agent (by  telephone or in writing) that the  Administrative  Agent has received
such notice and, if it has not, the Issuing Bank will provide the Administrative
Agent with a copy thereof.  Unless the Issuing Bank has received notice from the
Administrative  Agent on or before the Business Day  immediately  preceding  the
date on which the  Issuing  Bank is to make the  requested  Extension  of Credit
relating to such Letter of Credit  directing  the Issuing  Bank not to make such
Extension  of Credit  because  such  Extension  of Credit is not then  permitted
hereunder because of the limitations set forth in subsection (a) of this Section
2.16,  or that one or more  conditions  specified  in Section  3.02 are not then
satisfied,  then,  subject to the terms and conditions  hereof, the Issuing Bank
shall,  on the requested  date, make such Extension of Credit in accordance with
the Issuing Bank's usual and customary business practices.

     (d) The Issuing Bank shall examine all documents  purporting to represent a
demand for  payment  under a Letter of Credit  promptly  following  its  receipt
thereof. The Issuing Bank shall notify the Borrower and the Administrative Agent
(i) of such  demand for payment  and (ii)  whether the Issuing  Bank has made or
will make a LC Disbursement  thereunder;  provided,  that any failure to give or
delay in giving such notice shall not relieve the Borrower of its  obligation to
reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement.
The Borrower shall be irrevocably and unconditionally obligated to reimburse the
Issuing  Bank for any LC  Disbursements  paid by the Issuing  Bank in respect of
such drawing,  without  presentment,  demand or other  formalities  of any kind.
Unless the Borrower shall have notified the Issuing Bank and the  Administrative

<PAGE>
                                                                              22

Agent prior to 10:00 a.m. on the Business Day  immediately  prior to the date on
which such drawing is honored that the Borrower intends to reimburse the Issuing
Bank for the amount of such  drawing in funds  other than from the  proceeds  of
Advances,  the  Borrower  shall be  deemed  to have  timely  given a  Notice  of
Borrowing to the Administrative  Agent requesting a Borrowing  compromising Base
Rate Advances on the date on which such drawing is honored in the amount payable
to the  Issuing  Bank in respect  of such LC  Disbursement;  provided,  that for
purposes  solely  of such  Borrowing,  the  conditions  precedents  set forth in
Section  3.02 hereof shall not be  applicable.  The  Administrative  Agent shall
notify the Lenders of such  Borrowing in accordance  with Section  2.03(a),  and
each Lender shall make the  proceeds of its Base Rate  Advance  included in such
Borrowing  available to the Administrative  Agent for the account of the Issuing
Bank in accordance with Section 2.03(a). The proceeds of such Borrowing shall be
applied directly by the  Administrative  Agent to reimburse the Issuing Bank for
such LC Disbursement.

     (e) If for any reason a  Borrowing  may not be (as  determined  in the sole
discretion of the Administrative  Agent), or is not, made in accordance with the
foregoing  provisions,   then  each  Lender  shall  be  obligated  to  fund  the
participation that such Lender purchased pursuant to subsection (a) in an amount
equal to its Pro Rata  Share  of such LC  Disbursement  on and as of the date on
which such Borrowing should have occurred.  Each Lender's obligation to fund its
participation  shall be absolute and  unconditional and shall not be affected by
any  circumstance,  including without  limitation (i) any setoff,  counterclaim,
recoupment, defense or other right that such Lender or any other Person may have
against the Issuing Bank or any other Person for any reason whatsoever, (ii) the
existence of an Event of Default or the  termination of the  Commitments,  (iii)
any adverse change in the condition  (financial or otherwise) of the Borrower or
any of its  Subsidiaries,  (iv) any breach of this  Agreement by the Borrower or
any other  Lender,  (v) any  amendment,  renewal or  extension  of any Letter of
Credit or (vi) any other circumstance, happening or event whatsoever, whether or
not  similar to any of the  foregoing.  On the date that such  participation  is
required to be funded,  each Lender  shall  promptly  transfer,  in  immediately
available funds, the amount of its participation to the Administrative Agent for
the account of the Issuing  Bank.  Whenever,  at any time after the Issuing Bank
has  received  from any such  Lender  the  funds for its  participation  in a LC
Disbursement,  the  Issuing  Bank (or the  Administrative  Agent on its  behalf)
receives any payment on account thereof, the Administrative Agent or the Issuing
Bank,  as the case may be, will  distribute to such Lender its Pro Rata Share of
such payment;  provided, that if such payment is required to be returned for any
reason to the  Borrower  or to a trustee,  receiver,  liquidator,  custodian  or
similar  official in any bankruptcy  proceeding,  such Lender will return to the
Administrative  Agent  or  the  Issuing  Bank  any  portion  thereof  previously
distributed by the Administrative Agent or the Issuing Bank to it.

     (f) To the  extent  that any  Lender  shall fail to pay when due any amount
required to be paid pursuant to subsection (d) of this Section 2.16, such Lender
shall pay interest to the Issuing Bank  (through  the  Administrative  Agent) on
such amount  from the date such  amount  became due and payable to the date such
payment is made at a rate per annum equal to the Federal  Funds Rate;  provided,
that if such Lender  shall fail to make such  payment to the Issuing  Bank three
Business  Days  after  the  date  such  amount  became  due and  payable,  then,
retroactively  to such date,  such Lender shall pay interest on such amount at a
rate per annum equal to the Base Rate in effect from time to time plus 2%.
<PAGE>
                                                                              23

     (g) If any Event of Default shall occur and be continuing,  on the Business
Day that the  Borrower  receives  notice  from the  Administrative  Agent or the
Majority  Lenders  demanding  the  deposit of cash  collateral  pursuant to this
paragraph,  the Borrower  shall  deposit in an account  with the  Administrative
Agent,  in the  name of the  Administrative  Agent  and for the  benefit  of the
Issuing Bank and the  Lenders,  an amount in cash equal to the LC Exposure as of
such  date  plus  any  accrued  and  unpaid  fees  thereon;  provided,  that the
obligation to deposit such cash collateral shall become  effective  immediately,
and such deposit shall become  immediately  due and payable,  without  demand or
notice of any kind,  upon the  occurrence  of any Event of Default  described in
subsection (e) of Section 6.01. Such deposit shall be held by the Administrative
Agent as collateral for the payment and  performance  of the  obligations of the
Borrower under this  Agreement.  The  Administrative  Agent shall have exclusive
dominion and control,  including the exclusive  right of  withdrawal,  over such
account.  The Borrower  agrees to execute any documents  and/or  certificates to
effectuate the intent of this subsection.  Other than any interest earned on the
investment of such deposits,  which  investments shall be made at the option and
sole  discretion  of the  Administrative  Agent and at the  Borrower's  risk and
expense, such deposits shall not bear interest. Interest and profits, if any, on
such investments shall accumulate in such account.  Moneys in such account shall
be applied by the  Administrative  Agent to  reimburse  the Issuing  Bank for LC
Disbursements  for  which it had not  been  reimbursed  and,  to the  extent  so
applied, shall be held for the satisfaction of the reimbursement  obligations of
the  Borrower  for the LC  Exposure  at such  time or,  if the  maturity  of the
Advances  has been  accelerated,  with the consent of the Majority  Lenders,  be
applied to satisfy other  obligations of the Borrower under this  Agreement.  If
the Borrower is required to provide an amount of cash collateral  hereunder as a
result of the occurrence of an Event of Default,  such amount (to the extent not
so applied as aforesaid)  shall be returned to the Borrower  promptly  after all
Events of Default have been cured or waived.

     (h) Promptly following the end of each fiscal quarter of the Borrower,  the
Issuing Bank shall deliver (through the Administrative Agent) to each Lender and
the Borrower a report  describing the Letters of Credit  outstanding  and the LC
Exposure at the end of such fiscal quarter.  Upon the request of any Lender from
time to  time,  the  Issuing  Bank  shall  deliver  to  such  Lender  any  other
information  reasonably  requested by such Lender with respect to each Letter of
Credit then outstanding.

     (i) The Borrower's obligation to reimburse LC Disbursements hereunder shall
be absolute,  unconditional  and irrevocable and shall be performed  strictly in
accordance with the terms of this Agreement under all  circumstances  whatsoever
and irrespective of any of the following circumstances:

          (i) any lack of validity or  enforceability of any Letter of Credit or
     this Agreement;

          (ii) the existence of any claim, set-off,  defense or other right that
     the Borrower or any Subsidiary or Affiliate of the Borrower may have at any
     time against a  beneficiary  or any  transferee of any Letter of Credit (or
     any Person or entity for which any such  beneficiary  or transferee  may be
     acting),  any Lender  (including  the  Issuing  Bank) or any other  Person,
     whether in  connection  with this  Agreement or any Letter of Credit or any
     document related hereto or thereto or any unrelated transaction;
<PAGE>
                                                                              24
          (iii) any draft or other document  presented  under a Letter of Credit
     proving to be forged, fraudulent or invalid in any respect or any statement
     therein being untrue or inaccurate in any respect;

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

          (v) any other event or circumstance whatsoever, whether or not similar
     to any of the  foregoing,  that  might,  but  for  the  provisions  of this
     Section,  constitute a legal or equitable  discharge of, or provide a right
     of setoff against, the Borrower's obligations hereunder; or

          (vi) the existence of an Event of Default.

Neither the Administrative Agent, the Issuing Bank, any Lender nor any Affiliate
of the foregoing Persons, nor any director, officer, employee, agent of any such
Person or Affiliate shall have any liability or  responsibility  by reason of or
in  connection  with the  issuance  or  transfer  of any Letter of Credit or any
payment or failure to make any payment  thereunder  (irrespective  of any of the
circumstances referred to above), or any error, omission,  interruption, loss or
delay in  transmission or delivery of any draft,  notice or other  communication
under or relating to any Letter of Credit  (including  any document  required to
make a drawing  thereunder),  any error in  interpretation of technical terms or
any  consequence  arising  from causes  beyond the control of the Issuing  Bank;
provided,  that the foregoing  shall not be construed to excuse the Issuing Bank
from  liability to the Borrower to the extent of any direct  damages (as opposed
to  consequential  damages,  claims in respect of which are hereby waived by the
Borrower to the extent  permitted by  applicable  law)  suffered by the Borrower
that are caused by the Issuing Bank's failure to exercise care when  determining
whether drafts or other documents presented under a Letter of Credit comply with
the terms thereof.  The parties hereto expressly  agree,  that in the absence of
gross  negligence  or willful  misconduct  on the part of the  Issuing  Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank shall
be deemed to have exercised care in each such  determination.  In furtherance of
the foregoing and without  limiting the  generality  thereof,  the parties agree
that,  with  respect to documents  presented  that appear on their face to be in
substantial  compliance  with the terms of a Letter of Credit,  the Issuing Bank
may, in its sole discretion,  either accept and make payment upon such documents
without  responsibility for further  investigation,  regardless of any notice or
information  to the  contrary,  or refuse to accept and make  payment  upon such
documents if such documents are not in strict  compliance with the terms of such
Letter of Credit.

     (j) Each  Letter of Credit  shall be subject  to the  Uniform  Customs  and
Practices for  Documentary  Credits (1993  Revision),  International  Chamber of
Commerce Publication No. 500, as the same may be amended from time to time, and,
to the extent not  inconsistent  therewith,  the governing law of this Agreement
set forth in Section 8.08.
<PAGE>
                                                                              25

                                  Article III
                       CONDITIONS OF EXTENSIONS OF CREDIT

     Section 3.01. Conditions Precedent to Initial Extension of Credit.

     The  obligation  of each  Lender  to make its  initial  Advance  and of the
Issuing Bank to issue its initial  Letter of Credit  shall not become  effective
unless and until all fees due and  payable by the  Borrower in  connection  with
this Agreement have been paid and the  Administrative  Agent shall have received
the following:

     (a) Promissory  notes,  in a form acceptable to the  Administrative  Agent,
payable to the order of each Lender that has requested such a note.

     (b) Copies of the  resolutions  of the Board of  Directors  of the Borrower
approving this Agreement and all documents  evidencing other necessary corporate
action,  certified by the Secretary or an Assistant Secretary of the Borrower to
be true and correct, and in full force and effect on and as of the date hereof.

     (c) A  certificate  of  the  Secretary  or an  Assistant  Secretary  of the
Borrower, dated as of the date hereof,  certifying the names and true signatures
of the officers of the Borrower  authorized to sign this Agreement and the other
documents to be delivered hereunder.

     (d) A certificate of a Responsible Officer of the Borrower, dated as of the
date hereof,  certifying (i) the accuracy of the  representations and warranties
contained  herein and (ii) that no event has  occurred  and is  continuing  that
constitutes an Event of Default or that would constitute an Event of Default but
for the requirement that notice be given or time elapse, or both.

     (e)  Certified  copies of all  governmental  approvals  and  authorizations
required  to  be  obtained  in  connection  with  the  execution,  delivery  and
performance by the Borrower of this Agreement.

     (f) Certified copies of the Restated Charter and By-Laws of the Borrower.

     (g)  Favorable  opinions  of William  D.  Johnson,  General  Counsel of the
Borrower, and of Hunton & Williams,  counsel for the Borrower,  substantially in
the forms of  Exhibit  C-1 and C-2,  respectively,  hereto  and as to such other
matters as the Issuing Bank or any Lender through the  Administrative  Agent may
reasonably request.

     (h) A favorable opinion of King & Spalding,  counsel for the Administrative
Agent, substantially in the form of Exhibit D hereto.

     Section 3.02. Conditions Precedent to Each Extension of Credit.

     The  obligation  of each Lender to make an Advance on the  occasion of each
Borrowing  (including the initial Borrowing) and of the Issuing Bank to make any
Extension  of Credit  relating  to a Letter of Credit  shall be  subject  to the
further  conditions  precedent that (a) in the case of the making of an Advance,
the Administrative  Agent shall have received the written confirmatory Notice of
Borrowing with respect thereto, (b) on the date of such Extension of Credit, the

<PAGE>
                                                                              26

following  statements  shall be true (and the giving of the Notice of  Borrowing
and the  acceptance  by the  Borrower of the  proceeds of such  Borrowing  shall
constitute a  representation  and  warranty by the Borrower  that on the date of
such Borrowing such statements are true):

          (i) The representations  and warranties  contained in Section 4.01 are
     correct on and as of the date of such  Extension of Credit before and after
     giving  effect to such  Extension of Credit and to the  application  of the
     proceeds therefrom, as though made on and as of such date; and

          (ii) No event has  occurred  and is  continuing,  or would result from
     such Extension of Credit from the  application  of the proceeds  therefrom,
     that  constitutes an Event of Default or that would  constitute an Event of
     Default but for the  requirement  that notice be given or time  elapse,  or
     both;

and (c) the  Administrative  Agent  shall have  received  such other  approvals,
opinions  and  documents  as  the  Issuing  Bank  or  any  Lender   through  the
Administrative Agent may reasonably request.

                                   Article IV
                         REPRESENTATIONS AND WARRANTIES

     Section 4.01. Representations and Warranties of the Borrower.

     The Borrower represents and warrants as follows:

     (a) Each of the Borrower and each  Significant  Subsidiary is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and is duly qualified to do business in
and is in good  standing  under the laws of each  other  jurisdiction  where the
nature of its business or the nature of property  owned or used by it makes such
qualification  necessary  (except  where  failure to so qualify would not have a
material adverse affect on the financial condition,  operations or properties of
the Borrower and its Subsidiaries, taken as a whole).

     (b)  The  execution,  delivery  and  performance  by the  Borrower  of this
Agreement are within the Borrower's  corporate powers, have been duly authorized
by all necessary  corporate  action,  and do not  contravene  (i) the Borrower's
charter  or  by-laws or (ii) any law or  contractual  restriction  binding on or
affecting the Borrower or its properties.

     (c) No  authorization  or approval or other  action by, and no notice to or
filing with any  governmental  authority or regulatory  body is required for the
due execution, delivery and performance by the Borrower of this Agreement, other
than, the SEC Order, which has been duly issued and in full force and effect.

     (d) This Agreement has been duly executed and delivered by the Borrower and
is, and any promissory note when delivered  pursuant to Section 2.02(b) will be,
the legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
<PAGE>
                                                                              27

     (e) The Consolidated balance sheets of the Borrower and its Subsidiaries as
at December  31, 2001,  and the related  Consolidated  statements  of income and
retained  earnings of the Borrower and its Subsidiaries for the fiscal year then
ended, and the Consolidated  balance sheets of the Borrower and its Subsidiaries
as at March 31,  2002,  and the related  Consolidated  statements  of income and
retained earnings of the Borrower and its Subsidiaries,  copies of each of which
have  been  furnished  to each  Lender  and the  Issuing  Bank,  fairly  present
(subject, in the case of such financial statements dated March 31, 2002, to year
end adjustments) the financial condition of the Borrower and its Subsidiaries as
at  such  dates  and the  results  of the  operations  of the  Borrower  and its
Subsidiaries  for the  periods  ended  on such  dates,  all in  accordance  with
generally accepted accounting principles  consistently  applied.  Since December
31, 2001, there has been no material adverse change in the financial  condition,
operations or properties of the Borrower and its Subsidiaries, taken as a whole.

     (f) Except as described in the reports and registration statements that the
Borrower,  CP&L,  FPC and  Florida  Power  have filed  with the  Securities  and
Exchange Commission prior to the date of this Agreement,  there is no pending or
threatened action or proceeding  affecting the Borrower or any Subsidiary before
any court,  governmental  agency or arbitrator,  that may  materially  adversely
affect the financial condition, operations or properties of the Borrower and its
Subsidiaries, taken as a whole.

     (g) No  proceeds  of any  Extension  of Credit  will be used to acquire any
security  in any  transaction  that  is  subject  to  Sections  13 and 14 of the
Exchange Act.

     (h) The Borrower is not engaged in the business of extending credit for the
purpose of buying or carrying  margin stock  (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any Advance will be used to buy or carry any margin stock or to extend credit
to others for the purpose of buying or carrying any margin stock.

     (i) Following  application of the proceeds of each Extension of Credit, not
more than 5% of the value of the assets  (either of the Borrower  only or of the
Borrower and the Subsidiaries on a Consolidated basis) subject to the provisions
of Section  5.02(a) or  5.02(e)  will be margin  stock  (within  the  meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System).

     (j) No  Termination  Event has occurred or is reasonably  expected to occur
with respect to any Plan.

     (k) The Borrower is not an "investment  company" or a company  "controlled"
by an "investment company",  within the meaning of the Investment Company Act of
1940, as amended.

     (l) The Borrower is in substantial  compliance  with all  applicable  laws,
rules,  regulations and orders of any governmental authority,  the noncompliance
with which would  materially  and adversely  affect the business or condition of
the  Borrower,  such  compliance  to include,  without  limitation,  substantial
compliance  with  ERISA,  Environmental  Laws and paying  before the same become
delinquent all material taxes, assessments and governmental charges imposed upon
it or upon  its  property,  except  to the  extent  compliance  with  any of the

<PAGE>
                                                                              28

foregoing  is  then  being   contested  in  good  faith  by  appropriate   legal
proceedings.

     (m) All written information furnished by the Borrower to the Administrative
Agent  and the  Lenders  in  connection  with  this  Agreement  (the  "Disclosed
Information")  was (and all information  furnished in the future by the Borrower
to the Administrative  Agent, the Issuing Bank and the Lenders will be) complete
and correct in all  respects  material to the  creditworthiness  of the Borrower
when  delivered.  As of the date  hereof,  the  Disclosed  Information  does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the  statements  contained  therein not misleading in light of
the circumstances under which made.

                                   Article V
                            COVENANTS OF THE COMPANY

     Section 5.01. Affirmative Covenants.

     So long as there shall be any  Outstanding  Credits,  any amount payable by
the  Borrower  hereunder  shall  remain  unpaid  or any  Lender  shall  have any
Commitment  hereunder,  the Borrower  shall,  unless the Majority  Lenders shall
otherwise consent in writing:

     (a)  Compliance  with Laws,  Etc.  Except to the extent  contested  in good
faith,  comply,  and cause each Subsidiary to comply,  with all applicable laws,
rules,  regulations and orders (such compliance to include,  without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges  imposed upon it or upon its property),  the  non-compliance  with which
would materially adversely affect the Borrower's business or credit.

     (b) Preservation of Corporate Existence, Etc. Except as provided in Section
5.02(d),  preserve  and  maintain,  and cause  each  Significant  Subsidiary  to
preserve and maintain,  its corporate existence,  rights (charter and statutory)
and franchises.

     (c) Visitation Rights. At any reasonable time and from time to time, permit
the  Administrative  Agent, the Issuing Bank or any of the Lenders or any agents
or representatives  thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the  properties  of, the Borrower and
any  Subsidiary,  and to discuss  the  affairs,  finances  and  accounts  of the
Borrower and any Subsidiary with any of their respective officers or directors.

     (d) Keeping of Books. Keep, and cause each Subsidiary to keep, proper books
of record and account,  in which full and correct  entries  shall be made of all
financial  transactions  and the assets and  business of the  Borrower  and such
Subsidiary  in  accordance  with  generally   accepted   accounting   principles
consistently applied.

     (e) Maintenance of Properties,  Etc. Maintain and preserve,  and cause each
Subsidiary  to maintain and  preserve,  all of its  properties  that are used or
useful in the  conduct of its  business  in good  working  order and  condition,
ordinary wear and tear excepted.
<PAGE>
                                                                              29

     (f)  Maintenance  of  Insurance.  Maintain,  and cause each  Subsidiary  to
maintain,  insurance  with  responsible  and  reputable  insurance  companies or
associations  in such amounts and covering  such risks as is usually  carried by
companies  engaged in similar  businesses and owning  similar  properties in the
same general areas in which the Borrower or such Subsidiary operates.

     (g)  Taxes.  File,  and cause  each  Subsidiary  to file,  all tax  returns
(federal, state and local) required to be filed and paid and pay all taxes shown
thereon to be due,  including  interest  and  penalties  except,  in the case of
taxes,  to the extent the Borrower or such  Subsidiary is contesting the same in
good faith and by appropriate  proceedings  and has set aside adequate  reserves
for the  payment  thereof  in  accordance  with  generally  accepted  accounting
principles.

     (h) Material  Obligations.  Pay, and cause each  Significant  Subsidiary to
pay,  promptly  as the same shall  become due each  material  obligation  of the
Borrower or such Significant Subsidiary.

     (i) Reporting Requirements. Furnish to the Issuing Bank and the Lenders:

          (i) as soon as available and in any event within 60 days after the end
     of each of the first three quarters of each fiscal year of the Borrower,  a
     Consolidated  balance sheet of the Borrower and the  Subsidiaries as at the
     end of such  quarter and  Consolidated  statements  of income and  retained
     earnings of the Borrower and the Subsidiaries for the period  commencing at
     the  end of the  previous  fiscal  year  and  ending  with  the end of such
     quarter,  certified by the treasurer or the chief financial  officer of the
     Borrower,  together with a certificate of the treasurer or chief  financial
     officer of the Borrower, setting forth in reasonable detail the calculation
     of the Borrower's compliance with Section 5.01(j) and stating that no Event
     of Default and no event that, with the giving of notice or lapse of time or
     both,  would constitute an Event of Default has occurred and is continuing,
     or if an Event of Default or such event has occurred and is  continuing,  a
     statement  setting  forth details of such Event of Default or event and the
     action  that the  Borrower  has taken  and  proposes  to take with  respect
     thereto;

          (ii) as soon as  available  and in any event within 120 days after the
     end of each fiscal year of the  Borrower,  a copy of the annual  report for
     such year for the Borrower and the  Subsidiaries,  containing  Consolidated
     financial  statements for such year certified by Deloitte & Touche or other
     independent public accountants acceptable to the Majority Lenders, together
     with a  certificate  of the  treasurer  or chief  financial  officer of the
     Borrower,  substantially in the form of Exhibit E hereto,  setting forth in
     reasonable detail the calculation of the Borrower's compliance with Section
     5.01(j)  and stating  that no Event of Default and no event that,  with the
     giving  of notice or lapse of time or both,  would  constitute  an Event of
     Default has occurred and is  continuing,  or if an Event of Default or such
     event has occurred and is continuing,  a statement setting forth details of
     such Event of Default or event and the action that the  Borrower  has taken
     and proposes to take with respect thereto;

          (iii)  promptly  after the  sending or filing  thereof,  copies of all
     reports that the Borrower sends to any of its security holders,  and copies
     of all  reports  and  registration  statements  that  the  Borrower  or any

<PAGE>
                                                                              30

     Subsidiary  files  with  the  Securities  and  Exchange  Commission  or any
     national securities  exchange,  to the extent not delivered by the Borrower
     pursuant to clause (i) or (ii) of this Section 5.01(i);

          (iv) immediately upon any Responsible Officer's obtaining knowledge of
     the  occurrence of any Event of Default or any event that,  with the giving
     of notice or lapse of time, or both,  would constitute an Event of Default,
     a statement  of the chief  financial  officer or  treasurer of the Borrower
     setting forth details of such Event of Default or event and the action that
     the Borrower proposes to take with respect thereto;

          (v) immediately upon obtaining knowledge thereof, notice of any change
     in either the Moody's Rating or the S&P Rating;

          (vi) as soon as possible  and in any event  within five days after the
     commencement  thereof or any adverse  determination or development therein,
     notice of all actions,  suits and proceedings that may adversely affect the
     Borrower's ability to perform its obligations under this Agreement;

          (vii) as soon as possible  and in any event within five days after the
     occurrence of a Termination Event, notice of such Termination Event; and

          (viii) such other information  respecting the condition or operations,
     financial or otherwise,  of the Borrower or any Subsidiary as any Lender or
     the Issuing  Bank  through the  Administrative  Agent may from time to time
     reasonably request.

     (j) Indebtedness to Total Capitalization.  Maintain at all times a ratio of
Consolidated  Indebtedness  of  the  Borrower  and  its  Subsidiaries  to  Total
Capitalization of not more than .70:1.0.

     (k) Use of Proceeds.  Use the  proceeds of each Advance  solely for general
corporate purposes (including, in each case, without limitation, as a commercial
paper  back-up).  No proceeds of any Advance  will be used to acquire any equity
security of a class that is  registered  pursuant to Section 12 of the  Exchange
Act, or any security in any transaction that is subject to Sections 13 and 14 of
the Exchange Act.

     (l) Ownership of Subsidiaries. Own at all times, directly or indirectly and
free and clear of all liens and encumbrances,  100% of the common stock of CP&L,
FPC and Florida Power.

     Section 5.02. Negative Covenants.

     So long as there shall be any Outstanding Credits, any other amount payable
by the  Borrower  hereunder  shall  remain  unpaid or any Lender  shall have any
Commitment hereunder,  the Borrower will not, without the written consent of the
Majority Lenders:

     (a) Liens,  Etc.  Create,  incur,  assume or suffer to exist, or permit any
Subsidiary  to  create,  incur,  assume or suffer to exist,  any lien,  security
interest  or other  charge or  encumbrance,  or any other  type of  preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired,  or assign, or permit any Subsidiary to assign, any right to

<PAGE>
                                                                              31

receive income,  in each case to secure any  Indebtedness  of any Person,  other
than (i) liens, mortgages and security interests created by the Mortgage and the
Florida Power Mortgage,  (ii) liens and security interests against the fuel used
by the Borrower in its power  generating  operations  in favor of the  suppliers
thereof, (iii) liens and security interests created in connection with the GenCo
Financing,  and (iv) liens,  mortgages  and security  interests  securing  other
Indebtedness of the Borrower and its Subsidiaries not exceeding  $100,000,000 in
the aggregate.

     (b) Indebtedness.  Create,  incur, assume or suffer to exist, or permit any
Subsidiary to create,  incur,  assume or suffer to exist, any Indebtedness other
than (i) Indebtedness hereunder, (ii) Indebtedness secured by liens and security
interests  permitted  pursuant  to clauses  (ii),  (iii) and (iv) of  subsection
5.02(a),  (iii)  Indebtedness  evidenced  by the  First  Mortgage  Bonds and the
Florida Power Mortgage Bonds, (iv) unsecured Indebtedness,  including guarantees
issued in connection with the financing of pollution control facilities operated
by CP&L,  FPC or Florida  Power,  guarantees  of  Indebtedness  incurred  by any
wholly-owned  Subsidiary  and  guarantees  of  debt  securities  issued  by  any
financing  Subsidiary  established  to secure  debt  financing  in the  offshore
markets,  and (v) other Indebtedness  outstanding on the date of this Agreement,
as described on Schedule II hereto.

     (c) Lease Obligations.  Create, incur, assume or suffer to exist, or permit
any Subsidiary to create,  incur, assume or suffer to exist, any obligations for
the  payment of rental for any  property  under  leases or  agreements  to lease
having a term of one year or more  that  would  cause the  direct or  contingent
Consolidated  liabilities of the Borrower and its Subsidiaries in respect of all
such obligations  payable in any calendar year to exceed 10% of the Consolidated
operating  revenues of the Borrower  and its  Subsidiaries  for the  immediately
preceding calendar year.

     (d)  Mergers,  Etc.  Merge  with or into or  consolidate  with or into,  or
acquire all or  substantially  all of the assets or  securities  of, any Person,
unless,  in each case, (i)  immediately  after giving effect  thereto,  no event
shall occur and be continuing  that  constitutes an Event of Default or an event
that with the giving of notice or lapse of time,  or both,  would  constitute an
Event of Default,  and (ii) in the case of any such merger to which the Borrower
is a party,  such  other  Person  is a  utility  company  and the  resulting  or
surviving corporation,  if not the Borrower, (x) is organized and existing under
the  laws of the  United  States  of  America  or any  State  thereof,  (y) is a
corporation  satisfactory to the Majority Lenders,  and (z) shall have expressly
assumed,  by an  instrument  satisfactory  in form and substance to the Majority
Lenders,  the due and punctual  payment of all amounts due under this  Agreement
and the performance of every covenant and undertaking of the Borrower  contained
in this Agreement.

     (e) Sales, Etc. of Assets.  Sell, lease,  transfer or otherwise dispose of,
or permit any Subsidiary to sell,  lease,  transfer or otherwise dispose of, any
of its assets,  other than the following sales: (i) sales of generating capacity
to the wholesale  customers of the Borrower and the Subsidiaries,  (ii) sales of
nuclear fuel, (iii) sales of accounts receivable,  (iv) sales in connection with
a transaction  authorized by subsection  (d) of this Section,  (v) the Portfolio
Transaction, (vi) the Rail Transaction, (vii) sales of investments in securities
with a  maturity  of less than one year,  or (viii)  other  sales not  exceeding
$150,000,000 in the aggregate in any fiscal year of the Borrower.
<PAGE>
                                                                              32

     (f) Margin  Stock.  Use any  proceeds of any Advance to buy or carry margin
stock  (within the meaning of  Regulation  U issued by the Board of Governors of
the Federal Reserve System).

     (g)  Change in  Nature  of  Business.  Engage,  or cause or permit  CP&L or
Florida Power to engage,  in a material manner in businesses other than those in
which they are  engaged on the date  hereof and  businesses  reasonably  related
thereto.

                                   Article VI
                                EVENTS OF DEFAULT

     Section 6.01. Events of Default.

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

     (a) The  Borrower  shall  fail to pay any  principal  of any  Advance or LC
Disbursement when due, or shall fail to pay any interest on the principal amount
of any Advance or LC Disbursement or any fees or other amount payable  hereunder
within five  Business  Days after such  interest or fees or other  amount  shall
become due; or

     (b) Any  representation  or warranty made by the Borrower  herein or by the
Borrower (or any of its  officers) in any  document  delivered  pursuant to this
Agreement  shall prove to have been incorrect in any material  respect when made
or deemed made; or

     (c) The Borrower shall fail to perform or observe any other term,  covenant
or agreement contained in Section 5.01(b), 5.01(i)(iv), 5.01(j), 5.01(l) or 5.02
on its part to be performed or observed;  or the Borrower  shall fail to perform
or observe any other term,  covenant or agreement contained in this Agreement on
its  part  to be  performed  or  observed  and any  such  failure  shall  remain
unremedied for 30 days after written notice thereof shall have been given to the
Borrower by the Administrative Agent or any Lender; or

     (d) The Borrower or any Significant Subsidiary shall fail to pay any amount
in  respect  of  any  Indebtedness  in  excess  of  $10,000,000  (but  excluding
Indebtedness  hereunder) of the Borrower or such Significant  Subsidiary (as the
case may be), or any interest or premium thereon, when due (whether by scheduled
maturity,  required  prepayment,  acceleration,  demand or  otherwise)  and such
failure shall continue after the applicable grace period,  if any,  specified in
the agreement or instrument relating to such Indebtedness;  or any other default
under any  agreement or  instrument  relating to any such  Indebtedness,  or any
other event,  shall occur and shall continue after the applicable  grace period,
if any, specified in such agreement or instrument, if the effect of such default
or event is to  accelerate,  or to permit the  acceleration  of, the maturity of
such  Indebtedness;  or any such  Indebtedness  shall be  declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or

     (e) The Borrower or any Significant  Subsidiary shall generally not pay its
debts as such debts  become due, or shall admit in writing its  inability to pay
its debts  generally,  or shall  make a general  assignment  for the  benefit of
creditors;  or any proceeding  shall be instituted by or against the Borrower or
any Significant Subsidiary seeking to adjudicate it a bankrupt or insolvent,  or

<PAGE>
                                                                              33

seeking  liquidation,  winding  up,  reorganization,   arrangement,  adjustment,
protection,  relief, or composition of it or its debts under any law relating to
bankruptcy,  insolvency or reorganization  or relief of debtors,  or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar  official for it or for any  substantial  part of its  property;  or the
Borrower  or any  Significant  Subsidiary  shall  take any  corporate  action to
authorize any of the actions set forth above in this subsection (e); or

     (f) Any judgment or order for the payment of money in excess of $10,000,000
shall be rendered against the Borrower or any Significant  Subsidiary and either
(i) enforcement  proceedings shall have been commenced by any creditor upon such
judgment  or order or (ii)  there  shall be any  period of 30  consecutive  days
during which a stay of  enforcement  of such  judgment or order,  by reason of a
pending appeal or otherwise, shall not be in effect; or

     (g) Any Termination Event with respect to a Plan shall have occurred,  and,
30  days  after  the  occurrence   thereof,   (i)  such  Termination  Event  (if
correctable)  shall not have been  corrected  and (ii) the then present value of
such Plan's vested benefits exceeds the then current value of assets accumulated
in such  Plan by more  than  the  amount  of  $20,000,000  (or in the  case of a
Termination  Event  involving  the  withdrawal of a  "substantial  employer" (as
defined  in  Section   4001(a)(2)   of  ERISA),   the   withdrawing   employer's
proportionate share of such excess shall exceed such amount); or

     (h) The Borrower or any of its Affiliates as employer under a Multiemployer
Plan shall have made a complete or partial  withdrawal  from such  Multiemployer
Plan and the plan sponsor of such  Multiemployer  Plan shall have  notified such
withdrawing  employer that such employer has incurred a withdrawal  liability in
an annual amount exceeding $20,000,000; or

     (i) A Change of Control shall occur;

then, and in any such event, the Administrative  Agent shall at the request,  or
may with the consent,  of the Majority Lenders,  by notice to the Borrower,  (i)
declare the  Commitments  and the obligation of each Lender and the Issuing Bank
to make  Extensions  of  Credit  to be  terminated,  whereupon  the  same  shall
forthwith  terminate,  (ii) declare the Outstanding Credits all interest thereon
and all other  amounts  payable  under this  Agreement to be  forthwith  due and
payable, whereupon such principal amount, all such interest and all such amounts
shall become and be  forthwith  due and payable,  without  presentment,  demand,
protest or further notice of any kind, all of which are hereby  expressly waived
by the Borrower,  and (iii) exercise the remedies  specified in Section 2.16(g);
provided,  however,  that in the event of an actual or deemed  entry of an order
for relief  with  respect to the  Borrower or any  Subsidiary  under the Federal
Bankruptcy  Code, (A) the obligation of each Lender to make Extensions of Credit
shall  automatically  be terminated and (B) the  Outstanding  Credits,  all such
interest and all such other  amounts shall  automatically  become and be due and
payable, without presentment,  demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.
<PAGE>
                                                                              34

                                  Article VII
                            THE administrative AGENT

     Section 7.01. Authorization and Action.

     (a) The Issuing Bank and each Lender  hereby  appoints and  authorizes  the
Administrative  Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Administrative Agent by
the terms hereof,  together with such powers as are  reasonably  provided for by
this Agreement (including, without limitation,  enforcement or collection of the
Advances),  the  Administrative  Agent shall not be  required  to  exercise  any
discretion  or take any action,  but shall be required to act or to refrain from
acting (and shall be fully  protected  in so acting or  refraining  from acting)
upon the instructions of the Majority Lenders,  and such  instructions  shall be
binding  upon the Issuing  Bank and all  Lenders;  provided,  however,  that the
Administrative  Agent shall not be required to take any action that  exposes the
Administrative Agent to personal liability or that is contrary to this Agreement
or applicable law.

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

     Section 7.02. The Administrative Agent's Reliance, Etc.

     Neither the Administrative Agent nor any of its directors, officers, agents
or employees shall be liable for any action taken or omitted to be taken by each
or any of them under or in connection with this Agreement,  except for their own
gross negligence or willful misconduct.  Without limitation of the generality of
the  foregoing,  the  Administrative  Agent:  (i) may consult with legal counsel
(including  counsel for the Borrower),  independent public accountants and other
experts  selected by it and shall not be liable for any action  taken or omitted
to be taken in good faith by it in  accordance  with the advice of such counsel,
accountants or experts;  (ii) makes no warranty or representation to the Issuing
Bank or any  Lender  and shall not be  responsible  to the  Issuing  Bank or any
Lender  for  any  statements,  warranties  or  representations  made  in  or  in
connection with this Agreement; (iii) shall not have any duty to ascertain or to
inquire as to the  performance  or observance of any of the terms,  covenants or
conditions  of this  Agreement  on the part of the  Borrower  or to inspect  the
property  (including  the books and records) of the Borrower;  (iv) shall not be
responsible to the Issuing Bank or any Lender for the due  execution,  legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document  furnished pursuant hereto; and (v) shall incur
no  liability  under or in respect of this  Agreement by acting upon any notice,

<PAGE>
                                                                              35

consent,  certificate or other  instrument or writing (which may be by telegram,
telecopy  or  e-mail)  believed  by it to be  genuine  and signed or sent by the
proper party or parties.

     Section 7.03. The Administrative Agent and its Affiliates.

     With  respect  to  its  Commitments  and  the  Advances  made  by  it,  the
Administrative  Agent shall have the same rights and powers under this Agreement
as any  other  Lender  and may  exercise  the  same  as  though  it were  not an
Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly  indicated,   include  the  Administrative  Agent  in  its  individual
capacity, as applicable.  The Administrative Agent and its Affiliates may accept
deposits from, lend money to, act as trustee under  indentures of, and generally
engage in any kind of business with, the Borrower, any Subsidiary and any Person
who may do business with or own  securities  of the Borrower or any  Subsidiary,
all as if the Administrative Agent were not the Administrative Agent and without
any duty to account therefor to the Lenders.

     Section 7.04. Lender Credit Decision.

     Each  of the  Issuing  Bank  and  each  Lender  acknowledges  that  it has,
independently  and without reliance upon the  Administrative  Agent, the Issuing
Bank or any other Lender (as applicable)  and based on the financial  statements
referred to in Section  4.01(e) and such other  documents and  information as it
has deemed appropriate,  made its own credit analysis and decision to enter into
this Agreement.  Each of the Issuing Bank and each Lender also acknowledges that
it will,  independently and without reliance upon the Administrative  Agent, the
Issuing Bank 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 Agreement.

     Section 7.05. Indemnification.

     The Lenders agree to indemnify the Administrative  Agent (to the extent not
reimbursed  by the  Borrower)  and the Issuing  Bank,  ratably  according to the
respective  principal  amounts of the  Outstanding  Credits then held by each of
them (or if there are no Outstanding  Credits at the time,  ratably according to
the  respective  amounts of their  Commitments),  from and  against  any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements  of any kind or nature  whatsoever that may be
imposed on, incurred by, or asserted  against the  Administrative  Agent and the
Issuing  Bank in any way  relating  to or arising out of this  Agreement  or any
action taken or omitted by the Administrative  Agent or the Issuing Bank (as the
case may be) under this  Agreement;  provided that no Lender shall be liable for
any  portion  of such  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits, costs, expenses or disbursements resulting from the
Administrative  Agent's  or the  Issuing  Bank's  gross  negligence  or  willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
the Administrative  Agent or the Issuing Bank (as the case may be) promptly upon
demand for its ratable share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by the  Administrative  Agent or the Issuing Bank (as the
case may be) in connection with the preparation,  execution,  administration, or

<PAGE>
                                                                              36

enforcement  of, or legal advice in respect of rights or  responsibility  under,
this Agreement,  to the extent that the Administrative Agent or the Issuing Bank
(as the case may be) is not reimbursed for such expenses by the Borrower.

     Section 7.06. Successor Administrative Agent.

     The  Administrative  Agent may resign at any time by giving  written notice
thereof to the Lenders,  the Issuing Bank and the Borrower and may be removed at
any  time  with  or  without  cause  by the  Majority  Lenders.  Upon  any  such
resignation or removal,  the Majority  Lenders shall have the right to appoint a
successor  Administrative Agent. If no successor Administrative Agent shall have
been so  appointed  by the  Majority  Lenders,  and  shall  have  accepted  such
appointment,  within 30 days after the retiring Administrative Agent's giving of
notice  of  resignation  or  the  Majority  Lenders'  removal  of  the  retiring
Administrative   Agent,  the  Administrative   Agent  may  appoint  a  successor
Administrative  Agent, which shall be a commercial bank organized under the laws
of the United  States of America or of any State  thereof  and having a combined
capital  and  surplus  of at  least  $500,000,000.  Upon the  acceptance  of any
appointment  as  Administrative  Agent  hereunder by a successor  Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested  with all the  rights,  powers,  privileges  and  duties of the  retiring
Administrative Agent, and the retiring  Administrative Agent shall be discharged
from its  duties  and  obligations  under  this  Agreement.  After any  retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the  provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative  Agent under this
Agreement.

                                  Article VIII
                                  MISCELLANEOUS

     Section 8.01. Amendments, Etc.

     No amendment or waiver of any provision of this  Agreement,  nor consent to
any departure by the Borrower therefrom,  shall in any event be effective unless
the same shall be in writing and signed by the Majority Lenders,  in the case of
any such amendment,  waiver or consent of or in respect of this  Agreement,  and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided,  however, that no amendment,
waiver or consent shall,  unless in writing and signed by all of the Lenders, do
any of the following:  (i) waive any of the conditions specified in Section 3.01
or 3.02, (ii) increase the Commitment of any Lender or subject any Lender to any
additional obligations, (iii) reduce, or waive the payment of, the principal of,
or  interest  on,  the  Advances,  reimbursement  obligations  in  respect of LC
Disbursements,  or any fees or other  amounts  payable  to the  Lenders  ratably
hereunder,  (iv)  postpone  any date fixed for any payment of  principal  of, or
interest  on,  the  Advances,   reimbursement   obligations  in  respect  of  LC
Disbursements,  or any fees or other  amounts  payable  to the  Lenders  ratably
hereunder,  (v) change the  percentage  of the  Commitments  or of the aggregate
unpaid principal amount of the Advances,  or the number of Lenders,  which shall
be  required  for the  Lenders  or any of them to take  any  action  under  this
Agreement,  or (vi) amend,  waive, or in any way modify or suspend any provision
requiring the pro rata application of payments or of this Section 8.01; provided

<PAGE>
                                                                              37

further,  that no  amendment,  waiver or consent  shall,  unless in writing  and
signed by each Lender affected  thereby,  reduce,  waive or postpone the date of
payment of any amount payable to such Lender, other than any such amount payable
to the Lenders ratably; and provided,  further, that (A) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative  Agent and the
Issuing  Bank in  addition  to the  Lenders  required  hereinabove  to take such
action,  affect the rights or duties of such Administrative Agent or the Issuing
Bank under this  Agreement  and (B) this  Agreement  may be amended and restated
without  the consent of any Lender or the  Administrative  Agent if, upon giving
effect to such amendment and restatement,  such Lender or Administrative  Agent,
as the case may be, shall no longer be a party to this  Agreement (as so amended
and  restated) or have any  Commitment or other  obligation  hereunder and shall
have been  paid in full all  amounts  payable  hereunder  to such  Lender or the
Administrative Agent, as the case may be.

     Section 8.02. Notices, Etc.

     All notices and other  communications  provided for hereunder shall, unless
otherwise stated herein, be in writing (including telegraphic communication) and
mailed, telecopied, e-mailed or delivered, if to the Borrower, at its address at
410 S. Wilmington Street, PEB 19A3,  Raleigh,  North Carolina 27601,  Attention:
Director of Financial  Operations,  Treasury  Department,  Facsimile  no.: (919)
546-7826, e-mail: charles.beuris@pgnmail.com;  if to any Lender, at its Domestic
Lending  Office set forth  opposite  its name on  Schedule  I hereto;  if to the
Issuing Bank,  at its address at 25 Park Place,  16th Floor,  Atlanta,  Georgia,
30303,  Attention:  Mike Sullivan,  Facsimile no.: (404) 588-8129; and if to the
Administrative  Agent,  at its address at Two Penns Way,  Suite 200, New Castle,
Delaware  19720,  Attention:  Bank  Loan  Syndications,   Facsimile  no.:  (212)
816-8098, e-mail: j.nicholas.mckee@citi.com; or, as to each party, at such other
address as shall be  designated  by such party in a written  notice to the other
parties. All such notices and communications shall be effective when received by
the addressee thereof.

     Section 8.03. No Waiver; Remedies.

     No  failure  on  the  part  of  any  Lender,   the  Issuing   Bank  or  the
Administrative  Agent  to  exercise,  and no  delay  in  exercising,  any  right
hereunder  shall  operate as a waiver  thereof;  nor shall any single or partial
exercise of any right hereunder  preclude any other or further  exercise thereof
or the exercise of any other right.  The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.

     Section 8.04. Costs, Expenses, Taxes and Indemnification.

     (a) The  Borrower  agrees to pay on demand  all costs and  expenses  of the
Administrative Agent (and as described in clause (iv) below, the Lenders and the
Issuing Bank) in connection with (i) the  preparation,  execution,  negotiation,
syndication  and  delivery  of this  Agreement  and the  other  documents  to be
delivered  hereunder,  (ii) the first Borrowing under this Agreement,  (iii) any
modification,  amendment or supplement to this Agreement and the other documents
to be delivered hereunder and (iv) the enforcement of the rights and remedies of
the Lenders,  the Issuing Bank and the Administrative Agent under this Agreement
and the other documents to be delivered hereunder (whether through  negotiations
or legal  proceedings),  all the above costs and  expenses  to include,  without
limitation,  the reasonable fees and  out-of-pocket  expenses of counsel for the
Administrative  Agent,  the Issuing  Bank and each of the Lenders  with  respect
thereto.  In addition,  the Borrower shall pay any and all stamp and other taxes

<PAGE>
                                                                              38

payable or  determined  to be  payable  in  connection  with the  execution  and
delivery of this  Agreement and the other  documents to be delivered  hereunder,
and agrees to save the  Administrative  Agent,  the Issuing Bank and each Lender
harmless from and against any and all  liabilities  with respect to or resulting
from any delay in paying or omission to pay such taxes.

     (b) If (i) due to payments made by the Borrower due to the  acceleration of
the  maturity  of the  Advances  pursuant  to  Section  6.01 or due to any other
reason, any Lender receives payments of principal of any Eurodollar Rate Advance
based upon the Eurodollar Rate other than on the last day of the Interest Period
for such Advance, or (ii) due to any Conversion of Eurodollar Advance other than
on the last day of an Interest  Period  pursuant to Section  2.13,  the Borrower
shall,  upon  demand  by  such  Lender  (with  a  copy  of  such  demand  to the
Administrative  Agent), pay to the Administrative  Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses,
costs or  expenses  that it may  reasonably  incur as a result of such  payment,
including, without limitation, any loss (including loss of anticipated profits),
cost or  expense  incurred  by  reason of the  liquidation  or  reemployment  of
deposits or other funds acquired by any Lender to fund or maintain such Advance.
In addition,  if the Borrower  fails to prepay any Advance on the date for which
notice of  prepayment  has been given,  the Borrower  shall,  upon demand by any
Lender  (with a copy of such  demand to the  Administrative  Agent),  pay to the
Administrative  Agent for the  account of such  Lender any  amounts  required to
compensate  such Lender for any losses,  costs or  expenses  (including  loss of
anticipated profits) that it may reasonably incur as a result of such prepayment
not having been made on the date specified by the Borrower for such prepayment.

     (c) Any and all  payments  by the  Borrower  hereunder  shall be  made,  in
accordance  with Section 2.14,  free and clear of and without  deduction for any
and all  present  or future  taxes,  levies,  imposts,  deductions,  charges  or
withholdings,  and all liabilities with respect thereto,  excluding, in the case
of each Lender, the Issuing Bank and the Administrative  Agent, taxes imposed on
its income,  and franchise  taxes imposed on it, by the  jurisdiction  under the
laws of which such Lender, Issuing Bank or Administrative Agent (as the case may
be) is organized or any political  subdivision  thereof and, in the case of each
Lender,  taxes imposed on its income,  and franchise taxes imposed on it, by the
jurisdiction  of  such  Lender's  Applicable  Lending  Office  or any  political
subdivision thereof (all such non-excluded taxes, levies,  imposts,  deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower  shall be required by law to deduct any Taxes from or in respect
of any sum payable  hereunder  to any  Lender,  Issuing  Bank or  Administrative
Agent,  (i) the sum payable shall be increased as may be necessary so that after
making all required deductions  (including  deductions  applicable to additional
sums   payable   under  this  Section   8.04)  such  Lender,   Issuing  Bank  or
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such  deductions  been made,  (ii) the Borrower shall
make such  deductions and (iii) the Borrower shall pay the full amount  deducted
to the  relevant  taxation  authority  or other  authority  in  accordance  with
applicable law.

     (d) The  Borrower  will  indemnify  each  Lender,  the Issuing Bank and the
Administrative   Agent  for  the  full  amount  of  Taxes  (including,   without
limitation,  any Taxes imposed by any jurisdiction on amounts payable under this
Section 8.04) paid by such Lender,  Issuing Bank or Administrative Agent (as the
case may be) and any  liability  (including  penalties,  interest and  expenses)
arising  therefrom  or with  respect  thereto,  whether  or not such  Taxes were

<PAGE>
                                                                              39

correctly or legally asserted. This indemnification shall be made within 30 days
from the date such Lender, Issuing Bank or Administrative Agent (as the case may
be) makes written demand therefor.

     (e)  Prior  to the  date of the  initial  Borrowing  or on the  date of the
Assignment and Acceptance  pursuant to which it became a Lender,  in the case of
each Lender that becomes a Lender by virtue of entering into an  Assignment  and
Acceptance, and from time to time thereafter if requested by the Borrower or the
Administrative  Agent,  each Lender  organized  under the laws of a jurisdiction
outside  the  United  States  shall  provide  the  Administrative  Agent and the
Borrower with the forms prescribed by the Internal Revenue Service of the United
States  certifying  that such Lender is exempt from  United  States  withholding
taxes with respect to all payments to be made to such Lender  hereunder.  If for
any reason  during the term of this  Agreement,  any  Lender  becomes  unable to
submit  the  forms  referred  to above  or the  information  or  representations
contained  therein are no longer accurate in any material  respect,  such Lender
shall  notify  the  Administrative  Agent and the  Borrower  in  writing to that
effect.  Unless the Borrower and the Administrative Agent have received forms or
other documents  satisfactory to them indicating that payments hereunder are not
subject to United  States  withholding  tax, the Borrower or the  Administrative
Agent shall withhold  taxes from such payments at the applicable  statutory rate
in the case of  payments  to or for any  Lender  organized  under  the laws of a
jurisdiction outside the United States.

     (f) Any Lender claiming any additional  amounts payable pursuant to Section
8.04(c) or (d) shall use its reasonable  efforts  (consistent  with its internal
policy and legal and regulatory  restrictions) (i) to change the jurisdiction of
its  Applicable  Lending  Office if the making of such a change  would avoid the
need for,  or  reduce  the  amount  of,  any such  additional  amounts  that may
thereafter  accrue and would not, in the reasonable  judgment of such Lender, be
otherwise  disadvantageous  to such Lender and (ii) to  otherwise  minimize  the
amounts due, or to become due, under Sections 8.04(c) and (d).

     (g) If the Borrower makes any additional payment to the Issuing Bank or any
Lender  pursuant  to Sections  8.04(c) and (d) in respect of any Taxes,  and the
Issuing Bank or such Lender determines that it has received (i) a refund of such
Taxes or (ii) a credit against or relief or remission for, or a reduction in the
amount  of,  any tax or other  governmental  charge  solely  as a result  of any
deduction or credit for any Taxes with respect to which it has received payments
under  Sections  8.04(c) and (d), the Issuing Bank or such Lender shall,  to the
extent that it can do so without  prejudice  to the  retention  of such  refund,
credit, relief,  remission or reduction,  pay to the Borrower such amount as the
Issuing  Bank or such Lender shall have  determined  to be  attributable  to the
deduction or withholding of such Taxes. If the Issuing Bank or such Lender later
determines that it was not entitled to such refund, credit, relief, remission or
reduction to the full extent of any payment made pursuant to the first  sentence
of this Section  8.04(g),  the Borrower shall upon demand of the Issuing Bank or
such Lender  promptly repay the amount of such  overpayment.  Any  determination
made by the Issuing Bank or such Lender  pursuant to this Section  8.04(g) shall
in the absence of bad faith or manifest error be conclusive, and nothing in this
Section  8.04(g)  shall be construed as requiring the Issuing Bank or any Lender
to  conduct  its  business  or to  arrange  or alter in any  respect  its tax or
financial  affairs so that it is  entitled to receive  such a refund,  credit or
reduction  or as  allowing  any Person to inspect  any  records,  including  tax
returns, of the Issuing Bank or any Lender.
<PAGE>
                                                                              40

     (h) The Borrower  hereby agrees to indemnify and hold harmless each Lender,
the Issuing Bank, the Administrative  Agent, counsel to the Administrative Agent
and their respective officers, directors,  partners,  employees,  Affiliates and
advisors (each,  an  "Indemnified  Person") from and against any and all claims,
damages,   losses,   liabilities,   costs,  or  expenses  (including  reasonable
attorney's fees and expenses, whether or not such Indemnified Person is named as
a party to any proceeding or is otherwise subjected to judicial or legal process
arising  from any such  proceeding),  joint and  several,  that may  actually be
incurred by or asserted or awarded  against any Indemnified  Person  (including,
without  limitation,  in  connection  with  any  investigation,   litigation  or
proceeding or the preparation of a defense in connection therewith) in each case
by reason of or in connection  with the execution,  delivery,  or performance of
this  Agreement,  or the use by the Borrower of the proceeds of any Extension of
Credit  (including any refusal by the Issuing Bank to honor a demand for payment
under a Letter of Credit if the  documents  presented  in  connection  with such
demand do not strictly  comply with the terms of such Letter of Credit),  except
to the extent that such claims, damages, losses, liabilities, costs, or expenses
are  determined  in a final  non-appealable  judgment  by a court  of  competent
jurisdiction  to have  resulted  solely  from the gross  negligence  or  willful
misconduct of the party seeking indemnification.

     (i)  Without  prejudice  to the  survival  of any  other  agreement  of the
Borrower hereunder,  the agreements and obligations of the Borrower contained in
this  Section 8.04 shall  survive the payment in full of principal  and interest
hereunder and the termination of the Commitments.

     Section 8.05. Right of Set-off.

     Upon (i) the occurrence and during the  continuance of any Event of Default
and (ii) the making of the request or the  granting of the consent  specified by
Section 6.01 to authorize the  Administrative  Agent to declare the  Outstanding
Credits due and payable  pursuant to the provisions of Section 6.01, each Lender
and the Issuing Bank are hereby authorized at any time and from time to time, to
the fullest  extent  permitted by law, to set off and apply any and all deposits
(general or special, time or demand,  provisional or final) at any time held and
other  indebtedness  at any time owing by such Lender or Issuing  Bank to or for
the credit or the account of the Borrower now or hereafter  existing  under this
Agreement,  irrespective of whether or not such Lender or the Issuing Bank shall
have made any demand under this Agreement and although such  obligations  may be
unmatured.  Each  Lender  and the  Issuing  Bank  agree  promptly  to notify the
Borrower after any such set-off and  application  made by such Lender or Issuing
Bank;  provided  that the  failure  to give such  notice  shall not  affect  the
validity  of such  set-off  and  application.  The rights of each Lender and the
Issuing  Bank under this  Section are in addition to other  rights and  remedies
(including,  without  limitation,  other rights of set-off)  that such Lender or
Issuing Bank may have.

     Section 8.06. Binding Effect.

     This Agreement  shall become  effective when it shall have been executed by
the  Borrower and the  Administrative  Agent and when the  Administrative  Agent
shall have been notified by each Lender and the Issuing Bank that such Lender or
Issuing Bank has executed it and  thereafter  shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent, the Issuing Bank and each
Lender and their  respective  successors  and assigns,  except that the Borrower

<PAGE>
                                                                              41

shall not have the right to assign its rights  hereunder or any interest  herein
without the prior written consent of the Issuing Bank and each Lender.

     Section 8.07. Assignments and Participations.

     (a) Each Lender  may,  with the consent of the  Administrative  Agent,  the
Issuing Bank and the Borrower (such consent not to be unreasonably withheld and,
in the case of the  Borrower,  such consent shall not be required if an Event of
Default has  occurred and is  continuing),  assign to one or more banks or other
entities  all or a portion of its rights and  obligations  under this  Agreement
(including,  without  limitation,  all or a portion  of its  Commitment  and the
Advances owing to it); provided, however, that (i) each such assignment shall be
of a constant, and not a varying, percentage of all rights and obligations under
this Agreement,  (ii) the amount of the Commitment of the assigning Lender being
assigned  pursuant  to each such  assignment  (determined  as of the date of the
Assignment and Acceptance with respect to such assignment)  shall in no event be
less than the lesser of (A)  $10,000,000 and (B) all of such Lender's rights and
obligations and, if the preceding clause (A) is applicable, shall be an integral
multiple  of  $1,000,000,  (iii) each such  assignment  shall be to an  Eligible
Assignee, and (iv) the parties to each such assignment shall execute and deliver
to the  Administrative  Agent, for its acceptance and recording in the Register,
an Assignment  and  Acceptance  and such parties (other than when Citibank is an
assigning party) shall also deliver to the Administrative Agent a processing and
recordation  fee of  $3,500.  Upon  such  execution,  delivery,  acceptance  and
recording,  from and after the effective date  specified in each  Assignment and
Acceptance,  (x) the  assignee  thereunder  shall be a party  hereto and, to the
extent that rights and  obligations  hereunder have been assigned to it pursuant
to such Assignment and  Acceptance,  have the rights and obligations of a Lender
hereunder  and (y) the Lender  assignor  thereunder  shall,  to the extent  that
rights and  obligations  hereunder  have been  assigned  by it  pursuant to such
Assignment  and  Acceptance,  relinquish  its  rights and be  released  from its
obligations  under  this  Agreement  (and,  in the  case  of an  Assignment  and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and  obligations  under this  Agreement,  such Lender  shall cease to be a party
hereto).

     (b) By executing and  delivering an Assignment and  Acceptance,  the Lender
assignor  thereunder and the assignee  thereunder confirm to and agree with each
other and the other  parties  hereto as  follows:  (i) other than as provided in
such Assignment and Acceptance, 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 Agreement or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of this Agreement or any other instrument or document  furnished  pursuant
hereto;  (ii) such  assigning  Lender  makes no  representation  or warranty and
assumes  no  responsibility  with  respect  to the  financial  condition  of the
Borrower  or  the  performance  or  observance  by  the  Borrower  of any of its
obligations  under this Agreement or any other instrument or document  furnished
pursuant  hereto;  (iii) such  assignee  confirms that it has received a copy of
this Agreement,  together with copies of the financial statements referred to in
Section  4.01(e)  and such  other  documents  and  information  as it has deemed
appropriate  to make its own credit  analysis  and  decision  to enter into such
Assignment and Acceptance;  (iv) such assignee will,  independently  and without
reliance  upon the  Administrative  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 Agreement;  (v) such assignee  confirms that it is an Eligible

<PAGE>
                                                                              42

Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise  such powers  under this
Agreement as are  delegated  to the  Administrative  Agent by the terms  hereof,
together with such powers as are reasonably  incidental thereto;  and (vii) such
assignee  agrees that it will perform in accordance  with their terms all of the
obligations  that by the terms of this Agreement are required to be performed by
it as a Lender.

     (c) The  Administrative  Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance (and copies of the related
consents  of the  Borrower  and the  Administrative  Agent  to such  assignment)
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
Advances 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 Borrower,  the Administrative  Agent and the Lenders may
treat each Person whose name is recorded in the  Register as a Lender  hereunder
for all  purposes  of this  Agreement.  The  Register  shall  be  available  for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.

     (d) Upon  its  receipt  of an  Assignment  and  Acceptance  executed  by an
assigning Lender and an assignee  representing that it is an Eligible  Assignee,
the  Administrative  Agent shall,  if such  Assignment  and  Acceptance has been
completed and is in substantially the form of Exhibit B hereto,  (i) accept such
Assignment and Acceptance,  (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.

     (e) Each  Lender  may  assign to one or more  banks or other  entities  any
Advance made by it.

     (f) Each  Lender  may  sell  participations  to one or more  banks or other
entities  in or to all or a portion  of its rights  and  obligations  under this
Agreement  (including,  without limitation,  all or a portion of its Commitment,
the Advances owing to it); provided, however, that (i) such Lender's obligations
under this  Agreement  (including,  without  limitation,  its  Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any  promissory  note held pursuant
to Section  2.02(b) for all purposes of this Agreement,  (iv) the Borrower,  the
Issuing Bank, the  Administrative  Agent and the other Lenders shall continue to
deal solely and  directly  with such  Lender in  connection  with such  Lender's
rights  and  obligations  under  this  Agreement  and (v) the holder of any such
participation,  other than an Affiliate of such Lender, shall not be entitled to
require such Lender to take or omit to take any action hereunder,  except action
(A) extending the time for payment of interest on, or the final  maturity of any
portion of the  principal  amount of, the Advances or (B) reducing the principal
amount of or the rate of interest payable on the Advances.  Without limiting the
generality of the  foregoing:  (i) such  participating  banks or other  entities
shall be entitled to the cost protection  provisions contained in Sections 2.09,
2.13 and  8.04(b)  only if, and to the same  extent,  the Lender from which such
participating  banks or other entities acquired its participation  would, at the
time,  be entitled to claim  thereunder;  and (ii) such  participating  banks or
other entities  shall also, to the fullest extent  permitted by law, be entitled

<PAGE>
                                                                              43

to  exercise  the  rights  of  set-off  contained  in  Section  8.05  as if such
participating banks or other entities were Lenders hereunder.

     (g) If any Lender (or any bank, financial  institution,  or other entity to
which such  Lender has sold a  participation)  shall make any demand for payment
under Section  2.12(b),  then within 30 days after any such demand (if, but only
if, such demanded payment has been made by the Borrower), the Borrower may, with
the  approval  of  the  Administrative   Agent  (which  approval  shall  not  be
unreasonably  withheld)  demand that such Lender assign in accordance  with this
Section 8.07 to one or more  Eligible  Assignees  designated by the Borrower all
(but not less than all) of such  Lender's  Commitment  (if any) and the Advances
owing to it within the period  ending on the later to occur of such 30th day and
the last  day of the  longest  of the then  current  Interest  Periods  for such
Advances,  provided that (i) no Event of Default or event that, with the passage
of time or the giving of notice,  or both,  would constitute an Event of Default
shall  then have  occurred  and be  continuing,  (ii) the  Borrower  shall  have
satisfied all its presently due obligations to such Lender under this Agreement,
and  (iii)  if such  Eligible  Assignee  designated  by the  Borrower  is not an
existing Lender on the date of such demand, the Borrower shall have delivered to
the  Administrative  Agent an administrative fee of $3,500. If any such Eligible
Assignee  designated by the Borrower shall fail to consummate such assignment on
terms acceptable to such Lender,  or if the Borrower shall fail to designate any
such Eligible Assignees for all or part of such Lender's Commitment or Advances,
then such demand by the Borrower shall become  ineffective;  it being understood
for purposes of this subsection (g) that such  assignment  shall be conclusively
deemed  to be on terms  acceptable  to such  Lender,  and such  Lender  shall be
compelled to consummate  such assignment to an Eligible  Assignee  designated by
the Borrower,  if such Eligible  Assignee (i) shall agree to such  assignment by
entering into an Assignment and Acceptance in substantially  the form of Exhibit
B hereto with such Lender and (ii) shall offer compensation to such Lender in an
amount equal to all amounts then owing by the Borrower to such Lender  hereunder
made by the  Borrower to such Lender,  whether for  principal,  interest,  fees,
costs or expenses (other than the demanded payment referred to above and payable
by  the  Borrower  as a  condition  to  the  Borrower's  right  to  demand  such
assignment), or otherwise.

     (h) Any Lender may, in connection with any assignment or  participation  or
proposed assignment or participation  pursuant to this Section 8.07, disclose to
the assignee or participant or proposed assignee or participant, any information
relating  to the  Borrower  furnished  to such  Lender  by or on  behalf  of the
Borrower;  provided  that,  prior  to  any  such  disclosure,  the  assignee  or
participant  or proposed  assignee or  participant  shall agree to preserve  the
confidentiality  of  any  confidential  information  relating  to  the  Borrower
received by it from such Lender.

     (i)  Anything in this Section  8.07 to the  contrary  notwithstanding,  any
Lender may (i) assign and pledge all or any  portion of its  Commitment  and the
Advances  owing to it to any  Federal  Reserve  Bank  (and its  transferees)  as
collateral  security  pursuant to  Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank; provided,  that no such assignment shall release the assigning Lender from
its obligations  hereunder;  or (ii) assign its Commitments,  Advances and other
rights and  obligations  hereunder to any of its Affiliates  upon notice to, but
without the consent of, the Borrower and the Administrative Agent.
<PAGE>
                                                                              44

     (j)  Notwithstanding  anything to the contrary contained herein, any Lender
(a "Granting  Lender") may grant to a special purpose funding vehicle (an "SPC")
of such Granting  Lender  identified as such in writing from time to time by the
Granting Lender to the Administrative  Agent, the Issuing Bank and the Borrower,
the option to provide to the  Borrower  all or any part of any Advance that such
Granting Lender would otherwise be obligated to make to the Borrower pursuant to
this Agreement;  provided that (i) nothing herein shall  constitute a commitment
by any such SPC to make any  Advance,  (ii) if such SPC elects  not to  exercise
such option or otherwise  fails to provide all or any part of such Advance,  the
Granting  Lender shall be  obligated to make such Advance  pursuant to the terms
hereof and (iii) no SPC or  Granting  Lender  shall be  entitled  to receive any
greater amount  pursuant to Section 2.08 or 2.12 than the Granting  Lender would
have been entitled to receive had the Granting Lender not otherwise granted such
SPC the option to provide any Advance to the Borrower.  The making of an Advance
by an SPC hereunder  shall utilize the Commitment of the Granting  Lender to the
same extent,  and as if, such Advance were made by such  Granting  Lender.  Each
party  hereto  hereby  agrees that no SPC shall be liable for any  indemnity  or
similar  payment  obligation  under  this  Agreement  for  which a Lender  would
otherwise  be liable so long as, and to the extent  that,  the related  Granting
Lender  provides such  indemnity or makes such payment.  In  furtherance  of the
foregoing,  each party hereto hereby agrees (which  agreement  shall survive the
termination of this Agreement)  that, prior to the date that is one year and one
day after  the  payment  in full of all  outstanding  commercial  paper or other
senior  indebtedness of any SPC, it will not institute against or join any other
person  in  instituting   against  such  SPC  any  bankruptcy,   reorganization,
arrangement,  insolvency or liquidation proceedings under the laws of the United
States or any State thereof.  Notwithstanding the foregoing, the Granting Lender
unconditionally  agrees to indemnify the Borrower, the Administrative Agent, the
Issuing  Bank and each Lender  against  all  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be incurred by or asserted against the
Borrower, the Administrative Agent, the Issuing Bank or such Lender, as the case
may  be,  in any  way  relating  to or  arising  as a  consequence  of any  such
forbearance or delay in the initiation of any such  proceeding  against its SPC.
Each party  hereto  hereby  acknowledges  and agrees  that no SPC shall have the
rights of a Lender  hereunder,  such rights  being  retained  by the  applicable
Granting Lender.  Accordingly,  and without  limiting the foregoing,  each party
hereby further  acknowledges and agrees that no SPC shall have any voting rights
hereunder and that the voting rights  attributable to any Advance made by an SPC
shall be exercised only by the relevant  Granting  Lender and that each Granting
Lender shall serve as the administrative  agent and attorney-in-fact for its SPC
and shall on behalf of its SPC receive any and all payments made for the benefit
of such SPC and take all actions hereunder to the extent, if any, such SPC shall
have any rights hereunder. In addition, notwithstanding anything to the contrary
contained  in this  Agreement  any SPC may with notice to, but without the prior
written  consent  of any other  party  hereto,  assign  all or a portion  of its
interest in any Advances to the Granting Lender. This Section may not be amended
without the prior written  consent of each Granting  Lender,  all or any part of
whose Advance is being funded by an SPC at the time of such amendment.

     Section 8.08. Governing Law.

     This Agreement shall be governed by, and construed in accordance  with, the
laws of the State of New York.  The  Borrower  (i)  irrevocably  submits  to the
non-exclusive  jurisdiction of any New York State court or Federal court sitting
in New York City in any action arising out of this  Agreement,  (ii) agrees that

<PAGE>
                                                                              45

all claims in such action may be decided in such  court,  (iii)  waives,  to the
fullest extent it may  effectively do so, the defense of an  inconvenient  forum
and (iv)  consents  to the service of process by mail.  A final  judgment in any
such action  shall be  conclusive  and may be  enforced in other  jurisdictions.
Nothing herein shall affect the right of any party to serve legal process in any
manner  permitted  by law or affect  its right to bring any  action in any other
court.

     Section 8.09. Waiver of Jury Trial.

     THE BORROWER,  THE  ADMINISTRATIVE  AGENT, THE ISSUING BANK AND EACH LENDER
EACH HEREBY  IRREVOCABLY  WAIVES,  TO THE FULLEST EXTENT IT MAY  EFFECTIVELY AND
LAWFULLY  DO SO,  ALL  RIGHT TO TRIAL BY JURY AS TO ANY ISSUE  RELATING  TO THIS
AGREEMENT IN ANY ACTION,  PROCEEDING OR COUNTERCLAIM  ARISING OUT OF OR RELATING
TO THIS  AGREEMENT OR ANY OTHER  INSTRUMENT OR DOCUMENT  DELIVERED  HEREUNDER OR
THEREUNDER.

     Section 8.10. Execution in Counterparts.

     This  Agreement  may be  executed  in any  number  of  counterparts  and by
different  parties  hereto  in  separate  counterparts,  each of  which  when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

     Section 8.11. Severability.

     Any provision of this Agreement that is  prohibited,  unenforceable  or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition,  unenforceability or  non-authorization  without
invalidating  the  remaining   provisions  hereof  or  affecting  the  validity,
enforceability or legality of such provision in any other jurisdiction.

     Section 8.12. Headings.

     Section  headings in this Agreement are included  herein for convenience of
reference  only and shall not  constitute a part of this Agreement for any other
purpose.

     Section 8.13. Entire Agreement.

     This Agreement constitutes the entire contract between the parties relative
to the subject  matter  hereof.  Any previous  agreement  among the parties with
respect to the subject matter hereof is superseded by this Agreement.  Except as
is  expressly  provided  for herein,  nothing in this  Agreement,  expressed  or
implied,  is intended to confer upon any party other than the parties hereto any
rights,  remedies,  obligations  or  liabilities  under  or by  reason  of  this
Agreement.



                           [Signature Pages to Follow]
<PAGE>

                                                                             S-1


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



                                CITIBANK, N.A.


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-2

                                JPMORGAN CHASE BANK


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-3

                                BANK ONE, N.A.


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-4

                                BANK OF AMERICA, N.A.


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-5

                                BANK OF TOKYO-MITSUBISHI TRUST COMPANY


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-6

                                WACHOVIA BANK, N.A.


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-7

                                SUNTRUST BANK


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-8

                                MIZUHO CORPORATE BANK, LIMITED


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                             S-9

                                MELLON BANK, N.A.


                                By
                                  ------------------------------------------
                                  Name:
                                  Title:


<PAGE>

                                                                            S-10

                                PROGRESS ENERGY, INC.



                                By_______________________________
                                  Name:
                                  Title:


<PAGE>

                                   SCHEDULE I

                              PROGRESS ENERGY, INC.

               List of Commitments and Applicable Lending Offices

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                            Eurodollar                              Domestic
        Name of Bank                      Lending Office                         Lending Office              Commitment
        ------------                      --------------                         --------------              ----------

Citibank, N.A.                    Two Pennsway, Ste. 200                    Same as Eurodollar Lending      $80,526,315.78
                                  New Castle, Delaware  19720               Office

                                  Attention: Bank Loan Syndications

JPMorgan Chase Bank               270 Park Avenue                           Same as Eurodollar Lending      $80,526,315.78
                                  New York, NY 10017                        Office

                                  Attention:

Bank One, NA                      1 Bank One Plaza, Suite 0363              Same as Eurodollar Lending      $59,210,526.32
                                  Chicago, Illinois  60670-0363             Office

                                  Attention: Robert G. Bussa

Bank of America, N.A.             Bank of America Plaza                     Same as Eurodollar Lending      $68,684,210.53
                                  901 Main Street                           Office
                                  14th Floor, TX1-492-14-05
                                  Dallas, Texas 75202-3714

                                  Attention: Nora Taylor

Bank of Tokyo-Mitsubishi Trust    1251 Avenue of the Americas               Same as Eurodollar Lending      $59,210,526.32
Company                           12th Floor                                Office
                                  New York, New York 10020-1104

                                  Attention:  Nicholas R. Battista

Wachovia Bank. N.A.               191 Peachtree St.                         Same as Eurodollar Lending      $42,631,578.95
                                  Atlanta, Georgia 30303                    Office

                                  Attention: Loan Administration

SunTrust Bank                     200 South Orange Avenue                   Same as Eurodollar Lending      $23,684,210.53
                                  Orlando, Florida 32801                    Office


                                  Attention: William Barr

Mizuho Corporate Bank, Limited    1251 Avenue of the Americas               Same as Eurodollar Lending      $23,684,210.53
                                  New York, New York 10020                  Office

                                  Attention: Loan Administration

Mellon Bank, N.A.                 Three Mellon Center, Rm. 1203             Same as Eurodollar Lending      $11,842,105.26
                                  Pittsburgh, Pennsylvania 15259            Office

                                  Attention: Brenda Leierzapf
</TABLE>


<PAGE>

                                   SCHEDULE II

                         Permitted Existing Indebtedness

         None.



<PAGE>
                                                                     EXHIBIT A-1
                                                     Form of Notice of Borrowing

                               NOTICE OF BORROWING

                                     [Date]


Citibank, N.A., as Administrative Agent
   for the Lenders parties to the
   Agreement referred to below
Two Penns Way, Suite 200
New Castle, Delaware 19720

Attention: Bank Loan Syndications

Ladies and Gentlemen:

     The undersigned,  Progress Energy,  Inc. refers to the Amended and Restated
Credit Agreement, dated as of July 26, 2002 (the "Agreement",  the terms defined
therein  being  used  herein as therein  defined),  among the  undersigned,  the
Lenders thereunder, Citibank, N.A., as administrative agent for the Lenders, and
SunTrust  Bank,  as issuing Bank for Letters of Credit  issued  thereunder,  and
hereby  gives you notice  pursuant  to Section  2.03 of the  Agreement  that the
undersigned  hereby  requests  a  Borrowing  under  the  Agreement,  and in that
connection  sets forth below the  information  relating to such  Borrowing  (the
"Proposed Borrowing") as required by Section 2.02(a) of the Agreement:

          (i) The Business Day of the Proposed Borrowing is ___________, 20____.


          (ii) The Type of Advances  comprising the Proposed  Borrowing is [Base
     Rate Advances][Eurodollar Rate Advances].

          (iii) The aggregate amount of the Proposed Borrowing is $________.

          (iv) The Interest  Period for each  Eurodollar Rate Advance that is an
     Advance made as part of the Proposed Borrowing is months.

     The undersigned hereby certifies that the following  statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:

          (i) the  representations  and warranties  contained in Section 4.01 of
     the Agreement  are correct,  before and after giving effect to the Proposed
     Borrowing and to the application of the proceeds therefrom,  as though made
     on and as of such date; and

          (ii) no event has  occurred  and is  continuing,  or would result from
     such Proposed Borrowing or from the application of the proceeds  therefrom,

<PAGE>

     that  constitutes  an Event of  Default  or  would  constitute  an Event of
     Default  but for the  requirement  that  notice be given or time  elapse or
     both.

                                 Very truly yours,

                                 PROGRESS ENERGY, INC.


                                 By
                                   ---------------------------------------------
                                   Name:
                                   Title:


<PAGE>
                                                                     EXHIBIT A-2
                                                    Form of Notice of Conversion

                              NOTICE OF CONVERSION


                                     [Date]


Citibank, N.A., as Administrative Agent
  for the Lenders parties to the
  Agreement referred to below
Two Penns Way, Suite 200
New Castle, Delaware 19720

Attention: Bank Loan Syndications

Ladies and Gentlemen:

     The undersigned,  Progress Energy,  Inc. refers to the Amended and Restated
Credit Agreement, dated as of July 26, 2002 (the "Agreement",  the terms defined
therein  being  used  herein as therein  defined),  among the  undersigned,  the
Lenders thereunder, Citibank, N.A., as administrative agent for the Lenders, and
SunTrust Bank, as issuing bank for the Letters of Credit issued thereunder,  and
hereby  gives you notice  pursuant  to Section  2.10 of the  Agreement  that the
undersigned  hereby  requests  a  Conversion  under the  Agreement,  and in that
connection  sets  forth  the  terms  on which  such  Conversion  (the  "Proposed
Conversion") is requested to be made:

          (i) The  Business Day of the Proposed  Conversion  is  ______________,
     20____.

          (ii) The Type of, and Interest Period  applicable to, the Advances (or
     portions thereof) proposed to be Converted:_________________.

          (iii) The Type of Advance to which such Advances (or portions thereof)
     are proposed to be Converted: ________________________.

          (iv) Except in the case of a  Conversion  to Base Rate  Advances,  the
     initial  Interest  Period to be applicable to the Advances  resulting  from
     such Conversion: ______________________________.

          (v) The aggregate amount of Advances (or portions thereof) proposed to
     be Converted is $_______________________.

<PAGE>

     The undersigned  hereby certifies that, on the date hereof, and on the date
of the Proposed  Conversion,  no event has occurred and is continuing,  or would
result from such Proposed Conversion, that constitutes an Event of Default.

                                 Very truly yours,

                                 PROGRESS ENERGY, INC.



                                 By
                                   ---------------------------------------------
                                   Name:
                                   Title:


<PAGE>
                                                                       EXHIBIT B
                                               Form of Assignment and Acceptance

                            ASSIGNMENT AND ACCEPTANCE

                                  Dated , 20___



     Reference is made to the Amended and Restated Credit Agreement, dated as of
July 26, 2002 (as amended,  modified  and  supplemented  from time to time,  the
"Agreement",  the terms defined  therein being used herein as therein  defined),
among  Progress  Energy,  Inc.,  the  Lenders  (as  defined  in  the  Agreement)
thereunder,  Citibank,  N.A., as administrative agent for the Lenders thereunder
(the  "Administrative  Agent") and SunTrust Bank, as issuing bank for Letters of
Credit issued thereunder.

               (the "Assignor") and           (the "Assignee") agree as follows:
     ----------                     ----------

     1. The Assignor hereby sells and assigns to the Assignee,  and the Assignee
hereby  purchases and assumes from the Assignor,  that interest in and to all of
the Assignor's  rights and obligations under the Agreement as of the date hereof
that  represents  the  percentage  interest  specified  on  Schedule  1  of  all
outstanding  rights and  obligations  under the  Agreement,  including,  without
limitation, such interest in the Assignor's Commitment (to the extent it has not
been  terminated),  the Advances  owing to the Assignor.  After giving effect to
such sale and assignment,  the Assignee's  Commitment (if any) and the amount of
the Advances owing to the Assignee will be as set forth in Section 2 of Schedule
1.

     2. The  Assignor  (i)  represents  and  warrants  that it is the  legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or representations made in or in connection with the Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Agreement or any other instrument or document furnished pursuant thereto;
and (iii) makes no representation or warranty and assumes no responsibility with
respect  to the  financial  condition  of the  Borrower  or the  performance  or
observance by the Borrower of any of its obligations  under the Agreement or any
other instrument or document furnished pursuant thereto.

     3. The Assignee (i) confirms that it has received a copy of the  Agreement,
together with copies of the financial  statements referred to in Section 4.01(e)
thereof and such other documents and information as it has deemed appropriate to
make its own credit  analysis  and  decision to enter into this  Assignment  and
Acceptance;  (ii) agrees that it will,  independently  and without reliance upon
the  Administrative  Agent,  the  Assignor 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  the
Agreement;  (iii)  confirms that it is an Eligible  Assignee;  (iv) appoints and
authorizes the  Administrative  Agent to take such action as agent on its behalf

<PAGE>

and to  exercise  such  powers  under  the  Agreement  as are  delegated  to the
Administrative  Agent by the terms  thereof,  together  with such  powers as are
reasonably  incidental  thereto;  (v) agrees that it will perform in  accordance
with their terms all of the  obligations  that by the terms of the Agreement are
required to be performed by it as a Lender; [and] (vi) specifies as its Domestic
Lending  Office (and  address for  notices) and  Eurodollar  Lending  Office the
offices set forth  beneath  its name on the  signature  pages  hereof [and (vii)
attaches  the forms  prescribed  by the Internal  Revenue  Service of the United
States  certifying  as to the  Assignee's  status for  purposes  of  determining
exemption from United States  withholding  taxes with respect to all payments to
be made to the  Assignee  under the  Agreement  or such other  documents  as are
necessary to indicate that all such payments are subject to such rates at a rate
reduced by an applicable tax treaty].(1)

     4.  Following  the  execution  of this  Assignment  and  Acceptance  by the
Assignor and the Assignee,  it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent. The effective date of this
Assignment  and  Acceptance  shall  be the  date of  acceptance  thereof  by the
Administrative  Agent,  unless  otherwise  specified  on  Schedule 1 hereto (the
"Effective Date").

     5. Upon such  acceptance and recording by the  Administrative  Agent, as of
the Effective  Date,  (i) the Assignee shall be a party to the Agreement and, to
the extent  provided  in this  Assignment  and  Acceptance,  have the rights and
obligations of a Lender  thereunder and (ii) the Assignor  shall,  to the extent
provided  in this  Assignment  and  Acceptance,  relinquish  its  rights  and be
released from its obligations under the Agreement.

     6. Upon such acceptance and recording by the Administrative Agent, from and
after the Effective Date, the Administrative Agent shall make all payments under
the Agreement in respect of the interest  assigned  hereby  (including,  without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee.  The Assignor and Assignee shall make all  appropriate
adjustments  in payments  under the Agreement for periods prior to the Effective
Date directly between themselves.

     7. This  Assignment and  Acceptance  shall be governed by, and construed in
accordance with, the laws of the State of New York.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]


-----------------------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
United States.

<PAGE>



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Assignment  and
Acceptance  to  be  executed  by  their  respective   officers   thereunto  duly
authorized,  as of the date first above written,  such  execution  being made on
Schedule 1 hereto.



[NAME OF ASSIGNOR]                            [NAME OF ASSIGNEE]



By______________________                      By______________________
    Name:                                         Name:
    Title:                                        Title:



                                              Domestic Lending Office (and
                                              address for notices):
                                              [Address]


                                              Eurodollar Lending Office:
                                              [Address]

Accepted this      day of             , 20
              ----        ------------    ---

CITIBANK, N.A., as Administrative Agent


By_________________________
    Name:
    Title:

SUNTRUST BANK, as Issuing Bank


By_________________________
    Name:
    Title:

PROGRESS ENERGY, INC.(2)


By__________________________
    Name:
    Title:


-----------------
(2) If required.

<PAGE>


                                   SCHEDULE 1

                                       TO

                            ASSIGNMENT AND ACCEPTANCE



                                 Dated , 20____


         Section 1

                  Percentage Interest Assigned:                              %
                                                                       ------
         Section 2

                  Assignee's Commitment(3):                              $

                  Aggregate Outstanding Principal Amount of
                   Advances owing to Assignee [specify Facility]:      $

         Section 3

                  Effective Date(4)


------------------
(3) For use in connection with the Extension.
(4) This date should be no earlier than the date of acceptance by the
    Administrative Agent.


<PAGE>
                                                                     EXHIBIT C-1
                               Form of Opinion of General Counsel to The Company



                                  July 26, 2002



To each of the Lenders parties to
the Agreement referred to below,
Citibank, N.A., as Administrative
Agent, and SunTrust Bank, as Issuing Bank

     Re: Progress Energy, Inc.
Ladies and Gentlemen:


     This  opinion  is  furnished  to you by me as General  Counsel to  Progress
Energy,  Inc. (the  "Borrower")  pursuant to Section  3.01(g) of the Amended and
Restated Credit Agreement, dated as of July 26, 2002 (the "Agreement", the terms
defined therein being used herein as therein  defined),  among Progress  Energy,
Inc.,   certain  lenders   thereunder  (the  "Lenders"),   Citibank,   N.A.,  as
administrative  agent for the Lenders,  and SunTrust  Bank,  as issuing bank for
Letters of Credit issued thereunder.

     In  connection  with  the  preparation,   execution  and  delivery  of  the
Agreement, I have examined:

     (1) The Agreement.

     (2) The documents furnished by the Borrower pursuant to Section 3.01 of the
Agreement.

     (3) The Amended and Restated Articles of Incorporation of the Borrower (the
"Charter").

     (4) The By-Laws of the Borrower and all amendments thereto (the "By-Laws").

     I have also  examined  the  originals,  or copies of such  other  corporate
records of the Borrower, certificates of public officials and of officers of the
Borrower  and  agreements,  instruments  and other  documents  as I have  deemed
necessary as a basis for the opinions  expressed  below. As to questions of fact
material to such opinions,  I have,  when relevant facts were not  independently
established by me, relied upon  certificates  of the Borrower or its officers or
of public officials.  I have assumed the authenticity of all documents submitted
to me as originals,  the  conformity to originals of all documents  submitted as
certified or photostatic  copies and the authenticity of signatures  (other than
those of the  Borrower),  and the due execution  and  delivery,  pursuant to due

<PAGE>

authorization,  of the Agreement by the Lenders and the Administrative Agent and
the  validity and binding  effect  thereof on such  parties.  For purposes of my
opinions  expressed in paragraph 1 below as to existence  and good  standing,  I
have relied as of their  respective  dates on certificates of public  officials,
copies of which are  attached  hereto as Exhibit A.  Whenever  the phrase "to my
knowledge"  is used in this  opinion  it refers to my actual  knowledge  and the
actual  knowledge of the  attorneys who work under my  supervision  and who were
involved  in  the   representation  of  the  Borrower  in  connection  with  the
transactions contemplated by the Agreement.

     I or attorneys  working under my supervision  are qualified to practice law
in the States of North Carolina and Florida,  and the opinions  expressed herein
are limited to the law of the States of North Carolina and Florida,  the Federal
law of the  United  States  and,  in  reliance  on a  certificate  issued by the
Secretary of State of South  Carolina and attached  hereto as part of Exhibit A,
the laws of the State of South  Carolina for  purposes of the first  sentence of
opinion paragraph 1 below.

     Based  upon the  foregoing  and upon such  investigation  as I have  deemed
necessary, I am of the following opinion:

     1. Each of the Borrower and CP&L is a corporation  duly organized,  validly
existing and in good standing under the laws of the State of North Carolina, and
CP&L is duly qualified to do business and in good standing in the State of South
Carolina. Each of Florida Power and FPC is a corporation duly organized, validly
existing and in good standing  under the laws of the State of Florida.  Progress
Capital is a corporation  duly organized,  validly existing and in good standing
under the laws of the State of Florida. The Borrower has the corporate power and
authority to enter into the transactions contemplated by the Agreement.

     2. The execution, delivery and performance of the Agreement by the Borrower
have been duly authorized by all necessary  corporate  action on the part of the
Borrower and the Agreement has been duly executed and delivered by the Borrower.

     3. The execution, delivery and performance of the Agreement by the Borrower
will not (i) violate the Charter or the By-Laws or any law,  rule or  regulation
applicable to the Borrower (including,  without limitation,  Regulation X of the
Board of Governors of the Federal Reserve System) or (ii) result in a breach of,
or  constitute a default  under,  any  judgment,  decree or order binding on the
Borrower, or any indenture,  mortgage,  contract or other instrument to which it
is a party or by which it is bound.

     4. No  authorization,  approval  or other  action  by,  and no notice to or
filing with any  governmental  authority or regulatory  body is required for the
due execution,  delivery and performance by the Borrower of the Agreement, other
than the SEC Order, which has been duly issued and is in full force and effect.

     5. To my  knowledge,  except as described  in the reports and  registration
statements  that the Borrower,  CP&L,  FPC and Florida Power have filed with the

<PAGE>

Securities and Exchange  Commission,  there are no pending or overtly threatened
actions or proceedings  against the Borrower or any of such Subsidiaries  before
any court,  governmental  agency or arbitrator,  that may  materially  adversely
affect the financial condition, operations or properties of the Borrower and its
Subsidiaries, taken as a whole.

     The  opinions  set forth  above are  subject to the  qualification  that no
opinion is expressed  herein as to the  enforceability  of the  Agreement or any
other document.

     The  foregoing  opinions  are solely for your benefit and may not be relied
upon by any other  Person  other  than (i) any other  Person  that may  become a
Lender under the Agreement  after the date hereof and (ii) Hunton & Williams and
King & Spalding,  in connection with their respective  opinions delivered on the
date hereof under Section 3.01 of the Agreement.


                                 Very truly yours,




<PAGE>
                                                                     EXHIBIT C-2
                              Form of Opinion of Special Counsel for the Company




                                  July 26, 2002



To each of the Lenders parties to the
Agreement referred to below, Citibank,
N.A., as Administrative Agent, and
SunTrust Bank, as Issuing Bank

     Re: Progress Energy, Inc.

Ladies and Gentlemen:

     This opinion is furnished to you by us as counsel for Progress Energy, Inc.
(the "Borrower")  pursuant to Section 3.01(g) of the Amended and Restated Credit
Agreement, dated as of July 26, 2002 (the "Agreement", the terms defined therein
being used herein as therein  defined),  among Progress  Energy,  Inc.,  certain
lenders thereunder (the "Lenders"),  Citibank, N.A., as administrative agent for
the Lenders,  and SunTrust  Bank,  as issuing bank for Letters of Credit  issued
thereunder.

     In  connection  with  the  preparation,   execution  and  delivery  of  the
Agreement, we have examined:

     (1) The Agreement.

     (2) The documents furnished by the Borrower pursuant to Section 3.01 of the
Agreement.

     (3) The opinion letter of even date  herewith,  addressed to you by William
D. Johnson,  General Counsel to the Company and delivered in connection with the
transactions contemplated by the Agreement (the "Company Opinion Letter").

     We have also  examined  the  originals,  or copies of such other  corporate
records of the Borrower, certificates of public officials and of officers of the
Borrower  and  agreements,  instruments  and other  documents  as we have deemed
necessary as a basis for the opinions  expressed  below. As to questions of fact
material to such opinions,  we have, when relevant facts were not  independently
established by us, relied upon  certificates  of the Borrower or its officers or
of public officials. We have assumed the authenticity of all documents submitted
to us as originals,  the  conformity to originals of all documents  submitted as
certified or photostatic  copies and the  authenticity  of the originals  (other
than those of the Borrower), and the due execution and delivery, pursuant to due
authorization,  of the Agreement by the Lenders and the Administrative Agent and

<PAGE>

the validity and binding effect thereof on such parties. Whenever the phrase "to
our knowledge" is used in this opinion it refers to the actual  knowledge of the
attorneys of this firm involved in the  representation  of the Borrower  without
independent investigation.

     We are qualified to practice law in the States of North  Carolina,  Florida
and New York,  and the opinions  expressed  herein are limited to the law of the
States of North Carolina, Florida and New York and the federal law of the United
States.  To the extent that our opinions  expressed  herein depend upon opinions
expressed  in  paragraphs  1 through 4 of the Company  Opinion  Letter,  we have
relied  without  independent  investigation  on the  accuracy  of  the  opinions
expressed  in  the  Company   Opinion  Letter,   subject  to  the   assumptions,
qualifications and limitations set forth in the Company Opinion Letter.

     Based upon the  foregoing  and upon such  investigation  as we have  deemed
necessary, we are of the opinion that the Agreement constitutes the legal, valid
and binding  obligation  of the  Borrower  enforceable  against the  Borrower in
accordance  with its terms  except as  enforcement  may be limited or  otherwise
affected by (a) bankruptcy,  insolvency,  reorganization,  fraudulent  transfer,
moratorium or other similar laws affecting the rights of creditors generally and
(b) principles of equity, whether considered at law or in equity.

     The opinion set forth above is subject to the following qualifications:

     (a) In addition to the application of equitable principles described above,
courts have imposed an obligation on  contracting  parties to act reasonably and
in good faith in the exercise of their contractual rights and remedies,  and may
also apply public policy considerations in limiting the right of parties seeking
to obtain  indemnification under circumstances where the conduct of such parties
is determined to have constituted negligence.

     (b) No opinion is expressed herein as to (i) Section 8.05 of the Agreement,
(ii) the enforceability of provisions  purporting to grant to a party conclusive
rights of determination, (iii) the availability of specific performance or other
equitable remedies, (iv) the enforceability of rights to indemnity under federal
or state  securities  laws or (v) the  enforceability  of  waivers by parties of
their respective rights and remedies under law.

     (c) No  opinion  is  expressed  herein  as to  provisions,  if any,  in the
Agreement,  which (A)  purport  to  excuse,  release  or  exculpate  a party for
liability for or indemnify a party against the consequences of its own acts, (B)
purport  to make void any act done in  contravention  thereof,  (C)  purport  to
authorize a party to make binding  determinations  in its sole  discretion,  (D)
relate to the  effects of laws which may be enacted in the  future,  (E) require
waivers, consents or amendments to be made only in writing, (F) purport to waive
rights  of offset or to create  rights  of set off  other  than as  provided  by
statute,  or (G) purport to permit acceleration of indebtedness and the exercise
of remedies by reason of the occurrence of an immaterial breach of the Agreement
or any related document.  Further, we express no opinion as to the necessity for
any Lender, by reason of such Lender's particular  circumstances,  to qualify to
transact  business in the State of New York or as to any Lender's  liability for
taxes in any jurisdiction.
<PAGE>

     The foregoing opinion is solely for your benefit and may not be relied upon
by any other  Person  other than (i) any other  Person  that may become a Lender
under the  Agreement  after the date hereof in  accordance  with the  provisions
thereof and (ii) King & Spalding,  in connection with their opinion delivered on
the date hereof under Section 3.01 of the Agreement.


                                 Very truly yours,



<PAGE>
                                                                       EXHIBIT D
                          Form of Opinion of Counsel to the Administrative Agent
                                                           and the Lead Arranger


                                  July 26, 2002


To each of the Lenders parties to the
Agreement referred to below, Citibank, N.A.
("Citibank"), as Administrative Agent,
and SunTrust Bank, as Issuing Bank


     Re: Progress Energy, Inc.


Ladies and Gentlemen:

     We have acted as counsel to the Administrative  Agent and the Lead Arranger
in connection  with the  preparation,  execution and delivery of the Amended and
Restated Credit Agreement, dated as of July 26, 2002 (the "Agreement", the terms
defined therein being used herein as therein  defined),  among Progress  Energy,
Inc., the Lenders thereunder,  Citibank,  N.A., as administrative  agent for the
Lenders,  and  SunTrust  Bank,  as issuing  bank for  Letters  of Credit  issued
thereunder.

     In this connection, we have examined the following documents:

     1. a counterpart of the Agreement, executed by the parties thereto;

     2. the  documents  furnished  by or on behalf of the  Borrower  pursuant to
subsections (b) through (g) of Section 3.01 of the Agreement, including, without
limitation, the opinion of Hunton & Williams (the "Borrower Opinion").

     In our examination of the documents  referred to above, we have assumed the
authenticity of all such documents submitted to us as originals, the genuineness
of all signatures, the due authority of the parties executing such documents and
the conformity to the originals of all such documents submitted to us as copies.
We have also assumed that you have  independently  evaluated,  and are satisfied
with, the  creditworthiness  of the Borrower and the business terms reflected in
the Agreement.  We have relied, as to factual matters,  on the documents we have
examined.

     To the extent that our opinions  expressed below involve  conclusions as to
matters  governed  by law other  than the law of the State of New York,  we have
relied  upon  the  Borrower   Opinion  and  have  assumed  without   independent
investigation  the  correctness of the matters set forth  therein,  our opinions
expressed below being subject to the assumptions, qualifications and limitations
set forth in the Borrower Opinion.


<PAGE>

     Based upon and subject to the foregoing,  and subject to the qualifications
set forth below,  we are of the opinion that the  Agreement is the legal,  valid
and binding  obligation  of the  Borrower,  enforceable  against the Borrower in
accordance with its terms.

     Our opinion is subject to the following qualifications:

     (b) The enforceability of the Borrower's obligations under the Agreement is
subject  to the  effect of any  applicable  bankruptcy,  insolvency,  fraudulent
conveyance,  reorganization,  moratorium  or similar  law  affecting  creditors'
rights generally.

     (c) The enforceability of the Borrower's obligations under the Agreement is
subject to the  effect of  general  principles  of  equity,  including  (without
limitation) concepts of materiality, reasonableness, good faith and fair dealing
(regardless  of whether  considered in a proceeding  in equity or at law).  Such
principles  of  equity  are  of  general  application,  and,  in  applying  such
principles,  a court, among other things, might not allow a contracting party to
exercise remedies in respect of a default deemed immaterial, or might decline to
order an obligor to perform covenants.

     (d) We note  further  that,  in addition to the  application  of  equitable
principles  described  above,  courts have imposed an obligation on  contracting
parties to act reasonably and in good faith in the exercise of their contractual
rights and remedies, and may also apply public policy considerations in limiting
the right of parties seeking to obtain indemnification under circumstances where
the conduct of such parties is determined to have constituted negligence.

     (e) We express no opinion  herein as to (i) the  enforceability  of Section
8.05 of the Agreement, (ii) the enforceability of provisions purporting to grant
to a party  conclusive  rights  of  determination,  (iii)  the  availability  of
specific  performance or other equitable  remedies,  (iv) the  enforceability of
rights  to  indemnity  under  federal  or  state  securities  laws,  or (v)  the
enforceability  of waivers by parties of their  respective  rights and  remedies
under law.

     (f) Our opinions expressed above are limited to the law of the State of New
York, and we do not express any opinion herein concerning any other law.

     The foregoing opinion is solely for your benefit and may not be relied upon
by any other person or entity.

                                 Very truly yours,




<PAGE>
                                                                       EXHIBIT E
                                                  Form of Compliance Certificate

                      [Letterhead of Progress Energy, Inc.]


                                     [Date]


To each of the Lenders parties to the
Agreement referred to below, Citibank,
N.A., as Administrative Agent, and
SunTrust Bank, as Issuing Bank


                              Progress Energy, Inc.

Ladies and Gentlemen:

This compliance  certificate is furnished to you pursuant to Section 5.01(i)(ii)
of the Amended and  Restated  Credit  Agreement,  dated as of July 26, 2002 (the
"Agreement"),  among Progress  Energy,  Inc., a North Carolina  corporation (the
"Borrower"),  the banks listed on the  signature  pages  thereof (the  "Banks"),
Citibank,  N.A.  ("Citibank"),  as  administrative  agent  (the  "Administrative
Agent") for the Lenders (as hereinafter defined),  and SunTrust Bank, as issuing
bank for Letters of Credit issued thereunder. Terms defined in the Agreement are
used herein as therein defined.

1. As of [_______], 2001, the ratio of Consolidated Indebtedness of the Borrower
and its Subsidiaries to Total  Capitalization was _____ to 1.0,  calculated,  in
accordance with Section 5.01(j) of the Agreement, as follows:

A. Indebtedness as of such date was $________, calculated as follows:

Current Indebtedness:                                                   Amount
                                                                        ------
         [List all forms of current Debt]
         ----------------------------------                            $
         ----------------------------------
         ----------------------------------                            ---------
Total current Indebtedness                                             $________

Long-term Indebtedness :                                                Amount
                                                                        ------
         [list all forms of long-term Indebtedness ]
         ----------------------------------                            $
         ----------------------------------
         ----------------------------------                             --------

<PAGE>

Total long-term Indebtedness                                           $________

Total Indebtedness (current Indebtedness plus                          $________
                                         ----
long-term Indebtedness )

B. Total Capitalization as of such date was $_____, calculated as follows:

         Consolidated Indebtedness                                     $

         Preferred Stock                                               $

         Common Stock                                                  $

         Retained Earnings                                             $________


2. As of [_______],  2001, and as of the date hereof, no Event of Default and no
event that,  with the giving of notice or lapse of time or both, will constitute
an Event of Default, has occurred and in continuing.

I hereby  certify  that the  calculations  set forth in  paragraph 1 hereof were
prepared in accordance with generally accepted accounting  principles consistent
with those applied in the preparation of the financial statements referred to in
Section 4.01(e) of the Agreement.



                                 Very truly yours,

                                 PROGRESS ENERGY, INC.



                                 By______________________________________
                                      Name:
                                      Title: